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[2015] ZAWCHC 36
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Allen v Scheibert (14136/2010) [2015] ZAWCHC 36 (20 March 2015)
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
CASE NO: 14136/2010
In
the matter between:
LYNETTE
ETHEL
ALLEN
.................................................................................................
Plaintiff
and
HANS
PIETER WOLFGANG
SCHEIBERT
.................................................................
Defendant
JUDGMENT
DELIVERED ON FRIDAY 20 MARCH 2015
BLIGNAULT
J
:
Introduction
[1]
Plaintiff, Ms Lynette Allen, instituted this action against
defendant, Mr Hans Scheibert, for the payment of damages
pursuant
to a breach by him of a warranty contained in a written
agreement of sale.
[2]
Plaintiff and defendant concluded the agreement of sale on 29 July
2009. In terms thereof defendant sold the immovable
property
described as Erf 2054 Oranjezicht, Cape Town, situated at 6 Bridle
Road, Cape Town, to plaintiff for a purchase price
of R7 375 000,00.
[3]
On 29 July 2009 the parties concluded a written addendum to the
agreement of sale. It reads as follows:
‘
The
seller warrants that all alterations, additions and improvements to
the Property have been approved by the Local Authority and
that all
plans which are required have been submitted to and approved by such
Local Authority.’
[4]
Plaintiff made the following allegations in her particulars of claim:
‘
8.
Defendant breached the aforesaid warranty in that the fitted kitchen
in the guest suite in the ground floor space of the property,
being
an alternation, addition or improvement to the property, had not been
approved by such local authority
9.
The title deed in respect of the property provides that only one
dwelling, together with such outbuildings as are ordinarily
required
to be used therewith, may be erected on the erf.’
[5]
She alleged further that she suffered damage as follows:
‘
12.1
R7 827,24 representing the costs to Plaintiff of having to amend
designs in respect of the property and the resubmission
of plans to
the local authority pursuant to the discovery that the property did
not comply with local authority approvals;
12.2 R35 000,00
in respect of the costs incurred in the removal of the second
kitchen;
12.3
R350 000,00 in respect of the diminution in value of the
property as a result of the second kitchen having to be removed
and
Plaintiff being unable to use the guests suite as a separate
self-catering unit.’
[6]
Defendant did not dispute any of the material elements of plaintiff’s
claim but denied her allegations in regard to the
damage suffered by
her. He pleaded in the alternative that plaintiff could have and
ought to have mitigated her damage inasmuch
as plans could have been
submitted for a subsequent approval, or the equipment that allegedly
constituted a kitchen could have
been removed.
Evidence
on behalf of plaintiff
[7]
Plaintiff testified that she and her husband had been staying in
Milnerton before purchasing the house at 6 Bridle Road. They
decided
to look for a new house in the City Bowl area as their two sons were
studying at the Cape Town University of Technology
and their daughter
was going to the University of Cape Town. She and her husband looked
at about 12 to 15 properties over a period
of some 5 months. An
attraction of the house at 6 Bridle Road was that it contained a
separate flatlet that would allow their
sons to stay there with some
independent space. They inspected the property a couple of times and
also discussed some of it features
with defendant. It was of
importance to her that all aspects of the house had been properly
authorised by the City Council. For
that reason she required that the
addendum be added to the agreement.
[8]
After moving into the property plaintiff and her husband employed an
architect, a builder and an engineer in order to alter
certain
features of the house. The flatlet was on a lower level. It contained
a separate kitchen and a few rooms. They planned
to modernise and
reconfigure the flatlet as a separate dwelling. Their architect
prepared plans for these changes but he informed
them in due course
that he could not get the plans approved by the City Council. The
presence of a second kitchen rendered the
entire property a double
residential unit and as such it contravened the provisions of the
zoning scheme and the title deed of
the property.
[9]
Plaintiff’s architect advised her that she could either rectify
the situation by obtaining the necessary approvals or
cause the
flatlet area to be redesigned. In his letter dated 9 December
2009 he formulated these proposals as follows:
‘
The
process involved to rectify this matter is as follows:
1. An application
needs to be submitted for the removal of the title deed restriction,
this process can take between 6 – 24
months, if successful.
2. Extensive
public participation (neighbours consent) will be required,
3. Advertising by
Council is required,
4. A town planner
would need to be consulted,
5.
As built plans will then have to be submitted to update Council
records.
Outline
anticipated costs Excl. VAT are as follows:
1.
Town Planner
: R 20
000.00 – R 30 000.00
2.
Application fees
: R 4
500.00
3.
Plan walking fees
:
R 3
000.00
4.
Plan scrutiny fees
:
R
1 250.00
Total
:
R
28 750.00 – R 38 750.00
Once
submitted, there is no guarantee that the application will be
successful, in that a neighbour may object and take it to the
appeal’s process in which the entire process becomes drawn out
and more costly.
To
date, we have had to proceed in redesigning the area down stairs to
reflect planning and usage that is of “single dwelling”
classification in order to ensure that your planning approval for the
alterations can move forward without delay and without the
removal of
the restriction process as outlined above. This however does present
a down scale in the usage of the dwelling and will
present a loss in
market value in that it cannot be utilised legally as a second
dwelling unit as originally anticipated when purchased.
I am sure
that the resident estate agents will be able to verify this and
accordingly determine a potential reduction in the value
of the
property value.
Our
costs thus Excl. VAT to redesign and resubmit the plans is as
follows:
1. Redesign of
ground floor
…...........
: 1h30 @
R 1 200.00 /h = R1800.00
2. Redrawing of
plans and elevations: 8h15 @ R 600.00 /h = R4 950.00
3. 2 x A1
Plots
....................................
:
2 x R 18.00 each
......
= R 36.00
4. 8 x A1 Prints:
…..............................
8
x R 10.00 each =
…...
R 80.00
Total
=
….................
R6
866.00
’
[10]
Plaintiff testified that she decided to cause the kitchen in the
flatlet to be removed and to proceed with the alterations
to the main
house so that they could move in. She was influenced by the fact that
there was no guarantee that the application for
the approval of the
plans for a separate flatlet would succeed. She confirmed that she
had made the payments set forth in sub-paras
12.1 and 12.2 of her
particulars of claim, referred to above.
[11]
Plaintiff testified that the existence of the flatlet was of
importance to her. She said,
inter alia
,
the following:
‘
Well
we specifically wanted that area for our sons to have some
independence, we did not want to go the route of putting them into
any kind of apartment or anything like that, that was closer to the
university and we were looking at a house down the road from
this one
which had two apartments and a separate kitchen, and we might, I mean
at that stage this might have been the tipping scale,
we might have
gone with the other.’
[12]
Plaintiff’s architect, Mr Marchand Osche, confirmed that
plaintiff had paid for his services. He said that the application
for
the approval of the building plans for the flatlet was refused
because it contravened the provisions of the zoning scheme and
the
property’s title deed. The reconfiguration of the area would
not only have entailed the omission of the kitchen. It also
required
a change to the front entrance of the property to alleviate separate
access by a third party.
[13]
Plaintiff called Mr John van der Spuy as an expert witness. He has
considerable expertise and experience in the field of property
valuation. He is a registered professional valuer and the managing
director of Steer and Co. He obtained the National Diploma in
Property Valuation in 1976 and he is a member of,
inter
alia
, the Institute of Estate Agents
and the Institute of Valuers.
[14]
Mr Van der Spuy’s professional career commenced as a property
valuer for the city of Cape Town and other municipalities.
In May
1975 he joined the Property Management Division of Steer and Company.
He was responsible for the management of all the properties
in the
company’s portfolio and he handled the valuation of properties
entrusted to it. He headed the valuation division of
Steer and
Company for a number of years whilst maintaining control over the
various other divisions in which the company operated.
His valuation
activities included municipal valuations and handling objections in
this regard. He valued residential and commercial
properties for
litigation purposes and for deceased estates. He also prepared
valuations for purposes of investments in property.
[15]
Mr Van der Spuy and Ms Marlene Tighy, defendant’s expert, met
before the trial in an attempt to curtail the issues. Their
meeting
achieved very little. They only agreed on one material point, namely
that the order of desirability of neighbourhoods in
the city bowl
area is: (1) Higgovale; (2) Oranjezicht; (3) Tamboerskloof / Gardens;
(4) Devil’s Peak; and (5) Vredehoek.
[16]
Mr Van der Spuy provided a general description of the property and
the dwelling in a report submitted by him.
‘
2.2
The subject property is 6 Bridle Road, Oranjezicht, a large,
single residential home situated on the lower slopes of Table
Mountain in a prestigious residential area of the Cape Town City
Bowl, which has been firmly established since the 1940’s.
This
home is part of a row of properties forming the top most residences
in the City Bowl. Bridle Road, along with Rugby Road,
is the top most
road in this area, traversing the upper reaches of Oranjezicht. All
of the surrounding properties include substantial,
freestanding
dwellings many of which date from the 1940’s and 50’s and
some of which have been total renovated or replaced
in some cases
with more modern homes.
2.3 Bridle Road,
at its southern end, is situated a “cul-de-sac” and thus
a sought after area with easy access to the
Cape Town CBD, some 3kms
below. All the surrounding roads are tarred with easy access to all
modern amenities, such as schools,
shopping centres and public
transport. Views over the City Bowl suburbs, CBD and Table Bay are
panoramic.
……
4.
IMPROVEMENTS
At
the date of sale (and date of valuation), the steeply sloping
property with various terraces, including a freestanding substantial
dwelling typical of many of its neighbouring buildings with large and
spacious accommodation. This included a steep driveway off
Bridle
Road, up to a secure parking area for three cars.
A
flight of stairs leads inside to the main entrance, off which on the
lower level, was a flatlet of some 70m
2
approximately, with a separate entrance and
accommodation including two bedrooms, a shower, toilet and wash hand
basin (x 2), an
open plan kitchen and a living room opening onto the
adjacent parking terrace. There was a large storeroom under the
staircase.
The
entrance hall also leads to the upper level where the main part of
the dwelling included a hallway opening into a large lounge/dining
room with the original separate dining room then used as a TV room.
The upper level of the building is L-shaped and the reception
area
includes a large kitchen with a study leading therefrom. All the
floors in this area were surfaced with ceramic tiles. The
other “leg”
of the “L” led to four bedrooms with the main having an
en-suite bathroom. There were a further
two bathrooms and a guest
cloakroom. The dwelling has an external laundry and staff quarters,
as well as a swimming pool with entertainment
poolroom below the
bedroom wing. Next to it was a lockable storeroom below the
staircase. The pool is thus well away from the living
area.
Although
the dwelling was largely in its original structural condition,
certain renovations had been carried out, apparently in
the early
1990’s, to the kitchen and bathroom areas, thus providing
reasonably modern accommodation.’
[17]
Mr Van der Spuy valued the subject property as a single residential
unit i.e. without the flatlet being regarded as a separate
residential unit. He arrived at a value of R7 million. The basis
of his determination was the comparable sales’ method.
He
examined the prices of recent comparable sales in the same part of
Oranjezicht, namely:
8 Bridle Road,
13 February
2008,
R9,8 million;
2 Bridle Road,
15 December
2009,
R5,1 million;
2 Rugby
Road, 22 February
2009,
R7,3 million;
5 Rugby Road,
30 August 2008,
R6,25 million; and
10
Bridle Road, 18 January 2008,
R7 million.
[18]
According to Mr Van der Spuy the subject property was sold at a
premium of R375 000,00, probably due to the parties’
assumption
that the flatlet could be used as a separate residential unit. He
summarised his opinion as follows:
‘
In
order to assess the derogation of value occasioned by such a change,
the valuer has taken into account firstly, the different
selling
prices of the various homes listed above but has also taken into
account comparable residential rentals of apartments in
Oranjezicht
which were found to be approximately R4 000 per month for a two
bedroomed, 70m
2
unit with a lounge , kitchenette and bathroom facilities. It is
axiomatic that the lack of a kitchen does not totally remove the
“flatlet” from the overall dimensions of the building but
for the reasons listed above , it would simply form part
of the main
dwelling and could not be let as a separate unit. A further factor
brought to bear, is that a 70m
2
flat would sell independently for approximately R1 200 000
in this sought after area.’
[19]
Mr van der Spuy concluded that taking all the relevant factors into
account, he was of the opinion that the adjusted valuation
of the
overall property would reduce by approximately R350 000,00 ie to
just over R7 000 000,00. He calculated the
potential rental
loss by assuming a net rental of R31 500,00 per annum,
capitalised at 8,5% per annum.
Evidence
on behalf of defendant
[20]
Defendant gave evidence in person. He is an attorney, formerly
practising in Cape Town. He bought the property at 6 Bridle
Road
in 1995. In July/August 2008 he opened a satellite office in Berlin
but he continued practising in Cape Town. During the period
2008 to
2009 he spent about one-third of his time in the Cape Town practice
and the rest in Berlin. He decided to move permanently
to
Berlin and to sell the subject property.
[21]
In July/August 2008 he made contact with estate agents and asked them
to market the property. It was initially advertised at
a price in the
region of R10 million to R11 million but as the market dropped
he gradually reduced the asking price to R8,9 million.
The house
next door at 8 Bridle Road was sold twice in the relevant period,
first at R8,9 million and subsequently at R11 million.
He
marketed the property from mid-2008 until August 2009 but he himself
did not act proactively. When he left for Berlin his daughter,
Katrina, dealt with the estate agents. His perception at the time was
that the property market was dead.
[22]
On 26 June 2009 he received an offer for R5 million for the
property. He rejected it out of hand. On 27 July
2009 he
received an offer for R7 million from plaintiff. He rejected
this offer. Under cross-examination defendant confirmed
that he had
altogether mandated five estate agents to market the property,
including the leading estate agents in Cape Town. He
ultimately sold
the subject property for R7 375 000,00 because the estate
agent told him he would not get a better price.
[23]
Defendant called Ms Marlene Tighy to give evidence as an expert. She
is employed by Rhode and Associates. She holds the following
degrees:
BSc (Wits) (Mathematics & Mathematical Statistics) (1977); BSc
Hons (Operational Research) (Rand Afrikaans University)
(1979); MBL
(SA) (1985); and Pr Sci Nat – Professional Natural Scientist
(Mathematics) (1994). She also has the following
qualifications:
Registered Professional Valuer; Member of the SA Institute of
Valuers; Member of RICS; Advanced Diploma in Project
and Programme
Management, Old Mutual Business School; and PRINCE2 Registered
Practitioner (2006). Her professional experience
commenced in
1978. She worked for a number of employers in the fields of,
inter
alia
, mathematical statistics,
marketing research, property management, business systems analysis,
property valuation, and information
technology business analysis.
[24]
Ms Tighy determined the value of the subject property as at 4 August
2009. She obtained details of the building at the
time of the sale
from defendant to plaintiff and she looked at approved plans. The
house is situated on two levels. The flatlet
which forms the subject
of the dispute consists of a study with an adjacent cloakroom, a
guest room with an adjacent bathroom and
an area marked ‘
existing
garage guest extension’
. The
latter area was fitted out as a kitchen at the time of the sale. She
estimated this area as 109m
2
.
[25]
Ms Tighy stated that the object of her valuation was to determine the
market value of the subject property as at the date of
the sale. She
applied the following definition of market value which, she said, is
internationally accepted:
‘
Market
value is the estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a
willing seller in
an arm’s-length transaction, after proper marketing wherein the
parties had each acted knowledgably, prudently,
and without
compulsion.’
[26]
In a report which served as a summary of her evidence, she described
her method of valuation as follows:
‘
To
determine the market value of the subject property, we used as our
primary approach the sales details of 42 historical sales
in the area
as input to multiple-regression models to try to explain prices
achieved in the area. This is a quantitative and rather
robust method
that is far superior to the “soft” conventional method of
using “comparative” sales that
are vaguely comparable but
without the evidence to support the comparability …. In
addition, we also consulted estate agents.’
[27]
Her method consisted of the application of a multiple regression
analysis with respect to sales details of 42 properties in
Oranjezicht, Higgovale and Vredehoek over the period from January
2008 to December 2009. These prices were inflation adjusted
to
August 2009. She then tried a list of 15 value-forming attributes to
explain in a model the prices achieved for the 42 sales.
[28]
Using these data Ms Tighy constructed two regression equations. The
first yields a market value of the subject property of
R9190,976. The
model produced a correlation coefficient, ie one measure of the
goodness of the fit, of 0,57 which means that the
model explains 57%
of the variations of the evaluation in market value. The second
equation yielded a market value of R10 868 000,00
and a
coefficient factor of 0,59 which means that it explains 59% of the
variation.
[29]
Ms Tighy’s conclusions, as summarised in her report, read as
follows:
‘…
we
conclude (t)hat the market value of the subject property as at 4
August 2009 was R9 million or higher (excluding costs of
sale
and VAT). This value estimate typically reflects the price of
single-unit dwellings, but adjust for, inter alia, different
sizes.
(In our models, size of the floor area is catered for in proxy
variables like number of bathrooms and number of studies;
the 5½
bathrooms and 2 studies evidently push up the market value of the
subject property.)
The
“most likely” buyer determines market values in a given
neighbourhood, and this imaginary person would most likely
have
ignored the possibility of letting the lower-level suite. Hence the
price this person would have been prepared to pay would
have ignored
this possibility but would have considered the number of bathrooms
and studies (proxies for floor size). In fact,
by throwing out the
kitchen on the lower level, the Plaintiff implicitly confirms this
train of thought (viz. she was a “most
likely” buyer).
This is so because the probability is very high that she would have
been able to get consent use at little
cost, albeit only after one to
two years.’
[30]
Under cross-examination Ms Tighy’s valuation was tested against
the prices at which eight properties in the close vicinity,
including
the subject property, had been sold during the period January 2008 to
December 2009. This exercise is dealt with
more fully
hereunder. That concluded the evidence in the matter.
The
method of calculating plaintiff’s damage
[31]
In the course of argument the legal question arose as to the proper
method of calculating the damages to be awarded to plaintiff.
Counsel initially argued that the diminution in value of the property
was the relevant yardstick which had to be determined with
reference
to the opposing valuations of the property as a whole. Counsel
for defendant submitted that the market value of
the property
exceeded the price paid for it by plaintiff and that plaintiff for
that reason did not suffer any damage at all. Counsel
for
plaintiff argued that the price paid by plaintiff exceeded the market
value by at least R350 000,00, being the use value
of the
flatlet as such.
[32]
At my request counsel submitted supplementary written argument on the
question whether a claim for damages as a surrogate for
specific
performance is not available to plaintiff in the circumstances of
this case. The essential character of such a claim
is that a
party to a contract (A) who is entitled to claim specific performance
by the opposite party (B) by reason of a breach
of the contract by
it, may claim damages from B as a surrogate for such specific
performance. The damages in such a case
would be the amount
required by A to complete or rectify the defective performance by B.
[33]
In his supplementary argument plaintiff’s counsel contended
that her claim is indeed one for damages as a surrogate
for specific
performance. Counsel argued that she was entitled to an order
that defendant completes his prestation.
Her claim is intended
to compensate her for his failure to do so. Counsel for
defendant, on the other hand, submitted that
a claim for damages as a
surrogate for specific performance does not exist in our law.
On the facts of this case, he argued,
plaintiff’s claim as
pleaded is intended to compensate her for the difference between a
house with a flatlet that can be
used legally as a separate
residential unit and a house without such a flatlet. I have
considered plaintiff’s particulars
of claim but I am of the
view that her allegations are wide enough to accommodate the
arguments of her counsel.
[34]
The main contentions for and against the recognition of a claim for
damages as a surrogate for specific performance in our
law are set
forth in Van der Merwe et al
Contract General Principles
4
th
edition at 328-329:
‘
The
argument in favour of recognising damages as a surrogate for
performance as an independent remedy is that a contractant, who
has
performed in full and who would have been entitled to claim specific
performance had it been possible, should have the right
to claim full
monetary value of the counter-performance to enable him to effect or
complete the counter-performance to which he
was entitled.
After all, if he had not yet performed and was sued for performance
he would have been entitled to withhold
his performance until the
plaintiff either performed in full or complemented the shortcomings
in his performance. On the
other hand, it may be contended that
since a claim for specific performance is finally based on the exact
content of the contract,
damages as a surrogate for performance
should only be available if there is an appropriate term in the
contract. Moreover,
it should be taken into account that the
remedies for breach of contract are not intended to penalise the
party in breach.’
[35]
Although many writers are in favour of the recognition of such a
remedy, uncertainty was created by the decision of the Appellate
Division of the Supreme Court in
ISEP
Structural Engineering & Plating (Pty) Ltd v Inland Exploration
Co (Pty) Ltd
1981 (4) SA 1
(A). Three
separate judgments were delivered. Jansen JA and Hoexter AJA
(Viljoen JA concurring) held that the remedy
does not exist in our
law. Van Winsen AJA (Kotze JA concurring) opined that it does. The
ISEP
judgment has been widely criticised. In
Mostert
NO v Old Mutual Life Assurance Co (SA) Ltd
2001 (4) SA 159
(SCA) at 186E-G the Supreme Court of Appeal (per
Smalberger ADCJ) took note of the criticism and expressed the view
that its correctness
is open to doubt. Reconsideration of the
majority decision, the learned judge said, is called for but the case
at hand was
not the appropriate matter in which to do so.
[36]
It seems to me that the nature of appellant’s claim must be
considered within the wider context of the principles underlying
the
assessment of damages in our law. It is clear from
the judgment of Jansen JA in the
ISEP
case that the concept of damages in
this context should not be regarded as a separate or distinct kind of
damages. He refers
inter alia with approval to a statement in
De Wet and Van Wyk
Kontraktereg
4
th
edition 200 which is to the effect that the fact that damages are
claimed as a surrogate for specific performance does not alter
the
basic principles that apply to the calculation and award of
contractual damages.
[37]
The nature of a claim for damages is discussed at some length in
Visser and Potgieter’s
Law of
Damages
2nd edition
64-73. The general principle is
settled law. It was established more than hundred years ago.
See the judgment
of the Appellate Division of the Supreme Court in
Victoria Falls & Transvaal Power Co
Ltd v Consolidated Langlaagte Mines Ltd
1915
AD 1
at 22:
‘…
we
must apply the general principles which govern the investigation of
that most difficult question of fact - the assessment of
compensation
for breach of contract. The sufferer by such a breach should be
placed in the position he would have occupied had
the contract been
performed, so far as that can be done by the payment of money, and
without undue hardship to the defaulting party.’
[38]
In the practical application of this principle, however, there are
two main approaches to the assessment of damages.
The first is
described as the sum-formula method, the second as the concrete
approach. The sum-formula method has traditionally
been applied
in South Africa. Visser and Potgieter op cit 65 describe it,
with reference to an article by CFC van der Walt
in
(1980) 43
THRHR
1
at 4, as the negative difference between a person’s current
patrimonial position, after the occurrence of the damage-causing
event, and his hypothetical patrimonial position which would have
existed currently if the damage-causing event had not taken place.
[39]
The sum-formula has been criticised by a number of writers. They
favour the application of the concrete approach. Visser
and
Potgieter op cit 71 state that the latter approach focuses on the
withdrawal or deterioration of a particular part of someone’s
patrimony. According to Reinecke 1988
De Jure
226 the
concrete approach regards damage as a factual loss or deterioration
of a specific asset or a liability which is incurred
or increased.
Van der Merwe et al op cit 358-359 provides a fuller description of
the concrete approach:
“
In
actual fact, the courts do not always make use of a comparison
between a hypothetical and an actual total patrimony in order
to
assess damage. Much rather, they follow a concrete approach to
the question of damage by focussing on the particular elements
of the
estate that are affected. According to the concrete approach,
damage occurs whenever, as a consequence of an uncertain
or unplanned
event, the use of an asset is forfeited; a particular asset is lost
or reduced in value; a liability (that is, a debt)
is incurred or
increased, or expenditure becomes useless. It has even been
recognised that the loss of management time of
an organisation may
constitute damage. Assets are patrimonial rights and also
expectancies that have a monetary value, provided
that the particular
expectancies are recognised by the law. Liabilities or debts
are not only liabilities that have already
resulted from the
uncertain event complained of but also liabilities or expenses that
will inevitably result from the event and
which can be regarded as
both necessary and reasonable.”
[40]
The merits of the concrete approach, as opposed to the sum-formula
method, are well illustrated by two judgments. The
first is
that of Findlay AJ in
Schmidt Plant Hire
(Pty) Ltd v Pedrelli
1990 (1) SA 398
(D). The defendant in that case instituted a counterclaim for
damages suffered by him as a result of the defective construction
of
a dam wall by the plaintiff. He claimed the cost of repairing
the dam wall as damages. Counsel for the plaintiff
relied on
the
ISEP
judgment. He submitted, inter alia, that the true measure of
the defendant’s damage was the difference between the
value of
the dam wall had it been properly constructed and its value in its
defective and actual state. In the absence of
evidence by the
defendant as to the monetary value of the latter measure, counsel
submitted, the claim should fail.
[41]
In the course of his judgment Findlay AJ he analysed the three
judgments in
ISEP
case
fully and said the following, at 218G-219A:
‘
From
the above analysis it seems to me to follow, with respect, that the
majority decided the matter on the basis that the claim
as pleaded
was not one for damages consequent upon an election by the aggrieved
party to claim damages instead of pursuing a remedy
for specific
performance but was a misconceived cause of action seeking to claim
monetary compensation in lieu of specific performance.
… …
It
seems to me, therefore, that the further exposition as to the proper
yardstick applicable in the assessment of damages
for breach of an
obligation arising from contract as discussed and formulated by
Jansen JA is not a ratio of the Court that binds
me. I do not say
that for the purpose of examining the specific type of contract a
court may not investigate and pronounce upon
a general rule of
contract applicable to all contracts and thereby formulate a ratio
which would be binding but rather that, upon
my analysis of the
judgments, I do not find that the majority of the Court either
decided the question or found it necessary to
address it for the
purposes of deciding the appeal.’
[42]
Findlay AJ rejected the plaintiff’s submissions and gave
judgment for the defendant. His reasoning appears inter
alia
from the following passage:
‘
Such
an approach supports application of the existing rule inasmuch as the
principle is to ensure that the innocent party obtains
what he
bargained for (albeit that this may be translated into a monetary
equivalent as damages). The fact that the costs of remedial
work
might exceed the diminution in value or even the whole value may well
be due to increase in costs occasioned by the passage
of time
(resulting from escalation in cost or the eroding of the real value
of money). This does not necessarily, in my view, do
violence thereto
because a contract such as the present involves the erection and
creation of a substantial immovable structure
which, if defective,
cannot simply be replaced by a readily obtainable substitute in the
open market. That this must be so is because
it is, by nature, unique
and custom built and secondly because it is not something movable. It
must therefore be contrasted totally
with other commodities, such as
the example of the second-hand motor vehicle as is cited in the
English cases. In the present case
and since the component of the
contract other than hire charges has not been quantified, I cannot
say more than the costs of remedial
work may exceed by far what the
plaintiff received by way of hire charges but I am unable to relate
it to the overall value of
the whole contract. Such a result is not
necessarily inequitable as, for example, the nature and costs of
remedial work carried
out in the Holmdene Brick case supra.’
[43]
I agree with respect with the reasoning of Findlay AJ in the
Pedrelli
judgment. I am of the view that
it supports the concrete approach to the assessment of damages.
The successful claim
focused on the damage to a concrete object,
namely the broken dam wall. The learned judge declined to apply
the sum-formula
method.
[44]
The second judgment that illustrates the application of the concrete
approach is that of Trollip JA in
Ranger v Wykerd
and
Another
1977(2) SA 976 (AD). Although this case concerned a
claim following a fraudulent misrepresentation in a contractual
context,
the learned judge made it clear, at 994H-995B, that on the
facts of that case the assessment of delictual damages was similar to
the assessment of contractual damages. The facts were that the
seller of a residential property fraudulently represented
to the
purchaser that a swimming pool on the premises was structurally
sound. After taking transfer of the property the purchaser
found that that the pool was leaking. The purchaser repaired
the pool and claimed the costs of repair as damages from the
seller.
The seller’s contention was summarised by Trollip JA as follows
at 992GH:
‘
The
main argument for differentiating between the two kinds of delicts
rests on the applicability of the swings and roundabouts
principle
previously mentioned. In effect the contention is that, in
contradistinction to the hypothetical delict of wrongfully
causing
physical damage, the delict of fraud was committed in the course of
and as an integral part of appellant's acquiring the
property; the
fraud and its immediate effect must therefore be considered, not in
isolation, but in the context of the whole of
that transaction;
hence, whatever loss appellant sustained (on the swings) through the
cost of repairs is compensable by the net
gain in patrimony he
derived (on the roundabouts) through acquiring the property, such net
gain being the excess in value of the
property over what he paid for
it; and in the absence of proof that there was no such excess,
appellant failed to prove that he
had suffered any patrimonial
loss…….’
[45]
The learned judge rejected plaintiff’s contention and granted
the amount of the reasonable and necessary cost of remedying
the
defects of the swimming bath as damages to the purchaser. This,
he said, constituted the patrimonial loss that the purchaser
suffered
through the seller’s fraud. The reasoning of Trollip JA
appears inter alia from the following passage, at
994F-H:
‘
That
such
[repair]
cost,
as in the case of the supposed delict of wrongful physical damage to
the swimming bath, was directly and causally connected
with
respondent's fraud is manifest. For they knew, when committing the
fraud, the appellant and his family were intent on using
the swimming
bath if they acquired the property, and that, because of its defects,
he would probably have to repair it before long
for it to function
properly and enable them to use it. Indeed, the present is a fortiori
the kind of case in which the reasonable
cost of repairs ought to be
awarded as representing appellant's patrimonial loss directly flowing
from the fraud, for the respondents
must have foreseen it as an
inevitable consequence of their fraud.’
[46]
It is also useful to have regard to the concept of an ’
expectation
loss’
in common law jurisdictions. The law relating
to the assessment of damages for breach of contract was influenced by
an article
written by Fuller and Perdue in 46
Yale Law Review
(1936). It has variously been described as ‘
seminal’
,
‘
famous’
and ‘
immensely influential
’.
(Cf
Mainline Carriers (Pty) Ltd v Jaad Investments CC and Another
1998 (2) SA 468
(C) at para [17]). The authors distinguished
between three main purposes that may be pursued in awarding damages
for breach
of contract. They summarised these purposes as
follows:
‘
First,
the plaintiff has in reliance on the promise of the defendant
conferred some value on the defendant. The defendant
fails to
perform his promise. The court may force the defendant to
disgorge the value he received from the plaintiff.
The object
here may be termed the prevention of gain by the defaulting promisor
at the expense of the promisee; more briefly, the
prevention of
unjust enrichment. The interest protected may be called the
restitution interest… … …
Secondly,
the plaintiff has in reliance on the promise of the defendant changed
his position. For example, the buyer under
a contract for the
sale of land has incurred expense in the investigation of the
seller’s title, or has neglected the opportunity
to enter other
contracts. We may award damages to the plaintiff for the
purpose of undoing the harm which his reliance on
the defendant’s
promise has caused him. Our object is to put him in as good a
position as he was in before the promise
was made. The interest
protected in this case may be called the reliance interest.
Thirdly,
without insisting on reliance by the promisee or enrichment of the
promisor, we may seek to give the promisee the value
of the
expectancy which the promise created. We may in a suit for
specific performance actually compel the defendant to render
the
promised performance to the plaintiff, or, in a suit for damages, we
may make the defendant pay the money value of this performance.
Here our object is to put the plaintiff in as good a position as he
would have occupied had the defendant performed his promise.
The interest protected in this case we may call the expectation
interest.’
[47]
Fuller and Perdue’s third class of damage, ie expectation loss,
is relevant to the present case. The concept is
known and
applied in common law jurisdictions. See, for example,
Omak
Maritime Ltd v Mamola Challenger Shipping Co & Ors
[2010] EWHC 2026
(Comm) (4 August 2010), quoting from the judgment of
the High Court of Australia in
Commonwealth
v Amann Aviation Pty Ltd
[1991] HCA 54
;
(1992) 174 CLR 64
(12 December 1991) paras 23 and 24:
’
23.
The general rule at common law, as stated by Parke B. in Robinson v.
Harman (1848)1 Exch 850 , is "that where a party sustains
a loss
by reason of breach of contract, he is, so far as money can do it, to
be placed in the same situation, with respect to damages,
as if the
contract had been performed". This statement of principle has
been accepted and applied in Australia.
24.
The award of damages for breach of contract protects a plaintiff's
expectation of receiving the defendant's performance. That
expectation arises out of or is created by the contract. Hence,
damages for breach of contract are often described as "expectation
damages". The onus of proving damages sustained lies on a
plaintiff and the amount of damages awarded will be commensurate
with
the plaintiff's expectation, objectively determined, rather than
subjectively ascertained. That is to say, a plaintiff must
prove, on
the balance of probabilities, that his or her expectation of a
certain outcome, as a result of performance of the contract,
had a
likelihood of attainment rather than being mere expectation.’
[48]
See also
Popov v Moldova No 1
[2006]
ECHR 45
(17 January 2006), a judgment of the European Court of Human
Rights, which refers to the law of the United States of America in
the following terms:
‘
A
similar rule is to be found in the book “Introduction to the
law and legal system of the United States”
[by
William Burnham]
under the sub-title
‘Remedies for Breaches of Contracts’. I quote:
“
...The
most common kind of relief that is awarded in a suit for breach of
contract is “compensatory damages”. This type
of damages
is also referred to as “expectation damages” since such
damages seek to repair the expectations of a party
by awarding an
amount of money that will put the aggrieved party in the same
position he would have been if the contract had been
performed...”
[49]
The concept of ‘
expectation
damage
’
is relevant for purposes of this judgment. On the facts of this
case it is in my view similar to the concrete approach
in South
African law. Both approaches focus on the concrete asset or
assets which the innocent party expected to receive
in terms of the
contract but did not receive as a result of the guilty party’s
breach of contract. He is entitled to
be compensated for such
loss.
[50]
I revert to the facts of the present case. In my view the
concrete approach should be followed in assessing plaintiff’s
damage. The breach of the warranty by defendant adversely
affected only one of her assets, namely her use of the flatlet
area.
It had no effect at all on any other element of her patrimony.
It would therefore be illogical and impractical
to involve any other
asset in the process of assessing the amount of her damage.
[51]
The same result would follow if the expectation test were to be
applied. Plaintiff expected to receive a flatlet that
could be
used as a separate residential unit. She did not receive it as
a result of defendant’s breach of contract.
She is
therefore entitled to claim damages to compensate her for defendant’s
incomplete performance
[52]
I return to the question posed at the outset of this part of the
judgment, namely can plaintiff claim damages from defendant
as a
surrogate for specific performance. In my view she can.
It seems to me that the answer to this question follows
from my
analysis of the concrete approach and the expectation test. The
purpose of a claim for specific performance would
have been to compel
defendant to rectify his defective performance ie to provide
plaintiff with the asset which he undertook to
supply to her.
She elected to claim damages and her election as such has not been
challenged. She is now entitled to
claim damages from defendant
in an amount that would put her in the position that she would have
been if defendant had not breached
his warranty.
[53]
On this basis I am accordingly of the view that plaintiff is entitled
to claim damages from defendant. The outstanding
issues are
first the defence that plaintiff should have mitigated her loss and
secondly the quantum of the loss.
Evaluation
of the experts’ evidence
[54]
Although it is not necessary I have considered the question whether
plaintiff would have suffered any damage if the submission
of counsel
for defendant were correct, namely that the current value of the
property as a whole exceeds the purchase price.
To that end I
proceed to discuss the question whether the valuation of Mr van der
Spuy or that of Ms Tighy is to be preferred.
[55]
I consider Mr Van der Spuy’s valuation first. He was
subjected to lengthy cross-examination and various aspects
of his
evidence were criticised in argument. There are in my view,
however, two weighty factors which support his valuation
of the
property. The first is the fact that his valuation is similar to the
price agreed upon in the actual sale between plaintiff
and defendant.
In
Southern Transvaal Buildings
(Pty) Ltd v Johannesburg City Council
1979 (1) SA 949
(W) at 956D-F the importance of a bona fide sale for
purposes of valuation was emphasised:
‘
When
a sale of comparable property has been proved, the Court should, in
the absence of any evidence or indication to the contrary,
assume
that it was a bona fide transaction, concluded between reasonably
intelligent and well-informed people who were not acting
under any
abnormal pressure, or subject to any delusions or misapprehensions
about the property which was being bought and sold.
If there were any
abnormal features of the transaction, it is for the party who wishes
the Court to disregard the price reflected
therein to prove those
features.’
[56]
A second factor in favour of Van der Spuy’s valuation is that
he has considerable expertise and experience in the valuation
of
properties. See
City of Johannesburg v Chairman, Valuation
Appeal Board and Another
2014 (4) SA 10
(SCA) paras [22] –
[24]:
‘
[23]
… …In order to determine the market value of property,
valuers should have regard to various factors in order
to determine
what a notional willing buyer would probably pay to a willing seller
in the open market. These include comparable
sales of similar
properties in the open market; the extent to which the parties to
previous transactions acted voluntarily and
negotiated on equal terms
or acted under compulsion; the motivation of the respective parties
in previous transactions to buy and
sell; restrictions on the use of
the property and the possibility of their removal; the improvements
on the land and the depreciation
of those improvements; the potential
uses to which the land may be put; and the income that may be derived
from the property (this
list is not meant to be exhaustive). As was
said more than a century ago in a passage regularly approved by this
court thereafter:
'It
may not be always possible to fix the market value by reference to
concrete examples. There may be cases where, owing to the
nature of
the property, or to the absence of transactions suitable for
comparison, the valuator's difficulties are much increased.
His duty
then would be to take into consideration every circumstance likely to
influence the mind of a purchaser, the present cost
of erecting the
property, the uses to which it is capable of being put, its business
facilities as affording an opportunity for
profit, its situation and
surroundings, and so on. There being no concrete illustration ready
to hand of the operation of all these
considerations upon the mind of
an actual buyer, he would have to employ his skill and experience in
deciding what a purchaser,
if one were to appear, would be likely to
give. And in that way he would to the best of his ability be fixing
the exchange value
of the property.' [Per Innes J in
Pietermaritzburg Corporation v South African Breweries Ltd
1911 AD
501
at 516.]
[23]
This remains as true today as it did then. As was more recently
commented, correctly in my view:
'The
valuation process consequently calls for skill and experience,
without which a valuer would find it difficult to arrive at
a logical
deduction from the facts . . . . A valuer's awareness of existing
market conditions and trends, together with his knowledge
of the
circumstances and the facts relating to the property concerned,
enable him to understand how the buying and selling public
think, and
through his skill and experience he should be able to recognise
the elements most likely to influence intending
purchasers.'
[24]
Valuation is accordingly not an exact science. The market value of a
property can only be estimated and not precisely determined,
[See eg
Lornadawn Investments (Pty) Ltd v Minister van Landbou
1980 (2) SA 1
(A) at 8B – C and 19A – B.] and a valuer is called on to
exercise professional skill and expertise in a specialised
field by
expressing an opinion on the market value in monetary terms.’
[Footnotes omitted]
[57]
I consider Ms Tighy’s valuation next. In my view it is
defective in three respects. The first is that she practically
ignored the actual price at which the subject property was sold by
defendant to plaintiff. On the face of it, the selling
price of
the property was a cogent indicator of the market value. Ms Tighy did
not show that any one of the attributes of market
value, as defined
by her in her own report, namely that the parties acted knowledgably,
prudently and without compulsion, was not
present. In evidence
counsel for defendant submitted that defendant acted under financial
compulsion in that he required
the funds urgently. In my view
there is no merit in the latter argument. The property was on
the market for a long
time and defendant was advised by an estate
agent that he would not get a better price. There is no reason
for doubting the
value of this advice.
[58]
The second point of criticism is that there is no evidence to show
that the 24 properties on which Ms Tighy’s regression
analysis
was based, were comparable to the subject property. The evidence was
that those properties came from various suburbs whilst
the subject
property was situated in a unique and tranquil environment against
the mountain and with beautiful views. Using
properties from
other suburbs for comparative purposes seems wrong in principle.
[59]
The third defect in Ms Tighy’s valuation is that it produced
wide differences between the market values, as calculated
by her, of
some of properties in the vicinity of the subject property and the
actual selling prices of these properties. In
cross-examination
counsel for plaintiff illustrated that the
market
value
of a number of properties in the
neighbourhood, calculated according to Ms Tighy’s first and
second equations, differ in some
cases substantially from the actual
selling prices of these properties. The results of this exercise are
reproduced in the following
two tables, named Table A and Table B.
[60]
Table A shows in columns:
(1) The address of
the property;
(2) the inflation
adjusted price;
(3) the market value
calculated according to Ms Tighy’s first equation;
(4)
the market value calculated according to Ms Tighy’s second
equation.
TABLE A
PROPERTY
INFLATION ADJUSTED SALES PRICE
MARKET VALUE IN TERMS OF EQUATION 1
MARKET VALUE IN TERMS OF EQUATION 2
6 Bridle Rd (Subject)
7 375 000.00
9 190 967.07
10 867 726.63
13 Chesterfield Rd
5 391 660.00
4 935 439.99
4 256 768.13
20 Marmion Rd
7 678 620.00
6 862 052.90
7 120 962.89
28 Sidmouth Ave
5 230 727.00
5 204 777.91
5 137 013.97
2 Garfield Rd
4 969 151.00
6 731 650.32
6 372 544.39
73 Belmont Ave
7 108 251.00
8 144 487.29
7 540 675.87
12 Mountain Close
6 437 376.00
5 430 704.65
4 964 319.89
28 Rosemead Ave
7 500 000.00
6 312 976.19
5 992 067.89
[61]
Table B shows in columns:
(1) the difference
between the market value calculated according to Ms Tighy’s
first equation and the adjusted sales price;
and
(2) the difference
between the market value calculated according to Ms Tighy’s
second equation and the adjusted sales price.
TABLE B
DIFFERENCE I.T O
FIRST EQUATION (PERCENTAGE)
DIFFERENCE I.T.O. SECOND EQUATION
(PERCENTAGE)
ADDRESS
6 Bridle Rd (Subject)
1 815 967.07 (24.6%)
3 492 726.63 (47.4)
13 Chesterfield Rd
456 220.01 (
8.5%)
1 134 891.87 (21.0)
20 Marmion Rd
816 567.10 (10.6%)
557 657.11 (7.3)
28 Sidmouth Ave
25 949.09 (0.5%)
93 713.03 (1.8)
2 Garfield Rd
1 762 499.32 (35.5%)
1 403 393.39 (28.2)
73 Belmont Ave
1 036 236.29 (14.6%)
432 424.87 (6.1)
12 Mountain Close
1 006 671.35 (15.6%)
1 473 056.11 (22.9)
28 Rosemead Ave
1 187 023.81 (15.8%)
1 507 932.11 (20.1)
[62]
The difference (in some cases substantial) between Ms Tighy’s
figures and actual selling prices speak for themselves.
It is also
significant that the results yielded by Ms Tighy’s first and
second equations differ in some cases substantially
from each other,
in five cases by more than a R1 million. This raises the question
whether it is of much use in cases (such as
the present one) where an
exact figure is required.
[63]
I have little hesitation in preferring Mr Van Der Spuy’s
valuation to that of Ms Tighy. This means in effect that
plaintiff did not purchase the property for a price that was less
than the market value thereof. The value of the flat as
a
separate residential unit must therefore be determined.
Mitigation
of plaintiff’s loss
[64]
Counsel for defendant submitted that plaintiff should have mitigated
her damage by applying to the relevant authorities for
the necessary
departures from or removal of the provisions in question that would
have legalised the use of the flatlet as a second
residential unit.
[65]
It is trite law that the onus is on a defendant to prove that the
plaintiff failed to take reasonable steps to mitigate her
loss.
See the following passage in
Everett and
Another v Marian Heights (Pty) Ltd
1970
(1) SA 198
(C) at 201G-202B:
‘
Generally,
the burden of proof rests upon the party who asserts that a claimant
for damages failed to take reasonable steps to mitigate
his loss
(Hazis v Transvaal and Delagoa Bay Investment Co. Ltd,
1939 AD 372).
Similarly, in my view, the onus of proof would also rest upon the
party who asserts that the mode of mitigation employed
by
the claimant was not a reasonable one in that an alternative mode,
less expensive or burdensome, was available (cf. Shrog v
Valentine,
1949 (3) SA 1228
(T) at p. 1237). In this regard the Court should not
be too astute to hold that this onus has been discharged. As Lord
MCMILLAN
put it in the well-known case of Banco de Portugal v
Waterlow and Sons Ltd,
[1932] UKHL 1
;
1932 A.C. 452
at p. 506 –
“
Where
the sufferer from a breach of contract finds himself in consequence
of that breach placed in a position of embarrassment,
the measures
which he may be driven to adopt in order to extricate himself ought
not to be weighed in nice scales at the instance
of the party whose
breach of contract has occasioned the difficulty. It is often easy
after an emergency has passed to criticise
the steps which have been
taken to meet it, but such criticism does not come well from those
who have themselves created the emergency.
The law is satisfied if
the party placed in a difficult situation by reason of the breach of
a duty owed to him has acted reasonably
in the adoption of remedial
measures, and he will not be held disentitled to recover the cost of
such measures merely because the
party in breach can suggest that
other measures less burdensome to him might have been taken.”
[66]
The evidence in regard to plaintiff’s duty to mitigate her loss
is vague. Plaintiff’s architect advised her
in regard to
the likely costs and delays of the application in his letter of 9
December 2009. He described the processes
involved. It
would have entailed the following:
‘
1.
An application needs to be submitted for the removal of the title
deed restriction, this process can take between 6 – 24
months,
if successful.
2. Extensive
public participation (neighbours consent) will be required,
3. Advertising by
Council is required,
4. A town planner
would need to be consulted,
5.
As built plans will then have to be submitted to update Council
records.’
The
total costs, according to the architect, could amount to R 28 750,00
– R 38 750,00 and there is no guarantee
that the
application will be successful. Objections and appeals might
cause the process to become drawn out and more costly.
[67]
Hearsay evidence of a town planner, referred to in Ms Tighy’s
report, also describes uncertainties and potential delays.
Two
applications were required. The first would have been to the
Minister of Environmental Affairs and Development Planning
for the
amendment or removal of the restrictive title deed condition.
This application could have taken up to 24 months if
there were
objections. There was no appeal against the Minister’s
decision. The second application would have been
directed to
the town planning department of the City Council for a departure from
the relevant zoning provisions. This application
would have had
to be advertised and objections by neighbours could have caused
substantial delays. The objectors had a right
of appeal to the
Provincial Council. The entire process could have taken a very
long time but the prospects of success would
have been good as the
relevant authorities were keen to support densification.
[68]
I revert to the question whether plaintiff acted unreasonably by
failing to take steps to legalise the use of the flatlet as
a second
residential unit. In my view she did not. It is clear
that there were many uncertainties and potential delays.
There
was no guarantee of success. Pending the processing of the two
applications plaintiff would not have been able to use
the flatlet as
originally intended. It would have been unlawful. The
inhabitants of the prestigious and tranquil neighbourhood
might well
have taken a dim view of the possibility a flat in their midst
occupied by students. During the period in question,
plaintiff would
not have been able to use the flatlet as it would have been unlawful.
[69]
In all the circumstances I am of the view that defendant did not
discharge the onus of proving that plaintiff failed to mitigate
her
damage.
The
quantum of plaintiff’s damage
[70]
The final issue concerns the quantification of plaintiff’s
damage. Mr Van der Spuy calculated it in the amount of
R350 000,00. He capitalised the annual rental that could
have been obtained at a rate of 8% per annum. Counsel for defendant
did not challenge the correctness of these figures but submitted that
Mr Van der Spuy ignored the value of the flatlet area as
part of the
dwelling as a single residential unit.
[71]
It seems to me that the argument of counsel for defendant is valid.
There is, however, no clear evidence from which the
value of
the use of the flatlet as a second residential unit can be calculated
with any precision.
[72]
There are, however, decisions to the effect that a court may in such
a situation base its assessment on an ‘
informed
guess’
(
Griffiths
v Mutual & Federal Insurance Co Ltd
[1993] ZASCA 121
;
1994 (1) SA 535
(A) at 546G) or a ‘
rough
estimate’
(
Caxton
Ltd and Others v Reeva Forman (Pty) Ltd and Another
[1990] ZASCA 47
;
1990 (3) SA 547
(A) at 546G).
[73]
I propose to approach the assessment of plaintiff’s damage on
that basis. In my view it would be reasonable and fair
to both
parties if the value of the use of the flatlet as part of a single
residential unit is regarded as equal to one half of
its use as a
second residential unit.
[74]
Plaintiff is accordingly entitled to damages in the amount of
R175 000,00 for the loss of the flatlet as a second residential
unit. To this must be added the amounts of R7 827,24 and
R35 000,00 set forth in sub-paragraphs 12.1 and 12.2 of
plaintiff’s particulars of claim which have not been challenged
by defendant. Plaintiff’s damages thus amount
to a total
sum of R217 827,24.
[75]
The running of interest is governed by the Prescribed Rate of
Interest Act 55 of 1975 (‘the Act’). The relevant
sections thereof read as follows:
‘
1
Interest on a debt to be calculated at a prescribed rate in certain
circumstances
(1) If a debt
bears interest and the rate at which the interest is to be calculated
is not governed by any other law or by an agreement
or a trade custom
or in any other manner, such interest shall be calculated at the rate
prescribed under subsection (2) as at the
time when such interest
begins to run, unless a court of law, on the ground of special
circumstances relating to that debt, orders
otherwise.
(2)
The Minister of Justice may from time to time prescribe a rate of
interest for the purposes of subsection (1) by notice in the
Gazette.
2 Interest on a
judgment debt
(1) Every
judgment debt which, but for the provisions of this subsection, would
not bear any interest after the date of the judgment
or order by
virtue of which it is due, shall bear interest from the day on which
such judgment debt is payable, unless that judgment
or order provides
otherwise.
…
.….
2A Interest on
unliquidated debts
(1) Subject to
the provisions of this section the amount of every unliquidated debt
as determined by a court of law, or an arbitrator
or an arbitration
tribunal or by agreement between the creditor and the debtor, shall
bear interest as contemplated in section
1.
(2) (a) Subject
to any other agreement between the parties and the provisions of the
National Credit Act, 2005 (Act 34 of 2005)
the interest contemplated
in subsection (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.
……
(5)
Notwithstanding the provisions of this Act but subject to any other
law or an agreement between the parties, a court of law,
or an
arbitrator or an arbitration tribunal 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.’
[76]
The debt which plaintiff enforces in this matter is unliquidated.
In terms of sub-sec 2A(5) of the Act the court has
a wide discretion
to make an order which appears just to it. See
Adel
Builders (Pty) Ltd v Thompson
2000 (4)
SA 1027
(SCA) at 1032 H-J:
‘
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
and Others
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.’
[77]
In the present case it seems to me that the following orders would be
just and fair to both parties. Interest should
commence running
from 7 July 2010, being the date on which the summons was served on
defendant. The rate of interest, in
my view, should follow the
statutorily prescribed rate, namely 15,5% from 7 July 2010 to 31 July
2014 and 9% per annum from 1 August
2014. Interest on the
judgment debt should also run at the rate of 9% per annum.
[78]
In the result, I grant the following orders:
1. Defendant is
ordered to pay damages to plaintiff in the amount of R217 827,24.
2.
Defendant is ordered to pay interest to plaintiff on the amount of
R217 827,24, calculated at the rate of 15,5% per annum
from 7
July 2010 to 31 July 2014 and 9% per annum from 1 August 2014.
3.
Defendant is ordered to pay plaintiff’s costs including the
qualifying fees and expenses of Mr John van der Spuy.
___________________
A
P BLIGNAULT