THE SUPREME COURT OF APPEAL OF SOUTH AFRICA

REPORTABLE
Case no:   100/02

In the matter between
KUDU GRANITE OPERATIONS (PTY) LTD

APPELLANT

and

CATERNA LIMITED

RESPONDENT

Coram:
HARMS, FARLAM, NAVSA JJA, HEHER and SHONGWE AJJA

Heard:
6 MAY 2003

Delivered: 30 MAY 2003

Summary: Contract failing through no fault of parties - remedy - enrichment
action - requirements - calculation of interest on claim.

_____________________________________________________________________

JUDGMENT
__________________________________________________________________

NAVSA JA and HEHER AJA

NAVSA JA and HEHER AJA
[1]  This appeal is against a judgment of Smit J in the Transvaal Provincial Division and
raises the issue of the rights of parties who have performed in part where a contract
becomes void due to intervening impossibility.
[2] The appellant is a South African company engaged in the marketing of granite
throughout the world.  The respondent is a company incorporated in the British Virgin
Islands which has interests in granite quarries in Zimbabwe.  For convenience we shall
refer to the appellant as 'Kudu' and the respondent as 'Caterna'.
[3] During the 1990's the parties participated in a joint venture in granite mining
operations in Zimbabwe through the medium of Ruenya.  A change in the control of
Kudu gave rise to conflicts of interest from its side.  The parties therefore negotiated an
end to their relationship as a result of which, during October 1997, they concluded a
written agreement providing for the sale by Kudu to Caterna of its 49% shareholding and
its loan account in Ruenya.
[4] The material terms of the agreement were these
'4.1
In consideration for the sale shares and loan account claims, Caterna shall make payment to
Kudu of the sum of R4 000 000 (four million Rand), which shall be payable by Caterna as
follows -

4.1.1 the South African Rand equivalent of Z$3 723 727 (three million seven hundred and
twenty three thousand seven hundred and twenty seven Zimbabwean Dollars) shall be
discharged either partially or in full by way of transfer of stock by Caterna to Kudu or its
nominees in Zimbabwe.  Kudu undertakes to select at least six hundred cubic metres of stock

from that available (and not already sold) by Ruenya as at the 30th of September 1997, which
selection must take place within 15 (fifteen) days from the effective date.  Should any block
selected by Kudu not be available then Ruenya shall be obliged to replace that block with any
available block of similar dimensions and quality.  Ruenya shall not be obliged to transfer stock
over and above 600 cubic metres.  The parties record and agree that the price attributable to the
stock selected by Kudu shall be on a FOT Quarry basis and determined with reference to the
Ruenya "B" price list a copy of which is annexed hereto as Annexure "B", less then percent.  For
invoicing purposes, the loan account of Z$3 723 727 (three million seven hundred and twenty
three thousand seven hundred and twenty seven Zimbabwean dollars) will be converted into
American Dollars at the rate of 12-2951 Z$ to 1 (one) US$.  As material is selected and invoiced
the amount thus calculated will be reduced.  Without derogating from the foregoing, upon
completion of the selection process of material by Kudu, the balance, if any, payable by Caterna
to Kudu shall be payable in cash into such bank account designated by Kudu for this purpose in
accordance mutatis mutandis with the provisions of 4.1.3 below;
4.1.2 the rate of conversion of Zimbabwean Dollars into South African Rand in order to ascertain the
sum by which the purchase consideration is reduced by the transfer of stock by Caterna to Kudu
in terms of 4.1.1 above shall be converted from Z$ into Rand at the rate of 2 - 6301 Z$;
4.1.3 the sum of the difference between four million R4 000 000 (four million Rand) and the value of
the materials selected by Kudu in terms of 4.1.1 above ("the differential amount") shall be
payable by Caterna to Kudu in South African Rand, in cash into such bank account designated
by Kudu for this purpose within sixty days of agreement being reached between the parties of
the amount owing by CAG to Caterna (the CAG loan account) on the "effective winding up of
CAG" including shareholders' loan accounts, profits, debtors and realisable assets and which
agreement shall be reached within sixty days of the effective date.  Should there not be
agreement on the CAG loan accounts within the sixty day period then the parties agree to submit

the effective winding up of CAG and the finalisation of the CAG loan account for determination
by KPMG which determination is to be made within fifteen days from such referral.  The parties
agree that any such determination by KPMG shall be final and binding, in the absence of any
manifest error in calculation therein. . .
4.1.4 Caterna shall be entitled to cede the CAG loan account in writing to Kudu towards the discharge
in part or full of the differential amount.'
[5] The granite blocks were duly selected by Kudu and delivered by Ruenya to Kudu's
nominee.  Invoices were generated by Ruenya and the agreed values of the blocks were
entered in US dollar terms and debited against Kudu's loan account in Ruenya in
Zimbabwean dollars.
[6] The parties could not reach agreement on the value of the CAG loan account as
required by clause 4.1.3.  Nor could KPMG.  The agreement failed because of this on 14
October 1998.
[7] In January 1999 Caterna issued summons against Kudu in which it claimed the
following relief:
'1
An order declaring that the sale agreement, annexure "CL1" to the plaintiff's particulars of
claim, has failed and become unenforceable;
An order directing the defendant to restore to the plaintiff at the Ruenya Mine in Zimbabwe the
blocks of granite stock listed on the schedule, annexure "CL2" to the plaintiff's particulars of
claim, on or before a date to be determined by the court;
In respect of each block of granite stock listed on the schedule, annexure "CL2" to the plaintiff's
particulars of claim which the defendant has failed to restore to the plaintiff as directed, an order
for judgment against the defendant and in favour of the plaintiff for the sum expressed in

column 8 of the schedule "CL2" in US dollars converted into South African rands on date of
judgment;
Interest on each judgment debt at the prescribed rate from date of such judgment;
Costs of suit.'
[8] The basis of Caterna's case was set out in its particulars of claim as follows:
'14
Because the sale agreement has failed and become unenforceable and the defendant has received
the blocks of stock described in 8 above, the defendant:
14.1
has been unjustifiably enriched at the expense of the plaintiff in the several sums set forth in
column 8 of the schedule "CL2"; and
14.2
became, and is presently, obliged to restore such blocks of stock to the plaintiff at the Ruenya
Mine in Zimbabwe, alternatively, where the defendant has disposed of and is therefore unable to restore
a specific block of stock to the plaintiff: to restore to the plaintiff the value of such block of stock.'
[9] It was common cause that Caterna had received no performance from Kudu under the
agreement and its obligation make any restitution does not arise in this appeal.
[10] Kudu's defence was and remained a denial that any of the elements necessary for an
enrichment action had arisen from the failure of the agreement.  It also denied Caterna's
entitlement to return of the granite blocks or payment of their value.
[11] Smit J, after extensive, largely irrelevant, evidence from both sides, considered that
two principal issues fell to be decided:  first, whether Caterna was entitled to the return of
the blocks; second, in respect of blocks which Kudu could not return, the measure of
Caterna's financial entitlement.
[12] The learned Judge accepted the general principle that where an agreement fails

without fault on either side after partial performance, each party is entitled to the return of
whatever was performed so as to restore the status quo.  In his view, however, there is
uncertainty about the true cause of action, some authorities favouring a basis of
enrichment and others treating it as a distinct contractual remedy.  As Smit J understood
the divergent opinions, they gave rise to no material difference in approach.  From this
perspective it was therefore unnecessary to consider whether the elements of an
enrichment action had been proved.  Kudu was capable of returning only 11 of the 179
blocks of granite delivered pursuant to the agreement.  Smit J proceeded to consider and
decide the value of all but distinguished between them in the order which he made.  (At
least half the trial had been spent on the issue of the value of these blocks.)  He found that
the amount to which Caterna was entitled was their market value of US$ 319 793 at the
date of the trial.  Despite initial evidence from Kudu's side to the contrary effect, an
amount agreed between expert witnesses on both sides during the course of the
defendant's case was found to provide the correct measure of that value.
[13]  Smit J accordingly ordered Kudu to pay Caterna the sum of US$319 793
converted into SA rands on the date of payment and to redeliver the remaining blocks
of granite or their present-day value in US dollars, likewise converted.
[14] The present appeal against the judgment and orders in the Court below is with
the leave of that court.  Before us Kudu's main contentions were:
(i)
The true basis of Caterna's claim was enrichment and the Court below, in
deciding the matter on the basis described above, erred by equating the remedies

available to an innocent party who cancels a contract with that of a party who relies on
the failure of an agreement without fault from the side of either party to it.
(ii)
There was no evidence to prove any of the elements of an enrichment claim.
[15] Kudu's first contention is well-founded.  There is a material difference between
suing on a contract for damages following upon cancellation for breach by the other
party (as in Baker v Probert 1985 (3) SA 429 (A), a judgment relied on by the Court a
quo) and having to concede that a contract in which the claim had its foundation,
which has not been breached by either party, is of no force and effect.  The first-
mentioned scenario gives rise to a distinct contractual remedy:  Baker at 439 A, and
restitution may provide a proper measure or substitute for the innocent party's
damages.  The second situation has been recognised since Roman times as one in
which the contract gives rise to no rights of action and such remedy as exists is to be
sought in unjust enrichment, an equitable remedy in which the contractual provisions
are largely irrelevant.  As Van den Heever J said in Pucjlowski v Johnston's Executors
1946 WLD 1 at 6:
'The object of condiction is the recovery of property in which ownership has been transferred
pursuant to a juristic act which was ab initio unenforceable or has subsequently become inoperative
(causa non secuta; causa finita).'
The same principle applies if the contract is void due to a statutory prohibition (Wilken
v Kohler 1913 AD 135 at 149-50), in which case the condictio indebiti applies.  There
is no reason why contractual and enrichment remedies should be conflated.  Caterna's

case was one of a lawful agreement which afterwards failed without fault because its
terms could not be implemented.  The intention of the parties was frustrated.  The
situation in which the parties found themselves was analogous to impossibility of
performance since they had made the fate of their contract dependent upon the conduct
of a third party (KPMG) who was unable or unwilling to perform.  In such
circumstances the legal consequence is the extinction of the contractual nexus:  see De
Wet and Van Wyk, Kontraktereg en Handelsreg 5 ed vol 1 172 and the authorities
there cited.  The law provides a remedy for that case in the form of the condictio ob
causam finitam, an offshoot of the condictio sine causa specialis.  According to Lotz,
9 LAWSA (1st reissue) para 88, the purpose of this remedy is the recovery of property
transferred under a valid causa which subsequently fell away.  See De Vos,
Verrykingsaanspreeklikheid in die Suid-Afrikaanse Reg 3ed 65-6, cf Holtshausen v
Minnaar (1905) 10 HCG 50; Hughes v Levy 1907 TS 276 at 279; Snyman v Pretoria
Hypotheek Maatschappij 1916 OPD 263 at 270-1;  Pucjlowski v Johnston's Executors,
op cit.  It is sometimes suggested that the condictio causa data causa non secuta is the
appropriate remedy.  See para 85 of LAWSA supra.  Indeed in Cantiere San Rocco v
Clyde Shipbuilding and Engineering Co. 1923 SC (HL) 105, a case of a contract
frustrated by the outbreak of war which made performance legally impossible, the
Judicial Committee after an exhaustive consideration found that that was the remedy.
Of this conclusion Professor Evans-Jones commented in 1997 Acta Juridica 139 ('The
claim to recover what was transferred for a lawful purpose outwith contract (condictio

causa data causa non secuta)') at 157:
'The unhappy application of the condictio causa data causa non secuta in Cantiere. . . possibly
resulted from the fact that the condictio ob causam finitam had no profile in Scots law at the time
the case arose.'
The last-mentioned writer also notes, in 'Unjust enrichment, contract and the third
reception of Roman Law in Scotland', (1993) 109 LQR 663 at 668:
'If the impossibility were seen to extinguish the contract from the moment of the impossibility, the
remedy would be condictio ob causam finitam.'
[16] Except that the condictio causa data causa non secuta appears to apply to cases
where a suspensive condition or the like was not fulfilled, the identification of the
cause of action is not of importance since there appears to be no difference in the
requirements of proof of the two condictiones.  The essential point is that Caterna's
claim is covered by one or the other remedy for unjust enrichment.
[17] It follows that to assess that claim one has to consider whether the following
general enrichment elements are present:
(i)
whether Kudu had been enriched by its nominee's receipt of the granite;
(ii)
whether Caterna had been impoverished by procuring that Ruenya deliver the
blocks from its stock;
(iii)
whether Kudu's enrichment was at the expense of Caterna;
(iv)
whether the enrichment was unjustified.
- 9 LAWSA (1st reissue) para 76.  The quantum of Kudu's enrichment claim is the

lesser of the amounts of (i) and (ii).
[18] Before turning to a consideration of whether Caterna established a case in these
regards, it is necessary to advert to a further misconception which affected both
counsel and the Court a quo.  This was to treat the granite blocks as if they were a
subject-matter of the agreement of sale when it came to the question of what the
defendant was liable to restore.  Clause 4.1 of the agreement, understood in its proper
perspective, meant that the blocks were no more than the coinage by which part of the
obligation to pay the price for the shares and loan account was discharged.  Each block
was by agreement between the parties accorded a specific monetary value.  On failure
of the agreement Caterna was no more entitled to return of the individual blocks than
it would have been to the actual notes in the denominations used to discharge a
liability to pay in cash.  Nor, if the value attributed by the parties to the blocks had
been less or more than their market value, would either party have been entitled to
insist on repayment of the difference, but only a return of the purchase price as agreed
between them, ie that portion of the price of R4 million represented by blocks and
quantified by reference to the Ruenya "B" price list.  One is not thereby giving effect
to contractual provisions of a contract which has failed; one is simply identifying the
true substance of the prestation in terms of the transaction, which in this case was the
payment of a monetary price and not the sale of blocks.  The misconception led to at
least half the trial being devoted to a determination of the market value of the granite
blocks, a wholly irrelevant exercise.  It resulted in the Court a quo ordering Kudu to

pay a market value for the blocks, a value which, as will be shown, was substantially
in excess of the price which the parties attributed to them in their agreement.
[19] The evidence establishes that after 179 blocks had been delivered the purchase
price of the loan account was reduced by the sum of the agreed values placed on the
blocks by the parties.  (The Ruenya "B" price list was not proved in evidence but the
total of the prices debited against the loan account was Z$2 455 950.35, which must
have taken into account the agreed discount of  ten per cent).
[20] Although physical delivery of the blocks was effected by Ruenya from its own
stock, the evidence leaves no doubt that it acted as agent of Caterna and the latter is to
be considered in law as the person that made the payment to Kudu.  Caterna, therefore,
had the right of action to recover it:  Bowman, De Wet and Du Plessis NNO and
Others v Fidelity Bank Ltd 1997(2) SA 35 (A) at 42H-43D.  To suggest, as Kudu's
counsel did, that the debit of Kudu's loan account with the value of the stock was
evidence of a direct sale by Ruenya to Kudu for which the latter paid, is to ignore the
evidence.
[21] A presumption of enrichment arises when money is paid or goods are delivered.
A defendant then bears the onus to prove that he has not been enriched:  De Vos supra
2ed 183 quoted with approval in African Diamond Exporters (Pty) Ltd v Barclays
Bank International Ltd 1978 (3) SA 699 (A) at 713 G-H.  In the present case the
defendant attempted to discharge that onus by reliance on the fact that its loan account
in Ruenya had been debited with the full agreed value of the blocks delivered to its

nominee.
[22] That evidence requires to be considered in the broader context.  Caterna and
Kudu were, effectively, equal shareholders in Ruenya.  The effect of the agreement
was to render Caterna the sole shareholder.  The sale included Kudu's loan account,
the benefit in which passed to Caterna on the effective date (prior to the failure of the
agreement), although the cession of Kudu's interest in that account was only to take
place on the final date (in the event, after the agreement failed).  The effect of the
fulfilled agreement would therefore have been that Caterna both directed the affairs of
Ruenya and became its loan creditor.  In these circumstances it was appropriate for
Smit, Caterna's representative and at the same time Ruenya's managing director, to
cause the Kudu loan account to be debited.  When the sale fell away the parties were
restored to their position as equal shareholders.  The debit on the loan account, having
been made in anticipation of an event which would not take place fell to be reversed.
The submission of Kudu's counsel, based on the evidence of Marcenaro, the chief
executive officer of the Marlin group of companies of which Kudu was a member, was
that Kudu (and, therefore, Ruenya) would not agree to the reversal of the entry, which
stood, in consequence, as immutable proof of the discharge of Kudu's liability.  But
this also takes no account of reality and the inevitable legal consequence which could
not be changed by Kudu's withholding of its co-operation:  the causa for the debit
having never materialised, there could be no doubt as to the right of Caterna to insist
on its reversal by Ruenya.  Kudu's enrichment in consequence of the payment of the

price to it stands unaffected after all the evidence is considered.
[23] It was submitted on behalf of Kudu that Caterna had not paid Ruenya for the
granite blocks and the evidence was equivocal as to its intention ever to do so.  So, it
was argued, Caterna had not been impoverished by their delivery to Kudu.  The real
question is, however, whether Caterna incurred a liability to Ruenya arising from its
procurement of delivery.  If it did, then its patrimony was reduced by the amount of
the liability.  What is beyond dispute is that Ruenya, with the consent of both its
shareholders, provided finance in the form of the blocks, to enable one to acquire the
shares and loan account of the other.  As a quid quo pro the loan account (which was
in credit and remained so after the transaction) was debited with the equivalent
amount.  This was in itself a direct acknowledgment of Caterna's liability to account to
Ruenya for what it had received.  Caterna would hardly be in a position to resist any
claim by Ruenya against it for the value of the blocks.  Caterna established as a matter
of inevitable inference that it had been impoverished as a result of the delivery of the
blocks.
[24] The price attributable to the blocks in terms of the agreement was Ruenya's 'B'
price list less ten per cent.  There is no reason in the evidence to suppose that, as
against Ruenya, Caterna would be entitled to claim the same discount.  This supports
the conclusion that the measure of its impoverishment was no less (and was perhaps
more) than Kudu's enrichment.
[25] From the foregoing there can also be no doubt that that enrichment took place at

the expense of Caterna   because Kudu received, Caterna was obliged to pay for the
blocks   and that its continued retention of the benefits of the failed agreement finds
no justification in the evidence and is unfair to Caterna.
[26] Caterna therefore succeeded in its reliance upon the condictio and was entitled
to judgment in the Court a quo.
[27] The quantification of its claim was not the market price but the component
value which each block contributed to the monetary consideration for the sale.  On this
basis Caterna was entitled to repayment of the agreed price in respect of all 179 blocks
(666.057m3) and to return of none.  The agreement placed the exchange rate beyond
dispute by deeming it to be 2.6301 Z$ to 1R.  The amount of Caterna's entitlement was
thus R933 405.68   substantially less than the total of the amounts awarded by the
trial Judge.
[28] The learned Judge made no order in respect of the payment of interest.  In
Baliol Investment Co (Pty) Ltd v Jacobs 1946 TPD 269 the Court held after a
consideration of the common law that interest is not recoverable under the condictio
causa data causa non secuta or under the condictio indebiti unless the subject of
agreement or the debtor is in default or has been placed in mora.  See also CIR v
National Industrial Bank Ltd 1990 (3) SA 641 (A) at 654C-D, 659A-B.  The matter is
now regulated by statute:  s 2A of the Prescribed Rate of Interest Act 55 of 1975
provides that the amount of every unliquidated debt as determined by a court of law
shall bear interest as contemplated in s1, ie at the rate prescribed.  S 2A(2)(a) further

provides that, subject to any other agreement between the parties, the interest on an
unliquidated debt determined by a court of law shall run from the date on which
payment of the debt is claimed by service on the debtor of a demand or summons,
whichever date is the earlier.  In the present case there was no evidence of a demand,
but the summons was served on 6 January 1999.
[29] We are conscious of the fact that, despite the formulation of its case on the basis
of enrichment, the relief claimed by the respondent was substantially different from
that which we have found to be appropriate.  That should not be a bar to this Court
making an order which gives effect to the true issues between the parties where, as
here, those issues have been fully ventilated.
[30] The appellant has achieved substantial success in the appeal and the costs
should follow that result.  The duration and scope of the trial was materially extended
by the misinterpretation of the agreement and the resultant misplaced energies (of both
parties) directed to proving the market value of the blocks, an exercise necessitated by
the way Caterna's claim was formulated.  Counsel were agreed that about half of the
preparation and the trial were devoted to this issue.  Fairness to the appellant requires
that account be taken of that in the costs order which this Court will make.
[31] In the result the following order is made:

1.
The appeal succeeds in part.

2.
The order of the Court a quo is set aside and replaced by the following:

Judgment is granted in favour of the plaintiff for-

(i)
Payment of the sum of R933 405.68;

(ii)
Interest on the said sum at 15.5% per annum from 6
January 1999 until date of payment;

(iii)
One half of the costs of suit, on the basis that when two
counsel were employed such a precaution was justified.

3.
The costs of appeal, including the costs consequent upon the
employment of two counsel, are to be paid by the respondent.

______________________________

M S NAVSA AND J A HEHER

JUDGES OF APPEAL

HARMS JA
)Concur
FARLAM JA
)
SHONGWE AJA )