NDEWERE J: On 3 February 2011, the first defendant entered
into an agreement with the plaintiff for a facility covering call loans,
overdraft and off shore finance. The purpose of the facility was to
assist the first defendant to purchase stock from overseas and local markets as
well as day to day cash requirements. 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$240 000.00. He requested 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, Korolnek signed as surety for the first defendant's
institute up to the sum of US$239 800.00 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 $219 749.00 after a withdrawal by
him of US$20 000.00 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
800.00, was credited into the first defendant's account to clear its debt in
terms of the suretyship agreement between Korolnek and the plaintiff.
Thereafter, a debit balance of $32 115.98 remained on the first defendant's
account. The parties are in Court over that balance of $32 115.98.
The plaintiff issued summons for the remaining $32 115.98 on 10 July
2012. In their plea, the defendants admitted paras 1 to 12 of the
plaintiff's declaration although they amplified the facts surrounding para 11
of the declaration. They disputed paras 13 to 16 of the declaration.
Despite denying the interest rates in the plea, the facility agreement which
has been availed as part of the evidence to the court shows that Clause
4.1.2 to 4.1.6 of the “overdraft” section of the credit facility agreement of 3
February 2011 is about interest and how it will be calculated. Clause
4.1.3 in particular says:
“Interest shall accrue and shall
be calculated at a rate percentum per annum to be notified by us prior to or at
the time the cash advance/overdraft is made, or at anytime thereafter, provided
that the rate of interest notified to you shall have effect from the date
specified in the notice.”
Clause 4.2.4 to 4.2.7 of the “call loans” section of the credit facility
agreement is also on interest. Clause 4.2.5 is worded similarly to Clause
4.1.3.
Clause 4.3.4 and 4.3.5 under the “offshore finance” section of the credit
facility is also on interest.
In addition, the Pre-Trial Conference issues agreed to by the parties did not
make interest an issue for the trial. Indeed, during the hearing, counsel
for the defendants conceded this point when she advised the court to strike out
para 2 of the defendant's summary of evidence on p 47 of the record; saying
that interest was not in issue. This concession was properly made as it
is consistent with the agreed pre-trial issues jointly crafted by the
parties.
During oral evidence, the plaintiff clarified the
chargeable interest through the testimony of Elvin Tafadzwa Chiyoka and said
the interest based on the agreement is 36% per annum and that the penalty fee
which was given as 42% at the time the facility was advanced was reduced to 32%
in line with the market conditions.
Consequently, in view of the facility agreement, the agreed pre-trial issues,
the evidence during the hearing and the concession by defendant's counsel
during the hearing, the court makes a finding that the interest charged by the
plaintiff was agreed by the parties.
On the capital amount for which summons have been issued; it is common cause
that the first defendant entered into a credit facility arrangement with the
plaintiff and was advanced US$50 000.00. This facility operated from 3 February
2011 and the first defendant benefited from it as borne out by the statement
from the bank from page 82 of the bundle of discovered documents to p 93 where,
as at 1 September 2011, the debit balance is reflected as $257 915.98.
The defendants, in their evidence before the court, never disputed the
authenticity or correctness of the plaintiff's bank statement.
Consequently, the court makes a finding that the bank statement provided by the
plaintiff from p 76 to 96 is a correct reflection of the first defendant's
financial relationship with the plaintiff, although the court is just concerned
with the statement from p 82, when the credit facility was concluded on 3
February 2011 up to p 93 when funds from Korolnek's account to the total of
$225 800.00 liquidated most of the first defendant's debt leaving a balance of
$32 115.98.
It is clear to the court that the defendants have no real defence to the claim
for the balance of $32 115.98. They admit being lent and advanced US$50
000. The letter of 24 May, 2011 from the first defendant to the plaintiff
confirms this.
“The only facility we have with
the bank if of $50 000.00 secured by a bond registered over property for a
period of 12 months. This facility is still running, expiring sometime in
February, 2012.”
Another letter dated 27 October, 2011 from the first defendant to the plaintiff
also admits liability for US$50 000 and proposes a payment
plan;
“In an effort to liquidate our
US$50 000.00 facility with the bank we have managed to secure a Director's loan
from one of the Director's, Mr Bernard Mutanga in order to pay off the
facility.”
The offer which was made to the plaintiff then was that the loan would be
cleared by an initial payment of $20 000, another $20 000 at the end of
November 2011 and the balance of $10 000 plus interest at the end of December
2011. No payment was effected in terms of the above offer. So
clearly, the defendants admitted owing the plaintiff. Even in their plea,
they do not deny liability. All they say is the debt should have been
cleared off by Korolnek's pledged security, but we know now from the evidence
led that the pledged security was insufficient and did not clear the whole
debt. This is clear from the bank statement and clear from the oral
evidence led during the trial.
The defendants are fortunate that the use of Korolnek's
pledged security reduced their debt which was originally $50 000 to $32
115.98. It is unfortunate that the defendants did not agree to clear the
outstanding balance after Korolnek reduced the full debt for them.
As pointed out in African Banking Corporation of Zimbabwe Ltd vs P.W.C
Motors & Ors, HH 123 of 2013 referred to by plaintiff's
counsel,
“a trend is fast developing
among business people in this country to borrow huge sums of money from
financial institutions and when the time to pay comes to pay as little as
possible or better still, not pay at all.”
In the present case, we have businessmen whose accepted debt of US$50 000.00
has been reduced for them by a third party to $32 115.98, but the businessmen
refused to pay the reduced amount, arguing that the third party's funds should
have been sufficient to extinguish the debt in total. The courts cannot
condone such behaviour from business people of wanting to pay as little as
possible or nothing as in this case.
Consequently, the plaintiff has succeeded in establishing its claims against
the defendants and I accordingly order as follows:
1. The first, second, third
and fourth defendants shall jointly and severally the one paying the others to
be absolved; pay to the plaintiff the capital amount of $32 115.98 plus
interest of 36% per annum on the capital amount from 31 August 2011 to date of
payment. The interest payable is subject to the in duplum
rule.
2. Lot 1 of Lot 4 of Lot FA
Quinnington measuring 10 938 (ha) is declared executable.
3. The defendants shall pay
costs of suit on a legal practitioner and client scale.
Gill Godlonton and Gerrans,Plaintiff's Legal Practitioners
Mugugu
& Associates, 1st to 4th Defendants'
Legal Practitioners
