Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5) SA 193 (SCA)

Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5) SA 193 (SCA)

Issue: Whether a party who has made a payment to another party under a mistake of fact is entitled to recover the payment, even if the other party has changed their position in reliance on the payment.

Facts:

Kudu Granite Operations (Pty) Ltd (Kudu) and Caterna Ltd (Caterna) were joint venture partners in a granite mining operation in Zimbabwe. In 1997, the parties entered into a written agreement for the sale by Kudu to Caterna of its 49% shareholding and its loan account in the joint venture.

The agreement provided that the purchase price would be paid in two installments, the first installment to be paid on signing of the agreement and the second installment to be paid on transfer of the shares. The agreement also provided that Kudu would be entitled to retain certain materials from the joint venture operation.

Kudu mistakenly believed that the purchase price was payable in full on signing of the agreement. Kudu therefore paid the full purchase price to Caterna on signing of the agreement.

Kudu subsequently discovered its mistake and demanded that Caterna return the excess payment. Caterna refused to return the excess payment on the ground that it had changed its position in reliance on the payment. Caterna had used the excess payment to pay off debts that it owed to other parties.

Kudu then sued Caterna for the return of the excess payment.

Held:

The Supreme Court of Appeal (SCA) held that Kudu was entitled to recover the excess payment. The SCA reasoned that a party who has made a payment to another party under a mistake of fact is entitled to recover the payment, even if the other party has changed their position in reliance on the payment.

The SCA applied the principle of the law of restitution, which is based on the principle of unjust enrichment. The SCA held that Caterna had been unjustly enriched by the excess payment and that Kudu was therefore entitled to recover the excess payment.

The SCA also held that the fact that Caterna had changed its position in reliance on the excess payment was not a bar to Kudu's claim. The SCA reasoned that the risk of a mistake of fact should lie with the party who has received the benefit of the payment, rather than with the party who has made the payment under a mistake.

Key Facts:

• Two parties entered into an agreement for the sale of shares.
• The seller mistakenly paid the full purchase price on signing of the agreement, when the agreement provided for the purchase price to be paid in two installments.
• The seller discovered its mistake and demanded that the buyer return the excess payment.
• The buyer refused to return the excess payment on the ground that it had changed its position in reliance on the payment.
• The seller sued the buyer for the return of the excess payment.

Reasons:

The SCA held that the seller was entitled to recover the excess payment, even though the buyer had changed its position in reliance on the payment. The SCA applied the principle of the law of restitution, which is based on the principle of unjust enrichment. The SCA held that the buyer had been unjustly enriched by the excess payment and that the seller was therefore entitled to recover the excess payment.

The SCA also held that the fact that the buyer had changed its position in reliance on the excess payment was not a bar to the seller's claim. The SCA reasoned that the risk of a mistake of fact should lie with the party who has received the benefit of the payment, rather than with the party who has made the payment under a mistake.

Conclusion:

The SCA's decision in Kudu Granite Operations (Pty) Ltd v Caterna Ltd 2003 (5) SA 193 (SCA) is a significant case in South African law. The SCA's decision clarifies the law relating to the right of a party to recover a payment that has been made under a mistake of fact, even if the other party has changed their position in reliance on the payment.