THE SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case no: 915/2024
In the matter between:
SACTWU INVESTMENTS GROUP (PTY) LTD APPELLANT
and
SEKUNJALO INDEPENDENT MEDIA FIRST RESPONDENT
(PTY) LTD
SEKUNJALO INVESTMENTS HOLDINGS
(PTY) LTD SECOND RESPONDENT
Neutral citation: SACTWU Investments Group (Pty) Ltd v Sekunjalo Independent
Media (Pty) Ltd and Another (915/2024) [2026] ZASCA 39
(26 March 2026)
Coram: MATOJANE, SMITH and BAARTMAN JJA and VALLY and
NORMAN AJJA
Heard: 18 February 2026
Delivered: 26 March 2026
2
Summary: Law of Contract – loan agreement – whether the signatory to the
subordination agreement had actual or ostensible authority to conclude the
agreement – whether the subordination agreement is vitiated by mistake or is
voidable due to misrepresentation – whether the in duplum rule finds application in
relation to the calculation of interest on the capital amount of the loan where interest
had been capitalised over time.
3
ORDER
On appeal from: Western Cape Division of the High Court, Cape Town (O’Sullivan
AJ, sitting as court of first instance):
1 The appeal is upheld with costs, including the costs of three counsel.
2 The order of the high court is set aside and substituted with the following
order:
‘1 The plaintiff’s claim is upheld with costs , including costs of three
counsel.
2 Sekunjalo Independent Media (Pty) Ltd is liable to pay to SACTWU
Investments Group (Pty) Ltd, the amount of R458 606 995.07,
calculated as set out in Annexure A, attached to the parties’agreement.
3 Sekunjalo Independent Media (Pty) Ltd i s liable to pay interest from
29 August 2023 until the date of payment, on any amount then and
thereafter outstanding in respect of the amount payable to SACTWU
Investments Group (Pty) Ltd at the default interest rate provided in the
loan agreement.’
JUDGMENT
Norman AJA (Matojane , Smith and Baartman JJA and Vally AJA concurring)
Introduction
4
[1] This appeal has been brought by SACTWU Investments Group (Pty) Ltd
(SIG), with the leave of the Western Cape Division of the High Court, Cape Town
(the high court). On 16 April 2019, SIG brought an action for the recovery of
R150 million lent to the first respondent, Sekunjalo Independent Media (Pty) Ltd
(SIM), in August 2013 (the loan agreement). SIG is the investment vehicle of the
Southern African Clothing and Textile Union (SACTWU). SIG has SACTWU
Educational Trust as its sole shareholder. The parties agreed in the loan agreement
that its maturity date would be 14 August 2020. They also agreed that interes t was
to accrue on the loan amount due quarterly over the seven-year term of the loan. In
the event that SIM had insufficient funds to pay any accrued interest, then such
interest would be capitalised. The i ssues of liability and interest payable are for
determination in this appeal. SIM opposes the appeal.
Background
[2] During 2017, SIG faced challenges from a capital perspective and its dividend
income proved insufficient to make the necessary investments in the clothing
industry to preserve clothing businesses and prevent job losses. By 2017, no interest
payments had been made by SIM . SIG then decided to exit the loan agreement. It
had discussions with Dr Iqbal Surve of SIM about the exiting strategy. At that point,
SIM was merging its electronic and technology businesses into Sagarmatha
Technologies Limited ( Sagarmatha), which would list on the Johannesburg Stock
Exchange (JSE) and the New York Stock Exchange (NYSE). Dr Surve wrote to SIG
on 23 October 2017 and made a formal proposal that the second respondent,
Sekunjalo Investment Holdings (Pty) Ltd (SIH) , was offering to acquire all the
shares and loan claims that SIG has in and against SIM. The equity would be settled
by the issue of shares in Sagarmatha before its listing on the JSE. He further
informed SIG that Sagarmatha had attracted to its advisory b oard and as
5
shareholders, some technology billionaires from the USA, Holland, China,
Singapore, and India.
[3] That offer was accepted , and led to the conclusion of the sale agreement on
22 November 2017. In terms of the sale agreement , the parties agreed that SIG’s
claim of no less than R275 644 627, and its eight ordinary shares in SIM, were sold
for an aggregate purchase price of R334 164 627, plus any interest on the loan that
accrued up to the effective date. The effective date meant either the date on which
the Stock Exchange News Service (SENS) announcement is to be released , and if
no such SENS Announcement was released, the effective date would be the second
business day following the date on which the purchaser notifies the seller in writing
that the listing will proceed.
[4] The sale agreement further provided that on the effective date, the purchase
price shall be discharged by Sagarmatha allotting and issuing to SIG the shares
credited as fully paid up, at an issue price equal to the offer price. A cession would
take place in terms of which SIG’s claim under the loan agreement passed to
Sagarmatha. The parties agreed that SIG may not dispose of the shares for a period
of three months from the listing (the lock-in period). The lock-in period came about
because SIG intended to sell its shares in Sagarmatha as soon as possible after the
listing. Dr Surve wished to avoid that by proposing a lock -in period of six months,
which was, through negotiations, reduce d to three months. Sagarmatha was,
according to Dr Surve, going to become an African leader in e -commerce, digital
media, and syndicated technology ventures.
[5] On 22 November 2017, SIG’s board of directors passed a written resolution
authorising the sale agreement . The details of the resolution shall be dealt with later,
6
as they are relevant to the primary issue of whether Mr Andre Kriel (Mr Kriel), a
general secretary of SACTWU and one of the directors of SIG had authority to sign
the subordination agreement.
[6] On 1 December 2017, Mr Kriel, signed the subordination agreement in respect
of the loan agreement at Dr Surve’s offices. Mr Takudzwa Hove (Mr Hove) , a
chartered accountant, signed the subordination agreement on behalf of SIM some
days later. The Sagarmatha listing failed in April 2018, and consequently, SIG’s loan
was never transferred to Sagarmatha. The sale agreement became ineffective.
[7] Dr Surve came up with ways of repaying the loan to SIG after the listing
failed. At some point, he undertook to pay R120 million and to transfer shares valued
at R30 million to SIG. That promise never materialised. SIG subsequently sued for
repayment of the loan , and SIM defended the action , primarily relying on the
subordination agreement.
In the High Court
[8] SIG disputed the validity of the subordination agreement. It contended that
Mr Kriel lacked actual authority to conclude it. If it was found that the subordination
agreement was validly concluded, SIG argued that it was unenforceable or voidable
based on the doctrine of reasonable mistake or misrepresentation. It also relied on
three material representations that were made by Mr Hove to Mr Kriel, which,
according to SIG , were made with the intention of inducing SIG to enter into the
subordination agreement.
[9] Those representations were that: first, the subordination agreement would
only be utilised by SIM in the context and for the purpose of the listing of
7
Sagarmatha if and when the auditors of Sagarmatha and/or the JSE required SIG’ s
claim to be subordinated for purposes of Sagarmatha’s listing ; second, that the
auditors of SIM, Grant Thornton had called for the execution of the subordination
agreement to ensure that the creditors of SIM would not be able to enforce their
claims or apply for the liquidation of SIM during the period leading up to the listing
of Sagarmatha; and third, that the subordination agreement would in any event lapse
and be of no further force or effect, one week after the date on which Sagarmatha
was scheduled to list on the JSE. SIG further submitted that the in duplum rule does
not apply to capitalised interest.
[10] SIM abandoned its defence that the sale of Sagarmatha shares to SIG divested
SIG of its claim under the loan agreement , as it had passed to Sagarmatha on the
effective date. As stated earlier, SIM’s defence turned entirely on the subordination
agreement, namely, that by virtue of its terms, SIG is not entitled to demand or sue
for repayment under the loan agreement until s uch time that SIM’s auditors report
in writing that its assets exceed its liabilities. SIM further contended that Mr Kriel
derived actual authority from the resolution of the board of directors of SIG, passed
on 22 November 2017. In the alternative, SIM co ntended that Mr Kriel had
ostensible authority. Regarding interest, SIM contended that the in duplum rule
applies.
The High Court findings
[11] The high court made the following findings that have a bearing on the issues
before this Court: (a) that the subordination agreement, which was to give effect to
the transactions contemplated for the Sagarmatha listing, was in principle authorised
by the November 2017 resolution; (b) that it was not possible that Mr Kriel had been
given specific authority to sign a subordination agreeme nt that would lapse and be
8
of no further force and effect, one week after the date on which Sagarmatha was
scheduled to be listed on the JSE exchange; (c) that signing the subordination
agreement that enabled SIM’s financial statements to be prepared on a going concern
basis, which would facilitate the listing of Sagarmatha, clearly fell within Mr Kriel’s
authority. He thus had actual authority to sign it; (d) that SIG’s claim of lack of
authority point is impermissibly based on hindsight; (e) that the November 2017
resolution did not need to expressly mention a subordination agreement in order for
it to be included in the types of agreements which could be concluded by SIG ’s
directors; (f) that Mr Kriel , who had read the subordination agreement , could not
rely on iustus error in avoiding it, since the error was solely his fault; (g) that SIG
assumed the risk of Sagarmatha not listing; (h) that SIG’s defences based on
allegations of misrepresentation must fail; (i) the parties cannot by agreement
override or waive the in duplum rule and the interest consequently accumulates only
to the point of duplum; and (j) that the terms of the subordination agreement are
binding on SIG. For these reasons, the high court dismissed the claim with costs.
Before this Court
Issues for determination
[12] The primary issue is whether Mr Kriel had authority derived from the
November 2017 resolution to enter into the subordination agreement. In my view,
that issue is dispositive of the matter , and it may not be necessary to address the
issues such as misrepresentation or iustus error (justifiable mistake) should it be
found that he had neither actual nor ostensible authority. The other issue is whether
the interest that was payable in terms of the loan agreement was subject to the in
duplum rule by virtue of it having been capitalised.
Legal submissions by SIG
9
[13] SIG submitted that Mr Kriel did not have authority to bind it to the
subordination agreement because, properly interpreted, the board resolution relied
upon did not authorise him to do so. SIG relied on the established principles set out
in Natal Joint Municipal Pension Fund v Endumeni Municipality.1 The high court
erred in finding that the resolution authorised Mr Kriel to conclude the subordination
agreement on behalf of SIG.
[14] The high court further erred in finding that the subordination agreement is
related or incidental to the sale agreement . The high court further erred in finding
that Mr Kriel had ostensible authority to sign the subordination agreement.
[15] SIG submitted in the alternative that it is not bound by the subordination
agreement because it is vitiated by mistake or iustus error,2 in that SIM knew , or
ought to have known , that SIG did not intend to contract on the terms of the
subordination agreement, alternatively , the purported agreement was caused by
SIM’s misrepresentation. In the further alternative, the latter also renders the
subordination agreement voidable, and SIG elected to avoid it. Apart from the
misrepresentation, SIM knew or ought reasonably to have known that SIG’s
apparent expression of consensus was not in conformity with its actual intention. 3
SIG also relied on SIM’s subsequent conduct, after the listing failed, in that it
corroborated the fact that SIM placed no reliance on the terms of the subordination
agreement and made various alternative proposals to accommodate repayment of
SIG’s loan.
1 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; [2012] 2 All SA 262 (SCA); 2012
(4) SA 593 (SCA) paras 18-26 (Endumeni).
2 Sonap Petroleum (SA) (PTY) LTD (formerly known as SONAREP (SA) (Pty) Ltd) v Pappadogianis 1992 (3) SA 234
(A) at 239 G-H (Sonap).
3 Spes Bona Bank LTD v Portals Water Treatment South Africa ( Pty) Ltd 1983 (1) SA 978 (A) 984 E -F citing Smith
v Hughes (1871) LR 6 QB 597 at 607.
10
[16] SIG further asserted that the high court erred in its finding that the in duplum
rule applies in this case. SIG submitted that the loan agreement is not a pure loan
agreement but has elements of an investment agreement. It gave the debtor, SIM, an
election to delay interest payments. This is not a case where the debtor, from a policy
perspective, requires protection from the creditor as found in Bellingan v Clive
Ferreira & Associates CC and Others ,4 and should not apply in a case where the
debtor has contracted for and elected to defer interest payments. In this regard, it was
argued, the high court erred. SIG sought an order upholding the appeal with costs of
two counsel.
Legal submissions by SIM
[17] SIM argued that Mr Kriel had actual authority to conclude the subordination
agreement as it falls within the ambit of the resolution authorising him to conclude
any agreement related or incidental to the sale agreement and the implementation
thereof. In the alternative, Mr Kriel had ostensible authority.
[18] Furthermore, Mr Hove did not make any misrepresentations when he
informed Mr Kriel that the subordination agreement would fall away on
Sagarmatha’s listing. At the time of making this statement, Mr Hove did not consider
that Sagarmatha would not list. SIG cannot rely on a unilateral mistak e.
Capitalisation does not change the nature of the debt; it remains arrear interest, and
the in duplum rule applies.
[19] SIM further submitted that Mr Kriel had, at least, ostensible authority .
Ostensible authority is one instance of estoppel. It relied on Makate v Vodacom Ltd,5
4 Bellingan v Clive Ferreira & Associates CC and Others 1998 (4) SA 382 (W) at 401 B-C (Bellingan).
5 Makate v Vodacom Ltd [2016] ZACC 13; 2016 (6) BCLR 709 (CC); 2016 (4) SA 121 (CC), para 110.
11
for the contention that the majority judgment held that ostensible authority and
estoppel are not synonymous.6 A party cannot rely on its own mistake to avoid a
contract.7
[20] SIM relied on the principle of caveat subscriptor. It argued base d on that
principle that Mr Kriel, having read and signed the subordination agreement, is
bound by it. 8 SIM submitted that the high court correctly held that Mr Hove made
no misrepresentation to Mr Kriel. On the issue of the in duplum rule, SIM relied on
Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in
liquidation),9 for the contention that capitalisation of arrear interest does not change
its character from arrear interest to something different. In this case the unpaid arrear
interest has reached and exceeded the capital amount, it remains arrear interest, and
therefore, the in duplum rule applies as correctly found by the high court. SIM asked
for the dismissal of the appeal with costs of three counsel.
Discussion
The subordination agreement
[21] Given that the length and complexity of the subordination agreement were
central to the parties’ arguments concerning the reasonableness of Mr Kriel’s actions
and the relevance of the caveat subscriptor principle, I will reproduce it in its
entirety.
‘Memorandum of agreement
Between SACTWU Investments Proprietary Limited (“the Creditor”) and Sekunjalo Independent
Media Proprietary Limited (“the Company”) Whereas:
a. The Creditor is a substantial creditor of the Company.
6 Ibid, para 69.
7 Botha v Road Accident Fund [2016] ZASCA 97; 2017 (2) SA 50 (SCA).
8 George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) at 472A.
9 Standard Bank of South Africa Ltd v Oneanate Investments (Pty) Ltd (in liquidation) [1997] ZASCA 94; 1998 (1)
SA 811 (SCA); [1998] 1 All SA 413 (A) at 827 H-829 H (Oneanate Investments).
12
b. The Creditor has agreed to assist the Company by subordinating, subject to certain terms
and conditions, and together with the Government Employees Pension its claim(s) against
the Company in favour of and for the benefit of the other creditors of the Company.
c. It is desirable to record the matters agreed upon.
Now therefore it is agreed as follows:
1. It is recorded that as at 31 December 2016, the Creditor constituted a substantial creditor
of the Company in the amount of R243 986 857 for monies lent to the Company.
2. In order to assist the Company, the Creditor agrees, subject to 4 below, -
2.1 To subordinate for the benefit of the other creditors of the Company, both present and future,
so much of its claim (“the Subordinated Claim”) against the Comp any as would enable the
claims of such other creditors to be paid in full.
2.2 And hereby warrants that its claim s against the Company have not been ceded to any third
party and that no third party has any interest in the claims; the claim has been ceded and the
cessionary has been notified and has consented to the subordination;
2.3 That the claims of such other creditors of the Company, both present and future, will rank
preferentially to the Subordinated Claim of the Creditor against the Company; and
2.4 That in the liquidation of, or business rescue of, or compromise by the Company, it will not
prove or tender to prove a claim in respect of its Subordinated Claim, which proof would
reduce or diminish any dividend payable to other creditors, whether prese nt or future, and
accordingly, the Creditor hereby abandons that Subordinated Claim to the extent that it
would reduce or diminish the dividend payable to those other creditors.
3. It is intention of the parties that this agreement shall constitute a contract for the benefit of
other creditors of the Company, both present and future, and that the benefit shall therefore
be capable of express or implied acceptance by any or all of such creditors who may then
be capable of express or implied acceptance by any or all of such creditors who may then
enforce any terms of this agreement.
4. The subordination referred to in 2 shall remain in force and effect for so long only as the
liabilities of the Company, as fairly valued, exceed its assets, as fairly valued. This
subordination shall lapse immediately upon the date that the assets of the Company, as
fairly valued, and shall not, except by further agreement in writing, be reinstated if
thereafter the liabilities of the Company, as fairly valued, again exceed its assets, as fairly
valued, provided that for the purposes of this paragraph the liabilities of the Company, as
fairly valued, shall be deemed to continue to exceed its assets, as fairly valued, unless and
13
until the auditor of the Company has reported in writing, that he/she has been furnished
with evidence which reasonably satisfied him/her that the liabilities, as fairly valued, do
not exceed the assets, as fairly valued.
5. The Creditor hereby agrees that, until such time as the assets of the Company, as fairly
valued, exceed its liabilities, as fairly valued, and the auditor’s report referred to in 4 has
been issued, it shall not be entitled to demand or sue for or accept repayment of the whole
or any part of said amount owing to it by the Company and set -off shall not operate in
relation to the Subordinated Claim in respect of any debts owing by it now or in the future
provided that if the auditor of the Company reports in writing that he has been furnished
with evidence which reasonably satisfies him/her that the amount of the Subordinated
Claim exceeds the amount by which the liabilities of the Company, as fairly valued, exceed
its assets, as fairly valued, such excess portion of the subordinated claim as is specified in
the said certificate shall be released from the operation of this agreement.
6. It is agreed that from the date of signature hereto, notwithstanding that interest may accrue
on the Subordinated Claim, no interest will be paid by the Company on the Subordinated
Claim for so long as the subordination is in effect.
7. Should all or part of the Subordinated Claim be repaid, inadver tently or deliberately, then
the Creditor agrees that it will immediately refund to the Company the amount repaid.
8. The Creditor and the Company undertake that in the event of cancellation or variation of
this agreement in any respect, each will, as a condition precedent to the coming into force
and effect of such cancellation or variation, advise the auditor of the Company in writing
forthwith of the cancellation or variation.
9. The costs of and incidental to the preparation of this agreement shall be borne and paid for
by the Company.’
by the Company.’
[22] Ordinarily, a subordination agreement relates to a subordinated debt which
remains a liability of the debtor . The mere subordination of a creditor’s debt does
not automatically make the debtor solvent again.10
10 Ex Parte De Villiers and Another NNO: In Re Carbon Developments (Pty) Ltd (in liquidation) 1993 (1) SA 493 AD
at 504-505.
14
[23] It is not in dispute that Mr Kriel went to Dr Surve’s office to sign documents
that related to a separate ‘vendor finance deal ’. Mr Govender had vetted all
documentation related to the vendor deal. Mr Govender is an accountant and, at the
relevant time, was an executive director of Hoskin Consolidated Investments (HCI).
SIG is a major shareholder in HCI. SIG sought his advice on business and investment
matters.
[24] The subordination agreement was never shown to Mr Govender or vetted by
him, although he had been at Dr Surve’s offices an hour before Mr Kriel’s arrival to
vet all documents relating to the vendor finance deal. In fact , the subordination
agreement did not form part of the suite of agreements that were presented to
Mr Govender, and which were subsequently signed by Mr Kriel.
[25] It is common knowledge that there were no negotiations or discussions
regarding the subordination agreement between SIM and SIG prior to it s
presentation to Mr Kriel for signature. Mr Kriel testified that he did not read the
subordination agreement carefully, he read the first parts of it, it did not fall within
his area of expertise , and he did not pay attention to ‘every single legal or
commercial term.’
[26] Prior to signing the subordination agreement, Mr Kriel telephoned Mr Hove,
SIM’s chief financial officer, to enquire about its intention, purpose, and duration.
According to Mr Kriel, Mr Hove told him that the subordination agreement was
necessary for the listing of Sagarmatha; it was required by the auditors to facilitate
the listing; it would be for a limited duration; and it would ‘fall away seven days
after the listing was scheduled.’
15
[27] Mr Hove’s recollection of the telephonic discussion with Mr Kriel differed in
one material respect. He testified that when he was asked about the duration, he said,
‘the duration is of no consequence given that the claims in respect of the
subordination would lapse at the listing of Sagarmatha because Sagarmatha was
acquiring those claims.’ He denied mentioning a seven-day period.
[28] After speaking with Mr Hove, Mr Kriel telephoned Mr Govender and read to
him the first few parts of the agreement. Mr Govender testified that Mr Kriel reported
that Mr Hove had told him that the subordination was necessary for the listing, was
for a limited duration, and ‘would fall away a week after the listing took place.’ This
differed from Mr Kriel’s evidence, who had testified that it would ‘fall away seven
days aft er the listing was scheduled. ’ Based on the limited duration of the
subordination, Mr Govender told Mr Kriel to sign the subordination agreement.
[29] Under cross–examination, Mr Hove testified that he was almost certain that
he had seen the subordination agreement before it was sent to Mr Kriel. He stated
that in his understanding Mr Kriel was going to meet with Dr Surve and ‘was
expecting that Dr Surve in his meeting with And re would then ... take him through
the document and get a signature .’ The evidence showed that Dr Surve was not
present, and no one took Mr Kriel through the subordination agreement at Dr Surve’s
offices. Importantly, it is common cause that no one, including Mr Hove, explained
to Mr Kriel, Grant Thornton’s guidelines11 relating to the subordination agreement,
which directed specifically that reference to paragraph five of the subordination
agreement specimen should be drawn to the creditor’s attention, in this cas e, SIG.
11 The Grant Thornton’s guidelines that form part of the Record provide amongst others:
‘The creditor who has subordinated his/ her/ its claim should be informed that the subordination loan balance must
not be allowed to be reduced, except when the conditions as noted in the agreement have been complied with. (See,
for example, paragraph 5 of attached specimen agreement).’ The specimen agreement is the subordination agreement
quoted above.
16
That is the clause that conveys, amongst others, the open -ended nature of the
subordination agreement.
Did the November 2017 resolution authorise Mr Kriel to enter into the
subordination agreement?
Actual authority
[30] As aforementioned, the primary issue for decision is whether Mr Kriel had
authority to sign the subordination agreement that forms the subject matter of these
proceedings. This issue is dispositive of the matter because if it is found that
Mr Kriel did not have authority, that would render the subordination agreement void
and of no force or effect.
[31] Before dealing with the issue of authority, a close scrutiny of the
subordination agreement may provide a better context. SIG, as a juristic person, acts
through its agents. It is to the resolution taken by its board of directors that this Court
should look for authority , because a director has no inherent authority to bind the
company as he or she wishes. A director must act on authority conferred either
expressly or by implication.
[32] In Ditsoane v ACWA Power Africa Holdings (Pty) Ltd ,12 the Constitutional
Court remarked that:
‘Implied authority is a form of actual authority. If an attorney does something that is contrary to
the express instructions of the client, it is contrary to the attorney’s actual authority. The fact that
the attorney’s act would, but for the client’s express contrary instruction, have been within the
attorney’s implied authority does not convert the act from an unauthorised one into an authorised
one. However, the fact that the act would, but for the contrary instruction, have been within the
12 Ditsoane v ACWA Power Africa Holdings (Pty) Ltd [2023] ZACC 44; 2024 (3) BCLR 307 (CC); (2024) 45 ILJ 467
(CC), para 30.
17
attorney’s implied authority may be relevant in deciding whethe r the client is estopped from
denying the attorney’s actual authority.’
[33] In considering those sentiments where a company is involved, this Court dealt
with actual authority in Northern Metropolitan Local Council v Company Unique
Finance (Pty) Ltd and Others as follows:13
‘Actual authority may be express or implied. In Hely-Hutchinson v Brayhead Ltd and Another
(referred to with approval in NBS Bank Ltd v Cape Produce Co (Pty) Ltd and Others ) Lord
Denning MR expressed himself thus:
‘[A]ctual authority is express when it is given by express words, such as when a board of directors
pass a resolution which authorises two of their number to sign cheques. It is implied when it is
inferred from the conduct of the parties and the circumstances of the case, such as when the board
of directors appoint one of their number to be managing director. They thereby impliedly authorise
him to do all such things as fall within the usual scope of that office. Actual authority, express or
implied, is binding as between the company and the agent, and also as between the company and
others, whether they are within the company or outside it.’’
[34] There are broadly three categories of implied actual authority. First, implied
actual authority is that authority which is necessary or reasonably incidental to the
effective execution of the agent’s express authority. For instance, where the agent
has express authority to develop property for his principal, he will have implied
authority to do all such things as are reasonably incidental to the development of that
property, such as appointing architects to prepare plans. Alternatively, if an agent is
authorised to finalise an offer to purchase on behalf of a principal, they also have the
implied authority to handle related tasks, such as obtaining necessary compliance
certificates.14
certificates.14
13 Northern Metropolitan Local Council v Company Unique Finance (Pty) Ltd and Others [2012] ZASCA 66; 2012
(5) SA 323 (SCA); [2012] 3 All SA 498 (SCA), para 24 (Northern Metropolitan Local Council).
14 Hopkins v T L Dallas Group Ltd & Anor [2004] EWHC 1379 (Ch) (Hopkins); Coetzer v Mosenthal Ltd 1963 (4)
SA 22 (A); Kahn v Leslie & Sons 1928 EDL 416.
18
[35] Second, implied actual authority may be implied from the nature of the office
or the particular position to which the agent is appointed. This may be referred to as
implied usual authority. The appointment of a person as the managing director of a
company, for instance, may carry with it implied usual authority to enter into
contracts on behalf of the company and to do all such things as are within the usual
scope of that office.15 Where the board of directors appoint one of their members to
an executive position, they impliedly authorise him to do all such things as fall within
the usual scope of that office.16 Implied usual authority must be distinguished from
ostensible usual authority. Third, implied actual authority may arise as a reasonable
inference from the conduct of the principal, where the principal acquiesces in the
activities of the agent. An example of this category arose in Hely-Hutchinson v
Brayhead Ltd.17
[36] The November 2017 resolution must be looked at contextually, having regard
to, inter alia, the text, purpose, and the surrounding circumstances that led to it being
passed. It was not an ‘open sesame’ for any director of SIG to sign any agreement.
The directors’ authority was limited in that they were to do or cause ‘all such things
to be done, to sign and file all documents as may be reasonable and necessary, to
give effect to and implement each and/or every resolution set out herein’, that would
give effect to the implementation of the sale agreement.
[37] That context is provided both in the introductory summary preceding the
actual resolution and the resolution itself. The resolution, in the first part,
15 SA Securities v Nicholas 1911 TPD 450; Hely-Hutchinson v Brayhead Ltd [1967] 3 All ER 98 (CA).
16Hopkins at 572.
17 Hely-Hutchinson v Brayhead Ltd [1967] 3 All ER 98 (CA).
19
incorporated some of the terms of the sale agreement, such as the amount of shares
in SIM that SIG will sell to Sagarmatha, how the purchase price will be discharged,
and also the amount of the claim. It further recorded that a copy of the agreement
with the resolutions contained therein had been provided to the board for
consideration. The resolutions passed were recorded as follows:
‘3. Resolutions
3.1 Resolution 1
The terms and conditions of, and the transactions contemplated by, the agreement is hereby
approved, the company be and is hereby authorised to enter into and perform its obligations and
shall be bound in terms of:
3.1.1 the Agreement;
3.1.2 any other agreement, document, instrument, deed, notice or power of attorney related or
incidental to the agreement and/or th e implementation thereof (collectively, “the Related
Documents”) and any amendments to the Agreement and/or the Related Documents.)
3.2 Resolution 2
Any director of the Company, be and is hereby authorised, empowered and instructed, on behalf
of the Company, to do or cause all such things to be done, to sign and file all documents as may
be reasonable and necessary, to give effect to and implement each and/or every resolution set out
herein. Any actions which thus far been taken in this regard by any of the aforementioned be and
are hereby confirmed and ratified.’
[38] In Endumeni, this Court summarised the trite principles of interpretation as a
process of attributing meaning to the words used either in a contract or legislation,
by considering the language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears; the apparent purpose to which it
is directed and the material known to those responsible for its production.’18
18 Endumeni, para 18.
20
[39] The high court, in concluding that Mr Hove, acting as a reasonable person,
believed that Mr Kriel’s expressed intention was for SIG’s loan claim to be
subordinated in accordance with the terms outlined in the agreement, relied upon
Mr Kriel’s signature as evidence of both his express or apparent intention. However,
the high court did not give sufficient weight to the contextual factors , all of which
are essential as directed in Endumeni.
[40] The purpose of the November 2017 resolution was to enable SIG to exit the
loan agreement by authorising its directors to ensure that the sale agreement was
given effect to. That was its sole purpose. The loan agreement was going to be exited
by SIG in line with what was agreed to in the sale agreement, which was that on the
effective date the purchase price would be discharged by Sagarmatha, after its listing
on the JSE, by allotting and issuing to SIG the shares credited as fully paid up at an
issue price equal to the offer price. A cession would then take place in terms of which
SIG’s claim under the loan agreement would pass to Sagarmatha . Nowhere in the
sale agreement is there any mention of the subordination agreement.
[41] Mr Kriel understood that this resolution granted him the general mandate to
sign such documents and to do such things that would realise the mandate. The
mandate was that they would enter into a ‘loan swap’ or ‘share swap agreement’ ,
that would give SIG shares in Sagarmatha for the purpose of aiding it to be listed .
SIG would then sell those shares after three months to recover the loan. The
resolution was consistent with the terms of the sale agreement. The sale agreement
was predicated on the successful l isting of Sagarmatha. The resolution did not
explicitly or impliedly authorise Mr Kriel to subordinate SIG’s loan to the claims of
any other creditors of SIM until such time as SIM is declared to be solvent.
21
[42] According to Mr Kriel, he relied on the explanation from Mr Hove that the
subordination was for a limited period, needed by auditors to facilitate the listing ,
which would fall away seven days after the listing was scheduled. He also
understood that when the listing failed , the subordination agr eement was null and
void, ‘it was dead’ because it did not serve the purpose for which it was intended, as
explained to him by Mr Hove and as he understood it.
[43] It is the first category as explained in Northern Metropolitan Local Council,
that is implicated, namely, implied actual authority being that authority which is
‘necessary or reasonable’ to the effective execution of the agent’s express authority.
Whether it was necessary or reasonable to act, can only be determined by employing
the objective test. That is, evaluating the parties ’ words and conduct from the
perspective of a reasonable observer, rather than their subjective inner intentions.
[44] The resolution clearly refers to the sale of shares and claims agreement. The
sale of shares is between SIG and Sagarmatha and has a direct bearing on the exit
strategy. The resolution also recorded that the agreement pertaining to those issues
had been submitted to the board of directors of SIG. It appears therefrom that not
only was the sale agreement placed before the board, but the board applied its mind
to its terms by incorporating som e of them in its resolution doc ument, as stated
above.
[45] Most importantly, both the sale agreement and the resolutions were signed on
the same day, 22 November 2017. A subordination agreement that was placed before
Mr Kriel on 1 December 2017, some nine days after the passing of the resolution,
could not have been within the contemplation of SIG’s board when the resolution
was passed.
22
[46] The reference to the listing in the resolution is part of the record of the sale
agreement foreshadowed in the introductory part of the resolution that ‘the listing of
its shares on the Johannesburg Stock Exchange (the JSE) equals the purchase price
(fractions to be dealt with per Listings Requirements of the JSE)’, and nothing more.
It does not mean that a subordination agreement that is introduced for a completely
different pur pose, and whose effects or consequences were not even remotely
connected to the purpose for which the resolution was passed, is part of the authority
given to the directors of SIG. To do so, with respect, would undermine the resolution
itself.
[47] The reference to the shares in the resolution is to those that were to form part
of the exit strategy. SIG was intent on selling them after the lock -in period post the
listing. That, on any interpretation, could not mean what is contended for by SIM,
namely that SIG agre ed through the hand of Mr Kriel not to claim payment of its
loan indefinitely or until SIM became solvent in terms of the subordination
agreement.
[48] That contention is not supported by the objective facts because the plan that
Dr Surve came up with, which was negotiated and culminated in the sale agreement,
was meant to enable SIG to exit the loan agreement and recover its capital plus
interest. An indefinite subordination of its claim would prevent any form of exit
because it is linked to the state of solvency of SIM, the onset of which was unknown.
[49] Critically, neither the resolution nor the sale agreement made any reference to
a subordination agreement. The subordination agreement was not discussed with or
presented to SIG’s directors until 1 December 2017, nine days after the resolution
was passed. No director of SIG knew of the subordination agreement before it was
signed. Mr Govender also testified that in all his discussions with Dr Surve, the latter
23
never mentioned a need for a subordination agreement. Mr Govender’s evidence in
this regard stands uncontroverted because Dr Surve did not testify at the trial.
[50] Mr Hove, Mr Govender , and Mr Kriel may have believed that the
subordination agreement was related to the sale agreement and was limited in
duration. Factually, and contrary to their beliefs, the subordination agreement in
these proceedings is not related to the sale agreement and is for an indefinite period.
[51] Mr Kriel testified that he would not have signed the subordination agreement
if he had been aware of its open -ended nature, as it would have sterilised the loan
agreement. He relied on the representations made to him by Mr Hove that the
subordination agreement was for a limited period as it was going to fall away after
the listing. Under cross–examination the response of Mr Kriel to Mr Fagan was put
to Mr Hove:
‘Mr Kriel: Had Mr Hove said to me no this is not for a limited duration which [he did], he clearly
said to me this is for a limited duration , not his words but clearly it was a limit, it was to aid the
listing in other words, it was for a limited period, it would fall away within a defined period. Had
he taken the time to explain to me differently to say what is being presented to you for the first
time now, first time that you see this document is intended to be for an indefinite period I would
never have signed it, never.
Mr Kuschke: So, there is no doubt at least I would submit and it can be not little doubt at all in
anybody’s mind that had clause 5 which I was directing your attention in the context of this
question being drawn to the attention of Mr Kriel. And had it dawned on him if I can call it that
that is an unlimited and open-ended duration subordination agreement, he certainly would’ve said
to whoever was there it was nice to meet with you today but I am sorry I’m not signing this
document.
Mr Hove: Mm, yes
Mr Kuschke: Accept it
Mr Hove: Yes.’
24
[52] These responses evince that both Mr Kriel and Mr Hove shared the common
understanding that the subordination agreement w ould endure for a limited period
and would lapse after the listing. A subordination agreement limited in duration to
the period necessary for the listing process would undoubtedly be reasonable and
necessary. Such an agreement would facilitate the listing, enable the implementation
of the sale agreement, and protect SIG’s position if the listing were to fail.
[53] But an open -ended subordination agreement, which would continue
indefinitely even if the listing failed, cannot be described as ‘reasonable and
necessary’ to implement a transaction whose entire purpose was to enable SIG to
exit the loan through the listing. On the contrary, such an agreement would ensure
that if the listing failed, SIG would be left in a worse position than before, unable to
recover its loan, remediless and without the Sagarmatha shares that it had bargained
for.
[54] The resolution , properly interpreted, does not support the subordination
agreement. The failure of the listing clearly illustrates why an indefinite
subordination was not reasonable and necessary to implement a transaction designed
to facilitate SIG’s exit through a successful listing.
[55] According to Mr Hove, he conveyed to Mr Kriel that the subordination
agreement was required by the auditors for the listing. Mr Kriel accepted that the
subordination agreement was needed for the listing and so did Mr Govender. Both
Mr Kriel and Mr Govender testified that SIG was intent on recovering i ts loan
amount plus interest through the listing of Sagarmatha and the allocation of shares
25
to it, which it would sell three months after listing. According to Mr Kriel, he
understood that if the listing failed the subordination ‘would be dead.’
[56] When questioned about the purpose for which the subordination was signed
Mr Kriel stated that, ‘I would never have signed it. I have no authority to sign
something like that without reverting to my structures to get a mandate to do so. ’
His testimony in this regard supports SIG’s contention that he had no authority to
enter into the open -ended subordination. Mr Govender testified that if SIG signed
an open -ended subordina tion agreement SIG ‘ would not be able to exit their
investment’, if the listing failed. These responses are consistent with the exit plan as
contained in the sale agreement.
[57] The high court and the parties accepted that before Mr Kriel signed the
agreement, he did not contact any of the SIG board members. Mr Govender had not
seen the subordination agreement, and did not have any discussions regarding it
either with SIG or SIM. He gave Mr Kriel the go ahead to sign the agreement based
on the brief telephonic discussion with Mr Kriel and his statement -which rested
largely on what Mr Kriel was allegedly told by Mr Hove -that the subordination
would fall away after the listing.
[58] Mr Govender may have been the go-to man’ in SIG on matters relating to
contracts but, absent written authority from the board of directors, he possessed no
power in law to authorise the signing of the subordination agreement. There is no
evidence that SIG ratified the subordination agreement through its subsequent
conduct or other means. Furthermore, Mr Govender’s opinion or assumption s
conveyed to Mr Kriel regarding whether he required board approval to sign the
subordination agreement is irrelevant because he was not a director of SIG.
26
[59] It is common cause that there was no specific board resolution that authorised
Mr Kriel to conclude the subordination agreement. Mr Hove conceded that the sale
agreement and the subordination agreement were unconnected. The transcript before
the high court reveals that he was aske d whether the subordination agreement was
part of the transaction documents? In his response, Mr Hove indicated that ‘it came
about as a separate process. […] it was driven by the listing, and it came about as a
result of a need to get the financials signed. […] the commercial structure of the deal,
insofar as the swap, was a separate process to the subordination agreement. That’s
why I never combined the two insofar as the document was concerned. ’ (My
emphasis).
[60] It was properly conceded by the parties that the sale agreement and the
subordination agreement were entirely separate, each serving its own independent
purpose. The sale or swap agreement was intended to govern, among other things,
the repayment of the loan and interest. By contrast, the subordination agreement was
designed to sterilise the insolvency of the debtor on an ongoing basis , potentially
without end. In light of these fundamentally different objectives, the high court was
mistaken in its determination that the subordination agreement was ‘related or
incidental’ to the sale agreement. The two agreements addressed distinct matters and
were entered for distinctly different reasons.
[61] In sum, it follows that the finding by the high court that the subordination
agreement was related or incidental to the sale agreement, constitutes a misdirection.
The high court also erred in its findings that Mr Kriel had the requisite authority to
sign the subordination agreement. Authority is conferred by the reso lution and not
by the subjective expectations of the parties. The question is not what Mr Kriel or
Mr Hove anticipated but what the resolution authorised. Absent a written resolution
27
from the board of SIG, authorising the signing of the subordination agree ment by
Mr Kriel, SIG cannot be bound by it. I find that Mr Kriel lacked actual authority to
bind SIG to the subordination agreement. Based on these findings , this Court is at
large to interfere with the decision of the high court.
Ostensible authority
[62] On the alternative argument based on ostensible authority, Mr Hove testified
that he never saw a resolution authori sing Mr Kriel to sign the subordination
agreement. If SIM never saw the resolution it could not have relied on it as a
representation of authority. In Freeman and Lockyer v Buckhurst Park Properties
(Mangal) Ltd ,19 a case concerning the enforceability of obligations against a
company, the court set out the four-point test for establishing apparent or ostensible
authority. It listed the following: (a) a representation was made to the contractor that
the agent had authority; (b) the representation was made by someone with actual
authority; (c) the contractor was induced by the representation to enter the contract;
and (d) the company had the capacity to enter into the contract. Having regard to the
facts set out earlier, the four-point test was not satisfied.
[63] The evidence demonstrates that both parties were in agreement regarding the
purpose of the subordination agreement. It was understood by all involved that the
agreement was solely intended to facilitate the listing of Sagarmatha. Consequently,
the subordination agreement was envisaged to last only until the listing took place.
This temporary nature was central to its purpose and operation. Despite this common
understanding, Mr Kriel was, instead, presented with a pro -forma agreement
prepared by SIM’s auditors, which provided for the open-ended subordination of the
debt. SIM, as a result, failed to demonstrate that it altered its position to its own
19 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.
28
detriment based on reliance on the subordination agreement. Therefore, any claim
of prejudice arising out of the agreement is not supported by the evidence. At most,
SIM obtained an agreement it would not otherwise have obtained. That is not
prejudice;it is the loss of an unconscionable advantage.20 None of these requirements
have been satisfied by SIM, and the defence based on ostensible authority must also
fail.
[64] I do not deem it necessary to address innocent misrepresentation and mistake
or iustus error, because the resolution of the authority issue cuts across all the other
defences.However, in order to comply with the decision of the Constitutional Court
in Spilhaus Property Holdings (Pty) Ltd and Others v MTN and Another ,21 it is
sufficient to record the following findings with regard to misrepresentation and
iustus error. Mr Hove made specific representations to Mr Kriel regarding the nature
and purpose of the subordination agreement. He indicated that the subordination
agreement which he had reviewed and forwarded to Dr Surve’s offices , before it
was presented for signing to Mr Kriel, was effective for a limited period and was for
listing purposes. As an accountant and to whom the Grant Thornton guidelines
applied, he failed to bring to the attention of Mr Kriel the contents of paragraph five
of the subordination agreement. In his expl anation to Mr Kriel he described the
subordination agreement as if it w ere relevant to the listing itself, despite his
knowledge–later confirmed in his testimony–that it was, in fact, a separate process.
His actions therefore amounted to misrepresentation. At all relevant times relating
to the subordination agreement, Mr Hove was acting on behalf of SIM when he made
20 In Olex Focas Pty Ltd and Another v Skodaexport Co Ltd and Another O.M.P No. 232 (November 5, 1999) ,
unconscionability was held to include: (i) exploitation of vulnerability or weakness; (ii) abuse of a position of trust or
confidence; (iii) insistence upon rights in circumstances which make that harsh or oppressive; and (iv) inequitable denial
of legal obligations.
21 Spilhaus Property Holdings (Pty) Ltd and Others v Mobile Telephone Networks (Pty) Ltd and Another [2019] ZACC
16; 2019 (6) BCLR 772 (CC); 2019 (4) SA 406 (CC), at paras 44-45.
29
these misrepresentations. Consequently, the findings of the high court that there
were no misrepresentations constitute a misdirection.
[65] To avoid being bound to a signed document on the basis of iustus error
(justifiable mistake), the party relying on this defence must show (i) that they were
induced into the mistake either by the other party’s misrepresentation or by a
document that is itself misleading, and (ii) that a reasonable person in their position
would also have been misled. The test is objective and aimed at preventing abuse of
the defence.22 The question of iustus error is directly informed by the uncontested
testimony of Mr Kriel, who stated that the subordination agreement was not
explained to him when he visited Dr Surve’s offices. The agreement was presented
as if it belonged to the suite of documents associated with the listing, when it was
known to Mr Hove that it was not , but related to a separate process. Mr Hove
testified that he expected Dr Surve to take Mr Kriel through the agreement, but the
evidence confirms that Dr Surve was absent when Mr Kriel arrived. When Mr Kriel
telephoned Mr Hove to inquire about the subordination agreement, Mr Hove, a
chartered accountant, failed to properly clarify its purpose and significance. Instead,
he linked the agreement to the listing process and consequently induced Mr Kriel to
sign it. Mr Kriel was thus led to believe the subordination agreement was related to
the Sagar matha listing. He mistakenly accepted this connection and signed the
document under that impression. I find that a reasonable person in the position of
Mr Kriel would have been misled under the circumstances . These facts clearly
establish the requirements for reliance on iustus error.
22 George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) at 471A –D; Brink v Humphries & Jewell (Pty) Ltd [2004]
ZASCA 131; [2005] 2 All SA 343 (SCA); 2005 (2) SA 419 (SCA) paras 2–3, 7–8, and 11–12; See also Sonap where
this Court found in the context of objective, reasonable -reliance framework; there is a duty to speak where the other
party knows or ought reasonably to know of the mistake; See also Tshepe and Another v Rustia Feed (Pty) Ltd [2021]
ZASCA 104 (23 July 2021) para 47, Petse DP explained explained the two -limb, objective test to prevent abuse of
iustus error.
30
[66] I am satisfied that Mr Kriel was induced by Mr Hoves’s representation that
the subordination agreement was for a limited duration . A reasonable person in his
position would have been misled and h is mistake in signing the subordination
agreement was therefore justifiable. For these reasons I find that SIG is not bound
by the subordination agreement and it is of no force or effect. It follows that SIG is
entitled to claim repayment of its loan , which SIM had failed to pay. SIG must
accordingly succeed in its claim.
In duplum rule
[67] What remains for decision is the issue of whether the in duplum rule applies
to interest. Clause 3.3 read with clauses 1.2.33, 1.2.33, 1.2.43, 3.3.1, and 3.3.2 of the
loan agreement, regulate the payment of interest in terms of the loan agreement. I
will record them for context:
‘Clause 1.2.33: “Interest date” (means the date falling 3 (three) months from the Advanced Date
and each date falling 3 (three) months thereafter and each such date shall accordingly coincide
with the first day of an interest period, provided that the last interest date shall be the maturity date.
Clause 1.2.43. “Outstanding Amount” means, at any time, the aggregate amount outstanding under
the Facility, Including the Capital Advanced and not repaid, interest (including arrear, default and
capitalised Interest), costs, and all other amounts outstanding under this Agreement arising from
or in connection with the Facility.’
Clause 3.3 Interest:
‘3.3.1 The Facility shall bear interest at the Relevant Rate, which Interest shall be calculated daily
on the Outstanding Amount on the basis of a 365 (three hundred and sixt y five) day year and
calculated on the number of days elapsed. Such interest shall accrue on a day-to-day basis over the
Term and be compounded on each Interest Date.
3.3.2 All Interest accrued on the Outstanding Amount during each Interest Period shall be paid,
into the account specified in clause 14, to the Lender on each Interest Date provided that , to the
extent that the Borrower has insufficient funds to pay any accrued Interest on any interest date ,
then such interest shall be capitalised on that Interest Date.”
31
Clause 14 contains general payment provisions.
[68] SIG contends that the interest on the loan agreement , which had been
capitalised prior to the maturity date of 14 August 2020, does not fall foul of the in
duplum rule, as it did not comprise ‘arrear’ interest. It contended that because SIM
elected to delay payment of interest, the interest that accrued was not payable and
thus not in arrears. The loan agreement is not a pure loan agreement but has elements
of an investment agreement. The agreement was structured in such a way that SIM
could, at its election, delay payment of interest. The presence of this feature in the
agreement distinguishes this contract from those where the creditor (SIG) has
allowed the unpaid interest to accrue and reach the unpaid capital amount . Where
the interest accrued, but is not payable, it is not in arrears and thus not subject to the
in duplum rule. SIG contended that because interest in respect of the loan agreement
was contractually deferred, the in duplum rule does not apply as such interest does
not constitute arrear interest. In this regard, it relied on Bellingan.23 It also relied on
Sanlam Life Insurance Ltd v South African Breweries Ltd.24
[69] SIM, on the other hand, submitted that it is apparent from the agreement
reached between the parties on the quantification of SIG’s claim that the total amount
of interest considerably exceeds the capital amount, and the compound interest for
the period up to August 2020 in itself exceeds the capital amount. It was argued that
the fact that interest is capitalised , whether by agreement or by practice , does not
change the character of the debt; it remains arrear interest. In this regard, SIM relied
on Paulsen an d Another v Slip Knot Investments 777 (Pty) Ltd .25 SIM, further
23 Bellingan at 401 C.
24 Sanlam Life Insurance Ltd v South African Breweries Ltd 2000 (2) SA 647 (W).
25 Paulsen and Another v Slip Knot Investments 777 (Pty) Ltd [2014] ZASCA 16; [2014] 2 All SA 527 (SCA); 2014
(4) SA 253 (SCA) (Paulsen).
32
submitted that the parties cannot by agreement override the in duplum rule as found
by this Court in Oneanate.
[70] Merriam–Webster,26 defines ‘arrear’ as the state of being behind in the
discharge of duties, obligations or responsibilities; an unpaid and overdue debt.
‘Accrued interest’ is defined as interest earned since last settlement date but not yet
due or payable. ‘To capitalize’ is de fined as to compute, appraise, or estimate the
present value of income extended over a period of time. ‘Compound interest’ is
defined as interest paid or computed on the combined sum of the original principal
of a loan and interest accrued and payable at the end of each agreed period (as
monthly, quarterly, semi-annually, or annually).
[71] If one were to take the loan agreement herein , the capital amount was
advanced on 12 August 2013. The repayment date of the loan was 14 August 2020.
The debtor enjoyed non-payment of interest on the R150 million for seven years. It
failed to pay when it was called upon to do so. L itigation commenced on
15 April 2019, and the appeal was brought and heard by this Court some six years
later, on 18 February 2026. This is not an ordinary debtor that has purchased a motor
vehicle or a house that is bonded with a financial institution . This is a debtor who
had the benefit of a huge loan with the freedom to exercise an election not to pay
interest and let it accrue.
[72] In Margo and Another v Gardner, Gardner and Another v Margo and
Another,27 this Court found that as a rule, the in duplum rule is suspended during
litigation. It also found that a creditor is not prevented by the rule from collecting
26 Merriam–Webster, Third International Dictionary, Unabridged, Vol 1, at 121 (arrear); at 13 (accrued interest); at
332 (to capitalize); at 467 (compound interest).
27 Margo and Another v Gardner and Another , Gardener and Another v Ma rgo and Another [2010] ZASCA 110;
2010 (6) SA 385 (SCA) paras 11-12.
33
more than double the unpaid capital amount in interest, provided that he at no time
allows the unpaid arrear interest to reach the capital amount. This means that for as
long as the interest amount d oes not exceed the capital amount , the creditor is not
precluded from charging more interest . It is important to note that the fact that the
parties agreed, as recorded in clause 3.3.1, that interest shall be calculated daily on
the outstanding amount on the basis of a 365-day year and calculated on the number
of days elapsed. Such interest shall accrue on a day-to-day basis over the term and
be compounded on each interest date, does accord with the interpretation in Paulsen
that it remains arrear interest.
[73] The fact that it is not payable does not detract from the fact that it is calculated
daily and on the number of days elapsed. Even the capitalisation of interest refers to
interest that has not been paid because, for example , the debtor does not have
sufficient funds to pay accrued interest on t he interest date (as provided in
Clause 3.3.2). This means that the debtor failed to meet its obligations by not paying
on the interest date. Simply put, it is in arrears with payment of interest.
[74] Having said that , one cannot overlook the policy and public interest
considerations that this Court expressed i n Oneanate Investments .28 This Court
emphasised the critical role of the in duplum rule within the legal framework,
highlighting its function as a measure grounded in public policy. The primary
objective of this rule is to protect borrowers from the ongoing accumulation of
excessive interest, particularly in circumstances where a lender may choose not to
recover the interest immediately, thereby allowing interest to continue accruing
unchecked. Such a scenario would impose an undue burden on borrowers and could
have adverse consequences for the broader economy. By limiting the amount of
28 Oneanate Investments at 834 A-I.
34
interest that may be charged, the in duplum rule ensures that borrowers are not
subjected to oppressive financial obligations, thereby promoting fairness in lending
practices and contributing to economic stability. Although this was decided in the
context of banking institutions, it applies here equally. The danger of moving away
from the in duplum rule is that lenders or creditors could structure loans that were
repayable in seven years, interest payments deferred based on the liquidity of the
debtor, interest is capitalised, and it would easily escalate exponentially above the
capital amount. That would result in boundless interest. In this case, the capitalised
interest is interest that the debtor did not pay on the interest date, and it is accordingly
arrear interest.
[75] The high court, after a thorough exposition of the law on the in duplum rule
and the contractual terms between the parties in relation to interest, found that
interest that is by agreement capitalised every three months during the term of the
‘soft loan’ is to be regarded as arrear interest. In Paulsen,29 this Court confirmed that
position and stated:
‘Once interest is payable on a debt the in duplum rule potentially comes into play. The effect of
that rule is clear. Where a debt is owed and bears interest, the amount of such interest may not
exceed the capital amount. It was argued that this restriction only applied to arrear interest but, as
the cases show, that expression merely means the accumulated interest on the amount in arrears.
It excludes amounts already paid by way of interest and relates only to interest that has accrued
but is unpaid.’
[76] I agree with its finding that, in accordance with established principles, the fact
that interest has been capitalised , whether by agreement or by practice , does not
change the character of the debt, it remains arrear interest . As found in Oneanate
29 Paulsen, para 17.
35
Investments ‘[i]nterest remains interest and no methods of accounting can change
that.’30
[77] An article by Vessio,31 states that the prohibition on interest in duplum rule is
not limited to money–lending transactions but applies to all contracts arising from a
capital sum owed, which is subject to a specific rate of interest. I find that in line
with established principles, the high court was correct in its decision that the interest
accumulates only to the point of duplum. No case has been made for this Court to
interfere with the finding of the high court in this regard. It follows that the
submissions made by SIG in this regard must be rejected.
[78] Having said that , at the hearing of this appeal , the parties brought to the
attention of this Court an agreement reached by them on 2 August 2023, where they
agreed to, inter alia, limit issues. That agreement forms part of the appeal record. In
their submissions, both parties relied on it. They agreed on the following order in the
event the defences raised by SIM fail, that:
‘SIM shall be liable to pay to SIG:
3.1. The amount of R458 606 995.07, calculated as set out in Annexure A hereto;
3.2 Interest from 29 August 2023 until date of payment, on any amount then and thereafter
outstanding in respect of the amount set out in paragraph 3.1 above, at the default interest rate as
provided in the Loan Agreement., a copy of which is annexure “ POC1’ to the plaintiff’s particulars
of claim.’
[79] The parties agreed to be bound by what is contained in Annexure A, which
consists of the calculations upon which the amount in 3.1 of its agreement is based,
30 Oneanate Investments at 827H – 829H.
31 Monica L Vessio ‘A limit on the limit on interest ? The in duplum rule and the public policy backdrop’ (2006) 39
De Jure at 26-27.
36
and therefore , this Court has no basis to question it. In Eke v P arsons,32 the
Constitutional Court remarked that while courts must exercise judicial oversight to
ensure that settlement agreements are lawful, they should not arbitrarily interfere
with or question agreements freely reached by parties, as this violates the pacta sunt
servanda principle and the right of the parties to settle disputes.
Costs
[80] On the issue of costs, there is no reason to depart from the usual rule that the
successful party should be entitled to its costs. The parties agreed that costs of three
counsel would be appropriate.
[81] For all the reasons advanced, the appeal should succeed with costs, such costs
to include costs of three counsel.
Order
[82] In the result, the following order is made:
1 The appeal is upheld with costs, including the costs of three counsel.
2 The order of the high court is set aside and substituted with the following
order:
‘1 The plaintiff’s claim is upheld with costs , including costs of three
counsel.
32 Eke v Parsons [2015] ZACC 30; 2015 (11) BCLR 1319 (CC); 2016 (3) SA 37 (CC).
37
2 Sekunjalo Independent Media (Pty) Ltd is liable to pay to SACTWU
Investments Group (Pty) Ltd, the amount of R458 606 995.07,
calculated as set out in Annexure A, attached to the parties’agreement.
3 Sekunjalo Independent Media (Pty) Ltd i s liable to pay interest from
29 August 2023 until the date of payment, on any amount then and
thereafter outstanding in respect of the amount payable to SACTWU
Investments Group (Pty) Ltd at the default interest rate provided in the
loan agreement.’
_______________________
T V NORMAN
ACTING JUDGE OF APPEAL
38
Appearances
For the appellant: L Kuschke SC (with J Engelbrecht and M Tsele)
Instructed by: Edward Nathan Sonnenbergs Inc., Cape Town
C/o Lovius Block Inc., Bloemfontein
For the respondents: E Fagan SC (with N Mauritz and J Moodley)
Instructed by: Abrahams Kiewitz Inc., Cape Town
C/o Webbers Attorneys, Bloemfontein.