South Africa: Sellers Beware: Your Liability For Environmental Pollution Cannot Be On-Sold!

Last Updated: 18 July 2012
Article by Stephen Levetan and Olivia Rumble

Most Read Contributor in South Africa, September 2018

It has often been the case that landowners seeking to sell property upon which environmental pollution occurs, have sought to protect their interests through contracts of sale and the passing on of liabilities associated with environmental statutory obligations to their purchasers.  The High Court has, however, called into question the effectiveness of such transactions, particularly where sellers of land are already subject to a directive obligating the owner of the land to take certain measures regarding the pollution.

In the watershed judgment of the North Gauteng High Court, in the matter between Harmony Gold and the Department of Water Affairs (together with other interested parties), the court held that Harmony Gold must continue to pay for the pumping and treatment acid mine water in and around the Orkney Gold Mine in terms of a directive issued to it, despite Harmony Gold having sold the mine to Pamdozi Gold Orkney in 2007.

The obligation to pump and treat the water had its genesis in a series of directives issued in 2005 by the then Department of Water Affairs and Forestry (now the Department of Water Affairs) against Harmony Gold and other mining houses, in terms of section 19 of the National Water Act 35 of 1998 (NWA), to pump and treat underground water.

Section 19 of the NWA allows for a directive to be issued against "owners of land, a person in control of land, or a person who occupies or uses the land" on which any activity or process is or was performed or any situation exists which causes, has caused or is likely to cause pollution of a water resource.  It further obliges such person to undertake reasonable measures to prevent such pollution from re-occurring.  This obligation is commonly referred to as "the Duty of Care" regarding water. Should this duty not be fulfilled, the NWA allows for a directive to be issued to the persons identified in section 19, requiring them to take certain measures in order to comply with this duty.

The directives issued to Harmony Gold and the other mining houses directed them to take certain measures with regards to the polluted underground water, as it was common cause that their gold mining activities in Klerksdorp, Orkney, Stilfontein and Hartebeesfontein (the Kosh Area) were the source of underground water pollution in the vicinity. This obligation was to be in effect until Harmony Gold and the other mines (AngloGold Ashanti, Simmer and Jack Mines, Simmer and Jack Investments and Stilfontein Gold Mining Company) had reached and implemented an agreement on the long term management of the water. Unfortunately no such agreement was ever reached.

In 2007 Harmony Gold sold the mine to Pamdozi Gold Orkney, which went into liquidation in 2009. Harmony Gold then sought to relieve itself of the obligations imposed by the directive by writing to the Department stating that the directive was no longer valid against it, but against Pamdozi, and advised it would cease contributing to the cost of water pumping and treatment. When the Department refused to withdraw the directive against Harmony Gold, it approached the court for relief.. 

Harmony Gold argued before the court that the Minister's power to issue a directive is limited to the extent that the Minister may only direct the landholder to take preventative measures in terms of section 19, for as long as it remains the land owner. Thus the directive, by operation of law, became invalid when Harmony Gold's connection with the land came to an end. The primary question before the court was thus whether the continuance of the particular relationship between the landholder and the affected land is also required for its ongoing validity.

In dismissing Harmony Gold's submissions, Judge Tati Makgoka held that the imposition of liability in these circumstances was neither unreasonable nor constitutionally impermissible. As the court pointed out, it did not assist the applicant to decry the indefinite nature of the directive, in circumstances where Harmony Gold and the other mining houses had failed to reach the prescribed agreement.  The court thus held that if a person in control of land severs ties with the land, fully knowing that his validly imposed obligations remained unfulfilled, he can hardly complain if it is insisted that he should comply with those before he is discharged from them. 

It was also pointed out that the directive required Harmony Gold to take measures to address pollution which had occurred while the applicant was the landholder, during which time it derived financial benefits from its polluting activities.  Without fully complying with the directive, and while the obligations in terms of it remained unfilled, it then disposed of its entire issued share capital to Pamodzi in August 2007.  It was thus incorrect to say that Harmony Gold was being obliged to take responsibility for others' contribution to the pollution.  As such the court held that there was thus a clear causal and moral link between the directive and Harmony Gold's pollution activities.

Furthermore, there was, in the court's view, no reason to depart from the reasonable interpretation of section 19, in favour of a narrower interpretation, particularly in light of the principles contained in the National Environmental Management Act 107 of 1998; the Constitutional environmental right and the need to render section 19 effective. 

It was for these reasons, as well as other related findings in law, that Harmony Gold's application did not succeed.   A decision as to whether the judgment should be appealed is pending.

The judgment is a welcome addition to the relatively small pool of case-law on the content and meaning of the duty of care regarding the environment, particularly to what extent these obligations exist in perpetuity.  Whilst the outcome of the judgment initially appears extraordinary, it is no more than an accurate exposition of what already is provided for in the statute.  The court's reasoning not only accords with a plain reading of the language of the Act, but it also rightfully upholds the principles and objects of the NWA, the National Environmental Management Act 107 of 1998 (particularly section 28(1) and(1A) which retrospectively provides for the Duty of Care owed to the environment generally) and the Constitution.  Had Harmony Gold demonstrated that it had taken greater action to address the obligations contained in the directive, it is possible that the Court may not have made the findings that it did.  However the failure to have addressed these obligations in a meaningful manner, particularly the obligation to conclude an agreement with the other mine houses, appears to have played a pivotal role in the Court's reasoning.

The judgment will have a profound effect on land subject to a directive at the time that it is sold, and will materially impact the considerations taken into account by both purchasers and sellers alike.  The import of the judgment also testifies to the need to ensure that obligations contained within directives are duly complied with and, once discharged, that these directives are uplifted.  It also underscores the need to ensure that when pre-cursors to directives are issued by the Department (commonly known as pre-directives), they are appropriately dealt with through legal mechanisms at an early stage in order to prevent a final and binding directive being issued.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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