Brief Summary

Negligence — Professional negligence — Quantity surveyor's duty of care — Appellant, a quantity surveyor, engaged by respondent to assess subsidence and advise on remedial work — Appellant's advice deemed inadequate and incorrect, leading to greater expenses for respondent — Respondent successfully claims damages for reliance on appellant's negligent advice — Causal link established between appellant's conduct and respondent's damages — Trial court's award of damages upheld as appropriate, despite appellant's contention regarding recoverability from builder.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an appeal to the Supreme Court of South Africa (Appellate Division) against a damages award made by a trial court following admitted professional negligence. The appellant, R Rens, was a quantity surveyor practising in East London. The respondent, E Coltman, was the owner of a dwelling house who had retained the appellant in his professional capacity to investigate subsidence-related cracking and to advise on remedial works and cost.

The matter was heard at first instance by Kroon J sitting in the East London Circuit Local Division. By the time the trial court determined the matter, the appellant had admitted liability (both contractually and delictually pleaded, though liability in contract was common cause on appeal). The live disputes were confined to causation-related issues and quantum, particularly whether the respondent had proved (i) that she would have recovered a larger amount from the builder but for the appellant’s negligent advice, and (ii) that the damages should be assessed with reference to repair costs in June 1992 (when the substantial remedial works were carried out) rather than an earlier date.

The dispute concerned professional advice given in relation to building defects, the consequences of the respondent compromising a claim against the builder in reliance on that advice, and the later escalation of costs once the true extent of the structural defects became apparent.

2. Material Facts

In February 1989 the respondent engaged the appellant to investigate apparent subsidence and cracking in her house, advise what remedial work was required, and estimate the cost. After inspection, the appellant advised (via the respondent’s attorneys) that the foundations at the south-east corner were unsoundly founded, with evidence of root material beneath the footing. However, the remedial work he recommended was minimal, essentially involving drainage and allowing the building to settle before repairing cracks. The appellant also provided a cost estimate of R3 200.

It was common cause that the appellant knew the respondent intended pursuing the builder for the cost of remedial work. Acting on his advice and estimate, the respondent settled her claim against the builder in May 1989 for R3 200 in full and final settlement. It later emerged, and was ultimately admitted by the appellant, that he ought to have conducted a more detailed investigation and that proper investigation would have revealed the need for more extensive and materially more expensive remedial works. Liability for negligent advice was therefore no longer in issue.

The trial proceeded on an amended formulation of the respondent’s damages claim, divided into two components. The first component represented what she alleged she would have recovered from the builder in May 1989, quantified as R30 728,42 (less the R3 200 already received). This figure corresponded to the cost (as at May 1989) of performing appropriate repairs by implementing a design later referred to as the “Weaver design”. The second component was framed as the additional expense said to have been incurred due to acting on incorrect advice and due to delay and escalation in building costs, incorporating wasted expenditure and increased costs associated with eventually implementing proper remedial works. The total amount awarded by the trial court was R52 525,97, derived from the agreed cost of implementing the ultimately adopted remedial solution in June 1992 plus wasted expense, less the R3 200 settlement amount.

As to the identity and means of the “builder”, the respondent had originally contracted with Galon (Pty) Ltd trading as Rodlang Homes. The evidence accepted by the courts established that, by May 1989, Galon’s assets and liabilities had been taken over by Action Property (Pty) Ltd (later a close corporation), a company controlled by Mr Parker, who was also a well-known estate agent operating through that company. It was not in dispute that any claim the respondent had against the builder in May 1989 lay against Action Property.

A substantial factual dispute concerned whether Action Property would, in reality, have been able to meet a claim in the region of R30 000 in 1989. Financial statements reflected that Action Property’s liabilities exceeded its assets at relevant dates (technical insolvency). However, those same accounts also reflected profits (after “directors emoluments”) and the repayment over time of significant amounts in reduction of Mr Parker’s loan account. Mr Parker testified that he would have injected sufficient funds to avoid liquidation and to preserve goodwill and avoid reputational harm. The trial court rejected altruistic motives but accepted, on probability, the commercial rationale that Mr Parker would have ensured the claim was met to avoid embarrassment and reputational loss.

The chronology relevant to delay and the execution of repairs was also material. After the May 1989 settlement, some remedial work was carried out in June 1989 pursuant to the appellant’s advice (though the work included placing a large quantity of concrete under foundations). The cracks reappeared by September 1989, and in October 1989 the appellant advised the respondent’s attorney that the subsoil appeared to be drying and that the matter should be left until March/April 1990. The respondent continued, as a layperson relying on the appellant’s view that wetness was the underlying problem, to take steps aimed at drying the area (including municipal drainage and adjustments to runoff). By mid-1991 the deterioration was clear (bulging wall, discernible slope). In about July 1991, after a telephone call in which the appellant was said to have disavowed responsibility, the respondent concluded she might have a claim against him and sought alternative professional input. By late August 1991, she met an architect and Mr Dowling of KRC Structural Engineering, who prepared a design for extensive remedial work (the KRC design, later refined). The respondent then sought a second opinion from Mr Morris (consulting engineering technologist) in early January 1992, who conducted tests on 4 February 1992 and issued a report dated 21 February 1992; tenders were obtained and a contractor appointed in May 1992, with the work completed in June 1992. The KRC design (as refined) was implemented, although the contractor removed the roof rather than propping it.

3. Legal Issues

The central legal questions on appeal were, first, whether the respondent had established a sufficient causal link between the appellant’s negligent advice and the loss represented by the foregone recovery from the builder; specifically, whether it was proved on the probabilities that, but for the negligent advice and the resulting settlement, the respondent would have recovered R30 728,42 from Action Property in May 1989.

The second cluster of issues concerned the assessment of damages where the appropriate measure is the cost of remedial work and there has been delay before defects are fully appreciated and properly addressed. This required determination of the appropriate date by reference to which repair costs should be assessed, and whether the respondent acted reasonably (including in relation to mitigation) in only carrying out the substantial remedial works in June 1992, rather than by (as the appellant contended) August 1990.

A further issue was whether, for purposes of quantifying the respondent’s loss, the trial court should have assessed the cost of repairs in accordance with the less expensive Weaver design rather than the KRC design actually implemented.

These issues involved a combination of fact (what would probably have happened regarding payment by Action Property; whether the respondent’s delay was reasonable on the evidence), and the application of established principles of contract damages to those facts (particularly the proper temporal approach to costing repairs and the role of reasonableness/mitigation).

4. Court’s Reasoning

On the first issue (recoverability from the builder), the appellate court treated the challenge as an attack on the trial court’s factual findings and probability assessment. It accepted that Action Property was technically insolvent on the face of its financial statements, but emphasised the nature of private company financing (minimal share capital and reliance on loan accounts), the successful ongoing operation of the business, recorded profits, and the ability over time to repay substantial amounts on Mr Parker’s loan account. These features supported the inference that the company could probably have met a claim in the region of R30 000, even if not immediately.

The court also considered Mr Parker’s evidence that he would have injected funds if necessary. While the trial court had rejected the “moral obligation” rationale, it accepted the commercial rationale that liquidation at the suit of an unpaid creditor would have caused embarrassment and reputational damage to a well-known estate agent whose name was said to be synonymous with the company. The appellate court held that this reasoning was not unrealistic on the evidence, noted that the proposition that Mr Parker could simply have allowed liquidation and continued unaffected was not put to him in cross-examination, and further noted corroboration from his attorney that Mr Parker would have avoided liquidation if possible. In these circumstances the appellate court found no basis to interfere with the trial court’s conclusion that, but for the appellant’s negligent advice and the consequent settlement, the respondent would probably have recovered R30 728,42 from Action Property.

On the second issue (the appropriate date for assessing repair costs), the court made general observations regarding damages where defects are discovered late and repair costs escalate. Treating the matter for purposes of the computation of damages as a contract claim (because contractual liability was common cause), the court restated the fundamental principle that the innocent party should be placed in the position they would have occupied had the contract been properly performed, so far as money can achieve this without undue hardship to the breaching party. It acknowledged that, while damages are often assessed as at the date of breach/performance in many contexts, there is no inflexible rule, and the appropriate assessment date depends on circumstances and the proper application of the fundamental compensatory principle.

In situations where the cost of repairs is the proper measure of damages, the court reasoned that it may be unfair and inconsistent with the compensatory principle to insist on the date of breach, particularly in building matters where defects may only be discovered later. It adopted the approach that the cost should be assessed as at the time when it was reasonable for the plaintiff to begin repairs, which may extend as far as the hearing date if the plaintiff acted reasonably in not repairing earlier. On the facts, the court noted it was not disputed that the loss (including non-recovery from the builder and increased costs due to delay/escalation) was foreseeable and that cost of remedial work was the accepted measure; the dispute was whether the respondent’s timing was reasonable.

Applying that approach to the timeline, the court rejected the appellant’s contention that the respondent ought to have realised by August 1990 that the advice was wrong merely because she returned from holiday and observed the cracks had widened. It treated the respondent as a layperson who had relied on expert advice that drying and stabilisation were the solution and who had been told in October 1989 that more time was needed. The court reasoned that the persistence of movement did not compel a conclusion that the entire assessment was fundamentally wrong or that the house would require rebuilding of affected parts. The respondent’s practical steps to dry the area were treated as consistent with continued reliance on the appellant’s diagnosis and not as unreasonable conduct.

The court accepted that it was only around July 1991, when the appellant in effect disavowed responsibility, that the respondent sought alternative advice. It then examined the subsequent period leading to June 1992 and held that the respondent’s conduct was not unduly dilatory: she consulted an expert within weeks after considering whom to approach; the first engineer designed an extensive repair; and, given her prior experience and the extent of the proposed work, seeking a second opinion was prudent. The court therefore upheld the trial court’s finding that executing the work in June 1992 was reasonable, and that damages were properly assessed by reference to the costs at that time.

On the third issue (KRC design versus Weaver design), the court rejected the argument that because the first leg of the claim used the Weaver design to quantify what would have been recovered from Action Property in May 1989, the respondent was bound to that design for later cost assessment. The court framed the true question as whether, in adopting the KRC design and the process followed (including obtaining a second opinion and calling for tenders), the respondent acted reasonably. It held that the onus of showing that a less costly remedy ought reasonably to have been adopted rested on the appellant, and that producing a cheaper alternative design after the fact did not, without more, discharge that burden. It also noted that the two-legged formulation of the claim was essentially a product of pleadings and the need to address the builder-recoverability defence, and did not determine the proper measure of the respondent’s overall damages.

5. Outcome and Relief

The appeal was dismissed with costs. The appellate court upheld the trial court’s award of R52 525,97, being the agreed cost basis for implementing the remedial works as executed in June 1992 (including wasted expenditure) less the R3 200 previously received in settlement from the builder.

The result was that the trial court’s findings on (i) the probability of recovery from Action Property in May 1989, (ii) the reasonableness of the respondent’s conduct and the June 1992 costing date, and (iii) the acceptability of basing damages on the KRC design actually implemented, remained undisturbed.

Cases Cited

Culverwell and Another v Brown 1990 (1) SA 7 (A)

Miliangos v George Frank (Textiles) Ltd [1975] 3 All ER 801 (HL)

East Ham Borough Council v Bernard Sunley & Sons Ltd [1965] 3 All ER 619 (HL)

Dodd Properties (Kent) Ltd and another v Canterbury City Council and others [1980] 1 All ER 928 (CA)

Holmdene Brickworks (Pty) Ltd v Roberts Construction Co Ltd 1977 (3) SA 670 (A)

Legislation Cited

No legislation was cited in the judgment.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The court held that the respondent proved on the probabilities that, but for the appellant’s negligent advice and the consequent settlement, she would have recovered from Action Property (Pty) Ltd the amount representing the reasonable cost of appropriate remedial work as at May 1989 (R30 728,42), and that the technical insolvency reflected in the company’s accounts did not, on the evidence, negate that probability.

The court further held that where damages are properly measured by the cost of repairs, the appropriate temporal reference is when it was reasonable for the plaintiff to undertake the repairs, and that on the facts the respondent acted reasonably in only implementing the substantial remedial works in June 1992.

It also held that the appellant failed to show that the respondent acted unreasonably in adopting the KRC design (as refined and tendered), and that the use of the Weaver design for a component of the pleaded calculation did not bind the respondent to that design for purposes of the overall damages assessment.

LEGAL PRINCIPLES

The judgment applied the compensatory principle in contract that damages aim to place the innocent party, as far as money can do so, in the position they would have been in had the contract been properly performed, subject to the qualification that this should be achievable without undue hardship to the party in breach. The court emphasised that the commonly stated “general rule” of assessing damages at the date of breach is not rigid and may yield to the requirements of fair compensation in the circumstances of the case.

Where the proper measure of loss is the cost of repairs or remedial work, the court applied the principle that the relevant cost is to be assessed at the time when it was reasonable for the plaintiff to begin repairs. This accommodates cases where defects are discovered only after time has passed and where costs have escalated, provided the plaintiff’s conduct in not repairing earlier was reasonable.

In relation to mitigation and remedial choices, the court applied the approach that the defendant bears the burden of showing that the plaintiff failed to act reasonably to limit loss, and that the plaintiff’s remedial steps should not be scrutinised with undue strictness. The existence of a cheaper remedial option identified after the event does not, without more, establish that the plaintiff acted unreasonably in adopting the course they did.

Rens v Coltman (563/94) [1995] ZASCA 118; 1996 (1) SA 452 (SCA); (28 September 1995)