Offit Enterprises (Pty) Ltd and Another v Coega Development Corporation and Others

• Jurisdiction: South Africa
• Judge: Harms DP, Lewis JA, Maya JA, Hurt AJA and Wallis AJA
• Judgment Date: 15 February 2010
• Citation: 2010 (4) SA 242 (SCA)
• Docket Number: 09/09
• Hearing Date: 03 November 2009
• Counsel: RG Buchanan SC (with SC Rorke) for the appellants. MR Madlanga SC (with N Mayosi) for the first respondent. SJ Grobler SC (with BJ Pienaar) for the second and third respondents. AE Bham SC (with T Mota) for the fourth respondent.
• Court: Supreme Court of Appeal

Wallis AJA:

[1] This is a somewhat schizophrenic case about expropriation in which I the appellants seek, in the first instance, an order declaring that any expropriation in terms of current legislation of three properties owned by them, and falling within the Coega Industrial Development Zone (the Coega IDZ), is neither permissible nor lawful and, in the alternative, an order compelling any one of the respondents desirous of expropriating the properties to initiate expropriation proceedings within one month of J

Wallis AJA

A the court's order. The court below [1] refused both orders and the appellants appeal with its leave.

[2] The Coega IDZ is a major government initiative to develop a new deep-water port at Coega and a surrounding industrial area in the Eastern Cape to the north of Port Elizabeth. Millions of rand have been B spent on this initiative and its benefit to the country as a whole and the Eastern Cape in particular, where poverty and unemployment are rife, is not disputed. The first respondent, Coega Development, has from the project's inception held a permit to operate the IDZ. It is a company in which the second respondent, the Eastern Cape provincial government, has a stake together with the Department of Trade and Industry, C represented in this litigation by the fourth respondent. [2]

[3] The appellants' interest is derived from the fact that between them they own three properties, in total extent 524 hectares in the heart of the IDZ. They describe these collectively as a prime freehold site positioned D on the link road bisecting the IDZ and bordering on the area earmarked for the new Port Elizabeth airport. Since 2000 negotiations have taken place between them and the first respondent for the sale of the properties, but these have not been successful, and on each occasion that they were resumed the asking price increased. In 2001 it was R1,35 million for the hotel property and R883 750 for the remainder. The E response was an offer of R1,35 million for the hotel property and R669 000 for the remainder. In March 2003 the asking price had increased to R7 million and by November 2003 it had risen to R15,5 million. When the present proceedings were launched in 2007, the appellants were seeking a price of R40 million on the open market. [3]

F [4] From time to time during this period Coega Development indicated that it would seek to have the appellants' properties expropriated for incorporation into the Coega IDZ. We were furnished with correspondence that passed between the appellants and Coega Development over the years, in which the latter indicated that it would invoke expropriation as a means of obtaining the properties. In February 2005 notice of G expropriation was given by the second respondent, purporting to act in

Wallis AJA

terms of the Eastern Cape Land Disposal Act 7 of 2000 and the A Expropriation Act 63 of 1975. That notice was set aside by the High Court. A further notice, issued by the first respondent on 15 December 2006, was likewise set aside. Thereafter nothing was done by any of the respondents in regard to expropriation, although there was some skirmishing in the correspondence over fencing and the rehabilitation of the properties. B

[5] On 4 June 2007 the appellants' attorneys wrote to attorneys representing the first and second respondents and recorded that their clients were proceeding on the basis that the first and second respondents 'have no further interest in pursuing the acquisition of our clients' properties C whether by private treaty or expropriation', and that they would commence marketing the properties. To that end a well-known firm of estate agents was appointed and on 20 June 2007 a full-colour advertisement was published in Business Day, offering the properties for sale at a price of R40 million on the basis that they constituted a 'prime freehold development site . . . situated in the heart of the Coega Industrial D Development Zone'.

[6] The publication of this advertisement stirred Coega Development into action. It published an advertisement in Business Day on 26 June 2007, referring to the previous advertisement and reading as follows: E

'These are the facts:

The land referred to falls within the proclaimed Industrial Development Zone (IDZ) boundary. The Coega Development Corporation (CDC) is in discussions with all land owners within the IDZ to acquire their land, and is offering to purchase this land at reasonable market F rates. The CDC has largely succeeded with this option to purchase land, but where this option does not yield positive results, an alternative to expropriate land in order to secure control of land over the proclaimed IDZ boundary will be taken. The CDC has resorted to expropriation in the past.

The same principle applies in this case.' G

The appellants complain that notwithstanding this advertisement Coega Development took no steps at all to expropriate the properties and that its advertisement had the effect of depressing the market as evidenced by an offer for R30 million for the properties.

The basis of the main relief H

[7] Against that background the appellants launched these proceedings, seeking the relief already described. They advanced three grounds in the founding affidavit in support of the main relief sought, namely a declaratory order that any expropriation for or on behalf of Coega I Development would be unlawful. First, it was said that any attempt to expropriate for the benefit of Coega Development could never be for a lawful purpose because, so it was claimed, it was then operating and (as matters developed) continued to operate the Coega IDZ unlawfully. This was based on an allegation that the provisional operator permits issued to Coega Development and extended from time to time under the J

Wallis AJA

A regulations in force at the time had been unlawfully issued and extended. Second, it was said that such expropriation was not competent in terms of the relevant legislation. Third, it was said that, given the long history of the matter, any attempt to expropriate at that stage or thereafter would be administratively unfair and in breach of the appellants' constitutional B right to fair administrative action.

[8] In a supplementary affidavit delivered after the amendment of the relevant regulations governing permits and the issue of a fresh permit to Coega Development, the appellants claimed that the new permit was likewise invalid and hence had not remedied the problem. As this C argument was developed it became apparent that the appellants contended that there was an initial flaw in the earlier permits and that the terms of the new regulations rendered it impossible to remedy that flaw and legalise the activities of Coega Development. In addition it was contended that the issue of the new permit was invalid as being contrary D to the procurement provisions of s 217 of the Constitution.

[9] The respondents accepted that only the third respondent had powers of expropriation in terms of the Expropriation Act. All of them denied any current intention to ask her to exercise her powers. In an affidavit from Mr Meyring, the Director: Property Owner Activities in the Department of Public Works, the person responsible for dealing with E requests that the Minister should exercise her powers of expropriation, it was said that no such application had been made to the department in respect of the appellants' properties. On this basis the respondents contended that the declaratory relief sought in the first prayer was academic and that the court should in the exercise of its discretion not F make an order. The challenge to the validity of the permits was disputed, as were the contentions based on the right to fair administrative action and on s 217 of the Constitution. In regard to the validity of the permits the point was taken that none of the previous permits was set aside and that there was no application to set aside the present permit. Accordingly, so it was argued, the principle laid down in G Oudekraal Estates (Pty) Ltd v City of Cape Town and Others [4] applied, and it was not open to the appellants to challenge the validity of the permits collaterally. It is appropriate to address these competing contentions before dealing with the alternative claim.

H [10] The contention that an expropriation for the benefit of Coega Development would be unlawful has two aspects, namely that it would be for an impermissible purpose in terms of the Expropriation Act, and that it would be impermissible because the activities of Coega Development are themselves unlawful, because of the alleged invalidity of their permits. I will deal with each of these in turn.

The Expropriation Act I

[11] Section 2(1) of the Expropriation Act gives the Minister the power to expropriate 'any property for public purposes'. As the Constitution

Wallis AJA

provides in s 25(2)(a) that property can be expropriated for a public A purpose or in the public interest, the reference to 'public purposes' in the Expropriation Act must be construed as including both of these concepts, in accordance with the principle that statutes must where possible be construed as consonant with the Constitution. [5] Public purposes are defined in s 1 as including 'any purposes connected with the administration of the provisions of any law by an organ of State'. B

[12] In terms of s 3 the Minister is empowered to expropriate property on behalf of certain juristic persons. That power is expressed in the following terms:

'(1) If a juristic person . . . satisfies the Minister charged with the C administration of the law mentioned in connection therewith that it reasonably requires any particular immovable property for the attainment of its objects and that it is unable to acquire it on reasonable terms, the...