The Constitutional Court declines to recognise a novel extension of the Law of Delict

10 Nov 2014 3 min read Dispute Resolution Matters Article

Dolus eventualis is a phrase that has become bandied about in almost every social setting imaginable, given its prominence in the sensational Oscar Pistorius trial. It has also found itself in the spotlight in legal circles, although in the far-less sensational but more relevant purposes of commercial litigation context of delictual damages claims.

In the case of Country Cloud Trading CC v Member of the Executive Council, Department of Infrastructure Development, Gauteng [2014] ZACC 28, Country Cloud sued the Member of the Executive Council (MEC) for damages as a result of the unlawful cancellation by the department of a construction contract awarded to a third party, iLima Projects (iLima). Country Cloud contended that it suffered a loss of R12 million which it lent to iLima and which iLima was unable to repay to Country Cloud as a result of the department's unlawful termination of a construction contract that was awarded to iLima.

The case was taken on appeal by Country Cloud from the High Court to the Supreme Court of Appeal (SCA) and, not succeeding there, Country Cloud appealed to the Constitutional Court.

The Constitutional Court agreed with the SCA on its finding on the facts that the department breached its contract with iLima, and caused loss to Country Cloud, acting with intent in the form of dolus eventualis, which is satisfied where a wrongdoer foresees the possibility of a consequence eventuating as a result of his conduct, but reconciles himself with the fact and proceeds anyway. The question that the Constitutional Court had to determine was whether or not the Department's conduct was wrongful, not in a general sense or towards iLima, but vis-à-vis Country Cloud.

Wrongfulness is an element of delictual liability, which functions to determine whether the infliction of culpably caused harm demands the imposition of liability or whether the social, economic and other costs would be too high to justify imposing liability in the circumstances of a case.

In contrast to cases of physical harm, this was a case of pure economic loss. Under South African law, conduct causing pure economic loss is not necessarily wrongful. Wrongfulness must therefore be positively established. It has thus far been established in limited categories of cases, such as intentional interferences in contractual relations or negligent misstatements. Recognition of liability in this case would have been novel and an extension of the law of delict.

The court found that the department did not owe a duty to Country Cloud, which was a third party to the department's contract with iLima. As such it cannot be said that Country Cloud was wronged by the department. While the department's conduct was objectionable, it did not rise to the level of dishonesty or corruption. The court also found that Country Cloud willingly exposed itself to the foreseeable risk of iLima's downfall for the promise of a large financial reward. The court was therefore unpersuaded that considerations of legal and public policy require the imposition of liability and dismissed the appeal.

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