Cape Town - A massive legal battle looms between government and the new owners of the V&A Waterfront if planned legislation about the management of coastal areas goes through.

The legislation, currently being considered by parliament, will mean that Transnet won't be able to honour its contractual responsibilities towards Lexshell - owned by UK-based London & Regional Group, as well as Dubai World and BEE shareholders.

In 2001, before the Waterfront was sold to the consortium, Transnet signed a contract undertaking to reclaim land next to the Waterfront back from the sea.

This apparently included an area of 270 000 square meters - from Green Point lighthouse to Robben Island, extending to Melkbosstrand as well as the land that was reclaimed around the Castle.

Transnet has denied that the whole area will be reclaimed from the sea and has said that it will be limited to areas next to the Waterfront, which includes Granger Bay and the Breakwater residential area. But it couldn't give more details about the development of 270 000 square meters mentioned in the contract.

This emerged at a meeting of the Western Cape's standing committee on social development, where Transnet had to testify about the V&A Waterfront deal, explaining all the terms and its contractual obligations. Transnet has not made details of the contract, which took place in October 2006, known before now.

The agreement with the Waterfront entails that Transnet has to get the necessary governmental approval for reclaiming the land. The reclaimed land would then be handed over to the Waterfront.

Restrictions in the new legislation mean that Transnet won't be able to reclaim the land.

The legal representative of Lexshell, Hendrik Kotzé of the law firm Jan S. de Villiers, has said that this will have "very serious economic implications".

"We have solid contractual rights and expect parliament to honour them," he said.

- Die Burger