A “Biblical Lazarus” August 2016

By LIPTON NCUBE, Published in Mining Law

In the recent case of Palala Resources (Pty) Ltd (Palala) v Minister of Mineral Resources and Energy (the Minister) and Others (479/15) [2016] ZASCA 80, the Supreme Court of Appeal (SCA) had to consider whether restoration of a previously deregistered company constituted a "Biblical Lazarus" in respect of a lapsed mining right.

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Palala was granted a mineral prospecting permit on 20 May 2009 in terms of s17 of the Mineral and Petroleum Resources Development Act (28 of 2002) (MPRDA) to prospect for gold and pyrite for a period of two years. As a consequence of Palala's failure to file its returns with the Registrar of Companies timeously, its registration was cancelled in terms of s73 (5) of the Companies Act (61 of 1973) (the Previous Companies Act).

During this period the third respondent, Hectocorp (Pty) Ltd, applied for the prospecting right previously granted to Palala. Hectocorp's first application was rejected on grounds that the prospecting right had already been granted to Palala.

On 13 September 2010, Palala's registration as a company was restored in terms of s73 (6A) of the Previous Companies Act. Meanwhile, Hectocorp had re-applied for and was awarded the prospecting rights over the same land despite Palala's objection to the application. On 27 October 2010, Palala submitted an application to the Department of Mineral Resources and Energy for the renewal of its prospecting right and was advised that this had lapsed due to its deregistration.

The battle of reviews and appeals then began. Palala appealed to the Acting Director-General of the Department, where it was held that there was insufficient evidence to show that Palala was finally deregistered and, therefore, it had not been proven that Palala's prospecting right had indeed lapsed in terms of s56 (c) of the MPRDA, which states that "any right, permit, or permission granted or issued in terms of this Act shall lapse, whenever a company or close corporation is deregistered in terms of the relevant Acts and no application has been made or was made to the Minister for the consent in terms of section 11 or such permission has been refused".

Hectocorp lodged its own appeal to the Minister against the Acting Director-General's decision in terms of s96 (b) of the MPRDA; in upholding the appeal, the Minister stated that the Acting Director-General's findings were "clearly misguided and misleading".

Palala then sought to review and set aside the Minister's decision by approaching the high court, which dismissed the application on the basis that Palala's prospecting right had lapsed upon its deregistration and that the subsequent restoration did not constitute a "Biblical Lazarus" for a lapsed prospecting right.

Comparison with Newlands Surgical Clinic v Peninsula Eye Clinic (086/2014) [2015] ZASCA 25

In Newlands Surgical Clinic, the SCA had to consider whether the restoration of a company by Companies and Intellectual Property Commission under s82(4) of the Companies Act (71 of 2008) (the New Companies Act), which states that "if the Commission deregisters a company as contemplated in subsection (3), any interested person may apply in the prescribed manner and form to the Commission, to reinstate the registration of the company" operated retrospectively so as to validate actions performed on behalf of the company during the period of its deregistration.

The SCA held that the wording of s82 (4) of the New Companies Act has "automatic retrospective effect",not only in revesting the company with its property but also in validating its corporate activities during the period of its deregistration.

Of interest in the Palala case is the effect of restoration of companies on their mining rights. The SCA in the Palala case also clarified the conclusive nature of s73 (6A), and held that upon restoration of the company's registration all the company's corporate activities, assets and rights are retrospectively validated as "if the company was never deregistered".

Do mining rights revive with the restoration of a company?

Following the judgement of Newlands Surgical Clinic, the SCA found that restoration of registration operates retrospectively. The court went further to hold that the restoration of the company's corporate activities including its mineral prospecting rights, even to the detriment of third parties must have been the intention of the legislature, otherwise the legislature would have qualified s56 (c) to include the words "whenever a company or close corporation is deregistered" as a trigger for the lapsing of mineral rights, furthermore by saying that "the right would not be restored if the company or close corporation was restored to the register."

The SCA in Palala held that the restoration of registration of a company retrospectively restores the company's mineral prospecting rights, which had lapsed pursuant to the deregistration.

This case takes restoration of companies a step further by protecting their mineral rights and assets as was intended by the legislature under the MPRDA, and sets an important precedent for mining companies. In light of the progressive and challenging mining legislation, the SCA's reasoning and decision is correct to cater for any deregistration that may leave a mining company dispossessed of its mineral rights.

This decision further brings the fate of mineral rights under s82 (4) of the New Companies Act, and clarifies the intention of the legislature.

Ncube is candidate attorney with Fasken Martineau. The article was reviewed by Samantha van Breda, a partner in the Corporate/Commercial Practice Group.