OMERJEE
AJA:
This
is an appeal against the judgment of the High Court granting with
costs a claim by the respondent for:
(i)
Payment of the sum of US$750,000.00.
(ii)
Interest tempore
morae
at the London Interbank rate for United States dollars at 3.5% per
annum from 1 September 2005 to the date of payment.
(iii)
Costs
of suit.
The
factual background to this dispute which is largely common cause may
be summarised as follows:
The
appellant is a financial institution. The respondent is a
manufacturer and supplier of an exclusive range of cables for the
transmission of communication and distribution of energy used by such
entities like the Zimbabwe Electricity Supply Authority, the Rural
Electrification Agency and Tel-One.
The
respondent's business caters for both domestic and export markets.
As at end of 2003, 50% of its sales volumes were largely in exports.
In
2004 the respondent's business experienced slow growth due to
inflation and the scarcity of foreign currency. During that year the
respondent's representatives met with the appellant's Governor Dr
Gideon Gono with a view of securing foreign currency to purchase
imported inputs in order to sustain its business.
Dr
Gono gave an oral undertaking to avail US$150.000.00 per week to the
respondent, from the foreign currency auction system.
In
January, 2005 the respondent began to receive the said sums of
foreign currency against payment of a Zimbabwean dollar equivalent to
the appellant via a commercial bank.
The
special arrangement was extended to 35 other companies selected as
the recipients of foreign currency.
This
allocation of US$150,000.00 was, with effect from 16 June 2005,
increased to US$250,000.00.
Weekly
allocations at that new level were made to the respondent until the
end of July 2005.
In
August 2005 the respondent made three transfers of money in Zimbabwe
dollars, to the appellant for the equivalent of the amount of
US$750,000. The payments were accompanied by details of external
creditors to be paid by the defendant.
The
appellant did not pay the foreign currency.
Its
position at the trial was that foreign currency could not be paid
because it was not available.
The
respondent's witness Turina confirmed in evidence that the
appellant indicated that it did not have foreign currency for
disbursement.
On
2, 11 and 19 August respectively the respondent made payments in
Zimbabwe dollars equivalent to US$750,000.00.
In
respect of these three payments the respondent would receive a phone
call from the appellant before making payment.
On
1 August it received a call from the appellant before depositing a
sum of Z$4,438,294,052.45 with the appellant the following day.
With
regard to the second transaction, the respondent received a phone
call on 5 August. In response thereto, it deposited the sum of
Z$4,511,254,26l4.47 with the appellant on 11 August.
On
the third occasion the telephone call was made on 17 August. The
respondent deposited an amount of Z$4,587,562,920.90 with the
appellant on 19 August.
Bigboy
Masoso who was the Division Chief Treasury officer testified on
behalf of the appellant to the effect that the disbursement of
foreign currency could only be made if the front office of the
appellant made the funds available. He also stated that the telephone
calls made to the respondent and other companies were meant to
provide quotations to secure constance of the exchange rate.
In
the affidavit filed of record Dr Gono stated as follows at para four
thereof as follows:
“I
advised them that the Bank would endeavour to source foreign currency
for the plaintiff to the tune of USD$150,000 per week in recognition
of the plaintiff company's strategic role in the national economy.
No formal binding agreement was concluded in this regard and it was
never the common understanding of the parties that we were concluding
a formal agreement.”
At
para six of the affidavit, he stated as follows:
“As
a result of further representations made by the plaintiff, the
defendant increased the weekly allocation of foreign currency to the
plaintiff to USD250,000 from or about the 8th
June 2005. Again it was never the common understanding and
contemplation of the parties that they were entering into a formal
binding transaction, hence no formal contractual documentation was
executed.”
Again
at para seven of his affidavit he stated as follows:
“I
am advised that during the month of August 2005, plaintiff made
payments totalling Z$13,535,110 being the quoted equivalent at the
auction rate of USD750,000 which the defendant had hoped to pay to
the plaintiff. Due to many other competing and pressing national
requirements, the defendant was unable to avail the foreign currency,
not only to plaintiff but to many other companies in a similar
situation who then accepted an offer for immediate refund. Plaintiff
declined the refund.”
Following
a trial the learned Judge found as follows at p8 of the judgment:
“However,
the main issue, in my view, is whether by allocating to the plaintiff
US$150,000 ad later US$250,000 from the auction system, the defendant
then became obligated to release the money to the plaintiff upon
payment by the plaintiff within twenty four hours of the Zimbabwe
dollar equivalent at the defendant's instruction.”
At
p9 of the judgement, the court a
quo
stated as follows:
“It
becomes crucial for the defendant to explain the reasons for Patience
Aisam to set in motion the process, if foreign currency was
unavailable. My view is simply that the allocation was only made
against funds that were already available from the auction.
It
is important to note that Patience Aisam spoke of 'an approved
allocation and not successful bid.'
This
was so because the plaintiff was on a special list that was not
required to bid.
There
could, in my view, be no approval or allocation of what was not
already available.
Given
the condition that the completion of each transaction was totally
dependant upon the availability of foreign currency, the possibility
of Aisam confirming allocation and asking for payment of the Zimbabwe
dollar equivalent within 24 hours when there was no foreign currency
already earmarked for the plaintiff is, in my view, very remote.”
The
learned Judge at p9 made the following finding:
“I
am therefore unable to accept that the above scenario did not create
binding obligations on the part of the defendant.
To
that end, I am of the view that upon compliance by the plaintiff, a
binding contract was concluded and what remained was the release of
the foreign currency purchased by the plaintiff.
The
case of F.C.
Hume (Pvt) Ltd v Minister of Natural Resources & Tourism
1989 (3) ZLR 55 indeed supports this view.
With
the plaintiff having complied with all the requirements, the contract
was already in place and the defendant was obliged to meet its
obligation.”
The
gist of the court a
quo's
reasoning was that at the time the phone calls were made to the
respondent the foreign currency to which the call related was
available and the call was an offer which the respondent accepted by
depositing the money in Zimbabwean dollars with the appellant thereby
giving rise to a binding contract.
The
court a
quo
gave judgment in favour of the respondent as sought in the summons.
It is against this judgment that the appellant now appealed to this
Court.
In
the ground of appeal the appellant contends that:
1.
The court a
quo
erred in law and fact in not making a finding that the payment by the
respondent of the Zimbabwe dollars as directed by the appellant did
not create a binding contract which was an end itself but that
performance was always subject to foreign currency being available.
2.
The court a
quo
erred in law and fact in making a finding that the communications
made by Patience Aisam on behalf of the appellant calling upon the
defendant to pay the Zimbabwe dollars meant or was evidence that the
foreign currency being allocated was available for disbursement to
the respondent.
3.
The court a
quo
erred in fact and law in not making a finding that non availability
of foreign currency made performance impossible and that the
appellant was entitled to refund the respondent the money it had paid
as the suspensive condition, viz, the availability of foreign
currency had failed to be met.
4.
The court erred in law in allowing the claim for interest and in
ordering the interest to run from 1 September 2005.
The
primary question to be decided by this Court is, whether or not there
existed a binding contract for the disbursement of a sum of foreign
currency to the respondent's creditors, upon payment by the
respondent of an equivalent sum in Zimbabwean currency.
The
following are undisputed facts:
As
a result of an approach to the appellant's Governor, Dr Gono, on 27
October 2004 for assistance in obtaining foreign currency, the
respondent was granted the status of a successful bidder at the
weekly foreign currency auction.
Several
other companies were on this special list.
The
respondent was not required to place bids at the auction but was
merely telephonically advised of the agreed weekly allocations.
The
practice had been successfully operational from January 2005 to July
2005.
Payment
requirements were availed to the respondent who complied by effecting
payment of the equivalent amount of the foreign currency in Zimbabwe
dollars.
There
was no formal contract between appellant and respondent.
The
respondent was amongst a list of 35 companies on this special list
who had been identified as preferential recipients of foreign
currency under the arrangement.
The
court a
quo
correctly found that the arrangement between the parties was premised
on the availability of foreign currency. As such no allocation could
be made without the availability of foreign currency.
Indeed
both parties were aware that the arrangement for the disbursement of
foreign currency was subject always to a condition that foreign
currency had to be available in the first instance.
Mr
Turina stated that due to the scarcity of foreign currency the
respondent had reached an agreement with the appellant whereby bids
from the respondent would be given preferential treatment.
He
confirmed that the information on the allocations was done
telephonically and that once an allocation (i.e. the initial
US$150,000.00 rising to US$250,000.00) was made, the respondent was
required to pay the equivalent in Zimbabwean dollars.
The
arrangement had worked well from January 2005 until July 2005.
In
August 2005 the appellant failed to disburse US$750,000.00 to the
respondent's customers and suppliers after the respondent had
deposited with the appellant an equivalent sum in Zimbabwe dollars in
three separate tranches.
In
this regard the import of the affidavit of Patience Aisam was that a
telephone call would be made to advise of an approved application and
not allocation. In effect the approval and the actual allocation of
foreign currency were distinct processes, premised on the
availability of foreign currency.
It
was the evidence of Aisam's superior Masoso that payments in
foreign currency would only occur if the front office availed such
funds.
This
testimony accords with logic and probability.
Patience
Aisam was not employed in the front office which was responsible for
the allocation of foreign currency.
The
court a
quo
found that there existed a binding contract between the parties.
When
regard is had to Dr Gono's affidavit, it is clear that he advised
the respondent that the appellant would “endeavour” to source
foreign currency for the respondent.
Such
assertion does not suggest that the appellant was binding itself to
provide the respondent with foreign currency on an ongoing or
permanent basis.
It
is not in dispute that no allocation of foreign currency was made in
August 2005. According to Masoso the system was discontinued because
there was no foreign currency.
The
24 hours notice of payment of Zimbabwe dollars was not in fact
adhered to by the respondent in August 2005.
The
finding by the court a
quo
that upon payment by the respondent a binding contract was concluded
is not borne out by the evidence with regard to the payments made
following telephone calls of 5 and 17 August 2005.
It
is to be noted that there was no formal contract between the parties.
Dr
Gono offered to prioritise the respondent and other companies in the
allocation and disbursement of foreign currency.
The
Court finds that when Dr Gono put in place the special arrangement,
there was no intention to create a binding contract to avail foreign
currency to the respondent and the other companies on the special
list.
The
facility was put in place at the time because of the acute shortage
of foreign currency.
It
is highly unlikely that given that state of affairs, Dr Gono would
seek to bind the appellant to avail foreign currency to the
respondent upon payment of the local currency, when the volume of
inflows of foreign currency were unpredictable.
In
the circumstances, it would not be logical for Dr Gono to enter into
a binding contract to supply foreign currency to the respondent on
the terms suggested.
It
is not without significance that 35 other companies on the special
list subsequently accepted refunds of Zimbabwe dollars deposited with
the appellant in August 2005.
This
fact is consistent with the position that the allocation of foreign
currency was conditional upon its availability at any given time.
The
effect of the evidence is that the agreement for the disbursement of
foreign currency was predicated upon availability of foreign
currency.
It
was the respondent's testimony that the condition that foreign
currency would be availed to the respondent, subject to availability,
was expressed orally by the appellant's Governor when he
entertained the respondent's request to be allocated foreign
currency.
The
agreement to accord the respondent preferential treatment in the
disbursement of foreign currency, together with 35 other companies,
did not create a binding and enforceable contract between the
parties.
The
performance of the appellant's obligation to provide foreign
currency was always qualified or conditional upon its availability.
Reliance
by the respondent on previous dealings did not in the circumstances,
give rise to binding contractual obligations between the parties.
The
parties understood that in the absence of foreign currency there was
no contract between them.
The
Court is satisfied that the evidence does not establish that a
binding contract existed between the parties regarding the
disbursement of foreign currency, either formally or on past practice
upon payment by the respondent of the local currency equivalent.
It
was found by the court a
quo
that the Deputy Governor Mr Ncube, gave an undertaking to make
available the US$750,000.00 to the respondent as and when foreign
currency became available.
The
Deputy Governor's position was not part of the respondent's case
on the pleadings in the court a
quo.
The
finding by the trial court that Mr Ncube's testimony that he had
promised the respondent that it would be paid the sum of
US$750,000.00 was binding upon the appellant is a misdirection.
The
fulfilment of the promise would still have depended upon availability
of foreign currency.
By
the time that promise was made, the appellant had made it clear to
the respondent that it was terminating the special arrangement for
all companies concerned and offered to refund the Zimbabwe dollars
paid by them.
The
appeal is accordingly allowed with costs.
The
decision of the court a
quo
is set aside and is substituted with the following:
“The
plaintiff's claim be and is hereby dismissed with costs.”
MALABA
DCJ: I agree
ZIYAMBI
JA: I agree
T
H Chitapi & Associates,
appellant's legal practitioners
Coghlan,
Welsh & Guest,
respondent's legal practitioners
