The matter of Halstead-Cleak v Eskom Holdings Limited and some observations for liability insurers.
The Gauteng High Court, in the recent case of Halstead–Cleak v Eskom Holdings Limited  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:
Such exemptions are nonetheless "transactions", albeit exempt from certain provisions of the CPA.
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".
What then are the implications of this judgment?
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:
"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.