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[1989] ZASCA 100
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Culverwell and Another v Brown (625/87) [1989] ZASCA 100; [1990] 1 All SA 253 (A) (7 September 1989)
625/87
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In
the matter between:
ALLAN CULVERWELL
First Appellant
CULVERWELL
KNYSNA PROPERTIES (PTY) LTD
Second Appellant
and
CLAUDIUS HENRY
BROWN
Respondent
CORAM:
CORBETT, CJ, HEFER, VIVIER, EKSTEEN, JJA,
NICHOLAS AJA
HEARD:
11 May 1989
DELIVERED:
7 September 1989
JUDGMENT HEFER, JA
I have had the privilege of reading the judgment prepared by my brother
NICHOLAS. For the reasons stated in the judgment I agree that
the claim in
reconvention was rightly dismissed. However, since I am unable to support my
brother's
2
finding that the plaintiff did not prove the damages to which the claim in
convention related, I propose stating my own view in this
regard.
The claim
arose, it will be recalled, from second defendant's repudiation on 6 December
1984 of the agreement of sale. Having resold
the property on 15 March 1985 the
plaintiff advised the defendants on 18 March 1985 of the acceptance of the
repudiation. The evidence
is to the effect that the market started falling
towards the beginning of 1985 with the result that, when the property was
resold,
it fetched R30 000 less than the price at which it had been sold to the
defendants. In this court defendants' counsel did not challenge
the evidence
that the price fetched on resale was somewhat higher than the value of the
property at the time; nor did he challenge
the trial court's finding that there
was no undue delay on the plaintiff's part in accepting the repudiation or in
reselling the
property.
The damages claimed in the claim in convention
represent the difference (subject to adjustments not presently
3
relevant) between the amount of R210 000 at which the property
had been sold to the defendants and the amount of R180 000 at which
it was
resold. My brother NICHOLAS has come to the conclusion that the trial court
should have dismissed the claim in convention
since the plaintiff's damages
should have been assessed in relation to the value of the property at the time
of the repudiation during
December 1984 and since there is no evidence of its
value at that time. I agree that its value during December 1984 has not been
proved but I respectfully disagree with my colleague's view that the damages are
to be assessed in relation to the time of the repudiation.
The problem
arises, as my brother has indicated, from the fact that the time for performance
(ie the passing of transfer) has not
been fixed in the agreement. Although the
decision in
Novick v Benjamin
1972(2) SA 842 (AD) is accordingly not in
point I wish to draw attention to certain matters raised in the judgments in
that case
which do have a bearing on the present question. Firstly, there is
the
4
fundamental principle referred to in both judgments that the
injured party should be placed, by an award of damages, as far
as possible
in the position he would have occupied had the
agreement been fulfilled.
Secondly, there is TROLLIP JA's
reference at 860 E-H to the "original" rule
that damages for
breach of contract are assessêd in relation to the
time of the
breach, and his explanation that the original rule
"was, in effect, saying the same thing as 'at the time of performance', since
the two then invariably coincided, it being considered
that no such breach could
legally occur before the time for performance had
arrived."
TROLLIP JA indicated that this is no
longer the case since the
concept of an anticipatory breach has become
established. I
mention this in view of the statement in many reported
judgments
and in textbooks (especially the older ones) that damages
for
breach of contract are as a rule calculated in relation to the
time of the breach. Expressing the time element in the
calculation of damages in this manner is not necessarily
incorrect but it does tend to obscure the fact that the
5
appropriate time is really the time for performance. Finally I draw attention
to TROLLIP JA's observation at 860 C-D that the adverse
difference between the
contract price and the market value of the
res vendita
at the time of
performance which is usually awarded to the injured party in the case of the
breach of a contract of sale, represents
the loss that the parties themselves
normally contemplated as likely to ensue on such a breach. On this ground
TROLLIP JA at 861
C-F rejected MacKeurtan's view that damages should ordinarily
be measured at the time of the anticipatory breach.
Having mentioned
Novick v Benjamin
something should also be said about the cases referred
to by the court
a quo
at 476 F-H of its reported judgment. I do not find
the decisions in any of these cases of particular assistance to the solution of
the present problem.
Bester v Visser
1957(1) SA 628 (T) and
De
Lange v Deeb
1970(1) SA 561 (0) were claims for damages arising from the
cancellation of an agreement by one of the parties on account of
6
the other's non-performance of his obligations. These cases were presumably
referred to by the court
a quo
by reason of the resemblance between an
actual breach of contract and a repudiation, in so far as the injured party's
election to
terminate the agreement is concerned. That there is this resemblance
cannot be denied and any discussion of the appropriate time
for the assessment
of damages in the one type of case may therefore be of assistance in the
solution of problems relating to the
other type. But there is no discussion
either in
Bester v Visser
or in
De Lange v Deeb
and the bald
statements made therein do not take the matter any further. Equally unhelpful
are judgments actually dealing with repudiation
but in which the appropriate
time for the assessment of damages was not properly considered.
Markus &
Co v Louw
1930 CPD 123
,
Serman & Co v Brown and Others
1939 TPD
244
,
Moyes & McKenzie v Frenkel & Co
1912 NPD 282
and
Cooper v
Kohn's Produce Aqency Ltd
1917 TPD 184
fall in this category. There are
statements in the judgments in these cases to the effect that damages are to
be
7
assessed "as at the time of the breach" or "on the date of
the
repudiation", which sometimes leave one wondering at the
precise
meaning of the expression used (of the remark in
Novick
v
Benjamin
(
supra
) at 862 A-B in regard to
Moyes &
McKenzie v
Frenkel & Co
). Statements like these contribute
little to the
inquiry and can hardly be regarded as
authoritative
pronouncements on the subject.
Celliers v Papenfus and Rooth
1904 TS 73
, as my
brother
NICHOLAS has indicated, is another case concerning a
seller's
non-performance. Although in this case a reasoned judgment
was
delivered the issue was whether the buyer was entitled by way
of
damages for non-delivery to the difference between the contract
price and the highest price at which the property could have been
sold between the date of the contract and the date on which it
was
cancelled. It is with this in mind that INNES CJ said at 84:
"In the present contract there has been no time fixed for delivery, and I think
in such cases that the proper rule is that the buyer
should take some action to
fix the date at which his damages are to be calculated. He cannot lie by
indefinitly, and then, after
the lapse
8
of a long period of time, go back to the high-water mark of the fluctuation in
the value of the property in the interim ... As a
general rule it appears to me
that the general damage must be calculated at the date when the buyer elects to
treat the contract
as at an end."
In
Whitfield v Phillips and Another
1957(3) SA 318 (AD)
the seller repudiated an agreement for the sale of a pineapple
farm to the
plaintiffs who accepted the repudiation and sued the
seller for damages in
respect of (1) the loss of crops and (2)
the value of the farm in excess of
the purchase price. The
trial court awarded damages under (1). In a minority judgment
on appeal to
this court , HOEXTER JA came to the conclusion that
no award under (1) should
have been made. The
ratio
of the
judgment was that the plaintiffs
would have been adequately
compensated for their loss of crops on the basis
that the
spes
of future crops formed part of the value of the farm but
that,
since its value had not been proved, the claim under (1) should
have been
dismissed. At 324 opposite the letter H the learned
judge said:
9
"As a rule the damages for non-delivery of land, in a case in which the buyer
has rescinded the sale, are to be measured by the excess
of the value of the
land over the contract price at the time of
rescission."
(From the reference both before and
after this passage to
Celliers v Papenfus and Rooth
it is clear that
it is based on the
decision in that case.) At 325 G-H HOEXTER JA added:
"In my opinion the parties contemplated that, if the defendant failed to deliver
Thorn Park to the plaintiffs the latter would exercise
their right of electing
to enforce or to rescind the contract. If they elected to rescind, as they did
in the present case, the parties
contemplated that the plaintiffs would be
entitled to the true or market value of the farm as at the date of the
rescission."
Although these passages clearly support
the
respondent's argument in the instant case
HOEXTER JA's
observations were not made in the context of the present
problem.
The question of the appropriate time for the assessment
of
damages did not arise; the issue was whether the plaintiffs
were
entitled to be compensated for the loss of crops and the way in
which
HOEXTER JA dealt with the issue has already been described.
It is interesting to note that the learned judge related the
10
measure of damages (as TROLLIP JA later did in
Novick v
Beniamin
(
supra
) to the date that the parties themselves had
contemplated.
Stephens v Liepner
1938 WLD 95
is the last case
mentioned in the judgment of the court
a quo
. In this case the plaintiff
claimed damages arising from the defendant's repudiation of an agreement in
terms of which the latter,
without fixing a date for performance, had donated
shares in a company to the plaintiff. It was alleged in the declaration that the
plaintiff had accepted the repudiation and that the damages represented the
value of the shares at the date of the acceptance. On
exception to the
declaration SOLOMON J ruled that the date of the repudiation (not the date of
the acceptance thereof) was the correct
date for the assessment of the damages
and upheld the exception. It must be pointed out, however, that there was an
allegation in
the declaration that the donee had demanded delivery of the shares
and that the demand had been refused by the donor who had at the
same time
repudiated his
11
obligation. This being the case SOLOMON J said at 96:
"In this case demand was made and refused. Thus the breach of contract by the
defendant need not be looked for: it is
apparent."
The donor had been placed
in mora
by the demand and the case was
decided on the basis of an actual breach. In
an
obiter dictum
at 98 SOLOMON J said:
"Indeed the reasoning in (
Celliers v Papenfus and Rooth
) is strongly
against the contention of the present respondent that, after repudiation of the
contract by the excipient on August
20th, he had the right to withhold his
acceptance of the repudiation for over two months, thereby perhaps substantially
increasing
the amount of his claim for damages. There is abundant authority that
the court will not allow such a proceeding."
Presumably because it found itself unable to decide
the
present case on authority the court
a quo
decided it on
principle. For convenience I quote the relevant passage
from
FRIEDMAN J's judgment at 477 A-D. Itvreads as follows:
"The purchaser's wrongful repudiation does not
per se
bring the contract
to an end. The seller is not obliged to accept it immediately; he has an
election and may take a reasonable period
of time in order
to
12
decide whether to accept the purchaser's repudiation. During that time i e until
he has exercised his election, it is open to the
purchaser to retract his
repudiation and tender performance of his obligations. It is only when the
seller has exercised his election
to accept the repudiation that the contract is
cancelled. Only when the date of cancellation has been crystallised can any
question
of damages arise. It would be entirely artificial in a case such as
this to assess the plaintiff's damages by reference to an anterior
date, viz the
date of repudiation, on which date the contract was still alive and no claim for
damages had yet arisen. It seems,
moreover, that those cases in which it has
been held that the decisive date is the date of repudiation have proceeded on
the unwarranted
basis that the innocent party is obliged to accept the
repudiation immediately, which is clearly not so."
No fault can be found with FRIEDMAN J's exposition
of
the law relating to repudiation. A repudiation,
as was once
said, is "a thing writ in water" (per ASQUITH LJ in
Howard
v
Pickford Co Ltd
(1951) 1 KB 417
at 421; see also
HMBMP
Properties
(Pty) Ltd v King
1981(1) SA 906 (N) at 910 B-D). It merely
affords
the injured party an election to terminate the agreement
by accepting the
repudiation (
Nash v Golden Dumps (Pty) Ltd
1985(3) SA 1 (AD) at 22 D-F), and unless and until that happens
13
the repudiator's obligation to perform and the other party's right to receive
performance remain wholly unaffected. The latter is
not obliged to decide
whether to accept the repudiation immediately but is allowed a reasonable period
of time to consider and exercise
his election (
Seqal v Mazzur
1920 CPD
634
at 644,
Potgieter and Another v Van der Merwe
1949(1) SA 361 (AD) at
372;
Mahabeer v Sharma NO and Another
1985(3) SA 729 (AD) at 736
E-H).
These principles are trite and it will be noticed that my brother
NICHOLAS does not question any of them. What he does question, is
their
relevance to the determination of the appropriate date for the assessment of
damages. There is not necessarily a connection,
he says, between the date of
cancellation of a contract and the measure of damages for the breach of it.
Moreover, immediately upon
repudiation, the injured party's cause of action for
damages is complete; he may immediately issue summons since the summons itself
may be a binding announcement of his election to accept the repudiation.
14
Although there is force in my colleaque's reasoning I am, with respect, not
prepared to adopt it. It is correct that there is not
necessarily a connection
between the date of the cancellation of an agreement and the measure of damages
for its breach. But it does
not follow that the date of cancellation is
irrelevant to the enquiry when in a case where a time for per-formance has not
been stipulated,
the appropriate date for the assessment of damages is being
sought. In such a case two dates suggest themselves for consideration
- the date
of the repudiation and the date of the acceptance. The court
a quo
preferred the latter, as I understand the judgment, not simply because that
is the date on which the agreement was terminated or because
the date of
termination is necessarily the appropriate date, but because it would be
entirely artificial to relate the assessment
to a time when the agreement was
still in existence and a claim for damages had not yet arisen. I agree with this
view. The real
thrust of the argument is the artificiality of an assessment with
reference to a time when a claim for damages
15
has not arisen. That such a claim does not arise at the time of repudiation
is plain. After all, the injured party may elect to ignore
the repudiation and
to press for performance at the appropriate time. In that event a claim for
damages can obviously not be maintained,
except as an alternative to a claim for
specific performance, and then only in the event of the repudiator's failure to
comply with
an order for performance (
Custom Credit Corporation (Pty) Ltd v
Shembe
1972(3) SA 462 (AD) at 469 F - 471 E). My brother NICHOLAS says that
the injured party's cause of action is complete immediately
upon repudiation
since, although his decision to accept the repudiation is wanting at that stage,
the summons itself may be an announcement
of his election. There is authority
for this proposition (although cer-tan dicta in
Magnet Motor Co v
Bernstein
1929 TPD 431
at 434 seem to point the other way) and for the sake
of the present argument I am prepared to accept it. But, even on this approach,
the injured party's election is still required. It cannot be gainsaid that, as a
matter of principle, a claim for damages does
16
not arise until the repudiation is accepted.
The artificiality of an
assessment which relates the damages to the time of repudiation is manifest;
Indeed, bearing in mind the effect
of a repudiation as described above and
particularly that it does not by itself give rise to a claim for damages, it is
difficult
to see what relevance it has to the measure of damages. The
application of the principle that the injured party is to be placed in
the
position he would have occupied had the agreement been fulfilled, entails a
comparison between that notional position and the
actual position ensuing on its
non-fulfilment. What the position is immediately upon repudiation seems to be
entirely irrelevant
since that is not the position in which the injured party
may finally find himself. His final position depends upon the way in which
he
exercises his election and can only be determined once he has elected to accept
the repudiation. That this is so becomes plain
once it is realized that the
reasonable period of time that the injured party must be allowed to consider his
election, may turn
out to
17
be of quite considerable duration and that substantial fluctuations in the
value of the subject matter of the contract may occur in
the interval between
the repudiation and the acceptance. This is what happened in the present case
and what may also happen in a
case where the seller is the repudiator and the
market is rising. Considering that the injured party's position may change
dramatically
after the repudiation it appears, therefore, that the comparison
cannot properly be made until his final position can be assessed.
That the
injured party is allowed a reasonable period of time to consider his election
seems to have been overlooked in the
obiter dictum
in
Stephens v
Liepner
referred to earlier. In his unpublished thesis
Anticipatory
repudiation in English and South African Law of Contract
at 551 Dr P M
Nienaber (now NIENABER J) comments as follows on the view expressed in that
case:
"Indeed, to maintain that on acceptance of the
repudiation the damages are to be fixed retrospectively to the date of
repudiation really amounts to this that
18
the innocent party is deprived of any, let alone a reasonable time, to make up
his mind whether or not to accept the repudiation
because every moment he delays
may prejudice him in the amount of damages
recoverable."
This is indeed so. My brother NICHOLAS
accepts that the injured
party may temporise for a reasonable period but says
that he
cannot do so at the risk of the other party. But, with respect,
I fail to see how effect can be given to the right to delay the
decision
unless the defaulting party is to bear the risk; and,
even if it were
possible to do so, I fail to see why the injured
party should temporize at
his own risk. My colleaque's objection
is to the injured party being at liberty to speculate at the risk
of the
other party. I do not regard reasonable delay in taking
a decision whilst
considering the position as speculation. The
injured party does not normally delay his decision with a view
to await possible fluctuations in the market or to select the
best
possible date for accepting the repudiation; what is
normally considered, is not the time of the acceptance but
whether the
repudiation should be accepted at all.
19
A further objection raised by my colleaque is that
the
date of acceptance is an arbitrary one within
the sole control
of the injured party. I agree that this is so, but the
same
reasoning applies to the date of repudiation which is an
equally
arbitrary one within the sole control of the repudiator.
Dr
Nienaber says appositely in his thesis (
supra
) at 551 about
the
decision in
Stephens v Liepner
:
"In view of the Court's reluctance to afford the
innocent party
the
opportunity of choosing the most propitious moment for assessing the damages, it
does strike one as strange that the Court adopted
the date of the repudiation,
since in effect this permits the
guilty party
in a fluctuating market to
dictate the time for the fixing of the damages."
Having carefully considered my colleague's
criticism
of the judgment in the court
a quo
and the argument addressed to
us on the defendants' behalf I have not been
persuaded that
anything said in the passage at 477 A-D quoted above can
be
faulted. It seems to me that the application of the ordinary
rules
relating to repudiation and the acceptance thereof, coupled
with the
fundamental principle that the innocent party is to be
20
placed as far as possible in the position he would have
occupied had the agreement been fulfilled, inevitably leads to the conclusion
that the damages cannot, in a case like the present one, be appropriately
assessed in relation to the time of the repudiation.
It does not follow,
however, that the assessment should in all cases of an accepted repudiation be
made in relation to the time of
the acceptance. In cases eg where the
res
vendita
is resold or similar goods repurchased it would often be
inappropriate to do so. In such cases the resale or the repurchase itself
may,
of course, be regarded as a tacit acceptance but cases do occur where it is
preceded by an express acceptance. In that event,
provided there is no undue
delay either in the acceptance or in the resale or repurchase, it is the price
fetched on resale or paid
for similar goods in the market that has to be taken
into account. This principle has been established in a long line of cases. It
was stated as follows by DE VILLIERS CJ in W
olff & Co v Bruce, Mavers
& C
o
21
(1889) 7 SC 133
at 135:
"If the purchaser repudiates the sale, the seller is in the position of an
ordinary party to a contract which has been broken by
the other party, and he
may sue for damages for the breach. It would be a nugatory act for the seller to
tender the thing sold after
the purchaser has repudiated the sale altogether.
What then is the seller to do? If he keeps the thing sold until the purchaser is
willing to take it, the thing may deteriorate in quality or in price and the
purchaser may become insolvent. In self-protection,
therefore, he re-sells the
thing in order to avert the risk of loss from deterioration, fall in the market,
or insolvency. Such.a
re-sale cannot debar him from recovering damages which he
has sustained through the purchaser's breach of contract. If the nett price
realised by the sale exceeds the original price, he, of course, sustains no
damage, but, if it be less, the difference represents
the loss sustained by him,
and the difference he is, in my opinion, entitled to recover. After crediting
the purchaser with the proceeds
of the re-sale, the seller really recovers no
more than the purchase price, but he recovers it by way of damages for breach of
a
contract which the seller has repudiated."
There
are many other cases in which the injured party's right to resell or to buy
similar goods was recognised. (See eg
Dennill v Atkins & Co
1905 TS
282
at 289,
Oellermann v Natal Indian Traders Ltd
1913 NPD 337
,
Chapman v Dwor
1921 CPD 433
,
22
Bremmer v Ayob Mahomed & Co
1920 TPD 303
at
305,306,307,
Kaplan & Co v Basel Bros
1931 CPD 457
at 463,
Central
Produce Co v Hirschowitz
1938 TPD 350
at 357 to mention only a few of the
better known ones.) From all these cases the principle can be extracted that the
difference between
the contract price and the price ruling on the date that the
property is resold or similar property is bought, can be recovered by
way of
damages provided that there is no undue delay in reselling ór
repurchasing. This principle is so firmly established
that it was said in
Cooper v Kohn's Produce Agency Ltd
(
supra
) at 186 that
"... the rule is that the damages are assessed according to the price ruling at
the earliest date on which they could be sold."
(See
also
Serman & Co v Brown and Others
(
supra)
) at 248-249).
In the present case the plaintiff resold the property and is seeking to
recover the adverse difference between the contract price
and the price fetched
on resale. There was no
23
undue delay on the plaintiff's part in reselling and the
property was resold at a price in excess of its current market value. It
is
clear, in my view, that his claim was rightly allowed. The appeal is accordingly
dismissed with costs.
J J F HEFER, JA
CORBETT CJ ) VIVIER JA ) Concur EKSTEEN JA )