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[2021] ZAWCHC 127
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Brentmark (Pty) Ltd and Another v Puma Energy South Africa (Pty) Ltd (22235/19) [2021] ZAWCHC 127; [2021] 4 All SA 106 (WCC) (5 July 2021)
IN THE HIGH COURT OF
SOUTH AFRICA
WESTERN
CAPE DIVISION, CAPE TOWN
REPORTABLE
CASE
NO: 22235/19
In
the matter between:
BRENTMARK
(PTY) LTD
First
Plaintiff
BRENT
OK (PTY) LTD
Second
Plaintiff
and
PUMA
ENERGY SOUTH AFRICA (PTY)
LTD
Defendant
Bench:
P.A.L. Gamble, J
Heard:
2 February 2021
Delivered:
5 July 2021
This
judgment was handed down electronically by circulation to the
parties' representatives via email and release to SAFLII. The
date
and time for hand-down is deemed to be 10h00 on Monday 5 July 2021.
JUDGMENT
GAMBLE,
J:
INTRODUCTION
[1]
Is it wrongful for a party (A) who has
contracted with another party (B) to cause pure economic loss to a
non-contracting party
(C) through conduct that constitutes a breach
of the contract between A and B? That, in general terms, is the
question that
must be answered in this exception taken by the
defendant (“Puma”) to a delictual claim brought against
it by the second
plaintiff (“OK”) for damages for pure
economic loss.
[2]
The subject of the dispute is a service
station and adjoining convenience store at 51 Durban Road, Mowbray,
located on premises
owned by Mowbray Caledonian Court (Pty) Ltd
(“Caledonian”). The service station was operated by
the first plaintiff
(“Brentmark”), which sold petroleum
products supplied to it by Puma, while the convenience store was
operated by OK.
As might be expected, there is a suite of
written agreements in place that govern the relationships between the
parties.
The content of the various agreements is
uncontroversial and can be dealt with briefly.
BACKGROUND
[3]
As of June 2015, the premises were being
leased from Caledonian by Brent Oil (Pty) (“Brent Oil”),
for purposes of conducting
a service station and convenience store
business thereon. On 19 June 2015 Brentmark concluded a binding
agreement of sub-lease
with Brent Oil, with a view to Brentmark
conducting a similar business on the premises. The duration of
the sub-lease was
to be 9 years and 11 months. For the sake of
convenience, this will be referred to as “the Brentmark
sub-lease”.
[4]
It was an express term of the Brentmark
sub-lease that it was subject to a further agreement, to be concluded
between Brentmark
and Brent Oil, for the supply of petroleum products
by the latter to Brentmark. That condition was fulfilled on 19
June 2015,
when those parties also concluded a so-called “dealer
agreement”, to which further reference will be made later.
[5]
The shareholding in both Brentmark and OK
was held in equal shares by the Saman Trust and LMT Investments (Pty)
Ltd. While
the particulars of claim do not reflect who the
guiding minds of the two plaintiffs were, the equal shareholding in
each company
suggests a material degree of commercial interest
between the two entities trading on the premises. Further, the
Brentmark
sub-lease records that it was represented in the conclusion
of that agreement by Mr. Andrew Bradley, and Brent Oil by Mr. Phillip
Robinson, and in the particulars of claim it is alleged that the same
persons represented the parties to the dealer agreement.
[6]
Pursuant to the Brentmark sub-lease and the
dealer agreement, Brentmark –
6.1.
commenced operating a fuel filling station
at the premises;
6.2.
purchased petroleum products from Brent
Oil, which it sold to customers of the filling station; and
6.3.
procured that the convenience store be
operated by OK at the premises.
[7]
On 18 September 2015 Brent Oil changed its
name to that of the defendant – Puma Energy South Africa (Pty)
Ltd (“Puma”).
[8]
The convenience store business was
conducted by OK in terms of a further sub-lease concluded between it
and Brentmark. For
the sake convenience, this will be referred
to as “the BrentOK sub-lease”. Brent Oil (and
subsequently Puma)
was not a party to the BrentOK sub-lease, while OK
was not a party to the dealer agreement or the Brentmark sub-lease.
ALLEGED
ONEROUS TERMS OF DEALER AGREEMENT
[9]
Brentmark contends that the pricing
structure of the dealer agreement, pursuant whereto it was obliged to
purchase petroleum products
from Puma, was fixed and not subject to
any adjustment in order to counter the adverse effects of inflation
and unforeseen fluctuations
in economic and market conditions.
[10]
Brentmark contends further that as a
consequence of that pricing structure, the prices of the petroleum
products it was entitled
to sell under the dealer agreement became
increasingly uncompetitive and commercially unviable for it. To
that end, says
Brentmark, it attempted to persuade Puma to agree to a
revised pricing structure to replace a structure which, it says, had
become
obsolete and archaic.
[11]
However, says Brentmark, notwithstanding
Puma’s acknowledgement that the existing pricing structure was
obsolete and commercially
unviable, it refused to renegotiate that
part of the dealer agreement.
SALE
OF BUSINESSES
[12]
Brentmark alleges that in order to avert
its potential financial demise, which would have been inevitable if
it had remained locked
in to the dealer agreement under the existing
pricing structure, it took steps to investigate the sale of both the
filling station
business and that of the convenience store. It
says that Puma was kept informed of these negotiations at the time.
[13]
In the result, on 1 July 2018, and by way
of an agreement for the sale of the shareholding in each of the
entities –
13.1
Brentmark sold the filling station business to JR Petroleum (Pty) Ltd
(“JR Pet”) for the amount
of R2,5m, and
13.2
OK sold the convenience store business to
JR Convenience Foods (Pty) Ltd (“JR Foods”) for the
amount of R4m.
[14]
Under the Brentmark sub-lease, the sale of
the filling station business to JR Pet required the written consent
of Puma and, to this
end, during August 2018, Brentmark approached
Puma. However, Puma refused to furnish its consent.
ALLEGED
BREACH OF CONTRACT
[15]
The dealer agreement contained a so-called
‘good faith clause’, which was binding on the parties.
‘
24.
GOOD FAITH
In
their dealings with each other and in implementation of this
agreement, the parties undertake to observe the utmost good faith
and
to give full effect to the intent and purpose of this agreement and
neither to do anything nor to refrain from doing anything
which might
in any way prejudice or detract from the rights, property or interest
of any of them.’
[16]
For reasons which will be canvassed more
fully hereunder, Brentmark alleges that Puma breached the provisions
of this clause, when
it refused to agree to the sale of the filling
station business by Brentmark to JR Pet. After due notice had
been given to
Puma to remedy its breach, Brentmark gave notice of the
cancellation of the dealer agreement on 5 September 2018. The
effective
date of the cancellation was to be 31 October 2018.
[17]
Brentmark alleges that subsequent to such
notice of cancellation, the parties entered into discussions during
October 2018. The
outcome thereof, says Brentmark, was that the
termination of the Brentmark sub-lease would be postponed until 31
January 2019,
to avoid the sub-lease terminating during the 2018
Festive Season when an increase in turnover was anticipated.
[18]
Brentmark says that during the period
between October 2018 and the end of January 2019, Puma took certain
commercial steps that
ultimately led to the demise of its
filling-station business. As a consequence, Brentmark says it
was forced to close the
filling-station business, and the convenience
store business of OK was similarly forced to close.
ACTION
PROCEEDINGS
[19]
On 11 December 2019, Brentmark (as first
plaintiff) issued summons against Puma for damages for breach of
contract. Its damages
were quantified as R2,5m – the loss
allegedly sustained as a result of the closure of the filling station
business. OK
joined in those proceedings as the second
plaintiff, and independently sought delictual damages in the amount
of R4m for the losses
it says it sustained as a consequence of the
forced closure of the convenience store business.
[20]
On 3 June 2020 Puma gave notice to
Brentmark and OK, in terms of Rule 23(1), that it intended noting an
exception against both the
contractual claim of Brentmark and the
delictual claim brought by OK. The response of each of the
plaintiffs was to seek
to amend their particulars of claim. The
issue of the potential exception to Brentmark’s claims was
resolved through
the unopposed amendments which it subsequently
effected to its particulars of claim. However, Puma persisted
in its objection
to OK’s claims, notwithstanding the attempted
amendment thereof.
[21]
In the result, this Court must determine
both Puma’s exception to, and OK’s notice of intention to
amend, the particulars
of claim. The matter was heard virtually
on 2 February 2021. Brentmark and OK were represented by
Adv.P.de B. Vivier
SC, and Puma by Adv. M. van Kerckhoven. The
Court is indebted to counsel for their helpful heads of argument and
oral submissions.
THE
MATERIAL ALLEGATIONS MADE BY OK IN THE PARTICULARS OF CLAIM
[22]
The factual matrix relevant to both claims
was referred to as Section A in the particulars of claim, while
Brentmark’s claim
was termed Section B. The allegations
made by Brentmark which impact on OK’s claim will be referred
to in general hereunder.
It is necessary, at this stage, only
to recite OK’s claim in full, in which, for the sake of
convenience, I will substitute
the relevant parties’ names.
‘
C.
The Second Plaintiff’s claim
62.
[OK] conducted the convenience store in a section of the premises
which it rented from [Brentmark], in terms of a sub-lease
which had
been entered into between [Brentmark] and [OK] for such purpose
(hereinafter referred to as “
the
BrentOK sub-lease”
).
63.
[Brentmark] had duly acquired Brent-Oil’s prior written consent
to enter into the BrentOK sub-lease, as required by clause
12.12.1 of
the sub-lease between [Brentmark] and [Puma] (hereinafter referred to
as “
the Brentmark sub-lease”
).
64.
The continued existence of [OK’s] convenience store as a
successful business enterprise was contingent on the continued
existence of the filling station business (and [Brentmark’s]
right to occupy the premises in terms of the Brentmark sub-lease).
65.
The convenience store was [OK’s] only business and its sole
source of income.
66.
[Puma] was at all times aware of the facts and circumstances set out
in paragraphs 64 and 65 above. It knew, alternatively
ought to
have known, that the cancellation of the dealer agreement and the
Brentmark sub-lease would herald the end of [OK’s]
convenience
store business at the premises.
67.
The manner in which [Brentmark] was eventually forced to cancel both
the dealer agreement and the Brentmark sub-lease, as described
in
section A above, was not foreseeable by [OK] when it entered into the
BrentOK sub-lease with [Brentmark] with a view to operating
the
convenience store.
68.
Neither was [OK] in a position to avoid such occurrence, or to
protect its interests by means of appropriate contractual
stipulations
with [Puma], against the adverse consequences of the
forced cancellation of the said contracts, which underpinned [OK’s]
convenience store business.
69.
In the premises, considerations of public and legal policy dictate
that Puma owed a legal duty to [OK] to avoid that [OK] would
suffer
economic loss, as a consequence of the cancellation by Brentmark of
the dealer agreement and the Brentmark sub-lease, due
to Puma’s
breach of contract.
70.
[Puma] breached such legal duty negligently by failing to take
reasonable steps to prevent that [OK] suffer economic loss as
described in para 71 below.
71.
As a consequence of [Puma’s] aforesaid breach of its legal
duty, [OK] suffered pure economic loss, in that –
71.1
it was denuded of the opportunity to sell the convenience store
business at a time when its value was
at least R4 million;
71.2
such value was subsequently eroded, as a further consequence of
[Puma’s] wrongful conduct, as
set out in paragraphs 41 to 48
above.
72.
[OK’s] patrimonial position has, as a consequence of [Puma’s]
aforesaid wrongful conduct, been reduced with at least
R4 million.
73.
In the premises, [OK] suffered damages in an amount of R4 million,
which it is in law entitled to claim from [Puma].’
THE
EXCEPTION TO CLAIM C
[23]
As already stated, Puma filed a notice in
terms of Rule 23(1) affording both plaintiffs an opportunity to amend
their respective
claims on the basis that Puma contended that they
were both vague and embarrassing, and/or lacked averments necessary
to sustain
their causes of action. The notice recited three
grounds of complaint, of which only the second ground was relevant to
OK’s
claim.
[24]
In response thereto, Brentmark and OK gave
notice in terms of Rule 28 that they intended amending their
respective claims. The
proposed amendment in respect of the
first and third grounds of complaint addressed Puma’s
objection, but not the second,
in respect whereof Puma gave notice of
opposition under Rule 28(3). In the result, this judgment is
required to consider-
24.1
the validity of the exception noted in the
second ground of complaint raised by Puma in respect of Claim C; and
24.2
OK’s intended amendment to that claim
and the opposition thereto.
THE
EXCEPTION TO OK’S CLAIM
[25]
The exception, rather laboriously, repeats
much of the content of Claim C, but a further repetition thereof is
unavoidable if justice
is to be done to the parties.
‘
2.
SECOND COMPLAINT
2.1.
In paragraph 62, the plaintiffs plead that Brent OK conducted a
convenience store under a lease
agreement between Brentmark (as
lessor) and Brent OK (as lessee) (
the
Brent OK sub-lease
).
2.2.
In paragraph 66, the plaintiffs plead that the defendant was aware
that:
2.2.1.
the continued existence of the convenience store “
as
a successful business enterprise was contingent on the continued
existence of the filling station business (and [Brentmark’s]
right to occupy the premises in terms of the Brentmark sub-lease)”
(as pleaded in para 64); and
2.2.2
the convenience store was Brent OK’s “
only business
and its sole source of income”
(as pleaded in para 65),
and
knew or ought to have known (i.e. foresaw) that if the dealer
agreement and sub-lease were cancelled, this “
would
herald the end of [Brent OK’s] convenience store business at
the premises.”
2.3
In paragraphs 67 and 68, the plaintiffs plead that:
2.3.1
at the time of the conclusion of the Brent OK sub-lease, Brent OK did
not foresee the “
manner in which
[Brentmark] was eventually forced to cancel both the dealer agreement
and the Brentmark sub-lease”
set
out under claim A (that is, as a result of the failure of the sale of
shares agreements (para37), in turn caused by the defendant’s
alleged failure to provide consent (para 35-36)) (para 67);
2.3.2
Brent OK was not “
in a position to
avoid [the cancellation by Brentmark], or to protect its interest by
means of appropriate contractual stipulations
with the Defendant,
against the adverse consequences of the forced cancellation”
(para 68).
2.4
In paragraph 69, the plaintiffs plead that:
2.4.1
“
[i]n the premises”
- seemingly referencing both that the defendant foresaw that Brent OK
may suffer harm, and that Brent OK was vulnerable to the
risk of
suffering harm by reason of cancellation of the agreements;
2.4.2
“
considerations of public and
legal policy dictate that the Defendant owed a legal duty to [Brent
OK]”;
2.4.3
this duty being “
to avoid that
[Brent OK] would suffer economic loss”:
2.4.3.1
as a consequence of “
the
cancellation by [Brentmark]”
of
the agreements;
2.4.3.2
“
due to the Defendant’s
breach of contract”
(as pleaded
in para 54, being breaches of the dealer agreement).
2.5.
In paragraph 70, the plaintiffs plead that the defendant breached
this duty “
negligently by failing
to take reasonable steps to prevent that [Brent OK] suffer economic
loss”
– this amounting to a
claim that the defendant negligently breached a duty to Brent OK to
not breach the dealer agreement
between the defendant and Brentmark
in a manner that would cause Brent OK to suffer loss.
2.6
In paragraphs 71 to 73, the plaintiffs plead that:
2.6.1
as a result of the defendant’s alleged breach of its duty (to
not cause Brent OK loss by breaching
the dealer agreement) (
i
)
Brent OK was prevented from selling the convenience store business
when its value was at least R4 million, and (
ii
)
that this value “
was subsequently
eroded”
by the defendant’s
alleged wrongful conduct pleaded in paragraphs 41 to 48 (comprising
the allegations that the defendant
misrepresented the reasons for the
extension of the sub-lease) (para 71);
2.6.2
Brent OK’s patrimonial position was reduced by R4 million, and
it suffered damages of R4 million,
“
as
a consequence of the . . . aforesaid wrongful conduct”
(para
72 and 73).
2.7
The conduct that the plaintiffs rely on to establish a delict is
inconsistent:
2.7.1
Regarding the breach of the legal duty, the defendant’s conduct
appears to take the form of the breaches
of the dealer agreement as
pleaded in paragraph 54.
2.7.2
But the conduct that caused the loss is pleaded as the defendant’s
alleged misrepresentation of the
reasons for the extension of the
sub-lease, this being one, but not all of the alleged breaches of the
dealer agreement pleaded
in paragraph 54.
2.8
Brent OK effectively seeks to hold the defendant liable in delict for
pure economic loss
that Brent OK sustained by reason of the
defendant’s alleged negligent breach of the dealer agreement
between the defendant
and Brentmark, and Brentmark’s alleged
resultant forced cancellation of both the dealer agreement and the
sub-lease.
2.8.1
This is not an established category of delict claiming pure economic
loss and, as such, the defendant’s
alleged conduct is not
prima
facie
wrongful.
2.8.2
The plaintiffs must, therefore, positively establish wrongfulness.
2.8.3
The plaintiffs’ allegation in support of wrongfulness that:
2.8.3.1
the defendant foresaw the harm, is not relevant to the determination
of wrongfulness;
2.8.3.2
the defendant (sic) was vulnerable to the loss, is insufficient to
render the defendant’s conduct wrongful and, therefore,
for
liability to be imposed on the defendant for the damages flowing from
the alleged conduct.
2.8.4
As such, assuming all the other elements of delictual liability to be
present, Brent OK has not made out
a case that the defendant’s
negligent breach of a contract that Brent OK is a stranger to, is
wrongful such that the defendant
should be liable for damages that
Brent OK suffers as a result of that breach.
2.8.5
To the extent that Brent OK contends that Puma interfered with its
contractual relations:
2.8.5.1
intentional interference (or inducement) is required, not mere
negligence;
2.8.5.2
it is unclear which contract Brent OK contends was interfered with –
the Brent OK sub-lease or the sale of business;
2.8.5.3
it is unclear what benefits of which contract Puma deprived Brent OK
of and usurped as its own.
2.9.
The particulars of claim, therefore, lack averments that are
necessary to sustain a cause of
action against the defendant
alternatively are vague and embarrassing.’
THE
PLAINTIFFS’ NOTICE IN TERMS OF RULE 28(1)
[26]
As stated, on 4 September 2020 the
plaintiffs gave notice of their intention to amend their particulars
of claim in various respects.
Given that it is only the
proposed amendment to Claim B that is opposed by Puma, I shall only
recite the paragraphs of the
notice relevant thereto. Once
again, for the sake of consistency, I shall substitute the names of
the parties.
‘
6.
By substituting paragraphs 69 and 70 thereof, with the following
paragraphs:
“
69.
By reason of the facts and circumstances set out in paragraph 62 to
68 above, considerations of
public and legal policy dictate that
[Puma] owed a legal duty to [OK], not to cause the termination of the
contractual relationship
between Brentmark and Puma arising from the
sub-lease and the dealer agreement, by conduct which would be in
breach of its duty
of good faith and in terms of clause 24 of the
dealer agreement, in the manner as alleged in paragraph 54 above, and
thereby effectively-
69.1
cause the cancellation of the Brentmark sub-lease;
69.2
prevent [OK] from trading and operating the convenience store;
69.3
force [OK] to close down such business, alternatively to sell it at a
substantial loss; and
69.4
cause [OK] to suffer economic loss.
70.
[Puma] breached such legal duty negligently in that it failed –
70.1
to realise that its conduct as referred to in paragraph 54 above-
70.1.1
would result in the termination of the dealer agreement and the
sub-lease, and the concomitant adverse consequences for [OK]
as
described in paragraphs 69.1 to 69.4 above; and
70.1.2
cause [OK] to suffer economic loss; and
70.2
to take reasonable steps to ensure that the dealer agreement and the
sub-lease remain in existence, which would have (a) enabled
[OK] to
continue operating the convenience store, and (b) prevented [OK] from
suffering economic loss as described in paragraph
71 below.”’
PUMA’S
NOTICE IN TERMS OF RULE 28(3)
[27]
Puma’s objection to the proposed
amendment to OK’s Claim C reads as follows:
‘
TAKE
NOTICE THAT
the defendant, objects to
the plaintiffs’ notice of intention to amend their particulars
of claim dated 21 August 2020 (
the
notice
), on the following grounds:
1.
On 3 June 2020, the defendant delivered a
notice to remove cause of complaint under rule 23(1) . . . raising
three grounds on which
the defendant contended the plaintiffs’
particulars of claim were excipiable.
2.
The intended amendments in the plaintiff’s
notice will not cure the second ground of complaint in the
defendant’s notice
to remove cause of complaint and, as such,
the particulars will remain excipiable on that ground.’
[28]
This background detail thus sets the basis
for the consideration of Puma’s second ground of exception.
Obviously, the
exception must be considered with due regard for
Claim C in its amended from. If the exception survives that
intended amendment,
it must be upheld. If it does not, the
amendment must be granted and the exception dismissed.
THE
APPROACH TO EXCEPTIONS
[29]
The
approach to the determination of an exception is well established and
the relevant principles were conveniently summarized as
follows by
the Constitutional Court in
Pretorius
:
[1]
‘
In
deciding an exception a court must accept all allegations of fact
made in the particulars of claim as true; may not have regard
to any
other extraneous facts or documents; and may uphold the exception to
the pleading only when the excipient has satisfied
the court that the
cause of action or conclusion of law in the pleading cannot be
supported on every interpretation that can be
put on the facts. The
purpose of an exception is to protect litigants against claims that
are bad in law or against an embarrassment
which is so serious as to
merit the costs even of an exception. It is a useful procedural
tool to weed out bad claims at
an early stage, but an overly
technical approach must be avoided.’ (Internal references
omitted.)
[30]
In
order to succeed with the second ground of exception, Puma must
persuade the Court that upon every interpretation which OK’s
claims against it can reasonably bear, no cause of action is
disclosed.
[2]
Furthermore,
it must show that the claims
are
(and not may be) bad in law.
[3]
It is trite, too, that for the purposes of an exception, Puma
must accept that the facts pleaded in the particulars of claim
are
correct.
[4]
Lastly, unless
Puma can satisfy the Court that there is a real point of law or real
embarrassment, the exception should be
dismissed.
[5]
[31]
In
Ras
,
van Heerden J considered the authorities upon which a plea of
exception was based in some detail and offered the following summary,
at 541I:
‘
The approach is neatly summed up by one writer in the following manner:
“The court should not look at a pleading with a magnifying glass of too high power.
It is the duty of the court when an exception is taken to
a pleading first to see if there is a point of law to be decided
which will dispose of the case in whole or in part. If there is
not, then it must see if there is an embarrassment which
is real as a
result of the faults in the pleadings to which exception is taken.
Unless the excipient can satisfy the court
that there is such a
point of law or such real embarrassment the exception should be
dismissed.” (See Joubert (ed)
Law
of South Africa
vol 3 part 1 (first
re-issue by Harms and Van der Walt, 1997) at para 186.)’
DELICTUAL
DAMAGES FOR PURE ECONOMIC LOSS
[32]
Puma’s
second ground of exception traverses a legal issue which has been the
subject of considerable litigation in the last
decade or two –
delictual damages for pure economic loss occasioned to a plaintiff by
a defendant whose causal negligence
has allegedly resulted in such
loss.
[6]
[33]
The applicable principles were usefully
summarised by Harms JA in
Telematrix
:
‘
[1]
At stake is the liability for damages of the respondent, the
Advertising Standards Authority of SA (the ASA), to an advertiser
who
suffered a loss because of an incorrect decision by one of its
organs. The ASA filed an exception against the particulars
of
claim of the plaintiff (the present appellant) in which the ASA
pertinently raised the question whether such a negligent decision,
which prohibited the publication of two advertisements, and which
gave rise to pure economic loss can be “wrongful”
in the
delictual sense. “Pure economic loss” in this
context connotes loss that does not arise directly from
damage to the
plaintiff’s person or property but rather in consequence of the
negligent act itself, such as a loss of profit,
being put to extra
expenses, or the diminution in the value of property . . .
[12]
The first principle of the law of delict . . . is . . . that everyone
has to bear the loss he or she suffers . . . Aquilian
liability
provides for an exception to the rule and, in order to be liable for
the loss of someone else, the act or omission of
the defendant must
have been wrongful and negligent and have caused the loss. But
the fact that an act is negligent does
not make it wrongful . . . To
elevate negligence to the determining factor confuses wrongfulness
with negligence and leads to the
absorption of the English law tort
of negligence into our law, thereby distorting it.
[13]
When dealing with the negligent causation of pure economic loss it is
well to remember that the act or omission is not
prima
facie
wrongful (“unlawful”
is the synonym and is less of a euphemism) and that more is needed.
Policy considerations
must dictate that the plaintiff should be
entitled to be recompensed by the defendant for the loss suffered . .
. In other words,
conduct is wrongful if public policy considerations
demand that in the circumstances the plaintiff has to be compensated
for the
loss caused by the negligent act or omission of the
defendant. It is then that it can be said that the legal
convictions
of society regard the conduct as wrongful . . .’
(Internal references omitted.)
[34]
Harms
JA examined the law from the angle of the quasi-judicial
decision-making function on the part of the ASA and, in particular,
whether that function afforded a basis to found a claim for damages
for pure economic loss. The wrong decision taken by the
ASA in
Telematrix
in adjudicating a complaint regarding misleading advertising was
held, in the circumstances, not to afford the complainant a cause
of
action in respect of damages for pure economic loss. To that
extent, that matter is on a different footing to the present
in which
an alleged legal duty
[7]
is
essentially sourced in a contractual setting, in which an obligation
of utmost good faith is prescribed. Rather, the matter
is
closer to the dispute in
Country
Cloud
,
which will be discussed in more detail anon.
[35]
Further,
the fact that one is dealing with a contractual setting between
private parties, removes the matter from the ambit of the
many cases
involving pure economic loss in the context of decisions made by
public functionaries in cases such as
Knop
and
Steenkamp
.
The distinction was explained thus by Nugent JA in
Van
Duivenboden
:
[8]
‘
[
19] The
reluctance to impose liability for omissions is often informed by
a
laissez
faire
concept
of liberty that recognises that individuals are entitled to “mind
their own business” even when they might reasonably
be expected
to avert harm
and by
the inequality of imposing liability on one person who fails to act
when there are others who might equally be faulted.
The
protection that is afforded by the Bill of Rights to equality,
and to
personal freedom,
and to
privacy might now bolster that inhibition against imposing legal
duties on private citizens. However, those barriers
are less
formidable where the conduct of a public authority or a public
functionary is in issue, for it is usually the very business
of a
public authority or functionary to serve the interests of others and
its duty to do so will differentiate it from others who
similarly
fail to act to avert harm. The imposition of legal duties on
public authorities and functionaries is inhibited
instead by the
perceived utility of permitting them the freedom to provide public
services without the chilling effect of the threat
of litigation if
they happen to act negligently and the spectre of limitless
liability. That last consideration ought
not to be unduly
exaggerated, however, bearing in mind that the requirements for
establishing negligence and a legally causative
link provide
considerable practical scope for harnessing liability within
acceptable bounds.’ (Internal references
omitted.)
WRONGFULNESS
[36]
Two Oceans Aquarium
involved
a claim in delict by a building owner against a firm of structural
engineers, for pure economic loss resulting from the
alleged
negligent design of an aquarium. In the course of his judgment,
Brand JA discussed the importance of proof of the
element of
wrongfulness in the context of such claims for pure economic loss.
The passage in question has been regularly
referred to with
approval in subsequent similar decisions:
‘
[10]
The exception raises the issue of wrongfulness which is one of the
essential elements of the Aquilian action . . . Negligent
conduct
giving rise to damages is not, however, actionable
per
se.
It is only actionable if the
law recognises it as wrongful. Negligent conduct manifesting
itself in the form of a positive
act causing physical damage to the
property or person of another is
prima
facie
wrongful. In those cases,
wrongfulness is therefore seldom contentious. Where the element
of wrongfulness becomes less
straightforward is with reference to
liability for negligent omissions and for negligently caused pure
economic loss . . . In these
instances, it is said, wrongfulness
depends on the existence of a legal duty not to act negligently. The
imposition of such
a legal duty is a matter for judicial
determination involving criteria of public or legal policy consistent
with constitutional
norms . . .
[12]
When we say that a particular omission or conduct causing pure
economic loss is “wrongful”, we mean that public
or legal
policy considerations require that such conduct, if negligent, is
actionable; that legal liability for the resulting damages
should
follow. Conversely, when we say that negligent conduct causing
pure economic loss or consisting of an omission is
not wrongful, we
intend to convey that public or legal policy considerations determine
there should be no liability; that the potential
defendant should not
be subjected to a claim for damages, his or her negligence
notwithstanding. In such event, the question
of fault does not
even arise. The defendant enjoys immunity against liability for
such conduct, whether negligent or not
. . . When a court is
requested in the present context to accept the existence of a “legal
duty”, in the absence of
any precedent, it is in reality asked
to extend delictual liability to a situation where none existed
before. The crucial
question in that event is whether there are
any considerations of public or legal policy which require that
extension. And
as pointed out in
Van
Duivenboden
(para [21]) and endorsed in
Telematrix
(para [6]) in answering that question “what is called for is
not an intuitive reaction to a collection of arbitrary factors
but
rather a balancing against one another of identifiable norms”.’
(Internal references otherwise omitted.)
[37]
In
the present case, Puma contends in the exception that OK has failed
to make out a case that Puma’s breach of the dealer
agreement
with Brentmark, a contract to which it claims OK was ‘a
stranger’, was wrongful to the extent that it (Puma)
should be
held liable to OK for damages in delict. In support of its
argument, Puma relies heavily on the judgments of the
Supreme Court
of Appeal and the Constitutional Court in
Country
Cloud
.
[9]
[38]
OK disputes this reading of its claim
against Puma, contending that the contention is not only factually
incorrect, but based on
a misconception of the nature and extent of
the legal duty which it contends Puma owed to it. This
divergence in approach
is, in my view, central to the dispute before
the Court. Before considering the import of
Country
Cloud
though, it is necessary to
establish the facts upon which Puma’s exception must be
determined.
THE
FACTUAL MATRIX
[39]
The facts already traversed above, together
with certain further allegations in the particulars of claim,
constitute the factual
matrix upon which Puma’s exception must
be determined. They are, largely, uncontroversial and may be
summarised as
follows hereunder. For the sake of convenience,
the relevant paragraphs in the particulars of claim (“POC”)
will
be added in parentheses where applicable:
39.1
The pricing mechanism of the dealer
agreement, which determined the prices at which Brentmark had to buy
petroleum prices from Puma,
was fixed and not subject to adjustment.
(POC 16)
39.2
The dealer agreement contained no mechanism
by which to adjust the prices of Puma’s products, in order to
counter the adverse
effects of inflation and unforeseen fluctuations
in economic and market conditions. (POC 16)
39.3
Consequently, over time, the prices of
Puma’s petroleum products became uncompetitive and commercially
unviable for Brentmark,
and this ultimately affected the
profitability of the filling station business negatively. (POC
17)
39.4
Puma was fully aware of the effect of the
rigidity of the pricing mechanism in the dealer agreement and, in
particular, the detrimental
effect which it had on the profitability
of Brentmark’s filling station business. (POC 19)
39.5
The financial demise of Brentmark was
inevitable unless Puma expressed a willingness to amend the fixed
pricing structures in the
dealer agreement. (POC 20)
39.6
This eventuality notwithstanding, Puma
steadfastly refused to accede to Brentmark’s request that the
pricing structures be
adjusted. (POC 19)
39.7
In an attempt to ultimately avert their
corporate demise, Brentmark and OK disposed of their respective
businesses to JR Pet and
JR Food respectively. (POC 20-23)
39.8
Brentmark required Puma’s consent to
dispose of the filling station business to JR Pet. (POC 20 –
23)
39.9
Puma refused to consent to the sale to JR
Pet, without any reasonable or justifiable basis therefor, in
circumstances where it had
no reason whatsoever (from a commercial
perspective or otherwise) not to consent to the transaction.
(POC 29)
39.10
The explanation put up by Puma at the time
for refusing to consent to the transaction, was that there were too
many filling station
operators in the Western Cape. This
explanation was (to Puma’s knowledge) false, because, at that
time, Puma was negotiating
with JR Pet to enable the latter to
acquire control of additional filling stations in the Western Cape.
(POC 30, 31 &
46)
[40]
The particulars of claim further allege
that Puma was aware that –
40.1
OK’s business was commercially
dependent upon both the dealer agreement and the BrentOK sub-lease.
(POC 69)
40.2
The continued existence of the convenience
store as a successful enterprise, was contingent upon both the
continued existence of
the filling station business, and thus
Brentmark’s right to occupy the premises in terms of the
Brentmark sub-lease. (POC
64)
40.3
The convenience store was OK’s only
business and its sole source of income. (POC 65)
40.4
Cancellation of the aforesaid contracts
with Brentmark would result in the collapse of OK’s convenience
store business at
the premises. (POC 66)
40.5
The eventual forced cancellation of the
contracts was not foreseeable by OK when it entered into the BrentOK
sub-lease. (POC
67).
40.6
OK was not in a position to avoid such an
occurrence, or to protect its own interests by means of an
appropriate contractual stipulation
with Puma, whereby it might avoid
the adverse consequences of the forced cancellation of the contracts.
(POC 68)
[41]
In the circumstances, OK argues that it is
entitled to draw the incontrovertible factual conclusion that Puma
knew that the cancellation
of the Brentmark sub-lease (for whatever
reason) would inevitably result in the closure of the convenience
store, which in turn
would mean that OK would lose its only source of
business.
[42]
Finally, OK asks the Court to draw the
conclusion that Puma behaved dishonestly and fraudulently in the
circumstances, on the basis
of the following facts:
42.1
While claiming that its refusal to agree to
a revision of the dealer agreement with Brentmark was based on the
fact that there were
already too many filling stations in the Western
Cape, it was actively negotiating with JR Pet with a view to
increasing the number
of filling stations being operated by JR Pet in
the Western Cape.
42.2
In the course of these negotiations with JR
Pet, Puma indicated a willingness to amend the pricing structures of
the two existing
filling station dealer agreements it had with JR
Pet, having accepted that such agreements were archaic, obsolete and
necessitated
revision. (POC 32 – 33).
42.3
Notwithstanding these facts relevant to its
dealings with JR Pet otherwise, Puma refused to agree to Brentmark’s
request for
a revision of the pricing structure of the dealer
agreement and, further, refused to provide the consent required by
Brentmark
under the Brentmark sub-lease which was critical to enable
it to sell the filling station business to JR Pet.
42.4
Moreover, Puma used the consent so required
by Brentmark in terms of its sale agreement with JR Pet, to place
undue pressure on
JR Pet to agree to a prospective pricing structure
for the new filling station business which it was to conduct on the
premises
that would be more beneficial to Puma, and less beneficial
to JR Pet. Puma suggested that if JR Pet accepted such proposal
it would consent to the sale of the filling station business, but JR
Pet regarded such proposal as unacceptable. In the result,
the
sale of the filling station business to JR Pet fell through.
[43]
Brentmark and OK allege further dishonesty
on the part of Puma in the period subsequent to the cancellation of
the dealer agreement
and the Brentmark sub-lease in September 2018:
43.1
At a meeting on 17 October 2018 with
representatives of Puma, Brentmark was informed that Puma had entered
into negotiations with
a potential new sub-tenant for the premises,
which was interested in buying both the filling station and
convenience store businesses.
Puma said it thus needed
additional time to finalise these negotiations. (POC 41.1)
43.2
To this end Puma requested Brentmark to
postpone the date of the termination of the sub-lease for one or two
months, while it continued
to conduct the filling station business
and to procure that OK continued running the convenience store
business. (POC 41.2)
43.3
Brentmark was amenable to such an extension on condition that the
cancellation became effective on 31 January
2019, claiming that it
preferred that date because it would afford it the benefit of
additional trade over the Festive Season.
The parties agreed
accordingly and the plaintiffs continued conducting their respective
businesses. (POC 43 –
46)
43.4
Brentmark and OK say that Puma’s allegations that induced the
extension of time were false, in that
it was not involved at the time
in any
bona fide
negotiations with a third party relating to the conclusion of a new
sub-lease of the filling station business. (POC 48)
43.5
Rather, the plaintiffs claim that Puma’s motivation at the time
for requesting an extension of time
was to place further undue
pressure on them, by requiring Brentmark to trade at uncompetitive
prices and thus ensure its demise.
This would have had the
knock-on effect of procuring OK’s demise as well. (POC
49)
DELICTUAL
LIABILITY ARISING FROM INTERFERENCE IN CONTRACTUAL RELATIONSHIPS
[44]
In
Country
Cloud (SCA)
,
Brand JA focused on the question of delictual liability for pure
economic loss occasioned to a contracting party by a non-contracting
party, the so-called ‘stranger to the contract’ scenario.
In the course of his discussion, the Learned Judge
of Appeal
referred to cases such as
Dantex
[10]
and
Gore
NO
,
[11]
and noted that certain categories of interference in contractual
relationships had been recognised by our courts so as to afford
the
injured party a right of action in delict:
‘
[26]
With reference to the quotation from
Gore
NO
[12]
,
it will be realised that the present is not the type of situation
contemplated in cases such as
Dantex
.
In those cases a delictual remedy is afforded to a party to a
contract who complains that a third party – who is a
stranger
to the contract – has intentionally deprived him or her of the
benefits he or she would otherwise have obtained
from performance
under the contract. Examples include preventing a lessee from
taking occupation of the leased property in
terms of the lease
(
Dantex
);
enticing another person’s employees to breach the contract
(
Atlas
Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd
1981 (2) SA 173
(T) at 202G-H), and so forth (for a more complete
list of illustrations see JC Knobel (ed) J Neethling, JM Potgieter &
PJ Visser
Law
of Delict
5 ed (2006) at 282; Loubser et al supra
[13]
in para 17.2). For Country Cloud to succeed, we must extend
delictual liability to a contracting party for damages suffered
by a
stranger to the contract resulting from the intentional repudiation
of the contract by that contracting party. This,
as counsel for
Country Cloud rightly conceded, has never been done before. And,
as Grosskopf AJA said in
Lillicrap,
Wassenaar and Partners v
Pilkington
Brothers (SA) (Pty) Ltd
1985 (1) SA 475
(A) at 504F-G:
“
South
African law [unlike English law] approaches the matter in a more
cautious way, as I have indicated, and does not extend the
scope of
the Aquilian action to new situations unless there are positive
policy considerations which favour such an extension.”’
[45]
Relying
on this authority, counsel for Puma stressed that the contract under
discussion did not fall into one of the ‘recognised
categories’
in which our law permitted the imposition of delictual liability.
[14]
Hence, it was said, OK had to establish the element of
wrongfulness of Puma’s conduct with due regard to
considerations
of public policy.
[46]
I understood counsel for OK to accept that
the second plaintiff’s claim for pure economic loss did not
resort under one of
these so-called ‘recognised categories’.
I say ‘so-called’ because, as various of the
appellate cases
show, there is no
numerus
clausus
to which a party can look to
assess whether its delictual claim for pure economic loss is likely
to pass judicial muster or not.
In each case the element of
wrongfulness will be determined on its merits.
[47]
In
Telematrix
Harms JA dealt with the concept of ‘categories fixed by law’
as follows:
‘
[15]
Stating that there are no general rules determining wrongfulness and
that it always depends on “the facts of the particular
case”
is accordingly somewhat of an overstatement because there are also
some “categories fixed by the law”.
For example,
since the judgment in
Indac
[Electronics (Pty) Ltd v Volkskas Bank Ltd
[1991] ZASCA 190
;
1992 (1) SA 783
(A)],
which held that a collecting bank owes a legal duty to the owner of a
cheque, it is well-nigh impossible to argue that a
collecting bank
has no such duty, and all that may remain is to consider whether
vis-à-vis
the particular plaintiff the duty existed. However, as public
policy considerations change, these categories may change,
whether by
expansion or contraction.’ (Internal references omitted.)
[48]
It seems to me, therefore, that in a case
such as the present, where there is no established legal precedent
for the claim asserted
by OK, the Court will be required to consider,
as was said in
Fourway Haulage
,
whether the claim so advanced met the relevant policy considerations.
These considerations, said Brand JA, paras 23 –
25 of
Fourway Haulage
,
encompassed elements such as (i) indeterminate liability, (ii)
blameworthiness, and (iii) vulnerability to risk. In
Country
Cloud (SCA)
, paras 24 – 31, Brand
JA repeated the importance of consideration of these elements.
[49]
However, in
Fourway
Haulage
, Brand JA urged reticence in
developing the common law of delict, and cautioned against an
approach which might lead to a proliferation
of such claims in
circumstances where our law was rather inclined to the achievement of
legal certainty:
‘
[22]
Further insurance against uncertainty and unpredictability derives
from the principle which was formulated as follows . . .
in . . .
Van
Duivenboden
. . . para 21:
“
When
determining whether the law should recognise the existence of a legal
duty in any particular circumstances what is called for
is not an
intuitive reaction to a collection of arbitrary factors but rather a
balancing against one another of identifiable norms.”
.
. . In a case like the present where the claim for pure economic loss
falls outside the ambit of any recognised category of liability,
the
first step is therefore to identify the considerations of policy that
are of relevance. As part of the identification
process
assistance can of course be gained from previous decisions, both at
home and abroad, as well as from the helpful analysis
by academic
authors such as those to which I have already referred.’
[50]
In
Country
Cloud (SCA)
Brand JA also gave
consideration to the fact whether Country Cloud was vulnerable to
risk. The Court found that the plaintiff
was not at risk
because it had at least two alternate remedies available to it, and
included this factor in the policy considerations
for not affording
the injured party a claim for pure economic loss.
[51]
In relation to blameworthiness as a factor
for consideration in this exercise, Brand JA made the following
observations in
Country Cloud (SCA)
after citing the
dictum
in
Gore NO
referred to in footnote 12 above:
‘
[25]
Again I can find no fault with Country Cloud’s point of
departure that, generally speaking, the nature of the defendant’s
fault and the degree of blameworthiness of the conduct are policy
considerations that can be legitimately be taken into account
in
deciding whether or not delictual liability should be imposed . . .
As a general rule, no weight is therefore given, under the
rubric of
fault, to the degree of blameworthiness or any reprehensible motive
on the part of the defendant. This is so because
the element of
fault leaves no scope for considerations of policy. In
determining wrongfulness, on the other hand, these
very
considerations of policy do indeed come into play . . . In the end
the nature of the fault and the degree of blameworthiness
are
therefore considerations to be weighed up with all others in
determining whether delictual liability should be imposed.’
FACTORS
ADVANCED BY OK IN SUPPORT OF ITS DELICTUAL CLAIM
[52]
I turn then to consider the factors which
are said to be relevant to the determination whether there are policy
considerations in
favour of a right of action being granted to OK
against Puma. In doing so, the Court is bound to accept the
factual allegations
made in the particulars of claim by OK (and
Brentmark) as correct. This will include any inferences of fact
sought to be
relied upon by OK with reference to other allegations of
fact.
[53]
Then,
the Court must bear in mind that issues of public policy are now
infused with the values inherent in the Constitution, Act
108 of
1996, and it should further have regard to the fact that such
considerations will also include an appreciation of the sense
of
justice of the community.
[15]
These latter considerations may, in turn, depend on evidence to
be presented by OK at the trial. In my view, however,
the point
of departure in this exercise is that Puma was bound by the strict
provisions of the good faith obligations to be sourced
in clause 24
of the dealer agreement, and it is to that which I now turn.
GOOD
FAITH IN CONTRACT LAW GENERALLY
[54]
The
obligations imposed on Brentmark and Puma in clause 24 are consonant
with the principle of contractual
bona
fides
which the Constitutional Court has now adopted without more.
[16]
[55]
The
debate regarding the application of the principle of contractual
bona
fides
has raged on for decades, commencing in the pre Constitutional
era
[17]
and continuing
thereafter in the Constitutional era.
[18]
But, for present purposes it is not necessary to delve into any
of those decisions save to say that they had, at their core,
the
legal issue as to whether the existence of the general principle of
bona
fides
in the law of contract afforded a party a basis to avoid liability
under a contract, or whether the principle was rather to be
read
restrictively as a foundational value which underpinned the
interpretation and enforcement of an agreement.
[56]
Writing for the majority in
Beadica
,
Theron J conducted an extensive review of the law relating to good
faith in the law of contract, over various common law and European
jurisdictions. The Court was sensitive, too, to the perception
that there was dissonance between the jurisprudence emanating
from
that Court and the Supreme Court of Appeal. But, said the
learned Justice, there was really no difference.
[57]
The Constitutional Court accepted that the
application of the general principle of good faith and the so-called
‘abstract
values’ inherent in the law of contract, did
not entitle a Court to allow a party to avoid the consequences of a
contract
per se.
Rather, said the learned Justice, these values were ‘creative,
informative and controlling functions’ to be resorted
to when a
court was asked to enforce the provisions of a particular contract:
‘
[79]
Much was made by the applicants in this case of a “divergence”
between the approach of this court and that of the
Supreme Court of
Appeal to the judicial control of contracts. The “divergence”
is said to centre on the role
of abstract values in our law of
contract and whether these values can be directly relied upon to
invalidate, or refuse to enforce,
contractual terms. This
controversy has now been put to rest by the clarification of the law
as expressed by this court in
Barkhuizen
and
Botha
.
There is agreement between this court and the Supreme Court of
Appeal that abstract values do not provide a free-standing
basis upon
which a court may interfere in contractual relationships. As
mentioned, they perform creative, informative and
controlling
functions.
[80]
It emerges clearly from the discussion above that the divergence
between the jurisprudence of this court and that of the Supreme
Court
of Appeal is more perceived than real. Our law has always, to a
greater or lesser extent, recognised the role of equity
(encompassing
the notions of good faith, fairness and reasonableness) as a factor
in assessing the terms and the enforcement of
contracts. Indeed,
it is clear that these values play a profound role in our law of
contract under our new constitutional
dispensation. However, a
court may not refuse to enforce contractual terms on the basis that
the enforcement would, in its
subjective view, be unfair,
unreasonable or unduly harsh. These abstract values have not
been accorded autonomous, self-standing
status as contractual
requirements. Their application is mediated through the rules
of contract law including the rule that
a court may not enforce
contractual terms where the term or its enforcement would be contrary
to public policy. It is only
where a contractual term, or its
enforcement, is so unfair, unreasonable or unjust that it is contrary
to public policy that a
court may refuse to enforce it.’
(Internal references omitted.)
[58]
In the present matter, the dealer agreement
expressly contains a good faith clause, and there is thus no debate
as to the applicability
of the principle. What falls to be
determined here is the extent and ambit of clause 24, in the context
of a delictual claim
for pure economic loss by a non-contracting
party. The answer, it seems to me, is to be found in the
judgments from both
of the aforementioned courts.
[59]
When
the Supreme Court of Appeal discussed the underlying principle of
contractual
bona
fides
in
Brisley
,
it accepted (in para 22 of the majority judgment) the import of the
following passage in a journal article by Prof Dale Hutchison:
[19]
‘
What
emerges quite clearly from recent academic writings, and from some of
the leading cases, is that good faith may be regarded
as an ethical
value or controlling principle, based on community standards of
decency and fairness, that underlies and informs
the substantive law
of contract. It finds expression in various technical rules and
doctrines, defines their form, content
and field of application and
provides them with a moral and theoretical foundation. Good
faith thus has a creative, a controlling
and a legitimating or
explanatory
function. It is not,
however, the only value or principle that underlies the law of
contract; nor, perhaps, even the most
important one.’
[60]
In
Everfresh
,
the Constitutional Court was divided on the merits of the matter
before it. Nevertheless, there was unanimity on the importance
of the principle of good faith in the contractual setting. Yacoob
J (writing for the minority) explained the approach as
follows:
‘
[22]
Everfresh contends that the common law should be developed in terms
of the Constitution to oblige parties who undertake to
negotiate with
each other to do so reasonably and in good faith. The
contention of Shoprite is that a provision of this kind
should not be
enforceable because the concept of good faith is too vague. Good
faith is a matter of considerable importance
in our contract law and
the extent to which our courts enforce the good faith requirement in
contract law is a matter of considerable
public and constitutional
importance. The question whether the spirit, purport and
objects of the Constitution require courts
to encourage good faith in
contractual dealings and whether our Constitution insists that good
faith requirements are enforceable
should be determined sooner rather
than later. Many people enter into contracts daily and every
contract has the potential
not to be performed in good faith. The
issue of good faith in contract touches the lives of many ordinary
people in our country.
[23]
The values embraced by an appropriate appreciation of ubuntu are also
relevant in the process of determining the spirit, purport
and
objects of the Constitution. The development of our economy and
contract law has thus far predominantly been shaped by
colonial legal
tradition represented by English law, Roman law and Roman-Dutch law.
The common law of contract regulates
the environment within
which trade and commerce take place. Its development should
take cognisance of the values of the vast
majority of people who are
now able to take part without hindrance in trade and commerce. And
it may well be that the approach
of the majority of people in our
country place a higher value on negotiating in good faith than would
otherwise have been the case.
Contract law cannot confine
itself to colonial legal tradition alone.’
[61]
Writing for the majority in
Everfresh
,
Moseneke DCJ opined as follows:
‘
[71]
Had the case been properly pleaded, a number of interlinking
constitutional values would inform a development of the common
law.
Indeed, it is highly desirable and in fact necessary to infuse
the law of contract with constitutional values, including
values of
ubuntu, which inspire much of our constitutional compact. On a
number of occasions in the past this court has had
regard to the
meaning and content of the concept of ubuntu. It emphasises the
communal nature of society and “carries
in it the ideas of
humaneness, social justice and fairness” and envelopes “the
key values of group solidarity, compassion,
respect, human dignity,
conformity to basic norms and collective unity”.
[72]
Were a court to entertain Everfresh’s argument, the underlying
notion of good faith in contract law, the maxim of contractual
doctrine that agreements seriously entered into should be enforced,
and the value of ubuntu, which inspires much of our constitutional
compact, may tilt the argument in its favour. Contracting
parties certainly need to relate to each other in good faith. Where
there is a contractual obligation to negotiate, it would be hardly
imaginable that our constitutional values would not require
that the
negotiation must be done reasonably, with a view to reaching an
agreement and in good faith.’
[62]
Lastly in
Botha
,
the Constitutional Court (per Nkabinde J) commented on the import of
the principle of good faith in the contractual setting, as
follows:
‘
[46]
. . . Bilateral contracts are almost invariably cooperative ventures
where two parties have reached a deal involving performances
by each
in order to benefit both. Honouring that contract cannot
therefore be a matter of each side pursuing his or her own
self-interest without regard to the other party’s interests.
Good faith is the lens through which we come to understand
contracts in that way. In this case good faith is given
expression through the principle of reciprocity and the
exceptio
non adimpleti contractus.
’
OK’S
ALLEGATIONS IN SUPPORT OF ITS CLAIM FOR DELICTUAL LIABILITY BY PUMA.
[63]
For the purposes of the exception, the
Court must assume that Puma’s termination of the dealer
agreement with Brentmark was
in breach of the good faith clause. The
relevant allegations made by Brentmark in Part B of the particulars
of claim, contending
for such breach by Puma, are as follows (once
again, the parties’ names have been substituted):
‘
52.
Clause 24 of the dealer agreement imposed a duty on the parties to
observe the utmost good faith
and neither to do anything, nor to
refrain from doing anything, which might adversely affect the other
party (in the manner as
contemplated in the second part thereof) –
52.1
not only in respect of the implementation of the dealer agreement;
52.2
but also in respect of their dealings with each other, including
their dealings in relation to the
sub-lease.
53.
As a consequence of the aforesaid reciprocal obligations of the
parties arising from the
dealer agreement, created by the provisions
of clause 24 of the dealer agreement –
53.1
the contractual relationship between the parties arising from the
dealer agreement
and
the sub-lease, was analogous to that of a fiduciary relationship
imposed by law; and
53.2
neither party was entitled to put its own interests above those of
the other, in breach of this fiduciary
relationship.
54.
[Puma’s] conduct –
54.1
to refuse to enter into
bona fide
negotiations with [Brentmark], with a
view to amending the pricing structures in terms of the dealer
agreement (which refusal was
based on ulterior motives);
54.2
to refuse to consent to the sale of shares agreement, also with
ulterior motives; and
54.3
by negotiating the extension of the sub-lease on the premise of false
representations, to the financial
detriment of [Brentmark};
constituted a material breach of the provisions of clause 24 of the
dealer agreement.
55.
But for [Puma’s] aforesaid breach of contract, Brentmark would
have been able to sell
the filling station business for an amount of
not less than R2.5 million.
56.
The profitability and viability of [Brentmark’s] filling
station business were further
adversely affected during the extended
duration of the [Brentmark] sub-lease, to such an extent that when
the [Brentmark] sub-lease
was eventually terminated on 31 January
2019, [Brentmark] had to close down the filling station because it
could no longer be conducted
profitably.’
[64]
The facts upon which OK relies for its
claim against Puma have already been set out: in para 22 above the
claim as originally formulated
is reproduced and in para 26 the
intended amendment to that claim is set out. Both of these
formulations of the delictual
claim are based on considerations of
public and legal policy.
[65]
As
I have already said, OK accepts that the claim against Puma does not
fall into any so-called ‘recognised category’
of
liability for pure economic loss. But, it argues, that does not
mean that its claim should not be countenanced. In
the course
of argument, counsel for OK referred to
Bakkerud
[20]
in which Marais JA made the following observation regarding the
approach to be adopted by a court in assessing whether a party
was
said to be saddled with a legal duty in any given situation:
‘
[15]
While that attempt to devise a workable general principle by which to
determine on which side of the moral/legal divide a duty
to act falls
has not been universally acclaimed, it has been welcomed by most.
Those who welcome it do so because of its
inherent flexibility
and its liberation of Courts from the conceptual strait jacket of a
numerus clausus
of
specific instances in which a legal duty to act can be recognised.
Those who do not are distrustful of the scope it provides
for
equating too easily with the convictions of the community a
particular Court’s personal perception of the strength of
a
particular moral or ethical duty’s claim to be recognised as a
legal duty. That is a risk which is not peculiar to
this
particular problem. There are many areas of the law in which
Courts have to make policy choices or choices which entail
identifying prevailing societal values and applying them. But
Courts are expected to be able to recognise the difference
between a
personal and possibly idiosyncratic preference as to what the
community’s convictions
ought
to be and the
actually prevailing
convictions of the community. Provided that Courts
conscientiously bear the distinction in mind, little, if any, harm is
likely to result.’
[66]
While
the
dictum
of Marais JA in
Bakkerud
precedes that of Brand JA in
Fourway
Haulage
,
the
rationes
in both cases are entirely consistent with each other. Shortly
before his concurrence in
Fourway
Haulage
Scott JA delivered the unanimous judgment of the Court in
Mediterranean
Shipping
[21]
(in which Farlam and Lewis JJA, who had also concurred in
Fourway
Haulage
,
similarly concurred with Scott JA). As counsel for OK observed,
the approach to be adopted in a matter such as the present
was
usefully summarised in
Mediterranean
Shipping
:
‘
[14]
Wrongfulness and fault are both requirements for liability under the
modern Aquilian action. Negligent
conduct which is not also
wrongful is therefore not actionable. The inquiry into the
existence of the one, save in the case
of
dolus
,
is discrete from the inquiry into the existence of the other.
However, the issue of wrongfulness will more
often than not be contentious. This is because the culpable
conduct complained
of will be prima facie wrongful. Typically,
this is the case where the negligent conduct takes the form of a
positive act
which causes physical harm. But conduct which
takes the form of an omission or which results in pure economic loss
is not
prima facie wrongful. In such cases it becomes necessary
to determine whether there is a legal duty owed by the defendant
to
the plaintiff to act without negligence or, as the inquiry has more
recently been formulated, whether, if the defendant was
negligent, it
would be reasonable to impose liability on him for such negligence.
This, in turn, is a matter for judicial
judgment involving
criteria of reasonableness, the legal convictions of the community,
policy and where appropriate, constitutional
norms. Precedent
may also play a role. Where, as in the present case, it is
contended that there existed a delictual
legal duty in what was
essentially a contractual setting, relevant circumstances will
include such factors as the extent to which
the plaintiff was or
could have been protected against the risk of harm by contractual
provisions, whether the duty alleged could
have arisen in the absence
of a contract and generally, depending on the circumstances, the mere
existence of the contract. In
[
Two
Oceans
], for example, the court was not
prepared to recognise the existence of a legal duty in circumstances
where the plaintiffs could
have protected themselves against pure
economic loss by contractual means. Similarly, in [
Lillicrap
]
the court, while recognising the possibility of a
concursus
actionum,
declined to accept the
existence of a delictual legal duty in circumstances where the
plaintiff would previously have had a claim
in contract but had
subsequently assigned its rights and obligations under the contract
to a third party.’
[67]
The
dictum
in
Mediterranean Shipping
highlights the importance of a Court considering the factual setting
of the delictual claim in assessing whether a legal duty existed
or
not. It goes without saying that evidence which might be
adduced by a plaintiff relevant to issues of public policy will
greatly assist the Court in coming to its decision on the existence
or not of a legal duty. Similarly, evidence relevant,
for
example, to a plaintiff’s ability to protect itself against
harm through contractual stipulations would also be of assistance.
There is indeed a multitude of factors which a Court might
consider in determining whether Puma was under a legal duty not
to
cause harm to OK when it breached the dealer agreement with
Brentmark. That is the very essence of the value judgment
which
the Court is called upon to make in any given case of this nature.
[68]
How
is that value judgment to be made? In
Van
Duivenboden
,
para 13, Nugent JA cited with approval the following passage in
Fleming
[22]
in establishing
the general nature of the enquiry:
‘
In
short, recognition of a duty of care is the outcome of a value
judgment, that the plaintiff’s invaded interest is deemed
worthy of legal protection against negligent interference by conduct
of the kind alleged against the defendant. In the decision
whether or not there is a duty, many factors interplay; the hand of
history, our ideas of morals and justice, the convenience of
administering the rule and our social ideas as to where the loss
should fall. Hence, the incidence and extent of duties are
liable to adjustment in the light of the constant shifts and changes
in community attitudes.’
[69]
After a detailed consideration of the
approach to such a duty in various common law jurisdictions, Nugent
concluded that –
‘
[16]
. . . What is ultimately required is an assessment, in accordance
with the prevailing norms of this country, of the circumstances
in
which it should be unlawful to culpably cause loss.
[17]
. . . (T)he “convictions of the community” must
necessarily now be informed by the norms and values of our society
as
they have been embodied in the 1996 Constitution.’
[70]
More
recently, in deciding whether a railways authority was to be held
liable for its omission to provide adequate security on a
passenger
train, the learned Chief Justice said the following in
Mashongwa
:
[23]
‘
[23]
An omission will be regarded as wrongful when it also “evokes
moral indignation and the legal convictions of the community
require
that the omission be regarded as wrongful”
[24]
.
This leads to a legal policy question that must of necessity be
answered with reference to the norms and values, embedded
in our
Constitution, which apply to the South African society. And
every other norm or value thought to be relevant to the
determination
of this issue would find application only if it is consistent with
the Constitution. As Moseneke DCJ put it:
“the ultimate
question is whether on a conspectus of all reasonable facts and
considerations, public policy and public interest
favour holding the
conduct unlawful and susceptible to a remedy in damages”
[25]
.’
(Footnotes
otherwise omitted.)
DID
PUMA HAVE A LEGAL DUTY TOWARDS OK?
[71]
The question as to whether Puma had a legal
duty not to cause harm to OK when (as it is alleged) it intentionally
and with ulterior
motive breached the dealer agreement with
Brentmark, requires this Court to assess whether Puma’s conduct
‘evokes moral
indignation’ and whether public policy,
embracing the ‘legal convictions of the community’ as
understood through
the prism of the Constitution, requires that such
conduct be regarded as wrongful.
[72]
The
issue of whether the common law of delict should be advanced by
finding that Puma’s conduct was in breach of public policy,
and
hence unconstitutional, is not always suited to determination by way
of exception.
[26]
As I
have said, there may be material evidence going one way or the other
which would be conclusive of the enquiry. But
the matter must
now be adjudicated on the principles applicable to exceptions and on
the basis of the evidence as contended for
in the papers as they
stand.
[27]
That is the
risk a party runs when it decides to test the development of the law
by way of exception.
[73]
The point of departure in considering the
question of a legal duty, is the fact that Puma was both
contractually and legally bound
under the common law to observe good
faith towards its co-contractant, Brentmark. The judgment of
Nkabinde J in
Botha
,
para 46, is clear authority for the proposition that this obligation
did not, for example, permit it to place its own interests
above
those of Brentmark.
[74]
In
Silent
Pond
[28]
Morley AJ was required to interpret a good faith clause in an
agreement not dissimilar to the dealer agreement: the matter also
related to a convenience store/filling station set up. In
considering the import of the clause in question, the learned Acting
Judge remarked as follows:
‘
[
70]
I must, however, give the duty of good faith in the implementation of
the tripartite agreement some meaning. It appears
to me that
the parties intended the scope of the good-faith provision to be no
more and no less than the scope of the duty
of good faith in a
fiduciary relationship implied by law. The seminal case in this
regard is
Robinson
v Randfontein Estates Gold Mining Co Ltd
1921
AD 168
at 180, where Innes CJ said:
“
Whether
a fiduciary relationship is established will depend upon the
circumstances of each case. . . . But, so far as I am aware,
it is
nowhere laid down that in these transactions there can be no
fiduciary relationship to let in the remedy without agency.
And
it seems hardly possible on principle to confine the relationship to
agency cases. There may surely be circumstances,
apart from
mandate, where a duty to acquire for the company may be inferred.”
[71]
The consequence of the agreement between the parties in the present
case is, in my view, that stated by Innes CJ in
Robinson
(supra)
at 177 – 178 where the learned judge stated as follows:
“
Where
one man stands to another in a position of confidence involving a
duty to protect the interests of that other, he is not allowed
to
make a secret profit at the other's expense or place himself in a
position where his interests conflict with his duty. The
principle underlies an extensive field of legal relationship.”
[72]
At 179 the judgment reads as follows:
“
For
it rests upon the broad doctrine that a man, who stands in a position
of trust towards another, cannot, in matters affected
by that
position, advance his own interests (e.g. by making a profit) at
that other's expense.”’
[75]
The judgment in
Silent
Pond
was referred to with approval by
Francis AJ in this Division in
Puma
Energy SA (Pty) Ltd v JR Petroleum Services (Pty) Ltd
Case No. 10854/2019 (12 December 2019). The latter judgment
records that late in 2019 JR Pet operated filling stations in
Kraaifontein and Airport Industria, selling petroleum products
supplied to it by Puma under a dealer agreement similar to the
present. A dispute had arisen regarding fuel which JR Pet was
allegedly selling and which had been delivered by a supplier
other
than Puma. The dispute centred around the interpretation of the
dealer agreement and whether it contained an exclusivity
clause
limiting Puma as the sole supplier, and Puma sought an urgent
interdict to restrain JR Pet from selling products other than
its
own. Incidentally, Puma was represented by, inter alia, Mr. van
Kerckhoven and JR Pet by Mr. Vivier SC.
[76]
I agree with counsel for OK that these
decisions are authority for the fact that the contractual
relationship between the parties
in this matter, arising from the
dealer agreement, was analogous to that of a fiduciary relationship
imposed by law. I did
not understand counsel for Puma to take
issue with this proposition. Indeed, a remark by Francis AJ in
para 16 of his judgment
suggests that the parties before him were in
agreement –
‘
.
. . that the parties should act in good faith in the overall
implementation of the dealer agreements, and they must act honestly
in their commercial dealings and not promote a party’s own
interest at the expense of the other in so an unreasonable manner
as
to destroy the basis of the consensus between the parties.’
[77]
The good faith clause is only to be found
in the dealer agreement. However, the duty on the part of Puma
to act honestly was
not limited to the dealer agreement. Given
the clear stance now of our appellate courts in regard to the
application of the
principle of contractual
bona
fides
, I am of the view that the same
parties, as co-contractants to the Brentmark sub-lease agreement,
were required to conduct themselves
in accordance with
constitutionally normative standards of public policy and ethical
business dealings in relation to that agreement
too.
[78]
And, I consider, the same must apply to the
BrentOK lease. While that sub-lease might be regarded, in the
light of the common
shareholding, as effectively having been
concluded between the same parties (or at least between parties with
a strong commonality
of interests), it is important to have regard to
the fact that Puma was materially interested in the conclusion of
that sub-lease
agreement, as it was required to consent to the
further sub-lease of ‘the shop’ to OK. Self-evidently,
Puma’s
approval of the sub-lease of the convenience store to OK
was the very genesis of OK’s business.
[79]
In the result, I conclude that neither Puma
nor Brentmark was entitled to place its own interests above those of
the other. Yet,
this is just what Puma is alleged to have done
in clear breach of the dealer agreement. It refused to consent
to the sale
of the business by Brentmark to JR Pet, for no
discernible reason and, says Brentmark, that refusal was designed to
advance its
own interests in relation to its on-going negotiations
with JR Pet, and to enable it to put the squeeze on JR Pet in those
negotiations.
[80]
In my view, such conduct, in and of itself,
attracts moral indignation. In the words of Prof. Hutchison
quoted above,
it lacks the ‘standards
of decency and fairness that underlies and informs the substantive
law of contract.’
CONSIDERATION
OF THE JUDGMENTS IN COUNTRY CLOUD
[81]
Counsel for Puma relied heavily on the fact
that OK was ‘a stranger’ to the dealer contract and
stressed that this was
what had dissuaded the appellate courts from
extending liability for pure economic loss in coming to the
assistance of the plaintiff
in
Country
Cloud.
[82]
It is apparent that in his judgment in
Country Cloud (SCA)
,
Brand JA did not non-suit the plaintiff because it was a ‘stranger’
to the contract
per se
.
Rather, the learned Judge of Appeal declined to find that the
conduct of the relevant departmental official upon which the
plaintiff sought to rely for its cause of action was wrongful, citing
three primary considerations in support thereof – (i)
foreseeability of harm; (ii) the spectre of indeterminate liability;
and (iii) non-vulnerability to harm.
[83]
In
Country
Cloud (CC),
Khampepe J
[29]
did not dismiss
the claim on the basis that the plaintiff was ‘a stranger’
to the contract either. Rather, the
learned Justice observed
that the case was about consideration of the extension of the common
law in circumstances which were to
be regarded as novel. She
too looked to the issue of wrongfulness as being decisive of the
matter.
[84]
I consider that there are, in any event,
certain significant distinguishing factors in the instant matter that
render reliance on
Country Cloud
inappropriate. Firstly, the factual setting is wholly
different. That matter concerned a building contract for the
completion of a partially built clinic, by a company (Ilima Projects)
which had borrowed money from Country Cloud to finance the
remainder
of the project. After Country Cloud had advanced the money to
Ilima, the Department of Infrastructure Development
in Gauteng
Province (“the Department”) cancelled the contract, which
cancellation ultimately led to the liquidation
of Ilima. In
seeking to hold the Department liable in delict for its loss, Country
Cloud sought to characterise the conduct
of the relevant departmental
official charged with oversight of the project and the cancellation
thereof, Mr. Buthelezi, as wrongful.
[85]
Country Cloud
was
not decided on exception. Rather, the matter went to trial,
firstly, on two contractual causes of action, with an alternate
claim
for pure economic loss bringing up the rear. The plaintiff
succeeded in the court
a quo
on
the contractual claims and the delictual claim was thus not addressed
in that court. On appeal, the contractual claims
failed and
were set aside. The SCA was thus required to consider the pure
economic loss claim afresh. It did so on
the basis of the
evidence on record adduced before the court
a
quo.
[86]
Noting that the delictual claim had been
formulated with some difficulty at a late stage of the proceedings in
the court
a quo
,
and that it was the subject of inept draftsmanship, Brand JA
considered that what was really at issue in the matter was whether
Mr. Buthelezi had a valid basis for cancelling the contract with
Ilima, and whether his conduct in doing so was to be regarded
as
wrongful. The SCA judgment reflects that the enquiry as to
whether Mr. Buthelezi’s conduct was wrongful was determined
by
a number of factors, including compliance with myriad statutory
provisions such as the Public Finance Management Act, the
Preferential
Procurement Policy Framework Act and various Treasury
regulations.
[87]
The
judgments in
Country
Cloud
must thus be considered against the background of the constraints on
the use of public power, and the reluctance to inhibit public
officials in the orderly discharge of their duties. Extension
of delictual liability in those circumstances was to be discouraged,
for reasons such as those advanced in
Van
Duivenboden
,
para 19:
[30]
‘
.
. .
The imposition of
legal duties on public authorities and functionaries is inhibited
instead by the perceived utility of permitting
them the freedom to
provide public services without the chilling effect of the threat of
litigation if they happen to act negligently and
the spectre of
limitless liability.’ (Internal footnotes omitted.)
[88]
In
Country
Cloud (CC)
, Khampepe J highlighted the
concerns relating to the granting of private law remedies against
persons wielding public power:
‘
[45]
It is true that the value of state accountability can be a reason to
impose delictual liability on a state defendant. Equally,
however, it should be stressed that this value will not always give
rise to a private-law duty. And Country Cloud did very
little
to explain how or why state accountability compels us to recognise a
private-law duty on the state to compensate it here.’
(Internal footnotes omitted.)
The
finding of the learned Justice was clearly based on the evidence
before the court.
[89]
Lastly,
the Constitutional Court had regard to the conduct of Mr. Buthelezi,
which was categorised by Khampepe J, para 47, as that
of ‘a
bungling public functionary’ and not of ‘one bent on
illicit gain.’ The learned Justice went
on to distinguish
the conduct of the public functionary in
Country
Cloud
from the fraudulent and dishonest conduct of the officials in
Gore
NO
,
in which the imposition of liability was motivated, from a public
policy point of view, by such conduct.
[31]
[90]
In summary, it is apparent that the
appellate courts were concerned about the fact that Country Cloud was
a true ‘stranger’
to the contract between Ilima and the
Department, and had regard to the fact that imposing delictual
liability on the Department
in those circumstances would, in general
terms, be interpreted as rendering contracting parties liable in
delict for harm suffered
by such ‘strangers’ arising
causally from the repudiation of their contracts. The spectre
of indeterminate liability
thus loomed large in granting the remedy
sought by Country Cloud.
[91]
The appellate courts also had regard to the
fact that Country Cloud was not vulnerable to risk, having had the
opportunity to address
this consequence when it contracted to provide
financial assistance to Ilima, whom it knew was already in financial
straits. This
consideration played a pivotal role in the
judgment of both courts.
91.1.
In
Country Cloud (SCA)
,
para 30, Brand JA noted that this consideration ‘weighs heavily
against the imposition of delictual liability on the Department’;
while
91.2
In
Country Cloud (CC)
,
para 67, Khampepe J stated that the consideration was ‘highly
significant and militates against recognising its claim.’
[92]
Lastly, both courts examined the conduct of
Mr. Buthelezi in detail, and were satisfied, upon analysis, that his
decision to cancel
the contract with Ilima was not tainted, dishonest
nor fraudulent, and was not wrongful in the circumstances.
WAS
OK REALLY A ‘STRANGER’?
[93]
I turn then to consider the factors at play
in the delictual claim before the Court. While OK was
manifestly not a party to
the dealer agreement, it was certainly no
’stranger’ to the commercial rationale which under-pinned
both that agreement,
the Brentmark sub-lease, and the BrentOK
sub-lease. Indeed, OK’s very commercial existence and
viability derived from
the Brentmark sub-lease, in which the premises
which were the subject thereof were described as ‘the filling
station at 51
Durban Road, Mowbray, Cape Town, including all fixtures
and fittings contained on the forecourt, underground tanks, pumps and
shop
.’
(Emphasis added). Put simply, the entire premises
(including the convenience store) were made available by
Caledonian
to Puma for it to lease out, and Puma agreed that the ‘shop’
component thereof be leased, firstly, to Brentmark
and, subsequently,
to OK.
[94]
In the result, neither OK nor its business
was unknown to Puma. Nor was the relationship between Brentmark
and OK unknown
to Puma. In addition, OK knew that if
Brentmark’s sub-lease with Puma was unlawfully cancelled before
it had run its
designated 10-year course, and that Brentmark thus
stopped trading, the substratum of its (OK’s) business would
fall away,
and it would suffer financial ruin. Brentmark also
knew of that eventuality and, to be sure, so did Puma.
[95]
The
BrentOK sub-lease was entirely dependent on the dealer agreement –
without such an agreement there was no commercial rationale
for
either the sub-lease with Brentmark or Brentmark’s sub-lease
with Puma. And, as observed at the commencement of
this
judgment, the conclusion of a dealer agreement between Puma and
Brentmark was stipulated as a condition precedent to the conclusion
of the Brentmark sub-lease.
[32]
The structure of the parties’ commercial arrangements was
therefore based on a high degree of inter-dependence and
it might be
said that the collapse of, for example, the dealer agreement would
have a domino effect on the other agreements.
[96]
In the circumstances, I am not persuaded
that OK was a ‘stranger’ to the contract in the sense
contemplated in
Country Cloud
.
But even if it was, I do not consider that its status as such
precludes it from seeking to recover damages for pure economic
loss
from Puma. OK’s acquaintanceship with Brentmark and Puma,
and its necessary involvement with them in the running
of its
business, meant that it was liable to suffer financial damage (a
reduction of its patrimony) if Brentmark and Puma fell
out and
terminated the dealer contract. The question ultimately then is
whether Puma is capable of being held liable in delict
for OK’s
losses in such circumstances.
IS
THE NATURE OF PUMA’S ALLEGED CONDUCT RELEVANT?
[97]
The case advanced on behalf of OK is based
solely on an alleged legal duty on Puma not to breach the good faith
clause. Its
claim is not that there was a duty on Puma not to
commit any breach of the dealer agreement, which would justify the
cancellation
of that agreement or the Brentmark sub-lease. OK
maintains, at para 69 of its intended amendment to the particulars of
claim,
that by breaching clause 24 (and only that clause), Puma was
in breach of its good faith obligations and effectively caused the
cancellation of the BrentOK sub-lease, thereby –
97.1
preventing OK from trading and operating
the convenience store;
97.2
forcing OK to close its business,
alternatively to sell it at a substantial loss; and
97.3
causing OK to suffer economic loss.
[98]
In
Gore NO
,
the Supreme Court of Appeal considered a claim for pure economic loss
in the context of the irregular and fraudulent allocation
of a
provincial government tender. The matter went to trial and was,
once again, not decided on exception: the court of appeal
thus had
the benefit of the record of proceedings before the court
a
quo
which had found for the plaintiff
in delict.
[99]
In a joint judgment, Cameron and Brand JJA
had regard to the conduct of the relevant officials in the granting
of the tender and,
in particular, whether fraud, per se, on the part
of the officials was a basis for finding that their conduct was
wrongful. The
province had argued that the state of the law was
such that the conduct of its officials (Louw and Scholtz) was not to
be regarded
as wrongful, and thus did not expose it vicariously to
delictual liability.
[100]
The learned Judges of Appeal referred to
matters such as
Olitzki
and
Steenkamp
and came to the following conclusion:
‘
[86]
But the province’s argument starts from the wrong premise.
We do not think that it can
be stated as a general rule that, in the
context of delictual liability, state of mind has nothing to do with
wrongfulness. Clear
instances of the contrary are those cases
where intent, as opposed to mere negligence, is itself an essential
element of wrongfulness.
These include intentional interference
with contractual rights (see eg
Dantex
Investment Holdings (Pty) Ltd v Brenner and others NNO
)
and unlawful competition (see eg
Geary &
Son (Pty) Ltd v Gove
). Closer to
the mark, in our view, is the following exposition by Boberg
The
Law of Delict
vol 1 (Aquilian
liability) at 33, who correctly highlights the significance of the
perpetrator’s state of mind in determining
wrongfulness:
“
Examination
of these crystallised categories of wrongfulness reveals the
determining factors. They are: (a) the nature of
the
defendant’s conduct (was it a positive act or an omission; did
it consist of deeds or mere words?); (b) the nature of
the
defendant’s fault (was it intention or negligence; (sometimes)
did he have an improper motive?); (c) the nature of the
harm suffered
by the plaintiff (was it physical harm or mere pecuniary loss?).
These criteria do not operate independently
but in conjunction
with one another. Thus harm of one kind (eg physical) may be
actionable whether caused intentionally or
negligently, harm of
another kind (eg mere pecuniary loss) may be actionable only if
caused intentionally (otherwise it is problematical).
. . . At
the root of each of these crystallised categories of wrongfulness
lies a value judgment based on considerations
of morality and policy
– a balancing of interests followed by the law’s decision
to protect one kind of interest against
one kind of invasion and not
another. The decision reflects our society’s prevailing
ideas of what is reasonable and
proper, what conduct should be
condemned and what should not . . . .”
[87]
In the language of the more recent formulations of the criterion for
wrongfulness: in cases of
pure economic loss the question will always
be whether considerations of public or legal policy dictate that
delictual liability
should be extended to loss resulting from the
conduct at issue.
Thus understood,
it is hard to think of any reason why the fact that the loss was
caused by dishonest (as opposed to
bona
fide
negligent) conduct, should
be ignored in deciding the question.
We
do not say that
dishonest
conduct will always be wrongful for the purposes of imposing
liability, but it is difficult to think of an example where
it will
not be so.
[88]
In our view, speaking generally,
the
fact that a defendant’s conduct was deliberate and dishonest
strongly suggests that liability for it should follow in
damages,
even where a public tender is being awarded. In
Olitzki
and
Steenkamp
the cost to the public purse of imposing liability for lost profit
and for out-of-pocket expenses when officials innocently bungled
the
process was among the considerations that limited liability. We
think the opposite applies where deliberately dishonest
conduct is at
issue: the cost to the public of exempting a fraudulent perpetrator
from liability for fraud would be too high.
[89]
These considerations would indicate that liability should follow even
if the plaintiff’s
case were based on dishonesty on the part of
the State Tender Board itself. But that is not the case before
us, and this
constitutes a further problem for the province’s
argument. This case does not concern the direct liability of
the tender-awarding
authority itself: it concerns government’s
vicarious liability for its employees’ conduct. The
province’s
argument is therefore misconceived, since it starts
from the wrong premise and therefore inevitably arrives at the wrong
conclusion.
The plaintiff’s case is that defendants are
vicariously liable for the wrongful conduct of Louw and Scholtz.
Once we have decided the issue of vicarious liability in favour of
the plaintiff, as we have, the only remaining question in the
context
of wrongfulness is whether Louw and Scholtz, public employees in
charge of a tender process, should themselves be exempt
from the
consequences of their own dishonest conduct. The issue in
Olitzki
and
Steenkamp
– whether loss resulting from conduct by the tender-awarding
authority itself should be visited with delictual liability
–
does not arise. For present purposes the question about
wrongfulness is no different than if Scholtz and Louw themselves
were
the defendants.
[90]
Thus understood the question is: is there any conceivable
consideration of public or legal policy
that dictates that Louw and
Scholtz (and, vicariously, their employer) should enjoy immunity
against liability for their fraudulent
conduct? We can think of
none. The fact that the fraud was committed in the course of a
public-tender process cannot,
in our view, serve to immunise the
wrongdoers (or those vicariously liable for their conduct) from its
consequences. And
we find no suggestion in
Olitzki
and
Steenkamp
that the tender process itself must provide government institutions
with a shield that protects them against vicarious liability
for the
fraudulent conduct of their servants. The wrongfulness issue
therefore cannot shield the defendants.’ (Emphasis
added;
internal references otherwise omitted.)
[101]
Counsel for OK stressed that the
particulars of claim (in their form as sought to be amended) make out
a case for conduct on the
part of Puma which was dishonest and
intentional, rather than negligent, and that this was a relevant
factor to be taken into account
when determining the wrongfulness
thereof. Counsel adverted to the following factors:
101.1
Puma had recalcitrantly refused to enter
into
bona fide
negotiations with Brentmark in relation to reviewing the pricing
structure of the dealer agreement. On that score it is said
that Puma accepted in its negotiations with JR Pet that the existing
structure had become obsolete;
101.2
In so doing, Puma refused to assist
Brentmark in its attempts to re-establish its profitability and avoid
financial collapse;
101.3
It further refused to consent to the sale
of the filling station business to JR Pet, a refusal which is said to
have been actuated
by an ulterior motive;
101.4
After the cancellation of the contracts,
Puma agreed to the temporary extension of the Brentmark sub-lease,
while making false representations
that it was in negotiations with a
third party; and
101.5
Its conduct indirectly, but effectively,
deprived OK of its sole source of income.
[102]
It was stressed that Puma was fully aware
of these facts and the potential consequences thereof and,
accordingly, it was said that
the pleadings suggested the requisite
degree of intention on its part. Further, it was submitted that
Puma’s dealings
with Brentmark were alleged to be based on
dishonesty and expediency, and intended to advance its own interests
to the detriment
of Brentmark, in circumstances where it knew that
the consequences thereof would lead to OK’s demise. It
was said that
the question of foreseeability on the part of Puma had
thus been sufficiently pleaded as well.
[103]
I agree with the submissions made by
counsel for OK. In my considered view, the alleged conduct of
Puma falls squarely within
the purview of that deprecated by the
learned Judges of Appeal in para [88] of
Gore
NO
. While accepting that there
may be an exculpatory answer put up by Puma when the matter goes to
trial, I am satisfied, for
the purposes of determining the exception,
that the element of wrongfulness has been pleaded with sufficient
clarity and adequacy
by OK at this stage.
[104]
There are two remaining factors which
require consideration at this stage. Firstly, there is the issue of
indeterminate liability
– the so-called ‘floodgates
argument’ – and then there is the question of OK’s
potential vulnerability.
LIMITLESS
LIABILITY
[105]
In
the landmark decision of
Trust
Bank
[33]
which heralded the importation of the principle of delictual
liability for pure economic loss into our common law, the erstwhile
Chief Justice cautioned (at 833A) of the danger of ‘oewerlose
aanspreeklikheid’ (limitless liability). This aspect
has
rightfully concerned courts in the decades since the decision in
Trust
Bank
,
in determining where ‘the bright line of limitation’
[34]
might next be drawn.
[106]
In
Country
Cloud (SCA)
Brand JA suggested the
following answer:
‘
[18]
What Rumpff CJ decided in
Trust Bank
was to cast the element of wrongfulness in the role of an instrument
of control to prevent limitless liability. In this way
the role
of wrongfulness became far more pivotal than the one it traditionally
performs with reference to conduct causing physical
harm. In
the latter situation wrongfulness is rarely contentious. In
fact, in these cases wrongfulness is presumed
with the result that
the onus is on the defendant to exclude the inference of wrongfulness
arising from physical harm (see eg .
. .
Telematrix
. . . para 13 . . .). But in the case of pure economic loss,
wrongfulness performs the function of a safety valve, a control
measure, a long stop which enables the court to curb liability where
despite the presence of all other elements of the Aquilian
action,
right-minded people will regard the imposition of liability as
untenable. Decisions building upon
Trust
Bank
demonstrate the clear recognition
by different members of this court that wrongfulness in the context
of delictual liability for
pure economic loss is ultimately dependent
on an evaluation based on considerations of legal and public policy.
The enquiry
is thus: do these policy considerations require
that harm-causing conduct should be declared wrongful and
consequently render the
defendant liable for the loss, or do they
require that harm should remain where it fell, ie with the plaintiff?
(See eg .
. .
Knop
. . . at 26J – 27D).’ (Internal references
otherwise omitted.)
[107]
Despite
the apprehension expressed by Brand JA in
Country
Cloud (SCA)
,
[35]
I do not consider that granting OK a right of action in delict in
this matter will lead to a flood of claims by ‘strangers’
to contracts. In the first place, the apparent novelty of the
situation can never be a bar to the development of the law
in that
regard. Were that to be the case,
Trust
Bank
would never have ushered in the sea change in jurisprudence which it
sought to do. Moreover, s39(2) of the Constitution mandates
the
development of the common law as the rights protected in the
Constitution are developed over time. In cases involving
questions of public policy and the constitutional values inherent
therein, it is invariable that there will be advances in the
common
law from time to time.
[108]
Secondly,
as I have attempted to demonstrate, we are not dealing here with a
true ‘stranger’ to the contract as contemplated
in, for
instance,
Country
Cloud
.
The facts of this case are sufficiently unique to permit it to
be distinguished from future claims by non-contracting parties.
Importantly, in this matter, the alleged dishonest and
self-serving conduct of the contracting party (Puma) sought to be
held liable for its commercial misdemeanours, is sufficiently
reprehensible to render it incomparable to that of the proverbial
‘bungling bureaucrat’ in
Country
Cloud
.
There is thus a marked degree of blameworthiness on the part of
Puma: a factor which both Brand JA and Khampepe J
[36]
found can legitimately be taken into account in determining whether
to extend delictual liability for pure economic loss.
[109]
Looking at Puma’s conduct here, the
trouble started when it refused to engage with Brentmark in order to
amend the pricing
structure of the dealer agreement. For the
reasons alleged in para 18 to 20 of the particulars of claim, Puma’s
refusal
in that regard was manifestly
mala
fide
and in breach of its obligations
under clause 24. The situation was then exacerbated when it
subsequently refused to consent
to the sale of the filling station
business to JR Pet and the convenience store to JR Foods, while its
only explanation for this
recalcitrant refusal was false. As I
have said, this evidences a marked degree of blameworthiness which
favours the imposition
of delictual liability.
OK’S
VULNERABILITY TO RISK
[110]
In
Country
Cloud (SCA)
, para 30, Brand JA
discussed the steps which the plaintiff in that matter might have
been in a position to take to avoid or limit
its losses. That
finding was of course based on all the evidence then before the
court. In this matter, at para 68
of the particulars of claim,
OK makes the allegation that it was not in a position ‘to
protect its interests by means of
appropriate contractual
stipulations with [Puma], against the forced cancellation of the said
contracts, which underpinned [OK’s]
convenience store
business.’
[111]
Puma may be in a position to adduce
evidence to the contrary at trial, but that is neither here nor there
on exception, where the
integrity of the factual allegations in the
particulars of claim must prevail. In the circumstances, I am
unable to reject
those allegations at this stage of proceedings. As
suggested in
Country Cloud (SCA)
the presence of such an alternate remedy to avoid loss would be a
pointer away from imposing delictual liability. But there
is
nothing before the Court at this stage to gainsay OK’s
allegation to the contrary.
CONCLUSION
[112]
In my view, the alleged conduct of Puma
falls short of ‘the standards of decency and fairness that
informs the substantive
law of contract’ and does not measure
up to the behaviour to be expected of a party in its position.
Right-minded persons
would, in my view, deprecate the manner in
which Puma failed to uphold its contractual and common law
obligations.
[113]
On the basis of the aforegoing
considerations, I am satisfied that OK has made sufficient
allegations in its particulars of claim
(as sought to be amended) to
justify its contention that Puma’s conduct was wrongful in the
circumstances. It follows
that its claim against Puma for
damages for pure economic loss are sustainable in law and that the
exception thereto falls to be
dismissed.
[114]
As regards OK’s application to amend
its particulars of claim, I am satisfied, in light of what I have
found, that the amendment
does not render the particulars of claim
objectionable and it must accordingly be granted.
[115]
On the issue of costs, there is no debate
that costs should follow the result in relation to the exception. As
far as the
costs of the amendment are concerned, I agree with the
submission by counsel for Puma that fairness dictates that each party
should
bear its own costs.
ACCORDINGLY,
IT IS ORDERED THAT:
A.
The exception is dismissed.
B.
The plaintiffs are granted leave to amend
their particulars of claim in the manner set forth in their notice of
amendment dated
21 August 2020 and served on 4 September 2020.
C.
The defendant shall pay the plaintiffs’
costs in respect of the exception.
D.
Each party shall bear its own costs in
respect of the aforesaid notice of amendment.
GAMBLE, J
[1]
Pretorius
and another v Transport Pension Fund and others
2019 (2) SA 37
(CC) para 15.
[2]
Ocean
Echo Properties 327 CC and another v Old Mutual Life Assurance Co
(SA) Ltd
2018 (3) SA 405
(SCA) para 9.
[3]
Vermeulen
v Goose Valley Investments (Pty) Ltd
2001 (3) SA 986
(SCA) para 7.
[4]
Trustees,
Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd
2006 (3) SA 138
(SCA) para 10.
[5]
SA
National Parks v Ras
2002 (2) SA 537
(C) at 541I-542A.
[6]
See
for example
Knop
v Johannesburg City Council
1995 (2) SA 1
(A),
Olitzki
Property Holdings v State Tender Board and another
2001 (3) SA 1247
(SCA),
Premier,
Western Cape v Faircape Property Developers (Pty) Ltd
2003 (6) SA 13
(SCA),
Telematrix
(Pty) Ltd t/a Matrix Vehicle Tracking v Advertising Standards
Authority SA
2006 (1) SA 461
(SCA),
Steenkamp
N.O. v Provincial Tender Board, Eastern Cape
2007 (3) SA 121
(CC),
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2014 (2) SA 214
(SCA) (“Country Cloud SCA”);
2015 (1) SA
1
(CC) (“Country Cloud CC”).
[7]
It
is to be noted that OK has formulated its claim against Puma on the
basis of a ‘legal duty’ allegedly owed by it
to OK.
In
Country
Cloud
(SCA) para 19
et
seq
Brand JA stressed the importance of the use of that term in matters
involving delictual claims for pure economic loss so as not
to
confuse the duty owed under the broader term used in the English law
of tort of a “duty of care”.
[8]
Minister
of Safety and Security v Van Duivenboden
2002 (6) SA 431
(SCA)
[9]
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
2014 (2) SA 214
(SCA) (“Country Cloud SCA”);
2015 (1) SA
1
(CC) (“Country Cloud CC”).
[10]
Dantex
Investment Holdings (Pty) Ltd v Brenner and others NNO
1989 (1) SA 390 (A).
[11]
Minister
of Finance and others v Gore NO
2007 (1) SA 111 (SCA).
[12]
The
following passage in
Gore
NO
,
para 86, was cited with approval by Brand JA in
Country
Cloud (SCA)
,
para 24
:
‘
We
do not think that it can be stated as a general rule that, in the
context of delictual liability, state of mind has nothing
to do with
wrongfulness. Clear instances of the contrary are those cases
where intent, as opposed to mere negligence, is
itself an essential
element of wrongfulness . . . (see eg
Dantex
. . .) and unlawful competition (see eg
Geary
& Son (Pty) Ltd v Gove
[1964 (1)
SA 434 (A)]).’
[13]
Max
Loubser and Rob Midgley (eds) Andre Mukheibir, Liezel Niesing &
Devina Perumal
The
Law of Delict in South Africa
2
ed (2012).
[14]
Fourway
Haulage SA (Pty) Ltd v SA National Roads Agency Ltd
[2008] ZASCA 134
;
2009 (2) SA 150
(SCA) para 21.
[15]
Olitzki
Property Holdings v State Tender Board and another
2001 (3) SA 1247
(SCA) para 12;
Everfresh
Market Virginia (Pty) Ltd v Shoprite Checkers (Pty) Ltd
2012 (1) SA 256
(CC) paras 24, 71 – 72;
Botha
and another v Rich NO and others
2014 (4) SA 124
(CC) para 46.
[16]
Beadica
231 CC and others v Trustees, Oregon Trust and others
2020 (5) SA 247 (CC).
[17]
See
for example
Eerste
Nasionale Bank van Suidelike Afrika BPK v Saayman NO
[1997] ZASCA 62
;
1997 (4) SA 302
(SCA);
NBS
Boland Bank v One Berg River Drive and others
[1999] 4 All SA 183 (SCA).
[18]
Brisley
v Drotsky
2002 (4) SA 1
(SCA);
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC);
Botha
v Rich NO
fn
15 above
.
[19]
Dale
Hutchison
Non-variation
clauses in contract: Any escape from the Shifren straightjacket?
(2001)118 SALJ 720, at 744
[20]
Cape
Town Municipality v Bakkerud
2000 (3) SA 1049 (SCA).
[21]
MV
MSC Spain; Mediterranean Shipping Co (Pty) Ltd v Tebe Trading
(Pty) Ltd 2008 (6) SA 595 (SCA).
[22]
Fleming
The
Law of Torts
4
th
ed at 136.
[23]
Mashongwa
v Passenger Rail Agency of South Africa
2016 (3) SA 528 (CC).
[24]
Van
Duivenboden
para 13.
[25]
Steenkamp
para 42.
[26]
H
v Fetal Assessment Centre
2015 (2) SA 193
(CC) para 10
et
seq.
[27]
Hlumisa
Investment Holdings RF Ltd and another v Kirkinis and others
2020 (5) SA 419
(SCA) paras 64 – 65.
[28]
Silent
Pond Investments CC v Woolworths (Pty) Ltd and another
2011 (6) SA 343
(D).
[29]
Paras
27 – 32.
[30]
See
para 34 above.
[31]
‘
[47]
. . . The same powerful policy considerations that motivated the
imposition of liability in
Gore
are thus not present here.’
[32]
‘
Cl
4.1 This agreement . . . is subject to the fulfilment of the
following suspensive conditions . . . by no later than the
respective
dates provided below:
4.1.1
. . .
4.1.2 the Dealer
Agreement is concluded and becomes unconditional, save for any
condition that this agreement become (sic) unconditional.
. .’
[33]
Administrateur,
Natal v Trust Bank van Afrika Bpk
1979 (3) SA 824 (A).
[34]
Fourway
Haulage
para 17.
[35]
‘
[26]
. . . For Country Cloud to succeed, we must extend delictual
liability to a contracting party for damages suffered by a stranger
to the contract resulting from the intentional repudiation of the
contract by that contracting party. This, as counsel
for
Country Cloud rightly conceded, has never been done before.’
[36]
Country
Cloud (SCA)
para 25;
Country
Cloud (CC)
para 40.