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[1990] ZASCA 106
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SA Eagle Insurance Co Ltd. v Hartley (119/89) [1990] ZASCA 106; 1990 (4) SA 833 (AD); [1990] 2 All SA 616 (A) (26 September 1990)
Case no 119/89
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE
DIVISION)
In the matter between:
S A EAGLE INSURANCE CO
LTD
Appellant
and
GRAEME ERIC HARTLEY
Respondent
CORAM:
JOUBERT, ACJ, E M GROSSKOPF, MILNE, KUMLEBEN,
JJA, et
NICHOLAS, AJA
HEARD:
28 August 1990
DELIVERED:
26 September
1990
JUDGMENT
2
E M GROSSKOPF, JA
The respondent was injured in a
motor car collision on 5 February 1983. He instituted a third-party action in
the Cape Provincial
Division against the appellant, who was the statutory
insurer of the vehicle with which the respondent had collided. The matter was
heard by FAGAN J, who gave judgment in favour of the respondent on 21 December
1988. The respondent's total damages were calculated
by the court at. R464 245.
However, it was common cause at the trial that fault in respect of the collision
should be apportioned
on a fifty/fifty basis. Consequently judgment was granted
in the respondent's favour for payment of R232 123 as damages, with ancillary
orders for the payment of interest and costs.
Included in this award was an
amount for past loss of earnings, i e, earnings lost by the respondent, as a
result of his injuries,
between the date of the collision and the trial. This
amount was calculated as follows. But for the accident, the respondent would
have been able to earn R155 698 between the date
3
of the accident and the date of the calculation of his damages (1 October
1988). The court reduced this figure by a 5 percent contingency
allowance, which
then.gave a figure of R147 913. The court found that the respondent's actual
income during this period was R77 554.
By subtracting the actual income from the
potential income the court derived a figure of R70 359, which reflected the
respondent's
loss of earnings in rand terms. The court then added this figure to
the amount awarded for future loss of earnings, and (by consent)
made an
allowance to compensate for the period between the date of calculation, i e, 1
October 1988, and the date of judgment, 21
December 1988. This gave a figure of
R382 228 for a total of past and future losses of earnings as at 21 December
1988. To this was
added what the court called an "
Everson
adjustment" of
R31 457. This was an adjustment to compensate the respondent for the loss of
purchasing power of money since the dates
upon which his past losses of earnings
had been incurred, and it is the propriety of this adjustment which is in issue
in the present
appeal. The
4
addition of the "
Everson
adjustment" resulted in a total loss of
earnings (past and present) of R413 685, which was added to the amounts found
due in respect
of past medical expenses and general damages to reach the total
figure of R464 245 which I mentioned earlier. As I stated above,
half this
amount was awarded to the respondent as damages, and it is accordingly half the
amount of the
Everson
adjustment which will fall to be deducted if the
appeal were to succeed (i e, R15 728). The court
a quo
granted leave to
appeal against that portion of its judgment in which it held that the
"
Everson
adjustment" should be added to the respondent's past loss of
earnings.
The expressions "
Everson
adjustment" and "
Everson
principle" derive from the title of the pioneering case on this topic, viz.
Everson v Allianz Insurance Ltd.
1989(2) SA 173 (C). In that case also
the plaintiff was entitled to an award in respect of past loss of earnings. What
was not in
dispute were the sources and quantum of the sums which the plaintiff
would have earned had he not been injured, and those which he
had in
5
fact earned over the period; and therefore what in rand terms
he had lost.
The plaintiff's actuary, Mr. Koch, had expressed
the opinion in evidence that
to place the plaintiff in the
position in which he would have been had he not
been injured, it
was necessary to add to the sum of the loss as expressed in
rand
terms an allowance to compensate for the reduction of the
buying
power of the rand during the period between the date of
the
accident and the date of the trial. The fact and extent of the
reduction were common cause. The court (HOWIE J) dealt with the
matter as
follows (at p 174 I to 175 F):
"What is in dispute in the present connection is whether I should add on the
aforesaid allowance for lost buying power. Counsel intimated
that they were not
aware of any reported case in which such addition had been effected with regard
to loss of earnings up to the
time of trial. Nor am I. In my view the question
of an allowance for lost buying power is not a question involving legal policy
but
one of fact and the application of established principles. It is trite that
plaintiff is entitled by the Court's award to be placed
in the position, as far
as is reasonably possible, as that in which he would have been had he not been
injured.
The evidence of Mr Koch established without any question that if one were simply
to award plaintiff
6
the number of rands he has lost he would not be placed in the required
position and that it is necessary, in order to achieve that
position, to adjust
the numerical value of the rand sum involved by addition of the lost buying
power allowance referred to. That
adjustment does not amount to an indirect and
legally incompetent award of interest on damages as defendant's counsel sought
at one
stage to suggest. Factually the evidence proves that plaintiff has indeed
suffered loss in respect of the diminished buying power
of the rands he would
have earned uninjured. The allowance made by Mr Koch for increased earnings
during the period, even assuming
that such increases were prompted or
necessitated by inflation-related considerations, do not serve to eradicate that
loss of buying
power. The allowance for increased earnings is merely one of the
factors used in arriving at the number of rands lost. The fact is
that plaintiff
did not receive those increased earnings which he would have done if uninjured.
He has had to wait until the trial
to receive them. Therefore, having determined
the number of rands lost, what is then reguired is the adjustment of that number
so
as to reflect the real value of the rands lost. This is all part and parcel
of establishing the damages. It is not some addition
to an already established
sum of damages.
The recognition of the fact that loss has been incurred in
respect of the diminished buying power of what plaintiff would have earned
had
he not been injured and the making of an allowance to compensate for that loss
is, to my mind, fully supported by the approach
and the reasoning of the
Appellate Division in
General Accident Insurance Co SA Ltd v Summers
;
Southern Versekeringsassosiasie Bpk v Carstens NO
;
General Accident
Insurance Co SA Ltd v Nhlumayo
1987
7
(3) SA 577
(A) at 615H-616A. Plaintiff is therefore entitled, subject to 10%
contingency deduction, to an award comprising the numerical rand
value of his
past loss of earnings and an upward adjustment of that value so as to express
the loss in real terms."
Everson's
case was
followed in
Jonker v President Insurance Co
Ltd
, case no
87/14715 in the Witwatersrand Local Division
(SCHABORT J) and in the present case. It was not followed by
PREISS J in
Moekoena v President Insurance Co Ltd
1990(2) SA 112
(W). Its correctness has to be determined in the present appeal.
A
convenient point of departure is the decision of this court in
General
Accident Insurance Co SA Ltd v Summers
;
Southern Versekeringsassosiasie
Bpk v Carstens NO
;
General Accident Insurance Co SA Ltd v Nhlumayo
1987(3) SA 577 (A), to which I shall refer as the
Summers
case. HOWIE J
relied heavily on this decision in the
Everson
case, and it is important
to have clarity on what exactly was decided by it.
The relevant part of the
judgment in the
Summers
case dealt with the time at which past loss of
earnings or past loss of support should be calculated. For convenience I shall
deal
8
only with past loss of earnings: the same considerations apply to past lost
of support. The issue may be illustrated as follows. Assume
that it appears at
the trial that the plaintiff lost income in an amount of R1000 in the period
between the accident and the trial.
Should he then be awarded the full amount of
R1000, or should this amount be discounted back to the date of the injury, which
would
result in a substantially lower amount being awarded? The argument in
favour of discounting rested on the premiss that damages are
to be calculated as
at the date of the delict. This premiss was not accepted in the
Summers
case in respect of loss of earnings - such a loss, the court held, manifested
itself at a date later than the date of the delict,
and its extent could
properly be determined as at that later date (at p. 613 C-G).
Of course, if
it be supposed that judgment had been given the day after the delict was
committed, the amount of R1000 would have had
to be discounted,and the plaintiff
would have received a smaller amount. The reason is that the plaintiff
9
would then have been paid for his loss even before it was incurred. The
purpose of discounting in such cases is to award the plaintiff
a sum of money
which, if invested at an appropriate rate of interest, would provide him with
the amount of R1000 (which we assume
to be his loss of earnings)
at the time
when he would have received it had the injury not been sustained.
In this
way he would be placed in the same position as that in which he would have been
if the delict had not been committed. However,
if the loss of R1 000 had already
been sustained when the award is made, there could be no reason why it should be
discounted to
any earlier date. The plaintiff should then be awarded the full
amount. This is in essence what is said in the passage from the
Summers
case quoted by HOWIE J in
Everson
's case at p 175 E-F. It provides no
support for the contention that the loss of earnings already suffered (the R1
000 which I am
using as an example) should be increased in any way for the
reduction in purchasing power of money or any other reason.
10
If the
Summers
case affords no justification for such an increase, how
does the matter stand in principle ? Now, ex
hypothesi
, the R1 000
represents the actual financial loss incurred some time before the trial. Let us
assume it was incurred on a single occasion.
If judgment had been given a day
later an amount of R1 000 and no more would have been awarded. That represents
"the number of rands
he has lost" in the words of HOWIE J (
Everson
's
case, at p 175 A). The. application of the
Everson
principle would entail
that the plaintiff would be awarded a different number of rands at the-trial if
it took place some time after
the loss was incurred and there had been a change
in the purchasing power of the currency in the interim. (In recent decades we
have
suffered a decline in purchasing power, but the same rule must in principle
apply to an enhancement). The application of the
Everson
principle would
thus "be tantamount to altering the
quantum
of the debt according to when
the (plaintiff) seeks to exact it" (
Cosmopolitan National Bank of Chicago v
Steinberg
1973 (4) SA
11
579 (R) at p 581 F;
Voest Alpine Intertrading Gesellschaft M B H v Burwill
and Co SA (Pty) Ltd
1985 (2) SA 149
(W) at p 151 D).
This result seems to
me to be in conflict with the principle of nominalism of currency which
underlies all aspects of South African
law, including the law of obligations.
Its essence, in the field of obligations, is that a debt sounding in money has
to be paid
in terms of its nominal value irrespective of any fluctuations in the
purchasing power of currency. This places the risk of a depreciation
of the
currency on the creditor and saddles the debtor with the risk of an
appreciation. See Farlam and Hathaway, Contract: Cases,
Material and Commentary,
3rd ed., p 719 note 2; H J Delport, Inflation and South African Law, (1982) 4
Modern Business Law 115 and
A . Spandau, Inflation and the Law, 1975 S A L J
31.
Nominalism is the norm in the common law of western states with similar
systems to our own. Thus in
Deutsche Bank Filiale Nurnberg v Humphrey
(1926) 272 U S 517
at p 519 the
12
United States Supreme Court said:
"An obligation in terms of the currency of a country takes the risk of currency
fluctuations and whether creditor or debtor profits
by the change the law
takes
no account of it Obviously, in fact a dollar
or a mark may have different values at different times, but to the law that
establishes it it is always the same. If the debt had
been due here and the
value of dollars had dropped before suit was brought the plaintiff could recover
no more dollars on that account."
The same applies
in England. In
Treseder-Griffin and Another
v Co-operative
Insurance Society Ltd
(1956) 2 Q B 127
(CA) at
p 144 DENNING L J said the
following:
" in England we have always looked upon a pound
as a pound, whatever its international value. We have dealt in pounds for more
than a thousand years -long before there were gold
coins or paper notes. In all
our dealings we have disregarded alike the debasement of the currency by kings
and rulers or the depreciation
of it by the march of time or events.
Creditors and debtors have arranged for
payment
in our sterling currency in
the sure knowledge that the
13
sum they fix will be upheld by the law. A man who stipulates for a pound must
take a pound when payment is made, whatever the pound
is worth at that time.
Sterling is the constant unit of value by which in the eye of the law everything
else is measured. Prices
of commodities may go up or down, other currencies may
go up and down, but sterling remains the
same."
As far as the Netherlands are
concerned, see
Verbintenissenrecht, Part 1, in the Asser Series, 8th ed.(1988)
at p
450:
"De schuldenaar moet het nominale bedrag van de verschuldigde som betalen. Niet
terzake doet of wellicht de metaalwaarde van de munten
waarmee wordt betaald,
tengevolge van verandering van gehalte of gewicht gewijzigd is (intrinsieke
waarde), noch welke prijs het
geld waarmee de betaling moet geschieden in het
internationaal verkeer doet (koerswaarde), noch of er wijziging optreedt in de
koopkracht
van het geld, d.w.z. het aantal goederen en diensten dat men zich
ermee kan verschaffen. In geval van waardedaling zal de schuldeiser
met betaling
van het gedevalueerde of gedeprecieerde geld naar zijn nominale waarde genoegen
moeten nemen. Een koersdaling of
14
koopkrachtdaling (geldontwaarding) van de gulden komt dus ten laste van de
schuldeiser."
Concerning German Law, see Larenz,
Lehrbuch des Schuldrechts, 12th ed. (1979) at p 142 and p 144. See also,
generally, Delport (supra)
at pp 120 -1.
Delport (
op.cit
. at pp 116-8)
sets out the reasons commonly given for currency nominalism. It is not necessary
to consider them in detail, except
to point out that it would represent a
revolutionary transformation of our legal system if courts were to be called
upon to determine
the true economic value (in terms of purchasing power) of all
obligations sounding in money. I need not, however, labour this point:
currency
nominalism, for whatever reason, is firmly entrenched in our law.
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
15
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.
This does not, of course, mean that the effects
of
inflation are never relevant in the computation
of damages, as,
indeed, is shown by examples mentioned in argument by the
respondent's
counsel. Take, for instance, damages for future
loss of earnings or loss of
support. In computing such damages
one must have regard to what the plaintiff
or the breadwinner
would have earned in the future. Loss of purchasing power
of the
currency is relevant to this enguiry, but only indirectly. As
stated by Lord FRASER OF TULLYBELTON in
Cookson v Knowles
[1978] UKHL 3
;
1979
AC
556
at 576 E-F:
"What is relevant here is not inflation in general, but simply increases in the
rate of earnings for the job in which the deceased
person would probably have
been employed. The reason for the increase is irrelevant. There would be no
justification for attempting
to protect dependants against the effects of
general inflation, except to the extent that they
might
16
reasonably expect to have been protected by increases in the deceased person's
earnings."
The same applies,
mutatis
mutandis
, where a plaintiff claims for his own future loss of earnings.
Ultimately, in respect of both future loss of support and future loss
of
earnings, the court must calculate what such loss is likely to be in rand terms.
The expected rate of inflation is only one of
the features bearing on this
enquiry.
Then reference was made to awards of general damages. As stated by
Lord DIPLOCK in
Wright v Railways Board
(1983) 2 All ER 698
(HL) at p 699
j, non-economic loss is not susceptible of measurement in money. Any figure
which is awarded cannot be other than artificial,
and, if the aim is that
justice meted out to all litigants should be even-handed instead of depending on
the idiosyncracies of the
assessor, the figure must be "basically a conventional
figure derived from experience and from awards in comparable cases" (
Ward v
James
(1965) 1 All ER 563
(CA) at p 576 E). The need for even-handedness
requires that, when
17
comparing awards in comparable cases, regard must be had to the purchasing
power of the currency at the time when such cases were
decided, otherwise one
would not be comparing comparables. This does not offend against the principle
of currency nominalism. In
assessing general damages one is dealing, not with a
monetary debt, but with the valuation of a non-monetary loss. Such a valuation
must obviously be made in terms of currency values as they are at the time of
valuation, and not in terms of the values of an earlier
time. In the same way,
as it was put in 'argument, a valuer determining the present value of a farm
would not use the currency values
of the past. A monetary debt is not, however,
subject to a similar type of valuation. It has to be paid according to its
nominal
value.
From what I have said it follows that
Everson's
case
was, in my view, incorrectly decided. In the present case
FAGAN
J
followed and applied
Everson
's case, and his judgment therefore cannot
stand.
The result which I have thus reached is
18
not satisfactory. If a plaintiff through no fault of his own
has to wait a substantial period of time to establish his claim it seems
unfair
that he should be paid in depreciated currency. Of course, in respect of many
debts this problem is resolved (or partially
resolved) by an order for the
payment of interest, and the Prescribed Rate of Interest Act, nd 55 of 1975, is
flexible enough to
permit the Minister of Justice to prescribe rates of interest
which reflect the influence of inflation on the level of rates generally
(see
sec 1(2)). Its application is, however, limited to debts bearing interest (sec.
1(1)); and it is trite law that there can be
no
mora
, and accordingly no
mora
interest, in respect of unliquidated claims for dámages. See
Victoria Palls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines
Ltd
1915 AD 1
at pp 31-33, a decision which has been consistently applied
and followed, also in this Court.. It follows that there is no mechanism
by
which a court can compensate a plaintiff like the present for the ravages of
inflation in respect of monetary losses incurred
prior to the
19
trial. In other jurisdictions a statutory power to award interest is used for
this purpose. See e.g.,
Cookson v Knowles
(
supra
) and
Wright v
British Railways Board
(
supra
)
Whether our courts should have a
similar power, and what
precise form it should take, is not, however,
something we can
lay down. It is essentially a matter of policy which is for
the
legislature to decide. Cf.
Mc Louqhlin v O'Brian & Others
(1982) 3 All E R 298
(H L) at p 310 e - h. It is comforting
to know that the Law Commission is at present considering this
topic.
In the result the appeal is allowed with costs.
The
order of the Court
a quo
is altered by substituting in
paragraph (a)
of the order the amount of R216 395 (two hundred
and sixteen thousand three
hundred and ninety-five rands) for
the amount of R232 123 (two hundred and
thirty two thousand one
hundred and twenty three rands).
JOUBERT, ACJ
MILNE, JA Concur
KUMLEBEN,JA NICHOLAS, AJA E M GROSSKOPF J A