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[2002] ZASCA 22
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Sasria Ltd [formerly South African Special Risks Insurance Assosiation] v Lloyds (Certain Underwriters At Lloyds) (511/2000) [2002] ZASCA 22; [2002] 3 All SA 57 (A); 2002 (4) SA 474 (SCA) (27 March 2002)
IN
THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
511/2000
In the matter between
SASRIA LIMITED [Formerly THE SOUTH
AFRICAN
SPECIAL
RISKS INSURANCE ASSOSIATION]
Appellant
and
CERTAIN
UNDERWRITERS AT LLOYDS
Respondent
________________________________________________________________________
CORAM:
HOWIE, STREICHER, MTHIYANE, BRAND JJA et HEHER AJA
________________________________________________________________________
Date heard:
11 March 2002
Delivered:
27 March 2002
Mora
interest : tacit term as to date when debt
enforceable.
________________________________________________________________________
J U D G M E N T
________________________________________________________________________
HOWIE JA
HOWIE JA
[1]
The parties to this appeal are insurers and
the question is whether the respondent is liable to pay the appellant
mora
interest. Fire damaged certain timber plantations
respectively insured by the parties. The cover afforded by the
appellant was
only operative - and the cover afforded by the
respondent was not operative - if the fire was caused by labour
disturbances. When,
as a result of the fire, claims were made under
the respective policies, the parties disputed which of them was
liable. To resolve
the impasse they agreed to make interim payments
to the various insured. To the amount of these payments the parties
contributed
equally. They also agreed that when the insured
proceeded against the appellant for final payments of their claims -
which claims
were due to proceed by way of arbitration - the result
of the arbitration would determine which of the parties was liable to
the
insured and, therefore, which would refund half of the interim
payments to the other. Subsequently it was agreed that the
arbitration
proceedings would provide for recourse to an arbitration
appeal tribunal. That the respondent was a party to this further
agreement
was never denied and as the insured and the respondent were
throughout represented by the same attorney it is a matter of
inescapable
inference that it was such a party. (The respondent is
sometimes referred to in the papers as "respondents". I
shall
adhere to the singular.)
[2]
The arbitrator found that the fire was not
caused by labour disturbances and in his award in effect absolved the
appellant. That
was on 20 August 1997. On 21 August 1997 the
appellant, through its attorneys, claimed the refund due to it
(R2,35m) and
mora
interest if payment was not made by 22
August 1997. However an appeal failed. The award of the appellate
tribunal was made on
22 September 1998. Between 2 November 1998 and
19 January 1999 the respondent made five payments towards liquidating
the refund.
[3]
In May 1999, having not received payment of
the full refund, and more particularly, having received no interest,
the appellant applied
to the High Court at Johannesburg for an order,
inter alia
for payment of the outstanding capital and for
interest on the unpaid capital balance outstanding from time to time.
[4]
The application came before Marais J who
considered that what the parties had meant by resolving their dispute
by reference to the
result of the arbitration, and whether
mora
interest was payable, had to be determined according to the
procedural principles applicable to appeals against money judgments.
On this footing the learned Judge held that although liability for
the refund was only finally determined when the appeal result
was
declared, the date when the refund became payable was the date of the
arbitrator's award and
mora
interest ran from that date.
[5]
The respondent appealed to the Full Court.
By a majority the appeal was upheld. Writing for the majority,
Willis J held that as
the parties' dispute was not itself the subject
of the arbitration the principles relied upon by the Court of first
instance were
irrelevant. The parties had decided that their own
dispute would depend simply on the result of the arbitration
proceedings.
It followed that the refund only became payable when
those proceedings came to an end on appeal. Before that no
mora
interest could accrue. In the minority judgment Labe J adopted much
the same approach as Marais J in the Court of first instance.
The
judgment of the Full Court is reported: see
2001 (1) SA 744
(W).
[6]
With the necessary leave, the appellant
seeks, in effect, restoration of the order of Marais J.
[7]
The majority judgment in the Court below
appears to rest essentially on the reasoning that if there was an
appeal, payment of the
refund would have to await the outcome of the
appeal, and that
mora
interest could not have run until the
capital debt was payable consequent upon the appellate award. To my
mind, if I may say so
with respect, those considerations are not
enough to provide the answer. Resolution of the essential issue on
appeal depends on
what the parties variously expressed and implied
(as construed in the light of the background circumstances) not as to
the payability
of interest (for the appellant disavows entitlement to
interest as a contractual term) but as to the due time for payment of
the
capital debt. Obviously, liability for
mora
interest
would follow inevitably if a debtor failed to pay a contractually
agreed monetary obligation when performance was due and
enforceable:
Bellairs v Hodnett and Another
1978 (1) SA 1109
(A) at 1145
D-H;
CIR v First National Industrial Bank Ltd
[1990] ZASCA 49
;
1990 (3) SA 641
(A) at 652 H-I.
[8]
What the application papers contain that is
presently relevant is sparse in the extreme. The founding affidavit
contains the following
allegation:
"Pending the arbitration, both applicant and respondent had
agreed to make interim payments to the insured on the basis that
once
their respective liability had been determined through arbitration,
the loser would refund the winner the amounts paid by the
winner".
[9]
In response, the respondent's opposing
affidavit contains the following:
"8.1 There was indeed an agreement reached between the applicant
and respondents in terms of which each of the applicant and
respondents would make payment of one-half of an agreed sum pending
the final determination of the matter through the arbitration
procedure.
8.2 The intention of the parties to that agreement was clearly that
upon the final adjudication of the matter, which in this instance
included the appeal procedure and final award in the appeal
procedure, the party that was successful would be reimbursed by the
other
party in such amount as was paid by the successful party
pendente lite
. By a successful party I refer to either the
applicant or the respondents in this application. Although the
respondents were
not cited as parties in the arbitration proceedings
nevertheless it was understood that as far as the applicant and
respondents were
concerned one or either of them would bear the
burden of indemnity in favour the claimants. Accordingly, in the
event of the claimants
not succeeding in the arbitration, the
applicant would be regarded as having been successful vis-à-vis
the respondents.
8.3 There was no express agreement in regard to payment of interest
on the amounts paid and/or advanced by each of the applicant
and
respondents. It was clearly tacitly understood however that until
such time as the arbitration was finally determined, which
in this
instance included the final adjudication after the appeal procedure,
there would be no entitlement either on the part of
the applicant or
the respondents to claim repayment from the other.
8.4 Having regard to what is stated above, I submit that there could
have been no obligation on the part of either the applicant
nor the
respondents to make repayment to the other until such time as the
appeal award was made in the favour of either the claimants
or the
applicant (the respondent in the arbitration proceedings) and,
accordingly, there can be no question of a party being in
mora
prior to that date. In fact, it was contemplated at the time of the
agreement between the applicant and respondents that should
the
applicant be successful, a reasonable period of time would be
required in order to enable the respondent to make funds available
for the purpose of payment to the applicant. On this basis it must
have been understood that the obligation to make payment would
not
arise until the expiration of a reasonable period of time after the
publication of the award in the appeal."
In the replying affidavit the appellant merely denied
those allegations and disputed the accompanying contentions.
[10]
Certain correspondence which passed between
the parties' attorneys was annexed to the founding affidavit. Very
little of it assists.
It suffices to refer to a letter dated 9
December 1996 in which the attorney for the respondent addressed the
appellant's attorney
as follows:
"We are in receipt of a copy of your client's letter to Price
Forbes in terms of which your client agrees to pay one half of
the
loss, the Lloyds Underwriters to pay the other half pending the
outcome of an Arbitration to decide which of your client or the
underwriters are liable. What now needs to be attended to is the
selection of an Arbitrator, the nomination of an Arbitration Panel
if
the parties require the latter, the fixing of the venue and other
logistical matters. Would you please let us have your views
on the
aforegoing as soon as possible".
[11]
Correspondence immediately following upon
that letter merely referred to details of the pending arbitration,
the pleadings in which
were filed during March - April 1997.
[12]
Concerning the procedure to be followed in
the arbitration, the appellant's attorney wrote to the respondent's
attorney a letter
dated 26 May 1997 in which, among other
suggestions, the question of the appeal was raised. The letter also
contained this paragraph:
"We should like to agree with you that if the claim fails, your
clients will, as a matter of course, refund the payments of
R1 750
000 and R600 000 together with interest at 15,5%, which amounts they
received by way of provisional payment, without prejudice."
(Obviously by "clients" the writer meant to
refer to the respondent and by "they" he intended to refer
to the
insured.)
[13]
Replying by letter dated 28 May 1997, the
respondent's attorney did not react to the appeal suggestion but, as
regards a refund,
said:
"As far as the refund of the money which has been paid to our
clients in the event of our clients not succeeding is concerned,
whilst the amounts will be repaid, at the time when payment was made
there was no
question of interest arising, we see no reason
for interest to be added to these amounts".
[14]
One cannot determine when the interim
payments were made or what passed between the parties at that time
other than the letter of
9 December 1996. It is also not apparent
from the papers when the availability of an appeal procedure was
finally decided upon but,
by inference, it must have been between 11
June 1997, when the appellant's attorney declared in a letter of that
date that the appellant
would not go to arbitration except with an
appeal procedure, and 16 June 1997, when the arbitration hearing was
scheduled to begin.
Here again, there is nothing on record to
establish what was said on behalf of the parties when the appeal
procedure was agreed.
[15]
For the appellant it was argued that when it
was agreed to provide for an appeal the parties must, in the
interests of commercial
efficacy, have had in mind that the usual
principles applicable to an appeal in civil litigation would apply.
These included the
suspension of the arbitrator's award pending
appeal and the retrospectivity of the appellate award to the date of
the arbitrator's
award in the event of a successful appeal. It
followed, so ran the argument, that the time for repayment of the
capital, and the
time when
mora
occurred, was the date of the
arbitrator's award.
[16]
On behalf of the respondent it was
contended, with particular reliance on the word "outcome"
in the letter of 9 December
1996, that the present parties, who were
not the parties to the arbitration, hitched the resolution of their
own dispute to the result,
not the process, of the arbitration. As
the capital was not payable before the result of the appeal was
declared, the respondent
cannot have been in
mora
before that.
In addition, so it was submitted, the correspondence quoted shows
that although interest was in contemplation before
an appeal was
provided for, there was nothing in the record to show that the
parties dealt with the subject of interest when they
eventually
agreed to the appellate procedure.
[17]
In deciding what the parties intended as
regards the due date for payment of the refund, the starting point
must be that when the
interim payments to the insured were made, and
certainly when the letter of 9 December 1996 was written, there
was only one
possible due date. With no appeal procedure in
contemplation the due date had to be the date of the arbitrator's
award. The evidence
reveals no alternative as at that stage. And
between then and the agreement to provide for an appeal nothing was
said or done which
altered the position. The focus is then squarely
on the latter agreement and what it entailed.
[18]
If the parties resolved upon a new due date
they must have done so contractually. In the absence of express
terms in this regard
the question must be whether there was agreement
by way of a tacit term.
[19]
The financial realities in the light of
which that question must be answered are clear and compelling.
Before an appeal procedure
was mooted there would have been no reason
to contemplate any appreciable delay between the date of the
arbitrator's award and the
refund payment.
However, when the parties agreed to the availability of
an appeal they must have foreseen that the eventual winner might be
kept out
of its money for a considerable time. The amount of the
refund due to the winner of the parties' dispute was in excess of R2
000
000. That is a substantial sum. Interest on it at 15,5 per
cent per year (the rate referred to in the correspondence and not
queried) would plainly be commercially significant. It is not
realistic to think that the parties were unaware of these
considerations.
The appellant, after all, was due to pay
mora
interest to the insured if it lost the arbitration. It would have
been anomalous, had it been liable for the refund, that it would
not
also have been liable to pay
mora
interest to the respondent.
The converse holds good, too, if it was for the respondent to refund
the appellant.
[20]
Whether a tacit term was agreed depends,
according to trite law, on the answers the parties would probably
have given to certain
crucial questions had they been asked at the
relevant time.
[21]
Plainly, what applied to the one applied to
the other. Their respective situations did not differ. Either the
one had to make
the required refund or the other had to. It was not
a case where they might have given differing answers.
[22]
At the time the letter of 9 December 1996
was written what was in dispute between the parties was the same
fundamental factual issue
that arose as between the insured and the
appellant in the arbitration i e whether the fire was due to a labour
disturbance. The
arbitrator's award would decide that question for
the parties. The effect of their agreement and the effect of his
award would
be the same as if the loser had been ordered to refund
the winner. In other words, properly construed, their agreement was
that
they would treat and react to the award as if it were a money
judgment against the loser. That was the position prior to the
question
of an appeal being raised.
[23]
If it had been pointed out to the parties
when they agreed to the appeal provision (assuming that it was not
present to their minds
before) that attaching refund liability to the
date of the appellate award instead of the date of the arbitrator's
award would result
in a material loss of interest to the winner of
their dispute, it is strongly improbable that they would have
switched the due date
to the date of the appellate award. Putting
it another way, if advised that that interest loss would not occur if
the principles
applicable to an appeal against a money judgment in
the context of civil litigation were applicable to the arbitration
appeal and
to their own position vis à vis each other, it
would, I think, have been their unhesitating and unified response
that those
principles were indeed to apply.
[24]
As to the submission on behalf of the
respondent that the appellant's attorney's letter of 26 May 1997
specifically raised the question
of interest, and that it was not
expressly dealt with when the parties decide to provide for an
appeal, there are several considerations
to be borne in mind. The
first is that a tacit term may exist not only where the contracting
parties have thought about the matter
but also where they have not.
The enquiry here is what they would have answered on the matter had
it been drawn to their attention
when the appeal procedure was
finally agreed to. The letter in question was written before that,
at a time when, although the issue
of a possible appeal was first
being suggested, the refund date was still to be the date of the
arbitrator's award. As mentioned
already, there would then have
been no cause to expect delay between that date and the payment of
the refund. The answer of the
respondent's attorney of 28 May 1997
that he saw "no reason for interest to be added" must be
read in the correct context.
In that context he was not
contemplating the ramifications of an appeal. He was addressing the
question of contractual interest
as from the date of the provisional
payment to the insured. In all these circumstances the
correspondence relied on by the respondent's
counsel does not
militate against the existence of the tacit term under discussion.
[25]
I conclude, therefore, that when the parties
agreed to provide for an appeal it was a tacit term of their
agreement, firstly, that
the due date for payment of the refund
remained the date of the arbitrator's award and, secondly, that if
there should be resort
to an appeal the arbitrator's award would be
suspended pending appeal and the appellate award would either leave
the arbitrator's
award undisturbed or reverse the incidence of
liability retrospectively to the date of the arbitrator's award.
[26]
It follows that
mora
interest was
payable by the respondent to the appellant from the date of the
arbitrator's award. The decision of Marais J was,
with respect,
correct and the appeal to the Court below ought to have failed.
[27]
These conclusions make it unnecessary to
consider whether the respondent was, in substance, a party to the
arbitration and subsequent
appeal. The impression that it was, does
tend to linger. If indeed it was, then a quite separate basis might
have existed for
the same finding adverse to it in this appeal.
That is a question one need not now pursue.
[28]
The appeal is allowed with costs. The order
of the Court below is set aside and replaced by the following order.
"The appeal is dismissed, with costs."
CT HOWIE
JUDGE OF APPEAL
CONCURRED
:
STREICHER JA
MTHIYANE JA
BRAND JA
HEHER AJA