WANG v DEACON 2017 (1) ZLR 277 (H)

Flynote

Interest — rate of — loan agreement — agreement stipulating rate higher than prescribed rate — agreement not reduced to writing and signed at time of loan — prescribed rate of interest applicable c

Headnote

The D plaintiff, who was not a registered money lender, lent money to the defendant on various occasions during the period October 2010 to July 2011. The agreement of loan was not reduced to writing. It was a term of each advance of money that interest would accrue at the rate of 4 percent per month on the capital sum. Various re-payments of the money advanced were made. The balance outstanding was $300 000, and the E plaintiff claimed payment of that amount and maintained that he was entitled to interest at the rate of 4 percent per month. The defendant claimed that the plaintiff was not entitled to such an interest rate. The court was asked to have regard to a document signed by the defendant in which he acknowledged borrowing money from the plaintiff. The F parties requested the court to determine whether the interest rate charged by the plaintiff was charged legally. That determination would have the effect of disposing of the matter, as the parties would resolve the issue of quantum on their own. The plaintiff submitted that he was entitled to charge interest at the rate agreed to and that there was a document signed G by the defendant governing the transaction. The defendant submitted that the parties entered into an oral agreement which was not subsequently reduced to writing.

Held, that the prescribed rate of interest is applicable where the rate of interest applicable to a debt is not governed by an agreement, trade-custom or in any other manner. Lenders are prohibited from charging interest H exceeding the prescribed rate.

Held, further, that interest exceeding the prescribed rate may be charged A where the lender, who is not a registered money lender, has taken from the borrower a document, signed by the borrower, setting out all the essential parts of the transaction and has delivered to the borrower a duplicate copy of the document, which is signed by the borrower. The document must be signed at the time of the loan.

Held, further, that the failure by the plaintiff to take from the defendant a B document signed by him at the time of the loan rendered the document he had filed to be invalid. Accordingly, the interest charged by the plaintiff for the loan he gave to the respondent must be at the prescribed rate.