Study guide 001_PVL3704_4_b.pdf

© 2018 University of South Africa All rights reserved Printed and published by the University of South Africa Muckleneuk, Pretoria PVL3704/1/2019–2021 70682402 Shutterstock.com images used InDesign HSY_Style CONTENTS Page INTRODUCTION v Study unit 1: GENERAL OVERVIEW 1 1.1 INTRODUCTION TO UNJUSTIFIED ENRICHMENT 2 Study unit 2: GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY 14 2.1 INTRODUCTION 16 2.2 GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY 17 2.3 NATURE AND EXTENT OF ENRICHMENT CLAIMS 28 Study unit 3: CONDICTIO INDEBITI: GENERAL REQUIREMENTS 32 3.1 INTRODUCTION 34 3.2 ROMAN LAW 34 3.3 ROMAN-DUTCH LAW 35 3.4 APPLICATION IN SOUTH AFRICAN LAW 35 Study unit 4: CONDICTIO INDEBITI: SPECIFIC APPLICATIONS 43 4.1 INTRODUCTION 45 4.2 STATUTORY ENRICHMENT ACTION: ALIENATION OF LAND ACT 45 4.3 THE CONDICTIO INDEBITI AND THE LAW OF SUCCESSION 47 4.4 THE CONDICTIO INDEBITI AND THE LAW OF INSOLVENCY 48 4.5 ULTRA VIRES PAYMENTS AND THE CONDICTIO INDEBITI 49 4.6 PAYMENTS MADE UNDER DURESS AND PROTEST 50 Study unit 5: CONDICTIO OB TURPEM VEL INIUSTAM CAUSAM 53 5.1 INTRODUCTION 54 5.2 ROMAN LAW 55 5.3 ROMAN-DUTCH LAW 55 5.4 APPLICATION IN SOUTH AFRICAN LAW 56 Study unit 6: CONDICTIO CAUSA DATA CAUSA NON SECUTA 63 6.1 INTRODUCTION 64 6.2 APPLICATION IN SOUTH AFRICAN LAW 64 Study unit 7: CONDICTIO SINE CAUSA SPECIALIS 68 7.1 INTRODUCTION 69 7.2 APPLICATION IN SOUTH AFRICAN LAW 70 7.3 APPLICATION OF THE CONDICTIO INDEBITI IN CHEQUE LAW 71 Study unit 8: NEGOTIORUM GESTIO 75 8.1 INTRODUCTION 76 8.2 APPLICATION IN SOUTH AFRICAN LAW 77 PVL3704/1 (iii) Study unit 9: ENRICHMENT BY MEANS OF IMPROVEMENTS AND ATTACHMENTS (ACCESSIO) 85 9.1 INTRODUCTION 87 9.2 SOUTH AFRICAN LAW 87 Study unit 10: ENRICHMENT BY MEANS OF IMPROVEMENTS AND ATTACHMENTS (ACCESSIO) – CONTINUED 96 10.1 INTRODUCTION 98 10.2 OCCUPIERS AND HOLDERS (DETENTORES) 99 10.3 OCCUPIERS/HOLDERS AT WILL (PRECARIO HABENS) 106 Study unit 11: RIGHTS OF RETENTION AND LIENS 109 11.1 INTRODUCTION 110 11.2 IMPENSAE NECESSARIAE 112 11.3 IMPENSAE UTILES 112 11.4 IMPENSAE VOLUPTUARIAE 113 Study unit 12: ENRICHMENT ACTION AGAINST AND BY MINORS 115 12.1 INTRODUCTION 116 12.2 SOUTH AFRICAN LAW 116 Study unit 13: COMPENSATION FOR WORK DONE AND SERVICES RENDERED 119 13.1 INTRODUCTION 120 13.2 CONTRACTS FOR WORK 122 13.3 CONTRACTS FOR SERVICES 123 Study unit 14: GENERAL ENRICHMENT ACTION 126 14.1 INTRODUCTION 127 14.2 COMMON LAW 127 14.3 NORTJÉ V POOL 128 14.4 WAY FORWARD: THREE RECENT SUPREME COURT OF APPEAL CASES 129 14.5 CONCLUSION 134 GLOSSARY OF LATIN TERMS AND THEIR MEANING 138 (iv) 1 INTRODUCTION Welcome to the module, Undue Enrichment and Estoppel. We trust that you will enjoy studying the module. The module should enrich your understanding of the scope of private law in general and, more particularly, of the law of obligations. More than is the case with most other modules in private law, the module requires you to integrate and apply your knowledge of other modules. The module consists of two distinct parts that are independent of each other. What they have in common is that they are both founded on the principles of equity and reasonableness that are present in common law. In future, the further development of the parts of the law concerned should also take into account the constitutional values and imperatives involved. Unfortunately, very few cases have been conducted either in the Supreme Court of Appeal, or in the Constitutional Court, in terms of which guidance on the influence of the Constitution of the Republic of South Africa, 1996 could be given. The principle of Ubuntu is bound to play an important role in such a development, as issues of equity and reasonableness, which lie at the heart of the above-mentioned disciplines, commonly arise. Knowledge of the disciplines involved should play an important part in rounding off your understanding of private law. The disciplines consist of a range of topics, the knowledge of which should be of great value to you in practice. You have now reached quite an advanced stage in your law studies, having completed many basic modules, and even a few relatively advanced modules. In your study of the module Undue Enrichment and Estoppel, you will be required to integrate some of the knowledge that you have already gained in other such modules as Law of Property (PVL3701), Law of Contract (PVL3702) and Law of Delict (PVL3703) with the new knowledge and skills that you will learn in this module. As you move closer towards graduation and professional practice, an increasing amount of emphasis will be placed on the practical application of the knowledge and skills acquired in this module. In relation to some topics, you will also be required to apply advanced legal reasoning skills when dealing with the theoretical and practical problems and the approaches to theory involved. So when do the issues of (a) unjustified enrichment, and (b) estoppel find application? The following examples should provide you with an initial understanding of why you are required to study such subjects. ACTIVITY 1 Unjustified enrichment law typically comes into play in the following type of scenario: A owes B an amount of R100 000. A pays the amount of money owed to B to him on 25 June 2017 by way of an electronic funds transfer, after an urgent telephonic request by B. On 30 June 2017 X, A’s bookkeeper, pays the same amount to B by means of a separate electronic funds transfer, in the mistaken belief that the money is still owing. PVL3704/1 (v) Introduction What remedies does A have in law to reclaim the money? Is the claim either contractual or delictual? Or is there some other ground on which the amount of money outstanding can be claimed? The claim concerned cannot be contractual, because no breach of contract has occurred on the part of B, and the first payment extinguished the contractual relationship by payment. Neither can the claim be delictual, because B performed no unlawful conduct. Although B did not act fraudulently, it is quite clear that it would be unfair for B to keep the additional, erroneously made payment under such circumstances. Therefore, the law provides a claim for the above instance under unjustified enrichment law. ACTIVITY 2 Estoppel typically comes into play in scenarios like the following: X wants to buy a car that Y has on offer. Y assures X that he has paid for the vehicle in full, and that it belongs to him. However, in reality, Y still owes two instalment payments to Z, the bank that actually owns the vehicle until it has been paid for in full. X, being a prudent person, asks Z whether the car has, in fact, been paid for in full. M, a branch manager at Z, mistakenly informs X, upon inquiry, that the vehicle has indeed been paid off. Deeming himself secure in the above knowledge, X then buys the vehicle from Y. However, Y then fails to pay the remaining instal- ments, causing the bank to cancel the contract with Y, and to reclaim the vehicle. Does X have a delictual claim against Z, the bank? Can X use another remedy to fend off Z’s claim? In the above scenario, X, having acted upon the misrepresentation made by Z’s employee, can rely on estoppel to fend off Z’s claim under the rei vindicatio. (Refer back to your studies on the law of property for more particulars on the rei vindicatio.) In addition, X might be able to lay a delictual claim against Y, based on negligent misrepresentation, but, in the particular instance mentioned, the estoppel remedy should prove to be more useful. 1.1 PURPOSE OF THE MODULE 1.1.1 Purpose of this module The purpose of the present module is to equip you with the knowledge, skills, attitudes and competencies you need to solve basic problems relating to enrichment liability and estoppel, to perform basic research, and to acquire reporting skills in the above-mentioned areas of the law. 1.2 LEARNING OUTCOMES 1.2.1 Specific outcomes for the LLB You will be required to explain the role of the law in everyday life (vi) Introduction solve multidimensional legal problems engage with legal text by making notes and inferences perform basic research tasks in law write a basic research report 1.2.2 Specific outcomes of this module You will be required to: demonstrate that you understand the most pressing and prevalent issues that arise regarding enrichment liability and estoppel in terms of South African law use appropriate methods and skills to apply your basic knowledge of enrichment liability and estoppel in a variety of contexts that are typical of the problems set for undergraduate learners carry out research to produce a critical legal argument and, with guidance and support, take responsibility for the legal opinions that you advance identify problems and issues relating to enrichment liability and estoppel in real or simulated factual scenarios interpret and analyse daily occurrences regarding basic areas of enrichment liability and estoppel analyse and critically evaluate the relevance and applicability of various legal sources and authorities to identifying problems relating to enrichment liability and estoppel provide substantiated responses, based on acquired knowledge provide responsible and expert advice on an appropriate course of action to take critically analyse different viewpoints on theoretical and practical issues in terms of enrichment liability and estoppel find the relevant sources and authorities to solve problems regarding enrichment liability and estoppel 1.3 METHOD OF STUDY 1.3.1 Study material No prescribed book exists for this part of the module. Your study material consists of this study guide and a number of extracts from cases, textbooks and journal articles, which are listed under the heading Prescribed study material in the study guide and in Tutorial Letter 101. All of the judgments, extracts and articles, as well as further judgments, will be discussed in the study guide itself, and they will, therefore, also form part of your prescribed study material. You do not have to acquire said sources independently, but doing so could help you attain a fuller understanding of the specific topic than you might otherwise obtain. All case law and journal articles referred to are available in full text in the e-resources section of the Unisa library website. Particular cases can be found in Jutastat, LexisNexis, or Saflii (Southern African Legal Information Institute). Most journal articles are also available from the above- mentioned e-resources section. The LexisNexis section also provides access to The Law of South Africa (LAWSA), under the section entitled “Reference works”. The multivolume encyclopaedia, LAWSA, contains discussions of most parts of the law, including enrichment and estoppel. The work should form a valuable resource not only for the current module, but also for the assignments that you have to complete in other modules, including your research module. PVL3704/1 (vii) Introduction Any additional judgments or journal articles to which reference is made, and the extracts from textbooks that you find in the text, as well as any material mentioned under the heading Additional reading material, do not form part of your prescribed study material. You have no need, therefore, to look them up, or to study them for examination purposes. Such references are made not only for the sake of the completeness of your studies, but also because the sources involved might be of tremendous value to you if you want to expand your knowledge and understanding of the subject. They should also prove to be extremely useful if you need to conduct further research into certain topics for your assignments, or in your future employment. In the course of the year, additional material may be prescribed in further tutorial letters. We cannot emphasise enough that all the prescribed material is very important to you as a student of Private Law. As such sources of information form an integral part of the module, you have to study it intensively for examination purposes. 1.3.2 Activities and self-assessment The activities that are highlighted throughout the study guide serve to illustrate the content described above. They provide you with an opportunity to assess whether you have an adequate understanding of the theory involved. The examples given, which are quite often taken from case law, can appear in examination questions in either the same, or a slightly different, form. The above also applies to the self-assessment questions set in the text, and at the end of each study unit. The questions can be used to determine whether you have understood the content of the course, and to see whether you can apply the theory that you have learned. The feedback that follows the self-assessment questions can be used as a guideline to help you in your own self-assessment. If you find that you are unable to complete the self-assessment questions satisfactorily, you will need to revisit the basic study material. Only by revising it will you then be able to ensure that you understand the content in context. 1.3.3 Study journal You might consider keeping a study journal, in which you can write down your answers to the various activities, including those allowing for self-assessment, presented throughout the study guide. Such a journal should serve as a valuable tool in assessing your own understanding and skills in respect of the material provided, as well as your own growth throughout the module. The activities, including the self-assessment ones, may be reused in the examinations. In addition, they provide examples of the type of questions that you might expect to be required to answer in the examinations. 1.3.4 Historical development For a proper and thorough grasp of the meaning of enrichment liability in modern law, it is necessary to have some knowledge, and a good understanding, of the historical development of the various actions based on enrichment. Having reasonable knowledge of the influence of the Roman and Roman-Dutch law of enrichment should facilitate your coming to grips with the law that is currently applicable. You have, therefore, to read the sections dealing with the Roman and Roman-Dutch (viii) Introduction law carefully as background material to enable you to follow the development of the specific enrichment actions involved, and also for you to be able to come to an understanding of the move made towards the recognition of a general enrichment action. The sections on the Roman and Roman-Dutch law, which are not for examination purposes, serve only as background material to enhance your understanding of the subject that you are currently studying. In studying the various enrichment actions, you should, therefore, pay attention to: the general requirements for enrichment liability that apply in all circumstances the requirements in respect of the different actions the field of application of each of the actions the question whether a particular action is an enrichment action, meaning an action that is based on unjustified enrichment the critical assessment of various points of view, in terms of which the authors concerned make conflicting decisions, or hold diverse views 1.4 EXAMINATION In preparing for your examination, it is important that you have a good grasp and knowledge of the subject matter involved. You have to know: the general requirements for enrichment liability; and the specific requirements for each specific enrichment action. You must also be able to apply the existing rules to various practical scenarios. In the examination, you will be asked to deal with three different types of questions: straightforward theoretical questions, in response to which a systematic and critical discussion of aspects of the material is required problem-type questions, in which a practical scenario is posed, and you are required to – identify the legal issue or question raised (1–2/10) – discuss the relevant rules that might be applicable to the facts (3–4/10) – apply the rules to the facts (3–4/10) – provide a solution to the problem (1–2/10) questions requiring critical assessment of a theoretical or practical approach, a specific viewpoint or differences of opinion presented, in response to which you are required to – recognise the issue at stake (1–2/10) – summarise the different viewpoints given (3–4/10) – critically evaluate each viewpoint (3–4/10) – provide your own reasoned viewpoint on the issue (1–2/10) NB: All three types of question may be posed either in the form of multiple- choice questions, or as essay-type questions. Multiple-choice style questions will form the basis for 50% of your assessment in the examination. PVL3704/1 (ix) Introduction It is important to note that, when you are asked to provide a critical as- sessment, you are expected to evaluate the argument, case or legal posi- tion from both a positive and a negative point of view, in other words, to give a full assessment. Such an assessment requires not only negative criticism, but also posi- tive evaluative comments. Both positive and negative aspects should be highlighted. A critical assessment requires more than merely a descrip- tion of the case, or legal position, tendered; it requires you to state your opinion on whether you think the argument, case or legal position is well or poorly presented, positively or negatively set, and so on. The differing viewpoints of various academic commentators are often expressed in such questions and answers. (x) 1 STUDY UNIT 1 1 GENERAL OVERVIEW 1 OVERVIEW You have already studied two major sources of obligation, namely contract and delict. In the introduction to the current module, we will look at unjustified enrichment as being a third major source of obligations. We will also look at the rationale, or reason, for the existence of this part of the law. Finally, it is important that you know somewhat of the history of this part of the law, as much of it still consists of rules and principles dating back to Roman and Roman-Dutch law. Copious references are made to such sources in the case law. LEARNING OUTCOMES After completing your study of the introduction to enrichment liability, you should be able to: explain why unjustified enrichment is regarded as the third most important source of obligations in South African law describe the need for unjustified enrichment law explain the sources of South African enrichment law, and the importance of the historical context for the actions in modern law describe the five traditional enrichment actions and their specific requirements, and apply each of them to a given set of facts critically analyse and assess the different points of view on the existence of, or the need for, the taking of a general enrichment action understand the development that needs to take place in the discipline to ensure proper compliance with the principles inherent in the Constitution and in the spirit of Ubuntu. RECOMMENDED READING MATERIAL Du Plessis J The South African law of unjustified enrichment (Juta Cape Town 2012) 1–17 Eiselen S & Pienaar G Unjustified enrichment: a casebook 4th ed (LexisNexis Butterworths Durban 2016) 3 – 9 Lotz G & Brand FDJ “Enrichment” in Joubert WA et al (eds) The law of South Africa Vol 9 2nd ed (LexisNexis Butterworths Durban 2005) paras 207–209 Visser D Unjustified enrichment (Juta Cape Town 2008) 3 – 35 Chevron SA (Pty) Ltd v Wilson t/a Wilson’s Transport and Others 2015 10 BCLR 1158 (CC) Cool Ideas 1186 CC v Hubbard and Another 2014 4 SA 474 (CC) McCarthy Retail Ltd v Shortdistance Carriers CC 2001 3 SA 482 (SCA) National Credit Regulator v Opperman and Others 2013 2 BCLR 170 (CC) PVL3704/1 1 FIGURE 1.1: Structure of private law 1.1 INTRODUCTION TO UNJUSTIFIED ENRICHMENT 1.1.1 Enrichment as a source of obligation Traditionally, private law, which deals with the legal relationships between private entities other than the state in its public law capacity, has been divided into the following broad categories: sources of obligations, historical sources of enrichment and the theoretical structure of enrichment. sources of The law of obligations is concerned with the relationship that exists between the obligations debtor and the creditor. Of the many sources of obligations that exist in the law, the three main sources consist of: (a) the law of contract (in terms of which obligations are created by agreement) (b) the law of delict (in terms of which obligations arise by force of law, upon dam- age, or personal injury, being caused by the commission of an unlawful action) (c) the law of unjustified enrichment (in terms of which obligations arise in a number of different situations that fall neither under contract, nor under delict) historical The current sources of the law of unjustified enrichment are to be found mainly in sources of enrichment Roman and Roman-Dutch law, as augmented and developed by the South African courts, as will already have been made evident in your studies. Apart from the Alienation of Land Act 68 of 1981 and the National Credit Act 34 of 2005, no other legislation directly touches upon this area of the law. However, in our present constitutional era, enrichment law is also subject to the principles and influence of the Constitution. However, to date, neither the Constitution nor the Constitutional Court has had much influence on the development of the discipline. 2 STUDY UNIT 1: General overview Most of the development that has occurred over the past two decades has arisen in the Supreme Court of Appeal (SCA). In the Supreme Court, it seems that the emphasis on the requirements of specific actions is declining in a preference for the general requirements for enrichment liability. theoretical In its structure, unjustified enrichment shows many similarities to the law of delict, structure of enrichment in that it consists of some general principles or requirements that need to be fulfilled before the dictates of liability can come into play. Such enrichment also consists of a number of specific remedies, each with their own distinct requirements that require fulfilling in addition to the above. However, the general principles of the law of unjustified enrichment are not yet as well developed as are those of the law of delict. The pace of change is increasing, though, with the courts starting to make some significant advances in terms of developing the general principles involved. Some criticism has also been levelled at the emphasis that has, in the past, been placed on the concept of specific remedies. components Traditionally, the Law of Unjustified Enrichment has been divided into the components listed below. UNJUSTIFIED ENRICHMENT LAW General principles enrichment impoverishment sine causa requirement (without sufficient legal cause) causality (at the expense of requirement) Work done, Condictiones Improvements Management of or services sine causa to property another’s affairs rendered condictio bona fide actio locatio indebiti possessors negotiorum conductio condictio bona fide gestorum utilis operis ob turpem occupiers actio locatio vel iniustam mala fi de negotiorum conductio causam possessors gestorum operarum condictio and contraria causa data occupiers causa non secuta condictio sine causa specialis The kind of diagram that appears above will be used throughout the study guide to provide you with an overview of, and a perspective on, where the particular aspect fits into the bigger picture of the module. definitions The term “enrichment” is used to describe the situation that occurs when one person’s estate is increased unjustifiably (but not unjustly) at the expense of another. The term “unjustified” is used to indicate that the enrichment occurred without justification for such, or without any legal basis. In other words, the enrichment did not occur owing to a pre-existing agreement (or contract), or due to a delict having PVL3704/1 3 been committed. As a result of such an increase, under certain circumstances an obligation arises in terms of which the person whose estate has been increased has a duty to restore that which was received to the person at whose expense the increase occurred. The impoverished person also has a corresponding right to claim that the increase be restored to him or herself. (By this time you should be well aware of what the nature of an obligation is – you have, after all, devoted a whole year of your study of private law to the two other principal sources of obligation, namely contract and delict. Consequently, the nature of an obligation is not discussed here. If you feel you need to refresh your memory, you may do so by rereading study unit 1 of the Study Guide for the module on the Law of Contract (PVL3702)). 1.1.2 The necessity for enrichment liability Without doubt, allowing for the acknowledgement of liability for enrichment is necessary in terms of any developed legal system. Cases exist in relation to which one person obtains assets belonging to another person in circumstances where there are no grounds for the transfer of such assets, and where there is nothing to justify their retention by the receiver. In the above situation, it is usually regarded as being unfair that the enriched person should keep the goods, money or value with which he or she has been enriched. Consider the following two examples of what occurs within the ambit of South African law: Example In accordance with the rules relating to accessio (attachment to another’s property) anything that is affixed to the land becomes part of the land, and, consequently, the property of the owner of the land. The above means that, should the bona fide possessor (the unlawful occupier) of, for example, a farm, build an expensive house and outbuildings on the farm, all the buildings concerned will become the property of the owner of the farm. The owner is, of course, entitled to eject the unlawful occupier at any time. (You have already dealt with the principles of accessio in the Law of Property PVL3701.) The above situation would leave the occupier out of pocket, and the owner with a property that is worth more than it was before the improvements were made. No legal reason (no contract or delict) for the enrichment of the owner’s estate and for the impoverishment of that of the occupier would justify the retention of such enrichment by the owner. Unjustified enrichment liability is aimed at redressing the unfairness of such a situation. Example As you will recall from your study of the Law of Property (PVL3701), all that is necessary for the transfer of ownership is delivery of a thing (res) with the intention on the part of the transferor to transfer ownership, and the intention on the part of the transferee to become the owner thereof (Commissioner of Customs and Excise v Randles Brothers and Hudson Ltd 1941 AD 398). 4 STUDY UNIT 1: General overview The above type of transfer could result in, for example, a seller transferring the ownership of goods to the buyer, in the genuine belief that the contract of sale was valid. However, only later might the buyer learn that the contract was void, and that he or she might have no possibility of taking action to retrieve the purchase price from the buyer. Again, the one party has benefitted from the transfer of the property when there was no legal reason for such a transfer to have taken place. The unfairness that is present in the two examples given essentially leaves the bona fide possessor, in the first instance, and the seller, in the second instance, without remedy. Doing so would mean that both parties mentioned would be impoverished through no fault of their own, and that the owner and the buyer would be enriched without any good cause. The result is the need for the recognition of liability on the ground of unjustified enrichment. constitutional In terms of s 25 of the Constitution, ownership or property is protected from imperatives arbitrary deprivation of such, except for in terms of a law of general application. The widely worded provision concerned provides for deprivation against the payment of compensation in certain circumstances. Although the provision is aimed, firstly, at ensuring the security of tenure of land, the Constitutional Court has assigned a wide meaning to the word “property” to include all assets of a person, and not only their land. “Property”, in the above-mentioned sense, may mean fixed property (land), or intellectual property, and valuable rights, including a right to occupy land. See National Credit Regulator v Opperman and Others 2013 2 BCLR 170 (CC), in terms of which the court held that an enrichment claim constituted “property” for the purposes of s 25 of the Constitution. Ubuntu, public The concept of good faith in contract is closely akin to the concept of fairness, policy and good generally. In Everfresh Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd 2012 1 SA faith 256 (CC) (hereinafter the Everfresh Market Virginia case, the Constitutional Court considered the concept of good faith against the overarching principle of Ubuntu. Ubuntu is regarded as an all-embracing principle affecting all laws, in regard to their interpretation and application. The court decreed that the principle of Ubuntu must work hand in hand with the principles of public policy and good faith, within the context of a constitutionalised legal system. Ubuntu is, therefore, important to consider in the assessment and the development of enrichment law, as well. Yacoob J states the following in regard to Ubuntu and good faith in contract: The values embraced by an appropriate appreciation of ubuntu are also relevant in the process of determining the spirit, purport and objects of the Constitution. The development of our economy and contract law has thus far predominantly been shaped by colonial legal tradition represented by English law, Roman law and Roman Dutch law. The common law of contract regulates the environment within which trade and commerce take place. Its develop- ment should take cognisance of the values of the vast majority of people who are now able to take part without hindrance in trade and commerce. And it may well be that the approach of the majority of people in our country places a higher value on negotiating in good faith than would otherwise have been the case. Contract law cannot confine itself to colonial legal tradition alone. … Indeed, it is highly desirable and in fact necessary to infuse the law of contract with constitutional values, including values of ubuntu, which in- spire much of our constitutional compact. On a number of occasions in the PVL3704/1 5 past this Court has had regard to the meaning and content of the concept of ubuntu. It emphasises the communal nature of society and “carries in it the ideas of humaneness, social justice and fairness” and envelops “the key values of group solidarity, compassion, respect, human dignity, conformity to basic norms and collective unity”. The above-mentioned description of Ubuntu clearly shows that the underlying values that have given rise to the development of unjustified enrichment liability in the Roman and Roman-Dutch law could, just as well, have been founded on the principles concerned. From a communal perspective and from a perspective of simple fairness, it is imperative that a corrective should exist for when someone has made a mistake, or has inadvertently transferred property without good legal grounds for so doing, that the impoverished party should be compensated for its loss. Of equal importance, however, is the fact that the enriched party should not be left in a worse off position than would have been the case if no enrichment had taken place. The various enrichment requirements and enrichment actions will be assessed in the course of our discussion to establish whether the current law conforms to the basic requirements of Ubuntu. In the above text, we have given only two examples of unjustified enrichment to illustrate our point that liability for enrichment is very important. When we begin discussing the various enrichment actions, you will, of course, find many other cases of enrichment that will illustrate the above-mentioned point equally well. ACTIVITY 1.1 Can you think of any other possible situations where a transfer of property could take place without legal reason, thus giving rise to an enrichment action? Try to provide three more examples. Write them down in your study journal, or notes. 1 FEEDBACK Think about all the different situations where contracts may be void and where performance takes place, or where contracts that were initially valid might fall away. Looking at the table of contents for clues should help you to devise an appropriate answer. Also, think of such situations as electronic funds transfers into an incorrect bank account, or the case of a conditional contract, where the occurrence of the uncertain future event terminates the contract. Another example might be where someone improves property, believing that it is their own property, but where it, in fact, belongs to another. 1.1.3 Historical development of unjustified enrichment law The rules of unjustified enrichment law, as applied in South African law today, derive directly from the Roman and the colonial Roman-Dutch law that was imported into South Africa by the Dutch settlers during the 16th and 17th centuries. Of all the private law disciplines, enrichment law still shows the closest connection to such historical roots. It is also the area of private law that has been least affected by the influence of English Common Law, as that legal system, until quite recently, lacked sufficient comparable remedies. In modern English law, similar remedies have now been developed under the broad heading of “restitution law”. For a proper 6 STUDY UNIT 1: General overview understanding of our law, it is, therefore, necessary to consider the ancient Roman and Roman-Dutch law and its development. Roman law In Roman law, two texts in particular usually serve as the starting point for an investigation into the law relating to liability for enrichment. They are – D 12 6 14, which reads: Nam hoc natura aequum est neminem cum alterius detrimento fieri locupletiorem, and – D 50 17 206, which reads: Jure naturae aequum est, neminem cum alterius detrimento, et injuria fieri locupletiorem. – The two texts can be translated as follows: – D 12 6 14 Because it is according to natural equity that nobody should be enriched at the expense of another. – D 50 17 206 It is according to the equity of natural law that nobody should profit at the cost of another. broad The prohibition against enrichment quoted in the above-mentioned texts is so broadly principle only stated that it cannot possibly provide a basis for liability. What is prohibited here is not only unjustified enrichment, but also any enrichment whatsoever that occurs at the expense of another. An overly literal interpretation of the texts would also prohibit the making of a legitimate profit at the expense of another in any contractual situation, and would, thus, put a stop to all commercial transactions whatsoever. No general liability for enrichment was recognised in terms of Roman law. Relief was granted to a plaintiff in certain specific circumstances, based on the principles stated in the above-mentioned two texts. Certain specific enrichment actions, each with their own requirements, were possible, but there was no general liability for unjustified enrichment. Roman law did not, in fact, recognise any general obligations, whether in terms of contract, delict, or enrichment. Roman law was a remedy-based legal system, in terms of which liability only originated if there was an appropriate action to be taken in regard to the law. Some of the actions were akin to modern- day contractual or delictual liability, but there was no general underlying theory of contract or delict. Such theory only developed with the later systemisation of the Roman law during the Middle Ages. Roman- The enrichment actions of Roman law were received into Roman-Dutch law, in the Dutch law context of which, over the years, they were developed and extended. The works of our institutional writers, however, contain no indication that a stage was ever reached in classical Roman-Dutch law (ie the Roman-Dutch law of the 17th and 18th centuries) at which a general enrichment action was available. In 18th-century Dutch practice, however, a general enrichment action seems to have developed, with it being noted as such in the Observationes Tumultuariae of Van Bynkershoek. The issue will be dealt with more comprehensively in study unit 14 below. South The enrichment actions of classical Roman-Dutch law are still available to a plaintiff African law in current South African law. The South African courts have also recognised liability for enrichment in a number of circumstances where none of the old actions was applicable, thereby extending the scope of unjustified enrichment liability in South African law. general With regard to such extensions of enrichment liability, the majority of South African enrichment academics had, by 1966, concluded that a general subsidiary enrichment action had action developed in South African law that would apply in any case of unjustified enrichment where none of the previous actions were available. The view was, therefore, that PVL3704/1 7 where the circumstances of a particular case fell within the scope of one of the existing Roman-Dutch law actions, the plaintiff had to rely on the particular action in question. If, however, the circumstances of his or her case fell outside the scope of any of the existing actions, he or she could rely on the scope of a general enrichment action. Consequently, the view was not that a general enrichment action had been substituted for the existing actions, but that a general action had been developed that was additional, and subsidiary, to the existing actions. McCarthy In McCarthy Retail Ltd v Shortdistance Carriers CC 2001 3 SA 482 (SCA) (hereinafter Retail the McCarthy case), the court states: Unlike other branches of our law, the rich Roman source material has not led to an unqualified judicial recognition (with a few exceptions) of a unified general principle of unjustified enrichment, from which solutions to particular instances may be derived. Rather there has been an augmentation of the old causes of action, from case to case, usually with reference to rules treated as being of general application. This has led to a more or less unified patchwork (the “lapwerk” [ patchwork] according to Professor De Vos Verrykingsaanspreeklikheid in die Suid-Afrikaanse Reg 3rd ed). And although there has been no unequivocal recognition of a general enrichment action, time and again unjustified enrichment principles have been treated as a source of obligations being the basis for creating a new class or subclass of liability in particular circumstances. No better example of this can be found than the minority judgment of Ogilvie Thompson JA in Nortjé en ’n Ander v Pool NO 1966 (3) SA 96 (A) – the majority judgment which is still sometimes held out as having given the final death-blow to a general enrichment action. The question whether such an action should be recognised was passed by in Kommissaris van Binnelandse Inkomste en ’n Ander v Willers en Andere 1994 (3) SA 283 (A), but Botha JA made it clear that the piecemeal extensions of the old actions, which have been proceeding for over a century in South Africa, have not been impeded by the decision in Nortjé’s case (at 331B–333E). See also Bowman, De Wet and Du Plessis NNO and Others v Fidelity Bank Ltd 1997 2 SA 35 (A) at 40A–B. One of the restraints upon the acceptance of a general action is the belief, or fear, that a tide of litigation would be let loose. Initially there may be some surge of litigation, particularly under the emotive banner of unjustified enrichment. But it should not last long, once the restrictions even on a general action are appreciated. My opinion is that under a general action only very few actions would succeed which would not have succeeded under one or other of the old forms of action or their continued extensions. For this reason, if it be a good one, the acceptance of a general action may not be as important as is sometimes thought, save, of course, that its denial may lead to occasional individual injustices. A more daunting consequence of acceptance is the possible need for a re-arrangement of old-standing rules. Are the detailed rules to go and new ones to be derived from a broadly stated general principle? Or are the old ones to stand, and be supplemented by a general action which will fill the gaps? The correct answers to these questions are not obvious. But I would support the second solution. In a rare case where even an extension of an old action will not suffice I would favour the recognition of a general action. The rules governing it should not be too difficult to establish – see De Vos chap VII for an outline. We have been applying many of them for a long time. How we have reached our present state is a matter of history. The Roman law, although containing several general affirmations of liability for unjustified 8 STUDY UNIT 1: General overview enrichment, did not evolve a general action. Nor did the mediaeval writers, although there are some who would challenge this statement. But there is a strong, if by no means unanimous, body of academic opinion that Grotius, influenced by Spanish jurists and theologians, had come to accept unjustified enrichment as an independent source of obligations, just as contract or delict were. The case for Grotius is persuasively stated in Feenstra’s chapter Grotius’ Doctrine of Unjust Enrichment as a Source of Obligation: its Origin and its Influence in Roman-Dutch Law’, contained in Schrage (ed) Unjust Enrichment: The Comparative Legal History of the Law of Restitution (1995) vol 15 at 197, in the Comparative Studies in Continental and Anglo-American Legal History series. Whether Professors Feenstra and Scholtens are right about Grotius need not be determined, because the latter has demonstrated quite convincingly, in my opinion, that by the 18th century the Hooge Raad had come to accept the existence of what we would call a general enrichment action, although the descriptions of it by individual Judges differed – see Scholtens The General Enrichment Action that Was’ (1966) 83 SALJ 391 Feenstra (op cit at 228–35). The main reason why this development did not affect the evolution of Roman-Dutch law in Southern Africa, up to and including Nortjé’s case, is that the decisions recorded by Bynkershoek and Pauw lay unpublished for two centuries and more. This reveals the weaknesses of a practice (that of Holland at the time) which did not require Judges to give full reasons for their decisions and which lacked systematic law reporting. We now know from the hard print that there is a common-law basis for the acceptance of a general enrichment action, at least one of a subsidiary nature. In this respect the decision of the majority in Nortjé’s case at 139G–H has been shown by the then largely dormant authority to be clearly wrong. The above-mentioned statement provides an accurate picture of the modern South African enrichment law: – No general enrichment action exists, but only general requirements that underlie each specific enrichment act. The general requirements must be met in every case apart from the specific requirements of the individual actions. – The existing actions can, and have been, extended to cover new situations. – A general enrichment action may still develop, but only alongside the existing actions. move away However, it is important to note the tendency in case law to move away from specific from specific actions and their requirements, and to focus only on the general requirements actions involved. Eiselen and Pienaar state (Unjustified enrichment 3–4): In a sense the approach of De Vos and the quest for a general enrichment action has created a mind-set where one is still very much inclined to think in action based terms when thinking about enrichment law. De Vos extracted some generally applicable principles underlying all of the enrichment actions recognised at that time and proposed that these general principles be used as the requirements for the general enrichment action, whether that action replaced the existing actions or merely augmented them. This quest for the general enrichment action however created a false approach to the development of enrichment law. In its sister disciplines, contract and delict, liability had already been transformed from the Roman action based approach to a principle based approach to liability. The real issue therefore is not the need for a general enrichment action but the need for a similar development in enrichment law where the liability will be based on general principles augmented PVL3704/1 9 by more nuanced rules and exceptions to provide for public policy and correctives where needed. The first steps towards a principled approach were given in Lotz’s exposition of the law of unjustified enrichment in the Law of South Africa (see the original 1997 edition). For the first time Lotz stated the general principles extracted by De Vos from the various enrichment actions as prerequisites for any enrichment liability. These general principles had been applied by the courts for some time, but it was only with Lotz’s exposition that a subtle paradigm shift took place and the focus became more and more directed on the general principles, rather than the specific actions although the latter still remained very much in place. This approach was finally adopted by the Supreme Court of Appeal in Kudu Granite Operations (Pty) Ltd) v Caterna Ltd 3 All SA 1 (SCA) par 16 to 17 without much ado. In Glenrand MIB Financial Services (Pty) Ltd and Others v Van den Heever NO 1 All SA 511 (SCA) the Supreme Court of Appeal simply states that that it is generally accepted that there is no general enrichment action but that there are a minimum of four general requirements that have to be met in all cases (par 16). Although the general enrichment action has still not been recognised as presaged by Visser relying on the McCarthy case, two recent decisions of the SCA have raised further questions about general enrichment liability as neither of these cases referred to the requirements for any of the specific enrichment actions despite the courts of first instance doing so (see Nissan South Africa (Pty) Ltd v Marnitz NO and Others (Stand 186 Aeroport (Pty) Ltd intervening) 4 All SA 120 (SCA) and the Glenrand case). Both Visser and Du Plessis also argue that the scope of enrichment law is too limited at present and needs to be expanded to make provision for encroachment or abuse of rights from which a party has been enriched without necessarily impoverishing the other party. It might well be the case that the Supreme Court of Appeal and the Constitutional Court will expand the scope of enrichment liability, under the influence of the Constitution and of Ubuntu, to just such situations. ACTIVITY 1.2 Explain in your own words why unjustified enrichment is required as a corrective in our law. Your answer should not exceed 600 words (about two typewritten pages). 2 FEEDBACK Review the differences between the law of contract and the law of delict and the basic requirements for unjustifi ed enrichment. What are the basic underlying differences involved? Provide some practical examples in your discussion. 1.1.4 Development of general principles in South African law general The biggest development of the law of unjustified enrichment in South African law principles by the South African courts and commentators has been that of a number of general principles or requirements underlying all the various enrichment actions involved. Four requirements that must be met have been identified, namely: 10 STUDY UNIT 1: General overview The plaintiff must have been impoverished. The defendant must have been enriched. The enrichment must have been sine causa or without legal cause. Causality – the enrichment must have been at the expense of the impoverished party. In St Helena Primary School and Another v MEC: Department of Education, Free State Province and Another 2007 4 SA 16 (O) the court states: Although there is no general enrichment liability in our law, there are nonetheless basic requirements that must be met for relief to be granted under any of the recognised actions. These requirements are fully set out in Lawsa (op cit) at para 209. See also Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5) SA 193 (SCA) ( 3 All SA 1) at para ; McCarthy Retail Ltd v Shortdistance Carriers CC (supra) at para. They are the following: (a) the defendant must have been enriched; (b) the plaintiff must have been impoverished; (c) the enrichment of the defendant must be at the expense of the plaintiff; and (d) the enrichment must be unjustified (sine causa). The general principles, which are discussed in greater detail in study unit 2, provide the foundation for the aforesaid form of liability, setting it apart as a distinct discipline within the law of obligations. The principles concerned clearly distinguish enrichment liability from contractual and delictual liability. As you will remember from your study of contract and delict, certain circumstances exist where contractual and delictual liability may overlap, affording the plaintiff a choice or alternative grounds for his or her claim. Likewise, there are certain instances where delictual liability and enrichment liability may overlap, affording the plaintiff a choice of remedies. In principle, however, no instances occur where contractual liability and enrichment liability overlap. Where there is contractual liability, enrichment liability is naturally excluded, as a result of the sine causa requirement. extent of What the extent of a defendant’s liability will be in a particular case will emerge from liability the discussion of the various enrichment actions, which follows later. In principle, the plaintiff is entitled to the amount by which he or she has been impoverished, or to the amount by which the defendant has been enriched, whichever is the lesser. The quantum, or extent, of enrichment is determined at the time of the institution of the action. The above means that the defendant is not liable for benefits that he/she/it could have derived from the enrichment, but did not obtain (Gr 3 30 1 and 3 30 3; Voet 12 1 5; Dilmitis v Niland 1965 3 SA 492 (SR); De Vos 330–331). The above also means that, where the defendant’s enrichment is diminished or lost before the action is instituted, his or her liability is likewise reduced, or extinguished (King v Cohen, Benjamin and Co. 1953 4 SA 641 (W) 648–650 [hereinafter the King case]; Govender v Standard Bank of South Africa Ltd 1984 4 SA 392 (C) [hereinafter the Govender case]; ABSA Bank Ltd v Standard Bank of SA Ltd 1998 1 SA 242 (SCA) [252F]). The defendant has to prove non-enrichment (Le Riche v Hamman 1946 AD 648; ABSA Bank Ltd v Standard Bank of SA Ltd 1998 1 SA 242 (SCA) [252F]). However, such reduction or extinction of liability is subject to the qualifications outlined below. fi xing of A number of exceptions exist to the general rule that the enrichment is to be liability calculated at the time of lodging of claim. In such cases, the enrichment liability is PVL3704/1 11 calculated with reference to an earlier date, with it remaining constant from that date onwards. Four such circumstances have been recognised in our law. Enrichment may be calculated from the moment that the defendant becomes aware of his or her unjustifiable enrichment at the expense of another from an earlier date, if the defendant should have realised that the benefit received might later prove to constitute an unjustified enrichment from the moment that the defendant falls into mora debitoris from an earlier date, if the enriched party acted in bad faith (mala fide) exception: The qualifications set out above do not apply in the case of a minor who has been minors enriched by the performance directed towards him or her in terms of an unauthorised contract. The liability of such a minor remains restricted to the amount of his or her enrichment at the time of litis contestatio (D3 5 37pr; 4 4 34pr; Voet 3 5 8; Edelstein v Edelstein NO and Others 1952 3 SA 1 (A) [hereinafter the Edelstein case]; De Vos Ongeregverdigde verryking 336–337). evaluation The above-mentioned basic rules clearly show that the purpose of unjustified enrichment law, being to serve as a corrective, and to avoid the unfair and unjust enrichment of another, is compatible with the constitutional requirements of fairness and Ubuntu. The rules and exceptions create a fine balance between the interests of the enriched party and those of the impoverished party, firstly, when establishing if there should be any liability, and, secondly, when determining the extent of the enrichment obtained. SELF-ASSESSMENT 0.1 Explain the need for the recognition of unjustified enrichment liability in any developed system of law. 0.2 Explain why reference to Roman and Roman-Dutch law is still currently necessary when dealing with cases of unjustified enrichment liability. 0.3 A and B have concluded a contract in terms of which A is selling her car to B for R50 000, although the car is only worth R25 000. Does B have an enrichment claim against A? Explain your answer in full. 0.4 A has fraudulently induced B to pay an amount of R20 000 to him or her that B thought was owing, but which, in fact, was not due. Does B have an enrichment claim against A? Does B have any other kind of claim? 0.5 A has paid an amount of R20 000 to B which was not owing. B has used the money to go on a dream holiday that she has, until now, been unable to afford. A is now claiming the money back by instituting an enrichment action against B. Does B have any defence? 0.6 The State Student’s Support Scheme has been paying an amount of R1 400 per month towards the subsistence of A, a student who is resident on the campus of University X. In July 2017, the SSSS mistakenly paid an amount of R14 million into A’s account. 12 STUDY UNIT 1: General overview 3 FEEDBACK (1) See 1.1.2 above. Did you consider the difference of scope between enrichment, contract and delict in your answer? Did you explain the need with reference to practical examples? (2) See 1.1.3 above. Did you consider that Roman and Roman-Dutch law are the sources for the greater part of our private law, including contract and delict? Did you consider the fact that the principle of unjustified enrichment is still underdeveloped in comparison with the principles of contract and delict, and that the former, therefore, remains closer to the original sources than are the latter two? (3) Did you consider the fact that there is a valid contract in play, causing the profit (enrichment) made not to be unjustified? (4) The question is fairly complex, because, under certain circumstances, delictual and enrichment liability may overlap, providing the impoverished party with a choice. In the case provided, the claim could be based on delict and on damages claimed, or, alternatively, on enrichment. Resorting to the delictual claim would usually be preferable, because full damages could be claimed, as well as consequential damages that are not overly remote. In contrast, with enrichment, only the amount of the enrichment could be claimed. (5) Did you consider the fact that, although A has an enrichment claim in principle, the enrichment has been extinguished, which is a valid defence against A’s claim? (6) SSSS wants to reclaim the money from A. Do they have a claim, and, if so, for how much? Does the scenario perhaps depict a case of theft by A? PVL3704/1 13 2 STUDY UNIT 2 2 GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY Causality Enrichment Impoverishment Sine causa (at the expense of) 2 OVERVIEW Study unit 1 gave you an overview of unjustified enrichment liability. We will now deal with the subject in greater detail. Although South African law does not recognise a general enrichment action of the kind that will be discussed in relative detail in study unit 15 (see Nortjé en ’n Ander v Pool NO 1966 3 SA 96 (A) [hereinafter the Nortjé case]), nonetheless, certain general requirements exist for any action based on enrichment that have been recognised in terms of South African law. In this study unit, you will study such general requirements. PRACTICAL SCENARIOS The examples given below provide practical scenarios that will prove relevant in terms of the discussion and questions provided in this study unit. You will find such scenarios throughout your study guide, for you to consider. However, do not try to answer the questions in full as yet. Keep them at the back of your mind while reading through your prescribed material and the study guide. Doing so will make the abstract concepts discussed here fairly easy for you to absorb. scenario 1 A concluded a contract with B for the sale of a stud bull, Spartacus, for R100 000. B paid a deposit of R10 000 at the time of the signing of the contract. However, unbeknown to both A and B, Spartacus had died on the day before the conclusion of the contract. Can B reclaim the deposit paid? scenario 2 C concluded a contract with D, in terms of which D was to paint the exterior of C’s house for R20 000 while C was on holiday. As a result of a mix-up in addresses, D painted the house belonging to E, who was also on holiday during the period. E’s house also seemed to require a fresh coat of paint. Can D claim anything in the above regard from either C or E? scenario 3 F is renting a farm from G. F has concluded an agreement with H to repair the fences on the farm at a cost of R40 000. H has carried out the repairs. In the meantime, F has absconded and is nowhere to be found. Can H claim anything from G? 14 STUDY UNIT 2: General requirements for enrichment liability scenario 4 I has concluded an agreement with J for the sale of her second-hand car, at a price of R50 000. The market value of the car is only R30 000. Can J claim the difference from I? scenario 5 K has stolen L’s laptop computer from his office and has sold it to M for R2 000. Can L claim anything from either K or M? What would the basis of the claim be if such were to be the case? LEARNING OUTCOMES After completing this study unit, you should be able to indicate, with reference to case law, whether the defendant has been enriched and the plaintiff impoverished explain, with reference to an example, what favourable and detrimental side- effects are explain, with reference to an example, what “indirect enrichment” means briefly discuss the importance of the following decisions in respect of the “at- the-expense-of” requirement: Brooklyn House Furnishers (Pty) Ltd v Knoetze and Sons 1970 3 SA 264 (A) Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty) Ltd and Another 1996 4 SA 19 (A) Gouws v Jester Pools (Pty) Ltd 1968 3 SA 63 (T) describe the sine causa requirement with reference to case law explain what the impoverished party is entitled to claim by means of the bringing of an enrichment action, and how the extent of the enrichment claim is calculated apply the general principles to practical examples RECOMMENDED READING MATERIAL De Vos W “Enrichment at whose expense? A reply” 1969 SALJ 227–230 Eiselen S & Pienaar G Unjustified enrichment: a casebook 4th ed (LexisNexis Butterworths Durban 2016) 29–82 Lotz G The law of South Africa Vol 9 2nd ed (LexisNexis Butterworths Durban 2005) paras 207–209 Brooklyn House Furnishers (Pty) Ltd v Knoetze and Sons 1970 3 SA 264 (A) Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty) Ltd and Another 1996 4 SA 19 (A) Gouws v Jester Pools (Pty) Ltd 1968 3 SA 63 (T) Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 3 All SA 1 (SCA) McCarthy Retail Ltd v Shortdistance Carriers CC 2001 3 SA 482 (SCA) ADDITIONAL READING MATERIAL De Vos W Verrykingsaanspreeklikheid in die Suid-Afrikaanse reg (Juta Cape Town 1987) 340–343 Du Plessis J The South African law of unjustified enrichment (Juta Cape Town 2012) 151–160 Scholtens JE “Enrichment at whose expense?” 1968 SALJ 369–372 ABSA Bank Ltd t/a Bankfin v Stander t/a CAW Paneelkloppers 1998 1 SA 939 (C) Auby and Patellides (Pty) Ltd v Glen Anil Investments (Pty) Ltd 1960 4 SA 865 (A) Buzzard Electrical (Pty) Ltd v 158 Jan Smuts Avenue Investments (Pty) Ltd and Another 1996 4 SA 19 (A) Odendaal v Van Oudtshoorn 1968 3 SA 433 (T) PVL3704/1 15 Singh v Santam Insurance Company Ltd 1997 1 SA 293 (A) Standard Kredietkorporasie v Jot Motors h/a Vaal Datsun 1986 1 SA 223 (A) Wynland Construction (Pty) Ltd v Ashley-Smith en Andere 1985 3 SA 798 (A) 2.1 INTRODUCTION general Liability for unjustified enrichment is based on a movement of assets, whereby the requirements plaintiff is impoverished, the defendant is enriched, and a legally relevant relationship exists between the two facts. The relationship is usually expressed in the form of a statement that the defendant must have been enriched at the expense of the plaintiff. Furthermore, the enrichment must be unjustified, or sine causa. If the above conditions are present, an enrichment claim is recognised, unless the law denies the plaintiff his or her claim in a particular case. amount or The amount of the award is calculated according to the enrichment of the defendant quantum or the impoverishment of the plaintiff, whichever is the smaller enrichment at the relevant time, which is usually the moment when the action is instituted. retransfer of However, where property has been transferred, the impoverished party is entitled property to the retransfer of the property if it is still in existence and owned by the enriched party. Only in cases where the property cannot be retransferred is the impoverished party entitled to payment for the value of the enrichment, or the impoverishment, whichever the lesser. contract, You have to distinguish clearly between the liability that arises from unjustified delict and enrichment enrichment, and that which arises from contract and delict: Where there is a valid and enforceable contract between two parties, the liability to perform has its basis in the agreement made between the parties. Where a party has suffered damages as a result of the delictual conduct of another party, the ensuing liability has its origin in the unlawful and guilty conduct of the latter party. Unjustified enrichment liability depends neither on agreement, nor on unlawful conduct, but simply on the fact that value has been transferred from the patrimony of one party to that of another. No valid legal reason underlies or supports such transfer. ACTIVITY 2.1 Consider the five scenarios given above, and consider whether liability in each case should be based on the grounds of delict, contract or unjustified enrichment. 4 FEEDBACK scenario 1 What is the consequence of initial impossibility for the existence of a contract? Is there a contract in this case, or is the contract void? scenario 2 Does any agreement between D and E enable E to claim payment? Must E still perform its contract with C? Is E’s house now worth more as a result of the work done by D? 16 STUDY UNIT 2: General requirements for enrichment liability scenario 3 Does a contractual relationship exist between G and H? Has G benefitted from the work done by H? What of the contractual relationship between H and F? Must H sue F in the form of a contract? scenario 4 Is there any reason for concluding from the facts that the contract is void? If so, J should not be able to reclaim anything. J has made a bad bargain, but he or she is bound by it. scenario 5 K’s conduct is clearly unlawful, and L would be better advised to sue in delict than through attempting to pursue an unjustified enrichment action. Why? Can K use the actio rei vindicatio to reclaim the property from M, even though M might have acted bona fide? 2.2 GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY 2.2.1 The defendant must be enriched enrichment Enrichment may take the form of: (a) an increase in the defendant’s assets that would not have occurred had the enriching fact not taken place; (b) a non-decrease in his or her assets, where a decrease would have taken place, but for the enriching fact (Brooklyn House Furnishers Ltd v Knoetze & Sons 1970 3 SA 264 (A) [hereinafter the Brooklyn House case]); (c) a decrease in the number of liabilities that would not have taken place (Guarantee Investment Corporation Ltd v Shaw 1953 4 SA 479 (SR)); or (d) a non-increase in the liabilities that would have taken place. The enrichment must still exist in the patrimony of the enriched party at the time of lodging of the claim. The enrichment may consist either of the thing or the value received. The thing, for instance, may consist of either the painting that was transferred or the money that was paid. The substitute value may be supplied where the painting was subsequently sold, or where the money was used to buy something else. Example Assume that A pays B an amount of R12 000 that is not owing, and B uses the amount to buy household necessaries that she consumes within a month. At a later stage, A institutes an action against B for R12 000. The question then arises as to whether B is still enriched by the amount. It is immediately obvious that B’s estate, at this stage, is no bigger than it was before she received the R12 000. In other words, B’s assets have not increased. However, if B had not received the R12 000 from A, she would have had to use R12 000 of her own money to buy the household necessaries. Clearly, B’s assets would then have decreased. Such a decrease did not, however, occur, because of the R12 000 that she received from A. A should, consequently, succeed in her action. In this case, B’s enrichment, consequently, takes the form of expenses saved. PVL3704/1 17 Example Assume that A makes a payment to B of R150 000 that was not owing. B uses R5 000 of the amount to buy household necessaries and, with the balance of R145 000, she buys a car that she would not have bought had she not received the R150 000 from A. At a later stage, A institutes an action against B. B is once more enriched by the R5 000 that she spent on household necessaries, with her enrichment again taking the form of expenses saved. The R145 000 that she spent on the car does not, however, constitute saved expenses, as she could not have bought the car without the money that she erroneously received. Assume at the time of litis contestatio that the car has a value of R120 000, which constitutes an increase in B’s assets. A should, therefore, succeed in recovering the amount of R5 000 + R120 000 = R125 000. potential The examples given above relate to the acquisition of a benefit with a monetary value. benefit The financial position of the estate of the defendant at the relevant time is compared with the financial condition in which the estate would have been at the relevant time, if the fact causing the enrichment had not occurred. Until a potential benefit is received as an actual benefit, it does not constitute enrichment. Even where the defendant has knowingly neglected to appropriate, or to acquire, a potential advantage, he or she is not enriched by the potential benefit that he or she did not acquire. In the normal course of events, it is relatively easy to determine whether a defendant has been enriched, and by how much. However, as in every other field of law, there might be some extraordinary facts that make it extremely difficult to decide on whether there has been any enrichment at all of the defendant, or what the amount of his or her enrichment was. Example Take the facts of the Nortjé case, for instance, where the plaintiffs, who were prospectors, had, through their own efforts, discovered a rich deposit of porcelain clay on the defendant’s farm. A question that arose for decision was whether the discovery of the clay had enhanced the value of the farm itself. In the court a quo, Van Winsen J took the view that it was not the discovery of the clay, but its presence, that determined the value of the farm. Therefore, the defendant had not been enriched by the prospectors’ efforts (Nortjé v Boedel Pool 30 September 1965 (C) unreported). The above line of reasoning is unconvincing. The mere presence of the minerals did not enhance the value of land, but the knowledge of their presence did. When someone makes such knowledge available, an increase in the market value of the land follows on, both economically and juridically, from his or her own efforts (according to the judgment of Rumpff CJ in the Nortjé case (at 122–123). moral benefits: Another question that has already engaged the attention of a Provincial Division is the Tanne v whether a person’s estate can be enriched by means of “moral” benefits. In Tanne v Foggitt case Foggitt 1938 TPD 43, a minor, who had contracted to receive typewriting lessons, was held not to be liable ex contractu for the price of all the lessons concerned, but could only be liable for the benefits (in casu the lessons) actually received. In such a case, the action against him was regarded as only being permissible based on enrichment 18 STUDY UNIT 2: General requirements for enrichment liability alone. The case, therefore, seems to serve as authority for the proposition that such “moral” benefits can constitute enrichment. The above judgment appears to have been wrong. In our view, the result of enrichment must be an increased estate, and as “moral” benefits cannot increase one’s estate, they cannot, therefore, constitute enrichment. Some support for the above view is given in the Edelstein case, in terms of which Van den Heever JA expressed the view (at 13) that “no latinist would have used the word (locuples) to connote some vague, intangible and imponderable advantage”. De Vos’s view, however, is that, in an appropriate case, invisible or intangible personal benefits may be regarded as enrichment (De Vos 329–330). use of a The question as to whether the use of another’s thing constitutes enrichment has not thing yet been settled in our law. In principle, it should be possible for such use of a thing to constitute enrichment (see De Vos 264–270 and the discussion of the position of occupiers of land in study units 12-13). In Lodge v Modern Motors Ltd 1957 4 SA 103(SR), for instance, the court appears to have been willing to allow the value of the use of a vehicle to be taken into account for purposes of calculating the enrichment and impoverishment of the parties concerned. The issue remains unsettled, however. ACTIVITY 2.2 Consider practical examples 1 to 4 at the start of this study unit. Explain which party, if any, has been enriched, and to what extent. 5 FEEDBACK See the feedback at the end of this study unit for a detailed explanation of the above. 2.2.2 The plaintiff must be impoverished impoverishment As has already been stated, the quantum of the plaintiff’s claim is the amount by which he or she has been impoverished, or the amount by which the defendant has been enriched, whichever is the lesser amount. The above means that every enrichment action must embrace an inquiry not only into the extent of the defendant’s enrichment, but also into the extent of the plaintiff’s impoverishment. Such impoverishment may be constituted by: (a) a decrease (b) a non-increase in assets (c) an increase (d) a non-decrease in liabilities The rules that apply in determining the defendant’s enrichment apply, with the necessary adjustment, in determining the plaintiff’s impoverishment. favourable and Before proceeding to the third requirement for enrichment liability, we would like detrimental side-effects to make one further observation about the first two requirements above: in a fully developed enrichment action, all favourable and detrimental side-effects of the enriching fact or event ought to be taken into account in determining the defendant’s enrichment and the plaintiff’s impoverishment. PVL3704/1 19 When speaking of the favourable or detrimental side-effects of the enriching fact, we wish to indicate the effects that either increase or decrease the amount of the defendant’s actual enrichment, or that decrease or increase the amount of the plaintiff’s actual impoverishment. Such side-effects do not flow directly from the enriching fact, but are, nonetheless, connected to it. The side-effects may take many different forms. Example A and B enter into a lease of land, with A as the lessor and B as the lessee. Although the agreement is void for some reason, B remains in possession of the land for three years. She constructs certain buildings, costing her R180 000, on the land and they enhance the value of the land by R160 000. When A evicts her from the land, B claims compensation for the improvements that she made to the land. The claim by B is, of course, based on enrichment. At first glance, it would appear that A has been enriched by R160 000 and B impoverished by R180 000, so that B should succeed in an action for R160 000. Related to the enriching fact, however, are various side-effects. In the first place, A lost possession of her land for three years. If the value of her possessory interest for three years was R130 000, this detrimental side-effect reduces A’s actual enrichment to R30 000. Secondly, B had possession of the land for three years, and, for that period of time, had the use and enjoyment of the land. If the value of such use and enjoyment was R120 000, this is a favourable side-effect that reduces B’s impoverishment to R60 000. B should, therefore, succeed in an action for R30 000. We started off by saying that a fully developed enrichment action should take account of all favourable and detrimental side-effects of the enriching fact. However, when you study the various enrichment actions that exist in South African law, you will find that, whereas some side-effects are taken into account, others are ignored. The result is that the actions cannot be described as fully developed actions at this stage. Let us now consider the third requirement for enrichment liability. ACTIVITY 2.3 Consider the practical scenarios 1 to 5 at the start of this study unit. Explain which party, if any, has been impoverished, and to what extent. 6 FEEDBACK See the feedback at the end of this study unit for a detailed exposition of the above. 20 STUDY UNIT 2: General requirements for enrichment liability 2.2.3 The defendant’s enrichment must have been at the expense of the plaintiff causal link If a defendant is to be held liable for enrichment, it is not sufficient that he or she between enrichment and has been enriched, and that the plaintiff has been impoverished. A causal link must impoverishment also exist between the enrichment and the impoverishment concerned. The above is expressed by saying that the defendant’s enrichment must be at the expense of the plaintiff. Normally, the requirement involved causes little difficulty, as, in most cases, the causal link between the different elements is obvious. Problems have, however, arisen in cases of indirect enrichment. In certain such cases, A and B enter into a contract, in terms of which A renders performance to B, but the benefit of the performance accrues to C. Example (a) A enters into a contract with B to build a swimming pool for B on a residential stand that A believes to be B’s property, but which, later, turns out to be the property of C. (b) A contracts with B to repair a car that A believes to be B’s, but which turns out to be C’s. (c) A (as the subcontractor) contracts with B to supply the roof of a house that B is building for C. The question, in each of the above cases, is whether C can be said to have been enriched at A’s expense, if B fails to render performance to A. analysis Obviously, if B renders performance to A, that is, if B pays A for the work involved, C will be enriched at B’s expense, and not at A’s. Clearly, in addition, the position must be the same where B has not yet paid A, but where B is able to do so, and A is able to enforce his contractual action against B. Does it make a difference, then, if B becomes insolvent, and is unable to pay A, or if B disappears, so that A is unable to enforce the contract against her? De Vos De Vos’s view is that the fact that B is a penniless person cannot affect the juridical relationship between A and C, and that, in all our examples, C is enriched at B’s expense, and not at A’s. The result is that A cannot bring an enrichment action against C. Gouws v Jester The above-mentioned view was endorsed by the Transvaal Provincial Division in Pools Gouws v Jester Pools (Pty) Ltd 1968 3 SA 653 (T) (hereinafter the Gouws case). The facts, in the above case, were that A had built

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