Ngcamphalala v Swaziland Development and Savings Bank (76/2012) [ 2013] SZSC 23 (31 May 2013);

group

Full judgment

IN THE SUPREME COURT OF SWAZILAND

JUDGMENT

Civil Appeal Case No.76/2012

In the matter between

KENNETH BHEKIZWE

NGCAMPHALALA APPELLANT

And

SWAZILAND DEVELOPMENT AND RESPONDENT

SAVINGS BANK

Neutral citation: Kenneth Bhekizwe Ngcamphalala vs Swaziland Development and Savings Bank (76/2012)[ 2013] SZSC 23 (31 MAY 2013)

Coram: S.A MOORE JA, M.C.B. MAPHALALA JA. and

E.A. OTA JA.

Heard 16 MAY 2013

Delivered: 31 MAY 2013

Summary: Civil procedure: Order of interest in terms of Memorandum of Agreement: Interpretation of order of interest on judgment debt at the rate of 9% per annum from date of judgment until date of payment: Whether order for simple interest or compound interest: Held: Order for simple interest: Appeal dismissed.

JUDGMENT

OTA. JA

[1] This case has run the gantlet. It began within the four walls of the Respondent bank as an employer and employee dispute which led to the termination of Appellant’s employment by the Respondent. Appellant pursued avenues of redress which eventually found their way to the Industrial Court under a certificate of unresolved dispute issued by the Conciliation, Mediation and Arbitration Commission.

[2] The Appellant’s claim before the Industrial Court was for re-instatement or alternatively, maximum compensation calculated at twenty-four months and costs.

[3] Suffice it to say that at the end of the day, the Industrial Court found that the Appellant was unfairly dismissed by the Respondent, and awarded him compensation in the sum of E264,516.00 for same, which amount was to be paid within 14 days from delivery of the judgment.

[4] The Respondent noted an Appeal to the Industrial Court of Appeal against the aforegoing orders of the Industrial Court. As an antecedent to the appeal, the parties executed a document styled Memorandum of Agreement, the effect of which was to stay execution of the judgment of the Industrial Court pending the appeal. The ipsissima verba of the Memorandum of Agreement which is the crux of this case is pertinent at this juncture. It states as follows:-

“MEMORANDUM OF AGREEMENT

The parties in the above matter have agreed that execution of the Court order in Case No. 26/2003 shall be stayed pending the determination of the Appeal against the judgment of the Industrial Court dated 17^th March 2005, in Case No. 26/2003, subject to the following conditions:-

In the event that the Applicant’s appeal is unsuccessful, theApplicant shall be liable to pay interest on the judgment debt in Case No 26/2003 at the rate of 9% per annum from date of judgment to date of payment.
The Applicant shall diligently prepare and lodge the record of the proceedings on appeal without delay to ensure that the appeal may be heard at the next session of the Industrial Court of Appeal.
This agreement shall be made an order of Court”.(emphasisadded)

[5] It is common cause that the Memorandum of Agreement was indeed made an order of the Industrial Court. Also common cause is that the Respondent lost the appeal at the Industrial Court of Appeal and clause [1] of the agreement on payment of 9% interest on the judgment debt automatically came into force.

[6] In an attempt to honour this provision, the Respondent promptly calculated the interest on a straight line and sought to pay. The Appellant rejected the calculation as not being in conformity with the agreement which he contends propounds compound interest. A dispute thus arose as to the interpretation of the clause on interest as appears in the agreement.

[7] It was against a backdrop of the aforegoing facts that the Appellant as Applicant, approached the High Court per M Dlamini J, contending for inter alia, that the Respondent pays him a sum of E26,369.09 being the difference in interest due and payable to him; interest on this amount at the rate of 9% per annum from 17 March 2009 to date of payment; payment of costs and disbursement in the sum of E5,000, as well as further and alternative relief.

[8] The record shows that on 14 September 2012, the Court handed down its decision wherein it upheld the Respondent’s case that the order of interest as per the agreement is simple interest. It dismissed the application and ordered each party to bear its own costs.

[9] The Appellant challenges this judgment in this appeal. He urged one lone ground of appeal which bears this tone:-

“The learned Judge erred by not holding that the words interest would be payable ‘at the rate of 9% per annum from date of judgment to date of payment’ meant that arrear interest if not paid would be capitalized and interest in the following year would be payable on the increased capital”

[10] It is important to note that the Respondent filed a Cross-Appeal dated 24 January 2012, in respect of which it sought condonation for its late filing. When this Appeal was heard, Mr M. Sibandze who appeared for the Respondent informed the Court that the Respondent was abandoning its Cross-Appeal. This was not opposed by Mr. S.C. Dlamini who represented the Appellant. In the circumstances, the Cross-Appeal and all processes filed in relation thereto, are hereby dismissed.

[11] Now, the appeal raises only one question to wit; whether the order of interest propagates compound interest or simple interest. The controversial clause [I] of the Memorandum of Agreement, which I recap at this juncture states :-

“the applicant shall be liable to pay interest on the judgment debt in Case No. 26/2003 at the rate of 9% per annum from date ofjudgment to date of payment”

[12] In dismissing the application and making a finding for the Respondent that the interest order is for simple interest, the Courta quo held as follows:-

“[21] From the above it is clear that the parties’ intention was to be specific on the date of commencement of the period upon which interest was to start running viz date of judgment which was 17^th March 2005 as can be deduced from annexure B page 6 of the book of pleadings.

[22] It was further to stop on the date of payment as one can read the words ‘to date of payment’. The words, per annum, is indicative of the ratio to be used in calculating the interest. For instance, if the payment was made by respondent in June 2007, the interest would be 9% x 21/4 award.

[23] The ratio by his Lordship Beadle in Central Africa Supra indicates therefore that the phrase interest at the rate of ---- per centum per annum should be given the ordinary meaning which is that interest should be calculated, to use applicant’s wording ‘straight line’

[24] Had the parties so intended that the interest calculated should differ from the day to day computation, the parties would have so contracted as was the case in Central Africa but for the insolvency of respondent company.

[25] Further, the wording so employed by the parties in casu is one used by our Courts on a daily basis in granting judgment together with interest following similar wording as in casu is on a straight basis.

[26] To hold otherwise would be contrary to the acceptable standard applicable in all matters where interest has been awarded. In other words, in the absence of an express wording that interest shall be computed cumulatively, I cannot agree with the submission by applicant”

[13] I cannot fault the aforegoing deductions and conclusions reached by the Courta quo. They are not only commonsensical but also accord with sound legal principles.

[14] I say this because the basic rules of interpreting the judgment or order of a Court are no different from those applicable to the construction of documents. The Court’s intention has to be ascertained primarily from the language of the judgment or order as construed according to the usual well-known rules. The judgment or order and the Court’s reasons for giving it must be read as a whole in order to ascertain its intention. See Civil Practice of Supreme Court of South Africa (4^th ed) Herbstein and Van Winsen page 689. In casu, since the interest order did not flow from the judgment of the Industrial Court but was a fall out of the Memorandum of Agreement between the parties, it must be interpreted by the cannon of construction of such contracts.

[15] The learning is that, when any contract has been reduced to the form of a document, the terms therein bind the parties and no extrinsic evidence may be give of such contract. It is however also the position of the law, that in certain circumstances where there exist an ambiguity in the contract, the rule may be relaxed and extrinsic evidence led of the surrounding circumstances until a sufficient degree of certainty as to the correct meaning of the contract is ascertained.

[16] I am fortified in my aforegoing views, by the Text Joubert Law of South Africa (vol 9) at para 538, where the learned author postulates:-

“Inadmissibility of extrinsic or parole evidence: When a jurat act is incorporated in a document, it is not generally permissible to adduce extrinsic evidence of its terms. Thus, when a transaction has been reduced to writing, the writing is regarded as the exclusive memorial of the transaction and no evidence may be given to contradict, alter, add to or vary its terms.”

[17] Speaking about the same issue in the case of National Board (Pretoria) (Pty) Ltd v Estate Swanapoel 1975 (3) SA 16 (A) at 26, Botha JA, quoting from the learned author Wigmore, states as follows:-

“This process of embodying the terms of a jurat act in a single memorial may be termed the integration of the act i.e it’s formation from scattered parts into an integral documentary unity. The practical consequences of this is that it’s scattered parts, in their former and inchoate shape, do not have any jurat effect; they are replaced by a single embodiment of the act. In other words: when a jurat act is embodied in a single memorial, all other utterances of the parties on that topic are immaterial for the purpose of determining what are the terms of their act”

[18] Then there is the position of the Court in the case of South African Railways and Harbours v National Bank of South Africa Ltd 1924 (AD) 704 at 715 – 716, where the Court declared thus:-

“The law does not concern itself with the working of the minds of the parties to a contract, but with the external manifestation of their minds. Even, therefore, if from a philosophical standpoint the minds of the parties do not meet, yet if by their acts their minds seem to have met, the law will, where fraud is not alleged, look to their acts and assume that their minds did meet and that they contracted in accordance with what the parties purport to accept as a record of their agreement”

[19] It follows therefore that in the absence of ambiguity, fraud or misrepresentation, the intention of the parties to an agreement must be gathered from the language used in the agreement and not from what either of them had in mind. The Courta quo also correctly in my view, reached this conclusion with reference to the case of Worman v Hughes and Others 1948 (3) S.A 495 at 5050 (AD), where the Court stated as follows:-

“It must be borne in mind that in an action on a contract, the rule of interpretation is to ascertain, not what the parties intention was, but what the language used in the contract means, that is what their intention was as expressed in the contract”

[20] Since this appeal turns on whether the order for interest was for simple interest or compound/cumulative interest, it is imperative for a proper construction of the agreement executed by the parties, that I assert here, that the quintessential common law principle which holds sway in casu, is that for a party to be availed of a claim for compound interest, there must be a special provision in either a statute or an agreement to pay that nature of interest.

[21] This is the overwhelming judicial accord as demonstrated by the case of South African Building Society v Pierce N.O. 1969 (v) SA 445 (RA). The statute that came under construction in that case was section 88 of the Insolvency Act of the Republic of South Africa, which provides that the rate of interest shall be calculated at 6 percentum per annum unless otherwise lawfully stipulated in writing. In coming to the conclusion that there is nothing in sections 88 (1) and 88 (3) of the Insolvency Act to indicate that interest due “from the date of sequestration to the date of payment” must be compounded, the court made the following apposite remarks:-

“So far as interest owing before the date of sequestration is concerned, therefore, such interest is clearly capitalized in the claim together with the capital sum owing and interest in terms of sec. 88 (1) must be paid on it. So far as interest accruing after the date of sequestration is concerned, however, the position here is the same as that relating to the appropriation of interim payments. If the Act, is silent on it, the common law rule must prevail. If therefore, compound interest is to be paid on it, there must be something in the Act which specifically provides for the payment of such interest. The relevant sections are sec. 88 (1) and sec. 88 (3) and there is nothing in these sub-sections to indicate that interest which may be due from the date of sequestration to the date of payment may be compounded. The Act is, therefore silent on this matter and that being so, one must look again to the common law to see what the creditors rights are. It is trite law that, unless there is some special provision in either a statute or an agreement to pay compound interest, compound interest is not payable; see Wessels, Law of Contract in South Africa, para 580 and Wille, The Law of Mortgage and Pledge in South Africa 2^nd ed, pp. 72 and 161”. (underlining mine) See Davehill (Pty) Ltd and Others v Community Development Board 1988 (1) SA 290 (A) page 291.

[22] It is by reason of the aforegoing, that I agree with the Court a quo that the interest order which is expressed to be on the judgment debt in case No. 26/2003 at 9% per annum from date of judgment to date of payment must be construed strictly according to it’s language, especially in view of the fact that this application is completely devoid of any allegation of fraud or misrepresentation.

[23] To my mind, this order in plain and unambiguous language makes interest payable on the judgment debt only and none other; the ratio being at the rate of 9% per annum notwithstanding how often interest is paid. This is clearly an order for straight- line or simple interest; which is defined byBlacks Law Dictionary as follows “ interest paid on the capital only and not on accumulated interest. Interest accrues only on the principal balance regardless of how often interest is paid”. It follows therefore in this context that no matter how long it takes for the judgment debt to be paid, the interest of 9% will run on the capital sum only.

[24] In contradistinction to the above, the compound or accumulated interest for which Appellant contends, is defined by Blacks Law Dictionary as “interest paid on both the principal and the previously accumulated interest” This is a specialized form of interest. Little wonder then the law requires that it should be expressly stipulated in a statute or an agreement to be availed of.

[25] The language of clause [I] of the agreement between the parties, for all intents and purposes, does not fall within the purview of this category of interest, and cannot be read or expanded to include such. I agree entirely with the Court a quo that if the parties had intended that interest should be compounded or cumulative they would have said so in unequivocal terms. This is not such a case.

[26] It is expedient for me to observe here that when this appeal was heard Mr. Dlamini conceded that the intention of the parties to an agreement can only be gathered from their language as expressed in the agreement. He, agreed that compound or cumulative interest does not lie as of course in all cases where interest is payable, but is dependant on the agreement between the parties. Mr Dlamini also conceded the fact that compound or cumulative interest is not ex facie the agreement between the parties in casu. Inspite of all these concessions, Mr Dlamini became ambivalent when he sought to insist, that since the interest is in arrear it must be capitalized and when so capitalized the total amount shall bear interest at the agreed rate and that the words “at the rate of” mean that the amount is moving not static.

[27] Counsel further argued that the effect of this order is that the arrear interest from the date of judgment which was 17 March 2005, until the date the bank sought to pay which was on 17 October 2009, should be added to the capital sum awarded, which increased capital shall bear interest at 9%. He argued that the straight line method of calculating the interest employed by the Respondent reduced the sum payable to Appellant by the amount claimed in the notice of motion a quo.

[28] Mr Dlamin’s proposition, when juxtaposed with the language of the interest clause, in my respectful view, falls foul the general principle on construction of such agreements, which I have hereinbefore elucidated in extenso. He failed to demonstrate to the Court the legal basis for the proposition and inference urged; save to refer us to the headnote in the case of Davehill (Pty) Ltd and Others v Community Development Board (Supra), where the following appears:-

“Compound interest (interest on interest) may be expressly stipulated for by agreement, is commonplace today in commercial and financial dealings and has been sanctioned by our Courts for many years. In principle there appears to be no reason why the right to claim interest on interest should be confined to instances regulated by agreement,and why it should not extend to the right to claim mora interest (which is a species of damages) on unpaid interest which is due and payable----- There is therefore in principle, no objection, to claim for mora interest on outstanding interest”

(emphasis added)

[29] The opening statement of Davehill (Supra) in my view, foreshadows the circumstances in which compound interest can be envisaged, which is that it is expressly claimed in an agreement, as I have hereinbefore demonstrated Davehill also expressed the view that nothing precludes compound interest from being claimed by way of mora interest on an outstanding interest. Whether this proposition is right or wrong is an inquiry for another day. The paramount factor to my mind, is that assuming Davehill is perceived to be correct in its analogy, this principle would still be inapplicable in casu. This is because the Appellant did not claim mora interest a quo. Nor can it be validly raised in this appeal. A Court we must always bear in mind cannot grant a relief not specifically claimed before it.

[30] As Ramodibedi CJ correctly adumbrated in The Commissioner of Correctional Services v Ntsetselelo Hlatshwako Civil Appeal No 67/09 para 7:-

“At the outset it is instructive to note that the first order setting aside the decision of the Disciplinary Board was not prayed for. Accordingly it was in my view incompetent for the Court a quo to make the order in the absence of an amendment to the Notice of Motion. This part of the order was unfair both procedurally and materially. It is trite a litigant can also not be granted that which he/she has not prayed for in the lis”. See also my pronouncement in Ezisheneni Kandlovu v Ndlovunga Dlamini and Another Civil Appeal No 58/2012 para 49.

[31] It appears to me therefore, that Davehill (Supra) does not take Mr Dlamini’s proposition any further, it rather in my view, defeats it. With respect, Mr Dlamini is embarked on a fishing expedition and hopes to drag the Court along with him. This Court cannot engage in such speculative adventure.

[32] On the whole, I see no misdirection on the part of the Court a quo to sustain this appeal. It fails.

[33] ORDERS

In the result, I make the following orders:-