High Court dismisses RAF bid to dodge interest payments on court orders

An application by the Road Accident Fund (RAF) to avoid paying interest on court orders against the fund that did not provide for the levying of interest on those claim amounts has been dismissed with costs by the High Court in Pretoria.

The RAF applied for a declaratory order to end this allegedly unwarranted practice and also for:

• The practice of indemnifying the Sheriff of the High Court in Pretoria East when holding auctions based on unlawful writs of execution for the payment of interest to be declared unlawful because the writs are issued without a court order providing for interest; and
• A further declarator that a procedure must be followed requiring the preparation and submission of an affidavit setting out the calculation of the interest amount sought with the relevant court order.

The fund cited 23 respondents in its application, including the Board of Sheriffs, the Minister of Justice and Correctional Services, the Legal Practices Council, and several attorney firms. Twelve intervening parties were allowed to join the proceedings.

However, Judge Cornelius van der Westhuizen said in a judgment handed down on Tuesday that the RAF had effectively cited the broad legal fraternity, which was generally represented.

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The heart of the matter

Van der Westhuizen said at the heart of this matter was the RAF’s contention that although some of the summons provided for the payment of interest on the capital amount, the judgment order did not always provide for the payment of interest.

He said the RAF also bemoaned the attorney’s reliance on the provisions of the Prescribed Rate of Interest Act (Pria) for the basis of their interest claims.

The RAF said the Pria was amended effective 8 January 2016 to provide for a new system to change the Prescribed Rate of Interest. This new system introduced two requirements: a change in the repurchase (repo) rate determined by the SA Reserve Bank and the publication of the new rate by the Minister of Justice. The effective date of the new rate is two full calendar months after the publication of the new rate.

Judge van der Westhuizen said the RAF lamented the fact that the publication date sometimes did not fall within the two-month period, which allegedly caused and continues to cause problems in calculating the interest amount to be levied.

He said the RAF further alleged the fund must adhere to obligations placed on it in terms of the Public Finance Management Act (PFMA), and the lateness of the publication of the new rate and the delayed commencement date hampers the RAF in fulfilling the obligations imposed on it by the PFMA.

However, Van der Westhuizen ruled that the late publication of the new date is a matter to be addressed by the Minister of Justice and not the court.

He said Section 2 of Pria provides for interest on a judgment debt unless that judgment or order provides otherwise.

“Absent an adverse ruling on interest contained in the judgment or order, the judgment debt shall be subject to interest payable thereon, which may be recovered as if it forme[d] part of the judgment debt on which it is due,” he said.

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When interest starts 

The judge added it is clear from the provisions of Pria that the interest would be from the day on which such judgment debt is payable and the rate of interest is determined in terms of the provisions of Pria.

He said it is clear from this that the amount of interest payable on a judgment debt is readily determined, with the rate given and the date from which it is to run, particularly in regard to the provisions of the Road Accident Fund Act.

Judge van der Westhuizen said the RAF Act provides that no interest shall be calculated on the judgment debt until 14 days have lapsed since the date on which the judgment debt was granted.

“Where the parties in such instances agree that the applicant shall have 180 days to pay the judgment debt, or any other period agreed upon, the interest upon the judgment debt shall be calculated from the 181st day, or from such other agreed date,” he said.

Judge van der Westhuizen said upon execution of a writ on a judgment debt, the amount to be paid is certain by way of a simple calculation with reference to the interest payable and “there is no ambiguity to the amount to be recovered from the debtor”.

“Such writs are not unlawful, as contended for by the applicant [RAF].

“Interest is payable on judgment debts as well as claims for payment of monies in general. That is trite law,” he said.

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Compliance with PFMA

Judge van der Westhuizen said the RAF further contends that in view of the conduct and approach of attorneys, it experiences difficulties in complying with its obligations under the PFMA.

He said the prevailing procedures in respect of the payment of interest on judgment debts allegedly impact the RAF’s compliance with the PFMA obligations, the ability to budget, to process such payments due by it and impacts upon the payment of claims of other claimants being delayed but said there is no merit in any of those contentions.

“The inability of the applicant [RAF] to regularise its office and its internal, or otherwise, procedures, does not constitute a right, existing, or future, or contingent, for the court to inquire upon and to determine.

“At best it is a hope to convince the court to determine a process that enable[s] the applicant [RAF] to address its financial concerns.

“That is not the subject matter of a declarator,” he said.

Judge van der Westhuizen added that the proposal advanced by the RAF that the court should determine the rate of interest applicable and the date from which it ought to run in the judgment order is contrary to the provisions of Pria and the legal position.

He said the further proposal by the RAF that an affidavit be submitted in which the calculation of interest is calculated to be incorporated into the writ “is of no consequence”.

“That issue should be addressed by the Rules Board. It is not for the court to consider and opine upon.

“It is simply a procedural measure which the court has no jurisdiction to adjudicate upon.

“Furthermore, it does not constitute an existing, or future or contingent right which the court can inquire upon and determine and grant a declarator,” he said.

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Financial concerns

Judge van der Westhuizen added that the RAF’s reliance in seeking declarators is premised on its financial concerns other than an interest as intended by Section 21 of the Supreme Court Act.

The RAF’s attempt to clothe its financial concerns as an “interest” as contemplated in that section “is misplaced”, he said.

Judge van der Westhuizen said the RAF further bemoans the alleged practice of attorneys to indemnify the Sheriff.

He said that practice does not relate to an interest in an existing, future, or contingent right but is an issue between the attorneys and the sheriff.

“Should the application [RAF] have problems with a specific writ, it should undertake the required steps to address that issue before a court,” he said.

Judge van der Westhuizen said the provisions of Section 2 of Pria apply to unliquidated claims, which is not relevant to this matter and the issues presented to the court, adding the RAF’s contentions in this regard are misplaced.

Comment was requested from the RAF but has not yet been received.

This article was republished from Moneyweb. Read the original here.