IN THE HIGH COURT OF SWAZILAND
JUDGMENT
Case No. 3358/05
In the matter between:
INYATSI CONSTRUCTION LIMITED Plaintiff
and
ROOTS CIVILS (PTY) LIMITED Defendant
Neutral citation: Inyatsi Construction Limited v Roots Civils (Pty) Limited (3358/05) [2012] SZHC 09 (20 JANUARY 2012)
Coram: Mamba J
Heard:
Delivered: 20 JANUARY 2012
Summary
[1] By a summons dated and received by the Registrar on 19th September, 2005, the plaintiff claims against the defendant for “payment of the sum of E537,791.66 being in respect of monies due, owing and payable for the sale/purchase of a Motor Grader 140G plant sold by the plaintiff to the defendant on 31 May 2005 …[plus] interest on the said sum of E537 791-66 at the agreed interest rate of 2% per month a tempore morae to date of final payment.”
[2] After the filing of a notice of intention to defend by the defendant, the plaintiff filed its declaration on 05th October, 2005. The declaration stated that the said agreement of sale was oral and was actually entered into on 03 March 2004. The declaration states further that it was a material term of the agreement that:
(a) The purchase price was a sum of E500,000-00 (five hundred thousand Emalangeni) and that
(b) Payment would be made by the defendant by means of an initial instalment of E50,000-00 … and thereafter two (2) equal instalments in respect of the balance outstanding payable by no later than 31 December, 2004;
(c) The amount outstanding from time to time would attract interest at the rate of 2% per month;
(d) The plaintiff duly delivered the Motor Grader to the defendant on 21 May 2005 on which date, the defendant tendered a payment of E50,000-00 [and] …Despite having paid the initial deposit, the Defendant has refused to pay the balance outstanding upon which the Plaintiff has applied interest at the agreed rate of two (2%) percent per month.
(e) As at the date of issue of summons, the defendant was indebted to the plaintiff in the sum of E537 791-66 …plus interest thereon at the rate of 2% per month a tempore morae to date of final payment as more fully appears from the statement here annexed marked ‘A’.
[3] In its plea, the defendant admits the sale of the Grader and the price thereof but in a rather convoluted or confused way denies the rest of the alleged terms of the agreement. Such confusion and terminological in-exactitude is illustrated by the following:
“3.3 Ad par 4.3
The defendant further denies that there was no agreement for the interest in the amount or at all. [and] …
5. Ad paragraph 6
The defendant admits paying the deposit and admits refusal to pay in as much as it is not indebted to the plaintiff in the claimed amounts and interest at all.
6. Ad paragraph 7.
The contents are admitted and the plaintiff is put to strict proof thereof [why call for proof of admitted facts]. It is specifically averred by the defendant that all amounts due to plaintiff were paid in full and there was no interest agreed on.”
[4] These discrepancies and inconsistencies in both the declaration and plea were not amended or rectified in the pleadings. The parties were, however, agreed and this was borne out by the evidence that was common ground that:
4.1 The Defendant paid a deposit of E50,000-00 on 21 May 2004 rather than 2005 and
4.2 There was no agreement that any amount owing from time to time would be subject to interest charges. It emerged in the evidence that, according to plaintiff in the business or trade in which the parties were engaged the practice was to charge interest at 2% per month on any amount that was over-due and this was the only reason it demanded interest at that rate on the sum owed to it by the defendant.
[5] Interest on any amount and at any rate is a burden on the debtor. It acts as a penalty on the defaulter and because of this, it should not, in my view, be unilaterally levied on any transaction. I have no doubt that it was in recognition of this very situation that our law imposes or sets a fixed rate of interest on all such arrear payments, in the absence of an agreement, of course. It was urged upon me by counsel for the plaintiff that it was a trade or business custom in the business in question to charge interest at 2% per month on all over-due payments and that therefore I should read this as a tacit or implied term in the contract of sale herein.
[6] In K & S Dry Cleaning Equipment (Pty) Ltd and Another v South African Eagle Insurance Co Ltd and Another 2001 (3) SA 651 at 656-657, Labe J stated the position as follows:
“In order for a tacit term to be found to exist it must be a necessary implication and not one which is merely reasonable. In Reigate v Union Manufacturing Co (Ramsbottom) Ltd and Elton Cap Dyeing Co Ltd [1918] 1 KB 592 at 605 (118 LT 479 at 483) Scrutton LJ said this: “A term can only be implied if it is necessary in the business sense to give efficacy to the contract, that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, “what will happen in such a case?” they would both have replied, “of course, so and so will happen; we did not trouble to say that; it is too clear.”
The difference between a necessary implication in this sense and a reasonable implication appears from what Millin J said in Rapp and Maister v Aronovsky 1943 WLD 68 at 74-5;
“It has often been pointed out that it is not sufficient to show that the term would be highly reasonable or convenient to one or other or even both of the parties. The cases show that the court has to be continually on its guard against being persuaded to introduce a term which, on analysis of the argument, appears to be no more than a term which would make the carrying out of the contract more convenient to one of the parties or both of the parties and might have been included if the parties had thought of it and if they had both been reasonable. You are not to imply the terms merely because if one of the parties or a bystander had suggested it, you think only an unreasonable person would have disagreed. You have to be satisfied that both parties did agree. It is quite a different proposition, if in the hypothetical case Scrutton LJ puts in, you feel the parties might say: “you have called our minds to something we have not thought of and what you say is not unreasonable, let us discuss it.” If that is all that the court feels might have happened then the court is not entitled to imply the term.”
These principles are well established and have been followed in countless cases in our courts. The tacit term contended for complies with neither of these tests.”
In the present case there is neither allegation nor evidence showing that the interest claimed was necessary and reasonable. There was no agreement to charge interest and no interest may be awarded by this court other than legal interest, should this be necessary at the end of the matter. This is true of the defendant’s counter-claim as well; that is to say, there was no agreement to charge interest. That then disposes of the issue of interest in this case.
[7] The defendant having admitted purchasing the plant or machinery in question and having paid a deposit for it in the sum of E50,000.00, the issue of the transaction ever having taken place becomes moot, unhelpful and nearly irrelevant. The court has to decide, from the evidence presented, whether the balance of the purchase price was paid at any time after 21 May 2004. The defendant has pleaded “that it was a specific term of the contract that the balance of the purchase price would be deducted from what was due to the defendant as an advance payment from the Swaziland Government, to Roots in the joint venture”. (See paragraph 3.1 and 3.2 at page 11 of the Book of Pleadings). The defendant further avers that in fact, such amounts were deducted and in fact the debt was settled in full”.
[8] Before the defendant came into existence, a company known as Akwandze (Pty) Ltd did a lot of business with the plaintiff. Upon its formation or establishment the defendant was invited by Mr Parsson, the Managing Director of the plaintiff into forming a Joint Venture with the plaintiff. This was done in July 2003. The joint venture was formed and the defendant held 20% of the shares and the rest were held by the plaintiff. One of the major tenders won by the Joint Venture was the airport and related construction works at Sikhuphe and some other structures at Helemisi in Manzini.
[9] The evidence before me is plain that whilst indeed the defendant, through its managing director Mr. Msibi who gave evidence in court, did instruct the management of the plaintiff as managers of the Joint Venture to pay the plaintiff from the Joint Venture account, this was in fact not done. The managers of the Joint Venture objected to this and told Mr Msibi that the Grader had been sold to the defendant and not the Joint Venture. Mr Victor Manuel De Costa Oliveira and Mr Frans Pienaar testified that they informed Mr Msibi that the defendant and not the Joint Venture had to pay for the Grader. They both motivated their stand by saying that if monies belonging to the Joint Venture could be used to buy the Grader, it would mean that 80% of that money would be paid by the plaintiff which had an 80% stake in the Joint Venture. The other and more fundamental objection by the plaintiff to Mr Msibi’s instructions was that the advance due to the Joint Venture from Government was not profit but rather a loan that would be eventually deducted by the Government from the contract sum due to the Joint Venture. The defendant would, it was argued, be entitled to receive its pro rata share of the profits upon declaration.
[10] Mr Msibi, however insisted that the defendant was entitled to 20% of the advance payment and that at one stage he had instructed the plaintiff in its role as administrators or managers of the Joint Venture to pay monies to Wesbank on the defendant’s behalf from the Joint Venture account. These instructions had been carried out without demur. He expected the same in respect of the Grader in question.
[11] When the Joint Venture was eventually liquidated or disbanded the interests of the defendant were taken over by the plaintiff and a buy-out-sum of E3 282 264-20 was given to the defendant by the plaintiff. The issue of the payment for the grader in question was specifically excluded from these settlement talks at the request of the defendant.
[12] From the foregoing evidence, it is clear to me that the defendant only paid the deposit of E50,000-00 to the plaintiff for the Grader. The balance, which is a sum of E450 000-00 remains unpaid to date. The fact that Mr Brian Parsson was not called as a witness does not alter this basic yet fundamental fact of non payment. The crux of the matter is that the defendant fully acknowledged its liability to pay for the grader and then it instructed the plaintiff to get that money from the Joint Venture account. Plaintiff objected to this and the money was not paid. It remains unpaid. The plaintiff has established that the defendant is liable to it in the sum of E450 000.00 being the balance of the purchase price.
[13] I have discussed above the issue of interest on the balance of the purchase price for the Grader and concluded that there was no agreement – expressed or implied – that interest would be levied on any amount over-due or in arrears. I shall therefore order that only legal interest be paid on the amount and I so order.
[14] The defendant’s counter-claim is not based on any written terms or conditions. Indeed the defendant says the agreement of lease was oral or verbal. The lease agreement is denied by the plaintiff who, however, admits that the Roller and Container that are the subject of this claim were at the relevant time in its custody at its yard for safe keeping and at the request of the defendant. The plaintiff admits further that it sometimes used these items for its own purposes and that this was for an indeterminant time and with the knowledge and consent of the defendant and there was no charge or fee set for such use.
[15] The defendant avers that the roller in question was delivered to the plaintiff for the declared purpose (lease) on 31st August 2002 and the container on 14th March 2003. In all a total amount of E1547 866.52 is claimed as and for arrear rentals for the two items.
[16] The evidence by the defendant pertaining to this claim is very scanty and inconsistent and totally unreliable. For instance, in his evidence in court and pointing to certain letters he had sent to the plaintiff, Mr Msibi intimated that the lease agreement for the roller was with effect from around November 2000, yet the plea stated that this was 31st August 2002. It was pointed out to the defendant that the alleged lease that forms the basis of the counter-claim is nothing but an afterthought or ruse to divert the court from the real issue, ie the payment of the purchase price for the grader. There is some merit in this argument inasmuch as the only available invoices or letters by the defendant to the plaintiff claiming for the rentals for the equipment are dated after the service of the summons herein on the defendant. I am mindful of the assertion by Mr Msibi that there were letters and invoices pre-dating the service of the summons. These were never discovered or exhibited in court and were only mentioned by him under cross examination. I cannot accept this evidence. It is a lie. Again, in his evidence Mr Msibi suggested, much against the averments in the counter-claim, that there was no expressed agreement of hire or lease but that he billed the plaintiff for having possession of the roller and container.
[17] In the result, I hold that the defendant has failed to prove on a balance of probability that there existed a lease agreement between the parties, either expressed or implied for the hire of the equipment in question. The defendant’s counter-claim is therefore dismissed with costs.
[18] In summary, I make the following order:
(a) The defendant is ordered to pay to the plaintiff a sum of E450,000.00 (four hundred and fifty thousand Emlangeni) being the balance of the purchase price for the Grader, plus interest thereon at the rate of 9% per annum a tempore morae.
(b) The defendant is ordered to pay the costs of this action and
(c) The counter-claim by the defendant is hereby dismissed with costs.
(d) The costs in this action shall include the costs of Counsel to be duly certified in terms of the relevant rule of court.
MAMBA J
FOR PLAINTIFF: Adv. M. Van der Walt
FOR DEFENDANT: Mr. S. Mdladla
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