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LAND CLAIMS COURT MAKES LANDMARK DECISION

March 25, 2019

Introduction

 

The Honourable Canca AJ recently presided over the matter between Emakhasaneni Community v The Minister of Rural Development and Others LCC03/2009; Entembeni Community v The Minister of Rural Development and Others LCC230/2009 and Mthonjaneni Community and Others LCC201/2013.

 

This matter, set down in the Land Claims Court, was for the determination of “just and equitable” compensation the Minister of Rural Development and Land Reform (“the Minister”) would be obliged to pay certain landowner defendants in respect of properties the Minister had agreed to acquire from them. The determination of the aforesaid compensation was initially set down on the 3rd to 5th of December 2018 but could not proceed for the following reasons:

 

On 28 November 2018 the Land Claims Court handed down a judgment in terms of which it, inter alia, dismissed an interlocutory application brought by the Ingonyama Trust (“the Trust”).

 

In that application the Trust sought an order, in terms of which land to be awarded to the claimant communities in this matter, be transferred into its name, to be held by the Trust for the benefit of those communities.

 

The award of that land was as a result of a settlement reached by the Minister, the Regional Land Claims Commissioner, KwaZulu-Natal (“the Commission”) (together hereinafter referred to as the “State”), the aforementioned landowner defendants and the claimant communities. The settlement was made an Order of Court in the judgment referred to above.

 

The aforesaid agreement, inter alia, provided for the payment of just and equitable compensation to the landowner defendants whose properties were acquired by the State. The said compensation would in terms of the agreement, either be agreed to by the parties themselves, or, in case of a disagreement, be determined by the Court.

 

The State and the landowner defendants failed to reach an agreement and in accordance with the provisions of the settlement agreement, the amount of just and equitable compensation had to be determined by the Court.

 

State’s position

 

Notwithstanding that the State was a party to the settlement agreement, the State adopted a new stance. It now attempted to acquire the properties from the landowner defendants at values determined by the Office of the Valuer-General (“OVG”) and not at the compensation determined by the Court.

 

The State’s new stance which was contained in a document titled “Notice”, was communicate to the landowner defendants on 29 November 2018, approximately two days before the commencement of this matter.

 

The State’s rationale for their new stance was advanced through the contention that the Minister is bound by the determination of the compensation arrived at by the OVG. The State relied on the provisions of Section 12(1)(a) of the Property Valuations Act 17 of 2014 (“the PV Act”), including the Act’s definition of value under Section 1.

 

Section 12(1)(a) of the PV Act provides that:

 

“Whenever a property has been identified for-

  1. Purposes of land reform, that property must be valued by the Office of the Valuer-General for the purposes of determining the value of the property having regard to the prescribed criteria, procedures and guidelines.”

According to the State, the Minister had no basis for compensating the landowner defendants other than with the values determined by the OVG. Failure to comply with that determination and compensating the landowner defendants with values other than those determined by the OVG, would result in that compensation being unlawful.

 

The State furthermore contended that if the landowner defendants were unhappy with the Minister’s decision, they should have launched proceedings to set aside that decision. Moreover, should they have been so inclined, they were and still are at liberty to initiate proceedings to nullify the determination report which the Minister has based her decision on.

 

Landowner defendants’ position

 

The landowner defendants opposed the Minister’s new stance submitting that the Notice had no legal effect given that it was neither a valuation report, nor a tender and the Notice was not properly before Court.

 

Moreover, the landowner defendants argued, that even if the PV Act was applicable, its effect was not retrospective. They submitted that the PV Act only came into effect on 1 August 2015 – 9 years after the matters in LCC03/2009 and 230/2009 were referred to the Land Claims Court and 5 years after the referral of the LCC201/2013 matter. It was furthermore contended that the Minister had waived her right to rely on the provisions of the PV Act, assuming that the Act constrained her, by agreeing to the settlement referred to above.

 

The landowner defendants attack was specifically that the Notice was neither a tender, nor a valuation report based on the provisions of Rule 31 of the Rules of the Court and those of Section 15(2) of the PV Act respectively.


Court discussion

 

In its discussion, the Court put forward that its understanding was that the Notice put forward by the State, was not meant to be a valuation, but rather merely a document evidencing the compensation determined by the OVG for which compensation, the Minister alleged, she is bound to purchase the affected properties.

 

The Court further discussed the values of the respective properties set out in the Notice stating that they were not offers or tenders in the classical sense as per the State’s submissions, and moreover, that an offer or tender implies that same can be negotiated or refused by the party to whom it is directed.

 

The State’s case was that the landowner defendants were obliged to relinquish their properties to the State at the amounts set out in the Notice without the ability to negotiate the price with the Minister. The landowner defendants’ only remedy according to the State, would be to approach the Court for a review of the Minister’s decision and refer the matter back to her for redetermination should the review succeed.

 

The landowner defendants contended that the Notice had no substance (or legal effect) as the landowner defendants could not use same, for example to review the Minister’s decision. This was inter alia, because the Notice which purported to reflect the Minister’s decision in the matter, did not constitute an administrative decision in terms of the provisions of the Promotion of Administrative Justice Act 3 of 2000 (“PAJA”).

 

The Court held that a plain reading of the Notice supported the landowner defendants’ contention. The Notice did not set out a decision by the Minister or a decision by the OVG. The wording of Section 12(1)(a) of the PV Act merely states that the OVG must value the land “for the purposes of determining the value of the property having regard to the prescribed criteria and guidelines.” It does not say that the OVG makes the decision as to the compensation to be paid or that the Minister is bound by that decision.

 

Furthermore, in the Court’s view, at best, the determination of the OVG could be used as a guideline by the Minister when negotiating the purchase price of any property she intends acquiring in terms of a Section 42D from a landowner. The landowner should then be able to proceed to the Land Claims Court for a determination of the just and equitable compensation should he or she be unhappy with the value arrived at by the OVG and which the Minister undertakes to acquire the property. To find otherwise would be an iniquity. South Africa’s current Constitutional regime affords every individual the right to approach the Court for protection of a right which such an individual perceives to have been infringed or about to be infringed. To contend that such an individual, pitted against the might and resources of the State, should approach the Courts to set aside the OVG’s valuation and refer the matter back to the Minister for redetermination, would be unfair as most landowners, if not all, in cases of this nature, fund the litigation from their own funds.

 

In a joint minute prepared by the valuers of the State and the landowner defendants on 14 March 2018, the total amount of just and equitable compensation for the properties acquired by the Minister amounted to R760 999 890.00. The total amount set out in the Notice amounted to R420 000 000.00, approximately half of the amount agreed to in the minute of March 2018. The landowner defendants would, should the Minister’s new stance prevail, potentially suffer prejudice in to the sum of R340 999 890.00.

 

Moreover, even if the wording of the Notice was interpreted to constitute a decision by the Minister, no internal appeal procedure was provided for in the Notice, rendering its content unfair as, the option granted to the landowner defendants to approach the Court placed an undue financial burden on them.

 

It was furthermore contended on behalf of the landowner defendants that the Minister’s action was procedurally unfair as they were, inter alia not afforded an opportunity to exercise their rights as set out in Section 3 of PAJA.

 

The Court further held that there was merit in the contention that the landowner defendants only became aware of the Minister’s new stance approximately 2 days before the hearing and after that she had taken the decision. That decision clearly adversely affected the landowner defendants’ rights as there were marked differences in the values determined by their experts and the Minister’s valuer, compared to those of the OVG.

 

Considering the above, the Court held that it agreed that the Notice had no legal effect and it was not properly before Court. The State as a party to the settlement which was made an Order of Court should as the landowner defendants contended, either have brought an application setting aside the Order or have brought an application wherein it sought the Notice placed before Court, which it had failed to do.

 

Decision on whether the PV Act constrained the Minister as contended

 

The Court held that the PV Act commenced on 1 August 2015 when this matter was already before Court and it is silent as to whether its provisions apply prior to or after its commencement. Whether a statute has a retrospective effect or not depends on the intention of the Legislature as gleaned from the language and purpose of the legislation. This is further discussed in Euromarine International of Mauren v The Ship Berg and Other 1986(2) SA 700 (A).

 

Furthermore, the general rule is that legislation is to be construed as regulating future matters only as confirmed in Kaknis v Absa Bank Ltd, Kaknis v MAN Financial Devices (Pty) Ltd [2017] 2 All SA 1 (SCA).

 

The Court found no merit in the State’s submission that, whilst acknowledging the aforesaid general rule, it contended that insofar as compensation payable for property identified for land reform was concerned, the PV Act introduced a change in procedure and given that the landowner defendants’ rights would not be adversely affected, as they would still receive just and equitable compensation, the Act was applicable in this matter.

 

The State attempted to support their contention by relying on the dictum of Kentridge AJ, in S v Mhlungu and Others 1995 (3) SA 867 (CC), which states:

 

“There is a different presumption where a new law effects changes in procedure. It is presumed that such a law will apply to every case subsequently tried ‘no matter when such case began or when the cause of action arose’ – Curtis v Johannesburg Municipality 1906 TS 308 at 312. It is, however, not always easy to decide whether a new statutory provision is purely procedural or whether it also affects substantive rights. Rather than categorising new provisions in this way, it has been suggested, one simply ask whether or not they would affect vested rights if applied retrospectively. See Yew Bon Tew v Kenderaan Basa Mara (supra at 563 (AC); Industrial Council for Furniture Manufacturing Industry, Natal v Minister of Manpower and Aother (supra at 242).”

 

In this respect, the Court held that the Act may very well set out the procedure whereby the amount for which the Minister may purchase property for land reform purposes, but that does not exclude the Court’s jurisdiction to determine the just and equitable compensation and in particular, where the parties referred the matter for such determination.

 

The Court found the position argued on behalf of the State might apply where the parties are at a Section 42D negotiation stage but not where the matter was already before Court. Moreover, as the learned Judge stated in the Mhlungu matter, the test to be applied is whether the new legislation affects vested rights. In this matter the landowner defendants would have suffered substantial financial loss if the OVG’s valuation was upheld – this, notwithstanding the fact that the Minister’s own valuer determined a much higher value for the properties.

 

In this regard the Court could thus not find anything in the PV Act which prevented the Minister from paying “compensation” that exceeded the “value” determined by the OVG, nor to agree to the determination of “compensation” by the Court, well-knowing that the Court’s determination could be higher than the “value” determination of the OVG. Furthermore, the valuation guidelines prescribed by the Valuation Regulations (particularly paragraph 6 of the Regulations) could in the Court’s view, result in valuations which were much lower than just and equitable compensation determined terms of Section 25(3) of the Constitution and will also be in conflict with the definition of “value” contained in Section 1 of the PV Act.in

If the properties had been expropriated, compensation would have to be determined by a Court, untrammelled by the “value” determined by the OVG. In terms of Section 25(2)(b) of the Constitution compensation for expropriation “must either have been agreed by those affected or decided or approved by a Court”. The Court cannot be bound to accept a value determined by the OVG as the amount of compensation for expropriation. Section 26(2) of the Constitution provides that no law may limit any right entrenched in the Bill of Rights. Section 22(1)(b) of the Restitution Act empowers the Court to determine compensation for the expropriation of acquisition of land. The Court found that compensation for “acquisition” could not be determined on a different basis than compensation for “expropriation”.

 

Considering the above the Court found that the Minister was not constrained by the PV Act in the manner contended by the State.

 

Lastly, the landowner defendants argued that the Minister, having agreed that the Court should determine the question of just and equitable compensation, had waved reliance on the PV Act, alternatively elected not to rely on it and in the further alternative, was estopped from relying on this Act. Reliance for this submission was place on Eagle Insurance Co v Bavuma 1985 (3) SA 42 (A).

 

The Court held that at no point prior to the Notice, did the Minister, or her legal representatives indicate that they intended to rely on the PV Act. The Land Claims Court and the landowner defendants, who in anticipation of the hearing of expert evidence in respect of the determination of just and equitable compensation, had filed expert notices and summaries dealing with the issue of compensation. All assumed that the matter would have proceeded as set down for the hearing of expert evidence on 3 to 5 December 2018.

 

Order of Court

 

In its decision, the Land Claims Court ordered as follows:

  1. The Court Order dated 28 November 2018 remained binding on the first defendant and had not been negated by the contents of the Notice.

 

  1. An order as to costs awarded in favour of the landowner defendants against the first defendant which costs are to include the costs of two counsel and those of the landowners’ attorney, including traveling time and traveling and accommodation costs, and the reservation and attendance fee and accommodation costs of the landowners’ expert witnesses.

 

  1. The counsel for the first defendant are not permitted to charge a fee for the 4th and 5th of December.

 

Conclusion

 

This has been a momentous decision in respect of protecting the rights of landowners and has confirmed the Land Claims Court’s firm stance on the issue of “just and equitable” compensation in matters of land reform. It furthermore serves as a firm warning to the State that unsubstantiated reliance on legislation to enable arbitrary unfairness on individuals and unjustly limiting their rights can never be in line with the Constitution, let alone the spirit, object or purport of any right entrenched in the Bill of Rights.

 

It remains to be seen whether the State will challenge this position.

 

 

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