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CONSTITUTIONAL COURT OF SOUTH AFRICACase CCT 78/14In the matter between:ARUN PROPERTY DEVELOPMENT (PTY) LTDAppellantandCITY OF CAPE TOWNRespondentNeutral citation:Arun Property Development (Pty) Ltd v City of Cape Town[2014] ZACC 37Coram:Moseneke DCJ, Cameron J, Froneman J, Jafta J, Khampepe J,Leeuw AJ, Madlanga J, Nkabinde J, Van der Westhuizen J andZondo JJudgment:Moseneke DCJ (unanimous)Heard on:9 September 2014Decided on:15 December 2014Summary:Land Use Planning Ordinance 15 of 1985 — meaning ofsection 28 — structure plan is not a policy for purposes of thesection — alternative remedies to section 28 compensationSection 25 of the Constitution — arbitrary deprivation —expropriation

ORDEROn appeal from the Supreme Court of Appeal (hearing an appeal from the WesternCape High Court, Cape Town):1.The appeal succeeds.2.The order of the Supreme Court of Appeal is set aside.3.The order of the High Court is re-instated in the following amendedform:“(i)The excess land that may be established or agreed upon by theparties has vested in the City of Cape Town in terms ofsection 28 of the Land Use Planning Ordinance 15 of 1985(LUPO).(ii)Arun Property Development (Pty) Ltd is entitled to compensationin respect of the excess land, in terms of section 28 of LUPO.(iii)The compensation must be calculated under the relevantprovisions of the Expropriation Act 63 of 1975.”4.The City of Cape Town must pay the appellant’s costs including thecosts of two counsel in the High Court, Supreme Court of Appeal and inthis Court.JUDGMENTMOSENEKE DCJ (Cameron J, Froneman J, Jafta J, Khampepe J, Leeuw AJ,Madlanga J, Nkabinde J, Van der Westhuizen J and Zondo J concurring):Introduction[1]This appeal raises a significant constitutional issue connected to theexpropriation of land and compensation. It is whether a local authority that has2

MOSENEKE DCJacquired land, by operation of legislation, from a private owner in a planning approvalprocess for a residential development, is obliged to pay compensation for the land soacquired. Here, the owner and developer of the land claims compensation from thelocal authority for the value of the land it has so acquired. It does so on the groundthat the land was unrelated to the normal need for the provision of public streets andspaces for the residential development but was required for a future road networkplanned for the region as a whole.[2]Since 1986, the Land Use Planning Ordinance1 (LUPO or Ordinance) requiresof a local authority in the Western Cape to undertake land use planning and to adopt astructure plan.2 It is meant to capture the local authority’s vision for the use anddevelopment of the land within its jurisdiction. Thus, a structure plan should providea framework within which land use planning and development by the private sector isto take place.In many instances the requirements set by a local authority in astructure plan are, for a private developer, not easy to bypass or change. A localauthority may require that a planned future network of roads be shown on adeveloper’s plan of subdivision. If that were so, section 28 of LUPO would apply.[3]Section 28 provides, subject to certain qualifications, for the vesting of theownership of public streets and public places in the local authority, without thepayment of compensation.3 The appeal hinges on the meaning this Court accords tothe section. It is thus expedient to rehearse its terms this early:“The ownership of all public streets and public places over or on land indicated assuch at the granting of an application for subdivision under section 25 shall, after theconfirmation of such subdivision or part thereof, vest in the local authority in whosearea of jurisdiction that land is situated, without compensation by the local authorityconcerned if the provision of the said public streets and public places is based on the115 of 1985. LUPO was an Ordinance of the former Cape Province and still applies in the Western Cape.2A structure plan is a form of land use plan, along with subdivision plans, site development plans anddevelopmental frameworks.3If new developments were not initiated by developers, the land necessary to enable the structure plan would, indue course, be expropriated with compensation to the land owners.3

MOSENEKE DCJnormal need therefor arising from the said subdivision or is in accordance with apolicy determined by the Administrator from time to time, regard being had to suchneed.”Background[4]The appellant, Arun Property Development (Pty) Ltd (Arun), is a propertydeveloper.The respondent is the City of Cape Town (City), a local authorityestablished in terms of national legislation, the Local Government MunicipalStructures Act.4In 1997 Arun acquired from the University of Stellenbosch(University) a property located in Durbanville, Western Cape (property),5 with a viewto undertaking a substantial township development.[5]Before Arun’s purchase of the property, the University had instructed a host ofexpert consultants including city planners, architects and consulting engineers toadvise it on the possible future use and development of the property. The consultantsadvised the University that the property fell within the logical expansion area of theDurbanville district and that the value of the property would be optimised if it wereused for a township development. They considered documents regulating municipalplanning in the area and found that various planning instruments made provision for ahierarchy of roads that would run over the property.6[6]In the early 1990s, the University lodged its application with the City to obtainthe necessary approval for the township development of the property.On3 September 1992 the University was informed in writing that the ministerial4117 of 1998.5Portions 57 and 61 of the farm Langeberg No. 311, Durbanville.6These instruments include structure plans adopted in terms of section 4 of LUPO and certain transport plansfor the Cape metropolitan area which had been established in terms of the Urban Transport Act 78 of 1977. Forexample, the Provincial Executive Committee had approved a structure plan for the area north of the N1 interms of section 4(6) of LUPO on 13 June 1988. The structure plan provided for five categories of roads.Order 1 (freeway), order 2 (primary arterial), order 3 (secondary arterial) and order 4 (local arterial) wereessentially for non-residential areas. The fifth category was so-called access routes, serving a residentialfunction.4

MOSENEKE DCJrepresentative had approved the application for the rezoning of the property from itsagricultural zoning to subdivisional area.7[7]After it had acquired the property, Arun, like the University, was told bymunicipal officials that no application for rezoning and subdivision of the property fora township development would be approved by the competent authorities unless thelayout plans of the proposed development made due allowance for the planned futureroad infrastructure. This meant that the approval for the rezoning and subdivisionhinged on whether the development accorded with existing planning protocols. Oneparticularly significant planning instrument was the structure plan.In 1988 theWestern Cape provincial authorities approved the structure plan in terms ofsection 4(6) of LUPO (1988 structure plan). It envisioned primary roads which wouldrun over the property.8[8]Arun too employed a team of consultants whose investigations confirmed theearlier history of the rezoning of the property. Arun’s consultants were informed thatthe requirements of the 1988 structure plan and other planning documents envisaged aspecified road infrastructure and the developer was obliged to provide for the plannedprimary road system over the property.[9]Arun approached the City for permission to subdivide the property in order toundertake a residential development.The application was drawn up taking intoaccount the local authority’s envisaged road infrastructure. The sought subdivisionswere granted in terms of section 25 of LUPO.9 This the City did on three different7The approval of the application for the rezoning to subdivisional area was informed by a traffic impactassessment. This report pointed out that in their planning for an upgrading and extension of the road system inthe vicinity of the property, the road authorities had taken account of the increased demand, including traffic toand from this specific development. The conclusion was reached that the development would not have asignificant negative impact on the existing road system and its approval was recommended.8This planned primary road system consisted of an order 1 road (trunk roads and main roads) North/South,Kuilsriver highway (previously known as Main Road 81 and currently known as Main Road 81 and the R300extension); an order 2 road (primary distributors) East/West, De Villiers extension (also known as Golf CourseRoad) and an order 2 road (primary distributors) North/South, Brackenfell Boulevard in the East.9Section 25 provides:5

MOSENEKE DCJoccasions for the three phases of the residential development. In each case, theapproval took effect on the date of transfer to the purchaser of the first erf in a phase.It included confirmation of the rezoning of specified portions of the property to“public streets” as well as conditions for the design of the road infrastructure within aphase.[10]Although section 42(2) of LUPO allows for the imposition of conditionsrelating to the cession of land without compensation, the approvals did not set acondition that the portions of the planned primary roads that ran over the property hadto be ceded to the City at no cost.10[11]Arun was not happy with every condition of the approvals. It applied for thevariation of some of the conditions on a few occasions. It sought the area reserved forpublic open spaces within the development to be reduced from 16% to 8% of theproperty. The City approved the variation after the provisional approval of the secondphase of the subdivisions. In another instance, the City, acting in terms of section 42of LUPO,11 granted a variation of certain second-phase zoning conditions. Theseincluded the rezoning of two land units from “single residential” to “generalresidential” and the layout of an internal public road, with a minimum road reserve20 metres wide. The variation was approved subject to Arun’s complying with thepreviously imposed second-phase conditions and observing the requirement that—“(1)Either the Administrator or, if authorised thereto by scheme regulations, a councilmay grant or refuse an application for the subdivision of land.(2)In granting an application under subsection (1) either the Administrator or the councilconcerned, as the case may be, shall indicate relevant zonings in relation to thesubdivision concerned for the purpose of the application of section 22(2).”10This is in contrast to City of Cape Town v Helderberg Park Development (Pty) Ltd [2008] ZASCA 79; 2008(6) SA 12 (SCA) (Helderberg) at paras 4 and 7. See also Arun Property Development (Pty) Ltd v City of CapeTown [2012] ZAWCHC 399 (High Court judgment) at para 30, distinguishing Helderberg from the instant caseon this basis.11Section 42(3)(a) provides:“Subject to the provisions of the Removal of Restrictions Act, 1967 (Act 84 of 1967), eitherthe Administrator or a council, as the case may be, may, in relation to a condition imposedunder subsection (1), after consideration of objections received in consequence of anadvertisement in terms of subsection (4) and after consultation with the owner of the landconcerned and, in the case of the Administrator, with the local authority concerned . . . waiveor amend any condition”.6

MOSENEKE DCJ“all public roads be transferred to Council, prior to the utilisation of the property forGeneral Residential purposes, the transfer of any newly created erven, theredevelopment of the property or the approval of building and sectional title plans,whichever first occurs”.12[12]Barring the variations it successfully asked for, Arun did not challenge any ofthe rezoning and subdivision decisions, or their allied conditions, by way of appeal orreview; a matter to which I will revert.In the High Court[13]On 10 September 2001, Arun instituted action in the Western Cape High Court,Cape Town (High Court) premised on section 28 of LUPO. It claimed compensationfrom the City in an amount, as at January 2007, of R13 429 756. We are informedthat the figure now stands at a substantially higher amount. Arun pleaded that itsapproved subdivision plans had to provide for portions of the higher-order roads(“excess land”) which were meant to cut across the property. However, the need toprovide for the excess land did not arise out of the normal needs of the residentialdevelopment of the property. The excess land now vests in the City and it is asubstantial tract of valuable property. The City must pay compensation for it.[14]The City raised several exceptions to the summons, some of which were upheldby the High Court.However, it granted Arun leave to remedy the defects byamending its particulars of claim.13[15]When the matter went to trial, the High Court sanctioned an agreement by theparties that the issues for decision be separated in terms of rule 33(1).14 That decision12Condition (j) reflected in the minutes of a meeting of the Urban Planning Committee that took place on17 September 1999.13On 23 April 2003, Blignault J upheld an exception to Arun’s particulars of claim and granted leave to lodgeamended particulars of claim. See Arun Property Development (Edms) Bpk v Stad Kaapstad 2003 (6) SA 82(C). On 15 November 2005, Erasmus J upheld additional exceptions taken by the City against Arun’s amendedparticulars of claim. See Arun Property Development (Edms) Bpk v Stad Kaapstad [2005] ZAWCHC 86.7

MOSENEKE DCJallowed the Court to give meaning to section 28 of LUPO without deciding the extentof the excess land and the value to be placed on it. This, the parties procured bystipulating that it was to be assumed, without the City admitting this to be the case,that the portion of public streets indicated as running over the property at the grantingof the specified subdivisions exceeded the normal need therefor arising from thesubdivisions.[16]The separated issues were:(a)Does the excess land remain vested in Arun or has it vested in the Cityin terms of section 28 of LUPO? (vesting issue)(b)If the excess land has vested in the City, is Arun entitled tocompensation for the excess land? (compensation issue)(c)If Arun is entitled to compensation, is it to be calculated in terms of theExpropriation Act,15 or section 25 of the Constitution? (calculationissue)[17]The High Court found in favour of Arun. It concluded that the excess land hadvested in the City in terms of section 28 of LUPO and that Arun was entitled tocompensation for it. Dlodlo J further held that compensation was to be reckoned interms of the provisions of the Expropriation Act.16[18]In reaching this conclusion, the High Court reasoned that legislation is notpresumed to take away existing rights unless it expressly or by necessary implicationstates so. The object to take away property without compensation should also not beimputed to the Legislature unless it is expressed in clear terms.14Rule 33(1) of the Uniform Rules of Court provides:“The parties to any dispute may, after institution of proceedings, agree upon a writtenstatement of facts in the form of a special case for the adjudication of the court.”1563 of 1975 (Expropriation Act).16See High Court judgment above n 10 at para 31.8

MOSENEKE DCJ[19]Section 28 of LUPO was considered by the Supreme Court of Appeal inHelderberg.17 The High Court held that it was not bound by Helderberg because itwas distinguishable on the facts. In that case, the approval of the subdivision wasmade conditional upon the developer ceding a portion of the property to the City. TheHigh Court held that the interpretation given to section 28 by the majority inHelderberg was premised on the conditions imposed by the local authority. Thatconstruction was not binding on it.[20]The High Court also held that the 1988 structure plan cannot be considered tobe a “policy”, as contended by the City, because it catered not for the designated areabut rather applied generally to the broader community.In the Supreme Court of Appeal[21]The appeal before the Supreme Court of Appeal was at the instance of theCity.18 The City sought a reversal of the unfavourable decision of the High Court.The mainstay of Arun’s case was that on a proper construction of section 28 of LUPO,all public streets vested in the City and that Arun was entitled to compensation forthose that went beyond the normal needs of the development. Arun urged the Courtnot to follow the majority decision (per Farlam JA) in Helderberg on section 28 ofLUPO because it was obiter in as much as it did not analyse or deal in detail with themeaning of the section. Arun urged that the construction of the section in the minorityjudgment of Heher JA was correct and ought to be followed.[22]The Supreme Court of Appeal upheld the appeal and reversed the decision ofthe High Court. It held that the majority in Helderberg had decided the matter beforeit on the basis of section 28. The Court decided the compensation issue and in sodoing in effect also decided the vesting issue on a basis adverse to Arun’s case. TheCourt considered that the Helderberg decision was binding and was neither obiter nor17See Helderberg above n 10 at paras 15-6 and 39-48.18City of Cape Town v Arun Property Development (Pty) Ltd [2014] ZASCA 56 (Supreme Court of Appealjudgment).9

MOSENEKE DCJdistinguishable from the present dispute. The Court concluded that the excess landhad vested in the City and Arun was not entitled to compensation.In this Court[23]The appeal by Arun against the decision of the Supreme Court of Appeal washeard with the prior leave of this Court. Arun sought to move this Court to uphold theappeal with costs and to re-instate the order of the High Court by directing that theexcess land had vested in the City and that Arun was entitled to compensation whichis to be calculated in terms of the section 26(1) of the Expropriation Act.[24]Arun submitted that a proper reading of the section compels the City to paycompensation for excess land that has vested in it by operation of section 28 of LUPO.That meaning accords with the plain language of the section and the purpose of LUPOto procure and facilitate the orderly and beneficial use and development of land. Also,that meaning is in harmony with the guarantee against expropriation withoutcompensation afforded by section 25(2) of the Constitution.[25]The City argued that Arun has no right to compensation. The interpretation ofsection 28 urged by Arun is incorrect. The provision was properly understood by themajority in Helderberg, a case that is indistinguishable from the present. Section 28only deals with circumstances in which compensation is not required. It does not, as anecessary correlative, dictate when compensation must be paid.[26]In a separate argument, the City submitted that Arun was not entitled tocompensation because the 1988 structure plan was a “policy” as envisaged insection 28 and accordingly compensation is excluded. The City added that it hasalways been its case that the road reserves were provided for in accordance with asection 28 policy. To this Arun said there was no ground for equating the 1988structure plan with a “normal needs policy” imagined by section 28. Even if theprovision of the public streets is “in accordance with a policy”, the “normal need”10

MOSENEKE DCJrequirement for vesting must nevertheless be met.19The policy may not permitmunicipalities to acquire land free of the duty to compensate for planned public streetswhich exceed the normal needs of the subdivision.[27]On another tag, the City resisted the appeal on

On appeal from the Supreme Court of Appeal (hearing an appeal from the Western Cape High Court, Cape Town): 1. The appeal succeeds. 2. The order of the Supreme Court of Appeal is set aside. 3. The order of the High Court is re-instated in the following amended form: “(i) The excess land that may be established or agreed upon by the

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