Merafong City Local Municipality v AngloGold Ashanti Limited

AngloGold Ashanti Limited (AngloGold) operated gold mines near Carletonville since the mid-1940s. The mines used water for industrial purposes and domestic consumption by employees. Since 1958, water was directly supplied to AngloGold by Rand Water, a water board and organ of State, through its own infrastructure. AngloGold did not use Merafong City Local Municipality's (Merafong) water and sanitation services. In July 2003, Merafong assumed the status of water services authority under the Water Services Act 108 of 1997. On 11 February 2004, Merafong notified mines in its jurisdiction, including AngloGold, to apply for approval for water supply for industrial use under s 7 of the Act. AngloGold applied on 8 April 2004 to continue obtaining water from Rand Water at Rand Water's tariff. Merafong responded on 31 May 2004, approving the supply but imposing significantly higher tariffs that included a surcharge on both industrial and domestic water use. AngloGold appealed to the Minister of Water Affairs and Forestry under s 8(4) of the Act on 11 June 2004. The Minister upheld the appeal, ruling that the 62% tariff increase was unreasonable as Merafong added no value to the services. The Minister ruled that surcharges could only be levied on water for domestic purposes, not industrial use, and directed the parties to negotiate a reasonable tariff for domestic water. Negotiations began and a draft interim agreement was reached in July 2006, but then stalled. From July 2007, Merafong took over invoicing AngloGold and imposed higher tariffs despite the Minister's ruling, which it regarded as invalid on constitutional grounds. AngloGold paid under protest to avoid water supply cuts but sought to enforce the Minister's ruling through application proceedings.

• Whether AngloGold's appeal to the Minister under s 8(4) of the Water Services Act 108 of 1997 was properly conceived
• Whether the Minister exceeded her powers under s 8(9) of the Water Services Act in making the ruling
• Whether the Minister's ruling was valid and binding on Merafong
• Whether Merafong was entitled to disregard the Minister's ruling without seeking judicial review to set it aside
• Whether sections 6 and 7 of the Water Services Act applied to the circumstances of this case
• Whether an organ of State can mount a collateral challenge to administrative action taken by another organ of State

The appeal was dismissed with costs, including the costs of two counsel.

An administrative decision, even if invalid or made ultra vires, exists in fact and has legal consequences until it is set aside by a court through proper judicial review proceedings. An organ of State cannot simply disregard or treat as non-existent an administrative decision made by another organ of State, but must approach a court to have it set aside through the proper process of law. To do otherwise constitutes a breach of the principle of legality. In post-constitutional South African administrative law, the absence of jurisdictional facts or preconditions for the exercise of administrative powers does not render the resulting decision a nullity from the outset; rather, it means the decision is reviewable and capable of being set aside by a court. A collateral challenge to the validity of administrative action is a remedy available to persons threatened with coercive action by a public authority, but is not available to an organ of State seeking to defend against action by another organ of State.

The Court expressly assumed without deciding that the Minister's decision was ultra vires as argued by Merafong. This indicates the Court's view that even on the assumption most favorable to Merafong's case, its failure to seek judicial review was fatal to its position. The Court also did not decide whether sections 6 and 7 of the Water Services Act were applicable to the circumstances, or whether AngloGold's appeal to the Minister was properly conceived, as these substantive issues were rendered moot by the procedural findings. The Court's reference to the Constitutional Court's statement in Kirland that the Constitution "does not require [public officials] to act without erring" but "anticipates imperfection" and "makes it subject to the corrections and constraints of the law" reflects a broader judicial philosophy about the role of administrative law in a constitutional democracy.

This case establishes important principles regarding the binding nature of administrative decisions, even if potentially invalid, until set aside by a court. It reinforces the rule of law principle that organs of State cannot simply disregard administrative decisions made by other organs of State without seeking judicial review. The case clarifies that in post-constitutional administrative law, the absence of jurisdictional facts does not render an administrative decision a nullity but makes it reviewable. It also confirms that the remedy of collateral challenge to administrative action is not available to organs of State when defending against actions by other organs of State. The judgment emphasizes the importance of proper processes and adherence to legal procedures by government bodies, and that government should be held to the pain and duty of proper process rather than taking shortcuts.