Reclamation Property Holdings (Pty) Ltd v ArcelorMittal South Africa Limited

The Reclamation Group purchased a business from National Metal (Pty) Ltd (a subsidiary of Iscor, later ArcelorMittal) in 1999 and leased land from Iscor to conduct operations. In 2000, Iscor initiated the process to establish a township (Benoni Extension 74) on redundant properties, including land occupied by the Reclamation Group. In March 2003, a written sale agreement was concluded whereby Iscor sold land to the appellant, comprising three properties including Portion 32 of the farm Kleinfontein 67. The agreement was subject to suspensive conditions regarding township establishment and approval. The township was approved by the local authority in 2009 but had not yet been declared an approved township. In January 2010, a dispute arose regarding whether the agreement had lapsed. Iscor asserted the agreement was void under s 67 of the Town-Planning and Townships Ordinance 15 of 1986. The Reclamation Group instituted action in October 2012 for declaratory relief that the agreement was valid and binding.

• Whether the sale agreement contravened s 67 of the Town-Planning and Townships Ordinance 15 of 1986
• Whether Portion 32 of the land fell within the definition of 'erf' in the Ordinance
• Whether the prohibition in s 67(1) applies to a portion of land laid out as a township that would lose its identity once the township was established by being subsumed into a larger plot
• The proper interpretation of the second part of the definition of 'erf' in s 1 of the Ordinance

1. Subject to para 2 below, the appeal is dismissed with costs, including those consequent on the employment of two counsel. 2. The first respondent is ordered to pay the costs of the opposed application for the introduction of the general plan by way of further evidence.

Section 67(1) of the Town-Planning and Townships Ordinance 15 of 1986 prohibits the sale of an 'erf' in a proposed township until the township is declared an approved township. For purposes of this prohibition, an 'erf' includes any particular portion of land laid out as a township which is not intended for a public place, whether or not the township has been approved. There is no distinction between a portion of land that will retain its identity in the approved township and one that will be subsumed into a larger plot thereby losing its identity - the prohibition applies to both. Once an owner has laid out land as a township and taken steps to establish it, the prohibition applies to any particular portion of that land. A contract entered into in conflict with s 67(1) is of no force and effect pursuant to s 67(2).

The Court noted that an owner may apply under s 97 of the Ordinance for consent from the local authority to enter into a contract contemplated in s 67(1), subject to providing guarantees regarding engineering services, which would substantially reduce the risks to purchasers. The Court also observed that where the entire property which has been laid out as a township is sold (as opposed to a portion), the contract is not prohibited by s 67(1) as the land cannot be said to be an 'erf' (citing Headermans (Vryburg) (Pty) Ltd v Ping Bai 1997 (3) SA 1004 (SCA)). The Court commented that interpreting 'particular portion of land' to mean the whole of the land laid out as a township would make those words superfluous and would make the phrase 'which is not intended for a public place' inapposite.

This case provides important clarification on the interpretation of s 67 of the Town-Planning and Townships Ordinance 15 of 1986 and the definition of 'erf'. It establishes that the prohibition on selling land in a proposed township applies broadly to any particular portion of land laid out as a township, regardless of whether that portion will retain its identity once the township is approved. The case reinforces consumer protection principles in township development by preventing developers from circumventing statutory protections through creative structuring of sales. It confirms that the prohibition is absolute and applies regardless of the particular circumstances or sophistication of the purchaser. The judgment provides guidance on the two-part definition of 'erf' and clarifies which part is relevant when dealing with proposed (as opposed to approved) townships.