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[1987] ZASCA 120
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Davehill (Pty) Ltd. and Others v Community Development Board (353/86) [1987] ZASCA 120; [1988] 1 All SA 388 (A) (30 September 1987)
353/86 N v H
DA
VEHILL (PTY) LIMITED & OTHERS v THE
COMMUNITY DEVELOPMENT BOARD
SMALBERGER, JA :-
353/86
N v H
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE DIVISION
)
In the matter between:
DAVEH
ILL (PTY)
LIMI
TED First Appellant
GANNET ENTERPRISE
S
(PTY)
LIMITED
Second Appellant
TIRA (PT
Y
) LIMITED
Third
Appellant
SE
VENTY
FOU
R WEST (PTY) LIM
I
TED
Pourth
Appellant
LINFRANK (
P
TY) LIMITED
Fifth Appellant
SONNEBLOM BELEGGI
N
GS (EDMS) BEPERK
Sixth Appellant
and
TH
E COMMUNITY
D
EVELOP
M
ENT B
O
ARD
Respondent
CORAM
: RABIE, CJ, BOTHA, GROSSKOPF, SMALBERGER,
JJA, et BOSHOFF, AJA
HEARD
: 3 SEPTEMBER 1987
DELIV
E
RED
: 30 SEPTEMBER 1987
JU
DGMENT
SMALBERGER, JA;-
The appellants were previously the owners
of
certain erven situated in West
Germiston Township. These pro=
perties /
2 perties were expropriated by the respondent under the
provisions of the Expropriation Act 63 of 1975 ("the Act") on 24 October 1980.
On 3 December 1980 the respondent took possession of the properties concerned.
Initially the parties were unable to reach agreement
on the amount of
compensation payable under.the Act for the properties expropriated. This led to
the respondent making an interim
payment of compensation of R634 600,00 to the
appellants on 22 May 1983 ("the interim payment"). This was done in terms of the
provisions
of section 11(1) of the Act. During November 1984 the respondent made
a final offer of settlement to the appellants. The offer was
accepted on 19
December 1984. Consequent thereon the respondent paid a further amount of R453
550,00 to the
appellants /
3 appellants on 11 January 1985 ("the final payment"). This
brought the total agreed compensation paid to the appellants (exclusive
of
interest) to Rl 088 150,00. In terms of section 12(3) of the Act the respondent
was obliged to pay interest to the appellants
from the date of taking possession
of the properties on any outstanding portion of the compensation payable in
respect thereof. It
will be convenient to refer to such interest as "statutory
interest". On 1 April 1986 the respondent paid statutory interest in an
amount
of R162 850,33 to the appellants. This was followed by a further payment of
statutory interest of R224 403,40 on 5 January
1987. It is common cause that the
statutory interest paid by the respondent, totalling R387 253,73, represents the
full amount
of /
4 of interest payable to the appellants in terms of section
12(3).
In February 1986, prior to the first payment of statutory interest by
the respondent, the appellants commenced motion proceedings
against the
respondent in the Transvaal Provin= cial Division for the recovery of statutory
interest due to them. The appellants
proceeded with their application, despite
the payment of statutory interest on 1 April 1986, because they considered the
amount paid
to be less than that to which they were entitled. Two days prior to
the hearing of the application the appellants gave notice of
their inten= tion
to amend their notice of motion to include a claim for mora interest on the
amount of statutory interest outstanding
from /
5
from the date of the final payment of compensation.
The matter came before
O'DONOVAN, J, on 23 May 1986. The amendment was sought and granted. The Judge a
q
uo's
ex
tem
pore judgment, however, was confined to the
appellants' claim for statutory interest,and omitted to deal with the claim for
mora interest.
He held, in effect, that the amount of statutory interest paid to
the appellants on 1 April 1986 represented the full extent of the
respondent's
liability for such interest in terms of section 12(3). In the result he
dismissed the appellants' application, but granted
them leave to appeal to this
Court.
On 18 September 1986 judgment was delivered in this Court in the matter of
Co
mmunity Deve
lop
ment Board v Mahom
ed
and /
6
and
Oth
ers
NNO
(reported at 1987(2) SA 899). From the
terms of this judgment it became apparent that the amount of statutory
interest paid by the respondent was insufficient, and that
the judgment of the
Court a quo to the contrary was wrong. This gave rise to the further payment of
statutory interest on 5 January
1987. This left, as the only out= standing issue
between the parties, the question whether the respondent was liable to pay mora
interest to the appellants in respect of statutory interest due and payable over
the period 12 January 1985 to 5 January 1987.
The matter, however, does not end there. When they filed their heads of
argument the appellants gave notice of their intention to
apply at the hearing
of the appeal to
further /
7 further amend their notice of motion in terms of an amended
notice attached to their heads of argument. The amendment foreshadowed
in the
amended notice of motion sought to intro= duce an additional claim for
mora
interest on outstanding statutory interest from the date of the
interim payment of compensation to the date of the final payment
thereof. The
application was moved at the hearing of the appeal, but not before a further
amended notice of motion was handed in
to replace that annexed to the heads of
argument. The latter notice did not introduce anything new in principle. It
merely sought
to clarify the amounts of m
ora
interest claimed by each
appellant individually. Judgment was reserved on the application.
Before /
8
Beforedealing with the various issues that fall
to be decided it is
necessary to set out the relevant provi=
sions of sections 11(1) and (3) and
12(3) of the Act as the
determination of certain of the issues depends upon
their
proper construction. They provide as follows:
"11(1) if the Minister deems it expedient, he may, prior to the determination
of the amount of compensation payable in terms of this
Act for property or for
the use of property and on or at any time after the date of expropriation, but
subject to the provisions
of subsection (3), pay the amount offered the owner
concerned as such compensation, or a portion of such amount, to the owner
concerned,
or the person contemplated in section 19, or deposit it with the
Master or uti]ize it in settlement of the tax or other moneys contemplated
in
section 20 under the same circumstances under which he should or could have so
paid, deposited or utilized such compensation had
it been determined on that
date.
(3) The /
9
(3) The payment, deposit or utilization of
any amount under subsection (1) shall not preclude the determination by
agreement or by a court contemplated in section 14(1), of
a different amount as
compensation, but if the amount so determined as compensation is less than the
amount paid, deposited or utilized,
the owner to whom or on whose behalf the
last-mentioned amount was paid, or the Master with whom it was deposited, or the
local authority
concerned, as the case may be, shall refund the difference to
the State together with, in the case of such owner or local authority,
interest
at the rate contemplated in section 12(3) from the date on which the amount was
so paid or utilized, and, in the case of
the Master, the interest accrued
thereon in terms of subsection (2)."
"12(3) Interest at the standard interest rate determined in terms of section
26(1) of the Exchequer and Audit Act, 1975 (Act No
66 of 1975), shall be payable from
the date on which the State takes possession of the property in question in
terms of section 8(3) or (5) on any
outstanding
portion /
10
portion of the amount of compensation payable in accordance with subsection
(l)(a)(i): Provided that -
(b) from the date on which the
Minister in terms of section 11(1) pays or makes available an amount to the
owner or any person referred to in section 21(4),
the amount which is so payable shall for the purposes of the payment of
interest not be deemed to be an outstanding amount."
I shall commence with the appellants' claim for mora interest in respect of
statutory interest outstanding over the period 12 January
1985 to 5 January
1987. In terms of section 12(3) of the Act the respondent was obliged to pay
statutory interest at the prescribed
rate from the date on
which /
11.
which it took possession of the appellants' properties
"on
any outstanding portion of the amount of compensation payable".
As was
stated by BOTHA, JA, in
Community Development Board v
Ma
homed and Others NNO
(supra) at 909 H - J:
"the expression 'the amount of compensation payable' must have been intended
by the Legislature to refer to the amount as ultima=
tely determined Of that amount 'any
outstanding portion' must mean any part of it not yet paid as at the date of
taking possession of the property and for as long as
it remains unpaid
thereafter. If the whole of the amount in question is paid only after it has
been determined, interest will be
payable on it from the date of taking
possession until the date of payment."
The liability to pay statutory interest arises from considerations of
equity, and was designed to compensate a person whose property
has been expropriated for his loss of possession and fruits
of the /
12 of the property up to the time that compensation was paid
(Die Sui
d-Afrikaanse
Na
turelletrust v Kitchener en Andere
1964 (3)
SA 417
(A) at 423 E - F;
Community Developmen
t Bo
ard v Mahomed and
Others NNO
(supra)at 915 F). In effect, statutory interest runs from day to
day on the out= standing portion of the amount of compensation payable
(whether
it be the full amount or a reduced amount because of an interim payment in terms
of section 11(1) ), and ceases the moment
compensation is paid in full. At that
date the amount of statutory interest due can be computed at the rate prescribed
in section
12(3) i e "at the standard interest rate determined in terms of
section 26(1) of the Exchequer and Audit Act, 1975" (as to the meaning
of which
see Community
Dev
elopment
/
13
Development Board v
Maho
med and Others
NNO
(supra) ). So computed it constitutes a liquidated amount (
Oos-Randse
Bántoe
sake Administrasieraad v San
t
am
Versekeringsmaatskappy
Bp
k en Andere (2)
1978(1) SA 164 (W) at 168
H).
Section 12(3) is silent as to when the statutory interest due is payable,
that is to say, it contains no express provision in this
regard. As statutory
interest ceases to run the moment compensation is paid in full, and can readily
be computed, there is no justification
for withholding its payment beyond that
date. Just as full payment of a debt and interest thereon can normally be
expected to take
place at one and the same time, so too can it be expected that
payment of the full amount of compensation (or the balance thereof,
where /
14 where an interim payment has been made) and the payment of
statutory interest due should be paid simultaneously. Furthermore, if
statutory
interest is not paid when the final compensation is paid the owner of property
expropriated would be prejudiced by any
delay in making payment thereof, which
is presumably what section 12(3), having regard to its equitable origin and the
purpose it
was designed to achieve, would seek to avoid. With regard to the
above it is to my mind clearly implicit in the provisions of section
12(3) that
the respondent's obligation to pay statutory interest due arises on the same
date as the final payment of compensation
is made. Section 12(3) therefore fixes
the time for per= formance. In the present instance the time for performance
was /
15 was 11 January 1985, and the respondent's failure to pay the
statutory interest due by it to the appellants on that date automatically
placed
it in
mora
. (
Wessels
: Law of Contract in South Africa : 2nd Ed
para 2863). This is so because, as the time for performance was fixed, mora
operated ex
re and no demand (
interpellatio
) was necessary to place the
re= spondent in mora. The statutory interest due being a liquidated amount, and
the respondent being
in
mora
, the appellants are entitled, in keeping
with general principles, to m
ora
interest from 12 January 1985 on the
amount of statu= tory interest outstanding until it was paid in full on 5
January 1987. (
West Rand Esta
t
es Ltd v New
Z
ealand
Insur
ance Co Ltd
1926 AD 173
at 195/6).
In the /
16
In the course of argument Mr Burger, for the
respondent, raised the
question whether it was permissible, in the absence of agreement, to award
interest on interest. He referred
in this regard to
Stroebel v Stroebe
l
1973(2) SA 137 (T) at 139 F - H. Interest on interest (compound interest) could
not be claimed in Roman and Roman-Dutch Law (
Voet
: Commentarius ad
Pandectas : 22.1.20 and 45.1.11; va
n Leeu
wen: Het Rooms-Hollands-Regt :
4.7.6;
van der Linden
: Regtsgeleerd Practicaal en Koopmans Handboek :
1.15.3). In our modern law this principle has become obsolete, having been
abrogated
by disuse. (
Wessels
op cit p 192, note 107;
Natal Bank v
Kuranda
1907 TH 155
at 169/171). Compound interest may be expressly
stipulated for by agreement, is commonplace today in commercial and finan=
cial /
17 cial dealings, and has been sanctioned by our courts for many
years. 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. To the extent that the
decision in
Stroebel v Stroebel
(su
pra
) is in conflict with this
broad principle it cannot be supported. The problem which arose in
Stroeb
e
l's
case at 139 F would today be dealt with under the
provisions of
section 2
of the
Prescribed Rate of Interest Act 55 of 1975
.
Subject to what has been said above it is not necessary in this judgment to
attempt to define under what
circumstances /
18 circumstances and within what limits a claim for
interest on interest will lie. Suffice it to say that in principle there can be
no objection to a claim for
mora
interest on outstanding statutory
interest, bearing in mind that statu= tory interest is, in essence, compensation
for loss of posses=
sion and fruits.
Mr Burger
further contended that
as the respondent's delay in paying statutory interest was not culpable, it was
not in mora. In this respect
he referred to the dictum of KOTZE, JA, in West
Rand
Estates Ltd
v
New Zealand Insuranc
e C
o Lt
d (sugra) at
195 that "a defendant cannot be said to be in mora unless he knows the nature of
his duty or obligation; that is to say
when and how much he has to pay". He
submitted
that /
19
that because of the obscure formulation of the provisions of the Act relevant
to the calculation of statutory interest the respondent
was unable to calculate
the statutory interest due by it to the appellants before the judgment in
Com
munity Developm
e
nt Board v Mah
o
med and Others NNO
(
supra
) unravelled the tangled web of legislative confusion and made such
calcu= lation possible. This argument cannot prevail. On a proper
interpretation
of the relevant provisions of the Act the respondent was, or should have been,
able to ascertain the amount of statutory
interest due by it. Legally it was
therefore able to determine the amount due, and it cannot excuse its failure in
this regard on
account of its inability properly to interpret the relevant
provisions of the Act.
I turn /
20 I turn to consider whether statutory interest is payable when
an interim payment of compensation is made in terms of section 11(1).
At first
blush there would seem to be no sound reason f.or distinguishing between interim
and final payments with regard to when
statutory interest is payable. There are,
however, certain significant differences in the two situations. The inference
implicit
in section 12(3) that statutory interest is payable when the final
payment of compensation is made flows largely from the fact that
the statutory
interest due is determinable on that date, and there are no later events which
can affect its final calculation. There
is accordingly no reason why its payment
should be withheld. The position is different in the case
of an /
21
of an interim payment. It is provisional in nature, and could subsequently
turn out to be greater than the compen= sation finally
determined (whether by
agreement or by a court). Statutory interest may therefore ultimately be payable
on a lesser amount than the
interim payment of com= pensation. Its proper
calculation is accordingly dependent upon the interim payment being less than
the compensation
finally determined. In that sense statutory interest is not
finally determinable when an interim payment is made, and this would
justify the
payment thereof being withheld. In addition, the expectation that when a debt is
paid in full the interest thereon will
be paid at the same time is not so
compelling when only a partial payment of the debt
is made /
22
is made. Thus one has less reason to suppose that the Legislature intended
that when an interim payment was made, statutory interest
thereon should be paid
as well. Furthermore, whereas section 11(3) makes provision, where the amount of
compensation ultimately determined
is less than the interim payment in terms of
section 11(1), for the refund to the State of the difference together with
interest
thereon from the date of payment at the rate of interest contemplated
in section 12(3), it makes no provision for the refund of excess
statutory
interest paid. Were statutory interest to be payable when an interim payment is
made, and a refund becomes necessary because
the final determination is less
than the interim payment, such refund should embrace not only
the /
23 the difference between the amount of interim compensation paid
and the compensation finally determined, but also the statutory
interest which
would have been paid on that dif= ference from the date of possession of the
property concerned to the date of the
interim payment. Section 11(3), however,
does not provide for the repayment of the latter amount. The omission to make
provision
in this regard lends support to the conclusion that the Legislature
did not intend statu= tory interest to become payable when an
interim payment is
made. It may be suggested that the Legislature's failure to provide therefor was
a
casus omissu
s, but if on a reasonable construction of an Act a casus
o
missus
can be avoided, it should be (
Dhanabakium v Subramanian and
Another
1943 AD 160
at 170 / ...
24
at 170; K
oller, NO v Steyn, NO en 'n Ander
1961 (1 ) SA 422
(A) at 429 C). Nor can one construe the concluding words of section 11(1),
which provides for an interim payment to be made by the
Minister prior to the
determination of the amount of compensation payable "under the same
circumstances
under which he should or could have so paid such
com=
pensation had it been determined on that date", as indicative of the
Legislature's intention to put final and interim payments of
compensation on a
par as far as the time for pay= ment of statutory interest is concerned.
The conclusion to which I therefore come is that the provisions of section
12(3), read with sections 11(1) and (3) of the Act do not
require the payment of
any statutory
interest /
25 interest to be made at the time when an interim payment of
compensatíon is made in terms of section 11(1). Statutory intêrest
is only payable when the final payment of compensa= tion is made. From
this.it
follows that the amendment sought at the
hearing of the appeal to extend the appellants' claim for
mora
interest
seeks to introduce an issue untenable in law, and for that reason alone it must
be refused.
I come now to the final issue, viz., the rate at which
mora
interest
due to the appellants is to be calculated. It is common cause that the
Prescribed Rate of Interest Act 55 of 1975
applies to mora interest, and that
its provisions govern the applicable rate. The relevant part of
section 1
of
that Act reads as follows:-
"1(1) If /
26
"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 f rom time to time prescribe a rate of
interest for the purposes of subsection (1) by notice in the
Gazette."
Section 1(1) is couched in peremptory terms, and
its application is
obligatory, not discretionary (
Katzenellenbog
en
Lt
d v Mullin
1977(4) SA 855 (A) at 885 G). To give effect to
the intention of the
Legislature the words "shall be calculated
at the rate prescribed under
subsection (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
27 prescribed under
subsection (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
subsection (2). The fact that the Minister may from time to time
prescribe dif=
ferent 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 enact= ment as a whole a
court of law is satisfied the Legislature
could /
28 could not have intended" (per STRATFORD, JA, in Bhy
at v
Commiss
ioner for
Immigra
tio
n
1932 AD 125
at 129).
The only exception to the above method of calcu= lation 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 con= sider 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. The mere fact that the
Minister may from time to time vary
the /
29 the prescribed rate of interest in terms of subsection (2), a
matter affecting debts in general, cannot per
se
constitute a special
circumstance relating to a particular debt. The appellants' reliance upon this
consideration as a special circumstance
is therefore without substance. The
appellants did not suggest that the record revealed any special circum= stances
which might justify
a departure from the application of a fixed rate of
interest.
Our attention was drawn to the fact that this Court has in the past awarded
mora interest at the rates prescribed from time to time
under Act 55 of 1975 for
the period of application of each particular rate. We were re= ferred in this
regard to the cases of Ri
elly v
Seligson and
Clare /
30
Clare Ltd
1977(1) SA 626 (A) and
Katzenellen
b
ogen v
Mullin
(supra). In Rielly v
Selig
s
on and Clare Ltd
this Court
did not seek to interpret the provisions of section 1(1) but merely gave effect
(at 642) to a request by counsel for the
appellant (which was not opposed by the
respondent's counsel) to award interest at the rate prescribed from time to
time. The situation
that arose in Ka
tzenellenbogen Ltd v Mullin
is
clearly distinguishable from the present as portion of the
mora
interest
awarded related to the period before Act 55 of 1975 came into operation. We were
further advised that such orders were frequently
found in the judgments of
Provincial Divisions. Insofar as such judgments are not based on a finding of
special circumstances as
envisaged in section 1(1)
of Act /
31 of Act 55 of 1975, or on an agreement between the parties,
they are clearly wrong.
It is common cause that the prescribed rate of
interest applicable on 12 January 1985, the date on which
mora
interest
began to run on the outstanding statutory interest, was 11% per annum. Mora
interest accordingly falls to be awarded at
that rate. At the hearing of the
appeal the respondent accepted that if it was liable for
mora
interest,
such interest had to be calculated on the individual amounts set out in
paragraphs 2.2 and 2.3 of the amended notice of
motion handed in at the
commencement of the appeal. Effect will be given thereto in the order to be
made.
With /
32 With regard to costs, these must follow the result. The
appellants failed in their application to further amend their notice of
motion.
The amendment sought was an extension of their main claim and involved little in
the way of addi= tional argument on appeal.
It was not contended on the
respondent's behalf that the refusal of the application to amend should result
in any order as to costs
in its favour. The appellants have enjoyed substantial
success on appeal, and no adverse order as to costs against them would be
justified save to the extent of depriving them of their costs attendant upon the
preparation and service of the further amended notice
of motion. The
respondent's offer of R224 403,40 in respect of the balance of statutory
interest
due /
33
due by it was made under cover of a letter dated 2 January
1987, the final paragraph of which reads:-
"Be pleased to take notice further that my client hereby tenders and offers
to pay all your party and party costs incurred up until
receipt of this cheque,
such costs to include all the costs in= curred in the Court a guo as well as
your client's appea] costs including
the costs undergone in taking instructions
(re?) settlement upon receipt of the attached cheque."
The appellants accepted the tender of costs contained in the
respondent's letter. It is not disputed that the award
of costs should include the costs of two counsel.
One further matter falls to be mentioned. It was
brought to our attention at the hearing of the appeal that in
terms /
34 terms of Government Notice No 655 of 27 March 1987 the
assets, rights, liabilities and obligations of the respondent
have since 1
April 1987 vested in the Development and Housing
Board established under the
Development and Housing Act 103
of 1985. As an undertaking was given by the
respondent and/
or the Development and Housing Board to honour any
judgment
given against the respondent nothing turns on the provisions
of the Notice referred to.
In the result the following order was made:
(1) The appellants' application to further amend their notice of motion is
refused;
(2) The appeal is allowed, with costs. Such costs
include:
(a)
those tendered by the
respondent in its letter of 2 January 1987;
(b)
those incurred subsequent to the acceptance of the
tender;
(c) the costs of two counsel,
but exclude the appellants' costs atten= dant upon the preparation
and
service /
35
service of the further amended notice of motion;
(3) The respondent is ordered to pay m
ora
interest
at the rate of
11% per annum from 12 January
1985 up to and including 1 April 1986
in
respect of:
(i) the first appellant, on the sum of R121 366,78;
(ii) the second appellant, on the sum of R51 994,32;
(iii) the third appellant, on the sum of R22 768,26;
(iv) the fourth appellant, on the sum of R60 906,53;
(v) the fifth appellant, on the sum of R53 874,40;
(vi) the sixth appellant, on the sum of R7 5 825,40.
(4) The respondent is ordered to pay mora interest
at the rate of 11% per
annum from 2 April 1986
up to 5 January 1987 in respect of:-
(i) the /
36
(i) the first appellant, on the sum of R74 641,16;
(ii) the second appellant, on the sum of R25 103,46;
(iii) the third appellant, on the sum of R15 189,85;
(iv) the fourth appellant, on the sum of R36 608,74;
(v) the fifth appellant, on the sum of R27 463,72;
(vi) the sixth appellant, on the sum of R44 878,43.
J W SMALBERGER JUDGE OF APPEAL
RABIE, CJ )
BOTHA, JA ) CONCUR GROSSKOPF, JA ) CONCUR
BOSHOFF, AJA)