MALABA DCJ: This is an appeal against the judgment
of the High Court given on 6 December 2006 granting an application for a final
order and confirmation of an interim order authorising the appellant to have
rights under Special Grant No. 1278 to mine precious stones (diamonds) in area No.
405 in the district of Masvingo.
The background facts are
these. On 13 December 1992 the first
respondent gave to Auridiam Zimbabwe (Pvt) Ltd a "Special Grant" No. 1278 under
Part XV11 of the Mines and Minerals Act [Cap.
21:05] ("the Act") authorizing it to carry out mining operations for
diamonds in an area covering approximately 70 hectares within reserved area No.
405 in the mining district of Masvingo for a renewable period of 25 years.
Clause 14 of the Special
Grant provides:
"Rights under
this grant cannot be transferred and shall not be ceded or otherwise assigned
without the consent of the Secretary in writing. Such consent shall be subject to the
provisions of s 265 of the Act."
The Secretary referred
to in clause 14 of the Special Grant is the Secretary for Mines and Mining
Development ("the Secretary"). The
reference in clause 14 to s 265 of the Act was the numbering as it existed in
1992 in terms of what was then called the Mines and Minerals Act [Cap. 165]. In the revised edition of Statutes of 1994
the section number became 282. Section 282
of the Act provides:
"Notwithstanding
anything contained in this Act or any other enactment, no holder of a mining
location registered for precious stones or a mining lease on which the
principal mineral being mined or to be mined is precious stones shall tribute,
cede, assign, sell or otherwise alienate in any manner whatsoever that mining
location or mining lease or any interest therein without the permission of the
Minister."
On 13 February 1997
Auridiam Zimbabwe
(Pvt) Ltd changed its name to River Ranch (Pvt) Ltd ("the fourth
respondent"). The fourth respondent
continued the mining operations and production of diamonds in terms of the
Special Grant until it was placed under voluntary provisional liquidation on 24
February 1998. Mr Lewis Bailey of KPMG
was appointed the provisional liquidator.
On 13 October 1999 the
provisional liquidator representing the fourth respondent and its creditors
entered into an agreement of compromise with the appellant. The company had recently been incorporated by
Mr and Mrs Farquhar who had acted as fourth respondent's buyers before it was
placed under provisional liquidation.
The purpose of the agreement of compromise was stated as being to enable
the appellant to take transfer of all proved claims of creditors of fourth
respondent and for the creditors to effect transfer of the liabilities of fourth
respondent to the appellant in accordance with the terms and conditions set out
in the agreement.
It was a condition of
the agreement of compromise that specific classes of creditors had to be paid specific
sums of money by the appellant on specific dates from the effective date. The terms and conditions of the agreement of
compromise had to be made part of a court order by which fourth respondent was
to be removed from provisional liquidation.
Mr Bailey was to be appointed the agent of the creditors for the
purposes of effecting transfer to the appellant of their claims. He was also to be appointed the agent of the
appellant in order to receive, administer and make payments of money due to the
creditors in terms of the agreement. It
was also a term of the agreement of compromise that the shareholding structure
of the fourth respondent would not be altered.
The directors of the appellant made a declaration which was a term of
the agreement that neither the appellant nor any of them had any interest in the
fourth respondent.
The order was made by
the High Court in case HC 1591/99 on 20 October 1999. As a result of the court order the
provisional liquidation of the fourth respondent was set aside. In terms of the order Mr Bailey was appointed
the agent of the parties for the purposes of effecting transfer of the claims
of the creditors and for receipt, administration and payment of all monies due
to the creditors in terms of the agreement of compromise. The effective date was the date on which the
court order and a copy of the agreement of compromise were served by the Deputy
Sheriff for Harare
on the office of the Registrar of Companies.
The appellant took transfer of all proved claims of the creditors excluding
the shareholders' loans.
The appellant did not
have money with which to meet its obligations to the creditors in terms of the
agreement of compromise. It had
controlling shareholding in two external companies, Sedna and Cornerstone which
had shares in the fourth respondent. The
appellant entered into an agreement with Mr Adel Aujan an external investor who
agreed to purchase shares in the two external companies. Mr Bailey who still exercised administrative
powers under the agreement of compromise gave the appellant the right to treat
stockpiles of ore at the mine in order to raise the money to pay the
creditors. It was not given authority to
mine the pit.
The appellant operated
the mine until 2000. It did not have
sufficient capital to conduct mining operations. It borrowed heavily from Mr Aujan. Over the period from 23 February 1999 to 1
October 2001 the appellant obtained seven loans from companies belonging to Mr
Aujan who was the fourth respondent's principal shareholder. The loans totaled US1 399 764. The first three loans were for capital
expenditure and working capital at the mine.
There was then one loan of US1 million in March 2000 for payment of
a creditor of the fourth respondent because the appellant had failed to meet its
commitments under the agreement of compromise.
The last three loans were for payment of wages at the mine. From January 2001 the mine was under care and
maintenance management.
On 21 February 2000, Mr
E Matikiti wrote a letter to the first respondent seeking advice as to whether
the Special Grant held by the fourth respondent could be "registered" in the
appellant's name. He misrepresented that
the appellant had purchased all the shares and assets of the fourth respondent
which was liquidated. The letter reads:
"Re: SPECIAL
GRANT NO. 1278 - RIVER RANCH LIMITED
Given
that liquidation proceedings are now complete and Bubye Minerals (Pvt) Ltd has
been awarded the shares and assets of River Ranch Limited (previously in
liquidation) we are proceeding with the necessary matters of good housekeeping. This brings us to the matter of the Special
Grant, which remains registered to River Ranch Limited. We strongly believe it is in the interests of
the local partners that the Special Grant is registered to Bubye Minerals (Pvt)
Ltd since the aforesaid company was the successful bidder for the shares,
claims and assets of River Ranch Limited (Zimbabwe). This will serve to protect the interests of
local shareholders and ensure that the partnership retains a majority
indigenous component.
We would be glad
to have your advice in this matter given that the way is legally clear for the
transfer."
Notwithstanding the
attempt to found the right to claim transfer of the Special Grant from the
fourth responded to it on an alleged sale, the appellant sought the transfer at
a time it was in breach of the agreement of compromise. On 16 May 2000 an official in the Ministry
responded to the request for transfer of the Special Grant by saying that at
its 492nd meeting the Mining Affairs Board ("the Board") had resolved
that the "application" could not be considered until outstanding payments to
the creditors were made in terms of the agreement of compromise. On 12 September 2000 another letter was
written to the appellant advising that at its 494th meeting the Board
had resolved that a final reminder be sent to it to the effect that unless the
outstanding payments to creditors were made by the appellant before the Board's
next meeting on 11 October the "application" for transfer of the Special Grant
would not be considered. The appellant
failed to pay the outstanding amounts owed to the creditors. The money was paid by Mr Aujan in 2004.
Mr Aujan decided to
appoint a new board of directors and management to run the affairs of the
fourth respondent. In March 2004 a
general meeting of shareholders, at which the appellant was represented, was
held. A new Board of Directors was
appointed. It was tasked with taking
possession of the mine and carrying out mining operations in accordance with
clause 10 of the Special Grant requiring continuous working of the mine. The Board of Directors was also mandated to
demand from the appellant a statement of account on the administration of the
affairs of the fourth respondent during the period October 1999 to March 2004.
On 17 June 2004 Mr Farquhar
wrote to the Secretary saying that the appellant was renewing the "application"
it made on 21 February 2000 for "cession" of the Special Grant from fourth
respondent to it. He asked that the
"application" be placed before the Board.
The reason given for the renewed, "application" was that all outstanding
payments owed to the creditors had been made.
The fourth respondent was not given notice of the renewed
application. The appellant withheld from
the Secretary the fact that the outstanding payments to the creditors had been
made by Mr Aujan and not itself. At the
time the appellant wrote the letter of 17 June 2004 it had been served on 27
April with a letter of demand for the statement of account.
On 7 September 2004 the fourth
respondent applied to the High Court in case HC 10814/04 for an order directing
the appellant and its directors to render an account of the administration of
its affairs from October 1999 to March 2004.
The appellant opposed the application on the ground that the fourth
respondent had no locus standi.
On 25 January 2005,
without notifying the fourth respondent of its intention to consider the
application, the Board at its 518th meeting, decided to "approve"
the transfer of the Special Grant from the fourth respondent to the
appellant. The letter written on 28
January 2005 by the Secretary of the Board reads:
"RE:
APPLICATION FOR CESSION OF SPECIAL GRANT NO. 1278: FROM RIVER RANCH (PVT) LTD TO
BUBYE MINERALS (PVT) LTD
The above matter refers.
I am pleased to advise that the
Chairman of the Mining Affairs Board who is also the Secretary for Mines and
Mining Development has approved cession of the abovementioned Special Grant viz
from River Ranch (Pvt) Ltd to Bubye Minerals (Pvt) Ltd with effect from 25
January 2005."
On 15 February 2005 the High Court made an order in case No. HC 10814/04
referring the question of the obligation on the appellant to render the
statement of account to trial on the ground that there was a dispute of facts which
could not be resolved on the papers. On
13 May 2005, the fourth respondent made an application to the High Court in
case No. HC 2091/05 for an order setting aside the decision of the Board to
transfer the Special Grant to the appellant.
The grounds on which the application was made were two. The first ground was that the decision was
unlawful as no agreement of cession had been entered into by the fourth
respondent with the appellant. The
second ground was that the fourth respondent had not been notified of the
proposed decision. The appellant opposed
the application.
On 13 May 2005 the High Court stayed the proceedings pending the
determination of the issues referred to trial in case No. HC 10814/04. The ground on which the decision to stay the
proceedings was made was that the two cases raised the same questions for
determination. The fourth respondent
appealed against the judgment of the High Court in case No. SC-289-05. There is no doubt that the decision of the
High Court to stay the proceedings for the reasons given was wrong. The issue of the validity of the decision of
the Board made on 25 January 2005 was unrelated in time and substance to the
question whether the appellant was under an obligation to render the statement
of account demanded by the fourth respondent in case No. HC 10814/04. The validity of the decision of the Board
could not have been raised in case No. HC 10814/04 because the decision had not
been made when those proceedings were commenced.
On 16 May 2005 the fourth respondent wrote a letter to the Minister
questioning the legality of the decision to transfer the Special Grant to the
appellant and asking that the decision be reversed. The argument put forward in support of the
proposed action was that the decision was invalid for contravening s 282 of the
Act. It was also pointed out to the
Minister that the invalidity of the decision had been conceded by the
representative of the Ministry at the hearing of the application in case No. HC 2091/05
on the ground that it had been made on false information to the effect that the
appellant had been awarded all shares and assets of the fourth respondent. It was indicated that at no time had the
fourth respondent agreed to cede the rights under the Special Grant to the
appellant. It said that the fourth
respondent had not even known that the appellant had approached the Ministry
seeking to have the Special Grant transferred to it.
On 28 July 2005 the fourth respondent made another application to the
High Court in case No. HC 3336/05 for a provisional order setting aside the
decision of the Board. The appellant
opposed the application which was dismissed by the Court on 7 September. The ground for the dismissal of the
application was that it raised the same issues as were referred to trial in
case HC 10814/04. The decision of the
High Court was clearly wrong. The
question of the validity of the decision of the Board arose after the decision
was made on 25 January 2005. It could
not have been part of the cause of action in case no. HC 10814/04 which was commenced
on 7 September 2004. The fourth
respondent appealed in SC-144-05 against the judgment of the High Court.
On 22 November 2005 a letter was written to the fourth respondent on
behalf of the Secretary advising that the decision of the Board to transfer the
Special Grant to the appellant had been set aside. The letter was communicating the decision of
the first respondent made on 16 November.
The first reason given for the reversal of the decision of the Board was
that it was in contravention of s 282 of the Act as the permission of the
Minister had not been obtained. The
second reason was that the decision was made without notice to the holder of
the Special Grant.
On 1 February 2006 the appellant made an application to the High Court in
case No. HC 278/06 for a provisional order declaring that the "purported
cancellation of the cession" by the first respondent was null and void and be
set aside. An interim order interdicting
the third respondent from giving effect to the "purported cancellation of the
deed of cession of Special Grant 1278" was granted on 2 February 2006. The first respondent was also interdicted
from representing to any person or authority pending determination of the
application for the provisional order that, "the cession of Special Grant 1278"
to the appellant was cancelled save in terms of the law. The appellant also sought a final order
confirming the interim order and directing the fourth respondent to restore
vacant possession of the area covered by the Special Grant save under express
written authority of the appellant.
On 6 December 2006 the High Court discharged the interim order and
dismissed the application for the provisional order. Although it was argued on behalf of the
appellant that the sole issue for determination was the legality of "the
cancellation of the cession" by the first respondent, the learned Judge
accepted the contention advanced on behalf of the respondents that the validity
of the decision of the Board to transfer the Special Grant from the fourth
respondent to the appellant was the critical question for determination. The argument was that the legality of the
"cancellation of the cession" could not be established if the decision of the
Board was illegal.
Proceeding on the basis of the assumption that the Board had the power to
entertain the "application for the cession" of the rights under the Special
Grant from the fourth respondent to the appellant, the learned Judge held that
the manner in which the decision to transfer the Special Grant was made was
unfair and in contravention of s 3(2) of the Administrative Justice Act [Cap. 10:28] in that, the fourth
respondent was not given notice of the proposed action. The conclusion was that as the unlawful
decision could not confer rights on the appellant the decision of the first
respondent setting it aside did not affect any rights of the appellant under
the Special Grant. Authority for the
principle relied upon that all proceedings founded upon a decision which is null
and void ab initio are also bad and
incurably bad was found in the cases of
MacFoy v United Africa Co. Ltd [1961] 3 ALL ER 1169 (PC) at 1172I and Mugwebie v Seed Co. Ltd & Anor
2000(1) ZLR 93 at 97A-B.
The grounds of appeal are repetitive.
They can be addressed comprehensively by addressing the question whether
the learned Judge was correct in holding that the validity of the decision of
the Board to transfer the Special Grant from the fourth respondent to the
appellant was the critical question for determination.
It is necessary to point out that at the time the application was made to
the High Court the fourth respondent had formally withdrawn all the appeals it
had filed in the Supreme Court in cases SC-289-05 and SC-144-05. It had also formally withdrawn cases HC
10814/04 and HC 2091/05 from the High Court.
The question of the validity of the decision of the Board was therefore
not lis pendens in relation to any of
the previously filed cases at the time the application in case HC 278/06 was
made to the High Court as had been argued by Mr Zhou on behalf of the appellant.
Whilst the learned Judge found that the decision of the Board was
unlawful on the ground of procedural unfairness based upon breach of the right
of the fourth respondent to be heard, the facts show that the Board did not
have the power to entertain the "application for cession" of the rights held by
the fourth respondent under the Special Grant.
It is a fundamental principle of law that a public official or public
body can only do things which are governed by law and cannot act where there is
no law authorizing the kind of action to be undertaken. As the validity of the decision of the Board
was challenged, justification of the action taken had to be tested by reference
to evidence of compliance with the procedural and substantive requirements of
the provisions of clause 14 of the Special Grant as read with s 282 of the
Act. Section 294(1) of the Act provides
that a Special Grant shall be governed by its terms and conditions. It was to the terms and conditions of the
Special Grant No. 1278 that the court a
quo had to turn to decide the question of validity of the decision of the
Board.
Clause 14 of the Special Grant prescribed specifically the power to be
used in cases of cession of rights under the Special Grant, the form the
exercise of the power had to take, the repository thereof and conditions which had
to prevail before it could be exercised.
The power prescribed under clause 14 was exercisable by the repository
giving consent to the holder of the mining rights under the Special Grant to
cede those rights to a third party. The
power was specifically vested in the Secretary acting as such. The consent had to be in writing. It is clear that no other public official
could give written consent to the holder of mining rights under the Special
Grant relating to precious stones to cede them to any other person. The Secretary clearly had no power to cede
the mining rights under the Special Grant because he would not have been the holder
of those rights. He could not cede what
he did not have. The condition precedent
to the exercise by the Secretary of the power reposed in him or her was that
there had to be a proposed cession in terms of which the holder of the mining
rights under the Special Grant (the cedent) agreed to cede them to the third
party (the cessionary) who agreed to acquire them.
The prohibition directed specifically at the holder of the rights under
the Special Grant to the effect that he or she could not cede the rights to any
person without the written consent of the Secretary and the permission of the
Minister did not only underlie the significance of the content of the power as
a consent but also underlies the existence of an agreement of cession involving
the holder of the mining rights as a condition precedent to the exercise of the
power by the Secretary. The Secretary
could not create a cession. He could not
enter into an agreement of cession involving rights belonging to another
person. It was the party holding the
rights under the Special Grant who could enter into an agreement to cede the
rights to another person who upon written consent being given by the Secretary
would move into the shoes of the cedent to become the new holder of the rights
under the Special Grant.
The authorities emphasize the conception of a cession as a bilateral
agreement to transfer rights from one person to another. It cannot be a unilateral act. In LTA
Engineering Co. Ltd v Seacat Investments (Pty) Ltd 1974 (1) SA 747(A) at 762A
JANSEN JA said:
"A cession is
now considered to be a bilateral juristic act (agreement) whereby the cedent
transfers his right of action to the cessionary, the latter taking the place of
the former as creditor."
In Hippo Quarries (TVL) (Pty) Ltd v Eardley 1992(1) SA 867(A) at
873E-F, NIENABER JA said:
"Cession, it is
trite, is a particular method of transferring a right. The transfer is effected by means of
agreement. The agreement consists of a
concurrence between the cedent's animus
transferendi of the right and the cessionary's corresponding animus acquirendi. If a complete surrender of the right is not
intended the transaction, however it is dressed up, is not an out - and - out
cession."
See also Shell Zimbabwe (Pvt) Ltd v Webb 1981(4) SA 749(z) at
754. Botha
v Carapax Shadeports (Pty) Ltd 1992(1) SA 202(A) at 214.
The additional
requirement for a valid exercise of the power vested in the Secretary under
clause 14 was that under s 282 of the Act the written consent given to the
holder of the rights under the Special Grant must have the permission of the
Minister. In other words s 282
prohibited specifically the holder of rights to mine precious stones (in this
case diamonds) within a mining location under a Special Grant from ceding those
rights without the permission of the Minister.
Under s 274 which falls under Part XVII of the Act together with s 282 of
the Act the words "mining location" are defined so as to exclude a special
grant.
The contention advanced
on behalf of the appellant was that s 282 of the Act did not apply to the
Special Grant because of the definition of "mining location" in s 274 of the
Act. It is, however, clear from the
examination of the provisions of ss 275 to 281 that they deal with the
registration of transfers, hypothecations, options, tribute agreements and
conditions governing mining rights on reserved ground. These are matters which would apply generally
to all minerals. In each instance
specific provision is made and a special grant excluded because of the wording
of s 274.
The contention ignored
the fact that s 282 starts with the words "notwithstanding anything contained
in this Act or any other enactment .".
It is a rule of construction that when a provision starts with the
non-obstante clause the intention of the legislature is that the provision
should have overriding effect in relation to any other provision in the same
statute or any other enactment to the contrary.
So no other provision of
the Act including s 274 or any other statute would apply to the holder of a
mining location dealing in precious stones.
In respect of such mining location the holder could not cede mining
rights under a special grant without the permission of the Minister.
The contention also
ignored the fact that s 282 makes special provision in respect of mining
locations where precious stones are mined.
Section 274 makes general provision applicable to all minerals. The principle of generalia specialibus non derogant would apply. It is to the effect that general provisions
do not override special provisions. In Barker v Edger [1898] AC 748 at 754 LORD
HOBHOUSE said:
"The general
maxim is generalia specialibus non derogant.
When the legislature has given attention to a separate subject and made
provisions for it, the presumption is that a subsequent general enactment is
not intended to interfere with the special provision, unless it manifests that
intention very clearly. Each enactment
must be construed in that respect according to its own subject - matter and its
own terms."
So, s 282 of the Act must be construed according to its subject - matter
which is the prohibition of the holder of a mining right relating to precious
stones from ceding those rights without the permission of the Minister. In this case the Special Grant related to
precious stones (diamonds). Accordingly,
s 282 applied to the cession of those rights.
The cession would have required the permission of the Minister.
In applying the principles of the law to the facts of the case there is no
question that none of the requirements of clause 14 of the Special Grant as
read with s 282 of the Act were complied with.
There was no cession within the meaning of clause 14 of the Special
Grant as read with s 282 of the Act entered into between the holder of the
mining rights and the appellant. The
fourth respondent denied that it ceded or intended to cede the rights it held
under the Special Grant to the appellant.
The appellant did not produce any evidence to the contrary. Without a proposed cession there would have
been no cause for the exercise of the power conferred on him or her by the
Secretary under clause 14 of the Special Grant.
There would have been no cause for the granting of permission by the Minister
in terms of s 282 of the Act. It is,
indeed, clear that the Secretary did not give written consent to the fourth
respondent to cede any rights under the Special Grant. It is also common cause that the permission
of the Minister was not sought.
The Board which made the decision to transfer the rights held by the
fourth respondent under the Special Grant had no power to do what it did. When the decision was made the Secretary was
not acting as such. He was acting in the
capacity of a chairman of the Board. In
any case the repository of the power prescribed under clause 14 of the Special
Grant had no power to grant a cession of rights under the Special Grant. The Board could not have had power outside
the provisions of clause 14 of the Special Grant to grant cession of rights it
did not hold. The learned Judge was
correct in holding that the question of the validity of the decision of the
Board was the critical question for determination. Whilst he arrived at the correct conclusion
that the decision of the Board was a nullity, he was wrong in assuming that the
Board had power to entertain the application by the appellant for transfer of
the Special Grant from the fourth respondent to itself.
The appeal is dismissed with costs.
SANDURA JA: I agree
ZIYAMBI JA: I agree
Messrs Hussein Ranchhod & Co, the appellant's legal
practitioners
Civil Division of the Attorney-General's Office, the first and
third respondent's legal practitioners
Messrs Costa &
Madzonga, the fourth respondent's legal practitioners
