About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Supreme Court of Appeal
SAFLII
>>
Databases
>>
South Africa: Supreme Court of Appeal
>>
1991
>>
[1991] ZASCA 65
|
|
Boland Bank Ltd. v Master of the Supreme Court and Another (66/90) [1991] ZASCA 65; 1991 (3) SA 387 (AD); [1991] 2 All SA 329 (A) (27 May 1991)
Case no. 66/90 E du P
IN THE SUPREME COURT OF SOU
TH AFRICA
(APPELLATE DIVISION)
In the matter between:
BOLAND BANK LIMITED
Appellant
and
THE MASTER OF THE SUPREME
COURT
First Respondent
D J KLERCK NO
Second Respondent
Coram:
HOEXTER, MILNE, F H GROSSKOPF, GOLDSTONE JJA et PREISS
AJA
Heard:
Delivered:
6 May 1991 27 May 1991
2
JUDGMENT F H GROSSKOPF JA:
This appeal concerns the proper
interpretation of
section 103(2)
of the
Insolvency Act 24 of 1936
("the
Act").
The
crisp question to be decided is whether
section 103(2)
, read with
section
95(1)
of the
Act, makes
provision for the payment of compound interest on a
secured claim after the date of sequestration of the debtor's estate.
The
appellant was the applicant in the Court
a quo
. The application was for
an order declaring that the appellant, a secured creditor in an insolvent
estate, was entitled to recover
compound interest on its claim from the date of
sequestration to the date of payment. The Master and the trustee in the
insolvent
estate were cited as respondents in the application, but they decided
not to file any answering affidavits. They were not represented
at the hearing
of the application in the Court
a quo
and they both intimated that they
would abide the decision of the Court.
3
The Master did, however, furnish a report in which he expressed the view that
section 103(2)
of the
Act does
not provide for the payment of compound interest
after the date of sequestration of the debtor's estate. The application was
heard
in the South Eastern Cape Local Division by
Jones J
who held that
on a proper construction of
section 103(2)
, read with
section 95(1)
of the
Act,
the
appellant was not entitled to claim payment of compound interest on its
claim as from the date of sequestration. In coming to this
conclusion the
learned Judge relied on the judgment in the case of
Central Africa Buildinq
Society v Pierce NO
1969(1) SA 445 (RAD). The Court
a quo
dismissed
the application, but granted the appellant leave to appeal to this Court. On
appeal the second respondent was represented
by counsel who contended that the
judgment of the Court
a quo
ought to be upheld for the reasons therein
set forth.
The appellant's claim against the insolvent estate is secured by a "special
mortgage". The mortgage bond
4
expressly provides for the capitalization of interest, which means that the
appellant is entitled to charge compound interest, i.e.
interest computed on the
principal sum as well as on accrued but unpaid interest. Our Courts have for
many years enforced stipulations
providing for the payment of compound interest.
(
Natal Bank v R Kuranda and A Kuranda v Natal Bank
1907 TH 155
at
169-171;
United Buildinq Society v Labuschanqe
1950(4) SA 651(W);
Central Africa Building Society v Pierce NO
,
supra
, at 455 D-G;
Davehill (Pty) Ltd v Community Development Board
1988(1) SA 290(A) at 298
G - I). However, the issue in the present case is not whether the appellant was
entitled to claim compound
interest from the debtor in terms of the express
stipulation in the bond, but whether the
Act allows
him to recover compound
interest from the debtor's insolvent estate after sequestration. It should be
borne in mind that from the
date of sequestration the contractual rights of a
creditor
vis-á-vis
the insolvent are governed by the provisions of
the
Act. The
question
4
expressly provides for the capitalization of interest, which means that the
appellant is entitled to charge compound interest, i.e.
interest computed on the
principal sum as well as on accrued but unpaid interest. Our Courts have for
many years enforced stipulations
providing for the payment of compound interest.
(
Natal Bank v R Kuranda and A Kuranda v Natal Bank
1907 TH 155
at
169-171;
United Building Society v Labuschange
1950(4) SA 651(W);
Central Africa Buildinq Society v Pierce NO
,
supra
, at 455 D-G;
Davehill (Pty) Ltd v Community Development Board
1988(1) SA 290(A) at 298
G - I). However, the issue in the present case is not whether the appellant was
entitled to claim compound
interest from the debtor in terms of the express
stipulation in the bond, but whether the
Act allows
him to recover compound
interest from the debtor's insolvent estate after sequestration. It should be
borne in mind that from the
date of seguestration the contractual rights of a
creditor
vis-á-vis
the insolvent are governed by the provisions of
the
Act. The
question
5
whether the appellant is entitled to claim compound interest from the date of
sequestration therefore depends upon the true construction
of the relevant
provisions in the
Act.
It
was reaffirmed by
Smalberger JA
in
Public
Carriers Association and Others v Toll Road Concessionaries (Pty) Ltd and
Others
1990(1) SA 925(A) at 942I - 943A that the primary rule in the
construction of statutory provisions is to ascertain the intention
of the
legislature. He further observed that it is now weli established that one seeks
to achieve this, in the first instance, by
giving the words of the enactment
under consideration their ordinary grammatical meaning, unless to do so would
lead to an absurdity
so glaring that the legislature could not have contemplated
it. (
Venter v R
1907 TS 910
at 913-4;
Union Government (Minister of
Finance) v Mack
1917 AD 731
at 739;
Pick h Pay Retailers (Pty) Ltd v
Minister of Mineral and Enerqy Affairs
1987(2) SA 865(A) at 876 D).
Section 95(1)
of the
Act provides
as
follows:
6
"The proceeds of any property which was subject to a special mortgage,
landlord's legal hypothec, pledge or right of retention, after
deduction
therefrom of the costs mentioned in sub-section (1) of section
eiqhty-nine
, shall be applied in satisfying the claims secured by the
said property, in their order of preference, with interest thereon calculated
in
manner provided in sub-section (2) of section
one hundred and three
from
the date of sequestration to the date of payment, but subject to the provisions
of sub-section (4) of section
ninety-six."
Section 95(1)
thus specifically
provides for the payment of
interest, calculated in the manner provided in section
103(2), from the date of sequestration to the date of
payment.
Section
96(4)
has no bearing on the issue.
Section 103(2)
reads as follows:
"The interest mentioned in subsection (1) shall be calculated at the rate of
eight per cent per annum, unless the amount of any claim
bears a higher rate of
interest by virtue of a lawful stipulation in writing, when the interest on that
amount shall be calculated
at the stipulated rate of
interest."
Applying the said rule of construction to
the wording of
section 103(2)
it is in my view clear that its provisions
7
relate only to the
rate
at which interest is to be calculated, and not
to any other manner of calculating interest. A creditor is entitled in terms of
section 103(2)
to claim interest at the "stipulated rate", but there is nothing
therein which allows him to enforce any other contractual right
relating to
interest, such as an express stipulation for the payment of cpmpound interest.
The word "interest" standing alone, in
my view, denotes simple interest only.
Had the legislature intended to make provision for the payment of compound
interest by an
insolvent estate it could easily have done so, e.g. by allowing a
secured creditor to claim "any interest" stipulated for. (Compare
section 50(1)
of the
Act where
such words are in fact used).
It is true, as was pointed out by
Mr Nepgen
on behalf of the
appellant, that
section 95(1)
provides that interest on a secured claim shall be
calculated "in manner provided" in
section 103(2)
and not "at the rate"
therein
8
provided. Counsel submitted that where there is a contractual stipulation
governing the calculation of interest, the words "calculated
in manner provided
in subsection (2) of section
one hundred and three
" in
section 95(1)
really refer to the manner of calculating interest actually stipulated for by
the creditor. I fail to see how these words in
section 95(1)
can have the
alleged effect of extending the plain meaning of
section 103(2).
In any event,
it seems to me to be clear that in using the expression "in manner provided" in
section 95(1)
the legislature did not intend to say anything more than that
interest on the amount of a secured claim shall be calculated "according
to the
provisions" of
section 103(2).
This construction is supported, moreover, by the
wording of the Afrikaans version of
section 95(1)
, which incidentally is the
signed text. According to the Afrikaans version interest has to be calculated
"volgens die voorskrif van
subartikel (2) van artikel
honderd-en-drie
".
9
Counsel also relied on the appellant's right in terms of
section 103(2)
to
claim a "higher rate" of interest by virtue of a lawful stipulation. He
submitted that the payment of compound interest, which
was lawfully stipulated,
would yield a higher return and therefore a higher effective rate of interest.
In my view there is nothing
in the wording of
section 103(2)
to suggest that the
legislature had a "higher effective rate" in mind; the section merely refers to
a "higher rate". If counsel's
argument were correct the effect would be that a
claim for compound interest at the maximum rate permissible under the Usury
Act
would
inevitably lead to the payment not only of a higher rate of interest, but
a legally impermissible one.
The learned Judge in the Court
a quo
expressed the view that the
capitalization of interest involves a process whereby interest becomes capital
after a specified period
of time. Moreover, it appeared to the learned Judge to
be contrary to the intention of the
Act, and
the notion of a
10
concursus creditorum
, that the capital amount of a claim should
increase after sequestration. Counsel for the appellant submitted that this
approach was
incorrect inasmuch as the agreement to calculate interest on
accrued interest does not have the effect of converting interest into
capital.
He referred us in this connection to a
dictum
of
Innes CJ
in the
case of
Rooth & Wessels v Benjamin's Trustee and Another
1905 TS 624
,
at 633-634, where the learned Chief Justice rejected the contention that
interest becomes capital once it is capitalized. (See also
Volkskas Bpk v
Meyer
1966(2) SA 379 (T) at 380 G - 381 H). However, it is not necessary for
the purposes of this case to say any more about this aspect
of the matter.
I
am not persuaded that the legislature intended to make provision for the payment
of compound interest on a secured claim from the
date of sequestration of the
debtor's estate to the date of payment. In my judgment the appeal should
accordingly be dismissed.
11
In conclusion I would like to sound a note of warning that greater care
should be taken in preparing the record of the proceedings
to be lodged with the
Registrar of this Court. The record presented to us in this case contained a
wasteful duplication of the notice
of motion, the founding affidavit and all the
annexures thereto. Had the appeal succeeded a special order for costs may well
have
beeh considered.
For the reasons set out above the appeal is dismissed
with costs.
F H GROSSKOPF JA.
HOEXTER JA
MILNE JA
GOLDSTONE JA
PREISS AJA Concur.