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[2010] ZAGPPHC 121
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Graf v Wenger (36453/2009) [2010] ZAGPPHC 121 (23 September 2010)
NOT REPORTABLE
IN THE HIGH COURT OF SOUTH AFRICA
(NORTH GAUTENG HIGH COURT, PRETORIA)
CASE
NO: 36453/2009
DATE: 23/09/2010
IN THE MATTER BETWEEN:
GERD
GRAF
..................................................................
EXCIPIENT/DEFENDANT
AND
JOSEF
WENGER
........................................................
RESPONDENT/PLAINTIFF
JUDGMENT
OMAR, AJ
This matter
relates to an exception by the defendant to the plaintiff’s
particulars of claim as failing to disclose a cause
of action, as the
plaintiff is not entitled in law to claim damages to protect both his
reliance and expectation interest, i.e.
the plaintiff is not entitled
to claim as damages the amount he invested as well as a return on his
investment, and that the plaintiff’s
claims are separate and
distinct causes of action which have been pleaded as a single cause
of action.
The plaintiff’s
claim is predicated on an oral agreement which he alleges was
concluded between the parties herein, Gerald
Kaa and Angela Schmitzer
during 1999.
In terms of the agreement, the
parties would purchase a piece of land, register the land in the name
of the defendant and improve
the property to enable the parties to
use it as a weekend getaway.
The plaintiff
alleges that the defendant breached the agreement, and that he is
accordingly entitled to cancel the agreement and
as such, claims
cancellation of the agreement and his investment of R100 00-00 and
damages in the amount of R200-00-00 being his
share of the present
value of the plot.
It was submitted
by counsel for the excipient that damages for breech of contract is
usually computed on the basis of so-called
positive
interesse
.
Broadly speaking, this method involves a comparison between the
aggrieved party’s actual financial position (now that the
breach has occurred) with the hypothetical financial position in
which he would have been if no breach had occurred, i.e. if the
contract had been duly performed by the guilty party.
The positive
interest also known as the expectation interest, was the final
interest which the aggrieved party had in the fulfilment
of the
contract and was represented by the difference between the economic
position which the aggrieved party would have enjoyed
if there had
been n breach and the position in which he actually found himself as
a result of the breach.
It was submitted
further by counsel for the excipient that what the plaintiff has lost
(positive
interesse
)
as a result of the alleged breach of the oral agreement, is his use
and enjoyment of the property i.e. he is not able to retreat
to the
property on weekends. It is for this loss that the plaintiff must be
compensated by the payment of money or otherwise.
The plaintiff has
not quantified his loss on this basis.
The negative
interest, also known as the reliance interest, covers only the
expenses and loss caused by relying on the contract,
i.e. the
difference between the economic position the aggrieved party would
have enjoyed if he had not made the contract at all
and that in which
he actually finds himself.
See:
Mainline
Carriers (Pty) Ltd v Jaad Investments CC
1998 2 SA 468
(C).
Further, it was
submitted that in our law a plaintiff is entitled to recover his or
her reliance interest in the form of damages
for breach of contract,
but this interest is limited to the extent of his or her expectation
interest. The plaintiff’s loss
based on a claim for negative
interesse
is for
payment of the monies he invested in the project i.e. his investment
of R100 000-00.
Counsel for
excipient also referred to the American system, as referred to by the
judge in the
Mainline Carriers
case, where it is clear that a party must elect whether to claim for
his expectation or reliance interest pursuant to a breach
of
contract, or the party must claim in the alternative i.e. he cannot
claim both his reliance interest and expectation interest
in one
action. The plaintiff does not claim the amounts referred to in the
alternative.
It was further
submitted on behalf of the excipient that the plaintiff’s claim
for repayment of his investment is a claim
for his negative or
reliance interest, to place him in the position he would have been
had the agreement not been concluded (the
first claim). The
plaintiff’s claim for his current value of the plot is a claim
for his positive or expectation interest,
in order to place him in
the position he would have been had the defendant performed in terms
of the agreement (the second claim).
The plaintiff’s claims
are separate and distinct causes of action which have been pleaded as
a single cause of action.
The plaintiff is not entitled in law to
claim damages to protect both his reliance interest and expectation
interest i.e. the plaintiff
is not entitled to claim as damages the
amount he invested in the plot as well as a return on his investment.
In this matter,
if the plaintiff is entitled to claim both his
expectation and reliance interest in this action, he would obtain
compensation in
excess of his actual loss.
It was submitted by counsel for the
plaintiff (respondent) that damages for breach of contract, unlike
damages for delict, are
normally not intended to re-compensate the
innocent party for his loss, but to put him in the position he would
have been in if
the contract had been properly performed.
Counsel for the
plaintiff referred to the judgment of Farlam J in the matter of
Mainline Carriers (Pty) Ltd v Jaad
Investments CC
1998 2 SA 468
(C) where, he
submitted, it was clarified under which circumstances a plaintiff may
sometimes be entitled to claim his loss in
the sense of the
expenditure he would not have incurred if the contract had not been
entered into. This clarification is partly
due to preferring English
to Latin, and describing damages for breach as protecting the
plaintiff’s expectation interest,
reliance interest or
restitution interest rather than talking about his positive
interesse
or negative
interesse
.
A plaintiff’s expectation interest is protected by putting him
in the position he would have been in if the contract had
been
properly performed (the normal contractual measure of damages), his
reliance interest is protected by putting him in the
position he
would have been in if he had never entered into the contract; and his
restitution interest, which may overlap with
his reliance interest,
is protected when the contract has been cancelled and he claims and
offers restitution by analysing leading
American, Canadian, English
and Australian authorities. Farlam J convincingly demonstrates that
the majority decision in
Hamer v Wall
1993 1 SA 235
(T) at 241G, that a plaintiff is not entitled to “elect
whether to pursue either his negative or positive
interesse
”
is out of step and cannot be supported. He is entitled to make that
election, either on the American-Canadian-English basis
that there is
no restriction on his right to choose, or on the Australian basis
that reliance damages can be claimed only where
it is not possible to
predict what position the plaintiff would have been in had the
contract been properly performed.
Counsel for the plaintiff also
referred to a number of other cases in support of his arguments and
contentions.
I shall now endeavour to apply the
legal position as I understand it to the facts pleaded in the present
case and the grounds of
the exception thereto.
Counsel for the
excipient argued that the decision in the
Hamer
v Wall
case,
supra,
must prevail as it was a majority decision by two senior judges in
this division.
In
Hamer
v Wall, supra,
the majority held that a
party to a contract who complains of a breach of the contract by
another party thereto may only claim
his positive
interesse,
i.e. such damages as would place him in the
position he would have occupied had the contract been performed and
the breach not occurred.
The court further held that a plaintiff
could not elect to pursue either his negative
interesse
or his positive
interesse
.
In
casu,
it is clear to me that the
plaintiff’s claims are separate and distinct causes of action
which have been pleaded as a single
cause of action.
In my view, the plaintiff is not
entitled to claim as damages the amount he invested in the plot as
well as a return on his investment
as this would result in the
plaintiff obtaining compensation in excess of his actual loss.
I fully agree with
the decision of the majority of the judges in the
Hamer
v Wall
case,
supra,
that a plaintiff is not entitled to elect whether to pursue either
his negative or positive
interesse
.
The submission by
counsel for the plaintiff/respondent that a plaintiff is entitled to
make that election under the circumstances
is not acceptable and is
in my view untenable. The further submission by counsel for the
plaintiff that the legal point taken
by the defendant should be
argued at trial is equally untenable.
In the result, I make the following
order:
1. The exception is upheld with costs.
2. The plaintiff is ordered to amend
his particulars of claim within a period of ten (10) days from the
granting of this order.
SS OMAR
ACTING JUDGE OF THE HIGH COURT
Counsel for the applicant:
Instructed by:
Counsel for the respondent: TP Kruger
Instructed by: