MEC for Infrastructure Development, Qedani Mahlangu has welcomed the Supreme Court of Appeal’s judgement on the matter of Country Cloud Trading CC v MEC for Infrastructure Development.
“I welcome this judgement, which dismissed the appeal with costs, including the costs of two counsel. I am certain that this judgement will set a precedent and become important case law for future actions involving the State”, said MEC Mahlangu.
The appeal originates from a building contract between the department and Illima Projects (Pty), a construction company awarded a contract for the construction of the 300 bed Jabulani Hospital for R480 million in September 2008. In order to comply with its obligations under the contract, Illima borrowed R12 million from Country Cloud CC. In the loan agreement between these parties, Country Cloud stood to make a profit of R8.5 million.
After Country Cloud paid Illima R12 million, the Department of Infrastructure Development cancelled the contract on the basis of misrepresentations by Illima in September 2008, which led to the liquidation of Illima. Thereafter Country Cloud instituted action against the department in the South Gauteng High Court for delictual damages of R20.5 million. The High Court awarded in favour of the department. The matter was then appealed and heard in the Supreme Court on 8 November 2013.
The judgement delivered on 26 November 2013 states, “there were at least two alternative remedies available to Country Cloud to recover its loss. It could either have claimed repayment from Ilima in terms of the contract of loan or it could have taken cession of Ilima’s claim against the department. The reason why it did neither is not explained.
The contention on behalf of Country Cloud was that, because of Ilima’s insolvency, it was not able to recover its claim in full. But as I (JA Brand) see it, there is more than one answer to this contention.
First, it still does not explain why Country Cloud did not take cession of Ilima’s claim against the department if the liquidators elected not to pursue their claim.
Secondly, there is no reason to think that if Ilima or its liquidator had successfully pursued its claim for breach of contract against the Department, it would still be unable to repay Country Cloud.
Thirdly, if Ilima would remain unable to pay Country Cloud despite its success against the Government, the cause of Country Cloud’s loss would no longer lie in the department’s breach but in Ilima’s insolvency. Logic dictates that this must be so.
Once Ilima is by means of an award of damages in contract placed in the position it would have been if the department had complied with its obligations, any further damage that Country Cloud could suffer could no longer be laid at the door of the department.
It follows that in my view there is no room for the imposition of delictual liability on the department for the loss claimed by Country Cloud. For these reasons the appeal is dismissed with costs, including the costs of two counsel”. The judgement is attached.
For enquiries:
Ramona Baijnath, Spokesperson
Cell: 076 942 3419
E-mail:ramona.baijnath@gauteng.gov.za
