Greater Tzaneen Municipality v Bravospan 252 CC (2022) ZASCA 155
By Associate Designate Lungelo Mkhize and Partner Sushila Dhever, Fasken
This article covers two important take-away points from this judgment:
- whether an unjustified enrichment claim qualifies as a ‘debt’ under the Act; and
- whether South African law should recognise a general unjustified enrichment claim.
Introduction
On 7 November 2022, the Supreme Court of Appeal delivered a judgment in the case of Greater Tzaneen Municipality v Bravospan 252 CC (2022) ZASCA 155; the court relied on section 172(1)(b) of the Constitution of the Republic of South Africa in declaring that it was just and equitable for Bravospan 252 CC (“Bravospan”) to be compensated by the Greater Tzaneen Municipality (“Municipality”) for security services rendered under an unconstitutional agreement.
Facts
Following a competitive tender process, the Municipality concluded a Service Level Agreement (“SLA”) with Bravospan, in terms of which the latter would render security services to the former for a period of 12 months. Towards the end of the SLA, the parties concluded an agreement extending the SLA for a further 24 months without undergoing a further tender process.
Approximately three months into the extension agreement, the Municipality applied to the High Court and had the agreement declared null and void on the basis it failed to comply with the procurement requirements for organs of state as set out in section 217 of the Constitution. Despite the declaration of invalidity, Bravospan, at the Municipality’s instance, continued to render security services as per the extension agreement.
In January 2018, Bravospan instituted fresh proceedings against the Municipality for the payment of R9 624 000 in respect of the services rendered under the extension agreement. It relied on four alternative causes of action, namely delict, fraud, constitutional damages and unjustified enrichment. The High Court held that the Municipality had been unjustifiably enriched and had to compensate Bravospan for the services rendered.
The Municipality took the High Court’s judgment on appeal to the Supreme Court of Appeal, wherein it sought an order setting aside the High Court’s order on the basis that:
- Bravospan failed to comply with section 3(2) of the Institution of Legal Proceedings against Certain Organs of State Act 40 of 2002 (“the Act”); and
- Alternatively, a portion of Bravospan’s claim had prescribed.
Supreme Court of Appeal’s findings
Prior to even considering whether Bravospan had complied with section 3(2) of the Act, which requires the notice of legal proceedings to be served within 6 months of the debt arising, the court considered whether the Act was applicable to the matter and found that:
- the Act was not applicable to an unjustified enrichment claim because such claim did not qualify as a ‘debt’ under the Act; and
- the Municipality could not rely on such defence.
The court proceeded to state that since South African law does not recognise a general claim for unjustified enrichment, the High Court’s order granting Bravospan’s claim for unjustified enrichment was not sustainable in law.
The court rejected the Municipality’s prescription argument on the grounds that the Municipality could not prove the commencement date of the period of prescription, which is an essential element to prove when raising such a defence.
Having considered the facts of the matter, the court was of the view that it would be manifestly unjust for Bravospan to not receive any compensation for the services rendered to the Municipality. To mitigate the harsh effects of the extension agreement being declared null and void, the court relied on its discretionary power in section 172(1)(b) of the Constitution to make a just and equitable order.
As a just and equitable remedy under section 172(1)(b) of the Constitution, the court set aside the High Court’s order and replaced it with an order declaring that Bravospan is entitled to compensation for the services rendered to the Municipality under the extension agreement.
Analysis and Conclusion
The two important take-away points from this judgment are:
- whether an unjustified enrichment claim qualifies as a ‘debt’ under the Act; and
- whether South African law should recognise a general unjustified enrichment claim.
Unjustified enrichment claim as a ‘debt’
The meaning of a ‘debt’[1] as defined in the Act has been a contentious issue in our courts as the parameters of such definition have constantly been evaluated. The courts have interpreted ‘debt’, as defined in the Act, to be restricted to claims for damages, whether arising from delict, contract or any other cause of action.[2]
In the present matter, relief for damages could not be claimed under contract law because one cannot benefit from an unlawful contract.[3] Even if the contract had been a valid one, it seems that Bravospan’s claim for payment would have constituted a claim for specific performance as agreed in the SLA, and not a damages claim as required by the definition of ‘debt’ under the Act.[4] Relief could also not be claimed under unjustified enrichment as our courts do not recognise such a claim as one for damages, and one to which the Act applies.[5]
Bravospan had also relied on delict as one of its causes of action against the Municipality. A delict is defined as the act of a person that, in a wrongful and culpable way, causes harm to another.[6] Bravospan would have had to make the necessary allegations to show that the Municipality’s conduct constituted a delict, thus entitling it to damages.[7]
Had the delictual cause of action been explored, the Act would have been applicable because Bravospan would be claiming damages arising from the Municipality’s alleged wrongful conduct, which allegedly caused it to suffer patrimonial damages due to not being paid for services rendered. Whether Bravospan would have succeeded on a delictual claim or not is a question that could only be answered by the court on a balance of probabilities, after considering the facts and evidence before it.
Should South African law recognise a general unjustified enrichment claim?
Unjustified enrichment can be defined as “an obligation arising whenever one person’s estate has been increased at the expense of another person’s estate and sufficient legal ground (causa) for the retention of such increase is lacking.”[8]
The South African law of unjustified enrichment, with its foundations in Roman law, does not recognise a general remedy for unjustified enrichment, and instead recognises specific actions which cover a range of circumstances resulting in unjustified enrichment. Examples of such actions include circumstances where a party is seeking to recover money or property:
- transferred in terms of an illegal or otherwise invalid agreement (condictio ob turpem vel iniustam causam);
- mistakenly transferred to another in circumstances where it was not owed at all (condictio indebiti);
- transferred with the intention of eliciting counter performance, but such counter performance does not materialise (condictio causa data, causa no secuta); and
- transferred in circumstances not covered by the other actions mentioned above (condictio sine causa specialis).[9]
A general unjustified enrichment claim envisages a claim that does not fall under the traditionally recognised categories enrichment actions.[10]
South Africa’s non-recognition of a general unjustified enrichment claim has led to a long standing debate about whether such a claim should be recognised in our law. This debate can be traced back to the judgement in Nortje en ‘n Ander v Pool, NO(“Nortje”)[11], where the court held that there was nothing to show an express recognition of a general enrichment action in South African law.
On the one hand, those against recognition have raised concerns regarding legal uncertainty, and opening the ‘floodgates’ to general unjustified enrichment litigation as some of the key factors favoring continued non-recognition of such claims in South African law.[12]
On the other hand, those arguing for the recognition of a general unjustified enrichment claim argue that this area of the needs to be reformed due to restrictive nature of these actions in solving modern day problems.[13]
There is no definite answer as to whether there is room for a general unjustified enrichment action in South African law, and whether such an action is the answer to cases such as the present. Ultimately, it is a matter to be decided by our courts in developing the common law. At present, our courts have decided to continue with the non-recognition of a general unjustified enrichment action.
Despite the uncertainty regarding the recognition of a general unjustified enrichment action, it is clear that the law must constantly be developed to meet the current societal demands. In the present case, the court decided not to alter the position established in the Nortje judgment and later reiterated in the case of McCarthy Retail Ltd v Shortdistance Carriers CC (“McCarthy”) [14]. Instead, the court utilised its constitutional powers in section 172(1)(b) to craft what it considered a just and equitable remedy for Bravospan.[15]
At present, litigants and legal practitioners will have to continue relying on the recognised categories of unjustified enrichment, namely, condictio ob turpem vel iniustam causam, condictio indebiti, condictio causa data, causa no secuta, and condictio sine causa specialis.
[1] Section 1 of the Act defines a “debt” as any debt arising from any cause of action (a) which arises from delictual, contractual or any other liability, including a cause of action which relates to or arises from any act performed under or in terms of any law; or omission to do anything which should have been done under or in terms of any law; and (b) for which an organ of state is liable for payment of damages, whether such debt became due before or after the fixed date.
[2] Thabani Zulu & Co (Pty) Ltd v Minister of Water Affairs and Another 2012 (4) SA 91 (KZD) (Zulu), at paragraph 12; Nicor IT Consulting (Pty) Ltd v North West Housing Corporation 2010 (3) SA 90 (NWM), at paragraph 30
[3] AllPay Consolidated Investment Holdings (Pty) Ltd and others v Chief Executive Officer of the South African Social Security Agency and others (Corruption Watch and another as amici curiae) 2014 (1) SA 604 (CC), at paragraph 41
[4] Director General, Department of Public Works v Kovac Investments 2010 (6) SA 646 (GNP) (Nicor), at paragraph 10, the court held that the Act was not applicable as the applicant’s claim was for specific performance under the contract, and not one for damages.
[5] The present case, at paragraph 11, and the Zulu judgment, at paragraph 32, confirm that an enrichment claim does not fall within the confines of a ‘debt’ as defined in the Act.
[6] Neethling J and Potgieter JM, Law of Delict (Seventh Edition, LexisNexis 2015), at page 4
[7] Bravospan would have to show that the five elements of a delict are all present, i.e, an act, wrongfulness, fault, causation, and harm.
the conduct can be identified as a delict.
[8] Eiselin & Pienaar : Unjustified Enrichment : A Casebook, Second Edition, Page 3
[9] Visser Unjustified Enrichment (2008), at page 5
[10] KBI v Willers, [1994] 2 All SA 268 (A), at 291
[11] 1966 (3) SA 96 (A), at 136
[12] Du Plessis The South African Law of Unjustified Enrichment (2012), at page 4
[13] Op cit note 9, at pages 4 - 5
[14] [2001] ZASCA 14. At paragraph 8, the court noted that South African law does not have a general enrichment action.
[15] Section 172(1)(b) empowers a court to make a just and equitable remedy where it has made a declaration of constitutional invalidity in relation to a particular law or conduct. Our courts have repeatedly relied on section 172(1)(b) to provide a just and equitable remedy to a party who may be left without remedy after a declaration of constitutional invalidity has been made. See BW Brightwater Way Props (Pty) Ltd v Eastern Cape Development Corporation (1235/2019) [2021] ZASCA 47; 2021 (6) SA 321 (SCA) and Buffalo City Metropolitan Municipality v Asla Construction (Pty) Ltd [2019] ZACC 15; 2019 (4) SA 331 (CC)
