United Reformed Church, De Doorns v President of the Republic of South Africa and Others (905/2012) [2012] ZAWCHC 237; 2013 (5) BCLR 573 (WCC); 2013 (5) SA 205 (WCC) (14 December 2012)

Republic of South Africa

IN THE HIGH COURT OF SOUTH AFRICA

(WESTERN CAPE HIGH COURT, CAPE TOWN)

REPORTABLE

Case Number: 905/2012

In the matter between:

UNITING REFORMED CHURCH, DE DOORNS ...............................................Applicant

and

THE PRESIDENT OF THE REPUBLIC

OF SOUTH AFRICA ..............................................................................First Respondent

THE REGISTRAR OF DEEDS ..........................................................Second Respondent

THE PROVINCIAL MINISTER OF TRANSPORT

AND PUBLIC WORKS, WESTERN CAPE ..........................................Third Respondent

____________________________________________________________________

JUDGMENT DELIVERED ON 14 DECEMBER 2012

ZONDI, J:

INTRODUCTION

[1] The applicant is the Uniting Reformed Church, De Doorns. It owns the following three immovable properties, on which the three public schools under the control and administration of the third respondent, are located:

1.1 the remainder of Erf 49, De Doorns situated in the De Doorns Municipality, Division Worcester.

Bonne Esperance Primary School is located on this property.

In extent : 6,874 square metres.

1.2 Portion 1 of the farm Orchard no 119 BreedeValley Local Municipality Division Worcester

In extent : 1,7563 hectares

Held by : deed of transfer no. T13905/1959

Orchard Primary School is located on this property.

1.3 Portion of the Farm Riviera No 62, situated in the Matroosberg District Council, Division of Worcester, Western Cape

In extent : 3,531 square metres

Held by : deed of transfer no. T22166/1965

Rabie Primary School is situated on this property. It is not altogether certain when the schools on the applicant’s properties were established. They may have been either established by the applicant or taken over and improved by the applicant when it acquired the immovable properties in question.

(“theimmovable properties”)

[2] The matter concerns the constitutional validity of clause 16 contained in each of the three notarial lease agreements entered into between the applicant as lessor and the Department of Local Government, Housing and Agriculture : Administration House of Representatives (“the House of Representatives” or “the Department” or “the State”) as lessee on 1 April 1987 in terms of which the applicant leased its properties together with the school buildings thereon to the State. The tenancy was for a period of 20 years reckoned from 1 April 1987 and would have expired on 31 March 2007.

[3] Clause 16 of each of the lease agreements contained a provision in terms of which the applicant was obliged at the end of a 20 year period to transfer the properties free of charge to the House of Representatives (the lessee).

[4] The House of Representatives was one of the three separate houses of Parliament which had been created under the 1983 Tricameral

Constitution which was abolished in 1994 with the advent of a new democratic order. The functions which were performed by the House of Representatives were taken over by the third respondent.

[5] The first and second respondents do not participate in these proceedings. The third respondent is the organ of State which administers the premises of public schools in the Western Cape Province including the three public schools located on the applicant’s properties which were controlled by the House of Representatives. It opposes the relief sought by the applicant.

[6] For the reasons that will become apparent in due course a dispute has arisen between the applicant and the third respondent regarding the ownership of the three immovable properties on which the abovementioned public schools are located. After April 2007 the third respondent claimed to be entitled to enforce its rights against the applicant under the notarial lease agreements. The applicant disputed the third respondent’s right to enforce the lease agreement contending that the agreementsare against public policy, void and unenforceable.

[7] In order to resolve the dispute the applicant brought the present application in which it seeks an order declaring:

1. That the applicant is the lawful owner of the immovable properties;

2. That the applicant is under no lawful obligation to transfer the properties to the State free of charge;

3. That the applicant is entitled to receive the consideration agreed upon between the parties, alternatively fair compensation should the properties be transferred to the State;

4. the following provisions of clause 16 of the Notarial Lease Agreement concluded between the Applicant (as lessor) and the Department of Local Government, Housing and Agriculture : Administration House of Representatives in respect of the properties are void and

unenforceable with effect from 1 April 1987 :

“16.0 OORDRAG VAN PERSEEL

Die VERHUURDER is verpligomnaafloop van die huurtermynwat op 31 Maart 2007 verstryk, allegeboue, bestaandesowel as nuwe, tesame met die grondwaaropditstaan, groot 2,7968 (TWEE KOMMA SEWE NEGE SES AGT) Hektaar, met uisondering van opmeet-en oordrag kostewatdeur die HUURDER betaalmoet word, kosteloos in die naam van die Staattetransporteer.”

5. That the State is obliged to pay the agreed, alternatively fair rental to the applicant in respect of its continued occupation of the properties from 1 April 2007 until the termination of its occupancy of the said properties.

[8] The applicant contends that the provisions of the respective notarial lease agreements, in particular clause 16 thereof, in terms of which the lessor, (the applicant) is obliged after the expiration of the period of the lease on 31 March 2007 to transfer the relevant properties as well as all buildings existing thereon, to the State free of charge, are invalid. The applicant’s attack on the validity of the provisions of the respective lease agreements is on the basis that they are contrary to public policy.

[9] The applicant advances two grounds for its contention. First, that at the time of the conclusion of the lease agreements between it and the State there was unequal bargaining power and secondly, the enforcement of clauses 16 of the lease agreements will result in the arbitrary deprivation of its property in contravention of section 25 of the Constitution.

[10] The third respondent rejects the applicant’s suggestion that the provisions of the lease agreements are contrary to public policy and that by reason thereof they should be declared void and unenforceable. It contends that when the House of Representatives

assumed the management and control of the three schools located on the applicant’s properties in terms of section 27 of Act 47 of 1963 both the school buildings and immovable properties on which the schools were located vested in the State and the effect of the provisions of the respective lease agreements was to allow the applicant to continue to act as owner of the properties and to delay registration of transfer of ownership thereof to the State until the expiry of the lease period.

[11] The issue to be decided is whether the provisions of clause 16 of the notarial lease agreements which oblige the applicant to transfer its leased properties to the third respondent free of charge at the end of the lease period are contrary to public policy and should for that reason be declared void and unenforceable.

Factual Background

[12] The issues presented in this matter have to be determined on the basis of the following facts which are largely common cause. The Uniting Reformed Church was formed in 1994 as a result of unification of the two separate churches, namely the Dutch Reformed Mission Church initially formed in or about 1881 to serve Coloured members and the Dutch Reformed Church in Africa, formed in or about 1951, to serve African members. Prior to 1994 the applicant was known as Die NederduitseGereformeerdeSendingkerk in SuidAfrika, Gemeente De Doorns. In terms of the constitution of the amalgamated church, the applicant’s name was changed to the Uniting Reformed Church, De Doorns.

[13] Due to the apartheid policies there was a dire lack of adequate educational facilities in the communities served by the applicant.

The applicant was compelled to assume the responsibility of providing decent educational facilities to the communities in question as part of its social and spiritual obligations. This responsibility included developing new or improving existing very basic and largely neglected school buildings on its properties. To finance these educational projects the applicant used its financial resources and obtained loans.

[14] For instance when the applicant took formal transfer of Portion of the Farm Orchard on 6 October 1959 it had in fact assumed control during 1956 of the then existing elementary structure on the property that was used for the purpose of running a primary school. This it did by effecting various improvements to the building. The school became known as the Orchard Primary Dutch Reformed Mission School. In similar vein, Rabie Primary School was developed and conducted by the applicant on Portion 15 of the Farm Riviera and Bonne Esperance Primary School on Remainder erf 49 De Doorns.

[15] During or about 1987 the House of Representatives in terms of section 5 of the then Coloured Education Act, 47 of 1963 assumed

responsibility for running these three schools from the applicant. At that stage the schools were badly in need of maintenance which the applicant was unable to provide due to lack of funds. The House of Representatives came to the assistance of the applicant. It facilitated a loan in favour of the applicant for R1 671 290.00 from Sanlam against the security of building mortgage bonds which were to be registered over the properties on which the schools were located. In return the House of Representatives required a 20 year notarial lease to be concluded in respect of the school buildings and to be registered against the title deeds of the relevant properties.

[16] The notarial lease was prepared at the instance of the Department and concluded by the parties. The lease took effect from 1 April 1987 for a 20 year period and was to expire on 31 March 2007. The notarial lease together with the mortgage bond in favour of Sanlam was registered against the title deeds of the properties on 28 April 1987. Once that was done Sanlam made funds available to the Department with which to effect the required improvements to the schools.

[17] In terms of the notarial lease the total rental payable was R29 821.84 per month, payable as follows:

17.1 The amount of R3 633.00 per month with an annual escalation of 5 % directly to the applicant.

17.2 The amount of R26 188.84 directly to Sanlam being the monthly instalment in respect of capital and interest payable by the applicant to Sanlam pursuant to the terms of the mortgage bond in liquidation of the said loan.

[18] In terms of the notarial lease agreement the applicant was responsible for themaintenance of the buildings in question and was also liable for maintaining the insurance in respect of the properties. The applicant was furthermore responsible for paying the Municipal rates and taxes and other levies in respect of the properties.

[19] The impunged provisions of the relevant notarial lease agreements, which will be quoted in full for the sake of completeness, provide as follows:

Die VERHUURDER is verpligomnaafloop van die huurtermynwat op 31 Maart 2007 verstryk, allegeboue, bestaandesowel as nuwe, tesame met die grondwaaropditstaan, groot 2,7968 (TWEE KOMMA SEWE NEGE SES AGT) Hektaar, met uitsondering van opmeet-en oordrag kostewatdeur die HUURDER betaalmoet word, kosteloos in die naam van die Staattetransporteer.”

[20] The applicant duly complied with its obligations in terms of the said lease agreements and the Department and its successors in title did likewise until the expiry of the lease on 31 March 2007.

The Parties’ Submissions

[21] Mr D Potgieter SC who appeared with Mr G Potgieter for the applicant submitted that the notarial lease agreements, in particular clause 16 thereof, are unenforceable because, he argued, they are contrary to public policy and in support of this submission he relied on Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A) at 7; Barkhuizen v Napier [2007] ZACC 5; 2007 (5) SA 323 (CC) para [29]; Magna Alloys and Research SA (Pty) Ltd v Ellis [1984] ZASCA 116; 1984 (4) SA 874 (A) at 891. He argued that when the third respondent committed itself during 1987 to assuming responsibility in respect of the schools from the applicant, and proposed terms on which it would agree to fund the maintenance and development of the schools, the applicant because of its precarious financial situation at the time had no choice but to accept the terms.

[22] In developing his argument Mr Potgieter submitted that the lease agreements,to the extent that they authorised the transfer of the applicant’s property after 20 years to the third respondent without an obligation to pay compensation,are against public policy andareviolative of the provisions of section 25 of the Constitution which section proscribes the arbitrary deprivation of property as well as the expropriationof property, inter alia, without compensation.

[23] In his heads of argument Mr Oliver, who appeared for the third respondent, advanced two grounds on which he sought to defend the validity of clauses 16 of the relevant lease agreements. The first leg of his argument was based on the provisions of the Coloured Persons Education Act 47 of 1963 and in particular section 27 in terms of which the ownership of the school and the properties on which the schools are located vested in the State after the assumption by the then Department of Education in the Administration: House of Representatives of the management and control of the three schools in 1987. However, during oral argument Mr Oliver disavowed any reliance on section 27 of Act 47 of 1963 and confined his argument to the second leg of his argument, namely that there is no evidence to support the applicant’s contention that it was in a weaker position than the State at the time of the conclusion of the notarial lease agreements and that the effect thereof was that the contract was harmful to the public interest. For this contention he relied on Barkhuizen v Napier supra para [30]; Breedenkamp and Others v Standard Bank of South Africa Ltd and Another 2009 (5) SA 304 (GSJ); Sasfin (Pty) Ltd v Beukes supra at 9 B – C; Botha (Now Griessel) and Another v Finanscredit (Pty) Ltd 1989 (3) SA 773 (A) at 782 I -783 C; Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA).

Discussion

[24] The matter turns primarily on the validity of the provisions of clause 16 in the relevant notarial lease agreements. The question is whether they offend against public policy. The applicant contends that they do and that they should for that reason be declared void and unforceable. This contention is based on two grounds. First, the applicant says at the time of the conclusion of the lease agreements it was in a weaker position than the State with the result that it was forced to conclude the agreements which contain terms that are largely biased in favour of the State. The second ground is that the provisions of clause 16 violate section 25 of the constitution.

[25] In Sasfin (Pty) Ltd v Beukes supra Smalberger JA, after a thorough review of the authorities,concluded at 7 I that our common law does not recognise agreements that are contrary to public policy and that the interests of the community or the publicare of paramount importance in relation to the concept of public policy.

[26] At 8 C – D of the judgment the learned judge went on to hold that “agreements which are clearly inimical to the interest of the community, whether they are contrary to law or morality or run counter to social or economic expedience, will accordingly, on the grounds of public policy, not be enforced”. He concluded at 9B that “No Court should therefore shrink from the duty of declaring a contract contrary to public policy which the occasion so demands”. He cautioned, however, that “the power to declare contracts contrary to public policy should, however, be exercised sparingly and only in the clearest of cases, lest uncertainty as to the validity of contracts result from an arbitrary and indiscriminate use of power. One must be careful not to conclude that a contract is contrary to public policy merely because its terms (or some of them) offend one’s individual sense of propriety and fairness” bearing in mind that public policy generally favours the utmost freedom of contract, and requires that commercial transactions should not be unduly trammelled by restrictions on that freedom. SeeLloyds Bank v Bundy [1975] QB 326, 339. This was the position under the common law.

[27] The legal position under the Constitution was dealt with by the SCA in Napier v Barkhuizen 2006 (4) SA 1 (SCA). At para [10] of the judgment the SCA accepted the correctness of the “general premise” that contractual claims are subject to the constitution and that a contractual term that is contrary to public policy is unenforceable and that public policy “... now derives from the founding constitutional values of human dignity, the achievement of equality and the advancement of human rights and freedoms, non-racialism and non-sexism”.

[28] In Barkhuizen v Napier, supra the Constitutional Court pointed out that when a validity of a contractual term is challenged on the basis that it is contrary to public policy one needs to make that determination by reference to the values that underlie our constitutional democracy as given expression by the provisions of the Bill of Rights. Itsummed up the nature of the enquiry which needs to be undertaken as well as the approach to be adopted in conducting that enquiry as follows at paras [28] – [30]:

“[28] Ordinarily constitutional challenges to contractual terms will give rise to the question of whether the disputed provision is contrary to public policy. Public policy represents the legal convictions of the community; it represents those values that are held most dear by the society. Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values that underlie it. Indeed, the founding provisions of our Constitution make it plain: our constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law. And the Bill of Rights, as the Constitution proclaims, 'is a cornerstone' of that democracy; 'it enshrines the rights of all people in our country and affirms the democratic [founding] values of human dignity, equality and freedom'.

[29] What public policy is and whether a term in a contract is contrary to public policy must now be determined by reference to the values that underlie our constitutional democracy as given expression by the provisions of the Bill of Rights. Thus a term in a contract that is inimical to the values enshrined in our Constitution is contrary to public policy and is, therefore, unenforceable.

[30] In my view the proper approach to the constitutional challenges to contractual terms is to determine whether the term challenged is contrary to public policy as evidenced by the constitutional values, in particular, those found in the Bill of Rights. This approach leaves space for the doctrine of pacta suntservanda to operate, but at the same time allows courts to decline to enforce contractual terms that are in conflict with the constitutional values even though the parties may have consented to them. It follows therefore, that the approach that was followed by the High Court is not the proper approach to adjudicating the constitutionality ofcontractual terms.”

[29] The agreement in issue in the instant matter is the notarial lease agreement between the applicant and the House of Representatives in terms of which the latter leased from the applicant three immovable properties together with the school buildings thereon.In terms of the lease agreement the House of Representatives undertook to pay monthly rental to the applicant in the sum of R3 633.00 for the three schools located on the applicant’s properties plus an amount of R26 188.84. The applicant was responsible for the maintenance of the school buildings and had to ensure that the properties were sufficiently insured. In addition thereto, the applicant was responsible for paying the Municipal rates and taxes and other levies in respect of the properties.

[30] Clause 3.3 deals withhow the amount of R26 188.84 was to be utilised. It reads:

“3.3 Met dienverstandeegterdat die HUURDER geregtig is omsodanige deel van die balanshuurgeld as watgelystaanaan die maandelikse

kapitaal-en-rente-delgingspaaiement van R26 188.84 (SES EN TWINTIGDUISEND EENHONDERD AGT EN TAGTIG RAND EN VIER EN TAGTIG SENT) verskuldigdeur die VERHUUDER aan SANLAM ten opsigte van syboulening by daardieMaatskappyregstreeksaan SANLAM tebetaal by sodanigeadres as wat SANLAM van tyd tot tyd mag betaal.”

[31] The clause of the lease, the constitutionality of which is being challenged in this matter is clause 16 which, obliges the applicant to transfer its three properties free of charge to the first respondent after the expiry of the lease on 31 March 2007. This is the provision, which the applicant contends, is contrary to public policy and inconsistent with the provisions and values enshrined in the Constitution and the Bill of Rightson the grounds that the applicant was in a weaker position than the House of Representatives when it concluded the lease and secondly, that the provision of clause 16 is violative of section 25 of the Constitution.

[32] In determining the fairness of the offending clause in the lease the question to be asked is whether it is unreasonable on the basis as contended for by the applicant. There are two competing interests which should be borne in mind in the consideration of the fairness of the provisions of the lease. On the one hand public policy requires in general that parties should comply with contractual obligations that have been freely and voluntarily undertaken (freedom of contract doctrine or pactasuntservanda). Essential to this doctrine is the idea that individuals should be left free to conclude contracts and that the role of the Courts is merely to enforce contracts and that judicial intervention should be kept to a minimum. As the Supreme Court of Appeal observed in Brisley v Drotsky 2002 (4) SA 1 (SCA) at para[94]:

“... the Constitutional values of dignity and equality and freedom require that the Courts approach their task of striking down contracts or declining to enforce them with perceptive restraint.One of the reasons, as Davis J has pointed out, is that contractual autonomy is part of freedom. Shorn of its obscene excesses, contractual autonomy informs also the constitutional value of dignity...”

[33] There is no doubt in my mind that in determining the weight to be attached to the values of freedom and dignity and equality the extent to which the contract was freely and voluntarily concluded will be a vital factor.

[34] On the other end of the scale there is a public policy consideration which recognises that all persons have a right to seek judicial redress and that the role of the Courts is not merely to enforce contracts but also to ensure that a minimum degree of fairness, which will include consideration of the relative position of the contracting parties, is observed. This principle was recognised by the SCA in the judgment in Afrox Health care Bpk v Strydom supra and endorsed by the Constitutional Court in Barkhuizen, supra in which the Court expressed itself as follows at para[59]:

“... If it is found that the objective terms are not inconsistent with public policy on their face, the further question will then arise which is whether the terms are contrary to public policy in the light of the relative situation of the contracting parties. In Afrox the Supreme Court of Appeal recognised that unequal bargaining power is indeed a factor that together with other factors plays a role in the consideration of public policy. This is a recognition of the potential injustice that may be caused by inequality of bargaining power. Although the Court found ultimately that on the facts there was no evidence of an inequality of bargaining power, this does not detract from the principle enunciated in that case, namely that the relative situation of the contracting parties is a relevant consideration in determining whether a contractual term is contrary to public policy. I endorse this principle. This is an important principle in a society as unequal as ours.”

[35] The question is whether the applicant has established facts which objectively demonstrate that at the time of the conclusion of the lease agreement it was in a weaker bargaining position than the Department and that the effect of inequality in bargaining position was harmful to public interest. I am satisfied from the applicant’s papers that the applicant has succeeded in meeting the requisitethreshhold. This much appears in para 16 of the applicant’sfounding affidavit in which it alleges that “the Department, which represented so-called coloured own affairs in terms of the apartheidtricameralsystem, dictatedthe terms of the agreement, which the applicant had little option but to accept” as well as in para 28 where it says “the impugned provision in the lease agreement was inserted at the instance of the State and the applicant was left with no choice in the matter. It simply had to comply in order to fulfil the demands of the State for assuming responsibility of the schools”.

[36] These allegations have not been seriously disputed by the third respondent. Indeed in para 56 of its answering affidavit the third respondent avers that “the terms of the notarial lease agreements were necessitated by the realities that faced both applicant and the Department of Education of the Administration: House of Representatives, namely limited financial resources”.In my view the third respondent’s response should be rejected because it seeks to suggest that it was the applicant’s obligation to provide the farm workers’ children with learning facilities or to maintain and upgrade the existing ones. The third respondent’s assertion ignores the fact that it was the third respondent’s responsibility to see to it that the farm workers’ learners’ educational needs were adequately addressed and that there was no obligation on the applicant to finance from its own purse and raise loans for the building of the school facilities. The applicant and the House of Representatives were not partners. They were not in a partnership relationship.

[37] As far as the harmful effect which the relevant provisions of the lease have on the public interest is concerned, I agree with Mr Potgieter’s submission that on a proper analysis of the terms of the lease agreement the provisions of clause 16 are inimical to the values

enshrined in the Constitution. The particular section of the Constitution which is implicated by the provisions of clause 16 is

section 25. This is so because clause 16 obliges the applicant to, upon the expiry of the 20 year period and after 31 March 2007,

transferits properties to the third respondent free of charge.

[38] Section 25, which deals with property, provides as follows:

“(1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

(2) Property may be expropriated only in terms of law of general application-

(a) for a public purpose or in the public interest; and

(b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court.

(3) The amount of the compensation and the time and manner of payment must be just and equitable, reflecting an equitable balance

between the public interest and the interests of those affected, having regard to all relevant circumstances, including-

(a) the current use of the property;

(b) the history of the acquisition and use of the property;

(c) the market value of the property;

(d) the extent of direct state investment and subsidy in the acquisition and beneficial capital improvement of the property; and

(e) the purpose of the expropriation.

(4) For the purposes of this section-

(a) the public interest includes the nation's commitment to land reform, and to reforms to bring about equitable access to all South Africa's natural resources; and

(b) property is not limited to land.”

[39] It is common cause in the instant matter that should the third respondent proceed in enforcing the provisions of clause 16 the applicant will have no alternative but to transfer its properties to the third respondent without receiving any compensation. This constitutes deprivation as envisaged by section 25 (1), which, there is no doubt in my mind, fails to comply with the requirements of section 25 (2) (a) and (b) (First National Bank of SA Ltd t/a Wesbank v Commissioner, SARS [2002] ZACC 5; 2002 (4) SA 768 (CC) at para [46] and [100]).

[40] In my view the provisions of clause 16 sanction arbitrary deprivation of property and are contrary to the provisions of section 25. There is no sufficient reason for the deprivation from the perspective of either the relationship between the means employed and ends sought to be achieved or the relationship between the purpose for the deprivation and the applicant. The fact that the third respondent’s predecessor assumed control and management of the three schools located on the applicant’s properties can never, in my view, be a sufficient reason to justify the deprivation of the applicant’s properties. Neither can the fact that the third respondent’s predecessor facilitated a loan on behalf of the applicant be a justifiable reason for depriving the applicant of its properties. The applicant’s properties were used to secure the loan and the mortgage loan repayments were made from the rental which the applicant received from the third respondent. Financially, the third respondent’s contribution to the funds for the development of the schools was zero. That being the case there is no sufficient reason to warrant the deprivation of the applicant’s properties. To the extent that clause 16 of the lease seeks to deprive the applicant of its properties without creating an obligation on the third respondent to pay compensation, it is, in my view, unfair and therefore contrary to public policy. In the circumstances I hold that the provisions of clause 16 of the notarial lease agreements concluded on 1 April 1987 are invalid and unenforceable.

[41] In my view there were less intrusive means which the House of Representatives could have employed if it wanted to ensure that, upon the expiration of the lease, it did not lose the right to use the school buildings and other facilities on the applicant’s

properties. In order to achieve that objective it did not have to deprive the applicant of its properties.It could for instance have negotiated for itself an option to purchase the properties at the end of the lease term. In these circumstances there is no rational relationship between the means employed and the ends sought to be achieved. In my view the provisions of clause 16 in seeking to deprive the applicant of its properties are unnecessarily overbroad. The enforcement of clause 16 will completely extinguish the applicant’s ownership in the relevant properties for which the applicant receives no compensation. It is clear that the provisions of clause 16 are a disguised form of expropriation and cannot be allowed to stand.

[42] It is common cause that subsequent to the expiry of the lease, the applicant continues maintaining the insurance in respect of the properties and continued paying the municipal rates and taxes and other levies in respect of the properties. The education authorities continues to use the schools on the applicant’s properties after the expiry of the lease, but refused to pay any rent to the applicant in respect thereof. Their refusal is based on the contention that the lease has expired and that being so they are not obliged to pay the applicant any rent and further that in terms of the lease they are entitled to claim transfer of the properties.

[43] In light of the conclusion I have reached on the constitutionality of the provisions of clause 16 of the notarial lease agreements, it follows therefore that there is no basis for the third respondent to refuse to pay rent while it is utilising schools on the applicant’s property. It must decide either to continue utilising the applicant’s property and pay rent or find a place for the schools.

[44] In the result the following order is made:

It is declared:

1.1 That the applicant is the lawful owner of the following properties:

1.1.1 the remainder of Erf 49, De Doorns situated in the De DoornsMunicipality, Division Worcester.

In extent 6,874 square metres

Held by : deed of transfer no. T16823/1985

1.1.2 Portion 1 of the farm Orchard no 119 Breede Valley Local Municipality Division Worcester

1.1.3 Portion 15 of the Farm Riviera No 62, situated in the MatroosbergDistrict Council, Division of Worcester, Western Cape.

Held by : deed of transfer deed no. T22166/1965

(Hereinafter referred to as “the properties”)

1.2 The applicant is under no lawful obligation to transfer the properties to the State free of charge;

1.3 The applicant is entitled to receive the consideration to be agreed upon between the parties, alternatively fair compensation should the properties be transferred to the State;

1.4 The following provisions of clause 16 of the Notarial Lease Agreement concluded between the Applicant (as lessor) and the Department of Local Government, Housing and Agriculture : Administration House of Representatives in respect of the properties are void and

unenforceable with effect from 1 April 1987:

Die VERHUURDER is verpligomnaafloop van die huurtermyn wat op 31 Maart 2007 verstryk, allegeboue, bestaandesowel as nuwe, tesame met die grondwaaropditstaan, groot 2,7968 (TWEE KOMMA SEWE NEGE SES AGT) Hektaar, met uitsondering van opmeet-en oordragkostewatdeur die HUURDER betaalmoet word, kosteloos in die naam van die Staat tetransporteer.”

2. That the State is obliged to pay the agreed alternatively fair rental to the applicant in respect of its continued occupation of the properties from 1 April 2007 until the termination of its occupancy of the said properties.

3. The third respondent is ordered to pay the costs of this application including costs of two counsel.

______________

D H ZONDI

HIGH COURT JUDGE

CORAM : D H ZONDI J

JUDGMENT BY : D H ZONDI J

FOR THE APPLICANT : ADV. D POTGIETER (SC) &

ADV. G POTGIETER

INSTRUCTED BY : MOOSA PETERSEN & WAGLAY INC

FOR THIRD RESPONDENT : ADV. G A OLIVER

INSTRUCTED BY : STATE ATTORNEY

DATES OF HEARING : 31 MAY 2012

DATE OF JUDGMENT : 14 DECEMBER 2012