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[2000] ZASCA 167
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Adel Builders (Pty) Ltd v Thompson (274/98) [2000] ZASCA 167; [2000] 4 All SA 341 (A); 2000 (4) SA 1027 (SCA) (12 September 2000)
Case
no 274/98
IN
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
In
the matter of
ADEL
BUILDERS (PTY) LTD
Appellant
and
DR
J G T THOMPSON
Respondent
CORAM
:
Van Heerden ACJ, Nienaber, Howie, JJA
et
Melunsky and
Mthiyane AJJA
DATE
OF HEARING
:
22 August 2000
DATE
OF JUDGMENT
:
12 September 2000
Unliquidated
damages claimed – pre-judgment interest – Discretion of
Court
J U D G M E N T
/HOWIE JA:
HOWIE JA
:
[1] This
matter, which involves an appeal and a cross-appeal against orders
made by Mpati J in an action in the South Eastern
Cape Local
Division, is before us with the leave of the learned Judge. His
judgment is reported in
1999 (1) SA 680
(SECLD) and I shall refer to
it as “the reported judgment”.
[2] Appellant
company, a building contractor, undertook in terms of a written
building contract to construct a house for respondent
in Port
Elizabeth. When the balance of the contract price remained
outstanding appellant sued for payment. Respondent counterclaimed
for damages for breach of contract, with interest from date of
judgment, alleging that appellant’s workmanship was defective
in various material respects.
[3] The
proceedings in convention were later abandoned and, in a document
entitled “Consent to Judgment”, appellant
purported to
submit to judgment in respect of the counterclaim. The so-called
consent, which was not a confession to judgment
in terms of Rule 31,
and which did not acknowledge liability in a specified sum, did no
more than embody an admission of liability
in respect of the “fair
and reasonable cost” of the remedial action alleged by
respondent to be necessary, and
respondent took no judgment to
enforce compliance.
[4] Later still the
counterclaim was amended. A claim for consequential damages (also
allegedly arising from appellant’s
defective workmanship) was
included, the amount of damages claimed was increased and interest
was now claimed “at the
legal rate
a
tempore morae
”.
The increase in the quantum claimed was due in part to the alleged
consequential damages and in part to allowance for
future escalation
in building costs.
[5] Pleading
to the amended counterclaim, appellant contended that the claim as
it was prior to amendment had been resolved
by the so-called consent
to judgment and denied the allegations relative to consequential
damages and escalation. Appellant
went on to plead that it had
twice previously tendered to perform the necessary remedial work at
its own expense, to which tender
respondent had failed to respond.
Repeating the tender, appellant denied all and any liability.
[6] Preparatory
to trial of the issues in reconvention, the parties reached
agreement that as at February 1992 respondent’s
damages in
respect of necessary remedial work amounted to R330 000, of which
R200 000 represented the cost of such work
which had not yet
been done by February 1992. They also agreed on the extent to
which escalation in building costs would have
increased the latter
amount by the date of trial in June 1997. In addition, appellant
accepted liability for respondent’s
costs of suit and certain
qualifying expenses. Those points of accord having been reached,
the parties submitted three questions
for the trial Court’s
decision:
whether in
terms of the building contract consequential damages were
claimable;
whether
respondent was entitled to allowance being made for escalation in
the computation of his damages; and
whether, in view
of the then newly introduced s 2A of the Prescribed Rate of
Interest Act, 55 of 1975 (“the Act”),
respondent was
entitled to pre-judgment interest on the damages awarded.
[7] Mpati J answered the first two questions in
the negative. Hence the cross-appeal. As to the third, the
answer was in
the affirmative. In arriving at that answer the
learned Judge fixed the time of assessment of the damages as being
February
1992 and the amount (as a necessary consequence of the
parties’ agreement) as R330 000. He then held
(contrary
to the argument presented to him on behalf of appellant)
that s 2A of the Act, which came into operation on 5 April 1997,
applied
not only to future cases but also to damages claims pending
before that date and therefore to respondent’s counterclaim.
Consequently, the trial Court, in awarding R330 000 as damages,
found respondent entitled to pre-judgment interest, at
the legal
rate , from 1 February 1992. Against that finding the appeal was
brought.
[8] In
this Court the parties were represented by counsel who had not
appeared at any earlier stage of the litigation. Counsel
for
respondent, while not abandoning the issue of the consequential
damages, did not seek to add to the submissions in his predecessor’s
heads of argument. In this respect counsel exercised wise
judgement. There is nothing in the point. Moreover, he accepted
that his client could not legally be entitled to both interest and
increased damages due to costs escalation. It follows that
the
cross-appeal is bad.
[9] Turning
to the appeal, counsel for appellant raised two points: firstly,
that s 2A did not apply to claims pending before
the section came
into operation and, secondly, that in deciding that interest was to
run from 1 February 1992, the learned Judge
wrongly exercised the
discretion afforded him by the section.
[10] For
convenience, and because it was thus referred to during argument, I
shall refer to the first contention as “the
retrospectivity
point”.
It was also raised
before Mpati J who discussed it in some depth in the reported
judgment (at 688 G - 692 E) before concluding
that the section
applied in the present case. Since then, however, and after
appellant’s heads of argument were drawn
by counsel who
represented appellant at the trial, the judgment of this Court in
David Trust v Aegis
Insurance Co Ltd
was delivered on 31 March this year and subsequently reported in
[2000] ZASCA 108
;
2000 (3) SA 289
(A). That matter involved a claim pending before
s 2A was introduced into the Act. The section was held to be
applicable.
In advancing the retrospectivity point in the face of
David Trust
counsel did so with some understandable resignation. He did not
seek to suggest that the judgment was wrong and it clearly
disposes
of the point.
[11] The second
contention, that the trial Judge exercised his discretion wrongly,
was not put forward as a ground in appellant’s
notice of
appeal or in its heads of argument. To place the contention in
proper context it is necessary first to refer to
the relevant
contents of the Act. Before the introduction of s 2A no common law
principle or statutory enactment provided for
the award of
pre-judgment interest on unliquidated damages; in other words,
damages whose quantum had to be fixed by the court.
S 1 of the Act
states
i a
that if a debt bears interest and the rate of interest is not
governed by law, agreement, trade custom or in any other manner
then
interest must be calculated at the rate from time to time prescribed
in the Gazette by the Minister of Justice. S 2A is
headed
“Interest on unliquidated debts” and contains the
following subsections (irrelevant wording omitted):
“(1) Subject to the provisions of this section the amount
of every unliquidated debt as determined by a court of law
. . .
shall bear interest as contemplated in s 1.
(a) Subject to
any other agreement between the parties the interest contemplated
in ss (1) shall run from the date on which
payment of the debt is
claimed by the service on the debtor of a demand or summons,
whichever date is the earlier.
.
. .
Notwithstanding
the provisions of this Act but subject to any other law or an
agreement between the parties, a court of law
. . . 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.”
[12] Next it is
necessary to have regard to passages in the judgment of the Court
below to which appellant’s counsel drew
our attention. They
are at 689 G-H and 692 A-B of the reported judgment. In both
passages the learned judge observed that
in the light of remarks in
the judgment of this Court in
SA
Eagle Insurance Co Ltd v Hartley
1990 (4) SA833 (A) the new section was obviously aimed at
alleviating the plight of a plaintiff who has to wait a substantial
period of time to establish his claim, through no fault of his own,
and is paid in depreciated currency.
[13] The remaining
passage in the judgment of the Court
a
quo
which requires
attention is that at 692 E-I of the report:
“
It remains
for me to consider whether interest should be calculated in terms of
s 2A (2) or 2A (5) of the Act. Mr
Van
Rooyen
submitted
that certain liability was conceded by the plaintiff [the present
respondent] in March 1994, but that the case only
came to trial more
than three years thereafter. After liability was conceded in March
1994 the defendant amended his counterclaim
in September 1996 to
include the claim for consequential damages. I was not informed of
what transpired between March 1994 and
September 1996, but it was
not suggested to me that the delay in the matter ultimately coming
to trial was caused by the defendant.
Even if it were to be argued
that the delay was due to the amendment of the defendant’s
counterclaim, which needed to
be adjudicated upon, I can find no
reason why the plaintiff could not on its own initiative take steps
to assess that part
of the defendant’s damages for which
liability was conceded and to either make an offer of payment or a
payment into Court.
Mr
Buchanan
argued that in terms of s 2A (5) of the Act a court of law or an
arbitrator or an arbitration tribunal has a discretion to fix
the
rate at which interest shall accrue and the date upon which interest
shall run. I agree with Mr
Buchanan
that such discretion overrides the provisions of s 2A (2) of the
Act. Mr
Buchanan
did not, however, suggest that I should fix a rate of interest
different from the legal rate. As to the date from which interest
shall run, I am of the view that since the parties agreed that as at
February 1992 the defendant’s damages stood at R330 000,
interest should run from 1 February 1992.”
[14] Now the argument
for appellant on the discretion aspect was this. S 2A (2)(a)
lays down what is to be the general position,
namely, that interest
runs from date of demand or summons. If a plaintiff seeks interest
from an earlier time then the court
must be urged to exercise its
discretion under ss (5). To obtain a favourable discretionary
decision a plaintiff must discharge
the onus of establishing facts
justifying such decision. In the present case the requisite demand
had to be taken as being
the amended counterclaim, which was dated
9 September 1996. This was so, said counsel, because the
counterclaim as initially
formulated (filed in October 1991) had
been so radically altered that the amended claim was to all intents
and purposes an entirely
new claim. Significantly, it included
only now, for the first time, a prayer for
mora
interest and it was this new counterclaim which went to trial.
Therefore, because respondent had sought interest from a
date
earlier than September 1996 he bore the onus referred to.
According to the argument, the Court below accepted that the
date
of demand was the date of the amended counterclaim but, misled by
its own emphasis on the mischief which s 2A aimed to
remove,
wrongly placed the onus on appellant to justify the lengthy delay
in the recovery of his damages, thus overlooking
the need for
respondent to explain away its own part in the delay. In
consequence, the learned Judge failed to exercise his
discretion
judicially, thus permitting appellate interference.
[15] This argument
cannot succeed. Nothing in the passage at 692 E - I of the reported
judgment, cited above, and nothing elsewhere
in the Court’s
reasoning warrants the conclusion that the amended counterclaim was
found, or even assumed, to constitute
respondent’s demand in
this case. The learned Judge was not requested to decide when
demand was made and he did not purport
to do so. Indeed, having
resolved to order interest pursuant to ss (5) and not ss 2(a) there
was no need to determine the date
of demand. Acting in terms of ss
(5), it was open to the Court, in fixing the date from which
interest was to run, to give
effect to its own view of what was just
in all the circumstances. No question of onus was raised then or
in the notice of
appeal. Nor could it have been. The discretion
afforded by s 2A (5) was of the nature referred to in a long line of
cases
in this Court from
Ex
Parte Neethling
1951 (4) SA 331
(A) onwards. Plainly, if parties wish certain
facts and circumstances to be weighed in the exercise of such a
discretion they
must establish them. But there are no
facta
probanda
. No
enquiry arises as to whether a necessary fact has been successfully
proved. Similarly, absence of proof does not result
in failure on
any issue. Indeed, there are no evidential issues to attract any
onus.
[16] In
the learned Judge’s evaluation of the facts and circumstances
in the present case he took into account (at 692
F) the absence of
any suggestion that the pre-trial delay was due to respondent.
Appellant’s counsel suggested, as I
understood him, that there
was indeed fault on respondent’s part which the Court
overlooked. However, I can find nothing
in the record to
substantiate that suggestion. True, the Judge held, in assessing
damages, that it would have been reasonable
for respondent to have
had the outstanding remedial work done in February 1992 but that is
quite another matter. It does not
bear upon the delay in his
getting his just recompense from appellant. The inescapable truth
is that appellant was all along
liable to pay respondent damages.
But when appellant admitted liability in the so-called consent to
judgment (on 16 March 1994),
there was careful avoidance of an
admission of liability in a specified amount. If he had sought to
use this admission to his
advantage, respondent in all likelihood
faced the prospect of having to litigate in any event to have the
“fair and reasonable”
costs referred to in the consent
judicially quantified. I say that because all appellant ever
tendered (the first time being
on 25 March 1994) was its own
performance of the remedial work, albeit professionally supervised.
In view of the history of
this matter it is not surprising that
respondent declined the offer. In the result, therefore,
respondent was driven to wait
a particularly long time, while, as is
notorious, the value of money depreciated.
[17] As
against those considerations, there is the circumstance (referred to
at 692 G) that appellant could, on its own initiative,
have taken
steps to assess at least the costs referred to in the consent to
judgment and have made a tender in money or a payment
into court.
Such an assessment should not have proved an obstacle. Appellant
is, after all, in the relevant trade. So far
I can find no fault
at all with the learned Judge’s approach.
[18] There
remains the reason for fixing 1 February 1992 as the date from
which interest was to run. In that regard Mpati
J said that this
was because February 1992 was agreed upon as the time when the
damages (but for the consequential damages)
were fixed. It is not
apparent if the learned Judge considered any other dates. Eligible
choices were, of course, the date
of the counterclaim as initially
formulated (1 October 1991), the date of the consent to judgment (16
March 1994), the date of
the first tender (25 March 1994), the
date of the amended counterclaim (9 September 1996) and the date of
judgment.
[19] Whatever
might, notionally, be said of these various possibilities, it seems
appropriate to decide when respondent’s
demand was made in
this case (he issued no summons). It can then be seen whether the
date fixed by the Court pre- or post-dated
demand and then what
further implications follow.
[20] The counterclaim
as originally formulated was for damages (with interest from date of
judgment) to pay for remedial work
necessary by reason of defective
workmanship
i a
in respect of the house’s roof, foundations and interior. In
the consent to judgment in March 1994
appellant admitted the
need for remedial work in the same three respects and, in addition,
in regard to a certain window beam.
In the amended counterclaim
all four areas of complaint were set out. What was added was the
allegation that appellant had
taken unreasonably long to do the
contract work, and then there were the allegations in respect of
consequential damages and
escalation to which I referred earlier.
Not surprisingly, the quantum of the claim was increased and, as I
have also mentioned,
the interest prayer was changed to claim
interest “
a
tempore morae
”.
When eventually the parties agreed to the figure of R330 000
that sum clearly pertained only to the cost of remedial
work,
without any involvement of consequential damages or escalation.
[21] From
this summary it is plain that the counterclaim as initially
formulated, as later amended and as the subject of the
eventual
quantum agreement just mentioned, was essentially always one in
which the central thrust was the recovery of damages
representing
the cost of remedial work
necessitated by
defective workmanship. (In fact even the alleged consequential
damages were said to flow from the self-same
breach.) The
amendment did not, therefore, change the nature of the claim in any
important respect. It was fundamentally
the same claim that was
made in the counterclaim filed in October 1991. The alteration in
the interest prayer is neither here
nor there. It was always a
claim for
mora
interest, for even when interest runs from the date of judgment it
is still
mora
interest (
David
Trust
at 303 I).
In any event the demand that is relevant is not the demand for
interest but the demand for damages. The date of
demand in this
matter was therefore 1 October 1991 and it is obviously in favour
of appellant, not respondent, that the date
fixed by the Court for
the running of interest was later than that.
[22] It cannot be said
that the exercise of the Court’s discretion here was flawed
in any of the respects mentioned at
335 D - E of
Neethling’s
case.
[23] It
is consequently ordered that the appeal and the cross-appeal are
both dismissed with costs.
__________
C T HOWIE
VAN
HEERDEN ACJ)
NIENABER
JA)
MELUNSKY
AJA)
CONCUR
MTHIYANE
AJA)