Fuelling Administrative Fairness: High Court Sets Aside Controller Of Petroleum Products Decision

Cygnisol (Pty) Ltd ("Cygnisol") recently brought an application in terms of the Promotion of Administrative Justice Act 3 of 2000 ('PAJA") to review and set aside a series of decisions taken by the Controller of Petroleum Products ("the Controller") relating to the status of Bra Cass (Pty) Ltd.'s ("Bra Cross") retail petroleum license.

This application was heard before the KwaZulu-Natal Division of the High Court which shed guidance on the relevant procedural requirements relating to the issuing and use of licenses in terms of the Regulations regarding Petroleum Product Site and Retail Licences ("the Regulations") as well as the appropriate appeal relief considered within the context of the Petroleum Products Act 120 of 1977 and PAJA.

Background facts

On 5 December 2019, Bra Cross was issued a retail license by the Controller in terms of section 2A of the Petroleum Products Act. Regulation 24(1) of the Regulations thereafter requires the licence-holder to commence retailing activities at the licensed site within a period of 12 months after the date on which the retail licence was issued, failing which the licence would lapse. Bra Cass did not commence operations within 12 months, nor did it apply for an extension under regulation 24(2).

On 31 August 2023 – nearly 3 years after the statutory commencement deadline had passed – the Controller issued a formal notice to Bra Cass advising it that its licence had lapsed ex lege in terms of regulation 24(1), and further directed Bra Cass to surrender the physical license within 14 days. On 2 October 2023, the Controller issued a notice of intention to cancel the licence. However, following further exchanges between the Controller and Bra Cass, the Controller withdrew their intention to cancel notice on 6 November 2023 and informed Bra Cass that its licence remained valid.

Once Cygnisol became aware of this decision, it launched its PAJA application on 22 July 2024. This application was opposed by Bra Cass on the basis of the following three points:

1. Firstly, Cygnisol had failed to exhaust all internal remedies by not first appealing to the Minister of Mineral and Petroleum Resources in terms of section 12A of the Petroleum Products Act;
2. Secondly, Cygnisol lacked the necessary legal standing to bring these legal proceedings; and
3. Thirdly, Cygnisol's application was nevertheless brought outside the time limits prescribed by PAJA.

High Court's analysis

The High Court noted from the outset that the existing case law on this matter outline a clear position that the statutory and regulatory framework governing this issue provide no scope for the revival of a lapsed licence. The High Court thereafter addressed Bra Cass' first opposition ground and noted that section 12A is not peremptory and merely states than an aggrieved party 'may appeal' to the Minister. Moreover, an internal appeal presupposes a valid administrative decision capable of being appealed. In this case the lapsing of the license was automatic, and accordingly, the court found that the statutory appeal mechanism did not apply in this case.

With regards to Bra Cass' second ground of opposition, the High Court held that Cygnisol is a licence-holder operating a filling station in close proximity to the Bra Cass site. As such, its commercial interests are therefore directly affected by the unlawful revival of a lapsed licence, which is sufficient to establish a direct and substantial interest in the outcome. Therefore the court found that Cyngisol had legal standing to challenge the decision to regard Bra Cass' licence as valid.

In regard to Bra Cass' final ground of opposition, the High Court referred to section 7(1) of PAJA which requires the review to be brought within 180 days of becoming aware of the decision and the reasons. In this case, Cygnisol received the reasons through PAIA on 15 February 2024 and launched this application on 22 July 2024, within the prescribed period. Moreover, the High Court held that even if there had been a delay, it should be condoned under section 9 of PAJA, given the Controller's manifestly unlawful revival of a lapsed licence.

The High Court thereafter addressed the merits of the dispute which centred on the proper interpretation and effect of regulation 24. The court stated that the language of this provision clearly provides that the commencement of operations within the prescribed timeframe is a prerequisite for the continued existence of a retail licence. A licensed retailer must commence' activities within 12 months, failing which the licence will lapse. Bra Cass failed to do so within this period, nor did they seek an extension, and accordingly their license lapsed automatically. This conclusion is not dependent on any administrative declaration, as the lapse occurs by operation of law.

The High Court accordingly concluded that against this legal framework, once the Controller had acknowledged that the licence had lapsed, it was functus officio and had no power thereafter to declare that the licence remains valid. These actions all presupposed the existence of a valid license. As such, the Controller's attempted revival of the licence on 6 November 2023 was therefore ultra vires. It was taken in the absence of jurisdictional facts, contrary to mandatory statutory provisions, was irrational in the circumstances, and unlawful in terms of PAJA. The irrationality of the Controller's decision lies in purporting to revive a licence that had already lapsed in terms of the law.

The High Court further noted the prejudice suffered by Cygnisol as a result of this decision which is that Cygnisol had invested in establishing its filling station in reliance on the statutory framework and the absence of an operational licence at the Bra Cass site. The Controller's unlawful revival of the lapsed licence disrupted the regulatory environment and unfairly introduced unlawful competition.

The High Court accordingly declared Bra Cass' retail license to have lapsed by operation of law in terms of regulation 24(1) and directed them to surrender the lapsed licence to the Controller within 14 days. The Controller and Bra Cass were also ordered to pay the costs of the application, jointly and severally, including the costs of senior counsel.

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