Unjustified Enrichment in South African Law: Components, Applications, Exceptions, Schemes and Mind Maps of Law

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UNJUSTIFIED ENRICHMENT LIABILITY AND ESTOPPEL DEFINITION When one person’s estate is increased unjustifiably at the expense of another.  Enrichment = source of obligation  Relationship between debtors and creditors LAW OF PERSONS LAW OF OBLIGATIONS LAW OF PROPERTY LAW OF DELICT LAW OF CONTRACT UNJUSTIFIED ENRICHMENT COMPONENTS/ GENERAL PRINCIPLES / REQUIREMENTS  Enrichment  Impoverishment  Sine causa requirement (without legal cause)  Causality (at the expense of) VARIOUS ENRICHMENT CLAIMS AVAILABLE Condictiones sine causa Improvements to Property Management of another’s affairs Work done or service rendered  Condictio indebiti  Condictio ab turpem vel iniustam causam  Condictio causa data causa non secuta  Condictio sine cause specialis  Bona fide possessor  Bona fide occupier  Mala fide possessor  Mala fide occupier  actio negotiorum gestorum utilis  actio negotiorum gestorum contraria  locatio conductio operis  locatio conductio operarum EXAMPLES  electronic funds transfer into incorrect bank account  payment of cheque which has been stopped GENERAL ENRICHMENT ACTION See; Nortje v Pool No general enrichment action – mere ad hoc extensions of existing actions. Did not exclude possibility of general enrichment action, but emphasized that it would have to be gradually developed by the courts. EXTENT OF LIABILITY Entitled (in principle) to the amount by which he has been impoverished or by which defendant has been enriched – whichever is the lesser Quantum determined at time of institution of action. Defendant therefore not liable for benefits he could have derived but did not obtain. Where enrichment diminishes, so does liability reduced. EXCEPTIONS Liability usually fixed – calculated with reference to the date on which enrichment action was lodged. May be fixed at an earlier date under certain circumstances:  From the moment the defendant becomes aware he has been unjustifiably enriched. Liability only reduced if defendant can prove that loss/destruction would have taken place in any event or that it wasn’t his fault. Where negligent, he remains liable at time of actual knowledge.  If defendant should have realised that benefit may later prove to constitute unjustified enrichment. Liability reduced or extinguished if he can prove enrichment was not his fault. Liable at time when a reasonable person would have realised he might be enriched.  When defendant falls into mora debitoris. Liability reduced or extinguished only if defendant proves enrichment would have operated against plaintiff if performance had been made timeously. Where there is a doubt about the existence of a claim or a dispute – mora does not arise.  Mala fides – when defendant acts in bad faith. The above 4 circumstances do not apply to minors. If minor enriched in terms of unauthorised contract claim remains restricted to enrichment at time of litis contestatio. REQUIREMENTS DISCUSSED 1. DEFENDANT MUST BE ENRICHED  Increase in defendant’s assets (which would not have occurred)  Non-decrease in defendant’s assets (which would have occurred)  Decrease in liabilities (which would not have occurred)  Non-increase in liabilities (which would have occurred) Must still exist in patrimony of enriched party at time claim is lodged. Either the thing – or the money received for the thing sold. Acquisition of a benefit with a monetary value = financial position of estate at relevant time compared to financial position of estate if enrichment did not occur. Potential benefit not enrichment – unless received as actual benefit. In appropriate cases invisible or intangible personal benefits may be enrichment. The use of another’s thing? Not yet settled law. liable unless show thing would have suffered same fate at hands of plaintiff  Undeveloped enrichment action – not all detrimental side-effects taken into account. MONEY EXCHANGED FOR SOMETHING ELSE  If receiver bought something he would have bought in any case, then he is enriched by the full amount originally received (saved expenses)  If receiver bought something he would otherwise not have bought, he is enriched only to the extent of the value of performance obtained i.e. luxury holiday – not enriched.  If he bought something which is worth more than he paid for it, he is liable for full amount of undue payment. If worth less – liable only for lesser amount representing value of thing (or released from liability by delivering the thing to impoverished party)  Where worth more than amount paid – and chooses to return thing – plaintiff must pay excess value. Principle: Impoverished party can NEVER receive more than quantum of his impoverishment. Note: Where a party receives money which is not due to him, but is unaware of the fact that the money was not owing, he may spend the money on some or other luxurious item. So at the end of the month you find that there is more money left in your account than you thought (because someone had by mistake paid money into it) and you spend the money on a weekend trip which you would not otherwise have done. When the payer of the money seeks to reclaim the undue payment you will suddenly find yourself in a difficult position, because you have in fact spent the money on something which you would not normally have doen and you now further have to pay it back. However, if you were reasonable in believing that the undue money was yours, your defence of non-enrichment could succeed. Receiver of undue payment liable for full value (although no longer in possession):  Knows that money is not due  Later becomes aware of fact payment was not due.  Should have realised there is a possibility that performance could later prove to be undue. Defence (lessening liability / falling away): Only if he can show it was not his fault. Mora re repayment of un-owed performance: Defence can only succeed if enriched party can show that he performed in time – same fate would have befallen thing in hands of plaintiff. INTEREST DUE TO MORA  Liable if falls into mora with performance to repay.  When impoverished party demands payment  Not because of enrichment principle, but to compensate for damage caused by mora. ERROR OF LAW / ERROR OF FACT Error of fact: Party who deliver un-owed performance must NOT have been aware that performance was NOT owing. Act under mistake as to true position. Error of law (errorem iuris): see; Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue. Further requirement: iustus error - Mistake must be reasonable, but there has to be gross negligence on part of plaintiff for his mistake to be deemed unreasonable. PRESUMPTION OF ANIMUS DONANDI Irrebuttable presumption that delivery in the knowledge that performance is not due constitutes donation is totally unacceptable. It is possible to perform knowingly that which is not due without the intention to donate. Law allows relief when undue payment is made under protest. Not the protest which founds the claim but fact that protest is incompatible with intention to donate. CONDICTIO INDEBITI: SPECIFIC APPLICATIONS  Statutory enrichment claim created by S28 of Alienation of Land Act  Insolvency law and law of Succession  Payments made under duress and protest  Ultra vires payments Re: Void contracts for sale of land or void contracts for hire-purchase agreements Where performance made in terms of void contract – plaintiff should be able to reclaim performance if requirements of condictio are present. Courts – divergent views: Transvaal approach:  Entitled to restitution in principle Where a contracting party made performance in terms of a void contract because of non-compliance with prescribed formalities – not required to show performance was made under circumstances which would found a condictio.  No restitution where both parties performed  Restitution only if no performance from defendant If defendant willing and able to perform – restitution barred. Not in case of hire- purchase: recovery only barred if both parties performed in full. CPD approach:  For restitution requirements for condictio must be met  Performance of defendant irrelevant once requirements present. Recovery not barred if defendant performed even if willing or able to make performance. S28 OF THE ALIENATION OF LAND ACT Resolved the above matter as far as sales of land are concerned  Creates statutory enrichment action similar to condictio indebiti in subsection 1 and regulate position where both parties performed in full in subsection 2.  Fully developed enrichment action – takes adequate account of all factors increasing / decreasing enrichment / impoverishment.  SS(2) goes against general enrichment principles – party can reclaim whatever performed in terms of void contract  Gives effect to subjective intentions of parties despite non-compliance with formalities – where both parties performed fully. LAW OF SUCCESSION Executor in office:  Incorrect division, non-compliance with Administration of Estates Act, executor can reclaim performance.  Those prejudiced have a right of recourse against the executor in his personal capacity (improper actions), if not improper only claim in his official capacity.  Executor claims from those not entitled with the condictio indebiti.  Creditors already paid cannot be held liable in respect of belated claims (a person must lodge claims in time) – also excludes executor’s action. Discharged:  No longer held liable or institute action Unpaid creditors (who lodged late):  Institute condictio indebiti against beneficiaries who received too much or those who received payment that were not entitled to it. No action against creditors already paid. Unpaid creditors (timeously lodged): right to rescind – claim before counter- perform. (2) breach of contract other party not fulfil obligation to counterclaim – rescind with condictio. (3) resolutive condition One party delivered thing i.t.o. contractual resolutive condition and uncertain future event took place.  Content of claim Either thing delivered + fixtures and fruits or payment of value of these things Interest on money not reclaimed Defendant entitled to compensation for necessary and useful improvements. Remove luxury improvements. No action to defendant for compensation for improvements. Exception doli – refuse to restore until compensated. No claim to recover value of factum Undeveloped. consensual contracts do ut des and do ut facias in case of (1) Cancellation owing to breach (2) Fulfilment of resolutive condition  Ius poenitentiae fell away – no longer reclaim performance before other party counter-performed (change his mind. rendered on basis of future event taking place or not taking place.  Claim if delivered thing to defendant by virtue of: (1) Resolutive condition (fulfilled) (2) Suspensive condition (not fulfilled) (3) Modus disregarded (4) Assumption not fulfilled. SUSPENSIVE AND RESOLUTIVE CONDITIONS Resolutive: Hang like sword over head of parties affected by contract. Once uncertain event takes place / condition fulfilled – contract comes to an end. Suspensive: Suspends rights and obligations until occurrence of an uncertain future event. Unfulfilled Assumptions:  A fact which the parties elevate to the basis of their contract  Relates to the facts of the present or past (not the future) Modus:  Obligation created in contracts of donations or in wills  Non-compliance – disposition may be reclaimed by executor or heirs. Breach of contract  Condictio no longer plays part.  Use contractual remedies  Confirmed in Baker v Probert. CONDICTIO SINE CAUSA SPECIALIS Only applied where no other condictiones can find application In Roman law distinguish between condictio sine causa specialis and condictio sine causa generalis.  The general condictio is an alternative to any of the three previous condictiones, could be used in the place of any of the three as long as one of them could have been instituted. The formula was less complicated. Roman Law Roman-Dutch Law SA Law  Set aside stipulation (oral contract) if entered into without a iust causa.  Existing causa falls away – goods can be recovered  Owner transfers possession – receiver used/sold bona fide. If thing used up – and impoverished – could be claimed back.  A deliver thing to B on grounds of supposition that proves to be false. A could recover thing. Required an existence of negotium between parties (enriched / impoverished)  Negotium requirement precludes this condictio from being a general enrichment claim.  Not all detrimental side- effects  Factum not claimed  Undeveloped.  Negotium requirement disappear.  Still not general – value of factum not claimed – only things that had been transferred.  Bona fide possessor’s action designated as a utilis action negotiorum gestorium contraria (extended management of affairs action)  See; Govender v Std Bank of SA  Used under 4 circumstances (1) Where party performs – performance was due – but causa for performance has fallen away (condictio ob causam finitam) (2) Plaintiff’s property consumed/alienated by someone else (3) Bank made payment under countermanded/forged cheque (4) Ownership transferred sine causa – where none of the other condictiones would lie.  Where possessor receives thing ex causa onerosa (for value) their enrichment is constituted by the profit of the thing  A con only sue one of the bona fide possessors for profit  The bona fide possessor may then sue any of his predecessors in title again for the profit. NEGOTIORUM GESTIO (Management of another’s affairs) 1. Actio negotiorum gestorum contraria (true management) 2. Actio negotiorum gestorum utilis (extended form based on enrichment) Distinguish between 1 and 2 above. In (1) the gestor can claim all reasonable expenses. In (2) the gestor can claim only for impoverishment or enrichment of dominus (whichever is the least) Roman Law Roman-Dutch Law SA Law  Dominus obliged to compensate for expenses  Dominus granted an action to account for whatever is owed and damage for negligence.  Requirements - Gestor acts in interest of dominus without instruction - Gestor acts without mandate - Gestor’s actions reasonable (dominus benefited and would have acted in the same way) - Gestor acts with the intention of acting in another’s interest - Gestor not act with intention of rendering service free of charge (animus donandi)  Not true enrichment action. Whether owner enriched not considered only whether gestor had been impoverished.  Could be form of enrichment (expenses saved) if gestor would probably act in same way.  Exceptions - where minor’s interests protected - where gestor acted with own interests in mind  Only few changes:  Gestor no action if acted against prohibition by dominus  Romans denied action where gestor manag affairs of another believing he was busy managing his own affairs (bona fide).  Roman-Dutch granted action  Used to compensate possessor who effected improvements on another person’s land (bona fide and mala fide possessor)  Indirect enrichment (extended to)  A contracts with B to benefit C  Performance by A does not take place. Third party allowed to act directly against enriched dominus.  Third party no intention of benefiting dominus – acts in interests of another thinking he was acting in his own interests (action available)  Where a person with intention to act to the benefit of someone else takes charge of that person’s interests in a reasonable manner without animus donandi and without being forbidden to manage those interests.  Requirements (true management) (1) Gestor must perform without instruction (2) Must act reasonably (3) Must have intention to act in interests of dominus (4) Must not have acted free of charge (5) May not act contra express prohibition of dominus.  All requirements – claim full extent of expenses even if dominus did not benefit. May be necessary expense – expenses saved.  Duties of gestor (1) Complete that which he has commenced (2) Exercise necessary care (3) Account for anything he acquires (4) Surender to dominus all the latter is entitled to.  Rights of Gestor (1) Entitled to compensation for expenses and doli until compensated. A = ius retentionis. If a lost possession no ius retentionis. - Cannot use condictio sine causa specialis – no negotium. - Cannot use negotiorum gestio – did not act animo negotia aliena gerendi - Claim was for impensae necessariae or impensae utilis or increase in value of land (whichever is the least) - Could remove useful improvements – if B did not want to reimburse - No right to impensae voluptuariae. If B willing to reimburse A – A lost right of removal. - Value of fruits used by possessor – cost of production – subtracted from claim for compensation for improvements. - Could still vindicate his materials after receiving compensation.  Mala Fide - Ius retentionis or ius tollendi (right of removal) - Equated to bona fide possessor except for fruits - Must account for fruits he could have enjoyed and actually enjoyed (bona fide – only fruits actually enjoyed) Occupiers  Buyers of movable property received but not ownership  Buyers of land – possession not transfer  Institute action redhibitoria – cancel agreement – claim expenses incurred from sellers  Institute action empty / restitution in integrum. Lessees  Remove all fixtures except necessary improvements – not leave land in worse conditions than before  Claim all fixtures effected with consent of lessor (actual cost of material excluding cement, lime and labour)  Without consent – property of lessor if not removed before expiry of lease.  Crops on land – lease expire – may not harvest – claim from lessor cost of seed, sowing, cultivation  No ius retentionis Specificatio (creation of a thing)  Institute action for value of thing lost. SOUTH AFRICAN LAW Bona fide  In fact believe he is the owner  Mistake must be reasonable  Bona fide possessor loses ownership by accession.  Has recourse if owner enriched – actio negotiorum gestorum utilis  Ius tollendi (right of removal) – a personal right to remove attached materials without damage to the immovable exercised reasonably according to equitable principles.  Remove before true owner claims the land – after true owner made claim, may not remove unless true owner refuses to compensate.  Only claim for expended money or materials – not labour or interest on expenses. May claim for lost income resulting from labour expense.  Necessary Expense o Expenses in respect of preservation of property and protection of property if efforts successful (saved expenses)  Useful expenses o All expenses v amount by which value is enhances, whichever the lesser amount.  Luxurious Expenses o Decorations not necessary or useful – may increase value. Usually not claimed unless property sell for higher value due to improvement. Can be removed if owner does not compensate except where removal will damage the property.  Right of Retention o Refuse to leave land until reimbursed. o Requirements:  Possessor in control of property  Owner must be unjustifiably enriched at expense of possessor.  Fruits o Value of fruits gathered before awareness that possession unlawful minus production costs = deducted from claim for compensation o Includes natural fruits and rent o No interest on expenses o Not include fruit yielded by improvements o If value of fruit gathered exceeds enrichment – no compensation. o Use and enjoyment of property not set off against claim: he thinks he is the owner and does not therefore envisage that he will have to compensate for occupation.  Remedies (in summary) o Enrichment claim for compensation for necessary and useful improvements (sometimes luxury improvements) o Ius retentionis o Ius tollendi  Mala fide possessor (confusion) o Where true owner aware of mala fide possessor’s activities and remained silent – same position as bona fide possessor o Not function in private law to punish – mala fide possessor should be in same position as bona fide possessor o In some cases has a right to retention (JOT Motors v Standard Kredietkorporasie) o In certain circumstances a right to remove. Differences: Bona fide Mala fide  Mistakenly thinks he is owner  Knows he is not the owner  Becomes owner of all fruits gathered before becoming aware  No right to fruits gathered by him  Owner has no claim to value of fruits gathered before becoming aware. Cannot be set off against claim for compensation.  Owner has a claim for compensation for fruits consumed / disposed of / value of fruit that could have been gathered. Similarities: Bona fide Mala fide  Right of recourse for all useful and necessary and sometimes luxury expenses  Right of recourse for necessary, perhaps for useful (except where thief) – definitely not luxurious.  Right of retention  Not certain if right of retention. ACCESSIO – CONTINUED  Where animus domini absent – occupier / holder o Lawful – lawful occupation for certain period (lessee, pledgee, usufructuary) o Bona fide – mistaken impression he is lawful occupier o Mala fide – de facto exercises powers of lawful occupier – knows he is not.  Holder at will – person who possesses thing until possession terminated. At common law – no compensation – created law giving occupier action.  Lawful Occupiers o Actio negotiorum gestorum contraria – if all requirements of negotiorum gestio present o Actio negotiorum gestorum utilis - where own interests promoted while managing someone else’s affairs o Enrichment lien available (necessary / useful expenses – to extent of enrichment) o Standard v JOT Motors – lien against holder o Placaats still applicable : protection to owner if he was not able to compensate lessee for improvements and lessee could remain in occupation. o Placaats mean the following:  Lesse may remove structures – not leave property in worse condition than received in. Entitled to remove anything planted / saved.  Anything not removed becomes property of owner at expiry of lease. Before expiry lessor / lessee may agree on compensation.  Lessee may claim compensation for that which was not removed and erected with consent of owner. Restricted to value of material used. Not cost of labour. Owner must compensate for cost of seed, ploughing, tiling, sowing.  Lessor may elect to compel lessee to remove attachments after lease expires.  Lessee does not have right of retention  Lessee claim compensation only when lease expires.  De Beers Consolidated Mines v London and SA Exploration Co Compensation restricted to useful improvements. Necessary improvements awarded in terms of general principles applicable to bona fide possessors. o Placaats not applicable if lease terminated by breach of contract / insolvency of lessor. Only if lease expires / lessee commits breach of contract. Distinction between bona fide possessor and lessee: Bona fide lessee restricted in terms of placaats and no enrichment lien. Lessee in position to arrange his affairs and remain in control until lease expires. Not the case with a bona fide possessor.  Usufructuary o Must preserve substantial character o May recover unusually heavy expenses If deprived of physical control unlawfully or against his will he can claim that it be restored to his control – ius retentionis revives. AGAINST AND BY MINORS  Minor entering into contract without guardian’s assistance – not liable on contract. Other party is.  Cannot recover performance or compel minor to perform.  Can sue minor for undue enrichment. ROMAN AND ROMAN-DUTCH LAW  Minor who received performance liable for undue enrichment  If used to buy necessaries – saved expenses  Extent of liability always determined at litis contestatio. SA LAW  Contract entered into with minor enforceable or voidable by minor (with assistance)  Contract valid from point of view of other party – cannot enforce or rescind  Minor can exercise various options (with assistance) o Guardian ratify contract – enforce and perform o Rescind; refrain from enforcing or rescinding – enrichment liability MINOR RESCINDS (Void ab initio) Reclaim property delivered (rei vindicatio) – ownership cannot be transferred to another party (money cannot be recovered with rei vindicatio – becomes property of other party through commixtio). Must reclaim money with condictio. WHICH ACTION? NOT condictio indebiti – can only be used where performance was not due at that stage Condictio sine causa specialis – where money paid in terms of valid causa which later fell away Also available to other party who has performed. Separate actions. Cannot be used as side- effect. MINOR REFRAINS FROM ACTING  Where other party performed in terms of contract and minor refrains from rescinding, he (minor) will be enriched at expense of other party  Still valid contract so causa not fallen away (condictio sine causa specialis not applicable)  Performance was due and still is until contract is rescinded so, condictio indebiti also not available  Praetorian action (in Roman law) o Action in quantum locupletior factus est Exception to normal enrichment action – requirement: enrichment must be sine causa. CLAIM  Determined at time of litis contestatio  Saved expenses (necessaries) determined before this. COMPENSATION: WORK DONE AND SERVICES RENDERED Locatio conductio operis - contractor / contract of work Locatio conductio operarum – employee / contract of service  Performance by contractor or employee cannot be restored  Enrichment action allowed  Action for quantum meriut  Amount by which employer actually enriched or employee impoverished whichever the lesser. MANNER IN WHICH LIABILITY DETERMINED DIFFERS Locatio conductio operarum 1. Render personal services to employer. Labour object of contract 2. Employee at beck and call of employer 3. Services to be rendered in terms of contract of service at disposal of employer 4. Employee subordinate to employer 5. Contract of service terminated by death of employer 6. Contract of service terminated on expiration of period of services rendered. Locatio conductio operis 1. Object: performance of certain specified work 2. Stands in independent position. Not obliged to perform work himself 3. Must perform within specified time stipulated in contract or reasonably 4. Equal footing with locator operis. Not under obligation to obey order. 5. Not necessarily terminated by death of parties 6. Terminates on completion of work. CONTRACT FOR WORK  General principle – workman only claim after acceptance of work by employer – if not perform fully or properly – no claim on contract. Employer could defend with exceptio non adimpleti contractus  Can employer retain faulty performance without paying? Enrichment action available. See; Human v Nortje Recover contract price less cost of supplementation or completion. Criticism: if contract did not offer basis for claim – should not be used to determine compensation. See; BK Tooling v Scope Precision – new formulation  If above approach followed a claim based on contract should be instituted – not enrichment – court has a discretion  Factors: use of the performance and extent of shortcomings  If exceptio allowed (contractual) – plaintiff prevented from claiming in terms of contract  If innocent party cancels contract on basis of plaintiffs breach (positive malperformance) plaintiff would have enrichment claim – and not for contract price less costs obtaining proper performance. Result:  Enrichment liability rejected as basis of claim of plaintiff  Rejects the view that exceptio could not be raised if there was substantial performance  Rejects the view that exceptio could be raised if there was substantial defect in performance  Plaintiff claiming under contract must allege he performed properly otherwise only claim on basis of enrichment possible. CONTRACTS FOR SERVICE  Employee entitled to remuneration for services upon completion of term of his contract of service.  If services not rendered for the full term – not entitled to full agreed remuneration / unless contract determines  Compelled to claim on ground of unjustified enrichment because contractual claim will be defeated by exceptio. See; Spencer v Gostelow Employer cannot enjoy services of employee without compensation. Court awarded pro rata remuneration. Saved expense: didn’t have to hire other employee for time he worked Impoverishment: remuneration could have earned during time he worked there. Desertion: Loses claim Criticism: Why difference between termination of one form of breach and not for de facto termination of contract because of desertion?