Reform of Expropriation Law: The Objects of Expropriation

1. Reform of Expropriation Law: The Objects of Expropriation Thesis Presentation by: Sean Cornell

2. Structure of the Paper 1. Introduction: 2. The pre-Constitutional Position: 3. The post-Constitutional Position: 4. Direction of Reform: 5. Analysis of the Expropriation Bill:

3. 1. Introduction: 1.1. Purpose of the Paper 1.2. Rudimentary Definition – ‘Objects’ of expropriation 1.3. Importance of the Question 1.4. Aspects of the Objects of Expropriation 1.5. Objects determine compensation.

4. 1.1.Purpose of the Paper: • Descriptive: To examine previous approaches to what may be expropriated. • Prognostic: To predict and suggest future trends in the reform of expropriation law. • Normative: To evaluate these approaches as to what may be expropriated.

5. 1.2.Rudimentary definition: • Broadly speaking, the objects of expropriation are those items which the State may expropriate. • The key question is: “What may the State unilaterally take from a private owner, for any public purpose, against payment of compensation?”

6. 1.3.Importance of the question: • a. Defining the objects of reform is important: • For determining when expropriation law applies. • For determining what amount of compensation is due.

7. 1.3.Importance of the Question: • b. Importance of the study at this time: • Expropriation law is in need of reform. • The differing approaches of the 1975 Act and the 1996 Constitution. • 1975 Act: Primacy of market value in compensation – s12(a) • FNB case2002 (4) SA 768 (CC): s 25 of the Constitution both protects private property and serves the public interest; it therefore requires that a proportionate balance be struck between the two functions. • Recent announcement about the Bill.

8. 1.4 Aspects of the Objects of Expropriation: • The traditional view of expropriation: entire erf of land taken permanently. • Complete loss of ownership – clean title given to the state. • Examples: Numerous cases: • Land taken on which a road is built. • Expansion of a railway requiring more private land.

9. 1.4.Aspects of the Objects of Expropriation: • b.A particular right in the property is taken over by the State (“functional” expropriation). • Dominium remains with the private owner • State takes one or more rights in the property Example: Fink v Bedfordview Town Council 1992 (A): • State expropriated a road servitude over property Example: Beckenstrater v Sand River Irrigation Board 1964 (T) • An existing servitude may be expropriated; and • An “unsevered” servitude may be expropriated.

10. 1.4Aspects of the Objects of Expropriation: • c. Use for a period of time: The property (in whole or in part) is expropriated for a certain period of time. • Alexander: “Temporal Expropriation”. • Dominium remains with the private owner. Example: Du Toit v Minister of Transport 2006 (CC): • The Minister expropriated the right to extract gravel for the road.

11. 1.4 Aspects of the Objects of Expropriation: • d. Expropriation of a right to take the fruits or extract other material. • Dominium remains with the owner • The right, not the extracted property, is the object. Example: Du Toit v Minister of Transport • The Minister expropriated the right and extracted gravel for the road.

12. 1.4Aspects of the Objects of Expropriation: • e. Third-party holders of rights in the expropriated object. • These are non-owners who hold rights in the property. • Example: SAR & H v Interland1983 (1) SA 1110 (A) Sub-Lessee of a property which is expropriated. • Section 19: Mortgagees entitled to compensation

13. 1.5. Objects determine compensation. • How do different aspects of these objects determine what must be paid? For example, does the right to use land require the same method of determination of compensation as the right to extract property from the land?

14. 2. The Pre-Constitutional Position 2.1. The Expropriation Act 2.2. Case Law

15. 2.1 The Expropriation Act 63 of 1975: • Introduction: • Expropriation is wholly statutory • Procedures and compensation determined exclusively by statute. • Codification of Expropriation law

16. 2.1 The Expropriation Act 63 of 1975: • b. Provisions of the Act: • Section 12: • Determines the amounts and procedures for compensation to be paid • Differentiates between ‘property other than a right’ and ‘a right’ (except minerals)

17. 2.1 The Expropriation Act 63 of 1975: • b. Provisions of the Act: • Section 13: • Deals with compensation for lessees. • Restricts who may be compensated

18. 2.2 Case Law: • How have the courts applied pre-Constitutional expropriation law in respect of the ‘aspects’ of what may be expropriated?

19. 3. Post-Constitutional Position: 3.1 Effect of the 1996 Constitution: 3.2 Du Toit v Minister of Transport:

20. 3.1 Effect of the 1996 Constitution: • Impact of the Constitution on the concept of property • Deprivation and expropriation under the Constitution • The FNB case • Effect of the new Constitution on Expropriation law

21. 3.2 Du Toit v Minister of Transport • Facts: • Nearby road repair necessitated land use. • Expropriation notice specified land to be used temporarily for ‘any purpose’ connected with the repair. • 80 000m3 of gravel extracted. • Dispute over compensation: • Du Toit claimed the market value of 80 000m3 of gravel – R800 000 • Minister only paid for the right to use the land (this effectively amounted to rent) – R6 000.

22. 3.2 Du Toit v Minister of Transport Du Toit v Minister of Transport 2003 (1) SA 586 (C): • Held that: • Expropriation of both the right to use the land (temporarily) and the right to extract gravel – no market value for this. • Court determined compensation using ‘any suitable manner’ – for property taken. • Amount awarded: R257 000 (market value + a solatium).

23. 3.2 Du Toit v Minister of Transport • Minister of Transport v Du Toit 2005 (1) SA 16 • (SCA): • Held that: • What was expropriated was the right to use and the right to extract. • Compensation for the use of the right not the same as compensation for property – former based on actual financial loss. • Du Toit would not have sold the gravel and its removal caused no financial loss. • R6 000 (rental + a solatium) for the use of the land – CPD decision reversed.

24. 3.2 Du Toit v Minister of Transport • Du Toit v Minister of Transport 2006 (1) SA 297 • (CC): • Held that: • Object of expropriation was the right to use the land and to remove the gravel. • Compensation must be awarded for both the rights above. • The value of the land without the gravel was no greater than that with the gravel – no financial loss. • Therefore, the R6 000 (rental + solatium) stands as compensation.

25. 3.2 Du Toit v Minister of Transport: • Conclusions of Du Toit: • Recognition of: • The temporal aspect of expropriation • The right to use land • The right to extract property from land • Different compensation for: • right to use – actual financial loss/rental. • right to extract the property – actual financial loss • the extracted property – market value

26. 4. Directions for Reform: Conceptual Severance • 4.1 The Theory and its implications: • 4.2 Problems of compatibility with South African Law • 4.3 Possible solutions to these problems

27. 4.1 Conceptual Severance and its implications: • “Dephysicalization” per van der Walt: • A social/commercial trend: “Incorporeal or intangible property are becoming increasingly important for personal wealth” – Intellectual property, shares and the goodwill of a company. • Argues that these forms of property could be incorporated into our understanding of property law – wider notion of property. • Argues that this trend is recognised in our private law and cannot be ignored in the development of constitutional law. • This could mean that expropriation comes to incorporate incorporeal property in the definition of what may be expropriated.

28. 4.1 Conceptual Severance and its implications: • Theory by Radin cited in van der Walt – A US theory: • All “intangible rights” held by the owner are “treated as independent property rights” • For example: Owner of a house is prevented from developing on that land. C.S. says that he can then claim that a right of his property has been expropriated or deprived. • Further example: Owner of a house next to a newly-built freeway. He may claim that he has been deprived of his right to use the property free of noise.

29. 4.1 Conceptual Severance and its implications: • Conceptualise ownership as a bundle of “sticks” (rights) • Under the prevailing concept, State deprivation of one “stick” may be justified as “legitimate regulatory deprivation” – zoning, building of a public work, etc. • Deprivation of many sticks may come to qualify as a form of expropriation. • Keystone Bituminous v DeBenedictus (US Supreme Court 1987): “[T]he destruction of one strand of the bundle is not a taking because the aggregatemust be viewed in its entirety” – Holistic threshold test • Under conceptual severance, each right can be the subject of expropriation and its deprivation would require compensation.

30. 4.1 Conceptual Severance and its implications: • US Case – Lake Tahoe-Sierra: temporal conceptual severance • 32 Month moratorium on building at the Lake • Moratorium due to environmental concerns • Court held that it was not a taking under the US Constitution and no compensation was required. • Court explicitly rejected temporal C.S.: • To require compensation would pressurise decision-makers into making a decision – could disadvantage certain groups. • Other forms of conceptual severance may be possible.

31. 4.1 Conceptual Severance and its implications: • Effect of conceptual severance: • Strong (unrealistic) protection of private property rights. • Heavy (“crippling”) burden of compensation on the State.

32. Further Issues: • 4.2 Problems of compatibility of Conceptual Severance with South African Law • 4.3 Possible solutions to these compatibility problems

33. 5. Analysis of the Expropriation Bill: • 5.1 Discussion of content of the Bill on the aspects of Expropriation. • 5.2 Evaluation of the Direction of Reform. • 5.3 Possible Amendments to the Bill.

34. Selected Bibliography: • Constitution of the Republic of South Africa, 1996. • Case Law: Beckenstrater v Sand River Irrigation Board 1964 (4) SA 510 (T). Du Toit v Minister of Transport 2003 (1) SA 586 (C). Du Toit v Minister of Transport 2006 (1) SA 297(CC). Fink v Bedfordview Town Council 1992 (2) SA 1 (A). • First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service and Another; First National Bank of SA Ltd t/a Wesbank v Minister of Finance 2002 (4) SA 768 (CC). Minister of Transport v Du Toit 2005 (1) SA 16 (SCA). • South African Railways and Harbours v Interland Marketing (Pty) Ltd 1983 (1) SA 1110 (A).

35. Selected Bibliography (2): • Statutes: • Expropriation Act 63 of 1975. • Books: • Alexander G The Global Debate Over Constitutional Property: Lessons for American Takings (2006) University of Chicago Press London. • Van der Walt AJ Constitutional Property Law (2005) Juta Law Cape Town. • US Cases: • Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987). • Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002).