St Helena Primary School and Another v MEC: Department of Education, Free State Province and Another (891/2004) [2005] ZAFSHC 10; [2005] JOL 15846 (O); 2007 (4) SA 16 (O) (15 September 2005)

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[2005] ZAFSHC 10
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St Helena Primary School and Another v MEC: Department of Education, Free State Province and Another (891/2004) [2005] ZAFSHC 10; [2005] JOL 15846 (O); 2007 (4) SA 16 (O) (15 September 2005)

IN THE HIGH COURT
OF SOUTH AFRICA
(ORANGE
FREE STATE PROVINCIAL DIVISION)
Case No. : 891/2004
In
the matter between:
ST HELENA PRIMARY
SCHOOL
1
st
Plaintiff
THE
GOVERNING BODY OF
2
nd
Plaintiff
ST
HELENA PRIMARY SCHOOL
and
THE
MEC : DEPARTMENT OF EDUCATION,
1
st
Defendant
FREE STATE PROVINCE
THE
PREMIER OF THE FREE STATE
2
nd
Defendant
PROVINCE
_____________________________________________________
HEARD
ON:
17 AUGUST 2005
_____________________________________________________
JUDGMENT
BY:
H.M. MUSI J
_____________________________________________________
DELIVERED
ON:
15 SEPTEMBER 2005
_____________________________________________________
[1] The first and the
second plaintiffs are respectively a public school and its governing
body. In terms of section 9(1) of the
Free State Education Act 2 of
2000 (the Act) every public school is a juristic person “with legal
capacity to perform its functions
in terms of this Act”. Although
a public school has capacity to perform its functions as aforesaid,
its governance is vested in
its governing body in terms of section
37(1) of the Act. Now, the Act does not confer on the governing body
the status of a juristic
person, but states in section 37(2) that it
stands in a position of trust towards the school. However, section
41(1)(b) empowers
a governing body to adopt a constitution. This
means that a governing body can clothe itself with the status of a
juristic person
by its own constitution. So that the answer to the
question of whether the second plaintiff has the legal capacity to
sue or be
sued in its own name, would have to be answered with
reference to its constitution. There can be no doubt though that the
Act contemplates
that a governing body will clothe itself with such
capacity, in order to be able to properly fulfil its statutory
functions. In
the hearing of this matter it was assumed that the
second applicant is also a juristic person.
[2] The second defendant
has been joined purely as the head of the Free State Provincial
Government. The first respondent is the
real defendant in that he is
the member of the Provincial Government who is responsible for all
educational matters in the province.
In terms of section 10(1) of
the Act, he must establish and maintain public schools in the
province. He may reclassify existing
categories or phases of public
schools or register new categories (section 10(3)). He may, subject
to certain conditions, restrict
the right of public schools to occupy
the State buildings that house them. He may close public schools or
relocate them. He oversees
the establishment of governing bodies and
his head of department may replace those of their members who are
unable to perform their
functions. In short, the second defendant,
in tandem with his head of department, has ultimate responsibility
for the running of
public schools in the province, including control
of the buildings that house them.
[3] I shall, for the sake
of convenience, henceforth refer to the plaintiffs collectively as
the school and to the defendants collectively
as the department.
[4] On the first of the
three days set aside for the hearing of this matter, the parties
indicated that they would proceed in terms
of rule 33 of the Rules of
this Court. This meant that no
viva voce
evidence would be
heard and the parties submitted a written statement of agreed facts
(the stated case). The issues in dispute were
thereby set out and
the parties identified the legal issues that this Court was called
upon to decide, having heard arguments advanced
on behalf of the
parties.
[5] In summary, the
school occupies premises at Union Avenue, St Helena, Welkom. The
buildings and the land on which they are situate,
belong to the Free
State Provincial Government (the department). The school does not
occupy the premises in terms of any lease and
is therefore not a
lessee. Nor does it pay any rent. It however, occupies the premises
with the full permission of the owner, the
department.
[6] On 14 February 2002 a
fire broke out in the school premises and partly damaged the
buildings thereof. The costs of repairing
the damaged portion
amounted to R122 342,52. The school had a valid short term insurance
policy with Mutual and Federal Insurance
Company Ltd (the insurer),
covering
inter alia
damage to the buildings. A claim was duly
lodged with the insurer and an amount of R82 010,22 was paid in
settlement of the school’s
claim in respect of damage to the
buildings. The school utilised funds from other sources to make up
the short fall of R40 332,30
and had the damage repaired.
[7] In repairing the
damage, the school did not take any money from its banking account.
In other words, it did not take out money
from its budget. The money
came exclusively from outside the school’s coffers. Nor did it
demand any compensation from the owner
of the buildings, the
department. The demand for compensation comes from the school’s
insurer, so that the instant action has
been instituted at the
instance of the insurer. The insurer relies on the doctrine of
subrogation in terms of which it can institute
action in the name of
its insured to enforce a claim that the insured had against a third
party for compensation for the full amount
of the damages suffered by
the insured and for which the third party could be held liable.
[8]
In casu
, the
insurer avers that the department, as owner of the damaged buildings,
was obliged to repair the damage; that in itself repairing
the
damage, the school was impoverished to the extent of the repair costs
of R122 342,52 whereas the department was enriched by such
amount, in
the sense that it was saved that same amount which was needed to
restore the buildings to the condition in which they
were prior to
the fire.
[9] This is a claim based
on unjustified enrichment. It is a novel claim for which no
precedent could be cited. The defendants dispute
that an action for
unjustified enrichment lies in the instant situation; that even if
such cause of action is available to the plaintiffs,
the requirements
thereof have not been established. The plaintiffs also sought to
impute, in the alternative, liability to the department
on the basis
that the school acted as a
negotiorum gestor
. This latter
cause of action was, however, abandoned and not pursued in argument.
The sole question for decision is ultimately
whether a claim based on
unjustified enrichment can be sustained in the circumstances of this
case. The parties put it like this
in the stated case:
“
3. The Court is requested to
adjudicate the following question of law:
3.1 Whether or not plaintiffs are
entitled to judgment against defendants for the amount claimed in the
particulars of claim and based
on the cause of action pleaded
therein.”
[10] There was some
debate at the hearing as to whether the doctrine of subrogation is
applicable in respect of an enrichment claim.
The gist of the
doctrine was stated as follows by Farlam AJA (as he then was) in
COMMERCIAL UNION INSURANCE COMPANY OF SOUTH AFRICA LTD v LOTTER
1999 (1) ALL SA 235
(A) at page 240 e – f:
“
It is trite law that an insurer
under a contract of indemnity insurance who has satisfied the claim
of the insured is entitled to
be placed in the insured’s position
in respect of all rights and remedies against other parties which are
vested in the insured
in relation to the subject matter of the
insurance. This is by virtue of the doctrine of subrogation which is
part of our common
law.”
The debate arises from
the fact that though the school and its governing body are cited as
plaintiffs, this action has in fact been
instituted at the instance
of the insurer on the basis of subrogation. It was contended on
behalf of the department that subrogation
is confined to claims
arising
ex contractu
and
ex delicto
where an insured
has suffered loss as a result of the fault of a third party (the
wrongdoer). Mr. Claasen, for the defendants, cited
a number of cases
illustrating the operation of this doctrine and pointed out that in
all the cases the target of the insurer’s
claim for compensation
was a wrongdoer. He submitted that the doctrine cannot apply in a
case like the present where no-one could
be held liable for the fire
and the resultant damage.
[11] Mr. Daffue, for the
plaintiffs, argued, on the other hand, that the fact that there is no
wrongdoer in the instant case cannot
be a bar to the operation of
subrogation and that the principle is that as long as the insured had
a valid claim against the third
party, the insurer should be able to
recover compensation from such third party.
[12] In the view that I
take of the matter, it is unnecessary to decide on this dispute. I
shall assume, without deciding it, that
the insurer could proceed on
the basis of subrogation even in a claim based on undue enrichment.
The crux of the matter is whether
the school as the insured can
succeed in its claim based on unjustified enrichment in the
circumstances of this case.
[13] It is trite that our
law does not recognise a general enrichment liability. Instead our
law recognises specific instances in
which an enrichment action would
lie, so that a plaintiff wanting to sue for enrichment would have to
identify a particular head
under which his or her relief can be
granted. The so-called
condictiones
of Roman law have been
passed on to our legal system and comprise most of the recognised
instances where action for unjustified enrichment
lies. For a
discussion of the various
condictiones,
see
LAWSA
Vol.
9 second issue at par. 209 – 221.
[14] There are, however,
other instances where enrichment actions would lie apart from the
condictiones.
One such instance is the case of a
bona fide
possessor or occupier who has made necessary or useful improvements
to the property of another, in relation to which no agreement
exists.
Such possessor is entitled not only to retain possession of the
improvements until compensated (
ius
retentionis
), but
can also sue for compensation. See
McCARTHY RETAIL LTD v
SHORTDISTANCE CARRIERS CC
2001(3) SA 482 (SCA) at 489 G –
H.
[15] Although there is no
general enrichment liability in our law, there are nonetheless basic
requirements that must be met for relief
to be granted under any of
the recognised actions. These requirements are fully set out in
LAWSA
op cit
at par. 209. See also
KUDU GRANITE
OPERATIONS (PTY) LTD v CATERNA LTD
2003 (5) SA 193
(SCA) at
paragraph 17;
McCARTHY RETAIL LTD v SHORTDISTANCE CARRIERS CC
supra
at 490D par. 15. They are the following:
the defendant must have
been enriched;
the plaintiff must have
been impoverished;
the enrichment of the
defendant must be at the expense of the plaintiff;
the enrichment must be
unjustified (
sine causa
).
[16] It will be noted in
this regard that the plaintiffs
in casu
have not identified
any specific heading under which they are suing. Nor did Mr. Daffue
do so in his heads of argument or oral argument.
Counsel simply
listed the above requirements and went on to indicate on which basis
would each have been fulfilled with reference
to the agreed facts of
this case. Counsel seems to conflate what could be regarded as the
general principles of enrichment liability
with the specific
requirements set out above. No wonder Mr. Claasen criticised the
manner in which the cause of action has been
formulated. Indeed one
gets the impression that the plaintiffs aver a general enrichment
liability and Mr. Daffue referred to the
obiter dictum
of
Schutz JA in
McCARTHY
supra
where the
learned Judge of Appeal argues for the recognition of such general
enrichment liability, as if the
dictum
represents the current
legal position.
[17] Turning to the facts
of the instant case, it is common cause that the school buildings
belong to the State as represented by
the department. It is common
cause that the school effected the improvements to the buildings in
the form of repairs to the damage
caused by the fire. There can be
no doubt that the repairs were necessary in order to restore the
buildings to their pre-fire condition.
This is clearly a typical
case of necessary improvements. It is a case of someone who has
effected necessary improvements to the
property of another, which is
one of the recognised instances where an enrichment claim lies.
[18] It is necessary,
however, to determine the status of the school’s presence on the
property for whether it has a remedy or not
will depend on whether it
is a possessor or occupier and then whether it is a
bona fide
or
mala fide
possessor or
bona fide
or
mala fide
occupier. Then there is the position of a lawful occupier. These
figures are defined in
LAWSA
op cit
at par. 227
footnote 3, as set out hereunder.
[19 Now a
bona fide
possessor is one who controls the property of another
animo
domini
under the honest but mistaken belief that he or she is the
owner. A
bona fide
occupier,on the other hand, occupies
property not
animo domini
but in the belief that he or she is
entitled to occupy whereas he or she is not so entitled. Clearly the
school cannot be either
of the two. Certainly it is neither a
mala
fide
possessor nor
mala fide
occupier since there is no
dishonesty about its presence on the premises.
[20] In my view, the
school answers to the definition of a lawful occupier. A lawful
occupier does not have the
animus domini
but is entitled to
occupation in that he or she has the permission of the owner. A
lawful occupier does have an enrichment action
for the recovery of
the necessary and useful improvements that he or she has effected to
the property of another. See
LAWSA
op cit
at par. 237.
In the
McCARTHY
case
supra
the action of the
appellant, a garage that had effected repairs to the respondent’s
motor vehicle, was decided on the basis that
the garage was a lawful
occupier as it had been placed in possession by the owner.
[21] It follows that the
school does have an enrichment action against the department. The
cardinal question though is whether the
general requirements of an
enrichment action as set out above have been established and I now
proceed to deal with each requirement.
[22] Firstly, has the
defendant been enriched? I do not think that there can be debate
about this. The buildings were damaged and
it is not disputed that
the costs of repairing the damage amounted to R122 342,52. This was
a necessary expenditure and the owner
has been spared that much.
Besides, it has been held that once it is proved that money has been
expended or goods delivered a presumption
arises that the recipient
has been enriched and the onus then shifts onto such recipient to
prove that it has not been enriched.
See
KUDU GRANITE
supra
at page 203H paragraph 21. It has been shown in
this case that the plaintiff expended money on repairs and the
defendant has not
rebutted the presumption of enrichment.
[23] Has the plaintiff
been impoverished? There was much debate about this during the
hearing and the applicability of the maxim
“
res inter alios
acta
” was raised in this regard. This arose from the fact that
the school repaired the damage out of the proceeds of an insurance
policy
it had with its insurer and not from its own coffers. The
import of this rule, also called the collateral source rule, was
stated
as follows by Trollip JA in
SANTAM
VERSEKERINGSMAATSKAPPY BEPERK v BEYLEVELDT
1973 (2) SA 146
(AD) at 168F:
“
The cross-appeal raises an
interesting issue relating to the ‘collateral source rule’, i.e.,
the rule that generally any compensation
for bodily injuries that the
injured party receives from a collateral source, wholly independent
of the wrongdoer or his insurer,
does not operate to reduce the
damages recoverable by him.”
[24] It was contended on
behalf of the defendants that the maxim has no application in the
instant case since in an enrichment action
it must be shown that the
plaintiffs’ estate has been diminished to the extent of the amount
expended on the improvements. Mr.
Claasen argued that since the
school did not take out money from its coffers, but instead used the
proceeds of the insurance policy,
it has not been impoverished. I am
prepared to accept the counter argument by Mr. Daffue that once the
insurance payout was made,
it became the school’s money and
therefore an asset in its estate. In that context, the source of the
funds with which it repaired
the damage, is irrelevant. In other
words, the collateral source rule applies.
[25] Was the defendants’
enrichment at the expense of the plaintiffs? We are not here dealing
with the so-called indirect enrichment
or multiple parties as was the
case in cases like
BROOKLYN HOUSE FURNISHERS (PTY) LTD v
KNOETZE & SONS
1970 (3) SA 264
(A);
BUZZARD
ELECTRICAL (PTY) LTD v 158 JAN SMUTS AVENUE INVESTMENTS (PTY) LTD EN
‘N ANDER
1996 (4) SA 19
(A). Here there was a causal link
between the enrichment and the impoverishment.
[26] There are, however,
other considerations that impact on this requirement and the nature
of the relationship between the school
and the department is of
paramount importance. It will be noted that the school buildings are
public facilities that are held in
ownership by the State (the
department) strictly for the benefit of the public. The public
school is one such member of the public
for whose benefit the
buildings are meant. Hence it pays no rent. The department derives
no real benefit from its nominal ownership.
The real beneficiary is
the school and as long as it complies with the applicable law and
regulations it can have exclusive occupation,
control and enjoyment
of such premises almost in perpetuity. This much is clear from the
provisions of section 11(1) of the Act.
Section 11(2) even protects
the school’s right of occupation against any successor in title of
the department. It has a direct
interest in the maintenance and
preservation of the school premises and is the primary beneficiary of
any improvements thereon.
So that whereas it has been impoverished
by the amount expended on the repairs, that is offset by the fact
that the improvement is
to its benefit, rather than to its
disadvantage. In that context, the enrichment is not at its expense.
[27] The final and vexed
question is whether the enrichment is unjustified or
sine causa
.
The import of this requirement is that there must be a legal cause
or justification for the transfer of the value from the estate
of the
plaintiff to that of the defendant. This would normally entail a
quid quo pro
of some sort for the transfer of value or
retention thereof. If there is none, then the enrichment is said to
be unjustified. See
McCARTHY
supra
at 496
paragraph 4;
PRETORIUS v COMMERCIAL UNION
VERSEKERINGSMAATSKAPPY VAN SUID-AFRIKA BPK
1995 (3) SA 778
(O) at 782 B – E.
[28] In the same breath
it should be noted that enrichment actions are based on principles of
equity and fairness, the ultimate question
being whether in the
particular circumstances of the case, it will be fair or not that the
defendant should retain the value. Compare
VON
WULDFLING-EYBERS AND ANOTHER v SOUNDPROPS 2587 INVESTMENTS CC
1994 (4) SA 640
(CPD) at 644i;
KUDU GRANITE
supra
at 201F;
BUZZARD ELECTRICAL (PTY) LTD v 158 JAN SMUTS
AVENUE INVESTMENTS
supra
at 28i – 29G.
[29] Take the example
given in the latter case at page 29. An owner had always wanted to
erect an additional bedroom in his house
but had no funds to do that.
A friend of his, B, offers to erect such bedroom as a donation and
the owner happily accepts that.
Instead B engages a sub-contractor,
A, to do the job for R100 000,00. However, B fails to pay A the
agreed amount due to B’s
subsequent insolvency. The value of the
owner’s property has been increased by R100 000,00 due to A’s
efforts. It was concluded
that it would not be fair to expect the
owner to pay for such improvements.
[30] Turning to the facts
of the instant case, it will be noted that the school was obliged in
terms of the provisions of the Act
to maintain the buildings and, as
stated above, it had a direct interest in the maintenance and
preservation thereof. In line thereof
the school took out an
insurance policy covering
inter alia
the sort of damage in
question. The school had been given permission in terms of the Act
to raise funds to augment the funds that
it received from the
department and it did levy school fees from which it paid the monthly
premiums on the relevant policy. The
department had access to the
school’s budget which it approved and from this it can be accepted
that the department came to know
that the premises were properly
insured. Implicit in this must have been a common understanding
between the parties that any resultant
damage would be paid out of
the proceeds of the insurance policy. And for that reason the
department could not have itself taken
out additional insurance
covering the same subject matter. It may be noted also that the
insurance policy covered some R6 million.
[31] In my view, that
constituted, as between the school and the department, sufficient
cause for the enrichment. At any rate, by
assuming responsibility
for the maintenance and preservation of the buildings and properly
insuring them with the full knowledge
and approval of the department,
a reasonable expectation was created that the department would not be
held liable for the repair
costs. That this is so, is confirmed by
the fact that the school neither demanded that the department pays
for the repairs nor that
it be refunded the amount expended thereon.
The school was not even aware that its insurer had instituted the
instant action.
[32] Mr. Daffue also
contended that the funds that the school had been permitted to raise
to augment the funds provided by the department,
were meant to be
used exclusively for educational purposes and could not be applied to
maintenance costs. He also sought to distinguish
between maintenance
and repairs to the buildings and contended that the school’s
responsibility was limited to the ordinary upkeep
of the premises as
opposed to repairing damage. He cited
COMMERCIAL UNION
ASSURANCE v GOLDEN ERA PRINTERS & STATIONERS
1998 (2) SA
718
(BPD) especially the passages at 724.
[33] It should be noted
that the question under discussion in the part of the judgment
referred to above, was whether the lessee could
in terms of a clause
in the lease be obliged to repair and restore to its previous
condition a portion of the building that had been
destroyed by fire
in circumstances where the lessor had insured the buildings and had
been paid compensation for such destroyed portion.
Waddington J
stated the following at page 724 C:
“
It is not possible given the
ordinary meaning of words to repair or maintain
something which no
longer exists
. The agreement of lease nowhere casts a duty on the
lessee to replace, at any stage, a building destroyed by fire whether
caused
accidentally or through negligence.”
(My own
underlining)
It is significant that
the learned Judge uses the words “repair or maintain”.
In
casu
we are dealing with repairs which had in fact been effected
as part of the maintenance obligations of the school. Besides, there
is no agreement obliging the department to insure the premises in
the instant case. And if the school had no obligation to repair
the
damage to the building, why would it have taken out the relevant
insurance cover?
[34] I come to the
conclusion that the enrichment was neither at the expense of the
plaintiffs nor was it unjustified and the plaintiffs
had no valid
claim against the defendants. In the circumstances, subrogation
could not take place.
[35] The action is
dismissed with costs, which shall include the costs consequent upon
the employment by defendants of two counsel.
___________
H.M. MUSI, J
On behalf of
plaintiffs: Adv. J.P. Daffue
Instructed by:
Honey Attorneys
BLOEMFONTEIN
On behalf of
defendants: Adv. J.Y. Claasen
Assisted by:
Adv. S.E. Motloung
Instructed by:
L. Bomela
State Attorney
BLOEMFONTEIN
/sp