Transnet Ltd v Sechaba Photoscan (Pty) Ltd

• Jurisdiction: South Africa
• Judge: Howie P, Zulman JA, Farlam JA, Lewis JA and Van Heerden AJA
• Judgment Date: 01 April 2004
• Docket Number: 98/03
• Hearing Date: 01 March 2004
• Counsel: M S M Brassey SC (with G I Hulley) for the appellant. S F Burger SC (with M Nowitz) for the respondent.
• Court: Supreme Court of Appeal

Howie P: C

[1] The primary question in this appeal is whether on the facts of this case the loss of prospective profits is compensable in law as delictual damages.

[2] Transnet Ltd (the appellant), a parastatal corporation, called for public tenders for the purchase of one of its divisions, Transnet Production House, which operated a printing business. Among a D number of bidders the respondent company, a well-established printer, submitted a tender, as did Skotaville Press (Pty) Ltd.

[3] Despite very strong indications emanating from the appellant during the tender evaluation process that the respondent's tender would succeed, Skotaville was unexpectedly awarded the purchase E contract and duly bought the Production House business. Alleging that the award to Skotaville instead of the respondent was the culmination of a fraudulent tender process, the respondent sued the appellant for damages in the High Court at Johannesburg. There were two claims. F

[4] At the trial the following was recorded:

'1. For the purposes of settling the merits pertaining to the present trial action (and for no other purposes), the first defendant concedes the allegations contained in paras 6 to 12 of the plaintiff's particulars of claim as amended.

2. The first defendant accordingly admits that the plaintiff has suffered damages and that the first defendant is liable in respect G thereof.

3. Accordingly, the only issue to be determined between the parties is one of ''quantum'', ie whether the plaintiff is entitled to the relief set out in its main claim, its alternative claim, or alternative relief plus interest and costs.'

[5] In the light of those concessions and the consequent admission only one claim is relevant now. In terms of that claim compensation was H sought in the sum of R60 689 000 being the net profit which it was alleged the respondent would have been able to make in the three years following the purchase had it been awarded the contract. The respondent maintained that the appellant's fraudulent conduct had prevented it from earning that profit. I

[6] The learned trial Judge (Snyders J) proceeded to hear evidence on the quantum of damages. The respondent called three witnesses. They testified to facts, opinions and calculation data, all of which related to three years' net profit which they said the respondent would have earned had it conducted the business of Production House. In the course of J

Howie P

cross-examining these witnesses counsel for the appellant foreshadowed certain factual A evidence for the appellant but it was not in the end adduced. The tenor of the only evidence which the appellant did lead simply offered some criticism of the method by which the respondent computed its alleged damages. That was a line of defence not pursued with the respondent's witnesses. Having reviewed and considered the respondent's evidence, the learned trial Judge held it to be essentially unchallenged and she accepted it. After making a 5% B contingency deduction, she awarded the respondent R57 654 550 as damages. With her leave the appellant appeals.

[7] The main thrust of the argument for the appellant was that the respondent had sought to be placed in the position it would C have been in had this been a case for contractual damages, that is, to have its bargain made good. The claim being one in delict, however, the respondent was not entitled to compensation according to that measure but only to such out-of-pocket expenses as it had incurred in preparing and making its bid. The trial Court, it was urged, had therefore erred in awarding damages that were not recoverable in law D for the wrong that had been done. It must be said that this was not a point taken at the trial or dealt with by the trial Court in its judgment.

[8] It is unnecessary for present purposes to refer to the particulars of claim relative to the issue of liability. Although the respondent resisted the appellant's doing so for the first time on E appeal, it is clear, in my view, that despite this not having been raised at the trial, it was open to the appellant to advance the contention that the loss of prospective profits was not, as a matter of law, a type of loss which could be taken into account in quantifying a delictual damages claim of the present kind. That question was not F excluded by the settlement agreement on the merits. It was an integral part of the enquiry into quantum.

[9] The appellant's main submission rested on three bases: A well-known dictum in the case of Trotman v Edwick; [1] a passage in the case of Olitzki Property Holdings v State Tender Board and Another; [2] and authority which, according to G the submission, holds that a claimant in delict is entitled to negative interesse, not positive interesse.

[10] The dictum in Trotman v Edwick reads as follows:

'A litigant who sues on contract sues to have his bargain or its equivalent in money or in money and kind. The litigant who sues on H delict sues to recover the loss which he has sustained because of the wrongful conduct of another, in other words that the amount by which his patrimony has been diminished by such conduct should be restored to him.'

It does not seem to me that that statement assists the appellant. First, Trotman's case was one of fraud inducing a purchase where the land bought was, because of the fraud, not worth the price I paid. In our case the fraud prevented the purchase of a business that had, on the evidence,

Howie P

a highly desirable profit-earning potential. Accordingly, there, it was a case of diminution of the value of the A plaintiff's assets; trading profits did not come into it. Here, by contrast, it is all about the trading profits that the respondent was due to be able to make but where the opportunity to earn them was...