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[2019] ZASCA 88
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Rhino Oil and Gas Exploration SA (Pty) Limited v Normandien Farms (Pty) Limited and Another (100/2018) [2019] ZASCA 88; 2019 (6) SA 400 (SCA) (31 May 2019)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 100/2018
In
the matter between:
RHINO
OIL AND GAS EXPLORATION
SOUTH
AFRICA (PTY)
LIMITED APPELLANT
and
NORMANDIEN
FARMS (PTY) LIMITED FIRST
RESPONDENT
THE
SOUTH AFRICAN AGENCY FOR
PROMOTION
OF PETROLEUM EXPLORATION
AND
EXPLOITATION SOC
LIMITED SECOND
RESPONDENT
Neutral
citation
:
Rhino
Oil and Gas Exploration SA (Pty) Ltd v Normandien Farms (Pty) Ltd &
another
(100/2018)
[2019] ZASCA 88
(31 May 2019)
Coram
:
Ponnan, Mbha, Mathopo and Van der Merwe JJA and Plasket AJA
Heard
:
10 May 2019
Delivered:
31 May 2019
Summary:
Mineral and Petroleum Resources Development Act 28 of 2002
–
application for petroleum exploration right – process
challenged on review prior to decision being taken –
at that
stage, no prejudice to party challenging the process – matter
not ripe for adjudication.
ORDER
On
appeal from:
Western Cape Division of the High Court, Cape Town
(Dlodlo J sitting as court of first instance):
1.
The appeal is upheld with costs, including the costs of two counsel.
2.
The order of the court below is set aside and replaced with the
following order:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
JUDGMENT
Plasket
AJA (Ponnan, Mbha, Mathopo and Van der Merwe JJA concurring)
[1]
The appellant, Rhino Oil and Gas Exploration South Africa (Pty) Ltd
(Rhino), lodged an application with the second respondent,
the South
African Agency for Promotion of Petroleum Exploration and
Exploitation SOC – also known as the Petroleum Association
of
South Africa (PASA)
[1]
– in terms of s 79(1) of the Mineral and Petroleum Resources
Development Act 28 of 2002 (the MPRDA) for a petroleum exploration
right. The application was in respect of nearly 5 500 farms in
KwaZulu-Natal covering an area of just under two million hectares.
Some of these farms were owned by the first respondent, Normandien
Farms (Pty) Ltd (Normandien).
[2]
[2]
Normandien brought an application in the Western Cape High Court,
Cape Town for orders: (a) setting aside PASA’s acceptance
of
Rhino’s application; (b) setting aside the notices published by
PASA in terms of ss 10(1)(
a
) and (
b
) of the MPRDA that
the application had been accepted and inviting interested and
affected persons to submit comments on the application;
(c) setting
aside PASA’s acceptance of a scoping report submitted to it by
Rhino; and (d) interdicting Rhino from submitting
an environmental
impact assessment and environmental management program to PASA.
[3]
In the court below, Dlodlo J granted these orders with costs. Rhino
appeals against those orders with Dlodlo J’s leave.
[4]
In this judgment, I shall first set out the process that an applicant
for an exploration right is required to follow, from lodgement
to
decision. I shall then consider the salient facts of this case.
Finally, I shall turn to the application of the law to those
facts.
The
process
[5]
The long title of the MPRDA states that it makes provision for
‘equitable access to and sustainable development of the
nation’s mineral and petroleum resources’ and ‘matters
incidental therewith’. It does so, inter alia, by
placing the
mineral and petroleum resources of the country under the
custodianship of the State for the benefit of all South Africans.
[3]
The consequences of this for the exploitation of mineral and
petroleum resources are spelt out in s 3(2):
‘
As
the custodian of the nation's mineral and petroleum resources, the
State, acting through the Minister, may –
(a)
grant, issue, refuse, control, administer and manage any
reconnaissance permission, prospecting right, permission to remove,
mining right, mining permit, retention permit, technical co-operation
permit, reconnaissance permit, exploration right and production
right; and
(b)
in consultation with the Minister of Finance, prescribe and levy, any
fee payable in terms of this Act.’
[6]
Chapter 6 of the MRPDA deals with petroleum exploration and
production. It is to the provisions of this chapter that I now turn.
[7]
Section 69, the first section of chapter 6, states that the chapter
‘provides for the granting of exploration rights and
production
rights and the issuing of technical co-operation permits and
reconnaissance permits’. For this purpose, s 69(2)(
a
)
provides that various sections in chapters 4, 5 and 7, as well as in
Schedule II apply to the application of chapter 6, with the
necessary
changes.
[8]
Section 69(2)(
b
) provides specifically that in applying the
provisions of those other chapters:
‘
Any
reference in the provisions referred to in paragraph (
a
)
to –
(i)
minerals, must be construed as a reference to petroleum;
(ii)
mining, must be construed as a reference to production;
(iii)
mining area, must be construed as a reference to production area;
(iv)
mining rights, must be construed as a reference to production rights;
(v)
prospecting, must be construed as a reference to exploration;
(vi)
prospecting area, must be construed as a reference to exploration
area;
(vii)
prospecting rights, must be construed as a reference to exploration
rights; and
(viii)
reconnaissance permission, must be construed as a reference to
reconnaissance permit.’
[9]
It is not in dispute that PASA was appointed by the Minister as a
designated agency for the performance of functions in terms
of
chapter 6. Section 71 sets out its functions. These functions cover a
wide span and include: promoting both onshore and offshore
exploration and production of petroleum;
[4]
receiving applications for, inter alia, exploration rights;
[5]
and evaluating applications lodged with it and making recommendations
to the Minister.
[6]
[10]
Section 79 regulates applications for exploration rights. Section
79(1) is concerned with the lodging of applications. It provides:
‘
(1)
Any person who wishes to apply to the Minister for an exploration
right must lodge the application –
(a)
at the office of the designated agency;
(b)
in the prescribed manner; and
(c)
together with the prescribed non-refundable application fee.’
[11]
Once an application has been lodged, s 79(2) requires that PASA
‘must’, within 14 days of receipt, accept the application
if:
‘
(a)
the requirements contemplated in subsection (1) are met;
(b)
no other person holds a technical co-operation permit, exploration
right or production right for petroleum over the same land
and area
applied for; and
(c)
no prior application for a technical co-operation permit, exploration
right or production right over the same mineral, land
and area
applied for has been accepted.’
[12]
At this point, s 10 comes into play with the necessary changes.
Section 10(1) provides that within 14 days of the acceptance
of an
application, PASA must, in the prescribed form, make known that the
application has been accepted ‘in respect of the
land in
question’ and ‘call upon interested and affected persons
to submit their comments regarding the application
within 30 days
from the date of the notice’.
[13]
In terms of s 79(3), if an application does not comply with the
requirements of s 79, PASA ‘must notify the applicant
in
writing within 14 days of the receipt of the application and provide
reasons’.
[14]
Section 79(4) deals with the acceptance of applications. It provides:
‘
If
the designated agency accepts the application, the designated agency
must, within 14 days of the receipt of the application,
notify the
applicant in writing to –
(a)
consult in the prescribed manner with the landowner, lawful occupier
and any interested and affected party and include the result
of the
consultation in the relevant environmental report as required in
terms of Chapter 5 of the
National Environmental Management Act,
1998
; and
(b)
submit the relevant environmental reports required in terms of
Chapter 5 of the
National Environmental Management Act, 1998
, within
a period of 120 days from the date of the notice.’
[15]
It is at this stage of the process that issues of integrated
environmental management are to be addressed.
Section 79(4)
makes
chapter 5 of the National Environmental Management Act 107 of 1998
(NEMA) applicable to the process of applying for an exploration
right
for petroleum. Furthermore, s 80(1)(
c
), read with s 80(3) of
the MPRDA, provides that the Minister may not grant an exploration
right unless, inter alia, environmental
authorisation has been
granted to the applicant. As a result, before an application can
proceed any further, environmental authorisation
must be applied for.
[16]
In terms of the NEMA and its regulations, as well as certain
regulations under the MPRDA, an applicant must submit a scoping
report which, after acceptance by PASA, is to be followed by an
environmental impact assessment (EIA) and an environmental management
program (EMP). When these documents have been submitted to PASA it
may grant or refuse environmental authorisation.
[17]
At this stage, the Minister is required to decide whether to grant or
refuse the exploration right. Section 80(1) provides:
‘
The
Minister must grant an exploration right if –
(a)
the applicant has access to financial resources and has the technical
ability to conduct the proposed exploration operation
optimally in
accordance with the exploration work programme;
(b)
the estimated expenditure is compatible with the intended exploration
operation and duration of the exploration work programme;
(c)
the Minister has issued an environmental authorisation;
(d)
the applicant has the ability to comply with the relevant provisions
of the Mine Health and Safety Act, 1996 (Act 29 of 1996);
(e)
the applicant is not in contravention of any relevant provision of
this Act;
(f)
the applicant has complied with the terms and conditions of the
technical co-operation permit, if applicable; and
(g)
the granting of such right will further the objects referred to in
section 2 (d) and (f).’
[18]
Section 96 provides an internal appeal to anyone ‘whose rights
or legitimate expectations have been materially and adversely
affected or who is aggrieved by any administrative decision in terms
of this Act’.
[19]
The purpose of the process that I have outlined was considered in
Bengwenyama Minerals (Pty)
Ltd & others v Genorah Resources (Pty) Ltd & others
.
[7]
(While that case concerned a prospecting right for minerals, the
views expressed by Froneman J apply equally to exploration rights
for
petroleum.) Froneman J identified two principal purposes that the
process seeks to achieve. In the first place, the notice
and
consultation requirements of the MPRDA are ‘indicative of a
serious concern for the rights and interests of landowners
and lawful
occupiers in the process of granting prospecting rights’ given
that ‘the granting and execution of a prospecting
right
represents a grave and considerable invasion of the use and enjoyment
of the land on which the prospecting is to happen’.
[8]
A second purpose is, Froneman J held, to ‘provide landowners or
occupiers with the necessary information on everything that
is to be
done, so that they can make an informed decision in relation to the
representations to be made, whether to use the internal
procedures if
the application goes against them and whether to take the
administrative action concerned on review’.
[9]
He concluded that the ‘consultation process and its result are
an integral part of the fairness process because the decision
cannot
be fair if the administrator did not have full regard to precisely
what happened during the consultation process in order
to determine
whether the consultation was sufficient to render the grant of the
application procedurally fair’.
[10]
The
facts
[20]
In February 2015, two months prior to the application for an
exploration right being lodged, Rhino, through its environmental
consultant, SLR Consulting (Pty) Ltd (SLR), began to give notice
within the area concerned of its intention to make an application.
Letters were also sent to ‘landowners and stakeholders’.
The letter stated, inter alia, that a background document
containing
details of its proposed operations was available electronically and
available in isiZulu on request. It also gave notice
of public
meetings that would be convened on specific dates in Ulundi, Dundee,
Pongola, Melmoth, Vryheid, Newcastle and Dannhauser.
[21]
In the letter, SLR also stated:
‘
Rhino
Oil & Gas will only apply for approval to undertake early-phase
exploration for oil and gas which may be located underground
within
suitable geological strata. The purpose of the work would be solely
to determine the presence of any possible petroleum
resource which
could be investigated further. The 3-year exploration work programme
will be restricted to non-invasive techniques,
as well as the
drilling of less than 10 core boreholes for determining stratigraphy
and seismic surveys. No hydraulic fracturing
(fracking) is proposed
in this application.’
By
the time its scoping report had been accepted by PASA on 31 August
2016, the proposed activities had narrowed: Rhino had decided
to only
use remote exploration techniques, such as aerial surveying, in order
to assess whether gas reserves may exist that warranted
further
exploration. PASA described the extent of the proposed activities as
being no more than ‘a desktop study and investigation
together
with certain flights over the relevant properties’. This, it
said, would have no effect on Normandien’s properties
at all.
[22]
Having given advance notice of its intentions, Rhino lodged its
application with PASA on 12 April 2016. PASA accepted the application
on 15 April 2016. In early May 2016, in order to meet the
requirements of s 10(1) of the MPRDA, PASA gave notice, on its notice
board, that it had accepted the application. It also sent notices to
a number of Magistrate’s Courts in the proposed exploration
area. Notices were not sent to all Magistrate’s Courts in that
area and the notices did not expressly identify the specific
properties that could potentially be affected. In an attempt to
remedy these defects, PASA later, on 21 December 2016, published
a
further notice in the Provincial Government Gazette for KwaZulu-Natal
stating that it had accepted the application and calling
for
objections to be lodged by 3 February 2017.
[23]
On 3 June 2016, Rhino submitted an application for environmental
authorisation to PASA. Rhino was then required to produce
a scoping
report, as a prelude to an EIA and an EMP. Drafts of these documents
were produced and a public participation process
followed. Rhino
submitted its scoping report to PASA, which was accepted on 31 August
2016.
[24]
Normandien’s attorney, Mr Peter Vinnicombe, attended a public
meeting – part of the public participation process
–
concerning the EIA and EMP for the first time on 24 November 2016. He
attended a second meeting on 2 December 2016. On
13 December 2016,
however, Normandien launched its urgent application in the court
below.
[25]
The deadline for comments on the draft EIA and EMP was initially 15
December 2016. This deadline was extended by PASA on the
request of
Rhino to 10 April 2017 ‘in order to undertake further and wider
consultation with affected landowners who were
not included in the
initial consultation process’.
The
issue to be decided
[26]
Normandien’s case was that a series of misdirections of a
clerical, mechanical, nature had occurred in the process that
could
not be cured. These included the acceptance by PASA of Rhino’s
application despite it not being lodged in the prescribed
manner and
being out of time in the giving of notice in terms of s 10, with the
result that these steps in the process were nullities.
The acceptance
of the scoping report pursuant to the flawed notice was also a
nullity; and, for the same reason, the further step
of lodging the
EIA and EMP would have been unlawful. The relief sought by
Normandien, and granted by Dlodlo J, had the effect of
setting aside
every step in the process that had been taken to that point, and
interdicting the taking of the next step.
[27]
As a result of the view I take of the matter, there is no need to
engage with these arguments. The matter can be dealt with
on another
basis, anterior to the merits.
[28]
It was argued on behalf of Normandien that the actions of PASA in
relation to the acceptance of Rhino’s application,
the giving
of notice in terms of s 10 and the acceptance of the scoping report
were not administrative actions but clerical functions
that did not
involve the taking of a decision – a requirement of the
definition of administrative action in terms of the
Promotion of
Administrative Justice Act 3 of 2000 (the PAJA).
[11]
[29]
Instead, Normandien contended, they amounted to failures to comply
with statutory duties on the part of PASA. If that is so,
those
failures may be subject to review. In
Johannesburg
Consolidated Investment Co v Johannesburg Town Council
,
[12]
Innes CJ, in describing common law review, stated that ‘[w]henever
a public body has a duty imposed upon it by statute, and
disregards
important provisions of the statute, or is guilty of gross
irregularity or clear illegality in the performance of the
duty, this
Court may be asked to review the proceedings complained of and set
aside or correct them’. If the PAJA does not
apply, on the
assumption that no decisions were taken (and no rights were adversely
affected by the preliminary actions of PASA),
the only remaining
basis for review would be the principle of legality, sourced in the
founding constitutional value of the rule
of law. As its grounds of
review and procedural requirements have not been codified, the common
law informs the substance of the
principle of legality.
[13]
[30]
In terms of the common law, an applicant for judicial review, even if
he or she establishes an irregularity, is not entitled
to have the
offending action set aside on review unless he or she is prejudiced
by it. That was made clear by this court many years
ago in
Jockey
Club of South Africa & others v Feldman
,
[14]
and has been followed in numerous cases since. In
Rajah
& Rajah (Pty) Ltd & others v Ventersdorp Municipality &
others
[15]
Holmes JA explained the basis of the rule when he said:
‘
Now
I think it is clear that the Court will not interfere on review with
the decision of a
quasi
-judicial
tribunal where there has been an irregularity, if satisfied that the
complaining party has suffered no prejudice. . .
In principle it
seems to me that the Court should likewise not interfere in the
present case at the instance of the Council, whatever
the precise
nature of the present proceedings, since it is clear that there has
been no prejudice to the public interest which
the Council
represents. The underlying principle is that the Court is
disinterested in academic situations.’
[31]
That Normandien suffered no prejudice as a result of the alleged
misdirections it complains of is admitted by it. In answer
to a
statement in Rhino’s supplementary answering affidavit that
Rhino had no intention of entering onto Normandien’s
land and,
if it wished to, it would require further authorisation, Normandien
said:
‘
(a)
The Second Respondent states that it has no intention to enter upon
or physically interfere with the Applicant’s farms
at this
stage.
(b)
It is apparent that the main intention of the Second Respondent is to
ultimately do so as there is no undertaking that it will
never do so,
even if the non-invasive procedure provides results.
(c)
It is therefore with respect not the present situation which has
instilled a fear in the Applicant,
but
what the end result would be
,
which the Second Respondent is clearly intent upon doing.’
(Emphasis added.)
[32]
The situation is clear: Normandien’s rights have not been
adversely affected by the process so far, and it can point
to no
prejudice on its part at this stage.
[33]
As a general rule, a challenge to the validity of an exercise of
public power that is not final in effect is premature. An
application
to review the action will not be ripe, and cannot succeed on that
account. Hoexter explains the concept thus:
[16]
‘
The
idea behind the requirement of ripeness is that a complainant should
not go to court before the offending action or decision
is final, or
at least ripe for adjudication. It is the opposite of the doctrine of
mootness, which prevents a court from deciding
an issue when it is
too late. The doctrine of ripeness holds that there is no point in
wasting the courts’ time with half-formed
decisions whose shape
may yet change, or indeed decisions that have not yet been made.’
There
is a close connection between prejudice and ripeness. Baxter states
that ‘the appropriate criterion by which the ripeness
of the
action in question is to be measured is whether prejudice has already
resulted or is inevitable, irrespective of whether
the action is
complete or not’.
[17]
[34]
Normandien has approached the court before any decision, according to
it, has even been taken, and before it had suffered any
prejudice on
account of the actions complained of. It launched a pre-emptive
strike against Rhino. It may perhaps have been best
advised to
‘husband its powder’
[18]
in anticipation of the battle that may (or may not) lie ahead.
[35]
In the result, the relief granted in the court below ought not to
have been granted because of the absence of prejudice to
Normandien
and because the matter was not ripe for adjudication.
The
order
[36]
I make the following order.
1. The appeal is upheld with costs,
including the costs of two counsel.
2. The order of the court below is set
aside and replaced with the following order:
‘
The
application is dismissed with costs.’
____________________
C
Plasket
Acting
Judge of Appeal
APPEARANCES:
For
the Appellant:
A Rafik Bhana SC and I Goodman
Instructed by:
Webber Wentzel, Johannesburg
Symington & De Kok, Bloemfontein
For
the First Respondent:
M G Roberts SC and E Roberts
Instructed by:
Vinnicombe & Associates,
Pietermaritzburg
Lovius Block, Bloemfontein
[1]
PASA is a ‘designated agency’ for purposes of s 70 of
the MPRDA. That section provides that the Minister of Minerals
and
Energy may ‘designate an organ of State or a wholly owned and
controlled agency or company belonging to the State’
to
perform certain functions in terms of the Act.
[2]
The area is described as follows in a document produced by Rhino Oil
and Gas and made available to land owners and other interested
parties: ‘In broad terms the exploration right application
extends from Newcastle/Utrecht in the north west across to Vryheid
and Pongola in the north east. In the south east the area includes
Melmoth and is inland of the N2 highway. The southern boundary
is
contiguous with the boundary of the other Rhino application.’
[3]
Section 3(1).
[4]
Section 71(
a
).
[5]
Section 71(
b
).
[6]
Section 71(
c
).
[7]
Bengwenyama Minerals (Pty)
Ltd & others v Genorah Resources (Pty) Ltd & others
[2010] ZACC 26
;
2011 (4) SA 113
(CC).
[8]
Para 63.
[9]
Para 66.
[10]
Para 66.
[11]
See
Nedbank v Mendelow &
another NNO
[2013] ZASCA
98
;
2013 (6) SA 130
(SCA) para 25. See too
Minister
of Mineral Resources v Mawetse SA Mining Corporation (Pty) Ltd
[2015] ZASCA 82
;
2016 (1) SA 306
(SCA) para 8. Note, that in the
context of an application for mineral rights, Cameron J, in
Aquila
Steel (S Africa) (Pty) Ltd v Minister of Mineral Resources &
others
[2019] ZACC 5
;
2019
(4) BCLR 429
(CC) para 51 stated that the acceptance of an
application involved some degree of evaluation, and, in fn 43,
queried the correctness
of this aspect of
Mawetse
.
It is not necessary to decide the issue in this matter.
[12]
Johannesburg Consolidated
Investment Co v Johannesburg Town Council
1903 TS 111
at 115.
[13]
Mbina-Mthembu v Public
Protector
[2019] ZAECBHC 4
para 13.
[14]
Jockey Club of South Africa
& others v Feldman
1942 AD 340
at 359. See too Lawrence Baxter
Administrative
Law
(1984) at 718.
[15]
Rajah & Rajah (Pty) Ltd
& others v Ventersdorp Municipality & others
1961 (4) SA 402
(A) at 407H-408A.
[16]
Cora Hoexter
Administrative
Law in South Africa
2 ed
(2012) at 585.
[17]
Baxter (note 14) at 720.
[18]
Simelane & others NNO v
Seven-Eleven Corporation (SA) (Pty) Ltd & another
[2002] ZASCA 141
;
2003 (3) SA 64
(SCA) para 17.