Summary PVL3704 Exam Notes

1 PVL3704 - exam notes Law Of Enrichment Liabilty And Estoppel (University of South Africa) lOMoARcPSD| 1 1 Exam Notes - PVL 3704 UNJUSTIFIED ENRICHMENT LIABILITY STUDY UNIT 1 - Overview Explain why there is a need for unjustified enrichment liability in any developed system of law? Liability for enrichment is necessary in any developed legal system. There are cases in 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. Example 1: In accordance with the rules relating to accessio anything affixed to the land becomes part of the land and consequently the property of the owner of the land. This means that should the bona fide possessor of a farm build a house and outbuildings on that farm, all the buildings become the property of the owner of the farm and such owner is entitled to eject the bona fide possessor at any time leaving the occupier out of pocket and the owner with a property which is worth more than it had been before the improvements. There is no legal reason (no contract or delict) for the enrichment of the owner’s estate and the impoverishment of that of the occupier that would justify the retention of the enrichment by the owner. Unjustified enrichment liability is aimed at redressing this type of situation. Example 2: 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. This could result in, for example, a seller’s transferring ownership of the merx to the buyer in the genuine belief that the contract of sale was valid and only later learning that the contract was void and that he or she has no action for the purchase price against the buyer. Again the one party has benefited by the transfer of the property when there was no legal reason for such transfer. It would be unfair in these examples to leave the bona fide possessor and the seller without a remedy. This would mean that they would be impoverished through no fault of their own and that the owner and the buyer would be enriched without any good cause, hence the necessity for liability on the ground of unjustified enrichment. Explain why reference to Roman law is applicable today with reference to enrichment liability? Roman law had specific enrichment actions, each with their own requirements, but there was no general liability for unjustified enrichment. Relief was granted to a plaintiff in specific circumstances based on very broad principles stated in two texts which could not possibly provide a basis for liability. The enrichment actions of Roman law were received into Roman-Dutch law where they were developed and extended over time and are still available in South African law. Our courts have also recognised liability for enrichment in a number of circumstances where none of the old actions was applicable, thereby further extending the scope of unjustified enrichment liability in South African law. In Mccarthy Retail Ltd v Shortdistance Carriers the court stated that 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. Downloaded by Thomas Mboya () lOMoARcPSD| 2 2 Having regard to such extensions of enrichment liability, South African academics had concluded that a general subsidiary enrichment action had developed in South African law which would lie in any case of unjustified enrichment where none of the old actions would lie. The view was that a general action had been developed which was additional and subsidiary to the existing actions. Unjustified enrichment liability is still underdeveloped in comparison with contract and delict and therefore remains closer to Roman and Roman-Dutch law sources from which, it, and the greater part of our private law, including contract and delict is sourced. Check answer with proff. Define the requirements of enrichment liability? QUESTION 4: Name and explain the requirements for the use of an enrichment action 1. The defendant was enriched: - There must be an increase in assets - There was no decrease when one would have occurred - There is a decrease in liability which would not have occurred Compare the financial position at the time to the financial position he would have been in had the enrichment not occurred. • Nortjie: plaintiff found clay on the defendant’s farm = Q: did the clay enhance the value? Judge said that it was the presence of the clay which determined the value of the property = NO ENRICHMENT – BUT could be argued that knowledge of the clay is what enhanced its value in this case. • Foggit: typing lessons = moral enrichment. UNISA: enrichment means an increase of your estate and moral benefits shouldn’t be included. 2. The plaintiff must be impoverished: Amount: look at the difference between the enrichment and the impoverishment and claim the lesser amount. All favourable and detrimental side effects are taken into account. 3. The enrichment must have been at the expense of the plaintiff: There must be a CAUSAL LINK between the enrichment and the impoverishment. • Jester Pools: A built a pool for B in terms of a contract, the pool was built on C’s land – B didn’t pay. A brought an enrichment action against C. Held: C had been enriched at B’s expense and not A’s = No enrichment. • Van der Walt: C was in fact enriched at A’s expense and A’s action should have succeeded. • Buzzard Electrical: the court distinguished between 2 positions: a) A improves the property of the owner with no contract and A sues the owner (Jester). b) Owner contractors with B to improve his property and B sub contracts to A – A sues owner for enrichment. Briefly discuss the sine causa requirement for enrichment liability. (5) 4. Enrichment must have been sine causa: No one should be allowed to make a profit at the expense of another = must be no legal ground. • Van der Walt: there must be no obligation between the enriched and impoverished person. Downloaded by Thomas Mboya () lOMoARcPSD| 3 3 • De Vos: enrichment is unjustified where there is no legal ground for the transfer of value from one estate to another. • Buzzard – the owner of the property contracted with a developer to make improvements to his property and the developer then sub contracted the job, the subcontractor instituted action against the owner for undue enrichment. Held: the enrichment of the owner was unjustified, but the sub contractor should enforce his rights against the developer. • Singh: Santam paid for repairs done to a damaged vehicle even though the premiums weren’t up to date, Santam cancelled the policy after payment to the panel beater = enrichment wasn’t sine causa. Explain in your own words why unjustified enrichment is required as a corrective in our law. 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 Four requirements are: 1. The plaintiff must have been impoverished. 2. The defendant must have been enriched. 3. The enrichment must have been sine causa or without legal cause. 4. Causality — the enrichment must have been at the expense of the impoverished party. These requirements provide the foundation for this form of liability, setting it apart as a distinct discipline within the law of obligations and distinguishing enrichment liability from contractual and delictual liability. There are certain circumstances where contractual and delictual liability may overlap, affording the plaintiff a choice or alternative grounds for his claim. Likewise, there are certain instances where delictual liability and enrichment liability may overlap, affording the plaintiff a choice of remedies. In principle, however, there are no instances where contractual liability and enrichment liability overlap. Where there is contractual liability, enrichment liability is naturally excluded as a result of the sine causa(without legal cause) requirement. In principle, the plaintiff is entitled to the amount by which he/she/it has been impoverished or that by which the defendant has been enriched, whichever is the lesser. The quantum of enrichment is determined at the time of the institution of the action. This means that the defendant is not liable for benefits that he or she could have derived from the enrichment but did not obtain. It also means that where the defendant’s enrichment is diminished or lost before action is instituted; his liability is likewise reduced or extinguished. ABSA Bank Ltd v Standard Bank of SA Ltd The onus of proving non-enrichment is on the defendant but such reduction or extinction of liability is subject to the following qualifications: 1. Enrichment may be calculated from the moment the defendant becomes aware that he or she has been unjustifiably enriched at the expense of another 2. from an earlier date if the defendant should have realised that the benefit he or she received might later prove to constitute an unjustified enrichment 3. 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: in the case of a minor who has been enriched by performance to him in terms of an unauthorised contract where liability is restricted to the amount of the minors enrichment at the time of litis contestation (time of the institution of the action) Downloaded by Thomas Mboya () lOMoARcPSD| 4 4 3 A and B have concluded a contract in terms of which A is selling his 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 fully. Four requirements of enrichment liability are: 4. The plaintiff must have been impoverished. 5. The defendant must have been enriched. 6. The enrichment must have been sine causa or without legal cause. 7. Causality — the enrichment must have been at the expense of the impoverished party. The profit made was not without legal cause (sine causa) since there is a valid contract justifying such profit. 4 A has fraudulently induced B to pay an amount of R20 000 to him which B thought was owing, but was in fact not owing. Does B have an enrichment claim against A? In certain circumstances delictual and enrichment liability may overlap, providing the impoverished party with a choice. In this case the claim could be based on delict and damages claimed, or alternatively on enrichment. It would usually be better to resort to the delictual claim because full damages can be claimed, as well as consequential damages which are not too remote, whereas with enrichment only the amount of the enrichment can be claimed. 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 which she has been unable to afford up to now. A is now claiming the money back with an enrichment action. Does B have any defence? B has no defence. Although A has an enrichment claim in principle, the enrichment has been extinguished, which is a valid defence against A’s claim. 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. 1. where contracts may be void and performance takes place, or 2. Where contracts that were initially valid may fall away. 3. Electronic funds transfers into an incorrect bank account, 4. Payment of a cheque which has been stopped, 5. A conditional contract where the occurrence of the uncertain future event terminates the contract. STUDY UNIT 2 - GENERAL REQUIREMENTS FOR ENRICHMENT LIABILITY Downloaded by Thomas Mboya () lOMoARcPSD| 5 5 ACTIVITY Consider the five scenarios and consider whether liability in each case should be based on delict, contract or unjustified enrichment and explain whether the sine causa requirement has been fulfilled in each of these cases and explain whether the general requirements for unjustified enrichment liability have been met in each case. The sine causa requirement deals with the underlying legal ground for the transfer of property or value. If there is such a ground, for instance a contract, then the transfer is not sine causa. Using your knowledge of the law of contract, delict and property law, decide in each case whether there is an underlying causa or not. Scenarios 1 to 3 provides examples of transfers that were sine causa, but scenario 4 does not. 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. Unbeknown to both A and B, Spartacus had died on the day before the conclusion of the contract. Can B reclaim the deposit paid? The contract was void owing to the initial impossibility on the existence of the contract. If there is no contract between the parties, there is no underlying reason or causa for the payment of the deposit. B has been impoverished by the payment of the deposit and A has been enriched by it. As it is money which has been paid, B can reclaim the full amount unless A can prove that the enrichment has been diminished or extinguished. A’s enrichment has been caused by the direct transfer of the money from B and is therefore at B’s expense. B should be able to claim back the full amount. 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 this period. E’s house also seemed to need a fresh coat of paint. Can D claim anything from C or E? and also formulate your own reasoned point of view in respect of indirect enrichment situations. Although there is a contract between C and D there is no contract between D and E. D thought he was performing his contract with C, but because he painted the wrong house, he did not fulfil his contractual obligations towards C. There is no contract between D and E and consequently D has no contractual claim against E. D has clearly been impoverished by the expenditure of his time, labour and materials, but it is not certain whether E has been enriched, his house may not have risen in value as a result of the painting, in which case E was not enriched, Or maybe E saved some expenses if he was going to have his house painted anyway. This is not a case of indirect enrichment. The painter mistakenly painted the wrong house. 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 4 Did you consider whether there was a valid contract between the parties? If so, is the enrichment sine causa? Scenario 4 Is there any reason to conclude from these facts that the contract is void? If not, J should not be able to reclaim anything. He has made a bad bargain but is bound by it. 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 K or M? What would the basis of the claim be? And explain which party, if any, has been enriched and impoverished and to what extent. Downloaded by Thomas Mboya () lOMoARcPSD| 6 6 K’s conduct is clearly unlawful and L would be better advised to sue in delict than with an unjustified enrichment action. Why? Can K use the actio rei vindicatio to reclaim his property from M, even though M may have been bona fide? There is no transfer of ownership because the goods were stolen. The actio rei vindicatio or a delictual claim would therefore be more appropriate. (2) Can a potential benefit and a moral benefit form part of enrichment for purposes of the law of enrichment? Answer with reference to case law. (1) What does it mean if it is said that enrichment liability is based on a movement of assets from the plaintiff to the defendant? General requirements for enrichment liability 1. The defendant must be enriched 2. The plaintiff must be impoverished 3. The defendant’s enrichment must have been at the expense of the plaintiff 4. The enrichment must have been sine causa (unjustified) With regard to requirement (1) Enrichment may take the form of: (1) An increase in the defendant’s assets which would not have occurred had the enriching fact not taken place; (2) A non-decrease in his or her assets where a decrease would have taken place but for the enriching fact (3) A decrease in liabilities which would not have taken or (4) A non-increase in liabilities which would have taken place. The enrichment may consist either of the thing or value received and must still exist in the patrimony of the enriched party at the time when the claim is lodged. With Regard to requirement 2: quantum of the plaintiff’s claim is the amount by which he been impoverished or the amount by which the defendant has been enriched, whichever is the lesser. This implies that every enrichment action must embrace an enquiry 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 decrease or non-increase in assets or by an increase or non-decrease in liabilities. 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 including side effects which flow indirectly from the enriching fact. Example 1: A pays B an amount of R2 000 which is not owing, and B uses this amount to buy household necessaries which he consumes before A institutes an action against B for R2 000. At this stage there is no increase in the assets of B’s estate, but if B had not received the R2 000 from A he would have had to use R2 000 of his own money causing a decrease in his estate which, in the circumstances, did not take place because of the R2 000 that B received from A. B’s enrichment takes the form of expenses saved and A should consequently succeed with his action. Example 2: A makes a payment of R50 000 to B which is not owing. B uses R5 000 of this amount to buy household necessaries and with the balance of R45 000 she buys a car which she would not have bought had she not received the R50 000 from A. At a later stage A institutes an action against B. B is enriched by the R5 000 in the form of expenses saved. The R45 000 spent on the car does not, constitute saved expenses as she could not have bought the car without the money. If, at the time of litis contestatio the car has a value of R30 000; this constitutes an increase in B’s assets. A should therefore succeed in recouping the amount of R5 000 + R30 000 = R35 000. Downloaded by Thomas Mboya () lOMoARcPSD| 7 7 Example 3: In the Nortje´ case the plaintiffs who were prospectors had, through their own efforts, discovered a rich deposit of porcelain clay on the defendant’s farm. The question was whether the discovery of the clay had enhanced the value of the farm. The court a quo took the view that it was not the discovery of the clay, but its presence, which determined the value of the farm so that the defendant had not been enriched by the prospectors’ efforts. This line of reasoning is not convincing. It is not the mere presence of minerals which enhances the value of land, but the knowledge of their presence, and when someone makes such knowledge available an increase in the market value of the land follows economically and juridically from his or her efforts a. Potential Benifit 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 is not enrichment. Where the defendant has knowingly neglected to appropriate or acquire a potential advantage he is not enriched by the potential benefit not acquired. In Kruger v Navratil it was wrongly accepted that a benefit that the defendant did not acquire could be recovered by an enrichment action. b. Moral benifits QUESTION 5: Can a person’s estate be enriched by moral benefits? Discuss. Unisa is of the view that the result of enrichment must be an increased estate and ‘‘moral’’ benefits cannot increase one’s estate and cannot therefore constitute enrichment. According to Unisa the decision in Tanne v Foggitt was incorrect where the court held that a minor who had contracted to receive typewriting lessons could not be liable ex contractu for the price of all the lessons but could only be liable for benefits (the lessons) actually received. This decision implies that such ‘‘moral’’ benefits could constitute enrichment. De Vos’s view, however, is that in an appropriate case invisible or intangible personal benefits may be regarded as enrichment. c. Use of a thing Whether the use of a thing constitutes enrichment is unsettled. In Lodge v Modern Motors 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. (3) Explain, with reference to an example, the importance of favourable and detrimental sideeffects for the determining of the extent of the movement of assets. 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 including side effects which flow indirectly from the enriching fact. Such side-effects may take many different forms for example: A and B enter into a lease of land with A as the lessor and B as the lessee and the contract is void for some reason but B remains in possession of the land for three years and constructs buildings on the land which cost B R80 000 and which enhance the value of the land by R60 000. When A evicts him, B claims compensation based on enrichment for the improvements to the land. It would appear that A has been enriched by R60 000 and B impoverished by R80 000 so that B must succeed in an action for R60 000. Related to the enriching fact, however, are various side-effects. In the first place A lost possession of his land for three years, and the value of his possessory interest for three years was R30 000. This detrimental side-effect reduces A’s actual enrichment to R30 000. Secondly B had possession of the land for three years and thus use and enjoyment of the land. If the value of such use and enjoyment is R20 000. This is a favourable side-effect which reduces B’s impoverishment to R60 000. B should therefore succeed in an action for R30 000. Downloaded by Thomas Mboya () lOMoARcPSD| 8 8 (5) Discuss briefly, with reference to case law, the position of a plaintiff with regard to the first instance identified in Buzzard’s case. (5) The facts of the Gouws case illustrate the first instance. In Gouws it was decided that the plaintiff had failed in his or her enrichment claim against the owner because the enrichment of the owner was not at the expense of the plaintiff. In Brooklyn House Furnishers the Appellate Division allowed a right of retention in favour of the plaintiff, which was effective against anyone, including the owner. In Buzzard Electrical the Appellate Division decided that a right of retention cannot exist in vacuo but that it ensures or secures a recognised claim. In Hubby’s Investments the court decided that in view of the court’s decision in Buzzard’s 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 Furnishers (both decisions of the Appellate Division) rejected Gouws v Jester Pools by implication, but in neither of the two decisions did the judges do it expressly. In ABSA Bank v Stander the court expressly rejected the decision in Gouws v Jester Pools, but because the last mentioned decision is not an Appellate Division decision, it seems as if the position is still unclear. (6) Discuss briefly, with reference to case law, the position of a plaintiff with regard to the second instance identified in Buzzard’s case. (6) The position with regard to the second instance mentioned in Buzzard is quite clear since in Buzzard the Appellate Division made an express decision on this matter. The plaintiff’s enrichment claim against the owner was not recognised, since the owner received nothing more than he or she had contracted for. Therefore, the enrichment of the owner was not sine causa. (8) Give an example from case law where the courts incorrectly applied the sine causa requirement. (see Greenhill) (7) Explain briefly the sine causa requirement and illustrate its application with reference to case law. Reason for sine-causa requirement If the mere fact that a person was enriched at the expense of another were to form the basis for enrichment action, the concept of liability would be too broad and will limit all commercial transactions making profit at the expense of another. Sine causa is the limiting factor required to restrict liability to cases where it would be inequitable to allow a person to retain the benefits obtained at the expense of another. Definition by Van der Walt & criticism by De Vos Definition by Van der Walt : Enrichment is in principle sine causa if there is no existing obligation between the enriched person and the impoverished person in terms of which the enriched person could lay claim to the transfer of assets. Definition by De Vos: Enrichment is unjustified when there is no sufficient legal ground for the transfer or retention of value from one estate to the other De Vos’s criticism of Van der Walt’s definition: in so far as it implies that the only justification for the enrichment of a person can be the existence of an obligation between that person and the impoverished person, it would mean that where a person receives performance from another in terms of an order of court or where he becomes owner of another’s property through prescription he would have to be regarded as having been unjustifiably enriched at the expense of that other. In neither case is there an obligation between him and the other person and our law does not in such cases view the receiver as having been unjustifiably enriched. In the former the order of court justifies the transfer of the assets and in the latter the rules relating to prescription do. Downloaded by Thomas Mboya () lOMoARcPSD| 9 9 Greenhill Producers v Benjamin The plaintiff company had entered into a contract with the defendants in terms of which the defendants were to buy a number of sheep which were to be kept on the company’s land. The company was provisionally wound up, upon which the contract between it and the defendants fell away, a fact of which both parties were ignorant at the time. At a later date the company demanded that the defendants remove their sheep, which the defendants did, but only after a considerable lapse of time. The company then brought an enrichment action against the defendants based on the use of the land by the defendants from the date the contract ceased to exist until the date of removal of the sheep. The court had to decide whether the defendants’ enrichment was unjustified (sine causa) and held that prior to 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 Whether enrichment is sine causa or not does not depend on subjective factors such as the mistake on the part of the parties; it depends on whether, viewed objectively, there was a legal ground to justify the enrichment. In casu there was no such ground since the contract between the parties had fallen away on the provisional winding up of the company and whether or not the parties were aware of this fact was irrelevant. Whether a causa exists is a question of fact; it does not depend on what the parties may think. Dugas v Kempster Sedgwick The court stated: ‘‘Enrichment of the purchaser as a result of the bona fide use of the article of which he has been placed in possession pursuant to an invalid agreement of sale is not unjust enrichment.’’ Auby and Patellides v Glen Anil Investments In this case the sine causa requirement was interpreted correctly. In terms of the facts A had bought some land from B. The contract provided for its cancellation by B should A fail to pay the instalments promptly and further provided that in the event of such cancellation A would not be entitled to any compensation for improvements which he might have made to the land. After A had erected certain buildings he fell into arrears with his payments and B cancelled the contract. A then claimed compensation for the buildings. The court correctly held that the enrichment was not sine causa; the causa for the transfer of the buildings was, of course, the contractual provision that B need not pay compensation for improvements in the event of cancellation. Pretorius v Commercial Union The court held that even if enrichment had been caused by breach of contract, it could not be regarded as sine causa while the contract was still in existence. In ABSA Bank Ltd v De Klerk the court held incorrectly that the plaintiff had a choice between a claim based on contract or on enrichment. Buzzard Electrical In the Buzzard case the owner had contracted with a developer to make improvements to his property. The developer had subcontracted part of the work. After the subcontractor had completed the work, the developer was sequestrated before the subcontractor was paid. The subcontractor instituted a claim against the owner based on unjustified enrichment. The court decided that the owner had received nothing more than he had contracted for with the developer. Therefore, in this case, the enrichment of the owner was not sine causa; in fact, the contract with the developer was Downloaded by Thomas Mboya () lOMoARcPSD| 10 10 the causa for the owners enrichment. The subcontractor’s claim was denied and he could not have had recourse to any action or right of retention against the owner. Singh v Santam The court followed the decision in Buzzard. Santam paid for certain repairs to a damaged vehicle even though the premiums in terms of the risk policy were not paid up to date. It appeared that Santam cancelled the policy by conscious choice only a fortnight after the payment to the panelbeater, so that the payment was made pursuant to the policy. Even if the policy had perished automatically because of non-payment of the premiums, Santam’s evidence indicated that it had made payment in the belief that the policy was still alive. Therefore the enrichment was not sine causa. Some of the confusion that has occasionally arisen in connection with the sine causa element derives from the fact that unjustified enrichment is sometimes taken to mean unjust or unfair enrichment which has no specific content. 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 mean time F has absconded and is nowhere to be found. Can H claim anything from G? Formulate your own reasoned point of view in respect of indirect enrichment situations. This is clearly a case of indirect enrichment. Consider the facts against the principles discussed in the case law and articles on indirect enrichment and come to a conclusion, stating your own view point. Pay particular attention to the decision in the Gouws case and the Buzzard Electrical case. Note also the differences in the opinions expressed by the various writers, De Vos, Eiselen and Pienaar, Van der Walt, Scholtens and Van Zyl. Scenario 3 Is there any contractual relationship between G and H? Has G benefited from the work done by H? What about the contractual relationship between H and F? Must H sue F in contract? In scenario 3 the facts are quite similar to those in the Gouws case. In your answer you must consider the approach taken in the various decided cases, namely Gouws, Buzzard Electrical and Hubby’s Investments. However, you must also consider the viewpoints of the different writers before formulating a conclusion of your own (4) Name the two instances of indirect enrichment as identified in Buzzard’s case. Discuss the general requirement that the defendant’s enrichment must have been at the expense of the plaintiff. Refer in your answer to case law. (15) If a defendant is to be held liable for enrichment it is not sufficient that the defendant has been enriched and that the plaintiff has been impoverished. There must also be a causal link between the enrichment and the impoverishment and this is expressed by saying that the defendant’s enrichment must be ‘at the expense of the plaintiff’. Normally this requirement causes little difficulty since in most cases the causal link is obvious. Problems have, however, arisen in what DH Van Zyl refers to as cases of ‘‘indirect enrichment’’. These are cases where 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. For example, if A (as the subcontractor) contracts with B to supply the roof of a house which B is building for C, then if B renders performance (pays for the work) to A, C will then be enriched at B’s expense and not at A’s. 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 B? De Vos’s view is that the fact that B does not render performance to A cannot affect the juridical position between A and C and that in the above example C is enriched at B’s expense and not at A’s, with the result that A cannot bring an enrichment action against C. Downloaded by Thomas Mboya () lOMoARcPSD| 11 11 This view was endorsed in Gouws v Jester Pools where A had built a swimming pool for B in terms of a contract between A and B and on land which A believed belonged to B but the land did in fact belong to C. After B disappeared without paying A for the pool, A brought an enrichment action against C. The action failed, and the court held that C had been enriched at B’s expense and not at A’s. Van der Walt, Scholtens and Van Zyl do not share the above view but are of the opinion that in the circumstances of the Gouws case, C was indeed enriched at the expense of A and that A’s action should have succeeded. Van der Walt’s view is that the ‘at-the-expense-of’ requirement is satisfied once there has been a direct transfer of assets from A’s estate to that of C. ‘‘Direct transfer’’ is that the assets pass directly from A to C and not from A to B and then from B to C, that is not via the estate of an intermediary person. For example, assume that B and C enter into a contract in terms of which B undertakes to build a swimming pool for C and B now engages A to do the work using A’s own materials. The moment that A has built the pool C becomes owner thereof by accessio — the ownership of the materials therefore passes directly from A to C and the at-the-expense-of requirement, in Van der Walt’s view, is satisfied. In his view, should A now be unable to obtain payment from B, A should succeed in an enrichment action against C. If, however, B uses the materials which he purchases from A as the supplier in order to build the pool himself. C once again becomes owner of the materials by accessio, but in this case the materials did not pass directly from A to C; they passed, in fact, from A to B and then from B to C so that the at-the-expense-of requirement is not satisfied.