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[2019] ZAKZPHC 36
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Scally v Feltra (Pty) Ltd (272/2019) [2019] ZAKZPHC 36 (11 June 2019)
IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
DIVISION, PIETERMARITZBURG
Reportable
Case No: 272/2019
In
the matter between:
JEANNETTE VALERIE
SCALLY
Applicant
and
FELTRA (PTY) LTD
Respondent
JUDGMENT
GORVEN
J
[1]
The applicant seeks summary judgment. Her claim
arises from a sale agreement where she performed her obligations. The
respondent
admittedly failed to pay the full purchase price which was
to be paid in five tranches. It failed to pay the second and the
further
tranches timeously. The final tranche was due on 1 June
2014. Payments of lesser amounts were made regularly, the final one
in June 2018. An amount remains outstanding.
[2]
The affidavit opposing summary judgment is
replete with what might be termed technical points. The only
substantive defence raised
to the claim was that it has prescribed.
The respondent did not persist in certain of the points. There was,
in any event, no merit
in them and they need receive no further
attention.
[3]
The first point for consideration concerns
interest. In the first place, it was submitted that interest is not
claimable because
no demand for payment of the overdue sums had been
made. As a result, the respondent has never been placed in
mora
.
In the second place, it was submitted that interest had been charged
on interest which was impermissible. As a result, the sum
claimed was
subject to challenge since it arose from compounding the interest.
[4]
As to the first of these, in the heads of
argument it is submitted that the breach clause requires demand and
none was made. The
breach clause requires notice to remedy a breach
within 14 days. If not remedied, it gives the right to cancel or
accelerate the
amounts outstanding or to claim performance.
Significantly, this is said to be ‘without prejudice to such
other rights as
the aggrieved party may have at law . . .’. The
respondent in argument faintly submitted that the clause requires
notice
before interest can begin to run. But this misconstrues the
position. It may be that demand had to be made before the amount
could
be claimed but this was not the defence raised. No demand
needed to be made before interest started to run. As a matter of law,
failure to pay on time means that
mora
operates
ex re
.
[1]
Interest runs from the date a payment was due. The agreement was
silent concerning the rate of interest. In such circumstances,
interest is claimable at the rate set under the Prescribed Rate of
Interest Act 55 of 1957. Between 1 October 1993
and 31
July 2014, this was 15.5% per annum. Since the second tranche was not
paid and fell due on 17 August 2013, and all
of the others by no
later than 1 June 2014, this is the applicable rate. This rate
prevails until payment, regardless of any subsequent
changes.
[2]
[5]
The second point on interest is that the amount
claimed is arrived at by compounding interest at that rate when the
agreement makes
no provision for interest to be charged on interest.
It is so that no provision was made in the agreement for charging
interest
on interest. In support of having claimed interest on
interest, the applicant relied on dicta in
Davehill
[3]
and
Ryton Estates
.
[4]
The first of these held:
‘In
principle there appears to be no reason why the right to claim
interest on interest should be confined to instances regulated
by
agreement, and why it should not extend to the right to claim
mora
interest (which is a species of damages) on unpaid interest
which
is due and payable
.’
[5]
(My emphasis.)
And
Ryton Estates
was to similar effect:
‘This
judgment therefore lays down that in the absence of agreement to the
contrary,
mora
interest at the prescribed rate is payable on
unpaid interest
which is due and payable
.’
[6]
(My emphasis.)
[6]
Both of these matters seem to me to be
distinguishable. In
Davehill
,
property of the owners had been expropriated. In terms of s 12(3)
of the Expropriation Act 63 of 1975, the respondent was
obliged to
pay interest at a statutorily fixed rate on any outstanding sums from
the date it took possession of the properties.
It did not do so. The
appellants sued for the interest. Soon after, the respondent paid the
interest which it contended was due.
Not satisfied, the appellants
appealed. A further payment was made while the appeal was current.
The appellants persisted, raising
the point for the first time that
they were entitled to
mora
interest
on the interest due under the Expropriation Act. The court there held
that the interest which had been paid was provided
for by statute. As
a result of non-payment, mora interest could be claimed because the
interest in question had been due and payable.
[7]
A similar situation obtained in
Ryton
Estates
. Amounts contractually due on certain
dates, but not paid, incorporated amounts for interest. On
non-payment,
mora
interest on the interest provided for was held to be claimable
because the interest component of the debt was due and payable.
It is
clear from the reasoning, and the facts in these two matters, that
mora
interest can be
charged on interest which is due and payable.
[8]
It is by no means clear to me that those dicta
meet the present claim for interest on interest. The interest which
accrues on the
unpaid tranches is itself
mora
interest. There is no provision for compounding interest on any
mora
interest which might accrue. In such circumstances, I doubt that the
mora
interest can be
said to be ‘due and payable’ as was the case in the above
two matters. The respondent also submitted
that no basis had been
laid for this inclusion in the particulars of claim. This is correct.
However, it is not necessary to decide
this issue. Whether, in these
circumstances, it is permissible to claim interest on the interest
which arises by virtue of the
Prescribed Rate of Interest Act may
arise in a subsequent trial. It would thus be inappropriate to make a
finding on the issue
and I decline to do so.
[9]
It is clear that such interest has been included
in the sum claimed. The applicant submitted that a simple
recalculation could be
done which excludes any compound interest.
Summary judgment should then be given in the reduced amount. If this
were the only issue
bearing on the present matter, I would be
inclined to accede to this request. But the final point seems to me
to be dispositive
of the summary judgment application.
[10]
The respondent raised the defence that the debt
has prescribed. It submitted that the second tranche was due and
payable on 17 August 2013.
All other tranches were payable
no later than 1 June 2014. Accordingly, all amounts
outstanding were due and payable
by then. The summons was served in
February 2019. The amounts outstanding became due and payable well
over three years prior to
this. Accordingly, in terms of s 10(1)
read with
ss 11
(d)
and
12
(1) of the
Prescription Act 68 of 1969
, the debt had
prescribed. The response in the applicant’s heads of argument
invoked
s 14(1)
of the
Prescription Act. This
provides:
‘The
running of prescription shall be interrupted by an express or tacit
acknowledgement of liability by the debtor.’
It
was contended that the part payments made up till June 2018
constituted a ‘tacit acknowledgement of liability’ within
the meaning of those words. As such, the running of prescription had
been interrupted, the last interruption of which occurred
during June
2018. Since each interruption causes the prescriptive period to
commence anew, the claim has not prescribed.
[11]
In support of her submission that part payment of
a debt amounted to a tacit acknowledgement of liability, the
applicant relied
chiefly on
Cape Town
Municipality v Allie NO
.
[7]
There, an arbitration award had been made in an amount of money,
along with interest and costs, such costs to include the fees
of the
arbitrator. The capital sum was paid and a letter sent to the effect
that, once the costs were taxed, they would be paid.
The letter
prompted a response to the effect that the interest portion of the
award had not been paid. The costs were taxed in
an opposed taxation.
The appellant then sent a letter dated 3 September 1975 saying:
‘Council
accepts liability for payment of interest from the date of the award
to 28 December 1973, on the full amount
of the award . . .’.
This
was later followed by a payment of interest which the appellant
contended was due. Sometime later, the respondent attempted
to
recover the taxed costs. The appellant contended that the claim for
these had become prescribed. The issue was whether the payment
of
interest and the letter of 3 September 1975 amounted to a tacit
acknowledgement of liability and thus interrupted prescription
on the
claim for costs. The court held that the award was a single,
indivisible award, and the acknowledgement of liability for
the
interest component of the award amounted to a tacit acknowledgement
of liability for the whole award, including costs.
[8]
[12]
In arriving at a decision in that matter, the
court referred to a number of old authorities. In
Lubbers
& Canisius v Lazarus
,
[9]
the court recognised that Roman law accepted that an acknowledgement
of liability could be established by conduct and not only
by words.
Part payment of a debt was recognised as an example of such conduct.
In
De Beer v Gedye and Gedye
,
[10]
the court held to similar effect:
‘Merlin
in his
Repertoire de Jurisprudence
under the
heading: “Interruption de Prescription,” quotes from
Dunod as follows “If the debtor admits the debt
by an act of
any kind: if he pays a part of the capital, or the arrears without
protest . . . in a word whenever anything is done
between the
creditor and the debtor . . . which imports an acknowledgment express
or tacit of the debt . . . there will be a civil
conventional
interruption which will prevent the running of prescription.”
[11]
[13]
Recognition of an acknowledgement by conduct has
been given specific effect in
s 14(1)
where a tacit
acknowledgement is made sufficient. A tacit acknowledgement requires
an inference to be drawn from proved facts.
The test for proving a
tacit contract was set out in
Standard Bank of
South Africa Ltd & another v Ocean Commodities Inc &
others
:
[12]
‘In
order to establish a tacit contract it is necessary to show, by a
preponderance of probabilities, unequivocal conduct
which is
capable of no other reasonable interpretation than that the parties
intended to, and did in fact, contract on the terms
alleged.’
I can see no reason why the approach to prove a tacit
acknowledgement of liability should be approached differently. It
seems clear
that the test is objective.
[13]
The question is, thus, did the conduct of the debtor amount to a
tacit acknowledgement of liability?
[14]
Allie
recognised that
to establish this depended on a conspectus of all the relevant proved
facts on the point. The fact that part payments
have been made is not
decisive:
‘
But it is conceivable
that there may be circumstances in which it would not be correct to
infer an acknowledgment of liability for
a balance from the making of
a payment simply because, objectively regarded, it is a part payment.
There may be something in prior
dealings between the parties, or the
prior or contemporaneous conduct of the debtor, which would negate
such an inference.’
[14]
If, as is clear, the tacit acknowledgement arises
largely from conduct, the possibility that evidence of the
circumstances under
which the payments were made might put a
different blush on things seems self-evident. Those circumstances
would need to be considered
in order to properly draw an inference as
to whether there has been a tacit acknowledgement of liability. I
therefore respectfully
agree with this dictum.
[15]
The significance of this for the present matter
is clear. This is an application for summary judgment. In its
affidavit opposing
summary judgment, the defendant raised a defence
of prescription. Such a defence, when raised, places an onus on the
debtor to
allege and prove the date when the prescription
commenced.
[15]
Once proved, the onus then shifts to the creditor to allege and prove
the interruption of prescription.
[16]
In the present matter, allegations concerning interruption are
contained, not in the pleadings, but in the heads of argument. These
simply refer to the list of payments made after 1 June 2014 until
June 2018 which were annexed to the particulars of claim
in
support of the contention that the payments amount to a tacit
acknowledgement of liability.
[16]
The problem is that the respondent has had no
opportunity to lead evidence of any circumstances under which these
payments were
made. As was held in
Allie
,
these may cast a different light on the matter. The issue of the
interruption of prescription was not pleaded in the particulars
of
claim. This is understandable since it would ordinarily be raised in
a replication to a plea of prescription rather than in
particulars of
claim. The respondent could not have known that the applicant would
rely on an interruption. It was therefore not
alerted to deal with
the issue in the opposing affidavit. I accordingly do not have any
evidence of the respondent on the issue
before me. Granting summary
judgment would deny it an opportunity to place its version before a
court. This offends the basic principle
of
audi
alteram partem
. In the result, I am satisfied
that the respondent has raised a defence which gives rise to a
triable issue. As a consequence,
summary judgment must be refused and
the respondent given leave to defend the action.
[17]
In case I am wrong on this issue, even where the
requirements for summary judgment are met, a court retains a
discretion to refuse
summary judgment.
[17]
Rule 32(5) of the Uniform Rules of Court states:
‘If
the defendant does not . . . satisfy the court [that there is a bona
fide defence to the action] . . . the court may enter
summary
judgment for the plaintiff.’
As
has been stated in numerous judgments, summary judgment is a drastic
remedy. It does not allow for the matter to proceed to trial.
This is
why a court may exercise a discretion to refuse summary judgment.
That discretion must be exercised judicially and cannot
be founded on
a caprice.
[18]
To close the door on the ventilation of the issue of prescription
would not be appropriate in the circumstances of this matter.
It may
well be that an injustice would result should summary judgment be
granted. I would therefore be inclined in any event to
exercise my
discretion against granting summary judgment.
[18]
The respondent conceded that, if summary judgment
were refused, the case meets the requirement for being referred to
the expedited
trial roll under KwaZulu-Natal practice direction 21.3.
I agree with this concession.
[19]
In the result:
1.
Summary judgment is refused.
2.
The respondent is given leave to defend the action.
3. The costs of the
summary judgment application are reserved for decision by the trial
court.
4. The matter is
referred to the expedited roll in terms of KwaZulu-Natal practice
direction
21.3.
GORVEN J
DATE
OF HEARING:
6 June 2019
DATE
OF JUDGMENT: 11 June 2019
FOR
THE APPLICANT: EJB
Lingenfelder of Lingenfelder Attorneys.
FOR
THE RESPONDENT: I Topping SC instructed
by Derek
Sathenna
Attorneys, locally represented by
SL
Kunene & Partners.
[1]
Land & Agricultural Development Bank of SA v Ryton Estates
(Pty) Ltd & others
2013 (6) SA 319
(SCA) para 4.
[2]
Davehill (Pty) Ltd & others v Community Development Board
1988 (1) SA 290
(A) at 300J-301E;
Crookes Bros Ltd v Regional
Land Claims Commission, Mpumalanga
2013 (2) SA 259
(SCA) ([2012]
ZASCA 128) para 22.
[3]
Op cit at 298H-299B.
[4]
Ryton Estates
para 23.
[5]
Davehill
at 298H-I.
[6]
Ryton Estates
loc cit.
[7]
Cape Town Municipality v Allie NO
1981 (2) SA 1
(C) at
11H-12B.
[8]
Allie
at 15A-B.
[9]
Lubbers & Canisius v Lazarus
1907 TS 901.
[10]
De Beer v Gedye and Gedye
1916 WLD 133.
[11]
De Beer
at 137.
[12]
Standard Bank of South Africa Ltd & another v Ocean
Commodities Inc & others
1983 (1) SA 276
(A) at 292A-B.
[13]
Allie
at 7I-8C.
[14]
Allie
at 12B-C.
[15]
Gericke v Sack
1978 (1) SA 821
(A) at 826B-827H.
[16]
Aussenkehr Farms (Pty) Ltd v Trio Transport CC
2002 (4) SA
483
(SCA) ([2002]
3 All SA 309)
at 495, para 5 of the second
judgment. Two judgments were delivered in this matter, each with
their own paragraph numbers. The
second judgment concurred in the
main judgment with one reservation. There was no difference on the
question of onus.
[17]
Gruhn v M Pupkewitz & Sons (Pty) Ltd
1973 (3) SA 49
(A)
at 58H-59A.
[18]
Breitenbach v Fiat SA (Edms) Bpk
1976
(2) SA 226
(T)
at 229B-H.