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FORM AFILING SHEET FOR EASTERN CAPE JUDGMENT
PARTIES: OFFIT ENTERPRISES (PTY) LTD First Applicant
OFFIT FARMING ENTERPRISES (PTY) LTD Second Applicant
and
THE PREMIER OF THE EASTERN CAPE GOVERNMENT First Respondent
COEGA DEVELOPMENT CORPORATION (PTY) LTD Second Respondent
THE MINISTER OF PUBLIC WORKS Third Respondent
THE MINISTER OF TRADE AND INDUSTRY Fourth Respondent
• Registrar CASE NO:
• Magistrate:
• Supreme Court of Appeal/Constitutional Court:
DATE HEARD: 18 November 2005DATE DELIVERED: 31 January 2006
JUDGE(S): EBRAHIM J
LEGAL REPRESENTATIVES -Appearances:
• for the State/Applicant(s)/Appellant(s): Mr R G Buchanan SC with Mr S C Rorke for the First and Second Applicants
• for the accused/respondent(s): Mr P J De Bruyn SCwith Mr B J Pienaar for the First and Second Respondents
Instructing attorneys:Applicant(s)/Appellant(s): Rushmere Noach Incorporated
Respondent(s): Le Roux Inc
CASE INFORMATION -• Nature of proceedings : • Topic:
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IN THE HIGH COURT OF SOUTH AFRICA
(SOUTH EASTERN CAPE LOCAL DIVISION)
CASE NO: 1764/05
In the matter between:
OFFIT ENTERPRISES (PTY) LTD First Applicant
OFFIT FARMING ENTERPRISES (PTY) LTD Second Applicant
and
THE PREMIER OF THE EASTERN CAPE GOVERNMENT First Respondent
COEGA DEVELOPMENT CORPORATION (PTY) LTD Second Respondent
THE MINISTER OF PUBLIC WORKS Third Respondent
THE MINISTER OF TRADE AND INDUSTRY Fourth Respondent
JUDGMENT
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EBRAHIM J:
Introduction
1. The applicants are the owners of three immovable properties situate within
the Coega Industrial Development Zone in the Eastern Cape Province. In
a Notice of Intended Expropriation dated 2 February 2005, signed by the
first respondent, the applicants were informed that the first respondent
intended expropriating the properties for the purpose of transferring same
to the second respondent, Coega Development Corporation (Pty) Ltd
(‘CDC’).
2. The Notice of Intended Expropriation reads:
‘1. Kindly take notice that, by virtue of the powers vested in me in terms of
s2 of the Eastern Cape Land Disposal Act No 7 of 2000, as well the (sic)
provisions of ss1 and 2 of the Expropriation Act No 63 of 1975, read with
s25 of the Constitution (Constitution of the Republic of South Africa Act
108 of 1996), I as Premier in Executive Council of the Eastern Cape
Government, intend expropriating the Properties described hereinbelow
and transferring it (sic) to the Coega Development Corporation (CDC).
2. The properties are:
2.1 Remainder of the farm Swartkoppen No 302, situated in the Uitenhage
Registration Division in the Nelson Mandela Metropolitan
Municipality, Province of the Eastern Cape, measuring 475.8953
hectares and held by Deed of Transfer T29661/1977.
(Owner: Offit Farming Enterprises (Pty) Ltd).
2.2 Portion 45 of the farm Swartkoppen No 302, situated in the Uitenhage
Registration Division in the Nelson Mandela Metropolitan
Municipality, Province of the Eastern Cape, measuring 3.0396
hectares and held by Deed of Transfer T29660/1977.
(Owner: Offit Enterprises (Pty) Ltd).
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2.3 Portion 46 (Coega) of the farm Swartkoppen No 302, situated in the
Uitenhage Registration Division in the Nelson Mandela
Metropolitan Municipality, Province of the Eastern Cape,
measuring 29.9294 hectares and held by Deed of Transfer
T29661/1977.
(Owner: Offit Farming Enterprises (Pty) Ltd).
3. For ease of reference I annex hereto copies of the said Eastern Cape
Land Disposal Act (annexure “A”), the Expropriation Act (annexure “B”)
and s25 of the Constitution (annexure “C”).
4. A sketch plan of the said properties is annexed hereto as annexure “D”.
5. The matter is one of extreme urgency and the intended expropriation and
transfer is clearly for a public purpose and in the public interest.
6. It is intended that the expropriation of the properties shall take effect on
18th February 2005, and the State shall therefore take control and
ownership of the properties on such date, for transfer to the CDC. You
are however, entitled to continue with your business and remain in
possession of the properties until finalisation of this matter by way of a
Court Order or agreement.
7. Your attention is hereby drawn to the provisions of ss9 and 12 of the
Expropriation Act, the terms of which you are required to familiarise
yourself with and fully comply with.
8. Kindly take notice further that compensation will be offered for your
properties in the nearby (sic) future. The properties are in the process of
being valued and it is envisaged that an offer for (sic) compensation will
be made in the very near future.
9. Furthermore, you are obliged in the interim to take care of and maintain
the properties whereupon government shall compensate you for the costs
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which were necessarily incurred in respect of such maintenance and care.
Take note that if you wilfully or negligently fail to take care of and maintain
these properties you will be liable for the depreciation in its value.
10. You are however responsible for the payment of taxes and other charges
levied in respect of the properties as if these properties had not been
expropriated.
11. You are further entitled to the rights contained in s3 of the Promotion of
Administrative Justice Act 3 of 2000, which section is annexed hereto,
marked “E”.
12.Annexed hereto marked “F” find a copy of representations made to me on
behalf of the CDC which inter alia deals with the issues of urgency and
public purpose.’
3. The applicants now seek an order in the following terms:
‘(a) That the Notice of Intended Expropriation signed by the First Respondent
on 2 February 2005, a copy of which is annexed hereto marked “A”
(without annexures thereto), be and is hereby declared to be invalid and
of no force or effect;
(b) Alternatively, that the issue by the First Respondent of the Notice of
Intended Expropriation referred to in prayer (a) above constitutes
administrative action which falls to be reviewed and set aside in terms of
the provisions of the Promotion of Administrative Justice Act, 3 of 2000;
(c) That the First Respondent be ordered to pay the costs of the Application,
save that in the event that any other Respondent opposes the Application,
such Respondents be ordered, jointly and severally with the First
Respondent, to pay the costs of the Application;
(d) That the Honourable Court grant the Applicants such further and/or
alternative relief as it may deem fit.’
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The applicants’ challenge to the validity of the expropriation
4. The grounds upon which the applicants challenge the validity of the
expropriation may be summarised as follows:
(a) The legislative enactments upon which the first respondent relies,
namely the Expropriation Act, 63 of 1975 (‘Expropriation Act’), and
the Eastern Cape Land Disposal Act, 7 of 2000 (‘Land Disposal
Act’), do not vest the first respondent with authority to expropriate
the applicants’ properties for the purpose of transferring them to the
second respondent, a private company.
(b) Section 2(1) of the Expropriation Act specifies that the expropriation
must be for public purposes, which is defined in s 1 as including any
purposes connected with the administration of the provisions of any
law by an organ of State. Since the second respondent is a private
company and not an organ of State the expropriation is not a
legitimate one within the meaning of the provisions of s 2(1).
(c) In terms of s 1 of the Expropriation Act the Minister who may
expropriate property is defined as ‘the Minister of Public Works and
…… includes an executive committee’ which, it is said, ‘means the
executive committee of a province mentioned in s 7 of Provincial
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Government Act, 69 of 1986’. However, this latter Act had been
repealed. Accordingly, such an executive committee no longer had
any legal relevance to expropriations and only the Minister of Public
Works may expropriate property. In relying on these provisions in
issuing the Notice of Intended Expropriation. the first respondent
acted ultra vires the legislation.
(d) The Notice of Intended Expropriation is invalid as it does not comply
in various respects with the peremptory requirements of s 7 of the
Expropriation Act.
The answer of the first and second respondents to the application
5. The answer of the first and second respondents to the applicant’s
challenge to the validity of the expropriation is briefly the following:
(a) The Expropriation Act and the Land Disposal Act vest the first
respondent with the necessary authority to expropriate the applicants’
properties for the purpose of transferring them to the second
respondent. The first respondent did not act ultra vires the legislation
in relying on certain provisions of these legislative enactments to
effect the expropriation.
(b) The expropriation is for a public purpose and it is in the public interest
that the properties be transferred to the second respondent.
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(c) The sole share shareholder of the second respondent at the date
of expropriation was the Eastern Cape Development Corporation
(Proprietary) Limited (‘ECDC’) which was ‘owned 100% by the
government’.
(d) The Notice of Intended Expropriation complies with the provisions of
the Expropriation Act and is valid.
Counsels’ submissions
6. Mr Buchanan SC, with Mr Rorke, appeared for the applicants and
presented comprehensive heads of argument in amplification of the
grounds challenging the validity of the expropriation. Mr De Bruyn SC,
who, with Mr Pienaar, appeared for the first and second respondents
submitted equally comprehensive heads of argument disputing the
legitimacy of the grounds relied upon by the applicants. The gist of
counsels’ submissions will emerge from the ensuing discussions.
The nature of the second respondent and its shareholding
7. The parties were ad idem that the shareholding of the second respondent
determines its nature. The second respondent was incorporated on
20 April 1982 in terms of the Companies Act, 61 of 1973 (‘Companies
Act’), as a private company under the name ‘Plot 84 Klerksoord
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(Eiendoms) Beperk’ with registration no. 82/03891/07. On 17 August 1998
the name of the company was changed to ‘Coega Development
Corporation (Proprietary) Limited’. In addition, the Memorandum and
Articles of Association and the main business to be carried on by the
company, including its main object, were changed.
8. The second respondent’s Register of Members Share Accounts reflects
that on 2 February 2005 (the date the first respondent signed the Notice of
Intended Expropriation) forty five thousand ordinary shares had been
allotted to the Eastern Cape Development Corporation (Pty) Ltd (‘ECDC’)
and one “A” class share to the Department of Trade and Industry (‘DTI’).
9. The first and second respondents contend that the allotment of the “A”
class share was void. In an affidavit deposed to by Charlotte Fay Lane, a
chartered accountant of PricewaterhouseCoopers Inc, the external
auditors for the second respondent, the reasons for the allotment being
void are set out. She asserts that ‘the share certificate which was prepared
and forwarded to the Company Secretary of the second respondent for signature
by the directors and secretary, was never signed, nor returned to
[PricewaterhouseCoopers] and therefore no stamp duty was paid and the
transaction was not finalised. Where a relevant share certificate is not fully
issued (sic) within 60 days of allotment, the allotment becomes void. This is in
terms of S.96(1) of the Companies Act, 1973, as amended’. She also asserts
‘[t]he allotment of the ‘A’ class ordinary share (sic) has therefore become void
10
and the sole shareholder of The Coega Development Corporation (Proprietary)
Limited, (second respondent), is Eastern Cape development Corporation.’
10.Tumelo Chipfupa, described as Chief Director, Enterprise Support, The
Enterprise Organisation, of the Department of Trade and Industry (DTI),
asserts in an affidavit that ‘the DTI did not at any time take up the ‘A’ shares
(sic) issued by the second respondent. The issue of the share has therefore not
affected the ownership of and shareholding in the second respondent.’
11.Mr De Bruyn contended therefore that as the share certificate was not
signed it was not completed pursuant to the provisions of s 96(1) of the
Companies Act and consequently not handed over. Moreover, as stated
by Mr Chipfupa, the DTI did not ‘take up’ the “A” class share. Even though
the DTI was entitled in terms of s 96(2) to apply to court for the delivery of
the share certificate it elected not to do so. In the absence of any
application the allotment became void after two months.
12.Mr De Bruyn submitted that the applicants’ contentions (which are set out
below) in respect of the shareholding were based on hearsay and
secondary evidence. The respondents, he contended, have proved that at
the date of expropriation the ECDC was the sole shareholder of the
second respondent. If there was any doubt the issue was to be decided
on the version of the respondents as these are motion proceedings.
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13. I do not consider Mr De Bruyn’s criticism of the applicants’ contentions to
be wellfounded. In respect of the allotment of the “A” class share to the
DTI, the applicants based their contentions on documents that the second
respondent was, in terms of the Companies Act, compelled to lodge with
the Registrar of Companies. These documents constitute direct, and not
hearsay or secondary, evidence. In any event, the respondents do not
dispute the allotment to the DTI, but content themselves with the legal
argument that the allotment is void.
14.Mr Buchanan submitted that the respondents’ reliance on s 96 of the
Companies Act was misplaced. The section dealt with the delivery of
shares to the person entitled to receive them and did not state that the
failure to sign a share certificate rendered the allotment of the share void.
He contended there was no merit in the respondents’ contentions that the
allotment of the “A” class share was void on the grounds that the share
had not been ‘take[n] up’ by the DTI.
15.Section 96 of the Companies Act, 61 of 1973, reads as follows:
‘96. Limitation of time for issue of share certificates.—
(1) Every company shall within two months or within such extended time,
not exceeding one month, as the Registrar on good grounds shown and
on payment of the prescribed fee, may grant, after the allotment of any of
its shares, debentures or debenture stock, complete and have ready for
delivery the certificates of all shares, the debentures or the certificates of
all debenture stock allotted.
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(2) If default is made in complying with the requirements of subsection
(1), any person entitled to the certificates of shares, the debentures or the
certificates of debenture stock in question may by notice in writing call
upon the company to make good the default, and if the company fails to
comply with the notice within ten days after service thereof, the Court may
on the application of such person make an order directing the company to
make good the default within such time as may be specified in the order,
and if it thinks fit direct that any costs of or incidental to the application
shall be borne by the company or by any director or officer of the
company responsible for the default.
(3) If default is made in complying with the requirements of subsection
(1), the company, and every director or officer thereof who knowingly is a
party to the default, shall be guilty of an offence.
16.Mr Buchanan submitted that the provisions of s 96 were not open to
the interpretation that the respondents seek to place on it. I agree.
I consider Mr De Bruyn’s submissions in this regard to be misconceived. If
the intention was that s 96 should have the farreaching consequence that
Mr De Bruyn contended it has, the legislature would have said so in clear
and explicit terms and not have left unsaid the crucial fact that the
allotment of the share becomes void.
17. It is evident that the purpose of s 96 is to ensure, once shares, debentures
and debenture stock have been allotted, that the certificates in respect
thereof are completed and ready for delivery within a prescribed period.
To this end, s 96(1) specifies the company’s duty in this regard while
s 96(2) sets out what recourse is available to the person entitled to the
certificate should the company fail to comply with the requirements of
13
s 96(1). Finally, s 96(3) stipulates that the consequence of failing to
comply with these provisions is that ‘the company, and every director or officer
thereof who knowingly is a party to the default, shall be guilty of an offence’. I do
not find anything in the provisions to justify the conclusion that the
allotment becomes void if the relevant certificate is incomplete and not
ready for delivery within the prescribed period.
18. I am consequently of the view that there is no merit in the respondents’
contention that the allotment of the “A” class share to the DTI is void due
to noncompliance with the provisions of s 96.
19.On the respondents’ version, as disclosed in the affidavits of Ms Lane and
Mr Chipfupa, it is clear that the second respondent alloted the “A” class
share to the DTI and issued the share. An issue that arises for
consideration in this regard, however, is Mr Chipfupa’s assertion that the
DTI did not ‘take up’ the share.
Mr Buchanan submitted that our law did not recognise the notion of
not ‘taking up’ shares once these had been issued. A shareholder to
whom a share was issued remained the shareholder until the share was
transferred. Section 133(1) of the Companies Act requires a company to
register the transfer of any shares by entering details of the transferee,
and certain other information, in its register of members.
14
20. I find no indication in the extract of the second respondents’ register of
members (annexed to the applicants’ replying affidavit) that the “A” class
share was transferred by the DTI to any other entity or person. The first
and second respondents do also not assert that this ever occurred.
21. In Inland Property Development Corporation (Pty) Ltd v Cilliers 1973 (3)
SA 245 (A) at 251CD Rumpff JA stated:
‘In regard to shares, the word 'transfer', in its full and technical sense, is not a
single act but consists of a series of steps, namely an agreement to transfer,
the execution of a deed of transfer and, finally, the registration of the transfer’.
22.Section 103(2) of the Companies Act specifies that in addition to the
subscribers of the memorandum of a company ‘[e]very other person who
agrees to become a member of a company and whose name is entered in its
register of members, shall be a member of the company’.
23. I am in agreement with Mr Buchanan that any decision not to ‘take up’ the
share has no legal effect. The “A” class share was allotted and issued to
the DTI and the DTI remains a shareholder with majority voting rights in
the second respondent. It should be noted that the respondents do not
dispute that the “A” class share has preferential voting rights over the
ordinary shares.
15
24.Mr Buchanan contended that presently the test for determining whether a
company is a subsidiary company or not is the control of the subsidiary
company by virtue of voting rights, and not the number of shares held, as
was previously the case. I accept this as a correct interpretation of the
provisions of s 1(3)(a) of the Companies Act which read:
‘(3) (a) For the purposes of this Act, a company shall be deemed to be a
subsidiary of another company if
(i) that other company is a member of it and
(aa) holds a majority of the voting rights in it; or
(bb) has the right to appoint or remove directors holding a
majority of the voting rights at meetings of the board; or
(cc) has the sole control of a majority of the voting rights in it,
whether pursuant to an agreement with other members
or otherwise; or
(ii) it is a subsidiary of any company which is a
subsidiary of that other company; or
(iii) subsidiaries of that other company or that other
company and its subsidiaries together hold the
rights referred to in subparagraph (i) (aa), (bb)
or (cc).’
25. It is trite that a private company has a legal personality entirely separate
from that of its members. See Dadoo v Krugersdorp Municipal Council
1920 AD 530 at 550, Salomon v Salomon & Co Ltd [1897] AC 22, [18959]
All ER Rep 33 (HL), The Shipping Corporation of India Ltd v Evdomon
Corporation Ltd and Another 1994 (1) SA 550 (A) at 565566.
16
26.The facts set out in the respondents’ answering affidavit and the
supplementary affidavits filed in support thereof do not establish that the
ECDC is the second respondent’s sole shareholder. On the contrary, on
the facts, as presented by the respondents, it is clear that at the date of
expropriation the ECDC and the DTI were the second respondent’s
shareholders with the DTI holding a majority of the voting rights. I agree
with Mr Buchanan therefore that the second respondent cannot be
deemed a subsidiary of the ECDC.
Is the second respondent an organ of State?
27.Section 239 of the Constitution Act, 108 of 1996, (‘Constitution’) defines an
organ of State as:
‘(a) Any Department of State or administration in the National, Provincial or
local seat of Government; or
(b) Any other functionary or institution
(i) exercising a power or performing a function in terms of the
Constitution or a Provincial Constitution; or
(ii) exercising a public power or performing a public function in terms of
any legislation, but does not include a Court or a judicial officer.’
28. In their answering affidavit the respondents assert that the ECDC is ‘an
organ of state (sic) and 100% state (sic) owned’. However, the second
respondent is clearly not any of the institutions referred to in s 239(a) of
the Constitution. Further, the respondents have not suggested that the
second respondent exercises a power or performs a function as set out in
17
ss 239(b)(i) or (ii) of the Constitution. It follows, therefore, that the second
respondent is manifestly not an organ of State.
Is the second respondent a government or State entity or instrument?
29.Mr De Bruyn submitted that the expropriation of the properties and their
transfer to the second respondent was for a provincial public purpose.
The second respondent was a government or State entity or instrument
established for the benefit of the public good. As I understood the
submission, it was based on the contention that the second respondent is
a Provincial Government entity or instrument.
30.As I have stated the shareholders of the second respondent are the DTI
and the ECDC. It is trite that the DTI is a Department of State and
consequently an organ of State as defined in s 239(a) of the Constitution.
Since the majority of voting rights is held by the DTI, the second
respondent is, by virtue thereof, under the control of the National and not
the Provincial Government. The second respondent is clearly, therefore,
not a Provincial Government entity or instrument.
The constitutional imperatives
31.Sections 25(1) and (2) of the Constitution, Act 108 of 1996, stipulate:
‘(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.
(2) Property may be expropriated only in terms of law of general application
18
(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.’
The legislation the first respondent relies on for authority to expropriate
32.The legislative enactments that the first respondent relies on for the
authority to expropriate the properties of the applicants are s 2 of the Land
Disposal Act and ss 1 and 2 of the Expropriation Act. As I have stated
previously it is contended by the first respondent that these provisions do
not debar the expropriation of the properties in order to transfer them to
the second respondent. I proceed to examine the relevant legislative
provisions to establish if the first respondent is vested with the power to
expropriate immovable property and if the notice of expropriation complies
with the provisions of the Expropriation Act.
The Expropriation Act, 63 of 1975
33.The pertinent provisions of the Expropriation Act are s 2(1), read with s 1
(which sets out definitions) and s 7. Section 2(1) empowers the Minister
(defined in s 1 as ‘the Minister of Public Works and,…, includes an executive
committee’) to expropriate any property for ‘public purposes’. Section 1
defines an executive committee as ‘the executive committee of a province
mentioned in section 7 of the Provincial Government Act, 1986 (Act No. 69 of
1986)’ (‘Provincial Government Act’). However, s 230 of the Constitution of
the Republic of South Africa Act, 200 of 1993 repealed Act 69 of 1986
19
(save for s 20) resulting in the definition of ‘an Executive Committee’ being
of no effect.
34.Mr Buchanan’s submissions in relation to this were, essentially, that
an Executive Committee is no longer legally relevant. One cannot
substitute Executive Council, as defined in the Constitution, for Executive
Committee in the Expropriation Act. The two were entirely different
concepts and different political structures. The first respondent did not fall
within the definition of Minister and only the Minister of Public Works was
now empowered to expropriate property. As s 2(1) of the Expropriation
Act did not confer any powers on the first respondent she acted ultra vires
the legislation by relying on these provisions.
35.Mr De Bruyn submitted that Executive Committee can mean nothing else
than the Executive Council of a Province with the Premier as its head, as
referred to in s 125 of the Constitution. It is anomalous for the Premier in
Executive Council not to have such power as municipalities (with the
consent of the Premier) were empowered to expropriate. The intention
was to grant a province the power to expropriate property and an
interpretation to the contrary was overly restrictive and incorrect. Such an
interpretation also rendered superfluous other references to Executive
Committee in the Expropriation Act. Accordingly, Executive Committee
was now to be read as meaning the Executive Council of a Province.
20
36. In his Heads of Argument Mr De Bruyn made the submission that ‘it is a
wellestablished canon of construction that, if at all possible, no clause,
sentence or word in a statute should be regarded as superfluous, void or
insignificant, for the legislature is presumed to have chosen its words
carefully’. He referred to the remarks of Kotze JA in AttorneyGeneral,
Transvaal v Additional Magistrate for Johannesburg 1924 AD 421 at 436:
‘To hold certain words occurring in a section of an Act of Parliament as
insensible, and as having been inserted through inadvertence or error, is only
permissible as a last resort. It is in the language of Erle CJ: “the ultima ratio,
when an absurdity would follow from giving effect to the words as they stand”.’
37. I accept the relevance of these submissions. I do not agree, however, that
the lacuna in the definition of Executive Committee is capable of being
resolved in the manner that Mr De Bruyn contends. As pointed out by Mr
Buchanan it was said in Groengras Eiendomme (Pty) Ltd and Others v
Elandsfontein Unlawful Occupiers and Others 2002 (1) SA 125 (T) at 137H
that expropriation is a ‘privilege of the State and only in certain welldefined
circumstances and against compensation’.
38. It is evident that s 25(1) precludes the arbitrary dispossession of property
by any law. Section 25(2) grants authority for the enactment of laws of
general application in terms of which property may be expropriated subject
to the circumscribed circumstances specified in the section. In my view,
21
expropriation is in substance a limitation of the right not to be deprived
arbitrarily of property. A Court must therefore guard against its
implementation capriciously and without proper regard to the prescribed
legislative requirements.
39.Section 132(1) of the Constitution proclaims that the ‘Executive Council of
a province consists of the Premier, as head of the Council, and no fewer
than five and no more than ten members appointed by the Premier from
among the members of the provincial legislature’.
40.The Executive Committee referred to in Act 69 of 1986 was part of the
previous political dispensation and ceased to exist when the present
constitutionally based political system came into existence. There is no
indication in s 132(1) of the Constitution that an Executive Council is
synonymous with an Executive Committee or its successor. I accept
Mr Buchanan’s submission that the two are entirely different political
structures and one cannot simply substitute the one for the other in the
Expropriation Act. Moreover, the Legislature (of the previous political
dispensation) when it enacted the Provincial Government Act could not
have intended to refer to a political structure that did not exist nor to one
that was not within its contemplation.
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41. In the absence of an effective definition of Executive Committee in s 1 of
the Expropriation Act, s 2(1) manifestly does not confer authority on the
first respondent to expropriate property. I am consequently satisfied that
the first respondent acted ultra vires the legislation in relying on these
provisions in issuing the Notice of Intended Expropriation.
The Notice of Intended Expropriation
42.Section 7 of the Expropriation Act, 63 of 1975 reads as follows:
‘7. Notification that property is to be expropriated ………. –
(1) If the Minister has decided to expropriate, ………, any property in terms
of the provisions of section 2, he shall, subject to the provisions of
subsection (5), cause to be served upon the owner in question an
appropriate notice in accordance with the provisions of subsection (3).
(2) The notice of expropriation shall
(a) contain a clear and full description of the property in question and,
…………;
(b) state the date of expropriation …, ………, and also state the date
upon which the State will take possession of the property;
(c) draw the attention of the owner to the provisions of sections 9 (1)
and 12 (3) (a) (ii);
(d) if an amount is therein offered as compensation, draw the attention
of the owner to the fact that if a lessee has a right by virtue of a
lease contemplated in section 9 (1) (d) (i) in respect of the property
of which the Minister had no knowledge on the date of notice, the
Minister may withdraw that offer.
(3) ………….
(4) ………….
(5) ………… .’
(Those portions of s 7 not in issue in this matter are omitted.)
23
43.The applicants have attacked the validity of the notice of expropriation on
various grounds. Mr Buchanan submitted it was not a notice of
expropriation as defined in s 1, read with s 7 of the Expropriation Act. It
was not an actual expropriation of the applicants’ properties but merely an
expression of an intention to expropriate on some future date. Further, the
notice did not comply with certain peremptory requirements of s 7. The
notice did not disclose the date on which the State was taking possession
of the properties. It also stated that ‘it is envisaged that an offer of
compensation will be made in the very near future’. The applicants were thus
uncertain whether they should invoke the provisions of s 9(a) or s 9(b) of
the Expropriation Act. On a proper reading of s 7(2) the State either had
to offer an amount as compensation or decline to do so.
44.Mr De Bruyn’s response to these contentions was that the interpretation
advocated by the applicants was incorrect and contrary to the public
interest. The interpretation advocated by the applicants was legalistic,
overtechnical and overly restrictive. An extensive or generous
interpretation was called for and in the public interest. The notice had to
be interpreted holistically, and in context with the annexures thereto. In
support of this he cited the case of Privest Employee Solutions (Pty) Ltd v
Vital Distribution Solutions (Pty) Ltd 2005 (5) SA 276 (SCA) where the
Court stated at paras [22] and [23]:
‘[22] The main agreement and the addendum clearly form one contract and
must be construed together to determine the intention of the parties. Compare
24
Trever Investments (Pty) Ltd v Friedhelm Investments (Pty) Ltd 1982 (1) SA 7
(A). In that case the court was called upon to construe the meaning and effect
of a deed of sale and correspondence exchanged between the parties. Trollip
AJA stated (at 14H):
“The question that immediately arises is whether or not the deed of sale and
the correspondence just mentioned, read together, constituted a valid and enforceable
contract between Friedhelm and Trever. . . .'
And at 18C D:
“That does not mean that the writing and the parties' signatures must necessarily be
embodied in one and the same document. Thus an offer in writing in one document
signed by the seller can be accepted in writing in another document signed by the
purchaser.”
See also Hirschowitz v Moolman and Others 1985 (3) SA 739 (A) at 758B C
where Corbett JA said:
“This does not mean that the terms of the contract and the signatures of
the parties must necessarily be embodied in one document.”
[23] As a matter of logic, when construing an agreement comprising more than
one document, one must consider all the terms used by the parties in all the
documents to determine the meaning thereof. It follows too that terms in a
subsidiary document can prescribe how the terms in the main document are to
be construed.’
45.Mr De Bruyn submitted further that the notice complies with s 7(2)(b) of the
Expropriation Act. There was no substance in the applicants’ claim that,
as the heading of the notice was ‘Notice of Intended Expropriation’ and it
stated that the first respondent intended expropriating the properties, it
was only notice of intended future, and not actual, expropriation. The
heading to s 7 In the Expropriation Act in fact read ‘Notification that property
is to be expropriated … …‘. On a proper and holistic reading of the notice,
expropriation of the applicants’ properties was to take effect on 18
25
February 2005 and the State was to take control and ownership on that
date. In the absence of any objection to the expropriation, it would take
effect on 18 February 2005 on that basis.
46.Further, so the argument continued, paragraph 6 of the notice provided for
the applicants to remain in possession of the properties until ‘finalisation of
this matter by way of a Court Order or agreement’. The notice did not
prejudice the applicants but was to their advantage in that it fully satisfied
the audi alteram partem rule. Cf Gauss v Buffalo City Municipality and
Another [2003] JOL 12231 (E). If anything, the first respondent had been
overcautious in giving the applicants notice of intended expropriation.
Cf Buffalo City Municipality v Gauss and Another 2005 (4) SA 498 (SCA).
There was no duty on the State to offer compensation or to decline to do
so. Notwithstanding this, there had been compliance with the provisions of
s 7(2) as on the applicants’ version the first respondent had declined to
make an offer.
47.Mr De Bruyn did not dispute Mr Buchanan’s submission that the use of the
word ‘shall’ in ss 7(1) and (2) of the Expropriation Act demonstrated that
the legislature intended that there had to be compliance with these
provisions. They were therefore peremptory. See Sutter v Scheepers
1932 AD 165 at 173174 and Pio v Franklin NO and Another 1949 (3) SA
26
442 (C) at 451. The peremptory provisions relate to both the service of the
notice and what it should contain.
48. It is clear that the procedure in terms of which the State may expropriate
property is prescribed in s 7. Section 7(2)(a) stipulates the notice of
expropriation must contain ‘a clear and full description of the property’.
Section 7(2)(b) prescribes the notice must ‘state the date of expropriation’
including ‘the date upon which the State will take possession of the property’. If
an amount is offered as compensation then in terms of s 7(2)(d) the
owner’s attention must be drawn to the provisions of s 9(1)(d)(i). However,
s 9(1)(d)(i) is not relevant for present purposes.
49.The State may manifestly only expropriate property in terms of statutory
authorisation and for a public purpose or in the public interest. As I have
stated earlier the Court has to guard against the State capriciously
exercising its right to expropriate property. Where provisions in the statute
authorising expropriation are expressed in peremptory terms there must
be proper compliance with the prescribed requirements. In my view, a
duty rests upon the State to inform the owner of the property in
unequivocal terms that the property is being expropriated. Further, the
notice must fully set out in clear and unambiguous language all the
pertinent details in relation to the expropriation as prescribed in the
relevant statutory provisions. A failure to comply with any of the
27
peremptory provisions could have the effect of rendering the notice, and
consequently the expropriation itself, invalid. It is evident that whether or
not the notice is invalid will depend on the particular facts of each case.
50. In the present instance, I am of the view that the notice of expropriation
does not comply with the peremptory provisions of s 7. Section 7 sets out
clearly and explicitly what the notice must contain. There should be no
difficulty in complying with the prescribed requirements. Despite this the
wording of the notice is unsatisfactory and not explicit in relation to what it
is required to convey. Instead of stating directly that the first respondent is
expropriating the properties the notice instead repeatedly refers to an
intended expropriation. I am not persuaded that the notice constitutes
valid notification that the first respondent is expropriating the properties of
the applicants. I accordingly uphold this ground of objection to the validity
of the Notice of Intended Expropriation.
51.There are further deficiencies in the notice. It clearly does not specify on
what date the State will take possession of the properties. The first
respondent has not disclosed any reason for this obvious omission.
Regarding the question of possession Mr De Bruyn submitted that there
had been substantial compliance with the provisions of s 7(2)(b). In
support of this he referred to s 8(3) that specifies that ‘the State shall take
possession of any property expropriated on the date stated in terms of section
28
7(2)(b) or such other date as may be agreed upon between the owner concerned
and the Minister’.
52. I do not find this argument to be persuasive. The provisions of s 8(3)
presuppose that a date of possession has been stipulated, as required by
s 7(2)(b), and not that it has been left in the air. If s 8(3) was meant to
operate as contended by Mr De Bruyn it would have been a simple matter
for the legislature to have said so in explicit terms.
53.The failure to specify a date of possession undoubtedly prejudices the
applicants. They are entitled to know on what date they will be deprived of
possession and not be left in any doubt in this regard. I uphold the ground
of objection that the notice is invalid as it does not comply with this
peremptory requirement.
54.The position in respect of compensation is similar. The manner in which
the second respondent has approached the issue of compensation has
resulted in ambiguity insofar as the owner’s rights in terms of ss 9(a) and
(b) of the Expropriation Act are concerned. Mr De Bruyn contended that
as no compensation was offered in the notice the applicants must proceed
in terms of s 9(1)(b) and deliver a statement indicating the amount they are
claiming as compensation. I do not agree that the position is
unambiguous since the issue of compensation is set out in the notice in
the following manner:
29
‘Kindly take notice further that compensation will be offered for your properties
in the nearby (sic) future. The properties are in the process of being valued
and it is envisaged that an offer for (sic) compensation will be made in the very
near future.’
55. In my view, if the State elects not to offer an amount as compensation the
notice should indicate this explicitly so that the owner is left in no doubt
that he has to comply with the provisions of s 9(1)(b) and must do so
within sixty days of the date of the notice. This is certainly not what the
notice conveys. The notice does not comply with the provisions of s 7 of
the Expropriation Act and this ground of objection is upheld.
Expropriation for Public purpose
56.Section 2(1) of the Expropriation Act stipulates that the expropriation must
be for public purposes which s 1 defines as ‘includ[ing] any purposes
connected with the administration of the provisions of any law or by an organ of
State’. The respondents do not contend that the business activities of the
second respondent are of such a nature as to bring the second respondent
within the aforementioned definition of ‘public purposes’. Moreover, I
concluded earlier that the second respondent is not an organ of State.
The expropriation for the purpose of transferring the properties to the
second respondent is therefore not legitimate as it offends against the
provisions of s 2(1). In relying on these provisions for authority to
expropriate the applicants’ properties the second respondent acted ultra
vires the legislation.
30
Vesting of the expropriated properties
57. Mr Buchanan submitted that as s 3(1) of the Expropriation Act expressly
provided for expropriation by the State of property for the benefit of third
parties it meant that it was not the legislature’s intention to permit such
expropriation in terms of s 2(1). This is clear from the fact that s 8 stated
that ownership of properties expropriated in terms of s 2(1) vested in the
State. Moreover, there was no reference in s 2(1) to expropriation of
property for the benefit of third parties. Accordingly, in purporting to
expropriate the properties for the benefit of the second respondent, the
first respondent acted ultra vires the powers conferred by s 2(1).
58.Mr De Bruyn contended that s 2(1) did not prohibit an expropriator from
transferring the property to a third party. One would have expected this to
be stated clearly. In principle, there was nothing wrong with transferring
expropriated property to a third party. Furthermore, the provisions of the
Expropriation Act had to be interpreted in consonance and reconciliatory
with each other and not disjunctively. In this regard Mr De Bruyn referred
to what was stated in Kimberley Girls High School v Head of Department
of Education, Northern Cape Province 2005 [1] All SA 360 (NC) at para
[15], and Constantia Insurance Co Ltd v Hearne 1984 (4) SA 48 (ECD) at
52I.
31
59. I am not convinced of the validity of Mr De Bruyn’s argument. I agree with
Mr Buchanan that as s 3(1) of the Expropriation Act specifically provides
for the expropriation of property on behalf of certain juristic persons or
bodies (defined in s 3(2) of the Act), the provisions of s 2(1) may not be
utilised for such a purpose. I am of the view therefore that the first
respondent acted ultra vires the powers conferred by s 2(1).
The Eastern Cape Land Disposal Act 7 of 2000
60.The applicants contend that the first respondent acted ultra vires the
powers vested in her by the Land Disposal Act. Mr Buchanan submitted
that s 2(2) (the equivalent of s 8(1) of the Expropriation Act) provides that
provincial property acquired in terms of ss (1) vests in the province. In s 1
of the Land Disposal Act provincial immovable property is defined as land
‘which by virtue of registration in terms of s 28(1) of Schedule 6 of the
Constitution vests in the Province’. Mr Buchanan contended the purported
expropriation was unlawful as ownership of the properties would vest
ultimately in the second respondent and not the Province.
61.Mr Buchanan submitted further that the Land Disposal Act referred only
fleetingly to expropriation in the definition of ‘acquire’ in s 1. The Act did
not deal with the procedures to be followed when expropriating property,
payment of compensation and the manner in which compensation was to
be quantified, when it was to be paid, and generally, the requirements of
32
ss 25(2) and (3) of the Constitution. These were material lacunae in the
Land Disposal Act and as a result the Act did not comply with the
imperatives stipulated in ss 25(2) and (3) of the Constitution.
62.The respondents dispute these contentions. Mr De Bruyn submitted that,
as ‘the second respondent is 100% owned by the ECDC, which in turn is
100% owned by the Provincial Government of the Eastern Cape’,
ownership would, in substance, still vest in the Province even if the
properties were transferred to the second respondent. The first
respondent could acquire provincial property in terms of s 2(1) of the Land
Disposal Act on terms and conditions that she deemed fit. ‘Expropriation’
was included in the definition of ‘acquire’ in s 1 of the Land Disposal Act.
Once the properties vested in the Province the first respondent was
entitled in terms of s 2(1) of the Act to dispose of the properties to the
second respondent. There was nothing in the Land Disposal Act to
prohibit the second respondent doing so. In support of this Mr De Bruyn
referred to Administrator, Transvaal, and Another v J van Streepen
(Kempton Park) (Pty) Ltd 1990 (4) SA 644 (A). There, in regard to the
Administrator’s power to expropriate property in terms s 7(1) of the
(Transvaal) Roads Ordinance 27 of 1957, the Court said;
‘In principle, therefore, the Administrator's power under s 7(1) can extend to the
acquisition of land for what may include the benefit of a third party’ (at 661G).
33
63.However, as emphasised by Mr Buchanan, the Court’s comments in the
van Streepen case were directed at provisions of (Transvaal) Roads
Ordinance 27 of 1957 and not those of the Expropriation Act. The
Expropriation Act clearly distinguishes between two different scenarios.
Whereas s 2(1) provides for expropriation for public purposes, s 3(1)
provides for expropriation of property for on behalf of certain juristic
persons or bodies ‘as if it were required for public purposes’. However, the
respondents specifically disavow reliance on s 3(1) and rely, instead, on
s 2(1) of the Expropriation Act. In the circumstances, I do not consider the
views expressed in the van Streepen case to be apposite in respect of the
relevant provisions of the Expropriation Act. Interestingly, in the van
Streepen case, Smalberger JA observed in respect of the same
Ordinance:
‘I see no reason in principle why, once the purpose for which land is being
acquired for the secondary purpose has been clearly determined (as is the
case here), a Court is not entitled to enquire into the question whether such
purpose falls within the ambit of s 7(1)’ (at 656D).
And:
The power exists; the manner in which it is exercised may be open to
challenge, eg where the Administrator has acted mala fide and not in the public
interest. The present appeal, as has been stated previously, does not concern
the manner in which the Administrator exercised his power.’ (at 661G).
34
64. In view of my conclusion that the second respondent is not a Provincial
Government entity or instrument, Mr De Bruyn’s submission that the
property will, in substance, still vest in the Province is not sustainable.
Further, the Land Disposal Act does not authorise the acquisition of
immovable property for the purpose of transferring it to another entity or
person nor does it authorise the acquisition of property on behalf of such
entity or person. It conflicts with the purpose of the Land Disposal Act and
such power as the Act purports to vest in the first respondent in relation to
expropriation.
65. It is not in dispute that the Land Disposal Act must be read together with
the Constitution. Sections 25(2) and (3) of the Constitution prescribe the
parameters within which property may be expropriated in terms of law of
general application. I uphold Mr Buchanan’s submissions that there are
material lacunae in the Land Disposal Act. The Act consequently does not
comply with the prescripts of ss 25(2) and (3) of the Constitution. I do not
consider it a legitimate legislative medium in terms of which the first
respondent may expropriate property. To permit an expropriation, such as
the present one, in view of the limited and clearly deficient provisions of
the Land Disposal Act is tantamount to sanctioning the capricious exercise
of the constitutional right to expropriate property.
Administrative action
35
66.The applicants contended in their founding affidavit that the Notice of
Intended Expropriation constituted administrative action and fell to be
reviewed, and set aside, in terms of the Promotion of Administrative
Justice Act, 3 of 2000. However, Mr Buchanan did not pursue this issue
during argument. I do not consider it necessary therefore to determine this
question and I refrain from any further comment in relation thereto.
Conclusion
67. I am satisfied that the applicants have established that the Expropriation
Act and the Land Disposal Act do not vest the first respondent with the
authority to expropriate the applicants’ properties for the purpose of
transferring these to the second respondent. In terms of the Expropriation
Act, only the Minister of Public Works may expropriate property for a public
purpose.
68.Since the second respondent is not an organ of State the expropriation is
not a legitimate one within the meaning of the provisions of s 2(1) of the
Expropriation Act. In relying on s 2 of the Land Disposal Act and s 2, read
with s 1, of the Expropriation Act in issuing the Notice of Intended
Expropriation, the first respondent acted ultra vires the legislation.
36
69. I am satisfied further that the Notice of Intended Expropriation is invalid. It
does not comply with the peremptory requirements of s 7 of the
Expropriation Act.
70. In the circumstances, the application to declare invalid the Notice of
Intended Expropriation succeeds.
Costs
71.Mr De Bruyn has not suggested that costs should not be awarded to the
applicants should the application succeed. There is, in any event, no
reason why costs should not follow the result and the applicants are
entitled to an order for costs in their favour.
Order
72. In the result, there is an order in the following terms:
(a) The Notice of Intended Expropriation signed by the first respondent
on 2 February 2005 is declared to be invalid and of no force and
effect and is set aside.
(b) The first and second respondents jointly and severally, the one
paying the other to be absolved, are liable for payment of the costs
of the application, which costs will include the costs of two counsel.
37
OFFIT ENTERPRISES.CVJ
38