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Suing in contract and delict: is it really possible?

A recent judgment by Unterhalter J in the Gauteng Local Division of the High Court has revived the tension in our law as to whether a plaintiff with a contractual claim can proceed in delict to obtain relief. This is known as a concurrence of actions in contract and delict. In Trio Engineered Products Inc v Pilot Crushtec International (Pty) Ltd 2019 (3) SA 580 (GJ), the defendant sought to rely on an exclusive strategic distribution agreement between it and the plaintiff to make two counterclaims. In the first counterclaim, the defendant alleged that the plaintiff had breached the agreement by replacing it with a third party, and claimed damages in contract. In a second counterclaim, the defendant alleged that the plaintiff engaged in an unlawful strategy to undermine the agreement and the defendant’s position by allowing a third party to usurp its goodwill and to use its confidential information, causing it economic loss. For the second counterclaim, the plaintiff claimed damages in delict. The plaintiff excepted to the second claim on the basis that, it being in delict, was not sustainable in a contractual environment.

In dismissing this and the other exceptions raised by the plaintiff, Unterhalter J made the following observations about the concurrence of actions in South African law: (i) a breach of contract is not, without something more, a delict; (ii) the existence of a contract ordinarily excludes the recognition of delictual duties at variance with contractual ones; (iii) parties to a contract could, however, have additional or complementary duties arising independently of the contract in delict; and (iv) where the relationship between the parties extends beyond their contract, a cause in delict could be pursued in the alternative as a claim that subsisted concurrently with the contractual claim. It is Unterhalter J’s observations that it is possible to pursue alternative claims in contract and delict which warrant closer scrutiny. It will be suggested that our law, barring a very limited exception described below, does not permit a plaintiff to pursue an alternative claim in delict for a contractual breach because that would violate the sanctity of the contract between the parties.

The source of the confusion on the concurrence of actions is to be found in Grosskopf JA’s comment in the seminal case of Lillicrap, Wassenaar & Partners v Pilkington Brothers (SA) Pty) Ltd 1985 (1) SA 475 (A) that the same set of facts could, in principle, give rise to concurrent delictual and contractual remedies (p487). This statement is misleading, and several Appeal Court cases have sought to clarify its meaning. This is a summary of those cases:

In Trustees, Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd 2006 (3) SA 138 (SCA), Brand JA stated at para [24] that “I can see no reason why the Aquilian remedy should be extended to rescue a plaintiff who was in a position to avoid the risk of harm by contractual means, but who failed to do so.” To support this statement, Brand JA pertinently raised the question: what if the defendant 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? The clear answer to this question would be no.

In Holtzhausen v ABSA Bank Ltd 2008 (5) SA 630 (SCA), the court, per Cloete JA, explained that Lillicrap decided that no claim was maintainable in delict where the negligence relied on was the breach of a term in a contract. However, Cloete JA went on to say that the same conduct may be both a breach of contract and delict where the conduct of the defendant is both an infringement of the plaintiff’s right ex contractu and a right which he had independently of the contract. Unfortunately, this statement raises some difficulties. Barring a situation where a defendant has caused the plaintiff physical harm (e.g. see Van Wyk v Lewis 1924 AD 438), it would be difficult to imagine why a court would need to go beyond the four corners of a contract that the parties had decided would regulate their relationship. If the contract between the parties was silent on a material issue, the correct approach for the court would be to find an implied or tacit term in the contract (if that was indeed possible), not to consider a delictual claim.

The reason for this was laid out in Country Cloud Trading v MEC 2015 (1) SA 1 (CC). In that case, the Constitutional Court, per Khampepe J, stated at para [65] that “[w]here parties take care to delineate their relationship by contractual boundaries, the law should hesitate before scrubbing out the lines that they have laid down by superimposing delictual liability.” To allow a delictual claim would have the effect of subverting their autonomous dealings and eliminate contractual provisions which the parties considered necessary or desirable for their own protection.

Closing thoughts:
In Trio Products, Unterhalter J explained that the facts pleaded in the matter reflected a business relationship that precluded a third party from benefiting from the commercial relationship between the plaintiff and the defendant. At this point, Unterhalter J should simply have granted the plaintiff’s exception because there was no basis for a delictual claim in a contractual environment. However, Unterhalter J denied the exception and allowed the delictual claim on the grounds that “the delictual duties relied upon by Pilot (the defendant) as an incident of the business relationship are not repugnant to the agreement … Rather these duties complement and expand upon the contractual obligations undertaken by the parties.” Para [41]. In this respect, the learned judge erred since the test in our law for allowing a concurrent delictual claim is not whether the delictual duties between parties complement their contractual relationship. The test, as enunciated in Holtshauzen, is whether the claim is maintainable in delict where the relationship between the parties is governed by a contract. Barring the exceptional circumstances described above (physical harm), a claim arising out of a contract would not be maintainable in delict. This is because a plaintiff seeking to rely on a legal duty going beyond the contract would in effect be scrubbing out the lines that the parties chose to delineate their relationship. If the sanctity of contracts has any standing in our law, the only way a court could bypass a contract and impose delictual liability is to declare the contract null and void e.g. because it is contra bonos mores.

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Ivor Heyman is an advocate at the Johannesburg Bar. He publishes articles of interest to attorneys and their clients. For questions or comments you can reach him at adv.heyman@gmail.com or 061-120-8740.