A recent decision by the Supreme Court of Appeal (SCA) should be welcomed by holders of mineral or petroleum rights who were prejudiced by deregistration for nonpayment of annual returns that the companies were reasonably unaware of, owing to either the administrative oversight of the Companies and Intellectual Property Commission or other reasonable grounds.

Law firm Cliffe Dekker Hofmeyr dispute resolution directors Jackwell Feris and Rishaban Moodley say that, in the case of Palala Resources vs Minister of Mineral Resources and Energy, the SCA, on May 30, ruled that the deregistration of a company holding a prospecting right for minerals does not imply that such right automatically lapses in terms of Section 56(c) of the Mineral and Petroleum Resources Development Act, No 28 of 2002 (MPRDA).

The court held that the reference to “deregistration” in terms of Section 56(c) of the MPRDA must be read in conjunction with the Companies Act, No 71 of 2008, which provides for a company to apply for the restoration of registration.

According to Cliffe Dekker Hofmeyr, the court found that, in principle, the restoration of registration operates retrospectively and ex post facto validates all the company’s corporate activities (including its mineral prospecting rights), even to the detriment of third parties.

Further, it was also determined that the legislature is presumed to know the law, and when it enacted Section 56(c) of the MPRDA, it must have been aware that companies and close corporations that had been deregistered could be restored to the register with automatic retrospective effect.

However, the firm claims that the case did not qualify its reference to “whenever a company or close corporation is deregistered” as a trigger for the lapsing of rights under the MPRDA by stating that the right would not be restored if the company or close corporation was restored to the register.

Further, if the SCA wished to ensure the finality of the lapsing of a right on deregistration, Cliffe Dekker Hofmeyr claims, it could “easily have done so”.

In addition, the court also found that the legislature could have excluded rights under the MPRDA from the rights restored to a company or close corporation on being restored to the register.

Cliffe Dekker Hofmeyr claims that the decisions has a number of practical implications for the Department of Mineral Resources (DMR), which could open the DMR to review applications in respect of mineral or petroleum rights which were not given effect to despite the fact that restoration of companies holding such rights was done on the same or similar grounds as the Palala Resources matter.

The firm points out that, in terms of the current wording of the Mineral and Petroleum Resources Development Amendment Bill (Amendment Bill), Section 56 will be amended to change “deregistered” to “finally deregistered”.

The amendments will also clarify that mineral rights or petroleum rights do not lapse in the event of the holder thereof being “liquidated and finally deregistered or sequestrated”, but such rights will fall within the insolvent estate of the liquidated company or sequestrated person.

The decision of the SCA to some extent aligns with the proposed amendments to the MPRDA insofar as the continued existence of rights is concerned, according to Cliffe Dekker Hofmeyr.

“The DMR may, however, wish to reconsider the proposed amendments to Section 56 to ensure it is aligned with other pieces of legislation, such as the Companies Act, to ultimately ensure that the current interpretation by the court of ‘deregistration’ does not create an administrative burden for it,” states Cliffe Dekker Hofmeyr, adding that the DMR still has recourse to the Constitutional Court should its counsel be of the view there is a constitutional argument to be made out in terms of the application of Section 56(c) of the MPRDA.