Case no 274/98
IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
In the matter of
ADEL BUILDERS (PTY) LTD
Appellant
and
DR J G T THOMPSON
Respondent
CORAM:       Van Heerden ACJ, Nienaber, Howie, JJA et Melunsky and
Mthiyane AJJA
DATE OF HEARING:     22 August 2000
DATE OF JUDGMENT:   12 September 2000
Unliquidated damages claimed – pre-judgment interest – Discretion of
Court
J U D G M E N T
/HOWIE  JA:

HOWIE JA:
[1] This matter, which involves an appeal and a cross-appeal
against orders made by Mpati J in an action in the South Eastern Cape Local
Division, is before  us with the leave of the learned Judge.   His judgment is
reported in 1999 (1) SA 680 (SECLD) and I shall refer to it as “the reported
judgment”.
[2] Appellant company, a building contractor, undertook in terms
of a written building contract to construct a house for respondent in Port
Elizabeth.   When the balance of the contract price remained outstanding
appellant sued for payment.   Respondent counterclaimed for damages for
breach of contract, with interest from date of judgment, alleging that
appellant’s workmanship was defective in various material respects.
[3] The proceedings in convention were later abandoned and,   in
a document entitled “Consent  to Judgment”, appellant purported to submit
to judgment in respect of the counterclaim.   The so-called consent, which

was not a confession to judgment in terms of Rule 31, and which did not
acknowledge liability in a specified sum, did no more than embody an
admission of liability in respect of the “fair and reasonable cost” of the
remedial action alleged by respondent to be necessary,  and  respondent
took no judgment to enforce compliance.
[4] Later still the counterclaim was amended.   A claim for
consequential damages (also  allegedly arising from appellant’s defective
workmanship)  was included, the amount of damages claimed was increased
and interest was now claimed “at the legal rate a tempore morae”.   The
increase in the quantum claimed was due in part to the alleged consequential
damages and in part to allowance for future escalation in building costs.
[5] Pleading to the amended counterclaim,  appellant contended that
the claim as it was prior to amendment had been resolved by the so-called
consent to judgment and denied the allegations relative to consequential
damages and escalation.   Appellant went on to plead that it had twice
previously tendered to perform the necessary remedial work at its own

expense, to which tender respondent had failed to respond.   Repeating the
tender, appellant denied all and any liability.
[6] Preparatory to trial of the issues in reconvention, the parties
reached agreement that as at February 1992 respondent’s damages in respect
of necessary  remedial work amounted to R330 000, of which  R200 000
represented the cost of such work which had not yet been done by February
1992.   They also agreed on the extent to which escalation in building costs
would have increased the latter amount by the date of trial in June 1997.   In
addition, appellant accepted liability for respondent’s costs of suit and
certain qualifying expenses.   Those points of accord having been reached,
the parties submitted three questions for the trial Court’s decision:
(1)
whether in terms of the building contract consequential
damages were claimable;
(2)
whether respondent was entitled to allowance being made for
escalation in the computation of his damages;  and
(3)
whether, in view of the then newly introduced  s 2A of the

Prescribed Rate of Interest Act, 55 of 1975  (“the Act”),
respondent was entitled to pre-judgment interest on the
damages awarded.
[7] Mpati J answered the first two questions in the negative.  Hence
the cross-appeal.   As to the third,  the answer was in the affirmative.  In
arriving at that answer the learned Judge fixed the time of assessment of the
damages as being February 1992 and the amount (as a necessary
consequence of the parties’ agreement)  as R330 000.   He then held
(contrary to the argument presented to him on behalf of appellant) that s 2A
of the Act, which came into operation on 5 April 1997,  applied not only to
future cases but also to damages claims pending before that date and
therefore to respondent’s counterclaim.   Consequently, the trial Court, in
awarding R330 000 as damages, found  respondent entitled to pre-judgment
interest, at the legal rate , from 1 February 1992.   Against that finding the
appeal was brought.
[8] In this Court the parties were represented by counsel who had

not appeared at any earlier stage of the litigation.   Counsel for respondent,
while not abandoning the issue of the consequential damages, did not seek
to add to the submissions in his predecessor’s heads of argument.   In this
respect counsel exercised wise judgement.   There is nothing in the point.
Moreover, he accepted that his client could not legally be entitled to both
interest and increased damages due to costs escalation.   It follows that the
cross-appeal is bad.
[9] Turning to the appeal, counsel for appellant raised two points:
firstly, that s 2A did not apply to claims pending before the section came into
operation and, secondly, that in deciding that interest was to run from 1
February 1992, the learned Judge wrongly exercised the discretion afforded
him by the section.
[10] For convenience, and because it was thus referred to during
argument, I shall refer to the first contention as “the retrospectivity point”.
It was also raised before Mpati J who discussed it in some depth in the
reported judgment (at 688 G - 692 E) before  concluding that the section

applied in the present case.   Since then, however, and after appellant’s
heads of argument were drawn by counsel who represented appellant at the
trial, the judgment of this Court in David Trust v Aegis Insurance Co Ltd
was delivered on 31 March this year and subsequently reported in 2000 (3)
SA 289 (A).   That matter involved a claim pending before  s 2A was
introduced into the Act.   The section was held to be applicable.   In
advancing the retrospectivity point in the face of David Trust counsel did so
with some understandable resignation.   He did not seek to suggest that the
judgment was wrong and it clearly disposes of the point.
[11] The second contention,  that the trial Judge exercised his
discretion wrongly,  was not put forward as a ground in appellant’s notice
of appeal or in its heads of argument.   To place  the contention in proper
context it is necessary first to refer to the relevant contents of the Act.
Before the introduction of s 2A no common law principle or statutory
enactment provided for the award of pre-judgment interest on unliquidated
damages; in other words, damages whose quantum had to be fixed by the

court.   S 1 of the Act  states i a that if a debt bears interest and the rate of
interest is not governed by law, agreement, trade custom or in any other
manner then interest must be calculated at the rate from time to time
prescribed in the Gazette by the Minister of Justice.   S 2A is headed
“Interest on unliquidated debts” and contains the following subsections
(irrelevant wording omitted):
“(1)
Subject to the provisions of this section the amount of every
unliquidated debt as determined by a court of law . . . shall bear
interest as contemplated in s 1.
(4)
(a)
Subject  to any other agreement between the parties the
interest contemplated in ss (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 .
. . 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.”
[12] Next it is necessary to have regard to passages in the judgment
of the Court below to which appellant’s counsel drew our attention.   They

are at 689 G-H and 692 A-B of the reported judgment.   In both passages the
learned judge observed that in the light of remarks in the judgment of this
Court in SA Eagle Insurance Co Ltd v Hartley 1990 (4) SA833 (A) the new
section was obviously aimed at alleviating the plight of a plaintiff who has to
wait a substantial period of time to establish his claim, through no fault of his
own, and is paid in depreciated currency.
[13] The remaining passage in the judgment of the Court a quo
which requires attention is that at 692 E-I of the report:
“It remains for me to consider whether interest should be
calculated in terms of s 2A (2) or 2A (5) of the Act.   Mr Van
Rooyen submitted that certain liability was conceded by the
plaintiff [the present respondent] in March 1994, but that the
case only came to trial more than three years thereafter.   After
liability was conceded in March 1994 the defendant amended
his counterclaim in September 1996 to include the claim for
consequential damages.  I was not informed of what transpired
between March 1994 and September 1996, but it was not
suggested to me that the delay in the matter ultimately coming
to trial was caused by the defendant.   Even if it were to be
argued that the delay was due to the amendment of the
defendant’s counterclaim, which needed  to be adjudicated

upon,  I can find no reason why the plaintiff could not on its
own initiative take steps  to assess that part of the defendant’s
damages for which liability was conceded and to either make an
offer of payment or a payment into Court.   Mr Buchanan
argued that in terms of s 2A (5) of the Act a court of law or an
arbitrator or an arbitration tribunal has a discretion to fix the
rate at which interest shall accrue and the date upon which
interest shall run.  I agree with Mr Buchanan that such
discretion overrides the provisions of s 2A (2) of the Act.  Mr
Buchanan did not, however, suggest that I should fix a rate of
interest different from  the legal rate.   As to the date from
which interest shall run, I am of the view that since the parties
agreed that as at February 1992 the defendant’s damages stood
at R330 000, interest should run from 1 February 1992.”
[14] Now the argument for appellant on the discretion aspect   was
this.   S 2A (2)(a) lays down what is to be the general position, namely, that
interest runs from date of demand or summons.   If a plaintiff seeks interest
from an earlier time then the court must be urged to exercise its discretion
under   ss (5).   To obtain a favourable discretionary decision a plaintiff must
discharge the onus of establishing facts justifying such decision.   In the
present case the requisite demand had to be taken as being the amended

counterclaim, which was  dated 9 September 1996.   This was so, said
counsel, because the counterclaim as initially formulated (filed in October
1991) had been so radically altered that the amended claim was to all intents
and purposes an entirely new claim.   Significantly, it included only now, for
the first time, a prayer for mora interest and it was this new counterclaim
which went to trial.   Therefore,  because  respondent had  sought interest
from a date earlier than September 1996 he bore the onus referred to.
According to the argument,  the Court below accepted that the date of
demand was the date of the amended counterclaim but, misled by its own
emphasis on  the mischief which s 2A aimed to remove, wrongly placed the
onus on appellant to justify  the lengthy delay in the  recovery of his
damages, thus overlooking the need for respondent to explain away its own
part in the delay.   In consequence,  the learned Judge failed to exercise his
discretion  judicially, thus permitting  appellate interference.
[15] This argument cannot succeed. Nothing in the passage at 692
E - I of the reported judgment, cited above, and nothing elsewhere in the

Court’s reasoning warrants the conclusion that the amended counterclaim
was  found, or even assumed, to constitute respondent’s demand in this
case.  The learned Judge was not requested to decide when demand was
made and he did not purport to do so.   Indeed, having resolved to order
interest pursuant to ss (5) and not ss 2(a) there was no need to determine the
date of demand.   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 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.

[16] In the learned Judge’s evaluation of the facts and circumstances
in the present case he took into account (at 692 F) the absence of any
suggestion that the pre-trial delay was due to respondent.   Appellant’s
counsel suggested, as I understood him, that there was indeed fault on
respondent’s part which the Court overlooked.   However, I can find nothing
in the record  to substantiate that suggestion. True, the Judge held, in
assessing damages, that it would have been reasonable for respondent to
have had the outstanding remedial work done in February 1992 but that is
quite another matter.   It does not bear upon the delay in his getting his just
recompense from appellant.   The inescapable truth is that appellant was all
along liable to pay respondent damages.   But when appellant admitted
liability in the so-called consent to judgment (on 16 March 1994), there was
careful avoidance of an admission of liability in a specified amount.   If he
had sought to use this admission to his advantage, respondent in all
likelihood faced the prospect of having to litigate in any event to have the
“fair and reasonable” costs referred to in the consent judicially quantified.

I say that because all appellant ever tendered (the first time being on 25
March 1994) was its own performance of the remedial work, albeit
professionally supervised.  In view of the history of this matter it is not
surprising that respondent declined the offer.   In the result, therefore,
respondent was driven to wait a particularly long time, while, as is notorious,
the value of money depreciated.
[17] As against those considerations, there is the circumstance
(referred to at 692 G) that appellant could, on its own initiative, have taken
steps to assess at least the costs referred to in the consent to judgment and
have made a tender in money or a payment into court.   Such an assessment
should not have proved an obstacle.   Appellant is, after all, in the relevant
trade.   So far I can find no fault at all with the learned Judge’s approach.
[18] There  remains the reason for fixing 1 February 1992 as the date
from which interest was to run.   In that regard Mpati J said that this was
because February 1992 was agreed upon  as the time when the damages (but
for the consequential damages) were fixed.   It is not apparent if the learned

Judge considered any other dates.   Eligible choices were, of course, the date
of the counterclaim as initially formulated (1 October 1991), the date of the
consent to judgment (16 March 1994), the date of the  first tender (25 March
1994),  the date of the amended counterclaim  (9 September 1996) and the
date of judgment.
[19] Whatever might, notionally, be said of these various
possibilities, it seems appropriate to decide when respondent’s demand was
made in this case (he issued no summons).   It can then be seen whether the
date fixed by the Court pre- or post-dated demand and then what further
implications follow.
[20] The counterclaim as originally formulated was for damages
(with interest from date of judgment) to pay for remedial work necessary by
reason of defective workmanship i a in respect of the house’s roof,
foundations and interior.   In the consent to judgment in March 1994

appellant admitted the need for remedial work in the same three respects and,
in addition, in regard to a certain window beam.  In the amended
counterclaim  all four areas of complaint were set out.    What was added
was the allegation that appellant had taken unreasonably long to do the
contract work, and then there were the allegations in respect of consequential
damages and escalation to which I referred earlier.   Not surprisingly, the
quantum of the claim was increased and, as I have also mentioned, the
interest prayer was changed to claim interest “a tempore morae”.   When
eventually the parties agreed to the figure of R330 000 that sum clearly
pertained only to the cost of remedial work, without any involvement of
consequential damages or escalation.
[21] From this summary it is plain that the counterclaim as initially
formulated, as later amended and as the subject of the eventual quantum
agreement just mentioned, was essentially always one in which the central
thrust was the recovery of damages representing the cost of remedial work

necessitated by defective workmanship.   (In fact even the alleged
consequential damages were said to flow from the self-same breach.)   The
amendment did not, therefore, change the nature of the claim in any
important respect.   It was fundamentally the same claim that was made in the
counterclaim filed in October 1991.  The alteration in the interest prayer is
neither here nor there.   It was always a claim for mora interest,  for even
when interest  runs from the date of judgment it is still mora interest (David
Trust at 303 I).   In any event the demand that is relevant is not the demand
for interest but the demand for damages.   The date of demand in this matter
was therefore 1 October 1991 and it is obviously in  favour of appellant, not
respondent, that the date fixed by the Court for the running of interest was
later than that.
[22] It cannot be said that the  exercise of the Court’s discretion here
was flawed in any of the respects mentioned at 335 D - E of Neethling’s
case.
[23] It is consequently ordered that the appeal and the cross-appeal

are both dismissed with costs.

___________________
C T HOWIE
VAN HEERDEN      ACJ)
NIENABER                 JA)
MELUNSKY             AJA)      CONCUR
MTHIYANE              AJA)