IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
CASE NO 98/03
In the matter between
TRANSNET LIMITED

Appellant
and
SECHABA PHOTOSCAN (PTY) LTD
Respondent
________________________________________________________________________
CORAM:
HOWIE P, ZULMAN, FARLAM, LEWIS JJA et
VAN HEERDEN AJA
________________________________________________________________________
Date Heard:
1 March 2004
Delivered:
1 April 2004
Summary:  Delictual claim for damages – public tender process – tenderer for
purchase contract fraudulently deprived of award when due to win tender –
whether loss of profits that it would have earned claimable in delict.
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
HOWIE P

HOWIE P
[1] The primary question in this appeal is whether on the facts of this case
the loss of prospective profits is compensable in law as delictual damages.
[2] Transnet Limited (the appellant), a parastatal corporation, called for
public tenders for the purchase of one of its divisions, Transnet Production
House, which operated a printing business. Among a number of bidders the
respondent company, a well-established printer, submitted a tender, as did
Skotaville Press (Pty) Limited.
[3] Despite very strong indications emanating from the appellant during
the tender evaluation process that the respondent’s tender would succeed,
Skotaville was unexpectedly awarded the purchase contract and duly bought
the Production House business. Alleging that the award to Skotaville instead
of the respondent was the culmination of a fraudulent tender process, the
respondent sued the appellant for damages in the High Court at
Johannesburg.   There were two claims.
[4] At the trial the following was recorded:
‘1.
For the purposes of settling the merits pertaining to the present trial action (and
for no other purposes), the First Defendant concedes the allegations contained in
paragraphs 6 to 12 of the Plaintiff’s particulars of claim as amended.
2.
The First Defendant accordingly admits that the Plaintiff has suffered damages
and that the First Defendant is liable in respect thereof.

3.
Accordingly, the only issue to be determined between the parties is one of
“quantum”, ie whether the Plaintiff is entitled to the relief set out in its main claim, its
alternative claim, or alternative relief plus interest and costs.’
[5] In the light of those concessions and the consequent admission only
one claim is relevant now. In terms of that claim compensation was sought
in the sum of  R60 689 000 being the net profit which it was alleged the
respondent would have been able to make in the three years following the
purchase had it been awarded the contract. The respondent maintained that
the appellant’s fraudulent conduct had prevented it from earning that profit.
[6] The learned trial judge (Snyders J) proceeded to hear evidence on the
quantum of damages. The respondent called three witnesses. They testified
to facts, opinions and calculation data, all of which related to three years’ net
profit which they said the respondent would have earned had it conducted
the business of Production House. In the course of cross-examining these
witnesses counsel for the appellant foreshadowed certain factual evidence
for the appellant but it was not in the end adduced.  The tenor of the only
evidence which the appellant did lead simply offered some criticism of the
method by which the respondent computed its alleged damages. That was a
line of defence not pursued with the respondent’s witnesses. Having
reviewed and considered the respondent’s evidence, the learned trial judge

held it to be essentially unchallenged and she accepted it. After making a
5 per cent contingency deduction, she awarded the respondent R57 654 550
as damages. With her leave the appellant appeals.
[7] The main thrust of the argument for the appellant was that the
respondent had sought to be placed in the position it would have been in had
this been a case for contractual damages, that is, to have its bargain made
good. The claim being one in delict, however, the respondent was not
entitled to compensation according to that measure but only to such out-of-
pocket expenses as it had incurred in preparing and making its bid. The trial
court, it was urged, had therefore erred in awarding damages that were not
recoverable in law for the wrong that had been done. It must be said that this
was not a point taken at the trial or dealt with by the trial court in its
judgment.
[8] It is unnecessary for present purposes to refer to the particulars of
claim relative to the issue of liability. Although the respondent resisted the
appellant’s doing so for the first time on appeal, it is clear, in my view, that
despite this not having been raised at the trial, it was open to the appellant to
advance the contention that the loss of prospective profits was not, as a
matter of law, a type of loss which could be taken into account in
quantifying a delictual damages claim of the present kind. That question was

not excluded by the settlement agreement on the merits. It was an integral
part of the enquiry into quantum.
[9] The appellant’s main submission rested on three bases: a well known
dictum in the case of Trotman v Edwick;1 a passage in the case of Olitzki
Property Holdings v State Tender Board and another;2 and authority which,
according to the submission, holds that a claimant in delict is entitled to
negative interesse, not positive interesse.
[10] The dictum in Trotman v Edwick reads as follows:
‘A litigant who sues on contact sues to have his bargain or its equivalent in money or in
money and kind. The litigant who sues on delict sues to recover the loss which he has
sustained because of the wrongful conduct of another, in other words that the amount by
which his patrimony has been diminished by such conduct should be restored to him.’
It does not seem to me that that statement assists the appellant. First,
Trotman’s case was one of fraud inducing a purchase where the land bought
was, because of the fraud, not worth the price paid. In our case the fraud
prevented the purchase of a business that had, on the evidence, a highly
desirable profit-earning potential. Accordingly, there, it was a case of
diminution of the value of the plaintiff’s assets; trading profits did not come
into it. Here, by contrast, it is all about the trading profits that the respondent

1  1951 (1) SA 443 (A) at 449B-C.
2  2001 (3) SA 1247 (SCA) at 1261.

was due to be able to make but where the opportunity to earn them was
deviously denied.
[11] Second, the court approved the perennially true statement that the aim
in awarding delictual damages is to put the injured party in the same position
as he would have been in but for the delict. 3
[12] Third, the court in Trotman was careful to guard against laying down
a formula applicable to all cases of fraud of the nature involved there, that is,
fraud inducing a contract. It did not seek to comment at all on fraud having
the results involved here.4 Finally, even in the quoted passage the
formulation of the delictual measure of damages is wide enough to include,
in a suitable case, loss of profits.
[13] The appellant’s reliance on the Olitzki decision is also of no assistance
to it. That case did involve a loss of profits claim but it was not a case of a
tenderer being dishonestly deprived of a contract which it would otherwise
have been awarded. There, the plaintiff tenderer was not defrauded. Alleging
an irregular, unreasonable and arbitrary tender process, it sought, in the
words of this court, ‘to evoke a delictual remedy from the interstices of the
interim Constitution’5 on the ground of unlawful administrative action, and
to be placed in the same position as it would have been in had it been

3  At 450A-C.

awarded the contract. Apart from the fact that the plaintiff could not possibly
have shown that it would have been awarded the contract but for the alleged
wrongful conduct, the question in that case was not whether loss of profits
was claimable in delict but whether there was a delictual claim at all.  It was
in that context that Trotman’s case was referred to 6 in order to illustrate that
it was inappropriate, by judicial interpretation, to deduce a legislative
intention to accord a claim for the benefits of a lost bargain when the clear
intention of the constitutional provision under discussion 7 was that the very
matter of State procurement of goods and services had to be regulated by
subsequently passed legislation. It was accordingly unnecessary for the court
to decide whether, if a delictual claim lay, loss of profits was recoverable
pursuant to it.  One might add that, as a broad generalisation, contractual
damages claims by and large do concern recovery of loss of profits whereas
delictual claims, by and large, do not. The Trotman statement was therefore
an effective illustration by means of which to show that the terms of the
interim Constitution did not warrant the conclusion that they necessarily

4  At 450B-C.
5  At 1262 para 29.
6  At 1262 para 28.
7  Section 187(1) of the Interim Constitution (Constitution of the Republic of South Africa Act 200 of
1993) which read:
‘The procurement of goods and services for any level of government shall be regulated by an act of
Parliament and provincial laws, which shall make provision for the appointment of independent and
impartial tender boards to deal with such procurements.’

afforded the plaintiff a delictual claim. Further than that the Olitzki case, in
presently relevant respects, did not go.
[14] Turning to the third base of the appellant’s argument, the legal
position is briefly this. The Roman id quod interest (literally, that which is
between; broadly, that which makes up the difference) could afford a
damages claimant not only out-of-pocket losses but loss of profits as well.8
In medieval times the word interesse came into use but it simply denoted all
the damages that had to be paid. Voet9 defined interesse as ‘the deprivation
of a benefit and the suffering of a loss through such fraud or negligence on
the part of an opponent as he is liable to make good and as is assessed in
fairness by the duty of the judge’ (Gane’s translation). It was nineteenth
century German scholarship that drew the distinction between positive and
negative interesse.10 Specifically with regard to delict, this court has referred
to the difference between the patrimonial position of the plaintiff before and
after the delict, being the unfavourable difference caused by the delict.11
[15] It is now beyond question that damages in delict (and contract) are
assessed according to the comparative method.12 Essentially, that method, in

8 Visser and Potgieter Law of Damages 2 ed 9-10.
9 Commentary 45.1.9.
10 Professor Dale Hutchison, Professor of Private Law, University of Cape Town, in an unpublished paper
entitled ‘Back to Basics: Reliance Damages for Breach of Contract Revisited’ (delivered in October 2001)
4.
11  Santam Versekeringsmaatskappy v Byleveldt 1973 (2) SA 146 (A) at 150A-C.
12  Visser and Potgieter op cit  2 ed 64.

my view, determines the difference, or, literally, the interesse. The award of
delictual damages seeks to compensate for the difference between the actual
position that obtains as a result of the delict and the hypothetical position
that would have obtained had there been no delict.13 That surely says enough
to define the measure. There appears to be no practical value in observing
the distinction between positive and negative interesse in determining
delictual damages.14 It is a distinction that tends to obscure rather than
clarify. If to award the difference means necessarily awarding loss of profits
then it does not assist first to ask what positive interesse and negative
interesse comprise.
[16] The idea that loss of profit is not recoverable in delict is not
historically founded.15 Indeed, the converse is the case.16 Moreover, it is
commonly the subject of an award of damages for loss of earning capacity in
personal injury cases. Why should it matter that the injury is not physical but
economic, as long as the loss is one of earning capacity? Take the example
of the owner of a taxi that is negligently damaged. He has a claim for the

13 Visser and Potgieter op cit 66
14  For articles providing valuable contributions to the debate concerning positive and negative interesse in
breach of contract cases see Professor DJ Joubert ‘Negatiewe Interesse en Kontrakbreuk’ (1076) THRHR 1;
and Professor G Lubbe ‘The Assessment of Loss Upon Cancellation for Breach of Contract’ (1984) 101
SALJ 616.
15 Reinhard Zimmerman, The Law of Obligations: Roman Foundations of the Civilian Tradition (1990)
972.
16 Visser and Potgieter op cit 75.

profit lost while the vehicle is out of action.17 Can it make any difference if,
subject to quantification, the delict is committed when he has just bought the
vehicle, before commencing business? I think not. Nor can it matter if the
loss were caused by fraudulent conduct, not negligence. Clearly, the loss
would impair his earning capacity and that is part of his patrimony. The
claimant in the present case is a company. Once again, that can make no
difference. Its patrimony has been impaired by having the bargain that it was
on the point of acquiring dishonestly snatched away.
[17] Accordingly, in my view there is nothing in principle or the facts
which bars recovery of damages by way of loss of profits in this case. It
follows that the appellant’s main submission must fail. The respondent is
entitled to be placed in the position it would have been in but for its having
been fraudulently deprived of the purchase that it was destined to be
awarded.
[18] The appellant’s next submission was that the trial court had wrongly
relied on oral evidence of the contents of certain written service level
agreements in determining the profits that the respondent would have made.
These were agreements between Production House and various other
divisions of Transnet which regulated the quality of work to be done by

17  Hutchison op cit 6-7.

Production House in terms of supply contracts which Production House had
with those divisions and pursuant to which it did their printing work. On the
evidence it was these supply and service level agreements which provided
the essential attraction for tenderers who sought to buy Production House.
They constituted ready-made business with ‘captive’ clients. According to
the appellant’s argument it was not possible, on the evidence led, adequately
to quantify loss of profits without knowing the contents and the duration of
the service level agreements. Consequently admission of oral evidence on
those matters infringed the best evidence rule, the hearsay rule and the
principle that a plaintiff had to lead all such evidence as would permit the
court properly to assess its damages.
[19] These grounds of attack were not raised in the notice of application
for leave to appeal. They emerged for the first time in the notice of appeal
subsequent to leave having been given. What happened at the trial was this.
When the first of the respondent’s witnesses, Mr M Visser, who was
personally involved in the conclusion of the service level agreements, was
asked about their contents in evidence-in-chief there was no objection by
counsel for the appellant. (The appellant was represented at the trial by
senior and junior counsel. It was represented by different senior and junior
counsel on appeal.) Under cross-examination Mr Visser was in fact invited

to state what the contents of the agreements were. He did so unrestrictedly
and at length. There was never a suggestion during cross-examination, much
less an accusation, that he was uniformed on the subject or that his evidence
thus elicited was for any reason to be ignored. In re-examination he said the
real value of Production House to the respondent was its relationship with
Transnet and its other divisions which relationship was founded on the
service level agreements that he had put in place. Once again, there was no
objection or challenge from the appellant’s counsel.
[20] The second witness, Mr W Petersen, referred only briefly to the
agreements in evidence- in-chief. He did not mention their contents.
[21] The last witness for the respondent, Mr A de Aguiar, gave detailed
evidence-in-chief about the agreements. He did so without objection by the
appellant’s counsel. In cross-examination no attack was made upon either
the admissibility or the content of that evidence.
[22] In the circumstances just outlined the service level agreements were
never in contention either as to the admissibility of oral evidence concerning
their contents or as to the contents themselves. The trial court was therefore
fully justified in having regard to that evidence and relying on it. It is
nothing less than ironic that Transnet raises this complaint when the parties

to the agreements concerned were all part of Transnet. The second
submission cannot succeed.
[23] The third and final submission for the appellant was, in effect, that
had the admitted fraud not been perpetrated and the purchase contract been
awarded to the appellant, it would in any case have had to pay the purchase
price (R10 million) and this sum fell to be deducted from the proved
damages.
[24] This contention does not appear to have been raised in argument
before the court below for it is not mentioned in its judgment.  What appears
in the evidence is that Mr Petersen was asked in cross-examination whether
the deduction should be made and said he did not know how to answer the
question. There are also portions of Mr de Aguiar’s evidence in which he
discussed what he called ‘exit value’ after expiry of the service level and
supply agreements. I shall revert to his evidence presently.
[25] If the Production House business was, on the facts in the respondent’s
contemplation, not due to have any real value after expiry of those
agreements, in other words, if it was bought solely to exploit those
agreements until they had become a spent force, it might be a tenable
argument that the R10 million purchase price, being the cost of the profit-
generating enterprise, should be deducted as itself part of the cost of making

the contemplated profits. It would be otherwise, however, if, in line with a
purchase price normally being capital expenditure, the purchased capital
asset was expected still to be there after the three years, having retained, or
perhaps increased its value. In the latter event the respondent’s calculations,
as accepted by the trial court, would in my view rightly have excluded any
deduction of the purchase price.
[26] Mr de Aguiar, to whom I have already referred, is a chartered
accountant with tax and business experience. At the time of trial he was
chief executive of a company, Corporate and Merchant Advisers Limited,
which he himself had started. He conducted a due diligence test before the
respondent’s bid was submitted and helped to formulate the bid. He was also
involved in the computation of the damages assessment on which the
respondent relied in the court below, having taken into account the facts and
opinions of the other two witnesses and his own knowledge and expertise.
He was pre-eminently the witness to whom the point under discussion
should have been put. It was not.
[27] A brief summary of Mr de Aguiar’s evidence relative to the role and
function of the purchase price and the prospects of an exit value is as
follows. The purchase price mainly represented the acquisition of goodwill
in the form of the existing agreements with Transnet’s other divisions. Only

a small part of the price represented the acquisition of physical assets and it
was contemplated that most of them, comprising equipment possessed by
Production House, would have been scrapped or just not used by the
respondent. Both the purchase price (being input value), and the exit value
after three years were capital items, whereas the damages claim focused
solely on income and expenditure. The witness said that if the respondent
had conducted the business for three years, then, working on a contemplated
after-tax profit in the third year of R16 million, and applying the standard
valuation used for companies quoted on the Johannesburg Stock Exchange
of a price/earnings multiple of 4, the exit value would have been about
R64 million. He went on to say that it was not contemplated that new plant
would have been bought in the three years. Any surplus work beyond the
capacity of the respondent’s own equipment and the purchased equipment
would have been outsourced. He then said:
‘Thereafter, having built up profits and having the capacity to fund and acquire new
machinery the business would look to acquire new machinery because the plan was not
only to service Transnet but it was going to be one of the customers, the plan was to
make this a much larger business and serve its other customers as well. But there was a
feeling that in the three year period, because a lot of the service level agreements were
only for three years, they would have to focus on Transnet being their major client and

service them to ensure that after the three years they would still be able to retain their
clients based on the service and quality that they have given them at the time.’
[28] None of that evidence was challenged or queried. It was certainly
never put to Mr de Aguiar that there was a basis for deducting the purchase
price from the assessed damages or that there would have been minimal exit
value. These are points which should have been investigated by the appellant
at the trial. It is too late, when on appeal, to raise uncanvassed factual issues.
The evidence demonstrates that there would have been appreciable exit
value and that such value, as well as the input value represented by the
purchase price, were properly ignored in the computation and award of
damages. My conclusion is, therefore, that the third submission must also
fail.
[29] No other arguments having been advanced to attack the trial Judge’s
assessment of damages, the appeal is dismissed, with costs, such costs to
include the costs of two counsel in so far as two counsel were employed.
____________________
CT HOWIE
PRESIDENT
SUPREME COURT OF APPEAL
CONCURRED:

Zulman  JA
Farlam  JA
Lewis  JA
Van Heerden  AJA