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[2015] ZAWCHC 37
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Allen v Scheibert (14136/2010) [2015] ZAWCHC 37 (20 March 2015)
IN THE HIGH COURT OF
SOUTH AFRICA
(WESTERN CAPE DIVISION,
CAPE TOWN)
CASE NO: 14136/2010
DATE: 20 MARCH 2015
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
70m2 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, 70m2 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 70m2 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 109m2.
[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 s hould 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 4th 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 4th
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