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In the matter of:
KANGRA HOLDINGS (PTY) LTD        Appellant
and
THE MINISTER OF WATER AFFAIRS    Respondent
CORAM: MAHOMED CJ, VAN HEERDEN DCJ, EKSTEEN, HOWIE et STREICHER JJA
DATE OF HEARING: 7 May 1998
DATE OF DELIVERY 22 May 1998
J U D G M E N T
HOWIE JA:
(ii) an amount to make good any actual financial loss caused by the expropriation; and
(b)      in the case of a right, an amount to make good any actual
financial loss caused by the expropriation or the taking of the right;
In claiming under subsec (1), appellant founded its prayers for compensation upon the following allegations:
alternatively to paragraph 7.1.1.
Alternatively to paragraph 7.2.1
7.2.2    R35 331 088 calculated on the basis that the plaintiff
At the time of expropriation appellant had not yet exploited the coal rights, whether by establishing a coal mining operation or in any

6 other manner. The White/Sealey report incorporated by reference in the

respondent maintained:
duty assessments. The report goes on to state that in arriving at a
reasonable value for the rights which were expropriated in this case such
value —
9 value of an expropriated asset, even one, I would venture to add, for
which there would only have been a single potential buyer.
not have a market value that led the legislature to provide expressly for
the market value measure of compensation in para (a) of s 12(1) but not
in para (b). It is nevertheless plain that loss of an asset through
expropriation constitutes actual loss of its market value. Such loss
therefore necessarily falls within the ambit of (b). In other words, where
that which is expropriated is a right having a market value, there is no
difference between the measure of compensation respectively afforded by
paras (a) and (b). Consequently, (b) entitles the owner of an expropriated
right with market value to compensation not only in respect of such value
but to additional actual loss provided, of course, that the latter is "caused
by the expropriation" and, provided further that, apart from causation, it
is a loss for which the Act permits compensation.

is simply claimed as being actual financial loss caused by the
expropriation. However, counsel for appellant said that if the coal rights
had had a market value at the date of expropriation (the existence of
which value seems to me to be shown by a number of facts stated in the
White/Sealey report) he disavowed any intention, as evinced by the
present particulars of claim, to claim the compensation in issue qua
market value. His contention was that appellant was not confined to
market value but entitled to compensation on the basis of the present
value of the fully realised commercial potential inherent in the rights. In
the circumstances, the challenge raised by the exception is whether the
sum representing the latter value constitutes actual financial loss caused
by the expropriation, and, in any event, whether the loss claimed is
compensable under the Act at all.
Pienaar's case concerned two pieces of agricultural land. Portion 291 was irrigated with borehole water emanating from Portion 292. The former was expropriated, the latter not. 292 was not fully developed and because the borehole provided insufficient water to irrigate

12 both portions the owner's intention had been to construct a dam on 292
for supplying both Portions. The scheme would have involved
subdivision of another piece of land and consolidation of the owner's
share of it with 292. 291 had been valued as non-irrigated land and the
owner claimed compensation on the basis that Portion 291 had to be
valued as irrigated land or, alternatively, compensation for the actual
financial loss involved in its being valued as non-irrigated. In relation to
the alternative, the Court interpreted the words "deur die onteiening
veroorsaak" (in the counterpart of s 12(l)(a)(ii) )in conjunction with the
requirement (in the counterpart of s 12(5)(e) ) that "indirekte skade" had
to be left out of account, and concluded (at 25 A - C) that it followed from
the latter requirement that only actual financial loss directly caused by the
expropriation was compensable. It was not enough that the expropriation
was a causa sine qua non of the alleged loss; it had to be clear that there
was a direct causal connection between the two. Accordingly, so it was

13 held, the need for subdivision and consolidation before the development
of 292 and, consequently 291, could occur, demonstrated that before the
alleged actual loss could have been sustained there would, in various
respects, have had to be decision making, initiative and action by the
owner and others. All of these were necessary links in the causation of
the alleged loss and showed that such loss was independent of the
expropriation. It followed that the required direct causal connection was
absent and the claim failed. (At 25 E- H).

14 decided. The basis of that submission was that it had been erroneously
assumed throughout, without interpretative analysis, that the word
"damage" in s 12(5)(e) was synonymous with "loss" (and "skade" with
"verlies"). According to the argument, the word "damage" in the
subsection connoted physical, not patrimonial, harm and indirect loss, as
opposed to indirect damage, was therefore compensable.
"damage" are not defined in the Act and must therefore be given, subject
to their context, their ordinary meaning. There being no contextual
support for the argument to be derived from the wording or setting of the
provisions in question, the ordinary meaning prevails. "Damage" is a
word of wide and general import and ordinarily embraces physical
damage and pecuniary loss (Sandton Town Council v Erf 89 Sandown
Extension 2 (Pty)Ltd 1988 (3) SA 122 (A) at 130 I - 131 B, a case
involving provincial legislation conferring a power akin to expropriation)

15 and "loss" is a synonym for "damage" (at 131 G-H). Moreover, the
Pienaar decision preceded the Act and the legislature must be taken to
have been aware of the interpretation laid down in that case, based, as it
was, on the synonymity of "damage" and "loss". Finally, being a purely
statutory mechanism for taking property from its owner and vesting it in
the expropriator, expropriation per se has no physical impact. It
therefore cannot by itself cause physical damage whether direct or
indirect. If, however, indirect physical damage were to ensue following
upon expropriation, say, to the unexpropriated part of the owner's land
where the expropriated part is taken for a road or railway, and the damage
is due to the use of the property for the purpose for which it was taken,
such damage would be so obviously not "caused by the expropriation"
that there would have been no need to provide in s 12(5)(e) for its
exclusion. Alternatively, assuming such damage were indeed to be
interpreted as having been "caused by the expropriation", there appears

16 to be no reason in principle or logic why it should be excluded but not
also the indirect loss of profits which would have been earned in future by
exploiting the expropriated part.

17
retained the rights for another say ten or fifteen years before disposing of     |
them without having done any more about coal mining than it had by the
time of expropriation, its loss, or, more accurately, the financial
expression of its non-realisation of profits, would have been exactly the
same as the loss it now claims. The loss claimed was at best only an
indirect result of the expropriation and, on the statutory interpretation
stated above, not compensable.
18 included in s 12(l)(a)(ii) or s 12(l)(b) but all other forms of indirect loss
to be excluded by s 12(5)(e). The statutory interpretation necessarily
inherent in counsel's submission would be extraordinary and involve
violence to the language used. On the contrary, the reason for the
omission of "loss of profits" seems to be this. In Jacobs v Minister of
Agriculture 1972 (4) SA 608 (W), when those words were still part of the
exclusionary counterpart to s 12(5)(e), and followed upon the words "any
indirect damage or" it was argued that all loss of profits was excluded
from compensation. However, it was held (at 621 G- 622 A) that the
word "indirect" also qualified "loss of profits" and, accordingly, that
while indirect loss of profits had to be excluded, a direct loss of profits
had to be compensated. In the light of that decision, and the contention
of which it disposed, it is understandable that the legislature wished to
make it clear that loss of profits was not per ae a category of loss to be
left uncompensated. On the interpretation laid down in Pienaar, of which

19 the legislature by 1975 also knew, such loss was to be compensated if
direct but excluded from the reckoning if indirect.

should be observed between consequential loss and indirect loss. Even
if the latter were to be excluded, said counsel, the former, which included
the loss now claimed, was compensable. In this regard reliance was
placed on the decision in A and B Taxis Ltd v Secretary of State for Air
[1922] 2 KB 328 (CA). There, in terms of statutory war-time powers, the
government temporarily took the premises of a taxi business. The
company operating the business sought compensation from a War
Compensation Court under an indemnity statute, claiming the cost of
buying substitute premises and reinstating its business there, less the
amount realised on the sale of those premises once it was permitted to
return to its own. The statute permitted recovery of direct loss or damage
but not indirect loss. The compensation tribunal allowed certain items of

20 loss but not the expenditure on the substitute premises, holding that the
latter was consequential and not direct loss. The Court of Appeal
differed, holding that direct loss or damage could include consequential
damage and that the item in issue could not entirely be excluded as
indirect loss; what was recoverable depended on what it had been
reasonable to incur in the prevailing circumstances. In my view
appellant's argument derives no assistance from that case. The
distinction there, as here, was direct as opposed to indirect loss. Once
it was plain, as it was, that it was reasonable to continue the business
elsewhere and not to shut up shop, clearly some of the loss incurred
involved expenditure aimed at maintaining the existing income-producing
structure and, in that regard, the taking of steps that would never have
been necessary had it not been for the temporary unavailability of the
company's premises. A direct link therefore existed in respect of some
of the loss claimed. The present case is plainly distinguishable.

21 It was then argued for appellant that in so far as in the
Pienaar and Davis judgments the indirectness of loss was demonstrated
by the fact that the respective owners would have had to take a variety of       |
steps before the loss claimed could ever have been suffered, which steps
involved what the cases call "independent volition and action" on the
owners' part, such volition and action was also involved in cases where
claims for loss of profits had in fact succeeded eg in Natal Estates Ltd v
Community Development Board 1985 (3) SA 378 (D) In addition, so it
was urged, the criterion of independent volition and action could not apply
where what was expropriated was a right to minerals (as opposed to land)
because such volition and action formed an essential and integral part of
enjoyment of the right.

I agree that independent volition and action is not per se an
acid test and that, for example, it would appear to have involved
independent action on the owner's part to cut and process the sugar cane

22 in respect of which two years' worth of actual direct loss was
compensated in the Natal Estates case. The point to emphasise,
however, is the self-evident one that the facts of each individual case must
determine whether actual financial loss has been sustained and, if so,
whether such loss has been directly or only indirectly caused by
expropriation. And there is in this regard no difference in principle, in my
view, between the case of land and me case of mineral rights. One can
own land but do nothing on it or one can develop it. One can own mineral
rights but do nothing to exercise them or one can exploit them. Prior to
the expropriation in the present case appellant merely intended to exploit
its rights. They were not actually exploited. When expropriation
removed the rights there was a direct loss of their value. But there was
no direct loss of the alleged profits because numerous steps had yet to be
taken before they could be realised. Accordingly, if the rights had a
market value as at the date of expropriation then that market value would

23 have constituted a direct loss. If they then had no market value the
measure of direct loss might conceivably be determined with reference to
potential future profits but the profits alleged in this case, being indirect
loss, could not per se provide that measure.

Then, appellant's counsel placed special reliance on certain
aspects of a case which is the subject of two reported decisions: Minister
van Waterwese v Mostert 1964 (2) SA 656 (A) and Minister of Water
Affairs v Mostert 1966 (4) SA 660 (A). That litigation involved an
expropriation of three farms in terms of the Water Act. Two were the
subject of registered long leases. The lessees claimed i a loss of
prospective profits. Their claims were excepted to on the basis that their
rights as lessees did not entitle them to compensation at all under the
statute. In addition, application was made for the striking out of the
claims for loss of profits: The Water Court's dismissal of the exceptions
and application was upheld on appeal to this Court. However, all that is

24 said, in the earlier report (at 669 E-F) in relation to the claim for loss of
profits is that it is conceivable that there could be cases in which
compensation claimable under the Water Act could include loss of future
income. The matter then went to trial. The lessees were awarded
compensation not in respect of loss of profits but on the basis of a finding
that the leases had had a sale value. On appeal, in the later case, this
Court (at 734 G - 735 A) considered that there had been no such value
and that what the lessees would be entitled to was loss of anticipated
profits if causally related to the expropriation. The Court did not
determine the causation aspect, merely concluding that any loss in that
regard was not claimable because, on the facts, it had been reasonably
avoidable (at 735 H). The crucial point about Mostert's case is that
although actual loss was compensable if likely to be caused by the
expropriation the Water Act then contained no equivalent of s 12(5)(e)
which excluded compensation for indirect damage. The case therefore

25 affords appellant's argument no support.

26 its potential for sectional title development. An award was made
accordingly. The claim for loss of future profit was contested and
refused. In the trial judgment (at 540 D-F) the reasons for refusing that
claim were stated as follows:
In this Court the reasons were stated thus (at 770 I -771 C):
"It is to be observed that if this argument is correct it would mean in effect that in such a case the owner of the

28 If the trial court in the Davis case meant to imply that the
sum in contention was not a loss, I would rather say, as this Court
emphasised, that the award of the additional amount claimed would, in
effect, have afforded the owners the benefits they would have enjoyed had
the property, as at date of expropriation, been finally developed. What
the owners were entitled to, therefore, was the market value of the :
property as it was at date of expropriation, not to the benefits flowing
from what it would have become later. The principle referred to by this
Court at 770J must necessarily be that stated in Estate Marks v Pretoria
City Council 1969 (3) SA 227 (A) at 242 G - 243 A, namely that the Act
aims, principally, to provide the equivalent in value of the property lost.
Accordingly, the duplication which the trial Court in Davis must have had
in mind was that the owners would have been compensated twice in
respect of potential: once for potential as unrealised and the second time
for potential as realised. One might add this. Just as the owners could

29 not have claimed the sum by which the market value of the property
would have increased had development taken place, so must it be equally
plain that they could not get the profits it was alleged they would have
earned had development taken place.

30 the case of land is really the exploitation of it, as rights, too, can be
exploited. When rights have market value then, for reasons already
stated, that is a feature to be taken into account in determining whether
compensation is payable under s 12(l)(b) in respect of actual financial
loss. And it as was held in the Davis case, the principle of compensation
which the Act embodies permits cognisance of unrealised exploitation
potential but not realised potential, then mere is no reason why that
limitation should apply only to s 12(l)(a) and not also to s 12(l)(b). It
follows, in my opinion, that the claim in question seeks compensation for
a type of loss for which the Act makes no provision and therefore does
not permit.
sought the costs of only two.
The following order is made:
1.       The appeal is dismissed with costs, such costs to include the costs of two counsel.
2.       Appellant is granted leave to amend its particulars of claim within 20 days of the date of this order.
C T Howie
Mahomed CJ
Eksteen JA CONCUR
Streicher JA


REPUBLIC OF SOUTH AFRICA
Case No 626/95 bw/
IN THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
In the matter of
KANGRA HOLDINGS (PTY) LTD        Appellant
and
THE MINISTER OF WATER AFFAIRS    Respondent
Coram: Mahomed CJ, Van Heerden DCJ, Eksteen, Howie
and Stretcher JJA
Date of Hearing: 7 May 1998 Date of Delivery: 22 May 1998
JUDGMENT
Van Heerden PCI

-3-rights would have no market value (of the second Mostert case at 734G -
735 A). Also assume that the appellant was on the point of commencing the
exploitation of the rights at the time of expropriation. I cannot perceive of
any reason why the appellant in the postulated case cannot claim the value of
the rights in its hands, to be calculated with reference to its net loss of profits.
Yet, according to my colleague's judgment, the appellant will at most be
entitled to claim some nebulous direct loss.
The test, which can conveniently be called the volition test, which has
been applied in a number of decisions of this court, may easily be
misconstrued. It must be kept in mind that in all those cases the expropriatee
had suffered a primary loss. The question then arose whether he was entitled
to the secondary loss claimed by him and it was in this context that the
volition test was applied.

-5-right. The reason for the change in terminology is obvious. With a few
exceptions a right does not have a market value. This may be illustrated by
considering the example of A who has a right to draw water (for use on his
farm) from a dam on the farm of his neighbour. That right cannot be sold and
hence does not have a market value. If A's right is expropriated his loss is
consequently the value of his farm with the servitude minus such value
without the servitude (cf. JM de Kock en Seun (Edms) Bpk v
Elektrisiteitsvoorsiengskommissie 1983 (3) SA 160 (A) 168 E-F). It follows,
and this is important, that A cannot claim the profits he would have made by
virtue of the supply of water had the expropriation not taken place.
Some rights have, however, a market value. I have in mind mineral
rights and the rights of lessees; there may be others. It seems to me that the
legislature must have contemplated that in the case of an expropriation of

-6-such a right the ordinary common law measure of damages should apply; in
other words that the expropriatee should be entitled, and confined to the
market value of the right concerned unless he can show that because of
special circumstances that measure is not an appropriate one (cf.
Katzenellenbogen's case at 880B). It follows that in general the expropriatee
cannot claim loss of profits in lieu of the value of the expropriated rights.
In our case the appellant did not aver that the mineral rights do not
have a market value. Nor did it rely on special circumstances in the above
sense. Indeed, one of its claims, albeit an alternative one, was for payment
of some R77 million asserted to be the value of the expropriated rights.
There are furthermore indications in the White/Sealey report that the rights
in question do have a market value, not the least of which is that subsequent
to the expropriation the appellant sold his remaining mineral rights in respect

-7-of the farm to Trans-Natal Collieries Ltd.
For these reasons I concur with the order proposed by my colleague,
Howie.

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