Expropriation Bill: DPWI response to submissions & deliberations continued

Meeting report

The Chairperson welcomed the members of the Committee, the team from the Department, the legal services led by Adv Budlender, the Committee support staff and the members of the public to the meeting. The Committee was meeting on the first day of the term. The Committee also met after a sad week after what happened in KZN. Lives were lost in the flood. The Committee sent its condolences to all the families that had lost loved ones, all the families that were still looking for their loved ones, and to all the families that were displaced because they no longer had a home due to floods. The Committee felt their pain and was with them at this time. In the Eastern Cape, there were also families that were displaced that had been housed in the town hall. The Committee was also thinking of them.

The Chairperson sent her wishes to the Christians as they celebrated Easter weekend, and those that did not belong to this religion had a lovely long weekend.

There Committee was here to listen to the legal services of the Department, in responding to the issues and queries raised by the members. Before the close of Parliament, the Committee had Adv Naidoo as Adv Budlender was not present. She hoped that they were both present. The Office of the Chief State Law Advisor and the Parliamentary Legal Services were also present in the meeting. The Committee was going through the journey of ensuring that the Bill that would be tabled in Parliament will be the one that all the people of South Africa had commented on. Members representing their political parties in this Committee had raised issues on it.

The Chairperson asked the Committee Secretariat to read the apologies into the record.

The Committee Secretariat noted that the Minister and Deputy Minister would not be attending the meeting today as they were attending to the challenges of the flood in KZN with the other members of the Cabinet.

The Chairperson handed over to the Department’s legal services to brief the Committee.

Responses by the DPWI on issues raised during the consideration of the Expropriation Bill

Adv Geoff Budlender, Senior Counsel, Advocate of the High Court and Member of the Cape Bar, briefed the Committee on the issues raised during the consideration of the Expropriation Bill.

Adv Budlender presented a supplementary memorandum to the Committee. It was an updated memorandum that covered some of the questions and comments that were raised at the last meeting and cover some further matters. At the meeting of the Committee on 30 March, Adv Naidoo presented a memorandum of advice which had been prepared. Adv Naidoo had responded to the queries which were raised by members of the Committee, arising from the matters that were also raised by members of the public. Adv Naidoo did not complete the task on 30 March because time ran out. They had updated the previous memorandum. It included some additional points which would be helpful to members of the Committee. The update was based on two things. It was based on the matters which were raised by members of the Committee at the previous meeting. It was also updated on the basis of a meeting that the legal counsel held with the Parliamentary Legal Adviser and the Office of the Chief State Law Adviser last week.

Anatomy of section 25(2)(b) of the Constitution

Page two, paragraph five dealt with the anatomy of section 25(2)(b) of the Constitution. That was a section which was inserted because it addressed a question raised by the Parliamentary Legal Advisors, namely whether section 25(2)(b) of the Constitution means that an expropriating authority may decide the amount of compensation. The response in paragraph six was that the decision to expropriate lied with the administration, but only the courts had the constitutional competence to decide the amount of compensation if the expropriating authority and the expropriated owner did not agree on it. Section 25(2), which was quoted in paragraph seven, stated that property may be expropriated only in terms of the law of general application, subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court. There are two ways in which the amount can be fixed. It can be fixed either by agreements by those affected, or it can be decided or approved by a court. There was no provision anywhere in the Constitution, which said it could be decided by the expropriating authority. The Constitution did not permit that. There were two sets of agents who could decide or determine the compensation. The one was that the affected parties could agree, and the other was a court. He moved on to discuss paragraph ten. The point was made that it was possible for any arm of state to expropriate property because the law so provides. When one thought of expropriation, it was usually a Minister or Cabinet Minister expropriating property but in fact, all arms of the state could expropriate. In paragraph 10.1 the point was made that on occasion, the expropriation was not ordered by the courts. That was what happened in the Labour Tenants Act of 1996. That was an unusual provision, but it was the court which decided on the expropriation.

He discussed paragraph 10.2. There may be cases where legislation itself brought about the acquisition of private property by the state without executive implementation. For example, Parliament could pass a law that transferred property from an owner to the state. Parliament could pass a law that created a state monopoly in a particular industry. That had happened in other countries from time to time. Parliament could also determine that a property could be expropriated.

He discussed paragraph 10.3. The usual method of expropriation was by the administrative arm of the state.

He moved on to discuss paragraph 12. A court may set the amount and timing and manner of payment by deciding it or by approving. ‘Approving it’ implied that the court had been given a proposal, which the court found compatible with justice and equity. The court would then say that it approved it. The offer would usually have been made by the expropriating authority. When it says approved by a court, it meant a proposal had been made or a provisional decision had been made by somebody else, and the court had to approve it.

In paragraph 12.2, it states that ‘decision’ meant something other than ‘approval’. ‘Decision’ meant that the court itself decided the amount of compensation based on the evidence before it. That was the way it usually happened. The parties would appear before the court, they would all state their views as to what the expropriation would be and then the court decided on it.

Paragraph 12.3 stated that courts exist for the resolution of disputes. Decision or approval by a court was unnecessary if those affected agreed with the expropriator on the amount of compensation, its timing and manner of payment.

He moved on to paragraph 13. He had already made the point that there were two methods of deciding. There was either agreement or decision or approval by a court.

He discussed paragraph 16. If the administrative expropriating authority could decide the amount of compensation and time and manner of payment, excluding a court, then there would be nothing left for the courts to do. That would be inconsistent with the Constitution. Section 172 of the Constitution stated that the judicial authority of the Republic is vested in the courts. Judicial authority was about making decisions about, amongst other things, disputes about rights. It was only the courts, which could decide disputes about rights. Section 34 provided that disputes that could be decided by the application of law were to be decided by the courts or by any other independent tribunals. For all of these reasons, the legal advisors did not think that section 25(2)(b) of the Constitution meant that anyone other than a court could decide the amount of compensation and the timing and manner of its payment if those affected did not agree on those matters. He had not seen any academic writing, which suggested that the exploiting expropriating authority could decide the amount of compensation. All the commentaries that he had seen agreed that that was for the courts. That was in accordance with what the Constitution required. That was what section 55 required. He noted that when an item had been dealt with already and there was no change, he would say that it had been dealt with already. The long title had been dealt with in the last meeting and there was nothing to add.

Definitions

Page six dealt with the various definitions. The definition of ‘intangible property’ was dealt with last time.

He went on to discuss the removal of the Magistrates' Courts. There was some change. Members had debated it last time. He noted that there was some merit in the view of the Department that there would be questions of experience or capacity in the Magistrates’ Courts. It would introduce another layer. There would have to be another layer of appeals. The arguments that it would not be appropriate for Magistrates’ Courts to decide this were convincing. That was a policy question, which should be decided by the Committee. Did the Committee want the Magistrates’ Courts to have this power or not? It would be advantageous to get advice from the Department of Justice on that. He expressed a personal opinion on the matter. It would not be helpful to have the Magistrates’ Courts performing this role. It would result in more problems than it solved. It would be better to go straight to the High Court, or the new Land Court than to go to the Magistrates’ Court. He acknowledged that Magistrates’ Courts were more accessible, but they are heavily burdened. Magistrates’ Court did not do a lot of civil litigation and they did not have experience in that area. It would be better to leave it in the High Courts, but other people may take a different view. The other point that was added to the memorandum was added in paragraph 33. Magistrates’ Courts had a monetary limit on what they could do. If the value of the property or the compensation money was outside the monetary jurisdiction of a Magistrates’ Court, then, in any event, a Magistrates’ Court would not be able to decide the case. That was all the memorandum had to say on the question of the Magistrates’ Courts.

The Bill referred, gave the jurisdiction of a court by reference to the place where the property was situated. That assumed that the property did not move. The Bill did not limit property to immovable property. Therefore, to say that the court which has jurisdiction was where the property was situated may lead to all sorts of confusion. A suggestion was made in paragraph 38 that the solution was to pin the location of the property to a particular point in time. For example, the court within whose area of jurisdiction the property was situated when the notice of expropriation was issued. Or when the notice of intention to expropriate was issued. The location of the property would be fixed and that's the court that would have jurisdiction. That was the proposal.

He noted that the Land Court Bill had been dealt with previously and the advice remained the same.

On page nine, the definition of ‘deliver’, the answer remained the same as previously.

On page 10, ‘disputing parties’, the answer was the same as the previous advice.

On page 11 there was the question of the definition of ‘expropriating authority’. There had been some confusion raised by a lack of clarity in the Bill. It was necessary to make it clear that the expropriation of authority was an organ of the state, which was empowered by the Act or empowered by another Act to expropriate. It was just not any organ of state. In paragraph 57, to make it clear, it was suggested to add the following words to the definition of expropriating authority. Expropriating authority means ‘an organ of state empowered by this Act, or any other legislation to expropriate property for a public purpose or in the public interest’. He hoped that would lay to rest the concerns that this Act allowed any organ of state to expropriate any property. It should be regulated by a law, which was passed by Parliament.

He moved on to page 12. There was the definition of ‘expropriation’. He explained what the problem was. There were two sorts of expropriation or compulsory acquisitions which may take place. The law may say that property will be expropriated and will become owned by the expropriator. That was the usual thing. The expropriating authority published a notice of expropriation and the ownership of the property immediately shifted from the owner to the expropriating authority. But there was another sort of compulsory acquisition that could take place. Parliament could pass a law which states certain property will no longer be owned by the owner. If owned by somebody else, in other words, by a third party, Parliament could transfer property by law or by authorising an executive to decide that when a notice was issued, the property would shift from the owner to a third party. An example of that was land reform. If the Minister thought that it would be sensible for legislation to provide that where a property was going to be expropriated for the benefit of a third party, the beneficiaries, it should pass directly from the existing owner to the third party. There may be no reason for it first to be transferred to the state and then for the state to transfer it to the third party. Similar situations arise in relation to water rights. There may be situations in which what Parliament wanted was that when expropriation took place that it went directly from the owner, the existing owner to the new owner. For example, the land reform beneficiary. The problem was what the Constitutional Court has said. In the Constitutional Court ‘expropriation’ meant ‘the compulsory acquisition of property by an expropriating authority or organ of state, upon request by an expropriating authority’. Expropriate had a corresponding meaning. The Constitutional Court’s definition of expropriation did not include cases where the property goes directly to the third party. It means the compulsory acquisition of property by the state. The matter had been debated in the Constitutional Court. It said that expropriation means acquisition by the state. The point was made in paragraph 61, that that definition did not cater for transfers of property to third party beneficiaries of land and water and related reform which section 25(8) of the Constitution expressly mentioned. If the Bill used the definition of ‘expropriation’ which was used by the Constitutional Court, then this Bill would not apply to expropriations for a third party or to taking property from a third party. It would only apply where it was taken by the State. That was clearly a problem. This would be an error because transfers of that kind where transfers went from an owner to a third party were no less expropriatory than where the acquisition of property was by the state itself, for a public purpose or in the public interest. People who had been deprived of property by state action should receive the constitutional guarantee of just and equitable compensation, whether the property went to the state or whether the property went to a third party. In paragraph 64, it was recommended that the definition of expropriation should be amended to provide that it means the compulsory acquisition of property by an expropriating authority or a third-party beneficiary, for a public purpose or in the public interest.

He moved on to paragraph 66. The Office of the Chief State Law Adviser and the Parliamentary Legal Adviser raised concerns about this proposal. They were concerned that if the Constitutional Court had defined the word ‘expropriation’ to be limited to a particular category of cases then that would be very confusing if an Act passed by Parliament gave another interpretation. It would lead to great confusion when the consequences of the taking had to be decided. There would be an argument that expropriation under the Constitution was not expropriation under the Expropriation Bill.  Paragraph 69 made a suggestion. To accommodate the concerns of the Chief State Law Adviser and the Parliamentary Legal Adviser the insertion of a new subclause in the application clause, clause 2, was suggested. It would read, ‘the provisions of this Act apply to the compulsory acquisition of property directly or indirectly by third party beneficiaries in the public interest through an expropriating authority, including as contemplated in sections 25(4) to (8) of the Constitution’. The application clause would say that this Bill talked about expropriation, but it also applied when a third party was going to acquire it through an expropriating authority. That was the proposal for a means of making sure that the Bill covered all compulsory taking, whether the property went directly to the state or whether it went directly to the third-party beneficiary. He hoped that that was clear. There were then consequential changes which would need to be made. The ‘expropriating authority’ would need to be amended accordingly as discussed in paragraph 74. To resolve all these problems, it was recommended that reference to acquisition should be omitted from the definition of ‘expropriating authority’ because the expropriating authority itself may not acquire the property. It may be ordering the property to be transferred to someone else. The definition of ‘expropriating authority’ could read, ‘expropriating authority’ means an organ of state or person empowered by this Act or any other legislation to expropriate property or to bring about the compulsory acquisition of property contemplated in clause 2’. The expropriating authority was the party which took for itself or which gives to somebody else. It was essential that the Bill must deal with third party expropriations, but it does this now by saying there were two sorts of things. There was an expropriation of the kind which was mentioned by the Constitutional Court. That was when the state acquired itself. Then there was what was called a compulsory acquisition by a third party.

He moved on to page 15. Paragraph 76, the definition of ‘public purpose’ was dealt with last time and there were no changes there.

Paragraph 81 was the definition of ‘public interest’ and there was no change.

He discussed paragraph 85. There was a debate at the last meeting about the question of owners whose rights were not registered. Were they owners or were they holders? Or were they both? His view was that they could not be both. They must either be an owner or they must be a holder. That arose from a matter that Ms Graham had raised. Ms Graham had suggested that unregistered owners should be included in the definition of ‘owner’, that was correct. Owners should include all owners and holders should be people who had rights but were not owners. There were many forms of property for which an individual did not have to register ownership. The obvious one was the ownership of a car. An individual did register the ownership. A person went through that administrative process, but actually, the transfer of ownership took place when the car was bought. A person can own many things without registering them. A person owns books, clothing, animals, and all sorts of things where the ownership did not have to be registered. It was suggested that an amendment be made to recognise this. The confusion which had arisen was because a holdover right apparently included all rights that were not registered. That should be corrected to make the position clear because owners whose ownership rights were not registered and did not need to be registered, must be excluded from holders. They were owners. They were not holders. This would mean that ‘holder of a right’ means the holder of a right other than ownership. That was where ownership is not required to be registered and has not been so registered. He noted that at the top of page 17 there was an important point raised which would require further attention by the Committee. It occurred to him since the meeting of the Committee in March, that there was a difficulty in relation to common law landowners and the customary law. There were situations in which people were regarded as the owners of land under customary law, but they were not registered owners. There would have to be some attention given to the definition of owner to ensure that it did not weaken the rights of owners under customary law. There was a decision given recently by the KwaZulu-Natal High Court, in litigation involving the Ingonyama Trust in which a full bench of the High Court, three judges, said that the people who occupied the land under customary law were the owners of that land. It was true that they fell under a general ambit of the community, the traditional community concerned, but it was said that they were the customary law owners. There may be a need to deal with that in the Bill. He would have to look at that and make some suggestions to the Committee. He thought the answer would be to refer explicitly, to say that an owner included an owner under customary law, whether or not that ownership was registered. That would be the short answer to it. If ‘owner’ was the registered owner of land then ‘owner’ should also include the owner of land under customary law, where that ownership has not been registered. People's customary law ownership was not registered in the Deeds Office. One day it was hoped that that would be the case, but it was a long way from achieving that. It was proposed that when the Committee came back to the clause-by-clause amendments that the definition of ‘ownership’ should include an owner under customary law. The definition of ‘valuer’ had not changed. Clause 2(2) was also unchanged. He moved on to page 19.

Clauses 3(2) and (3)

He discussed clauses 3(2) and (3). There was one new thing which had been added. There was no real change there. It simply dealt with a situation with what the Minister of Public Works was required to do when a request for expropriation was made by another organ of state, which required it for the organ of state’s accommodation or land or infrastructure needs. There was no material change.

He discussed paragraph 107. What this situation contemplates is that a Minister in another Department would come to the view that that property was needed for that organ of state’s accommodation or land or infrastructure needs. That Minister did not have the power to expropriate. The Minister would therefore request the Minister of Public Works to carry out the expropriation. Should the Minister of Public Works have discretion, or should the Minister be obliged to carry out the expropriation if requested? The point was made in paragraph 107, that the Minister may do so, expropriated property, on behalf of an organ of state that does not itself have the power to expropriate only if the Minister was satisfied that the request would indeed be for a public purpose or in the public interest. The word ‘must’ was not problematic. If the Minister was satisfied that the expropriation was required for a public purpose or in the public interest there could be no reason to refuse a request for the other organ of state to make the decision that the property was required. The Minister of Public Works would then check that it was required for that purpose.

Clauses 3(5) and 23

He discussed clauses 3(5) and 23. New paragraphs were added regarding clause 23, which provides for the withdrawal of expropriation. This was a matter which was debated at length by the Committee at the last meeting. The principle was set out in paragraph 111. If the property was not used for the purpose for which it was expropriated and was not intended to be used for that purpose, then the justification for the expropriation would fail. That applied equally to all expropriating authorities and all third-party beneficiaries. Property could only be expropriated for particular purposes. If it was not going to be used for the intended purpose or the stated purpose, then it could not be expropriated. There had to be some provision for what happened when the expropriating authority said that it was expropriating for a particular reason and then something changed, and the property was no longer needed for that purpose. Many things could change after an expropriation, in complete good faith. The question was what happened to the property which had been expropriated for purpose x, and now was not going to be used for purpose x? That had been debated at length in the previous meeting. His view, in that case, was that the owner should have an entitlement to take the property back and to give back the compensation which was received.

He moved on to page 23, Paragraph 115.2. This was a new suggestion which was made in the light of the discussion last time. The expropriated owner or holder should be able to find out how the property was being used without having to go through the Promotion of Access to Information Act, which was quite slow and could be a very cumbersome process. It should not have to depend on self-disclosure by the expropriating authority. It was particularly relevant where land was expropriated for land reform purposes and the expropriating authority did not have information on how the land was being used.

He discussed paragraph 115.3. What happened if the property was expropriated by an organ of state for a particular purpose, but that organ of state decided not to use it for that purpose after all, but now another organ of state said it wanted to take that property for a public purpose? It was said in paragraph 115.3, that if another organ of state - with its own expropriation powers – requires the property for a public purpose or in the public interest then it should be possible for it to obtain the property via the expropriating authority. It could not acquire that property on the same basis that the original expropriating authority relied on. It would have to issue a new notice to the expropriating authority saying, that it wanted the property and the purpose for which it wanted it.

Paragraph 116 dealt with clause 23(2) of the Bill, which deals with a situation where use was taken, and the property was not used. That came from the old Act. It did not really fit with the notion of a change of purpose. It may even require the state to hold on to the property, which it did not need, which would really be senseless.

Paragraph 117 was a long clause that had been drafted dealing with the change of purpose after expropriation. He emphasised that this was for discussion purposes only. It had not been discussed with the Department. The purpose was for preparing a draft is to assist the Committee to identify the issues which had to be decided. People may agree or may disagree with the proposals which were made, but these were the questions which would have to be decided on when the clause-by-clause Bill was dealt with. He went through paragraph 117. The purpose of this draft was not to make a formal proposal but to highlight the issues which the Committee might want to think about and make a decision about in dealing with the change of purpose of expropriation. He read through the proposed subclause that dealt with the change of purpose of the expropriation. The proposed clause noted that the expropriating authority would offer the expropriated property to the expropriated owner or expropriated holder for reacquisition if the expropriating authority did not commence with the physical use of the property for the public purpose/public interest for which it was expropriated within three years of the expropriation; ceases to use the property for the public purpose/public interest for which it was expropriated within a period of 10 years after the date of expropriation; or no longer requires the property for the purpose for which it was expropriated. The proposed clause had eight subsections. Those were the suggestions for the mechanisms for dealing with the situation where the property was not going to be used for the purpose for which it was expropriated. He moved on to clause 5(4), which was unchanged.

Clauses concerning mortgages

He discussed the clauses concerning mortgages on page 25. From paragraph 121, the memorandum dealt with the problem of mortgages. He explained what a mortgage was. When a mortgage took place, the person who was the owner was the mortgagor and gets a loan. The money was then lent by somebody who was usually a bank, that person was called the mortgagee. In return for giving the loan the mortgage, the lender gets a right on the property. It was called in law a limited real right in property. It was definitely property which was protected by the Constitution. The lender, therefore, has a right to the property. The difficulty was that that right was dependent on the owner. If the owner lost the property, the mortgage disappeared and did not continue with the property. The result then was that when the property was expropriated, it did not only affect the owner but also affected the lender, who previously had a right in respect of the property. There was a mortgage and that mortgage had now disappeared. The question was about how to deal with this situation when it arose. That was discussed in paragraph 124. When the owner loses the property on expropriation, the lender loses its security and loses the mortgage. This amounted to a deprivation of constitutional property. The expropriating authority did not acquire the mortgage by the expropriation. The mortgage just ceases to exist. What the Bill did, like the current Act, was that it seeks to ameliorate the harshness by giving the lender, the mortgagee, a preference for the compensation amount to satisfy the outstanding debt. The current Act said that where the property was expropriated, then the mortgagee has first claim on the compensation amount. That was all well and good when the property was being expropriated at market value. Usually, the mortgagee will get back what it lent. But what happened if the property was being expropriated at less than market value or for nil? Then it may not be possible for the mortgagee to get the property back. There was a limit to how much the law could deal with that.

In paragraph 125 it was stated that the expropriating authority did not assume the role of the debtor. The expropriating authority did not step into the shoes of the owner. Those parties must regulate their own contractual affairs, privately. The Bill ensured that with the mortgagee there was a measure to ensure that its debt can be satisfied from the compensation sum, through negotiations with the expropriated owner.

Paragraph 126 stated that because the expropriating authority does not acquire the mortgage, the mortgagee is not an ‘owner’ as defined in the Bill.  Nor is the mortgagee a ‘holder of a right’, as the mortgage must be registered to exist, and holders are by definition the holders of unregistered rights. 

Paragraph 127 noted that the Bill did not make any provision for mortgagees to be involved in the expropriation process. Unless the Bill provides expressly for mortgagees at the various stages of the expropriation process, they will inadvertently be excluded in a way that adversely impacts their rights. They were about to lose their rights as mortgagees, but they were not given notice and they were not given an opportunity to make representations and to make submissions. That was inconsistent with the Constitution. They had a right, under the Constitution, to make representations in this regard.

Paragraph 128 made recommendations. It was recommended that the investigation stage must expressly provide for mortgagees to be consulted.  This will also bear on the enquiry into the suitability of the property for the purpose of the expropriation. If mortgages were not consulted during the investigative process, this may prove a constitutionally problematic paragraph. Secondly, mortgagees must receive notice of intention to expropriate.  If such notice is not given, a decision to expropriate may be procedurally arbitrary or unfair.  And, since a mortgagee’s interests will be affected by an expropriation, it may also result in substantive arbitrariness. Thirdly, as the Bill stands, mortgagees will receive notice of expropriation, but that is late in the process to meet the constitutional requirements.  The mortgagee would be constrained to accept any agreement that the expropriating authority may have reached with the expropriated owner. Fourthly, clause 12 provides that compensation must reflect an equitable balance between the public interest and the interests of the expropriated owner or expropriated holder.  But this is narrower than the Constitution, which requires a balance between the public interest and the interests ‘of those affected’.  A mortgagee will be ‘affected’ by an expropriation.

Paragraph 128.7 recommended that clause 12(1) be amended to mirror the language of section 25(3) of the Constitution, and not be limited to the interest of owners or holders. It was also recommended that the words ‘paid to the expropriated owner’ be omitted, so that clause 12 simply required the amount of compensation to be just and equitable, using the formulation of section 25(3) of the Constitution. He noted that the Committee will remember previous suggestions that the process of the Bill was too slow, clumsy and cumbersome. The Bill needed to be streamlined, otherwise, it would be a very slow process to achieve an expropriation. He proposed a streamlining of the expropriation process. Paragraph 128.10 noted that even if the proposal for streamlining the expropriation process is not accepted, clause 14 would still require amendment if the property is subject to a mortgage.  A mortgagee has a right not only to be informed of the intention to expropriate and the decision to expropriate but also to make representations about the intended expropriation and proposed compensation. Because of the material interest that the mortgagee has in the compensation amount, the Bill should provide that the mortgagee and the owner may agree to the amount of compensation offered.  Clause 14(1) will therefore need to be amended to include mortgagees.

Clause 7

He moved on to discuss clause 7. Ms Graham echoed the public comments that the notice of intention to expropriate should include an offer of compensation from the expropriating authority.  This is related to the concern about the right to possession passing before the amount of compensation has been decided, if not agreed. What the Bill currently stated was that it was for the expropriator to say that it was considering expropriating. Then the owner stated how much compensation is demanded. There was a concern about that because the notice of expropriation shifts the ownership of the property. It was an odd situation that the notice was issued saying that the property was being taken but the expropriating authority was not making an offer of compensation. The Bill overcomplicated the process for negotiating and arriving at a compensation sum.

He went through the questions under paragraph 130. The Bill assumed that the Constitution requires the state to attempt to purchase property before expropriating it. That was not so. The state does not need expropriation legislation to give it the power to acquire property by consent. The Bill places the onus on a property owner or holder to gather information about the value of the property and estimate what she thinks would be just and equitable, without necessarily having knowledge of all relevant factors. The expropriating authority may then accept the offer without more. This places owners and holders at a disadvantage.  Unsophisticated persons may be particularly disadvantaged in that they may be unable to obtain a proper valuation.  This could lead to a mismatch between the compensation sum agreed and a truly just and equitable amount. The expropriating authority was reactive rather than proactive in settling the amount of compensation.  By the end of the investigative stage, the expropriating authority should know whether it requires the property for a public purpose or in the public interest and what amount of compensation is likely to be just and equitable. As the Bill currently stands, the negotiation process was repeated up to three times and during this time the expropriation could not proceed. This slowed matters down. The memorandum made the point that the amount of compensation should be agreed on or decided by a court, in general, before expropriation takes place.  The Constitutional Court recognised that there may be instances where expropriation ‘must’ precede compensation but affirmed that justice and equity generally favour prior determination. Paragraph 131 proposed that the process for expropriation and determination of compensation be streamlined. It included a streamlining of the investigation stage, the notice of intention to expropriate, the mediation or determination by court and notice of expropriation.

Paragraph 132 noted that the clause regulating urgent expropriations does not require a prior determination of compensation.  Urgent expropriations would likely fall into the category of cases where expropriation ‘must’ precede the determination of compensation.

Non-urgent temporary use as a form of expropriation

He discussed non-urgent temporary use as a form of expropriation. The Bill provides for property to be used temporarily and for a defined period.  This must be communicated to the owner or holder in the notice of intention to expropriate and in the notice of expropriation. This type of expropriation was for a defined period.  The right expropriated is only the right of use, not ownership.  The expropriating authority retains that right only for so long as the notice of expropriation permits it, after which it must give the right of use back to the owner or holder.

Paragraph 136 noted that clause 9, governing vesting and possession of the expropriated property, contained a technical error insofar as it concerned temporary use. There was also an ambiguity in clause 9(5). It implies that the expropriating authority becomes liable for municipal property rates, taxes and similar charges only after the right to possession vests, but not before.  But it does not say who will pay rates, taxes and similar charges if the property is used only temporarily. It may be unfair to the expropriated owner or holder to bear those costs while it is denied the use of the property. The solution might be in ensuring that the number of compensation factors in future costs where the expropriating authority uses the property only temporarily. Lastly, there was no provision governing damage to property after the period of temporary use has come to an end and the property is returned to the owner or holder.  This should be addressed to afford an owner or holder a statutory, as opposed to a common law right to compensation.

Clause 19

He discussed clause 19, on page 31 of the memorandum. Clause 19 was technical in nature. It dealt with the fact that expropriation did not take place by transfer. Expropriation took place by the issuing of the notice of expropriation. The way clause 19 was formulated at the moment it assumed there was a registration process, which is critical. He explained to the members what happened when a notice of expropriation was issued. Once the notice took force, it comes into operation then automatically the owner of the property shifts to the expropriator or the third party without any registration in the Deeds Office. The notice of expropriation changed the ownership of the property. Then afterwards the notice was given to the registrar and the registrar records the change of ownership in the title deed. Clause 19 recognised that it was not registration which transferred the ownership, it was simply the notice of expropriation which transferred the ownership.

Paragraph 142 stated clause 19 should be reworded. It needed to provide for the fact that ‘the expropriating authority must pay outstanding municipal property rates, taxes and similar charges out of the compensation amount’.

Clause 21

He discussed clause 21, which dealt with arbitration. He noted that sometimes there was confusion about the difference between mediation and arbitration. Mediation was a process of reaching an agreement. Paragraph 144 made the point that parties to a mediated dispute resolution process endeavour to reach an agreement on disputed issues.  If they do not reach an agreement, then the mediation fails. The focus is on reaching a consensus. Mediation is appropriate for the purpose of section 25(2)(b) of the Constitution, which speaks of agreement on the amount of compensation. In arbitration, unlike mediation, the parties agree to a process of dispute resolution on a particular issue and to be bound by the decision on that issue by an impartial arbitrator. They may well not agree with the outcome, but they are bound by it.  And so, arbitration does not fit under the words ‘agreed to by those affected’ in section 25(2)(b) of the Constitution.

Clause 25

He discussed clause 25 and extensions of time periods. Clause 25 governed the extension of time periods under the Bill applicable to an owner, holder of a right in a property or other interested or affected person, which would include a mortgagee. Ms Graham questioned what would happen if the expropriating authority needed an extension. Clause 29(2) addresses this in part. It provides that the failure to take steps in terms of the Bill which are needed to culminate in a decision will not invalidate that decision unless the procedural slip is material, prejudicial or procedurally unfair. So, if the expropriating authority does not comply with a set time prescribed in the Bill, the failure must be immaterial, non-prejudicial and not procedurally unfair. The formulation does not permit an expropriating authority to extend a timeframe applicable to it or other organs of state under the Bill.  There is no such provision. There is also no provision for the expropriating authority to agree with the owner or holder or other interested persons to extend a period applicable to it or to approach a court for an extension. This appeared to be a policy choice taken by the previous Committee.  It was open to this Committee to revisit that choice. It seemed odd that the parties which are affected cannot agree to extend an applicable period.

(See Document)

Discussion

The Chairperson said that Members had raised questions and it was agreed that the Department would come back and respond to those queries raised on the document itself. This is what the Department had responded with and presented to the Committee. She noted Members who wanted a further explanation of what had been presented or who wanted to comment.

Ms S Graham (DA) thanked Adv Budlender for his presentation. She appreciated the amount of work that had gone into it and the analysis of the issues that had been raised. Adv Budlender had elaborated extensively on some of the members’ concerns, and it made a wealth of difference to how the members saw things. She believed that there were quite a number of amendments that were going to have to be made, in light of what Adv Budlender had raised. That was a positive because it was going to end up being a really good piece of legislation that was put out that all of the members could stand behind.

She referred to clause 7 and the urgent expropriation. Someone from AgBiz had been in touch with her and said that one of the problems of the Agri SA majority judgement was that it focused narrowly on the acquisition aspect and did not deal with ‘constructive acquisition’ or ‘constructive expropriation’. That was where the bare property ownership may be retained but the property rights were watered down to such an extent that the property really becomes worthless to the owner. That could very much be a result of the urgent expropriation. It could also be a result of normal expropriation if the expropriation definitional, the acquisition, was not clarified. There was a concern with respect to urgent expropriation. It was slightly addressed in terms of the fact that compensation should be payable on any damages. She provided an example. What would happen in the extreme event government issued an urgent expropriation, which was temporary, and did fracking? The damage done to the property could be to such an extent that the groundwater was poisoned, and the flora and fauna were damaged. When the owner got their property back, the property would be unusable for what they were initially using it for. That needed to be addressed as a concern. That was something that the Committee needed to look at further. She supported the idea of a streamlined approach. It was absolutely imperative. The bulk of the work should be done at the investigation phase so that by the time the discussions come to expropriate, most of the work had been done. That process would be streamlined, and everyone knew what was happening.

The Committee still needed to seriously look at the proposals with respect to the clause on the change of purpose. She would look at that quite extensively. She agreed that it was something that needed to be covered. She appreciated that the Committee was given some guidelines to work within.

She noticed that clause 12(3) was not dealt with. The DA had raised that clause 12(3) was no longer constitutional in light of the failed amendment. Clause 12(3) should be removed because given that an Ad Hoc Committee was required, and a constitutional amendment was required to put in place that stipulation to nil compensation. Retaining that in the existing Bill amounted to an amendment of the Constitution by legislation, which was not allowed. It was a backdoor amendment. She wanted Adv Budlender’s opinion on that matter.

Mr E Mathebula (ANC) said that he fully agrees with what the Committee had received. It helped the Committee. The responses vindicated the stance of the ANC and its resolution that was taken from its conference in 2017. He noted that there were members who were opposed to the amendment of section 25 of the Constitution, and they had said there was no need for the Expropriation Bill because of section 25 of the Constitution. He was taken aback when the very same opposition party that was opposed to the amendment of section 25 were also opposing the very same Amendment Bill. He agreed with what Adv Budlender had advised the Committee on.

He was concerned that magistrates could not deal with such matters. It had been adequately covered but he still felt that there was a need for easier and cheaper access to justice. A magistrate should have been included in the jurisdiction in terms of the courts that should be used. Magistrates’ Courts were accessible and were everywhere. It was very expensive to approach the High Court on such matters. He understood the shortcomings of the magistrates that could not be utilised in this instance.

He also went through clause 25 of the Bill. The Committee hoped it would not come to that clause because if that were to happen then it would indicate that something had not been done correctly. Adv Budlender said that there might be circumstances which dictate that clause 23 of the Bill could be involved. When a property was expropriated, there was a change, and the expropriating authority wanted that particular property to go back to that person from whom it was expropriated. He understood that government would be liable for those costs. It destabilised that particular person. He hoped that when the members took another look at the Bill, and amend it, they took a closer look at that particular clause. This clause should not be invoked. However, there was a need for the Committee to prepare for things like that, but it should be very minimal. He appreciated the fact that Adv Budlender explained section 25(2) of the Constitution in terms of fixing the price of the property that would be expropriated in the event that this became the law. It was not going to be a matter of the state or expropriating authority. It was going to be a matter between from person from whom the property was expropriated and when there were disagreements it would go to the courts. This showed that the state was not a dictatorial state. The state was open to any engagements in order for an amicable agreement to be reached.  

Adv Budlender responded to the questions on clause 7 and constructive expropriation. The principles of constructive expropriation, as Ms Graham had explained it, dealt with a situation where the ownership of the property remained with the owner. The ownership was not taken. So much else was taken that it was as if the ownership itself was taken. Sometimes ownership was spoken about as being a bundle of rights. If so many of the rights were taken, then there was no ownership at all in substance. All that was left was the title, but it was an empty title. In some legal jurisdictions, that was classified as a constructive expropriation, and it must be dealt with as if it were an expropriation. The debate in those situations is always about how far the removal of rights has to go. To the point where it could be said that it was an expropriation even though the title had not been taken. It was not known yet whether constructive expropriation was part of the law in South Africa. There had not been a case yet in which either under the old Constitution or under the new Constitution, in which a court has found that there has been a constructive expropriation. It was not known yet if that was part of South African law. The general approach around the world was that that was not something that could be defined in the statute because it was so fact-specific. It depended on the particular facts of the case. There had been cases all over the world in which courts have debated what happened and said that it was not an expropriation but an action of expropriation. Sometimes the courts said it was an expropriation and sometimes the courts said that it was not. He expected the same thing to happen in South Africa. Cases would arise someone said that their title was not taken but everything else was taken. The result was that the property was worthless. The person might argue that they had been expropriated and were entitled to compensation. He anticipated that those cases would arise. There was one case in which that arose, and it was rejected on the basis that there had not been a constructive expropriation. There was no decision by the courts on whether this doctrine was part of South African law. His expectation was that the situation may arise. Fracking could be a good example of it. The owner will be able to claim that their property was taken and that they must be compensated. It was for the courts to decide whether they recognised constructive expropriation. If so, was this such a case? That would be one of the most interesting cases decided in the Constitutional Court. He responded to the question of section 12 of the Constitution. He understood the argument which said that there was a constitutional amendment, which failed to pass and as a result that meant that expropriation for nil compensation was not permissible under the Constitution. When compensation must be just and equitable, that necessarily carried within it the possibility nil may be just and equitable. That will have to be decided on a case-by-case basis in the courts. He did not think that the fact that the constitutional amendment failed has the result that there could never be nil just and equitable compensation. The Constitution implicitly provides that compensation could be anything from nil to infinity, depending on what was just and equitable. He suggested that those interested have a look at the judgement of the Constitutional Court in the Agri SA. There was quite an interesting discussion in paragraphs 96 to 99, about circumstances in the East German case. There was an attempt after reunification to try to restore ownership to people who had rights before it was taken by the East German state. There was an attempt to give those rights back to them. There was legislation which gave it back to them. Then there was legislation which took it away from some of them again. There was a question about whether that was an arbitrary deprivation or expropriation. Ultimately, the German Federal Constitutional Court held that it was permissible in the circumstances of what was being attempted to be achieved, the reconstruction of democratic Germany. A Justice made the remark that the circumstances have some similarities to South Africa. His view was that the Constitution does permit nil compensation to be just and equitable. It does permit a conclusion, by a court, that nil compensation was just and equitable in a particular instance. The failure of the constitutional amendment does not affect that one way or the other. He noted that there were others who held a different view. It was fair to say that the majority view of those of the legal commentators and experts who have written on the subject, take the view that nil compensation was possible under Section 25 of the Constitution. He noted that the majority was not always right. Ultimately, it would have to be decided by the Constitutional Court.

He agreed with Mr Mathebula. Section 23 needed to be looked at quite closely. The draft that had been put up was not a proposal for a draft section. It was an attempt to identify the issues which would have to be decided when the section was formulated and put before the Committee for consideration. There needed to clearly be some provision. The expropriating authority could not take it for one purpose and use it for another. That was the fundamental principle of law. It was a principle which goes back, 80 years in law, to a case which was decided at the time of the Second World War. A government body had used the power which was given by one purpose to do something for another purpose. That could not be done no matter how good the second purpose was. A body may only use power for the purpose for which it was given. And the same principle would apply to expropriation. Property could only be expropriated for the purpose that the expropriating authority said it was going to use it for. It could not expropriate for another purpose, no matter how well-intentioned. Section 23 needed to deal with this much more fully than the existing Expropriation Act did. The memorandum suggested some questions which should be asked and some issues that should be addressed in formulating the new section 23.

The Chairperson said that Adv Budlender, who was representing the Department’s legal services, had shed some light on what was not clear when the Committee was discussing clause by clause. She did not think it was necessary for him to come back the next day. Adv Budlender had provided clarity on matters which Members had raised. The Committee appreciated that the Department, as the authors of this Bill, had come and explained. This was not the first time that the Department came to the Committee. Before the Committee had even started it invited the Department. The Department came, explained and responded to some of the issues that were raised in public hearings. The Committee appreciated that the Department took the Committee through step by step in explaining this important Bill, which the Committee wanted to be tabled in Parliament and adopted by Parliament.

Ms Graham said that she did not want to jump the gun, but she wanted to check on something. Adv Budlender, who advises the Department, had come up with fairly extensive recommendations in terms of amendments to the Bill. She wanted to know what the next step would be in terms of this and whether or not the Committee would refer back to the Department? Would the Committee adopt the report of Adv Budlender? She wanted clarity on how the next phase of the process would work.

The Chairperson said that the Committee still had to adopt the report. The Committee staff was still working and taking into account all the recommendations that had been raised by Adv Budlender. The Committee was still going to hear from the State Law Advisor. The Committee would then have a report that would consider all that had been presented. She noted that some of the comments raised by Adv Budlender did not necessarily mean a change in what the Bill said. It was not necessarily changing what the Bill said. All that had been presented would be discussed by the members and the Committee would look at what the team had consolidated. All the legal advice presented would be seen in a report.

The Chairperson thanked Members for their time and engagement on this important Bill. The Committee appreciated the legal services from the Department and Adv Budlender who presented. The members would continue to read what had been presented to the Committee, the Bill itself and what had been raised previously. The Bill would come before the Committee once having affected all the changes that had been raised in the report. That would be adopted by the Committee in the end.

The Committee sent its prayers and condolences to the displaced families of KZN. It was a sad time for South Africa. She urged Members to assist and contribute where they could. She noted that in Cape Town many people in the Langa informal settlement were displaced due to a fire. Many people had lost their belongings. The Committee sent their condolences to those families.

The meeting was adjourned