The Court can Step into the Minister’s Shoes – Aquila Decision in the Constitutional Court

After years of litigation, the South African Constitutional Court has given its decision on the dispute between Aquila Steel and Ziza. The dispute revolved around which company had the right to be granted a mineral right over certain land. Since South Africa’s application procedure uses a “first come first served” method, the court’s decision ultimately hinged on which company was the first to lodge a valid application.  

There were three applications:

  • Ziza’s prospecting right application, submitted April 2005, and granted February 2008;
  • Aquila’s prospecting right application, submitted April 2006, and granted October 2006; and
  • Aquila’s mining right application, submitted December 2010, but refused.

The Constitutional Court found in Aquila’s favour, finding that the first application that the Department of Mineral Resources (DMR) received, and was able to legally grant, was the third application – Aquila’s mining right application.

Ziza’s prospecting right application was the first application submitted to the DMR, and would ordinarily be the first in queue for consideration and grant. The court, however, found that this application was so defective when the Minister of Mineral Resources (Minister) considered and granted it, that the grant was unlawful and had to be set aside.

Here the Constitutional Court differed from the South African Supreme Court of Appeal (SCA) decision, which found that Ziza’s application was “substantially compliant” and could be legally granted.    

The court then considered Aquila’s prospecting right application. It found that the DMR granted this application prematurely because at the time of grant Ziza’s defective application hadn’t yet been considered and refused. Ziza’s defective application was still ahead in the queue, preventing the lawful grant of Aquila’s prospecting right application. The grant of Aquila’s prospecting right application was accordingly unlawful and had to be set aside.   

The last application standing was Aquila’s mining right application. Here the court was faced with two considerations.

First, should Ziza’s unlawfully granted prospecting right block Aquila’s mining right application in the queue? The court analysed the legal “Oudekraal principle”. This states that an unlawful action should be considered lawful until it is formally set aside by a court. Based on this principle it could be (and was) argued that the grant of Aquila’s mining right application should be blocked by Ziza’s unlawful prospecting right. The court, however, held that this principle didn’t apply and couldn’t be used by Ziza to thwart a valid grant of a mining right to Aquila.

Second, the court considered the appropriate legal remedy. There were two options. The court could refer Aquila’s mining right application back to the Minister, and order the Minister to take the decision on if the application should be granted or not. Alternatively, the court could grant “substitutionary relief”. This is where the court steps into the shoes of the public official who must make a decision, and makes the decision for them. Typically, substitutionary relief is only granted by a court where, (i) the end result is a forgone conclusion; (ii) the court is as well qualified as the original authority to make the decision; (iii) any further delay will cause unjustifiable prejudice; or (iv) the original decision maker has exhibited bias or incompetence.

Here, again, the Constitutional Court’s decision differed from the SCA. The SCA found that the court didn’t have the power to grant substitutionary relief in a grant of a mining right because (i) the minister’s power to grant a mining right, and the minister’s power to impose conditions on the mining right, are inextricably linked and it is impossible to separate these two decisions – a grant of the mining right without considering what conditions should be imposed is an invalid exercise of power; and (ii) the information in the mining right application was 7 years old, and possibly outdated, meaning that the grant of the mining right was not a foregone conclusion.

The Constitutional Court, however, held that substitutionary relief was possible because (i) the conditions that are ordinarily imposed on a mining right “are relatively standard and typically imposed regardless of who the applicant is; and (ii) no arguments were made to indicate that Aquila would be precluded from being granted an mining right. The Constitutional Court thus granted Aquila a mining right over the disputed area, and confirmed that a court is not automatically precluded from granting substitutionary relief when considering decisions regarding the grant of prospecting and mining rights in terms of the Mineral and Petroleum Resources Development Act (MPRDA).

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