THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Case No:765/2010
Not reportable

In the matter between:

NELSON MANDELA METROPOLITAN
MUNICIPALITY

Appellant

and

NGONYAMA OKPANUM HEWITT-COLEMAN                    First Respondent
HARLECH-JONES ARCHITECTS

Second Respondent
RAJ MAHARAJH & ASSOCIATES

Third  Respondent
BHAM TAYOB KHAN MATUNDA

Fourth Respondent
COTTERELL DAVIES MAZWANA PEIRSON
Fifth Respondent
SCHOOMBIE HARTMAN

Sixth Respondent
LOUW STRYDOM CONSULTING ENGINEERS
Seventh Respondent
SKC & NIEMANN CC

Eighth Respondent
ELDRED BOONZAAIER CONSULTING ENGINEERS      Ninth Respondent
BERGMAN-INGEROP (PTY) LIMITED

Tenth Respondent
MAKALIMA JOHNSTON ASSOCIATES CC

Eleventh Respondent
METROPLAN

Twelfth Respondent
BOPITE ENGINEERING GEOLOGISTS CC
Thirteenth Respondent
HEMSLEY & MYRDAL

Fourteenth  Respondent

Neutral citation:
Nelson Mandela Municipality v Ngonyama Okpanum Hewitt-
Coleman (765/2010) [2012] ZASCA 11 (14 March 2012)

Coram:
Brand, Malan, Bosielo, Majiedt JJA and  Boruchowitz AJA

Heard:
20 February 2012
Delivered:
14 March  2012

Summary:
Condictio indebiti – mistake – excusability –
overpayments made by Municipality to professional
consultants – reasonableness of mistake

________________________________________________________________
ORDER

On appeal from: the South Eastern Cape High Court, Port Elizabeth (Mhlantla J
sitting as court of first instance).

(1)
The appeal is upheld with costs including the costs of two counsel;
(2)
The order of the court below is set aside and replaced with the following
order:
‘(a)
The first, second and third respondents are ordered to pay the sum
of R401 252,69 to the plaintiff jointly and severally;
(b)
the fourth, fifth and sixth defendants are ordered to pay the sum of
R151 676,18 to the plaintiff jointly and severally;
(c)
the seventh, eighth and ninth defendants are ordered to pay the
sum of R153 107,80 to the plaintiff jointly and severally;
(d)
the tenth defendant is ordered to pay the sum of R7 896,47 to the
plaintiff;
(e)
the eleventh and twelfth defendants are ordered to pay the sum of
R75 069,38 to the plaintiff jointly and severally;’
(f)
the fourteenth defendant is ordered to pay the sum of R21 478,66
to the plaintiff;
(g)
the defendants are ordered jointly and severally to pay interest on
the respective amounts to the plaintiff at the prevailing prescribed
interest rate a tempore morae;

(h)
the defendants are ordered to pay the plaintiff’s costs of suit jointly
and severally.’

________________________________________________________________
JUDGMENT

MALAN JA (Brand, Bosielo, Majjiedt JJA and Boruchowitz AJA concurring):

[1] This is an appeal against the order of Mhlantla J dismissing with costs the
plaintiff’s action against the defendants for the repayment of fees that were
allegedly not due. The action was dismissed on the ground that, although the
amounts paid were in excess of what was due, the plaintiff when making
payment was grossly negligent. The appeal is with the leave of the court below.

Introduction
[2] The Nelson Mandela Metropolitan Municipality, formerly known as the Port
Elizabeth Transitional Local Council, instituted action against the respondents, all
professional consultants, for the sum of R1 073 818,41, alternatively R810
481,19, which it alleged was paid in excess of what was due to them in respect of
their professional fees. I will refer to the plaintiff, the appellant, as the Municipality
and to the respondents as the defendants or consultants.

[3] The Municipality owned the Matthew Goniwe Hostel in Kwazakhele, Port
Elizabeth. The hostel was overcrowded, derelict and in a state of decay for a long
time. The services in the hostel had collapsed: water pipes were broken, sewers
blocked and overflowing, and some residents lived in communal toilet blocks.
Electrical reticulation had collapsed and cables were disintegrating with illegal
connections crossing from one building to another. Some 16 000 people at one
stage lived in the hostel.

[4] The community had put considerable pressure on the Municipality to
resolve the problems and upgrade the hostel. In 1995 Mr Alan Zeiss, a qualified
attorney, was the chief estates officer and acting director of the Municipality’s
housing department. The Provincial Housing Board (the PHB) provided funds in
the form of housing subsidies pursuant to their Hostel Redevelopment
Programme. The Municipality’s budget and administration committee considered
its 1994/5 operating budget and requested a report on the future of the hostel. Mr
Zeiss prepared a memorandum and the committee resolved that the hostel be
upgraded and that funds to this end be obtained from the PHB. The proposed
undertaking, which became known as the Matthew Goniwe project, involved the
upgrade of the hostel, the construction of houses as part of the Greenfields
development and the infill of additional land situated at the hostel. The
Municipality did not have the required funds to embark on the project and
resolved that it be funded entirely from funds made available for that purpose by
the PHB.

[5] Moreover, the Municipality had neither the capacity nor the expertise to
prepare and motivate an application for funding and to supervise completion of
the project. It was therefore resolved that a managing agent be appointed. His
appointment was followed by the appointment of the defendants as architects,
quantity surveyors, consulting and electrical engineers, land surveyors and town
planners as the primary consultants. The first to twelfth defendants were
appointed in July 1996. Other defendants were appointed by the managing
agent. The consultants were required to and did conclude joint venture
agreements for each discipline involved in the project. The managing agent had
to consult with the local community, the consultants and interested parties,
prepare an application for funding and co-ordinate and manage the
implementation of the upgrading proposals. The managing agent’s fees and
appointment were to be approved by the PHB and were subsequently approved.

Appointment
[6] The initial letters of appointment of the primary consultants were in similar
terms and signed by Mr Zeiss, on behalf of the Municipality, following a resolution
of the Municipality’s executive committee. They were dated 15 July 1996 and
read as follows:

‘UPGRADING OF MATTHEW GONIWE HOSTEL
I wish to advise that the Council’s Executive Committee, at a meeting held on 21 May
1996 agreed that, subject to the provision of the required funds by the Provincial
Housing Board, Messrs [name of consultant] be appointed as [eg Quantity Surveyors or
Civil and Structural Engineers] for the above project.’

[7] In the course of 1996 and later various other agreements, the client-
consultant agreements, were signed by the defendants. They were signed by Mr
Zeiss on behalf of the Municipality in mid-1997 under circumstances to which I
shall refer later. The consultants first had to secure funding for the project from
the PHB and had to draft and submit a funding proposal to the PHB in the
manner prescribed in the Implementation Manual of the Hostel Redevelopment
Programme. This was done and a preliminary amount for the funding application,
that is R625 000, was approved by the PHB on 29 November 1996. Funding for
the entire project and the fees of the defendants were approved much later under
circumstances to which I will refer.

Termination of the project
[8] After work on the project had commenced, a dispute between the
Municipality and the defendants arose leading to the termination of the
agreements and the suspension of the project in mid-1998. The Municipality
ascertained that the consultants had charged and were paid fees that were
higher than those approved by the PHB. Action was instituted for the amount of
the overpayment based on the condictio indebiti.

Particulars of claim
[9] The Municipality’s particulars of claim contains the allegation that the first
to the twelfth defendants accepted their appointments during July 1996, and the
fourteenth defendant its during June-July 1997. Their appointments entailed the
rendering of services to the Municipality for the design, tender and construction
phases of the Matthew Goniwe project. The total amount payable to all the
defendants was to be restricted to such amount as was approved and made
available by the PHB. Both the appointment of the defendants and the amount of
their fees were to be subject to the final approval of the PHB. The defendants
were obliged to allocate among themselves no more than the total fees and
disbursements payable to all of them as was approved and made available by
the PHB. It was pleaded in the alternative that, in respect of each discipline the
defendants forming part of the relevant joint venture, were obliged to, and did,
allocate among themselves, no more than the fees payable in respect of that
discipline, having regard to the total of the fees available to such discipline. The
ratios in which the fees available for each discipline stood to the total of the fees
were set out in a schedule to the particulars of claim. The plaintiff’s alternative
claim is based on the client-consultant agreements. It was the plaintiff’s
contention that on the basis that these agreements constituted the basis for the
defendants’ fees they were overpaid.

[10] The PHB ultimately approved the appointment of the defendants but
restricted the total amount of fees and disbursements to (a) 7,5 per cent of the
total amount approved and to be made available in respect of the Greenfields
development and infill sites and (b) 9,2 per cent of the total amount approved and
to be made available by the PHB in respect of the upgrading of the hostel.

[11] The Municipality specified the total amount made available by the PHB for
the project and the amount available for payment of the defendants’ fees and
disbursements which sum had to be divided among them in accordance with the
ratios agreed by them. However, to quantify the overpayment it was also

necessary to have regard to the amount of work done at the time the Municipality
instructed the defendants to cease work.

[12] The Municipality alleged, and this was not disputed, that during the period
1996 to 1999 substantial sums were paid to the defendants. Having regard to the
nature and extent of the work actually executed, the nature and extent of the
services provided and the maximum amounts permissible in accordance with the
agreed ratios the defendants were overpaid by substantial amounts. The
alternative claim was based on the client-consultant agreements and consisted of
a claim for an overpayment, being the difference between the amount paid to the
consultants and the fees permitted under these agreements at the time of work
stoppage. The amounts overpaid were calculated by Mr D Elliot, the
Municipality’s expert witness and, during the course of the trial, recalculated by
him, taking into account certain propositions put to him in cross-examination. His
calculations were set out in exhibits L and M. His conclusion was that an
overpayment in the amount of R810 481,19, the amount claimed in the
alternative, had been made.

[13] The Municipality alleged that all the defendants were jointly and severally
liable for the total amount of the overpayment. In the alternative, it claimed
payment from the defendants forming part of each joint venture the amount
overpaid to such joint venture, jointly and severally.

Defences
[14] The defendants denied that the amounts paid to them were not due or, if
due, were paid by mistake or, if paid in error, that the mistake of the Municipality
was bona fide and reasonable. All the elements of the condictio indebiti were
therefore put in issue. In addition, certain specific defences were pleaded. The
defendants also took issue with the allegation that any liability they may have
was joint and several or joint only. Generally, all the defendants pleaded that the
amounts paid to them were due in terms of their respective client-consultant

agreements and that their appointments and fees were not subject to the
approval of the PHB. Any attempt by the PHB, some specifically pleaded, to
restrict their fees was ‘irrelevant to the rights and obligations of the parties to the
client customer agreement’. Some of the defendants counterclaimed but these
counterclaims were not persisted with. Others pleaded oral variations of the
client-consultant agreement while some relied on separate agreements relating
to specific work to be done, such as the emergency electrical intervention. In
addition, the first defendant pleaded that the managing agent had informed the
defendants on 9 February 1998 that the PHB had approved the application for
funding, the appointment of consultants and the fee structure. I will deal with
these defences in due course.

Evidence
[15] The Municipality called Messrs Mzimkulu Msiwa, Alan Zeiss and Dicky
Elliot as witnesses. The defendants relied on the evidence of Messrs Timothy
Hewitt-Coleman (on behalf of the consortium of architects), Thembinkosi
Matunda (on behalf of the fourth, fifth and sixth defendants, the consortium of
quantity surveyors), Richard Boonzaaier (on behalf of the ninth defendant, the
civil engineer), Peter du Toit (on behalf of the tenth defendant, the electrical
engineer), Ndabezitha Ndzombane (on behalf of the eleventh and twelfth
defendants, the consortium of town planners) and Robert Hemsley (on behalf of
the fourteenth defendant, the land  surveyor). At the trial Mr Maharaj, the third
defendant’s representative, stated that its defence was fundamentally the same
as that of the first defendant and closed its case without calling any witnesses.
The action against the thirteenth defendant was not proceeded with.

Judgment of the court below
[16] The court below found that the evidence established that the defendants
were appointed subject to PHB approval both in respect of the terms of
appointment as well as the fee structure and fees of the defendants. The
approval of the PHB limited their professional fees to 7,5 per cent in respect of

the Greenfields development and infill site and 9,2 per cent for the hostel
upgrade. That, the court below found, included all work from inception including
the preliminary planning, funding applications, emergency electrical intervention,
fees and disbursements. The defendants’ reliance on the purported client-
consultant agreement, it held, was therefore misplaced. The court also found that
some of the defendants had signed their client-consultant agreements knowing
that both their fees and the continuation of the project were subject to PHB
approval.

[17] The court below, however, held that the Municipality failed to discharge
the burden of proving that it had not been negligent when it made the payments
and that its error was excusable. The Municipality should, it found, before making
payment of the claims submitted by the defendants, have advised them that their
claims exceeded the amounts approved. The only explanation offered was that
the Municipality had relied on the managing agent to verify the claims for
payments made. That explanation was found to be inadequate and not sufficient
to render the mistake of the Municipality excusable.

[18] The evidence supports the finding of the court below that the
consultants’ fees were subject to PHB approval and that it was a term of their
appointment.  Mr du Toit, who testified on behalf of the tenth defendant, agreed
in so many words that the preliminary fees were included in the total cost of the
project and that the PHB had to approve the fees of the consultants. Mr
Boonzaaier, who testified on behalf of the ninth defendant, conceded that their
appointment as well as their fees had to be approved by the PHB. During cross-
examination, Mr Matunda, testifying on behalf of the fourth, fifth and sixth
defendants, conceded that the ‘whole of the funding was subject to the PHB …
and obviously the fees being part of that’. He admitted that the consultants were
working at risk, pending such approval. Mr Ndzombane, on behalf of the twelfth
defendant, understood that all fees had to be approved by the PHB and that the
Municipality was not incurring any liability beyond the fees approved. This was

also conceded by Mr Hewitt-Coleman, testifying on behalf of the first defendant.
The conclusion of the court below that all the defendants were working at risk
pending approval by the PHB of both their fees and appointments is justified.

History
[19] In order to understand the circumstances under which the Municipality
paid the fees of the defendants a review of the history of the project and,
particularly, the numerous applications made for funding by the defendants and
their negotiations with the PHB concerning fees is necessary. Mr Zeiss testified
that the city engineer’s department was not involved in housing matters at the
time the project was considered. Nor was the Municipality able to establish a
body, to be known as the Local Negotiating Group (the LNG), through which the
community and the residents of the hostel could participate in the upgrading
process. It was at that time government policy that a formalised body be
established for the implementation of housing projects to facilitate communication
between the developer, the consultants and the hostel community.

[20] The executive committee, with the subsequent approval of the PHB,
resolved in August 1995 to appoint a managing agent, the H-J Studio Trust,
controlled
by
Mr
Elwyn
Harlech-Jones,
to
‘facilitate
the
successful
implementation of the project’ (clause 3 of its appointment). This entailed the
establishment of a local negotiating group (phase 1), assisting the ‘social
compact’ to appoint a professional team, the submission of an application to
cover preliminary planning costs, the ‘workshopping’ of all proposals, the
submission of an application for development funding (phase 2) and the co-
ordination and management of the upgrading proposals (phase 3). Mr Harlech-
Jones was associated with the second defendant. Clause 6 of the managing
agent’s appointment  provided that –
‘[i]n executing its functions as Managing Agent, the Trust shall comply with all directives
of the Council, in its capacity as the local authority, and all policies, guidelines and
directives of the Provincial Department of Housing and the PHB, as specifically set out in

the publications entitled, “Policy for the Upgrading of Public Sector Hostels and Hostel
Initiative Operations Manual” and “A Guide to use the Implementation Manual” of the
Department of Housing.’
In terms of clause 8 the managing agent acknowledged that it was to be paid
from funds approved by the PHB and undertook, other than at its own risk, not to
proceed with the work until the PHB had made such funding available. It also had
to prepare the budget for the project and submit an application for its funding.

[21] A ‘social compact committee’ which eventually became the LNG was
formed. It was a consultative body that had no executive powers and facilitated
meetings between the stakeholders in the project. Mr Zeiss attended the meeting
of the LNG on 17 November 1995 where it was minuted that he had said that the
Municipality –
‘would play a caretaker role in the overall managing of the project which he felt should
be community driven involving a broad cross section of the beneficiary community. The
day-to-day running of the hostel would continue and the Council will provide the
necessary secretarial support i.e. recording the minutes of meetings and the supply of a
venue for meetings. He concluded that the common objective was the upgrading of the
hostel and the Managing Agent was expected to play a leading role in such upgrading.’

[22] It was the managing agent’s responsibility to assemble a team of
consultants. The Department of Housing had also placed considerable pressure
on the Municipality to ensure that marginalized professionals and consultants be
involved and it was decided that a lead consultant for every discipline be
appointed to head a joint venture of those professionals within each discipline.

[23] The managing agent produced a document entitled Guidelines for
Appointment of Consultants, the final draft of which was dated 23 February 1996,
setting out the organizational network of the project. It stated that the managing
agent ‘will be responsible to obtain the budget approvals from the L.N.G. and
negotiate, on behalf of the [Municipality], the project finance and subsidies from
the [PHB]’. It dealt with the goals and aims of the ‘social contract’ involved: the

consultants were expected to be accountable at all times and to bear the
community’s interests at heart when carrying out their professional services. The
social contract emphasised the importance of providing low-cost, high-quality
housing with community involvement, and to engender community work by the
professionals. As far as the professional consultants were concerned it was
provided that they –
‘will be contractually responsible to the [Municipality] . . . Contractual Documentation will
be required to be signed by the participating Consultants to formalise professional
appointments.’
The different roles of the consultants were set out. Their professional fees were
to be calculated on the standard fee regulation ‘for every profession, altered by
negotiation in accordance with the Scope of Work’. Moreover, it is provided that
‘[t]he financing and subsidy policy of the Provincial Housing Board should be
considered within the overall budget allocation for the Project’. As far as the
financial control for the project was concerned it was specifically provided that –
‘11.1
The financial obligation of the [Municipality] is limited to the funds approved by
the P.H.B.
11.2
All claims for Professional Fees will be certified for payment by the Managing
Agent, payment to be effected with the prior approval of the L.N.G.’
The professional consultants were required to enter into –
‘Joint Ventures with other emerging Consultants and should be prepared to work on a bi-
partisan level to ensure upliftment of the Professionals, who have in the past been
marginalised and denied opportunities of Professional advancement.’

[24] In a further document dated 19 March 1996 the managing agent dealt
with the appointment of consultants and noted that ‘[a]ppointments will only be
finalised once the Provincial Housing Board approves the funds for Preliminary
Planning . . . ‘. The preliminary planning concerned the entire project and its
costs formed part of the costs of the total project although the Municipality might
have had to provide some bridging finance. On 12 April 1996 the PHB approved
further fees of the managing agent, the appointment of a liaison officer and the

running costs of the LNG. It required the managing agent to exercise proper
control over the funds awarded.

[25] An advertisement was placed in the Eastern Province Herald calling
interested persons to come forward before 24 April 1996 to be considered for
appointment as consultants. A meeting of the consultants appointed, the so-
called primary consultants, was held on 7 May 1996. The Guidelines referred to
were read at the meeting and copies were also handed out. It was minuted that –
‘[e]ach Primary Consultant accepted the contents of the Guidelines, as it was confirmed
that the Guidelines would form part of the appointment contract with the [Municipality].’
The formal appointment of the consultants was discussed and it was stated that
the agreements would be between them and the Municipality. The first action
would be the formulation of a preliminary planning budget after approval of which
the appointments would be formalised. A letter was written to the managing
agent, with copies to the LNG and the architects and quantity surveyor,
emphasising that the Municipality, and not the LNG, had to make the
appointments –
‘this being subject to the necessary finance being made available by the Provincial
Housing Board for the payment of Professional fees.’

[26] The executive committee of the Municipality resolved on 21 May 1996 to
appoint the primary consultants. The resolution made it clear that their
appointment was subject to the provision of the required funds by the PHB. This
led to the letters of appointment referred to being sent to the defendants. It is not
disputed that all the defendants had accepted their appointments.

[27] Numerous meetings were held by the defendants. At the meeting of 7 May
1996 the managing agent confirmed that once a team of consultants had been
selected and approved, all consultants would be equal and the designation of
‘primary’ consultant would no longer be used. At one meeting the cost of the
preliminary study was determined in an amount of R625 000.  It was minuted at

the meeting of consultants on 3 July 1996 that the preliminary budget in the said
amount had been approved by the PHB. It was further agreed that consultants
would make available to the managing agent copies of their standard contracts to
be used by the Municipality when formalising their appointments. The executive
committee of the Municipality resolved on 23 July 1996 that application be made
to the PHB for approval of the R625 000 preliminary planning budget subject to
there being no financial implications for the Council.

[28] Concern was, however, expressed by the managing agent in his report of
4 August 1996 that funding of the project had not been finalised. This concern
was repeated at the meeting of 15 August 1996 and it was stated that the
question of financing be addressed as a matter of priority. An outline for the
funding application was presented to consultants on 9 October 1996. It was
minuted at the task group meeting of 10 October 1996 that preliminary fees by
the consultants had been processed and presented to the Municipality. The
managing agent’s report of 15 October 1996 envisaged that the funding
application to the PHB would be made in November 1996.

[29] It was only by letter dated 3 December 1996 that the Municipality was
informed that the appointment of certain (primary) consultants had been
approved and that a preliminary fee of R625 000 was allowed by the PHB at its
meeting on 29 November 1996. As a result of this approval the Municipality
commenced making payments to the consultants for services rendered. At this
time, however, the fees of the consultants had not yet been approved by the
PHB.

[30] The PHB resolved at its meeting on 31 January 1997 to approve the
amount of R22 343 332,50 for the hostel upgrade and R16 867 500 for the
construction of housing for the Greenfields development giving a total of R 39
210 832,50. All previously approved funds, with the exception of the managing
agent’s fees, were to be part of the development cost. The amount of R625 000

thus formed part of the total grant. As far as the upgrading and infill units were
concerned the PHB provided that any shortfall between the development costs
and the grant be funded by the Municipality. The Municipality, however, never
accepted liability for any shortfall in the funds approved. The PHB also specified
that the costs of the emergency electrical intervention, to which I will refer again,
formed part of the total grant. A further 15 per cent ‘top up’ grant in respect of
dilapidated buildings and infill sites due to conditions of the soil in respect of the
Greenfields development and infill units was also allowed.

[31] On 17 February 1997 the managing agent reported that the grant had
been approved. He added that the amount of R39 210 832,50 also included the
fees of the consultants. From the minutes of the consultants’ meeting of 21
February 1997 it appears that a copy of the grant was given to each consultant
for circulation to each of the associates. It was also resolved that application be
made for approval of the ‘top up’ grant in relation to the Greenfields development.
The managing agent was mandated to clarify the fee of R625 000 with the
Department of Housing and Local Government (the Department) which, it was
stated at the meeting, should have been regarded as an once-off payment not
forming part of the main grant. The consultants were requested to finalise their
fees by 10 March 1997. There was some discussion of the fees at the meeting
and it was again questioned whether the R625 000 should be seen as an
additional grant. It was also debated whether the total fees should be 7,5 per
cent of total cost but not exceeding 10 per cent. Further discussions about the
fees followed on 13 March 1997 and it was noted that the matter should be
discussed with the Department. A further meeting was held on 10 April 1997
where the managing agent reported that the fee of 7,5 per cent was calculated
for the Greenfields development with standard fees for the hostel. The latter fees,
however, had not been approved by the PHB at that time. The managing agent
wrote to the Department on 10 April 1997 stating that fees of 7,5 per cent for the
Greenfields development was acceptable but that the standard tariff for the
hostel should apply. The managing agent wrote to the Municipality on 17 April

1997 stating that total fees would amount to 12 per cent of the funds granted. Mr
Zeiss testified that the Municipality was in no position to validate the fees
suggested and would only have forwarded the suggestion to the Department.

[32] This debate on fees culminated in a meeting of the managing agent with
the Department on 18 April 1997. Mr Zeiss as well as the chairman of the PHB
attended. At that time the defendants were threatening to stop work unless a
decision on fees was taken. The fees suggested by the managing agent in his
letter of 17 April 1997 were acceptable to the consultants. The managing agent
reported to the consultants what had transpired at the meeting and requested Mr
Matunda, one of the quantity surveyors, to finalise their fees and brief in terms of
the suggested parameters for submission to the PHB. His proposal, containing
details of the work and fees, was to form the basis of a further meeting with the
Department. The PHB, however, was not in favour of the standard tariff of fees
and it was agreed that a revised document be furnished.

[33] The PHB resolved on 25 April 1997 to approve professional fees of 7,5%
for the Greenfields development and infill sites, and to ‘negotiate the professional
fees for the alterations to the existing hostels, with the consultants to an
acceptable norm’. This resolution again led to a flurry of activities. The
consultants attended the meeting of the task team on 8 May 1997 and agreed
that a further meeting be held with the Department. At that time the detailed
design for the project had virtually been completed. Agreement had to be
reached with all the roleplayers for the submission of a fees proposal to the PHB.
On 15 May 1997 the managing agent informed the meeting of the LGN that the
consultants’ brief and fee structure ‘was a difficult process because all the key
role players had to be satisfied.’ With regard to the breakdown of fees he noted
that not all the information had been received from the consultants. He remarked,
however, that he was not happy with the apparent arrangement between the
province and the consultants as he wanted a detailed breakdown and requested
deferment of the item for a period of seven days to extend the negotiating

process. A meeting with the Department was arranged for 26 May 1997. Further
proposals followed which were discussed at the meeting of the LNG but the fees
suggested were higher than the ceiling set by the PHB at the meeting on 26 May
1997. The Municipality supported the proposals of the defendants. At the LNG
meeting on 28 May 1997 it was resolved that the consultants would supply the
managing agent with a breakdown of fees costed per activity, a revised scope of
work and a new ‘proposed fees structure to cover any additional functions as well
as alternative suggestions which would be subject to the approval of the
Department . . .’.

[34] The lack of clarity on fees was delaying the project. A new fee structure
was approved at the meeting of the LNG of 5 June 1997 and it was resolved that
it be submitted to the Department for approval. The Municipality’s housing
committee recommended on 7 July 1997 that the fee proposals put forward be
accepted and submitted to the PHB. The managing agent was requested by Mr
Zeiss on 9 July 1997 to call for tenders and submit the consultants’ brief and fee
structure to the PHB for approval. There was still no finality on fees as appears
from the minutes of the consultants’ meeting of 31 July 1997.  Further meetings
followed. A meeting with the Minister was called for. It was noted that the
consultants were performing at risk. The chief executive of the Municipality on
8 August 1997 wrote to the Minister that the delays –
‘have now resulted in the Managing Agent being instructed to advise all professionals
working on the planning and design of the project to cease all further work until finality
has been reached by the Board on the appointment of the professional team and their
respective fee structure.’

[35] The Municipality was informed on 12 August 1997 of the 25 April 1997
resolution of the PHB and of the further negotiations between the Department
and the consultants. It was stated by the PHB that –
‘negotiations took place and the consortium of consultants agreed to reduce the fees to
an acceptable norm of 9,2% for alterations to the existing hostel . . . . It should also be
noted that an average of 7,4% fee structure has been achieved for this development

through negotiations when both the upgrading of the existing hostel and the Greenfields
project are combined. This was achieved notwithstanding the fact the Housing Board
anticipated an average fee of 7,5 %. A contract document for the employment of
consultants has also been drawn up by the Managing Agent . . .’.

[36] The PHB resolved at its meeting on 26 August 1997 that –
‘(a)
A standard tariff of fees of 9.2% be approved in principle for the alterations to the
existing hostel and that the fees be reviewed on submission of the final detailed
designs
(b)
The involvement of professionals such as Architects, Electrical Engineers,
Quantity Surveyors in the Greenfields  project must be clarified
(c)
The previous decision in respect of professional fees for the Greenfields portion
of the project must be made available . . . to the Board.’
This resolution did not explain all the issues relating to the professional fees and
a clarification, particularly in view of the earlier decision of the PHB, was
requested by the Municipality. The managing agent reported to the consultants
on 14 October 1997 that the PHB had approved the appointment of consultants
and the fees for the hostel. They were requested to separate their fees for the
hostel and the Greenfields development. It was anticipated that the fees for the
hostel would be paid. At that time problems with the size of the houses that was
built on the Greenfields development occurred, leading to the PHB refusing to
subsidise houses that did not comply with their specifications. The managing
agent was not satisfied with the fee of 7.5 per cent imposed for the Greenfields
development and moved for a ‘realistic’ fee of 12 per cent. By November 1997
neither the architects nor the quantity surveyors for the Greenfields development
had been approved by the PHB. On 18 November 1997 the managing agent
requested the consultants to submit claims for the balance of their fees for the
Greenfields development in order to discuss their payment with the PHB at their
meeting on 11 December 1997.

[37] At their meeting on 29 January 1998 the PHB resolved to allow a 12.5 per
cent variance allowance in respect of the Greenfields development and also

approved the appointment of architects, electrical engineers and quantity
surveyors. At the meeting of 24 April 1998 a further sum of R6 586 125, subject
to the availability of funding, was approved. The Municipality was informed of the
resolution of 29 January 1998 on 20 May 1998. The managing agent notified the
consultants on 9 February 1998 that the PHB had approved at their meeting of
29 January 1998 –
‘the comprehensive application for funding and the appointment of consultants for the
construction phase of the project. The fee structure as set out in the fee schedule was
also approved.’

[38] In June 1998 the Municipality established a housing department within the
city engineer’s department. It was decided to reduce the number of consultants
active on the project, hence a series of letters were sent to them during June
1999 terminating some of the appointments. The city engineer took over
management of the project. There were complaints about the non-payment of
fees by the consultants. Mr Zeiss responded to the managing agent on 29
September 1999 that in terms of the agreement  –
‘fees as approved by the Provincial Housing Board are payable to you. It appears that
there has been a considerable over payment of fees not only to you, but to other
consultants, all of which payments were authorised by you. These payments have all
been referred for audit and until such time as agreement is reached as to what fees have
been approved and these compared with the amounts paid to determine the accuracy or
otherwise of such allegations no additional fees will be paid to you or any consultant.’
The managing agent responded by stating that ‘[a]ll fees which were claimed
were paid in terms of the Client Consultant Agreement signed between the Trust
and the [Municipality] dated 7th August 1997’.

[39] On 31 January 1999 the PHB confirmed the total grant with specific
reference to the redevelopment of the existing hostel with the conditions that the
grant replaced all previous grants resolving inter alia that ‘(vi) all previously
approved funds with the exception of the facilitators fees be accepted as part of

the development cost’ and that ‘(ix) the emergency intervention form part of the
total grant’.

Payment process
[40] The Municipality alleged that some 102 payments were made over the
period from 21 November 1996 to 1 July 1999. The court below found that 45
authorisations were signed by Mr Judd (an official of the Municipality), three by
Mr Zeiss and eight by an unknown official. Twenty two claims were accompanied
by statements that the claims were made in terms of the respective client-
consultant agreement. Nine contained statements to the effect that they were in
respect of preliminary expenditure and one that it was payable in terms of the
managing agent’s instruction.

[41] The payment process involved Mr Judd’s processing of the claims
submitted and certified by the managing agent. The Municipality would thereafter
submit a claim to the Department for a refund. As Mr Zeiss said: ‘If the managing
agent signed it off, we passed it for payment.’ The managing agent was
responsible for the financial administration of the project and the Municipality
assumed that he had done his job. The city treasurer did not undertake any
investigation as to whether the fees were payable or not but simply verified
whether the paperwork was in order, ie whether the claim submitted was certified
by the managing agent. As I have said, the payments were made from November
1996. The same payment procedure was followed both before and after the
notification by the managing agent to the consultants on 9 February 1998, relied
on by the first defendant. There is no evidence that this notification in any way
affected the standard procedure the Municipality followed when making
payments. Nor is there any suggestion that the defendants in any way relied on it
in preparing their claims for payment. The ‘tariff’ referred to in the notification is a
reference to the fees schedule forming part of the client-consultant agreements.
The schedule, however, contains no tariff but set out maximum amounts payable.

Client-consultant agreements
[42] The client-consultant agreements were prepared pursuant to a resolution
of the LNG on 5 June 1997. They consisted of four parts and it was recorded in
each that it constituted a contract between the consultant and the Municipality to
perform certain services against payment of professional fees. It set out the
consultant’s mandate and the respective fees in a schedule. It also contained the
scope of the different services to be rendered in addenda to the agreements.
This draft document was formulated because, according to Mr Zeiss, the
Department wanted to ensure that there was no duplication of work among the
various consultants and to curtail fees. The draft was approved by the LNG on 26
June 1997 and the consultants resolved to submit it to the Department for formal
approval at their meeting of 27 June 1997. The Municipality’s housing committee
approved the fees and scope of mandate as well as the terms of the client-
consultant agreement on 7 July 1997 subject to approval by the PHB. Mr Zeiss
explained that his signature on the agreements meant that the agreement was
approved subject to approval by the PHB. If the PHB did not approve the draft
agreements or the fees specified, he continued, they would have had to either
renegotiate fees or reduce the scope of work. It is clear that the appointment of
the consultants and their fees were both subject to the approval of the PHB. The
evidence shows and the court below correctly found that the approval of the PHB
formed part of the appointment of the consultants and, hence, a term of the
client-consultant agreements relied upon by the defendants. The fees set out in
the client-consultant agreements were never approved by the PHB.

Quantum
[43] The extent of the work completed was largely common cause. Mr Elliot, a
quantity surveyor, whose expertise was not disputed, made his own assessment
of the work completed. He also verified the ratios in which the fees applicable to
each discipline stood to the total amount of fees payable. He met with the
defendants to clarify those areas where he had been required to make
assumptions. After he gave evidence he was recalled to present further

calculations taking into account issues raised by Mr Matunda when the latter
testified. In the new calculations, set out in exhibits L and M, he accommodated
the views of Mr Matunda that the fees should be calculated as a percentage of
the grant rather than the contract value and also that the fees for the hostel
upgrade and the Greenfields development and infill sites be separated and
looked at individually. VAT was further added to the final figures. He also brought
into account R56 033,79 paid to the quantity surveyors that had been left out of
his earlier calculations.  The amount of the overpayment arrived at was R810
481,19 and was calculated on the basis that the fees, including disbursements of
the tenth defendant for the emergency electrical intervention, formed part of the
total fees to be paid from the funds granted and were not to be regarded as a
separate item. He also disallowed the fees and disbursements claimed by the
ninth defendant for an additional thirteenth month of supervision, the fees and
disbursements of the fourth, fifth and sixth defendants in respect of firm bills of
quantities and the fees and disbursements of the fourteenth defendant in respect
of additional work and further disbursements made as a result of an increase in
the fees of the Surveyor General. As I will show, there is no reason not to accept
his calculations and it was hardly contended otherwise.

[44] As far as the fees for the emergency electrical intervention is concerned, I
am satisfied that there is no evidence that the Municipality undertook any liability
for the fees of the tenth defendant for the intervention. It is correct that the
managing agent wrote to the Department on 15 October 1996 that he had been
requested to co-ordinate the emergency electrical intervention ’with funding
approved by the [Municipality]’ and that he had to submit an application for
additional funding to the PHB. Mr Judd thereafter approved payment of the tenth
defendant’s fees. It does not follow, however, that the Municipality had accepted
any liability for these fees. The PHB on 3 December 1996 resolved specifically
that the cost of the emergency electrical intervention be deducted from the total
amount of the grant. This was confirmed by their subsequent resolution of 31
January 1999. Mr Msiwa’s unchallenged evidence is that the electrical

intervention was part of the whole project and that, by reason of the bad
condition of the electricity supply to the hostel, the work was merely performed
earlier than it would have been in the normal course of events. There is thus no
room for the contention of Mr du Toit, who testified on behalf of the tenth
defendant, that the emergency intervention fees were to be treated separately
from the fees payable in respect of the entire project.

[45] There is also no basis for allowing the fees of the ninth defendant in
respect of supervision for a thirteenth month and the increased fees and
additional disbursements of the fourteenth defendant. Their increased fees and
disbursements were simply not part of the scope of work envisaged in the
respective client-consultant agreements.

[46] It was further submitted that, as far as the fees of the quantity surveyors
for final bills of quantities were concerned, the managing agent had requested
final, and not provisional, bills of quantities. Mr Matunda, who testified on behalf
of the fourth, fifth and sixth defendants, could not demonstrate that the
agreement he relied upon had been varied to provide for the drawing up of firm
bills of quantities. As appears from his cross-examination, it was highly unlikely
that an agreement to call for firm bills of quantities would have been concluded at
a time when the whole project had practically come to a standstill.

Condictio indebiti
[47] The condictio indebiti is the enrichment remedy by means of which the
solvens recovers from the accipiens money paid or property transferred in
intended payment or performance of a debt that is not due.1 The condictio
indebiti is available against the accipiens. Who the latter is is a legal question
because the person physically receiving the performance may in law not be
regarded as the recipient of the performance, such as an agent or a conduit or a

1 Frame v Palmer 1950 (3) SA 340 (C) at 346D-G; Le Riche v Hamman 1946 AD 648 at 656 and
see J G Lotz ‘Enrichment’ 9 LAWSA (2ed) para 211 ff (updated by F D J Brand).

person nominated for payment.2 The payment or transfer must have been
indebite in the widest sense, that is, there must have been no legal or natural
obligation to pay or perform.3 The payment or performance must further have
been made in the mistaken belief that the debt was due. Generally, if the plaintiff
knew that the debt was not due or doubted whether it was due recovery may be
excluded.4 In the past it was required that the mistake be one of fact or mixed
fact and law and not of law only,5 but in Willis Faber Enthoven (Pty) Ltd v
Receiver of Revenue & another6 the distinction was done away with and it was
held that an error of law could also give rise to the condictio indebiti.

[48] Generally, as in the case of a mistake of fact, the mistake must be
excusable, that is the ignorance of the solvens must be nec supina nec affectata
– neither slack nor studied.7 No precise formulation of the circumstances when a
mistake would be excusable is possible since it calls for a value judgment. In
Bowman, De Wet & Du Plessis NNO & others v Fidelity Bank Ltd 8 Harms JA
said:
‘It is a general requirement for the condictio indebiti that the error that gave rise to the
payment must not have been an inexcusable error, that is inexcusable in the
circumstances of the case . . . . There have been many attempts to lay down rules or
formulations in this regard in order to circumscribe what is excusable and what is not
. . . Since one is concerned with the exercise of a value judgment, it seems inappropriate
to refine the test of whether judicial exculpation is justified . . .‘.
Similarly, in Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue & another9
Hefer JA remarked:
‘It is not possible nor would it be prudent to define the circumstances in which an error of
law can be said to be excusable or, conversely, to supply a compendium of instances

2 Phillips v Hughes; Hughes v Maphumulo 1979 (1) SA 225 (N) at 229B-D. See further Daniel
Visser Unjustified Enrichment (2008) at 282-285.
3 Lotz and Brand para 212.
4 Lotz and Brand para 212.
5 Rooth v The State (1888) 2 SAR 259; Miller & others v Belville Municipality 1973 (1) SA 914 (C).
6 Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue & another 1992 (4) SA 202 (A).
7 Voet 12.6.7 and see Rahim v Minister of Justice 1964 (4) SA 630 (A) at 634A-B. For the history
of the rule see Visser Unjustified Enrichment at 320.
8 Bowman, De Wet & Du Plessis NNO & others v Fidelity Bank Ltd 1997 (2) SA 35 (A) at 44C-E.
9 Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue & another at 224E-H.

where it is not. All that need to be said is that, if the payer’s conduct is so slack that he
does not in the Court’s view deserve the protection of the law, he should as a matter of
policy, not receive it. There can obviously be no rules of thumb; conduct regarded as
inexcusably slack in one case need not necessarily be so regarded in others, and vice
versa. Much will depend on the relationship between the parties; on the conduct of the
defendant who may or may not have been aware that there was no debitum and whose
conduct may or may not have contributed to the plaintiff’s decision to pay; and on the
plaintiff’s state of mind and the culpability of his ignorance in making the payment.’
An excusable mistake is not required in all cases for the condictio indebiti to be
available. It is not necessary where the plaintiff acts on behalf of others, such as
where he is an executor claiming an overpayment,10 or a person making payment
in a representative capacity.11

[49] The requirement that the mistake be excusable has often been criticized,
and proposals for its reformulation have been made.12  In view of my conclusion
that the mistake of the Municipality in making payment was excusable, it is not
necessary to question this requirement and venture into a consideration of the
historical roots of this rule.13

Excusability
[50] The court below found that the mistake of the Municipality was not
excusable and said that ‘[i]f they [Judd and Zeiss] knew there was no approval or
there was a limit, they should have advised the defendants accordingly and
rejected the claims which fell outside the ambit of the approved tariff’. However,

10 Bowman, De Wet & Du Plessis NNO & others v Fidelity Bank Ltd at 44G-45G; Rulten NO v
Herald Industries (Pty) Ltd 1982 (3) SA 600 (D) at 608B-C.
11 Affirmative Portfolios CC v Transnet Ltd t/a Metrorail  2009 (1) SA 196 (SCA) para 29.
12 See eg J C van der Walt ‘Die Condictio Indebiti as Verrykingsaksie’ (1966) 29 THRHR 220;
Visser Unjustified Enrichment at 301 ff; Helen Scott Unjust Enrichment by Transfer (2005)
(dissertation Oxford) at 257 ff and her ‘The Requirement of Excusable Mistake in the Context of
the Condictio Indebiti: Scottish and South African Law Compared’ (2007) 124 SALJ 827; J C
Sonnekus Ongegronde Verryking in die Suid-Afrikaanse Reg (2007) at 245 ff; Jacques du Plessis
‘Towards a Rational Structure of Liability for Unjustified Enrichment: Thoughts from Two Mixed
Jurisdictions’ (2005) 122 SALJ  142.
13See Reinhard Zimmermann The Law of Obligations Roman Foundations of the Civilian
Tradition (1990) at 834 ff; Daniel Visser in Reinhard Zimmermann and Daniel Visser  Southern
Cross Civil Law and Common Law in South Africa  (1996) at 528 ff.

there was no approved tariff. What the PHB in the end approved was that the
defendants’ fees be limited to 7.5 per cent and 9.2 per cent of the total funds
available for the Greenfields development and infill site and the hostel upgrade
respectively.

[51] It was simply not possible for the Municipality, even if they had the
required expertise, to have known at any one time during the course of the
project what the approved fees would be and that the payments of fees
exceeded the amount of the percentages approved. The approval of the PHB
was given in stages: The first resolution was taken on 25 April 1997 and related
to the Greenfields development and infill sites and limited those fees to 7,5 per
cent. The second resolution was passed on 26 August 1997 following a period
during which the consultants were involved in negotiating their fees. This
resolution limited the professional fees for the upgrading of the hostel to 9,2 per
cent of the funds granted and called for the involvement of certain of the
consultants to be clarified. This resolution again led to further negotiations. At
their meeting on 29 January 1998 the PHB resolved to allow a 12.5 per cent
variation allowance and approved the appointment of certain of the consultants.
This resolution also affected the amount of the defendants’ fees. At the 24 April
1998 meeting a further amount was made available by the PHB. The final
resolution of the PHB was passed only on 31 January 1999. It was only after an
analysis of the work completed by Mr Msiwa after the establishment in June 1998
of a housing department within the city engineer’s department and supervision of
the project by him that the fact of the overpayments could be established.

[52] The actual quantification of the amounts overpaid required complex
calculations by Mr Elliot, calculations he had to revise after extensive cross-
examination. The Municipality lacked the capacity and expertise during the
period payments were made to ascertain the extent of their liability and the extent
of the consultants’ entitlement.  It relied on the managing agent. While it is
correct that the latter was the agent of the Municipality, the managing agent was

also involved with the second defendant. But, moreover, in certifying the claims
of the defendants and presenting them for payment, he also acted as their agent.
The defendants were at all times aware of the need for the PHB to approve their
fees and, accordingly, knew that their fees were limited. They knew that pending
approval they were working at risk. They nevertheless submitted claims pending
approval in terms of the client-consultant agreements that were in excess of the
amounts that were eventually approved. They were indeed in a much better
position than the Municipality to have ensured that their fees were kept within the
limits that were acceptable to the PHB. As I have found, the notification by the
managing agent on 9 February 1998 played no role in the payment procedure
followed by the defendants and the Municipality.

[53] The Municipality made payment relying on both the claims submitted and
the managing agent’s certification. The latter was, as I have said, the agent of
both the Municipality and the defendants. While the Municipality was aware that
the defendants’ fees had to be approved it made payment in anticipation of such
approval. It cannot be said that it intended to pay the claims submitted whether or
not they were due. Payment without further verification does not mean that the
Municipality was indifferent or reckless. Nor can the defendants, who knew that
their fees had to be approved, suggest that they were under the impression that
they were entitled to the amounts claimed. As I have said, the Municipality did
not have the means of verifying the true facts. Its failure to do so cannot be
construed as an indifference as to whether the money was due or as an intention
to pay whether it was due or not. In the circumstances the Municipality has
demonstrated that its mistake was excusable.

Joint and several liability
[54] Joint ventures were in fact established by the defendants for every
discipline. The civil and structural engineers formed a joint venture consisting of
the seventh, eighth and ninth defendants. The quantity surveyors formed a joint
venture consisting of the fourth, fifth and sixth defendants. The first three

defendants were a joint venture of architects. The eleventh and twelfth
defendants acted in a joint venture of town planners.

[55] The remedy relied upon, the condictio indebiti, lies against the accipiens,
the person receiving the undue performance. There is no evidence to suggest
that all the defendants incurred liability to the Municipality jointly and severally.14
They were appointed, initially, on an individual basis and accepted their
appointments as such. It was only later that joint ventures were formed. These
joint ventures undertook the work pertaining to the particular discipline and
undertook that the fees due to them did not exceed the fees approved of by the
PHB. Payments were made in the mistaken belief that the amounts were due
and owing either to the individual consultant (as in the case of the fourteenth
defendant) or to the particular joint venture. It follows that the accipiens is either
the individual consultant or the particular joint venture. The relationship between
the parties to a joint venture is that of partners.15 Partners are liable jointly and
severally in solidum.16 It follows that the members of each joint venture are liable
jointly and severally in solidum to the Municipality. The division of the fees
payable to each joint venture was a matter to be determined by the partners in
each joint venture. Should any of them have recourse to any of the others that is
a matter based on the agreement between them. Any order made should
therefore be against the partners in the particular joint venture concerned. The
amounts due by them were calculated by Mr Elliot and are reflected in the order
made.

14 See Tucker & another v Carruthers 1941 AD 251 at 254. Also Schalk van der Merwe, L F van
Huyssteen, M F B Reinecke and G F Lubbe Contract General Principles 3ed (2007) at 247 ff.
15 Joubert v Tarry & Co 1915 TPD 277 at 281.
16 Joubert v Tarry & Co 1915 TPD 277 at 281.

Order
[56] In the result the following order is made –
(1)
The appeal is upheld with costs including the costs of two counsel;
(2)
The order of the court below is set aside and replaced with the following
order:
‘(a)
The first, second and third respondents are ordered to pay the sum
of R401 252,69 to the plaintiff jointly and severally;
(b)
the fourth, fifth and sixth defendants are ordered to pay the sum of
R151 676,18 to the plaintiff jointly and severally;
(c)
the seventh, eighth and ninth defendants are ordered to pay the
sum of R153 107,80 to the plaintiff jointly and severally;
(d)
the tenth defendant is ordered to pay the sum of R7 896,47 to the
plaintiff;
(e)
the eleventh and twelfth defendants are ordered to pay the sum of
R75 069,38 to the plaintiff jointly and severally;
(f)
the fourteenth defendant is ordered to pay the sum of R21 478,66
to the plaintiff;
(g)
the defendants are ordered jointly and severally to pay interest on
the respective amounts to the plaintiff at the prevailing prescribed
interest rate a tempore morae;
(h)
the defendants are ordered to pay the plaintiff’s costs of suit jointly
and severally.’

__________
F R MALAN
JUDGE OF APPEAL

APPEARANCES:

For  Appellant:

R G Buchanan SC and E A S Ford SC

Instructed by:

Rushmere Noach Inc

Port Elizabeth

c/o Webbers Attorneys

Bloemfontein

For  Respondent:

R P van Rooyen SC and O H Ronaasen

Instructed by:

Pagdens

Port Elizabeth

c/o McIntyre & van der Post

Bloemfontein