Agri South Africa v Minister of Minerals and Energy

• Jurisdiction: South Africa
• Court: North Gauteng High Court, Pretoria
• Judge: Du Plessis J
• Judgment Date: 28 April 2011
• Citation: 2012 (1) SA 171 (GNP)
• Docket Number: 55896/07
• Counsel: GL Grobler SC (with JL Gildenhuys) for the plaintiff. CH Badenhorst (with MA Wesley) for the defendant. G Budlender SC (with M du Plessis and J Brickhill) for the amicus curiae.

Du Plessis J:

Introduction

[1] This is a claim for compensation consequent upon an alleged expropriation by the State. H

[2] The Mineral and Petroleum Resources Development Act 28 of 2002 (the MPRDA) came into force on 1 May 2004. Section 3(1) thereof provides:

'Mineral and petroleum resources are the common heritage of all the I people of South Africa and the State is the custodian thereof for the benefit of all South Africans.'

Apart from transitional measures to which I shall refer later, the MPRDA does not recognise the existence of common-law mineral rights as they existed directly before the Act took effect. J

Du Plessis J

A [3] When the MPRDA commenced, a company, Sebenza Mining (Pty) Ltd [1] (Sebenza), held the coal rights on and under Portion 4 of the farm Goedehoop 169 and also those on and under the Remaining Extent of the same farm. (I shall refer to these two farms collectively as 'the farms'.)

B [4] The plaintiff, as cessionary of Sebenza's alleged right to compensation, contends that Sebenza was on the date of commencement of the MPRDA expropriated of its coal rights. It is the plaintiff's case that the very enactment of the MPRDA constituted an expropriation. Accordingly, the plaintiff claims compensation [2] from the Minister of Mineral C Resources [3] who, as the appropriate member of the National Executive, is cited for and on behalf of the State.

[5] By order of this court the Centre for Applied Legal Studies was allowed to intervene as amicus curiae (the amicus) in respect of the constitutional issue that arises. The amicus adduced no evidence nor did D its counsel cross-examine any witness. At the end of the trial its counsel presented helpful written and oral argument for which the court is indebted to them.

The issues

[6] Subsections 25(1) and (2) of the Constitution of the Republic of E South Africa, 1996, provides as follows:

'(1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

(2) Property may be expropriated only in terms of law of general F application —

(a)

for a public purpose or in the public interest; and

(b)

subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.'

[7] It is the plaintiff's case that on the commencement date of the G MPRDA, Sebenza's coal rights were expropriated in terms of s 5 as read with ss 2, 3 and 4 of the MPRDA. Accordingly, the plaintiff contends that, viewed through the prism of the Constitution, [4] it is entitled to compensation determined in terms of the MPRDA [5] read with the Expropriation Act 63 of 1975.

[8] Stripped of issues that have been resolved between the parties and H also of amplifications that are in the defendant's plea, the plea raises

Du Plessis J

essentially three issues: did the MPRDA deprive [6] Sebenza of its coal A rights? If so, [7] was Sebenza expropriated of its coal rights? If so, is Sebenza (and thus the plaintiff as cessionary) entitled to compensation?

[9] It is of note that Mr Badenhorst for the defendant and Mr Budlender for the amicus accepted that Sebenza's coal rights as they were before the enactment of the MPRDA constituted property as envisaged in s 25 of the B Constitution. As will more fully appear from my analysis of the nature and content of common-law mineral rights (of which the coal rights constitute a species), this concession was rightly made.

The facts

[10] The plaintiff called three factual and two expert witnesses. The C defendant called two factual and one expert witness.

[11] It is convenient to deal with the evidence of each witness when discussing the respective issues to which the evidence of each relates. The essential facts are uncontroversial. What follows is a brief overview thereof. D

[12] Agri Suid Afrika (Agri SA) is an important role player in the field of commercial agriculture in South Africa. It is a federal association representing the interests of commercial farmers. Its members are provincial faming associations and a number of farming interest groups. E Agri SA's provincial members in turn have local agricultural unions as their members. Individual farmers belong to local agricultural unions. Although it thus has no individual farmers as members, Agri SA ultimately represents the interests of commercial farmers. In various ways and by various means, Agri SA seeks to contribute to the wellbeing of agriculture in this country. It regularly engages with the government F regarding matters that concern farmers and agriculture in general.

[13] Agri SA established the plaintiff, an association not for gain under s 21 of the Companies Act 61 of 1973. Under its articles of association, three of the plaintiff's objects are to make representations to Parliament in relation to legislation that might affect commercial farming; to G institute court proceedings to challenge, in the interest of farming; such legislation; and to institute legal proceedings to protect the rights and interests of the commercial farming community.

[14] Mr JF van der Merwe, one of the plaintiff's directors and the chief H executive of Agri SA, explained that Agri SA took an active part in the consultation process that preceded the enactment of the MPRDA. When

Du Plessis J

A the MPRDA was enacted, Agri SA obtained counsel's opinion that the Act constituted an expropriation of property. The Minister and the Department of Mineral Resources (DMR) did not agree. Agri SA decided to institute court proceedings in order to seek legal clarity.

[15] Agri SA instructed their attorneys, MacRobert Inc (MacRobert) to B find a suitable case to serve as a test case and to obtain cession of the relevant right-holder's right to compensation. Sebenza was identified as a suitable cedent. I now turn to a brief account of the background to Sebenza's coal rights and the cession.

[16] Sebenza had bought the relevant coal rights in November 2001 for C R1 048 000. The rights were delivered to it by way of a notarial cession. Sebenza, however, never obtained a prospecting permit or a mining authorisation under the Minerals Act 50 of 1991 (the Minerals Act). [8] There also is no evidence that Sebenza ever conducted mining or prospecting operations on the farms.

D [17] On 29 April 2004 the members of Sebenza took a special resolution that the company be placed under a creditors' voluntary winding-up. [9] On 18 May 2004 the resolution was registered with the Registrar of Companies and Sebenza was placed under liquidation. Provisional liquidators were appointed in September 2004 and in the same month they advertised Sebenza's coal rights for sale. It is important to note that E by then the MPRDA had commenced. [10]

[18] The liquidators received an offer from Metsu Trading (Pty) Ltd (Metsu) to purchase the coal rights for R750 000. They instructed an auctioneer, Mr Bonini, and a mining engineer, Dr Peter Cox, [11] to visit F the farms so as to evaluate the coal rights. Bonini and Cox advised the liquidators that if the latter could obtain a price of R700 000, they should accept it.

[19] The liquidators accepted Metsu's offer. After the purchase price had been paid, the liquidators and Metsu, respectively, received legal advice that the purported sale was void in view thereof that, in terms of the G MPRDA, the coal rights had ceased to exist. The liquidators repaid the R750 000 to Metsu.

[20] In March 2006 the liquidators, contending that Sebenza had been expropriated, lodged with the DMR a claim for compensation. [12] At this stage Agri SA identified Sebenza's claim as a suitable one to serve as a H 'test case', and the claim for compensation was ceded to the plaintiff. The plaintiff paid the liquidators R250 000 for the ceded right. The DMR rejected the claim and these proceedings were commenced.

Du Plessis J

[21] When he cross-examined Mr Van der Merwe, [13] counsel for the A defendant put questions that seemed to imply some sort of impropriety on the part of Agri SA and the plaintiff in launching these proceedings. On the pleadings no such impropriety is raised. It suffices therefore to state that Mr Van der Merwe candidly and satisfactorily explained that, from the point of view of Agri SA, this is a 'test case' instituted in the B interests of legal certainty. There is nothing in his evidence, or in the evidence of any other witness, that goes towards indicating anything other than a genuine desire to obtain clarity. Obviously, Agri SA has a viewpoint as to whether the MPRDA effected expropriation. The defendant holds a contrary viewpoint. That is ultimately what this case is about. C

Rights to minerals before and after the MPRDA

[22] In order to decide whether Sebenza has been expropriated by the enactment of the MPRDA, it is first necessary to determine the content of its rights as they were before the MPRDA took effect. It is also D necessary to determine how the MPRDA affected, not only the coal rights as such, but also the content of those rights. I start with mineral rights as they existed before the MPRDA took effect.

Mineral rights before the MPRDA [14]

[23] In principle an owner of land is at common law also the owner of E everything below the surface, including minerals. [15] Such owner was therefore, in principle, at common law entitled to prospect for valuable minerals, to mine them, and to keep, sell or otherwise alienate them. [16] The owner's right to mine and dispose of minerals has, however, throughout South Africa and from early on been restricted and regulated F by various statutes. It is for present purposes unnecessary to go into the nature and effect of statutory restrictions that affected landowners.

[24] A corollary of the principle that land...