KUDYA J: An order for the consolidation
of these two matters was granted by UCHENA J, by consent with no
order as to costs on 2 June 2006 for hearing before me on 7 June 2006
in Case Number 3157/06. The first application, Case No. HC 5186/05,
concerns an order for specific performance while the second one Case
No. 5264/05 seeks an order for the provisional liquidation of Zambezi
Paddle Steamer (Pvt) Ltd (hereinafter called ZPS).
On 7 June 2006, at the request of the
parties, I postponed the hearing to 13 July 2006. When the hearing
resumed Mrs Wood
for Turner and Sons applied for the forced recusal of Mr de
Bourbon for Dobrocks (Pvt) Ltd
on the basis that he had been an arbitrator between these parties in
1994. She referred to Pertisilis
v Calaterra & Anor 1999
(1) ZLR 70(H) as authority for the proposition that the legal
practitioner who acted for a former client is precluded from
representing a different client in circumstances where a conflict of
interest is likely to arise between the former and present client.
SMITH J set out the basis of the rule at 74C as being that:
“A legal practitioner who represents
the adversary of his own client in litigation would clearly be
violating his or her duty of loyalty and the common law rules against
conflict of interest.”
He proceeded to survey American, English,
South Africa and Zimbabwean decided cases on the point at pages 74C –
77 F. While he held that neither a partner nor his employee could
represent an opponent of a former client in order to fulfill the
adage that justice must not only be done but that it must manifestly
and undoubtedly be seen to be done, he nevertheless permitted a
partner to represent the opponent on the basis that there was no
allegation that the other partner had acquired information from the
papers in the possession of his firm which could be used to the
former client's disadvantage.
Mrs Wood
contended that justice will
not be seen to be done if Mr de
Bourbon was allowed to
represent Dobrock especially on the liquidation case where Turner and
Sons allege a deadlock has manifested itself between the joint
shareholders, a fact found by Mr de
Bourbon as arbitrator to exist
in his 25 June 1994 ruling. She further foresaw a need to call Mr de
Bourbon on the deadlock issue
in the liquidation case.
Mr de
Bourbon countered by
contending that he did not represent either Dobrock or Turner and
Sons but acted in a quasi-judicial capacity. He knew of no law which
debarred him from representing either party as long as he had not
possessed confidential information which could be used to the
detriment of his client's adversary. He referred to Benmac
Manufacturing (Pvt) Ltd v Angelique Enterprises (Pvt) Ltd
1988 (2) ZLR 52(H). In that case, Mr de
Bourbon accepted a general
retainer from Angelique Enterprises in a matter in which that company
was involved in a dispute with Albco. He was at that time already
seized with a retainer for Benmac Manufacturing in its contest with
Angelique Enterprises, supra.
He had accepted the retainer in the matter against Albco after
assurance from his instructing attorney that there would be no
conflict of interest. It was accepted in that case by that attorney
that he had not come into contact with any confidential information
which would prejudice Angelique Enterprises in its contest with
Benmac. The Law Society and two other counsel had absolved him of
any impropriety but the managing director of Angelique Enterprise Mr
Holland was not satisfied with their findings and advise.
REYNOLDS J held that Angelique
Enterprises had not shown that Mr de
Bourbon had in fact become
acquainted with information that could be used to its detriment which
would result in real mischief and real prejudice if he continued to
act for Benmac Manufacturing. He did express his reservation on a
legal practitioner acting for and against his client in the same or
different matters.
Mr de
Bourbon submitted that he had
not acquired any information that he could possibly utilize to the
prejudice of Turner and Sons and that his impartiality in 1994 had
not been impugned by any of the parties.
I went through the arbitral award. It
concerned and dealt with the share of each joint shareholder in the
extra costs, which were above the original cost of construction of
the large commercial houseboat which ZPS was to own. Turner and Sons
was not able to show what information Mr de
Bourbon accessed which could
prejudice its present defence and claim. If anything I was satisfied
that the arbitral award stands on its own and there would be no need
to call the arbitrator to testify on it. I accordingly dismissed the
application for the forced withdrawal of Dobrock's counsel.
I also postponed the hearing sine
die and granted by consent
authority to Turner and Sons to file a further affidavit in response
to Dobrock's supplementary affidavit. I further reserved the
question of costs in the provisional liquidation claim to which these
additional affidavits pertained.
I eventually, set down the matter for
hearing on 1 November 2006. I directed that the parties argue the
specific performance case first and thereafter proceed to argue the
liquidation case.
On 12 October 2005, Dobrock filed the
court application for specific performance against Turner and Sons
and two others. It sought the following order:
1. That the respondents jointly as well as
severally, the one paying the other to be absolved shall forthwith
undertake all that is necessary and required, including making all
payments and completion and signing all documents required in order
to procure transfer without delay by first respondent to applicant
of first respondent's entire shareholding in Zambezi Paddle
Steamer (Pvt) Ltd.
2. That immediately upon registration of
transfer in the share register of ZPS applicant shall pay to first
respondent the balance of the purchase price for the said shares
such balance being the sum of $138 million.
3. That the respondents jointly as well as
severally, the one paying the other to be absolved, shall pay the
costs of this application on the scale of legal practitioner and own
client.
The application was served on the three
respondents on 13 October 2005 (see Peter Dobson's opposing
affidavit of 9 November 2005 for which this averment was accepted by
Antony Turner on 2 December 2005). The three respondents filed their
opposition papers on 27 October 2005 and prayed for the dismissal of
the applicant's case with costs on the higher scale and made
reference to the liquidation claim, case number HC 5264/2005.
Case number 5264/05 is a court
application brought on 17 October 2005 by Turner and Sons (Pvt) Ltd
against ZPS and Dobrock. It prayed for the winding up of ZPS and
that a liquidator be appointed in the following terms:
-
That first respondent Zimbabwe Paddle
Steamers (Pvt) Ltd be provisionally wound up pending the granting of
an order in terms of paragraph 3 hereof or the discharge of this
order.
-
That Mrs Theresa Grimmel of KPMG
Chartered Accountants, Mutual Gardens 100, The Chase, Emerald Hill,
Harare be appointed as provisional liquidator of first respondent
company with the powers set out in section 221 of the Act.
-
Any interested party appear before this
court sitting at Harare on (a date sixty days from the date of the
order) to show cause why an order should not be made placing first
respondent's company in liquidation and order that the costs of
these proceedings all be costs of the liquidation.
-
That this order shall be published once
in the Government Gazette and once in the Herald Newspaper.
Publication shall be in the short form annexed to this order.
-
Any person intending to oppose or
support the application on the return day of this order shall:
5.1. Give due notice to the applicant at
Messrs Byron Venturas &
Partners, 2nd
Floor Tanganyika House, Corner 3rd
Street/Kwame Nkrumah Avenue, Harare.
5.2. Serve on the applicant at the
address given above a copy of any affidavit, which he files with the
Registrar of the High Court.
The application for provisional
liquidation was served on the respondents on 17 October 2005, who
entered opposition on 31 October 2005 and filed on that day their
opposing affidavit by fascimile. The actual opposing affidavit was
filed on 9 November 2005.
These two applications were consolidated
on the bases that the principal parties were the same and that the
fundamental issue in each matter related to the ownership and
management control of ZPS.
The pleadings in these consolidated
matters are voluminous. The founding, opposing, answering and
supplementary affidavits are reinforced by an assortment of
attachments which consists of the memorandum of association of ZPS,
electronic mail between the parties and other documents raised by
various people who worked for the parties in various capacities. I
have read all these documents. It is apparent from these documents
that there are areas in which the parties agree and others where they
are at variance.
It is appropriate that I first deal with
the facts as I have determined them to be from the wealth of
information that is set out in the pleadings in both these cases.
The preliminary details on the formation
of ZPS on 3 April 1989 are set out in detail by Anthony Turner
(Antony) in his founding affidavit in the liquidation matter, case HC
5264/05 (Case No. 2). Those details were admitted to by Peter
Jameson Dobson (Peter) in his opposing affidavit in that case.
Turner and Sons (Pvt) Ltd (T & S)
agreed with Dobrock in 1988 on a joint venture to construct and
thereafter operate a 'Mississippi River Boat' for commercial use
on Lake Kariba. The concept of the “Southern Belle” was created
by T & S who approached Dobrock. Dobrock agreed to become its
joint partner in the venture and to provide working capital and
investment in the project. ZPS was incorporated as the special
purpose vehicle through which the large commercial houseboat MV
Southern Belle would be owned and operated.
ZPS was incorporated in terms of the
Companies Act [Chapter 24:03]
with an issued share capital of $30 000 divided into 30 000 shares of
$1.00 each fully paid up. Each of the two joint partners subscribed
to 15 000 shares of $1.00 each in ZPS.
The joint shareholders agreed that T &
S would first build a model of the craft and thereafter carryout the
necessary construction work and interior design of the vessel at a
contracted price. Dobrock would source both local and foreign raw
materials for this construction. The total costs of both these
operations would be the total cost of the vessel and would be met
equally by the joint shareholders. The agreement was reduced to
writing and signed on 31 May 1991.
The arbitral award of 15 June 1994
indicated that the vessel was completed in 1994. The original
construction price was set at $5 950 000.00. The issue before the
arbitrator centred on the amount by which the original contract price
increased, which issue he resolved.
ZPS was run for 18 months from the
completion of the vessel in 1994 by T & S. Dobrock thereafter
took over the management control of ZPS and appointed a managing
director Adamson to run it. It was common cause that from 2000 the
tourism industry went into decline and this affected the bottom line
of the MV Southern Belle Operations of ZPS.
There is evidence, in the form of
electronic mail exchanged between Peter and Anthony, the principal
shareholders in Dobrock and T & S respectively, between 19
January 2003 and 7 April 2004 that the joint shareholders were
prepared to sell their respective shareholdings in ZPS to the right
suitor, if one came along. On 4 May 2004, ZPS managing director
presented a report which highlighted the difficult circumstances the
commercial houseboat operations were in. It required urgent
maintenance and refurbishment to attain its former glittering glory.
On 6 June 2004, Antony indicated his
decision to sell his shares in the commercial houseboat to Peter.
This was a clear pointer to his unwillingness to inject funds for
maintenance and refurbishment of the houseboat. On 18 June 2004
Peter indicated his willingness to inject $250 million, for this
purpose, provided his shareholding in ZPS increased by 10% while that
of Athony was reduced by the same percentage. He suggested that the
houseboat was valued at approximately $3.5 billion. He followed up
this by another e-mail of 25 June 2004. He received a response on
that same day (contained in an e-mail wrongly dated as 6 June 2004)
from Antony in which he offered him his shareholding in ZPS for the
sum of $250 million. Peter duly accepted the offer. He came to
Harare and during the period 28 June to 14 July 2004 discussed with
Antony on the terms of payment of Antony's entire shareholding.
He agreed to procure payment where and
when Antony wanted. The purchase price was agreed at $250 million.
It was to be paid by Peter into the account of Antony's daughter,
Jenny, in the United Kingdom, the bank account details of which he
received. The following day after the terms of payment had been
agreed, Antony requested part payment of the purchase price in local
currency. Peter alleged that he made out cheque payments to
Chitekeshe of $115 million and to Vretto of $25 million, as part
payment, a total of $140 million which Anthony used to buy a pick-up
truck. This averment was not disputed by Antony, yet he maintained
in his other affidavits that he was paid $138 million and $112
million remained outstanding. Peter in his prayer and in Mr de
Bourbon's submissions on
behalf of Peter's company, accepted that the outstanding purchase
price was $112 million. No cheques or proof of payment in the sum of
$140 million was produced. I am therefore prepared to hold that
Peter paid $138 million and had an outstanding balance of $112
million.
Antony averred in his opposing affidavit
that he required £12 000 to import a new engine for the craft that
he was building, known as the “Zambezi Trader”. This craft would
not be in competition with the houseboat at all and he was building
it for his own account with the moral support and blessing of Peter.
Peter agreed to pay this amount into his daughter's bank account in
the United Kingdom. He repeated this allegation in paragraphs 31 and
32 of his founding affidavit in Case No. HC 5264/05. This was to be
in lieu
of the balance of the purchase price of $112 million. In Case No.
5264/05, in paragraphs 26 and 27 of his opposing affidavit Peter did
not respond to these averments in so far as they refer to the
alleged mode of payment in foreign currency.
That payment was to be in foreign
currency is clear from Peter's own founding affidavit. In
paragraph 18 he averred that even when he met Antony per chance at
the Borrowdale Race Course in November 2004 he reassured him that
notwithstanding the fall in the value of the Zimbabwean dollar
against the Pound Sterling, the amount outstanding as the purchase
price remained £12 000 being the amount in pounds in July 2004.
The two gentlemen agreed that the
accountant and company secretary of ZPS, Paul Turner, (Paul) a
partner in Ernst and Young Chartered Accountants, would effect the
share transfer and receive Antony's letter of resignation as a
director therein.
There was a delay in the transfer of the
shares which was occasioned by Paul's attempts to structure a tax
avoidance scheme for the benefit and at the insistence of Antony. I
make this finding based on Antony's deliberate failure to respond
to Paul's affidavit, which was filed in support of Peter's
founding affidavit. It was agreed that on 3 August 2004 and 21
August 2004 Peter wrote to Anthony enquiring whether or not he had
signed the necessary transfer documents and resigned as a director of
ZPS, the two factors which would trigger the payment of the balance
of the purchase price by Peter. It also appears that even on 5
November 2004, a date disputed by Athony who put it as being sometime
in September 2004, when the two met at Borrowdale Race Course Antony
intimated that he had been too busy to visit Paul. The parties
reaffirmed that despite an adverse movement of the Zimbabwe dollar
since July 2004, the balance of the purchase price would be paid into
Antony's daughter's account in the United Kingdom at the exchange
rate agreed in July 2004.
On 17 January 2005, Antony proceeded to
appoint Peter Drummond and Martin King as directors of Turner &
Sons, in his stead, who were charged with the responsibility of
overseeing Turner & Sons's interests in the Southern Belle. A
flurry of e-mails followed which attempted to resolve the issue of
the sale of Antony's shares in the ZPS, who was claiming that the
failure by Peter to pay the balance of the purchase price timeously
amounted to repudiation of the contract. He therefore regarded
himself released from the contract.
The negotiations by the parties
culminated in a letter of 23 August 2004 by Turner & Sons's
erstwhile legal practitioners to Dobrocks legal practitioners which
set out the history of their association. In that letter T & S
indicated that it would seek an order to wind up the company in terms
of section 206(g) of the Companies Act, supra.
Dobrock held the firm belief that it had purchased Turner & Sons
shareholding and was therefore the sole shareholder in ZPS. These
disagreements resulted in the two applications for specific
performance and liquidation that are now before me.
The first issue for determination is
whether or not a binding contract of sale was reached between Dobrock
and Turner & Sons.
It is, I believe, common cause that an
agreement of sale was entered into. In its opposing affidavit, in
paragraph 17, Turner & Sons acknowledges that the parties had a
loose gentleman's agreement. Antony concludes that paragraph by
stating that "I believe with respect that the only explanation
that is reasonable in the circumstances is that applicant repudiated
the contract." Paragraph 49(iii) in Case No. HC 5264/05 by
Turner & Sons is to the same effect. Turner & Sons's defence
was in the main predicated on repudiation by conduct of the contract
that was executed between the parties. Indeed Mrs Wood,
for Turner & Sons, in paragraph 2 of her written heads of
argument wrote:
"It is apparent from the applicant's
own case that the agreement in question was very loose even if it was
binding between the parties."
Counsel concentrated their submissions
on the question whether time was of the essence in the performance by
Dobrock of the term relating to payment of the outstanding purchase
price. It was on the assumption that it was of the essence that
Turner & Sons alleged repudiation. The onus in my view lies on
Turner & Sons to show that time was of the essence and that the
failure by Dobrock to act timeously entitled it to rescind the
contract.
Turner & Sons blamed Dobrock for the
delay in paying the balance of the purchase price. The facts as I
find them do not bear out the correctness of Turner & Sons's
view. Paul indicated in his unchallenged affidavit that the tax
avoidance scheme was initiated at the instance of Antony, and was for
Turner & Sons's benefit. My view is that at that stage, Paul was
working as an agent of Turner & Sons. It became, in my finding,
the duty of T & S to impress on him to act with speed if time was
of the essence to it. It is clear to me that Antony understood and
appreciated that the balance of the purchase price would not be paid
out until the share transfer had been effected by Paul, until Antony
had resigned as a director of ZPS and until Antony had obtained a
capital gains clearance certificate from the Zimbabwe Revenue
Authority (ZIMRA).
The delay cannot therefore, be
attributed to Dobrock. Peter, after all was desirous that transfer
be effected with speed as shown by his enquiries of 4 August and 21
August 2004 which Antony did not acknowledge. Antony never did
challenge the averment that when they met at Borrowdale race course
he indicated that he was responsible for the delay for he was too
busy to make a follow up with Paul. Paul after all was acting, as
regards the tax avoidance scheme only, as an agent of Antony. It is
therefore my finding on the papers that it was in fact Antony who was
responsible for the delay. He could not, therefore, lawfully
repudiate the contract by projecting his own inaction onto Dobrock.
Mrs Wood
contended with reference to Concrete
Products Co Pty Ltd v Natal Leather Industries
1946 NPD 377 at 380 and Broderick
Properties v Rood 1962(4) SA
447 that the mere fact that the agreement did not provide a
particular date of performance did not mean that time was not of the
essence. She submitted that to Peter's knowledge Antony had to
purchase an engine for another boat that he was building for £12 000
immediately, that is at the time that they concluded the agreement.
In her view though not spelt out in the oral agreement, the nature of
that agreement and the purpose to which Antony wanted to utilize the
funds were inherently indicative that both parties contemplated that
payment had to be speedily made. Speed payment was inherent in the
agreement itself. The proposition in my view conforms with the
examples that were highlighted in Broderick's
case
supra concerning
the purchase of theatre tickets and repairs of a motor vehicle at a
garage which are required for use within a set time frame.
The appreciation that I attribute to
Antony of the conditions that had to be fulfilled before payment was
made in my view removes his case from one relating to mora
ex re (time set out in the
contract) to one of mora ex
persona, which requires demand
before the time limits for performance are reached.
I associate myself with the statement of
law that was propounded by GUBBAY CJ in Asharia
v Patel 1991(2) ZLR 276 at
279G-280C. He stated thus:
"The general applicable rule is that
where time for performance has not been agreed upon by the parties,
performance is due immediately on conclusion of their contract or as
soon as is reasonably possible in the circumstances. But the debtor
does not fall into mora ipso
facto if he fails to perform
forthwith or within a reasonable time. He must know that he has to
perform. This form of mora,
known as mora ex persona,
only arises if, after a demand has been made calling upon the debtor
to perform by a specified date, he is still in default. The demand,
or interpellatio,
may be made either judicially by means of a summons or
extra-judicially by means of a letter of demand or even orally; and
to be valid it must allow the debtor a reasonable opportunity to
perform by stipulating a period of performance which is not
unreasonable if unreasonable, the demand is ineffective.
Where a debtor has fallen into the mora
ex persona after demand, the
creditor can acquire a right to cancel the contract by serving notice
of rescission in which a second reasonable time limit is stipulated,
making time of the essence. Both demand and notice of rescission are
necessary in order to allow for cancellation for non-performance.
The two may be, and commonly are, contained in the same notice. Such
notice will then fulfil a double function. It will fix a time for
performance after which the debtor will be in mora,
and create a right in the creditor to rescind the contract on account
of the mora."
In the present case, payment of the
purchase price was not due immediately on conclusion of the contract.
It was due as soon thereafter as was reasonably possible in the
circumstances. The circumstances related to the transfer of Turner &
Sons's shareholding by Paul, receipt by him of Antony's resignation
letter and of a clearance certificate from ZIMRA. It was within
Antony's power to expedite these matters. Indeed that it was not
immediate was clearly demonstrated by the use put by Antony of the
part payment which was made of $138 million. He bought a pick up
vehicle. He also was duty bound to place Peter in mora
if he believed that a delay had been occasioned in paying up the
outstanding balance of the purchase price.
Christie
in The Law of Contract in South
Africa 3rd
edition Butterworths 1996
deals with the line of cases culminating in Broderick, supra
at pages 556 to 557. At page
555 he stated:
"The general rule, will be seen in
the next section, is that when the contract does not fix a time for
performance there can be no mora
ex re, only mora
ex persona, so a demand by the
creditor is necessary in order to place the debtor in
mora. Whether there are
exceptions to this general rule is a question that has led to
differences of judicial opinion, but the present law can be stated
with a fair degree of confidence."
It seems to me that in Zimbabwe, Asharia
v Patel, supra
has provided the answer. It confirms the correctness of the general
rule as set out by Christie. It appears to me too that the
differences of judicial opinion that Christie noted may be resolved
by applying the general rule to the particular facts of each matter
in order to ascertain its validity to the time frames as contemplated
by the parties. It is only after this has been done that a decision
on whether mora ex re or
mora ex persona,
applies can be made.
I, therefore, hold in the present matter
that Turner & Sons could not lawfully repudiate the contract
without first placing Dobrock in mora.
Mrs Wood
further submitted with reference to section 11(1) of the Exchange
Control Regulations 1996 (SI 109/96) that on applicant's own case,
the agreement was illegal because payment of the balance of the
purchase price was to be made outside the country. Mr de
Bourbon, on the other hand
submitted that the contract was not illegal. He contended that there
was nothing on the papers to show that the obligations of Dobrock
would be met by it. Rather, so he opined, it was only in the nature
of assistance between friends, between Peter and Antony which was
permissible in terms of the Exchange Control Regulations.
There is a plethora of cases which have
been determined by both the High and Supreme Court which are in
point. My starting point is section 11 of the Exchange Control
Regulations, supra.
It reads:
"11(1) Subject to subsection (2)
unless otherwise authorized by an exchange control authority, no
Zimbabwean resident shall -
-
make payment outside Zimbabwe or
-
incur any obligation to make payment
outside Zimbabwe
-
Subsection (1) shall not apply to:
-
any act done by an individual with free
funds which were available to him at the time of the act concerned;
-
any lawful transaction with money in a
foreign currency account."
Mrs Wood
contended that Dobrock was
registered in Zimbabwe and was therefore resident in this country.
This contention is in my view correct, as it reflects the position
set out in section 3(1) of the Exchange Control Regulations, supra,
for artificial persons. She further contended that Dobrock had not
shown that it had been authorized by the Exchange Control Authority
before it incurred the obligation to make payment outside Zimbabwe.
It had not demonstrated that this was a lawful transaction with money
in a foreign currency account. She contended further that the free
funds exception was applicable to individuals and not to companies,
and that Dobrock could not save the agreement on that basis as it was
inapplicable to it.
In International
Who's Who Ltd v Bernstein Clothing (Pvt) Ltd
SC 28/99, MUCHECHETERE JA, considered the effect of section 8(1) of
the Exchange Control Regulations RGN 399/77 where the respondent, a
limited liability company registered locally incurred an obligation
to pay 20 450 Swiss francs to the appellant, a limited liability
company registered in England, in Johannesburg for transmission to
Vaduz, Switzerland. The respondent raised a point in
limine averring illegality.
At page 4-5 of the cyclostyled judgment, the learned judge of appeal
stated as follows:
"At the outset I should state that I
agree with Mr Moyo's submission
that the contract
between the parties was illegal, invalid and unenforceable because it
was in breach of s 8 (1) of the said Regulations. The provisions of
the section are peremptory. See Abreu
v Campos 1975(1) RLR 198 and
Swart v Smuts
1971(1) SA 819 at 829-30.
As already indicated above, the appellant
conceded that no authority had been obtained by the parties from the
relevant authority for any payment outside Zimbabwe when the contract
was entered into. On the law see Macape
Pty Ltd v Executrix, Estate Forrester
1991(1) ZLR 315 at 320D-E where McNALLY JA said:
"In other words, when one is
concerned with payments INSIDE Zimbabwe (s 7 of the said Regulations)
it is perfectly lawful to enter into the agreement to pay. But
without authority from the Reserve Bank, the actual payment may not
be made. By contrast, when dealing with payments OUTSIDE Zimbabwe
(s8 of the said Regulations) it is unlawful even to enter into the
agreement to pay without first obtaining the authority of the
Minister which has been delegated to the Reserve Bank.” (my
emphasis)
See also Abreu
v Campos, supra;
Young v Van Resnburg
1991(2) ZLR 149(s) at 155 Adleu
v Elliot 1988(2) ZLR 283(s) at
287.”
The
facts in the Young v Van
Rensburg case, supra,
are distinguishable from the present matter. It involved individuals
who were foreign residents. Its importance in my view lies in the
sentiments of KORSAH JA at page 153G - 154A where he agreed with Mr
de Bourbon
in that case that subparagraph 8(1)(a) which barred a Zimbabwean
resident from doing any act, outlawed the doing of even a single
act. It is noteworthy that section 8 of the 1977 Regulations is the
precursor to section 11 in the 1996 Regulations even though there are
some variations in the wording of the two sections in these
respective regulations.
In International
Who's Who Limited case,
supra,
MUCHECHETERE JA agreed with the observation of Mc NALLY JA in
Macape's case,
supra
that an agreement to pay outside Zimbabwe by a resident without
Exchange Control authority where the resident was not an individual
without free funds or where the resident was not utilising money in a
foreign currency account, was void
ab initio.
In Hattingh
and Others v Van Kleek 1997(2)
ZLR 240 were a foreign visitor to Zimbabwe, Van Kleek, who was not
aware that the Exchange Control Regulations prohibited local
residents from incurring obligations to pay money abroad, agreed to
give a loan to a Zimbabwean to be used to develop a Safari business
and the money loaned was to be paid into that Zimbabwean's bank
account outside Zimbabwe, and that Zimbabwean and two other locals
signed a promisory note to repay the loan, the High Court then
ordered the locals to repay the loan. They appealed on the basis
that they acted illegally by incurring an obligation to make payment
outside Zimbabwe without the requisite exchange control authority.
The appeal was dismissed.
KORSAH JA held at page 244D that:
“Section 8 of the Regulations only
prohibits, but does not declare void or illegal, the transactions
enumerated therein” and found that the transactions did not
contravene section 8 of the regulations.
At page 246B he stated:
“The cases clearly show that where a
contract is on the face of it Legal but by reason of a circumstance
known to one party only, is forbidden by statute, it may not be
declared illegal so as to debar the innocent, party relief, for to
deprive the innocent person of his rights would be to injure the
innocent, benefit the guilty and put a premium on deceit.”
The facts of Van
Kleek's case are
distinguishable from the present matter. In addition in casu
both parties were aware that their agreement fell foul of the
Exchange Control Regulations.
In Greebe
& Another v Famaps Investments (Private) Limited
& Anor
HH 124-2004, MAVANGIRA J dealt with the question whether a local
resident could withhold and keep the assets that accrued to him from
a sale by another local resident of those assets situated in Zimbabwe
in circumstances where no payment was made abroad as agreed, on the
basis that to do so would violate section 11(1) (b) of the Exchange
Control Regulations, 1996, supra.
She held that while the agreement
contravened section 11 of the Regulations, the facts called for a
relaxation of the par delictum
rule for if she were to
decline to do so, she would reward the purchaser by giving him a
premium for deceit.
In Adleu
v Elliot 1988(2) ZLR 283(S)
GUBBAY JA at 290B recognised that in oral contracts the court had the
power to determine whether the terms of that contract required exact
performance or the performance of some equivalent act. He stated
thus:
“The application of this broad
principle [that it is not for the court to remake a contract of the
parties in line with INNES CJ in Ambrose
and Aitken v Johnson and Fletcher 1917
AD 327 at 343 and the remarks of BEADLE CJ in Holmes
v Palley 1975(2) RLR 98(AD) at
105C that one party to a contract was not entitled to expect that it
will be carried out in a different manner than agreed because of the
absence of prejudice] does not, of course, preclude a court from
determining whether the parties to an agreement intended that a
particular term thereof was to be fulfilled in
forma specifica, that is in
the exact manner agreed upon by the parties or per
acquipollens, that is, by some
equivalent act.
Where the agreement is in writing and the
language employed is sufficiently clear, the common intention of the
parties must be extracted from the agreement itself. But if the
language is ambiguous or where the agreement of the parties was oral,
then the court is obliged to have regard to the surrounding
circumstances, and to any other admissible evidence in order to
ascertain whether the common intention of the parties was to be
fulfilled in forma specifica
or whether performance thereof by some equivalent act would suffice.”
In Adleu's
case, supra the parties
entered into an agreement of sale in which part of the purchase price
was payable abroad in foreign currency and the remainder at home in
local currency. GUBBAY JA approved the four factors outlined by
CLAASEN J in Diggelen v de
Bruin and Another 1954(1) SA
188 SWA at 193B-G that:
“1. If the surrounding circumstances
and other admissible evidence afford no clue as to what was in the
contemplation of the parties then there is a rebuttable presumption
in favour of performance in
forma specifica. But the
presumption cannot be rebutted where it is clear from the terms of
the contract that performance in
forma specifica had been
stipulated.
-
In case if doubt the court will be more
likely to find in favour of performance per
acquipollens if the manner of
performing the term is not material and also where performance in
forma specifica is impossible
through no serious fault on the promissors part.
The act or performance tendered per
acquipollens where such is
permissible must be an equivalent act to that stipulated for or be
of such a nature that it can make no material difference to the
promise.
Where the promissor succeeds in
rebutting the presumption mentioned above, there may be
circumstances falling short of impossibility and even where there
may be some fault on the part of the promissor; a court may be
justified in concluding that the promissor's perfomance or
tendered performance amounted to substantial performance.”
It seems to me, as appears from Dobrock's
averment that the parties contemplated that payment would be in
sterling pounds in England into the account of Antony's daughter
Jenny. Dobrock was willing to pay “where and when” T & S
desired it be made. The agreement was sealed when T & S agreed
to make payment in foreign currency in England. The parties thus
contemplated exact performance and not some substantial performance.
That exact performance was however illegal. There is no room for the
application of CLAASEN J's formulation in Diggelen's
case, supra,
in these circumstances.
It is my view, that Van
Kleeks case, supra does not
apply to the present matter. Dobrock was aware that it was
contravening the Exchange Control Regulations when it promised to pay
“where and when” and agreed to pay in England. This is clear
from the lack of particularity on the decision on the mode of payment
that is apparent in its affidavits. I cannot allow this court to be
an accomplice to an illegality by enforcing this illegal contract, as
prayed for by Dobrock.
I agree with Mrs Wood,
that Dobrock's claim on specific performance and other subsequent
relief related thereto should be dismissed. After all Dobrock is not
an individual so the free funds exception would not avail it. The
oral agreement was transacted between the parties by individuals who
were representing them respectively. Peter did not aver nor even
suggest that he had free funds from which he would pay T and S. Even
though he was an individual he was acting for Dobrock. He had no
exchange control approval to incur the liability to pay on behalf
Dobrock in foreign currency in England. The agreement reached is
illegal, invalid, and unenforceable. See also Barker
v African Homesteads Touring and Safaris (Pvt) Ltd & Anor
SC 18/2003.
THE PROVISIONAL LIQUIDATION CLAIM CASE
5264/05
T and S seeks the liquidation of ZPS on
the basis that the two shareholders in T & S and Dobrock have had
a disharmonius and tumultuous working relationship.
It set out the history of that
relationship from the period of the construction of the vessel which
culminated in arbitration. Thereafter T and S ran the project until
1996 when Dobrock took over, and appointed a managing director who
ran the affairs of ZPS. The tourism industry suffered a downturn
after 2000 and the profitability of ZPS plummeted. Antony and Peter
were desirous of disposing of their shareholding.
It is correct, as submitted by Dobrock,
that the problems that beset the parties which culminated in
arbitration were not catastrophic. The parties operated ZPS in fit
and starts up to the conclusion of the illegal oral agreement of July
2004. Until January 2005, it appeared that T and S had given up on
the management control of ZPS and had no interest in what was going
on. It is also true that the e-mail exchanged showed decorum and
civility until matters came to a head in 2005 as a result of the
ill-fated agreement of sale.
In 2005, T and S earnestly sought to be
appraised as a shareholder of its interest in ZPS. Dobrock
stonewalled and took the attitude that T and S no longer had any
interest in the joint venture to warrant its revived attention. The
shareholding battle brought out the worst in the two personalities
involved. They maligned each other's personalities and managerial
competencies (see Dobrock's letter of 6 October 2005).
That the affairs of ZPS were not being
run with the full participation of both shareholders is clear from
the contents of the letter of 28 November 2005 which was written by T
and S erstwhile legal practitioners requesting copies of all bank
statements from 1995 to date and details of all passengers who
travelled on the houseboat, how much it was paid and in what
currency.
There were insinuations of financial
misappropriations which were denied by Dobrock. A supplementary
affidavit was filed by T and S in order to strengthen its application
on 23 June 2006. That supplementary affidavit is replete with
allegations of diversion of foreign currency proceeds from ZPS to
other sister companies of Dobrock, a fact vehemently denied by
Dobrock. It also demonstrated a reluctance by Dobrock to release
administrative records in regard to passenger information. It
averred the possible misappropriation of foreign currency receipts
due to ZPS.
The documentation was eventually
supplied to Ernst and Young by Dobrock on 7 July 2006. It was filed
with the leave of this court on 19 October 2006 in the form of an
answering affidavit in response to the supplementary affidavit.
The documentation supplied showed that
foreign currency generated by ZPS was utilised to pay an offshore
loan of Intercontinental Trading (1992) (Private) Limited.
Dobrock denied that ZPS had not operated
successfully in the 10 years between 1994 and 2004. It alleged that
the relationship between Peter and Antony was friendly, harmonius,
cordial and constructive up to January 2005. It denied managerial
deadlock and denied stealing operating revenue principally foreign
revenue from ZPS.
Its view was that the failure to
complain since 1997 to the date of application showed T and S had
been satisfied. It proposed a full audit of all cruises, foreign and
local revenue from the records between 1999 to 2004 since those going
back beyond a period of 7 years were no longer in existence.
It took the view that there were
disputes of facts which could not be resolved on the papers. It
prayed for the dismissal of the application.
It seems to me that notwithstanding the
dispute of facts, I can make a robust determination of the two issues
before me which are whether there is a deadlock and whether ZPS
should be wound up. After all, T & S need only to establish on a
prima facie
basis that it is just and equitable that the company be provisionally
wound up. It seems to me that a deadlock exists especially after the
ill fated contract of sale. Clearly there is a justifiable lack of
confidence in the conduct of the company's affairs. There are
accusations, supported by documentary evidence that foreign currency
generated by ZPS has not been utilized for the benefit of ZPS
business activities.
ZPS is a small domestic company. In
accordance with the principal guidelines set out in Sultan
v Fryfern Enterprises (Pvt) Ltd & Another
2000(1) ZLR188 which approved the remarks of House of Lords in
Ebrahimi v Westbourne
Galleries [1972] 2 ALLER 492,
1find that it is just and equitable that ZPS be provisionally wound
up on that ground.
There does not appear to me to be any
realistic, sufficient and reasonable remedy other than provisional
liquidation. The bickering that has gone on can only be resolved by
protracted negotiations whose outcome is uncertain. There is no
alternative remedy in my estimation to winding up. Applicant has
thus discharged the onus on it to justify the order sought.
I accordingly grant the order sought by
T and S in case No. HC5264/05
COSTS
Turner and Sons has been successful in
both applications. In the specific performance matter it sought the
dismissal of Dobrock's application with costs on the higher scale.
It cannot escape culpability for agreeing to an illegal agreement.
Its pleadings were based on the principle of repudiation
which I have not upheld. It seems to me fair and just that I grant
it its costs in case No. HC 5186/05 on the ordinary scale.
As regards the liquidation claim the
costs will be determined on the return date.
DISPOSITION
In the premises: It is ordered that:
The application in case No. HC 5186/05
be and is hereby dismissed with costs.
-
In case HC 5264
-
The first respondent company Zambezi
Paddle Steamers (Private) Limited is provisionally wound up pending
the granting of an order in terms of paragraph 2:3 or the discharge
of this order.
-
Mrs Theresa Grimmel of KPMG Chartered
Accountants, Mutual Gardens 100 The Chase, Emerald Hill, Harare be
appointed as Provisional Liquidator of the First Respondent Company
with the powers set out in section 221 of the Companies Act
[Chapter 24:03].
-
Any interested party may appear before
this court sitting at Harare on the 14th
day of February 2007 to show cause why an order should not be made
placing the first respondent company in Liquidation and the costs
of these proceedings all be costs of liquidation.
-
This order shall be published once in
the Government Gazette and once in the Herald Newspaper.
Publication shall be in the short form approved by the Registrar of
this Honourable Court.
-
Any person intending to opposed or
support the application on the return day of this order shall:
-
Give due notice to the applicant at
Messrs Byron Venturas &
Partners, 2nd
Floor Tanganyika House, corner 3rd
Street/Kwame Nkurumah Avenue, Harare.
-
Serve on the applicant at the address
given above a copy of any affidavit which he files with the
Registrar of the High Court.
Atherstone & Cook,
applicant's legal practitioners in Case No. HC 5186/05
Byron Venturas & Partners,
respondent's legal practitioners
Byron, Venturas & Partners,
applicant's legal practitioners in Case No. HC 5264/05
Atherstone & Cook,
respondent's legal practitioners in Case No. HC 5264/05
