Thoroughbred Breeders' Association of South Africa v Price Waterhouse (416/99) [2001] ZASCA 82; [2001] 4 All SA 161 (A) (1 June 2001)

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Thoroughbred Breeders' Association of South Africa v Price Waterhouse (416/99) [2001] ZASCA 82; [2001] 4 All SA 161 (A); 2001 (4) SA 551 (SCA) (1 June 2001)

IN THE SUPREME COURT OF
APPEAL
OF SOUTH AFRICA
Case number : 416/99
In
the matter between :
THOROUGHBRED
BREEDERS’ ASSOCIATION
OF SOUTH AFRICA
Appellant
and
PRICE
WATERHOUSE
Respondent
CORAM : NIENABER, MARAIS, OLIVIER, FARLAM JJA and
BRAND AJA
HEARD : 2 - 3 MAY 2001
DELIVERED : 1 JUNE 2001
Auditor - duties of
vis-à-vis
client
- negligent failure by auditor, in auditing the books of a company,
to appreciate the significance of (and pursue) certain
unusual
features and discrepancies in the company’s books of account -
had it done so it would have led to the discovery
that the company’s
financial manager was engaged in large-scale thefts from the company
- company suing auditor for damages
for breach of contract for the
losses it suffered because the thefts continued for a further period
after the audit - company itself
careless in failing to properly
supervise the activities of its financial manager, knowing that he
had previously been convicted
of and imprisoned for theft - auditor
not so informed - causation and remoteness - test for - whether the
Apportionment of Damages
Act 1956 applies to breach of contract -
additional interest payable on increased overdraft - whether claimed
as special damages
or as
mora
interest - interest on the amount awarded as damages -
from when and on what scale - costs on attorney and own client scale.
JUDGMENT
NIENABER JA
/
NIENABER JA
:
[1]
Introduction
This is a case of a client suing its auditor for damages
for breach of contract. The complaint is that the auditor, in the
course
of a routine annual audit, failed to realise that the client’s
own financial manager, a man with a criminal record for theft
of
which the client but not the auditor was aware, had been
systematically stealing from it in the past and, if undetected, would

be likely to continue to do so in the future.
[2] The appellant, the plaintiff in the court below,
hereinafter referred to simply as “TBA”, is a statutory
juristic
person registered in terms of s 18 of the Livestock
Improvement Act, 25 of 1977. It is a non-profit making association of
breeders
of thoroughbred horses, as its name implies. Membership of
TBA is a precondition for the registration of horses to be entered
into
the stud book maintained by the Jockey Club of South Africa, the
body administering horse racing in this country. TBA has some 700–800

members, scattered throughout the country, who are predominantly
farmers. TBA furthermore acts as auctioneer and sales agent for
the
sale of thoroughbred horses and it derives its income principally
from membership fees and from the commissions it earns on
auctions
and sales.
[3] In 1991 TBA appointed one John Mitchell as its
financial manager. During his three months probationary period it was
discovered
that he had been convicted in 1985 of theft and sentenced
to a period of imprisonment of eight years of which he served
approximately
18 months. Even though he withheld this information
from TBA when applying for the position (and indeed supplied false
information
to it about his employment during the period of his
incarceration) it was nevertheless resolved by TBA’s council
(a) to confirm
his employment, (b) to monitor his activities in
future, (c) not to disclose his past history to other members of the
staff, and
accordingly (d) not to minute the discussion and the
resolution.
[4] Mitchell’s performance was in fact monitored
for the first eighteen months or so of his employment and proved to
be entirely
satisfactory. Indeed, he was highly regarded by his
co-employees and the council alike for his competence in
significantly improving
the manner in which TBA’s financial
affairs were conducted. By all accounts he was the dominant figure in
TBA’s entire
management team.
[5] Since the early 1970’s Messrs Richardson Reid
acted as auditors to TBA and prepared its annual financial
statements. The
responsible partner was a Mr Reid. It was part of the
modus operandi
of
Richardson Reid to do what was described in the trial as a
“reperformance” of the annual year-end bank
reconciliation.
This was described by TBA expert witness, Wainer, as
“a redoing of the task that has already been done by the entity
being
audited.”
[6] During 1990 Richardson Reid amalgamated with Price
Waterhouse Meyernel (as it was known at the time the trial
commenced), a
partnership of public accountants, hereinafter referred
to simply as “PW”. PW was the defendant in the Court
below
and is the respondent in this Court. Reid continued to be
responsible for the audit of the TBA’s books of account but,
following
PW’s new procedures, he no longer caused a
reperformance of the year-end bank reconciliations to be done. What
Reid did not
know, since he was never told and could not have
discovered it from the appropriate minutes, was that Mitchell had a
record of
proven dishonesty.
[7] The last set of financial statements prepared under
the supervision of Reid was for TBA’s financial year ending
October
1993. The actual field work was done by three audit clerks in
January 1994. Their work was initially reviewed by the audit manager,

Greyling, but ultimately by Reid himself. The core of TBA’s
case against PW is that there were a series of discrepancies
in TBA’s
books of account which ought to have alerted the auditing team, but
did not, that something was amiss; that if these
matters had been
pursued as they should have been, Mitchell’s misdemeanours
would have been discovered in January 1994; and
that the thefts he
committed thereafter with the consequent losses to TBA would have
been averted.
[8] It was only during November 1994 that it was
discovered that Mitchell had consistently stolen large sums from TBA.
He had done
so by a process described in the trial as “teeming
and lading” or “rolling over”. This consisted of
misappropriating
cash or cheque payments made by members or customers
of TBA and using them to “clear” earlier defalcations,
thereby
ostensibly “balancing” the books for the time
being. When Mitchell was confronted he immediately confessed to the
fact
but not necessarily to all the details of his embezzlement. At
that stage it was believed that the thefts had commenced after
October
1993 i.e. after the period on which PW had focused for
purposes of its last audit. PW, more particularly Reid, was thereupon
commissioned
to investigate and prepare a full report on the extent
of Mitchell’s thefts. This he did. He uncovered a massive
series of
thefts which he quantified as being of the order of R
1 697 929.28. Mitchell was dismissed. TBA obtained summary
judgment
against him based on Reid’s report. (An amount in the
vicinity of R100 000 was recovered from him.) At the same time

and at TBA’s insistence he was prosecuted, convicted and again
imprisoned.
[9]
TBA’s complaint
During the course of these investigations it became
apparent that Mitchell had also stolen considerable sums during 1993,
later
estimated to be about R300 000. It was this disclosure,
that Mitchell’s thefts predated the 1993 audit, that became the

source of the present proceedings against PW. PW, it was common
cause, was contractually bound to exercise reasonable care in the

execution of its audit and not to do the work negligently. The
allegation is that it failed in that respect; that had the work
been
done properly, Mitchell’s theft would have been uncovered in
January 1994; and that all the direct losses suffered by
TBA due to
Mitchell’s subsequent thefts and his inability to repay were
accordingly for the defendant’s account. The
factual basis of
TBA’s quantification of its claim, much to PW’s
indignation, was Reid’s special report commissioned
by TBA
after the thefts were initially discovered in November 1994.
[10]
PW’s defence
PW in its plea denied that it was negligent and
accordingly that it committed a breach of contract
vis-à-vis
TBA. In the alternative it denied that any breach it may
have committed was a cause of TBA’s loss. The true cause of the
TBA’s
loss, so it alleged, was TBA’s own negligence
first, in employing Mitchell; secondly, in retaining him as its
financial officer
after discovering that he had a criminal record;
thirdly, in failing to inform PW thereof; and fourthly, in failing,
due also to
its own admittedly inadequate and lax internal controls,
to properly supervise and control Mitchell’s activities. It was
furthermore alleged by PW in its plea that the parties at all
material times contemplated and agreed that PW’s appointment

was made on the basis that it would not be liable to TBA “for
any loss suffered by the latter as a result of the defendant’s

breach of contract, if the plaintiff’s own negligence was the
primary cause, or alternatively a material cause, or alternatively
a
cause of its loss”. As a final alternative it was pleaded that
TBA’s claim was liable to be reduced because TBA was
itself
negligent, because its negligence was a contributory cause of its
loss and because the Apportionment of Damages Act, 34
of 1956 (“the
Act”) was applicable to its cause of action.
[11]
The issues and the Court
a
quo’s
findings thereon
The first major issue before the Court
a
quo
(Goldstein J sitting in the Witwatersrand
Local Division of the High Court) was whether PW was negligent (and
hence committed a
breach of contract) in not being sufficiently alert
in conducting its October 1993 audit. The Court
a
quo
held that it was and since it was common
cause that TBA had suffered a loss (the quantification of which was
eventually settled
between the parties), the next major issue was
whether such negligence was the cause of such loss. And that issue
posed the next
two, namely, whether TBA was not itself negligent and
if so, whether such negligence was not the true cause of its loss.
The Court
a quo
found
that TBA was indeed negligent and that its negligence was the real
and dominant cause of its loss. Despite that finding Goldstein
J held
that TBA was not non-suited because the claim was partly rescued by
the Act, even though it was not framed in delict but
in contract. It
further held that TBA was eighty percent to blame for its own loss
and that the damages it was otherwise entitled
to recover had
accordingly to be reduced by that percentage. The judgment has been
reported as
Thoroughbred Breeders’
Association of South African v Price Waterhouse
1999
(4) SA 968
(W).
[12] The parties had earlier agreed on the
quantification of Mitchell’s misappropriations of cash receipts
and cheques payments
as being R1 389 801.90. The Court
a
quo
deducted R143 403,44, in respect of
moneys stolen before 31 October 1993. In the result the Court
a
quo
calculated that TBA was entitled to
R1 246 398,46 less eighty percent, resulting in an award of
R249 279,69. Both
parties were in agreement before us that the
amount of R143 403.44 was wrongly deducted and that,
consistently with the Court
a quo
’
s
apportionment of liability, the sum should have been R277 960.38
(being twenty percent of R1 389 801.90).
[13] TBA disputed, as a matter of law, the finding that
the Act was applicable to a claim founded on breach of contract and
it disputed,
as matters of fact, both the finding and the Court
a
quo
’
s assessment of the proportion of
TBA’s own negligence. There were other issues as well. PW had
instituted a counterclaim
for the payment of its agreed fees for the
preparation of the special report referred to earlier. This was
initially disputed by
the TBA on the basis that its “obligation
to pay is reciprocal to [PW’s] obligation to produce a report
which is accurate
and true”. The Court
a
quo
found that there was no merit in this
defence and the point was not pursued by TBA. Nor did TBA dispute its
obligation to pay the
agreed fees on the ground that these were
foreseeable consequences of PW’s alleged breach of the routine
audit contract.
The agreed fee of R74 000 is accordingly to be
deducted from the amount, if any, to be awarded to TBA. Other issues
which
remain alive are whether PW was liable to TBA for the interest
TBA was obliged to pay its bank on the amount by which, due to
Mitchell’s
undiscovered theft, its overdraft was inflated; and
from what date and at what rate interest on its claim was otherwise
to be calculated.
And finally there was the question of costs. Save
for a special order against PW in respect of the time spent in
proving the
quantum
which
was eventually agreed (in respect of which there is still an
outstanding issue, namely, whether such costs should have been

awarded on the scale as between attorney and client or attorney and
own
client), the
Court, in the exercise of its discretion, initially resolved to make
no order as to costs in respect of the trial.
[14]
The orders made
After a trial which commenced in May 1997 and concluded,
with interruptions, some seventeen months later and generated a
record
of close to 6 500 pages, the Court
a
quo
on 7 July 1999 and at 1038B-F of the
report made the following order:
“
1. The defendant is ordered to pay the sum of
R249 279.69 to the plaintiff together with interest thereon at
Nedbank’s
prime rate to its most favoured customers and
reckoned from date of judgment to date of payment.
2. The plaintiff is ordered to pay to the defendant the
sum of R74 100 together with interest thereon at 15,5% per annum
from
6 February 1996 to date of payment.
3. The defendant is ordered to pay the plaintiff’s
costs, including the costs of two counsel, of 14 days’ trial
spent
on
quantum
on
the scale as between attorney and client and including the costs of
the argument on the admissibility of J W Mitchell’s
admissions
at his criminal hearing.
4. The defendant is to pay the plaintiff’s costs,
including the costs of 2 counsel, of consultation with Mr D Dorfan
and the
latter’s qualifying fees.
5. Save as aforesaid there will be no order as to costs.
6. …”
[15] Both parties sought leave to appeal. At the same
time the Court
a quo
considered
the aftermath of a secret payment into court of R281 680 which
PW had made on 16 April 1997 (before the commencement
of the trial)
in terms of Supreme Court rule 34(12). Leave to appeal was duly
granted to both parties but in the light of the secret
payment and
allowing for a
spatium deliberandi
until
24 April 1997, the Court
a quo
amended its earlier order and on 22 September 1999 (at
1038H-1039D) substituted for it the following order:
“
1. …
2. The order of 7 July 1999 is amended by the deletion
of paragraphs 3, 4 and 5 and the substitution therefor of the
following:
‘
3. The defendant is ordered to pay the
plaintiff’s costs, including the costs of two counsel and the
qualifying fees of the
plaintiff’s expert, Harvey Elliot
Wainer, incurred on or before 24 April 1997.
4. The plaintiff is ordered to pay the defendant’s
costs, including the costs of two counsel and the qualifying fees of
the
defendant’s expert witness, Mr. Guy Smith, incurred after
24 April 1997 subject to the contents of paragraph 5 below.
5. The defendant shall not be entitled to recover costs
in respect of 14 days’ trial spent on
quantum,
including the costs of the argument on the admissibility
of J W Mitchell’s admissions at his criminal hearing.’
…
4.1 …
4.2 …
4.3 …”
[16] This, then, is the appeal against certain aspects
of that order.
[17] The first and perhaps foremost issue is whether PW
breached its agreement with TBA to act as its auditor and hence to
audit
its financial statements for the financial period ending 1993.
That question presents itself in two parts: (a) what were the terms

of the agreement between the parties; and (b) did PW breach any of
those terms?
[18]
The terms of the agreement
The agreement in respect of the audit for 1993 was
concluded when PW was routinely appointed in March 1993 as TBA’s
auditors
by its Annual General Meeting. This has been a recurring
annual item on the agenda since the 1970’s when Richardson Reid
was first appointed as auditors to TBA and Reid became the partner
primarily responsible for the TBA account, both before and after

Richardson Reid was absorbed into PW in 1990. The actual terms of the
appointment were never formalised as such. The relationship
between
the parties was accordingly governed by such terms as were customary
in South Africa at the time between a client and his
auditor.
[19] There has been a fair measure of recent learning in
various cases in various jurisdictions about an auditor’s
contractual
duties and responsibilities
vis-à-vis
his client. We were referred to a host of authorities of
which I list the more prominent ones as a source for future
reference:
In re London and General Bank (No.
2)
[1895] 2 Ch 673
(CA);
In
re Kingston Cotton Mill Co (No 2)
[1896] 2 Ch
279
(CA);
In re City Equitable Fire Insurance
Co Ltd
[1925] 1 Ch 407
(CA);
Fomento
(Sterling Area) Ltd v Selsdon Fountain Pen Co Ltd
[1958]
1 All ER 11
(HL);
Re Thomas Gerrard & Son
Ltd
[1967] 1 Ch 455
;
Pacific
Acceptance Corporation Ltd v Forsyth and Others
(1970)
92 WN(NSW) 29;
Tonkwane Sawmill Co v Filmalter
1975 (2) SA 453
(W);
Alexander
and Others v Cambridge Credit Corporation Ltd
(1987)
9 NSWLR 310
;
Fletcher v National Mutual Life
[1990] 3 NZLR 641
(HC Auckland);
AWA
Ltd v Daniels t/a Deloitte Haskins & Sells
(1992)
7 ACSR 759
;
Galoo Ltd (in liq) and Others v
Bright Grahame Murray (a firm) and Another
[1995]
1 All ER 16
(CA);
Dairy Containers Ltd v NZI
Bank Ltd
[1995] 2 NZLR 30
(HC Auckland).
[20] For present purposes it is not necessary to delve
into these authorities or to discuss controversies such as whether
and to
what extent an auditor in conducting an audit is bound
nowadays to actively search for, detect, pursue and, if needs be,
prevent
fraud and other illegal acts (in contradistinction to mere
inaccuracies, irregularities and errors) that may have been committed

during the year under review. It is not so necessary because it was
common cause between the parties in this case that the plaintiff

would conduct its audit “in accordance with generally accepted
auditing standards” (GAAS) and “with due professional

care required of an auditor in public practice and would not act
negligently”. It was so alleged by TBA and so admitted by
PW.
Being admitted, there is no need to enquire whether these were tacit
terms arising
ex consensu
or
by operation of law
.
Nor
is it necessary to enquire whether TBA succeeded in proving the
additional term which it alleged (but PW disputed) that PW would

“properly verify investments shown in the accounts of the
plaintiff”. Whether the failure to do so (which was common

cause) constituted the breach of a particularised term or a
particular manifestation of the breach of a general term is not
conclusive.
However it is presented, PW would have been in breach if
it had been careless in the execution of any aspect of its mandate,
measured
against the general standards prevailing in the profession
at the time.
[21] Those standards are to be gathered from relevant
legislative enactments (in this case the Public Accountants’
and Auditors’
Act, 80 of 1991), from the profession’s own
codifications of an auditor’s duties (such as the material
issued by the
South African Institute of Chartered Accountants), from
authoritative publications and legal decisions, here and abroad, and
from
expert evidence presented to the court. AU130 of the statement
issued by the South African Institute of Chartered Accountants states

generally:
“
Due professional care must be exercised during
the examination and in the preparation of the report.
This standard requires the auditor to perform his work
with due care and imposes a responsibility upon each person within an
auditor’s
organisation to observe the required standards of
field work and reporting. Exercise of due care requires critical
review at every
level of supervision of the work done and of the
judgment exercised by those assisting in the examination.
The application of due care concerns what the auditor
does and how well he does it. For example, due care in the matter of
working
papers requires that their content be sufficient to provide
an important support to the auditor’s opinion and to show
compliance
with generally accepted auditing standards.”
In this respect the evidence of the expert witnesses,
Wainer for TBA and Reid and Smith for PW, was perhaps more directly
in point
than the other sources mentioned. The issue before the trial
court, once again, was not whether it was incumbent on PW, as a
particularised
term of its agreement with TBA, to unmask Mitchell as
a thief. The issue was whether PW was careless and thus negligent and
therefore
in breach of the uncontested general term in not
recognising and reacting to certain irregularities and anomalies in
TBA’s
books of account which TBA alleges should reasonably have
alerted it to Mitchell’s deviousness. TBA’s allegation,
which
was hotly disputed by PW, was that the work on the financial
statements for the period ending 31 October 1993 was negligently done

in that respect and that PW was accordingly liable for the
consequences flowing from its failure to pick up and follow
Mitchell’s
trail. The first enquiry with which this case is
accordingly concerned is whether PW was negligent in two respects in
particular:
(a) in not verifying the promissory note included in the
item “investments” in the Futurity race programme; and
(b)
in not appreciating the significance in the bank reconciliations
of the items described as “outstanding deposits”. I
deal
in sequence with each of these alleged manifestations of negligence
and hence of breach of contract.
[22]
The promissory note
The TBA 1993 financial statements reported separately on
the Futurity race programme. That was a programme designed to provide
additional
stake money collected from all breeders and participating
owners to be distributed to such breeders and owners whose horses
finished
within the first four in any of a series of designated
races. The funds so collected were retained in a separate bank
account and
in certain selected investments. The financial statement
relating to this programme showed investments of R423 665. The
working
papers of Ms Smit, who was responsible for the field work on
this part of PW’s audit, indicated that this investment
consisted
of only two items, one being the balance of a secured
mortgage debenture of R315 165 and the other a promissory note
issued
by the Department of Trade and Industry (“DTI”)
and dated 7 February 1993. (The face value of the note, issued by DTI

to Snoek Wholesalers (Pty) Ltd, and which TBA obtained at the
discounted price of R108 500 was R138 864.) A note in
Smit’s working papers referred back to PW’s 1992 working
papers, which meant that she must have appreciated, if she
applied
her mind to it, that the date 7 February 1993 could not have been the
date of issue but could only be its date of maturity
and that the
difference of R30 364 between the face value and the discounted
value remained unaccounted for. Smit did not
demand to see the
original of the promissory note. Had she done so it could not have
been produced to her. The reason was that
TBA no longer held it.
Mitchell had earlier arranged with DTI to replace the note which in
the meantime had gone stale with a cheque
for R138 864 which he had
deposited on 3 May 1993 in the TBA sales account (not the Futurity
programme bank account) and which
was dealt with in the books as if
it constituted a payment received from another TBA debtor, one
Wilensky. In this manner Mitchell
contrived to cover, in TBA’s
books, payments previously made by Wilensky to TBA but which he had
misappropriated. The net
effect was that Wilensky was no longer
reflected as a debtor but that TBA had lost the R108 500 which
it had initially invested
(as well as the difference between that sum
and the face value of the note), although it was still reflected in
the financial statements
of the Futurity race programme as a current
asset.
[23] TBA’s complaint is that it was negligent of
Smit, knowing as she did that TBA’s system of internal control
was
lax (which was common cause), not to have verified the continued
existence of the document when it was patent that it had matured
and
had thus gone stale since the previous audit in 1992. Had she done
so, instead of simply relying on what had been done in 1992,
she
would have discovered that the document no longer existed. That
discovery would have set in motion a chain of enquiry, so it
is
alleged, which would inevitably have led to Mitchell’s exposure
and the prevention of his future defalcations. This is
not,
therefore, the sort of case where suspicions were aroused but not
pursued; this is a case, says TBA, where suspicions were
not aroused
when, reasonably, they should have been aroused and pursued.
[24] Reid, PW’s partner who supervised the audit
and testified on its behalf, conceded that the existence of the
document
should have been verified and that an explanation for its
absence ought to have been asked for. If Smit had not asked for an
explanation
“then she did not perform her work properly”.
Smit was not called as a witness by PW although she was still in PW’s

employ at the time of the trial. The inference is inescapable that
she did not ask Mitchell for an explanation. Reid testified
that if
she had done so “I cannot imagine what explanation … was
or was not offered, if any”. Mr Smith, an experienced
and
respected auditor, who also gave expert evidence on behalf of PW,
likewise confirmed that in the circumstances, more especially
the
fact that the maturity date had obviously expired, Smit should have
insisted on seeing the document and should have demanded
an
explanation from Mitchell if it could not be produced. Nevertheless
this failure, according to Smith, did not amount to negligence
on
PW’s part. One reason was that the promissory note was not in
auditing terms a material item; and, that being so, it did
not
imperatively call for separate “verification” by the
auditor concerned. (The other reason is discussed in para
42.)
[25] Materiality in this context is understood to refer
to an item or matter which is significant in relation to the
substantial
correctness of the financial statements as a whole and
which would ordinarily be calculated to influence a client (or any
other
regular reader of the financial statements) in his assessment
thereof. As it was put by Reid in evidence: “Well, material

means important in the context of the presentation of the annual
financial statement.” AU010.03 of the statement issued by
the
South African Institute of Chartered Accountants reads:
“
The elements of “materiality” and
“audit risk” underlie the application of all the
standards, particularly
the standards of fieldwork and reporting. The
concept of materiality is inherent in the work of the auditor. There
should be stronger
grounds to sustain the auditor’s opinion
with respect to items which are relatively more important and with
respect to those
in which the possibilities of material error are
greater than with respect to those of lesser importance or those in
which the
possibility of material error is remote.”
[26] From an auditing perspective the promissory note,
according to Smith, was not a material item, that is to say, an audit
risk
which demanded separate attention. He gave a number of reasons
for saying so:
Quantitatively, being an asset of only approximately
R100 000 and representing less than 1% of TBA’s total asset
holdings
of R16m, it was relatively trivial.
The fact that it was separately treated in the
financial statements as part of the Futurity race programme and
reflected “an
operating profit” of R79 000, whereas it
was in truth a loss situation, was also not of any great
consequence. That is
so, firstly, because PW did not purport to
render a separate report on the Futurity account on its own but
reported on TBA’s
financial statements as a whole; nor did
TBA, which was in the habit of transferring assets freely from one
fund to another,
administer the Futurity programme separately.
Secondly, the financial statements did not in any event reflect the
true situation
of TBA (including the Futurity account) because of a
deliberate change in the accounting policy of TBA in 1993, when it
was decided
to write back the provision made in 1992 for doubtful
debtors and to make no further provision therefor in the 1993
statement.
This had the effect, so Smith contended, of inflating its
1993 “operating profit” by R385 388 and the value

of its 1993 assets by R991 907. In the result PW felt
constrained to qualify its 1993 audit report in that respect. The

consequence was that the ostensible operating profit of R79 000
in the Futurity programme paled into insignificance and would
not,
in the light of PW’s qualification of the financial
statements, have impressed any reasonably informed reader.
The inclusion in the financial statements of the
promissory note as an asset did not represent “an audit risk”
and
diminished the need for verification. Once it had been raised as
an asset in TBA’s books of account, it could only be removed

by either a payment or by writing it off as a separate item. Since
neither eventuality was likely to occur its loss by theft
was bound
to be discovered at the next audit. Consequently it was not vital
that it should have been detected in the current
one.
Finally, materiality is a matter for the judgment of
the auditor concerned. Smit, and those above her, Greyling, the
audit manager,
and Reid, the partner, adjudged that it was not
necessary to verify the existence of the promissory note. That being
so it cannot
be said that Smit’s judgment call was negligent
in the circumstances.
[27] Smith’s opinion that the promissory note was
not material and that the failure to verify it was accordingly of no
significance
in the broad scheme of things was contradicted by PW’s
own principal witness, Reid, and by TBA’s expert witness,
Wainer.
That concession makes the discussion about materiality
somewhat academic but it was persisted in in argument and must
accordingly
be considered. In my opinion and for the reasons that
follow Smith’s assertion that the non-verification of the
promissory
note was not material, must be rejected. I deal with the
points made by Smith in the same order.
[28] As to (a) and (b): The assets of the Futurity
programme were separately identified in the financial statements. A
loss (which
should have been reflected) instead of a profit (which
was), would doubtless have been heeded by management and members as
something
which required investigation and attention. It would have
tended, if reported as a loss, to have instilled a sense of disquiet
rather than one of comfort. Nor does the change in TBA’s
accounting policy, however ill-advised it may have been, assist PW.

It is a red herring. A greater falsity in the books for which TBA was
responsible does not nullify a lesser one for which PW was

responsible. That TBA changed its policy as regards the treatment of
debtors could not therefore relieve PW of the obligation of

reflecting a true state of affairs in the financial statements.
[29] As to (c): It is true that the unavailability of
the promissory note would in due course, probably at the next audit,
have
been detected. On the other hand, it was not detected during the
1993 audit and, if it was missed once, it could have been missed

twice. In the meantime, because of its non-detection, Mitchell was
enabled to misappropriate moneys in excess of a million rand.
An item
which might otherwise not have been regarded as an audit risk (and
hence as material) may become material precisely because
it stands
out, or ought to do so to the alert auditor, as being anomalous,
irregular, unusual or illegal and as such as demanding
of further
investigation. As it is stated in PW’s own audit manual:
“
Sometimes a matter may not be significant in
itself but may have implications for other matters which are
material.”
That would be particularly so when such an item
may be indicative of a recurring irregularity or of a
flaw in the system or of dishonesty. This, according to TBA, was such
a case.
I agree. Materiality should not be judged in isolation. It
does not depend merely on the magnitude or not of the item relative
to the whole but also on its actual or potential implications
relative to other items or relative to the future. The stale
promissory
note was an anomaly which it was common cause between the
witnesses for both sides, called for further investigation. In the
absence
of a satisfactory explanation from management the stale
promissory note could be a pointer to other irregularities in TBA’s

books of account. As such it was material.
[30] As to (d): It may well be that materiality is
initially a matter for the judgment of the auditor himself. That does
not invest
him with immunity should his judgment afterwards be
adjudged to have been so conspicuously wrong as to be symptomatic of
carelessness
on his part. In this case, moreover, it is by no means
clear from her working note whether Smit consciously exercised any
judgment
at all not to verify the promissory note. This was conceded
by Reid. She simply reproduced the item from the 1992 statements and

either overlooked or ignored the warning signal that it was outdated.
This is in contrast to the manner in which the promissory
note was
treated in the 1992 audit where it received meticulous attention. By
way of further contrast other items in the 1993 audit
with a value
far less than R100 000 were in fact closely scrutinised.
[31] The Court
a quo
’
s
treatment of this aspect (at 1005H-J of the report) was odd. It
expressed a preference for Smith’s view, notwithstanding
Reid’s
concession to the contrary, that the non-verification of the
promissory note was not material. It then stated:
“
Furthermore, the TBA is an association not for
profit. An operating loss of about R30 000 in place of a profit of
R79 893 does not
seem of great significance when one considers that
the TBA has the substantial number of 800 members.
It seems to me too that there is a fatal flaw in TBA’s
case relating to materiality of the promissory note, and that is that

no evidence has been led on Mitchell’s financial position as at
31 October 1993. If he were able to repay the amount stolen
by him on
that date, the figures in the operating profit would have been
unaffected and Mitchell’s debt would have replaced
the
promissory note as an asset.”
The first paragraph contains a
non
sequitur
. The second entails a disregard of
both the significance of a discovery that the note was missing and of
the probabilities. As
to the former, the significance of such a
discovery would have been that Mitchell’s inability to produce
the note coupled
with an inability to provide a plausible explanation
as to how it was accounted for (a matter dealt with in para 42),
would have
led to his unmasking as a thief. His ability, if any, to
repay the amount misappropriated would not have altered that and
would
have been irrelevant to the materiality of the
misappropriation. As to the latter, in the light of Mitchell’s
proven gambling
addiction, and his thefts which commenced in March
1993 and appear to have increased exponentially until November 1994
it is surprising
to learn that he might have been able to make good
his defalcations in October 1993. There was not an iota of evidence
that pointed
in that direction. The Court then continued (at
1006B-D):
“
It follows from the aforegoing that I am of the
view that TBA did not discharge its
onus
in regard to materiality. In reaching this conclusion I
do not overlook that Reid says that he would have verified the
promissory
note and that Smith too, despite his evidence against
materiality, says that he would have done so. These factors are,
however,
not weighty enough. It follows, too, that I cannot find that
Smit should have verified the promissory note even if there was no

indication of anything amiss in regard thereto.”
Having first found that Smit need not have verified the
promissory note, the Court then proceeded to find that she should at
least
have examined it and that she was negligent in not doing so.
This finding is a little difficult to reconcile with the earlier
finding
that the promissory note was not a material item. If it was
not a material item there was no duty on Smit to examine it and
consequently
she would not have been negligent in failing to do so.
[32] For the reasons stated earlier I am of the view
that the Court
a quo
erred
in finding that the promissory note was not a material feature of the
financial statements requiring verification. It follows
that there
was a duty on PW to do so and that its failure was negligent in the
circumstances and constituted a breach of contract.
I deal with the
consequences of that finding later in this judgment in conjunction
with the next issue
viz,
whether
PW committed a breach of contract in not appreciating the
significance of what was described during the trial as the
“outstanding
deposits”.
[33]
The outstanding deposits
:
The audit clerk who was deputed to perform the field
work on this part of the audit was a Mr A. Ford. Like his
counterpart, Ms Smit,
he was still, at the time of the trial, in the
employ of PW but was not called to give evidence on its behalf. His
working papers
reveal that he had reviewed the bank reconciliations
and that he reported that “the overall results were
satisfactory”.
His working papers were reviewed by Greyling,
the audit manager, who was likewise not called to give evidence, and
by a partner
of PW, Reid, who was.
[34] TBA operated several accounts with its bank. One of
them was the sales bank account, known as “TBA Sales”.
Ford’s
duties in terms of his working programme included the
duty to:
“
examine monthly bank reconciliations and
investigate any unusual reconciling items, outstanding deposits,
etc.”
This involved a comparison and reconciliation of TBA’s
cash book and its monthly and year-end bank statements. Ford’s

note, in elaboration of what he had “done”, reads:
“
Work done
Examined monthly bank recons for Authorisation of Bank
recons by John Mitchell and for large and unusual items.
Results
1. John Mitchell (accountant) sighnes (sic) the bank
recons monthly as evidence of his reviews (not all recons were
sighned) (sic).
2. Unpaid cheques were not written back.
3. Overall results were satisfactory.”
Mitchell in fact did not sign the monthly bank
reconciliations. Ford also omitted to mention the “outstanding
deposits”.
Those referred to a series of entries in the monthly
bank reconciliations routinely done by Ms Gloria Seamen, an employee
of TBA
who worked under Mitchell. These bank reconciliations reveal
that payments received by TBA and recorded in the cash book, and for

which receipts were issued, were not, as one would have expected,
immediately banked. So for example the bank reconciliation as
at 25
April 1997 reflected three payments of R23 700, R52 700 and
R25 300 respectively for which receipts had been
issued but
which had not been deposited at the bank. The first two items were
still undeposited a month later and the amount of
R23 000, which
in the meantime had been listed with other items described as
“outstanding deposits”, was still
recorded as
“outstanding in the bank reconciliation of September 1993”.
It was only “cleared” (as were
all the other “outstanding
deposits” totalling as at that date, R148 903,44), at the
end of September 1993, in
time for the year-end reconciliation of
October 1993 which Mitchell knew would be reviewed by the auditor. As
the Court
a quo
remarked
(at 978G-H):
“
Of course, a long-outstanding deposit is a cause
for suspicion. Money, and especially cash, ought to be deposited as
soon as possible.
If this does not occur a reasonable suspicion
arises that the money has been stolen.”
The Court
a quo
regarded it (at 979J-980A) as an:
“
overwhelming probability arising from Ford’s
working papers that he must have overlooked the outstanding deposits
despite
his having perused the bank reconciliations, or at least,
that he failed to recognise their significance if he saw them.”
[35] A further feature, not commented on by Ford, was
the manner in which the outstanding deposits were ‘cleared’.
This
was done
inter alia
by
two cheques of R25 000 and R18 000 respectively signed by
Mitchell and drawn on the TBA sales account in favour of
itself. This
could conceivably have been a legitimate means of reconciling the
bank statements with the cash book on paper but
only if there were
vouchers substantiating that the payments which had not been banked
had been used in the course of TBA’s
operations. It is common
cause that there were none. In the circumstances it is difficult to
escape the conclusion that the clearing
of the outstanding deposits
in this manner was simply a ruse by Mitchell to pull the wool over
the auditors’ eyes.
[36] According to Wainer the outstanding deposits as an
item was not the only anomaly that Ford should have picked up but did
not.
It is common cause that if Ford had done a reperformance of the
1993 year-end bank reconciliations he would, in the words of Wainer,

have identified
“
numerous deposits in the cash books which were
not in agreement with the bank statement entries. The differences
identified indicate
deposits in the cash book not appearing in the
bank statements; deposits in the bank statement not appearing in the
cash book,
and deposits where the amount in the cash book is not in
agreement with the amounts per the bank statement ...”
There is a difference between Wainer and Smith as to
whether it was necessary for PW to have done such a reperformance.
According
to Wainer it should have been done because TBA was a
relatively small and tightly-knit entity with admittedly poor
internal controls.
Smith disagreed. The Court
a
quo
preferred the view expressed on this
point by Wainer. It also analysed and commented on other
discrepancies, not noted by Ford,
which would have become apparent
from a reconciliation of the deposits in the cash book and the bank
statements during the period
September to October 1993, and which
caused it to conclude (at 981I-982A):
“
None of the above discrepancies, anomalies or
coincidences appear from Ford’s working papers. On the
contrary, as we have
seen, his working papers indicate that he was
satisfied that none such existed. The inference is accordingly
inescapable, in the
absence of an explanation from him, that his
investigation of unusual reconciling items was superficial and
inadequate –
a matter to which I shall return below.”
[37] It is an issue between the parties whether PW was
obliged to do a reperformance of the year-end bank reconciliation.
TBA pleaded
that it was a specific term of the agreement that such a
reperformance should have been done. Had such term been proved it
would
have been the end of the matter because its breach was common
cause and its consequences were clear: Mitchell’s manipulations

would have been exposed forthwith. But the existence or not of such a
specific term was not a matter that ever exercised TBA’s
mind.
Until 1990 when Richardson Reid was absorbed by PW it was the
practice to reperform the year-end bank reconciliation. This
practice
was discontinued (in favour of PW’s own “standard
procedure”) when PW took over Richardson Reid (but
was,
incidentally, reinstated in the case of small entities as a result of
PW’s experience in this case). TBA left it to
PW to decide how
to conduct its audit. Its agreement with PW was in the broad terms
that it should do its work with proper and
reasonable care. In the
circumstances it cannot be said that TBA discharged the
onus
of establishing the specific term pleaded. Nor can it
confidently be said that the failure to do such a reperformance was a
manifestation
of work carelessly done. It is in any event not
necessary to resolve this issue between Wainer and Smith for whatever
differences
there may be between them on that point, all the experts,
including Reid, were agreed that Ford was remiss in not examining the

outstanding deposits and in not insisting on an explanation from
management. It was conceded in argument that Ford did not do his
work
properly in that regard. His failure to do so was not picked up and
corrected by either Greyling or Reid who were supposed
to supervise
his work. To that extent it appears to be common cause that PW did
not give that particular aspect of its audit the
attention it
deserved and accordingly that it was negligent and hence in breach of
its contract with TBA.
[38] It follows from what has been said above that TBA
succeeded in proving that PW was negligent and hence committed a
breach of
its contract with TBA in at least the two respects outlined
above, the failure to appreciate the significance of and to react to

the non-existent promissory note and the failure to appreciate the
implications of the recurring item “outstanding deposits”

in the bank reconciliation statements.
[39] It is central to TBA’s case that if PW had
been more astute in either of these respects it would have prompted
what was
described as “a train of enquiry” which, if done
competently, would in the ordinary course of the audit inevitably
have revealed that Mitchell was systematically siphoning off funds
for which he would have been unable to account. This is disputed
by
PW. But what can hardly be disputed is that Mitchell was embezzling
vast sums of money from TBA. When ultimately confronted
he
immediately capitulated. Reid’s own special report established
the extent of Mitchell’s larceny and Mitchell, having

confessed, pleaded guilty and was sentenced to a term of imprisonment
on the strength thereof. If the earlier thefts had been uncovered
in
January 1994 there can, moreover, be little doubt that Mitchell,
given his past record, would have been dismissed or at the
very best
for him prevented from committing the massive thefts that occurred
after February 1994 and that he would have been unable
to repay the
missing amounts.
[40] The
quantum
of
TBA’s losses was finally agreed between the parties to be
R1 389 801.90. That sum includes thefts committed prior
to
February 1994 but since it was established that Mitchell made good
his earlier thefts by later ones in order to “clear”
the
earlier ones in TBA’s books of account, the full amount was in
principle recoverable from PW. This was not contested
by PW.
[41]
Causation
The next issue is whether TBA succeeded in showing that
the breach of contract it proved caused the losses it sustained. This
is
disputed by PW on three main grounds:
(a) Mitchell would have been able to deflect any
enquiries directed to him;
(b) The loss suffered by TBA, having regard to the test
for causation in a claim for damages for breach of contract, was too
remote;
(c) The dominant cause of TBA’s loss was its own
negligence.
I deal in turn with each of these topics.
[42]
Would the discrepancies have
been explained away
?
Reid and even more so Smith were adamant that if Smit or
Ford or Greyling or even Reid himself had asked Mitchell about any of
the
matters that should have concerned them he would have been able
to satisfy them in January 1994 that nothing was fundamentally amiss.

That is because they would not have been predisposed to suspect
dishonesty let alone larceny, on Mitchell’s part. This was
not,
after all, a forensic audit and PW’s personnel, not having been
briefed about Mitchell’s past, had no cause to
approach any
explanation he may have furnished with scepticism and suspicion. By
all accounts Mitchell was an intelligent, skilled
and plausible
person who commanded the unqualified respect of his co-employees. He
was able to keep them at bay and he would likewise
have been able, so
it was contended, to explain any matter relating to TBA’s books
to the satisfaction of any reasonable
auditor, at least until the
next audit. (As it happens his defalcations were discovered in
November 1994 when the scale of his
gambling losses reached such
proportions that they could no longer be covered up by a manipulation
of TBA’s books of account.)
But when asked what possible
explanation Mitchell could have given which in February 1994 would
have satisfied a reasonable auditor
Reid was unwilling to speculate
and Smith’s speculations were unconvincing. Mitchell may have
been able to hoodwink his colleagues;
it by no means follows that he
would likewise have been able to bluff an observant auditor
investigating apparent irregularities
in TBA’s books of
account.
[43] But perhaps most significantly neither Smit nor
Ford was called by PW to explain whether either of them paid any
attention
to the anomalies described earlier, whether it occurred to
them to confront Mitchell, whether they asked him for any
explanations
and what explanations could conceivably have been given
which would have satisfied them. In the absence of such evidence it
is
idle to conjure up possible explanations, as Smith sought to do.
What is at least clear is that there were no obviously plausible

explanations, for if there had been any Smith would have thought of
them.
[44] According to the Court
a quo
Mitchell might yet have been able to explain away the
missing promissory note but not the outstanding deposits. As to the
promissory
note the Court
a quo
said (at 1011D-G):
“
I return to Smit and Mitchell and the promissory
note. Smith speculates that Mitchell may well have proffered the
following explanation
to Smit: that he had in error not presented the
note on due date, that he had thereafter contacted the Department of
Trade and
Industries and requested a replacement cheque, that he had
returned the note to the department and been promised such a cheque
when funds became available, that such had not yet occurred but that
in the new financial year the department would have the funds
and
would pay the TBA. Mitchell might even have produced a letter from
his computer, directed to the department and confirming
these
arrangements. Mitchell was by all accounts, Smith points out, a
plausible liar and given his seniority Smit would have been
entitled
to believe him and do nothing further. There is no basis for me to
reject this evidence of Smith on a balance of probabilities
and I
shall accept that Mitchell may have been able to overcome the hurdle
of the promissory note when it was presented to him
on or just prior
to 20 January 1994. The matter does, of course, not end there.”
As to the outstanding deposits the Court
a
quo
said (at 1012G-I):
“
Of course, he [Ford] could have confronted
Mitchell himself but I think, overwhelmingly on the probabilities, he
would have consulted
his immediate superior, Smit, and explained the
disturbing facts to her. She would then have recalled the missing
promissory note
and Mitchell’s explanation of it. In my view,
she would then, as a reasonable diligent auditor, have decided that
it was
necessary to question Mitchell on the outstanding deposits and
to revisit the problem of the promissory note. Before doing so she

ought, in my view, to have reperformed or caused Ford to reperform
the October bank reconciliation to see how the outstanding deposits

were cleared.”
And if that had been done, so the Court finds, she and
Ford would have become aware of the serious discrepancies which are
apparent
when the cash book is compared to the deposits on the
October 1993 bank statement. The Court then concluded (at 104A-B):
“
In my view, this was clearly a case with so much
calling for explanation that the level of suspicion of the reasonably
astute auditor
ought to have been so high that a thorough
investigation was called for; the matter required in fact a ‘probe
... to the
bottom’.”
(Of course, as stated earlier, if such a probe had been
attempted Mitchell’s thefts would have been uncovered.)
[45] I agree with the conclusion which can in my opinion
be reached by a more direct route. On the supposition that Smit
discovered
the non-existence of the promissory note, that Ford
appreciated the significance of the outstanding deposits, that they
reported
these peculiarities to their superiors and that PW realised
that something was seriously out of kilter, the scale thereof would

have driven the auditors firstly, to seek corroboration for any
possible explanation Mitchell might have furnished them and secondly,

to reconcile the cash book, the receipts, and the deposits reflected
on the bank statements, especially the October 1993 bank statement.

Had they done so it would have revealed the other discrepancies
detailed by the Court in its judgment. The thefts would then have

been discovered. Further thefts would have been averted. TBA would
not have suffered its loss.
[46]
Does the loss flow from the
breach
?
Factual causation being a given, was the loss not too
remote? The traditional approach for determining remoteness in a
contractual
context was restated in 1977 by Corbett JA in
Holmdene
Brickworks v Roberts Construction Company
1977
(3) SA 670
(A) 687D-F in the following terms:
“
To ensure that undue hardship is not imposed on
the defaulting party … the defaulting party’s liability
is limited
in terms of broad principles of causation and remoteness,
to (
a
) those damages
that flow naturally and generally from the kind of breach of contract
in question and which the law presumes the
parties contemplated as a
probable result of the breach, and (
b
)
those damages that, although caused by the breach of contract, are
ordinarily regarded in law as being too remote to be recoverable

unless, in the special circumstances attending the conclusion of the
contract, the parties actually or presumptively contemplated
that
they would probably result from its breach (
Shatz
Investments (Pty.) Ltd.
v.
Kalovyrnas,
1976 (2) S.A. 545
(A.D.) at p. 550). The two limbs, (
a
)
and (
b
), of the
above-stated limitation upon the defaulting party’s liability
for damages correspond closely to the well-known two
rules in the
English case of
Hadley v. Baxendale
,
156 E.R. 145
, which read as follows (at p. 151):
‘
Where two parties have made a contract which one
of them has broken, the damages which the other party ought to
receive in respect
of such breach of contract should be such as may
fairly and reasonably be considered either arising naturally, i.e.,
according
to the usual course of things, from such breach of contract
itself, or such as may reasonably be supposed to have been in the
contemplation
of both parties, at the time they made the contract, as
the probable result of the breach of it.’
As was pointed out in the
Victoria
Falls
case,
supra
,
the laws of Holland and England are in substantial agreement on this
point. The damages described in limb (
a
)
and the first rule in
Hadley v. Baxendale
are often labelled “general” or “intrinsic”
damages, while those described in limb (
b
)
and the second rule in
Hadley v. Baxendale
are called “special” or “extrinsic”
damages.
It was suggested in argument that in the present case
the damages claimed were special or extrinsic and had to be
considered in
terms of the test laid down in limb (
b
)
above. As a corollary to this the Court was invited to resolve the
controversy as to whether in this connection the “contemplation

principle” or the “convention principle” should
prevail (see
Shatz’s
case,
supra
at pp. 552-4, in
which the point was left open). In my opinion, however, for the
reasons which follow, it is limb (a) that is relevant
and I see no
need to accede to counsel’s invitation.”
[47] It is apparent from the above
dictum
that “contemplation” is the minimum
desideratum
common to
both so-called limbs or sub-rules. The controversy referred to in the
dictum,
which was
identified in
Shatz Investments (Pty) Ltd v
Kalovyrnas,
1976 (2) SA 545
(A) at 552 and
which remains unresolved to this day, relates to limb (b) and not to
limb (a): it is whether “the rationale
of special damages is
the parties’ convention and not merely their contemplation”
(
Shatz
at 552C), that
is to say, whether the contemplation of the parties must be shown
“virtually to be a term of the contract”
(at 552D). One
of the disputes in this case was precisely whether TBA’s claim
was to be classed under limb (a) (termed the
“default position”
by Cartwright in
1996 Cambridge L J 488
490 513) or limb (b). TBA
pleaded its case in the alternative under both limbs but contended
that it was properly to be accommodated
under limb (a). PW on the
other hand contended that it was immaterial under which limb the
claim was advanced because even at the
lesser threshold of limb (a),
requiring proof of the parties’ actual or presumed
contemplation of the loss as a “probable”
result of the
breach, TBA must fail.
[48] According to PW the kind and extent of loss
suffered by TBA could never have been in the contemplation of the
parties, either
actually or presumptively, as a
probable
result of the type of breach committed by PW. PW’s
breach of contract, so it was contended, if any, was that it was
negligent
not in the actual performance of its audit but in failing
to appreciate the full implications of certain admitted
irregularities.
TBA sustained a loss because its financial manager
stole its money and his thefts remained undetected; that loss could
not be said
to have been of the kind “that flows naturally and
generally” from PW’s breach of contract; such thefts are
not
according to the usual course of things the probable result of a
mere oversight; it might conceivably be a foreseeable risk but
it was
never a probable result. That was the argument.
[49] It is not altogether clear whether the word
“probable” in the phrase “which the law presumes
the parties
contemplated as a probable result of the breach” in
the
dictum
from the
Holmdene Brickworks
case,
quoted earlier, (previously endorsed by Innes CJ in
Victoria
Falls & Transvaal Power Co Ltd v Consolidated Langlaagte
Mines
1915 AD 1
22 (“likely”) and by Curlewis JA in
Lavery
& Co Ltd v Jungheinrich
1931 AD 156
169
(“probable”)) is to be understood in the sense of “more
likely to occur than not”. Corbett JA was not
in the quoted
phrase formulating the rule (i.e. damages flowing naturally and
generally from the breach) but only its supposed
rationale (the
presumed contemplation of the parties) and it is far from certain
that he meant to introduce “high probability”
as a
further limiting factor under the first sub-rule. In this field South
Africa has tended to follow the contours of the English
law. English
law deferred to Pothier (Obligations sec 159-162) and South African
law deferred to Pothier and the English law (compare
Hadley
v Baxendale
(1854) 9 Ex 341
354;
Emslie
v African Merchants Ltd
1908 EDC 82
90-91;
Victoria Falls and Transvaal Power Co Ltd v
Consolidated Langlaagte Mines, supra,
22;
Lavery & Co Ltd v Jungheinrich, supra,
165-166; Erasmus
(1975) 38 THRHR 363-364
; Cartwright
op
cit
Cambridge L J 488; Zimmermann,
The
Law of Obligations
829-830). In England the
degree of likelihood required for purposes of the contemplation test
has in recent years attracted close
attention. These developments are
discussed in some detail in the standard text books (such as McGregor
on
Damages,
16
th
ed, para 248-274; Chitty on Contracts, 28
th
ed, para 27-039-051; Cheshire, Fifoot & Furmston,
Law of Contract,
13
th
ed, 611-617; Treitel,
The Law of
Contract
, 8
th
ed, 855-859; Atiyah,
The Law of
Contract
, 3
rd
ed, 318-323 and 15 Stair Memorial Encyclopaedia para
903-905), with particular reference to what was said in
Koufos
v C Czarnikow Ltd (The Heron II)
[1969]
1 AC 350
(HL) and the cases following it, such as
Balfour
Beatty Construction (Scotland) Ltd v Scottish Power plc
1994
SC 20
(HL). (See, too, the helpful exposition in Kerr,
The
Principles of the Law of Contract,
5
th
ed 700-709). The formulae used ranged from ‘real
danger’ or ‘very substantial’ to ‘easily
foreseeable’,
‘liable to result’ or ‘not
unlikely’ (Treitel,
op cit,
857).
The Heron II, supra,
was
referred to in both
Shatz’s
case,
supra
,
and
Holmdene Brickworks, supra,
but
in neither case, unlike this one, was the exact shading or nuance of
meaning of any consequence. Even so, it is not necessary
to trace the
minute developments in the English decisions in this case for I
believe that McGregor in para 264 of the work cited
has fairly
captured the essence of current English thinking on the point when he
stated:
“
The important factor is therefore whether the
particular type of loss which occurs is within the contemplation of
the contracting
parties as a serious possibility …”
Or, as it was put by Goff J in
The
Pagase
[1981] 1 Ll R 175 182:
“…
but the thread running through the
speeches [in the
Heron II
]
is that the damages must have been within the contemplation of the
defendant, not in the sense that they were probable (which
would be
too strict a test) but rather in the sense that there was a serious
possibility of their occurrence or that they were
not unlikely to
occur.”
That approach, postulating as it does not a likelihood
(at the upper end of the scale) of the harm complained of occurring
but (at
the lower end) a realistic possibility thereof, appears to me
to be sensible and sound. Parties cannot contemplate what they cannot

foresee. In the end it will usually turn on the degree of
foreseeability of the kind of harm incurred (compare
McElroy
Milne v Commercial Electronics Ltd
[1993] 1
NZLR 39(CA)
43 45). What matters to the law is of course not infinite
but reasonable foreseeability. Leaving aside atypical situations
(such
as, for instance, a circumstance which was foreseeable by only
one of the parties or only at the time of breach and not
also
at the time of contract), what is required to be
reasonably foreseeable is not that the type of event or circumstance
causing the
loss will in all probability occur but minimally that its
occurrence is not improbable and would tend to follow upon the breach

as a matter of course.
[50] I cannot agree that the loss suffered by TBA did
not in that sense flow naturally and generally from PW’s breach
(compare
Bruce NO v Berman
1963
(3) SA 21
(T) 23G-24E). Both the non-existent promissory note and the
outstanding deposits should have struck Smit and Ford, if they had
done their work properly, as odd. There would have been a reason for
it. That reason could have been either innocent or not innocent
–
although any possible innocent explanation was clearly not an obvious
one or Reid and Smith would immediately have suggested
it in
evidence. If the reason was not an innocent one it was an indication
either of neglect or of dishonesty on the part of one
or more of
TBA’s personnel. Dishonesty was consequently one of three
conceivable and predictable reasons. It was a realistic
possibility.
PW’s breach consisted not only of the failure to read the
warning signs but also in its failure to probe them
further. Had it
done so Mitchell’s past thefts would as a matter of course have
been uncovered and his future ones avoided.
A competent auditor would
know that the failure to recognise, identify and engage a problem of
this kind may well lead to a prospective
loss of this nature for his
client which cannot be redeemed from the thief. This is what
happened. TBA’s loss, in the words
of Corbett JA in
Holmdene
Brickworks, supra
, at 687D-F, did “flow
naturally and generally” from PW’s breach.
[51] That being so it is not strictly speaking necessary
to revisit, in general, the dichotomous orthodox approach of this
Court
to remoteness in contract. Nor is this the occasion, as it was
not the occasion in both
Shatz Investments,
supra,
554F-G and
Holmdene
Brickworks, supra,
688A, to review limb (b)
in particular. (The “convention principle” embraced by
Wessels JA in
Lavery & Co v Jungheinrich,
supra,
at 176 has long been discredited in
England. Compare
The Pegase, supra,
182-183; Cartwright,
op cit,
492.) But it may be worth noting that this Court’s
approach to legal causation within other disparate fields such as
crime,
delict, insurance and latterly, perhaps, estoppel, has
undergone considerable evolution in recent years by the development
of a
new model for causation sometimes termed the flexible or supple
test. (Compare
S v Mokgethi en Andere
1990
(1) SA 32
(A) 39I-41A;
International Shipping
Company (Pty) Ltd v Bentley
1990 (1) SA 680
(A) 700H-701F;
Smit v Abrahams
1994
(4) SA 1
(A) 15B-18H;
Stellenbosch Farmers’
Winery Ltd v Apostolos Vlachos t/a Liquor Den
case
number 117/99, not yet reported.) In
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994
(4) SA 747
(A) at 765A-B the new test was described, again by Corbett
CJ, as:
“…
a flexible one in which factors such as
reasonable foreseeability, directness, the absence or presence of a
novus actus interveniens
,
legal policy, reasonability, fairness and justice all play their
part.”
[52] When the matter, which was deferred for future
consideration in
Shatz’s
case,
supra,
does
eventually come before this Court as a pertinent issue, it may be
appropriate to employ the learning developed in those cases
to good
advantage. With breach of contract, as in delict and estoppel but
unlike insurance (which entails the interpretation of
the terms of
the policy – compare
Napier v Collett
and Another
[1995] ZASCA 44
;
1995 (3) SA 140
(A)), the
exercise would involve measuring the consequences of wrongful conduct
by a composite legal yardstick. Admittedly there
is an important
factor present in contract and absent in the other categories
mentioned and that is the competence of the parties
to regulate,
limit or expand by arrangement amongst themselves the consequences of
any prospective breach (compare Kerr,
op cit
648). Such arrangements can and must of
course be accommodated in any flexible test. A conjectured
application of the flexible test
will not mean that the collected
wisdom of past cases is summarily to be discarded. Both limbs of the
current conventional test
can readily be blended into an integrated
test as being relevant factors to be taken into account. The fact
that both parties had
particular consequences in mind when they
concluded their agreement will still be conclusive. There may be
instances where the
time of breach will be more appropriate than the
time of contract. The circumstances of each case will determine where
the emphasis
belongs. Reasonable foreseeability, one imagines, will
govern most but not all cases (compare
Holmdene
Brickworks, supra,
688G-H;
Smit
v Abrahams, supra,
17 D-F; Kerr,
op
cit
718). Ultimately it may be practical
common sense based on the judicial officer’s years of
experience – and not dogma
– that has to cut the Gordian
knot. (Compare
Alexander v Cambridge Credit
Corporation Ltd
(1987) 9 NSWLR 310
, 315B-C;
358B-C.) As has recently been said by Lord Steyn in a slightly
different context in
Smith New Court
Securities v Scrimgeour Vickers (Asset Management)
[1996] UKHL 3
;
[1996]
4 All ER 769
(HL) 794j-795b:
“
The development of a single satisfactory theory
of causation has taxed great academic minds … But, as yet, it
seems to me
that no satisfactory theory capable of solving the
infinite variety of practical problems has been found. Our case law
yields few
secure footholds. But it is settled that at any rate in
the law of obligations causation is to be categorised as an issue of
fact.
What has further been established is that the ‘but for’
test, although it often yields the right answer, does not always
do
so. That has led judges to apply the pragmatic test whether the
condition in question was a substantial factor in producing
the
result. On other occasions judges assert that the guiding criterion
is whether in common sense terms there is a sufficient
causal
connection … There is no material difference between these two
approaches. While acknowledging that this hardly amounts
to an
intellectually satisfying theory of causation, that is how I must
approach the question of causation.”
[53] The only fundamental difference between the current
and the suggested approaches is that there will be a more expansive
solvent
more suitable for all circumstances (compare Kerr,
op
cit
716). The exclusive criteria of the past
will become auxiliary criteria in the future. There may of course be
other repercussions
relating to matters such as pleadings of which
time alone will tell but those are not the problems of today but of
tomorrow.
[54]
Was TBA itself negligent
?
The primary cause for TBA’s loss was of course the
dishonesty of its own financial manager, Mitchell, who stole and
continued
to steal its money. PW laid great stress on TBA’s own
alleged negligence, rather than on PW’s own breach, as being
the true, real, effective, dominant or overwhelming cause of TBA’s
loss. PW accused TBA of being negligent in not protecting
its own
assets and in not forestalling its own loss in one or more of several
respects with which, before returning to the issue
of causation I
deal in the paragraphs that follow. (Since TBA owes itself no legally
enforceable duty to protect its assets against
the risk of theft by
its own personnel, it is perhaps more accurate to speak of
carelessness in this connection rather than negligence.)
[55] The first complaint is that TBA confirmed
Mitchell’s appointment in the sensitive position of financial
manager when,
during his period of probation, TBA discovered that he
had been convicted of theft, had served a term of imprisonment and
had lied
to it in his application for the position. But was it
irresponsible or, as it was put on PW’s behalf, “reckless”

of TBA to do so? In our view not necessarily so. It may have been a
calculated risk, but it was not careless in itself. It would
only
have been negligent in the broad sense if it was reasonably
foreseeable that Mitchell, far from being reformed as he claimed
to
be, would steal from it in future. There was no warrant in the facts
for making that assumption. What is of course true, as
a matter of
common experience, is that a man with a criminal record for theft is
more likely to steal than someone with no such
precious convictions.
Consequently an employer should be even more cautious in giving such
a person unsupervised access to sizable
sums of money. The
“negligence”, if any, would have consisted not in his
appointment as such but in TBA’s failure
to introduce
sufficient hedging mechanisms to prevent a repetition of Mitchell’s
past misdeeds. The point is dealt with further
in para 59 below.
Indeed, it was a humanitarian act on TBA’s part to confirm
Mitchell’s appointment on the basis of
his potential. In turn
that meant that the information about his criminal past had to be
kept hidden from the other members of
staff. That is also the reason
why the discussion of the matter and the decision of council were not
minuted or disclosed to its
auditor or insurers. (TBA paid a price
for its magnanimity: a potential claim in terms of its fidelity
insurance policy was for
that reason not even made.) Mitchell’s
permanent appointment, even if open to criticism, was anterior to and
was thus overtaken
by PW’s later breach of contract. PW, as
auditors, were entrusted with the auditing of TBA’s financial
statements.
There was admittedly no contractual obligation on PW to
detect and prevent illegal acts (as opposed to
bona
fide
irregularities and errors) on the part
of management. But TBA’s complaint against PW was not that it
failed to detect and
prevent Mitchell’s thefts but that it
failed to read the signs of possible illegal activities within the
ranks of its management
team and that it failed to respond thereto
when it would have been reasonable for it to have done so. The
complaint is that PW,
had it interpreted the signs correctly, would
have been able to intercept Mitchell’s later thefts. In our
view the confirmation
of Mitchell’s appointment as such,
notwithstanding his criminal record, was therefore not per se
“negligent”
and was not a relevant cause of TBA’s
loss.
[56] The second complaint was that TBA’s financial
management of its affairs and its business practices and controls
were
notoriously inadequate, thereby enabling Mitchell to exploit the
weaknesses in its system to his own dishonest advantage. It
disregarded,
so it was contended, the provisions of its own
constitution and bye-laws, such as clause 11.2 which required all
cheques to be
signed by two of its officials. It was common cause
that this did not happen and that this was one of the means by which
Mitchell
was able to siphon off money from TBA. The difficulty with
this argument is that PW was fully aware that TBA’s controls
were
lax. It undertook its mandate to audit TBA’s financial
statements on that very basis. As such there was in our opinion a
duty on PW to be extra attentive; and it was not open to it to
complain of a form of neglect which it was contracted to take into

account.
[57] The next complaint is that TBA did not advise PW
when it was commissioned to do the audit that Mitchell, who was in
charge
of its financial affairs, had a criminal record involving
theft and dishonesty. Was it careless of TBA not to inform PW of
Mitchell’s
past and if so, was this the crucial or at the very
least a relevant cause of TBA’s loss? The first observation to
be made
is that the omission had no effect on PW’s breach of
contract as such. PW committed its breach unaware of Mitchell’s

track record and purely on its own terms. If, as has been held
earlier, PW should in the course of its ordinary audit have uncovered

Mitchell’s past thefts without the benefit of any knowledge of
his past record, then it is irrelevant for purposes of its
breach
whether PW was so informed or not. If the information had been given
to PW in advance it may conceivably have enhanced PW’s

capability of discovering Mitchell’s thefts. But that had no
effect on its contractual obligations. Since PW was obliged
in the
particular circumstances of this case to discover the thefts when it
was, so to speak, blindfolded to the risk posed by
the employment of
Mitchell, it is no defence for it to say that it would have
discovered the thefts if only it could see. The omission
to inform PW
would only have been relevant to PW’s breach if it would have
made its task more onerous, not more easy. This
failure so to inform
PW accordingly had no effect on PW’s breach as such.
[58] But of course the question is not whether TBA was
negligent
vis-à-vis
PW
but whether it was “negligent”
vis-à-vis
the protection of its own interests and the
avoidance of its own loss. The proper question for purposes of
causation is thus whether
TBA should have appreciated that the loss
could and would have been avoided if TBA had briefed PW about
Mitchell’s criminal
past. At best for PW it was argued that the
failure on TBA’s part to disclose information concerning
Mitchell’s dishonesty
precluded PW “from properly
assessing the risk” and “from planning their audit
accordingly”. But the evidence
fell far short of establishing
that if Smit and Ford had been told (even on condition of complete
confidentiality) they would have
approached their task differently
and they would have uncovered the thefts. Smit and Ford were not
called to say that. Had it been
PW’s case that TBA should have
appreciated this and that it would probably have discovered
Mitchell’s defalcations
if only it had been told of his prior
criminal record in advance of the audit being undertaken, the failure
so to inform PW may
indeed be said to have been the effective cause
of TBA’s loss. But that was not the case pleaded by PW nor was
it the thrust
of its evidence. There was a passing suggestion that PW
would not have accepted the commission as auditors if it had been
told
of Mitchell’s previous misdemeanours, but that allegation,
if accepted, would not in itself have been a self-sufficient defence

to TBA’s claim based on PW’s breach of contract.
[59] The final and perhaps major complaint was that TBA,
knowing of Mitchell’s criminal past, placed him in charge of
the
administration of TBA’s accounts when TBA’s business
had an annual turnover of R40m, much of it in cash. By the admission

of TBA’s own witness, Bladergroen, it “had the fox
looking after the hen coop”. TBA’s real “negligence”

therefore consisted, so it was alleged, (a) in placing Mitchell in a
situation where he could freely manipulate TBA’s affairs
to his
own advantage and (b) in failing to properly monitor and supervise
his activities. Peter Fenix, a member of TBA’s
council, who
held the “finance and administration” portfolio, was
initially entrusted with the responsibility of supervising
Mitchell’s
performance. This he did for approximately 18 months until March
1993, when he was succeeded by Allem. Allem testified
that he was not
aware that he was supposed to scrutinise Mitchell’s work.
Hawkins, TBA’s chief executive officer during
much of that
period, had been told of Mitchell’s past but by all accounts
(except his own, for he was not called to testify)
lacked the
personality, the expertise and the experience to keep a firm hold on
Mitchell’s activities. It is not without
significance that
Mitchell’s first known defalcation commenced when Fenix’s
term as council member ended. I agree with
the criticism expressed by
PW and accepted by the Court below that TBA’s supervision of
Mitchell, given his background, was
demonstrably inadequate and
constituted carelessness on its part. Such lack of supervision
continued after the 1993 audit and until
Mitchell was eventually
exposed.
[60] The cumulative effect of the relevant factors
mentioned above is that it can fairly be said that TBA’s
conduct fell short
of the standard and degree of care and attention
which an organisation of this nature ought to have exercised over its
own management
and ought to have devoted to its own affairs.
[61]
Was TBA’s carelessness
the sole or dominant cause of its loss
?
Both parties were careless. Can it be said that TBA’s
carelessness was the exclusive cause of its loss? I do not think so.

This is not the sort of case where harm can be said to have been
caused by either one or the other of two competing causes, one
for
which a plaintiff and the other for which the defendant was
responsible. On a finding to that effect, a plaintiff, bearing
the
onus
to prove
causation, must lose if he fails to prove that it was the cause for
which the defendant was responsible. This case is better
typified as
one where two unrelated determinants converged in causing the loss
complained of. Whether and to what extent it is
necessary to
disentangle and apportion between them their respective degrees of
carelessness in relation to that loss is a matter
to which I return
later in this judgment.
[62] The Court
a quo
made the following finding (at 1024B-D):
“
Applying these principles of our common law and
approaching the matter mindful of the cases, I conclude that both
causes operated
significantly in bringing about the result complained
of. Price Waterhouse’s failure to perform their contractual
duties
as auditors was an important cause of the loss. But, in my
view, the highly irresponsible employment of a convicted thief in so

vulnerable an area of the TBA’s business and with so little
check on his behaviour was the predominant, effective or real
cause
of the loss suffered. It follows, applying the common law, that the
TBA’s claim must fail because its own negligence
in employing
Mitchell as it did was the
causa causans
of its loss.”
It was submitted on behalf of PW, on the assumption that
both parties were to blame for the loss and in support of that
finding,
that its own negligence was so slight and TBA’s
failure to guard against the loss it suffered was so dominant that
PW’s
breach was to be disregarded as a sufficiently significant
cause of the loss.
[63] In my view both the dictum and, following it, the
submission are wrong both in fact and in law. It is wrong as a
conclusion
of fact since it cannot as a matter of practical common
sense be said that PW’s negligence was so minimal in comparison
to
TBA’s carelessness as to be nullified as an effective cause
of the loss. It is wrong as a proposition of law since it seeks
to
convert an approach which is more appropriate to the law of delict to
the law of contract where it is not appropriate.
[64] In the law of
delict where there is
culpa
on both sides the so-called “all
or nothing principle” has been applied since Roman times. This
is dealt with
in
extenso
by
Zimmermann,
op cit,
1010-1013 1030 and 1047-1048. At 1030
it is stated:
“
The fault of the plaintiff/victim was, in a way,
‘set off’ against that of the defendant/wrongdoer, with
the result
that ‘culpa culpam abolet’. Hence the
expression of compensatio culpae or culpa compensation that came to
be used to
label the uncompromising approach to the problem of
contributory negligence. Whether every contributory fault on the part
of the
victim – even culpa levissima – was originally
taken to deprive him of his remedy is not quite clear. In the later
usus modernus, at any rate, the issue appears to have been decided on
the basis of a preponderance of fault: only if he had displayed
the
same or a greater degree of negligence than the wrongdoer did the
victim lose his claim. Where, on the other hand, his negligence
was
less significant, when compared with that of the wrongdoer, his claim
for damages remained completely unaffected.”
In South Africa, under
the influence of English law (compare Zimmermann and Visser,
Southern
Cross
575-6), the
all or nothing approach prevailed and its application was, in the
words of Boberg,
The
Law of Delict
, vol
1 653, “uncompromising”. He continued:
“
A plaintiff who was part author of his own loss
could recover nothing at all. No provision existed for comparing the
negligence
of the parties and awarding proportionate compensation.
The plaintiff’s fall from grace, no matter how venial, cost him
his
remedy, and the defendant – through possibly far more
negligent than the plaintiff – went scot-free. The defence was

a complete one.”
[65] A similar clear-cut statement is absent in the law
of contract. There is a conspicuous dearth of express authority in
the Roman-Dutch
law either admitting or denying the existence of a
defence of preponderance of own fault to a claim for damages for
breach of contract.
None was quoted to us by counsel and we were
unable to find any ourselves, as to the applicability or
non-applicability of an all-
embracing “all or nothing
principle”, or any variant thereof, in a contractual setting.
Nowhere is it expressly stated
that a plaintiff who sued a defendant
for negligently performing his contract but who was himself careless
was thereby non-suited,
except of course where his
culpa
was
held to be the sole cause of his loss. On the other hand, there is
also no direct authority to the effect that such a plaintiff
was
entitled to full payment notwithstanding his proven lack of care. Not
surprisingly there is likewise no authority for the intermediate

situation i.e. that a plaintiff’s claim is to be reduced in
those circumstances in proportion to his own lack of precaution
in
preventing or minimising his loss.
[66] The defence of a preponderance of fault on the part
of the plaintiff, on which the Court
a quo
appears to rely, is
incongruent within the field of contract. Where a plaintiff can prove
that the breach of the defendant was
a
cause of the loss (as
opposed to
the
cause thereof) he should succeed even if there
was another contributing cause for the loss, be it an innocent one,
the actions
of a third party (compare
Nedcor Bank Ltd t/a Nedbank
v Lloyd-Gray Lithographers (Pty) Ltd
2000 (4) SA 915
(SCA) para
10-12), or, logically, the carelessness of the plaintiff himself in
failing to take reasonable precautions to avoid
it. A defendant who
commits a breach of contract does so independently of any of the
extraneous factors mentioned above. All the
requirements for his
liability will have been fulfilled. In the absence of a contrary term
in the agreement itself or of legislative
intervention excluding or
reducing his claim, he should therefore be held fully liable,
regardless of whether the plaintiff’s
culpa
was the
dominant or pre-eminent cause of the loss. What was said for
Australia in
Alexander v Cambridge Credit Corporation Ltd and
Another, supra,
315B, applies, I believe, with equal force to
South Africa:
“
It is irrelevant to inquire whether the
defendants’ default was the dominant, effective or real cause
of the plaintiff’s
loss. If the evidence is suggestive of
multiple causation, the inquiry to be made is whether the defendants’
default was
a
cause of
the plaintiff’s loss:
Fitzgerald v Penn
[1954] HCA 74
;
(1954) 91 CLR 268
at 273.”
And again, at 357G-358A:
“
In my opinion the above cases do not establish
the proposition that a plaintiff in an action for breach of contract
must prove that
the breach of contract was the real and efficient or
dominant cause of the loss which he suffered. In the law of tort it
is well-established
that it is sufficient that the wrongful act or
omission of the defendant is
a
material cause of the plaintiff’s injury or damage. In
principle the same rule must apply in the law of contract unless the

terms of the contract require the sole or dominant cause to be
determined. In
Simonius Vischer & Co v
Holt & Thompson
[1979] 2 NSWLR 322
,
Samuels JA, with whose judgment on this point Moffit P and Reynolds
JA agreed, said (at 346) that in an action for breach of contract

against an auditor it was ‘sufficient for the plaintiffs to
establish that the defendants’ breaches were
a
cause of the loss notwithstanding that there may have been other
concurrent causes’.”
[67] A plaintiff who sues for damages for breach of
contract for a loss allegedly sustained through the negligence of the
defendant
but who was himself careless in relation to the
non-avoidance of such loss may therefore be non-suited: (a) if there
was a term
in the contract to that effect; (b) if the plaintiff’s
own carelessness is held to be the sole cause of the loss, either in

its totality or, to that extent, in relation to a particular segment
thereof; or (c) if the defendant’s negligence was,
comparatively speaking, so negligible or minimal as to be
discountable as a significant cause of the loss, which, strictly
speaking,
is simply an instance of (b).
[68] In the present case PW did indeed seek to invoke a
contractual term to that effect. It pleaded:
“
8.3 The parties at all material times
contemplated and made and accepted the defendant’s appointment
on the basis that the
defendant would not be liable to the plaintiff
for any loss suffered by the latter as a result of the defendant’s
breach
of contract, if the plaintiff’s own negligence was the
primary cause, or
alternatively
a
material cause, or
alternatively
a
cause of its loss.”
No serious attempt was, however, made in evidence or in
argument to press for the acceptance of the term so pleaded and it
may for
present purposes be disregarded.
[69] The Court
a
quo’s
finding
that TBA’s carelessness was “the predominant, effective
or real cause of the loss sustained” involved
a qualitative and
quantitative comparison between the one party’s breach of
contract and the other party’s lack of
precaution. Nevertheless
there was common ground capable of comparison: The failure by both
parties to prevent the loss by the
exercise of due care. What the
Court
a quo
in
effect found was that TBA’s carelessness was so gross that PW’s
negligence paled into insignificance and was accordingly
neutralised
as a causative factor. I disagree with that factual finding. Both
sets of carelessness contributed to the loss. The
defendant’s
negligence was
a
cause of the loss. TBA accordingly
succeeded in proving the causative element of its cause of action.
[70]
The Apportionment of Damages
Act
Having wrongly concluded, as stated in para 62 above,
that TBA must lose the Court
a quo
proceeded
to say (at 1024D-E):
“
This conclusion does not end the matter for the
question which now arises is whether the TBA’s claim is not at
least partly
saved by the provisions of chap 1 of the Apportionment
of Damages Act 34 of 1956 (the Act), ...”
My approach is somewhat different. The issue is not
whether the Act can salvage something from a lost cause but whether a
good cause
is to be abated. The foremost question on that approach is
whether the Act is applicable to a claim for damages for breach of
contract
where the breach consists of the negligent performance of a
professional duty. To that question I now turn.
[71]
Chapter 1 of the Act which is the portion thereof which is relevant
for present purposes, provides as follows:
“
1. Apportionment of liability in case of
contributory negligence.
–
(1) (
a
)
Where any person suffers damage which is caused partly by his own
fault and partly by the fault of any other person, a claim in
respect
of that damage shall not be defeated by reason of the fault of the
claimant but the damages recoverable in respect thereof
shall be
reduced by the court to such extent as the court may deem just and
equitable having regard to the degree in which the
claimant was at
fault in relation to the damage.
(
b
)
Damage shall for the purpose of paragraph (
a
)
be regarded as having been caused by a person’s fault
notwithstanding the fact that another person had an opportunity of

avoiding the consequences thereof and negligently failed to do so.
(2) Where in any case to which the provisions of
subsection (1) apply, one of the persons at fault avoids liability to
any claimant
by pleading and proving that the time within which
proceedings should have been instituted or notice should have been
given in
connection with such proceedings should have been instituted
or notice should have been given in connection with such proceedings

in terms of any law, has been exceeded, such person shall not by
virtue of the provisions of the said subsection, be entitled to

recover damages from that claimant.
(3) For the purposes of this section “fault”
includes any act or omission which would, but for the provisions of
this
section, have given rise to the defence of contributory
negligence.”
[72]
I have had the considerable benefit of reading in draft the opposing
judgments of Marais JA, Farlam JA and Brand AJA, on the
one hand and
Olivier JA on the other. The two judgments, I would suggest,
comprehensively cover the entire field and it would serve
little
purpose for me to traverse the same territory. My sympathies and
inclination are wholly on the side of the views expressed
by Olivier
JA. There is, I believe, for the reasons stated by him, a pressing
need for legislative intervention in a situation
such as the present
where the defendant’s breach of contract is defined in terms of
his negligent conduct but the plaintiff,
by his own carelessness,
contributed to the ultimate harm. But having said that, I am afraid
that I have reluctantly come to the
conclusion that this particular
piece of legislation does not fulfil that function. I state my
reasons for saying so with a minimum
of elaboration.
[73]
The core concept in chapter 1 is “the defence of contributory
negligence” which is foreshadowed in the words “shall
not
be defeated” in ss 1(a) and which is expressly referred to in
ss 3. Section 1 envisages:
a) a claim by a claimant against a defendant for damages
(the loss) he sustained as a result of the fault (i.e. causative
negligence)
of the defendant;
b) fault (causative negligence) on the part of the
claimant himself which partly caused the loss;
c) a defence of contributory negligence, based on such
fault, which, but for the provisions of s 1, would have availed the
defendant
against the claim of the claimant.
[74]
As was stated in paras 63-67 above the extraneous defence of
culpa
compensatio
was known to the common law in
the law of delict but not in the law of contract. In the law of
contract the claim of the claimant
would not have been “defeated”
by his own
culpa.
(Of
course, it would have been a defence available to a defendant, even
in a contractual setting, if the claimant’s carelessness
was
the
sole
cause of the
loss – but that would
ex hypothesi
not have been a case where the damage was caused “partly
by his own fault and partly by the fault of any other person”.)

That remained the position at the time the Act was promulgated in
1956. The intention of the legislature as to the scope and range
of
the Act must be determined in the light of the situation prevailing
at the time it was enacted. At that time the concepts of
both
contributory negligence and “last opportunity” were
unknown to a claim based on breach of contract. That being
so, it
seems to me to follow that the Act was designed to address and
correct a particular mischief that was identified as such
within the
law of delict; that it was confined to that particular mischief; and
that the corresponding problem that might arise
within the law of
contract was never within the legislature’s compass. The
express wording used in the Act does not fit a
contractual claim. In
my view the comfort of the Act was accordingly not available to PW in
this case to counter or curtail TBA’s
claim for damages.
[75]
It follows from that approach that it is not open to this Court to
seek to determine whether and to what extent TBA’s
claim should
be reduced “having regard to the degree in which the claimant
was at fault in relation to the damage”.
I turn, then, to the
other issues remaining alive between the parties.
[76]
Interest
As was stated in para 13 above it remained an issue
between the parties on what basis and to what extent PW was liable to
TBA for
the payment of interest on its claim, which was eventually
quantified at R1 389 801.90 and accepted by the parties as

being the amounts stolen by Mitchell during the period February to
November 1994.
[77]
TBA’s main claim for interest was calculated at the rate of
interest levied by its banker, Nedbank, on every individual
amount
stolen by Mitchell from the date upon which that particular amount
was stolen. Because of the thefts TBA’s overdraft,
so it was
contended, was inflated and the excess attracted interest at the
higher rates charged by a banker to its customer on
overdraft. The
factual basis relied upon for this claim is that during the financial
year under consideration, i.e. 1994, TBA consistently
operated its
bank account in overdraft and that, but for the misappropriations by
Mitchell, its overdraft would have been reduced
by the exact amount
stolen on the very day it was so stolen. In those circumstances, so
TBA maintained, it suffered damages not
only in the form of the
capital amounts stolen but also in the form of additional interest
for which it became liable to its banker
on an overdraft that would
otherwise have been reduced. TBA’s case was that these
additional damages flowed naturally from
PW’s breach of
contract, alternatively, that the additional interest which it was
thus liable to pay on overdraft was a matter
which fell squarely
within the contemplation of the parties, particularly since PW acted
as TBA’s auditors and as such was
fully aware of the existence
of its perennial overdraft.
[78] Thus formulated,
TBA’s claim was one not for ordinary
mora
interest but for additional damages
in the form of interest. But as a further alternative TBA contended
that it was entitled to
mora
interest at the rate charged by
Nedbank on the appellant’s overdraft from a date upon which the
quantum
of TBA’s damages became
reasonably ascertainable by PW. In this regard various dates were
mooted by TBA, the latest being
the date of Reid’s final report
on Mitchell’s defalcations, i.e. 24 January 1995.
[79] PW’s
contention, on the other hand, was that TBA was entitled to no more
than
mora
interest on the capital amount,
calculated in accordance with the provisions of the Prescribed Rate
of Interest Act 55 of 1975 (“the
latter Act”). In terms
of this Act TBA would be entitled to interest on the capital sum
calculated at the prescribed rate
of 15,5% per annum from the date of
demand or summons, whichever date is the earlier. Since no demand
prior to summons was proved,
the date for the commencement of the
calculation would therefore be the date upon which summons was
served, that is 3 November
1995.
[80] The relevant provisions of the latter Act are:
“
1. Interest on a debt to be calculated at a
prescribed rate in certain circumstances
.-
(1) If a debt bears interest and the rate at which the interest is to
be calculated is not governed by any other law or by an
agreement or
a trade custom or in any other manner, such interest shall be
calculated at the rate prescribed under subsection (2)
as at the time
when such interest begins to run, unless a court of law, on the
ground of special circumstances relating to that
debt, orders
otherwise.”
(2) “The Minister
of Justice may from time to time prescribe a rate of interest for the
purposes of subsection (1) by notice
in the
Gazette
.
(3) …
2A. Interest on unliquidated debts.
-(1)
Subject to the provisions of this section the amount of every
unliquidated debt as determined by a court of law, or an arbitrator

or an arbitration tribunal or by agreement between the creditor and
the debtor, shall bear interest as contemplated in section
1.”
(2) (
a
)
Subject to any other agreement between the parties the interest
contemplated in subsection (1) shall run from the date on which

payment of the debt is claimed by the service on the debtor of a
demand or summons, whichever date is the earlier.
(
b
)
…”
[81] The Court
a
quo
made an award
of interest, quoted in para 14 above, from the date of judgment at
Nedbank’s prime rate, which is substantially
higher than the
15,5% per annum prescribed in terms of the latter Act. The award left
both sides dissatisfied, not without justification,
since it does
reveal some confusion. If the award was one for
mora
interest there is
no reason why, having regard to s 2A of the latter Act, interest
should only run from date of judgment and not
from date of summons
(compare
Adel
Builders (Pty) Ltd v Thompson
2000
(4) SA 1027
(SCA) para 10). By the same token, and having regard to s
1(2), there is no reason why
mora
interest should be calculated at
Nedbank’s prime rate instead of at the prescribed rate. It is
therefore clear that the interest
award as formulated by the Court
a
quo
cannot stand.
What order should it have made?
[82] The approach to a
claim for interest was formulated by this Court in
Bellairs
v Hodnett and Another
1978
(1) SA 1109
(A) 1146H-1147C in these terms:
“
As previously pointed out,
mora
interest in a case like
the present constitutes a form of damages for breach of contract. The
general principle in the assessment
of such damages is that the
sufferer by the breach should be placed in the position he would have
occupied had the contract been
performed, so far as this can be done
by the payment of money and without undue hardship to the defaulting
party. Accordingly,
such damages only are awarded as flow naturally
from the breach or as may reasonably be supposed to have been in the
contemplation
of the contracting parties as likely to result
therefrom (
Victoria
Falls and Transvaal Power Co. Ltd.
v.
Consolidated
Langlaagte Mines Ltd.,
1915
A.D. 1
at p.22). In awarding
mora
interest to a creditor
who has not received due payment of a monetary debt owed under
contract, the Court seeks to place him in
the position he would have
occupied had due payment been made. The Court acts on the assumption
that, had due payment been made,
the capital sum would have been
productively employed by the creditor during the period of
mora
and the interest
consequently represents the damages flowing naturally from the breach
of contract. The practice of awarding such
interest at the legal rate
of 6 per cent obviates the need to prove in every case what the
capital sum would naturally and probably
have earned had it thus been
productively employed. A party wishing to recover a higher rate of
interest would, in the absence
of any alteration in this practice,
have to establish by way of evidence as to current rates of interest
on investment, etc. (such
as was adduced in, for instance, the
Enteka
case,
supra
)
that the loss naturally and probably suffered by him through the
non-employment of his capital exceeded the accepted legal rate.”
[83] If TBA’s
claim for interest is advanced as a claim for damages it must, as the
law now stands, be accommodated under
either limb (a) or limb (b) of
the dictum in
Holmdene
Brickworks, supra,
discussed
in para 46 and following above. I do not believe that the additional
interest for which TBA became liable to its banker
can for the
purpose of limb (a) be said to flow naturally from PW’s breach.
Thinking away, as one must, the particular knowledge
PW had that TBA
was habitually operating on overdraft, it does not tend to follow as
a matter of course that where an auditor is
negligent his client will
(a) operate on overdraft (b) apply the exact amounts stolen from him
because of an oversight on the part
of his auditor to the reduction
thereof and (c) be unable factually to recover such monies from the
thief.
[84] The next question
is then whether TBA’s claim can be accommodated under limb (b).
Here TBA is perhaps on firmer ground.
PW’s working knowledge of
TBA’s chronic overdraft is germane. Even so, and regardless of
whether the “contemplation”
or the “convention”
approach is to be adopted, I do not believe that it can confidently
be said that both parties were
intent on that consequence. Be that as
it may, there is in any event a more elementary reason why TBA’s
claim for interest
qua
damages, be it general or special,
cannot succeed and that is that it lacks the factual underpinning to
support it. It is crucial
to TBA’s case in this regard that it
became liable to its banker for the additional interest now claimed.
The only evidence
proffered related to the actual rates of interest
that were in fact charged by Nedbank. I agree with the submission
made on behalf
of PW that in order to substantiate its claim TBA at
the very least had to prove: (a) the existence of the overdraft
agreement
between it and its banker; (b) the specific terms of that
agreement, including the applicable terms as to the basis upon and
the
rate at which interest would be charged on the various levels of
the overdraft; to which I would add (c) that had it not been for

Mitchell’s thefts its overdraft would have been reduced by the
exact amounts of the thefts (and would not, for instance,
have been
employed for another purpose such as an investment). TBA’s only
witness on this issue, Bladergroen, testified that
the terms of TBA’s
overdraft agreement with Nedbank were embodied in a document which
Bladergroen undertook to produce, but
never did. The factual basis
for the claim was accordingly lacking. It follows that TBA’s
claim for interest
qua
damages cannot succeed (compare
Bellairs v Hodnett
and Another, supra,
1147C-H).
[85] That leaves the
claim for
mora
interest on the residual basis. Our
courts accept without requiring special proof that a party who has
been deprived of the use
of his capital for a period of time has
suffered a loss. At the same time it is accepted that in the normal
course of events such
a party will be compensated for his loss by an
award of
mora
interest (see e.g.
Bellairs
v Hodnett and Another, supra,
1145D-H).
The first issue in this regard relates to the rate at which such
interest should be calculated. PW contends for the rate
prescribed
pursuant to the provisions of s 1 of the latter Act, i.e.15,5% per
annum. TBA’s opposing contention is that interest
should, in
the exercise of the court’s discretion provided for in s 1 of
the latter Act, have been awarded at the higher
rate charged by TBA’s
banker on its overdraft. In my view TBA has failed to make out any
case for the exercise of such a
discretion in its favour. At best for
TBA it is accordingly entitled to interest at 15,5% per annum.
[86] The only remaining
issue regarding TBA’s claim for
mora
interest relates to the date from
which such interest should be calculated. TBA’s contention is
that the commencement date
should be a date earlier than the date of
summons because the
quantum
of its damages was readily
ascertainable by PW at such earlier date. I disagree. In the first
place the
quantum
was by no means capable of easy and
ready proof and the fact that Reid reported on it cannot be held as
an admission by PW against
itself. In the second place it fails to
recognise the fundamental principle that however liquidated a
plaintiff’s claim for
damages may be,
mora
interest can only be calculated from
the date when
mora
commenced. This principle is
formulated by Solomon JA in
West
Rand Estates Ltd v New Zealand Insurance Co Ltd
1926 AD 173
at 182:
“
Here … the amount of
loss in respect of each item of the claim was ascertained by
agreement between the parties before issue
of summons … It
follows therefore that by our law interest began to run on the amount
of defendant’s liability from
the date of
mora
.
And that brings me to consider the question of what that date is.”
and
at 183:
“
There is no satisfactory
reason for following any other practice, and we think that we should
now definitively lay down the rule
that
mora
begins to run from the
date of receipt of the letter of demand. It of course follows that,
where there has been no letter of demand,
there would be no
mora
until summons has been
served on defendant.”
(see also
Standard
Chartered Bank of Canada v Nedperm Bank Ltd
[1994] ZASCA 146
;
1994
(4) SA 747
(A) 778A-B). It is idle to contend that PW was in
mora
on the very date each amount was
stolen by Mitchell or for that matter on the date Reid submitted his
report. For these reasons
TBA should have been awarded interest on
the capital amount of its claim, calculated at the rate of 15.5% per
annum from date of
summons, being 3 November 1995, to date of
payment.
[87]
Costs
The initial costs order
by the Court
a quo
was made on 7 July 1999 and is quoted
in para 14 above. It can be separated into two parts. The first part
related to the 14 days
of trial during which TBA set out to prove the
quantum
of its claim. With regard to this
period of 14 days PW was ordered to pay TBA’s costs on the
scale of attorney and client.
The second part of the order provided
that, save for the
quantum
-related
period of 14 days dealt with in the first part, there would be no
order as to costs, i.e. that each party was liable for
its own costs.
[88] After 7 July 1999
it was disclosed to the Court that PW had made a “without
prejudice” tender as contemplated in
rule 34 on 14 April 1997
i.e. shortly before the commencement of the trial. This is referred
to in para 15 above. Since the amount
tendered exceeded the damages
awarded in the first order PW asked the Court to reconsider its
original costs order. The Court acceded
to PW’s request and as
a result the revised order which is quoted in para 15 above was
substituted. In terms of the revised
order PW was ordered to pay
TBA’s costs incurred up to 24 April 1997 while TBA was ordered
to pay PW’s subsequent costs,
save for the costs incurred by PW
during the stipulated
quantum
-related
period of 14 days. With reference to this 14 days period PW was
deprived of its costs.
[89] On the view I hold on the merits of the appeal the
tender of 24 April 1997 is no longer of any consequence. I did not
understand
PW’s counsel to contend that in these circumstances
this Court is to deviate from the general principle that costs should

follow the result. Accordingly, PW is to pay the trial costs incurred
by TBA.
[90] The only remaining
issue regarding the costs in the Court
a
quo
relates to the
scale of the costs awarded to TBA during the
quantum
-related
period of 14 days. Though both sides maintained that the Court
a
quo
erred when, in
its original order of 7 July 1997, it awarded those costs to TBA on a
scale as between attorney and client, their
respective contentions as
to what the Court should have ordered differ diametrically. TBA
contended that the Court should have
awarded those costs not only on
an attorney and client scale but on the even more punitive scale as
between attorney and
own
client. PW’s contention, on the
other hand, is that the special order of costs was unwarranted and
that the costs should have
been awarded on the ordinary party and
party scale.
[91] From the judgment
of the Court
a quo
it is apparent that it did not
appreciate the import of TBA’s request for attorney and own
client costs. What also appears
from the judgment is that the reason
for its special costs order was the finding that in all the
circumstances PW acted “grossly
unreasonably” in only
conceding
quantum
after the matter was bitterly
contested for fourteen days of the trial. In weighing up these
opposing contentions it is unnecessary
to dwell in detail on the
trial court’s stated reasons for its finding of gross
unreasonableness on PW’s part. Although
it may be that I would
not have made a similar order, sitting as a court of first instance,
it is a discretionary decision with
which this Court, in the absence
of a misdirection, will be slow to interfere. PW’s case is not
that the Court
a quo
misdirected itself. In all the
circumstances there is in my view no basis for interfering with the
Court
a quo’s
conclusion that a special costs order
was justified.
[92] This brings me to
TBA’s counter-submission that the costs pertaining to the
quantum
-related
period of 14 days should have been awarded on the even more punitive
scale of attorney and
own
client. Since the Court
a
quo
appears not to
have appreciated that TBA’s request was for an order in its
refined form this Court is at liberty to reconsider
the issue
de
novo
. Having done
so, I believe that the grounds advanced by TBA in support of its
submission fall short of justifying a cost order
which is even more
punitive than the one already made in its favour. That being the
case, and in the absence of full argument on
the matter, it is not
called for to express a firm view on whether an order in that form is
a competent one. I may in passing mention
that the Full Bench of the
Cape Provincial Division has recently expressed the considered view,
in
Law Society of
the Cape of Good Hope v Windvogel
1996
(1) SA 1171
(C), that an order for attorney and
own
client costs is not appropriate since
it is not generically different from an order for attorney and client
costs. On the other
hand, there are considered decisions to the
contrary in other Divisions (see e.g.
Cambridge
Plan AG v Cambridge Diet (Pty) Ltd and Others
1990
(2) SA 574
(T);
Fidelity
Bank v Three Women (Pty) Ltd and Others
[1996]
All SA 368
(W) and
Ben
McDonald Inc and Another v Rudolph and Another
1997
(4) SA 252
(T)). Moreover, in
Sentrachem
v Prinsloo
1997 (2)
SA 1
(A) 22B-D and
Cape
Pacific Ltd v Lubner Controlling Investments (Pty) Ltd
[1995] ZASCA 53
;
1995 (4) SA 790
(A) 807C-D, this
Court appears to have accepted in principle, but without pertinent
consideration, that an order for attorney and
own
client costs would in appropriate
circumstances be competent. This remains yet another issue for future
consideration by this Court
(see generally, Cilliers,
Law
of Costs
, 3
rd
ed para 4.08.)
The following order is made:
1. The appeal succeeds with costs including the costs of
two counsel.
2. The following order
is substituted for the orders made by the Court
a
quo:
‘
1. The defendant is ordered to pay the sum of
R1 389 801.90 to the plaintiff together with interest
thereon at the rate
of 15,5% per annum from 3 November 1995 to date
of payment.
2. The plaintiff is ordered to pay to the defendant the
sum of R74 100 together with interest thereon at the rate of
15,5%
per annum from 6 February 1996 to date of payment.
3. The defendant is ordered to pay the plaintiff’s
costs, including the costs of two counsel and the qualifying fees of
the
plaintiff’s expert witnesses, Wainer and Dorfan. Save for
paragraph 4 below, the plaintiff is awarded such costs on a party
and
party scale.
4. The defendant is
ordered to pay the plaintiff’s costs, including the costs of
two counsel, of 14 days’ trial spent
on
quantum
on the scale as between attorney and
client.’
…………………
P M NIENABER
JUDGE OF APPEAL
MARAIS JA, FARLAM JA, BRAND AJA:
[1] With one reservation we concur in the judgment
of Nienaber JA. The reservation relates to what has been referred to
as the “supple”
test in assessing what damages are
recoverable. While the approach has attractions, we have not explored
its possible disadvantages
in sufficient depth to enable us to affirm
its soundness. We too prefer to leave the question for another day.
We have also had
the advantage of reading the informative judgment of
Olivier JA. Regrettably, we are unable to agree with his conclusion
that the
Act is applicable in this case.
[2] At the risk of stating what should be obvious
we remind ourselves that the enquiry is what the legislature intended
when it
enacted the Act. The exercise is one of interpretation of a
statute and does not involve “reforming” either the law

of delict or the law of contract. Nor does it involve developing the
common law in the manner contemplated by s 39(2) of the Constitution

of the Republic of South Africa Act 108 of 1996. The manner in which
the common law might
now
be reformed or developed in terms of
that provision is logically irrelevant to the interpretation of the
Act. What is relevant
to its interpretation is what the common law
was commonly understood to be in 1956 when the legislature decided to
alter it by
legislation. It is so of course that s 39(2) of the
Constitution enjoins us “when interpreting any legislation”
to
“promote the spirit, purport and objects of the Bill of
Rights”, but that postulates that the interpretation which it

is proposed to place upon legislation is indeed one which would
demonstrably promote an identifiable value enshrined in the Bill
of
Rights and also one of which the legislation is reasonably capable.
To this aspect of the matter we shall return.
[3] We have no doubt that in 1956 the
common understanding of the common law of South Africa was that
contributory negligence (a
well-known term of art evolved in and
peculiar to the law of delict) was a concept alien to the law of
contract. It is true of
course that the negligence of a plaintiff was
not always entirely irrelevant in a contractual claim. It might be
regarded from
a purely causative point of view as the only or true
cause of the plaintiff’s loss or it might form the basis for a
successful
contention that the plaintiff had unreasonably failed to
mitigate the loss. However, in such cases no question of
contributory
negligence and hence of apportionment of liability
could arise. The plaintiff either succeeded or failed in the claim
or, in the
case of unreasonable failure to mitigate part of the loss,
had the claim reduced to the extent that the loss could have been
mitigated.
But factual causation was the key concept, not respective
degrees of
culpa
.
[4] Where, as here, the stated object of
the Act in its long title is “To amend the law relating to
contributory negligence
and the law relating to the liability of
persons jointly or severally liable in delict for the same damage,
and to provide for
matters incidental thereto”, one is
immediately led to think that it was the law of delict which the
legislature had in mind
to amend.
A
fortiori
when one recalls the
dissatisfaction which existed at the time in regard to the common law
principle in the law of delict which
put a plaintiff entirely out of
court if he or she was concurrently negligent, even if the degree of
the defendant’s negligence
was much greater. It led to
considerable sophistry in the search for a last opportunity to avoid
loss which could be said to have
been available to the defendant in
order to rescue the plaintiff from being non-suited because of his or
her contributory negligence.
But even where such an opportunity could
be identified, it was generally thought to be unfair that the
plaintiff’s negligence
should then be entirely ignored and the
defendant be held liable for the full amount of the loss. There was
thus a notorious mischief
in the common law of delict to which the
Act would be expected to be intended to put an end. No comparable
state of public and
professional disaffection with the extent to
which the law of contract catered for negligence on the part of a
plaintiff existed
and, in the absence of a clear indication in the
Act that it was intended to amend the law of contract in that
respect, one would
hesitate to conclude that it did.
[5] As one reads on, one finds provisions which
plainly show that the law of contributory negligence in the common
law of delict
was being amended but precious little, if anything, to
show that negligence in the law of contract was also being addressed.
Indeed,
one finds indications to the contrary. One need waste no time
on the former. It has never been doubted that the Act was intended
to
amend, at least, the law of delict in so far as it related to
contributory negligence. But what of the latter?
[6] First there is the choice of
language. We have already observed that contributory negligence is a
term of art which had its
fons et origo
in the law of delict. It is a concept entirely
foreign to the law of contract. Yet that is the expression which the
legislature
has employed in the long title of the Act, as the heading
to Chapter I, and in s 1(3).
[7] Next there is s 1(1)(b). It provides that for the
purposes of paragraph (a) of s 1(1), damage shall be regarded as
having been
caused by a person’s fault notwithstanding the fact
that another person had an opportunity of avoiding the consequences
thereof
and negligently failed to do so. It was obviously intended to
abolish the last opportunity rule which was also a common law rule

associated with the law of delict.
[8] Then there are the consequences of accepting that
the Act was intended to apply to contracts. The plaintiff sues the
defendant
for damages for breach of contract. No negligence is
entailed in the breach; the obligation is absolute and fault is
irrelevant.
As a fact the plaintiff’s negligent conduct has
contributed to the happening of the loss-causing event. There being
no damage
caused partly by the defendant’s fault, s 1 (1)(a)
cannot apply and the defendant cannot claim an apportionment of
liability.
If, on the other hand, negligence was entailed in the
breach of contract, the defendant would be entitled to an
apportionment of
liability. The inequity is manifest: the defendant
who is at fault may invoke the plaintiff’s negligence to reduce
the claim;
the defendant who is not at fault, may not. That bizarre
result is not satisfactorily explained by saying that the contractual
obligation of the latter was “absolute” whereas that of
the former was relative and dependent upon the existence of

negligence. The former was under just as absolute an obligation not
to be negligent. Why would he or she have been allowed to invoke
the
Act after breaching the contract by being negligent, but the latter
not be entitled to do so after breaching the contract in
a manner
which does not entail negligence? The distinction seems absurd. What
is more, there is a clear distinction between a contractually
imposed
obligation to take care in discharging a stated obligation and a
contractually imposed obligation to perform a stated obligation

failure to perform which will constitute a breach of contract whether
or not the breach was in fact due to lack of care. In the
case of the
latter, is the defendant who is blameless in breaching the contract
to be liable in full but the defendant who is negligent
in breaching
the contract to have the benefit of the Act? It is difficult to
accept that, if the legislature did intend the Act
to apply to
contracts generally or even to only some contracts, it would have
enacted so blunt an instrument and left fundamental
questions such as
these unanswered.
[9] In our view, the random and inconsistent results
of the indiscriminate application of the Act to contracts negative
the existence
of any intention on the part of the legislature to have
the Act apply to contracts, whether or not they are contracts which
require
to be performed in a manner which is not negligent.
[10] There are still further indications
that such is the correct conclusion. Section 1(1)(a) provides that a
claim “shall
not be defeated by reason of the fault of the
claimant”. In the law of delict that was of course something
which could and
did happen. A claim valid in all respects could be
defeated by the plaintiff’s contributory negligence. In the law
of contract
it could not. The negligence of a plaintiff could not
“defeat” his claim. The point was made by Watermeyer J in
OK Bazaars (1929) Ltd and Others v
Stern and Ekermans
1976 (2) SA 521
(C)
at 528F. If his own negligence was held to be the true or real cause
of his loss and he was non-suited on that account it was
implicit
that there never was a justifiable claim against the defendant. If he
negligently failed to mitigate his loss, that too
did not “defeat”
his claim. It disabled him from pursuing a valid claim if the entire
loss could have been avoided
and merely reduced it if part of the
loss could have been avoided.
[11] Section 1(3) provides that “
‘fault’ includes any act or omission which would, but for
the provisions of
the section, have given rise to the defence of
contributory negligence”. Here again it is necessary to repeat
that the law
of contract knew no “defence of contributory
negligence”. Moreover, “fault” must obviously be
confined
to negligence. The context of the Act shows that to be so.
Dolus
is
a form of fault in the wide sense but it is obviously not included.
The legislature did not exclude it by name because the context
of the
Act showed plainly enough that it was to be excluded. If it be
suggested that fault is always involved in a breach of contract
and
therefore contracts are covered by the Act the suggestion would be
wrong. Contracts may be breached in circumstances where
no fault can
be identified. If it be said that at least those contracts breach of
which entails fault are covered, the questions
raised in para [8]
arise. All these considerations point inexorably to the conclusion
that the law of contract was far from the
mind of the legislature
when it enacted the Act and that it did not intend the Act to amend
the law of contract.
[12] We cannot agree with the approach of the
Court
a quo
to the interpretation of the Act. It entailed
isolating s 1(1)(a) and attempting to accommodate contractual claims
within what
was said to be the plain language of the provision. Such
an approach ignores the colour given to the language by the context
of
the Act read as a whole and by the long title, the use of the
expression contributory negligence, and the other considerations
raised in this judgment. The days are long past when blinkered
peering at an isolated provision in a statute was thought to be the

only legitimate technique in interpreting it if it seemed on the face
of it to have a readily discernible meaning. As was said
in
University of Cape Town v Cape Bar Council
1986 (4) SA 903
(A)
at 914D-E “I am of the opinion that the words of s 3(2)(d) of
the Act, clear and unambiguous as they may appear to be
on the face
thereof, should be read in the light of the subject-matter with which
they are concerned, and that it is only when
that is done that one
can arrive at the true intention of the Legislature”. The
well-known passage in the dissenting judgment
of Schreiner JA in
Jaga
v Dönges NO and Another; Bhana v Dönges NO and Another
1950
(4) SA 653
(A) at 662G-663A was also quoted with approval. It is of
course clear that the context to which reference is made in the
latter
case must include the long title and chapter headings. (Cf
Swart v Cape Fabrix (Pty) Ltd
1979 (1) SA 195
(A) at 202C.)
[13] The decision of Watermeyer J and Steyn J in
the
OK Bazaars
case,
supra
, that the Act does not apply
to claims in contract has stood for 26 years. Its correctness has not
been challenged in our courts.
The legislature has amended the Act on
three occasions since the decision and, if the decision did indeed
frustrate its desire
to amend the law of contract, we find it very
strange that remedial legislative steps were not taken on any of
those three occasions.
It is so that it was not a decision of this
Court which would have bound every court in the land but it was a
decision of two judges
in a provincial division which would bind
single judges in the Cape Provincial Division and magistrates
throughout the country.
That the legislature has acquiesced in the
decision for nigh on 30 years is significant. The remarks made in
Kergeulen Sealing and Whaling Co Ltd v CIR
1939 AD 487
at 505
also have some bearing on the matter. In that case the decision of
two judges of the Cape Provincial Division in a prior
case which had
remained unchallenged for over 20 years and on which the commercial
community had presumably acted on the assumption
of its correctness
was described as one which “one would hesitate now to disturb”.
Such a consideration can obviously
not be conclusive. Its weight will
depend upon the circumstances of the case and the extent to which
existing legal relations affecting
many members of society may be
retrospectively nullified by disturbing the commonly accepted
interpretation. We say “retrospectively”
because that
would be the effect of a decision by a court reversing the previously
held view. It has never been suggested that
South African courts have
the power to limit the operation of such judge-wrought changes in the
law. (See Hahlo & Kahn,
The South African Legal System and its
Background
, p 145 n 13 and pp 249-50.) We should add that, in any
event, we consider the reasoning of Watermeyer J to be sound.
[14] We do not find it helpful to examine how courts
elsewhere have interpreted their own domestic legislation dealing
with contributory
negligence. Their legislation falls to be
interpreted against the background of a common law regime which,
while similar in important
respects to our own, is or may be in other
respects very different. The language of the legislation is also not
identical to our
own. None the less and because the legislation
elsewhere clearly influenced ours and the interpretation of it might
be thought
to be persuasive we shall indicate briefly why we do not
find it to be so.
[15] We do not think that the difference in wording
between the English definition of “fault” in section 4 of
the Law
Reform (Contributory Negligence) Act, 1945 8 &
9 Geo. 6
,
c.28 and the definition of “fault” in s 1(3) of our Act
indicates an intention on the part of the South African legislature

to make the Act apply in contractual cases. The English definition of
“fault” is:
“ ‘
fault’ means negligence, breach of
statutory duty or other act or omission which gives rise to a
liability in tort or would,
apart from this Act, give rise to the
defence of contributory negligence.”
Our definition is in s
1(3) of the Act and reads as follows:
“
(3) For the purpose of this
section ‘fault’ includes any act or omission which would,
but for the provisions of this
section have given rise to the defence
of contributory negligence.”
[16] In English law in a case where both
a plaintiff employee and a defendant employer are not negligent but
are in breach of their
statutory duties under the factories
legislation and the regulations made thereunder the damages suffered
by the plaintiff will
be subject to apportionment under the 1945 Act
because the employee’s non-negligent breach of statutory duty
is “fault”
specifically covered by the definition in s 4
of that Act: see
Boyle v Kodak Ltd
[1969] 1 WLR 661
(HL). In that case Lord Diplock
pointed out (at 672B) that a new branch of the law of civil wrongs
was developed in England by
judicial decisions based on the Factories
Act (9 & 10 Eliz 2, c. 34) and its predecessors and by
regulations made thereunder.
[17] Although our law recognizes an action for
damages for breach of a statutory duty where the statute was intended
to give a right
of action (see McKerron,
The Law of Delict,
7
th
edition, p 276), where it does not the courts may yet
hold that the breach may be evidence of negligence. Compare
Rawles
v Barnard
1936 CPD 74
at 77 and
Olitzki Property Holdings v
State Tender Board and the Premier of the Province of Gauteng
(SCA, 28.3.2001, as yet unreported, at para [13]).) Our courts have
not by judicial decision built up a new branch of the law of
civil
wrongs relating to breach of statutory duties imposed by legislation
akin to the English Factories Acts. It may well be that
for that
reason our legislature decided to omit from the definition of “fault”
in the Act a reference to breach of
statutory duty such as was found
in the English 1945 Act. Furthermore, liability for delict in our law
is based in general on fault,
unlike in English law where in an
appreciable number of torts strict liability exists. That would
explain why our legislature omitted
any reference to other acts or
omissions which give rise to strict liability and was content to make
apportionment available only
in cases where fault in its ordinary
sense was present, subject only to the inclusion of contributory
negligence for the reason
given in the next paragraph. Moreover, as
Lord Diplock said (at 674H) in
Boyle v Kodak Ltd, supra,
it is
difficult to apportion the respective shares of responsibility for
damage of parties who were not blameworthy in any way
and who are
only regarded as being at “fault” because of the
application of strict liability to their case. We therefore
do not
think that the differences between the definitions of “fault”
appearing in the English and South African Acts
indicate an intention
on the part of our legislature to make the Act apply not only in the
context of actions
ex delicto
but also of those
ex
contractu
.
[18] The fact that our definition is introduced by
the word “includes” and not “means”, as is
the English
definition, is explicable in our view on the simple
ground that because a plaintiff is said to be guilty of contributory
negligence
where he is careless in safeguarding his own person or
property, even if his carelessness puts no-one else’s person or
property
at risk, it was considered advisable to make it clear that
the blameworthy conduct of the plaintiff which was to form the basis

of the apportionment was to include contributory negligence in this
sense. Aquarius (Watermeyer CJ) in his article Causation and
Legal
Responsibility
(1941) 58 SALJ 232
at 248 made this aspect of
contributory negligence clear when he said:
“It
is negligence in the sense of a failure to look after his own
interests, and not necessarily negligence in the sense of
a breach of
a duty to take care which is owed to another.”
[19] In para 11 (a) and again in para 12 of his
judgment Olivier JA states that, by virtue of the decision of this
Court in
Lillicrap
, the approach followed in England and New
Zealand is not open to us. We have difficulty in seeing the relevance
of the decision
in
Lillicrap
to the solution of the problem.
The approach followed in England and New Zealand involves drawing a
distinction between three categories
of breach of contract and an
acceptance of the proposition that their Acts only apply to the third
category, being the category
of concurrent contractual and delictual
liability. This approach is dictated by the definition of fault in
their Acts, more particularly,
the requirement in the definition that
the defendant’s conduct must give rise to a liability in tort.
It follows that if
the defendant is only liable in contract and not
in tort there is no “fault” on the part of the defendant
and the English
Act cannot apply. That is the very essence of the
Glanville Williams theory. However, as is emphasised by Olivier JA in
para 5
(a) and again in 9 (f), the expression “which gives rise
to liability in tort” does not form part of the definition
of
“fault” in our Act. The existence of concurrent liability
in delict and contract therefore appears to be irrelevant
when
construing our Act.
[20] However, even if it were open to us to adopt
the approach of the English courts and accept that the Act could
apply to what
was identified as the third category of case in
Forsikringsaktieselskapet Vesta v Butcher
[1986] 2 All ER 488
,
namely, where concurrent liability in both contract and delict
exists, this is not such a case. It falls within the second category

of case identified by Hobhouse J at 508 (and approved by the Court of
Appeal: see
[1989] UKHL 5
;
[1989] AC 852
at 865D-E, 867F-G and 875F-G) in which an
apportionment on the basis of contributory negligence is not
available: see further
Raflatac Ltd v Eade
[1999] 1 Ll R 506
(QB) at 510.
[21] The decision of the Court of Appeal in
Vesta
was given by a majority (O’Connor LJ and Neill LJ). The third
member of the court, Sir Roger Ormrod, dissented, saying (at
879 A-B)
that he remained unconvinced that “contributory negligence, as
such, at common law had any relevance in a claim
in contract”.
[22] On the other hand one of the factors
mentioned by O’Connor LJ (at 867 F-G) in favour of the view
that there is a power
to apportion in a category (3) case even though
the claim is made in contract was “that contributory negligence
was a defence
in category (3) cases pleaded in contract before 1945”.
He continued: “The argument is supported by railway cases and

banking cases.”
[23] The majority in the High Court of Australia
in
Astley v Austrust Ltd
(1999) 197 CLR 1
based their decision
in part on a finding that prior to 1945 contributory negligence did
not operate as a defence to a breach of
contract. Further support for
that view is to be found in an article by N E Palmer and P J Davies,
“Contributory Negligence
and Breach of Contract – English
and Australian Attitudes Compared” published in
(1980) 29 ICLQ
415
, who state (at 418-9) that contributory negligence was never a
defence to an action for breach of contract at common law and refer

to a decision of the Court of Appeal,
Becker v Medd
(1897) 33
TLR 313
, in which it was specifically held that a claim in contract
could not be defeated by proof of negligence on the plaintiff’s

part.
[24] The point need not detain us further in this
case because, whatever the position was in English law, it was not
suggested that
contributory negligence by the plaintiff was a defence
to a contractual claim in our law.
[25] During the course of the argument counsel for
the respondents referred us to the texts of draft bills which were
published
in the Government Gazette before the Act was passed by
Parliament. These texts showed, so it was submitted, that although it
was
originally proposed to limit the operation of the Act to
delictual claims this intention was departed from in the text which
was
eventually passed by the Legislature. Counsel for the appellant
responded to this material by placing before us the text of the

Hansard report of the proceedings in the House of Assembly which
clearly showed, particularly from the speech of the Minister of

Justice, who introduced the Second Reading of the Bill, that the
discussions related solely to delictual claims. In view of the
fact
that we have without reference to this material come to the
conclusion that the Act only applies to delictual claims it is

unnecessary for us to decide whether material of this kind can be
looked at by a court when legislation falls to be interpreted
and, in
particular, whether the decision of the House of Lords in
Pepper v
Hart
[1992] UKHL 3
;
[1993] AC 593
(HL) is in accordance with our law.
[26] It remains to observe that we are unable to
discern in the Bill of Rights any societal value which is imperilled
by the conclusion
that the Act does not apply to claims based on
breach of contract and that we do not consider the Act to be
reasonably capable
of a contrary interpretation in the light of all
the
indicia
to the contrary which exist.
[27] We conclude, therefore, that there can be no
reduction of the damages proved to have been suffered by the
appellant. Whether
there were other ways at common law in which the
respondent could have exploited the negligence of the appellant does
not fall
to be considered. Those that were suggested and covered by
the pleadings have been dealt with in the judgment of Nienaber JA.
[28] By drawing attention to some of the
implications of boldly applying the Act to cases in contract (even if
only to those where
a breach entails negligence), we do not wish to
be thought to be hostile to the very idea of extending the operation
of the Act
to contract cases by legislation. All that we would
caution against is a decision to do so without a full appreciation
and consideration
of all its implications. These matters are, so we
understand, being considered by the Law Commission and it will
doubtless take
into account all the relevant implications, including
those touched upon in the case of
Austrust, supra,
at paras 47
and 48.
R M MARAIS
JUDGE OF APPEAL
I G FARLAM
JUDGE OF APPEAL
Olivier JA
[1]
I am in
respectful agreement with the judgment of my colleague, Nienaber JA,
that there was a failure by both TBA and PW to prevent
the loss
suffered by TBA by the exercise of due care. I also agree with his
approach to the questions of interest and costs. Unfortunately,
I
disagree with my learned colleagues that s 1 (1) (a) of the
Apportionment of Damages Act, 34 of 1956 ('the Act') is not
applicable
in the present case. I readily concede that the question
whether the Act is applicable to contractual claims is controversial.
In the end the opposing judicial views may well depend on differing
philosophical and jurisprudential points of departure.
A minority judgment is usually short and to the point.
In the present case I consider it necessary to explain my views
somewhat
more fully, also because the Act is presently under review
by the South African Law Commission and a somewhat more complete
overview
may be helpful to it.
[2]
While it is
undisputed that the Act applies to claims based on delict, the
question of the applicability of the Act and its counterparts
to
contractual clauses has elicited strongly opposed views and judgments
in England, Australia, New Zealand and Canada and in our
country. All
the Commonwealth countries just mentioned share apportionment
legislation. But the wording of the various acts differ;
so do the
lenses through which we look at the statutes. In particular, South
African lawyers are required to keep our common law
- the Roman-Dutch
law - in mind as a background factor in interpreting our legislation.
What is important, though, is the quest
for recognition of the
underlying principles and philosophies developed by other courts as
an aid in clarifying our own thoughts.
I will first examine the
position in our common law and, for the sake of clarity, distinguish
between delictual and contractual
claims.
[3]
Apportionment
in delictual actions
(a) Originally, in Roman law, due to the
procedural formula applicable to the Aquilian action, a strict
all-or-nothing approach
prevailed. Reinhard Zimmermann,
The
Law of Obligations : Roman Foundations of the Civilian Tradition
,
(1990), at 1010 concludes :
'If somebody suffered harm through his own fault, he was
denied recovery, unless the tortfeasor had acted intentionally (in
which
case he could recover his full damages). The strict principle
of all-or-nothing was predetermined by the procedural formula. The

judge only had the alternative to condemn in the full amount or to
absolve the defendant -
tertium non datur.
'
This principle appears from two texts in
the
Digesta
dealing
with general principles applicable to the Aquilian action, D 9.2.9.4
in fine
(Ulpianus) and
D 9.2.31 (Paulus). But two peculiar cases have elicited involved
debates through the ages. The first is the case
of the athlete who is
training at javelin throwing, discussed in D.9.2.9.4. A slave is
passing by and is injured by the javelin.
If this happens on a proper
sports field, the athlete is not held liable; if outside a recognised
sports field, he is liable. Is
this a case of contributory
negligence? Or, rather,
volenti non fit
injuria
? The second case is that of the
barber who sets up his chair in the immediate vicinity of a playing
field. While shaving a slave,
the barber's hand is hit by a ball
thrown or kicked by one of the players. The slave is injured. The
text (D.9.2.11 pr) mentions
three opinions, none of which applies an
apportionment of damages. Mela says the one who is negligent, is
liable. But who is negligent
: the player or the barber? Mela does
not say. Proculus thinks the barber is negligent for setting up his
chair in a dangerous
place. Ulpian states that it is rightly said
that the slave only had himself to blame, because
' … it is no bad point in reply that if someone
entrusts himself to a barber who has his chair in a dangerous place
he has
only himself to blame for his own misfortune.'
(See Zimmermann
op
cit
1011 - 1013 for a discussion of the
texts.) We do not know how the Romans actually solved the problem.
Mela and Proculus clearly
think that the answer lay in the field of
culpa. Does Ulpian invoke the
volenti
defence?
What emerges is that the problem of concurrent causation of the loss
by a plaintiff and a defendant was not solved by what
Flemming,
Torts
, p 244 calls
'the abracadabra of causation', but by having regard to fault
or
wrongfulness.
(b) There is, however, another text which
later assumed more importance than the discussions by the classical
scholars of the cases
of the javelin thrower and the barber. It is
D.50.17.203, a text ascribed to Pomponius and which appears in the
50
th
book of the
Digest, dealing with general rules and principles. The text lays down
:
'If anyone incurs loss which is his own fault, he is not
regarded as incurring loss'
(c) This principle was used by medieval
lawyers to begin to develop a theory applicable to cases of
concurrence of fault in the
field of delict. Zimmermann
op
cit
1030, citing Lauterbach (1618 - 1678) and
a gloss to D.9.2.9.4, explains that the approach of the Roman law was
retained, but it
was now more clearly explained in terms of fault:
'The fault of the plaintiff / victim was, in a way, "set
off" against that of the defendant/wrongdoer, with the result

that "culpa culpam abolet". Hence the expression of
compensatio culpae or culpa compensation that came to be used to

label the uncompromising approach to the problem of contributory
negligence. Whether every contributory fault on the part of the

victim - even culpa levissima - was originally taken to deprive him
of his remedy is not quite clear.
In the later usus modernus, at
any rate, the issue appears to have been decided on the basis of a
preponderance of fault; only if
he had displayed the same or a
greater degree of negligence than the wrongdoer did the victim lose
his claim. Where, on the other
hand, his negligence was less
significant, when compared with that of the wrongdoer, his claim for
damages remained completely
unaffected
.'
(My
emphasis)
(d) On the continent of Europe, the
Romanistic principle of D.50.17.203 and the idea of
culpa
compensatio
, as described above, prevailed (
see Zimmermann
op cit
1047).
(e) The South African law of delict, cut off from its
historical roots
in the 19
th
and early 20
th
centuries
' … became completely entrapped in the
"abracadabra" of the causal approach to contributory
negligence. Ultimately,
therefore, only the legislator was able to
save the day.'
(Zimmermann
op cit
1049)
Our courts simply adopted the English law
according to which the contributory negligence of a plaintiff was a
complete bar to relief
in an action in tort, rather than the relative
fault principle of our common law. This was lamented by Watermeyer CJ
in
Pierce v Hau Mon
1944
AD 175
at 195 :
'The law relating to the subject of contributory
negligence which is applied by our Courts has been taken over from
English law
and it is seldom that any Roman-Dutch authority is
referred to. In fact there is plenty of authority in Roman law (see
Grueber,
Lex Aquilia
(2.7.4, p. 228
et seq.
) and also
in Roman-Dutch law (see
Voet
(9.2.17; 9.2.22)), and the
principle of
culpa compensatio
was referred to by De Villiers,
C.J., in
Lennon's
case
(1914, A.D. 1)
, by Kotze, J.A., in
Jacobs v Union Government
(1919, A.D. 325)
and by Gardiner,
A.J.A., in the case of
Union Government v Lee (
1927, A.D.
202).
It may be that if Roman - Dutch authorities had been more fully
referred to in earlier South African cases that our law of
contributory
negligence might have developed on different lines from
the English law. However, if we take the English law on the subject
as
it now is, and as it had been adopted in our Courts, we shall find
that there are still doubts and difficulties about its application
in
certain classes of cases.'
(f) Our courts, not enchanted with the 'all-or-nothing'
approach, adopted the 'last opportunity' rule : the party who had the
last
opportunity to avoid the loss is liable. This was a
manifestation of the proximate cause theory of causation.
(g) In the Commonwealth countries, in the
field of torts, the law in respect of contributory negligence was
changed by legislation
first in 1924 in Ontario, later in England by
the Law Reform (Contributory Negligence) Act of 1945 and in other
Commonwealth countries.
Some of these statutes were specifically
designed and phrased to be applicable to delictual claims only;
others were worded in
general terms. Our legislator followed suit in
1956 with the Act which in its terms differs from that of the other
Commonwealth
statutes. Overall the Act was not well-drafted - see the
scathing remarks of Holmes J in
Taylor v South
African Railways and Harbours
1958 (1) SA 139
(D) at 142 A - B. Since 1956 our courts have developed a substantial
body of jurisprudence as regards the application of the Act
to
delictual claims. In that field our law has now, broadly speaking,
stabilised in a system which seems to be equitable.
[4] Apportionment in contractual actions
(a) We must now return to the field of contract and
ascertain how the phenomenon of concurrent fault was dealt with in
our common
law. The subject is a difficult one, mainly because of the
absence of clear texts or well-developed rules.
(b) Culpa played a significant role in the Roman and
Roman-Dutch law relating to breach of contract.
In post-classical Roman law all claims for
breach of contract were given content
ex aequo
et bono
. From now on, through medieval law,
usus modernus
and
Roman-Dutch law :
'What mattered was simply whether the debtor had
complied with his contractual obligations and, if not, whether his
failure to perform
(properly) was attributable to his fault; hence
the emphasis throughout the various periods of the ius commune on the
subjective
requirements for liability for breach of contract and the
attempts to analyse, refine and systematize the various degrees of
culpa
(in the broad sense of the word).'
(Zimmermann
op
cit
807
et seq;
Ramsden
Supervening
Impossibility of Performance in the South African law of Contract
.
1985 19
et seq
).
(c) The important point is that the basic
requirements for contractual and delictual liability in our common
law did not differ
fundamentally. Both kinds of liability were based,
in the end, on culpa. The incidence of
onus
may have been different, and the
quantum
of damages may have been different, but there was a
basic unitary approach. No wonder that, as Zimmermann (
op
cit
at 808 footnote 176) points out, during
the time of the
usus modernus
liability arising as a consequence of deficient
performance 'tended to be based on the
lex
Aquilia
rather than on contractual
principles.'
(d) I must pause here to refer to and
emphasise the fundamental difference between our common law roots and
that of the English
law in relation to the role played by culpa as a
requirement for an action on contract. Zimmermann
op
cit
814 puts it as follows :
'Contrary to the tradition of the ius commune, the
debtor's liability [in English law] does not depend on fault. The
reason is,
of course, that the common law regards all contractual
promises as guarantees:
"[W]hen [a] party by his own contract creates a
duty or charge upon himself, he is bound to make it good, …
notwithstanding
any accident by inevitable necessity." '
The harsh and uncompromising rule of English contract
law led to the creation of fictional 'implied' terms and 'implied'
conditions
to assist the debtor. But it has also led to the view that
as fault is not relevant in contract cases, the principle of
apportionment
could not become relevant - and this explains, in my
view, the omission in the English Act of 1945 of a reference to
actions based
on contract.
(e) The question remains : how did our
common law deal with cases where the plaintiff, suing on contract,
was also at fault in respect
of the loss suffered by him? Did the
principle of
culpa compensatio
or
the last
opportunity rule or apportionment of liability apply? We
simply do not know. The old authorities do not give us any guidance.
Neither
our old writers nor our early reported cases are helpful in
this respect. There simply is no authority for the proposition that

the contributory negligence of a plaintiff who sues in contract was
ever considered to be relevant; nor for the opposite point
of view.
The principle of our common law that both delictual and contractual
liability depend in various ways on culpa was never
expressly
rejected; nor the common law principle, recognised so clearly in
delictual claims, that the greater culpa of the plaintiff
neutralises
the lesser culpa of the defendant. We could find no pertinent
authority for the proposition that the principles relating
to delict
applied did not apply to contractual claims.
[5] The legislation
I now turn to the legislative intrusion, especially in
England and in our country in respect of contributory negligence in
delict
and contract.
(a) In
England
,
the question of apportionment of damages is dealt with in the Law
Reform (Contributory Negligence) Act 1945. S 1 reads as follows
:
‘
(i) Where any person suffers
damage as a result partly of his own fault and partly of the fault of
any other person or persons,
a claim in respect of that damage shall
not be defeated by reason of the fault of the person suffering the
damage, but the damages
recoverable in respect thereof shall be
reduced to such extent as the court thinks just and equitable having
regard to the claimant's
share in the responsibility for the damage :
Provided that -
this subsection shall
not operate to defeat any defence arising under a contract;
where any contract or
enactment providing for the limitation of liability is applicable to
the claim, the amount of damages recoverable
by the claimant by
virtue of this subsection shall not exceed the maximum limit so
applicable.’
S 4 of the English Act contained a
definition of fault,
viz
‘ “
fault” means
negligence, breach of a statutory duty or other act or omission which
gives
rise to a
liability in tort
or would, apart from this Act, give rise to the defence of
contributory negligence.’
(My
emphasis)
In South Africa, the
Apportionment
of Damages Act
34 of 1956 ("the Act")
came into operation on 1 June 1956. Its long title states that its
purpose is
'To amend the law relating to contributory negligence
and the law relating to the liability of persons jointly and
severally liable
in delict for the same damage, and to provide for
matters incidental thereto.'
Chapter 1 bears the title 'Contributory Negligence' and
Chapter 2 the title 'Joint or Several Wrongdoers'. For our purposes
Chapter
1 (consisting of only one section) is of direct and immediate
importance; Chapter 2 becomes relevant only insofar as it may be said

to illuminate the ambit and scope of Chapter 1.
(b) Chapter 1 reads as follows :
‘
1.
Apportionment
of liability in case of contributory negligence.
-
(1) (a) Where any person suffers damage which is caused
partly by his own fault and partly by the fault of any other person,
a claim
in respect of that damage shall not be defeated by reason of
the fault of the claimant but the damages recoverable in respect
thereof
shall be reduced by the court to such extent as the court may
deem just and equitable having regard to the degree in which the
claimant was at fault in relation to the damage.
(b) Damage shall for the purpose of paragraph (a) be
regarded as having been caused by a person’s fault
notwithstanding the
fact that another person had an opportunity of
avoiding the consequences thereof and negligently failed to do so.
(2) Where in any case to which the provisions of
sub-section (1) apply, one of the persons at fault avoids liability
to any claimant
by pleading and proving that the time within which
proceedings should have been instituted or notice should have been
given in
connection with such proceedings in terms of any law, has
been exceeded, such person shall not by virtue of the provisions of
the
said sub-section, be entitled to recover damages from that
claimant.
(3) For the purposes of this section ‘fault'
includes any act or omission which would, but for the provisions of
this section,
have given rise to the defence of contributory
negligence’
(c) Is Chapter 1 applicable to cases where the plaintiff
who sues for damages caused by a breach of contract by the defendant
is
himself causally negligent in respect of the said damage?
[6] South African case law
In the past, two Provincial Divisions of
what is now the High Court have said 'no'. This is the first occasion
that the question
has come before this Court. The Provincial
decisions are those in
Barclays Bank D.C.O. v
Shaw
1965 (2) SA 93
(O) (‘
Shaw’
)
and
O.K. Bazaars (1929) Ltd. and Others v
Stern and Ekermans
1976 (2) SA 521
(C) (‘
OK
Bazaars’
).
(a) In
Shaw
the plaintiff sued his bank on contract for damages in
the sum of R999. The plaintiff had issued a bearer cheque for R1,
which amount
was unlawfully altered by a bearer to R1000. The latter
amount was negligently paid out by the bank. The defendant argued
that
the plaintiff was also negligent and that s 1 of the Act should
be applied. The court (quite wrongly) held that the plaintiff’s

claim was not one for damages. It was said (at 99 E), clearly
obiter
and without any researches into the authorities, that
the Act was historically not intended to apply to claims based on
contract.
(b) In the second case mentioned above, O K
Bazaars sued the defendant, a firm of land surveyors, for damages for
breach of a contract
to survey a property in order to determine the
correct boundaries and site limits thereof, and to prepare an
up-to-date site diagram.
The plaintiff alleged that the contract
incorporated an implied term, requiring the defendant to exercise
reasonable skill in the
performance of its obligations. It then
alleged that the defendant, in breach of its obligations, failed to
set out the correct
boundaries,
etc
,
as a consequence of which the plaintiff suffered the damage alleged.
In its plea the defendant alleged,
inter alia
,
that the plaintiff was partly at fault in relation to the occurrence
of the damage, it being negligent in a number of respects,
set out by
the defendant. It relied on s 1 of the Act, claiming an
apportionment. The plaintiff excepted to this part of the plea
on the
basis that the Act deals only with delictual claims and not with
claims based on breach of contract.
(c) The Court held that the plaintiff’s claim was
based solely on breach of contract (at 525 H). The Court (per
Watermeyer
J; Steyn J concurring) held that s 1 of the Act does not
apply to such a claim, for the following reasons :
1 It was argued that the word ‘fault’ in s 1
of the Act, in so far as it refers to the defendant, was wide enough
to
include a breach of contract (at 528 A - B). But, held Watermeyer
J, (at 528 B) fault normally connotes a degree of blameworthiness;
a
contract can be breached by a party through no fault of his own. If s
1 is then construed as covering claims based upon breach
of contract,
should it be held to apply to certain breaches of contract only and
not to others?
2 The history of the Act shows that it was intended to
apply to delictual actions only. Prior to the passage of the Act,
contributory
negligence on the part of the plaintiff had the effect
of completely defeating his or her claim. To alleviate this harsh
consequence
the ‘last opportunity’ rule was developed,
but even this was not satisfactory. Chapter 1 of the Act was designed
to
overcome this state of affairs (at 528 C - E).
3 The aforesaid object of the Legislature seems to be
borne out by the words ‘shall not be defeated by reason of the
fault
of the claimant’ in s 1 (1). Watermeyer J said :
‘
Although in a claim based upon
breach of contract negligence on the part of the plaintiff might be
relevant in determining whether
or not the damages claimed flowed
from the defendant’s breach, it would not be apposite to say
that such negligence (fault)
“defeated” the plaintif’s
claim. The plaintiff’s claim would fail because he did not show
that
the damages flowed from the breach.’
(at
528 F)

The learned judge also stated that whilst this reasoning
may not be entirely conclusive, it seems to be far more likely that
the
Legislature had in mind the well-known defence of contributory
negligence to a delictual claim.
4 A further indication is that contributory negligence
was not normally one of the recognised defences to a claim based upon
a breach
of contract (at 528 H).
5 The meaning of s 1, if it is ambiguous,
has then to be found by applying the canons of construction, which
all indicate that the
section is not applicable to actions based upon
breach of contract,
inter alia,
that
the legislature knows the existing state of the law; that an
ambiguous statute should be interpreted in such a way as to conform

to the existing law, and that in cases of obscurity the long title
may be looked to. The learned judge remarked that the long title

makes it clear that the Act is one to amend the law relating to
contributory negligence (at 529 A).
6 Inasmuch as prior to the passing of the Act
contributory negligence was not one of the recognised common law
defences to a claim
based upon a breach of contract it seems unlikely
that, had the legislature intended to introduce a radical change in
the law,
it would have done so in an oblique way and without using
clear language to express such an intention (at 529 F - G).
7 An alternative argument was raised by the
defendant. It was that even if s 1 of the Act did not apply to all
claims for breach
of contract, then it should at least be construed
as covering claims for breaches of contract which import a duty not
to be negligent
(at 529 G - H). Counsel for the defendant relied on a
number of English cases,
viz
Sayers
v Harlow Urban District Council
(1958) 2 All
E. R. 344 ;
Quinn v Burch Bros. (Builders)
Ltd.
(1965) 3 All E.R. 801
,
(1966) 2 All E.R.
283
and
De Meza and Stuart v Apple, Van
Straten, Shena and Stone
(1974) 1 Lloyd’s
Law Reports 508 (Q.B.). Watermeyer J held that the first case
mentioned above appears to have been brought
in tort, the second was
decided on the basis of causation, and the last was unconvincing.
Apart from these considerations, Watermeyer
J held that the English
common law is not the same as ours and that there are material
differences between the English Act and
our Act. The alternative was
thus also rejected.
(d) The present state of our case law is
that laid down in
O K Bazaars
:
the Act is not applicable to contractual claims, not even where the
contract imports a duty not to be negligent. Where the plaintiff
has
clearly elected to sue in contract, ‘ ... it does not lie in
the defendant

s mouth to say that the
defendant might also have been liable to the plaintiff in delict.’
(per Watermeyer J at 527 A).
(e) Counsel for the defendant in this
Court, PW, invited us to revisit the question now under consideration
and to subject
O K Bazaars
to
close scrutiny. They asked this Court to consider the latest trends
in England and New Zealand, especially in view of the fact
that the
question of apportionment of damages is dealt with in these two
countries in legislation largely similar to our Act. Counsel

contended that in those two countries an apportionment can take
place, in certain circumstances, even where the claim is based
on a
breach of contract. Counsel for the plaintiff, on the other hand,
referred to the Australian law, where, they contended, an

apportionment cannot take place if the claim is based on a breach of
contract.
[7] Comparative Law : England
(a) Conflicting views were expressed by
English judges as to whether the Act of 1945 was applicable to claims
based on breach of
contract. Eventually, the matter came before the
Court of Appeal in
Forsikringsaktieselskapet
Vesta v Butcher
[1989] UKHL 5
;
[1989] 1 AC 852
(CA) (‘
Vesta
v Butcher
'
)
.
The matter came on appeal from a judgment by Hobhouse J. For our
purpose, it is sufficient to state that the plaintiff, Vesta,
having
correctly settled a claim against it, instituted action against the
first defendant, an underwriter, for indemnification
by virtue of a
policy of reinsurance. In the alternative, Vesta claimed damages
against the second and third defendants (insurance
brokers), alleging
that they failed to obtain a valid contract of reinsurance and
furthermore that they failed to inform the first
defendant that the
insured could not comply with a clause requiring it to provide a
24-hour watch over its operations, thus allowing
the first defendant
to escape liability. The second and third defendants denied
liability. Hobhouse J found that the third defendants
were in breach
of their duty towards the plaintiff, but that the plaintiff was
contributorily negligent in not making sure that
the matter of the
24-hour watch problem had been solved by the third defendants. He
held that the Act of 1945 was applicable and
assessed the respective
degrees of fault as 75% to the plaintiff and 25% to the third
defendants.
(b) The decision of Hobhouse JAs regards
the applicability of the Act of 1945 to claims based on breach of
contract was upheld by
the Court of Appeal (O’Connor L J; Neill
L J and Sir Roger Ormrod). Hobhouse J in the Court
a
quo
approached the question now under
consideration as follows : (see
[1986] 2 All ER 488
at 508)
‘
The question whether the 1945
Act applies to claims brought in contract can arise in a number of
classes of case. Three categories
can conveniently be identified. (1)
Where the defendant’s liability arises from some contractual
provision which does not
depend on negligence on the part of the
defendant. (2) Where the defendant’s liability arises from a
contractual obligation
which is expressed in terms of taking care (or
its equivalent) but does not correspond to a common law duty to take
care which
would exist in the given case independently of contract.
(3) Where the defendant’s liability in contract is the same as
his
liability in the tort of negligence independently of the
existence of any contract.’
Hobhouse J held that
Vesta
v Butcher
fell into category (3).
He said, at 509 :
‘
The category (3) question has
arisen in very many different types of case and the answer is treated
as so obvious that it passes
without any comment. It is commonplace
that actions are brought by persons
who have suffered personal injuries as the result of the
negligence of the person sued and that there is a contractual as well
as
tortious relationship. In such cases apportionment of blame is
invariably adopted by the court notwithstanding that the plaintiff

could sue in contract as well as in tort. The example normally cited
in the present context is the decision of the Court of Appeal
in
Sayers v. Harlow Urban District Council
[1958] 1 W.L.R. 623
,
which concerned a contractual visitor to premises (a lady who had
paid to use a public lavatory). The Court of Appeal said it
did not
matter whether the cause of action was put in tort or in contract and
proceeded to apportion blame awarding her three-quarters
of her
damages. This was a decision on a category (3) case. The power to
make an apportionment was part of the ratio decidendi
and is binding
on me. There are innumerable similar decisions to the same effect
which could be cited, very many by appellate courts.’
(d) O’Connor L J came to the
conclusion that the claim of Vesta against the brokers fell into
category (3) and was, therefore,
subject to apportionment. Neill L J,
now convinced that he was wrong in the decision given by him in
A.B.
Maintrans v Comet Shipping Co. Ltd.
[1985] 1
W.L.R. 1270
(to the effect that apportionment could not be applied
where the claim was one in contract), agreed that Vesta’s claim
fell
into category (3)
inter alia
‘
Where the broker’s
liability in contract is the same as their liability would have been
in tort. Accordingly, I would agree
that as the claim against the
brokers could have been framed in this action as a breach of a duty
of care in tort any damages awarded
to Vesta can properly be reduced
and apportioned in accordance with the Act of 1945.'
(at
875 F - G)
.
(e) Sir Roger Ormrod, the third member of
the bench, held that the context of the Act of 1945 and the language
of s 1 made it clear
that the Act is concerned only with tortious
liability. The power to apportion only arises where the defendant is
liable in tort
and that concurrent liability in contract, if any, is
immaterial (at 879 C - D). However, notwithstanding that Vesta

s
claim against the brokers was framed as one on contract,
‘
... the existence of the
contract created a degree of proximity between Vesta and the brokers
sufficient to give rise, on ordinary
principles, to a duty of care
and, therefore, to a claim in negligence. Consequently, I agree with
Hobhouse J that this is a case
for apportionment of damages.’
(at 879 E - F).
(f)
Vesta v Butcher
went on appeal to the House of Lords. The appeal only
dealt with the liability of the re-insurers (they were held liable)
and the
alternative claim against the brokers fell away and
consequently the question of apportionment was not considered.
[8] Comparative law : New Zealand
(a)
In New Zealand,
where the Contributory Negligence Act 1947 follows the wording of the
English Act of 1945, the case of
Dairy
Containers Ltd v N Z I Bank Ltd
;
Dairy
Containers Ltd v Auditor-General
[1995] 2
NZLR 30
(H C Auckland) (‘
Dairy
Containers’
) raised the very
difficulties with which we are now confronted. In that case, the
Auditor-General was the auditor of the Dairy
Containers Ltd (‘DCL’)
by virtue of a contract between them. DCL sued the Auditor-General
for damages, relying on a
breach of contract by the latter, alleging
a number of negligent acts and omissions. Thomas J held that the
Auditor-General had
been negligent and had thus committed a breach of
contract. The Auditor-General argued that the damages awarded against
him should
be reduced having regard to DCL’s contributory
negligence,
inter alia
,
in failing to provide any clear direction or supervision in respect
of a major part of the company

s business
(at 80 line 30
et seq)
.
(b) In discussing the approach to be taken
to the test for contributory negligence the learned judge touched
upon the heart of the
matter,
viz
the policy underlying the approach to the apportionment
question. He said (at 76 line 29
et seq
):
‘
Difficult though the exercise
may at times be, the Act requires a Court to recognise the
plaintiff’s failure to meet the standard
of care required of it
for its own protection where that failure is partly the cause of the
loss. It is an attempt to ensure that
liability coincides with the
responsibility of the parties for the damages in issue. As Cook P
said in
Mouat v
Clark Boyce
(at p
563), it would be strange if after all these centuries the common
law, using that word in its widest sense, had been able
to produce
only instruments of remedy so blunt and inefficient that
apportionment of responsibility where it rightly belongs is

impossible. The President did not believe that this was so. And nor
do I.
The Contributory Negligence Act was enacted to remedy
the arbitrary consequences of the all-or-nothing approach which
developed
where the plaintiff was in part responsible for the loss
which he or she suffered. It is now inappropriate to approach the
application
of the Act in a manner which would perpetuate arbitrary
consequences, although less dramatic, of the kind which the Act was
designed
to remedy. It is for the Courts, in implementing the Act, to
fashion a regime under the Act which is fair and efficient in
apportioning
responsibility for the loss to where it rightly belongs.
In the context of this case there is no merit in
providing DCL with immunity from the consequences of its negligence
where that
negligence has clearly contributed to cause the loss
simply because the Auditor-General was also negligent. One can
paraphrase
Rogers CJ’s question, posed in a different context,
in
AWA v Daniels
(at p 1003) and ask why the negligent auditor
should be exposed to the payment of the whole of the loss when much
of the damage
lies at the door of the company? The answer is clear.
It would be wrong in principle if the Auditor-General could be sued
for failing
to report the unauthorised investments and detect the
frauds which occurred and yet not be able to rely upon DCL’s
own acts
which permitted the unauthorised investments and frauds to
occur in the first place.’
(c) In the result apportionment was applied
and
DCL’s
damages
were reduced by 40% (see 83 line 31).
[9] Comparative law : Australia
(a) The opposite approach prevails in
Australia. In
Astley and Others v Austrust
Limited
[1999] HCA 6
(197 CLR 1)
, the High
Court of Australia had to deal with the following problem. Austrust,
the plaintiff, was a trustee company. It had sought
advice from the
defendant, Astley, a firm of solicitors, as to whether it should
assume the position of trustee of an existing
trading trust. The
attorneys advised that it could so and Austrust took office. Shortly
thereafter the trust failed and Austrust
was held personally liable
for its debts in an amount exceeding the value of the trust property.
It alleged that the solicitors
were at fault in failing to advise it
not to accept the office of trustee unless its personal liability for
losses arising in the
course of carrying out the trust was excluded.
The defendant denied liability but pleaded, in the alternative,
contributory negligence
on the part of Austrust. The trial judge
found negligence on the part of both parties and, pursuant to the
provisions of s 27 A
of the Wrongs Act 1936 of South Australia, which
Act was applicable to the dispute, apportioned the damages payable by
the solicitors.
On appeal to the Full Court it was held that the
finding of contributory negligence on the part of Austrust was wrong,
and Astley
was held liable for the full extent of the damage proved
by Austrust.
(b) On a further appeal to the High Court it was held
that the Full Court erred in finding that Austrust was not guilty of
contributory
negligence. However, notwithstanding this finding and
the fact that Austrust had sued in contract as well as in tort, it
was held
that Austrust was entitled to recover the whole of the
damage that it suffered because damages awarded pursuant to a claim
in contract
cannot be reduced by reason of conduct that would
constitute contributory negligence for the purposes of the Wrongs
Act. It was
held that the history, text and purpose of the Wrongs Act
made it clear that the Act was not intended to apply to claims for
breach
of contract (per Gleeson CJ McHugh, Gummow and Hayne JJ).
Callinan J, in a minority judgment, was of the opposite opinion and
expressed
the view that the trial court was correct.
(c) The majority first defined the concept of
contributory negligence. It held that at common law contributory
negligence consisted
in the failure of a plaintiff to take reasonable
care for the protection of his or her person or property. Proof of
contributory
negligence defeated the plaintiff’s cause of
action in negligence. Furthermore, although conduct amounting to
contributory
negligence may also constitute the breach of a duty
which the plaintiff owes to the defendant, a plaintiff can be guilty
of contributory
negligence in the absence of such a duty : a
pedestrian owes no duty to a speeding driver to avoid being run down
but is guilty
of contributory negligence if he or she fails to take
reasonable care to keep a proper lookout for speeding vehicles.
(d) The majority then dealt with the
proposition raised in Australia and the USA in a number of decisions,
especially in cases where
auditors were sued, that contributory
negligence cannot arise where the very purpose of the duty owed by
the defendant was to protect
the plaintiff

s
interests. Following the decision of the New South Wales Court of
Appeal in
Daniels v Anderson
(1995)
37 NSWLR 438
, the majority held that no such rule should apply :
‘
Thus, a plaintiff who
carelessly leaves valuables lying about may be guilty of contributory
negligence, calling for apportionment
of loss, even if the defendant
was employed to protect the plaintiffs valuables.’
(at
para 29).
This is also the case where there was a statutory duty
to protect the plaintiff (paras 31 - 32).
(e) Having come to the conclusion that
Austrust was contributorily negligent in the present case, and that
contributory negligence
requires an apportionment of damages in an
action in tort, the majority held that the question is whether such
negligence also
requires apportionment where the plaintiff has sued
in contract in circumstances where he or she has, or could have, sued
in tort.
(para 37).
(f) S 1 of the Wrongs Act 1936 (South Australia) defines
‘fault’ as follows :
‘ “
fault” means
negligence, breach of statutory duty or other act or omission
which
gives rise to a liability in tort
or would, apart from this Act, give rise to the defence of
contributory negligence’
(My
emphasis)
S 27 A (3) reads:
‘
Where any person suffers
damage as the result partly of his own fault and partly of the fault
of any other person or persons, a
claim in respect of that damage
shall not be defeated by reason of the fault of the person suffering
the damage, but the damages
recoverable in respect thereof shall be
reduced to such extent as the court thinks just and equitable having
regard to the claimant’s
share in the responsibility for the
damage ...’
(g)
The majority held
that the natural and ordinary meaning of s 27 A (3), read in the
light of the definitions contained in the section,
leads to the
conclusion that the section was concerned with claims in tort rather
than claims in contract :
‘
The sub-section was designed
to remedy the evil that the negligence of a plaintiff, no matter how
small, which contributed to the
suffering of damage, defeated any
action in tort in respect of that damage.’
(para
41)
And :
‘
Nothing in s 27 A (3) suggests
that “fault” - in either of its uses in s 27 A (3) -
includes rights and obligations
arising from a breach of contract.
Nor is there anything in the ordinary and natural meaning in the
section that can be said to
assume or by necessary implication
authorise the apportionment of damages in claims for breach of
contract. On its face, s 27 A
deals only with actions in tort.’
(para 42).
(h) The question the majority posed is
whether s 27 A of the Wrongs Act was not applicable where the
defendant’s obligation
under the contract coincides with the
duty imposed by the general law of negligence
i
e
concurrent delictual and contractual
liability were present. (para 43)
(i)
The majority then
examined the case law on this subject, as well as the influential
views of Professor Glanville Williams in his
book
Joint
Torts and Contributory Negligence
, 1951, in
which he advanced the proposition that apportionment legislation
always applied to claims based on breach of contract
because
contributory negligence always constituted a possible defence to an
action for damages for breach of contract. This last
mentioned point
of view was rejected by the majority : the plaintiff

s

negligence

never
gave rise to a defence of contributory negligence in an action for
breach of contract according to the common law.
‘
No doubt a plaintiff’s
conduct, which could be equated with contributory negligence”
in an action in tort, could
defeat an action in contract. It might,
for example, show that there was no causal connection between the
plaintiff’s damage
and the breach of contract. But
“contributory negligence”, that is, negligence which
contributed to the damage was
not as such a defence to an action for
breach of contract.’
(para
53)
(j) Reference was also made to the English
case of
Vesta v Butcher
and
a judgment of Pritchard J in New Zealand in
Rowe
v Turner Hopkins & Partners
[1980] 2 NZLR
550
, where apportionment was applied to contractual claims because
there was or could have been concurrent tortious claims. These views

were followed in a number of Australian cases but were unambiguously
rejected by the majority in
Astley v Austrust
.
(k) The majority argued as follows:
(i) The
tripartite division adopted and applied in
Vesta
v Butcher
is
unacceptable. The legislation does not hint at such a distinction.
The reasoning in cases applying apportionment to contractual
claims
'is generally sparse to the point of non-existence'. (para 69) (ii)
The decisions in the UK which have applied apportionment
legislation
to breaches of contract are wrong and should not be followed in
Australia. The interpretation of the legislation is
strained. It
relies principally, if not exclusively, on the use of the term
'negligence' in the definition of 'fault'. But it ignores
the context
of the said words in the legislation and ignores the mischief which
the legislation was intended to remedy. (para 70)
(iii) A breach of
contract does not come within the meaning of fault; the word
'negligence' is furthermore limited by the words
'which gives rise to
a liability in tort'; if this qualification is taken away, it would
mean that all breaches of statutory duty
would fall under 'fault',
and not only those that constituted a tort. (para 72)
(iv) Ss 27 A (3) and (4)
support the view that an award for damages under a contractual claim
is treated differently from an award
in tort, and should not be
subject to apportionment. (paras 73 - 75)
(v) The
state of the pre-existing law and the purpose of the legislation made
it clear that the legislation does not affect actions
for breach of
contract. At common law contributory negligence was a complete
defence to an action in tort for negligence. But no
case could be
found where contributory negligence, as such, was ever held to be a
defence to an action for breach of contract.
No trace of such a
defence could be found in the great works on pleading written in the
19
th
century. This pointed
'irresistibly' to the conclusion that the apportionment legislation
is concerned only with actions in tort
and did not affect awards of
damages based on breach of contract:
'To what, other than a common law action in tort, can s
27 A (3) be referring when it says that a claim in respect of damage
shall
not be defeated by reason of the fault of the person
suffering the damage”? It makes no sense now, and it made even
less
sense when the legislation was passed, to speak of an action in
contract being
defeated
by "negligence, breach of
statutory duty or other act or omission which gives rise to a
liability in tort or would, apart
from this Act, give rise to the
defence of contributory negligence!".'
(para 80)
In view of the history of the legislation in England, in
Admiralty and in Canada, the majority said :
‘
It would be strange if a rule
introduced to do away with an absolute defence to a claim in
negligence, diminished the rights of
a plaintiff who sued in
contract.’
(Para 81; see also paras 82 and 84)
It was also said :
‘
The section was designed to
increase the rights of plaintiffs, not reduce them.’
(para
59; see also para 83)
(vi) The majority also
found support for their views in policy considerations. The view that
it would be anomalous or unfair or
both not to apply apportionment
legislation to contractual claims was rejected. In an action based on
contract, the defendant could
have limited its liability; in a claim
based on tort, the respective duties of the parties are imposed on
them by law. In the former
case there seems to be no reason to apply
the apportionment principle. (paras 84 - 87)
(l) In the result it was held that,
although Austrust
was correctly held to have been
'contributorily negligent', no apportionment could be applied.
(m)
The decision in
Astley v Austrust
was
subjected to criticism by Geoff Masel and David Kelly see
Contributory Negligence and the
Provision of Services : A Critique of Astley
,
in
74
Australian Law Journal
306
et seq
. In particular,
I draw attention to the remarks at 324 :
'In principle, the rules of our legal
system should be consistent with one another. At least presumptively,
there should not be
a different answer in tort from the one given in
contract on
precisely
the same issue - liability for
negligent advice in performing a contract. If a plea of contributory
negligence is available in one
action, why not also in the other? If
the plea can lead to apportionment in one action, why not also in the
other? If we expect
our legal system to be efficient and to be
respected, we cannot tolerate overlaps and inconsistencies which have
no rational foundation,
but which are explicable only in terms of
procedural history.'
[10] Comparative Law : Canada
In Canada the position seems to be that the
wording of the various provincial statutes dealing with the problem
now under consideration
differs - and thus also the decisions of the
provincial courts (see G H L Fridman
The Law
of Contract in Canada
3
rd
ed., 756). In
Giffels Associates
Ltd v Eastern Construction Co (
(1978) 84
D.L.R. (3d) 344) the Supreme Court of Canada left the matter
undecided. In two Ontario decisions the courts reached a
result
similar to apportionment by developing a doctrine of 'anticipatory
mitigation'. (Fridman
op cit
756
- 757.
Fridman (
loc cit
)
concludes :
'It would seem that the issue is unresolved by Canadian
courts. On principle there should be no barrier to the application of
the
idea of apportionment in breach of contract cases. Even if the
legislation that applies to tort cannot be interpreted to extend
to
contract situations, the need to establish a casual connection
between the plaintiff's loss and the defendant's breach of contract,

to which reference has been made should logically lead to the
conclusion that where the plaintiff has been partially responsible

for his loss he should bear that proportion by a reduction in his
damages. Whether Canadian courts will finally arrive at this

conclusion remains to be seen.'
[11] South Africa :
Quo
vadis?
(a)
The approach
followed in
Vesta v Butcher
in
England and
Dairy Containers
in
New Zealand
i e
that
if the defendant is concurrently liable in delict and contract,
apportionment can be applied, is not open to us. This is so
by virtue
of the decision of this Court in
Lillicrap,
Wassenaar and Partners v Pilkington Brother (SA) (Pty) Ltd
1985 (1) SA 475
(A) ('
Lillicrap'
).
The plaintiff, a glass manufacturer, wished to build a glass plant on
a particular property. It concluded a contract with the
defendant, a
firm of consulting structural engineers, to investigate the site and
to determine its suitability, and if suitable,
to design the plant.
The defendant did the work, but, according to the plaintiff,
negligently. Having paid a part of the defendant's
fees, the
plaintiff sued the defendant for payment of damages in the sum of 
R3,6 million. The plaintiff sued in delict
only, more particularly
basing its claim on the
actio le gis Aquiliae
in its modern and extended form. To this claim the
defendant raised an exception, particularly on two bases : (a) that,
in the light
of the contractual relationship between the parties, the
defendant did not owe the plaintiff a delictual duty of care; and (b)
that, in the light of the contractual relationship between the
parties, the alleged facts did not give rise to any claim for damages

in respect of pecuniary or financial loss only. (at 495 D - E)
(b) The majority, per Grosskopf AJA, held
that in principle our law recognises concurrent contractual and
delictual claims, and
allows the plaintiff to choose the remedy which
he wishes to pursue. Thus, the facts giving rise to a claim for
damages under the
lex Aquilia
could
in Roman and Roman-Dutch law overlap with those founding an action
under certain types of contract,
e g
deposit, commodatum, lease, partnership or pledge. The
learned judge concluded at 496 H - I :
'The mere fact that the respondent might have framed his
action in contract therefore does not
per se
debar him from
claiming in delict. All that he need show is that the facts pleaded
establish a cause of action in delict. That the
relevant facts may
have been pleaded in a different manner so as to raise a claim for
contractual damages is, in principle, irrelevant.'
(c) The learned judge then held that in the
case under consideration there was no physical damage to the
plaintiff or his property
but that,
per se
,
would not be fatal to a claim based
on
the
lex Aquilia
-
our law already recognises Aquilian liability for negligent
misstatements which cause pure financial loss. (
Administrateur,
Natal v Trust Bank van Afrika Bpk
1979 (3) SA
824
(A)). In
casu
, the
learned judge held (at 499 A
et seq
)
that it was not alleged by the plaintiff that the defendant would
have owed it a duty to exercise diligence if no contract had
been
concluded between them requiring it to perform professional services.
In this respect the case differed from those in which
a physician
operates on a person found unconscious in the street - if the doctor
was negligent in performing the operation, he
would only be liable
ex
delicto
. But if there was a contract between
the physician and his patient, there would be, in the case of
negligence, concurrent actions
in contract and delict against the
physician, because even in the absence of a contract, there would
have been a violation of an
existing right
i e
that of physical integrity.
(d) But, Grosskopf AJA held, the only
infringement of which the present plaintiff complained was that of
the defendant's contractual
duty to perform specific professional
work with due diligence (at 499 D - E). Is the infringement of this
duty a wrongful act for
purposes of Aquilian liability? (at 499 E -
F). Grosskopf AJA held that those cases in our common law where
concurrent liability
was recognised, occurred when the conduct of the
defendant constituted both an infringement of the plaintiff's rights
ex contractu
and
a
right which he had independently of the contract
.
(My emphasis, see at 499 H - I and also
Van
Wyk v Lewis
1924 AD 443.)
(e) Is an extension of Aquilian liability justified in
cases where the right allegedly infringed is one created by a
contract for
delivery of professional services? Is there a need
therefor? Grosskopf AJA answered in the negative. (at 500 F)
'While the contract persisted, each party had adequate
and satisfactory remedies if the other were to have committed a
breach. Indeed
the very relief claimed by the respondent [plaintiff]
could have been granted in an action based on breach of contract.'
(f) Grosskopf AJA further held (at 500 G
et
seq
) that the Aquilian action does not fit
comfortably in a contractual setting like the present. Contracting
parties contemplate,
generally speaking, that the relationship
between them should be regulated by their agreement. If one
superimposes Aquilian liability
on claims for breach of contract, a
party's performance would, so Grosskopf AJA said (at 500 I),
presumably have to be tested not
only against his contractual duties
but also by applying the standard of the
bonus
paterfamilias
. But how is the latter standard
to be determined? Are there two standards? There are no policy
considerations for invoking the
law of delict to reinforce the law of
contract. (at 501 A - B) In the result, it was held that
'To sum up, I do not consider that policy
considerations, require that delictual liability be imposed for the
negligent breach of
a contract of professional employment of the sort
with which we are here concerned.'
(at 501 G - H)
(g) Finally, Grosskopf AJA, after reviewing
English cases such as
Anns v Merton London
Borough Council
[1977] UKHL 4
;
1978 AC 728
;
Donoghue
v Stevenson
[1931] UKHL 3
;
1932 AC 562
;
Hedley
Byrne & Co Ltd v Heller and Partners Ltd
,
supra
;
Home
Office v Dorset Yacht Co. Ltd
(1970) AC 1004
and
Junior Books Ltd v Veitchi & Co Ltd
[1982] UKHL 4
;
1983 AC 520
, noted the difference on the matter now
under discussion between English and South African law : English law
adopts a liberal approach
to the extension of a duty of care; South
African law approaches the matter in a more cautious way (at 504 A -
G). Also, the policy
considerations underlying the two approaches may
be different (at 504 H - I).
[12]
Thus, in a
nutshell : in the light of the judgment in
Lillicrap
the 'concurrent liability' solution is not available to
us to apply in the present case,
i e
in the category 2 type of situation referred to in
Vesta
v Butcher
. In this respect it must be noted,
perhaps
en passant
,
that our law now lags far behind the English law on this point - see
Henderson and Others v Merrett Syndicates Ltd
and Others
[1994] UKHL 5
;
[1994] 3 All ER 506
(HL).
[13]
This is not
the end of the matter, because we must now examine the position
where, although it cannot be said that the defendant
is not liable in
delict, and only committed a breach of contract, he or she did so
negligently,
i e
was
'at fault'. As I have said, the present case falls into the category
2 class of case developed in
Vesta v Butcher
,
supra
. That negligence
in such a case becomes highly relevant for success for the plaintiff
is so because the contract imports that standard.
What is more, in
our law s 20 (9) (a) of the Public Accountants' and Auditors' Act 80
of 1991 provides that an auditor shall not
incur any liability in
respect of a statement, account or document certified by him unless
it was certified maliciously or pursuant
to a negligent performance
of his duties.
[14]
Although
the full ramifications and implications of the matter might require a
full dissertation, expedience requires that we set
out as succinctly
as possible the arguments pro and contra the proposition that the Act
is applicable to contractual claims.
A
The pro
arguments and counter submissions
1
The plain meaning
of s 1 of the Act.
1.1 The first argument is that if the
golden rule of statutory interpretation is applied, the provisions of
s 1 of the Act do seem
to be applicable to contractual claims. The
rule has been stated in
Adampol (Pty) Ltd v
Administrator, Transvaal
1989 (3) SA 800
(A)
at 804 B - C as follows:
'The plain meaning of the language in a statute is the
safest guide to follow in construing the statute. According to the
golden
or general rule of construction the words of a statute must be
given their ordinary, literal and grammatical meaning and if by so

doing it is ascertained that the words are clear and unambiguous,
then effect should be given to their ordinary meaning unless
it is
apparent that such a literal construction falls within one of those
exceptional cases in which it would be permissible for
a court of law
to depart from such a literal construction, eg where it leads to a
manifest absurdity, inconsistency, hardship or
a result contrary to
the legislative intent."
1.2 For the sake of convenience, s 1 of the Act will be
repeated :
'1.
Apportionment of liability in case of
contributory negligence.
- (1) (a) Where any person suffers
damage which is caused partly by his own fault and partly by the
fault of any other person,
a claim in respect of that damage shall
not be defeated by reason of the fault of the claimant but the
damages recoverable in respect
thereof shall be reduced by the court
to such extent as the court may deem just and equitable having regard
to the degree in which
the claimant was at fault in relation to the
damage.
(b) Damage shall for the purpose of paragraph (a) be
regarded as having been caused by a person’s fault
notwithstanding the
fact that another person had an opportunity of
avoiding the consequences thereof and negligently failed to do so.
…
(3) For the purposes of this section "fault"
includes any act or omission which would, but for the provisions of
this
section, have given rise to the defence of contributory
negligence.
'
1.3 The argument is that s 1 of the Act is
clear and unambiguous. The only threshold requirement is causative
fault on both sides.
Fault, at the very least, includes negligence. S
1 of the Act does not specify the categories of obligations in which
the 'fault'
can occur,
i e
delict,
contract, statute or
ex variis causarum
figuris
. There is nothing in the language of
s 1 (1) (a) that limits its operation to claims in delict; by its
plain wording it is equally
apposite to claims for damages flowing
from a negligent breach of a statutory duty or a breach of a
contractual duty to exercise
reasonable care.
1.4 The counter-submission on this aspect was that the
wording is not all that clear. It was argued that there are two
provisions
indicating that s 1 was not intended to apply to claims in
contract :
(a) the long title of the Act, and
(b) Chapter 2 of the Act
1.5 But this counter-submission, so it was
argued, is flawed. It is true that the long title of the Act, and
other provisions of
the Act can and should be taken into account when
s 1 is interpreted (see
Stellenbosch Farmers'
Winery Ltd v Distillers Corporation (SA) Ltd and Another
1962 (1) SA 458
(A) at 476 E - F;
Commissioner
of Taxes v First Merchant Bank of Zimbabwe Ltd
1998
(1) SA 27
(ZSC) at 30 I - 32 E). But neither the long title nor the
provisions of Chapter 2 of the Act support the view that s 1 of the
Act
is not applicable to contractual claims, so it was submitted.
1.6 Counsel for PW for ease of reference numbered the
components of the long title as follows:
'1 To amend
(a) the law relating to contributory negligence and
(b) the law relating to the liability of persons jointly
or severally liable in delict for the same damage, and
2 to provide for matters incidental thereto.'
S 1 of the Act gives effect to part 1 (a).
Ss 2 and 3 (Chapter 2) give effect to part 1 (b). Ss 4 to 6 give
effect to part 2. Counsel
for PW submitted that this analysis of the
long title into its components clearly shows that it was not the
legislature's intention
that s 1 (1) (a) or part 1(a) above should
apply only to claims in delict. Part 1 (a) is at least equally
consistent with the very
opposite interpretation,
i
e
that whereas part 1 (b) specifically refers
to claims in delict, part 1 (a) does not do so. If it had been the
intention of the
legislature to limit the application of both parts
to claims in delict, it would, and should, have said so in plain,
conjunctive
terms. That it has not done so, PW's counsel argued,
supports its side of the argument.
1.7 What is more, it was submitted by PW,
there was a good reason why the legislature made part 1 (b)
applicable to delictual joint
wrongdoers, but not to contractual
co-debtors. While delictual joint wrongdoers were, in our common law,
always jointly and severally
liable, contractual co-debtors may
according to the intention of the parties, be liable jointly or
severally or jointly and severally
(see Christie,
The
Law of Contract in South Africa,
3
rd
ed 1996 at 279,
et seq
).
It was thus both unnecessary and impossible to make the philosophy
underpinning Chapter 2 of the Act applicable to contractual

co-debtors.
1.8 This analysis indicates, so it was
argued, that there was a sound reason for distinguishing between
Chapter 1 and Chapter 2
of the Act in so far as it concerns
contractual
vis-à-vis
delictual claims. The analysis elucidates the wording of
the preamble and the interpretation of s 1 (1) (a) the Act. It
supports
the pro-argument, so it was submitted.
2
Purposive and
teleological interpretation of the Act
But the pro-argument does not rest solely
on the golden rule of interpretation. On behalf of PW it was argued
that weighty considerations
favour the purposive or teleological
approaches. The last-mentioned approach, in particular, not only
'encapsulates in a synthesis
the meritorious aspects of other
theories and excludes their limitations' (Devenish,
Interpretation
of Statutes
, 1992 at 53) but also gives
expression to the fundamental principles and ethos of the legal
system as a whole: it is a value-coherent
approach which best accords
with the values of our Constitution (see, in general, Devenish,
op
cit
, 39 - 55).
The
pro
-argument,
so it was submitted, is supported by both a purposive or teleological
approach to the Act. Both approaches recognise
the importance of the
genesis and legislative history of the Act. We have discussed the
common law background above. We now turn
to the specific legislative
history of the Act.
2.1 S 1 was modelled on the English Law Reform
(Contributory Negligence) Act of 1945. It closely followed the
language of s 1 (1)
of the English Act which we repeat for the sake
of convenience:
'Where any person suffers damage as the result partly of
his own fault and partly of the fault of any other person or persons,
a
claim in respect of that damage shall not be defeated by reason of
the fault of the person suffering the damage, but the damages

recoverable in respect thereof shall be reduced to such extent as the
court thinks just and equitable having regard to the claimant's
share
in the responsibility for the damage: Provided that -
this subsection shall not operate to defeat any defence
arising under a contract;
where any contract or enactment providing for the
limitation of liability is applicable to the claim, the amount of
damages recoverable
by the claimant by virtue of this subsection
shall not exceed the maximum limit so applicable.'
2.2 As appears from a comparison of the two texts, the
main provision of the English s was substantially reproduced in s 1
(1) (a)
of our Act, and
the provisos of the English section were substantially
reproduced in our ss 4 (1) (b) and (c).
2.3 The only significant departure from the
English text is in the definition of '
fault
'.
S 4 of the English Act defines it as follows:
' ... "fault" means negligence, breach of
statute or duty or other act or omission which
gives rise to a
liability in tort
or would, apart from this Act, give rise to the
defence of contributory negligence.'
(My emphasis)
2.4 When this definition of fault is read into s 1 (1)
of the English Act, its effect clearly appears to be to confine s 1
(1) to
claims in tort.
(a) The definition purports to be an exhaustive
definition of
'fault' (' ... fault means ...')
(b) The first part of the definition refers to the fault
of the defendant (' ... negligence, breach of statutory duty or other
act
or omission which gives rise to a liability in tort ... ') and
the second part to the fault of the plaintiff (' ... or other act
or
omission which ... would, apart from this Act, give rise to the
defence of contributory negligence ...').
(c) The description of the defendant's 'fault' in the
first part of the definition seems to suggest that it was limited to
claims
in delict (' ... which gives rise to liability in tort ...').
(d) This inference is fortified by the description of
the plaintiff's fault in the second part of the definition because it
is confined
to conduct which would previously have given rise to a
defence of contributory negligence, which was in English law a
defence in
delict but not in contract.
2.5 However, in 1951 Professor Glanville
Williams published his
Joint Torts and
Contributory Negligence
in which he argued
forcefully and persuasively that the Act also applied to claims in
contract. His argument was directed at the
interpretation of the
definition of 'fault' because that was considered to be the only
obstacle to the application of the Act to
claims in contract:
'Whether the Act applies in contract depends largely
upon the wording of the definition of 'fault'. At first sight the
definition
... may appear to be limited to actions in tort, but it is
submitted that where a breach of contract occurs through the
negligence
of the defendant, the Act will apply whether the action is
framed in contract or in tort.' (329)
He proposed various arguments in support of this
interpretation (328 - 332). The second of those arguments eventually
prevailed
in the English courts :
'There is another line of argument. Even if the
interpretation just advanced is thought to be too fine-spun it is
submitted that
where the same act or omission constitutes both a tort
and a breach of contract, so that in its tort aspect the case is
subject
to the provisions of the Act, then the case is subject to the
provisions of the Act even in its contract aspect.' (330)
(See
also Cheshire, Fifoot & Furmston's
Law of
Contract
12
th
ed 619; Jackson and Powell on
Professional
Negligence
4
th
ed 60 to 62; and Treitel
The Law
of Contract
10
th
ed 915 to 919.)
2.6 The point is that our departure from the English
text strongly suggests that our s 1 (1) (a) was intended to apply to
claims
in contract as well.
2.7 Our Act was only enacted in 1956, well after the
publication of the treatise of Professor Glanville Williams which
triggered
the controversy abroad.
2.8 The differences between the definition of 'fault' in
the English Act and our Act are significant :
(a) The English definition exhaustively defines 'fault'
(' ... fault means ...'). Our section is open-ended (' ... fault
includes
...'). The effect of our section is in other words merely to
extend the ordinary meaning of 'fault' and not to limit it in any
way.
(b) The only real obstacle to the
application of the English section to claims in contract, lay in the
first part of their definition
of 'fault' which defined the
defendant's fault, and therefore the plaintiff's cause of action, as
conduct giving rise to liability
in tort.
That
part of the definition has been wholly omitted from our section
.
(c) The combined effect of these two changes is that the
only real obstacle to the application of the English Act to claims in
contract,
has been removed from our Act, and apparently deliberately
so.
2.9 It is also significant, so it was submitted on
behalf of PW, that there was a simultaneous and comparable but
opposite amendment
of s 2 of our Act which deals with joint
wrongdoers and which expressly limits its application to persons
liable in delict.
2.10 It accordingly seems clear, so it was argued, that
our Act was deliberately drafted so as to differ from the English
text to
remove from s 1 the limitation of its operation to claims in
delict, and
to introduce in s 2 an express limitation of its
operation to joint wrongdoers in delict. On behalf of PW it was
accordingly submitted
that the legislative history of our Act, when
compared to its English parentage, overwhelmingly suggests that it
was deliberately
tailored so as to make the principle of
apportionment also applicable to claims in contract when there is a
similar co-incidence
of negligence.
2.11 But both approaches to the
interpretation of statutory interpretation mentioned above also
attach importance to the purpose
of the legislation,
i
e
the mischief aimed at and the societal and
legal ends desired. The phenomenon of causative negligence of the
part on both a plaintiff
and a defendant is not limited to delictual
claims. It is obvious that in many instances of contractual claims
for damages there
can and will be a co-incidence of both contractual
and delictual liability (
i e
if
there was damage of the kind giving rise to Aquilian liability,
e
g
in the case of a physician's negligence, as
in
Van Wyk v Lewis
1924
AD 438
or
Mukheiber v Raath
1999
(3) SA 1065
(A)). If the plaintiff sues in delict, the Act would
apply and the plaintiff would be liable only in part; if the action
is brought
in contract, the plaintiff would succeed totally if one
follows the approach of our courts at present,
OK
Bazaars
,
supra
.
Why should there be a difference, it was rhetorically asked by PW,
depending not on the acts or the respective degrees of fault
or
blameworthiness of the parties, which are the same in both actions,
but on the form of action chosen by one of the parties
viz
the plaintiff? Commenting on the position in the English
law, Buckley (
The Modern Law of Negligence
,
3
rd
ed 1999 at 84)
says of the approach in
Vesta v Butcher
that it is sensible, and proceeds:
'A rigid demarcation between tort and contract would
seem mechanistic and outdated today, not least in the expanding field
of professional
negligence where allegations, amounting in substance
to claims that defendants failed to take reasonable care, are often
advanced
in a contractual context.'
2.12 South African legal writers, it was
pointed out by counsel for PW, have also remarked on the
indefensibility of the distinction
between contractual and delictual
claims as far as the applicability of s 1 (1) (a) of the Act is
concerned. Christie (
The Law of Contract in
South Africa
,. 3
rd
ed 1996 at 613 - 614) is of the view that
' … it is undesirable to leave the law in a state
where the employment of purely technical skill in pleading may lead
to
a result fundamentally different from that which would be reached
if a lesser degree of technical skill were employed. When a contract

contains an express or implied term imposing an obligation not to be
negligent (which very frequently happens) a breach of this
term may
equally well be described as a breach of contract or a delict giving
rise to Aquilian liability. Under our law as it presently
stands a
skilful pleader, by pleading such a case in contract, could avoid the
danger of a reduction of damages by apportionment
under the Act,
whereas a less skilful pleader, pleading the same facts in delict,
would lay his client open to a reduction in damages
… This
degree of knife-edge technicality should be eliminated from the law
where possible … '
(In similar vein, see also D J Lötz
Vermindering van kontraktuele skadevergoeding
in
1996 TSAR 172
; P H Havenga
Contractual
Claims and Contributory Negligence
(2001) 64
THRHR
125
- 126.)
Commenting on the judgment of the Court
a quo
in the present case, Havenga, who supports the judgment,
states at 128 :
'Goldstein J's interpretation of the Act is to be
commended. It is not absurd, inconsistent or anomalous. Quite the
contrary : it
is absurd to non-suit a plaintiff merely because he or
she has suffered damage caused partly by his or her own fault. In
this case,
it would be inconsistent and anomalous to have different
rules for claims based on breach of contract and for claims founded
in
delict.
B
Thus far
the pro-arguments. We now turn to the contra arguments and the
counter-submissions thereto
.
1 The Act, so it was argued by TBA's
counsel , is not applicable to contractual claims because
contributory negligence was never
by our common law and pre-1956,
considered as a factor to be taken into account where a plaintiff
sues in contract. This is borne
out, so it was argued, by s 1 (3) of
the Act. It was argued that the section says 'fault' 'includes any
act or omission which would,
but for the provisions of this section,
have given rise to the defence of contributory negligence'. TBA
argued that such a defence
was not in the common law applicable to a
plaintiff's claim in contract, therefore it must have been the
legislature's intention
that s 1 of the Act would apply to delictual
actions only - where contributory negligence was a defence. This is
the strongest
argument presented on behalf of TBA, and the one on
which the other judgments in the present case are based. The argument
submitted
on behalf of TBA is, perhaps, best formulated by Masel and
Kelly (
op cit
at 313 -
314) and also best refuted by them.
'The 1945 English reform and subsequent apportionment
legislation allows for apportionment where a person suffers damage as
a result
partly of his or her own fault and partly of the fault of
another person. It is the definition of "fault" which has
given
rise to the problem, as it was defined ambiguously to mean
"negligence, breach of statutory duty or other act or omission
which gives rise to a liability in tort or would, apart from this
Act, give rise to the defence of contributory negligence".
The drafters presumably intended this provision to apply
to actions in tort. They probably assumed that contributory
negligence
was not a defence to an action in contract. If it had
been, it would have been a complete bar to a plaintiff's action and
it would
have been necessary to protect plaintiffs by extending the
legislation to that situation. As the majority judgment states: "The

section was designed to increase the rights of plaintiffs, not reduce
them." However, the legislation was passed at a time
when it was
thought that contract and tort were completely discrete in their
coverage, and there was no suggestion of concurrent
liability. The
relatively recent emergence of the principle of concurrent liability,
which was reaffirmed by the High Court in
Astley
, has given
rise to a new question. The question is whether the emergence of
concurrent liability requires an adjustment to be made
of the
application of the legislation to avoid the anomaly that arises if
the legislation is restricted to actions brought in tort.
The majority judgment analyses those decisions which
have applied the apportionment legislation in cases where the
defendant's obligation
under contract was commensurate with his or
her duty in tort. It recognises that the concluding phrase of the
definition of "fault"
- "which gives rise to a
liability in tort or would, apart from this Act, give rise to the
defence of contributory negligence"
- might be interpreted as
only governing "other act or omission" and not as governing
the opening words "negligence,
breach of statutory duty".
But it fails to follow up the possibility. It also notes, but does
not adopt, the suggestion made
by Pritchard J in
Rowe v Turner
Hopkins & Partners
that :
"The second limb of the definition means simply and
logically that no act or omission of the plaintiff will entitle the
defendant
to a reduction of damages unless it amounts to the sort of
conduct which, prior to the enactment of the
Contributory
Negligence Act
, would have afforded a defence of contributory
negligence."
The majority interprets the apportionment legislation as
being restricted to an action in tort. But there is nothing in the
legislation
itself that
requires
that result. The legislation
defines fault in terms of conduct which would give rise to a defence
of contributory negligence. The
plaintiff's conduct would have given
rise to that defence in an action in tort. Consequently, the
legislation applies. The fact
that the particular action is one in
contract, not tort, is irrelevant. The basis for the action - the
defendant's breach of the
duty of care - is precisely the same in
each case. Why not apply the legislation?'
But there is a further argument, once again based on a
clear difference between our Act and the English statute. The English
Act
specifically states in s 4 that fault
'
means
negligence, breach of a statutory duty or
other act or omission which gives rise to a liability in tort or
would, apart from this
Act, give rise to the defence of contributory
negligence.'
Our s 3 reads :
'For the purposes of this section "fault' includes
any act or omission which would, but for the provisions of this
section,
have given rise to the defence of contributory negligence.'
The wording of the English section is much
stronger than ours. 'Fault' is defined in definite terms - it 'means'
only what is described
in the section. In our section, fault is not
so defined. Fault only 'includes' the acts or omissions described,
but does not exclude
other acts or omissions which in law would also
amount to 'fault'. In our Act, this definition could simply signify
an attempt
to indicate that the well-known rule of contributory
negligence in the law of delict is to be retained,
i
e
to leave no doubt that contributory
negligence is a species of 'fault'.
At best for TBA, s 1 (3) is ambiguous. We
thus have this position : s 1 (1) (a), on its wording, unambiguously
would allow apportionment
in contractual claims. S 1 (3) is ambiguous
and possibly excludes apportionment in such claims. In such a case -
and even if one
views section1 (3) as unambiguous - the situation is
that two conflicting interpretations can be given to s 1. In such a
case the
correct approach, in my view, is the one laid down by this
Court as long ago as 1931 in
Principal
Immigration Officer v Bhula
1931 AD 323
at
336 per Wessels JA as follows :
'There is another principle which ought to be invoked in
this case, and which would lead to the same interpretation. It has
been
repeatedly laid down by this Court that where a statute is
clear, the Court must give effect to the intention of the
Legislature,
however harsh its operation may be to individuals
affected thereby. Where, however, two meanings may be given to a
section, and
the one meaning leads to harshness and injustice, whilst
the other does not, the Court will hold that the Legislature rather
intended
the milder than the harsher meaning. This principle is thus
stated by
Maxwell
(3
rd
ed., p. 299): "A sense
of the possible injustice of an interpretation ought not to induce
judges to do violence to well-settled
rules of construction, but it
may properly lead to the selection of one rather than the other of
two possible interpretations
per
Lord Herschel in
Arrow
Shipping Co
v
Tyne Commissioners
(1894) A.C. 516.
Whenever
the language of the Legislature admits of two constructions, and if
construed in one way would lead to obvious injustice,
the Courts act
upon the view that such a result could not have been intended unless
the intention had been manifested in express
words"; and cases
cited.'
There can be no doubt that, for the reasons discussed
above, fairness and justice favour the approach that s 1 of the Act
should
apply also to contractual claims.
2 The second
contra
-argument
was based on the precedents created by the decisions in
Shaw
and
OK Bazaars
,
supra
.
2.1 The two said decisions were, to put it
mildly, not well received by our academic writers (see
inter
alia
Boberg 1965
Annual
Survey of South African Law
179 - 180; Jean
Davids,
Altered cheques : Apportionment of
loss
(1965) (82) SA Law Journal 289; Jean
Davids,
Apportionment and contractual damages
(1966) 83 SA Law Journal 226; Boberg,
The
Law of Delict
, vol 1, 1984, 710 - 713; Louise
Tager,
1976 Annual Survey of South African Law
87 - 88; DJ Lötz
Vermindering
van kontraktuele skadevergoeding
, in
(1996)
TSAR 170
- 174; P H Havenga
Contractual Claims
and Contributory Negligence
in 2001
THRHR
124 - 130; Christie,
op cit
613
et seq
.
In a submission to the SA Law Commission Professor A J Kerr opposes
the view that the Act is applicable to contractual claims
but favours
apportionment on the basis of causation.)
2.2 The judgment in
OK
Bazaars
was and can be criticised on the
following bases:
(a) The main argument in
OK
Bazaars
in favour of applying the Act was
that the word 'fault' in s 1 of the Act was wide enough to include a
breach of contract. Watermeyer
J dismissed this argument : some forms
of breach of contract do not require fault on the part of the debtor.
It follows that if
s 1 of the Act is applicable, it would apply to
some breaches of contract (where fault is required) but not to
others. This was
the first and seemingly most important reason why
Watermeyer J rejected the argument.
With respect, this argument is not convincing. The
object of the Act was to regulate those cases where both parties
acted negligently.
It excluded from its operation cases of strict
liability, statutory liability and contractual liability which do not
depend on
proof of negligence. S 1 (1) (a) of the Act specifically
refers to cases where both parties are at 'fault'. How can the
argument
that the section cannot be applied, even if this particular
defendant is at fault, because other defendants in contracts may be

liable without any fault, be sound?
(b) It was also held in
OK
Bazaars
that the history of the Act shows
that it was intended to apply to delictual actions only. But, as was
argued by counsel for PW,
this argument loses sight of the crucial
difference between our Act and the English Act. If our Legislature
intended s 1 to apply
to delictual actions only, why did it not
simply follow the English Act?
(c) It was also held in
OK
Bazaars
that the words in s 1 '... a claim in
respect of that damage shall not be defeated by reason of the fault
of the claimant'
support the view that the
section was intended to apply to delictual claims only: it would not
be apposite to say that fault on
the part of the plaintiff who sued
on contract would 'defeat' his or her claim; the plaintiff's claim
would fail because he would
not be able to show the causal connection
between the defendant's act and the damage.
The argument, so it was argued, is
untenable. The very same can be said of a claim in delict : by 1956 a
plaintiff's claim in delict
was not 'defeated' by reason of his or
her fault - it would fail, sometimes, because the plaintiff's
conduct, and not that of the
defendant, was the proximate cause of
the loss (
i e
he or
she had the last opportunity to avoid the loss).
(d) It was then said in
OK
Bazaars
that the rule in s 1 (1) (b) that
damage, for the purpose of s 1 (1) (a) shall be regarded as having
been caused by a person's fault
notwithstanding the fact that another
person had the last opportunity of avoiding the consequences thereof
and negligently failed
to do so, showed that the apportionment was
intended to apply to delictual claims only.
But the argument seems to be a
non
sequitur
. Even if it is assumed that s
1(1)(b) was enacted to overcome the line of decisions based on the
'abracadabra' criterion of causation
and the last opportunity rule,
non constat
that the new
apportionment principle cannot and should not be equally applicable
to contractual claims. S 1 (1) (a) is the dominant
clause, not s 1
(1) (b).
(e) It was also held by Watermeyer J that
contributory negligence is not normally one of the recognised
defences to a claim based
upon a breach of contract. On behalf of PW
it was submitted that this argument overlooks the wording of the
whole of the Act and
the principle laid down in
Principal
Immigration Officer v Bhula
,
supra
,
viz
that in the case
of conflicting or ambiguous provisions, the fair and equitable
interpretation should be followed, rather than a
harsh and
uncompromising one or, one can add, rather than an approach which
leads to unjustifiable discrimination
between classes of defendants.
(f) It was also held that the application
of various canons of constructions,
inter alia
relating to the long title of the Act which refers to
contributory negligence, indicates that the Act was intended to apply
to delictual
claims only.
PW submitted that there is no canon of construction
which militates against the view that the Act applies to contractual
claims.
On the contrary, it was argued, an analysis of the wording of
the long title (as done above) and of s 1 (1) (a) shows the opposite.
(g) It was also held in
OK
Bazaars
that, inasmuch as contributory
negligence was, before the passing of the Act, not a valid defence to
a claim based upon a breach
of contract, then, if it was the
legislature's intention to change the legal position, it would have
done so explicitly. Based
on its previous submissions, PW argued that
it was clear what the legislature intended to do; furthermore, if it
was the legislature's
intention to apply the Act only to delictual
claims, why did it not simply follow the English Act?
(h) Finally, the argument was put before
the court in
OK
Bazaars
that
even if the Act did not apply to all contractual claims, it should at
least be construed as covering claims for breach of contracts
which
import a duty not to be negligent
i e
at fault, in committing the breach of contract.
Watermeyer J was not convinced by the English authorities and
distinguished them.
But, PW argued, the substance of the argument was not
addressed : if the breach of contract by the defendant requires proof
of fault
to found a claim for damages against the defendant, and the
plaintiff is also at fault, why should s 1 (1) (a) of the Act,
according
to its clear terms, and as a matter of logic, legal policy,
fairness and justice not be applicable?
3
The status of
OK
Bazaars
The next argument submitted by TBA was that
the decision in
OK Bazaars
has
now stood for more than two decades and should not be overturned even
if wrong, except by a clear legislative intervention.
This Court has on several occasions
rejected this approach. In
Dukes v Marthinusen
1937 AD 12
Stratford ACJ said at 23 :
'If the decisions had disregarded fundamental principles
of our law, we might have to reassert those principles even at the
cost
of reversing judgments of long standing.'
(See also
S v
Bernardus
1965 (3) SA 287
(A) at 297
in
fine
- 299 A;
Peri-Urban
Areas Health Board v Munarin
1965 (3) SA 367
(A) at 376 E - G.)
[15]
Conclusion
(a)
What is plain from
the above discussion is that the feasibility of a plea of
contributory negligence in the case of a claim for
breach of contract
on the defendant's failure to exercise due care depends upon an
exercise of statutory interpretation. Behind
this, however, lies
important policy considerations. That being so, there are two
interrelated considerations which cause me to
lean in favour of the
applicability of s 1 to claims of a contractual nature. These are :
(i) the need for its applicability. This is not simply
an academic exercise: there is a definite lacuna in the law if such a
defence
is to be denied in the narrow circumstance which apply in
this case.
(ii) the glaring inequity of denying the existence of
such a defence in circumstances such as those prevailing in this
case.
(b) The facts of the current case provide a perfect
illustration of both propositions. It would be patently unfair if PW
should
have to bear the full brunt of the entire loss when TBA was
itself partly to blame for its occurrence. The greater the
comparative
degree of a plaintiff's lack of precaution in relation to
the harm of which he complains, the more apparent will be the
inequity
of the denial of a plea of contributory negligence.
(c)
One can readily
conjure up other comparable instances. One that was much discussed
during the course of argument is this: a contract
is entered into
between a building owner and a contractor. The specifications
furnished by the building owner to the contractor
negligently
stipulate an incorrect mix for the concrete he is to use. The
contractor, on the other hand, is negligent in that,
contrary to
proper specifications about reinforcing, he provides inadequate
reinforcing. As a result a wall collapses. According
to expert
evidence both factors contributed thereto. The building owner sues
the contractor for the damage it sustained as a result
thereof. Is it
fair that the plaintiff should succeed in full or not at all? Another
telling example is furnished in the recent
report of the Scottish Law
Commission entitled
Report on Remedies for
Breach of Contract
”
(1999) which, in
part 4 thereof, deals with this very issue. In para 4.10 it is
stated:
'On principle it would seem to be
desirable to take into account the conduct of the aggrieved party in
contributing to the loss
or harm. This is just an extension of the
policy underlying the well-established rules on mitigation of loss.
In cases where loss
of damage is sustained as a result of breach of
contract it will often be the case that the aggrieved party is partly
to blame
for the loss or harm. To force courts into an all or nothing
choice is likely to produce unreasonable results.
Example
.
A contractor contracts with an electricity supply company for a
continuous supply of electricity. The company, in breach of the

contract, allows an interruption in the supply. This is one of the
causes of a loss to the contractor who has to re-lay a large
column
of concrete. Another causal factor was that the contractor failed to
take reasonable steps to see that a back-up system
was available
before beginning a task for which a continuous supply of concrete was
indispensable.
In a case like this, awarding the
contractor full damages or no damages may be equally unattractive.
The reasonable course may be
to apportion the liability, taking the
conduct of both parties into account. Other, more commonplace,
examples could easily be
imagined. For example, a party to a contract
for the carriage of goods gives the carrier a wrong address and then,
when the carrier
fails to take all reasonable steps to ascertain the
correct address in time, claims damages for late delivery. Or a
person who
has bought sophisticated electronic equipment which is not
in all respects conform to contract causes damage to it by ignoring
the clear instructions supplied with it and taking foolish and
unreasonable steps to remedy the small defect. Or a woman injures

herself in foolishly and unreasonably attempting to climb over a high
gate which ought, in terms of a contract, to have been left
open. In
some such cases the effect of the existing law may be that the
aggrieved party recovers nothing. A court, faced with arguments
that
there is no room for apportioning liability, may feel obliged to hold
that the aggrieved party’s conduct was the sole
cause, or the
sole effective cause, of the loss.'
(d)
Other examples of how unfairly the denial of such a plea would
operate are suggested by the facts in
O
K Bazaars,
quoted above or
British South African Co v
Lennon Bros Ltd
1913 SR 94.
Contrast, with these cases the judgment of the Queen's Bench Division
(per Brabin J) in
De Meza
and Stuart v Apple, Van Straten, Shena and Stone
[1974]
1 Lloyds Rep 508
(Q.B.). There the defendant auditors were found to
have been negligent, but also the instructing plaintiff, a firm of
solicitors.
Relying on a number of previous cases and well-known
text-books, the learned judge found that the contract had imported a
duty
on the part of the auditors not to be negligent, and held that
the English Law Reform (Contributory Negligence) Act of 1945 did

apply. The fairness of this result speaks for itself.
(e)
What is clear is that the corrective which the English law invented
as a counter to the denial of a claim to a plaintiff who
was himself
negligent, namely, the last opportunity rule, formed no part of the
Roman-Dutch law and was imported into this country
from England. One
of the motivations for the Act was undoubtedly to regularise the
position in this country as far as the last
opportunity rule was
concerned. That could of course only be done if the principle of
apportionment was introduced as a balancing
factor. This was clearly
a peculiarity of the law of delict. It may be that the Act was
primarily concerned to rectify the kind
of problem which occurred
consistently in the law of delict and less so in the law of contract.
But the ultimate question is not
whether the Act was designed to
rectify a problem of the law of contract but whether, in its terms
and as a corollary of treating
a problem surfacing more directly in
the sphere of delict, it managed also to provide a satisfactory
answer to a problem which,
although it may have occurred less often
in the law of contract, was nevertheless a real one.
(f)
In the result I would apportion the loss suffered by TBA according to
the standard laid down by s 1 (1) (a) of the Act. Having
regard to
the analysis of the facts by my colleague Nienaber JA, I am of the
view that both parties were equally at fault, with
the result that
the claim of TBA
should
be reduced by 50%.
(g)
The effect of my approach is that the appeal succeeds but not to its
full extent. In the court
a
quo
TBA's claim was reduced
by 80%. In my view it should only be reduced by 50%. This means that
although its appeal succeeds only partly,
it is successful in getting
R694 909,00 instead of R249 279,69 awarded to it
a
quo
. This represents
substantial success, and TBA is therefore entitled to its costs of
appeal.
As
far as the remaining orders made by my colleague Nienaber JA are
concerned, I would not suggest any changes.
P
J J OLIVIER