The Global Damages Review: South Africa
Under South African law, claims for damages are financial claims that are brought to compensate a plaintiff as a result of a loss-causing event that occurred because of the fault of the defendant.
A claim for damages may be instituted by a plaintiff: (1) in the event of a breach of contract; (2) in the event that the defendant has committed a delict (tort) against the plaintiff; or (3) where there has been a breach of a statute that provides for an award of damages or compensation in the event of such a breach.
Each of these causes of action require that certain elements must be proven. Because of the fact that these cases inevitably involve disputes of fact between the parties, they are always brought by way of action proceedings (as opposed to motion proceedings) and culminate in a trial where evidence is led.
When dealing with a claim for damages, it is particularly important to note the following:
- South African law does not allow a plaintiff to claim punitive damages from a defendant in a private claim, as this is seen as being contrary to public policy. A plaintiff is only entitled to the damages that he or she can prove that they have suffered.
- In the context of a delict, claims for pure economic (financial) loss, with no accompanying harm to an individual's person or property, are only available in limited circumstances.
i Contractual damages
Under the South African common law, an automatic remedy that stems from a breach of contract is a claim for damages against the breaching party, in the hands of an innocent party.
To successfully claim damages, a plaintiff must show that: (1) a contract exists or existed; (2) the contract was breached by the defendant; and (3) the plaintiff suffered damage (loss) as a result of the defendant's breach.
Under the South African law of contract, a claim for damages may also be coupled with a claim for specific performance of the contract.
In addition to the above automatic remedy, parties are also free to agree to terms that vary their common law rights, insofar as such variation is lawful. Examples of such variations that may affect a claim for damages as a result of a breach of contract are:
- Limitation clauses: Parties may agree that any claim for damages, because of a breach of contract, is limited to a specific amount (such as the amount of the contract price).
- Penalty clauses: Parties may also agree that a liquidated (pre-calculated) amount of damages or an agreed penalty amount may become payable in the event of a breach of contract.2
ii Delictual damages
The following elements must be present, to successfully claim damages as a result of a delict:
- The defendant must have committed an act, or an actionable omission;
- that is 'wrongful';3
- that caused;4
- harm,5 in the form of damage or loss,6 to the plaintiff;
- because of the fault (whether intentionally or negligently) of the defendant7.
iii Damages for 'pure economic loss' in the context of a delict
In circumstances where a plaintiff: (1) has no contractual relationship with a defendant; (2) has sustained no harm to their property or person; and (3) alleges that a defendant has, nonetheless, caused it financial loss, through a specific act, South African courts have held that such 'pure economic loss' claims are available in limited circumstances only.8
This is particularly because of that fact that the elements of a delict (as set out above) must still be satisfied when 'pure economic loss' claim is brought. It is, however, far more difficult to prove that an act or omission that causes financial loss (without any damage to person or property) is wrongful.9
Examples of 'pure economic loss' claims that have been held to be actionable include the claim of 'interference in contractual relations' and 'negligent misstatements'.10
In addition, the tests applied by South African courts to ascertain whether such a cause of action exists are generally quite strict.
iv Statutory damages
The circumstances under which a plaintiff may be awarded compensation under certain legislation is particular to the provisions of the specific statute that is being relied upon. Examples include the following:
- The Competition Act:11 Section 49D(1), read with Section 65(6) of the Competition Act entitles the Competition Tribunal to hand down a consent order12 that may contain an award for damages because of loss suffered as a result of a breach of the Competition Act;
- The Consumer Protection Act13: Section 61 states that a producer, importer, distributor or retailer of 'goods' (as defined in the Act) is liable for any harm caused by unsafe or defective goods, which do not comply with the Consumer Protection Act; and
- constitutional damages may be awarded to a plaintiff by a court, as compensation where a breach of a person's constitutional right occurs.14
Quantification of financial loss
As discussed above, a plaintiff in a civil claim is generally only entitled to claim the damages for damage that it can prove it suffered. Accordingly, the quantification of the loss is a crucial component of any claim for damages.
It is often the case that the trial in respect of the 'merits' of a claim (i.e., whether a defendant is liable) are separated from the 'quantum' portion (i.e., how much the defendant is liable for) of the claim, to save time and money in the event that the plaintiff's claim is not successful on the merits.
In other words, parties may agree, or the court/tribunal may order, that the evidence on the quantum will only be led once the plaintiff has proved that the defendant is liable, in principle.
The South African law of evidence is heavily influenced by English Law. Although there is no actual civil code, there are two pieces of legislation that (apart from the common law) are deemed to be the main source of law in this field; namely, the Criminal Procedure Act15 and the Civil Proceedings Evidence Act.16
The quantification of a plaintiff's loss generally requires the presentation and evaluation of factual oral, written or expert evidence, or both. Expert evidence (which will be dealt with in further detail below) must be distinguished from factual evidence in that it relates to the specialist knowledge of an expert in regard to a particular issue in dispute and which is required to assist the court or tribunal. On the other hand, factual evidence is evidence that proves an ascertainable fact.
Because of the fact that plaintiffs in South Africa are required to prove their allegations on a balance of probabilities, the onus rests on the plaintiff to lead evidence of the loss suffered by it. In cases where damages are capable of exact mathematical computation, the plaintiff must produce sufficient evidence to substantiate the exact amount of the damages.17 Where the plaintiff is unable to do so, the court will, in some cases, assess the damages on the evidence available.18 However, where the plaintiff has simply failed to produce all the available evidence to substantiate his or her claim, the court is likely to give the defendant absolution from the instance,19 thereby dismissing the claim.
Quantification of loss involves the presentation of both oral and written evidence and, in many cases, may also involve the leading of expert evidence, depending on the complexity of the matter. The manner in which the evidence is led and the type of evidence that is led is highly dependent on the nature of the claim and the complexity of the loss suffered.
In addition, and as has been alluded to earlier in this chapter, in the case of damages for a breach of contract, it may sometimes be the case that parties have agreed on a specific method for the calculation of damages or on a pre-agreed 'liquidated' or 'penalty' amount. In such instances, the evidence that needs to be led in order prove the quantum of the claim may be far more simple.
Although the law of evidence is an entire topic in and of itself, it is important to note that the general rule in South Africa in respect of the admissibility of factual evidence is that all facts of sufficient probative value are relevant and admissible, unless there is a specific exclusionary rule that prohibits its admissibility.20 In addition, although it may be found that evidence is admissible, the weight that will be afforded to the evidence depends on a variety of factors (including its relevance), which is in the discretion of the tribunal or court that is adjudicating the matter.21
iii Date of assessment
The date at which the plaintiff's loss will be assessed is dependent on the particular facts of each case and the cause of action.
- Delictual damages: these will usually be assessed on the date of the commission of the delict (including prospective loss).22 However, certain exceptions to this rule have been established.23
- Contractual damages: there are various possibilities regarding the date when damage is to be assessed and this is specific to each case. Examples of assessment dates include the date of the breach of the contract,24 the date when performance was due,25 the date on which it would have been reasonable for repairs or remedial work to have been done26 and the date of cancellation.27
iv Financial projections
There are numerous situations and scenarios where financial projections may be required when proving losses suffered. For example, 'prospective losses' may also be claimed from a defendant, by a plaintiff.
In essence, a 'prospective loss' is damage that may manifest itself in the future (i.e., after the date of assessment), as a result of the earlier damage-causing event.28 Examples of prospective losses that are recognised by South African courts include:29
- future expenses because of a damage-causing event (for example, future medical expenses);
- loss of future income or earning capacity;
- loss of prospective business or profit;
- loss of support; and
- loss of a chance.
A plaintiff is required to claim its prospective loss at the same time as it claims the loss that it has already suffered, because of the 'once-and-for-all' rule, which requires that all claims arising from the same cause of action are to be claimed at the same time.
As a result of the fact that the damage may not yet have arisen, the quantification of prospective damage involves speculation, as exact calculations may not possible.
Financial projections, utilised to prove aspects such as prospective losses, generally take the form of complex actuarial and accounting calculations that are presented to the court or tribunal as evidence. These financial projections must be supported by correct factual evidence and data, and expert evidence given by individuals with specialist knowledge, who can substantiate the numerical calculations. A court or tribunal may reject such calculations if it is not satisfied with the investigations underpinning it.30
When estimating prospective loss, it is not necessary for a plaintiff to prove that there is a possibility of more than 50 per cent that it will sustain damage in the future. If it can be shown that there is some chance that damage may be suffered, a South African court will make certain assumptions to award damages that will cater for the possibility that some damage may be suffered.
For example, where liability has been established and the plaintiff proves on a balance of probabilities that there is a 40 per cent chance that he or she may suffer damage in the amount of 1,000 South Africa rand in future, the court will usually make an award of damages calculated on an equitable basis as follows: 40 per cent × 1,000 rand = 400.14 rand.31 Although this assumption is not particularly accurate or ideal, it has been described as a 'necessary evil' flowing from the once-and-for-all rule32.
In addition to the above, when awarding damages for future loss, courts usually make provision for 'contingencies', which are assumed. These have been described as 'hazards that normally beset the lives and circumstances of ordinary people',33 which must also be taken into account when calculating the future loss that will possibly be suffered by the plaintiff. Contingencies include any other possible relevant future event that (1) might otherwise have caused the damage or a part thereof; or (2) may otherwise influence the extent of the plaintiff's damage.
In other words, contingencies usually reduce (but sometimes increase)34 the amount of damages to be awarded to the plaintiff. This is because the court makes provision for the fact that the prospective loss (which is possible at the time of assessment of damage) might, in any event, possibly have occurred independently of the delict or the breach of contract in question.35
Provision for contingencies is a matter for the discretion of the court, who will look at what is reasonable and fair.36 South African courts have held that direct evidence on this issue cannot be given by an actuary, because an actuary is not qualified to give evidence as to the hazards and contingencies applicable to any particular type of work.37
vi Discount rates
After damages for prospective patrimonial loss have been calculated, a court will reduce these using a 'rate of discount'.38
The 'rate of discount' is utilised to counter the benefit obtained by the plaintiff39 as a result of the fact that it has received compensation in advance of the date upon which the loss is expected to arise40 (particularly in respect of loss of earning capacities and loss of future support). This is calculated by determining: (1) the 'present values' of the future benefits and losses; (2) the rate of return at which it is assumed that the plaintiff would have invested the lump sum; and (3) the likely future rate of inflation. The calculation is performed by actuaries who rely on, among other things, tables of capital values41 and annuity and discount tables.42
Usually, damages are discounted to the date when the delict occurred; however, as far as loss of earning capacity (future loss of income) and future loss of support are concerned, damages are discounted only to the date of trial and not the date when the delict occurred.43
vii Currency conversion
In South Africa, it is permissible for a judgment to be expressed in foreign currency.44 It has been held that the currency in which the loss is suffered is the proper currency in which the award is to be expressed.
In circumstances where the damages are to be determined in a foreign currency, but the plaintiff wishes the judgment to be made in South African currency, the rate of exchange must be proved by the plaintiff45 and is not a matter of judicial notice. The appropriate date at which the exchange rate must be calculated is dependent on the facts of each matter and whether the damages arose as a result of a delict or a breach of contract.46 In some instances, parties may even agree to the rate of exchange that is to be utilised.
viii Interest on damages
South African courts generally award interest on top of any award that they might make in respect of damages. The date, and rate, utilised to calculate the amount of interest owed is dependent on the facts of each case.
Rate of interest
The Prescribed Rate of Interest Act47 is applicable when determining what interest rate should be used in the following circumstances:
- where a debt bears interest and the interest rate is not governed by any other law, agreement, trade or custom;
- when calculating interest on an unliquidated debt; and
- when calculating the interest due on an unpaid judgment debt. This includes the sum awarded under a judgment, including an order as to costs.
In particular, the Act states that the Minister of Justice, in consultation with the Minister of Finance, shall prescribe a rate of interest that is applicable in the above scenarios, by notice in the Government Gazette.
The current prescribed rate is linked to the South African repo rate plus 3.5 per cent. As of 1 May 2020, the prescribed interest rate is, therefore, 8.75 per cent.
In respect of contractual damages, parties may also have agreed their own interest rates. In such circumstances, South African courts will give effect to the agreement between the parties.
Unless expressly agreed by the parties to a contract, interest will be payable calculated as simple interest and not as compound interest.48
Date at which interest is calculated
In terms of contractual damages, parties are free to agree when interest commences to run in their contract, and this will be given effect to by a South African court. In the absence of an agreement, the Prescribed Rate of Interest Act is applicable.
In this regard, the Act states that (1) interest on unliquidated debts (which includes a claim for unliquidated damages) shall commence to run from the date on which payment of the debt is claimed by service on the debtor of a demand or a summons, whichever date is earlier;49 and (2) judgment debt (including costs) shall bear interest from the day on which such judgment debt is payable.50
As a result (in the absence of an agreement to the contrary), a plaintiff's claim for unliquidated damages will accumulate interest from the date of demand, until such time as the judgment debt is paid by the defendant. The amount payable for any costs awarded will accumulate interest from the date of judgment.
This may entail, particularly in instances where another interest rate has been agreed in respect of the damages, that a different interest rate will apply after the judgment has been granted.
The general rule in South Africa is that, in the absence of special circumstances, a successful litigant is entitled to his or her costs.51 This rule applies in respect of an award of damages as well.
It should be noted, however, that in court proceedings, the 'costs' awarded to a successful litigant are, very rarely, the actual costs incurred by the litigant in prosecuting, or defending, the claim.
In this regard, unless it has been otherwise agreed or unless there are circumstances that warrant a punitive award of costs against the unsuccessful party, costs will be awarded on the 'party-and-party' tariff (which is published for each court). This tariff limits the amount that a successful party can claim in respect of their legal expenditure, to the amounts stipulated in the tariff, regardless of what the successful party actually paid.
Despite the general rule, it is not always the case that the successful party is entitled to an award of costs and that an unsuccessful party should pay them. In this regard, examples of some of the factors that are considered when a court is determining what the appropriate costs order should be, are:
- if a plaintiff has advanced a grossly extravagant and unreasonable claim for damages, and is only awarded a small portion thereof, they may still be mulcted in costs, despite their success;52
- the importance of the rights involved;53
- the public interest;54
- the complexity of the matter;55 and
- the duration of the trial.56
When calculating and assessing the extent of past and future loss of earning capacity, the tax that would have been paid by the plaintiff is also deducted from the amount of damages awarded to the plaintiff,57 provided that there is sufficient certainty as to the extent of the tax.58 The onus of proving the size of the allowance for tax is on the plaintiff. If the plaintiff is unable to do so, the court may reduce the damages awarded to the plaintiff by a percentage that it deems appropriate.59
The stage of the calculation at which tax is taken into account is important, as it may substantially affect the quantum that is ultimately awarded to the plaintiff and could amount to double taxation. South African courts have previously (somewhat inconsistently) followed the English approach that was set out in the case of British Transport Commission v. Gourley.60 However, in 2012 the court in the case of Barclay v. Road Accident Fund61 expressly declined to do so and the position is now further divided.
In South Africa, either income tax or capital gains tax is levied on receipts of sums of money by individuals, depending on whether the amount is of a revenue or capital nature. It is therefore also important, for purposes of calculating tax on the damages awarded, to draw a distinction between loss of earnings claims as opposed to claims for a loss of earning capacity. Because of the fact that an award of damages takes on the character of the loss in respect of which it was paid, the former is an income and the latter is of a capital nature. As such, it is essential that this be borne in mind when calculating the taxation amount to be deducted. Income tax should not be deducted from an amount that is 'capital' in nature.62
An expert is utilised in circumstances where the court does not have the necessary special knowledge and expertise to make a decision on a particular issue. An expert is therefore utilised in circumstances where he or she is better qualified to express an informed opinion on an issue that falls within his or her expertise.
For this reason, an expert must have the necessary skill, training or experience to enable him or her to materially assist the court in reaching a conclusion on a particular issue, in order for his or her evidence to be admissible.63
ii The role of expert evidence in calculation of damages
Experts are most frequently utilised, in damages claims, to quantify the loss suffered by the plaintiff. As has been set out above, and particularly in a situation where prospective losses are being claimed, this usually involves highly complex calculations that are undertaken and performed by actuaries and other experts.
iii The court's role excluding and managing expert evidence
Expert witnesses are utilised to assist the court, but a court is not bound by the opinion of the experts.64 The court always remains the sole arbiter of fact, and all expert evidence must be weighed up, accepted or rejected by the court in the same way as any other evidence.65
South African courts have cautioned that 'opinion evidence must not usurp the function of the court. The witness is not permitted to give opinion on the legal or the general merits of the case. The evidence of the opinion of the expert should not be proffered on the ultimate issue.'
It is in the court's discretion to determine whether an expert's opinion should be relied on and, if so, to determine what weight should be afforded to it.
It has been held that, even in situations where a proper conclusion cannot be reached without the assistance of an expert because of the technical nature of the evidence, a court is still obliged to make an evaluation as to whether it is safe to accept the opinion.66
Admissibility of expert evidence
The opinion of a witness ordinarily constitutes inadmissible evidence under South African law. However, the exception to the rule is that the opinion of an expert will be allowed in certain circumstances; namely, where the expert has specific knowledge in a particular field that is usually outside the knowledge or experience of the court.
It has been held that it is not the mere opinion of the witness that is decisive, but his or her ability to satisfy the court that, because of their special skill, training or experience, the reasons for the opinions he or she expresses are acceptable.67
From a substantive point of view, there is no closed list of situations where expert evidence would be admissible, and this is dependent on the facts of each case. The general point of departure, however, is:
- whether the court is incapable of forming an opinion without the assistance of the expert; and
- whether the expert's evidence is relevant and reliable, in that it will assist the court in (1) understanding a scientific or technical issue or (2) establishing a fact by using inferential, as opposed to speculative reasoning (i.e., if the court is able to come to its own conclusions from the proven facts, the experts opinion should be disallowed).68
South African courts have held that the admission of expert evidence should be guarded, as it is open to abuse.69 By way of example, the South African Supreme Court of Appeal has disapproved of the practice of allowing expert witnesses to testify as to the meaning of a contract.70
There are, however, also instances where expert evidence that is useful (but not necessarily essential) may also be admitted. Whether or not the expert evidence is admissible is therefore at the discretion of the court.71
Procedurally, admissible expert evidence may not be led in a South African court unless the relevant provisions of the High Court or Magistrates Court Rules (depending on which court the trial has been instituted in) are complied with.
In this regard, both sets of Rules state that no person shall, save with the leave of the court or the consent of all parties, be entitled to call an expert witness unless:
- notice of an intention to call an expert witness has been given within a certain amount of days from the close of pleadings (this time period depends on whether the plaintiff or defendant intends to call the expert); and
- a summary of the expert's opinion and reasons therefor have been given, within a certain amount of days from the close of pleadings (this time period also depends on whether the plaintiff or defendant intends to call the expert).
Practically speaking, the different divisions of the High Court also have their own independent procedural practises pertaining to the calling of expert witnesses, which differ throughout the country.
Evaluation of expert evidence
It is an established principle that a South African court is not bound by, nor obliged to accept the evidence of an expert witness and it is require to actively evaluate the expert's evidence 'in the contextual matrix of the case with which [the Court] is seized'.72 This is the case whether or not there are conflicting expert opinions that have been provided.
Certain principles pertaining to the manner in which our courts will evaluate expert evidence have been formulated over time through various decisions that have been handed down by the South African courts. Examples of these principles include the following:
- Reasonableness of the expert evidence. When a court analyses the evidence of conflicting factual witnesses, it is required to make a determination on the reasonableness73 of the expert's evidence. A trial judge will therefore determine to what extent the opinions advanced by the experts are founded on logical reasoning and how the competing sets of evidence stand in relation to one another, viewed in the light of the probabilities.74
- Independence of the expert. An expert is required to assist the court and is not supposed to be the advocate of the party who has briefed him or her. It has recently been held that the evidence of an expert witness is of little value where he or she is biased. This will be taken into account when it comes to assessing his or her credibility.75
- Bald statements by experts. An expert's bald statement of his or her opinion is not of any real assistance to the court. In this regard, the expert must inform the court of all facts and assumptions upon which they base their opinions. This is because of the fact that the court can only properly evaluate the opinion if the court is made aware of the process of reasoning that led to the conclusion, including the premises from which the reasoning ensues.76
- Logical reasoning of the expert. The expert's evidence must be verifiable and capable of being tested. The expert, in particular, must state the grounds upon which he or she bases his opinion, in order for the court to test its correctness.77 'Logical reasoning' has been held to be extremely important when evaluating expert evidence.78
- Facts relied upon by the expert. Because of the fact that the expert's opinion is generally based on certain facts, it is essential for the court to know what facts have been relied on by the expert as the basis of the opinion. The court must therefore be made aware of the expert's assumed premises. Bald statements of opinion generally have little to no value.79 In addition, it has been held that a court should always bear in mind the fact that an expert has to rely on calculations that are based on imperfect human observation.80
iv Independence of experts
Although an expert is hired by a party to prove (or refute) the losses that have been suffered by the plaintiff, an expert witness is, nonetheless, required to provide the court with an unbiased and objective opinion.
South African courts have been at pains to stress that an expert must not assume the role of the advocate for the party that it is representing.81 In fact, the independence of the expert will affect the manner in which the court views and evaluates that expert's evidence.
Recently, the Supreme Court of Appeal, when determining how to approach conflicting expert opinions, held the following:
It is well established that an expert is required to assist the court, not the party for whom he or she testifies. Objectivity is the central prerequisite for his or her opinions. In assessing an expert's credibility an appellate court can test his or her underlying reasoning and is in no worse a position than a trial court in that respect. Diemont JA put it thus in Stock v Stock: 'An expert . . . must be made to understand that he is there to assist the court. If he is to be helpful he must be neutral. The evidence of such a witness is of little value where he, or she, is partisan and consistently asserts the cause of the party who calls him. I may add that when it comes to assessing the credibility of such a witness, this court can test his reasoning and is accordingly to that extent in as good a position as the trial court was.'82
v Challenging experts' credentials
From a practical point of view, the experts' expertise is generally challenged during the trial.
For the reasons set out above, an expert must satisfy the court that he or she has the requisite skill, training and experience to assist it in determining the disputed issue in order for his or her evidence to be admissible. This has been held to be the duty of the expert.83
As a result, a challenge to the credentials of the expert will generally constitute a challenge to the fundamental question as to whether the expert's evidence is admissible.
However, the aspect of what constitutes an 'adequate' qualification under South African law is a flexible one that is not only limited to practical experience or theoretical training, but also dependent on the facts of each matter. The expert's qualifications are measured against the evidence that she or he has to give, to determine whether they are sufficient to deem his or her evidence 'relevant'.84
vi Novel science and methods
As has been set out above, one of the important factors that is taken into account when evaluating expert evidence is that the evidence must be capable of being tested and must be verifiable. Although this question has not been dealt with extensively by South African courts, there is some case law that suggests that in order for a theory or an explanation to be accepted as scientific, it must be falsifiable.85
Our courts have previously quoted the dicta in the US case of Daubert v. Merril Dow Pharmaceuticals Inc86 (although acknowledging its controversial nature), which stated that:
[o]rdinarily a key question to be answered in determining whether a theory or technique is scientific knowledge that will assist the trier of fact will be whether it can be (and has been) tested . . . Scientific methodology is what distinguishes science from other fields of human enquiry.
In addition, a court will usually look at whether the expert's methods and reasoning enjoy general acceptance in the relevant scientific community.
As such, the manner in which novel science and methods will be treated in a particular case will be dependent on (1) whether it can be shown to be admissible (as described above) and (2) if it is held to be admissible, it will still need to be evaluated. In this regard, the weight given to the evidence will likely be less in circumstances where the method or science is so new that it cannot be tested.
vii Oral and written submissions
South Africa follows an accusatorial-adversarial system of law. In such a system, it is generally the case that a party is not entitled to prior knowledge of the evidence that is to be led by its opponent at the trial. However, the exception to this general rule is expert evidence.
The rules of the South African High Court proceedings envisage that a party wishing to lead expert evidence must, prior to the hearing, deliver a notice of his or her intention to do so.87 In addition, the Rule requires the party to file a 'summary' of the expert's opinion and his or her reasons therefor. The reason for this departure is that, because of the specialised nature of the expert evidence, fairness requires that the opposing party must be given an opportunity to familiarise themselves with the opinion, to properly prepare for trial, prepare evidence in rebuttal and conduct an informed cross-examination of the expert witness.
At the trial, after the expert report has been filed, the expert is also called to lead his or her oral evidence and in order for the other side to cross-examine him or her. The South African Supreme Court of Appeal has previously held that an expert may be tendered for cross-examination upon his or her written report alone, without additional oral examination in chief, or after only limited questioning.88 As such, the report of an expert witness can be read as the evidence in chief, subject only to supplementary questions necessary for explanation or elaboration of the report. Ultimately, it remains for the court to evaluate the testimony that is presented as expert evidence.
Recent case law
i Quasi-judicial proceedings between Families of Mental Health Care Users Affected by the Gauteng Mental Marathon Project v. National Minister of Health of the Republic of South Africa and Others (handed down in March 2018)
In September 2015, the Gauteng Health Department decided to terminate a long-standing contract with the Life Esidimeni Care Centre. The Esidimeni Care Centre was an establishment that housed mental healthcare patients. As a result, a mass transfer of over 1,400 mental healthcare patients took place. The individuals in question were transferred to non-governmental organisations (NGOs). The majority of these organisations operated with invalid licences and lacked the experience and capacity to care for these patients. As a result, 1,418 mental healthcare users were exposed to trauma and morbidity, while 144 patients died. The state was unable to confirm the whereabouts of another 44 patients. The matter was referred for determination to a public arbitration.
Section 38 of the Constitution of the Republic of South Africa 1996 provides that a court is empowered to award 'appropriate relief' where a right in the Bill of Rights has been violated. South African courts have accepted that this relief may include a form of compensatory damages known as 'constitutional damages'.
In this case, the claimants alleged that there had been severe infringements of the constitutional rights of the deceased patients, the survivors and the families of the patients. Their claims for damages were based on the breaches of constitutional law rights by the government of South Africa (i.e., they were constitutional damages); however, they had already been awarded common law damages for pain and suffering.
The government argued that once someone has been compensated under the common law, they may not rely on the Constitution to obtain additional compensation.
The arbitrator held that Section 38 of the Constitution provides that a person whose rights have been infringed or threatened may approach the Constitutional Court for an appropriate remedy, but this does not mean that a party is barred from relying on the Constitution where the breaches defy common law formulation.
The arbitrator found that several constitutional rights had been violated by the state's actions and that the claims for compensation due to the 'invasive and pervasive violation of constitutional guarantees by the government cannot readily be couched in common law terms'. In addition, it was held that the only way to vindicate the claimants' constitutional rights was to grant an order awarding constitutional damages over and above the amount already awarded for emotional shock and trauma.
The current matter is of relevance owing to the fact that, while South African courts generally accept that punitive damages are not recognised under South African law, constitutional damages (which are similar to punitive damages to an extent) have been deemed to constitute appropriate relief as envisaged under the Constitution.
In this arbitration, the amounts claimed for emotional shock and trauma far exceeded the limit that one can claim under the common law, and as a result the arbitrator awarded constitutional damages to compensate for the deficit. As a result, the arbitrator awarded constitutional damages over and above the amount already awarded for emotional shock and trauma under the common law. This had not been done in the past.
In essence, it was held that a party is not barred from relying on the Constitution where the breaches that have been committed defy common law formulation.
However, owing to the fact that the proceedings were not formal court proceedings, the award has not set a binding precedent. With that being said, the arbitrator in this matter was the former Deputy Chief Justice of the Constitutional Court of South Africa. Considering this fact and that the award was handed down, publicly, in 2018, it is anticipated that courts in future may refer to this arbitration in support of awarding constitutional damages as appropriate relief, when the circumstances warrant.
ii Komape v Minister of Basic Education (754/2018 and 1051/2018)  ZASCA 19
Michael Komape, a five-year-old child, drowned in a pit toilet on his school's premises in 2014. The Komape family sought constitutional damages, a delictual claim of damages for emotional trauma and shock, and other relief, such as medical expenses, against the Department of Basic Education in South Africa.
The claimants contended that the nature of the violations, as well as the failure of the government to provide proper sanitation facilities in rural schools, meant that an award for constitutional damages was the most appropriate way to vindicate the violation of constitutional rights.
The court found that many constitutional rights had been violated but that a claim for constitutional damages was punitive (which is not allowed under South African law) and would result in over-compensation of the Komape family. Under South African law, the aim of a claim for damages is to compensate for the loss suffered and not to enrich a party. The court held that the punitive nature of such an award in itself would not serve to enforce any of the violated rights. The award of constitutional damages, as a result, would not have served the interests of society, nor would it be a deterrent that would prevent the future violation of rights. The court, instead, decided on an award of a 'structural interdict'. In this regard the Minister of Education and the Limpopo Department of Education was ordered to supply and install toilets at each rural school currently equipped with pit latrines.
The High Court also dismissed the Komape's family claim for emotional shock and trauma and awarded 6,000 rand to each of the Komape's siblings for medical expenses.
The matter was appealed to the Supreme Court of Appeal where the Court held that there was sufficient evidence to prove that the Komape's family had suffered emotional shock and trauma which resulted in psychiatric injury. However, the Court held that damages were provided for under the common law and as a result there was no need to develop the common law. An award of 1.4 million rand was made in respect of the damage suffered by the Komape family for emotional shock, including grief. Lastly, the Court did not award constitutional damages finding that the approach taken by the Constitutional Court in Fose v Minister of Safety and Security  ZACC 6; 1997 (7) BCLR 851; 1997 (3) SA 786 had to be followed.
Constitutional damages have previously been awarded in South Africa, for example in the case of President of the Republic of South Africa and Another v. Modderklip Boerdery (Pty) Ltd 2005 (5) SA 3 (CC), where the court awarded damages to the owners of land due to an infringement of their constitutional right to property in circumstances where unlawful occupiers had refused to vacate the premises.
The Komape matter differs, however, in that the family has claimed constitutional damages in circumstances where there was an infringement of a constitutional right, but no direct financial loss was suffered. However, the Supreme Court of Appeal on appeal did not award constitutional damages in this instance.
iii Masstores (Pty) Limited v. Pick n Pay Retailers (Pty) Limited (CCT242/15)  ZACC 42; 2017 (1) SA 613 (CC); 2017 (2) BCLR 152 (CC)
The matter concerned an alleged interference by Masstores with the trade of Pick n Pay, owing to the fact that Masstores was expanding its store, offering to include the sale of perishable and non-perishable groceries and foodstuffs. Pick n Pay sought to protect an exclusive contractual right to trade as a supermarket in a shopping centre, granted to Pick n Pay by Hyprop (the lessor and owner of the shopping centre) in a lease agreement.
Pick n Pay sought relief against Masstores under the delict of 'interference with contractual relations'.
The decision is relevant insofar as it pertains to the manner in which South African courts approach the cause of action known as 'damages due to interference in contractual relations'.
The High Court in this matter had previously interdicted Masstores from operating the supermarket in breach of its own lease agreement with Hyprop. The Supreme Court of Appeal confirmed this finding by relying on the Constitutional Court judgment of Country Cloud Trading CC v. MEC, Department of Infrastructure Development, Gauteng (CCT 185/13)  ZACC 28 as authority that this kind of prevention of contractual performance constituted wrongful conduct, actionable in delict under South African law.
However, on appeal, the majority of the Constitutional Court held otherwise.
In particular, the Constitutional Court stated that there is no authority for the argument that the deprivation of contractual rights (in delictual claims for interference with contractual relations) is prima facie unlawful. The Constitutional Court also clarified that the Country Cloud case did not lay down that, in inducement cases, the wrongfulness inquiry need not be concerned with the duty not to cause harm or the infringement of rights. It confirmed that the degree or intensity of fault may indeed play an important role in the wrongfulness inquiry in these kinds of claims.
In addition, the Constitutional Court held that there is no legal duty on third parties not to infringe contractually derived exclusive rights to trade, because exclusive trading rights make the competitive field uneven.
This matter involved the assessment of wrongfulness in delict, which raises matters of policy, infused by constitutional values. The court in this case made it clear that there is no general right not to be caused pure economic loss and there is no legal duty on third parties not to infringe contractually derived exclusive rights to trade. However, this does not mean that unlawful competition cases are not actionable in South Africa. In such an instance, South African courts have recognised that the loss may lie in the infringement of a right to goodwill or in the legal duty.
iv Children's Resource Centre Trust and Others v. Pioneer Food (Pty) Ltd and Others (050/2012)
An application was brought by a number of NGOs and five individual consumers for the certification of a class action against three of the major bread producers arising out of anticompetitive conduct which had increased the price of bread. The class action proposed was to be brought 'on behalf of the consumers for compensation and related relief' as a result of the anticompetitive conduct.
It should be noted that a class action had never been brought before in South Africa and there is no legislation that allows for such proceedings. The question before the Supreme Court of Appeal was therefore whether a class action could be brought at all and, if so, what procedural requirements needed to be satisfied before it was instituted.
The Supreme Court of Appeal held that when it comes to defining the 'class' in the class action, it is not necessary to identify the individual members of the class, 'but that the class must be defined with sufficient precision that a particular individual's membership can be objectively determined by examining their situation in the light of the class definition'. Further, foreign members of a class will be bound to the proceedings if they are regarded as members of the class in accordance with South African law.
The Supreme Court of Appeal provided elements to guide a court in determining a certification application, which are as follows:
- the existence of a class identifiable by objective criteria;
- there is a cause of action raising a triable issue;
- the right to relief depends upon the determination of issues of fact, or law, or both, common to all members of the class;
- the relief sought, or damages claimed, flow from the cause of action and are ascertainable and capable of determination;
- where the claim is for damages, there is an appropriate procedure for allocating the damages to the members of the class;
- the proposed representative is suitable and is permitted to conduct the action and represent the class; and
- whether, given the composition of the class and the nature of the proposed action, a class action is the most appropriate means of determining the claims of the class members.
Since class actions in South Africa are not regulated by statute, as such, this decision is vital in that it provides a common law mechanism by which groups of individuals can bring class action proceedings. The Court made it clear that, procedurally, a class action must be certified by the court, before summons can be issued – a preliminary application must be made to court for the authority to do so and the court in the certification application will give directions as to the procedure of the class action.
It is important to note that a class action does not constitute a separate cause of action. Therefore, the elements of a delict, as discussed above, will need to be proved separately once the class has been certified.
v De Bruyn v Steinhoff International Holdings N.V. and Others (29290/2018)  ZAGPJHC 145
The Applicant in this matter, Ms De Bruyn, brought an application to the High Court seeking authorisation to bring a class action (in terms of which she would represent three classes of shareholders) against numerous defendants, including a number of directors of Steinhoff International Holdings. In particular, the plaintiffs wished to sue the defendants in order to reclaim losses which they had suffered as a result of alleged misstatements by the defendants pertaining to the business of Steinhoff International Holdings.
Such an application in South Africa precedes the actual class action and is referred to as an application for certification of the class.
The Court referred to the case of Children's Resource Centre Trust and Others v. Pioneer Food (Pty) Ltd and Others 2013 (2) SA 213 (SCA), where the Supreme Court of Appeal set out the factors to be considered when deciding whether a class action should be certified. One of the factors listed in the above judgment was that the cause of action should raise a triable issue.
The Court in this matter held that in determining whether a class action raises a triable issue it should be asked 'whether the cause of action proposed is tenable in law'. In applying this question to the facts at hand, the Court asked whether the misstatements that were alleged to have issued from the defendants constituted wrongful conduct as against the shareholders, which would give rise to a claim for delictual damages on behalf of the shareholders.
The Court held that the matter was not a triable issue based on the judgment of Foss v. Hardbottle  EngR 478. The essence of that ruling was that the shareholders had suffered losses because the company was wronged by its directors, therefore it was only the company that was able to sue and not the shareholders. As such, the shareholders did not have a valid cause of action against the defendants and the class could not be certified.
This application was the first shareholder class action brought for certification before the South African courts relating to directors' liability towards shareholders in respect of damages. It also sets out the test for what is considered a 'triable issue' and, in particular, enumerates that shareholders do not have a damages claim against directors in circumstances where they may have caused the company to suffer harm (which subsequently leads to a shareholder loss).
1 Jonathan Ripley-Evans is a director and Fiorella Noriega Del Valle is a senior associate at Herbert Smith Freehills.
2 It should be noted, however, that the Conventional Penalties Act 15 of 1962 (1) does not allow a plaintiff to recover both the penalty amount and common law damages and (2) the penalty must be in proportion to the prejudice suffered by the innocent party as a result of the breach.
3 A positive 'act' that causes harm is wrongful (Country Cloud Trading CC v. Member of the Executive Council, Department of Infrastructure Development, Gauteng 2014 (12) BCLR 1397 (CC)). However, in order for an omission to be wrongful, a legal duty to have acted must be shown to exist on the part of the defendant (Minister of Safety and Security v. Van Duivenboden 2002 (6) SA 431 (SCA)).
4 A 'causal link' must exist between the act or omission and the harm suffered (Oppelt v. Head: Health, Department of Health, Provincial Administration: Western Cape 2015 (12) BCLR 1471 (CC)).
5 Oppelt v. Head: Health, Department of Health, Provincial Administration: Western Cape 2015 (12) BCLR 1471 (CC) Paragraph 34.
6 Jowell v. Bramwell-Jones and others  2 All SA 161 (A) 169.
7 Country Cloud Trading CC v. Member of the Executive Council, Department of Infrastructure Development, Gauteng 2014 (12) BCLR 1397 (CC) Paragraph 40. See Kruger v. Coetzee 1966 (2) SA 428 A 430 as to the test for negligence.
8 Pilkington Brothers (SA) (Pty) Ltd v. Lillicrap, Wassenaar and Partners  3 All SA 111 (W) 116. Country Cloud Trading CC v. MEC, Department of Infrastructure Development 2015 (1) SA 1 (CC) A Paragraph 22.
9 Doug Parsons Property Investments (Pty) Ltd v. Erasmus De Klerk Inc 2015 (5) SA 344 (GJ) Paragraph 20; Home Talk Developments (Pty) Ltd and Others v. Ekurhuleni Metropolitan Municipality 2018 (1) SA 391 (SCA).
10 Country Cloud Trading CC v. Member of the Executive Council, Department of Infrastructure Development, Gauteng 2014 (12) BCLR 1397 (CC) Paragraph 24.
11 The Competition Act 89 of 1998.
12 Section 49D of the Competition Act.
13 Consumer Protection Act 68 of 2006.
14 The requirements for a claim for Constitutional damages were dealt with in Minister of Police v. Mboweni and another  4 All SA 452 (SCA), and Lee v. Minister for Correctional Services (Treatment Action Campaign and Others As Amici Curiae) 2013 (2) BCLR 129 (CC).
15 51 of 1977.
16 25 of 1965.
17 Versfeld v. SA Citrus Farms Ltd 1930 AD 452.
18 The Law of South Africa, Volume 14.1- Third Edition, Damages: Practice and Procedure: Proof.
20 The Law of South Africa, Volume 18, Third Edition, Evidence: Admissibility.
21 The Law of South Africa, Volume 18, Third Edition, Evidence: Admissibility: Relevance.
22 General Accident Insurance Co SA Ltd v. Summers; Southern Versekeringsassosiasie Bpk v Carstens; General Accident Insurance Co SA Ltd v Nhlumayo 1987 2 All SA 345 (A).
23 For example in General Accident Insurance Co SA Ltd v. Summers; Southern Versekeringsassosiasie Bpk v. Carstens; General Accident Insurance Co SA Ltd v. Nhlumayo supra 613C–E, the court viewed loss of income caused by bodily injuries (loss of earning capacity) as damage that continues into the future, well after the time of the commission of a delict. This theory prompted the court to discount damages for loss of earning capacity and loss of support only to the date of trial and not to the date of delict. Also, in Drake Flemmer & Orsmond Inc v. Gajjar 2018 1 All SA 344 (SCA); 2018 3 SA 353 (SCA) par 68, where a claim against a firm of attorneys for negligent under-settlement of a damages claim against the Road Accident Fund was negligently allowed by a second firm of attorneys to prescribe (the proper date for the determination of damages was held to be the date of the notional trial against the Road Accident Fund).
24 Mostert v. Old Mutual Life Assurance Co (SA) Ltd 2001 4 All SA 250 (SCA).
25 Novick v. Benjamin 1972 2 All SA 510 (A).
26 Rens v. Coltman 1996 1 SA 452 (A) (here, the plaintiff was held not to have been acting reasonably in mitigating his damages).
27 Culverwell v. Brown 1990 1 All SA 253 (A) (this is relevant in the case of repudiation).
28 Visser & Potgieter Law of Damages 129.
29 The Law of South Africa, Volume 14(1), Third Edition, Damages: Assessment of Damage: Prospective Loss.
30 Commissioner for the South African Revenue Service v. Stepney Investments (Pty) Ltd  1 All SA 1 (SCA) Paragraph 28.
31 See Burger v. Union National South British Insurance Co 1975 3 All SA 647 (W); 1975 4 SA 72 (W) 75D–G; Blyth v. Van den Heever 1980 1 All SA 148 (A); 1980 1 SA 191 (A) 225F–226B (confirming the approach in the Burger case).
32 The Law of South Africa, volume 14(1) Third Edition, Damages: Assessment of Damage: Prospective Loss.
33 AA Mutual Insurance Association Ltd v. Van Jaarsveld (1) 1974 2 QOD 360 (A). See also Sigournay v. Gillbanks 1960 2 All SA 319 (A); ('the ordinary accidents and chances of life'); Southern Insurance Association Ltd v. Bailey 1984 1 All SA 360 (A) ('the fortunes of life'); Road Accident Fund v. Guedes 2006 5 SA 583 (SCA) ('the vicissitudes of life, such as illness, unemployment, life expectancy, early retirement and other unforeseen factors').
34 Southern Insurance Association Ltd v. Bailey 1984 1 All SA 360 (A) 117B–D.
35 The Law of South Africa, volume 14(1) Third Edition, Damages: Assessment of Damage: Prospective Loss.
36 Southern Insurance Association Ltd v. Bailey 1984 1 All SA 360 (A).
37 Shield Insurance Co Ltd v. Hall 1976 4 All SA 374 (A); 1976 4 SA 431 (A) 444F.
38 See, generally, Koch, Lost Income 40, pp 76–89.
39 The Law of South Africa, volume 14(1) Third Edition, Damages: Assessment of Damage: Prospective Loss.
40 SA Eagle Insurance Co Ltd v. Hartley 1990 2 All SA 616 (A).
41 Corbett & Buchanan The Quantum of Damages in Bodily and Fatal Injury Cases: General Principles 3 ed (1985) pp 106–131.
42 ibid., pp 132–141.
43 General Accident Insurance Co SA Ltd v. Summers; Southern Versekeringsassosiasie Bpk v. Carstens; General Accident Insurance Co SA Ltd v. Nhlumayo 1987 2 All SA 345 (A).
44 Standard Permanent Bank of Canada v. Nedperm Bank Ltd 1994 (4) SA 747 (A) at 774C–775A. See also Murata Machinery Ltd v. Capelon Yarns (Pty) Ltd 1986 (4) SA 671 (C); Elgen Brown and Hamer Ltd v. Dampskibsselskabet Torm Ltd 1988 (4) SA 671 (N); Barclays Bank of Swaziland Ltd v. Mnyeki 1992 (3) SA 425 (W).
45 Barclays Bank of Swaziland v. Mnyeki 1992 (3) SA 425 (W).
46 In Voest Alpine Intertrading Gesellschaft MBH v. Burwill and Co SA (Pty) Ltd 1985 (2) SA 149 (W), for example, the court held that the rate of exchange should be assessed on the date when the breach of contract occurred.
47 Act 55 of 1975.
48 Euro Blitz 21 (Pty) Ltd and another v. Secena Aircraft Investments CC  JOL 32990 (SCA).
49 Section 2A(2)(a) of the Prescribed Rate of Interest Act.
50 Section 2(1) of the Prescribed Rate of Interest Act.
51 Fripp v. Gibbon & Co 1913 AD 354.
52 Naidoo v. Auto Protection Insurance Co Ltd 1963 4 SA 798 (D); Palmer v. SA Mutual Life & General Insurance Co Ltd 1964 3 SA 434 (D); Nedcor Bank Ltd v. SDR Investment Holdings Co (Pty) Ltd 2008 2 All SA 627 (SCA) (claim of over 20 million rand succeeding in respect of R93 986,65 only; plaintiffs awarded 20 per cent of their costs).
53 Mvu v. Minister of Safety & Security 2009 6 SA 82 (GSJ).
54 Seria v. Minister of Safety & Security 2005 2 All SA 614 (C).
55 Seria v. Minister of Safety & Security 2005 2 All SA 614 (C).
56 Mathe v. Minister of Police 2017 4 All SA 130 (GJ).
57 British Transport Commissioner v. Gourley 1955 3 All ER 796 (HL) 802–803; Oberholzer v. SANTAM Insurance Co Ltd 1970 1 All SA 179 (N); Krugell v. Shield Versekeringsmpy Bpk 1982 4 All SA 505 (T); Minister of Defence v. Jackson 1991 3 All SA 354 (ZS); Barclay v. RAF 2012 3 SA 94 (WCC).
58 Sigournay v. Gillbanks 1960 2 All SA 319 (A); Muller v. Mutual & Federal Insurance Co Ltd 1994 1 All SA 199 (C).
59 Minister of Defence v. Jackson 1991 3 All SA 354 (ZS).
60  All ER 796 (HL).
61 2012 (2) SA 94 (WCC).
62 Barclay v. Road Accident Fund 2012 (2) SA 94 (WCC) par 16.
63 The Law of South Africa, Volume 18, Third Edition, Evidence: Admissibility: Similar Fact Evidence: Opinion.
64 Municipality v. International Parking Management (Pty) Limited and Others  JOL 33183 (GSJ) Paragraph 172.
65 Municipality v. International Parking Management (Pty) Limited and Others  JOL 33183 (GSJ) Paragraph 171.
66 R v. Morela 1947 3 All SA 310 (A).
67 Menday v. Protea Assurance Co Ltd 1976 (1) SA 565 (E) at 569B. See also Gentiruco AG v. Firestone SA (Pty) Ltd 1972 (1) SA 589 (A) at 616–17.
68 R v. Turner  1 All ER 70 and Twine and Another v. Naidoo and Another  1 All SA 297 (GJ).
69 Twine and Another v. Naidoo and Another  1 All SA 297 (GJ).
70 KPMG Chartered Accountants (SA) v. Securefin 2009 (4) SA 399 (SCA) at 410F–G. See also Masstores (Pty) Ltd v. Pick 'n Pay Retailers (Pty) Ltd 2016 (2) SA 586 (SCA) at 593A–B.
71 Ruto Flour Mills Ltd v. Adelson (1) 1958 4 All SA 198 (T).
72 S v M 1991 SACR 91 (T) and Twine and Another v. Naidoo and Another  1 All SA 297 (GJ).
73 That is to say, the 'reasonableness of imposing liability' – see Masstores (Pty) Ltd v. Pick N Pay Retailers (Pty) Ltd 2017 (1) SA 613 (CC) Paragraph 48.
74 Louwrens v. Oldwage  1 All SA 197 (SCA) Paragraph 27.
75 Stock v. Stock 1981 (3) SA 1280 (A) and Jacobs and Another v. Transnet Ltd t/a Metrorail and Another 2015 (1) SA 139 (SCA).
76 Coopers (South Africa) (Pty) Ltd v. Deutsche Gesellschaft Für Schädlingsbekämpfung MBH 1976 (3) SA 352 (A) 371. R v. Jacobs 1940 TPD 142; R v Barry 1940 NPD 130.
77 R v. Jacobs 1940 TPD 142.
78 Mutual & Federal Insurance Co Ltd v. SMD Telecommunications CC 2011 2 All SA 34 (SCA).
79 Barry v. R 1940 NPD 130; R v. Jacobs 1940 TPD 142; R v. Theunissen 1948 4 All SA 34 (C); S v. Mngomezulu 1972 1 All SA 707 (A); Mahomed v. Shaik 1978 4 All SA 370 (N).
80 Owners of the MV 'Banglar Mookh' v. Transnet Ltd 2012 3 All SA 632 (SCA).
81 Schneider v. Aspeling 2010 3 All SA 332 (WCC) and Stock v. Stock 1981 (3) SA 1280 (A).
82 Jacobs and Another v. Transnet Ltd t/a Metrorail and Another 2015 (1) SA 139 (SCA).
83 Menday v. Protea Assurance Co Ltd 1976 1 All SA 535 (E); Mahomed v. Shaik 1978 4 All SA 370 (N).
84 S v. Kimimbi 1963 3 All SA 210 (C); S v. Bertrand 1975 4 All SA 288 (C); Menday v. Protea Assurance Co Ltd 1976 1 All SA 535 (E).
85 Twine and Another v. Naidoo and Another  1 All SA 297 (GJ).
86  USSC 99.
87 Uniform Rules of the High Court of South Africa, Rule 36.
88 See PricewaterhouseCoopers Incorporated and others v. National Potato Co-operative Ltd and another, Paragraph 161 and sources cited there.