IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
REPORTABLE
511/2000

In the matter between

SASRIA LIMITED [Formerly THE SOUTH AFRICAN
SPECIAL RISKS INSURANCE ASSOSIATION]

Appellant

and

CERTAIN UNDERWRITERS AT LLOYDS

Respondent

________________________________________________________________________

CORAM:
HOWIE, STREICHER, MTHIYANE, BRAND JJA et HEHER
AJA
________________________________________________________________________

Date heard:
11 March 2002

Delivered:
27 March 2002

Mora interest : tacit term as to date when debt enforceable.
________________________________________________________________________

J U D G M E N T
________________________________________________________________________

HOWIE JA

HOWIE JA
[1] The parties to this appeal are insurers and the question is whether the
respondent is liable to pay the appellant mora interest.   Fire damaged
certain timber plantations respectively insured by the parties.   The cover
afforded by the appellant was only operative - and the cover afforded by the
respondent was not operative - if the fire was caused by labour disturbances.
When, as a result of the fire, claims were made under the respective policies,
the parties disputed which of them was liable.   To resolve the impasse they
agreed to make interim payments to the various insured.   To the amount of
these payments the parties contributed equally.   They also agreed that when
the insured proceeded against the appellant for final payments of their claims
- which claims were due to proceed by way of arbitration - the result of the
arbitration would determine which of the parties was liable to the insured
and, therefore, which would refund half of the interim payments to the other.

Subsequently it was agreed that the arbitration proceedings would provide
for recourse to an arbitration appeal tribunal.   That the respondent was a
party to this further agreement was never denied and as the insured and the
respondent were throughout represented by the same attorney it is a matter
of inescapable inference that it was such a party.  (The respondent is
sometimes referred to in the papers as "respondents".   I shall adhere to the
singular.)
[2] The arbitrator found that the fire was not caused by labour
disturbances and in his award in effect absolved the appellant.    That was on
20 August 1997.   On 21 August 1997 the appellant, through its attorneys,
claimed the refund due to it (R2,35m) and mora interest if payment was not
made by 22 August 1997.   However an appeal failed.   The award of the
appellate tribunal was made on 22 September 1998.   Between 2 November

1998 and 19 January 1999 the respondent made five payments towards
liquidating the refund.
[3] In May 1999, having not received payment of the full refund, and
more particularly, having received no interest, the appellant applied to the
High Court at Johannesburg for an order, inter alia for payment of the
outstanding capital and for interest on the unpaid capital balance outstanding
from time to time.
[4] The application came before Marais J who considered that what the
parties had meant by resolving their dispute  by reference to the result of the
arbitration, and whether mora interest was payable, had to be determined
according to the procedural principles applicable to appeals against money
judgments.   On this footing the learned Judge held that although liability for
the refund was only finally determined when the appeal result was declared,

the date when the refund became payable was the date of the arbitrator's
award and mora interest ran from that date.
[5] The respondent appealed to the Full Court.   By a majority the appeal
was upheld.   Writing for the majority, Willis J held that as the parties'
dispute was not itself the subject of the arbitration the principles relied upon
by the Court of first instance were irrelevant.   The parties had decided that
their own dispute would depend simply on the result of the arbitration
proceedings.   It followed that the refund only became payable when those
proceedings came to an end on appeal.   Before that no mora interest could
accrue.   In the minority judgment Labe J adopted much the same approach
as Marais J in the Court of first instance.   The judgment of the Full Court is
reported:  see 2001 (1) SA 744 (W).
[6] With the necessary leave, the appellant seeks, in effect, restoration of
the order of Marais J.

[7] The majority judgment in the Court below appears to rest essentially
on the reasoning that if there was an appeal, payment of the refund would
have to await the outcome of the appeal, and that mora interest could not
have run until the capital debt was payable consequent upon the appellate
award.   To my mind, if I may say so with respect, those considerations are
not enough to provide the answer.   Resolution of the essential issue on
appeal depends on what the parties variously expressed and implied (as
construed in the light of the background circumstances) not as to the
payability of interest (for the appellant disavows entitlement to interest as a
contractual term) but as to the due time for payment of the capital debt.
Obviously, liability for mora interest would follow inevitably if a debtor
failed to pay a contractually agreed monetary obligation when performance
was due and enforceable:  Bellairs v Hodnett and Another 1978 (1) SA 1109

(A) at 1145 D-H;  CIR v First National Industrial Bank Ltd 1990 (3) SA 641
(A) at 652 H-I.
[8] What the application papers contain that is presently relevant is sparse
in the extreme.   The founding affidavit contains the following allegation:
"Pending the arbitration, both applicant and respondent had agreed to make
interim payments to the insured on the basis that once their respective liability had
been determined through arbitration, the loser would refund the winner the
amounts paid by the winner".

[9] In response, the respondent's opposing affidavit contains the
following:
"8.1
There was indeed an agreement reached between the applicant and
respondents in terms of which each of the applicant and respondents
would make payment of one-half of an agreed sum pending the final
determination of the matter through the arbitration procedure.
8.2
The intention of the parties to that agreement was clearly that upon the
final adjudication of the matter, which in this instance included the appeal
procedure and final award in the appeal procedure, the party that was
successful would be reimbursed by the other party in such amount as was

paid by the successful party pendente lite.   By a successful party I refer to
either the applicant or the respondents in this application.   Although the
respondents were not cited as parties in the arbitration proceedings
nevertheless it was understood that as far as the applicant and respondents
were concerned one or either of them would bear the burden of indemnity
in favour the claimants.   Accordingly, in the event of the claimants not
succeeding in the arbitration, the applicant would be regarded as having
been successful vis-à-vis the respondents.
8.3
There was no express agreement in regard to payment of interest on the
amounts paid and/or advanced by each of the applicant and respondents.
It was clearly tacitly understood however that until such time as the
arbitration was finally determined, which in this instance included the
final adjudication after the appeal procedure, there would be no
entitlement either on the part of the applicant or the respondents to claim
repayment from the other.
8.4
Having regard to what is stated above, I submit that there could have been
no obligation on the part of either the applicant nor the respondents to
make repayment to the other until such time as the appeal award was made
in the favour of either the claimants or the applicant (the respondent in the
arbitration proceedings) and, accordingly, there can be no question of a
party being in mora prior to that date.   In fact, it was contemplated at the
time of the agreement between the applicant and respondents that should
the applicant be successful, a reasonable period of time would be required

in order to enable the respondent to make funds available for the purpose
of payment to the applicant.   On this basis it must have been understood
that the obligation to make payment would not arise until the expiration of
a reasonable period of time after the publication of the award in the
appeal."

In the replying affidavit the appellant merely denied those allegations and
disputed the accompanying contentions.
[10] Certain correspondence which passed between the parties' attorneys
was annexed to the founding affidavit.   Very little of it assists.   It suffices
to refer to a letter dated 9 December 1996 in which the attorney for the
respondent addressed the appellant's attorney as follows:
"We are in receipt of a copy of your client's letter to Price Forbes in terms of
which your client agrees to pay one half of the loss, the Lloyds Underwriters to
pay the other half pending the outcome of an Arbitration to decide which of your
client or the underwriters are liable.   What now needs to be attended to is the
selection of an Arbitrator, the nomination of an Arbitration Panel if the parties

require the latter, the fixing of the venue and other logistical matters.   Would you
please let us have your views on the aforegoing as soon as possible".

[11]  Correspondence immediately following upon that letter merely
referred to details of the pending arbitration, the pleadings in which were
filed during March - April 1997.
[12] Concerning the procedure to be followed in the arbitration, the
appellant's attorney wrote to the respondent's attorney a letter dated 26 May
1997 in which, among other suggestions, the question of the appeal was
raised.   The letter also contained this paragraph:
"We should like to agree with you that if the claim fails, your clients will, as a
matter of course, refund the payments of R1 750 000 and R600 000 together with
interest at 15,5%, which amounts they received by way of provisional payment,
without prejudice."

(Obviously by "clients" the writer meant to refer to the respondent and by
"they" he intended to refer to the insured.)

[13] Replying by letter dated 28 May 1997, the respondent's attorney did
not react to the appeal suggestion but, as regards a refund, said:
"As far as the refund of the money which has been paid to our clients in the event
of our clients not succeeding is concerned, whilst the amounts will be repaid, at
the time when payment was made there was no question of interest arising, we see
no reason for interest to be added to these amounts".

[14] One cannot determine when the interim payments were made or what
passed between the parties at that time other than the letter of 9 December
1996.  It is also not apparent from the papers when the availability of an
appeal procedure was finally decided upon but, by inference, it must have
been between 11 June 1997, when the appellant's attorney declared in a
letter of that date that the appellant would not go to arbitration except with
an appeal procedure, and 16 June 1997, when the arbitration hearing was
scheduled to begin.   Here again, there is nothing on record to establish what
was said on behalf of the parties when the appeal procedure was agreed.

[15] For the appellant it was argued that when it was agreed to provide for
an appeal the parties must, in the interests of commercial efficacy, have had
in mind that the usual principles applicable to an appeal in civil litigation
would apply.   These included the suspension of the arbitrator's award
pending appeal and the retrospectivity of the appellate award to the date of
the arbitrator's award in the event of a successful appeal.   It followed, so ran
the argument, that the time for repayment of the capital, and the time when
mora occurred, was the date of the arbitrator's award.
[16] On behalf of the respondent it was contended, with particular reliance
on the word "outcome" in the letter of 9 December 1996, that the present
parties, who were not the parties to the arbitration, hitched the resolution of
their own dispute to the result, not the process, of the arbitration.   As the
capital was not payable before the result of the appeal was declared, the
respondent cannot have been in mora before that.   In addition, so it was

submitted, the correspondence quoted shows that although interest was in
contemplation before an appeal was provided for, there was nothing in the
record to show that the parties dealt with the subject of interest when they
eventually agreed to the appellate procedure.
[17] In deciding what the parties intended as regards the due date for
payment of the refund, the starting point must be that when the interim
payments to the insured were made, and certainly when the letter of
9 December 1996 was written, there was only one possible due date.   With
no appeal procedure in contemplation the due date had to be the date of the
arbitrator's award.   The evidence reveals no alternative as at that stage.
And between then and the agreement to provide for an appeal nothing was
said or done which altered the position.   The focus is then squarely on the
latter agreement and what it entailed.

[18] If the parties resolved upon a new due date they must have done so
contractually.   In the absence of express terms in this regard the question
must be whether there was agreement by way of a tacit term.
[19] The financial realities in the light of which that question must be
answered are clear and compelling.   Before an appeal procedure was
mooted there would have been no reason to contemplate any appreciable
delay between the date of the arbitrator's award and the refund payment.
However, when the parties agreed to the availability of an appeal they must
have foreseen that the eventual winner might be kept out of its money for a
considerable time.   The amount of the refund due to the winner of the
parties' dispute was in excess of R2 000 000.   That is a substantial sum.
Interest on it at 15,5 per cent per year (the rate referred to in the
correspondence and not queried) would plainly be commercially significant.
It is not realistic to think that the parties were unaware of these

considerations.   The appellant, after all, was due to pay mora interest to the
insured if it lost the arbitration.   It would have been anomalous, had it been
liable for the refund, that it would not also have been liable to pay mora
interest to the respondent.   The converse holds good, too, if it was for the
respondent to refund the appellant.
[20] Whether a tacit term was agreed depends, according to trite law, on
the answers the parties would probably have given to certain crucial
questions had they been asked at the relevant time.
[21] Plainly, what applied to the one applied to the other.   Their respective
situations did not differ.   Either the one had to make the required refund or
the other had to.   It was not a case where they might have given differing
answers.
[22] At the time the letter of 9 December 1996 was written what was in
dispute between the parties was the same fundamental factual issue that

arose as between the insured and the appellant in the arbitration i e whether
the fire was due to a labour disturbance.   The arbitrator's award would
decide that question for the parties.   The effect of their agreement and the
effect of his award would be the same as if the loser had been ordered to
refund the winner.   In other words, properly construed, their agreement was
that they would treat and react to the award as if it were a money judgment
against the loser.   That was the position prior to the question of an appeal
being raised.
[23] If it had been pointed out to the parties when they agreed to the appeal
provision (assuming that it was not present to their minds before) that
attaching refund liability to the date of the appellate award instead of the
date of the arbitrator's award would result in a material loss of interest to the
winner of their dispute, it is strongly improbable that they would have
switched the due date to the date of the appellate award.   Putting it another

way, if advised that that interest loss would not occur if the principles
applicable to an appeal against a money judgment in the context of civil
litigation were applicable to the arbitration appeal and to their own position
vis à vis each other, it would, I think, have been their unhesitating and
unified response that those principles were indeed to apply.
[24] As to the submission on behalf of the respondent that the appellant's
attorney's letter of 26 May 1997 specifically raised the question of interest,
and that it was not expressly dealt with when the parties decide to provide
for an appeal, there are several considerations to be borne in mind.   The first
is that a tacit term may exist not only where the contracting parties have
thought about the matter but also where they have not.   The enquiry here is
what they would have answered on the matter had it been drawn to their
attention when the appeal procedure was finally agreed to.   The letter in
question was written before that, at a time when, although the issue of a

possible appeal was first being suggested, the refund date was still to be the
date of the arbitrator's award.   As mentioned already, there would then have
been no cause to expect delay between that date and the payment of the
refund.   The answer of the respondent's attorney of 28 May 1997 that he
saw "no reason for interest to be added" must be read in the correct context.
In that context he was not contemplating the ramifications of an appeal.   He
was addressing the question of contractual interest as from the date of the
provisional payment to the insured.   In all these circumstances the
correspondence relied on by the respondent's counsel does not militate
against the existence of the tacit term under discussion.
[25] I conclude, therefore, that when the parties agreed to provide for an
appeal it was a tacit term of their agreement, firstly, that the due date for
payment of the refund remained the date of the arbitrator's award and,
secondly, that if there should be resort to an appeal the arbitrator's award

would be suspended pending appeal and the appellate award would either
leave the arbitrator's award undisturbed or reverse the incidence of liability
retrospectively to the date of the arbitrator's award.
[26] It follows that mora interest was payable by the respondent to the
appellant from the date of the arbitrator's award.   The decision of Marais J
was, with respect, correct and the appeal to the Court below ought to have
failed.
[27] These conclusions make it unnecessary to consider whether the
respondent was, in substance, a party to the arbitration and subsequent
appeal.   The impression that it was, does tend to linger.   If indeed it was,
then a quite separate basis might have existed for the same finding adverse
to it in this appeal.   That is a question one need not now pursue.
[28] The appeal is allowed with costs.  The order of the Court below is set
aside and replaced by the following order.

"The appeal is dismissed, with costs."

CT HOWIE
JUDGE OF APPEAL

CONCURRED:

STREICHER  JA
MTHIYANE  JA
BRAND  JA
HEHER  AJA