Relational economic loss (or interference with contractual relations): The last hurdle
| Jurisdiction | South Africa |
| Published date | 29 May 2019 |
| Author | Dale Hutchison |
| Date | 29 May 2019 |
| Pages | 133-157 |
Relational economic loss (or interference with contractual
relations): The last hurdle
2000 Acta Juridica 133
Dale Hutchison *
University of Cape Town
I Introduction
Relational economic loss is the term coined by common lawyers to denote pure economi c
loss suffered by one p erson, as a result of injury to the person or property of an other. 1
It is, by definition, harm of an indirect or secondary nature, what the French call
dommage par ricochet: the victim is at least one step removed from the original
accident, but is financially affected because of a relationship with the primary victim — i n
one way or another he was dependent for his economic well-being on the person or
property of the latter. The loss suffered by a dependant on the d eath or disablement of a
breadwinner is a classic example; another is the loss caused to the users of a bridge
when it is put out of operation as a result of a collision. 2 Very often, but not always, the
relationship between the primary and secondary victim will be a contractual one, in
which case the loss is sometimes call ed contractual relational economic loss, 3 though we
in South Africa are more familiar with the term interference with contractual relations.
The two concepts are not qui te identical 4 —a negligent act mi ght, for example, disturb
contractual relations without causing any physical harm — but, nonetheless, overlap
sufficiently for present purposes to allow them to be used almost i nterchangeably.
For reasons that are well known, but which will nonetheless be restated below, the
common-law courts have for more than a century, and with a remarkable degree of
consistency, maintained a fairly rigi d exclusionary rule with regard to rel ational economic
loss. Even in the post-Hedley Byrne e ra, attempts to relax the rule so that at least some
plaintiffs may recover compensation for th is type of loss, have met with only limited
success, as we shall see. And in South Africa, too, the
* BCom LLB (Cape Town) PhD (Cantab), Professor of Private Law, University of Cape Town.
2000 Acta Juridica 134
position at present is very much th e same. Despite the gradual recognition of claims for
economic loss general ly, and the widening of the circle of persons who may institute the
actio legis Aquiliae, the decision of the Appeal Court in Union Government v Ocean
Accident and Guarantee Corporation Limited 5 still stands firmly in the way of any
plaintiff seeking compensation for relational economic l oss. In denying the claim of the
Government in that case for l oss suffered through an injury to one of its employees, the
Court adopted a very cautious and pragmati c approach, emphasi zing the dangers
inherent in any such expansion of the Aquilian remedy:
'Once one goes beyond physical pro ximity and considers the possibilities that may arise out
of the relationships, contractual or other, between the physically injured person and other
persons who may suffer indirectly, though materially, through his incapacitation, one is
immediately met with the prospects of an unmanage able situation. It is easy to imagine the
1 See eg B Feldthusen Economic Negligence 2ed (1989) 200; J G Fleming The Law of Torts 8ed (1992) 145.
2 Cf Canadian National Railway Co v Norsk Pacific Steamship Co Ltd (1992) 91 DLR (4th) 289, [1992] 1 SCR
1021.
3 ['(A)] convenient if somewhat barbarous phrase', in the words of La Forest J in the Norsk case (n 2) at 291e.
4 Cf Feldthusen (n 1) 201; Robby Bernstein Economic Loss (1993) 131-32; D Hutchison 'Relational economic
loss in the Supreme Court of Canada' (1994) 111 SALJ 240 at 241.
2000 Acta Juridica 133
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absurdities that would arise if all persons contractually linked to the injured person could sue
the careless injurer for the loss suffered by them.' 6
The important question is whether this is still good law in our country. Given the
developments in our law of delict since 1956, when the Union Government case was
decided, and more particularly in the field of economic loss, it is obvious that the
continued existence of the exclusi onary rule cannot be taken for granted. The matter will
have to be reconsidered by the Appeal Court, and one senses that a different app roach
will be adopted, more in line with that followed i n cases dealing with other forms of
economic loss. That woul d gladden the heart of many academic writers, and none mo re
so than N J van der Merwe, who has long argued that Union Government is wrong, or at
least a bad decision. 7 We should bear in mind, however, the caution displayed in this
regard by the late Paul Boberg, whose views still deservedly command the respect of our
courts. Although he welcomed the opening up of liability for economic loss that began in
earnest with the decision in the Trust Bank case, 8 Boberg pr edicted that in the field of
negligent interference with contractual relations th e courts were unlikely to depart
significantly from the a pproach adopted in Union Government. 9 Thus far th e subsequent
case law tends to bear out his prediction. It certainly remains true to say that not
2000 Acta Juridica 135
every foreseeable person who is mad e worse off as a result of an accident can expect to
recover compensation. 10
Against this background, it may prove interesti ng and helpful to look again at the
origins and rationale of the exclusionary rule in the common law systems, and at why
the rule continu es to survive in the post-Hedley Byrne era. The developments i n Canada
and Australia are of particular interest, for there alternatives to a firm exclusi onary rule
have been seriously explored, with strong divisions of opinion emerging in the highest
courts, and then (in Canada) being smoothed over in the interest of legal certainty. 11 It
is my strong belief that we, i n South Africa, should pay more a ttention to these
developments in the common law, for although the terminology and general approach is
often very different to our own, the underlying policy concerns are the same, and the
recognition of different categories of economic loss can be of considerable assistance in
determining when it is wrongful to cause such l oss. The more concrete approach of the
common law can usefully supplement, with out displacing, our more general and abstract
theory.
II The exclusionary rule in common-law systems
The earliest case in point seems to have been an American one, Anthony v Slaid, 12 but
the cases generally regarded as establishing the rule are British: Cattle v Stockton
Waterworks Co 13 and Simpson & Co v Thompson. 14 In th e former a contractor's cost of
performing his contract was increased due to the defendant's negli gence; in the latter an
insurer tried to sue in its own name for damag e caused to the insured property. In both
6 At 585F-H, per Schreiner JA.
7 See generally N J van der Merwe Die Beskerming van Vorderingsregte uit Kontrak teen Aantasting deur
Derdes (1959). See too N J van der Merwe & P J J Olivier Die Onregmatige Daad in die Suid-Afrikaanse Reg
6ed (1989) 370ff; J Neethling, J M Potgieter & P J Visser Law of Delict 2ed (1993) 293ff.
8 Administrateur, Natal v Trust Bank van Afrika Bpk 1979 (3) SA 824 (A).
9 P Q R Boberg The Law of Delict; vol I: Aquilian Liability (1984) 104 and 108.
10 See eg De Harde v Protea Assurance Co Ltd 1974 (2) SA 109 (E); Franschoekse Wynkelder (Ko-operatief)
Bpk v SAR & H 1981 (3) SA 36 (C); Shell & BP South African Petroleum Refineries (Pty) Ltd v Osborne Panama
SA 1980 (3) SA 653 (D); Pike v Minister of Defence 1996 (3) SA 127 (Ck); but cf Coronation Brick (Pty) Ltd v
Strachan Construction Co (Pty) Ltd 1982 (4) SA 371 (D).
11 See the discussion below.
12 (1846), 52 Mass 290 (Sup Jud Ct); see Feldthusen (n 1 above) 200n8.
14 (1877) 3 App Cas 279 (HL).
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