Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga and Others (590/2011) [2012] ZASCA 128; 2013 (2) SA 259 (SCA); [2013] 2 All SA 1 (SCA) (21 September 2012)

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[2012] ZASCA 128
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Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga and Others (590/2011) [2012] ZASCA 128; 2013 (2) SA 259 (SCA); [2013] 2 All SA 1 (SCA) (21 September 2012)

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THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 590/2011
CROOKES
BROTHERS LIMITED
.....................................................
Appellant
and
REGIONAL
LAND CLAIMS COMMISSION FOR
THE
PROVINCE OF MPUMALANGA
...................................
First
Respondent
THE
NATIONAL DEPARTMENT OF LAND AFFAIRS
....
Second
Respondent
THE
GOVERNMENT OF THE REPUBLIC OF
SOUTH
AFRICA
..................................................................
Third
Respondent
Neutral
citation
:
Crookes Brothers Ltd v Regional Land Claims
Commission for the Province of Mpumalanga & others
(590/2011)
[2012] ZASCA 128
(21 September 2012)
BENCH:
CLOETE, PONNAN, CACHALIA, WALLIS JJA and
SOUTHWOOD
AJA
HEARD: 24 AUGUST 2012
DELIVERED: 21 SEPTEMBER 2012
CORRECTED:
SUMMARY: Contract – interpretation of - sale of immovable
properties – claim for mora interest on purchase price.
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from
:
North Gauteng High Court
(Pretoria) (Sapire AJ sitting as court of first instance).
(a) The appeal succeeds with costs to be paid jointly and severally
by the respondents.
(b) The order of the court below is set aside to be replaced with:
‘
The respondents are ordered jointly and
severally to pay to the applicant:
(i) the sum of R22 761 643,85;
(ii) interest on the sum of R22 761 643,85 at the rate of 15.5% per
annum from 6 July 2010 to date of payment;
(iii) costs of suit including those of two counsel where employed.'
___________________________________________________________________
JUDGMENT
___________________________________________________________________
PONNAN JA (CLOETE, CACHALIA, WALLIS JJA and SOUTHWOOD AJA
concurring):
[1] Interest, which Centlivres CJ described as ‘the life-blood
of finance' (
Linton v Corser
(1952 (3) SA 685
(A) at 695G), is
what this appeal is about. The appellant, Crookes Brothers Limited, a
public company, seeks payment of
mora
interest on the purchase
price of certain immovable properties sold by it to the third
respondent, the Government of the Republic
of South Africa as
represented by the first respondent, the Regional Land Claims
Commission for the Province of Mpumalanga and
the second respondent,
the National Department of Land Affairs.
[2] The appellant was the owner of a number of farms situated in the
Province of Mpumalanga, which formed the subject matter of
land
claims by various communities in terms of the
Restitution of Land
Rights Act 22 of 1994
. Whilst the litigation was pending before the
Land Claims Court and those who held legitimate claims to those
properties were yet
to be determined, negotiations occurred over an
extended period between representatives of the appellant, on the one
hand, and
the respondents, on the other, which culminated on 8 April
2009 in the conclusion of a written agreement of sale in respect of
some 15 properties for the aggregate purchase price of R200 million.
[3] Material terms of the agreement were:
'3.2 The purchase price shall be
paid into the Designated Account by electronic funds transfer during
normal banking hours by no
later than the 10
th
(tenth)
succeeding day after the Transfer Date.
...
4.1 Within 14 (fourteen) days of
written request by the Conveyancers, which request shall only be made
when the documents required
for the transfer of the Properties are
ready to be lodged with the Deeds Registry, office of the Mpumalanga
Province, the Purchaser
shall furnish to the Conveyancers a written
undertaking from the Chief Land Claims Commissioner in the form of an
undertaking contained
in Annexure A in terms of which the Purchaser
undertakes to pay the purchase price into the Designated Account by
no later than
the 10
th
(tenth) succeeding day after the
Transfer Date.
...
6. MORA INTEREST
Should any part of the purchase
price not be paid by the Purchaser to the Seller on the date on which
it is due in terms of this
Agreement, the Purchaser shall be liable
for payment of interest to the Seller on such amount outstanding at
the rate of interest
(presently 15.5% per annum) prescribed from time
to time in terms of the Prescribed Rate of Interest Act, No 55 of
1975 (as amended),
which will be calculated from date of default to
date of payment. Such interest shall be in addition to, and not in
substitution
for, the rights accorded to the Seller elsewhere in this
Agreement.
...
9.1 The Seller shall, subject to
payment of the purchase price in full, grant to the State/Purchaser
occupation and possession of
the Properties on the Transfer Date, it
being recorded that after the Transfer Date the Properties shall be
let to CBL Agri Services
(Pty) Ltd in terms of the Lease Agreement
...
9.3 The Seller shall be entitled
to all operational income accrued from the Properties up to the date
of full payment of the purchase
price to the Seller.
...
9.5 Ownership of and all rights
and obligations, together with the benefit in and risks, attaching to
the Properties shall pass
to the State on the Transfer Date, from
when onwards the Properties shall be at the sole risk, loss or profit
of the State.
...
16.2 The registration of
transfer of the Properties shall take place as soon as reasonably
possible after the Signature Date.
...
18. DEFAULT
In the event of any Party
committing a breach of this Agreement or being otherwise in default
of the terms and conditions hereof,
and remaining in default after
being given 14 (fourteen) days notice in writing within which to
rectify such default, the aggrieved
Party shall be entitled to
enforce the terms and conditions of this Agreement and sue for
specific performance and any damages
suffered, or to cancel this
Agreement, in either event, any action taken by the Parties shall be
without prejudice to their rights
to claim damages arising from such
default, or to any other rights the Parties may have under the common
law, or otherwise. On
cancellation of this Agreement, the Purchaser
shall be obliged to forthwith restore possession of Properties to the
Seller.'
[4] The agreement envisaged that the properties would be purchased by
the second respondent and registered in the name of the third

respondent for the ultimate benefit of the various communities who in
due course would have emerged as having established a valid
claim to
one or more of the properties. Pending that determination, the
properties were to be leased to a subsidiary of the appellant,
CBL
Agri Services (Pty) Ltd, for the purposes of farming sugar cane and
subtropical fruit. The lease, which was to commence on
the date of
registration of transfer, was to endure for a period of five years at
an agreed rental of R2 million per annum escalating
annually at 7%.
[5] Pursuant to the agreement the conveyancing attorney prepared all
such documents as were necessary to be lodged with the Deeds

Registry, Mpumalanga, to cause transfer of the properties to be
effected into the name of the respondents. On 14 August 2009 the

conveyancer despatched a letter (Annexure ‘GC3’ to the
applicant’s founding affidavit) to the chosen
domicilium
citandi et executandi
of the respondents, being the Office of the
Chief Land Claims Commissioner of the Department of Land Affairs,
informing them that
all the documents necessary to cause transfer of
the properties were ready for lodgment with the Deeds Registry and
they were accordingly
requested to furnish the written undertaking
within 14 days as contemplated by clause 4.1 of the agreement. That
letter, which
went on to threaten the institution of a claim for
specific performance and
mora
interest (computed at R84 931
per day), went unanswered. On 7 September 2009 a further letter was
addressed to the respondents
by the conveyancing attorney. It
informed the respondents that they were in breach of their
obligations under the agreement and
afforded them an opportunity to
remedy the breach within 14 days. That letter elicited a response
from the Chief Land Claims Commissioner
dated 13 September 2009,
which stated: '[w]e are currently facing severe funding constraints
and are not in a position to make
an undertaking for payment of the
agreed purchase price'. On 15 October 2009, yet a further letter was
despatched by the conveyancing
attorney to the Chief Lands Claims
Commissioner. It set out the history of the matter and in compliance
with
s 4
of the
Institution of Legal Proceedings Against Certain
Organs of State Act 40 of 2002
, gave notice of the appellant's
intention to institute legal proceedings against the respondents for
payment of the sum of R 200
million (against a tender to transfer the
properties into the name of the respondents),
mora
interest,
damages and costs.
[6] Notwithstanding having given formal notice of its intention to
institute legal proceedings and it having become entitled to
do so by
31 January 2010, the appellant held off until May of that year when
it launched an application in the North Gauteng High
Court in which
it sought the following orders:
'1. Directing the Respondents to
provide the Applicant with an original and duly signed [letter of
undertaking] within SEVEN (7)
days of the date of this order.
2. Declaring that the Second and
Third Respondents are liable for and indebted to the Applicant for
the payment of interest at the
rate of 15.5% per annum (or such other
rate as may in future be prescribed under the
Prescribed Rate of
Interest Act 55 of 1975
corresponding from that time to such changed
rate) on the amount of R200 million from 6 October 2009 to date of
payment; alternatively.
3. Declaring that the Second and
Third Respondents are liable and indebted to the Applicant for
payment of interest at the rate
mentioned in paragraph 2 above on the
amount of R200 million from 5 September 2009 until the date of the
provision of the guarantee
mentioned in paragraph 1 above on the
basis of the Respondents' breach of their obligation to provide such
guarantee.
. . .
5. Directing the Second and
Third Respondents to pay the Applicant's costs.’
[7] That application was opposed by the respondents. However, on 15
June 2010, the Chief Land Claims Commissioner, acting on behalf
of
the respondents, furnished the undertakings sought by the appellant.
The registration and transfer of the properties was thereafter

effected and the purchase price of R200 million was paid into the
trust account of the conveyancing attorney on 5 July 2010.
[8] That left unresolved the relief sought in respect of interest. In
support of the appellant’s entitlement to that relief,
Mr Guy
Stanley Clarke, its managing director, deposed to a supplementary
affidavit, the material portion of which reads:
‘
5.
5.1 Annexure "GC3" to
the Applicant's founding affidavit is a formal demand, served on the
Respondents on 17 August 2009
which placed the Respondents on terms
to perform their obligations under the sale agreement within 14 days.
6.
6.1 In terms of the sale
agreement (clause 1.1.6 of Annexure "GC1" to the
applicant's founding affidavit), "
day
" means any day
excluding a Saturday, Sunday or public holiday. Hence, the last day
for compliance by the Respondents with
Annexure "GC3" to
the Applicant's founding affidavit, was Friday 4 September 2009.
7.
7.1 Assuming that the
undertaking had been provided on that date, and allowing a reasonable
period of 14 days for lodgment of the
transfer documents and for the
subsequent registration of the transfer, such transfer would have
been registered by not later than
25 September 2009. Had this
occurred, and bearing in mind that the Respondents had a further 10
days after registration of transfer
within which to pay, the purchase
price of R200 000 000,00 would have been received by not later than 9
October 2009.
8.
8.1 As a matter of fact, as a
result of the Respondents' initial failure to adhere to the sale
agreement and their subsequent failure
to comply with the notice
(Annexure "GC3") the purchase price was only paid on 5 July
2010. I wish to point out that
in fact the lodgment of the transfer
documents and the subsequent transfer of the property took a matter
of only a few days. However
I have been advised that 14 days is a
reasonable period of time to allow for the process of lodgment of
transfer documents and
the subsequent registration of transfer. The
Applicant has thus given the Respondents the benefits of the doubt by
adhering, in
its calculations of the dates set out above, to that 14
day period.
9.
9.1 I am advised, that, in the
result, the Applicant is entitled to
mora
interest at 15.5%
per annum calculated on the purchase price of R200-million from 10
October 2009, being the date on which payment
ought to have taken
place, had the Respondents complied with the notice contained in
Annexure "GC3" to the founding affidavit,
to 5 July 2010,
when payment was in fact received.
10.
10.1 According to my
calculations, the interest for the period 10 October 2009, calculated
on the basis aforesaid, amounts to R22
761 643,85.
11.
11.1 I am also advised that the
Applicant is entitled to further interest on the amount of R22 761
643,85 at the
mora
rate of 15.5% per annum from 6 July 2010 to
date of payment.
12.
12.1 I am advised that at the
hearing of this matter an amended order prayed will be presented to
this Honourable Court, in terms
of which the Applicant will seek an
order for:-
12.1.1 payment of the sum of R22
761 643,85.
12.1.2 payment of interest on
the sum of R22 761 643,85 at 15.5% per annum from 6 July 2010 to date
of payment;
12.1.3 costs of suit.'
[9] The response that the supplementary affidavit elicited from Ms
Itumeleng Sarah Seboka, the acting Regional Land Claims Commissioner

for the Province of Mpumalanga, was:
'42.
AD PARAGRAPHS 5 AND 6
THEREOF
:
Save to admit demand, it is
highlighted that the State was not in a position to furnish an
undertaking due to a lack of funds.
43.
AD PARAGRAPH 7 THEREOF
:
The contents of this paragraph
call for legal argument that will be made during the hearing of this
matter. I however wish to highlight
that the issue of interest only
arises in terms of clause 6 read with clause 3.2 which were duly
complied with.
44.
AD PARAGRAPH 8 THEREOF
:
Save to admit that the purchase
price was paid on 05 July 2010, the rest of the contents of this
paragraph call for speculation
and are therefore denied.
45.
AD PARAGRAPHS 9, 10 AND 11
THEREOF
:
The contents of these paragraphs
are denied.
46.
AD PARAGRAPH 12 THEREOF
:
I note the intended amendment to
the notice of motion and wish to state that such amendment is not
proper and will be opposed. The
applicants should use the rules of
the above Honourable Court regulating amendments.'
[10] The matter came before Sapire AJ, who dismissed the application
and ordered the appellant 'to pay the Respondents' costs,
incurred
after the Respondents complied with their contractual obligations
including those attendant on the briefing of two counsel',
but
granted leave to the appellant to appeal to this court. In arriving
at that conclusion the learned acting judge reasoned:
'Applicant's claim is really one
for damages arising, from the Respondents' breach of contract in
failing timeously to provide the
undertaking without which transfer
could not be given.
The Respondents' obligation in
terms of clause 4.1 of the Agreement was to furnish the written
undertaking within 14 (FOURTEEN)
days of being called upon to do so.
The Respondents persisted in the delay until the application for
specific performance was pending.
The claim made by the Applicant
is for interest on the purchase price calculated from the date upon
which the undertaking was to
have been furnished until the date it
was in fact furnished. The question arises whether this is the
appropriate measure of damages
in the present instance.
The damages to which an injured
party is entitled on breach of contract is the amount required to
place that party in the same financial
condition as it would have
been had the contract been properly and timeously performed.
Where the breached obligation is
to pay money on a determined or determinable date and there are no
circumstances affecting the
determination of damages other than the
lapse of time, the interest may well be the proper measure. The
agreement presently under
consideration has a specific provision for
the consequences of a breach by the purchaser in failing to pay the
purchase price on
due date, that is within 10 days of transfer. The
payment of mora interest is stipulated as the appropriate and
applicable penalty.
This stipulation does not apply
where the breach is a delay by the purchaser in furnishing the
undertaking to make payment after
transfer. Rightly so, for until
transfer the seller remains the owner, and in possession of the
property, and as such entitled
to the enjoyment of the property and
its fruits.
It would be wrong in the present
instance to ignore the circumstances in which the Agreement was
entered into, especially the terms
of the collateral Lease which in
effect entitled the Applicant to remain in occupation not only until
transfer but, through its
subsidiary, for the period provided for in
the Lease. Rental in terms of the lease did not become payable until
transfer had been
effected.
Counsel for the Applicant argued
that this was not a relevant circumstance because the Lessee was a
different persona to the Applicant.
This contention cannot be
sustained. It was the Applicant which remained in possession of the
Land until transfer was given and
the subsidiary was only introduced
as an
adjectus
solutionis causa
, to
take on the rights and obligations of the lessee.
From the date of transfer rental
had to be paid albeit not by the Applicant itself but by its
subsidiary. The overall situation
is what has to be taken into
account and the consolidated position of the Applicant and its
subsidiary will reflect whether or
not damages were occasioned by the
delay. This can only be ascertained on the basis of evidence adduced
by the parties’.
[11] In seeking to support the reasoning and conclusion of the court
below the thrust of the respondents’ case on appeal
was that,
on a proper interpretation of the agreement, the purchase price was
payable in terms of clause 3.2 not later than ten
days after the date
of transfer. That having occurred clause 6 did not find application.
Accordingly, so the argument went, any
claim the appellant might have
had to interest derived from s 1 of the Prescribed Rate of Interest
Act 55 of 1975 (the Act) and
not clause 6 of the agreement. And as
the appellant had failed to prove actual loss or damage (but had
sought to advance a case
that the fact of the delay entitled it as a
matter of law to payment of interest) and having regard to the
‘special circumstances’
which the court below (apparently
unwittingly) took into account in terms of s 1 of the Act (quoted
below), it properly exercised
its discretion not to award any
interest to the appellant.
[12] The first issue for consideration therefore is whether clause 6
does find application. I must confess to having some difficulty
in
following why clause 6 would not apply in a situation such as this.
Of the many obligations imposed on the parties, two that
were imposed
on the respondents, are relevant for present purposes. Sequentially
they were: first, to furnish a guarantee within
14 days of a written
request (clause 4.1); and, second, to pay the purchase price no later
than ten days after transfer (clause
3.2). The second was not an
independent and self-standing obligation but was dependent for its
fulfilment upon the first. The respondents’
obligation to
fulfil the second could thus hardly have arisen until the first had
been satisfied. The respondents breached the
agreement by not
furnishing the written undertaking for the payment of the purchase
price within 14 days of being called upon to
do so as required by
clause 4.1. They failed to do so, because on their own version they
then lacked the funds to pay the purchase
price within ten days of
transfer. That breach, until it was cured, caused a delay in
effecting transfer of the properties and
consequently, a commensurate
delay in the payment of the purchase price.
[13] That such a state of affairs had come to pass was entirely the
respondents’ fault. They had contracted on the basis
that they
had funds at their disposal to meet their contractual obligations,
when in truth, as it subsequently emerged, they did
not. By not
furnishing the undertaking the respondents deliberately frustrated
the operation of the agreement. And in so doing
they delayed the
payment date. They thus rendered the 14 days envisaged in clause 4.1
illusory and meaningless. And in blatant
disregard of the contractual
scheme and the time frames that had been agreed upon, simply
furnished the guarantee when it was convenient
for them to do so.
Thus despite their admitted breach, which in turn delayed payment,
the respondents seek to maintain with impunity
the benefit of the
agreement. Respondents’ counsel was constrained to concede
during argument that, had the undertaking been
furnished but for some
or other reason not been met, then clause 6 could have been relied on
by the appellant to claim
mora
interest. But where, as here,
there had simply been a refusal to furnish the requisite guarantee,
clause 6 could not be invoked
by the appellant. To my mind to treat a
deliberate refusal to perform more generously than ineffective or
defective performance
would be strained and tortuous. It follows, in
my view, that clause 6 does indeed find application. The court below
reached a contrary
conclusion. But even had it been justified in its
conclusion on that score (which it had not), as I shall show
presently, the matter
did not end there.
[14] Even in the absence of a contractual obligation to pay interest,
where a debtor is in mora in regard to the payment of a monetary

obligation under a contract, his creditor is entitled to be
compensated by an award of interest for the loss or damage that he

has suffered as a result of not having received his money on due
date. Centlivres CJ made that plain in
Linton v Corser
supra
(at 695G-696A), when he stated:
'The old authorities regarded
interest
a tempore
morae
as "
poenaal
ende odieus
",
vide
Utrechtsche Consultatien
,
3, 63, p. 288. Such interest is not in these modern times regarded in
that light. To-day interest is the life-blood of finance,
and there
is no reason to distinguish between interest
ex
contractu
and
interest
ex mora
.
Milner's
case is, as far as I have been
able to ascertain, the only case which applied the old authorities,
and in
Johnston v
Harrison
,
1946 N.P.D.
239
at p. 251, the Court was not slow in distinguishing that case.
The question that now arises is whether we should apply the old
Roman-Dutch Law to modern conditions where finance plays an entirely
different role. I do not think we should. I think that we should
take
a more realistic view than in a matter such as this to have recourse
to the old authorities.'
[15] It is so that
mora
interest is a species of damages
(
Davehill (Pty) Ltd & others v Community Development Board
1988 (1) SA 290
(A) at 298I-J). But as is evident from the
approach of Sapire AJ to the enquiry that confronted him, he lost
from sight the following
important distinction drawn by Fagan JA in
Union Government v Jackson & others
1956 (2) SA 398
(AD)
at 411C–412A:
'In considering this question of
taking into account the time that may elapse between the date when a
man is deprived of an asset
and that of his being reimbursed by
receiving compensation for it, we must be careful to distin
guish
between two different approaches that call different legal principles
into play and may therefore diverge greatly in their
application to
particular circumstances. The one approach is to treat this lapse of
time as merely an element ― one of many
items ― which the
Court may be urged to bring into its reckoning in computing or
estimating the damage which a plaintiff
has suffered and for which he
should be recompensed. A set-off of interest on the capital amount
awarded for the expropriation
of a tradin
g
store and outbuildings against a claim for loss of rentals was
applied by this Court in the case of
Union
Government v Maile
,
supra
,
especially at p 11. I mention this example to illustrate the point
that there may be circumstances in which the interest-bearing

potentialities of money play a part in the computation of damages. In
Maile's
case those potentialities
counted in reduction of the plaintiff's claim, but there may well be
cases where they will count the other
way.
The other approach is that of
dealing with the liability to pay interest as a consequential or
accessory or ancillary obligation
(the three adjectives are used as
interchangeable words in the judgments in
West
Rand Estates Ltd v New Zealand Insurance Co Ltd
1926
AD 173
at pp 177, 193), automatically attaching to some principal
obligation by operation of law. The best illustration of this type is

the liability for interest
a
tempore morae
falling
on a debtor who fails to pay the sum owing by him on the due date.
Here the Court does not make an assessment; it does not
weigh the
pros and cons in order to exercise an equitable judgment as to
whether, and to what extent, the interest-bearing potentialities
of
money are to be taken into account in computing its award. The only
issue is whether the legal liability exists or not; if it
does, the
rest is merely a matter of mathematical calculation: the legal rate
of interest on a definite sum from a definite date
until date of
payment. The award of interest by the Provincial Division clearly
falls under the second of the two compartments
of my classification.'
[16] Sapire AJ appeared not to appreciate that he was dealing with an
enquiry under what Fagan JA described as the second of the
two
compartments of his classification. It follows that he misconceived
the enquiry. For our courts have come to accept without
requiring
special proof that a party who has been deprived of the use of his or
her capital for a period of time has suffered a
loss (
Thoroughbred
Breeders’ Association v Price Waterhouse
2001 (4) SA 551
(SCA) para 85). And that, in the normal course of events, such a
party will be compensated for his loss by an award of
mora
interest (
Bellairs v Hodnett & another
1978 (1) SA
1109
(A) at 1145 D-G). As it was put in
Bellairs
'... under
modern conditions a debtor who is tardy in the due payment of a
monetary obligation will almost invariably deprive his
creditor of
the productive use of the money and thereby cause him loss. It is for
this loss that the award of
mora
interest seeks to compensate
the creditor.'
[17] The term
mora
simply means delay or default. When the
contract fixes the time for performance,
mora
(
mora ex re
)
arises from the contract itself and no demand (
interpellatio
)
is necessary to place the debtor in
mora
. In contrast, where
the contract does not contain an express or tacit stipulation in
regard to the date when performance is due,
a demand (
interpellatio
)
becomes necessary to put the debtor in
mora
. This is referred
to as
mora ex persona
. (See
Scoin Trading (Pty) Ltd v
Bernstein NO
2011 (2) SA 118
(SCA) paras 11 & 12.) The
purpose of
mora
interest is therefore to place the creditor in
the position that he or she would have been in had the debtor
performed in terms
of the undertaking. Here a demand (
interpellatio
)
was necessary to place the respondents in
mora
.
[18] It is common cause that such a demand was received by the
respondents on 19 August 2009. It was not disputed that the appellant

was ready and willing to pass transfer to the respondents when that
letter of demand was despatched. Nor was it disputed that on

receiving the required undertaking the conveyancing attorney would
have taken immediate steps to lodge the necessary documents
in the
Deeds Registry to cause transfer of the properties sold to pass to
the respondents. Accordingly on an application of common
law
principles the respondents were in
mora
and an obligation to
pay interest to the appellant on the purchase price had accrued. That
notwithstanding, the learned acting
judge in the court below held:
‘
The
interest on the purchase price is in the present instance not a
proper measure of damages. The Applicant may well have a claim
for
damages arising from the delay, but it is illiquid and will have to
be proved by demonstrating an overall financial loss occasioned
by
the delay. This the applicant has not done, and may not do in motion
proceedings.'
Such an approach, which finds no support in the authorities, cannot
be endorsed. It follows that the appellant ought to have succeeded
in
the court below. That, ordinarily at any rate, ought to dispose of
the matter. But, as I shall show, even if one were to approach
the
matter on the basis postulated by the respondents, they still ought
not to have succeeded in the court below.
[19] Although there is no explicit indication in the judgment of the
court below that it had s 1 of the Act in mind, it was submitted
on
behalf of the respondents that it approached the matter mindful of
that section. And that, what it in fact embarked upon was
indeed the
exercise envisaged by that section. In my view even if one were to
accede to the argument on behalf of the respondents
that any right as
the appellant may have to interest derives from s 1 of the Act and
not clause 6 of the agreement, the conclusion
of the court below that
the appellant was not entitled to any interest whatsoever cannot be
supported.
[20] The relevant part of s 1 of that Act reads:
‘
1(1)
If a debt bears interest and the rate at which the interest is to be
calculated is not governed by any other law or by an agreement
or a
trade custom or in any other manner, such interest shall be
calculated at the rate prescribed under subsection (2) as at the
time
when such interest begins to run, unless a court of law, on the
ground of special circumstances relating to that debt, orders

otherwise.
(2) The Minister of Justice may
from time to time prescribe a rate of interest for the purposes of
subsection (1) by notice in the
Gazette
.’
[21] Three submissions were urged upon us by counsel for the
appellant with respect to the construction that should be placed on

the section: First, the introductory words of the section ‘if a
debt bears interest’ vests a court with a discretion,
to be
exercised on equitable grounds, only to reduce the rate of interest
and not to disallow interest in its entirety. Second,
the section
only finds application to a situation where there is no agreement.
There being an agreement in this case, the section
did not find
application. Third, the debtor and not the creditor bore the onus of
establishing special circumstances. There may
well be something to be
said for each of those submissions. But it is not necessary for the
purposes of this judgment to consider
their validity. I accordingly
do no more than merely mention them.
[22] In
Davehill
(at 300J-301E), Smalberger JA stated:
‘
Section
1(1) is couched in peremptory terms, and its application is
obligatory, not discretionary (
Katzenellenbogen
Ltd v Mullin
1977
(4) SA 855
(A) at 885G). To give effect to the intention of the
Legislature the words "shall be calculated at the rate
prescribed under
s (2) as at the time when such interest begins to
run" must be given their ordinary and literal meaning. Such
meaning is clear.
The rate prescribed under ss (2) at the time when
interest begins to run governs the calculation of interest. The rate
is fixed
at that time and remains constant. Subsection (1) does not
provide for the rate to vary from time to time in accordance with
adjustments
made to the prescribed rate by the Minister of Justice in
terms of ss (2). The fact that the Minister may from time to time
prescribe
different rates of interest therefore has no effect on the
rate applicable to interest which has already begun to run. The plain

meaning of the words in question must be adopted as they do not lead
to "some absurdity, inconsistency, hardship or anomaly
which
from a consideration of the enactment as a whole a court of law is
satisfied the Legislature could not have intended"
(per
Stratford JA
in
Bhyat v Commissioner for Immigration
1932
AD 125
at 129).
The only exception to the above
method of calculation is where "a court of law, on the ground of
special circumstances relating
to that debt, orders otherwise".
"Special circumstances" are not defined in the Act. It is
not necessary for the
purposes of the present appeal to consider what
circumstances are envisaged under that term. The existence or
otherwise of special
circumstances in any given case must needs
depend upon the facts and circumstances of that case. What is clear
is that the special
circumstances must relate to a particular debt,
not to debts in general.'
[23] What appeared to weigh with the court below was that the
appellant continued to have the benefit of the properties either
as
the owner until the date of transfer or for a period of five years
beyond that date in terms of the lease through its subsidiary,
CBL
Agri Services. The conclusion that the appellant’s continued
possession of the properties constituted a benefit is at
odds with
the evidence. Mr Clarke dealt in his replying affidavit with the
assertion in Ms Seboka’s answering affidavit that
the appellant
had ‘unhindered and uninterrupted possession of the property
[and] continued to use the property and enjoyed
the fruits or
proceeds of the said farm, as it always had’, thus:
'13.2 While the Applicant
enjoyed the fruits of the properties during the period of the delay,
it is simply wrong to say that it
suffered no prejudice. The
Applicant in fact suffered significant prejudice due to delays caused
by the State during the entire
sale process.
...
13.5 Because the properties sold
constituted a substantial portion of the Applicant's assets the sale
agreement had to be approved
by a special general meeting of the
Applicant's shareholders. A second valuation of the properties was
called for and carried out
by the same valuer who had initially
valued the properties on behalf of the State. The second valuation,
dated 13 March 2009, put
the value of the properties at R267.7
million, an increase of no less than R31.5 million in the value of
the properties.
...
13.7 The significance of the
above is that no adjustment was ever made to the price of the
properties to take account of the general
increase in the value of
agricultural properties during the period in question and,
specifically, the very substantial increase
in the value of the
properties as outlined above. The Applicant received no benefit from
this very significant increase in the
value which attached to the
properties when they were finally transferred. Such benefit, had the
Applicant received it, far exceeds
the value of the interest now
claimed.
13.8 Furthermore, as a result of
the uncertainty surrounding the future of the properties which
constituted a significant portion
of the Applicant's assets, the
Applicant was unable to devise any long-term financial and investment
strategy for a financial return
on these assets or the funds which
stood to be realised by their sale.
13.9 In addition, the very
nature of the situation, the Applicant was limited in as far as
planning, development and investments
in the properties were
concerned.’
[24] No evidence was adduced as to the maturity of the sugar cane
crops, the crushing cycle of the sugar mills or when the tropical

fruit on the properties would have been ripe for harvesting. It was
thus impossible to have assessed whether or not there was any
real
benefit for the appellant. Moreover, whilst there may well have been
some kind of filial relationship between the appellant
and its
subsidiary CBL Agri Services, there is no evidence that the latter, a
separate and distinct juristic entity, had acted
as an agent for an
undisclosed principal, in this case the appellant, or had transferred
its rights in terms of the lease agreement
to the appellant. (See
Wambach v Maizecor Industries (Edms) Bpk
[1993] ZASCA 28
;
1993 (2) SA 669
(A)
at 674H-J.) Even if it were to be accepted that CBL Agri Services had
in fact acted as an agent for the appellant, the simple
truth is that
the appellant could have continued to enjoy the fruits of the
collateral lease with the benefit of the purchase price
of R200
million. Thus even were it to have been permissible for the court
below to have embarked upon this enquiry, it ought, in
my view, to
have arrived at a contrary conclusion. It follows that even on this
leg of the case the respondents ought to have failed.
[25] The fact that the appellant may have had the benefit of the
property is irrelevant where, as here, a default interest clause
had
been agreed on and the seller’s continued possession of the
sold property occurred as a consequence of the purchaser’s

deliberate default. Acceptance of the proposition that there should
be no liability for interest in the circumstances of this case

implies that a purchaser such as this can breach its payment
obligations with impunity, whilst at the same time maintaining the

benefit of the bargain that has been struck. That proposition merely
has to be stated to be rejected.
[26] Properly analysed the gist of the respondents’ case is
that they were somehow excused from performing their contractual

obligation because of a lack of funds. In
Mokala Beleggings &
another v Minister of Rural Development and Land Reform & others
2012 (4) SA 22
(SCA) para 8, this court dealt with a similar
argument thus:
‘
. . .
In
Linton
v Corser
supra
the court held the purchaser liable for mora interest (it was a case
of mora ex persona) for delaying the signing of the transfer

documents and the delivery of the necessary guarantees. Mora in the
present matter concerned a delay in the payment of the purchase
price
as a result of the department's delay in having the registration of
transfer effected by its conveyancers. As stated, the
fact of and the
reason for the delay were common cause. The delay was deliberate, due
to the department's financial constraints
and resultant inability to
pay the purchase price. Of course our law does not require fault on
the part of a debtor for a contractual
damages claim. All that is
required is proof that the debtor is in mora.'
Majiedt JA, however, later, remarked
en passant
(para 15):
'It was common cause that the
appellants had suffered loss as a result of the delay. The
appellants' farming enterprise was the
main source of income for the
Snyman family. They had sold all their cattle during April 2009 in
anticipation of the transfer of
the properties to the state, which
they had to vacate within 48 hours of the registration. The
appellants were plainly dependent
on payment of the purchase price to
re-establish their farming business or to establish other enterprises
from which to derive
income. The financial prejudice and loss flowing
from the state's prevarication are self-evident.'
Those considerations, as I have endeavoured to show and my learned
colleague Majiedt earlier in his judgment appreciated, are irrelevant

to an enquiry such as the present.
[27] It remains to observe that the conduct of the officials in the
employ of respondents evokes strong feelings of disquiet in
one.
Because of their conduct the public purse is much the poorer. As I
have already pointed out for as long as the purchase price
remained
unpaid interest accrued at R84 931 per day. To that must be added the
costs of what can only be described as ill-advised
and morally
unconscionable litigation. In
Mokala Beleggings (Pty) Ltd
,
Majiedt JA observed (para16):
'It may well be that the
department is under severe strain to meet the financial (and, it
seems, the administrative) demands imposed
by the land reform
process. The restitution of land under the
Restitution of Land Rights
Act 22 of 1994
, is not only a constitutional imperative but a highly
emotive issue as well. Considerable circumspection, diligence and
sensitivity
are required on the part of all concerned, including
departmental officials. Agreements to purchase land for restoration
to dispossessed
communities should be honoured in accordance with the
terms agreed upon, lest the already demanding challenges of the
process be
further exacerbated.'
[28] In the result:
(a) The appeal succeeds with costs to be paid jointly and severally
by the respondents.
(b) The order of the court below is set aside to be replaced with:
‘
The respondents are ordered jointly and
severally to pay to the applicant:
(i) the sum of R22 761 643,85;
(ii) interest on the sum of R22 761 643,85 at rate of 15.5% per annum
from 6 July 2010 to date of payment;
(iii) costs of suit including those of two counsel where employed.'
_________________
V M PONNAN
JUDGE OF APPEAL
APPEARANCES:
For Appellant: K J Kemp SC
Instructed by:
Livingston Leandy Inc
La Lucia Ridge
McIntyre & Van Der Post
Bloemfontein
For 1
st
, 2
nd
and 3
rd
Respondents: N G D Maritz SC
M Majozi
Instructed by:
The State Attorney
Pretoria
The State Attorney
Bloemfontein