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[2012] ZAGPPHC 14
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1st Holdings (Pty) Ltd v Boardwalk Lakeside Development (Pty) Ltd (A1134/09) [2012] ZAGPPHC 14 (29 February 2012)
NOT
REPORTABLE
IN
THE HIGH COURT OF SOUTH AFRICA
(NORTH
GAUTENG HIGH COURT, PRETORIA)
CASE
NO: A1134/09
DATE:29/02/2012
In
the matter between:
1ST
HOLDINGS (PTY)
LTD
.........................................................................................
Appellant
and
BOARDWALK
LAKESIDE DEVELOPMENT (PTY)
LTD
..........................................
Respondent
JUDGMENT
MNGQIBISA-THUSI
J:
[1]
This is an appeal against the judgment and order granted by Webster J
on 27 March 2009, in particular, the portion dealing with
interest.
[2]
The order reads as follows:
"Judgment
is accordingly granted to the plaintiff in the sum of R1 149 000.00,
with costs. It is ordered that the first defendant
pay interest
thereon at 19% per annum from 1 May 2003 until date of payment."
[3]
In January 2000 the parties concluded a lease agreement in terms of
which the respondent let certain property to the appellant
at an
agreed monthly rental. The lease was to operate for a period of 5
years, from 1 May 2000 to 30 April 2005.
[4]
During March 2003 the appellant purported to cancel the agreement and
stopped paying rental. Although the respondent rejected
the
cancellation of the agreement by the appellant, it accepted the
failure by the appellant to pay rent as repudiation of the
lease
agreement and cancelled the agreement. The respondent cancelled the
agreement as per clause 23 of the lease agreement.
[5]
The respondent instituted proceedings against the appellant in May
2003 in terms of which it claimed damages for loss of rental
it would
have earned had the appellant not breached the agreement by stopping
to pay rent for the period 1 May 2003 until 20 April
2005. In its
particulars of claim the respondent claimed the amount of R1 961
928.80 as damages plus interest calculated at 19%
per annum.
[6]
It appears that the respondent based its claim for interest on clause
11.5 of the agreement (dealing with arrear rental) which
provides
that in respect of arrear rental due but unpaid, the lessor would be
entitled to payment of interest calculated at the
rate of 2% per
annum higher than the prime rate of interest charged from time to
time by the lessor's bankers on overdraft facilities,
such interest
to be compounded monthly from due date to date of payment.
[7]
In its plea the appellant denied being in default of the agreement
and alleged that the respondent had agreed (expressly or
tacitly) to
the cancellation of the agreement.
[8]
In its request for further particulars, the appellant requested the
respondent to furnish it with the name of its bankers and
with
particulars of its banker's prime rate and any fluctuations in the
rate since May 2003.
[9]
The respondent's response was that its bankers are Nedcor Bank and
that it would furnish the particulars about the banker's
prime rate
and fluctuations later. The respondent did not, however, provide the
appellant with the relevant information.
[10]
On 25 February 2005 when the trial began, the parties agreed that
should the court find that the appellant did not properly
cancel the
agreement, the agreed quantum of damages payable to the respondent
would be R1 149 000.00. This agreed amount on quantum
was less than
the amount initially claimed due to the fact that the appellant
disputed whether the respondent had mitigated its
losses.
[11]
The appellant has already paid the capital amount as directed in the
order of 27 March 2009.
[12]
The issue in this appeal is whether the court a quo was correct in
ordering the appellant to pay interest on the agreed capital
amount
at the rate of 19% per annum or at all.
[13]
It is the appellant's contention that since the respondent did not,
at the trial, provide evidence on what its banker's prime
rate on its
overdraft facilities was during May 2003, and since the court a quo
did not deal with the issue of interest payable
even though it was
still not settled, the respondent was not entitled to any interest.
Further, the appellant contends that in
its letter dated 5 August
2009 the respondent had conceded that the interest ordered by the
court a quo was wrong and had thereby
abandoned its claim on interest
on the capital amount. The appellant further contends that the
Prescribed Rate of Interest Act
55 of 1975 (the Act) is not
applicable as there was an agreement between the
parties
that interest payable on arrear rent would be as set out in clause
11.5 of the agreement.
[14]
The letter the respondent sent to the appellant dated 5 August 2009
reads in part as follows:
"3.
So as to eliminate any doubt, we confirm that the Plaintiff has
abandoned that portion of the judgment relating to the
incorrect
interest rate, and the Plaintiff has conceded that it is only
entitled to interest on the amount awarded at the rate
of 2% per
annum higher than the prime rate of interest charged from time to
time by the Plaintiff's bankers on overdraft facilities,
from
01/05/2003 to date of payment, alternatively (and in the absence of
the court agreeing to this) to interest on the amount
awarded at the
rate mora in terms of the
PRESCRIBED RATE OF INTEREST ACT. 55 OF
1975
, from 01/05/2003 to date of payment."
[15]
The respondent has conceded that the order of the court a quo in
respect of the rate of interest payable is incorrect since
no
evidence was led to prove its bankers' prime rate during the relevant
period. However, the respondent contends that it is entitled
to
interest on the capital amount as compensation for the loss it
suffered as a result of the failure by the appellant to pay rent
for
the remaining portion of the lease agreement. The respondent submits
that it is entitled to interest as prescribed in section
1 of the Act
from 1 May 2003.
[16]
Section 1(1) of the Act reads as follows:
"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 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."
[17]
I am in part in agreement with the appellant's contention that
failure by the respondent to prove that its banker's prime rate
during May 2003 was 17% does not entitle it being charged interest at
17% plus 2%. However, the fact that the respondent did not
at the
trial prove what the applicable bankers' rate on overdraft facilities
was during the relevant period, does not mean that
the respondent was
not entitled to any interest. Firstly, the respondent sued for
damages for the loss it suffered as a result
of the appellant's
repudiation of the agreement. As a result the respondent cancelled
the agreement. Since at the time the respondent
instituted the action
against the appellant it had already cancelled the agreement, it
could not rely on a non-existent agreement
in order to determine
interest due. Although the respondent based the determination of the
damage it suffered on the outstanding
arrear rentals, its claim was
not for payment of arrear rentals but for damages. The respondent,
relying on Siman & Co (Pty)
Ltd v Barclays National Bank Ltd
1984(2) SA 888 (A), has submitted that interest should be made
payable as of the date of settlement,
being 25 February 2005.
[18]
At the time the parties reached a settlement on what the quantum of
damages would in the event that the court determines that
the
respondent had rightly cancelled the agreement and was entitled to
damages, the parties did not deal with the interest which
would be
payable. I am therefore of the view that section 1 of the Act would
be applicable since it provides for interest in cases
where the rate
of interest is not governed by any other law or by agreement between
the parties.
[19]
With regard to the date when interest would commence, in terms of
section 2A (2) (a) the respondent would normally be entitled
to
interest as from the date it demanded payment form the appellant or
served it with summons. Alluding to the provisions of section
2A(2)(a) of the Act, the court held in David Trust v Aegis Insurance
Co Ltd
[2000] ZASCA 108
;
2000 (3) SA 289
(A) at 303J -304B that:
"With
effect from 11 April 1997 the Prescribed Rate of Interest Amendment
Act 7 of 1997 (which amended the Prescribed rate
of Interest Act 55
of 1975), sanctioned, inter alia, the recovery of mora interest in
amounts awarded by a court which, but for
such award, were
unliquidated. Once judgment is granted such interest 'shall run from
the date on which payment of the debt is
claimed by the service on
the debtor of a demand or summons, whichever is the earlier' (s 2A(2)
(a); and see The MV Sea Joy: Owners
of the Cargo
Lately
Laden on Board the MV Sea Joy
1998 (1) SA 487
(C) at 505F-507H; Adel
Builders (Pty) Ltd v Thompson
1999 (1) SA 680
(SE) at 688G-691C). The
word 'demand' in s2A (2) (a) is defined to mean a written demand
setting out the creditor's claim in such
a manner as to enable a
debtor reasonably to assess the quantum thereof (s 4 of the principal
Act)."
[20]
The respondent issued summons against the appellant in May/June 2003.
This means that in general the respondent would, applying
the
provisions of section 2A (2) (a) be entitled to interest as from June
2003. However, even though the respondent would normally
be entitled
to interest from the date it served a demand or summons, taking into
account that the quantum of damages in this matter
was settled only
on 25 February 2005, that the trial ended in 2005 and the judgment
delivered on 27 March 2009, this court could
exercise its discretion
in terms of section 2A (5) of the Act. This section provides that a
court has the power to make such order
as appears just in respect of
the payment of interest that shall accrue and the date from which
such interest shall be payable.
[21]
I am of the view that in terms of equity, taking into account the
period from the time the trial ended to the date of judgment,
it
would be equitable that interest should be ordered to be payable as
from the date the settlement was reached rather than at
the time
summons were served. That is the date when the damages became
liquidated which is the date on which the appellant became
in mora.
[22]
The appellant's submission that the respondent should have
counter-appealed on the issue of interest holds no water as the
respondent has clearly indicated its position with regard to the
issue of interest.
[23]
In view of the issue to be determined in this appeal, I am of the
view that the appellant was entitled to appeal, in particular
since
in terms of the order of the court a quo, the appellant was ordered
to pay interest from May 2003, being the date it defaulted
on the
rentals. I view of paragraph 21 above, I am satisfied that the
appellant has substantially succeeded in this appeal and
is therefore
entitled to costs of the appeal.
[24]
In the premises the following order is made:
1.
The appeal is upheld with costs.
2.
The order of the court a quo is substituted with the following:
"Judgment is accordingly granted to the plaintiff in the
sum of
R1 149 000.00 with costs. It is ordered that the first defendant pays
interest thereon at 15.5% per annum from 25 February
2005 until date
of payment."
NP
MNGQIBISA-THUSI
Judge
of the Gauteng North High Court
I
agree
EM
MAKGOBA J
Judge
of the Gauteng North High Court