Trustees for the Time Being of Two Oceans Aquarium Trust v Kantey & Templer (Pty) Ltd

The Two Oceans Aquarium Trust leased and operated an aquarium at the Victoria and Alfred Waterfront in Cape Town. The respondent, a company of consulting engineers, was involved in the design of exhibit tanks at the aquarium. The waterproofing lining of the tanks deteriorated, becoming porous and allowing seawater to penetrate the concrete and corrode the steel reinforcement. The Trust claimed damages of R14,924,395.00 from the respondent and five other defendants for remedial work and loss of revenue. The Trust alleged that the respondent negligently chose to waterproof the tanks by means of lining rather than designing water-retaining concrete structures. This alleged negligent design occurred both before and after a formal contract was concluded between the Trust and the respondent. The Trust was formed in July 1994. Prior to its formation, a joint venture agreement existed between potential investors to investigate the feasibility of the aquarium project. The respondent agreed with the joint venture to assist in investigating design options with a view to formal appointment if the project proceeded. The Trust claimed the respondent owed it a legal duty in delict even before the contract was concluded.

• Whether negligent conduct causing pure economic loss occurring prior to the conclusion of a contract gave rise to delictual liability
• Whether a legal duty existed in delict where parties contemplated a future contractual relationship
• Whether the element of wrongfulness was established in a claim for pure economic loss arising from alleged negligent design
• Whether policy considerations favored extending Aquilian liability to cover pre-contractual negligent conduct where a contractual remedy could have been negotiated
• Whether the plaintiff's claim was for physical damage to property or pure economic loss

The appeal was dismissed with costs, including the costs of two counsel. The exception to the particulars of claim was upheld, precluding the appellants from relying on any conduct by the respondent occurring prior to the conclusion of its agreement with the Trust as founding a delictual claim.

Where parties contemplate from the outset that their relationship will be governed by contract, and a plaintiff could have protected itself against the risk of harm from pre-contractual negligent conduct through appropriate contractual stipulations but failed to do so, there are no policy considerations justifying the extension of Aquilian liability for pure economic loss arising from such pre-contractual conduct. Delictual liability for pure economic loss depends on wrongfulness, which requires positive policy considerations favoring the imposition of a legal duty not to act negligently. South African law adopts a cautious approach and does not extend Aquilian liability to new situations unless there are positive policy considerations which favor such extension. A plaintiff is not 'vulnerable' to risk within the meaning required for extending delictual liability where the plaintiff had reasonable opportunity to avoid the risk by contractual means.

The Court made several non-binding observations: (1) It clarified terminology regarding 'legal duty' in the context of wrongfulness, noting that reference to a 'legal duty not to be negligent' would be clearer than simply 'legal duty', though the settled terminology need not change. (2) The Court noted that wrongfulness concerns the reasonableness of imposing liability, not the reasonableness of conduct itself (which is an element of negligence). (3) The 'legal duty' in South African delictual law must not be confused with the 'duty of care' in English law which straddles both wrongfulness and negligence. (4) The Court distinguished the case from subsequent purchaser situations (where a subsequent owner of a building claims against the original builder), noting that unlike the Trust, a subsequent purchaser would not have had any opportunity to arrange contractual protection. The Court expressly declined to decide whether delictual liability should extend to subsequent purchaser situations, noting this as a material difference that might lead to a different result. (5) The Court expressed support for the Australian concept of 'vulnerability to risk' as developed in Woolcock Street Investments Pty Ltd v CDG Pty Ltd, which requires that a plaintiff could not reasonably have avoided the risk by other means such as obtaining a contractual warranty.

This case is significant in South African delictual law as it reinforces the cautious approach to extending Aquilian liability for pure economic loss, particularly in pre-contractual contexts. It clarifies that where parties contemplate a future contractual relationship and have the opportunity to regulate their rights and remedies by contract, policy considerations do not favor imposing delictual liability for pre-contractual negligence. The judgment emphasizes the concept of 'vulnerability' - that delictual remedies should not rescue a plaintiff who was in a position to avoid the risk by contractual means but failed to do so. It also confirms that a claim for defective construction or design from the outset constitutes pure economic loss, not physical damage to property. The case demonstrates the importance of distinguishing between wrongfulness and negligence, and clarifies that the existence of a 'legal duty' in the context of wrongfulness is a matter of policy regarding whether negligent conduct should be actionable, not merely whether there was a duty of care.