About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
2015
>>
[2015] ZASCA 21
|
|
Euro Blitz 21 (Pty) Ltd and Another v Secena Aircraft Investments CC (102/2014) [2015] ZASCA 21 (19 March 2015)
Links to summary
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 102/2014
Reportable
In
the matter between:
EURO
BLITZ 21 (PTY)
LTD
.......................................................................................
First
Appellant
IVO
BRANCO
...........................................................................................................
Second
Appellant
and
SECENA
AIRCRAFT INVESTMENTS
CC
....................................................................
Respondent
Neutral
citation:
Euro Blitz 21 v Secena
Aircraft Investments CC
(102/14)
[2015]
ZASCA 21
(19 March 2015)
Coram:
Maya, Majiedt, Pillay and Mbha JJA and Mayat AJA
Heard:
23 February 2015
Delivered:
19 March 2015
Summary:
Interest –whether words
'calculated daily' in court order implied compound or simple interest
– compound interest claimable
only in defined circumstances.
ORDER
On
appeal from the South Gauteng High Court, Johannesburg (Kolbé
AJ) sitting as court of first instance):
1 The appeal is
upheld with costs.
2 The order of the
South Gauteng High Court, Johannesburg, is set aside and replaced by
the following order:
'(a) Having regard
to the judgment of the additional Magistrate E de Klerk dated 19
February 2009 under case number 2795/2006 in
the Germiston
Magistrate's Court, it is declared that:
(i) Interest which
accrues on the capital amount of R353 126.40 may accumulate for
the period from 24 March 2006 to 1 June
2012 and that the
in
duplum
rule is suspended for such period;
(ii) The
in
duplum
rule shall apply to interest which accrues on the capital
of R353 126.40 and accrued interest thereon from 2 June 2012 to
date of payment;
(b) the respondents
are to pay the applicant's costs of the application until date of
delivery of its answering affidavit, jointly
and severally, the one
paying the other to be absolved;
(c) the remainder of
the application is dismissed;
(d)
the applicant is to pay the respondents' costs of the application
incurred after the delivery of its answering affidavit.'
JUDGMENT
Mbha
JA (Maya, Majiedt and Pillay JJA and Mayat AJA concurring):
[1]
This appeal concerns the proper interpretation and meaning of the
order given by the Magistrate's Court, Germiston (the trial
court)
dated 19 February 2009, in terms of which the appellants were ordered
inter alia, to pay the respondent '[i]nterest at prime
plus 5%
calculated daily with effect from 24/03/06 to date of payment.' The
issue for determination is whether the interest envisaged
in the
order was simple or compound interest. The South Gauteng High Court,
Johannesburg, (Kolbé AJ) held that the words
'calculated
daily' in the order permitted no other interpretation but that
interest was to be compounded daily. This appeal is
against that
finding and is with leave of the court a quo.
[2]
The background facts to the dispute are largely common cause. The
respondent issued summons as plaintiff against the appellants
as
defendants in the trial court, claiming payment of arrear rental plus
interest and costs, based on a written lease agreement
entered into
between the parties. The prayer sought in the particulars of claim
was specifically couched in the following terms:
'1. Payment of the
sum of R353 126.40.
2. Interest on the
abovementioned amount at the rate of prime plus 5% (five per centum)
calculated daily per annum a tempora morae
to date of final payment.
.
. .'
[3]
After hearing argument, the trial court was satisfied that the
respondent had proved on a balance of probabilities that the
appellants had breached the terms of the lease agreement. It
accordingly granted judgment in favour of the respondent in
accordance
with the prayer sought in its particulars of claim. The
question whether the interest payable on the capital amount
constituted
compound interest was neither raised nor argued. The
learned magistrate merely based her order on the provision in clause
21.4
of the lease agreement which states that:
'21.4
The Lessee consents and agrees to pay interest charges on all
outstanding amounts due to the Lessor arising from any matter
whatsoever, calculated on a daily basis, at a rate of prime plus 5%.'
[4]
Subsequently, the respondent launched application proceedings in the
court a quo. It sought a declarator that the trial court's
order in
relation to the interest payable, meant interest calculated at 5 per
cent above the prime rate of interest charged by
Nedbank Limited from
time to time from 24 March 2006 and that such interest shall be
calculated daily and compounded daily from
the 24
th
March 2006 to date of payment.
[1]
As
alluded to earlier, the court a quo granted the order sought holding
that the words 'calculated daily' in the trial court's magistrate's
order meant that interest was to be compounded daily.
[5]
The parties' respective contentions can be summarised as follows. The
appellants submitted that the word 'calculated' in the
order must be
ascribed its ordinary grammatical meaning namely, to determine the
interest for a particular period mathematically,
which in this case,
is on a daily basis. Furthermore, as there was no averment or
evidence of an agreement that interest shall
be compounded, the order
must accordingly be interpreted to provide for simple interest only.
The respondent contended on the other
hand, that if the intention was
to calculate interest on the arrear amount outstanding on a daily
basis, then there was no need
to include the words 'calculated daily'
in the order and that their inclusion can only mean that interest was
to be compounded
on a daily basis.
[6]
It is trite law that the rules applicable to the interpretation of
documents are applicable to the interpretation of a judgment
or order
of court. The test in this regard is well established. If there is no
uncertainty in the meaning of the words the court's
intention must be
established primarily from the language of the judgment or order as
construed according to the usual, well-known
rules of interpretation
of documents. If, however, uncertainty arises from the judgment or
order, regard may be had to extrinsic
and the surrounding
circumstances relevant to the granting of such judgment or order such
as the evidence, both oral and documentary,
that was adduced before
the trial and submissions made. Trollip JA described the test as
follows in
Firestone
South Africa (Pty) Ltd v Gentiruco A G
:
[2]
'First,
some general observations about the relevant rules of interpreting a
court's judgment or order. The basic principles applicable
to
construing documents also apply to the construction of a court's
judgment or order: the court's intention is to be ascertained
primarily from the language of the judgment or order as construed
according to the usual, well-known rules. See
Garlick
v Smartt and Another
,
1928 A.D. 82
at p. 87;
West
Rand Estates Ltd. v New Zealand Insurance Co. Ltd.
,
1926 A.D. 173
at p. 188. Thus, as in the case of a document, the
judgment or order and the court's reasons for giving it must be read
as a whole
in order to ascertain its intention. If, on such a
reading, the meaning of the judgment or order is clear and
unambiguous, no extrinsic
fact or evidence is admissible to
contradict, vary, qualify, or supplement it. Indeed, it was common
cause that in such a case
not even the court that gave the judgment
or order can be asked to state what its subjective intention was in
giving it (
cf
.
Postmasburg
Motors (Edms.) Bpk. v Peens en Andere
,
1970 (2) S.A. 35
(N.C.) at p. 39F-H). Of course, different
considerations apply when, not the construction, but the correction
of a judgment or
order is sought by way of an appeal against it or
otherwise – see
infra
.
But if any uncertainty in meaning does emerge, the extrinsic
circumstances surrounding or leading up to the court's granting the
judgment or order may be investigated and regarded in order to
clarify it; for example, if the meaning of a judgment or order
granted on an appeal is uncertain, the judgment or order of the court
a
quo
and its reasons therefor, can be used to elucidate it. If, despite
that, the uncertainty still persists, other relevant extrinsic
facts
or evidence are admissible to resolve it. See
Garlick's
case,
supra
,
1928 A.D. at p. 87, read with
Delmas
Milling Co. Ltd. v Du Plessis
,
1955 (3) S.A. 447
(A.D.) at pp. 454F-455A;
Thomson
v Belco (Pvt.) Ltd. and Another
,
1960 (3) S.A. 809 (D).'
[3]
[7]
In my view and having regard to the above rule of interpretation, the
word 'calculated' in the trial court's order pertaining
to interest,
must be given its grammatical and ordinary meaning, unless that would
result in some absurdity, repugnancy or inconsistency
with the rest
of the order. To 'calculate' means to '[e]stimate or determine by
arithmetical or mathematical reckoning; estimate
or determine by
practical judgement or on the basis of experience'.
[4]
[8]
To 'capitalise' on the other hand means to 'convert into a capital
sum'.
[5]
Needless
to say, the term capitalisation of interest is interchangeable with
the expression compounding of interest.
[6]
Thus
'compound interest' is defined as 'reckoned on the principal together
with the accumulated unpaid interest'.
[7]
This
must be contrasted with simple interest, which is reckoned or
determined on the principal or capital sum.
[9]
As can clearly be seen, 'capitalised' and 'compound' on the one hand
bear a different meaning to the word 'calculated'. In terms
of its
definition, capitalisation of interest, is no more than an accounting
exercise which is designed to simplify the calculation
of compound
interest, in respect of which the interest's identity remains intact.
In other words the concept is merely concerned
with what is to be
done with the interest after it has been calculated. Thus, it is
quite possible that in certain circumstances
capitalisation might
amount to a novation thereby converting the interest element into
capital.
[8]
However
'calculated' only refers to the period or method of calculating
interest on the capital amount.
[9]
The
calculation will be in respect of either simple or compound interest
which may be done on an annual, monthly or as in this case,
on a
daily basis. There is accordingly a clear distinction between a
method of calculation of interest on the one hand, and the
method of
accounting for interest after its calculation on the other.
[10]
Based on the aforegoing, it follows that the respondent's contention
that the words 'calculated daily' in the order envisaged
that
interest is to be compounded daily, is legally untenable and cannot
be sustained. In my view, the fact that the respondent
sought an
order declaring that the interest must be '
calculated
daily and compounded daily
' (emphasis
added) is an implicit concession on the respondent's part that these
are two distinctly different concepts which cannot
have the same
meaning.
[11]
The legal principles governing the applicability of compound interest
also militate against the interpretation which the respondent
seeks
to have attached to the clause in question, especially when it is
compared against simple interest. As a starting point,
it is accepted
generally that where in a written agreement, compound interest is not
expressly provided for, only simple interest
was due. In
Mayfair
South Townships (Pty) Ltd v Jhina
,
[10]
clause
3 of the agreement read:
'The balance from
time to time owing by the purchaser to the seller in respect of the
purchase price shall bear interest at the
rate of 9.75 per cent per
annum, provided that the seller in its discretion may at any time
increase such rate to a rate not exceeding
the maximum rate which
from time to time is charged by any building society in respect of a
loan secured by a first mortgage bond
over land. Such interest shall
be calculated monthly in advance and the payment of interest shall be
included in the aforesaid
monthly payments, which payments shall in
the first instance be allocated to the payment of interest and
thereafter in deduction
of the purchase price'
In
deciding whether or not compound interest was intended, Flemming J
held that the clause as phrased, could not have provided for
anything
more than simple interest.
[12]
It is also trite law that compound interest is claimable only in
certain defined circumstances, namely, where parties agree
to pay
compound interest;
[11]
if
the obligation to pay interest is alleged,
[12]
and
if it is established by evidence that a universal custom of lessors
charging compound interest on arrear rentals is uniformly
and
universally observed throughout leasing practices in South
Africa.
[13]
The
respondent has failed to establish any of these grounds. Further, at
the trial the respondent never attempted to raise or argue
any of
these points. Significantly, the appellants' version in this respect
was not disputed in the respondent's replying affidavit.
[13]
As stated earlier, the order of the trial court was granted in
accordance with the respondent's prayer as set out in the particulars
of claim and also in accordance with clause 2.14 of the lease
agreement. The words 'compounded daily' do not appear in this clause
nor in the trial court's order. In light of the aforegoing, the court
a quo erred in finding that the words 'calculated daily'
intended
that interest was to be compounded daily. The separate issue
pertaining to the applicability of the
in
duplum
rule was conceded in the court a
quo and for that reason was not considered in this court.
[14]
In the circumstances I make the following order:
1 The appeal is
upheld with costs.
2 The order of the
South Gauteng High Court, Johannesburg, is set aside and replaced by
the following order:
'(a) Having regard
to the judgment of the additional Magistrate E de Klerk dated 19
February 2009 under case number 2795/2006 in
the Germiston
Magistrate's Court, it is declared that:
(i) Interest which
accrues on the capital amount of R353 126.40 may accumulate for
the period from 24 March 2006 to 1 June
2012 and that the
in
duplum
rule is suspended for such period;
(ii) The
in
duplum
rule shall apply to interest which accrues on the capital
of R353 126.40 and accrued interest thereon from 2 June 2012 to
date of payment;
(b) the respondents
are to pay the applicant's costs of the application until date of
delivery of its answering affidavit, jointly
and severally, the one
paying the other to be absolved;
(c) the remainder of
the application is dismissed;
(d)
the applicant is to pay the respondents' costs of the application
incurred after the delivery of its answering affidavit.'
_____________________
B
H MBHA
JUDGE
OF APPEAL
APPEARANCES:
For
appellant: H P van Nieuwenhuizen (1
st
& 2
nd
)
Instructed
by:
David
Kotzen Attorneys, Edenvale
Lovius-Block
Attorneys, Bloemfontein
For
respondent: G Kairinos SC
Instructed
by:
Marais
Stephens Attorneys, Sandton
Symington
& De Kok, Bloemfontein
[1]
Prayer
1.4 of the Notice of Motion reads:
'1.4
Interest which accrues shall be interest at the rate referred to in
1.3 above calculated daily and compounded daily from
the 24
th
March 2006 to date of payment.'
[2]
Firestone
South Africa (Pty) Ltd v Gentiruco A G
1977
(4) SA 298
(A) at 304D-H.
[3]
Van
Rensburg & another NNO v Naidoo & others NNO; Naidoo &
others NNO v Van Rensburg NO & others
2011 (4) SA 149
(SCA) para
42.
[4]
Shorter
Oxford English Dictionary 6 ed vol 1 (2007).
[5]
Shorter
Oxford English Dictionary (supra).
[6]
Commercial
Bank of Zimbabwe Ltd v M M Builders & Suppliers (Pvt) Ltd
and
three similar cases
1997 (2) SA 285
(ZH) at 308C.
[7]
Shorter
Oxford English Dictionary (supra).
[8]
Pfeiffer
v First National Bank of SA Ltd
1998
(3) SA 1018
(SCA) at 1032B.
[9]
Commercial
Bank of Zimbabwe
(supra)
at 308F-310B.
[10]
Mayfair
South Townships (Pty) Ltd v Jhina
,
1980
(1) SA 869
(T)
.
[11]
Davehill
(Pty) Ltd v Community Development Board
1988
(1) SA 290
(A) at 298H-J where Smalberger JA said: '[c]ompound
interest (interest on interest) may be expressly stipulated for by
agreement,
is commonplace today in commercial and financial dealings
and has been sanctioned by our courts for many years'.
[12]
L
T C Harms,
Amler's
Precedents of Pleadings
,
7 ed at 240.
[13]
Standard
Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
liquidation)
[1997] ZASCA 94
;
1998
(1) SA 811
(SCA) at 829F.