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Labels and Meaning: Unjust Factors and Failure of Purpose as Reasons for Reversing Enrichment by Transfer

Document Cited authorities 5 Cited in Related
Published date01 September 2014
Date01 September 2014
Pages416-433
DOI10.3366/elr.2014.0237
AuthorJacques du Plessis
INTRODUCTION

A prominent feature of the South African law of unjustified enrichment is that it has remained remarkably faithful to its Roman-law roots. This is especially evident from its continued recognition of the condictiones, which may be used to obtain restitution where one party deliberately confers a benefit on another, but there is no legal ground for retaining it.1

See Nortje v Pool NO 1966 (3) SA 96 (A) at 134; J du Plessis, The South African Law of Unjustified Enrichment (2012) 60–68.

This act of deliberate conferral is often simply called a transfer

Scholarly analyses of the origins of the various condictiones generally accept that they were developed to govern typical situations where a transfer was made for a particular purpose, but the purpose was not achieved.2

See e.g. M Kaser, Das römische Privatrecht Erster Abschnitt 2nd edn (1971) 595–598; F Schwarz, Die Grundlage der Condictio im klassischen römischen Recht (1952) 229; H Weitnauer, “Zweck und Rechtsgrund der Leistung” in Ungerechtfertigte Bereicherung Grundlagen, Tendenzen, Perspektiven (1984) 51–52 and D Visser, Unjustified Enrichment (2008) 230–253.

For example, the condictio indebiti, which is by far the most prominent of these condictiones, could be used to obtain restitution of a transfer that was made with the purpose of fulfilling an obligation, but failed to do so. Such a transfer is not owed, or is an indebitum. Hence the name condictio indebiti – an action for reclaiming something not owed

In the Civil-law tradition it has never been the position that an undue transfer is automatically recoverable. There usually also had to be an indication that the transfer was made under a mistake as to liability, but some systems also recognised other alternative circumstances that had to accompany the undue transfer. In structuring claims based on unjustified enrichment, the standard approach in modern systems that share the Roman heritage is to deal with these circumstances within the broader category of transfers that were not owed. In South African law, which retains the condictio indebiti in uncodified form, this type of approach has also been supported by commentators like Danie Visser and myself.

However, in an important and thought-provoking recent work, Professor Helen Scott rejects this analysis. Her main charge is that Danie Visser and I inaccurately reflect the “true analytical structure of the modern law of enrichment”, because our analyses “simply do not take sufficient account of specific reasons for the restitution of transfers”.3

H Scott, Unjust Enrichment in South African Law – Rethinking Enrichment by Transfer (2013) 9.

To Scott these reasons for liability must be related to certain unjust factors, such as mistake and duress, which have been inspired by English law.4

Scott, Unjust Enrichment (n 3), 1–2, 12–15.

 The response in this paper is to argue that we do in fact take sufficient account of reasons, but do so in a different way. Furthermore, the way we favour is not only more closely aligned to the existing law, but also facilitates its future development, whereas the approach favoured by Scott is not only conceptually problematical, but follows a path which some systems that share our Civil-law roots have departed from long ago

Before proceeding further, it must be stressed that Scott has no problem with the general distinction between liability for enrichment arising from a transfer and liability for enrichment that arises in another way. She regards this “neo-civilian approach” as appropriate for South African law.5

Scott, Unjust Enrichment (n 3) 5.

Within the category of enrichment by transfer, she further accepts that the condictiones serve as the principal means by which enrichment by transfer is reversed in South African law.6

Scott, Unjust Enrichment (n 3) 14–15.

 And in the non-transfer cases, she has sympathy for recognising that the various forms of unauthorised improvements of another's property could constitute a distinct category of cases. She also has not made use of an unjust-factors based approach to explain enrichment liability in these cases.7

Although this is what one might expect, if unjust factors were indeed to be such powerful triggers of duties of restitution (see S Meier, “Unjust factors and legal grounds” in D Johnston & R Zimmermann (eds) Unjustified Enrichment – Key Issues in Comparative Perspective (2002) 37 at 49).

 In this regard she is therefore closer to a Civil-law approach than some proponents of unjust factors in Scots law.8

See R Evans-Jones “Thinking about some Scots law: Lord Rodger and unjustified enrichment” in A Burrows, D Johnston & R Zimmermann (eds) Judge and Jurist – Essays in Memory of Lord Rodger of Earlsferry (2013) 431 at 433–434; J E du Plessis, “Towards rational structures of liability for unjustified enrichment: Thoughts from two mixed jurisdictions” 2005 SALJ 142.

 Nonetheless, it is with regard to the reasons for restitution within the condictiones, and especially within the condictio indebiti, that she differs substantially from the more conventional approach. In essence, the fact that the transfer was not owed is only accorded limited significance as a potential reason for restitution. Her preference is for an explanation based on “unjust factors” inspired by English law. It is to this explanation that we will first turn “UNJUST FACTORS” AS REASONS FOR RESTITUTION OF TRANSFERS UNDER SOUTH AFRICAN LAW What is an “unjust factor”?

If, as Scott argues, the “positive reasons” for restitution are to be found in “unjust factors”, an obvious question to pose at the outset is what the concept of an “unjust factor” means. It further may be asked how this concept could be applied in the context of South African law. To answer these questions we need to turn to modern English law, the home of the “unjust factors” approach.9

Scott, Unjust Enrichment (n 3) 12–15.

The father of the notion that duties of restitution could be triggered by unjust factors was the Oxford law professor Peter Birks. In the mid-1980s he set out this approach in his An Introduction to the Law of Restitution.10

P Birks, An Introduction to the Law of Restitution (1985).

After pointing out that Goff and Jones's The Law of Restitution, which was then in its second edition, is the one “great textbook” on the field in English law, Birks commented that his new book was “… pre-occupied with the task of finding the simplest structure on which the material in Goff and Jones can hang”.11

Birks, Restitution (n 10) 3.

 It was therefore to make sense of English law that Birks devised his classification of unjust factors; it was not first designed to be universal, and then happened to be applied to English law.12

See N R Whitty, “Some trends and issues in Scots enrichment law” 1994 JR 127 at 134.

 It is a reflection of English case law on duties of restitution.

Classifications require criteria or standards for grouping together material. To Birks, the key feature of many of the unjust factors was that they dealt with cases where transfers were not voluntary; these could be classified into cases where there was no intent, impaired intent (for example due to mistake), and qualified intent. The other unjust factors essentially dealt with policy motivations; Birks later stated that “the list degenerated into miscellaneous other reasons for restitution not amounting to a wrong or contract”.13

P Birks, Unjust Enrichment 2nd edn (2005) 107.

In terms of this approach, an unjust factor, such as a mistake, is therefore essentially a primary reason for restitution, and (at least) triggers a prima facie duty of restitution. The “grounds” for restitution in Charles Mitchell's, Paul Mitchell's and Stephen Watterson's most recent edition of Goff and Jones fulfil a similar function – these grounds, which include mistake, are said to be sufficient to give rise to a prima facie claim for restitution.14

C Mitchell, P Mitchell & S Watterson, Goff and Jones The Law of Unjust Enrichment 8th edn (2011) 8. G Virgo The Principles of the Law of Restitution (2006) 119 also refers to “grounds for restitution” to establish unjust enrichment.

 In Andrew Burrows’ recent Restatement, 15

A Burrows, A Restatement of the English Law of Unjust Enrichment (2012).

 the point of departure again is to identify a particular unjust factor, such as mistake, as a primary reason for restitution. This factor may or may not trigger restitution, depending on whether its application is denied, or whether there is a defence.

Where does the fact that a transfer is not owed or is not due (i.e. is an indebitum) fit under this approach? Can it be an unjust factor? The answer according to proponents of the unjust factors approach is clearly no. The fact that the transfer was not owed is relevant, but not a reason for restitution. In section 3(6) of the Burrows’ Restatement it is stated that “in general” an enrichment is not unjust if the benefit was owed to the defendant by the claimant under a valid contractual, statutory or other legal obligation. This rule applies in the context of a variety of unjust factors, namely mistake, duress, undue influence, exploitation of weakness, incapacity and necessity. In each of these situations the fact that there was an obligation means that the particular unjust factor cannot render the enrichment unjust. Proof of an obligation or proof that a transfer was owed essentially “overrides” or “nullifies” any unjust factor, such as mistake.16

Burrows, Restatement (n 15) para 3(6).

According to Burrows the onus is on the claimant to prove mistake and that there was no prior obligation.17

A Burrows, “Is there a defence of good consideration?” in C Mitchell & W Swadling (eds), The Restatement Third: Restitution and Unjust Enrichment (2013) 165 at 183.

 But the absence of such an obligation is not a separate item in his list of cases indicating that enrichment is unjust; it is...

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