The Member of the Executive Council of the Department of Human Settlements, Free State Province v Ntsu Building Materials (Pty) Ltd

In 2010, the Department of Human Settlements concluded written building contracts with seven defendants for low-cost housing construction. The Department made advance payments totaling R34,089,179.20 to Ntsu Building Materials in 2010 and 2011, as advance payment for building materials that Ntsu would supply to the seven defendants. In 2019, the high court declared unlawful, reviewed and set aside the agreements and decisions pursuant to which these advance payments were made. The Department then instituted an action claiming that the payments to Ntsu were made sine causa (without legal basis) and that Ntsu was unjustly enriched. The Department's pleadings stated that Ntsu had supplied building materials to the seven defendants through these contracts. Ntsu excepted to the claim, arguing it failed to disclose a cause of action. The high court upheld the exception and granted leave to amend. The Full Court dismissed the Department's appeal, and the Department sought special leave to appeal to the Supreme Court of Appeal.

• Whether an unjust enrichment claim based on the condictio sine causa specialis can succeed where payments were made pursuant to agreements and decisions that factually existed at the time of payment but were subsequently declared invalid on review
• Whether the setting aside of administrative decisions and agreements by way of public law review renders payments made pursuant to those decisions sine causa for purposes of an enrichment claim
• What is the effect of the Oudekraal principle (that invalid administrative action exists in fact until set aside) on private law enrichment claims
• Whether the pleadings disclosed a cause of action for unjust enrichment
• Whether special leave to appeal should be granted

1. The application for special leave to appeal is granted to the Supreme Court of Appeal. 2. The appeal is dismissed, with costs.

Where payments are made pursuant to agreements and administrative decisions that factually exist at the time of payment, the subsequent declaration of invalidity of those agreements and decisions on administrative review does not, without more, render the payments sine causa for purposes of an enrichment claim based on the condictio sine causa specialis. The factual existence of the agreements and decisions at the relevant time constitutes a factual causa for the payments. Where the payee has provided the consideration contemplated by those agreements (in this case, supplying building materials), there is no unjust enrichment at the payer's expense, regardless of the subsequent invalidity of the underlying agreements. The validity of subsequent acts (such as payments and performance) depends on whether they rely on the substantive validity of the administrative action or merely on its factual existence at the time - in the latter case, the subsequent acts survive the declaration of invalidity.

The Court noted that the pleadings suffered from internal contradictions - the contemporaneous assumption (that no debt ever arose) and the ex-post assumption (that the debt became invalid when agreements were set aside) rested on contradictory predicates. The Court also observed that counsel for the Department raised the question of whether, following Esorfranki Pipelines (Pty) Ltd v Mopani District Municipality, there is a principled reason why the Department's invocation of public law self-review to set aside agreements should permit pursuit of a private law enrichment claim. The Court noted this was an issue of importance but declined to engage with it as it was not raised by the exception. The Court commented that the exception itself could have been more precisely and fully pleaded, though the first ground sufficiently raised the core issue.

This case clarifies the intersection between public law (administrative review) and private law (unjust enrichment) in South African law. It establishes that the setting aside of administrative decisions on review does not automatically create a cause of action for unjust enrichment based on the condictio sine causa specialis. The judgment reinforces the Oudekraal principle that factually existing administrative decisions can have legal consequences that survive their subsequent invalidation. The case is significant for government entities seeking to recover payments made pursuant to contracts or decisions later set aside on review - they cannot rely solely on the declaration of invalidity but must demonstrate actual unjust enrichment, including that no consideration was received. The judgment also highlights the limits of using public law remedies to facilitate private law claims for recovery of funds.