Opposed Application
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.
HC5186/05, 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–77F.
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:
“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 HC5264/2005.
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:
“1.
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.
2.
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.
3.
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.
4.
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.
5.
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
HC5264/05 (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. HC5264/05.
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. HC5264/05
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 (SI109/96) 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 -
(a)
make payment outside Zimbabwe; or
(b)
incur any obligation to make payment outside Zimbabwe.
(2)
Subsection (1) shall not apply to:
(a)
any act done by an individual with free funds which were available to
him at the time of the act concerned;
(b)
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
SC28/99, 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 section 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
(section 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 (section 8 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 McNALLY 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
HH124-2004, 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.
2. 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.
3.
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.
4.
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
SC18/2003.
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) ZLR 188 which approved the remarks of House of Lords in
Ebrahimi
v Westbourne Galleries
[1972] 2 ALL ER 492, I find 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. HC5186/05 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:
1.
The application in case No. HC5186/05 be and is hereby dismissed with
costs.
2. In
case HC 5264:
2.1
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.
2.2
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].
2.3
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.
2.4
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.
2.5
Any person intending to opposed or support the application on the
return day of this order shall:
2.5.1
Give due notice to the applicant at Messrs
Byron Venturas & Partners,
2nd
Floor Tanganyika House, corner 3rd
Street/Kwame Nkurumah Avenue, Harare.
2.5.2
Serve on the applicant at the address given above a copy of any
affidavit which he files with the Registrar of the High Court.
Atherstone
& Cook, applicant's
legal practitioners in Case No. HC5186/05
Byron
Venturas & Partners,
respondent's legal practitioners in
Case
No. HC5186/05
Byron,
Venturas & Partners,
applicant's legal practitioners in Case No. HC5264/05
Atherstone
& Cook, respondent's
legal practitioners in Case No. HC5264/05
