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[2013] ZAKZDHC 68
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Conforth Investments (Pty) Ltd v Ethekwini Municipality (21593/2004) [2013] ZAKZDHC 68 (28 November 2013)
In
the High Court of South Africa
KwaZulu-Natal
Local Division, Durban
Case
No 21593/2004
DATE:
28 NOVEMBER 2013
In
the matter between :
Conforth
Investments (Pty) Ltd
..............................
Plaintiff
And
Ethekwini
Municipality
......................................
Defendant
Judgment
Lopes
J
[1]
I am required to decide whether the defendant is obliged to
compensate the plaintiff for the loss of its beneficial use,
occupation
and control of the immovable property forming the right of
way servitude registered over Erf 669 Brickfield pursuant to Notarial
Deed of Servitude of Right of Way No K00410/11S (hereinafter referred
to as ‘the property’)
History
[2]
Since 1892 Jan Smuts Highway (hereinafter referred to as ‘the
Highway’) has abutted onto the northern boundary of
Erf 669.
For many years the Highway constituted the main road between Durban
and Pietermaritzburg. The roadway has been widened
and changed
slightly from time to time and undergone a name change and is now
called King Cetshwayo Highway. It is common cause
that the Highway
is under the ownership and control of Ethekwini Municipality
(hereinafter referred to as ‘the Municipality’).
[3]
On the 21st October 1986 the plaintiff, Conforth Investments (Pty)
Ltd (hereinafter referred to as ‘Conforth’),
became the
registered owner of Erf 669, which was then described as Erf 669
Brickfield 95/1 situated at 5 Jan Smuts Highway, Durban.
Conforth
wished to develop an oncology centre and a college of learning on the
property and to that end in 1986 sought town planning
approval for
its rezoning.
[4]
The town planning consent which was granted contained the following
condition :
‘’
The
ownership of the portion of the site forming part of the existing
road reservation to Jan Smuts Highway shall be donated and
transferred to the South Central Local Council or a right of way
servitude shall be donated and transferred to the South Central
Local
Council for the benefit of the public, the conveyancing costs,
including the costs of survey, shall be borne by the Council.’
(The
South Central Local Council was the predecessor of the Municipality).
[5]
For some years nothing was done by Conforth to comply with this
requirement, although it went ahead with the development of
the
oncology centre and the college. In this regard :
(a)
in 1997 Conforth signed an offer ‘to donate and register a
right-of-way servitude over the property in favour of the
Municipality for the benefit of the public’. That was never
accepted by the Municipality;
(b)
in 2001 the Surveyor-General approved a diagram setting out the
parameters of the right-of-way servitude, but it was still not
registered.
[6]
During or about 2000 a dispute arose between Conforth and the
Municipality when Conforth alleged that it had been paying rates
over
the property. That matter was settled between the parties, and, as I
understand it Conforth was compensated for the incorrect
payments,
and Conforth has, since then, not paid rates over the property.
[7]
In 2004 Conforth instituted the present action against the
Municipality claiming rental from the Municipality for its use of
the
property. The relief now sought has changed from that which was
originally sought, and Conforth now seeks an order for compensation.
(I am only required to determine the right to compensation, and not
the nature or extent thereof.)
[8]
In 2011, and pursuant apparently to Conforth’s desire further
to develop its land and build a hospital facility thereon,
Erf 669
was consolidated with the adjoining Remainder of Portion 2 of Erf
667. A Certificate of Consolidated Title was registered
on the 17th
February 2011, simultaneously with the registration of a Notarial
Deed of Servitude of Right of Way over the property
in favour of the
Municipality.
Conforth’s
claim :
[9]
Mr Gordon SC who appeared for Conforth submitted that it was entitled
to be compensated by the Municipality for the loss of
the property or
its use on the following grounds :
(a)
the registration of the servitude of right-of-way was not a gift or
donation made by Conforth to the Municipality – that
was done
pursuant to the condition imposed upon Conforth (initially) by the
1996 town planning decision;
(b)
the imposition of that condition was unlawful because it constituted
an arbitrary deprivation of property contrary to the provisions
of s
25(1) of the Constitution;
(c)
if the condition imposed by the town planning decision constituted an
act of expropriation, then Conforth is entitled to be
compensated;
(d)
this court should recognise that the doctrine of constructive
expropriation is now part of South African law and would entitle
Conforth to be compensated.
Analysis
:
[10]
With regard to the registration of the servitude, I do not have any
facts which reveal the reason why it was registered in
2011. Both
parties appear to have ignored the necessity to register it after the
1996 town planning decision, at least until the
consolidation
application was made. Although Conforth completed the project
envisaged in 1996, the Municipality did not insist
on the
registration of the servitude. Conforth may have made tentative
steps to do so (indicated by the 1997 offer and the 2001
drawing) but
ultimately only did so at the time of registration of the deed of
consolidation. That may have been self-serving
because it was
required by an official such as the Registrar of Deeds, but that is
not clear from the papers, and the parties
did not wish to lead
evidence to clarify that aspect. I am therefore only able to proceed
on the basis that Conforth acted in
compliance with the 1996 town
planning requirement in causing the servitude to be registered.
[11]
S 25(1) of the Bill of Rights contained in Chapter 2 of the
Constitution provides that :
‘
(1)
No one may be deprived of property except in terms of law of general
application, and no law may permit arbitrary deprivation
of
property.’
That
a ‘deprivation’ of property would include all the limited
real rights recognised at common law has been made clear
in First
National Bank of SA LTD t/a Wesbank v Commissioner, South African
Revenue Service and Another
[2002] ZACC 5
;
2002 (4) SA 768
(CC) at paragraphs 47 –
50. These rights would include servitudal rights and partial or
limited rights of ownership.
[12]
In First National Bank the court pointed out that there is a
distinction between ‘deprivation’ and ‘expropriation’.
The word ‘expropriation’ as used in s 25(2) refers to a
narrower form of interference with an owner’s rights
than does
‘deprivation’. Any ‘deprivation’ of property
would be required to be justified in terms of s
26 of the
Constitution, failing which it would be unconstitutional.
[13]
Mr Topping, who appeared for the Municipality submitted that no
deprivation had taken place because :
(a)
in terms of s 208 of the Local Authorities Ordinance 25 of 1974 :
‘
208
Public streets and public places to vest in council
The
ownership, management and control of all public streets (other than
main roads and national roads maintained by the Provincial
Administration of the Province of Natal) and public places within the
borough and the land comprised in such streets and places
shall vest
in the council which may assign names to such streets and places.’
(b)
accordingly, and as the property had ‘vested’ in the
Municipality long before Conforth acquired ownership of Erf
669,
Conforth had no rights in and to the property of which it as been
deprived.
[14]
Mr Gordon submitted that a reliance upon s 208 was nonetheless
unlawful because it remained a deprivation of property (subject
to s
25(1) of the Constitution) without compensation, which was arbitrary
and hence unconstitutional.
[15]
I was referred to Coverdale v Charlton
1878 (4) QBD 104
(CA) for an
analysis of the meaning of the words ‘vest in’. That
case concerned the right of a local board to let
pasturage on a
street which ‘vested in’ a local board pursuant to
legislation. As was pointed out in that case however,
the meaning to
be given to the words ‘vest in’ must depend in part upon
the subject to which the words relate –
in that case a ‘street’
- and it was on that basis that the Court of Appeal dealt with the
concept of ‘vest in’.
In this case it is the streets and
the ‘land comprised in such streets and places’ which
‘vest in’ the
council. This distinguishes much of what
was said in Coverdale insofar as that case is authority for a
decision in this matter.
[16]
Mr Topping submitted that there can be no deprivation of property
where the owner has never been in possession or control of
it, and
has never had any benefit from it. The act of registering the
servitude of right-of-way achieved no utility because it
added
nothing to the rights of the Municipality which already had
'ownership, management and control’ of the property. He
recorded that it was common cause between the parties that the
Highway was a public street as defined in the Ordinance.
[17]
Mr Topping submitted that in order for the deprivation of the
property (if that is what s 208 achieved) to be deemed to be
‘arbitrary’ the operation of s 25(1) must be deemed not
to have provided sufficient reason for the particular deprivation
or
must be procedurally unfair. (See First National Bank at paragraph
100 for the factors to be considered). Procedural fairness
does not
apply to Conforth because the property had ‘vested in’
the Municipality long before it purchased the property.
[18]
Considering the circumstances of this matter, in order to
determine whether ‘sufficient cause’ existed for
the
deprivation of the property, the following are relevant :
(a)
the purpose of s 208 is clearly to enable the proper control,
administration and management of public roads;
(b)
the purpose of the deprivation and the person whose property is
affected cannot assist Conforth here. Conforth never had the
use of
the property at any stage. In truth, none of its representatives
could suggest that when the company purchased Erf 669
they envisaged
that they would be able to use or benefit from, the property. This
is not a case where the state wished to construct
a road or other
facility, required land to do so, and took away Conforth’s land
to achieve that object. The property has
only existed in the form of
the Highway (subject to periodic widening, etc) for over the last one
hundred years, and the object
of the provisions of s 208 were clearly
to regulate the ownership, management and control of the existing
streets and public places,
and not to acquire new ones. That is
dealt with differently;
(c)
the fact that the deprivation embraced all aspects of Conforth’s
use of the property does not render the deprivation arbitrary
because
the provisions of s 208 deal only with ‘all public streets …
and public places within the borough and the
land comprised in such
streets and places’;
(d)
this is not a situation where Conforth was asked by the state to bear
a burden (i.e. the deprivation of its property to achieve
the public
purpose of a road), which should have been borne by the public at
large. Compensation in such circumstances is inapplicable;
(e)
the extent of the deprivation (if it were such) in this matter has no
economic impact whatsoever on Conforth and its rights
as it saw them
when purchasing Erf 669 including the property.
[19]
Thus s 208 does not purport to deal with the deprivation of private
property. The fact that the property is described in the
records of
the Registrar of Deeds as being included in the consolidated Erf 944
and the diagram forming part of the Title Deed,
cannot bestow upon
Conforth a right of ownership which already vested in the
Municipality. Even if the provisions of s 208 constitute
a
deprivation of Conforth’s property, the threshold requirements
of it being done in terms of a law of general application
and it not
being arbitrary are satisfied. In those circumstances there has been
no ‘deprivation’ of property as envisaged
in s 25(1) of
the Constitution.
[20]
The next question to be considered is whether, notwithstanding that
the property does not fall within s 25(1), there has been
an
expropriation in terms of s 25(2) of the Constitution, and whether
compensation is payable. Any act of expropriation however
involves
an interference with an owner’s right in and to property. For
the reasons set forth that has not taken place and
the section is
inapplicable.
[21]
It only then remains for me to consider whether the doctrine of
constructive expropriation is part of our law, and applicable
in the
present matter.
[22]
In this regard I have had reference to the section on constructive
expropriation as set out in Constitutional Property Law,
A J van der
Walt (Juta) at pages 209 FF.
[23]
Constructive expropriation deals with a situation where by virtue of
a statutory provision, a property owner suffers loss which
could
justify the conclusion that compensation is necessary even though the
State did not, and did not intend to, acquire ownership
of the
property. Here the state is required to compensate a property owner
for a loss caused by a limitation on the rights in
and to his
property which was not intended, but which had the effect of
expropriating those rights.
[24]
The basis on which the principle operates is that when statutory
intervention causes excessive and unfair loss to an owner,
the owner
should receive compensation even though the state does not
necessarily require the use of the property for public purposes.
Where one is dealing with formal expropriation, the statute or
administrative decision which declares the intention to expropriate
property is the key factor, where as in constructive expropriation
the intention is to regulate control of the property rather
than to
expropriate it. With constructive expropriation the property is not
acquired by the state, and the state may not even
acquire any benefit
from it.
[25]
The unfairness which constructive expropriation would appear to be
aimed at is when an individual person suffers a deprivation
of
property and is required to bear a statutory burden on behalf of the
rest of society without being compensated.
[26]
It is important that the interference with the property be
significant, such as where it deprives the owner of the property
of
all of his rights of ownership or enjoyment in and to the property,
or so interferes with the proprietary value of the property
that it
is rendered useless.
[27]
As I understand it, the concept of constructive expropriation would
not inhibit the imposition of burdens which would be viewed
as
administrative easements for a public utility on the basis that the
burden imposed is insignificant.
[28]
Although the question whether constructive expropriation is part of
South African law has been raised, it has not yet been
authoritatively decided. (See Steinberg v South Peninsula
Municipality
2001 (4) SA 1243
(SCA). In that matter the applicant
sought to compel a local authority to complete an approved
expropriation process initiated
by a road scheme by the local
authority. The scheme had the effect of preventing the applicant
from selling or properly using
her land. The case for the applicant
appears to have been based on the fact that the road scheme was
approved, but not executed
by the local authority and did not
constitute a proper expropriation, but amounted to constructive
expropriation entitling her
to a remedy. The application was
ultimately unsuccessful because although the scheme had been approved
it had not, and may not
ever be put into operation.
[29]
For the reasons which follow, I am of the view that it is unnecessary
for me to decide whether constructive expropriation should
form part
of our law, or should be applied in this case.
[30]
What we are concerned with in this matter is the condition which was
laid down by the Town Planning Board in 1996. It was
that condition
with which Conforth alleges it was complying when agreeing to the
registration of the servitude of right of way.
When it did so, and
indeed at the time the condition was imposed in 1996, ownership of
the property already vested in the predecessor
of the Municipality
and it was neither necessary for the condition to be imposed by the
town planning decision, nor was it necessary
for the applicant to
have acted upon it. Furthermore in acting upon the decision there
has been absolutely no prejudice to Conforth
because there has been
no financial prejudice whatsoever to it as a result of the fact that
ownership and control of the property
vested in the Municipality by
virtue of the provisions of s 208.
[31]
In any event, and even if there had been some prejudice to Conforth
in acting upon the condition contained in the town planning
decision,
it cannot complain now about having done so. It stood by and failed
to take any steps to review the town planning decision
for almost
fifteen years. In those circumstances the entire action seems to
rely upon a strained construction of the law.
[32]
In those circumstances I am of the view that even if it were
applicable, constructive expropriation would find no application
in
this case.
[33]
I make the following order :
‘
The
action is dismissed with costs.’
Date
of hearing :22nd November 2013
Date
of judgment : 28th November 2013
Counsel
for the Applicant : D A Gordon SC(instructed by Seevnarayan
Attorneys)
Counsel
for the Respondent : I L Topping (instructed by Linda Mazibuko)