The plaintiff, a commercial Bank, claims against the three defendants payment of a sum of money amounting to US$1,105,748=90 together with interest thereon at the rate of 15% per annum calculated from the 9th September 2015 to the date of payment in full; such interest to be calculated monthly and in advance and capitalized.
The plaintiff also claims collection commission and costs of suit on the legal practitioner and client scale, as well as an order declaring a certain immovable property, described in the summons as a certain piece of land situate in the District of Salisbury called the Remainder of Lot 6 of Reitfontein, measuring 1,2129 hectares, to be specially executable.
The claim is for money advanced to the first defendant pursuant to loan and overdraft facilities and in respect of which the second and third defendants are said to have executed deeds of suretyship and guarantorship.
The claim is contested by all the defendants....,.
On the main claim, the plea which was filed on behalf of the defendants is very brief. In that plea, the defendants deny that the person who entered into the agreements pursuant to which the plaintiff advanced money to the first defendant had the authority to represent the first defendant.
The other aspect, which is denied, is that the second defendant executed the power of attorney which was used to register a mortgage bond over his immovable property in favour of the plaintiff.
Going by the pleadings, the other material allegations made in the plaintiff's declaration are not disputed and must therefore be taken as admitted. These include:
(i) The existence of the facilities (save for the alleged lack of authority of the person who represented the first defendant).
(ii) The terms of the loan facility as set out in paragraph 6 of the plaintiff's declaration.
(iii) The facts alleged in paragraph 7 of the plaintiff's declaration that the second and third defendants executed deeds of suretyship and guarantees by which they bound themselves as sureties and co-principal debtors for performance of the first defendant's contractual obligations to the plaintiff under the facilities.
(iv) There is also no denial of the failure by the first defendant to pay the amount due to the plaintiff in terms of the agreements.
(v) The amount claimed in the summons and declaration is also not disputed in the plea.
Although three issues were outlined in the joint pre-trial conference minute, a resolution of those issues depends on the determination of whether the loan facilities were validly concluded on behalf of the plaintiff and whether the mortgage bond over the immovable property known as a Certain Piece of Land Situate in the District of Salisbury Called the Remainder of Lot 6 of Rietfontein measuring 1,2129 hectares, held by the second defendant under Deed of Transfer Number 4388/1994, was validly executed.
The plaintiff led evidence, oral and documentary, from Alwyn Tafadzwa Chinyoka, Leonard Tendai Nhari, Lazarus Marume, Benson Ndachena, and Lionel Chinyamutangira, all of whom are its employees save for Leonard Tendai Nhari who is a handwriting expert.
The essence of the evidence of these witnesses is that the second defendant, Julius Tawona Makoni, was a founder and director of the plaintiff. He was still a director of the plaintiff when the facility upon which the claim arose was granted to the first defendant.
A composite facility of call loans and overdraft of US$760,000 was extended to the first defendant. The first defendant is the second defendant's Trust through which he operated to access money from the plaintiff.
Alwyn Tafadzwa Chinyoka testified, that, Dr Makoni signed the power of attorney to pass a mortgage bond over his property. The guarantee executed by the third defendant was signed by Dr Higginson, who, together with the second defendant, was the authorized signatory. The two were also the signatories for the first defendant.
The second defendant would give instructions to the plaintiff's employees for draw-downs on the facility.
He stated that the plaintiff engaged the second defendant about recovery of the amounts owed following a directive from the Reserve Bank of Zimbabwe that all insider loans be settled by 31 December 2014.
When the second defendant was approached about the debt, he acknowledged it and advised that he was making arrangements to settle it.
The matter was discussed at some Board meetings of the plaintiff in the presence of the second defendant. The minutes of Board meetings were produced in evidence.
The witness also gave evidence of the emails which were exchanged between the second defendant and the plaintiff's officials in connection with the debt in which the second defendant acknowledged the debt.
The witness disputed the signatures on the alleged loan agreement upon which the first defendant's counter-claim was based.
He also gave evidence of payments made on behalf of, and, at times, on the instructions of the second defendant from the account of the first defendant.
He testified that the facility availed to the first defendant was to cater for the personal needs of the second defendant.
The first defendant held shares in the plaintiff on behalf of the second defendant, according to the witness.
Lazarus Marume, who was employed by the plaintiff as Branch Manager at Mutare, stated that he knew the second defendant as the founder of the plaintiff and as a Bishop of the Church of the Province of Central Africa.
He confirmed, that, the second defendant signed the power of attorney to pass a mortgage bond at Mutare.
The witness had always known the second defendant's signature as he had dealt with him many times before that. He signed as a witness after the second defendant had signed in his presence. The document was signed at the second defendant's office to which the witness had taken the document.
Significantly, at no time during cross-examination was it suggested to this witness that the signature on the document was not that of the second defendant; neither was it suggested that the second defendant had not signed the document.
The evidence of Leonard Tendai Nhari and Benson Ndachema pertains to the first respondent's claim in reconvention, which, as already noted, has been abandoned.
In relation to the main claim, Benson Ndachema's evidence confirmed the instruction from the Reserve Bank of Zimbabwe for the recovery of insider loans. He also stated, that, the second defendant, as representative of the first defendant, owed money to the plaintiff, and that he resigned from his directorship owing to his failure to repay the loan.
The second defendant, according to the witness, had indicated that he would settle his indebtedness to the plaintiff from the proceeds of his shares in MBCA Bank which he would dispose of.
Lionel Chinyamutangira was Chief Banking Officer at the plaintiff at the time that he gave his evidence.
When he was Relationships Manager he reported directly to the second defendant, and got to deal with the first and third defendants as well. He explained that the purpose of the facility extended to the first defendant was in fact to take care of the second defendant's affairs when he was away, such as paying for his family's expenses and motor vehicle expenses. The second defendant would instruct him, and the other employees of the plaintiff, on the transactions to be performed, and Higginson would do the paperwork.
He identified some e-mails exchanged between him and the second defendant in terms of which the second defendant would sometimes instruct him to debit the first defendant's account for the purposes of paying his (second defendant's) expenses.
This witness identified various documents pertaining to payments to or on behalf of the second defendant made from the account of the first defendant. He confirmed that the second defendant stepped down from the Board of the plaintiff because of his failure to discharge his financial obligations to the plaintiff.
Two witnesses testified on behalf of the defendants. These are James Friedlander and the second defendant, Julius Makoni.
James Friedlander's evidence pertained to the claim in reconvention. It is therefore not necessary to consider it in any detail in view of the abandonment of that claim.
The second defendant's evidence was that he is the one who founded the plaintiff. He was its Chief Executive Officer, Executive Director, and Non-Executive Director at different times. He is also a shareholder of the plaintiff.
His evidence was that he was not clear as to what the basis of his liability for the first defendant's debts to the plaintiff was.
He recognized and identified the signature on the Deed of Suretyship, executed on 10 July 2002, to be his. He then sought to state that he did not understand why he was to act as surety for the first defendant's obligations to the plaintiff.
He stated that he never enjoyed any benefit from the facility granted to Cornerstone.
He stated that he resigned voluntarily from the Board of the first defendant and that his resignation was unconnected to the debt owed by the first respondent.
The first issue, of whether or not there was a valid loan agreement between the plaintiff and the first defendant, can be easily disposed of.
The facility letter, dated 19 June 2013, was duly signed on behalf of the first defendant. The person who signed on behalf of the defendant, David Higginson, was a duly authorized signatory on the account.
Both the first and second defendants benefited from the facilities as shown by the evidence of the witnesses for the plaintiff.
There is documentary evidence, in the form of emails, exchanged with the second defendant in which instructions to make payments from the account of the first defendant were given by the second defendant.
It is clear that the first defendant was a just vehicle by which the second defendant accessed loan facilities from the plaintiff using his position in the plaintiff.
It was clear that the second defendant is a dishonest person who was being deliberately untruthful and sought to mislead the court about his involvement in the financial transactions of the first defendant. He is the typical businessman who started the business of a Bank in order to give money from the bank to himself.
The unchallenged evidence of the witnesses for the plaintiff was that when the second defendant was approached about the need to settle the loan account he advised that he would do that from the proceeds of the sale of his shares in MBCA Bank.
At no time did he dispute the amount or that he owed it.
Minutes of a meeting of the plaintiff's Board of the Credit Committee held on 30 January 2015 deliberated on the first defendant's debt and the undertaking by the second defendant to settle it. Under item 12.7 of the minutes, the following is recorded:
“CORNERSTONE $1,059,432: Management advised that Dr Makoni had advised that he intended to repay the loan from proceeds of a share sale as he held shares in another financial institution.”
In the same minutes, under item 14 (from 14.1 to 14.10) the second defendant is the subject of discussion, and the resolution that he must resign his directorship, owing to his non-performing loan, is recorded.
The second defendant feigns ignorance of that resolution in the face of such documentary evidence.
His evidence is unconvincing.
The first defendant pretended not to know anything about the Reserve Bank of Zimbabwe's directive concerning insider loans. Yet, that matter was discussed at a Board meeting which he attended on 19 March 2014, and appears as item 5.4 in the minutes of that meeting.
The evidence led establishes that the first defendant entered into a valid facility agreement in terms of which it accessed funds availed by the plaintiff.
The court finds, that, the first defendant was an entity established and controlled by the second defendant for the purposes of accessing money from the plaintiff. Through the first defendant, the second defendant accessed money from the plaintiff, and, from time to time, gave instructions to Bank officials to pay his expenses from the account of the first defendant.
The second defendant signed a Deed of Suretyship for the first respondent's obligations to the plaintiff. He is accordingly liable on the basis of that Deed of Suretyship.
The third defendant is equally liable to the plaintiff for the debts of the first defendant on the basis of the suretyship agreement.
As noted above, the existence of these deeds of suretyship is not challenged by the defendants.
On the power of attorney used to register the mortgage bond over the second defendant's property, the document was duly signed by the second defendant on 10 July 2013.
The second defendant did not dispute the signature on that power of attorney when he gave evidence.
It is clearly his signature.
The court finds, that, he is the one who signed the power of attorney to pass a mortgage bond on his immovable property.
The debt secured by the mortgage bond has been proved. The plaintiff is accordingly entitled to recover the debt through the sale of the mortgaged property.
In terms of clause 5.7 of the facility agreement, the plaintiff is entitled to recover collection charges and its legal fees on the attorney-client scale.
In any event, such costs would still have been justified by the vexatiousness of the defence to the claim in the instant case.
In the result, IT IS ORDERED THAT:
1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly and severally the one paying the others to be absolved for:
(a) Payment of US$1,105,748=90 plus interest thereon at the rate of 15% per annum from the 9th September 2015; such interest calculated monthly and in advance on the said sum and capitalized to the date of payment in full.
(b) Payment of collection commission in accordance with the Law Society By-Laws.
(c) Payment of plaintiff's costs of suit on the legal practitioner and client scale.
(d) A declaration that the immovable property, being a certain piece of land situate in the district of Salisbury called the Remainder of Lot 6 of Rietfontein, measuring 1,2129 hectares, held by the second defendant under Deed of Transfer No.4388/1994, is executable.
2. The first defendant's claim in reconvention be and is hereby dismissed with costs on the legal practitioner and client scale.
