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LESOTHO
IN THE COURT OF APPEAL OF LESOTHO
HELD AT MASERU C OF A (CIV) NO. 45/2023
CIV/T/799/18
In the matter between:
MOSELE DIBAKGA APPELLANT
and
MATOKELO NCHELA 1ST RESPONDENT
LAND ADMINISTRATION AUTHORITY 2ND RESPONDENT
CORAM: DAMASEB AJA
MUSONDA AJA
VAN DER WESTHUIZEN AJA
HEARD: 23 APRIL 2025
DELIVERED: 2 MAY 2025
FLYNOTE
Land Law—Unjust enrichment—Bona fide possessor—Compensation for improvements—Measure of enrichment—Retention of rental income—Set-off—Discretion of the court—Limits of discretion—Condonation—Whether late appeal permissible.
The appellant, owner of undeveloped land, instituted ejectment proceedings against the respondent who had, in mistaken but bona fide belief of ownership, taken possession and constructed rental flats. The District Land Court recognised the respondent’s status as a bona fide possessor and awarded her an improvement lien. The High Court subsequently granted her monetary compensation assessed on the basis of the open market value of the improvements, including flats, water, electricity, and fencing. It declined to deduct rental income earned by the respondent from the compensation awarded. On appeal, the appellant contended that compensation ought to have been limited to actual construction costs and that rental income should be set off against the award.
Held: Appeal allowed in part.
Compensation for useful improvements by a bona fide possessor is limited to the lesser of the actual expense incurred or the owner's enrichment. A court retains equitable discretion in determining compensation, but such discretion must be judicially exercised and supported by evidence—Fletcher & Fletcher v Bulawayo Waterworks Co Ltd (1898) 15 SC 1, applied.
The High Court erred in awarding compensation based on unproven market value elements (namely electricity, water, and fencing) and thereby misapplied the enrichment principle. The onus was on the possessor to prove actual enrichment; failure to do so precluded recovery—Standard Bank Financial Services Ltd v Taylan (Pty) Ltd 1979 (2) SA 383 (C), considered.
The court below properly rejected the contention that rental income should be deducted from the improvement compensation. The principle that civil fruits derived from bona fide improvements are not subject to set-off remains binding—Makotoko and Another v Lesotho Development and Construction (Pty) Ltd C of A (CIV) 28/2013, followed.
Although the appeal was lodged out of time, condonation was granted due to a satisfactory explanation and the existence of reasonable prospects of success on one ground.
Appeal partially allowed; High Court order substituted with an award of M56,272.00 as compensation for proven construction costs. No order as to costs in either court.
JUDGMENT
P.T. DAMASEB AJA
Background
[1]
The genesis of the dispute in this case is a misunderstanding concerning land ownership. The respondent, Matokelo Nchela, acting under a bona fide but mistaken belief that she was the owner of site No. 11302-081 situated in Maseru, took possession of the property and proceeded to develop it. At the time, the site was undeveloped. Relying on what she believed to be her lawfully acquired title, the respondent constructed four flats on the property and allegedly also installed utility infrastructure such as electricity and water, and fenced the property.
[2]
Nchela’s possession was later challenged by the appellant, Mosele Dibakga, the lawful owner of the property, who initiated ejectment proceedings in the District Land Court.
Proceedings in the District Land Court
[3]
In proceedings before the District Land Court, the appellant sought the respondent’s eviction. In defence and by way of a counterclaim, Nchela (the respondent) pleaded that she was a bona fide possessor and claimed a lien over the property on condition
that she was compensated for the ‘necessary and useful’ improvements she effected to the property.
[4]
The District Land Court recognised the respondent as bona fide possessor and granted her a lien over the property - entitling her to remain in possession until she was compensated for the improvements she made to the land.
[5]
The District Land Court accepted as established that the respondent was not fraudulent or malicious in her possession and had undertaken substantial improvements to a previously undeveloped parcel of land.
[6]
The District Land Court concluded that under these circumstances, the respondent was entitled to compensation as a bona fide possessor, in accordance with the equitable doctrine of unjust enrichment. It accordingly granted her a lien over the property.
Proceedings in the High Court
[7]
In the wake of her success in the District Land Court, the respondent instituted proceedings in the High Court for monetary compensation in the amount of M124 672.00. Her claim was predicated on what she alleged to be the open market value of the property arising from the improvements she made on the property. The possessor led the evidence of an expert property valuer who
opined that the constructed flats added M94 720.00 in value to the land, while the land’s value was M29 952.00.
[8]
The appellant opposed the claim on several bases. She maintained that compensation should be limited to the actual expenses incurred by the respondent and not the market value of the improved property. In support of her defence, she presented evidence from a quantity surveyor who calculated the actual construction cost of the flats at M56 272.68.
[9]
The appellant also pleaded that any amount awarded in compensation should be reduced by the rental income collected by the respondent over the period of her occupation−amounting to M72 000.00−as she had already derived substantial benefit from the property. She further contended that the respondent was not entitled to include the land value in her compensation claim, as the land remained her property and could not lawfully form part of the award.
High Court’s findings
[10]
The High Court was called upon to resolve two main questions: (i) the appropriate method for assessing compensation to a bona fide possessor for improvements, and (ii) whether the rental income derived by the possessor should be deducted from such compensation.
[11]
Mokhesi J correctly stated the applicable principle as follows:
‘[4] THE LAW
Parties are on common ground that the plaintiff was a bona fide possessor of the site in question, and that when she possessed it was undeveloped. She then constructed four rental flats thereon, installed water and electricity, and erected parameter fence. In order to determine the amount of compensation due to the applicant for the improvements she made on the site, comparison has to be made between the market value of the whole property (ie the flats and the land) with the market value of the land without the flats (Rubin v Botha 1911 AD 568 at 578…. However, this is not a hard and fast rule as the court is endowed with a discretion to award compensation for which equity and fairness of each case will cry out for.’
[12]
Therefore, the court a quo was alive to the fact that as to the amount it could award, it enjoyed a discretion in the matter. That the court a quo had discretion is not I doubt.1
[13]
Against that backdrop, Mokhesi J held that ‘the plaintiff did not adduce evidence of the actual expenditure she incurred in developing the site’ but
‘…relied on the ‘enhanced market values of the site after the improvements, which placed the market value of the whole property (land and improvements) at M124 672.00. The value of the flats being M94 720.00 and land M29 952.00. On the other hand the defendant adduced an estimate of the expenses the plaintiff incurred in making the improvements, but this expense did not include fencing, installation of
1 Meyer’ Trust Trustee v Malan 1911 TPD at 568; Fletcher’s case supra at 656-657; Lechoana v Cloete 1925 AND 536 at 547; Lodge v Modern Motors Ltd 1957 (4) SA 103 (SR) at 120; Wynland Construction (Pty) Ltd v Ashley-Smith 1985 (1) SA 534 (C) at 537-538 and ABSA Bank Ltd t/a Bankfin v Stander t/a CAW Panelkloppers 1998 (1) SA 939 (C) at 957.
electricity and water, while these were covered in the enhanced value determination by the plaintiff’s valuers. The defendants’ estimate for erecting the building is M56 272.68. The problem with the plaintiff’s claim is that she does not discount the value of the land from the amount of compensation…because the value of land cannot be the improvement for purposes of this enquiry.’
[14]
Mokesi J concluded:
‘[9] Applying the formula …in Fletcher’s case, the value of the whole property is M94 720.00. This value was not disputed to be the correct value of the flats. This value juxtaposed with the defendant’s estimate of M56 272.00 which does not account for parameter fencing, water and electricity installation associated expenses, to my mind represents a fair value of the improvement.
[10] In the result the following order is made:
a) That the defendant pays the plaintiff an amount of M94 720.00 as compensation for the improvements made at plot NO. 11302-081.
b) The plaintiff is awarded the costs of suit.’
[15]
Regarding the rental income, the High Court rejected the appellant’s contention that such income should be set off against compensation. The learned judge a quo invoked the principle established in Fletcher & Fletcher V Bulawayo Waterworks2, that civil fruits derived from improvements made by a bona fide possessor are not to be deducted from compensation.
2 Fletcher and Fletcher v Bulawayo Waterworks Co Ltd 1915 AD 636.
The appeal
[16]
The appellant noted the appeal on two grounds. First, that the High Court erred in not limiting the possessor’s claim to actual costs incurred as opposed to the open market valuation of the improved land.
[17]
The second ground is that the High Court erred in rejecting the claim that the respondent would be over-compensated if the rental income were not off set against the compensation due to her, particularly in light of the common cause fact that she had no legal title to the land.
Parties’ submissions
Appellant
[18]
On appeal, the appellant sought condonation for the late filing of the appeal, attributing the delay to difficulties caused by the COVID-19 pandemic which resulted in her legal practitioner of record receiving the judgment quite late.
[19]
On the merits, she reiterated that compensation should be limited to actual construction costs as verified by a quantity surveyor, rather than the open market value. She further argued that the respondent’s expert report was speculative and failed to prove the actual expenses incurred.
[20]
She also sought to impugn the continued retention of rental income by the respondent post-judgment, arguing that once the
court found she had no title, she could no longer legally retain the “fruits” of the property and that a bona fide possessor is entitled to keep fruits acquired before litigation, but must account for them once legal title is denied.
Respondent
[21]
The respondent opposed the condonation application, arguing that the appellant had failed to provide a satisfactory explanation for the delay and had not demonstrated prospects of success on appeal. It was contended on behalf of the respondent that the High Court had correctly applied established principles governing compensation for bona fide possessors, including the market value method as approved in Rubin v Botha3 and applied in Makotoko and Another v Lesotho Development and Construction (Pty) Ltd.4
[22]
She rejected the notion that rental income should be deducted, emphasizing that the legal and equitable framework governing unjust enrichment does not support such a deduction. The respondent also refuted the appellant’s invocation of constitutional rights under section 17 of the Constitution of Lesotho, arguing that this was not properly raised and was inapplicable to the facts.
Issues on appeal
[23]
The appeal raises three key issues for determination.
3 1911 AD 568.
4 (C of A (CIV) 57 of 2013) [2014] LSCA 28 (24 October 2014).
a.
Condonation application
[24]
A preliminary issue arises as to whether the appellant has satisfied the legal requirements for the grant of condonation for the late filing of the appeal. As the appellant claims prospects of success in her condonation application, this preliminary issue will be considered together with the merits.
[25]
The other two issues are:
b.
Whether the High Court was correct to add the improvements for electricity, water and fencing?
c.
Whether the High Court erred in refusing to deduct rental income?
The law
[26]
Under Roman-Dutch law, the basis of liability of a property owner to a bona fide possessor who incurs expenses in respect of the owner's property arises from the principles of unjust enrichment.
[27]
According to these, a person who incurs expenses in managing another’s affairs without their knowledge or consent, believing them to be their own, may seek compensation if certain conditions are met. These include:
a)
Ignorance of ownership: The gestor (plaintiff) must have managed the affairs of another in the mistaken but bona fide belief that they were managing their own affairs
(Standard Bank Financial Services Ltd v Taylan (Pty) Ltd 1979 (2) SA 383 (C)).
b)
Intent to benefit: The possessor must have had the intention (animus negotia aliena gerendi) to benefit the owner and not merely themselves (LAWSA Vol 17; Odendaal v Van Oudtshoorn 1968 (3) SA 433 (T)).
c)
Unjust enrichment: The property owner must have been enriched at the expense of the bona fide possessor, and the possessor must have been correspondingly impoverished (United Apostolic Faith Church v Boksburg Christian Academy 2011 (6) SA 156 (GSJ); LAWSA Vol 9, para 224).
d)
Reasonableness and necessity: The management or improvement must have been reasonably undertaken, and the expenses must have been necessary or useful (Maritime Motors (Pty) Ltd v Von Steiger 2001 (2) SA 584 (SE)).
[28]
The underlying rationale of these principles is equity: no one should be unjustly enriched at the expense of another. The enrichment must be without cause (sine causa) and quantifiable, and the onus rests on the possessor to prove enrichment of the owner to the possessor’s impoverishment.
[29]
The measure of compensation for the improvements brought about by a bona fide possessor depends on whether they are ‘necessary, useful or luxuries’. The differences are the following:
Necessary Expenses (impensae necessariae)
[30]
These are costs incurred to preserve or protect the property from damage or depreciation. The key features and measure are:
a.
Full reimbursement of actual expenses.5
b.
Limited only to the extent of the owner's enrichment.6
c.
No compensation for the gestor's own labour.7
d.
The plaintiff must prove that the property would have depreciated but for the repairs.8
Useful Expenses (impensae utiles)
[31]
These improve the property and increase its value. The compensation is:
(i)
The lesser of the actual expenses incurred or the amount by which the value of the property has increased.9
(ii)
Subject to the same enrichment limitation – the owner cannot be liable beyond actual benefit received.10
(iii)
The onus is on the plaintiff to prove both the actual expenses and the enrichment.11
(iv)
Finally, as correctly recognised by Mokhesi J, the court retains discretion to award compensation for useful improvements, including adjusting the amount deemed appropriate in the circumstances.
5 Voet 6.1.36; Lechoana v Cloete 1925 AD 536.
6 LAWSA Vol 9, para 224.
7 Harrisen v Marchant 1941 WLD 16).
8 Naidoo v Sanbonani Express Freight 2008 (5) SA D.
9 Fletcher & Fletcher v Bulawayo Waterworks Co Ltd 1915 AD 636.
10 Rhoode v De Kok 2013 (3) SA 123 (SCA).
11 United Apostolic Faith Church v Boksburg Christian Academy 2011 (6) SA 156 (GSJ).
Luxurious expenses (impensae voluptuariae)
[32]
These are decorative or prestige-improving expenses. They are not reimbursable unless:
(i)The owner elects to retain the improvement, or
(ii)The market value increases and the property is to be sold.
First ground of appeal
[33]
The first ground of appeal states that the court a quo ‘erred and misdirected itself in deciding that the proper method of compensation is ‘evaluation method’ rather than ‘quantity survey method’. It is not clear what is meant by ‘evaluation method’ but the context in which the appeal arises makes clear that the appellant’s grievance is that the court a quo compensated the respondent based on the market value proposition advanced in the High Court.
Discussion
[34]
The improvements in the present case concern buildings constructed on the appellant’s property. Although the respondent’s suggestion in the District Land Court was that the improvements were both ‘necessary and useful’, all indications are that the improvements to the appellant’s land were treated by the parties and the High Court as ‘useful expenses’ in respect of which the measure of damages is – ‘the lesser of the actual expenses
incurred or the amount by which the value of the property has increased’.12
[35]
The respondent’s stance before Mokhesi J was that she was entitled to the ‘market value’ of the improved property. To that end, she led the evidence of an expert witness supposedly to prove the market value. The appellant on the other hand, maintained that the measure of compensation was actual expenses incurred.
[36]
In the High Court, the respondent claimed the amount of M124 672.00 and it is clear that she alleged that to represent the market value of the land. From that figure, the court a quo discounted what it found proved as the value of the land being the amount of M29,570.00. The balance of M94,720. 00 therefore, on the respondent’s version, was the market value of the improved land. In awarding the respondent M94, 720. 00, Mokhesi J in effect granted the respondent the ‘market value’ of the land which he claimed – a measure of compensation applicable to necessary improvements.
[37]
Although the court had a discretion, in my view, the learned judge did not appreciate the important qualification in the Fletcher case that ‘inasmuch as the possessor is to be compensated for the expense to which he has been put, he can in no circumstances recover more than the amount of such expenses’.
12 Fletcher & Fletcher v Bulawayo Waterworks Co Ltd 1915 AD 636.
[38]
Moreover, as owner, the appellant could not be liable to the possessor beyond the actual benefit received,13 the respondent bearing the onus to prove the amount by which the value of the land increased.
[39]
The total value of the expenses incurred to construct the flats by the bona fide possessor (M56 272.00) was common ground between the parties as representing either the expenses incurred or the improved value of the land. The value of the electricity, water and fencing were not admitted by the appellant. The respondent therefore bore the onus in respect of them. Thus, the difference between M94 720.00 and the undisputed amount of M56 272.00 (M29 592.00) was not admitted by the appellant and needed to be proved.
[40]
The respondent’s expert witness did not itemise and assign values to the various elements that made up the original amount of M124 672.00 claimed by the respondent as the ‘enhanced market value’. Certainly, he did not itemise electricity, water and fencing.
[41]
By only deducting the value of the land and leaving intact the amount claimed by the respondent as the market value of the land, the court a quo in effect granted the respondent’s claim for the market value of the land. The court could not, in the exercise of its discretion, award amounts that had not been proved. Discretion has its limits: it must be exercised judicially. It is not judicially
13 Rhoode v De Kok 2013 (3) SA 123 (SCA).
exercised if it is not founded either in reason or the facts established in the case.
[42]
It is a misdirection for the learned judge to have found that ‘the whole value of the whole property is M94 720.00 [and that it] was not disputed to be the correct value of the flats.’ Truth is that the appellant had not admitted the quantum in respect of water, electricity and the fencing and the quantum for those items was not proved.
[43]
On a proper interpretation of Mokhesi J’s reasoning (considering his reliance on Fletcher), the learned judge a quo rejected the respondent’s claim to compensation for the market value but in the manner the award was made, the learned judge in effect granted the respondent’s market value claim.
[44]
As I have demonstrated, the respondent’s expert made no effort to itemise and assign values to what he said were the market values of the improvements. As plaintiff then, the respondent bore the burden of proof. Absent such proof, the learned judge’s finding that the respondent was entitled to an additional M29 952.00 in respect of electricity, water and fencing is a material error of law.
[45]
The amount of M29 952.00 should not have been added by the learned judge to the amount of M56 272.68. The first ground of appeal should therefore be allowed.
Second ground of appeal
[46]
What remains is the appeal in respect of the court a quo’s rejection of the appellant’s contention that the rentals that accrued to the respondent’s estate from his presence on the property should be offset from any amount due for the improvements.
[47]
The High Court rejected the proposition that the rental should be offset from any amount due for the improvements based on binding precedent of this Court: Makotoko and Another v Lesotho Development and Construction (Pty) Ltd.14
[48]
Mr Kao for the appellant relied on the South African High Court decision in Remhoogte CC and Others v The Jacob Durr Trust and Others15 and urged us, as was supposedly done in that case, to develop the common law of Lesotho consistent with the constitutional right of the owner of the land not to be arbitrarily expropriated of his property. To do so, Mr Kao accepted, we would be overruling a decision of this Court which points in the opposite direction.
[49]
We decline the invitation to ‘develop the common law’ when the full implications of doing so have not been properly tested in the High Court exercising its constitutional jurisdiction.
[50]
The second ground of appeal therefore fails.
14 C of A (CIV) 57/2013 [2014] LSCA 28 (24 October 2014 para 10.
15 Remhoogte CC and Others v The Jacob Durr Trust and Others (A23/2020) [2021] ZAMPMHC 14 (8 April 2021)
Condonation application
[51]
Considering that the appellant has demonstrated prospects of success on one ground of appeal, and having furnished a satisfactory explanation for the non-compliance, condonation is granted for the late noting of the appeal.
Costs
[52]
Since the parties have achieved success and suffered failure in equal measure, there is no order of costs.
Order
1.
The appeal succeeds in part only, condonation is granted, the appeal reinstated and the order of the High Court set aside and replaced as follows:
‘The defendant must pay to the plaintiff the amount of M56,272 as compensation in full and final discharge of the plaintiff’s improvement lien over plot No. 11302-081. There is no order of costs’.
2.
There is no order of costs in the appeal.
______________________________
P.T DAMASEB
ACTING JUSTICE OF APPEAL
I agree:
_____________________________
P. MUSONDA
ACTING JUSTICE OF APPEAL
I agree:
_____________________________
J. VAN DER WESTHUIZEN
ACTING JUSTICE OF APPEAL
FOR THE APPELLANT: ADV E.M KAO
FOR THE RESPONDENT : ADV T LETSIE