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Given these differences, together with other considerations the Supreme Court of Appeal regarded as material, the matter was referred back to the High Court for the hearing of further evidence.
Sections 25(2) and 25(3) of the Constitution of the Republic of South Africa, 1996 (Act 108 of 1996) stipulate that just and equitable compensation must be paid when the state expropriates property for a public purpose or in the public interest. These sections have long been controversial, and discussions regarding their interpretation and application are likely to continue for years to come.
Case law and public debate
It is important to remain informed about how courts interpret and apply these provisions. Case law and the passage of time often reveal the real reasons for the tension underlying public debates on expropriation and compensation.
This was evident in the recent judgment of the Supreme Court of Appeal (the Court of Appeal) in NAD Property Income Fund (Pty) Ltd vs Sanral (710/2024). The matter concerned the determination of just and equitable compensation payable to the owner following the expropriation of property by the minister of transport on 25 July 2016 at Sanral’s request. The expropriation was done in accordance with applicable legislation, including the Expropriation Act 63, 1975 (the ‘old’ Expropriation Act).
The case involved conflicting expert evidence presented by valuers. Given these differences, together with other considerations the Supreme Court of Appeal regarded as material, the matter was referred back to the High Court for the hearing of further evidence. Despite this referral, it raised additional criticism that could influence future case law.
Criticism of the court’s approach
The criticism centred on the High Court’s treatment of the constitutionally prescribed factors contained in section 25(3) of the Constitution, which provides that the following factors must be considered when determining just and equitable compensation:
- The current use of the property.
- The history of the acquisition and use of the property.
- The market value of the property.
- The extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property.
- The purpose of the expropriation.
The role of market value
In the judgment, the criticism was based on the High Court’s ruling that market value is no longer the primary consideration when determining just and equitable compensation under the Constitution, but merely one of several relevant factors. According to the High Court, the weight given to it depends on the facts of each case, and the ultimate determination of compensation remains a discretionary assessment by the court.
However, in the judgment, it was pointed out that the High Court failed to reference the leading authority and majority judgment of the Constitutional Court (the Land Court) in Du Toit vs Minister of Transport 2006 (1) SA 297 (CC).
According to the Court of Appeal, the Land Court found that determining just and equitable compensation constitutes a two-stage approach:
- First, consider what compensation is payable under the Expropriation Act.
- Then consider if that amount is just and equitable under section 25(3) of the Constitution.
The Supreme Court held that the prevailing law and correct interpretation of section 25(3) of the Constitution is not what was held in the minority judgment of the Constitutional Court in the Du Toit matter, where the two-stage approach was criticised because it would “continue to privilege market value at the expense of other considerations relevant to justice and equity which are expressly advocated by the Constitution”. The two stage was confirmed by the Supreme Court of Appeal. It was explicitly held that the majority judgment did “not render the market value of the property ‘no longer a core consideration’” when determining just and equitable compensation in terms of section 25(3) of the Constitution.
Implications for future case law
The Court of Appeal further held that a court’s determination of just and equitable compensation under section 25(3) must be grounded in objective facts, rather than the discretionary power of the courts, as the High Court had found. The consideration of each factor under section 25(3) (where relevant) must be backed by evidence and not a discretionary assessment by the court.
The judgment of the Court of Appeal is significant, particularly in the context of the passage of time. It appears that public debates on fair and equitable compensation and expropriation may at times have overshadowed the well-established and important case law of the Constitutional Court (dating back to 2006). Fortunately, the case law has corrected this, thereby providing clearer guidance for the future. – Hans-Jurie Moolman, Moolman & Pienaar Incorporated
For more information, contact Hans-Jurie Moolman at hj@mmlaw.co.za or 018 297 8799 (Potchefstroom) or 033 032 0241 (Pietermaritzburg).
