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INTRODUCTION: THE LAW OF UNJUSTIFIED ENRICHMENT

Law of Obligations

CONTRACT

DELICT

UNJUSTIFIED ENRICHMENT Where a person is enriched at the expense of another, there is an obligation to restore what has been lost.

BACKGOUND The concept of Justice Commutable justice concerns the relationships between private persons and according to Ulpian; justice is the constant and perpetual will to give each one his due. The three principles of natural law are the pacta sunt servada, ne quis alteram laeda, neminem cum alterius detrimeto fieri locuplotiorum and should these principles not be observed, it constituted a breach. Unjustified enrichment is aimed at restoring or equalizing the positions of the parties by filling the hole in the plaintiff’s assets from the defendant’s assets which he benefitted from the plaintiff. Roman law 

Law of Contract Embodied by the principle of pacta sunt servanda. In order for a creditor to

have a remedy he must have concluded one of the Roman contracts and satisfied its requirements. He would then rely on a remedy that is specific to that contract. An example would be the actio venditi for a seller against the purchaser. This action enables the seller to compel buyer to pay the price or to make any required performance from his side. 

Delict The civil law remedies included the f urtum, rapina domnum, iniura datum and

iniura. The praetorum remedies included the metus,dolus and fraus creditotium. 

Law of Unjustified Enrichment The enrichment principles were relied upon for the remedies that were

available at that time. However they did not develop an unjustified enrichment remedy at this time. Amongst the remedies that were available, they included the classification ex variis causarum.quasi delicto ad quasi contractu. These were classified as arising from a contract or a delict. Condictiones referred to those remedies that did not have a proper classification. These are the condictio indebiti, condictio ob turpem rei inistam causam and the condictio causa data causa not secuta.

THE RECOGNITION OF A GENERAL ENRICHMENT ACTION

Nortjie v Pool (1996) AD The court in this case recognise that the Roman remedies were extended ius commune and that the courts have, on several occasions been prepared to extend them . There court further held that there was no general enrichment action in our South Africa law and was not prepared to recognise the action.

McCarthy Retail Ltd v Short distance carriers CC (2001) The court declined to recognise he general enrichment action. It was however, prepared to recognise such action in future where the situation is not covered by an existing action. It favoured the approach of De Vos. The recognised general requirements for a general enrichment liability is the enrichment of the defendant and the impoverishment of the plaintiff at the expense of the plaintiff and that there is a lack of causa for the enrichment.

The current position with regard to claims arising from unjustified enrichment entails That the requirements that were recognised in McCarthy should be considered. It must be considered whether the situation at hand had falls under any of the existing actions. Subsequently additional requirements must be made. Id situation does not fall within the existing actions a consideration can them be made to extend it. The Law of Unjustified Enrichment and Property law In South Africa the abstract system of transfer of ownership applies. This means that for the transfer of ownership the underlying agreement does not affect the sale. The underlying agreement can be defective and the property would still be

transferred. This has the consequence that the “owner” cannot vindicate the property once it is in the possession of another. It is clear that the enrichment claim of recovering the property cannot be possible. A monetary claim can instead be instituted. A security for payment would be a lie that the plaintiff has over the property. In Buzzard Electrical case the court stated that a creditor can enforce an enrichment lien against a debtor only if he has an enrichment claim against that debtor. THE TAXANOMY OF THE LAW OF UNJUSTIFIED ENRICHMENT We distinguish between two categories of unjustified enrichment. They are enrichment

by

a

deliberate

transfer

and

enrichment

that

arises

from

outlays/expenditure. The former entails a claim on the basis of recovery of the thing transferred or a claim for a monetary reward where it cannot be returned. The latter entails expenditure resulting from managing the affairs of another person and also incurred in the transfer of property of another. In this case the basis for compensation is a monetary claim.

GENERIC REQUIREMENTS It is important to understand the connection between the Generic Requirements for unjustified enrichment and the existing actions. As explained above, Unjustified Enrichment is a legal term of when a person benefits unfairly at the expense of another, hence we have impoverishment and enrichment which will be fully explored further in this chapter. The reason for generic requirements for an obligation caused by unjustified enrichment is that, it was decided in the McCarthy case that there is no general requirements for obligations from unjustified enrichment. When dealing with generic requirements it is important to consider the two models, that is:

1. First model Here the claimant must prove the generic requirements as well as the additional requirements in order to be able to claim for enrichment. There are questions that

needs to be answered such as- 1. Whether the claimant was impoverished, 2. Whether the defendant was impoverished, 3. Whether the enrichment of the defendant was at the expense of the claimant, 4. Whether the enrichment was sine cause and 5. The additional requirements and the answer must be a yes from all the above mentioned questions

2. Second Model The emphasize is on the additional requirements of the existing actions with the generic requirements, deals more with the sine causa. Sine cause has to do with public policy. Visser criticizes the additional requirements in that the existing action will no longer be independent and there is no way that will be used to prove whether enrichment is justified or not.

Impoverishment and Enrichment will now be explained.

The underlined two terms are to be used together. It is known that patrimony is made of assets and liabilities and it is the property that is inherited from the male ancestor. When calculating the patrimony of a person we follow the objective approach. For example if a person breaks a door of a building unintentionally, the person will be liable for delict to compensate unless if the building was going to be demolished the next day and the leading case is Skyword v Peter Sales. The other approaches are abstract approach that focuses on the personal rights and not actual fact and concrete approach enforces personal rights. If a farmer enters in a contract with A to plant vegetables on B’s property, A then disappears, in terms of abstract approach the farmer will not be impoverished because the contact is against A but the farmer will be impoverished in terms of a concrete approach.

Impoverishment

The

claimant

is

impoverished

when

position

worse

is

said

to

the than

be

actual the

hypothetical

position.

(assets

decrease) The defendant is enriched when the

Enrichment

actual position is better than the hypothetical

position.

(assets

increase).

The onus is on the defendant to prove since the date of litis contestation his or her enrichment has decreased or is no more. Sonnekus states that enrichment claim is calculated on the date of litis contestatio (Claim 1 and apportionment is not possible) and Delictual claim for damages arising before litis contestatio (claim 2 and apportionment is possible).

Devos purports that single enrichment claim covers

entire situation and apportionment is not possible.

Sine causa

For sine causa requirement there must be no cause dandi and no cause retendi. There are two approaches to this requirement that is the German law and the English law. The German law focuses on the defendant that is the enrichment of the defendant. It also includes the abstract approach. The English law focuses on the claimant that is the impoverishment of the claimant, it looks at the position of the claimant’s point of view. The claimant must have the positive concrete reason for restitution by meeting one of the requirements for restitution. De Vos focused on the concrete approach to deal with unjustified enrichment. De Vos and Sonnekus both believe that causa dandi and causa retendi must not be present for liability of unjustified enrichment. Visser therefore stated that the absence of causa retenendi was more appropriate in South African law.

If the sine causa requirements is not met, enrichment liability will not exist and also if enrichment was cum causa . Legal policy should not be left out when dealing with sine causa requirement but Eiselen and Pienaar maintains that legal policy is unnecessary as it creates a lot of problems. Du Plessis and Visser believe that legal policy has a goof influence when it comes to determining sine causa.

At the expense of is when a party is enriched at the expense of the other. It becomes complicated when there are more parties in a matter because one must first find out who the transferor and recipient. The test for causation in the law of unjustified enrichment is determined by the two approaches that is the newer and older approaches. The older approaches includes the first of the older approaches of the Bouldier judgment and the second of the older approaches that the direct enrichment liability must be outlawed. The newer approaches adopted by the supreme court of appeal. Here it is important to establish both the factual and legal causation. The ABSA Bank case followed a flexible, policy-based approach as far as causation is concerned.

Generic requirements are a problem when it comes to multiparty. Sonnekus’s abstract approach will be useful to succeed with enrichment claim and generic requirement will have to be accordingly formulated for direct enrichment.

The Condictio indebiti What is the condictio indebiti? The condictio indebiti is an enrichment action and can be used to reclaim a performance that was made under a mistaken belief that such performance was due. The three requirements for the condictio indebiti: 

There has been a transfer of ownership



There has been an excusable error and



The mistake must have been a reasonable one.

Visser has argued that the requirement of the excusable error iustus error was not a requirement under the Roman Dutch Law for the institution of the condictio indebiti and that it should be the same for South African law. The view is supported by arguments that the requirement is illogical, discriminatory and unnecessary. Arguments in support of the abolishment of the excusable error



Enrichment actions allowed in cases where

a

 

The

claimant



It

is

protecting not

terms of an illegal

requirement

contract.

other

The

actions.

blameworthy

conduct

of

a

recipient

for

several

enrichment

the while defences

are now available at

their

disposal

namely:

the

>Estoppel

transferor prejudices

It is unnecessary as it is aimed at

is

punished.

person

performed in has



Unnecessary

Discriminatory

Illogical

the

claimant.

>Loss of enrichment >Protection of reasonable belief.

Willis Faber Enthoven v Receiver of Revenue 1992 SA 202 (SA) Facts: Willis Faber and Co Pty (Ltd) made payments to the defendant .The payments were not due to him because of an error in law. The company then had a merger with another company to form a new company called Willis Faber Enthoven. A claim was then instituted by the new company in order to claim the money that had been paid to the defendant. The amounts were not due and were made because of an excusable error.

Legal issue: Whether there was a basis for condictio indebiti and whether the company could reclaim payments made.

Judgment: The court took note of the criticism against the iuris error requirement, that it is illogical. The court gave guidelines to determine when an error can be justifiable when instituting an enrichment action; the relationship of the parties, the conduct of the defendant, the culpability of the ignorance and the plaintiff’s state of mind. The court abolished the requirement that an error had to be one of fact rather than one of law because there was no logic in the distinction of the two.

Instances where an excusable error is not a requirement: 1)Payments that are made under duress and protest

The person who makes payment under duress is well aware of the payment and thus there is no mistake. According to common law the available remedies in this case would be exclude condictio indebiti. The condictio indebiti was however extended to cover such instances. This extension was made by the court in Union Government v Gowar. Academic authors are in support of this extension. 2) Ultra vires payments and payments made by minors These types of payments can be recovered through the condictio indebiti without the claimant having to prove an excusable error. This is because the necessarily legal capacity to perform legal acts is absent. 3) Payments made into natural obligations

When a person makes a payment in accordance with a natural obligation, that payment cannot be recovered with the condictio indebiti because natural obligations may be legally fulfilled but not legally enforced. Specific applications of the condictio indebiti 1) Payments made under duress and protest

See above. 2) Ultra vires payments and payments made by minors See above. 3) The condictio indebiti of executors, creditors and beneficiaries

The issue in question here would be what happens when a creditor has not been paid as a result of the already distributed assets amongst the heirs and legatees of the deceased’s estate? Executor in office: The executor can use the statutory remedy provided for in the Administration of Estates Act to reclaim the money and then make payment to the creditor accordingly. It is important to note that the executor cannot recover anything from a creditor who has been paid what is due to him. Executor Discharged:

The executor can no longer institute the action once he is discharged from office. The creditor can then institute the action by himself to first the heirs and then the legatees. He can not institute the action against other creditors.

4)Unpaid claims against liquidated companies

Creditors are limited to claims only against the insolvent’s estate and do not have claims against the insolvent personally. The court in Kommissoris van Binnelandse Inkomste extended the direct claim of the unpaid creditor of a deceased estate against his heirs and legatees to the unpaid creditors of a company that is in liquidation. 5)Transfers made into void contracts

The claimant can use the condictio indebiti if the contracted entered into was void. He must however, prove that there was an excusable error on his side. Should he have known the contract was void, then there was no excusable error on his side. In Wilken v Kohler the court held that were both parties have performed fully into a void contract, neither party has an enrichment claim and also no claim for the recovery of performance. The rule will not apply if there is no proper agreement, where both parties performed invalid agreement in full and where the agreement is void for non-compliance with statutory formalities. Furthermore, section 28 of the Alienation of Land Act provides for an enrichment action which is that is similar to the condictio indebiti.

Condictio ob Turpem Vel Iniustam Introduction Prior to the extension, the condictio ob turpem vel iniustam causam was only used to reclaim money or property which has been transferred in terms of an illegal agreement. The extension made it possible for the reclaiming of money or property retained by a defendant where it constitutes the proceeds of illegal conduct. Should the money or property be transferred under an illegal agreement, that agreement will be void and there will be no causa. An agreement may be deemed illegal in terms of common law or legislation. With common law the subject matter of the contract, its objection or its conclusion has to be contra bone mores or against public policy. By legislation on the other hand, it has to be prohibited expressly or be implicated by statue.

Changes in South African Law

1. Relaxation of the par delictum rule. Under common law, it was a requirement for a plaintiff to come to court with clean hands. No action arises from a cause tainted with turpitude or impropropriety. The defence that can raised against a claim is, in pari delicto portior est condition defentis. This meant that the position of the defendant is the strongest in the case of equal works. The par delictum rule precluded a person who is a turpis persona from reclaiming his money or property. A turpis persona is someone whose actions are tainted with turpitude or impropriety. So the relation of this rule meant that, in certain instances the turpis persona can in fact reclaim his money or property. Jajhbay v Cassim The Supreme Court of Appeal in this matter held that the courts may exercise discretion to relax the par delictum rule based on the interest of public policy. If simple justice between man and man requires it to prevent unjustified enrichment. De wet criticised the decision made by the court, he argued that there was no historical foundation for the relaxation of the rule. De Wet also objected to the notion of “degrees of turpitude” referred to in the case. De Wet further argued that relaxation of the rule creates legal uncertainty. Eiselen and Pienaar provide 2 reasons for the total abolishment of the par delictum rule; 

In modern South African law civil claims have lost their penal character because the criminal law usually provides sufficient remedies to protect public policy interest.



The abolishment of the rule would be in harmony with the character of a more developed enrichment law and would

also facilitate the acceptance of a

general enrichment action. 

A third reason to the two mentioned by Eiselen and Pienaar is that: if one accepts that the true basis for the condictiones is the failure of the aim of the transfer, this will be sufficient and it will be unnecessary to retain the par delictum rule.

2. Tendering the return by claimant of what he had received under the illegal agreement.

In order to succeed a claimant must offer or tender the return of anything he received himself from the defendant ...