BENGWENYAMA-YA-MASWAZI COMMUNITY & OTHERS v GENORAH RESOURCES
(PTY) LTD & OTHERS 2015 (1) SA 197 (SCA)
BENGWENYAMA-YA-MASWAZI COMMUNITY & OTHERS v GENORAH RESOURCES
(PTY) LTD & OTHERS 2015 (1) SA 219 (SCA)
BENGWENYAMA-YA-MASWAZI COMMUNITY & OTHERS v GENORAH RESOURCES
(PTY) LTD & OTHERS (unreported, Case No. 27136/2011, Gauteng North High
Court, 21 June 2013)
BENGWENYAMA-YA-MASWAZI COMMUNITY & OTHERS v GENORAH RESOURCES
(PTY) LTD & OTHERS (unreported, Case No. 58867/2011, Gauteng North High
Court, 21 June 2013)
Importance
Parties
Facts
This important series of cases follows on from the precedent-setting
decision of the Constitutional Court in Bengwenyama Minerals (Pty)
Ltd & others v Genorah Resources (Pty) Ltd 2011 (4) SA 113 (CC). While
the Constitutional Court decision is valuable for the issues of public
participation and consultation and the right of communities entitled to
a preferential prospecting right to a hearing, the second series of
Bengwenyama decisions is valuable for the clarity obtained on which
entities have authority to represent a community; whether companies
can hold preferential prospecting rights as contemplated in s 104 of
the Constitution; the level of shareholding necessary to protect
community interests; and the circumstances under which a court will
order substitution of the right, rather than referring the matter back to
the Minister for reconsideration. For a critical analysis of this series of
decisions see T. Humby “The community preferent right to prospect:
Nagivating the faultlines of community, land, benefit and development
in Bengwenyama II” (forthcoming in the South African Law Journal,
2016).
First Applicant/Appellant: Bengwenyama-ya-Maswazi Community
Second Applicant/Appellant: Bengwenyama-ya-Maswazi Tribal
Council
Third Applicant/Appellant: Miracle Upon Miracle Investments (Pty)
Ltd
In the Eerstegeluk matter:
First Respondent: Genorah Resources (Pty) Ltd
Second Respondent: Roka Phasha Phokwane Traditional Council
Third Respondent: Roka Phasha Community
Fourth Respondent: Minister for Mineral Resources
In the Noooitverwacht matter:
First Respondent: Minister for Mineral Resources
Second Respondent: Sizane Nkosi
Third Respondent: Nkotola Sam Nkosi
Fourth Respondent: Genorah Resources (Pty) Ltd
The first two judgments in this series of cases were decided on 21 June
2013 in the Gauteng North High Court (henceforth referred to as
Bengwenyama
HC
(Eerstegeluk)
and
Bengwenyama
HC
(Nooitverwacht) respectively. The matter was taken on appeal and
heard in the Supreme Court of Appeal in August 2014. These cases
were decided on 26 September 2014 and are henceforth referred to as
Bengwenyama SCA (Eerstegeluk) and Bengwenyama SCA
(Nooitverwacht) respectively.
The cases in this series ensued after the Bengwenyama
Community’s landmark victory in the Constitutional Court
(Bengwenyama Minerals (Pty) Ltd & others v Genorah Resources (Pty)
Ltd 2011 (4) SA 113 (CC)). This case was the culmination of a struggle
that had commenced in 2007, when the Bengwenyama Tribal Council,
their corporate investment vehicle at the time, Bengwenyama
Minerals (Pty) Ltd, and a number of trustees initiated judicial review
proceedings against a black empowerment company, Genorah
Reources, and the Minister for Mineral Resources over prospecting
rights granted to two of the Community’s ancestral farms:
Nooitverwacht and Eerstegeluk. The nub of Bengwenyama Minerals’
contention was that whilst it had submitted an application for
prospecting rights to these properties (though not explicitly in terms
of s 104 of the MPRDA, which allows for community’s to submit a
preferential right to prospect or mine), the minister had granted
prospecting rights to Nooitverwacht and Eerstegeluk to Genorah
Resources, despite the latter’s flagrant failure to consult with the
Bengwenyama community.
Complicating the Bengwenyama’s case was that from the start of
the litigation, two members of the Bengwenyama Royal Council (Dr
Sizani Nkosi, a medical practitioner, and Mr Sam Nkosi) sought and
were granted leave to intervene in the judicial review pertaining to
Nooitverwacht in order to persuade the court that the Tribal Council
had become defunct, that the objects of the established trust were not
really to facilitate the upliftment of the community, and that the
applicants’ application was as such not a ‘community’ application
contemplated in s 104. In the case of Eerstegeluk, Genorah Resources
had formed a strategic alliance with the Roka Phasha Community,
which maintained that it also had an interest in the land.
The Bengwenyama applicants lost in both the High Court and
Supreme Court of Appeal, but upon appeal to the Constitutional Court
their fortunes were dramatically reversed. The Constitutional Court
upheld the appeal and set aside the prospecting rights granted to
Genorah. The Constitutional Court found particularly that Genorah did
not comply with the requirements for consultation, and that as the
application for a s 16 prospecting right had the effect of disentitling a
community to the ‘special category of right’ created by s 104, the
community was entitled to a hearing before a prospecting right in
terms of s 16 could be granted. The court however refrained from
substituting the Bengwenyama proponents as the holder of the rights
or even commenting on the merits of their application, and limited
their protection of this right to a right to a hearing.
In the meantime the Bengwenyama Tribal Council had re-launched
their community investment vehicle as Miracle-Upon-Miracle
Investments (MUM) in which the community, via the Tribal Council,
now held 51 per cent shares via Nurinox (Pty) Ltd, a company wholly
owned by the Bengwenyama community. The remaining 49 per cent of
the shares were held by Atlantic Nominees (Pty) Ltd, in which the
South African investors and Forbes, the new Canadian investor that
was assisting with the funding of the ongoing litigation, held shares.
On the day the Constitutional Court handed down its judgment, the
Tribal Council and MUM submitted a new s 104 application for
prospecting rights to Nooitverwacht and Eerstegeluk. This application
was allegedly brought with the full support of the Tribal and Royal
Councils and after extensive consultation within the community.
Shortly thereafter two competing applications to the farms were
submitted: One by Dr Nkosi and Mr Nkosi, purportedly also on behalf
of the ‘community’ and one by Genorah Resources, in apparent ‘joint
venture’ with the neighbouring Roka Phasha community.
After making it as difficult as possible for the Bengwenyama
community to be afforded a hearing in line with the Constitutional
Court’s judgment (insisting for instance that the meeting be convened
on Christmas Eve), and failing to insist that the competing applicants
consult with the community, in February 2011 the Minister reawarded the prospecting rights to Eerstegeluk to Genorah and the
Roka Phasha, and refused the Bengwenyama application. The reason
given for this refusal was that the Bengwenyama community was
“neither the registered landowner nor the occupier of the farm”. In
the case of Nooitverwacht, the Minister split the prospecting right
50/50 between MUM and “the community”. Subsequent to this, it
became apparent that in the eyes of the Minister and the DMR, “the
community” referred to the application submitted by the Dr Nkosi and
Mr Nkosi. The linkages between Genorah and the Nkosi’s became
apparent when Nkwe, as the holding company of Genorah, issued a
statement on the Australian Securities Exchange on 17 March 2011
(the Bengwenyama community had still not been notified of the
refusal of its application) that its shareholding in Eerstegeluk had been
restored and that a “joint-ownership scenario” in relation to the rights
for Nooitverwacht would be likely to ensue. Further, it later transpired
that Dr Nkosi had been instrumental in the signing of an agreement
with Genorah – purportedly on behalf of the Tribal Council – which
appointed the latter as the technical and financial adviser to the
community for purposes of exercising the prospecting rights on
Nooitverwacht. This agreement (referred to as the “impugned
agreement”) laid the basis (amongst other evidence) for the charges of
fraudulent conduct made by the Bengwenyama applicants in respect
of the Nkosi’s. Although the right had been granted 50/50 to the
Nkosi’s and MUM, when the right was executed by the DMR it was
issued as an undivided exclusive right and made subject to the
impugned agreement. This effectively excluded MUM and by
extension the broader Bengwenyama community from the
prospecting rights to Nooitverwacht.
The Bengwenyama community, the Tribal Council and MUM
subsequently launched another round of judicial review in May 2011,
initiating the second tranche of litigation. They sought a review and
setting aside of the Minister’s decisions relating to the award of the
prospecting rights after the Constitutional Court judgment, and
substitution of the community, as represented by the Tribal Council
and acting through MUM, as the one hundred per cent holder of
Relief Sought
prospecting rights over both farms. The call for substitution was based
on allegations of bias on the part of the Minister and her delegated
officials. In respect of the application relating to Nooitverwacht they
additionally sought an order that the Tribal Council was the only
authorized representative in dealings with the Minister and that the
impugned agreement was fraudulent.
When the matter was heard in the Gauteng North High Court in
2012 the cases were split, a situation that persisted in the Supreme
Court of Appeal. The outcome of each of the cases in the series is as
follows:
 Bengwenyama HC (Eerstegeluk): The court set aside the
prospecting right granted to Genorah and the Roka Phasha on the
basis of the latter’s misrepresentation of facts in their application,
but found no apprehension of bias on the part of the minister and
refused to substitute the Bengwenyama community, as
represented by the Tribal Council and MUM, as the rights holder.
The matter was thus referred to the minister for reconsideration.
The court also found that for purposes of s 104 the Bengwenyama
Community’s success in their land restitution claim was almost
guaranteed.
 Bengwenyama HC (Nooitverwacht): The court dismissed the
application in its entirety, finding that the objective facts did not
support a finding that the Bengwenyama applicants should be
preferred as the sole representative of the community, and that
the benefits flowing from MUM shareholder’s agreement were
suspect.
 Bengwenyama SCA (Eerstegeluk): The court set aside the Minister’s
award of the prospecting right to this farm to Genorah and the
Roka Phasha, as well as her decision not to award the right to the
Bengwenyama community. The court directed the minister to issue
an exclusive prospecting right to MUM subject to a condition
changing a key threshold in MUM’s shareholder agreement. The
court also found that on the facts of the matter, the Bengwenyana
community possessed a right “to be registered” in the land.
 Bengwenyama SCA (Nooitverwacht): The court declared that the
Tribal Council was the only authorized representative of the
Bengwenyama community in its dealings with the Minister. It
further set aside the prospecting right that had been granted 50/50
to MUM and “the community” and made subject to the impugned
agreement with Genorah, and directed the Minister to issue a “full
and exclusive prospecting right” in respect of Nooitverwacht to
MUM. The court also found that the application submitted by
MUM was in substance one submitted by the Bengwenyama
community. The substitution of MUM as the prospecting rights
holder over Nooitverwacht was however made subject to the same
amendment of the shareholder’s agreement as in the Eerstegeluk
matter.
Review and setting aside of the Minister’s decision to award
prospecting rights to the farms Nooitverwacht and Eerstegeluk to
Genorah Resources and two other parties purportedly representing
the community, and substitution of the community, as represented by
the Tribal Council and acting through MUM, as the one hundred per
cent holder of prospecting rights over both farms.
Legal Issues & Issue 1: Did the applicants have locus standi to bring the application?
Judgment
in Judgment: Makgoka J addressed this as one of the “technical points”
Bengwenyama HC raised by the respondents (para 13). The respondents had argued that
the community and the tribal council had not complied with the
(Eerstegeluk)
provisions of the Traditional Leadership and Governance Framework
Act No. 41 of 2004, and the Limpopo Traditional Leadership and
Institution Act 6 of 2005 and hence could not be recognized as a
traditional community and traditional council respectively. As such,
they did not have locus standi to launch the proceedings. However,
the applicants were able to show that they had substantively complied
with the provisions of these Acts, specifically as regards to gender
representation on the traditional council. Makgoka J held that the
council did have locus standi notwithstanding that these facts had
been alleged in the replying and not the founding affidavit (para 16).
He also agreed with the applicants that the courts have consistently
allowed communities to pursue customary and restitutionary rights in
their own name (para 17).
As regards the locus standi of MUM, the respondents had argued
that s 104 contemplates that a “community” is entitled to the
prospecting right. MUM not being a community, they had no
entitlement to the right. Makgoka J found however that this argument
lacked merit: There was no impediment to a community forming a
corporate vehicle to pursue their interests. Moreover, in the
Constitutional Court the court had not frowned upon the community
pursuing their interests through a corporate vehicle (para 19); the
need for the community to prove they had the requisite technical and
financial resources to benefit from the prospecting right was
consistent with the establishment of some corporate vehicle (para 20);
and the Minister and DMR had been satisfied that MUM was an
appropriate vehicle for MUM to explore its s 104 right (para 21). It
followed that MUM had locus standi (para 21).
Issue 2: Is Eerstegeluk due to be registered in the name of the
Bengwenyama community?
Judgment: Makgoka J noted that it was common cause Eerstegeluk
was not registered in the name of the community. The Bengwenyama
community had been dispossessed of the farm in 1945, but had lodged
an application for restitution, which had no yet been finalized (para
22). The court noted the various pieces of evidence before it regarding
ownership and the Bengwenyama’s prospects of success in the
restitution claim. On the side of the Bengwenyama there was an
expert opinion by historians (para 23), and an uncontested study that
Roka Phasha community members constitute an insignificant minority
on Eerstegeluk (para 25). On the side of the Roka Phasha, there was a
notice, issued by the government of Lebowa in 1990, conferring
traditional authority and jurisdiction over Eerstegeluk to the Roka
Phasha. As Makgoka J noted, however, such allocation of authority did
not confer registered title to the farm, which remained vested in the
South African state. Apart from the allocation by the Lebowa
government the Roka Phasha had not asserted any rights to
Eerstegeluk and had taken no steps to obtain registered title (paras 24,
26). As the majority of Eerstegeluk’s residents belong to the
Bengwenyama community, there was no impediment to their being
awarded restoration of the farm – it was “inconceiveable” that the
Bengwenyama would not be granted registered title to it (para 27).
The judge was careful to note that he could not determine the fate of
the Bengwenyama’s land restitution claim that was pending in the
Land Claims Court, but held that the court should also not ignore the
application’s prospects of success, which was “almost guaranteed”
(paras 30 – 31).
Issue 3: Had Genorah and the Roka Phasha community made false
representations in their s 104 application to the Minister?
Judgment: The judge found that the Roka Phasha had made three
false and/or misleading statements in their s 104 application (para 34).
He rejected the respondents’ attempts to explain these statements
away stating: “I … harbour no doubt that those incorrect assertions
were deliberately made, which makes them nothing but patent lies
(para 36). Makgoka J further found that the false/misleading
statements materially influenced the Minister in granting the
prospecting right to Eerstegeluk to Genorah Resources and the Roka
Phasha (paras 37–38). It was therefore clear that the Minister’s
decisions were based on errors of fact and fell to be set aside in terms
of PAJA (para 40).
Issue 4: Was the applicants’ apprehension of bias on the part of the
Minister and DMR well-founded?
Judgment: Based on statements Nkwe had made to the Australian
Securities Exchange the applicants alleged that Nkwe and Genorah had
enjoyed privileged and improper access to decision-makers within the
department. They contended that the Minister’s decision was
therefore tainted by bad faith, alternatively, the apprehension of bias
against the applicants. However, Makgoka J could find no basis for the
improper relationship alleged by the applicants (para 41).
Issue 5: Were there legal grounds to order substitution on the right, or
should the matter be remitted to the Department for reconsideration?
Judgment: Justifying its strong argument for substitution, the
applicants pointed out that the Bengwenyama Community’s s 104
application fully complied with the MPRDA, that there was an
apprehension of bias on the part of the Minister, and that there had
been a considerable length of time during which the Community had
been denied the right to prospect on their land (para 43). The judge
held, however, that he was reluctant to grant the prospecting rights,
for two reasons. Firstly, as a result of the Roka Phasha’s misleading
statements it was clear that the Minister had never properly
considered the Bengwenyama’s application. The Minister and
Department should accordingly be afforded an opportunity to apply
their minds to the application (para 44). Secondly, he expressed
“unease” with MUM’s shareholder agreement and the proportion of
shareholder and control held by Nurinox (which represented the
community’s interest. In his view the shareholding agreement was not
an adequate vehicle to ensure that a significant portion of the benefits
accrued to the community, as opposed to corporate vehicles such as
Legal Issues &
Judgment
in
Bengwenyama HC
(Nooitverwacht)
Legal Issues &
Judgment
in
Bengwenyama
SCA
(Nooitverwacht)
MUM (paras 45–49). The court therefore declined to grant
substitution (para 50).
Issue 1: Is the traditional council the only authorised representative of
the Bengwenyama Community in its dealings with the Minister?
Judgment: The issue of who is entitled to represent the community
rose pertinently in the Nooitverwacht matter because of the
contending voices of Sizane and Sam Nkosi, who were members of the
advisory Royal Council but not of the traditional council. Makgoka J
noted that he had “difficulty” in authorizing the traditional council as
the sole representative of the community because it was not borne
out by the objective facts (para 16). While the traditional council might
have been the structure de jure entitled to represent the community,
it was plain from a reading of the papers as a whole that there were
divisions in the community concerning the prospecting rights on the
farms and who the empowerment partner should be (paras 16–17). “It
is certainly not for the Minister to concern herself with the disputes
around the leadership of traditional communities and structures and
who is or not (sic) authorised to act on behalf of the traditional
communities involved in applications for prospecting rights,” the court
said (para 18). The main thrust of the applicants’ case – that Dr S. and
Mr S. Nkosi had fraudulently held themselves out to be the
representatives of the community – could not be sustained. It seemed
the in submitting their application the two Nkosi’s had the mandate of
at least a portion of the community (paras 20–21). Having found that
he could not set aside the right granted to MUM and “the
community”, Makgoka J expressed the same concerns regarding
MUM’s shareholding agreement as expressed in the Eerstegeluk case
(para 23).
Issue 1: Did the Tribal Council have legitimacy/standing? Were they
the authoritative voice of the community?
Judgment: The respondents in the SCA once again attacked the
legitimacy of the Tribal Council, arguing that it was not a properly
recognized or constituted legal entity. The alleged that the Traditional
Leadership and Governance Framework Act (TLGFA) and the Limpopo
Act on traditional leadership did not recognize “tribal councils” (para
35). They asserted that in order for the Bengwenyama Tribal Council to
be formally recognized the prescripts set out in s 2(2)(a) of the TLGFA
had to be observed; i.e. a notice confirming the tribal council’s
reconfiguration as a “traditional council” had to be published in the
provincial Gazette, in accordance with provincial legislation and after
consultation with the provincial House of Traditional Leaders, the
community concerned, and if applicable the king or queen under
whose authority the community fell (para 36). MUM and the
Bengwenyama Tribal Council submitted that the use of the term
“Tribal Council” was merely a case of imprecise nomenclature; that it
had always functioned as a “traditional council” as contemplated by
the TLGFA and the Limpopo Act, and that it had at all material times
operated with the recognition of the Limpopo Provincial Government
as the traditional council of the Bengwenyama Community (para 35).
Navsa JA pointed out that the respondents insistence on compliance
with s 2(2)(a) of the TLGFA failed to take into account the transitional
provisions set out in s 28(1) – (4) of the same Act (para 36). After
reviewing the history of the Bengwenyama Tribal Council (paras 37 –
38), the court held the Tribal Council was in fact a constitutional and
statutorily established institution (para 39). Navsa JA concluded:
“Having regard to the legislative underpinning referred to above, and
to the extensive community consultation process the appellants
demonstrated that they had embarked upon, in relation to the
circumstances of this case I can hardly think of a more authoritative
voice for the community than the Tribal Council. In my view the Tribal
Council and MUM have demonstrated the Tribal Council’s de facto
existence for a century and proved its legal existence for much of that
time” (para 40).
Issue 2: Is MUM, a corporate entity, entitled to a preferent
prospecting right?
Judgment: The SCA, rather than considering this question in isolation,
linked the MUM’s legitimacy to hold a prospecting right with the
extent of community shareholding in the company (paras 45 – 47).
While acknowledging the applicants’ argument – that in the “real
world” of commerce and high finance it was naïve to imagine that a
traditional community would be able to raise sufficient finance and
gather appropriate technical expertise to be able to properly utilize a
prospecting right (para 45) – the court nevertheless also took seriously
the respondents’ contention that the MUM shareholders’ agreement
proved that the Bengwenyama Community did not control the
company; that the interest held by the community could be diluted to
the point where it would be outvoted; and that the financial benefit
accruing to the community would be negligible (para 47). The
respondent’s argument was thus twofold: Firstly, that the
Bengwenyama Community did not control MUM; and secondly, that
the shareholders’ agreement did not meet the prescripts of s 104(2)(a)
and (c) of the MPRDA (para 47).
Navsa JA noted that, superficially at least, the Bengwenyama
Community through its 51% share in MUM via Nurinox appeared to be
the majority shareholder (para 48). However Clause 12.2 of the
shareholders’ agreement restricted the decision-making capacity of
both the shareholders and directors in respect of a range of matters
set out in an Appendix, to the effect that no decision could be taken
without the support of the shareholders holding 70% of the issued
share capital of the company. This had to be read together with Clause
17.4 of the agreement, which provided that the shares held by
historically disadvantaged South Africans in MUM would not fall below
26% or the level set by the Mining Charter from time to time (para 49).
The “veto right” that Clause 12.2 purportedly established could thus
be rendered ineffective if community shareholding fell to 26% (para
50). During the course of the proceedings, however, counsel for the
applicants had submitted an order in relation to Clause 12.2 of the
shareholders agreement that raised the threshold of the “veto” to
74.1%, and the court accepted this (para 51). Navsa JA concluded: “I
believe this amendment adequately addressed the respondents
concerns, and safeguards the shareholding of the BYMC in MUM (para
51).
The court dealt with one further contention regarding MUM’s
capacity to hold a preferential prospecting right, namely that
companies have an existence separate from their shareholders, relying
on the precedent in Goldberg NO v PJ Joubert Ltd 1960 (1) SA 521 (T)
(para 52). The court held that resort to this statement “missed the
point”and that the question was rather whether, adopting a purposive
approach, the Bengwenyama Community could be said to be applying
for a s 104 prospecting right through MUM (para 53). Navsa JA once
again endorsed the notion that in the “real world of high finance” one
could hardly imagine a community such as the Bengwenyama
Community engaging in mining without using a corporate vehicle to
garner technical and financial expertise. In the court’s view, the Tribal
Council and MUM had demonstrated that the Bengwenyama
Community had overwhelmingly endorsed an application for a
prospecting right using MUM as a vehicle (para 54). Of necessity,
acquiring the technical and financial expertise resulted in a certain
quid pro quo whereby other parties were given shareholding in the
company (para 55).
Issue 3: Should the applicants be substituted as the rights holders?
Judgment: In coming to this point, the court spent some time dwelling
upon the reprehensible conduct of the DMR. After noting that the
DMR had not heeded the dicta of the Constitutional Court in the
preceding Bengwenyama decision (para 58), the court explained why
it considered the DMR’s conduct to be “reprehensible” (para 61).
While stopping short of labelling the DMR, Genorah Resources and
Sam and Sizane Nkosi’s conduct as “fraudulent”, the court
nevertheless saw fit to express their displeasure by imposing an
appropriate costs order (para 62).
Having decided that the right granted to Genorah and the
“community” (as fraudulently represented by the two Nkosis), the
court decided that in the circumstances of the case it was appropriate
to make an order of substitution (para 64). Citing the opinion of
Professor Cora Hoexter in her book Administrative Law in South Africa
2nd edition, the court held that it was “clear in our law that where the
original decision maker has, as in this case, twice exhibited bias or
incompetence, the reviewing court can correct that decision itself
(para 64).
Legal Issues & Issue 1: The issues in this case, and the court’s decisions thereon,
Judgment
in largely overlap with the court’s decisions in the Nooitverwacht matter.
Bengwenyama
The one additional issue posed by the Eerstegeluk case was whether
the fact that the land was not yet registered in the name of the
SCA (Eerstegeluk)
Bengwenyama Community militated against their being awarded a
preferential prospecting right.
Judgment: It was common cause that Nooitverwacht and Eerstegeluk
were registered in the name of the state. As in the High Court, the
respondents contended that the Minster was correct in refusing
MUM’s prospecting rights application on the basis of the
Bengwenyama not holding registered title to the land. This ignored,
the court added, the fact that the Roka Phasha itself did not have
registered title (para 17). Having reviewed the evidence submitted by
the applicants (which included the expert opinion of legal historians,
the results of a land survey, and the proof of their restitution claim)
the court simply concluded that s 104 contemplates that a prospecting
right can be granted to a community that either is the registered
titleholder or will be the registered titleholder in the future. In the
present case there was no indication that the Bengwenyama’s land
restitution claim would not be successful (para 60).