Reportable
Case No: 1392/2018

In the matter between:

JOHANNES THEOBALT HATTINGH VAN NIEKERK          Appellant

and

LIBERTY GROUP LIMITED

Respondent

Neutral citation: Johannes TH van Niekerk v Liberty Group Limited (1392/18)
[2020] ZASCA 65 (15 June 2020)

Coram:
NAVSA, ZONDI, MOCUMIE, SCHIPPERS AND DLODLO JJA

Heard:
14 May 2020

Delivered: This judgment was handed down electronically via e-mail to the
parties’ legal representatives on 15 June 2020 It has been published on the
Supreme Court of Appeal website.

Summary: Unjustified enrichment – condictio indebiti – overpayment of benefit
under insurance policy – written cession of portion of benefit by beneficiary to
secure debt – cession registered with insurer – debt still unpaid – full benefit paid
to beneficiary – insurer paid under bona fide but mistaken belief – amount of
benefit ceded paid to cessionary – debt still unpaid – overpayment to beneficiary
excusable error – indebite – overpayment recoverable.

ORDER

On appeal from: Limpopo Division of the High Court, Polokwane (Phatudi J
sitting as court of first instance):
The appeal is dismissed with costs.

JUDGMENT

Schippers JA (Navsa, Zondi, Mocumie and Dlodlo JJA concurring):

[1] This appeal, with the leave of the Limpopo Division of the High Court,
Polokwane, essentially concerns the application of the principles of the condictio
indebiti. The central question is this. Was the conduct of the respondent, Liberty
Group Limited (Liberty), in making an erroneous payment in the sum of
R470 000 under an insurance policy to the appellant, inexcusably slack, that
disentitled it to recovery of that amount in terms of the condictio indebiti?

[2] The facts are uncontroversial. In March 1996 the appellant, Mr Johannes
van Niekerk, took out a life insurance policy with Liberty (the policy) on the life
of his mother, Mrs Hester van Niekerk. The appellant was the beneficiary under
the policy and paid the premiums or ‘contributions’, as they are referred to in the
policy. The guaranteed benefit in terms of the policy was R1 808 263.68.

[3] On 13 June 2013 the appellant ceded to his brother, Mr Daniel Johannes
van Niekerk (the cessionary), a portion of the benefit under the policy in the sum
of R470 000, as security for monies lent and advanced by the cessionary. The

cession was facilitated by the cessionary’s insurance broker, Ms Katrien
Neethling. She submitted the completed cession form to Liberty which recorded
the cession on its system, known as ‘Blueprint’, in accordance with the terms of
the policy.

[4] The appellant, as cedent, signed a collateral cession (‘aanvullende sessie’),
described in the cession form as follows:
‘2.  Aanvullende sessie
•
Die regte op die polis word as sekuriteit aan ‘n derde oorgedra.
•
Die sedent bly egter die poliseienaar maar kan nie by die polis baat nie tensy die sessie
gekanseller word. Terwyl die sessie bestaan kan die sessionaris die polis sonder die eienaar se
toestemming in kontant omskep.
•
Die sedent bly egter verantwoordelik vir die premies op die polis.’1
The appellant and the cessionary did not however agree to the terms indicated by
the second bullet describing the collateral cession. That provision was crossed out
on the cession form, rendering it inoperative.
The form states the following under the heading ‘POLISBESONDERHEDE’:
‘Aanvullend: tydelike oordrag van eienaarskap as sekuriteit vir ‘n skuld R470 000.’2

[5] Clause 9 of the General Conditions of the policy reads:
‘SETTLEMENT OF CLAIM
Any benefits due will be paid to the Owner or his estate, provided that:
–  if  a Beneficiary has been appointed and the contract is not ceded, payment will be made to
the Beneficiary

1 Translation:
‘2.   Collateral cession
• The rights under the policy are transferred to a third party as security.
• The cedent remains the owner of the policy but cannot derive any benefit from the policy unless the cession is
cancelled. While the cession is in existence, the cessionary cannot convert the policy into cash without the owner's
consent.
• The cedent however remains responsible for the premiums in respect of the policy.
2 Translation:
‘Collateral: temporary transfer of ownership as security for a debt R470 000.’

–  if the contract is ceded, payment will be made to the Cessionary, or any Beneficiary
nominated by the Cessionary as Owner.’

[6] Mrs Van Niekerk died on 18 August 2015. The appellant completed a form
with the following heading: ‘Claimant’s Statement for Death Claim’, and claimed
the full benefit under the policy, which he requested Liberty to deposit directly
into his bank account. On 24 August 2015 Ms. Elizna Smith, the appellant’s
broker, submitted the claim form to Liberty on his behalf. On 10 September 2015
Liberty paid the full benefit under the policy, ie R1 808 263.68 to the appellant.

[7] Subsequent to payment of the full benefit of the policy to the appellant, Ms
Neethling inquired of Liberty why the cessionary had not, in terms of the policy,
been paid the amount of R470 000, secured by the cession. According to the
evidence, at the time of payment to the appellant, Liberty was not in possession
of the cession form and subsequently obtained a copy of it from Ms Neethling.
Liberty then discovered that it had mistakenly paid the appellant the full benefit
of the policy. On 25 September 2015 Liberty paid the sum of R470 000 to the
cessionary.

[8] In the interim, Liberty tried to recover the R470 000 from the appellant.
Pursuant to a telephonic discussion with him, by letter dated 22 September 2015,
Liberty advised the appellant that he had been overpaid, requested him to repay
R470 000, and furnished its bank details for him to do so. The appellant refused
to repay the money. On 1 October 2015 Liberty again wrote to the appellant,
requesting repayment and apologising for any inconvenience caused. The letter
was accompanied by a small gift (a fruit basket). Still, the appellant refused to
repay the funds.

[9] In January 2016 Liberty instituted action against the appellant for recovery
of the money. The particulars of claim stated the following. Liberty paid the

appellant the amount of R1 808 263.68 in the bona fide but mistaken belief that
such payment was due and payable, and without taking into account the cession
of R470 000, which had been overlooked. The appellant was entitled to payment
of only R1 338 263.68. He was unjustifiably enriched and Liberty impoverished,
in the sum of R470 000.

[10] Following on a notice of intention to defend by the appellant, Liberty
applied for summary judgment. In his opposing affidavit, the appellant stated that
Liberty had caused its own impoverishment by paying the cessionary the amount
of R470 000, as it had no obligation to do so. The cession, he said, was one in
securitatem debiti to provide temporary security for his debt to the cessionary,
which ‘lapsed’ when Liberty paid the full benefit under the policy to the appellant.
He denied that he had been enriched as he was, in his words, ‘the owner of all the
funds’. He also denied that Liberty had been impoverished, since it ‘had no
entitlement to pay the funds’ to the cessionary, or that Liberty’s error was
reasonable. Summary judgment was refused and the appellant was granted leave
to defend the action.

[11] The appellant’s plea was essentially a repetition of the allegations in his
affidavit opposing summary judgment. He denied that he had ceded ownership of
R470 000 of the benefit under the policy to the cessionary. He alleged that it was
his intention to retain ownership of the whole of the policy and to cede only
limited rights to the cessionary as security for the fulfilment of his obligations
under the agreement between them; that the debt secured by the policy was not
yet due; and consequently that the cession was unenforceable. The appellant
denied that the payment of R470 000 was made erroneously because he was
entitled to receive the full benefit under the policy – the cessionary was not
entitled to payment at all.

[12] At the trial only Liberty tendered evidence, by four witnesses. The
appellant chose not to testify, called no witnesses and closed his case. The
cessionary was subpoenaed by Liberty but failed to appear at court. Whilst a
warrant for his arrest was being issued by the court, the parties received a medical
certificate stating that he was suffering from a contagious illness. Liberty
subsequently dispensed with his evidence.

[13] The evidence was largely common ground, not seriously disputed and
certainly not contradicted. Ms Neethling testified that the appellant and the
cessionary had agreed that a portion of the benefit under the policy in the sum of
R470 000, would be ceded to the cessionary for a debt owed to him by the
appellant. When the cession was signed, the debt was already R470 000. Ms
Neethling had written that amount on the cession form prior to its signature by
the appellant. She said that in the event of the appellant not settling the debt or
any part of it, the debt had to be settled on the death of Mrs Van Niekerk. Pursuant
to the conclusion of the cession, she sent the form by email to Liberty. After the
death of Mrs Van Niekerk, Ms Neethling also submitted a claim form to Liberty
on behalf of the cessionary, as she put it, ‘just for notice’ of the cession.

[14] Ms Emily Weideman, a claims assessor at Liberty, together with Ms
Linah Mngoma, the team leader for death claims, took the decision to pay the
proceeds of the policy to the appellant. Ms Weideman testified that prior to
making payment, she had looked for the cession on the Blueprint system, which
indicated that there was a cession against the policy in the name of the cessionary,
but she could not find it. According to the system, no cession form had been
submitted. Neither had the form been included with the documents required to
effect payment of the policy. Ms Mngoma essentially confirmed Ms Weideman’s
evidence and said that they could not find the cession form on the Blueprint
system because it had been recorded by another department within Liberty. It will

be recalled that the appellant had submitted a claim for payment of the full amount
due in terms of the policy.

[15] As already stated, the overpayment to the appellant was discovered when
the cessionary claimed payment of R470 000. On 16 September 2015 Ms
Weideman and Ms Mngoma telephoned the appellant regarding repayment of that
amount but he told them that he would discuss the matter with his broker, Ms
Smith. Subsequently Ms Smith dealt with the matter on the appellant’s behalf
when the letters of 22 September and 1 October 2015 were sent to him, requesting
repayment.

[16] In her evidence, Ms Smith confirmed that she had submitted the claim
form (which the appellant completed) together with supporting documentation to
Liberty. She said that the cession was still in existence when the overpayment
was made. She accepted that the debt secured by the cession remained extant, and
said that the appellant was very upset by Liberty’s mistake. Ms Smith testified
that she had asked Ms Mngoma a few times not to proceed with legal action
against the appellant as she was, in her words, ‘trying to get the situation sorted’.
This however, to no avail.

[17] On 15 October 2015 Ms Smith advised Liberty that the appellant was not
willing to refund the R470 000, for the following reasons. In 2013 he had
encountered difficulty in getting the policy reinstated, after Liberty informed him
that it had lapsed due to system errors on its part. Thereafter it had taken the
appellant months to obtain confirmation from Liberty that the cession had been
registered for the correct amount, ie for not more than R470 000 and then, after
all the paperwork had been done, Liberty still made the mistake of overpayment.
It is clear from her evidence that at that stage, both parties knew that the payment
to the appellant was erroneous.

[18] The high court, after referring to the decision of this court in Grobler v
Oosthuizen3 at paras 23 and 24, held as follows:
‘In view of [the] express provisions, there is no room for the alleged pledge or a re-cession
agreement as contended for on behalf of the defendant. I find therefore that the nature of the
cession was one in securitatem debiti, irrespective of whether it is structured as an out-and-out
cession subject to a pactum fiduciae, and should for purposes of the debtor, be deemed to all
intents and purposes, as an out-and-out cession.’
[19] The court concluded that the overpayment to the appellant was made
without lawful cause, and that it resulted in his unjustified enrichment and
Liberty’s impoverishment. The appellant was therefore ordered to repay Liberty
the sum of R470 000, together with interest and costs.

[20] The high court’s view referred to in paragraph 18 above is confusing and
appears to be based on a misreading of Grobler. Earlier in that case Brand JA
stated that an out-and-out cession meant that a cedent would have divested him
or herself of the right in question. In that case too it was the right to the proceeds
of a policy that was in question,4 and the dispute was whether the relevant cession
was an out-and-out cession or one in securitatem debiti.5 In Grobler this Court
said that even where the cession document describes the cession as an ‘out-and-
out’ cession, that is not always decisive, and one should be careful to differentiate
between form and substance.6

[21] This Court in Grobler affirmed the pledge theory as the doctrinal basis of
a cession in securitatem debiti, as opposed to the theory of an outright or out-and-
out cession coupled with a pactum fiduciae.7 Brand JA said:

3 Grobler v Oosthuizen [2009] ZASCA 51; 2009 (5) SA 500 (SCA).
4 Grobler fn 3 para 8.
5 Grobler fn 3 para 10.
6 Ibid.
7 In terms of this theory, a cession in securitatem debiti is an outright or out-and-out cession on which an
undertaking (pactum fiduciae) is superimposed that the cessionary will re-cede the principal debt to the cedent on
satisfaction of the secured debt. The right which is ceded vests in the cessionary and the cedent is left with a mere

‘In accordance with this theory, the effect of a cession in securitatem debiti is that the principal
debt is “pledged” to the cessionary while the cedent retains what has variously been described
as the “bare dominium” or a “reversionary interest” in the claim against the principal debtor
(See eg Land- en Landboubank van Suid Afrika v Die Meester 1991 (2) SA 761 (A) at 771C-
G; Development Bank of Southern Africa Ltd v Van Rensburg 2002 (5) SA 425 (SCA) para
50).
…
[D]espite the doctrinal differences arising from the pledge theory, this court has in its latest
series of decisions – primarily for pragmatic reasons – accepted that theory in preference to the
outright session/pactum fiduciae construction (see eg Leyds NO v Noord-Westelike
Koöperatiewe Landboumaatskappy Bpk 1985 (2) SA 769 (A) at 780E-G; Bank of Lisbon and
South Africa Ltd v The Master (supra) at 291H-294H; Incledon (Welkom) (Pty) Ltd v Qwa Qwa
Development Corporation Ltd 1990 (4) SA 798 (A) at 804F-J; Millman NO v Twiggs 1995 (3)
SA 674 (A) at 676H; Development Bank of Southern Africa Ltd v Van Rensburg (supra) para
50). In the light of these decisions the doctrinal debate must, in my view, be regarded as settled
in favour of the pledge theory.’

[22] A claim ceded in securitatem debiti automatically reverts to the cedent
once the secured debt is extinguished. In such event a re-cession by the cessionary
is not required.8 In Development Bank of Southern Africa Ltd v Van Rensburg NO
and Others,9 Nienaber JA described the cedent’s reversionary interest as follows:
‘This reversionary interest, properly understood, refers to the cedent’s interest in the debtor’s
performance (ie satisfaction of principal debt by the debtor) rather than to his interest in the
cessionary’s performance (ie re-cession of the principal debt on satisfaction of the secured debt
– which is a right ex contractu against the cessionary).’10

personal right against the cessionary, arising from the agreement creating the obligation, to reclaim it once the
secured debt has been redeemed (2 Lawsa 2 ed Part 2 at 47 para 53; Grobler fn 3 para 17).
8 National Bank of South Africa Ltd v Cohen’s Trustee 1911 AD 235 at 246-247; Grobler fn 3 para 20.
9 Development Bank of Southern Africa Ltd v Van Rensburg NO and Others 2002 (5) SA 425 (SCA) para 50.
10 Cited in Grobler fn 3 para 22.

[23] The true character and consequences of a cession in securitatem debiti
depends on the intention of the parties as embodied in their agreement.11 In the
present case it is clear from the cession form that the parties entered into a
collateral cession (‘aanvullende sessie’) as envisaged in that form, save that they
did not incorporate into their agreement the provision in terms of which the cedent
would remain owner of the policy but could not derive any benefit from it unless
the cession was cancelled, and which authorised the cessionary to convert the
policy to cash without the owner’s consent.

[24] In my view, there can be no doubt that the cession is one in securitatem
debiti, founded on the pledge theory. The appellant ceded or ‘pledged’ the right
to payment of R470 000 by Liberty to his own creditor (the cessionary), as
security for a debt owed to the latter.12  This is consistent with both the cession
form and the context. The form states, in terms, that the cedent transfers the rights
to the policy to the cessionary named in the form; and that it constitutes a
temporary transfer of ownership as security for a debt in the sum of R470 000.
The right was to be retained by the cessionary until the secured debt had been
paid. Indeed, that was the evidence: the appellant continued with payment of
contributions in respect of the policy and the secured debt of R470 000 had to be
settled in full upon the death of Mrs Van Niekerk, when he became entitled to the
benefit of the policy. The appellant, as cedent, retained a reversionary interest
(satisfaction of the principal debt by Liberty) and had he settled the secured debt,
the ceded right would automatically have reverted to him. That did not happen
because the debt was still unpaid when the appellant claimed, and received, the
full benefit of the policy from Liberty.

11 Grobler fn 3 paras 11 and 17; PG Bison Ltd and Others v The Master of the High Court, Grahamstown and
Another [2001] 1 All SA 363; 2000 (1) SA 859 (SCA).
12 Lawsa fn 7 at 46 para 52.

[25] In terms of clause 9 of the policy conditions, payment of the benefit due
under the policy would be made to the beneficiary if the contract was not ceded,
but if it was, payment would be made to the cessionary. It follows from this
provision and the cession form that where, as in this case, a portion of the benefit
was ceded, the owner of the policy, the appellant, was not entitled to payment
from Liberty in the sum of R470 000 when he received it, nor at any relevant
time.

[26] Whatever the nature of the cession, the appellant’s allegation that he was
entitled to the full benefit of the policy and thus had not been enriched, because
he was the owner of all the funds, is simply wrong. His debt had been
extinguished and he received the same amount in cash from Liberty. The
submission by his counsel that Liberty did not prove that the secured debt of
R470 000 was payable to the cessionary is without substance. The appellant
admitted to his broker, Ms Smith, that the sum of R470 000 was payable to the
cessionary, when he instructed her to ensure that no higher amount would be paid
to the former. And before us his counsel conceded that there was no evidence on
record to show that the appellant had paid the secured debt.

[27] What remains is whether Liberty met the requirements of the condictio
indebiti. These are that generally, the action is only available where ownership of
money or other property is transferred by the act (negotium) of the parties; the
action lies only against the recipient of the indebitum; the transfer of money must
have taken place indebiti in the widest sense, ie there must have been no legal or
natural obligation to make it; the payment or transfer must have been made in the
bona fide and reasonable, but mistaken, belief that the debt was owing; and the
mistake must be excusable.13

13 See 9 Lawsa 2 ed (2005) at 116 para 212 and the authorities there cited.

[28] The only requirement in issue in this case is whether Liberty’s mistake in
paying the full benefit of the policy to the appellant, is excusable, in respect of
which it bears the onus.14 The requirement that the mistake must be neither slack
nor studied has been criticised by academic writers.15 In Willis Faber Enthoven
(Pty) Ltd v Receiver of Revenue and Another,16 Hefer JA, alive to the criticism by
Prof Visser,17 said:
‘But the historic nature of the remedy as one granted ex aequo et bono should be preserved and
care should be taken to avoid it being turned into a tool of injustice to the receiver of money
paid indebite. As Tindall J (as he then was) warned in Trahair v Webb & Co 1924 WLD 227
at 235 “Where a plaintiff bases his claim for relief on an equitable doctrine the court must be careful
that, in a desire to do justice to the plaintiff, an injustice is not done to the defendant”. ’

[29] Having concluded that no distinction should be drawn in the application
of the condictio indebiti between a mistake of law and mistake of fact, Hefer JA
went on to say:
‘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 where it is
not. All that need 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.’18

14 Willis Faber Enthoven (Pty) Ltd v Receiver of Revenue and Another 1992 (4) SA 202 (A).
15 See in in this regard 9 Lawsa fn 13 at 118 fn 24.
16 Willis Faber fn 14 at 224E-H.
17 D Visser Unjustified Enrichment (2008) at 171-182.
18 Willis Faber fn 14 para 42. (Emphasis added.); Yarona Healthcare Network (Pty) Ltd v Medshield Medical
Scheme 2018 (1) SA 513 (SCA) para 23.

[30] In Bowman, De Wet and Du Plessis NNO and Others v Fidelity Bank
Ltd,19 this Court considered that it was inappropriate to refine the above approach,
and held that the determination of what is an excusable error and what is not in
the circumstances of the case, involves the exercise of a value judgment.20

[31] Ms Weideman testified that the cession form had not been provided by
the appellant and that she tried, unsuccessfully, to find it on the Blueprint system,
which reflected only the name of the cessionary and the type of cession as
‘collateral’. Ms Weideman and Ms Mngoma became aware of the terms of the
cession and the amount ceded, when they received a copy of the cession form
from Ms Neethling. The cession had been registered on the Blueprint system by
another department within Liberty. At best for the appellant, Ms Weideman or
Ms Mngoma should have taken steps to establish the true state of affairs from that
department, before paying out the full benefit of the policy. For this reason,
Liberty’s counsel conceded that there was a degree of slackness on its part.

[32] At some point before the death of his mother the appellant had been
informed by Liberty that the full benefit would be paid to the cessionary, and as
stated earlier, asked Ms Smith to ensure that only R470 000 would be paid in
terms of the cession. In an email on 1 June 2015 she informed the appellant as
follows:
‘Die sessie se bedrag is nooit verander nie alhoewel dit voorkom asof iemand probeer het om
dit te verander. Daar is nog steeds ‘n kollaterale sessie op die polis.
Ons is nog besig om te kyk wat hier aangegaan het en ek sal in verbinding wees sodra ek
antwoorde het. Op hierdie stadium kan jy rustig wees dat die res van die versekerde bedrag
nog steeds aan jou sal uitbetaal [word].’21

19 Bowman, De Wet and Du Plessis NNO v Fidelity Bank Ltd 1997 (2) SA 35 (A).
20 Bowman fn 19 at 44C-E.
21 Emphasis added. Translation:
‘The amount of the cession has never been changed although it appears that somebody has tried to change it.
There is still only a collateral cession on the policy.

[33] It took Ms Smith some two months to get the relevant information from
Liberty. On 13 July 2015 she forwarded an email that she had received from
Liberty to the appellant, to which the cession form was attached, and confirmed
that the amount ceded was R470 000. The appellant thanked Ms Smith in an email
on 15 July 2015, stating that the issue had been one of grave concern to him. At
all material times he knew that he was not entitled to the full proceeds of the
policy, and never disputed that the sum of R470 000 was the amount of the
secured debt.

[34] Thus, when the appellant completed the claim form, he was fully aware
of the following facts:  the cession was still in existence; he had not paid the
secured debt; and he was not entitled to payment of the full benefit of the policy.
This is underscored by Ms Smith’s evidence that when she discussed repayment
of the R470 000 with the appellant, it was clear that he knew that the amount paid
to him was incorrect. What is more, in claiming the full benefit, he declared, inter
alia, that what was stated in the claim form was true, and that he had not withheld
any material fact from Liberty. Ms Weideman said that she had read that
declaration, the appellant did not submit the cession form and the full benefit was
paid to him. This conduct by the appellant, in my judgment, directly contributed
to the decision to pay him the full benefit of the policy. Given the particular
circumstances of this case, the overpayment by Liberty, is in my view excusable.

[35] Finally, there is the submission by the appellant’s counsel that he should
not be held liable for the costs of the appeal. The appellant had ample opportunity
to repay the money but refused to do so. He defended the action on the unfounded
basis that the cessionary was not entitled to payment. His reasons for not repaying

We are busy with an investigation to see what precisely happened here and I will be in touch as soon as I have
answers. At this stage you can rest assured that the remainder of the insured amount will still be paid to you.’

the money were unrelated to the action. There is no reason why costs should not
follow the result.

[36] The following order is made:
The appeal is dismissed with costs.

__________________

A Schippers

Judge of Appeal

Appearances:

For Appellant:

Morne Coetzee
Instructed by:

Morne Coetzee Attorneys, Pretoria

Lovius Block Inc, Bloemfontein

For Respondent:

J F Steyn
Instructed by:

Gerings Attorneys, Johannesburg

Rossouws Attorneys, Bloemfontein