City of Cape Town v Helderberg Park Development (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Harms JA, Mthiyane JA, Nugent JA, Conradie JA and Theron AJA
• Judgment Date: 31 August 2006
• Citation: 2007 (1) SA 1 (SCA)
• Docket Number: 429/05
• Hearing Date: 17 August 2006
• Counsel: S P Rosenberg SC for the appellant. T R Tyler for the respondent.
• Court: Supreme Court of Appeal

Harms JA:

Background H

[1] This is an expropriation case and the issue on appeal concerns the amount of compensation payable to the dispossessed owner. In particular, the question relates to the effect on the determination of compensation of the so-called Pointe Gourde principle as reflected in s 12(5)(f) of the Expropriation Act 63 of I 1975.

[2] The problem can be illustrated by means of an example, even though the facts of this case are somewhat different. An owner of land applies for the rezoning of the land from agricultural to commercial. The local authority grants the rezoning subject to the condition that a portion of J

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the land must be set aside as public open space. The owner A accepts the condition. Later, the local authority expropriates the public open space for use as a public park. Is the owner entitled to compensation based on the assumption that the expropriated land was zoned commercial and not public open space?

[3] The plaintiff, Helderberg Park Development (Pty) Ltd, is the owner of a property which fell within the municipality of Helderberg, B Western Cape. On 4 December 2000 the municipality became part of the City of Cape Town (the appellant) and all its rights and obligations were assumed by the latter and it was therefore cited as the defendant in the High Court. For ease of reference I intend to refer to the plaintiff (the present respondent) as 'Helderberg' C and I shall not distinguish between the two local authorities and simply refer to them interchangeably as 'the local authority'.

[4] The local authority expropriated a strip of land 25 m wide and 1,037 ha in extent along the one border of the property during D August 2000 for the purposes of a stormwater canal, a sewer line and a walkway.

[5] Relying on the provisions of s 12(1)(a)(i) of the Act, Helderberg claimed compensation in the amount of R1 386 260,92, representing its assessment of the market value of the expropriated portion. In addition, Helderberg claimed an amount of E compensation for actual financial loss under subpara (ii). [1] The Court below (Allie J) awarded the sum of R705 160 under subpara (i) - together with a solatium calculated in accordance with ss (2) and interest under ss (3) - but dismissed the claim under subpara (ii). The High Court also dismissed a counter-claim by the local F authority which was based on an alleged overpayment made to Helderberg as a result of a calculation based on the wrong assumption that the area expropriated was 1,583 ha and not 1,037 ha. On this basis, the local authority had paid Helderberg R304 000. Its case in the Court G

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below and before us was, however, that the market value of the A expropriated strip amounted to no more than R207 400.

[6] The local authority lodged an appeal and Helderberg, a B cross-appeal. The sole issue on appeal is whether the High Court erred in its determination of the compensation payable under subpara (i). Helderberg accepts the findings of the High Court in relation to subpara (ii). Our assessment of the compensation payable will therefore determine both the appeal and the cross-appeal and simultaneously the outcome of both the claim and counterclaim.

[7] I should note that neither party has suggested that the value of the land should have been determined by means of 'any other C suitable manner' in terms of proviso (bb) of the subsection, instead of in relation to its market value, and none springs to mind.

Nature of the property and its history

[8] It is necessary to deal, in some detail, with the nature and history of the property. The property concerned is the Remainder of Erf D 18835, The Strand. The original Erf 18835, some 52,7 ha, initially formed part of the farm Die Bos No 1056 and belonged to a company known as Farm One Nought Five Six Die Bos (Pty) Ltd. E

[9] Erf 18835 was more or less rectangular in shape and situated between the proposed N2 highway on its north-western border and Broadway Road on the south-eastern border. The property was later subdivided, in stages, into three portions and, for the sake of convenience, I shall refer to the three portions as Phases 1, 2 and 3. If a line were to be drawn through Erf 18835 from the north-west to the F south-east, Phases 1 and 2 would lie on the one side and Phase 3 on the other. The strip of land expropriated was a portion of Phase 3 along its border with Phase 2.

[10] Erf 18835 was zoned as agricultural land but, due to its location, it had township development potential. However, by its very G nature, it had a developmental limitation because it was duty-bound to receive stormwater from properties higher up. The maps and diagrams show a number of natural water courses, collectively referred to as a 'river', crossing the property and collecting in a relatively marshy area thereon. H

[11] The owner of the erf (represented by a potential purchaser, to whom I shall refer as Guldenland) applied for the local authority's consent to subdivide the erf by creating a separate property, which came to be known as Phase 1, and for the rezoning of Phase 1 from agricultural to subdivisional area in order to provide for 76 residential erven. The remainder of the erf (the future Phases 2 and I 3) was to remain agricultural. This application was granted on 10 December 1992, subject to conditions. These were to form an agreement between the owner and the local authority. Important, for present purposes, is the condition that the river had to be canalised to deal with a 1:50 year flood and that the canal had to be designed in accordance with a floodwater J

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report prepared some years earlier by the local authority's consulting engineers, Messrs Hill, Kaplan and Scott. A

[12] The river in the main ran (a) diagonally across Phase 2 (where it appeared to have been canalised by means of a ditch or furrow) and then (b) more or less along the border between Phase 1 and Phase 3. The local authority, additionally, required that a condition be entered in its favour against the title B deed of the property, obliging the owner of the property to allow the conveyance of, inter alia, stormwater of any other erf across the property without compensation.

[13] The owner accepted these conditions and a Certificate of Consolidated Title was issued accordingly. Phase 1 was, in due course, C sold to Guldenland. Guldenland then considered purchasing another part of the erf for the development of Phase 2. This again required consent from the local authority for the subdivision of the remainder of the erf (sans Phase 1) into two parts, Phases 2 and 3. Guldenland, on behalf of the owner of the remainder, submitted a stormwater management plan to the local authority in compliance with D the conditions imposed when Phase 1 was rezoned. It proposed that the section of the river that bisected Phase 2 (numbered (a) above) be rerouted to the border between Phases 2 and 3, but to run mainly on Phase 3. The rest of the canal (b) was then to be built along the border of Phases 1 and 3. The local authority accepted these proposals provisionally on 20 October 1994. E

[14] Later Guldenland elected not to purchase Phase 2. Instead, Helderberg, which is a related company, during August 1995, purchased Phase 3 for developmental purposes in order to establish a township with mixed uses, predominantly commercial and light industrial with a F smattering of general residential. The price was R1 625 000. The sale was subject to the approval by the local authority of the subdivision. This application also involved the rezoning of the land to 'subdivisional area' with a mixed bag of uses. The proposed uses included, for instance, 112 general residential units covering an area of 1,8215 ha and retail use on 4,4913 ha, in all about 26 ha. Of the G 32,5 ha, some 6,47 ha was allocated to road reserves, public open spaces, a detention pond (another aspect of stormwater management but which need not be discussed for present purposes) and the stormwater canal. The application was approved and the suspensive condition accordingly fulfilled on 12 December 1995. The approved subdivisional diagram shows the 25 m reserve as described above for H both existing and future canalisation.

[15] Guldenland, in order to develop Phase 1, undertook the construction of that part of the canalisation of the river which affected Phase 1 - numbered (b) above. The area expropriated was, accordingly, the portion of land on Phase 3 which had been reserved for the rerouted riverbed between Phases 2 and 3. I

[16] The effect of all this was that the area set aside for the stormwater canal became sterilised from a developmental point of view. The river had to be canalised and diverted in order to make the land usable for township development. The canal was, consequently, a necessary precondition J

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for the development of the properties concerned. This Helderberg knew when it purchased Phase 3 and it, in other words, A bought some 32,5 ha of land knowing full well that about 6,5 ha of land could not be used for development purposes. The price it paid must have taken this material factor into account.

[17] Realising that the canal area had no or little commercial value to it, Helderberg undertook to register, free of charge, a 25 m B servitude in favour of the local authority along the border of Phase 3 for purposes of a stormwater canal and relief sewer line. In fact, at the time of expropriation, the necessary diagram was being prepared and the Surveyor-General approved it shortly after the expropriation. C

[18] In spite of this, the local authority chose to expropriate the servitude area. The reason for the decision is not entirely clear but there are indications in the evidence that it may have been due to the unwillingness of Helderberg to permit the local...