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Liability Insurance
Thursday, January 1, 2009
For whom the toll goes

The 26th November 2008 judgment of the Supreme Court of Appeal that allowed the South African National Roads Agency to recover damages from a transport company, Fourway Haulage SA (Pty) Limited, for negligently blocking their toll road for 24 hours with loss of revenue over R100 000 has some important lessons for anyone wishing to sue Eskom for power cuts.
Loss of revenue without physical damage is what is known as pure economic loss, namely a loss suffered which is not the direct result of actual damage to property.  The blocked road was not damaged but the Roads Agency was unable to collect toll fees from two toll plazas for a day as a result of the negligence of the driver of the articulated truck that collided with a van and overturned and dumped its hazardous cargo of chrysolite asbestos which required extensive cleaning-up and decontamination. Pure economic loss is only recoverable if the court finds there was wrongfulness in the sense of a legal duty to avoid negligently causing economic harm to the other party. The courts determine whether there is wrongfulness in relation to categories of liability (for instance, a negligent misstatement by someone bound to give correct information that causes economic loss may be actionable).
Two important policy considerations were considered in this judgment.  The first is the fear of so-called boundless liability. If a category of liability would open the floodgates to thousands of claims for an indeterminate amount for an indeterminate time to an indeterminate class of claimants, the courts are unlikely to extend the category of wrongfulness to the circumstances.  Where however there is a single loss for a single identifiable claimant (such as the Roads Agency in the present circumstances), the courts will more easily find wrongfulness.  Even that is not decisive.
Another question is whether the loss eventuated because the claimant did not protect itself against the risk as it could have by concluding a contract with users admitting liability for negligent conduct.  Clearly the Roads Agency could not have contractually prevented the loss that it suffered.  Another policy consideration is whether the liability will impose an unwarranted burden on the defendant and limit its activities. No such consideration applied to the trucking company which was already under an obligation to other users of the road to drive with reasonable care. The economic liability was as a result of negligent driving which has legal consequences in any event.  The court also refused to accept an argument that the Roads Agency should put up its toll fees to cover events of this nature.  There is no reason why innocent road users should be held responsible for the negligent conduct of other drivers.
The remaining question is whether the loss is too remote from the event to justify a claim.  Remoteness is determined by deciding whether it is reasonable, fair and just to impose liability for the loss or whether it is too removed from the event to have been foreseeable.  In the present case it was clearly foreseeable that the Roads Agency would suffer a loss if negligent driving caused the toll road to be blocked.  The trucking company was held liable.  As this is a new category of pure economic liability, the advice to all readers is that careless driving on a toll road might have greater consequences than are immediately recognised.
What has this to do with claims against Eskom for power cuts?  Firstly, the courts will be reluctant to grant a right of action which could create liability for an indeterminate amount for an indeterminate class of claimants.  Secondly, the courts will look at the question whether Eskom could and did protect itself against the risks.  Both the legislation involving electricity supply and the contracts entered into with consumers will be very important in deciding liability issues. The courts are likely to uphold any clear limitations on liability in those laws or contracts.  The courts are also unlikely to extend liability to an indeterminate class of people who do not actually themselves contract for the supply of electricity.  Lastly, the question of forseability of harm is going to be a factor if wrongfulness is found.  Not every loss remotely connected with an electricity cut will be actionable. Written by: Patrick Bracher, Director, Deneys Reitz Inc.

Note
Deneys Reitz was established in the early 1920s, and is now one of the largest independent commercial law firms in the country, providing specialist services in the full spectrum of legal disciplines. The firm frequently engages with the media on topical legal issues.
Deneys Reitz is a national organisation, employing over 450 people at its offices in Sandton, Durban and Cape Town. The firm has an Africa-specialised division, Africa Legal, which provides an international pan-African legal service.  The company also has global reach through its established working relationships with major law firms in the United Kingdom, United States of America, Australia and the Far East.
Deneys Reitz is classified as a Black-influenced company and the firm is well ahead of its employment equity goals. Its  clients include major industrial and commercial corporations, mining houses, parastatals, government departments and financial institutions. For more information please visit www.deneysreitz.co.za.
 

Copyright © Insurance Times and Investments® Vol:22.1 1st January, 2009
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