THE EFFECT OF AVOIDING THE FNB METHODOLOGY IN SECTION 25 DISPUTES

Abstract

In First National Bank of SA Ltd t/a Wesbank v Commissioner, South African Revenue Service; First National Bank of SA Ltd t/a Wesbank v Minister of Finance (FNB), the Constitutional Court set out a particular methodology with regard to the adjudication of section 25 disputes. In terms of this methodology, all expropriations in terms of section 25(2) must satisfy the requirements for a valid deprivation in terms of section 25(1). Therefore, the starting point of any constitutional property dispute is section 25(1). However, subsequent case law shows that the methodology proposed by the court is not consistently followed. In cases where the State formally expropriates property, courts customarily ignore the FNB methodology. In this article, it is argued that the avoidance of the FNB methodology in these cases is justifiable.
It has also become clear recently that the courts will on occasion forgo the methodology proposed in FNB even in cases where there was no formal expropriation procedure. In this article, the effect of avoiding the FNB methodology in cases where there was no formal expropriation procedure is considered. It is argued that the avoidance of the FNB methodology in these cases has two interrelated effects. Firstly, parties are free to choose whether to rely on section 25(1) or section 25(2). Litigants are therefore, in theory, free to rely on section 25(2) directly. This makes it possible for litigants to claim compensation in terms of section 25(2), even if no formal expropriation procedure was adopted. Secondly, since litigants can decide whether to rely on section 25(1) or section 25(2), the difference between deprivation and expropriation becomes an important initial consideration, although not a simple one. In this article, it is argued that apart from state acquisition, the authority on which the State relies to effect an imposition on property is an important element in distinguishing between deprivation and expropriation.