Watson NO and Another v Shaw NO and Others

• Jurisdiction: South Africa
• Judge: Fourie J
• Court: Cape Provincial Division
• Citation: 2008 (1) SA 350 (C)
• Counsel: J Newdigate SC (with E Fagan) for the plaintiffs JJ Reynecke SC (with W la Grange) for the defendants
• Docket Number: 6096/02

Fourie J:

Introduction

[1] Second plaintiff (Publiserve) is a medical scheme duly registered as such in terms of the Medical Schemes Act 72 of 1967 and deemed to be D registered in terms of the present Medical Schemes Act 131 of 1998 (the 1998 Act). Publiserve was finally wound up by an order of this court on 17 July 2001 and first plaintiff appointed by the Master as the liquidator of Publiserve. E

[2] The original first defendant was Africa Group Employee Benefits (Pty) Ltd (Africa Group), which was wound up after the institution of the present action. Mr Brian Shaw was appointed as the provisional liquidator of Africa Group and substituted in his official capacity as first defendant in Africa Group's stead. The case against Africa Group was postponed sine die and the trial, F which commenced before Knoll J on 11 March 2004, proceeded against second and third defendants (to whom I will respectively refer as Afrisure and De Villiers, or jointly as defendants). The trial ran for 19 days and was thereafter argued fully. However, the learned judge unfortunately passed away before handing down judgment. G

[3] It was subsequently agreed by the parties, and so ordered by Hlophe JP, that the matter be argued afresh before a new judge and that a transcription of the oral evidence given in the previous proceedings, as well as the documents referred to in the course thereof, would constitute the entire record for purposes of argument. I heard argument H on 11, 12 and 16 April 2007, the parties being represented by the same counsel who appeared in the previous proceedings, namely Mr Newdigate SC, assisted by Mr Fagan, on behalf of plaintiffs, and Mr Reynecke SC, assisted by Mr La Grange, on behalf of defendants. I should add that I have I derived valuable assistance from the written and oral arguments of counsel.

[4] Afrisure is a close corporation of which De Villiers was at all material times the sole member. De Villiers is an insurance broker who conducted business in Mpumalanga and, while representing Afrisure, was instrumental in the course of 2000 in effecting the transfer of a substantial J

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number of members of the Meddent medical scheme to Publiserve. This resulted in Publiserve's membership being boosted by A 5251 new members.

[5] Plaintiffs' claim against Afrisure arises from five payments, totalling R5 454 636,50, allegedly made by Publiserve to Afrisure during the period 26 October 2000 to 31 January 2001 pursuant to the transfer of the aforesaid new members to Publiserve. B The main claim against Afrisure for payment of R5 454 636,50 is based on unjustified enrichment, while the alternative claim for payment of R3 759 114,50 is brought in terms of the provisions of s 29 of the Insolvency Act 24 of 1936. C

[6] Plaintiffs' main claim against De Villiers who, during the period 25 August 2000 to 28 May 2001, served as a trustee of Publiserve, is for payment of R5 454 636,50 as damages. Plaintiffs allege that De Villiers breached his duty as trustee by causing Publiserve to make, or failing to prevent Publiserve from making, the aforesaid five payments to Afrisure. Alternatively, it is alleged that D as De Villiers was knowingly party to the carrying on of the business of Publiserve in a reckless manner, he should be held personally liable for all the debts of Publiserve by virtue of the provisions of s 424 of the Companies Act 71 of 1973. Plaintiffs maintain that in both instances the liability of De Villiers should be joint and several with E that of Afrisure.

The enrichment claim against Afrisure

[7] As explained by JG Lotz in the chapter on 'Enrichment' in Joubert et al (eds) The Law of South Africa vol 9 (2 ed) para 207 (LAWSA), the term 'enrichment' is used to F describe the situation which occurs when one person's estate is increased at the expense of another without legal cause. From the fact of such increase an obligation arises in certain circumstances in terms of which the person whose estate has been increased has a duty to G restore the increase to the person at whose expense the increase has taken place. However, as there is no general action based on enrichment in South African law, a plaintiff instituting an enrichment claim has to base the claim on one of the condictiones or actiones derived from the Roman law. In addition the plaintiff in any enrichment claim has to prove the existence of certain H general enrichment requirements.

[8] Mr Newdigate submitted that there is a clear movement, heralded by the Supreme Court of Appeal, away from the maintenance of a strict distinction between the various condictiones. He argued that our courts have tended to extend the ambit of the existing condictiones so as to I ensure the failure of technical defences to enrichment claims, aimed at finding a crack between the condictiones into which a defendant might slip. In particular he referred to the decisions of the Supreme Court of Appeal in McCarthy Retail Ltd v Shortdistance Carriers CC J

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2001 (3) SA 482 (SCA); [*] and First National Bank of South African Ltd v Perry NO and Others 2001 (3) SA 960 (SCA) (FNB v Perry) [†1] A

[9] There is in my view much to be said for this submission of Mr Newdigate. In Kommissaris van Binnelandse Inkomste en 'n Ander v Willers en Andere 1994 (3) SA 283 (A) at 333D Botha JA held that a court could recognise enrichment liability as existing even if such recognition had not before been given in the same or B similar circumstances. As said by Daniel Visser in 'The General Enrichment Action Cometh' (2002) 119 SALJ 262, this dictum 'represents an important advance by suggesting to pleaders that the Supreme Court of Appeal would not be deterred by the hoary limits of the traditional enrichment actions quite to the extent that had C hitherto been assumed'. In Bowman, De Wet and Du Plessis NNO and Others v Fidelity Bank Ltd 1997 (2) SA 35 (A) at 40A - B [‡] Harms JA held, on the strength of the Willers dictum at 333G - H, that the principles underlying the condictio indebiti are not immutable and that, in principle, a party is entitled to rely 'op die analogiese aanwending van die condictio indebiti'. Similarly, in FNB v Perry (supra at 971D (SA)) Schutz JA held that the circumstances of the case justified the extension of the D operation of the condictio ob turpem vel iniustam causam.

[10] The plaintiffs' approach to the enrichment claim was accordingly to 'move between' (as it was described by Mr Newdigate) the condictio ob turpem vel iniustam causam and the condictio indebiti. Having joined the E debate at a late stage (as explained above), I was once again intrigued by the amount of time and energy taken up in determining whether the formal requirements of the aforementioned two condictiones were met or not. In this regard I respectfully echo the remarks of Schutz JA in McCarthy Retail Ltd v Shortdistance Carriers CC (supra at 489B (SA)); and FNB v Perry (supra at 969H - 970A (SA)) that the acceptance of a general enrichment action will hopefully F result in much less energy being devoted to the correct identification of a condictio or actio, and more time to the identification of the core elements of enrichment. Be that as it may, I am tasked to not only determine whether plaintiffs have satisfied the general requirements for an enrichment claim, but also whether they G have met the individual requirements of the condictiones upon which they rely. A useful summary of these requirements is provided by JG Lotz in LAWSA (supra paras 209 - 16).

[11] The general requirements for liability for enrichment are the following: H

(a)

the defendant must be enriched;

(b)

the plaintiff must be impoverished;

(c)

the defendant's enrichment must be at the expense of plaintiff; and

(d)

the enrichment must be unjustified (sine causa).

[12] To succeed with the condictio ob turpem vel iniustam causam in this action plaintiffs have to prove that: I

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(a)

the aforesaid five payments were made by Publiserve to Afrisure; A

(b)

the payments were made in terms of an illegal agreement; and

(c)

in making payment Publiserve did not act dishonourably.

[13] Insofar as they rely on the condictio indebiti, plaintiffs bear the onus of proving that:

(a)

the payments were made by Publiserve to Afrisure; B

(b)

the payments were made in the bona fide and reasonable belief that they were owing to Afrisure; and

(c)

this belief was mistaken, as the amounts were not owing to Afrisure, as there was no legal or natural obligation to make such payments.

[14] In their plea as amended defendants admit that Afrisure received the amount of R5 454 636,50 but deny that it was received C from Publiserve. They also deny that the amount was paid by way of five instalments. In amplification of their denial, defendants aver that the payments were made by Methealth, the administrator of Publiserve, allegedly acting both as principal and as agent of Publiserve. D

[15] I agree with plaintiffs' submission that the evidence that the said five payments were made by Publiserve is overwhelming. A payment of R2 455 925 was made on 21 December 2000 by way of a cheque drawn on the Publiserve bank account. It was made payable to a firm of attorneys, Mojapelo & Co, and defendants admit that this payment was received by said attorneys on behalf of Afrisure. There is no doubt that this payment was made by Publiserve as principal. The E evidence further shows that the remaining four payments were made on 26 October 2000, 23 November 2000, 28 December 2000 and 31 January 2001, respectively, by means of electronic funds transfer. In each instance the transfer was effected by Metropolitan F Life on behalf of Publiserve, the amount thereafter being recovered from Publiserve by way of a...