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[2010] ZASCA 160
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Scoin Trading (Pty) Ltd v Bernstein (29/2010) [2010] ZASCA 160; 2011 (2) SA 118 (SCA) ; [2011] 2 All SA 608 (SCA) (1 December 2010)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 29/2010
SCOIN
TRADING (PTY) LIMITED
...............................................
Appellant
and
BERNSTEIN,
GILLIES MARTIN NO
........................................
Respondent
Neutral citation:
Scoin
Trading v Bernstein
(29/10)
[2010] ZASCA 160
(1 December 2010)
Coram:
HARMS DP and
SNYDERS JA and K PILLAY AJA
Heard:
19 November 2010
Delivered: 1 December 2010
Summary:
Breach of
contract ─ death of debtor does not affect liability for
interest.
___________________________________________________________
ORDER
On appeal from:
KwaZulu-Natal
High Court (Durban) (Van Heerden AJ sitting as court of first
instance):
1 The appeal is upheld with
costs.
2 The following order is inserted
into paragraph 1 of the order of the court below:
‘
The
respondent is also directed to make payment of interest on the sum of
R1, 750m at the rate of 15, 5 per cent per annum from
1 January 2008
to date of payment.’
3 Paragraph 2 of the aforesaid
order is replaced with the following:
‘
The
respondent is directed to pay the applicant’s costs of suit.’
___________________________________________________________
JUDGMENT
K
PILLAY AJA (HARMS DP and SNYDERS JJA concurring)
[1] This is an appeal from the
KwaZulu-Natal High Court (Durban), Van Heerden AJ sitting as court of
first instance. The appellant
launched an application for payment of
the balance of the purchase price of a ZAR Een Pond Overstamp gold
coin together with interest
at the rate of 15,5 per cent per annum
from 1 January 2008 to date of payment against delivery of the coin.
The court below granted
the claim for the balance of the purchase
price but refused the claim for interest. The matter is before us
with the leave of the
court below.
[2] Gregory John Till (the
deceased) was an avid coin collector who purchased a number of gold
coins and medallions from the appellant,
Scoin Trading (Pty) Ltd, a
company dealing in gold coins and similar items. During August 2007
the appellant had a rare ZAR Een
Pond Overstamp gold coin (‘the
coin’) available for sale. The deceased entered into
negotiations with the appellant
to buy the coin.
[3] They agreed on a purchase
price of R1, 950m. The deceased paid a deposit of R200 000 and agreed
to pay the balance by the end
of the year. There is some dispute
(which I shall deal with later) on whether it was agreed that the
balance had to be paid by
the end of December 2007 or when the
proceeds from the sale of certain property became available.
[4] The deceased died on 16
November 2007. The respondent was appointed executor of the
deceased’s estate. He acknowledged
liability for the balance of
the purchase price of the coin but disputed liability for interest.
[5] This resulted in the
appellant applying to the court below for judgment for the balance of
the purchase price together with
interest at 15, 5 per cent per annum
against delivery of the coin. The court granted judgment for the
capital sum but dismissed
with costs the claim for interest. Leave to
appeal was granted to this court by Van Heerden AJ.
[6] The only issue in this appeal
is the liability of the estate of the deceased for the payment of
interest. The issue is dependent
upon two aspects, one factual and
one legal. First, the parties disagreed on whether payment of the
balance of the purchase price
had to be made by 31 December or when
the proceeds of a sale of property by the deceased became available
to him. Second, the effect
of the death of the debtor on the
consequences of
mora
was in issue.
[7] Sometime in August 2007 the
deceased was informed that the coin had become available. He did not
have the full amount available
to pay for the coin. Mr Sham, the
appellant’s sales manager was prepared to accept a deposit and
the balance later. This
was conveyed in an e-mail on 27 August 2007
that reads as follows:
‘
Please
could you set up a proposal or offer, regarding the 99 over stamp. I
believe that management are looking for a deposit of
at least 10 %
and an idea of when or how you would be able to pay the outstanding
balance. E.G: on the amount of R1, 950 000-00,
a deposit of R200
000-00 and the outstanding balance to be paid over a period of three
months, or within a three month period.’
The response from the deceased to
this suggestion was:
‘
A
down payment of R200 000-00 will be paid into your bank account
today. Greg has liquidated a property portfolio which should all
be
done and dusted by the end of December. This has in the interim left
him a little cash strapped. He is expecting the R60 million
for the
properties by the end of the year at which stage he will be able to
pay the balance.’
This offer was accepted.
[8] The respondent contends that
the words used in the e-mail dated 27 August 2007 mean that what the
deceased was offering was
not definite payment by 31 December, but
rather payment from a stipulated source, namely the proceeds of the
realisation of a property
portfolio. Simply put, the trigger event
for payment was said to be the receipt of the aforesaid proceeds.
[9] This construction is
untenable. It is clear from the first e-mail that payment had to be
made either over three months or within
a three month period. In
response payment was not made conditional upon the sale of property,
but promised by the ‘end of
December’ or ‘the end
of the year’. There is therefore no basis for rejecting the
appellant’s submission
that it was a term of the agreement that
payment was to be made by the end of December.
[10] I turn
now to the second issue. The respondent made two primary submissions.
First, that the deceased was not at fault in failing
to make payment
of the balance of the purchase price, by reason of his dying before
the debt became payable, and therefore was
not liable to pay
mora
interest.
Second, that the death of the deceased made performance impossible.
[11] The
starting point is therefore an examination of the meaning of mora.
The term
mora
simply
means delay or
default.
1
This concept
is employed when the consequences of a failure to perform a
contractual obligation within the agreed time are determined.
2
The date may
be stipulated either expressly or tacitly and there must be certainty
as to when it will arrive.
3
Thus, 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
.
The fixed time, figuratively, makes the demand that would otherwise
have had to be made by the creditor.
[12] 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
.
The debtor does not necessarily fall into
mora
if he or she
does not perform immediately or within a reasonable time. In this
situation
mora
arises
only upon failure by the debtor to comply with a valid demand by the
creditor.
Mora
ex persona
is
so referred as it requires an act of a person (the creditor) to bring
it into existence.
4
[13] In this
case it has been established that the date agreed for the payment of
the balance of the purchase price was 31 December
and that the debt
was not paid on this date. This is therefore a situation where
mora
ex re
applies.
[14] If a
debtor’s obligation is to pay a sum of money on a stipulated
date and he is in
mora
in that he
failed to perform on or before the time agreed upon, the damages that
flow naturally from such failure will be interest
a
tempore
morae
or
mora
interest. The
purpose of
mora
interest
is to place the creditor in the position he would have been if the
debtor had performed in terms of the undertaking. This
notion was
more fully explained in
Bellairs
v Hodnett
:
5
‘
It
may be accepted that the award of interest to a creditor, where his
debtor is in
mora
in
regard to the payment of a monetary obligation under a contract, is,
in the absence of a contractual obligation to pay interest,
based
upon the principle that the creditor is entitled to be compensated
for the loss or damage that he has suffered as a result
of not
receiving his money on due date. . . This loss is assessed on the
basis of allowing interest on the capital sum owing over
the period
of
mora
.
. . Admittedly, it is pointed out by Steyn,
Mora
Debitoris
,
p 86, that there were differences of opinion among the writers on
Roman-Dutch law on the question as to whether
mora
interest
was lucrative, punitive or compensatory; and that, since interest is
payable without the creditor having to prove that
he has suffered
loss and even where the debtor can show that the creditor would not
have used the capital sum owing, this question
has not lost its
significance. Nevertheless, as emphasised by CENTLIVRES, CJ, in
Linton
v Corser
,
1952 (3) SA 685
(AD) at p 695, interest is today the “lifeblood
of finance” and 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.’
[15] It was
submitted before this court by counsel for the respondent that to be
in
mora
,
failure to perform must be due to the
culpa
of
the debtor and that
mora
i
s
referred to as the ‘wrongful delay or default’ in making
payment or the failure without lawful excuse to perform timeously.
6
[16] This
argument found favour with the court below for the learned judge
after considering the decisions in, inter alia,
Victoria
Falls and Transvaal Power Co Ltd v Consolidated Langlaagte Mines Ltd
7
and
RB
Ranchers (Pvt) Limited v McLean’s Estate & another
8
held:
‘
.
. . it is, in my view, trite that in a contractual context an
entitlement to
mora
interest
presupposes some form of culpability attaching to the debtor’s
conduct, and more specifically his failure to pay
by the stipulated
date. Mora interest is, as Mr King submitted, based upon the concept
of default which encompasses the notion
that the debtor was capable
of making payment on due date, but failed to do so. It is a damages
claim which arises from wrongful
conduct.’
And further:
‘
In
the present matter the deceased died before his indebtedness became
payable. . . .
Mr
King submitted, on behalf of the respondent, that the requirement of
culpability is obviously absent in the case of the premature
death
(before due date of the indebtedness) of the deceased in the present
matter and that accordingly the deceased cannot be blamed
for such
non payment. I must say that Mr King’s submissions seem to me
to have merit, founded in logic. In my view the deceased
cannot be
said to have breached the contract, nor can it be said that his death
was a wrongful or culpable act such as to constitute
a breach of
contract. That being the case there is in my view no basis in law to
find that the deceased is liable to pay damages
(
mora
interest)
to the applicant.’
[17] This
approach is erroneous. That
mora
interest is
sometimes regarded as a kind of penalty for a failure to pay on due
date does not mean that the breach of contract is
a delict or that a
breach of contract is only established if the debtor acted
‘wrongfully’ or ‘culpably’.
[18] It
requires emphasis that unlike damages for delict, in cases of breach
of contract, damages are not intended to recompense
the innocent
party for their loss, but to put them in the position in which they
would have been if the contract had been properly
performed.
9
[19] This
difference between contractual and delictual damages was succinctly
stated in
Trotman
v Edwick
10
as follows:
‘
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
on
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.’
[20] As
correctly submitted by counsel for the appellant, contractual damages
do not depend on fault. All that the creditor is required
to prove is
that the debtor is in
mora
.
It is not necessary to prove any fault on the part of the debtor.
11
The court
below relied on the following statement in Victoria Falls
12
to support his
view that some form of wrongful conduct was required of the debtor
before he could be said to be in mora:
‘
Speaking
generally, the liability of a debtor for interest under the civil law
depended (apart from agreement) upon whether he was
in
mora.
Mora
was
a wrongful default in making (or accepting) payment or delivery-
Moram
vocamus injustam restitutionis solutionisveaut faciendae aut
accipiendae cessationem
.
(Mulenbruch,Vol II sec.355). It was of two kinds,
mora
ex
re, arising out of the transaction itself, and
mora
ex
persona
arising
out of the conduct of the debtor.’
In that case the court had to
consider whether a plaintiff was entitled to interest on unliquidated
damages from the date of summons.
It held not, because the debtor can
only be in
mora
if he knows what the debt is that he has to
pay. Without such knowledge the failure cannot be ‘wrongful’.
Counsel for
the appellant, submitted correctly, in my view, that seen
in its context the court did not intend to hold that a failure to
make
payment had to be culpable before interest would run but that
the word wrongful or
injustam
(the Latin translation of the
word wrongful) referred to in the judgment meant simply that the
debtor had failed to pay without
legal justification.
[21] The facts in
RB Ranchers
may be compared to the facts extant herein. The purchaser ‘M’
bought cattle from the seller and posted a cheque in
favour of the
seller for the amount due. ‘M’ died a few days later. The
cheque was presented for payment on the day
of M’s death. The
bank, which had been notified of M’s death refused payment of
the cheque. The applicant lodged a
claim against the executor in M’s
estate for the payment due. This was paid two years later. The seller
then claimed payment
of interest on the selling price from date of
sale until date of payment. The court dismissed the claim for
interest. However,
as correctly submitted by counsel for the
appellant, the court’s decision was based on the following
three issues. Firstly,
whether it was an implied term of the
agreement of sale that in the event of the money not being paid in
cash immediately, the
purchaser would become liable for interest on
the outstanding amount. The court found, after considering various
authorities, that
no such term could be implied. Secondly, whether
purchaser was liable for damages for breach of contract for failure
to pay cash
immediately. Here the court concluded that it was
conceded that there was no contract to pay cash immediately. Thirdly,
whether
the drawer of the cheque was liable in terms of s 46(1)(a)
and s 56(a) of the Bills of Exchange Act Chap 277 (Z) for
‘interest/damages’.
The court rejected this contention on
its interpretation of the aforesaid Act. It is clear from the above
that the said case was
decided on issues that do not apply to the
present case.
[22] The
further point raised by counsel for the respondent was that the death
of the deceased was an instance of
casus
fortuitus
which
amounted to supervening impossibility of performance, thus excusing
the deceased from payment by 31 December. This submission
is
untenable. The law does not regard mere personal incapability to
perform as constituting impossibility.
13
The payment of
the debt is not rendered impossible by the death of the deceased; as
performance of a personal nature like singing
in an opera would have
been.
[23]
Section 35
(12) of the
Administration of Estates Act No. 66 of 1965
obliges an executor to
pay creditors and distribute the estate to its heirs only once a
Liquidation and Distribution Account has
lain for inspection and has
been confirmed by the Master. Except for the risk of personal
liability if he overpays, it is not unlawful
for an executor to pay a
creditor’s claim before the confirmation of such account.
[24] The court
in the
RB
Ranchers
’
matter
found that the applicant’s rights against the executor are, as
set out, in Meyerowitz
14
which reads:
‘
Unless
the claim carries interest, the creditor will not be entitled to
interest between the date of death and payment of the claim,
except
for the period after the executor becomes obliged to pay and the
creditor has demanded payment, ie the executor is put in
mora
.’
[25]
The court
concluded that the only basis upon which a claim for interest could
succeed in that matter was on the basis that the executor
wrongfully
or culpably delayed payment, for which no foundation was laid in the
papers. In the present matter the claim is one
which carries
interest. The creditor is therefore entitled to interest from the
date of
mora
to the date of
payment of the debt.
[26] Christie
15
states
appropriately:
‘
The
question, of course, is whether any particular contract is
enforceable by and against the estate (represented by the executor)
or whether the deceased’s death discharged it without liability
on either side by a process akin to supervening impossibility.
The
question may be answered by the contract itself, which may expressly
provide for its discharge on the death of one or either
of the
parties, or may bind the executor to perform or may make some other
special provision. Failing such express provision the
nature of the
rights and duties arising from the contract must be examined,
together with the surrounding circumstances, in order
to see whether
there is any indication of a
delectus
personae
or
an intention that the rights and duties should not be transmitted by
death. In the absence of any such indication the general
principle is
that they are so transmitted and are enforceable by or against the
executor.’
[27] The
argument that the deceased’s estate is not liable for
mora
interest,
on the facts of the present case, is in any event self-defeating as
the respondent conceded liability for the balance
of the purchase
price, despite the death of the deceased
.
T
he
executor as administrator of the estate is obliged to pay the debt.
Part of the debt is the interest. There was no need for the
appellant
to have entered into an agreement with the deceased that his estate
would be liable for interest as was required by the
court below. The
duty to pay interest arose from the contract itself and the failure
to perform on due date.
[28] In this
case the time fixed for performance of the contract was 31 December
2007. Payment was not made on that date. The agreement
that bound the
deceased’s estate was for payment by 31 December and the
consequences of
mora
,
the liability to pay interest, commenced the next day.
[29] I
accordingly find that the appellant is entitled to interest
a
tempore morae
on
the outstanding balance of the debt. The
mora
rate of
interest is governed by the
Prescribed Rate of Interest Act 55 of
1975
. It is not in dispute that the current prescribed rate of
interest is 15,5 per cent per annum.
[30] In the circumstances the
following order is made:
1 The appeal is upheld with
costs.
2 The following order is inserted
into paragraph 1 of the order of the court below:
‘
The
respondent is also directed to make payment of interest on the sum of
R1, 750m at the rate of 15,5 per cent per annum from 1
January 2008
to date of payment.’
3. Paragraph 2 of the aforesaid
order is replaced with the following:
‘
The
respondent is directed to pay the applicant’s costs of suit.’
___________________
K
Pillay
Acting
Judge of Appeal
APPEARANCES:
APPELLANT:
N Segal
Instructed by Gary Segal
Attorneys, c/o TC Mehta & Co, Durban
Lovius Block, Bloemfontein
RESPONDENT:
JC King SC
Instructed by Goodrickes
Attorneys, Durban
Symington & De Kok,
Bloemfontein
1
Wessels
Law of Contract in South Africa
vol 2 2ed 1951 para 2857 at p
777.
2
RH
Christie
The Law of Contract in South Africa
5ed (2006) p
544.
3
5(1)
LAWSA
2ed para 220 at 298.
4
5(1)
LAWSA
para 222 at 301.
5
1978
(1) SA 1109
(A) at 1145D-G.
6
Respondents
Heads para 4.2 at pg 6.
7
1915
AD 1.
8
1986
(4) SA 271
(ZS).
9
RH
Christie
The Law of Contract
in South Africa 5ed (2006) p
544.
10
1951
(1) SA 443
(A) at 449B-C.
11
Legogote
Development Co (Pty) Ltd v Delta Trust & Finance Co
1970 (1)
SA 584
(T) at 587F.
12
Supra
page 31.
13
WA
Ramsden
Supervening Impossibility of Performance in the South
African law of Contract
(1985) p 17.
14
Administration
of Estates and Estate Duty
2007ed
s 16.3
at 219.
15
Op
cit pp 493-494.