Offit Enterprises (Pty) Ltd and Another v Coega Development Corporation (Pty) Ltd and Others (09/09) [2010] ZASCA 1; 2010 (4) SA 242 (SCA) ; [2010] 2 All SA 545 (SCA) (15 February 2010)

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[2010] ZASCA 1
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Offit Enterprises (Pty) Ltd and Another v Coega Development Corporation (Pty) Ltd and Others (09/09) [2010] ZASCA 1; 2010 (4) SA 242 (SCA) ; [2010] 2 All SA 545 (SCA) (15 February 2010)

THE
SUPREME COURT OF APPEAL
OF SOUTH
AFRICA
JUDGMENT
Case no: 09/09
In
the matter between:
OFFIT ENTERPRISES (PTY) LTD First
Appellant
OFFIT
FARMING ENTERPRISES (PTY) LTD Second Appellant
and
COEGA
DEVELOPMENT
CORPORATION
PTY) LTD First Respondent
PREMIER
OF THE EASTERN
CAPE
GOVERNMENT Second Respondent
MINISTER
OF PUBLIC WORKS Third Respondent
MINISTER
OF TRADE
AND
INDUSTRY Fourth Respondent
Neutral citation:
Offit
Enterprises v Coega Development Corporation
(9/09)
[2010] ZASCA 1(15 February 2010)
Coram:
HARMS DP,
LEWIS, MAYA JJA,
HURT and WALLIS AJJA
Heard
:
3
November 2009
Delivered
:
15
February 2010
Summary:
Expropriation
–
when for a public purpose or in the public
interest
–
whether threat of constitutes unfair
administrative action
–
whether
issue of permit to operate Industrial Development Zone invalid –
whether affects validity of potential expropriation –
section
217(1) of Constitution – whether landowner can obtain order
compelling authority to expropriate land.
ORDER
On
appeal from:
South Eastern Cape Local
Division of the High Court (Jansen J sitting as court of first
instance):
The
appeal is dismissed with costs, such costs to include the costs of
two counsel.
JUDGMENT
WALLIS AJA (HARMS DP,
LEWIS, MAYA JJA and HURT AJA concurring):
INTRODUCTION
[1]
This is a somewhat schizophrenic case about expropriation in which
the appellants seek, in the first instance, an order declaring
that
any expropriation in terms of current legislation of three properties
owned by them, and falling within the Coega Industrial
Development
Zone (‘the Coega IDZ’), is neither permissible nor lawful and, in
the alternative, an order compelling any one of
the respondents
desirous of expropriating the properties to initiate expropriation
proceedings within one month of the court’s
order. The court
below
1
refused both orders and the appellants appeal with its leave.
[2]
The Coega IDZ is a major government initiative to develop a new
deepwater port at Coega and a surrounding industrial area in the
Eastern Cape to the north of Port Elizabeth. Millions of Rand have
been spent on this initiative and its benefit to the country as
a
whole and the Eastern Cape in particular, where poverty and
unemployment are rife, is not disputed. The first respondent, Coega
Development, has from the project’s inception held a permit to
operate the IDZ. It is a company in which the second respondent,
the
Eastern Cape Provincial government, has a stake together with the
Department of Trade and Industry, represented in this litigation
by
the fourth respondent.
2
[3] The appellants’
interest is derived from the fact that between them they own three
properties, in total extent 524 hectares
in the heart of the IDZ.
They describe these collectively as a prime freehold site positioned
on the link road bisecting the IDZ
and bordering on the area
earmarked for the new Port Elizabeth airport. Since 2000,
negotiations have taken place between them and
the first respondent
for the sale of the properties but these have not been successful,
and on each occasion that they were resumed
the asking price
increased. In 2001 it was R1,35m for the hotel property and R883 750
for the remainder. The response was an offer
of R1,35m for the hotel
property and R669 000 for the remainder. In March 2003 the asking
price had increased to R7m and by November
2003 it had risen to
R15,5m. When the present proceedings were launched in 2007, the
appellants were seeking a price of R40m on the
open market.
3
[4] From time to time
during this period Coega Development indicated that it would seek to
have the appellants’ properties expropriated
for incorporation into
the Coega IDZ. We were furnished with correspondence that passed
between the appellants and Coega Development
over the years in which
the latter indicated that it would invoke expropriation as a means of
obtaining the properties. In February
2005 notice of expropriation
was given by the second respondent, purporting to act in terms of the
Eastern Cape Land Disposal Act
7 of 2000 and the Expropriation Act 63
of 1975. That notice was set aside by the high court. A further
notice, issued by the first
respondent on 15 December 2006, was
likewise set aside. Thereafter nothing was done by any of the
respondents in regard to expropriation
although there was some
skirmishing in the correspondence over fencing and the rehabilitation
of the properties.
[5] On 4 June 2007 the
appellants’ attorneys wrote to attorneys representing the first and
second respondents and recorded that
their clients were proceeding on
the basis that the first and second respondents ‘have no further
interest in pursuing the acquisition
of our clients’ properties
whether by private treaty or expropriation’ and that they would
commence marketing the properties.
To that end a well-known firm of
estate agents was appointed and on 20 June 2007 a full colour
advertisement was published in Business
Day offering the properties
for sale at a price of R40m on the basis that they constituted a
‘prime freehold development site …
situated in the heart of the
Coega Industrial Development Zone’.
[6] The publication of
this advertisement stirred Coega Development into action. It
published an advertisement in Business Day on
26 June 2007 referring
to the previous advertisement and reading as follows:
‘
These
are the facts:
The land
referred to falls within the proclaimed Industrial Development Zone
(IDZ) boundary. The Coega Development Corporation (CDC)
is in
discussions with all land owners within the IDZ to acquire their
land, and is offering to purchase this land at reasonable
market
rates. The CDC has largely succeeded with this option to purchase
land, but where this option does not yield positive results,
an
alternative to expropriate land in order to secure control of land
over the proclaimed IDZ boundary will be taken. The CDC has
resorted
to expropriation in the past.
The same
principle applies in this case.
’
The appellants complain
that notwithstanding this advertisement Coega Development took no
steps at all to expropriate the properties
and that its advertisement
had the effect of depressing the market as evidenced by an offer for
R30m for the properties.
THE BASIS OF THE MAIN
RELIEF
[7] Against that
background the appellants launched these proceedings seeking the
relief already described. They advanced three grounds
in the founding
affidavit in support of the main relief sought, namely a declaratory
order that any expropriation for or on behalf
of Coega Development
would be unlawful. First it was said that any attempt to expropriate
for the benefit of Coega Development could
never be for a lawful
purpose because, so it was claimed, it was then operating and (as
matters developed) continued to operate the
Coega IDZ unlawfully.
This was based on an allegation that the provisional operator permits
issued to Coega Development and extended
from time to time under the
regulations in force at the time had been unlawfully issued and
extended. Second it was said that such
expropriation was not
competent in terms of the relevant legislation. Third it was said
that given the long history of the matter
any attempt to expropriate
at that stage or thereafter would be administratively unfair and in
breach of the appellants’ constitutional
right to fair
administrative action.
[8] In a supplementary
affidavit delivered after the amendment of the relevant regulations
governing permits and the issue of a fresh
permit to Coega
Development, the appellants claimed that the new permit was likewise
invalid and hence had not remedied the problem.
As this argument was
developed it became apparent that the appellants contended that there
was an initial flaw in the earlier permits
and that the terms of the
new regulations rendered it impossible to remedy that flaw and
legalise the activities of Coega Development.
In addition it was
contended that the issue of the new permit was invalid as being
contrary to the procurement provisions of s 217
of the Constitution.
[9] The respondents accepted that only the third
respondent had powers of expropriation in terms of the Expropriation
Act. All of
them denied any current intention to ask her to exercise
her powers. In an affidavit from Mr Meyring, the Director: Property
Owner
Activities in the Department of Public Works, the person
responsible for dealing with requests that the Minister should
exercise
her powers of expropriation, it was said that no such
application had been made to the department in respect of the
appellants’
properties. On this basis the respondents contended
that the declaratory relief sought in the first prayer was academic
and that
the court should in the exercise of its discretion not make
an order. The challenge to the validity of the permits was disputed
as
were the contentions based on the right to fair administrative
action and on s 217 of the Constitution. In regard to the validity
of
the permits the point was taken that none of the previous permits was
set aside and that there was no application to set aside
the present
permit. Accordingly, so it was argued, the principle laid down in
Oudekraal Estates (Pty) Ltd v The City of Cape
Town and Others
4
applied and it was not open to the appellants
to challenge the validity of the permits collaterally. It is
appropriate to address
these competing contentions before dealing
with the alternative claim.
[10] The contention that an expropriation for the
benefit of Coega Development would be unlawful has two aspects,
namely that it would
be for an impermissible purpose in terms of the
Expropriation Act and that it would be impermissible because the
activities of Coega
Development are themselves unlawful because of
the alleged invalidity of their permits. I will deal with each of
these in turn.
THE EXPROPRIATION ACT
[11] Section 2(1) of the Expropriation Act gives the
Minister the power to expropriate ‘any property for public
purposes’. As
the Constitution provides in s 25(2)(a) that
property can be expropriated for a public purpose or in the public
interest the
reference to ‘public purposes’ in the Expropriation
Act must be construed as including both of these concepts in
accordance with
the principle that statutes must where possible be
construed as consonant with the Constitution.
5
Public purposes are defined in s 1 as including ‘any purposes
connected with the administration of the provisions of any law
by an
organ of State’.
[12] In terms of s 3 the Minister is empowered to
expropriate property on behalf of certain juristic persons. That
power is expressed
in the following terms:
‘
(1) If a juristic person … satisfies the
Minister charged with the administration of the law mentioned in
connection therewith
that it reasonably requires any particular
immovable property for the attainment of its objects and that it is
unable to acquire
it on reasonable terms, the Minister may, at the
request of the first-mentioned Minister, â€¦ expropriate such
immovable property
on behalf of that juristic person or body as if it
were required for public purposes.
(2) The juristic persons … contemplated in
subsection (1) are­­­­­â€”
(h) any juristic person, … established by or under
any law for the promotion of any matter of public importance.
(3) If the Minister expropriates any immovable
property on behalf of a juristic person or body in terms of
subsection (1),
such juristic person or body shall become the
owner thereof on the date of expropriation in question.’
[13] The appellants contend that an expropriation for
the benefit of Coega Development would not be legal because (i) it
could not
be an expropriation for public purposes under s 2(1), and
(ii) Coega Development is not a juristic person contemplated in s
3(2)(h).
In my view both contentions are incorrect and an
expropriation directed at securing for Coega Development the land
falling within
the Coega IDZ would be a lawful expropriation under
these provisions of the Expropriation Act.
[14]
I first deal with the provisions of s 2(1). The expression ‘public
purposes’ is a broad one including ‘
things
whereby the whole population or the local public are affected and not
only matters pertaining to the State or the Government’.
6
In
Administrator, Transvaal v J van Streepen
(Kempton Park) (Pty) Ltd
7
this court dealt with an expropriation under a provincial ordinance
that gave the power of expropriation ‘for any purpose in connection
with the construction or maintenance of any road’. In order to
upgrade certain roads the administrator expropriated the bulk of
the
respondent’s property so as to accommodate the relocation of a
private railway line providing access to a factory in the vicinity
of
the road. The intention was to transfer the land to the owner of the
railway line. The validity of the expropriation was challenged
on the
grounds that the power to expropriate could not be used for the
purpose of acquiring property and then transferring it to
a private
third party. Smalberger JA rejected that proposition and said:
8
‘It is a
non sequitur
that because land must be acquired in the name of the State it must
be acquired for the use of the State.’
[15]
The learned judge went on to draw a distinction between public
purposes and the public interest and said that
9
:
‘
Expropriation,
generally speaking, must take place for public purposes or in the
public interest. The acquisition of land by expropriation
for the
benefit of a third party cannot conceivably be for public purposes.
Non constat
that it cannot be in the public interest. It would
depend upon the facts and circumstances of each particular case.’
It
was not explained why it was said that the acquisition of land for
the benefit of a third party cannot be for a public purpose.
10
It may be that this flowed from a perception of the role of the State
and private participants in the public arena that is different
from
that current at present, where many functions hitherto regarded as
public are carried out by private concerns in co-operation
with state
authorities. In particular many major development initiatives are
undertaken between government at one of the three tiers
recognised by
the Constitution and private enterprise through what are called in
common parlance public–private partnerships. There
is no apparent
reason why the identity of the party undertaking the relevant
development, as opposed to the character and purpose
of the
development, should determine whether it is undertaken for a public
purpose. Thus the expropriation of land in order to enable
a private
developer to construct low-cost housing is as much an expropriation
for public purposes as it would be if the municipality
or province
had undertaken the task itself, using the same contractors. I do not
think it can be said in our modern conditions and
having regard to
the Constitution that an expropriation can never be for a public
purpose merely because the ultimate owner of the
land after
expropriation will be a private individual or company.
[16]
It is helpful in this regard to consider the position in other
jurisdictions. In the United States the power of eminent domain
11
can be exercised only for a public purpose and not for purely private
purposes. This is the interpretation given to the Fifth Amendment
guarantee that there can be no
taking
of private property for public use without just compensation.
However the US Supreme Court has held that it may be exercised to
enable a run-down area to be redeveloped by private entrepreneurs.
12
In an even more far-reaching decision, that has resonance in this
country in the light of s 25(4)(a) of the Constitution,
it held that it was permissible to exercise the power in order to
compel lessors to sell their leased properties to lessees in order
to
secure more equitable land ownership in the state of Hawaii.
13
In its most recent decision it held that the exercise of the power of
eminent domain to take private property for the purposes of
an urban
development project was a public use even though the project was to
be undertaken by a non-profit private developer and
the land in issue
was to be transferred to the developer.
14
The effect of these decisions is that the notion of public purposes
is broadly and generously construed by the courts. The position
in
France, Germany, Italy and Mexico and other countries appears to be
similar.
15
The European Court of Human Rights has followed the same path.
16
[17]
Reverting to the position of Coega Development, its shareholders are
Eastern Cape Development
Corporation (Pty) Limited, a company the shares in which are
controlled by the Eastern Cape government
and the Department of Trade and Industry, both of which operate
squarely in the public sector. The Eastern Cape Development
Corporation
(Pty) Ltd is
a
provincial government business enterprise listed in part 3D of
Schedule 3 to the
Public Finance Management Act 1 of 1999
. The
responsibility of Coega Development to develop the Coega IDZ is of
national and regional importance and the development takes
place in
accordance with authority given under a statute. Providing industrial
development with its concomitant benefits of employment
and economic
growth is manifestly a public purpose and indeed a central public
purpose in South Africa. The establishment of a deep-water
port to
accommodate changes in world shipping is vitally important in a
country whose international trade is largely by sea. If the
development of the Coega IDZ had been undertaken by the national or
provincial government it could never have been suggested that
an
expropriation for the purposes of the development was not for public
purposes. I fail to see why it should be any different because
a
company owned by government at the national and provincial level
undertakes the task instead.
[18] For
those reasons I am of the opinion that an expropriation of the
appellants’ properties for the purposes of their inclusion
in the
Coega IDZ would serve a public purpose and it can make no difference
whether the properties are retained by the national government
as the
expropriating authority or transferred to Coega Development. In any
event such an expropriation would plainly be in the public
interest
once it is accepted that it furthers the development of the Coega
IDZ. That suffices to dispose of the point that an expropriation
would not be permissible under
s 2
of the Expropriation Act.
[19] I now
turn to explain why, in my view, an expropriation would also be
permissible under s 3(2)(h) of the Act, so that the property
could be
expropriated and transferred directly to Coega Development.
[20] There
is no dispute that Coega Development is a juristic person. It was
faintly argued before us that because it was originally
established
as a property-owning company it was not ‘established’ for the
promotion of the matter of public importance in question,
namely the
development of the Coega IDZ. However that is an artificial meaning
to give to the notion of establishment. It can surely
make no
difference whether a company is formed specifically for a particular
purpose, or is acquired as an ‘off the shelf’ company
from a firm
of auditors, or is acquired from its existing shareholders as a
dormant entity and its memorandum and objects altered
to fit its new
purpose, as happened in the present case.
[21] The
next question that arises under s 3 is whether the object of Coega
Development is to promote ‘a matter of public importance’.
If it
is the acquisition on its behalf is deemed in terms of s 3(1) to have
been for ‘public purposes’. Its present purpose and
function is
to undertake and operate the development of the Coega IDZ, which is
accepted as being an important government project.
On its face
therefore, and in the light of the facts set out in para 17 above, it
exists ‘for the promotion of a matter of public
importance’. It
follows that an expropriation of property to enable it to fulfil that
purpose, where that purpose cannot be attained
without such
expropriation, is taken to be equivalent to a public purpose and such
expropriation would be legally permissible under
s 3(2)(h).
THE VALIDITY OF THE IDZ PERMIT
[22]
On the assumption that an expropriation would otherwise be
permissible in terms of the present Expropriation Act
17
the appellants contend that as – so they say – Coega Development
is operating the IDZ unlawfully, because of the alleged invalidity
of
its permit, an otherwise permissible expropriation is rendered
impermissible. I have grave doubts whether that is correct. The
fact
that the permit may be flawed or liable to be set aside does not seem
to me to alter the fact that an expropriation would serve
a public
purpose and be in the public interest for the reasons I have already
given. The fact that a person is conducting an activity
without a
lawful permit or licence does not necessarily mean that the activity
is so tainted by unlawfulness that it has no legal
effect. Whether it
is will depend upon a consideration of a number of different matters.
[23] It is in this
context that the schizophrenic nature of the case becomes apparent.
The appellants intentionally refrain from seeking
to set any of the
operating permits aside and having them declared invalid. The reason
is simple and apparent. They want the advantages
flowing from the
declaration of the IDZ. They therefore do not challenge the validity
of the permits or address the implications
of their invalidity. They
want Coega Development to continue to operate the Coega IDZ, which is
accepted as being in the public interest,
and are content for it to
do so under its present permit. On the other hand, they wish to
retain their land and sell it to the highest
bidder with all the
advantages of it being within the Coega IDZ and none of the
disadvantages. If, as they anticipate, the Coega
IDZ is successful
they will profit handsomely from this stance. However, I know of no
warrant for such an approach and it smacks
of having one’s cake and
eating it.
[24]
However, it is unnecessary to explore this question further since in
my view there is no merit in the contention that the permit
under
which Coega Development is operating the Coega IDZ is invalid. In the
papers and in argument a variety of reasons were advanced
in support
of the contention of invalidity ranging back to the original
provisional operator permits under which Coega Development
commenced
its activities. As I take the view that the current permit under
which it is operating at present is valid it is unnecessary
for me to
delve into this historical material.
[25]
The permit currently held by Coega Development was issued on 7 August
2007 under the revised regulations that came into
operation only
after the present litigation commenced.
18
It is an IDZ operator permit, defined as ‘
the
permit granted by the Minister to a company authorising such company
to develop and operate a new or existing IDZ under these
Regulations
’. The appellants
say that this permit was not validly issued. The following
regulations were relied on in support of the appellants’
argument:
‘
16
Application for IDZ operator permit
(a)
Any party interested in obtaining an IDZ operator permit shall, in
the prescribed manner, submit a completed IDZ operator permit
application to the Minister.
(1) In case of a new IDZ,
the application for an IDZ operator permit must accompany the
application for designation of an area for
which the IDZ Operator
permit is sought.
(2)
In case of an existing IDZ, the provisions of regulation 20 regarding
transfer of an IDZ Operator permit, must be complied with.
(b)
An applicant for an IDZ operator permit must:
(1)
show its control of the land within an existing IDZ or within the
area under application designated for development as an IDZ
or within
a new IDZ pertinent to its application in the detail and manner as
indicated in the guidelines;
20
Transfer of an IDZ operator permit
(a) An IDZ operator may
transfer its interests in an IDZ to another company, provided that
such a company is a holder of a valid IDZ
operator permit.
(b)
For the purposes of taking transfer of the interests referred to in
subsection (a), the transferee shall:
(1)
Comply with the requirements contained in regulation 16 of this
Regulation;
(2)
Apply for an IDZ operator permit in the manner prescribed by
regulation 17 of this regulation …’
[26] The appellants’
argument was that since Coega Development was not seeking a permit in
respect of a ‘new’ IDZ r 16(1)
was inapplicable, and since
it was likewise not seeking a ‘transfer’ of its existing permit
r 16(2) was also inapplicable.
In any event they contended that
Coega Development was not the holder of a valid permit at the time it
was issued with a permit under
the revised regulations, as required
by r 20(1). Accordingly a transfer of its existing permit would
have been impermissible.
[27] These arguments
cannot succeed because they depend upon the wrong regulations. The
applicable regulation is r 57 containing
the transitional
provisions necessary because the 2006 amendment to the regulations
effectively embodied a new scheme for the operation
of industrial
development zones. This regulation reads as follows:
‘
57 Transitional
Provisions
(a) Any designation of an
IDZ already made shall not be made void by reason of this amendment,
and shall be considered to have been
made in accordance with the
requirements stipulated in these Regulations.
(b)
Any suspension or withdrawal of a designation already made shall be
considered to have been made in accordance with the requirements
stipulated in these Regulations.
(c)
Any increase or decrease of the total landmass of the area designated
as suitable for development as an Industrial Development
Zone already
made shall be considered to have been made in accordance with the
requirements stipulated in these Regulations.
(d)
Any provisional IDZ operator permit issued in terms of the
Regulations, shall remain valid and enforceable in terms of the
applicable
terms and conditions.
(e) The
holder of an IDZ provisional permit may at any stage apply for the
IDZ operator permit under this regulation and must comply
with all
regulations regarding the IDZ operator permit.’
[28] I have no doubt
that this regulation’s purpose, properly construed, was to preserve
the status quo in regard to all the existing
industrial development
zones at the time these regulations were promulgated, of which we
were informed from the Bar there were no
more than three or four in
the entire country. Existing designations of industrial development
zones are expressly preserved so that
the Coega IDZ remained in
existence as if it had been constituted under the revised
regulations. Existing IDZ provisional operator
permits were to remain
valid and enforceable. In terms of r 57(e), under which the new
permit was issued, the holder of an existing
provisional operator
permit was entitled to apply for the issue of
an
IDZ operator permit. This is precisely what Coega Development did and
such a permit was granted.
[29] It was argued on
behalf of the appellants that the reference in r 57(d) to an
existing permit remaining valid and enforceable
mandated an enquiry
into the validity of existing permits for the purposes of r 57(e).
I do not agree. It seems to me that the
clear underlying assumption
of the regulations was that existing provisional operator permits
were valid and enforceable and that
for future purposes under the
revised regulations this should be taken to be the position. (I leave
aside situations where they might
have been vitiated by fraud or
corruption and confine myself to situations such as the present where
there may have been technical
deficiencies in their issue that could
possibly have rendered them susceptible to being set aside on review
by an interested party.)
In my view the intention of the amended
regulations was to draw the curtain across any arguments there might
have been over the validity
of existing permits and to treat all
those extant at the time of the amendments as being valid and
continuing in existence. Bearing
in mind the fundamental change
wrought by these amended regulations it cannot have been the
intention of the Minister to have a situation
where there could be
arguments in the future about the validity of what had been done in
the past under the previous regulations.
It is clear from the record
that practical difficulties were known to exist with existing permits
and in particular with the renewal
of permits from time to time. I
can think of no good reason why the Minister should have thought it
desirable to preserve a situation
of uncertainty that had generated
the need for revised regulations in the first place.
[30] Once it is
recognised that the effect of the transitional provisions was to cure
any problems that might have existed at the
time of their
promulgation in regard to the validity of the provisional operator
permits held by existing operators the only question
is whether the
permit that Coega Development applied for and obtained under r 57(e)
was validly issued.
[31] Only one argument
was advanced in support of invalidity arising solely from the issue
of the new permit under the amended regulations.
It was that in terms
of r 16(b)(1) it was necessary for Coega Development to show its
control of the land in the existing IDZ
and it had failed to do so,
in part at least, because it did not control the appellants’ land.
19
The contention was that the control had to exist at the time the
permit was obtained and had to consist in ownership or at least
long-term leasehold rights over all the property in the IDZ. In my
view that is a narrow and technical argument that is inconsistent
with other indications in the regulations.
[32] In the first
instance I do not construe the requirement that the putative operator
should ‘show its control of the land within
the existing IDZ’ as
requiring that there be actual legal control existing at the time of
the application for a permit, failing
which the application must
fail. There is no obvious justification for such a reading. The
development of an IDZ is by its very nature
a long-term operation.
The area encompassed by an IDZ is likely to be substantial. As the
development progresses changing circumstances
may well dictate that
its intended scope and area should alter. Why then should it be
necessary for the potential operator to demonstrate
from the outset
that it controlled every piece of land within the proposed IDZ area?
I can see no reason for that.
[33] In my view the
requirement that the applicant for a permit ‘show its control’
means nothing more than that it indicate with
appropriate clarity the
manner in which control is to be obtained and exercised as the
development of the IDZ proceeds. In the case
of properties that it
did not already own I see nothing wrong with it saying in its
application that its control consisted of an
intention to acquire by
purchase any land it did not own and, if that could not be achieved
by agreement, that it intended to approach
the third respondent to
exercise her powers of expropriation under the Expropriation Act so
as to enable it to acquire the land.
It could if necessary add that
if all else failed it would ask that the area of land designated for
the IDZ be altered to exclude
the property in question. Of course,
whether that would be regarded as adequate control would depend on
the particular circumstances
of the proposed development. Such an
approach in relation to a key piece of land for the proposed port
might have been regarded as
inadequate. However the history of the
Coega IDZ suggests that this approach in relation to the appellants’
properties, which have
never been under the control of Coega
Development, would not have occasioned difficulties.
[34] It is apparent from
the record that this is precisely the basis for control that Coega
Development submitted in support of its
application for a permit. In
doing so it was acting consistently with the guidelines that are an
important component of r 16(b)(1).
Those contemplated the very
scenario I have sketched and the permit issued to Coega Development
contained a condition that it should
provide the Manufacturing
Development Board, which oversees the grant of permits on behalf of
the fourth respondent, with bi-annual
reports on the progress made
with expropriation proceedings in respect of the land not yet under
its control. It also provided that
if the conclusion was ultimately
reached by the Board that Coega Development would not be able to
obtain control of any particular
portion of land it was entitled to
recommend to the Minister that the land in question be excluded from
the permit area.
[35] It follows that the
attack on the validity of Coega Development’s permit to operate the
Coega IDZ fails.
FAIR ADMINISTRATIVE
ACTION
[36] I turn then to the
argument based on the right to fair administrative action. As I
understand the argument it is advanced on
the following basis. An act
of expropriation constitutes administrative action in terms of PAJA.
20
In terms of s 6(2)(g) of PAJA a decision includes a failure to take a
decision. The failure to take a decision in regard to the
expropriation
of the appellants’ properties is therefore
administrative action. It proceeds that in view of the history of the
matter and the
impact that the ongoing threat of expropriation has
had on the value of these properties the appellants have
pro tanto
been deprived of property in terms of s 25(1) of the
Constitution. It follows, so the argument goes, that the failure to
take the
decision to expropriate has not only itself been unfair and
given rise to a breach of their constitutional rights, but in
addition,
to permit it to be taken at this stage, after all the
inconvenience and financial detriment that the appellants have
undergone, would
itself be unfair. Hence any expropriation that took
place now or hereafter would constitute unfair administrative action
and an interdict
should issue to prevent it.
[37] In my view both the
constitutional argument based on s 25(1) of the Constitution and
the syllogism leading to the conclusion
that the failure to take a
decision to expropriate the property is administrative action are
incorrect. I will deal with each in
turn.
[38] I accept that the
issue of the possible expropriation of the properties has been on the
table since around 2000 or at least 2001
when Coega Development first
obtained a provisional operator permit. I accept that there is no
current plan to undertake an expropriation.
However, the possibility
of an expropriation in the future remains real. I also accept that
this has some depressing effect on the
price that the appellants
could hope to receive for their properties in the open market and
puts a damper on any development proposals,
although it is not
suggested that it otherwise prevents the appellants from using the
properties for whatever purpose they deem appropriate.
[39]
None of this amounts, however, to the type of
substantial
interference or limitation of the owners’ use and enjoyment of
their properties
that is the hallmark of a
deprivation of property under s 25(1) of the Constitution.
21
The situation of the appellants can be compared with that of the
appellants in the recent decision by the Constitutional Court in
Reflect-All 1025 CC and others v Member of the
Executive Council for Public Transport, Roads and Works, Gauteng
Provincial Government
22
where it was held that the limitation on
owners’ rights occasioned by the proclamation of proposed new roads
was not an expropriation
or a prohibited deprivation of property,
even though it had the effect of sterilising the properties affected
for many years and
no end was in sight. There was not even any
clarity on whether the properties affected would in fact ever be used
for new roads as
times had changed and the perception of the need for
such roads had altered. Nonetheless the owners could do nothing with
the affected
land.
[40] In giving the
judgement of the court Nkabinde J said (para 33):
’
The protection of the right to property is a
fundamental human right, one which for decades was denied to the
majority of our society.
However, property rights in our new
constitutional democracy are far from absolute; they are determined
and afforded by law and can
be limited to facilitate the achievement
of important social purposes. Whilst the exploitation of property
remains an important incident
of land ownership, the State may
regulate the use of private property in order to protect public
welfare, eg planning and zoning
regulation, but such regulation must
not amount to arbitrary deprivation. The idea is not to protect
private property from all State
interference but to safeguard it from
illegitimate and unfair State interference.’
[41] It is regrettably
so that planning decisions very often take time to implement and may
be subject to alteration over time. While
there is uncertainty
property owners will be affected by that uncertainty and hampered in
their unfettered ability to use or develop
their properties as they
might otherwise wish. If they are sellers they may find that buyers
are put off by the uncertainty and prefer
to invest elsewhere unless
they can be sure of getting the property at a bargain price. However,
this is a hazard attendant upon
the ownership of property. It is no
different in effect from a failure to foresee a shift in business
patterns from the city centre
to the suburbs that may leave owners of
properties in the city without tenants and with properties that have
markedly declined in
value. It is not possible to construe such
financial disadvantage as a deprivation of property where it flows
from the possibility
of expropriation at some stage in the future any
more than the threat of a large industrial development by a private
developer, that
creates similar uncertainty and has a similar adverse
effect on market prices of land, would constitute a deprivation of
property.
In the present case the delay has hardly been undue given
the nature of the Coega IDZ and it is accordingly unnecessary to
explore
whether the creation of such uncertainty over a very
protracted period may constitute a deprivation.
23
[42] That conclusion removes a fundamentally important
plank from the appellants’ argument concerning unfairness. If what
has occurred
does not constitute a deprivation of property for the
purposes of the Constitution, what other legal ground is there for
condemning
the failure to take a decision to expropriate as unfair?
In my view the answer is that there is none.
[43] However, that is not the only reason why this
contention must fail. The two premises upon which reliance is placed,
namely that
the decision to expropriate constitutes administrative
action and that a failure to take an administrative decision may
constitute
administrative action, are correct. However they do not
justify the conclusion that the failure to decide to expropriate in
the present
case is administrative action. The reason is that where
s 6(2)(g) of PAJA refers to the failure to take a decision it
refers
to a decision that the administrator in question is under some
obligation to take, not simply to indecisiveness in planning on
policy
issues. It is directed at dilatoriness in taking decisions
that the administrator is supposed to take and aims at protecting the
citizen against bureaucratic stonewalling. As such its focus is the
person who applies for an identity document, government grant,
licence, permit or passport and does not receive it within an
appropriate period of time and whose attempts to chivvy officialdom
along are met with: ‘Come back next week.’ It is not directed at
decisions in regard to future policy such as whether property
will be
expropriated. The difficulty of applying it in that context is well
illustrated by the present case where the only person
with the power
of expropriation, the third respondent, has not even been approached
in that regard much less considered or had reason
to consider that
possibility. To suggest that she or the officials in her department
have failed to take a decision of the possibility
of which they were
blissfully unaware until this litigation commenced cannot be correct.
[44] There is one other problem that constitutes an
insuperable bar to this contention being upheld. It is that the
administrative
action sought to be condemned is action that can only
occur in the future. In other words we are asked to condemn as unfair
something
that has not yet happened and may not ever happen and if it
does happen may take place in a different legislative and economic
environment.
For all we know, if expropriation is decided upon in the
future, the process will be a model of administrative fairness with
the
appellants being given every opportunity to make representations
to claim adequate compensation and the like. We simply do not know.
In my view it is not in general permissible to seek an interdict
against future administrative action when the parameters of such
action are so indistinct. For those reasons I reject the appellants’
claim to relief based on unfair administrative action.
CONSTITUTION s 217(1)
[45] That leaves the contention based on s 217(1)
of the Constitution. It reads:
‘
(1)
When an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive
and cost-effective.’
The appellants contended
that the application for an IDZ operator permit by Coega Development
fell within this section and accordingly,
in order to comply with
this section, a process had to be put in place that would have
enabled third parties to apply for such permit.
In my view there is
no substance in that contention. The issue of an operator permit
under the regulations is not a contract for
the supply of goods and
services but a licensing activity directed at authorizing Coega
Development to carry out the task of developing
the Coega IDZ. That
is something wholly distinct from contracting to supply goods and
services to organs of state.
[46] For those reasons,
which differ somewhat from those of the court below, it correctly
dismissed the claim for relief under the
first prayer.
ALTERNATIVE RELIEF
[47] That leaves the
alternative prayer in terms of which the appellants sought an order
that any of the respondents who wish to expropriate
should make up
their minds now and give effect to that decision within a month from
the date of the court order. It is a claim that
can be disposed of
shortly.
[48]
The timing of an expropriation is generally a matter within the
discretion of the expropriating authority,
24
which will have to take into account the priority of the project
requiring expropriation, the availability of funds and competing
needs in respect of other projects in which it is engaged. Those are
matters involving decisions on what Professor Hoexter has called
‘polycentric issues’,
25
where courts should in the proper exercise of the judicial function
hesitate to intervene and particularly not with the sole view
of
galvanizing the decision-maker into action in the interests of one
party without considering the broader picture.
26
There are cases where the timing by a local authority of the decision
to expropriate has come in for criticism as being premature
and
directed at securing the property at a favourable price. See for
example
Broadway Mansions (Pty) Ltd v Pretoria
City Council
.
27
However in that instance this court held that the timing was a matter
for the local authority provided it did not exercise its powers
for
an improper purpose. In my view the same principle applies in the
other direction. The fact that an authority having powers of
expropriation recognizes the possibility that at some future stage it
will have to exercise those powers does not entitle anyone
to compel
them to do so. The protection that the Constitution affords against
arbitrary deprivation of property may enable a property
owner to seek
relief in certain situations, but as a general proposition it seems
to me that the expropriating authority must be
left to decide for
itself when to expropriate. For a court to intervene to compel it to
make that decision would trespass across
the boundaries constituted
by the separation of powers into the terrain of the executive.
CONCLUSION AND ORDER
[49] It
follows that the appellants were not entitled to either form of
relief that they sought and the application was rightly dismissed.
[50] The
appeal is dismissed and the appellants are ordered to pay the costs
thereof, such costs to include those consequent upon
the employment
of two counsel.
M J D
WALLIS
ACTING
JUDGE OF APPEAL
APPEARANCES:
APPELLANTS:
R
G Buchanan SC (with him S C Rorke)
Instructed by Rushmere Noach Inc,
Port Elizabeth
Webbers Attorneys
Bloemfontein.
FIRST RESPONDENT: R
Madlanga SC (with him N Mayosi)
Instructed
by Fairbridges Attorneys, Cape Town;
McIntyre & Van der Post, Bloemfontein.
2
nd
and 3
rd
RESPONDENTS:
S J Grobler SC
(with him B J Pienaar)
Instructed
by State Attorney
Port
Elizabeth and Bloemfontein.
FOURTH RESPONDENT:
A
E Bham SC (with him T Motau)
Instructed
by State Attorney
Port
Elizabeth and Bloemfontein.
1
The judgment is reported as
Offit Enterprises (Pty) Ltd v Coega
Development Corp (Pty) Ltd
2009 (5) SA 661
(SE).
2
The precise nature and status of the shares of these two arms of
government in the first respondent is the subject of some debate
in
the papers but in my view nothing turns on this.
3
To what extent these changes in the appellants’ perception of the
value of the properties were affected by the development of
the
Coega IDZ and hence would not be taken into account on expropriation
in accordance with the
Pointe Gourde
principle (
Pointe
Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands
[1947] AC 565
(PC) as discussed in
City of Cape Town v
Helderberg Park Development (Pty) Ltd
2007 (1) SA 1
(SCA)) is
not canvassed and does not need to be considered. It is also
unnecessary to examine the views recently expressed by the
House of
Lords on the
Pointe Gourde
principle in
Transport for
London (London Underground Ltd) v Spirerose Ltd (in administration)
[2009] 4 All ER 810
(HL).
4
2004 (6) SA 222
(SCA).
5
In accordance with the approach in
Du Toit v Minister of
Transport
2006 (1) SA 297
(CC) paras 26 to 37.
6
Fourie v Minister van Lande en 'n ander
1970 (4) SA 165
(O)
at 172B-175A; W
hite Rocks Farm (Pty) Ltd and others v Minister of
Community Development
1984 (3) SA 785
(N) at 793H-I.
7
[1990] ZASCA 78
;
1990 (4) SA 644
(A).
8
At 660I.
9
At 661C-D.
10
Geoff Budlender, Johan Latsky and Theunis Roux,
Juta’s New
Land Law
(looseleaf 1998) 1-50.
11
As expropriation is known in that country.
12
Berman v Parker
348
US 26
(1954).
13
Hawaii Housing Authority v Midkiff
[1984] USSC 115
;
467
US 229
(1984).
14
Kelo v City of New London
545 US 469
(2005). The decision has
apparently prompted a number of state legislatures in the United
States of America to narrow the purposes
for which eminent domain
may be invoked.
15
G M Erasmus (ed)
Compensation for Expropriation: A Comparative
Study
Vol 1 (1990), pp 40 (France), 86 (Germany), 107
(Italy) and 270 (Mexico).
16
James v United Kingdom
[1986] ECHR 2
;
(1986) 8 EHRR 123.
17
What lends a surreal air to the arguments in the present case is
that a revision of the Expropriation Act to bring it in line with
s
25 of the Constitution has been underway for some time and it has
been announced that a new Act is to come before Parliament
shortly.
18
The regulations are promulgated in terms of the
Manufacturing Development Act 187 of 1993 as the
Industrial Development Zone Programme Regulations
and p
ublished under GN
R1224 in GG 21803 of 1 December 2000 and amended by GN R1065 in GG
29320 of 27 October 2006.
19
The need to comply with r 16(b)(i) flowed from the provisions
of r 57(e).
20
The
Promotion of Administrative Justice Act 3 of 2000
.
21
Mkontwana v Nelson Mandela Metropolitan
Municipality and another
2005 (1) SA
530
(CC) at [32].
22
[2009] ZACC 24
,
2009 (6) SA 391
(CC).
23
In
Sporrong and Lönnroth v Sweden
[1982] ECHR 5
;
(1983)
5 EHRR 35
the European Court of Human Rights rejected the notion that the
issue and maintaining in force of expropriation permits for 23
and 8
years respectively, accompanied by prohibition notices that
prevented development for 25 and 12 years respectively was either
a
deprivation of property or a de facto expropriation.
24
A Gildenhuys
Onteieningsreg
2 ed (2001), 77: Die beoordeling van die vraag of ’n onteiening
wenslik of noodsaaklik is, hoort by die onteienaar.’
25
Cora Hoexter 'The Future of Judicial Review in South African
Administrative Law'
(2000) 117
SALJ
484
pp 501 – 2.
26
Ekurhuleni Metropolitan Municipality v Dada NO and others
2009
(4) SA 463
(SCA) para 10.
27
1955 (1) SA 517
(A) at 522D-F.