On 26 August 2004, the plaintiff instituted proceedings in the High Court wherein it sued for $60,000,000= being the sum assured in terms of a motor vehicle comprehensive policy it held with the second defendant. The first defendants were the insurance brokers who facilitated the policy.

On 21 December 2006, and before the pre-trial conference, the plaintiff amended its claim by the addition of paragraph 10 which is a claim for consequential damages in the sum of $100,000,000= being the replacement value of the vehicle.

The first defendant pleaded that it first acted as the second defendant's agent and its obligation ended as soon as the policy was in place and that the premium had not been paid at the time of the accident hence the policy was revoked.

The second defendant, in its plea, pleaded ignorance of the policy and put the plaintiff to the proof thereof.

At the commencement of the trial, the second defendant applied for, and was granted an amendment to its plea. The amendment was a withdrawal of the initial plea and its substitution with a plea to the effect that;

1. The first defendant, as agent of plaintiff, entered into an agreement with the second defendant that the plaintiff should pay the insurance policy premium of $3,524=26 in equal installments over a period of 3 months as from 25 February 2004.

2. That the plaintiff did not comply with this agreement, and, as at the date of the accident the plaintiff had not performed its obligations to pay the instalments.

3. In any event, the plaintiff is covered for a total of $60,000= in terms of the policy and is contractually precluded from claiming more.

The plaintiff gave evidence through its Managing Director, Mr. Zisengwe. Mr. Gideon Muchakwa gave evidence for the first defendant after which Mr. Moses T. Chakaringa and Mr. Member Murasiranwa gave evidence for the second defendant.

From the evidence adduced in court the following are common cause.

The plaintiff entered into an insurance contract with the second defendant. This was done through the first defendant who acted as broker. The premium was put at $3,524,259=. The insured value was put at $60,000,000= (old currency). On 10 February 2004, the plaintiff paid $200= (revalued) towards the premium. The plaintiff was then issued with a policy document dated 18 February 2004. The period of insurance was stated as 'From 10/02/ 04 to 31/01/05 (both dates inclusive)'.

On 23 March 2004 the motor vehicle so insured was involved in an accident and was declared a write off. As at the time of the accident, the plaintiff had not paid the balance of the premium. Such balance was only paid on 7 April 2004 to the first defendant. When the plaintiff attempted to make a claim on the policy the second defendant refused to honor the claim on the basis that the plaintiff had not paid the premium as per policy.

The testimony by Mr. Zisengwe was to the effect that the plaintiff had been asked to pay the premium in three months. It was never stated that the instalments had to be equal. At the time of the accident the three months period had not lapsed. When the accident occurred the plaintiff was asked to pay the balance in order that its claim can be sent to the second defendant - and it did so. In this regard he tendered two receipts as exhibits 1 and 2 for the payments.

The first defendant's evidence, on the other hand, was to the effect that when Mrs. Zisengwe came to insure the plaintiff's motor vehicle she was told the premium that had to be paid. As she did not have the full amount she was allowed to pay $200= on her undertaking to pay the balance in two weeks time. She was warned of the consequences of not paying the full premium. After failing to pay within that period the first defendant extended the period to three (3) months. According to Mr Muchakwa, this extension was at the plaintiff's risk.

At the pre-trial conference, the issues were viewed as;

“1. The interpretation of clause 1 of the contractual document. It being admitted that plaintiff paid its premium on 25 February 2004; and

2. The quantum of damages.”

After hearing evidence from the witnesses, it was apparent that the parties were not agreed that the premium was paid on 25 February, 2004. The receipts tendered showed the initial payment was on 10 February 2004 and the second payment was on 7 April 2004.

The main issues would thus be;

1. Whether or not the plaintiff had paid the premium in terms of the policy;

2. Whether or not the defendants are liable to the plaintiff as per claim;

3. Whether or not the plaintiff is entitled to payment of the sum of $100,000,000= in respect of its claim for the loss of its motor vehicle in terms of the policy agreement; and

4. Who between the defendants is liable to pay the plaintiff.

PAYMENT IN TERMS OF THE POLICY

The policy document, in its preamble, states that “whereas the insured, by a proposal and declaration which shall be the basis of this contract and deemed to be incorporated herein, has applied to the company for the insurance and has paid the premium as consideration for such insurance in respect of accident loss or damage occurring during the period of insurance.”

That preamble presupposes the applicant has paid the premium.

I did not hear any party to interpret that paragraph in any way as pre-supposing that premium would not have been paid. It is in that light that the issue of payment of the premium is important.

The plaintiff's case was that in spite of this there was a premium payment plan in place which was agreed with the first defendant at the time the policy was agreed in terms of which the premium was payable over a period of three months. Mr. Zisengwe tendered exhibit 3 as proof of the arrangement.

Paragraph 2 thereof states that;

“We hasten to add that a premium payment plan had been agreed to spread payment over three months and initial payment had been effected on receipt of policy before the accident, which we take cognizance of.”

This letter is from the first defendant to the plaintiff. The first paragraph thereof shows clearly that the second defendant was refusing to pay on the premise that premium payment was done after the loss which aspect they contended vitiates the terms and conditions of the policy.

In his evidence Mr. Muchakwa did not deny this.

The first defendant having allowed the plaintiff to pay in instalments found itself in difficulties to persuade the second defendant to pay.

In both its plea and in evidence the first defendant acknowledged that it had no authority to allow the plaintiff to pay its premium in installments. It is because of that lack of authority that it asked the plaintiff to pay up before they could file their claim. It is clear beyond doubt that the payment arrangement was initially as between the plaintiff and the first defendant. That arrangement was apparently not in terms of the policy document. It was an arrangement the first defendant agreed to for the convenience of the plaintiff and not because there was express authority from the second defendant for the first defendant to grant such payment terms.

The second defendant's evidence was to the effect that the insurance policy the plaintiff took out required a one off payment. In the instance case no such payment was made hence it declined the plaintiff's claim. However, in its amended plea, the second defendant stated that “first defendant, acting in its capacity as agent for plaintiff entered into an agreement with second defendant that plaintiff should pay the insurance policy premium of $3,524= 26 in equal installments over a period of 3 months as from 25 February 2004.”

There was thus contradiction between the second defendant's plea and evidence by its witnesses. The witnesses could not explain away the contradiction.

Mr Muchakwa who should have been better placed to testify on this was a ball of confusion and contradictions. For instance, whilst being categorical that the policy was of a one off payment at inception he was, at some stage, heard to say the second defendant should nevertheless have honored the claim. He found it difficult to admit the first defendant's negligence in not advising the plaintiff of the consequences of partial payment and also in not advising the second defendant about the credit arrangement with the plaintiff.

The second defendant, through Mr Murasiranwa, indicated that upon receipt of $200 towards payment of the premium they questioned the first defendant about it. The first defendant was reminded that a failure to pay the full premium would lead to the invalidity of the policy for non-remittance. When asked why the second defendant had not advised the first defendant of the invalidity of the policy in view of non payment of the premium Mr Murasiranwa said that events took over as the accident took place. In terms of clause 8 of the General Conditions of the policy document the second defendant could have cancelled the policy.

Despite not receiving full premium the second defendant issued the policy document and had not cancelled it by the time of the accident.

The amended plea acknowledges the arrangement to pay in instalments. If therefore the second defendant wishes to rely on a breach of contract the burden of proof is on it. See Brightside Enterprises (Pvt) Ltd v Zimnat Insurance Co. Ltd 1998 1 ZLR 117.

In casu, the second defendant seemed to have condoned the payment in installments and conceded in its amended plea that; “First defendant, acting in its capacity as agent for plaintiff entered into an agreement with second defendant that plaintiff should pay the insurance policy premium of $3,523=26 in equal installments over a period of 3 months from 25 February 2004.”…,.

The second defendant can thus not seek to rely on such mode of payment not to honor the claim.

Another point regards the first defendant's position.

Though in their initial pleadings impression was created that the first defendant was the second defendant's agent the closing submissions were clear that an insurance broker can act as agent for both the insured and the insurer. In Gordon and Getz on The South African Law of Insurance, 4^th edition by D.M DAVIS…, it is stated that:

“An insurance broker acts primarily as the insured's agent to obtain insurance, though he receives his commission from the insurer, and may, for limited purposes, such as collecting the premium, be the latter's agent.”

In casu, therefore, the first defendant was the insured's agent when they secured insurance cover for the plaintiff from the second defendant, but, in collecting the premiums and remitting them to the second defendant the first defendant acted as the second defendant's agent.

When the first defendant was now collecting money this was for and on behalf of the second defendant. Upon receipt of the money it was the first defendant's responsibility to account to the second defendant as the second defendant's agent. The second defendant, by accepting part payment of the premium, was in fact confirming its acceptance of the arrangement the first defendant had made with the plaintiff for the payment of the premium and that the first defendant was its agent in collecting the premium.

That probably explains the assertion in its amended plea acknowledging the arrangement to pay in three instalments.

If the second defendant had rejected the arrangement it should not have issued the policy document, or, at least, it should have cancelled the contract as soon as it became aware of the credit arrangement if such had not been known to it when it issued the policy document.

Instead of cancelling the contract, the second defendant opted to merely warn the first defendant, who, by then, had become its agent of the risk of non-payment of the full premium yet the contract provides that the second defendant could have cancelled the contract. Paragraph 8 of the General Conditions states that;

“The Company may cancel this policy by sending seven days notice by registered letter to the insured at his last known address, and, in such event, will return to the insured the premium paid pro-rata portion thereof for the period the policy has been in force…,.”

The second defendant gave an impression to the plaintiff that the arrangement was acceptable. If the second defendant now wishes to rely on such breach, which was there from inception, the onus is on it to prove such breach and to show that such vitiated the contract in spite of its own conduct.

This, the second defendant did not do.

The question of payment of the balance of the premium is between the first defendant and the second defendant. This is so because the plaintiff paid to the first defendant and it was for the first defendant, as agent for the second defendant, to account to the second defendant. The first defendant received the money on 7 April 2004 as agent for the second defendant. The second defendant had an arrangement with the first defendant on when and how premiums received on its behalf by the first defendant would be transmitted.

Though the two witnesses for the second defendant did not seem of the same mind on the period of credit the first defendant was granted, it was certainly a period of at least 60 days. Mr. Chakaringa put the credit period granted the broker at 90 days whilst Mr. Murasiranwa put the period at 60 days. They both agreed, however, that such credit was only to the broker and did not extend to the insured. As already alluded to, this contradicts the amended plea. Both witnesses indicated that queries on premium payments would be by the Accounts Department of which they were not part of.

Exhibit 2 confirms payment of the balance to the first defendant on 7 April 2004.

The first defendant alleged that it paid that sum over to the second defendant. As proof of the payment, the first defendant produced a document called BORDEREAU. Mr. Muchakwa argued that this was proof of payment to the second defendant. The document is addressed to Global Insurance from Kantharia Insurance Brokers and is titled; 'INTIMATION OF MARCH 2004 BORDEREAU'. It was tendered in as exhibit 5.

Item 6 thereon refers to the plaintiff and the balance of the premium.

Whilst Mr. Muchakwa argued that that was proof of payment Mr. Murasiranwa said that was just an intimation of what was to be expected. Proof of payment would be titled 'Payment bordereau'.

In any case, this could not have been proof of payment as the plaintiff had not paid the balance.

It is my view that not enough evidence was adduced to show that that sum was paid over to the second defendant. That is however as between the defendants and should not prejudice the plaintiff.

QUANTUM

It is common cause that the plaintiff insured its motor vehicle with the second defendant, through the first defendant, for the sum of $60,000= (revalued). In terms of that contract, the second defendant, in the event of a loss may pay the plaintiff the estimate of the value of the motor vehicle as specified in the schedule or the reasonable market value of the motor vehicle at the time of the loss or damage whichever is less. Paragraph 2(a) of section 1 of the policy document is quite clear on this when it states that, inter alia;

“…,. The Company may, at its own option, repair, reinstate or replace the motor car and /or…, may pay in cash the amount of the loss or damage and the liability of the Company shall not exceed the actual value of the parts damaged or lost plus the reasonable cost of fitting and such parts shall in no case exceed the insured's estimate of the value of the motor car including the accessories and spare parts thereon as specified in the schedule or the reasonable market value of the motor car including accessories and spare parts thereon at the time of the loss or damage whichever is less.”

I did not hear the plaintiff to deny that this was a limited value policy.

In his evidence, Mr. Zisengwe conceded that the policy was indeed a limited value policy. His argument for $100,000,000= was thus not based on the provisions of the contract.

The plaintiff alleged that “as a result of the defendants' breach of the insurance contract the plaintiff has suffered consequential damages in the sum of $100,000,000= which is the current replacement value of the motor vehicle.” This amendment was only to that extent. It did not go so far as to expunge the initial basis of the claim which was contractual.

In his closing submissions, the plaintiff's legal practitioner argued that it is not unheard of that even where a party is contractually bound to perform certain obligations, should he do so negligently the wronged party may sue both in contract and in delict.

Unfortunately, counsel could not cite any authority in support of this, and, in any case, the suit here was in contract and not delict. The nature of the amendment did not change the nature of the suit at all. Nowhere in the amendment is there any allegation of negligence on the part of the defendants.

The basis advanced by the plaintif'fs counsel for seeking consequential damages are based on what he termed common cause that;

1. That the sum assured is $60,000,000= (which is now $60,000= revalued).

2. That at the time of the inception of the contract that sum was the pre-accident estimated value of the motor vehicle.

3. That due to the volatile economic environment (which the court was urged to take judicial notice during the trial), the sum of $60,000= is but a tiny fraction of the actual market value or replacement value of such a vehicle.

4. That the first defendant, in a letter to the plaintiff, acknowledged the premium payment plan and acknowledged liability on behalf of the plaintiff.

5. That had payment of the $60,000= been made in 2004 the plaintiff would have been indemnified against his loss.

6. That the refusal to pay was grossly unreasonable in view of the facts.

Counsel for the plaintiff argued that in view of the above facts and also of what he perceived to be clear liability the defendants acted wrongfully in repudiating the claim.

The law in this aspect is quite clear.

“Property insurance is a contract for indemnity. The insurer's liability is therefore limited to the 'real and actual' value of the loss suffered by the insured through the happening of the event insured against. It cannot exceed either the amount insured or the amount of the insurable interest; and if it exceeds either or both these items, it must be reduced to correspond with the smaller of them.”

See Gordon and Getz on The South African Law of Insurance, 4^th edition by D.M DAVIS …,.

In cases of limited valued policy which specified the agreed value of the subject matter of the insured therefore the parties are bound by the value agreed to. In the case of Elcock v Thomson [1949] 2 ALL ER 381…, MORRIS J said;

“When the parties have agreed a valuation, then, in the absence of fraud or of circumstances invalidating their agreement, they have made an arrangement by which for better or for worse, they are bound.”

In General Principles of Insurance Law by E.R.H. IVAMY, 4^th edition…, the author thereof states that;

“In the case of a 'valued' policy the amount recoverable is fixed by the policy…,. In the case of an insurance upon property, the value of the subject matter may be fixed by agreement and inserted in the policy as the amount recoverable in the event of loss. This valuation is binding, except in the case of fraud or mistake, and dispenses the assured from the necessity of proving the value of his interest, though he still must prove that he has an interest in the subject-matter of insurance.”

A valued policy is one which specifies the agreed value of the subject-matter of the insurance.

In casu, there is no allegation of fraud or mistake. The plaintiff simply argued that by their refusal to pay when he lodged his claim the defendants acted grossly unreasonably and so must be made to pay consequential damages that would enable the plaintiff to buy a similar motor vehicle.

From the evidence adduced can it really be said that the defendants' refusal to pay was grossly unreasonable?

It is my view that there was no such unreasonableness as clearly the defendants were entitled to contest the claim as the plaintiff had only paid a fraction of the premium by the time of the accident. The contract required a one-off payment but for the plaintiff's failure to do so that led to the first defendant granting an extension of time within which to pay the balance. This not having been an express term of the contract, and, in fact, being contrary to the express provisions of the contract the second defendant cannot be said to have been unreasonable in seeking to repudiate the contract.

The defendants had an arguable case.

I am of the view that the plaintiff has not made out a case for a claim outside the policy document. The policy document shows the sum insured as $60,000,000=. In terms of that document there are some deductions to be made in the event of a claim as indicated in exhibit 6. The defendants witnesses outlined the deductions as including salvage value @ 30% of the sum assured, excess applicable in terms of the policy @ 4% of the value.

Mr. Murasiranwa confirmed the calculations as per exhibit 6. The calculations were as follows:

Sum insured of the vehicle at the time of the loss $60,000.00

Less salvage value @ 30% of the sum insured     $18,000.00

                                                                               $42,000.00

Less Excess applicable in terms of the policy

(4% of vehicle value)                                              $ 2,400.00

Claim amount                                                         $39,600.00

Less outstanding premium $3,524.26 less $200    $ 3,324.26

Amount due and payable                                       $36 275.74

As it was proved that the plaintiff paid the balance of $3,324=59, albeit after the accident, it follows that the sum payable to plaintiff is $39,600=.

As between the defendants the issue is who must pay the plaintiff?

In as far as the first defendant acted as agent for the second in collecting the premium, the second defendant cannot be absolved as the principal. Indeed “where the agent has authority to receive payment of premiums on behalf of the insurers, the effect of the payment is the same as if it had been made to the insurers themselves and the fact that the premiums thus received by the agent have been misappropriated by him, or have not reached the insurers owing to his bankruptcy, affords them no defence against a claim by the assured upon the contract.” See General Principles of Insurance Law by E.R.H. IVAMY, 4^th edition…,.

In the circumstances, the second defendant is liable as the insurer.

COSTS

In as far as the plaintiff has succeeded, albeit to the sum as per the policy document, I am of the view that the plaintiff's argument for costs on a higher scale cannot succeed. The plaintiff is entitled to costs on the general scale from both defendants.

Accordingly, judgment is entered for the plaintiff and against the second defendant in the sum of $39,600= (re-valued) with interest at the prescribed rate from the date of summons to date of payment in full.

Costs on the general scale against both defendants jointly and severally with one paying and the other to be absolved.

The distortions caused by the galloping inflation currently characterizing our economy are graphically shown, in part, by the claims that are being brought before the courts. The above, in my view, is one such example.

While inflation is a fact that they must take judicial note of, courts must, in my view, be wary that the distortions caused by inflation in the economy are not transported wholesale into the law thereby causing distortions of legal principles.

The plaintiff operates a butchery from Muzarabani Business Centre in Mashonaland Central. In 2003, he thought of adding to his assets by having a freezer room installed at the butchery. He approached the defendant, who, in or about September 2003, gave him a quotation for installing a 6x8x8 cubic metre cold room for $13 million. In terms of the written quotation, the plaintiff was required to pay 50% of the total cost as a deposit and to show confirmation of the order. A deposit in the sum of $5,4 million was duly paid on 29 September 2003 and installation was to be done in a week's time. On 17 October 2003, the defendant delivered the cold-room, ready to install and commission it. Upon realizing the error, the plaintiff declined to accept delivery and installation of the coldroom whereupon the defendant returned to Harare with the cold room. Efforts to get the defendant to return and install a freezer room were in vain, prompting the plaintiff to approach his legal practitioners for assistance.

In April 2004, the defendant refunded the sum of $1,955,000= to the plaintiff, retaining the sum of $3,445,000= as necessary expenses incurred in manufacturing and attempting to deliver the cold room to the plaintiff. Unhappy with this development, the plaintiff issued summons claiming a payment of the sum of “$13,000,000= of $2,480,000= which is current $657,200,000=, with room to in increase it to match the current costs of installing a freezer room at trial”…., together with interest at the prescribed rate from date of the deposit to date of payment in full and costs of suit.

At the trial of the matter, the claim was amended to $53 billion.

The matter was defended.

In its plea, the defendant denied that it ever quoted the plaintiff for the supply and installation of a freezer room and averred that it quoted it for the supply and installation of a cold room.

At the trial of the matter, the defendant was in default, and, in terms of Rules 59A and 60 of the High Court Rules, 1972 I called upon the plaintiff to lead evidence on the amount of his claim.

The plaintiff's evidence was largely a rehash of the facts of the matter as I have detailed above. In addition, the plaintiff adduced into evidence a quotation that he obtained from a company called Commercial Refrigeration in the sum of $202 billion. The date of the quotation is not given on the handwritten quotation which also includes a component of foreign currency.

When asked to explain his claim in the sum of $53 billion, the plaintiff had the following to say, in part:

“I am claiming an amount that has the same value as the amount that I paid to the defendant in 2003.”

He went on, further, to explain that the amount he is claiming is one quarter of the total amount of the quotation from Commercial Refrigeration just as the amount that the defendant retained was a quarter of the quotation it had given him.

At the commencement of the trial I was under the impression that the plaintiff's claim was one of damages.

It was with this response that it appeared to me that he is simply claiming a refund of the amount that the defendant retained as expenses of manufacturing the cold room and travelling to and from Muzarabani with the wrong refrigeration unit, not at its nominal value, but, at its appreciated value, taking into account the impact of inflation.

His claim appears to me to be one for a debt and not for damages arising ex contractu.

The plaintiff's evidence was to the effect that the sum of $3,445,000= that was retained by the defendant in 2004 now has the same value as $53 billion which he claims. It became clear to me, from this response, that the plaintiff is raising inflation as the basis of his claim.

The plaintiff's stance was re-affirmed by counsel for the plaintiff when he addressed me on the issue.

His argument was to the effect that the plaintiff is entitled to claim the same percentage of the amount that it will now cost to supply and install a freezer room as was the percentage of the amount that the defendant retained in 2004 to the cost of installing a cold room in 2004.

Judges have often used telling adjectives to describe submissions they did not expect from legal practitioners such as “startling” or “ingenious”. Neither term aptly describes my sentiments at being presented with this submission.

I hasten to remark that the matter before me, although set down for trial, proceeded as an application for default judgment.

Ordinarily, a request for default judgment is hardly denied, as, by his default, the defendant is taken to have admitted all the averments made by the plaintiff. I am also aware of the school of thought that holds the view that it is not for a judge or the court determining an application for default judgment to act as the unpaid and un-briefed counsel for the defendant who is in default and deny a plaintiff judgment on issues that the defendant may not have raised if in attendance. Thus, a court dealing with an application for default judgment is perfectly within its rights to enter a default judgment not on the merits of the matter but on the technical basis that the defendant is in default even in cases where it is of the opinion that a defence may have been available to the defendant.

There is, in my view, however, a limit to the non-participatory role that a court may play in an application for default judgment. In my view, where a claim is clearly not well founded in law, a court may not give judgment on such a claim simply on the basis that the defendant is in default. Similarly, where damages have not been adequately proved to the satisfaction of the court, judgment may not be entered in the claimed sum; again, simply on the basis that the defendant is in default.

The basis for drawing the limit to the non-participatory role of the court, in my view, is the fundamental principle that after the parties have made their submissions to the court, the decision or order that is made is solely that of the court and such decision or order must find a basis in law at all times.

In my view, the claim before me is a case compelling me to abandon my non-participatory role for two reasons;

(i) Firstly, I take the view that the plaintiff's claim, being a claim in which the alleged debt has been appreciated to take into account inflation, is badly founded in law. Courts will take inflation into account when assessing damages in certain delictual claims but inflation, on its own, cannot be a cause of action.

In Edward Marume and Another v Todd Muranganwa HH27-07, I had occasion to deal with the issue of inflation in another application for default judgment. The following were my views on the matter:

“In my view, the issue involves a detailed discussion of 'currency nominalism' and 'revalorization' and the place of such concepts in Zimbabwean Law.”

The concept of currency nominalism has been held to be applicable in all aspects of South African Law. See SA Eagle Insurance Co Ltd v Hartley 1990 (4) SA 833. In view of the provisions of the Prescribed Rate of Interest Act, there is a strong case for arguing that the concept also underlies all aspects of Zimbabwean law and that revalorisation, or the appreciation of debts to take into account inflation has no place in our law.

Again, like in Edward Marume and Another v Todd Muranganwa HH27-07, I have not been adequately addressed on the issue.

I hold the view that the distortions caused by inflation in the economy should not lead to the wholesale distortion of legal principles that have withstood the test of time in a bid to find legal solutions to a problem that is not legal in nature and origin and may prove to be transient. I am yet to be persuaded that revalorization is part of our law of debt collection.

Assuming that I have erred in classifying the plaintiff's claim as one based on inflation, and that properly it is one seeking damages for an alleged breach of contract, then, in my view, two other issues arise;

(i) Firstly, it has not been proved that the retention of the sum of $3,455,000= was wrongful in any way or that it constituted breach of the contract between the parties. In fact, it would appear to me that the parties were not ad idem as the plaintiff requested for a freezer room and the defendant supplied a cold room. The offer and the acceptance did not coincide and the parties never had a contract in my view.

Even if one were to be generous and hold that there was a contract that the defendant breached by supplying the wrong refrigeration unit, the damages suffered by the plaintiff for the alleged breach have not been adequately proved.

It cannot be said that the quotation from Commercial refrigeration in any way represents the correct loss of value in money between 2004 and the date of the hearing. It has also not been proved that the quotation by Commercial Refrigeration has any relationship to the quotation given by the defendant in 2003. One was quoting for a cold room of different dimensions and the other was quoting for a freezer room of entirely different dimensions.

How the one can be tendered as proof of the value of the other was not argued before me.

Despite much effort, I cannot figure out a possible argument on the relationship myself.

For the above reasons, I cannot accede to the prayer for default judgment in the matter in the amount prayed.

I have anxiously considered whether I can grant judgment in the sum of $3,455= that was retained by the defendant in 2004 together with interest thereon at the prescribed rate from the date of the retention to date of payment. The amount involved, even with interest, is so pitiful, in my view, as to make a mockery of the justice delivery system where I to order its payment. In m view, the plaintiff is best served by the order that I make below.

In the result, I make the following order:

1. The defendant is granted absolution from the instance.

2. The plaintiff is hereby granted leave, after effecting necessary amendments to his claim, and upon service of such on the defendant, to set the matter down for judgment in terms of Rule 58 of the High Court Rules, 1972.

3. There shall be no order as to costs.

On 25 August 2008 the plaintiffs' issued summons out of this court claiming from the defendants the sum of US$3,872,123= together with interest thereon at the rate of 6% per annum capitalized monthly and calculated from 1 February 2001 to date of payment in full.

It was alleged in the plaintiffs' declaration that the debt claimed arose from certain advances and loans made to the defendants by the plaintiffs, at the defendants' special instance and request, during the period 1 February to 9 November 2001. It was further alleged that the total sum advanced and lent to the defendants amounted to $4,272,123=, and that the defendants had received the sum of $400,000= leaving the balance claimed. It was also alleged that at one stage the defendants' deposited the sum of $3,508,000= into the account of the plaintiffs' after selling off a mine in the Democratic Republic of Congo, which deposit was, however, reversed by the plaintiffs' bank leaving the defendants' indebted to the plaintiff in the amount of the claim.

The claim was resisted.

On the preponderance of equities, the applicant contended that the payment has been outstanding since 2004 and the long delay has deprived it of the use of these funds to fulfil its obligations.

Counsel for the respondent submitted that the balance of convenience was evenly balanced.

It seems to me that the applicant has been prejudiced of the utilization of those funds for which indebtedness is admitted. However, as money is involved, the payment of interest in the currency of account would tend to offset the prejudice by compensating the applicant for the loss in the time value of money.

The plaintiff issued summons out of this court on 14 October 2009 claiming payment in the sum of US$8,769=44 for coal delivered and supplied to the defendant at the defendant's special instance and request, interest from the date of the service of summons to the date of payment in full, collection commission and costs of suit.

The action was contested.

Following a full trial, the High Court ordered the appellant to pay the sum of Z$121=52 (revalued) together with interest thereon at the rate of 30% per annum, the sum of South African R201,750=08 together with interest thereon at the applicable rate in terms of  the law of South Africa and costs of suit.

Dissatisfied, the appellant has appealed to this Court.

After perusing the papers filed of record and hearing counsel, this Court was of the unanimous view that the appeal lacked merit. Consequently, we dismissed the appeal with costs and indicated that the reasons for the decision would follow in due course.

What follow are the reasons for the decision.

FACTUAL BACKGROUND

The appellant is the father to one Fortune Makgatho, now Mojapelo. Fortune Mojapelo, born Makgatho, is, in these proceedings, simply referred to as “Fortune”. In 1995, Fortune applied to the respondent for a bursary to enable him to study for a degree programme in Actuarial Science at the University of Cape Town in South Africa. By letter dated 15 January 1995, the respondent advised Fortune that, out of the many applications it had received, he had been fortunate to have been selected to study for the degree at the University of Cape Town. The degree programme was to cover a period of four years.

One of the conditions for the grant of the bursary was that Fortune had to provide an acceptable guarantor for the due fulfilment of his obligations. On 4 February 1995, the same day that Fortune signed the agreement, the appellant signed as surety and co-principal debtor for the due fulfilment of all obligations by Fortune.

The conditions stipulated by the respondent, and accepted by Fortune, were the following:-

(i) Fortune was to take all the subjects in which passes at the required level would lead to exemptions from the local equivalent post-graduate intermediate course.

(ii) The bursary was to cover all tuition, residence, examination fees, repatriation and book allowances. All other liabilities were to be for the account of Fortune.

(iii) Fortune was to make satisfactory progress. He was expected to maintain the standard required in order to obtain exemptions from the post-graduate intermediate examinations of the Institute of Actuaries. This meant that first and upper second grades were to be his goal.

(iv) On Fortune obtaining the degree, the respondent could demand that he immediately commences work for Old Mutual Zimbabwe as an employee for a period equivalent to the academic years in respect of which the bursary would have been provided.

(v) The bursary would be deemed to be a loan until Fortune successfully completed the degree programme and had been employed by the respondent for the required number of years. The indebtedness was to be reduced proportionately taking into account the period worked as an employee.

(vi) In the event that, having successfully completed the degree programme and achieved satisfactory academic performance, the respondent did not offer Fortune employment, the loan would not be repayable.

(vii) The bursary could be withdrawn because of unsatisfactory progress or failure to fulfil any term stipulated in the agreement.

(viii) In the event of the bursary being withdrawn, or Fortune deciding not to fulfil any term of the employment contract, all monies paid under the bursary would be deemed to have been advanced as a student loan.

(ix) In the event of the bursary being withdrawn, no offer of employment would apply but the respondent reserved the right to demand immediate repayment of the loan.

Despite averments by the appellant to the contrary, documentation produced during the trial confirmed that Fortune did not perform as expected by the respondent.

In October 1998, the respondent wrote to Fortune expressing its disappointment at his half-year results and the fact that he had made no progress to obtain exemptions. He had also failed Acturial Science (Act Sci). The respondent, in the same e-mail, further warned that unless there was an improvement, the respondent might find it difficult to continue sponsoring the studies. In September 1999, the respondent again wrote expressing its disquiet over the failure by Fortune to attain the exemption studies in Survival Models. In the letter, the respondent also advised that it expected Fortune to commence employment with it in Harare by end of the year.

Fortune did not commence work as requested.

Instead, he wrote to the respondent advising that he would not commence work with the respondent in January 2000 because he wanted to set up the Student Enterprise Foundation which he had apparently initiated when he was the President of the Student Representative Council. He also indicated he wanted to enrol for a post-graduate study in Financial Mathematics or Financial Analysis and Portfolio Management. In view of this development, Fortune suggested that the two parties agree on a financial settlement that would have the effect of releasing him from his obligations for at least a year. Nothing came out of this suggestion as Fortune appeared unhappy to pay South African Rand into the respondent's account with Standard Bank, Robert Mugabe Branch, Harare, citing the possibility of a violation of local foreign exchange Regulations. The respondent agreed, in October 1999, to defer commencement of his employment to enable him to pursue these other commitments on condition he took up such employment in 2001. The respondent further advised him that it would not provide any financial support unless he wrote professional actuarial examinations or obtained exemptions from those examinations.

Despite such accommodation, Fortune did not, in 2001 or at any time thereafter, report for work with the respondent.

PROCEEDINGS IN THE HIGH COURT

The respondent issued summons out of the High Court, Harare, on 2 September 2003 claiming payment of the amounts in Zimbabwe Dollars and South African Rand that it had disbursed pursuant to the agreement.  In his plea, the appellant denied that his son had failed to perform in terms of the agreement and stated that, in fact, it was the respondent which had failed to honour its side of the agreement, resulting in Fortune refusing to work for the respondent.

Following a pre-trial conference in chambers, a judge referred the matter to trial on the following issues:-

(a) Whether there was a valid agreement between the two parties.

(b) Whether Fortune performed his part of the agreement or whether it was the respondent that breached the agreement.

(c) Whether the appellant was liable to pay to the plaintiff the amounts claimed in the summons.

The court found that indeed there was a valid agreement in terms of which Fortune was obliged to work for the respondent, when called upon to do so, for the equivalent number of years for which he had been sponsored. On the second issue, the Court found that Fortune did not perform satisfactorily. In particular, he did not obtain satisfactory passes in Acturial subjects that would have enabled him to get exemptions back home and had refused to take up employment with the respondent when requested to do so. On the third issue, the court noted the concession by the appellant on both liability and quantum. Consequently, the court ordered the appellant to pay the amounts claimed, together with interest and costs of suit.

It is against that order that the appellant has now appealed to this Court.

GROUNDS OF APPEAL

In his notice of appeal, the appellant has attacked the judgement of the High Court on the following grounds:-

(a) That the Court erred in failing to find that the failure by the respondent to advise him, firstly, of the alleged unsatisfactory performance and, secondly, of the failure to report for work on the part of Fortune was a breach of the agreement.

(b) That the respondent's claim was inconsistent in that, whilst it was alleged that Fortune had failed to perform satisfactorily, the respondent alleged that he had refused to commence work upon completion of his studies

(c) That the court a quo erred in disregarding the manner in which the respondent had paid for the fees in South Africa; the respondent not having led any evidence on the amounts paid to the university.

(d) The court a quo erred in finding that:

(i) The withdrawal of the bursary had been proved.

(ii) There was basis for such withdrawal.

(iii) In relying on the question whether or not Fortune was invited to work for the respondent.

(e) The respondent's claim against the appellant was time–barred.

(f) The court a quo erred in not considering that there was a prejudicial extension of time within which to meet the alleged conditions of the contract.

(g) The appellant had been released from his obligation as surety by virtue of the following:

(i) The agreement between the respondent and Fortune had been novated.

(ii) The respondent's claim had been compromised.

(iii) The obligations between the two had been materially and prejudicially altered.

(iv) There was a prejudicial agreement not to enforce the agreement as between the respondent and Fortune.

THE ISSUES ON APPEAL

Although only three issues were initially identified in the appellant's notice of appeal, the appellant, in an amended notice of appeal, introduced a number of others - some for the first time on appeal. On a consideration of the papers, it seems to me that, in fact, there are seven main issues that fall for determination before this Court.

I proceed to deal with each of these in turn.

WHETHER THE AMOUNTS DISBURSED WERE PAYABLE

The place to start is the agreement entered into by the parties. Clauses 5, 9 and 11 deal with the repayments of the amounts disbursed by the respondent to the University of Cape Town.

(i) Clause 5, in particular, provides that Fortune was to immediately commence work for the respondent after obtaining his degree, if requested to do so, and that he was to work for the equivalent number of years sponsored by the respondent.

The same clause made it clear that the bursary was to be regarded as a loan until such time as Fortune would have successfully completed his degree programme and been employed by the respondent for the requisite period.

Further, in the event of dismissal from employment or disqualification, the bursary or the amount of such bursary “not worked off” would become payable.

(ii) In terms of clause 9, in the event of the bursary being withdrawn because of unsatisfactory performance, or a decision on the part of Fortune not to fulfil the employment contract, all monies paid under the bursary would be regarded as having been advanced in terms of a student loan, and, in this situation, no offer of employment would apply.

(iii) In terms of both clauses 5 and 11, if, after successfully completing his degree, the respondent failed to offer Fortune employment, the loan would not be repayable.

The agreement therefore makes it clear that any monies disbursed on behalf of Fortune would remain payable except in two terms:

(a) Firstly, if Fortune, having successfully completed his degree programme worked for the respondent for the period equivalent to the number of years sponsored by the respondent; or

(b) Secondly, if having completed such degree and through no fault on his part, he was not offered employment by the respondent.

WHETHER FORTUNE PERFOMED IN TERMS OF THE AGREEMENT

Allusion has already been made to this aspect earlier in this judgment. The exchange of correspondence between Fortune and the respondent demonstrates beyond doubt that Fortune did not perform in terms of the contract. The respondent expressed dismay at his failure to obtain passes at the required level in order to obtain exemptions back home; which exemptions would have fast-tracked his qualification as an Acturial Scientist. Indeed, by the end of 1999 both parties were agreed that Fortune had not only failed to obtain passes at the required level but had even failed certain subjects. Since the respondent had disbursed funds for the period of four years in terms of the agreement, it made it clear that it would no longer sponsor him for the year 2000 but would consider sponsoring him purely to ensure that he obtained passes at the required grade so that he would get the necessary exemptions. Indeed, Fortune himself accepted he had not performed and offered to pay the amount of the bursary so that he would be released completely.

Therefore, the finding by the court a quo that Fortune did not obtain satisfactory passes in actuarial subjects cannot be said to be wrong.

The suggestion that he completed his degree and that it was the respondent who refused to offer him employment is therefore not tenable, it being clear that Fortune refused to work for the respondent at the end of the four year academic programme - or at any time thereafter.

This is an appeal against the judgment of the High Court granting with costs a claim by the respondent for:

(i) Payment of the sum of US$750,000.

(ii) Interest tempore morae at the London Interbank rate for United States dollars, at 3.5% per annum, from 1 September 2005 to the date of payment.

(iii) Costs of suit.

The factual background to this dispute, which is largely common cause, may be summarised as follows:

The appellant is a financial institution. The respondent is a manufacturer and supplier of an exclusive range of cables for the transmission of communication and distribution of energy used by such entities like the Zimbabwe Electricity Supply Authority, the Rural Electrification Agency, and Tel One.

The respondent's business caters for both domestic and export markets. As at end of 2003, 50% of its sales volumes were largely in exports.

In 2004, the respondent's business experienced slow growth due to inflation and the scarcity of foreign currency. During that year, the respondent's representatives met with the appellant's Governor, Dr. Gideon Gono, with a view of securing foreign currency to purchase imported inputs in order to sustain its business.

Dr Gono gave an oral undertaking to avail US$150.000 per week, to the respondent, from the foreign currency auction system.

In January 2005, the respondent began to receive the said sums of foreign currency against payment of a Zimbabwean dollar equivalent to the appellant via a commercial bank.

The special arrangement was extended to thirty-five (35) other companies selected as the recipients of foreign currency.

This allocation of US$150,000 was, with effect from 16 June 2005, increased to US$250,000.

Weekly allocations, at that new level, were made to the respondent until the end of July 2005.

In August 2005, the respondent made three transfers of money, in Zimbabwe dollars, to the appellant, for the equivalent of the amount of US$750,000. The payments were accompanied by details of external creditors to be paid by the defendant.

The appellant did not pay the foreign currency.

Its position, at the trial, was that foreign currency could not be paid because it was not available.

The respondent's witness, Mr. Turina, confirmed, in evidence, that, the appellant indicated that it did not have foreign currency for disbursement.

On 2, 11 and 19 August, respectively, the respondent made payments, in Zimbabwe dollars, equivalent to US$750,000.

In respect of these three payments, the respondent would receive a phone call from the appellant before making payment.

On 1 August, it received a call from the appellant before depositing a sum of Z$4,438,294,052=45 with the appellant the following day.

With regard to the second transaction, the respondent received a phone call on 5 August. In response thereto, it deposited the sum of Z$4,511,254,261=47 with the appellant on 11 August.

On the third occasion, the telephone call was made on 17 August. The respondent deposited an amount of Z$4,587,562,920=90 with the appellant on 19 August.

Bigboy Masoso, who was the Division Chief Treasury Officer testified on behalf of the appellant to the effect, that, the disbursement of foreign currency could only be made if the front office of the appellant made the funds available. He also stated that the telephone calls made to the respondent, and other companies, were meant to provide quotations to secure constance of the exchange rate.

In the affidavit filed of record, Dr Gono stated as follows at paragraph four thereof as follows:

“I advised them that the Bank would endeavour to source foreign currency for the plaintiff to the tune of USD$150,000 per week in recognition of the plaintiff company's strategic role in the national economy. No formal binding agreement was concluded in this regard and it was never the common understanding of the parties that we were concluding a formal agreement.”

At paragraph six of the affidavit, he stated as follows:

“As a result of further representations made by the plaintiff, the defendant increased the weekly allocation of foreign currency to the plaintiff to USD250,000 from or about the 8th June 2005. Again, it was never the common understanding and contemplation of the parties that they were entering into a formal binding transaction, hence no formal contractual documentation was executed.”

Again, at paragraph seven of his affidavit, he stated as follows:

“I am advised, that, during the month of August 2005, plaintiff made payments totalling Z$13,535,110 being the quoted equivalent at the auction rate of USD750,000 which the defendant had hoped to pay to the plaintiff. Due to many other competing and pressing national requirements, the defendant was unable to avail the foreign currency, not only to plaintiff but to many other companies in a similar situation who then accepted an offer for immediate refund. Plaintiff declined the refund.”

Following a trial, the learned Judge found as follows at p8 of the judgment:

“However, the main issue, in my view, is whether, by allocating to the plaintiff US$150,000 and later US$250,000 from the auction system, the defendant then became obligated to release the money to the plaintiff upon payment by the plaintiff, within twenty-four hours, of the Zimbabwe dollar equivalent at the defendant's instruction.”

At p9 of the judgement, the court a quo stated as follows:

“It becomes crucial for the defendant to explain the reasons for Patience Aisam to set in motion the process, if foreign currency was unavailable. My view is simply that the allocation was only made against funds that were already available from the auction.

It is important to note that Patience Aisam spoke of 'an approved allocation and not successful bid.'

This was so because the plaintiff was on a special list that was not required to bid.

There could, in my view, be no approval or allocation of what was not already available.

Given the condition that the completion of each transaction was totally dependant upon the availability of foreign currency, the possibility of Aisam confirming allocation and asking for payment of the Zimbabwe dollar equivalent, within 24 hours, when there was no foreign currency already earmarked for the plaintiff is, in my view, very remote.”

The learned Judge, at p9, made the following finding:

“I am therefore unable to accept that the above scenario did not create binding obligations on the part of the defendant.

To that end, I am of the view, that, upon compliance by the plaintiff, a binding contract was concluded and what remained was the release of the foreign currency purchased by the plaintiff.

The case of F.C. Hume (Pvt) Ltd v Minister of Natural Resources & Tourism 1989 (3) ZLR 55 indeed supports this view.

With the plaintiff having complied with all the requirements, the contract was already in place and the defendant was obliged to meet its obligation.”

The gist of the court a quo's reasoning was that, at the time the phone calls were made to the respondent, the foreign currency to which the call related was available and the call was an offer which the respondent accepted by depositing the money, in Zimbabwean dollars, with the appellant thereby giving rise to a binding contract.

The court a quo gave judgment in favour of the respondent as sought in the summons. It is against this judgment that the appellant now appealed to this Court.

In the grounds of appeal, the appellant contends that:

1. The court a quo erred in law and fact in not making a finding that the payment by the respondent of the Zimbabwe dollars, as directed by the appellant, did not create a binding contract which was an end itself but that performance was always subject to foreign currency being available.

2. The court a quo erred in law and fact in making a finding that the communications made by Patience Aisam, on behalf of the appellant, calling upon the defendant to pay the Zimbabwe dollars, meant or was evidence that the foreign currency being allocated was available for disbursement to the respondent.

3. The court a quo erred in fact and law in not making a finding that non-availability of foreign currency made performance impossible and that the appellant was entitled to refund the respondent the money it had paid as the suspensive condition, viz, the availability of foreign currency had failed to be met.

4. The court erred in law in allowing the claim for interest and in ordering the interest to run from 1 September 2005.

The primary question to be decided by this Court is: whether or not there existed a binding contract for the disbursement of a sum of foreign currency to the respondent's creditors upon payment by the respondent of an equivalent sum in Zimbabwean currency.

The following are undisputed facts:

As a result of an approach to the appellant's Governor, Dr Gono, on 27 October 2004, for assistance in obtaining foreign currency, the respondent was granted the status of a successful bidder at the weekly foreign currency auction.

Several other companies were on this special list.

The respondent was not required to place bids at the auction but was merely telephonically advised of the agreed weekly allocations.

The practice had been successfully operational from January 2005 to July 2005.

Payment requirements were availed to the respondent who complied by effecting payment of the equivalent amount of the foreign currency in Zimbabwe dollars.

There was no formal contract between the appellant and the respondent.

The respondent was amongst a list of thirty five (35) companies on this special list w