Mbhele NO v Smith (A225/2008) [2009] ZAFSHC 86 (17 September 2009)

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[2009] ZAFSHC 86
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Mbhele NO v Smith (A225/2008) [2009] ZAFSHC 86 (17 September 2009)

FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC
OF SOUTH AFRICA
Appeal
No.: A225/2008
In the
appeal between:
LYDIA
MBHELE NO
Appellant
and
ETTIENE
SMITH
Respondent
CORAM
:
JORDAAN, J
et
LEKALE,
AJ
___
____________________________________________________
JUDGMENT:
LEKALE, AJ
_______________________________________________________
HEARD
ON:
7 SEPTEMBER 2009
_______________________________________________________
DELIVERED
ON:
17
SEPTEMBER 2009
_______________________________________________________
INTRODUCTION AND
BACKGROUND:
[1]
The
appellant applied unsuccessfully, in terms of section 62 of the
Magistrate’s Courts Act, no. 32 of 1944 (“the Act”), for
the
setting aside of a warrant of execution against property in the
Magistrate’s Court for the District of Kroonstad held at
Kroonstad
with the judgment being delivered on the 22 September 2008.
[2] She,
thereafter, felt aggrieved by the judgment and now approaches this
court, by way of an appeal against the same, on the
grounds that the
court
a
quo
,
inter
alia
,
erred in its findings on the evidence insofar as:
[
2.1] it
did not find that the impugned warrant included interest in the
amount of R39 941,77 which exceeded the capital amount of
R37 517,52;
[
2.2] it
found that the settlement agreement concluded on the 4 July 2003,
which was made an order of court, was not a novation of
the default
judgment issued earlier.
[3] A
perusal of the court record reveals that the section 62 application
was preceded by a default judgment entered against the
appellant on
the 11
th
June 2002 for payment of the capital amount of R37 517,52 plus
interest calculated at the rate of 15.5% from the 1
st
October 1999 to date of final payment as well as costs.
[
4] Consequent
to the judgment the costs were, eventually, taxed after a warrant of
execution had already been issued. The said
warrant was re-issued on
three occasions before the impugned re-issue.
[
5] During
July 2003 the appellant approached the court
a
quo
in terms of section 73 of the Act for the suspension of the execution
of the default judgment, which move was opposed by the respondent.
[
6] The
parties, however, concluded an agreement on the 4
th
July 2003 in terms of which the section 73 application was withdrawn
and the appellant undertook to pay the capital amount and
costs by
way of monthly installments of R800.00, among others.
[
7] The
said agreement was made an order of the court
a
quo
.
The debtor and creditor relationship between the parties continued
without any apparent significant hiccups until the 24
th
July 2008 when the sheriff for the relevant district attached and
removed property belonging to the appellant on the strength of
a
warrant re-issued on the 13
th
April 2008.
[
8] As
at the date of the attachment and removal, the appellant had already
paid a total amount of R57 000,00 to the respondent since
about
October 2002.
[
9] The
appellant, eventually, launched the section 62 application on the
30
th
July 2008. On his part the respondent filed an affidavit of his
attorney in opposition of the application.
[
10] The
application was, eventually, dismissed with costs inclusive of costs
for preparation on the 22 September 2008.
[
11] The
appellant, thereafter, noted an appeal which is being opposed by the
respondent.
SUMMARY
OF DEPOSITIONS AND SUBMISSIONS:
[12]
In
the Heads of Argument filed for the appellant, it is acknowledged
that the argument in respect of the
in
duplum
rule was not raised before the court below but a request is,
effectively, being made for the issue to be heard in terms of the

Notice of Appeal. In this regard it is submitted that the respondent
is not, in law, entitled to recover more, in interest, than
the
capital amount.
[13] It
is, further, argued for the appellant that the interest claimed in
the warrant is wrongly calculated insofar as it is clear
from the
warrants that the respondent’s attorney had not deducted the
amounts paid by the appellant from the capital amount and,
as such,
calculated the interest on the wrong capital amount.
[14] The
appellant, furthermore, maintains that the settlement agreement
constitutes a novation and that, in terms thereof, no interest
was
and is payable to the respondent insofar as the agreement only
provides,
inter
alia
,
for payment of the capital amount and costs but is silent on payment
of interest.
[15] On
his part, the respondent, through his attorney, contends in the
opposing papers that the settlement agreement in question
related
only to the section 73 application and that following the same, a
letter was directed to the appellant’s erstwhile attorneys
Du
Plessis Le Roux Inc, dated the 23 January 2003 outlining the
outstanding balance and including interest in the calculations.
[16] The
respondent, further, contends that the said attorneys, in their
response made on the 6
th
February 2003, did not object to the inclusion of interest in the
calculations and only expressed their discontent with the interest

calculated on the taxed costs from the 19 November 2002.
[17] In
the aforegoing regard I must hasten to point out, at this early stage
of my judgment, that the correspondence between the
appellant’s
erstwhile attorneys and the respondent’s attorneys was, in fact,
exchanged before the fact of the settlement agreement
and not
subsequent thereto as contended for the respondent. The settlement
was concluded and made a court order in July 2003 while
the
correspondence in question was exchanged in January and February of
2003. This issue was, therefore, in my view and to that
extent
irrelevant to the matter.
[18] The
respondent, further, contends, by implication, that the settlement
agreement in question was concluded on the 29
th
July 2002 viz the date on which it was,
ex
facie
the same, signed by the respondent’s attorneys. It is, however,
apparent that the same was received by the appellant’s erstwhile

attorneys on the 4
th
July 2003 and it was, further, made an order of the court
a
quo
as
having been concluded on the same date.
[19] The
respondent, furthermore, concedes in his opposing papers that the
liability of the appellant for payment of interest was
omitted in the
settlement agreement but attributes the same to a
bona
fide
oversight. To the aforegoing extent he relies on the correspondence
exchanged between the lawyers referred to earlier as being
a very
clear proof that the intention of the parties was always that the
appellant would be liable for payment of interest.
[20] In
conclusion, the respondent requested the court below to vary the
order relating to the settlement agreement in terms of
section 36 of
the Act if necessary.
DISPUTE:
[
21] In
the Heads of Arguments submitted by and for the parties as well as
verbal submissions made by their respective counsel, the
issues in
dispute are limited to the following:
[
21.1] whether
or not the settlement agreement,
qua
an order of the court below, novated the default judgment; and if so
[21.2]
whether
or not the appellant’s indebtedness to the respondent, in terms of
the said agreement, was extinguished as at the date
of the warrant of
execution in question;
[
21.3] in
the event of the question in 21.1 above being decided in the
negative, whether or not the interest levied exceeds the capital

amount and, as such, offends the
in
duplum
rule and is, therefore, in law not payable.
NOVATION
:
[22]
The
issue before the court
a
quo
was whether or not good cause existed, as contemplated by section 62
of the Act, for the setting aside of the warrant.
[23] In
support of her contentions that there existed such good cause the
appellant, effectively, relies on the settlement agreement
qua
order of the court below as having replaced the default judgment as
well as proof of payment to the respondent in the total amount
of R57
000,00.
[24] On
his part, the respondent contends, in the Heads of Argument filed for
him as well as through his counsel in verbal submissions
made before
the court, that there is no merit in the argument that an order
granted in terms of section 73 constitutes novation
of the original
judgment. In the opposing papers the respondent does not dispute
payment of R57 000,00 by the appellant.
[25] In
deciding whether or not such good cause existed the court
a
quo
,
thus, had to interpret the settlement agreement to determine its
effect on the default judgment.
[26] In
my view, the appellant relies on novation in the form of compromise
insofar as she, in effect, contends that the settlement
agreement
changed the initial judgment by,
inter
alia
,
not making provision for payment of interest and by only referring to
the capital amount and costs.
[27]
As
effectively and correctly submitted for the appellant, the question
as to whether or not the judgment novates the contract depends
on the
answer to the question whether or not the judgment wholly replaces
the
“
contractual
rights and liabilities of the parties
inter
se
”.
(See
TRUST
BANK OF AFRICA LTD v DHOOMA
1970 (3) SA 304
, at page 310).
[28]
It
is, further, effectively common cause between the parties that an
order in terms of section 73 of the Act normally does not have
the
effect of novation and only gives the judgment debtor the opportunity
to pay the judgment debt in affordable installments and
does not
entail, as a general rule, the replacement of the original court
order.
[29] As
was found in
TRUST
BANK OF AFRICA LTD v DHOOMA
-supra
at page 310 and in a case similar to a section 73 order,
“…
where the
only purpose of the judgment is to enable the plaintiff to enforce
certain rights, by means of execution if need be, without
in any way
affecting other rights arising out of the contract, it seems more
realistic to regard the judgment not as novating the
former, but as
strengthening or reinforcing them. The right of action will have been
replaced by a right to execute, but the enforceable
right remains the
same.”
[30]
Compromise
is a settlement, by agreement, of disputed obligations whether
contractual or otherwise. Oral agreement suffices. (See
Christie
on Law of Contract in South Africa
,
5
th
Edition, on page 455).
[31] There
must be a dispute for a compromise to take place. Without a dispute
there can be no compromise. (See
KARSON
v MINISTER OF PUBLIC WORKS
1996 (1) SA 887
(E) at p 893 F – 894 I).
[32] The
appellant is quick to admit that there is no express provision in the
agreement to the effect that the same replaces the
original (default)
judgment. She, however, effectively contends that an inference to
that effect is the most plausible to draw
from the facts and relies
on the following excerpt from
Christie
in Law of Contract in South Africa
(s
upra)
at p 450 in that submission:
“
Only the very
exceptional contract will expressly state that its purpose is to
novate a previous one, so the intention and
consensus
that must be sought is a common intention to cancel the old contract
so that it can no longer be enforced and no longer exists,
and
replace it with the new one.”
[33] The
question in this matter is, in my view, whether or not the
enforceable right in terms of the original judgment remained
the same
after the settlement agreement was concluded and made a court order.
(See generally
TRUST
BANK OF AFRICA LTD v DHOOMA
(supra).
[34] Although
the court below seems to have, inadvertently, been under the
impression that the settlement agreement is a section
73 order, I am
of the view that that was not the case. The aforegoing flows from
the fact that:
[34.1]
the
appellant specifically withdrew the section 73 application in terms
of the said agreement;
[34.2]
no
order in terms of section 73 could, thus, ensue in the absence of
such an application.
[35] It
follows from the above finding that the making of the settlement
agreement an order of court was not in terms of section
73. The
aforegoing prevails despite the finding by the court
a
quo
that:
“
Die skikking is duidelik ten
opsigte van die artikel 73 aansoek – dit is ook die aansoek wat
voor die hof gedien het.”
(See
line
1, page 40 of the record).
[36] However
the contract may be described by the parties, the court looks at the
substance rather than the form in order to decide
whether a
particular obligation or dispute has been compromised. (See
NATIONAL
EMPLOYERS GENERAL INSURANCE COMPANY LTD v SPRINGBOK TIMBER AND
HARDWARE COMPANY
1969 (3) SA 444
(W) at p 447).
[37] The
fact that the settlement agreement, in its dominant clause, declares
that it is
“ter
skikking van die artikel 73
”
does not, in my view, necessarily mean that,
[37.1]
the
agreement is limited, in its effect, to section 73;
[37.2]
the
ensuing judgment making the agreement a court order was made in terms
of section 73.
[38]
The
court below had to construe the agreement as a whole to establish if
it has the effect of rendering the enforceable right conferred
on the
respondent by the default judgment not the same.
[39] There
was, in the court’s view, a dispute between the parties, as at the
date of the agreement, with regard to whether or
not the execution of
the judgment should be suspended and, as such, there existed a
jurisdictional fact necessary for compromise
to take place.
[40] The
agreement in question deals with the subject matter of the default
judgment and specifically mentions capital amount and
costs. It
provides for the manner of liquidating the capital amount and costs,
which can only be those to which the respondent
is entitled in terms
of the default judgment or the warrant of execution already issued as
at the date of the agreement. To the
aforegoing extent, the
agreement is similar to an order envisaged by section 73.
[41] The
agreement, further, makes provision for,
inter
alia
,
payment of additional costs and collection commission but is
conspicuously and curiously silent on the appellant’s liability
for
further interest and how the same is to be paid.
[42] The
right which the respondent acquired through the default judgment is,
most probably, payment of the capital amount, interest
and costs. As
at the date of the agreement a warrant of execution had already been
issued and re-issued with the judgment debt
reflected, in the
warrant, including interest accrued and payable as at the date of the
warrant.
[4
3] In
the determination of the issue of novation the court, in my view, is
not concerned with the intention of the parties but with
the effect
of the new agreement or judgment on the earlier agreement or
judgment. The question as to whether or not the parties
intended
such an effect arises in an appropriate case such as rectification of
the agreement or variation and/or rescission of
the judgment.
[44] Contentions
on behalf of the respondent to the effect that the omission of
payment in respect of interest in the agreement
was as a result of a
bona
fide
oversight are, therefore, beyond the issue. The fact of the matter
is that the judgment which made the agreement an order of court
had
not been rescinded or varied as at the date of the section 62
application.
[45] There
was no application for rectification before the court
a
quo
and
the issue which fell to be decided concerned novation.
[46] Mr
Coetzer, for the appellant, persisted in the contention that
reference in the agreement to capital amount was, in fact,
reference
to the capital amount as per the default judgment and it excluded
interest as set out in the earlier judgment. In the
appellant’s
view no interest whatsoever was payable as a result of the agreement.
[47] The
aforegoing was, in the appellant’s case, the nature and extent of
the novation relied on before the court below.
[48] The
enforceable right which the respondent had in terms of the earlier
judgment is, however, affected by the agreement insofar
as no
provision is made in the agreement for payment of further interest in
accordance with the default judgment.
[49] To
the aforegoing extent, the settlement agreement
qua
a court order novated the original judgment in that the enforceable
right to
“interest
until final payment of the capital amount”
did not remain the same after the agreement.
[50] The
appellant’s contention with regard to the nature and extent of
novation, in the court’s view, loses sight of the following
and, as
such, does not carry water:
[50.1]
it
is to the effect that interest was not payable
ab
initio
;
[50.2]
the
appellant’s contention that she had already paid R57 000,00 as at
the date of the impugned warrant together with copies of
receipts
attached to her affidavit covers payment of R20 000,00 made to her
erstwhile attorney and which is also not disputed by
the respondent
in his opposing papers;
[50.3]
the
said payment was apparently and most probably made before the date of
the agreement insofar as it was made to her attorneys
on the 16
th
October 2002 according to page 9 of the record. This amount can,
reasonably, be expected to have found its way to the respondent’s

attorneys long before the 4 July 2003;
[50.4]
as
at the 4 July 2003, when the agreement was made, interest payable
was, most probably, in excess of R15 677,18 which was due and
payable
as at the date of default judgment according to the first warrant
issued. (See p 27 of the record);
[50.5]
that
payment of R20 000,00 would have been applied first towards
satisfying the costs and interest before it could extend to the

capital amount;
[50.6]
it
is, thus, clear that, as at the date of the agreement, the payment in
question would have already been applied;
[50.7]
for
the alleged novation to operate retrospectively to the date of the
default judgment, so as to sustain the appellant’s contention,
it
would have been necessary for either a specific provision to that
effect to be made in the agreement or a provision to the effect
that
all payments made to the date of the agreement would be regarded as
having been in respect of the capital amount and costs
and not in
respect of interest to be made. There is no such provision
ex
facie
the agreement;
[50.8]
the
tenor of the agreement, further, indicates that it applies going
forward insofar as the first payment is,
inter
alia
,
to be made not later than the 7
th
August 2003.
[51]
In
the court’s view the capital amount referred to in the agreement,
most probably, bears a liberal, as opposed to a restrictive
meaning
attached to it by the appellant, and refers to the amount of R53
267.66 appearing as the first amount of the warrant on
p 24 of the
record, viz the re-issue of the warrant dated the 24 February 2003.
[52] In
my view, after the date of the agreement the appellant was not liable
for payment of further interest going forward. In
other words the
respondent was not entitled to levy any interest on the amount
outstanding on the debt. In this regard, it should
be noted that,
while an order for payment of the capital amount is independent of
and can be issued as a stand alone order without
any accompanying
order for payment of interest, the contrary is true about an order
for payment of interest insofar the latter
is dependent on and is,
inter
alia
,
intended as a cushion, to the former, against erosive effect of
inflation.
INDEBTEDNESS
:
[53]
In
the court’s view the judgment debt, inclusive of costs, as at the
date of the agreement was less than the R67 910.35 reflected
on the
re-issued warrant dated the 24
th
February 2003, viz p 24 of the record insofar as payments made by the
appellant as at that date are not reflected and are given
as nihil.
The aforegoing state of affairs is not correct because, according to
the undisputed deposition of the appellant, she
at least effected
payment of R20 000,00 during 2002. This amount should have been
reflected in that re-issued warrant.
[54] The
said payment, as alluded earlier, was most probably laid out to
extinguish the costs and part of accrued interest as at
the date of
payment leaving the capital amount, as per the default judgment,
intact. It follows, therefore, from a simple exercise
in commercial
mathematics that the appellant’s calculations in paragraph 6 of her
affidavit, viz p 4 of the record, are not correct
insofar as they
make no provision for the said accrued interest which, as at the date
of the original judgment, amounted to R15
677,18.
[55] On
the appellant’s version and taking into account the said accrued
interest, she was, at least, indebted to the respondent
in the amount
of R15 585,98 as at the date of the warrant in question as follows:
Total amount of debt as
per appellant R 56 908.80
Add
accrued interest as at 11-6-02 +
R
15 677.18
R 72 585.98
Less
total paid as per appellant
-R
57 000.00
R 15 585.98
==========
[56]
The
aforegoing amount excludes further costs and/or interest and is based
solely on the appellant’s version as reflected in paragraph
6 of
her affidavit, viz p 4 of the record.
[57] The
court is not called upon, in this matter, to make a precise
commercial calculation of the extent of the appellant’s
indebtedness or otherwise to the respondent. The court’s task is
simply to establish if there exists good cause for the setting
aside
of the warrant in question on the basis that the appellant is no
longer indebted to the respondent. In other words, whether
or not
the
causa
for the warrant has fallen away. (See
RAS
EN ANDERE v SAND RIVER CITRUS ESTATES (PTY) LTD
1972 (4) SA 504
(T) at 510E).
[58] The
law is that a judgment debtor is not entitled to have the warrant
issued against him set aside on the basis that it reflects
an
inflated or too large an amount than he actually owes without proof
of actual prejudice suffered by him as a result of the issue
of the
warrant in such an exorbitant amount. (See
DUNLOP
RUBBER CO v STANDER
1924
CPD 4
59).
[59]
In
casu
it
is probable that the warrant reflects an amount which is more than
what is due by the appellant. The question is, therefore,
whether or
not there is substantial prejudice to the appellant to warrant the
setting aside of the writ in question.
[60] Mr
Coetzer could not show any substantial prejudice, on the part of the
appellant, as same is not apparent from the material
properly before
the court.
[61] An
averment in appellant’s affidavit to the effect that the furniture
attached is her exclusive property and that she needs
the same is, in
my view, a self-evident prejudice which is not contemplated by the
law as constituting substantial prejudice for
the purpose of setting
aside the warrant. (See
DUNLOP
RUBBER CO v STANDER
(supra)
where the court found that the fact that the judgment debtor had to
pay the full amount of the writ, although he owed less, in
order to
escape arrest, did not constitute substantial or the element of
prejudice required.)
[62] In
circumstances where the writ includes an amount which is not due and
payable, the law is that the proper course of action
is to have the
warrant amended to the extent of reducing or adjusting the sum
reflected to the correct one. (See
DUNLOP
RUBBER CO v STANDER
(supra).
)
[63] In
the present matter there was no application for the amendment of the
warrant before the magistrate, as the appellant’s
case was that she
was not indebted to the respondent in any amount whatsoever. Had she
tendered payment of the amount which was
legally owing to the
respondent the position could, most probably, have been different.
[64] In
this court there is no such an application for amendment and the
court, further, does not have sufficient material before
it to engage
in the mathematical exercise of identifying the correct amount owing.
[65] It
is, further, probable that the appellant became liable for further
interest once she failed to effect payment of a single
agreed
installment after the 4
th
July 2003. In this regard, it should be noted that the agreement,
qua
court order, provides that the whole outstanding amount becomes due
and payable in such an event. It is apparent from copies of
the
receipts attached to the appellant’s affidavit that the last
payment was made in 2007 and, therefore, as at the date of the

impugned warrant the appellant had skipped payments. In such
circumstances interest at the prescribed rate becomes payable
ex
lege
in terms of
section 2
of the
Prescribed Rate of Interest Act no. 55
of 1975
.
[66] Mr
Coetzer implored the court to remit the matter, where necessary, to
the court below with directives for the warrant to be
amended. On
the other hand Mr Gilliland, on behalf of the respondent, argued
vehemently for the dismissal of the appeal with costs.
[67] The
course of action proposed by Mr Coetzer is, in the opinion of the
court, not appropriate because it is not the appellant’s
case that
the warrant is inflated and needs to be corrected. The extent of the
inflation is, further, not known to the court.
[68] Consequently
the court cannot give directions to the court
a
quo
when it is, itself, not in a position to formulate the same with any
measure of clarity.
[69] In
the premises the court only deals with what is properly before it by
way of appeal.
ORDER
[70]
In
the result the appeal is dismissed with costs.
[71]
The
decision of the court below is, therefore, confirmed and, as such,
prevails.
_
________________
L. J. LEKALE, AJ
I concur.
__
______________
A
.
F. JORDAAN, J
On
behalf of the applicant: Adv.
J.
C. Coetzer
Instructed
by:
Rosendorff,
Reitz Barry
BLOEMFONTEIN
On
behalf of the respondent: Adv. J. G. Gilliland
Instructed
by:
Naudes
BLOEMFONTEIN
/em