Nelson Mandela Metropolitan Municipality v Ngonyama Okpanum Hewitt-Coleman and Others

The Nelson Mandela Metropolitan Municipality undertook the Matthew Goniwe Hostel redevelopment project, funded entirely through housing subsidies approved by the Provincial Housing Board (PHB). Because it lacked capacity and expertise, the Municipality appointed a managing agent and numerous professional consultants (architects, engineers, quantity surveyors, planners and others). All appointments and professional fees were expressly subject to PHB approval and limited to percentages of the total approved grant. During 1996–1999 the Municipality paid substantial professional fees to the consultants. After disputes arose and the project was terminated, the Municipality discovered that the consultants had been paid fees exceeding the amounts approved by the PHB. It instituted action based on the condictio indebiti to recover overpayments. The High Court found that the payments were not due but dismissed the claim on the basis that the Municipality’s mistake in making the payments was inexcusable due to gross negligence. The Municipality appealed to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The High Court’s order was set aside and replaced with an order directing the various respondents, jointly and severally within their respective joint ventures, to repay specified amounts totalling the overpayments, together with interest a tempore morae and costs of suit.

The case is a leading Supreme Court of Appeal authority on the excusability of mistake in claims based on the condictio indebiti. It clarifies that negligence is not assessed in the abstract and that reliance on agents or administrative systems may render a mistake reasonable. The judgment is also significant for public-sector contracting, confirming that professional consultants engaged on subsidised projects are bound by funding approvals and work at risk pending such approval.