CIV/T/110/91
CIV/T/337/91

IN TEE
HIGH COURT OF LESOTHO

In the
matter between:

SPIRVIN
BOTTLING COMPANY (PTY) LTD PLAINTIFF

V

LESOTHO
CASH & CARRY DEFENDANT

K.B.T.
JANDRELL AND CO. (PTY) LTD. PLAINTIFF

V MA.
ABUBAKER DEFENDANT

Before
the Honourable Chief Justice Mr. Justice B.P. Cullinan on the 15th
day of June, 1992.

For the
Plaintiffs : Mr. S.A. Redelinghuys & Mr. J. Kambule;

Mr. C.S.
Harley

For the
Defendants : Mr. S.S. Mafisa

JUDGMENT

Cases
referred to:

1. Kloppers
   Handel (Pty) Ltd. v Lesotho Photo Labs & Lighting CIV/T/158/87
   Unreported;

   
   

2. LTA
   Construction BPK v Administrateur. Transvaal(1992) 1 SA 469;

   
   

3. Benaim
   v Debono (1924) A.C. 514 (P.C.);

   
   

4. Ascherbere.
   Hoowood & Crew Ltd. v Casa Musicale Sonzogno (1971) 1 WLR 173,
   1128 (C.A.).

   
   

In both
these actions interlocutory judgment was granted in the Motion Roll,
judgment in default of appearance in the first

2

action
and summary judgment (as to the major portion of the claim) in the
second action. In both cases the question has arisen as
to what is
the appropriate rate of interest, in default of prior agreement, to
be ordered by the court on the respective debts.
It proves convenient
therefore to deliver a composite judgment.

Mr.
Mafisa initially referred me to the judgment of this Court in the
case of Kloppers Handel (Pty) Ltd, v Lesotho Photo Labs &

Lighting (1). In that case the plaintiff claimed 12% interest, in
default of agreement thereon. It was submitted on behalf of the

defendant "that 11% is the rate followed in normal practice".
On behalf of the plaintiff it was "conceded that the
interest
rate is not settled, for even at times without proof of prior
agreement, this Court has allowed not only 12% but upwards
of 17%
interest". In the event, the Court awarded interest at 11%. It
would seem therefore that the learned Judge accepted
that "11%
is the rate followed in normal practice".

I observe
however that that decision was made nigh on five years ago.
Furthermore, the submissions on the point seem to have been
extremely
brief and the Court does not seem to have received quite the same
assistance by way of submission as I have received.
Further, Mr.
Mafisa himself has conceded that the rate of 11% is no longer
applicable.

While I
do not say that the rate of interest is necessarily

3

a
constantly ascending one, I consider it notorious that that has been
the trend for the last four to five years. Mr. Redelinghuys
refers me
to the recent case of LTA Construction BPK v Administrateur,
Transvaal(2) where the Appellate Division (per Joubert J.A)
observed
at p.477 at D (the Report is in Afrikaans and Mr, Redelinghuys has
kindly supplied a translation);

"Interest was limited by the Government in various ways from the
earliest times based on economic consideration aimed at limiting
the
usury of creditors and in order to protect debtors responsible for
payment of interest. ...

One of the methods applied was to peg the rate of interest from time
to time. During the classical period the interest rate was
12%
(usurae centesimae) while Justinianus in AD 528 set interest for
ordinary Citizens at 6% (usurae semisses). Interest which
complied
with the set rate is known as usurae legitiaae...........

Certain legal principles appear from the relevant text of the Digest
which applied in the classical period. They include the following.

An agreement to pay interest at the legal rate of interest of 12% per
annum on the capital amount was valid and enforceable. This
is so
because it was based on usurae legitimae. An undertaking to pay
interest at a rate above 12% per annum was invalid and unenforceable

inasmuch as it exceeded usurae legitimae."

The
Appellate Division held, incidentally, that the prohibition on
interest in duplum, namely, that interest may not exceed the
capital
sum, is not an anachronism and has not been abrogated by disuse. In
any event, Voet defended "promised" interest
at length,
observing inter alia (Gane's Translation 22.1.4)

4

The furnishing under covenant of moderate and definite interest in
return for money given on loan is not in conflict, as some have

wrongly thought, either with the principles or fairness of natural
law, or with that equality which is to be observed in contracts."

Speaking
of "unpromised" interest Voet observes (22.1.12),

"... there are some cases in which a defendant can have judgment
given against him for intrest according to the usage of today
in our
courts even on extra-judicialdefault only. Instances are when one who
is indebted on the cause of a large-scale business
transaction or of
merchandise sold and delivered to him wholesale has become a
defaulter; ...

It is the same general1ly if a purchaser is in default of payment of
the price after the date fixed for payment, although he has
neither
made any covenant to pay interest, nor has received or could have
received fruits from the thing sold equal in amount to
what has to be
paid on account of interest under the custom of the country. Fairness
does not allow the purchaser and him alone
to make a gain for himself
at the same time both out of the fruits of the property and the
interest on the price.

Nay indeed if a purchaser has suffered eviction of the thing sold he
would correctly sue not only for restoration of the price
paid, but
also for interest upon it from the time of the occurrence of
eviction."

Whatever
about the rate of interest, the principle of the payment of
"unpromised" interest is then well established at
common
law. Today the situation is covered by statute in the Republic of
South Africa, that is, the provisions of the Prescribed
Rate of
Interest Act, 1975 (see Uniform Rules of Court by Nathan, Barnett &
Brink, 3 Ed. at pp.663/664) which in part read
as follows:

"1.(1) If a debt bears interest and the rate at

5

which the interest is to be calculated is not governed by any other
law or by an agreement or a trade custom or in any other manner,
such
interest shall be calculated at the rate prescribed under subsection
(2) as at the time when such interest begins to run,
unless a court
of law, on the ground of special circumstances relating to that debt,
orders otherwise.

2. The
   Minister of Justice may from time to time prescribe a rate of
   interest for the purposes of subsection (1) by notice in the

   Gazette.

   
   

2. No
   rate of interest shall be prescribed under subsection (2) except
   after consultation with the Minister of Finance,

   
   

2.(1) Every judgment debt which, but for the provisions of this
subsection, would not bear any interest after the date of the
judgment or order by virtue of which it is due, shall bear interest
from the day on which such judgment debt is payable, unless
that
judgment or order provides otherwise.

2. Any
   interest payable in terms of subsection (1) may be recovered as if
   it formed part of the judgment debt on which it is due.

   
   

2. In
   this section 'judgment debt' means a sum of money due in terms of a
   judgment or an order, including an order as to costs, of
   a court of
   law, and includes any part of such a sum of money, but does not
   include any interest not forming part of the principal
   sum of a
   judgment debt."

   
   

For the
purpose of section 1.(1) above, the Minister of Justice of South
Africa prescribed a rate of interest of 11% per annum as
from 16th
July, 1976. That was sixteen years ago however and the rate was
altered a number of times thereafter, that is, to 20%
in 1985, 15% in
1986, 12% in 1987 and ultimately to 18.5% per annum with effect from
1st July, 1989. (See Hortor's Legal Diary,
1992, at pp.66/67).

6

That
figure is of course not binding upon this Court, but it is
undoubtedly highly persuasive. Mr, Harley placed a certificate before

the Court in which the Manager of Boland Bank Limited, a commercial
bank operating in the Republic of South Africa, certified that
the
current "prime rate" is 20.25%, and that such prime rate is
"the rate of interest charged by a commercial bank
to its best
corporate customers where the risk is regarded as minimal".
Generally however, the certificate indicates, a bank
charges a
percentage in excess of the prime rate, motor vehicle instalment
finance, for example, being charged at the rate of 5%
or more above
the prime rate. In this respect, the Managing Director of the
first-named plaintiff above has deposed in an affidavit
that the
plaintiff corporation has an overdraft facility with Boland Bank at
the interest rate of 22% per annum.

In an
earlier submission, Mr. Mafisa suggested that the Court should not
prescribe a rate above that which commercial banks award
on funds
invested, namely, he submitted, 14%, which figure was not contested.
In a public lecture delivered on 19th September,
1991 in Maseru,
Professor John Murray (Dickson Minto Professor of Company and
Commercial Law, University of Edinburgh) observed
at p.4;

"In the present state of affairs, is it not in the ordinary
course of things that if a man is not paid monies owed to him
at the
date when payment is due, then either he himself will have to borrow
money (and so have to pay interest) or he is unable
to use that

7

money to earn interest,"

The
impracticality of ascertaining the particular creditor's financia
situation in each and every case is apparent. Quite clearly,
the
court has to strike a mean rate, as a compromise between an overdraft
rate and an investment rate. In this respect there is
an affidavit in
the second action, sworn by a Branch Manager of Standard Chartered
Bank Africa PLC, to the effect that the current
prime rate prevailing
in Maseru (that is, one month before the certificate supplied by the
Manager of Boland Bank) was 20%, and
that "ordinary customers
pay between 2% and 3% above the prime rate for overdrafts." That
indicates that the average
overdraft rate is some 22.5%. Allowing for
an investment rate of 14%, I calculate the mean rate to be 18.25%.

This
accords with a suggestion made by Mr. Harley, and agreed by Mr.
Kambule and Mr, Mafisa, that it would be equitable for the
Court to
fix a rate of 2% below the prime rate indicated by the Manager of
Boland Bank (20.25%), that is, 18.25%. The mean rate
of 18.25% also
closely approximates with the rate of 18.5% prescribed in the
Republic. For the future, I consider that the Court
should, in the
absence of any law, agreement or trade custom to the contrary, award
a rate of interest on debts at 2% below prime
rate. As to the present
two cases, I consider that an interest rate of 18.25% is indicated.

In this
respect Mr. Kambule seemed at one stage to have

8

resiled
from his earlier agreement in the matter, and to seek a figure of
20%, interest. He pointed to the banker's certificate
submitted, in
which the Manager of Boland Bank Limited stated that

"It is a common commercial custom amongst suppliers of goods and
service to charge interest on overdue accounts at a rate
of 20% per
annum."

Mr.
Harley very properly (as his client sought 22% interest) submitted,
that much evidence would have to be led on the point, from
a wide
range of experts, and that he doubted very much whether a Bank
Manager could be regarded as expert in the matter. With that
I agree.
Further, I observe that the above statement is made in the body of a
certificate - the other contents of which I accepted
on the basis of
agreement between the parties. There is simply no evidence before the
Court of any trade custom in the matter of
the percentage applicable.

Mr.
Kambule further submits that the rate of 18.5% prescribed in South
Africa applies, as the contract was made in that country.
Again there
is no such evidence before the Court, The claim is expressed to be
for goods sold and delivered to the Defendant".
That indicates
that the plaintiff corporation was required to execute and did
execute its part of the contract in Lesotho. The
place of payment is
not stated. The amount owed is expressed in Maloti rather than Rands,
and while it is the debtor's duty to
seek out the creditor, one would
expect that

9

payment
should properly be made and certainly would have been accepted, upon
delivery, that is, here in Lesotho. There is however
simply no
satisfactory evidence upon the point. Voet observes (22.1.11),

"... if debtor and creditor cherish domicile in different places
which employ an incosistent law in regard to the amount of
interest,
the position is rather that the custom of that place in which the
debtor dwells and in which especially he can be sued
and forced to
pay what is due should be followed in the awarding of interest on
default; unless some other place has been expressly
or impliedly
attached to the obligation for the making of payment,"

The
learned editors of Dicey & Morris on The Conflict of Laws Vol. 2,
11 Ed. at p.1194 observe,

"The law of the place where one party has to fulfill his
obligations may, and often will, have the most substantial connection

with the entire contract and therefore govern the obligations of
other parties who have to perform elsewhere. Thus, there is sometimes

a good case for saying that a contract of sale is governed by the law
of the place where the seller has to deliver, irrespective
of that at
which the buyer has to pay (see e.g. Benaim v Debono (3)."

The
probabilities are therefore that the law of Lesotho, is the lex loci
solutionis, that is as the system of law with which the
transaction
had its closest and most real connection, and I so hold. In any
event, 1 observe that if a party wishes to rely upon
foreign law, he
must plead it in the same way as any other fact (Ascherberg, Hopwood
& Crew Ltd v Casa Musicale Sonzogno (4)).
There is no such
pleading before me.

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I award
interest to both plaintiffs therefore at the rate of 18.25% per
annum, with effect from the respective dates of service
of the
summonses. I grant costs to the plaintiff in the first action. In the
second action, as unconditional leave to defend was
granted as to
portion of the claim, I order that costs be in such cause.

Delivered
at Maseru This 15th Day of June, 1992.

B.P.
CULLINAN

CHIEF
JUSTICE