As discussed above, a plaintiff in a civil claim is generally only entitled to claim the damages for damage that it can prove it suffered. Accordingly, the quantification of the loss is a crucial component of any claim for damages.
It is often the case that the trial in respect of the 'merits' of a claim (i.e., whether a defendant is liable) are separated from the 'quantum' portion (i.e., how much the defendant is liable for) of the claim, to save time and money in the event that the plaintiff's claim is not successful on the merits.
In other words, parties may agree, or the court/tribunal may order, that the evidence on the quantum will only be led once the plaintiff has proved that the defendant is liable, in principle.
The South African law of evidence is heavily influenced by English Law. Although there is no actual civil code, there are two pieces of legislation that (apart from the common law) are deemed to be the main source of law in this field; namely, the Criminal Procedure Act and the Civil Proceedings Evidence Act.
The quantification of a plaintiff's loss generally requires the presentation and evaluation of factual oral, written or expert evidence, or both. Expert evidence (which will be dealt with in further detail below) must be distinguished from factual evidence in that it relates to the specialist knowledge of an expert in regard to a particular issue in dispute and which is required to assist the court or tribunal. On the other hand, factual evidence is evidence that proves an ascertainable fact.
Because of the fact that plaintiffs in South Africa are required to prove their allegations on a balance of probabilities, the onus rests on the plaintiff to lead evidence of the loss suffered by it. In cases where damages are capable of exact mathematical computation, the plaintiff must produce sufficient evidence to substantiate the exact amount of the damages. Where the plaintiff is unable to do so, the court will, in some cases, assess the damages on the evidence available. However, where the plaintiff has simply failed to produce all the available evidence to substantiate his or her claim, the court is likely to give the defendant absolution from the instance, thereby dismissing the claim.
Quantification of loss involves the presentation of both oral and written evidence and, in many cases, may also involve the leading of expert evidence, depending on the complexity of the matter. The manner in which the evidence is led and the type of evidence that is led is highly dependent on the nature of the claim and the complexity of the loss suffered.
In addition, and as has been alluded to earlier in this chapter, in the case of damages for a breach of contract, it may sometimes be the case that parties have agreed on a specific method for the calculation of damages or on a pre-agreed 'liquidated' or 'penalty' amount. In such instances, the evidence that needs to be led in order prove the quantum of the claim may be far more simple.
Although the law of evidence is an entire topic in and of itself, it is important to note that the general rule in South Africa in respect of the admissibility of factual evidence is that all facts of sufficient probative value are relevant and admissible, unless there is a specific exclusionary rule that prohibits its admissibility. In addition, although it may be found that evidence is admissible, the weight that will be afforded to the evidence depends on a variety of factors (including its relevance), which is in the discretion of the tribunal or court that is adjudicating the matter.
iii Date of assessment
The date at which the plaintiff's loss will be assessed is dependent on the particular facts of each case and the cause of action.
There are numerous situations and scenarios where financial projections may be required when proving losses suffered. For example, 'prospective losses' may also be claimed from a defendant, by a plaintiff.
In essence, a 'prospective loss' is damage that may manifest itself in the future (i.e., after the date of assessment), as a result of the earlier damage-causing event. Examples of prospective losses that are recognised by South African courts include:
A plaintiff is required to claim its prospective loss at the same time as it claims the loss that it has already suffered, because of the 'once-and-for-all' rule, which requires that all claims arising from the same cause of action are to be claimed at the same time.
As a result of the fact that the damage may not yet have arisen, the quantification of prospective damage involves speculation, as exact calculations may not possible.
Financial projections, utilised to prove aspects such as prospective losses, generally take the form of complex actuarial and accounting calculations that are presented to the court or tribunal as evidence. These financial projections must be supported by correct factual evidence and data, and expert evidence given by individuals with specialist knowledge, who can substantiate the numerical calculations. A court or tribunal may reject such calculations if it is not satisfied with the investigations underpinning it.
When estimating prospective loss, it is not necessary for a plaintiff to prove that there is a possibility of more than 50 per cent that it will sustain damage in the future. If it can be shown that there is some chance that damage may be suffered, a South African court will make certain assumptions to award damages that will cater for the possibility that some damage may be suffered.
For example, where liability has been established and the plaintiff proves on a balance of probabilities that there is a 40 per cent chance that he or she may suffer damage in the amount of 1,000 South Africa rand in future, the court will usually make an award of damages calculated on an equitable basis as follows: 40 per cent × 1,000 rand = 400.14 rand. Although this assumption is not particularly accurate or ideal, it has been described as a 'necessary evil' flowing from the once-and-for-all rule.
In addition to the above, when awarding damages for future loss, courts usually make provision for 'contingencies', which are assumed. These have been described as 'hazards that normally beset the lives and circumstances of ordinary people', which must also be taken into account when calculating the future loss that will possibly be suffered by the plaintiff. Contingencies include any other possible relevant future event that (1) might otherwise have caused the damage or a part thereof; or (2) may otherwise influence the extent of the plaintiff's damage.
In other words, contingencies usually reduce (but sometimes increase) the amount of damages to be awarded to the plaintiff. This is because the court makes provision for the fact that the prospective loss (which is possible at the time of assessment of damage) might, in any event, possibly have occurred independently of the delict or the breach of contract in question.
Provision for contingencies is a matter for the discretion of the court, who will look at what is reasonable and fair. South African courts have held that direct evidence on this issue cannot be given by an actuary, because an actuary is not qualified to give evidence as to the hazards and contingencies applicable to any particular type of work.
vi Discount rates
After damages for prospective patrimonial loss have been calculated, a court will reduce these using a 'rate of discount'.
The 'rate of discount' is utilised to counter the benefit obtained by the plaintiff as a result of the fact that it has received compensation in advance of the date upon which the loss is expected to arise (particularly in respect of loss of earning capacities and loss of future support). This is calculated by determining: (1) the 'present values' of the future benefits and losses; (2) the rate of return at which it is assumed that the plaintiff would have invested the lump sum; and (3) the likely future rate of inflation. The calculation is performed by actuaries who rely on, among other things, tables of capital values and annuity and discount tables.
Usually, damages are discounted to the date when the delict occurred; however, as far as loss of earning capacity (future loss of income) and future loss of support are concerned, damages are discounted only to the date of trial and not the date when the delict occurred.
vii Currency conversion
In South Africa, it is permissible for a judgment to be expressed in foreign currency. It has been held that the currency in which the loss is suffered is the proper currency in which the award is to be expressed.
In circumstances where the damages are to be determined in a foreign currency, but the plaintiff wishes the judgment to be made in South African currency, the rate of exchange must be proved by the plaintiff and is not a matter of judicial notice. The appropriate date at which the exchange rate must be calculated is dependent on the facts of each matter and whether the damages arose as a result of a delict or a breach of contract. In some instances, parties may even agree to the rate of exchange that is to be utilised.
viii Interest on damages
South African courts generally award interest on top of any award that they might make in respect of damages. The date, and rate, utilised to calculate the amount of interest owed is dependent on the facts of each case.
Rate of interest
The Prescribed Rate of Interest Act is applicable when determining what interest rate should be used in the following circumstances:
In particular, the Act states that the Minister of Justice, in consultation with the Minister of Finance, shall prescribe a rate of interest that is applicable in the above scenarios, by notice in the Government Gazette.
The current prescribed rate is linked to the South African repo rate plus 3.5 per cent. As of 1 May 2020, the prescribed interest rate is, therefore, 8.75 per cent.
In respect of contractual damages, parties may also have agreed their own interest rates. In such circumstances, South African courts will give effect to the agreement between the parties.
Unless expressly agreed by the parties to a contract, interest will be payable calculated as simple interest and not as compound interest.
Date at which interest is calculated
In terms of contractual damages, parties are free to agree when interest commences to run in their contract, and this will be given effect to by a South African court. In the absence of an agreement, the Prescribed Rate of Interest Act is applicable.
In this regard, the Act states that (1) interest on unliquidated debts (which includes a claim for unliquidated damages) shall commence to run from the date on which payment of the debt is claimed by service on the debtor of a demand or a summons, whichever date is earlier; and (2) judgment debt (including costs) shall bear interest from the day on which such judgment debt is payable.
As a result (in the absence of an agreement to the contrary), a plaintiff's claim for unliquidated damages will accumulate interest from the date of demand, until such time as the judgment debt is paid by the defendant. The amount payable for any costs awarded will accumulate interest from the date of judgment.
This may entail, particularly in instances where another interest rate has been agreed in respect of the damages, that a different interest rate will apply after the judgment has been granted.
The general rule in South Africa is that, in the absence of special circumstances, a successful litigant is entitled to his or her costs. This rule applies in respect of an award of damages as well.
It should be noted, however, that in court proceedings, the 'costs' awarded to a successful litigant are, very rarely, the actual costs incurred by the litigant in prosecuting, or defending, the claim.
In this regard, unless it has been otherwise agreed or unless there are circumstances that warrant a punitive award of costs against the unsuccessful party, costs will be awarded on the 'party-and-party' tariff (which is published for each court). This tariff limits the amount that a successful party can claim in respect of their legal expenditure, to the amounts stipulated in the tariff, regardless of what the successful party actually paid.
Despite the general rule, it is not always the case that the successful party is entitled to an award of costs and that an unsuccessful party should pay them. In this regard, examples of some of the factors that are considered when a court is determining what the appropriate costs order should be, are:
When calculating and assessing the extent of past and future loss of earning capacity, the tax that would have been paid by the plaintiff is also deducted from the amount of damages awarded to the plaintiff, provided that there is sufficient certainty as to the extent of the tax. The onus of proving the size of the allowance for tax is on the plaintiff. If the plaintiff is unable to do so, the court may reduce the damages awarded to the plaintiff by a percentage that it deems appropriate.
The stage of the calculation at which tax is taken into account is important, as it may substantially affect the quantum that is ultimately awarded to the plaintiff and could amount to double taxation. South African courts have previously (somewhat inconsistently) followed the English approach that was set out in the case of British Transport Commission v. Gourley. However, in 2012 the court in the case of Barclay v. Road Accident Fund expressly declined to do so and the position is now further divided.
In South Africa, either income tax or capital gains tax is levied on receipts of sums of money by individuals, depending on whether the amount is of a revenue or capital nature. It is therefore also important, for purposes of calculating tax on the damages awarded, to draw a distinction between loss of earnings claims as opposed to claims for a loss of earning capacity. Because of the fact that an award of damages takes on the character of the loss in respect of which it was paid, the former is an income and the latter is of a capital nature. As such, it is essential that this be borne in mind when calculating the taxation amount to be deducted. Income tax should not be deducted from an amount that is 'capital' in nature.
