Rustenburg Local Municipality v Burrie Smit Ontwikkelaars (Pty) Ltd

The respondent, Burrie Smit Ontwikkelaars (Pty) Ltd, owned land measuring about 87.5316 hectares, which it acquired in 1995 for township development. On 31 July 2004, the appellant municipality expropriated approximately 3.2350 hectares of the property for construction of a 100 mega-litre water reservoir and an area of approximately 7 834 m² for a servitude for water pipeline conveyance. The municipality offered compensation of R1,941,000 for the reservoir area (R60 per m²), R235,020 for the servitude area (R30 per m²), and R55,000 as solatium. On 7 August 2007, the municipality paid R2,622,703, which included the offered compensation plus R391,683 in interest. The respondent deposited the cheque but demanded further compensation at R85 per m² for both areas, plus solatium, VAT, and compensation for loss of development potential. On 24 November 2008, the respondent instituted action proceedings for determination of compensation. On 11 November 2016, before trial commenced, the municipality made a without prejudice tender of R1.5 million, which was rejected. The trial commenced on 11 June 2018 and ran for three years with 37 days of hearings. On 7 June 2023, the high court determined compensation at R2,264,500 for the reservoir area (R70 per m²) and R274,190 for the servitude area (R35 per m²), plus R55,000 solatium. On 3 November 2023, the high court made orders regarding interest and costs, ordering the municipality to pay interest on the balance of R362,670 from the expropriation date and ordering each party to bear its own costs.

• What is the meaning and effect of s 12(3) of the Expropriation Act 63 of 1975 regarding interest on unpaid compensation from the expropriation date?
• What is the nature and rate of interest payable on unpaid expropriation compensation?
• What is the effect of a rejected offer of compensation on costs under s 14(8)(e) read with s 15 of the Expropriation Act?
• Whether the court has discretion in applying the costs formula in s 15 and s 14(8)(e) of the Expropriation Act?
• Whether a solatium should be included in compensation for purposes of applying the costs formula?
• Whether costs should be apportioned when compensation determined by the court is less than the amount claimed by the owner but exceeds the amount last offered as compensation?
• Whether the municipality's without prejudice offer of R1.5 million should be considered in addition to or separately from the initial payment of R2,231,020 made under s 11(1)?

The appeal was upheld with costs, including costs of two counsel where employed. The cross-appeal was dismissed with costs, including costs of two counsel where employed. Paragraphs (c), (e), and (f) of the high court's order of 3 November 2023 were set aside and replaced. The municipality was ordered to pay simple statutory interest on R593,690.80 from 31 July 2004 to 7 August 2007, less R391,683 already paid. The respondent was ordered to pay the municipality's costs, including costs of two counsel and qualifying fees of expert witnesses Messrs Ballack, Rudolph, Nagy and D Griffiths, incurred after 11 November 2016, and costs of the interlocutory application reserved on 17 September 2019. In respect of costs incurred until 11 November 2016 (including interlocutory applications reserved on 3 August 2015 and 11 October 2016), each party was to bear its own costs.

1. Section 12(3) of the Expropriation Act requires payment of simple statutory interest (not compound interest) on unpaid compensation from the date of taking possession, calculated at the rate determined by the Minister of Finance in terms of s 80(1)(a) of the Public Finance Management Act 29 of 1999. The interest runs on the outstanding portion of compensation as ultimately determined until paid in full. 2. A solatium payable under s 12(2) of the Expropriation Act forms part of the compensation for purposes of applying the costs formulas in ss 14(8) and 15. 3. When an expropriating authority makes a without prejudice settlement offer after having already made a payment under s 11(1) of the Act, the offer must be interpreted in context. Where the offer is clearly in respect of the balance claimed and not stated to replace the previous payment, both amounts must be considered together in applying the costs formula. 4. Section 14(8)(e)(ii) of the Expropriation Act is mandatory: where an owner rejects a settlement offer and the compensation determined by the court is equal to or less than the amount offered by the expropriating authority, the court must order the owner to pay the authority's costs incurred after the date of the offer, including costs of two counsel where employed and qualifying fees of expert witnesses who testified after that date. 5. The costs formula in s 15(2)(c) providing for apportionment applies only where the compensation awarded is less than the amount claimed by the owner but exceeds the amount offered by the expropriating authority. It does not apply where the compensation determined is equal to or less than the offer. 6. Section 14(8)(f) grants the court discretion regarding costs incurred before the date of a settlement offer, subject to the provisions of s 15(3). 7. As expropriation laws must be strictly interpreted, courts have limited discretion in awarding costs and must apply the mandatory formula in s 14(8)(e) unless justified deviation is permitted under s 15(3).

The Court noted that the high court's order awarding R362,670 as the balance owing should have been less, because the solatium of R55,000 that had already been paid should have been deducted from the total compensation determined. However, since the high court did not grant leave to appeal on this aspect, the Court did not interfere with it. The Court also observed that determining from the record on what date particular experts testified was not possible, but there was nothing to indicate that calling any expert was not reasonably necessary. The judgment emphasizes that when an expropriating authority has already accepted liability to compensate and made payment under s 11(1), the owner acts lawfully by banking the cheque while proceeding to claim what it considers the full compensation due. The Court noted that the matter was not moot despite dealing only with costs and interest, because the high court had failed to exercise its discretion at all regarding costs, which constitutes exceptional circumstances justifying the appeal, along with the fact that substantial costs were incurred during the extensive three-year trial.

This case is significant for clarifying the application of the costs provisions in ss 14(8)(e) and 15 of the Expropriation Act 63 of 1975, particularly where an owner rejects a without prejudice settlement offer that, when combined with previous payments under s 11(1), exceeds the compensation ultimately determined by the court. The judgment emphasizes that courts must strictly interpret expropriation laws and that the costs formula in the Act is mandatory where applicable, limiting judicial discretion. The case clarifies that: (1) interest on unpaid expropriation compensation is simple statutory interest calculated at the rate determined by the Minister of Finance; (2) solatium forms part of compensation for purposes of the costs formula; (3) a without prejudice offer must be considered in the context of previous payments made under the Act; (4) where compensation determined is less than the expropriating authority's total offer, the owner must pay the authority's costs after the offer date as mandated by s 14(8)(e)(ii); and (5) apportionment under s 15(2)(c) is not applicable when the determined compensation is less than the offer. The judgment provides important guidance on how settlement offers should be evaluated in expropriation proceedings and reinforces the mandatory nature of the statutory costs regime.