Case  CCT 119/23
[2025] ZACC 01

Hearing Date: 06 May 2024

Judgement Date: 24 March 2025

Post Judgment Media Summary  

The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.

On Monday, 24 March 2025, the Constitutional Court handed down judgment in an application for leave to appeal against an order of the High Court of South Africa, Northern Cape Division, Kimberley (High Court) dated 2 September 2022.

The first applicant, Ekapa Minerals (Pty) Ltd, and the second applicant, Ekapa Resources (Pty) Ltd (collectively referred to as Ekapa), are private companies that conduct diamond mining operations in Kimberly, Northern Cape. The first respondent is the Sol Plaatje Local Municipality (municipality) and the only respondent who participated in the appeal. The second, third and fourth respondents are the Minister of Cooperative Governance and Traditional Affairs, the Minister of Finance and the Member of the Executive Counsel for Local Development, Northern Cape.

Pursuant to the conclusion of a sale agreement on 30 November 2015, Ekapa purchased eight immovable properties from De Beers Consolidated Mines (Pty) Ltd. All eight immovable properties lie within the jurisdiction of the municipality. Upon purchase of the properties, Ekapa became liable for the payment of all rates, taxes and other charges levied by the municipality. Ekapa’s operations on these properties involved the re-working of old mine dumps by using new technology to identify diamonds that were not recovered during the original mining operations. As a result, these immovable properties were categorised as “mining property” for the purposes of levying rates by the municipality.

In order to levy rates, a municipality is obliged to enact a Rates Policy in terms of section 3 of the Local Government: Municipal Property Rates Act 6 of 2004 (Rates Act). Such a policy may develop criteria for differentiating between different categories of property which will attract different rates. Some municipalities, such as the respondent, develop ratios that indicate the level of rates applicable to particular kinds of property with residential property being given the value of ’1’. For the duration of the six financial years, commencing from 2014/2015 to 2020/2021, the municipality, in terms of its Rates Policy, set the rates ratio applicable to the category of “mining property” at 1:22. In other words, the rates levied in respect of “mining property” were 22 times the rates levied in respect of “residential property”. In turn, the rates tariff applicable to “mining property” was calculated on the basis of the rates ratio of 1:22. The rates ratio applicable to most other “non-residential property” was set at the range of approximately 1:3 for the six-year financial period. The rates ratio was significantly more than that imposed in many other municipalities where mining activities took place. Ekapa claimed that they conducted marginal mining operations and were thus unable to pay these very high rates. Consequently, throughout the six financial years in question, they unilaterally decided to pay rates according to the rates ratio applicable to the category of “business and commercial property” set at 1:3. The difference between the rates payable in respect of the 1:3 ratio and the 1:22 ratio, amounted to R30 million over this period.

On 14 April 2021, Ekapa brought an application in the High Court to review and set aside the six decisions taken by the municipality for the period of 2014/2015 to 2020/2021 to set the rates ratio applicable to “mining property” at 1:22 (review application). Ekapa contended that the six impugned decisions contravened section 19(1)(c) of the Rates Act and section 229(2)(a) of the Constitution. Their main complaint was that the significant differentiation between the rates applicable to “business and commercial property” and the rates applicable to the “mining property” involved an unreasonable discrimination between categories of “non-residential” properties.

On 2 September 2022, the High Court found in favour of Ekapa and declared the six impugned decisions invalid in terms of section 172(1)(a) of the Constitution. The Court reasoned that the municipality had failed to proffer any explanation for the significantly higher rates ratio applicable to “mining property” in comparison to other “non-residential”properties. Consequently, its decisions in that regard were deemed unreasonable and inconsistent with sections 19(1)(c) of the Rates Act and 229(2)(a) of the Constitution.

The High Court found that Ekapa was delayed in bringing the review application and that the delay was extensive and unreasonable. In this regard, the Court found that the delay caused real prejudice to the municipality, as the municipality in its budget would have relied on the fact that it was due to receive the higher rates from Ekapa (an outstanding amount of R30 million). As a result, the municipality may have had to borrow money from financial institutions to recover the debt. The High Court held that its declaration of invalidity would only apply with prospective effect. It utilised its powers in terms of section 172(1)(b)(i) of the Constitution to limit the retrospective effect of setting aside the six impugned decisions. Doing so, it reasoned, would ameliorate the disruptive consequences on the fiscus of the municipality and allow it to recover the R30 million owing to it by Ekapa.

Aggrieved by the High Court’s order, Ekapa launched an application for leave to appeal which was refused by the High Court and a subsequent application for leave to appeal to the Supreme Court of Appeal suffered the same fate. Ekapa then approached this Court and sought to appeal the High Court’s decision to render its declaration of invalidity as having prospective effect only. Hence, the issue before this Court was confined to whether the order of invalidity made by the High Court should have operated retrospectively or prospectively.

Before this Court, Ekapa contended that in exercising its discretion to make a just and equitable order in terms of section 172(1)(b) of the Constitution, the High Court ought to have balanced the interests of the municipality with the interests of Ekapa. They contended that the High Court did not factor in their interests at all but rather focussed exclusively on the speculative disruptive effect that a retrospective order would have on the municipality, noting that no evidence in this regard nor that the municipality would be placed in an impoverished position had been placed before the Court. More specifically, Ekapa contended that the High Court did not consider the impact of the unlawfully promulgated rates’ ratios and tariffs on the continuation of Ekapa’s business; the marginal nature of their business; and the impact it would have on Ekapa’s service providers and employees.

Although Ekapa accepted that the High Court exercised a true discretion in terms of section 172(1)(b) of the Constitution, they contended that this Court may nevertheless interfere with that discretion as the High Court failed to exercise its discretion judicially; misdirected itself on the facts; and was influenced by wrong principles of law. While Ekapa did not seek repayment of any monies already paid to the municipality, it sought that this Court set aside the High Court order limiting the retrospective effect of its order of invalidity with costs, and to order that Ekapa pay rates on their properties at a rate ratio of 1:3 for the six financial years commencing from 2014/2015 to 2020/2021.

The municipality contended that this Court should refuse leave to appeal because it was not in the interests of justice to entertain a matter that was fact-specific and of importance only to the present litigants. In addition, it contended that this Court could not interfere with the true discretion exercised by the High Court as Ekapa’s complaints were essentially that the High Court reached the wrong conclusion on the facts before it. It also contended that Ekapa failed to establish that the High Court did not exercise its discretion judicially; or exercised its discretion on wrong principles of law; or misdirected itself on the facts before it. The municipality sought a dismissal of the application, with costs.

In a unanimous judgment penned by Gamble AJ, the Constitutional Court held that its jurisdiction was engaged by the necessity of determining the appropriate method for a court to exercise its true discretion in relation to relief granted under section 172(1)(b) of the Constitution. Furthermore, this Court held that leave to appeal must be granted as there were reasonable prospects of success, particularly because little attention was paid to Ekapa’s interests by the High Court in granting a just and equitable remedy.

Turning to the exercise by the High Court of the discretion under section 172(1)(b) of the Constitution, this Court held that this was a “true discretion” as contemplated in Central Energy Fund which held that discretion must be exercised on a case-by-case basis. Hence, it was open for this Court to interfere with the High Court’s judgment if it was satisfied that the discretion in question was not exercised judicially, was influenced by a wrong principle or based on a misdirection of fact.

Following Millenium Waste, this Court found that the High Court failed to have regard to the interests of all the parties – it only looked at the municipality’s prejudice and ignored the position of Ekapa completely. The Court held that it was entitled to interfere with the exercise of the municipality’s discretion. With reference to Khumalo, the Court noted that it was obliged to declare all conduct that was unconstitutional invalid but that it was not necessarily required to set such conduct aside. However, the Court observed that when a decision of the state was declared invalid, the default position was that the impugned decision was void ab initio. The onus was on the party who alleged that the default position should not apply to establish that proposition.

In this matter, the Court found that the municipality failed to discharge that onus and the finding of the High Court that a prospective order was warranted was wrong. The Court found that just and equitable relief in the circumstances of the matter required the order of validity to be fully retrospective: to permit the municipality to recover rates from Ekapa in circumstances where those rates had been unlawfully imposed would have been counter to the principle of legality, which this Court must uphold at all times.

For these reasons, the Court upheld the appeal and confirmed the finding of the High Court that the imposition of rates for mining property at the rate of 1:22 for the years in question was unlawful. The municipality’s determination in that regard was set aside, with the order operating fully retrospectively. Noting that Ekapa had in the interim paid rates at the ratio of 1:3, and that it had tendered in Court not to seek to recover those payments from the municipality, the Court made this an order of this Court. The municipality was ordered to pay Ekapa’s costs, both before the High Court and in this Court.

The Full judgment  here