Contractual warranty breached:  The seller of immovable property breached a warranty regarding alterations, additions and improvements to the property.  But the SCA allowed the seller’s appeal against the judgment of Blignault J in the high court.  The SCA held that the buyer failed to discharge the onus of proving any actual loss.  The buyer paid less than the true market value of the property and failed to prove that the breach of warranty diminished the actual value of the property.

Scheibert v Allen (694/2015) [2016] ZASCA 126 ; [2016] JOL 36672 (SCA) (26 September 2016) per Dambuza JA (Lewis, Shongwe, Willis and Saldulker JJA concurring)

SCA summary:

Contract: damages for breach of warranty: onus on plaintiff to prove diminution in value of property as a result of breach of warranty: the evidence must show an adverse difference between the purchase price and the market value of the property: the purchase price paid for the property was lower than its market value: breach of warranty did not result in loss of value of the property.

Excerpts without footnotes

[13]      The basic principle in claims for damages based on defective performance or breach of warranty in a contract is that the plaintiff must establish that he or she has suffered damages.  Unlike damages for delict, damages for breach of contract are normally not intended to recompense the innocent party for patrimonial loss, but to put him in the position he would have been in if the contract had been properly performed.  The difference was succinctly stated by Van den Heever JA in Trotman v Edwick & another:

‘A litigant who sues on contract sues to have his bargain or its equivalent in money or in money and kind.  The litigant who sues in delict sues to recover the loss which he has sustained because of the wrongful conduct of another, in other words that the amount by which his patrimony has been diminished by such conduct should be restored to him.  The Roman-Dutch authorities I have consulted are not helpful and merely state that the plaintiff is entitled to his id quod interest, but I suppose they take the obvious for granted and imply that damages should be assessed on the same principles as in, say, the Aquilian action.’

[14]      In Katzenellenbogen Ltd v Mullin the court held that where a contract is one of purchase and sale of a marketable commodity and is breached by non-performance, the extent of the innocent party’s loss is ordinarily established by applying the market value measure.  If a party wants to avail himself of a measure other than the normal one the onus rests on him to satisfy the court that the measure contended for is the appropriate one to employ in all the circumstances of the case.  A litigant does not have an unqualified discretion in the selection of the measure to be employed in determining the extent of the loss.

. . . . .

[18]      Mr Scheibert’s expert, Ms Marlene Tighy, also a valuer, used a more comprehensive and scientific property evaluation method called ‘multiple-regression analysis’ to examine data relating to 42 historical sales in the area.  The data consisted of different value forming attributes such as the size of the plot, the size of the dwelling, its condition, age, the number and the type of rooms, for example, bedrooms and bathrooms, sale dates and prices.  These attributes were fed into two formulas each of which placed emphasis on different attributes resulting in two inflation adjusted evaluations for each property.  On this methodology, Ms Tighy concluded that the selling price of the subject property had been below its market value of R9 million or the market price for a single dwelling in the area.

. . . .

[20]      Consequently there is no evidence to support Mrs Allen’s claim for a reduction in the value of the subject property.  Even with the breach of warranty, the market value of what was delivered remained higher than what was paid.  Therefore, Mrs Allen failed to prove that the breach of the warranty resulted in damages as she had pleaded.  That being the case, it is not necessary to deal with Mr Scheibert’s second defence based on failure to mitigate the damages.  Nor is it necessary to consider the claims for the costs of removing the kitchen and redesigning the plans since Mrs Allen did not prove that she had suffered any loss.