De Klerk v Absa Bank Ltd and Others (176/2002) [2003] ZASCA 6; [2003] 1 All SA 651 (SCA) (6 March 2003)

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De Klerk v Absa Bank Ltd and Others (176/2002) [2003] ZASCA 6; [2003] 1 All SA 651 (SCA); 2003 (4) SA 315 (SCA) (6 March 2003)

THE SUPREME COURT OF APPEAL OF SOUTH
AFRICA
Case No 176/2002
REPORTABLE
In
the matter between:
A T W De Klerk

Appellant
and
Absa Bank Ltd
First
Respondent
Absa Insurance Brokers
(Pty) Ltd Second Respondent
Commercial Union Life
Assurance Co of SA Ltd Third Respondent
Neville
G Du Toit
Fourth Respondent
Gert
van Rooyen
Fifth Respondent
Before: Marais,
Schutz, Cameron, Cloete JJA and Shongwe AJA
Heard: 18
February 2003
Delivered: 6
March 2003
Absolution
from the instance at end of plaintiff’s case – stringent test
applied before granted – damages – loss of a chance
to invest –
distinction between causation and quantification – absolution set
aside.
_______________________________________________________________
JUDGMENT
_______________________________________________________________
SCHUTZ JA
[1] Counsel who applies for
absolution from the instance at the end of a plaintiff’s case takes
a risk, even though the plaintiff’s
case be weak. If the
application succeeds the plaintiff’s action is ended, he must pay
the costs and the defendant is relieved
of the decision whether to
lead evidence and of having his body of evidence scrutinized should
he choose to provide it. But time
and time again plaintiffs against
whom absolution has been ordered have appealed successfully and left
the defendant to pay the costs
of both the application and the appeal
and with the need to decide what is to be done next. The question in
this case is whether
the plaintiff has crossed the low threshold of
proof that the law sets when a plaintiff’s case is closed but the
defendant’s
is not.
[2] The plaintiff is Mr De Klerk, a
Pretoria attorney, who carries on practice as a firm styled De Klerk
en Vennote. His case was
based on fraudulent or negligent
misrepresentation, leading him to make a poor investment. The
damages which he ultimately claimed
were for the difference between
what this investment yielded and the return that he would have
obtained had the money so invested
been available to be more
fruitfully applied. Van der Walt J, sitting in the Transvaal
Provincial Division, granted absolution on
the ground that De Klerk
had failed to lead any evidence that could prove his loss,
particularly because he had not at all proved
that he would have
invested elsewhere had the money been available to him. Other
grounds for absolution were also advanced. I shall
deal with them
later.
[3] Before setting out the facts it is
pertinent to repeat what was said by Schreiner JA in
Gafoor v Unie
Versekeringsadviseurs (Edms) Bpk
1961 (1) SA 335
at 340D-G:
‘
[O]n
appeal it is generally right for the Appellate Tribunal, when
allowing an appeal against an order granting absolution at the
close
of the plaintiff’s case, to avoid, as far as possible, the
expression of views that may prematurely curb the free exercise
by
the trial Court of its judgment on the facts when the defendant’s
case has been closed. Where, however, the issue turns on
the
interpretation of a document, the Appellate Tribunal, if it does not
agree with the trial Court’s view that the interpretation
of the
crucial document is so manifestly in favour of the defendant as to
justify the granting of absolution at the close of the
plaintiff’s
case, should at least make its reasons clear enough to provide some
assistance to the trial court in its eventual decision
of the case.
I think, however, that the Appellate Tribunal should preferably
refrain from stating its reasons in such a way as to
tie the trial
Judge’s hands unduly, for the proper interpretation of the document
may be affected by circumstances appearing in
the evidence led by the
defendant.’
[4] Three witnesses gave evidence, De
Klerk himself, Professor Marx, whose evidence may, in the
circumstances, be ignored, and an
actuary, Mr Gouws.
[5] De Klerk described how he was
approached by a broker, Mr
Du Toit
(the fourth respondent and
fourth defendant below). He was employed by United Insurance Brokers
(Pty) Ltd (the second respondent
and second defendant below – now
known as Absa Insurance Brokers (Pty) Ltd). I shall refer to this
company as ‘
United Insurance
’. Du Toit requested to see
him about an investment plan developed by United Bank Ltd (‘
United
Bank
’ – the first respondent and first defendant below –
now known as Absa Bank Ltd) and Commercial Union Life Insurance
Company
of SA Ltd (‘
Commercial Union
’ - the third
respondent and third defendant below). De Klerk was not wholly won
over by Du Toit as to the merits of the scheme,
so Du Toit introduced
Mr
van Rooyen
to confirm what he had said. Van Rooyen was the
local manager of United Insurance and was later to be the fifth
defendant and is
the fifth respondent on appeal.
[6] In persuading De Klerk to invest Du Toit and van
Rooyen made use of a brochure described as a ‘Leningsrekening –
Delgingsplan’
under the name of Commercial Union. In the
introductory part it describes all the disadvantages for a director
of a company or for
a proprietor of a professional firm if he makes
long term loans to the company or firm. One of those is that if he
takes interest
it is taxable in his hands. Then, certain
requirements for admission to the scheme are set out. De Klerk could
meet them all.
The workings of the scheme follow. United Bank will
lend the firm (to take De Klerk’s case) a sum equal to the
proprietor’s
loan account for a fixed ten year period. The firm
will pay interest to the bank on the loan for ten years. Such
interest will
be tax deductible. On receipt of the loan the firm
will repay the proprietor’s loan account. He will then invest this
sum in
a specially evolved ‘Prima-Groeiplan’ issued by Commercial
Union. At the end of the ten years the ‘Prima-Groeiplan’ is paid
out to the proprietor free of tax. (Du Toit stated to De Klerk that
the Receiver of Revenue had agreed to this.) The proprietor
would
then lend to the firm an amount equal to the original bank loan,
which money would be used to discharge the bank loan. The
difference
between what the proprietor would receive from Commercial Union and
the amount of the original bank loan would be retained
by him free of
tax. This would represent the proprietor’s ‘return’ after ten
years. The other benefit offered (as already
mentioned) was that the
interest on the bank loan over ten years would be tax deductible. De
Klerk said that it was those benefits
that had persuaded him to
invest.
[7] Paragraph 6 of the brochure proceeds with the
statement that:
‘
Die volgende voorbeeld van ‘n tipiese
Leningsrekening-Delgingsplan
sit duidelik uiteen
hoe die plan
werk sowel as die
voordele
vir beide maatskappy en direkteur’
(emphasis supplied).
The brochure then states that in the
example given it is assumed that the loan is for R100 000, that the
proprietor will be 45 on
his next birthday, that his marginal tax
rate is 45 % and that the interest rate on the bank loan would be 15
%. The amount borrowed
by De Klerk was R100 000, and although he
would be 48 on his next birthday, Gouws gave evidence that the
difference in age would
result in the benefit being reduced by only
some R5 000. The last phase of the example is depicted in
paragraph 9. It shows
an amount of R320 622 being paid to the
proprietor after ten years, so that after paying off the bank loan of
R100 000 he would be
left with R220 622. There follows the statement
that one of the options open to the proprietor after ten years will
be to retain
the net amount remaining, ie R220 622, free of tax.
[8] In the brochure there are no
further qualifications to the statements to which I have referred.
This is De Klerk’s main complaint.
He did not enquire into the
internal workings of the scheme and relied on the assurances in the
brochure as fortified by Du Toit
and van Rooyen. In fact he says
that both assured him that the R320 622 was a minimum amount – but
the payout might be more.
[9] In contrast to the statements
that De Klerk says were made to him in unqualified form is a document
provided under discovery by
Commercial Union, dated 7 October 1988.
(The commencement date of the plan was 18 October 1988.) The
document of 7 October bears
the names of De Klerk and Du Toit, and it
reflects the ‘Illustrative Values on the Basic Plan’ after ten
years as R244 823.
De Klerk says he knew nothing of this. Towards
the end of the ten years Commercial Union wrote to De Klerk, on 12
October 1998,
claiming that in 1988 it had sent a quotation to him
which reflected an illustrative value of R244 823. De Klerk denies
that he
ever received such a quotation. At this stage of the case
his denial must be provisionally accepted.
[10] The correct approach to an
absolution application is conveniently set out by Harms JA in
Gordon
Lloyd Page & Associates v Rivera and Another
2001 (1) SA 88
(SCA) at 92E-93A:
‘
[2] The test for absolution to be applied by a trial
court at the end of a plaintiff’s case was formulated in
Claude
Neon Lights (SA) Ltd v Daniel
1976 (4) SA 403
(A) at 409G-H
in these terms:
“…
(W)hen absolution from the instance is sought at
the close of plaintiff’s case, the test to be applied is not
whether the evidence
led by plaintiff establishes what would finally
be required to be established, but whether there is evidence upon
which a Court,
applying its mind reasonably to such evidence, could
or might (not should, nor ought to) find for the plaintiff.
(
Gascoyne v Paul and Hunter
1917 TPD 170
at 173
; Ruto
Flour Mills (Pty) Ltd v Adelson (2)
1958 (4) SA 307
(T).)”
This implies that a plaintiff has to make out a prima
facie case – in the sense that there is evidence relating to all
the elements
of the claim – to survive absolution because without
such evidence no court could find for the plaintiff (
Marine &
Trade Insurance Co Ltd v Van der Schyff
1972 (1) SA 26
(A) at
37G-38A; Schmidt
Bewysreg
4
th
ed at 91-2). As far
as inferences from the evidence are concerned, the inference relied
upon by the plaintiff must be a reasonable
one, not the only
reasonable one (Schmidt at 93). The test has from time to time been
formulated in different terms, especially
it has been said that the
court must consider whether there is “evidence upon which a
reasonable man might find for the plaintiff”
(
Gascoyne
(loc
cit)) – a test which had its origin in jury trials when the
“reasonable man” was a reasonable member of the jury (
Ruto
Flour Mills
). Such a formulation tends to cloud the issue. The
court ought not to be concerned with what someone else might think;
it should
rather be concerned with its own judgment and not that of
another “reasonable” person or court. Having said this,
absolution
at the end of a plaintiff’s case, in the ordinary course
of events, will nevertheless be granted sparingly but when the
occasion
arises, a court should order it in the interests of
justice.’
[11] Mr Joubert, appearing for Absa
Bank, Absa Insurance, Du Toit, and van Rooyen, confined his attack to
absence of evidence of damages,
to which I shall return after dealing
with the other grounds for absolution advanced by Mr Roos, for
Commercial Union. Those further
grounds are that there was no
evidence upon which it could or might reasonably be found:
1 that such representations as may have been made were proved to be
false,
2 that fraud had been committed,
3 alternatively to 2, that there was any negligence,
4 that there was any unlawful conduct,
5 that Du Toit and van Rooyen had acted as the agents of Commercial
Union.
Falsity
[12] In order to establish whether
there was potentially acceptable evidence of falsity it is first
necessary to establish what it
is that the brochure says. As appears
from
Gafoor’s
case, when it comes to the interpretation of
documents an appeal court need be less slow to give guidance to the
judge below. To
my mind the brochure, standing alone and
unqualified, that is without reference to any further evidence which
may yet be led, plainly
says that after ten years De Klerk will
receive R320 622 free of tax (R220 622 after repaying the loan).
According to Gouws’s
unchallenged evidence that amount must be
reduced by R5 000 because of De Klerk’s age. Yet Commercial
Union’s own discovered
document says that it actually had in mind a
value of R244 823. That may call for an explanation from Commercial
Union. Moreover
the value is merely an ‘illustrative’ value and
such values, according to one of Commercial Union’s own letters,
depend upon
its future profits, which in turn depend upon a number of
factors, such as future investment performance, taxation of insurers,
future
administration costs and mortality experience. Knowing that,
it had no right to make an unqualified statement yet it made one.
In
the result it tendered to pay no more than R216 435, out of which the
bank loan had to be repaid. If there is no more evidence,
which is
the postulate, I am of the view that a court could reasonably find
the brochure to have been false in the respect complained
of.
Fraud, Negligence and Unlawfulness
[13] For the reasons just given,
again I think that it is possible that a court might reasonably
conclude that there was at least
negligence, in not warning De Klerk
about possible qualifications, when the brochure was pressed upon
him. Whether there was fraud
present is so intimately bound up with
the enquiry into negligence that it would be wrong to isolate and
remove it prematurely from
the arena. As to unlawfulness, if all the
other elements of the cause of action were to be established, I have
little doubt as to
what the man in the street would say about
Commercial Union’s liability.
Agency
[14] Commercial Union launched its
brochures into the investment world, intending that they should be
used by brokers and acted upon
by investors. That is enough for a
court to say that Commercial Union could be held to be answerable for
the representations complained
of. It is unnecessary to enquire
whether technically the two brokers acted as its agents or whether
their statements as to the minimum
benefit payable are attributable
to it.
[15] In
the result, in respect of all five additional grounds, I am of the
opinion that De Klerk has crossed the threshold and that
at this
stage at least the judge
a quo
(although he did not expressly
deal with all of them) was correct in not upholding any of them.
Evidence
of damage
[16] We
now come to the real issue in the case, whether De Klerk has produced
enough evidence to escape on absolution finding. I
must say that
there has been much falling around in the presentation of this part
of De Klerk’s case. Initially he relied on Professor
Marx as his
expert on damages. His evidence was interposed during De Klerk’s
evidence. Essentially, his calculations involved
the deduction of
what remained of the Commercial Union’s actual payment after the
bank had been repaid, from the figure in the
brochure – R320 622.
Although there are cases in which the calculation of contractual and
delictual damages may fortuitously come
to the same amount, it seems
to me that at the end of De Klerk’s own evidence what he was really
claiming was contractual damages,
whilst disavowing in his evidence
that he was relying on a contract. (I share the trial judge’s
query whether he might not successfully
have contended that the
brochure formed part of his contract.) After De Klerk’s evidence
had been concluded the case was postponed.
A summary of an opinion
by Gouws was then served and the particulars of claim were amended.
Upon the resumption of the trial Gouws
gave his evidence. The
plaintiff’s case was closed without De Klerk being recalled to
state that he would have acted in accordance
with the Gouws
assumptions as to how a reasonable investor would probably have
deployed the sums available for investment. This
is the nub of the
respondents’ absolution attack. They say that, absent such
evidence, one of the essential legs of the proof
of damage - that De
Klerk would in fact have invested more advantageously elsewhere -was
lacking. Van der Walt J agreed.
[17] I
have set out the outline of the damages claim in para [2] above. To
expand upon it, Gouws lists the periodic payments made
by the firm to
United Bank between 1 November 1988 and 1 October 1998. The total is
R199 230,42, of which about R10 000 represents
a repayment of
capital. The rest is interest. Gouws then made certain assumptions.
The first is that if De Klerk had not invested
in the plan he
could
have applied these payments in making other investments. This is
self-evidently so. The next assumption is also obviously correct.

If he had not invested in the plan he would not have received the sum
of R131 257 that Commercial Union ultimately paid him. The
third is
also uncontentious, that by investing in the plan he saved on income
tax, as the interest payments were tax deductible at
an average rate
of 44 %.
[18] Then
he made assumptions as to the manner in which De Klerk
would
(this is how his evidence proceeded) have invested (these assumptions
are crucial), namely two-thirds in growth stocks, for instance
unit
trusts or shares, one-sixth in taxable interest-bearing investments
and one-sixth in redemption of interest-bearing debt, for
instance a
mortgage bond. Based on these assumptions he arrived at an average
rate of return of 12.5 % p a. His ultimate calculation
commences
with a figure of R456 680. This represents the periodic payments
amounting to R199 230-42 escalated at 12,5 % p a from
the date of
each payment over the ten year period. From this sum is deducted two
others. The first is the value of what was received
from Commercial
Union, a net R131 257 plus interest, totalling R143 940. The second
deduction is the sum of R200 940, being 44 %
of R 456 680, which
represents the income tax saving. After making these two deductions
the total loss estimated by Gouws comes
to R111 800, which is what is
claimed.
[19] Gouws’s
report was drawn up in a hurry and he did not have much discussion
with De Klerk. The assumptions he made as to the
alternative
investment pattern were his own, although he was acquainted with some
aspects of De Klerk’s affairs. For instance,
he knew that he had
been active in developing a property. De Klerk mentioned to him an
investment in a growth fund made through
De Klerk’s firm and the
fact that he had an overdraft. (The first statement is hearsay but
the second was confirmed by De Klerk.)
He was quite frank. It was,
he said, impossible to say exactly what De Klerk would have done.
But, he said, De Klerk was an educated
professional man and it would
be unfair to him to assume that he would have placed his money under
the proverbial mattress. On the
other hand, he said, it would be
unreasonable to assume that he would have invested all in particular
shares, which, with the aid
of hindsight, would have made him a
millionaire. Nor would he have assumed, against De Klerk, that he
would have chosen all the
duds. What he had attempted to do was to
arrive at a reasonable middle of the road picture of the way markets
behave over the longer
term. He postulated that De Klerk would have
behaved sensibly. However, he conceded that he did not know what
investments De Klerk
had made before 1988 or after 1998. Gouws’s
evidence, also, stands uncontradicted. Naturally he conceded that it
was possible,
as far as he knew, that De Klerk might simply have
consumed the money had it been available to him.
[20] I now
turn to such evidence as De Klerk himself gave which may be relevant
to proof of the damages ultimately claimed. This
evidence is to be
found scattered around the record, presumably because a different
case was being sought to be proved when he gave
evidence. One
strongly suspects that when De Klerk’s case was being prepared an
advice on evidence was not sought nor given.
Such an advice focuses
the minds of the legal team
before
the trial commences, on
what facts have to be proved and how they are to be proved. An
advice is not simply an item in a bill of
costs, but is vital to the
preparation of all but the simplest cases. If a proper advice had
been given there would have been no
need for a postponement, while
running repairs were effected to the case, and there would almost
certainly have been no application
for absolution and no appeal.
That said, I turn to what De Klerk did say.
[21] From
the nature of his practice as an attorney he had to invest his
clients’ money daily, in transactions generally, including
those
related to property and deceased estates. Some of the investments
would be in call accounts, others in notice deposits, and
others in
deposits for fixed terms of various durations. Concerning his own
affairs, he had life policies, endowment policies and
annuities, the
latter two payable when he turned 60 or 65. An old friend was his
broker and each year, before 28 February, they
would review his
affairs so as to ensure that he took out insurance and annuities in a
way that would minimise his tax liability.
He had insurance policies
other than the one with Commercial Union. Then comes a passage which
Mr Maritz, De Klerk’s counsel
(who did not appear in the court
below), emphasized heavily in argument. Some time in 1996, to his
great shock, he learned for the
first time that Commercial Union
intended paying him much less than he believed he had been promised.
In a letter to United Bank
dated 15 November 1996 he said, with
reference to the scheme:
‘
Ek het die skema by u aanvaar met die
uitsluitlike
bedoeling om my aftredingsannuïteit te versterk
’ (emphasis
supplied).
De Klerk
confirmed this intention in his evidence. This statement, said Mr
Maritz, expressly tells us that his client was bent on
investment
and, he submitted, it is reasonable to infer that had he not invested
in this scheme he would have invested similar amounts
elsewhere.
Generally annuities, he said, are not speculative investments. Add
to this that not only did De Klerk in fact invest
in the scheme but
he saw the matter through for the whole of the ten years,
notwithstanding that in 1996 he found it difficult to
keep up his
payments. Indeed, by 1998, when the ten years had run he had not
only paid all the interest but had repaid some R10
000 of the loan,
without any obligation to have done so.
[22] Two
arguments are raised by the respondents. One is that the fact that
De Klerk’s circumstances were straitened in 1996 indicates
that he
would not, in all likelihood, have invested the full R199 230,42
elsewhere. The other is that it was Du Toit’s active
marketing
that caused De Klerk to invest, so that it is not to be assumed that,
Du Toit absent, he would have invested. As I shall
seek to explain
later these points may be relevant when it comes to quantification of
the damages, but they do not in themselves
negate a reasonably
possible inference that De Klerk would have invested elsewhere.
[23] Further,
Mr Maritz stated that De Klerk might have invested in
interest-bearing investments, having regard to who offered the
best
returns and the possibilities of their being tax-free. Also, in
1988, he did have a bond with United Bank, the unstated inference
being that he might have chosen to pay it off, thus saving interest
payments without incurring liability for income tax. He already
had
sufficient life insurance, so that the probability was that he would
not have expended further moneys in obtaining such cover.
Finally,
in 1988 he was involved in a property development in consequence of
which he had a high level of exposure to his bank,
which he and his
wife sought to cover by taking out life policies of R500 000 on each
of their lives. Engagement in property development
may be seen to
identify an active investor.
[24] I
shall comment later on what bearing the evidence of Gouws and De
Klerk has on the adequacy of proof of damage. But I would
point out
that, had the respondents asked for the recall of De Klerk after
Gouws had given evidence, their request must surely have
been
granted. This does not mean that the onus of proof shifted to them,
only that if such evidence as had been given had significance,
they
made no attempt to break it down through further cross-examination.
[25] Turning
to the Court
a quo’s
detailed reasons for granting
absolution, what has been described as the first pillar of the
judgment is a conclusion that because
De Klerk invested R199 230 over
ten years and was returned R213 163 at the end of that period, he
suffered no loss. Indeed it was
said, obedient to the principles of
nominalism which our law recognizes, he actually made a profit of R14
033. In other words a
1993 rand or a 1998 rand was equal to a 1988
rand. The effects of inflation are to be ignored. This was the
argument which found
favour below. Inflation over the last 30 years
or so has been such a basic fact of life that a judge who is not
prepared to take
judicial notice of its existence and very
approximate extent removes himself from the real world. However, in
the case before us,
whether a profit or a loss was occasioned by the
investment in the scheme is not the point in issue. How good or bad
a scheme it
may have been need not be explored at this point, as the
damages claimed by De Klerk are not based on any such estimation.
His case
is based upon the contention that had the respondents’
false representations not been made, his moneys would not have been
locked
into the scheme, but would have been employed to better
advantage, having regard even to the tax benefit lost. If he can
prove that,
I fail to see why he should be non-suited because he made
a nominal ‘profit’ of R14 033.
[26] That
brings me to the real issue in the case, has De Klerk produced such
evidence that at this stage a court could reasonably
find that he is
entitled to some damages? A negative answer to this question is the
second pillar of the Court
a quo’s
judgment.
The law
[27] Without
prescribing to the trial judge what principles of law may be
appropriate of application at the end of the case, when
all the
evidence has been led, I think that it will be helpful to indicate
some of the avenues, hardly explored before in this case,
which may
be open to him.
[28] At
the outset it should be said that this is not a case in which exact
quantification is possible. Proceeding further, it seems
to me
important to draw attention to differing standards of proof which may
apply, depending upon whether the issue is one of causation
or one of
quantification. In this connection particularly, the judgment of
Stuart-Smith LJ in
Allied Maples Group Ltd v Simmons & Simmons
(A Firm)
[1995] 1 WLR 1602
(CA) is instructive. The plaintiff’s
case was that because the defendant, a firm of solicitors, had been
negligent in drawing
an agreement for the acquisition of certain
department stores by the plaintiff, the plaintiff had lost the chance
of obtaining appropriate
warranties from the sellers that there were
no contingent liabilities, which it later appeared that there were.
The trial judge
had held that there was a real and not merely a
speculative chance that had the solicitors advised the plaintiff
correctly it would
have obtained the warranties, so that it was
entitled to substantial damages. Stuart-Smith LJ said (at
1609E-1610D):
‘
[Counsel for the defendant] submitted that there was
no evidence that Gillow would have given the protection sought by the
plaintiffs
because neither Gillow [the sellers] nor Theodore Goddard
[the sellers’ solicitors] gave evidence to say that they would, or
alternatively
that the plaintiffs could not establish on a balance of
probability that Gillow would have done so, and/or that these
findings of
the judge were against the weight of the evidence.
However, the court pointed out to Mr. Jackson [counsel
for the defendant] that he might be approaching the case on the wrong
basis
and that once the judge had found that the plaintiffs would
have sought to negotiate with Gillow to obtain appropriate
protection,
provided there was a real and not a mere speculative
chance that they would have succeeded in the negotiation, that aspect
of the
case fell to be considered on the
basis of evaluating the
chance, a question of quantum, and not causation; and that issue did
not depend on a balance of probability
. In the light of this
intervention by the court, Mr. Jackson submitted that the suggested
approach of the court was wrong, Gillow’s
favourable reaction had
to be proved by the plaintiffs as a matter of causation on balance of
probability. But, if that was incorrect,
he challenged the judge’s
finding (1) that the plaintiffs if properly advised would have sought
by negotiation to obtain full,
or at least partial, protection.
Furthermore, he submitted that the plaintiffs had not passed the
threshold of establishing that
they had a realistic chance of success
in such negotiations.
In these circumstances, where the plaintiffs’ loss
depends upon the actions of an independent third party, it is
necessary to consider
as a matter of law what it is necessary to
establish as a matter of causation, and where causation ends and
quantification of damage
begins.
(I) What has to be proved to establish a
causal link
between the negligence of the defendants and the loss sustained by
the plaintiffs depends in the first instance on whether the
negligence
consists of some positive act or misfeasance, or an
omission or non-feasance. In the former case, the question of
causation is one
of historical fact. The court has to determine on
the balance of probability whether the defendant’s act, for example
the careless
driving, caused the plaintiff’s loss consisting of his
broken leg. Once established on balance of probability, that fact is
taken
as true and the plaintiff recovers his damage in full. There
is no discount because the judge considers that the balance is only
just tipped in favour of the plaintiff; and the plaintiff gets
nothing if he fails to establish that it is more likely than not
that
the accident resulted in the injury.
Questions of
quantification
of the plaintiff’s
loss, however, may depend upon future uncertain events. For example,
whether and to what extent he will suffer
osteoarthritis, whether he
will continue to earn at the same rate until retirement, whether, but
for the accident, he might have
been promoted. It is trite law that
these questions
are not decided on a balance of probability, but
rather on the court’s assessment
, often expressed in percentage
terms, of the risk eventuating or the prospect of promotion, which it
should be noted depends in part
at least, on the hypothetical acts of
a third party, namely the plaintiff’s employer’ (emphasis
supplied).
And
at 1611G-H:
‘
Secondly, Mr. Jackson submitted that the plaintiffs
can only succeed if in fact the chance of success can be rated at
over 50 per
cent. It so happened that in
Kitchen v Royal Air
Force Association
[1958] 1 WLR 563
,
Otter v Church, Adams,
Tatham & Co.
[1953] Ch. 280
and
Hall v Meyrick
[1957]
2 QB 455
, to which I shall shortly refer, the plaintiff did recover
more than 50 per cent of the full value of the loss. But this is
fortuitous
and there is no reason in principle why it should be so.
In
Yardley v Coombes
(1963) 107 SJ 575 Edmund Davies J awarded
one-third of the full liability value of the plaintiff’s claim
against the negligent
defendant solicitors.’
And in
conclusion (at 1614C-E):
‘
[I]n my judgment, the plaintiff must prove as a
matter of causation that he has a real or substantial chance as
opposed to a speculative
one. If he succeeds in doing so, the
evaluation of the chance is part of the assessment of the quantum of
damage, the range lying
somewhere between something that just
qualifies as real or substantial on the one hand and near certainty
on the other. I do not
think that it is helpful to seek to lay down
in percentage terms what the lower and upper ends of the bracket
should be.’
[29] Transposing
these
dicta
to the facts of this case, at the end of the trial
De Klerk will have to have proved, on a balance of probability, that
he would
have invested at least some of the moneys used to make the
monthly payments (causation). But if he surmounts that hurdle, then
I
think that the court may be entitled, in quantifying the amount of
his damages to form an estimate of his chances of earning a
particular
figure. This figure will not have to be proved on a
balance of probability but will be a matter of estimation.
[30] There
is a long line of English cases (see eg McGregor on
Damages
16ed paras 357-359, 378-381) on the evaluation of a chance of which
the plaintiff has been deprived. One of them is
Chaplin v Hicks
[1911] 2 KB 786(CA).
The defendant had advertised in a newspaper
that he would employ the twelve winners of a beauty contest as
actresses. In the first
round the readers of the newspapers would
narrow down the competitors to 50, by voting their preferences, based
on photographs provided
by the contestants, which would be published.
Ms Hicks was one of the initial 6 000 entrants and had advanced,
through popular vote,
to inclusion among the 50. The members of this
band were invited to present themselves to the defendant so that he
might select
the lucky 12. But Ms Hicks’s invitation did not reach
her in time, because of the defendant’s breach of his contractual
duty
to give her timeous notice. In consequence she was excluded
from the final selection. A jury’s award of substantial as opposed
to nominal damages was upheld by the Court of Appeal. Vaughan
Williams LJ said (at 791):
‘
I agree that the presence of all the contingencies
upon which the gaining of the prize might depend makes the
calculation not only
difficult but incapable of being carried out
with certainty or precision. The proposition is that, whenever the
contingencies on
which the result depends are numerous and difficult
to deal with, it is impossible to recover any damage for the
loss
of the chance or opportunity
of winning the prize’ (emphasis
supplied).
After
remarking that before she was excluded her chance of being chosen had
narrowed to about one in four, the learned judge added
(at 792):
‘
I only wish to deny with emphasis that, because
precision cannot be arrived at, the jury has no function in the
assessment of damages.’
[31]
Chaplin’s
case was applied in
AG Hendrie and Company Ltd v McGarry
1936
SR 209. The plaintiff had been given a sole mandate to sell a
property. In breach of the mandate the owner sold it through
another
agent. The plaintiff claimed the amount of the commission lost as
damages. The Court declined to award the full amount
claimed, in
recognition of the facts that the mandate was revocable and that the
plaintiff might not have succeeded in selling the
property. Noneless
a substantial award of damages was made, because of the wrongful
deprivation of the chance of the plaintiff’s
earning commission.
Chaplin’s
case was also cited with apparent approval in this
Court in
Esso Standard SA (Pty) Ltd v Katz
1981 (1) SA 964(A)
at 970A-B.
[32]
Boyd
v Nel
1922 AD 414
is a comparable case. An exception was taken
to the plaintiff’s claim, which was based on the defendant’s
breach of his commitment
under an option given to the plaintiff
entitling the plaintiff to buy a certain farm. The breach consisted
in selling to another.
One ground for the exception was that the
plaintiff had not exercised the option. This argument was dismissed.
In giving judgment
(at 422) Maasdorp JA quoted a similar English
case (
Lovelock v Franklin
(15 LJQB at 148) where Denman CJ had
said that the plaintiff was entitled to say ‘I had a right to
expect that you would keep yourself
in a condition to fulfil your
promise whenever I should choose to exercise the option…’ In
other words the plaintiff had been
deprived of a chance and on
principle the defendant was liable to him, whatever the ultimate
damages award might be.
[33] Stuart-Smith
LJ’s statement that where quantification of damages is dependent
upon uncertain future events the plaintiff does
not have to provide
proof on a balance of probability (by contrast with questions of
causation) and is entitled to rely on the Court’s
assessment of his
chances, was preceded in our own country by the judgment of Colman J
in
Burger v Union National South British Insurance Company
1975 (4) SA 72(W).
This was a case in which damages for personal
injury were claimed. The learned judge said (at 74F-75F):
‘
It was pressed upon me that, as the burden of proof
was on the plaintiff, it would be for her to prove the effects of the
collision,
and that she was entitled to compensation only for those
effects which she proved. In so far as that submission relates to
pure
questions of causation, I accept it, as other Courts have done
in such cases as
Ocean Accident and Guarantee Corporation Ltd v
Koch
1963 (4) SA 147
(AD). It is on that basis that I exclude
from consideration the black-outs, which have not been shown to my
satisfaction to be causally
related to the collision. I disregard
for the same reason the plaintiff’s theory or suggestion that the
collision was the primary
cause, or a cause, of her matrimonial
troubles.
I do not think, however, where the available evidence
established a likelihood of some fact, situation or event as a
consequence of
the collision which is incapable of quantification
within narrow limits, that I am obliged, because the
onus
is
on the plaintiff, to act on the possibility least favourable to her.
Causation is one thing and quantification is another
, although
I readily concede that it is not always possible to distinguish
clearly between them in cases like the present one. It
has never,
within the range of my knowledge and experience, been the approach of
our Courts, when charged with the assessment of
damages, to resolve
by an application of the burden of proof such uncertainties as I have
referred to. I am not dealing with a case
in which the plaintiff
could have called evidence to remove the uncertainty, but neglected
to do so. I am referring to cases like
Turkstra Ltd v Richards
1926 TPD 276
, in which the plaintiff has laid before the Court
such evidence as was available, but that evidence has necessarily
failed to remove
uncertainties with regard to matters bearing upon
the
quantum
of damage. The Court, in such a case, does the
best it can with the material available. If it can do no better, it
makes the ‘informed
guess’ referred to by Holmes JA in
Anthony
and Another v Cape Town Municipality
1967 (4) SA 445
(AD).
What the Court will not do in such a case is to select,
from the range of possibilities presented by the evidence, the
possibility
which is least favourable to the plaintiff because he
bears the
onus
, and has not proved that a more favourable
possibility ought to be preferred. In the familiar bone injury case,
where the evidence
is that the plaintiff will probably suffer from
osteo-arthritis at some future time and that it may manifest itself
at any time within
the next ten years, it is not the practice to
assume against the plaintiff, because he bears the
onus
, that
he will be free of the symptom until ten years have elapsed.
Similarly, when the possible remarriage of a widow is relevant
to the
assessment of damages, we do not assume against her that she will
remarry in the immediate future, merely because she cannot
discharge
the
onus
of proving that she will not encounter romance round
the next corner.
A related aspect of the technique of assessing damages
is this one; it is recognised as proper in an appropriate case, to
have regard
to relevant events which may occur, or relevant
conditions which may arise in the future. Even when it cannot be
said to have been
proved, on a preponderance of probability, that
they will occur or arise, justice may require that what is called a
contingency allowance
be made for a possibility of that kind. If,
for example, there is acceptable evidence that there is a 30 per cent
chance that an
injury to a leg will lead to an amputation, that
possibility is not ignored because 30 per cent is less than 50 per
cent and there
is therefore no proved preponderance of probability
that there will be an amputation. The contingency is allowed for by
including
in the damages a figure representing a percentage of that
which would have been included if amputation had been a certainty.
That
is not a very satisfactory way of dealing with such
difficulties, but no better way exists under our procedure’
(emphasis supplied).
[34] The
crux of van der Walt J’s decision granting absolution was that De
Klerk and De Klerk alone had to come and say that he
would have
invested elsewhere monthly, had his money not been committed to
Commercial Union. I quote:
‘
Maar steeds het ons geen enkele woord van Mnr De
Klerk in getuienis byvoorbeeld ek was op soek na beleggings … as ek
nie daar belê
het nie [at Commercial Union] … dan sou ek
daardie geld elke maand gebruik het op advies van my makelaar en dit
belê het
in annuïteite by X of Y of Z of ek sou ‘n
dergelike skema gesoek het. Daardie getuienis kort. Daardie
getuienis is absoluut
noodsaaklik om die ekonomiese verlies daar te
stel, want onthou die getuienis is hy is genader om hierdie
beleggings by [Commercial
Union] te maak, hy het nie gesoek na ‘n
belegging nie… As daar nie getuienis is dat hy wel beleggings
gesoek het en elders sou
belê het, getuienis van hom af nie,
dan waar kom sy verlies in, waar lê die grondslag vir sy
skade?… die eiser moet
kom sê ek het skade gely, ek sou belê
het, ek het gesoek en hierdie wanvoorstellings het my ontneem van
daardie moontlikheid
… Gouws … kan dit nie getuig namens die
eiser nie, die eiser moet die grondslag lê. Die eiser het nie,
die eiser het geen
titseltjie getuienis aangetoon dat hy hierdie
bedrag … elders sou aangewend het nie, dit is spekulasie, hy moes
dit kom sê
het …’
It was for
these reasons that Van der Walt J granted absolution. He regarded
his hands to be tied. I do not think that that was
so.
[35] I
would agree that it was incumbent on De Klerk, during the course of
his case, to present some evidence upon which it might
reasonably be
found that he would have invested elsewhere. That is a question of
causation. If he would not have done so, then
he did not lose by
having his money committed. Whether he may have proved this element
on a balance of probability I shall consider
later. But that said, I
have several difficulties with the passage quoted. In particular I
do not agree with statements to the
effect that:
1 It had to be shown that (a) every month he would have invested (b)
in a similar scheme.
2 It had to be shown that he would have acted on his own initiative
and looked for another investment.
3 That he and he alone could give evidence of what his investments
would have been.
4 That there was no tittle of evidence as to what he would have done.
[36] As to
points 1 (a) and 1 (b), it seems to me that these are matters
relevant to quantification rather than causation. If the
trial judge
should wish to consider whether in some months De Klerk may not have
invested because he was short of cash, the judge
might be disposed to
make an allowance for that possibility, whilst bearing in mind that
in the end De Klerk actually repaid some
capital. Nor do I see why
De Klerk ought to have said he would have invested in another annuity
rather than in some other way.
As to point 2 it seems to me to be
subsumed in the requirement that he present some evidence upon which
it might reasonably be found
that he would have invested elsewhere.
[37] As to
point 3, that it was De Klerk and he alone who had to give the
evidence, I doubt that that is necessarily so, or even that
he is
necessarily the best person to give that evidence. After all, he was
a man who acted on advice, so that what might have determined
his
conduct might have been the opinion of another rather than his own.
Our courts have constantly emphasized that in assessing
damages the
court must have regard to the particular facts of the case. That
being so it may be wrong to apply what might seem to
be stated as
principles of general application to cases which are quite different
from those in which the statements were made.
There have been
numerous decisions in which our courts have said that a court will
come to a plaintiff’s aid in a case of uncertainty
and make an
estimate in his favour, provided he has led the best evidence
available – see for instance
Enslin v Meyer
1960 (4) SA
520(T)
at 523F-524A. Ordinarily the measure of the damage that a car
owner has suffered is taken to be the reasonable cost of repairs.

But that cost is not necessarily in itself the true measure, merely a
frequently encountered way of arriving at it in particular
cases.
But when a court says, in the case of an old car, where cost may not
be the measure, that the plaintiff has not produced
the best evidence
or that he has not provided evidence of value before and after the
collision, the court is really saying that the
evidence that the law
requires in the particular case has simply not been led. It may be
dangerous to extrapolate from cases such
as
Enslin
a general
principle as to ‘best evidence’, that a plaintiff must always
personally say what he would have done. Facts may be
proved not only
by direct evidence but by inference also - a man’s intentions may
be provable through the observations of others.
[38] That
one should not be doctrinaire about what constitutes ‘best
evidence’ is well illustrated by the case of
Arendse v Maher
1936 TPD 162.
A widow sued for damages resulting from the loss
of her husband’s support. Greenberg J pointed out that had the
evidence of an
expert on actuary been led it would have been of great
assistance. Without it he had to make all sorts of calculations and
assumptions.
But this did not deter him from arriving at an amount.
He added, though (at 165):
‘
It remains, therefore, for the Court, with the very
scanty material at hand, to try and assess the damage. We are asked
to make bricks
without straw, and if the result is inadequate then it
is a disadvantage which the person who should have put proper
material before
the Court should suffer. The means at hand are
extremely unsatisfactory, but …’
It should
be remarked that in
Arendse’s
case absolution was sought at
the end of the whole case, at which stage the requirements of proof
by the plaintiff are at a higher
level than at the end of his case –
‘ought to find’ instead of ‘might find’. If the trial judge
should consider that De
Klerk’s failure to give evidence on certain
matters detracts from the allowable
quantum
, then that is his
decision but it is not a basis for entirely non-suiting him.
[39] The
reasoning implicit in Greenberg J’s judgment is spelt out more
fully by Nicholas JA in
Southern Insurance Association Ltd v
Bailey NO
1984 (1) 98(A) at 113F-114E, as follows:
‘
The second attack on the judgment of the trial Court
was that an actuarial computation was inappropriate in the present
case for the
reason that it was based on assumptions and hypotheses
so speculative, so conjectural, that it did not afford any sound
guide to
the damages which should be awarded.
Any enquiry into damages for loss of earning capacity
is of its nature speculative, because it involves a prediction as to
the future,
without the benefit of crystal balls, soothsayers, augurs
or oracles. All that the Court can do is to make an estimate, which
is
often a very rough estimate, of the present value of the loss.
It has open to it two possible approaches.
One is for the Judge to make a round estimate of an
amount which seems to him to be fair and reasonable. That is
entirely a matter
of guesswork, a blind plunge into the unknown.
The other is to try to make an assessment, by way of
mathematical calculations, on the basis of assumptions resting on the
evidence.
The validity of this approach depends of course upon the
soundness of the assumptions, and these may vary from the strongly
probable
to the speculative.
It is manifest that either approach involves guesswork
to a greater or lesser extent. But the Court cannot for this reason
adopt
a
non possumus
attitude and make no award. See
Hersman
v Shapiro & Co
1926 TPD 367
at 379 per STRATFORD J:
“
Monetary damage having been suffered, it is necessary
for the Court to assess the amount and make the best use it can of
the evidence
before it. There are cases where the assessment by the
Court is little more than an estimate; but even so, if it is certain
that
pecuniary damage has been suffered, the Court is bound to award
damages.”
And in
Anthony and Another v Cape Town Municipality
1967 (4) SA 445(A)
HOLMES JA is reported as saying at 451B-C:
“
I therefore turn to the assessment of damages. When
it comes to scanning the uncertain future, the Court is virtually
pondering the
imponderable, but must do the best it can on the
material available, even if the result may not inappropriately be
described as an
informed guess, for no better system has yet been
devised for assessing general damages for future loss; see
Pitt v
Economic Insurance Co Ltd
1957 (3) SA 284(N)
at 287 and
Turkstra
Ltd v Richards
1926 TPD at 282
in fin
-283.”
In a case where the Court has before it material on
which an actuarial calculation can usefully be made, I do not think
that the first
approach offers any advantage over the second. On the
contrary, while the result of an actuarial computation may be no more
than
an “informed guess”, it has the advantage of an attempt to
ascertain the value of what was lost on a logical basis; whereas
the
trial Judge’s “gut feeling” (to use the words of appellant’s
counsel) as to what is fair and reasonable is nothing more
than a
blind guess. (Cf
Goldie v City Council of Johannesburg
1948
(2) SA 913(W)
at 920.)’
[40] There
are two other considerations. The first is that although this case
is concerned with the past, in reality what is being
looked at is the
unpredictable future as it appeared in 1988 and thereafter. And what
would particularly have bedevilled any evidence
given by De Klerk was
the fact that he had the benefit of hindsight. It would be nice if
one could place one’s bet after the race
has been run. How much
content or weight his evidence would have had is questionable. In
the case of most persons I do not think
that an honest plaintiff
could have said, other than in general terms, what he would have
done. The evidence of the actuary Gouws,
whom I assume to have been
impartial, might well be better evidence of
quantum
than any
that De Klerk might have given, provided, that is, that the prior
conclusion may be reached that De Klerk would have invested
elsewhere.
[41] The
second consideration is this. If, as may be found to be the case, an
unlawful negligent (or,
a fortiori
, a fraudulent) misstatement
has resulted in the plaintiff being placed in the invidious position
of having to ask the court to assess,
with all the difficulties
inherent in the exercise, the value of his lost opportunity of
investing elsewhere, the court should not
be too astute to entertain
dire and pessimistic speculations emanating from the defendants that
the plaintiff may have been even
worse off if he had not been
culpably misled into making the investment which he did.
[42] This
brings me to point 4 – the final and critical question – whether
the trial judge was right in saying that there was
not a tittle of
evidence that De Klerk would have found alternative investments. I
have set out a summary of the evidence given
by Gouws and De Klerk in
paras [17] to [23]. At this stage, mindful of what was said in
Gafoor’s
case, the less said the better. But I would add
that once the evidence is approached shorn of the misdirections
a
quo
, to which I have referred, and bearing in mind the passage
relied on by Mr Maritz as to De Klerk’s purpose (which seems to
have
been overlooked
a quo
), and applying the legal principles
which may be appropriate, I do not think that it can be said there
was not a tittle of evidence.
De Klerk comes across as a man who was
a fairly knowledgeable and an active investor. As to the
quantification or evaluation of
the chance that the alternative
investment would have been more profitable, Gouws’s evidence may
reasonably be read to mean that
he has had regard to a spread of
investments, the good and the bad and the in between. That is also
one’s experience of life,
that more investments come out well than
badly. If not there would be very little investment. Gouws’s
figure is much higher than
Commercial Union’s (even after taking
account of the tax saving), which is enough, in my view, for a court
reasonably to say at
least that it is reasonably possible that De
Klerk would have done better. And the more likely the court may
consider that prospect
to be, the higher its evaluation of his lost
opportunity will be. Again, we are in the realm of quantification –
not causation.
[43] I
refer back to what I have said in para [1] about the risks attendant
upon an absolution application at the end of the plaintiff’s
case.
I recall, when I was young at the Bar, a story of a judge (I forget
his name, but he was quite well remembered) who said to
counsel ‘Mr
So-and-So I am prepared to give you absolution if you insist, but let
the consequences of an appeal be on your head’.
Counsel for the
defendant (who perhaps has better cause to be well remembered)
withdrew his application.
[44] The
appeal is allowed with costs with the costs of senior counsel being
appropriate. The defendants are to be jointly and severally
liable
for the costs. The order of the court below is set aside and
replaced with an order that absolution be refused. The plaintiff
is
entitled to any wasted costs occasioned by the application for
absolution, the defendants being jointly and severally liable for
the
same. The case is remitted to the trial court for further hearing
and decision.
_____________
W P SCHUTZ
JUDGE OF APPEAL
CONCUR
MARAIS
JA
CAMERON
JA
CLOETE
JA
SHONGWE
AJA