Minister of Water and Sanitation and Others v Lötter NO and Two Similar Cases

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Zondo CJ, Baqwa AJ, Kollapen J, Madlanga J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J and Rogers J
• Judgment Date: 15 March 2023
• Citation: 2023 (4) SA 434 (CC)
• Hearing Date: 15 March 2023
• Counsel: R Ramawele SC (with K Magano and P Loselo) for the appellants. GL Grobler SC (with JL Gildenhuys SC) for the respondents in the Lötter NO and Wiid matters. M Oosthuizen SC (with J Rust SC) for the respondent in the SAAWUA matter.
• Docket Number: CCT 387/21 [2023] ZACC 09
• Court: Constitutional Court

Madlanga J (Zondo CJ, Baqwa AJ, Kollapen J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J and Rogers J concurring):

Introduction

[1] This is an application for leave to appeal against a judgment of the Supreme Court of Appeal. [1] That court set aside a judgment of the Gauteng Division of the High Court, Pretoria. [2] The High Court judgment concerned three matters. [3] The application before us is about all those three matters. Before the High Court the matters raised the same central issue: the interpretation of s 25(1) and (2) of the National Water Act [4] (Water Act). That is what is at issue before us. More specifically, what we must determine is whether a water use entitlement obtained in terms of the Water Act may be 'transferred' [5] to a third party and, if so, whether a fee may be charged for the transfer. To use the state applicants' terminology, the second part of the question is whether holders of water use entitlements may 'trade' in the entitlements. [6]

Background

[2] Starting with the Lötter NO matter, the Doornkraal Business Trust (Doornkraal) owns farms in Somerset East in the Eastern Cape. It concluded an agreement with Britzkraal Properties (Pty) Ltd (Britzkraal) in terms of which it purchased 30 hectares of Britzkraal's water use entitlement for R1 950 000. In terms of s 25(2) of the Water Act, Britzkraal surrendered its water use entitlement. Doornkraal applied for a licence in terms of s 41 of the Act in respect of that water use entitlement. To this end, Doornkraal submitted a detailed motivation that dealt with each of the relevant considerations for the grant of a licence listed in s 27(1) of the Water Act. The Director-General of the Department of Water and Sanitation (Director-General), who is the responsible authority for purposes of s 41 applications and who is the second applicant in all the three matters before us, refused Doornkraal's application. Two of the reasons given for the refusal were that s 25(2) of the Water Act makes no provision for the transfer of a water use entitlement from one person to another and that the Water Act does not permit trading in water use entitlements. [7] Doornkraal, through its trustees, instituted proceedings

Madlanga J (Zondo CJ, Baqwa AJ, Kollapen J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J and Rogers J concurring)

in the High Court for the review and setting-aside of the Director-General's decision and for a declarator on the meaning of s 25(2) of the Act.

[3] Coming to the Wiid matter, three agreements were concluded between Mr Wiid, Torqhoff Boerdery (Pty) Ltd and the trustees of the De Kalk Trust, on the one hand, and the GP Viljoen Trust, on the other. In the agreements, the GP Viljoen Trust undertook to surrender three water use entitlements in terms of s 25(2) of the Water Act to facilitate applications for licences to be made in terms of s 41 of the Water Act in respect of the three water use entitlements. In the Wiid agreement the contract price was R5 920 000. In the Torqhoff agreement the contract price was R15 413 333. And in the De Kalk Trust agreement it was R2 666 667. The purpose of the transfer was to enhance the combined crop-farming operations of Mr Wiid, Torqhoff Boerdery and the De Kalk Trust in the Hopetown district of the Northern Cape. Mr Wiid, Torqhoff Boerdery and the De Kalk Trust applied for licences in terms of s 41 of the Water Act in respect of the three entitlements. For the same reasons given in the Lötter matter, the Director-General did not grant the licences. Mr Wiid, Torqhoff Boerdery and the De Kalk Trust (the last-mentioned, through its trustees) brought an application in the High Court seeking the same relief as that applied for in the Lötter matter.

[4] I next move on to the SAAWUA matter. The South African Association for Water User Associations (SAAWUA) is a voluntary association made up of a number of water user associations and irrigation boards. SAAWUA, Eagle's Nest Investments 3 CC (Eagle's Nest) and Thusano Empowerment Farm (Pty) Ltd (Thusano Empowerment) applied in the High Court for a declarator on the meaning of s 25(1) and (2) of the Water Act. In bringing suit, SAAWUA acted in its own interest, on behalf of its members and in the public interest. What triggered the litigation were refusals by the Director-General of applications for transfers of water use entitlements that Eagle's Nest and Thusano Empowerment had made.

[5] Interestingly, it is common cause that in about 1998 when publicising the Water Act, the Department of Water and Sanitation (the Department) said — in so many words — that holders may trade in water use entitlements. It did not end there. During the period 1998 to 19 January 2018 the Department consistently allowed trading in water use entitlements. But on 19 January 2018 the Department issued

Madlanga J (Zondo CJ, Baqwa AJ, Kollapen J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J and Rogers J concurring)

a circular in which it said that s 25 does not allow trading in water use entitlements. This change of stance serves to explain what informed the Director-General's impugned decisions.

[6] The High Court dismissed all three applications. In the main, it held that on a proper reading of s 25 of the Water Act, trading in water use entitlements is not allowed as it is at variance with s 2 of the Act. Section 2 provides that the purpose of the Act is —

'to ensure that the nation's water resources are protected, used, developed, conserved, managed and controlled in ways which take into account amongst other factors —

. . .

(c)

redressing the results of past racial and gender discrimination; . . .'.

On appeal to it, the Supreme Court of Appeal was split four – one. The minority agreed with the High Court's conclusion. The majority upheld the appeals. It held that s 25(1) and (2) of the Water Act does permit the temporary or permanent transfer of water use entitlements from a holder to a third party. The applications are now before us for leave to appeal. The actively participating applicants are the Minister of Water and Sanitation and other state functionaries. [8] I will simply refer to these state applicants as the applicants.

The applicants' submissions

[7] The applicants contend that the ordinary grammatical meaning of s 25(1) of the Water Act does not include the transfer of water use entitlements to a third party. Section 25(1) provides:

'A water management institution may, at the request of a person authorised to use water for irrigation under the Act, allow that person on a temporary basis and on such conditions as the water management institution may determine, to use some or all of that water for a different purpose, or to allow the use of some or all of that water on another property in the same vicinity for the same or similar purpose.'

[8] The applicants call that part of this section — which concerns allowing, on a temporary basis, 'a person authorised to use water for irrigation under the Act' to use some or all of the water for a different purpose — 'the first leg'. I will call this part of the section 'the first part', and the rest

Madlanga J (Zondo CJ, Baqwa AJ, Kollapen J, Majiedt J, Mathopo J, Mbatha AJ, Mhlantla J and Rogers J concurring)

of the section 'the second part'. The applicants accept, correctly, that the first part concerns allowing water use by the holder for a different purpose on the same property in respect of which the authorisation was granted.

[9] What is in contention is the second part of s 25(1), ie allowing the use of some or all of the water on another property in the same vicinity for the same or similar purpose. The applicants take issue with the Supreme Court of Appeal's interpretation of this part. They contend that this part contemplates temporary use of water for the same or similar purpose on another property in the same vicinity by the holder, not a third party. They submit that this interpretation is informed by the fact that the section refers to use 'on another property' and says nothing about such use being 'by another person or third party'. They also argue that 'transfer of water use authorisations' in the heading under which s 25 falls means no more than the transfer of a water authorisation from one property to another, 'and not from an authorised water user to a third party'. The applicants contend that their interpretation is in harmony with the rest of the provisions of the Water Act.

[10] I set out the applicants' submissions on the question whether s 25(1) does allow the charging of a fee shortly.

[11] Coming to s 25(2) of the Act, this section provides:

'A person holding an entitlement to use water from a water resource in respect of any land may surrender that entitlement or part of that entitlement —

(a)

in order to facilitate a particular licence application under section 41 for the use of water from the same resource in respect of other land; and

(b)

on condition that the surrender only becomes effective if and when such application is granted.'

[12] The applicants argue that this section is meant to facilitate a licence application in terms of s 41 of the Water Act by the holder, not a third party. According to the applicants, s 25(2) finds application where the holder wants to use water on a property other than the property to which the entitlement attaches. So, under this section as well, a third party does not feature.

[13] On the question whether the Water Act allows the charging of a fee in respect of transactions concluded in connection with water use entitlements, the applicants' answer is in the negative. As I indicated earlier, until 19 January 2018 the...