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[2016] ZAECPEHC 83
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Pentree Limited v Nelson Mandela Bay Municipality (3199/2013) [2016] ZAECPEHC 83; [2017] 2 All SA 260 (ECP); 2017 (4) SA 32 (ECP) (17 November 2016)
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
EASTERN
CAPE LOCAL DIVISION, PORT ELIZABETH
Case
No.: 3199/2013
Date
Heard: 26 & 27 October 2016
Made
available: 17 November 2016
In
the matter between:
PENTREE
LIMITED
Plaintiff
and
NELSON
MANDELA BAY MUNICIPALITY
Defendant
RULING
(OBJECTION
TO ADMISSIBILITY OF EVIDENCE)
EKSTEEN
J:
[1]
This
is a ruling on an objection to evidence which comes in the course of
protracted expropriation proceedings. The defendant
has
objected to the plaintiff adducing evidence through Ms Jenny Falck, a
valuer called as an expert witness, of information given
to her by
one Edelson, a valuer based in Port Elizabeth.
[2]
It
is necessary, at the outset, to place the objection in its
perspective. The plaintiff claims compensation in terms of
section 12(1) and (2) of the Expropriation Act, 63 of 1975 (the Act)
in respect of a property (the subject property) expropriated
by the
defendant on 2 October 2011. The subject property is
undeveloped agricultural land and situated within the urban edge
of
Uitenhage. The plaintiff contends that the subject property
offers an above average potential for short term urban development
and it accordingly appointed a team of consultants who embarked upon
a comprehensive process to acquire all administrative approvals
necessary to undertake a large scale mixed used development centred
around a residential core. An application under the Land
Use
Planning Ordinance, 15 of 1985, was submitted to the municipality in
March 2007 for approval of the proposed subdivision of
the land.
It had not been approved at the time of the expropriation.
Extensive evidence has been led relating to the
proposed subdivision
and numerous related issues which may have an impact upon the
feasibility of such a development.
[3]
Ms
Falck, as alluded to earlier, has been called as an expert valuer to
testify in respect of the market value of the subject property
at the
time of the expropriation. She stated that in the course of her
work on the valuation of the subject property she
met with Edelson on
12 July 2012 and that she spoke with him on the telephone sometime
thereafter but prior to 23 July 2012.
During the meeting and
the telephone conversation Edelson informed her about a transaction
regarding a property (the Motherwell
property) which he did not
identify specifically but which he said was situated in Motherwell, a
township within the Nelson Mandela
Metropole and in relative
proximity to Uitenhage. He informed Ms Falck that the
information relating to the Motherwell property
and the transaction
in respect thereof had been supplied to a bank for purposes of
attaining finance, and that he had been appointed
by the bank to
value the Motherwell property.
[4]
Ms
Falck made contemporaneous notes during the meeting and telephone
conversation with Edelson and with reference to these contemporaneous
notes she testified that Edelson passed the following information to
her:
(a)
The
transaction had not yet been registered, but registration was
imminent;
(b)
The
Motherwell property was about 489 hectares in extent;
(c)
Approvals
had been granted for the development on the Motherwell property of
4 366 freestanding single storey units on 112
hectares, 533
semi-detached single storey units on 12,25 hectares, 24 two to three
storey apartments on 15,8 hectares, a retail
site on 11 hectares,
public open space of 103 hectares including a nature reserve of 98
hectares, institutional units, roads and
13 mixed use erven on 5.6
hectares;
(d)
An
application had either already been made or would still be brought to
the municipality to increase the number of residential
units to be
developed to 10 000. The transaction was subject to the
increase being granted by the municipality;
(e)
The
Motherwell property was to be developed in a joint venture between
the property owner and a developer (the applicant for the
bank
finance). The developer would have a 55 % interest in the
venture, which excluded 250 residential erven and the commercial
component. The land on which the residential portion was to be
situate was 112 hectares in extent, excluding the 103 hectares
public
open space, roads etc;
(f)
The
property owner would retain a 45% interest in the venture, as well
250 residential erven, and the commercial component;
(g)
The
developer would pay the property owner R75,4 million for its 55% in
the venture, which then comprised 6 142 approved residential
units, less the 250 units “retained” by the property
owner;
(h)
The
R75,4 million purchase price for the developers 55% interest in the
venture translated into a value of R137 127 364
for the
development as a whole and a price of R280 000 per hectare for
the 489 hectare property as a whole. This figure
is arrived at
by dividing R137 127 364 by 489 hectares;
(i)
If
the 5 892 approved residential units were developed, the cost
per unit would be R23 272 (this is arrived at by dividing
R137 127 364 by 5 892);
(j)
If
the applied for 10 000 residential units were developed, the
cost per unit would equate to R13 713 (this figure is
arrived at
by dividing R137,13 million by 10 000);
(k)
The
payment of R75,4 million would be made in two tranches, namely an
initial tranch of R30 million and the remaining R45 million
pro rata
as the development was sold out. The sell-out period was
envisaged to be 20 years;
(l)
If
a discount rate was used to determine a present value of the units to
be sold over that period, the present value for the 5 892
units
costing R23 000 was R14 000 and the present value for the
10 000 units costing R14 000 was R8 500.
The
average of those had present values was R11 250;
(m)
The
venture would make use of government subsidies.
[5]
Ms
Falck states that she utilised the information obtained from Edelson
to arrive at her valuation of the subject property as set
out in her
report dated 24 August 2013 which has been filed of record in terms
of the provisions of Rule 36(9) of the Uniform Rules
of Court and in
particular para 4.3 thereof. The alleged transaction is the
third in a series of transactions to which she
had regard in a
comparative sales analysis. Para 4.3 is headed “Transaction
No. 3: Unidentified property in Motherwell”.
Ms Falck
confirmed that the information relating to the Motherwell property
was obtained solely from Edelson and that she had no
other source of
information against which to verify the correctness thereof.
She did not, however, blindly adopt the calculations
made by Edelson
but recalculated the various values utilising the factual information
conveyed to her so as to satisfy herself
as to the correctness
thereof.
[6]
It
emerges from her valuation report that she based her conclusion in
respect of the Motherwell property,
inter
alia
,
on the approved density of approximately 6 142 units and
excluding the 250 that did not form part of the joint venture (i.e
5
892 units). She calculated the value of each developable
opportunity at a rate of R23 267. In the event that
the
density was increased to approximately 10 000 units, she
calculated the value of each developable opportunity at R13 710
per unit. These figures differ marginally from the values
calculated by Edelson. She further calculated that, based
on
what she considered to be a realistic sell-out rate and an
appropriate discount rate to determine the present value, that the
value per developable opportunity changed to:
(a)
Approximately
R14 936 per unit for 5 892 units, as opposed to R14 000 as
calculated by Edelson; and
(b)
R8 800
per unit for 10 000 units as opposed to the 8 500 as
calculated by Edelson.
[7]
Ms
Falck testified, however, that shortly before she took the witness
stand she telephoned Edelson again about this transaction
in order to
enquire whether the transfer had been registered. On this
occasion Edelson advised her that the Motherwell property
was not
situated in Motherwell but in KwaNobuhle (KwaNobuhle is situated
closer to the subject property than Motherwell) and that
the
transaction was not in the form of a deed of sale but rather a land
availability agreement. The owner would make the
land available
to the developer who would develop it. He confirmed however
that the developer would pay an amount of R75,4
million to the owner
in exchange for the right to develop the land. Edelson advised
that the negotiations between the parties
were still ongoing and, as
a result, the development had not yet gone ahead and no subdivided
erven had been transferred.
[8]
At
this juncture Mr
Ford
SC
,
who appears on behalf of the defendant, together with Mr
Richards
,
raised an objection to this evidence. On behalf of the
defendant it is argued that the evidence constitutes hearsay evidence
and whereas no application has been brought in terms of the
provisions of section 3 of the Law of Evidence Amendment Act, 45 of
1988 (the Evidence Act) it is inadmissible. Mr
Breitenbach
SC
,
who appears on behalf of the plaintiff, together with Mr
Townsend
,
argued, however, that the evidence in question is not hearsay
evidence at all and, if I should find that it is, then it
should be
admitted in terms of section 3 of the Evidence Act. In
these circumstances the second leg of the objection
falls away.
[9]
I
pause at this juncture to record that the parties have advised me
that a number of further objections similar in nature relating
to
further information passed to Ms Falck may be raised later in the
proceedings. I can, of course, not rule on such objections
at
this stage without the evidence first being tendered. I am
accordingly requested to deal generally with the issue of whether
a
party in expropriation proceedings may, through a valuer called as an
expert witness, adduce evidence of statements made to the
valuer by
other persons in respect of matters which have influenced her
valuation of the land, in circumstances where such other
persons are
not called as witnesses. In
Lornadawn
Investments
(Pty) Ltd
v
Minister van Landbou
1977 (3) SA 618
(T) the Court gave consideration to a similar issue
(see
Lornadawn
p.
620 in fin - 621A). I shall revert to this decision in some
detail below.
[10]
It
is expedient to consider first what constituted hearsay evidence
prior to the Evidence Act and what the impact of the Evidence
Act is
on the position. In
Lornadawn
Botha J, as he then was, referred to the description of hearsay
evidence by Watermeyer J in
Estate
De Wet v De Wet
1924 CPD 341
as being:
"......evidence
of statements made by persons not called as witnesses which are
tendered
for the purpose of proving the truth of what is contained in the
statement
.”
(Emphasis added)
[11]
In
R
v Muller
1939 AD 106
at 119 Watermeyer JA expanded on this dictum and stated:
“
Statements
made by non-witnesses are not always hearsay. Whether or not
they are hearsay depends upon the purpose for which
they are tendered
as evidence. If they are tendered for their testimonial value
(i.e. as evidence of the truth of what they
assert), they are hearsay
and are excluded because their truth depends upon the credit of the
asserter which can be tested only
by his appearance in the witness
box. If on the other hand they are tendered for their
circumstantial value, to prove something
other than the truth of what
is asserted, then they are admissible if what they are tendered to
prove is relevant to the enquiry.”
[12]
This
led Botha J in
Lornadawn
to conclude that evidence which is apparently of a hearsay nature
tendered for a purpose other than establishing the truth of the
content thereof is not struck by the hearsay rule and that such
evidence is admissible provided that such other purpose for which
it
is tendered is relevant to the issues in dispute. On behalf of
the defendant, however, it is argued that the validity
of these
pronouncements in
Lornadawn
,
and the decisions which followed it, has been impugned by the
promulgation of the Evidence Act and that the common law rules
relating to hearsay find no application after 1988. In this
regard I was referred to the
South
African Law of Evidence
,
2
nd
ed:
DT
Zeffert and AP Paizes
at p. 389 where the learned authors state:
‘
No
longer is hearsay defined along assertion-orientated lines, with the
result that the hearsay status of the evidence no longer
depends upon
whether or not it is tendered to prove the truth of what it
(expressly or impliedly) asserts. In its place is
a
declarant-oriented definition that, in effect, identifies hearsay
according to whether or not the traditional “hearsay
dangers”
are present.’
[13]
Whilst
it is true that the common law rules in respect of hearsay no longer
find application I am not persuaded that the statement
of the learned
authors can be accepted without qualification. Section
3(4) of the Evidence Act defines hearsay evidence
as being “evidence,
whether oral or in writing, the probative value of which depends upon
the credibility of any person other
than the person giving such
evidence”.
[14]
At
common law, if the evidence of a statement by a non-witness is
tendered for a purpose other than its testimonial value
then the
truth or otherwise is irrelevant and it is not dependent for its
reception on the credibility of the asserter. It
is not
hearsay. (See also
Davey
v Minister of Agriculture
1979 (1) SA 466
(N) at 476H). The position under the Evidence
Act appears to me to be much the same. If it is not tendered
for its
testimonial value its probative value is not dependant on the
credibility of any person other than the person giving such
evidence.
It is therefore not hearsay as defined in the
Evidence Act. The Appellate Division (now the Supreme Court of
Appeal) considered
the effect of the provisions of section 3 of the
Evidence Act in
Mdani
v Allianz Insurance Limited
[1990] ZASCA 119
;
1991 (1) SA 184
(A) and Van Heerden JA stated therein at 189J to
190A:
“
If
A testified that B made such an admission, A’s evidence in
itself is clearly not hearsay. Whether B in fact made
the
admission depends upon A’s credibility and can be tested by
cross-examination. What is hearsay is the content of
the
admission
if
it is to be used to establish the truth of what was said
.
Whether the content is true or not, depends entirely on B’s
credibility.” (Emphasis added)
[15]
It
seems to me therefore that the purpose for which the evidence is
tendered may still determine whether it is hearsay or not within
the
definition in the Evidence Act. This, I think accords with the
finding of Botha J in
Lornadawn
where he held at 622F-H:
“
Telkens
wanneer getuienis aangebied word van mededelings gemaak deur persone
wat nie self getuig in die saak nie, en daar teen sulke
getuienis
beswaar gemaak word, moet die Hof die aard van die getuienis
oorweeg in die samehang van die saak as geheel en
tot 'n beslissing
kom of die getuienis, objektief gesproke, relevant is tot enige van
die geskilpunte in die saak, op 'n grondslag
anders as dat die
inhoud daarvan die waarheid is. As die antwoord op hierdie ondersoek
bevestigend is, dan is die getuienis
toelaatbaar vir die besondere
doel wat dit relevant maak afgesien daarvan of dit die waarheid is of
nie, en die blote feit dat
dit terselfdertyd op 'n ander grondslag
ook ter sake sou wees indien dit as die waarheid beskou word, kan dit
nie ontoelaatbaar
maak nie. Tot die mate dat die waarheid van die
inhoud van die mededeling relevant mag wees tot 'n geskilpunt, sal
die Hof vanselfsprekend
nie die getuienis vir daardie doel in ag neem
by die uiteindelike beoordeling van die saak nie; gebruikmaking van
die getuienis
bly beperk tot die besondere doel op grond waarvan dit
toegelaat word.”
[16]
On
behalf of the plaintiff it is argued that the evidence set out
earlier is tendered as information which, irrespective of whether
it
is true or not, would have been available to the notional
informed buyer and seller and which they would have considered
in
arriving at the purchase price for the subject property as at the
expropriation date. For this contention the plaintiff
relied
heavily on the
Lornadawn
case and the cases which followed it.
[17]
The
defendant, on the other hand, argues that the purpose for which Ms
Falck has utilised the information as set out earlier, has
as its
foundation an acceptance of the truth of the information.
Reference is made to unquestionable authorities that the
facts relied
upon by expert witnesses must first be proved in evidence. (See
Price
Waterhouse Coopers Incorporated and Others v National Potato
Co-operative Ltd and Another
[2015] 2 All SA 403
(SCA).) In the absence of proof of the
underlying facts the opinion has no value. The arguments
necessitate a consideration
of the nature of the evidence and of
expropriation proceedings.
[18]
In
Lornadawn
Botha J accepted, without reservation, an argument put forward by
counsel. The import of the argument is as follows:
[19]
In
a expropriation matter, where the issue concerns the determination of
the quantum of compensation payable there is no lis between
the
parties and therefore no onus upon the plaintiff, in the ordinary
sense of these concepts and the function of the court is
that of a
“super valuer”; as such the court must place itself
in the shoes of the notional informed seller and
buyer: on this
basis the court must have regard to everything which such a seller
and buyer would have experienced in the
open market and all the
information which would have been at their disposal; the court
cannot itself go into the market to
gather information, but it is
part of the function of an expert valuer to do so and to found his
opinion thereon (compare
Jacobs
v Minister of Agriculture
1972
(4) SA 608
(W) at 628D-E); in the enquiry it is the duty of a valuer
“…
.
to take into consideration every circumstance likely to influence the
mind of the purchaser.”
(
Pietermaritzburg
Corporation v SA Breweries Ltd
1911 AD 501
at p. 516); circumstances which would have influenced the
seller and the purchaser in the fixing of the purchase price is not
limited
solely to facts which have been properly proved, but also
information which they obtained from other persons, replies to their
enquiries provided by other persons, general talk amongst farmers in
the area, etc; on that basis a valuer is equally entitled
to
base his opinion on what he had heard from other people, and to place
that information before the court so that the court can
judge what
weight should be attached thereto and whether the valuer’s
opinion is founded on strong or weak grounds (see
Lornadawn
at 626A-F).
[20]
In
accepting the argument Botha J stated at 626G-H:
“
Die
kern van die taak van die Hof in 'n onteieningsaak is om die
markwaarde van die onteiende goed op die datum van die onteiening
te
bepaal, …, dit [is] die toets, die maatstaf, van markwaarde
wat voor oë gehou moet word en wat van deurslaggewende
belang is
by die behandeling van die onderhawige probleem: dit is die prys wat
vir die betrokke eiendom betaal sou geword het as
dit op die
datum van die onteiening op die ope mark deur 'n gewillige verkoper
aan 'n gewillige koper verkoop was.”
[21]
Botha
J reasoned that in determining compensation the court was in fact
busy with an enquiry into the probable conduct of two fictitious
persons to whom we should attribute full knowledge of all
circumstances which would play a role in the manner in which they
would
conduct themselves and the manner in which they would have
acted in their negotiations with one another in determining a
purchase
price for the subject property. He then proceeded to
state at 627A-D:
“
Dit
kom my voor as duidelik te wees dat die gedrag en optrede van daardie
persone ook beïnvloed sal word deur tersaaklike mededelings
wat
hulle van ander mense ontvang. Die belangstellende koper verneem van
'n naburige eienaar dat dit in sy ondervinding in
die afgelope
40 jaar nog nooit in daardie omgewing geryp het nie. Die
belangstellende verkoper word deur sy buurman vertel dat
hy so pas sy
besproelingsgrond verkoop het teen 'n prys van soveel per hektaar.
Albei partye sal in hulle onderhandelings met mekaar
deur sulke en
soortgelyke mededelings beïnvloed word tot die mate wat
hulle voel dat hulle gewig daaraan kan heg. Onderhewig
aan
oorwegings van gewig, is sulke mededelings derhalwe direk ter sake in
die ondersoek waarmee die Hof besig is,
en
dit is so afgesien van die vraag of die inhoud van sulke mededelings
objektief gesproke die waarheid is of nie
.”
(Emphasis added)
[22]
The
effect of these findings is that evidence of such communications are
not dependant for their reception on the credibility of
the asserter
and the probative value thereof in expropriation proceedings depends
on the weight which the notional willing buyer
and willing seller
would have attached thereto in the light of all the known facts.
[23]
Reverting
to the argument advanced on behalf of the defendant, Botha J
expressly recognised in
Lornadawn
the general rule that the opinion of an expert is of little value
unless the underlying facts upon which the opinion is founded
are
properly proved in evidence. In doing so he recognised the
principles which are set out in the various authorities to
which
defendant’s counsel has referred me. He proceeded,
however to hold at 627G-H:
“
Ek
is van oordeel dat die algemene reël dat 'n deskundige
mening nutteloos is vir sover dit gebaseer is op feite wat nie
behoorlik bewys is nie, nie van toepassing is op 'n waardeerder wat
sy opinie oor die waarde van 'n eiendom baseer op inligting
wat hy
ingewin het in die vorm van mededelings van ander mense nie. Die rede
daarvoor is nie dat 'n waardeerder 'n besondere soort
deskundige is
nie maar wel omdat mededelings van ander mense toelaatbare
materiaal is by 'n waardasie, op grond daarvan dat
sulke mededelings
per
se
deel vorm van die inligting wat aan 'n ten volle ingeligte
denkbeeldige verkoper en koper beskikbaar sou gewees het en hulle sou
kon beïnvloed het in hulle onderhandelinge met mekaar met die
oog op die bereiking van 'n ooreenkoms oor die koopprys van
die
betrokke eiendom.”
(See
also
The
Law of South Africa
,
2
nd
ed vol 10 part 3 para 146 where the views expressed by the authors
Gildenhuys and Grobler appear to me to accord with the position
enunciated by Botha J.)
[24]
Subsequent
to the
Lornadawn
case in the matter of
Davey
supra
Kumleben J was faced with an argument by counsel, ostensibly based on
the judgment in
Lornadawn
,
that because a court was acting as a “super valuer” no
rules of evidence applied. I am not convinced that Botha
J ever
suggested that to be the position. Nevertheless, Kumleben J
rejected the argument noting that the term “super
valuer”
cannot serve as a basis for the far reaching submission which counsel
made. He held, correctly, that he was
bound by the rules of
evidence. Save, for this clarification, Kumbleben J expressly
approved of the reasoning of Botha J
in
Lornadawn
and stated his agreement that the general rule that expert opinions
are of no use when they are based on facts which have not been
properly proved did not find application to a valuer whose opinion in
respect of the value of property is based on information
which he has
gathered in the form of communications from other people.
[25]
The
decision in
Lornadawn
was further referred to with approval in
Southern
Transvaal Buildings (Pty) Ltd v Johannesburg City Council
1979 (1) SA 949
(W) where King JA held at 952D-E:
“
The
plaintiff has the
onus
of establishing the potentiality of the property alleged by it while
in regard to the
quantum
of compensation there is no real
lis
between the parties and, therefore, no
onus
in the legal sense; the Court has to do the best it can with the
evidence before it.”
[26]
I
pause to record that in
Southern
Transvaal Buildings
supra
King
AJ stated, somewhat loosely, at 958A:
“
While
a valuer is entitled to refer to information received, even though
hearsay, in arriving at his conclusions, the same as a
willing
buyer or seller would do, in my view he cannot utilise a conclusion
arrived at by another valuer.”
[27]
Whilst
the latter part of the statement is correct the reference to
“hearsay” attracted academic criticism (see
Zeffert:
2000 ASSAL
795 at 802). I think the better view is that it is not hearsay
at all in the context of expropriation proceedings for the
probative
value thereof is not dependant on the credibility of any other
person, but rather on the weight which a notional willing
buyer or
seller would have attached to the statement in his negotiation.
As I understand the reasoning in
Lornadawn
that is what Botha J held.
[28]
Mr
Ford
SC
has
referred to
Lornadawn
and the authorities which have followed it as a “line of old
cases”. It is argued that the legal position has
changed
substantially in three material respects since these cases were
decided. Firstly, the Evidence Act was promulgated
in 1988.
Secondly, it is pointed out, correctly, that these cases were decided
under the Expropriation Act, 55 of 1965 (the
1965 Act) wherein market
value was the test. Thirdly, section 25 of the Constitution
introduced a new measure of compensation.
[29]
I
have dealt earlier with provisions of the Evidence Act. I am
unpersuaded, for the reasons set out earlier, that the introduction
thereof has any impact upon the reasoning in
Lornadawn
.
I turn therefore to consider the second leg of the argument.
The argument, as I understand it, proceeds on the basis
that all the
cases to which I have referred and which followed the reasoning in
Lornadawn
were decided on the basis that the core function of the court, which
has its origin in the 1965 Act, is to decide the market value
of the
property as at the date of expropriation and that it is this notion,
that gives rise to the idea that in considering the
quantum of
compensation in expropriation cases there is in fact no
lis
between
the parties and no specific onus in the true sense in relation to the
determination of the value. This, it is contended,
is directly
contrary to the provisions of the Act which provides in section 12(1)
that the amount of “
compensation
”
to be paid to an owner in respect of the property expropriated shall
not
exceed
the amount which the property would have realised if sold on the date
of notice in the open market by a willing seller to a willing
buyer.
Section 14 of the Act further provides that the amount of
compensation for any property expropriated shall, on the
application
of any party concerned be determined by the High Court (section
14(1)) and that any such proceeding shall be instituted
and conducted
by way of action (section 14(3)(a)) with the law of procedure
applicable in civil proceedings in that court applying
in respect of
such proceedings (section 14(4)). For this reason, it is
submitted, that under the Act a claim for compensation
is an ordinary
civil action subject to the ordinary rules of evidence, including
expert evidence, and that there is no question
that the burden of
proving the market value in the ordinary course now rests on the
party claiming compensation. This, it
is suggested, put paid to
the notion that an action for compensation is a unique procedure in
which the ordinary rules of procedure
and evidence will not apply.
[30]
As
recorded earlier I do not think that Botha J in
Lornadawn
intended to suggest that the ordinary rules of procedure and evidence
do not apply in expropriation matters. He clearly recognised
that they do, hence the lengthy explanation for him finding the
evidence to be admissible. The finding, I think, is based
upon
his conclusion that the evidence is not hearsay as it is not tendered
to establish the truth thereof and that it is admissible
irrespective
of whether it is true or not. (See
Lornadawn
p. 626C.) It is admissible because the mere fact that such
statements were being made is a consideration which a willing
buyer
and willing seller would have considered, subject to the weight which
they would have attached to them, in arriving
at a price.
The weight which they would have attached to it, and which the Court
will attach to it, will depend on a consideration
of all proven
facts.
[31]
It
may transpire that the notional informed buyer would conclude that
the statement in issue is so incredulous when viewed against
all the
known facts that he would have attached no weight at all to it.
The position is well illustrated by the facts in
Ingersoll-Rand
Co (SA) Ltd v Administrateur, Transvaal
1991 (1) SA 321
(TPD). In that instance a valuer testified that
he had spoken to the purchaser of a property and that he used the
information
imparted to him in his valuation of an expropriated
property. The purchaser of the said property advised that he
had purchased
a bargain as the said property was overgrown at the
time with reeds which was caused by a blocked sewer on the property
next door.
An inspection
in
loco
in the course of the trial revealed that the said property was
situated on an incline running down to a railway line. In these
circumstances the trial judge considered that it was patently
improbable that a marsh could have formed on the property.
In
the result the court attached no weight at all to the alleged
assertion. The weight which can be attached to such
communications
can, however only be determined at the conclusion of
the trial (see also
Lornadawn
p. 638C-E).
[32]
It
is necessary at this juncture to record the provisions of section
8(1) of the 1965 Act. It provided:
“
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 exceed
-
(a)
In
the case of any property other than a right, the aggregate of-
(i)
The
amount which the property would have realised 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 of inconvenience caused
by the expropriation; and
(b)
In
the case of right an amount to make good any actual financial loss or
inconvenience caused by the expropriation or the taking
of the
right.” (Emphasis added)
[33]
In
respect of the expropriation of land, the compensation provided for
under the 1965 Act is in all material respects identical
to that
provided for in section 12 of the Act. What Botha J, Kumleben J
and King AJ were considering in
Lornadawn,
Davey
and
Southern
Transvaal Buildings
supra
was
accordingly “compensation” to be arrived at in precisely
the same manner as that provided for in section 12(1) of
the Act.
[34]
Moreover,
like the provisions of section 14 of the Act, section 7 of the 1965
Act also provided that where agreement could not be
reached in
respect of the amount of compensation the matter was to be determined
by a court. Section 9 of the 1965 Act similarly
provided:
“
(1)
Proceedings contemplated in subsection (1) of section 7 shall be
instituted and
conducted
by way of action
.
(2)
The
law
of procedure applicable in civil proceedings
in the court in which such proceedings are conducted
shall
,
subject to the provisions of this Act and any regulations made
thereunder,
apply
mutatis
mutandis
in respect of such proceedings and any award of compensation shall be
regarded as if it were a civil judgment of that court.”
(Emphasis added)
[35]
In
the circumstances I do not think that the introduction of the Act
brought about any change at all in respect of the manner in
which the
court is required to arrive at an amount of compensation nor to the
procedure. The findings in
Lornadawn,
Davey
and
Southern
Transvaal Buildings
supra
in respect of the absence of a
lis
between the parties and an onus remain equally valid under the Act.
Section 14 of the Act deals with procedure and has no
impact on the
onus which applies. Onus, is a matter of substantive law.
The issue of onus was recently confirmed in
Port
Edward Town Board v Kay
1996 (3) SA 664
(A) 674J-675D where it was held in the proceedings
under the Act that:
“
A
party who asserts that a property has a particular potential must
prove it (
Loubser
en Andere v Suid-Afrikaanse Spoorweë en Hawens
1976 (4) SA 589
(T) at 608G-615F). By potential is meant a use,
additional to its current use, for which the property is suited and
reasonably
capable of being put in the future … Such
proof has three components:
(a)
that the potential exists;
(b)
that a willing buyer and seller would have taken it into account in
fixing the price … and
(c)
the
quantum
.
Component
(a)
must be shown as a reasonable possibility …
Component
(b)
must be proved on a balance of probabilities … Once
(a)
and
(b)
have been conceded or established there is no
onus
in the narrow sense in respect of component
(c).”
[36]
On
behalf of the defendant it is argued that component (c) referred in
Port
Edward Town Board
supra
is
a reference to compensation and not to the market value of the land.
Before the court gets to a consideration of the quantum
of
compensation, so the argument goes, the plaintiff bears the onus to
establish the market value upon which it wishes to rely.
I have
given careful consideration to the submission, however, I consider
the submission to be unsound. In an expropriation
matter a
person has been deprived of property, which could otherwise have been
sold on the open market, by an organ of State.
He is
ex
lege
entitled to compensation. The function of the court is merely
to fix the compensation to be paid to such an owner to compensate
him
for his loss. The starting point in the enquiry into the
quantum of compensation, which is the function of the court,
is the
determination of the amount which the property would have realised if
sold on the date of expropriation in the open market
by a willing
seller to a willing buyer. The property has only one value
which is to be fixed without reference to the circumstances
of a
particular owner (see
Pienaar
v Minister van Landbou
[1972] 1 All SA 287
(T)). It is for this reason that Botha J
concluded that the core function of the court in an expropriation
matter is to decide
the market value of the property as at the date
of expropriation. Once the market value has been established
consideration
may be given under the Act to factors which may justify
a reduction in the compensation. The determination of the
market
value is therefore an integral part of the court’s
function in fixing the quantum of compensation. For these
reasons
I do not think that the introduction of the Act changed the
position at all nor do I think that the statutory provisions relied
on are inconsistent with the reasoning in the cases referred to.
[37]
I
turn to the third leg of the argument. Section 25(2) and (3) of
the Constitution provides:
“
(2) 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.
(3) 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.”
[38]
In
support of the defendant’s argument that market value no longer
lies at the heart of the enquiry I was referred to the
matter of
Msiza
v Director-General, Department of Rural Development and Land Reform
and Others
2016 (5) SA 513
(LCC) [32] where the Land Claims Court stated:
“
The
existing Expropriation Act, 63 of 1975, an Act passed during the
Apartheid era makes it clear that market value is the formula
for
determining compensation due to a person whose land has been
expropriated by the State. The Constitution is a rejection
of
the market based approach to land reform and compensation in cases of
expropriation. …”
[39]
I
think the position may be overstated by the Learned Judges in the
Land Claims Court. The Constitution provides for additional
factors which may, if appropriate, justify an adjustment to the
market based compensation to reflect a just and equitable result.
Market value, however, remains an assertive consideration.
In
Khumalo
and Others v Potgieter and Others
[2000] 2 All SA 456
(LCC) Gildenhuys J applied the constitutional
compensation standard as it was incorporated in section 23(1) of the
Land Reform
(Labour Tenants) Act 3 of 1996 and he decided that the
court should determine the amount of just and equitable compensation
in
two stages. First, the court has to determine the market
value of the property according to the established principles and
valuation methods; and thereafter the court must consider to
what extent the market value should be adjusted according to
considerations enumerated in section 25(3) of the Constitution.
The Land Claims Court followed the same approach in
Ex
Parte Former Highland President; in re: Ash and Others v Department
of Land Affairs
[2002] 2 All SA 26
(LCC) [25]-[38]. In
Du
Toit v The Minister of Transport
2006 (1) SA 297
(CC) the majority of the Constitutional Court
recognised that there are clear differences between section 12(1) of
the Act and
section 25(3) of the Constitution. Despite these
differences they considered that there does not appear to be an
inconsistency
between them. Although the Constitutional Court
was not considering an expropriation of land, they adopted a roughly
comparable
approach to that which was followed in
Khumalo’s
case
supra
.
They considered that it was practical to consider first what is
payable under the Act, in an expropriation of land that
is a
determination of the market value, and then to consider if that
amount is just and equitable under section 25(3) of the
Constitution.
[40]
The
two staged approach has been applied in other cases in the Supreme
Court of Appeal. (See for example
The
City of Cape Town v Helderberg Park Development (Pty) Ltd
2007 (1) SA 1
(SCA) para [20] and [33]; and
Haakdoornbult
Boerdery CC and Others v Mphela and Others
2007 (5) SA 596
(SCA) para [36].) I consider the approach to be
correct.
[41]
In
all the circumstances I consider that in order to fix compensation in
terms of section 12(1) of the Act, with regard to section
25 of the
Constitution, the primary task of the court in the first
instance is to determine the market value of the property.
This
is so not only because that is what the plaintiff has lost but also
because market value is one of the few considerations
set out in
section 25 which is qualifiable. Once that is determined an
adjustment should be made, if necessary, to reflect
just and
equitable compensation having regard to the further considerations
set out in section 25. In considering the market
value as first
step in the determination of the quantum of compensation I find that
there is no
lis
between the parties and there is no onus in the ordinary sense on the
plaintiff (see
Port
Edward Town Board
supra
).
The reasoning in
Lornadawn
remains equally valid in respect of the first step of the
quantification of compensation. In those circumstances I am of
the view that Mr
Breitenbach
SC
is correct that the evidence of Ms Falck of statements made by
persons not called as witnesses may be received as information which
the notional informed willing buyer and willing seller would have had
at their disposal. She is entitled to found her opinion
as to
the value of the subject property on such information, including
statements of prices fetched for comparable properties,
(cf
Lornadawn
627B-C), as it is part of the relevant information which could have
influenced a willing buyer and willing seller. The probative
value of this information and therefore the strength of the valuer’s
opinion can, as recorded earlier, only be determined
at the
conclusion of the trial.
[42]
I
therefore consider too that Botha J was correct in
Lornadawn
that the general rule that an expert’s opinion is of no value
to the extent that it is founded upon facts which have not
been
properly proved does not find application to the opinion of an expert
valuer who testifies in respect of the value of immovable
property
based upon information which he/she has gained from communications by
other people.
[43]
On
behalf of the defendant it is argued, however, that there is nothing
to suggest that a notional willing buyer and seller would
have had
access to the information provided by Edelson and it was not freely
available in the market. There is nothing before
me to suggest
that Edelson would not have shared this information with an aspirant
buyer or seller, if approached, on the same
basis as he did with Ms
Falck when she enquired from him. In these circumstances I
think that an informed notional buyer
would have had access thereto
and given consideration thereto. (Compare
Lornadawn
p. 628B-C.) The notional buyer in issue is, after all, an
informed buyer.
[44]
During
argument Mr
Ford
SC
raised
a further objection, namely that the Rule 36(9)(b) notice filed on
behalf of Ms Falck does not comply with the provisions
of the Rule
and that the evidence set out earlier herein should be excluded on
that basis. The argument was founded primarily
on the decision
of
Coopers
(SA)(Pty) Ltd v Deutsche Gesellschaft für Schädlingsbekämpfung
MBH
1976
(3) SA 352
(A). In
Coopers
at 371B-E Wessels JA stated:
‘
In
the context in which the phrase “reasons therefore” is
used in Rule 36(9)(b) it means, or at least includes, the
facts or
data
on which the opinion is based. The facts or
data
would
include those personally or directly known to or ascertained by the
expert witness … or known to or ascertained by
others of which
he has been informed in order to formulate his opinions, eg …
investigations by others, or information from
text-books which are to
be duly proved by the trial. However, “summary”
also governs “his reasons therefor”;
hence the
testimony that the expert witness intends to give need not be fully
set out in the summary.
In
deciding whether there has been due compliance with sub-rule (9)(b),
it is, in my opinion, relevant to have regard to the main
purpose
thereof, which is to require the party intending to call a witness to
give expert evidence to give the other party such
information about
his evidence as will remove the element of surprise, which in earlier
times (regarded as an element of affording
a tactical advantage)
frequently caused delays in the conduct of trials. Indeed, all
the sub-rules of Rule 36 were formulated
with that purpose in mind.
Consequently, when summarising the facts or data on which the expert
witness premises his opinions,
the draughtsman should ensure that no
information is omitted, where the omission thereof might lead to the
other side being taken
by surprise when in due course such
information is adduced in cross-examination or evidence.”
[45]
The
notice filed contains the following information relevant to the
objection:
‘
4.3
Transaction No. 3: Unidentified Property in Motherwell
4.3.1
Although this transaction has not yet been registered, we have been
informed that the registration is imminent.
The information
used here was obtained from the bank’s valuer and is based on
the information supplied to the bank for mortgage
bond purposes.
In June 2011 a property of ± 489ha was to be developed in a
joint venture, with 55% of the development
to be “sold off”
and 45% retained by the other party. The transaction however
excluded 250 residential units
and the commercial component.
Using the purchase consideration of ±R75,000,400 for the ±
55% share, the
“value” of the development as a
whole could be determined. This came to about R137,000,000, or
±R280,000
per ha.
4.3.2
Based on the approved density of ±6,142 units and excluding
the 250 units that did not form part
of the joint venture, a rate of
±23,267 per developable opportunity is reflected.
However, the buyer was of the opinion
that the density could be
increased to about 10,000 units, which would have reflected at rate
of ±13,710 per unit.”
[46]
It
is argued on behalf of the defendant that the information falls short
of what is required in terms of Rule 36(9)(b) as the “unidentified
property” does not appear on the diagram of the area included
in the Rule 36(9)(b) summary and the bank’s valuer is
not
identified thereby making it impossible for the defendant to
investigate the truth of the content of the communication by Edelson
or the appropriateness of the comparison with the subject property.
The diagram of the area included in the Rule 36(9)(b)
notice depicts
the entire Nelson Mandela Metropole and reflects the Motherwell
Township. Clearly it was not possible to identify
the property
within Motherwell as Edelson had not confided in Ms Falck in this
regard. During her evidence, however, as set
out earlier herein
Ms Falck revealed that shortly before taking to the witness box she
was advised that the property is not situated
in Motherwell at all
and that it is situated in KwanNobuhle. Particulars of the
property were obtained shortly before she
testified and information
of the erf number in KwaNobuhle and the nature of the transaction are
now available and disclosed.
Edelson has also now been
identified.
[47]
In
my view there is merit in the objection raised by the defendant to
the content of the Rule 36(9)(b) notice. After hearing
of the
objection, however, the parties requested that I deliver reasons for
such ruling as I may make in writing in respect of
the general
proposition as set out earlier herein. The effect thereof has
been that the matter has in any event been adjourned
for
approximately three months. In the circumstances I conclude
that the shortcomings in the Rule 36(9)(b) notice were not
designed
to obtain any tactical advantage and any prejudice which may have
resulted therefrom is cured by the postponement of the
matter.
The information which was lacking has now been provided and a full
investigation by the defendant relating to the
property is now
possible. In the circumstances I consider that it would be
inappropriate to exclude the evidence on this
basis.
[48]
In
the event and to the extent that I may err in my conclusion that the
contentious evidence does not constitute hearsay evidence
it is
necessary to have regard to the provisions of section 3(1) of the
Evidence Act.
[49]
The
general approach which applies when considering whether to admit
hearsay evidence in terms of this section was set out in
S
v Shaik and Others
[2006] ZASCA 105
;
2007 (1) SA 240
(SCA) at 298 para [170] as follows:
“
Section
3 provides that hearsay evidence is admissible if a Court is of the
opinion that it should be admitted in the interests of
justice.
In
McDonald's
Corporation v Joburgers Drive-Inn Restaurant (Pty) Ltd and Another;
McDonald's Corporation v Dax Prop CC and Another;
McDonald's
Corporation v Johburgers Drive-Inn Restaurant (Pty) Ltd and Dax Prop
CC
1997
(1) SA 1 (A)
this Court held that the admissibility of evidence is, in
general, one of law, not discretion, and that there was nothing
in s
3 which changed this situation. The section enjoins a Court in
determining whether it is in the interests of justice to admit
hearsay evidence to have regard to every factor that should be taken
into account, more specifically, to have regard to the
factors mentioned
in s 3(1)
(c)
.
Only if, having regard to all these factors cumulatively, it would be
in the interests of justice to admit the hearsay evidence,
should it
be admitted.”
[50]
Section
3(1)(c) of the Evidence Act provides:
“
(1)
Subject to the provisions of any other law, hearsay evidence shall
not
be admitted as evidence at criminal or civil proceedings, unless-
…
(c)
The
court, having regard to-
(i)
The
nature of the proceedings;
(ii)
The
nature of the evidence;
(iii)
The
purpose for which the evidence is tendered;
(iv)
The
probative value of the evidence;
(v)
The
reason why the evidence is not given by the person upon whose
credibility the probative value of such evidence depends;
(vi)
Any
prejudice to a party which the admission of such evidence might
entail; and
(vii)
Any
other factor which should in the opinion of the court be taken into
account, is of the opinion that such evidence should be
admitted in
the interests of justice.”
[51]
The
considerations set out in section 1(c)(i)-(iv) have been fully
discussed earlier herein. In respect of the aspect of the
litigation to which Ms Falck testifies there is in the nature of the
proceedings no lis between the parties and no onus in the
strict
sense upon the plaintiff. The evidence objected to relates to
information given to Ms Falck, as a valuer, by other
persons in
respect of matters which have influenced her valuation of the land.
Such information forms part of the general
body of information which
may have influenced an informed buyer and an informed seller in
arriving at the purchase price for the
subject property and which a
court is required to weigh as part of the mass of information which
is relevant to the determination
of the market value. The
evidence is tendered for that purpose and the probative value of such
evidence, or the weight which
an informed buyer and an informed
seller would have attached thereto is a matter which the court can
only determine in conjunction
with all the proven facts at the
conclusion of the trial. These factors, I think, militate
strongly in favour of the admission
of the evidence for the reasons
which are set out earlier in this judgment.
[52]
I
have been advised by Mr
Breitenbach
SC
from
the Bar that Mr Edelson is available to testify and in the event that
I should rule against the plaintiff the evidence of Mr
Edelson will
be presented. On behalf of the plaintiff reliance is placed on
an American authority which was quoted by Botha
J in
Lornadawn
p. 625C-D and which states:
“
From
a practical standpoint, if each person previously involved in
effecting comparable sales should have to be called to the
stand
to establish the detailed facts of such sales, it would lengthen
litigation of this kind out of all reason and would make
it almost
impossible for the State or defending landowners to make a proper
showing as to valuation opinion within a reasonable
time and at
reasonable expense. Therefore, within proper limits, facts acquired
by hearsay and used by a valuation expert in support
of his
conclusion that certain sales are comparable and therefore furnish
support for his opinion concerning value, have been customarily
received in evidence in this State".
[53]
In
Davey’s
case,
supra,
Kumleben J was somewhat sceptical of this motivation. He stated
at p. 477A-B:
“
I
am not all convinced that the reception of such evidence without
qualification or limitation has or will have this result.
The
prolixity of these cases, which normally accept such hearsay evidence
as admissible, is notorious. As a rule a disproportionately
small percentage of the evidence tendered is ultimately relied upon
in argument and this case was no exception.”
[54]
I
venture to suggest that the present matter is no different, however,
I am nonetheless of the view that there is merit in the view
expressed in the American authority. There is, however, a
further consideration to be weighed. Edelson conveyed the
information to Ms Falck which he had attained from the bank in order
to carry out a valuation of the property for bond purposes.
He
too was not directly involved in the transaction and obtained such
information as he has from the bank, presumably in the form
of a
written contract and other documents reflecting,
inter
alia,
municipal approvals for subdivision. The probative value of the
content of the information does not depend upon the credibility
of
Edelson, or at least not entirely. The truth of the content of
the information depends upon the credibility of the participants
to
the transaction who have not been identified and, are unknown to the
plaintiff. As set out earlier, however, the evidence
is
relevant and material irrespective of the truth or otherwise
thereof.
[55]
I
have referred earlier to the prejudice to the defendant which flows
from the Rule 36(9)(b) notice and the summary of the evidence
of Ms
Falck. This, as recorded earlier, appears to me to be cured by
the postponement of the matter. The evidence is
to be tendered
by Ms Falck and, having been afforded a full opportunity to consider
the comparability of the transaction now that
the property has been
identified the defendant would have adequate opportunity to challenge
the correctness of the information
conveyed to Ms Falck in
cross-examination. The defendant, as the local authority
required to approve the subdivisions for
the development would be
well placed to tender evidence in rebuttal if deemed necessary.
This consideration too, I think,
militates in favour of the admission
of the evidence.
[56]
Section
3(1)(c)(vii) is an all-encompassing blanket provision providing for
any other factor which should in the opinion of the
court be taken
into account to be considered. One such factor which, in my
view, weighs heavily is the fact that such evidence
had, prior to the
promulgation of the Evidence Act, been consistently admitted in
matters relating to expropriation. It was
admitted because it
was considered to be material to arriving at a just conclusion as to
the reasonable compensation payable under
the Act. That, it
seems to me, remains equally so for the reasons which I have set out
earlier herein.
[57]
In
all the circumstances, even if I err in my conclusion that the
evidence in issue does not constitute hearsay evidence, I would
admit
the evidence in terms of the provisions of section 3(1)(c) of the
Evidence Act. The interests of justice require it.
[58]
In
the result, the objection to the evidence of Ms Falck which is set
out earlier herein and in paragraphs 4 and 5 of the first
Rule
36(9)(b) notice in respect of her evidence is overruled. The
said evidence is admitted on the grounds set out herein.
J
W EKSTEEN
JUDGE
OF THE HIGH COURT
Appearances:
For
Plaintiff:
Adv A Breitenbach SC and Adv Townsend
instructed by DHM Attorneys,
Somerset West c/o Greyvensteins Inc, Port Elizabeth
For
Defendant: Adv EAS
Ford SC and Adv G Richards instructed by Rushmere Noach Inc,
Port
Elizabeth