Merafong City v AngloGold Ashanti Ltd

• Jurisdiction: South Africa
• Citation: 2017 (2) SA 211 (CC)

Merafong City v AngloGold Ashanti Ltd
2017 (2) SA 211 (CC)

2017 (2) SA p211

Citation	2017 (2) SA 211 (CC)
Case No	CCT 106/15; [2016] ZACC 35
Court	Constitutional Court
Judge	Moseneke DCJ, Bosielo AJ, Cameron J, Froneman J, Jafta J, Khampepe J, Madlanga J, Mhlantla J, Nkabinde J and Zondo J
Heard	February 18, 2016
Judgment	October 24, 2016
Counsel	SM Brassey SC (with IB Currie SC and JA Motepe) for the applicant.; J Graves SC and IB Currie for the respondent.

Flynote : Sleutelwoorde E

Administrative law — Decision of functionary — Collateral challenge to validity of decision — Circumstances in which available — Whether available to organ of state or strictly restricted to individuals whom public authority threatened with coercive action — No rigid doctrinal limitation upon availability F — Available where justice required it and dependent in each case on facts — Organ of state not categorically excluded from raising collateral challenge.

Administrative law — Administrative action — Invalidity — Consequences — Government's obligations in face of invalid administrative action — Principles established in SCA decision of Oudekraal and CC decision of Kirland G explained.

Local authority — Water — Tariff — Increase — Water for industrial use — Minister, citing its unreasonableness, upholding mines' appeal against 62% increase — Whether municipality entitled to ignore ruling on ground that it was unlawful — Municipality should have gone to court to set aside H Minister's ruling once it had reached opinion that it was invalid — In failing to do so it acted in conflict with good constitutional citizenship and its duty as an organ of state to uphold and protect rule of law — However, despite inaction, not in circumstances disqualified from later resisting application to enforce ruling. I

Headnote : Kopnota

AngloGold owned mines in the jurisdiction of Merafong City (Merafong). To operate its mines, and for the domestic use of its employees, it required water. From 1958 it had acquired this directly from Rand Water. This, however, changed in 2003 when Merafong assumed the role of 'water services authority' under the Water Services Act 108 of 1997, and with it J

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A the responsibility to provide access to water to those in its jurisdiction. In 2004 Merafong informed all mines in its jurisdiction, including AngloGold, that it had appointed Rand Water as its water-services provider for the area. It further set out proposed new tariffs. These were 62% more than those charged by Rand Water. Being of the view that the change in B tariffs was unreasonable, AngloGold appealed to the relevant Minister against them: the latter, in a ruling of July 2005, overturned the surcharge levied by Merafong on water for industrial purposes; in respect of water used by AngloGold for domestic purposes, Merafong, AngloGold and Rand Water were directed to negotiate a reasonable tariff. Merafong, however, continued to apply a surcharge on the industrial use of water after C it had obtained a legal opinion that the Minister's decision was void in law. Negotiations to reach a compromise were unsuccessful. In April 2011 AngloGold instituted proceedings in the High Court to compel Merafong's compliance with the Minister's ruling. Merafong counter-applied, attacking the validity of the Minister's decision, and seeking declarators to the effect that the setting, adoption and implementation of tariffs fell within its D exclusive area of competence as a local municipality, and that the Minister had no authority to interfere in the tariff in the manner it did.

The High Court ruled in favour of AngloGold in respect of both the application and the counter-application, and Merafong was ordered to comply with the Minister's ruling. Merafong appealed to the Supreme Court of Appeal (the SCA). Here, again, the SCA ruled in favour of AngloGold, dismissing the E appeal. The SCA found to be decisive the failure of Merafong to challenge the Minister's ruling in judicial-review proceedings. Even if such ruling were indeed ultra vires, it existed in fact and had legal consequences, and Merafong could not simply ignore it; in doing so, it breached the principle of legality. The SCA further found that Merafong was, as an organ of state, barred from raising a collateral challenge to the ruling. In other words, as F long as an administrative decision had not been set aside, an organ of state could not raise its invalidity as a defence to proceedings against it to enforce the decision.

Merafong appealed to the Constitutional Court. The key issue was whether the courts a quo were correct in enforcing the Minister's decision and disallowing Merafong's collateral challenge. In answering this the court considered G the circumstances in which, and at whose instance, the collateral challenge — or reactive challenge, as the court preferred to call it (see [26] at n27) — could correctly in terms of the law be employed. In particular, was the availability of the reactive challenge strictly limited in the manner understood by the SCA, ie available only to individuals whom a public authority threatened with coercive action (and never to organs of state)?

H Held, that the import of the cases [*] of Oudekraal and Kirland was that government could not simply ignore an apparently binding ruling or decision on the basis that it was invalid. The allegedly unlawful action had to be challenged by the right actor in the right proceedings. The sole power to pronounce that the decision was defective, and therefore invalid, lay with the courts. It remained legally effective until properly set aside. However, an absolute I obligation was not imposed on private citizens to take the initiative to strike

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down invalid administrative decisions affecting them. Both decisions A recognised that there might be occasions where an administrative decision or ruling should be treated as invalid even though no action had been taken to strike it down. Neither decision expressly circumscribed the circumstances in which an administrative decision could be attacked reactively as invalid. Further, they did not imply or entail that, unless they bring court proceedings to challenge an administrative decision, public authorities were obliged B to accept it as valid. Neither did they impose an absolute duty of proactivity on public authorities. It all depended on the circumstances. (Paragraphs [41] – [44] at 230A – 231B.)

Held, having surveyed the pre- and post-Constitution approaches to reactive challenges (see [26] – [44]), that there was no rigid doctrinal limitation upon their viability. While reactive challenges, in the first instance, and perhaps C in origin, protected private citizens from state power, good practical sense and the call of justice indicated that they could usefully be employed in a much wider range of circumstances. There was no practical, or conceptual, justification for straitjacketing them to private citizens. Categorical exclusions should be eschewed. A reactive challenge should be available where justice required it to be, dependent in each case on the facts. As to the D permissibility of a reactive challenge by an organ of state, it had to depend on a variety of factors, invoked with a 'pragmatic blend of logic and experience', and it would be imprudent to pronounce any inflexible rule. (Paragraphs [25] and [55] – [56] at 222E – F and 234C – H.)

Held, that Merafong itself should have gone to court to set aside the Minister's ruling once it had reached the opinion that it was invalid. In failing to do so E it acted in conflict with good constitutional citizenship, as well as its duty as an organ of state to uphold and protect the rule of law, which called for action in the face of unlawfulness. However, despite this failure to take the initiative, Merafong's challenge should, for considerations springing largely out of con- venience, be allowed to proceed, and Merafong's status as an organ of state did not categorically exclude it, as was incorrectly held by the SCA. But the F correct approach was to remit Merafong's challenge to be decided afresh by the High Court. This was in acknowledgment of the distinctive character of Merafong's reactive challenge. That is, it was one in response to a decision not directed at the world at large, but one that was specific, and known to the subject, and where a remedy was readily available. In such category of challenges the delay in addressing the decision attacked might very well be a G disqualifying factor. This aspect called for scrutiny, and an explanation by Merafong. (Paragraphs [58] – [61], [65] – [72], [81] and [83] at 235A – 236B, 236G – 238C, 240F – G and 241C – D.)

Appeal upheld, and matter remitted to High Court to determine, after the lodging of affidavits by Merafong and the Minister, the lawfulness of the Minister's decision, and what remedy should be granted. (Paragraph [84] at H 241E – H.)

Minority judgment (Jafta J, with Bosielo AJ and Zondo J concurring):

It dealt principally with two issues: (a) Was an organ of state prohibited from raising a collateral challenge; and (b) was it correct to state, as did the majority in this judgment, that an invalid administrative act that existed in fact was binding and enforceable until set aside by a competent court? I

The answer to the question set out in (a), the minority held, was No, there being no reason in logic or principle that militated against the state raising a collateral challenge where it faced a claim that it should comply with an illegal decision. (Paragraphs [101] and [106] at 245B – C and 246B.)

As to (b), the minority held that such a statement was incorrect, and stemmed from a misapplication of the principles laid down in Oudekraal and Kirland. J

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