MAKONI
J:
The
applicant (Alshams) instituted action proceedings against the
respondents jointly and severally the one paying the other to be
absolved for the payment of US$2,789,137-02.
The
second respondent (Interfin) did not enter appearance to defend.
Alshams sought and obtained default judgment against the Interfin.
Savannah,
the first respondent entered appearance to defend. Alshams then
instituted the present application for summary judgment proceedings.
The
background to the matter is that Alshams is the holder of Bankers
Acceptances (BAs) avalised by Interfin to the value of
$26,000,000-00. It has sufficient assets in the jurisdiction of this
court to be able to satisfy any adverse order of costs.
Sometime
in 2011 and in 2012 Savannah accessed certain facilities from
Interfin secured by BAs issued by Savanna and drawn on, avalised and
accepted by Interfin to the value of US$2,789,137-02. Interfin sold
the BAs to Alshams on a buy back basis. On maturity Alshams presented
the BAs for payment by Savannah who failed and or refused to honour
or discharge the BAs.
Alshams
then instituted action proceedings referred to above.
In
its founding affidavit, Alshams verily the cause of action and aver
that notwithstanding the notice of appearance to defend, Savannah has
no bona
fide defence
to the claim and the notice was entered solely for purposes of
delaying the action. It further avers that by letter dated 7 March
2012, Savannah was advised by Interfin that it had sold the BAs to
the applicant on a buy back basis and that the amounts had become due
and payable to Alshams directly by Savannah.
In
its opposing affidavit, Savannah avers that it accessed a loan
through Interfin from Afrexim Bank. As a condition of the loan the
BAs in issue were issued by it and were in support of the loan
facility by Afrexim Bank. It averred that it was unaware of any
transfer or negotiation of the BAs to Alshams and that the transfer
was unlawful, fraudulent and in breach of the Banker/client
relationship between Savannah and Interfin. It only became aware of
the alleged arrangement between Alshams and Interfin on 7 March 2012
when it received a letter to that effect.
It
further averred that it had discharged its obligations to Interfin
outside of the Afrexim facility which were secured by the BAs. In the
alternative it averred that the BAs relied on by Alshams have expired
and are invalid.
In
the further alternative, it avers that in the event that judgment is
entered against Savannah, then this court must order Interfin to
indemnity Savannah dollar for dollar for the loss that it will suffer
as a result of the fraudulent conduct by Interfin together with all
legal costs.
Alshams
filed an answering affidavit where it averred that it had no
knowledge of the dealings between Savannah and Afrexim Bank. It
denied that Interfin had no authority to negotiate or trade the BAs
in its favour. It further denied that Savannah had no knowledge of
the negotiation of the BAs to Alshams. It referred to the letter of 7
March 2012. It denied that the negotiation of the BAs was unlawful
and fraudulent. It further averred that the Savannah does not deny
receiving net proceeds against the BAs in issue.
Alshams
in its Heads of Argument, gave notice that it will apply in terms of
Order 10 rule 67(c) for leave to have the answering affidavit filed
of record in this matter to be included as part of the record.
Savannah,
in their heads of argument took, in
limine,
the point that Alshams had failed to comply with the provisions of
Order 10 rule 67 in that the rule precludes an automatic right to
file an answering affidavit in summary judgment proceedings.
It
appears Mr Chinake's
concern was that the answering affidavit was filed without prior
permission of the court. SMITH J (as he then was) in In
Vogue (Pvt) Ltd v
E
L Blue HH82/93
at p 3 stated;
“I
d not think a replying affidavit should be, as it were, held in
reserve and then produced at the hearing of the application. That
would be most unfair to the respondent and the judge hearing the
matter. I consider that any replying affidavit in an application for
summary judgment should be filed as though it were an answering
affidavit and then at the hearing of applicant should seek the
court's permission in terms of part (c) of the proviso to rule 67.”
See
also Edgars
Stores Ltd
v Dolem
Investments
(Pvt) Ltd HB 3/04.
I
agree with the approach adopted by SMITH J. This will allow all the
parties involved to have read the affidavit before hand and be able
to formulate their positions and be ready to deal with the issue
rather than wait for day of hearing. To do otherwise leads to the
undesired postponement and unnecessary increase of costs in the
matter.
At
the hearing, Mr Chinake
contended that Alshams was aware of the circumstances of the Interfin
which was that the arrangement between it and Alshams was temporary
as stated in the letter of 7 March 2012. The averments of fraud are
not new. They could not have escaped Alshams. They should have dealt
with all facts in the founding affidavit.
Mr
Girach
submitted
that rule 67(c) was designed for situations such as the present case.
The applicant was not aware of the allegations of fraud. The letter
of 7 March 2012 does not suggest any fraud. There is nothing to
suggest that Alshams ought to have known about the fraud. It was not
in the public domain. There were no criminal allegations.
The
relevant portion of rule 67 provides:-
“67.
Limitations as to evidence at the hearing of applications
No
evidence may be adduced by the plaintiff otherwise than by affidavit
of which a copy was delivered with the notice, nor may either party
cross-examine any person who gives evidence viva vorce or by
affidavit; provided that the court may do one or more of the
following –
(a)
Permit evidence to be led in respect of any reduction of the
plaintiff's claim;
(b)
Put to any person who gives oral evidence questions -
(i)
To elucidate what the defence is; or
(ii)
To determine whether, at the time the application was institute, the
plaintiff was or should have been aware of the defence;
(c)
Permit the plaintiff to supplement his affidavit with a further
affidavit dealing with either or both of the following -
(i)
Any matter raised by the defendant which the plaintiff could not
reasonably be expected to have dealt with in his first affidavit; or
(ii)
The question whether, at the time that the application was
instituted, the plaintiff was or should have been aware of the
defence.”
The
parties are agreed on the import of rule 67(c) which is that the
court may permit the plaintiff to supplement his affidavit with a
further affidavit in response to issues raised by the defendant which
the plaintiff could not reasonably be expected to have dealt with in
his founding affidavit.
The
issue therefore, is whether the matters raised by the plaintiff in
the answering affidavit are in response to matters which the
plaintiff was not aware of at the time it filed its answering
affidavit.
The
only issue raised by Alshams in its submissions is the fraud
allegations made by Savannah. This aspect is related to in para 7.2
of the answering affidavit. The rest of the affidavit which is 19
pages long, dealt with other issues not related to the fraud. Alshams
was building and strengthening its case in the answering affidavit
when the other party have no opportunity to respond to same. Such
acts defects the whole purpose of having summary judgment
proceedings. I will therefore allow the answering affidavit in so far
as it responds to the issue of fraud and expunge the rest of the
paragraphs from the record.
Summary
judgment is a procedure designed to enable the plaintiff whose claim
falls within certain defined categories to obtain judgment without
the necessity of going to trial. The objective is to enable the
plaintiff, with a clear case, to obtain swift enforcement of a claim
against a defendant who has no real defence to the claim.
This
position is now settled in on law. Case law has stressed the fact
that the remedy provided by this rule is of an extraordinary and
drastic nature which is very stringent in that it closes the door for
the defendant. The basis of granting the claim is that the
plaintiff's case is unimpeachable and that the defendant's
defence is bogus or bad or low. See Herbstein
&Van Winsen,
ed 4 p 34.
The
defendant must establish a prima
facie defence
and must allege facts which if he can succeed in establishing them at
trial would entitle him to succeed in his defence at trial. See Rex
v
Rhodian
Investments (Pvt) Ltd
1957 R & N 723; Kingstone
Ltd v
LD
Ineson (Pvt) Ltd 2006
(1) ZLR 451 S.
See
also Hales
v Doverick
Investments (Pvt) Ltd
1988 (2) ZLR 228 at 239 G-239 B where MALABA J (as he then was)
stated;
“The
defendant's affidavit should not
disclose the nature of the defence relied upon to resist
plaintiff's claim for ejectment, but
must set out the material facts on which that defence is based in a
manner that is not inherently or seriously unconvincing. In
Mbayiwa
v
Estern Highlands (Pvt) Ltd S-139-86
at pp 4-5 of the cyclostyled judgment MANALLY JA referred to the
degree of particularity and completeness which the facts averred by
the defendant in its affidavit filed in opposition to an application
for summary judgment must achieve as being that:-
'while
the defendant need not deal exhaustively with the facts and the
evidence relied on to sustain them, he
must at least disclose his defence and material facts upon which it
is based, with sufficient clarity and completeness to enable the
court to decide whether the affidavit discloses a bona
fide
defence.
(Maharaj v Barclays
National Bank Ltd
1976 (1) SA 418 (A) at 426D).
...the
statements of material facts (must) be sufficiently full to persuade
the court that what the defendant has alleged. If it is proved at the
trial will constitute a defence to the plaintiff's claim......if
the defence is averred in a manner which appears in all the
circumstances needlessly bald, vague or sketchy that will constitute
material for the court to consider in relation to the requirement of
bona
fides (Breitebanch
v
Fiat
SA (Edms)BPK
1876 (2) SA 226 at 228 D-E)
...he
must take the court into his confidence and provide sufficient
information to enable the court to assess his defence.
He must not content himself with vague generalities and conclusory
allegations not substantiated by solid facts (district
Bank Ltd v
Hoosain
& Ors 1984
(4) SA 544 at 547 G-H).”
Mr
Girach
submitted that BAs were signed by Savannah as the drawer and Interfin
as the acceptor. BAs were made in favour of Interfin as security. He
further contended that BAs are by that nature negotiable. The consent
of Savannah was not a prerequisite to the negotiation of the BAs. The
contention that the negotiation of the BAs amounted to unlawful
conduct is untenable.
Mr
Girach
further contended that the other issues raised by Savannah were
seeking to create a ruse with vague unsubstantiated allegations in a
desperate attempt to buy time. These are;
(i)
That the letter dated 7 March 2012 indicated that the BAs had been
sold on a temporary basis.
(ii)
That Interfin engaged in a fraud but do not provide particulars of
how this came about.
(iii)
That it paid off the loan to Interfin but does not advise the court
as what payments were due and what payments were made and proof of
the payment.
(iv)
That Savannah retired BA No. 1736–615913-180 and yet it is not of
one of the BAs applicant relies on for its claim.
Mr
Chinake
submitted
that Savannah admits issuing the BAs and that they were to produce
security for a facility with Afrexim Bank. Interfin was acting as an
intermediate Bank for the loan advanced to Savannah by Afrexim Bank.
In negotiating the BAs, Interfin acted fraudulently. No wonder its
statement in the letter of 7 March 2012 that the arrangement was
temporary. He further submitted that an endorsement by Savannah for
the negotiation of the BAs was necessary as the BAs were used as
security for the benefit of Afrexim Bank facility.
Mr
Chinake
further contended that, in the alternative, the bills had expired at
the time that they were presented and section 44(1) of the Bill of
Exchange Act applies.
He
further contended that Alshams had claimed interest at the rate of 23
per cent in the summons and yet was claiming 25 per cent in the
present proceedings. Alshams was also claiming collection commission
and yet the BAs do not set out any such conditions. He further
contended that Savannah had made payments to Interfin but is now
being required to pay the entire face value of the BAs without
reference to the payments it has made.
In
reply Mr Girach
contended that Savannah endorsed the BAs and there was no reference
to Afrexim Bank. He further submitted that Alshams will claim
interest at the rate of 23 per cent as mentioned in the summons and
that it abandons the claim for collection commission.
He
further submitted that the bills were presented on maturity and were
not honoured. Savannah did not deny the averment in para 10 of the
founding affidavit. No evidence of fraud was submitted by Savannah.
Both
parties are agreed that the BAs are bills of exchange within the
meaning of the expression as used in the Bills of Exchange Act
[Chapter
14:02]
(the Act). Section 3(1) of the Act defines a bill of exchange as
follows:
“(i)
A bill of exchange is an unconditional order in writing, addressed by
one person to another, signed by the person giving it, requiring the
person to whom it is addressed to pay on demand, or at a fixed or
determinable future time, a sum certain in money to, or to the order
of a specified person or to bearer.”
Black's
Law
Dictionary,
ed 5 at p 133 defines a BA as;
“Bankers
acceptances are short-term credit instruments most commonly used by
persons or firms engaged in international trade. They are comparable
to short-term securities (for example, treasury bills) and sold on
the open market at a discount.”
KUDYA
J in Standard
Chartered Bank v
Zimra
2007
(1) 228 (H) at 213 E stated the following in relation to treasury
bills;
“THE
NATURE OF TREASURY BILLS
These
are freely negotiable financial instruments which fall into the same
class as promissory note, bankers
acceptances
and bills of exchange. They
are freely negotiable before debt instruments which are sold at a
discount on that face value. They
are used to finance commercial operations from their sale at a
discount and payment is made at that face value on maturity. They
may, of course further be sold for less than their face value by any
holder before maturity.”
(my own underlining)
From
the above it is clear that BAs are, by their name freely negotiable.
Savannah
endorsed the BAs at the back and in the endorsement there is no
reference to Afrexim Bank. It was an open endorsement suggesting that
Interfin would deal in the BAs in relation to any other party and not
Afrexim Bank.
As
was stated in the Standard
Chartered
Bank
(supra)
the BAs may be sold for less than their face value by
any holder
before maturity.
Interfin
was the holder of the BAs and could freely negotiate them. The
consent of Savannah was therefore not a pre requisite to the
negotiation of the BAs.The contention that the negotiation of the BAs
by Interfin amounted to unlawful and fraudulent conduct cannot be
sustained. Seeking such consent would defeat the whole idea
underlying the issuance of BA which is to raise funds on the open
market.
In
any event, if Savannah had issues with the way Interfin had handled
the BAs one would have expected it to protest to both Interfin and
Alshams at the earliest available opportunity, which was 7 March
2012. Its silence is consistent with the fact that it knew and
appreciated the exact nature of the instrument it had signed.
My
view is that this is the determining factor. All the other issues
being raised by Savannah are as rightly pointed by Mr Girach,
a ruse in an attempt to deny Alshams to obtain a swift enforcement of
its claim.
Savannah
has not laid a basis for stating that it has paid off the loan to
Interfin. In any event Alsham's claim is based on the BAs and not
the facility that Savannah had with Interfin. The BAs that Savannah
claim to have retired are not the BAs that Alshams's claim is based
on.
It
is my finding that Alshams's claim is unimpeachable and that the
Savannah has failed to establish a prima
facie defence
and facts which if it can succeed in establishing them it will
entitle it to succeed in his defence at the trial.
Accordingly
I will make the following order:
IT
IS ORDERED THAT:
1.
Summary Judgment be and is hereby granted.
2.
The first respondent, be and is hereby ordered to pay:-
(a)
The sum of US$2,789,137-02 (Two million seven hundred and eighty nine
thousand one hundred and thirty seven United States Dollars and two
cents) being the face value of the Banker's Acceptances issued by
first respondent.
(b)
Interest thereon at the rate of 25 per cent per annum, capitalised
from the maturity date of each and every one of the Banker's
Acceptances, to date of final payment.
(c)
Collection commission in relation to the aforesaid claim in
accordance with By-law 70 (2) of the Law Society of Zimbabwe By-laws,
1982.
3.
The first respondents liability is joint and several with that of the
second respondent and the first respondent may only be absolved upon
payment of the outstanding amount in full by the second respondent.
Dube,
Manikai & Hwacha,
applicant's legal practitioners
Kantor
& Immerman,
1st
respondent's legal practitioners
