About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2017
>>
[2017] ZASCA 169
|
|
Drake Flemmer and Orsmond Inc and Another v Gajjar NO (21/2017) [2017] ZASCA 169; [2018] 1 All SA 344 (SCA); 2018 (3) SA 353 (SCA) (1 December 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 21/2017
In
the matter between
DRAKE
FLEMMER & ORSMOND INC
FIRST
APPELLANT
LE
ROUX INC
SECOND
APPELLANT
and
G
GAJJAR NO
RESPONDENT
Neutral
citation:
Drake
Flemmer & Orsmond Inc & another v Gajjar NO (21/2017)
[2017]
ZASCA 169
(1 December 2017)
Coram:
Cachalia and Tshiqi JJA, Makgoka, Ploos van Amstel and
Rogers AJJA
Heard
:
17 November 2017
Delivered:
1 December 2017
Summary:
Contract – breach of mandate by first
attorneys in under-settling RAF claim – breach by second
attorneys in allowing
claim against first attorneys to prescribe –
damages to be assessed at notional trial date of RAF claim.
Contract
– damages – whether court a quo ought to have reduced
damages for delay in bringing claim to trial.
Interest
– applicability of s 2A(5) of
Prescribed Rate of Interest
Act 55 of 1975
.
ORDER
On
appeal from:
The
Eastern Cape Local Division of the High Court, Port Elizabeth (Bloem
J sitting as court of first instance).
(a) The
appeal is dismissed with costs, including those attendant on the
employment of two counsel, such costs to be paid by
the second
appellant.
(b) The
cross-appeal is upheld with costs, including those attendant on the
employment of two counsel, such costs to be paid
by the second
appellant.
(c) Para
87.1 of the court a quo’s order is set aside and replaced with
the following:
‘
The
second defendant is ordered to pay the plaintiff, in his
representative capacity, the amount of R
9 211 953’.
JUDGMENT
Rogers
AJA (Cachalia & Tshiqi JJA and Makgoka, Ploos van Amstel
concurring)
Introduction
[1]
The main issue in this appeal is the date at which damages should be
assessed in an action against attorneys for professional
negligence
in the conduct of a client’s claim against the Road Accident
Fund (RAF), where the claim was settled at substantially
below its
true value. In general terms, the client’s damages are the
difference between the settlement amount and the true
value of the
claim against the RAF. In relation to the assessment of the true
value of the claim against the RAF, this judgment
considers (i) the
law to be applied; (ii) the facts and evidence to which regard
may be had; (iii) the time-value
of money.
[2]
The client in this case is Mr Rex Sutherland. Initially he was the
plaintiff in his personal capacity. Latterly he has been
represented
by a curator ad litem, the present respondent. For convenience I
refer to Mr Sutherland as the plaintiff. He was badly
served by two
successive firms of attorneys, the first and second appellants. The
first firm, Drake Flemmer & Orsmond Inc (DFO),
were the
plaintiff’s attorneys in his claim against the RAF. They
negligently under-settled the claim. The second firm, Le
Roux Inc
(LRI), were the attorneys whom the plaintiff engaged to sue DFO. They
negligently allowed his claim against DFO to prescribe.
I refer to
the appellants collectively as the defendants.
[3]
By the time the case came to trial in November 2015, the defendants
had conceded negligence. The plaintiff’s only extant
claim was
against LRI. His evidence was directed at proving the amount he
would have been awarded had his RAF claim been
properly conducted.
For that purpose his claim was actuarially valued as at 1 December
2015. The defendants adduced no evidence.
The court a quo
substantially accepted the plaintiff’s quantification but
reduced it by 43.69 per cent because of a supposed
delay of about
seven years by the plaintiff in suing LRI. This effectively resulted
in a valuation date of September 2009. The
judge deducted from the
reduced sum the actual settlement amount, grossed up to its September
2009 value, and awarded the plaintiff
the difference.
[4]
With the leave of the court a quo, the defendants appeal to this
court, contending that the plaintiff’s claim should have
been
valued at the date of the settlement or at the date of a notional
trial against the RAF, and that for this reason his claim
should have
been dismissed. Also with the leave of the court a quo, the plaintiff
cross-appeals against the reduction of 43.69
per cent.
The factual background
[5]
The plaintiff and his fiancee were injured in a head-on collision on
2 July 1997. The plaintiff, then 24 and living in King
William’s
Town, was employed as a youth pastor and part-time teacher. They were
both hospitalised for some weeks. The plaintiff
was treated for
fractures of the pelvic ring and right femur. While in hospital they
engaged DFO to pursue claims against the RAF.
They married in October
1997.
[6]
The plaintiff returned to work in January 1998 but experienced pain
and persistent headaches, was forgetful and battled to concentrate,
and displayed anger and frustration. He continued to work at the same
church until the end of 1999, interrupted by operations in
August
1998 and March 1999.
[7]
DFO arranged for Dr Mandell, an orthopaedic surgeon, to prepare a
medico-legal report, which was dated 8 May 1998. DFO lodged
the RAF
claim in January 1999. The only injuries mentioned were orthopaedic.
The amounts claimed totalled R150 771, including
R100 000
for general damages. Nothing was claimed for loss of earnings.
[8]
The RAF conceded negligence and made several offers of settlement,
the last of which
the plaintiff accepted on 21 December 1999 on DFO’s
advice. The offer was R98 334 (incorporating general damages of
R50 000) together with an undertaking in terms of
s 17(4)(a)
of the Road Accident Fund Act 56 of 1996 (RAF Act) and costs. The
undertaking was ‘limited to’ Dr Mandell’s report.
The plaintiff’s complaint in the court a quo was that DFO not
only failed to claim the loss of past and future earnings flowing
from his orthopaedic injuries; they also failed to investigate the
possibility of brain injury.
[9]
At the beginning of 2000 the Sutherlands relocated to East London and
the plaintiff started work at a new church on probation.
He continued
to suffer symptoms which affected his performance. He was not offered
a permanent post. In July 2000 they moved to
Port Elizabeth. The
plaintiff started an appliance business which soon failed.
Orthopaedic complications resulted in further operations
in April
2000, September 2000 and December 2000. On 19 September 2000 the
plaintiff wrote to DFO. Among other things, he asked
whether it was
possible for his RAF claim to be reviewed
‘
due
to the fact that I am literally losing thousands of rands a month
because I am unable to work normally, something that was not
taken
into account at the beginning of the claim.’
DFO
replied, explaining that he could not pursue further claims against
the RAF or against the negligent driver.
[10]
In July 2001 the plaintiff terminated DFO’s mandate and engaged
LRI. On 25 April 2002 LRI advised the plaintiff that
DFO had
negligently under-settled his RAF claim. Unfortunately LRI itself
made an elementary error. They assumed that prescription
against DFO
started to run on 25 April 2002, not 21 December 1999. The
commencement of prescription was not, however, dependent
on the
plaintiff’s having knowledge of the legal consequences of the
facts (
Truter & another v Deysel
[2006] ZASCA 16
;
2006 (4) SA 168
(SCA)).
[11]
In the meanwhile the plaintiff’s condition was going downhill.
He was becoming addicted to analgesic drugs. He was referred
to a
rehabilitation facility in December 2001. Things did not improve.
During the course of 2002 he suffered several epileptic
fits. The
degree of his addiction and the extent of his behavioural alteration
can be gauged from the fact that he began to forge
prescriptions. He
was seen by a psychiatrist, Dr Zabow, in October 2003, by which stage
he was psychotic. He was diagnosed as suffering
from depression and
epilepsy in consequence of brain damage. Dr Zabow recommended a full
evaluation after completion of treatment
for drug abuse.
[12]
Following criminal charges relating to the forging of prescriptions,
the plaintiff spent about three months at a drug rehabilitation
facility, Magaliesoord Centre, over the period March to June 2004.
The social worker’s report regarding the results was not
optimistic.
[13]
LRI issued summons against DFO on 21 April 2005. Even on their
mistaken view of prescription, they cut things fine. In its
plea,
filed during June 2005, DFO inter alia raised prescription. It is
unclear when the plaintiff was told of this. The first
explicit
reference to prescription in correspondence between LRI and the
plaintiff was on 12 July 2007, when the plaintiff –
in a letter
to Mr Abraham le Roux, the senior member of the firm – said
that he was totally confused about what was going
on because Mr Dean
Niekerk, the attorney handling the matter, told him that prescription
was being raised whereas Mr le Roux had
assured the plaintiff that
the summons was timeously issued.
[14]
In August 2007, more than two years after the filing of DFO’s
plea, LRI filed a replication alleging that prescription
did not
start to run until 25 April 2002. A trial date was obtained for 6
November 2007 with a view to determining the special
plea. On 2
November 2007 LRI delivered a notice of amendment to introduce into
the replication an allegation that from the middle
of 2001 until June
2004 the plaintiff had been insane and that completion of
prescription had thus been delayed in terms of
s 13(1)(a)
of the
Prescription Act 68 of 1969
. This was based on Dr Zabow’s
report of his examination of the plaintiff in 8 October 2003.
[15]
There is no evidence that the plaintiff was told of this amendment.
It has all the hallmarks of a desperate attempt by LRI
to ward off
prescription. Because of the belated notice, the trial date of 6
November 2007 was vacated, the plaintiff being ordered
to pay the
wasted costs.
[16]
Inexplicably, LRI applied for a new trial date but failed to file the
amended replication. As a result a new trial date in
September 2008
fell away by agreement. Eventually in December 2008 LRI delivered the
amended replication. LRI had the plaintiff
examined by Dr Zabow in
April 2009. The latter’s report of 10 May 2009 did not advance
the insanity allegation.
[17]
LRI continued to handle the matter in desultory fashion. A new trial
date in June 2010 was aborted because the parties could
not agree on
the issues to be tried: DFO wanted the entire defence of prescription
to be adjudicated whereas LRI insisted that
insanity be dealt with
first. LRI was at fault in not ensuring that the question of
separation was resolved in time to save the
trial date.
[18]
In October 2010 a new attorney at LRI wrote to the plaintiff to say
that she and counsel were investigating the quantum of
his claim and
that he would need to be examined by an industrial psychologist. This
letter was written more than nine years after
the plaintiff engaged
LRI. After another five months, in keeping with LRI’s feckless
conduct of the case, they told the plaintiff
that they had arranged
for him to see an industrial psychologist, Mr Whitehead. His report
came to hand in June 2011.
[19]
On 16 August 2011 LRI notified the plaintiff that the new trial date
was 28 November 2011. DFO delivered an application for
an order that
all issues relating to prescription be dealt with first. LRI brought
a counter-application that insanity be determined
first. On 7
November 2011 the court granted DFO’s application. There was a
flurry of expert notices in the first half of
November 2011. Reports
by a psychologist and psychiatrist engaged on behalf of the
defendants lent no support to the insanity defence.
LRI had no
additional ammunition of its own.
[20]
In the run-up to the new trial date, the plaintiff instructed LRI
that under no circumstances should the trial be postponed.
If
necessary, new counsel should be engaged. Shortly before 18 November
2011 LRI consulted a new advocate. He must have given LRI
sobering
advice because on 18 November 2011 they told the plaintiff that they
had been advised to withdraw. In a letter to DFO’s
attorneys,
LRI stated that their new counsel had ‘provided a fresh
perspective’ and had advised them to withdraw and
to inform the
plaintiff that he should instruct other attorneys. Because the matter
could not proceed on 28 November 2011, LRI
personally tendered the
wasted costs.
[21]
The plaintiff then instructed his current attorneys. On 12 June 2012
they delivered an application to join LRI as second defendant.
This
was granted on 26 July 2012. In its initial plea, LRI declined to
admit many of the allegations which it had caused the plaintiff
to
make against DFO regarding his injuries and their sequalae. LRI also
denied that the claim against DFO had prescribed or that
LRI had been
negligent.
[22]
Eventually a new trial date of 26 November 2014 was obtained. The
parties agreed that the question of negligence should be
determined
first. In the event, the trial did not run on 26 November 2014
because the defendants made various admissions formally
recorded in a
court order. Although the defendants did not admit that the plaintiff
had suffered a brain injury, DFO admitted that
it had been negligent
and that such negligence caused the plaintiff to suffer damages; and
LRI admitted that it had been negligent
in allowing the plaintiff’s
claim against DFO to prescribe. LRI agreed to pay the wasted costs of
the aborted negligence
trial.
[23]
On 20 October 2015 an order was made appointing a curator ad litem to
report whether the plaintiff was capable of managing
his own affairs.
Following the curator’s report, and on 5 November 2015, the
present respondent, Mr Gajjar, was appointed
as the plaintiff’s
curator ad litem in the present litigation.
[24]
The trial was scheduled to start on 16 November 2015. On 13 November
2015 the defendants gave notice of their intention to
ask the court
to decide a preliminary point. The notice stated that the alleged
breach by DFO occurred on 21 December 1999 and
that regard could only
be had to reports in existence at that date. It was said that the
plaintiff had not formulated a cause of
action with reference to a
later notional trial date of the RAF claim. The court would thus be
asked to make a ruling as to the
applicable date for determining the
damages and regarding the admissibility of evidence.
[25]
The matter came before Revelas J who heard argument on the
preliminary point. On 19 November 2015 she dismissed it, providing
reasons on 24 November 2015. The trial proper started before Bloem J
on 23 November 2015. It is mystifying that the preliminary
point was
heard by a different judge. Revelas J’s order did not finally
decide anything. Bloem J was entitled to make, and
did in fact make,
his own decisions regarding the relevant evidence and the proper date
for assessing damages.
[26]
The court a quo delivered judgment on 11 October 2016. In the
meanwhile, and in May 2016, Mrs Sutherland brought an application
to
have her husband declared unable to manage his affairs. An order to
this effect, and appointing a curator bonis, was made on
28 June
2016.
The court a quo’s
judgment
[27]
The court a quo found that the plaintiff had suffered a brain injury
in the collision and that if DFO had handled the plaintiff’s
RAF claim with reasonable care, the fact of the brain injury and its
sequelae would have emerged.
[28]
In regard to the date for assessing damages, the court a quo accepted
that the usual rule was that damages for breach of contract
are
assessed at the date of the breach. In DFO’s case, the date of
the breach was 21 December 1999. The court referred to
authorities
stating that the date of breach is not a rigid rule and that a
different date might be selected in the proper application
of the
fundamental rule that the injured party is to be placed in the
position he would have occupied had the agreement been fulfilled.
[29]
After referring to the chronology, the court a quo said that the
plaintiff’s claim should have been finalised a long
time ago
but that it would be speculation to put a date to ‘long ago’.
The case called for ‘pragmatism and common
sense’. It did
not lie in DFO’s mouth to contend that the plaintiff’s
damages should be assessed as at 21 December
1999, because it was
only due to its negligence that the case was settled on that date.
LRI in turn had failed to explain why it
took so long to issue
summons against DFO. This took one to 21 April 2005. On the other
hand, the plaintiff had not explained when
he instructed his present
attorneys and why the application to join LRI was only made in June
2012. An aggrieved party ‘is
not entitled to sit back and allow
damages to multiply’. The plaintiff had failed to establish
that he acted reasonably in
the period between April 2005 and July
2012, a period of slightly more than seven years.
[30]
This led the court a quo to conclude that the plaintiff was not
entitled to receive compensation at 2016 monetary value, otherwise
the defendants would be ‘saddled with undue hardship’
because ‘between 2009 and now, there has been a drastic
change
in the value of money’. To accommodate this change, the judge
reduced the plaintiff’s damages (valued at December
2015) by
43.69 per cent, being the inflation rate over the seven-year period
from September 2009 to September 2016. He grossed
up the actual RAF
settlement amount to its September 2009 value, deducted it from the
reduced RAF damages and added to the resultant
difference an amount
of 7.5 per cent in respect of the costs of the curator bonis. The
results were as follows:
Item
Original amount
Reduced to/
grossed up to
Past loss of income
2 393 330
1 665 620
Future loss of income
4 346 125
3 024 653
Future hospital &
medical expenses
1 086 561
756 184
General damages
1 000 000
700 000
Total of above items
8 826 016
6 146 457
Less
grossed up settlement award
98 334
[1]
117 788
Net amount
6 028 669
Plus
7.5% curator bonis costs on net
amount
452 150
Damages awarded:
R6 480 819
[31] If the court a quo
had not made the 43,69 per cent deduction, it would have grossed up
the December 1999 settlement figure
to a December 2015 value. It
appears from the plaintiff’s notice of cross-appeal that the
plaintiff calculated the grossed-up
settlement figure as R256 757,
[2]
leaving net damages before the curator bonis’ fee of
R8 569 259. With the addition of the curator bonis’
fee, the total damages would thus be R9 211 953. That is
the amount the plaintiff seeks in its cross-appeal.
What would have
happened but for DFO’s negligence?
[32] During oral argument
before us the defendants’ counsel said that the defendants
accepted the court a quo’s factual
findings (i) that the
plaintiff suffered a brain injury: and (ii) that, but for DFO’s
negligence, the brain injury
and its sequelae would have come to
light during DFO’s handling of the claim. This accorded with
the unchallenged evidence
of the plaintiff’s expert, Mr
Annandale, who testified that all three of his diagnoses –
severe neurocognitive disorder
due to traumatic brain injury;
secondary change in personality; and secondary psychiatric disorders,
including major depressive
disorder, adjustment disorder and
agoraphobia – would have been evident during 1999 had the
plaintiff been properly assessed
by a neuropsychologist.
[33]
The course which the RAF claim would have taken had DFO not been
negligent involves a measure of speculation. Having submitted
a claim
on 19 January 1999, DFO would have had until 1 July 2004 to issue
summons.
[3]
By not later than
August 1999 DFO would have begun the process of investigating the
suspected brain injury. (Although there were
earlier red flags, the
court a quo found that DFO’s file contained a consultation note
of 19 August 1999 painting an alarming
picture of the plaintiff’s
psychiatric and psychological condition. It matters not for present
purposes whether the note
was of a consultation which the Sutherlands
had with DFO or with the psychiatrist Dr van Wyk – the
important point is that
the note was in DFO’s file.) The
investigation would probably have entailed assessment by a
psychiatrist or neurologist,
followed by referral to a
neuropsychologist for psychometric testing. According to Mr
Annandale, the results would have been substantially
the same as
those he had obtained 16 years later. Proper consultation with the
plaintiff and his employer would have revealed that
his work
performance was seriously compromised. The emergence of this
information would have coincided with the Sutherlands’
relocation to East London and the unsuccessful three-month probation
at the new church. An augmented claim would probably have
been
formulated on the basis that the plaintiff was unemployable. This
would have required a report by an occupational therapist
and an
actuary.
[34]
It is not unreasonable, in the circumstances, to suppose that an
augmented RAF claim would have been lodged by 1 June 2000.
A
settlement would not have been more likely than a trial. A reasonable
timeline would be: the issuing of summons on 1 December
2000; a trial
date of 1 December 2002; delivery of judgment on 15 January 2003; and
payment of the judgment debt on 1 February
2003. In their
supplementary submissions the parties did not take issue with this
timeline.
What
would have happened but for LRI’s negligence?
[35]
LRI should have treated prescription as having started to run on 21
December 1999. Having advised the plaintiff of his rights
in April
2002, there would have been no difficulty in issuing summons by 1
December 2002. One can thus estimate a trial date of
1 December 2004,
delivery of judgment on 15 January 2005 and payment of the judgment
debt on 1 February 2005.
The
assessment date for purposes of applicable law and evidence
[36] The selection of an
assessment date bears on three discrete aspects alluded to earlier,
namely the applicable law, the permissible
evidence and the
time-value of money. Under the present heading I deal with the first
two matters.
[37] There are three
relevant damages claims in the present case: the plaintiff’s
claims against the RAF, against DFO and
against LRI. His claim
against the RAF was delictual, subject to the relevant provisions of
the RAF Act. His claims against DFO
and LRI were contractual claims
for breach of mandate.
The claim against
the RAF
[38] Although delictual
damages are normally assessed at the date of the delict, in personal
injury claims the court takes into
account events occurring up to the
date of trial.
[4]
The claimant
is entitled to compensation for all injuries and sequelae which are
known or reasonably foreseeable at the trial date.
I have estimated
that the plaintiff’s claim against the RAF would have come to
trial on 1 December 2002. Any evidence that
would have been available
to the plaintiff at that time could have been presented in support of
his claim.
[39] The law applicable
to the claim against the RAF would have been ordinary delictual
principles in December 2002 as supplemented
by the then applicable
provisions of the RAF Act.
[5]
The
claim against DFO
[40]
The plaintiff’s claim against DFO was contractual. The damages
claimed was the economic loss suffered by the extinction,
on 21
December 1999 through compromise, of his personal injury claim. The
ordinary rule is that damages are assessed at the date
of the breach
but the court a quo was correct in appreciating that our law allows
some flexibility.
[41]
Where an attorney has all the relevant information for assessing a
proper settlement but negligently under-settles, the date
of the
settlement will be the appropriate date for assessing damages. The
decision in
Fourie v Ronald Bobroff and Partners Inc
[2015] 2
All SA 210
(GJ), upheld by this court on appeal –
Ronald
Bobroff and Partners Inc
[2017] ZASCA 91
(7 June 2017) –
was such a case. Where, however, the complaint is that the attorney
settled the case at a time when he had
not properly investigated the
claim, the date of settlement is inappropriate because it does not
meet the essential function of
an award of contractual damages,
namely to place the aggrieved party in the position he would have
enjoyed had the mandate been
properly performed. The court a quo was
thus correct in rejecting 21 December 1999 as the assessment date.
[42]
In other Commonwealth jurisdictions the prevailing view is that if,
but for the attorney’s negligence, a personal injury
claim
against the original debtor would have gone to trial, one assesses
damages as at the date of the notional trial against the
original
debtor.
[6]
In regard to the law
and evidence applicable to the assessment of the damages, this is
sound, because if the attorney had not breached
his mandate the case
would have come to trial and evidence available at the trial date
could have been led in support of the claim.
In
Johnson
v Perez
[7]
the High Court of Australia said that too much should not be made of
the difficulty surrounding the selection of a notional trial
date and
that in the majority of cases some variation in this regard would be
immaterial.
[8]
[43]
English courts have been willing to receive evidence of events which
occurred after the notional trial date, in keeping with
the view that
a court should not have to predict what would have happened where
subsequent events reveal what actually happened.
As I understand the
cases, subsequent events cannot be used to fix the attorney with a
liability in respect of something which
was not reasonably
foreseeable at the notional trial date. However, if at the notional
trial date an allowance would have been
made for a reasonably
foreseeable item, subsequent events may be taken into account in
order to fix the allowance more precisely
than the notional trial
judge could have done.
[9]
In
Australia, by contrast, subsequent events can only be used for the
limited purpose of piecing together the sort of evidence
which might
have been available to the notional trial judge.
[44] In regard to the
evidence which would have been available as at 1 December 2002, I am
satisfied that there would have been
sufficient to establish that the
plaintiff suffered a brain injury and that the sequelae were those
subsequently diagnosed by Mr
Annandale. In short, all the evidence
which the court a quo received in November 2015 was evidence that
would probably have been
available to the notional trial court as at
1 December 2002.
The
claim against LRI
[45]
The plaintiff’s claim against LRI was for contractual damages
caused by the loss of his claim against DFO. That loss
occurred when
the claim against DFO was extinguished by prescription on 21 December
2002. But for this negligence, the claim against
DFO would have come
to trial on 1 December 2004. In determining the value of what the
plaintiff had lost, one is concerned with
the value of his claim
against DFO, which I have dealt with above. No separate question of
valuation arises in respect of the claim
against LRI.
[46]
The court a quo thus did not err in relation to the admissible
evidence and applicable law. The remaining issue is the time-value
of
money. But before I deal with this aspect, I must address the
appellants’ criticism of the court a quo’s treatment
of
future medical expenses.
Future
medical expenses
[47] The appellants
submitted that the court a quo erred in its assessment of future
medical expenses because it ignored the fact
that the plaintiff had
the benefit of the RAF’s s 17(4)(a) undertaking.
[48] The items making up
the total future medical expenses were (i) a personal assistant
or handyman – R149 430;
(ii) orthopaedic shoes –
R190 570; (iii) a tripod walker and easy-reach device –
R510; (iv) psychotherapy,
psychiatric consultations and
psychiatric medication – R746 510. Whether these items
were covered by the undertaking
depends on its interpretation. The
costs of services and goods covered by the undertaking were stated to
be ‘limited to’
Dr Mandell’s report of 8 May 1998.
Item (iv) of the future medical expenses would definitely not be
covered.
[49] The other three
items were claimed on the basis of the orthopaedic injuries. The
plaintiff called an RAF claims manager to
give evidence about the
interpretation of the undertaking. I doubt if this evidence was
admissible and in the event it was unhelpful.
The witness correctly
acknowledged that if there were a dispute about the scope of the
undertaking it would be for a court to decide.
[50] Dr Mandell did not
make provision for any orthotic items. The penultimate section of his
report was headed ‘Provision
for Future Medical Care’.
The most plausible interpretation of the undertaking is that it was
limited to the items set out
in that section of the report. The
unsatisfactory and limited terms of the undertaking was one of the
criticisms of DFO’s
conduct. The plaintiff should not therefore
be prejudiced by potential uncertainty as to the scope of the
undertaking. I thus do
not think that the court a quo erred in its
assessment of the future medical expenses.
The time-value of
money
[51]
Because of inflation, the value of the RAF claim as determined by the
court a quo as at 1 December 2015 was a higher rand amount
than it
would have been if it had been expressed in the value of money as at
1 December 2002. The court a quo seems to have thought
that the
defendants would be penalised by expressing the claim in the value of
money as at 1 December 2015. Economically, that
is fallacious. If the
RAF case had been tried in December 2002, the plaintiff would have
got a smaller rand amount but the money
would have been more
valuable.
[52]
It appears that, but for the supposed delay by the plaintiff, the
court a quo would have expressed the award in the value of
money as
at 1 December 2015. However, and supposedly to avoid penalising the
defendants for the plaintiff’s delay, the court
reduced the
award by seven years’ worth of inflation. The deduction was
unsound in law and unjustified by the facts. There
is no legal
principle which entitles a court to reduce a claimant’s damages
because of delay in bringing a case to trial.
If a defendant wants to
bring the matter to trial, there are procedural remedies at his
disposal.
[53]
On the facts, the court a quo had no justification for penalising the
plaintiff. From July 2001 until late November 2011, LRI
were his
attorneys. It was only in November 2011, by withdrawing, that they
signalled to him that they had been at fault. They
did not advise him
at an earlier time that they had let him down. In fact, over the
period June 2005 to November 2011 they kept
him under the
misapprehension that the prescription defence could be defeated.
[54]
Throughout the period from April 2002 to November 2011, LRI dealt
with the plaintiff’s matter deplorably. After advising
him of
his rights in April 2002, they took nearly three years to issue
summons. The delay in progressing the case thereafter was
attributable to them, not him. There was, before the court a quo, a
file of the correspondence evidencing repeated requests from
the
Sutherlands for progress reports. Many were rudely ignored. Things
got so bad that on 5 June 2007 the Sutherlands lodged a
complaint
with the Cape Law Society. Although communication then improved
slightly, LRI generally reacted to contact from the Sutherlands
rather than initiating it. Time and again, scheduled trial dates were
jettisoned. LRI either caused or went along with these postponements
in apparent disregard for the plaintiff’s desire for finality.
When LRI finally did the right thing and withdrew in November
2011, a
fifth trial date had to be aborted.
[55]
Accordingly, if it was permissible for the court a quo to express its
award at a valuation date of 1 December 2015, it should
not have made
the 43.69 per cent deduction. The defendants’ counsel, I may
add, did not seek to support the deduction in
argument before us.
[56]
Commonwealth jurisdictions recognise that if a client were only
awarded an amount in the value of the relevant currency as
at the
notional trial date, he would not be compensated for the fact that,
if the attorney had properly performed his mandate,
the client would
have received the money sooner. Two possible solutions to this
hardship are mentioned: (i) award interest from
the date of demand
(if the jurisdiction permits such interest), followed by interest on
the amount of the notional judgment; (ii) valuing
the award as
at the date of the trial against the attorney. I shall refer to these
as the interest-rate solution and the current-value
solution.
[57]
The interest-rate solution seems to be favoured in the
Commonwealth
[10]
but the focus
of the cases has been on the law and evidence to which regard should
be had rather than the time-value of the award.
Furthermore, there is
a debate whether to use the prescribed interest rate or an investment
rate. In Australia the prescribed rate
is thought to under-compensate
claimants for the ravages of inflation whereas in England the
opposite seems to be true.
[11]
As will presently appear, the interest-rate solution is unlikely to
under-compensate South African claimants, given the relatively
high
level at which prescribed interest has been set.
[58]
The strongest voices in favour of the current-value solution are
those of some of the judges in the Australian case of
Johnson
v Perez.
[12]
Eleven judges in all dealt with the case – the trial judge,
three judges in the intermediate appeal court and seven judges
in the
High Court of Australia. The four judges in the lower courts and two
of the judges in the High Court of Australia (Brennan
J and Deane J)
favoured the current-value solution. In Deane J’s forceful
dissent he said that if the value of the lost right
of recovery were
assessed by reference to the levels of comparable awards at the
notional trial date, there could be no valid objection
if the amount
so assessed were then adjusted to take account of the comparatively
lower value of present-day currency. He continued
(para 6, citation
of authority omitted):
‘
If
such an adjustment were not made however, the assessment would
affront logic and short-change the respondent. . . This is because
while he lost a right to recover damages assessed by reference to the
monetary values applicable at the time when an enforceable
award of
compensation was made, he would only recover damages assessed by
reference to outdated currency values and payable in
the debased
currency of the present day.’
However,
the binding precedent in Australia is established by the contrary
view adopted by five of the judges in the High Court.
[59]
In South Africa, this court’s decision in
SA Eagle Insurance
Co Ltd v Hartley
[1990] ZASCA 106
;
1990 (4) SA 833
(A) stands in the way of the
current-value solution. The court confirmed the principle of currency
nominalism. What was in issue
was whether past medical expenses could
be grossed up to their trial-date value. In rejecting this approach,
E M Grosskopf
JA stated his conclusion thus (840G-H)
‘
The
principle of currency nominalism is in my view to be applied as
follows in the present case. The respondent suffered a loss
of
income, expressed in rands, prior to the trial. That loss had to be
made good by the appellant by paying to the respondent the
number of
rands which he has lost, irrespective of whether the purchasing power
of the rand has varied in the interim.’
[60]
In the present case, we are concerned with the damages the plaintiff
suffered in consequence of LRI’s negligence. His
loss was
suffered when, on 21 December 2002, his right to recover damages from
DFO prescribed. Whereas his claim against the RAF
included a present
value for future medical expenses and loss of future earnings caused
by personal injuries, his claim against
DFO represented a single
economic loss equating to the value of the extinguished claim against
the RAF; and his claim against LRI
represented a single economic loss
equating to the value of the extinguished claim against DFO. In
determining the recoverable
amount, one cannot, consistently with
Hartley
, adjust the rand amount as at 21 December 2002 to
account for inflation between December 2002 and December 2015.
[61]
Although, as the court a quo observed, assessing damages at the date
of breach is not an inflexible rule, there is no authority
in this
country for the proposition that one can use this flexibility to
counter the ravages of inflation. The flexibility accommodates
problems of a different kind. For example, in
Culverwell &
another v Brown
1990 (1) SA 7
(A) this court held that where an
aggrieved party cancels a contract because of the other party’s
repudiation, the damages
should be assessed at the date of
cancellation rather than repudiation. In
Rens v Coltman
[1995] ZASCA 118
;
1996
(1) SA 452
(A) this court held that where the aggrieved party
performs remedial work to make good the other party’s defective
work,
the actual cost of reasonable repairs can be claimed as damages
– the aggrieved party is not confined to the notional cost
of
reasonable repairs at the date of the breach. In neither of these
cases was it suggested that there could be a further upwards
adjustment to account for inflation. Indeed, if a court were entitled
to make such an adjustment, every financial claim would have
to be
assessed in the value of money at the date of the trial, since the
value of money is always changing.
[62]
Grosskopf JA acknowledged in
Hartley
that the result was
unsatisfactory because the claimant suffered the negative effects of
inflation and trial delay. At that time
the Prescribed Rate of
Interest Act 55 of 1975 (Interest Act) did not allow interest to be
charged on unliquidated claims for damages
prior to judgment.
Grosskopf JA said that whether South African courts should be given a
power to award pre-judgment interest was
a policy choice for the
legislature (841G-842B).
[63]
The legislature exercised that policy choice by inserting s 2A
into the Interest Act with effect from 11 April 1997. That
section
provides that interest at the prescribed rate runs on an unliquidated
debt from the date on which payment was claimed by
service of a
demand or summons, whichever is the earlier, unless the court in the
interests of justice determines a different date
or rate. In relation
to claims against the RAF, s 17(3)
(a)
of the
RAF Act provides that no interest calculated on the amount of any
compensation which the court awards shall be payable unless
14 days
have elapsed from the date of the court’s order. This provision
may trump s 2A of the Interest Act in relation
to pre-judgment
interest against the RAF
[13]
but it would not apply to the plaintiff’s claims against DFO
and LRI.
[64]
One must distinguish between interest leviable by law on a principal
debt and interest as a form of damages. Although interest
of the
former kind compensates the creditor for delay, he does not need to
prove that he suffered damages in the amount of the
interest claimed.
Interest as damages stands on a different footing. In
Steyn NO v
Ronald Bobroff & Partners
[2012] ZASCA 184
;
2013 (2) SA 311
(SCA) the plaintiff claimed damages against her former attorneys for
delaying the finalisation of her RAF claim by 14½ months.
The
claim was quantified at a rate of 15.5 per cent per annum over that
period. Bosielo JA (with whom the other members of the
court
concurred) dismissed the plaintiff’s appeal on the merits.
Brand JA (with whom the other members of the court likewise
concurred) dealt with the question of damages. He drew the
distinction I have mentioned and said that in the case under
consideration
the plaintiff was clearly claiming interest as damages
rather than as an ancillary obligation to a principal debt. In order
to
support her damages claim, the plaintiff needed to prove that if
she had received her award 14½ months earlier she would
have
invested it at a rate of 15.5 per cent per annum. Since she failed to
do so, her claim also fell to be dismissed on this account.
[65]
The plaintiff did not allege or prove in the present case that, if he
had received an award against the RAF or DFO, he would
have invested
the money at 15.5 per cent or at any other particular rate of return.
He was thus not entitled to additional damages
in the form of
interest.
[66]
Although s 17(3)
(a)
of the RAF Act may have precluded the
recovery of pre-judgment interest against the RAF, there is no
similar prohibition in respect
of the plaintiff’s claim against
LRI. That claim would legitimately have been valued as at December
2002. In terms of s 2A(2)(a)
of the interest Act, interest
usually runs on unliquidated claims from the date of demand or
summons. The plaintiff’s earliest
demand or summons against LRI
was the service of the joinder application in June 2012. However, it
would be manifestly unjust for
the plaintiff to receive no more than
the value of his claim as at December 2002 together with interest as
from June 2012. The
delay from December 2002 until June 2012 was
attributable to LRI, not him.
[67]
Section 2A(5) of the Interest Act provides that, notwithstanding the
other provisions of that Act, a court may make such order
as appears
just in respect of the payment of interest on an unliquidated debt,
the rate at which interest shall accrue and the
date from which
interest shall run. I have no doubt that in the present case justice
required that interest should run from 21
December 2002, the date on
which LRI became indebted to the plaintiff by virtue of having
allowed his claim against DFO to prescribe.
This conclusion is
fortified by the consideration that, but for LRI’s negligence,
the plaintiff’s summons against DFO
would have been issued by 1
December 2002 and such summons would have claimed interest at the
prescribed rate of 15.5 per cent
from that date until payment; and a
similar rate would have applied to the subsequent judgment against
DFO.
[68]
In summary, the correct approach in the present case would have been
for the plaintiff to prove the nominal value of his damages
as at the
notional trial date of 1 December 2002. That would have been the
value of the claim against DFO which LRI allowed to
prescribe on 21
December 2002. The time-value of money would have been dealt with by
an order for interest in terms of s 2A(5),
such interest to run
from 21 December 2002. Put differently, s 2A(5) provides the
means by which a court in this country can
apply the interest-rate
solution.
[69]
Instead, the plaintiff quantified his damages as at 1 December 2015.
Is he to be non-suited on this account? This depends on
whether the
material in the record allows us to arrive at a reasonable figure for
the plaintiff’s damages as at December
2002. If so, prescribed
interest as from December 2002 would be a matter of arithmetical
calculation.
[70]
Subject to the question of general damages, on which the defendants
have a separate argument with which I shall deal presently,
the court
a quo’s assessment of damages as at December 2015 was a correct
assessment as at that date. The annual rate of
inflation between 2002
and 2015 is readily ascertainable. In their heads of argument the
defendants’ counsel referred to
the Consumer Price Index (CPI)
table contained in Robert J Koch’s well-known
The Quantum
Yearbook
and we have subsequently been furnished with the table
from the 2017 edition of that work. Inflation would be the primary
reason
for the substantial difference between an award calculated as
at December 2002 and as at December 2015.
[71]
In my view, therefore, one could arrive at a fair figure for the
plaintiff’s damages as at December 2002 by reducing
the court a
quo’s determination as at December 2015 by inflation for the
intervening 13 years. Inflation would not account
for all the
differences in an accurate calculation of damages at the two dates.
On the facts of the present case, some of those
differences might
favour the plaintiff while others might favour the defendants but
disregarding them is unlikely to favour the
plaintiff:
(i) In
an actuarial calculation of future losses, life expectancy (the
chance of death in each year of the calculation) is
taken into
account. If the plaintiff’s claim had been valued as at
December 2002 rather than December 2015, an annual chance
of death (a
sliding scale in which the chance becomes greater in each succeeding
year) would have been applicable to the lost earnings
over the period
December 2002 to December 2015. And the annual chance of death in
respect of the prospective claims after December
2015 would, if
assessed as at December 2002, have been somewhat higher than the
annual chance of death assessed as at December
2015. This would have
had the effect of reducing the plaintiff’s claim by more than
simply the time-value of money.
[14]
(ii) In
the present case the contingency deductions would not be affected
because the court a quo applied the same contingency
deductions to
past and future earnings.
(iii)
On the other hand, if (as I have in mind) one makes a blunt deduction
for 13 years’ worth of inflation between December
2002 and
December 2015, one will inter alia be reducing the past loss of
earnings (R2 393 330) by 13 years of inflation
even though
most of those earnings were lost over shorter periods. For example,
to account for the time-value of money, one would
only need to reduce
the 2004 earnings by one or two years’ worth of inflation.
(iv) Furthermore,
if the claim had been valued as at December 2002, the future medical
expenses the court a quo allowed
as from December 2015 would have
been allowed as from December 2002. Because of the delay, the
plaintiff has had to do without
those services.
(v)
In addition, the plaintiff would probably have benefited from a
curator bonis from an earlier date, which would again
have increased
his award as at December 2002.
(vi) The
plaintiff’s financial disadvantage in respect of (iii),
(iv) and (v) almost certainly outweigh
the defendants’
financial disadvantage in respect of item (i).
(vii) Moreover,
I have – in respect of item (i) – assumed that the
prospective losses as at December 2002
would have been based on the
plaintiff’s life expectancy as at December 2002. The English
cases show, however, that if in
principle an allowance should be made
for a certain item (for example, loss of future earnings), one can
take into account subsequent
events to quantify the allowance more
accurately. Since the plaintiff was still alive as at December 2015,
it is fairly arguable
that – even in respect of a claim
quantified as at December 2002 – the court was entitled to
assess his life expectancy
on the known facts as at December 2015.
However, it is unnecessary to express any definite opinion on this
question.
[72]
The defendants submitted that in terms of
Southern Insurance
Association Ltd v Bailey NO
1984 (1) SA 98
(A) a court is not
obliged to determine damages for loss of earnings by way of actuarial
calculation and can instead make a lump-sum
‘guesstimate’.
They argue that this is the better way to determine the plaintiff’s
loss of earnings in the present
case. I disagree. While the
non-actuarial approach may be legitimate in some circumstances,
Nicholas AJA nevertheless said in
Bailey
that an actuarial
computation has the advantage of attempting to proceed on a logical
basis whereas a judge’s ‘gut feel’
as to what is
fair and reasonable is ‘nothing more than a blind guess’
(114D-E). In the present case, the ‘guesstimate’
approach
is unlikely to provide a safer answer than the discounted value of
the court a quo’s otherwise correct actuarial
determination of
the damage to the plaintiff’s earning capacity.
[73]
In respect of general damages, the defendants argue that simply
discounting the court a quo’s award of R1 million by
13 years’
worth of inflation would not yield a fair figure for the general
damages a court would have awarded in December
2002. The court a
quo’s award of R1 million in 2016 equates to R466 000 in
2002. If the defendants’ submission
were correct, it would
imply that awards of general damages for the sorts of sequelae which
feature in the present case have become
more generous since 2002.
However, the judicial inclination towards higher awards for serious
injuries appears already to have
been established by 2002.
[15]
The court a quo cited three cases in regard to general damages. Of
those,
Torres
v Road Accident Fund
[16]
is perhaps the most similar to the present case. The court there
awarded R600 000 in March 2007, which the court a quo equated
to
R1,041 million in 2016.
[74]
The defendants’ counsel, in a supplementary note, referred us
to cases decided over the period 1989 to 2003 which in
their
submission pointed to the likelihood of a significantly lower award
in December 2002 than R466 000. The older cases
may predate the
more generous approach and two of the awards were unreasoned. In some
of the cases the claimants were considerably
older than the plaintiff
in the present case (the claimants were aged 39 and 53 respectively)
and in another case the claimant’s
catastrophic injuries left
her with a life expectancy of only 18 months. More advanced age or
reduced life expectancy is a factor
which tends to suppress general
damages since the period over which a claimant can derive solace from
money is shorter. In one
case the claimant’s brain injury did
not result in intellectual impairment or personality change though it
affected his vision
and hearing which a hearing aid would only
partially ameliorate. Perhaps the most comparable case cited by the
defendants is the
2003 decision in
Adlem
[17]
where the claimant
was awarded R400 000, equating to a 2002 award of R376 000.
[75]
The plaintiff’s counsel, in their supplementary submissions,
unsurprisingly referred us to other cases which supported
a higher
award. For example, reference was made to
Road
Accident Fund v Marunga
2003
(5) SA 164
(SCA) where this court awarded R175 000 just for
orthopaedic injuries not dissimilar to those suffered by the
plaintiff. An
additional substantial alliance for the plaintiff’s
brain injury and its sequelae would, the plaintiffs argued, have
resulted
in a total award in the present case of at least R400 000
in 2002. The plaintiffs also mentioned decisions dating back to 1964
and 1974 which, when updated for inflation, would have come to just
under R400 000 in 2002. In both these cases the claimants
were
considerably older than the plaintiff (their ages were 43 and 62
respectively). The plaintiffs’ counsel also cited the
court a
quo’s decision in
Du
Pisanie
[18]
where R400 000 was awarded (fortuitously) in December 2002. They
argue that the plaintiff’s orthopaedic injuries were
more
severe than in that case and that the plaintiff was also younger. I
should point out, though, that on appeal the award in
Du
Pisanie
was
reduced to R250 000.
[19]
[76]
My conclusion is that R466 000 would have been a generous award
in December 2002 but I cannot say it would not have been
within the
permissible range. One must bear in mind the difficult exercise a
trial judge would have in attempting to assess general
damages in
accordance with an earlier mindset – in this case, an approach
to damages prevailing 13 years before the case
was ultimately tried.
Strictly speaking, the trial judge should have attempted to determine
what a judge, trying the notional case
between the plaintiff and DFO
in December 2004, would have thought a judge, trying the notional
case between the plaintiff and
the RAF in December 2002, would have
awarded as general damages. In a slightly different context, the
English courts have said
that in professional negligence cases of
this kind the court should tend towards generous assumptions in
favour of the claimant,
bearing in mind that it was due to the fault
of the negligent attorney that the claimant lost the opportunity of
actually running
the case at the proper time.
[20]
In any event, and as will appear from my quantification exercise
below, a reduction of the general damages to a 2002 award from
R466 000 to, say, R250 000 would not affect the ultimate
result.
[77]
The defendants submitted that no professional advice would have
existed in December 2002 justifying the appointment of a curator
bonis and that this item should be left out of account. I disagree.
In late 2001 the plaintiff was referred to a drug rehabilitation
facility in a state of extreme stress. He subsequently experienced
panic attacks and epileptic fits. His condition had deteriorated
significantly over the period 1999-2002. The court a quo accepted Mr
Annandale’s evidence that if the plaintiff’s brain
injury
had been appropriately investigated during 1999, a specialist would
have reached the same conclusions as Mr Annandale did
in his report
of October 2015. This is all the more so if one assumes an updated
assessment shortly before the notional trial date
in December 2002 I
have already referred to Mr Annandale’s three broad diagnoses.
His report concluded with the firm opinion
that due to the ‘clear
evidence of cognitive decline and significant functional impairment’
resulting from brain injury,
the plaintiff required the protection of
his funds by way of the appointment of a curator bonis
[78]
Accordingly, I think the court a quo’s assessment of damages
can be used as a fair guide to the damages the plaintiff
would have
been awarded in December 2002 by adjusting for the time-value of
money. The reduced amount is 46,6 per cent in the case
of general
damages and 49.6 per cent in the case of the other heads of damages
which were valued as at December 2015. By the same
token, the
settlement amount of December 1999 must be grossed up to a value as
at December 2002 (121.6 per cent). The results are
as follows:
Item
Original amount
Reduced to/
grossed up to
Past loss of income
2 393 330
1 187 092
Future loss of income
4 346 125
2 155 678
Future hospital &
medical expenses
1 086 561
538 934
General damages
1 000 000
466 000
Total of above items
8 826 016
4 347 704
Less
grossed up settlement award
98 334
[21]
119
574
Net amount
4 228 130
Plus
7.5% curator bonis costs on net
amount
317 110
Damages to be awarded:
4
545 240
[79]
If the court a quo had awarded the plaintiff damages of R4 545 240
as at December 2002, interest should, as I have
explained, been
awarded in terms of s 2A(5) as from 21 December 2002. The
prescribed rate at that time was 15.5 per cent,
resulting in simple
interest over 13 years of R9 158 656. The capital and
interest would thus be R13 703 896
as at December 2015 and
even more if one continued the interest calculation to the date on
which the court a quo gave judgment
in October 2016, which would be
the logical approach. This exceeds the court a quo’s December
2015 assessment of R9 211 953
by more than R4,49 million. I
point out that the simple interest rate which would cause capital of
R4 545 240 to grow
to R9 211 953 over 13 years is
7.9 per cent. And if interest had been awarded at 15.5 per cent from
any date earlier
than March 2010, the resultant interest would
likewise have caused the award to exceed R9 211 953 as at
October 2016
when the court a quo gave judgment.
[22]
Since DFO pleaded prescription in June 2005, LRI should have realised
long before June 2009 that they had failed the plaintiff
and allowed
his claim to prescribe.
[80]
The court a quo did not have occasion to consider s 2A(5)
because it expressed damages in December 2015 terms. I am entirely
satisfied, however, that if the court a quo had instead expressed
damages in December 2002 terms, the only just order would have
been
to apply s 2A(5) so as to shield the plaintiff from the
corroding effects of delay for which LRI, not he, was responsible.
There is no question of onus in relation to s 2A(5). The court,
having regard to all the facts of the case, gives effect to
its own
view as to what would be just (
Adel Builders (Pty) Ltd v Thompson
2000 (4) SA 1027
(SCA) para 15). It is unnecessary to decide
whether in the circumstances of the present case the court should
have reduced the
prescribed rate from 15.5 per cent to prevent
over-compensating the plaintiff. What is incontrovertible is that
there would have
been no legitimate grounds to reduce the rate to a
figure lower than that which would cover intervening CPI inflation (a
simple
interest rate of 7.9 per cent). The plaintiff does not ask for
more.
[81]
The plaintiff tendered an amount of R500 000 in respect of past
loss of earnings. It was not argued at the appeal that
this should be
taken into account in any revised order we make.
[82]
I thus consider that justice would be done by dismissing the
defendants’ appeal and upholding the plaintiff’s
cross-appeal. Technically, the amount of R9 211 953
reinstated by the cross-appeal comprises damages of R4 545 240
plus interest of R4 666 713 in terms of s 2A(5),
such interest being the minimum amount of interest to which
the
plaintiff would have been entitled on the correct legal approach.
Economically, the plaintiff has succeeded in defending the
full
amount awarded by the court a quo prior to the unwarranted reduction
of 43.69%.
The in duplum rule
[83]
The correct analysis of the position does, however, raise the
potential application of the in duplum rule, since the interest
needed to sustain the full amount assessed by the court a quo exceeds
the capital. In
LTA Construction Bpk v Administrateur, Transvaal
[1991] ZASCA 147
;
1992 (1) SA 473
(A) Joubert JA concluded, after a learned
treatment of the authorities, that the in duplum rule is not confined
to moneylending
transactions but applies to all contracts in terms of
which a capital sum is owing and which attracts interest at a
prescribed
rate (482I-483A). In the present case the plaintiff’s
claim is for contractual damages. Whether this is a capital sum owing
in terms of a contract within the meaning of the authorities is
debatable. I have not found any case dealing with the applicability
of the rule to interest on damages, perhaps because, until relatively
recently, interest could not be recovered on unliquidated
debts prior
to the date of judgment and because, even now, such interest is not
ordinarily awarded from a date earlier than the
date of demand or
summons.
[84]
It is unnecessary, however, to decide these matters because the
problem can be disposed of on a different basis. In
Ethekwini
Municipality v Verulam
Medicentre
(Pty) Ltd
[2006] 3 All SA 325
(SCA) a contract for the sale of land provided that the seller was to
repay the purchase price, together with interest at a stipulated
rate, if a certain rezoning application failed. The rezoning
application having failed, the buyer sued to recover the capital and
agreed interest which exceeded the capital. This court held that the
in duplum rule only applied to arrear interest. Because the
interest
in
Ethekwini Municipality
only became owing once the rezoning application failed, the interest
was not arrear interest and was not hit by the rule.
[85]
In the present case, the interest the court a quo could have imposed
in terms of s 2A(5) would not have been arrear interest.
Until
the court invoked its power in terms of s 2A(5), the only
interest that would run on the unliquidated debt would, at
most, be
interest in terms of s 2A(2)(a), ie interest from date of demand
or summons. Upon the court’s exercising its
power in terms of
s 2A(5), additional interest in respect of the earlier period
would there and then become owing. Stated
differently, the in duplum
rule is concerned with the running of interest, the effect of the
rule being to cause interest to stop
running once the unpaid interest
equals the capital. In a case such as the present, the interest which
the court can award in terms
of s 2A(5) in respect of the period
prior to demand or summons is not interest which was running at that
earlier time.
[86]
The practical effect of this is that, by way of s 2A(5), the
court can – if this is just – order interest
to be paid
which exceeds the amount of the unliquidated debt. Because this
accords with the general principle of the common law
rule as
expounded in
Ethekwini Municipality
,
it is unnecessary to decide whether s 2A(5) does not in any
event confer a power on the court to override the in duplum rule.
[87]
Since the court a quo’s assessment of R9 211 953 must
be understood as comprising R4 545 240 capital
plus
interest of R4 666 713, the further question arises
as to (i) the amount on which further interest is
to be computed
and (ii) whether such further interest can run in the light of
the in duplum rule. The answer to the first
question is that, where a
court awards a capital sum together with pre-judgment interest, the
interest that runs on the judgment
itself in terms of s 2(1) of
the Interest Act is interest on the sum of the capital and the
pre-judgment interest (
Paulsen & another v
Slip Knot Investments 777 (Pty) Ltd
[2015]
ZACC 5
;
2015 (3) SA 479
(CC) paras 99-100 and 106), ie in the present
case post-judgment interest will run on the amount of R9 211 953.
As to
the second question, it is well-established that post-judgment
interest can again run until such interest reaches the amount of
R9 211 953.
Conclusion
[88]
In summary, where an attorney’s negligence results in the loss
by a client of a claim which, but for such negligence,
would have
been contested, the court trying the claim against the attorney must
assess the amount the client would probably have
recovered at the
time of the notional trial against the original debtor. Where the
original claim is one for personal injuries,
the evidence available
and the law applicable at the notional trial date would determine the
recoverable amount. The nominal amount
in rands which the client
would have recovered against the original debtor represents the
client’s capital damages against
the negligent attorney. If
justice requires that the client be compensated for the decrease in
the buying power of money in the
period between the notional trial
date and the date of demand or summons against the attorney, the
remedy lies in s 2A(5)
of the Interest Act. If s 2A(5) were
invoked, the court would not necessarily apply the prescribed rate
but might choose instead
to adopt a rate which would neutralise the
effect of inflation.
[89]
A similar approach applies where, as in the present case, a second
attorney has allowed the claim against the first attorney
to
prescribe. Generally in such a case the client’s claim for
damages against the second attorney is determined by the amount
the
client would have obtained against the first attorney; and that
amount in turn is to be ascertained in the way summarised in
the
preceding paragraph. Section 2A(5) again provides the mechanism, if
justice so dictates, for compensating the plaintiff for
delay in the
receipt of the amount he would have recovered against the first
attorney.
[90]
Where s 2A(5) is invoked, the in duplum rule does not preclude
the court from ordering an amount of interest which exceeds
the
client’s nominal capital loss. Where such interest is ordered,
post-judgment interest will run on the sum of the capital
and the
pre-judgment interest.
[91]
In the present case, the plaintiff, in the absence of clear
authority, approached the matter differently, valuing his claim
as at
the date of the trial against LRI rather than as at the date of the
notional trial against the RAF. We have found it possible,
on the
material before us, to determine the amount which the plaintiff would
probably have recovered as at the notional trial date
and are
satisfied that the amount we have determined is unlikely to err in
the plaintiff’s favour. The total amount which
the court a quo
assessed as being the plaintiff’s damages as at 1 December 2015
does not exceed the capital value of the
plaintiff’s claim as
at the notional trial date together with the minimum amount of
interest which it would have been just
to award the plaintiff in
terms of s 2A(5). It is for that reason that the defendants’
appeal fails.
[92]
The circumstances of the case are exceptional there was an absence of
clear authority and the plaintiff had already been badly
let down by
two earlier sets of attorneys. This is not a licence for claimants in
future cases to approach matters as the plaintiff
did here. The
capital damages should be assessed as I have summarised above and
pre-judgment interest should be formally claimed
in terms of s 2A(5).
[93]
Finally, I need to make clear that in the present case there was no
dispute that the plaintiff would have succeeded on the
merits of his
claims against the RAF and DFO. We have thus not considered the
approach a court should take where it is uncertain
whether the
client’s lost claim would have succeeded on its merits. In
particular, we have not been called upon to decide
whether in such
cases there should effectively be a trial within a trial of the
original claim and whether the claimant must prove
on a balance of
probability that his original claim would have succeeded or whether,
as in England, one assesses the client’s
prospects of success
in accordance with ‘loss of a chance’ principles and thus
allows a certain percentage of the proved
value of the lost claim.
[94]
I thus make the following order:
(a) The
appeal is dismissed with costs, including those attendant on the
employment of two counsel, such costs to be paid by
the second
appellant.
(b) The
cross-appeal is upheld with costs, including those attendant on the
employment of two counsel, such costs to be paid
by the second
appellant.
(c) Para
87.1 of the court a quo’s order is set aside and replaced with
the following:
‘
The
second defendant is ordered to pay the plaintiff, in his
representative capacity, the amount of R
9 211 953’.
______________________
OL Rogers
Acting Judge of Appeal
APPEARANCES
For
Appellants
PE Jooste (with him
TJD Rossi)
Instructed by
Joubert Galpin Searle,
Port Elizabeth c/o Honey
Attorneys,
Bloemfontein
For
Respondent
LA Schubart SC (with
him T Zietsman)
Instructed by
Nonxuba Attorneys,
Port Elizabeth c/o Webbers,
Bloemfontein
[1]
This grossed-up figure is clearly wrong. Robert J Koch’s CPI
table for 1925-2017 shows that inflation from 1999 to 2009
was 180.6
per cent so the grossed up figure should have been R177 591.
[2]
This is the figure grossed-up to 2016, the inflation rate from 1999
to 2016 being 261.1 per cent. If one grossed the figure up
to 2015,
the grossed-up amount would be R241 017.
[3]
Section 23(3) of the RAF Act provides that no claim which has been
duly lodged shall prescribe before the expiry of five years
from the
date on which the cause of action arose.
[4]
See eg
Botha v
Rondalia
Versekeringskorporasie van Suid-Afrika Bpk
1978
(1) 996 (T) at 1004D-1005B;
Beverley
v Mutual & Federal Insurance Co Ltd
1988
(2) SA 267
(D) at 271D-I;
Road
Accident Fund v Monani & another
(241/
2008)
[2009] ZASCA 18
;
2009 (4) SA 327
(SCA) para 9.
[5]
The amendments
brought about by the
Road Accident Fund Amendment Act 19 of 2005
,
which came into force on 1 August 2008, would have played no part.
[6]
England
:
Charles v Hugh James Jones
& Jenkins
[2000] 1 All
ER 289
(CA);
Dudarec
v Andrews & Ors
[2006]
EWCA Civ 256
;
Nicholson
v Knox Ukiwa &
Co (A Firm) & Ors
[2008] EWHC 1222
(QB); JL
Powell and R Stewart
Jackson
& Powell on Professional Negligence
7 ed para 11-297 at 912 and para 11-310 at 922; C Walton
Charlesworth & Percy on
Negligence
12 ed para
9-291 at 686.
Australia
:
Johnson v Perez
[1988]
HCA 64
;
Nikolaou
v Papasavas, Phillips & Co
[1989]
HCA 11
;
Rosa
v Galbally & O’Bryan (No 2)
[2013]
VSCA 154
para 14;
Liddy
v Bazley
[2013]
NSWCA 319.
Canada
:
Kelly
v Lundgard
[2001]
ABCA 185
(CanLII) paras 35
,
45-46, 181 and 249(c);
Campbell
v
Ragona
[2010]
BCSC 1339
(CanLII) paras 116-124; and cf
Rose
v Mitton
[1994]
NSCA 4111
(CanLII) which was a case, like
Fourie
v Ronald Bobroff
above,
where the appropriate assessment date was the date of the negligent
settlement.
[7]
Fn 5 above.
[8]
Para 14 of
the plurality judgment in
Johnson
fn
5 above.
[9]
Charles
(fn
5 above) at 301d-j;
Dudarec
(fn 5
above) paras 49-50, 56-57 and 64;
cf
Hibbert
Pownall
&
Newton (A Firm) v Whitehead & Anor
[2008]
EWCA Civ 285
paras 21-25; and cf the discussion of these cases in H
McGregor
McGregor
on Damages
18
ed paras 8-086 – 8-090 at 377-379, not altogether supportive
of the English cases.
[10]
United
Kingdom
:
Nicholson
(fn
5 above) paras 105-108;
Neeson
v Agnew & Ors
[2009]
NIQB 10
para 16;
Jackson &
Powell
(fn 5) para 11-297.
Australia
see
para 18 of the plurality judgment in
Johnson
v Perez
(fn 5 above) para
118 per the plurality and par 11 per Dawson J.
Canada
:
Kelly
(fn 5 above) para 196
[11]
See
Nicholson
para
106;
Neeson
para
16; cf
Watts & another
v Morrow
[1991] 4 All ER
(CA) at 958e-g and 960d-e.
[12]
See fn 5 above.
[13]
Vermaak v Road Accident
Fund
(1976/06)
[2008]
ZAWCHC 12
(5 March 2008);
Kwezi
obo Kwezi v Road Accident Fund
(67671/08)
[2011] ZAWCHC 455
(16 September 2011).
[14]
The plaintiff's actuary used K
och’s
Life Table 3 (Males). The plaintiff's date of birth was 19 January
1973. For purposes of applying the life table,
the plaintiff can be
treated as 30 years old at the notional trial date in December 2002
and 43 years old at the valuation date
used by the actuary, namely
December 2015.
According to the relevant life table, of 93 124 males alive at
age 30, 88 041 would still be alive at age 43 while
79 875
would still be alive at age 53 (an age I have chosen for
illustrative purposes). From this one can deduce that if
the
plaintiff's prospective losses had been calculated with reference to
his life expectancy at age 30, the actuary would have
assumed a 5.5
per cent chance of death at age 43 (93 124-88 041 = 5 083
which 5.5 per cent of 93 124) and
a 14.2 per cent chance of
death at age 53. Because the actuary calculated the plaintiff's
prospective losses with reference to
his life expectancy at age 43,
he would have assumed a 0 per cent chance of death at age 43 and a
9.3 per cent chance of death
at age 53. So in the calculations for
the income lost during the year in which the plaintiff was 53, the
actuary would have allowed
90.7 per cent of the projected income
whereas if he had used a valuation date of December 2002 he would
only have allowed 85.8
per cent of the projected income.
[15]
Du
Pisanie NO (obo JG Rabe) v De Jongh
C
& H Vol 5 B4-109 at 144-145; and see on appeal
De
Jongh v Du Pisanie
2005
(5) SA 457
(SCA) para 60.
[16]
Torres v
Road Accident Fund
2010
(6A4) QOD 1 (GSJ).
[17]
Adlem
v Road Accident Fund
C
& H Vol 5 J2-41.
[18]
Fn 14 above.
[19]
Fn 14 above.
[2
0]
Mount
v Barker Austin (A Firm)
[1998]
EWCA Civ 277
;
(1998) PNLR 493
at 510-511;
Sharif
&
Ors v Garrett & Company (A Firm)
[2001]
EWCA Civ 1269
paras 18 and 38-39.
[21]
I have grossed up the full amount of the settlement. In their
supplementary submissions the plaintiff's counsel say
that only the component of the settlement relating to general
damages, ie R53 000, should be taken into account because
the
balance of the settlement related to medical expenses which were
excluded from the claim against LRI. This is probably correct
but in
the plaintiff's notice of cross-appeal the calculations were
performed on the basis that the full settlement amount was
to be
grossed up and that is thus the approach I shall follow. The
difference is not material.
[22]
The amount of interest that has to be added to the capital of
R4 545 240 to reach R9 211 953 is R4 666 713.
At 15.5 per cent simple, the annual interest on R4 545 240
is R704 512, so it would take six years and seven months
to
earn interest of R4 666 713. Counting back six years and
seven months from October 2016, one gets to March 2010.