At the hearing of this matter the plaintiff Bank was in default.

Counsel for the defendant sought and was granted leave to argue the matter on the merits. Judgment on the merits of the case was granted in favour of the defendant with costs. I indicated that my reasons for judgment would follow.

At the pre-trial conference it was declared that this matter be referred to trial as a Stated Case. The agreed facts were as follows;

1. On 14 February 1992, the plaintiff and African Savanna Touring (Pvt) Ltd entered into an agreement in terms of which the plaintiff lent to African Savanna the sum of Pound Sterling 102,063= which sum was repayable on certain terms and conditions which are not mentioned in the instant case.

2. By way of written guarantee dated 27 August 1992, the defendant guaranteed the indebtedness of African Savanna Touring in an amount not exceeding Z$600,000=.

3. African Savanna Touring having breached the agreement entered into between itself and the plaintiff; the plaintiff instituted legal proceedings and obtained judgment in the sum of Z$2,300,743=90. This judgment remains unsatisfied.

4. By way of letter dated 21 June 1994, the defendant gave the plaintiff notice of termination of the said guarantee with effect from 21 July 1994.

5. On 11 October 1994, Northridge (Private) Limited (Insurance Agents), representing African Savannah Touring Company, wrote to the plaintiff requesting a copy of the old Financial Guarantee Bond 6260327187.

6. By way of letter dated 20 October 1994, the plaintiff forwarded to Northwood (Private) Ltd a copy of the guarantee. The plaintiff retained the original guarantee.

The plaintiff sues the defendant for payment of the sums indicated in the guarantee in satisfaction of the judgment it obtained against African Savanna Touring. The plaintiff contends that as the guarantee is a guarantee in respect of only one transaction, and not a continuing guarantee, the defendant was not entitled, at law, to withdraw from the said guarantee and is therefore liable to effect payment.

On the other hand, the defendant contends that it was entitled, as of law, to withdraw from the said agreement and that even if it was not, the plaintiff, in any event, accepted the defendant's termination of the suretyship. Further, the defendant contends that, in any event, the plaintiff's claim is prescribed.

At the pre-trial conference, the parties adopted the following issues:

1. Was the defendant entitled, at law, to terminate the guarantee on notice?

2. Did the plaintiff accept the termination?

3. Has the plaintiff's claim prescribed?

The guarantee under consideration relates to a single transaction. As such, at law, the defendant cannot resile from the arrangement.

In Lennard Clothing Manufacturing (Pvt) Ltd v Van Rhyn Interiors (Pvt) Ltd 1974 (1) RLR 207 the principle was established that where the obligation of a guarantor relates to a single contract, such guarantee cannot be terminated upon due notice. The answer to the first issue, therefore, is that, at law, the defendant was not entitled to terminate the guarantee.

The guarantee was for an indefinite period. In other words, it would hold for as long as the plaintiff remained indebted. For that reason, the question of prescription cannot arise. In my view, the third issue must therefore be decided in favour of the plaintiff; namely, that the guarantee could not have prescribed.

However, the plaintiff would appear to have accepted the cancellation of the guarantee and must therefore be held to have waived any rights he might have legally exercised in enforcing the same.

The letter of termination, dated 21 June 1994, was forwarded to the applicant, and, it would appear, was received by them on 23 June 1994, as evidenced by their date stamp that appears on a photocopy of that letter. In addition, the applicants were duly advised by their agents, Northridge Insurance Agents, of the cancellation. The plaintiff's conduct, in not challenging the purported cancellation, and, indeed, in returning the old guarantee, which had been requested as a result of the purported cancellation, indicates that they had indeed accepted the fact of cancellation.

It was for these reasons that judgment was granted in favour of the defendant with costs.

The applicants seek a provisional order in the following terms:

“Terms of the final order sought

That you show cause why a final order should not be granted in the following terms:

1. The sale in execution of immovable property, namely, Lot 8 of Lot 37A Lochview situate in the district of Bulawayo measuring 5,427 square metres in pursuance of the judgment under case number HC237/11 be and is hereby stayed pending the final determination of case number HC221/12 and the subsequent applicant for suspension of sale of an immovable property.

2. The 1st respondent pays the costs of this application.

Interim order granted

That pending the final determination of this application, it is ordered that:

3. The 1st and 2nd respondents, or any of their authorized officers, be and are hereby ordered to stop the sale in execution of the immovable property described in paragraph 1 herein pending the final conclusion of this application.”

The salient facts of the matter are the following:

On or about 5 November 2009, at the instance and request of CMS Leather (Pvt) Ltd trading as Footwear and Rubber Industries (“Footwear and Rubber Industries”), the first respondent lent/and advanced a sum of US60,000 to the former. That loan was secured by a special hypothecation over Lot 8 of Lot 37A Lochview (“Lot 8”) also known as Number 3 Hill Road Lochview, Bulawayo. The applicants were also guarantors to the loan, and, to that effect, signed unlimited guarantees in favour of the first respondent.

Based on the agreement between the parties, a bond was registered over Lot 8 with the consent and acceptance of the applicants which bond provided for foreclosure proceedings should the loan remain unpaid.

On the basis of that, the loan was then disbursed to Footwear and Rubber Industries.

When Footwear and Rubber Industries defaulted, the first respondent called up the bond and issued summons against the guarantors in January 2011 claiming the sum of US$73,447=69 with interest at the rate of 42,5% compounded daily and an order declaring Lot 8 executable.

The applicants filed an appearance to defend on 10 February 2011 leading to an application for summary judgment on 28 March 2011. That application was not opposed, and, on 21 April 2011, judgment was granted in favour of the first respondent against the applicants.

On 18 July 2011, Lot 8 was attached by the Deputy Sheriff pursuant to a warrant of execution that had been issued by the first respondent.

Thereafter, the applicants approached their erstwhile legal practitioners. Nothing was done by the applicants from July 2011 to December 2011. The applicants only sprung into action on 15 December 2011 when they saw that Lot 8 was advertised for sale for 16 December 2011.

They filed an application in terms of Rule 348A(5a) to suspend and/or stop the sale on the basis that a reasonable offer had been made of US$1,500 a month with effect from 31 December 2011 and that the sale would cause undue hardship to them.

That application was opposed the very next day as it was improperly before the court.

The sale was however cancelled by the Deputy Sheriff for some other reason unrelated to that application. That application was withdrawn by the applicants on 3 January 2012.

Thereafter, Lot 8 was once more advertised for sale by the Deputy Sheriff on 5 January 2012 for 27 February 2012.

From 5 January 2012 to 20 January 2012, the applicants did nothing. It was only on 20 January 2012 that they filed an application for condonation for the late filing of their intended application in terms of Rule 348A(5a). The application was served on the first respondent on 20 January 2012.

On 24 January 2012, the present urgent chamber application was issued and served on the first respondent.

The first respondent raised points in limine which I propose to consider in turn.

(i) The first point is whether the application is urgent.

The applicants seek an interdict under a certificate of urgency. In CABS v Ndlovu HH03-06, CHATUKUTA J rightly pointed out that:

“Applicant is required to satisfy the court that irreparable harm may be suffered by the applicant if the matter is not dealt with urgently and that applicant should have treated the matter urgently.”

See also Triangle Ltd v ZIMRA HB12-11 and Kuvarega v Registrar General 1998 (1) ZLR 188 (H).

It is not the arrival of the date of reckoning that matters.

As alluded to above, the applicants were served with the notice of execution on 18 July 2011. The latter was, therefore, the time to act. They did nothing from July until 15 December 2011. They only acted a day before the date of the advertised sale.

When the sale was cancelled, they once more did nothing until 3 January 2012 when they withdrew their flawed application of 15 December 2011. They did not simultaneously, or soon thereafter, file another application until the first respondent re-advertised the sale of Lot 8.

After the latter sale was advertised, on 5 January 2012, they waited for several days before filing the current application on the eleventh hour.

It is evident that all along the applicants were acting in snail's pace, so to speak, and were only prompted into action by the arrival of the date of reckoning. They simply did not treat their matter urgently.

The attempt to blame their erstwhile legal practitioners is not helpful as such dilatoriness persisted even under the current legal practitioners.

The applicants have all along been represented by legal practitioners and even brief an advocate at some point yet there was no urgency shown on their part. There is no explanation proffered for the non-timeous action: Kuvarega v Registrar General 1998 (1) ZLR 188 (H) and Mutizhe v Ganda & Ors SC17-09.

In the absence of such acceptable explanation, the matter cannot be treated as urgent whatever the prospects of success may be: see also Bosman Transport Works Committee & Ors v Piet Bosman Transport (Pty) Ltd 1980 (4) SA 794 (A)…, and Viking Woodwork (Pvt) Ltd v Bluebells Enterprises (Pvt) Ltd 1998 (2) ZLR 249 (S)…,.

Taking all the above factors into consideration, the applicants failed to make a case for the matter to be dealt with urgently.

On this point alone, without going into the merits, the application is dismissed with costs.

There has also been argument on whether the security was intended to cover overnight facilities or CDH's general indebtedness. One may accept that initially the arrangement between the parties was that there should be overnight accommodation and that some security may have been necessary. Indeed, one must accept that security can be made available to cover future overnight accommodation. However, the circumstances of this case show quite clearly that whilst the respondent had at some stage indicated that there may be need for some security; such security had not been insisted upon.

Zimbank argues that the transaction whereby CDH furnished the bills was a pledge of the bills, which conferred a real right to deal with them as owner or holder on a preference on insolvency, should it come about before the security has been realized. In short, Zimbank submitted that it had the right to deal with the bills as owner and that it had a preference in the event of insolvency, should it come about before the security had been realized.

I do not agree with this submission.

The applicant and the first respondent are landlord and tenant respectively. Their relationship commenced when they concluded a written agreement in respect of certain commercial premises situate at Throgmorton House, Samora Machel Avenue, in Harare. The agreement was for a period of one year, commencing on 1 July 2006 and terminating on 30 June 2007.

The second and third defendants, as directors of the first respondent, bound themselves as co–principal debtors under the lease agreement.

On 1 May 2003, the applicant entered into a lease agreement with the first respondent in respect of the Ground Floor of premises known as Building No.3 located on Lots 24 and 26 Arundel Office Park, Norfolk Road Mount Pleasant, Harare. The lease agreement was for a period of three years, terminating on 30 April 2006. The lease agreement was, in terms of clause 2, renewable. Clause 2 of the lease agreement provides as follows:-

“2. LEASE

2.1. The Lessor lets to the Lessee who hires the premises for the lease period.

2.2. At least three calendar months prior to the last day of the lease period the Lessee shall advise the Lessor in writing whether -

2.2.1 The Lessee intends to vacate on the termination date, in which event the Lessee undertakes to vacate on such date; or

2.2.2 The Lessee wishes to renew the lease, in which event a written agreement of renewal shall be entered into by the Lessor and Lessee on such terms as may be agreed.

2.3. If the Lessee fails to give notice, as provided in clause 2.2 hereof, the Lease will continue from the termination date of the lease or option period on the same terms and conditions other than the rent payable but subject to two months' written notice of termination of either side being given.”

In terms of clause 1.7 of the lease agreement, the lessee (applicant) was to provide three sureties. The said clause provided as follows:-

“1.7 The Lesses shall provide three sureties with a traceable financial history who will bind themselves as sureties and co-principal debtors for the Lessee's due performances of its obligations in terms of this Lease Agreement.”

On 1 May 2003, the date on which the first respondent signed the lease agreement, the second and third respondents, as Directors of the first respondent, signed Deeds of Suretyship as sureties and co-principal debtors of the first respondent. The relevant Deeds of Suretyship provided as follows:-

“I/We under renunciation of the legal exception – beneficium ordinis seu excussionis, with the meaning and effect which I/We am/are fully acquainted do hereby bind myself/ourselves jointly and severally as surety and co-principal debtor for the due and faithful performance by the Tenant, BUSINESS ASSOCIATES (PRIVATE) LIMITED of all obligations imposed in terms of the Agreement of Lease entered into between the TENANT and the LANDLORD in respect of premises being the land known as Lots 24 and 26, Arundel Office Park, Norfolk Road, Mount Pleasant, Harare and the improvements thereon.”

There can be no doubt that the sureties were for the lease agreement signed on 1 May 2003….,.

There is no documentation in the file relating to renewals of the lease agreement after 30 April 2006. However, on 3 February 2009, a Mr John Ndere, representing the applicant, wrote the following letter to the first respondent:

“03 February 2009

Business Associates

1^st Floor, Building 3

Arundel Office Park

Mt Pleasant

HARARE

Att: Mr Mahaka

Dear Sir/Madam

RE: FEBRUARY 2009 RENT

Your rentals for the month of February 2009 shall be an equivalent of 1,419USD units at 6.00 units per square metre (incl vat). This is payable on or before the first day of the month (1 February 2009).

We would like to thank you in advance for your cooperation.

Yours faithfully

John Ndere

PROPERTY PORTFOLIO MANAGER”

The letter was addressed to a Mr Mahaka, who, on 27 February 2009, accepted the proposed rental on behalf of the first respondent.

In para 10 of the founding affidavit, the applicant states as follows:-

“In breach of the lease agreement, first respondent failed to pay rent and accumulated arrears for rent from January, 2009 to August, 2009 in the sum of US$14,054=74.”

Clearly, the arrears refer to the period after 30 April 2006 when the three year lease agreement under which the second and third respondents had bound themselves jointly and severally as sureties and co-principal debtors had expired.

In August 2009, the first respondent vacated the property on its own accord. At the time of vacating the property, some arrear rentals were still outstanding for the period after February 2009. On 25 August 2010, the applicant filed this application seeking the following relief:-

“IT BE AND IS HEREBY ORDERED THAT:-

The respondents shall pay to applicant jointly and severally one paying the other to be absolved:-

(a) The sums of US$14,884=41 and US$3,381=28.

(b) Interest on the above sums at the rate of 5% per annum from August, 2010 to date of payment in full.

(c) Payment of collection commission on all amounts claimed herein calculated in accordance with By-Law 70(2) of the Law Society of Zimbabwe By-Laws 1982.

(d) Costs of suit at Legal Practitioner and Client Scale.”

On 3 September 2010, the third respondent filed a notice of opposition to the relief sought….,. In his opposing affidavit the third respondent states, in part:

“I do not dispute that indeed I bound myself as surety and co-principal debtor for the obligations of first respondent. My obligation as surety and co-principal debtor for the first respondent terminated when the attached lease agreement terminated on 30^th April 2006. After the expiry date of this lease agreement I was no longer bound as the surety and co-principal debtor The Deed of Suretyship I signed on 1^st of May, 2003 was signed during the Zimbabwe Dollar era and thus was valid for that period. The applicant and the first respondent indeed entered into a new United States Dollar agreement for rent on the 27^th of February 2009. At the relevant time of the signature of the new agreement I was on longer the surety and co-principal debtor for the first respondent as I had long parted ways with the said company in 2006.”

In court, the third respondent, who appeared in person, stuck to the above defence and urged the court to dismiss the application. He said his obligations terminated at the end of the lease period (i.e 30 April 2006). He further stated that he had nothing to do with the renewed lease agreement whose terms and conditions he did not know.

In response to the submissions made by the third respondent, counsel for the applicant argued that in terms of clause 2.3 of the lease agreement, the third respondent could not escape liability because all terms and conditions on the renewed lease still subsisted. He said that there was no evidence that the lease had been terminated. With respect to the law relating to suretyship, counsel for the applicant, in his heads of argument, opined:

“9. The duration of a contract of Suretyship is a matter of construction. Broadly speaking, a Suretyship is likely to be either of a fixed period, in which case it cannot attach to a debt incurred after the period has elapsed; or to be a continuing guarantee, in which case, in the absence of some clear indication to the contrary, it is terminable by the Surety by notice to the Creditor that we will not be responsible for any liabilities incurred after receipt of the notice, or it will relate to a particular obligation in each case it will continue until the obligation is fully discharged. See CHRISTIE, Business Law in Zimbabwe at page 457.

10. In the case of Rauf Haroon Mhandu v Scotfin Limited 64-03 it was held that to determine the extent of a sureties liability, regard must be made to the contract of suretyship and its interpretation as a whole.

11. In applying the law to the facts the argument is that the contract of Suretyship that appears on p23 of the Court application is a continuing Guarantee by third respondent for the payment of rent to the applicant by the first respondent as the third respondent bound himself for the due and faithful performance by the first respondent of all obligations imposed in terms of the lease agreement entered into with the applicant. On this basis it is clear therefore that:

11.1 First respondent had an obligation to pay agreed rent in United States dollars to the applicant. First respondent failed to pay the rent and operating coats thereby accumulating arrears. Therefore, this obligation is still outstanding and on that basis third respondent is liable for the obligation of the first respondent to pay the arrears for rent and operating costs.

11.2 No evidence has been placed on record by the first respondent to show that he terminated the Suretyship or that it was for a fixed period.”

The above submissions are helpful in the determination of this matter.

In constructing the proper import of the Deed of Suretyship that was signed by the third respondent, I come to the conclusion that what he was binding himself to were obligations that fell under the lease that was signed on the date he also signed the Deed of Suretyship, namely, 1 May 2003. That is the lease referred to in the Deed of Suretyship and that is the lease that expired on 30 April 2006. The Deed of Suretyship did not extend to renewals.

It does not state so.

My view is that the financial obligations that the third respondent was aware of at the time of signing the Deed of Suretyship were as expressed in clause 1.8:

“1.8 The rent for the leased premises for the first year as provided in Clauses 3 and 4 of the Lease is made up of a “basic” rent and an “operating cost” rent and is broken down as follows:-

1.8.1 The basic rent is:

$477,200= per month from 01/05/2003 to 30/04/2004.

1.8.2 The proportionate share of the property's operating costs having been estimated as:

$102,800= per month from 01/05/2003 to 31/12/2003.

Operating Costs for the 2^nd and 3^rd year will be reviewed in January of each year.

1.9. The rent review date is 31 January 2005;

1.10 The authorised use of the leased premises is for offices;

1.11 The additional charges are electricity, contents and plate glass insurance and internal maintenance and repairs;

1.12 The common areas are the steps, entrances, passages, services, servitudes and loading bays in the Building;

1.13 The deposit is $580,000= or one month's rent, including operating costs, whichever is the greater;

1.14 The place of payment is CB Richard Ellis, 8^th Floor, Beverley Court, 100 Nelson Mandale Avenue corner Fourth Street, Harare or such other place in Zimbabwe designated in writing by the Landlord.

1.15 The Directors of the Company are

         FRANCIS HALE

         SHINGAI MTEZO.”

The above provision in the lease agreement should be read together with all other financial clauses therein. It would, in my view, be absurd to reason that the third respondent would guarantee what he did not know. It was therefore the applicant's obligation to ensure that clause 1.7 of the lease agreement was complied with at each time of any renewal. Any renewal, in my view, brought in different financial obligations. It was therefore imperative that the surety should agree to the new financial obligations. There is no evidence of that in the papers before me. There is, however, evidence that the third respondent bound himself as surety for financial obligations of a lease that commenced on 1 May 2003 and expired on 30 April 2006. Indeed, the third respondent would, in terms of the Deed of Suretyship, be liable for “all obligations” of the first respondent falling under that fixed period. In the circumstances, I find merit in the third respondent's submissions. The relief sought against him must fail.

In view of the foregoing, the application, as it relates to the third respondent, should fail. The first and second respondents did not oppose the application. I therefore believe the applicant is entitled to default judgment against the first and second respondents.

I therefore order as follows:-

1. The application against the third respondent be and is hereby dismissed with costs.

2. The first and second respondents be and are hereby ordered to pay the applicant, jointly and severally, the one paying the other to be absolved, US14,884=41 and US$3,381=28 in respect of rent and operating costs.

3. The first and second respondents be and are hereby ordered to pay, jointly and severally, the one paying the other to be absolved, collection commission on all amounts claimed in accordance with By-law 70(2) of the Law Society of Zimbabwe By-Laws 1982, and

4. The first and second respondents shall pay, jointly and severally, the one paying the other to be absolved, costs of suit on a Legal Practitioner and Client Scale.

The plaintiff company issued summons against the three defendants out of this court on 8 November 2005. It claimed for the payment of an outstanding debt of US$1,560,437=68, interest at the rate of 15% per annum, costs of suit on an attorney and client scale and collection commission at the Law Society tariff rate.

The claim was based on the Deeds of Suretyship that each defendant signed in favour of the plaintiff.

The defendants contested the action mainly on the ground that their personal guarantees offended against section 11 of the Exchange Control Regulations, S.I.109 of 1996 as they did not have Exchange Control authority to incur an obligation to pay in foreign currency outside Zimbabwe. In the alternative, they averred that on the date of settlement, the security adequately covered the debt. The third defendant further contested the action on the ground that when he appended his signature to the Deed he did not actually know that he was signing a Deed of Suretyship.

The plaintiff called the evidence of two witnesses.

These were Jayesh Shah its executive mind and Bartholomew Mswaka  a stockbroker with Renaissance Securities Limited. In addition, it produced seven documentary exhibits. Each defendant testified. In addition, all three defendants called the evidence of Robert Mutakwa, the Divisional Head of Central Scrip, a subsidiary of ZB Bank Limited and Emmanuel Munyukwi, the Chief Executive Officer of the Zimbabwe Stock Exchange. A total of four documentary exhibits were produced by the defendants.

Most of the facts were common cause.

The plaintiff, a company incorporated in the United Arab Emirates, was at all material times represented by Jayesh Shah. Jayesh Shah was in charge of searching for investment opportunities and providing bridging finance for banks and discounting export receivables in Zimbabwe, Zambia, Malawi and South Africa. During the period 2003-2004, the plaintiff extended bridging finance denominated in United States dollars to many local players in the financial services sector, amongst who was Trust Bank Limited. In his dealings with Trust Bank Limited that commenced in 1999, Jayesh Shah mostly interfaced with Christopher Goromonzi, the second defendant, an expert in structured finance. All the deals with Trust Bank Limited were a success. He came to know Tapera William Nyemba, the first defendant and Chief Executive Officer of Trust Holdings Ltd, the holding company of Trust Bank Limited but alleged that he met Josphat Sachikonye, the third defendant after summons was issued. The three defendants were Directors of Trust Bank Limited. Christopher Goromonzi appraised Jayesh Shah of the existence of Barato Holdings Limited, a special purpose vehicle incorporated in Jersey, Channel Islands to hold 42,296,673 shares (the security) in a local public company, Ariston Holdings Limited. Barato Holdings Limited was, in turn, a wholly owned subsidiary of Blantyre Investments Limited, often referred in documents and evidence by the parties as Blantyre Asset Management. The three defendants were the sole Directors of both Barato Holdings Limited and Blantyre Investments Limited. In his evidence and under cross examination, Tapera William Nyemba disclosed that Barato Holdings Limited was purchased from Conafex SA of Luxembourg on 23 May 2003 for US$2,927,000= by Blantyre Investments Limited using funds appropriated for the purpose by Trust Holdings Ltd through Trust Bank Limited. Apparently, the nominal shareholder in Blantyre Investments Limited was the Caversham Trust, which acted on the sole instructions of the Directors of Barato Holdings Limited, who, in turn, acted as nominees of the Board of Trust Holdings Ltd. As a result of this corporate manoeuvering, Trust Holdings Ltd was entitled to three Board representations in Ariston Holdings Limited. Tapera William Nyemba was appointed Deputy Chairperson of Ariston Holdings Limited while two other nominees fulfilled the Trust Holdings Ltd Board quota. These three were able to influence the policy formulation and strategic direction of Ariston Holdings Limited to the extent that its share price appreciated with the result that the value of the security increased to US$4 million.

Tapera William Nyemba was, however unable to prove the truthfulness of his assertions that both Blantyre Investments Limited and Barato Holdings Limited were special purpose vehicles for Trust Holdings Limited. He did not proffer any satisfactory explanation on why if that were so, Christopher Goromonzi declined Jayesh Shah's overtures for Trust Holdings Limited to stand as surety and co-principal debtor in place of the three defendants.

In December 2003, Christopher Goromonzi initiated negotiations with Jayesh Shah for the advancement by the plaintiff of a loan in the sum of US$2,223,000= to Barato Holdings Limited. The negotiations culminated in the loan agreement, exhibit 1, on 23 December 2003. Jayesh Shah signed on behalf of the plaintiff while Tapera William Nyemba and Christopher Goromonzi signed for Barato Holdings Limited. The loan could only be disbursed after the three Directors of Barato Holdings Limited had executed personal guarantees in favour of the plaintiff. Josphat Sachikonye executed his personal guarantee, exhibit 4, on 22 December, while Christopher Goromonzi executed, exhibit 3, on 23 December and Tapera William Nyemba executed, exhibit 2, on 29 December 2003.

In his testimony, Tapera William Nyemba expressed his appreciation of the legal implications of the Deed of Suretyship at the time he executed it. He did not envisage that he would be called upon to meet the guarantee as at the time of execution he believed that the security adequately covered the loan.

Barato Holdings Limited surrendered the Share Certificate for the Ariston Holdings Limited shares in negotiable form together with the Deeds of Suretyship of the three defendants to the plaintiff before the plaintiff disbursed the loan amount on 29 December 2003 directly to the African Export Import Bank, Egypt from its Geneva account. The loan was to be repaid in five instalments on 15 February, 31 March, 30 June, 30 September and 30 December 2004. While no interest was charged, the parties, however, agreed on the payment upfront by the borrower of a flat fee of 15% of the loan amount. In addition, in the event of default, interest would accrue at a rate proportional to the flat rate. Jayesh Shah stated that the flat rate was in line with the authorization of the Reserve Bank of Zimbabwe to Trust Bank Limited to conduct six-month transactions at the discount rate of 14,9625%. He further surmised from the authorization and the repayment terms of the loan agreement that the effective interest rate yield was 30% per annum.

Jayesh Shah delved into his previous dealings with Christopher Goromonzi. He stated that Christopher Goromonzi used to borrow foreign currency-denominated loans for his personal account secured by personal guarantees. He had repaid all the personal and Trust Bank Limited loans using offshore funds. It was Jayesh Shah's uncontroverted testimony that he was advised by Christopher Goromonzi that the loan was to retire an African Export Import Bank bank loan before African Export Import Bank purchased the Ariston Holdings Limited shares for US$4 million. However, in 2004 African Export Import Bank declined to purchase the shares after Trust Bank Limited experienced financial woes with the Reserve Bank of Zimbabwe that culminated in its curatorship on 23 September 2004. Barato Holdings Limited defaulted on the first instalment, and, later, on the other instalments. The plaintiff did not call the loan after Christopher Goromonzi pleaded for more time to raise funds from other business deals and work they were involved in outside Zimbabwe. On 30 April 2004, Christopher Goromonzi wrote for Barato Holdings Limited, to the plaintiff's erstwhile legal practitioners of record, inter alia, requesting “that the share disposal be delayed whilst the share price readjusts to the expected level.” He promised to raise funds from other sources to service the debt while continuing to secure buyers of the security at the right price. At some point, Christopher Goromonzi even indicated that he had found a buyer of the security in South Africa but the deal fell through. In early 2004, in the aftermath of financial woes in Trust Bank Limited, Tapera William Nyemba and Christopher Goromonzi ran away from the country.

The loan was not repaid.

On 27 July 2005, the plaintiff exercised its rights and placed the shares on the Zimbabwe Stock Exchange for sale. The shares were not purchased but the share price fell in local currency from $675= to $300=. The plaintiff purchased the shares at $300= for $12,689,001,900=. It incurred brokerage fees of $300 million. At the time, the exchange rate was ZW $17,700: 1 USD. In addition, the unreported case of Alshams Global Inc v Ariston Holdings Limited HC5758/08, a judgment of BHUNU J, delivered on 17 September 2008, confirmed Jayesh Shah's testimony that the plaintiff received dividends due to Barato Holdings Limited from Ariston Holdings Limited in 2004 of US$30,856=38….,.

The disputed facts centered on the resolution and resignations of the Directors of Blantyre Asset Management Company (Pvt) Ltd ….,.

Under cross-examination, Jayesh Shah denied procuring the resolution and resignations of the three defendants from the directorship of Blantyre Asset Management Company (Pvt) Ltd. He acknowledged receiving the resolution and the three letters of resignations produced as exhibit 7 but denied receiving the other letter of resignation from Josphat Sachikonye…,. The import of the resolution was that the three defendants acknowledged the inability of Barato Holdings Limited to repay the loan and averred that the plaintiff desired to take cession of the shares and the concomitant Board representation and dividend rights attached to them. The Directors resolved to surrender to the plaintiff these rights and to resign from Blantyre Asset Management Company (Pvt) Ltd to facilitate the transfer and to alert Ariston Holdings Limited on possible changes on its Board driven by the new shareholder.

The letter of resignation by Tapera William Nyemba was dated 1 August 2004. It was addressed 'To Whom It May Concern.' It was on Pivot Capital Partners of Bryanston South Africa letterhead and indicated that Tapera William Nyemba was its Managing Director. He was resigning from Ariston Holdings Limited, Barato Holdings Limited and Blantyre Asset Management Company (Pvt) Ltd with effect from 1 August 2004. He intimated that he was relinquishing all his rights and obligations in both Barato Holdings Limited and Blantyre Asset Management Company (Pvt) Ltd and that he had resigned from Ariston Holdings Limited. He signed it in Johannesburg, South Africa. In his testimony, Tapera William Nyemba did not recall what happened. He assumed that the resolution was done much later as an afterthought. Jayesh Shah denied meeting Tapera William Nyemba on the day he signed the letter of resignation contending that he was not in South Africa at the time. In his testimony, Tapera William Nyemba stated the he signed the resolution and prepared the resignation letter in South Africa at the instance of Christopher Goromonzi who was also in South Africa. Christopher Goromonzi advised him that he had been told by Josphat Sachikonye that Jayesh Shah had sought these two documents. He assumed, at the time, that the security adequately covered the loan. He did not know whether Jayesh Shah accepted or rejected the letter of resignation.

The letter of resignation by Christopher Goromonzi was typed but the date is written in ink. It bears a Harare address. He was resigning from Blantyre Asset Management Company (Pvt) Ltd with immediate effect. He wished the company well into the future under its new shareholder.

Two letters of resignation were attributed to Josphat Sachikonye. The first had a Tafara Harare Box Number. It intimated his resignation from Blantyre Asset Management Company (Pvt) Ltd with immediate effect. He opined that he was relieved of all responsibilities and liabilities relating to Blantyre Asset Management Company (Pvt) Ltd. The second letter also had the Tafara Box address and the words Alshams Building Material t/a LLC in bold print. He indicated in that letter that he was resigning from Blantyre Asset Management Company (Pvt) Ltd at the instance of the plaintiff. He further added that as a condition thereof  he was “to be relieved of all the responsibilities and liabilities relating to this company and cancel, without reservation, my deed of surety issued in respect of the loan to Barato of US$2,223, 000=.”

Jayesh Shah admitted that he did not discuss with any of the defendants how they would individually pay up in the event of default by Barato Holdings Limited. He stated that he was assured by Christopher Goromonzi that all three defendants were beneficial owners of Barato Holdings Limited, had resources, assets, businesses and were consultants for other banks in the Region. He stated that Christopher Goromonzi stated that all three could easily raise US$150,000= every second or third month and clear the debt by 31 December 2004, which information was confirmed by Tapera William Nyemba, hence the repayment schedule in the Agreement….,.

The first and second defendants conceded that they voluntarily signed the Deed of Suretyship. Tapera William Nyemba stated, and Christopher Goromonzi confirmed, that their strategy was to pay the first instalment within six weeks of the loan agreement from dividends declared to Barato Holdings Limited by Ariston Holdings Limited. Thereafter, he expected the share price of Ariston Holdings Limited to appreciate and with it the value of the security. The appreciation in the value would enable the defendants to sell the security and repay the plaintiff. If they failed to sell they would utilize long term financial arrangements of Trust Bank Limited.

In my view, these arrangements were very uncertain as they depended on the ability of Ariston Holdings Limited to pay a dividend in local currency that could easily be converted into United States dollars. As seasoned bankers, it must have been in the contemplation of both Tapera William Nyemba and Christopher Goromonzi that the conversion depended on the availability of sufficient and surplus United States dollars in the foreign currency account of Ariston Holdings Limited. The strategy miserably failed because Ariston Holdings Limited did not have the envisaged funds in its foreign currency account….,.

I understood their three letters and the resolution to be merely expressing the obvious position that, on resignation, they ceased to be liable for the operations of the corporates from which they were resigning. The letters do not, in any way, free them from outstanding obligations which they entered into prior to the resignation - such as the suretyship. It explains why both Tapera William Nyemba and Christopher Goromonzi did not aver in their joint plea that the resignation discharged the suretyships. Rather…., they pleaded that the security carried a higher value than the loan agreement when they resigned and when the plaintiff exercised his rights of settlement…..,.

At the pre-trial conference held on 4 November 2009, the following issues were referred to trial:

1. Whether the personal guarantees entered into by the defendants required Exchange Control permission, and, if so, whether the guarantees are enforceable.

2. Whether the defendants held out that Barato Holdings Limited had the ability to repay the principal debt.

3. Whether the principal debt was to be paid solely from dividend payments due to Barato Holdings Limited and Blantyre Asset Management and from the realization of security handed to the plaintiff.

4. Whether the defendants assured the plaintiff that all necessary Exchange Control approval had been obtained prior to the furnishing of the personal guarantees.

5. Whether the plaintiff has been repaid the principal debt in full.

6. Whether the third defendant is bound by his signature to the guarantee notwithstanding his averments, firstly, that he did not know at the time he signed it that it was a guarantee, and, secondly, that it was discharged by the plaintiff when he agreed to resign his Directorship in Blantyre Asset Management….,.

This is an application for a relief based on the principle of parate executie (i.e summary execution). The applicant seeks the following relief -

“(i) That the applicant, in terms of the Agreement signed by the parties on 22 January 2010, be allowed to attach and sell in execution, two Renmson Refrigerator coldrooms together with the compressors as spelt out in the Agreement of the parties.

(ii) That the Messenger of Court be allowed to carry the execution and such costs of execution be levied on the respondent.

(iii) That the respondent pays costs of this application at an Attorney and client scale.”

In line with the principles of parate execution, the applicant wants this court to compel the respondent to honour clause 4 of the Pledge Agreement. The applicant submitted that in approaching the court it did not  want to take the law into its own hands and realizes that in terms of the law it is the Sheriff or his/her Deputy who is authorised to execute orders/judgments of this court. Furthermore, the applicant submitted that the Agreement relates to the delivery of movable assets. To that end, the applicant correctly relied on Change v Standard Finance Limited 1990 (2) ZLR 412 (SC) where the Supreme Court said the following -

“It was settled in Osry v Hirsh, Loubser and Co Ltd 1922 CPD 531 that as far as movables are concerned an agreement for their delivery to the Creditor and sale by him by means of parate execution is valid and binding. That decision was approached and followed by BEADLE J (as he then was) in Aitken v Miller  1951 SA 153 (SR), 1950 SR 227. The recognition extended under the civil law to such agreements is subject, however, to the qualifications expressed at p547 of Osry's case (supra) in these terms;

'It is, however, open to the debtor to seek the protection of the court, if, upon any just ground, he can show that in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him in his rights.'”

In other words, the creditor, although entitled to parate executie, is not entitled to act in a manner that prejudices the rights of the debtor.

Notwithstanding the decision in Sakala v Wamambo & Anor 1990 (2) ZLR 263 (HC) where it was held that “the law regarding parate execution is not in accordance with sound jurisprudence and require fresh examination”, the above remains the law in this country.

In my view, the Pledge Agreement..., constitutes clear consent by the respondent to parate executie. Accordingly, once the existence of the document is established and found to be authentic or genuine, the applicant's case must succeed.

Notwithstanding acceptance by our courts of the law relating to parate executie, it should always be borne in mind that summary execution is a drastic remedy. In Sakala v Wamambo & Anor 1990 (2) ZLR 263 (HC)..., SANSOLE J said -

“In my view, summary execution is a drastic remedy which a pledgee is able to extract from a pledgor because of his advantageous position over the pledgor. It is tantamount to taking the law into one's own hands. Consequently, such a provision in an agreement should be construed strictly. This is done “in order to protect debtors and to prevent creditors taking undue advantage of the impecunious position of the debtors.” (See..., Osry's case at p541). Speaking for myself, Shylock may have his pound of flesh but without any drop of blood. The law must not countenance any prejudice which is caused by a pledgee who is in such an advantageous position.”

The respondent was of the view that in order to execute on the basis of the Pledge Agreement the applicant ought to obtain a judgment first authorising the sale of its (the defendant's) property.

The applicant has approached this court on the understanding that the debt is accepted/ acknowledged by the respondent through the Pledge Agreement and hence the need to be granted authority by this court to execute against the pledged assets. The applicant is therefore not asking this court to decide on whether or not the respondent owes it USD7,500=. That aspect distinguishes this application from one for summary judgment brought in terms of Rule 64 of the High Court Rules. The applicant's approach to this court is in line with the sentiments expressed in SA Bank of Athens Limited v May Van Zyl 431/03 (Supreme Court of Appeal of South Africa). It was, in that case, stated as follows -

“In summary, the common law, insofar as stipulations for parate execution are concerned, is that stipulations, which are not so far-reaching as to be contrary to public policy, are valid and enforceable; that, as a matter of practice, creditors seeking to enforce such stipulations take the precaution of applying for judicial sanction before doing so; and that the debtor can avail himself of the court's assistance in order to protect himself against prejudice at the hands of the creditors.”

In casu, the issue was not to prove a claim but to enforce an agreement. All the applicant seeks is judicial sanction to deal with the pledged assets.

Accordingly, the relief sought accords with the principle of parate executie. The application, in my view, has merit. I therefore order as follows -

(i) That the respondent be and is hereby ordered to pay the applicant the sum of US$7,500=;

(ii) That assets pledged by the respondent in the Agreement signed by the parties on 22 January 2010, namely two Renmson Refrigerator coldrooms together with the compressors, be and are hereby declared executable for the purposes of satisfying the amount referred to in (i) above;

(iii) That the Messenger of Court be and is hereby authorised to carry out the execution envisaged in (ii) above and that costs of execution be levied on the respondent;…,.

In 2009, the applicant supplied the respondent with flour worth US$7,500= (Seven thousand five hundred United States dollars). Upon failure to pay the applicant for the flour, the respondent pledged its refrigerator and coldrooms for the debt.

The Pledge Agreement signed by both parties on 22 January 2010 provides as follows -

“AGREEMENT TO PLEDGE

made and entered into by and between

BRIGHTLAND FARMING P/L T/A as Q-TEES

(Hereinafter referred to as 'THE PLEDGOR')

and

CEPRAT FARMING P/L

(Hereinafter referred to as 'THE PLEDGEE')

WHEREAS the parties herein have agreed to enter into this Pledge Agreement

AND WHEREAS the parties have agreed to reduce the terms and conditions of this Agreement into this document as follows -

“1. The parties have agreed that Q-tees owe the pledgee US7,500= arising from flour supplied to the PLEDGOR.

2. The PLEDGOR undertakes to settle USD5,000= by 15^th February and the balance of USD2,500= by 28 February 2010.

3. The Pledgor herein pledges the following movable assets to the Pledgee as security for the debt;-

3.1 Two Renmson Regrigerator Coldrooms.

3.2 One coldroom is non functional and the other is working.

3.3 Each of the coldrooms has a compressor.

3.4 It is agreed that the coldrooms are valued at USD9,000=.

4. The parties have agreed that in the event of failure of payment by the Pledgor, CEPRAT FARMING shall proceed to attach and sell the coldrooms to recover their money. This shall be done immediately.”

It was also argued that the doctrine of parate executie did not apply in casu because coldrooms are fixed to buildings and therefore become part of the immovable property.

The facts that are common cause between the parties are the following. In January 2005, the applicant was one of the shareholders in an entity called Continental Bakeries (Pvt) Ltd…,. On 14 January 2005 Continental Bakeries (Pvt) Ltd placed an order with the first respondent for the supply by the latter to Continental Bakeries (Pvt) Ltd of 142.74 metric tons of baking flour for a unit price of Z$3.4 million per ton making a total of Z$485,316,000=.

For the due payment of the cost of flour the first respondent required that Continental Bakeries (Pvt) Ltd provide security.

The applicant, in the hope of doing business in future with the first respondent then put up his immovable property as security for the debt. In the event, a mortgage bond was registered by the applicant over his immovable property in favour of the first respondent on 28 January 2005.

On 2 February, the applicant 'parted company' with the company and set up his own bakery business after an exchange of shareholding between himself and his co-shareholders in Continental Bakeries (Pvt) Ltd. The applicant ceased all participation in the business of Continental Bakeries (Pvt) Ltd after he gave up his shareholding therein. After his departure however, Continental Bakeries (Pvt) Ltd disposed of all its assets and liabilities to Harambe Holdings (Pvt) Ltd on 17 March 2005.

Later that year, the applicant received summons from the first respondent wherein it claimed payment of the monies in respect of which the applicant had given security for the due payment of the debt by Continental Bakeries (Pvt) Ltd. He defended the matter all the way to the Supreme Court but decided not to proceed with the appeal. On 22 March 2007, on his instructions, his legal practitioners addressed a suitable letter to the first respondent's legal practitioners offering to settle the debt in full together with accrued interest. A cheque in the sum of Z$970,632,000= representing the amount of $485,316,000= as the capital debt and an equal sum as accrued interest accompanied the accompanied the letter. Although the court had ordered that the applicant pay costs on a legal practitioner client scale, he did not pay the costs when the cheque for settlement of the debt was sent to the legal practitioners for the respondent, presumably on the advice of his own legal practitioners. It also appears that the respondent, on its part, has not given the applicant a computation of the amount of costs owing to it.

The payment made by the applicant was accepted on a without prejudice basis, and the applicant was informed that the respondent reserved the right to sue for further accrued interest in an amount equal to the amount of the cheque that had been sent to its legal practitioners. No further action was taken by the respondent or its legal practitioners at the time.

On 21 August 2007 the applicant instructed his legal practitioners to demand, in writing, the cancellation of the mortgage bond.

The respondent's legal practitioners responded to the letter on 5 September 2007 by a letter which was to the following effect -

“Thank you for your letter to us dated 21^st August 2007. As you are aware our client disputes the fact that your client has liquidated its debt to ours due to the fact that his defence to our summons was mala fide. This is noted in the Honourable Mr Justice HLATSHWAYO's judgment and is corroborated by the fact that you have now withdrawn your Notice of Appeal which proves that it was only noted to delay matters. Our client requires that your client pays the capital owed plus accrued interest to date. As you are well aware public policy cannot protect your client who has used the court's procedure to unnecessarily delay finalization in this matter. Please may we have payment within the course of the next 10 (ten) days.”

No payment was made, and, as a result, the respondent, on 3 August 2009, caused summons to be issued against Continental Bakeries (Pvt) Ltd, the applicant, and Harambe Holdings (Pvt) Ltd, wherein it claimed damages in the sum of US$148,800= representing the cost of two hundred and forty metric tons of flour together with interest on the said sum at the applicable rate in the courts of the United States with effect from 1 November 2008 to date of payment.

The respondent obtained judgment on 9 September 2009 and issued a writ of execution against Continental Bakeries (Pvt) Ltd and the applicant.

The applicant contends, further, that he has paid in full what he owed the respondent except for costs. He contends, further, that the issue of costs should not be a reason for the respondent to continue holding onto his Deed of Transfer and the refusal to cancel the mortgage bond granted in its favour.

The respondent opposes the granting of the relief being sought by the applicant.

The opposing affidavit was deposed to by the respondent's Managing Director who states that the applicant had mistaken the import of the claim for damages. He avers that the claim is predicated on the loss caused to the respondent by the deliberate delay on the part of the applicant to settle his indebtedness timeously which payment, when it finally came, was insufficient to meet the cost of the flour supplied to Continental Bakeries (Pvt) Ltd.

In respect of the mortgage bond the contention by the respondent is that it provided security for money owing or claimable by it from 'any cause or debt whatsoever' and that in the event the respondent was entitled to retain the Title Deeds and to decline to cancel the bond until such time as the court determines, in Case No HC3518/09, whether or not there are any monies owing to the respondent. The deponent states, further, that were this court to grant the relief sought any judgment under the damages claim in the respondent's favour would be a brutum fulmen. The respondent's view is that the applicant stood surety for flour worth almost US$150,000= but has paid less that $100= towards the debt.

In his answering affidavit, the applicant contends that he has not misunderstood the import of the damages claim and maintains that what the respondent, in that matter, seeks, is payment for the cost of the flour - albeit in United States dollars. He contends further that he has discharged his indebtedness to the respondent, and, as he is a businessman, he cannot await the determination of the damages claim and he requires the return of his Title Deeds.

The applicant states, further, that the fact that the security provided in the bond was in respect of indebtedness arising from any cause or debt whatsoever did not mean that the quantum of the indebtedness was without limit. He stated that, in fact, the mortgage bond limited his indebtedness to Z$500,000,000= together with interest thereon and that clause 1(d) of the mortgage bond provided for a limit of Z$125 million for securing the bond and that, therefore, his indebtedness was Z$650 million excluding interest. He stated that he had paid the capital debt in full and that the respondent had no justification to continue holding on to his Title Deeds.

In this application the applicant seeks relief in the following terms-

1. That the first respondent be and is hereby ordered and directed to cancel the registration of Mortgage Bond No. 911/2005 dated 28 January 2005 registered in the second respondent's registry by the applicant in favour of the first respondent within thirty (30) days of the granting of this order.

2. That the first respondent be and is hereby ordered and directed, within thirty (30) days of the granting of this order, to return and surrender to the applicant Deed of Transfer No. 2942/2003 dated 23 May 2003 relating to a certain piece of land situate in the district of Salisbury called Stand 91 Park Meadowlands of subdivision B of Makavusi and that the said Deed of Transfer be free of the endorsement of the mortgage bond referred to in (1) above.

3. That the first respondent pays the costs of this application.

In order for me to grant the relief sought by the applicant in terms of the draft order I would have to be satisfied that indeed the applicant has paid his indebtedness to the respondent.

The respondent had, out of caution, insisted on the applicant granting it security in the form of a mortgage bond to put the applicant and Continental Bakeries (Pvt) Ltd on terms to pay the debt. The applicant did not pay when called upon to do so and even after he was hauled to court for an order for him to pay the debt he defended his obligation to pay taking the matter on appeal which was then abandoned more than two years after the debt would have been due. It cannot be denied that the applicant resisted any attempt to make him pay and only paid when it seemed convenient to him. Although he acknowledges that an amount of $125 million was due and payable for securing the mortgage, it appears that even that has not been paid. The costs ordered against him by HLASTSHWAYO J were not paid. His explanation is that he or his legal practitioners were never appraised of the amount of those costs. It seems to me that in order for him to satisfy this court that he has settled his indebtedness and that he has attempted to pay the costs but that the respondent's legal practitioners refuse to divulge the sum of the costs. There is no letter from either the applicant or his legal practitioners demanding a breakdown of those costs and an offer to settle them.

The essence of the right in a mortgage bond is that the mortgagee is able to retain his hold or security over the mortgaged property until the obligation is discharged when due, and, where it is not so discharged, to have the property sold and from the proceeds to recover the money owed by the mortgagor. The mortgagor, on the other hand, has the right to have his property freed from the mortgage upon payment of the monies owed in respect of the mortgage bond. A valid mortgage confers a jus in re aliena on the mortgagee who may retain his security as long as his debt remains unpaid. See National Bank of SA Ltd v Cohen's Trustee 1911 AD 235. This right is effective not just against the mortgagor but also his creditors.

A mortgage is extinguished when the debt secured by the mortgage bond is satisfied in full together with interest and the costs for cancellation of the bond. A partial payment does not satisfy the obligations of the debtor to pay the debt in full. Thus, the duty of the creditor is to cancel his bond and the duty of the debtor is to pay the amount due and the authorities are agreed that the duties are reciprocal and cancellation should take place pari passu with payment. See Nulliah v Harper 1930 AD 141.

It is correct, as contended by the applicant, that he had, by executing the mortgage bond in favour of the respondent, undertaken the obligation of surety and co-principal debtor with Continental Bakeries (Pvt) Ltd, and, further, that this obligation was for the due payment of costs related to the purchase of flour by Continental Bakeries (Pvt) Ltd. In Trans-Drakensberg Bank Ltd v Guy 1964 (1) S.A. 790 MILLER J put the obligations of a surety thus-

“It is of the essence of a contract of suretyship that it is “accessory to the main contract;” the surety undertakes that the obligation of the principal debtor will be discharged, if not by the principal debtor, by himself. (Corrans v Transvaal Government 1909 T.S. 605 AT P 612). Where the surety concludes a contract of suretyship with the creditor in respect of a particular obligation, he undertakes to discharge that obligation and no other:

'Where the surety has expressed what sum or what cause he engages, his obligation only extends to the sum or to the cause which is expressed…,.'”

On the basis of this authority it is the contention of the applicant that he did not undertake to discharge any other claims by the first respondent save for the contractual obligation arising out of the purchase of the flour, and that in the event, the first respondent's claim for damages was therefore outside the purview of what the applicant bound himself to perform.

The contention by the first respondent, however, is to the effect that the applicant has not discharged his indebtedness. The first respondent argues, further, that the damages claim is covered by the mortgage bond executed by the applicant in that it covers-

“…, arising from and being monies lent and advanced by the mortgagee to the mortgagor, acts of suretyship or from any other cause of debt whatsoever and as continuing security for money which may hereafter be lent and actually paid or become owing to or claimable from any cause whatsoever…,.”

The facts are generally common cause. 

Sometime in 2008, the second respondent obtained an order in the Magistrates' Court against the applicant in the sum of R205,060= together with interest. That court order went on to provide that, in the event of the applicant's failure to pay, his immovable properties, namely number 13 Drayton Avenue, Woodvile Bulawayo and Stand 6436 Luveve, Bulawayo, could be taken over by the second respondent, after valuation, to establish the exact amount they represent as against the judgment debt. 

These properties had been given as security for the debt in question.

WAS IT COMPETENT FOR THE DEFENDANT TO SELL THE PLAINTIFF'S PROPERTY WITHOUT ANY RECOURSE TO COURT?

The main thrust of the defendant's position is that the contract allegedly entered into by the plaintiff and the defendant allowed the latter to act in the manner it did.

In his closing submissions, counsel for the defendant equated the contractual arrangement to one governed by what is referred to as a “paratie execution clause” which he argued has support in our law. Counsel referred me to the case of Changa v Standard Finance Limited 1990 (2) ZLR 412 (SC) where there is some reference to this principal of our law.

There can be no argument, in my view, that “paratie execution”, in appropriate circumstances, remains part of our law subject to the qualification that the creditor is precluded to act in a manner that prejudices the debtor in his/her rights.

In this jurisdiction, the operation of “paratie excutie” as a principle of our law can be traced back to the case of Aitken v Miller 1951 SA 153 (SR), 1950 SR 227, per BEADLE J, where the headnote reads:

“In Southern Rhodesia, an agreement for the sale by means of paratie executie of movables delivered to a creditor by a debtor, is valid and enforceable.”

The qualification in the operation of paratie excutie is succinctly put in the following terms in Osry v Hirsch, Loubser and Co. Ltd 1922 CPD 531:

“It is, however, open to the debtor to seek the protection of the court, if, upon any just ground, he can show that, in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him his rights.”

It occurs to me that paratie excutie, as a principle of law, is not something that our courts have blindly followed….,.

In contrast, counsel for the plaintiff in this case put up an equally strong and persuasive argument that in her conviction the clause that governed the plaintiff and the defendant in this case, and relied upon by the defendant in disposing of the plaintiff's property was a “pactum commissarium” and unenforceable, and therefore invoking it in this case was incompetent on the part of the defendant. In supporting her position, the plaintiff's counsel referred me to the case of Chimutanda Motor Spares (Pvt) Ltd v Teclar Musare & Anor 1994 ZLR 310 (H) where the leaned judge, MUTAMBANENGWE J …., made a fairly detailed analysis of a pactum commissorium and why the law reprobates it. In the particular case he was seized with, the learned judge remarked -

“I find the agreement as to the consequences of defaulting on the defendant's part is a pactum commissorium and as such unenforceable.”

It would seem to me that in all the cases where an attempt has been made to rely on a paratie executie, both the defendant and the plaintiff would be in agreement as regards the liability of the latter. Liability is never an issue in those cases as there is unanimity in that regard.

In the case before me, there is certainly no unanimity as regards the liability of the plaintiff. This issue occupied the bulk of the proceedings in this case and even after the case was concluded, it was not possible to establish the alleged liability of the plaintiff because of the position adopted by the plaintiff, and accepted by the court, that she was never advised of her liability through her chosen contact address. It occurs to me that before the defendant sought to dispose of the plaintiff's property in the manner it did, the plaintiff's liability ought to have been established first through a court process. In this case there was no agreement as regards what was due to the defendant hence the inapplicability of the principle.

Even if one were to assume that parate execution was applicable in this case, it is clear to me that in unilaterally deciding that the plaintiff owed it certain sums of money in a situation where the defendant acted as both the prosecutor and the adjudicator in determining what was allegedly due to it, the defendant acted to the prejudice of the plaintiff. If this is accepted (as it should be, in my view), then, it becomes clear that the situation in this case projects the qualification highlighted in Osry v Hirsch, Loubser and Co Ltd 1922 CPD 531 where the plaintiff has a justified reason to have recourse to court.

The plaintiff's position in this case is that she was never given the opportunity, in court, to contest what was allegedly due to the defendant in terms of outstanding payments before the defendant unilaterally decided on the figure which was followed by the sale of her property by way of public auction. There is persuasion in the argument advanced by the plaintiff's counsel that there was need for the plaintiff to get a court authorization/order to dispose of the plaintiff's property. Loosely interpreting the contract in the manner suggested by the defendant's counsel would, in my view, have grave consequences in that that approach would stampede upon the rules of natural justice which demand that even a murderer must be heard first before drastic or adverse action is taken against him/her.

Allowing the defendant to embark on unilateral action would give the defendant to act as both the prosecutor and a judge in a matter it has vested interest in, and, in my view, this would not accord well with public policy. Consumers, or those in the plaintiff's position, would be most vulnerable to such conduct as exhibited by the defendant in this case. There is need to curtail of the conduct of the defendant by ensuring that it does not act to the prejudice of the consumers of its services.

It is equally disturbing that contrary to the averments by the defendant, the evidence in this case clearly showed that not all the property that was deposited with the defendant was sold through public auction. Property like the plaintiff's marriage certificate, children's academic and birth certificates could not possibly have been sold and such property was not accounted for. It was only in a fully-fledged adversarial proceeding, which ought to have preceded the disposal of the plaintiff's goods, that such issues should have been ascertained. I find it even more disturbing that even after unilaterally selling the plaintiff's property, the defendant did not bother to trace the plaintiff at her chosen contact address to give her the residue from the sale of her property after taking into account what it deemed was due to it.

One gets the impression that if the plaintiff had not taken it upon herself to take the trouble of going to make enquiries to Glens Removals & Storage Zimbabwe (Private) Limited (the defendant) she would never have known what happened to her property. The conduct exhibited by the defendant falls far short of the best practice in conducting business in a transparent manner.

Further, the parties agreed that if Barato Holdings Limited defaulted, the plaintiff had a wide discretion to deal with the security it held in negotiable form in any manner it saw fit and claim any shortfall from the defendants. Clause 9.3 reads:

“It is recorded that in the event of any default by the borrower, the borrower hereby accepts and acknowledges that the security deposited by it shall be forfeited to the lender and the lender shall have the right to exercise the security, and, in the event of a shortfall, claim from the borrower any such shortfall which may still be due to the lender under the terms of this agreement.”

It was common cause that that the plaintiff could, in the exercise of its discretion, keep or sell the security and demand for any shortfall from the defendants.

Jayesh Shah testified that the security was inadequate to meet the loan, hence the plaintiff's recourse against the defendants….,.

The dispute also centered on the valuation of the Ariston Holdings Limited shares at the time of appropriation….,.

Jayesh Shah was taken to task on the value of the shares at disposal on 29 July 2005.  He was adamant that the parties agreed to maintain the value of the shares at 1½ times cover precisely because they could not predict the price of the shares on disposal. The existence of the personal guarantees tended to confirm Jayesh Shah's testimony that the parties were well aware of the uncertainties surrounding the value of the security on disposal. In his testimony, Tapera William Nyemba asserted that the value of shares was often affected by economic trends, the political environment and exchange rate policies. His view was confirmed by the failure to dispose the shares at US$4 million or any higher figure at any other time before or after the resignation of the three defendants as Directors of Blantyre Asset Management Company (Pvt) Ltd. The tone of the letter of Christopher Goromonzi, of 30 April 2004, in which he pleaded with the plaintiff not to appropriate the shares until the share price had appreciated to levels around ZW$450= implicitly recognised that the share price was depressed. While Jayesh Shah was reluctant to concede that in nominal terms the share price improved, the table on page 9 of exhibit 5, that was compiled by Interfin Merchant Bank at the request of the parties erstwhile legal practitioners of record, showed a nominal appreciation in value from ZW$174= in November 2004, a dip in December of $133= rising to $235= in January, $385= in February, $345= in March, $450= in April, $418= in May, $350= in June, $545= in July, $705= in August and $590= in September 2005….,.

Jayesh Shah denied that at the time of executing the agreement, Barato Holdings Limited expressed its intention to redeem the debt through dividend pay outs. His version is on firm ground. It was not disputed that the defendants hoped to redeem the debt, even before the due date, once African Export Import Bank purchased the shares for US$4 million. The use of dividends to repay only appears in the letter of 30 April 2004, at a time after Barato Holdings Limited had defaulted on two instalments. That letter also highlights the uncertainty of relying on externalized dividends to meet its repayment obligations.

The method of valuation of the shares is set out in clause 5.4 which reads:

“In determining the value of the security at any time during the operation of this agreement, the lender shall consider the share price quoted by the Zimbabwe Stock Exchange and the cost of procuring United States dollars on the market as may be advised by the lender's bankers. A certificate signed by the lender's bankers in Zimbabwe determining the value of the security in terms of this clause shall be conclusive proof of the value of the pledged shares and/or security.”

Jayesh Shah testified that at the time there existed in Zimbabwe three exchange rates for procuring United States dollars. These were the official rate that was applicable to Government transactions, the auction rate that was an interbank rate and the illegal parallel rate. In my view, because it referred to the rate provided by the local bankers of the plaintiff, clause 5.4 contemplated the use of the auction rate.

To arrive at the value of the shares in United States dollars, he referred to exhibit 6; a document compiled by Interfin Merchant Bank Limited at the request of the parties erstwhile legal practitioners. The legal practitioners supplied Interfin Merchant Bank Limited the four scenarios found in the document. The first was based on the special bargain price of ZWD300= per share. At the exchange rate of ZWD17,700= to the USD, less selling costs, the security carried a value of USD695,342=48. The second scenario was based on the market price of ZWD675= per share and after accounting for selling costs the security was valued at USD1,564,574=95. The third scenario was based on the special bargain price of ZWD300= less both selling and buying costs. The value of the security was set at USD673,792=18. The last scenario was based on the market value of the shares at ZWD675= less both selling and buying costs, which placed the value of the security at USD1,516,141=18.

Jayesh Shah was adamant that in terms of clause 6.2 of the agreement the plaintiff was not liable to pay any interest, fees, commissions or any other charges on the security provided by Barato Holdings Limited. It, however, paid for both the selling and buying expenses and was entitled to receive recompense from the defendants. He maintained that the third scenario, rather than the fourth, correctly captured the value of the security. It was this value plus the value of the one dividend that was received of US$30,856=38 that had to be deducted from the loan amount to arrive at the plaintiff's claim of USD1,560,437=68 million….,.

All three defendants averred that the security was adequate to meet the loan, both on the date that they resigned and relinquished control of the security and on the settlement date chosen by the plaintiff….,.

The defendants further called the evidence of Emmanuel Munyukwi to show that the method used by the plaintiff to dispose of the shares was opaque and unfair. The pith of their argument in this regard was best expressed by Josphat Sachikonye who described the sale of 27 July 2005 as a commercially impaired imagined sale without the dynamics of a willing buyer and a willing seller….,.

Whether the plaintiff has been repaid the principal debt in full

The plaintiff instructed Renaissance Stockbrokers (Pvt) Limited to sell the Ariston Holdings Limited shares on the local bourse. It provided the stockbroker with the Share Certificate and a signed transfer form. Bartholomew Mswaka conducted the sale on 29 July 2005. He testified that he found no takers at the price of ZW$675= per share that prevailed on the previous day. It fell to ZW$300= per share. No other third party was interested in the shares. He then purchased the shares at a special bargain price of ZW$300= per share for the plaintiff. The special bargain required the approval of the local bourse in its capacity as the regulatory authority. The approval was granted and the sale was passed. Even though he passed both the Seller's and Buyer's note to Jayesh Shah, he appeared oblivious to the fact that Jayesh Shah acted as both the Seller and Buyer. The shares were priced in Zimbabwe dollars and after deducting both the Seller's and Buyer's selling and buying costs, and applying the auction rate used by the Central Bank at the time, the value translated to USD673,792=18.

The value in United States dollars had the shares been valued at ZW$675=, after deducting both the Seller and Buyer's costs, would have amounted to USD1,516,141=18.

Bartholomew Mswaka's testimony of the events that transpired on the market on 29 July was not put in issue when he was cross examined. Rather, counsel for the respondents suggested to him that the fairer value would have been the USD1,516,141=18 rather than USD673,792=18.

Having allowed Bartholomew Mswaka's testimony to go unchallenged, counsel for the respondents proceeded to call the evidence of the Chief Executive Officer of the local bourse, Emmanuel Munyukwi. He produced exhibit 11, a document he alleged recorded the transaction that took place on the local bourse on 29 July 2005. It showed, firstly, that 76,000 Ariston Holdings Limited shares were sold at a price of ZW$675=, and, secondly, that a special bargain was transacted at ZW$300= on the day in question. In addition, he produced exhibit 10, documents capturing special bargains conducted in 2009 and 2010, in order to underscore the point that special bargains moved in a narrow range above or below the market price. He further underscored from these statistics that in the majority of the special bargains the price was above the market price. He surmised that the variance between the market price of ZW$675= and the special bargain price of ZW$300= was “rather unusual”, yet his Stock Exchange approved the transaction because such off-market deals with such a variance were not uncommon on the local bourse. He stated that they were legal and were designed to save transaction costs. Emmanuel Munyukwi's testimony was undermined by two factors. The first was that his testimony was never canvassed with Bartholomew Mswaka and the second was that the operating economic environment in 2005, in which the special bargain sale was transacted, was materially different from the one prevailing in both 2009 and 2010. The two periods are simply incomparable. Rather, Emmanuel Munyukwi's comparisons would have been helpful had he provided documents of other special bargains that were conducted in 2005. Emmanuel Munyukwi conceded, under cross-examination, that he could not dispute the testimony of Bartholomew Mswaka that the market price had fallen to ZW$300= on 29 July 2005 precisely because there were no buyers who were prepared to buy at a higher price. Bartholomew Mswaka's testimony was also confirmed by the probabilities. As a broker, he would have earned more fees had the sale been transacted at a higher price. He was to content with fees at the lower price because he failed to secure buyers at any price higher than ZW$300=.

I find that the market price of the shares on 29 July 2005 was ZW$300= and not ZW$675= as suggested by the defendants. Accordingly, the Ariston Holdings Limited shares were worth USD673,792=18 on 29 July 2005.

The defendants further contended that the value of the shares should be calculated as at 29 October 2004, the date on which they resigned from Blantyre Asset Management Company (Pvt) Ltd and effectively handed over the shares to the plaintiff.

Clause 5.4 of the loan agreement gave a wide discretion to the plaintiff to appropriate the security once the borrower defaulted. It was in recognition of this wide power that Christopher Goromonzi, on 30 April 2004, pleaded with the plaintiff not to exercise its rights. The tone of that letter indicated that the value of the Ariston Holdings Limited shares was low. He sought the plaintiff's indulgence to wait until the price had firmed to ZW$450= without indicating what it was at the time. It is unlikely that he would have sought such an indulgence were the share price able to extinguish the loan amount. Clause 5.4, as read with clause 9.3, does not provide a time frame within which the lender was to redeem the security. As long as the plaintiff indulged the Borrower's pleas for an extension, the loan agreement remained open. The continued existence of the loan agreement was not affected by the resignation of the defendants as Directors of the Borrower. In my view, as long as the lender did not exercise its rights over the security, the loan agreement would remain operational even beyond 30 December 2004. It would cease to operate once the plaintiff decided to exercise its rights. It was not within the power of the Borrower or its Directors to stampede the plaintiff into exercising those rights. Neither the Borrower nor its Directors had the power to force the plaintiff to exercise its rights through a Board resolution or resignations. The contention that the date of surrender of the security was 29 October 2004 has no merit. The date chosen by the plaintiff, in the exercise of its wide discretion, was 29 July 2005.

The defendants further contended that the valuation of the shares should be based on the official rate of ZWD250= to 1USD. They relied on the rates of the local currency to the United States dollar supplied on page 9 of exhibit 5 by Interfin Research. The document shows that in November 2004, the share price of each Ariston Holdings Limited share was ZWD174=. The value of the security translated to USD29,438,484= leaving a surplus due to Barato Holdings Limited of USD27,215,484=. It further shows that in July 2005 each share carried a value of ZWD545= that translated to USD92,206,747= leaving a surplus of USD89,983,747= due to Barato Holdings Limited.

That this was a preposterous and disingenuous contention was demonstrated by the defendants' failure to counterclaim for the alleged excess value of the security.

I, however, agree with the submission by counsel for the plaintiff that the rate of exchange contemplated by the valuation formula set out by the parties in clause 5.4 of the Agreement contemplated the use of the auction rate rather than the official rate. The valuation formula provided for the conversion of the value of the security quoted by the local bourse into United States dollars at the rate equivalent to the cost of procuring United States dollars on the market as provided by the plaintiff's local bankers. The parties contemplated that the local bankers of the plaintiff would state the value of the security in United States dollars in a signed valuation certificate. The envisaged certificate was not furnished by the plaintiff. I was satisfied by the information provided by the defendants from the Reserve Bank of Zimbabwe …, that the exchange rate that the plaintiff's bank would have used on the date the plaintiff appropriated the security would have been the auction rate of ZWD17,700 to 1USD. The auction rate constituted the weighted average rate of the bids of the eighteen participating banks for the purchase of the United States dollars on auction at the time the security was appropriated.

The plaintiff purchased the security at the price of ZWD300= a share. The defendants contended that the method used to purchase the security at that price was unfair regard being had to the market value of ZWD675= a share.

If the plaintiff's method of appropriating the security is upheld then the value of the security would be in the sum of US$673,792=18. The defendants contended that a fair value of the security at a market value of ZWD675= would be in the sum of USD1,516,141=18. Jayesh Shah's testimony on how the security was disposed of was confirmed to the hilt by Bartholomew Mswaka. The defendants relied on Emmanuel Munyukwi's testimony that the method of disposal was unfair in that it did not protect the interests of Barato Holdings Limited. The defendants and Emmanuel Munyukwi averred that the sale was not conducted at arms-length as in reality the party who sold the security turned out to be the purchaser.

I agree with the defendants that the plaintiff was the party who held the security and that it ended up as the purchaser of the security. Clause 5.4 of the loan agreement mandated the plaintiff to consider “the share price quoted by the Zimbabwe Stock Exchange.” The plaintiff went to the Zimbabwe Stock Exchange for an assessment of the share price of the security. The uncontroverted testimony of Bartholomew Mswaka was that the security was placed on the local bourse for sale. The price per share fell from ZWD680= to ZWD300= but there were no takers. The holder of the security then snapped all the shares at ZWD300= per share. While Emmanuel Munyukwi characterized the sale as unfair, he failed to provide concrete suggestions that might have been used in the disposal of the security. One suggestion he proffered was in splitting the Share Certificate but he could not dispute Bartholomew Mswaka's testimony that splitting was not only cumbersome but did not guarantee a higher price for the shares. In any event, splitting would pose further difficulties of having a multiplicity of possible dates of settlement of the security. The failure by Barato Holdings Limited and its main mind, Christopher Goromonzi, to dispose of the security during the period from 23 December 2003 until the resignation of the defendants as Directors on 29 October 2004 belied the belief propounded by the defendants and Emmanuel Munyukwi that the security had a high value because it was in high demand. That the security was not sought after by investors was further demonstrated by the fact that it found no takers - even until 29 July 2005 when the plaintiff, as a last resort, purchased it. Under cross examination by counsel for the plaintiff, both Tapera William Nyemba and Christopher Goromonzi agreed that the plaintiff had acted properly in the way it disposed of the shares even though they would have done it differently. Apparently, until the shares were disposed of on the Zimbabwe Stock Exchange to the plaintiff, their different method of disposal had failed. I am unable to discern any unfairness in the method used by the plaintiff. It brought the shares onto the open market. It instructed an independent and experienced stock broker to sell to the highest bidder. It was in the financial interest of the stockbroker to secure sales at the highest possible price. The shares found no takers. The plaintiff purchased them. The sale was approved by the local bourse, in the full knowledge that the price had fallen from ZWD675= to ZWD300=. The approval gave the transaction the stamp of fairness. There was no suggestion from the defendants that the plaintiff manipulated the bidding process or settlement price.

I am satisfied that the process used by the plaintiff in determining the value of the security of considering the share price quoted by the local bourse was fair and reasonable. It was in substantial compliance with clause 5.4 of the loan agreement.

The plaintiff averred that Barato Holdings Limited repaid, in local currency, the value of the security equivalent to US$673,792=18 and a dividend in local currency equivalent to US$30,856=38. The defendants called Robert Mutakwa in a bid to show that Barato Holdings Limited paid three as opposed to one dividend to the plaintiff. Robert Mutakwa's testimony failed to establish that any of the dividends due to Barato Holdings Limited was ever paid to the plaintiff. The onus lay on the defendants to show that the other two dividends were paid to the plaintiff. They failed to discharge this onus. They did not indicate the dates on which the payments were made. The dividends, according to Robert Mutakwa's schedule, were all declared before the loan agreement was consummated but presented to Barato Holdings Limited on 18 March and 9 June 2004 during the operation of the loan agreement. The plaintiff accepted receipt of the last dividend presented to Barato Holdings Limited on 9 June 2004. The defendants failed to show that two other dividends due to Barato Holdings Limited were paid out to the plaintiff.

Josphat Sachikonye further averred in his pleadings that his suretyship was discharged by the plaintiff on his resignation from the Directorship of Barato Holdings Limited.

In his evidence-in-chief and under cross examination, he shifted from this firm position and was content to say Jayesh Shah simply noted the contents of the letters. Jayesh Shah denied requesting his resignation from Barato Holdings Limited as a pre-condition for the discharge of the Deed of Suretyship. The other co-defendants stated that they did not speak to Jayesh Shah but relied on what Josphat Sachikonye told them concerning the request for the Board resolution and resignations. Like his co-defendants, Josphat Sachikonye was unable to explain why Jayesh Shah would require their resignation when he held a negotiable security. I do not accept that the Board resolution and letters of resignation were instigated by Jayesh Shah. The testimony of Josphat Sachikonye on the request is as difficult to follow as it is to believe. He alleged that he was the one who spoke to Jayesh Shah on 29 October 2004 and relayed the message to his co-defendants who were based in South Africa. He further alleged that the letters of the co-defendants and his first letter, without an addressee, and the Board resolution were collected by Jayesh Shah on the same day. Again, on that same day Jayesh Shah came back to him and demanded a letter of resignation specifically addressed to the plaintiff, hence the second letter that was more detailed and in which he gave as a condition of his resignation the discharge of the Deed of Suretyship. Jayesh Shah accepted receiving the resolution and the first three letters, but did not disclose when he did so. He disputed any knowledge of Josphat Sachikonye's second letter. Josphat Sachikonye stated that he met Jayesh Shah on 29 October 2004. He was being untruthful. It was not possible for all three defendants to sign the resolution and their respective letters of resignation on the same day that Jayesh Shah allegedly requested them from Josphat Sachikonye. Time and distance separated them. In any event, had Jayesh Shah demanded that the letters be addressed to the plaintiff, it was inconceivable that Josphat Sachikonye would have failed to relay this information to his co-defendants. Josphat Sachikonye's second letter demonstrated beyond doubt that he had prior knowledge of the contents of his Deed of Suretyship. His attempts to explain that he knew of its existence on that day after Jayesh Shah's visit was a vain attempt to escape from his earlier contradictory version made at the commencement of his evidence-in-chief that he only heard of Jayesh Shah when the case arose as before that he had not been exposed to circumstances were the two would meet.

It seems to me that the resolution and letters were made by the defendants of their own accord in recognition that once the plaintiff exercised its rights in appropriating the security, they no longer had a basis for remaining as Directors in an entity whose sole asset was the shares. The Board resolution merely expresses the thinking of the three co-defendants as Directors. Again, their letters expressed their own beliefs that they were discharging their respective guarantees because the security carried a value higher than the outstanding loan. Of course, Jayesh Shah was not bound by either the resolution or the letters of resignation, which did not proffer any advantage to the plaintiff. In my view, they were merely informative in nature, hence the climb down by Josphat Sachikonye that Jayesh Shah did not discharge his guarantee but merely took note of the contents of the second letter.

When the lease agreement was concluded on 9 October 2006, the three Directors of the second respondent, viz the applicant, the third respondent and one Alfred Tawanda Mupereri bound themselves as surety and co-principal debtor jointly and severally for the due and faithful performance by the second respondent of all obligations imposed in terms of the lease agreement in question.

In compliance with the Loan Agreement, the respondents agreed that Stand No.697 Ruwa Township of Stand 659 Ruwa Township situate in the district of Goromonzi held by the respondents under Deed of Transfer No.3198/96, dated 7 May 1997, was specially hypothecated by a Note of Hand from the applicant;….,.

(a) …,.

(b) …,.

Another issue I am constrained to advert to at this juncture which is closely connected with the above issue relates to the incompetence of the order sought by the applicant, viz to exonerate its Directors and guarantors from their personal liabilities. 

The first and second applicants are party to the proceedings in that they signed a guarantee document and binding themselves as surety and co-principal debtors with the second respondent for repayment of all sums due and outstandings to the first respondent, Ecobank Zimbabwe Limited.

As part of the agreement, both the first and second applicants registered a surety mortgage bond over a certain piece of land, 375 Borrowdale Brook Township of Stand Number 137 Borrowdale Brooke Harare.

1….,.

(a) …,.

(b) …,.

(c) …,.

The second and third respondents signed guarantees as sureties and co-principal debtors for money advanced to the first respondent.

It is further averred that the agreement between the parties provided that in the event of default and that as security for the debt the second, third, fourth and fifth respondents bound themselves as sureties and co-principal debtors. 

The second, third and fourth defendants offered themselves as sureties. The second defendant also registered a mortgage bond against Lot 1 of Lot 4 of Lot FA Quinnington, measuring 1,0938 (ha), as security for US$62,500=.

On 21 April, 2011, one Macy Korolnek opened an account with the plaintiff and deposited US$240,000=. He requested the plaintiff to use the funds as security for student loans at the first defendant's training institute and its' Director, who is the fourth defendant.

On 30 April 2011, Macy Korolnek signed as surety for the first defendant's institute up to the sum of US$239,800= which was the balance of his invested funds after bank charges. On the same day, he signed a pledge of documents in consideration of the plaintiff allowing Braitwood Institute certain facilities. On 6 May 2011, he signed another pledge of documents following a reduction of the investment to $219,749= after a withdrawal by him of US$20,000= from the pledged investment.

On 17 May 2011, Macy Korolnek wrote to the plaintiff asking it to send the balance of his funds to his account in Canada. The bank wrote back and said they could not do that until the first defendant's account, to which his funds were security, was cleared in full. On 24 May 2011, the bank wrote to the first defendant asking it to repay all drawn amounts in full to enable it to release Macy Korolnek from his pledge. This resulted in the dispute between the plaintiff and the defendants. The first defendant denied owing the amount being claimed by the bank of up to $232,400=49 as at 24 May 2011. 

The plaintiff then cancelled the facility.

On 7 September 2011, the bank used the pledged funds of Macy Korolnek to reduce the first defendant's indebtedness to it. An amount of $225,800= was credited into the first defendant's account to clear its debt in terms of the suretyship agreement between Macy Korolnek and the plaintiff. Thereafter, a debit balance of $32,115=98 remained on the first defendant's account. 

The significance of mortgage bonds and all other forms of hypothecation lies in the fact that they provide the creditor with a “real security” for the payment of his claim for if the debtor is unable to raise the necessary funds to pay the debt which is secured, the creditor is entitled to demand that the property, that being the thing which is subject matter of his security, be sold and that the proceeds of such sale are used for the satisfaction of his claim – The Law of Property (3^rd Ed) SILBERBERG and SCHOEMAN…,.

The rights of the judgment creditor will enjoy relative primacy. 

The plaintiff, a commercial bank, instituted an action against the five defendants jointly and severally the one paying the others to be absolved, for payment of a sum of US$685,442=42 together with interest thereon, costs of suit and collection commission. 

The claim arose from certain banking facilities extended to the first defendant by the plaintiff.

The second to fifth defendants were cited on the basis that they executed guarantees in favour of the plaintiff for the performance by the first defendant of its obligations to the plaintiff arising from the facilities….,.

Only the fifth defendant entered appearance to defend and filed a plea in which she denied that her liability in terms of the guarantee, which she executed, was unlimited. Her contention was that her liability was limited to a maximum amount of US$150,000= which amount, according to her, has already been paid by the principal debtor….,.

In support of its claim, the plaintiff called Bernard Mutambara, its Credit Services Manager.

His evidence was that the first defendant was given a facility by the plaintiff in March 2011. The terms of the facility were reduced to writing. It was a composite facility in terms of which a limit of US$500,000= applied in relation to revolving acceptance credits while US$100,000= was in respect of the cash advance facility. The facility offer letter details the figures applicable under the composite facility. He testified that the fifth defendant signed an unlimited guarantee and tendered her immovable property as security for the debt. The mortgaged property is a certain piece of land situate in the District of Salisbury called Stand 156 Groombridge Township 2 of Lot 39A Mount Pleasant measuring 4062 square metres. Copies of the Deed of Hypothecation and Guarantee form signed by the fifth defendant were produced in evidence. The witness stated that the amount secured by the Deed of Hypothecation was up to a maximum of US$150,000=. He stated, however, that that amount did not reflect the total debt guaranteed by the fifth defendant which, according to him, was unlimited.

The fifth defendant gave evidence and also called the second defendant, Duncan Mukondiwa, to testify on her behalf. 

The two of them are related.

The fifth defendant testified that she was approached by the second defendant who asked to use her property as security for a loan which he intended to obtain from the plaintiff. He advised her that the loan amount was US$150,000=. She agreed and surrendered the title deed of her immovable property to the second defendant. She did not personally meet the Bank officials. The guarantee form was brought to her by one Fainah Mangwende who was the first defendant's accountant. The form had blank spaces when she signed it. In other words, according to her, the handwritten portions were completed after she had signed the form. She filled in her name and address and signed the form. She stated that she never became aware of the further borrowings made by the first defendant after she had signed the guarantee form. Her evidence was that her understanding of the Deed of Hypothecation was that the hypothecation of her property related to a maximum of US$150,000=. She understood that to be the full extent of her liability as well. The fifth defendant stated that she was assured by the second defendant that he would repay the loan to the plaintiff within three months and that her security was required just for that period.

Duncan Mukondiwa's evidence was that as far as he understood, the fifth defendant's immovable property was to secure the first defendant's debt up to a maximum of US$150,000=. He confirmed that he is the one who approached the fifth defendant, as a relative, in order for him to use her property as security for the first defendant's debt. He denied that he assured the fifth defendant that the security she had given would lapse after three months. His evidence was that even in 2011, when he made further borrowings, the security given by the fifth defendant was still valid.

The principal requirements of suretyship are succinctly stated in GIBSON, South African Mercantile and Company Law 8^th edition: Juta and Company Ltd…, as follows:

“Suretyship is a contract of which a third party [a surety] agrees to pay, while there is in existence an obligation due by a debtor to a creditor, the whole or part of that obligation to the latter, not in lieu of the debtor, but jointly and severally with the debtor. So the debtor remains bound to the creditor in terms of the principal obligation, and the surety is bound to the creditor in terms of his contract of suretyship.”

A party who expressly, or impliedly, undertakes to pay a debt due by a debtor to a creditor, like what the second defendant did in casu, cannot attempt to resile from that undertaking before the debt is discharged. The second defendant bound itself to the first defendant's debt to the plaintiff, not only as a surety but also as a co-principal debtor. 

The facts giving rise to this matter may be summarised as follows.

By letter dated 2 March 2010, Stanbic Bank Zimbabwe Limited (“the Bank”) offered a loan facility to Birdland Trading (Private) Limited (“the Company”) which offer the company accepted on that same day. Birdland Trading (Private) Limited actually received from the bank a total of $794,860=54 in terms of the said loan facility.

In order to secure that loan, Neil William Rix, Francis Van Der Zee and a company called Alco Forest Industries (Pvt) Ltd signed suretyship agreements binding themselves as sureties and co-principal debtors for the due repayment of the loan. As sureties, the three respondents meant that if Birdland Trading (Private) Limited failed to pay the loan they undertook to do so themselves.

Birdland Trading (Private) Limited did fail to pay the loan and the respondents were expected to have come to its rescue and paid in terms of their undertakings as sureties but they also were unable to do so. 

The Bank was left with no option but to institute action proceedings under case number HC1252/11 against the company and the three respondents jointly and severally the one paying the others to be absolved.

On 8 September 2011, the Bank applied for and was granted summary judgment against the respondents and the company in the following terms:-

“It is ordered that:-

(1) Judgment with costs on the legal practitioners and client scale be and is hereby entered against the four defendants, jointly and severally, the one paying the others to be absolved for payment of US$794,860=54 together with interest thereon at the rate of 31.8% per annum from 1 May 2011 to date of payment.

(2) Stand 16463 Bulawayo Township of Stand 13567 Bulawayo Township held by fourth defendant under Deed of Transfer No.2103/2004 be and is hereby declared specially executable.”

This judgment is extant and has not been appealed against. 

The company and its three sureties have no complaints against that judgment and ought to expect it to be executed one day or another. With that realization, the company i.e. Birdland Trading (Pvt) Ltd, applied for and was granted an ex parte provisional order placing it under provisional judicial management.

It was only the company which applied for and was granted provisional judicial management. The three respondents were not party to those proceedings, and neither did they apply to be allowed to participate in the proceedings. They do not intend to apply for provisional judicial management. As natural persons, the first and second respondents would, of course, not.

However, paragraph 4 of the interim relief granted to the company provided that:-

“Pending the return date, all actions and the executions of all writs, summons and other processes against the company and its guarantors be and are hereby stayed and shall not be proceeded without the leave of this court.”…,.

In my view, the protection against all actions and proceedings and the execution of all writs, summons and other processes should have been limited to Birdland Trading Industries (Pvt) Ltd only as it was the one that sought to be placed under provisional judicial management. There was no basis for extending the protection to the sureties, who never sought to be placed on provisional judicial management, and were not parties to those proceedings. The extension of the protection to them was, in my view, a patent error.

The respondents sought to benefit from the protection which they did not seek and were not party to the proceedings wherein the company was granted that protection. They had no legal basis for wanting to be associated to that protection. Their claim to the protection is clearly mala fide.

Since the extension of the protection granted to these mala fide guarantors was a patent error, the Bank, in terms of order 49 Rule 449(1)(a) and (b) filed a court application under HC3519/11 seeking the variation or correction of the wording of paragraph 4 of the provisional judicial management order. The three respondents opposed the application without success.  The order of the court was in these terms:-

“Order

(1) Paragraph (4) of the provisional order issued by this court in HC2616/11, and dated 21 September 2011, is amended by the deletion of “and its guarantors.”

(2) The applicant is granted leave to execute on the judgment granted in its favour against the 1^st, 2^nd and 3^rd respondents which was issued against the respondents on case number 2226/11 and dated 8 September, 2011.

(3) The costs of this application shall be costs in the cause in HC1252/11 and shall be paid by the respondents on the legal practitioner and client scale.”

The respondents noted an appeal to the Supreme Court against the judgment of this court. 

The Bank sought leave to execute on the judgment pending the appeal but the respondents opposed the application.

At the hearing, both parties referred this court to the case of South Cape Corporation v Engineering Management Services 1977 (3) SA 534 (A)…, where the court held that:-

“The court to which application for leave to execute is made has a wide general discretion to grant or refuse leave and, if leave be granted, to determine the conditions upon which the right to execute shall be exercised…,. In exercising this discretion, the court should, in my view, determine what is just and equitable in all the circumstances, and, in doing so, would normally have regard, inter alia, to the following factors:-

(1) The potentiality of irreparable harm or prejudice being sustained by the appellant on appeal (respondent in the application) if leave to execute were to be granted.

(2) The potentiality of irreparable harm or prejudice being sustained by the respondent on appeal (applicant in the application) if leave to execute were to be refused.

(3) The prospects of success on appeal, including, more particularly, the question as to whether the appeal is frivolous or vexatious or has not been noted with the bona fide intention of seeking to reverse the judgment but for some indirect purpose, e.g. to gain time or to harass the other party; and

(4) Where there is the potentiality of irreparable harm or prejudice to both appellant and respondent the balance of hardship or convenience, as the case may be.”

As already observed in this judgment, the respondents executed suretyships and are liable in solidium as co-principal debtors with Birdland Trading (Pvt) Ltd. In simple terms, they undertook to pay the loan in full in the event of Birdland Trading (Pvt) Ltd being unable to pay. In the result, no harm or prejudice whatsoever would be sustained by the respondents if leave to execute would be granted.

It came out at the hearing of the matter that Birdland Trading (Pvt) Ltd has since applied for and was granted a provisional liquidation order. The company has made the already bad situation of the respondents worse. They can no longer try to cling to the provisional judicial management which the company must have abandoned as provisional judicial management cannot exist side by side with provisional liquidation, in my view. It is therefore clear that the company is unable to pay and its guarantors will have to do so.

It was submitted by the Bank that it had suffered, and continued to suffer, irreparable financial prejudice for as long as the respondents delayed the execution of the writ against them. It pointed out that part of its business was lending money to clients on specific repayment terms and the repayments were used to on-lend to other clients. Consequently, the potentiality of irreparable financial prejudice being sustained by the Bank, and which would continue to be sustained by the Bank if leave to execute were to be refused, is very obvious and beyond question.

In this matter, this court specifically finds that the respondents bound themselves as sureties and co-principal debtors with Birdland Trading (Pvt) Ltd for the repayment of the bank loan. They failed to pay the bank loan and the bank sought and was granted summary judgment against them in case number HC2226/11 and they have not sought to appeal against the judgment. They accept it as binding on them. They, therefore, know that the writ against them would be executed ultimately. There is no lawful basis for them to delay execution of the judgment against them in light of the fact that they are bound jointly and severally with Birdland Trading (Pvt) Ltd for the repayment of the bank loan.

The outcome of the appeal against the judgment of this court in case number HC2226/11 will have no bearing on their liability to satisfy to summary judgment against them….,.

The interim interdict that the applicants sought is set out in paragraph 4 of the draft order. The applicants wanted the transfer of the Pelhams Limited shares to the second respondent to be interdicted pending the hearing of the appeal in case no. SC 293/11.

The request for this interdict is predicated on the proposition that the Supreme Court would determine the issue of the transference of shares when it heard the appeal. 

That proposition is fallacious, as I shall demonstrate…,.

The first applicant delivered the Pelhams Limited shares to the first respondent in negotiable form as security for the loan he received. The inescapable inference to be drawn from this is that the first applicant freely consented to the shares being sold, or negotiated, in the event of his failure to repay the loan. He failed to repay the loan and the shares were sold by the first respondent. The applicants want the transfer interdicted. The sale…, had already been concluded. What remained was the transfer of the shares by the stockbroker to the purchaser.

The papers in this matter show that the loan agreement between the parties, voluntarily signed by the first applicant and the first respondent, was transparent. The parties were ad idem in respect of all the terms and conditions of the loan agreement. The loan agreement correctly reflects the contractual intentions of the parties. There is no allegation or suggestion of any form of coercion or underhand dealings. The loan agreement appears to be a normal business transaction between businessmen of substance. For the first applicant to now seek the assistance of the law to renege on a contract he openly and willingly entered into smacks of duplicity and deceit.  

It sounds crooked.

Be that as it may, I am aware of the divergence of decided cases on the issue of paratie executie. On the one hand there is the case of Findevco (Pty) Ltd v Faceformat (Pty) Ltd 2001 (1) SA 251, which is authority for the proposition that paratie executie is unlawful; while on the other hand, the cases of Osry v Hirsch, Loubser & Co Ltd 1922 CPD 531 and Changa v Standard Finance Ltd 1990 (2) ZLR 412, are authorities to the contrary.

In this regard, I wish to observe, in passing, that clarity on the lawfulness or otherwise of paratie executie is on the way. On 5 March 2014, the full Bench of the Constitutional Court is set to hear the matter between Glens Removal and Storage Zimbabwe (Pvt) Ltd v Patricia Mandala. In that case, the lawfulness and the constitutionality of paratie executie are issues that will fall for determination.

EXECUTABILITY OF IMMOVABLES

As I have already indicated, the court a quo granted an order entitling the first respondent to execute the order for payment in the sum of US$112,000= against the appellant's immovable properties, in the event that he failed to pay that sum.

Counsel for the appellant argues that an order for special execution against immovables is normally only granted for preferential or secured creditors, such as mortgage bond holders. His further submission in that regard is that execution must first be applied against the judgment debtor's movables before it can be effected against his immovables.

He relies for this proposition on Rule 326 of the High Court Rules.

In the present matter, it is common cause that there was no nulla bona return in respect of the assets of Coldrac (Pvt) Ltd t/a Tacoola Beverages and no attempted attachment of the appellant's movables. The order of the court a quo, so it is contended, entitles the first respondent, without any qualification, to execute against the appellant's immovables, thereby circumventing the requirements of Rule 326.

I am unable to agree with that contention for the simple reason that the order for execution granted by the court a quo only comes into operation in the event that the appellant fails to pay the judgment debt. The order is clearly conditional and contingent upon such failure. Therefore, the appellant is perfectly at large to tender his movables in satisfaction of the judgment before any process for the execution of his immovables is initiated.

In any event, the interpretation of Rule 326 propounded by counsel for the appellant is clearly not supported by the wording of that Rule. It deals with the attachment of immovable property in the following terms:

“It shall not be necessary to obtain an order of court declaring a judgment debtor's immovable property executable or to sue out a separate writ of execution in order to attach and take in execution the immovable property of any judgment debtor, but, where so desired, the judgment creditor may sue out one writ of execution for the attachment of both movable and immovable property:

Provided that the Sheriff or his deputy shall not proceed to attach in execution the immovable property of the judgment debtor unless, and until, he has, by due inquiry and diligent search, satisfied himself that there is no or insufficient movable property belonging to the judgment debtor to satisfy the amount due under the writ.”

First and foremost, the Rule patently does not, as is contended for the appellant, differentiate as between secured and unsecured creditors. It applies to both without distinction. Secondly, the plain meaning of this Rule is that the judgment creditor has the option to sue out a separate writ of execution for the attachment of immovable property or a single writ for the attachment of both movable and immovable property. In either event, before proceeding to attach immovable property, the Sheriff, or his deputy, is enjoined to satisfy himself that the judgment creditor does not own any, or has insufficient, movable property to satisfy the judgment debt.

IS PARATE EXECUTIE COMPLIANT WITH THE PROVISIONS OF THE FORMER CONSTITUTION, NAMELY, SECTION 18(9), AS READ WITH SECTION 16(7)?

The issue of whether or not parate executie complied with the former Constitution is not, as counsel for the defendant, correctly submitted, a new issue. The issue was raised in the case of Nyamukusa v Agricultural Finance Corporation SC174-94. The facts of Nyamukusa v Agricultural Finance Corporation SC174-94 are that the appellant's farm had been seized and sold because the appellant had failed to repay a loan. The respondent in the matter acted pursuant to a contractual clause, which read as follows:

“Should the borrower commit or be in breach of any of the terms and conditions of this agreement the Corporation specifically stipulates, as provided in section 40 of the Act, that it shall have the right in terms of that section of the Act, after demand by registered letter addressed to the borrower at his last known address or to the address given by him in his application for this loan, and without recourse to a court of law, to enter upon the property hypothecated and to take possession thereof and sell and dispose of the same in whole or in part as the Corporation may determine always in terms of and subject to the provisions of the Act.”

The appellant in that matter challenged the above clause on the basis that it offended the provisions of section 18(9) of the former Constitution. The court held that the parate executie clause in Nyamukusa v Agricultural Finance Corporation SC174-94 was lawful and permissible in terms of section 18(9), as read with section 16(7), of the former Constitution.

The plaintiff in casu, as in Nyamukusa v Agricultural Finance Corporation SC174-94, seeks to rely on the “access to the courts” provision set out in section 18(9) of the former Constitution, which provided:

“18 Provisions to secure protection of law

(9) Subject to the provisions of this Constitution, every person is entitled to be afforded a fair hearing within a reasonable time by an independent and impartial court or other adjudicating authority established by law in the determination of the existence or extent of his civil rights or obligations.”

The import of the words “subject to” is to render this access to the courts provision subservient to other provisions of the former Constitution.

In S v Pillay 1995 (2) ZLR 313 (H)…, Chatikobo J interpreted the meaning of the phrase “subject to” in the following manner:

“The phrase 'subject to' has been interpreted to mean 'except as curtailed by'.”

See also Commissioner of Police v Wilson 1981 ZLR 451.

It follows, therefore, as counsel for the defendant correctly submitted, that the “access to the courts” provision set out in section 18(9) of the former Constitution is applicable except as curtailed by other provisions of that Constitution. In the former Constitution, section 16(7) curtailed section 18(9) in the following terms:

“16 Protection from deprivation of property

(7) Nothing contained in or done under the authority of any law shall be held to be in contravention of subsection (1) to the extent that the law in question makes provision for the acquisition of any property or any interest or right therein in any of the following cases —

(a) - (c)…,.

(d) As an incident of a contract, including a lease or mortgage, which has been agreed between the parties to the contract, or of a title deed to land fixed at the time of the grant or transfer thereof or at any other time with the consent of the owner of the land;…,.

except so far as that provision or, as the case may be, the thing done under the authority thereof is shown not to be reasonably justifiable in a democratic society.”

Thus, quite clearly, parate executie was permissible in terms of section 16(7) of the former Constitution.

It is apparent, therefore, that the “access to the courts” provision enshrined in section 18(9) of the former Constitution applies, except as curtailed by section 16(7) of the former Constitution which sanctions parate executie.

In the result, I am satisfied that the “access to the courts” provision, enshrined in section 18(9) of the former Constitution, applies, except as curtailed by section 16(7) of the former Constitution which sanctions parate executie. The former Constitution did not outlaw parate executie per se. It was lawful to the extent allowed by section 16(7) of the former Constitution, which exception covered the facts of this case….,.

SHOULD THIS COURT OUTLAW PARATE EXECUTIE ON THE GROUNDS OF PUBLIC POLICY?

Finally, counsel for the plaintiff submitted that parate executie should be abolished as part of our common law on the grounds that it offends public policy.

I am not persuaded by this argument for the following reasons.

Counsel for the plaintiff submitted that this court should reconsider the cases of Aitken v Miller 1950 SR 227; 1951 (1) SA 153 (SR) and Changa v Standard Finance Ltd 1990 (2) ZLR 412 (SC), which cases are to the effect that parate executie is both lawful and constitutional.

Counsel for the plaintiff urged the court to follow the approach adopted by South African courts in the cases of Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC) and Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD), in which cases parate executie was held to be both unlawful and unconstitutional.

In Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC), the Constitutional Court of South Africa had this to say…,:

“The judicial process, guaranteed by s 34, also protects the attachment and sale of a debtor's property, even where there is no dispute concerning the underlying obligation of the debtor on the strength of which the attachment and execution takes place. That protection extends to the circumstances in which property may be seized and sold in execution and includes the control that is exercised over sales in execution.”

Thus, Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC) is authority for the proposition that parate executie is not only unlawful but unconstitutional, in that it violated the access to courts right guaranteed by section 34 of the South African Constitution.

Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC) was followed in Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD), where froneman j had this to say…,:

“If legislation which allows the attachment and sale of movable goods given as security without recourse to courts is unconstitutional, even where there is no dispute about the debtor's indebtedness, why should the common law allow it? I can see no valid reason why it should. Section 39(2) of the Constitution applies to the interpretation of both legislation and the common law. The leading case for upholding the validity of parate executie clauses in respect of movables is Osry v Hirsch, Loubser & Co Ltd 1922 CPD 531. In that case, the rule against self-help was considered un-important (at 541, but compare Iscor Housing Utility Co and Anor v Chief Registrar of Deeds and Anor 1971 (1) SA 613 (T) at 616H). Lesapo's case supra tells us that the rule is of fundamental importance to our Constitution. I consider myself bound by the ratio of Lesapo's case supra in the present matter.”

The above South African cases were interpreting section 34 of the South African Constitution, which provides as follows:

“Access to courts

34. Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.”

A comparison of section 34 of the South African Constitution and section 18(9), as read with section 16(7) of the former Constitution, reveals that the two provisions are very different. The South African provision is much wider than the provisions of the former Constitution. Thus, in terms of the former Constitution, parate executie was expressly permitted.

Accordingly, the above cited South African cases are of no assistance when interpreting section 18(9), as read with section 16(7) of the former Constitution.

I accept, however, that section 34 of the South African Constitution is very similar to section 69(2) and (3) of the Constitution, although not couched in exactly the same terms. They are of the same purport. I also accept that the cases of Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC) and Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD) were interpreting section 34 of the South African Constitution and are authorities for the proposition that parate executie is unconstitutional in terms of section 34 of the South African Constitution.

However, these two cases have not been followed in a number of other South African cases. In some instances it was held that they were wrongly decided.

In Bock v Duburoro Investments (Pty) Ltd 2004 (2) SA 242 (SCA) HARMS JA was led to state the following in relation to the constitutionality of parate executie clauses:

“…,. I find it difficult to extend the prescription of these statutory provisions by the Constitutional Court to parate executie of movables which are lawfully in the possession of the creditor….,. Since the debtor may seek the protection of the court if, on any just ground, he can show that, in carrying out the agreement and effecting a sale, the creditor acted in a manner which prejudiced him in his rights, the creditor cannot be said to be the judge in his own cause.”

In that case, the court came to the conclusion that the judgment in Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD), finding that the law relating to parate executie of movables is unconstitutional, was wrong.

Similarly, in Juglal v Shoprite Checkers (Pty) Ltd 2004 (5) SA 248 (SCA) the Supreme Court of Appeal upheld the validity of a notarial covering bond which entitled the creditor, in the event of default on the part of the debtor, to take possession of the debtor's business and assets as security for the debt, to sell the assets, and to apply the proceeds in settlement of the debt as parate executie. The court a quo had granted an order perfecting its security. The judge had expressly declined to follow the Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD) case. HEHER J commented…, that the refusal was justified by the decision in Bock v Duburoro Investments (Pty) Ltd 2004 (2) SA 242 (SCA). He also declared…, that the common law in relation to parate executie does not limit the right of access to the courts, “nor does it fall short of the spirit, purpose, or the object of the Bill of Rights.”

Again, in SA Bank of Athens Ltd v May van Zyl [2006] 1 All SA 118 (SCA) the learned judge held…, that:

“I am, however, unpersuaded that parate execution is per se unconstitutional or offensive to public policy.”

Thus, in South Africa, the cases of Chief Lesapo v North West Agricultural Bank and Anor 2000 (1) SA 409 (CC) and Findevco (Pty) Ltd v Faceformat SA (Pty) Ltd 2001 (1) SA 251 (NPD) have not been followed in a number of cases.

Section 69 of the Constitution provides as follows:

“69 Right to a fair hearing

(1) Every person accused of an offence has the right to a fair and public trial within a reasonable time before an independent and impartial court.

(2) In the determination of civil rights and obligations, every person has a right to a fair, speedy and public hearing within a reasonable time before an independent and impartial court, tribunal or other forum established by law.

(3) Every person has the right of access to the courts, or to some other tribunal or forum established by law for the resolution of any dispute.

(4) Every person has a right, at their own expense, to choose and be represented by a legal practitioner before any court, tribunal or forum.”

As I have already stated, this provision, although worded differently, bears the same import as section 34 of the South African Constitution. I see nothing in the wording of both these provisions which explicitly, or by necessary implication, renders parate executie unconstitutional.

A party that is aggrieved by the manner in which parate executie has been carried out by the creditor has the right to approach the courts to complain about the manner in which he/she has been prejudiced by the application of parate executie. The debtor's right of access to the courts remains intact and he is free to exercise it.

This approach was highlighted in the case of Osry v Hirsch, Loubser & Co Ltd 1922 CPD 531…, where it is stated:

“It is, however, open to the debtor to seek the protection of the court if, upon any just ground, he can show that, in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him in his rights.”

Similarly, in the case Changa v Standard Finance Ltd 1990 (2) ZLR 412 (SC), the court held:

“An agreement for the delivery of movables by a debtor to a creditor and their sale by the latter by means of parate execution is valid and binding subject to the qualification that the creditor is not entitled to act in a manner so as to prejudice the debtor in his rights.”

In Nyamukusa v Agricultural Finance Corporation SC174-94, this court adopted the same approach and concluded that parate executie was both constitutional and lawful.

I respectfully associate myself with the authorities that have held that parate executie is not only lawful but constitutional for the simple reason that the debtor's right of access to the courts is not taken away by parate executie. The debtor has unlimited access to the courts to complain about the manner in which the creditor has performed the contract. To allow the debtor to escape liability freely and openly undertaken on the basis of parate executie smacks of duplicity and strikes at the heart of the time honoured principle of the sanctity of the freedom to contract….,.

In the result, it is declared that parate executie is part of our common law and that it does not contravene section 69(3) of the Constitution as being contrary to public policy in the context of the right of access to the courts.

THE APPELLANT'S POSITION AS SURETY AND CO-PRINCIPLAL DEBTOR

The appellant bound himself as surety and co-principal debtor for the due fulfilment of all obligations by his son. He has argued that the respondent had an obligation to advise him of the unsatisfactory performance of his son before instituting proceedings.

A related issue raised in the grounds of appeal is whether the respondent had an obligation to sue Fortune first before instituting legal action against the appellant.

The position is now settled that the liability of a surety and co-principal debtor is joint and several with that of the principal debtor and is no more, nor less than, nor different from, that of the latter - Neon and Cold Cathod Illuminations (Pty) Limited v Ephron 1978 (1) SA 463,473 B-C; Union Government v Van der Merwe 1921 7 PD 318,322.

I further agree with the submission by the respondent that there is no general legal obligation on a creditor to advise the surety and co-principal debtor of the breach by the principal debtor, because, in law, they become one and the same once the principal debtor is put in mora. There is no requirement for a separate demand and the failure to make demand on a co-principal debtor may only have an effect on the question of costs in the event that the co-principal debtor makes payment on receipt of summons.

In the result, I am in agreement that there is no requirement in law that a creditor should first proceed against the principal debtor before doing so against the surety and a co-principal debtor.

Additionally, the appellant specifically renounced the benefits of excussion and division in the Surety Agreement.

On 14 March 2016, we heard the appellant's appeal against the decision of the High Court. After hearing the parties we dismissed the appeal with costs on a legal practitioner and client scale. We indicated that detailed reasons for judgment would follow. 

These are the reasons for our decision.

The appellant, Stand Five Four Nought (Pvt) Ltd is a company registered in terms of the laws of Zimbabwe. It owns the property known as Stand 540 Salisbury Township. It entered into a suretyship agreement in which it bound itself as a co-principal debtor and surety in the sum of $750,000= to the respondent, Salzman ET CIE S.A., a company registered in terms of the laws of the Republic of Panama, in respect of a loan of US$1,245,000= granted by Salzman ET CIE S.A. to Myramar Farming (Pvt) Ltd.  Myramar Farming (Pvt) Ltd failed to pay the debt and has since been placed under judicial management.  The appellant was, by letter of demand dated 25 February 2014, and summons filed on 8 September 2014, called upon to pay the debt.

To avoid its liability, it secretly, by ex parte application, sought and obtained a provisional judicial management order. On the return day, the court a quo dismissed the provisional judicial management order.

The appellant appealed to this Court against the dismissal of the provisional judicial management order.

The appeal is premised on the following grounds of appeal;

1. The learned judge a quo erred at law in failing to appreciate that:-

1.1 The deponent to the opposing affidavit filed by the intervener, Salzman ET CIE SA was not properly authorised by the company to represent it in proceedings against the Appellant. The Intervener was improperly before the court.

1.2 The shortened form of the provisional judicial management order published in the Government Gazette and Herald newspaper created a dies induciae for interested parties to file opposing papers and consequently that the intervener was barred for failure to file its Notice of Opposition before the 30^th of September, 2014.

1.3 The appellant has an intention to discharge the debt owed to Salzman ET CIE SA in a manner that will ensure the company does not plunge into liquidation. Consequently, it is just and equitable to place the company under final judicial management.

The issues which fall for determination in this appeal are;

1. Whether the deponent to the opposing affidavit by the respondent had proper authority to represent the respondent in the proceedings.

2. Whether the respondent was barred for failure to file its notice of opposition by 30 September 2014.

The circumstances giving rise to this application are accurately set out in the respondent's heads of argument. They are that there are essentially three (3) main actors involved in the matter, namely, Salzman ET CIE SA, the creditor, a company incorporated in Panama, Myramar Farming (Pvt) Ltd, incorporated in Zimbabwe, which is the principal debtor, and the applicant, also incorporated in Zimbabwe, and is the surety and co-principal debtor.

The principal debtor approached the creditor for a loan o $1,245,000= which the creditor was only prepared to advance upon security in the form of a surety mortgage bond on immovable property being furnished. The applicant, being a sister company of the principal debtor, with a common shareholder, was prepared to grant that security. In 2010, the applicant executed surety mortgage bond number 2367/2010 in favour of the creditor binding itself as surety and co-principal debtor in the sum of $750,000= for the due performance of the principal debtor's obligations under the loan agreement. The applicant mortgaged its immovable property, being Stand 540 Salisbury Township measuring 595 square metres. It undertook that in the event of the principal debtor's failure to pay the debt, it would itself pay any amount due to the creditor in terms of the loan agreement.

Content with that security, the creditor then advanced the sum of $1,245,000= to the principal debtor.

When the principal debtor defaulted, the creditor instituted proceedings in this court against the principal debtor which came to naught when the principal debtor was placed under judicial management. The creditor was forced to turn to the surety, the present applicant, for redress, directing a letter of demand on 25 February 2014. When no response was forthcoming, the creditor issued summons against the applicant on 8 September 2014, in HC7916/14, seeking payment of the sum of $750,000= and an order declaring the mortgaged property specially executable.

Meanwhile, the applicant moved quickly, and without notice to the creditor, to obtain a provisional judicial management order on 10 September 2014 bringing the creditor's suit to a crashing halt. It is the confirmation of that provisional order which is strenuously opposed by the creditor on the grounds that while the basis for seeking to place the applicant under judicial management is that the mortgaged property is the applicant's sole property, such cannot found a basis for that order because the applicant knew, when it mortgaged the property that it was its sole asset but proceeded all the same. To grant such relief would therefore be contrary to all notions of security for a debt and the principles of freedom and sanctity of contract.

The effect of the appellant contracting as the borrower and surety of his own debt

Counsel for the appellant submitted that the agreement was senseless and invalid because the appellant contracted as the borrower and surety of his own debt in his personal capacity.

Counsel for the respondent submitted that the appellant could not be a surety for his own debt but argued that this does not invalidate the loan agreement.

A suretyship is an accessory agreement between the surety and the creditor of the principal debtor in terms of which the surety makes himself liable to the creditor for the proper discharge by the debtor of his duties to the creditor. In the case of Orkin Lingerie Co. (Pty) Ltd v Melamed & Hurwitz 1963 (1) SA 324 (W)…, TROLLIP J, commenting on the definition of a suretyship agreement said:-

“Various definitions of suretyship have from time to time been given. They are collected in Wessels on Contract 2^nd ed, paras, 3774, 3785 to 3793, and Caney on Suretyship, pp 11, 17 and 18. I think that, having regard to them, a contract of suretyship in relation to a money debt can be said to be one whereby a person (the surety) agrees with the creditor that, as accessory to the debtor's primary liability, he too will be liable for that debt.

The essence of suretyship is the existence of the principal obligation of the debtor to which that of the surety becomes accessory.”

This means a suretyship agreement can only be entered into if there is an agreement between the creditor and principal debtor. It is therefore an additional agreement to the one between the creditor and principal debtor. They are two separate agreements entered into between the creditor and principal debtor and between the creditor and the surety.

A surety, therefore, agrees to make himself liable to the creditor for the principal debtor's debt. He cannot stand surety for a debt in which he is the principal debtor. It does not make sense that a borrower can be both the borrower and the surety. One cannot say if I fail to pay you as the principal debtor I will pay you as a surety. Failure to pay as the principal debtor will result in failure to pay as surety because the resources of the same person will be used to satisfy the debt. I am therefore satisfied that a borrower cannot secure his own debt as a surety. It is not legally possible for a borrower to stand as the surety of his own debt.

See the cases of Standard Bank of SA Ltd v Lombard and Anor 1977 (2) SA 808 (W)…, and Litecor Voltex (Natal) (Pty) v Jason 1988 (2) SA 78 D.

In the case of Standard Bank of SA Ltd v Lombard and Anor 1977 (2) SA 808 (W) doubt was raised on the propriety of a partner standing surety for a partnership's debt. In my view, that situation can be arguable. It is different from that of a debtor being the surety of his own debt.

In the case of Litecor Voltex (Natal) (Pty) v Jason 1988 (2) SA 78 D, DIDCOT J…, commented on a debtor standing surety for his own debt as follows -

“To guarantee the payment of your own debt is a futile exercise, to say the least, neither underwriting nor reinforcing the obligation to pay it rests on you in any event. Failing the basic test for a suretyship, it does not amount to such. Nor does it accomplish anything else. It is not worth, in short, the paper on which it is written.”

Counsel for the appellant argued that the fact that the appellant was both the borrower and surety renders the loan agreement and surety agreement nullities.

Counsel for the respondent submitted that the suretyship agreement is a nullity but the loan agreement is valid.

I agree.

As already said, a suretyship agreement is entered into to secure the debt of the principal debtor in an agreement already entered into. In this case the appellant borrowed US$40,000= from the respondent. He received the money and used it.

The appellant cannot benefit from having promised to be the surety of his own indebtedness to the respondent. He cannot be allowed to benefit from his wrongdoing by arguing that they entered into a single agreement for both the loan and the suretyship agreements.

The fact that the Suretyship Agreement is a nullity does not affect the loan agreement. The loan agreement was perfected by the payment of the money into the appellant's Bank account. The Suretyship Agreement is a subsequent agreement.

The fact that the two agreements were rolled into one document does not affect their separate existence.

I accept that in the heat of drafting pleadings, the third defendant's counsel made the averments that the plaintiff had stood as surety and co-principal debtor for the amounts that are owed by the second defendant when there is no suretyship agreement to that effect and when the third defendant did not deal with the plaintiff at all prior to the registration.

However, that is of academic interest only given the legal effect of a mortgage bond which the plaintiff acceded to with its eyes, or is it those of its Directors, very wide open.

This is because a mortgage bond is, in essence, an acknowledgment of debt backed up by the security of immovable property. Stricto sensu, in conveyancing, a mortgage bond is executed by either the owner of the immovable property or a legal practitioner (Conveyancer) authorized by the owner, in the presence of the Registrar of Deeds for it to be valid. Where the owner has given the conveyancer a power of attorney, which is valid, to appear on his behalf and register the bond, a bond so registered is valid and creates a creditor and debtor relationship between the mortgagee and mortgagor respectively.

Counsel for the plaintiff submitted that there exists four grounds upon which the mortgage bond should be nullified, namely –

(i) That Senator Aguy Clement Georgias' signature was forged;

(ii) The power of attorney for its registration was irregular by reason that it fell foul of section 78(a) of the Deeds Registries Act [Chapter 20:05] to the extent that, according to the evidence of Russell Karimazondo, it was signed in the absence of witnesses;

(iii) Although purporting to be a surety, the bond was not predicated on a tripartite agreement between the plaintiff, the second, and third defendants; and finally,

(iv) That it does not accord with the terms of the principal agreement between the plaintiff and the second defendant.

I have canvassed the first ground, relating to the signature allegedly forged, and found that the signature was not forged. The other three (3) grounds sought to be relied upon were not identified as trial issues. I shall, however, address them.

Section 78(a) of the Deeds Registries Act [Chapter 20:05] provides:

“Powers of attorney to pass deeds or to do any act in connection with a deeds registry shall, if executed within Zimbabwe, be accepted if witnessed by two competent witnesses or by a justice of the peace or commissioner of oaths and the signature of each such witness, the justice of the peace or commissioner of oaths, as the case may be, has been affixed thereto in the presence of the person executing it.”

Counsel for the plaintiff submitted that the power of attorney was invalid by reason that, according to Russell Karimazondo, it was signed by Senator Aguy Clement Georgias alone in the absence of witnesses. He urged me to nullify the mortage bond on the basis that the power of attorney signed in breach of section 78(a) of the Deeds Registries Act [Chapter 20:05] could not found a valid bond.

I do not agree that the power of attorney was signed in the absence of two witnesses.

For a start, two witnesses appended their signatures on that document as a seal that they witnessed the signing by Senator Aguy Clement Georgias, and, on the face of it, there was compliance with the provisions of section 78(a) of the Deeds Registries Act [Chapter 20:05].

The problem with counsel for the plaintiff's argument is that it relies on the evidence of Russell Karimazondo - and his alone. I have already rejected that evidence as being demonstrably unreliable. It therefore cannot form the basis for impugning an otherwise valid power of attorney.

Counsel for the plaintiff submitted that the power of attorney should be nullified on the further basis;

(i) Firstly, that there was no tripartite agreement involving the plaintiff, the second and third defendants. A surety bond should have an underlying suretyship agreement. 

(ii) Secondly, the bond itself as registered, was at variance with the terms of the principal agreement between the plaintiff and the second defendant.

Counsel for the third defendant objected strongly to the reliance on that argument in light of the fact that it was not pleaded thereby depriving the defendants an opportunity to respond to it and appears to have been highlighted in closing submissions.

I must say that those issues were canvassed during the cross examination of witnesses but were certainly not pleaded. More importantly, they were not made issues for trial at the pre-trial conference of the parties. The same applies to the submission that by entering into an agreement post the default to extend the time to pay, the second and third defendants released the surety. 

Can the plaintiff be allowed to raise a new cause of action which is not contained in the pleadings? I think not. I have said that a party is bound by its pleadings.

Even if I am wrong in that conclusion, the plaintiff's cause cannot be rescued because having denied the mortgage bond, it cannot, at the same time rely on it on the merits. The plaintiff cannot approbate and reprobate at the same time. That principle is to the effect that a person cannot on the one hand state that a transaction is invalid and then turn round on the other to state that it is valid for purposes of securing some other advantage:

Archipelago (Pvt) Ltd v Local Authorities Pension Fund & Anor SC30-13; Fulner v Freeman 1985 (3) SA 555 (C).

Allied to that is the question of the disparity between the terms of the principal agreement and the mortgage bond. This was not the cause of action relied upon by the plaintiff in the suit. Even if it had been relied upon it would not affect the liability of the plaintiff to the third defendant.

This is because suretyship is a separate agreement between the surety and the creditor.

Counsel for the plaintiff referred to a part in Caney's, The Law of Suretyship, 6^th ed, Juta, page 30, where it is stated that there are three parties involved in a suretyship to the extent that the suretyship agreement is an accessory to the principal obligation and suggested that there must, at all times, be a principal suretyship agreement.

What counsel overlooked was the extrapolation by the authors at page 31:

“Although there are three parties involved, there is not necessarily a tripartite agreement or contract; indeed, in practice there seldom is. There is the transaction, as a result of which the principal debtor is bound to the creditor, and there is a contract between creditor and surety by which each is bound to the other. Thus, the principal debtor is bound to the creditor, and there is a contract between creditor and surety by which each is bound to the other. Thus, the principal debtor is not necessarily a party to the contract between the surety and the creditor, but, nonetheless, there comes into existence the obligation of the principal debtor to reimburse the surety what he pays the creditor…,. The surety's obligation arises from the making of the contract of suretyship, from then he becomes bound to the creditor and from then he becomes a conditional creditor to the principal debtor in relation to his right of recourse against the latter.”…,.

What is clear, therefore, is that the suretyship agreement, although accessory, is a stand alone one binding the surety to the creditor.

In the present case, what we have is a suretyship created by a mortgage bond which the plaintiff passed, through the medium of its attorney. Counsel for the first defendant made the vital point that the mortgage bond itself, without recourse to any other document, is evidence of liability that the plaintiff undertook. After all it is an acknowledgment of indebtedness in which the mortgagor agreed to:

“…, bind itself as surety and co-principal debtor in the sum of US$1,000,000= (one million United States Dollars) ('the capital sum') for the due payment of the said indebtedness of the Principal Debtor under the facilities and as security to hypothecate the immovable property of the mortgagor hereinafter described.”

In my view, that was a separate suretyship agreement binding the plaintiff.

In that regard, all the other issues of how and why it came about and the contents of the agreement between the second and third defendants pale. The liability of the plaintiff arises from the mortgage bond that it passed with its eyes very wide open which I find as valid and binding.

It has been argued, on behalf of the plaintiff, that the extension of time to pay given to the second defendant by the agreement signed after default released the plaintiff from liability in terms of the suretyship agreement.

I have already said that the plaintiff is not entitled to make that argument when it denied the existence of the suretyship and/or validity of the bond. This would amount to approbating and reprobating at the same time. Even if it had been properly made it would fail.

My attention has been drawn to the remarks of the learned authors, CF FORSYTH & JT PRETORIUS in Caney's, The Law of Suretyship, 6^th ed, Juta…., which settles that issue. They remarked:

“Although the old authorities are not entirety harmonious on the question of the effect of an extension of time, the law was laid down by the Appellate Division in Estate Liebenberg v Standard Bank of South Africa Ltd (1927 AD 502 at 520 ff). The central rule is that where the creditor gives the debtor more time in which to pay before the debt falls due, and time is of the essence, that amounts to a material alteration and releases the surety. Unlike in English Law, should the grant be made after the debtor is in mora, the surety is not released. This is because the surety can avoid any prejudice in such circumstances by paying the debt when it falls due and exercising his right of recourse against the debtor.”…,.

In the present case, I have found, as proved, that the plaintiff gave Peter Joseph Moor of Wintertons a valid power of attorney to appear before the Registrar of Deeds and pass the mortgage bond in favour of the third defendant. All the conveyancing formalities were complied with. To that extent, therefore, the plaintiff is bound as surety and co-principal debtor. That, in any event, is the whole basis for requiring security of that nature. So that in the event of a default, the creditor will fall back on the security. It can only do so if the mortgagor is so bound….,.

In the result, it is ordered that;

The second defendant, who is a Director of the first defendant, signed a Deed of Suretyship on 7 March 1999 in terms of which he bound himself a surety and co-principal debtor singuli et in solidum for the due and faithful compliance and performance by the first defendant of its obligations in terms of the lease agreement.

The applicant argues that the purported agreement amounts to a pactum commissorium and is unenforceable at law. It relies on the case of Oceaner (Pvt) Ltd & Another v Upper Class Enterprises (Pvt) Ltd and Anor 2001 (2) ZLR 130 (H) in which immovable property had been pledged in default of payment. Transfer had been demanded on default of payment. The court held the arrangement to be illegal particularly as it sought to oust the jurisdiction of the court by resorting to self-help….,.

The first respondent disputes that the agreement amounts to a pactum commissorium on the basis that the elements of a pactum commissorium are entirely absent as no property was pledged as security for the debt.

There was no pledging of any property in this case and I would agree with the first respondent that this was not a case of a pactum commissorium which is defined in Oceaner (Pvt) Ltd & Another v Upper Class Enterprises (Pvt) Ltd and Anor 2001 (2) ZLR 130 (H)…, citing Van Rensburg v Weiblen 1916 TPD as;

“A pact by which the parties agree that if the debtor does not, within a certain time, release the thing given in the pledge by paying the entire debt, after the lapse of the time fixed, the full property in the thing will irrevocably pass to the creditor in payment of the thing.”

The Notarial General Covering Bond was produced as an exhibit. It contains the usual covenants against the alienation of the encumbered assets….,.

It is important to highlight that even if it had been shown that Foldaway Investments (Pvt) Ltd and Zim Halaal Meats are two distinct entities…, that would not have affected the Notarial General Covering Bond that was registered in favour of the plaintiff.

Even if it was Foldaway Investments (Pvt) Ltd that was trading with the plaintiff, Zim Halaal Meats, as a separate entity, could provide security on behalf of Foldaway Investments (Pvt) Ltd if it so wished and have its assets mortgaged in favour of the plaintiff.

Security can be provided by anyone as long as they consent to doing so….,.

Disposal of property which is mortgaged clearly breaches the terms of the Notarial General Covering Bond which prohibit the disposal of the property pending the discharge of the plaintiff's claim.

NDOU J had this to say in Priscilla Meda v Homelink (Pvt) Ltd HB195-11….,:-

“In my humble view, execution of mortgaged property is different from the property being referred to in Order 40 Rule 348A.

The difference is that we are dealing here with foreclosure proceedings.

In foreclosure proceedings, the security which the mortgagor pledged is the one that is sold after institution of judicial proceedings for the amount of the debt whereafter a writ of execution against the property is issued. In other words, if the mortgagor does not pay the capital when due, or if he commits any breach of the conditions of the contract entitling the mortgagee to foreclose then the latter is entitled to have the secured property sold and obtain the amount of his debt from the proceeds of the sale - Benson v Hirschlorin 1936 NPD 277.

A mortgagor cannot claim a stay of execution in terms of Rule 348A supra.

It has to be noted that, as a general rule, a creditor who has obtained judgment is entitled to enforce such judgment by levying execution and the court has no jurisdiction to restrain the judgment creditor from enforcing such legal right - Sabena Belgian World Airlines v Vas Elst 1981 (1) SA 1235 (T) and South Cape Corp (Pty) Ltd v Engineering Management Services (Pty) Ltd 1977 (3) SA 534 (A) at 544. Rule 348A should be viewed as an exception to this general rule.

In casu, in the summons and the summary judgment application, the 1^st respondent specifically sought an order allowing it to sell the Northend house. The applicant was served with all those processes and she was legally represented. She could have defended the matter even on that aspect alone. She did not.

On 3^rd March 2011, this court acceded to the prayer sought by the 1^st respondent and ordered that the Northend house be sold. Having made an order directing the sale of the house, applicant cannot now bring an application in terms of Rule 348A(5a) stopping the sale on the basis she has made a reasonable offer. She is thus precluded from doing so as allowing the application would have the effect of rescinding, through the back door, the order that has been made by a competent court. By declaring the house 'specially executable' the court has given the 1^st respondent the right to sell the house in execution to recover what is owed to it. The mortgagor's first and foremost duty is to pay the debt secured and the mortgagee's corresponding right is to 'call up' or 'foreclose' the bond. The significance of mortgage bonds and all other forms of hypothecation lies in the fact that they provide the creditor with a 'real security' for the payment of his claim; for if the debtor is unable to raise the necessary funds to pay the debt which is secured, the creditor is entitled to demand that the property, that being the thing which is subject matter of his security, be sold and that the proceeds of such sale are used for the satisfaction of his claim - The Law of Property (3^rd Ed) SILBERBERG and SCHOEMAN at 419 and 429.

The rights of the judgment creditor will enjoy relative primacy. If this were not so, it would bring about a situation in which debtors could borrow money to purchase immovable property and defeat their creditors' legitimate claims to repayment by using Rule 348A(5a).

To put residential immovable property, which is a person's home, into that class of assets beyond the reach of execution would be to sterilize the immovable property from commerce thereby rendering it useless as a means to raise credit.

Preventing debtors from using their homes as security to raise credit will create a class of homeless persons - those who are unable to afford the full purchase price of their homes in a cash sale but could afford to repay a loan for the purchase price. It would lock up capital and prevent the home owning entrepreneur from using his home as security to finance business initiative. Members of the poor communities will not be able to obtain finance from Banks who will not advance money to purchase immovable property if the immovable property cannot be used as security for repayment - Nedbank Ltd v Fraser & Anor case number 2011/00418 (Republic of South Africa - South Gauteng High Court).”…,.

The hypothecation of immovable property should not be a routine exercise. The applicant ought to have borne this in mind before he mortgaged the property.

If there is anything to which all the parties in this matter are generally in agreement about, it is that the first applicant is a businessman of repute, of commendable experience, who has been conducting business in this country and South Africa for a considerable period and he is good at what he does.

The second and third applicants are his companies which he registered in South Africa while the fourth applicant is yet another company of his which he controls and is registered in Zimbabwe.

In the normal conduct of his business, the first applicant acquired certain shares in the third respondent, registered at the Zimbabwe Stock Exchange, which he held in the names of his companies which he has joined as applicants in this matter. The registered shares total 358,207,502 made up of 100,000,000 held by the second applicant under share certificate number 9945; 8,666,586 held by the third applicant under share certificate number 12306; and 174,540,961 held by the fourth applicant under eight (8) different share certificates.

Finding himself in need of money the first applicant entered into a loan agreement with the first respondent who had the money and was willing to give it out on certain terms and conditions. This was in February 2011 and the amount involved was $3,000,000= which the parties agreed would be repaid by 20 February 2011. As security for the loan, the first applicant was to surrender, as pledge, the Pelhams shares held by him through his companies. The delivery was in the form of the share certificates relating to those shares.

The first respondent must have been a shrewd business man as well who went to great lengths in ensuring that he held proper and negotiable security in the usual and almost predictable event that the debtor defaulted in payment. In addition to getting the first applicant to sign two (2) agreements on 9 and 10 February 2011 recording the loan agreement and the terms, including clauses 3 to 5 of the agreement signed on 9 February 2011 and clauses 3 and 5.1 of the one signed the following day, on 10 February 2011…., the first respondent caused the first applicant to sign further Securities' Transfer Forms transferring the pledged shares to him.

Clauses 3 to 5 of the 9 February 2011 agreement read:

“3. The parties agree that such terms and conditions shall include, inter alia, the following:

3.1 The repayment of the debt within a period of 10 days from the date of lending or within such time the lender, upon receiving satisfactory explanation from Premier Bank, may prescribe. It is recorded that the maximum period within which the debt shall be paid is 30 days.

3.2 The borrower has agreed to procure the following securities;

3.2.1…,.

3.2.2…,.

3.2.3…,.

3.2.4 Cause the surrender of Pelhams Limited shares totalling to 380,000,000 held by the entities mentioned in 3.2.1, 3.2 (2) and 3.2.3 to the lender in negotiable form.

3.2.5…,.

4. The borrower acknowledges and accepts that the lender has disbursed the aforesaid amount on understanding and condition that the above named security will be provided.

5. The borrower warrants that he is the beneficial owner of the security mentioned and that no other person has an interest or claim to any of the security mentioned.”

The second agreement, signed on 10 February 2011, contains Clause 3 thereof which reads;

“Acknowledgment

The borrower acknowledges that he is truly and lawfully indebted to the lender in the total sum of USD3,000,000= (Three Million United States Dollars) (hereinafter referred to as 'the debt).”

Clause 5 provides;

“5. Security

As security for the prompt repayment of the debt, the borrower undertakes and shall procure to provide the following securities:-

5.1.1 Provide a Deed of Suretyship by Dannov Investments (Pty) Ltd.

5.1.2 Provide a Deed of Suretyship by Danoct (Pty) Ltd.

5.1.3 Provide a Deed of Suretyship by Broadway Investments (Pvt) Ltd.

5.1.4 Cause the surrender of Pelhams Limited shares totalling 380,000,000 held by the entities mentioned above to the lender in negotiable form.

5.1.5…,.”

Clearly, therefore, the first respondent was not content with a mere surrender of the shares. He wanted them in “negotiable form.” Writing about negotiable instruments, the learned author R.H. CHRISTIE, Business Law in Zimbabwe, ed 2, Juta & Co Ltd stated…,:

“In outline, this concept is simply that provided a written instrument complies with the prescribed formalities, the legal rights which are written on the instrument may be transferred from person to person either by mere delivery or by the transferor's signing his name on the back of the instrument (endorsement) followed by delivery. A person who takes transfer of the instrument in good faith and for value then receives title to those rights free from any defences which might have been available against previous holders ('free from equities.')”…,.

The first applicant duly signed on behalf of the other applicants, in whose names the shares were held, transfer forms in which they transferred all the shares that had been given as security.

There can be no doubt, therefore, that in that form and with the transfer certificates signed by the first applicant, the shares given to the first respondent were in negotiable form. He could negotiate them further to other parties.

As happens so often in this country, the first applicant failed to pay the debt only succeeding in repaying a small fraction of it - the sum of $300,000= paid on 21 March 2011. Indeed, up to now, the applicants have not paid anything further towards liquidating the debt and only hold on to a vague statement that the amount claimed is disputed. They have not even begun to explain how a claim based on all the unequivocal acknowledgments of indebtedness could be disputed.

Be that as it may, when the first applicant defaulted, the first respondent negotiated the share instruments, promptly selling all of them to the second respondent who accepted the shares for value. The applicants would have none of that. They have brought several applications, initially trying to prevent the sale and transfer of the shares and now trying to reverse the transfer. They have been to the Supreme Court and back still pursuing the same issue.

In the present application, the applicants seek a declaratur that the sale of the shares by the first respondent to the second respondent “constituted unlawful parate executie”; that the securities transfer form executed by the fourth applicant in respect of shares held by it was invalid by reason that the certificate was defective and that ownership of the shares did not lawfully pass to the second respondent. The applicants also seek the return of the shares to them among other relief.

In his founding affidavit, the first applicant insists that he did not authorise the first defendant to transfer the shares and that he had given the documents I have referred to as “a security interest in the shares” and that he did not pass ownership. For that reason the first respondent had no right to sell the shares without instituting legal proceedings against him. Selling the shares as the first respondent did is a case of parate executie which is unlawful self-help. According to the applicants, parate executie is unlawful and this should entitle them to the order that they seek.

The application has been strongly opposed by the first and second respondents.

The former insists that he acted lawfully and within his rights conferred upon him by the agreements of the parties. When he was approached by the first applicant for the loan he had insisted on negotiable security being tendered as he did not want security which would be difficult to dispose of in the event of a default. He wanted the shares to be in negotiable form to enable him to sell them without resort to the applicants. This explains the documents the first applicant had to sign in order to get the loan.

On its part, the second respondent's position is that considering that the issues raised by this application have already been subject of earlier judicial pronouncements, particularly by the Supreme Court, the present application is an abuse of process.

The second respondent maintained that when it purchased the shares it had been shown the agreements entered into between the first respondent and the applicants including the share transfer forms executed by them authorising the first respondent to transfer the shares to third parties. It therefore acted on those and purchased the shares in good faith and for value meaning that the applicants are estopped from denying the existence of authority for the first respondent to sell.

Counsel for the applicants had a difficult time indeed in moving the application mainly because the application was predicated on a wrong principle that parate executie is unlawful. When he could not sustain that line of argument he was forced to swing round, almost full circle, to argue that by contending, in the absence of any contractual provision to that effect, that the first applicant authorized the sale, the respondents were effectively saying that parate executie was a tacit term of the agreement. It is a remedy that cannot be inferred.

The difficulty with that argument lies in the fact that it does not arise from the applicant's case as contained in the founding affidavit and supporting documents where they insisted that parate executie was unlawful self help. In addition, parate executie cannot possibly be said to be implied when the first applicant did sign securities transfer forms clearly authorising the first respondent to sell. It was a specific term of the agreement.

For what it is worth, I must state that parate executie is now accepted as lawful in our law. Let me restate the passage in Farmers World Holdings (Pvt) Ltd v Manica Zimbabwe Limited HH297-12…,.;

“The fallacy of that argument is self-evident. The respondent relies on a consent by the applicant, firstly, in the original agreement signed in May 2009, and, secondly, in the Acknowledgment of Debt penned in March 2010, to parate execution. That our law recognises parate execution, subject to qualifications, cannot be doubted. As stated by BECK JA in Changa v Standard Finance Ltd 1990 (2) ZLR 412 (S) 414 A-C:

'It was settled in Osry v Hirch, Loubser & Co Ltd 1922 CPP 531 that, as far as movables are concerned, an agreement for their delivery to the creditor and sale by him be means of parate execution is valid and binding. That decision was approved and followed by BEABLE J (as he then was) in Aitken v Miller 1957 (1) SA 153 (SR); 1950 SR 227. The recognition extended under the civil law to such agreement is subject, however, to the qualifications expressed at p547 of Osry case (supra), in these terms:

'It is, however, open to the debtor to seek the protection of the court if, upon any just ground, he can show that, in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him in his rights.'”

To the extent that the applicants have based their application on a mistaken view that parate executie is unlawful, the application is sitting on sinking ground. It simply cannot succeed.

Even the attempt by counsel for the applicants to resuscitate it by trying to argue that even if the first respondent had the power to transfer the shares, such power did not mean authority, he still needed authority of the first applicant before he could transfer. While it is the typical spirit of advocacy, it cannot save this application. It is an unnecessary splitting of hairs. There is no doubt in my mind that the first respondent acted lawfully and in accordance with the agreement of the parties.

Counsel for the second respondent made the additional point that the issue has long been settled by the Supreme Court and that the applicant is asking me to make a decision on matters already decided by the Apex Court.

I agree.

We are covering ground that has already been traversed merely because the applicants think they can try their luck. CHIDYAUSIKU CJ made findings adverse to the applicants in Chidawu & Ors v Shah & Ors SC13-12 when he said:

“The first applicant delivered the Pelhams Limited shares to the first respondent in negotiable form as security for the loan he received. The inescapable inference to be drawn from this is that the first applicant freely consented to the shares being sold or negotiated in the event of his failure to repay the loan. He failed to repay the loan and the shares were sold by the first respondent. The applicant wants the transfer interdicted. The sale, as stated above, had already been concluded. What remained was transfer of the shares by the stock broker to the purchaser. The papers in this matter show that the loan agreement between the parties, voluntarily signed by the first applicant and the first respondent was transparent. The parties were ad idem in respect of all the terms and conditions of the loan agreement. The loan agreement correctly reflects the contractual intentions of the parties. There is no allegation or suggestion of any form of coercion or underhand dealings. The loan agreement appears to be a normal business transaction between businessmen of substance. For the first applicant to now seek the assistance of the law to renege on a contract he openly and willingly entered into, smacks of duplicity and deceit. It sounds crooked.”

See also Chidawu & Ors v Shah & Ors SC12-13.

It ought to have been apparent to the applicants that this court is bound by the pronouncements of the Supreme Court. When they prosecuted this application knowing what the Supreme Court had already determined without even putting forward any new facts upon which a different conclusion could be made, they were abusing process. It is the kind of conduct which should be frowned upon with a good measure of punitive costs.

In the result, the application is hereby dismissed with costs on the scale of legal practitioner and client.

Even though he claimed, in his founding affidavit, that he never signed any surety deed, it turns out that he did and there is no conceivable reason why he should not be bound by it. His signature on the surety deed brings into operation the caveat subscriptor rule.