Lillicrap Explained

Lillicrap Explained
Paper delivered at Deneys Reitz Case Law Update held on 8 June

2005.
There has always been confusion in our law as to whether you may bring a claim
for damages based in delict when there has also been a breach of contract, where
both claims arise from the same set of facts. Does the South African legal system
recognise a concurrence of actions? If so, is the plaintiff constrained to bring a
claim for the breach of contract or may the plaintiff choose which action to
pursue?
The seminal case dealing with the dichotomy between contract and delict, the
interpretation of which has led to much of the confusion which exists, is
Lillicrap Wassenaar and Partners v Pilkington Brothers (SA) (Pty) Ltd
1985 (1) SA 475 (A). Subsequent cases have misinterpreted this judgment to
mean that where a concurrence of actions exists, the plaintiff is limited to claim
in contract. This is incorrect and hopefully the case of FF Holtzhausen v Absa
Bank Limited Case No. 280/03 (SCA) will clear up the confusion.
In the Holtzhausen case, the plaintiff, Mr. Holtzhausen, dealt in diamonds. He

was approached by X, who was acting on behalf of an unidentified purchaser
wishing to purchase R500 000 worth of diamonds. Mr. Holtzhausen agreed to
the deal and also agreed to pay X R20 000 commission if the transaction was
concluded. A few days later, X told Mr. Holtzhausen that the money had been
deposited into his bank account. He gave Mr. Holtzhausen three telephone
numbers to verify the information. Mr. Holtzhausen obtained a copy of his bank
statement, which showed the credit, and he assumed, correctly, that the deposit
had been made by cheque. He approached his bank manager to find out whether
he could safely deliver the diamonds. The manager made several telephone calls
and gave Mr. Holtzhausen the assurance that the money was safe and that he
could proceed with delivery. The manager also personally authorised the
withdrawal by Mr. Holtzhausen of the R20 000 commission payable to X.
Needless to say, the cheque bounced and the credit to Mr. Holtzhausen’s account
was reversed.
Mr. Holtzhausen alleged that the bank manager undertook to and did have the
cheque cleared. Furthermore, he alleged that the bank manager was under an
obligation not to make a misrepresentation to him which he did by representing
that the cheque had been honoured whereas it had not been.
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Interestingly, Mr. Holtzhausen did not rely on a breach of any contract between
himself and the bank as constituting negligence for a claim based in delict. And
in the SCA, Mr. Holtzhausen advanced only a claim in delict for the pure
economic loss he suffered in consequence of the negligent misstatement by the
bank manager.
In the lower court the trial judge held that Mr. Holtzhausen’s claim was for
damages in delict, based on the breach of a contractual term, and on this basis
granted absolution from instance. In reaching this decision, he relied on the
Lillicrap judgment. In support of the trial judge’s decision, the defendant’s
counsel submitted that a claim for pure economic loss is not maintainable in
delict when a claim can be maintained in contract. Once again there was reliance
on the Lillicrap judgment. This is incorrect.
A trip down memory lane reveals the following: 1985, AD, Lillicrap. This case
dealt with the issue of whether a breach of a contractual duty to perform
professional work with due diligence is per se a wrongful act for the purposes of
delictual liability. In essence, Lillicrap> decided that no claim is maintainable
in delict where the negligence relied on consists solely in the breach of a term in a
contract. One of the elements of delict that a plaintiff has to prove is fault,
usually in the form of negligence. On the basis of Lillicrap, a plaintiff
cannot rely on the breach of a contract in order to establish
negligence in delict. The plaintiff must be able to demonstrate that
the defendant was negligent even though there was also a breach of
contract. Applying this principle to the case at hand, if Mr.
Holtzhausen relied on the breach of the contract between him and
Absa, and in doing so, brought a claim in delict, his claim should have
been dismissed, by virtue of the Lillicrap decision. And rightly so.
However, Mr. Holtzhausen relied upon a negligent misstatement by his bank
manager that induced him to part with the diamonds and therefore he could
rightly bring a claim based in delict. A delict was committed against him, which
he based his claim upon – in delict. There might have also been a breach of the
contract between him and his bank, which he may have been able to rely upon if
he had brought a claim in contract, based on that breach.
Based, on the above, the judgment in Pinshaw v Nexus Securities (Pty)

Limited 2002 (2) SA 510 (C) was incorrect. In that case, the plaintiff, Ms
Pinshaw, brought an action in delict against a director of an investment company
for the pure economic loss she suffered as a result of the bad investment by the
director. This is similar to the Holtzhausen case. Ms Pinshaw brought a claim
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based in delict because she had a right that existed independently of the contract,
which was infringed. Similarly, she could have sued for breach of contract. The
judge, in dismissing Ms Pinshaw’s action, cited the often misquoted Lillicrap,
which he interpreted to mean that where delictual liability coexists with liability
for a contractual breach, the plaintiff is limited to a claim in contract.
In summary, Lillicrap is not authority for the general proposition that

an action cannot be brought in delict if it coexists with a contractual
claim. Our law acknowledges a concurrence of actions where the same set of
facts can give rise to a claim for damages in delict and in contract, and allows
plaintiffs in such cases to choose which action they wish to pursue. Judge
Grosskopf emphasised this in the Lillicrap case. When pursuing a claim in
delict, you must prove negligence, and in doing so, you should take care to
remember that there is no proposition in our law that a breach of contractual
duty to perform professional work with due diligence is per se negligent.
Delictual liability cannot necessarily be imposed for the breach of a contract,
which is precisely what Lillicrap says.
Author / Contact Info
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 DURBAN
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Contact Durban Office
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 CAPE TOWN
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Lillicrap Explained

Paper delivered at Deneys Reitz Case Law Update held on 8 June

In the Holtzhausen case, the plaintiff, Mr. Holtzhausen, dealt in diamonds. He

Based, on the above, the judgment in Pinshaw v Nexus Securities (Pty)

In summary, Lillicrap is not authority for the general proposition that

Author / Contact Info

Deneys Reitz office in Johannesburg

+27 11 685 8500

+27 11 883 4000

Contact Johannesburg Office

Docex 215 Johannesburg

4th Floor The Marine

+27 31 367 8800

+27 31 301 3346

Contact Durban Office

Docex 90 Durban South Africa

Deneys Reitz office in Cape Town

8th Floor Southern Life Centre

Private Bag X10

+27 21 405 1200

+27 21 418 6900

Contact Cape Town Office

Docex 181 Cape Town

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