South Africa: Can An Enrichment Claim Be Considered A ‘Debt' In Terms Of The Institution Of Legal Proceedings Against Certain Organs Of The State Act?

The Supreme Court of Appeal was recently asked – in the matter between  Greater Tzaneen Municipality v Bravospan – to consider whether an enrichment claim is considered a 'debt' in terms of the Institution of Legal Proceedings against Certain Organs of the State Act.

An Appeal was recently sought against a judgment in terms of which the High Court granted Bravospan 252 CC an enrichment claim against the Greater Tzaneen Municipality. 

The Municipality had concluded a Service Level Agreement (SLA) with Bravospan. Near the end of the term of the SLA, and without any tender process, the municipality and Bravospan concluded an addendum to the SLA (extension agreement) in terms of which it was agreed that the SLA would be extended for a further 24 months. 

In January 2018, Bravospan instituted action against the Municipality for payment of R9 624 000, the sum of invoices submitted to the municipality for the duration of the extension agreement. Bravospan relied on four alternative causes of action, namely, delict, fraud, constitutional damages and unjust enrichment. 

On 2 February 2021, the High Court ruled that Bravospan had made out a case against the municipality based on unjust enrichment. He declared the municipality liable to pay an amount to be determined.

The Municipality appealed the decision and raised only two issues on appeal, namely: 

a) Bravospan failed to comply with the provisions of s 3(2) of the Institution of Legal Proceedings against Certain Organs of State Act 40 of 2002; and

b) Alternatively, a portion of Bravospan's enrichment claim had been prescribed.

The Supreme Court of Appeal therefore had to decide to consider three aspects:

1. Failure to comply with section (3)2 of the Institution of Legal Proceedings against Certain Organs of State Act 40 of 2002 (the Act)

According to the Municipality, Bravospan's notice in terms of s 3(2) of the Act did not comply with all the requirements set out in the Act, in that the said notice was not served on the municipality within a period of 6 months from the date which the debt became due in accordance with s 4 (1) of the Act. 

However, during their presentation of their case in the SCA the Municipality conceded that the claim for unjust enrichment was not a 'debt' as defined in s 1(1) of the Act. Therefore, the municipality conceded that the Act was not applicable to the enrichment claim. 

2. Whether a portion of Bravospan's claim for unjust enrichment has prescribed

It is commonly understood that the party that raises a plea of prescription bears the onus of proof. Rule 22 of the Uniform Rules of Court provides that a party who raises a plea shall, in his plea, "clearly and concisely state all material facts upon which he relies." 

The Municipality argued that a portion of Bravospan's enrichment claim had been prescribed. The argument failed on the basis that it failed to prove the 'said' date on which the prescription had commenced. 

It is important to note that South Africa is yet to recognise a general claim for unjustified enrichment. The High Court held that "an order granting Bravospan's claim for unjust enrichment was therefore not sustainable in law." 

3. Whether Section 172 of the Constitution provided an appropriate remedy

The SCA then turned its attention to Section 172 of the Constitution in terms of which the Court has discretionary power in terms of s 172 (1) (b) of the Constitution to grant a just and equitable remedy. 

The court concluded that Bravospan should in the exceptional circumstances of this case be afforded compensation for the services rendered under the extension agreement as a just and equitable remedy under s 172(1)(b) of the Constitution. 

Section 172(1)(a) of the Constitution provides that when deciding a constitutional matter, a court must declare any law or act that is inconsistent with the Constitution invalid. Section 172(1)(b) of the Constitution empowers the court, in respect of an order of invalidity, to make any order that is just and equitable. 

The SCA made an order declaring that Bravospan, in terms of s 172 (1) (b) of the Constitution, was entitled to compensation for the services rendered to the municipality during the extension agreement period. The matter was referred back to the High Court for the quantum of the compensation to be determined.

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