An extract from The Global Damages Review - 2nd edition
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.
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.
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';
- that caused;
- harm, in the form of damage or loss, to the plaintiff;
- because of the fault (whether intentionally or negligently) of the defendant.
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.
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.
Examples of 'pure economic loss' claims that have been held to be actionable include the claim of 'interference in contractual relations' and 'negligent misstatements'.
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: Section 49D(1), read with Section 65(6) of the Competition Act entitles the Competition Tribunal to hand down a consent order that may contain an award for damages because of loss suffered as a result of a breach of the Competition Act;
- The Consumer Protection Act: 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.
Recent case lawi 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)Facts
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.Decision
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.Relevance
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 and Others v. Minister of Basic Education (1416/2015)  ZALMPPHC 18Facts
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.Decision
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 instal toilets at each rural school currently equipped with pit latrines.
The judge 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.Relevance
This matter has since been appealed to the Supreme Court of Appeal. The appeal was heard on 2 September 2019 and judgment is presently awaited.
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.
As the matter has been appealed, it will be interesting to see if the Supreme Court of Appeal overturns the High Court order and awards constitutional damages to the Komape family; if so, this will set a new precedent.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)Facts
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'.Decision
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.Relevance
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)Facts
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.Decision
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.