Drake Flemmer & Orsmond Inc and Another v Gajjar

• Jurisdiction: South Africa
• Judgment Date: 01 December 2017
• Citation: 2018 (3) SA 353 (SCA)

Drake Flemmer & Orsmond Inc and Another v Gajjar
2018 (3) SA 353 (SCA)

2018 (3) SA p353

Citation	2018 (3) SA 353 (SCA)
Case No	21/2017; [2017] ZASCA 169
Court	Supreme Court of Appeal
Judge	Cachalia JA, Tshiqi JA, Makgoka AJA, Ploos van Amstel AJA and Rogers AJA
Heard	December 1, 2017
Judgment	December 1, 2017
Counsel	PE Jooste (with TJD Rossi) for the appellants.; LA Schubart SC (with T Zietsman) for the respondent.

Flynote : Sleutelwoorde

Attorney — Negligence — Liability to client — Damages — Negligent under-settlement of personal injury claim — Time at which damages assessed — Claim settled without proper investigation — Damages to be assessed at notional date of claim — Court may shield plaintiff against corroding effect of C inflation by using s 2A(5) of Prescribed Rate of Interest Act 55 of 1975.

Interest — A tempore morae — Mora interest on unliquidated debt — Court's discretion under s 2A(5) of Prescribed Rate of Interest Act 55 of 1975 — May be used to neutralise effect of inflation. D

Headnote : Kopnota

The principal issue in the present case was how to account for the effects of inflation and trial delay on the value of a claim. The plaintiff was badly served by two law firms in succession: the first firm, DFO, under-settled a Road Accident Fund (RAF) claim instituted by the plaintiff; and the second firm, LRI, allowed his resultant claim for damages against DFO to prescribe. [*] The only claim still in issue was the one against LRI, and the question was E the time at which the plaintiff's damages had to be assessed.

The plaintiff, acting on DFO's (bad) advice, had accepted the RAF's offer of settlement on 21 December 1999, which meant that his right to recover was extinguished by prescription three years later, on 21 December 2002. To prove the amount he would have been awarded had his claim been properly conducted, he had it actuarially valued as at 1 December 2015. F The court a quo, while accepting the valuation, reduced it by 43,69% to account for the plaintiff's seven-year delay — from September 2006 to September 2016 — in suing LRI (which meant an effective valuation date of September 2009). The court then subtracted from the reduced sum the actual settlement amount, and awarded the plaintiff the difference. G

DFO and LRI appealed to the Supreme Court of Appeal, contending that the plaintiff's claim should have been valued at the date of settlement — 21 December 1999 — or at the date of a notional trial against the RAF, and that the claim should have been dismissed for this reason. The plaintiff cross-appealed against the reduction of 43,69%.

Section 2A of the Prescribed Rate of Interest Act 55 of 1975 allows the award of H pre-judgment interest. It provides that interest at the prescribed rate runs on an unliquidated debt from the date on which payment was claimed unless the court in the interests of justice determines a different date or rate: see s 2A(5).

Held

The applicable law could be summarised as follows: Where an attorney's negligence resulted in the loss by a client of a claim which, but for such I negligence, would have been contested, the court trying the claim against the attorney had to assess the amount the client would probably have

2018 (3) SA p354

recovered A at the time of the notional trial against the original debtor. If the original claim was for personal injuries, the evidence available and the law applicable at the notional trial date would determine the recoverable amount. The nominal sum the client would have recovered from the original debtor was the client's capital damages against the negligent attorney. If justice required that the client be compensated for the decrease B in the buying power of money in the period between the notional trial date and the date of demand or summons against the attorney, the remedy was in s 2A(5). If s 2A(5) were invoked, the court would not necessarily apply the prescribed rate but might choose instead to adopt a rate which would neutralise the effect of inflation. (See [88].)

A C similar approach applied where — as in the present case — a second attorney allowed the claim against the first attorney to prescribe. In such a case the client's claim for damages against the second attorney was determined by the amount the client would have obtained against the first attorney, and that amount in turn had to be ascertained in the way summarised in the preceding paragraph. (See [89].)

Since the complaint against DFO was that it under-settled the claim without D proper investigation, the court a quo correctly rejected the date of settlement (21 December 1999) as the appropriate assessment date (see [41]). But the 43,69% reduction was unsound in law and unjustified by the facts (see [52]). There was no legal principle that entitled a court to reduce a claimant's damages because of delay in bringing a case to trial, and in any event the delay here was attributable to LRI, not the plaintiff (see [53] – [54]). E The correct approach would have been for the plaintiff to prove the nominal value of his damages as at the notional trial date of the RAF claim, namely 1 December 2002. This would have been the value of the claim against DFO which LRI allowed to prescribe (see [68]). Section 2A(5) would then have been used to shield the plaintiff from the corroding effect of the delay by allowing interest to run from the day his claim against DFO prescribed F (21 December 2002) (see [68], [80]).

Since the court a quo's assessment of damages as at December 2015 was, however, correct as at that date, it could be used as a fair guide to the damages the plaintiff would have been awarded in December 2002 by adjusting for the time value of money. This meant that the damages claims — valued as at December 2015 — had to be reduced while the G settlement — of December 1999 — had to be grossed up (see [69] – [71], [78]). Since the plaintiff succeeded in defending the full amount awarded by the court a quo prior to the unwarranted reduction of 43,69%, his cross-appeal had to succeed (see [82]). And since the court's 2015 assessment did not exceed the capital value of the plaintiff's claim as at the notional trial date, plus fair interest under s 2A(5), the appeal had to fail (see [91]).

Cases cited

Southern H Africa

Adel Builders (Pty) Ltd v Thompson 2000 (4) SA 1027 (SCA) ([2000] 4 All SA 341): dictum in para [15] applied

Adlem I v Road Accident Fund Corbett & Honey 5J2 41: compared

Beverley v Mutual & Federal Insurance Co Ltd 1988 (2) SA 267 (D): dictum at 271D – I applied

Botha v Rondalia Versekeringskorporasie van Suid-Afrika Bpk 1978 (1) SA 996 (T): dictum at 1004D – 1005B applied

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

De J Jongh v Du Pisanie NO 2005 (5) SA 457 (SCA): referred to

2018 (3) SA p355

Du Pisanie NO (obo Rabe) v De Jongh Corbett & Honey Quantum of A Damages 5B4 109: referred to

Ethekwini Municipality v Verulam Medicentre (Pty) Ltd [2006] 3 All SA 325 (SCA) ([2005] ZASCA 98): applied

Fourie v Ronald Bobroff and Partners Inc [2015] 2 All SA 210 (GJ): distinguished

Fourie v Ronald Bobroff and Partners Inc [2017] ZASCA 91: distinguished B

Kwezi obo Kwezi v Road Accident Fund [2011] ZAWCHC 455: referred to

LTA Construction Bpk v Administrateur, Transvaal 1992 (1) SA 473 (A): considered

Paulsen and Another v Slip Knot Investments 777 (Pty) Ltd 2015 (3) SA 479 (CC) (2015 (5) BCLR 509; [2015] ZACC 5): dicta in paras [99] – [100] and [106] applied C

Rens v Coltman 1996 (1) SA 452 (A): compared

Road Accident Fund v Marunga 2003 (5) SA 164 (SCA) ([2003] 2 All SA 148): compared

Road Accident Fund v Monani and Another 2009 (4) SA 327 (SCA) ([2009] ZASCA 18): dictum in para [9] applied D

SA Eagle Insurance Co Ltd v Hartley 1990 (4) SA 833 (A) ([1990] ZASCA 106): distinguished

Southern Insurance Association Ltd v Bailey NO 1984 (1) SA 98 (A): discussed and applied

Steyn NO v Ronald Bobroff & Partners 2013 (2) SA 311 (SCA) ([2012] ZASCA 184): discussed and applied E

Torres v Road Accident Fund 2010 (6A4) QOD 1 (GSJ): compared

Truter and Another v Deysel 2006 (4) SA 168 (SCA) ([2006] ZASCA 16): referred to

Vermaak v Road Accident Fund [2008] ZAWCHC 12: referred to.

Australia F

Johnson v Perez [1988] HCA 64 ((1988) 166 CLR 351): referred to

Liddy v Bazley [2013] NSWCA 319: referred to

Nikolaou v Papasavas, Phillips & Co [1989] HCA 11 ((1989) 166 CLR 394): referred to

Rosa v Galbally & O'Bryan (No 2) [2013] VSCA 154: referred to. G

Canada

Campbell v Ragona [2010] BCSC 1339 (CanLII): referred to

Kelly v Lundgard [2001] ABCA 185 (CanLII) ((2001) 286 AR 1 (CA)): referred to

Rose v Mitton [1994] NSCA 4111 (CanLII): referred to.

England H

Charles v Hugh James Jones & Jenkins [2000] 1 All ER 289 (CA): referred to

Dudarec v Andrews [2006] EWCA Civ 256: referred to

Hibbert Pownall & Newton (A Firm) v Whitehead [2008] EWCA Civ 285: referred to I

Mount v Barker Austin (a Firm) [1998] EWCA Civ 277 ((1998) PNLR 493): referred to

Nicholson v Knox Ukiwa & Co (A Firm) [2008] EWHC 1222 (QB): referred to

Sharif v Garrett & Co (a Firm) [2001] EWCA Civ 1269: referred to

Watts v Morrow [1991] 4 All ER 937 (CA): referred to. J

2018 (3) SA p356

Northern A Ireland

Neeson v Agnew [2009] NIQB 10: referred to.

Legislation cited

Statutes

The Prescribed Rate of Interest Act 55 of 1975, s 2A(5): see Juta's Statutes B of South Africa 2016/17 vol 2 at 1-500.

Case Information

PE Jooste (with TJD Rossi) for the appellants.

LA Schubart SC (with T Zietsman) for the respondent.

An appeal against a decision of the Eastern Cape Local Division C (Bloem J as court of first instance).

Order

(a)

The appeal is dismissed with costs, including those attendant on the employment of two counsel, such costs to be paid by the second appellant.

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