South Africa: High Courts - Gauteng

IN THE HIGH COURT OF SOUTH AFRICA

(WITWATERSRAND LOCAL DIVISION)

CASE NO: A5008/2000

DATE:23/08/2000

In the matter between:

CERTAIN UNDERWRITERS AT LLOYDS...............................................APPELLANTS

and

SOUTH AFRICAN SPECIAL RISKS ASSOCIATION................................RESPONDENT

JUDGMENT

[1] It is with some hesitation that I dissent from my learned brothers more particularly because when I first began working on the judgment I came to the same conclusion as they did. I give short reasons for my dissent.

[2] The appellants in this appeal were the respondents in the court a quo. I refer to them as LLOYDS. The respondent in the appeal was the applicant in the court a quo. [3] I refer to it as SASRIA.

[4] The facts giving rise to this appeal have been set out by my brother Willis, J and I do not have to repeat them.

[5] I mention at the outset, however, that both parties were ad idem that the Arbitration Act, 1965 was not applicable to the appeal, presumably because the agreement to arbitrate was not wholly in writing.

[6] There was no agreement between the parties that interest would run on the amount which one or the other of them would have to pay the other as a result of any order made by Solomon, SC. They were however agreed at the appeal that the award would carry interest. The only dispute was whether interest would run from the date of the award of Solomon SC or from the date of the award of the appellate tribunal.

[7] The parties were ad idem that if they had not agreed on an appeal procedure then upon the making by Solomon SC of his award, LLOYDS would have been obliged forthwith to have paid to SASRIA the amount that SASRIA had prepaid. In other words interest would have run on the award from that date. SASRIA would have been in mora at that date.

[8] SASRIA insisted that there should be an appeal to an appellant tribunal. Not all the correspondence between the parties in regard to the appeal procedure was put before us but Mr Subel SC for the appellant contended that the mere fact that it had been agreed that there would be an appeal procedure, without more, resulted in Lloyds not having to pay interest on the award of Solomon SC from the date thereof but they would only have to pay interest once the appellate tribunal had given its award.

[9] The fact that Lloyds was not an actual party to the arbitration before Solomon SC does not affect the matter because the parties agreed that the arbitration before Solomon SC would determine their rights inter se. The fact that the effect of the award of Solomon SC was a declarator is irrelevant.

[10] See CIR v First National Bank Industrial Bank Ltd 1990(3) SA 641 (A) at 652H -653C where the following was said:

“To be in mora there must be a debt and the debt must be enforceable. (Steyn Mora Debitoris volgens die Hedendaagse Romeins-Hollandse Reg at 40; De Wet and Yeats Kontraktereg en Handelsreg I 4th ed at 147; Joubert (ed) Law of South Africa vol 5 para 203.) The Commissioner could not be in mora as regards repayment until such time as it was decided that a duty to repay existed. That was the very point of their understanding: that the money would only be refundable once it has been established (by a tribunal or by compromise) that the Commissioner misconstrued the statute and was obliged to repay the J money. Any claim by the Bank for repayment to be made prior to the determination of the dispute could be met by the Commissioner with the defence that such a claim would be premature and might yet prove to be idle.

That, in my view, is the short and simple answer to the Bank's contention: the Commissioner was not in mora and so cannot be liable for interest a tempora mora.

It does not really assist the Bank to contend, as its counsel did, that the order of the Court below did not create the Commissioner's obligation to return the money to the Bank but that it merely declared and gave effect to that obligation. That may well be so, once the order was granted. But that does not mean, as counsel suggested, that his obligation to repay did not remain in abeyance pending the judgment, and C consequently that it was forthwith enforceable, even before judgment. It was not, and the Bank itself never understood it to be, immediately repayable.”

[11] It is clear that had the parties resorted to the courts and not to arbitration mora interest on the judgment of the Court a quo would have run from the date of the order of the Court of first instance either as confirmed or as varied by the court of appeal.

[12] See General Accident Versekerings Maatskappy SA Bpk v Bailey N.O 1988(4) SA 353(A) where Smalberger JA said this at pages 357G - J and 359A:-

“Soos alreeds aangedui, dra elke vonnisskuld rent, luidens art 2(1) van Wet 55 van 1975, ‘vanaf die dag waarop die vonnisskuld betaalbaar is.’ Die vraag ontstaan, wanneer is ‘n vonnisskuld betaalbaar? In die gewone gang van sake is dit betaalbaar op die datum wanneer dit deur die uitspraak van die Verhoorhof bepaal word. Waar geen appèl aangeteken is nie dra die vonnisskuld gevolglik rente vanaf datum van uitspraak (tensy die Hof se bevel anders bepaal) -onderhewig egter aan die voorskrifte van art 21(1A) van Wet 56 van 1972. Indien daar appèl teen die uitspraak aangeteken word (hetsy teen die bevindings op die meriete, of die bedrag toegeken, of albei), word die inwekingtreding en tenuitvoerlegging van die Verhoorhof se bevel opeskort hangende die beslising op appèl (Reid and Another v Godart and Another 1938 AD 511), tensy die teendeel gelas word. As die appèl afgewys word, verval die opskorting. Meneer Scholtz, namens die appellant, gee toe dat in so ‘n geval, waar die vonnis overandered of wesenlik onveranderd bly (maar alleenlik in so ‘n geval), rente op die voonisskuld betaalbaar is vanaf die datum van die Verhoorhof se uitspraak. As rede hiervoor voer hy aan dat die afwysing van die appèl daarop neerkom dat die Hof van appèl die uitspraak van die Verhoorhof bekragtig as korrek van meet af aan. Dit stel nie ‘n nuwe vonnis daar nie. In teenstelling hiermee betoog mnr Scholtz dat waar die appèl slaag en die bedrag van die vonnisskuld gewysig word, hetsy deur dit te verminder of te verminder (by die geval waar die eiser geslaagd appelleer teen die quantum van die toegestaande bedrag), daar in albei gevalle ‘n ‘nuwe’ vonnisskuld ontstaan wat alleenlik betaalbaar is vanaf die datum van uitspraak van die Hof van appèl.

Die logiese uitvloeisel van hierdie betoog kan tot absurde en onbillike gevolge lei. Om maar enkele daarvan te noem. Sou ‘n eiser suksesvol teen die quantum van skadevergoeding wat toegestaan is, appelleer, en die bedrag daarvan word verhoog, verloor hy die rente wat hy op die aanvanklike bedrag, wat deur die Verhoorhof aan hom toe geken is, sou ontvang het as hy nie appèl aangeteken het nie-omdat daar nou kwansuis ‘n ‘nuwe’ vonnis is. Hierdie verlies van rente, oor die tydperk tussen die uitsprake van die Verhoorhof en die Hof van appèl, kan in ‘n bepaalde geval die voordeel van die geslaagde appèl verminder, heeltemaal ongedaan maak word die bedrag toegeken op appèl verminder, vanweë ‘n geslaagde appèl deur die verweeder, verloor die eiser ook alle rente oor die tussentydperk, selfs op die verminderde bedrag. Insgelyks, waar in ‘n derdeparty-aksie die quantum van die eiser se skade nie in geskil is nie, maar die verweerder slaag op appèl met ‘n verweer van bydraende nalatigheid aan die kant van die eiser, en die bedrag van die eiser se skade word dienooreenkmomstig verminder, sou die eiser rente op die verminderde bedrag ontneem word. Sulke onbillikhede druis in teen die oorheersende beginsel met betrekking tot die betaling van rente, nl om ‘n eiser te vergoed omdat geld wat hom toekom van hom weerhou is deur die verweerder wat intussen die voordeel daarvan geniet.

Die basiese denkfout in mnr Scholtz se benadering is om die uitspraak van die Hof van appèl, wat dit die Verhoorhof se bevel wysig, as ‘n ‘nuwe’ vonnis te beskou. Luidens art 22(b) van die Wet op die Hooggeregshof 59 van 1959, is ‘n Hof van appèl bevoeg:

‘Om die uitspraak of bevel wat die onderwerp van die appèl is, te bevestig, te wysig of tersyde te stel, en om enige uitspraak te gee of bevel uit te vaardig wat die omstandighede vereis’.

In die praktyk kom dit daarop neer dat die Hof van appèl sy uitspraak stel in die plek van dié van die Verhoorhof - hy gee dié uitspraak wat die Verhoofhof in die eerste instansie moes gegee het. Vandaar die gebruik om die bevel van die Verhoorhof te vervang met die van die Hof van appèl - kyk bv die bevel wat in die Bailey NO - Appèlhofbeslissing gemaak is (1984 (1) SA 98 op 121 A). Dit is nie ‘n ‘nuwe’ vonnis nie, asof ‘n Hof van appèl ‘n Hof van eerste instansie is (wat nie die geval is nie), maar die gewysigde vonnis van die Verhoorhof, dws die vonnis wat die Verhoorhof moes gegee het. Daardie vonnis moet gereken word om van krag te wees vanaf die datum wanneer die Verhoorhof uitspraak gegee het, met ander woorde dit het terugwerkende krag tot die datum van die Verhoorhof se uitspraak - juis omdat dit die vonnis is wat die Verhoorhof se uitspraak - juis omdat dit die vonnis is wat die Verhoorhof moes gegee het. Dat dit nog altyd so ingesien is, blyk, ten minste by duidelike implikasie, uit utisprake van onder andere hierdie Hof beide voor en na die inwekingtreding van art 2(1) van Wet 55 van 1975.”

[My underlining]

[13] See also Holmdene Brickworks v Roberts Construction Company Limited 1977 (3) SA 670 (A) at 692 F to G and Russell Loveday NO vs Collins Submarine Pipelines 1975 (1) SA 110 (A) at 156 F to H.

[14] I agree with Marais, J and my learned brothers that there is no reason in principle why the ordinary rules which apply to the suspending of a judgment by the noting of an appeal in the courts should not apply where an arbitration agreement provides for an appeal.

[15] The reasons given in General Accident Versekerings Maatskappy v Bailey N O as to why interest should run from the date of judgment in the court of first instance and not from the date of the judgment in the court of appeal applies also to arbitration. Common sense dictates that this should be so. For example it is unthinkable that a party to an arbitration should be entitled to lodge a frivolous appeal against an award, and thereby delay the period from which interest should run on the award.

[16] Of course the parties, by agreement, can vary the date as from which mora interest is to run. They may agree that mora interest should run only from the date of the decision of appellate tribunal. But that did not happen in this case. The parties agreed only that the matter should go to appeal, and nothing more. That brought into operation the principles referred to above. The obligation to pay interest from the date of the award of Solomon, SC was suspended pending the outcome of the decision of the appellate tribunal, it was not extinguished.

[17] The difference between the suspension of the obligation to pay mora interest on the award of Solomon SC and the extinguishment of such obligation was not appreciated by the appellant and constituted a fatal flaw in its reasoning. This is illustrated by what is said in paragraph 13 of the appellant’s heads of argument:

“Until such time as the appeal in the arbitration had been determined, any claim for a refund would have been premature. It is inconceivable that the parties could have intended that once the first arbitration award was published there would be an obligation to refund the amount paid in advance notwithstanding that the unsuccessful party in the first instance was exercising its right to appeal and an appeal was being proceeded with. It is unlikely that the parties contemplated that there must be a refund subject to a reversal of that refund in the event of the appellants being successful in the arbitration appeal. These factors support the appellants’ version of the agreement and of the tacit terms contended for by the appellants. Since repayment was not due until the liability had been finally determined, mora could not arise on the part of the unsuccessful party until the point of final determination. Mora interest could not therefore be claimed from a date prior to such determination.”

[18] There is also nothing in the award of Solomon SC which suggests that it is only when the appeal tribunal has given its award that LLOYDS would have to make payment of interest from the date of the appellant’s tribunals award. See Standard Bank of SA Ltd v Stama (Pty) Ltd at 1975(1) SA 730 (A) 745H - 746E.

[19] I am therefore satisfied that the effect of the appellate tribunal having made its award was that LLOYDs was obliged to pay interest from the date of the award of Solomon SC.

[20] I would dismiss the appeal with costs.

SIGNED at JOHANNESBURG on this the DAY of AUGUST 2000.

M B LABE

JUDGE OF THE HIGH COURT

WILLIS J:

[21] This is an appeal against the judgment of Marais J in which he ordered the appellants to pay the respondent R445 971,83 together with interest and costs. The amount he ordered be paid was the interest on a sum of money which the appellants were liable to pay the respondent and which the appellants have paid the respondent. The Court a quo granted leave to appeal to this Court.

[22] The respondent in the appeal was the applicant in the Court a quo. In order to avoid confusion, I shall refer to the appellants as “ Lloyds” and the respondent as “ SASRIA”. These were the terms of convenience used by counsel when arguing the appeal.