Plaintiff
in this matter issued summons claiming:
(a)
Payment of the sum of $13,123= (United States dollars) being the face
value of pension annuity that defendant undertook to pay to plaintiff
upon maturity of such policy.
(b)
Interest thereon from the date of issue of summons to date of
payment.
(c)
Costs of suit.
The
facts of the matter are largely common cause. They being that:
On
1 October 1993, by written agreement, the parties entered into a
retirement annuity policy agreement whereby the plaintiff invested
the sum of $19,704=31 with Old Mutual Retirement Annuity Fund. The
policy was to mature in October 2014 at the value of $86,485= plus
profit. At some stage, at around 2004, due to economic hurdles, the
defendant offered the plaintiff the sum of $207,000=, in Zimbabwean
dollars, which the plaintiff says was equivalent to 36 United States
dollars at the material time. He refused to accept it on the basis
that he could not be paid out an equivalent of $36 after investing
about $2,990-00 United States dollars which he expected to be grown
by the defendant as the defendant was an investment expert.
In
2011, the plaintiff was again offered $167=16 by the defendant who
blamed the hyper-inflationary environment that prevailed between
2003- 2009. There is not much factual dispute and where factual
disputes are present, I hold the view that they are not so material
to the issues for determination. The plaintiff's case is simply
that he invested an
equivalent of about US$$2,990= in 1993, which was to be paid out in
about 21 years at a rate equivalent to about US$13,000= now that the
Zimbabwean dollar is no longer in existence.
The
defendant's case is that, indeed, the plaintiff invested about
ZW$19,704=31 in 1993 which was to mature at about ZW$86,485=
Zimbabwean dollars in 2014. The defendant disputes the United States
dollars equivalent as claimed by the plaintiff, and, in fact,
challenged the admissibility of the Reserve Bank of Zimbabwe Currency
Evaluation Report over the years.
All
this court has to determine is what the plaintiff should be entitled
to in the current multi-currency regime. The defendant offered the
plaintiff $167=16 in 2011.
The
plaintiff insists that he is entitled to the full performance of the
contract by the defendant and puts the equivalent of the maturity at
about US$13,000=. The plaintiff avers that the defendant should be
compelled to perform its obligations in terms of the contract as they
failed in their duty to warn him about the effects of hyperinflation
as well as their inability to remedy the situation due to regulatory
constraints. He insists the defendant was negligent in not advising
him of the erosion of his savings on time. He argues that had he been
advised on time he could have removed his funds and invested in
sectors that would not dwindle his returns as that was still possible
despite the hyper-inflationary environment.
The
defendant, on the other hand, pleads supervening impossibility that
they are a regulated industry and could not just act as they wished.
Also that they did try, in 2004, after the regulator granted them the
permission to do so, to pay back the plaintiff's dues in terms of
the contract.
This
court has to assess the following pertinent issues;
(1)
The parties entered into a Retirement Annuity contract which would
mature in 2014 with a sum of about $19,704=31 having multiplied about
four times to $86,485= over 20 years, that is, the defendant would
grow the plaintiff's investment to about four times its value.
(2)
The plaintiff argues that he should be entitled to US$13,123= as that
was the value of ZW$86,485= in 1993 in relation to the USD.
(3)
The defendant pleads a supervening impossibility in terms of the
hyper-inflationary environment that eroded investments and savings
thereafter.
I
need to assess if the plaintiff is entitled to anything in terms of
the contract. In other words, the first issue to ascertain is whether
vis
major, as raised by defendant in its plea, rendered the contract
impossible to perform.
I
will hasten to point out that the defendant's own conduct, between
the period 2004 and 2011, does not show that they believed that the
hyper-inflationary environment relinquished their obligations in
terms of the contract, but, rather, that the sums due had to be
recalculated. I say so because, in 2004, they offered to pay the
plaintiff ZW$207,000= (Zimbabwean dollar); they did not say to him
that it was no longer possible to meet their obligation. Again, in
2011, they offered the plaintiff US$167=, meaning right up to 2011,
they still knew they had a duty to meet their part of the deal. By
the defendant's own conduct, it cannot be held that the contract
was no longer possible to perform, but, rather, that they sought to
alter the terms of the contract, which alterations were not accepted
by the plaintiff.
In
other words, the defendant pleads supervening impossibility to the
extent that the original terms of the contract are no longer possible
to perform and now they want to pay out a sum that deviates from the
original contractual terms due to hyperinflation.
The
question before this court is, therefore, how much should be paid to
the plaintiff, not that the plaintiff should not be paid at all, as
per the defendant's own conduct prior to the proceedings. This is
so even from the defendant's own witness' testimony. Her evidence
was not that the defendant could not pay anything at all but that
because of hyperinflation they re-calculated values of all policy
holders upon dollarization of the economy.
We
now move on to assess how much then should the plaintiff be paid. The
defendant offered US$167= as at 2011; the plaintiff wants $13,000= as
at 2014.
Firstly,
a look at the Retirement Annuity Contract, annexed in the schedule of
documents, shows that there is nothing to show that the plaintiff was
advised, or that he agreed that he would bear the risk, in the event
that the economy does not perform as expected. Neither did any of the
parties point towards such a clause.
Again,
there is no clause in the agreement that gives the defendant the
right of cancellation of the contract for any reason. Neither have
the parties pointed at such a clause. This means that the defendant
could not, in terms of the Retirement Annuity Contract, cancel it
either on notice or mutually. The contract only provides for the
lapsing of the policy if certain conditions are not met by the
insured - but not cancellation.
The
defendant, from the facts, attempted to cancel the contract in 2004,
due to the hyperinflationary environment; plaintiff refused, as he
was of the view that he would not get value for his money and that
the defendant had left it until too late to notify him of the erosion
on his policy. According to his own understanding he expected them to
invest in assets in order to protect his savings in property form
despite the hyper-inflationary environment.
It
would appear, from the correspondence led between the parties, and
the evidence of the defendant's witness, there was no specific
explanation to the plaintiff as to how his monies would be invested
and the risks attendant thereto. In fact, the defendant's witness
shrugs that responsibility off saying the plaintiff's personal
financial advisor should have been the one to do that.
The
bottom line is that that was never done by the defendant as per the
plaintiff's evidence.
Now,
it is trite law that once a contract has been entered into it can
either be cancelled on notice as per the provisions of the agreement,
or mutually by the parties, or through an order of the court, where
mutual agreement cannot be reached.
This
is not what happened in this case. The plaintiff's contract with
the defendant therefore still subsists.
In
the case of Unibank
Savings and Loans Ltd v ABSA Bank Ltd
2000 (4) SL 191 (W) FLEMING DJP remarked as follows:
“Impossibility
is furthermore not implicit in a change of financial strength or in
commercial circumstances which cause compliance with contractual
obligations to be difficult, expensive or un-affordable.
Deterioration of that nature can be foreseen in the business world at
the time when the contract is concluded.”
The
approach of the courts is therefore that the commercial circumstances
that make compliance with contractual obligations impossible are
factors which should be regarded as being foreseeable in the business
world. It would therefore be very difficult to raise a defence of
inability to perform in terms of the agreement that the circumstances
caused by an economic recession. It would thus be prudent for the
contracting parties to explicitly include vis
major
in their agreement and specifically provide for an economic recession
as a ground for inability to perform in a contract.
It
is my considered view that between 1993 and 2004, the Zimbabwean
dollar was gradually losing its value and it would either have been
prudent for the defendant to seek cancellation of the contract at
that stage than to wait until the plaintiff's funds were valueless.
Again, the country dollarized in 2009. The defendant does not explain
why, between 2009 and 2014, it would still be impossible to perform
as per Mrs Vera, the defendant's witness, she says in 2009 they
re-calculated the plaintiff's entitlement, but since the plaintiff
was not paid the recalculated sum, as he did not accept it, it is not
clear as to what the defendant then did in the five (5) years to save
the situation. It would have been better if the defendant's case
had been that mathematically we can only pay the plaintiff so much as
at 2014, because, after the dollarization of the economy, we
re-invested what we had salvaged at dollarization and here are the
figures, this is what the plaintiff should now be entitled to.
The
plaintiff claims judgment in the United States dollars. United States
dollars are the functional currency at this material time. There is
ample authority to show that the plaintiff is indeed entitled to
payment in the currency that is functional at the material time. The
Supreme Court, in the case of Watergate
(Pvt)
Ltd v Commercial Bank
of Zimbabwe
SC70-06 held that:
“…,
the legal position is that a party is entitled to payment in foreign
currency if he can show that a judgment in that currency would most
truly express his loss, and, therefore, most fully compensate him for
that loss. That was the rational in the case of Makwindi
Oil Procurement (Pvt)
Ltd v National Oil Company of Zimbabwe
1998 (2) ZLR 482 (SC) where it has held that 'justice
requires that a plaintiff should not suffer by reason of a
devaluation of a currency…,.“
NDOU
J, in the case of Joseph
Marshall Stuart v NRZ
HB07-14,
also held the same view.
It
is therefore an accepted view that contracts that were entered into
during the Zimbabwean dollar era and sounding therein, can be paid
out in the functional currency which is the United States dollar.
In
fact, the plaintiff's claim in this case does not even sound in
foreign currency, it sounds in the functional currency of the country
as the Zimbabwean dollar is no longer applicable. Even the defendant
sought to pay the plaintiff US$167= in 2011 as that is the
operational currency in the multi-currency regime.
We
then move on to decide how much then is due to the plaintiff by the
defendant?
ZW$19,704=31,
an equivalent of US$2,990= in 1993, which was to mature at ZW$86,485=
in 2014. Whilst the plaintiff argues that the value of ZW$86,485=, in
1993, would be US$13,123-67, therefore, that should be the payment
amount, I doubt if this court can be in a position to hold that the
maturity value in 2014, should be equated to a rate of foreign
exchange that was applicable in 1993; this would, in my view, not
make any logical conclusion on the amount due to the plaintiff in
2014. I, however, hold the view that the plaintiff invested an
equivalent of US$2,990=, in 1993, which was ZW$19,704=31, and then
maturity value in 2014 would be ZW$86,485= (Zimbabwean dollar). A
logical assessment of the same due to the plaintiff in 2014, in my
view, would be to hold that the sum of ZW$19,704=31 (Zimbabwean
dollar) would be multiplied about 4; four (4) times in the 21 years
to amount to ZW$86,485=. Therefore, a fair assessment of what is due
to the plaintiff would be to multiply US$2,990=, which is the proven
equivalent of ZW$19,704=31, as at 1993, by the 4. Four (4) times
US$2,990=, this would give us about US$13,156=.
This
would mean that the plaintiff has, on a balance of probabilities,
indeed shown that he is entitled to the sum as claimed in the
summons. That should be the maturity value of his investment in
2014….,.
I,
accordingly, grant the plaintiff the prayer he seeks in the summons,
that is:
(a)
That the defendant pays to the plaintiff the sum of $13,123=67
(United Stated dollars) together with interest at the prescribed rate
from the date the summons were issued to the date of payment.
(b)
Costs of suit.
