Delictual liability in the administrative law paradigm

The SCA’s recent ruling in Odinfin (Pty) Ltd v Reynecke (906/2016) ZASCA 115 (21 September 2017) is one that clarifies the legal position pertaining to delictual liability for pure economic loss arising from a breach of administrative law. It further confirms the long-standing legal position pertaining to the requirements for delictual liability in instances where there have been breaches of administrative law.

14 Mar 2018 3 min read Disput Resolution Alert Article

This ruling flows from a decision by the court a quo, wherein an employer, who was a registered FSP, debarred an employee who was a representative in terms of s14 of the Financial Services Advisory and Intermediary Services Act, No 37 of 2002 (FAIS Act), without complying with the requirements of procedural fairness as set out in the Promotion of Administrative Justice Act, No 3 of 2002 (PAJA). The question before the court was whether such non-compliance was wrongful and whether it entitled the employee to delictual damages. The court found in the employee’s favour and awarded him damages.

On appeal, the SCA found that PAJA does not suggest an intention of the lawmaker to extend a delictual remedy for non-compliance with its provisions as PAJA provides extensively for the rights of an aggrieved person affected by unfair administrative action in s6 and s8. The court, however, qualified this by stating that where there was a breach of the statute pursuant to which the administrative action was taken and if such statute on a proper interpretation confers a delictual remedy, then delictual liability is possible.

The general requirements for delictual liability and the test for wrongfulness were confirmed by the court. It found in relation to the “fault” requirement that the employee did not allege that the employer’s alleged breach was either knowingly wrongful (dolus) or negligent (culpa) therefore, on the merits, he was required to show not only that the breach of procedural fairness was wrongful in the delictual sense but that it gave rise to strict liability. In reaching its decision, the court relied on Home Talk v Ekurhuleni Metropolitan Municipality (225/2016) [2017] ZASCA 77 (2 June 2017) wherein it was held that generally, delictual liability will not be imposed for a breach of administrative law unless there are convincing policy considerations that warrant such imposition.

Further, in instances where a tender was negligently awarded contrary to the principles of administrative justice and where that tender is subsequently set aside after the successful tenderer has incurred significant expenses in attempting to comply with its contractual obligations, the position remains that policy considerations preclude a disappointed tenderer from recovering delictual damages that were purely economic in nature. This was confirmed in Steenkamp NO v Provincial Tender Board, Eastern Cape [2006] JOL 18364 (CC), where the court found that neither the statute under which the tender was issued nor the common law imposed a legal duty on the tender board to compensate for damages where it had bona fides but negligently failed to comply with the requirements of administrative justice.

Similarly, and in addition, it follows that a claim against an administrative body will lie only if it is established that the award of the contract to a rival tenderer was brought about by dishonest or fraudulent conduct on the part of one or more of the officials for whose conduct the appellant was vicariously liable, but for which the contract would have been awarded to the complainant. (South African Post Office v De Lacy and another [2009] 3 All SA 437 (SCA))

The court’s position thus remains unchanged in respect of their unwillingness to extend delictual liability to matters concerning breaches of administrative law unless policy considerations necessitate delictual liability, a statue confers delictual liability or there has been fraudulent or dishonest conduct.

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