Du Toit v Minister of Transport CCT 22/04

By Sharon BrinkPresentation for the Land Law Forum4 October 2005

A Case Discussion

Application for leave to appeal to the CC from judgement handed down by the SCA after the minister of transport appealed against the decision of the Cape High Court.

Dispute between applicant and Roads Board whose rights were taken over by the Minister of Transport.

Facts

Dispute relates to correct approach to determine compensation in terms of S12 of the Expropriation Act (the Act) for expropriation under S8 of the National Roads Act (the Roads Act).

A notice of expropriation was issued and a borrow pit created to excavate gravel for +/- 18 months and around 80000 cubic metres of gravel was extracted.

Facts (Cont.)

The contentious issue related to whether the notice of expropriation was correctly issued under S8(1)(c) instead of S8(1)(b) and as a result of this, whether S12(1)(b) was the correct statutory basis for compensation or whether S12(1)(a) should have been used to determine the amount of compensation.

Facts (Cont.)

S8(1) The Board may, subject to an obligation to pay compensation–

b)take gravel, stone, sand, clay, water or any other material or substance on or in land for the construction of a road or for works or for purposes to referred in paragraph (a);

b)take the right to use land temporarily for any purpose for which the Board may expropriate such land.

Relevant Legislation

S12(1) The amount of compensation to be paid in terms of this Act to an owner in respect of property expropriated in terms of this Act, or in respect of the taking, in terms of this Act, of a right to use property, shall not, subject to the provisions of subsection (2), exceed—

a)in the case of any property other than a right, excepting a registered right to minerals, the aggregate of—

i. the amount which the property would have realized if sold on the date of notice in the open market by a willing seller to a willing buyer; and

ii. an amount to make good any actual financial loss caused by the expropriation; and

b)in the case of a right, excepting a registered right to minerals, an amount to make good any actual financial loss caused by the expropriation or the taking of the right:

Provided that where the property expropriated is of such nature that there is no open market therefore, compensation therefore may be determined—

aa) on the basis of the amount it would cost to replace the improvements on the property expropriated, having regard to the depreciation thereof for any reason, as determined on the date of notice; or bb) in any other suitable manner.

Expropriation Act 63 of 1975

Relevant Legislation

S25 (1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

1)Property may be expropriated only in terms of law of general application- a) for a public purpose or in the public interest; and b) subject to compensation, the amount of which and the time and manner of

payment of which have either been agreed to by those affected or decided or approved by a court.

2)The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interests of those affected, having regard to all relevant circumstances, including-

a) the current use of the property; b) the history of the acquisition and use of the property;c) the market value of the property; d) the extent of direct state investment and subsidy in the acquisition and

beneficial capital improvement of the property; and e) the purpose of the expropriation.

Relevant Legislation

Applicant contended that the notice of expropriation should have been issued in terms of S8(1)(b) of the Roads Act and that it should be based on the market value of the property expropriated.

Respondent held that it was indeed correct for the notice to be issued in terms of S8(1)(c) since what was expropriated was in fact a temporary right to use the applicant’s land and not the property itself and therefore S12(1)(b) should be used to determine the correct compensation based on the actual loss of the applicant.

Arguments of the parties

Notice issued by the Roads Board in terms of S8(1)(c) was correct – a temporary right to use.

The right is one that includes temporary use of the land to create a pit to excavate gravel and to remove the gravel permanently.

Court held that S12(1)(aa) and (bb) are applicable since there’s no open market for the gravel and compensation can either be determined on the basis of the replacement value of that which was removed or another suitable way.

Court determined compensation in another suitable manner – by interpreting S12(1)(bb) in line with S25 and S39(2) of the Constitution.

Court determined the value of gravel per cubic metre and based this decision on the: (a) the remaining deposits on the farm, (b) use of property at the time of expropriation, (c) effort and cost of removal of material and rehabilitation of the site, (d) purpose of the expropriation.

Based on this the High Court awarded R257623.00 compensation and a solatium.

High Court-Decision

The Court rejected the reliance placed on S12(1)(bb) by the High Court and held that the compensation should be determined by using S12(1)(b).

The SCA held that the owner of land temporarily expropriated is not entitled to compensation just because that land was used, even where the use resulted in certain elements of the land being permanently removed.

Since a market value could not be determined, compensation had to be based on actual financial loss suffered (considering that the applicant could still provide gravel to a ltd market for a further 60 years) through the expropriation and it must be remembered that the applicant has to mitigate his loss.

Enhancing the market value of the property due to the increased demand resulting from the expropriation could not be considered.

Consequently, the decision of the High Court was set aside and only R6060.00 and an amount for solatium was awarded

SCA-Decision

Applicant’s argument

Applicant did not challenge the constitutionality of S12(1)(b) or (c) of the Act.

The compensation should be measured by the market value of the gravel taken and in the alternative he relied on the provisions relating to just and equitable compensation in S25(3) of the Constitution.

SCA was incorrect to hold that S12(1)(b) was applicable and that their interpretation of the issue at hand was incorrect. He regards S12(1)(b) as being the incorrect approach since, unlike S25(3), it makes no explicit reference to the market value in calculating the compensation.

Applicant also holds further that if one were to regard S12(1)(b) as not making room for just and equitable compensation then it is contrary to the Constitution – furthermore that an interpretation of the relevant sections of the act must be in line with the values embodied in the Constitution, particularly S25(3) and S39(2).

SCA-Decision

Respondent’s arguments

Respondent held that the applicant was entitled only to compensation based on actual financial loss in terms of S12(1)(b).

That which was expropriated was the right to create a pit to excavate gravel for the purposes of a public road for a period of 18 months – not a long term expropriation.

Issuing the notice under S8(1)(c) of the Road’s Act was thus correct.

Compensation is therefore aimed at putting the expropriate in the financial position he prior to the expropriation (but for – sine qua non test).

Also, market value is only one of the factors listed in S25(3) and there is no indication that it needs to be taken account of in all circumstances.

Therefore, market value alone should not be equated with just and equitable compensation.

The SCA’s finding that S12(1)(b) should be used to determine compensation does not mean that it excludes a consideration of just and equitable compensation.

SCA-Decision

Majority (written by Mokgoro):

Affirms the fact that all laws need to pass constitutional muster and be in accordance with the Constitution.

Therefore the determination of compensation must comply generally with the spirit, purport and objects of the BOR and specifically with S25.

CC Judgment

The Court points out that S25(3) is peremptory and therefore must be complied with when deciding on compensation.

Also highlights that market value is one of the factors listed in S25(3) and that other factors outside of the list in S25(3) may also be considered.

CC Judgment

There are also differences between the Act and the Constitution – but that the Act is not challenged in this case (e.g. of the difference: S12(1) confines compensation to either actual loss or the aggregate of market value and financial loss which is not done by in the Constitution).

The issue is therefore whether or not S12(1) enables the award of compensation which is just and equitable as required by S25(3).

S12 of the Act does not preclude the award of just and equitable compensation where neither the market value nor actual financial loss was proven.

SCA held that neither actual financial loss nor the market value of the gravel could be proven - but that the state offered an amount of compensation that was just and equitable.

CC Judgment

S25(3) does not require that all factors contained therein need to be applied in order for the compensation to be just and equitable. Therefore, whether the amount of compensation is determined by using S12(1)(a) or S12(1)(b) it must still be just and equitable.

Par. 34 – Assumes without deciding that there does not appear to be inconsistency between the Act and S25(3).

In these circumstances where the constitutionality if the Act is not challenged, one would need to follow a 2-staged approach – which is practical but not ideal. Firstly, it is necessary to determine the amount of compensation payable in terms of the Act and secondly, to determine if that amount if valid in terms of S25(3).

CC Judgment

One cannot ignore the Act or the Constitution in this case.

S25(3) – does not give market value a central role – which needs to be seen in light of our social, political, historical and economic circumstances.

As held in Ex Parte Former Highlands Residents; In Re: Ash and Others v Department of Land Affairs [2000] 2 All SA 26 (LCC), the market value is a helpful starting point to determine whether compensation is just and equitable.

CC Judgment

S 8(1)(c) was the correct section to use as a basis for the notice of expropriation – since what was expropriated was a right to use land temporarily for the purpose of upgrading a national highway

As stated as the purpose of S S 8(1)(a)

There was a permanent removal of an unspecified amount of gravel.

CC Judgment

The court also highlights that what was expropriated was the right to remove gravel for which the Board had to use its own resources to create a pit to excavate the gravel.

Applicant was incorrect to assume that the SCA took the incorrect approach to compensation.

Since the court did take into account the market value of the applicant's property.

CC Judgment

Actual financial loss linked with market value is a legitimate approach.

Therefore the SCA was correct on this issue.

It is calculated by not taking the market value of the gravel into account, that did create the expropriation.

The market value of the gravel created by the expropriation must be thought away.

CC Judgment

Since the increased demand and value was as a result of the expenses and effort incurred by the Board.

S12(1)(b) is therefore the correct section to use since it makes provision for compensation in both the use of property and the property taken.

But in essence, there is no difference between the measures of compensation.

Even if S S12(1)(a) was used

Since both sections would require a consideration of market value.

CC Judgment

Compensation in terms of S 25(3):Current use of Property

Agricultural and gravel areas

Gravel areas was to a large extent unused

Uncertain if it was to be excavated

The unused gravel would satisfy demand

CC Judgment

Compensation in terms of S 25(3):History of the acquisition and use of the property

Portion used to extract the gravel had not previously been used.

CC Judgment

Compensation in terms of S 25(3):Purpose of expropriation

Public interest

Interest that the applicant shared with the public in general.

CC Judgment

Compensation in terms of S 25(3):Other considerations

It is relevant to consider the amount of time and effort taken to remove the gravel and the cost of rehabilitation and the limited demand for gravel in that area

Therefore the Majority came to the conclusion that the SCA order should be set aside and no order for the costs made.

CC Judgment

Minority Judgment ( Written by Langa):

Would dismiss the application based on the fact that it has no material prospects of success and hearing the matter would not be in the interests of justice.

CC Judgment

The judgment differs on 2 main points from the Majority:

1. Disagrees with the analysis of S 8(1) of the Roads Act

2.Disagrees with the relationship between S 12(1) of the Act and S 25(3) of the Constitution.

CC Judgment

S 8(1)(c) was not the correct basis for issuing the notice and S 8(1)(b) should rather have been used.

But the situation actually falls within both sections

But in any event it does not change the outcome of the case.

See especially Par 81 & 82 of the case.

CC Judgment

The Test for just and equitable compensation in S 25(3) differs drastically from that in S 12

One cannot accept the approach of the majority that reconciles the approaches between S25(3) and S 12.

The Constitution requires justice & equity as THE test for the calculation of the compensation and does not make it secondary.

CC Judgment

Therefore, if the compensation is just and equitable in terms of the Constitution

The Applicant will have no cause to complain

In this case therefore the amount is just and equitable.

CC Judgment