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IN THE NORTH WEST HIGH COURT, MAFIKENG

 

CASE NO:  2868/2008

Reportable: YES / NO

Circulate to Judges: YES / NO

Circulate to Magistrates: YES / NO

Circulate to Regional Magistrates: YES / NO

 

In the matter between:

 

BURRIE SMIT DEVELOPERS (PTY) LTD                    Plaintiff

 

and

 

RUSTENBURG LOCAL MUNICIPALITY                      Defendant

 

 

FOR THE PLAINTIFF                                         :ADV. DE VILLIERS

 

FOR THE RESPONDENT                         :           ADV. DU PLESSIS SC

                                                                               with ADV. LINDEQUE

 

 

JUDGMENT

 

 

Delivered:        This judgment was handed down electronically by circulation to the parties’ representatives via email. The date and time for hand-down is deemed to be 09H00 on 07 June 2023.

 

ORDER

 

 

Resultantly, the following order is made:

 

(i)      The defendant is ordered to pay to the plaintiff an amount of R2 264 500.00 in respect of the expropriated property (the reservoir area) calculated at R70/m² in terms of section 12 (1) (a) of the Expropriation Act 63 of 1975.

 

(ii)     The defendant is ordered to pay the plaintiff an amount of R 274 190.00 for the expropriated property (the servitude area) calculated at R35/m² in terms of section 12 (1) (b) of the Expropriation Act 63 of 1975.

 

(iii)    The defendant is ordered to pay an amount of R55 000.00 as solatium to be added in terms of section 12 (2) of the Expropriation Act 63 of 1975.

 

(iv)    Interest on the aforementioned amounts (including any reserved costs), Value Added Tax (VAT), as well as costs of suit are reserved to be later determined by this Court, after written submissions submitted by both parties within twenty (20) days of the date is this order.

 

 

JUDGMENT

 

 

HENDRICKS JP

 

[1]        This case has a very long protracted history. The trial started before my former colleague Gutta J (as she then was), on 11^th June 2018. She resigned on 14^th May 2020. By agreement between the parties it was decided that the record, which already by then comprised of hundreds of pages, be transcribed. This inevitably caused considerable delay. It was furthermore decided that the trial should not start de novo but should continue from where it stopped, following the unavailability of the previous presiding officer. The former Judge President Leeuw allocated the matter to me and the trial re-commenced and continued. A lot of further evidence have been presented. Upon conclusion of all the evidence tendered, written and oral submissions were made, whereupon judgment was reserved. That this is an involved expropriation matter consisting part of a transcribed record, pleadings, documents and written submissions that comprises way in excess of 5000 pages, behoves no argument. However, the delay in the finalization of this matter is indeed regrettable. The heads of argument of the plaintiff, as well as its additional heads of argument, consists of 130 pages and that of the defendant 290 pages. The heads of argument by both party’s legal representatives were of great assistance to this Court.

 

[2]        The plaintiff is a property development company, who buys portions of farm land and develop it into townships. The land is sub-divided into erven for re-selling. The Remaining Extent of Portion 43 of the Farm Waterval 306, Registration Division JQ, North West Province was transferred into the name of the plaintiff, which was acquired by its predecessor in title. Rand Water Board (Rand Water) urgently required land for the construction of a 100 mega-litre reservoir to augment the bulk water supply to the Rustenburg area. There was an agreement between Rand Water and the Rustenburg Municipality (municipality), that the municipality would expropriate the land needed for the construction of the reservoir from the plaintiff. Compensation for the expropriation was tendered to the plaintiff. The compensation is for the account of Rand Water (through the defendant). By agreement between the parties, the actual date of expropriation has been determined to be 31 July 2004.

 

[3]        There is a dispute between the parties with regard to the amount of compensation to be paid, as well as the calculation thereof. Rand Water tendered the following payment:

 

·         In terms of section 12 (1) (a) of the Expropriation Act, for the expropriated property (the reservoir area of 32 350 m²) at R60/m², the amount of R1 941 000.00;

 

·         In terms of section 12 (1) (b) of the Expropriation Act, for the expropriated property (the servitude area of 7 834m²) at R30/m², the amount of R235 020.00;

 

·         In terms of s 12 (2) of the Expropriation Act the amount to be added, namely R55 000.00.

 

The plaintiff claims in its amended particulars of claim, the following:

 

·         For the expropriated property (the reservoir area) R2 749 750.00 plus a solatium of R55 000.00 and Value Added Tax (VAT) in the amount of R392 665.00. The total amount claimed is R3 197 415.00.

 

·         For the expropriated property (the reservoir area) R665 890.00 plus a solatium of R34 976.70 and VAT in the amount of R98 121.00. The total amount is R798 987.00.

 

·         For actual financial loss in respect of the remaining area (sterilized land) the amount of R3 469 360.00 plus a solatium of R55 000.00 and VAT in the amount of R486 635.00.

 

All three claims of the plaintiff are based on an alleged market value of R85/m².

 

[4]     The claim for the full value of the remaining land seems to be based on the idea that whereas the area was before expropriation fully developable, the expropriation of the reservoir area and the servitude area rendered it totally undevelopable and worthless. There is no claim for a reduced value of the remaining land.   It is an “all or nothing” claim. In response to this, the defendant submitted that aApart from one vague allegation in paragraph 14B.4 that that area “was sterilised for development”, the pleadings revealed nothing about the cause of the sterilisation or the extent thereof.   The exact basis for the claim remains a mystery.   Whatever it is, it was further submitted that there is no such claim in law or on the facts before this Court.

 

[5]        Section 25 (1) of the Constitution of the Republic of South Africa Act 108 of 1996 (the Constitution), provides that no one should be deprived of property except in terms of the law of general application and no law may permit arbitrary deprivation of property. Section 25 (2) (b) states that property may be expropriated only in terms of the law of general application subject to compensation, the amount of which at the time have either been agreed to by those affected or decided or approved by a court. Sub-section (3) provides that the amount of compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance between the public interest and the interest of those affected, having regard to all the relevant circumstances including:

 

(a)       the current use of the property;

 

(b)       the history of the acquisition and use of the property;

 

(c)        the market value of the property;

 

(d)       the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

 

(e)       the purpose of the expropriation.

 

[6]        The Expropriation Act 63 of 1975 (the Act) prescribes how expropriation with compensation should occur and finds application. Section 12 (1) provides that the compensation amount should be confined to either actual financial loss, when what is expropriated is a right, or to the aggregate of market value and financial loss when the subject of the expropriation is tangible property.

 

See:    Kangra Holdings (Pty) Ltd v Minister of Water Affairs [1998] ZASCA 36; 1998 (4) SA 330 (SCA)

 

It is however now, in terms of our constitutional democracy since the advent of the Constitution, the Constitution which provides the principles and values and sets the standard to be applied whenever property, which in turn is now also constitutionally protected, is expropriated.

 

See:    Du Toit v Minister of Transport 2006 (1) SA 297 (CC).

 

[7]        The plaintiff contents that the amounts claimed in respect of the expropriation of the reservoir area and the servitude area, as well as the financial loss, are just and equitable considering current use, the history of the acquisition and use of the property, the market value of the property and the purpose of the expropriation (“the constitutional factors”). It is further contended that if the amounts claimed are not just and equitable they must be adjusted by this Court to just and equitable compensation. This much is true, with regard to this second contention. In the alternative, it is contended that if the effect of section 12 of the Act is to exclude any of the amounts of compensation claimed, section 12 is to that extent unconstitutional. This is open to debate and one of the issues to be determined by this Court.

 

[8]        In this regard, the defendant pleads that the current use, history of the acquisition, the use of the property and the purpose of the expropriation, require that any amount of compensation that is determined in excess of that which was paid and tendered by the defendant, should be reduced to those amounts. The factual basis is the following:

 

8.1       The land was acquired by the plaintiff in 1995 and despite a shortage of housing in Rustenburg, it only applied for development permission in November 2003. An application approved in 1987 was not implemented. Hoarding of land only to be sold at a profitable time in future cannot be allowed to increase the amounts payable under the Act. An award of R60/m² to the plaintiff as at 31 July 2004, would represent a fabulous increase in value from 12 May 1995, when the property was purchased at the equivalent of R1.55/m².

 

8.2       The plaintiff as developer, benefited from the construction of the reservoir. The reservoir augmented the water supply to the municipality. The water supply is also more reliable even in times of peak demand and low pressure when, previously, the supply was interrupted to the higher lying residential developments. The reservoir is also a strategic development for the benefit of the community as a whole, including the plaintiff's developments.

 

8.3.      The reservoir provides a reserve capacity for times of emergencies because of, for instance, a breakdown of the main supply outlines from another reservoir, namely the Barnardsvlei reservoir. It reduces operating costs, in particular pumping costs, because the whole Rustenburg municipal system of supply was changed from a bottom up supply to a top down supply, using gravity instead of boosting (pumping). The supply to the higher lying townships, including the plaintiff's Cashan Extension 7, and the potential Cashan Extension 8, was improved because of the supply from this new reservoir.

 

[9]          The evidence tendered during the trial can be summarized as follows, as it was so succinctly set out in the heads of argument filed on behalf of the defendants, from which I borrow extensively.

 

MR. RONNIE SCHILD

Mr. Schild was the plaintiff’s first witness and testified as a director and shareholder of the plaintiff. He testified that the plaintiff bought a farm, namely the Remaining Portion of Portion 43 of the Farm Waterval in 1995. The purpose of buying the land was to develop a township. The plaintiff envisaged the development to be a top housing security estate. He testified that the said farm was developed in phases, and that the portion of land whereupon the proposed Rand Water reservoir would have been situated, was on a part of the development initially known as Cashan Extension 7.

 

[10]      The plaintiff was informed during May 2004 by means of a letter from the defendant’s attorneys, that the defendant planned to start construction early in June 2004. Plaintiff was requested to grant access to the property, to the defendant to start with construction and that any dispute regarding compensation be postponed to a later stage. The expropriation followed in July 2004 as explained above.

 

[11]      Mr. Schild gave the contractors who built the reservoir, namely Murray & Roberts, inter alia permission to dump soil that was excavated from the reservoir area which they took out on the top (northern-western) section of the property.

 

[12]      At a later stage of the trial, the defendant applied to recall Mr. Schild in respect of his evidence regarding the soil that was dumped on the property. Mr. Schild was then further cross-examined by the defendant. Mr. Schild denied that he ever had an agreement with Murray & Roberts regarding dumping of the soil on the south east side of the reservoir.

 

[13]      Mr. Schild further denied the defendant’s version that he agreed that excess material from the reservoir, from the excavation, would be disposed of by filling and contouring partly on the reservoir site and partly outside the reservoir site on the eastern side. Although he saw the deposited soil after construction of the reservoir, he only spoke to his legal team in respect thereof, but cannot recall what advice he received.

 

[14]     MR. NOLTE EKKERD

Mr. Ekkerd was the plaintiff’s second witness.   He is a town planner by profession. He had been involved with the plaintiff and the development of Cashan Extension 7. He assisted the plaintiff with two other developments on the farm in question, namely Remainder of Portion 43 of the farm Waterval, being Cashan Extension 10 and Cashan Extension 33. He was instructed to proceed with the next phase, namely Cashan Extension 7, whereupon he did a lot of investigation and found that it had been an approved township in terms of the old 1965 Ordinance.

 

[15]     After investigation, he advised that as a result of the 1965 Ordinance being repealed and replaced in 1986, and the Nature Conservation Regulations which came into operation in 1988, that the whole township be redesigned. He became aware that Rand Water was planning a reservoir development on a portion of the specific site. On the 3^rd of February 2003, he received a letter from the defendant concerning a new proposed position for the Rand Water reservoir.

 

[16]     There was considerable correspondence between himself and Rand Water regarding the position of the reservoir. The plaintiff was dissatisfied with the positioning of the proposed reservoir, in that it believed that it would sterilise five hectares of developable land. He prepared a plan for the development of Cashan 7 in November 2003, wherein provision was made for the Rand Water reservoir all the way south to the boundary with the nature reserve.

 

[17]     He prepared an application in terms of the Town Planning and Township Ordinance, 1986 for the establishment of a new residential township on the Remainder of Portion 43 of the Farm Waterval which would have been known as Cashan Extension 7. He testified about the content of his motivating memorandum. He motivated 384 residential 1 erven as well as 6 residential 2 erven with a density of 30 units per hectare.

 

[18]     On 13 July 2005, he received a Record of Decision (ROD) from the Department of Agriculture, Conservation, Environment & Tourism (DACE) which was only a partial authorisation for the development applied for on behalf of the plaintiff.

 

[19]     MR. JOHAN VILJOEN

The plaintiff’s third witness was Mr. Johan Viljoen. Mr. Viljoen is a consulting electrical engineer who gave expert evidence in the trial. In his evidence he differentiated between two scenarios, namely scenario A which was an estimate of electrical engineering costs in respect of the development consisting of 13 residential erven surrounding the reservoir.

 

[20]     In scenario B, he gave another estimate based on the hypothesis that the reservoir and the pipeline servitude are not there, and that the development consists of 51 residential 1 erven and 5 residential 2 erven, again an estimate of the electrical infrastructure costs. In support of his evidence, he handed in two bundles of documents, namely a civil and electrical part (bundle 1) and a civil and electrical part (bundle 2).

 

[21]     MR. WILLIE ENGELBRECHT

The plaintiff’s fourth witness was Mr. Willie Engelbrecht. Mr. Engelbrecht is a civil engineer who testified as an expert witness. He also made a comparison between a scenario A and a scenario B in respect of civil engineering costs for development of the area. Scenario A took into account the expropriated reservoir site as well as the expropriated servitude but in scenario B the reservoir site and pipeline servitude were left out.

 

[22]     He was provided with two layout plans in order to do same, namely annexure “WE1” to his summary for scenario A and annexure “WE2” for scenario B. The two layout plans were provided to him by a town planner, namely Mr. Ferrero.

 

[23]     He testified that blasting in the vicinity of the reservoir could be a problem. Furthermore, that blasting close to existing residential areas can also cause huge problems. The cost of blasting is enormous. A development of the remaining land is not economically feasible inter alia because there is no economy of scale that can be achieved as you need to put in link services from an existing development which costs money. The deposited soil is up to 5 metres high. That has to be excavated and removed if one wants to develop there.

 

[24]     In respect of the development on steep areas, he testified that in Cashan Extension 33 they developed on a gradient of up to 16% and in Cashan Extension 6 adjacent to Cashan Extension 7, gradients up to 13%. The Rustenburg Strategic Environmental Assessment earmarked the Remaining Portion of Portion 43 for future residential development.

 

[25]     During re-examination, he said that Rand Water has a 500 metre limitation on blasting from their facilities, which indicates how sensitive their facilities are to blasting, but you can get special permission from Rand Water to blast right next to a facility. He personally would not recommend that to a client as the insurance will be excessive and if there is damage to the reservoir, it may cause severe damage downstream. There was flooding after serious rain in Rustenburg, as all the water simply ran down the slope. Berms were erected on the eastern side of the reservoir to divert the stormwater down into the natural stream. If you remove the berms, there would be a risk of flooding.

 

[26]     As a result of Mr. Engelbrecht’s opinion expressed during re-examination, namely that the removal of the deposited soil would cause flooding, the plaintiff engaged the services of a civil engineer, Mr. Andre Ballack to investigate the correctness of the evidence. As a result, Mr. Engelbrecht was recalled during a subsequent session of evidence being led. Mr. Engelbrecht was again led in-chief.

 

[27]     He testified that after the previous adjournment, there was another site visit whereafter he prepared a photograph that indicates the berms and the disturbed portion of soil.   The photograph was handed in as exhibit S. He testified that the major portion of disturbed land had been backfilled “onto the natural level” and that it varies from 0 up to 5 metres deep. Mr. Engelbrecht was then again cross-examined by the defendant. The cross-examination dealt with his reaction to Mr. Ballack’s Rule 36(9) summary, as well as a bundle of photographs and drawings of the reservoir site compiled by Mr. Ballack.

 

[28]     GWEN THERON

The plaintiff’s next expert witness was Dr Gwen Theron, a Landscape Architect and Environmental Planner. The purpose of her evidence was to testify generally about the Rustenburg Strategic Environmental Assessment and the Cashan Extension 7 and 8 applications. She testified that in terms of the National Environmental Management Act and its regulations, there is no reference to a Strategic Environmental Assessment pertaining to a specific site.

 

[29]     She further testified that in essence and by nature, the Rustenburg Strategic Environmental Assessment is an environmental management tool to assist in strategic decision-making, and is not a legal instrument that imposes or prescribes binding and enforceable environmental restraint on the development of land.

 

[30]     She further testified that although a Strategic Environmental Assessment is applied at the level of specific project decision-making, it is at best a guideline or policy which may assist in a specific project’s decision-making, but by the very nature thereof it does not require a rigid adherence thereto and is inherently flexible.

 

[31]     She further testified that as far as she can remember, the Rustenburg SEA has never been incorporated into the Integrated Development Plan or the Spatial Development Framework of the Rustenburg Municipality. During cross-examination, she testified that as the reservoir received a positive record of decision (ROD) to be built, the land would have been able to be developed for residential purposes, if the reservoir was not there.

 

[32]     According to Dr Theron the whole site is developable, but you would look at the least environmentally sensitive areas and utilise those for residential development. She disagrees with the Richard and Christine Newberry report that the proposed development is situated almost entirely within pristine montane grassland.

 

[33]     PETER JOHN DACOMB

The plaintiff’s next witness was Mr. Peter Dacomb, who testified as an expert witness, as a consulting town planner. Mr. Dacomb replaced Mr. Tino Ferrero who passed away before he could testify in the matter, although Mr. Ferrero’s Rule 36(9) Expert Summary was filed before the trial commenced. Mr. Dacomb studied Mr. Ferrero’s documents and opinion as well as the reasons therefor in order to testify.

 

[34]      His evidence relates mainly to four aspects:

 

(a)      Whether the remainder of the Farm Waterval 43 had township potential and especially the portion expropriated for the servitude and reservoir;

 

(b)      whether a portion of “uitvalgrond” or sterilised land was created;

 

(c)      the before and after layout plans, namely annexure “WE1” and “WE2” to Mr. Viljoen’s summary;

 

(d)      the town planning costs, expert fees and disbursements in respect of the before and after layout.

 

Furthermore, Mr. Dacomb was asked to testify regarding the process that had to be followed to establish a township in terms of Ordinance 15 of 1986.

 

[35]      Mr. Dacomb testified that he checked the calculation of Mr. Ferrero in respect of development costs and his disbursements and they seem to be reasonable and in line with the accepted norms in the industry. These costs are relevant in as far as it is a component of a residual land value calculation. Mr. Ferrero and Mr. Nagy, the town planner on behalf of the defendant, agreed that there were three comparable properties, namely sales 1, 3 and 10.

 

[36]      With reference to the two expropriation notices, Mr. Dacomb testified that there is an additional two (2) metre area around the pipeline servitude, which is excluded from development in terms of the expropriation notices.   The plaintiff cannot build thereon and can only use it for agricultural purposes. He testified that without finality on where the reservoir site would be, how large it would be and where the servitude would be, you cannot be expected as a town planner to finalise the application for township establishment.

 

[37]      He agreed with Mr. Ferrero that given the general shortage of housing in Rustenburg at the time, as well as the historic link between the affected property and Cashan Extension 7, the subject property has a very strong development potential. Mr. Dacomb agreed that Rand Water could waive the 2 metre buffer area around the servitude.

 

[38]      During his evidence, it was put on record on behalf of the defendant that Rand Water will waive the two (2) metre protection around the servitude as far as the land of the plaintiff is concerned. Mr. Dacomb testified that in as far as he inherited Mr. Ferrero’s position, he could not revisit it and change anything in respect of environmental considerations. Mr. Dacomb testified that he perhaps would have done it differently, if he had similar environmental information at his disposal.

 

[39]      He agreed that as there was an application pending for the establishment of a township on the greater Cashan Extension 7 as at the date of expropriation, 31 July 2004, the existence of such application would have excluded any possibility of having at the same time an application for the establishment of Cashan Extension 8, or the 56 erf township.

 

[40]      N R GRIFFITHS

The plaintiff’s last witness was its valuer, Mr. Norman Griffiths.  He testified as an expert witness. The purpose of his evidence was to state his opinions in respect of the compensation due as a result of the expropriation of the land and the expropriation of a servitude within and over the remaining extent of Portion 43 of the Farm Waterval.

 

[41]      He based his valuation on two methods, firstly the method of comparable sales and secondly, the residual land value calculation, which, he said, was a check on the correctness of the first method. The evidence of this witness will be dealt with in greater detail later on in this judgment.

 

[42]      MR. DAVE RUDOLPH

Mr. Rudolph was the defendant’s first witness. He is an environmental assessment practitioner and testified as an expert witness with reference to his Rule 36(9) Expert Summary.

 

[43]      Mr. Rudolph testified that the plaintiff’s 56 erf development does not take into account the attributes which are on the property and that on the eastern side where the residential 2 developments are, that there is a quite steep slope with a lot of natural vegetation on it and trees which are sensitive in nature.

 

[44]      The 56 erf development plan does not take into account the ecological attributes of the area. The receiving environment would not allow you to develop the plan as a responsible environmentalist. The receiving environment consists of grasslands, bush clumps, drainage lines which form the palette on which you eventually begin to create your development.  You do not start with a clean slate with absolutely nothing on it.

 

[45]      He is of the opinion that with the planned density of 30 units per hectare for the residential 2 stands, the vegetation would be obliterated. Mr. Rudolph describes the Rustenburg SEA as a decision support tool, which will guide authorities as to how they would make decisions.

 

[46]      The area in question, namely the potential development of Cashan Extension 8 and in particular the 56 erf development, falls in the high environmental control zone of the Rustenburg SEA, because it falls within the 500 metre buffer of the nature reserve. Eco residences will be an appropriate use in a high environmental control zone.

 

[47]      Mr. Rudolph further testified regarding the attributes of an eco residential estate which would typically be a very low impact development which would control your behaviour patterns as well. He testified that in his experience of what they have done in the past is that you would not go over 4 to 5 units per hectare in an eco residential development in a high environmental control zone. Furthermore, the footprint or development area of each unit will be limited to between 300 to 500m² for the house.

 

[48]      The development proposed by the plaintiff in this area, namely 51 residential 1 erven and then 5 residential 2 erven, does not qualify as an eco residential development.

 

[49]      MR. ANDRÉ BALLACK

Mr. André Ballack was the defendant’s second witness. Mr. Ballack is a practising civil engineer, who testified as an expert witness, to investigate and report on issues relating to the reservoir and the “disturbed area”, namely:

 

(a)         whether the presence of the reservoir contributes to the risk of flooding;

 

(b)         whether the removal of the deposited soil in the “disturbed area” will increase the risk of flooding.

 

[50]      He testified that the reservoir does not increase the risk of flooding. He was further of the opinion that the removal of the deposited soil in the disturbed area would not increase the risk of flooding. He gave his evidence with reference to a photo album which contains photos of the reservoir site which he took himself.

 

[51]      During cross-examination the method with which Mr. Ballack calculated the catchment area was questioned. As a result, Mr. Ballack was asked to email his calculations and the CAD programme which was used by Mr. Ballack to the plaintiff’s civil engineer, Mr. Engelbrecht. His further cross-examination was then postponed. On 5 May 2021 Mr. Ballack’s cross-examination continued with reference to exhibit QQ containing the calculation and to maps. He explained that he based his calculation on a 1 in 5 year rainstorm, and that it is the acceptable norm to use.

 

[52]      MR. DANIEL ZEEMAN

Mr. Zeeman is an explosive technologist and testified regarding concerns that the plaintiff raised in respect of blasting around the reservoir. He works as a consultant for Rand Water and evaluates third party applications for blasting, where Rand Water’s permission is required. If he is satisfied that all the documentation is in order, he will sign it off and let Rand Water’s plant protection manager, Ms Paleka Mashele, know that he is satisfied.

 

[53]      He was referred to the concerns of the plaintiff’s witnesses, namely Mr. Norman Griffiths, Mr. Ferrero and Mr. Engelbrecht. He testified that the Explosives Act is applicable, as well as the regulations in terms of the Act. He testified that Regulation 10.17.1 is the specific regulation applicable when blasting is to be done within 500 metres of buildings and other infrastructure, where the written permission is needed from inter alia water boards.

 

[54]      He further testified that he is not aware of any legislation or regulation that prohibits blasting close to Rand Water’s infrastructure. He testified that blasting could safely be done in close proximity of the reservoir and pipelines. During cross-examination he testified that when blasting is undertaken, the risk will always be with the developer or the blaster if employed by a third party.

 

[55]      MR. ISY MPHIWA

Mr. Mphiwa is employed by Rand Water as a senior assets planning manager and testified regarding Rustenburg’s position in the bigger Rand Water system and specifically the Eikenhof system. He furthermore testified regarding the capacity of the P1 and P2 pipelines which supply Rustenburg with a maximum of 130 mega litres of water per day.

 

[56]      He testified that there are three different drawings which show the layout of the pipelines and reservoirs in Rustenburg over time to explain the background to the reservoir. He testified that planning of the reservoir started around 2002 as there were water shortages in Rustenburg.   A further pipeline was once expected to be laid from the Hartbeespoort Dam to Rustenburg. This, in the end, never materialised due to environmental concerns.

 

[57]      He explained why the reservoir had to be built at the exact site where it is situated. He explained the problems with the reservoir after it was commissioned in 2007. It had been constructed with one pipeline for “in” and “out”. The reservoir was able to fill up, but it took a long time.   Because of the pressure in P1 and P2 there was not sufficient water coming out of the reservoir after it had been filled up. This led to some stagnation and compromised water quality.

 

[58]      The problem was solved by adding an outlet, the P7 pipeline. The reservoir was then operational again but cracks appeared in the walls. After that problem was solved it was put back into operation in 2016. He testified that the reservoir has been working correctly since 2016.

 

[59]      MR. JONATHAN PATRICK

The defendant’s next witness was Mr. Jonathan Patrick, a senior technologist surveyor employed by Rand Water. He testified that on the 3^rd of October 2018 he went to the reservoir site to do a survey of the distance between the valve chambers in the servitude area. He testified with reference to a drawing which illustrated his survey. He testified that the distance between the two valve boxes is approximately 34 metres and further gave evidence regarding the depth of the pipe at different points in the servitude area.

 

[60]      MS PALEKA MASHELE

The defendant’s next witness was Ms Paleka Mashele, the pipeline protection manager of Rand Water since 2013. It is her responsibility to consider all applications to cross Rand Water’s services, inter alia pipelines. She also testified with regard to the formal conditions for crossing Rand Water’s services.

 

[61]      Rand Water requires a culvert to be installed to ensure access to pipelines when an applicant wants to cross a pipeline. He/she is given standard drawings of such a culvert as a guideline. She explained the steps that an applicant has to take in order to cross Rand Water’s services.

 

[62]      She testified with reference to drawings prepared by Mr. Nagy, that there is enough space between the valve boxes, with reference to Mr. Johnathan Patrick’s evidence, and the sketches for Rand Water to consider an application to cross the servitude.

 

[63]      She testified that there are basically three options available to Rand Water to cross the servitude area. She testified that Rand Water does not refuse applications for crossing of any of its services if an applicant complies with its standard conditions. She testified in respect of the blasting expert, Mr. Danie Zeeman, that she is the person at Rand Water making the final decision regarding blasting close to Rand Water’s services. She testified that if an applicant wants to blast within 500 meters of Rand Water’s services, such applicant will need to have insurance in place.

 

[64]      MR. LESIBA PHALANE

Mr. Phalane is a legal advisor at Rand Water who has been duly authorised to act on behalf of Rand Water in litigation matters. Mr. Phalane confirmed that Rand Water waives certain rights flowing from the notice of expropriation, dated 6 July 2004, namely the right to lay pipelines above the ground in the servitude area and the prohibition to erect structures, plant trees or place material within two metres of the servitude area.

 

[65]     He further testified that despite an intensive search, he could not find a signed copy of the construction contract between Murray & Roberts and Rand Water for the construction of the reservoir and excavation thereof. He identified an unsigned copy of the contract.

 

[66]     MR. ANDRÉ DE KLERK

Mr. De Klerk is a civil engineer and a professional construction manager and was involved in the excavation and construction of the reservoir on behalf of Murray & Roberts. He testified regarding a meeting that he attended on 20 April 2005 regarding the plaintiff’s objections to the authorisation received by Rand Water to build the reservoir. He testified that he needed a dumping site for the excavated material.

 

[67]     He came to an arrangement with Mr. Schild on behalf of the plaintiff, to stockpile a lot of the material on the property approximately a kilometre away from the site. Furthermore, royalties were paid to Mr. Schild in respect of this material that was stockpiled to the north-west on the property. The topsoil was stored in the south eastern corner. He testified that about 70 000 cubic metres of soil, came from the excavation.

 

[68]     Mr. Schild visited the area where the soil was dumped in the south eastern area during construction and did not complain about the soil being dumped in the “disturbed area”. Murray & Roberts landscaped the dumped soil and planted boulders to give it a natural look. Murray & Roberts did a survey of indigenous grasses and had the “disturbed area” hydro-seeded to reinstate the veld as it was and Mr. Schild, despite having witnessed the operations, never complained or raised objections to the “disturbed area” and the way it was being landscaped.

 

[69]     MR. GEZA NAGY

The next witness on behalf of the defendant was Mr. Nagy who testified as an expert town planner. The purpose of his evidence was to investigate the Remainder of the Extent of Portion 43 of the farm Waterval, with a view to determine its development potential and to assist the valuer in determining compensation. He also testified as to the effect of the expropriation on the remaining land.

 

[70]     Furthermore, he was briefed to advise the defendant with regard to the plaintiff’s case as it progressed during the trial.

 

[71]     MR. DERRICK GRIFFITHS

Mr. Derrick Griffiths is a professional valuer who testified on behalf of the defendant. He testified that his valuation method is the comparable sales approach. Mr. D Griffiths criticised the land residual method as applied by Mr. N Griffiths.

 

[72]     Mr. D Griffiths came to the conclusion that a rate of R60/m² is the applicable rate to determine the market value of raw farmland with the potential for township development. In respect of the open space, Mr. D Griffiths applied a rate of R15,00/m². In respect of the servitude areas, Mr. D Griffiths applied 50% of the developable value, namely R30,00/m². The evidence of this witness is dealt with in some detail later on in this judgment.

 

[73]      The issues to be determined by this Court are the potential of the remaining extent of the land, its developability, the effect of the expropriation on the remaining land and the calculation of the rate per square metre (R/m²) thereof. Before dealing in some detail with the aforementioned contentious issues, it will be appropriate to explain in the form of a brief synopsis, history of the expropriated and surrounding areas.

 

[74]      As at the date of the expropriation, 31 July 2004, the Remaining Extent of Waterval 306 was 87.8316 hectares (ha) in extent. As a result of the expropriation the extent of the property was reduced to 84,5966 ha. The whole area was, according to the plaintiff, designed for a hypothetical 56 erf development, both before and after the expropriation. As at the date of the expropriation, the property was the subject of a township application to be known as Cashan Extension 7.

 

[75]      Around 2005 the township application was split into a northern portion (Cashan Extension 7) and a southern portion (Cashan Extension 8).   This step followed the issue of a Record of Decision (“ROD”) by the North West Department of Agriculture, Conservation and Economic Affairs (NW DACE), who granted authorisation to develop the northern portion, but refused authorisation to develop the southern portion. The subject property is located approximately 5 km south of the Central Business District (CBD) of Rustenburg and at the date of expropriation, to wit 31 July 2004, consisted of a vacant triangular piece of land, situated along the Magaliesberg Ridge which was used as grazing land for animals. The Kgaswane Nature Reserve in Rustenburg, is situated to the west and south of the subject property, which is a protected natural environment. The property is bounded by township development to the north (Safari-Tuine Extensions 12 and 15) and east (Cashan Extensions 4 and 6).   In the south-east it is bounded by Cashan Extension 33.

 

[76]      The subject terrain is undulating, varying from approximately 1 340 m above sea level in the east to approximately 1 440 m above sea level in the west.   This is therefore not a flat piece of land, which is at certain places rocky too. A valley runs from west to east through a section of the property.   The water reservoir which serves Cashan 7 is situated on a distinct hill, midway along the southern boundary of the subject property. This was observed during an inspection-in-loco which was conducted.

 

[77]      The market value of land depends, inter alia, on its development potential. For the determination of the potential in the present case, the relevant portion is the Remaining Extent of Portion 43. It was agreed between the town planners that the Remaining Extent of Portion 43 had the potential to be developed as a residential township. Each valuer based his valuation on that potential. There is no dispute about that potential. What was strenuously debated in evidence was the type of township. The plaintiff’s Mr. Dacomb contended that it had the potential for a normal residential security estate as an extension of Extension 7. The defendant’s Mr. Nagy contended that only a residential estate on ecological conservation principles would have been approved.

 

[78]      The plaintiff furthermore contended that the residual land value calculation depends thereon that it would have received permission to develop an upmarked security estate with a certain number and type of residential stands (Residential 1 and Residential 2 stands). The extent to which the remainder of the land potential can be developed, was a matter of much debate. In other words, can a township be developed over the whole of the remainder of the land including the area to the east of the reservoir, which are ecological sensitive.

 

[79]      In other words, the real dispute as far as potential is concerned, is whether a township, whatever its form and substance, could be physically developed over the whole remaining land in light of environmental restrictions. This issue boils down to one question, namely whether the area in the extreme east of the prospective Extension 8 (next to the existing Extension 7) was developable, or whether the relevant authorities (the municipality and NW DACE), would have required that the area in the east should be preserved in its natural state.

 

[80]      The issue of the developability is relevant to the claim based on the alleged sterilised land (the “remaining land”). The claim for compensation for the alleged loss of the remaining land, is a claim for actual financial loss in terms of s 12(1)(a)(ii) of the Act. As at the date of expropriation [31 July 2004], the plaintiff had already submitted an application to NW DACE for environmental authorisation to develop the Remaining Extent of Portion 43, as an upmarket security estate. An application had also been submitted to the municipality for development approval. The status of this application was a town planning application in progress. The hypothetical buyer and seller would have known about that. The question whether the plaintiff’s application would be successful would have been foremost in their minds. They would have contemplated a decision in the future, and would have formed opinions as to the possible outcome of the application. It was submitted on behalf of the defendant that this Court can and should therefore take the actual outcome of the application into account. 

 

[81]      This approach, so it was contended, accords with s 25(3) of the Constitution which requires the amount of compensation to be just and equitable, having regard to “all relevant circumstances”. It was further submitted that s 25(3) widens the scope of a court’s enquiry into the “relevant circumstances”, compared to the relative straitjacket laid down by the Expropriation Act.

 

[82]      The developability of the remaining land having been determined. The effect, if any, of the expropriation on the remaining land, is the next logical issue. The onus is on the plaintiff to prove that the expropriation caused actual financial loss. It is not sufficient to prove a hypothetical financial loss. On behalf of the defendant it was submitted that a problem for the plaintiff is that the development, was described as “entirely hypothetical” and designed to “maximise the potential”. It is further submitted that it was designed by the plaintiff to maximise the compensation. The defendant contended that this is not an acceptable basis on which to claim compensation. The plaintiff’s case is apparently that the whole area east of the reservoir and the servitude has been rendered worthless. It has become isolated and useless for township development according to the plaintiff.

 

[83]      However, various witnesses on behalf of the plaintiff, described the effect differently. One of the questions is whether, on the plaintiff’s own evidence, it can be found that the plaintiff has acquitted itself of the onus to prove an actual financial loss as a direct result of the expropriation. The short answer of the defendant is that the area in the east is not isolated as a result of the expropriation and that, on the plaintiff’s own version, it could be developed before the expropriation and also after the expropriation, with the necessary adjustments to the layout. This much is quite apparent.

 

[84]      Insofar as the method of calculation and the rate per m² is concerned, on the evidence of Mr. Norman Griffiths, who testified for an on behalf of the plaintiff; a value of R85/m² was calculated. Of importance, this was the case for the plaintiff for the whole area which was divided into Residential 1 and 2 erven. Mr. Derrick Griffiths, who testified for and on behalf of the defendant, argument was that it wasn’t simply a division of the remaining land into as much Residential 1 or 2 type of erven, but other factors must also be taken into account. He concluded and based his mathematical calculation on the value of the remaining portion of the land on R60/m² for developable land and R15/m² for undevelopable land. Of utmost importance, both these developers based their conclusions on a potential for residential township development, and on the same comparable sales of other development in surrounding areas, as could be seen during an inspection in loco held.

 

[85]      The main differences between the two valuers is, first, Mr. Norman Griffith’s insistence that the areas set aside for streets and parks in the comparable sales, should be excluded from the area by which the purchase price is divided to calculate the average rate per square metre (m²). Second, is his failure to make the necessary adjustments to the agreed sales to make the resultant price per square metre (m²) comparable. This Court is required to decide whether that method produces a credible rate per square metre (m²). Mr. Derrick Griffith made various adjustments to his face value average sale price. This Court is obviously not bound to one of the two results but can perform its own valuation, which is just and equitable taking into account all the relevant factors. This Court should accordingly act as the so-called “super valuator”.

 

[86]      What is apparent is that at the date of expropriation 31 July 2004, the extent of the remaining land was reduced from 87.8316ha to 84.5966ha. Thus 32 350m². According to the plaintiff 56 erven could be developed at R85 m² on this remaining portion of the land. This is with regard to the whole remaining area. As alluded to earlier, this does not make provision for streets and parks, that is essential for township development, and which must be taken into consideration. So too, was it contended by the plaintiff, that the servitude area of 7 834 m² was totally undevelopable, whereas the contrary was submitted by the defendant.

 

[87]      This Court is called upon to determine the market value of the remainder of the land, as a whole. The plaintiff claims R6 219 110.00 in terms of s 12(1)(a)(i) of the Expropriation Act, as the amount which the expropriated portion would have realised, if sold on the date of the notice of expropriation, in the open market by a willing seller to a willing buyer.

 

[88]      The defendant contended that when this claim is compared with the alternative claims, the solution to the riddle as to what is claimed in respect of what, seems to be that the claim is in respect of both the expropriated property (the reservoir area) and the remaining land (east of the reservoir), which has not been expropriated but has allegedly been sterilised by the expropriation. That second part of the claim is in fact in respect of actual financial loss and should be separately claimed. That is done in paragraph 14.2 as an alternative claim. It is for an amount of R3 469 360.00. The claim for the expropriated property (the reservoir area) seems to be for R2 749 750.00.

 

[89]      The determination of the exact amounts of compensation to be awarded must be determined. Each of the valuers determined a rate expressed in R/m² as a base rate to be applied to the area found by this Court to have attracted compensation on the basis of the market value. As required by s 12(1)(a)(i) of the Expropriation Act, the market value has to be established as at the date of the notice of expropriation which, in this case, has been fixed by agreement as 31 July 2004. At the date of expropriation, the Remaining Extent of Portion 43 was zoned “agricultural”.  

 

[90]      However, the plaintiff based its claim on a potential for a residential township development. This emerged when the plaintiff’s expert summaries were filed. To this extend there was an agreement between the town planners, Mr. Ferero and Mr. Nagy, that Portion 43 had the potential “for the establishment and development of a residential township (including the development of a private residential security estate)”.

 

[91]      Both parties valuers base their respective valuations on the agreement that the Remaining Extent of Portion 43 had the potential for township establishment as alluded earlier. For their purpose to determine the market value of the expropriated land, the exact nature and form of the potential residential estate is irrelevant. For the purpose of establishing the market value of the reservoir area and the area of the servitude, no further finding by this Court with regard to potential is therefore required. The market value enquiry has also been substantially curtailed by the fact that the valuers reached agreement on the identity of the four “comparable sales”. However, none of the four properties involved in the comparable sales, was completely on all fours with the Remaining Extent of Portion 43, which is the subject property. Adjustments are therefore required to be made to the land prices paid. This aspect led to a difference of opinion between the valuers.

 

            See:    Minister of Agriculture v Davy 1981 (3) SA 877 (A).

Sher & Another NNO v Administrator, Transvaal [1990] ZASCA 77; 1990 (4) SA 545 (A).

Opera House (Grand Parade) Restaurant (Pty) Ltd v Cape Town Municipality 1989 (2) SA 670 (c).

 

The author Gildenhuys, “Onteieningsreg”, Second Edition pg 310 says the following in respect of using comparable sales to value land with township potential quoted herein:

 

“Omdat daar soveel veranderlikes by ‘n dorpsgebied in the proses van ontwikkeling is, kan ‘n waardasie daarvan baie moelik aan die hand van vergelykbare verkope gedoen word. In so ‘n geval kan die ontwikkelings metode met vrug gebruik word”

 

[92]      Although Mr. Norman Griffiths acknowledged that the comparable sales approach is the primary approach to valuation, he nevertheless tendered in evidence a second valuation approach as a “check” on his comparable sales approach. It is referred to as “the residual land value” calculation. The defendant submitted that the residual land value calculation as tendered in evidence by Mr. Norman Griffiths is so defective that it cannot be regarded as a check. With regard to the comparable sales and the results derived therefrom, the main difference between the two valuers is a difference of interpretation of the comparable sales. According to the evidence, the agreed comparable sales are as follows:

 

Sale no 1 namely, Portion 145 of Waterval No 306 JQ which became Cashan Extension 33.

 

Sale no 3, namely Portion 86 Boschdal No 309 JQ which became Boschdal Extension 3.

 

Sale no 10, namely Portion 10 Boschdal No 309 JQ which became Boschdal Extension 6.

 

Sale no 14, namely Portion 86 Boschdal No 309 JQ which became Boschdal Extension 5.

 

[93]     Mr. Norman Griffiths commenced by adjusting the prices by escalating the pre-expropriation sale prices by 15% and de-escalating the post-expropriation sales by 20% to bring the prices to the valuation date.   He says: “This is not an exact science by any means, and some of it may even look a bit arbitrary.” Up to that point Mr. Derrick Griffiths agrees. But then Mr. Norman Griffiths embarked on a process which Mr. Derrick Griffiths rejects emphatically. He extracted the developable area of the properties to recalculate the price paid per square metre (m²). He argues: “The property developer buying that property will have regard to what he can develop, not merely divide a price by the total 10 hectares.” He then re-calculated the average price paid per square metre (m²) by dividing the total price paid for all four properties by the total only of the sellable areas.

 

[94]     He testified that he “totalled up the number of zoned stands”, in each sale to determine the area with which the total price paid has to be divided. This means that streets and parks were excluded. It had the effect of drastically increasing the R/m² price as opposed to the result of a calculation, where the total price is divided by the total area of the properties. I find this reasoning quite surprising. There can be no township development without any streets and parks. Suffice, to also point out that there is no precedent for this calculation either. It does not give the actual price paid. It was submitted by the defendant that this is a stratagem to increase the price to be paid artificially. I agree.

 

[95]     With regard to Boschdal Extension 6, the valuers are in agreement that the actual size of the property was only 4,4837 ha. R2 million is the value placed on the area that had to be re-transferred, with the purchaser then effectively only paying R5.5 million. Mr. Norman Griffiths disagrees with Mr. Derrick Griffiths that there were additional buildings on the property that had to be taken into account. He says those buildings had no effect or commercial value. With due respect, this does not make economical sense, as development increase the value of the property. As far as Boschdal Extention 5 (sale no 14) is concerned, Mr. Norman Griffiths disagrees with Mr. Derrick Griffiths that one should take 2004 as the date of the sale. Boschdal Extension 5 is the sale introduced by Mr. Derrick Griffiths at the expert meeting.

 

[96]     What emerges during cross-examination is that, whereas Mr. Derrick Griffiths for the defendant, valued the whole of the Remaining Portion of Portion 43 and applied the figure of R60/m² to certain areas, Mr. Norman Griffiths valued only the hypothetical 56 erf development. His reason for doing so is that there are “concentrations of value which one can identify as a property value”. The reasons why Mr. Norman Griffiths submits that there is a concentration of value are, with due respect, incomprehensible. He was attempting to justify his failure to value the whole of the Remaining Extent of Portion 43 with the non-existent concentration of value.

 

[97]     According to Mr. Norman Griffiths, he restricted his valuation to the “areas affected by the expropriation”, which are specified as follows:

 

          “Reservoir Site                               32 350 m²

 

          Servitude Area                                 7 834 m²

 

          Sterilised Land                               41 730 m²

                                                                                                    81 914 m²”

 

His valuation based on the comparable sales is stated as follows:

 

The combined value of the land affected as per paragraph [97] is thus:

81,914 m² @ R85/m² = R6 962 690 – say R7 million.

 

[98]     This approach, it was submitted by the defendant, is fundamentally defective. I couldn’t agree more. According to Gildenhuys, “Onteieningsreg” 2^de uitgawe, pg 210 to 212 as well as Jonker, “The Law of Property Valuation and Planning in South Africa” pg 193 to 196, there are three possible approaches to the valuation where only a portion of a cadastral unit has been expropriated. The first is to determine the market value of the whole property before the expropriation and then the value after the expropriation and then to subtract the “after” value from the “before” value. The second is to value the expropriated portion as a separate unit plus the decrease in value of the remaining portion. This approach is only feasible where the expropriated portion forms a separate economic unit, which could be sold separately in the open market. The third is to value the expropriated portion as part of the whole and to apply the unit price per m², or prices per m² for different areas, to the expropriated portion.

 

[99]     Mr. Norman Griffiths valued only “the land affected” (81 914 m²). However, that land is not a separate economic unit. He attempted to justify his method with reference to the so-called “concentrations of value in that area”. In a claim for actual loss, the onus is on the plaintiff to prove his claim, in this instance, the so-called sterilized land. The plaintiff bears the onus to plead and prove it. The truth is that there are no “concentrations of value”. The whole of the Remaining Extent of Portion 43, except for the sensitive areas, has the potential for township development.

 

See:    Bonner v Department of Agricultural Credit and Land Tenure 1974 (3) SA 737 (T).

 

[100]   Once a valuer has established broadly comparable sales, he has to make adjustments to micro tune the comparability, and has to look at certain elements in the comparable sales compared to the subject property to make them properly comparable.  Some of the elements of comparison are location, zoning and financial terms of the sale. Mr. Norman Griffiths agreed that adjustments are appropriate where necessary to “micro tune your comparability”. The theory behind Mr. Norman Griffiths’ exclusion of streets and parks is that the developer who is the hypothetical buyer, would say how many selling opportunities one can get if you buy this property. He stated: “I am looking at the business model that arises of the buying and selling of these properties. I have identified where his revenue flow will arise and what he sells.”

 

[101]   It was submitted that the figures were taken off the general plan of each development, which plan was not available to the parties at the time of the sale. It is a way of analyzing after the event, what was the developer’s potential selling points. As stated previously, in the original list of comparable sales, Boschdal Extension 5 was not included. That sale produces a sale price of R55.85/m². So without this sale Mr. Norman Griffiths got to a figure of R85/m². After Mr. Derrick Griffiths drew attention to Boschdal Extension 5, Mr. Norman Griffiths result is still R85/m². This does not make sense. It raises a suspicion that the R85/m² is contrived, so it was submitted. It is supported by the stratagem of reducing the total of the areas purchased, to the total of the developable area.

 

[102]   It is common knowledge between the valuers that the smaller properties are more expensive per square metre (m²). One has to make an adjustment for the size when comparing Cashan Extension 33, which is a smaller property, with the subject property. Mr. Norman Griffiths did not make any adjustment. Mr. Norman Griffiths was given the opportunity to explain why he concentrates his analysis of comparable sales on the “sellable” areas only. He was given the example of an eco-estate with golf courses. The question is whether the developer is not also paying for those vast areas that are going to be used for the golf courses and the parks, although they will not be sold. His explanation was “I am not saying that the overall property has not got overall value. It is just a method of analysis.” With due respect, I fail to understand this explanation.

 

[103]   The result of Mr. Norman Griffiths’ analysis of the comparable sales is alleged to be R85.63/m². He escalated the price paid in terms of sales before the expropriation date at 15%. In respect of the price paid in terms of agreements after the expropriation date, he de-escalated the prices at 20%, from the date of the sale to the expropriation date. This adjustment for the time value of money was accepted by Mr. Derrick Griffiths who applied the same percentages in his calculation.

 

[104]   The main difference between the two valuers is the adjustment that Mr. Norman Griffiths made to the area of the land being the subject matter of the sale. He adjusted the gross area by taking into consideration only sellable erven.   In other words, he excluded, inter alia, the areas of the streets and parks. In the case of Cashan Extension 33, the area was reduced from 28.8296 ha to 20,3828 ha, which is a smaller are than the area in question, which makes it more expensive. The result is an increase in the average price of that sale from R71.87 to R101.68. It appears that it is common cause between the valuers that adjustments are necessary and allowable in valuing and ought to be done. Mr. Norman Griffiths made no further adjustments.

 

[105]   Mr. Norman Griffiths motivates his adjustment consisting of exclusion of the streets and parks and other undevelopable areas on the basis that the developer is a businessman, and he wants to know what revenue he will achieve. The problem with this approach is that it becomes entirely subjective. Elsewhere, when Mr. Norman Griffiths was confronted with the question that the hypothetical businessman should also take into account his costs, which will include the non-sellable areas, his answer was that the businessman is aware of his cash flow. This means that the price per square metre (m²) paid for the sellable erven is the product of a calculation by the purchaser of the comparable property based on his cost structure.

 

[106]   That is not information that would ever be available in the market place.  Without that information the price allegedly paid for the sellable erven is meaningless for the valuation of the subject property. This simply proves that the approach is entirely subjective. It cannot be a guide for a subsequent purchaser who wants to know what the purchaser of the property in the comparable sales actually paid for the land, which included streets and parks and undevelopable areas. If the areas of the streets and parks are put back into the calculation, Mr. Norman Griffiths calculation works out at R59.13. Mr. Derrick Griffiths confirmed that it is irrelevant for the purpose of the valuation whether the Remaining Extent of Portion 43 had a potential as a normal residential estate or as an eco-residential estate.

 

[107]   The evidence of Mr. Derrick Griffiths is that as at the date of the expropriation, the application for township establishment on Extension 7 had run for 8 months. Sale no 14 was originally Boschdal Portion 87. It became Boschdal Extension 5. A portion had to be re-transferred at a value of R2 million and according to the buyer the actual purchase price, excluding Value Added Tax (VAT), was only R5.5 million for the 4,49 ha area. There are also other improvements on the property that have to be taken into account, when analysing the sale.

 

[108]   It was submitted that there was a spectacular rise in prices between 2001/2 to 2007/8, with most of the sharp escalation taking place between 2003 and 2007. The transaction in respect of Portion 87 Boschdal (now Boschdal Extension 5) was concluded in 2004 or 2005, but due to the fact that ministerial approval for the subdivision had to be obtained in terms of Act 70 of 1970, the sale could only be formalised after ministerial approval was obtained in 2007. The conclusion of Mr. Derrick Griffiths is that at the expropriation date, the rate of R60/m² was the applicable rate to apply to raw farmland suitable for township development.

 

[109]   Mr. Derrick Griffiths explain how he derived at the price for developable land of R60/m². He estimates the effect of the taking of the servitude at 50% of full value. He says in the old days with regard to the areas under Eskom power lines, they used to give 33%. In other words, that the power line destroyed 33% of the value. Nowadays, Eskom gives 100%.

 

[110]   Mr. Derrick Griffiths is of the opinion that taking out streets and parks is not a valid way of determining the price paid in a comparable sale. The streets and parks form part of developable land. You have to have streets and parks in a township. That is land that one pays for.  In the “finishing off analysis”, Mr. Derrick Griffiths determines a different rate for undevelopable space by taking the open space from the general plan.  He assigned a rate of 20% of the full value of R56.25/m² to open space.

 

[111]   He explains that this was a judgment call. The 20% was in respect of Cashan Extension 33. Different percentages were taken for the other three properties. The 10%, according to him, is what could be considered normal. Cashan Extension 33 “has got a bit of open space but it is two areas incorporated as nice parks into that town”.  So the open space areas have a higher value. A developer who buys that land will say: “I can actually incorporate this into my township and make a nice walkway, a park, a stream, whatever.” The 20% of R56.25 is R11.25. The value of the open space is then R390 813.00 which is the extent of the undevelopable land times the rate (34,739m² x R11.25/m²). He then round it off to R60/m². Derrick Griffiths’ gave a detailed explanation of his calculation of the value of the sales.  The calculation proceeds from the adjusted rate of R56.25.

 

 

[112]   I need not go into much detail of each of the calculations. What is more important is the methodology used to determine the price per square metre (m²) used by the respective valuers with regard to the more appropriate comparable sale, which will at the end be just and equitable.

 

[113] As alluded to earlier, I am of the considered view that it is wrong to take off streets and parks. I align myself with the reasoning of Mr. Derrick Griffiths that a township consists of erven, streets and parks. There is an obligation to provide streets and a certain amount of park. In most cases you have to put your streets on developable land. In some cases, like the subject properties under the four comparable sales, there is actually excess open space. You are not going to pay the same for excess open space. The value could be positive, neutral or negative. The question is how much do you need for your erven, your streets and your required park. It is incorrect to exclude those streets and parks.

 

[144] The claim for R85/m² for the area in the east which is not expropriated, does not make sense, because the plaintiff retains the land. It must have some value. It cannot have no value. In my view it should be accorded the same value as the remainder, except for the servitude area.

 

[115] If it was to be that a simple mathematical arithmetic was to be applied, it would have been easy to make a determination. However, this is not simply a method a mathematics. Various other facts, factors and circumstances need to and must be taken into consideration. It is furthermore also not a simple division of the remaining piece of land in Residential type 1 and 2 erven. There are other factors that informs the decision what value to be attached to the remaining piece of land, for instance the developability of the remaining land.

 

[116]   Another factor to be considered is that the plaintiff submitted in its planning, five Residential 2 erven (“Res 2”), in the extreme east of the site. This represents townhouses or sectional title units at a density of 30 units/ha. The defendant’s case is that it would not have been approved, but an eco-residential type development with a density of no more than 5 units/ha was likely to be approved. If the development as suggested by the plaintiff is found to be improbable, the plaintiff’s reliance on the residual land value calculation fails as it is based, inter alia, on the income from sales of Residential 1 and Residential 2 stands.

 

[117]   The second issue arising from the dispute about the developability concerns the size of the developable area. More specifically the question is whether the area in the extreme east of the remaining land would be required to be preserved in its natural state because of ecological sensitivity. A decision on this issue could be relevant to the question of possible financial loss. It depends on the totality of the evidence led by the plaintiff and the correct characterisation of its claim in respect of the remaining land.

 

[118]   The two issues are inter-related. If the sensitive area in the east is undevelopable, the Residential 2 component cannot be developed. If it is refused authorisation, the alternative is an eco-residential township, which will require conservation of the sensitive area in the east. Evidence was presented by the Rustenburg Strategic Environmental Assessment (the “SEA”) and the opinions of environmentalists and town planners.

 

[119]   As the prespective Cashan Extension 8 is situated within 500m of the Kgaswane Nature Reserve, which is part of the Magaliesberg Protected Natural Environment, it is, in terms of the SEA, a High Environmental Control site. A conventional residential development is therefore declared to be an “inappropriate” land use and “Eco Residences” are stipulated to be an “appropriate” land use.

 

[120]   These provisions form the basis for the negative decisions by the municipality and NW DACE, with regard to the prospective Cashan Extension 8 and for Mr. Nagy’s opinion that the municipality and NW DACE would not have approved Extension 8, on the southern portion of the Remaining Extent of Portion 43. His opinion is based, inter alia, on the facts and conclusions set out in the following documents which show that the municipality and NW DACE in the past applied the SEA as a decision-making tool and would have done so, if a further amended application for the proposed Cashan Extension 8 came before them for decision. Although the true legal nature of the SEA was hotly debated between Dr Theron, Mr. Rudolph and Mr. Nagy, it is common cause that it was used as a decision-making tool by the municipality and NW DACE.

 

[121]   The other documents referred to are the following:

 

(a)       The minutes of the Mayoral Committee meeting of 24 June 2003 in which the Municipality resolved to implement the SEA.

 

(b)       The letter dated 29 July 2004 from the Manager: Development Impact Management of DACE to the municipality with regard to Cashan Extension 7 and the Rand Water Reservoir development.

 

(c)        The Record of Decision dated 13 July 2005 in which DACE granted approval for development of the northern portion (Extension 7) but refused authorisation for the southern portion.

 

(d)       The letter dated 24 May 2006 from the Municipality to EPS Consulting Engineers, informing the latter that Extension 7 had been approved.

 

(e)       The letter dated 28 February 2007 from the Divisional Manager, Protected Areas Management of DACE to Mr. Mukhola of DACE.

 

(f)        The letter dated 16 April 2007 from the Chief Director: Environmental Services of DACE to Mr. Bradley Thorp of Rock Environmental Consulting (Pty) Ltd.

 

(g)       The letter dated 23 November 2010 from the Chief Director: Environmental Services of DACE to Mr. R Shield of the plaintiff.   

 

[122]   As appears from the abovementioned documents, both the municipality and NW DACE were clearly very concerned about the close proximity of the proposed Cashan Extension 8 to the Kgaswane Nature Reserve and the detrimental effect the residential development could have on the nature reserve. The 25m buffer was clearly not regarded as sufficient protection. The issue whether the proposed Extension 8 could be developed, overlaps to an extent with the next issue which relates to the exclusion of the sensitive area in the east, which is planned to accommodate a portion of the five Residential 2 erven, an area of 3,651ha at a density of 30 units/ha. That sensitive area is covered by between 50% and 75% of the Residential 2 erven.   If the sensitive area in the east is to be preserved in its natural state, an important element will change and it will form a further reason why Mr. Norman Griffith’s residual land value calculation will become irrelevant.

 

[123]   However, there are more fundamental reasons why an application for environmental authorisation for the proposed Cashan Extension 8 would not have been approved, namely it is not environment friendly. It contains no park or open area. The contrast with the eastern part of the original Cashan Extension 7 is obvious. It reduces the ratio of open space to the total area of Extension 8 from 32,15% to 22,1%. Furthermore, it conflicts in every respect with the design philosophy of the owner/developer as represented by Mr. Shield. That design philosophy appears clearly in various paragraphs of the memorandum in support of the application for the establishment of the original Cashan Extension 7. The preservation of the natural environment as far as possible is stated as one of the factors influencing the planning approach. It is stated:

 

“With the above given, an effort was made not only to create another township in Rustenburg, but rather to create a place of living designed for gentle use of the environment. Every possible precaution was taken to minimise the environmental impact: soils, assessments, geology, water resources, drainage, land use and vegetation studies, aesthetic, historical and cultural appraisals – ensuring a development perfectly in tune with the natural surroundings.” 

 

[124]   This was the design philosophy which was confirmed by Mr. Schild under cross-examination. Mr. Schild confirmed during that session that the natural environment and features along the “spruit” were seen as important assets, and that the environment in general should not be unnecessarily damaged. The assets had to be preserved as far as possible.

 

[125]   The plaintiff’s possible layout of the potential development of the area is a wholly hypothetical exercise performed by Mr. Ferero. He did not take any environmental restraints or restrictions into consideration. It is designed to maximise the commercial element of the development. Being hypothetical, it cannot form the basis for a residual land value calculation which requires actual cost and income inputs.

 

[126]   If the actual amended Cashan Extension 8 application, with all its green components and mitigation measures was refused, authorisation for the environmentally destructive design as suggested on behalf of some of the witnesses for the plaintiff, stood no chance of success. The developers did not have to wait for 2010 for that result to materialise. The Department (NW DACE) expressed its attitude as early as 29 July 2004 in its abovementioned letter. If the hypothetical buyer and seller had approached the Department on or about the expropriation date to establish what its attitude would be, it would have been more or less as expressed in that letter.

 

[127]   To conclude on this aspect, it is quite apparent that the required permission to develop Residential 2 erven with a high density in the ecological sensitive area in the east, would probably not have been granted. That this impacts on the rate square metre (m²) goes almost without saying. However, because of its ecological sensitive nature which enhances the aesthetical view of the area, it, in my view, would increase the value of the area as a whole. Mr Derrick Griffiths did not make any adjustment for the magnificent views as described by senior counsel for the First Defendant and ignored the valuation principles that land with a magnificent view command a premium or higher price and also did not consider that the adjacent land, the Kgwasane mountain reserve was next door and green open space where no development will take place. It is submitted by the plaintiff that a developer will pay more for property next to green open space because potential buyers will pay more for such property and the benefit of not having an immediate neighbour to one side.

 

[128]   By taking Boschdal Extension 5 into consideration, Mr. Derrick Griffiths with his method of valuation, arrived at a rate of R60/m². I am of the view that same cannot be applied over the whole are, as it would ignore the ecological aesthetical beauty of the eastern part of the property. As stated, it ought to enhance the value of the property. Although Cashan Extension 33 is a much smaller area which makes it more expensive, the sale price per square metre (m²) was at the time it was sold (which was much later), R71.87m². Having considered all the factors relevant as enjoined by the Constitution to determine a just and equitable amount of compensation for the expropriated area, I am of the considered view that an amount of R70/m² would be reasonable, fair, just and equitable.

 

[129]   As the servitude area of 7834m² is not rendered completely useless, but has diminished in value because of the servitude, an amount per m² of half of the value of the remaining land, to wit R35/m² would be reasonable, fair, just and equitable. To avoid lengthy and involved arguments about compensation for a relatively small area, and to show its goodwill, the defendant is prepared to agree that the full market value of the various component parts be awarded for the whole area of the servitude. Thereby it follows the example of Eskom, which was quoted in evidence before the Court.

 

[130]   I have taken all the evidence with regard to the developability over the servitude area into account, as well as all the submissions made in this regard. For example, I considered the extension of Baboon street even over this area, the risk of blasting, the creation of a park(s), ect. Although not specifically mentioned, all the evidence tendered was considered in arriving at the aforementioned rate per m², both with regard to the servitude area as well as the reservoir area, that was expropriated. In terms of section 12 (2) of the Expropriation Act, a solitium is also payable. I find the defendant’s proposed or suggested amount of R55 000.00 quite appropriate.

 

[131] The plaintiff contended that if this Court does not award the amounts claimed as compensation, or exclude any of them, then a declaration should be made declaring section 12 (5) (f) of the Expropriation Act, to be inconsistent with the dictates of the Constitution. At first, it was stated that “any” provision of section 12 of the Expropriation Act should be declared unconstitutional, which was too general in nature. The attack on the constitutionality was than change to specific section 12 (5) (f).

 

[132]   The defendant contends to the contrary and submitted that section 12 (5) (f) is not unconditional. According to the plaintiff, section 12 (5) (f) is unconstitutional in general as it infringes ownership of land in general. The defendant submitted that the constitutional attack on section 12 (5) (f) is “to open the door for its (the plaintiff’s) claim in respect of the remaining land”. That is land that was not adjacent land, but it only applies to the marked value of the “property in question”, the expropriated land or property. It does not apply to financial loss to property that is not expropriated. Section 12 (1) (a) (ii) is very specific. It required that the financial loss must be “caused by the expropriation” itself. This is a claim in law. No evidence in this regard was presented for this Court to find actual financial loss caused by the expropriation itself.

 

As stated earlier on in this judgment, the area to the east which is ecological sensitive is not worthless, it has value and the plaintiff is not expropriated out of this remaining land. To the contrary, on the plaintiff’s own version, there can be development, including in this area.

 

[133]   I find that section 12 in particular section 12 (5) (f), is not unconstitutional. The defendant also take issue with the fact that the attack on the constitutionality of section 12 or rather section 12 (5) (f), was not properly raised. Because of this Courts’ finding that section 12 (5) (f) is not unconstitutional, I find it unnecessary to deal with the aspect whether the point was properly raised or not, in any detail. No case has been made out by the plaintiff in order to declare section 12 of the Expropriation Act unconstitutional.

 

[134]   Insofar as interest, Value Added Tax (VAT), and the costs of suit are concerned, this Court will make a determination after written submissions have been made by both parties.

 

Order

 

[135]   Resultantly, the following order is made:

 

(i)      The defendant is ordered to pay to the plaintiff an amount of R2 264 500.00 in respect of the expropriated property (the reservoir area) calculated at R70/m² in terms of section 12 (1) (a) of the Expropriation Act 63 of 1975.

 

(ii)     The defendant is ordered to pay the plaintiff an amount of R 274 190.00 for the expropriated property (the servitude area) calculated at R35/m² in terms of section 12 (1) (b) of the Expropriation Act 63 of 1975.

 

(iii)    The defendant is ordered to pay an amount of R55 000.00 as solatium to be added in terms of section 12 (2) of the Expropriation Act 63 of 1975.

 

(iv)    Interest on the aforementioned amounts (including any reserved costs), Value Added Tax (VAT), as well as costs of suit are reserved to be later determined by this Court, after written submissions submitted by both parties within twenty (20) days of the date is this order.

 

 

R D HENDRICKS

JUDGE PRESIDENT OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG

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