Strict liability under the Consumer Protection Act

The matter of Halstead-Cleak v Eskom Holdings Limited and some observations for liability insurers.

This article:

• Examines a recent court decision which dealt with strict liability under the Consumer Protection Act;
• Will be of interest to public liability insurers and brokers; and
• Will also be of interest to design professionals and consultants and to their professional indemnity insurers and brokers, particularly in the design-build/construct contractual arrangement, and in the context of the Occupational Health and Safety Act and the Construction Regulations.

The Gauteng High Court, in the recent case of Halstead–Cleak v Eskom Holdings Limited [2015] JOL 33332 (GP), held that Eskom was "100% liable" to the Plaintiff who had been riding a bicycle and who, inadvertently, came into contact with a low hanging live powerline spanning a footpath, sustaining serious burn injuries in the process.

Eskom was responsible for the power line in question which spanned two poles in the Nooitgedacht area of Gauteng, through which Eskom conducted electricity. The line was not used to conduct electricity to a user.

While Eskom might ordinarily have been liable in these circumstances under the common law (on the basis of negligence), what was exceptional in this instance was that the Court found that Eskom was strictly liable in terms of the Consumer Protection Act ("the CPA") (pursuant to the provisions of Section 61 of the CPA). This finding, based on the Court's interpretation of the CPA, has to some extent served to substitute strict liability for common law negligence beyond the intended scope of the CPA.

In terms of Section 61(1) of the CPA:

"…the producer or importer, distributor or retailer of any goods is liable for any harm, as described in subsection (5), caused wholly or partly as a consequence of—

(a) supplying any unsafe goods;
(b) a product failure, defect or hazard in any goods; or
(c) inadequate instructions or warnings provided to the consumer pertaining to any hazard arising from or associated with the use of any goods, irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributor or retailer, as the case may be."

This Section accordingly imports strict liability for the producer, importer, distributor or retailer of goods (which are very widely defined).

Section 61(5) of the CPA defines "harm" as follows:

"Harm for which a person may be held liable in terms of this section includes–

(a) the death of, or injury to, any natural person;
(b) an illness of any natural person;
(c) any loss of, or physical damage to, any property, irrespective of whether it is movable or immovable; and
(d) any economic loss that results from harm contemplated in paragraph (a), (b) or (c)."

It is correct that Section 61(1), read with Section 61(5) of the CPA, is of wide application, particularly in that it embraces "harm" to "any natural person" and not just the consumer (we also highlight under comment below the implications of the section for professional indemnity insurers).

Eskom argued that the CPA was not intended to apply in circumstances such as in the instant case. Eskom contended that the CPA:

"… is about consumerism and the protection of consumers and that had the plaintiff suffered the electrical burns that he did in the course of utilising the supply of electricity to his home, or otherwise in the course of his use of electricity, then the CPA might well have applied."

The Court held that Section 61(5) of the CPA made it clear that liability:

"… arises not only in respect of "consumers" as defined in the CPA or consumers in the general sense, but to "any natural person"…. The plaintiff need not, therefore be a "consumer" in the contractual sense as defined in order for the defendant to be liable for harm".

The Court held that:

"The submission therefore, by the Defendant that an innocent third party who is not necessarily a "consumer" stricto sensu, who suffers loss (such as a dependent of a bread winner who is or may be a consumer who is killed by a defective product) cannot claim redress because he or she is not the consumer would be contrary to the spirit and purpose of the CPA".

This finding is, we submit, correct, but then only in the context of or against the background of a supplier – consumer relationship. To be more specific, provided only that the harm that ensues to "the innocent third party" (or "any natural person") is harm arising from goods supplied in terms of or pursuant to a supplier/consumer transaction – such circumstance did not prevail in this matter.

The harm that ensues must necessarily be harm arising from goods supplied in terms of or pursuant to a supplier/consumer transaction, for the following reasons:

• Section 5(1) of the CPA restricts the application of the CPA to goods and services that are promoted and supplied or performed "in terms of a transaction". Section 5 ("Application of the Act") provides that "This Act applies to every transaction occurring within the Republic …".
• Section 5(2) goes on to list those "transactions" to which the CPA does not apply. Thus for instance, the CPA does not apply to transactions:
  • In terms of which the consumer is a juristic person whose asset value or annual turnover, at the time of the transaction, equals or exceeds the threshold value of R2 000 000.00.
  • If the transaction falls within an exemption granted by the Minister. The exemptions granted by the Minister include:
    • All municipalities other than high capacity municipalities.
    • All banks including mutual banks and cooperative banks (from certain sections of the Act only).
    • Certain collective investment schemes.

Such exemptions are nonetheless "transactions", albeit exempt from certain provisions of the CPA.

• Section 5(5) states that even in respect of exempt "transactions", the importer, producer, distributor and retailer of those goods is subject to strict liability for ensuing harm.

Thus the application of the CPA, it is submitted, clearly has as its starting point a transaction, between a supplier and an individual, or company (but then in terms of the CPA only a company whose asset value or annual turnover, at the time of the transaction does not equal or exceed R2 000 000.00). As the word "transaction" is not defined in the CPA it must be given its ordinary grammatical meaning, which is defined in the Oxford Dictionary to mean "an instance of buying and selling". The application of the CPA must therefore have as its backdrop, a buying or selling, or a business transaction.

Had the Court had regard to the express application of the CPA, the Court would not in our view have concluded that the electricity in the low hanging live power line, which spanned a footpath and which was not used to conduct electricity to a user, constituted goods supplied in terms of a transaction, as prescribed by the CPA. What the Court did was to find that the Plaintiff had been harmed in the context of an exempt transaction as it reasoned that Section 61 is "applicable even in respect of transactions exempt from the CPA". That is incorrect, as there was no prior transaction at all, let alone an exempt transaction.

We conclude that the CPA is limited in its application to harm caused by goods that are supplied "in terms of a transaction". To interpret the application of the CPA beyond that would be to substitute strict liability for common law negligence.

We agree with Eskom's contention that the act is "about consumerism only".

Comment

What then are the implications of this judgment?

• Negligence, in the legal context, is a failure to exercise that degree of the care that a reasonably prudent person would exercise in all the circumstances of the incident, and outside of any contractual or supplier- consumer scenario. Thus the effect of the judgment, in extending the application of Section 61 beyond the purview of a transaction entered into between a supplier and a consumer, is that liability will be imposed regardless of what steps may have been taken to avoid harm. A few examples in each of which there is no underlying "transaction" between a supplier and a consumer are:
  • Eskom will be strictly liable to pedestrians or children at play on pavements, in parks, fields and in the veld, who inadvertently come into contact with exposed electrical cables and leakage generally from whatever cause where the electricity is conveyed not to the user, but between stations, and regardless of whether such areas were fenced off and/or off limits to the public.
  • A farmer will be strictly liable to third parties who suffer injury or damage to property consequent upon a fire which starts on the farmer's farm, and spreads to neighbouring property.
  • Municipalities will be strictly liable to owners of motor vehicles, whose vehicles are damaged by potholes, regardless of how long such potholes have existed and any steps taken by the Municipality to fix them.
• Exposure is accordingly enhanced for public liability insurers, and in particular insurers of municipal and public entities.

The decision does nonetheless remind us of the wide application of Section 61 of the CPA and its potential increased exposure for professionals and professional indemnity insurers. Professional indemnity underwriters and brokers should be mindful of the following:

• The section introduces an added exposure for those who insure consultants who are involved in or lead design-build/construct projects given that:
  • Design-build/construct is an integrated approach that delivers design and construction services under one contract with a single point of responsibility for both the design and construction of the works. The concept of design and build project delivery is becoming ever more popular, in particular given the growing popularity of Building Information Modelling ("BIM"). BIM is used for planning, design, construction and operation of the works, and facilitates the accurate and efficient prosecution of the works through virtual presentation (of what is to be built in a simulated environment).
  • Section 61(2) of the CPA provides:

"A supplier of services who, in conjunction with the performance of those services, applies, supplies, installs or provides access to any goods, must be regarded as a supplier of those goods to the consumer, for the purposes of this section."

Accordingly, a consultant may be strictly liable for harm arising out of goods manufactured, constructed, installed, sold or supplied on behalf of the consultant, in the design-build/construct scenario where the consultant is the lead figure, or takes contractual responsibility for the design and build components.

• Similarly, health and safety representatives in terms of the Occupation Health and Safety Act 85 of 1993, and designers of structures in terms of the Construction Regulations 2014, whose obligations encompass the service of ensuring the implementation of health and safety measures, will also be strictly liable for harm caused by goods inasmuch as these professionals "provide access to" goods as contemplated by Section 61(2) of the CPA.