The Applicant (alternatively, “Dunn”) instituted action against the Road Accident Fund (“RAF”), which claim was settled on 17 August 2016. The parties agreed, inter alia, that the Applicant would receive a payment of R5 934 730.00 (Five Million Nine Hundred and Thirty Four Thousand Seven Hundred and Thirty Rand) (the “Judgment Debt”), payable on or before 17 December 2016.
Payment of the Judgment Debt was effected on 16 January 2017. As a result, Dunn brought an application to the High Court seeking the following relief:
- that, upon proper interpretation of the Court Order (the “Order”) granted on 17 August 2016, as well as s173(a) of the Road Accident Fund Act 52 of 1996 (the “RAF Act”), the RAF was obliged to pay interest on the Judgment Debt at a rate of 10.5% with effect from 31 August 2016, being 14 days after the date on which the Order was granted, to 16 January 2017, being the date of payment of the Judgment Debt; and
- the Respondent accordingly make payment to Dunn in the amount of R235 600.65 (Two Hundred and Thirty-Five Thousand Six Hundred Rand and Sixty-Five Cents), being the alleged accumulated interest in respect of the Judgment Debt.
The aforesaid Order directed payment to be made “on or before” 17 December 2016, however, it was silent on the issue of interest.
The pertinent dispute before the Court was whether interest in respect of the Judgment Debt could be calculated 14 days from date of the judgment (31 August 2016), or only from the mandated date of payment as specified in the Order (17 December 2016).
The Applicant relied on s2A (1) of the Prescribed Rate of Interest Act 55 of 1975 (the “PRI Act”) which, read in tandem with section 1 of the same Act and section 173(a) of the RAF Act, prescribes that no interest is payable on compensation awarded by a Court unless 14 days have elapsed from the date of the relevant order.
Counsel for the Applicant submitted that the 14 days as aforementioned was the only “grace period” within which the Respondent could pay the Judgment Debt interest-free. Once the 14 days elapsed on the initial date of judgment, the Applicant would thus be entitled to claim interest from this date until date of actual payment (16 January 2017).
The Respondent raised the defence of res judicata, whereby a court order can only give effect to what was agreed upon between the parties, which, in this instance, was deferment of payment to 17 December 2016. Therefore, in applying common law principles, mora interest will only run from 17 December 2016, if the capital sum was not paid on that date (which it was not).
Furthermore, the Respondent reinforced that the offer made to the Applicant in terms of the settlement agreement (the “Agreement”) between the parties constituted a full and final settlement and the Applicant’s acceptance of said offer served to waive the provisions of section 173(a) regarding the 14 days. Counsel for the Respondent went on to state further that mora interest starts from date the party defaults of payment of the capital sum and not before such date.
The Court considered the wording of the settlement agreement (the “Agreement”), whereby the terms therein were assigned their simple meaning. It was consequently apparent that the Judgment Debt was not to payable to the Applicant within a 14-day period, but was deferred until 17 December 2016.
The Court held that the 14-day period as provided for in section 173(a) of the RAF Act was implemented purely for administrative purposes in processing payment.
The Court went further to state that the purpose of the RAF Act was not intended as a “mechanism to gain interest.” Thus, an express clause in the Agreement between the parties making provision for interest to run from the date of the judgment should have been included from the outset. The Court therefore could not accept the Applicant’s contentions that interest on the Judgment Debt would become payable 14 days after the handing down of the Order.
It was accordingly held that he Respondent was not in mora from the date of judgment but from the date when it failed to perform in terms of the Agreement and, by extension, the Order.
The Court reiterated that it is a fundamental principle in our law, as relates to interest claimable, that mora interest is only calculable from the moment the debtor is in default. Thus, the Applicant was only entitled to claim interest on the Judgment Debt from the date of default, namely, 17 December 2016.
Where the parties have agreed upon a date of payment, in the event of one party defaulting on payment, mora interest will arise. Interest does not automatically run subsequent to the handing down of a court award in RAF matters.
Written by Divina Naidoo and supervised by Jarryd Spargo, 05 October 2018