D.C.A obo N.M and Another v Member of the Executive Council for the Department of Health, Northern Cape Province (2250/2016) [2023] ZANCHC 41 (11 August 2023)

SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

IN THE HIGH COURT OF SOUTH AFRICA,

NORTHERN CAPE DIVISION, KIMBERLEY

Not reportable

Case No: 2250/2016

In the matter between:

D[...] C[...] A[...]

OBO

NM

FIRST PLAINTIFF

S[...] J[...]

SECOND PLAINTIFF

and

MEMBER OF THE EXECUTIVE

COUNCIL

FOR THE DEPARTMENT OF HEALTH,

NORTHERN CAPE

PROVINCE

DEFENDANT

Neutral citation: D[...] C[...] A[...] and Another v Member of the Executive Council for the Department of Health: Northern Cape Province (Case no. 2250/2016) (11 August 2023)

Heard: 09 May 2023

Delivered: 11 August 2023

Judgment

Phatshoane

DJP

[1] The principal issue in this application is the date in respect of which interest ought to run on a debt which was settled by agreement between the parties. This follows on the action for damages instituted by the first plaintiff, Ms D[...] A[...], in her representative capacity as the mother and natural guardian of her minor child, NM, against the defendant, the Member of the Executive Council for the Department of Health, Northern Cape Province, which flows from the injuries sustained by NM during his birth on 14 October 2013 at the Robert Mangaliso Sobukwe Hospital, Kimberley. The second plaintiff, Mr S[...] J[...], NM’s biological father, did not participate in the proceedings.

[2] Preparatory to trial of the issues, the question of liability was settled by agreement on 18 August 2018. There is no contest that largely the claims by the plaintiff were unliquidated claims for damages. On 10 February 2023 during the first week of the trial, certain specified aspects of NM’s claim for future hospital, medical and related expenses and his claim for general damages became settled in the amount of R5 100 971. Further specified aspects of future medical expenses and future loss of earning capacity were also settled between the parties. The agreed amounts which totals R9 574 902 are set out in a document titled “Upgraded List of Agreed Expenses” signed on behalf of both parties on 15 February 2023 and filed with the Court.

[3] The plaintiff filed an application for the interim payment of R 9 574 902 which was set down for hearing on 13 March 2023. However, the action became settled in its entirety on 14 March 2023. In terms of the order agreed to between the parties, dated 15 March 2023, the defendant is liable to pay the plaintiff on behalf of NM R20 Million inclusive of the trustees’ remuneration and costs of the creation of the trust in full and final settlement of the claim. The amount is to be paid in six instalments. The first instalment of R3.5 million was payable on 31 May 2023 and the remaining five equal instalments of R3.3 Million at the end of each of the subsequent five months with the final payment being on 31 October 2023.

[4] The only question remaining for this Court’s decision is whether the defendant is liable to pay interest a tempore morae on the capital amount of R20 million from 15 March 2023, the date of the order by consent, to 31 October 2023, the date of final payment or whether the interest is due and payable only in the event the defendant defaulted in the payment of the capital amount as ordered.

[5] I first get out of the way the application brought by the defendant to strike out certain averments contained in paras 40 to 42 of the plaintiff’s answering affidavit. It is trite that two requirements must be met before an application to strike out can succeed in terms of rule 6(15) of the uniform rules. First, the matter sought to be struck out must be scandalous, vexatious or irrelevant; and secondly, the court must be satisfied that if such a matter is not struck out the party seeking such relief would be prejudiced.[1]

[6] It was contended for the defendant that the contents of the specified paragraphs constituted inadmissible hearsay evidence. The defendant argued that the plaintiff was not a party to the unrelated proceedings referred to in those paragraphs and had laid no basis for her knowledge of the information she supplied. In addition, her evidence, it was argued, is not supported by the confirmatory affidavits of the experts that were called in that case. In any event, so it was contended, the specific expert report she relies on is significantly outdated as it captured data accessed in 2019. The hearsay evidence she endeavoured to adduce was woefully short of the requirement for its admission as envisaged in s 3(1)(c) of the Law of Evidence Amendment Act 45 of 1988, the argument continued.

[7] The impugned paragraphs seek to show that an expert report had been filed in an unrelated matter before this Court which paints a picture that the reasons for the financial constraints of the Department of Health, Northern Cape (the department) based on its official records were multifactorial. These included consistent accruals, alleged weaknesses in managerial capabilities, high irregular expenditure and so forth. The plaintiff states that she does not have access to the financial records and related information since the filing of the expert report in that unrelated matter. She solely brought this information to the fore so as to be afforded the opportunity to disprove the defendant’s averments on the alleged potential contribution of payment interest on claims as a factor allegedly jeopardising the department’s ability to meet its obligation to the wider public.

[8] The paragraphs sought to be struck out contains hearsay as correctly conceded by counsel for the plaintiff. The paragraphs may well be intended to show, as argued for the plaintiff, that Mr Jacobus Steyn’s (the defendant’s deponent) allegation, that the payment of interest would affect the department’s ability to pay claims against it, is capable of being challenged. It is trite that the probative force of the assertions contained in the affidavit is not a matter for consideration in the application to strike out. What is of consequence is the relevance thereof to the merits of the case.[2]

[9] On the view I take of this matter, the evidence contained in the paragraphs is of little importance in the resolution of the present dispute. Nevertheless, I remain unpersuaded that they ought to be struck out simply because the defendant did not advance any argument that it stood to suffer prejudice if these were to be retained. Its application to strike out must consequently fail.

[10] In a separate order, dated 15 March 2023, the parties agreed to exchange affidavits for purposes of addressing the issues pertaining

to the payment of interest. In the defendant’s affidavit, Mr Steyn essentially advanced a case that the department carries a contingent liability in respect of various medical negligence claims totalling approximatively R1.5 Billion. He stated that the department has settled most of these unrelated claims on the basis that the capital would be paid in instalments with interest being payable in the event it defaulted to pay. Consequently, he stated, the department has to disburse significant sums monthly in the payment of these claims. It would therefore not have been able to pay the capital sum ordered in this case in a lump sum. If it did, it would be unable to reimburse the other claimants. The agreement to pay by instalment was to ensure the continuous provision of services to the public at large.

[11] Mr Steyn further intimated that the department is not in a position to pay interest on the capital amount because this would result in additional liability for it. In any event, he stated, it would be inherently unfair for the department to be burdened with interest on the total capital amount because the plaintiff would not receive interest on the R20 million in light of the contingency fee agreement she entered into with her attorneys. Ordinarily, the contingency fee and other disbursements would have to be deducted from the capital. He stated that insofar as the residual amount following the deductions is presently unknown, no order with regard to the payment of interest ought to issue. Furthermore, he said, the plaintiff bore a duty to mitigate her loss by ensuring that she generates and earns interest on the instalments of the capital sum that she would receive.

[12] The plaintiff replied that there was no obligation on severely disabled persons to assist the defendant to meet its financial obligations. She intimated that she has not waived any of her son’s rights to claim interest on the capital amount and gainsaid the defendant’s inability to pay interest due to its current financial position. She criticised Mr Steyn’s assertion, that contingency fees and costs would be deducted from the capital amount, as vexatious and of no moment. She intimated that, if anything, the fact that fees and costs would have to be deducted from the capital would be a fair and just motivation for the payment of interest.

[13] Mr De Waal SC, for the plaintiff, contended that Mr Steyn is neither sufficiently qualified nor experienced to express an opinion on the financial affairs of the department, an aspect Mr Steyn denies. In this regard it was further argued that the defendant did not comply with rule 36(9)[3] and neither were the financial records and related documents discovered in support of Mr Steyn’s opinion. Furthermore, what

Mr Steyn alleged had not been pleaded in the action but was sprung on the plaintiff at the last possible minute. It was contended that the plaintiff places in dispute Mr Steyn’s impermissible “one-sided version of the alleged facts of this case” and that the defendant’s so-called “public healthcare defence”, ought not to avail it. To this end, Mr De Waal argued that if it is found that Mr Steyn’s evidence regarding the defendant’s alleged dire financial position and alleged inability to pay interest is permissible, the plaintiff would require an opportunity to cross-examine him as envisaged in rule 38 (2) which directs that witnesses at the trial of any action shall be orally examined. The plaintiff would also require that the defendant discover certain financial records and related documents which she had listed.

[14] Ms Williams SC, for the defendant, countered that there is no basis to justify a new trial and convoluted process to be embarked upon for purposes of determining whether the plaintiff is entitled to interest from 15 March 2023. This is so because, so it was argued, the parties agreed that the question be disposed of on the affidavits filed and argument. Whether the plaintiff was entitled to interest is a straightforward legal question, the argument continued.

[15] The answer to the question of when interest should be paid lies in whether s 2(1) or s 2A of the Prescribed Rate of Interest Act 55 of 1975 (the PRIA) applies. If s 2(1) is applicable, as Ms Williams contends, the capital amount would bear interest from the day on which such judgment debt is payable. This would be on each of the agreed payment dates. However, where s 2A applies, as Mr De Waal argued, interest would have to be determined on the basis of that statutory provision.

[16] As already alluded to, Ms Williams relies on s 2 of the PRIA as support for the proposition that the capital amount bears interest from date on which it becomes payable. Section 2 provides:

‘(1) Every judgment debt which, but for the provisions of this subsection, would not bear any interest after the date of the judgment or order by virtue of which it is due, shall bear interest from the day on which such judgment debt is payable, unless that judgment or order provides otherwise.

(2) Any interest payable in terms of subsection (1) may be recovered as if it formed part of the judgment debt on which it is due.

(3) In this section 'judgment debt' means a sum of money due in terms of a judgment or an order, including an order as to costs, of a court of law, and includes any part of such a sum of money, but does not include any interest not forming part of the principal sum of a judgment debt.’

[17] Ms Williams argument also hinges on s 3(3)(a) of the State Liability Act 20 of 1957 (the State Liability Act) which stipulates:

‘A final court order against a department for the payment of money must be satisfied-

(i) within 30 days of the date of the order becoming final; or

(ii) within the time period agreed upon by the judgment creditor and the accounting officer of the department concerned.’

[18] Ms Williams argued that interest ‘a tempore morae’ is only payable when a debtor is in default. In this case she argued that the defendant had not defaulted in its payment thus the

plaintiff is not entitled to the payment of interest. In amplification of her submission, Ms Williams referred to Motaung and Others v Road Accident Fund[4] where it was said:

‘[19] As a result, ex lege mora interest arises on default or failure to pay on the agreed due date whereupon the creditor is entitled to claim interest on the outstanding capital amount. The date when interest is to accrue is fixed by the time for payment agreed upon by the parties. The capital amount can therefore only bear interest from the date on which payment was due. The creditor is entitled to claim even without a specific contractual provision to pay interest..’

[19] According to Ms Williams the principles enunciated in Motaung (supra) were dispositive of the plaintiff’s contention that the interest should run from 15 March 2023. She argued that the interest in this case was only payable if the defendant defaulted in the payment of any of the instalments amounts agreed. Until then ‘no interest at all accrues to the plaintiff’. She contended that insofar as the plaintiff agreed to payment in six instalments she waived her right to claim interest on the total capital sum of R20 million from 15 March 2023. It was argued that the plaintiff bore the onus of proving that she is entitled to claim interest from 15 March 2023.

[20] For the plaintiff, Mr De Waal contended that the 30-day period referred to in s 3(3)(a)(i) of the State Liability Act finds no application in the present case. So too, he argued, are the provisions of s(3)(a)(ii) in light of the agreed six months instalments. He argued that the relief sought in the plaintiff’s Particulars of Claim included interest in terms of s 2A of the PRIA from date of service of the summons to date of final payment. The plaintiff was entitled to interest on R5 100 971 from 13 February 2023 and on R9 574 902 from 15 February 2023, the date the defendant agreed to pay these amounts. Insofar as the interest claimed is on the full capital amount of R20 million from the date of the order, so it was argued, this redounds to the benefit of the defendant. He further contended that interest on unliquidated damages, ought to be resolved on the basis of s 2A of the PRIA.

[21] I hasten to state that manifestly, the facts in Motaung are entirely different from those which apply to this case. There, the argument pivoted on s 17(3)(a) of the Road Accident Fund Act 56 of 1996.[5] To contextualise the legal issues that arises for consideration here, it is important to set out the statutory architecture which regulates interest in respect of unliquidated debts. Section 2A of the PRIA provides in part:

‘2A Interest on unliquidated debts

(1) Subject to the provisions of this section the amount of every unliquidated debt as determined by a court of law, or an arbitrator or an arbitration tribunal or by agreement between the creditor and the debtor, shall bear interest as contemplated in section 1.

(2) (a) Subject to any other agreement between the parties and the provisions of the National Credit Act, 2005 (Act 34 of 2005) the interest contemplated in subsection (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.

(b) In the case of arbitration proceedings and subject to any other agreement between the parties, interest shall run from the date on which the creditor takes steps to commence arbitration proceedings, or any of the dates contemplated in paragraph (a), whichever date is the earlier.

(3) The interest on that part of a debt which consists of the present value of a loss which will occur in the future shall not commence to run until the date upon which the quantum of that part is determined by judgment, arbitration or agreement and any such part determined by arbitration or agreement shall for the purposes of this Act be deemed to be a judgment debt.

(5) Notwithstanding the provisions of this Act but subject to any other law or an agreement between the parties, a court of law, or an arbitrator or an arbitration tribunal 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.’

[22] The PRIA was amended by the Prescribed Rate of Interest Amendment Act 7 of 1997 with effect from 11 April 1997[6] to make provision in s 2A for the payment of interest on unliquidated debts, which the plaintiff’s claim is. This altered the common law position laid down in Victoria Falls & Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd [7]as follows:

‘The civil law did not attribute mora to a debtor who did not know and could not ascertain the amount which he had to pay. “Non potest improbus videri, qui ignorat, quantum solvere debeat.” (Dig. 50.17.99). And that rule was adopted by the Courts of Vriesland. (See Sande, Dec., 3.14.9). It has also been followed in our own practice. No South African decision was quoted to us, nor have I been able to find any, in which interest before judgment has been awarded upon unliquidated damages. I do not think, therefore, that they can be given here. I do not say that under no circumstances whatever could such damages carry interest. Cases may possibly arise in which though the claim is unliquidated the amount payable might have been ascertainable upon an enquiry which it was reasonable the debtor should have made. Such cases, should they occur, may be left open. But the present matter stands in a different position. It was not possible for the defendant to know or ascertain what damage its breach of contract had caused, and it cannot therefore, on the principles of our law, be held liable for interest prior to judgment upon the amount of the damage.’

[23] The above common law principle was rendered obsolete by s 2A of the PRIA which provides for interest to 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, subject to a court's discretion.[8] Section 2A(5) of PRIA endows the court with a discretion to ‘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.’ No evidential issues trigger any onus when a court exercises its discretion. In Adel Builders (Pty) Ltd v Thompson[9] Howie JA remarked that:

‘…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 and Others 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.’

[24] In David Trust and Others v Aegis Insurance Co Ltd and Others[10] it was said that s 2A(5) intended:

‘…amongst other things, to ameliorate instances of inequity which may occur where a debtor is required to pay mora interest on, for instance, damages for breach of contract at a rate in excess of what his contract provided or from a date before the amending Act came into operation when 'he did not know and could not ascertain the amount which he had to pay...'

[25] The argument by the defendant that the agreement to settle was never made contingent upon the payment of interest; that the plaintiff waived her right to claim interest; and that her attorneys had agreed to forgo the payment of interest from date of the order need not be discussed at any great length. This is so because para 1.3 of the order of 15 March 2023 puts paid to any suggestion that the plaintiff abandoned her right to claim interest. Apparent from para 1.3 of the order, the parties were fully cognisant that the issue of interest would be argued separately on 09 May 2023. It therefore follows that the question of waiver does not arise.

[26] As I see it, s 2A (3) of the PRIA is more relevant in the context of this case and would find application because the debt mainly consists of the present value of a loss which will occur in the future. In that case, interest shall not commence to run until the date upon which the quantum is determined by judgment, arbitration or agreement. That determination shall, for the purposes of the PRIA, be deemed to be a judgment debt.

[27] Mr Steyn’s evidence that the department disburses a significant sum monthly in respect of the claims it settled for medical negligence and thus is not in a position to pay the interest claimed in this case, is bare of any substantive content which would enable this Court to exercise the discretion in the department’s favour in terms of s 2A(5) of the PRIA. The department did not file any documentary evidence in support of its claim of financial constraints.

[28] It should be mentioned that the parties had agreed that a trust be created the purpose of which is recorded as being: “(T)he

creation of a trust fund for the benefit of the minor child to provide for his general day to day maintenance and his well-being,

which shall include but not limited to medical expenses in respect of which meticulous, comprehensive and accurate records and books of accounts shall be kept and maintained, in addition to any other accounting records, for purposes of potential future reversion of certain trust assets to the defendant or the State” (my emphasis). Upon the termination of the trust or death of the minor child a clawback provision is made in the proposed trust deed which essentially ring-fences the award in respect of future medical expenses in the ‘Medical Fund’ which, if not depleted at the time of the minor’s passing, shall at the defendant’s election be transferred to it.

[29] It bears repeating that the capital amount was determined by agreement which was made an order of the court on 15 March 2023. The rate prescribed at the time of the order was 10.75%. I am unable to conclude, absent any substantiation, that it would be inequitable if the defendant was held liable for the payment

of interest at the specified legal rate. In terms of s 2A(5) of PRIA, it seems to me to be just that mora interest at 10.75%, being the legal rate applicable on 15 March 2023, should apply.

[30] There remains for determination the question of costs. Even though the plaintiff successfully defended the application to strike out, I am not swayed that she is entitled to the costs pertaining to that application. This is so because the hearsay evidence contained in the paragraphs sought to be struck out may have motivated the defendant to bring the striking out application. As to the costs of the proceedings in respect of the determination of interest, the plaintiff sought that they be on a punitive scale and to include costs consequent upon the employment of two counsel. The bases for costs to follow on the proposed scale has not been established in the plaintiff’s answering affidavit. I am unpersuaded that the defendant’s conduct of this litigation calls for any rebuke by the Court. Accordingly, costs are to follow the result on party and party scale. I make the following order.

Order:

1. The defendant’s application to strike out is dismissed with no order as to costs.

2. The defendant is to pay interest on the sum of R20 000 000 (twenty Million rand) from 15 March 2023 to date of final payment at the rate of 10.75% per annum.

3. The defendant is to pay the first plaintiff’s costs of adjudication of the issue of interest on party and party scale which costs shall include costs consequent upon the employment of two counsel.

PHATSHOANE DJP

Appearances:

For the first plaintiff Adv WP De Waal SC (with Adv CH Botha) Instructed by: Elliot Maris Attorneys, Kimberley. For the first defendant: Adv RT Williams SC (with Adv S Mahomed) Instructed by: Robert Charles Attorneys & Conveyancers, Kimberley.

[1] Beinash v Wixley [1997] ZASCA 32; 1997 (3) SA 721 (SCA) at 733B; Helen Suzman Foundation v President of the Republic of South Africa 2015 (2) SA 1 (CC) para 27.

[2] National Director of Public Prosecutions v Zuma [2009] ZASCA 1; 2009 (2) SA 277 (SCA) para 25.

[3] The rule provides inter alia that a party intending to call an expert shall not more than 30 days in case of the plaintiff or 90 days in case of the defendant, after the close of pleadings, have delivered notice of intention to call such expert; and in the case of the plaintiff not more than 90 days after the close of pleadings and in the case of the defendant not more than 120 days after the close of pleadings such plaintiff or defendant shall have delivered a summary of the expert’s opinion and the reasons therefor.

[4] (26222/15;66316/18;88788/19) [2023] ZAGPPHC 206 (7 March 2023); [2023] JOL 58475 (GP).

[5] Section 17(3)(a) of the Road Fund Accident Act provides that: “No interest calculated on the amount of any compensation which a court awards to any third party by virtue of the provisions of subsection (1) shall be payable unless fourteen (14) days have elapsed from the date of the court’s relevant order.”

[6] The Prescribed Rate of Interest Amendment Act 7 of 1997 was published in GG 17914 of 11 April 1997 and came into operation on the same date.

[7] 1915 AD 1 at 32.

[8] Griffiths v Janse Van Rensburg and Another NNO 2016 (3) SA 389 (SCA) para 35.

[9] 2000 (4) SA 1027 (SCA) para 15; The principle enunciated in Adel Builders was reaffirmed in Drake Flemmer & Orsmond Inc v Gajjar NO 2018 (3) SA 353 (SCA) para 80.

[10] [2000] ZASCA 108; 2000 (3) SA 289 (SCA) para 39.