Adv Louis Nel Business Review: Indemnities – Insert 8: The role of contractual issues, public policy, delict and the duty of care (Part 2)
I am sure that when you read all my articles to date, you may be a bit confused – you may even say ‘That’s putting it mildly’!
I am the 1st to acknowledge the latter so let me give you a brief snapshot of the evolution of some of the key issues from the last insert before I address the duty of care (‘DOC’), which is a common law principle to be applied in conjunction with the CPA and case law.
An indemnity is a contract (pactum) between the service/product provider and the client/consumer, in terms of which the client undertakes not to sue the provider.
The default principle is known as ‘pacta sunt servanda’ (‘PSS’), i.e. contracts entered into must be upheld.
The common law (delict/tort) concept of voluntary acceptance of risk (‘VAR’) goes hand-in-hand with PSS and is a further default principle, i.e. if you have voluntarily accepted the risk, you cannot claim for adverse consequences such as injury or death (Volenti non fit injuria).
Certain requirements must be met before PSS and VAR will be upheld – in essence these include inter alia: plain language – the signing of the indemnity & participation in the activity in question must be voluntary – the participant must be fully informed of all the material facts & risks (failing which there can be no consensus, a requirement for a binding contract) – unfairness and harshness of the wording does not automatically mean the indemnity will not be upheld – good faith – reciprocal rights and obligations.
The latter brings into the equation the DOC issue mentioned above. A careful reading of the Naidoo v Birchwood Hotel case highlights this aspect – see below:
- '......... the gate should have been subject to regular inspections and maintenance, inter alia to avoid undue hazards'
- '..... regular checks to ensure that every gate on the hotel premises is well maintained and functioning properly at all times'
- 'Erwee in his report on ‘precautionary measures’ made after the incident, recommended that the heavy gate be replaced with a new lighter gate that should run on gate motors to ensure that it would always be on the track and that no person would have to pull or push the gate. This, he concluded, would make certain that if the gate did fall, no person would be injured. The report is itself an admission that reasonable steps could have been taken to avert the harm'
Likewise, in the case of Duffield v Lilyfontein School (a zip line accident), the court referred to the DOC and held for the injured party, i.e. even if an indemnity has been signed, the party indemnified should do all things reasonably necessary to ensure that stringent safety measures are put in place.
What is the DOC?
- It is the duty owed by one person (Legal or natural) to another.
- Liability may arise if & when the DOC is breached.
- The breach can be of the contract or statute giving rise to the DOC or the common law.
It should be borne in mind that even if the DOC is owed, if the breach thereof does not amount to gross negligence, then the indemnity should be upheld.
So when does the principle of public policy come into consideration? It underscores the above PSS principle, i.e. freedom and indignity including the right to freely and voluntarily conclude a contract which must thus be upheld and secondly that all persons have a right to seek judicial redress – this inter alia was discussed in detail in the case of Cooper v Shamwari Game Reserve (‘the Shamwari case’ – ‘the SGR’) – before I embark on an analysis thereof, let’s take a 2nd snapshot of what the courts have said so far about public policy to give you some context:
- Beadica v Oregon Trust – the degree to which enforcing the indemnity is ’unfair, unreasonable or unjust’ will determine the role of public policy.
- Brisley v Drotsky – the court will address fairness, unreasonableness and good faith only in ‘exceptional cases’.
- Botha and Another v Rich - the Constitutional Court stated that fairness, unreasonableness and good faith can be considered but in the context of the circumstances.
- Barkhuizen v Napier – the court stated that they will only consider the circumstances if the clause is unreasonable and contrary to public policy.
- Mohammed v Southern Sun – the court indicated that before it addresses the public policy issue, they would assess the objective terms of the indemnity in the circumstances to determine whether or not it was clearly unreasonable or unfair as to be contrary to public policy, i.e. ’The fact that a term in a contract is unfair or may operate harshly does not by itself lead to the conclusion that it offends the values of the Constitution or is against public policy’.
Against the backdrop of the above where it seems the circumstances played a key role, let’s have a look at the Shamwari case, in my view, an erudite assessment of the CPA, public policy, and the above cases:
- The client (Cooper) visited SGR where she signed an indemnity upon arrival but during her stay she tripped and fell into the pool en route to dinner.
- Cooper’s case was based inter alia on breach of duty of care, lighting of pool, the pool not being cordoned off, the CPA and public policy.
- SGR argued they had met the duty of care, Cooper was aware of the pool which was well lit, she must’ve been mindful of the area, did not keep a proper lookout and Cooper indemnified SGR.
- The court referred in the 1st instance to the case of Durban’s Water Wonderland (Pty) Ltd v Botha which stated that if an indemnity is worded in ‘express and unambiguous terms’, it must be upheld – it was of the view that the SGR indemnity passed this test.
- The court also followed the guidelines of the Barkhuizen & Beadica cases discussed above.
- Cooper relied on the CPA section 48 (Terms must be ‘fair, reasonable and just and it is not of excessively one-sided’); sections 49 & (Certain risks must be brought to the attention of the consumer as early as possible & consumer must acknowledge via assent, signing or initialling it)(Note LOUIS: see my earlier inserts # 5 & 6 for in-depth discussion).
- The court expressed the view that Cooper’s public policy argument clearly entailed aspects of the CPA e.g. unequal bargaining power and curtailing her right to legal redress.
- Cooper’s contended that limiting access to the court, breaches regulation 44 (3) of the CPA (section 48) – this regulation provides a detailed list of ‘contract terms which are presumed not to be fair and reasonable’ such as (a) excluding or limiting the liability of the supplier for death or personal injury caused to the consumer through an act or omission of that supplier subject to section 61 (1) of the Act; (b) excluding or restricting the legal rights or remedies of the consumer against the supplier or another party.
- However, the court, based on the following extract from regulation 44 ‘
The list in sub-regulation (3) is indicative only, so that a term listed therein may be fair in view of the particular circumstances of the case’ found that the reference does not mean the indemnity is contrary to public policy and therefore ruled against Cooper. (Note Louis: see ‘circumstances’).
It would appear that (1) the reference to DOC seems to ‘elevate’ the negligence in question into the ‘gross’ category which cannot be excluded in an indemnity in terms of the CPA (Section 51) and (2) reference to the circumstances in each case seems to ameliorate the public policy issue when juxtaposing PSS with the preclusion of the right to legal redress.
© ADV LOUIS NEL
November 14, 2023
DISCLAIMER - Each case depends on its facts & merits - the above does not constitute advice - independent advice should be obtained in all instances.