DUBE
J:
This
is contractual a claim for a debt and interest arising therefrom.
The
plaintiff sold various electrical goods to the defendant on credit.
The defendant fell into arrears amounting to $22,968-00. On 5 May
2010 the defendant's erstwhile Managing Director signed a final
demand agreeing to interest being charged on the overdue account at
4% per month. The plaintiff commenced charging interest on the
outstanding amount and payments made were appropriated first to
interest and then to the capital amount. At the time of trial, the
amount claimed was $12,162-00.This figure was revised down to
$11,751-00 following adjustments to the account.
The
defendant denies that it agreed to pay interest on the outstanding
debt and disputes that the debt was one bearing interest. The
defendant further avers that the payments it has made so far suffice
to liquidate the debt. The defendant denies that its erstwhile
Managing Director had authority to enter into an agreement on
interest without approval of the other directors. It further denies
that the final demand is an agreement to pay interest and that it is
binding on the defendant as it is not signed by a representative of
the plaintiff. That there are errors in the calculations and the
amount claimed has not been proved.
The
plaintiff called two witnesses. John Breyten Reid is a Financial
Director for the plaintiff. His evidence is to the following effect.
The defendant purchased stock from the plaintiff and a total of
$22,968-00 was outstanding as at May 2010.When the defendant could
not settle the debt, the account was suspended. The parties agreed
that the defendant pay interest on the account after the plaintiff
made a demand for that money. He communicated with Mr Wallbridge who
was the Managing Director of the defendant at the time who verbally
agreed with the plaintiff that the defendant would pay interest on
the account at 4% per month on the outstanding balance. The account
had been suspended and after the agreement to pay interest, the
credit facility that had been suspended was resumed and
defendant
continued trading with the plaintiff. There was a verbal agreement
between the parties before the final demand was reduced to writing.
The oral agreement was entered into between Mr Moran and Mr
Wallbridge after Mr Moran consulted him. The written agreement is in
the form of a final demand to pay interest. He produced a final
demand generated by the plaintiff's Credit Department dated 5 May
2010 which was signed by Mr Wallbridge. Subsequent to the final
demand and the summons, certain payments were made. The plaintiff
began to charge interest on the outstanding debt and the payments
made on the account were appropriated first to interest. The
outstanding amount was US$12,162-00 and was revised downwards to
$11,751. The plaintiff adjusted the claim to comply with the in
duplum
rule.
He
explained that the agreement is not signed by the plaintiff because
the plaintiff needed it signed by the defendant only.
The
witness gave his evidence well.
The
next witness to be called is the defendant's former Managing
Director Ross Grantly Wallbridge. He left the defendant company in
January 2011 after he refused to take a reduction in salary.
His
evidence is as follows.
He
was the Managing Director of the defendant at the time that the debt
in issue was created. The defendant approached the plaintiff to
supply it with goods for resale. The defendant owed US$22,968-00. He
was approached by Mr Moran, an employee of the plaintiff, and the two
discussed the overdue account and further that a final demand would
be issued and interest would be charged on the overdue account. He
signed the final demand and agreed to interest being charged in his
capacity as the Managing Director and had a discretion over the
issue. He had authority to sign the final demand by virtue of his
authority as the Managing Director. After he agreed to interest, the
plaintiff continued to supply them. Interest was supposed to be
calculated from 5 May 2010 on $22,968-00. The final demand refers to
outstanding amounts accrued before this date. Any subsequent
purchases are not covered by this final demand. The witness accepted
that it was a requirement that there be two signatories on purchase
orders but contended that this practice was introduced after he had
already signed the final demand.
He
resigned from the company because they wanted him to take a reduction
in salary. He refuted claims that he was testifying in favour of the
plaintiff because he had left the defendant's company and had a
labour case pending against the defendant. He also refuted the
suggestion that he was conniving with the plaintiff. He contended
that his labour issue with the defendant has nothing to do with the
parties' dispute. He stated that he has no current dealings with
the plaintiff and no personal interest in the matter. The witness
gave his evidence well. I found the witness to be fair and honest. He
conceded a number of points against the plaintiff's case.
The
defendant called Gift Marufu who is the current Managing Director of
the defendant company. His evidence is as follows.
He
was the Financial Director of the defendant when this final demand
was signed by Mr Wallbridge. The defendant never agreed to pay
interest at the rate of 4% over the debt. When Mr Wallbridge signed
the final demand he was not authorised to sign the document. A system
had been put in place requiring all matters that have financial
implications on the company to be authorised by two signatories. This
policy was put in place in December 2009. The purpose of the new
system was to ensure control of all purchases and financial matters
including the final demand in issue. The witness was not involved in
the agreement concerning interest. He testified that the signature of
Mr Wallbridge is not binding on the defendant as he had no authority
to sign the final demand on his own. He contended that even assuming
that the final demand is binding, it is improper for the plaintiff to
claim interest over new purchases made after 5 May 2010. He testified
that Mr Wallbridge left the defendant company after a series of
losses which emanated from his management style. He deliberately
sacrificed the company by putting it into the liability as he was
aware that the company had no capacity to pay even the capital amount
at the time. As a result the defendant decided to reduce the salaries
of all Board members. The company is not liable to pay the amount
claimed as there is no agreement between the parties to pay interest
of 4% over the debt. He was not sure how the figure of $11,751.00 was
arrived at. The witness admitted that the relationship between him
and Mr Wallbridge was sour. The witness was at times evasive.
The
issues referred to trial are as follows:-
“1.
whether or not the plaintiff is entitled to charge interest at the
rate claimed in the summons, namely, 4% per month.
2.
whether or not the defendant is liable to pay interest claimed by the
plaintiff.”
It
is common cause that there was a debtor/creditor relationship between
the parties in respect of a thirty day credit facility where the
defendant would draw stock from the plaintiff. As at May 2010 the
defendant owed US$22,968-84 and Mr Wallbridge signed a final demand
acknowledging the debt and agreeing to interest at 4% per month. The
defendant continued to do business with the plaintiff.
The
final demand is on a Powerspeed Electrical letter head and is for
US$22,968-84. Part of the letter of demand reads as follows:-
“In
accordance with our agreement this overdue amount will attracted a 4%
interest charge per month.
Your
credit facilities are hereby suspended until full settlement of
overdue monies is received by Powerspeed Electrical Limited. You have
7 calendar days in which to settle this overdue amount or further
steps, as is deemed necessary by Powerspeed Electrical Limited, will
be taken to recover these monies……”
The
final demand refers to an agreement were the parties agreed that the
overdue account will attract a 4% interest charge per month. Not much
detail is known about the agreement referred to in the final demand.
The
defendant submitted that when the defendant's Managing Director
signed the final demand, he had no authority to enter into the
arrangement in that he failed to get another Director to counter sign
and authorise the final demand. The plaintiff contends that they were
not aware that he did not have the authority to enter into such an
agreement. The final demand was signed by Mr Wallbridge in his
capacity as the Managing Director of the defendant company. The
plaintiff proposed to charge interest at 4% and the defendant by
signing the final demand agreed to be bound by its contents. Its
conduct signifies assent to the terms proposed.
Any
person who deals with a director or manager of a company who did not
have actual authority to enter into a contract with third parties may
be excused from making assumptions that internal company procedures
have been followed.
This
position is well captured in section 12 of the Companies Act [Cap
24:03].
The section reads as follows:-
“12
Presumption
of regularity
Any
person having dealings with a company or with someone deriving title
from a company shall be entitled to make the following assumptions,
and the company and anyone deriving title from it shall be estopped
from denying their truth —
(a)
that the company's internal regulations have been duly complied
with…..”
This
section has been interpreted in a number of cases.
In
Royal
British Bank
v Turquand
(1856) 6E and B327 it was held that even if a director of a company
did not have actual authority to enter into a contract to bind third
parties, he had ostensible authority by virtue of his office to so
act.
The
defendant's erstwhile Managing Director held himself out as having
authority to represent the company when he signed the final demand.
If the internal procedures of the defendant company were not
followed, the rule in the Tarquand case applies in this case. The
court is satisfied that Mr Wallbridge had ostensible authority to
bind the defendant.
The
next question is whether a binding contract was entered into. The
final demand that the plaintiff relies on is not the ordinary
contract where both parties append their signatures to an agreement.
It is signed and agreed to by the defendant and is not signed by a
representative of the plaintiff. It originates from plaintiff's
Credit Department.
The
fact that the final demand was on plaintiff's letter head should
not be an issue but rather the import of the contents of the letter
of demand and the intention of the parties when the contract was
signed. The arrangement between the parties is recorded in clear and
unequivocal terms. Mr Wallbridge appended his signature thereby
acknowledging the terms of the contract. The fact that the
plaintiff's representative did not append its signature is
inconsequential. The acknowledgement by the defendant that it owes
the plaintiff constitutes concurrence to pay interest on the
outstanding balance at the rate of 4%.
Another
consideration is the conduct of the parties after the signing of the
final demand. The approach that this court will adopt is the one
followed in Levy
v
Banket Holdings Pvt Ltd
R&N 98 where TREDGOLD CJ in relying on the remarks of CENTLIVRES,
JA in Collen
v
Rietfontein Engineering Works,
1948 (1) SA 413 (AD) F said the following;
“in
considering whether a contract is concluded between two parties, a
court is not interested in the state of mind of the parties
considered in the abstract. It must decide the issue on the state of
mind of the parties as manifested by word or deed. It is idle for a
party to avow mental reservations or unspoken qualifications if these
are inconsistent with what is said or done.”
After
the signing of the final demand, supply of goods resumed.
What
can be inferred is that credit facilities resumed because the
defendant agreed to pay interest. The defendant continued to service
the debt. A credit guarantee arrangement was also put in place. The
defendant did not express any disquiet about the charges. The final
demand amounts to an acknowledgement by the defendant that it owes
and is an agreement to pay interest. There is no doubt in my mind
that a binding contract was entered into between the parties.
The
final demand relates to an amount of $22,968-00. The defendant
continued to service the debt. The plaintiff originally claimed an
outstanding balance of $12,662-00. This figure was reduced by the
sums of $60-00 and $351-00 being interest which it stated was over
claimed leaving a balance of $11,751-00. The final demand states that
“this overdue amount will attract a 4% interest charge per month”.
The date from which interest would be levied is not specified. The
claim for interest is limited to $22,968-00 which is the capital
amount and interest carrying amount. The claimable interest does not
in terms of this agreement extend to debts incurred after the final
demand. Mr Wallbridge conceded that it would be wrong to charge
interest on any purchases after 5 May 2010. The concession was
properly made. It makes sense to me that this arrangement should take
effect from the date of agreement which is 5 May 2010.
The
plaintiff levied interest for the months of March and April 2010 in
the amounts of $434-00 and $880-00 respectively totalling $1,314-00.
The defendant conceded in its submissions that this interest was
charged in error and suggests a deduction of this figure from the
amount claimed leaving a balance of $10,437-00.
The
interest to be charged was limited to $22,968-00 which is the
interest bearing amount. Mr Wallbridge conceded that it would be
wrong to charge interest on any purchases after May 2010. Again, the
concession was properly made. The statement of account, Exhibit 2,
outlines all transactions from March 2010 to October 2011. The
statement does reveal that that the plaintiff calculated interest
including the new purchases, contrary to the agreement between the
parties. As more purchases were made, interest was being charged both
on the amount due and on the subsequent purchases. Despite that the
interest calculations were challenged, the plaintiff made no effort
to explain and/or do a breakdown of these figures in order to refute
the assertion that interest was charged in respect of the new
purchases. Instead the plaintiff contended that the burden was on the
defendant to prove that it owes less than what is claimed or nothing
at all. The plaintiff does not deal directly with the defence
allegation in its submissions but shifts the onus onto the defendant.
It is wrong to try to shift the onus onto the defendants when the
plaintiff has not established how it arrived at the figure claimed
first. No attempt was made to demonstrate how the calculations were
arrived at. I am concerned about the cavalier approach the plaintiff
adopted in the presentation of its case. Simple recalculations of the
interest payable for June and July 2010 reveal that interest was
calculated inclusive of the new purchases. For example, in order to
arrive at interest of $923.00, for the month of June, June purchases
amounting to 115 were added to the capital amount of 22,968 in order
to get a total of 23,083. The interest was calculated at 4% as
follows.
23,083
x 0,04 = 923.
This
figure includes interest on new purchases.
In
the month of July, interest payable was calculated as follows. July
purchases amounted to 2110 and were added to 23,083 to give a total
of 25,193.The interest was calculated at 4% as follows;
25,193
x 0.04 = 1007.72, this was rounded off to 1008.-00.
This
approach is clearly wrong. If interest had been calculated on the
interest carrying amount of $22,968-00, as agreed, the interest
levied per month for May and June 2010 would have been 918,72 for
both months. There is no doubt in my mind that interest was
calculated contrary to the agreement that was in place. As more
purchases were made, interest was being levied on the amounts due and
on the subsequent purchases. The basis of the calculation of the
interest was wrong and as a result all the figures are distorted and
incorrect.
I
have not bothered to recalculate the total interest based on the
interest carrying amount because it is not my function. All I have
done is to show that the approach adopted in calculating the interest
owed was wrong. Ultimately it is not known what amount of money is
owed, if any. It was the plaintiff's duty to ensure that it put
correct figures before the court. The plaintiff dismally failed to do
that.
I
am unable to find that the plaintiff has proved its case on a balance
of probabilities.
The
plaintiff's claim is dismissed with costs.
Costs
follow the event.
Scalen &
Holderness,
plaintiff's legal practitioners
Maunga,
Maenda & Associates,
defendant's legal practitioners
