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[2019] ZAKZDHC 14
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Hume Housing v Hibiscus Coast Municipality (AR 552/18) [2019] ZAKZDHC 14 (30 August 2019)

IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, DURBAN
NOT
REPORTABLE
Case No: AR
552/18
In
the matter between:
HUME
HOUSING
APPELLANT
and
HIBISCUS
COAST
MUNICIPALITY

RESPONDENT
JUDGMENT
(delivered
on 30 August 2019)
KRUGER
J
[1]
On the 18
th
April 2018, van Zÿl J granted judgment in
the following terms:
“
(a)
Judgment is granted in favour of the plaintiff against the defendant
for payment of:
(i)
R2 200 000,00 exclusive of VAT, as compensation for the
properties,
namely Erven 2155 to 2164, 2170 to 2191 and 2197 to 2208
of Gamalakhe Township, KwaZulu-Natal.
(ii)
The sum of R55 000,00 as a solatium.
(iii)
VAT on the aforesaid sums at the applicable rate.
(iv)
Interest on the said sums calculated at the rate and in the manner
consistent with the
provisions of s12(3)(a) of the Expropriation Act
63 of 1975 and with effect from 26 November 2010 to date of payment
both dates
inclusive.
(b)
The defendant will pay the costs:
(i)
Of the action under case number 13433/2011D, including the costs of
senior counsel,
where employed.
(ii)
Of the application under case number 14041/10D, which will also
include the costs
reserved by Vahed AJ in para 10 of the order of 21
November 2011, including the costs of the proceedings on 10 and 17
December
2010 and 21 January 2011.
(iii)
The costs of the application for leave to appeal against the order of
Koen J dated 10
August 2012 in the application under case number
13433/2011D
(c)
Absolution from the instance is granted on the defendant’s
claim in reconvention
in the action under case number 13433/2011D and
the defendant will pay the costs thereof.”
[2]
The Appellant (who was the Plaintiff in the Court
a quo
)
lodged an appeal in respect of paragraph (a)(i) of the aforesaid
order.  The Respondent (Defendant in the Court
a quo
)
lodged a cross-appeal in respect of the entire judgment.
BACKGROUND
[3]
The Appellant is the registered owner of the immovable properties
described as Erven
2155 to 2164, 2170 to 2191 and 2197 to 2208,
inclusive of the road reserve, situate in Gamalakhe Township,
KwaZulu-Natal (hereinafter
referred to “the properties”).
It had acquired the said properties for purposes of a housing
development.
[4]
Sometime after it acquired the properties, the properties were
invaded and occupied
by informal settlers who subsequently
constructed various types of dwellings thereon.  It is common
cause that these dwellings
were illegally constructed on the
properties.  Given the potential threat of violence, the
Applicant negotiated with the Respondent
for the possible sale of the
properties to the Respondent at a fair and reasonable price.
These negotiations however failed.
[5]
Approximately twenty years later negotiations resumed between the
parties.
[1]
It was ultimately
resolved that the Respondent would acquire the properties from the
Appellant “paying fair compensation
to the Applicant”.
This clearly was the intention of the parties although the record of
the meeting reflects that the
word “expropriation” was
used interchangeably.
[6]
Despite this consensus, there were no further developments.  As
a result the
Appellant, by way of Notice of Motion, dated 25th
November 2010, (Case No. 14041/10D) sought,
inter alia
, an
order for the eviction of the illegal occupiers.  In the
alternative it sought an order directing,
inter alia,
the
Respondent to “acquire the properties from the Applicant
against payment of the sum of R2 508 000,00”.
The
Respondent opposed the application.  On 21
st
November
2011 the matter presented before Vahed AJ (as he then was).
Counsel representing the parties drafted an order, which
was granted
by Vahed AJ, in the following terms:
“
1.
It is recorded that the terms of the order about to be made have been
settled as amongst
counsel but for the fact that the order is not
going to be one by consent.
2.
It is recorded that Attorneys Shepstone & Wylie and Mr Goddard
appear for
the 1
st
Respondent and the 5
th
to
38
th
Respondents.
3.
That the 1
st
Respondent will acquire the properties
referred to in the application, which are owned by the Applicant,
once compensation determined
as set out below has been paid.
The 1
st
Respondent shall be entitled to effect transfer
into its own name or into the name of its nominee(s).
4.
That the compensation will be determined in accordance with Section
12(1), 12(2)
and 12(3) of the Expropriation Act 63 of 1975.
5.
That the Applicant will deliver a summons and particulars of claim
within 10
days.  The 1
st
Respondent will deliver a
plea and counterclaim, if any, within 10 days thereafter, and the
Applicant a plea in reconvention and
replication, if any within a
further 10 days.
6.
That the provisions of the Uniform rules of Court will apply.
7.
It is ordered that the Respondent currently occupying the property
will not be
required to vacate, pending finalisation of the said
proceedings.
8.
For the purpose of the Act the date of Expropriation insofar as it
requires to
be defined for the purposes of that Act, in determining
compensation, is 26
th
November 2010.
9.
That the Applicant shall not as from the date of this order, be
liable for rates
or taxes on the properties.
10.
That the costs of today are reserved.  All previously reserved
costs orders, including
those of today will be decided in the above
proceedings.
11.
That it is recorded that the 4
th
Respondent has agreed to
fund the acquisition in paragraph (1) above.  Nothing herein
will affect the Applicant’s right
to receive a payment from the
1
st
Respondent.
12.
That any amounts found payable by any party to the other, will be
payable
pari passu
with the other.”
[7]
The action before van Zÿl J  arose from paragraph 5 of the
aforesaid order.
The parties agreed upon the appointment of
Mills Fitchet (Natal) (Pty) Ltd as an expert valuer.  Mills
Fitchet valued the
land at R2 200 000,00 excluding Value
Added Tax; determined a
solatium
of R55 000,00 and placed
a value of the structures on the property at R3 790 00,00
excluding Value Added Tax.
[8]
On the day of the trial before van Zÿl J, it was common cause
that the Respondent
had paid the sum of R2 200 000,00 plus
interest in the sum of R863 628,91 to the Appellant.  The
issues before
the Court
a quo
and indeed before us on appeal
are the following:
(a)
Whether the Appellant is entitled to compensation in respect of the
structures built on
the land or whether he is only entitled to the
value of the land only;
(b)
whether the Respondent is liable for the payment of Value Added Tax
in respect of its acquisition
of the land; and
(c)
Whether the Respondent is liable for the payment of costs as outlined
in the judgment
of van Zÿl J.
[9]
(a)
Is the Appellant entitled to compensation in respect of the
structures built on the land?
Mr
Stokes SC, on behalf of the Appellant, submitted that as buildings
erected on land accede to the land, all of which become one

indivisible unit and cannot be owned separately, -
superficies
solo cedit
– it follows that the Appellant was, by
operation of law, the owner of the land and buildings as one
indivisible unit.
Accordingly, as I understand his submission,
the compensation payable to the Appellant must, by operation of law,
include the value
of the buildings erected on the land.  In
theory, I cannot fault these submissions.  It is however trite
that each case
must be considered on its own merits.  There are,
in my view, two essential aspects that require consideration.
Firstly,
what was the intention of the parties and secondly how does
one interpret the order of Vahed AJ (set out above).
[10]
At the outset (and as set out earlier in the judgment), the parties
were
ad idem
that the land had been unlawfully occupied and
that illegal/unlawful structures had been erected thereon.  It
was at that
initial stage that the Appellant sought to sell the
properties to the Respondent.  At that stage, what the Appellant
sought
to sell was the land only.  Indeed there were no
improvements at that stage.  The Respondent negotiated with the
Appellant
for the purchase of the land only.  Unfortunately
these negotiations were unsuccessful.
[11]
When negotiations resumed some twenty years later, the Appellant was
still intent on selling
the “land” to the Respondent at a
fair market price.  It was clearly the intent of the parties
that what was offered
to the Respondent to purchase was the land only
or unimproved land.  This intent is evident from the numerous
correspondences
exchanged between the parties.
[12]
When the application under Case No. 14041/2010D was launched, it was
still the intention of the
Appellant to sell the land only to the
Respondent.  The Appellant sought an order in the following
terms:
“
That the First
and/or Fourth Respondents are directed to acquire the properties from
the Applicant against payment of the sum of
R2 508 000,00
within 90 days of date of this order”.
Interestingly
the amount sought for the purchase of the properties was
R2 508 000,00 – which is the value of the
vacant land
– R2 200 000,00 plus Value Added Tax at the then
prevailing rate of 14%.  The Appellant did not
claim any amounts
in respect of improvements on the properties.  The reason for
this is obvious – the Appellants had
not improved the land.
[13]
From the aforesaid, it is clear that the intention of the parties,
from the outset and persisted
with some twenty years later, was for
the Appellant to sell and for the Respondent to acquire the
unimproved land only.  I
am accordingly of the view that the
Appellant is not entitled to compensation in respect of the illegal
structures that have been
built on the properties.
[14]
I turn now to consider the order of Vahed AJ (as he then was).
The Court
a quo
, in considering the said order and in
particular paragraph 4 thereof, concluded that the reference to the
Expropriation Act in
the said order merely identified the mechanism
to be used in determining the value of compensation to be paid to the
Appellant.
Although no specific reference was made to Section
12(5) of the Expropriation Act, the Court
a quo
was of the
view that these provisions could not be excluded.  As a
consequence and in terms of the provisions of Section 12(5)(c),
the
Appellant was not entitled to compensation for the structures erected
on the properties as the properties were enhanced in
an unlawful and
illegal manner.  I can find no misdirection by the Learned Judge
in arriving at this conclusion.  I fully
agree with the
sentiments expressed by van Zÿl J that “at the level of
just and equitable compensation I cannot conceive
that it would be
either just, or equitable, to compensate a landowner for improvements
illegally erected on his property by an
unlawful occupier, when such
compensation has to be paid out of the public purse.”
[15]
I am accordingly of the view that the Appellant is not entitled to
compensation for the improvements
to the properties.  The
Appellant’s appeal therefore falls to be dismissed.
[16]
(b)
Value Added Tax
In
the Court a
quo
and in argument on appeal, Mr Goddard SC, on
behalf of the Respondents, submitted that the Respondent did not
acquire the property
from a sale but in terms of a Court order.
In terms of Section 7(1)(9) of the Value Added Tax Act 89 of 1991,
Value Added
Tax is to be levied upon the “supply” by a
vendor for goods in the course of any enterprise carried on by it.

The submission, as I understand it, is that some performance or act
on the part of the vendor is required in order to attract the
payment
of Value Added Tax.  As the transfer of the properties was in
terms of an order of Court and not an act by the vendor,
the
submission is that the Respondent is not liable for the payment of
Value Added Tax.
[17]
After considering the relevant provisions of the Value Added Tax Act
and the definition of “supply”
contained therein, van Zÿl
J held that from the outset, the intention of the parties was for the
Respondent to acquire the
properties via a sale.  Once payment
was received, the Appellant was obliged to give transfer of the
properties to the Respondent.
This constituted “supply”
in terms of the Value Added Tax Act and accordingly the Respondent
was liable for the payment
of Value Added Tax.  I can find no
misdirection in the reasoning and conclusion of van Zÿl J.
The Respondent’s
cross-appeal in respect thereof is to be
dismissed.
[18]
(c)
Costs
The
Respondent has appealed the entire costs order granted by van Zyl J.
The Respondent contends that in respect of the application
under Case
No. 14041/2010D, it should be entitled to costs from the institution
of the matter up to and including 21
st
January 2011.
This submission was also presented in the Court
a quo
.
Having considered the circumstances surrounding the entire matter,
van Zÿl J, in the exercise of his discretion, ordered
that the
costs be paid by the Respondent.  This included the costs of the
trial as well.  In making the order, van Zÿl
J was critical
of the attitude adopted by the Respondent and found “no good
reason to exercise my discretion in favour of
the Municipality by
awarding it the costs of these wasted exercises”.  There
is no basis or justification to interfere
with the exercise of the
learned Judge’s discretion.  Neither could Mr Goddard SC
offer any reason for this court of
appeal to interfere with the
discretion exercised by van Zÿl J.  The Respondent’s
appeal relating to the costs
must also fail.
CONCLUSION
[19]
It
is noted that the judgment of the Court
a quo
is to be
corrected in certain respects.  It is common cause that the
Respondent had paid the capital sum of R2 200 000,00
as
well as the interest thereon.  It had also paid the sum of
R55 000,00 as a
solatium
. Paragraph (b)(iii) relating to
the costs of the application for leave to appeal the order of Koen J,
was also tendered.
The Appellant paid the Respondent’s
claim in reconvention in Case No. 13433/2011 and tendered the costs
thereof.  Paragraph
(c) of the order is to be deleted.
[20]
I accordingly grant the following order:
1.
The appeal is dismissed.
2.
The cross-appeal is dismissed.
3.
The judgment of the Court
a quo
is varied as follows:
(a)
By the deletion of paragraphs (a)(i), (ii) and (iv).
(b)
Paragraph (a)(iii) is amended to read as follows:
Value Added Tax on the
sum of R2 200 000,00 at the rate of 14%.
(c)
By the deletion of paragraph (b)(iii) and;]
(d)
By the deletion of paragraph (c).
4.
Each party is to pay their own costs of the appeal.
KRUGER
J
BALTON
J
I
agree
MASIPA
J
I
agree
DATE
OF HEARING:

29
July 2019
DATE
OF JUDGMENT:
30 August
2019
FOR
THE APPELLANTS:
Stokes SC
INSTRUCTED
BY:

Eversheds Sutherland (KZN) Inc
FOR
THE RESPONDENT:
Goddard SC
INSTRUCTED
BY:

Shepstone & Wylie
[1]
This was as a result of the Respondent instituting an action against
the Applicant for payment of arrear rates and taxes and
services.