Schoch, NO and Others v Bhettay and Others

• Jurisdiction: South Africa
• Judge: Botha JA, Trollip JA, Muller JA, Corbett JA and Hofmeyr JA
• Judgment Date: 27 September 1974
• Citation: 1974 (4) SA 860 (A)
• Hearing Date: 19 September 1974
• Court: Appellate Division

Botha, J.A.:

In February 1969, the Community Development Board, established under sec. 2 of the Community Development Act, 3 of 1966 (the fourth appellant in this appeal and hereinafter referred to as the Board) expropriated, under sec. 39 of the said Act, erven 2067, 2074, 2096, 1976, 2103 and 2113, situated F in the Korsten area within the municipal area of Port Elizabeth, for the purposes contemplated in that Act. The registered owner of erven 2067, 2074 and 2096 was the first respondent, while the second respondent was the registered owner of erf 1976, and the third respondent the registered owner of erven 2103 and 2113. The second and third respondents were represented in these proceedings by the first respondent.

G The Board and the registered owners of the erven in question were unable to agree on the amount of compensation payable in respect of the expropriated erven, and the matter was accordingly referred to arbitration in terms of secs. 41 and 45 of the said Act. The first, second and third appellants were H appointed by the Minister of Community Development in terms of sec. 45 of the Act as the members of the arbitration court. The matter was heard by the arbitrators on 26 and 27 May 1971 and on 23 June 1971 the respondents were advised of the amounts determined by the arbitrators as the compensation payable in respect of each of the expropriated properties. The arbitrators further ordered the fourth appellant to pay two-thirds of the costs of the respondents in the arbitration proceedings, and ordered the respondents to pay one-fourth of the fourth appellant's costs in those proceedings. The costs

Botha JA

payable in terms of this order were to be assessed on the appropriate scale in accordance with the table of costs applicable in the magistrate's court, and were to include the remuneration of the arbitrators in the same proportion.

Being dissatisfied with the compensation awarded by the A arbitrators, and with the order as to costs made by them, the respondents applied on notice of motion to the Eastern Cape Division for the review and the setting aside of the proceedings before the arbitrators on the ground that they arrived at their determination in an arbitrary and capricious manner, and that their awards were such that no reasonable man could have made them on the evidence adduced before the B arbitrators. The respondents also applied for an order increasing the awards made in respect of each property, and awarding the costs of the proceedings before the arbitrators and the costs of the application to the respondents.

The Eastern Cape Division (per CLOETE, J., KANNEMEYER, J., C concurring) came to the conclusion -

"that the cumulative effect of the conclusions which I have set out above, namely, the complete lack of any indication as to the premises on which the awards were based, which are incapable of reconciliation with any of the facts and data placed before it by the parties, the apparent refusal, without apparent just cause, of the court to take into account, as an D index for the purpose of assessing its awards, of the sales of certain erven in the vicinity, and the apparent complete disregard of the evidence of McCallum as a persuasive expert, points to the conclusion that the awards were such that no reasonable man could have given them. The papers therefore prove vitiating conduct on the part of the arbitration court, and that being so, it seems to me that we are justified in drawing supporting inferences from the failure to give any reasons for the awards made... I come to the conclusion that, taking the factors set out above in the totality of the case, there is proof on a balance of probability of E arbitrariness on the part of the arbitration court, as averred by the applicants".

The Court a quo declined, however, to make its own assessment of the compensation payable in respect of the properties expropriated, but made an order -

(a)

setting aside the proceedings before the arbitration F court and ordering the matter to be heard afresh before another arbitration court differently constituted; and

(b)

ordering the Board to pay the costs of the proceedings before the arbitration court which had been set aside, as well as the costs of the application.

D. McCallum, a sworn appraiser, gave evidence for the G respondents before the arbitrators, while D. C. Howard, R. K. Hancock and E. M. Fenlon, sworn appraisers, gave evidence on behalf of the Board. Their valuations in respect of each erf, the amount claimed by the respondents, the amount offered by the Board and the award made in respect of each erf were as follows -

Erven 2067 and 2074 (each 1 167 sq. ft.)
McCallum	90 cents per sq. ft. (R1 050)
Howard	50 cents per sq. ft.
Amount claimed	R1 050 each
Board's offer	R580 (50 cents per sq. ft.)
Award	R600 (51 cents per sq. ft.)

Botha JA

Erf 2103 (5 296 sq. ft.)
McCallum	R1,25 per sq. ft. (R6 620)
Hancock	40 cents per sq. ft.
Fenlon	75 cents per sq. ft.
Amount claimed	R6 600
Board's offer	R4 500 (85 cents per sq. ft.)
Award	R5 500(R1,03 per sq. ft.)
Erf 2096 (2 250 sq. ft.)
McCallum	90 cents per sq. ft. (R2 025)
Howard	50 cents per sq. ft.
Hancock	20 cents per sq. ft.
Fenlon	30 cents per sq. ft.
Amount claimed	R2 020
Board's offer	R1 125 (50 cents per sq. ft.)
Award	R1 250 (55 cents per sq. ft.)
Erf 2113 (4 456 sq. ft.)
McCallum	R1 per sq. ft. (R4 456)
Hancock	17 cents per sq. ft.
Fenlon	40 cents per sq. ft.
Amount claimed	R4 450
Board's offer	R2 500 (56 cents per sq. ft. - incorrectly referred to in the evidence as 49 cents per sq. ft.)
Award	R2 500 (56 cents per sq. ft.)
Erf 1976 (2 784 sq. ft.)
McCallum	85 cents per sq. ft. (R2 366)
Fenlon	20 cents per sq. ft.
Amount claimed	R2 360
Board's offer	R1 496 (53 cents per sq. ft.)
Award	R1 700 (61 cents per sq. ft.)

It is clear that where the owner of property and the Board are unable to agree on the amount of the compensation payable for G the expropriated property, such amount shall, in terms of sec. 41 of Act 3 of 1966, be determined by three arbitrators appointed by the Minister of Community Development in terms of sec. 45, and shall not exceed the market value of the property as at the date of expropriation. The function of the H arbitrators was, accordingly, to determine the fair market value of the expropriated properties, i.e. the amount which the properties would have realised if sold on the date of expropriation in the open market by a willing seller to a willing buyer. The determination of their market value by the arbitrators was, as was pointed out by OGILVIE THOMPSON, J.A., in Estate Marks v Pretoria City Council, 1969 (3) SA 227 (AD) at p. 253 -

"essentially a matter which is in the realm of estimate".

Secs. 41 and 45 confer upon the arbitrators complete discretion to determine

Botha JA

the market value of expropriated property, and their decision is not subject to appeal by the ordinary Courts of law and is therefore final on the merits. That does not mean, however, that the jurisdiction of Courts of law are altogether excluded, for Courts of law will interfere with the purported exercise of A their discretion if it is made to appear that the arbitrators have, by failing to apply their minds to the issues before them in accordance with the principles of natural justice, failed to exercise the discretion conferred upon them; such failure could be established by, for instance, proof of mala fides, improper motives, arbitrariness or caprice on the part of the arbtitrators, or by showing that their decision was so grossly B unreasonable that they could not have applied their minds to the issues before them. (Cf. National Transport Commission v Chetty's Motor Transport (Pty.) Ltd., 1972 (3) SA 726 (AD) at p. 735).

Although the Court a quo found that there was proof of...