Charity Begins at Home: What to consider when dealing with Pure Economic Loss Claims

We recently dealt with a claim instituted by a non-profit organization (let’s refer to it as “Charity for purposes of this article) who funded a patient’s medical costs for a particular medical procedure. The procedure was unsuccessful, and Charity sought to claim back its costs from the medical institution who was responsible for performing that procedure. As Charity’s claim was one of pure economic loss, we questioned whether its claim was in fact sustainable in our law.

While the leading authority on the issue of pure economic loss is Country Cloud CC v Member of the Executive Council, Department of Infrastructure Development, Gauteng 2014 ZA CC 28, there have been several recent cases where the courts have been called upon to consider the validity of such claims.

Country Cloud reminds us of the following when dealing with pure economic loss claims:

1. The validity of pure economic loss claims is largely dependent on determining whether the conduct complained of is wrongful.
2. While positive conduct which results in physical harm to person or property is prima facie wrongful, in cases of pure economic loss such harm is not prima facie wrongful and “the criterion of wrongfulness assumes special importance.”
3. Determining wrongfulness in such circumstances entails determining whether “the infliction of culpably caused harm demands the imposition of liability” and
4. Where a plaintiff has taken steps to protect itself contractually or should  have taken such steps, it is unlikely that a claim for pure economic loss brought in delict would succeed. In other words, if a plaintiff is not vulnerable to risk, the probabilities of the claim being upheld are significantly reduced.

The court recently found that “the infliction of culpably caused harm demanded the imposition of liability” in the widely publicised case of Grand Valley Estates (Pty) Ltd & Others v Mpumalanga Tourism and Parks Agency & Others, Decision of the High Court of South Africa, Gauteng Division, Pretoria, under case number 34502/2010. Here, the plaintiffs had acquired land in Mpumalanga which it sought to develop as a high-end ecotourism and conservation project. The defendants however actively sought to frustrate the plaintiffs’ plans through withholding the necessary permits, orchestrating unjustified land claims, acts of violence, and vandalising property. Since there was no contractual relationship between the parties, the plaintiffs’ only option was to institute a delictual claim for pure economic loss.

Relying on the principles as set out in Country Cloud, the court found that public policy considerations dictated that the defendants be held liable, and stated as follows:

“It was a concerted campaign over several years by members of the executive in the province, in league with high officials in at least two organs of state which, were in a unique position to intimidate Mr Daniel and frustrated the realisation of his dream. They enlisted in their scheme a criminal mob and instructed the SA Police to stand aside while the mob did its work. This is a case which cries out for the recognition of delictual remedy.”

Just short of a month after the Grand Valley Estate’s case, The Supreme Court of Appeal handed down judgment in the case of Nelson Attorneys v Smit N.O. & Another (532/2024) ZA SCA 162 (24 October 2025). There are similarities between the two cases: both involve delictual claims for pure economic loss and both relate to property developments which did not materialise. That is however where the similarities end.

In the Nelson Attorneys case, the plaintiffs had entered into agreements with a property developer in terms of which they agreed to sell their homes at a premium to allow the developer to establish a townhouse development on their land. Nelson attorneys were appointed by the property developer as the conveyancers.

For reasons unrelated to the conduct of Nelson Attorneys, the development failed. The property developer with whom the plaintiffs had contracted was also liquidated. Thus, the plaintiffs sought to hold Nelson Attorneys liable for their loss suffered. Nelson Attorneys’ involvement in the matter was, however, limited to their appointment as the conveyancers responsible for attending to the deed of sale relating to the plaintiffs’ properties sold to the developer. No contractual arrangement existed between the plaintiffs and Nelson Attorneys.

Relying on Country Cloud the SCA held that the plaintiffs’ claim against Nelson Attorneys had to fail. Insofar as the wrongfulness was concerned, the Court found that there was no persuasive legal policy consideration to impose liability, the plaintiffs were not vulnerable to risk and that they had alternative legal remedies available to them.

We would say that Grand Valley Estates and Nelson Attorneys are almost polar opposites on the pure economic loss claim scale. On the one hand, the defendants’ behaviour was so offensive that the courts had to impose legal liability. On the other hand, Nelson Attorneys had not even acted negligently let alone wrongfully. Unfortunately, there exists a considerable grey area between these two poles, which must be navigated with caution.

Charity is not the only entity who is likely to find itself wanting when pursuing a pure economic loss claim. Charity does not enjoy the same protection that, for example, an insurer would in respect of its subrogation rights which are entrenched in our common law. Charity is more likely to find itself in a similar situation to a medical aid scheme for instance.

Our courts have distinguished medical aid schemes from insurers and have held that they do not enjoy the same subrogation rights as insurers do. Thus, if a medical aid scheme proceeds with a recovery of the medical expenses disbursed on behalf of one of its members directly from a third party, such claim is currently, unlikely to succeed.

This issue has recently been touched on in the case of Discovery Health (Pty) Ltd v Road Accident Fund & Another 2025 ZA GP PHC 363 which appeal is currently pending before the SCA. Although the majority of the trial court felt strongly that subrogation principles do not apply to medical aid schemes in the same way that it is applied in insurance law, the court felt that it was necessary for the superior courts to rule decisively on the issue.

We suspect that if the principles as set out in Country Cloud are followed, the SCA is likely to find that medical aid schemes would be precluded from pursuing such claims from the third-party wrongdoer, since they ought to protect their interest through their contractual and statutory relationship with its members and because medical aid schemes are not entities which would be considered vulnerable to risk.

In a similar position to Charity are third party litigation funders. While litigation funding in South Africa is still in its relative infancy, we have seen it becoming a more popular option to litigants recently. While there are obvious benefits to litigation funding it has its drawbacks.

Unlike contingency fee agreements, litigation funding is not regulated. However, the principles surrounding the use of litigation funding have been broadly outlined in various cases such as Price Waterhouse Coopers Inc v National Potato Cooperative Limited 2004 (6) SA 66 (SCA) (1 June 2004) and more recently in the case of De Bruyn v Steynhoff International Holdings N.V. & Others 2022 (1) SA 442 (GJ) (26 June 2020). 

Typically, a litigation funder would enter into a litigation funding arrangement with a litigant, whereby the litigation funder would agree to fund litigation and upon successful finalisation of the litigation the litigation funder would be paid its costs plus a pre-agreed payment directly linked to the claim awarded.

Unlike contingency fee agreements where the agreement is between the litigant and its legal representatives, typically in litigation funding there is no relationship between a litigation funder and the litigant’s legal representatives. It therefore follows that the litigant’s legal representative does not ordinarily owe a duty of care to the litigation funder.

What recourse would the litigation funder have against the legal representative whose negligence causes the litigant’s claim to fail resulting in the litigation funder suffering a pure economic loss? The only remedy to the litigation funder would be to pursue a delictual claim against the negligent legal representative. If we apply the principles as set out in Country Cloud, unless there are extenuating circumstances it is unlikely that the litigation funder could independently pursue such a claim against the negligent legal representatives.

Pure economic loss claims are the exception rather than the norm. It is the last resort where there are no contractual remedies available to the aggrieved party. Does this then mean that Charity will never succeed with a claim for pure economic loss? No, it does not. However, one must bear in mind the extraordinary circumstances and compelling reasons required to provide a legal remedy to a litigant in such circumstances. The Grand Valley case illustrates this point: although the plaintiffs succeeded in recovering pure economic loss, the judgment paradoxically limits rather than advances the law, as it highlights the exceptionally stringent requirements that must be met before such claims can succeed.