A building contractor entered a binding and legal, written building contract with a closed corporation to erect a residential house on land registered to the sole member of the corporation and a third party.
Occupation was taken and the builder released the property (and thus his builder’s lien) to the owners of the land, in spite of the final certificate still outstanding, due, owing and payable.
The building contractor has issued summons in terms of the written building contract against the corporation, which has no assets. The question arose whether the building contractor has an alternative claim against the co-owners of the land for enrichment as the land has been improved with the residence.
The development of the law of enrichment in South African was dealt a severe blow in the judgement of Couws vs Jester Pools (Pty) Limited 1968 (3) SA 563 (T) when Justice Jansen took quite a narrow view on enrichment and claims in terms thereof.
Jester Pools erected a swimming pool on a property under the impression that it was contracted by the owner, whilst in fact they contracted with a third person. The court ruled that the building contractor had no claim against the actual owner of the property based on enrichment either calculated on the increase in value of the property or the actual expense of the swimming pool. Jester Pools had to accept the loss and pay the legal cost of the owner as well.
The keeper of his “brother’s” goods, a person or entity thus acting on behalf or in the interest of another, in certain circumstances, could incur costs or expenses in the process. The recovery of these costs or expenses can be problematic.
Depending on the facts, a claim can be instituted either on enrichment (conditio indebiti or condition sine causa) or based on unauthorised administration (negotiorum gestio).
Any claim based on enrichment, whether conditio indebiti or condition sine causa conditio indebiti or condition sine causa each has four, almost similar essential elements a claimant must fulfil to be successful.
In short, the elements entail enrichment of the other party at the expense of the keeper, impoverishment of the keeper and absence of justification thereof.
A claim in terms of the negotiorum gestio also has four essential elements.
Firstly, the affairs managed by the keeper must be those of another. The keeper can be a company, trust or a natural person and the affairs that of a company, trust or a natural person.
Secondly, the other must be oblivious of the fact that his affairs are being managed.
Thirdly, and a very important element, is that the keeper must have had the intention to manage the affairs of another.
Fourthly, the management of the affairs should be conducted in a reasonable manner. Even if the management was unsuccessful, the caretaker shall have a claim against the other. However, if the management was unreasonable, the caretaker will have no claim.
To succeed in a claim based on the negotiorum gestio, our builder will have to fulfil all of the above essential requirements. The contractual obligations between the builder and the corporation negate the intention to manage and the reasonableness thereof. In terms of the Couws vs Jester Pools judgement the builder will be limited to a claim in terms of the contract, with the risk of an empty judgement with little if any hope to recover any of the outstanding amount.
Luckily for our builder, thirty years after the Couws vs Jester Pools matter, two judgments have paved the way for an extension of the negotiorum gestio or unauthorised administration on behalf of a third party by the “extended” actio negotiorum gestorum or the actio negotiorum utilis. This development will specifically assist the building contractor as he had no intention to manage the affairs of another and it could assist where the reasonableness of his actions is questioned.
In ABSA Bank Limited t/a Bankfin vs Stander t/a CAW Paneelkloppers 1998 (1) SA 939 (C) J Van Zyl detailed the development of South African enrichment law. The judgement will provide any reader thereof with a cursory yet detailed background knowledge of this specific area in our law.
This judgement extends the reach of the enrichment law in that, although a general enrichment action is still not accepted or proposed, the holes caused by Couws vs Jester Pools are at least plugged.
In the second judgement, McCarthy Retail Limited vs Shortdistance Carriers CC, delivered by JA Schutz on 16 March 2001 under case number 110/1990, the Supreme Court of Appeal again carefully considered the position. The judgement refers to the predicament of our builder, but does not make a ruling which would constitute applicable case law. The comments do take the position further and clarify the case law noted.
The perceived injustice of the Couws vs Jester Pools-judgement has been rectified.
The last two cases combined does open an alternative claim to our building contractor against the actual registered owners of the stand on which the residence has been erected. In the event of the corporation not being able to fulfil its payment obligations towards our building contractor, the owners of the stand might just find themselves indebted to their keeper.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)