Compensation for What? An Analysis of the Outcome in Arun Property Development (PTY) LTD v Cape Town City

Abstract

In Arun Property Development (Pty) Ltd v Cape Town City the Constitutional Court awarded compensation for land that vested in the City of Cape Town in terms of a regulatory framework. The regulatory framework, sections 25 and 28 of the Cape Land Use Planning Ordinance of 1985 (LUPO), provides that land needed for public streets and places and indicated as such on a subdivision plan should vest in the local authority concerned, but without compensation if that land is based on the normal need of providing the particular development with such public streets and places. The appellant argued that since land in excess of the normal need also vested in the City, it had a right to be compensated for the excess land that vested in the City.

The Court, overturning two Supreme Court of Appeal decisions, awarded compensation. The Court hinted that the compensation was for the expropriation of the appellant's land that was excess to the normal need. In the absence of a formal expropriation procedure, this case note investigates whether the compensation could have been awarded for statutory expropriation or constructive expropriation.

Therefore, the question that is posed is whether the alleged expropriation for which the Court awarded compensation can be classified as either statutory expropriation or constructive expropriation. It is pointed out that the Court accepted that section 28 of the LUPO constitutes a development contribution for the land based on the normal need. In terms of the notion of development contributions, a developer has to donate land to the local authority concerned if that land is required to provide the particular development with public streets and places. A development contribution, as part of the administrative process of approving developments, is regulatory in nature and its validity is judged in terms of the requirements for a valid deprivation of property.

It is argued that since the Court interpreted section 28 of the LUPO to provide for development contributions, the alleged expropriation cannot be classified as statutory expropriation. Statutory expropriation occurs when legislation expropriates property directly through mere promulgation. In this case, the excess land vested in the City only after an administrative action was taken to approve a subdivision plan. It is also argued that statutory expropriation cannot be recognised in South African law, due to the constitutional requirements for a valid expropriation in section 25(2) of the Constitution.

Keywords: Expropriation; compensation; development contributions; statutory expropriation; constructive expropriation