Makulu Plastics & Packaging CC v Born Free Investments 128 (Pty) Ltd and Others

3 2 1 Extension of Categories of Interference with a Contractual Relationship

It is evident that Lamont J viewed the facts of the instant case as falling within the confines of the first of the four categories of cases systematised by Neethling and Potgieter (306-307), earlier alluded to (see 3 1 above), viz where a defendant or respondent caused one of the contracting parties to commit a breach of contract. This is evident from his general reference to relevant parts of Lanco Engineering CC v Aris Box Manufacturers (Pty) Ltd (supra) (382A-383A) and more specific reference to Atlas Organic Fertilisers (Pty) Ltd v Pikkewyn Ghwano (Pty) Ltd (supra) 9383A-384C). It is further clear that the fact that no such contractual relationship, relating to the supply of services, between the appellant and the municipality existed at the relevant time, did not in the least stand in the way of the court’s approach on this basis. As pointed out earlier (see 2 above), the court was of the opinion that such contract would inevitably have been concluded, but for the interference by the first respondent (381H).

This finding warrants some comment. In this regard it is important to observe that Lamont J referred approvingly (382A-383A) to a long passage from the Lanco Engineering case (380B-381B) as authority, inter alia, for the broad requirements for a delictual claim based on interference with a contractual relationship, namely “that there must be (a) an unlawful and (b) a culpable (in the broad sense) (c) interference”. First, a reference to “interference” seems out of place here.

In the first place, commencing with the last requirement, an interference implies the existence of a relationship, which in the instant case has not yet materialised. Logically there can thus be no interference at all. It is suggested that the word “conduct” would convey the factual situation more accurately. Furthermore, the fact cannot be ignored that, at the time of the conduct of the first respondent, no contractual relation existed between the appellant and the municipality. The bland statement by the court that such a state of affairs does not affect the position, fails to address the legal basis on which such view rests. It is suggested that the mere fact that the first respondent’s omission to communicate the “true state of affairs” (according to the appellant, but not necessarily according to the first respondent) to the municipality, should, in itself, be irrelevant in this regard. The legal position regarding omissions is well known in our law: a mere omission attracts no legal consequences, whereas an omission in breach of a legal duty is the only type of omission bringing about legal consequences. The court should at least have explained its finding on the basis of the existence of a legal duty to communicate.

The position taken by the court, in which it regards a potential (future) contractual relationship as having the same standing as an existing legal relationship, resembles the approach of our law of contract regarding the so-called fictitious fulfilment of a condition, viz where the law regards a condition as having been fulfilled if one of the parties involved deliberately frustrates the fulfilment of such condition in order to gain a benefit from such negative conduct. However, no such construct exists in our law of delict. Creating further confusion in this regard, is the court’s obvious uncertainty with its own finding, reflected in phrases such as “ ... if the contractual relationship existed, [it] would constitute an interference...” (381G) and “... assuming the existence of the lease, the appellant would be entitled to obtain relief ...” (381J). The only conclusion to which one must come in evaluating this approach, is that the court in fact extended the categories of instances where the law will grant redress in consequence of an interference with contractual relations, namely where a potential or future contractual relationship would have come into being, but for the conduct of the defendant or respondent. Should such a notion be tenable at all, it would in any event have to be linked to a further requirement, namely that the defendant’s or respondent’s conduct in question should have breached a legal duty either to have refrained from acting in such a way that the potential contract did not come into being, or to have taken active steps to promote the conclusion of such a contract.

It is suggested that neither our common law, nor our case law provides any authority for the extension effected in this judgment by the court to the existing law on interference with contractual relationships. The only analogous extension in modern times, relevant for South Africa in view of the history of this type of liability - an extension not even alluded to by counsel or the court - actually took place in England, in the judgment handed down by Lord Denning MR in the case of Torquay Hotel v Cousins [1969] 1 All ER 522 (CA) 529 sqq where that famous jurist extended the action for inducing breach of contract to a situation where a trade union targeted a hotel by means of industrial action, in the process inducing a supplier who had been contractually bound to deliver furnace oil to it, as well as a supplier who had not yet entered into a contract for the supply of furnace oil, to desist from dealing with the hotel in question. However, the general principle enunciated by Lord Denning was criticised as erroneous in the later judgment of Cheall v APEX [1983] 2 AC 180. In the case of Middlebrook Mushrooms Ltd v TGWU [1993] 1CR 612 620 Neill LJ opined that the liability for inducing breach of contract must not be expanded outside its proper limits, which point of view was finally reiterated in the recent judgment of Lord Nicholls in OBG Ltd v Allan [2008] 1 AC 1 [185], in which judgment Lord Denning’s view “is exploded”, to use the words of Rogers Winfield and Jolowicz on Tort (2010) 865. In that judgment (n 32) the court held that one “cannot be liable for inducing a breach unless there has been a breach. No secondary liability without primary liability” (see also Rogers 864). It would thus seem that the present English position is that this form of tortuous liability is even more restricted than its South African counterpart. Dugdale, Jones et al Clerk and Lindsell on Torts (2006) 1496, with reference to F v Wirral MBC [1991] Fam 69 115, remark that there are at present four “necessary ingredients” for the tort of inducing breach of contract, viz existence of the legal right of a contracting party vis-à-vis the other contracting party, knowledge on the part of the tortfeasor of such right and an intention to interfere with it, direct and unjustifiable interference with the right and, finally, damage. This brief comparative review of English sources makes it abundantly clear that the court’s approach cannot even be justified by referring to that legal system.

As will be demonstrated later (3 3 below), the only sound legal basis for the finding in favour of the appellant would be an infringement of the rights flowing from the contract of lease concluded between itself and the first respondent.

3 2 2 The Wrongfulness Element

However, even if one were, for argument’s sake, to accept the extended basis for granting redress in the case at hand, it is to be doubted whether the appellant should have been successful at all, in light of the two other requirements posed in the Lanco Engineering case. In the first instance, one may question whether the element of wrongfulness had in fact been established on the part of the first respondent. From the outset it is quite clear that no illegal means - viz the commission of a criminal act or civil wrong - had been employed by it in failing to communicate the position of the appellant to the municipality (cf the Atlas Organic Fertilizers case 179H, referring to McKerron 270). In view of the general principles pertaining to wrongfulness, this element will in the case of positive conduct only be present where the defendant or respondent infringed the plaintiff’s interest in a legally reprehensible way or, in the event of an omission, failed in terms of a legal duty owed to the plaintiff, to prevent the plaintiff from suffering harm (see in general Neethling & Potgieter 33-49; Van der Walt & Midgley Principles of Delict (2005) 67-84). In each of these cases the boni mores criterion is employed to ascertain whether a factual infringement of an interest, or breach of a legal duty is in fact in a legal sense to be regarded as reasonable and therefore lawful, or unreasonable and therefore wrongful. It is suggested that the application of this criterion - which, as has been demonstrated earlier (see 3 1 above) only comes into being once a factual indication of possible wrongfulness exists, otherwise one would have to do with what is termed “wrongfulness in the air”. In this regard Lewis JA uttered the following warning in Premier, Western Cape v Faircape Property Developers (Pty) Ltd 003 6 SA 13 (SCA) 31-32: “For an act or omission to be actionable, it must constitute an infringement of a legal interest. Just as there cannot be negligence in the air, so too there cannot be wrongfulness ... in the air ...”; see further sources quoted by Neethling & potgieter 33 n 6.) The only substantiation offered by Lamont J in this case of his finding of wrongful conduct on the part of the first respondent, appears as follows (381I): In my view, the conduct of the first respondent in performing acts designed to frustrate the free commercial activity of the appellant constitutes a wrongful act.

It is suggested that this is a prime example of an approach to establishing wrongfulness on the basis of “wrongfulness in the air” and that the implications of such an approach is so far reaching, that it could in fact frustrate normal transactions in a society where free trade is the order of the day. In this respect it is well worth to note the warning sounded by McKerron in the context of competition law, where he refers to the approach taken by English judges that courts should not concern themselves with the propriety on ethical or social grounds of what litigating parties have done, but should only be concerned with the question whether the plaintiff could prove such unlawful act on the defendant’s part as would entitle him to relief (270 sqq, referring to the leading English cases of Hodgson v Webb supra and Allen v Flood supra; see 3 1 above).

3 2 3 Excursus on Fault in Cases of Interference with a Contractual Relationship

It would appear that, from an academic point of view at least, some measure of doubt exists as to what the fault requirement in this regard entails. Although the present appeal deals with the application for an interdict, for which fault need not be proved by the applicant, the court’s extension of the field of application of the remedy for interference with a contractual relation justifies a brief discussion of the present South African position in this regard.

Obviously influenced by the application of the term “malice” in some of the English cases, McKerron (274; quoted in extenso in the Atlas Organic Fertilisers case 180A-C) is the only South African author who is not averse to an interpretation of this term as being tantamount to “spite”, “ill-will” or “improper motive” which, in addition to dolus, has to be present on the part of the defendant or respondent and which would then explain that in the case of interference with business relations a person’s motive has a part to play. In this context McKerron concludes (274):

[C]ourts of law should not attempt to distinguish between acts of interference which are unfair and unreasonable. But a line can and should be drawn between acts of interference whose object is the defence or advancement of a person’s own interests, and acts of interference whose sole or dominant purpose is the infliction of harm for harm’s sake.

It is suggested that if this line of reasoning is followed, the facts of the present case do not warrant a finding of malice on the first respondent’s part. The sole fact that a measure of doubt existed as to the existence of a contract of lease between the appellant and the first respondent (that it “is apparent that there is a dispute between the first respondent and the applicant as to the existence of the lease”) and that the court at most found that there was prima facie evidence of the appellant’s occupation of the premises in terms of a lease (384D), to my mind definitely does not justify a finding of malice on the part of the first respondent. If the court’s reference to the first respondent’s conduct as “designed to frustrate the free commercial activity of the appellant” (381I, quoted above) was meant as a positive finding as to malice, it is clearly wrong. (For stringent criticism of an interpretation of malice as representing an improper motive, see Van der Merwe 13 sqq.)

There seems to be a greater measure of unanimity in respect of the requirement of fault: intent (dolus) at least is required, with specific emphasis on the element of consciousness of wrongfulness (see the Lanco Engineering case 380J, merely endorsing the earlier leading judgment of Union Government v Ocean Accident and Guarantee Corporation Ltd (supra); Neethling & Potgieter 308-309 who, in principle, favour negligence as a sufficient form of fault). It is suggested that if the facts of this case are kept in mind, it is doubtful whether any action on the first respondent’s part giving rise to the appellant’s dilemma had been done with full consciousness of wrongfulness, considering the great measure of uncertainty regarding the existence or a lease between the appellant and the first respondent. It could well be argued that the first respondent’s conduct had simply been consistent with an opinion that no lease agreement had been concluded and that it simply acted to its own advantage in wishing to see the appellant leaving the premises.

3 2 4 Compliance with Requirements for Granting of an Interim Interdict

Finally, something falls to be observed on the way in which the court applied the requirements for the granting of an interim interdict to the appellant. Courts confronted with instances of interference with a contractual relationship usually have to decide a claim for damages instituted by the aggrieved party. However, Van der Merwe (195) points out in this respect that “die krag van ’n interdik ook nie uit die oog verloor [moet] word nie”. This is indeed the only reported case of this kind which I could find and in which the remedy of an interdict featured. The first, second and fourth requirements regularly posed for the granting of a temporary interdict (see 384A-C; see further LF Boshoff Investments (Pty) Ltd v Cape Town Municipality 1969 2 SA 256 (C) 267; Neethling & Potgieter 255; Van der Merwe & Olivier 257) call for some comment.

The first requirement is that the applicant should prove a prima facie right (which is being infringed or imminently threatened by the respondent). If the typical position in cases of this kind is taken into account - where A and B are in a contractual situation on which C infringes - it will be evident that the court did not pay careful attention to this. In this case one could imagine A being the appellant (tenant), B being the municipality and C being the first respondent (landlord). In the typical case the prima facie right would be that of A, flowing from his contractual relationship with B, under threat by C. The court’s positive finding in respect of the existence of the required prima facie right, appears as follows: “The appellant [A] has established prima facie that it occupies the property pursuant to a lease [with landlord C]” (384D). It is obvious from the information supplied in square brackets, that the required prima facie right as explained above - viz between A and B - is totally lacking! The only right which the court alluded to here, was B’s right vis-à-vis C in terms of the purported contract of lease. This is a far cry from the required right of A vis-á-vis B, on which C’s conduct could constitute an infringement. The unavoidable conclusion from this is that there had been no compliance in this case with the first requirement for granting an interim interdict.

As Harms (LAWSA vol 11 422) points out, the second requirement for obtaining an interim interdict, viz that irreparable harm would follow if such interdict were not granted, need not eo nomine be adhered to where the applicant has already established a clear right; and that it is furthermore closely related to the last requirement posed for the granting of an interim interdict, such being a consideration of the balance of convenience, which should favour the granting of the interdict. It is trite that this means that such interdict should be granted if this would not entail serious detriment to the respondent, while a refusal of the order would give rise to the applicants suffering substantial harm (Olympic Passenger Service (Pty) Ltd v Ramlagan 1957 2 SA 382 (D) 383F; see further Harms LAWSA vol 11 422, in particular authorities quoted in nn 1-4). It should be kept in mind that an interim interdict, when granted, only applies pending the outcome of a trial action based on the same facts (see Neethling & Potgieter 255). From the order granted by the court it appears that it was expressly made subject to such action being instituted within a month of the granting thereof. One could thus safely predict that the dispensation brought about by the granting of the order in favour of the appellant would be of relatively short duration. Was that the main reason for the court’s lenient attitude towards the appellant? One can only speculate on this, as the judgment itself sheds no further light on the matter.

Furthermore, it is not clear on what basis the order against the municipality (the third respondent) to conclude a contract for the provision of services with the appellant rests, having regard to the above-mentioned requirements. In the first place, from the facts it is patently clear that a contractual relationship had not yet come into existence between the appellant and the municipality; in fact, the entire object of the legal proceedings had been to effect such a relationship. Any prima facie right of the appellant required vis-à-vis the municipality on the basis of a services contract had thus been totally absent. Although it might be argued that, in the event of the existence of a lease between the appellant and the first respondent (as prima facie decided by the court), the municipality would have been obliged to conclude a contract for the provision of services with the appellant (on the basis of a consumer’s right based on the relevant bylaws), there is no indication in the facts set out in the judgment that the municipality would not have concluded such a service agreement if it had been informed by the first respondent of the appellant’s tenancy of the premises in terms of a lease. As a necessary corollary to the existence of a clear or prima facie right on the part of an applicant, our law requires an act or omission on the part of the respondent indicating that a breach of the right would occur in the absence of an interdict (see eg Conde Nast Publications v Jaffe 1951 1 SA 81 (C); Van der Merwe & Olivie 252). It is therefore suggested that this fundamental requirement for granting the order against the municipality was lacking. One can justifiably argue that the appellant could have proceeded against the municipality with an urgent application for a temporary interdict aimed at the conclusion of a services contract, only after the municipality would have failed to conclude the contract for the provision of services with the appellant after having been informed of the court order against the first respondent.