Study Unit 2

Question 1

Four requirements for Unjustified Enrichment?

Answer 1

1. Enrichment
2. Impoverishment
3. Causality (at expense of)
4. Sine causa (without cause)

Question 2

On what is liability for UE based?

Answer 2

It is based on:

1. Movement of assets;
2. Plaintiff is impoverished;
3. Defendant is enriched; and
4. a Legally relevant relationship exists between two facts;
5. Enrichment must be unjustified, or without cause.

Question 3

How is UE quantum determined?

Answer 3

Awarded amount is calculated by amount of impoverishment to plaintiff, or,
Enrichment of the defendant,
- Whichever amount is the smallest

Question 4

What happens when property was transferred?

Answer 4

The property is re-transferred back to plaintiff, or

If the property can not be transferred back, value of the impoverishment / enrichment, whichever is lesser.

Question 5

Contract, delict and enrichment

Answer 5

1. Valid and enforceable contract between to parties, liability to perform has basis in agreement made;
2. Party suffered damages as result from delictual conduct of another party, then liability has origin in unlawful and guilty conduct of latter party;
3. UE does not depend on agreement nor unlawful conduct. It simply looks at the value of transferred assets from one party to another, which has no valid legal reason to support it.

Question 6

Enrichment may take the form of:

Answer 6

a. Increase in defendants assets;
b. Non-decrease in his or assets where a decrease would have taken place;
c. Decrease in the number of liabilities that would have taken place;
d. Non-increase in liabilities that would have taken place.

Question 7

Nortje v Boedel Pool 1965

Answer 7

Prospectors came to a farm, made arrangement with farm owner to find porcelain clay.

• Porcelain clay was found, farm owner dies.
• Claim for enrichment by plaintiff.
• Winsen JA = knowledge of clay does not make value increase, but the presence thereof.
• Rumpff CJ = knowledge of clay increases value, not the presence thereof. One has to know it is there to increase value.

Question 8

Moral benefits? Tanne v Foggitt 1938

Answer 8

Minor concludes agreement for typing lessons.

• Minor goes into contract for typing lessons.
• Minor not liable ex contractu for all lessons concerned,
• Minor only liable for lessons actually received, not for all lessons concerned.
• This case seems to serve as authority for proposition that moral benefits can constitute enrichment.

Question 9

Use of a thing?

Answer 9

In our law, no matter as such have been settled yet, although in theory it would be possible for the use of a thing to constitute enrichment.

Question 10

Quantum is determined how?

Answer 10

By the amount plaintiff was impoverished or defendant enriched, whichever is lesser.

Question 11

How many inquiries needed to determine which amount is lesser?

Answer 11

You require an inquiry into plaintiffs impoverishment and defendants enrichment, two.

Question 12

Plaintiffs impoverishment may be constituted by>

Answer 12

a. a decrease
b. a non-increase in assets
c. an increase
d. a non-increase in liabilities

Question 13

What is needed within a fully developed enrichment action?

Answer 13

All favourable and and detrimental side-effects of the enriching fact or event ought to be taken into consideration to determine extent of plaintiff and defendant’s impoverishment and enrichment.

Question 14

Is mere enrichment and impoverishment sufficient?

Answer 14

No. You will need a causal link between enrichment and impoverishment.

Question 15

Relevance of Gouws v Jester Pools case

Answer 15

A and B contracts to build a pool:

• A believes land belongs to B;
• Land belongs to C;
• A builds the pool;
• A claims enrichment from C, land owner
• Court denies claim, states:
• • C was enriched by impoverishment, of B, the person who requested the pool, and not A, who built and provided materials for pool.
• • Criticism on the judgment, as A was impoverished and not B.

Question 16

Buzzard Electrical case: What was the two distinctions the court relied on?

Answer 16

(a) where A effects improvements to the property of an owner, not pursuant to a contract with the owner but pursuant to a contract with B and A then sues the owner for enrichment (as was the case in the Gouws case); and
(b) where the owner contracts with B for improvements to his or her property,and B subcontracts the job to A. Once A has completed the work A sues the owner (with whom she never entered into a contract) on the basis of enrichment liability.

Question 17

In the Buzzard Electrical case, which of the two distinctions did the court rely on?

Answer 17

b. The subcontractor distinction, because the relationships between owner, A and B was all regulated by contract.

Question 18

Was there enrichment in the Buzzard Electrical case?

Answer 18

No. This is a matter of contractual debt and not unjustified enrichment.

Question 19

Nortje v Boedel Pool 1965

Answer 19

• Plaintiffs are prospectors, discovered porcelain clay on a farm;
• Did discovery of clay enhance value of farm?
• Van Winsen J says the discovery of clay does not increase farm value, but the presence thereof.
• Rumpff CJ later on added is not the presence that increases value, but the knowledge thereof.

Question 20

Briefly explain Tanne v Foggitt

Answer 20

Question of moral benefits in question.

• Applicant is a minor, concludes agreement for typing lessons.
• Minor was not liable ex contractu for the price of lessons concerned, but for lessons actually received.
• Minor only liable for benefits not received.
• Case can be used to support moral benefits, although there will be disagreement, as enrichment did not take place wherein value flowed from one estate to another.

Question 21

What about the using of a thing?

Answer 21

Question as to whether using of a thing constitutes enrichment has not been settled in our law, although it would be possible.

Question 22

Impoverishment may be constituted by:

Answer 22

1. a decrease
2. a non-increase in assets
3. an increase
4. a non-decrease in liabilities

Question 23

Are favourable and detrimental side-effects of importance?

Answer 23

Yes. Both favourable and detrimental side effects have to be taken into consideration when calculating the value of impoverishment and enrichment.

Question 24

Must the defendants enrichment take place at expense of the plaintiff?

Answer 24

Yes, there must be a causal link between enrichment and impoverishment.

Question 25

Briefly explain Gouws v Jester Pools

Answer 25

A, agreed to build a swimming pool for B and concluded a contract;

• A thought the land on which pool is built belongs to B;
• The land actually belonged to C;
• B disappears from the scene, did not pay A;
• A attempted to claim enrichment from B.
• Enrichment claim fails, judge says C enriched at B, not A.
• Criticism regarding judgment.

Question 26

What is a right of retention?

Answer 26

Where a person has expended money, materials or labor on the preservation or improvement, of anothers property, then person is granted a enrichment lien over said property. This operates against anyone involved, even the owner.

Question 27

Briefly explain Brooklyn House case

Answer 27

B bought furnitare on a hire purchase agreement from C:

• C reserves the right to store furniture at his facility, and if B stores furniture at another storage it would be a breach of agreement.
• B breaches storage prohibition, C cancels agreement and claims furniture from A, who is storing it now.
• Appellant court upholds the right to enrichment lien.

Question 28

Briefly explain the obiter discussing of the Supreme Court of Appeal in the McCarthy case

Answer 28

SCA stated it would reject the Gouws approach in instances of indirect enrichment.

Question 29

What is the reason for the sine cause requirement?

Answer 29

No one would be allowed to make any profit each other.

Question 30

What is De Vos’ definition of sine causa?

Answer 30

Enrichment is unjustified when there is no sufficient legal ground for the transfer of value from one estate to another, or for the retention of such value.

Question 31

Briefly explain the Greenhill Producers v Benjamin matter

Answer 31

Plaintiff company and defendant enters contract to purchase sheep, keep them on the lands of plaintiff company and share profits from selling them on a fixed basis.

• The company was provincially wound up and the contract between them fell away.
• None of the parties were aware.
• Plaintiff company demanded defendant remove the sheep.
• Defendant removed the sheep at later stage.
• Plaintiff company claims enrichment from date of contract cancellation to removal of sheep.
• Van der Riet J = enrichment not unjust, but natural result of parties’ joint error.

Question 32

Briefly explain Dugas v Kempster Sedgwick 1961

Answer 32

Henochsberg J stated “Enrichment of the purchaser as a result of bona fide use of the article of which he or she has been placed in possession pursuant to an invalid agreement of sale is not unjust enrichment”

Question 33

Briefly explain Auby and Patellides v Glen Anvil Investments

Answer 33

Sine causa was correctly interpreted in this matter:

• A buys land from B and goes into contract;
• Contract states cancellation of sale if payments not made promptly AND no compensation for improvements.
• A goes into arrears, B cancels;
• A claims enrichment via improvements, but contract specified no compensation for improvement

Question 34

Explain re-transfer of ownership

Answer 34

An UE claim is to have a specific item concerned transferred in ownership, or, for occupation or possession to be re transferred to the original owner / occupier

Question 35

Explain residual value with an example

Answer 35

A sells horse to B for R150, 000.00.

• Later on the agreement was found void;
• B had sold horse to C for R140,000.00;
• A can only claim R140,000.00 from B.

Question 36

Can enrichment be diminished or extinguished?

Answer 36

Yes. Liability can be diminished or extinguished if defendant can prove it was not his fault.

Question 37

Describe implied or actual knowledge

Answer 37

When the defendant became aware of the enrichment

Question 38

Explain mora debitoris ito UEL

Answer 38

From the moment that the defendant falls into default (mora debitoris), his or her
liability is reduced or extinguished only if he or she can prove that the event that diminished or extinguished his or her enrichment would also have operated against the plaintiff, if the retransfer had been made timeously.

Question 39

What happens in mala fide circumstances?

Answer 39

If the enriched party acted mala fide in relinquishing or reducing the enrichment, the enrichment liability of the pary can be fixed at an earlier date than that of lodging the claim.

Question 40

What is the case with minors?

Answer 40

Liability of a minor is limited to the enrichment at the time of lodging.

Question 41

What does the enrichment liability being based on a movement of assets from
the plaintiff to the defendant, in effect, mean?

Answer 41

The plaintiff must be impoverished and the defendant must be enriched. The asset will move from the plaintiff’s estate, impoverishing him to the estate of the defendant, enriching him.

Question 42

Can potential and moral benefit form part of enrichment for purposes of the law of enrichment? Answer with reference to case law.

Answer 42

Tanne v Foggitt:

• Can a persons estate be enriched by moral benefits?
• According to Tanne v Foggitt, this matter seems to serve as authority for the proposition that ‘moral’ benefits can constitute enrichment.

Question 43

Explain, with reference to an example, the importance of both the favourable
and the detrimental side-effects involved for the determining of the extent of
the movement of assets

Answer 43

In a fully developed enrichment action, all favourable and dentrimental side-effects of the enriching fact or event should be taken into consideration when determining the defendants enrichment and the plaintiff’s impoverishment.

A and B enters into contract for for lease of land, A as lessor and B as lessee:
- Assume the agreement is void for some reason;
- B erects buildings to value of R180k;
- Buildings increase value of land by R120k;
- A stays on the land for three years, even though agreement is void;
- B evicts A, upon which A claims enrichment;
Looking at side effects:
- B loses use of land for three years;
- A erected buildings;
- B’s value of losing use of land amounts to R130k;
- A used land for the for a value of R120k
- Thus leaving B’s impoverishment to R30k

Question 44

Name the two instances of indirect enrichment identified in the Buzzard Electrical case:

Answer 44

1. The first instance is when A makes improvements to the property of the owner in terms of a contract with B, and then institutes a claim against the owner on the basis of enrichment.
2. The second instance is when the owner contracts with B to improve his or her property, and B enters into a
   subcontract with A to perform the work, where, after A has done the work,
   A then sues the owner (with whom he had not entered into contract) on the basis of the enrichment concerned.

Question 45

Discuss briefly, with reference to case law, the position of a plaintiff with regard to the first instance identified in the Buzzard Electrical case.

Answer 45

The facts of the Gouws case illustrate the first instance. In the case, the plaintiff was decided as having failed in his or her enrichment claim against the owner, because the enrichment of the owner did not occur at the expense
of the plaintiff.

In the Brooklyn House case, the Appellate Division allowed for the right of retention in favour of the plaintiff, which was effective against anyone involved, including the owner.

In the Buzzard Electrical case, the Appellate Division decided that the right of retention cannot exist in a vacuum, but that it ensures, or secures, a recognised claim.

In Hubby’s Investments,
the court decided that, in view of the court’s decision made in the Buzzard
Electrical case that the distinction between a right of retention and an action
is a distinction without a difference, an action should also be recognised in
the first instance.

Buzzard Electrical and Brooklyn House (both decisions of the Appellate Division) rejected the Gouws case by implication, albeit not expressly. In the McCarthy case, however, the court expressly rejected the
decision made in terms of the Gouws case, but the discussion concerned was only an obiter one, and, therefore, not strictly binding. The argument
does have strongly persuasive power, though.

Question 46

Discuss briefly, with reference to case law, the position of a plaintiff with regard to the second instance identified in the Buzzard Electrical case.

Answer 46

The position with regard to the second instance mentioned in the Buzzard
Electrical case is quite clear, since in the case concerned, the Appellate Division expressly decided on the matter. The plaintiff’s enrichment claim against the owner was not recognised, since the owner received nothing more than that for which he or she had contracted. Therefore, the enrichment of the owner was not sine causa.

Question 47

Explain briefly the sine causa requirement, and illustrate its application with
reference to case law.

Answer 47

If the mere fact that one person was enriched at the expense of another were to form the basis for the taking of an enrichment action, the concept of liability would be so broad as to put a stop to all commercial transactions, because no-one would then be allowed to make a profit at the expense of another.

The sine causa requirement was interpreted correctly in Auby and Patellides (Pty) Ltd
v Glen Anil Investments (Pty) Ltd 1960 4 SA 865 (A). In this case, A had bought some land from B. The contract provided for its cancellation by B, should A fail to pay the instalments promptly. It further provided that, in the event of such a cancellation, A would be entitled to no compensation for any improvements that he might have made to the land.

Question 48

Give an example from the case law where the courts have incorrectly applied
the sine causa requirement.

Answer 48

Greenhill Producers v Benjamin:

In the above case, Van der Riet J had to decide, in effect, whether the defendants’ enrichment was unjustified (sine causa). In the above regard, he held: “Prior to this date [ie the date on which the company demanded that the sheep be removed] any enrichment which the defendants received was not unjust, but was the natural result of the parties’ joint error, and the principle could not apply.” In other words, because both parties had been labouring under the mistaken belief that the contract was still valid, the enrichment was not sine causa.

Criticism of Greenhill:

Van der Riet J’s view of the sine causa requirement shows a lack of insight into the nature of the requirement. Whether enrichment is sine causa or not does not depend on such subjective factors as a mistake being made on the part of the parties concerned; it depends on whether, viewed objectively, there was a legal ground on which to justify the enrichment