This is an opposed application wherein the applicant
seeks the following relief:
“1. That the respondent be and is hereby ordered to
deliver six million (6,000,000) AICO Africa Ltd shares together with the share
certificates within 48 hours of this order.
2. That the respondent shall pay the costs of this
application in terms of the Law Society tariff including costs of two counsels
where the two are employed.”
The dispute for determination arises out of the sale of
shares or securities.
The facts of the case are that on 5 November 2008, the
applicant approached the respondent, who is a registered stockbroker, with a
request to purchase AICO shares which the respondent said it had on the market.
The respondent said it had authority to sell the shares but did not disclose
the owner of the shares. The purchase price for the shares was two hundred and
sixty quintillion Zimbabwe dollars. On the same date, the applicant transferred
the said sum of two hundred and sixty quintillion Zimbabwe dollars (Z$260,000,000,000,000,000,000=)
into the respondent's account. The transfer was effected through a bank cheque
drawn through the applicant's bankers namely, Kingdom Bank Ltd.
On 6 November 2008, the respondent deposited the said
cheque with its bankers, namely Stanbic Bank Zimbabwe Limited. For reasons
unknown to the applicant, the respondent was only credited with the amount on
30 January 2009.
Following the cheque payment made by the applicant on 5
November 2008, the respondent, on 7 November 2008, generated a Deal Note
(Advice of Purchase of Securities) which, in the main, as related by the
applicant, stated the following:-
“9.1 That the price of each AICO Africa Ltd share was
thirty two thousand Zimbabwe dollars (Z$32,000=).
9.2 That the number of shares that had been sold to me
were six million (6,000,000).
9.3 That the amount of the broker was Z$192,000,000,000= (one
hundred and ninety two billion dollars).
9.4. That the brokerage was $3,840,000,000= (three
billion eight hundred and forty million Zimbabwe dollars).
9.5 That the value added tax was ($576,000,000=) five
hundred and seventy six million dollars.
9.6 That the Government's stamp duty (Z$3,840,000,000=)
three billion eight hundred and forty million dollars.
9.7 The amount that was to be paid by the purchaser for
the sale to go through was Z$200,256,000,000 (two hundred quintillion, two
hundred and fifty six million) which was to be paid by 14 November, 2008. This
amount was to be paid by be 14 November, 2008.”
The full purchase price, as already stated, was paid on 5
November 2008.
However, notwithstanding payment of the full purchase
price for the shares, on 13 January 2009,
the respondent wrote the to the applicant in the following terms:
“Due to failed settlement on the following deals we wish
to advise that we have resolved to nullify the deals.
Date Ref Counter Volume Total
Consideration
01/11/08 P264475 Aico 6000 000 200 256 000 000 000 000 000
13/11/08 P264951 Aico 200 000 938
700 000 000 000 000 000
13/11/08 P 264952 Aico 200 000 938
700 000 000 000 000 000
13/11/08 P2644953 Aico 200 000 938
700 000 000 000 000 000
Please sign attached copy underneath as acknowledgement
and concurrence with the above. Accordingly, please return deal notes relating to
the above transactions.”
On 3 February 2009, the respondent again wrote to the
applicant in the following terms:
“FAILED SETTLEMENT
Reference is made to our letter dated 13 January 2009 and
the meeting we had yesterday. This serves to confirm matters discussed as
follows:
During the meeting we both noted that a bank cheque
valued at $260 quintillion was received from you on the 5th November
2008. This cheque was banked and subsequently stamped by the bank on the 6th
November 2008. However, we were only credited with value of the cheque on the
30th January 2009. This payment was intended for the purchase of
AICO shares. Deal details are as follows:
Date Ref Counter Volume Total
Consideration
01/11/08 P264475 Aico 6 000 000 200 25600000000000000
Now that the money has been received, Interfin Securities
will approach the seller to see if the cancelled deal can be restored.
As noted during our discussion yesterday, the decision by
the seller to cancel the deal is premised on the ZSE rule that if a deal has
not been settled within 60 days it shall be regarded null and void. The seller
also contends that he has lost massively due to hyperinflation.
Meanwhile, we are meeting Stanbic to see how best you can
be compensated for loss of value.”
Finally, on 9 February, the respondent confirmed the
cancellation of the deal in the following terms:-
“I refer to our letter dated 3 February 2009 and advise
that the seller of the six million AICO shares has refused to rescind on the
decision to have the deal cancelled.
I further advise that as promised, we have since met
Stanbic Bank to see how best you can be compensated for loss of value on the
$260 Quintillion. They advise that the delay in giving us value was mainly due
to challenges encountered with the clearing system.
Given the above, I advise that the AICO deals, as
indicated on our letter dated 13 January 2009, have been cancelled.”
The applicant responded to the above intimation as
follows:
“1. Reference is made to the above matter and to your
letter to me dated 9 February 2009 whose contents have been noted.
2. As you are definitely aware, the circumstances of this
transaction are that:
2.1 I ordered 6,000,000 (six million) AICO shares as
confirmed by your deal note dated 7 November 2008 referenced Advice of Purchase
of Securities No. P 264475.
2.2 In terms of the aforesaid deal note, payment was due
on 14 November 2008.
2.3. I deposited with you and received my bank cheque
drawn on a Kingdom Bank Crown banking account in a sum of $260 quintillion.
2.4. You deposited my cheque with your bank on 6 November
2008.
2.5 To the best of my knowledge, my cheque was not
dishonoured. You received value. Accordingly, I discharged my obligations in
terms of the transaction.
3. In the above premises, I advise you that the purported
cancellation of the transaction by the seller is a nullity.
4. As far as I am concerned, the cause of the alleged
delay in crediting your account has nothing to do with me and is a matter
between yourselves and your bankers Stanbic.
I therefore advise that I will not accept anything short
of the 6,000,000 AICO shares which I purchased and paid for in full. I demand
that the shares be transferred to me and my share certificate forwarded to me
within seven days failing which I shall institute proceedings for the delivery
of the shares against you without further notice to you and you shall bear the
costs of the same. I believe this shall not be necessary.”
As a response to the above, on 4 March 2009, Stanbic Bank
Zimbabwe, the respondent's bankers, wrote to the respondent in the following
terms:
“We acknowledge receipt of your correspondence dated 10
February 2009, the contents of which we have duly noted. Kindly note that we
unable to entertain any discussions for loss of value and the restitution of
the same in terms of shares, we are however willing to discuss possible
compensation and interest arising therefrom in the applicable currency being
Zimbabwean dollars. Kindly let us have your indication of the quantum of the
same so that we can remit payment accordingly.
We look forward to hearing from you on this issue and
thank you for your kind assistance.”
The above letter was forwarded to the applicant who
responded as follows:
“RE DELAYED SETTLEMENT: 6 000 000 AICO SHARES
2. Reference is made to the above matter and to your
letter to me dated 5 March 2009 whose contents I have noted.
3. I note with great disappointment that you do not
appear to be attaching any importance to this matter considering that it took
you almost a month to revert to me. I have been prejudiced by your delay to
settle payment for my shares and you are determined to continue the prejudice.
4. I have perused the letter from Stanbic Bank and I find
the proposal contained therein unreasonable and unacceptable at all.
5. You will need to appreciate these simple and basic
facts.
5.1 I ordered 6 000 000 (six million) AICO shares as
confirmed by your deal note dated 7 November 2008 referenced Advice of Purchase
of Securities No. P 264475.
5.2 In terms of the aforesaid deal note, payment was due
on 14 November 2008.
5.3 I deposited with you my bank cheque drawn on a
Kingdom Bank Crown banking Account in a sum of $260 quintillion.
5.4 You deposited my cheque with your bank on 6 November
2008.
5.5 To the best of my cheque was not dishonoured. You
received value. Accordingly I discharged my obligations in terms of the
transaction.
5.6 Therefore, my money was meant for the purchase of
shares which I did purchase through yourselves and its value was, and still is,
6 000 000 AICO shares. Accordingly any compensation structure should recognise
that my loss is 6 000 000 AICO shares. Put differently, if your bank and
yourselves had acted diligently I should have received 6 000 000 AICO shares
and that is all I am asking for.
5.7 You will need to appreciate that with the
dollarization of the stock market, which you are well aware of, the Zimbabwean
dollars which your bank is offering cannot buy me any shares anywhere in
Zimbabwe.
6. I therefore advise that I will not accept anything
short of the 6 000 000 AICO shares which I purchased and paid for in full. I
demand that the shares be transferred to me and my share certificate forwarded
to me within seven days of this letter failing which I shall institute
proceedings for the delivery of the shares against you without further notice
to you and you shall bear the costs of the same.”
The dispute remains unresolved and on 31 March 2009, the
applicant filed this application seeking the relief indicated on the first page
of this judgment.
I have deliberately given a detailed background and
reproduced in full the relevant correspondence between the parties so that the
issues for determination can easily be understood. I shall, in dealing with
this matter, also quote extensively from the relevant statutes upon which this
dispute will fall to be determined.
Counsel for the applicant submitted that the respondent
is an agent sui generis and that its obligations towards the applicant are
established in terms of statutory law. He said the generation of the brokers
note (Advice of Purchase of Securities) sealed the contract between the two
parties. He said the law, as we shall see, protects the broker (respondent) in
the event of non-payment of the purchase price of the shares. He went further
to submit that the nature of the transaction did not allow for reliance on any
third party. The respondent made his offer of shares and the applicant complied
with what was required of him to be the owner of the AICO shares….,. Counsel
for the applicant went further to submit that as for the applicant, his
obligation was fulfilled through payment, by a bank cheque, which was honoured.
The applicant had no recourse to the respondent's bank regarding the delay that
might have occurred in clearing the cheque. He further submitted that there was
no evidence that the AICO shares were no longer available. Accordingly, the
relief for specific performance was appropriate….,.
Counsel for the respondent submitted that notwithstanding
the generation of the broker's note, the respondent was merely acting as an
agent. The broker was not selling its own shares. He said in terms of the
broker's note payment was to be made on 14 November 2008 and not 30 January
2009. He argued that until payment appeared in the respondent's bank statement,
there was no payment to talk about. That being the case, counsel for the
respondent argued, the transaction
had failed on 14 November 2008. He said the delay in having the applicant's
cheque cleared had nothing to do with the respondent. Counsel for the
respondent submitted that the court could not take judicial notice of the fact
that the AICO shares were still on the market. It would therefore not be proper
for the court to grant an order for specific performance, he argued.
I believe the real issue for determination is whether or
not there was a valid contract between the parties which obliged the respondent
to deliver AICO shares to the applicant (i.e need for an order for specific
performance).
I believe there was, in casu, a valid contract.
There is no doubt in my mind that in entering the
transaction (contract) the respondent represented to the applicant that he had
the capacity to deliver the shares once payment had been made by the applicant.
There was no question of the respondent relying on a third party for the
transaction to go through. The question of whether or not the respondent had
control of the AICO shares as an agent was of no concern to the applicant. The
respondent told the applicant that it had AICO shares for sale and that it had
authority to sell them. It gave the price of the shares and the applicant
accepted the offer. The applicant then proceeded to effect payment through a
bank cheque on 5 November 2008 before the deadline date of the 14th
November 2008. The cheque was not dishonoured.
Indeed, following payment, the respondent, as per
statutory rules, generated the requisite Broker's Note indicating the full
particulars of the transaction. The rules require that a registered broker,
such as the respondent, who has purchased or sold any listed securities on
behalf of a client should, within twenty four hours after the purchase or sale
despatch a Broker's Note to the client. It is important to note that this was
not the first time the applicant was buying shares through the respondent.
I believe that the transaction between the parties is
clearly regulated by statutory law. That being the case, my view is that, in
casu, arguments about the ordinary law of agency are misplaced. Admittedly, the
respondent acted as an agent but his agency was clearly regulated by statutory
provisions…,.
I also want to believe that, in generating the Broker's Note
on 7 November 2008, after receiving a bank cheque on 5 November 2008, for the
purchase price of the shares, the respondent was confirming the
transaction/contract.
All what remained was the respondent to deliver the
shares to the applicant.
In view of the above, my finding is that the purported
cancellation of the transaction on 13 January 2009 was null and void. It should
also be noted that as per the respondent's letter of 3 February 2009, the
cancellation was being made even before 30 January 2009 when the respondent was
credited with the value of the cheque of 5 November 2008. The cheque…, had
already been banked and stamped by the respondent's own bank on 6 November
2008. It would, in my view, be unreasonable to accept that after generating the
Broker's Note on 7 November 2008, upon being paid on 5 November 2008 and also
upon banking the proceeds on 6 November 2008, the respondent never made a
follow up of the transaction until 13 January 2009. The respondent was
executing his usual business and it is reasonable to expect that follow ups
were made or ought to have been made.
If, indeed, payment had not been made, the law provides
protection for the respondent. Section 121(5) of the Securities Act [Chapter
24:25] which repealed the Zimbabwe Stock Exchange Act [Chapter 24:18] provides
as follows:
“(5) The repealed Act, other than Parts III to VI, Part
IX, Part XIV, shall be deemed to be rules made by the Zimbabwe Stock Exchange
in terms of section sixty-five, and may be amended or repealed accordingly:
Provided that any reference in the repealed Act to the
Minister or the Registrar shall be construed as a reference to the Commission.”
The relevant rules for our purposes in casu are sections
54, 55 and 57 of the repealed Act which, in full, provide as follows:
“54 Registered
stockbroker to dispatch broker's note to client within twenty-four hours of
purchase or sale of listed securities.
(1) Subject to s17 of the Stamp Duties Act [Cap 23:09], a
registered stockbroker who has purchased or sold, in Zimbabwe, any listed
securities on behalf of a client shall, within twenty-four hours of that
purchase or sale, as the case may be, dispatch to the client a broker's note –
(a) Advising the purchase or sale of the listed
securities; and
(b) Stating the price at which the purchase or sale
referred to in para (a) was effected and the brokerage charged in respect of
that purchase or sale; and
(c) With the words “Subject to the Zimbabwe Stock
Exchange Act [Cap 24:18] and the regulations and rules made thereunder and the
usage of the Zimbabwe Stock Exchange” thereon; and
(d) Containing such particulars, other than those set out
in para(s) (a) (c), as may be prescribed.
(2) A registered stockbroker who does not comply with
subs (1) shall not have any legal claim to brokerage in respect of the purchase
or sale concerned, whether or not he ceases to be registered after that
purchase or sale.
55 Registered
stockbroker to act as agent of client in purchase or sale of listed securities
unless otherwise authorised and makes disclosure
A registered stockbroker who has been instructed by a
client –
(a) To purchase any listed securities on behalf of the
client shall not, in connection with that purchase, enter into any arrangement
whereby, instead of purchasing the listed securities from a third party, the
registered stockbroker sells his own listed securities to the client; or
(b) To sell any listed securities on behalf of the client
shall not, in connection with that sale, enter into any arrangement whereby,
instead of selling the listed securities to a third party, the registered
stockbroker purchases the listed securities on his own behalf;
unless that registered stockbroker –
(i) Has obtained the consent of the client to that
arrangement; and
(ii) Discloses that arrangement to the client in the
broker's note concerned.
57 When listed
securities purchased by registered stockbroker on behalf of client must be paid
for, and duty of registered stockbroker if purchase price not paid
(1) Where a registered stockbroker purchases any listed
securities on behalf of a client, the client shall pay to the registered
stockbroker the purchase price of the listed securities in cash or by cheque
against an offer to deliver the listed securities, unless the client –
(a) Arranges with a banking institution or non-member
institution for the listed securities to be paid for against delivery of the
listed securities to the banking institution or non-member institution; and
(b) Notifies the registered stockbroker in writing of the
arrangement referred to in para (a).
(2) A registered stockbroker referred to in subs (1) who
has not been –
(a) Paid the purchase price of the listed securities
concerned in terms of that subsection; and
(b) Notified in terms of para (b) of that subsection;
Shall sell, as soon as is reasonably possible after the
failure to pay that purchase price and, in any event, not later than sixty days
thereafter, those listed securities on behalf of the client.
(3) If the sum realized by the sale referred to in subs
(2) is less than the purchase price referred to in subs (1), the registered
stockbroker concerned shall, as soon as is reasonably possible after that sale
and, in any event, not later than sixty days thereafter, sell on his own behalf
so much of any other securities -
(a) Held by him on behalf of: or
(b) To be delivered to him by;
The client concerned as may be necessary to realize the
difference between that sum and that purchase price.
(4) A registered stockbroker referred to in subs (1) who
has not been paid the purchase price of the listed securities concerned in
terms of that subsection and has been notified in terms of para (b) of that
subsection shall -
(a) Before purchasing those listed securities on behalf
of the client, satisfy himself that the arrangement referred to in para (a) of
that subsection has been made; and
(b) As soon as is reasonably possible after purchasing
those listed securities on behalf of the client, offer to deliver those listed
securities in negotiable order to the banking institution or non-member
institution concerned against payment of the purchase price of those listed
securities; and
(c) If payment of the purchase price of those listed
securities is not made forthwith in terms of para (b), sell as soon as is
reasonably possible after the date of the failure to make that payment and, in
any event, not later than sixty days thereafter, those listed securities on
behalf of the client.
(5) If the sum realized by the sale referred to in para
(c) of subs (4) is less than the purchase price referred to in subs (1), the
registered stockbroker concerned shall, as soon as is reasonably possible after
the date of the failure to make the payment referred to in that paragraph and,
in any event, not later than sixty days thereafter, sell on his own behalf so
much of other securities –
(a) Held by him on behalf of; or
(b) To be delivered to him by;
the client concerned as may be necessary to realize the
difference between that sum and that purchase price.
(6) In this section –
'purchase price' includes the brokerage payable on the
purchase of the listed securities concerned.”
The above Rules, particularly Rules 54 and 57, are quite
relevant to the determination of the issue in casu.
It is clear from the above Rules that the Broker's Note
is issued upon payment of the purchase price of shares as happened in casu. The
respondent admits that having been instructed to purchase shares, it indeed
proceeded in terms of Rule 55. The respondent did not, however, proceed to act
in terms of Rule 57(2). The relevant part of the Rule…, provides as follows:-
“57(2)
A registered stockbroker referred to in subs (1) who has
not been –
(a) Paid the purchase price of the listed securities
concerned in terms of that subsection; and
(b) Notified in terms of para (b) of that subsection;
Shall sell, as soon as is reasonably possible after the
failure to pay that purchase price, and, in any event, not later than sixty
days thereafter, those listed securities on behalf of the client.”
The above provision in our law, in my view, governs the
transaction in casu, and, indeed,
settles the matter.
The period of 60 days expired before 13 January 2009 and
by that time, if it believed it had not been paid, the respondent had not
availed itself to the protection of the law. Accordingly, given the clear
provision of the law, I am unable to accept that the respondent can hide behind
the general law of agency. The provision clearly refers to shares that are
already purchased and are under the control of the broker. The broker can, in
terms of law, sell the shares to realize the purchase price.
That is what the broker should have done before the
expiry of 60 days.
In casu, the respondent purchased AICO shares for the
client (the applicant) and was paid the purchase price which then lay in its
bank up to 30 January 2009. Without proving that the applicant's cheque was
dishonoured, the respondent, in casu, cannot deny that payment was made. There
was, in my view, no need to proceed in terms of section 57(2) of the Securities
Act [Chapter 24:25]. All that the respondent had to do was to chase its bank
for the value of the cheque before the expiry of the 60 days. That was not done
and the responsibility to do so did not fall on the applicant. It fell on the
respondent who had a duty to deliver the AICO shares that had been paid for
through a bank cheque on 5 November 2008. It is strange that the respondent was
only heard on 13 January 2009….,. The respondent can have recourse to its own
bank which makes reference to what it refers to as “challenges encountered with
the clearing system.” That, in my view, had nothing to do with the applicant
whose cheque was honoured.
In view of the foregoing, my finding is that there is
merit in the applicant's claim and the relief sought should be granted. I
therefore order as follows:
1. That the respondent be and is hereby ordered to
deliver six million (6 000 000) AICO Africa Limited shares together with the
share certificates to the applicant within seven days.
2. That the respondent shall pay costs of this
application in terms of the Law Society tariff including costs of counsel.
