At
the pre-trial conference, held on 8 September 2005, the defendants
admitted owing the plaintiff the aggregate sum of $500 million made
up of capital of $250 million and interest of $250 million….,.
WHETHER
OR NOT THE DEFENDANTS ARE LIABLE TO PAY INTEREST ON BOTH CAPITAL AND
INTEREST ON THE SUM OF $500 MILLION FROM THE ...
At
the pre-trial conference, held on 8 September 2005, the defendants
admitted owing the plaintiff the aggregate sum of $500 million made
up of capital of $250 million and interest of $250 million….,.
WHETHER
OR NOT THE DEFENDANTS ARE LIABLE TO PAY INTEREST ON BOTH CAPITAL AND
INTEREST ON THE SUM OF $500 MILLION FROM THE DATE OF SUMMONS TO THE
DATE OF FULL PAYMENT
The
second issue deals with the question of when interest commences to
run after reaching the in
duplum
level, that is, whether it commences to run from the date of the
service of summons or from the date of judgment.
Counsel
for the plaintiff contended that it commences to run from the service
of summons, while counsel for the defendants was of a contrary view,
submitting that it starts to run from the date of judgment.
The
plaintiff's witness, Dumisani Sibanda, in his testimony, stated
that the Bank was entitled to interest beyond in
duplum
because the money owed to the Bank remained an outstanding cost to
the Bank as the Bank finances this expense from the Bank's own
reserves from which it should be earning further income.
The
in
duplum
rule remains part of our law. See:-
1.
Commercial Bank of Zimbabwe Ltd v MM Builders and Suppliers (Pvt) Ltd
and Others
1996 (2) ZLR 420 (H)…,.
2.
Georgias & Anor v Standard Chartered Finance Zimbabwe Ltd 1998
(2) ZLR 488 (S).
3.
Ehlers v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H)…,.
4.
Conforce (Pvt) Ltd v City of Harare 2000 (1) ZLR 445 (H).
It
is also firmly entrenched in the South African Law. See;
1.
LTA Construction Bpk v Administrator Transvaal 1992 (1) SA 473 (A)…,.
2.
Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1995 (4) SA
511…,.
3.
Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA
811 (SCA)…,.
In
the South African Supreme Court of Appeal case of Standard Bank of SA
Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA 811 (SCA)…, ZULMAN
JA stated:
“It
is undoubtedly part of our law. It provides that interest stops
running when the unpaid interest equals the outstanding capital.
When, due to payment, interest drops below the outstanding capital,
interest again begins to run until it once again equals that amount.”
In
Zimbabwe, GILLESPIE J, with the concurrence of SMITH J and BLACKIE J,
in Commercial
Bank of Zimbabwe Ltd v MM Builders and Suppliers (Pvt) Ltd and Others
1996 (2) ZLR 420 (H)…,
stated:
“In
conclusion, the result of this investigation is such as to persuade
me that it is a principle firmly entrenched in our law, that
interest, whether it accrues as simple or as compound interest,
ceases to accumulate upon any amount of capital owing, whether the
debt arises as a result of a financial loan or out of any contract
whereby the capital sum is payable together with interest thereon at
a determined rate, once the accrued interest attains the amount of
capital outstanding.”
The
issue that confronts me relates to whether or not, after the double
is reached, interest commences to run afresh, and, if so, at which
stage and on which amount.
GILLESPIE
J, in Commercial
Bank of Zimbabwe Ltd v MM Builders and Suppliers (Pvt) Ltd and Others
1996 (2) ZLR 420 (H)…,
confirms that interest starts to run again and it does so from the
date of judgment. He states:-
“Upon
judgment being given, interest on the full amount of the judgment
debt commences to run afresh but will once again cease to accrue when
it waxes to the amount of the judgment debt, being the capital and
interest thereon for which the cause of action was instituted.”
Counsel
for the defendants urged me to follow Commercial
Bank of Zimbabwe Ltd v MM Builders and Suppliers (Pvt) Ltd and Others
1996 (2) ZLR 420 (H)
on the basis that it is highly persuasive as it was a decision of a
three-judge panel of this court. Counsel for the plaintiff,
on the other hand, submitted that I should follow the persuasive
authority of the Supreme Court of Appeal in South Africa in Standard
Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA 811
(SCA). She submitted that it overturned the earlier decision of
SELKOWITZ J in the Cape Provincial Division, which decision she
contended GILLESPIE J had followed. She referred to the local case of
Ehlers
v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H),
in which MALABA J came to a conclusion contrary to that of GILLESPIE
J et
al.
Ehlers
v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H)
was an application for condonation co-joined with an application for
a partial rescission of a default judgment. Ehlers
submitted that he had prospects of success on appeal as the interest
that had been levied on him, which was confirmed by the default
judgment, ran foul of the in
duplum
rule.
MALABA
J dismissed both applications holding that there were no prospects of
success against the default judgment as Ehler
was not only in willful default but had no prospects of success as
interest in excess of the double commenced to run again on the date
of service of the summons. At page 139G-140B he stated:-
“The
learned judges preferred the view that interest only commences to run
anew as from the date of judgment. I must, with respect, express my
dissent from the decision in Commercial
Bank of Zimbabwe's case supra
on the date on which interest commences to run afresh in a case where
the in
duplum
rule applies. This view of the law does not give effect to the policy
behind the in
duplum
rule, nor does it recognize the discretion enjoyed by the court in
the matter. In Georgias
& Anor v Standard Chartered Finance Zimbabwe Ltd
1998 (2) ZLR 488 (S) at 495D GUBBAY CJ said that the in
duplum
rule is based upon a public policy designed to protect borrowers from
the exploitation of lenders by prohibiting usurious abuse. The
principle that interest commences
to run afresh from the date of litis
contestatio,
which, in this case, is the date of service of summons, is based upon
the recognition of the fact that from that date the creditor ceases
to be in control of the process by which interest accumulates.”
The
learned judge dissented from GILLESPIE J's decision on the basis
that levying interest from the date of judgment did not give effect
to the public interest sought to be protected by the in duplum
rule, and, secondly, that making it an immutable rule cast in stone
tended to deprive judges of their discretion in the matter.
In
my view, he did not hold that in all matters involving interest above
the double that interest starts to run after the date of service of
summons. The date of service of summons in Ehlers
v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H)
was the date on which the parties were deemed to have joined issue
(litis
contestatio).
Litis
contestatio
is reached at the time that pleadings are closed.
Ehlers
v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H)
therefore
does not support counsel for the plaintiff's
contention.
The
effect of ZULMAN JA's decision, in Standard Bank of SA Ltd v
Oneanate Investments (Pty) Ltd 1998 (1) SA 811 (SCA), was to order
interest to run from the date of service of summons (the 26th
of
November 1990 in that case). The learned Judge of Appeal was in no
measure influenced, in arriving at his decision, by the delay in
concluding the matter before him which had started in 1990. He held
that public policy considerations would not favour the debtor who
kept the creditor who had timeously instituted recovery but was
frustrated by delays endemic in the legal system out of his money
when interest is the lifeblood of finance in modern times. It was his
conclusion that such a creditor could not be held to have exploited
the debtor.
The
conclusion of ZULMAN JA, with respect, is difficult to follow, and
appears out of sync with his reasoning on the entrenchment of the in
duplum
rule
in our law.
He
recognized that it was part of our law (at 827H). He accepted that
interest did not lose its identity whatever label it was given (at
828-I to 829-A). He recognized that the rule in Clayton's
case,
as to appropriation, is a presumption of fact (831E). Thus far, the
learned Judge of Appeal acknowledges the in
duplum
rule.
It
is difficult to reconcile the learned judge's conclusion with the
opinion he states on page 832H. He poses the question:
“If,
during the course of litigation, the double is reached, whether
interest stops running and only begins to run again once judgment is
pronounced.”
His
preliminary response to that rhetorical question is that:-
“There
is no dispute that in this case the Bank is entitled to interest as
from the date of judgment at the agreed rate and in spite of the
double having been reached.”
The
difficulty presents itself further when the learned judge surveys
commentaries of Van
der Keessel, Scheltinga, Van Bynkershoek, Huber, Ganes
translations from Huber
to Carpzovius and Sande.
This survey resulted in the finding that a judgment cannot, and does
not, novate the original debt.
The
effect of the conclusion resulted, with respect, in the proverbial
throwing away of the baby with the bath water. It undermined the in
duplum
rule and made it irrevelant especially on the basis of unproven
suspicions that in the olden times legal interests were low. The
suggestion begged the question of the necessity of introducing such a
rule of law as the in
duplum.
If necessity is the mother of invention, clearly the rule came into
being because, at some point in our dim past, hyperinflation must
have reared its ugly head.
I
decline to follow the Supreme Court of Appeal decision in South
Africa not only for the reason that it undermines, before judgment,
the in
duplum
rule but also because on the facts it is distinguishable from the
case before me.
In
Standard Bank of SA Ltd v Oneanate Investments (Pty) Ltd 1998 (1) SA
811 (SCA), on the facts, interest reached the double after litigation
had commenced. In the present matter it did so before litigation had
started. The factual situation which therefore confronted the Supreme
Court of Appeal in South Africa is distinguishable from the facts in
the present matter. Indeed, the learned Judge of Appeal's parting
remarks, at page 834G-H, appear to recognize that in cases such as
the present one, interest commences to run after judgment.
Counsel
for the plaintiff's contention as to when interest should again
commence to run after the double cannot, as I have demonstrated, be
based on Ehlers
v Standard Chartered Bank Zimbabwe Ltd 2000 (1) ZLR 136 (H),
nor can it be based on the Supreme Court of Appeal of South Africa's
decision. If, however, it could be so based, I would distinguish the
basis on which those decisions were made with the present matter. It
is on the following basis;
In
Georgias
& Anor v Standard Chartered Finance Zimbabwe Ltd 1998 (2) ZLR 488
(S),
GUBBAY CJ…, approved the sentiments of GILLESPIE J in Commercial
Bank of Zimbabwe Ltd v MM Builders and Suppliers (Pvt) Ltd and Others
1996 (2) ZLR 420 (H).
He stated as follows:-
“Reverting
to the considerations behind the in
duplum
rule, they are correctly summarised and stated to be based on:
'A
policy to protect a debtor who has not serviced his loan from facing
an unconscionable claim for accumulated interest and to enforce sound
fiscal discipline upon a creditor.' Per GILLESPIE J in Commercial
Bank of Zimbabwe case at 465G.
Thus,
there are two main objectives:-
(a)
Protection of a debtor against exploitation; and
(b)
Enforcement of a sound fiscal discipline on a creditor.
It
follows that as waiver of the in
duplum
rule in advance cannot be sanctioned, for to do so would defeat these
two objectives.”
In
coming to the decisions they did, MALABA J and ZULMAN JA…, did not,
with respect, consider the desire to enforce a sound fiscal
discipline on the creditor. Neither did they consider the
unconscionable aspect of discarding the in
duplum
rule.
I
find comfort in the remarks of CHINHENGO J in Conforce
(Pvt) Ltd v City of Harare 2000 (1) ZLR 445 (H)…,.
At page 458A-F he noted:-
“I
venture to say that the public interest served by the in
duplum
rule is not identified with sympathy for the debtor so as to protect
him. I view the public interest involved as encompassing a wider
spectrum of interests, from the protection of the debtor to securing
fiscal discipline on the part of lenders to considerations of
justification for charging interest in the first place i.e. to
compensate the creditor for deprivation of use of the money due until
payment (Mawere
v Mukura
1997 (2) ZLR 361 (H) at 364G) and to the interests of commerce
generally and perhaps many more interests. Thus, the public interest
cannot be restricted to one or two considerations i.e. the protection
of the debtor and the dictates of modern commerce. But, even if it
were so restricted, I cannot see anything incompatible with the rule
serving those interests if it were applied in the manner advocated
for in MM
Builders
case.
The creditor's claim for interest would be limited to an amount
that does not exceed the capital.
In
my view, the danger in adopting the approach in Oneanate
and
Ehlers cases supra
is that an unscrupulous creditor only has to institute action to
defeat the in
duplum
rule.
He may so act as to ensure that the institution of proceedings and
the attainment of the double coincide with the result that the rule
is rendered inoperative. I do not see anything that is against the
public interest or the interest of modern finance if the in
duplum
rule operates in the manner outlined by GILLESPIE J and the old Roman
Dutch authorities which espouse the view that once the double has
been reached, interest
must stop to run regardless of the institution of proceedings or that
the stage of litis
contestatio
has been reached. Where in particular the double has not been
reached, I find no relevance at all of the event of institution of
proceedings. Interest must continue to run until it equates to the
capital amount soon after or long after the institution of
proceedings, but that is immaterial. I am therefore unpersuaded by
the conclusion reached on this point in Oneanate
and Ehlers cases.
I must respectfully express my dissent from those judgments.”
I
associate myself with these views so ably expressed by CHINHENGO J.
It
does not appear to me that the plaintiff in the present matter has
even begun to discharge the onus on him, on a balance of probability,
to circumvent the in
duplum
rule. It does not appear to me that it can be circumvented.
In
the premises, I hold that interest on the sum $500 million dollars in
casu can only commence from the date of judgment…,.
1.
The defendants, jointly and severally, the one paying the others to
be absolved, shall pay to the plaintiff:
(a)
The sum of $500,000,000= together with interest thereon calculated at
the rate of 1% per day from the date of judgment to the date of
payment in full.
