Roger Rodney Hatton Smith v Buffalo City Municipality and Others

The applicant owned a farm known as Wembley Farm (Remaining Extent of Farm 813, Division of East London, 49.1949 hectares). On 3 May 1999, the Buffalo City Municipality acquired ownership of the property for R762,440.00 (including compensation, solatium, and costs) under threat of expropriation for the purpose of establishing a municipal cemetery. The property was subsequently found to be unsuitable for the intended cemetery and has remained unused since 1999, with existing infrastructure being vandalised and destroyed. In 2008, the applicant instituted action proceedings seeking restitution of the property on the basis that he was an unwilling seller induced by a false representation. The claim was dismissed on prescription grounds, but the applicant obtained leave to appeal. On 30 July 2018, the parties reached a settlement agreement whereby ownership would be restored to the applicant upon payment of R3,006,090.00 (the original amount plus interest) plus R4,393,910.00 as contribution to the municipality's litigation costs. The municipality would retain a one-hectare portion for a fire station. The municipality's council passed a resolution on 25 August 2021 confirming acceptance of the settlement. However, the second respondent (City Manager) never signed the final revised settlement agreement. The applicant then brought this application to have the settlement agreement made an order of court.

• Whether ownership of land transferred to a public body under expropriation for a legitimate public purpose can be restored to the previous owner when the land is found unsuitable for that purpose
• Whether a court should make a settlement agreement an order of court in the circumstances
• Whether section 14 of the Municipal Finance Management Act 56 of 2003 (MFMA) applies to the restoration of property acquired through expropriation that proved unsuitable for the intended public purpose
• Whether the municipality's council resolution authorising the settlement was lawful and valid
• Whether the restoration of ownership constitutes a 'transfer' within the meaning of section 14 of the MFMA requiring compliance with supply chain management policies

1. It is declared that the proceedings in Makhanda case no. 1323/2008 have been settled. 2. Paragraphs 2 to 5 of the deed of settlement marked as annexure RRHS28 to the applicant's founding affidavit are made an order of court (providing for restoration of ownership to the applicant upon payment, retention of one-hectare portion by municipality, etc.). 3. The first respondent is ordered to pay the costs occasioned by its opposition to this application on scale C.

Section 14 of the MFMA does not apply to the restoration of property to a previous owner where the property was acquired through expropriation (or threat thereof) for a legitimate public purpose which subsequently became unattainable due to the property being unsuitable for that purpose. The restoration or restitution of property rights in such circumstances is fundamentally different from the transfer or disposal of municipal capital assets contemplated by section 14. Where expropriation fails to perform its function of providing access to land suitable for the intended public purpose, the infringement of property rights fails to serve its legitimate purpose and becomes unlawful and unconstitutional. Section 14 should not be interpreted mechanically but rather purposively, having regard to its objects of protecting assets needed for basic municipal services and introducing procedural safeguards against unjustified adverse effects on municipal property status. To construe section 14 as preventing restoration of property rights in all circumstances would undermine the constitutional right to property in section 25(1) of the Constitution. The restoration of ownership pursuant to a settlement agreement undoing the consequences of a failed expropriation is properly effected through section 6 of the Deeds Registries Act rather than through ordinary transfer mechanisms.

The court made several obiter observations: (1) It criticised the conduct of the second respondent (City Manager) for acting in bad faith by failing to communicate his concerns about section 14 compliance during lengthy settlement negotiations and only raising the issue after the application was brought. (2) The court noted that if the second respondent honestly held views about section 14 being a hindrance, transparency was required rather than the opaqueness he chose. (3) The court observed that the second respondent appeared to attempt to renege from the settlement agreement without even presenting his views to the council, despite the municipality's legal department having no difficulties with the lawfulness of the agreement. (4) The court reiterated established principles regarding when courts should make settlement agreements orders of court, citing Eke v Parsons regarding the requirements that agreements must relate to litigation, not be objectionable, and hold practical and legitimate advantage. (5) The court emphasised the policy benefits of settlements in reducing court rolls and conserving judicial resources, citing PL v Y.

This judgment is significant for South African property and administrative law as it establishes important principles regarding the restoration of property rights where expropriation for a legitimate public purpose fails due to unsuitability of the property. The court recognised that where the public purpose underpinning an expropriation becomes unattainable, the deprivation of property rights becomes unlawful and unconstitutional, entitling the previous owner to restitution. The judgment provides important guidance on the proper interpretation of section 14 of the MFMA, clarifying that it does not apply to restoration of property acquired through failed expropriation, and cautioning against mechanical interpretation of statutory provisions. It reinforces constitutional property rights under section 25 and the principle that expropriation must serve its legitimate purpose to be lawful. The judgment also emphasises the importance of good faith conduct by municipal officials in settlement negotiations and the courts' willingness to enforce settlement agreements that serve the interests of justice.