The effect of the Oudekraal principle on the rule of law

August 1st, 2018
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By Ndivhuwo Ishmel Moleya

Lord Denning once famously said: ‘If an act is void, then it is in law a nullity’ and that ‘every proceeding which is founded on it is also bad and incurably bad’ (MacFoy v United Africa Co Ltd [1961] 3 All ER 1169). In the South African context, the same principle was expressed by Innes CJ in Schierhout v Minister of Justice 1926 AD at 109, where he stated that ‘[it] is a fundamental principle of our law that a thing done contrary to the direct prohibition of the law is void and of no effect.’ Yet, in Oudekraal Estates (Pty) Ltd v City of Cape Town and Others 2004 (6) SA 222 (SCA) the Supreme Court of Appeal (SCA) developed the principle that an unlawful act may produce legally recognisable consequences (Oudekraal principle). The application of the Oudekraal principle was the bone of contention in MEC for Health, Eastern Cape and Another v Kirland Investments (Pty) Ltd t/a Eye & Lazer Institute 2014 (3) SA 481 (CC); Merafong City v AngloGold Ashanti Ltd 2017 (2) SA 211 (CC); and Department of Transport and Others v Tasima (Pty) Ltd 2017 (2) SA 622 (CC). In these cases, the minority strongly asserted that the majority’s interpretation of the principle offends the rule of law. Against this backdrop, this article analyses these three cases.

Origins of the Oudekraal principle

In the Oudekraal case, the then provincial administrator had granted Oudekraal’s predecessor conditional permission to establish a township. The first condition was to lodge a general plan of the proposed township with the Surveyor-General for approval. The second was to lodge a general plan, as approved by the Surveyor-General, with the Registrar of Deeds. There was a prescribed period for complying with each condition.

The applicable ordinance provided that should the applicant fail to comply with the conditions within the prescribed or extended period, the administrator’s permission would be deemed to have lapsed. Oudekraal failed to comply timeously and was granted extensions to comply with each condition, but only after the expiry of the prescribed period. Relying on this, the Municipal Council contended that the administrator’s purported extensions were ultra vires and, therefore, unlawful.

The High Court found that the administrator’s extensions of time were invalid and that finding otherwise would mean that an illegal decision had somehow evolved into a legal decision. On appeal, the SCA found that the administrator’s permission was ‘unlawful and invalid at the outset.’ It, however, questioned whether the permission should ‘simply … be disregarded as if it had never existed?’ The court took the view that: ‘Until the Administrator’s approval … is set aside by a court in proceedings for judicial review it exists in fact and it has legal consequences that cannot simply be overlooked’ (at para 26). In developing what is now known as the Oudekraal principle in administrative law parlance, the court reasoned at para 31 that: ‘If the validity of consequent acts is dependent on no more than the factual existence of the initial act then the consequent act will have legal effect for so long as the initial act is not set aside by a competent court’ (my italics).

Application of the Oudekraal principle in the Kirland, Merafong and Tasima cases

The Oudekraal principle was first afforded judicial imprimatur by the Constitutional Court (CC) in Kirland. In that case, the question was whether a decision of a state official may be set aside by a court even when the government has not applied for the court to do so. The majority held (at para 64) that: ‘Even where the decision is defective … government should generally not be exempt from the forms and processes of review. It must apply formally for a court to set aside the defective decision.’ It explained that the essential basis of the Oudekraal principle is that an ‘invalid administrative action may not simply be ignored, but may be valid and effectual, and may continue to have legal consequences, until set aside by proper process’ (at para 101). On the other hand, the minority took the view that ‘courts do not have the power to make valid administrative conduct that is unconstitutional’ (at para 60).

The principle was once again contested in Merafong. There, the minister had overturned Merafong Municipality’s decision to levy a surcharge on water for industrial purposes used by AngloGold. In the High Court, AngloGold compelled the municipality to comply with the minister’s decision. In reaction, the municipality argued that the minister was not legally empowered to take the decision on a matter within its exclusive jurisdiction. Relying on the Oudekraal principle, the High Court held that the minister’s decision was binding on the municipality until it was set aside. The decision was endorsed by the SCA. At the CC, the majority found that as ‘a good constitutional citizen,’ the municipality was supposed to either accept the minister’s ruling as valid or to challenge it in court, but not ignore it. The court explained (at para 41) that the import of Oudekraal and Kirland is that ‘government cannot simply ignore an apparently binding ruling or decision on the basis that it is invalid’ and that the decision ‘remains legally effective until properly set aside’ by a court of law. For the minority, the suggestion that ‘an unlawful administrative act that exists in fact, and not in law, has legal force and is binding for as long as it is not set aside’ is incorrect and ‘pays no regard to the supremacy of the Constitution’ (at para 114).

The debate about the proper application of the Oudekraal principle continued in Tasima. There, the Department of Transport (DOT) sought, by means of a collateral challenge, to impugn a decision of its official to extend an agreement with Tasima on the ground that the extension was in contravention of s 217 of the Constitution, s 38 of the Public Finance Management Act 1 of 1999 and the Treasury Regulations. The High Court concluded that the extension was illegal and declared it void ab initio. On appeal to the SCA, that court found that the DOT could not bring a collateral challenge as it was an organ of state. It treated the application as a review under the Promotion of Administrative Justice Act 3 of 2000 (PAJA) and concluded that since it was brought out of time, the unlawful extension of the contract was ‘validated by the delay.’ In the CC, the minority stressed that no ‘amount of delay can turn an unlawful act into a valid administrative action’ (at para 81). It reiterated that Oudekraal is not authority for the proposition that ‘an administrative action performed in violation of the Constitution should be treated as valid until set aside’ (at para 87). It further pointed out that the ‘notion of an invalid action remaining valid until set aside is flawed’ (at para 124). The majority agreed that the SCA was wrong in concluding that a reactive challenge is not available to organs of state. It, however, stressed that although no invalid administrative decision may ‘morph into a valid act’ it may have a binding effect because of its mere factual existence until it is set aside by a court of law (at para 147). It further pointed that the principle does not offend the doctrine of objective invalidity as it ‘merely preserves the fascia of legal authority until the decision is set aside by a court’ and until that happens the decision ‘remains legally effective, despite the fact that it may be objectively invalid.’

Exploring the seemingly discordant relationship between the Oudekraal principle and the rule of law

The divergence between the minority and the majority in Kirland, Merafong and Tasima lies on the effect of the Oudekraal principle on the rule of law. In Kirland, the minority stressed that ‘[u]nder our Constitution the courts do not have the power to make valid administrative conduct that is unconstitutional’ (at para 60). This was a broad response to the majority’s proposition that an ‘invalid administrative action . . . may be valid and effectual . . . until set aside by proper process’ (at para 101).

To that extent, I think the criticism is jurisprudentially sound as it is conceptually incorrect to suggest that an invalid act that is not set aside by a competent court ‘may become valid’. Theoretically, the invalid act remains invalid. The fact that it is functionally effectual until it is set aside by a competent court does not make it legally valid. Had that been the case, the need for a court to set it aside would not arise. However, whatever ambiguity that Kirland may have spurred through that statement was cleared in Merafong. There, the majority at para 43 made it clear that Kirland did not ‘fossilise possibly unlawful – and constitutionally invalid – administrative action as indefinitely effective’ (at para 43). It only placed ‘a provisional brake’ on determining the invalidity of the act. In my view, once it is accepted that Kirland does not validate invalid acts, the critical assertions by the minority in Merafong and Tasima should crumble.

So, the proposition that ‘an invalid administrative act that exists in fact is binding and enforceable until set aside by a competent court’ does not, in my view, ‘[collide] head-on with the principle of legality’ as asserted by the minority in Merafong (at para 89). If anything, it complements the rule of law. There is no doubt that whimsical disregard of administrative acts (valid or invalid) may be disruptive to the administration of justice. It is in recognising this that the CC (citing Kirland) in Economic Freedom Fighters v Speaker, National Assembly and Others 2016 (3) SA 580 (CC) stated (at para 74) that administrative decisions may not simply be ignored ‘without recourse to a court of law’ as that would ‘amount to a licence to self-help’ and indeed a recipe for anarchy.

The minority’s assertion in Tasima (at para 79) that ‘[a] decision that is invalid because of its inconsistency with the Constitution can never have legal force and effect’ departs from an incorrect premise. It is indeed theoretically correct that ‘[n]o amount of delay can turn an unlawful act into a valid administrative action’ (at para 81). But, as Merafong painstakingly explained, the Oudekraal principle does not validate invalid acts. This much is also clear from the context in which it originated. It was formulated as an answer to the question ‘whether, or in what circumstances, an unlawful administrative act might simply be ignored, and on what basis the law might give recognition to such acts’ (Oudekraal at para 1). The answer was that unless the invalid act is set aside by a competent court ‘it exists in fact and it has legal consequences that cannot simply be overlooked’ (Oudekraal at para 26). It is in this context that the principle should be understood.

As I understand it, Christopher Forsyth’s theory of the second actor was invoked in the Oudekraal case (at para 34) to provide the basis on which ‘the law might give recognition to [invalid] acts’ (at para 1). In my view, when the SCA referred to the theory of the second actor, it did so to locate a jurisprudential basis for sustaining the proposition. So was reference to the other related authorities and the maxim omnia praesumuntur rite et solemniter esse acta. It would then be imprudent to unduly focus (as the minority appears to have done) on the analysis of the theory of the second actor when determining the question whether ‘an unlawful administrative act might simply be ignored’. It is indeed for this reason that the majority in Tasima was able to eloquently dispose of the question without reference to that theory.

Conclusion

In my view, the Oudekraal principle is ‘constitutionally sustainable, and indeed necessary’ (Merafong at para 36). The majority in Merafong rightly points out that the principle applies for ‘rule of law reasons and for good administration.’ Rule of law reasons because a bad decision (administrative or judicial) is nonetheless law unless it is properly substituted by an impeccable one. As pointed out in Merafong, the ‘validity of the decision has to be tested in appropriate proceedings’ and ‘the sole power to pronounce that the decision is defective, and therefore invalid, lies with the courts.’ Before and unless that happens, the decision must be complied with notwithstanding its defectiveness. Differences aside, both the minority and majority should be credited for unanimously jettisoning the SCA proposition that collateral challenges are not available to organs of state.

Ndivhuwo Ishmel Moleya LLB (Univen) is a candidate attorney at Adams & Adams in Pretoria.

This article was first published in De Rebus in 2018 (Aug) DR 28.

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