Brief Summary

Expropriation — Compensation — Expropriation Act 63 of 1975 — Interpretation of sections 12(3) and 14(8)(e) regarding interest on unpaid compensation and costs following a rejected offer — Respondent's property expropriated by the appellant municipality for water reservoir construction; compensation offered by municipality was rejected by respondent, leading to litigation for determination of fair compensation — High Court awarded compensation lower than respondent's claim but higher than municipality's last offer; municipality contested costs order and interest calculation — Appeal upheld, clarifying that interest is simple statutory interest and costs should be apportioned according to the Act.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal and cross-appeal in the Supreme Court of Appeal concerning interest and costs following the determination of compensation for expropriation under the Expropriation Act 63 of 1975. The merits and quantum of compensation had largely been determined previously in the North West Division of the High Court, Mahikeng; what remained contested on appeal was the proper interpretation and application of the statutory regime governing interest on outstanding compensation and the costs consequences of a rejected settlement offer.

The appellant was Rustenburg Local Municipality (the municipality), which had expropriated land for public purposes on behalf of the Rand Water Board. The respondent was Burrie Smit Ontwikkelaars (Pty) Ltd (the owner), a property development company and the registered owner of the affected land.

Procedurally, after expropriation in 2004 and payment by the municipality in 2007 of an amount it regarded as due under the Act (including interest to 31 July 2007), the parties failed to agree on the final compensation. The owner instituted action proceedings in November 2008 for the court determination of compensation. Trial commenced in June 2018 and ran over an extended period. On 7 June 2023 the high court determined the amounts payable for the reservoir area and servitude area and awarded a solatium, while reserving interest and costs. On 3 November 2023 the high court issued a further order on VAT, interest and costs. The municipality obtained leave to appeal against the interest and costs aspects; the owner obtained leave to cross-appeal on the same aspects.

The general subject-matter of the dispute was the statutory consequences of expropriation, specifically the nature and computation of statutory interest under s 12(3) of the Expropriation Act and the costs regime triggered by a rejected offer to settle under s 14(8)(e) read with s 15 of the Act.

2. Material Facts

The following facts were treated as undisputed or were common cause in the appeal.

The owner acquired the relevant property in 1995 and designated it for township development. The municipality, acting under s 79(24) of the Local Government Ordinance 17 of 1939 read with relevant provisions of the Expropriation Act, expropriated parts of the property for urgent bulk water infrastructure needs in Rustenburg, namely a 100 megalitre water reservoir and related pipeline servitudes.

Although the notice of expropriation was dated 6 July 2004, the parties accepted that the actual expropriation date was 31 July 2004.

The expropriated land consisted of two components: a reservoir area (approximately 3.2350 hectares) and a servitude area (approximately 7 834 m²). The municipality offered compensation calculated per square metre for each area and also offered a solatium. On 7 August 2007 the municipality paid the owner by cheque a total of R2 622 703, comprising compensation as offered, a solatium of R55 000, and interest up to 31 July 2007 in the amount of R391 683. The owner deposited the cheque but contended that further compensation was due.

In November 2008 the owner instituted action for a determination of compensation, including compensation calculated at higher rates per square metre, a solatium, VAT, and compensation for alleged loss linked to diminished development potential of the remaining property. The municipality defended and maintained its original compensation was fair, disputing in particular the claimed further losses.

Before trial commenced, on 11 November 2016, the municipality served a written “without prejudice” tender of R1.5 million stated to be “in full and final settlement” of the owner’s claim, excluding interest and costs. The owner rejected that tender. Substantial costs were subsequently incurred during the trial.

On 7 June 2023 the high court determined compensation at R70/m² for the reservoir area and R35/m² for the servitude area, and awarded a solatium of R55 000. The high court later ordered (on 3 November 2023) that an additional R362 670 was payable as compensation (being the difference between what had been paid and what was determined), and made orders dealing with interest and costs, including an order that each party pay its own costs.

For purposes of the appeal, the parties placed before the Supreme Court of Appeal an agreed statement of issues and facts under the SCA rules. By the time of the hearing, the parties informed the Court that the nature and rate of interest were no longer contested in principle, but that the high court’s order required correction to specify the applicable interest and the capital amount for the pre-payment period.

A central disputed point on costs was the proper characterisation and effect of the 11 November 2016 tender: whether it was to be assessed as a standalone “total compensation” offer (as the owner argued), or whether it was an offer to settle the balance of the owner’s claim after the earlier s 11(1) payment (as the municipality contended). This characterisation determined whether the statutory costs consequences in s 14(8)(e) and s 15 were triggered in favour of the municipality.

3. Legal Issues

The court was required to determine two main legal questions, each involving the interpretation and application of statute rather than a pure factual dispute.

The first question concerned interest: on a proper interpretation of s 12(3) of the Expropriation Act, what is the nature of the interest payable on outstanding compensation and how is it to be described in the order. This included whether the interest was simple statutory interest at the rate determined under the relevant public finance legislation, and the identification of the capital amount upon which interest should run for the period between expropriation and the earlier payment.

The second question concerned costs: whether the high court was correct to order each party to pay its own costs, or whether it was bound by s 14(8)(e) read with s 15(2) to order costs against the owner after the municipality’s rejected tender, and whether costs incurred earlier required apportionment or fell within a discretionary domain. This question involved the application of the statutory costs formula to the particular procedural history, including the significance of the earlier statutory payment and the later settlement tender.

These questions were treated by the court as matters of law (statutory interpretation) and application of law to the established facts (how the statutory formula operated given the sequence of payment, tender, award, and rejection).

4. Court’s Reasoning

Interest under s 12(3) of the Expropriation Act

The Supreme Court of Appeal approached the interest issue through the language of s 12(3) of the Expropriation Act and prior appellate authority interpreting that provision. The court reiterated that expropriation statutes, like expropriation laws generally, must be strictly interpreted.

Relying on Community Development Board v Mahomed and Others NNO 1987 (2) SA 899 (A), the court noted that the phrase “the amount of compensation payable” in s 12(3) refers to the amount as ultimately determined, and that “any outstanding portion” refers to the portion unpaid from the date of possession and for so long as it remains unpaid. The court further relied on Davehill (Pty) Ltd and Others v Community Development Board 1988 (1) SA 290 (A) for the proposition that statutory interest arises from considerations of equity and compensates for loss of possession and fruits until compensation is paid, running day-to-day on the outstanding portion and ceasing upon full payment.

Although s 12(3) still refers to interest determined under earlier finance legislation, the court accepted that the relevant statute had been repealed and replaced, and that s 80 of the Public Finance Management Act was the applicable regime for the determination of the standard rate. The court accepted the parties’ position that the interest contemplated was simple statutory interest, and that the high court’s order should be clarified accordingly.

The court therefore amended the high court’s order to specify that the interest referred to in the relevant paragraphs was simple statutory interest as envisaged in s 12(3)(a) of the Expropriation Act, charged at the rate determined from time to time by the Minister of Finance in terms of s 80(1)(a) of the Public Finance Management Act, and also corrected the order to identify the relevant capital amount for the period 31 July 2004 to 7 August 2007 (with deduction of the interest already paid in August 2007).

Costs: the statutory regime and the effect of a rejected offer

On costs, the court held that the matter was not moot in terms of s 16(2)(a) of the Superior Courts Act 10 of 2013, because exceptional circumstances existed: the high court had failed to exercise the required statutory discretion (or apply the statutory framework) at all in relation to costs. The court also pointed to the unusually long duration of the trial and the substantial costs incurred as supporting the appropriateness of appellate determination.

The court explained that the Expropriation Act contains a structured and, in certain respects, mandatory costs regime for proceedings where compensation is determined by a court in the absence of agreement. It set out s 15(2), which prescribes outcomes depending on the relationship between (i) the award and (ii) the last claim by the owner and the last offer by the expropriating authority. It also emphasised s 15(3), which confers only a limited discretion to deviate from the formula in enumerated circumstances, and s 15(3A), which makes s 14 prevail in the event of conflict between s 14 and s 15.

The court then focused on s 14(8)(e), which deals specifically with the costs consequences of a written offer to settle that is not accepted. Under s 14(8)(e)(ii), if an offer by the expropriating authority is not accepted and the court determines compensation at an amount equal to or less than that offer, the court shall order the owner to pay the authority’s costs incurred after the date of the offer. The court treated this as a mandatory consequence, subject only to the statutorily delimited discretion for deviation.

A pivotal interpretive question was how to understand the municipality’s “without prejudice” tender of R1.5 million made on 11 November 2016 in circumstances where the municipality had already paid a substantial amount under s 11(1) years earlier. The owner argued that the tender had to be viewed in isolation as a total settlement figure, and that it could not be added to the earlier payment because it was expressed to be “in full and final settlement”. The municipality argued that the tender was directed at the remaining disputed balance of the owner’s claim, taking into account the earlier statutory payment.

The court reasoned that the earlier payment was unequivocally a payment made pursuant to the statutory scheme, following notice under ss 10(2) and 11(1), and that the owner was entitled in law to bank that amount while still pursuing adjudication of the disputed balance because liability to compensate had been accepted. On the facts, the municipality did not demand repayment of the earlier sum and did not propose that the earlier offer be replaced by the later tender. Against that background, the court interpreted the tender’s reference to “the Plaintiff’s claim against the defendant” as indicating that the tender was directed to the claim as advanced in litigation, which necessarily concerned what the owner contended remained owing after the statutory payment.

On that construction, the court considered that the statutory comparison required by s 14(8)(e) and s 15 was satisfied in the municipality’s favour: whether viewed as the later tender compared to the balance found due, or viewed as the earlier payment plus tender compared to the compensation ultimately determined, the amount determined by the high court did not exceed what the municipality had effectively offered to settle. The court therefore concluded that, because the owner rejected the tender and the compensation ultimately determined was less than or equal to the municipality’s offer (properly understood), the high court was obliged by s 14(8)(e)(ii) to order the owner to pay the municipality’s costs incurred after 11 November 2016.

The court held that this was not a case calling for apportionment under s 15(2)(c) (which applies where the award is less than the owner’s claim but more than the authority’s offer). Once the statutory precondition of s 14(8)(e)(ii) was met, it was not open to the high court, nor to the Supreme Court of Appeal, to apportion the costs incurred after the offer as if it fell under the intermediate category.

The court further held that the high court had misdirected itself by determining costs without reference to s 14(8) or s 15, which entitled the appellate court to determine costs afresh. For the period before 11 November 2016, the court referred to s 14(8)(f), which provides that costs incurred prior to the date of an offer are to be decided in the court’s discretion, and it concluded that fairness required that each party bear its own costs for that period.

In addressing the content of the costs order, the court accepted that the costs after the tender should include the costs of two counsel where employed and the relevant qualifying fees of expert witnesses for the post-offer period (as identified in the substituted order). It also dealt expressly with reserved interlocutory costs, allocating the 17 September 2019 reserved costs to the post-offer costs payable by the owner, and leaving the earlier reserved interlocutory costs within the pre-offer period where each party was to bear its own costs.

The court additionally remarked, as an aside, that any solatium payable forms part and parcel of compensation for purposes of applying the statutory costs formula, but indicated that leave to appeal had not been granted on that aspect and it did not alter the outcome reached on the issues before it.

5. Outcome and Relief

The Supreme Court of Appeal upheld the municipality’s appeal and dismissed the owner’s cross-appeal, both with costs including the costs of two counsel where so employed.

The court set aside paragraphs (c), (e), and (f) of the high court’s order dated 3 November 2023 and replaced them with an order that clarified the applicable interest as simple statutory interest under s 12(3)(a) of the Expropriation Act at the rate determined from time to time under s 80(1)(a) of the Public Finance Management Act, and that specified the capital amount for which interest was to be calculated for the period from the expropriation date to 7 August 2007, with deduction of the interest already paid.

On costs, the substituted order directed that the owner (plaintiff) pay the municipality’s costs incurred after 11 November 2016, including the costs of two counsel where so employed, specified qualifying expert fees incurred after that date, and the costs of an interlocutory application reserved on 17 September 2019. For all costs incurred until 11 November 2016 (including reserved interlocutory costs of 3 August 2015 and 11 October 2016), the order directed that each party bear its own costs.

Cases Cited

Community Development Board v Mahomed and Others NNO 1987 (2) SA 899 (A).

Davehill (Pty) Ltd and Others v Community Development Board [1988] 1 All SA 388; 1988 (1) SA 290 (A).

Naylor and Another v Jansen [2006] ZASCA 94; 2007 (1) SA 16 (SCA).

Van Staden & Others NNO v Pro-Wiz Group (Pty) Ltd [2019] ZASCA 7; 2019 (4) SA 532 (SCA).

Oudebaaskraal (Edms) BPK en Andere v Jansen van Vuuren en Andere 2001 (2) SA 806 (SCA).

ABSA Bank Ltd v Van De Vyver NO [2002] 3 All SA 425; 2002 (4) SA 397 (SCA).

Dormehl v Gemeenskapsontwikkelingsraad 1979 (1) SA 900 (T).

Legislation Cited

Expropriation Act 63 of 1975, particularly ss 5(1), 10(2), 11(1), 12(2), 12(3), 14(1), 14(8)(e)–(g), 15(2), 15(3), and 15(3A).

Local Government Ordinance 17 of 1939, particularly s 79(24).

Public Finance Management Act 29 of 1999, particularly s 80(1)(a), as referenced in the agreed statement and in the substituted order.

Public Finance Management Act 1 of 1999, particularly s 80, as referenced in the judgment’s discussion of the repeal and replacement of earlier finance legislation.

Superior Courts Act 10 of 2013, particularly s 16(2)(a).

Exchequer Act 66 of 1975, as referenced in s 12(3) of the Expropriation Act.

Rules of Court Cited

Rules 8(8) and 8(9) of the Rules of the Supreme Court of Appeal.

Held

The Supreme Court of Appeal held that interest payable under s 12(3) of the Expropriation Act on outstanding compensation is simple statutory interest, running from the date the expropriating authority takes possession (in this matter, the agreed expropriation date) on the outstanding portion of compensation ultimately determined, at the standard rate determined from time to time under the applicable public finance legislation. The high court’s order required amendment to specify the nature of interest and the relevant capital amount for the pre-payment period, with deduction of interest already paid.

The court further held that the high court erred on costs by failing to apply the statutory costs regime in s 14(8)(e) read with s 15. On a proper construction of the municipality’s 11 November 2016 without prejudice tender in context, and given the prior statutory payment under s 11(1), the compensation ultimately determined did not exceed what the municipality had effectively offered. As a result, s 14(8)(e)(ii) applied and the owner was liable for the municipality’s costs incurred after the tender date. Costs incurred prior to the tender fell to be determined in the court’s discretion under s 14(8)(f), and the appropriate order was that each party bear its own costs for that earlier period.

LEGAL PRINCIPLES

Statutory provisions governing expropriation, including provisions relating to compensation, interest, and costs, are to be strictly interpreted, consistent with the nature of expropriation law.

For purposes of s 12(3) of the Expropriation Act, “the amount of compensation payable” refers to the compensation as ultimately determined, and interest is payable on any “outstanding portion” from the date possession is taken until payment, calculated as simple statutory interest at the applicable statutory rate regime referenced by the Act (as updated through replacement legislation).

The Expropriation Act establishes a structured costs regime in compensation determination proceedings. Where a written settlement offer is made and rejected, and the compensation determined is equal to or less than the authority’s offer, s 14(8)(e)(ii) requires the court to order the owner to pay the authority’s costs incurred after the offer date, subject only to the limited and enumerated bases for deviation permitted by the Act.

The discretion to deviate from the costs formula in s 15(2) is limited by s 15(3), and where s 14 and s 15 conflict, s 14 prevails by virtue of s 15(3A). Costs incurred prior to an offer fall to be decided in the court’s discretion under s 14(8)(f).

A failure by a court to apply the statutory costs framework and thereby to exercise the discretion required by law constitutes a misdirection that permits an appellate court to determine the costs afresh within the statutory scheme.

Rustenburg Local Municipality v Burrie Smit Ontwikkelaars (Pty) Ltd (236/2024) [2025] ZASCA 147 (7 October 2025)