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[2014] ZACC 28
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Country Cloud Trading CC v MEC, Department of Infrastructure Development, Gauteng (CCT 185/13) [2014] ZACC 28; 2015 (1) SA 1 (CC); 2014 (12) BCLR 1397 (CC) (3 October 2014)
Links to summary
CONSTITUTIONAL
COURT OF SOUTH AFRICA
Case
CCT 185/13
In
the matter between:
COUNTRY
CLOUD TRADING
CC
........................................................................................
Appellant
and
MEMBER
OF THE EXECUTIVE COUNCIL,
DEPARTMENT
OF INFRASTRUCTURE
DEVELOPMENT,
GAUTENG
.............................................................................................
Respondent
Neutral
citation:
Country Cloud Trading CC v
MEC, Department of Infrastructure Development, Gauteng
[2014]
ZACC 28
Coram:
Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J,
Jafta J, Khampepe J, Madlanga J, Majiedt AJ, Van der Westhuizen J and
Zondo J
Heard
on:
20 May 2014
Decided
on:
3 October 2014
Summary:
Delict — wrongfulness —
pure economic loss — intentional interference with contractual
relations — relevance
of intention in wrongfulness enquiry —
norm of state accountability — vulnerability to risk —
existing contractual
relations
ORDER
On
appeal from the Supreme Court of Appeal (hearing an appeal from the
South Gauteng High Court, Johannesburg):
1.
The appeal is dismissed.
2.
There is no order as to costs.
JUDGMENT
KHAMPEPE
J (Mogoeng CJ, Moseneke DCJ, Cameron J, Froneman J, Jafta J, Madlanga
J, Majiedt AJ, Van der Westhuizen J and Zondo J concurring):
Introduction
[1]
This matter concerns a delictual claim for
pure economic loss, and involves complex issues of legal
responsibility and public policy.
It comes before us by way of
an application for leave to appeal against a judgment of the Supreme
Court of Appeal which, in turn,
dismissed an appeal against a
decision of the South Gauteng High Court, Johannesburg (High Court).
The appellant is Country
Cloud Trading CC (Country Cloud) and the
respondent is the Member of the Executive Council (MEC) for the
Gauteng Department of
Infrastructure Development (Department).
The MEC represents the Department in these proceedings. The
appeal originates
from a building contract between the Department and
a construction company, iLima Projects (Pty) Ltd (iLima). In
virtue of
the allegedly unlawful termination of this agreement,
Country Cloud, which had lent money to iLima, suffered a loss of
R12 million.
Facts
[2]
The
history that preceded this dispute commenced in May 2006 when the
Department awarded a tender to build the Zola Clinic in Soweto
(original contract). This 300 bed district hospital was to
be constructed by a joint venture of four companies, including
iLima,
at a contract price of around R335 million.
[1]
The deadline for completion was May 2008.
[3]
But the joint venture foundered. In
March 2008 – when only 20 per cent of the hospital
had been completed
– iLima’s three partners abandoned
it. The rescue operation fell to Mr Buthelezi, the then Head of
Department,
who was tasked with finding a contractor to complete the
project.
[4]
Mr Buthelezi was presented with two
options. On the one hand, the Departmental Acquisition Council
(DAC), responsible for
the procurement of goods and services for the
Department, recommended a competitive tender process to select a
contractor.
In contrast, senior officials in the Department
suggested that the contract be awarded immediately to iLima, the last
surviving
entity in the joint venture. Mr Buthelezi took
the latter course on the basis that to delay the project further
would
have negative consequences for the community and service
delivery.
[5]
iLima, however, was in no position to
complete the project, absent immediate financial assistance.
The Department thus agreed
to make an initial “remobilisation”
payment of R21.5 million to iLima, being five per cent of the
contract price,
within 30 days of the conclusion of the
construction contract. But iLima needed financing before this
time. To
this end, Mr Lupepe, the founder and chief executive
officer of iLima, approached Mr Dement, the managing director of one
of iLima’s
principal suppliers under the original contract.
Mr Lupepe informed him that iLima did not have the capacity to repay
its
debts to his company, because of the breakdown of the original
contract. It also could not return the supplier’s
equipment,
which was under the Department’s control.
However, he advised that iLima anticipated being awarded the contract
to
complete the hospital, if it could get the necessary bridging
finance. If this materialised, it would be in a position to
repay its debt as soon as it received the remobilisation fee.
In the light of this, Mr Dement decided to find a way to help
iLima.
The conduit was Country Cloud, a close corporation in which his wife
was the sole member.
[6]
Discussions commenced between Country Cloud
and iLima about the loan agreement’s terms. The
agreement, which was finally
concluded on 18 July 2008, required
Country Cloud to advance R12 million to iLima. The amount was
to be repaid by 31 August
2008, six weeks later. In addition, a
“service fee” of R8.5 million was to be paid to
Country Cloud in monthly
instalments, so that it would be fully
repaid by 1 May 2009.
[7]
Given iLima’s precarious financial
circumstances, Country Cloud also insisted on certain protections.
First, Mr Lupepe
was listed as one of the parties to the loan
agreement, and stood as surety and co-principal debtor for the loan.
Second,
the whole agreement was made conditional upon iLima being
awarded the completion contract. Finally, and importantly, the
loan agreement was subject to the condition that the Tau Pride/Moteko
Consortium (Tau Pride), the Department’s official managing
agent for the contract, “agree in writing to the payment of the
sum of R12 million to Country Cloud from the initial
remobilisation fee payable [by the Department] to iLima”.
Aware of the need for safeguards, the Department had appointed
Tau
Pride to manage and supervise the building project. Tau Pride’s
mandate included the management, by means of a
joint bank account, of
iLima’s financial transactions relating to the project.
[8]
The agreement between Country Cloud and Tau
Pride was concluded on 21 July 2008. Tau Pride undertook
to ensure that the
R12 million would be paid to Country Cloud from
the initial remobilisation fee received by iLima under the contract
and to authorise
irrevocably the release of both that payment and the
service fee from the joint bank account. Thereafter the
contract for
the completion of the hospital (completion contract) was
concluded between the Department and iLima on 4 August 2008.
[9]
In execution of the loan agreement, Country
Cloud paid R12 million to iLima in two tranches: one directly before,
and one shortly
after, the conclusion of the completion contract.
The Department’s principal agent for the completion contract,
Tsiya
Developments (Pty) Ltd, sent the Department a payment
certificate, tax invoice and recommendation for the payment to iLima
of the
initial R21.5 million. And iLima submitted to Tau Pride
an invoice for the same amount. So all seemed well as far as
Country Cloud was concerned.
[10]
But the semblance of stability was
short-lived. Mr Buthelezi came under pressure from the media,
through a query from the
City Press
newspaper on 15 August 2008, and the Department itself, for
failing to follow the DAC’s recommendation to go to tender.
He eventually cancelled the completion contract on 4 September 2008,
before any payment had been made under it. Mr Buthelezi
relied
on two alleged misrepresentations in doing so: iLima’s tax
clearance certificate, submitted as a precondition for
the conclusion
of the contract, allegedly could not be trusted, as information from
the South African Revenue Service (SARS) showed
it had considerable
outstanding tax; and the authenticity of iLima’s building
accreditation was apparently “questionable”.
[11]
The cancellation of the completion contract
was the beginning of iLima’s end. In a last-ditch attempt
to salvage its
financial position, it launched a contractual claim
for R1.4 billion against the Department. The claim was
referred
to mediation, which broke down. Unable to meet its
financial obligations to its creditors, iLima was placed in
liquidation
in March 2010.
High
Court
[12]
Before the High Court, Country Cloud
claimed R20.5 million from the Department in delictual damages.
According to Country
Cloud, the Department owed it a duty not to
repudiate the completion contract prior to the payment of the initial
remobilisation
fee to iLima. The Department had repudiated the
contract notwithstanding this duty, but for which iLima would have
been able
to pay Country Cloud the loaned amount (R12 million) and
the service fee (R8.5 million).
[13]
But
the High Court did not get to the issue of wrongfulness in
delict.
[2]
It disposed of
Country Cloud’s claim by holding that the completion contract
was void from its inception because Mr
Buthelezi had no authority to
depart from the DAC’s recommendation to retender. There
was no valid contract for the
Department to repudiate at all and
therefore no question of its breach being delictually wrongful.
Supreme
Court of Appeal
[14]
Country
Cloud appealed to the Supreme Court of Appeal, where the question of
delictual wrongfulness became a focal issue.
That Court, in a
judgment written by Brand JA, swiftly dispensed with the issue that
had preoccupied the High Court.
[3]
It held that Mr Buthelezi, as the Department’s accounting
officer, had the authority to deviate from the prescribed
tendering
procedure, despite the DAC’s advice. The Court also
accepted Mr Buthelezi’s assertion that the urgency
of
completing the hospital justified deviation in this case.
[15]
The Department’s defence that the
completion contract was validly cancelled – on the basis that
iLima had presented
a false tax clearance certificate (the Department
had conceded that iLima had the necessary accreditation) – was
also dismissed.
While the evidence suggested that iLima was
indeed heavily indebted to SARS, the Department’s own expert, a
SARS employee,
conceded that iLima could have made a repayment
arrangement with SARS and that, as a consequence, the certificate
could be valid.
[16]
The only issue left was the Department’s
defence that its cancellation of the completion contract was not
delictually wrongful.
The Court accepted, on the facts, that
the Department breached its contract with iLima, and caused loss to
Country Cloud, acting
with intent, at least in the form of
dolus
eventualis
. But, it said, the
case did not fall under the established delict of intentional
interference with a contract. Nor
were there sufficient
positive policy considerations justifying a novel finding of
wrongfulness. Country Cloud’s claim
was indistinguishable
from the claims of countless other creditors, subcontractors and
employees who could potentially suffer loss
because of the
Department’s breach, thus raising the risk of limitless or
indeterminate liability. In addition, Country
Cloud had
alternative remedies available to it: it could have claimed repayment
from iLima’s estate under the loan agreement
or taken cession
of iLima’s claim for breach of contract against the Department.
[17]
The Supreme Court of Appeal therefore
dismissed Country Cloud’s appeal.
Leave
to appeal
[18]
In terms of an order dated 12 March 2014
Country Cloud was granted leave to appeal to this Court.
Issues
[19]
The
sole issue is whether the Department should be held delictually
liable for Country Cloud’s loss.
[4]
The answer to this question rests on an important question: Was the
Department’s conduct in cancelling the completion
contract
wrongful? The issue is not whether the Department’s
conduct was wrongful in some general sense, or wrongful
towards
iLima. It is whether its conduct was wrongful vis-à-vis
Country Cloud.
Wrongfulness
[20]
Wrongfulness
is an element of delictual liability. It functions to determine
whether the infliction of culpably caused harm
demands the imposition
of liability or, conversely, whether “the social, economic and
others costs are just too high to justify
the use of the law of
delict for the resolution of the particular issue”.
[5]
Wrongfulness typically acts as a brake on liability, particularly in
areas of the law of delict where it is undesirable or
overly
burdensome to impose liability.
[21]
Previously,
it was contentious what the wrongfulness enquiry entailed,
[6]
but this is no longer the case. The growing coherence in this
area of our law is due in large part to decisions of the Supreme
Court of Appeal over the last decade. Endorsing these
developments, this Court in
Loureiro
recently articulated that the wrongfulness enquiry focuses on—
“
the
[harm-causing] conduct and goes to whether the policy and legal
convictions of the community, constitutionally understood, regard
it
as acceptable. It is based on the duty not to cause harm –
indeed to respect rights – and questions the reasonableness
of
imposing liability.”
[7]
The
statement that harm-causing conduct is wrongful expresses the
conclusion that public or legal policy considerations require
that
the conduct, if paired with fault, is actionable. And if
conduct is not wrongful, the intention is to convey the converse:
“that public or legal policy considerations determine that
there should be no liability; that the potential defendant should
not
be subjected to a claim for damages”, notwithstanding his or
her fault.
[8]
[22]
Wrongfulness
is generally uncontentious in cases of positive conduct that harms
the person or property of another. Conduct
of this kind is
prima facie wrongful.
[9]
However, in cases of pure economic loss – that is to say, where
financial loss is sustained by a plaintiff with no
accompanying
physical harm to her person or property
[10]
– the criterion of wrongfulness assumes special importance.
In contrast to cases of physical harm, conduct causing
pure economic
loss is not prima facie wrongful.
[11]
Our law of delict protects rights, and, in cases of non-physical
invasion, the infringement of rights may not be as clearly
apparent
as in direct physical infringement. There is no general right
not to be caused pure economic loss.
[12]
[23]
So
our law is generally reluctant to recognise pure economic loss
claims, especially where it would constitute an extension of the
law
of delict.
[13]
Wrongfulness
must be positively established.
[14]
It has thus far been established in limited categories of cases, like
intentional interferences in contractual relations
[15]
or negligent misstatements,
[16]
where the plaintiff can show a right or legally recognised interest
that the defendant infringed.
[24]
In
addition, if claims for pure economic loss are too freely
recognised, there is the risk of “liability in an indeterminate
amount for an indeterminate time to an indeterminate class”.
[17]
Pure economic losses, unlike losses resulting from physical harm to
person or property—
“
are
not subject to the law of physics and can spread widely and
unpredictably, for example, where people react to incorrect
information
in a news report, or where the malfunction of an
electricity network causes shut-downs, expenses and loss of profits
to businesses
that depend on electricity.”
[18]
[25]
So
the element of wrongfulness provides the necessary check on liability
in these circumstances. It functions in this context
to curb
liability and, in doing so, to ensure that unmanageably wide or
indeterminate liability does not eventuate and that liability
is not
inappropriately allocated. But it should be noted – and
this was unfortunately given little attention in argument
–
that the element of causation (particularly legal causation, which is
itself based on policy considerations) is also a
mechanism of control
in pure economic loss cases that can work in tandem with
wrongfulness.
[19]
[26]
This
case is manifestly one of pure economic loss. Would it be
reasonable to impose liability on the Department in the
circumstances?
Although there is no “checklist” of
relevant considerations, the enquiry does not call for an “intuitive
reaction
to a collection of arbitrary factors but rather a balancing
against one another of identifiable norms.”
[20]
Intentional
interference with contractual relations
[27]
Country
Cloud sought to bring itself within one of the subcategories of pure
economic loss cases where wrongfulness has already
been established,
saying its claim amounts to an intentional interference with
contractual relations.
[21]
The
Supreme Court of Appeal rejected this argument. It said that
the delict of intentional interference with contractual relations
may
be brought by a party to a contract who asserts that a third party –
a stranger to the contract – has intentionally
deprived it of
benefits it would otherwise have gained from performance in terms of
the contract. But, according to the Supreme
Court of Appeal,
Country Cloud was the stranger to the interfered-with contract
between iLima and the defendant Department.
Accordingly, the
Court held that the success of Country Cloud’s claim would
depend on the extension of delictual liability
to claims for damages
suffered by a stranger to the contract interfered with. This,
according to the Court, had never been
done before.
[22]
[28]
Country Cloud disputes this
characterisation of its claim. It contends that the Supreme
Court of Appeal focused on the wrong
contract. The relevant
contract, it argues, was not the contract between iLima and the
Department, to which it was indeed
a stranger. The relevant
contract was the loan agreement it concluded with iLima, the benefits
of which it was deprived when
the Department repudiated the
completion contract and made iLima incapable of repaying its debts.
Country Cloud alleges Mr
Buthelezi knew that it would suffer
loss if the completion contract was cancelled and had an improper
motive for cancelling that
contract (saving face under public and
inter departmental pressure), and hence cancelled it with the
requisite intention.
Thus, Country Cloud contends, the
Department intentionally interfered with its contract with iLima.
The implicit force of
this, Country Cloud seems to suggest, is that
the conduct fell within a category of pure economic loss that our law
recognises
as prima facie wrongful.
[29]
I cannot quibble with Country Cloud’s
contention that, loosely speaking, the Department intentionally
“interfered”
with Country Cloud’s contractual
relations with iLima by causing it to lose contractual benefits to
which it was entitled.
But that fact does not in itself render
conduct prima facie wrongful.
[30]
The
legal category is narrower. The cases where conduct may
arguably be prima facie wrongful are limited. They involve
a
situation where a third party, A, the defendant, intentionally
induces
a contracting party, B, to breach his contract with the claimant, C,
without lawful justification for doing so.
[23]
But
the Department did not induce iLima’s breach in the relevant
sense. In these circumstances this would require an
act of
persuasion directed at iLima with the intent that it dishonour its
agreement with Country Cloud. The defendant wrongdoer
thereby
becomes an accessory to the primary wrong: the breach of contract.
The act of persuasion, paired with intent, establishes
this accessory
liability.
[24]
In
Pikkewyn
Ghwano
,
for
example, the defendant wrongdoer induced an employee of the plaintiff
to breach his employment contract by assisting him to
sell a
competitor’s product and by writing the orders for the product
for the employee.
[25]
By
contrast, iLima’s breach of the loan agreement with Country
Cloud was simply a consequence of the Department’s
conduct in
cancelling the completion contract. There was no act of
persuasion.
[26]
[31]
Liability
has also been established in cases where A refuses to vacate premises
owned by B, which interferes with the lease agreement
between B and
her tenant, C, causing the latter loss. Both
Dantex
[27]
and
Lanco
[28]
involved
these circumstances. While the plaintiff’s claim in
Dantex
failed, because fault was not alleged,
[29]
the
plaintiff in
Lanco
succeeded.
[30]
But
that case is different from Country Cloud’s. The act of
interference in
Lanco
involved the holding-over of leased premises.
[31]
The
defendant there did not simply cause the plaintiff to lose its right
to occupy the premises. The defendant usurped that
right,
appropriating it for itself. It also did so in a manifestly
“dishonest and mischievous” way.
[32]
The
factual matrix in this case – where the defendant’s
supposed act of interference is the cancellation of an entirely
different contract – is thus distinguishable from that which
confronted the Court in
Lanco
.
The Department’s responsibility for Country Cloud’s loss
is very different.
[32]
So Country Cloud’s claim is not on a
par with the cases considered above. Nor were we referred to
any other similar
case in which a delictual remedy was provided.
But I did not take Country Cloud to dispute this. In its
submissions,
it acknowledged that recognition of liability in this
case would be novel and an extension of the law of delict. In
the light
of this, the wrongfulness of the Department’s conduct
must be established positively. It is to this enquiry –
and to the competing considerations that must be weighed under it –
that I now turn.
The
role of fault and foreseeability in determining wrongfulness
[33]
It is not disputed that the Department’s
fault is established. Country Cloud submits, however, that the
nature of the
Department’s fault – in particular, that it
was in the form of intention – is a relevant policy
consideration
favouring the imposition of liability. It argues
that the Department, through Mr Buthelezi, unlawfully cancelled the
completion
contract and thereby intentionally caused it harm.
Furthermore, Country Cloud contends that Mr Buthelezi’s
subjective
foresight of the precise nature and extent of the harm it
would suffer if the completion contract was cancelled is a relevant
consideration
in the wrongfulness enquiry. In response, the
Department disputes that Mr Buthelezi acted with intent to cause
harm, but
does not appear to take issue with the contention that the
nature of the fault, foreseeability and the degree of blameworthiness
are relevant to the wrongfulness enquiry.
[34]
The
Supreme Court of Appeal agreed with Country Cloud on the facts,
holding that the Department had intent, at least in the form
of
dolus
eventualis
[33]
– and that this was a relevant factor in assessing whether its
conduct was wrongful.
[34]
It disagreed, however, that foreseeability of harm in and of itself
is a relevant consideration in that enquiry. Although
it had
been adopted in previous judgments, the Supreme Court of Appeal
stated that this approach was “bound to add to the
confusion
between negligence and wrongfulness”.
[35]
Furthermore, the Court held that this factor could not single out
Country Cloud’s claim for “special treatment”
because foreseeability is already a “prerequisite for delictual
liability in all cases”. This is because foreseeability
of harm is already required to establish other delictual elements,
namely negligence and causation.
[36]
[35]
On the facts, Mr Buthelezi was aware of the
loan Country Cloud had provided to iLima. Indeed, the
Department agreed to pay
the remobilisation fee precisely in order to
assist iLima to obtain the loan. And three days after the loan
agreement was concluded,
Tau Pride formally acknowledged that
agreement and guaranteed Country Cloud that it would be repaid from
project funds once they
were released to iLima.
[36]
Mr Buthelezi also knew of iLima’s
parlous financial affairs and that it would be able to repay Country
Cloud only if it received
the remobilisation fee. Tau Pride had
been brought into the fold for precisely these reasons. The
above considered,
the ineluctable inference is that, at the very
least, Mr Buthelezi subjectively foresaw the possibility that the
repudiation of
the completion contract would cause loss to Country
Cloud. He reconciled himself with this possibility and
repudiated the
contract regardless.
[37]
So
Country Cloud is right that the Department had intention in the form
of
dolus
eventualis
,
which is satisfied where a wrongdoer foresees the possibility of a
consequence eventuating as a result of her conduct, but reconciles
herself with the fact and proceeds anyway.
[37]
In fact, it is arguable that Mr Buthelezi’s intent rose
to the level of
dolus
indirectus
– where the defendant aims at one result (in this case, the
cancellation of the contract) but has knowledge that the consequence
in question (iLima’s breach of the loan agreement) will
unavoidably or inevitably occur
[38]
– and I am prepared to assume so, for the sake of argument.
[38]
The evidence also suggests, as the Supreme
Court of Appeal correctly held, that Mr Buthelezi foresaw the risk
that his purported
cancellation would breach the completion
contract. Mr Buthelezi came under severe pressure from within
the Department and
from the media for not following the DAC’s
recommendation to put the completion contract out to tender. He
was no doubt
desperately looking for reasons to cancel, and the
reasons he advanced proved to be utterly unfounded. Finally,
despite the
allegation in Country Cloud’s founding papers that
Mr Buthelezi had intentionally cancelled the completion contract
without
any basis for doing so, the Department failed to call Mr
Buthelezi to give evidence at the trial. So the probable
inference
that he foresaw that his conduct was contractually unlawful
was not rebutted.
[39]
But
are these features of the Department’s conduct relevant to the
wrongfulness enquiry as Country Cloud contends? They
are
indeed. The relevance of the nature of fault and fault-related
considerations in the wrongfulness enquiry has been recognised
on a
number of occasions by the Supreme Court of Appeal.
[39]
Summing up this trend, the Supreme Court of Appeal in
Roux
held:
“
Amongst
the considerations that may influence the policy decision whether or
not to impose liability, is the nature of the fault
that is proved,
as well as other fault-related factors. Accordingly, while
intentional conduct may sometimes attract legal
liability, the same
conduct may not be regarded as wrongful if the degree of fault
established was no more than negligence. In
other factual
situations conduct may not even be regarded as wrongful when it was
intentional, but only when it was accompanied
by a motive to cause
harm or by a particular awareness of the risk of serious harm that
may follow.”
[40]
[40]
And
this approach makes sense. As is noted by the Supreme Court of
Appeal in the present case, the element of fault is satisfied
by
either intention or negligence. The form of fault is generally
irrelevant in the fault enquiry; proof of either form suffices.
[41]
It can, however, be given weight under the wrongfulness enquiry.
This is not to conflate the elements of fault and
wrongfulness, or to
suggest that the establishment of fault is necessarily a prerequisite
for the establishment of wrongfulness.
Fault, like all other
delictual elements, must still be separately established. It is
merely recognition of the fact that
where fault rises to the level of
intention, and where other fault-related elements (such as motive to
cause harm) are present,
this may be relevant to establishing
wrongfulness.
[41]
However, Country Cloud also contends that
foreseeability of loss, and the fact that Mr Buthelezi foresaw the
precise loss it would
suffer, is relevant in the wrongfulness
enquiry. Of course foreseeability is relevant, as has been
noted above, to the extent
that it plays a role in establishing the
nature of the defendant’s fault. It is not necessary,
however, to consider
whether foreseeability might have some broader
relevance in the wrongfulness enquiry. I am prepared to assume
that the purpose
it might serve here – to limit potential
plaintiffs and diminish the risk of limitless liability – is
already served
by the nature of the Department’s fault.
[42]
Does
all of this impel a finding of wrongfulness in this case? No.
As the Supreme Court of Appeal correctly noted, the
defendant’s
blameworthiness, and the risk of indeterminate liability, are
relevant but not dispositive considerations.
They should be
weighed with all others in determining whether conduct is
wrongful.
[42]
In
addition, there are cases where knowingly causing loss, even absent
any risk of indeterminate liability, could not plausibly
be wrongful,
for the plaintiff would not have harmed a right or legal interest of
the defendant. To take one obvious example:
if the Department’s
cancellation of the completion contract had been valid, Country Cloud
would have had no hope of establishing
wrongfulness. Yet the
extent of its loss, and the Department’s foresight of it, would
have been the same as they are
here; and the risk of indeterminate
liability would be equally absent.
[43]
Country Cloud must persuade us that the
Department is responsible for the loss suffered. If the
Department acted permissibly
in causing Country Cloud that loss, it
does not matter that it did so intentionally. Nor does it
matter that there is no
risk here of indeterminate liability.
Until we are satisfied the Department
wronged
Country Cloud, its claim does not get off the ground. Country
Cloud did not allege here, as in a negligent misstatement
case,
that the Department made a representation to it that the Department
would honour the completion contract. And the terms
of the
contract between the Department and iLima cannot and do not
determine, without more, that the Department owes a duty to
Country
Cloud.
State
accountability
[44]
A
central prong of Country Cloud’s argument is the constitutional
value of accountability. Country Cloud pointed to
section
195(1)
[43]
(which sets out the
basic values and principles governing public administration) and
section 217(1)
[44]
(which
concerns public procurement) of the Constitution.
[45]
According to Country Cloud, for the Department to evade liability
would be to condone Mr Buthelezi’s “capricious
conduct”
and would be inconsistent with the principle of accountability.
By contrast, it argues, permitting the claim
would deter similar
capricious conduct.
[45]
It
is true that the value of state accountability can be a reason to
impose delictual liability on a state defendant.
[46]
Equally,
however, it should be stressed that this value will not always give
rise to a private-law duty.
[47]
And
Country Cloud did very little to explain how or why state
accountability compels us to recognise a private-law duty on the
state to compensate it here.
[46]
Moreover, this case does not raise the
acute public-policy concerns that prompted the imposition of
liability in
Gore
,
which was relied on extensively by counsel for Country Cloud.
In
Gore
damages were awarded against state entities which were vicariously
responsible for the conduct of their employees who, through
fraudulent conduct, prevented the award to a tenderer of a contract
it would otherwise have been awarded. The contract was
ultimately awarded to a company in which the wrongdoers held an
undisclosed interest. So there was dishonesty going to the
root
of the defendants’ conduct.
[47]
By
contrast, Mr Buthelezi’s dishonesty lay, at worst, in the
reasons he gave for his purported cancellation. This is
not to
suggest that his conduct was unobjectionable or innocuous. It
was not. But it did not rise to the level of dishonesty
and
corruption that was present in
Gore
.
[48]
Mr Buthelezi was a bungling public functionary, not one bent on
illicit gain. Counsel for Country Cloud conceded at
the hearing
that its case was different from
Gore
.
He suggested that it fell between that case and
Steenkamp
,
where this Court refused to impose delictual liability for loss
caused through the cancellation of a tender award because of a
negligent breach of procurement regulations.
[49]
The same powerful policy considerations that motivated the
imposition of liability in
Gore
are thus not present here.
[48]
Furthermore, Country Cloud’s argument
once again assumes, rather than proves, that the Department has
wronged it. One
can be held “accountable” only for
doing something wrong. And one can be held accountable only to
the particular
person whom one has wronged. Accountability is
not fostered by holding the Department liable to any randomly
selected third
party.
[49]
In
Gore
the defendants breached a public-law duty they owed squarely to the
aggrieved tenderer, to whom it should have awarded the contract.
The only question was whether paying delictual damages was the
appropriate remedy. In these circumstances, the value of state
accountability was vital. It compelled a finding that the
defendants were delictually liable to the plaintiff for the
undisputed
wrong they had committed against it. But there is no
equivalent link between the Department and Country Cloud in this
case.
Certainly, the Department breached the contractual duty
it owed to iLima. But that does not tell us what duty it owed
to
Country Cloud. Pointing vaguely at state accountability does
not help.
[50]
And
the Department is of course liable to iLima, the party whose
contractual right it unquestionably breached. So there are
much
more direct and effective ways of calling the state to account in
this case, most obviously the enforcement of this contract.
[50]
It seems odd and circuitous to recognise an indirect claim by a
corporate entity not directly involved in the contract between
the
Department and its contractor, iLima, as a means of ensuring the
former’s accountability. In short, this is a case
where
imposing delictual liability on the Department for a third party’s
loss is not justified on the grounds of accountability
because—
“
the
wrongdoer is already vulnerable to a claim by [its contracting
partner], and the extent of that liability [is] extensive.
Imposing further liability on the wrongdoer for the relational
economic consequences of [its] act, therefore, cannot usually be
justified on the ground of deterrence.”
[51]
To
impose on the Department delictual liability to a third party, over
and above its normal contractual liability, is unnecessary.
Indeed it “might undermine [its] functioning”.
[52]
In many cases, if not most, the insufficiency of the state’s
reasons for cancelling will be adequately addressed by
its consequent
contractual liability.
Vulnerability
to risk
[51]
It
is settled that
where
a plaintiff has taken, or could have reasonably taken, steps to
protect itself from or to avoid loss suffered, this is an
important
factor counting against a finding of wrongfulness in pure economic
loss cases.
[53]
In these
circumstances, the plaintiff is not “vulnerable to risk”
and, so it is reasoned, there is no pressing
need for the law of
delict to step in to protect the plaintiff against loss.
[54]
[52]
The
Supreme Court of Appeal held that Country Cloud was not vulnerable to
risk. It said Country Cloud could have either claimed
repayment
from iLima in terms of the loan agreement or taken cession of iLima’s
claim against the Department.
[55]
This, it concluded, was a reason for refusing to impose liability on
the Department.
[56]
[53]
Country Cloud contends it was vulnerable to
risk. It suffered the loss even though it had, so it argued,
taken all reasonable
precautions to protect itself before advancing
the loan amount to iLima. This, so it says, is evident from the
undertakings
it secured from Tau Pride.
Country
Cloud also disputes the viability of the avenues of recovery proposed
by the Supreme Court of Appeal. It says that
it had no
contractual claim of any worth against iLima because, once the
completion contract was cancelled, its contract with iLima
was an
“empty shell”. And it was speculative of the
Supreme Court of Appeal to suggest that taking cession of
iLima’s
claim would have been a successful means of recouping its losses.
Indeed, Country Cloud points out that iLima’s
contractual claim
against the Department went into mediation and ultimately foundered.
[54]
I agree with Country Cloud that the
measures proposed by the Supreme Court of Appeal may not have been
without difficulty.
It may have been very expensive for Country
Cloud to buy iLima’s claim against the Department, which iLima
may have been
unwilling to cede it at all; and it could have exposed
Country Cloud to a slew of counterclaims by the Department.
Country
Cloud’s contractual claim against iLima was also likely
worthless, especially once the latter was liquidated.
[55]
However,
a perusal of the loan agreement reveals a further step Country Cloud
took to protect itself from loss. Mr Lupepe,
iLima’s
chief executive officer, had bound himself as surety for the loan
amount.
[57]
Indeed, he
is reflected as one of the contracting parties on the front page of
the agreement.
[56]
Country Cloud failed to call up this
suretyship obligation, or provide a justifiable excuse why it had
not. Its counsel’s
response at the hearing when asked why
the close corporation did not pursue its claim against Mr Lupepe was
woefully inadequate.
He submitted that Country Cloud had relied
upon Mr Lupepe’s own representations that he was impecunious.
But what did
iLima – controlled by Mr Lupepe – do
with the money Country Cloud paid it? And where did the money
go?
[57]
These questions require answers if Country
Cloud is to persuade a court of the cogency of its delictual claim.
Its counsel
also speculated that those in control of Country Cloud
did not want to go against Mr Lupepe, who was their friend.
This does
little to strengthen Country Cloud’s demand for an
extension of the law of delict to afford it a remedy. Plainly,
Country
Cloud had other avenues of recovery available to it.
[58]
But there is a further consideration
weighing against Country Cloud’s claim. It has already
been noted that Mr Buthelezi
subjectively foresaw the risk of loss
that the cancellation of the completion contract would cause to
Country Cloud. But
foreseeability cuts both ways. The
risk of loss was also highly foreseeable by Country Cloud. It
knew of iLima’s
financial state and that iLima would not be
able to commence construction under the completion contract without
the money.
That is why Country Cloud became involved in the
first place. And iLima’s precarious financial state was
why Country
Cloud insisted on Tau Pride’s management of iLima’s
repayments. It was presumably also for this reason that Country
Cloud’s attorney was closely involved in devising the terms for
the transaction. That Country Cloud was fully aware
of the
substantial risk it was taking is also signalled by the huge profit
it stood to earn: R8.5 million on a (roughly) 30-day
loan.
[59]
So the risk that ultimately materialised
was highly foreseeable to all parties. And the risk was the
direct corollary of Country
Cloud’s potential gain. It
was the very reason for the loan’s existence, and the reason
for the tremendous benefits
Country Cloud would have obtained if all
had gone well.
[60]
Country
Cloud took steps to minimise that risk. But, even for the risk
that remained, it was no sitting duck. Far from
being the
Department’s helpless victim, it willingly exposed itself to
the vagaries of Mr Buthelezi’s conduct, and
to the risk of
iLima’s downfall, for the promise of a large financial reward.
In
Cape
Empowerment Trust
the Supreme Court of Appeal relied on the plaintiff’s failure
to extract itself from a high-risk transaction in the course
of
finding against it.
[58]
Its choice not to extract itself from, but instead to affirm, the
transaction made it “the author of its own misfortune.”
[59]
In conclusion, Brand JA held that the plaintiff—
“
rendered
itself vulnerable to risk . . . by reinstating the agreement in order
to procure a tax benefit. . . . The point is
that as a matter
of policy it would, in my view, be unreasonable to impose liability
on [the defendant] for a loss to which [the
plaintiff] had exposed
itself, and hence rendered itself vulnerable, while attempting to
gain a tax benefit.”
[60]
[61]
This is not to suggest that a delictual
claim is precluded whenever a party puts herself in a position where
there is a risk of
harm. Far from it. We expose ourselves
to risk, for example, every time we elect to travel on public roads
and that
would not excuse from liability those who culpably crash
into us. But where a transaction involves a substantial and
highly
foreseeable risk of loss, which a commercially sophisticated
and well advised plaintiff nevertheless accepts because of the
promise
of significant financial gain inextricably linked to it,
there is often no pressing need for the law of delict to intervene.
Existing
contractual relations
[62]
It
is true that in this case Country Cloud had no direct dealings, nor
any direct contractual relationship, with the Department.
But
it did contract with Tau Pride, the Department’s management
agent under the completion contract. Through
it, Country Cloud
exacted specific undertakings from the Department to protect
itself.
[61]
Although
this was not raised before this Court or either of the Courts below,
it may present an additional obstacle to the
recognition of Country
Cloud’s claim.
[63]
In
Lillicrap
,
Grosskopf AJA for the then Appellate Division held as follows in the
course of declining to recognise the plaintiff’s delictual
claim:
“
[I]n
general, contracting parties contemplate that their contract should
lay down the ambit of their reciprocal rights and obligations.
To
that end they would define, expressly or tacitly, the nature and
quality of the performance required
from
each party.
”
[62]
Contracts
may, apart from defining the parties’ respective duties,
regulate other aspects of their relationship. They
may limit or
extend liability, impose penalties or grant indemnities, or provide
special methods of settling disputes.
[63]
For this reason, courts should be wary of extending the law of delict
where there are existing contractual relationships.
This may
subvert provisions the parties considered necessary or desirable for
their own protection and introduce an unwanted
liability that “could
provide a trap for the unwary”.
[64]
[64]
On
this basis, the Supreme Court of Appeal held in
Two
Oceans Aquarium
that delictual claims do not usually “fit comfortably in a
contractual setting”.
[65]
Pertinently, the Court asked:
“
[W]hat
if the respondent had been asked, but refused to give a contractual
warranty in respect of the work that it had done . .
. ? Would
it still be held liable in delict if that work was negligently
done?”
[66]
The
Court’s implicit answer was “no”, and it refused to
recognise the plaintiff’s claim.
[67]
[65]
Where
parties take care to delineate their relationship by contractual
boundaries, the law should hesitate before scrubbing out
the lines
they have laid down by superimposing delictual liability.
[68]
That could subvert their autonomous dealings. This underscores
the broader point made by this Court in
Barkhuizen
that, within bounds, contractual autonomy claims some measure of
respect.
[69]
[66]
While Country Cloud had no direct
contractual relations with the Department, it obtained certain
undertakings from it – including
that the loan be repaid from
the remobilisation fee – through Tau Pride. But the
agreed protections did not extend
to imposing liability on Tau Pride
(which was acting as the Department’s agent for the project)
for any loss caused to Country
Cloud if the Department breached its
contract with iLima. This seems to me to reinforce the notion
that Country Cloud should
have no claim in delict.
Conclusion
[67]
All told, I am unpersuaded that
considerations of legal and public policy require liability in this
case. Country Cloud has
not established that the Department
bears any real responsibility for the loss it caused Country Cloud.
I agree with the
Supreme Court of Appeal, though for different
reasons, that the category of intentional interference with contract
does not help
Country Cloud’s claim. Unlike the Supreme
Court of Appeal, in this case I am prepared to accept that Mr
Buthelezi’s
state of mind does help distinguish Country Cloud’s
claim from others. But this is not dispositive of the
wrongfulness
enquiry, and reliance on state accountability and
Gore
offers Country Cloud little assistance. And, although my
conclusion is based on different considerations, I agree with the
Supreme Court of Appeal that Country Cloud’s non vulnerability
is highly significant and militates against recognising
its claim.
This conclusion is bolstered by the threat that a delictual award may
upset existing contractual relations.
Costs
[68]
Though
unsuccessful, Country Cloud’s conduct in litigating this matter
was not inappropriate. In accordance with the
general rule in
constitutional litigation against the state, I therefore make no
order as to costs.
[70]
Order
[69]
In the result the following order is made:
1.
The appeal is dismissed.
2.
There is no order as to costs.
For
the Applicant:
L
Morison SC, X Stylianou and O Ben zeev instructed by Ramsay
Webber Inc.
For
the Respondent:
V
Notshe SC and B Shabalala instructed by the State Attorney.
[1]
The
other three companies were Motheo (Pty) Ltd, Yikusasa (Pty) Ltd and
TTR Construction (Pty) Ltd.
[2]
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
[2012] ZAGPJHC 166;
[2012]
4
All
SA
555
(GSJ).
[3]
Country
Cloud Trading CC v MEC, Department of Infrastructure Development
[2013] ZASCA 161
;
2014 (2) SA 214
(SCA) (Supreme Court of Appeal
judgment).
[4]
In
its written submissions in this Court, Country Cloud abandoned its
claim for the R8.5 million in lost profits and focused solely
on the
R12 million loan amount. The Department also did not persist
with the defences it raised in the High Court and Supreme
Court of
Appeal based on the lawfulness of the award of the completion
contract and the lawfulness of its cancellation.
[5]
Visser
“Delict” in
Wille’s
Principles of South African Law
9
ed (Juta & Co Ltd, Cape Town 2007)
at 1098. See also Du Bois “Getting Wrongfulness Right: A
Ciceronian Attempt” in Scott and Visser (eds)
Developing
Delict: Essays in Honour of Robert Feenstra
(Juta
& Co Ltd, Cape Town 2000) at 28.
[6]
See,
for example,
Fagan
“Rethinking Wrongfulness in the Law of Delict”
(2005)
122
SALJ
90.
[7]
Loureiro
and Others v Imvula Quality Protection (Pty) Ltd
[2014] ZACC 4
;
2014 (3) SA 394
(CC);
2014 (5) BCLR 511
(CC)
(
Loureiro
)
at para 53.
[8]
Trustees
for the Time Being of Two Oceans Aquarium Trust v Kantey &
Templer (Pty) Ltd
[2005] ZASCA 109
;
2006
(3) SA 138
(SCA)
(
Two
Oceans Aquarium
)
at para 12. See also
Gouda
Boerdery BK v Transnet Ltd
[2004] ZASCA 85
;
2005 (5) SA 490
(SCA)
(
Gouda
Boerdery
)
at para 12 and
Minister
of Safety and Security v Van Duivenboden
[2002] ZASCA 79
;
2002 (6) SA 431
(SCA)
(
Van
Duivenboden
)
at para 12.
[9]
To
say that conduct is “prima facie wrongful” means that to
prove the fact of conduct alone is sufficient, absent
indications to
the contrary, to establish wrongfulness. In other words,
wrongfulness need not be positively established
by the plaintiff;
wrongfulness is presumed, but may be rebutted by the defendant.
[10]
Fourway
Haulage SA (Pty) Ltd v SA National Roads Agency Ltd
[2008]
ZASCA 134
;
2009 (2) SA 150
(SCA) (
Fourway
Haulage
)
at para 10;
Two
Oceans Aquarium
above n 8 at para 14;
Telematrix
(Pty) Ltd v Advertising Standards Authority SA
[2005]
ZASCA 73
;
2006 (1) SA 461
(SCA) (
Telematrix
)
at para 1; and Midgley and Van der Walt “Delict” in
LAWSA
second
reissue (2005) vol 8(1) at para 68. In
Lillicrap,
Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd
[1984]
ZASCA 132
;
1985 (1) SA 475
(A) (
Lillicrap
)
at
498,
Grosskopf
AJA defined pure economic loss as “loss which was caused
without the interposition of a physical lesion or injury
to a person
or corporeal property”.
[11]
Fourway
Haulage
id at para 12 and
Two
Oceans Aquarium
id at para 10.
[12]
Administrateur,
Natal v Trust Bank van Afrika Bpk
1979
(3) SA 824
(A) (
Trust
Bank
)
at 833A-B. See also Fagan “Aquilian Liability for
Negligently Caused Pure Economic Loss – Its History and
Doctrinal Accommodation”
(2014) 131
SALJ
288
at 291 and 295 in relation to negligently caused pure economic
loss.
[13]
Two
Oceans Aquarium
above n 8 at para 20, citing
Lillicrap
above n 10 at 504D-H.
[14]
See,
for example,
Telematrix
above n 10 at para 13;
BoE
Bank Ltd v Ries
[2001] ZASCA 132
;
2002 (2) SA 39
(SCA)
at
paras 12-3; and
Lillicrap
above n 10 at 501G-H.
[15]
See
[27] to [31].
[16]
See
Mukheiber
v Raath and Others
[1999]
ZASCA 39
;
1999 (3) SA 1065
(SCA) and
Trust
Bank
above
n 12.
[17]
This
was memorably put by Cardozo CJ in
Ultramares
Corporation v Touche
174
NE 441
(1931) at 444
.
See also
Fourway
Haulage
above n 10 at paras 23-4 and
Trust
Bank
above n 12 at 833A.
[18]
Loubser
and Midgley (eds)
The
Law of Delict in South Africa
2 ed (OUP, New York 2012) at 228.
[19]
See
Fourway
Haulage
above n 10 at paras 30-1;
International
Shipping Co (Pty) Ltd v Bentley
[1989] ZASCA 138
;
1990 (1) SA 680
(A) at 701F-G; and
Trust
Bank
above n 12 at 833B.
[20]
Van
Duivenboden
above n 8 at para 21.
[21]
See
generally Loubser and Midgley above n 18 at 234-7 and Neethling and
Potgieter
Law
of Delict
6
ed (LexisNexis, Durban 2010) at 306-9.
[22]
Supreme
Court of Appeal judgment above n 3 at para 26.
[23]
The
classic statement recognising such a claim in our law was
articulated thus by Van Dijkhorst J in
Atlas
Organic Fertilizers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd and Others
1981
(2) SA 173
(T) (
Pikkewyn
Ghwano
)
at
202G. See also
Woodlands
Dairy (Pty) Ltd v Parmalat SA (Pty) Ltd
2002
(2) SA 268
(E) at 279F;
Aetiology
Today
CC
t/a Somerset Schools v Van Aswegen and Another
1992
(1) SA 807
(W)
(
Aetiology
Today
)
at 820D-E and 824I-J; and
Genwest
Batteries (Pty) Ltd v Van der Heyden and Others
1991 (1) SA 727
(T) at 729A.
[24]
In
English law, from which the category derives (see its importation
in, for example,
New
Kleinfontein Company Ltd v Superintendent of Labourers
1906 TS 241
at 253-4), these circumstances constitute a standalone
delict. See
OBG
Limited and Others v
Allan
and Others; Douglas and Another and Others v
Hello!
Limited and Others;
Mainstream
Properties Limited
v
Young and Others and Another
[2007]
UKHL 21
(
OBG
v Allan
).
This is because the wrongdoer’s liability is regarded as
flowing from the fact that she incurs accessory liability
to the
primary liability of the contract-breaker for the breach. See
id at paras 3 and 44.
[25]
Pikkewyn
Ghwano
above
n 23.
[26]
Moreover,
I believe a certain level of intent greater than subjective
foresight that the breach would result – as Country
Cloud
contends the Department possesses in this case – would be
necessary to place it in this category. Little work
has been
done on this in South African law, but English law has given
consideration to what counts as intention for these purposes.
According to the House of Lords in
OBG
v Allan
above n 24 at para 42, it is necessary to “distinguish between
ends, means and consequences”. Where the breach
of the
contract is the end itself or a means to that end, this is
sufficient to establish intention for this purpose. But
the
fact that the breach is merely a foreseeable consequence, on the
other hand, is not sufficient. In this regard, Lord
Hoffmann
held as follows at paras 42-3:
“
If
someone knowingly causes a breach of contract, it does not normally
matter that it is the means by which he intends to achieve
some
further end or even that he would rather have been able to achieve
that end without causing a breach. . . . [P]eople
seldom
knowingly cause loss by unlawful means out of simple disinterested
malice. It is usually to achieve the further
end of securing
an economic advantage to themselves. . . . On the other hand,
if the breach of contract is neither an end
in itself nor a means to
an end, but merely a foreseeable consequence, then in my opinion it
cannot for this purpose be said
to have been intended.”
See
also paras 62-4 (Lord Hoffmann) and paras 164-7 (Lord Nicholls).
This distinction appears to accord with our precedent.
In
Pikkewyn Ghwano
above
n 23, the defendant’s aim was to procure business for itself
and its means was persuading the plaintiff’s employee
to
breach his contract on its behalf. See 202E-F. And in
Aetiology Today
above
n 23 the defendant’s aim was to solicit pupils for its new
school from another school, which aim it achieved through
the
teachers of the latter school, which was a breach of their
employment contracts. See 820D-E.
[27]
Dantex
Investment Holdings (Pty) Ltd v Brenner and Others
NNO
[1988]
ZASCA 122
;
1989 (1) SA 390
(A) (
Dantex
).
[28]
Lanco
Engineering CC v Aris Box Manufacturers (Pty) Ltd
1993
(4) SA 378
(D) (
Lanco
).
[29]
Above
n 27 at 395C-397B.
[30]
Above
n 28 at 389E-F.
[31]
Id
at 379E-G.
[32]
Id
at 388E.
[33]
Supreme
Court of Appeal judgment above n 3 at paras 21-3.
[34]
Id
at paras 24-5.
[35]
Id
at para 27.
[36]
Id
at paras 27-8.
[37]
Visser
above n 5 at 1129; Neethling and Potgieter above n 21 at 127; and
Loubser and Midgley above n 18 at 110-1. See also
Burchell and
Milton
Principles
of Criminal Law
3 ed (Juta and Co Ltd, Cape Town 2007) at 461-3.
[38]
Id.
[39]
See
Roux
v Hattingh
[2012] ZASCA 132
;
2012 (6) SA 428
(SCA) at para 38;
Le
Roux and Others v Dey
[2010] ZASCA 41
;
2010 (4) SA 210
(SCA) at paras 34-5;
South
African Post Office v De Lacy and Another
[2009] ZASCA 45
;
2009 (5) SA 255
(SCA) at para 5;
mCubed
International (Pty) Ltd and Another v Singer and Others NNO
[2009] ZASCA 6
;
2009 (4) SA 471
(SCA) at para 34;
Mediterranean
Shipping Co (Pty) Ltd v Tebe Trading (Pty) Ltd
[2007] ZASCA 12
;
2008 (6) SA 595
(SCA) at para 14; and
Minister
of Finance and Others v Gore NO
[2006] ZASCA 98
;
2007 (1) SA 111
(SCA) (
Gore
)
at para 86. See also
Boberg
The
Law of Delict
(Juta
& Co Ltd, Cape Town 1989) at 33.
[40]
Roux
id.
[41]
Supreme
Court of Appeal judgment above n 3 at para 25, citing Loubser and
Midgley above n 18 at 141 and 157.
[42]
Supreme
Court of Appeal judgment above n 3 at para 25. See also
Loubser and Midgley above n 18 at 157. In
Two
Oceans Aquarium
above
n 8 the Supreme Court of Appeal considered whether a claim for
delictual damages was warranted for pure economic loss caused
by the
allegedly negligent structural design and waterproofing of an
aquarium that necessitated remedial work by the plaintiff.
The
Court refused a claim, despite the fact that the danger of limitless
liability was not present, because of other considerations
that
militated against the imposition of liability. See especially
para 20. See also
Fourway
Haulage
above n 10 at para 25.
[43]
Section
195(1) provides, in relevant part:
“
Public
administration must be governed by the democratic values and
principles enshrined in the Constitution, including the following
principles:
.
. .
(f)
Public administration must be accountable.”
[44]
Section
217(1) provides:
“
When
an organ of state in the national, provincial or local sphere of
government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.”
[45]
To
these I might add section 1 of the Constitution, which reads in
relevant part:
“
The
Republic of South Africa is one, sovereign, democratic state founded
on the following values:
.
. .
(d)
Universal adult suffrage, a national common voters roll, regular
elections and a multi-party system of democratic government,
to
ensure
accountability
, responsiveness and openness.”
(Emphasis added.)
In
addition, section 41, which is entitled “Principles of
co-operative government and intergovernmental relations”,
reiterates the value of state accountability. Section 41(1)(c)
provides:
“
All
spheres of government and all organs of state within each sphere
must provide effective, transparent, accountable and coherent
government for the Republic as a whole”.
[46]
Lee
v Minister for Correctional Services
[2012] ZACC 30
;
2013 (2) SA 144
(CC);
2013 (2) BCLR 129
(CC) at para
70; Froneman J’s concurring judgment in
F
v Minister of Safety and Security and Others
[2011] ZACC 37
;
2012 (1) SA 536
(CC);
2012 (3) BCLR 244
(CC) at para
123; and
Rail
Commuters Action Group and Others v Transnet Ltd t/a Metrorail and
Others
[2004] ZACC 20
;
2005 (2) SA 359
(CC);
2005 (4) BCLR 301
(CC)
(
Metrorail
)
at para 73;
Gore
above n 39 at para 88; and
Van
Duivenboden
above n 8 at paras 21-2.
[47]
Metrorail
id at para 78 and
F
id at paras 123-4.
In
Telematrix
above n 10 at para 24, the Supreme Court of Appeal reiterated that
the value of accountability “has not evolved into a
general
liability for damages for imperfect administrative actions.”
[48]
Gore
above n 39 at para 85. This level of dishonesty and corruption
was definitive for the Supreme Court of Appeal in deciding
that the
conduct in question was wrongful. See paras 87-90.
[49]
Steenkamp
NO v Provincial Tender Board, Eastern Cape
[2006] ZACC 16; 2007 (3) SA 121 (CC); 2007 (3) BCLR 300 (CC).
[50]
Compare
Van
Duivenboden
above
n 8 at para 21.
[51]
Hutchinson
“Relational Economic Loss (or Interference with Contractual
Relations): The Last Hurdle” in Scott and Visser
(eds)
Developing
Delict: Essays in Honour of Robert Feenstra
(Juta & Co Ltd, Cape Town 2000) at 143, relying on the
dissenting judgment of La Forest J in
Canadian
National Railway Co v Norsk Pacific Steamship Co
[1992] 1 SCR 1021
; 91 DLR (4th) 289, especially at para 164.
[52]
Froneman J’s concurring judgment in
F
above n 46 at para 124. See also
Metrorail
above
n
46
at
paras 78 and 80
and
Van
Duivenboden
above
n 8 at para 22.
[53]
Cape
Empowerment Trust Ltd v Fisher Hoffman Sithole
[2013] ZASCA 16
;
2013 (5) SA 183
(SCA) (
Cape
Empowerment Trust
)
at para 28;
Delphisure
Group Insurance Brokers Cape (Pty) Ltd v Dippenaar and Others
[2010] ZASCA 85
;
2010 (5) SA 499
(SCA) at para 25;
Fourway
Haulage
above n 10 at para 25; and
Two
Oceans Aquarium
above n 8 at paras 23-4.
[54]
AB
Ventures Ltd v Siemens Ltd
[2011] ZASCA 58
;
2011 (4) SA 614
(SCA) (
AB
Ventures
)
at para 21. The term “vulnerability to risk” was
initially imported into South African law from Australian
law.
See, for example,
Woolcock
Street Investments Pty Ltd v CDG Pty Ltd
[2004]
HCA 16
;
216 CLR 515
at
para 23 and
Perre
and Others v Apand
Pty
Ltd
[1999] HCA 36
;
198 CLR 180
at para 118.
Vulnerability
to risk should be distinguished from the duty on a plaintiff to
mitigate the loss she suffers (see
Jayber
(Pty) Ltd v Miller and Others
1980 (4) SA 280
(W) at 282F-G) and the relevance of the plaintiff’s
contributory negligence in the Aquilian action (see section 1(1) of
the Apportionment of Damages Act 34 of 1956). Both are
relevant to the assessment of the amount of damages a plaintiff may
claim. By contrast, vulnerability to risk falls squarely under
the wrongfulness enquiry and is thus relevant to whether
the
plaintiff should be afforded a claim at all.
[55]
Supreme
Court of Appeal judgment above n 3 at paras 30-1.
[56]
Id
at para 32.
[57]
Clause
5 of the loan agreement reads:
“
Lupepe
hereby binds himself as surety and co-principal debtor for the
obligation of iLima Projects to repay the sum of R12 000
000 (TWELVE
MILLION RAND) plus interest at the Interest Rate as iLima Projects
is obliged to do in terms of clause 4 above.
Lupepe hereby
renounces the benefits of excussion, no value received, errors in
calculation and cession of action.”
[58]
Cape
Empowerment Trust
above n 53 at paras 28-33.
[59]
Id
at para 30.
[60]
Id
at para 33.
[61]
See
[7] and [8].
[62]
Above
n 10
at
500H-I.
[63]
Id
at 501E-F.
[64]
Id
at 501F-G.
[65]
Two
Oceans Aquarium
above n 8 at para 25.
[66]
Id.
[67]
Id.
See also
AB
Ventures
above n 54 at paras 16 and 19 where the Supreme Court of Appeal
relied on similar reasoning in arriving at the conclusion that
the
defendant’s conduct was not wrongful.
[68]
This
is the strong motif in
Lillicrap
above
n 10,
as
applied in
Two
Oceans Aquarium
above n 8.
[69]
Barkhuizen
v Napier
[2007] ZACC 5
;
2007 (5) SA 323
(CC);
2007 (7) BCLR 691
(CC) at para
57, and compare para 70.
[70]
Biowatch
Trust v Registrar Genetic, Resources and Others
[2009] ZACC 14
;
2009 (6) SA 232
(CC);
2009 (10) BCLR 1014
(CC) at
paras 21-3.