THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT

Not Reportable

Case No: 694/2015

In the matter between:

HANS PIETER WOLFGANG SCHEIBERT

APPELLANT

and

LYNETTE ETHEL ALLEN

RESPONDENT

Neutral Citation:
Scheibert v Allen (694/2015) [2015] ZASCA 126 (26 September
2016).
Coram:

Lewis, Shongwe, Willis, Saldulker and Dambuza JJA
Heard:

18 August 2016
Delivered:

26 September 2016

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.

___________________________________________________________________

ORDER
___________________________________________________________________

On appeal from: Western Cape Division of the High Court, Cape Town (Blignault J,
sitting as court of first instance):
1 The appeal is upheld with costs, such costs to include the costs consequent upon
the employment of two counsel.
2 The order of the court a quo is set aside and is substituted with the following:
‘The plaintiff’s claim is dismissed with costs.’
___________________________________________________________________
JUDGMENT
___________________________________________________________________

Dambuza JA (Lewis, Shongwe, Willis, Saldulker JJA concurring):

[1] The appellant, Mr Hans-Peter Scheibert, appeals against an order that he pay
damages to the respondent, Mrs Lynette Allen, for breach of a warranty in respect of
a sale of immovable property. The appeal is with leave of the court a quo
(Blignault J).

[2] On 29 July 2009 Mr Scheibert sold his immovable property, Erf 2054, situated
at No 6 Bridle Road, Oranjezicht, Cape Town, to Mrs Allen for R7 375 000. On 4
August 2009, in a written addendum to the agreement of sale, Mr Scheibert
warranted that all alterations, additions and improvements to the property had been
approved by the City of Cape Town (the City). The dwelling on the property
comprised a main house and a 70m² flatlet situated on a level lower than the main
house. The flatlet comprised two bedrooms, a bathroom and a kitchen.

[3] The property was transferred to Mrs Allen on 6 October 2009. After moving
into the property, Mrs Allen and her husband prepared to effect some renovations to
alter certain features of the house. The renovation plans prepared by an architect

were rejected by the City because the kitchen in the flatlet had never been approved
by the City. Further, this kitchen rendered the property a double residential unit in
contravention of the provisions of the zoning scheme and a condition of title to the
property.

[4] The architect presented Mrs Allen with two options. She could retain the
kitchen and submit to the City an application for removal of the title deed restriction,
a process which, according to the architect, could take six to 24 months, at an
estimated cost of R38 750. Alternatively, she could remove the kitchen, rendering
the property a single dwelling and submit revised plans to the City. Mrs Allen chose
the second option and then instituted proceedings against Mr Scheibert claiming
damages for breach of warranty.

[5] Mr Scheibert admitted that he was in breach of the warranty but denied that
Mrs Allen had suffered any damages as a result. He contended that Mrs Allen had
bought the property at a price lower than its market value and that the removal of the
kitchen did not derogate from the market value of the property. Mr Scheibert had
also pleaded, in the alternative, that Mrs Allen ought to have mitigated her damages
by seeking removal of the restrictive condition of title. Thus the issues for
determination by the court a quo were whether the removal of the kitchenette had
resulted in loss of value to the property and whether Mrs Allen had been obliged to
mitigate her damages as contended.

[6] In the summons, Mrs Allen’s main claim was for R350 000 ‘in respect of
diminution in the value of the property’ as a result of the removal of the second
kitchen. She also claimed R35 000 as costs incurred in the removal of the second
kitchen and R7 827.24 in respect of alterations to the renovation plans. The court a
quo awarded damages of R217 827 which comprised damages of R175 000 for ‘loss
of the flatlet as the second residential unit’, R35 000 for removal of the flatlet kitchen
and R7 827.24 as costs of amending the design of the renovations and resubmission
of the plans to the City.

[7] In support of her claim for diminution of the value of her property, Mrs Allen
gave evidence, and relied on the expert evidence of Mr John van der Spuy, a

professional valuer. Mrs Allen’s evidence was to the effect that her family decided to
relocate from Milnerton to the Cape Town 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 chose the property in question because it had the
self-contained flatlet which her sons could use ‘with some independence’.

[8] According to Mr van der Spuy’s valuation report, he was instructed to
‘…determine the impact on the market value at the date of sale caused by the
removal of the second kitchen…’. When doing the comparable sales analysis Mr Van
der Spuy considered the subject property to be a double dwelling. He described his
methodology in carrying out his task as a ‘comparable sales’ method, in terms of
which he examined sale (prices) of five homes in the Oranjezicht area and compared
them to that of the subject property. Three of the five houses were on Bridle Road.
House No 2 Bridle Road had been sold for R5.1 million on 5 December 2007.
Number 10 Bridle Road had been sold for R7 million on 18 January 2008. Number 8
Bridle Road had been sold for R9.8 million on 13 February 2009. The last two
properties were on Rugby Road. Number 2 Rugby Road had been sold for R7.3
million on 22 February 2009 and No 5 Rugby Road had been sold for R6.25 million
on 30 August 2008. From this information Mr Van der Spuy concluded that Mrs Allen
had paid a ‘premium price’ for the subject property. He assumed that the higher price
was, in part, attributable to the self-contained flatlet.

[9] Mr Van der Spuy then went further to consider ‘comparable residential rentals
of apartments in Oranjezicht which he found to be approximately R4 000 per month
for a ‘…two bedroomed, 70m² unit with a lounge, kitchenette and bathroom facilities’.
He then applied a capitalisation calculation of 8.5% on an estimated rental loss of
R31 500 per annum. He also considered that a 70m² flat would sell for approximately
R1.2 million. From this he concluded that ‘…the adjusted valuation of the overall
property would reduce by approximately R350 000, ie to just over R7 million’.

[10] When doing the comparable sales analysis, Mr Van der Spuy interviewed
three estate agents, one of whom was his wife. All three estate agents were satisfied
that the removal of the kitchenette had resulted in loss of value of the property. This
is the view that Mr Van der Spuy also held. He then computed the quantum of the

diminution as set out in his report, ‘…utilising potential rental loss of an independent’
dwelling.

[11] At the invitation of the court a quo the parties filed heads of argument on the
issue of whether a claim for damages in lieu of specific performance was available to
Mrs Allen. The court then considered the different approaches to the assessment of
damages, that is, the negative difference between the patrimonial position after the
damage causing event and the factual loss or asset deterioration. The difference
between the two approaches is not material for the purposes of this case because,
on both approaches, Mrs Allen had to prove reduction in value of the property.

[12] The court a quo reasoned that, because the breach related to a specific
portion of the property, Mrs Allen was entitled to claim damages in an amount that
would put her in the position that she would have been but for the breach. The court
found that the breach had only impacted the use of the flatlet. It accepted Mr Van der
Spuy’s opinion that Mrs Allen had bought the property at a price higher than its
market value. The court then halved Mr Van der Spuy’s ‘diminution’ value
assessment based on use of the flatlet as part of a single dwelling. Hence the award
of R175 000 as damages for diminution in value.

[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.1 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.2 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

11 Sommer v Wilding 1984 (3) SA 647 (A) at 664-7; A J Kerr The Principles of the Law of Contract 5th
eds (2002) at 737.
2 Mostert N O v Old Mutual Life Assurance Co (SA) Ltd 2001 (4) SA 159 (SCA) at para 76.

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.’3

[14] In Katzenellenbogen Ltd v Mullin4 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.

[15] The basis for the conclusion by Mr Van der Spuy, that Mrs Allen had paid a
premium price for the property, is flawed. Firstly, on his own evidence, Mr Van der
Spuy did not look at properties similar to the subject property. Having considered the
subject property to be a double dwelling property, one would have expected that he
would have compared sales relating to a more-or-less similar double dwelling
properties. Second, even the comparable sales that Mr Van der Spuy considered did
not show that Mrs Allen paid a price higher than the market value. Their average
market value was approximately R7 million.

[16] Moreover, Mr Van der Spuy had not done any inflation adjustment on the
prices he had considered. Had he done so, he would have realised that three of the
five properties on his list were sold at prices higher than the subject property. In fact,
the evidence shows that R7 million was in fact the lowest base for properties in the
area of the subject property. Number 10 Bridle Road, described by Mr Van der Spuy
as unrenovated and ‘vacant land’, had been sold for R7 million in January 2008.
Even further, he had omitted two significant comparable sales from his list. Number 8
Bridle Road had been sold for R9.8 million in July 2008 and for R11 million in
February 2009. Number 27 Bridle Road, which was less than half of the size of the
subject property, was sold for R8 million in July 2008. Mr Van der Spuy explained the
higher price in respect of No 8 Bridle Road by saying that the plot was considerably

3 Trotman v Edwick 1951 (1) SA 443 (SCA) 449B-C.
4 1977 (4) SA 855 (A).

more level and the dwelling thereon superior than the subject property. But the
explanation does not account for the rest of the evidence.

[17] Mr Van der Spuy also explained that his comparable sales exercise was only
intended to establish the market value of the property. With regard to his assessment
of diminution in value, at first, he testified that he considered that although Mrs Allen
intended to use the flatlet for her student sons, he also took into account that a
potential buyer might want to use it for commercial gain. Later, his evidence was that
he relied on his subjective opinion together with the consultations he had had with
the three estate agents. According to him, the term ‘premium price’ meant ‘upper
market prices in the area at the time’ and/or ‘equivalent to top prices in that area’; ‘it
wasn’t a premium price for the property per se…’ This explanation does not assist
Mrs Allen. At best Mr Van der Spuy’s evidence establishes that Mrs Allen had not
paid more for the property than she would have paid for a comparable single
dwelling property and, in fact, Mr Van der Spuy also testified that he was ‘…satisfied
that the [purchase price paid by Mrs Allen] was a fair reflection of the market value at
that point in time’.  I may also say that no basis had been laid for a claim based on
rental.

[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.

[19] The submission that Mrs Allen bought the subject property at a price lower
than its market value is consistent with the background to the sale. Mr Scheibert had
been living on the property until 2008 when he relocated to Germany. In about July
or August 2008 he instructed estate agents to market the property. At first his asking

price was between R10 and R11 million. As time went on and in light of the slump in
the housing market in 2008, he gradually reduced the price until he set it at R8.9
million, this being the price at which he believed that his neighbour, Mr Winter, had
sold No 8 Bridle Road. His evidence was that he regarded this price as his ‘bottom
line’. However, he did not receive any offers until June 2009 when he received an
offer of R5 million which he rejected. By that time he was desperate for a buyer. The
costs of maintaining the subject property, with a bond of R4 million, together with the
relocation and re-establishment costs had drained his financial resources. Both he
and his wife were too busy to attend to the marketing of the house, so it was his
eldest daughter, who was a student at the University of Cape Town, who liased with
estate agents. It was under these circumstances that he accepted Mrs Allen’s offer
and sold the house for considerably less than its market value.

[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.

[21] In the result:
1 The appeal is upheld with costs, such costs to include the costs consequent upon
the employment of two counsel.
2 The order of the court a quo is set aside and substituted with the following:
‘The plaintiff’s claim is dismissed with costs.’

____________
N DAMBUZA
JUDGE OF APPEAL

APPEARANCES:

For the Appellant:

W Duminy SC and G A Leslie

Instructed by:

Scheibert & Associates Inc. Attorneys, Cape Town

Lovius Block Attorneys, Westdene, Bloemfontein

For the Respondent:
R Patrick

Instructed by:

STTB Smith Tabata Buchanan Boyes, Cape Town

EG Cooper Majiedt Attorneys, Westdene, Bloemfontein