© Webber Wentzel 2014 SUBMISSIONS ON THE CONSTITUTIONALITY OF THE EXPROPRIATION BILL, 2015 PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITTEE ON

© Webber Wentzel 2014

SUBMISSIONS ON THE CONSTITUTIONALITY OF THE EXPROPRIATION BILL, 2015

PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITTEE ON PUBLIC WORKS

BEN WINKSAssociate: Litigation, Johannesburg

28 July 2015

INTRODUCTION

• The Expropriation Bill, 2015 ("the Bill") takes impressive strides towards a more uniform and procedurally fair expropriation regime than the current Expropriation Act, 1975 ("the Act")

• However, the Bill inherits features from the Act which are inconsistent with the Constitution of the Republic of South Africa ("the Constitution") o insufficient clarity regarding which authorities may request the

Minister of Public Works ("the Minister") to expropriate propertyo insufficient direction regarding the date on which ownership and

possession pass to the stateo insufficient direction regarding the determination of compensationo unfairly burdening the property right holder with the onus and costs of

approaching a court to decide on compensationo undue scope for delay in determination and payment of compensation

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INTRODUCTION

• These limited constitutional inconsistencies may be easily remedied through relatively minor amendments to the following:o Clause 3(1)(a): powers of the Minister to expropriateo Clause 7(2): notice of intention to expropriateo Clause 8(3): notice of expropriationo Clause 12(2): determination of compensationo Clause 15(3): offers of compensationo Clause 17: payment of amount offered as compensationo Clause 21: determination by courto Clause 24(1): service of documentso Clause 1: definitionso Clause 31: repeal of laws

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If the new Constitution is a bridge away from a culture of authority, it is clear what it must be a bridge to.

It must lead to a culture of justification - a culture in which every exercise of power is expected to be justified; in which the leadership given by government rests on the cogency of the case offered in defence of its decisions, not the fear inspired by the force at its command.

The new order must be a community built on persuasion, not coercion.

Etienne Mureinik "A Bridge to Where? Introducing the Interim Bill of Rights" 10 SAJHR 31 (1994) at 32

INTRODUCTION

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CLAUSE 3(1)(a): POWERS TO EXPROPRIATE

CONSTITUTIONAL INCONSISTENCY

•The "organs of state" permitted to request expropriation by the Minister must be confined to those officials on whom the Legislature has elsewhere explicitly conferred expropriation powers.

•Otherwise, it will indirectly confer unfettered and unguided expropriation powers on all "organs of state", which include anybody exercising any public power or performing any public function in terms of any legislation.

REMEDY

The Minister may, subject to the obligation to pay compensation which is just and equitable, expropriate property for a purpose connected with the execution of his or her mandate or upon request by [an organ of state] another expropriating authority.

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CLAUSE 7(2): NOTICE OF INTENTION TO EXPROPRIATE

INCONSISTENCY

•The clause fails to require inclusion of an indication of the date(s) on which ownership and possession are proposed to pass to the state, as well as the reasons for selecting such dates.

•Without including these particulars, the notice may be inadequate when measured against the right to administrative action that is procedurally fair.

•Section 3(2)(b)(iii) of PAJA requires that an affected person must be given "a clear statement of the administrative action", which necessarily requires as much clarity as possible regarding the time and manner in which the action is intended to unfold.

•In turn, the rationale for this intended time and manner of transferring ownership and possession will form part of "the reason for the intended expropriation of that particular property", included in the notice by virtue of clause 7(2)(d) of the Bill.

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CLAUSE 7(2): NOTICE OF INTENTION TO EXPROPRIATE

REMEDY

A notice of intention to expropriate must include—

(a) a statement of the intention to expropriate the property, including the date or dates on which it is intended that ownership and possession will pass to the expropriating authority;

(b) a full description of the property;

(c) a short description of the purpose for which the property is required and the address at which documents setting out the purpose may be inspected and particulars of the purpose may be obtained during business hours;

(d) the reason for the intended expropriation of that particular property, as well as the reason for the particular date or dates on which it is intended that ownership and possession will pass to the expropriating authority; …

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CLAUSE 8(3): NOTICE OF EXPROPRIATION

INCONSISTENCY

•The Bill does not give expropriating authorities any guidance regarding the appropriate timeframe for the transfer of ownership and possession, thus vesting them with unilateral and unfettered discretion to make this crucial determination.

•This is inconsistent with the constitutional separation of powers, a critical aspect of which was articulated as follows by the Constitutional Court in the leading Dawood decision.

•In failing to provide guidance regarding the timeframe for transferring ownership and possession, the Bill is no better than the Act.

•As was held in Dawood, it cannot be said "that there is any legislative purpose to be achieved by not supplying such guidance at all".

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In a constitutional democracy such as ours the responsibility to protect constitutional rights in practice is imposed both on the legislature and on the executive and its officials. The legislature must take care when legislation is drafted to limit the risk of an unconstitutional exercise of the discretionary powers it confers…

It is for the legislature to ensure that, when necessary, guidance is provided as to when limitation of rights will be justifiable. …

Dawood and Another v Minister of Home Affairs and Others 2000 (3) SA 936 (CC), paras 48 and 54


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REMEDY

The notice of expropriation served as contemplated in subsection (1) must contain—

…

(e) the date of expropriation, which shall, unless otherwise agreed, be no earlier than ninety days from the date of such service, or, as the case may be, the date from which the property will be used temporarily and also stating the period of such temporary use;

(f) the date on which the expropriating authority will take possession of the property, which shall, unless otherwise agreed, be no earlier than the date of expropriation and no later than ninety days after the date of expropriation; …

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CLAUSE 12(2): DETERMINATION OF COMPENSATION

INCONSISTENCY

•The extraordinarily wide range of expropriating authorities, across the various sectors and spheres of government, are not necessarily equipped for the complex and contested task of assessing, firstly, the market value of a particular property and, secondly, the just and equitable impact of the public interest on that value.

•Moreover, the exercise of this discretion is largely unguided and entirely uncontrolled. The discretion is unguided in that the Bill does not add any flesh to the factors set out in section 25(3) of the Constitution, but rather retains the Act's list of factors which must be taken into account, "to the extent that it is just and equitable to do so".

•The discretion is uncontrolled in that the Bill offers no procedural mechanism to ensure that all expropriating authorities correctly and consistently apply a single methodology to determine "just and equitable" offers of compensation. 11

CLAUSE 12(2): DETERMINATION OF COMPENSATION

REMEDY

In determining the amount of compensation to be paid in terms of this Act, the expropriating authority shall request and accept the determination of the value of the property by the Office of the Valuer-General in terms of section 12(1)(b) of the Property Valuation Act, 2014 (Act 17 of 2014): Provided that, if such determination is not practicable, the expropriating authority shall adopt the market value of the property as determined by a valuer, subject to the subtraction therefrom of any amount by which the claimant would be unjustly enriched, having regard to the following [must not, to the extent that it is just and equitable to do so, take account of]— …

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CLAUSE 15(3): OFFERS OF COMPENSATION

INCONSISTENCY•This clause is derived from section 10(5)(a) of the Act, and is regrettably inconsistent with the guarantee in section 25(2(b) of the Constitution that property may not be expropriated without being "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". •The plain language of this provision requires that, in the absence of agreement, the state must have its offer "approved by a court". •Clause 15(3) would circumvent this guarantee by requiring expropriated owners and holders to bear the burden, inconvenience and cost of approaching a court, simply in order to register the fact that the state's compensation offer has not "been agreed to by those affected". •In these circumstances, the acceptance of the state's offer is not obtained freely and fairly, and thus the clause cannot be constitutionally permissible.

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The Bank itself decides whether it has an enforceable claim against the debtor; the Bank itself decides the outcome of the dispute and the subsequent relief; and the Bank itself enforces its own decision, thereby usurping the powers and functions of the courts.

The fact that the debtor may have recourse to a court of law after the attachment takes place does not cure the limitation of the right; it merely restricts its duration. For the period of limitation, the debtor has been deprived of possession of the assets in question without the intervention of a court of law and in a manner inconsistent with section 34.

Lesapo v North West Agricultural Bank and Another 2000 (1) SA 409 (CC), paras 19-20


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REMEDY

Unless the expropriating authority and the claimant have agreed otherwise, the [latter] expropriating authority must be regarded to have accepted the [compensation offer made to him or her by the expropriating authority, as contemplated in subsection (1)] amount claimed by the claimant in terms of section 14(1), if [he or she] the expropriating authority fails to make an offer in terms of subsection (1) or, having made such offer, fails to institute legal proceedings for the determination of the compensation before a date stipulated in such offer [by the expropriating authority by written notice delivered on the claimant], provided that the said date may not be a date [earlier] later than 60 days from such [notice] offer.

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CLAUSE 17: PAYMENT OF COMPENSATION

INCONSISTENCY

•The Constitutional Court has already held, in Haffejee, that this does not always require compensation to be agreed or determined by a court before the transfer of ownership or even possession, this should still be the general rule.

•By tying the payment of compensation to the transfer of possession, which itself is left to the unfettered and unsupervised discretion of the expropriating authority,19 clause 17 of the Bill is inflexible and incompatible with the Haffejee principles.

•By empowering the expropriating authority, at its sole discretion, to utilise the compensation in "settlement of municipal property rates or other charges", clause 17(2) violates the guarantee that the "manner of payment" must either be agreed to or decided or approved by a court.

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(a) The provisions of section 25(2)(b) do not require that the amount of compensation and the time and manner of payment must always be determined by agreement or by the court before expropriation under section 25(2);

(b) Generally the determination of compensation, in accordance with the provisions of section 25(3), before expropriation will be just and equitable;

(c) In those cases where compensation must be determined after expropriation, this must be done as soon as reasonably possible, in accordance with the provisions of section 25(3);

Haffejee NO and Others v eThekwini Municipality2011 (6) SA 134 (CC), para 43


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REMEDY

(1) An expropriated owner or expropriated holder is entitled to compensation payable, subject to sections 18 and 19, on the date of expropriation [on which possession passes to the expropriating authority in terms of section 9(2) or (4)].

(2) Unless the expropriating authority and the expropriated owner or expropriated holder has agreed to a later date or dates, and subject to subsection (3), the expropriating authority must pay, on the date contemplated in subsection (1), not less than 80% of the amount or offer of compensation as stipulated in the notice of expropriation, to the claimant concerned [or to the person referred to in section 18(1)(b) or may utilise it in settlement of the municipal property rates or other charges or deposit it with the Master, as contemplated in sections 19 and 20, respectively].

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REMEDY (continued)

(3) The payment[, utilisation or deposit] of any amount in terms of subsection (2) does not preclude the determination by agreement or by [a court] the Land Claims Court of a different amount of compensation, but if the amount so determined as compensation is less than the amount paid, [utilised or deposited,] the claimant to whom or on whose behalf the last-mentioned amount was paid[, or the Master with whom it was deposited, as the case may be,] must refund the difference to the expropriating authority together with[, in the case of such claimant,] interest at the rate contemplated in section 13(1) from the date on which the amount was so paid [or utilised and in the case of the Master, the interest accrued thereon].

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CLAUSE 21: DETERMINATION BY COURT

INCONSISTENCY

•The entire compensation scheme of the Bill could be fatally undermined in practice if its dispute settlement mechanism lacks the capacity to function efficiently, expertly and consistently.

•By requiring all compensation disputes to be determined by a "court", defined as "a High Court [or] … a Magistrate’s Court having competent jurisdiction", the Bill creates the prospect of compensation being determined inconsistently among the hundreds of judicial officers in dozens of districts and divisions across the country.

•Moreover, it allows compensation disputes to be delayed by congested court rolls and potentially dilatory practices, whether by the state or by the expropriated owner or holder.

•In the interests of consistency, efficiency and accuracy in the determination of "just and equitable compensation", it is essential that these disputes be decided by a specialised court with appropriate capacity. 20


INCONSISTENCY

•The costs regime, also descended from the Act, presents another impediment to the right to have compensation "decided or approved by a court", as it heaps further pressure on expropriated owners and holders to accept the state's offer of compensation, even if they are aggrieved by it.

•The Bill puts them at risk of not only being unable to recover their own legal costs from the state, but even being liable for the state's legal costs, if only because their personal assessment of "just and equitable" compensation for their own property is ultimately found to fall wide of the judicial mark.

•The clause thus operates to discourage owners and holders from challenging the state's compensation offers, and it casts an unconscionable chilling effect on their exercise of the constitutional right to have compensation decided by a court.

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Constitutional litigation frequently goes through many courts and the costs involved can be high. Meritorious claims might not be proceeded with because of a fear that failure could lead to financially ruinous consequences.

Similarly, people might be deterred from pursuing constitutional claims because of a concern that even if they succeed they will be deprived of their costs because of some inadvertent procedural or technical lapse.

Biowatch Trust v Registrar Genetic Resources and Others 2009 (6) SA 232 (CC), paras 22-23


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REMEDY

1 Definitions

"Land Claims Court" means the Land Claims Court established by section 22 of the Restitution of Land Rights Act, 1994 (Act 22 of 1994); …

12 Determination by [court] Land Claims Court

(1) [A court] The Land Claims Court must, in the absence of agreement, determine any dispute between an expropriating authority and an expropriated owner or expropriated holder on the compensation to be paid on any property expropriated by an expropriating authority.

(2) If the compensation awarded by [a court] the Land Claims Court in any proceedings contemplated in subsection (1)—

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REMEDY (continued)

(a) [is equal to or] exceeds the amount last [claimed one month prior to the date for which the proceedings were for the first time placed on the roll] offered by the expropriating authority, [costs must be awarded against] the claimant's costs shall be borne by the expropriating authority on the scale as between party and party;

(b) is equal to or less than the amount last offered by the expropriating authority [one month prior to the date contemplated in subsection (a), costs must be awarded against the claimant party in question;], the parties shall each bear their own costs,

unless the Land Claims Court orders otherwise in the interests of justice.

[(c) is less than the amount last claimed, but exceeds the amount last so offered by the expropriating authority, ...]

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REMEDY (continued)

(3) Notwithstanding subsection (2), a court may in its discretion decide as to costs—(a) in a case not mentioned in subsection (1);(b) if any party did not within a reasonable time comply with reasonable requests for particulars under section 16(1);(c) if any party abuses the provisions of section 16(1); or(d) if, in the opinion of such court, the conduct of any party during or prior to the proceedings, or any other relevant factor, justifies a deviation from subsection (2).

(4) Subject to any appropriate order a court may make, the liability for costs of a claimant is a first charge against the money which, in terms of the order of court, and the interest which is to be paid to him or her, and such money and interest must be applied, as far as may be required, towards payment of those costs.] 25

CLAUSE 24(1): SERVICE OF DOCUMENTS

INCONSISTENCY

•The significance and permanence of expropriation require that, at least, the initial notice of intention to expropriate must be served in the same manner as a summons, which does not include service by registered post.

•Sebola v Standard Bank of South Africa Ltd 2012 (5) SA 142 (CC): for legal notices under the National Credit Act, 2005, mere dispatch by registered post is not sufficient, even when the consumer has agreed to service by registered post in the credit agreement.

•in circumstances where the expropriated owners and holders have never before been contacted by the expropriating authority, and indeed have never nominated a postal address for this purpose, registered post is inappropriate for service of the notice of intention to expropriate.

•At the very least, the Sebola standard or service by registered post should be included in the Bill, if registered post is to be retained.

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CLAUSE 24(1): SERVICE OF DOCUMENTS

REMEDY

Whenever a notice in terms of section 7(1), a notice of expropriation, a notice in terms of section 11(2) to an expropriated holder or a notice of withdrawal in terms of 23(1)(b) is required to be served in terms of this Act, the original or a certified copy thereof must—(a) be delivered or tendered to the addressee personally at his or her residential address, place of work, place of business or at such address or place as the expropriating authority and the addressee may, in writing, agree upon;(b) [be posted by pre-paid registered post to the postal address of the addressee;(c)] be published in the manner contemplated in subsection (2)—…

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© Webber Wentzel 2014 SUBMISSIONS ON THE CONSTITUTIONALITY OF THE EXPROPRIATION BILL, 2015 PRESENTATION TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITTEE ON