CIV/T/281/95
IN THE HIGH COURT OF LESOTHO
In the matter of :
THE STANDARD CHARTERED BANK LESOTHO LTD Plaintiff
EVERISTUS RETSELISITSOE SEKHONYANA 1st Defendant
'MALEROTHOLI JOSEPHINE SEKHONYANA 2nd Defendant
'MASENATE AGNES MOPELI 3rd Defendant
JUDGMENT
Delivered by the Honourable Mr Justice ML. Lehohla on the 29th day of November, 1999
Because the 1st Defendant died before the closure of the defence case he was substituted by the second defendant who for convenience will be referred to as the 1st defendant and the 3rd defendant as the 2nd defendant while the deceased shall be referred to either as such or by his name Retšelisitsoe Sekhonyana.
On the procedural aspect relating to the filing of the heads of arguments it should be observed that after leading the evidence of the 1st and only defence witness
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Mrs E. van der Linde, Mr Mphalane indicated, on the resumption of the hearing after
a postponement that was required in order to find the deceased's substitute, that he was left with no option but to withdraw as legal representative for the defendants because of differences that seemed impossible to resolve then.
In the result the two defendants were virtually left in the lurch. What is more they were not even present when the matter resumed. Thereupon Mr Hoffman for the plaintiff started moving the Court for dismissal of the defendants' case. It was while he was making his submission in this regard and was about fifteen minutes into his arguments that the 2nd defendant pitched into Court. Having been given an audience she pleaded that she would seek the indulgence of the Court to find a legal representative for her and her co-defendant.
Mr Hoffman while agreeable to this sought to persuade the Court that Judgment should be granted against the defendant who was absent.
The Court mindful of one of the aspects it took into account when giving a ruling earlier following an application for absolution from the instance was constrained to refuse Mr Hoffman's prayer. In that ruling the Court had taken into
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consideration that the two defendants had pinned their colours to the deceased's mast.
Further that in terms of the principles pertinent to that ruling all the defendants were to be treated as one. Thus it couldn't have made sense that when one defendant was present before Court and the other absent Judgment should be entered against that other even though the one present sought an indulgence to secure legal representation for both defendants. Refusal to grant this indulgence would have undermined a principle on which the previous ruling turned. Moreover the deceased was the life-blood of the fight waged against the plaintiff It wouldn't be fair to incline to the suggestion by Mr Hoffman that a lone woman in these circumstances should be asked to say what the lawyer she was going to look for would say failing which the matter should be decided against the defence. Her very plight was a factor crying out for legal representation.
The matter was accordingly postponed. On the day when it resumed Mr Mphalane informed Court that he was once more appearing for the defendants. He there and then closed the case for the defence.
Mr Hoffman addressed Court without benefit of heads of arguments. Understandably so. For who would have thought that the defence was no longer
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going to call further evidence, especially in the light of the fact that PW1 Rahlao's
evidence was not contradicted in most essential respects which were fatally adverse to the defence case.
Mr Mphalane for his part had his heads of arguments ready and was able to guide the Court along them in his closing address to which Mr Hoffman replied. At the close of the addresses Mr Hoffman was directed by the Court to formalise his oral address by means of heads of arguments covering his main address and reply to Mr Mphalane's address. The learned Counsel duly complied by filing them some days later.
In its Summons the plaintiff instituted action against the deceased and the two defendants, jointly and severally, the one paying the others to be absolved for :
Payment of the sum of Ml 847 122-94. This amount was amended later claim by 50 lisente.
Interest thereon at the rate of 18,5% per annum calculated from 9th December 1994 to date of payment.
The date calculation was later amended during proceedings to 04-01-1995. Application for amendements in paragraphs 1 and 2 was granted.
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An order declaring the following properties specially mortgaged under the.
.
Deeds of Hypothecation executable, namely:-
3.1 Plot No. 17684-009, situate at Lower Moyeni, Quthing Urban Area in the district of Quthing, as held under Deed of Transfer No. 22881, registered on 19th November 1991.
3.2 Plot No. 12281-008, situated at Maseru West, Maseru Urban Area, in the District of Maseru, as held under Lease No. 12281-008,
registered on 29th June 1981.
Costs of suit.
Further and/or alternative relief.
Paraphraseology of contents of page 10 of the Ruling dated 4th November, 1998 in the instant matter reflects the following which is essential for providing the basis for this suit:
On 18th June 1993, 'Malerotholi the 1st defendant as a surety and co-principal debtor secured indebtedness of the deceased who was the principal debtor by way of registration of a continuing covering Deed of Hypothecation No. 23724 in favour of the Plaintiff in the office of the Deeds Registry, Maseru, under the Deeds Registry Act of 1967.
The defendants admit Ad Paras 6 through 14 that the Mortgage Bonds were
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registered over the property reflected in the Declaration and that the Deed of Suretyship was signed by the 2nd defendant 'Masenate. But the defendants plead that the deceased denies indebtedness towards the plaintiff, therefore they maintain that the plaintiff is not entitled to rely on the security set out in the Mortgage Bond or in regard to the suretyship.
It should be noted that the 1st defendant is the deceased's wife married to him, during his life time, in community of property and duly assisted by him with chosen domicilium citandi et executandi for the purposes of the instant action in respect of plot No. 17684-009.
The 2nd defendant is described as a major spinster and Lesotho citizen................with chosen domilium citandi et executandi for the purposes of the present action is (sic) Plot No. 12281-008 Maseru West, Maseru Urban Area. The plaintiff sets out in its declaration that the deceased entered into an oral agreement with it at Maseru at the deceased's special instance and request that plaintiff lend and advance money to him from time to time on overdraft facility. This oral agreement also provided for the repayment of the said money on demand. As
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reflected at page 16 of Volume 1 of the defendants' plea this is indeed common cause.
The defendants however deny in their plea that it was ever the specific term of the said oral agreement that the said overdraft facility would carry interest at the prime lending rate of the Central Bank, which at all material times till issuance of summons was 18.5%. The defendants challenged the plaintiff to furnish proof of this allegation.
The defendants further deny in their plea contents of paragraph 5 of the plaintiff's declaration that on 9th December, 1994 and again on 31st January, 1995 the plaintiff demanded in writing from the deceased payment of the sum of Ml 847 122-94, being monies advanced in terms of the aforesaid oral agreement. The defendants are emphatic that the deceased is not indebted to the plaintiff in the amount of Ml 847 122-94 or any other amount and put the plaintiff to the proof thereof.
Otherwise the defendants' attitude towards paragraphs 6,7,8,9,10,11,12,13 and 14 of the plaintiffs declaration was covered in the reasons for the previous ruling made following an application for the absolution from the instance.
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Suffice it to say the defendants admitted that Mortgage Bonds were registered over the property reflected in the plaintiff's declaration and that the Deed of Suretyship was signed by the present 2nd defendant 'Masenate Mopeli who was originally the 3rd Defendant.
However the defendants pleaded that as the deceased denied indebtedness towards the plaintiff the latter, they maintain, is not entitled to rely on the security set out in the Mortgage Bonds or in regard to the Suretyship. Thus they therefore deny that these surities may be called upon by the plaintiff and put the plaintiff to proof that it might.
In response to the plaintiff's charge and complaint that the defendants have failed to pay the indebtedness of the deceased, they, in unison, plead that they were entitled to refuse payment for reasons set out above.
Given the above scenario it remains to see by reference to evidence led in this proceeding if the defendants' stance has any support in law.
But before then it is worth mentioning that the pleadings make it abundantly
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clear that the deceased conducted a bank account with the plaintiff bank, and that
monies were lent to him from time to time on overdraft.
'Malerotholi the deceased's substitute, admits passing a security bond over the Lower Moyeni property in order to secure the debt to the bank of the deceased up to an amount of Ml - million.
'Masenate Mopeli admits signing a deed of suretyship guaranting the debt to the deceased's bank up to an amount of Ml 200 000 and passing a covering bond to support that suretyship in terms of which she hypothecated the plot 12281-008 Maseru West in favour of the bank. The accuracy of these observations is gathered from paragraphs 6 to 13 of the declaration read with paragraph 4 of the defendants' plea at page 67.
The plaintiffs only witness who was called is S.M. Rahlao who testified on oath that he started his employment with the Standard Bank of South Africa Limited on 5th May 1966. This came to later be known as the Standard Chartered Bank in 1969. This in turn was taken over by the present NedBank from 2nd January 1997. The take over was achieved through negotiations in consequence of which accounts
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previously conducted under the name Standard Chartered Bank were not affected.
Instead they remained the same. The debts which were in the books are still in those books. The account numbers haven't changed nor has the manner in which the bank conducts its business. The modus operandi.
PW1 is presently a senior manager of the plaintiff and as such has dealt over an extended period, with the deceased.
He testified that from time to time, overdraft facilities were extended and increased, and that by late 1994 the bank was extremely concerned at the state of the account. This is adequately borne out by the number of letters written by the plaintiff to the deceased; placing on record the fact that the account was over its limit.
PW1 stated that he knew the deceased for a long time in a personal capacity, but later got to know him as a Bank client from 1993.
This witness indicated that the deceased enjoyed considerable banking facilities in the early nineties going on towards 1993.
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Towards the end of 1993 the bank was gravely concerned with the way the accounts were being conducted by the deceased who kept on exceeding the limits allocated in respect of his overdraft.
PW1 testified that the deceased had two accounts. The concern was particularly in respect of the hotel business of Orange River Hotel in Quthing. The bank facility allowed this particular account some advance for working capital purposes.
The witness was led to refer the Court in this regard to page 78 of Volume II (the discovered documents) where a letter marked A1 was written on 13-08-93 by the bank and addressed to E.R. Sekhonyana to the effect that:
"Our records show that your Account No. 027042 13 756 was overdrawn to the extent of Ml 343 352-60 on 12-08-93. Please adjust.
Yours faithfully Manager."
Further credence to the state of the deceased's account is reflected in the discovered letters addressed to the deceased by PW1 himself They consist of a letter
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dated 06-09-93 at page 79 showing debit on current account as Ml 417 210-58 and
debit on business account as M10 087-28. This letter opens up by referring the addressee to "previous verbal reminders about the facilities extended to" the deceased reflected in the heading of the letter. The heading consists of the two amounts reflected in this paragraph of my judgment.
At page 80 of the discovered documents bundle PW1 further indicates in a note addressed to the deceased that as of 16-11-93 Account No. 027042 13 7561 was overdrawn to the extent of Ml 651 529-97.
As of 12-11-93 this account was overdrawn to the extent of Ml 629 953-85. As of 22-11-93 the amount overdrawn was 1 666 978-82. By 09-12-93 the amount was Ml 719 280-10.
The increase in this pattern is reflected for the dates : 21-12-93; 24-12-93 and 29-12-93 culminating in the overdrawn amount of Ml 791 892-78.
No evidence was led on behalf of the defendants to counteract this serious worsening of the deceased's financial position in the Bank. On the contrary Mr Mphalane in argument contents himself with submitting that there is no proof that Mr Sekhonyana received this and other forms of correspondence on the same subject.
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But while as indicated earlier that the deceased and his co-defendants deny owing the
bank anything, the deceased's own letter tells a different story that is enough to thwart any contention to the effect that he never received the correspondence in question from the bank.
At page 103 of the discovered documents bundle, in a letter dated 29-11-1994 addressed to PW1 the deceased writes as follows :
"Sir,
Re: Overdue-Account E.R. Sekhonyana
I have received several letters from you drawing me to the gravity of the status of abovementioned account........."
If one may pause here and reflect one would indeed be in agreement with the writer of this letter that not only were numerous letters which were not responded to, written to the deceased as stated by PW1 but that the gravity of the status of the deceased's account was not in doubt.
It is in this connection that the submission by Mr Mphalane is in serious conflict with the deceased's state of mind as reflected in this letter which further continues :
"I am aware that I have in the past few months promised you a partial
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injection of substantive funds towards a situation whereby a full settlement could be realised. I am aware that other attempts shall only partially meet my indebtedness to the Bank, and it is the latter situation which has led me to attempt securing overseas funds to cover the account. There is yet no basis to abandon this attempt and I am frantically working for a settlement at the latest by end of January/February 1995".
Once again a pause and reflection would enable one to quickly discern a sharp conflict between the allegation in the plea that the defendants owe nothing, buttressed by argument in that regard by their Counsel, and the plain admission borne out by the deceased's reference to his indebtedness to the Bank Coupled with this indebtedness there is clear indication that the deceased had no immediate means of reducing or putting right his account with the Bank hence his allusion to looking overseas for unguaranteed hope that he might secure the funds to settle his account.
The date of this letter and the projected period i.e. January/February when hopefully there would be settlement of this account are preceded by numerous and obviously unanswered letters written by PW1 spanning the dates 05-05-94; 19-05-94; 04-08-94; 09-09-94 and -5-11-94 showing the debit in the account to have steadily risen from upwards of M2.1 Million (Maloti) to M2 420 424-45 debit.
In all humility the deceased concluded his letter by saying :
"Once again please bear with me and I sincerely apologise for what may seem to have been lack of taking your warnings seriously. I take them
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seriously indeed.
Sincerely
E.R. Sekhonyana signed"
I agree therefore with the submission made by Mr Hoffman as even supported by evidence of PW1 that at no stage did the deceased query the amount of his overdraft as reflected in the correspondence sent by the bank to him. If he indeed queried the amount of his overdraft how else would his above-quoted letter be reconcilable with any such contention.
There is substance in Mr Hoffman's submission with which I agree that statements were sent to the deceased by post from month to month as uncontroverted evidence of PW1 established. None of these were either queried nor put in dispute in any way. The statements extend from page 117 to 282 of the discovered documents bundle Volume II barring some five odd pages constituting Plaintiff's Further and Better Discovery Affidavit.
It would thus be bizarre to expect the Court to entertain any wild notion that these documents are faulty when none of them was queried at the time they were being sent to the deceased who must have received them.
16 The Court paid particular attention to the cross-examination of PW1 in order
to learn and determine what case was being put by the defence to the plaintiff. PW1 was not tackled on the evidence he gave in-chief. The thrust of the cross-examination as later urged on the Court by Mr Hoffman, was devoted entirely to finding if PW1 could separate out interest from capital with reference to the bank statements. Of course PW1 said he could not do so nor did he see the need so to do.
The Court was not told through cross-examination of the plaintiff's witness what the defendants were going to say in an endeavour to alert the Court to what could seriously be regarded to be their defence to this action. This stands out significantly in the light of the fact that PW1's evidence was that the statements were sent and never queried by Mr Sekhonyana. No question was put to the effect that Mr Sekhonyana would testify to the contrary or what exactly would be his version in the face of PW1's story.
Indeed contrary to the contentions insisted on by the defendants' Counsel the deceased's conduct has, through his rare ever occasions that he responded to the plaintiff, been consistent with his implicit acceptance of liability.
For instance in a letter written by him on 26th April, 1994 addressed to the plaintiff he says at page 93 of Vol 2 :
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"I apologise for delay to reply to your several (sic) querries re the current overdraft excess on Account,
At a personal level I have had several close deaths and a major ongoing sedition case which ends at the close of the month of May, 1994.
I have detailed my younger brother, Morena Bereng Sekhonyana to follow up on the issue in accordance with the details I gave you during the verbal brief.
I have thus been assured that we should be in a position to liquidate the excess perhaps during the first week of June if not earlier.
In the meantime 1 humbly request for normal facilities to avoid catastrophic consequences.
Yours sincerely E.R.Sekhonyana"
From all this one gathers an attitude of a man who is in no illusion about the worrying state of his ever-growing debt but who is so steeped in Micawberian optimism that something good will turn up despite the absence of any tangible or visible evidence of the basis for such hope barring perhaps the infinitely remote possibility that by wielding of some magical wand; dust and ashes can be turned into gold. I am afraid that no commercial institution worth its salt can fall for that.
It is also significant that Morena Bereng Sekhonyana made mention of in the above letter did not come to testify in support of contentions made by defence counsel especially after the deceased's death vet he was assigned the task of looking after the
18 affairs of the deceased when the latter was fast held by matters that caused him to
delay replying to plaintiffs letters. The only inference to make is that Chief Bereng failed to step into the breach because he felt that doing so would be inconsistent with the true state of affairs he discovered when performing duties assigned him by his brother during the letter's stated inability to do so personally.
At the close of the plaintiffs case DW1 Mrs van der Linde came to the stand and testified on oath for the defence. DW1 said that by profession she is an accountant at Ladybrand and has been in practice as such for the last four years. She further indicated that she is a Member of the Commercial and Financial Accounts Institute. She holds a Bachelor of Commerce Degree and has done her articles through the Institute of Commercial and Financial Accountants.
DW1 testified that she had occasion to look at the bank statements involving E.R. Sekhonyana at the standard Bank.
She said she compiled a record of her exercise in a document entitled Notice to Discover (in terms of) Rule 34(1).
The plaintiff's discovery affidavit and the deceased's statements were attached in the document she prepared. These were handed in and marked Exhibits "C" and 19 "D" respectively.
She testified in-chief that she could not give an opinion on the beginning balance of M372 000-00 because she did not have he documentation necessary for the purpose. Apparently her analysis only commenced from a point when the account was already overdrawn to the extent of M372 000-00.
This is not the only disadvantage that bedevilled her efforts to adduce evidence that would be of assistance to the Court but as Mr Hoffman pointed out her analysis is flawed in that it makes no provision for bank charges. This was a legitimate criticism of her evidence because it seemed that she made an assumption that all debits other than those relating to cheques are to be considered as interest.
Apart from the disadvantage of inadequate information DW1 found herself being compelled to work under the results emanating from the wrong assumption she made cannot be reliable at all.
In no time DW1 was out of her depth while under cross-examination. In the result she conceded a number of vital points raised on behalf of the plaintiff. In her concessions the Court was able to discern lack of bias in her character. At least she didn't give the impression of having come to Court to give a story that exclusively
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favoured the defence.
She conceded that hers was only to do an arithmetic calculation. She was led to this concession as the next logical step after conceding as follows at page 156-157
"You have totalled the cheques written.............? Yes
You have totalled the deposits..................? Yes
And you have said that there is a difference between those two......? Yes.
And you have said that the remaining amount of the overdraft is taken account of by way of interest and bank charges.............? That we have added up as well as it appeared on the bank statements"
The Court has had a look at various bank statements in this proceeding and observed that apart from interest, various other debits were passed from time to time; and that interest is invariably shown as a separate debit in each and every month.
Mr Hoffman took at random the Bank statement 47 which he referred to as a typical one when putting it to DW1 who conceded it was.
The witness was guided through entries in this statement which reflected debits column and bank charges showing typical country cheque commission of M2-00 and a service charge of M28-26. DW1 conceded that these indeed were normal sort of entries to expect on a bank statement. She also conceded that she could not say
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whether the commissions were properly charged or whether the bank charges were
properly raised or not as that was not her mandate.
From the above background that in effect constitutes DW1's evidence under cross-examination it is easy to observe that commissions are charged on country cheques, that bank charges were issued for M12 742-55 and M4 066-00. Further that commissions were charged on bank cheques and cash paid in the sum of Ml 2 000-00. Other statements follow this pattern in a more or less typical fashion.
Clearly as pointed out earlier the sort of evidence that van der Linde was called to lead is of no assistance to the defendants nor to the Court in view of concessions she made when confronted with what the case is about. As pointed out by Mr Hoffman she confirmed in cross-examination that her calculations were based on the difference between monies deposited and cheques written by the deceased and that the difference represents interest and charges. Apart from the fact that this is incorrect, she did not even seek to separate interest from charges. See pages 157-158 of the record.
Having briefly dealt with evidence set out above it remains to deal with the law. It has previously been demonstrated that the deceased did not at any stage dispute his indebtedness to the plaintiff. Had he done so, no doubt he would have
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queried the bank statements which he kept on receiving. He would have written in
response to the numerous letters received by him and stated that he disagreed with the extent of his indebtedness. Instead what betrays his unsolicited admissions of his liability notwithstanding his counsel's submissions to the contrary is his letter of 19-11-94 referred to earlier. See page 103 Vol 2 of Discovery Documents.
In Benefit Cycle Works vs Atmore 1927 TPD p.524 which turned on more or less a similar principle to the instant matter De Waal J.P. said :
"Now what are the other circumstances in this case, apart from the evidence of the two witnesses, Maltz and the defendant? There is the circumstance that a letter was written on the day which the conversation took place in which Spitz placed on record the telephonic conversation of that date, that is, that the defendant had undertaken personally to make payment of the amount owing by Solomon. To that letter no reply was vouchsafed, nor was a reply vouchsafed to the letter of the 7th February, nor to the letter of the 18th February, in all of which the defendant is referred to the terms of his verbal undertaking to be personally responsible for Solomon's indebtedness. That is a circumstance to my mind which drops the scale in favour of the probability that the evidence given by the plaintiff is the true evidence. I am quite in agreement with Mr. Price that a letter which places on record something false does not necessarily call for a reply from the person to whom it is addressed. If for instance a letter is written by A to B, stating that B owed A a certain amount of money, and B has had no prior dealings with A, there would be no obligation on the part of B to reply to that letter; but where, as in this case, negotiations had taken place immediately preceding the writing of the letter, and the writer then places on record his version of what had taken place during the negotiations, and there is no reply by the other side, then the Court is bound to attach the greatest importance to that fact. In Wiedeman vs Walpole (1891, 2 QB at 534), the question to be determined was whether the plaintiff in an action for damages for breach of promise of
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marriage could rely on the fact that she had written a letter to the defendant to which no reply had been vouchsafed. In dealing with the matter the MASTER OF THE ROLLS said this at p.537 : 'Now the allegation in the present case was that the defendant, had promised to marry the plaintiff. Suppose, however, the letter had charged against him some grievous offence or misconduct, and the writer had stated that unless the defendant paid something he would be exposed. The argument, if true at all, must be that by not answering such a letter the man who receives it must be taken to admit that he is guilty of the charges contained in it. Now there are cases, business and mercantile cases, in which the Courts have taken notice that in the ordinary course of business if one man of business states in a letter to another that he has agreed to do certain things, the person who receives that letter must answer it if he means to dispute the fact that he did not so agree. So, where merchants are in dispute one with the other' but you promised me that you could do this or that,' if the other does not answer the letter, but proceeds with negotiations he must be taken to admit the truth of the statemen1st; and Lord Kay says at p.541 : ' There are certain letters written on business matters and received by one of the parties to the litigation before the Court, the not answering of which has been taken as very
strong evidence that the person receiving the letter admitted the truth of what was stated in it. In some cases that is the only
possible conclusion that could be drawn.................................".
I agree entirely with the exposition of the law distilled from the above statement and would venture to say in the instant case circumstances point to the deceased as having admitted his liability to the plaintiff because the writing of letters by the plaintiff to the deceased who either didn't reply to or took a long time to respond to some of them without denying contents of those letters when he did so, was preceded by negotiations over bank facilities between the plaintiff and the deceased.
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I take further comfort from Hoffmann & Zeffert1sts invaluable works On Evidence pp 180-181 where the learned authors say :
"The question is always whether it would be reasonable to infer that the party concerned did not answer because he acknowledged that the facts stated in the letter were true... The principle was summed up by Miller J.A. in Me Williams vs First Consolidated Holdings (Pty)Limited 1982(2) S A 1 (A):
'In general, when according to ordinary commercial practice and human expectation firm repudiation of.......... an assertion would be the norm if it was not accepted as correct, a party's silence and inaction unless satisfactorily explained may be taken to constitute
an admission by him of the truth of the assertion, or at least will be an important factor telling against him in the assessment of the probabilities and in the final determination of the dispute. And an adverse inference will the more readily be drawn when the unchallenged assertion had been preceded by correspondence or negotiations between the parties relative to the subject-matter of the assertion.'.....".
A matter of some nicety was raised in argument by Mr Mphalane for the defendants. That matter relates to the principle that it is not permissible that interest should exceed capital debt.
While I agree with the salutary effect of this principle and do acknowledge the binding nature of its application by our Court of Appeal wherever such was pronounced I do not for a moment think that this principle could be capriciously and whimsically resorted to at any stage during proceedings in Court and without having
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been properly pleaded.
It is one of the basic requirements in civil litigation that pleadings should be conducted with discipline. A practical application of this requirement is that a defendant "must clearly and concisely state all material facts upon which he relies". See Herbstein & van Winsen : The Civil Practice of the Supreme Court of south
Africa p.462.
At page 463 the Learned authors say that apart from denying allegations with which the defendant disagrees "if any explanation or qualification of a denial is necessary it must be stated in the plea".
I am aware that Mr Mphalane came into the scene long after pleadings had been closed and that he is not the one who drew the pleadings. But since there was no attempt to apply for amendment of pleadings he had no option but to toboggan within the confines of a narrow corridor set and designed for him by someone else. Furthermore it is a cardinal rule in civil procedure that no side should be allowed to spring a surprise on the other.
The principle that Mr Mphalane sought to invoke albeit at a wrong stage of the proceedings is one based on and generally known as in duplum rule. But in all
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occasions where this rule has been raised it has always been by way of a plea. Nor has it ever been suggested that a general denial will suffice to enable a defendant to raise the principle.
As satisfactorily summarised in Standard Bank of South Africa Ltd vs Oneanate Investments Pty Ltd (In Liquidation) 1998(1) SA 811 (SCA) the salutary benefit of In duplum rule is that as it ordains that interest has to stop when it equals unpaid capital this rule is based on public policy designed to protect borrowers from exploitation by lenders.
But the practical application of this rule has been shown not to exist in a vacuum. Factors of relevant concern require it to be applied with discipline. At pages 827 J to 828 A Sulman J.A. succinctly deals with a point of moment when generally addressing himself to the question of Capitalisation in this regard by saying
“..................when summons was served the interest element of the claim did not exceed the amount of the outstanding capital and, for that simple reason, the application of the rule did not arise at that stage. Because of the delays in the litigation the in duplum rule only became of concern well into the life of the litigation. Because of this, a number of subsidiary questions arise. The first concerns capitalisation....... It
reared its head in response to the plea of in duplum. What the bank then alleged was that, due to the practice of banks to capitalise
interest, interest once capitalised loses its character and becomes capital. Therefore the in duplum rule cannot apply to overdraft
accounts. This practice, it was alleged, is long established, notorious, reasonable,
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certain and does not conflict with the positive law".
At page 828 H - J the learned Judge went further to say and with his statement
I agree
"An examination of the bank statements in this matter reveals simply that the compound interest was charged and added to the
previous balance. Plainly if the bank was entitled to capitalise interest in the sense suggested by the plaintiff, namely, to regard
each charge of interest as going to increase the capital amount of the debt, this would make serious inroads upon the in duplum rule. If interest were to become capital the capital amount of the debt would always be increasing and the bank would run no risk of a lesser capital amount being the subject-matter of the rule.
As correctly pointed out by Mr Rogers the practice of 'Capitalisation' of interest by bankers does not result in the interest losing its character as such for the purposes of the in duplum rule. Furthermore it lenders were entitled to employ the expedient of a book entry to convert what is interest into capital, this would afford an easy way to avoid not only the in duplum rule but also the provisions of the Prescription Act and Usury Act 73 of 1968........When interest is compounded it remains interest".
The learned Judge cited with approval the words of Selikowitz J. :
"After considering the evidence and weighing the views of the many eminent Judges referred to above, 1 conclude that there is no basis for saying that the interest debited by a bank to an overdrawn current account and added to the total amount outstanding loses its character as interest and becomes capital or anything else. The debit balance shown in a customer's bank statement is made up of separate debits, each one of which has its own identity and origin. Some arise from moneys lent and advanced, others from the banker's service charges or commissions, still others from taxes or even from the sale to the customer of stationery such as cheque or deposit books. Lumping together all the amounts which are owed to the bank and which remain unpaid does not change their origin or their nature".
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But at 834 Sulman J.A. cautiously adds at letter C, after indicating that the rule protects borrowers from exploitation by lenders who permit interest to accumulate, that:
"If that is so, I fail to see how a creditor, who has instituted action can be said to exploit a debtor who, with the assistance of delays inherent in legal proceedings, keeps the creditor out of his money. No principle of public policy is involved in providing the debtor with protection pendente lite against interest in excess of the double. Since the rule as formulated by huber does not serve the public interest, I do not believe that we should consider ourselves bound by it. A creditor can control the institution of litigation and can, by timeously instituting action, prevent the prejudice to the debtor and the application of the rule. The creditor, however, has no control over delays caused by the litigation."
I am in respectful agreement with the above passage. I am particularly enamoured of the phrase no principle of public policy is involved in providing the debtor with protection pendente lite against interest in excess of the double. I don't think any such principle is involved in the instant matter either. Summons was timeously issued in 1995 but delays for which plaintiff bears no responsibility dogged this matter and militated against its speed finality.
Before concluding I may just indicate that in his strenuous effort to strike blows for the defendants in paragraph 8 of his heads of arguments and during addresses Mr Mhalane rightly pointed out that the plaintiff bears the onus of proving its case on the balance of probabilities. However elaborating on the rationale on which the burden and standard of proof are based he put a spanner in the works by
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saying that the Court, when finding for the plaintiff, should feel comfortable, and convinced. There should not be a slight doubt that (sic) injustice is done. (Emphasis laid).
The standard of proof to meet which there should not be a slight doubt is one required in criminal proceedings. The matter being dealt with here is a civil one in which the plaintiff is required only to discharge the onus on a balance of probabilities which is a lower standard. It would therefore be wrong and unconscionable to subject the plaintiff to meet and satisfy a higher and more stringent standard than one imposed by land.
In conclusion therefore I find for the plaintiff and do order as follows :
1. As against the 1st defendant 'Malerotholi Sekhonyana (in her representative capacity)
1.1. Payment of the sum of M1 847 122-44
1.2. Interest on the sum of Ml 847 122-44 at the rate of 18.5% per annum from 29th January 1995 to date of payment.
2. As against the 1st defendant 'Malerotholi Sekhonyana
2.1. Judgment is entered in the sum of M1. Million
2.2. Interest on the sum of Ml. Million at the rate of 18.5% per annum From 29th January 1995 to date of payment
2.3 An order is made declaring executable the property situate at plot No.
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1784.009 Lower Moyeni, Quthing Urban Area, in the Quthing District.
3. As against the 2nd Defendant 'Masenate Mopeli
3.1 Judgment is entered in the sum of Ml 200 000-00
3.2 Interest on the sum of Ml 200 000-00 at the rate of 18.5% per annum from 29th January 1995 to date of payment.
3.3 an order is made declaring executable the property situate at Plot No. 12281 -008 Maseru West, Maseru Urban Area, in the District
of Maseru.
4. The defendants are held jointly and severally liable the one paying the other to be absolved.
5. The plaintiff is awarded costs of suit.
JUDGE
29th November, 1999
For Plaintiff: Mr Hoffman, S.C.
For Defendants : Mr Mphalane
