REPORTABLE ZLR (9)
Judgment
No S.C. 16\2002
Civil
Appeal No 47\2001
FOODEX
(PRIVATE) LIMITED v CLIMAX INVESTMENTS (PRIVATE)
LIMITED
SUPREME
COURT OF ZIMBABWE
CHIDYAUSIKU
CJ, EBRAHIM JA & SANDURA JA
HARARE
JANUARY 29 & APRIL 12, 2002
R.M.
Fitches,
for the appellant
P.
Nherere,
for the respondent
SANDURA
JA: This is an appeal against a judgment of the High Court which
ordered the appellant to pay to the respondent the
sum of $40 476.45
together with interest and costs of suit. The summons had been
issued against the appellant by the Zimbabwe Banking
Corporation
Limited (Zimbank), but Zimbank subsequently ceded its rights to
the respondent.
The
relevant facts are as follows. The appellant had a letter of credit
facility at the international division of Zimbank which
facilitated
the importation of various goods into the country by the appellant.
In addition, the appellant had a current account
at the Angwa Street
branch of Zimbank.
In
1995 the appellant, intending to import certain goods from Morocco,
applied for a letter of credit from the international division
of
Zimbank. The application was successful and the letter of credit
was issued. It was a ninety day letter of credit.
However,
when payment of the amount due in respect of the letter of credit was
not made at the international division of Zimbank
within the ninety
day period, Zimbank debited the amount due to the appellants
current account at its Angwa Street branch. As
a result, the
appellants current account was overdrawn, and Zimbank charged
interest at the punitive rate of 43% per annum due
to the fact that
the overdraft was unauthorised.
When
the appellant failed to clear the overdraft, Zimbank issued a summons
against it, but subsequently ceded its rights in the
action to the
respondent.
Thereafter,
when the matter was heard, the learned judge in the court a
quo
ordered the appellant to pay to the respondent the sum claimed
together with interest and costs of suit. Aggrieved by that
decision,
the appellant appealed to this Court.
The
first issue which I should consider is whether Zimbank had the right
to transfer the sum owing in respect of the letter of credit
to the
appellants current account at its Angwa Street branch. I think
it had. I say so partly because of the contents of a
document
produced at the trial by the respondent, and partly because of the
appellants conduct after the account had been debited.
The
document is a standard application form which is completed by a
person applying for a letter of credit.
The
relevant part of one of the clauses in that document reads as
follows:
Whenever
the Bank in its sole discretion considers it desirable to obtain cash
cover against this Letter of Credit, the Bank is hereby
irrevocably
authorised to debit our account, without reference to us, with the
amount concerned
In
my view, the wording of this clause is clear and unambiguous. The
clause clearly authorised Zimbank to debit the appellants
current
account at its Angwa Street branch, as it was not suggested by the
appellant that the international division of Zimbank operated
ordinary customer accounts. That division was responsible for
issuing and administering letters of credit.
In
the circumstances, the phrase our account could only mean the
appellants account at some other branch of Zimbank, i.e.,
in this
case, the Angwa Street branch.
Whilst it is
correct that the document in question was not the actual form
completed by the appellants Managing Director when
he applied for
the Morocco letter of credit in 1995, but was the form completed by
him when he applied for a different letter of
credit in October 1994,
the document was produced as the standard application form to be
completed by any applicant for a letter
of credit. In my view, the
learned judge in the court a
quo
was correct when he concluded that on a balance of probabilities the
appellants Managing Director completed an identical application
form when he applied for the Morocco letter of credit in 1995.
In any
event, when the document was produced in the court a
quo
the appellants Managing Director did not allege that the document
was not identical to the application form which he had completed
in
1995 when he applied for the Morocco letter of credit.
However, Mr
Fitches,
who appeared for the appellant, submitted that in view of the fact
that the document in question had not been discovered, the learned
judge in the court a
quo
ought to have made an appropriate order as to costs, i.e. by
depriving the respondent of part of its costs. In this regard, it
is pertinent to note that this argument was not advanced in the court
a
quo.
Had
the argument been advanced, the learned judge would have considered
it and exercised his discretion in the matter. As the
question of
costs is a matter which lies within the discretion of the trial
judge, this court is not in a position to substitute
its own
discretion and there is no basis for doing so. In any event, the
issue was not raised in the court below.
Furthermore,
in my view the learned judge could have reached the conclusion which
he reached without taking into account the document
in question
because the appellants conduct, after its current account had been
debited, clearly showed that it accepted that Zimbank
was perfectly
entitled to transfer the debit in respect of the letter of credit to
its current account at the banks Angwa Street
branch. This
emerges from the correspondence between the Angwa Street branch of
Zimbank and the appellant, after the appellants
current account
had been debited.
On
28 December 1995 the Senior Manager of the Angwa Street branch of
Zimbank wrote to the appellant as follows:-
The
above account is overdrawn by $396 898 after meeting the Letter of
Credit drawing in the amount of $460 984.92.
We
enclose herewith acknowledgement of debt forms for your signature
Kindly return these to us for the completion of our records.
We
however, expect the above overdraft to be repaid now since no prior
arrangements with ourselves for accommodation had been made.
On
8 January 1996, the appellants Managing Director replied as
follows:-
Reference
is made to your letter and annexures of 28th
December 1995 received by this office on the 5th
January 1996
As
indicated to you telephonically prior to the date of this letter, in
early December I offered to Zimbank after discussions with
your Mr
Visser, a further guarantee of ZWD 1 million on a property belonging
to me through another company. The obvious idea behind
my move
was that your bank would have given our group substantial assistance
so as to get us through the serious cash flow problems
which we were
experiencing as a result of a negative trading pattern during
September and October last year
Under
the circumstances therefore, you would appreciate that I am not
willing at this present stage to give any more guarantees in
my
personal capacity or otherwise and as a result regret to advise that
I am not prepared to sign the acknowledgement of debt forms
Obviously
every effort will be made for this account to return to a credit
state as soon as humanly possible
We
do apologise for the obvious difficulties that we are causing you as
a result of this overdrawn account
It
is significant that the appellants Managing Director did not
protest that the appellants current account at the Angwa Street
branch had been debited with the amount payable in respect of the
letter of credit without authority. Had the account been debited
without authority the Managing Director would obviously have
protested.
Subsequently,
on 18 June 1996, Zimbanks lawyers wrote to the appellant demanding
payment of the full amount owing in respect
of the overdraft. In
his reply a week later, the appellants Managing Director, whilst
querying the punitive rate of interest
charged by Zimbank, did not
protest that the account should not have been debited with the amount
payable in respect of the letter
of credit.
In
the circumstances, I am satisfied that the learned judge in the court
a quo correctly
found that the appellants current account was debited with the
appellants authority.
I
now proceed to consider whether Zimbank was entitled to charge
interest on the appellants overdraft at the punitive rate of
43%
per annum.
There
can be no doubt in my mind that the appellants overdraft was
unauthorised and that Zimbank was, therefore, entitled to
charge
interest on the overdraft at the punitive rate, which was higher than
the rate of 30% per annum which the appellant thought
should have
been charged.
In
this regard, clauses 4 and 5 of Zimbanks General Terms and
Conditions applicable to overdrafts read as follows:-
4. The rate of interest and
the basis upon which interest is calculated or charged may be altered
by the Bank from time to time and
as it, in its discretion, deems
fit.
A
penalty charge of not less than an additional 4% is levied in
respect of any unauthorised excesses over the agreed limit. Plus
10% of the excess interest as management fees.
Although
there was no express agreement as to the rate of interest chargeable
on the appellants overdraft it was common cause that
interest was
chargeable. The issue was whether it should be charged at the rate
of 30% per annum or at the punitive rate of 43%
per annum.
However,
in terms of clause 5 of Zimbanks General Terms and Conditions
applicable to overdrafts, it is clear that the bank was
entitled to
charge interest at the punitive rate of 43% in respect of
unauthorised overdrafts. As the appellants overdraft was
unauthorised, the punitive rate of interest charged by the bank on
such overdrafts applied to it.
In
addition, the appellant was bound by Zimbanks practice of
periodically debiting, as money due and payable, interest on an
overdrawn account.
Dealing
with a similar issue in Senekal
v Trust Bank of Africa Limited
1978 (3) SA 375 (A) MILLER JA had this to say at 384F-H:-
Ordinarily,
the customer is probably aware of the banks practice of
periodically debiting, as money due and payable, interest to
an
overdrawn current account and, if the customer may have been unaware
of that practice at the time of his seeking and obtaining
overdraft
facilities, he must needs have become aware of it when periodical
statements of account were rendered to him by the bank,
showing that
interest had been periodically charged and added to his current
capital account. It appears to me that a customer
who receives such
periodical statements without protest or objection acquiesces in the
system and thereby tacitly agrees to be bound
thereby. This view
has been taken by Courts in England. (See Paget
The Law of Banking 8th
ed at 132-4 and the cases there referred to). Another approach,
leading to the same result, is that, in the absence of any express
agreement on the point, the customer, when seeking and obtaining
overdraft facilities from his banker, tacitly agrees to be bound
by
the practice of the bank in regard to the debiting of accrued but
unpaid interest to capital account. The evidence of Burger
clearly
reveals that the respondents practice was to debit unpaid interest
to the current account at periodical intervals of approximately
one
month and, indeed, he testified that that is and has for very many
years been the common practice of commercial banks in South
Africa.
This
was followed in Absa
Bank Bpk v Saunders
1997 (2) SA 192 (NC) where, according to the translation, STEENKAMP
AJP said the following at 196J-197A:-
According
to Mr Fouries evidence, which was not disputed, a long-standing
trade usage exists that it is within the discretion of
the bank
manager to determine the interest rate on an overdrawn account and
that it was unnecessary for the commercial bank to notify
its client
of the increase or decrease in interest.
In
my view, these dicta
are very persuasive authority in favour of Zimbank and the
respondent.
The
learned judge in the court a
quo, therefore,
correctly determined the issue concerning the punitive rate of
interest charged by Zimbank on the appellants overdraft.
Finally,
I wish to consider the date from which interest should be charged on
the difference between the sum of $28 540.00, originally
claimed in
the summons, and the sum of $40 476.45 claimed in the amended
summons. The difference between the two sums is $11 936.45.
Whilst
it was common cause that demand for payment of the sum of $28 540 had
been made by the respondent, there was no agreement
on whether
payment of the sum of $40 476,45 had been demanded.
On
8 December 1999 the appellant filed its request for further and
better particulars in the High Court. One of the further and
better
particulars sought was the following:-
When
was the demand made of the sum of $40 456.45?
In
reply, the respondent, in its further and better particulars filed in
the High Court on 8 March 2000, stated as follows:-
Demand
of the sum of $40 456.45 was made by the Notice of Amendment filed in
this matter on the 1st
September 1999.
The
Notice of Amendment referred to stated the following:-
Please
take note that (at) the Pre-Trial Conference of this matter plaintiff
will apply for amendment of its summons by the deletion
of paragraphs
1 and 2 and substitution (of) the following
However,
the Pre-Trial Conference minute filed of record does not indicate
whether the application for the amendment of the summons
was made at
the Pre-Trial Conference and what the result was.
Nevertheless,
it is clear from the record that the trial proceeded on the basis
that the respondents claim was in respect of
the sum of $40
476.45. This was mentioned by counsel who appeared for the
respondent in the court a
quo before she called
her first witness.
In
the circumstances, I agree with Mr Fitches,
who appeared for the appellant, that the learned judge in the court a
quo should have
ordered interest on the sum of $11 936.45 to run from the date of the
judgment, i.e. 1 February 2001.
In
my view, a notice of amendment of the summons cannot be a demand in
the true sense of the word. As Mr Fitches
submitted, the significance of a demand is to put the defaulting
party in mora,
and it is from that date that interest should run.
In
the circumstances, the order of the court a
quo is altered so that
it reads as follows:-
1. That the defendant shall
pay to the plaintiff the sum of $40 476.45.
That
interest on the sum of $28 540.00 shall be calculated at the rate of
43% per annum from 29 October 1996 to the date of payment
in full,
compounded monthly on the last day of each month from 31 October
1996.
That
interest on the sum of $11 936.45 shall be calculated at the rate of
43% per annum from 1 February 2001 to the date of payment
in full,
compounded monthly on the last day of each month from 28 February
2001.
That
the defendant shall pay the costs of suit.
Subject
to the above alteration, the appeal is dismissed with costs.
CHIDYAUSIKU
CJ: I agree
EBRAHIM
JA: I agree
Lofty
& Fraser,
appellant's legal practitioners
Gill,
Godlonton & Gerrans,
respondent's legal practitioners
