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Normandien Farms (Pty) Limited v South African Agency for Promotion of Petroleum Exportation and Exploitation SOC Limited and Others [2020] ZACC 5

24 March 2020

This matter has important implications for what constitutes administrative action under the Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA) in relation to applications for exploration rights. It is also important in determining when a judicial review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) is available in the context of an application for exploration rights, and the circumstances when a review under the common law principle of legality is appropriate.

The matter involves the interpretation of sections 10 and 79 of the MPRDA, and the MPRD Regulations.

Constitutional Court

Coram: Khampepe ADCJ, Jafta J, Madlanga J, Majiedt J, Mhlantla J, Theron J, Tshiqi J and Victor AJ

Judgment: Mhlantla J (unanimous)

Heard on: 26 November 2019 

Decided on: 24 March 2020

Neutral citation: Normandien Farms (Pty) Limited v South African Agency for Promotion of Petroleum Exportation and Exploitation SOC Limited and Others [2020] ZACC 5

Download the judgment here.

History of matter: The High Court found in favour of the Applicant (Normandien Farms (Pty) Limited). The Second Respondent (Rhino Oil and Gas Exploration South Africa (Pty) Limited) then successfully appealed the judgment to the Supreme Court of Appeal. Normandien Farms then appealed the judgment of the Supreme Court of Appeal to the Constitutional Court where its appeal was dismissed with costs.

Constitutional Court:

Facts: Rhino Oil and Gas Exploration South Africa (Pty) Limited (Rhino) applied for an exploration right under section 79 of the MPRDA to search for petroleum on properties belonging to Normandien Farms (Pty) Limited (Normandien).  The South African Agency for Promotion of Petroleum Exportation and Exploitation (PASA) accepted Rhino’s application for an exploration right.

The case revolves around formal defects in the process for applying for an exploration right under the MPRDA. The four stages involved in this process are:

  1. Acceptance by PASA of an application for an exploration right;
  2. Publication of the acceptance of the application;
  3. Filing of various reports with PASA as proof of legislative conformity (including an environmental impact assessment (EIA) and a Scoping Report); and
  4. If appropriate, the granting of an exploration right itself.

Normandien argued that PASA had failed to adequately complete steps one and two above and that it had suffered prejudice as a result of PASA’s failure to properly publish its acceptance. Normanien submitted that it was able to challenge this failure despite the fact that the exploration right had not been granted (stage four of the process). Rhino argued that the challenge was premature and that Normandien should have waited until stage 4 in the process to launch reveiw proceedings. Rhino submitted that Normandien had not suffered prejudice because there was substantial compliance with the relevant requirements and Rhino had in any case subsequently withdrawn its exploration right application.

The High Court found that the failures of PASA to comply with the preremptory MPRDA requirements meant that their actions were unlawful and were set aside on the basis of illegality. The High Court found that Normanied had been prejudiced since it had not had an opportunity to object to the acceptance due to failures with regards the public participation process.

Rhino succefully appealed to the Supreme Court of Appeal (SCA) which held that Normandien had not suffered prejudice and the matter was not ripe for adjudication. Note that the SCA did not decide Normandien’s application on the merits of the application or pronouce on the legality of the process – it decided the matter on the preliminary issues of ripeness and lack of prejudice.

The SCA held that:

  • Acceptance of an application for an exploration right does not constitute administrative action (and therefore cannot be reveiwed under PAJA);
  • Failures to comply with statutory duties are reviewable under the common law but a requirement for such a review is that the action must give rise to prejudice;
  • Normandien was therefore required to show prejudice but had failed to do so.

The SCA concluded that Normandien had not suffered prejudice because the exploration right process was not completed (as only two out of the four steps had ostensibly been completed). The application was therefore premature and PASA’s actions in accepting the application were not final in effect.

Normandien appealed the SCA’s decision to the Constitutional Court. After discussing issues relating to condonation, jurisdiction and mootness, the Constitutional Court found that is was not in the interests of justice to grant leave to appeal.

The order of the SCA was confirmed by the Constitutional Court, including a punitive costs order against Normandien for persisting with the application despite Rhino having withdrawn the application for exploration.

The Constitutional Court dismissed Normandien’s concerns that future applicants for exploration rights could circumvent public participation requirements based on the SCA’s judgment and held that “… the fundamental importance of public participation in the process for an exploration right application was not undermined by the Supreme Court of Appeal. Rather, the Supreme Court of Appeal stated that “while [Bengwenyama] concerned a prospecting right for minerals, the views expressed by Froneman J apply equally to exploration rights for petroleum”. This evinces the Supreme Court of Appeal underscoring the importance of public participation in the process of applying for an exploration right.” [see para 54].

 

 

 

 

 

 

 

 

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Section 24of the Constitution of the Republic of South Africa, 1996

Everyone has the right to an environment that is not harmful to their health or well-being; and to have the environment protected, for the benefit of present and future generations, through reasonable legislative and other measures that prevent pollution and ecological degradation; promote conservation; and secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social development.

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