CALCULATING LOSS: HOW TO ‘MAKE AMENDS’ IN TERMS OF THE RESTITUTION OF LAND ACT Florence v Government of the Republic of South Africa (CCT 127/13) [2014] ZACC 22 (26 August 2014) This judgment’s main focus deals with the question how one arrives at a figure to compensate someone who lost a home as a result of apartheid legislation. The court held that each circumstance had to be determined on its own facts, but that using the CPI index was a fair measure for determining “changes over time in the value of money” as stipulated in the Restitution of Land Act. For those involved in such claims, the discussion of the various methods to do the calculation is a valuable reference and in any event an interesting read. The Judgment can be viewed here. FACTS Ms Florence instituted a claim for financial compensation under the Restitution of Land Rights Act (‘the Restitution Act’). Her claim related to the family home on which the Florence family lived for almost twenty years (in the present day Rondebosch, Western Cape). Because the area was classified as a “White Group Area” in terms of apartheid legislation, the Florence family was forced to leave the property in 1970. The Land Claims Court found that Ms Florence met the requirements for restitution and determined the amount of compensation due by escalating the value of the loss in 1970 to present-day monetary terms using the Consumer Price Index (‘the CPI’). Ms Florence also claimed the costs of erecting a memorial plaque on the property. In this regard, the court held that it lacked jurisdiction to make an order regarding the memorial plaque since it was the subject of a private agreement between the current property owner and the Florence family. Ms Florence appealed to the Supreme Court of Appeal (‘the SCA’) which affirmed the Land Claims Court’s decision to use the CPI as the method of conversion. However, with regard to the plaque, the SCA held that the Land Claims Court had a very wide remedial discretion under the Restitution Act which allowed it to order the State to pay for the erection of such a plaque. 1 // 2 Ms Florence then applied for leave to appeal to the Constitutional Court against the SCA judgment with regard the finding that the CPI Index was an appropriate measure in the circumstances. The cross-appeal of the State dealt with the duty of the state to bear the costs of erecting a memorial plaque on the property. The Constitutional Court granted Ms Florence leave to appeal. HELD: The application of the CPI as measure for calculation of compensation: • The court agreed with the existing SCA case law on this issue, which determines that the application of returns on investment on a historical loss is likely to result in overcompensation, which is at odds with the purpose of the Restitution Act. The market value of the property is but one of the factors which must be taken into account when determining what would be fair compensation. • As such, where the Land Claims Court and the Supreme Court of Appeal opted for the CPI to measure “changes over time in the value of money”, as required in section 33 of the Restitution Act, this constituted an appropriate measure. The appeal accordingly failed. (A minority judgment rejected the use of the CPI, finding that it would not result in just and equitable redress in the present matter. Since the Restitution Act prioritises restoration of land, claimants who can only be compensated financially, should – as far as possible – be put in the same position as if the land had been restored to them. If no accurate current market value is available, the value of the property at the time of the loss must be adjusted to present-day value. It held that the CPI was not an appropriate tool for adjustment because it measures the change in the costs of consumption, rather than returns on investment, and therefore does not adequately account for the loss of immovable property. It held further that whilst a 32-day notice deposit rate is not without shortcomings, it was a more appropriate measure available given the evidence before the court in the present matter.) With regard to the memorial plaque: • The Court held that under section 35 of the Act a court could grant “alternative relief”. But this was only available in a case where the relief of restoration of a right in land or equitable redress was not appropriate or competent. • The present matter was not however such a case, as Ms Florence was granted just and equitable compensation, being a part of equitable redress. (In terms of the Restitution Act, the remedy for dispossession of land is either restoration of a right in land or equitable redress.) The State’s cross appeal was accordingly upheld in respect of the memorial plaque. CONTACT US 2 // 3 2 // 2 CAPE TOWN Tel: 021 406 9100 SOMERSET MALL Tel: 021 850 6400 ILLOVO Tel: 011 219 6200 CLAREMONT Tel: 021 673 4700 TABLE VIEW Tel: 021 521 4000 CENTURION Tel: 012 001 1546 FISH HOEK Tel: 021 784 1580 TYGERVALLEY Tel: 021 943 3800 BEDFORDVIEW Tel: 011 453 0577