Can an application for an exploration right in terms of section 79 of the Mineral and Petroleum Resources and Development Act, 2002 (MPRDA), and the process followed in considering whether to award an exploration right, be reviewed prior to the exploration right being granted?
This was a key question that the courts confronted in the litigation instituted by Normandien Farms (Pty) Ltd (Normandien) against the Petroleum Agency South Africa (PASA) and Rhino Oil and Gas Exploration South Africa (Pty) Ltd (Rhino), one of our clients.
In summary, the litigation described below establishes that, in the context of application processes under the MPRDA, interested parties should not approach the court until they suffer prejudice, which in effect means a final decision is reached on the relevant application. This allows application process to run its course and any reviewing court will ultimately consider the process holistically to assess whether the procedural fairness or other statutory requirements have been fulfilled.
Contentions of the parties
Normandien Farms sought to stop the environmental impact assessment and exploration right application processes midstream, before any decisions in those processes had been taken, based on alleged failures:
- by PASA to comply with a 10-day period required to notify interested parties in terms of section 10 of the MPRDA, where the notification was sent after this period but before any decision on the application was taken by PASA. Normandien contended that once the 10-day period was not complied with, the exploration right application processes a nullity that must be set aside;
- by Rhino to include certified copies of title deeds (instead relying on Deeds Office search reports) in the exploration right application, in circumstances where all the relevant information was contained in such reports. Normandien contended that a failure to comply strictly was fatal to the application even if, substantively, no information was missing;
- by Rhino to notify Normandien of the environmental impact report (EIR) process, even where it was common cause that Normandien was notified well before the extended date for submitting any comments or objections on the EIR. Again, Normandien contended that once the time for notification had passed, the process was irremediably tainted, even if a later fulsome opportunity to comment was provided before any final decision on the EIR was made.
Normandien contended that each of these bases was sufficient to set aside the exploration right and EIR processes and that even if the process as a whole is administrative, it could at any stage rely on failures to comply with statutory prescriptions to undo the process before any final decision was reached.
Rhino argued, in addition to refuting each of the grounds for challenge on the merits, that Normandien's application was premature and not ripe for adjudication.
The High Court agreed with Normandien.
In May 2019, the Supreme Court of Appeal (SCA) overturned the High Court's decision and dismissed Normandien's application. The SCA pointed out that "[a]s 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". Before such a challenge would be entertained by a court, an applicant seeking to have an exercise of public power set aside needs to show that its rights had been adversely affected, or that it had been prejudiced.
The exercise of public power, or a failure to comply with statutory duties, is generally not reviewable if the action is not final. This was reflected both in the definition of what constitutes "administrative action" in terms of the Promotion of Administrative Justice Act, 2000, and in terms of the common law principle of "ripeness".
Normandien could show neither an adverse effect on its rights or prejudice. This meant that until there was a final decision on the exploration right application and the EIR, the challenge was premature. The SCA held that Normandien impermissibly "launched a pre-emptive strike against Rhino. It may perhaps have been best advised to ‘husband its power’ in anticipation of the battle that may (or may not) lie ahead."
By the time that the matter reached the Constitutional Court, it had become moot, given that Rhino elected to withdraw its exploration right application for technical reasons. The Constitutional Court judgment thus did not have to deal with the merits of Normandien's challenge in any detail. It is clear from the tenor of that judgment that it agreed with the ripeness doctrine relied on by the SCA and that courts should only be approached with legal challenges once there is prejudice to interested parties and not for the purposes of playing spoilers in an ongoing administrative process where errors may be rectified or an adverse decision may never be reached.
Given that the application for leave to appeal was moot and there was no reason of public importance why leave should be granted, Normandien's application was dismissed by the Constitutional Court. The Constitutional Court was also highly critical of the conduct of Normandien in persisting with a moot application, in not disclosing the mootness to the Court and not withdrawing the application despite Rhino's repeated requests for it to do so. It thus made an adverse costs award on a punitive attorney-client scale, one of the very few times in the history of the Constitutional Court that a punitive award was made against any litigant.
Webber Wentzel took over the litigation on behalf of Rhino after the hearing on the merits in the High Court and represented Rhino in its leave to appeal application before the High Court and in the proceedings before the SCA and the Constitutional Court.