SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in
compliance with the law and SAFLII Policy
THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 710/2024
In the matter between:
NAD PROPERTY INCOME FUND (PTY) LTD APPELLANT
and
THE SOUTH AFRICAN NATIONAL ROADS
AGENCY SOC LIMITED CROSS-APPELLANT/
FIRST RESPONDENT
THE MINISTER OF THE NATIONAL
DEPARTMENT OF TRANSPORT SECOND RESPONDENT
Neutral citation: NAD Property Income Fund (Pty) Ltd v The South African
National Roads Agency SOC Limited and Another (710/2024)
[2026] ZASCA 42 (1 April 2026)
Coram: UNTERHALTER, BAARTMAN and COPPIN JJA
Heard: 23 February 2026
Delivered: This judgment was handed down electronically by circulation to the
parties’ representatives by email, publication on the Supreme Court of Appeal
website and released to SAFLII. The date and time for hand -down of the
judgment is deemed to be 11h00 on 1 April 2026.
Summary: Expropriation – s 12(1) of the Expropriation Act 63 of 1975 – s
25(3) of the Constitution – just and equitable – compensation payable – true
discretion –market value – potential use – actual sales – expert evidence-remittal
– costs – s 15(2) of the Expropriation Act.
ORDER
On appeal from: Limpopo Division of the High Court, Polokwane (Diamond
AJ, sitting as the court of first instance):
1 The appeal is upheld, with costs, including the costs of two counsel, where so
employed;
2 Paragraphs 1 and 2 of the high court’s order are set aside;
3 The portion of paragraph 4 of the high court order that requires the first
respondent to pay the costs of suit is set aside, the balance of paragraph 4 that
orders the first respondent to pay the costs of the trial dates 28 November
2022 – 2 December 2022 on a scale as between attorney and client stands, as
does paragraph 3 of the high court order;
4 The case is remitted to the high court for the hearing of further evidence an d
argument, as the high court further directs;
5 The cross-appeal is dismissed with costs, including the costs of two counsel,
where so employed.
JUDGMENT
Unterhalter JA (Baartman and Coppin JJA concurring):
Introduction
[1] The Appellant, Nad Property Income Fund (Pty) Ltd (Nad), was the
registered owner of Erf 2[...], Extension 6, Hoedspruit (the property). The first
respondent, the South African National Roads Agency Soc Limited (Sanral),
requested the second respondent (the Minister) to expropr iate a portion of the
property. This the Minister did. The date of the expropriation was 25 July 2016.
The expropriation was effected in terms of s 41 of the South African National
Roads Agency Limited and National Roads Act 7 of 1998 (the Sanral Act). Nad
claimed compensation from Sanral in terms of s 41(5) of the Sanral Act, read
with s 12 of the Expropriation Act 63 of 1975 (the Expropriation Act) . Nad and
Sanral could not agree upon the amount of compensation. Nad brought an action
against Sanral in which, after an amendment to its claim, it sought compensation
in an amount no less than R16 980 000. Sanral pleaded that it was liable to
compensate Nad in an amount of R190 777.40. The case proceeded to trial. On
19 January 2024, the high court handed down its judgment. It awarded Nad
compensation in the amount of R933 509,52, interest calculated from 25 July
2016 to the date of payment ; and costs, including certain costs to be paid by
Sanral on a scale as between attorney and client.
[2] Nad sought leave to appeal the whole of the judgment and order made by
the high court. Sanral sought to cross -appeal the costs order. The high court
granted Nad and Sanral leave to appeal to this Court.
[3] The high court gave a detailed judgment. The essential reasoning of the
high court may be summarised as follows. First, the determination of
compensation in terms of the Expropriation Act requires co nformity with s 25(3)
of the Constitu tion. The market value of the expropriated property is but one
consideration. Ultimately , compensation is determined by what is just and
equitable, as prescribed by s 25(3) of the Constitution. That determination is an
exercise of judicial discretion, and it constitutes a true discretion . Second, to
determine market value, the parties’ experts utilised a methodology that made use
of comparative sales, on the basis of a ‘before and after valuation’, that is, before
and after the expropriation. Third, the hig h court rejected the position of Nad’s
experts that the highest and best use of the property was the development of a
community shopping centre. And once that was so, the comparators relied upon
by Nad’s expert, Mr Parfitt , no longer had relevance because they were
by Nad’s expert, Mr Parfitt , no longer had relevance because they were
predicated upon the use of the property as a community shopping centre. In
consequence, the high court rejected the market valuation proposed by Nad. The
high court also declined to adopt the expert opinion s proffered by Mr Win ckler
Snr and Mr Winckler Jnr for Sanral.
[4] Instead, the high court proceeded to determine an amount by recourse to
the standard to be found in the proviso in s 12(1) of the Expropriation Act, being
a determination ‘in any other suitable manner’, having considered the factors set
out in s 25 (a), (b), (d) and (e) of the Constitution. The high court proceeded to
make a determination in the following way. It took into account that Nad
purchased the property in January 2015 for an amount of R7 750 000. That price,
allowing for ch anges in the value of money over time, was then adjusted to an
amount of R8 137 500 to reflect the market value of the property as at the date of
expropriation, that is, 25 July 2016. It was common ground that the property,
without the portion expropriated by Sanral (the remaining property), was sold by
Nad on 25 January 2022 for an amount of R14 500 000. I shall refer to this as the
ex-post transaction. The purchase price of the ex-post transaction, calculated by
Mr Parfitt (and not placed in issue) to reflect the present value as at the date of
expropriation was R11 487 966.
[5] This gave rise to a paradox for the high court. The market value of the
property before expropriation was less than the market value of the remain der of
the property after the expropriation. The high court observed that in consequence
the property was worth more after the expropriation than before it. This would
indicate that no compensation was due. This, the high court concluded, would be
an inequitable result.
[6] To avoid this result, the high court reasoned as follows. Nad should be
compensated on the basis of the pro rata a mount of the purchase price of the
property that represent s the valu e of the asset. The property was purchased by
Nad for the amount of R174,82 per square meter. The expropriated portion of the
property is an area of 5101 square meters. The amount of the compensation the
property is an area of 5101 square meters. The amount of the compensation the
high court found to be due was thus R891 756,82. The high court then added a
solatium and thus ordered Sanral to pay compensation in the amount of
R933 509.52, together with interest calculated from 25 July 2016.
[7] The high court then proceeded to consider the question of costs. It found
that Sanral’s unsuccessful application to amend its pleading had been a waste of
court time. Furthermore, the high court concluded that the conduct of the case by
Sanral’s erstwhile counsel had led to a protracted trial that was unwarranted.
Sanral was ordered to pay the cost s occasioned by the application to amend, on
the scale as between attorney and client. Sanral was also ordered to pay the costs
of suit, and the costs of the six trial days, 28 November 2022 – 2 December 2022,
on the scale as between attorney and client.
[8] The following issues consequently arise for determination in the appeal.
First, what is the law of application to decide Nad’s claim for compensation?
Second, on a proper application of the law to the evidence led at trial, did the
court below arrive at the correct amount of compensation due to Nad? Third, if
not, is this Court in a position to determine the compensation due to Nad? Fourth,
if so, what is this amount? Fifth, as to the cross -appeal, we must decide whether
there is any basis established to interfere with the costs orders made by the high
court. And only if that is so, to consider if any revision is warranted.
The law
[9] Nad’s pleaded case for compensation relied upon s 41 of the Sanral Act,
read with s 12 of the Expropriation Act. In particular, Nad invoked s 12(1)(a)(i)
of the Expropriation Act . Its case was thus pr edicated on the compensatory
standard of the Expropriation Act which determines value by reference to a
construct of market exchange. I shall refer to this standard as ‘the market
standard’.
[10] The market standard reflects the pedigree of the Expropriation Act. It is the
standard that long prevailed before the Constitution to determine the amount of
compensation due to the owners of property who were lawfully expropriated. The
Expropriation Act has continued to be of force and effect after the Constitution
became the foundation of our legal order. Section 25 of the Constitution provides
a regime in terms of which property may be expropriated , and it entrenches the
constitutional norm that determines the amount of compensation. That norm is set
out in s 25(3) of the Constitution. The amount of compensation and the time and
manner of payment must be just and equitable. What is just and equitable must
reflect an equitable balance between the public interest and the interests of those
effected, having regard to all relevant circumstances, which include s an
enumerated list. I shall refer to this as the constitutional compensatory norm. This
norm includes the considera tion of the market value of the property. But this
consideration is but part of a larger, expansive enquiry that must ultimate ly
decide what is just and equitable.
[11] It is plain that s 12(1) of the Expropriation Act, and the market standard i t
applies, has a poor fit with the constitutional compensatory norm. This
constitutional problem was considered by the Constitutional Court in Du Toit.1 It
sought to reconcile s 12(1) of the Expropriation Act and s 25(3) of the
Constitution. The judgment of Mokgoro J (which enjoyed the support of the
majority of the Constitutional Court) adopted what it styled a ‘two -stage
approach’. On the assumption that there is no inconsistenc y between s 12(1) of
the Expropriation Act and s 25(3) of the Constitution, Mokgoro J held as follows:
‘. . . consider what compensation is payable under the [Expropriation] Act, which
is still valid and then to consider if that amount is just and equitable under s 25(3)
of the Constitution’. 2 The minority considered this approach to be incorrect
because it ‘would continue to privilege market value at the expense of other
because it ‘would continue to privilege market value at the expense of other
1 Du Toit v Minister of Transport [2005] ZACC 9; 2005 (11) BCLR 1053 (CC); 2006 (1) SA 297 (CC) .
2 Ibid para 34.
considerations relevant to justice and equity which are expressly advocated by the
Constitution’.3
[12] The judgment of the high c ourt does not cite Du Toit. Rather, it held that
the market value of the expropriated property is ‘ . . . no longer a core
consideration. It is but one consideration and the weight that should be attached
to it is to be determined in the light of the circumstances of each case and finally
in the light of what is ‘just and equitable ’, as is prescribed in s 25(3) of the
Constitution’. The high court went on to say that the final determination of
compensation, ‘takes place by way of discretionary power of the court’. That
discretion, the high court found, was ‘a true discretion’, though ‘market value is a
valuation and not the exercise of a discretion, but is a valuation based on the
facts’.
[13] This is not a correct statement of the law. First, the approach required by
the majority’s holding in Du Toit does not render the market value of the property
‘no longer a core consideration’. Indeed, the minority judgment of Langa ACJ (as
he then was) in Du To it offered as its principal criticism of the judgment of
Mokgoro J that it would privilege market value, and render justice and equity ‘a
second-level “review” test’. Even if this criticism is a somewhat parsimonious
treatment of the two -stage approach ado pted by the majority in Du Toit, market
value sets the presumptive standard against which consistency with justice and
equity must then be determined. This approach does not render market value a
subordinate consideration. The high court was bound by the h olding of the
majority in Du Toit, as are we , and it failed to state or apply the two-stage
relationship between the statutory standard of market value and the constitutional
standard of just and equitable compensation.
3 Ibid para 84.
[14] Second, the high court’s decision bifurcates the determination of market
value and the final determination of compensation that is just and equitable.
Market value is said to be based on the facts of the case, whereas what is just and
equitable is a determination made by the court on the basis of the exercise of a
true discretion. In Trencon,4 the Constitutional Court explained the difference in
our law between a true discretion and a discretion ‘in the loose sense’. A true
discretion is one where the repository of the power enjoys a range of permissible
options and the exercise of the power is beyond (in this case) appellate review, if
the power is exercised by recourse to one of these options, even though the
adoption of a different option would have been preferable.
[15] The proposition that the application of the constitutional compensatory
norm is the exercise of a true discretion by the court is an error of no small
consequence. The difficulty of applying a legal norm is not a reason to adopt the
notion that the courts enjoy a wide discretionary power, being a true discretion, to
decide what compensation is just and equitable . For a number of reasons, quite
the opposite is true.
[16] First, s 25(3) is not cast as a regime of discretion. It specifies that
compensation must be just and equitable. Second, s 25(3) requires that a court has
regard to circumstances that may be relevant , including an enumerated list of
circumstances. These circumstanc es are matters of fact that a court, where
relevant, must determine. They are not discretionary considerations. While
findings of fact may give rise to different conclusions, th ese differences are not
matters of discretion, but differences as to what findi ngs the evidence supports.
And this is an objective enquiry, not a discretionary exercise of power.
[17] Third, no doubt, the equitable balance demanded by s 25(3) may, in some
cases, be difficult to determine. But a matter that is difficult to adjudicate is not to
cases, be difficult to determine. But a matter that is difficult to adjudicate is not to
4 Trencon Construction (Pty) Ltd v Industrial Development Corporation of South African Limited and Another
[2015] ZACC 22; 2015 (5) SA 245 (CC); 2015 (10) BCLR 1199 (CC) para 85 .
be equated with a discretionary power, characterised as a true discretion. The
balancing of interests may give rise to different views as to how the correct
balance is to be struck. So too, how the relevant circumstances referenced in s
25(3) provide reasons for deciding what compensation is just and equitable may
also require judgments that are difficult to make, and may be contested. The
concept of ‘just and equitable ’ references overarching legal values . Even in the
domain of compensation for the expropriation of property, these values engage
much complexity of history, distributive justice, and constitutionally sanctioned
recompense. It is tempting, in the face of this complexity, to retreat into the
protective embrace of discretion that confers both freedom and inoculation from
intrusive review.
[18] But this is mistaken. We are here concerned with rights under the Bill of
Rights. Section 25(3) reflects a constitutional compromise that was strenuously
negotiated. That the State may expropriate property for a public purpose or in the
public interest is an important competence that the Constitution recognises. But
so too is the constitutional regime of compensation to which the state’s
competence to expropriate is rendered subject. As s 25(2) (b) of the C onstitution
states, absent agreement, compensation must be approved or decided by a court.
That approval or decision is not framed as one of discretion. It is a duty that the
courts must discharge to ensure that the constitutional regime of compensation is
honoured. That is don e, in the first place, by a court making the findings of fact
required to have regard to all relevant circumstances, including those enumerated
in s 25(3). Having done so, and taking account of all relevant circumstances, the
court determines compensation as to amount, timing, and the manner of payment.
Such compensation, s 25(3) states plainly, must be just and equitable. The
Such compensation, s 25(3) states plainly, must be just and equitable. The
decision of the court must meet this constitutional standard . It does so by setting
out the facts and reasoning that support its order of just and equitable
compensation. Conformity with the constitutional standard under s 25(3) provides
no basis to posit that a co urt is given discretionary latitude to choose from a
variety of permissible options and select its option of preference.
[19] This interpretation of s 25(3) is entirely inimical to the investiture of a true
discretion in the court to decide upon compensation, and for three principal
reasons. First, once compensation is required to meet a defined constitutional
standard, the compensation either meet s the standard or it does not. Conformity
with the standard is not a matter of variable satisfaction. Second, and in
consequence, the question of whether a court’s decision conforms to the
constitutional standard permits of intervention on appeal by recourse to the
criterion of correctness, and not under the extremely deferential standard of
application to the exercise of a true discretion. Third, as indicated, the court is
required to have regard to enumerated circumstances that are relevant to the case.
This is a further indication that what is required of the court is an objective
determination.
[20] For these reasons I find that the court below was in error as to the law of
application to this matter. The implications of this error are considered in what
follows.
Market value and just and equitable compensation
[21] Following Du Toit, the first step in the ana lysis is to determine the amount
of compensation to be paid in terms of s 12(1) of the Expropriation Act. The high
court devoted a considerable part of its reasoning to the market value of the
property expropriated. However, because it did not follow the t wo-step analysis
required of it by Du Toit, it did not finally arrive at an amount of compensation to
be paid in terms of s 12(1). It explained why it did not agree with the expert
opinions offered in evidence by the parties. But then went on to decide upon the
compensation to be paid on its construction of what it considered just and
equitable. The high court thereby fell into error because it was not at la rge to
equitable. The high court thereby fell into error because it was not at la rge to
come to a discretionary determination of compensation and fail to adhere to the
discipline imposed by the holding in Du Toit. In particular, the high court was
required to determine the amount of compensation to be paid to Nad in terms of s
12(1) of the Expropriation Act. It did not do so.
[22] I turn to consider the determination of the amount of compensation to be
paid to Nad in terms of s 12(1) of the Expropriation Act. The essential basis for
this determination is set out in s 12(1): it is the amount which the property would
have realized if sold on the date of notice of expropriation in the open market by
a willing seller to a willing buyer , or under the proviso in s 12(1), if the proviso
applies, by recourse to ‘any other suitable manner’. One of th e issues that was
central to the reasoning of the high court, and divides the parties before us, is the
potential use to which the property may have been put. In Port Edward ,5 this
Court explained that a party may contend that a property has a particular
potential, that is a use, additional to its current use, ‘for which the property is
suited and reasonably capable of being put in the future’.6 The party who relies on
potential use must prove the potential exists and that a willing buyer and seller
would have taken it into account in fixing the price. The Court further clarified
the position as follows: ‘Where there are several possibilities, al l reasonable, for
which the property is suited, the party relying on the potential is entitled to select
from amongst them the one which is most advantageous to him as being the
“highest and best use ” to which the property can be put, provided of course th at
such use would have occurred to both the notional parties and would have been
accommodated by them in their negotiations about the price. But such potentiality
must not be inflated; it remains a mere potentiality, not a reality’.7 In other words,
the possible future use of the property only has value if the hypothetical buyer
would be prepared to pay for that potential in arriving at the price.
would be prepared to pay for that potential in arriving at the price.
5 Port Edward Town Board v Kay 1996 (3) SA 664 (A) at 674J-675F.
6 Ibid at 675A.
7 Ibid at 675E-F.
[23] Nad’s case was that there was a reasonable possibility that the property had
the potential to be used as a c ommunity shopping centre. This was the opinion of
the experts called by Nad at trial, Mr Makk ink, a professional town and regional
planner, and Mr Parfitt, a professional property valuer. Mr Parfitt took account of
what he testified were six comparable sal es of community shopping centres. He
then used these sales to derive a value of R641,26 per square meter. Applying this
rate to the property before the expropriation resulted in a value of
R28 414 871.86. Mr Parfitt valued the property after the expropriat ion to be
R11 487 966.00. The difference of value before and after the expropriation is the
compensation payable, being a n amount of R16 926 905,86. What drives Mr
Parfitt’s valuation is the potential use of the property as a community shopping
centre before the expropriation and the elimination of that potential, according to
Mr Parfitt, because the expropriation bisects the property in such a way as to
render this use impossible.
[24] Sanral relied upon the opinions of two professional valuers, Mr Winckler
Snr and Mr Winckler Jnr. Mr Winckler Jnr testified at the trial. Mr Winckler Jnr’s
valuation ultimately came down to the following. The property was purchased by
Nad in January 2015 for R7 750 000.00. The property was expropriated on 25
July 2016. The property, less the expropriated land, was sold by Nad on 25
January 2022 for R14 5000 000.00. Taking these actual sales, and comparable
sales in the vicinity as a check, Mr Winckler Jnr considered R317.00 per square
meter to be fair market value. Appl ying this value to the expropriated portion of
the property , being 5101 square meters , the compensation payable is
R1 617 017.00. Mr Winckler Jnr did not accept that the potential best use of the
property was a community shopping centre, but rather a retail small business
development. And he did not consider that the expropriation compromised the
development. And he did not consider that the expropriation compromised the
potential use of the property after the expropriation as a small business
development. Thus, he was content to rely upon the value derived from the actual
sale prices achieved for the property.
[25] The high court declined to adopt either of the valuations presented in
evidence by these experts. The high court reasoned thus. Whether , before the
expropriation, the property’s highest and best potential use was its develo pment
as a community shopping centre is determined by answering the following
questions: was it physically possible, appropriately justified, legally permissible
and financially feasible? First, the high court concluded that under the property’s
zoning of Business 1 , and given the location and size of the property , a
community shopping centre was physically possible. Second, the development
rights attaching to the property, before the expr opriation, made it possible to a
develop a community shopping centre. However, at the time that Nad acquired
the property, negotiations had already commenced between Sanral and the
erstwhile owner as to the possible expropriation of the property by Sanral. A
reasonable purchaser of the property , the high court found, would have realised
that ‘some action from the side of SANRAL to acquire the Expropriated portion,
was possible and imminent’. This would have created a legal obstacle to the
future development of a community shopping centre because, on Mr Parfitt’s
analysis, if Sanral proceeded with the expropriation, this would effect a bisection
of the property and put paid to such a development. Lastly, the high court found
that Nad did not adduce sufficient evidence to show that a community shopping
centre was financially viable. The high court thus concluded that the potential use
of the property as a community shopping centre was not reasonably possible.
[26] This conclusion had profound consequences for N ad’s case. Once the
highest and best potential use of the property as a community shopping centre
was excluded, the central premise of Mr Parfitt’s valuation fell away. The effect
of the expropriation was then not to eliminate the potenti al use of the property as
of the expropriation was then not to eliminate the potenti al use of the property as
a community shopping centre. And the significant loss of value that Mr Parfitt
attributed to such elimination was of no account. Consequently, no point was
served by his comparative sales analysis.
[27] Was the high court’s conclusion correct? A number of conceptual and
factual issues arise. Following Port Edward, it is important properly to situate the
analysis within the hypothetical negotiation that would have taken place between
a willing buyer and seller in respect of the property before its expropriation. The
potential use of the property concerns the possible future development of the
property and the value that would be placed on such potential use in the
hypothetical negotiation. I will call this ‘the potential use value’. The potential
use value should not be confused with the value the property would have if it was
to be developed. Nor should it be confused, relatedly, with the costs that would
be incurred to affect the development. It is the present value of the property’s
potential use that matters.
[28] The potential use value of the property should also r ecognise that potential
use value cannot avoid the consideration of risk. Whether the potential use of a
property will be capable of being so used in the future carries uncertainty and
risks of different kinds: some known risks, some known unknown risks, and even
some unknown unknown risks, to borrow this well -known typology. Risk does
not mean that the potential use of the property does not have a value, it means
that if risks would have likely figured in the hypothetical negotiation, such risks
will be re flected in the price. Indeed, it is precisely because parties to a
negotiation have different appetites for risk, and different views of the returns
that an asset may yield in the future that a bargain is struck.
[29] Illustrative of the question of risk is the emphasis that the high court placed
upon the fact that Nad knew at the time it purchased the property of the
possibility that Sanral may require the expropriation of a portion of the property.
Nad placed reliance upon Mooikloof8 for the proposition that an owner may
continue to develop his property regardless of the fact that a road may one day be
continue to develop his property regardless of the fact that a road may one day be
8 Mooikloof Estate (Edms) Bpk v Premier, Gauteng 2000 (3) SA 463 (T) at 490 C-E.
proclaimed over the property. And hence, knowledge of the possibility of
expropriation does not affect potential use value. The high co urt distinguished
what it took to be the framing of the proposition in Mooikloof, being a plan of
indeterminate future possibility, and the position in this case , where Sanral had
undertaken a traffic study and initiated a process that ultimately resulted in the
expropriation.
[30] Both Nad’s submission and the stance adopted by the high court, pulling in
opposite directions, appear to me incorrect. Sanral had commenced planning the
road in 2011/2012, and various negotiations had ensued. The agreement of sale in
terms of which Nad acquired the property in 2015 referred to a plan of the State
to proclaim a road and a diagram of the portion of the property that Sanral might
acquire was given to the seller and made available to Nad. Nad acquired the
property subject to this risk. As it turned out, the risk materialised.
[31] This does not mean that the potential use value should be assessed without
regard to the risk of expropriation, nor, as the high court would have it, that the
risk of expropriation constituted a le gal impediment such as to render the
development of a community shopping centre impossible. This binary position, in
the face of risk , is not consistent with a correct understanding of the legal
framework of application to the assessment of potential use v alue. Prior to the
expropriation there was a non -negligible risk that Sanral’s plans may be pursued
and result in the expropriatio n that in fact occurred. But of course, Sanral may
have ultimately decided not to proceed , or been persuaded of another plan. The
risk of expropriation cannot be ignored in the hypothetical negotiation. But nor is
the presence of this risk a legal bar to the reasonable possibility of the
development of the property as a community shopping centre.
[32] The question is rather how significant was the risk and what effect would it
[32] The question is rather how significant was the risk and what effect would it
be likely to have on the price. Since the case of Nad is that the significant upside
potential use value of the property was that of a community shopping centre, and
the road under consideration by Sanral would make this use impossible, the risk
of the expropriation going ahead would have a significant impact upon the
development potential of the property. The key question is then this: would the
risk exclude any price to be paid for the potential use of t he property to develop a
community shopping centre? Or would the risk be reflected in the price that
would be negotiated to take account of this risk in the hypothetical negotiation
prior to the expropriation. These questions were not squarely faced.
[33] However, the reasoning of the high court is also incorrect. The high court
understood the risk of expropriation to constitute a legal impediment to
expropriation. That is not so. Sanral enjoyed the competence to go ahead with the
expropriation. But this does n ot mean that it would do so. It may have been
persuaded to adopt a different plan or defer its plans. The competence to do
something does not mean that the competence will be exercised. There was a
concrete plan in place, and hence a risk, but not a legal fait accompli.
[34] The high court also went astray in its consideration of the financial
viability of a community shopping centre. The high court found Nad’s evidence
wanting because there should have been ‘some tangible evidence concerning total
retail demand . . . how much of that demand is currently satisfied by the current
retail facilities in the area . . . one would have expected clear evidence regarding
the retail profile of the consumers in the catchment area of the to -be-developed
shopping centre’. This requirement for a feasibility study of current demand for a
community shopping centre is misplaced . The issue before the high court was to
consider potential use. That does not require evidence that it was financially
viable to build a community shopping centre in July 2016. The correct question is
whether a hypothetical buyer would have placed a potential use value on the
whether a hypothetical buyer would have placed a potential use value on the
property because it would in the future have the potential to be developed as a
community shopping centre. It is the potential for such a develo pment of the
property in the future that counts and not whether there is a buyer who would
have considered it a viable commercial proposition in 2016 . However, that in
itself would be a factor that could influence the price in a notional sale.
[35] I have expl ained that Winckler s’ expert valuation proceeded from a
premise different to that of Mr Parfitt. They did not accept that the potential use
of the property was the development of a community shopping centre. Their
opinions emphasised the significance of t he purchase by Nad of the property in
January 2015, and the fact that it was expropriated on 25 July 2016, some 18
months later. That there was a sale between a willing buyer and a willing seller at
a time not far distant from the expropriation is a data p oint of significance. So
too, the fact that the remaining extent of the property, after the expropriation, was
sold on 2 5 January 2022 constitutes another actual sale, and a further data point
to be reckoned with. If there are actual sales in the market, rather than constructed
sales in a hypothetical negotiation, these are salient data. As the matter was put in
Southern Transvaal Buildings ,9 a serious bona fide offer made by a willing
purchaser on the date of expropriation is strong evidence of the value of a
property. A fortiori, if there is an agreed sale.
[36] Mr Parfitt did not attach significance to the price paid for the property in
2015 because it was acquire d with ‘all sorts of strings attached’. These included
the considerable costs of demolishing a school on the property and relocating it;
securing zoning rights; and assuming development risks attaching to the property.
As a result, Mr Parfitt disregarded t he sale price because ‘it was not a clean
comparative’.
[37] This position is also untenable. It confuses the incremental costs that would
have to be incurred to render the property fit for development, in Mr Parfitt’s
view, as a community shopping centre, wit h the potential use value of the
property. The costs incurred to realise the development potential of the property
property. The costs incurred to realise the development potential of the property
9 Southern Transvaal Buildings (Pty) Ltd v Johannesburg City Council 1979 (1) SA 949 (W) at 956H.
is not the same thing as the value that attaches to its potential use. Potential use
value determines what value attaches to the property at a point in time in virtue of
its potential . It does not determine what value the property would have if that
potential were developed. Thus, Mr Parfitt’s outright rejection of actual sale
prices as an indication of value was incorrect.
[38] The high court, in essence, rejected Mr Parfitt’s postulate that the potential
use of the property was that of a community shopping centre. It accepted, in
consequence, the position of Messrs Winckler that there was no value to be
attached to the integrate d potential of the property, as that concept is understood
in Ingersoll-Rand.10 That is to say , that that the development potential of a
property may be adversely effected because the property does not remain an
integrated whole. In the present case, the potential to develop the property as a
community shopping centre, as Mr Parfitt proposed, depended upon the property
not suffering the bisection effected by the expr opriation. But once the high court
rejected this potential use, the effect of the expropriation was no longer to end the
potential use of the property for other kinds of commercial development.
[39] The high court then reasoned that the correct way to value t he property
before expropriation was to treat the 2015 sale ‘as representing the sale of the
property’. The purchase price of R7 750 000.00 stood to be adjusted for the time
value of money, which is to adjust the value of the property as at the date of
expropriation. This, the experts agreed, should be done by multiplying the
purchase price by 1,05, with the result that the high court concluded that the
market value of the property on the date of expropriation was R8 137 500.00. It
was common ground that th e expropriated property had no value, since no
purchaser would be interested in buying this parcel of land on the open market.
purchaser would be interested in buying this parcel of land on the open market.
This meant that the proviso in s 12(1) was of application. If the expropriated
property has no open market value as specified in s 12(1) (a)(i), then under the
10 Ingersoll-Rand CO (SA) Ltd v Administrateur Transvaal 1991(1) SA 321 (T) at 329.
proviso of s 12(1), compensation is determined ‘in any other suitable manner’.
The high court decided that, having rejected the potential use of the property as
an integrated whole, as proposed by Nad, it would then determine the
compensation payable for the expropriated portion of the property , and do so in a
suitable manner in terms of the proviso in s 12(1) of the Expropriation Act.
[40] The high court however did not then do so. What it then did was to offer a
brief considerati on of the enumerated circumstances in s 25(3)(a)-(f) of the
Constitution. And then sought to determine compensation that is just and
equitable. What the high court did not do was to complete its analysis of the
compensation payable under the s 12(1) of the Expropriation Act, and then
proceed to the second stage of evaluation required by Du Toit.
[41] Rather, it proceeded to determine just and equitable compensation in the
following way. It adopted the market value of the property as at the date of
expropriation to be R8 137 500.00 in conformity with its earlier reasoning. It then
had to confront the oddity presented by Mr Parfitt ’s calculation of the present
value of the 2022 transaction (by which Nad sold the remaining extent of the
property). That is to say, the purchase price of R14 500 000.00, discounted back
to the date of the expropriation in July 2016, being an amount of R11 487 966. As
the high court observ ed, this was ‘a strange result . . . [in] that the Property is
worth more after expropriation than before expropriation’. I shall refer to this as
the Parfitt paradox.
[42] The high court considered that the payment of no compensation is only
justified in spec ial circumstances. This was not such a case . What was required
was to award a sum of money to replace what had been lost by the owner of the
property, striking an equitable balance between the public interest and the interest
of the property owner. To do t his, the high court decided that Sanral should be
of the property owner. To do t his, the high court decided that Sanral should be
placed in the position it would have been in had Sanral concluded the
negotiations it had commenced with Overine 145 BK (Overine) (the original
owner of the property) to buy a portion of the property. These negotiations came
to naught because Overine sold the property to Nad in January 2015. Quite why
the compensation payable to Nad for the expropriation is determined by placing
Sanral in the position it would have enjoyed had it concluded its negotiation wi th
Overine to buy the property is not explained by the high court.
[43] However, the basis upon which the high court then ma de its determination
of compensation is straightforward. Overine was willing (and did) sell the
property for R7 750 000.00. Divided by the size of the property, this works out at
a value of R174.82 per square meter. The expropriated portion of the property
measures 5101 square meters. 5101 x R174.82 = R891 756.82. This amount, the
high court found, is the just and equitable compensation to be paid to Nad.
Assessing the high court’s judgment
[44] I have set out the reasoning of the high court and its engagement with the
expert evidence before it in some detail. I have done so in order to decide whether
the high court’s judgment and orders can be sustained.
[45] The first difficulty is that the high court did not adopt nor apply what was
required of it under the holding in Du Toit. The high court, as I have observed,
failed to determine the amount of compensation to be paid in terms of s 12(1) of
the Expropriation Act. It ventured upon a detailed enquiry into the question of
market value, and finally determined the market value as at the date of
expropriation, but did not complete the analysis by deciding what diminution of
market value was occasioned by the expropriation. Having failed to complete the
first stage of the enquiry required by Du Toit, the high court then did not engage
the second stage of the enquiry , and in particular, how compensation determined
by recourse to the market standard should be modified in conformity with the
constitutional compensatory norm. These omissions are compounded by the
constitutional compensatory norm. These omissions are compounded by the
further error of the high cour t: that it enjoyed a true discretion at to decide upon
the payment of just and equitable compensation. For these reasons alone, the
judgment of the high court cannot stand.
[46] There are also a number of important conceptual errors that vitiate the
reasoning of the high court in its consideration of market value. First, as I have
explained, the high court rejected the potential use of the property as a
community shopping centre and as a result attributed no value to the
developmental potential of the property as an integral whole. It did so on the
basis of an incorrect understanding of the relationship between the potential value
of a property in a hypothesised negotiation and the incidence of risk. The risks of
the development of a community shopping centre do not mean that this potential
use of the property is ousted. The issue is rather whether a hypothetical bargain
could have been struck if this potential use, with all its attendant risks, was in
play. That issue was not engaged by the high court. Nor was the high court’s
assessment of financial viability a proper basis to reject a community shopping
centre as a potential use . Given the centrality of this premise for Nad’s case, the
rejection of this premise, for unsupportable reasons must be corrected.
[47] Second, the high court rightly attached significance to actua l market
transactions concerning the property. They are data points that are informative of
market value at a point in time. The high court however fell short in two ways. It
did not ask what the purchase price paid by Nad for the property in 2015 might
mean for the potential value of the property, if the premise of a community
shopping centre was correct. The high court’s rejection of the premise excluded
this line of enquiry.
[48] In addition, the high court understood the two data points, being the sale
price of the property in 2015 and the price achieved for the sale of the remaining
extent of the property in 2022 to give rise to the Parfitt paradox. The high court
extent of the property in 2022 to give rise to the Parfitt paradox. The high court
did not resolve the paradox; it simply evaded it. It had to do so because if both
data points were valid, worked back to present value, then no compensation was
due. The high court , however, did not entertain a different possibility. The price
of the 2022 transaction, discounted back to July 2016, reveals the following. Nad
sold the remaining exte nt of the property, being some 39 230 square meters for
R11 487 966. That is, by my calculations, R292.83 per square meter. That
compares with the price of the property at the date of the expropriation in respect
of the 2015 transaction of R8 137 500.00, d ivided by the size of the property,
being 44 331 square meters, resulting in the rate of R183.56 per square meter.
What this comparison indicates is not a paradox , but rather that the market has
generated different prices, and done so by giving a higher value to the property,
even with the bisection effected by the expropriation. This variance requires
explanation. It may suggest that Nad bought the property at a discount because
the pa rties undervalued the property’s potential value. There are other
possibilities. Market’s yield different prices at different times. What the data
means requires proper consideration, guided by the experts . It does not warrant
selecting one data point, as the high court did, and ignoring the other, simply to
avoid a seeming paradox. For this reason, also, the judgment does not reason to a
defensible conclusion.
Completing the analysis
[49] We were urged by the parties, if we should find that the high court’s
determination of compensation is faulty to use the evidence of record to
determine the correct amount of compensation to be paid to Nad. With some
regret, that is not possible. The evide nce in this case turns largely on expert
evidence. The high court sought to navigate its way through the differences the
expert evidence gives rise to. The role of the court is not simply to select an
opinion from what is offered by the experts. And commen dably, the high court
did not do so. But, as I have explained, there is much that the experts have yet do
did not do so. But, as I have explained, there is much that the experts have yet do
to place the court in a properly informed position to determine the compensation
payable in terms of s 12(1). And that is but the first phase of what is required
under the holding in Du Toit.
[50] It is a well -recognised principle of our law and practice that experts owe a
duty to the court to exercise their independence and use their expertise to assist
the court in coming to a robust conclusion. In this c ase, there remain too many
issues that require engagement with the experts. Much more is required to
interrogate potential use and whether the development of a community shopping
centre can figure in a proper understanding of potential use, and if so, with what
appreciation of risk and resulting value. So too, the use of market data must be
properly engaged, understood, and reconciled, if necessary, with plausible
scenarios as to potential use. All of this is required so as not to end up with an
answer to the question of market value that does not do justice to all the data and
its analysis.
[51] The matter must thus be remitted to the high court so as to permit the
parties to recall tho se witnesses they consider will assist the court to resolve the
difficulties that I have sought to highlight. And for the high court itself to engage
the experts so as to be in a position to cure the errors I have identified. The parties
will also have to apply Du Toit and ensure that they have adduced the evidence
required to do so. Here too, the high court will be mindful that the determination
of market value is but the first phase of the analysis, and what follows is a further
step in the analysis to secure conformity with what is constitutionally sanctioned
recompense. Here to o, the court may seek the assistance of the expert witnesses
called by the parties.
[52] In the result, Nad’s appeal must be upheld.
The cross-appeal
[53] Sanral appeals against the cost orders granted by the high court. Paragraph
3 of the high court’s order requires Sanral to pay Nad’s costs in respect of
Sanral’s application to amend its pleadings, brought on 27 December 2023, and
to do so on a scale as between attorney and client. I sh all refer to this as ‘the
amendment costs order’. Sanral points out that the amendment was in fact moved
by its counsel on 27 March 2023. The reference to the wrong date is a clerical
error. Sanral complains that the amendment was sought in good faith, and its
refusal by the high court did not warrant a punitive costs order. Rather the
application should have been dismissed and costs award on a party and party
scale.
[54] Paragraph 4 of the high court’s order requires Sanral to pay the costs of suit
and the costs of the trial dates 28 November 2022 – 2 December 2022, on a scale
as between attorney and client. I shall refer to this as the ‘trial costs order’. The
high court made this order on the following basis. It would be prejudicial to Nad
to apply the formu la set out in s 15(2) of the Expropriation Act, and the high
court considered that a deviation from the formula was required. An application
of the formula would result in Nad receiving less than 5% of its costs. In addition,
the trial was drawn out by reason of Sanral’s erstwhile counsel engaging in
protracted and irrelevant cross examination ; and valuable court time was wasted
by counsel reading the pleadings and expert reports while contemplating the next
question to put to a witness. T his waste of court time was calculated to be six
days, hence the punitive aspect of the trial costs order.
[55] I turn first to the appeal of the amendment costs order. The amendment
sought by Sanral was brought at a stage when Nad had indicated that it would be
closing its case. The amendment not only sought to amplify its case as to the
illegality of the zoning of the property (subsequently abandoned), but included a
prayer to have the zoning review ed and set aside. The high court considered the
amendment not simply unnecessary but, in addition, the proposed review would
impact upon the interests of the new owners of the property. Confronted with this
difficulty, counsel simply responded that the cou rt could ignore the review
difficulty, counsel simply responded that the cou rt could ignore the review
portion of the proposed amendment. The high court considered the application to
amend frivolous and unjustified.
[56] The award of costs by the high court is the exercise of a true discretion. An
appellate court will only interfere i f the discretion has not been exercised
judicially. I cannot find that this test is met. Litigants should not be discouraged
from seeking to place their case before a court. That an amendment is refused is
not of itself a reason to make a punitive costs or der. Here, however, the proposed
review sought in the amendment would have had consequences that reached
beyond the interest s of the parties to the action. The apparent nonchalance with
which the amendment to introduce the review was abandoned provided a b asis
for the high court’s displeasure. It suggested a careless failure to consider what
was being sought. The reasoning of the high court is not such that a court could
not reasonably make the order that it did. This aspect of the cross -appeal
therefore, cannot succeed.
[57] The trial costs order must be considered in its component parts. The first
complaint of Sanral is the punitive costs order awarded in respect of six of the
eleven days of the trial. The high court found that Sanral’s erstwhile counsel had
wasted this court time. Sanral complains on this score that, without conceding the
criticisms of its counsel, Nad’s conduct of the trial was also wasteful of time.
Sanral submits that Nad and its witnesses made many errors that also prolonged
the trial. Th is complaint is different to that upon which the high court criticised
the conduct of Sanral’s counsel. Court time is precious. It must be used well. But
in every trial, there will be errors made in the construction and presentation of a
case. That is, in part, what the trial process is there to achieve. Entirely different
is the use of cross -examination in a wasteful, meandering, and purposeless way.
Cross-examination is there to test adverse witnesses. It is not a process to be used
to discover what case a litigant might wish to make.
to discover what case a litigant might wish to make.
[58] Here too, I find no basis to interfere with the punitive costs order that was
made in virtue of the waste of court time occasioned by th e manner of counsel’s
cross-examination. These court days were lost , according to the reasoning of the
high court , for no good reason. Nothing was gained from them, and they are
irretrievably lost. Accordingly, this aspect of the trial costs order must stand.
[59] Sanral would also have this Court interfere with the decision of the high
court that decided to deviate from the award of costs determined in terms of s
15(2) of the Expropriation Act. The trial court costs order, apart from the punitive
costs order, also contains an order that Sanral ‘pay the costs of suit’. This order is
a deviation from the costs regime dictated by s 15(2) . The high court was cursory
in its reasoning as to why deviation was warranted. It simply said that a costs
order in terms of s 15(2) would be prejudicial to Nad. This treatment of the matter
may not suffice to bring this aspect of the trial court ’s costs order within the
deviation permitted under s 15(3). The matter is complicated because the ultimate
determination of compensation is not sim ply an application of the Expropriation
Act. It necessarily involves the consideration of the constitutional compensatory
framework.
[60] Happily, this aspect of the cross -appeal need not be decided. The outcome
of the appeal requires that the matter be remitted to the high court. What
determination as to compensation this brings about lies in the future. It would be
prudent, as an incident of the appeal being upheld, that the order of the high court
requiring Sanral to pay the costs of suit should also be set aside. At the end of the
trial, and in its judgment, the high court may again consider what order should be
made in respect of the costs of the suit. This will depend in part upon the outcome
of its final award of compensation. The high court will then be able to consider
the entire course of the trial and its outcome, and may then also revisit the
question of s 15(2) and any dev iation from it. It follows that the cross-appeal in
respect of the trial court costs order fails, and the punitive costs order made in
respect of the trial court costs order fails, and the punitive costs order made in
paragraph 4 of the high court’s order stands. That portion of paragraph 4 that
requires Sanral to pay the costs of suit i s set aside, not by reason of the cross -
appeal, but simply as an incident of the main appeal being upheld. This aspect of
the challenge raised in the cross-appeal is thus premature.
[61] As a result, the cross -appeal must be dismissed, and the costs thereof m ust
follow the result.
Conclusion
[62] For the reasons given, Nad’s appeal succeeds , and the costs of the appeal
follow this outcome. Paragraphs 1 and 2 of the high court order must be set aside.
The case is remitted to the high court on the terms set out in the order I propose to
make. The order of the high court as to the costs of suit is set aside, on the basis I
have set out. The cross -appeal falls to be dismissed, with costs . In consequence,
Paragraphs 3 and 4 of the high court order stand, save for the c osts of suit in
paragraph 4 of the high court order.
[63] The following order is made:
1 The appeal is upheld, with costs, including the costs of two counsel, where
so employed;
2 Paragraphs 1 and 2 of the high court’s order are set aside;
3 The portion of paragraph 4 of the high court order that requires the first
respondent to pay the costs of suit is set aside, the balance of paragraph 4 that
orders the first respondent to pay the costs of the trial dates 28 November 2022 –
2 December 2022 on a scale as between attorney and client stands, as does
paragraph 3 of the high court order;
4 The case is remitted to the high court for the hearing of further evidence
and argument, as the high court further directs;
5 The cross -appeal is dismissed with co sts, including the costs of two
counsel, where so employed.
______________________
D N UNTERHALTER
JUDGE OF APPEAL
Appearances
For Appellant: NGD Martiz SC (with him JA Venter SC)
Instructed by: Ivan Pauw & Partners, Pretoria
Phatshoane Henney Attorneys, Bloemfontein
For Cross-Appellant/First
Respondent: R de Villiers (with him SM van Vuuren)
Instructed by: Haasbroek & Boezaart Inc., Pretoria
Honey Attorneys, Bloemfontein.