GEORGIAS & ANOR V STANDARD CHARTERED FINANCE ZIMBABWE LTD 1998 (2) ZLR 488 (S)

Flynote

Interest — in duplum rule c - subsequent compromise between debtor and creditor — effect of compromise that debtor pays interest over the double — validity of compromise

Practice and procedure — judgment by consent — rescission of — considerations to be taken into account

Headnote

When considering an application for rescission of a judgment entered into by consent, the court should have regard to:

• (1) the reasonableness of the explanation proffered by the applicant of the circumstances in which the consent judgment was entered;
• (2) the bona fides of the application;
• (3) the bona fides of the defence on the merits of the case which prima facie carries some prospect of success. A balance of probability need not be established.

Too much emphasis should not be placed on any of these factors. They must be viewed in conjunction with each other and with the application as a whole. An unsatisfactory explanation may be strengthened by a very strong defence on the merits. In general terms, what an applicant must show is something which entitles him to ask for the indulgence of the court.

The in duplum rule is one based on a public policy designed to protect borrowers from the exploitation of lenders by prohibiting usurious abuse. There are two main objectives: protection of a debtor against exploitation and enforcement of sound fiscal discipline on a creditor. The rule cannot be waived either in advance or during the course of a loan. It cannot be excluded by means of a contractual provision.

Different considerations apply, however, where there has been a compromise. Compromise is the settlement by agreement of disputed obligations, or of a law suit the issue of which is uncertain. The parties agree to regulate their intention in a particular way, each receding from his previous position and conceding something - either diminishing his claim or increasing his liability. The purpose of compromise is to end doubt and to avoid the inconvenience and risk inherent in resorting to the methods of resolving disputes. Its effect is the same as res judicata on a judgment given by consent. The cause of action that may previously have existed is extinguished; the party sued cannot rely on defence to the original cause of action.

A compromise does not defeat the object of the in duplum rule. The debtor, in agreeing to settle his obligations and pay the creditor a sum which includes or embraces interest over the double, puts himself outside the purposes of the rule. He is not being exploited; he is making an informed choice. Similarly, the dilatoriness of the creditor is not being rewarded.