South African law makes provision for the fact that a person should, in principle, be entitled to institute an action for restitution where their estate was impoverished without justification.
An action for unjustified enrichment may exist if a Plaintiff transferred value to the Defendant and:
- The Defendant was enriched;
- The Plaintiff was impoverished;
- The Defendant’s enrichment was at the expense of the Plaintiff;
- The enrichment was without legal cause.
There are various types of enrichment actions that find application in certain sets of circumstances. These actions are, however, beyond the scope of the present article, which focuses solely on one enrichment action, namely the condictio indebiti.
The condictio indebiti deals with transfers of value that was made erroneously and without a legal cause. Common examples that could possibly trigger the application of the condictio indebiti includes the following:
- when funds are transferred into an incorrect bank account;
- when funds are transferred to a bank account under the mistaken belief that the funds are due, but are in fact not;
- when funds are transferred to someone under the mistaken believe that there is a valid underlying contract.
To rely on the condictio indebiti, the plaintiff must first prove the aforementioned requirements for an unjustified enrichment action. If the plaintiff can prove all four requirements, they must further prove that the undue transfer was made either
(1) while they were labouring under an excusable mistaken belief that the transfer was in fact due (“error and excusability”); or
(2) that the transfer was subject to a certain, sufficient degree of compulsion.1 (“compulsion”)
Error and excusability
A Plaintiff will only succeed with the condictio indebiti if they can show that the transfer was made as a result of an “excusable” mistake. It is clear from case law that not every mistake is excusable. If a Plaintiff made a mistake that is grossly negligent or inexcusable slack, for example, it is most improbable that such a mistake would be accepted as an excusable one.
In Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue & Another, the court held the following, in relation to whether a mistake is “excusable”.
“Much will depend on the relationship between the parties; on the conduct of the Defendant who may or may not have been aware that there was no debitum and whose conduct may or may not have contributed to the Plaintiff’s decision to pay; and on the Plaintiff’s state of mind and the culpability of his ignorance in making the payment.”
Whether a mistake is excusable will therefore depend on the facts of the case.
Situations may occur where a party is forced to make a payment as a result of pressure or duress.
The decision in CIR v First National Industrial Bank Ltd 1990 (3) SA 641 (A) provides a good example of payments made under duress.
In this matter, a dispute had arisen between the Commissioner of Revenue and FNB on whether a particular card scheme attracted stamp duties or not. The Commissioner insisted that the FNB pay the duties and FNB subsequently did so under protest.
The court then found that no stamp duties where in fact payable and therefore the money had been repaid to FNB on the basis of unjustified enrichment.
Other examples of duress may include threats of physical force.
There are, as mentioned above, various other enrichment actions available to aggrieved parties. If you believe you may have an enrichment action, contact a legal professional to assist you in determining the way forward.
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)