South Africa: Can delictual legal duties exist separately from contractual duties?
Market Insight 25 March 2022 25 March 2022
Insurance & Reinsurance
The full bench of the Gauteng Local Division, Johannesburg recently considered this in the context of a delictual action by Zandspruit Cash & Carry and Devland Cash & Carry against G4S Cash Solutions SA with which they each had a cash management and security services contract. The court accepted that a legal duty originated in the contract but existed in the context of the broader business relationship between the parties. This decision will be of interest to litigants and prospective litigants, as well as their insurers and legal representatives, in considering delictual claims when a contractual relationship exists.
G4S was contracted by Zandspruit and Devland to provide cash management and security services. In terms of each contract, G4S would collect, convey, store and deliver money for its clients.
During April 2010, Zandspruit was a victim of an illegitimate cash pickup and R265 265.25 was stolen. The uniforms worn by the thieves, their vehicle and identification cards were all substantially like those used by G4S. Zandspruit’s employee did not verify the identity of the imposter, either via his identity card or by contacting G4S’ control room, which fell short of the G4S-issued protocol to its clients, including Zandspruit.
During March 2011, Devland also fell victim to the scheme and R641 744.00 was stolen. This was despite the identity of the imposter, who was impersonating a G4S guard, being verified by Devland with G4S.
Zandspruit and Devland, who have common directors, sued G4S in delict. They contended that G4S had legal duties to:
Inform them of bogus pickups by imposters.
cash in transit employees’ uniforms and/or official identification cards were lost or stolen;
vehicles were used without authority or had been converted to look like those used by G4S;
cash collection boxes of keys had been lost or stolen or could be duplicated; and
it had allowed access to the cash in transit security guard duty rosters for Zandspruit and Devland in an open and unsecured part of its offices.
Not represent that imposters were its employees, in relation to the Devland incident; which legal duties G4S negligently breached.
G4S denied that it had a delictual legal duty to inform Zandspruit and Devland of bogus pickups as they were public knowledge. In addition, Devland’s directors were aware of the Zandspruit incident. If a legal duty was established, G4S alleged that the damage was caused by Zandspruit and Devland’s own negligence because they failed to take the requisite steps to ascertain the identities of the imposters and handed the money over when it was not safe.
Zandspruit and Devland succeeded in the trial court and G4S appealed against this decision to the full bench.
The issues on appeal
The critical issue on appeal was whether G4S acted wrongfully, but the court also considered negligence and causation.
Did a legal duty exist?
It is trite that a special relationship between parties can give rise to a legal duty. However, G4S argued that this relationship must exist wide of a contractual relationship. In other words, the legal duty must arise independently in delict. Zandspruit and Devland argued that the contracts were foundational to the parties’ relationships and G4S’ legal duties towards them.
The court agreed with the following principles and findings in Trio Engineered Products Inc v Pilot Crushtec International (Pty) Ltd 2019 (3) SA 580 (GJ):
- a breach of contract is not automatically a delict;
- delictual duties which contradict a contract will usually not be recognised;
- parties to a contract may have additional or complementary duties that arise independently in delict;
- a cautious approach to wrongfulness is necessary in determining whether a third party who suffered harm due to a breach of contract can sue in delict; and
- where a business relationship is founded on a contract but extends beyond it and is complementary to it, a delictual cause of action is possible in the alternative to a contractual cause of action.
The court reasoned that the legal duties to inform and not to cause harm were not repugnant to the contracts or the autonomy principle. Instead, the legal duties were complimentary to and expanded upon the parties’ contractual obligations. The legal duties arose out of the business relationship between the parties. Although the court recognised that the legal duties may not have come into being but for the contract, the causal origin of the duties was not the determining factor.
Also, because the claims were for pure economic loss, the court considered whether public policy favours the imposition of the legal duties. It found that it does, considering factors such as that:
- there was no risk of indeterminate liability;
- not only omissions but also positive conduct was complained of; and
- the applicable policy considerations are alike to those present where private security companies are involved. In Loureiro and Others v iMvula Quality Protection (Pty) Ltd 2014 (3) SA 394 (CC) which involved a private security company which had allowed access to its client’s premises to imposters posing as police officers, it was decided that the Constitutional rights to personal safety and protection from theft or damage to property are important considerations, and that there is significant public interest in ensuring that private security companies and guards, in providing crime protection services for a fee, succeed in thwarting avoidable harm. There would be little incentive to avoid harm if they are too easily protected from claims when the harm eventuates.
The negligence of G4S and Zandspruit
In determining if G4S was negligent, the court applied the well-known test in Kruger v Coetzee 1966 (2) SA 428 (A), which entails a consideration of both foreseeability and preventability. Because G4S did not dispute that harm was foreseeable if a legal duty existed, the court focussed on what steps a reasonable person would have taken in the circumstances and if G4S failed to take those steps. In so doing, it considered:
- the degree or extent of the risk created by the relevant conduct;
- the gravity of the consequences if the harm occurs; and
- the burden of eliminating the risk of harm.
On the facts, the court found G4S negligent in not informing Zandspruit and Devland of the scheme (which it could have done with little cost and effort) as this would have allowed them to be more guarded or to increase their security measures. Contrary to the finding of the trial court, the court found that Zandspruit was 50% contributorily negligent through not verifying the identity of the imposter.
Despite various arguments by G4S that causation was absent, the court pointed out that G4S admitted in its plea that if it had informed Zandspruit and Devland of the risk of the scheme, the damage could have been avoided and that G4S could also have taken steps to avoid the loss. The undisputed evidence of a director of Zandspruit and Devland also established that if the schemes’ extent was known, more security measures would have been required of G4S, failing which Zandspruit and Devland would have changed service providers. Zandspruit had in fact changed service providers, whereas Devland only retained G4S’ services because no other company provided the same services. Consequently, the court found that causation was established.
While the judgment does not alter the law, it serves as a useful reminder and practical example on the principles governing the recognition of delictual legal duties between parties who have a contractual relationship. The crux of the decision is that a business relationship between parties can give rise to additional or complementary legal duties to the obligations in the contract between those parties, which can found liability in delict.
At the time of writing this article, it is unknown whether G4S will launch a further appeal.
A copy of the judgment can be accessed here.