Debt re: Contractual and Judgment Debt iro Approach, Proof of Claim, Execution, Revalorization and Civil Imprisonment

SC03-20 : ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED vs N.R. BARBER (PRIVATE) LIMITED and THE SHERIFF FOR ZIMBABWE
Ruled By: MALABA CJ, MAVANGIRA JA and MATHONSI JA

This is an appeal against the decision of the High Court (“the court a quo”) dismissing an urgent chamber application for an order declaring that the payment made to the first respondent in terms of a court order was a full and final settlement of the liability owed by the appellant.

The appeal succeeds.

The Court holds that the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act & Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) (“S.I.33/19”) expressly provides that assets and liabilities, including judgment debts, denominated in United States dollars immediately before the effective date of 22 February 2019 shall, on or after the aforementioned date, be valued in RTGS dollars on a one-to-one rate.

The order in terms of which the appellant was obliged to pay the judgment debt owed to the first respondent, denominated in United Stated dollars, was made before the effective date. The judgment debt, and its evaluation, fell within the ambit of the provisions of section 4(1)(d) of S.I.33 of 2019. The payment made by the appellant, in fulfilment of the judgment debt, is a full and final settlement of the liability owed by the appellant.

The reasons for the decision now follow.

BACKGROUND FACTS

The facts are largely common cause.

The first respondent instituted proceedings against the appellant for payment of USD$3,885,000. The payment was for services which had been rendered by the first respondent to the appellant. On 25 June 2018 the appellant was ordered, by the High Court, to pay the first respondent the amount claimed, together with interest at the prescribed rate and costs of suit on an attorney client scale.

The appellant noted an appeal against the judgment. The appeal was dismissed on 13 May 2019.

On 21 May 2019, the appellant deposited an amount of RTGS$4,136,806=54 into the first respondent's account as settlement of the judgment debt plus interest and costs of suit.

The first respondent, through its legal practitioners, wrote to the appellant on the day of receipt of the funds, complaining that the amount deposited was less than the amount ordered by the court. The first respondent said that the amount deposited was equivalent to US$144,788=23. It used the interbank rate as at 21 May 2019. The contention was that the appellant still owed an amount of US$3,992,018=31. The first respondent advised the appellant that it was instructing the second respondent to proceed with the attachment of its property for sale in execution.

The appellant responded by a letter dated 24 May 2019, stating that the payment of RTGS$4,136,806=54 satisfied the judgment debt. It referred to the provisions of section 4(1)d) of S.I.33 of 2019 for authority that the payment was a full and final settlement of the judgment debt.

On 4 July 2019 the first respondent instructed the second respondent to attach the appellant's properties in Hwange to recover an amount of US$3,992,018=31. The appellant filed an urgent chamber application in the court a quo seeking an order for stay of execution and a declaratory order to the effect that the judgment debt had been fully discharged in terms of S.I. 33/19.

The matter of the dispute between the parties was the correct interpretation of section 4(1)(d) of S.I.33/19.

The court a quo dismissed the application with costs on a legal practitioner and client scale. The holding was that, had the Legislature intended to alter all court orders and writs that had been made prior to the promulgation of S.I.33 of 2019, it should have expressly said so. The court a quo held, further, that the payment made by the applicant did not discharge the judgment debt, as the payment ought to have been made at the Inter-bank rate prevailing on 21 May 2019. The court a quo accepted the evidence that the Interbank rate was 1 United States dollar to 3.5 RTGS dollars. The court a quo interpreted the provisions of section (4)(1)(d) of S.I.33/19 in a way that excluded judgment debts from the application of S.I.33 of 2019.

Aggrieved by the decision of the court a quo, the appellant appealed. The grounds of appeal were as follows:

“1. The High Court erred in failing to find that the judgment debt for the sum of USD3,885,000 together with costs of suit and interest in case number HC7882/17 was a liability to the applicant valued in United States dollars before the effective date as specified in Statutory Instrument 33/19.

2. The High Court further erred in failing to find that the United States dollar denominated debt was capable of being discharged at the rate of One United States dollar to One RTGS dollar as specified in section 4(1)(d) of Statutory Instrument 33/19, and, therefore, failing to find that the appellant fully discharged the debt on 21 May 2019.

3. The High Court further erred in finding that section 4(1)(d) of the Statutory Instrument 33/19 was not applicable to assets and liabilities arising from court orders.

4. The High Court further grossly erred in awarding costs of suit against the appellant on attorney and client scale having decided to dismiss the application.”...,.

Section 4 of S.I.33 of 2019 provides as follows:

“4. (1) For the purposes of section 44C of the principal Act, as inserted by these regulations, the Minister shall be deemed to have prescribed the following with effect from the date of promulgation of these regulations ('the effective date') -

(a) That the Reserve Bank has, with effect from the effective date, issued an electronic currency called the RTGS Dollar;

(b) That Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C(2) of the principal Act), immediately before the effective date, shall, from the effective date, be deemed to be opening balances in RTGS dollars at par with the United States dollar; and

(c) That such currency shall be legal tender within Zimbabwe from the effective date; and

(d) That, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on and after the effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States Dollar; and

(e) That after the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS Dollar for the United States Dollar on a willing seller-buyer-basis…,.”

In interpreting section 4(1)(d) of S.I. 33/19 the court a quo said:

“In my view, while the debt to the first respondent may be treated as a liability as against the applicant and an asset as against the first respondent for accounting purposes, this debt was not valued immediately before the effective date. The effective date is the 22nd of February 2019. The debt was due on the 25th of June 2018 despite that it was appealed against. Even if I may be wrong, I am not convinced that the legislature intended to alter all court orders made by the court. If the court had not made any pronouncement as to what denomination the debt should be paid in on 25 June 2018, then the applicant's argument may make sense. It was not made immediately before, on, or after the effective date. If the legislature wanted it to include court orders and writs, then it should have expressly said so.”

The court a quo went on to say:

“As I have said above, section 4(1)(d) of S.I.33 of 2019 cannot be construed as giving the legislature power to alter court orders. To allow that would be a violation of the separation of powers that is enshrined in the Constitution.”

Neither party questioned the validity of S.I.33/19.

The constitutionality of section 4(1)(d) of S.I. 33/19 was not in dispute. It was not an issue before the court a quo. There was no basis on which the court a quo found it necessary to allude to the suggested violation by the Legislature of the fundamental constitutional principle of separation of powers in the enactment of S.I.33 of 2019.

The question for determination, on appeal, was whether the court a quo correctly interpreted and applied the provisions of section 4(1)(d) of S.I.33 of 2019 in the light of the facts of the case.

INTERPRETATION OF SECTION 4(1)(d) OF STATUTORY INSTRUMENT 33 OF 2019

It is the duty of a court to interpret statutes. Where the language used in a statute is clear and unambiguous, the words ought to be given the ordinary grammatical meaning. However, where the language used is ambiguous and lacks clarity, the court will need to interpret it and give it meaning. There is enough authority for this rule of interpretation.

In Endeavour Foundation and Anor v Commissioner of Taxes 1995 (1) ZLR 339 (S)…, the Supreme Court stated:

“The general principle of interpretation is that the ordinary, plain, literal meaning of the word or expression, that is, as popularly understood, is to be adopted, unless that meaning is at variance with the intention of the Legislature as shown by the context or such other indicia as the court is justified in taking into account, or creates an anomaly or otherwise produces an irrational result.”

In Natal Joint Municipal Pension Fund v Endumeni Municipality 2012 (4) SA 593 (SCA) the Supreme Court of Appeal of South Africa noted the following…,:

“Interpretation is the process of attributing meaning to the words in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence.

Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed; and the material known to those responsible for its production.”…,.

In Chihava and Others v The Provincial Magistrate Francis Mapfumo N.O. and Another 2015 (2) ZLR 31 (CC)…, the Constitutional Court said:

“The starting point, in relation to the interpretation of statutes generally, would be what is termed 'the golden rule' of statutory interpretation. This rule is authoritatively stated thus in the case of Coopers and Lybrand & Others v Bryant 1995 (3) SA 761 (A) at 767:

'According to the “golden rule” of interpretation, the language in the document is to be given its grammatical and ordinary meaning, unless this would result in some absurdity, or some repugnancy or inconsistency with the rest of the instrument.'”…,.

A reading of section 4(1)(d) of S.I.33 of 2019 does not reveal any ambiguity in the language used by the Legislature in the expression of its intention in enacting S.I.33/19. The purpose and object of the statute can easily be ascertained from the ordinary and grammatical meaning of the language used.

The liabilities referred to in section 4(1)(d) of Statutory Instrument 33/19 can be in the form of judgment debts, and, such liabilities amount to obligations which should be settled by the judgment debtor.

In interpreting section 4(1)(d), regard should be had to assets and liabilities which existed immediately before the effective date of the promulgation of Statutory Instrument 33 of 2019. The value of the assets and liabilities should have been expressed in United States dollars immediately before 22 February 2019 for the provisions of section 4(1)(d) of S.I.33/19 to apply to them.

Section 4(1)(d) of S.I. 33/19 would not apply to assets and liabilities, the values of which were expressed in any foreign currency other than the United States dollar immediately before the effective date.

If, for example, the value of the assets and liabilities was, immediately before the effective date, still to be assessed by application of an agreed formula, section 4(1)(d) of S.I.33 of 2019 would not apply to such a transaction even if the payment would thereafter be in United States dollars.

It is the assessment and expression of the value of assets and liabilities in United States dollars that matters.

Section 4(1)(d) of S.I. 33/19 is specific as to the type of assets and liabilities that are excluded from the reach of its provisions. The origin of the liabilities is not a criterion for exclusion. In other words, the fact that the liability is based on a court order does not exempt the liability from the application of the provisions of section 4(1)(d) of S.I.33 of 2019.

What brings the asset or liability within the provisions of the statute is the fact that its value was expressed in United States dollars immediately before the effective date and did not fall within the class of assets and liabilities referred to in section 44C(2) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] (“the principal Act”).

Section 44C(2) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] provides as follows:

“(2) The issuance of any electronic currency shall not affect or apply in respect of —

(a) Funds held in foreign currency designated accounts, otherwise known as 'Nostro FCA accounts', which shall continue to be designated in such foreign currencies; and

(b) Foreign loans and obligations denominated in any foreign currency, which shall continue to be payable in such foreign currency.”

As a matter of correct interpretation of section 4(1)(d) of S.I.33 of 2019, it would not be possible to exclude a judgment debt expressed in United States dollars immediately before the effective date from the application of its provisions. The fact that the source of the liability, the value of which was expressed in United States dollars, was a judgment of a court was immaterial for the purposes of the Statutory Instrument.

The Legislature put the matter beyond any doubt when it enacted the Finance (No.2) Act 2019.

In section 20 of the Finance (No.2) Act, 2019, under Part V of the Act, “financial or contractual obligations” were defined to include judgment debts.

Section 20 of the Finance (No.2) Act, 2019 provides:

“'financial or contractual obligations' includes (for the avoidance of doubt) judgment debts;….,.

'judgment debt' means a decision of a court of law upon relief claimed in an action or application which, in the case of money, refers to the amount in respect of which execution can be levied by the judgment creditor; and, in the case of any other debt, refers to any other steps that can be taken by the judgment creditor to obtain satisfaction of the debt (but does not include a judgment debt that has prescribed, been abandoned or compromised);.”

A judgement debt is thus a contractual obligation which can either be an asset to the party in whose favour it is made or a liability on the party against whom it is made.

Section 4(1)(d) of S.I.33/19 made it clear that it applied to all assets and liabilities that shared the prescribed characteristics, except those referred to in section 44C(2) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] (the principal Act).

The court a quo construed the words “immediately before the effective date” to mean that the expression of the value of the liability in United States dollars ought to have occurred as an event at a time “immediately before the effective date”.

The court a quo misdirected itself because the words “immediately before the effective date” refer to the state in which the assets and liabilities, to which the provisions of section 4(1)(d) of S.I.33 of 2019 apply, should be in relation to the effective date, irrespective of how far back in time the asset or liability valued and expressed in United States dollars came into existence.

The phrase “immediately before” means that the liability should have existed at a date before the effective date and that such liability should have been valued and expressed in United States dollars.

The issue of the time-frame within which the liability arose in relation to the effective date of 22 February 2019 does not matter.

What is of importance is the fact that the liability should have been valued before the effective date, in United States dollars, and was still so valued and expressed.

The judgment debt was ordered against the appellant on 25 June 2018. It was valued and expressed in United States dollars and was still so valued and expressed immediately before 22 February 2019.

Section 4(1)(d) of S.I. 33/19 provides that all assets and liabilities that were valued and expressed in United States dollars immediately before the effective date shall “on and after” the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.

The word used is “values” and not “valued”. “Values” and “valued” are two different concepts.

The former presents a notion of a set value which remains even where it is subjected to a certain conversion. The latter, on the other hand, suggests a value which can be changed according to the circumstances under which the value is being applied.

The values referred to in section 4(1)(d) of S.I.33/19 show that after a one-to-one conversion the RTGS dollar takes the value and character of the United States dollar.

The effect of the phrase “on and after” is that the conversion of the values of “all assets and liabilities” which were valued and expressed in United States dollars immediately before the effective date to values in RTGS dollars at a rate of one United States dollar to one RTGS dollar would apply at the time the value of the asset or liability is liquidated or discharged.

Assets and liabilities covered by section 4(1)(d) of S.I.33 of 2019 are of a sui generis nature. They accrue immediately before the effective date and continue to exist after the effective date.

EXCHANGE RATE

Counsel for the first respondent submitted that, in interpreting S.I.33 of 2019, the Court should have regard to the principle of parity.

Counsel further enjoined the Court to have regard to the fact that a judgment is a judicial fact that results from adjudication. The contention was that, in interpreting the statute, the Court ought to place the first respondent in the position it would have been in had S.I.33/19 not been enacted.

Counsel also argued that the Statutory Instrument is a bridge between the United States dollar and the RTGS dollar and that in that regard the Court ought to have regard to the Inter-bank exchange rate as a means of arriving at parity.

The Court finds that the arguments by counsel are devoid of merit.

Counsel would like the Court to believe that a conversion of a foreign currency denomination to a local currency denomination amounts to a lesser value in the local currency. This reasoning is wrong at law. There can be no parity to talk about once it is accepted that the RTGS dollar is a currency denomination with a set legal value. It is the legal tender used in Zimbabwe, and, as such, carries a specific value.

Once a conversion of the value of an asset or liability denominated in United States dollars is made to the value of RTGS dollars, the converted value remains the same, as the two different currency denominations both carry value. No exchange rate can be applied as the judgment debt remains a judgment debt with a value after it is converted to the local currency.

The RTGS dollar has the value given under the one-to-one rate and it remains on that value even after the effective date.

The first respondent, and likewise the court a quo, were wrong at law in trying to find parity by adding value on the RTGS dollar through the Inter bank rate.

Section 4(1)(d) of S.I.33 of 2019 states that for such sui generis liabilities, including judgment debts, a rate of one-to-one between the United States dollar and the RTGS dollar will apply. The transactions entered into after the effective date would fall under the provisions of section 4(1)(e) of S.I.33/19.

CONCLUSION

The payment of RTGS$4,136,806=45 made by the appellant as settlement of the judgment debt was a full and final settlement of the judgment debt in terms of section 4(1)(d) of S.I.33 of 2019.

DISPOSITION

In the result, it is ordered as follows -

1. The appeal is allowed with no order as to costs.

2. The order of the court a quo is set aside and substituted with the following -

“1. It is declared that the appellant's payment of RTGS$4,136,806=45 is a full and final settlement of the first respondent's judgment debt.

2. There shall be no order as to costs.”

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

The plaintiff, N.R Barber (Private) Limited (hereinafter referred to as “plaintiff”) is a company duly registered in terms of the laws of Zimbabwe, whose registered office is 114 Seke Road, Graniteside, Harare. The plaintiff specialises in mining operations, underground, open cast, mining plans, transport logistics for ferrying the ore from one place to the supplier and related business.

The first letters of the plaintiff stand for Nolan Robert whose surname is Barber. Incidentally, he is the Managing Director and alter ego of the plaintiff.

The defendant, Zambezi Gas Zimbabwe (Private) Limited (hereinafter referred to as the “defendant”) is equally a duly registered company in terms of the law of Zimbabwe whose offices are situated at Number 28 Transtobac Complex, Hillside Road Extension, Msasa, Harare.

Mr Francis Chirimuuta, the Managing Partner of Chirimuuta and Associates, is the Board Chairman of the defendant; Mr E. Raradza is the Managing Director; Mr Thomas Nherera is the Executive Director for Finance and Administration; Mr M. Raradza is the Executive Director for Operations and Marketing; Mrs R.M Kajese being the fifth Director.

The defendant is a proprietor and hence holder of a coal mine situated in Hwange under a special Grant Number 4084 in respect of coal reserves which comprise of approximately 20,000,000 (twenty million) tonnes mineable and extractable in situ tons of coal. The defendant then formed a Special Purpose Vehicle under the name of Entuba Coal Fields of Zimbabwe (Private) Limited whose registered office address is given as 28 Hillside Road Extension Transtobac Complex, Msasa, Harare whose directors are Dr C. Msipa, Mr Hlongwani, Mr E. Raradza, Mr T. Nherera and Mr M. Raradza.

Dr C. Msipa and Mr Hlongwani are directors of another entity called Coal Brick which company is known to the plaintiff. Hence, Mr E. Raradza and Mr T. Nherera are both directors of the defendant and Entuba Coal Fields of Zimbabwe (Private) Limited.

On 28 August 2017, the plaintiff issued summons against the defendant for the following relief;

(a) Payment of the amount of USD3,885,000, being payment of money due and owed to the plaintiff by the defendant in terms of an acknowledgment of debt which was executed by the defendant in favour of the plaintiff on the 15th of February 2017;

(b) Interest on the amount at the prescribed rate of 5% per annum calculated from the date of summons to the date of payment in full; and

(c) Costs of suit on attorney client scale.

In paragraph 3 of the plaintiff's declaration it summarises the plaintiff's cause of action as follows:

“3. On the 15th of February 2017 the defendant executed an acknowledgement of debt in favour of the plaintiff wherein it admitted that the amount of $3,885,000 (three million eight hundred and eighty five thousand United States dollars) was due and owed to the plaintiff as a debt arising from the work done by the plaintiff at Entuba Mine at the instance and request of the defendant.”

In paragraph 5 of its declaration the plaintiff adds:

“The defendant failed to pay the monthly instalments as per the acknowledgement of debt and the amount of US$3,885,000 is now due and owed to the plaintiff.”

The defendant entered appearance and filed its plea and the gravamen of its plea is contained in paragraph 3 which states the following:

“3: Ad Paragraph 3 Defendant denies;

(a) The existence of any privity of contract between plaintiff and itself and denies that any work was allegedly performed on its behalf.

(b) That plaintiff performed work on its behalf or for whomsoever at its special instance and request. It puts plaintiff to the proof thereof.

Defendant, consequently, denies that there was any legal cause for the alleged acknowledgement of debt.”

On the strength of this plea, the defendant prays that the plaintiff's claim be dismissed with costs.

On 29 January 2018 the parties signed a joint pre-trial conference minute which streamlined issues for trial as follows:

“1. Whether there was legal cause for the acknowledgement of debt.

2. Whether the debt acknowledged by the defendant arises from work done by the plaintiff at the instance and request of the defendant.

3. What amount is due by the defendant to the plaintiff?”

On 13 June 2018 the matter proceeded to trial.

Mr N R Barber, the plaintiff's Managing Director, gave evidence. He stated that between 2013 and 2014 he was tasked to do work at Hwange by Entuba Mine, a company owned by the defendant company. The total amount due from Entuba was $3,012,493=46, and, on 12 May 2016, the defendant's Chief Executive Officer, Mr Thomas Nherera, wrote to the plaintiff acknowledging its indebtedness to the plaintiff for that amount.

The first acknowledgement of debt, authored and signed by the defendant's Directors, was produced by the plaintiff in court and accepted as exhibit number 1.

In the contents of exhibit 1, the witness pointed out that the defendant thought it acknowledged its indebtedness to the plaintiff in the sum of $3,012,493=46, a reconciliation of the total capital owed was going to be carried out and factor in any amount towards fuel expense issued to the plaintiff during the operations, thereafter, interest was going to be added to the capital.

On 15 February 2017, Mr N.R. Barber told the court that indeed a second acknowledgement of debt showing a deduction in capital and a figure of interest was signed by the defendant. The second acknowledgement of debt, exhibit 2, was produced in court.

Mr NR Barber further clarified and confirmed that although all the invoices were reflecting Entuba Coal Mine, those were subsequently accepted by the defendant and the defendant acknowledged its indebtedness to the plaintiff and what was more crucial to the plaintiff were the acknowledgements of debt specifically created, authored, and signed, by the defendants which formed the plaintiff's cause of action.

He clearly testified that Entuba Mine was a special purpose vehicle formed by the defendant and he was not surprised when the defendants delivered to him exhibit(s) 1 and 2. He believed the defendant when it told him that it was going to take over the debt.

In any case, according to the witness, the defendant was the beneficiary of the product the plaintiff produced.

He added that at all material times Mr T Nherera was aware of all the invoices issued to Entuba and Mr T. Nherera used the same invoices to prepare and reconcile figures which he ultimately used to compile the acknowledgement of debts.

Mr N.R. Barber was extensively cross examined by the defendant's counsel but he maintained his stance, and, further, added that although the defendant was joined by Linos Masimura, well after the signing of the acknowledgement of debt, the defendant did not challenge the authenticity of the acknowledgment.

Mr NR Barber was actually surprised when Mr E Raradza and Mr T Nherera refused to honour the defendant's indebtedness. The amount of $3,885,000 was calculated and reconciled by the defendant and it ought to be honoured he contended.

The plaintiff's second witness was Mr Antiock Kuraone who was appointed as agent by the plaintiff to recover the outstanding debt.

When the witness was appointed he engaged the Directors of the defendant, the Managing Director, Mr E Raradza, and Mr T. Nherera. The defendants unreservedly acknowledged owing the plaintiff an amount of $3,885,000 and they produced exhibit no. 2 where the defendant indicated the proposed date of payment with a cut-off date for last payment being February 2020.

The witness reiterated the fact that in as far as the legal cause of the acknowledgement of debt was concerned, the acknowledgements themselves, prepared by the defendant, succinctly disclosed the cause, that is, for payment of money for the work done for the defendants at Entuba Mine in Marange.

Exhibit 2 was signed by the Managing Director, Mr E Raradza, and Director Finance and Administration, Mr T Nherera.

The two were not forced and co-operated throughout the engagement, he said.

He also clarified that at no time did the defendant raise the issue of liability; the sticking issue that arose when he came into the matter was basically reconciliation, more particularly, of factoring in the fuel aspect. Otherwise, the parties were in agreement as to the amount.

During cross examination by the defendant's counsel, the witness remained adamant that the issue of legal causa did not arise during the engagement.

Mr T. Nherera was fully aware of all the verifications and he (Mr T Nherera) is the one who did the reconciliation.

Mr Kuraone rejected the amount of $896,884 as the correct amount and denied that Mr Masimura engaged him for a revisit on the alleged reconciliation of the figures contained on the acknowledgements.

After the acknowledgement, what Mr Kuraone and the plaintiff were waiting for was payment. When the defendant did not honour the payment he advised the plaintiff to take legal action, which the plaintiff did.

Mr Antiock Kuraone impressed the court as an honest witness, he did not exaggerate but remained forthright. He actually confirmed Mr N.R. Barber's testimony and both witnesses were credible. Their evidence tallies with the exhibits produced in court....,.

Defendant's Evidence

The defendant called Mr Edward Raradza, its Managing Director; to give evidence. I will deal with portions of his evidence relevant to the matter before me.

He told the court that sometime in September 2013 the defendant and Coal Producers and Processors Trust Zimbabwe entered into a joint venture agreement where the two parties formed a Special Purpose Vehicle, Entuba Coalfields (Private) Limited. The defendant was to avail its mining concession to the joint venture and Coal Producers Trust was to provide resources to mine the coal.

The plaintiff was brought on site to Entuba Coalfields to provide mining contractor services.

According to the witness, it was Coal Producers Trust which brought the plaintiff to Entuba and payment of work done by the plaintiff, per Entuba, was Coal Producers Trust's responsibility. He repeated what is contained in the defendant's plea, that there was no contractual arrangement between the plaintiff and the defendant.

In July 2015, the Special Purpose Vehicle, Entuba Coal Mine Company, became dysfunctional and the defendant repossessed its mining concession. The defendant was aware of the plaintiff's debt, and, according to Mr E Raradza, the defendant, without any legal obligation thereto, executed an acknowledgement of debt in favour of the plaintiff in the amount that the plaintiff had indicated was wrong subject to a reconciliation being conducted.

He added that the defendant could not pay because the income flows from the mining operations did not permit fulfilment of such undertakings that the defendant had made.

During cross-examinations by the plaintiff's legal practitioner, Mr Raradza unequivocally admitted that the Directors and the defendant company confirm that the plaintiff is owed but the only contentious issue was the amount. He accepted the authenticity of both exhibit 1 and 2, and, per exhibit 2, he accepted that he co-signed it but he was not familiar with issues relating to costing mining invoices. He admitted that efforts were made to reconcile the figures acknowledged but was not clear as to when such efforts were made before the drafting of exhibit 2 or after it was already signed.

Most of his evidence actually substantiated the plaintiff's case.

The defendant's second witness was Mr Thomas Nherera. In principle, the witness dwelt more on corporate divisibility, that, as long as there are two existing companies, the liability of one does not cross the demarcating line to the other side. Each company is accountable to its own liabilities. Hence, the defendant did not enter into any contractual relationship with the plaintiff, and, as such, there was no pretext for the writing of the acknowledgement of debt.

He however brought a very crucial revelation which greatly assisted this court. He admitted, under cross examination, that the Managing Director of the defendant and himself were both directors of Entuba. He was its Chief Executive Officer and he is the one who received all the invoices from the plaintiff. Using those invoices, he prepared exhibit 1 and 2. However, when exhibit 1 and 2 were prepared and signed, the real motive was to retain business relationship and rapport with Mr NR Barber but thus far.

He also admitted that Entuba had no assets at all and was fictitious in principle.

Mr T Nherera was evasive during cross-examination and had difficulties in answering simple questions. He contradicted Mr E Raradza especially on the aspect of liability of the defendant to the plaintiff.

Mr Linos Masimura was the defendant's third witness.

He holds a Masters in Business Leadership and is involved in mining operations in Zimbabwe and South Africa. He is the Deputy Managing Director of the defendant from June 2017. When he joined the defendant he was briefed about the defendant's status, its employees and liabilities. He was shown exhibit 1 and 2 and undertook to do a verification exercise. He visited the mine at Hwange with Mr E Raradza, the Mining Manager, and Mr Kurauone. He worked out a reconciliation thereafter and came out with a figure of $896,884 as being the “real” amount per the work done by the plaintiff. He also worked out the total sum of payments made to the plaintiff by Entuba or payments made to the plaintiff for work done.

He strengthened the defendant's plea that there was no legal causa between the plaintiff and the defendant.

During “conciliation” of figures, he worked with Mr Kurauone who was representing the plaintiff but when the witness engaged Mr Kurauone with the figure of $896,884 Mr Kurauone could not accept it.

The witness is not an accountant, he did not produce a comprehensive audit report based upon the acknowledgement figures and show the deductions of double invoicing. The document shown by the witness is but scanty. It does not show the reconciliation process for one to come up with the amount of $896,884.

The witness was cross-examined by the plaintiff's counsel and was at pains to explain how he arrived at that figure of $896,884.

He did not agree with the Managing Director's evidence that the defendant owes the plaintiff money.

After the testimony of Mr L Masimura, the defendant closed its case....,.

Analysis of plaintiff's Exhibits

Exhibit 1

Exhibit 1 is the first acknowledgment of debt dated 12 May 2016. The exhibit reads as follows:

“AGREEMENT OF INDEBTEDNESS

We acknowledge our indebtedness to your company, N R Barber (Pvt) Ltd, in regards to the contract mining work your company carried out for us at Zambezi Gas's Entuba Coal Concession in Hwange, Zimbabwe.

We acknowledge the capital amount of USD3,012,493=46 (USD Three million and twelve thousand four hundred and ninety three dollars and forty six cent) subject to the reconciliation of the total amount of fuel issued out to NR Barber (Pvt) Ltd mining team during the period between 16 May 2014 to 4 June 2014. This amount excluding interest. This interest will be added after reconciliation of total capital amount owing as per the contract.

We are also agreeable to your proposal that as soon as inflows of income from our mining operations start to come in the proceeds will be shared amongst us at the agreed percentages that shall be agreed between Zambezi Gas and NR Barber (Pvt) Ltd at that time. We are also agreeable to giving you full access to our books of accounts so as to have full transparency between us.

This agreement is without prejudice to prior contracts made between our two parties….,.”

The letter was written by the defendant company and signed by Mr Thomas Nherera, its Chief Executive Officer, the defendant's second witness in this trial. It originates from the defendant company written on the defendant's letter head. The defendant's witnesses acknowledge same.

Exhibit 2

This letter was written and signed by Mr E Raradza (the Managing Director of the defendant) and Mr Thomas Nherera (Executive Director Finance and Administration) dated 15 February 2017 on behalf of the defendant.

It is equally central to this matter and it needs extensive quotation and analysis. It is necessary to quote it as is:

“Zambezi Gas Zimbabwe Private Limited

15 February 2017, Mr J.M Kurauone, Harare, Attn: Mr Kurauone

Dear Sir

REPAYMENT PROPOSAL FOR THE PAYMENT OF N.R BARBER (PVT) LTD

We, as Zambezi Gas Zimbabwe (Pvt) Ltd, are committed to the repayment of the principle debt of USD2,715, 000 (two million seven hundred and fifteen thousand dollars) and an interest amounting USD1,170,000 (one million one hundred seventy thousand dollars) to the work done at Entuba Coal Mine in Hwange between 2014 and 2015. We are proposing the following repayments starting from February 2017 onwards to February 2020.

MONTH AMOUNT (USD)
February 2017 10,000
March 2017 10,000
April 2017 15,000
May 2017 15,000
June 2017 20,000
July 2017 20,000
August 2017 30,000
September 2017 30,000
October 2017 40,000
November 2017 40,000
December 2017 40,000
Total 265,000

January 2018 50,000
February 2018 50,000
March 2018 70,000
April 2018 70,000
May 2018 90,000
June 2018 90,000
July 2018 100,000
August 2018 100,000
September 2018 100,000
October 2018 100,000
November 2018 100,000
December 2018 100,000
Total 1,020,000

January 2019 150,000
February 2019 150,000
March 2019 200,000
April 2019 200,000
May 2019 200,000
June 2019 200,000
July 2019 200,000
August 2019 200,000
September 2019 200,000
October 2019 200,000
November 2019 200,000
December 2019 200,000
Total 2,300,000

January 2020 150,000
February 2020 150,000
Total 300,000

Total all arrears $ 3,885,000

We are hopeful that you will find this a fair way of settling this outstanding debt.

Yours faithfully

E RARADZA (ER)
T NHERERA (TN)
MANAGING DIRECTOR, EXECUTIVE DIRECTOR FINANCE & ADMINISTRATION”

Exhibit 1 and 2 gave rise to the action taken by the plaintiff. The following aspects seem not to be controverted by the parties;

(a) The defendant and the plaintiff are known to each other in business.

(b) The defendant's own agents/Directors, Mr E Raradza (the Managing Director) and Mr T Nherera (Executive Director: Finance & Administration) wrote exhibit 2 above proposing to settle the debt of the exact amount owed by the defendant to the plaintiff in the sum of $3,885,000.

(c) The defendant unconditionally undertook, and promised, to pay specified amounts of money per month from 2017 to the month of February 2020.

(d) The acknowledgments of debt are of a specific sum of money and made in writing by the defendant's authorised agents and accepted by the plaintiff.

(e) The defendant is bound by the actions of its agents, Mr E Raradza and Mr T Nherera; resultantly, the defendant, through, the actions of its agents, rendered itself liable as the principal.

(f) Exhibit 2, written by the defendant acknowledging indebtedness to the plaintiff, is not denied by the defendant in its pleadings, hence, it is deemed authentic and accepted by the defendant.

Contrary to what is contained in the defendant's plea, more particularly paragraph 3 thereto, the defendant, in its letter of 15 February 2017, unreservedly acknowledge that the US$3,885,000 was due “to the work done at Entuba Coal Mine in Hwange between 2014 and 2015.”

The opening of the letter/acknowledgment of debt dated 15 February 2015 reads as follows:

“We, as Zambezi Gas Zimbabwe (Pvt) Ltd, are committed to the repayment of the principle (sic) debt of…,.”

This, in this court's view, is not disputed by the defendant. If the foregoing are issues of common cause then what is the reason proffered by the defendant to impugn or perjure the acknowledgment of debts duly signed by it?

Exhibit 2 is self-explanatory to the aspect of legal cause raised in the defendant's plea.

The defendant, in its own letter to the plaintiff, admits that the amount due to the plaintiff was for work done at Entuba Coal Mine in Hwange and that it was committed to the repayment in full, albeit, in staggered figures. The acknowledgment did not question the motive or otherwise by the defendant to pay or not to pay.

The plea by the defendant was not sustainable.

If it had denied authorising the 15 February 2017 letter maybe one would have understood that.

When the defendant, on its own letter head, signed by its own Directors acknowledging the amount due and proposing sums of payments per month, then disown such evidence, defies all logic.

The acknowledgments of debt authored by the defendant contained the legal causa of the debt. They had written confirmations of the matter in dispute and acknowledged the exact amount due to the plaintiff.

Entuba Coal Mine was created by the defendant's Directors. The registered office of Entuba was the same with that of the defendant, 28 Transtobac Complex, Hillside Road Extension, Msasa, Harare. Mr Thomas Nherera was Entuba Coal Mine's Chief Executive, and, the defendant's Managing Director, Mr E Raradza, was a co-Director of Entuba. Entuba was formed to operate the defendant's mining concession in Hwange and all the invoices for Entuba were sent to the defendant's address for the attention of Mr T Nherera.

Entuba Cola Mine was hence purely an alter ego of Mr Raradza and Mr Nherera. One cannot differentiate the defendant from Mr Raradza and Mr Nherera and from Entuba.

This court has found that the work done at Entuba by the plaintiff at Hwange Mine was at the instance of the defendant. This is clearly accepted by the defendants in exhibit 1 and 2 and Mr E Raradza ungrudgingly accepted this during the trial.

It is therefore found that there is a legal causa to the acknowledgment of debt as admitted by the defendant's Directors.

Exhibit 1 and 2 captures the previous transactions and embodies such to show how the amounts arose from work done on behalf of the defendants.

The defendant voluntarily wrote to the plaintiff confirming its indebtedness, and, in terms of exhibit 2, the defendant outlines the estimated period of settlement of the debt until the whole sum is liquidated.

Hence, not only an amount is acknowledged but also a promise to pay and specific dates provided by the defendant in writing.

Assuming that the defendants are stating the truth that the court should treat Entuba and the defendant as separate legal entities, which I do not accept; from the day exhibits 1 and 2 were written by the defendant such acknowledgments bound the defendant and exhibit 2 became the cause of action at the instance of the plaintiff.

The defendant, in its plea, presents a bare denial based on law.

It persisted that there was never any contractual relationship between it and the plaintiff, and, during the trial, it tried to paint a picture that exhibits 1 and 2 were prepared out of compassionate grounds with the intention to maintain good business relationships with Mr NR Barber, the Managing Director for the plaintiff.

The reading of exhibits 1 and 2 shows a totally different picture.

Exhibits 1 and 2 show that the defendant adopted the liability and undertook to settle the amounts due.

The figure of $3.012,493=46 was revised as the capital figure, and, on exhibit 2, the capital principal debt became $2,715,000. Such a reconciliation is consistent with the undertaking of the defendant in its letter of 12 May 2016, exhibit 1.

The Managing Director, Mr E Raradza, and the Chief Executive Officer, Mr T Nherera, wanted to convince the court that they had no knowledge of mining concepts of invoicing; but, the defendant's Board Chairman is a legal practitioner of long outstanding and experience – surely, he would have explained to the defendant the legal effect of exhibit 1 and 2; and, it is assumed, in the circumstances, that such advice was given to the defendant and it proceeded to prepare them.

Mr Linos Masimura came to join the defendant well after exhibits 1 and 2 had been prepared. The alleged reconciliation was post facto and could not affect exhibits 1 and 2.

Mr T Nherera is in charge of the defendant's finances and he is the one who initiated both exhibits 1 and 2; the only reasonable inference relating to exhibits 1 and 2, in this court's view, is that they reflect the actual amount owed to the plaintiff.

The amount of $896,884 does not appear in the defendant's plea.

It only emerges in exhibit No. 4; the defendant's legal practitioner's letter dated 24 August 2017 written in reply to the plaintiff's letter. It was never tendered to the plaintiff as being the amount due to the plaintiff. It was not even admitted by the defendant in its papers. There is no evidence to show that the figure came as a result of conciliating $3,012,493=46 contained in exhibit 1.

The court concludes that the amount of $3,885,000 acknowledged by the defendant, on 15 February 2017, is the capital debt inclusive of interest due to the plaintiff.

The Law

In the matter of Bared van Wyk v Tarcon (Pvt) Ltd SC49-14, PATEL JA…, stated the law as follows:

“In the circumstances, I am inclined to take the view, in the absence of evidence to the contrary adduced before the court a quo, that the claim in casu was based on a Stated Account. There was an agreed acknowledgment of liability signed on behalf of the respondent. All that appears to have been required thereafter is its Chairman's approval of the payment plan or method of discharging that agreed liability.

As was recognized by the learned judge, it is competent to sue a debtor on his admission of liability as set out in an acknowledgment of debt without founding the action on the original transaction giving rise to that acknowledgment. See Mahomed Adam (Edms) Beperk v Raubenhumer 1966 (3) SA 646 TRD and the authorities there cited.”

The above legal position is very apposite to the matter before me.

I do not agree with the defendant's argument to the effect that the court should go beyond the acknowledgment of debt to see the motive or basis behind its birth or existence.

The plaintiff has managed to prove its case on a balance of probabilities, and, in effect, the defendant, to a large extent, agrees with plaintiff's evidence on material aspects.

Disposition

The plaintiff's claim succeeds and it is ordered as follows;

1. Judgment be and is hereby entered for plaintiff in the sum of USD3,885,000 (three million eight hundred and eighty five thousand United States dollars).

2. Interest on the amount of US$3,885,000 at the rate of 5% per annum calculated from the date of summons to the date of payment in full; and

3. Costs of suit on an attorney client scale.

Appealed
SC04-20 : NICKOLAS VAN HOOGSTRATEN vs TAPIWA NELOMWE
Ruled By: GARWE JA, MAVANGIRA JA and MATHONSI JA

This is an appeal against the whole judgment of the High Court handed down on 18 July 2018 in which it ordered the appellant to deliver to the respondent 167,275 Old Mutual Public Limited Company shares within 10 days of the date of the order. Alternatively, it ordered the appellant to pay damages equivalent to the value of 167,275 Old Mutual Public Limited Company shares calculated using the rate determined by the Zimbabwe Stock Exchange as at the close of trading on the last day that Old Mutual PLC traded in Zimbabwe.

The appellant was also ordered to pay costs of suit.

THE FACTS

The respondent instituted an action against the appellant for the return of the 167,275 Old Mutual PLC shares (the shares) which shares he had transferred to the appellant or its nominee in pursuance of an Asset Swap Agreement. In the alternative, the respondent sought payment of damages equivalent to the market value of the shares.

His case was that sometime in 2008 he had entered into a verbal Asset Swap Agreement with the appellant, the terms of which were that the respondent would transfer the shares and a further 110,000 PPC shares to the appellant. Upon the transfer of the shares, the appellant would transfer to the respondent an immovable property known as No.4 Wroxham Road, The Grange, Harare (the property). Thereafter, the respondent would also transfer the 110,000 PPC shares to the appellant.

It was the respondent's case that about 22 October 2008, he duly transferred the shares to the appellant's nominee, Zimcor Limited, under Share Certificate No. 606776.

In breach of the agreement, the appellant failed to transfer the property to the respondent as a result of which the respondent cancelled the agreement in January 2011.

Accordingly, the respondent became entitled to the return of the shares he had transferred to the appellant. As the appellant failed to return the shares, the respondent sued for their return. In the alternative, he claimed their value as damages.

Before the court a quo, the appellant denied ever entering into an agreement with the respondent maintaining that he had only received the shares from the respondent in his capacity as an agent of Zimcor Limited, a company in which he was neither a Director nor a shareholder.

The appellant asserted that the shares in issue were not transferred to him, and, as such, he was not liable to the respondent in respect of the shares.

The respondent insisted that he dealt with the appellant in his personal capacity and not as an agent and that the shares were transferred to Zimcor Limited on the instructions of the appellant; the respondent himself not having had any relationship with Zimcor Limited.

The court a quo found in favour of the respondent and granted an order aforesaid. The appellant was aggrieved. He noted an appeal to this Court on the following grounds:

1. The court a quo erred in fact and in law by finding that there was an agreement for the sale of an immovable property in exchange for shares in the absence of any evidence, disregarding the physical evidence which negatived the existence of the alleged agreement.

2. The court a quo erred in fact and at law in finding that the appellant was not a credible witness as a result of discrepancies in his evidence without taking into account the fact that the trial was taking place about a decade since the occurrence of the events under scrutiny which time would naturally have an effect on the memory of the appellant.

3. The court a quo erred in fact and in law by finding that the plaintiff (sic) had proved his case on a balance of probabilities and yet the appellant (sic) had in fact not proved the issues for trial.

4. The court a quo erred in fact and in law in ordering the appellant to return shares which, from the evidence before the court, were never in the appellant's possession.

5. The court a quo erred in fact and at law in finding that the shares should be compensated by a party who had not been proved to have benefited from same, in the absence of any proof that Zimcor Limited itself had not solely benefited from the shares transferred in its name.

I must state that at the hearing of the appeal counsel for the appellant quickly abandoned grounds of appeal numbers 1 and 3 which were afflicted by invalidity. This left only grounds of appeal numbers 2, 4 and 5 to be motivated.

THE COURT A QUO'S FINDINGS

The court a quo accepted the evidence of the respondent which it found to have been simple and in support of his averments in the pleadings. It found that although the shares in question had been transferred to Zimcor Limited and not to the appellant, Zimcor Limited was in fact the appellant's nominee to whom the respondent owed no obligation for which he could transfer the shares.

The court a quo found the existence of a link between an immovable property which the appellant had purchased at a Sheriff's auction and the transfer of the shares.

The court a quo concluded that the respondent was not only a credible witness, but that his evidence also accorded with probabilities. The evidence of the appellant, in opposition to the claim, did not impress the court a quo at all. In fact, the court a quo was quite critical of the appellant's presentation describing him “as an evasive and in some instances deliberately mendacious witness” who made inconsistent statements.

The court a quo concluded that nothing turned on the transfer of the shares to Zimcor Limited because the appellant had inadvertently admitted being in the habit of not registering his assets in his own name. This explained why he directed the respondent to transfer the shares into the name of Zimcor Limited.

ISSUES FOR DETERMINATION

This appeal, in essence, turns on two issues, namely;

1. Whether the court a quo erred in finding that there was a valid agreement between the parties; and

2. Whether the court a quo erred in ordering the delivery to the respondent of the shares or their equivalent value.

1. WHETHER THE COURT A QUO ERRED IN FINDING THAT THERE WAS A VALID AGREEMENT BETWEEN THE PARTIES

It was submitted, on behalf of the appellant, that he acted as an agent of a disclosed principal, namely, Zimcor Limited. For that reason he could not assume personal liability being merely a conduit that fell away the moment the agreement was concluded between his principal and the respondent.

In advancing that argument, counsel for the appellant relied on the proof of transfer of the shares dated 22 October 2008 showing that the respondent indeed transferred the shares to Zimcor Limited. The document in question was signed by the appellant on the same date and he endorsed that he had received it “on behalf of Zimcor.”

Once it was accepted that the appellant acted on behalf of a principal, so the argument goes, the court a quo was precluded from ordering the appellant to return the shares which he did not receive in his personal capacity.

Counsel for the respondent submitted that the existence of an agency relationship between the appellant and Zimcor Limited was not established.

Riding on the court a quo's finding that there existed no relationship between the respondent and Zimcor Limited as would motivate the transfer of the shares to the latter, counsel for the respondent submitted that the court a quo's findings on that aspect cannot possibly be said to have been irrational as to invite the Appellate Court to intervene.

I agree.

This is a matter which was decided entirely on the credibility of witnesses. The appellant was pitted against the respondent and the court a quo made factual findings based upon their presentation of evidence.

I have already said that the court a quo was critical of the evidence of the appellant. The court a quo assessed the quality of the appellant's evidence and concluded…,:

“The defendant's (appellant) demeanor punctuated by evasiveness and the use of impertinent language whenever he was confronted with facts presented him as a witness who was seeking to mislead the court.”

Indeed, there is a reason why the court a quo came to that conclusion.

The appellant's evidence was not only incoherent, it was punctuated by the use of intemperate language. Expressions like: “this is nonsense;” “no, it is rubbish, absolute rubbish; it is ridiculous…,” are all over the record of his testimony which is also replete with situations where the appellant refused to answer questions.

The trial court was required to resolve the factual disputes of whether there was a Swap Agreement and whether the appellant was acting in his personal capacity, among others.

The quality of the appellant's evidence was so poor that the trial court cannot be faulted for rejecting it and embracing that of the respondent. The appellant has himself to thank for that outcome having done nothing to endear himself in the eyes of the court.

In rejecting the appellant's evidence, the trial court made factual findings, including the finding that the appellant had acted for himself and not as an agent of Zimcor Limited which was merely his nominee for receiving the shares.

It has long been regarded as settled in this jurisdiction that this Court will not interfere with factual findings, including findings on the credibility of witnesses, made by a trial court unless the decision is irrational.

This Court has, in a number of cases, followed the general rule on whether to interfere or not which was expressed in Hama v National Railway of Zimbabwe 1996 (1) ZLR 664 (S)…, where the court pronounced:

“The general rule of the law, as regards irrationality, is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at such a conclusion: Bitcoin v Rosenburg 1936 AD 380 at 395-7; Secretary of State for Education & Science v Metropolitan Borough of Tameside [1976] 3 All ER 665 (CA) at 671 E-H; CCSU v Min for the Civil Service supra at 951 A-B; PF-ZAPU v Minister of Justice (2) 1985 (1) ZLR 305 (S) at 326 E-G.”

When following this principle, almost two decades later, ZIYAMBI JA restated it more emphatically in ZNWA v Mwoyounotsva 2015 (1) ZLR 935 (S)…,:

“It is settled that the Appellate Court will not interfere with factual findings made by a lower court unless these findings were grossly unreasonable in the sense that no reasonable tribunal applying its mind to the same facts would have arrived at the same conclusions; or that the court had taken leave of its senses; or, put otherwise, the decision is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at it; or that the decision was clearly wrong.”

The appellant's case was never that there was no agreement involving the transfer of the shares but that such agreement was between the respondent and Zimcor Limited.

He maintained that he was only an agent of Zimcor Limited.

The respondent asserted that the verbal Swap Agreement was with the appellant and that he knew nothing about Zimcor Limited. He only transferred the shares to the latter as directed by the appellant. The respondent produced proof of the transfer of shares which was in fact signed by the appellant in acknowledgment of receipt. He also produced further documents signifying his pursuit of the transfer of the immovable property at the centre of the dispute, or, alternatively, the return of the shares.

It is the view of this Court that the requirements of a valid contract were satisfied by the evidence. The probabilities favoured the respondent as correctly found by the trial court. This is particularly so given that the appellant was not a credible witness.

The court a quo's finding on credibility, as I have said, is one which this Court cannot lightly interfere with. The assessment of the credibility of a witness is for the trial court to make and not this Court. That is the view expressed in S v Mlambo 1994 (2) ZLR 410 (S) …,:

“The assessment of the credibility of a witness is par excellence the province of the trial court and ought not to be disregarded by an Appellate Court unless satisfied that it defies reason and common sense.

A careful reading of Ndlovu's evidence, to which no accompanying adverse demeanor finding was made, does not persuade me that the magistrate's assessment was erroneous.”

See also Nzira v The State SC23-06.

There was no adverse finding on demeanor in respect of the respondent.

It was not suggested, on behalf of the appellant, that the findings of the trial court on credibility could be faulted in any way except the suggestion that the appellant's frailties as a witness should have been excused because of the lengthy passage of time.

I disagree because the respondent, who was credible and gave clear testimony, also related to the same events and was also afflicted by the same lengthy delay.

There was no misdirection on the trial court's finding that a valid agreement was concluded by the parties.

2. WHETHER THE COURT A QUO ERRED IN ORDERING THE DELIVERY TO THE RESPONDENT OF THE SHARES OR THEIR EQUIVALENT VALUE

Counsel for the appellant strongly submitted that it was incompetent for the trial court to order the appellant to return the shares which were never transferred to him, they having been transferred to Zimcor Limited and not the appellant.

In a way, the conclusion already made, that the parties entered into a valid agreement involving the transfer of the shares, resolves this issue as well.

In fact, that argument is not well taken to the extent that it ignores the primary transaction between the parties. The appellant did not meaningfully refute that there was an underlying agreement in terms of which he was selling to the respondent a house he was in the process of purchasing from a Sheriff's sale.

I have already adverted to the trial court's factual findings which were adverse to the existence of an agency relationship between the appellant and Zimcor Limited. I have said that there is no legal foundation for interfering with that finding. If there was no agency, as the trial court correctly established, the consequences of an aborted Swap Agreement, namely, the return of the shares or their value, cannot be shared with any other party. They are for the appellant alone.

When giving evidence, the appellant was unable to show that he was an agent of Zimcor Limited. Quite to the contrary, he stated clearly, under cross examination, at p148 of the record, that he did not get any authority from Zimcor Limited. Pressed further, he dithered stating:

“I cannot remember.”

There can be no doubt that the obligation to make good the shares fell on the appellant. In fact, that he was an agent of Zimcor Limited was a claim made by the appellant himself. He was therefore under an obligation to lead evidence to establish that claim. His failure to lead evidence from Zimcor Limited, which, presumably, was available, further warranted the drawing of an adverse inference that no such evidence existed or that the evidence would not support his case.

The respondent sought an order compelling the appellant to transfer the shares to him given the cancellation of the Swap Agreement. In the alternative, he sought payment of damages equivalent to the market value of the shares. The trial court issued the following order:

“In the result, it is ordered that:

1. Judgment be and is hereby given in favour of the plaintiff and against the defendant for:

(a) Delivery to the plaintiff of 167,275 Old Mutual Public Limited Company shares within ten days of the date of this order; or, alternatively

(b) Payment of damages equivalent to the value of 167,275 Old Mutual Public Limited Company shares calculated using the rate determined by the Zimbabwe Stock Exchange as at the close of trading on the last date that that company traded in Zimbabwe.

2. Defendant shall pay the costs of suit.”

It is not clear why the trial court made such a disposition given that the fourth issue for trial, which it was required to resolve, was the value of the shares.

Apart from that, it was common cause at the trial that Old Mutual PLC had ceased to operate in Zimbabwe and had delisted from the Zimbabwe Stock Exchange before commencement of trial. Not only that, it was also common cause that the shares forming the dispute between the parties no longer existed.

According to a letter of 9 March 2015, by Corpserve Registrars (Pvt) Ltd to the respondent's legal practitioners, the shares were transferred to Stanbic Nominees NNR on 4 June 2009.

Counsel for the appellant submitted that a court of law sits to resolve disputes and should not sub-contract its duties to a third party.

The trial court should have determined the value of the shares and issued a holistic order instead of delegating the task to the Zimbabwe Stock Exchange. He further submitted that the Court ordered the determination of the value to be as at the close of trading on the last day Old Mutual PLC traded in Zimbabwe. That date was not determined and the parties had not made any submissions in that regard.

In his view, the matter should be remitted to the trial court to complete the case.

Counsel for the respondent, in a way, conceded that the order of the trial court presents some difficulties. He however took the view that the value of the shares is ascertainable because all stock brokers have an index which can be used to determine the date of the de-listing of Old Mutual PLC. As to why all that was not canvassed during the trial and resolved by the trial court, counsel for the respondent would not say.

Clearly, the trial court did not resolve all the issues for trial, and, in the end, gave an order which did not bring the dispute to finality.

It should have determined the value of the shares from evidence presented to it. If such evidence was not presented, there are remedies available for such eventuality. It could not assign the resolution of a trial issue to a third party who was not even cited in the proceedings. Moreso in a case such as the present where it was common cause that restitution of the shares was, to the knowledge of the parties and the court, no longer possible - they having been disposed of 17 years earlier.

The matter has to be remitted for resolution of the outstanding issues.

In the result, it is ordered that;

1. The appeal partially succeeds to the extent described below:

(a) The appeal on the merits is dismissed;

(b) Paragraphs 1(a) and (b) of the order of the court a quo, relating to the delivery of the 167,275 Old Mutual Public Limited Company shares and payment of damages, are set aside and in their place is substituted the following:

“The defendant shall pay to the plaintiff damages equivalent to the value of 167,275 Old Mutual Public Company Shares.”

2. The matter is remitted to the court a quo for a determination of the value of the 167,275 Old Mutual Public Limited Company Shares to be paid.

3. Each party shall bear its own costs.

View Appeal
HH444-18 : TAPIWA NALOMWE vs NICHOLAS VAN HOOGSTRATEN
Ruled By: ZHOU J

The plaintiff instituted the summons in casu claiming the following relief against the defendant:

“1. An order compelling the defendant to transfer 167,275 Old Mutual Public Limited Company shares to the plaintiff within ten (10) days of the date of the order; being shares which the plaintiff transferred to the defendant in pursuance an asset swap agreement which agreement was cancelled due to the defendant's breach.

2. Alternatively, and in the event that the defendant no longer has possession of the 167, 275 Old Mutual Public Limited Company shares, an order for payment of damages equivalent to the market value of 167,275 Old Mutual Public Limited Company shares at the date of judgment.

3. Costs of suit.”

The claim is contested by the defendant.

The plaintiff's case, as pleaded, is as follows;

In 2008, he entered into a verbal agreement in terms of which the defendant agreed to deliver to him an immovable property at 4 Wroxham Road, The Grange, Harare. In consideration of that the plaintiff would transfer to the defendant 167,275 Old Mutual Public Limited Company shares and 110,000 shares in a company known as PPC. Transfer of title in the property would be registered in favour of the plaintiff upon delivery of the Old Mutual shares. The PPC shares would be transferred to the defendant after the transfer of the property to the plaintiff.

Pursuant to the agreement, the plaintiff delivered the 167,275 shares to the defendant.

The defendant, however, breached the agreement by failing to transfer the immovable property into the name of the plaintiff. Consequently, the plaintiff cancelled the agreement and demanded the return of his Old Mutual shares which demand the defendant failed to comply with hence the instant proceedings.

The defendant denies the alleged agreement and states that he only received the 167,275 shares from the plaintiff in his capacity as agent for a company known as Zimcor Limited in which he was neither Director nor shareholder. The share certificates were in the name of Zimcor Limited.

Four issues were referred to trial. These are;

(1) Whether or not the defendant entered into an Asset Swap Agreement with the plaintiff;

(2) Whether or not the defendant was acting in his personal capacity;

(3) Whether or not, as a result of the said agreement, the defendant had 167,275 Old Mutual shares transferred to him by the plaintiff; and

(4) If so, whether or not the defendant is liable to transfer the aforementioned shares to the plaintiff, or, upon failure to do so, the value of the shares.

The plaintiff gave evidence in support of his claim. In addition to stating the facts as stated in his declaration, the plaintiff stated that he was introduced to the defendant by one Brian Machengo, an estate agent who was acting as the defendant's agent. The agreement, the terms of which are detailed in the plaintiff's declaration, was then concluded. The defendant advised the plaintiff that he had purchased the immovable property which he would deliver to the plaintiff from the Sheriff of the High Court at an auction. The defendant instructed the plaintiff to transfer the shares into the name of Zimcor Limited, a company which the plaintiff was made to understand belonged to the defendant.

Having transferred the shares into the defendant's nominee through his brokers, New Africa Securities, the plaintiff presented proof of such transfer to the defendant who duly signed to acknowledge receipt while Brian Machengo signed as a witness.

Thereafter, attempts were made by the plaintiff, acting through Brian Machengo, to obtain vacant possession of the immovable property which the defendant had agreed to deliver to the plaintiff. Those efforts yielded nothing.

The defendant gave evidence himself. He stated that he did not know the plaintiff but then said that he had met him two or three times before in 2008. He categorically denied entering into an agreement in terms of which he agreed to swap the immovable property referred to above for shares as alleged by the plaintiff.

His evidence was that at some point an estate agent advised him that a potential client wanted to buy the immovable property in question but the property could not be sold as it was the subject of a dispute and was not available for disposal.

He denied ever receiving the Old Mutual shares from the plaintiff or directing the plaintiff to transfer the shares to Zimcor Limited. His evidence was that he only received the documents pertaining to the shares on behalf of the “owners” of Zimcor Limited who had moved to South Africa at that time.

The standard of proof required in this case, being a civil matter, entails a comparative rather than a quantitative test.

The onus, in this case, is on the plaintiff to prove his case on a balance of probabilities.

The degree of proof is expressed in the following statement of lord denning in the case of Miller v Minister of Pension [1947] 2 All ER 372…,:

“It must carry a reasonable degree of probability but not so high as is required in a criminal case. If the evidence is such that the tribunal can say 'we think it more probable than not', the burden is discharged, but if the probabilities are equal it is not.”

This test has stood the test of time, and has been consistently applied; see Ocean Accident and Guarantee Corporation Ltd v Koch 1963 (4) SA 147 (A) at 157D; Zimbabwe Electricity Supply Authority v Dera 1998 (1) ZLR 500 (S) at 503E-504D.

This is a case in which the versions of the plaintiff and the defendant are mutually destructive.

The approach of the court in the face of such a scenario is as stated by sandura JA in Matiza v Pswarayi 1999 (1) ZLR 140 (S)…,:

“Commenting on mutually destructive stories, wessels JA (as he then was) had this to say in National Employers Mutual General Insurance Asociation v Gany 1931 AD 187 at 199:

'Where there are two stories mutually destructive; before the onus is discharged, the court must be satisfied upon adequate grounds that the story of the litigant upon whom the onus rests is true and the other false. It is not enough to say that the story told by Clark is not satisfactory in every respect. It must be clear to the court of first instance that the version of the litigant upon which the onus rests is the true version, and that, in this case, absolute reliance can be placed upon the story as told by A Gany…,.'

I entirely agree with the learned JUDGE OF APPEAL.”

The plaintiff's evidence is simple and supports the averments in his declaration. He tendered proof of transfer of the Old Mutual shares. He also explained why the shares were transferred into the name of Zimcor Limited rather than in the defendant's name. The company was the defendant's nominee for the purpose of receiving the payment. The plaintiff owed no obligation to that company which would have underpinned transfer of shares into its name.

The link between the transfer of shares and the existence of an immovable property which the defendant had purchased from the Sheriff's auction is established by evidence.

There is no way that the plaintiff would have known that the defendant had purchased that property from an auction.

The plaintiff also testified on the efforts which were made to recover the immovable property from the judgment debtor who was the owner of the property.

The documents on record show the involvement of a firm of attorneys, Ziumbe & Mtambanengwe, in the efforts to get the property from the judgment debtor. From the documentary evidence adduced by the plaintiff, the defendant gave written authority to Brian Machengo to recover possession of the property from the owner of it.

The plaintiff was not only a credible witness; his evidence accords with the probabilities.

The defendant presented himself as an evasive, and, in some instances, deliberately mendacious witness. When he was asked if he knew the plaintiff his initial response was: “I don't know him.” A moment later he said that he had met the plaintiff two or three times way back in 2008.

When he was asked if he had entered into the agreement in terms of which the plaintiff would transfer shares to him in return for the immovable property his response was: “Absolutely no.” When his attention was drawn to his affidavit in Case Number HC14089/12 in which he stated that in 2008 he extended an offer to the plaintiff to purchase the property, the defendant sought to disown the contents of the affidavit.

In his evidence in this court he denied ever attempting to sell the property to the plaintiff. He denied that he was at some point represented by a Mr Ndoro of Ziumbe & Mtambanengwe - even in the face of an affidavit in Case No. HC2560/09 in which he was represented by that attorney, and he states so in the affidavit.

The defendant's statement that he received the proof of share transfers as agent of Zimcor Limited cannot be accepted.

He conveniently endorsed on one of the documents that he was receiving on behalf of Zimcor Limited so that he would point to that endorsement as a ground to wriggle out of his contractual obligations.

The defendant did not call any witness from that company to support his story.

He inadvertently admitted that he is in the habit of not registering assets in his own name which would explain why he directed the plaintiff to transfer the shares into the name of Zimcor Limited.

The defendant made inconsistent statements about whether he had appointed Brian Machengo to be his agent.

In one instance, he disputed that fact before he admitted it with some qualification. This was so notwithstanding the availability of a handwritten document which he authored and signed appointing Brian Machengo to be his agent and the fact that when the plaintiff gave evidence on the appointment of Brian Machengo to be the defendant's agent he was never challenged.

The defendant's demeanour, punctuated by evasiveness and the use of impertinent language whenever he was confronted with facts, presented him as a witness who was seeking to mislead the court.

This court is convinced that the plaintiff has established, on a balance of probabilities, that he entered into an agreement with the defendant and that pursuant to that agreement he transferred his Old Mutual shares to the defendant. The defendant failed to perform in terms of the agreement. The plaintiff, as he was entitled to do, cancelled the agreement.

He is entitled to the return of his shares or payment of the value of the shares.

It was submitted, on behalf of the defendant, that Old Mutual PLC is no longer listed on the Zimbabwe Stock Exchange.

That fact is not a bar to an order that the value of the shares be calculated as at the last day that that company traded in Zimbabwe.

In the result, IT IS ORDERED THAT:

1. Judgment be and is hereby given in favour of the plaintiff and against the defendant for:

(a) Delivery to the plaintiff of 167,275 Old Mutual Public Limited Company shares within ten days of the date of this order; or, alternatively;

(b) Payment of damages equivalent to the value of 167,275 Old Mutual Public Limited Company shares calculated using the rate determined by the Zimbabwe Stock Exchange as at the close of trading on the last date that that company traded in Zimbabwe.

2. Defendant shall pay the costs of suit.

SC07-20 : FARAI BWATIKONA ZIZHOU vs THE TAXING OFFICER and RITA MARQUE MBATHA
Ruled By: MAKARAU JA

This is a review of taxation in terms of Rule 56 of the Supreme Court Rules, 2018.

The Rule provides that any party aggrieved by the taxation of a bill of costs shall give notice of review setting out his or her grounds of objection. Thereafter, the matter shall be set down before a judge in chambers.

I will refer to the parties as the applicant, first and second respondents respectively for convenience.

The applicant raised three grounds of objection;

(i) He alleged, firstly, that the first respondent had erred in denominating the taxed bill in United States dollars in light of the provisions of S.I.33 of 2019.

(ii) Secondly, he argued that the first respondent erred in allowing the second respondent's travelling expenses from Bulawayo to Harare when the second respondent is resident in Harare.

(iii) Finally, he argued that the first respondent erred in allowing costs for legal services rendered to the second respondent in contravention of the Legal Practitioners Act [Chapter 27:07].

The second respondent opposed the review.

In the main, she contended that the parties agreed to the bill as well as to two other bills relating to other matters. The draft bill agreed to in casu was simply presented to the first respondent for his endorsement. She further argued that it was quite proper for the parties to agree to a bill denominated in United States dollars at the time of taxation as the prohibition against charging for goods and services in foreign currency came into force after 28 September 2019 when S.I. 213/19 was published.

In compliance with Rule 56(3), the Registrar filed a report.

The report was compiled by the first respondent. It states that when the parties appeared before him, they advised that they wanted to discuss the bill between themselves before engaging him. When they finally did, they presented to him a bill for endorsement. The issue of the denomination of the bill in United States dollars was never discussed with him.

I note, at this stage, that it was this endorsement of the bill by the first respondent that has given rise to this review.

The applicant regarded the endorsement, and correctly so in my view, as adoption of the bill by the first respondent.

The first respondent cannot distance himself from the denomination of the bill in United States dollars. By affixing his signature to the draft that was presented to him and lending the authority of his office to the draft, he effectively passed the bill under his hand.

For this reason, both parties regarded the bill as having been taxed by the first respondent, hence, the second respondent took out a writ of execution to recover the amount of the taxed costs.

The issue that falls for determination in this review is whether the bill of costs, as taxed in this matter, is proper.

The court is very slow to interfere with the exercise of the Taxing Officer's discretion. It will not readily do so unless it is satisfied that the Taxing Officer acted on some wrong principle or did not exercise his or her discretion at all.

The bill was presented for taxation on 8 July 2019. By that date, S.I.33 of 2019 was part of the law, having been published on 22 February 2019.

The statutory instrument introduced the RTGS dollar as a currency and legal tender, and placed it on par with the bond note and the United States dollar.

Although not of direct relevance to the determination of this review, S.I.33 of 2019 also decreed that all assets and liabilities denominated in United States dollars, prior to the publication date, were to be deemed to be in RTGS dollars at a rate of one-to one with the United States dollar. It also declared that every enactment in which an amount was stated in United States dollars was to be construed as stating the amount in RTGS dollars at parity with the United States dollar.

In addition, and more relevant to the determination of this matter, at the time the draft bill was presented for taxation, S.I.142 of 2019 was also in force, having been published on 24 June 2019. Whilst S.I 33 of 2019 introduced the RTGS dollar as legal tender alongside the bond note and other currencies, S.I 142/19 made the local currency, as set out in S.I.33 of 2019, the sole legal tender in all transactions in Zimbabwe.

The second respondent argued that it was not illegal to have the costs awarded in United States dollars where the parties had agreed to the amount being denominated in the currency of their choice. The illegality of the denomination of the bill in United States dollars only arose on 28 September 2019, she argued, when S.I.213 of 2019 was published. In her view, it was this instrument that made it illegal to sell goods and services in any other currency save the local currency.

With respect, the second respondent is in error. S.I.213/19 amended the Exchange Control Act to enforce the exclusive use of the Zimbabwean dollar in domestic transactions by creating civil offences and penalties. The Statutory Instrument merely provided sanctions for contravening the law that had decreed the local currency as the sole legal tender in all domestic transactions. The law that declared the local currency as the sole legal tender in all domestic transactions was S.I.142/19 and not S.I. 213/19.

In light of the prevailing legal position at the time the bill was taxed, its denomination in United States dollars was in contravention of the law. The first respondent therefore erred in passing under his hand a bill that contravened the law.

Accordingly, and on this basis alone, the bill cannot stand. It is the settled position at law that anything done in direct conflict with a statute is a nullity.

In making the above finding, I am aware that the second respondent averred that the denomination of the bill in United States dollars was with the consent of the applicant.

Such consent, which is disputed, would have been of no import even if proven to be true. The parties could not, by their consent to act against the clear letter of the law, confer legality upon a bill of costs denominated in United States dollars.

It is therefore my finding that the bill of costs taxed in SC211/19 should be set aside for the reason that it was in contravention of the law....,.

I am satisfied that the applicant has made a case for the setting aside of the bill of costs purportedly taxed in SC211/19. It will be so ordered....,.

On the basis of the foregoing, I make the following order:

1. The bill of taxed costs in SC211/19 is hereby set aside.

2. The second respondent shall bear the applicant's costs of review.

Appealed
SC12-20 : ZIMASCO (PVT) LTD vs CASPER TSVANGIRAI and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS BULAWAYO
Ruled By: GARWE JA, HLATSHWAYO JA and GUVAVA JA

This is an appeal against the whole decision of the High Court sitting in Bulawayo under judgment number HB16-14, dated 30 January 2014, in which the appellants' application for absolution from the instance at the close of the first defendants case was dismissed.BACKGROUND FACTSThe facts which gave rise to this ...

BACKGROUND FACTS

The facts which gave rise to this matter are mainly common cause and may be summarized as follows:

On 10 June 2008, the appellant and the first respondent entered into an agreement of sale of a certain piece of land known as Stand 1004 Redcliff Township, situate in the District of Que Que (hereinafter referred to as the property). The property was owned by the first respondent.

In terms of the first respondent's summons and declaration before the court a quo, the purchase price for the property was said to be set at a local currency equivalent to US$180,000. The appellant purchased the property with the aid of the second respondent, a registered real estate agent.

The dispute centered on the amount of the purchase price which was payable.

The first respondent alleges that it was a term of the agreement that if the payment was to be made by cheque the amount would be based upon the prevailing informal market rate on the date of such payment.

It is not in dispute that the appellant paid Z$720,000,000,000,000 (Z$720 trillion) on 11 June 2008 through an interbank transfer.

The first respondent was thereafter requested to sign a power of attorney to effect transfer of the property by the second respondent. The first respondent alleged that it was his understanding that the transfer would only pass upon receipt of the full purchase price. The first respondent averred that the appellant, or the second respondent, removed some pages from the written agreement of sale and altered, inter alia, the purchase price so that it read the sum of Z$720 trillion without his knowledge or consent. The first respondent further indicated that the appellant and the second respondent then attached the forged pages to the authentic document bearing the first respondent's signature to make a complete “agreement of sale”.

Following the signing of the power of attorney to transfer the property, the property was transferred into the appellant's name.

According to the first respondent, the amount paid by the appellant, when he received the money, was equivalent to US$96,000. This left a balance of US$84,000, or its equivalent, in Zimbabwe dollars, in respect of the purchase price.

The first respondent alleged that the appellant should pay the difference but the appellant argued that it had paid the purchase price in full in terms of the agreement.

Following this dispute, the first respondent instituted summons seeking the nullification of the purported Agreement of Sale and cancellation of the Deed of Transfer in favour of the appellant. In the alternative, the first respondent prayed for the appellant to pay the outstanding balance of US$84,000, or its equivalent, together with interest.

PROCEEDINGS IN THE HIGH COURT

After the first respondent instituted summons, the appellant and the second respondent entered an appearance to defend. In its plea, the appellant denied allegations of falsifying the Agreement of Sale.

The appellant contended that the purchase price was always in Zimbabwean dollars and not quoted in United States Dollars. The second respondent confirmed the appellant's story.

The appellant, thereafter, filed a counter claim for the eviction of the first respondent from the property. It also claimed payment of arrear rentals and holding over damages in the sum of $400 per month plus interest from the first respondent.

At the close of the first respondent's case, the appellant made an application for absolution from the instance. The appellant further asked the court to grant its counter-claim. The basis upon which this application was made was three pronged;

(i) Firstly, it argued that the respondent could not claim that there was under payment when he had failed to prove the exchange rate on 11 and 12 June 2008, when the payment was made, to sustain the assertion that the payment made was not enough if converted to United States dollars.

(ii) Secondly, that the power of attorney contained a purchase price of $720 trillion. The first respondent was not disputing his signature thereon. It thus submitted that the caveat subscripto maxim applied regarding the signed power of attorney.

(iii) Thirdly, that the basis of its claim for eviction was the rei vindicatio. It further alleged that because they possessed the title deeds of the property it was prima facie the owner of the property and the onus now lay on the first respondent to justify why the eviction sought was not warranted.

On that basis, it was submitted that it was entitled to the order in terms of its counterclaim for the first respondent's eviction, arear rental, and holding over damages.

It was common cause that the appellant made a payment in the sum of $720 trillion dollars through an inter-bank transfer commonly known as an RTGS.

The appellant contended that even if it was accepted that the purchase price was pegged in United States dollars, which was denied, where payment is made through a Bank transfer, the date of the payment was the date when the application to pay is made to the Bank and not the date the money is reflected in the account of the transferee. The appellant thus submitted that payment of the full purchase price was made on the date that the application for transfer of the funds was made with the Bank.

The first respondent contended that the purchase price for the property was the equivalent of US$180,000 and that the time of payment would be the time that he received the money in his Bank account and was able to use the money - and not when the application for an interbank transfer was made.

He argued that, because of hyperinflation at the time, when he received the money in his account on 13 June 2008, it was less than the agreed amount when converted into United States dollars.

He submitted that the appellant, therefore, had not paid the purchase price in full.

It was also his submission that the original Agreement of Sale that he signed indicated that the purchase price was the Zimbabwe dollar equivalent of US$180,000 but the agreement was tampered with such that the amount that was eventually reflected in the agreement was Zimbabwe $720 trillion.

The court a quo refused to grant the application for absolution from the instance made by the appellant.

The court reasoned that in view of the letter written by the appellant's legal practitioner in respect to the purchase price being quoted as equivalent to US$180,000 it was necessary for the appellant to explain what the exchange rate was on 11 and 12 June when payment was made.

With regards to the allegation that the signed power of attorney was proof of the purchase price, the court held that the issue could not be determined because of the allegation of fraud.

The court also found that it was necessary for the appellant to prove its counter claim for damages in respect to the arrear rentals and holding over damages.

As a result, the court also declined to grant the appellant's counter claim.

Dissatisfied with the determination of the court a quo, the appellant, having been granted leave, noted an appeal to this court on the following grounds:

“1. The court a quo erred in placing upon the appellant the onus to prove what the exchange rate was on the 11th and 12th June 2008 under circumstances where the onus was upon the 1st respondent and had to be discharged by him.

It so erred in failing to grant absolution from the instance on the basis of 1st respondent's failure to prove that he had not been paid the contract sum.

2. The court a quo further erred in not giving effect to the fact that 1st respondent had signed transfer documents knowing what those were and which bore the purchase price which he had already paid and which he now sought to discount. It particularly erred on coming to the conclusion that the issue could not be dealt with at that stage.

3. The court a quo further erred in failing to come to the conclusion that as appellant sought a rei vindicatio in its claim in reconvention, the failure by the 1st respondent to rescind the agreement would ipso jure entail the success of the action for vindication.

4. The court a quo further erred in failing to come to the conclusion that the damages for unlawful occupation could competently be awarded, at least on the basis of the 1st respondent's confession.”

THE APPELLANT'S SUBMISSIONS ON APPEAL

In its submissions before this court, the appellant argued that the first respondent bore the onus to prove, prima facie, that the sum of $720 trillion dollars that he received was not the full purchase price for the property. The appellant further argued that the first respondent also had the onus to prove the exchange rate that was applicable as at the date of payment so as to successfully argue that $720 trillion dollars did not amount to the US$180,000 that he alleged had been agreed to as the purchase price.

It was the appellant's contention that the approach of the court a quo, in holding that the onus lay on the appellant to prove the exchange rate on 11 and 12 of June 2008, was erroneous.

The appellant also submitted that, by signing the power of attorney to effect transfer, the first respondent had accepted that he had been paid the full purchase price and that he was estopped from denying same.

The appellant also stated that, in any event, the power of attorney was quoted in Zimbabwean dollars in the amount of $720 trillion and that was therefore the purchase price.

The appellant further submitted that the court a quo should have granted its application for absolution from the instance, and, thereafter, granted its claim for eviction of the first respondent together with holding over damages as claimed.

FIRST RESPONDENT'S SUBMISSIONS ON APPEAL

The first respondent argued that the decision of the court a quo was appropriate in the circumstances. The first respondent asserted that he had proved a prima facie case of fraud and forgery which the appellant was called upon to answer.

The first respondent further submitted that he had proved that the original Agreement of Sale was fraudulently altered without his knowledge. The purchase price clause which stated that the purchase price was the equivalent of US$180,0000 was altered to reflect the purchase price of Z$720 trillion.

The first respondent stated that this was proved by correspondence between the parties when they discussed the issue of the purchase price.

He further submitted that he was not obliged to prove the exchange rate on 11 and 12 June as he was of the view that payment was made on 13 June. He also alleged that he had successfully proved the exchange rate on the date he received the money.

The first respondent also denied that the appellant was entitled to its counter claim for eviction as the basis of the eviction was based on the contract which stipulated that the first respondent was to grant the appellant vacant possession upon payment of the full purchase price.

ISSUES FOR DETERMINATION BEFORE THIS COURT

Two issues arise from both the grounds of appeal and the submissions made by counsel before this Court. The issues to be determined by this court are as follows:

1. Whether or not the requisite evidentiary burden required to grant absolution from the instance at the end of the first respondent's case was discharged.

2. Whether or not the appellant was entitled to an order for the first respondent's eviction and damages.

1. WHETHER OR NOT THE REQUISITE EVIDENTIARY BURDEN REQUIRED TO GRANT ABSOLUTION FROM THE INSTANCE AT THE CLOSE OF THE FIRST RESPONDENT'S CASE WAS DISCHARGED

As stated above, the first respondent instituted proceedings against the appellant seeking the nullification of the Agreement of Sale in terms of which he had sold a piece of property to the appellant. His claim was also that the Deed of Transfer that had been made in favor of the appellant should be cancelled.

The first respondent prayed, in the alternative, that the outstanding balance for the property be paid.

After leading evidence to the effect that he had not been paid the full purchase price in accordance with the Agreement of Sale, the respondent closed his case.

The appellant then applied for absolution from the instance on the basis that the respondent's claim had not been established as insufficient evidence had been led to show that the Agreement of Sale had been altered.
It was also alleged by the appellant that the agreed purchase price of the property was always in Zimbabwean dollars and not the United States dollars equivalent as claimed by the first respondent. It was submitted, on behalf of the appellant, that, in the event that the court accepted that the purchase price was pegged in United States dollars, then, insufficient evidence had been placed before the court by the first respondent to establish a valid claim as he was unaware of the prevailing market exchange rates on 11 and 12 of June 2008.

It is trite that after a plaintiff has closed its case, a defendant, before commencing his own case, may apply for absolution of the plaintiff's claim. Should the court accede to this application, the judgment will be one of 'absolution from the instance'; see CILLIERS AC, LOOTS C and NEL HC, HERBSTEIN and Van WINSEN, The Civil Practice of the Supreme Court of South Africa (4th edn, Juta and Co Ltd)…,.

A decree of absolution from the instance is derived from Roman Dutch Law. It is the appropriate order to make after all the evidence led by the plaintiff has not laid out a prima facie case upon which a court may find for the plaintiff.

If, at the end of the plaintiff's case, there is insufficient evidence upon which a reasonable man could find for him, the defendant is entitled to absolution. See LH HOFFMAN, DT ZEFFERT, The South African Law of Evidence (4th ed)…, who notes the following:

“It has also been said that the term 'absolution from the instance' is used to describe the finding that may be made at either of two distinct stages of trial. In both cases, it means that the evidence is insufficient for a finding to be made against the defendant.”

It is trite that the court cannot mero motu consider whether absolution must be granted. It is an option which is available to the defendant, upon application.

When an application for absolution from the instance is made at the end of the plaintiff's case the test is: what might a reasonable court do, that is, is there sufficient evidence on which a court might make a reasonable mistake and give judgment for the plaintiff? If the application is made after the defendant has closed his case the test is: what ought a reasonable court do?

In deciding what a court may or may not do, it is implied that the court may make an incorrect decision, because, at the close of the plaintiff's case, it will not have heard all the evidence.

In the case of Nobert Katerere v Standard Chartered Bank Zimbabwe Limited HB51-08, it was stated thus:

“The court should be extremely chary of granting absolution at the close of the plaintiff's case. The court must assume that, in the absence of very special considerations, such as the inherent unacceptability of the evidence adduced, the evidence is true.

The court should not, at this stage, evaluate and reject the plaintiff's evidence.

The test to be applied is not whether the evidence led by the plaintiff establishes what will finally have to be established. Absolution from the instance, at the close of the plaintiff's case, may be granted if the plaintiff has failed to establish an essential element of his claim; Claude Neon Lights (SA) Ltd v Daniel 1976 (4) SA 403 (A); Marine & Trade Insurance Co Ltd v Van Der Schyff 1972 (1) SA 26 (A); Sithole v PG Industries (Pvt) Ltd HB47-05.”

What flows from the above cases is that absolution from the instance will not be granted if there is sufficient evidence, which a court, directing its mind reasonably to such evidence, could or might (not should or ought to) find for the plaintiff.

In casu, the first respondent averred that after the appellant paid him the equivalent of US$96,000, there was a balance of US$84,000.

It is common cause that payment was done through an inter-bank transfer on 11 June 2008. The first respondent received payment on 13 June 2008.

The first respondent, in his evidence, did not prove what the exchange rate was on 11 and 12 June 2008.

The first respondent alleged that he was not obliged to do so as his case was that he was only obliged to prove the exchange rate on the date that the money reflected in his account.

The evidence before the court a quo showed that as soon as the $720 trillion reflected in his account, the first respondent quickly contacted the appellant to inform it that the money deposited into his account had a shortfall of US$84,000.

The appellant did not respond, only to do so sometime in December 2008 indicating that the deposited amount was equivalent to the US$180,000.

The first respondent testified that the amount of US$96,000 was arrived at using the rate he was given by Trust Bank on 13 June 2008.

At the time the first respondent received the amount transferred, it was less than the United States dollar stipulated amount. There was, however, no evidence on which rate was being used at the time the money was transferred.

The appellant seems to suggest that the money it paid was equivalent to the United States dollar amount agreed to by the parties. The rate, however, was not stated in the agreement.

Once the appellant stated that the amount deposited was equivalent to US$180,000, the onus shifted from the first respondent to the appellant, as it now carried the evidentiary burden to prove that the transfer that it had made into the first respondent's account was equivalent to the US$180,000.

It was the view of the court a quo that it was incumbent upon the appellant to lead evidence to buttress its allegation that the amount it paid on 11 June 2008 was equivalent to the United States dollar amount. This was on the basis that the appellant had submitted that the amount paid on that date was equivalent to US$180,000.

It was thus incumbent upon the appellant to state the rate that it used in coming up with that assertion.

The court a quo made a finding that the appellant had to answer the question regarding the rate of exchange on 11 and 12 June 2008. This finding was made in light of the letter written by the appellant's legal practitioners affirming that the Zimbabwean dollar purchase price paid by the appellant to the first respondent was equivalent to US$180,000.

This position, taken by the appellant's legal practitioners, had to be established by evidence of the exchange rate on 11 and 12 June 2008.

It is trite that “he who alleges must prove”.

The maxim was applied in the cases of Circle Tracking v Mahachi SC04-07 and Goliath v Member of the Executive Council for Health, Eastern Cape 2015 (2) SA 97 (SCA).

In the absence of such evidence, the court, as the adjudicating authority, cannot make its determination.

I share the sentiments expressed in Delta Beverages (Pvt) Ltd v Murandu SC38-15, where it was stated that:

“I take the time to point out that parties are expected to argue their cases so as to persuade the court to see the merit, if any, in the arguments advanced for them. They are not expected to make bald, unsubstantiated averments and leave it to the court to make of them what it can.”

It is common cause that when the first respondent was asked what the exchange rate was on 11 and 12 June 2008 he indicated that he did not know. This was after the first respondent had indicated that he had received a sum less than the agreed US$180,000 on 13 June 2008.

In my view, this was a pertinent question which had to be answered by the first respondent. This is so regard being had to the argument by the appellant that the rate had to be calculated on the date that the money was paid into the Bank.

This position is premised on the principle stated by CHRISTIE R.H in Business Law in Zimbabwe (1st edn, Juta & Co Ltd, Cape Town, 1998) which stated that;

“If payment by cheques is permissible under the contract, its acceptance by the creditor, as held in Marshall v Ivory 1951 SR 76, 82, 1951 (2) SA 555 at 558, is conditional on it being subsequently honoured; so, if it is honoured, however, the time of payment is taken to be the time at which it was delivered to the creditor, even if it would not be possible to present it to the debtor's bank for payment until some later date.”…,.

Payment by interbank transfer is similar in all respects to payment by cheque. Proof of payment is calculated on the date that the transfer is accepted by the Bank and not on the date that it is received by the recipient.

Based on the above, the relevant date in the circumstances is therefore 11 June when the transfer was processed.

The onus thus lay with the first respondent to show that the amount paid on that date was not equivalent to the purchase price as agreed.

The court a quo's decision was clearly premised on the assertion by the appellant's legal practitioners that the amount paid by the appellant was equivalent to US$180,000. The relevant part of the letter which was written by the appellant's legal practitioners read as follows:

“17 December 2008
Mkushi Foroma and Maupa Legal Practitioners KWEKWE

RE: ZIMASCO (PRIVATE) LIMITED V C. TSVANGIRAI STAND 1006 REDCLIFF TOWNSHIP

Your letter of 17 November 2008 refers.

We now have our client's instructions and respond thereto as follows;

1. That Zimasco is aware of only one Agreement of Sale which is the one they signed for $720 trillion.

2. That the purchase price of $720 trillion paid was then equivalent to an amount of US$180,000 (which was discussed and agreed to by the parties). Using an agreed rate of $4 billion to a US$3. That the Agreement of Sale was signed in the afternoon of the 10th of June 2008 by Zimasco. Payment was effected on the 11th June 2008 within 24 hours of signature of the Agreement of Sale….,.”

Having alleged the above, it was the first respondents duty to prove to the court a quo that the amount paid was not equivalent to US$180,000 that had been agreed.

It was him, as plaintiff, who claimed that the amount paid to him was equivalent to US$96,000 only.

The exchange rate which was proved by the first respondent related to the date when the money reflected in his account. The rate proved was of no consequence in view of the fact that the rate had to be determined on the date that it was paid into the Bank by the appellant.

The date when it reflected in his account was of no moment to the resolution of the dispute between the parties.

It was the first respondent, as plaintiff, who alleged that he had not been paid in full and that what was paid was equivalent to US$96,000 only. The burden was on him to show how the sum of Z$720 trillion equalled to US$96,000 only. The duty was on the first respondent to prove that insufficient money had been paid warranting the cancellation of the Agreement of Sale or ordering the appellant to pay the alleged balance.

It seems to me that the court a quo erred and misdirected itself in finding that the appellant had to prove the exchange rate on 11 and 12 June 2008. It was for the respondent to prove his case.

Accordingly, absolution from the instance should have been granted by the court a quo.

View Appeal
HB16-14 : CASPER TSVANGIRAI vs ZIMASCO (PVT) LTD and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS, BULAWAYO
Ruled By: MUTEMA J

The genesis of the dispute between the parties resides in an Agreement of Sale entered into in respect of Stand 1004 Redcliff Township owned by the plaintiff which the first defendant purchased on 10 June 2008 via the facilitation of the second defendant.

Both the first and second defendants aver that the purchase price, which was paid in full on 11 June 2008, was Z$720 trillion. The plaintiff, however, avers that the price was set at the local currency equivalent of US$180,000 based on the prevailing informal market rate obtaining on the date of payment.

He further avers that he signed his portion of the Agreement of Sale first while the first defendant was to sign later.

On the same date, he signed a power of attorney to make transfer by the second defendant on the understanding that transfer would only pass upon receipt of the full purchase price.

It, however, so happened that the first defendant and the second defendant, or one or other of them, removed some pages from the written Agreement of Sale and altered, inter alia, the purchase price and inserted the plaintiff's initials without his knowledge or consent and attached the forged pages to the last page the plaintiff had signed.

Thereafter, the first defendant paid Z$720,000 (revalued) on 13 June 2008 which amount was at variance with the agreed calculation formula.

This amount, according to the plaintiff, was an equivalent of only US$96,000, leaving a balance of US$84,000.

In the event, the plaintiff prays for nullification of the purported sale agreement, cancellation of the Deed of Transfer No.1906/08 in favour of the first defendant in respect of the property and reversal of ownership into the plaintiff's name; that he refunds the Z$720,000 (revalued) to the first defendant with interest plus costs of suit on a punitive scale.

Alternatively, the plaintiff prays for payment of the outstanding balance of US$84,000 with interest and costs on a punitive scale by both the first and second defendants jointly and severally, the one paying absolving the other.

Both the first and second defendants deny the alleged malfeasance and aver that the agreement is as per exhibit 2 with the purchase price being Z$720 trillion with no US dollar component.

The first defendant counter-claimed for the plaintiff's eviction from the house, arrear rentals, and holding over damages from plaintiff at US$400 per month, plus interest and costs on attorney and client scale.

The plaintiff led evidence from only himself which was to the following effect:

Sometime in 2008, Albert Tsikira of the second defendant phoned him asking whether his house was still on sale. He confirmed it still was. Albert Tsikira then went and viewed the house with the first defendant's representatives. He communicated that his asking price was US$220,000. The price was negotiated down to US$180,000. He told Albert Tsikira that the purchase price was US$180,000 payable in local currency at open market rates.

Albert Tsikira captured that in the Agreement of Sale that he brought to him.

He told Albert Tsikira that the exchange rate was changing daily due to hyper-inflation; that he be consulted when payment was being made so that they agree on the rate.

He signed the last page of the Agreement of Sale and initialled all other pages. Albert Tsikira then left with the agreement documents and the next time he heard from him was on 15 June 2008 when he received payment in his account.

He told Albert Tsikira that the rate had since changed and the amount paid was equivalent to only US$96,000. Exhibit 1 is the letter he wrote.

He explained that when he signed the sale agreement he had also signed a power of attorney and given the title deeds of the property because Albert Tsikira had said the first defendant required those before it could sign the agreement.

When Albert Tsikira gave him exhibit 2, he discovered that the purchase price of US$180,000 had been substituted with Z$720 trillion and the pages preceding the last had been initialled differently on his behalf.

Albert Tsikira told him that he had effected the alterations to the agreement because the first defendant would not accept an agreement denominated in US dollars.

He then wrote exhibit 3 pointing out that the document he was given was not the one he had signed. He did not think that the first and second defendants would go ahead with transfer of the property until he received exhibit 4 – a letter from Wilmot and Bennett legal practitioners demanding vacant possession of the house.

He then instructed his current legal practitioners who wrote to Mrs Matshiya of Wilmot and Bennett who responded via exhibit 5 admitting that US$180,000 was the agreed purchase price.

He produced exhibit 6 – Deed of Transfer of the property from him to the first defendant which he said was fraudulently done.

He said the amount of US$96,000 was arrived at using a rate he was given by Trust Bank.

He concluded by saying that the first defendant's counter-claim has no leg to stand on on account of the fact that the house still belongs to him.

He then closed his case whereupon the first and second defendants applied for absolution from the instance.

The basis upon which the application was made is three-pronged, viz:

1. The date of payment of the purchase price and its effect.

It was argued that no reasonable man might find for the plaintiff because the legal position is that if payment is made by cheque or bank transfer, the date of payment when the instrument is subsequently honoured is the date when the application for transfer is made and not when the funds are credited.

The plaintiff conceded that on 11 and 12 June 2008 he did not know what the informal market exchange rate was and he produced no evidence as to what it was.

Without knowing the exchange rate, no reasonable man might find that the amount he was paid was less by an equivalent of US$84,000 as he claims.

I find that the issue regarding the Zimbabwe dollar equivalent needs the first defendant's answer in view of Mrs Matshiya's letter to the plaintiff's legal practitioner dated 17 December 2008 (exhibit 5) wherein she conceded that the Zimbabwe dollar purchase price was equivalent to US$180,000. There is need for the first defendant to also explain what the obtaining exchange rate was on 10 and 11 June 2008.

It is pertinent to note here that Mrs Matshiya is the first defendant's instructing legal practitioner.

Also, the mode of payment employed by the first defendant was not in sync with the relevant clause in the Agreement of Sale.

2. The caveat subscriptor maxim regarding the signed blank power of attorney does not require comment in extenso at this juncture save to state that fraud is being alleged.

3. re: the first defendant's counter-claim.

It is settled law that an order of absolution from the instance does not attract a subsequent plea of res judicata.

In the application, Mr Mpofu, while praying for absolution regarding the plaintiff's claim, also prayed that the first defendant's counterclaim the for plaintiff's eviction, arrear rentals, hold over damages, etc be granted.

He submitted that such a novel claim is competent in terms of Rule 185 and S W M Electrical P/L v Electrical Pulley Component Suppliers P/L 1996 (1) ZLR 696 (S).

The case was thrown in to buttress the plaintiff's seeming concession that reasonable rentals for the house in question are US$250 per month. The first defendant then indicated its willingness to abandon the counter-claimed US$400 per month, settling for the US$250 per month.

While it is difficult to say with any degree of certainty that what the plaintiff said amounts to a confession of indebtedness, no authority falling on all fours with what Mr Mpofu's application seeks particularly regarding the counter-claim has been cited.

It would be a novel precedent if the court were to grant the application in its current form.

Granting it would effectively put the entire dispute to rest, with the plaintiff losing his right to re-institute the suit in the future.

On the totality of the foregoing, the application for absolution from the instance at the close of the plaintiff's case and for the first defendant's counter-claim to be granted be and is hereby dismissed with costs.

Appealed
SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED
Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

This is an appeal against the decision of the High Court handed down under HH253-16 wherein the court a quo found the appellant liable to pay to the respondent the sum of US$847,847=65 together with costs of suit and interest at the prescribed rate from the date of the granting of the judgment to the date of payment in full.

The appellant is a statutory corporation set up in terms of the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] (“the IDBZ Act”). The respondent is an oil company registered in accordance with the Companies Act [Chapter 24:03].

The background to the matter may be summarized as follows:

A company known as Wedzera Petroleum (Private) Limited (“Wedzera”) entered into a verbal agreement with the respondent wherein the respondent would sell bulk petroleum fuels to it from time to time. The respondent would supply the petroleum products on credit and raise invoices to be settled by Wedzera Petroleum. Wedzera Petroleum would, in turn, settle the invoices within ten days from the date on which the invoices would be raised.

In November 2010, the respondent sold to Wedzera, petroleum products worth US$847,847=65. The sale of the petroleum products was made on the basis of two guarantees made by the appellant binding itself to pay in the event that Wedzera Petroleum failed to honour the debt. The two guarantees were drafted on 5 November 2010 and 19 November 2010 for the sums of US$500,000 and US$450,000 respectively.

The guarantees issued by the appellant were in the form of a letter, which bore the letter head of the Infrastructural Development Bank of Zimbabwe. It was addressed to the respondent and signed by one Francis Mugwara (“Mugwara”) the Head of the Short Term Loans Unit.

Part of the first guarantee, dated 5 November 2010, read as follows:

“In consideration of Wedzera Petroleum (Pvt) Ltd…, agreeing to the submission of a guarantee for the supply of fuel products by Engen Petroleum Zimbabwe (Pvt) Ltd, we, Infrastructure Development Bank of Zimbabwe – IDBZ…, do hereby guarantee full payment of USD500,000.00…, being the total amount of the Bank Guarantee to Engen Petroleum Zimbabwe (Pvt) Limited. The payment of the USD500,000 will be after a period of 10 (ten) days from the date of fuel drawdown and is on revolving basis…,.”

The second guarantee, dated 19 November 2010, read as follows:

“In consideration of Wedzera Petroleum (Pvt) Ltd…, agreeing to the submission of a guarantee for the supply of fuel products by Engen Petroleum Zimbabwe (Pvt) Ltd, we, Infrastructure Development Bank of Zimbabwe – IDBZ…, do hereby guarantee full payment of USD450,000…, being the total amount of the Bank Guarantee to Engen Petroleum Zimbabwe (Pvt) Limited. The payment of the USD450,000 will be after a period of 10 (ten) days from the date of fuel draw-down and is on revolving basis…,.”

After the guarantees had been issued, Wedzera Petroleum failed to pay the debts arising from the petroleum products which were sold to it on credit by the respondent.

On 8 March 2011, Wedzera Petroleum wrote to the respondent informing that it (Wedzera Petroleum) was experiencing negative cash flows due to the unavailability of fuel during the months of December 2010 and January 2011 and that it was aware of its indebtedness to the respondent. Wedzera Petroleum further informed the respondent that it would pay its entire indebtedness within 14 days.

Wedzera Petroleum failed to honour its indebtedness as promised.

The respondent wrote to the appellant on 15 March 2011 informing it to liquidate Wedzera Petroleum's debt in accordance with the two guarantees.

The appellant, through a letter dated 31 of March 2011, informed the respondent that upon checking its records it found that it had not issued the guarantees in favour of the respondent against any debts incurred by Wedzera Petroleum. The appellant further informed the respondent that it was unsure of the circumstances under which the purported guarantees had been drafted and issued to the respondent on behalf of Wedzera Petroleum.

Following the failure by Wedzera Petroleum to make due payment of the debt, and the repudiation of the guarantees by the appellant, the respondent issued summons against Wedzera Petroleum and the appellant for the payment of the sum of US$847,847=65.

PROCEEDINGS BEFORE THE COURT A QUO

In the court a quo, Wedzera Petroleum, in its plea, admitted its indebtedness to the respondent but denied liability as it argued that liability had passed to the appellant who undertook to settle the debt due in terms of the two guarantees.

The appellant, in its plea, denied being indebted to the respondent at all. It indicated that according to their records there was no indication that Wedzera Petroleum had applied for, or had been granted any guarantees. It further alleged that the guarantees had been generated through fraud.

At the pre-trial conference, the main issue which was referred to trial was: whether or not the appellant was liable to pay Wedzera Petroleum's debt on the basis of the two guarantees.

At the trial, Wedzera Petroleum was in default. The court a quo, upon application from the respondent, granted default judgment against Wedzera Petroleum in favour of the respondent for the sum of US$847,847=65 together with costs of suit and interest at the prescribed rate.

The trial proceeded against the appellant.

In analysing closing submissions made by counsel, the court a quo noted that the appellant's counsel sought to introduce a new argument which had not been pleaded.

The argument was based on the fact that the appellant was a statutory corporation which derived its powers from the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] and that the provisions of the Companies Act [Chapter 24:03] (“the Companies Act”), which codified the Turquand Rule, could not be applied against the appellant in terms of section 30 of the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14].

The court held that in spite of the provisions of section 30 of the Infrastructure Development Bank of Zimbabwe Act (IDBZ Act) which made the appellant immune to the provisions of the Companies Act, the actions of Francis Mugwara fell squarely within the scope of the presumptions of ostensible authority.

The court found that Francis Mugwara held a senior position in the Bank; that he had subordinate staff under him; he had access to and used the appellant's stationery. He was the Head of the Short Term Loans Unit which Unit had, amongst others, a mandate to issue guarantees.

The court further found that Francis Mugwara's job description empowered him: “…, to generate, manage and control the Bank's short-term lending portfolio as well as [to] supervis[e]…, Regional Offices.”

Further, that his key duties included decision making authority, authority to approve departmental expenses and the budgets for the Unit and the Regional Offices.

The court found that the onus was on the appellant to prove that Francis Mugwara did not have any form of authority to facilitate guarantees and to prove any form of fraud and bribery on his part.

The court found the appellant liable to the respondent for the guarantees which were issued by Francis Mugwara in respect of Wedzera Petroleums's indebtedness. The appellant was thus ordered to pay the respondent the sum of US$847,847=65, or the remaining amount after payment was made by Wedzera Petroleum, together with costs of suit and interest at the prescribed rate from the date of the granting of the judgment to the date of payment.

PROCEEDINGS ON APPEAL

Aggrieved by the findings of the court a quo the appellant noted this appeal on the basis of the following grounds of appeal:

(i) Having found, as it did, that there was no conclusive evidence to establish that one Francis Mugwara had authority to issue the two guarantees relied upon by the respondent on his single signature, the court a quo erred in law in placing a further negative onus of proof on the appellant to establish that one Francis Mugwara had no such authority.

(ii) Having found, as it did, that there was no conclusive evidence to establish that one Francis Mugwara had authority to issue the two guarantees relied upon by the respondent on his single signature, the court a quo erred and misdirected itself on the facts, and in law, in finding, as it did, that Francis Mugwara had actual and/or implied authority to issue the two guarantees relied upon by the respondent in its cause of action.

(iii) The court a quo erred and misdirected itself in law in finding the appellant liable to the respondent on the basis of ostensible authority when such was not pleaded by the respondent in the Summons and Declaration.

(iv) The court a quo grossly erred and misdirected itself on the facts in finding, as it did, or must be taken to have done that the appellant represented to third parties, in particular to the respondent, that one Francis Mugwara had authority to issue the guarantees relied upon by the respondent in its cause of action.

(v) The court a quo erred in law in failing to find that the two guarantees relied upon by the respondent were fraudulently procured and thereafter tendered to the respondent by Wedzera Petroleum (Private) Limited, and, as such, no liability could flow from such fraudulent instruments.

(vi) The court a quo erred on the facts and in law in finding, as it did, that the respondent had acted diligently in accepting the two guarantees tendered to it by Wedzera Petroleum (Private) Limited in the absence, inter alia, of any facility between the appellant and Wedzera Petroleum (Pvt) Ltd.

(vii) The court a quo erred on the facts and in law in failing to find that the conduct of Francis Mugwara, in purporting to issue the two guarantees in the absence, inter alia, of any facility agreement between the appellant and Wedzera Petroleum (Pvt) Ltd and/or the respondent not only offended the internal processes of the appellant but also the procedure set out in the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14]. Consequently, the court a quo ought to have found that his conduct was a legal nullity and no liability attached to the appellant.

(viii) The court a quo erred in law in effectively finding the appellant liable on the two guarantees on the basis of the Turquand Rule when the application of such rule is specifically ousted by the provisions of section 30 of the Infrastructure Development Bank of Zimbabwe Act.

In my view, it is apparent from the appellant's grounds of appeal that three issues arise for determination. These are the following:

A. Whether or not the court a quo erred in finding that Francis Mugwara had authority to issue the two guarantees relied upon by the respondent.

B. Whether or not the court a quo erred in finding the appellant liable to pay the respondent on the basis of ostensible authority.

C. Whether or not the appellant was liable to pay the respondent on the basis of the Turquand Rule when such was never pleaded by the respondent in its summons and declaration.

I will proceed to deal with each of these issues.

Whether or not the court a quo erred in finding that Francis Mugwara had authority to issue the two guarantees relied upon by the respondent

The appellant argued that Francis Mugwara's contract of employment did not give him authority to act on behalf of the Bank. It also submitted that the court a quo erred in its factual findings to the effect that he had implied authority to act on behalf of the appellant.

In order to fully understand the authority Francis Mugwara possessed there is need to make reference to his key duties in the Bank.

Francis Mugwara held the title of the 'Head of Short Term Loans'. Under this title, he was the second in charge after the office of the Director of Private Sector Projects as shown from the organogram of the Short Term Loans Unit. A summary of Francis Magwara's job was stated as:

“To generate, manage, and control the Bank's short term lending portfolio as well as supervision of Regional Offices.”

Among his key tasks was “marketing of Bank products to achieve bankable portfolio of clients, disbursements of funds on approved facilities, and making presentations to the Private Sector Projects Committee (PSPC) on projects for approval.”

In addition, Francis Mugwara's job description had an incidental clause on error of judgment and the consequences which would affect the Bank if the Head of Short Term Loans made a wrong decision. The clause stated as follows:

“Catastrophic as bad decisions can lead to the insolvency of the Bank through the creation of a Bad Loan portfolio. Reputation of the Bank can be on the line if prompt and correct decisions are not made.”

The court made factual findings that Francis Mugwara had authority to act on behalf of the appellant. The court a quo noted the following:

“…, notwithstanding the Bank's argument that Mugwara's power might have been limited, I find that as much as between himself and the Bank, Mugwara had actual or implied authority to issue those guarantees. I find that as between Engen and the Bank, Mugwara had ostensible authority to issue the guarantee and to bind the Bank to third party recipients.”

A clear reading of Francis Mugwara's key tasks shows that he worked under a Unit which controlled the manner in which guarantees were issued. He was the senior personnel in the Bank as he was second in command from the Director of the Unit. He had access and control of the appellant's stationery to an extent that he had business cards to identify himself. He had the task of marketing Bank products and disbursements of funds on approved loan facilities.

The court a quo found that on these factual findings the key tasks done by Francis Mugwara were enough evidence to show that he had authority to act on behalf of the appellant.

The court a quo also took into account that although criminal proceedings were instituted against Francis Mugwara by the appellant, on the basis of fraud and bribery, the office of the Prosecutor General refused to prosecute the matter on the basis that it was a labour matter. That, in any event, the appellant had failed to provide adequate evidence to sustain a conviction.

The court a quo, in determining the impact of the criminal charges laid against Francis Mugwara, found that the onus to prove fraud and bribery was on the appellant and that the prosecutor had failed to prove that Francis Mugwara had been fraudulent or had received any bribe.

The proof to be proffered by the appellant for fraud and bribery in casu would be proof on a balance of probabilities as the fraud and bribery were being alleged in a civil trial after the criminal charges had failed to materialise.

Proof in civil proceedings is always on a balance of probabilities.

In the case of Zimbabwe Electricity Supply Authority v Dera 1998 (1) ZLR 500 (SC), the court stated the following:

“…, in a civil case, the standard of proof is never anything other than proof on the balance of probabilities. The reason for the difference in onus between civil and criminal cases is that in the former the dispute is between individuals, where both sides are equally interested parties. The primary concern is to do justice to each party, and the test for that justice is to balance their competing claims.

In a criminal matter, on the other hand, the trial is an attack by the State, representing society, on the integrity of an individual. The main concern is to do justice to the accused. If the prosecution fails, the State does not lose.”

Francis Mugwara, having admitted that he issued the guarantees and having alleged that he did so lawfully, it was for the appellant to prove all the allegations laid against him of fraud and bribery.

The appellant did not adduce any proof to the contrary, but, rather, stood on the argument that he had no authority to individually sign a guarantee.

The appellant produced sample guarantees which it alleged were lawfully facilitated for other parties. These sample guarantees were juxtaposed with the guarantees which Francis Mugwara had facilitated and affixed a single signature instead of two signatures as appeared on the sample guarantees. The appellant argued that the fact that the guarantees issued on behalf of Wedzera Petroleum were not counter-signed meant that the guarantees were fake and invalid.

Sample guarantees produced before the court a quo showed that Francis Mugwara would countersign a guarantee with other personnel of the Bank. It is of importance to note, however, that such other personnel would be junior personnel and Francis Mugwara would counter sign to give effect to the validity of the guarantee facilitated by his subordinates.

It thus could not have been extensively irregular that on the two guarantees made in favour of the respondent Francis Mugwara signed the guarantees with no other counter signature as he was the head of the Unit from which such guarantees originated.

The arguments raised by the appellant, that absence of a second signature rendered the guarantees ineffective, thus lacks merit.

The appellant did not adduce any evidence to show that the facilitation of the guarantee was not carried out in-house. The appellant's witnesses could have brought the register for credit facilities issued by the Bank to show that no entry was ever made in favour of Wedzera Petroleum to the respondent.

Francis Mugwara vehemently denied that he had not followed proper procedures in processing the guarantees and stated that records of the guarantees were with the appellant.

In examination in chief, Francis Mugwara admitted to having recorded the guarantees in the Bank's register. The court a quo, in assessing these facts, found that:

“The evidence on whether or not Mugwara could issue guarantees on his single signature was inconclusive. Mugwara said he could. The Bank said he could not. The onus was on the Bank to prove that he could not. It did not refute, satisfactorily, Mugwara's claim that it was only guarantees initiated by subordinates that required to be counter-signed for validity. I find that the Bank failed to discharge the onus on such a key aspect of defence.”

In finding that Francis Mugwara had authority to act on behalf of the appellant, the court a quo made reference to the incidental clause in his job description document. A reading of the clause shows that Francis Mugwara, as the Head of Short Term Loans, had to take due diligence and not make an error of judgment as such error in creating a bad loan portfolio would have catastrophic consequences which could lead the appellant to insolvency.

This clause, in itself, crystalizes the point that he had authority to act on behalf of the appellant in a manner which could extend to issuing guarantees. Only a senior officer of the Bank could possess authority to act on its behalf to an extent where an error of judgment would lead to catastrophic results.

It is a settled principle that this Court will not easily interfere with factual findings made by a lower court unless the findings are grossly unreasonable. See ZINWA v Mwoyounotsva 2015 (1) ZLR 935 (S); Hama v NRZ 1996 (1) ZLR 664 (S); Reserve Bank of Zimbabwe v Corrine Granger and Another SC34-01.

The lower court enjoys the opportunity to see the witnesses on the stand, assess their demeanour and credibility. Such findings of fact cannot easily be interfered with by an Appellate Court as it is limited to the record of proceedings. See Mtimukulu v Nkiwane and Another SC136-01.

It is my view that the court a quo's factual findings cannot be impugned.

Francis Mugwara was a senior employee who could carry out credit facilitation and represent the appellant.

All the above findings lead to the inescapable conclusion that the court a quo's factual findings were correct.

The next inquiry that arises from this finding is the extent of the authority Francis Mugwara had in issuing the guarantees to the respondent; that is, whether or not it was implied or express authority.

Whether or not the court a quo erred in finding the appellant liable to pay the respondent on the basis of ostensible authority

The court a quo found that the authority exercised by Francis Mugwara, in issuing the guarantees, was implied (apparent or ostensible) authority.

The respondent based its arguments for the claim of payment of the guarantees on the ostensible authority which had been exercised by Francis Mugwara. Counsel for the respondent submitted that it was on the basis of this apparent authority exercised in the issuing of the guarantees that the respondent agreed to issue Wedzera Petroleum fuel.

It was the appellant's argument that no such implied authority existed and that on the basis of Francis Mugwara's job description such authority was not given to him.

The appellant also argued that in terms of the Bank's Lending Policy, Francis Mugwara did not have authority to single-handedly facilitate a credit facility, sign it, and issue it without proper procedure being followed.

Ostensible authority, or apparent authority, exists where an agent's words or conduct lead a reasonable person in a third party's position to believe that the agent is authorized to act, even if the principal and the purported agent have never discussed such a relationship.

The effect and meaning of ostensible authority was discussed in Makate v Vodacom Ltd 2016 (4) SA 121 (CC)…, in which the case of Hely-Hutchinson CA v Brayhead Ltd and Another [1968] 1 QB 549 (CA)…, was referred to with approval. The court stated the following:

“Actual authority and ostensible or apparent authority are the opposite sides of the same coin. If an agent wishes to perform a juristic act on behalf of the principal, the agent requires authority to do so, for the act to bind its principal. If the principal had conferred the necessary authority, either expressly or impliedly, the agent is taken to have actual authority. But, if the principal were to deny that she had conferred authority, the third party who concluded the juristic act with the agent may plead estoppel in replication.

In this context, estoppel is not a form of authority but a rule to the effect that if the principal had conducted herself in a manner that misled the third party into believing that the agent has authority, the principal is precluded from denying that the agent had authority.”

The court went on to state the importance of ostensible authority and made the following remarks..,.:

“The concept of apparent authority, as it appears from the statement by, Lord Denning, was introduced into law for purposes of achieving justice in circumstances where a principal had created an impression that its agent has authority to act on its behalf.

If this appears to be the position to others, and an agreement that accords with that appearance is concluded with the agent, then justice demands that the principal must be held liable in terms of the agreement.

It cannot be gainsaid that, on present facts, there is a yearning for justice and equity.”

In Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147, SLADE J noted as follows:

“Ostensible or apparent authority which negatives the existence of actual authority is merely a form of estoppel; indeed, it has been termed agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients:

(i) A representation;

(ii) A reliance on the representation; and

(iii) An alteration of your position resulting from such reliance.”

See also Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.

Ostensible authority thus binds a principal over actions done by its agent with relation to third parties. Such principal can thus be estopped from denying liability of the actions of the agent.

In casu, Francis Mugwara was an agent of the appellant; he was the head of the Short-Term Loans Unit and had subordinates under him. His key duties included a mandate to approach companies and commercial institutions in a bid to facilitate that these companies and institutions acquired loan facilities from the appellant.

It was not in dispute that at the time the two guarantees were issued to the respondent on behalf of Wedzera Petroleum, the appellant was running off-balance sheet facilities due to the economic situation which was prevailing in the country at that time. On the basis of such off balance sheet facilities the appellant would issue credit facilities to finance different business ventures.

It is important to note that the first encounter under which Francis Mugwara and the respondent met was not on the issuance of the guarantees. Francis Mugwara had previously made presentations before Mr Mudzengerere, who was the respondent's Managing Director. Francis Mugwara approached the respondent to issue the guarantees on fuel procurement and disbursement. The intended business venture between Francis Mugwara and the respondent did not materialise at that time but a relationship had been formed.

It thus cannot be taken as being irregular that, upon being presented with the guarantees in favour of Wedzera Petroleum, for fuel allocation, Mr Mudzengerere, on behalf of the respondent, accepted these guarantees.

The respondent duly accepted the guarantees on the basis of the conduct and representations which had been made by Francis Mugwara - even before Wedzera Petroleum sought a credit facility from the appellant.

The respondent's cause of action against the appellant, for payment, was on the basis of ostensible authority which had been exercised by Francis Mugwara.

The court a quo duly made factual findings on the exercise of this authority. Clearly, there is nothing illogical or unreasonable from the court a quo's findings.

Francis Mugwara confirmed that he had authority to carry out his duties and the respondent could not be faulted for honouring the guarantees which were issued on behalf of the appellant by its Head of Short Term Loans.

The court a quo found Francis Mugwara to be a reliable witness.

On the basis of the above finding it is therefore my view that the appellant is liable to pay the respondent the sums of money arising from the guarantees.

View Appeal
HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE
Ruled By: MAFUSIRE J

This was a civil trial.

The first defendant [“Wedzera”] was in default. On application by the plaintiff [“Engen”] in respect to which the second defendant [“the Bank” or “IDBZ”] had nothing to say, I entered a default judgment against Wedzera, in favour of the plaintiff, in the sum of $847,847=65, together with costs of suit and interest at the prescribed rate.

Most of the material facts were common cause.

Engen was an oil company. It sold bulk fuels. Wedzera operated filling stations at which it retailed fuels. IDBZ was a statutory corporation set up in terms of its enabling Act, the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] [“IDBZ Act”].

Engen's claim arose out of petroleum fuels sold and delivered to Wedzera in terms of an agreement between them. Wedzera had failed or neglected to pay. Engen claimed IDBZ had guaranteed the due payment by Wedzera up to an amount in the sum of $950,000. That amount was made up of two guarantees, one for $500,000 and the other for $450,000.

But, IDBZ disowned them. It argued that one of its ex-employees had issued them fraudulently or without authorisation.

Engen called two witnesses.

The first, Johannes Mudzengerere [“Mudzengerere”] had been Engen's Managing Director at the relevant time. He had been in charge of Engen's entire operations, including the procurement and disposal of fuel stocks.

Engen's second witness, Francis Mugwara [“Mugwara”], was the man at the centre of the guarantees. He had been subpoenaed just before the trial commenced. He was the one who had signed and issued the impeached guarantees. Figuratively, and perhaps not unexpectedly, the Bank sought to lynch him.

For the Bank, there were also two witnesses.

At the relevant time, Norbert Munengwa [“Munengwa”] had been an Assistant Director in charge of a unit or division called Private Sector Projects. He reported to the Chief Executive Officer. His portfolio covered the crafting of strategies, policy formulation, and business development. Within that sector Francis Mugwara had, at all relevant times, been the Head of the unit called Corporate Banking. It was formerly called the Short Term Loans Unit. He had joined it as Assistant Head, and had subsequently been promoted. He reported to Norbert Munengwa.

The Bank's second witness was Desmond Matete [“Matete”]. He was a qualified lawyer. At the relevant time he was the Director for Legal and Corporate Services. Amongst other duties, he was the custodian of the Bank's legal documents.

There was much convergence, or little controversy, on such key aspects of the evidence as would, in my view, decide the matter. Differences were mainly on peripheral issues and on the parties' application of the law to the facts.

Wedzera used to buy bulk fuels from Engen for cash. As its sales increased, it wanted more fuels - but on credit. Engen obliged. Wedzera signed Engen's standard credit facility application form. Johannes Mudzengerere ran it past Engen's agent for credit rating. He also sought and obtained clearance from Engen's head office in South Africa. Everything seemed in order.

Wedzera had to provide a Bank guarantee to guarantee the due payment for the fuels. These came from IDBZ.

During this period, 2010, the country's economy had just “dollarized”. A multi-currency system had been introduced following the demise of the local currency. Most companies' balance sheets had almost reduced to zero. As a re-capitalisation strategy, the Bank had decided to offer non-traditional or non-generic products that either avoided or minimised direct cash outlays, or that brought in quick income. The witnesses said the Bank was trading off-balance sheet. The Bank's new strategy concentrated on non-direct cash products such as short to medium term loans, Bankers' acceptances, Bills discounting and Bank guarantees. This strategy also involved the bulk importation of petroleum products and the procurement of fertilisers for disposal on the local market.

The Bank had set up a body known as the Private Sector Projects Committee [“the PSPC”]. This committee would grant global approvals and cap the upper monetary limits for any new projects. The members of this committee were the Bank's senior officials, including Norbert Munengwa and Desmond Matete. But heads of divisions, such as Francis Mugwara, were also members. Francis Mugwara was a member.

It was common cause that Francis Mugwara had the Bank's authority to market this new strategic innovation. He had the authority to procure new business, to manage, and grow it.

The point of departure between Francis Mugwara, on the one side, and Nobert Munengwa and Desmond Matete on the other, was the extent of Francis Mugwara's authority - specifically with regards to the issuing of guarantees.

Francis Mugwara claimed he had the authority to issue guarantees in favour of third parties and binding on the Bank, for as long as the amounts on them did not exceed the limits set by the Private Sector Projects Committee (PSPC). He claimed he could issue such guarantees on his single signature. He had access to the Bank's stationery - including sample guarantee forms. He managed Harare, Bulawayo and other towns. He was in charge of all staff falling under his unit. He insisted he had complied with all the standard operating procedures, not least opening an account for Wedzera and issuing it with a facility letter; raising bank charges and completing all other relevant documents. He claimed all the paper work had been placed in the relevant Bank records which Desmond Matete kept. He challenged Desmond Matete to produce those records.

Of some guarantees that were produced in evidence bearing two signatures and which the Bank gave as an example of what a valid guarantee was like, Francis Mugwara said these had been initiated by his subordinates who also had the authority to issue guarantees. However, guarantees by subordinates had to be countersigned by himself, as head of the unit, or else they would be invalid.

Nobert Munengwa and Desmond Matete vehemently disputed that Francis Mugwara could issue guarantees on his single signature and bind the Bank. They said all the Bank's guarantees had to be counter-signed. They said there were elaborate internal standard operating procedures. These had to be followed at all times that the Bank would offer any credit facility to anyone. Of the two guarantees in question, and some two others that Francis Mugwara had also issued on his single signature in favour of other third parties, Nobert Munengwa and Desmond Matete said they were invalid for lack of authority. They had never been brought up to the Private Sector Projects Committee (PSPC) for specific approval.

Nobert Munengwa and Desmond Matete also accused Francis Mugwara of fraud. They said when they had confronted him after Johannes Mudzengerere had called up the guarantees and was pressing for payment, Francis Mugwara had broken down and confessed to having been paid by Wedzera's Managing Director, one Eric Nhodza [“Nhodza”], an amount in the sum of $10,000 in return for the guarantees. The Bank had raised misconduct charges against him. However, he had ducked out of the disciplinary process by resigning.

Francis Mugwara denied the fraud. He denied the confession. He maintained he had issued the guarantees within the scope of his mandate.

It was common cause that the Bank had reported Francis Mugwara to the police. However, it was also common cause that the State had declined to prosecute for lack evidence.

For Engen, Johannes Mudzengerere said his first encounter with Francis Mugwara was when, a few days before the guarantees, Francis Mugwara had arrived at his office offering Engen two million litres of fuel. Francis Mugwara had introduced himself as the Bank's Head of Corporate Unit. He had produced his business card. However, the fuel deal had subsequently fallen through. When Wedzera was increasing its fuel purchases and was asking for supplies on credit, Johannes Mudzengerere had required the provision of security in the form of assets or guarantees from a reputable Bank. A few days later a Wedzera representative and Francis Mugwara had returned to Johannes Mudzengerere's office with a sample guarantee from IDBZ. Johannes Mudzengerere had been satisfied with the wording. He had been comfortable with IDBZ as a “Government Bank”.

The first guarantee had been issued. It was for $300,000. Engen never had to call it up. Wedzera had paid in accordance with the agreement. Wedzera had further increased its fuel purchases. It had provided further guarantees from IDBZ for $500,000 and $450,000.

It was on these last two guarantees that the case before me was all about. Wedzera had failed to pay. Its debt at the time of the default stood at $847,847=65. That was the amount claimed in the summons.

There was no issue about the wording of the guarantees.

When Johannes Mudzengerere called up the guarantees, Francis Mugwara got in touch with Wedzera. Wedzera wrote something to assuage Engen. Johannes Mudzengerere was un-impressed. He pressed for payment. Eventually, he got through to Nobert Munengwa. Nobert Munengwa disowned the guarantees. The Bank's position was that Wedzera was not, and had never been, a customer of the Bank. Among other things, and contrary to standard operating procedures, there was no record of any account having been opened for Wedzera before or after the guarantees had been incepted. No bank charges had been raised as fees for the guarantees. There was simply no paper trail relating to them. As far as the Bank was concerned, the purported guarantees had been an abuse of the Bank's stationery by Francis Mugwara. They were invalid.

Having faced a brick wall, Engen sued. That was essentially the case before me.

Counsel for the plaintiff argued that the Bank's defence was misconceived. From the facts, Francis Mugwara had the actual authority to issue the guarantees in question. He was the Head of the Bank's unit that had the requisite mandate to issue such type of Bank products. Francis Mugwara's contract of employment empowered him to issue such guarantees. Counsel for the plaintiff further argued that if it should be said that Francis Mugwara had no actual authority to issue the guarantees, then he undoubtedly had ostensible authority. The Bank had held him up as one with such authority. He had started off as Assistant Head in the Short Term Loans Unit. He had interacted with the public in that capacity. This unit had subsequently changed its name to Corporate Banking. Francis Mugwara had subsequently been promoted to head it. All this had been in the eyes of the public.

Counsel for the plaintiff highlighted that Francis Mugwara had access to the Bank's stationery. It had provided him with business cards, obviously to assist in the marketing of its products. One such product had been the non-generic, off balance sheet facility that involved minimal cash outlay. There were also other innovations, such as the non-traditional trade in fuels and fertilizers. Francis Mugwara had been mandated to market and manage them. Third parties, like Engen, could hardly be faulted for accepting Francis Mugwara's authority and his guarantees. Nothing warned them that he might be unauthorised. That he might have breached the Bank's in-house standard operating procedures, or that he might have exceeded the bounds of his authority, could not dis-entitle Engen from holding the Bank to the guarantees.

Counsel for the Bank explored Francis Mugwara's contract of employment in some detail and argued that nothing said therein could be said to amount to authority for Francis Mugwara to issue such guarantees on his single signature.

Counsel for the Bank further explored the Bank's standard operating procedures and concluded that Mr Mugwara had manifestly breached all the important check-lists. Among other things, Wedzera had never been a customer of the Bank. There was nothing on record to show that any of the account opening and account operating procedures had been put in place. No fees had been raised. No facility letter had been issued. No customer vetting had been done. The guarantees had never been brought up to the Private Sector Projects Committee (PSPC) for approval. There was not a single meeting convened for this business, let alone any minutes taken in respect of it.

To the Bank, Francis Mugwara was just a rogue.

He had taken a bribe for $10,000 in return for the guarantees. When confronted by Messrs Nobert Munengwa and Desmond Matete, he had confessed. To avoid disciplinary action he had simply resigned. He had an axe to grind with the Bank. He had been blacklisted and was no longer employable in the finance industry.

According to counsel for the Bank, Francis Mugwara had neither the actual nor the ostensible authority to issue those guarantees. Engen had been negligent in accepting them without verification. It should have checked with the Bank for their authenticity. On this particular point, Desmond Matete claimed, in his evidence, that it was the practice and custom in the capital markets that a third party who is given a guarantee, such as the type Francis Mugwara had issued, would run them past its own bankers. The bankers would know how to go about verifying them for authenticity.

Counsel for the Bank discredited Engen's credit rating process of Wedzera. He pointed out that on the credit facility application form, the Standard Chartered Bank, not IDBZ, had been listed as Wedzera's bankers. If Engen had been diligent or prudent enough, it should have been suspicious to be receiving from Wedzera guarantees from IDBZ instead of the Standard Chartered Bank....,.

Section 12 of the Companies Act codifies the common law rule of Company Law, also known as the Turquand Rule, after the 19th century English case of Royal British Bank v Turquand (1856) 6 E & B 327; (1843-60) 119 ER 886 in which the rule was first succinctly expounded.

This rule says that any person dealing with a company is entitled to make certain assumptions, such as that the company's internal regulations have been duly complied with. The company is estopped from denying the truth of such assumptions. Anyone is entitled to assume that every person whom the company represents to be its officer or agent has been duly appointed and has authority to exercise the functions customarily exercised by him: see Mills v Tanganda Tea Company Ltd 2013 [1] ZLR 38 [H]…,.

In terms of section 13 of the Companies Act, a company shall be bound in terms of section 12 notwithstanding that the person held out to be the officer or agent for it might have acted fraudulently or forged a document purporting to be sealed or signed on behalf of the company....,.

LORD DENNING MR, in Hely-Hutchinson v Brayhead Ltd & Another [1968] 1 QB 549; [1967] 3 All ER 98 [CA] [quoted with approval by MPATI P in Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA]…, explained actual or implied authority as follows:

“[Actual authority] is express when it is given by express words, such as when a Board of Directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the Board of Directors appoint one of their number to be Managing Director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office.”

BEADLE CJ, in Reed NO v Sager's Motors (Pvt) Ltd [1969] [2] RLR 519 [AD]…,; 1970 [1] SA 521 [RAD] [quoted with approval in Seniors Service [Pvt] Ltd v Nyoni 1986 [2] ZLR 293 [SC]] explained apparent or ostensible authority as follows:

“The word 'ostensible', in the Rhodes Motor Company case (1965 (4) SA 40), is used in the sense of 'apparent' and in the language of the law of agency these two terms are synonymous.

If a principal employs a servant or agent in a certain capacity, and it is generally recognised that servants or agents employed in this capacity have authority to do certain acts, then any of those acts performed by such servant or agent will bind the principal because they are within the scope of his 'apparent' authority. The principal is bound even though he never expressly or impliedly authorised the servant or agent to do these acts, nor had he by any special act [other than the act of appointing him in this capacity] held the servant or agent out as having this authority.

The agent's authority flows from the fact that persons employed in the particular capacity in which he is employed, normally have authority to do what he did.”

The principles that emerge from case authority in relation to the ostensible authority of employees in general, and Bank managers in particular, are that the principal [the employer] must have created an impression in the mind of the third party, even though that impression might be wrong, that his agent [the employee] had the requisite authority to transact on behalf of the principal. The third party must show a representation by words or conduct by the principal, not merely by the agent. The representation must have been in such form as would reasonably lead outsiders to act on the strength of it to their prejudice.

The court considers the façade of regularity of the employee's actions purporting to act on behalf of the employer, given all the trappings of his appointment as set in a context.

The branch manager of a Bank is a senior employee. He is the face of the Bank to the world. He is its local spokesman. The outside world is normally entitled to assume or believe that he has the authority to issue out letters of credit binding on the Bank: see Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA]; NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA]; Africa Life Assurance Company Limited v NBS Bank Limited 2001 [1] SA 432 [W] 432; and Glofinco v ABSA Bank Ltd t/a United Bank & Ors [2002] ZASCA 91.

In NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA], SCHULTZ JA,, holding the Bank liable for deposits stolen by a rogue manager at one of its branches, said:

“[The branch manager] was appointed the local head of this business at Kempton Park. He commanded the staff, including his secretary, who typed the letters and then deleted them from her computer on his instructions, keeping qualms to herself - whether out of fear, or loyalty, or both. The letterhead on which the letters were typed was provided by the NBS. The facility was created, and it functioned, for the NBS to take Cape Produce's cheques into its bank account, and for its cheques to be issued in repayment. The state of affairs continued for some 18 months with numerous repayments, without the NBS's own system of control detecting the abuse.”

One of the cases on which counsel for the Bank relied was the judgment of the court of first instance in Glofinco v ABSA Bank Ltd t/a United Bank & Ors Reported in 2001 [2] SA 1048.

In that case, the trial court held the Bank not liable where a manager at one of its branches was in the habit of endorsing certain post-dated cheques from one of its customers in favour of a factoring agent, in effect making the Bank a surety and co-principal debtor in solidum with the customer. The manager's actions were inimical to the interests of the Bank. She had no authority to commit the Bank in that manner.

The trial court held that the powers of a Bank manager are not limitless. The decision was upheld on appeal.

It was found that the transactions were not ordinary transactions of a kind a branch manager would do as a matter of course. Other than the fact of her appointment, the Bank had made no other representation that the manger might have been authorised to carry out such peculiar transactions. Furthermore, in spite of its own serious misgivings about the authority of the manager to bind the Bank in the manner she was doing, the factoring agent had purposefully chosen to rely on her word and had refrained from verifying with her employer.

The appeal judgment was a split decision: three for and two against.

Even then, the majority judgment made it clear from the outset that the case would turn on its own peculiar set of facts; it being analogous to two other cases that the court had recently dealt with and in which the Banks had been found liable. These two other cases were NBS Bank v Cape Produce Company [Pty] Ltd and Others 2002 [1] SA 369 [SCA] and South Eagle Insurance Company Ltd v NBS Bank Ltd 2002 [1] SA 560 [SCA].

In my view, Glofinco v ABSA Bank Ltd t/a United Bank & Ors Reported in 2001 [2] SA 1048 is distinguishable from the instant case on the facts.

In Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA], the court freed the Metropolitan Council from liability for the contracts signed by some security personnel, one Du Plessis. He was a mere superintendent. He was No.2 from the bottom in the order of administrative authority. His immediate boss, one Van Wyk [senior superintendent], had purported to approve the contracts. Du Plessis and Van Wyk both operated from a side structure outside of the main offices. It was not clear how they had got hold of Council's stationary and equipment like letterheads and stamps. There was no evidence of what the trappings of their positions were, or what would normally go with those positions. The court found that the third party had dealt very casually and superficially with Du Plessis. Among other things, it had relied on a clumsily worded and open-ended resolution, signed by Van Wyk, and which purported to give Du Plessis limitless powers to contract on behalf of the Council. The conduct of the third party had not been reasonable, especially given the experience that its witnesses said they had in dealing with local authorities.

Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA] is also distinguishable from the instant case.

Du Plessis and Van Wyk were, respectively, the last and second last from the bottom.

In casu, Nobert Munengwa and Francis Mugwara were, respectively, No.1 and No.2 from the top in the Corporate Banking Unit.

The Unit, among other things, had the requisite mandate to issue guarantees.

Francis Mugwara was the Head. He had layers of staff below him. He managed other regions, not just Harare. He had the authority to use the Bank's stationery. He was expressly entitled and empowered to market the Bank's new innovative trade in non-traditional products in the new multi-currency dispensation. In the overall administrative structure of the Bank, he was No.4 from the Chief Executive Officer, the top most officer.

Francis Mugwara's job description empowered him “to generate, manage and control the Bank's short term lending portfolio as well as [to] supervis[e]…, Regional Offices.”

Expressly, he was tasked with ensuring that his unit achieved its set business volumes, and, significantly, he was also tasked with the “disbursements of funds on approved facilities.”…,.

Among Francis Mugwara's key decision making authority aspects was the approval of departmental expenses and the budgets for the Unit and the Regional Offices.

There was one further subtle detail on Francis Mugwara's job description.

Listed as one of the consequences of an error of judgment on his part in relation to, for example, financial/material loss, etc., i.e. what could happen to the organization if he made a wrong decision or failed to perform his job, was this:

“Catastrophic, as bad decisions can lead to the insolvency of the Bank through the creation of a bad Loan portfolio;” and:

“Reputation of the Bank can be on the line if prompt and correct decisions are not made”…,.

During trial, the Bank tried desperately to downgrade Francis Mugwara's position. It tried to strip him of all manner of authority.

I totally disagree.

The evidence on whether or not Francis Mugwara could issue guarantees on his single signature was inconclusive.

Francis Mugwara said he could. The Bank said he could not.

It did not refute, satisfactorily, Francis Mugwara's claim that it was only guarantees initiated by subordinates that required to be counter signed for validity. I find that the Bank failed to discharge the onus on such a key aspect of its defence.

Francis Mugwara was by no means a junior employee. I have found nothing from his contract of employment, or his job description, that precluded him from issuing those guarantees on his single signature.

Admittedly, these documents did not expressly say he could. But, equally, they did not expressly say he could not.

There was simply nothing in them that was specific to any type of product the Bank was offering at the time. But, when one considers, objectively, the overall job description and the trappings of his appointment; when one considers that an error of judgment on his part could lead to the Bank going bankrupt or putting its reputation at risk, I find that the issuing of the guarantees in the manner Francis Mugwara did, fell squarely within the scope of the risk the Bank had assumed when it appointed him to that position.

That, in my view, was implied authority for what Francis Mugwara did....,.

The Bank's complaint was only that he had to have had the guarantees counter-signed and that he did not follow the standard operating procedures.

But, to the rest of the world, like Engen, those were minute details. They could not be of concern to it. Francis Mugwara's position, as Head of Corporate Banking, who had business cards issued to him by the Bank confirming such status, was not a “nude appointment”. It was an appointment that had to be considered with “all its trappings”: see NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA].

I find nothing unreasonable in Johannes Mudzengerere's reliance on Francis Mugwara's job description as one who had the requisite authority to issue the guarantees. I find nothing that should have put him on his guard.

When Francis Mugwara called at his office for the first time, it was to interest Johannes Mudzengerere in a bulk fuel deal worth over a whopping $2 million. So when Francis Mugwara came back a few weeks later, now in the company of a representative from Wedzera, with a guarantee for a trifle $300,000, it was not unreasonable for him to accept the guarantee. Francis Mugwara's actions had a “façade of regularity.” This particular guarantee ran its life without the Bank's system of control detecting it: see NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA]. So, again, Johannes Mudzengerere cannot be faulted for accepting the two subsequent guarantees.

The Bank's reliance on fraud or bribery was problematic.

Nothing was proved. The criminal case that the Bank had reported against Francis Mugwara had collapsed.

In casu, the Bank had no records or document of any sort to support the allegations. Its witnesses said that some of its records had been misplaced or had become unavailable when it had changed offices sometime after the incident. They further said that they had been unaware that Francis Mugwara would testify for Engen until a few days before the trial.

That was rather lame.

Whether or not Francis Mugwara had been lined up to testify for Engen did not detract from the fact that the onus would always lie on the Bank to prove fraud or bribery. It was the Bank making those allegations.

Furthermore, the Bank had reported Francis Mugwara to the police soon after the guarantees had surfaced. Nobert Munengwa's witness' statement to the police did not contain any reference to Francis Mugwara having received a cash inducement from Eric Nhodza. The complaint was concealment by Francis Mugwara of his transactions of which Nobert Munengwa concluded amounted to fraudulent misrepresentation.

No wonder the State had declined to prosecute.

In his testimony, Francis Mugwara maintained that the allegations of fraud or bribery had never been made to him at any time before the trial.

The Bank did not satisfactorily refute this.

For these reasons, I find the Bank liable to Engen for the guarantees issued by Francis Mugwara in respect of Wedzera's indebtedness. Therefore, I make the following Order:

The second defendant shall pay the plaintiff the sum of US$847,847=65, or so much of it as has remained unpaid by the first defendant, together with costs of suit and interest at the prescribed rate from the date of this judgment to the date of payment.

View Appeal
SC47-20 : ROBSON MAKONI vs CBZ LIMITED
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAKONI JA

This is an appeal against the whole judgment of the High Court sitting at Harare in which the court dismissed an application for rescission of a default judgment entered against the appellant on 23 July 2015.

BACKGROUND FACTS

On 19 March 2015, the respondent issued summons against the appellant in the High Court under Case No. HC2525/15, wherein it claimed the sum of US$521,083=41 being the capital claim of US$258,019=29, interest adjusted by the in duplum rule in the sum of US$258,019=29 and bank charges in the sum of US$5,044=83. The respondent further claimed interest on the amounts at the rate of 28 percent per annum from the date of demand, being 24 February 2015, to the date of full and final payment....,.

Aggrieved by that decision, the appellant noted the present appeal based on the following grounds:

1. The court a quo erred in determination, finding as fact that the amount (quantum), claimed by the respondent was correct, when in actual fact it was overcharged by US$59,000, plus 28% interest, contrary to the 12% as per agreement.(sic)...,.

Regarding the appellant's defence, counsel for the appellant contended that there..., was a dispute pertaining to the figures and the appellant was raising the defence of error in calculation....,.

The bare denial made by the appellant, that he did not owe the respondent the sum claimed but a lesser figure, was not sufficient.

The point was made in Songore v Olivine Industries (Pvt) Ltd 1988 (2) ZLR 210 (S) where the following was stated;

“Before I go further, I think it is necessary to say something about the kind of allegations one may expect from an applicant for rescission of judgment.

The effect of the cases is summed up to p371 of the third edition of HERBSTEIN and Van WINSEN, The Civil Practice of the Superior Courts in SA as follows:

'The applicant must show that he has a bona fide defence to the plaintiff's claim; it being sufficient if he sets out averments which, if established at the trial, would entitle him to the relief asked for; he need not deal with the merits of the case or produce evidence that the probabilities are actually in his favour.'

It is dangerous to generalise, and each case differs from others, but, nonetheless, I think it must be said that bald general allegations of fact may not be enough in every case to show bona fides. It might be argued that 'I do not owe the money' is 'an averment which, if established at trial, would entitle him to relief asked for'.

In most cases, and particularly where there is a suspicion that the defence is not bona fide, more specific allegations of fact will be required.”

The appellant, in his founding affidavit, devoted only two paragraphs out of twelve to the issue of whether he had a bona fide defence to the claim.

He alleged that he was not indebted to the respondent in the sum of US$258,019=29 but to the sum of US$198,000 together with interest at the rate of 12 percent per annum. He concluded by saying that;

“I therefore submit that I have prospects of success in the main matter.”

In Delta v Murandu SC38-15, GWAUNZA JA…, had this to say;

“I take the time to point out that parties are expected to argue their cases so as to persuade the court to see the merit, if any, in the arguments advanced for them. They are not expected to make bold, unsubstantiated averments and leave it to the court to make of them what it can.

In as much as the court is handicapped in terms of being able to properly determine this point, so too is the respondent. He has not been given enough detail to enable him to understand, and properly defend, the case posed against him in this respect.

The effect of this, in my opinion, is to visit unfairness on the respondent.

The appellant bore the burden to prove its case on this point but lamentably failed to do so.”

Although she was dealing with a different issue from the one before me, the remarks are apposite where an applicant fails to address prospects of success in its founding affidavit as in casu. Such bald general allegations cannot be deemed to suffice to convince a court that a party has a bona fide defence on the merits....,.

The respondent, on the other hand, expressed its claim in quite some detail.

The respondent specified that the debt arose from a credit facility between the parties. The total sum lent in respect of the facility was a sum of US$257,000 including a rollover of US$175,000 from a previous agreement and an additional US$82,000 for the 2010/1011 summer cropping season.

The respondent explained the interest charged and the total debt after taking into account the in duplum rule.

The court a quo made the finding that the appellant merely made bald assertions in both the founding affidavit and the answering affidavit – yet, the respondent's explanation of its figures was made in a clear and meticulous manner.

The loan agreement, signed on 1 December 2010, tallies with the figures presented by the respondent.

Having considered all the above, the finding made by the court a quo, that the appellant had no defence on the merits, cannot be faulted.

View Appeal
HB179-18 : YUSUF GAIBIE and MAHMOUD GAIBIE vs ALEXANDER CASTANHEIRA and RACHEL CASTANHEIRA
Ruled By: MAKONESE J

The defendants have made an application for absolution from the instance at the close of the plaintiffs case.

The defendants contend that the plaintiffs had failed to lead evidence upon which a court might find in favour of their claims. The application is made on the basis that an essential of the claim, an alleged breach of contract, was not proved in sufficient evidence. Further, the plaintiffs alleged right to cancel the agreement was not proved. The defendants aver that the evidence led by the plaintiffs was fraught with glaring inconsistencies and unacceptable variance with the plaintiffs' pleaded case.

The plaintiffs are opposing the application for absolution from the instance.

The plaintiffs' aver that taking into account the applicable law, and evaluating all the evidence adduced on behalf of the plaintiffs, the pleadings filed of record, the exhibits, and all the discovered documents as well as the viva voce evidence, the application for absolution from the instance is unsustainable and ought to fail with costs.

The plaintiffs aver that they have established a prima facie case of breach of contract and the plaintiffs' right to cancel the contract as a result of such breach. The plaintiffs alleged that the application for absolution from the instance is premised on a mis-interpretation of the terms of the Agreement of Sale, as amended, and a misconception of the consequences at law of the defendants' failure to pay the full purchase price after they were called upon to remedy their breach.

The Factual Background

On the 25th of January 2006 the parties entered into an Agreement of Sale in terms of which the plaintiffs sold to the defendants an immovable property for the agreed price of Z$11,5 billion, subject to certain terms and conditions as set out in the agreement. The plaintiffs alleged that the defendants breached the agreement by failing to pay the purchase price in full despite the extension of time to pay by the 28th of February 2006 in terms of an addendum to the Agreement of Sale signed on the 16th of February 2006.

The defendants deny having breached the agreement of sale and state that they have paid the purchase price in full. They aver that the Capital Gains Tax was paid to the plaintiffs' legal practitioners, who, incidentally, were also the defendants' legal practitioners at the relevant time in accordance with the Agreement of Sale.

The joint pre-trial conference memorandum filed by the parties' legal practitioners set out the following issues for trial;

1. Whether the defendants are in breach of contract.

2. Whether the plaintiffs' cancellation of the Agreement of Sale was in terms of the Contractual Penalties Act [Chapter 8:04].

3. Whether the plaintiffs' attempted to restitute the amount paid by the defendants towards the sale due to breach.

4. Whether the plaintiffs are entitled to cancel the agreement based on the defendants' breach of contract.

5. The onus on the plaintiffs on all the issues.

The Pleadings and Burden of Proof

This being a cause based on breach of contract, the onus of proof rests on the plaintiff to prove breach and the nature thereof. The plaintiffs not only have to allege breach in sufficiently clear terms in their pleadings, but also to prove such breach in evidence. In their pleadings, the plaintiffs allege breach in the following respects:

(a) Failure by the defendants to pay a balance of Z$1,2 billion.

(b) Failure by the defendants to pay the sum of Z$2,3 billion to the conveyancers. The breach, as alleged, is mentioned in paragraphs 4, 5, 6, 7 and 9 of the declaration.

(c) Failure to pay interest in the sum of Z$54,208,814.

In their plea, the defendants denied breaching the terms of the agreement and contend that they have complied fully with the Agreement of Sale.

Assessment of evidence

The plaintiffs filed both the Agreement of Sale and the addendum as part of their case. During the course of the proceedings, the plaintiffs also produced, as exhibit 2a, a schedule showing the defendants' payments totaling Z$9,2 billion made to the first plaintiff, and exhibit 3, a letter from Joel Pincus, Konson and Wolhuter, legal practitioners who were then legal practitioners for the plaintiffs.

The plaintiffs led oral evidence from two witnesses. The first plaintiff confirmed, wholesale, together with all and any defects therein, the evidence, beliefs, and recollections of the second plaintiff.

The evidence of the first plaintiff that he confirmed and adopted the evidence of the second plaintiff was of little probative value to the court.

The first plaintiff had no independent recollection of the matter and did not corroborate the second plaintiff's evidence in any material respects.

It has to be noted that corroboration can only be supplied by independent evidence of a witness giving independent recollections of an incident at issue.

Only one question was put to the first plaintiff, under cross-examination, which question elicited new evidence from the witness. The following exchange occurred between the first plaintiff and the defendants' legal practitioners;

“Q. Who is the registered owner of the property?

A. I am. I gave it to my brother, but I am not the registered owner.”

The only independent aspect of the witness' evidence was that he and not the second plaintiff, and not him and the second plaintiff is the registered owner of the property. The witness, under cross examination, suddenly wept copiously in court. He then informed the court that he and his father had worked hard to acquire the building at issue. He indicated that it was not proper for the property, to “just go like that”. The witness asked the court for a “good judgment”. The first plaintiff certainly displayed his emotions in a rather exaggerated manner.

The second plaintiff gave evidence central to the plaintiffs' claims. He was the single and key witness in this matter.

Clause 1.2 of the Agreement of Sale provides as follows:

“It is recorded herein that the purchase price has been determined and agreed in the context of the prevailing Midrate of Exchange between the Zimbabwean and United States Dollar…,.”

The second plaintiff confirmed that the price was set by him at an equivalent of US$120,000 which was a reasonable price and acceptable to him at the time. The second plaintiff accepted that the midrate only changed between 25 and 3 March 2006.

The suggestion that the purchase price was eroded by the slide of the Zimbabwean dollar, in a period of two months, is baseless.

The second plaintiff confirmed that he signed both the Agreement of Sale and the addendum and he signed both in his own name, and on behalf of the first plaintiff. This is evident from an examination of both documents.

The second plaintiff testified that he co-owns the building with the first plaintiff.

The witness testified that the defendants failed to pay the purchase price by the 27th of January 2006 as stipulated in the Agreement of Sale. Initially, the witness stated that he tried to pursue the defendants to no avail. He stated, further, that upon chasing the defendants he reached no agreement with them. He later conceded that he had signed the addendum with the defendants. After the addendum was signed the witness averred that the defendants were given up to the 28th of February 2006 to settle the balance.

By 28 February, the defendants had not paid the entire purchase price.

He then approached his lawyers who issued a notice to remedy the breach. By the time the notice and demand was issued, the defendants had paid a total of Z$9,2 billion. Such payments were recorded and agreed by the parties prior to issuance of summons.

The witness affirmed that his claim was for cancellation of the contract and that he was tendering a refund of all monies paid by the defendants against such cancellation.

Under cross-examination, an entirely different picture began to emerge.

The plaintiff was moving away and in some instances contradicting his initial evidence. The witness sought to allege that when the addendum was signed, on 16 February 2006, the defendants had already breached the Agreement of Sale by failing to pay the sum of Z$10 billion into his account by 27 January 2006. The witness admitted that, on the face of it, the addendum did not give the sellers the right to cancel the agreement on account of non-payment with the extended time limits. The witness conceded that the addendum gave the sellers the right to levy interest at the rate of 80% or at the NMB Bank investment rate for any further delays in paying off the purchase price. The witness emphatically denied, under cross examination, that he had advised the defendants how much they needed to pay on account of Capital Gains Tax, to the nominated conveyancers, Ben Baron & Partners. The witness repeatedly disputed that the figure of Z$2.3 billion as the amount of Capital Gains Tax in spite of a demand having been made to settle that amount. When it was put to the witness that his lawyers had pleaded on his behalf that Capital Gains Tax was in the sum of Z$2,3 billion the witness stood firm that there was no way he could calculate and demand capital gains tax from the defendants.

Under cross-examination, the witness contradicted his pleadings on the amount, excluding capital gains tax, which remained due to him under the agreement. He pleaded mistakes in the calculations.

The witness further contradicted the terms of the Agreement of Sale and the addendum in material respects.

One glaring contradiction is that the witness sought to argue that capital gains tax was not, contrary to clause 4.5 of the Agreement of Sale, and contrary to the wording of the notice and demand written by his legal practitioners, and the pleadings on record, payable directly to the conveyancers. The witness kept insisting that the money was his money and that it should have been paid to him. Later, in his cross-examination, the witness had departed from his earlier evidence and sought to assert that he had indeed “estimated” capital gains tax in the sum of Z$2,3 billion.

The witness conceded that, up to the time demand was made by his legal practitioners, he had not opened a file at Ben Baron & Partners or supplied the firm with an irrevocable power of attorney as required by the Agreement of Sale.

The witness conceded that the following payments were made to the plaintiffs by the defendant:

(a) Z$9.2 billion into the first plaintiff's account which was nominated in the Agreement of Sale.

(b) Z$2,3 billion in various instalments to Joel Pincus, Konson and Wolhuter.

(c) Z$54,208,844 on account of interest to Joel Pincus, Konson and Wolhuter.

It was accepted, by the second plaintiff, that at the time the last two payments were made, the plaintiffs still did not have an account with the nominated conveyancers for payment of capital gains tax.

Sufficiency of evidence at the close of plaintiffs case

The defendants argue that at the close of the plaintiffs case the plaintiffs failed to lead evidence upon which a court might return a judgment in their favour.

The plaintiffs, however, do not agree.

The plaintiffs urge the court to dismiss the application for absolution from the instance as it is wholly without merit. The plaintiffs argue that they have made a prima facie case for breach of contract, entitling them to cancel the Agreement of Sale. Further, it is alleged by the plaintiffs that there is abundant evidence upon which a court, directing its mind reasonably to such evidence, could or might find for the plaintiffs.

I shall examine the sufficiency or otherwise of the evidence presented by the plaintiffs at the close of their case.

(a) Firstly, the breach of contract pleaded by the plaintiffs was not proved.

In his evidence, the second plaintiff could not explain how the sum of Z$1,2 billion which was stated in his pleadings, and which the defendants were said had failed to pay was calculated or arrived at. The defendants are alleged to have failed to pay such amount in the plaintiffs' pleadings. That the plaintiffs relied on the defendants' failure to pay that amount is clear from the plaintiffs' declaration, which states, in paragraph 4, as follows:

“In breach of the aforesaid terms of the agreement, defendants only paid the plaintiffs' the amounts detailed in annexure 'B' hereto, leaving a balance of $1,200,000,000 plus accumulated interest on all outstanding amount.”

The obligation to pay the sum of Z$1,2 billion, which was termed a material breach, was not proved nor explained by the plaintiffs at all.

(b) Secondly, in their pleadings, the plaintiffs based their allegations of breach of contract upon the alleged failure by the defendants to pay the sum of Z$2,3 billion in respect of Capital Gains Tax on time and as provided under the Agreement of Sale.

In his evidence, the second plaintiff conceded that after payment of Z$9,2 billion into the second plaintiff's account, the defendants met with a Mr Lunat, the plaintiffs accountant, and enquired about the plaintiffs representation at Ben Baron & Partners. What was admitted, however, was that when the defendants intended to pay the Capital Gains Tax, the plaintiffs had no file or account at the nominated conveyancers. It was therefore not possible for the defendants to pay the amount at the offices of the seller's nominated conveyancers.

In the event, the plaintiffs cannot be allowed to rely on the delay in payment of Capital Gains Tax. To do so would be tantamount to allowing the plaintiffs to benefit from their own tardiness or wrongdoing which is not permissible at law.

(c) Thirdly, the plaintiffs, according to their own admission, were in breach of the contract.

Under cross-examination, the second plaintiff conceded that the plaintiffs were in breach of clause 4.7 of the agreement of sale which provides as follows:

“Upon signing of this agreement, the sellers shall furnish the conveyancers herein with an irrevocable power of attorney authorising them to do all such things and sign all such papers as might be necessary to give effect to the transfer.”

The plaintiffs, having breached the terms of the Agreement of Sale, which breach occurred prior to the alleged breach by the defendants, ought not to be permitted to profit from such breach. See Chioza v Siziba SC04-15 where the Supreme Court held that:

“It will seem quite clear that the appellant seeks to benefit unjustly from the transaction. Having sold the property and received the proceeds through his agent, he now seeks the return of the property and thus, so to speak, 'have his cake and eat it'. The respondent, on the other hand, has parted with the full value of the property and stands to incur great financial prejudice if an order for eviction is granted in terms of the counter claim. It would appear then, that the court a quo was correct in its finding that the appellant sought to benefit from its own wrongdoing…,.”

In this instance, the plaintiffs admittedly received the full market value of the property, as set out and accepted by them as at the time of the sale. I make the observation that the plaintiffs ensured that the fluctuating Zimbabwean dollar was pegged at the mid-rate of the United States dollar at the relevant time.

The plaintiffs received the full purchase price for the property.

It is crucial to note that the addendum to the Agreement of Sale provided for a punitive rate of interest of 800% for any late payment.

The second plaintiff, under re-examination, sought to clarify his case on the alleged breach. He stated that there were various instances of breach, the first occurring on the failure to pay by the 27th of January 2006, the second one by failure to pay by the 28th of February 2006 following the delivery of the demand.

The plaintiffs' evidence was clearly at variance with the pleaded cause of action.

The evidence was also contrary to any correct reading of the addendum.

Under re-examination, the second plaintiff stated that, by the end of the notice period, only Z$9,2 billion had been paid to him out of Z$11,5 billion. The defendants had indeed paid the total amount, exclusive of Capital Gains Tax. The witness made reference to a failure to pay Z$10 billion by the 27th of January 2006. This argument presents an inconsistency in the contract of sale.

Under clause 4.2 and 4.3, a total of Z$10 billion was to be paid into an account nominated by the sellers. This account turned out to be the sellers personal account. In terms of clause 4.4 of the agreement the last payment of Z$1,5 billion was only to be made upon the buyers obtaining occupation. The second plaintiff could not state when occupation was taken by the defendants, but conceded that this could not have been in November 2006. No interest, therefore, would have become due and payable before the last payment of Z$1.5 billion became due. Clause 4.5 inconsistently required that the amount required for Capital Gains Tax was to be held by the conveyancers. The pleadings allege that this amount was Z$2,3 billion. Given the amount, it becomes difficult to determine how the defendants could be said to have failed to pay Z$10 billion to the second plaintiff. The amount, less the Z$2,3 billon, came to Z$9,2 billion which was admittedly paid to the plaintiffs.

The second plaintiff conceded that the Agreement of Sale was drafted by himself.

It follows that the second plaintiff is the proferens in this matter, therefore, by operation of the contra proferentem sale, any obscurity, vagueness and lack of clarity around the issue of what clause was breached must be resolved against the plaintiffs; see Blumo Trading (Pvt) Ltd v Nelmah Milling Co and Anor HH39-11.

In concluding the analysis of the evidence led by the plaintiffs, I find that the plaintiffs' evidence fell far short of establishing a prima facie case for breach of contract.

The plaintiffs' evidence was so discredited under cross-examination that no reasonable court examining the evidence could or might find in its favour. The plaintiffs' pleaded case contradicted the viva voce evidence in material respects. The alleged breach was not established.

The second plaintiff departed from the pleaded case in several respects. His evidence is not reliable.

By choosing to extend the true limits, and signing an addendum to provide expressly for penalties for late payment and not reserving the right to cancel the Agreement of Sale, the plaintiff exercised an election to remain in the agreement and to receive the full market value for the property.

There is sufficient evidence that the plaintiffs received, in full, the value of the property at the relevant time, pegged against the United States midrate at the time. The plaintiff is attempting to have his cake and eat it at the same time.

The Law applicable

One of the leading case law authority, in this jurisdiction, on the test to be applied when deciding whether to grant an application for absolution from the instance at the close of the plaintiffs' case is United Air Charters (Pvt) Ltd v Jarman 1994 (2) ZLR 341 where GUBBAY CJ stated as follows…,;

“The test in deciding an application for absolution from the instance is well settled in the jurisdiction. A plaintiff will successfully withstand such an application, if, at the close of his case, there is evidence upon which a court, directing its mind reasonably to such evidence, could or might (not should or ought to) find for him…,. Moreover, in considering an application for absolution, the court should lean favour of continuing the case rather the dismissing it…,.”

See; Claude Neon Lights (SA) Ltd v Daniel 1976 (4) SA 403 (AD) and Manyange v Mpofu & Ors 2011 (2) ZLR 87 (H).

The test to be applied in this instance is whether, at the close of the plaintiffs' case, there is any evidence upon which the court, directing its mind reasonably to such evidence, could or might find in favour of the plaintiffs. The court must also examine whether the plaintiff has failed to adduce any evidence or adduced insufficient evidence to establish an essential element of the claim. The court is enjoined to make an overall assessment of all the evidence adduced on behalf of the plaintiffs and the pleadings filed of record together with exhibits and annexures, as well as viva voce evidence to establish whether the evidence is sufficient to proceed to hear the case for the defendants.

I am satisfied, that, in applying the applicable law to the facts of this dispute, it becomes evident that the plaintiffs case is full of glaring inconsistencies and unacceptable variance with the pleadings filed of record. The second plaintiffs' evidence, by all accounts, was at direct variance with the pleadings. The plaintiffs sought to correct his evidence under re-examination. The net result was that this court concluded that the plaintiffs failed, at the close of the plaintiffs' case, to establish a prima facie case.

In the result, and accordingly, absolution from the instance is granted. The plaintiffs are ordered to pay costs of suit.

HH69-10 : COTTON COMPANY OF ZIMBABWE LIMITED vs MOBIL OIL ZIMBABWE (PVT) LTD AND TOTAL ZIMBABWE (PVT) LTD
Ruled By: MAKARAU JP

The ClaimThe plaintiff issued summons against the defendants on 16 March 2005 seeking an order compelling the defendant to deliver to it 522,763 litres of diesel.In its declaration, it was alleged that the parties had an oral agreement in terms of which the defendant would supply diesel to the plaintiff. ...

Appealed
SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC
Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

This is an appeal against the judgment of the High Court ordering the appellant to pay the outstanding amount due to the respondent in United States dollars (USD) as opposed to its Real Time Gross Settlement (RTGS) equivalent.

The relevant background to this matter is as follows;

On 25 February 2016, the parties entered into an agreement for the sale by the respondent to the appellant of its entire issued share capital in a company named Milchem Zambia Limited (Milchem) for the sum of USD46,347, payable on or before 31 March 2016.

The appellant then paid USD6,347 on an unspecified date and a further USD8,600 on 19 January 2018, leaving an outstanding balance of USD31,400. The appellant contended that the balance remaining as at 19 January 2018 was USD15,400 and not USD31,400 as claimed by the respondent.

On 15 July 2019, the parties concluded a Statement of Agreed Facts in which the appellant admitted that the sum of USD31,400.00 was still to be paid. However, it now argued that the sum was payable in RTGS and not in United States dollars.

The sole issue for determination by the High Court was whether the balance due was payable in United States dollars following the promulgation of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019 (S.I.33 of 2019) and the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019 (S.I.142 of 2019).

Judgment of the High Court

The court a quo found that the sum of USD31,400, payable by the appellant to the respondent, did not fall under the auspices of section 4(1)(d) but section 2(b) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019 S.I.33 of 2019. This was the appellant's obligation as denominated and payable in foreign currency to the respondent. The court noted that in 2016 and 2017 the respondent had written to the appellant providing the details of its Bank account and the relevant IBAN and SWIFT codes. These codes applied to the payments in foreign currency into Nostro FCA accounts.

Given that the two payments already made by the appellant were by way of cash in United States dollars, the conduct of the parties, and that of the appellant in particular, showed that it was obliged to pay in United States dollars, and, in fact, proceeded to do just that. Additionally, the appellant's plea a quo, which was filed after it became aware of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33/2019, stated that it would pay the sum of USD15,400 to the respondent. Thus, the obligation to settle the debt in United States dollars was both explicit and implied by conduct.

The currency governing the terms sheet (the written agreement) was United States dollars and this was confirmed by paragraph 5 of the Statement of Agreed Facts drawn up by the parties on 15 July 2019.

The court also found that payment in foreign currency would not contravene S.I.142/2019 and would therefore not constitute a brutum fulmen.

In the event, the appellant was ordered to pay the respondent the sum of USD31,400 together with interest at the prescribed rate from 19 January 2018 and costs of suit on the ordinary scale.

Grounds of Appeal

At the commencement of the hearing, the Court pointed out the mis-citation of a statutory provision referred to in the first ground of appeal. The provision in question was incorrectly cited as section 3(2)(b) of S.I.33 of 2019, instead of section 44C(2)(b) of the Reserve Bank of Zimbabwe Act [Chapter 22:15].

This error is understandable given the convoluted fashion in which S.I.33 of 2019 is structured and formulated.

In any event, the error was corrected by the Court by allowing the first ground to be appropriately amended, with the consent of counsel for the respondent.

The first and second grounds of appeal take issue with the finding of the court a quo that the outstanding debt of USD31,400 fell under the auspices of section 44C(2)(b) of the Reserve Bank Act, and was therefore a foreign obligation payable in foreign currency, rather than being a local obligation governed by section 4(1)(d) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33 of 2019, that was payable in RTGS dollars.

The third ground of appeal impugns the court a quo for having failed to appreciate that the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, S.I. 142 of 2019 made it impossible for the appellant to pay the sum of USD31,400 to the respondent in foreign currency.

Foreign or Local Obligation

The critical provision to be interpreted in casu is section 44C of the Reserve Bank Act [Chapter 22:15] (as inserted by section 3(1) of S.I.33 of 2019).

Section 44C(1) of the Reserve Bank Act empowers the Reserve Bank to issue, or cause to be issued, electronic currency in Zimbabwe. Section 44C(2) provides as follows:

“The issuance of any electronic currency shall not affect or apply in respect of –

(a) Funds held in foreign currency designated accounts, otherwise known as 'Nostro FCA Accounts', which shall continue to be designated in such foreign currencies; and

(b) Foreign loans and obligations denominated in any foreign currency, which shall continue to be payable in such foreign currency.”…,.

Section 4(1)(a) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33 of 2019 provides for the issuance and operation of an electronic currency, dubbed “the RTGS Dollar”, with effect from the effective date, being the date of promulgation of S.I. 33 of 2019, i.e. 22 February 2019.

Paragraphs (c), (d) and (e) of section 4(1) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I. 33/2019 stipulate as follows:

“(c) That such currency shall be legal tender within Zimbabwe from the effective date; and

(d) That, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on and after the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar; and

(e) That after the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS Dollar for the United States dollar on a willing-seller willing-buyer basis; and…,.”…,.

What emerges, clearly and unequivocally, from section 44C(2)(b) of the Reserve Bank Act, as read with section 4(1)(d) of S.I. 33 of 2019, is that foreign loans and obligations denominated in any foreign currency are excluded from the broad remit of S.I.33 of 2019. Thus, foreign loans and obligations continue to be valued and payable in the foreign currency in which they are denominated.

Counsel for the appellant submits that the debt in casu was a local obligation and not a foreign obligation within the meaning of section 44C(2)(b) of the Reserve Bank Act [Chapter 22:15].

For a debt to be a foreign obligation, the creditor must be resident outside Zimbabwe. The nationality of the creditor is irrelevant and it is his residence that matters.

The respondent's declaration, in the court below, admits that it is a resident of this country. It also has a registered office in Zimbabwe as its place of business, as accepted in its further particulars. Again, in terms of the written agreement between the parties, payment by the appellant was to be made “in Zimbabwean US Dollar bank account to be nominated” by the respondent. At the relevant time, all bank accounts in Zimbabwe were designated in United States dollars. The United Kingdom bank account details that were furnished by the respondent were provided on 6 December 2016 - well after the effective date of the agreement, i.e. 25 February 2016.

Counsel for the respondent observes that in the appellant's plea, which was filed on 28 February 2019, after the promulgation of S.I.33 of 2019, the appellant prayed for an order requiring it to pay the lesser “sum of US$15,400”. The court a quo found that the appellant was fully aware of the existence of S.I. 33 of 2019. The plea was not amended, and, so submits counsel for the respondent, it constitutes a firm irrevocable admission of the appellant's liability to pay the outstanding debt in United States dollars. Additionally, the two initial payments that were made by the appellant, totalling USD14,947, were made in cash in United States dollars.

The respondent initially supplied the details of a United Kingdom bank account, together with IBAN and SWIFT codes, which were recognised by the court a quo as pertaining to FCA accounts. At a later stage, in its further particulars, the respondent furnished the details of its local Nostro FCA account. Such accounts are specifically referred to and excluded from the scope of electronic RTGS transactions by section 44C(2)(a) of the Reserve Bank Act.

As regards the respondent's declaration a quo, counsel for the respondent argues that the respondent's statement that it is “a company duly [incorporated] according to the laws of the United Kingdom with an office in Zimbabwe where it is resident” is somewhat ambiguous. The Statement of Agreed Facts before the court a quo makes it clear that the respondent is “a foreign company registered in terms of the British laws with a registered office in Zimbabwe”. All that the respondent has is a business presence in Zimbabwe.

Having regard to the factual circumstances preceding the institution of proceedings a quo, coupled with the conduct of the parties, it is abundantly clear that it was the intention of both parties, from the onset of their transaction, that the appellant's contractual obligation to pay the respondent would be discharged in United States dollars.

Indeed, counsel for the appellant, in his replying submissions, quite properly conceded that until the promulgation of S.I.33 of 2019 the parties were fully agreed that payment would be made in foreign currency.

What is more contentious in casu is the status of the respondent in this country and the nature of the transaction between the parties. These two issues are obviously inter-related and need to be considered together in the context of this appeal.

The term “foreign loans and obligations denominated in any foreign currency”, as it appears in section 44C(2) of the Reserve Bank Act, is not defined in S.I.33 of 2019 or in any other relevant legislation that I am aware of. Its meaning, in any given case, must be ascertained from the factual circumstances of the parties involved and the material substance of the transaction that they have entered into.

It is common cause that the appellant is a local entity. On the other hand, the status of the respondent is not self-evident from the papers filed of record.

I agree with counsel for the respondent that the respondent's pleadings, i.e. its declaration and further particulars, are ambivalent in this regard. Its nationality, in as much as it is incorporated in the United Kingdom, is obviously foreign. What is less clear is the question of its residence and the nature of its physical presence in Zimbabwe. This is obviously a question of fact. Nevertheless, some guidance on this aspect can be gleaned from relevant statute law.

The commercial operations and transactions of all companies, whether foreign or local, are governed by our Company Law, both under statute and at common law. At the time when the transaction between the parties in casu was concluded, the relevant statutory provisions were contained in the Companies Act [Chapter 24:03]. (They are now to be found in the Companies and Other Business Entities Act [Chapter 24:31] which came into operation on 13 February 2020, ninety days after its publication on 15 November 2019).

Section 2 of the Companies Act [Chapter 24:03] (the repealed Act) defined a “foreign company” as “a company or other association of persons incorporated outside Zimbabwe which has established a place of business in Zimbabwe.” The term “place of business” was defined in section 329 to mean “any place where the company transacts or holds itself out as transacting business…,.” The formalities and requirements for the registration of a foreign company were stipulated in section 330. In essence, these included the submission of certified copies of the company's constituent instruments and the particulars of its directors resident in Zimbabwe. Thereafter, the responsible Minister would issue a certificate, subject to such conditions as he saw fit, authorising the foreign company to establish a place of business in Zimbabwe.

In the instant case, it is common cause that the respondent is a company incorporated in the United Kingdom with a registered office or place of business in Zimbabwe. The prescribed formalities for its registration do not form part of the record and were obviously not in issue in the proceedings a quo. In any event, it is undoubtedly a foreign company that was registered and entitled to operate in Zimbabwe.

The related question of residence in the country is indirectly addressed in the Exchange Control Regulations 1996, S.I.109 of 1996, as amended. Although these Regulations pertain principally to dealings in foreign currency, they are also relevant to the determination of questions of residence in Zimbabwe. In terms of section 3(1)(c) of the Exchange Control Regulations, a company or other body corporate is to be regarded as a Zimbabwean resident if “it is incorporated in Zimbabwe” or “it has its head office or principal place of business in Zimbabwe.”

In casu, it is abundantly clear that the respondent is neither incorporated in Zimbabwe nor does it have its head office or principal place of business in Zimbabwe.

By virtue of the Companies Act, as read with the Exchange Control Regulations, it is quite evidently a non-resident foreign entity operating in Zimbabwe.

As regards the transaction between the parties, it is not in dispute that what was sold by the respondent to the appellant was its entire share capital in a foreign company located in a foreign country, namely, Zambia. In short, a foreigner sold a foreign asset to a local company.

The asset consisted of shares in a foreign company that could presumably be sold abroad for foreign currency or, at any rate, in any currency other than the currency of Zimbabwe.

What the parties intended, and what they transacted, unquestionably gave rise to a foreign obligation.

In my view, it was not the intention behind S.I. 33 of 2019 to strike at an obligation of the kind involved in this case.

Section 44C(2)(b) of the Reserve Bank Act, as inserted by section 3(1) of the 2019 Regulations, makes it clear that the issuance of any electronic currency, i.e. RTGS dollars, shall not affect or apply to any foreign obligation. This is reinforced by section 4(1)(d) of the Regulations which explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.

To conclude on this aspect, the currency of payment intended by the parties was United States dollars. Moreover, the obligation incurred by the appellant was a foreign obligation denominated in foreign currency within the contemplation of S.I.33 of 2019. That obligation therefore continued to be payable in foreign currency, even after the effective date, i.e. 22 February 2019.

It follows that the first and second grounds of appeal are without merit and must accordingly be dismissed.

Legality of Payment in Foreign Currency

Counsel for the appellant initially took the stance that S.I.33 of 2019 constituted a supervening obstacle to the continued payment of the appellant's obligation in United States dollars. He later conceded that, as at 22 February 2019, there was nothing to prevent the appellant from discharging its obligation in foreign currency. However, he persisted with the argument that following the promulgation of the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, S.I.142 of 2019, on 24 June 2019, the Zimbabwean dollar was the sole legal tender for all local transactions in Zimbabwe.

Counsel for the respondent submits that there was no supervening impossibility preventing payments in foreign currency at any material time.

It was legal for the parties to enter into an agreement for the payment of United States dollars or any other foreign currency. Neither S.I.33 of 2019 nor S.I.142 of 2019 prohibited or precluded any such payment.

Subject to the broad impact of later restrictive measures introduced by S.I.212 of 2019, I fully agree with the position taken by counsel for the respondent for the following reasons;

As regards S.I. 33 of 2019, I have already concluded that this instrument did not operate to prohibit the payment of any foreign obligation denominated in foreign currency in such foreign currency. The status quo ante was explicitly saved and preserved by those provisions of S.I.33 of 2019 that I have alluded to earlier.

Turning to S.I.142 of 2019, the relevant provisions, for present purposes, are contained in subsections (1) and (2) of section 2, which stipulate as follows:

“(1) Subject to section 3, with effect from the 24th June 2019, the British pound, United States dollar, South African rand, Botswana pula, and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.

(2) Accordingly, the Zimbabwe dollar shall, with effect from the 24th June 2019, but subject to section 3, be the sole legal tender in Zimbabwe in all transactions.”…,.

Section 3(1) of S.I.142 of 2019 provides for savings from the ambit of section 2. In particular, it stipulates that nothing in section 2 shall affect the opening or operation of foreign currency designated accounts (Nostro FCA accounts) or the requirement to pay customs duties and import or value added tax in foreign currency in respect of such goods as are specified under the relevant tax legislation. Section 3(2) extends the exemption from the provisions of section 2 to the tender of foreign currency in payment for international airline services.

My reading of section 2 of S.I.142 of 2019 is that its operation and impact are confined to local transactions. It obviously cannot, and does not, apply to foreign transactions which ordinarily lie beyond the reach of purely domestic legislation. At any rate, this is clearly evident from the particular wording of the provision which expressly refers and relates to transactions in Zimbabwe.

By the same token, I take the view that section 2 of S.I.142 of 2019 does not extend to the discharge of foreign loans and obligations denominated in any foreign currency. This is so for two fairly obvious reasons;

(i) Firstly, it would be commercially incongruous and internationally unacceptable to attempt to settle any foreign loan or obligation in local currency - unless this is mutually agreed between the parties involved.

(ii) Secondly, and more importantly, the exemption from the scope of local currency in respect of foreign loans and obligations is explicitly preserved and embodied in section 44C(2)(b) of the Reserve Bank Act [Chapter 22:15] itself. The restrictions imposed by S.I.142 of 2019 are contained in Regulations made under the very same Act.

It is trite that subsidiary or subordinate legislation cannot override or purport to alter, whether expressly or impliedly, anything contained in its parent or enabling statute, or indeed in any other Act of Parliament. This proposition is so axiomatic that it requires no case law or other learned authority to support it.

There is yet a further reason for taking a restrictive view of the scope and operation of section 2 of S.I.142 of 2019. This arises from the juridical import of what is meant by “legal tender”.

In this context, it is the State, which is generally responsible for regulating its monetary system, that issues its own currency to serve as the universal means of exchange within its own boundaries. See PROCTOR: Mann on the Legal Aspect of Money, 7th ed, 2012…,..

To similar effect, GOLDBERG: Legal Tender SSRN (2008)…, observes that it is the Government which typically accords the status of legal tender to any currency which it has itself issued. Thus, when the law confers legal tender status only on the Government's currency, it implicitly allows the Government to reject any other currency as a medium of payment.

Insofar as concerns transactions between private persons and entities, GOLDBERG: Legal Tender SSRN (2008)…, points out that the “legal tender” concept originates in Contract Law and entitles the payer to settle a contractual obligation in whatever currency or medium of payment that has been declared, by law, as acceptable legal tender. Conversely, a buyer does not enjoy the same leeway in attempting to settle a contractual obligation through any medium of payment that is not recognised as legal tender within the State concerned.

The same point is underscored by PROCTOR: Mann on the Legal Aspect of Money, 7th ed, 2012 …,:

“If a country's system of trade and commerce is to be based on money as a means of exchange, then the law must buttress that position and allow for the assured discharge of monetary debts by payment in that medium. Thus, the law must require that creditors accept payment through that medium – in other words, the creditor must accept payment in legal tender.”…,.

To conclude on this aspect, the concept of “legal tender”, in its ordinary signification, denotes money or currency in official circulation that must be accepted if offered in payment of a debt.

In the realm of contractual relations, what this means is that the debtor is entitled to settle his debt through the medium of legal tender, and, conversely, the creditor is obliged to accept that tender.

The latter has no choice or latitude in the matter.

On the other hand, unless explicitly proscribed by statute…, there is nothing under the common law to preclude the debtor from discharging his debt in any currency or medium of exchange other than the officially designated legal tender, including any foreign currency, so long as the creditor is prepared to accept such payment in settlement of the debt.

This arises by virtue of the time-honoured doctrine of freedom of contract, which, in my view, remains intact and un-impaired by the provisions of S.I.142 of 2019.

In any event, as I have already emphasised, these provisions do not operate to override or detract from the explicit import of section 44C(2)(b) of the Reserve Bank Act in relation to the repayment or settlement of foreign loans and obligations in foreign currency.

I have earlier alluded to the wide impact of S.I.212 of 2019, to wit, the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) Regulations 2019, promulgated on 27 September 2019.

The term “domestic transaction” is very broadly defined in section 2(1) of the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) Regulations 2019, S.I.212 of 2019, subject to section 4, to encompass virtually every conceivable commercial transaction within Zimbabwe. Section 3(1), which is also subject to section 4, expressly prohibits the payment or receipt of any currency other than the Zimbabwe dollar, as the price or consideration payable or receivable in respect of any domestic transaction. Section 4 enumerates those transactions which are excluded from the scope of the definition of “domestic transaction”. Of particular relevance, for present purposes, is section 4(e), which excludes “transactions in respect of which any other law expressly mandates or allows for payment to be made in any or a specific foreign currency.”

As I have already concluded, the transaction in casu gave rise to a foreign obligation denominated in foreign currency. By virtue of section 44C(2)(b) of the Reserve Bank Act, as read with section 4(1)(d) of S.I.33 of 2019, that obligation continues to be, and is therefore allowed, by another law, to be payable in a specific foreign currency, i.e. the United States dollar.

It follows that the underlying transaction is excluded, by dint of section 4(e) of S.I. 212 of 2019, from the scope of the prohibition, imposed by section 3(1) of S.I. 212 of 2019, against the payment or receipt of any currency other than the Zimbabwe dollar in respect of any domestic transaction.

It follows from all of the foregoing that the third ground of appeal cannot be sustained.

Statutory Instrument 142 of 2019, or any other relevant or applicable law, did not make it impossible for the appellant to discharge its outstanding contractual obligation to pay the sum of USD31,400 to the respondent in foreign currency.

Present Status of S.I.33 of 2019 and S.I.142 of 2019

For the sake of completeness, it is necessary to address and clarify the present status of the two statutory instruments under scrutiny in casu.

S.I.33 of 2019 was enacted in terms of section 2 of the Presidential Powers (Temporary Measures) Act [Chapter 10:20]. In terms of section 6(1) of the Presidential Powers (Temporary Measures) Act, S.I. 33 of 2019 lapsed after the expiry of a period of 180 days. However, its provisions have been re-enacted, with some crucial modifications, through section 22 of the Finance (No.2) Act 2019 (Act No.7 of 2019).

As for S.I.142 of 2019, its provisions have also been substantially reproduced, in virtually identical terms, in section 23 of Act No.7 of 2019. This Act was promulgated on 21 August 2019 and came into operation and effect on the same date.

Section 21 of the Finance (No.2) Act 2019 (Act No.7 of 2019) inserts, and re-enacts, with effect from the “first effective date”, i.e. 22 February 2019, the entirety of section 44C of the Reserve Bank Act as was contained in section 3 of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33 of 2019. Section 44C(2) of the Reserve Bank Act preserves the position of funds held in foreign currency designated accounts as well as the continued acquittal of foreign loans and foreign obligations denominated in any foreign currency in such foreign currency.

As regards the issuance and legal tender of RTGS dollars, section 22 of the Finance (No.2) Act 2019 (Act No.7 of 2019) re-enacts the provisions of S.I.33 of 2019, but, with certain critical changes, which are not relevant for present purposes, with retrospective effect from the first effective date, i.e. 22 February 2019.

Section 23 of the Finance (No.2) Act 2019 (Act No.7 of 2019) reproduces and re-enacts the provisions of the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, S.I.142 of 2019, to declare, in essence, that any foreign currency whatsoever is no longer legal tender in any local transactions and that the Zimbabwe dollar shall, with effect from the “second effective date”, i.e. 24 June 2019, be the sole legal tender in all such transactions, subject to the original savings in respect of the opening and operation of foreign currency designated accounts, the payment of customs duties and import or value added tax, and payments for international airline services.

Disposition

As I have concluded earlier, all the grounds of appeal in this matter are devoid of merit. They cannot be sustained and must therefore be dismissed. As for costs, there is no reason to depart from the norm that costs should follow the cause.

It is accordingly ordered that the appeal be and is hereby dismissed with costs.

View Appeal
HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL
Ruled By: MUZENDA J

On 24 December 2018 the plaintiff issued summons against the defendant claiming the following:

1. Payment of US$31,400.

2. Interest thereon at the prescribed rate of interest per annum from 19 January 2018 to the date of payment in full and final settlement.

3. Interest at the prescribed rate from 1 March 2016 to 18 January 2018 on the sum of US$40,000.

4. Costs of suit on attorney-client scale.

From the plaintiff's declaration, on or about 25 February 2016, at Harare, the parties entered into an agreement in terms of which the plaintiff sold to the defendant its entire issued share capital of an entity known as Milchem Zambia Limited for US$46,347 which amount was payable to the plaintiff on or before 31 March 2016. The defendant paid US$6,347 on an unspecified date and a further US$8,600 on 19 January 2018 leaving a balance of US$31,400 which amount the defendant rejects or refuses to pay.

The defendant, on the other hand, admits the contents of the 2016 sale agreement but goes on to add that a new agreement was later concluded, more particularly, in that it paid both amounts of $6,347 and $8,600, but, on 2 September 2017, the defendant was using Leopard Rock Hotel for an amount of $23,285=48 being claimed under Case No. HC5580/17. Incidentally, the plaintiff owners or directors or shareholders had interests in Leopard Rock Hotel, the $23,285=48 that was owed to the defendant by Leopard Rock Hotel as US$16,000 for the purpose of off-setting and settling. Hence, the balance outstanding would be US$24,000. After the payment of $8,600, the defendant contends that the balance outstanding, as at 19 January 2018, was $15,400 not $31,400 as pleaded by the plaintiff.

After payment of the $8 600, a misunderstanding pertaining to interest arose as well as the 10% discount which the defendant thought applied to the $40,000 agreed as owing on 2 September 2017. The plaintiff argued that the discount applied to the time prior to 2 September 2017 when the debt was about $45,000 that was owed originally and was dependent on immediate payment which was not affected. The defendant tendered to refund the amount paid to it by Leopard Rock Hotel so as to revert to the 2 September 2017 agreement.

The defendant refutes being in breach of the 2016 sale agreement.

On 22 March 2019, the plaintiff filed its replication where it disputed any novation to the original sale agreement. It insisted that the balance, being the capital on the summons denominated in US dollars, should be paid by the defendant. There was never a set-off agreed by the parties relating to the Leopard Rock Hotel debt. In fact, the defendant was fully paid by Leopard Rock Hotel and accepted payment, and, lastly, it rejects the tendered amount for not being made in accordance with any agreement.

At the joint pre-trial conference held on 13 and 29 May 2019 the following issues were spelt out for trial:

(a) Whether or not the defendant is liable to pay to the plaintiff the sum of $31,400 and interest?

(b) Whether or not the defendant is liable to pay interest on the sum of $40,000 from 1 March 2016 to 18 January 2019?

(c) Whether or not the defendant is liable for the payment of costs at attorney-client scale?

(d) Whether or not there is a new contract between the parties supplanting the terms and conditions of the contract signed on 25 February 2016?

On 15 July 2019, the date of trial, the parties filed a Statement of Agreed Facts to the following effect:

1. The plaintiff is a foreign company registered in terms of the British Laws with a registered office in Zimbabwe and the defendant is a company registered in Zimbabwe.

2. On 25 February 2016, the plaintiff sold to the defendant the entire of its issued shares in Milchem Zambia with effective date of sale being 1 September 2015.

3. The purchase price was US$46,347 (forty six thousand three hundred and forty seven United States dollars); the term sheet agreement is already filed of record as part of the plaintiff's bundle of documents.

4. The defendant initially paid an amount of US$6,347 leaving a balance of US$40,000 of which US$8,600 was paid in cash to the plaintiff at Harare on 19 January 2018 leaving the balance of US$31,400 which is the subject of this claim.

5. The defendant admits the amount of US$31,400 has not been paid to the plaintiff but argues that the amount is now payable in RTGS dollars and not in US dollars as denominated in the term sheet agreement.

6. The issues the court is being called upon to determine are:

6.1. Whether or not the outstanding balance owing to the plaintiff, in terms of the term sheet agreement, is payable in United States dollars or not?

6.2. Whether or not the plaintiff is entitled to interest as acclaimed in the summons?

6.3. Whether or not the plaintiff is entitled to costs of suit on attorney-client basis?

Before the parties addressed the court it was further agreed that issues 6(2) and 6(3) on the Statement of Agreed Facts were no longer meant for determination by the court.

If the plaintiff succeeds, the issue of interest was going to follow the order and would be as acclaimed in the plaintiff's summons. Given the fact that the defendant had admitted owing the plaintiff the amount of US$31,400 and dispensed with the trial proceedings, counsel for the plaintiff, properly in the court's view, abandoned his insistence on claiming costs on attorney-client scale.

It was agreed that if the plaintiff succeeds, the defendant will pay wasted costs at an ordinary scale.

The remaining outstanding issue for determination is whether or not the outstanding balance owing to the plaintiff, in terms of the term sheet agreement, is payable in United States dollars or not?

THE ARGUMENTS

Counsel for the plaintiff submitted that contrary to what the defendant argues, Statutory Instrument 33 of 2019, Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019, S.I.33 of 2019 does not affect the parties' agreement.

The Statutory Instrument only introduces Real Time Gross Settlements Electronic Dollars (RTGS) as a currency to operate side by side with the bond note and coin as a form of settlement currency within Zimbabwe. At the time it was introduced, that is the RTGS dollar, it operated side by side with the multi-currency permitted in Zimbabwe.

The recently introduced Statutory Instrument, S.I.142 of 2019, Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019 does not bar the defendants from depositing the balance into the plaintiff's foreign account. The Statutory Instrument, 142 of 2019 still provides and allows payment into foreign accounts but payment made in Zimbabwe during transactions should be in local or domestic currency. He submitted that it will be in the interests of justice if the balance of US$31,400 should be paid in United States Dollars and cited the matter of Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd and 2 Others HH95-06 per PATEL J…,.

On the other hand, counsel for the defendant argued that there is a supervening impossibility. He cited CHRISTIE, The Law of Contract in South Africa, 6th edition, 2011…, and insisted on the defence of a vis major. The effect of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019, S.I.33 of 2019, more particularly section 4(1)(d) which reads as follows:

“(d) That, for accounting and other purposes, all assets and liabilities that were immediately before the effective date valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on and after the effective date, be deemed to be valued in RTGS dollars, at a rate of one-to-one to the United States dollar; and...,.”

To the defendant, in terms of paragraph 4(1)(d) of S.I.33 of 2019, cited above, the amount due to the plaintiff in the sum of US$31,400 should now be deemed to be RTGS$31,400 because, to the plaintiff, in accounting terms, it will appear on the balance sheet as an asset and to the defendant it will appear as a liability.

Statutory Instrument 142 of 2019, the defendant argued, makes it specific that the Zimbabwe dollar shall be the sole legal tender for Zimbabwean transactions. It will be illegal for the defendant to settle its obligations in United States dollar denomination. If this court proceeds to grant the judgment in United States dollars, the judgment will be a brutum fulmen.

Counsel for the defendant submitted and if the court grants the order, as per the summons, the judgment will open a floodgate to many entities who would approach the court with similar claims denominated in United States dollars. He concluded by urging the court to return the judgment sounding in RTGS dollar and order payment of RTGS$31,400.

THE STATUTORY INSTRUMENTS 33 AND 142 OF 2019

Statutory Instrument 142 of 2019, Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, was issued in terms of section 64 as read with section 44A of the Reserve Bank of Zimbabwe Act [Chapter 22:15]. In principle, the statutory instrument effectively ended the multi currency system and promoted, established, and determined, the Zimbabwe dollar as the sole legal trading currency in the country…,.

It was introduced to declare that the sole currency for use within Zimbabwean borders is the Zimbabwean dollar and eliminated the multi currency.

Statutory Instrument 33 of 2019, Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019 was introduced in terms of section 2 of the Presidential Powers (Temporary Measures) Act [Chapter 10:20] and the statutory instrument introduced a new baby currency code-named Real Time Gross Settlement Electronic Dollar (RTGS Dollars) to enjoin Ecocash and other versions of mobile banking services. The bond note, the bond coin, and RTGS dollar became three major forms of domestic currency permitted to trade under the banner of the Zimbabwe dollar.

Of great interest to this matter is paragraph 2(b) of S.I.33 of 2019 which provides as follows:

“Shall not affect or apply in respect of -

(b) Foreign loans and obligations denominated in any foreign currency which shall continue to be payable in such foreign currency.”…,.

I conclude that, contrary to counsel for the defendant's submission that US$31,400 falls under the auspices of paragraph 4(1)(d) of S.I. 33/ 2019, it falls under paragraph 2(b) of S.I.33 of 2019 and it is the defendant's obligation denominated in foreign currency and payable to the plaintiff.

WHETHER OR NOT DEFENDANT IS LIABLE TO PAY PLAINTIFF THE SUM OF US$31,400 IN FOREIGN CURRENCY

The caption extracted from the terms sheet dated 25 February 2016 titled “Purchase Consideration” provides as follows:

“US$46,347 (forty six thousand three hundred and forty seven US dollars) being the net asset value (excluding shareholders and inter-company loan accounts) evidenced by the attached signed balance sheet.”

Further, under the following subtitle “Payment” it provides:

“In Zimbabwean US dollar bank account to be nominated by Cambria (the Plaintiff). Payable by 31 March 2016.”

The last extract pertinent for consideration is subtitled “agreement” and provides thus:

“The parties agree that this term sheet is a legally binding document and accurately records the intention of the parties.”

On 6 December 2016 and 23 March 2017, the plaintiff wrote to the defendant providing the name of the account holder, the Bank, account number, and, more importantly, the IBAN and SWIFT code numbers. The IBAN and SWIFT codes apply to payment into Nostro accounts and payment in foreign currency and the communication relating to that account was for the depositing of the balance of US$40,000. The two payments of $6,347 and $8,600 were made in United States dollars - and this court does not write an agreement for the parties.

From the clauses extensively cited above herein, the parties' conduct, more particularly that of the defendant, clearly shows that it was obliged to meet its obligations in United States dollars and proceeded to do so.

The defendant's plea contains, in its prayer..., that it shall pay to the plaintiff the sum of US$15,400, it being fully aware of the existence of S.I.33 of 2019.

The debtor's obligation to settle its indebtedness in foreign currency need not be more explicit than in this case and may also be implied, moreso, when such conduct is in fulfilment of that party's performance of the agreement.

It is also abundantly clear from the foregoing logic that the currency governing the terms sheet is the United States dollar and I am more satisfied in that conclusion by paragraph 5 of the Statement of Agreed Facts dated 15 July 2019 filed of record. The defendant, I conclude, is desirous of meeting its obligation in United States dollars but its only concern is whether such payment would not contravene the law obtaining in Zimbabwe.

That's how I interpret the conduct of the defendant.

The only question which is pertinent is whether the judgment should be in foreign currency.

As per the judgment of the learned Judge PATEL in Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd and 2 Others HH95-06, citing the Supreme Court case of Makwindi Oil Procurement (Pvt) Ltd v National Oil Company of Zimbabwe (Pvt) Ltd 1988 (2) ZLR 482 (SC), stated that:

“Our courts are at liberty to give judgments in foreign currency. This follows the radical approach adopted in England by the House of Lords in 1975. As was observed by gubbay cj (as he then was), at 488 A-B;

'In Miliangos v Geroge Frank (Textiles) Ltd (1975) 3 All ER 801 (HL), the majority of the members of the House of Lords (Lord Sermon of Celaisdale dissenting) took the unusual steps, termed by some as “revolutionary”, of reversing their earlier decision. Their Lordships laid down a new rule that where the justice of the case so required the court should give judgment in favour of the plaintiff for the amount of the foreign currency due to him or its sterling equivalent at the time of payment. With regard to the proper conversion date, Lord Wilberforce noted that changes in the value of currency between the breach date and the date of judgment or payment were the rule rather than the exception.'

The Learned Judge continued:

'The rationale for this novel approach is explained, at 492B-C, as follows:

'That the majority of the Law Lords succeeded in surmounting such an obstacle and opted for a more realistic approach to modern economic conditions is strongly illustrative of the concept, never to be overlooked, that the law is a living system that adapts to the necessities of [present time and is to be given new direction] where, on principle and in reason, it appears right to do so.'

At 492C-F the Chief Justice concluded:

'I am firmly of the opinion that in the absence of any legislative enactments which require our courts to order payment in local currency only the innovative lead taken both in Miliangos and the subsequent extensions to the rule there enunciated and in the Murata Machinery case in South Africa is to be adopted. This will bring Zimbabwe into line with many foreign legal systems. See Mann, The Aspect of Money, 4th ed at pp 339-40.

Fluctuations in world currencies justify the acceptance of the rule not only that a court order may be expressed in units of foreign currency, but also that the amount of the foreign currency is to be converted into local currency at the date when leave is given to enforce the judgment. Justice requires that a plaintiff should not suffer by reason of a devaluation in the value currency between the due date on which the defendant should have met his obligation and the date of actual payment or the date of enforcement of the judgment. Since execution cannot be levied in foreign currency, there must be a conversion into the local currency for this limited purpose and the rate to be applied is that obtaining at the date of enforcement.'”…,.

I entirely subscribe to both the Learned Judge and the then Chief Justice.

The matter of AMI Zimbabwe (Pvt) Ltd v Casalee Holdings (Successors) (Pvt) Ltd 1997 (2) ZLR 77 (S)…, is apposite where it was held that it was proper not only to give judgment in a foreign currency but also to couple such award with standard order that interest on the amount be payable tempore morae at the rate applicable to the currency in question.

I do not agree with counsel for the defendant that a judgment in foreign currency will be a brutum fulmen in light of the cases extensively cited herein above and dismiss that argument.

This is an appropriate case which warrants a judgment in foreign currency as clearly reasoned by the Chief Justice in Makwindi Oil Procurement (Pvt) Ltd v National Oil Company of Zimbabwe (Pvt) Ltd 1988 (2) ZLR 482 (SC)…,.

The plaintiff succeeds in its claim and the following is my order;

DISPOSAL

(a) Defendant is ordered to pay the plaintiff the sum of US$31,400.

(b) Interest thereon at the prescribed rate of interest per annum from 19 January 2018 to the date of payment in full and final settlement.

(c) Costs of suit ordinary scale.

Appealed
SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA
Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

This is an appeal against the whole judgment of the High Court handed down on 24 September 2018 wherein it granted the first respondent's claim against the appellant.BACKGROUND FACTSThe following facts are common cause;The second respondent, Bernard Chiswa (“Bernard”), entered into a car hire agreement with the first respondent, Car ...

This is an appeal against the whole judgment of the High Court handed down on 24 September 2018 wherein it granted the first respondent's claim against the appellant.

BACKGROUND FACTS

The following facts are common cause;

The second respondent, Bernard Chiswa (“Bernard”), entered into a car hire agreement with the first respondent, Car Rental Services (Private) Limited (“Car Rental Services”), in October 2015. In terms of the agreement, he was issued with a motor vehicle, a Ford Everest, and was expected to make payments as per the vehicle hire agreement. He failed to do so until the motor vehicle was withdrawn from him.

The first respondent sought the services of the police for the second respondent to return the motor vehicle by laying criminal charges against him.

The appellant, sister to the second respondent, offered to settle the debt and the criminal charges were withdrawn. She signed an acknowledgement of debt and a payment plan. In due course, she withdrew the offer to settle the debt. The first respondent thereafter caused summons to be issued against the appellant and Bernard, jointly and severally, claiming the sum of US$13,868=90.

The appellant applied for the appointment of a curator ad litem on behalf of Bernard on the grounds that he was not of sound mind. On 17 March 2017, a provisional order was granted and a curator ad litem was appointed.

The matter was not prosecuted further.

As a result of the provisional appointment of a curator ad litem, the first respondent withdrew its claim against Bernard and proceeded against the appellant.

PROCEEDINGS BEFORE THE COURT A QUO

Car Rental Services sued the appellant, and Bernard, jointly and severally, for the payment of US13,868=90 for the rental charges due to it. The basis for the claim, in respect of Bernard, was that he had entered into an agreement with Car Rental Services for the hire of a motor vehicle and had failed to pay in terms of the agreement.

In respect of the appellant, it was averred that she had agreed “to take over the debt due by the first defendant (Bernard) and had assumed full responsibility of it which undertaking the plaintiff (Car Rental Services) agreed and accepted (sic).”

In their joint plea the appellant and Bernard disputed liability.

Bernard pleaded that he did not have the requisite mental capacity to enter into a contract. The appellant put in issue the validity of the acknowledgement of debt she signed on the basis that the initial agreement, which gave rise to the acknowledgement of debt, was void ab initio.

TWO ISSUES WERE REFERRED TO TRIAL, NAMELY:

1. Whether or not the agreement entered into between Bernard and Car Rental Services was valid.

2. Whether the obligation assumed by the appellant, in an acknowledgement of debt and payment plan, dated 2 March 2016, is valid and binding.

Regarding the first issue, the court found that the agreement of sale between Car Rental Services and Bernard was invalid for the reason that he was not compos mentis at the time he entered into the contract.

In respect of the second issue, the court a quo quoted from the declaration the basis of the appellant's liability as follows:

“The second defendant (appellant) herein agreed, on 2 March 2016, to take over the debt due by the first defendant (Bernard) and assumed full responsibility of it which undertaking the plaintiff agreed and accepted.”

The court found that the validity or otherwise of the agreement between Car Rental Services and Bernard is irrelevant.

The appellant, after being advised of how investigations proceeded in respect of mentally incapacitated persons, offered to pay the debt to avoid the incarceration of her brother.

It opined that the debtor was replaced and that it was a case of delegation. It defined delegation as a form of novation in which, by agreement between all parties concerned, a third party is introduced as a debtor in substitution of the original debtor, who is discharged. It further opined that the new agreement was not dependent on the validity of the agreement between Car Rental Services and Bernard. It, therefore, found the appellant liable and made an order that she pays the respondent the amount due in terms of that agreement.

Aggrieved by this decision, the appellant noted an appeal to this Court seeking an order reversing the decision of the court a quo.

THE APPEAL

The appellant attacks the judgment of the court a quo on the following grounds: I quote these verbatim;

“1. The Honourable court a quo erred when it found, as it did, that the second defendant was liable to the plaintiff in the sum of US$13,868=90 with interest at the rate of 3.5 percent from 1 April 2016 after having made the finding, as she did, that the agreement between the plaintiff and the first defendant was invalid due to his mental incapacity to contract.

1.1 For the stronger reason that once a finding was made that the initial agreement was null and void, the subsequent agreement, which purported to replace the non-existent agreement, was itself null and void, it being premised on a nullity.

2. The Honourable court a quo erred at law when it found, as it did, that the parties had novated the initial agreement by delegation.

2.1 For the stronger reason that novation by delegation requires agreement of all parties to the initial agreement, which the first defendant, in his mental state, could not possibly give. To that end, there was no novation to talk about.

3. The Honourable court a quo erred at law when it concluded, as it did, that the plaintiff had sued the second defendant based on the novated agreement when the summons and declaration clearly show that the defendants were sued jointly and severally with one paying the other to be absolved.

3.1 For the stronger reason that if the plaintiff was suing the second defendant based on the subsequent agreement, it would not have sued the first defendant or demanded judgment against them jointly and severally, and, more important, it would have been apparent from the pleadings.

4. The court a quo erred when it found, as it did, that the second defendant was liable for payment of anything or at all when regard is had to the fact that she unilaterally offered to pay the debt and subsequently unilaterally withdrew the offer which fact was not disputed by the plaintiff.”

SUBMISSIONS BEFORE THIS COURT

Counsel for the appellant submitted as follows;

The court a quo could not competently come to the conclusion that there was a delegation. Delegation is a novation which pre-supposes that there is a pre-existing agreement which is binding - which was not the case in this matter. It found that the agreement between the respondent and Bernard was not binding. No rights or obligations could be transferred from the agreement. It could not be novated. In any event, for delegation to take place, all the parties have to agree. This could not competently take place as when the acknowledgement of debt was signed, Bernard was admitted into a mental institution. The acknowledgement of debt is a unilateral document. It cannot be an agreement which falls in the confines of delegation.

Counsel for the respondent filed extensive heads of argument where he advanced argument that there was a compromise in the circumstances of this matter. In the last paragraphs of the heads of argument, under the heading: “Whether the court order can be supported on grounds which were rejected by the trial court” he advanced argument that when the second respondent signed the Acknowledgement of Debt an expromissio occurred. He concluded by submitting that the doctrine of compromise was applicable in the circumstances of the present matter. Alternatively, the judgment of the court can be supported on the basis of expromissio.

In his submissions before this Court, he totally abandoned the argument in respect of the doctrine of compromise.

His submissions were as follows:

The appellant interposed herself as between the first and second respondents. This is where an outsider intervenes between two parties and undertakes to satisfy that which is demanded by one party from the other party. Such an undertaking is independent of the underlying obligations or issues between the parties. He relied on the authority of Baker NO vs Total South Africa (Pvt) Ltd 1990 (3) SA 159 for this proposition. It is a step through which a novation can be achieved. The one who originally owed can plead that the debt was extinguished by the interceder. This arrangement does not depend on whether the underlying agreement was valid or not.

On being engaged by the court regarding the issue of the doctrine of compromise, he conceded that there was no involvement of Bernard when the new agreement was entered into. He could not, therefore, argue, with confidence, that a proper compromise was concluded when the original debtor was not involved. He could not argue that the acknowledgement of debt was a compromise but rather that it was an expromissio.

In rebuttal, counsel for the appellant took note of the concession made that there was no compromise in the circumstances of this matter.

On the doctrine of expromissio, he relied on Black's Law Dictionary, 2nd ed, where it was defined as an act in which a creditor accepts a new debtor who becomes bound instead of the old debtor with the latter being released. It is a species of novation. The underlying agreement has to be valid. The creditor must accept the new debtor.

Nothing was advanced in this matter to show that the new debtor was accepted by the creditor. The first respondent went on to sue both the old and the new debtor jointly and severally.

ISSUE

With the argument regarding the doctrine of compromise having been abandoned, the issue for determination is whether the doctrine of expromissio applied to the circumstances of this matter.

THE LAW

An expromissio is a type of novation by which a creditor accepts a new debtor in place of a former one, who is then released; Black's Law Dictionary, 8th ed. 2004…,..

The new debtor, known as an expromissor, becomes solely liable for the original debtor's debt. Thus, an expromissio has been described as an assumption of liability for the debt of another; See Total South Africa (Pty) Limited v Bekker NO 1992 (1) SA 617.

An expromissio has the following characteristics:-

(i) It occurs with the consent of the creditor.

(ii) At the instance of the new debtor.

(iii) The effect being that the old debtor is released from the obligation.

An expromissor differs from a surety in that a surety is bound together with his principal to the creditor. See Bouvier Law Dictionary, 6th ed, CHILDS & PETERSON, Philadelphia, 1856…,. Since an expromissio is a form of novation, it is dependent on the validity of the principal agreement.

An expromissio was defined in Total South Africa (Pty) Limited v Bekker NO 1992 (1) SA 617 where the court, in contextualizing the concept of intercessio, quoted with approval the following extract from WESSELS' Law of Contract in South Africa, 2nd edition..,:

"3778. There are several ways in which a person, without being compelled to do so by law, may intervene in a contract between two parties ob maiorem creditoris securitatem. The Roman jurists called this intervention an intercessio on the part of the stranger to the contract ('per intercessionem aes alienum suscipiens' (D.14.3.19.3). 'Se medium inter debitorem et creditorem interponere' (Voet, 16.1.8)).3779.

3779. The term intercession is a convenient one to denote the intervention of one person (intercessor) in the obligation of another either by way of substituting or adding a new debtor (Nov., 4.1; C.8.40 (41).19).

3780. The stranger may either intervene by contracting with the creditor in such a way that the original debtor is completely liberated, or else he may promise the creditor to become liable for the debt, the original debtor continuing to remain bound.

In the former case, called expromissio by the glossators, there is a complete novation - the old debtor and intercessor are liable, they may either both be principally bound to the creditor or else the debtor may be principally liable, whilst the intercessor is only bound in subsidium, ie., in case the creditor cannot obtain payment from the principal debtor."…,.

An expromissio is, therefore, a form of intercessio.

Intercessio is the general act of assuming liability for another person's debt by contract with his creditor. It can either be privative or cumulative depending on the extent of intervention.

With privative intercessio, the intercessor takes upon himself an existing obligation of a debtor thereby liberating the debtor of his obligations in the principal agreement. Thereafter, the debtor can, if sued, plead that the debt was extinguished by the intercession of the third party. Such is the case of an expromissio.

While, with cumulative intercessio, the intercessor, together with the original debtor, become principally bound to the creditor as in cases of suretyship; see SMITH et AL, A Dictionary of Greek and Roman Antiquities, 1890.

Since an expromissio is a species of novation, the principles applicable to novation are apposite in determining the fate of an expromissio where the original agreement is invalid.

In Mupotola v Southern African Development Community SC07-06 ZIYAMBI JA made the following pertinent remarks regarding novation…,:

“Novation means replacing an existing obligation by a new one, the existing obligation being thereby discharged; see, The Law of Contract in South Africa, Third Ed, by R.H. CHRISTIE at p498.

The above definition pre-supposes that both the existing obligation and the new one arise out of valid contracts.

'When parties novate, they intend to replace a valid contract by another valid contract.' See Swadif (Pvt) Ltd v Dyke 1978 (1) SA 928 (A) at 940 quoted by CHRISTIE in the Law of Contract in South Africa, supra.

The starting point, therefore, in determining this issue is to consider whether the first agreement constituted a valid contract.

This being so, the first agreement was a non-event and there could be no novation of a contract which did not exist...,.”...,.

It is evident that the validity of the former obligation determines the validity of an expromissio.

In line with the reasoning adopted by the court in Mupotola v Southern African Development Community SC07-06, it would mean that the original agreement has to be valid for an enforceable expromissio to come into existence.

An expromissio cannot, therefore, stand on an invalid principal agreement.

The court, in Hamilton v Van Zyl 1983 (4) SA 379 (ECD)…, in distinguishing between novation and compromise stated:

“In pointing out the difference between novation and compromise (transactio) WESSELS on The Law of Contract in South Africa, 2nd ed. Vol. II para. 2458 states:

'There is a great similarity between transactio and novation, and, as a rule, the principles which apply to the latter apply to the former. (Voet 46.2.3).

There is, however, this difference between the two;

When parties novate they intend to replace a valid contract by another valid contract, and, if therefore the novated contract is invalid, the novating contract is, as a general rule, of no effect. If, however, a claim is made upon a contract, about the validity of which the defendant has a doubt, and a transactio follows, the defendant cannot upset the compromise on the ground that the agreement which was compromised was in fact invalid.'”…,.

Consequently, the principal agreement has to be valid for a legally enforceable expromissio to ensue. Where the initial agreement is invalid, the subsequent contract is of no force and effect.

The remarks of LORD DENNING, in MacFoy v United Africa Co Ltd [1961] 3 All ER 1169 (PC)…, to the effect that nothing can ensue from a nullity, apply.

ANALYSIS

The first respondent, in paragraph 36 of the Heads of Argument, sought to argue as follows:

“The undertaking by the appellant was based on the appreciation that second respondent was liable to first respondent such liability exposed the second respondent to a potential detention.

On the appellant's part, the undertaking was an overture to the first respondent to stop the process that might lead to the second respondent detention. Rather, the undertaking was made on the basis of the appellant's belief that second respondent might not survive detention in a mental institution. It was motivated by the desire to protect the second respondent; it cannot be invalidated by the same condition that motivated its being made.

What the appellant did, in her undertaking, was to independently assume an obligation for the payment of money in favour of the plaintiff. It therefore is of no consequence if the second respondent was under a mental incapacity when he took the plaintiff's vehicle in terms of the rental agreement.”

All he has succeeded in doing is clouding an otherwise very clear issue.

Once the court a quo made a finding that the agreement between the first respondent and Bernard was void, no expromissio can ensue. Expromissio is a species of novation which entails the replacing of an existing obligation by a new one.

In casu, the court a quo having found that the original agreement was void, there was no obligation in existence and therefore the appellant could not intervene or intercede in a non-existent obligation.

Further, as is clear from the summons, the second respondent was not released as a debtor by the alleged intercession by the appellant. The first respondent sued both the original debtor and the intercessor jointly and severally in terms of the original agreement and in terms of the new agreement.

In an expromissio, the debtor is liberated of his obligations in terms of the original agreement. The debt is extinguished by the intercession and he cannot, therefore, be sued on the basis of that debt. The suit against both the intercessor and the original debtor also demonstrates that the creditor, the first respondent, had not accepted the new debtor in the place of the former one.

As is clear from the above, the first respondent did not manage to establish that an expromissio ensued. He abandoned the argument regarding compromise. The appeal has merit and must succeed. There is no basis why costs should not follow the cause.

In the result, I will make the following order:

1. The appeal succeeds with costs.

2. The judgment of the court a quo be and is hereby set aside and substituted with the following:

“The plaintiff's claim be and is hereby dismissed with costs.”

View Appeal
HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA
Ruled By: MUZOFA J

The plaintiff issued summons against the defendants claiming payment of US$13,868=90 for car rental charges due to the plaintiff and interest thereon at the rate of 3.5% from 1 April 2016 to date of full payment.

The undisputed facts are that the first defendant entered into a car hire agreement with the plaintiff in October 2015. In terms of the agreement, he was issued with a motor vehicle, a Ford Everest, that he used and was expected to make payments. He failed to do so until the motor vehicle was withdrawn from him.

The plaintiff had to seek the services of the police for the first defendant to return the motor vehicle. The plaintiff laid criminal charges against the first defendant. The second defendant, a sister to the first defendant, offered to settle the debt and the criminal charges were withdrawn.

In due course, the second defendant withdrew the offer to settle the debt. It is then that the summons was issued. The second defendant applied for the appointment of a curator ad litem over the first defendant.

On 17 March 2017 a provisional order was granted. No final order was sought by the second defendant.

As a result of the appointment of the curator ad litem persona the plaintiff withdrew its claim against the first defendant.

This trial therefore relates to the second defendant only.

At the pre-trial conference meeting held after the withdrawal of charges against the first defendant the parties agreed that the following issues would determine the case;

1. Whether or not the agreement entered into between the first defendant and the plaintiff was valid.

2. Whether the obligation assumed by the second defendant in an acknowledgement of debt and payment plan dated 2 March 2016 is valid and binding.

The plaintiff led evidence through two witnesses.

Trevor Chakawata “Trevor” gave evidence first; he is the Operation Manager at plaintiff company.

He said the first defendant,, Bernard, entered into a monthly rental contract of a motor vehicle in October 2015 with the plaintiff. Payments were done on a monthly basis. Bernard went to Binga in December 2015. He wanted to make a pre-payment but the network was down; no payment was made. While in Binga, Bernard was reminded of the unpaid bill; he advised Trevor to use his credit card he had left with the plaintiff to pay off the amount due, however, the credit card was blocked. Trevor said he communicated with Bernard on the phone by voice calls and text messages. When the payment was not made, Trevor advised Bernard to return the car. Bernard promised to do so but did not return the car. He then reported the matter to the police. He advised Bernard of the police report; Bernard was surprised at this turn of events as he questioned why the matter was reported yet he was a reliable customer.

The police communicated with Bernard who promised to return the car in a week's time. He did not. The police then opened a docket.

Trevor then advised Bernard that the matter had been handed over to the police. Bernard came to Harare in February 2016. He advised the police that he had returned the car and promised to settle the bill the following day. On the following day he did not turn up at the police station where Bernard and Trevor were supposed to meet. Trevor and the policeman went to his residence where they were referred to Mr Chanakira, who also referred them to Mrs Chanakira. They called Mrs Chanakira who agreed to meet them in Eastlea. At the meeting, after being told about the case, Mrs Chanakira, the second defendant, advised them that Bernard had a mental problem. When the policeman advised her of the criminal charges against Bernard and how the police deal with mentally ill accused persons, Mrs Chanakira offered to settle the bill.

Trevor said he advised her to put the offer in writing. This was done. In terms of that offer, she was to pay $1,000 a month from March 2016 until the debt was fully paid. She did not pay anything.

Initially, on being asked about the payment, she said she was in South Africa. However, later, Mr Chanakira called Trevor and said they should leave Mrs Chanakira but pursue Bernard who was well and was selling cell phones in town. Eventually, Mrs Chanakira withdrew the offer to settle the bill.

Trevor denied that at the time of contracting, Bernard was mentally incapacitated. He said Bernard knew that every month end he was supposed to pay - and he did. The car that he hired, a Ford Everest, is a unique car such that if one is of an unsound mind he could not drive it - but he did. In December, he was double billed and he was able to pick it; this cannot be done by a mentally incapacitated person.

He also said the acknowledgement of debt by Mrs Chanakira was valid because she offered to pay the debt. The acknowledgement of debt was drafted by her lawyers.

Mrs Chanakira asked them to leave Bernard she would pay the debt. The police could not confirm Bernard's mental capacity through their processes because Mrs Chanakira undertook to pay the debt.

Under cross examination, he said he saw Bernard when he signed the initial agreement and he looked normal. He also said a report from Parirenyatwa Annex Hospital indicated that Bernard had a history of mental disorder. He was not sure why the matter was withdrawn against Bernard. He confirmed that the undertaking was made on the understanding that Bernard was mentally unstable.

The second witness was Constable Nelson Mungati whose evidence was to the following effect;

He is a member of the Zimbabwe Republic Police with fifteen years in service stationed at R.G. Mugabe Airport. He received a report in this case and opened a docket. He phoned Bernard who indicated he was stuck in Gokwe but will return the car. On 7 February 2016 Bernard phoned him advising that he had returned the car. This was confirmed by Trevor Chakawata (Trevor).

When the bill remained unsettled he proceeded to Bernard's residence in the company of Trevor. They were referred to Mr Chanakira who referred them to Mrs Chanakira. They arranged to meet. When they met, he advised Mrs Chanakira about the investigations. She advised him that Bernard was of an unsound mind and offered to settle the bill. It took some time for the acknowledgment of debt to be drawn up; when it was submitted he advised his superiors. He was advised to check at Parirenyatwa Annex Hospital if the history is documented. He made a formal request for the report; he did not get it but was given a record that showed that Bernard was detained some time at the hospital.

Under cross examination he said, from his physical appearance, Bernard did not exhibit signs of mental incapacity. He said after explaining the process of dealing with mentally incapacitated persons to Mrs Chanakira, Mrs Chanakira offered to settle the bill to save Bernard from incarceration. He then summarised the docket and closed it.

Eventually, he learnt that Bernard had been hospitalized. The plaintiff then closed its case.

The second defendant, 'Shaillon' (Mrs Chanakira), called two witnesses in evidence. She gave evidence first.

She is Bernard's brother and she was staying with him. On a date she cannot remember she was phoned by a police officer looking for Bernard. She was advised that Bernard was wanted for a car rental matter. She agreed to meet the police officer and Trevor. The police officer explained that Bernard would be arrested and detained at Chikurubi until the investigations were over. She did not want to see her brother detained; she had lost another brother who had a similar mental condition. He advised the officer that Bernard had a mental disorder. She then offered to settle the bill to avoid the incarceration of Bernard.

They came to an understanding; an acknowledgment of debt was prepared and signed leading to the release of Bernard.

She said his mental condition caused him to think that he had a lot of money and he became irresponsible with money. At one time she met Bernard at the South African border with an agreement of sale to buy a house and an agreement to buy a Mercedes Benz in South Africa. He said he was to pay the money after the British government paid him his millions of pounds that it owed him.

She said his mental condition started when he was about 20-22 years, and, at the time, he was 33 years. He is a Parirenyatwa Annex patient.

She confirmed that she signed the acknowledgement of debt, but it was under pressure from the police officer.

She later withdrew the offer after receiving advice that people like Bernard, with mental incapacities, are not liable at law.

Bernard was on medication, and, when he adhered to his medication, he was fine. If he defaulted, he would relapse and became withdrawn, very violent, and would exhibit a lot of strength; at one time he emptied a swimming pool overnight using a bucket.

After this incident she caused a curator to be appointed, the court order was produced as an exhibit. She said she was not indebted to the plaintiff because she withdrew her offer.

Under cross-examination, she said she signed the acknowledgment of debt to avert the incarceration of Bernard. She said Bernard stayed with her for about six years; he would do some home chores and escort their driver on errands. Bernard received a stipend from the family in cash. He was usually treated in South Africa. She denied that Bernard operated a cell phone shop. She saw Bernard with the Ford Everest and was told it belonged to a friend whom Bernard was assisting in a mining venture. She did not probe further because, at that time, he had become withdrawn; he was not bathing, not changing clothes, and would not come home at times.

This was over three months.

She could not probe too much about his behaviour because he turned violent if put under pressure - at one time he stabbed her daughter.

She could not confirm or deny that Bernard went to Binga and Gokwe.

In respect of the appointment of the curator, she confirmed that she was the applicant and that after obtaining the provisional order she did not do anything.

On re-examination, she said it was unnecessary to have a report on Bernard's capacity since the matter had been withdrawn against him.

The second witness was Dr Patience Maunganidze. She is a medical doctor, a psychiatrist, based at Parirenyatwa Psychiatrist Unit. She wrote a letter setting out Bernard's condition based on the examination she carried out on Bernard in 2016 and the records kept at the Unit. The letter was produced as an exhibit.

She said Bernard's condition was called bipolar disorder. It's a problem with mood.

Bernard exhibited mania in that he believed he was excessively wealthy. Generally, such persons should not manage their affairs or make decisions but they do so. Under cross-examination, she said when a patient is examined, and an opinion is expressed, it relates only to the time of examination. It does not apply in retrospect or for the future. The assessment in casu was correct only as on 25 October 2016. She did not examine Bernard between August 2015 and August 2016.

She expressed an opinion that if Bernard signed a contract for a car hire and paid the money he could have entered into the agreement with a sound mind. She also said if a patient adheres to medication he or she can lead a normal life.

The defence case was then closed.

I directed counsel for the parties to file written submissions on stated dates.

Counsel for the plaintiff chose not to abide by the timelines. l therefore write the judgment without the benefit of the submissions.

I now determine the issues in view of the evidence and the law.

The first issue turns on whether Bernard had the mental capacity to contract with the plaintiff.

The onus to prove such mental incapacity is on the party relying on it.

The issue whether a contracting party had the requisite mental capacity is a question of fact to be determined by the court. See Blamire's Executrix v Milner and Wirsing 1969 NLR 39. It is for the court to assess the surrounding circumstances of the making of the contract. In Pheasant v Wayne 1922 AD 481…, INNES CJ made the following observation;

“And a court of law called upon to decide a question of contractual liability depending upon mental capacity must determine whether the person concerned was or was not, at the time, capable of managing the particular affair in question – that is to say, whether his mind was such that he could understand and appreciate the transaction into which he purported to enter.”

Case law has established three principles of testing the existence or lack of corpus mentis.

The three principles were summarised succinctly in Executive Hotel (Pvt) Ltd v Bennet NO SC 2007 (1) ZLR 343 (S) that;

1. At the time of contracting was the state of mind of the contracting party whose capacity is at issue such that he was incapable of estimating what was or what was not a fair and beneficial bargain?

2. Was the state of mind of the contracting party whose capacity is at issue such as would, in common honesty, not make him liable or responsible for such an act or contract; and

3. Whether the contracting party whose capacity is at issue was of such unsound mind as to be incapable of understanding and appreciating the transaction into which he purported to enter.

In this case, it is not in dispute that Bernard suffered from a bi-polar mental disorder. He believed he was an important person with a lot of money. He was on medication but would have periods of relapses. He had been admitted into Parirenyatwa Annex Hospital three times. His condition was not easily discernible unless if it is at its peak.

Although Trevor gave evidence that he attended to Bernard when he hired the motor vehicle, I believe Bernard had relapsed.

He used the allowances from the family to hire a top of the range motor vehicle, a Ford Everest. His source of income was the family which income was not consistent according to the first defendant. He lied about the motor vehicle to Shaillon, the second defendant.

Shaillon's evidence on Bernard's conduct, while he had the motor vehicle, is important.

She had stayed with Bernard for about five years and could tell the onset of a relapse. Bernard's mood at home had charged; she could not even cross examine him on the motor vehicle he brought for fear he would turn violent when put under pressure. She was also afraid because at one point in the past he stabbed her daughter. I do not doubt Shaillon's evidence on the conduct of Bernard in so far as his behaviour is concerned and his mental capacity.

However, it was clear that she was untruthful when she said she was under pressure from the police to sign the acknowledgement of debt.

This is because, in her evidence, she set out her love and concern for her brother, Bernard; she did not want him arrested. In fact, it turns out now that she did not want the brother to even go through this court process that is why she applied for the appointment of a curator which process she did not pursue to its logical conclusion when the claim was withdrawn against him. It is therefore unbelievable that the police forced her to sign the acknowledgement of debt.

It is my view that she freely took over the obligation to pay off the debt so that Bernard would not be held liable.

Indeed, this happened, because Bernard was not prosecuted to establish his liability and was not even before this court.

At the time that she signed the acknowledgment of debt, in March 2016, Bernard had been admitted at Parirenyatwa Annex Hospital.

It is my considered view that Bernard's mental incapacity confines itself to the use of money.

His belief that he had a lot of money would naturally lead him to overspend; this case is an example of his mental disorientation. He rented a car which incurred a bill of $13,600, an amount which can buy a car. This is exactly the upshot of his mental condition; he believed he had the money yet he was a man living on inconsistent allowances from the family.

At the time of contracting, Bernard believed, due to his mental disorder, that he had money to meet his obligations.

There was no evidence placed before the court on Bernard's mental condition at the time of contracting.

However, the evidence by Shaillon, which described Bernard's behaviour for the period proximate to the time of contracting, gives me an inclining that Bernard had relapsed at the time of contracting with the plaintiff. He knew what he was doing but the knowledge was based on a mental incapacity which has not been denied. I believe this is where, in common honesty, Bernard should not be made liable or responsible for his conduct as set out in the second principle in Executive Hotel (Pvt) Ltd v Bennet NO SC 2007 (1) ZLR 343 (S).

To that extent, the agreement between the plaintiff and Bernard is invalid.

The second issue is whether the acknowledgment of debt signed by the second defendant is valid.

From the plaintiff's declaration, the second defendant's liability is set out as follows:

“The second defendant herein agreed, on 2 March 2016, to take over the debt due by the first defendant and assumed full responsibility of it; which undertaking the plaintiff agreed and accepted.”

The claim is based on the takeover of the debt incurred by Bernard leading to the signing of the acknowledgment of debt by Shaillon.

The plaintiff sued the second defendant based on the acknowledgement of debt.

It was submitted, for the first defendant, that the acknowledgment of debt resulted in a novation. The Court was referred to the case of Leader Tread Zimbabwe (Pvt) Ltd v Smith HH131-03 where it was held that an intention to novate pre-supposes the existence of a valid existing obligation.

In this regard, since the agreement between Bernard and the plaintiff is invalid, the offer by the first defendant to settle the debt was void ab initio.

A reading of Leader Tread Zimbabwe (Pvt) Ltd v Smith HH131-03 does not support the second defendant's case in its entirety. The court opined that an acknowledgment of debt is a compromise. The court refused to consider the initial agreement because the plaintiff in that case sued on the acknowledgement of debt and not on the original agreement. The court, in that case, cited the sentiments of L.R CARIEY in Law of Novation…, that;

“A compromise (transactio) is a novation, with a difference, however, that a novation on an invalid contract in itself is invalid, but if a compromise is made about a contract the validity of which is in doubt, this cannot be upset on the ground that the contract which was compromised was invalid; the purpose is to replace uncertainty with certainty.

It is a novation designed to effect settlement of a dispute and may be arrived at by novation in the narrower sense of the word or by delegation.”

The sentiments are apposite in this case.

The second defendant, after being made aware of the police's investigations, and how investigations proceed in respect of mentally incapacitated persons, she offered to pay the debt to avoid the incarceration of her brother. The debtor was therefore replaced. This is a case of delegation.

Delegation is a form of novation in which, by agreement between all parties concerned, a third party is introduced as debtor in substitution of the original debtor, who is discharged; R H CHRISTIE in Business Law in Zimbabwe, 1998…,.

The second defendant entered into a new agreement in which she took over the debt. The parties came up with a payment plan which she breached in due course. This agreement is not dependent on the validity of the agreement between the plaintiff and Bernard. Indeed, in Leader Tread Zimbabwe (Pvt) Ltd v Smith HH131-03 the court even declined to consider the illegality or otherwise of the initial contract because the acknowledgment of debt was held not to be dependent on it. Similarly, the validity or otherwise of the agreement between Bernard and the plaintiff is irrelevant.

Accordingly, the following order is made;

1. That judgment be and is hereby entered in favour of the plaintiff for the payment of $13,868=90 by the second defendant together with interest at the rate of 3.5% from 1 April 2016 to the date of payment in full.

2. Defendant to pay costs.

HH454-18 : YAKUB MAHOMED vs JOHN BREDENKAMP
Ruled By: CHIKOWERO J

This is an opposed summary judgment application.

The law on the relief of summary judgment is settled.

In sum, it is to enable a plaintiff with a clear case to obtain quick judgment against a defendant who has no real defence against the claim.

The plaintiff's claim must be unanswerable both on the facts and the law.

To successfully repel such an application, the defendant must establish that he has a good prima facie defence.

The defendant must show that there is a mere possibility of his success at the trial; that he has a plausible case; or that there is a real possibility that an injustice may be done if summary judgment is granted.

These principles have been set out in a plethora of cases including Chrismar (Pvt) Ltd v Stutchbury 1973 (1) RLR 277; Bubye Minerals (Pvt) Ltd and Another v Rani International Ltd 2007 (1) ZLR 22 (S); and Zimplastics (Pvt) Ltd v Corbett 2014 (1) ZLR 68 (H).

The applicant issued summons against the respondent seeking to recover the sum of US$194,302=11 being the balance alleged to be due to him in terms of a compromise agreement entered into between the parties.

The applicant obtained a judgment of this court in terms whereof the defendant was to pay to the former the sum of US$3,872,123 plus interest and costs on the higher scale.

In light of the applicant granting the respondent a stay of execution, so the former claims, the parties agreed that the latter would, instead of the judgment debt, pay the agreed sum of US$5,000,000 in full and final payment.

The summons claims the difference between the judgment debt and the sum of US$5,000,000. The summons also claims interest and costs.

It is this summons which gave birth to the summary judgment application....,.

I am not satisfied that this is a suitable case for the granting of summary judgment. I am not satisfied that the applicant's claim is unanswerable.

The applicant is relying on a verbal agreement of compromise.

The existence of such an agreement is disputed by the respondent.

A draft settlement agreement, prepared by the applicant's legal representatives, was sent to the respondent for signature. It increased the respondent's indebtedness from the amount granted in the judgment aforesaid to US$5,000,000.

The respondent never signed it.

The supporting affidavit deposed to by the applicant's legal practitioner did not mention that US$5,000,000 was the compromise amount agreed to between the parties.

The applicant's own legal practitioner, in that supporting affidavit, contended himself with stating the following in paragraphs 3 and 4:

“3. In or around 1 February 2017, I received a telephone call from Innocent Chagonda of Messrs Atherstone and Cook. The phone call was a reaction to a letter I had generated threatening execution. He told me that he had received RTGS payments into his firm's trust account.

4. He undertook to pay the agreed sum to the trust account of Messrs Venturas and Samukange's trust account once the funds had cleared.”

This deponent is expected to be privy to the quantum of the indebtedness agreed to. He does not state that amount.

On 3 February 2017, Advocate Thabani Mpofu, instructed by the applicant's legal practitioners, wrote an email to Mr Innocent Chagonda splitting the sum of US$5 million into portions of US$3.8 million and US$1.2 million. He provided the bank accounts into which each portion had to be paid into.

This may suggest that the parties had agreed to the respondent paying the sum of US$5 million to the applicant in full and final payment.

So too does Atherstone and Cook's letter, of 2 February 2017, wherein it was acknowledged that two RTGS payments of US$4 million and US$1 million had been effected to the credit of the author's trust account.

The letter was addressed to the applicant's legal practitioners.

It was a response to the applicant's legal practitioners' own letter of the same date. Neither party produced this particular letter.

Two further considerations, in my view, dissuade me from finding the applicant's claim as unanswerable. They are the following;

If the indebtedness had been compromised at US$5 million, in full and final payment, there would have been no need for the parties to have costs of suit taxed.

Such costs were not only taxed; the amount allowed on taxation was taken up on review before a judge of this court. The judge allowed the application for review. His decision was appealed to the Supreme Court.

The respondent's letter of 9 September 2016, to the applicant, was attached as annexure “C” to the summary judgment application. It was attached as evidence that the parties agreed that the respondent withdraws his appeal to the Supreme Court against this court's judgment ordering payment of the sum of US$3,872,123 plus interest and costs on the basis of the parties' agreement that the respondent would pay US$5 million in full and final payment instead.

Paragraph 10 of the founding affidavit states in this regard:

“10. On 9 September 2016, the respondent wrote me a personal letter which I annex hereto as annexure “C”. The respondent agreed to drop his appeal to case number HC8103/2014 pending in the Supreme Court and to pay me all that was due by 31 January 2017 being a compromised sum of US$5,000,000 (five million United States dollars).”…,.

Quite clearly, the underlined portion is a misrepresentation of annexure “C.”

It is not necessary that I reproduce the entire contents of that annexure. It suffices that I record that in annexure “C” the respondent pleaded for a three-month grace period to raise funds to liquidate his indebtedness in terms of the High Court judgment. He states, in paragraphs 2 and the last paragraph of annexure “C”:

“…, for this reason, I am willing to drop my appeal so that the order that was made by the High Court stands.

I will then put in place mechanisms in terms of which you will be paid the full amount by 31 January 2017. To this end, I would require that we agree that the execution of this judgment be suspended until 31 January 2017 by which time I confident you would have been paid…,.

…, considering that you have waited quite long and that interest will continue to run on the capital, I think that a delay of 3 months will not necessarily prejudice you any further. Please let have (sic) from you.”

The response to this letter, if any, was not placed before me.

The applicant's case cries out for trial. It leaves more questions than answers at this stage. A trial will redress all that.

Quite clearly, the respondent's defence, that there was no compromise agreement to pay US$5 million, is prima facie good and plausible. There is nothing to indicate it as not bona fide.

Both parties asked for costs on the punitive scale. I am not satisfied that costs on that scale are justified.

In the result, I order as follows:

1. The application for summary judgment is refused.

2. The matter under case number HC1245/18 shall proceed in accordance with the High Court of Zimbabwe Rules, 1971.

3. The applicant shall pay the costs of this application.

HH604-18 : PUWAYI CHIUTSI and ELLIOT RODGERS vs SHERIFF OF HIGH COURT and ELLIOT RODGERS and REGISTRAR OF DEEDS and BARIADIE INVESTMENTS PL and MC DUFF MADEGA N.O. and PUWAYI CHIUTSI
Ruled By: MATHONSI J

The State set up a National Housing Fund in terms of section 14 of the Housing and Building Act [Chapter 22:07] for the purpose of assisting genuine cases of indigency and inability to settle debts by the less privileged citizens of this country who end up losing dwelling houses to ...

What Puwayi Chiutsi is saying is that he was a candidate for such assistance in terms of which the Secretary should have settled the execution creditor's claim from the National Housing Fund.

Without interfering with the prerogative of the Secretary to settle claims from that fund, I find it extremely difficult to fathom the use of such a noble fund to satisfy or settle a claim arising from the facts of this matter wherein a practising lawyer, entitled to charge quite high fees, in terms of his seniority, would be a beneficiary of a fund such as that provided for in section 14 of the Housing and Building Act.

What is even more repugnant are the circumstances under which the debt arose - from an embezzlement of trust funds entrusted to Puwayi Chiutsi as a conveyancer, by an innocent client.

Out of what may rank as unbridled greed, he then appropriated a large sum of $116,000 of trust funds for his own use as a result of which the judgment sought to be executed was made.

In my view, it would be the height of turpitude to use the National Housing Fund, set up in terms of the Housing and Building Act, as insurance cover for corruption and pilfering by lawyers unable to resist temptation or to practice law in an honest and noble manner.

How can a lawyer, who is shown to have mis-appropriated trust funds in the most despicable manner, seek to shelter under a National Housing Fund designed for genuine cases of inability to pay?

It is unthinkable that someone would want to continue perpetuation this strange sense of entitlement; not only to a client's money, but, also having been caught with his hands deep inside the cookie jar, he regards himself as being entitled to have his misdemeanour's paid for by the State - from taxpayers' money.

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE
Ruled By: PATEL J

The plaintiff in this matter claims the sum of US$24,100 as special damages, being loss of profits arising from an alleged breach of contract by the defendants.It also claims restitution of US$10,000 paid as a deposit to the first defendant under the same contract.The defendants deny any breach on their ...

The plaintiff in this matter claims the sum of US$24,100 as special damages, being loss of profits arising from an alleged breach of contract by the defendants.

It also claims restitution of US$10,000 paid as a deposit to the first defendant under the same contract.

The defendants deny any breach on their part and allege that it was in fact the plaintiff that acted in breach of contract.

Evidence for the Plaintiff

Wayne Victor Moss is the Chief Executive Officer of the plaintiff company which, together with CCC Pigs (Pvt) Ltd, is a subsidiary of Colcom Foods Limited. He testified as follows:

On the 18th of January 2010, he signed the Agreement in casu with the defendants. In essence, the Agreement was for the sale of 500 tons of maize (at US$235 per ton) for a total purchase price of US$117,500. The maize was to be sourced by the first defendant from the Grain Marketing Board (the GMB).

On the same date, the second defendant signed a contract of suretyship guaranteeing the delivery of maize in terms of the Agreement. He said that the first defendant had a credit facility with the Grain Marketing Board (GMB) for 2,000 tons.

On the 21st of January, he withdrew a total of US$100,000 from the bank. He paid the agreed deposit of US$10,000 to the second defendant and then proceeded with him to the Grain Marketing Board (GMB) with US$90,000 in cash.

The Grain Marketing Board (GMB) was not aware of the transaction and had no release orders in the name of the first defendant. He was told by the GMB's Credit Controller (Mawanza) that he could obtain only 300 tons of maize at a higher price of US$300 per ton if he paid the US$90,000 into the first defendant's account with the GMB. This was because the first defendant's facility was for a maximum of 300 tons and because its account with the GMB was in debit at that time.

The second defendant then undertook to resolve the matter the following day.

The witness subsequently visited the Grain Marketing Board (GMB) on four consecutive days and was given the same explanations by Mawanza. He then met the GMB Marketing Manager (Mandizvidza) who cautioned him against dealing with the first defendant. Mandizvidza later furnished a letter confirming the first defendant's credit standing with the GMB at the relevant time.

The plaintiff did not proceed with the transaction as it became evident that the first defendant did not have the capacity to deliver as agreed.

The Agreement was cancelled on the 2nd of February and this was confirmed by the plaintiff's lawyers in their letter of the 4th of March to the first defendant. The defendants offered to restitute the US$10,000 deposit in January and October 2010, but have not made any payment to date.

The plaintiff had a contract with CCC Pigs (Pvt) Ltd, signed immediately after the Agreement with the defendants, for the onward supply of 500 tons of maize at a price of US$290 per ton. This represented a profit margin of US$55 per ton equating to a total profit of US$22,500. The plaintiff had arranged for the transportation of the maize at a cost of US$200 per truck. In order to meet its contract with CCC Pigs the plaintiff had to order 508 tons of maize from South Africa at a price of US$317 per ton.

Under cross-examination, the witness conceded that the deposit of US$10,000 was not paid on signature of the Agreement but on the 21st of January and that the sum of US$90,000 was not deposited into the GMB's bank account as agreed. The payments were a few days late and not strictly in accordance with the terms of the Agreement. However, this was not unreasonable in the circumstances of the transaction and the second defendant had accepted the delays. Moreover, the witness did not have the Grain Marketing Board's (GMB) bank account details.

Odson Dzanga is the plaintiff's Financial Manager. He accompanied Wayne Victor Moss to the Grain Marketing Board (GMB) on the 22nd of January 2010. He confirmed that the GMB would only have released 300 tons of maize upon payment of the US$90,000 in cash. He added that the first defendant's account with the GMB was in arrears standing at about US$54,000 as at the 8th of January 2010.

Emson Mandizvidza has been employed by the Grain Marketing Board (GMB) as its Marketing Manager since 2003. His duties include checking the credit facilities of customers, and, in conjunction with the Credit Controller, authorising release orders on credit sales. He corroborated the testimony of Wayne Victor Moss and Odson Dzanga regarding their visit to the GMB on the 22nd of January and his discussion with Moss in the presence of the second defendant. He also confirmed the contents of his letter of the 13th of May 2010 concerning GMB prices and the first defendant's credit status.

Between the 18th and 22nd of January 2010, the first defendant's credit facility was on hold because of its outstanding arrears of US$54,000, and, in any event, that facility did not enable it to buy 500 tons of maize from the Grain Marketing Board (GMB). At that time, the first defendant's credit facility was limited to 300 tons per month.

In practice, a credit customer wishing to increase its credit limit would have to apply, in writing, and the application would then be assessed by the Risk Management Committee (the RMC) which meets once a week.

In December 2009, the first defendant applied to increase its credit limit to 2,000 tons per month. This application was turned down by the Risk Management Committee (RMC) before the 18th of January. As at that date, there was no application from the first defendant to increase its credit limit. Even if it had lodged an application, this would only have been processed the following week and it would not have been possible to approve any increase on the 22nd of January. The Grain Marketing Board (GMB) sued the first defendant for the outstanding US$54,000 in April 2010 in Case No. HC2191/10. At the present time, the first defendant is no longer a credit client of the Grain Marketing Board (GMB).

Wanda van den Bergh is a grain broker. Her evidence was that she introduced Wayne Victor Moss to the second defendant in January 2010. The agreement between them was for the first defendant to supply maize to the plaintiff for onward sale to CCC Pigs (Pvt) Ltd. She was not aware of the first defendant's credit facility with the Grain Marketing Board (GMB).

Evidence for the Defendants

Nelson Mahupete, the second defendant, is the Chairman and Managing Director of the first defendant.

His evidence was that in December 2009 he applied to the Grain Marketing Board's (GMB) credit controllers (Mawanza and Pfumbidza) to increase the first defendant's credit facility from 300 tons to 2,000 tons per month. They agreed to increase the facility to 1,500 tons - provided the outstanding debt of US$54,000 due to the GMB was cleared.

After the Agreement was concluded with the plaintiff, Wayne Victor Moss only paid the deposit of US$10,000 after three (3) days. Moreover, he did not effect transfer of the US$90,000 into the Grain Marketing Board's (GMB) account but arrived at the GMB offices with the cash equivalent. He then declined to pay that amount towards the first defendant's account with the GMB. If he had done so, the first defendant would have fulfilled the contract to deliver 500 tons of maize.

As regards the debt of US$54,000 owed to the Grain Marketing Board (GMB), the first defendant has already paid US$33,250 towards this and the balance is to be cleared as per an agreed payment plan.

Under cross-examination, the second defendant conceded that the 500 tons of maize in question was for pig feed but denied that it was intended for CCC Pigs (Pvt) Ltd.

He disputed the averment to that effect made by Mandizvidza in his statement to the CID Serious Fraud Squad on the 12th of February 2010.

As regards the release orders for 500 tons of maize, he admitted that he did not have them in his possession on signature of the Agreement on the 18th of January or at the Grain Marketing Board (GMB) offices on the 21st of January.

He has been charged with fraud in respect of the present contract. The criminal trial has commenced and is yet to be completed.

Vavavirayi Mawanza has been the Grain Marketing Board's (GMB) Credit Controller since January 1999.

His evidence was that Grain Marketing Board (GMB) release orders are first signed by him and then by the Marketing Manager before they are issued. In August 2009, the first defendant applied for a credit facility, and, in September, it was granted a facility for 150 tons per fortnight or 300 tons per month. In December 2009, the GMB released a total of 268 tons of maize to the first defendant. The latter then applied for a facility of 2,000 tons per month. On the 18th or 19th of December, he verbally advised the second defendant that he could only approve a facility of 1,500 tons on condition that the first defendant paid an additional US$200,000 towards its account with the GMB.

As at the 8th of January 2010, the first defendant's account was in debit of about US$54,000. On the 22nd of January 2010, Wayne Victor Moss came to the Grain Marketing Board (GMB) wanting to pay US$90,000 into the first defendant's account. The witness refused his request and said that the first defendant should make the payment itself. Moreover, it would not have been possible for Moss to have paid the GMB through its own bank account.

In his statement to the CID Serious Fraud Squad, dated the 15th of February 2010, he declared that “the accused (second defendant) has a buying limit of 150 tonnes at a time.”

There was no mention of an increased limit of 1,500 tons having been conditionally approved.

Tatenda Pfumbidza is an Assistant Credit Controller with the Grain Marketing Board (GMB).

He confirmed that an existing credit client must apply, in writing, for any increase in its credit facility and that, if its application is approved, the Marketing Department and the client must be advised of the increased limit in writing.

When the first defendant applied for an increased limit of 2,000 tons, in December 2000, it was told to make an additional payment of “more than US$100,000” towards its account with the Grain Marketing Board (GMB). This application was not approved because the additional payment was not made.

In February 2010, the second defendant approached him for a credit reference. He then wrote two reference letters dated the 5th and 8th of February. He conceded that the letters were silent as to the conditions of release and the tonnage that could be released to the first defendant. Moreover, he accepted that the letters were not addressed to the plaintiff or to Wayne Victor Moss and that they were written after the events giving rise to the plaintiff's action in casu.

Breach of Agreement by Plaintiff

It is a fundamental premise of every contract that both parties will duly carry out their respective obligations. See Green v Lutz 1966 RLR 633; ESE Financial Services (Pty) Ltd v Cramer 1975 (2) SA 805 (C)…,.

As is explained by CHRISTIE: Business Law in Zimbabwe…,.:

“There is a presumption that in every bilateral or synallagmatic contract, i.e. one in which each party undertakes obligations towards the other, the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations….,.

…,. Conversely, a party who has caused the other to commit a breach cannot found a claim on the breach…,.”

In terms of clause 3 of the Agreement in this case, the plaintiff undertook to pay a deposit of US$100,000 “upon the signing of this agreement”, US$90,000 into the bank account of the Grain Marketing Board (GMB) and US$10,000 in cash to the defendants.

It is common cause that Wayne Victor Moss did not pay the deposit of US$10,000 and did not transfer the sum of US$90,000 into the Grain Marketing Board's (GMB) bank account upon signature of the Agreement. Instead, he paid the US$10,000 deposit only on the 21st of January, and, on the same date, tendered US$90,000 in cash to the GMB.

It is therefore clear that the plaintiff did not perform its obligations strictly in accordance with clause 3 of the Agreement.

However, it is equally clear that the defendants accepted the late payment of the US$10,000, and, furthermore, they actively attempted to pressurise Wayne Victor Moss to pay the US$90,000 in cash to the Grain Marketing Board (GMB), particularly as it was not practically possible for him to make that payment into the GMB's bank account.

At that stage, he was obviously willing and able to make both payments in performance of the plaintiff's obligations.

Given the attitude and conduct of the parties, the delay of three (3) days in tendering the payments and the departure in the mode of payment to the Grain Marketing Board (GMB) were not material to the plaintiff's undertakings under the Agreement; and, although the plaintiff did not strictly comply with its payment obligations, such non-compliance was accepted by the defendants.

In short, they positively acquiesced in that non-compliance and are therefore estopped from raising it as a defence to the plaintiff's claim.

Breach of Agreement by Defendants

Turning to the defendants' undertakings, these were spelt out in clauses 4 to 7 of the Agreement.

(a) Firstly, once the plaintiff had paid the deposit, the first defendant was obliged, under clause 4, to cede its release orders for 500 tons of maize “which it has already received or will shortly receive from GMB.”

(b) Secondly, after paying the deposit, the plaintiff was authorised, by clause 5, “to immediately upload the maize from GMB.”

(c) Thirdly, by virtue of clause 6.1, the first defendant warranted that “it does currently, or it will, by Tuesday 19 January 2010, have a release order or release orders in its name from GMB for 500 tons of maize.”

(d) Finally, clause 7.1 entitled the plaintiff to cancel the contract “should the seller not have a release offer [sic] or release offers [sic] in its name by Friday 22 January 2010.”

It is submitted, for the defendants, that the undertakings stipulated in the Agreement are dubious in their meaning. Consequently, in as much as the Agreement was drafted by the plaintiff's lawyers, its provisions must be construed strictly as against the plaintiff on the one hand and leniently as against the defendants on the other.

While this may be the general purport of the so-called contra proferentem or contra stipulatorem rule of interpretation, it is trite that this rule may only be invoked where the provision to be applied is ambiguous in its meaning or effect. See CHRISTIE: Business Law in Zimbabwe…,.

In the instant case, I do not perceive any such ambiguity in the terms of the Agreement. In my view, the combined effect of clauses 4 to 7 of the Agreement was this:

The defendants warranted that they either had the requisite release orders or would have them in their possession by the 19th of January; they undertook to cede the release orders to the plaintiff upon payment of the stipulated deposit; the plaintiff would then take delivery of 500 tons of maize; and, in the event that the defendants did not have the release orders by the 22nd of January, at the latest, the plaintiff was entitled to cancel the Agreement.

The test for determining the repudiation of a contract by way of anticipatory breach was expounded by NIENEBAR JA in Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (1) SA 581 (A)…, as follows:

“…, the emphasis is not on the repudiating party's state of mind, on what he subjectively intended, but on what someone in the position of the innocent party would think he intended to do; repudiation is, accordingly, not a matter of intention, it is a matter of perception.

The perception is that of a reasonable person placed in the position of the aggrieved party. The test is whether such a notional reasonable person would conclude that proper performance (in accordance with a true interpretation of the agreement) will not be forthcoming. The inferred intention accordingly serves as the criterion for determining the nature of the threatened actual breach.

…, due to the co-contractant's repudiation, the innocent contractant is excused from any steps that he must take in preparation for his own performance…,. In these circumstances, the purchaser will not fall into mora by failing to tender performance…, as long as he signifies his willingness to perform.”

Similarly, LORD WRIGHT, cited with approval in Chinyerere v Fraser N.O. 1994 (2) ZLR 234 (H)…, observed as follows in Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1940] 3 All ER 60 (HL)…,.:

“I do not say that it is necessary to show that the party alleged to have repudiated should have an actual intention not to fulfil the contract. He may intend in fact to fulfil it, but, may be determined to do so only in a manner substantially inconsistent with his obligations, and in no other way.”

The evidence before the Court shows that the first defendant did not have the requisite release orders from the Grain Marketing Board (GMB), either by the 19th or the 22nd of January, nor did it hold a credit facility with the GMB for 500 tons of maize at that time. Conversely, on the 21st of January, the plaintiff had paid the cash deposit of US$10,000 to the defendants and was prepared to pay the remaining deposit of $90,000 in cash to the GMB.

It follows that the defendants were patently in breach of the warranty contained in clause 6.1, and, because of their evident inability to fulfil the contract timeously, they were in anticipatory breach of their obligations under clauses 4 and 5 to cede the release orders and deliver 500 tons of maize. Consequently, the plaintiff was entitled to withhold any further payment under the Agreement.

Cancellation of Agreement

At common law, an anticipatory breach ordinarily entitles the innocent contractant to cancel the contract. As is observed by KERR: The Principles of Contract Law (6th ed.)…,.:

“…, repudiation before the due date for performance by a party prospectively in default constitutes anticipatory breach of contract on which the aggrieved party may take action if he so elects.”

In the instant case, clause 7.1 of the Agreement expressly allowed the plaintiff to cancel the contract in the event of the first defendant's failure to have the requisite release orders in its name by the 22nd of January 2010.

Thus, as at that date, the plaintiff was entitled to cancel on two separate grounds, viz;

(i) The defendants' actual breach of warranty as well as;

(ii) Their anticipated failure to cede the release orders and deliver the stipulated tonnage of maize in breach of clauses 4 and 5 of the Agreement.

In the event, the plaintiff lawfully cancelled the Agreement on the 2nd of February 2010, as was confirmed by its lawyers in their letter of the 4th of March 2010 to the defendants....,.

Claim for Restitution

In the event of non-delivery of the goods sold under a contract, the right of the aggrieved party to claim restitution from the defaulting party is ordinarily unchallengeable.

As was held by KORSAH JA in Nissan Zimbabwe (Pvt) Ltd v Hopitt (Pvt) Ltd 1997 (1) ZLR 569 (S)…,:

“Whether the wrongful act arises out of contract or tort, where there has been actual pecuniary loss which is capable of precise quantification, the rule which the law adopts is restitutio in integrum – the injured party is entitled to claim to be placed back in the same position as he would have been in had it not been for the defendant's wrongful act.”

In the present matter, the plaintiff's right to recover the deposit paid in the event of cancellation is also affirmed in clause 7 of the Agreement...,.,

The evidence clearly shows that the plaintiff paid US$10,000 as a deposit to the defendants and that the latter gave nothing in return for that amount.

Indeed, the defendants specifically acknowledged their liability to refund the deposit in the subsequent dealings between the parties and their respective lawyers.

It follows that there is no defence to the plaintiff's right to restitution and that this claim must also be upheld.

HH755-15 : CHIKUDZA MANGWENDE vs LIBERTY MACHODO
Ruled By: UCHENA J and MWAYERA J

At the conclusion of the trial of this matter, the court a quo dismissed the claim for payment of the outstanding lobola.

The court found that there was material breach of the very tenants of lobola.

The court concluded that the appellant was not entitled to payment of the balance of lobola because his daughter, who was married to the respondent, committed adultery with multiple partners ranging from the respondent's brothers, nephews, and the herd boy. The court also found that customarily a husband is allowed to divorce an adulterous wife, and then, if he has paid lobola in full, he is entitled to a refund of the lobola from the inlaws.

The appellant approached this court seeking to have the dismissal of his claim for payment of lobola set aside. The grounds of appeal, as outlined by the appellant, are as follows:

1(a) That the appellant's daughter was acting on the respondent's, that is, her husband's instructions and was safeguarding her husband's cultural values.

(b) That it was not the duty of the appellant's daughter to research on the truth of her husband's cultural values but only to do so as per husband's instructions and demands as a respectful wife.

(c) That the appellant's daughter was forced to confess under duress from the respondent and his relatives.

(d) That the child of the appellant's daughter did not breast feed after confession but only after they had both visited a prophet.

(e) That the appellant's daughter was not in wilful wrong-doing; this is evidenced by her not being in any other affair with outsiders.

2. That the learned magistrate erred in dismissing the appellant's claim when it was clear that the parties had engaged into a lobola agreement which was not completely paid off.

3. That the trial court misdirected itself in dismissing this claim when the averments by the appellant that his daughter and the respondent's brothers had never been to any court for adultery claims.

The facts of the matter, as discerned from the record of proceedings and submissions by the parties, can be summarised as follows:

The appellant's daughter was customarily married to the respondent. The respondent and his wife, the appellant's daughter, had a misunderstanding after the birth of their child. Central to the dispute is the fact that the newly born was not breast feeding. Evidence adduced from the respondent, and the respondent's wife, is to the effect that the child started to breast feed after a confession by the respondent's wife. The confession, which was uncontroverted evidence in the court a quo, was to the effect that the respondent's wife had, during the subsistence of the marriage to the respondent, been intimate with the respondent's elder, younger brothers, nephew, and herd boy.

It was after evidence of intimate relations between the respondent's wife and multiple partners that the respondent took his wife back to her parents.

Irked by this move, the appellant then approached the court a quo claiming for the balance of outstanding lobola.

The Magistrate's Court, basing on the evidence before it, concluded that the confession by the appellant's daughter was voluntarily given. Further, the appellant and his daughter did not dispute that the daughter had intimate relations with multiple partners. The appellant sought to argue, unsuccessfully, that his daughter was wayward in line with the respondent's family custom. The herd boy and nephew were not the respondent's brothers. In any event, other than the appellant's mere say so there was no evidence to confirm the promiscuous conduct by the respondent was in accordance with custom. No one else in the respondent's family had been subjected to such custom according to the appellant's daughter.

It was with this background that the trial magistrate concluded that the appellant's daughter engaged in adulterous relationship with multiple partners and that she, by so doing, breached the marriage relationship. This conduct was ruled as not entitling the appellant to payment of the outstanding lobola.

The court a quo properly spelt out that under customary law a man who would have paid lobola is entitled to a refund if the wife engages in adultery. Further, the court a quo stated that parents whose child would have committed adultery are not entitled to payment of the balances of lobola.

The very purpose of lobola is what was flouted by the appellant's daughter thereby severing the marriage relationship. The respondent did not choose to condone the adultery but to divorce his wife for the gross misconduct.

In coming up with the disposition of the matter whereby the court a quo dismissed the claim for the balance of lobola, the trial magistrate properly exercised his discretion and we find no fault in his findings.

Accordingly, the appeal lacks merit and must fail.

It is ordered that the appeal be and is hereby dismissed with costs.

HH95-10 : TIISO HOLDINGS (PTY) LIMITED vs ZIMBABWE IRON & STEEL COMPANY LIMITED
Ruled By: PATEL J

The plaintiff in this matter has issued summons for payment of the sum of EUR6,640,295=94 together with interest and costs of suit.

The claim arises pursuant to a default judgment of the Regional Court of Frankfurt entered in favour of Kreditanstalt fur Wiederaufbau (KFW) as against the defendant on 25 July 2006.

On 20 May 2008, KFW assigned its rights in the judgment to the plaintiff.

The latter then obtained judgment on the Frankfurt award for an equivalent sum in the High Court of Botswana on 5 June 2009.

The defendant has not satisfied either the Frankfurt or the Botswana judgment.

The plaintiff's claim in this Court is founded on the Frankfurt judgment.

The defendant has filed a Plea in Abatement challenging the enforceability of that judgment on various grounds.

At the hearing of this matter, counsel for the defendant abandoned several of these grounds relating to, inter alia, the impact of the in duplum rule on the interest claim, the non-payment of security for costs by the plaintiff as a peregrine suitor, and the non-enforceability of the Botswana judgment. The last aspect was not pursued in light of the concession by counsel for the plaintiff that its claim was premised solely on the Frankfurt award and not on the Botswana judgment.

Following these concessions, the issues for determination in casu are as follows:

(a) Whether the Deed of Assignment between KFW and the plaintiff is a mere sham depriving the plaintiff of any locus standi to sue on the Deed.

(b) Whether the plaintiff has locus standi to claim any interest beyond the assigned capital amount.

(c) Whether the Frankfurt judgment is contrary to natural justice because of the failure to serve court process properly or at all.

(d) Whether part of the amount claimed by the plaintiff before the Frankfurt Regional Court had prescribed at the time that the claim was instituted.

(e) Whether the Frankfurt award was unenforceable ab initio in the absence of any executable assets belonging to the defendant in Germany.

(f) Whether or not the Frankfurt judgment is final and conclusive for the purposes of its recognition and enforcement in this country.

Recognition and Enforcement of Foreign Judgments

Under the common law, the general requirements for the recognition and enforcement of foreign judgments may be summarised as follows:

(i) The foreign court in question had the requisite international jurisdiction or competence according to our law;

(ii) The judgment concerned was final and has the effect of res judicata according to the law of the forum in which it was pronounced;

(iii) The judgment must not have been obtained by fraudulent means;

(iv) It must not entail the enforcement of a penal or revenue law of the foreign State;

(v) It must not be contrary to public policy in this country; and

(vi) The foreign court must have observed the minimum procedural standards of justice in arriving at the judgment.

See JOUBERT (ed.): The Law of South Africa (First Reissue, 1993) Vol. 2…,.

See also Jones v Krok 1995 (1) SA 677 (A)…,; Purser v Sales 2001 (3) SA 445 (SCA)…,; Gramara (Pvt) Ltd & Another v Government of the Republic of Zimbabwe & Others HH169-09…,.

Validity of Deed of Assignment

On 21 July 2009, KFW instituted proceedings against the Government of Zimbabwe in the High Court of South Africa to enforce an arbitral award rendered on 5 December 2006 by the International Court of Arbitration. This award relates to repayments due under two loan agreements (Nos. F2971 and F3040), including the amount assigned to the plaintiff.

In this regard, the defendant contends that, if the assignment were valid and genuine, KFW qua assignor would have divested itself of any right or interest in the debt assigned. Therefore, inasmuch as the assignor is claiming the amount assigned in other litigation, it must be inferred that the Deed of Assignment between KFW and the plaintiff is a mere sham.

In my view, the defendant's position is clearly misconceived for the following reasons:

In the Deed of Assignment between KFW and the plaintiff, the former has assigned to the latter its rights to the debt claimed as against the defendant. This assignment does not embrace KFW's rights as against the Government of Zimbabwe in its capacity as guarantor under the loan agreements in question. These are separate rights founding a separate cause of action and KFW is undoubtedly entitled to proceed against the Government on its guarantees through separate litigation. This should not entail any double jeopardy to the defendant or unjust enrichment of the plaintiff, as anything recovered on either claim must obviously be set-off against the amount recovered through the other.

It follows that there is nothing untoward in the assignment between KFW and the plaintiff and that the latter is duly vested with the requisite locus standi in judicio to claim the debt assigned.

Claim for Interest

In terms of clause 1.1 of the Deed of Assignment, KFW transferred to the plaintiff, by way of assignment, “the claim for payment of the Assignor under the loan agreements Nos. F2971 and F3040…, up to an amount not exceeding EUR6,640,295.94 against Zimbabwe Iron & Steel Company…, as awarded by the judgment of the District Court in Frankfurt am Main dated July 25, 2006.”

In the instant case, the plaintiff claims the entirety of the Frankfurt award, i.e. the capital sum of EUR6,640,295=94 as well as interest at varying rates on diverse amounts from 30 December 1999.

It is axiomatic that a litigant is only entitled to claim that in which he has a legal right or interest.

The plaintiff herein clearly has no locus standi whatsoever to claim anything more than the assigned amount of EUR6,640,295=94.

Counsel for the plaintiff quite correctly conceded this point and abandoned the plaintiff's claim for interest as set out in the Summons and Declaration.

However, he then sought to substitute a claim for interest at the prescribed rate of 5% per annum, calculated from 25 July 2006, being the date of the Frankfurt ruling.

Counsel for the defendant did not appear to raise any objection to the proposed amendment.

Despite this apparent consensus between counsel, I perceive one particular difficulty with the revised claim for interest.

What is essentially sought in casu is the recognition and enforcement of a foreign judgment, as embodied in a private treaty, in the form of a Deed of Assignment. Any such recognition and enforcement may only be granted on the face of the judgment as translated into the Deed of Assignment.

Accepting the original un-amended claim for interest, as I have already stated, involves granting to the plaintiff more than what it owns. Acceding to the amended claim for interest entails having to modify the express terms of the foreign judgment sought to be recognised and enforced.

In my view, neither of these avenues is available to the plaintiff. It must be confined to the amount awarded by the Frankfurt court as recast and transferred to it through the Deed of Assignment.

For the sake of completeness, I should add that I might have been prepared to accede to a revised claim for interest at the prescribed rate, either from the date of issuance of the summons or from the date of judgment in casu.

However, that is not what was specifically sought before me and I am not at liberty to entertain any such claim mero motu.

Service of Court Process

As I have indicated earlier, a foreign judgment will not be recognised or enforced where it is shown, on a balance of probabilities, that it was obtained contrary to the rules of natural justice: see VAN WINSEN, CILLIERS & LOOTS: The Civil Practice of the Supreme Court of South Africa (4th ed. 1997)…,.; Corona v Zimbabwe Iron & Steel Co. Ltd 1985 (2) SA 423 (TkA)…,.

In particular, although a mere procedural irregularity will not debar recognition, there must have been reasonable notice of the proceedings to the persons affected and adherence to the audi alteram partem principle: see JOUBERT (ed.): The Law of South Africa (First Reissue, 1993) Vol. 2 …,.

The defendant herein avers that it was not properly served with legal process instituting KFW's claim in the Frankfurt court.

However, this averment is clearly belied by the certified translation of the Frankfurt court's ruling (at p.5), wherein it is explicitly stated that the defendant was served with the Complaint on 10 April 2005, and, having been required to answer the Complaint within seven (7) weeks, did not give any indication of its willingness to defend within that time limit.

There is nothing in the papers to counter this position.

It follows that the defendant has failed to establish, on a balance of probabilities, any fundamental violation of the rules of natural justice such as to warrant the non-recognition of the Frankfurt judgment.

Prescription of Claim

According to the defendant, part of the loans founding KFW's claim had prescribed under the law of Zimbabwe by the time that KFW instituted proceedings in the Frankfurt court.

In this regard, the defendant refers the Court to the loan repayment schedules set out in the two loan agreements (Nos. F2971 and F3040) and contends that all the amounts due for repayment on or before 31 September 2001 had prescribed at the relevant time. The defendant further contends that the judgment of the Frankfurt court itself, delivered on 25 July 2006, had prescribed within three (3) years and that the plaintiff's action in this Court, filed on 15 October 2009, was instituted out of time.

I must confess that I find it somewhat difficult to comprehend the defendant's contentions on prescription.

First and foremost, the defendant is unable to state, with any certainty, when the proceedings in the Frankfurt court were instituted, and, therefore, what the cut-off date should be for the purposes of prescription before that court.

Secondly, even if the cut-off date argued for by the defendant is accepted, I note that the repayments due on or before that date constitute only about 20% of all the repayments owing to KFW.

Thirdly, the schedules referred to deal only with capital repayments and there is no indication as to the quantum of interest payable on the loans and the due dates for payment of such interest.

Finally, the ruling of the Frankfurt court (at p.4 of the certified translation) refers to a letter of demand for all amounts owed by the defendant, exceeding Euro 50 million, while the amount actually claimed by KFW in the Frankfurt court is no more than Euro 6.6 million (together with interest).

On these facts, it seems to me virtually impossible to ascertain precisely what amounts were owed under the loan agreements and when such amounts became due and payable. Therefore, without further documentary and oral evidence being lead, any attempt, at this stage, to determine what has prescribed would be an exercise in utter futility.

In any event, quite apart from the aforementioned evidential difficulties, there is considerable merit in the plaintiff's submission that prescription is a substantive matter, and, as such, falls to be determined by the lex causae and not the lex fori: see Laurens N.O. v Von Hohne 1993 (2) SA 104 (W)…,.

Under the loan agreements in casu (Article 10.2 of Loan No. F2971 and Article 9.2 of Loan No. F3040) the loans are governed by the law of the Federal Republic of Germany.

It is that law that is the lex causae and it is that law that determines the question of prescription.

In this regard, the defendant has not adduced any evidence as to the German law of prescription.

In any event, it is not competent for this Court to review the correctness or otherwise of the Frankfurt court's determination, if any, as to whether or not KFW's claim had prescribed under the law of Germany.

In proceedings for the recognition of a foreign judgment, it would be quite improper to pronounce upon the merits of any issue of fact or law tried by the foreign court and to review or set aside its findings: see JOUBERT (ed.): The Law of South Africa (First Reissue, 1993) Vol. 2…,.

As regards the prescription of the Frankfurt judgment itself, I concur with counsel for the plaintiff that the effect of that judgment was a novatio necessaria of the original debt sued upon. However, contrary to counsel's submission, such novatio does not necessarily entail the creation of a new obligation. Nevertheless, the clear effect of the judgment is to provide a new right of action enforceable as such: see Commercial Bank of Zimbabwe Ltd v MM Builders & Suppliers (Pvt) Ltd & Others 1996 (2) ZLR 420 (H)…,.

If one applies the prescription law of Zimbabwe to this new right, i.e. section 15(a)(ii) of the Prescription Act [Chapter 8:11], it is evident that a judgment debt only prescribes after 30 years.

In this context, given the all-embracing definition of “debt” in section 2, there is nothing in the Prescription Act to suggest that the prescription period of 30 years applies only to local judgments and does not extend to foreign judgments. Thus, even as regards the Frankfurt judgment, it is abundantly clear that the plea of prescription does not avail the defendant.

Enforceability without Executable Assets

Under the loan agreements in question (Article 10.3 of Loan No. F2971 and Article 9.3 of Loan No. F3040) the parties expressly agreed that the place of jurisdiction for all litigation in connection with the loans would be Frankfurt/Main in the Federal Republic of Germany.

It is therefore perfectly clear that the defendant specifically submitted to the jurisdiction of the Frankfurt court.

The defendant avers that the Frankfurt judgment could not have been enforced by execution in Germany as the defendant had no executable assets in that country, at that time, to satisfy the judgment in whole or in part.

In this regard, counsel for the defendant contends that the mere submission of the defendant to the jurisdiction of the Frankfurt court is not enough to render its judgment effective.

Counsel for the plaintiff counters that submission to the Frankfurt court is sufficient and that the defendant should have raised the effectiveness of its ruling before that court and not in the present proceedings.

The principle of effectiveness that underlies the law of jurisdiction, in its absolute sense, is that the court will only have jurisdiction if it controls the person or property of the defendant, as the mere consent or submission of the defendant to the jurisdiction of the court affords no absolute guarantee that the court's judgment will be effective: see FORSYTH: Private International Law (4th ed.)…,.

However, as is further explained by the learned author, at pp.215-216:

“Today, the doctrine of effectiveness is artificial and conceptual rather than realistic.

And, indeed, even those cases that would most severely restrict submission do not reject it altogether. Moreover, submission is widely recognised in legal systems across the world as a ground of international competence justifying the enforcement of the judgment of a foreign court to which the defendant has submitted. Thus, on the whole, a judgment based on submission will be effective. It is submitted that effectiveness in this slightly attenuated sense should suffice to justify the exercise of jurisdiction on the grounds of submission. The fact is that most other legal systems…, give wide recognition to and encourage submission as a ground of jurisdiction…,. It is to the benefit of international commerce that this should be so….,. As economic development in Southern and Central Africa proceeds, there is no reason, other than archaic restrictions on the exercise of jurisdiction, why the local courts should not develop an international role akin to that of the Commercial Court in London.”

Similar sentiments predicated on policy grounds were expressed in Richman v Ben-Tovim 2007 (2) SA 283 (SCA)…, where ZULMAN JA observed that:

“There are compelling reasons why…, in this modern age, traditional grounds of international competence should be extended, within reason, to cater for itinerant international businessmen. In addition, it is now well established that the exigencies of international trade and commerce require 'that final foreign judgments be recognised as far as is reasonably possible in our courts, and that effect be given thereto'.”

As I have stated earlier, the enforcement of a foreign judgment requires that the foreign court had jurisdiction, in the international sense, according to the principles of our law on the jurisdiction of foreign courts: see JOUBERT (ed.): The Law of South Africa (First Reissue, 1993) Vol. 2…,; SCHULZE: International Jurisdiction in Claims Sounding in Money 2008 20 SA MERC. LJ…,.

Thus, the mere fact that the foreign court may have had jurisdiction under its own laws is not conclusive: see Reiss Engineering Co Ltd v Insamcor (Pty) Ltd 1983 (1) SA 1033 (W)…,.

The rules for assessing the international jurisdiction of a foreign court are expounded by POLLAK: The South African Law of Jurisdiction (1937)…,. The overall position is summarised…, as follows:

A foreign court has jurisdiction to entertain an action for a judgment sounding in money against a natural person if, at the time of the commencement of the action, the defendant is physically present in the State to which the court belongs or is domiciled or resident within that State or has submitted to the jurisdiction of that court.

According to POLLAK: The South African Law of Jurisdiction (1937) there are no other grounds for jurisdiction.

This summation was cited with approval in Reiss Engineering Co Ltd v Insamcor (Pty) Ltd 1983 (1) SA 1033 (W)…, and followed in Richman v Ben-Tovim 2007 (2) SA 283 (SCA)…,.

With specific reference to submission as a basis of jurisdiction, the position is reiterated by PISTORIUS: Pollak on Jurisdiction (2nd ed. 1993)…,:

“Submission has been accepted, in our law, as an acceptable basis for international competence.

As in the case of local jurisdiction, submission may be by way of agreement or by a defendant acquiescing by his conduct in such jurisdiction after litigation against him has commenced. In the case of agreement, this may be pursuant to a contract between the parties which specifically provides for submission in the event of disputes or by an express or tacit submission after litigation. Submission by conduct may be difficult to prove, and…., the conduct must be of such a nature that it is consistent only with acquiescence.”

Again, in relation to claims sounding in money, FORSYTH: Private International Law (4th ed.)…, encapsulates the modern law as follows:

“It is widely recognised, by both writers and the decided cases, that submission by the defendant to the jurisdiction of the foreign court grants to that court international competence even if it would not otherwise enjoy that competence.”

As regards submission by agreement, the learned author…, states that:

“In accordance with the general principles of the law of contract, parties may, either expressly or impliedly, enter into binding agreements to submit their dispute to a particular court which might otherwise lack jurisdiction…,; express submission where the parties agree to submit in the ipsissma verba of their contract; provided such submission is valid under its proper law, such an agreement is undoubtedly effective.”

Having regard to the foregoing cases and commentaries, I conclude that a defendant's express submission to the jurisdiction of a foreign court suffices, ipso facto, and without any further jurisdictional ground, to endow that court with the requisite international competence, enabling and allowing the recognition and enforcement of its judgments under the common law.

I am fortified in that conclusion by the policy considerations that I have cited earlier, which are obviously germane to any analysis of international competence according to the principles of our law governing the jurisdiction of foreign courts.

In that context, the tenets of international comity, informed by the inexorable trans-nationalisation of trade and commerce, dictate that our courts should be astute to extend, rather than constrict, the scope of international jurisdiction and competence as regards claims sounding in money.

On that basis, there can be no objection to a more liberal approach that recognises the enforceability of a foreign judgment, founded on the submission of the defendant, whether it be a natural person or an artificial entity, to the jurisdiction of the foreign court in question.

I accordingly take the view, in keeping with principle as well as policy, that the explicit contractual submission of the defendant in casu, to the jurisdiction of the Frankfurt court, suffices for the purpose of recognising its judgment. This is so regardless of the fact that the defendant may or may not have had any executable assets in Germany at the time of the commencement of the plaintiff's action in Frankfurt.

Finality and Conclusiveness of Frankfurt Judgment

The defendant avers that the judgment that the plaintiff seeks to enforce is ex facie not one that is final and conclusive, and, as such, it cannot be enforced in casu.

In this respect, it is specifically pleaded by the plaintiff, in paragraph 4 of its Declaration, that the Frankfurt judgment “is final in its terms and remains valid and effective.” Consequently, it is submitted, by counsel for the plaintiff, that the defendant cannot challenge the validity and finality of the judgment by way of special plea and can only raise that issue on the merits.

It is further argued, by counsel for the plaintiff, that the finality or otherwise of the judgment under German law is a matter for the defendant to establish. This contention is disputed by counsel for the defendant who submits that the burden in this regard falls squarely on the plaintiff.

The requirement of finality and the burden of proof in that regard are lucidly adumbrated by JOUBERT (ed.): The Law of South Africa (First Reissue, 1993) Vol. 2…,:

“A foreign judgment will not be enforced unless it is a final judgment and has the effect of res judicata according to the law of the forum that pronounced the judgment. The fact that it is subject to appeal does not affect its finality for the purposes of recognition, but, if an appeal is actually pending, the South African court will probably exercise its discretion not to recognise the judgment. Finality must be alleged and proved by the party seeking to enforce the judgment.”

According to FORSYTH: Private International Law (4th ed.)…,:

“A provisional judgment of an internationally competent foreign court will not be enforced or recognised.

After all, it would be undesirable if the foreign court's judgment were enforced, and, thereafter, the foreign judgment was set aside or altered by the court which made it in the first place. Consequently, any foreign judgment must be final and conclusive before it will be recognised or enforced.

Our courts have largely accepted the English principles in this regard; thus, what is required is that the judgment was un-alterable by the court which pronounced it. But it need not be absolutely unalterable. Indeed, the fact that a particular judgment is appealable or has been appealed against in the legal system from which it comes does not affect the finality of the judgment. Although the original judgment may be upset on appeal it is not then altered by the court which made it. It appears, further, however, that where the rendering court has suspended its judgment pending an appeal, such a judgment will not be enforced locally, and, moreover, where an appeal is pending although the effect of the judgment has not been suspended the court has a discretion not to enforce the judgment…,.

The onus of establishing that a foreign judgment is final rests, naturally, on the party seeking to enforce it; but, once this is shown the 'defendant must place before the Court the facts relating to the impending appeal, and such other relevant facts as may persuade the Court to exercise its discretion in granting a stay of proceedings.' [per Jones v Krog 1995 (1) SA 677 (A) at 692].”

With reference to default judgments, the learned author opines as follows…,:

“The position in regard to default judgments, which may or may not be rescinded by the court which rendered them, is less clear.

Under German law, for example, a defendant against whom a default judgment has been given has the privilege of Einspruch available (if exercised within two weeks of the judgment being served on him) in terms of which the case against him is automatically re-opened without the defendant needing to excuse the default. Such a judgment is certainly not final while the defendant can exercise this privilege; but, thereafter, it must be considered final.

Other legal systems, however, do not build time limits into their rules.

In our own law, for example, it appears that, notwithstanding certain cases to the contrary, a High Court judgment can be rescinded at any time on grounds that would normally entitle defendant to restitutio in integrum or 'some other just cause'. Such judgments are, in theory, not final for they may still be altered by the court which made them.

…, there is a strong case for creating an exception to the 'final and conclusive' rule in the case of default judgments. If this is not done, default judgments, even when granted by an internationally competent court, will often be worthless outside the territory of that court. Moreover, in the absence of a time limit after which the default judgment cannot be set aside by the court which pronounced it, only an application by the defendant to have the judgment set aside can, when dismissed, transmute the judgment into an internationally enforceable one…,.

The courts, in several jurisdictions, have been creating such an exception (subject to safeguards) and the local courts should do so too.”

As regards proof of the finality of a foreign judgment, VAN WINSEN, CILLIERS & LOOTS: The Civil Practice of the Supreme Court of South Africa (4th ed. 1997)…, enunciate the position concisely:

“The foreign judgment must, however, be a final and conclusive one, and the finality and conclusiveness of the judgment should appear ex facie the record. It should be alleged, in the summons, that the judgment is a final one, and the law and facts which make it final should be stated if, on the face of it, the judgment appears to be provisional.”

With reference to the requisite formalities, the learned authors continue, at pp.1000-1001:

“It is essential that all the papers should be in order before a foreign judgment will be enforced. The plaintiff must therefore have, before the court, a properly authenticated copy of the judgment upon which provisional sentence is sought, and, if it does not appear from that, that the judgment is a final one, the plaintiff should annex a certificate from the competent authority in the foreign tribunal to show that the judgment is or has become final. If the judgment is in a foreign language, a due and proper translation of it must be annexed to the summons. The documents must show that the translation was made either by a sworn translator of the court or by a person otherwise qualified to translate the judgment.”

In the instant matter, the plaintiff has annexed to its Declaration certified copies of the original judgment and what purports to be a certified translation of that judgment. However, it is not clear that the copy of the original judgment has been properly authenticated. Moreover, there is no indication on the papers that that the translation was made by a sworn translator of the Frankfurt court or by a person otherwise qualified to translate the judgment.

Be that as it may, these are technical issues that may well be addressed and rectified should the matter proceed to trial.

What is more significant, at the present stage of the proceedings, is the content of the record as it stands and what appears on the face of the Frankfurt judgment itself.

It is not in dispute that the judgment was granted by default and that the defendant has neither applied for its rescission nor appealed against it. In that regard, nothing has been placed before this Court as to whether or not the period for appealing against the judgment or for seeking its rescission has expired: FORSYTH: Private International Law (4th ed.)…, and, without such clarification, I am not at liberty to assume the correct position under German law at the present time.

In any event, quite apart from the possibility that the judgment may be susceptible to appeal or rescission (which seems unlikely given the passage of time, since it was delivered in July 2006) what is more crucial, for present purposes, are the actual words employed in the judgment itself.

At page 2 of the certified translation, it is decreed that: “The judgment is provisionally enforceable,” and, at page 6 of the judgment, it is declared that: “The decision about preliminary enforceability is based on ss 708 No.2 ZPO.”

What then emerges ex facie the Frankfurt judgment is that it is provisional or preliminary and only provisionally enforceable.

The word “preliminary” normally denotes something that is initial, first, opening or introductory; the term “provisional”, in ordinary parlance, means temporary, interim, conditional or impermanent. In legal jargon “provisional” is similarly defined in Black's Law Dictionary (6th ed.) as:

“Temporary, preliminary, acceptable in the existing situation but subject to change or nullification.”

Having regard to all of these connotations, it seems unequivocally clear, from the record, that the Frankfurt judgment is purely provisional in nature, and, therefore, subject to change or nullification.

In this regard, the plaintiff has failed to discharge the onus upon it to demonstrate that the ruling is final and conclusive or to explain the esoteric reference to “ss 708 No.2 ZPO” upon which it appears to have been based.

The plaintiff has merely proffered the bald assertion in its Declaration to the effect that the judgment is final.

It has not furnished any certificate from a competent authority in the Frankfurt court to show that the judgment is or has become final. Nor has it adduced anything to counter the defendant's special plea, explaining the relevant law of Germany, by way of written law or judicial decisions, as would conform with the requirements of section 25 of the Civil Evidence Act [Chapter 8:01].

In the premises, it must be held that the judgment in casu is not final and conclusive for the purposes of its recognition and enforcement in this jurisdiction, and that, for that reason, this Court must decline to recognise and enforce the judgment.

Disposition

In the final analysis, many of the issues for determination in casu must be answered in favour of the plaintiff, save for the second question, pertaining to its claim for interest, and the last question, relating to the finality and conclusiveness of the judgment that it seeks to enforce.

This last issue is critical to the plaintiff's case and it is one that the plaintiff has clearly failed to establish on the record.

Accordingly, the defendant's Plea in Abatement, challenging the enforceability of the Frankfurt judgment, succeeds on that single ground and must therefore be upheld.

In the result, the plaintiff's claim is dismissed with costs.

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD
Ruled By: MATHONSI J

The plaintiff is a medical doctor, a gynaecologist, and a professor at the University of Zimbabwe. He boasts that he is a founder member and majority shareholder of the defendant, a maternity institution he is suing for $50,000, being money he says he paid to a creditor of the defendant on its behalf.

In his declaration, the plaintiff averred that sometime in September 2005, while he was the Managing Director of the defendant, he entered into an agreement with Vengesayi Architects (the architects), on behalf of the defendant, in terms of which the architects were to provide the defendant with services for a fee. The architects were contracted to make town planning applications for special consent on the Stand, co-ordinate all project consultations, design, work on drawings and supervise construction work of the proposed additions and alterations to the hospital.

Although the architects drew up the plans, the defendant did not proceed with the construction, but, the agreement he had concluded with the architects resulted in the defendant being indebted to the architects in the sum of US$1,300,000.

As Managing Director, founder, and majority shareholder of the defendant he paid a sum of $50,000 towards settlement of the debt in order to protect the integrity and good name of the defendant.

The $50,000 was paid by him in instalments between 30 May 2011 and 18 July 2011. The plaintiff averred, in paragraph 8 of the declaration, that:

“The money paid to the architects by the plaintiff thus made the latter the defendant's creditor. There is no dispute as to whether the plaintiff made the payment aforesaid.”

The plaintiff then prayed for judgement in the sum of $50,000 together with interest at the prescribed rate and costs of suit on a legal practitioner and client scale.

Having entered appearance to defend, the defendant filed a plea denying liability and stating that the plaintiff was not authorised by its Board of Directors and shareholders to enter into an agreement with the architects and that he had entered into that agreement unlawfully.

It further averred that when the plaintiff paid the sum of $50,000 to the architects, he did so without the authority of the defendant. As he had entered into the agreement without authority, the plaintiff was personally liable to the architects. The plaintiff's claim should therefore be dismissed with punitive costs.

At the pre-trial conference the parties agreed on the issues as:

1. Whether the plaintiff entered into an architectural agreement with the architects without the authority of the defendant's Board of Directors and shareholders.

2. Whether the defendant is liable to the plaintiff in the sum of $50,000 paid to the architects.

Only the plaintiff gave evidence at the trial of this matter, stating that he had been the Managing Director of the defendant since 1998 and he still holds that position.

On 29 January 2010, the defendant's Board had proposed, and agreed, that they should negotiate terms of payment of the architects' fees for work done. The architects had performed work for the defendant and submitted a claim for the payment of their fees.

Prior to that, the architects had drawn plans for the development of the hospital which was called the second phase.

A contract had been signed in 2005 between the hospital and the architects with the former being represented by himself. He made reference to pages 66 to 69 of exhibit 1, being the agreement in question, stating that it was signed by himself in his capacity then as Executive Chairman and countersigned by the defendant's Administrator.

The plaintiff maintained that he had the authority of the Board which he worked with then, to enter into the agreement, and, as such, the agreement was binding on the defendant which however did not pay the fees of the architects even though a demand for payment was initially made in 2006, re-submitted in 2009, and, finally, in 2010.

Prior to making payment on behalf of the defendant, he had been specifically mandated, by the Board, to negotiate with potential investors for the funding of the project. He had brought in Banc ABC which was willing to invest $7.5 million and Mbizvo Group which was willing to invest $15 million into the project. Content with the funding arrangement, the plaintiff said he had incorporated the architects' fees in the funding. He then paid $50,000 to the architects satisfied that he could recoup his money in due course.

The payment was made in order to create a good atmosphere for negotiation with the architects.

The plaintiff referred to letters written by the architects between 30 May 2011 and 18 July 2011…, in which the architects were acknowledging payment of the various sums allegedly made by the defendant to them.

The letters themselves are drafted the same way except for the figure acknowledged. The plaintiff did not explain why no receipt, in the usual manner, was issued. It was suggested to him, under cross-examination, that the letters were manufactured to justify his claim and he did not give a meaningful response.

The plaintiff stated that he had paid the money to the Administrator of the defendant, Mr Makamure, who, alone with the accountant, Mr Tembo, effected payment to the architects.

He pointed out that there was no formal Board meeting to authorize the payment and there was evidence that some Board members did not want payments to be made to the architects while others favoured payment.

There was no formal instruction given to him to effect that payment.

He however sought legal advice from Mr Mabulala, who was also a Board member. Before Mr Mabulala's advice came, in the form of a letter dated 13 June 2011..., the plaintiff went ahead and started paying instalments to the architects, the first one of $3,500 being made on 30 May 2011. When the letter from Mabulala & Motsi legal practitioners finally came it not only endorsed that payment was a fait accompli, it also counselled caution. It reads:

“RE: ARCHTECTS

I refer to your note to me dated 9th June 2011 and the letter from Kantor and Immerman dated 8th June 2011. It seems to me that you have already committed yourself, personally, to paying the architects' fees, and, any opinion from me would be of academic interest. The question which remains is whether or not you can, and did, lawfully commit the hospital as well. I hope the Board and the shareholders are fully informed of these latest developments.”

From the correspondence that had been refereed to Mr Mabulala, it is apparent that the plaintiff had already offered to pay $50,000 to the architects in “tranches” and had already agreed with them that he would sign a Deed of “surety, acknowledgement and undertaking” in respect of the full extent of their claim of $1,303,783 in respect of their fee note dated 3 August 2010…,.

The plaintiff says he then convened a meeting of the Board, in September 2011, intending to regularise what he had done without Board approval.

Unfortunately, on 21 September 2011, he says he was locked out of his office at the hospital and was prevented from going in by armed guards. He has never had access to the office since then and his efforts to reclaim his position and the office, subsequent to that, have hit a brick wall.

He approached this court, in HC9630/11, for spoliatory relief but was turned down. The judgement in that matter, delivered by MUTEMA J is HH221-11, and, at p3 of it, the court made the following findings:

“Applicant alleges (he) was despoiled of the office as well as his personal belongings lodged therein which he uses for his private life and business. Respondents have offered that applicant is at liberty, at his earliest convenience, to come and collect his personal items. I have no reason to doubt the sincerity of that offer.

However, as regards the office, that is a different kettle of fish.

While applicant alleges spoliation, respondents' papers clearly show that it is him who is the spoliator. He had been away for some 8 months and Saungweme was in lawful and undisturbed possession of that office. He was denied occupation of the office but he locked it to the exclusion of everyone except himself. This, despite the exitant dispute between the parties, amounts on the applicant's part, to self-held.

I did not hear applicant to dispute respondents' version either on paper or in oral submissions, of how he ended up re-occupying the office. He therefore cannot come to court with clean hands. He is the spoliator. To allow him audience would be tantamount to sanctioning unlawfulness.”

He says that if the meeting took place he does not know what transpired as he was unable to attend.

What is even more important is the fact that he was unable to “regularize” his payments made to the architects without approval - meaning that the plaintiff's payments remained unsanctioned.

The plaintiff testified that he paid the architects, on behalf of the defendant, because it was necessary to maintain the integrity and good name of the institution.

He did not have vouchers to show that payment was indeed made through the defendant.

Although he did not have direct and formal authority to effect the payment, he had indirect authority emanating from the fact that the Board had tasked him to raise funds for the project.

It did not specify the source of those funds which then left him at liberty, as the Managing Director at the time, to pay from his pocket. In any event, loans from shareholders (he is a major shareholder) have been given to the institution in the past.

Under cross examination, it became apparent that the plaintiff was not the Managing Director at the time that he made instalment payments of the $50,000 to the architects - Dr Saungweme was. According to the minutes of a Board meeting held on 10 May 2011…, the plaintiff was trying to force his way back in that position. The minutes state, at paragraph 4.2:

“Dr P. Zvandasara

Dr Zvandasara came into the boardroom and advised the Board that he had notified the Board chair person that he was now back at the hospital as the Managing Director. He went on to say that he had taken legal action against some Board members who had accused him of stealing hospital funds.”

That state of affairs was also captured in the minutes of a Shareholders meeting held on 25 May 2011 during which the plaintiff notified the gathering that he was coming back as Managing Director (MD) because some people had accused him of being a thief. At paragraphs 5 and 6, the minutes state:

“He (the plaintiff) went on to declare that whether the members approved or not, he was now the one running the activities of the institution as the MD. He said that he could no longer work with the shareholders and proposed that we proceed with a separation either through him buying the other shareholders out or vice versa.

The shareholders noted, with concern, the developments that had taken place.

They advised Dr Zvandasara that the current recognised MD for the institution is Dr Saungweme; the position remained that Dr Saungweme had been appointed by the Board as the MD with effect from August 2010. This motion was put to the vote and was unanimously endorsed.”

It also became apparent that the defendant had contested the validity of the agreement for architectural services throughout, and, when they raised a fee note for those services, in the sum of $1,071,999=05, on 3 August 2010, about the same time that the plaintiff ceased to become Managing Director (MD), the defendant disputed liability.

It is a matter of record that in HC2893/12 the architects sued the defendant for the amount set out in the fee note, without deducting the $50,000 allegedly paid by the plaintiff, suggesting they did not recognise any payment. That claim was dismissed by this court, per DUBE J, by judgement delivered on 18 February 2015 (HH161-15).

In that matter, the plaintiff was called as a witness by the architects and stated that:

“He paid $50,000 from his own pocket after the defendant had refused to settle the fee note.”

My attention was also drawn to a summons and declaration in HC9444/11…, in which the plaintiff had sued the defendant for payment of the same amount of $50,000 through Mambosasa legal practitioners of Harare. In paragraph 7 of the declaration he had averred;

“The defendant failed, refused and/or neglected to pay the amount due to the architects in its entirety alleging, inter alia, that the plaintiff had no authority to contract with the architects resulting in the plaintiff feeling compelled to repay part of the debt from his personal sources.”

The totality of the evidence shows, clearly, that, at the time that the plaintiff took it upon himself to pay $50,000 of the claim made by the architects he had no authority of the defendant to make that payment and the defendant was already contesting the claim.

The plaintiff was aware of the defendant's position in that regard but decided to take a calculated risk and pay the money all the same. He said that he did so because he could not renege on the promise he had given to the architects that payment would be made.

At the end of evidence for the plaintiff, counsel for the defendant made an application for absolution from the instance on the basis that no evidence had been led upon which the court may find in favour of the plaintiff. He submitted that the evidence has not shown any contract between the parties in terms of which the money was paid. In any case, the claim, as pleaded, is not based on contract.

In addition, the claim is not based on unjust enrichment either because it was not pleaded.

Counsel for the defendant submitted that the plaintiff's counsel could not possibly introduce the claim for unjust enrichment in his opening address when it has not been pleaded.

In any event, according to the plaintiff's evidence, he paid the $50,000 without authority in order to create a conducive atmosphere for dialogue between the parties. He did not achieve that objective and there is no evidence that the defendant was enriched in any way.

Counsel for the plaintiff opposed the application, submitting that the plaintiff has shown, in his evidence, that the defendant was enriched by the payment made to the architects especially as the plans prepared are available and can be used.

No such evidence about the plans was led.

As to whether unjust enrichment was pleaded, counsel for the plaintiff suggested that it should be implied from paragraph 8 of the declaration which I have already quoted above.

Surely, that averment cannot, by any stretch of the imagination, be taken as pleading unjust enrichment.

What counsel is asking me to do is to stretch the imagination to elasticity limit.

The plaintiff merely averred, that, by paying to the architects, the plaintiff became the defendant's creditor and not that the defendant was unjustly enriched by such payment. As to how the debtor-creditor relationship so alleged germinated from those circumstances we are not told.

The essence of any claim is to be found in the pleadings.

It is the function of pleadings to inform the parties of the points of issue between them to enable them to know, in advance, what case they have to meet, to assist the court to define the limits of the action, and to place the issues on record: Matewa v Zimbabwe Electricity Transmission and Distribution Company (ZETDC) HH04-13...,; see also BECK's Theory and Principles of Civil Actions, 5th ed..., and Chifamba v Mutasa & Ors HH16-08.

Where a litigant has pleaded a particular cause of action, the opponent is entitled to rely on that pleading in order to prepare for court and put together evidence which it has in order to meet the claim at the trial.

This is because the pleading exists for the purpose, first and foremost, of informing the other party of the precise nature of the claim they have to meet. The party pleading in that way, and therefore informing the other of the claim, cannot be allowed to twist and turn and infer averments that have not been pleaded. Allowing that would not only embarrass the other party but also prejudice that party.

In an application for absolution, the test to be applied was set out by GUBBAY CJ in United Air Charterers v Jarman 1994 (2) ZLR 341 (S)..., as:

“The test in deciding an application for absolution from the instance is well settled in this jurisdiction.

A plaintiff will successfully withstand such an application if, at the close of his case, there is evidence upon which a court directing its mind reasonably to such evidence, could or might (not should or ought to) find for him; see Supreme Service Station (1969) (Pvt) Ltd v Fox & Goodridge (Pvt) Ltd 1971 (1) RLR (A) at 5D–E; Lourenco v Raja Dry Cleaners & Steam Laundry (Pvt) Ltd 1984 (2) ZLR 151 (S) at 158B–E.”

In Supreme Service Station (1969) (Pvt) Ltd v Fox & Goodridge (Pvt) Ltd 1971 (1) RLR (A)..., BEADLE CJ said of that test:

“The test boils down to this: Is there sufficient evidence on which a court might make a reasonable mistake and give judgment for the plaintiff?

What is a reasonable mistake in any case must always be a question of fact, and cannot be defined with any greater exactitude than by saying that it is the sort of mistake a reasonable court might make – a definition which helps not at all.”

See also Quintessence Co-ordinators (Pty) Ltd v Government of the Republic of Transkei 1993 (3) SA T84 (TK) 85B–D; Standard Chartered Finance Zimbabwe Ltd v Georgious & Anor 1998 (2) ZLR 547 (H) 55 2 G–H; Modcraft Engineering (Pvt) Ltd v Tenda Buses (Pvt) Ltd 207-13; Katsande v Welt Huinger Hilfer & Anor HH396-13.

It is true that if the defence is something peculiarly within the knowledge of a defendant and the plaintiff has made out some case to answer, the plaintiff would not be lightly deprived of his remedy without first hearing what the defendant has to say, and such a defendant should not be allowed to shelter behind the procedure of absolution from the instance merely because he is afraid to go into the witness box; Supreme Service Station (1969) (Pvt) Ltd v Fox & Goodridge (Pvt) Ltd 1971 (1) RLR (A)...,; Munhuwa v Mhukahuru Bus Service 1994 (2) ZLR 382 (H)...,.

Right from the commencement of the trial, the plaintiff premised his claim on unjust enrichment. That is what counsel for the plaintiff said in his opening address. He did not, however, see any wisdom in amending the declaration to ground the claim on unjust enrichment, electing, instead, to leave it to the court to infer such a claim.

What remains at this stage, however, is that there is no claim based on unjust enrichment.

Even if it had been pleaded, I am not satisfied that the plaintiff has made a case based on unjust enrichment.

The requirements for such a claim were set out by BARTLETT J in Industrial Equity v Walker 1996 (1) ZLR 269 (H) 298..., where he said:

“I am of the respectful view that the principal requisites for a general action on enrichment can be regarded as aptly summarised by WOUTER De VOS in Verry King saanspreeklikheid in die Suid Africk aansc Reg (1958) as stated by SCHOLTENS in 1996 Annual Survey of South African Law, 150 at 152 as:

(a) The defendant must be enriched;

(b) The enrichment must be at the expense of another (i.e. the plaintiff must be impoverished and there must be a causal connection between enrichment and impoverishment);

(c) The enrichment must be unjustified;

(d) The case should not come under the scope of one of the classical enrichment actions;

(e) There should be no positive rule of law which refuses the action to the impoverished person.

Obviously these requirements can only be fulfilled if, in any given case, the action is based on a defined set of circumstances.”

What happened in this case is that a shareholder and founder member of the defendant who had been ousted from the position of Managing Director was fighting tooth and nail to force his way back into office; an office which was already occupied by Dr Saungweme.

Proceeding roughshod on all the rights and interests of others, and stating that he did not care whether anyone approved or not, he forcibly took office with no recognisable role to play except, perhaps, to cause alarm and despondency among everyone associated with the institution.

He threatened to sue Board members because they were accusing him of stealing money from the defendant.

In the midst of all this, he claimed to have taken his money, generated from his own medical rooms, and meant for the tuition fees of his children studying out of the country, and paid $50,000 of it to a perceived creditor of the defendant without anyone asking him to and certainly without any authority to do so.

When he did that, he was aware that the defendant was denying liability and was contesting the claim. In fact, as fate would have it, the defendant has successfully defended the architects' claim. It cannot be said, therefore, that it was liable and that the payment, if any, made by the plaintiff was for its benefit. No benefit whatsoever has been shown.

It is remarkable that not a single receipt for the fifteen (15) or so instalments allegedly made to the architects has been produced.

What has been produced in place thereof are dubious letters written by the architects who were woefully conflicted given they were also making a claim against the defendant and the plaintiff was their star witness in that doomed adventure. As to why, if at all payments were made, copies of receipts could not be produced, we can only speculate.

I am not satisfied that the evidence establishes that payment was indeed made by the plaintiff or that the defendant derived any benefit or enrichment from it as to ground a claim for unjust enrichment.

I agree with counsel for the defendant that the pleadings, as they stand, do not disclose a cause of action recognisable at law.

The evidence led does not do so either.

Even if we were to assume in favour of the plaintiff that he paid the money to the architects, it is still difficult to find the defendant liable for that payment.

This is because the defendant did not want payment to be made (the plaintiff admitted as such) as it did not hold itself liable. Just how then could a payment made against the will of the defendant be recoverable from it?

In advancing the argument that there can be no earthly basis upon which the defendant could be found liable for the folly of the plaintiff in paying money against the will of the supposed beneficiary, counsel for the defendant referred to a negotiorum gestio under the Law of Contract. He asserted that even that would not aid the plaintiff.

I agree.

Writing about the doctrine of negotiorum gestio, the learned author, R H CHRISTIE, Business Law in Zimbabwe, 2nd ed, Juta & Co Ltd..., stated:

“This doctrine permits any person to step in and act on behalf of another with the intention of benefiting him, unless prohibited by that other.

The gestor who thus steps in assumes the responsibility of completing the task he has begun, which will normally involve carrying on until the return of the absent principal, of accounting to the principal, and of showing a degree of care that will vary according to whether his position was thrust upon him or he intervened officiously.

The principal is liable to reimburse the gestor for all expenses properly incurred in a genuine attempt to benefit the principal, and the gestor has a right of retention over the principal's property until reimbursed.

Not being an agent, a negotiorum gestor does not create legal relationships between the principal and third parties, but, if he properly incurs obligations in his own name he is entitled to be indemnified by the principal.”

Even if a gestor is prohibited from acting on behalf of the other, he may recover his expenses to the extent that the other party has been enriched: Standard Bank Finance Services (Pty) Ltd v Taylam (Pvt) Ltd 1979 (2) SA 383 (C).

Unfortunately for the plaintiff, he does not qualify as a negotiorum gestor.

He was acting in no capacity at all as there was a Managing Director in place, Dr Saungweme, discharging that role. He may be taken to have been specifically prohibited from paying because he was aware that the defendant was denying liability and was contesting the claim. He could not then pay while swimming against the tide and then come back to claim from the very same defendant.

The law and the courts are not there to protect poor and extremely unreasonable business decisions; decisions made by people knowing fully well they are unwise hoping that the courts will sympathise.

The plaintiff simply had no business paying that money if he genuinely believed it was for the account of the defendant. If he did, there is no way any court, applying its mind reasonably, could make a mistake and find in his favour.

I conclude, therefore, that there is merit in the application for absolution from the instance. No evidence has been led upon which a reasonable mistake may be made to give judgment for the plaintiff.

In the result, I make the following order, that;

1. Absolution from the instance is hereby granted.

2. The plaintiff shall bear the defendant's costs.

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

This is an appeal against the decision of the High Court granting summary judgment against the appellant in the sum of US$8,330,470=52 together with interest at 2.5% per annum above the prime overdraft Bank rate and costs of suit.The claim against the appellant arose from a Service Provider Agreement concluded ...

The claim against the appellant arose from a Service Provider Agreement concluded between the parties on 10 March 2006 (the Agreement). The Agreement required the appellant to pay the sums due thereunder within thirty days of receiving the respondent's invoices.

It is common cause that the appellant owed the respondent the outstanding amount claimed as at 30 September 2010.

The respondent issued summons on 16 November 2010, and, following the appellant's appearance to defend, applied for summary judgement on 14 February 2011.

The court a quo held that the respondent's claim was unimpeachable and that the appellant had no plausible defences to the claim. In particular, the court found that there was no supervening impossibility due to the currency regime changeover between January and March 2009, entailing any objective impossibility of recovering debts from the appellant's customers. Additionally, there was no condition precedent in the Agreement that those customers should first pay the appellant before it became obliged to pay the respondent. Lastly, there was no principal and agent relationship between the parties to preclude the recovery of payments from the appellant upon presentation of the respondent's invoices.

The grounds of appeal herein arise from the defences raised in the High Court, viz: supervening impossibility of performance, recovery from customers as a condition precedent for payment, and the existence of a principal and agent relationship between the parties.

In essence, the question to be determined is whether the learned judge was correct in holding that the respondent's claim was unassailable and that the appellant had no bona fide defences to that claim....,.

GROUNDS OF APPEAL

The grounds of appeal set out in the notice of appeal appear to have conflated the three defences raised in the court a quo.

The essence of these grounds is that the relationship between the parties, based on their conduct after the inception of the Agreement, was one of principal and agent, whereby the appellant was an agent of the respondent in sourcing customers for post-paid cellular airtime usage, collecting payments for the airtime used or sold, and then remitting payments to the respondent after deducting its commission.

Consequently, since payments to the respondent would only be due upon the appellant recovering the same from its customers, payment by the latter was a condition precedent to any payment to the respondent. This applies to the entire amount of US$8,330,470=52 claimed by the respondent.

Again, on the same footing, the appellant's failure to recover the payments from its customers constituted a supervening impossibility suspending the appellant's obligation to remit payments to the respondent, there being nothing to remit until such time as payments had been made by or recovered from the customers.

PRINCIPAL AND AGENT RELATIONSHIP

The appellant's position, as I understand it, is as follows:

Although not expressly stated in the Agreement, the common understanding of the parties was that the appellant would be paid by its customers for network service usage and would then deduct its commission and pass on the balance to the respondent.

This position appears to be buttressed by paragraph 3 of the respondent's declaration which states that the appellant would collect payments for airtime used by its customers and remit the collected amounts less its commission to the respondent.

In this connection, counsel for the appellant submits that the Court must look at the true nature and substance of the Agreement and not merely at its form. The description of the parties contained in the Agreement is not necessarily conclusive as it disguises the true nature of their principal and agent relationship.

I note in this regard the remarks of SILKE: The Law of Agency in South Africa (3rd ed.)…, where the learned author adverts to the difficulties in ascertaining the true nature of an agency relationship.

Turning to the provisions of the Agreement itself, clause 2 thereof sets out the principal rights and obligations of the parties.

The respondent undertakes to supply and distribute terminal equipment and network services to the appellant's customers (clause 2.1). In turn, the appellant may from time to time order and purchase quantities of smartcards from the respondent (clause 2.2.1). The respondent is then obliged to make the network service available to the appellant for onward supply to the appellant's customers (clause 2.2.2 as read with clause 6.1). The smartcards ordered and purchased by the appellant are allocated by it to its own customers (clause 4.1). The appellant is liable to the respondent for all charges generated in respect of each smartcard activated by the appellant with effect from the date of such activation (clauses 4.5.1 and 4.5.2). The respondent is then entitled to raise call charges, monthly service charges, and all other charges for the account of the appellant (clause 8.1). Thereafter, all charges invoiced by the respondent to the appellant shall be paid by the appellant to the respondent within 30 days of the date of the relevant tax invoice (clause 8.3).

My reading of the afore-cited provisions of the Agreement is that they clearly spell out the true nature of the relationship between the parties.

In essence, it was agreed that the appellant would go to the airtime market and source its own customers for the network services to be provided by the respondent. The respondent did not decide who those customers would be or which of them would receive network service on credit. More significantly, it was the appellant itself that carried the risk of default by its customers.

As was quite correctly conceded by counsel for the appellant, the respondent had no right, except where this was ceded to it by the appellant, in terms of clause 17.1, to sue the appellant's customers in order to enforce and collect any payments due and outstanding from them. There was simply no nexus or privity of contract between the respondent and the appellant's customers. If the appellant was merely an agent for the respondent, as its principal, those customers would have been directly liable to the respondent.

The apparent admission of agency emanating from paragraph 3 of the respondent's declaration is not, in my view, of any material significance.

The importance of pleadings should not be unduly magnified so long as there is no likelihood of prejudice being occasioned to any of the parties. While the parties should ordinarily be restricted to the averments in their pleadings, the courts should not enslave themselves to the pleadings in complete disregard of their duty to decide the real dispute between the parties so that justice is eventually attained.

See, in this context, the very pertinent observations of CHATIKOBO J in Musadzikwa v Minister of Home Affairs & Another 2000 (1) ZLR 405 (H)…, and the authorities there cited, which were subsequently applied by this Court, per ZIYAMBI JA in Moyo & Another v Intermarket Discount House Ltd 2008 (1) ZLR 268 (S)…,.

In short, pleadings cannot be construed so as to compromise the delivery of justice.

In the instant case, although paragraph 3 of the declaration is somewhat ineptly worded, it cannot be elevated above the entire declaration and the clear terms of the Agreement itself.

In any event, that paragraph makes explicit reference to the Agreement itself. More importantly, it is immediately followed by paragraph 4 which captures the essence of the appellant's obligation to pay in terms of the Agreement, i.e. to make payment for all charges within thirty days of receiving the respondent's tax invoice.

Having regard to the Agreement as a whole, I am unable to discern from its express provisions anything approximating the principal and agent relationship espoused by the appellant. It was clearly contemplated by the parties that the appellant would be engaged as an independent contractor to distribute to its own customers the network services provided by the respondent.

CONDITION PRECEDENT FOR PAYMENT

The supposed common understanding between the parties is also relied upon by the appellant as the basis for its contention that payment by its customers was a condition precedent to any payment becoming due to the respondent.

Although this contention flies in the face of the express provisions of the Agreement, it is one that the appellant intends to substantiate by extrinsic evidence to be adduced should the matter be allowed to proceed to trial.

As is correctly argued by counsel for the respondent, this is clearly impermissible by virtue of the so-called parole evidence or integration rule.

Generally speaking, although the integration rule may not invariably apply where the true nature of an agreement is in issue, extrinsic evidence cannot be allowed to negate the express and clear terms of the agreement: see the remarks of ZIYAMBI JA in Nhundu v Chiota & Another 2007 (2) ZLR 163 (S)…,.

This is particularly so where, as in this case, the agreement constitutes the entire contract between the parties (clause 20.3) and any variation, addition, deletion, or waiver is ineffective unless reduced to writing and specifically subscribed by the parties (clause 20.5).

SUPERVENING IMPOSSIBILITY

The final defence advanced by the appellant is that of supervening impossibility – that, its failure to recover payments from its customers constituted a supervening event suspending its obligation to remit payments to the respondent.

This was occasioned, so it is argued, by the advent of dollarization between January and March 2009 when, for some unexplained reason, a significant number of the appellant's customers defaulted on their payments.

It is trite that the courts will be astute not to exonerate a party from performing its obligations under a contract that it has voluntarily entered into at arms length. Thus, the suspension of a contractual obligation by dint of vis major or casus fortuitus can only be allowed in very compelling circumstances.

The courts are enjoined to consider the nature of the contract, the relationship between the parties, the circumstances of the case, and the nature of the alleged impossibility: see Watergate (Pvt) Ltd v Commercial Bank of Zimbabwe 2006 (1) ZLR 9 (S)…,.

In particular, it must be shown that the impossibility is objective and absolute in contradistinction to one that is merely subjective or relative: see Chiraga v Msimuko 2002 (2) ZLR 368 (H)…, where it was held that shortage of foreign currency did not constitute an absolute supervening impossibility.

Again, the contract must have become finally and completely impossible of performance as opposed to the situation where one party is only temporarily disabled from fulfilling its obligations: see Beretta v Rhodesia Railways Ltd 1947 SR 48…,; NUST v NUST Academic Staff & Others 2006 (1) ZLR 107 (H)…,; Mutangadura v TS Timber Building Supplies 2009 (2) ZLR 424 (H)…,.

In the instant case, the appellant has dismally failed to demonstrate why its customers failed to meet their bills and how that alleged failure necessarily and definitively precluded it from meeting its payment obligations aliunde or from recovering the outstanding amounts from its customers at some later stage.

In other words, the appellant's subjective inability to pay its debts cannot be confused with the objective impossibility that must prevail for its plea of supervening impossibility to succeed.

AVAILABILITY OF BONA FIDE DEFENCE

It is apparent, from all of the foregoing, that the appellant has not been able to proffer any plausible defence to the respondent's claim. The court a quo was therefore perfectly correct in concluding that the appellant had no bona fide defence to the respondent's unassailable claim for summary judgment.

In the result, the appeal must fail and it is accordingly dismissed with costs.

HH44-09 : BLESSMOE CHANAKIRA and AUXILIA DANAYI MYNYEZA vs MAI KAI REAL ESTATE DEVELOPMENT TRUST and BERNARD MUTANGA
Ruled By: BERE J

Application in terms of Order 29 of the High Court Rules, 1971.The BackgroundThe agreed facts of this matter, as given by the parties, are as follows:-On 9 November 2004, the plaintiffs entered into an Agreement of Sale with the first defendant, represented by the second defendant, in respect of the ...

Application in terms of Order 29 of the High Court Rules, 1971.

The Background

The agreed facts of this matter, as given by the parties, are as follows:-

On 9 November 2004, the plaintiffs entered into an Agreement of Sale with the first defendant, represented by the second defendant, in respect of the extend of subdivision “A” of subdivision “C” of Kingsmead extension of Borrowdale Estates.

In terms of that agreement, the plaintiffs purchased from the defendant the above-mentioned property for the sum of $700 million (old currency).

The plaintiffs duly paid in full the purchase price in terms of the agreement.

Subsequent to payment of the purchase price, the plaintiffs could not get transfer of the property because a Mr Geoffrey Andrew Harrel, the previous owner of the property, from whom the first defendant had purchased it, was refusing to pass transfer to the first defendant claiming that he was still owed the sum of $460 million (old currency) by the first defendant with the latter disputing it.

Acting on that understanding, and in the interest of protecting their rights arising from their agreement with the first and second defendants, the plaintiff duly paid the $460 million to Mr Geoffrey Harrel.

The first and second defendants do not deny that they are liable to the plaintiff, what is however in issue is the quantum of such liability.

The plaintiffs claim is for unjust enrichment as set out in the summons.

The defendants deny the plaintiffs are entitled to claim for unjust enrichment and aver that the defendant's are entitled to the sum of $460 million plus interest calculated at the prescribed rate only.

The plaintiffs deny the defendants' computation of its liability to the plaintiffs.

ISSUE BEFORE THE COURT

The issue which the court has been called upon to determine is a question of law, viz whether, in the light of the agreed facts, the plaintiffs' claim for unjust enrichment is sustainable or whether the plaintiffs are entitled to the tendered amount of four hundred and sixty million dollars together with interest at the prescribed rate calculated from the date of liability to the date of payment.

Counsel for the plaintiffs put up a very strong and persuasive argument in favour of the plaintiffs' claim for unjust enrichment.

It was his contention, guided by precedent from this court: Industrial Equity v Walker 1996 (1) ZLR 269: Mtunda v Ndudzo 2000 (1) ZLR 71 (H) 718; Jengwa v Jengwa 1999 (2) ZLR H 121 and outside our own jurisdiction; Nortje En'nAnder v Pool NO 1966 (111) SALR 96 that the remedy of unjust enrichment would entitle the plaintiffs to get damages in order to achieve equity.

Counsel also reasoned that if the court were to proceed with this claim under unjust enrichment, the court would be able to award damages at current values which would take into account inflation for purposes of computing the amount of compensation.

Counsel for the defendants vehemently opposed the position adopted by the plaintiffs by arguing, inter alia, that, the amount paid by the plaintiffs to a Mr Harrel was a simple debt which should be repaid with interest at the prescribed rate hence the tender by the defendants.

It was also argued by counsel that the issues to do with inflation are really to do with the legislature which prescribes what it deems to be an appropriate rate of interest from time to time.

Having acquainted myself with the authorities cited there can be no denial that a claim of unjust enrichment is recognised as part of our law.

In an appropriate case, such a claim can be sustainable.

I think the issue which must remain impeded in my mind, to avoid clouding my focus, is whether or not the circumstances under which the debt of four hundred and sixty million dollars arose would justify the claim as crafted by the plaintiffs.

In doing so, I remain cognisant of the fact that not every claim made under unjust enrichment will pass the test under this heading.

In determining this matter, I remain conscious that it is not the function of the court to re-write the contract for the parties but that the court must endeavour to ascertain what was in the minds of the parties at the time the issue of four hundred and sixty million dollars arose.

What is clear from the pleadings, and agreed upon by the parties, is that the sole reason why the plaintiffs paid Mr Harrel the four hundred and sixty million dollars was that they wanted to protect their rights in the sold property or to ensure the smooth transfer of the purchased property.

It is also clear that the first defendant had never accepted this liability to Mr Harrel and that the plaintiffs were themselves not privy to the circumstances surrounding the liability as between the first defendant and Mr Harrel.

It is important to note that the main contract between the plaintiffs and the first defendant remained intact and that the property was transferred with the purchase figure still remaining pegged at the original agreed price of seven hundred million dollars.

It is a time honoured principle of our law of contract that it is founded upon true consensus ad idem of the parties involved: The Law of Contract in South Africa, (Butterworths), by R H CHRISTIE…,.

In the words of WESSELS…, and approved by ROBERTS AJ in the case of Jordaan v Trollip 1960 1 PH A25 (T):

“Although the minds of the parties must come together, courts of law can only judge from external facts whether this has or has not occurred. In practice, therefore, it is the manifestation of their wills and not the unexpressed will which is of importance.”

Can it be seriously contended in this matter, that, at the time the plaintiffs paid the four hundred and sixty million dollars to Mr Harrel, on behalf of the defendant (who was disputing liability at the time), the plaintiffs had in mind the recovery of their money from the defendant based on the principles of unjust enrichment?

In the same vein, can it be said that, at the time the issue of four hundred and sixty million dollars arose, the first defendant had in his mind the concept of unjust enrichment at the time of repayment or both parties viewed the transaction as a simple ascertainable debt which would be repaid as such?

I detect some revealing indication from the plaintiff's heads of argument where counsel on behalf of the plaintiffs states as follows:-

“An equitable remedy is one that seeks to do justice between the parties, and, in the circumstances of this matter, an order for the payment of 460 million dollars (old currency) plus interest will not do justice to the plaintiff's claim. This amount has become so insignificant as a result of inflation and the removal of zeros on our currency in June 2006 and July 2008 such that in today's terms the said amount is now the equivalent of 0,00046 cents. When the said 460 million dollars was paid, in October of 2005, it was about the equivalent of 66% of the value of the property that the plaintiff's were purchasing; now, the said amount cannot buy a single brick.”…,.

I have not the slightest doubt in my mind, that, at the time the plaintiffs and the first defendant discussed the issue of four hundred and sixty million dollars paid to Mr Harrel they all looked at it as a simple debt that would be repaid as it was. The issue of unjust enrichment could not possibly have occupied their minds at the time this money was paid out.

As is clearly apparent from the above quotations, it does seem to me that the plaintiffs claim, as now crafted, is not as a result of the arrangement as they perceived it with the first defendant at the time the four hundred and sixty million dollars was paid out to Mr Harrel but an afterthought, a direct response to the impact of galloping inflation coupled with the axing of zeros from our currency which has rendered the advanced amount completely valueless.

There has been no suggestion by the plaintiffs that the first defendant was responsible for triggering inflation, let alone the removal of zeros from our currency.

It is quite significant to note that, at the time the plaintiffs paid the four hundred and sixty million dollars to Mr Harrel, they were fully aware that the first defendant had a dispute with Mr Harrel over the amount in question. The plaintiffs, for convenience's sake, decided to pay the disputed amount because they did not want the transfer of the purchased property compromised.

In such a scenario, there can be no question of non-disclosure on the part of the first defendant and this probably explains why even in the declaration filed there was no reference to such non-disclosure as the basis for the claim.

Even if this court were to make a specific finding that there was a material non-disclosure on the part of the first defendant; in my view, such a finding would not advance the plaintiffs claim under unjust enrichment for as long as it is agreed that the plaintiffs claim is a simple debt sounding in money the principle of currency nominalism would come into play.

The principle of currency nominalism, which no doubt is part of our law, forbids the approach adopted by the plaintiffs in this matter.

I am fortified in this view by the position adopted by E.M. GROSSKOPF JA in SA Eagle Insurance Co. Ltd v Hartley 1990 4 SA 833…, when he eloquently elaborated on the principle of currency nominalism in the following terms:-

“'This result seems to me to be in conflict with the principle of nominalism of currency which underlies all aspects of South African law, including the law of obligations. Its essence, in the field of obligations, is that a debt sounding in money has to be paid in terms of its nominal value irrespective of any fluctuation in the purchasing power of currency.'

This places the risk of a depreciation of the currency on the creditor and saddles the debtor with the risk of an appreciation…,.

Nominalism is the norm in the common law of Western States with similar systems to our own. Thus, in Deutsche Bank Filiale Nurnberg v Humphrey (1926) 272 US S17 at 519 the United States Supreme Court said:

'An obligation in terms of the currency of a country takes the risk of currency fluctuations and whether creditor or debtor profits by the change the law takes no account of it…,. Obviously, in fact, a dollar or a mark may have different values at different times, but, to the law that established it, is always the same. If the debt had been due here and the value of dollars had dropped before suit was brought the plaintiff could recover no more dollars on that account.'

The same applies in England.

In Treseder–Griffin and Another v Co-operative Insurance Society Ltd (1956) 2 QB 127 (CA) at 144 DENNING LJ said the following:

'…,. (I)n England, we have always looked upon a pound as a pound, whatever its international value…,. In all our dealings we have disregarded alike the debasement of the currency by kings and rulers or the depreciation of it by the march of time or events…,. A man who stipulates for a pound must take a pound when payment is made, whatever the pound is worth at that time.'”…,.

After commenting on nominalism of currency in the Netehrlands and German legal systems the learned Judge of Appeal went on to consider the reasons commonly given for currency nominalism. The judge commented as follows:

“It is not necessary to consider them in detail, except to point out that it would represent a revolutionary transformation of our legal system if courts were to be called upon to determine the true economic value (in terms of purchasing power) of all obligations sounding in money. I need not, however, labour the point; currency nominalism, for whatever reason, is firmly entrenched in our law:” SA Eagle Insurance Co. Ltd v Hartley 1990 4 SA 833 p840…,.

Clearly, the attempt by the plaintiffs to lodge their claim under unjust enrichment in this case is an attempt to circumvent the principles of nominalism of currency given the effect of the rapid depreciation or debasement of the Zimbabwean dollar ever since the debt of four hundred and sixty million dollars was paid by the plaintiffs.

I am in total agreement with the views expressed by my brother judge, KUDYA J, in the recent case of Constantinos Bakari v George Kattarenos HH01-09 where he stated that:

“Courts have adopted a conservative approach to the question of determining the true economic value of money” by leaving it up to the legislature which is empowered to review and set from time to time the prescribed rate of interest.

Everything considered, I do not see how the plaintiffs claim, under unjust enrichment, can be sustained in this case.

I am of a very strong conviction that the plaintiffs are entitled to no more than the sum of four hundred and sixty million dollars (revalued) together with interest at the prescribed rate of 30% as tendered by the defendants.

COSTS

I think in all fairness the Stated Case is of great legal significance. This probably explains why neither of the parties have asked for costs.

Each of the parties must bear their own costs.

SC40-15 : INDIUM INVESTMENTS (PVT) LTD vs KINGSHAVEN (PVT) LTD and DANIEL SHUMBA and LINDA SHUMBA
Ruled By: CHIDYAUSIKU CJ, GWAUNZA JA, GOWORA JA, HLATSHWAYO JA and MAVANGIRA AJA

On 28 February 2008, under case no. HC1239/08, the appellant caused summons to be issued against the respondents seeking an order for the cancellation of a lease, and, consequent thereto, the eviction of the respondents from the leased premises.

On 10 December 2008, a second summons was issued by the appellant under case no.6969/08 wherein it sought the eviction of the respondents due to the expiry of the lease.

The High Court dismissed the claims with costs.

The appellant was aggrieved by the dismissal and has noted this appeal.

THE FACTUAL BACKGROUND

The basic facts surrounding the dispute are the following:

The appellant (hereinafter referred to as “Indium”) is the registered owner of certain immovable property, being Stand 450 Avondale West Township of Stand 390 Avondale West, also known as 108 West Road, Strathaven, Harare, (hereinafter referred to as “the premises”). The first respondent (hereinafter referred to as “Kingshaven”) is a private company registered as such under the laws of Zimbabwe. The second respondent (hereinafter referred to as “Shumba” and the third respondent, his wife, are the only shareholders of and directors in Kingshaven.

Kingshaven carries on business in the hospitality sector and is in occupation of the premises by virtue of a lease concluded on 14 December 2007 with Indium. Notwithstanding the date of signing, the agreement was to come into force on 10 December 2007 and was to endure for a period of 365 days, terminating automatically on 9 December 2008.

Shumba and his wife are shareholders in a Close Corporation, ERF Bryanstan Cc, which is duly registered as such under the laws of South Africa.

ERF Bryanstan is the registered owner of an immovable property, being Portion 2 of ERF 825 Bryanstan Township also known as 17 Portman Road, Bryanstan Sandton, Johannesburg.

In 2007, ABSA Bank, in whose favour ERF Bryanstan had registered a mortgage against the property, called up the mortgage and executed against the same.

In an effort to save the property, Shumba approached Jayesh Shah (hereinafter referred to as “Shah”) for financial assistance, and this culminated in a number of agreements.

The first agreement consists of a loan between Shah, on the one part, as lender, and Shumba and ERF Bryanstan Cc, on the other, as borrowers. The loan amount is UD$500,000.

The second agreement is for the sale of the entire shareholding in Indium concluded by Shumba and his wife, on the one part, as sellers, and Jayesh Shah and Shaleetha Mahabeer, on the other, as purchasers.

The last agreement is the lease agreement concluded between Indium, as lessor, and Kingshaven, as lessee on 14 December 2007.

The two matters instituted by Indium were, by consent of the parties, consolidated for trial before the High Court.

In dismissing the claims, the court a quo stated:

“He intended to secure a windfall by all means legally possible. His legal practitioner advised a web of agreements to ensure he remained within the realms of the law. A loan here, a purchase of shares there and a lease with a buy-back option to crown it all, was all it took to secure apparent control of the debtor's immovable property in Zimbabwe without any reference to its true value.

Clearly, whatever the parties decided to call it, the agreement to take over control of the plaintiff company from Shumba, without paying for it, amounted, in my view, to a pactum commissorium.

It is the substance, not the form, to which the court looks when deciding the true nature of an agreement.

Consequently, therefore, the second issue, whether annexure “C” amounts to a pactum commissorium is determined in defendants' favour.

I have already found that the payment, in South Africa, by Shah, was intended as a loan, as pleaded by plaintiff; therefore, there is no evidence to suggest that the same payment doubled as payment for shares in Indium Investments (Private) Limited.

That issue is resolved in favour of the defendants as well.

The transactions were clearly in fraudum legis. The law in this jurisdiction is clear. Where the contract which is in fraudum legis is performed, the court cannot come to either party's assistance.”

The appeal is premised on the following grounds:

1. That, the court a quo erred in not finding, that, in the absence of a plea for rectification of a contract, the parole evidence rule operates to exclude extrinsic evidence to disprove the contents of a written contract. (sic)

2. The court a quo erred in not finding, that, returns lodged with the Registrar of Companies are prima facie proof of the correctness thereof, and the same cannot be impugned without the joinder of the Registrar of Companies.

3. Consequently, and for the stronger reason in view of grounds of appeal 1 and 2 above, the court a quo erred in holding that the respondents had discharged the onus of justifying possession of the appellant's property within the context of the actio rei vindicatio.

4. The court a quo erred in fact and in law in holding that the agreements in question were simulated agreements which “mimicked” the South African agreements.

5. The court a quo erred in any event in holding, that, the agreements the subject of the litigation were in fraudem legis in that they sought to evade the exchange control legislation, in view of the fact that free funds were paid to the credit of a South African resident, and in not finding, that, the fact that such South African resident was a citizen of Zimbabwe and did not give rise to the need for exchange control approval.(sic)

6. The court a quo erred in fact and in law in holding, that, the agreements the subject of the litigation a quo were a pactum commissorium.

Counsel for the appellant urged us to find, that, the learned judge in the court a quo had not dealt with the case that was placed before him.

It was his contention, that, the matter before the court was principally for the cancellation of the lease agreement between Indium and Kingshaven and consequential relief. He argued that it was essentially a rei vindicatio.

What the court a quo did, however, it is argued, was to turn its focus on a completely different issue which it could not competently determine and made findings which cannot be supported.

It is contended, that, the court thereby misdirected itself.

In my view, the dispute can be resolved by this court having regard to the manner in which the court a quo dealt with what it referred to as the simulated agreements, and, secondly, dealing with the actio rei vindicatio in accordance with the claims in the summons.

THE ALLEGEDLY SIMULATED AGREEMENTS

In answer to the claim for the eviction of Kingshaven from the premises, the respondents raised various defences, namely, that Shumba and his wife had borrowed a specified sum of money from Shah, and that, as security for their due performance thereon, the latter had demanded security in Zimbabwe in the form of shares in Indium. They pleaded, further, that the parties entered into a simulated agreement for the sale of shares in Indium which ultimately resulted in the lease agreement providing for a buy-back option in favour of Shumba and his wife.

There is no suggestion on the papers that Indium participated in any of the agreements except the lease.

It then begs the question which parties the court a quo referred to when it concluded that the agreements were fraudum legis.

It is common cause, that, the loan agreement was between ERF 825 Bryanston Cc, in which Shumba and his wife owned shares, and Shah.

ERF Byanston Cc was not cited as a party to the proceedings before the court a quo.

Shah only appeared in the proceedings in the court a quo as a witness on behalf of Indium.

In the circumstances, the court could not have properly considered the loan agreement, or its legality, in the absence of the parties thereto.

I turn next to the “share sale” agreement in relation to the shares in Indium.

The parties to the sale of the shares were, on the one part, Shumba and his wife, as sellers, and, on the other part, Jayesh Shah and Shaleetha Mahabeer.

The last two were never before the court as parties and the agreement for the sale of shares could therefore not be scrutinised to any extent by a court in their absence.

Consequently, the determination by the court of the issues related to the lease agreement concluded by Indium and all the respondents in reference to the share sale agreement was highly irregular.

It follows, therefore, that, any issues referred to the trial court for determination in relation thereto would be irregular. It is therefore logical to conclude that the court a quo dealt with matters and issues that were not before it.

This leaves Indium, Kingshaven, Shumba and his wife.

They were parties to a document, being the lease agreement, which is the only document properly before the court.

Those were the parties that were before the court, and, therefore, the only dispute for determination was that arising from the lease agreement in respect of which the court had to determine the respective rights and obligations of the parties before it....,.

THE VALIDITY OF THE LEASE AND THE REI VINDICATIO

I turn, then, to discuss the real issue before the court a quo, that is, the claim for the eviction of Kingshaven, and through it, Shumba and his wife, from its premises.

The preamble to the lease agreement acknowledges that Jayesh Shah and Shaleetha Mahabeer have become the beneficial owners of shares in Indium Investments (Private) Limited. The relevant provision states:

“Whereas, by a sale of shares agreement between JAYESH SHAH and SHALEETHA MAHABEER, on the one part, and DANIEL SHUMBA and LINDA SHUMBA, on the other, JAYESH SHAH and SHALLETHA MAHABEER have become the beneficial owners of shares in INDIUM INVESTMENTS (PRIVATE) LIMITED.”

In turn, Indium is the registered owner of the premises.

In terms of clause 3.1 of the lease agreement, the lessee undertook to deposit an amount of Z$ One Billion as security for the due performance by it of its obligations under the lease. Rental for the premises was set at Z$ One Billion per month payable in advance and reviewable from time to time.

In recognition of the prior ownership of the shares in Indium, by Shumba and his wife, in terms of clause 13.1 of the lease, the latter were granted an option to re-purchase the shares in Indium. The option was to expire on 9 October 2008.

It is common cause that the option was not exercised.

In February 2008, Indium advised Kingshaven, that, it was in breach of its obligations under the lease to pay rentals and cancelled the lease. On 10 December 2008, the lease also expired through the effluxion of time. Indium again issued summons, this time claiming return of the premises by virtue of the expiry of the lease through the effluxion of time.

In the plea to the claim for their eviction from the premises, the respondents admitted, that, the appellant was the registered owner of the premises.

The claim, as pleaded by the appellant, was a simple actio rei vindicatio.

The nub of the actio rei vindicatio is that an owner is entitled to reclaim possession of his property from whosoever is in possession thereof. As was stated in Chetty v Naidoo 1974 (3) SA 3…,:

“It may be difficult to define dominium comprehensively (cf. Johannesburg Municipal Council v Rand Townships Registrar & Ors 1910 TS 1314 at 1319), but, there can be little doubt…, that, one of its incidents is the right to exclusive possession of the res, with the necessary corollary that the owner may claim his property wherever found, from whomsoever holding it.

It is inherent in the nature of ownership, that, possession of the res should normally be with the owner, and, it follows, that, no other person may withhold it from the owner unless he is vested with some enforceable right against the owner (e.g. a right of retention or a contractual right).”

As a consequence, once the ownership by Indium of the premises was acknowledged and accepted by the respondents, all that the court a quo had to determine was whether Kingshaven had any legal right to remain in possession of the same.

Therefore, the simple task before the court a quo was to decide whether or not a lease agreement existed between the parties as alleged, and, thereafter, to determine whether or not the claim for eviction on the lease was well founded.

This, the court failed to do.

It went on to make wider pronouncements on relationships that were not before it. It thereby misdirected itself.

The principle of rei vindicatio was applied in Stanbic Finance Zimbabwe Ltd v Chivhungwa 1999 (1) ZLR 262 (H) by MALABA J…, where he remarked as follows:

“The principle on which the actio rei vindicatio is based is that an owner cannot be deprived of his property against his will and that he is entitled to recover it from any person who retains possession of it without his consent.

The plaintiff, in such a case, must allege, and prove, that he is the owner of a clearly identifiable movable or immovable asset and that the defendant was in possession of it at the commencement of the action.

Once ownership has been proved, its continuation is presumed.

The onus is on the defendant to prove a right of retention: Chetty v Naiddo 1974 (3) SA 13 (A) at 20A-C: Makumborensa v Marini SC130-95 p2.

It follows, that, the action is based on the factual situation that prevailed at the time of the commencement of the legal proceedings.”

Once an owner proves that the property is his and that the defendant originally obtained possession of the res pursuant to a contract, the owner is obliged to prove that such a contract has expired or that he was entitled to cancel it and has indeed terminated it.

In Chetty v Naidoo 1974 (3) SA 3 it was emphasised that:

“…,. a plaintiff who claims possession by virtue of his ownership must, ex facie his statement of claim, prove the termination of any right which he concedes the defendant would have had but for the termination.”…,.

The only defences available to a defendant in the position of the respondent are the following;

(i) That he had a right to possess;

(ii) That he was not in possession; or

(iii) That the plaintiff is not the owner.

It is worth noting, that, the respondents did not plead any of these defences.

In truth, they could not have, as they had a lease with Indium the termination of which they did not deny or place in issue. The validity of the lease agreement is confirmed.

Counsel for the appellant has, however, further submitted, that, the court, in the face of this clear claim, then went on to grant judgment in favour of the respondents in the absence of a counter claim.

In African Farms and Townships v C.T. Municipality 1963 (20) SA 555 (AD) STEYNE CJ made the following remarks:

“Counsel for the appellant further argued, that, the order in the original proceedings, which as such is an order dismissing the application, is to be equated with absolution from the instance, leaving the issue undecided.

In my view, there is no substance in that argument.

As Sande, De Diversis Regulis ad l. 207, points out, the res judicata is not so much the sentential, the sentence, or the order made, as the lis or negotium, the matter in dispute or question at issue about which the sententia is given, or the causa which is determined by the sententia judicis.

As pointed out in Purchase v Purchase 1960 (3) SA 383 (N) at p385, dismissal and refusal of an application have the same effect, namely, a decision in favour of the respondent.

The equivalent of absolution from the instance would be that no order is made, or that leave is granted to apply again on the same papers.

In Commissioner of Customs v Airton Timber Co Ltd 1926 CPD 351 at p359, WATERMEYER J, draws a distinction between the actual judgment and the reasons for judgment, and expresses the view, in effect, that, where the decision of a particular question, although dealt with in the reasons for judgment, is not incorporated in the actual judgment, and the question is not necessarily determined by the judgment, the matter is not res judicata.

I do not understand this to mean, that, where a Court decides the particular issue raised and dismisses the application, the question decided is not res judicata. If that is what it does mean or imply, I would be unable to agree with it.

In the present case, having regard to the judgment, the import of the order is clearly that, on the issues raised, the Court found against the appellant and in favour of the respondents.”

A dismissal of the plaintiff's claim is a judgment in favour of a defendant.

It is my view, that, the dismissal had the effect of awarding the respondents judgment in their favour.

I turn next to the relief being sought.

In the prayer, the appellant seeks an order for the setting aside of the judgment of the court a quo and its substitution with an order entering judgment in its favour in terms of the summons.

In addition to the cancellation of the lease, Indium sought the following relief:

“2. An order directing the defendants, and all those claiming occupation through them, to vacate the premises situate Stand 450 Avondale West Township of Stand 390 Avondale West, otherwise known as 108 West Road, Strathaven, Harare (“the premises”).

3. An order that in the event that within forty-eight (48) hours of the date of the above order being issued and the defendants failing and/or neglecting and/or refusing to comply, the Sheriff for Zimbabwe, or his lawful deputy for Harare, duly assisted by the Zimbabwe Republic Police if need be, be authorised empowered and directed to eject the defendants from the premises, and all those claiming occupation through them, and to hand over vacant occupation of the premises to the plaintiff or its authorised agent or representative.

4. An order precluding and restraining the defendants from removing any item of property from the premises.

5. An order for payment of the sum of $Z2,567,000,000 (two billion five hundred and sixty seven million dollars) together with interest thereon calculated at the prescribed rate to the date of payment as follows;

5.1 On Z$567,000,000 (five hundred and sixty seven million dollars) with effect from 10 December 2007;

5.2 On Z$1,000,000,000 (one billion dollars) with effect from 1 January 2008; and

5.3 On Z$1,000,000,000 (one billion dollars) with effect from 1 February 2008.

6. An order for holding-over damages at the rate of Z$4,000,000,000 (four billion dollars) per month with effect from 1 March 2008 to the date that the plaintiff recovers vacant occupation of the premises aforesaid, such rate to be adjusted from time to time in accordance with market rates.

7. An order for interest on the sum of holding over damages aforesaid at the prescribed rate from the date each amount becomes due and payable.

8. An order for payment of the sum of Z$10,000,000,000 (ten billion dollars) together with interest thereon at the prescribed rate from the date of judgment to the date of payment.

9. Costs of suit as between legal practitioner and client.”

The appellant sought for an order confirming the cancellation of the lease.

It is common cause that the lease has expired through the effluxion of time. Its expiry is not in dispute and it is not necessary to confirm its cancellation.

As a consequence, an order for the eviction of the respondents from the premises will issue.

The interdict against the removal of items from the premises was never put in issue.

However, the claim for the payment of sums under various heads was not considered by the court a quo.

Neither counsel addressed us on the issue.

The record is clear, however, that, no evidence was adduced by Indium in respect of the sums of money being claimed under the various heads.

The claim for holding over damages is premised on the lease agreement and it would follow from a confirmation of the cancellation of the lease.

The same considerations would apply to the claim for arrear rentals as that would be a consequence of the finding that a valid lease existed between Kingshaven and Indium.

The amounts claimed were denominated in the local currency and were never converted to the United States Dollar currency in the trial below. They therefore remain an issue for determination by the court a quo.

In view of the position taken by the court a quo not to delve into the merits of the claim for ejectment and consequential relief flowing therefrom, it seems in order that the parties be given an opportunity to have that aspect of the dispute fully ventilated and determined by the court.

In the premises, it is only appropriate to grant relief in respect of the eviction and the interdict and to remit the matter to the court a quo for the determination of what sums of money, if any, may be due to Indium.

The trial court can take judicial notice of the fact, that, the country, and, indeed, every person in the country uses foreign currency to transact and that the country adopted a multi-currency regime with effect from February 2009.

It is also worthy to note, that, the Zimbabwe Dollar has since been demonetized.

To that end, justice would best be served if the parties were to adduce evidence from experts in the field of real estate as to any sums that may be owing under the headings on which the matter is remitted for the adduction of evidence.

With regard to the sums being claimed for payment of costs on the various agreements concluded between the parties, no evidence was led in the court a quo, either as to the amounts being claimed in the local currency, if any, or the rate of exchange that should be applied in converting the said sums to the US Dollar.

This claim must fail.

Accordingly, the appeal succeeds to the extent that the lease agreement is held to be valid and an order for the eviction of the respondents shall ensue.

The matter is remitted for the determination of the arrear rentals and holding over damages before the court a quo.

Accordingly, the following order will issue:

“IT IS ORDERED THAT:

1. The appeal is allowed with costs to the extent provided for hereunder:

(i) The judgment of the court a quo is set aside and substituted with the following:

(a) It is declared that the lease agreement between the plaintiff and the first respondent has terminated through the effluxion of time.

(a) The defendants, and all those claiming occupation through them, shall vacate the premises, being Stand 450 Avondale West Township of Stand 390 Avondale West, otherwise known as 108 West Road, Strathaven, Harare within seven (7) days of the date of this judgment, failing which the Sheriff for Harare or his lawful deputy is hereby authorised to eject them from the same and give vacant possession to the plaintiff or its duly authorised agent or representative.

(b) The defendants be and are hereby precluded and prevented from removing, with the exception of personal items belonging to them, any item of property from the premises.

(c) The claim for payment of Z$10,000,000,000, being costs for the preparation of various agreements concluded by the parties, is hereby dismissed with costs.

2. The issue relating to the payment of sums of money claimed under paras (e) to (g) of the prayer in the declaration are remitted to the court a quo for a determination on the substance of what sums are due and owing.”

Appealed
HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS
Ruled By: KAMOCHA J

The plaintiff in this matter seeks:-“1. An order to declare that the sale agreement executed between him and first defendant on the 30th of September 2001 on Stand 378, Gorebridge Road, Killarney, Bulawayo is still binding and effectual as between the parties;2. An order to compel the first defendant to ...

The plaintiff in this matter seeks:-

“1. An order to declare that the sale agreement executed between him and first defendant on the 30th of September 2001 on Stand 378, Gorebridge Road, Killarney, Bulawayo is still binding and effectual as between the parties;

2. An order to compel the first defendant to transfer all her rights, title and interests in Stand Number 378 Gorebridge Road, Killarney, Bulawayo to plaintiff.

3. An order authorizing the Deputy Sheriff of Bulawayo to sign all the transfer documents for and on behalf of the first defendant in order to effect transfer of Stand 378 Gorebridge Road, Killarney, Bulawayo to plaintiff.

Alternative to 1, 2 and 3 above -

Plaintiff seeks an order:

4(a) To be refunded by first defendant $1,500,000 plus interest a tempore morae at the prescribed rate, effective from the 31st of October 2001; and

(b) To be compensated by first defendant in the sum of $2,500,000.

5. That the first defendant pays all costs of this action on an attorney and client scale.”

When the parties appeared before a judge for a pre-trial conference it was agreed that the issues to be determined by the trial court be as follows:-

“(1) Did plaintiff advise first defendant that plaintiff was no longer prepared to be held to the contract of sale, and, as a result thereof, did plaintiff cancel the contract of sale?

(2) Was the contract of sale perfected?

(3) Is the plaintiff entitled to tender $3,800,000 plus interest, and, in that event, at what rate is the interest to be calculated?

(3) In the alternative, is plaintiff entitled to:-

(a) A refund of $1,500,000 plus interest calculated from the 31st October 2001; and

(b) Compensation for improvements effects (sic) by plaintiff.”

Each party had the onus to prove two of the above issues. The plaintiff had to prove issues 3 and 4 while the defendant had to prove issues 1 and 2.

The plaintiff gave evidence himself and called two witnesses to support him.

The plaintiff's story was that he was a businessman in Bulawayo. Mr Thokozani Khumalo was his business partner who needed a house. Thokozani Khumalo (“Khumalo”) had been initially leasing House Number 378 Gorebridge Road, Killarney, Bulawayo. The house belonged to Ronnah Mafurirano, the first defendant.

The husband of the first defendant, Mr Davis Sunganayi Mafurirano, was the plaintiff's business associate. They knew each other from the time Davis Sunganayi Mafurirano used to work for CBZ Bank.

After Thokozani Khumalo had expressed his wish to purchase the house he was renting, the plaintiff conveyed the message to Davis Sunganayi Mafurirano who asked the plaintiff to make an offer to him.

When the plaintiff made an offer of $2.5 million, Davis Sunganayi Mafurirano said he needed time to go and discuss with his wife, the owner, and would come back to them.

Davis Sunganayi Mafurirano came back with a figure of $5.3 million which the parties agreed on.

Although the house was being purchased for Thokozani Khumalo, the negotiations were being done by the plaintiff, Naran, while Davis Sunganayi Mafurirano represented his wife, the first defendant.

The parties then had a memorandum of agreement of sale reduced to writing which reads in part:

“Purchase Price and Payment

The purchase price payable to the seller by the purchaser for the said Stand shall be the sum of $5,300,000 (five million three hundred thousand dollars). A deposit of $2,500,000 (two million five hundred thousand dollars) shall be paid upon signing of this agreement and the balance of $2,800,000, (two million eight hundred thousand dollars) shall be paid in monthly instalments of $1,500,000 with effect from on/or before the 31st of October 2001 finishing with the balance of $1,300,000. 30% per month interest shall be paid on $2,300,000.”

The plaintiff engaged Sibusiso Ndlovu to represent him.

The seller signed the agreement on 12 September 2001 while the buyer signed it on 30 September 2001.

The plaintiff conceded that he had failed to pay the deposit as stipulated in the agreement. He should have paid $2,500,000 when he signed the agreement on 30 September 2001, but he, instead, paid the sum of $1,500,000 on 26 October 2001.

The plaintiff was clearly in breach of what the parties had agreed on not so long back.

He however seems to take solace in his belief that the $1,500,000 was not rejected by the buyer despite the fact that it was less than what the parties had agreed and was even paid late. He said the money was never sent back to him or his lawyers.

It was his evidence, that, as a business associate in relation to the buying of paper he had given Davis Sunganayi Mafurirano the sum of one million dollars to import paper. That, however, did not materialize but Davis Sunganayi Mafurirano never returned the $1 million.

The plaintiff seemed to suggest that that amount replaced the shortfall of one million he was supposed to pay as a deposit.

The plaintiff denied ever taking any steps to cancel the agreement. Instead, he said it was Davis Sunganayi Mafurirano who appeared to be bent on cancelling the agreement in his letters to be found on pages 12 and 15 of the plaintiff's bundle of documents.

The first one is undated and addressed to Sibusiso Ndlovu & Associates and marked for the attention of Mr S Ndlovu and reads thus:-

“Dear Sir

Re: Sale of House Number 378 Gorebridge Road, Killarney

Further to our telephone conversation on Wednesday 19 September 2001, I wish to confirm that we would like to give your clients up to 24 September 2001, 1400 hours, to pay their deposit. Failing, which, will give us the freedom to allow those who have shown interest to view the house as from 1000 hours on Tuesday 25 September 2001.

Please be advised accordingly, and your client's co-operation will be assumed.

Yours faithfully
D S Mafurirano”

I pause to observe that the above letter did not spur the plaintiff into trying to pay the deposit timeously at all. Instead, an amount of $1,500,000 was paid more than a month later - on 26 October 2001.

The plaintiff still had problems in paying as agreed prompting Mr Mafurirano to address a letter direct to Thokozani Khumalo on 8 November 2001 in the following terms:

“Re: Sale of House Number 378 Gorebridge Road, Killarney

It is with regret that I write to inform you of our decision to cancel the sale of the above property. The sale of the property was linked to a project we wanted to undertake, but we have had to seek alternative financing sources at higher costs than initially anticipated.

This affair concerning the sale of the above property has been one great problem and waste of time to us, simple because we didn't know that we were dealing with not so-serious people or rather people with other interests but to buy a house.

The negotiations for the price and other conditions were concluded on the 12th September 2001, with Mr Ndlovu, Mr D Naran's appointed representative. The payment of $2.5 million deposit was supposed to be immediate, but we had to wait until 26/10/2001 when a down payment of only Z$1.5 million was made. Promises of similar payments every week were made.

The above payment was based on the price and conditions negotiated, and signed for on the 12th September 2001. Mr D Naran called me to discuss the issue of payment, only to tell me that Mr Ndlovu, his representative, had no authority to conclude the negotiations on price and conditions as he did, as such, he, Mr Naran, was not bound by that agreement, which effectively meant there was no agreement in the first place. In fact, there is no agreement as I write, because Mr Naran nullified the one which we thought was binding.

Further, Mr D Naran, indicated that the house was overpriced, and that the whole deal should be abandoned, and that we were to return $1.1 million, with $400,000,00 being payment for inconvenience suffered by us, and that we were to compensate Mr Khumalo for the improvement done.

Despite good intentions we had, we have finally decided not to dispose of this property because we no longer need to, and, most importantly, the problems we have gone through and which we may go through in future, if we carry on as we have done this far.

In this regard, please forward invoices/receipts for the improvements you have undertaken so far for re-imbursement. Further, as discussed with you before, please, no improvements without consulting us first. You can stay if you like, but please we do not want to chase anybody for rent money.

If, in the future, we decide to sell, you will obviously have the first refusal option.

Regards
D S Mafurirano”…,.

The tone of the above letter reveals that the seller was disappointed by the behavior of the buyer who did not appear to be serious to pay on signature of the agreement. When payment was made, more than a month later, the money was one million dollars less than the agreed deposit. According to the letter, Naran did not feel bound by the agreement as he allegedly accused his lawyer of concluding negotiations on the price and conditions without his client's mandate.

The plaintiff denied ever doing or saying what is contained in the letter. He instead alleged that the negotiations were done by him. He did not remember the meeting of 7 November 2001 where he was alleged to have made those remarks.

It was his evidence that although he may have asked for more time to pay, never did he, at any stage, indicate that he wanted to cancel the agreement. It was the defendant who was bent on wanting to cancel the agreement as illustrated by her letter of 17 October 2001 addressed to the plaintiff's legal practitioners marked for the attention of Mr S Ndlovu which reads:

“Re: Sell of House Number 378 Gorebridge Road, Killarney

Further to our various discussions and letters concerning the sale of the above property. It is now almost the anniversary of the signing of an agreement of sale of the above property whose deposit should have been paid immediately after signing. This has not happened for the past 29 days.

I feel you have had ample time to raise and pay the deposit amount, therefore, I wish to officially inform you of my withdrawal from the agreement. And also to inform you that with immediate effect, Mr Khumalo should give access to people wishing to view the house.

Yours faithfully
R. Mafurirano (Mrs)”

The plaintiff went on to say that he had never instructed his legal practitioner to cancel the contract and accordingly wanted it to be enforced.

He said he did not know anything about the letters of 7 February 2002 and 2 May 2002 addressed to him at 6 Hussor Road, Khumalo, Bulawayo as he did not live there. He had never lived, owned, or used that address.

Under cross examination, Naran told the court that he in fact only became aware of the two letters two weeks before the trial when they were sent to him by his legal practitioner. He was not even aware of the letters when he issued summons and emphasized that he could not have been influenced to issue summons by something that he was not even aware of.

Similarly, he claimed the letter of 8 November 2001, addressed to Thokozani Khumalo, was only brought to his attention two weeks before the trial commenced. It also could not have influenced him to institute these proceedings.

In a nutshell, his erstwhile legal practitioner, Sibusiso Ndlovu, never brought to his attention all these letters.

Naran was being untruthful when he said he was not aware of the said letters before he issued summons. That is contrary to what he said in paragraphs 6 and 7 of his declaration where he says the defendant purported to cancel the agreement by addressing two letters to him, copies of which were attached to the declaration marked “B” and “C”. He said he had never received those letters and had accordingly not been put in mora by the defendant.

As can be seem from his declaration, his concern was that he had not been put in mora since he had not received the said letters.

He was clearly aware of the letters before he issued summons.

Consequently, his suggestion that they were only brought to his attention two weeks before the trial commenced is rejected as it is false and so is his suggestion that he was not aware of the letter of 8 November 2001 and that it did not influence him to institute these proceedings.

Further, Naran could not give a satisfactory explanation, under cross-examination, why he was tendering the balance of $3.8 million for the house if he had treated the $1 million meant for the paper project as part of the purchase price for the house. If what he told the court was true he should have tendered $2.8 million. There would have been no reason for him to tender more than what was due and owing.

In any event, the paper project involved Naran and the defendant's husband and had nothing to do with the defendant herself. Hence the $1 million could not have been treated as part of the price for the house.

Naran was an unreliable witness who was not worth to be believed. His evidence was in conflict with that of Thokozani Khumalo who categorically stated, that, on receipt of the letter of 8 November 2001 he discussed the import of its contents telephonically with Naran who distanced himself from the contents and suggested that the letter should be handed over to their lawyer Sibusiso Ndlovu. Indeed, the letter was handed over to the lawyer as suggested by Naran.

Thokozani Khumalo told the court that Naran never told him that the $1 million was part payment for the purchase price. Instead, he said Naran told him that Davis Sunganayi Mafurirano had borrowed the money.

Thokozani Khumalo said he had effected some improvements at the property. He, however, admitted under cross examination that the improvements were made without the authority from the Mafuriranos.

Mr Sibusiso Ndlovu was a friend and business partner of Naran. He was also a friend of Thokozani Khumalo. He was the legal practitioner who drew up the agreement of sale and signed it on behalf of Naran – the plaintiff.

He knew Mrs Mafurirano who had been introduced to him by one Mathew Nhindiri and also had dealings with her from her bank – CBZ Bank. He said he only got to know Mr Mafurirano at the time he drafted the agreement of sale.

He confirmed that three letters were addressed to his law firm but the fourth one was directly addressed to Thokozani Khumalo, who, without delay, handed it to him.

Thokozani Khumalo was reported as having been still agitated as he handed the letter to Sibusiso Ndlovu who got concerned after going through the contents of the letter. The letter in question is the one dated 8 November 2001 quoted from page 4 and 5 supra.

Sibusiso Ndlovu, like Thokozani Khumalo, telephoned Naran about the contents of the letter. Naran denied having agreed to cancel the agreement and told Sibusiso Ndlovu to contact Davis Sunganayi Mafurirano which he did. He went further to advise Davis Sunganayi Mafurirano that Naran and Thokozani Khumalo were still committed to pay but did not have money at that stage because the money they had expected from the payment of a cement consignment from a Zambian buyer was not forthcoming. But, Davis Sunganayi Mafurirano still allegedly told Sibusiso Ndlovu to pressurize Naran to make payment for the house as he knew Naran's plight. He knew about the Zambian consignment and anticipated that Naran would be paid for the consignment at some stage.

Under cross examination, Sibusiso Ndlovu said he had never regarded the letter of 8 November 2001 as a cancellation of the agreement. He also conceded that the defendant still considered herself bound by the agreement in the letter of 7 February 2002. In it, the defendant wanted to know when the plaintiff was going to pay if he was still interested in the agreement. The letter was written by her legal practitioners addressed directly to Naran and sent to 6 Hussar Road, Khumalo which was a wrong address.

The main body of the letter reads:

“Re: Agreement of Sale with Ronnah Marurirano

We refer to the above matter in which we act for Ronnah Mafurirano with whom you entered into a sale agreement in respect of Stand 378 Gorebridge Road, Killarney.

The purchase price was in the sum of $5,300,000 payable as to a deposit of $2,500,000 and the balance of $2.8 million in monthly installments of $1.5 million starting end of October 2001.

You paid $1.5 million as a deposit on the 26th October 2001. This was $1 million less than the agreed deposit.

You have not paid anything further after the $1 million (sic) referred to.

Our clients instruct us to enquire from you, as we hereby do, whether it is still your intention to proceed with the purchase, and, if so, when they can expect to receive the balance which is overdue. If you are no longer interested in the purchase please advise to enable our clients to move forward. Please let us have your election either way within 7 days of this letter failing which we will approach court for an order to declare forfeit as a pre-estimate of damages the deposit paid.

Yours faithfully
Majoko and Majoko”…,.

The contents of this letter clearly establish that the defendant still considered herself bound to the agreement as at 7 February 2002.

This court, therefore, makes a specific finding to that effect.

Another letter addressed directly to Naran, but also sent to the wrong address, was dated 2 May 2002 and it reads this:-

“Dear Sir

Re: Agreement of Sale with Ronnah Mafurirano

We refer to the above matter.

In terms of your agreement, you were supposed to pay a deposit for the purchase price in the sum of $2,500,000 on the date of your signing the agreement. You failed to do so. In fact, you only paid the sum of $1,100,000 (sic).

Through several letters to you our client informed you that time of payment was of the essence. You have failed to make any other payment from the date you made the first installment. You have breached your contract.

Due to your breach of the contract by failing to pay on time and as stipulated in the contract our client now considers your contract cancelled.

Our client also wishes to notify you that he reserves the right to forfeit the installment paid to her.

Yours faithfully
Majoko and Majoko”

The above two letters were sent to a wrong address although they were directed at Naran personally.

Naran said he had never used that address and had never lived there. He went on to state that he did not even know anyone living at that address.

He was being untruthful on that point, because, when Sibusiso Ndlovu asked him if he had once lived there, or had once used the address, or if he knew anyone at that address, he denied ever living there or ever using the address but revealed that his distant cousin lived there but was quick to say he was not close to him.

Sibusiso Ndlovu's evidence also confirmed that Naran was well aware of the above two letters well before the summons was issued. He was in fact aware of all the four letters quoted in this judgment id est;

(a) The undated letter addressed to Sibusiso Ndlovu & Associates;

(b) The one addressed to Thokozani Khumalo dated 8 November 2001;

(c) The one dated 7 February 2002 addressed to himself but sent to the wrong address; and

(d) The last one dated 2 May 2002 also addressed to himself but sent to a wrong address.

Accordingly, Sibusiso Ndlovu's evidence belies Naran's story that he only became aware of the letters two weeks before the trial commenced.

Sibusiso Ndlovu admitted, under cross examination, that, Naran did not disclose to him that he himself had made a tender of the purchase price to the defendant. He further admitted that Naran, the plaintiff, was in material breach of the agreement. He, however, went on to state that despite the fact that Naran was in material breach of the agreement the defendant kept on accepting and granting extensions.

The defence case was closed after the evidence of Sibusiso Ndlovu.

Mrs Mafurirano, the first defendant, gave evidence and called her husband as a defence witness.

She herself did not have much to say as most of what took place in relation to the agreement of sale was done by her husband. He did all the negotiations relating to the sale.

She told the court that she and her husband had more than one property in Bulawayo. The property at the centre of this dispute was registered in her name. Sometime in September 2001 the couple was offered a farm to buy. They needed money to buy it. They then decided to dispose of one of their properties in order to raise the money. They decided to sell the property in question. The first offer was made to Thokozani Khumalo the sitting tenant.

After sometime, her husband brought an Agreement of Sale drawn up by Sibusiso Ndlovu & Associates legal practitioners for her signature.

She confirmed that the plaintiff was in breach of the contract as he failed to pay the deposit in terms of the agreement. The purchase price was also not paid.

Although she had not been involved in the writing of several letters to the plaintiff by her husband she was made aware of what was going on.

Under cross-examination, she maintained that she had not cancelled the contract despite indications in the letters that it would be cancelled. She said she still considered herself bound by the agreement although her attitude was that the whole deal had taken too long. Her major concern was to have the house sold so that they could raise money for the farm project.

Mrs Mafurirano gave her evidence in a simple and clear manner. She was worth to be believed.

She called her husband who was her key witness as he was the one involved in the negotiations for the sale of the house.

The husband, one Davis Sunganayi Mafurirano, had this to say:

He told the court that Thokozani Khumalo was their tenant who rented the house in question. At one stage, an opportunity arose whereby someone was selling a business and a farm. He and his wife got interested in that property. They decided, as a family, to raise some money by selling their Killarney house in an endeavour to acquire the farm and a business. They agreed, as a family, that the husband was going to handle all negotiations and transactions relating to the selling of their Killarney house.

They then approached the sitting tenant, Thokozani Khumalo, and informed him about their wish to dispose of the house. Thokozani Khumalo was interested in the house but said he would seek financial assistance from Naran who was his employer. Later, Thokozani Khumalo advised him to go and see his lawyer, Sibusiso Ndlovu.

He went and had a discussion with Sibusiso Ndlovu. They agreed on a price of $5.3 million for the house. The lawyer, Sibusiso Ndlovu, undertook to draft an Agreement of Sale and said Davis Sunganayi Mafurirano should return the next day to sign it. He returned to the lawyer's office whereat the lawyer and himself made some amendments to the draft Agreement of Sale. Thereafter, he was given the amended draft Agreement of Sale to take to his wife for signature.

His wife signed the Agreement of Sale on 12 September 2001 and Davis Sunganayi Mafurirano immediately returned it to the law firm for the buyer to sign it. Davis Sunganayi Mafurirano expected the buyer to also sign the agreement on 12 September 2001, but, to his surprise and disappointment, the buyer only signed it 18 days later - on 30 September 2001.

Davis Sunganayi Mafurirano's expectations were that Naran was going to pay a deposit of $2.5 million on signature as stipulated in the Agreement of Sale but that never happened. Payment of the deposit was not made even on the belated date of signature by the buyer.

That caused a lot of anxiety to the Mafuriranos as their plans to purchase a farm and business were thrown into disarray. Davis Sunganayi Mafurirano had to go to a Mr Turner to negotiate with him about the time they could pay him for the farm and business.

The deposit was paid in by Thokozani Khumalo on 26 October 2001. To the Mafurirano's further disappointment, Thokozani Khumalo paid in $1.5 million leaving a shortfall of $1 million. That payment was made on a Friday and Thokozani Khumalo had promised to pay the balance the next Monday but failed to do so.

The witness reminded Thokozani Khumalo of his promise but the reminder produced no result. He then decided to go and see Sibusiso Ndlovu who referred him to Naran whom the witness had not dealt with in relation to the sale of the house.

The witness said he embarked on fruitless efforts to have the outstanding part of the balance paid. He went to Thokozani Khumalo who referred him to Sibusiso Ndlovu who in turn referred him to Naran.

As if that was not enough trouble, Naran surprised him by allegedly saying:-

(a) Sibusiso Ndlovu had no right to enter into the agreement;

(b) He also pointed out that the house was over-priced and went on to say he could get a better house for that price in Ilanda or Famona; and

(c) He finally said of the $1.5 million that had been paid that far $1.1 million had to be returned (without specifying to whom) while the witness kept $400,000 for the inconvenience caused to him.

Naran allegedly made the above revelations at a meeting which he had with the witness on 7 November 2001.

The following day, Davis Sunganayi Mafurirano addressed the letter to Thokozani Khumalo quoted supra…,.

The witness denied that he meant to cancel the agreement by writing the letter. He contended that he was merely conveying to Thokozani Khumalo what his benefactor said at the meeting of the previous day. It was the witness' further contention that it was Naran, instead, who was canceling the agreement by revealing that he was not bound by it since Sibusiso Ndlovu had no mandate from him to conclude the agreement.

It was Davis Sunganayi Mafurirano's evidence that the series of letters written by him and his wife were merely intended to cajole Naran and Thokozani Khumalo into honouring their obligation. But, to their disappointment, no written response came from the buyers and their legal practitioners.

They were further disappointed by the fact that the buyers and their legal practitioners drew up the Agreement of Sale wherein they stipulated conditions which they never met. Hence their ultimate conclusion that Naran had cancelled the Agreement of Sale.

That was what prompted them to instruct their legal practitioners to write the final letter on 2 May 2002…,.

According to Davis Sunganayi Mafurirano, the letter was a mere acceptance of the fact that Naran had cancelled the Agreement of Sale.

Davis Sunganayi Mafurirano vehemently denied the suggestion that he was given $1 million dollars which was applied to the purchase of the house.

Davis Sunganayi Mafurirano was subjected to a lengthy and thorough cross-examination. He came out of the cross examination badly bruised as he could not give direct answers to questions and was evasive.

He, however, made it clear, under cross-examination, that, it was not correct that he had been given the $1 million for the purchase of bond paper which money was later applied to the purchase of the house. He said the issue of bond paper only involved $80,000 and not $1 million as had been suggested by the plaintiff. He then referred the court to a document attached to exhibit 3 reflecting that he indeed paid $80,000 for A4 paper on 18 October 2001.

He further emphasized, under cross examination, that, the various letters written to the buyers were not meant to cancel the agreement but were being used as a means to spur them into making payment. They were just a tactic to pressurize Naran and Thokozani Khumalo to honour their contractual obligations.

Davis Sunganayi Mafurirano maintained that the letter of 2 May 2002 was just an acceptance of the fact that Naran had cancelled the agreement.

There is merit in Davis Sunganayi Mafurirano's conclusion in the light of the following findings made by the court:

This court makes a finding that the plaintiff was in material breach of the agreement right from the onset.

He failed to pay the deposit on signing the agreement as stipulated. When he did so, a month later, what he paid was $1 million less than what the parties had agreed.

Although the plaintiff was in material breach of the agreement, the defendant, through desperation, kept on accepting and granting extensions resulting in the plaintiff taking advantage of her and grossly abused that advantage.

Demands for him to pay, coupled with repeated threats to cancel the Agreement of Sale, did not spur him into honouring his side of the bargain.

This court has already found that Naran was an unreliable witness who was not worth to be believed. He contradicted the evidence of Thokozani Khumalo and Sibusiso Ndlovu. He did not end there. He sought to distance himself from his pleadings.

This court further finds, that, the probabilities favour the story that the plaintiff said he was not bound by the agreement, and, in any event, the house was overpriced and he could get a better house for that price in Illanda or Famona.

Here is why:

He did not want to pay the deposit in terms of the agreement. When he did so, after a month, he only paid $1.5 million instead of $2.4 million. He claimed to have lent Davis Sunganayi Mafurirano a sum of $1 million which sum he alleged had been applied to the purchase of the house. As far as he was concerned a total of $2.5 million had been paid.

It is important to note that Naran said he had offered to buy the house for $2.5 million.

Interestingly, after he had paid an amount equal to $2.5 million he made no further payment towards the purchase of the house despite a series of letters urging him to pay. He was simply unwilling to pay more than $2.5 million.

He denied being aware of any of the letters claiming that he had only become aware of them two weeks before the trial.

He was clearly untruthful.

This court also finds that Davis Sunganayi Mafurirano did not answer questions directly and was evasive. He tended to give unsolicited explanations, but, the court cannot go so far as classifying him as a witness who was not worth to be believed.

He was just a seller who had been disappointed by the buyer who had no respect for the agreement the parties had entered into.

The buyer drafted the Sale Agreement and stipulated conditions therein which he thereafter disregarded with impunity.

The Mafuriranos urgently needed the money to purchase a farm and business which explains why they continued to grant extensions of time within which to pay.

In conclusion, this court finds, in the light of the foregoing, that, the plaintiff stated that he was no longer prepared to be held to the contract of sale hence his unwillingness to make any further payments beyond the sum of $2.5 million thereby cancelling the agreement.

He is therefore not entitled to tender the sum of $3,800,000 plus interest.

He is, however, entitled to a refund of $1,500,000 plus interest calculated from 31 October 2001.

He is further entitled to compensation for proved improvements, if any, effected to the said property.

The plaintiff is to blame for the failure of the Agreement of Sale and should accordingly bear the costs of suit.

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA
Ruled By: MAKARAU JP

The plaintiff is resident in the United Kingdom.

Sometime in 2003, he telephoned one Simbarashe Sagonda and Thomas Makwangudze, relatives of his, to proceed to view a property that was being offered for sale through the agency of the second defendant.

The property, whose description and location in Ruwa was known to the second defendant's property negotiator, “Nyasha”, is owned by the first defendant who holds freehold title to the land.

It is common cause that the instructions to sell the property did not emanate from the first defendant but from a fraudster, still at large, who was making out to be the first defendant and not only had with him a forged copy of the Deed of Transfer in respect of the property bearing the first defendant's name, but also a driver's licence and a passport with the names of the first defendant but bearing his picture.

It is further common cause that the two plaintiff's relatives viewed the property in the company of Nyasha, the property negotiator, and were satisfied with its condition in relation to the asking price. They accordingly, but separately, recommended to the plaintiff that he purchases the property.

An Agreement of Sale was duly drawn up and the plaintiff cautioned that he wanted the transaction to be supervised by a lawyer. Debut the third respondent in her capacity as a conveyancer and one who was well known to the second defendant and had done work for the second defendant previously.

On the date that the Agreement of Sale was signed, the fraudster, still making out to be the first defendant, attended at the third defendant's offices and not only did he sign the agreement as seller and first defendant, he also collected the deposit of the purchase price that had been paid in the sum of 8,000 pounds sterling. It is at this meeting that the fraudster exhibited the identity documents that he used to commit the fraud. The documents were inspected by all who were present, including the plaintiff's representative, who did not find anything amiss with the documentation.

A further payment in the sum of 6,000 pounds sterling was made some months thereafter.

Soon after the payment of the balance of the purchase price, transfer fees were called for in anticipation of transferring the property into the plaintiff's name. It was at this stage that the fraud was discovered as the Registrar of Deeds raised issues with the authenticity of the Deed of Transfer tendered with the transfer papers and advised that the matter be reported to the police.

Efforts to trace the purported seller of the property to obtain vacant possession of the property by the plaintiff's agent were in vain.

On 21 April 2004, the plaintiff issued summons claiming against all defendants, an order compelling them to transfer the property in dispute to him. In the alternative, the plaintiff sought an order against all the defendants jointly and severally for the payment of damages to be calculated as the purchase price of a similar stand in Ruwa at the time of payment less the Zimbabwe Dollar equivalent of 14,000 pounds sterling, $2,7 million, and interest a temporae morae on the two amounts at the prescribed rates.

The action was defended by all three defendants.

The first defendant denied that he ever put up his property for sale or connived with the fraudster to defraud the plaintiff. The second defendant denied conniving with the fraudster or misrepresenting any facts to the plaintiff. The third defendant also denied conniving with the fraudster or misrepresenting any facts to the plaintiff.

At the pre-trial conference of the matter, four issues were identified for trial. These were;

(i) Whether or not there was misrepresentation on the part of the defendants that led the plaintiff to lose his money;

(ii) The quantum of damages;

(iii) From whom such damages were recoverable; and

(iv) Who should bear costs of suit.

At the trial of the matter, the plaintiff called Simbarashe Sagonda and Thomas Makwangudze as witnesses. The testimonies of the two witnesses were to narrate what is essentially common cause in this trial.

It was Simbarashe Sagonda's testimony, that, when he went to view the property in the company of the property negotiator from the second defendant, Nyasha, they were shown around by a lady of middle age. Also present were a gardener who opened the gate for them, a maid who was busying herself in the kitchen, and some other young man. From the visit, he got the impression that Nyasha had been to the property before and knew all the faults and uncompleted details in the structure.

The witness gave his evidence well and I have no reason to disbelieve him.

As indicated above, his testimony was a narration of facts that are not in dispute as between the parties.

Thomas Makwangudze also testified as to how he went to view the property in the company of Nyasha and one Lovemore Hombarume who was held out to be the nephew of the seller of the property. He also testified as to how an Agreement of Sale was then drafted and that at the time of signing the agreement and paying the deposit, he met the fraudster, who produced a driver's licence and passport all bearing the names of the first defendant. He inspected the documents together with the third defendant, Nyasha, and a friend he had brought along to witness the transaction.

All four of them did not notice anything irregular with the identity documents and were duped into believing that they were dealing with the first defendant, the owner of the property.

He further testified as to how he paid the balance of the purchase price and transfer fees for the property.

Again, in my view, the witness gave his evidence well. I gained the impression that he is honest and reliable.

He found it difficult, on his observations, to categorically hold that the defendants were conniving with the fraudster. He only assumed there may have been connivance between the first defendant and the fraudster but had no basis for making this assumption save the fact that he and Nyasha freely viewed the first defendant's property in the presence of his maid and gardener.

After leading these two witnesses, the plaintiff closed its case.

At the close of the evidence, the plaintiff withdrew his claim against the first defendant, tendering costs. It is therefore unnecessary that I deal with the evidence led by the first defendant in his defence.

The second and third defendants applied for absolution from the instance arguing that the plaintiff had not established a prima facie case that the defendants had misrepresented to him any fact.

I granted the application and indicated that my reasons would follow. I now set them out.

Before I proceed to deal with the application for absolution from the instance, there are two issues that I wish to remark on. These relate to the standard of pleadings exhibited in this matter and the need for legal practitioners at pre-trial conferences to assess the cogency of the evidence they intend to adduce at the trial of the matter.

The purpose of pleadings is not only to inform the other party in concise terms of the precise nature of the claim they have to meet, but, pleadings also serve to identify the branch of the law under which the claim has been brought. Different branches of the law require different matters to be specifically pleaded for a claim to be sustainable under that action.

Thus, for example, in a divorce action, the allegation of irretrievable breakdown is imperative while in a delictual claim for bodily injury, fault has to be averred against the defendant.

This may appear trite but a number of matters coming before the courts seem to indicate that legal practitioners have abandoned the need to plead a cause of action by making the necessary averments to sustain such an action: see S Pilime v B Chisvo HH10-07.

In casu, the plaintiff's legal practitioner appears to have simply rehashed the instructions he had received from his client in the declaration without making an attempt to precisely and concisely lay out the cause of action and the averments necessary to sustain such. I gain this impression from the wording of the concluding paragraph of the declaration which is framed as follows:

“All the defendants were either conniving together or misrepresented facts to the Plaintiff in order to deprive the plaintiff of the said Stand and money.”

The defendants' legal practitioners did not fare any better in the matter.

Instead of seeking clarification of the claim and its basis by either a request for further particulars or an appropriate exception, the defendants were advised to file pleas to the merits which pleas read no better than the declaration as they seek to deny the statements made in the declaration (Mr Nhemwa was not representing the second defendant at the time the pleadings were exchanged).

In my view, the exchange of pleadings between the parties is what may pass as conversation at a social gathering between disagreeing parties but bears not the slightest resemblance to pleadings in a court of law.

Legal practitioners are urged to read on the law before putting pen to paper to draft pleadings in any matter so that what they plead is what the law requires their clients to prove to sustain the remedy they seek.

The duty of a legal practitioner to precisely and concisely draw up pleading is closely related to the duty to establish and assess the evidence necessary to sustain each important averment made in the pleadings.

This should be done before or at the pretrial conference stage when the summaries of evidence are drawn up. Gaps in the evidence should be identified at this stage and brought to the attention of the party who may thus avoid the loss occasioned by a dismissal or absolution from the instance at the close of the plaintiff's case at trial.

All too often, legal practitioners are heard in a pre-trial conference to whisper to their clients asking how many witnesses they will call at the trial of the matter. Preparedness is the hallmark of a good legal practitioner. It is no use for a legal practitioner to concede, at trial, that his client does not have sufficient evidence when pleading that the matter should not be dismissed but that absolution from the instance be granted.

It is my view, that, had the plaintiff's legal practitioner in this matter assessed the cogency of the evidence that he had, he may have avoided a trial in this matter and legal costs for his client as none of the plaintiff's witnesses testified as to a misrepresentation made to them, and, the second witness in particular, denied that there was any connivance by the defendants to deprive the plaintiff of his money. His testimony was to the effect, that, because the second and third defendants were professionals, they should have guarded against the loss. This, in my view, suggests a claim based on negligence rather than on misrepresentation or fraud.

Litigation in the High Court is serious business and the standard of pleadings in the court must reflect such.

In view of the evidence adduced on behalf of the plaintiff, it was clear, at the close of the plaintiff's case, that there was no need to call upon the defendants to testify.

Even if I were to be overly generous and hold that the plaintiff had pleaded misrepresentation as a cause of action against the defendants, the evidence adduced by the plaintiff revealed that it was the fraudster who misrepresented to both the plaintiff and to the defendants that he was the registered owner of the property that he was selling.

It is this fraud that induced the sale between the parties.

The fraudster went to the extent of producing cleverly forged documents to support his fraud. The defendants did not assist him in this fraud and were also the victims of the fraud.

In any event, it was not specifically pleaded in the papers whether the alleged fraud by the defendants was innocent, negligent, or fraudulent.

Having alleged that he was induced into the contract by misrepresentation, the plaintiff proceeded to pray for transfer of the property into his name.

I am not clear how the remedy of specific performance was pleaded after the alleged misrepresentation.

I may mention, in passing, that, the Rules require that particulars of any misrepresentation be stated in the pleading: see Rule 103 of the High Court Rules, 1972.

The Rule is often overlooked in drafting summons and declarations.

It is on the basis of the above that I granted absolution from the instance at the close of the plaintiff's case.

HH90-10 : LOCAL AUTHORITIES PENSION FUND vs F & R TRAVEL TOURS AND CAR SALES (PVT) LTD and FREEJOY CHIGWIDA and RAPHAEL MAKWARA
Ruled By: MAKARAU JP

The applicant and the first respondent are landlord and tenant respectively. Their relationship commenced when they concluded a written agreement in respect of certain commercial premises situate at Throgmorton House, Samora Machel Avenue, in Harare. The agreement was for a period of one year, commencing on 1 July 2006 and terminating on 30 June 2007.

The second and third defendants, as directors of the first respondent, bound themselves as co–principal debtors under the lease agreement.

In July 2009, the applicant filed this application seeking an order evicting the respondents from the rented premises. In its founding affidavit, it averred that the respondents had breached the written lease agreement by failing to pay rentals and operating costs for the premises since January 2009. The amount of arrear rentals and outstanding operating costs was also prayed for in the order.

It is pertinent, in my view, that, at this stage, before I detail the opposition that was filed by the respondents, I comment on the manner in which the applicant proceeded to frame its cause of action against the respondents.

The applicant has alleged that the respondents are in breach of the written lease agreement of 2006.

It is common cause that the written lease agreement between the parties terminated by the effluxion of time in June 2007. As at the time of the filing of the application, it was no longer binding upon the parties and could thus not found a cause of action for the applicant.

Its terms and conditions may have continued to afford the respondents protection against eviction under the operation of the provisions of the Commercial Rent Regulations S.I. 276/83(“the Regulations”), under what is commonly referred to as statutory tenancy.

This is however not part of the averments made by the applicant in its founding affidavit.

In my view, statutory tenancy is not an issue that the court should take judicial notice of mero motu. It must be specifically pleaded as it brings into play different considerations regarding the respective rights of the parties. It is a separate cause of action, apart from the terminated lease agreement.

I shall avert to the provisions of the Commercial Rent Regulations S.I.276 of 1983 (“the Regulations”) in detail below.

At this stage, the point I am making is that the applicant could not validly seek to rely on an agreement that had terminated without first laying a legal basis for its revival so to say. As I shall show later, this may have fatally compromised the applicant's quest to recover its property from the tenant.

In opposing the application, the respondents argued, that, the written agreement between the parties provided for payment of rent in local currency, and, when that currency lost favour with traders and generally, the applicant sought to impose a rental in United States currency with the parties failing to reach agreement on the amount payable.

Again, I pause to make the point, that, the respondents were clearly relying on the protection against eviction afforded them by the Commercial Rent Regulations but did not specifically raise that defence in their papers.

In moving for the granting of the order sought in the draft, the applicant urged me to find that the parties had a written lease agreement, that, in terms of that lease agreement, the first respondent was obliged to pay rentals and operating costs monthly and in advance and that in breach of that agreement, the first respondent failed to pay any rent or operating costs from January 2009 to the date of the filing of the application.

As indicated above, the applicant's argument is flawed in one or two respects and does not flow from the facts that are common cause:

(i) Firstly, the written lease agreement terminated in July 2007. As from that date, the first respondent became a statutory tenant and the expired lease agreement can no longer found a cause of action between the parties.

The first respondent, in my view, can now only be competently evicted in terms of the provisions of the Rent Regulations.

It is common cause that the applicant is not proceeding in terms of the Rent Regulations, but is proceeding ex contractu, alleging breach of the written agreement.

(ii) Secondly, and assuming that the written lease agreement between the parties is still subsisting, then, in that event, the first respondent's obligation is to pay rentals monthly in advance in local currency. The obligation to pay rentals monthly in advance must have been imposed by some other agreement which has not been pleaded.

The applicant has urged me to find that the agreement to levy rentals in foreign currency, and in the sum of US$700 per month, was reached between the parties at a meeting that was held on 12 May 2009.

I cannot agree.

It is common cause, that, on 8 May 2009, the applicant addressed a letter of demand to the first respondent, claiming payment of the sum of US$4,497=75 as arrear rentals and the sum of US$1,772=81 as unpaid operating costs.

The parties met on 12 May 2009 to discuss the demand.

On the same day of the meeting, the first respondent responded to the letter of demand in writing, acknowledging the letter of demand and advising that at the meeting held with the applicant's representatives, it had been agreed that the first respondent would pay one thousand dollars towards the arrear rentals and the balance over two or three weeks.

It is worth noting that the meeting of 12 May 2009 was in response to the applicant's letter of demand. By then, the amount of the arrear rentals had already been calculated. In other words, the breach had already occurred.

It appears to me, that, by January 2009 the parties had not yet agreed on the rental payable for the premises.

As detailed above, the applicant seeks to rely on the alleged agreement concluded on 12 May 2009 - some five months after the alleged breach.

If the parties had agreed to the rentals in January 2009, why would they need to meet over the same issue in May?

Similarly, if the parties had not reached agreement on the rentals in January 2009, on what basis can they be held to have breached the contract before the parties had reached agreement on it?

These are questions that will go begging for an answer, as, in my view, the applicant has placed its cart before the horse. It has proved the breach before proving the agreement breached!

Assuming that I have erred in concluding that the applicant has placed its cart before the horse and that by application of some other legal principle, not argued before me, the applicant could prove that the agreement reached on 12 May 2009 could apply retrospectively, then, the denial of the agreement by the respondent would raise a material dispute incapable of resolution on the basis of the papers filed of record.

I have considered whether I can convert the proceedings before me into an action by referring the matter to trial.

In view of the reservations that I have regarding the cause of action that the applicant has pleaded in this matter, I am of the view that such exercise of discretion will not have the effect of saving to expedite the resolution of this matter or of saving costs.

Before I dispose of this matter, it is important, in my view, that I remark on the submissions made on behalf of the respondents.

They have argued, that, the first respondent is a statutory tenant and is protected against eviction. In this regard, they have relied on the provisions of section 22(2) of the Commercial Rent Regulations S.I.276 of 1983 (“the Regulations”) which provide as follows:

“(2) No order for the recovery of possession of commercial premises or for the ejectment of a lessee therefrom which is based on the fact of the lease having expired, either by the effluxion of time or in consequence of notice duly given by the lessor, shall be made by a court, so long as the lessee —

(a) Continues to pay the rent due within seven days of due date; and

(b) Performs the other conditions of the lease;
unless the court is satisfied that the lessor has good and sufficient grounds for requiring such order other than that —

(i) The lessee has declined to agree to an increase in rent; or

(ii) The lessor wishes to lease the premises to some other person.”

While the section specifically limits the right of landlords to recover their properties where leases have terminated by expiration for the reason given in the Commercial Rent Regulations S.I.276 of 1983 (the Regulations), it simultaneously creates the right in favour of the tenant to remain in occupation of the leased premises provided the tenant pays the rent that is due in terms of the lease within seven days of the due date and performs all the other conditions of the lease.

The provisions of the section seek to protect the genuine tenant, who is not in breach of any of the terms of the lease agreement, from being at the mercy of a landlord who may wish to let out the premises to another tenant.

The issue that exercises my mind in this application is whether the statutory tenancy remains viable where the rentals payable were fixed in local currency, in view of the lack of value now attaching to that currency.

It is trite that for a statutory tenancy to be created and thus earn protection, the tenant has to continue to pay the rent due within seven days of due date and perform the other conditions of the lease.

The practical difficulty that arises is that where the tenant's obligation is to pay in local currency, how does such a tenant remain protected when the rentals are neither payable nor constitute a valuable exchange for the right to use the landlord's tenant?

While it is not necessary for me to make a specific finding on this issue, I would venture to suggest, that, in circumstances similar to the facts before me, where the obligation in terms of the written agreement of sale was in local currency, the protection afforded by the statutory instrument, S.I.276 of 1983, becomes doubtful or of limited value as payments for rentals in local currency are ludicrous, and may, in some instances, be impossible to effect.

Finally, I wish to refer to the case of Negowac Services (Private) Limited v 3D Holdings (Private) Limited and Others HH144-09 in which MTSHIYA J was faced with facts similar to the ones before me.

In that case, in upholding the landlord's right to evict the tenant, the learned judge was of the view, that, the obligation of the tenant to continue paying rent on due date imposed by the Commercial Rent Regulations S.I.276 of 1983 (the Regulations), in turn, imposes an obligation on statutory tenants to pay “reasonable rentals” in respect of the property leased where the parties fail to reach agreement on the amount of rentals payable.

Counsel for the applicant urged me to follow the decision in that case.

Again, it is not necessary, in my view, that I distinguish this case from the application before me. It is my finding above that the applicant has not pleaded statutory tenancy as its cause of action. It has instead alleged breach of a specific written agreement and I have disposed of the matter on that basis.

Had the applicant approached the court on an action in rem, seeking to recover its property from the tenant on the basis that the parties had failed to reach agreement on a material term of the lease, I would have found the reasoning by MTSHIYA J very attractive in the general sense that the sine qua non for enjoying the use of the property of another is the payment of rent and one cannot hope to have that enjoyment for nothing.

In the absence of proof of payment of anything, a tenant would have no defence, in my view, to resist the enforcement of the right of an owner to recover their property. As PATEL J observes, a tenant is not entitled to withhold rentals except in a few and very limited instances: see Parkside Holdings (Private) Limited v Londoner Sports Bar HH66-05.

As I indicated above, the applicant has approached court alleging breach of a specific term of the lease agreement. It is my finding that the averred lease agreement is no longer binding on the parties, and, even if it were, it cast an obligation upon the first respondent in a currency that is now redundant.

On the basis of the foregoing, it is my view, that, the applicant has pleaded a cause of action that is not competent and cannot therefore succeed.

In the result, I make the following order:

1. The application is dismissed.

2. The applicant shall pay the respondents' costs.

HH164-10 : KENNETH PATRICK McCOSH vs PIONEER CORPORATION AFRICA LIMITED
Ruled By: KUDYA J

The plaintiff, a former financial director of the defendant company, filed summons on 8 July 2009 seeking payment of the capital sum of US$72,334 and interest at the rate of 10% per annum from the date when the amount fell due to the date of the issue of summons in the sum of US$12,658, payment of interest on the capital amount at the rate of 10% from the date of the issue of summons to the date of payment in full and costs of suit.

The defendant contested the matter.

The plaintiff's cause of action was disclosed in paragraphs 3, 4 and 5 of its declaration in these terms:

“3. The defendant became indebted to the plaintiff in respect of arrear salaries and other benefits arising from a contract of employment concluded between the parties on or about 21 September 2004 that was terminated by the plaintiff's resignation from employment on 7 March 2007.

4. During the month of April 2007, the defendant partly liquidated the amount claimed by the plaintiff by delivering to the plaintiff a motor vehicle and a laptop computer whose agreed values totalled US$30,000.

5. On or about 18 July 2007, the Group Chief Executive Officer of the defendant, Mr Hamish Rudland acknowledged liability for the sum as at that date of US$70,000 which would attract interest at the rate of 10% per annum.”

The defendant raised a plea in bar based on two grounds before pleading over to the merits. Its plea reads as follows:

“1. As appears from the plaintiff's declaration:-

1.1 The cause of action is predicated on a contract of employment concluded by the parties on 21 September 2004.

1.2 The claim is for payment of alleged arrear salaries and benefits consequent upon resignation.

1.3 The payment of salaries and benefits during and upon termination of a contract of employment is governed by the provisions of the Labour Act [Cap 28:01].

1.4 Accordingly, and in terms of section 89(6) of the Labour Act, this Honourable Court has no jurisdiction to hear and determine this claim.

2. Additionally, but without prejudice to the above, the defendant avers that:

2.1 The contract of employment between the parties provided for payment of salaries and benefits in Zimbabwe dollars, being the lawful legal tender.

2.2 The plaintiff's claim is denominated in foreign currency, namely, the United States dollars.

2.3 At the material time, the payment of salaries and benefits in foreign currency, without exchange control approval, was illegal and unenforceable by virtue of:

2.3 1. The Exchange Control Act [Cap 27:05].

2.3.2. Exchange Control Regulations, 1996, SI 110/1996.

2.3.3. The Labour Act [Cap 28:01].

2.4. In the premises, the plaintiff's claim is bad and unsustainable at law and ought therefore to be dismissed with costs.”

In pleading over to paragraphs 3, 4 and 5 of the plaintiff's declaration, the defendant denied these averments and put the plaintiff to the proof thereof and reiterated that the mode of payment sought was unlawful.

In his replication, the plaintiff averred that his cause of action was premised on an acknowledgment of debt signed by a representative of the defendant and not on the terms of employment.

He also averred that the defendant was obliged to obtain the necessary foreign currency exchange approvals to pay him in foreign currency using its free funds.

At the pre-trial conference that was held on 8 April 2010, the following four issues were referred to trial:

(a) Whether or not this Honourable Court, and in the light of section 89(6) of the Labour Act [Chapter 28:01], has jurisdiction to adjudicate over the dispute between the parties;

(b) Whether the contract of employment between the parties provided for payment to the plaintiff in United States dollars and the amount thereof;

(c) Whether the plaintiff's claim was lawful at the material time; and

(d) What amount, if any, is due to the plaintiff.

The trial in this matter was held on 14 June 2010. The plaintiff called the evidence of two witnesses and produced a 40-paged bundle of documents as exhibit 1.

After the close of the plaintiff's case, the defendant elected to open and close its case without calling any evidence.

My findings of fact are based on those aspects of the evidence called by the plaintiff that survived cross examination.

The plaintiff holds a Bachelor of Law (Honours) degree from the University of Zimbabwe (1983) and is a Chartered Accountant (1988). He was the Group Financial Director of the defendant from 1 June 2004 until his resignation on 7 March 2007. His contract of employment with the defendant is covered in pages 2 to 6 of exhibit 1. The relevant sections fall under the headings Remuneration and Benefits. I set them out below:

“3. REMUNERATION

As remuneration for services rendered, the Contractor shall pay the contracted person, during the subsistence of this agreement, the sum of $21 million per month, payable monthly in arrears. The salary will be subject to taxation in line with the rules and regulations of the Zimbabwe Revenue Authority. As you are on a fixed term contract, the company is not liable to pay any further sums of money which may be required of you by operation of law. This shall be reviewed every quarter.

4. BENEFITS

In addition to the salary stated above, you will be entitled to the following:

4.1 Cimas Medexec Medical Aid for you and your family.

4.2 Use of a company vehicle and 200 liters per month. Such allowance is for monthly usage and shall not accrue.

4.3 School fees for two children, but any change in school requires the authority of the CEO.

4.4 Cafeteria/entertainment allowance to be agreed annually by CEO.

4.5 Any other amounts will be deducted from the cafeteria allowance.”

The plaintiff indicated that his claim was based on the contents of pp7 and 8 of exhibit 1. It is an e-mail dated 13 July 2006 which the plaintiff dispatched to himself and copied to his website. It was signed and dated at the bottom of each page by Hamish Rudland, the acting Chief Executive Officer of the defendant at the time. The purported acknowledgment of debt was sandwiched between a set of seven action plans on the first page and another set of seven action plans on the second page. The acknowledgments read:

“HR acknowledges outstanding balance to KPM of US70K subject to update of figures.

HR acknowledges 10% interest per annum calculated monthly.

HR acknowledges salary US6K per month inclusive of local salary.”

The plaintiff stated that HR referred to Hamish Rudland while KPM referred to the plaintiff.

He stated that the defendant was to promote a company in Mauritius which would be used as the vehicle to pay top management in Zimbabwe in foreign currency and pay his outstanding debt.

It was common cause that the vehicle and laptop were sold to the plaintiff as indicated in the letter by Hamish Rudland (HR) of 10 September 2007 on p18 of exhibit 1. He averred that the two items were valued at US$30,000 and abated the outstanding capital sum and interest.

On pages 19 and 20 are the purported minutes that he wrote on 15 January 2008 of a meeting he held with Hamish Rudland (HR) and the plaintiff's wife in which he recorded, inter alia, his demand for payment of the outstanding debt by Pioneer Corporation Africa (PCA) and the reluctance to pay by Hamish Rudland (HR) until he had received a return on his investment and an undertaking that payment would be made at a later date.

He was the only one who signed those minutes.

He also relied on the minutes he authored on 18 March 2009 between Hamish Rudland (HR), EM Warhurst (EMW) and himself on pp 29-30 of exhibit 1. They were signed by EM Warhurst (EMW) and the plaintiff only.

They indicate that Pioneer Corporation Africa (PCA) owed EM Warhurst (EMW) US$15,000 and the plaintiff just over US$80,000.

While they show that Hamish Rudland (HR) was unwilling to pay the debt, they record that he had signed the plaintiff's contract of employment and acknowledgment of debt in July 2006.

Pages 38-39 show that, from October 2003 to February 2007, the plaintiff was entitled to receive from the defendant US$215,000 in salary. He was paid a total of US$157,251 between October 2003 and March 2007. The capital outstanding in salary arrears was US$57,749. The amount due as interest, from December 2005 to June 2009 was in the sum of US$26,462.

He was cross-examined.

He based his claim on an acknowledgement of debt of 17 July 2006. The acknowledgment arose from the failure to pay salaries during the period extending from October 2003 to February 2007.

He stated that he did not sue the defendant for arrear salaries that were incurred between October 2003 and July 2006 because during that period he was a member of the plaintiff's management team.

He accepted that, at that time, legal tender in Zimbabwe was the local dollar.

He was referred to section 12A of the Labour Act.

He was evasive on whether his claim was founded on a contract of employment or not. He was evasive on whether payment in United States dollars was payment in kind or not. He stated that in 2006 there were no exchange control prohibitions against the payment of salaries in foreign currency but conceded that during the period of his employment with the defendant he was never paid in United States dollars. He further acknowledged that at that time the defendant did not pay any of its employees in foreign currency.

He said the United States dollar was used to index the payment in kind in the form of air tickets that he received for holidays outside Zimbabwe.

He admitted that he could not claim in United States dollars before February 2009.

He accepted that the email of 18 July 2006 was made when Hamish Rudland (HR) had taken over as the Acting Chief Executive Officer of the defendant but denied that it was a mere update of the company's affairs and hand over/take over summary sheet. He said it was not an exchange of information document but a contract between the plaintiff and the defendant.

He accepted that it was not in the usual mode of an acknowledgement of debt that is drawn up by legal practitioners.

He averred, that, at the time, the defendant was obliged to pay him in the Zimbabwe dollar equivalent of US$70,000 at the prevailing parallel market rate of exchange.

He called Edward Mark Warhurst, a practicing legal practitioner, who, at the time, was the Group Company Secretary and Managing Director of Clan Transport (Pvt) Ltd, one of the subsidiaries of the defendant.

Edward Mark Warhurst confirmed the accuracy of the minutes written by the plaintiff at the meeting of 18 March 2009 found in exhibit 1. He said Hamish Rudland (HR) sought to refute indebtedness on the basis that the plaintiff had given poor service to the defendant but he accepted that the defendant owed the plaintiff arrear salaries in foreign currency for which it was unable to pay.

He was cross examined.

He was a workmate of the plaintiff during the period 2003 to 2006 when he worked for the defendant. He was owed arrear salaries in foreign currency for the period September 2005 to August 2006. He was invited by the plaintiff to the meeting of 18 March 2009 because both were creditors to the defendant.

He confirmed that his salary was paid in local currency.

It is on the basis of the evidence led that I proceed to determine the issues referred to trial.

(a) Whether or not this Honourable Court, and in the light of section 89(6) of the Labour Act [Chapter 28:01] has jurisdiction to adjudicate over the dispute between the parties

Counsel for the defendant submitted that this court did not have the jurisdiction to deal with this matter as it is a labour dispute. The plaintiff conceded, in his replication, that, were the present matter a labour dispute, he would have had to file it out of the Labour Court.

It seems to me, notwithstanding that this court is a superior court imbued with inherent jurisdiction, that all labour disputes must be dealt with in terms of the relevant provisions of the Labour Act.

It was common cause that section 89(6) of the Labour Act ousts the inherent jurisdiction of this court to hear labour disputes in the first instance. Put in other words, the High Court cannot be the first port of call to any party in a labour dispute.

The dispute, being one of right and not interest, would perforce be dealt with in terms of section 93 of the Labour Act by a labour officer who could refer it to arbitration from whence it would find its way to the Labour Court.

Counsel for the plaintiff submitted that this court had the jurisdiction to determine this matter because the plaintiff's case was found on an acknowledgment of debt and not on a contract of employment.

It is correct that, in our law, an acknowledgment of debt can found a cause of action: see Chimutanda Motor Spares (Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…,; Gondwe v Bangajena 1988 (1) ZLR 1 (H)…,; and Salisbury Municipality v Partington & Anor 1961 (3) SA 218 (SR)…,.

Counsel for the defendant contended that the plaintiff pleaded his cause of action as the contract of employment. He argued that reference to an acknowledgment of liability by the defendant's acting Chief Executive Officer in the declaration did not shift the cause of action to that of an acknowledgment of debt. He further contended that the document purported by the plaintiff to be an acknowledgment of debt was merely an update of the company's affairs and a hand over/take over sheet.

Counsel for the plaintiff contended that the statements sandwiched between other unrelated action plans constitute an acknowledgment of debt.

His contention appears to be borne out by the sentiments expressed by McNALLY J in S v Manyere 1984 (1) ZLR 104 (H)…, to the effect that an “I owe you” left in a cash box would constitute an acknowledgment of debt.

It is correct that the defendant did not call evidence to dispute the facts set out by the plaintiff and his witness or offer an alternative version of events.

It is also correct, that, subsequent to the acknowledgement of debt, two sets of minutes were written by the plaintiff, that the defendant's acting Chief Executive Officer refused to sign, which show that he acknowledged the defendant's indebtedness to the plaintiff in the amount claimed.

Again, the plaintiff's version was supported by Edward Mark Warhurst who was a forthright and credible witness.

It seems to me, notwithstanding the failure by the defendant to lead evidence, that counsel for the defendant's contention that the plaintiff's cause of action was predicated on a contract of employment is correct.

In my view, paragraphs 4 and 5 of the plaintiff's declaration are explanatory averments of how he arrived at the capital sum and interest claimed. The legal foundation of the claim lies in the contract of employment. Paragraph 3 of the declaration is the basis of the plaintiff's claim.

I understand him to be averring that the debt for which he seeks redress arose from unpaid salary arrears.

This is confirmed in the further particulars supplied by the plaintiff as read with the information supplied to the defendant's chairman on pages 31 to 39 of exhibit 1 in which he collated the outstanding salaries from October 2003 to February 2007 and outstanding interest due from December 2005 to June 2009.

The failure by the plaintiff to plead that his claim was based on an acknowledgment of debt executed on 18 July 2006 further confirms that he found his claim on unpaid arrear salaries.

Accordingly, I uphold the exception raised by the defendant and dismiss the plaintiff's claim on the basis that this court lacks the jurisdiction to determine the matter by virtue of the provisions of section 89(6) of the Labour Act [Chapter 28:01].

However, in the event that I am wrong, and the cause of action was properly pleaded in terms of paragraph 5 of the declaration, I proceed to deal with the other issues that were referred to trial.

(b) Whether the contract of employment between the parties provided for payment to the plaintiff in United States dollars and the amount thereof

The plaintiff confirmed, in his testimony, that the contract of employment did not provide for payment in United States dollars or any foreign currency. He alleged that payment in United States dollars was incorporated as a cafeteria benefit. He agreed that the contract did not delineate the United States currency as the currency of account for the cafeteria allowance. He did not produce a document in writing, and signed by both parties, to demonstrate that the contract of employment was varied as contemplated by paragraph 14 of the contract of employment.

The second issue is determined in favour of the defendant.

(c) Whether the plaintiff's claim was lawful at the material time

The time referred to is the period from October 2003 to 7 March 2007.

Counsel for the defendant submitted that it was unlawful, at the time, for a Zimbabwean-registered company to pay its employees in foreign currency for work performed in Zimbabwe without exchange control authority. He relied on the provisions of section 4(1)(a)(ii) of the Exchange Control Regulations S.I.109 of 1996.

Counsel for the plaintiff submitted that the exchange control legislation was not violated by an agreement to pay a salary in foreign currency to the plaintiff in Zimbabwe for work done in Zimbabwe. He relied on a case in which the claim was based on an acknowledgment of debt that the defendant did not sign but was reduced to writing by the plaintiff's legal representative which reflected the terms of the oral agreement reached of Macape (Pty) Ltd v Executrix Estate Forrester 1991 (1) ZLR 315 (SC)…, where McNALLY JA, dealing with sections 7 and 8 of the Exchange Control Regulations 1977, the precursor to the present sections 10 and 11 of the Exchange Control Regulations 1996, stated:

“The essential point to be noted is that there is a clear difference between sections 7 and 8. The former proscribes only the actual payment. The latter proscribes both payment and the underlying agreement to pay.

In other words, when one is concerned with payments inside Zimbabwe 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, it is unlawful even to enter into the agreement to pay, without first obtaining the authority of the Minister, whose powers have been delegated to the Reserve Bank.”

The case dealt with the payment, in local currency in Zimbabwe, of a foreign resident by a Zimbabwean resident.

The facts in Macape (Pty) Ltd v Executrix Estate Forrester 1991 (1) ZLR 315 (SC) differ with those in the present case in that in the former case payment was made by a local resident for the account of a foreign resident in local currency. In the present case, a local resident was to pay another local resident in foreign currency. The former concerned an outflow of foreign currency while the present matter concerned the inflow of foreign currency.

It seems to me that the payment of an employee's salary in foreign currency, at the time, would have contravened section 4(1)(a)(ii) of the Exchange Control Regulations.

Both CHINENGO J and GOWORA J held, in separate cases of Jumvea Zimbabwe Ltd & Anor v Matsika 2003 (1) ZLR 71 (H)…, and Gambiza v Tavaziva HH109-08…, that payment of foreign currency, whether inside or outside Zimbabwe, would amount to an exchange and thus be in violation of section 4(1)(a)(ii) of the Exchange Control Regulations.

In the present case, the defendant did not make any payment but entered into an agreement to pay.

Counsel for the plaintiff was therefore correct that such an agreement was not prohibited by the Exchange Control Regulations.

This is what McNALLY JA had in mind in Macape (Pty) Ltd v Executrix Estate Forrester 1991 (1) ZLR 315 (SC)…, when he said…,:

“The contract to pay is lawful. Actual payment in pursuance of the contract is unlawful without permission. There is no reason why the court should not order payment; subject to the condition that authority is obtained. I must make it clear that this judgment in no way inhibits the Reserve Bank in the exercise of its discretion. It is entirely for the Reserve Bank to decide whether or not to authorise the payment. If it decides not to do so the payment may not be made. The contract remains lawful. Payment will then have to await a change either in the law or in the policy of the Reserve Bank.”

I hold that the contract to pay the plaintiff in foreign currency did not contravene any Exchange Control Regulations.

Counsel for the respondent further contended that payment in foreign currency contravened section 12A(1) of the Labour Act [Chapter 28:01]. Counsel for the plaintiff countered by arguing that section 12A(2) of the Labour Act allowed for the payment of employees in foreign currency.

Section 12A(1) and (2) of the Labour Act read:

“12A Remuneration and deductions from remuneration

(1) Remuneration payable in money shall not be paid to an employee by way of promissory notes, vouchers, coupons or in any form other than legal tender.

(2) Remuneration may be payable in kind only in industries or occupations where such payment is customary, and shall be subject to the following conditions —

(a) Any such payment shall be appropriate for the personal use and benefit of the employee and the employee's family;

(b) The value attributed to such payment shall be fair and reasonable;

(c) Equipment or clothing required to protect the health and safety of the employee shall not be computed as part of the remuneration of the employee;

(d) No payment shall be made in the form of liquor or drugs;

(e) Remuneration in kind shall not substitute entirely for remuneration in money.”

Counsel for the defendant argued, that, at the time of employment, legal tender was constituted by local banknotes and coins. He submitted that though foreign currency was money, at the time, it was not legal tender in Zimbabwe.

Counsel for the plaintiff did not controvert this argument.

Rather, he ingeniously contended that the fact that the Exchange Control (Payment of Salaries by Exporters in Foreign Currency for Critical Skills Retention) Order S.I.127 of 2008 introduced for the first time the need for an exporter to seek exchange control authority to pay salaries in foreign currency showed that the payment of salaries in foreign currency was not proscribed before its promulgation. He went on to argue, that, as this subsidiary legislation did not have retrospective effect, it did not affect the plaintiff whose contract of employment ended in March 2007

I, however, agree with counsel for the defendant's rebuttal that the introduction of S.I.127/08 into our law was the first inroad made against the restrictive provisions of section 12A(1) of the Labour Act against the payment of salaries in any currency other than local currency.

Subsections (1) and (2) of section 12A of the Labour Act recognize the payment of remuneration in cash or in kind.

Subsection (1) restricts those employers who remunerate their employees in money to the use of legal tender to the exclusion of other modes of payment such as promissory notes, vouchers, coupons or any form other than legal tender.

I understand the phrase 'any form other than legal tender' to be of wide application.

In my view, it restricts payment to the use of legal tender and excludes payment in kind or money that is not legal tender.

Subsection (2) permits employers who are in occupations or industries that customarily pay remuneration in kind to do so.

Paragraph (e) of subsection (2) of section 12 puts it beyond doubt that remuneration in kind is not the same as remuneration in money. This same paragraph, in my view, is clear proof that in the mind of the legislature legal tender, in section 12A(1) of the Labour Act, was another euphemism for money: see Rhodes Motors (Pvt) Ltd v Pringle-Wood NO 1965 (4) SA 40 (SRA)…, where legal tender is considered and treated as money; S v Zakana 1976 (2) SA 248 (R) where SMITH J, by reference to The Shorter Oxford English Dictionary, defined legal tender to be, inter alia, “the money of a country in actual use.'”; and McNALLY JA in S v Bennett-Cohen 1985 (1) ZLR 46 (SC)…, defined legal tender as currency or money. The same LEARNED JUDGE OF APPEAL, in S v Mafarachisi 1990 (1) ZLR 118 (SC)…, approved the definition by COWEN in The Law of Negotiable Instruments in South Africa, 5ed, Vol I…, that legal tender was “the medium legally authorised by the State for the payment of debts.”

Counsel for the defendant's submission, that foreign currency did not constitute legal tender at the time of the plaintiff's contract of employment with the defendant, is borne out by the views of textbook writers and case law. The definition of legal tender is provided by MANN in The Legal Aspect of Money, 4th ed, at p41, in these words:

“Legal tender is such money, in the legal sense, as the legislator has so defined in the statutes organizing the monetary system. Chattels, which are legal tender have, therefore, necessarily the quality of money, but, logically, the converse is not true…; not all money is necessarily legal tender. The question what money is to be considered legal tender is usually answered by the statutes organizing the monetary system.”

Again, at p186, the learned author states:

“Where these principles lead to foreign money being regarded as money, the conclusion is in no way affected by the established rule that foreign money is not legal tender, for not all money is legal tender, but all legal tender is money. Legal tender is such money as is 'current coin of the realm'. This does not mean more than that foreign money cannot be tendered in discharge of a debt to pay pounds sterling, but it does not touch the question of the manner of discharging, in England, a debt expressed in foreign money.”

WILLIS in Banking in South African Law, Juta 1981, at p200, observes that in terms of the SA Mint and Coinage Act 75 of 1964 the South African Reserve Bank has the power to issue and make bank notes and coins and that these coins and banknotes constitute legal tender in South Africa. At p191 WILLIS confirms that, in South Africa, foreign money is not legal tender. He writes:

“The definition of foreign currency has since been amended to mean 'any currency which is not legal tender in the Republic.'”

CHRISTIE, in The Law of Contract in South Africa, 3rd ed…, is in agreement with the observations made by WILLIS.

MORSE, in Vol 1 of A Treatise on the Law of Banks and Banking, 3rd ed (1888)…, recognizes the sovereign right of every State to define what is legal tender within its jurisdiction in these words:

“The right of the depositor is not, however, necessarily to the gold or silver coin of the country; but only to such money as is, by the law of the land, legal tender at the time.”

In Vol 2…, the learned author defined legal tender in these words:

“At present, in our country, the treasury notes of the United States have been made by Act of Congress a legal tender, and payment, or offer of payment, in them satisfies the duty of the Bank; though it has bound itself by a specific agreement to pay in gold or silver coin.”

And, in para 637…, he wrote:

“Bank bills are not money, in the strict sense of the term; that is to say, they are not legal tender, even to pay debts due to the bank itself.”

The textbook writers have equated legal tender with currency and noted that what constitutes legal tender in any country is governed by the legislation of that country.

In Zimbabwe, the term is used, inter alia, in section 12A of the Labour Act [Chapter 28:01]; section 41(1), 42(1), 44(2) and section 44A of the Reserve Bank of Zimbabwe Act [Chapter 22:15], and in the definition sections of the Balance of Payments Reporting Act [Chapter 22:16] (Act No.4/2004) and the Exchange Control Regulations S.I.109 of 1996.

At the time the acknowledgment of debt was entered into, the legal tender for the payment of salaries in Zimbabwe was local currency and not foreign currency. The defendant could not, under section 12A(1) of the Labour Act, agree to pay the plaintiff in foreign currency.

That the plaintiff was aware that it was unlawful is shown by his failure to invoke the provisions of section 13 of the Labour Act for the payment of the purported arrear salaries when he left employment; and his failure to write into the terms of his contract of employment payment of part of his salary in foreign currency.

Formal acknowledgments of debt that are usually prepared by legal practitioners contain renunciation clauses such as the one highlighted by YOUNG J in Caltex (Africa) Ltd v Trade Fair Motors (Pvt) Ltd & Anor 1963 (1) SA 36 (SR)…, like non numeratae pecuniae, non causa debiti, errore calculi, revision of accounts, de duobus vel pluribus reis debendi.

There were no such renunciation clauses in the acknowledgment of debt in issue.

In Macape (Pty) Ltd v Executrix Estate Forrester 1991 (1) ZLR 315 (SC)…, McNALLY JA held that a court could go behind the making of an acknowledgment of debt to test its legality. He stated that:

“There is no evidence before the court to show that the underlying cause of the acknowledgement of debt was illegal and the acknowledgment itself was not illegal.”

I am satisfied that the underlying cause of the acknowledgment of debt that was relied upon by the plaintiff was illegal. A court cannot enforce an illegal contract: see Dube v Khumalo 1986 (2) ZLR 103 (SC)…,.

There are other features of the case which were revealed by the plaintiff, during cross-examination, which militate against the enforcement of the acknowledgment of debt against the defendant.

(i) The first was that he was never paid in foreign currency during his time of employment but was paid a salary in local currency that was indexed to the United States dollar at the parallel rate of exchange to preserve the purchasing power of the local currency.

The acknowledgment of debt that was executed erroneously referred to the currency of indebtedness as the United States dollar. The acknowledgment of debt therefore told a lie about itself.

(ii) The second disquieting feature was that the plaintiff averred that he was to be paid in foreign currency by an offshore sister company to the defendant called PXL that was to be set up in Mauritius in which the defendant's acting Chief Executive Officer would have an interest.

He did not disclose whether this company was ever set up.

It seems to me that he should have sought payment from that company rather than the defendant.

I determine the third and fourth issues referred to trial in favour of the defendant.

Accordingly, it is ordered that:

1. The exception raised by the defendant be and is hereby upheld.

2. The plaintiff's claim be and is hereby dismissed.

3. The plaintiff shall pay the defendant's costs of suit.

HH688-14 : GERALD CHIWESHE and SAMEER KHAN and BRUCE THOMAS vs AIR ZIMBABWE HOLDINGS (PVT) LTD
Ruled By: MTSHIYA J

In this consolidated action, each plaintiff claims payment of salary arrears and allowances from the defendant.On 22 January 2013, KUDYA J, who dealt with the pre-trial conference relating to the parties herein issued the following order:“IT ORDERED THAT:1. The parties have failed to reach a settlement.2. The present matter, HC315/12, ...

In this consolidated action, each plaintiff claims payment of salary arrears and allowances from the defendant.

On 22 January 2013, KUDYA J, who dealt with the pre-trial conference relating to the parties herein issued the following order:

“IT ORDERED THAT:

1. The parties have failed to reach a settlement.

2. The present matter, HC315/12, be and is hereby consolidated with the case of Sameer Khan v Air Zimbabwe Holdings (Pvt) Ltd HC316/12 and the Matter of Gerald Chiweshe v Air Zimbabwe Holdings (Pvt) Ltd HC1786/12 for trial.

3. The present matter is referred to trial on the basis of the Joint Pre-Trial Conference Memorandum dated 4 June 2012.”

The Joint PreTrial Conference Minute signed by the parties in HC316/12 on 4 June 2012 was endorsed by HUNGWE J on 24 October 2012. It was, however, formally filed on 5 June 2012. There is therefore no doubt that the memorandum referred to in KUDYA J's order is the one filed on 5 June 2012. The said memorandum lists the issued for determination in this trial as follows:

“1.1 Whether or not this Honourable Court has jurisdiction to deal with the plaintiff's claims.

1.2 Whether or not the plaintiff is collectively bound by the arbitration award which was issued in November 2011.

1.3 Whether or not any rights accrue in favour of the plaintiff in terms of his contract of employment.

1.4 Whether or not the schedule of the alleged sums due is an authentic document reflecting defendant's indebtedness to the plaintiff.

1.5 Whether or not the failure to settle the plaintiff's salaries by the defendant is attributed to supervening impossibility.

1.6 Whether the sum claimed or any sum is due to plaintiff by defendant.”

The record shows that the award referred to in 1.2 above was actually issued on 5 October 2011. The effect of consolidation is that the above issues are the ones to be determined with respect to each of the three plaintiffs in this matter.

The determination herein shall follow the manner in which the parties' legal practitioners have put forward their arguments with respect to each plaintiff. Upon dealing with the preliminary issues, counsel for the parties then proceeded to argue the case of each plaintiff in the following order:

(a) Gerald Chiweshe - 1st Plaintiff.

(b) Sameer Khan - 2nd Plaintiff.

(c) Bruce Thomas - 3rd Plaintiff.

I shall therefore be guided by the same arrangement when dealing with each plaintiff.

The common factor in this case is that each one of the plaintiffs was at one time employed by the defendant as a pilot, with the highest rank, where applicable, being that of captain. The plaintiffs, prior, to leaving the employ of the defendant, were each owed outstanding salaries and allowances. They then, on the different dates indicated against their names here-below, issued summons for the amounts also indicated against their names:

I shall now proceed to deal with the preliminary issues raised by the defendant.

(i) The first issue raised is that this court has no jurisdiction on the ground that the plaintiffs' issues are labour disputes which should be handled by the Labour Court.

Notwithstanding the fact that the first and second plaintiffs filed summons when they were still employees of the defendant, it is accepted that they are now ex-employees. The plaintiffs are now claiming outstanding salaries from a former employer. Outside the employment arena, which is generally governed by the Labour Act [Chapter 28:01] (“the Act”), this becomes a purely debt collection matter.

In that situation, depending on the amount to be collected, the plaintiffs are free to approach either the High Court or the Magistrates Court.

I therefore believe the plaintiffs in casu are already in the right forum.

Although specifically dealing with the definition of 'employer', in the case of S v Stead 1991 (2) ZLR 54 (SC), the Supreme Court, in my view, also defined the word 'employee'. The Supreme Court, in that case, stated:

“The word 'employer' is defined in section 2 of the Labour Relations Act 1985 to mean:

'…, any person who employs or provides work for another person and remunerates him and includes the manager, agent, or representative of such person who is in charge or control of the work upon which such other person is employed.'

It is apparent that this definition presupposes the existence of employment. It is aimed at a person, (whether an individual, a company, an association, or the like), for whom employees work and who pays their wages or salaries.”

The above definition is in line with the current definitions of “employee” and “employer” in the Labour Act. Under section 2, the definitions are given as follows:

“'Employee' means any person who performs work or services for another person for remuneration or reward on such terms and conditions as agreed upon by the parties or as provided for in this Act, and includes a person performing work or services for another person -

(a)…,.

(b)…,.

'employer' means any person whatsoever who employs or provides work for another person and remunerates or expressly or tacitly undertakes to remunerate him, and includes -

(a)…, control of the work upon which such other person is employed; and

(b)…,.

(c)…,.

(i)…,.

(ii)…,.

(d)…,.”

The above definitions, in my view, relate to an existing employee-employer relationship.

The plaintiffs in casu are no longer performing work or services for the defendant for which they continue to be rewarded. They are claiming payment for services they rendered before terminating their contracts, and, to strengthen their cases, they have provided schedules from the defendant where the existence of arrear salaries and allowances is acknowledged.

The position of the plaintiffs is further fortified by the dicta in Eagle Training (Pvt) Ltd and Anor v Employees of Eagle Training (Pvt) Ltd and Anor SC238-91, where it was said:

“The reality of the matter is that the thirty-three employees had a civil claim for the remaining 75% of their bonus against either Eagle or Belmont Heather or against both in the alternative. They should have made that claim in a civil court.”…,.

The plaintiffs have civil claims and they have, in my view, correctly approached the civil division of the High Court for a remedy.

It should also be noted that both the Constitution of the Republic of Zimbabwe and the High Court Act [Chapter 7:06] clothe this Court with civil jurisdiction over the disputes that have been brought before it by the plaintiffs. This is so because section 171(1)(a) of the Constitution states:

“The High Court – has original jurisdiction over all civil and criminal matters throughout Zimbabwe.”…,.; and

Section 13 of the High Court Act also provides as follows:

“Subject to this Act, and any other law, the High Court shall have full original civil jurisdiction over all persons and over all matters within Zimbabwe.”…,.

The Labour Act, which, in casu, is “any other law”, does not, as it stands, expressly oust the jurisdiction that the law cited above confers upon the High Court.

This means the plaintiffs have a legal right to approach this court - even whilst still employed.

Accordingly, the first preliminary issue on jurisdiction cannot be upheld....,.

I shall now turn to the merits of the claims as they relate to each plaintiff.

As already indicated, consolidation of the matters was due to the fact that the issues affecting the plaintiffs are similar. This means that, in general, findings made on one plaintiff apply to the other two plaintiffs.

1. Gerald Chiweshe (Chiweshe) – 1st Plaintiff

Gerald Chiweshe (Chiweshe) gave evidence on his own behalf. He said he was claiming US$56,511=76 (i.e as amended). This claim was in respect of unpaid salaries and allowances due to him for the period February 2009 to July 2012.

Gerald Chiweshe said he was first employed by the defendant, as a pilot, from 2003 to 2010 when he resigned to relocate in Canada. He said he had resigned due to the failure by the defendant to regularly pay him his salary, Chiweshe said he had later returned to the employ of the defendant from the end of 2010 up to 31 March 2012. He said his monthly salary, as at 1 June 2011, was US$4,002=76 and that the salary was still the same when he left on 31 March 2012.

He said he was never a member of the Zimbabwe Flight Crew Association (the Association) and had never paid any subscriptions to it, and, therefore, the arbitral award had nothing to do with his case.

In support of his evidence, Gerald Chiweshe tendered documents (exhibit 1) showing his employment history and the arrear salaries and allowances he was claiming. He said he had been given the schedule showing the total of his outstanding salaries and allowances by the defendant's accounts department.

2. Sameer Khan – 2nd Plaintiff

Sameer Khan (Khan) said he was employed as a pilot in the rank of Captain. He was claiming his unpaid salaries and allowances for the period February 2009 to July 2012. His claim was for a total sum of US$123,473 (as amended).

He said his salary arrears and allowances were confirmed in a schedule bearing the defendant's official stamp. He produced the schedule as exhibit 2. He also supported his record of employment by producing exhibit 2A i.e employment contract, letter of resignation, and letter from the defendant accepting his resignation.

He said his salary, as at 1 January 2012, was US$7,058 per month and US$7,804 per month as at 31 July 2012 when he left the employ of the defendant.

He admitted that he was a member of the Zimbabwe Flight Crew Association (the Association) but was not personally named in the dispute between that association and the defendant i.e the dispute that was referred to arbitration. He said the arbitral award had no bearing on his claim.

3. Bruce William Thomas – 3rd Plaintiff

Bruce William Thomas (Thomas) testified that he was employed by the defendant as a commercial pilot. To that end he tendered exhibits 3 and 3A. He said his claim of US$39,779 relates to the period 1 February 2009 to 28 February 2010.

He had obtained schedules from the defendant's accounts department showing the total arrears of his salary and allowances. He, however, said the amount in the schedule was not correct because:

(a) It did not take into account an amount of US$830 which the defendant had already paid him; and

(b) The schedule incorrectly reflected that he had received an amount of US$2,000 as an advance payment; and

(c) A sum of US$22,000 had been paid to him but would not reduce his current claim due to when it was paid. He said a reconciliation of the figures therefore showed that the defendant still owed him US$39,779. He said his monthly salary, as at February 2010, was US$7,239.

Bruce William Thomas said he was never a member of the Zimbabwe Flight Crew Association (the Association), and, to that end, he had never paid any subscriptions and had never mandated the Association to represent him in his employment affairs. His claim therefore had nothing to do with the arbitral award.

The defendant called two witnesses, namely, Mrs Madziwana Nhira (Nhira), the Salaries Administrator and Mrs Pamela Mutsinze (Mutsinze), the defendant's Acting Manager–Human Resources.

In the main, the evidence of both witnesses was to give effect to the already rejected issue of res judicata and to deny the authenticity of the schedules relied upon by all plaintiffs.

I formed the impression that these innocent ladies were brought in at the last minute to reverse what the former Manager-Corporate Human Resources, a Mr O. Madziwa (Madziwa) had actually authorised.

They both confirmed Mr O. Madziwa's status, and even agreed that he had the capacity to call for salary schedules from the Accounts Department. Obviously, he dealt with the schedules as he deemed fit in his capacity as Manager-Corporate Human Resources.

To that end, it would be improper to allow the mentioned fall-out between Mr O. Madziwa and the defendant to influence the outcome of this case. He had official authority to act for the defendant.

In the case of all the plaintiffs, Mrs Madziwana Nhira's evidence was that she is the one who issues salary schedules but they have to be signed by the Human Resources Manager, the General Manager Finance, and the recipient. She said the stamping of schedules, without the three signatures, did not make them official.

She also went on to say that she had, in April 2011, issued signed salary schedules to all the three plaintiffs. She said the plaintiffs were also given monthly pay slips.

Unfortunately, the signed schedules and pay slips were not placed before the court.

As to the first plaintiff's claim, Mrs Madziwana Nhira said the defendant owed him around US$3,000. She agreed, though, that the schedule attached to Mr O. Madziwa's letter of 29 December 2011 came from her and also that the other schedules produced by the second and third plaintiffs were similar to the one she prepared for Madziwa.

In his letter to Gerald Chiweshe's legal practitioners, Messrs Kantor and Immerman, dated 29 December 2011, Mr O. Madziwa wrote:

“This is to certify that First Officer Gerald Chiweshe is employed by Air Zimbabwe Holdings (Private) Limited, as a Pilot in the Passenger & Cargo Division. His staff number is 27286. We write to confirm that due to financial challenges, the Airline has not been able to pay salaries as and when they fall due. As a result, salaries for the month of July to December 2011 have not been paid. Hence, his deferred salaries is USD28,493 as per the attached schedule. At this point in time, we are hesitant to indicate by which date we would have paid the outstanding salaries. Your patience and cooperation with him is greatly appreciated as he is an honest and hardworking Pilot.

Yours sincerely

For and on behalf of AIR ZIMBABWE HOLDINGS (PVT) LIMITED
O. Madziwa MANAGER – HUMAN RESOURCES”

It is important to note that the schedule attached to the above letter was prepared after 5 October 2011 i.e the date of the arbitral award.

As already indicated, similar schedules were attached to the claims filed by the second and third plaintiffs.

It was not denied that schedules contained information relating to the period before and after the arbitral award. That shows that the arbitral award had no impact on the plaintiffs' claims.

Notwithstanding the fact that the Human Resources Manager, O. Madziwa, in his signed letter to Gerald Chiweshe's legal practitioners, attached a schedule confirming the outstanding salary arrears, Mrs Madziwana Nhira urged the court to reject the schedule because it was not signed by three people.

However, as already stated, she was not able to place before the court either copies of the signed schedules that she gave to the plaintiffs or pay slips.

I do not believe, that, the defendant, given its standing in society, would take the issue of record keeping lightly as demonstrated by its failure to avail the court with what it claimed were authentic records in its custody. In view of the problems regarding non-payment of salaries and allowances the need for such records was paramount.

Under cross examination, she admitted that she at times issued unsigned schedules. She, however, tried to put a rider by saying she only gave the unsigned schedules to Management. She did not disclose how many schedules, in addition to the one she gave to O. Madziwa, she also dished out to other members of management who might have needed them.

Mrs Madziwana Nhira said she was not able to dispute Gerald Chiweshe's salary of US$4,002=67 as at the time of his departure from the employ of the defendant. She also agreed that everything relating to the plaintiffs would have been placed on record including pay slips.

I also did not hear her challenge the monthly salaries of the other plaintiffs (i.e Sameer Khan US$7,804 per month and Bruce William Thomas US$7,239 per month).

Sadly, at the end of the day, what we have in casu is a situation where the defendant accepts that the plaintiffs' are owed arrear salaries and allowances but simply refuses to pay or declare what those salaries and allowances are. This is despite the fact that the defendant is the custodian of the requisite records.

Given that situation, the court can only rely on the schedules produced by the plaintiffs.

Those schedules, it is my finding, emanated from officers of the defendant. The defendant did not produce counter schedules which it claimed to have given to the plaintiffs (i.e in the form of reconciled schedules and payslips).

Accordingly, in the absence of any such pay slips or reconciled schedules from the defendant, it is difficult to reject the plaintiffs' evidence.

It was not denied that the plaintiffs rendered services to the defendant as particularised in their claims. The defendant has a legal obligation to pay for their services.

There was also no evidence of any supervening impossibility which could have led to the defendant's failure to pay the plaintiffs their salaries and allowances.

The plaintiffs have, therefore, on a balance of probabilities, proved their claims. I therefore order as follows:

1. The defendant be and is hereby ordered to pay the first plaintiff (Gerald Chiweshe) the sum of US$56,511=76 (Fifty six thousand Five hundred and Eleven United States Dollars and Seventy Six Cents) with interest at the prescribed rate from 1 March 2009 to date of payment in full;

2. The defendant be and is hereby ordered to pay the second plaintiff (Sameer Khan) the sum of US$123,473 (One Hundred and Twenty Three Thousand Four Hundred and Seventy Three United States Dollars) with interest at the prescribed rate from 1 March 2009 to date of payment in full;

3. The defendant be and is hereby ordered to pay the third plaintiff (Bruce Thomas) the sum of US$39,779 (Thirty Nine Thousand Seven Hundred and Seventy Nine United States Dollars) with interest at the prescribed rate from 1 March 2009 to the date of payment in full; and

4. The defendant be and is hereby ordered to pay the total costs of suit incurred by all the plaintiffs.

HH224-22 : MUTSA DENHERE and DEMMUSK ENTERPRISES (PVT) LTD vs FAENSA FRISCO LIMITED
Ruled By: CHIRAWU-MUGOMBA J

The genesis of this matter lies in proceedings held under case number HC8844/12. In that matter, the respondent in casu obtained an order against the applicants as follows:

1. Judgement be and is hereby entered in favour of the plaintiff against defendants jointly and severally the one paying the other to be absolved in the sum of US$43,065.

2. Defendants pay, jointly and severally, the one paying the other to be absolved penalty interest at the rate of 4% per month on the sum of US$41,800 from the 24th of August 2021 to date of payment in full.

3. Costs of suit on an attorney and client scale.

The applicants' case is as follows:

The second applicant entered into a loan facility with the respondent for a total sum of US$45,000 constituting US$15,000 roll over and a new sum of US$30,000. This money was disbursed to the applicants.

It was a material term of the loan agreement that since the respondent is a foreign entity, it had to obtain exchange control approval from the Reserve Bank and this was also in terms of Clause 7:10.

Such proof was never furnished despite the payment supposedly coming from Mauritius.

In pursuance of a writ of execution in case no. HC8844/12, the Sheriff of the High Court visited the first applicant's place of residence armed with a notice of seizure and attachment. This writ was in Zimbabwean dollars and her legal practitioners paid on her behalf the sum of ZW$50,878.

The respondent's legal practitioners however insisted that the payment had to be in United States Dollars. This was ostensibly on the basis that the amount owed was a foreign debt.

The circumstances of the loan however point out to the fact that it was not a foreign obligation as claimed. It was actually a fraud based on the fact that no exchange control authority was sought and obtained.

The loan agreement was executed in Harare, the funds were to be used in Zimbabwe, the laws of Zimbabwe apply and the respondent's representative ordinarily resided in Zimbabwe.

The applicants therefore sought an order declaring the loan agreement entered into by the parties on the 18th of November 2010 as null and void and the discharging of the sureties.

In addition, they sought an order of costs on a higher scale.

Alternatively, they sought a declaratur that the ZW$50,878 is in full and final settlement of the respondents judgment debt.

In responding to the application, the respondent raised points in limine.

They contended that the applicants and respondents entered into the loan agreement in 2010 and the applicants defaulted in 2012 leading to institution of proceedings. They were aware of the existence of the agreement but did not challenge it. They entered into a Deed of Settlement which resulted in the default judgment against them when they failed to honour the agreement. They should have challenged the validity of the agreement within three (3) years but they did not do so. They cannot seek to enforce an agreement nearly nine years after.

Their claim for a declaratur has prescribed.

Additionally, the relief they seek has been overtaken by events. The Deed of Settlement settled the obligations between the parties which Deed became the cause of action resulting in the obtaining of the default judgment. The judgment remains extant and they have not challenged its validity. The applicants are estopped from challenging the validity of the loan agreement.

In any event the applicants are seeking an opinion and not a declaratur.

On the merits, the respondent averred as follows:

It is a duly registered company located in Mauritius. A copy of a certificate of incorporation was attached.

The second applicant and the respondent entered into a loan agreement as stated in the founding affidavit. The advance was made from Mauritius where the respondent is incorporated. Inserted into the loan agreement were warranties to ensure compliance with the laws of Zimbabwe.

The loan agreement did not require exchange control authority as contended by the applicants.

The loan amount was credited into the second applicant's Standard Chartered bank account held in Zimbabwe. The applicants made some payments, specifically a payment of US$2,000 (two thousand) via telegraphic transfer on the 15th of June 2012 to the respondent's bank account held in Mauritius but subsequently defaulted which resulted in the institution of legal proceedings on the 8th of August 2012.

Thereafter, the respondent obtained judgment against the applicants based on a Deed of Settlement.

Further, that the debt is owed to a foreign entity and should be paid in United States Dollars.

The fact that the writ and notice of removal by the Sheriff was in Zimbabwe dollars does not make it less so. The court order upon which the debt is based is expressed in United States dollars. The fact that the loan agreement was executed in Zimbabwe, by a borrower in Zimbabwe, for use in Zimbabwe is irrelevant as is the fact that the respondent's representative was based in Zimbabwe.

What defines whether or not a loan is a foreign obligation is the source of the funds.

The applicants cannot deny that the respondent is registered in Mauritius and funds were transferred from a bank in Mauritius.

At the hearing, after counsel for the respondent had made submissions on the points in limine, counsel for the applicants, in response, abandoned the main relief sought and submitted that the applicants were now only seeking the alternative relief.

The alternative relief is couched as follows:

Alternatively -

(a) It is declared that the applicants payment of ZW$50,878 is a full and final settlement of the respondent's judgment debt.

(b) The respondent shall pay costs of suit on the higher scale of legal practitioner and client scale.

As rightly contended by counsel for the applicants, the legal issue that arises is whether or not the debt is a foreign obligation.

In his submissions, he contends that the court must declare that the ZW$50,878 discharged the obligations the applicants owed to the respondent. This is due to the effects of S.I.33 of 2019 as subsequently provided for in the Finance Act, No.2 of 2019.

By operation of the law, the debt became a Zimbabwe dollar one.

The loan agreement must be viewed in a holistic manner based on the factual circumstances upon which the loan was extended. The laws to be applied must be those of Zimbabwe - including the Exchange Control Regulations.

Counsel for the respondent, on the other hand, submitted as follows:

It is not in dispute that the respondent is a foreign entity operating out of Mauritius as evidenced by the certificate of incorporation. The loan agreement itself shows the domicile of the parties as being Zimbabwe and Mauritius respectively. The capital sum of US$45,000 advanced to the applicants came out of Mauritius. The loan agreement sets out the Bank to which the loan is to be repaid as being in Mauritius. Partial settlement was made by the applicants into that Bank.

They cannot now be heard to suggest that the loan should be paid in Zimbabwe dollars.

In Zimbabwe, the issue of debts owed and indeed the currency in which they have to be paid has found its way into the courts after the promulgation of SI33 of 2019.

The Supreme Court dealt with these issues in the oft cited cases of Zambezi Gas Zimbabwe (Pvt) Ltd v N.R Barber and Another SC03-20 and Breastplate Services (Pvt) Ltd v Cambria Africa PLC SC66-20. See also Central Africa Building Society v Stone and Ors SC15-21.

In Mushayakura v Zimbabwe Leaf Tobacco Company (Pvt) Ltd SC108-21, the court dealt with a matter involving a growing and financing agreement, an acknowledgment of debt, and a Deed of Settlement involving the appellant and respondent. MALABA CJ had this to say regarding the definition of a foreign loan and obligation:

“The term 'foreign loans and obligations denominated in any foreign currency', as it appears in section 44C(2) of the Reserve Bank Act, is not defined in SI33 of 2019. As stated in the Breastplate case supra, its meaning in any given case must be ascertained from the factual circumstances of the parties involved and the material substance of the transaction that they have entered into.

Section 44C(2)(b) of the Reserve Bank Act makes it clear that the issuance of any electronic currency, that is RTGS dollars, shall not affect or apply to any foreign obligation, as the provision explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.

It is settled that the effect of SI33/19 was to render all assets and liabilities, except those referred to in section 44C(2)(b) of the Reserve Bank Act, as values in RTGS dollars at the exchange rates prescribed.

It was the appellant's position that, since the parties had concluded a Deed of Settlement, the court a quo was not entitled to take into consideration agreements that preceded the Deed of Settlement.

The appellant argued that the Deed of Settlement constituted a compromise.

It was the appellant's further submission that it did not matter that the debt had been expressed in United States dollars. The argument was that the issue was whether the appellant could discharge his liability in RTGS dollars at the rate of one-to-one in terms of Statutory Instrument 33 of 2019.

The Deed of Settlement, and the preceding contracts, have to be read together for a proper understanding of the arrangement the parties entered into.

The source of the funds had to be established first for the Court to be able to make a determination of the issue of the currency in which the debt admittedly due had to be repaid.”

Further, that:

“The Deed of Settlement was entered into for the purpose of allowing the appellant to repay the debt he acknowledged to be owing in instalments in United States dollars. The Deed of Settlement was for the benefit of the appellant.

The appellant cannot escape the obligation he voluntarily undertook to repay the funds advanced to him in United States dollars for the specific purpose of financing the production of the tobacco crop by calling the Deed of Settlement a compromise. There was no dispute between the parties over the currency in which the offshore funds received by the appellant from the respondent had to be repaid.

The respondent was entitled to invoke the provisions of section 44C(2)(b) of the Reserve Bank Act to protect its rights to the repayment of the offshore funds advanced to the appellant in United States dollars under the Deed of Settlement.”

In casu, it is common cause that the source of funds was from a bank in Mauritius. The applicants never denied this fact.

They, instead, after benefiting from the loan, sought to cast aspersions on the juristic person of the respondent and went on to place irrelevant facts of money laundering before the court.

It is also common cause that the respondent is a registered entity in Mauritius.

Clause 5.7 of the loan agreement makes it clear that the repayments were to be done through a bank in Mauritius. The applicants did, in fact, pay a sum of US$2,000 via that account. The loan agreement itself was cognisant of the fact that the currency in Zimbabwe could change and hence clause 9.3 which states as follows:

“The borrower acknowledges that in the event of the Government of Zimbabwe announcing plans for, or implementing plans for the re-introduction of the Zimbabwe dollar as the primary currency of transactions, with or without the withdrawal of the use of other currencies in use as at the date of this agreement, the lender shall be entitled, at its election to call up the entire amount then due from the borrower and the borrower shall be obliged to repay back the amount due as provided for in clause 11.2 of this agreement.”

This clearly and unequivocally supports the fact that the loan itself was a foreign obligation otherwise there would not have been need for such a clause.

Clause 16 of the agreement shows the domicile of the respondent as being at an address in Mauritius.

The Deed of Settlement signed by the parties shows the amount owing as being US$51,800.

The totality of the circumstances of the matter, and on the authority of Mushayakura v Zimbabwe Leaf Tobacco Company (Pvt) Ltd SC108-21, the inescapable conclusion is that the debt owed to the respondent can only be discharged in United States Dollars.

The fact that the Sheriff expressed the amount in Zimbabwe currency, in the writ and notice of removal, is neither here nor there.

I find no merit in the applicant's contention that there was no exchange control approval obtained.

Once the applicants abandoned the main claim in favour of the alternative, the only issue is whether or not payment of the amount owed in Zimbabwean dollars discharged the debt.

In Mushayakura v Zimbabwe Leaf Tobacco Company (Pvt) Ltd SC108-21, the court made a very pertinent observation that:

“If payment were to be made in RTGS dollars, contrary to the clear and unambiguous language of section 44C(2)(b) of the Reserve Bank Act, the purpose of the provision of ensuring that tobacco farmers benefit from offshore funding lines of credit accessible to the respondent and others in similar business would be defeated to the detriment of the national interest in the protection and promotion of the development of the tobacco industry.

The court a quo cannot be faulted for holding that the funds advanced to the appellant had to be repaid in United States dollars.

The Zambezi Gas case supra is distinguishable from the present matter.

The present case relates to offshore funding. The obligation incurred by the respondent was a foreign obligation denominated in foreign currency within the contemplation of section 44C of the Reserve Bank Act.”

In casu, the agreement between the parties constitutes offshore funding.

The respondent stated clearly in its opposing affidavit that the applicants sought funding after they had been denied such by local banking institutions. This was not denied.

Offshore funding presents a lifeline for most businesses in Zimbabwe that cannot obtain any or adequate funding on the domestic market.

Surprisingly, after receiving the money, the applicants turned around and accused the respondent of not being an authorised dealer yet happily received US$45,000.

Clearly, payment in RTGS dollars will have a negative impact on businesses and would not be in the national interest.

The requirements of a declaratur have been set out in a plethora of cases: see Streamsleigh Investments (Pvt) Ltd v Autoband Investments (Pvt) Ltd, 2014 (1) ZLR 736.

In my view, and for reasons stated above, the applicants have not established any basis for the granting of a declaratory order.

Costs should follow the cause. I do not perceive of any factors that support an award of costs on a higher scale.

DISPOSITION

1. The application be and is hereby dismissed with costs.

Appealed
SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

INTRODUCTIONThis appeal arises from the judgment of the High Court in which the court a quo ordered the appellant to pay the respondent the sum of US$89,000 with interest at the prescribed rate calculated from 11 December 2012 to the date of full payment.The appellant is a gold mining company. ...

INTRODUCTION

This appeal arises from the judgment of the High Court in which the court a quo ordered the appellant to pay the respondent the sum of US$89,000 with interest at the prescribed rate calculated from 11 December 2012 to the date of full payment.

The appellant is a gold mining company. It is registered in terms of the laws of Zimbabwe. It owns a gold mine located in Shurugwi (Sky Rocket 16485).

The respondent is a private individual of Chinese origin. He is a foreigner investor based in Zimbabwe.

BACKGROUND FACTS

On 13 January 2011, the appellant and the respondent entered into a joint venture agreement. In terms of the agreement, the parties would constitute a new company. The appellant would provide mining claims and the respondent would be responsible for exploration and providing investment of capital and equipment in respect to the mining venture.

In terms of the agreement, the respondent would get 75 per cent and the appellant 25 per cent of the proceeds from the mine.

The respondent was obliged to grant a loan to the new company in the sum of US$150,000. The loan was to be paid back to the respondent through deductions from profits that would accrue to the appellant when such profit was realized by the company.

The respondent had to pay a down payment in the sum of US$50,000 within ten days of coming into effect of the agreement. In return, the appellant would give the respondent 'blocks of claims' certificate and the company certificate “after agreement of signature of ten days.” (sic)

The new company was to be established before 1 March 2011, and, thereafter, the respondent would pay the remaining US$100,000 to the appellant within ten days after 1 March 2011.

Failure by the respondent to bring reasonable mining equipment and to have the project take off by July 2011 would entitle him to be paid back the loaned amount within six (6) months.

Following signing of this agreement, the respondent, through his erstwhile legal practitioners, wrote a letter to the appellant dated 13 May 2011. In this letter, the respondent informed the appellant that there was a misconception on the terms and conditions of the agreement which had been agreed to by the parties on 13 January 2011. As such, the respondent informed the appellant that he was cancelling the agreement and demanded a refund of the sum of US$88,099 which he had paid to the appellant as a loan amount in terms of the agreement.

Following the letter cancelling the agreement, the parties thereafter entered into a new agreement on 3 October 2011.

In terms of the new agreement, the appellant admitted that it owed the respondent the sum of US$89,000. It was also agreed that the full loan amount, as agreed by the parties, was US$150,000.

It was further agreed that the respondent would recover the loan amount through a tribute to operate and extract ores from the mine. The respondent was to take over the appellant's workers and general control of the mine and recover the amount due to him.

Payment of the loan balance of US$61,000 was to be made before the respondent could take up occupation of the mine.

On 11 December 2012, the respondent issued summons against the appellant claiming the sum of US$89,000 being the amount advanced to the appellant as well as interest at the prescribed rate and cost of suit.

In his declaration, the respondent averred that the new agreement between the parties did not come into fruition due to the appellant's (represented by Philemon Mubata who was cited as the second defendant a quo) failure to perform in terms of the agreement by excluding him from the operations at the mine and using the loan contrary to the provisions of the agreement.

The respondent further averred that he had no choice but to cancel the agreement as the appellant had breached it.

In its plea, the appellant did not dispute entering into a joint venture agreement with the respondent but argued, instead, that, the respondent had not sought to recover his money by mining ore equivalent to the loan sum of US$89 000. It was the appellant's argument that according to the agreement, the appellant was entitled to six months in which to repay the loan. The appellant thus stated that the issuance of summons proceedings was premature.

On 20 November 2013, the appellant amended its plea and averred that the respondent had breached the agreement and failed to provide equipment necessary to carry out exploration work at the mine.

Following breach of the first agreement by the respondent, the parties entered into a second agreement.

The appellant further averred that the second agreement had a suspensive provision to the effect that the respondent had to pay the full amount of US$150,000 before he could recover his monies from production on the mine.

The appellant also filed a counter claim against the respondent with the amended plea for the sum of US$61,000 being payment of the balance of the loan in fulfilment of obligations which the respondent had undertaken in order to fulfill the terms of the agreement.

In response to that claim, the respondent alleged that a condition had to be satisfied, prior to the payment of the US$61,000, which condition was his involvement in management and operations at the mine at the inception of the loan agreement. The respondent averred that he was frustrated by the actions of the appellant. This was the reason why he failed to fulfill his obligation and led to the cancellation of the whole agreement.

PROCEEDINGS BEFORE THE COURT A QUO

At a Pre-Trial Conference, the agreed issues for determination were stated as follows:

“(a) Whether or not the plaintiff was, in accordance with the joint venture agreement, obliged to pay the sum of US$150,000 towards financing the gold mining venture.

(b Whether or not the first and second defendants frustrated the contract resulting in non-fulfillment of the terms and conditions of the agreement between the parties.

(c) Whether or not the first and second defendants were in breach of the fundamental terms of the agreement causing the plaintiff to cancel the whole agreement and demand repayment of the loaned sum of US$89,000.”

During the trial the respondent, Ms. Ding (his assistant at the time when the agreement was made) and one Mr. Wei Ren (the respondent's mining manager from 2005 to 2010-2011) gave evidence.

The three witnesses all testified to the effect that the appellant and respondent entered into two agreements which never materialized and that the appellant denied the respondent access to the mine so that he would recover his monies. Ms Ding further clarified that the second agreement was prepared by Mr Mubata. She denied that the respondent had breached any of the terms of the agreement and insisted that it was the appellant which had breached the terms of the agreement by denying the respondent access to the mine.

Two witnesses led evidence on behalf of the appellant.

Mr. Mubata (the second defendant a quo) testified that the agreement failed to materialize because the respondent failed to bring the requisite equipment to the mine and that the respondent cancelled the agreement because the appellant had refused to sell the mine and transfer the registration certificates to him. The second witness was Mr. Mhere, the appellant's Finance and Administration manager. He testified that the respondent failed to pay the full loan amount which had been agreed between the parties leading to the breach of the agreement.

In its judgment, the court a quo found that the respondent had had the agreement explained to him in Chinese and therefore they were valid agreements.

The court believed the evidence of the appellant that the respondent paid the loan in 'dribs and drabs' contrary to the terms of the agreement. The court a quo also found that the respondent was in breach of both agreements.

The court, however, decided to apply the principle of equity on the basis that the respondent's grasp of English was so bad that he may not have understood the terms of the agreement and decided to reimburse the respondent the amount that he had loaned the appellant. The court stated as follows:

“I (sic) persuaded that it would be appropriate to utilize the equitable principle in coming to a resolution of this matter. I hold the view primarily because the court was uneasy with the plaintiff's level of understanding of the terms of both agreements.”

The court made the following order:

“In the result, it is ordered that:

1. The plaintiff's claim against the 2nd defendant be and is hereby dismissed with costs.

2. The defendant's counter-claim against the plaintiff, for payment of USD$61,000, be and is hereby dismissed with costs.

3. Plaintiff's claim, as against the 1st defendant, Big Valley Masters Private Limited, in the sum of US$89,000, is allowed, together with interest thereon at the prescribed rate calculated from 11 December 2012 to the date of payment in full.

4. 1st defendant shall bear the costs of suit.”

The appellant was dissatisfied and appealed on the following grounds:

1. The court a quo erred in law in deeming the partnership dissolved by a letter at a future date contrary to the principle that dissolution of a contract is exercised ex nunc.

2. The court grossly misdirected itself in adjudging that the respondent was entitled to recover US$89,000 when he was in clear breach of the parties' agreement.

3. The court a quo grossly misdirected itself by allowing the respondent to derive a benefit from his own wrong.

4. The court a quo erred in failing to uphold the appellant's defence of the exceptio non adimpleti contractus.

5. The court a quo further erred in allowing interest on the sum of US$89,000 to run up to the date of payment thus contravening the in duplum rule.

6. The court a quo grossly misdirected itself in awarding costs in favour of the respondent where it had failed to fully succeed in the matter.

In my view, from the appellant's grounds of appeal, and from submissions made, the issue that resolves the appeal is the following:

Whether or not the court a quo erred in applying the principle of equity in resolving the matter

SUBMISSIONS ON APPEAL

Counsel for the appellant…, submitted, in the main, that, the court a quo erred in determining the matter before it on the basis of the principle of equity as such principle is not part of the Zimbabwean law.

Counsel argued that the principle could only be resorted to where a statute provides for its application.

It was counsel's submission that the terms of the agreement were clear and should have been complied with. With these submissions, whilst not abandoning the other grounds, counsel prayed that the appeal be allowed.

Per contra, counsel for the respondent…, argued that the court a quo did not misdirect itself when it applied the principle of equity. It was his submission that the principle is part of our law in terms of the common law. Counsel further argued that the breach of the agreement by the respondent could be attributed to the fact that there had been difficulty in communication as the respondent could not communicate fluently in English. Counsel thus submitted that the case was one which justified the application of the principle of equity so as to ensure that the appellant would not be unjustly enriched.

The court a quo found in favour of the respondent on the basis of the principle of equity. The court stated as follows;

“A modern interpretation of the equitable principle, one that takes into account the situation prevailing in our economy, may not favor an insistence that the plaintiff cannot succeed in his claim until he has performed in full, the terms of the October agreement. The court can exercise its discretion in the plaintiff's favor despite his partial performance of the January agreement (by advancing a loan up to US$89,000) and his non-performance of the October agreement.”

The appellant has argued that the court a quo erred in applying the principle of equity in this matter as the principle is foreign to this jurisdiction. With that, the appellant seeks to show that the court misdirected itself in finding for the respondent resulting in him deriving a benefit from his own wrong.

The second agreement had a provision, under paragraph 8, which stated as follows:

“(8) PAYMENT OF LOAN BALANCE ($61,000) SHOULD BE PAID TO SUM IN FULL BEFORE OCCUPATION OF PLANT WILL BE TAKING AFTER MR SHI IS BACK”(sic)

It was not in dispute that the provision under paragraph 8 was not fulfilled by the respondent.

It was also an agreed fact that at no point did the respondent mine or recover any profits from the mine.

The appellant submits that the court a quo erred by ordering it to pay the respondent his money in circumstances where he had breached the contract.

The respondent argued, before the court a quo, that, he was denied entry on to the mine by the appellant. This prevented him from being productive to recover his monies as agreed between the parties in the second agreement. The appellant counter-argued that the respondent was never refused access to the mine from the date when the first agreement was signed to the signing of the second agreement.

The court a quo believed the appellant's arguments and found that the respondent failed to honor some of the provisions of the agreement and was never denied access to the mine.

It is a settled principle that this Court will not easily interfere with factual findings made by a lower court unless the findings are grossly unreasonable: see ZINWA v Mwoyounotsva 2015 (1) ZLR 935 (S); Hama v NRZ 1996 (1) ZLR 664 (S); Reserve Bank of Zimbabwe v Corrine Granger and Another SC34-01.

The lower court enjoys the opportunity to see the witnesses on the stand, assess their demeanour and credibility. Such findings of fact cannot easily be interfered with by an Appellate Court as it is limited to the record of proceedings: see Mtimukulu v Nkiwane and Another SC136-01.

The respondent, in making his claim for the amount which had been advanced to the appellant, had to prove that he was owed such money.

It is pertinent to note that the standard of proof in all civil matters is on a balance of probabilities.

The concept of proof on a balance of probabilities was enunciated in British American Tobacco Zimbabwe v Chibaya SC30-19 wherein the court quoted with approval the case of Miller v Minister of Pensions [1947] 2 All ER 372, 374 and explained the concept of balancing probabilities as follows:

“It must carry a reasonable degree of probability but not so high as is required in a criminal case. If the evidence is such that the tribunal can say 'we think it more probable than not', the burden is discharged, but if the probabilities are equal it is not.”

This was further emphasized in the book, Principles of Evidence, 4th ed (2016) Juta: Cape Town, wherein the authors SCHWIKARD PJ and Van der MERWE SE stated that:

“In civil proceedings, the inference sought to be drawn must also be consistent with all the proved facts, but it need not be the only reasonable inference: it is sufficient if it is the most probable inference.”

The rule on onus of proof was pronounced in ZUPCO Ltd v Pakhorse Services (Pvt) Ltd SC13-17 where the Court stated that:

“The cardinal rule on onus is that a person who claims something from another in a Court of law has to satisfy the Court that he is entitled to it.”

The respondent managed to discharge the onus of proof which was required of him in making his claim.

Indeed, it was conceded, by the appellant, that, the sum of US$89,000 was paid to it by the respondent. It was also conceded that during the subsistence of the agreement the respondent did not mine any gold or recover any profit from the use of that money.

The resultant effect was that the appellant ended up unjustly enriched by the respondent's US$89,000 which the respondent did not benefit from.

The appellant, in motivating the point that the court a quo erred in finding that the respondent could recover money he had paid to the appellant, relied on the ground that the court erred in failing to uphold its defense of exceptio non adimpleti contractus.

This point was not pursued in the appellant's heads of argument and was never pleaded a quo.

Clearly the appellant was wrong in submitting that the court a quo erred by not dealing with the point.

It is a trite principle that it is not open to the courts to rewrite a contract entered into between the parties or to excuse any of them from the consequences of the contract that they have freely and voluntarily accepted, even if they are shown to be onerous or oppressive as this is a matter of public policy: see Magodora and Others v Care International Zimbabwe SC24-14.

This Court must interpret the second agreement literally.

It can be deduced from the agreement that the respondent had to pay the full loan amount first before taking occupation of the mining claims. The respondent failed to do so and this resulted in a breach of the contract. Once the respondent failed to fulfil his end of the agreement, and a breach occurred, the agreement was terminated and the respondent would ordinarily not be entitled to recover his money.

However, for a wholesome resolution of this matter, it is in the interests of justice that the principle of equity be looked at as that was the basis of the court a quo's decision.

The scholar R.H. CHRISTIE, Business Law in Zimbabwe, 2nd Ed, Juta & Co Ltd…, provides that the principle of equity may be resorted to where there is incomplete performance of a contract. The principle is based on unjust enrichment.

The court, in Carlis v McCusker 1904 TS 917, observed that:

“In view of the well-known maxim of law, that no man should be allowed to enrich himself at the expense of another, this court would not permit a man who had verbally agreed to sell landed property, and had, on the faith of that agreement, received the whole or portion of the purchase price, to retain both the money and the land. It would, under such circumstances, come to the relief of the purchaser,”

See also Matipano v Gold Driven Inv (Pvt) Ltd SC225/12.

This principle is clearly discretionary and is applied by a court on the basis of the particular circumstances of a case which warrant the use of such a principle.

I would, however, venture to suggest that the principle of equity should be sparingly used as it has the effect of undermining the contract entered into between the parties.

In this case, the respondent paid a known sum of money to the appellant on the basis of the first agreement. The respondent never acquired any minerals from the appellant's mine. Although the first agreement was dissolved, the court a quo, in the exercise of its discretion, took into account that the second agreement did not have an operational clause to deal with what would happen if any of the parties breached the agreement.

In the first agreement, it was an agreed provision, that, in the event that the respondent failed to bring equipment to the mine he would be entitled to a refund of his money within six (6) months. The appellant, in its own plea, stated that it was an agreed provision that if there was failure to pay the debt it would settle the debt over a period of six months.

It seems to me that even though the second agreement did not have a provision for settlement between the parties, in the event that the respondent failed to fulfill his obligations, the court a quo was correct to exercise its discretion and be guided by the spirit of the provision in the first agreement. It was quite apparent that the second agreement flowed from the first agreement between the parties.

This is a matter where equity may properly be applied.

It would be unjust for the appellant to remain in possession of the US$89,000 which was paid to it by the respondent when the respondent himself did not get anything from the deal. The agreement between the parties was an investment on the part of the respondent that was going to jointly benefit both parties. The loan paid by the respondent was to be paid back through production on the mine.

Production did not happen.

Despite the respondent's breach of the agreement, justice will be met if the parties are returned to their status quo ante.

The appellant did not, either in its grounds or in argument, seek to challenge the application of discretion by the court a quo in applying the principle of equity in these circumstances.

Indeed, in my view, the appellant would have been hard pressed to make such a submission in view of the concession it had made that it had received the money.

It would appear, however, that an order for interest on the sum is not justified.

The respondent accepted, in his evidence, that he was in breach of the agreement between the parties. He did not fulfil his obligations which would have resulted in him occupying the mine and getting his money back.

He thus cannot benefit by being awarded interest in view of the fact that he did not comply with the terms of the agreement.

However, the special circumstance of the respondent justifies the approach by the court a quo.

The respondent's understanding of the English language was so bad that the court felt the need to intervene. It would be a travesty of justice to hold the respondent to the terms of the agreement in circumstances that clearly show that he did not grasp that he was obliged to pay the full amount before he could recover his money. This was in circumstances where the appellant not only retained the profits from the mining operations but also retained the respondent's money.

DISPOSITION

The court a quo did not err in finding that it was just and equitable for the appellant to return the respondent's loan of US$89,000. Indeed, it was clearly accepted by the appellant that it had received the money from the respondent. The court, however, erred in awarding interest on the sum at the prescribed rate when such interest was not justified where the court was applying principles of equity.

The appeal thus succeeds on this point.

With regards to costs, the respondent has successfully defended the appeal in the main and I thus find no reason why costs should not follow the cause.

In the result, it is accordingly ordered as follows:

1. The appeal be and is hereby partially allowed with costs.

2. Paragraph 3 of the judgment of the court a quo be and is hereby set aside and substituted with the following:

“3. Plaintiff's claim, as against the 1st defendant, Big Valley Masters (Private) Limited, in the sum of US$89,000 is allowed.”

View Appeal
HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA
Ruled By: CHIGUMBA J

Zimbabwe adopted a policy that was dubbed “look east” as a way of combating economic sanctions that were imposed on it by the international community. The “look east” policy encourages a forging of closer business and trade ties with countries in the east as opposed to the west, the traditional former business and trade partners.

When this policy was adopted, a lot of Chinese nationals came to our country in pursuit of business opportunities, especially in the mines and minerals sector. Unfortunately, the language barrier has caused a lot of difficulty in the conclusion of contracts and the implementation of business deals.

The plaintiff is a Chinese national who does not speak English. He relied on the interpretation of a business associate who told him of the terms of the contract that he entered into with a Zimbabwean company called Big Valley Masters (Private) Limited (the first defendant). The company owns gold mining claims in Shurugwi (Sky Rocket Mine 1645). Mr. Phillimon Mubata (second defendant) is a director and shareholder in the first defendant.

The plaintiff issued summons against the defendants on 11 December 2012, claiming payment of USD$89,000 being a sum outstanding in respect of a loan advanced to the defendants, as well as interest thereon at the prescribed rate, and costs of suit.

In his declaration, the plaintiff averred, that, on 13 January 2011 he and the first defendant entered into a written agreement. The first defendant was represented by the second defendant when the agreement was concluded. The terms of the agreement included, among other things, an obligation on the plaintiff's part that he would pay for exploration work at the mine, invest capital and mining equipment, and use the block of claims which constituted Sky Rocket Mine 1645 as surety.

The parties agreed that the block of claims would subsequently be transferred into the name of a new investment company in which they would have equal shares, and which would be exclusively managed by the plaintiff.

The plaintiff averred, further, that, the parties agreed that he would advance a loan in the sum of USD$150,000 to the defendants, subject to repayment on certain conditions, for purposes of discharging pressing debts owed by the first defendant.

On 3 October 2011, the parties entered into a second agreement, in terms of which the defendants allegedly admitted to being indebted to the plaintiff in the sum of USD$89,000 and agreed to repay the loan, while allowing the plaintiff to run the mine.

The plaintiff is aggrieved because none of these undertakings given by the defendants have been honored.

The defendants filed their plea on 15 January 2013.

They did not dispute that the parties had entered into what they called a joint venture agreement relating to gold mining. They averred that the plaintiff breached the terms of the joint venture agreement by failing to provide capital to fund their joint venture, in the agreed sum of USD$150,000.

The second defendant denied that he entered into a loan agreement with the plaintiff, or that he entered into any agreement at all with the plaintiff in his personal capacity. He stated, that, at all times; he dealt with the plaintiff in a representative capacity as a director and shareholder of the first defendant.

In the plea, it was averred that the parties had agreed that any loan sums advanced by the plaintiff would be repaid using the proceeds of production at the mine.

After clearing the loan sums, by offsetting against the proceeds of production, the parties would subsequently enter into a profit sharing agreement.

The defendants averred that the plaintiff breached the agreement by failing to finance production through the agreed USD$150,000, and that this breach caused the collapse of the joint venture.

The defendants averred that the joint venture resulted in loss, which should be borne equally with the plaintiff, as an equal partner in the joint venture.

On 20 May 2013, the defendants filed an amended plea, in which they averred that the terms of the second agreement entered into by the parties were such that the plaintiff was obliged to advance the full USD$150,000, as agreed, before any repayment of that loan could be made.

The averment was that the plaintiff was not entitled to repayment until he paid USD$150,000 to the first defendant in full.

The defendants denied that they prevented the plaintiff from assuming control of the mining operations.

The defendants filed a counterclaim for the payment of USD$61,000 which they alleged was still due and owing to the first defendant in terms of the parties' first agreement.

In his replication to the amended plea and counter claim, dated 22 May 2013, the plaintiff denied being in material breach of the terms of the parties' agreements. In his plea to the counter-claim, he reiterated that the defendants themselves breached the agreement, by refusing to relinquish control of the first defendant's mining operations to him, as agreed.

This matter was referred to trial for the determination of these issues:

1. Whether the plaintiff was obliged to provide USD$150,000 towards the financing of a joint venture agreement.

2. Whether the defendants frustrated the contract and caused the non-fulfillment of its terms and conditions.

3. Whether the defendants breached the contract and caused the plaintiff to cancel it and demand re-payment of the USD$89,000 which he had advanced.

In terms of the joint pre-trial conference minute filed of record, on 29 May 2013, the defendants admitted that they received the sum of USD$89,000 from the plaintiff.

At the trial of the matter, Mr. Shi Jinwu gave evidence and told the court that he met the second defendant in February 2010 at a petrol station. He said that the second defendant told him that he was looking for investors for his mineral claims because he was experiencing financial difficulties, and invited him to form a partnership with him.

The plaintiff said that the second defendant invited him to tour his mining operations. He said that he asked him for a loan of USD$150,000. The loan was to be disbursed in phases. The second defendant offered to give up the certificates to his mining claims as collateral. He offered to let the plaintiff take over the day to day running of the mining activities.

The plaintiff told the court that the parties agreed that if he paid an initial USD$50,000 he would be allowed to take over the mining operations of the first defendant.

He said that he was surprised when the second defendant refused to let him assume control of the mining operations of the first defendant after he had paid the fifty thousand as agreed.

The plaintiff referred to Annexure 'A' to the summons, the agreement which the parties signed on 13 January 2011.

The plaintiff signed on behalf of “Chinese”. The second defendant signed that agreement on behalf of the first defendant. In fact, the plaintiff and second defendant are referred to as representatives.

The plaintiff told the court, that, despite the express terms of the agreement, the defendants refused to let him assume control of the mining operations, and, consequently, he was now seeking re-payment of the USD$89,000 which he had advanced to them.

He referred to a second agreement entered into on 3 October 2011 in which the defendants agreed to let him run the mine for purposes of recovering the USD$89,000 which he had advanced to them.

The plaintiff told the court, that, despite the signature of that second agreement, he was never given a chance to enter the mine.

He said that the defendants never prepared the relevant paperwork towards establishing a tribute agreement. There were no environmental and other requisite mining licenses. The plaintiff said that the second defendant kept on giving him excuses as to why he could not allow him to enter the mine and begin mining operations.

The plaintiff told the court that the spirit of the agreement never materialized.

He decided to cancel the partnership and to get a refund of his USD$89,000.

Finally, the plaintiff told the court, that, in his opinion, the second defendant ought to be bound in his personal capacity because he first knew him in his personal capacity.

During cross examination, the plaintiff told the court that he entered into the agreement with the first defendant in a representative capacity, as a representative of a company which is registered here in Zimbabwe, which he is a director of. He conceded that the name of this company was not part of any of the agreements entered into by the parties.

The plaintiff told the court that the first agreement was drafted by his friend who understands English, and that his friend explained the exigencies of the agreement to him. The plaintiff conceded that due to lack of understanding of the English language, he needed to have the agreements explained to him in Chinese.

He said that he was told of the contents of the agreements before he signed them, so he knew what he was signing for.

He called exhibit 1 a mining partnership agreement.

The plaintiff insisted that the partnership fell apart because he was not allowed to gain entry and to start mining operations.

He denied that the agreement known as exhibit 1 had anything to do with the loan agreement.

The plaintiff told the court that exhibit 1 was never followed that's why the parties entered into a second agreement - which was also never fulfilled.

The plaintiff told the court that the second defendant demanded that he pay USD$100,000 to him before he could allow him to enter and begin mining operations.

The plaintiff could not recall the exact dates when he cancelled the agreements entered into by the parties.

He could not comment on the letter shown to him, of 13 May 2011, from Messrs Danziger & Partners, which letter suggested that the parties had been at cross-purposes from the outset regarding the terms and conditions of their respective agreements.

He was unable to provide a cogent reason why the letter of cancellation did not mention that he had been denied entry to the mine, and suggested that the lawyers possibly misunderstood his instructions because of the language barrier.

The court had no problem following the logic of the plaintiff's evidence.

He was sincere in his belief of the terms of the agreements between the parties as they were explained to him in his language. The court believed that he told the truth as he knew it.

The plaintiff called Ms Hua Ding as his second witness.

She is also a Chinese national currently resident in Zimbabwe and South Africa. She told the court that she and the plaintiff met the second defendant at Gweru service station in December 2010. She was employed by the plaintiff as his assistant at the time. Ms Ding told the court that the second defendant invited them to tour his mining operations in Shurugwi and proposed that he enter into a joint venture agreement with the plaintiff to mine gold. She said that when the parties signed their first agreement, on 13 January 2011, she was not present but she witnessed some of the payments made to the defendants.

Ms Ding told the court that the agreement collapsed because the second defendant frustrated the plaintiff by denying him entry onto the mine site. She said that the second defendant had voluntarily surrendered the registration certificates to the first defendant's mining claims, as collateral against payment in full of the money advanced to the defendants as a loan.

Ms Ding told the court that the second agreement entered into by the parties was prepared by the second defendant.

She denied that the plaintiff breached the terms of this agreement, and insisted that it was the defendants who breached the agreement by failing to allow the plaintiff access to the mining site for purposes of conduction explorations, and to commence mining activities.

During cross-examination, Ms Ding remained steadfast that the plaintiff was denied access to the mine. She was unclear as to the reasons advanced for cancellation of the agreements, but she insisted, that, as far as she knew, the plaintiff was aggrieved when he was denied access to the mine despite clear provisions to the contrary in the two agreements signed by the parties.

Again, the court found this witness to be believable, although she could not shed light on some material aspects of the dispute between the parties. Ms Ding was articulate in English. It's a pity that when some of the material aspects of this matter were taking place she was in South Africa and is unable to assist the court to determine the truth.

The plaintiff's last witness was another Chinese national who is currently resident in Zimbabwe, Mr. Wei Ren.

He told the court that he was the plaintiff's mining manager from 2006 to 2010-2011. He confirmed that he was involved in the signing of the agreement between the plaintiff and the defendants.

Mr. Ren was responsible for structuring the mining partnership agreement.

He confirmed that he personally explained the exigencies of that agreement to the plaintiff, and satisfied himself that the plaintiff had understood the contents, before allowing him to append his signature to the agreement.

Mr. Ren also confirmed that exhibit 10, the second agreement between the parties, had been prepared by the second defendant.

He said that he signed that agreement on the plaintiff's behalf.

Before signing, he had consulted widely with the plaintiff who was in China at the time.

This witness told the court that the second defendant was given a loan by the plaintiff and that, he, in turn, had surrendered the certificates of registration to his mining claims to the plaintiff, as collateral for the repayment of the loan.

Mr. Ren told the court that the partnership collapsed because the second defendant denied the plaintiff access to the mine.

He said that the second defendant kept making excuses, but, at the same time, making requests for money to pay the first defendant's debts, until the plaintiff had disbursed a total sum of USD$89,000 to the defendants.

The witness told the court that the plaintiff lost his confidence in the second defendant because of the numerous lies he was told, and that, consequently, he elected to cancel the agreement of partnership.

He said that the second defendant never gave his permission to the plaintiff to commence mining operations, but, instead, kept on making incessant demands for more money.

Mr. Ren disputed the assertion that it was the plaintiff who breached the agreement between the parties. He insisted that it was the second defendant who failed to hold up his end of the bargain.

During cross examination, Mr. Ren confirmed that the plaintiff understood the entire contents of both agreements.

He told the court that a technical team was denied entry onto the mine after the initial USD$50,000 deposit had been paid. This happened fifteen (15) days after 13 January 2011, when the first agreement was signed.

The witness was unable to give a satisfactory explanation as to why the letter of cancellation of the agreement, dated 13 May 2011, had not mentioned that the plaintiff had been denied entry onto the mine as part of the reasons for cancellation.

When he was pressed, he blamed the legal practitioner for not following the plaintiff's instructions.

When it was suggested to him that the plaintiff's breach of clause 8 of the second agreement was the cause of the failure of the partnership, Mr. Ren denied this strenuously.

The plaintiff then closed its case.

Mr. Phillimon Mubata, the second defendant, testified on behalf of both defendants.

He told the court that it was the plaintiff who approached him and proposed that they enter into a joint venture. He said that this was after the plaintiff had proposed to buy the first defendant's mining claims and he had refused.

The second defendant told the court that the plaintiff was involved in a chrome mining project near to where the first defendant's mining claims were. He said that, contrary to what had been asserted by the plaintiff, the first defendant's legal documents were up to date, and all the requisite mining licenses were in place, and had always been in place.

The second defendant told the court that the parties agreed that a total of USD$150,000 would be paid to the first defendant, with an initial USD$50,000 to be paid, where after the second defendant would go to China with the plaintiff where water purification equipment would be bought, and paid for by the plaintiff, using the balance of USD$100,000.

After that, the parties would mine together using a new company which would be jointly owned.

He said that the parties agreed that the USD$150,000 would be repaid to the plaintiff using the proceeds of their joint mining efforts.

The second defendant told the court that the plaintiff breached the parties' agreement by failing to mount an exploration exercise at the mine. He said that he formed the view that the plaintiff ran out of money and was unable to bring the requisite equipment onto the mine. He also said that the plaintiff failed to bring technical experts onto the mine to conduct viability surveys as agreed.

The second defendant denied that the plaintiff was ever denied access to the mine. He said that at all material times, the plaintiff had personnel from his company present at the mine, taking soil samples, and finishing construction of certain buildings on the mine which they intended to use to accommodate their employees.

The second defendant told the court that the reason why the plaintiff purported to cancel the parties' first agreement was because he had refused to sell the mine to the plaintiff or to transfer the claim registration certificates to him.

On exhibit eleven, the parties' second agreement, the witness told the court that the plaintiff was extensively consulted over the telephone by Mr. Wei, and that he authorized Mr. Wei to sign the agreement on his behalf.

According to the second defendant, part of the problem with this matter is that the plaintiff relied entirely on Mr. Ren's interpretation and understanding of things, and there is a possibility that Mr. Ren could have distorted some things in his interpretation from English to Chinese, because Mr. Ren had ambitions to go into business for himself.

During cross-examination, the second defendant denied that it had ever been the parties' intention that he be personally liable or a party to the agreements in his personal capacity. He denied ever receiving any money in his personal capacity, and insisted that all transactions were done in the name of the first defendant, and that he never bound himself as surety.

Mr. Isaac Mhere testified as the defendant's second witness.

He said that he is employed as a Finance and Administration manager by the first defendant, and that the plaintiff, together with a group of other Chinese investors, came to the mine in January 2011 and asked if they could tour the mine and look at the mining operations.

He knew the plaintiff from the mine next door, so he agreed.

Mr. Mhere asked the second defendant for permission to allow the Chinese investors to tour their mining operations, and permission was granted.

Later, he was involved in the discussions for a joint venture, and present at the signing of the first agreement.

The witness told the court that the plaintiff paid the initial deposit of USD$50,000 in bits and pieces, and not as a lump sum as agreed. He personally receipted the payments. He said that the fifty thousand was not paid by the agreed date; it was paid much later than that.

Mr. Mhere said that the plaintiff was never denied access to the mine. He is in charge of the day to day running of the mine, and, if access was to be denied to the plaintiff, it would have been denied by him because he was in charge at the mine site and the second defendant normally operated from offices in Gweru city.

Mr. Mhere told the court, that, the purpose of the second agreement entered into by the parties was to rescue the first agreement and make it workable.

He said that the plaintiff breached the second agreement by failing to pay USD$61,000 as it stipulated; he failed to form a joint venture company; he failed to bring in equipment; he failed to conduct an exploratory survey; and he failed to provide working capital.

During cross examination, Mr. Mhere was adamant that the plaintiff was allowed access to the mine immediately after the first agreement was signed. He said that daily meetings were held on the site at the mine with the plaintiff's employees. He said the plaintiff was never blocked from coming onto the mine.

The defendant closed its case at this juncture.

The question for determination is a simple one: the Court must decide who is telling the truth between the plaintiff and the second defendant, regarding the question of breach of the parties' respective agreements.

Once the court determines this question, the next matter for consideration will be whether the plaintiff is entitled to be refunded USD$89,000, or whether the defendant is entitled to specific performance, and to payment of USD$61,000.

The law that governs contractual relationships is clear.

In interpreting a contract, a court must determine what the intention of the parties was when they entered into a contract.

In this case, did the parties intend to enter into a joint venture agreement in terms of which the plaintiff loaned one or both the defendants the sum of USD$150,000, or did the parties enter into a mining partnership agreement, in terms of which the plaintiff agreed to loan the partnership USD$150,000 which was to be re-paid from the proceeds of the mining venture?

The evidence shows that the parties had different ideas about their rights and obligations which emanated from both agreements which they entered into.

Were they ever of one mind, or there was never any consensus ad idem?

In researching what the law says on how to interpret the intention of parties to a contract, I came across the following:

In the case of Chikoma v Mukweza 1998 (1) ZLR 541 (SC) the Supreme Court stated that:

“…, the approach that the courts will adopt to the issue of whether a contract is void for vagueness will be to help the parties towards what they both intended rather than obstruct them by legal subtleties and allow one of the parties to escape the consequences of all he has done and all he has intended. The courts will interpret contracts fairly and broadly, without being quick to find defects, following the principle ut res magis valeat quam pereat.”

The court said that:

“Against this scenario, the approach to be adopted to the issue of vagueness must be that expressed by PRICE J in Hoffmann & Carvalho v Minister of Agriculture 1947 (2) SA 855 (T) at 860, namely:

'Where parties intend to conclude a contract, think they have concluded a contract, and proceed to act as if the contract were binding and complete, I think the court ought rather to try to help the parties towards what they both intended rather than obstruct them by legal subtleties and assist one of the parties to escape the consequences of all that he has done and all that he has intended....'”

Not to be overlooked, as well, are the wise words of LORD WRIGHT in Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494 (HL) at 503I; (1932) 147 LT 503 (HL) at 514:

“Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English Law, verba ita sunt intelligenda ut res magis valeat quam pereat.”

The mutual intention of the parties, at the time of the contract, will govern the court's resolution of a contractual dispute if that intention can be determined and if that intention is lawful.

If possible, the mutual intent of the parties will be determined only from the written terms of the contract. If the language of the contract is clear and definite, that language will determine the mutual intent of the parties.

It is my view that the language of the parties' first agreement is clear.

It was an agreement to co-operate and operate the mine under the auspices of a new company which was to be incorporated and to be jointly-owned and controlled by the parties. The parties intended to conclude a contract. They thought that they had concluded a contract, and proceeded to act as if the contract were binding and complete.

The plaintiff proceeded to pay USD$50,000 in drips and drabs.

The parties went to China to look for water purification equipment. The plaintiff continued to give the first defendant money when requested to do so until he had paid USD$89,000.

There were no defects in the January agreement.

None were found in the second agreement.

The court discharged its duty and construed both documents fairly and broadly, without being too astute or subtle in finding defects. The court concluded, that, in respect of both documents, there was consensus as to the intention of the parties and a meeting of the minds in regards to the parties rights and obligations.

The evidence on record showed that the plaintiff had all the terms of both agreements explained to him, in Chinese, before appending his signature. Both agreements were valid and binding on the parties.

The court believed the evidence of the defendants that the plaintiff did not pay the initial USD$50,000 by 26 January 2011 as agreed. The evidence was that the plaintiff paid the USD$50,000 in drips and drabs and that, by 1 March 2011, the plaintiff had not fulfilled its obligation to form a joint venture company.

The court accepts, that, the plaintiff failed to pay the balance of USD$100,000 to the first defendant by 11 March 2011.

The court finds that the plaintiff breached the terms of the agreement entered into by the parties on 13 January 2011.

The plaintiff's excuse for non-performance of the contract appears to be an allegation of frustration of purpose.

However, the plaintiff's claims that he was not allowed to enter the mine are not supported by the evidence.

The court believed the first defendant's manager, that, the plaintiff had employees on the ground, immediately after the agreement was signed, who could come and go at their leisure on the site, and that the plaintiff even posted a guard at the gate to the mine to safeguard his interests.

That explanation is the most probable; given that the plaintiff was already operating on a neighboring mine; it would be absurd to find that his employees were barred entry onto the defendant's mine when they had previously come and gone without any hiccups.

The plaintiff was never prevented from entering the mine.

It is more probable that the plaintiff failed to raise the initial USD$50,000 tranche of the loan; he failed to register the joint venture company on time; and he failed to pay the USD$100,000 within the stipulated period.

The parties then decided to complicate matters by entering into a second agreement, which was described by the defendants' witness as “an attempt to rescue the first agreement.”

On 3 October 2011, nine months after the first agreement was entered into, the parties agreed to let the plaintiff operate the mine to recover the USD$89,000 that the first defendant had borrowed in terms of the first agreement.

Clause 3 of the second agreement stipulates that the USD$89,000 would be repaid using the proceeds of production from operating the mine.

It was agreed that the plaintiff would be offered a tribute to operate and extract ore from the first defendant's claims, and that if the USD$89,000 was paid in full before the expiry of the tributary period, then, a “percentage share structure” would be drafted by the parties.

It was agreed that the loan balance of USD$61,000 would be paid before the plaintiff could be given access to the mining area.

The author R. H. CHRISTIE, Business Law in Zimbabwe, 2nd ed, 1998…, has the following to say about reciprocal obligations:

“There is a presumption that in every bilateral or synallagmatic contract, i.e. one in which every party undertakes obligations towards the other, the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations. Whether this presumption applies and whether the reciprocal obligations are to be performed simultaneously or consecutively are questions of interpretation of the contract.

See ESE Financial Services (Pty) Ltd v Cramer 1975 (2) SA 805 @ 808-9.

In contracts to which this principle of reciprocity applies, a plaintiff who demands performance without himself having performed, or tendered to perform, may be met with the exceptio non adimpleti contractus in the form of a dilatory plea: see BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A).

What if, in a contract to which the principle of reciprocity applies, the plaintiff has partly, but not completely, performed?

If the wording of the contract makes it very clear that he has no claim until he has performed in full, the defendant will be entitled to rely on the exceptio: Van Rensburg v Straughan 1914 AD 317.

But, in any other case, an equitable principle comes into play, based on unjust enrichment: see Ambrose and Aitken v Johnson and Fletcher 1917 AD 327 and applied in Grizzel v P & W Erection Co (Pvt) Ltd 1972 (2) RLR 68 (A), 1972 SA 449 378, 1972 RLR 21.”

Clearly USD$61,000 was never paid to the first defendant, so, the plaintiff's excuse for non-performance, that of frustration of purpose, does not apply.

In my view, the plaintiff has brought these proceedings in an effort to anticipate the first defendant's repudiation of the contract.

The terms of the second agreement between the parties were clear.

The plaintiff was to pay USD$61,000 before he could be allowed onto the mining site, or be allowed to commence operations, or be granted a mining tribute.

The plaintiff cannot claim that the first defendant breached the second agreement, which superseded the first agreement, when it was clearly a condition precedent to entry on the mine, that the additional sum of USSD$61,000 be paid first.

Novation means the replacing of an existing obligation by a new one, the existing obligation being thereby extinguished.

It could be argued that the October agreement was a novation of the January agreement.

The January agreement is what is governing the parties reciprocal obligations. The wording of the agreement has no provision for breach.

This means that the equitable principle, which is based on unjust enrichment, comes into play.

It is my view that the plaintiff's breach of both agreements went to the root of the agreements.

He failed to pay the USD$50,000 on time; he failed to register a joint venture company within the agreed period; he failed to bring equipment and capital to the venture; he failed to conduct geological surveys as agreed; he failed to pay USSD$150,000 as agreed.

A reasonable person may conclude that the plaintiff repudiated the parties' agreements.

He clearly does not intend to pay the first defendant the remaining USD$61,000.

He told the court that he has lost confidence in the defendants and no longer wants to work with them.

One of the remedies for breach of contract is cancellation.

I find that the plaintiff repudiated the parties' agreements. The first defendant is entitled to cancel the agreements and claim damages.

It has elected, instead, to counterclaim for payment of USD$61,000.

In my view, such a claim, being one for specific performance, is not sustainable where the other party to the contract has repudiated it.

The parties agreements did not provide any breach clauses. They never applied their minds to what would happen in the event of breach.

I am persuaded that it would be appropriate to utilise the equitable principle in coming to a resolution of this matter.

I hold this view primarily because the court was uneasy with the plaintiff's level of understanding of the terms of both agreements.

The plaintiff is a Chinese national who came to invest in the mining business in this country. He does not understand English. He relied on the services of his employees to explain the terms of the agreements to him.

The evidence before the court is that some of the interpretation of the agreements was not entirely bona fide because Mr. Ren wanted to go into business for himself and could have misled the plaintiff on some material aspects of the contracts between the parties.

The court believed that evidence.

The plaintiff seemed adamant that he ought to have been allowed to commence mining operations. The terms of the October agreement are diametrically opposed to this belief.

Contracts are made by agreement. They can be unmade by agreement, but, they cannot be unilaterally varied or discharged: see Strachan v Lloyd Levy 1923 AD 670, 671.

It has been said that:

“…, waiver is a bilateral transaction and does not result from a unilateral declaration or a decision…,.:” see Alberts v Bryson 1976 (2) RLR 193 (A) 198, 1977 (1) SA 857 860.

A modern interpretation of the equitable principle, one that takes into account the situation that is currently prevailing in our economy, might not favor an insistence that the plaintiff cannot succeed in his claim until he has performed, in full, the terms of the October agreement.

The court can exercise its discretion in the plaintiff's favour, despite his partial performance of the January agreement (by advancing a loan up to USD$89,000), and his non-performance of the October agreement.

In weighing the equities, the court was guided by Ambrose and Aitken v Johnson and Fletcher 1917 AD 327 where it was stated that it is not for the court to remake a contract of the parties.

The first defendant would be unjustly enriched if it were allowed to keep the USD$89,000 advanced to it by the plaintiff.

The doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

Privity is the legal term for a close, mutual, or successive relationship to the same right of property or the power to enforce a promise or warranty: see Coalridge (Private) Limited v Peter Makawu & Mobil Zimbabwe (Private) Limited SC69-04.

It is my considered view that just because the second defendant signed the January agreement as a representative of the first defendant did not mean that he became a party to the agreement.

The evidence before the court was that the mining claim certificates are in the name of the first defendant. It was the first defendant which entered into the January and October agreements with the plaintiff.

Being a juristic person, the first defendant is unable to sign documents; it would have to rely on its director and shareholder, the second defendant, to sign the documents as its officer and on its behalf.

No evidence was led before the court to show that the parties intended that the second defendant be bound as surety with the first defendant for the due performance of its liabilities.

Accordingly, I find that there was no privity between the plaintiff and second defendant, and that there is no evidence of liability against the second defendant.

Having found that the plaintiff was obliged to provide USD$150,000 towards the financing of a joint venture agreement, and that the defendants did not frustrate the contract and cause the non-fulfillment of its terms and conditions, or breach the contract and cause the plaintiff to cancel it, the court finds, nonetheless, that, it would be just and equitable to allow the plaintiff to recover the USD$89,000 which he had advanced to the first defendant.

In the result, it is ordered that:

1. The plaintiff's claim against the second defendant be and is hereby dismissed with costs.

2. The defendant's counterclaim against the plaintiff, for payment of USD$61,000, be and is hereby dismissed with costs.

3. Plaintiff's claim, as against the first defendant, Big Valley Masters (Private) Limited, in the sum of USD$89,000, is allowed, together with interest thereon at the prescribed rate calculated from 11 December 2012 to the date of payment in full.

4. First defendant shall bear the costs of suit.

Appealed
HH287-20 : PENELOPE STONE and RICHARD BEATTIE t/a THE STONE/BEATTIE STUDIO vs CENTRAL AFRICAN BUILDING SOCIETY and RESERVE BANK OF ZIMBABWE and MINISTER OF FINANCE & ECONOMIC DEVELOPMENT
Ruled By: ZHOU J

This is an application for an Order that:

1. The first Respondent pays a sum of US$142,000 together with interest thereon at the rate of 5% per annum from 28 November 2016 to the date of payment within seven days from the date of this order.

2. In the alternative, the Applicants ask that the first and second Respondents be ordered to pay the said sum of money jointly and severally the one paying the other to be absolved.

3. The further alternative relief is for the Exchange Control Directive No. RT120/2018 to be declared a nullity, or, in the further alternative, that section 44B(3) and (4) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] be declared unconstitutional.

4. Costs of suit are, in the main, sought against the first Respondent, and, in the alternative, against all the Respondents jointly and severally the one paying the others to be absolved.

The application is opposed by all the respondents.

The factual background to this matter is as follows:

The applicants are partners in a firm of architects trading under the name The Stone/Beattie Studio. The partnership has a savings account, number 1005428905, with the first respondent, which was opened in 2011. This account was opened after the introduction of the multi-currency system which became operational in February 2009.

The account was a United States Dollar account.

On 4 May 2016, the Governor of the second respondent issued a press statement under the title: “Measures to deal with cash shortages whilst simultaneously stabilising and stimulating the economy.”

In that statement, the Governor of the second respondent acknowledged the prevailing shortage of cash, the factors contributing to such shortage, and the impact that these factors had had on the economy, among other issues. He announced some monetary policy measures instituted to address the challenges which he highlighted as afflicting the multi-currency system.

In paragraph 13 of the written statement, the Governor announced that the Reserve Bank had established a USD200 million foreign exchange and export incentive facility which was supported by the African Export-Import Bank (Afreximbank) to provide cushion on the high demand for foreign exchange and to provide an incentive facility of 5% on all foreign exchange receipts, including tobacco and gold sale proceeds.

He proclaimed that in order to guard against possible abuse of the facility through capital flight, the facility was to be granted to qualifying foreign exchange earners in bond coins and notes which would continue to operate alongside the currencies within the multi-currency system and at a par with the United States Dollar.

The statement also promised the introduction of the Zimbabwe Bond Notes of denominations of $2, $5, $10…, to facilitate portability given the magnitude of the USD200 million backed facility. The facility would, further, be used to discount trade-related paper in order to provide liquidity for business trading operations.

The BOND currency was made part of the family of currencies in the multi currency basket.

In the same statement, the Governor announced that the process to configure the RTGS system into the multicurrency was already underway.

It did come - in that on 31 October 2016, the Presidential Powers (Temporary Measures) Regulations, 2016 which were contained in Statutory Instrument 133 of 2016, SI133 of 2016, were enacted in terms of section 2 of the Presidential Powers (Temporary Measures) Act [Chapter 10:20].

As at the end of October 2016, the applicants account number, 1005428905, had a credit balance of US$142,000.

In response to the enactment of the Presidential Powers (Temporary Measures) Regulations 2016, S.I.133 of 2016, referred to above, the applicants wrote a letter, dated 28 November 2016, to the first respondent. The material portions of the letter are as follows:

“RE: The STONE/BEATTIE STUDIO Savings Account No. 1005428905

The attached printed statement of the above account, dated today's date, records that CABS is the custodian of US$142,000 (one hundred and forty two thousand United States Dollars) deposited and held on behalf of The Stone/Beattie Studio.

You are advised there will be no further deposits into or withdrawals from this account after today's date until written instruction is given to you by the partners, named below, being the authorized signatories, or their successors.

Yours faithfully
P.D. STONE/R.H.S. BEATTIE”

The letter is signed by the two applicants.

A statement showing a credit balance which was attached to the letter is part of the documents attached to the founding affidavit.

The applicants have also adduced proof of delivery of that letter.

On 4 October 2018, the second respondent issued the Exchange Control Directive RTl20/2018 which separated what was therein referred to as the RTGS Foreign Currency Account from a Nostro Foreign Currency Account based on the source of funds.

The effect of this was to categorise the applicants account as an RTGS Foreign Currency Account.

Money from the applicants account could only be paid in the Bond note (and bond coin) - but not in the United States dollar which was the currency in which it is denominated.

By letter dated 17 October 2018, written on their behalf by their legal practitioners, to the first respondent, the applicants asked to withdraw the sum of US$142,000 from their account, or, alternatively, to have it transferred into a Nostro Foreign Currency Account.

The concept of the Nostro Foreign Currency Account came into existence following the second respondent's Monetary Policy Statement of 1 October 2018.

According to the applicants, their letter of demand was written after they were advised by the first respondent that they could only be paid their money in the Bond note currency.

The Applicants case

The applicants case is that they are entitled to payment of the sum of US$142,000 on the basis of the banker/customer relationship that exists between them and the first respondent.

In the alternative, should this court find that the first respondent is excused from paying the money in the currency of the United States in which it was reflected in their account by reason of the Exchange Directive No. RT l20/2018, issued by the second respondent, that, that Directive be found to be unconstitutional for being unlawful and grossly irrational and ultra vires the provisions of the enabling Act.

In the further alternative, the applicants contend that section 44B(3) and (4) of the Reserve Bank Act contravene the provisions of section 71 and section 56 of the Constitution of Zimbabwe, Amendment (No.20) Act 2013 which, respectively, protect property rights and equality before the law and the right to equal protection and benefit of the law.

The First Respondent's case

The first respondent contends that the applicants cause is founded upon a falsehood in that they allege that they instructed the first respondent to preserve their balance in the currency of the United States, yet the letter relied upon does not state so.

A second argument raised in limine in the opposing affidavit, but does not appear to have been pursued in argument, is that the application was not one for an order ad pecuniam solvendam but for a declaratur, and, further, that the requirements for declaratory relief were not met.

The first respondent states, that, its obligation as the banker, is "to pay on demand the equivalent of the money deposited by the applicants."

The first respondent advances the further contention, that, it could not be enjoined to pay the applicants in the currency of the United States because such payment would be contrary to the Exchange Control Directive RT120/18, issued by the second respondent on 4 October 2018, by which all credit balances were to become RTGS balances unless they were converted into Nostro Foreign Currency Accounts.

In this respect, the respondent's case is that, at law, it is under obligation to comply with the terms and conditions of its registration as a Banking institution. For these reasons, the first respondent's case is that the amount in the applicants account is payable in the RTGS or Bond currencies.

Second Respondent's case

The second respondent's case is that it exercised its powers in terms of the law by issuing the Directive referred to above.

It also states, that, the Bond note (and coin) is not a currency, and, further, that Bond notes are legal tender in Zimbabwe. The second respondent states that there is "no such thing as an RTGS balance in our law, in much the same way as there is no currency in Zimbabwe known as the bond note (or coin).”

The second respondent's averments, that the Bond note (or coin) is not a currency, are contradictory because the impugned Directive talks of making the Bond note part of the family of currencies in the multi-currency basket.

Third Respondent's case

The third respondent's case is that the dispute in this case is a contractual one between the applicants and the first respondent and that he was improperly joined in this matter. He therefore objected to his joinder.

According to the third respondent, the dispute revolves upon an interpretation of the contractual terms arising out of the agreement between the applicants and the first respondent.

Issues for determination

The following issues are material to the determination of this matter:

1. Whether the third respondent was improperly joined in this application, and, if so, the effect of such joinder on the proceedings.

2. The nature of the relationship between the applicant and first respondent and the implications thereof on the relief which is being sought.

3. Whether the Exchange Control Directive RT120/2018 is unconstitutional, and, if so, the implications thereof.

4. Whether section 44B(3) and (4) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] are unconstitutional; and, if so, the implications thereof....,.

The Relationship of the Applicants and First Respondent and its Implications

Both the applicant and the first respondent accept that theirs is a banker customer relationship.

The relationship has its foundation in contract, hence the general principles of the Law of Contract apply to it. It, however, has its unique features which would distinguish it from other special contractual relationships.

The relationship is explained in a leading text on Banking Law, Paget's Law of Banking, 13th Ed by M. HAPGOOD QC…, as follows:

"The relationship of a banker to customer is one of contract. It consists of a general contract, which is basic to all transactions, together with special contracts which arise only as they are brought into being in relation to specific transactions or banking services. The essential distinction is between obligations which come into existence upon the creation of the banker-customer relationship and obligations which are subsequently assumed by specific agreement; or, from the standpoint of the customer, between services which a bank is obliged to provide if asked, and services which many bankers habitually do, but are not bound to, provide."

In the case of Standard Bank of South Africa v Oneanate Investments (Pty) Ltd 1995 (4) SA 510 (C)…, the Court examined how this relationship, of banker-customer, developed to its current status:

"The law treats the relationship between banker and customer as a contractual one. The reciprocal rights and duties included in the contract are, to a great extent, based upon custom and usage.

Although historically the original objective of a depositor was to ensure the safekeeping of his money; over time, jurists have considered characterizing and explaining the basic relationship as one of depositum, mutuum or agency.

All of these approaches have, on analysis, proved to be inadequate.

It is now accepted that the basic, albeit not sole, relationship between banker and customer in respect of a current account is one of debtor and creditor.

In the landmark 1848 case of Foley v Hill (1843-60) AII ER Rep 16 (1848) 2 HL Cas 28, it was strenuously argued that the banker should be treated as an agent with authority to use his customers money at his own discretion. The argument was rejected in favour of the finding that the nature of the ordinary relationship was one of debtor and creditor. The bank makes use of the money which the customer has deposited:

'It is then the money of the banker…, he makes what profit he can, which profit he retains for himself…, he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands.'”

In situations where the bank collects, on behalf of a customer, the proceeds of a cheque, the relationship remains the same, as articulated by ATKIN LJ in Joachimson v Swiss Bank Corporation 1921 (3) KB 110…,:

"The bank undertakes to receive money and collect bills for its customer's account. The proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and during banking hours. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch, and as such written orders may be outstanding in the ordinary course of business for two or three days, it is a term of the contract that the bank will not cease to do business with the customer except upon reasonable notice.

The customer, on his part, undertakes to exercise reasonable care in executing his written orders so as not to mislead the bank or to facilitate forgery. I think it is necessarily a term of such a contract that the bank is not liable to pay the customer the full amount of his balance until he demands payment from the bank at the branch at which the current account is kept."

Where a current account is in credit, money deposited into the account ceases to belong to the account holder. The banker becomes the owner of the money and is free to use it as it pleases, as long as it pays the equivalent therefor on demand: see Zimbabwe Revenue Authority & Anor v Murowa Diamonds (Pvt) Ltd 2009 (2) ZLR 213 (S); Standard Chartered Bank of Zimbabwe Ltd v China Shougang International Ltd (2) ZLR 385 (S), SC49-13…,; ABC Bank v Mackie Diamonds SC23-13.

But, the kind of debtor-creditor relationship that exists between a banker and its customer is a complex one and has different facets.

MOSENEKE AJ…, described the relationship as a “conspicuously complex collection of juristic relationships:” see Standard Bank of South Africa Limited v ABSA Bank Limited 1995 (2) SA 740 (T)…,.

That is so, because, within that relationship, there may be other contractual dimensions, such as in situations where the bank offers custodial services to its customers, in which case the relationship becomes one of depositum, and, in a case where the account becomes overdrawn, in which case the bank becomes the creditor and the customer becomes the debtor.

It is in this context that the debtor-creditor relationship of a banker and its customer has been characterized as a contract sui generis: see G S George Consultants and Investments (Pty) Ltd v Datasys (Pty) Ltd 1988 (3) SA 726 (W)…,.; PEN & SHEA, The Law Relating to Domestic Banking, 2nd Ed…,.; MALAN on Bills of Exchange, Cheques and Promissory Notes…,.

It is a debtor-creditor relationship in a class of its own, with its own unique facets which demand careful approach when considering the obligations of the parties to it.

More than many other such relationships, the banker-customer relationship is the subject of regulation by different statutory bodies and constitutional entities such as the first respondent.

This court is clear, that, in this case, the obligation of the first respondent is to repay the equivalent sum of money and not the exact notes or coins deposited into the bank.

Further, some of the money may not have been deposited as notes or coins but could have been transferred from other financial institutions as suggested by the respondent.

Whichever way the money was credited into the account of the applicants is irrelevant for the purposes of determining the obligations of the first respondent to the applicant because the value of the money is reflected in the credit balance.

It is US$142,000.

The first respondent accepts, by reference to the case of Equitable Trust and Insurance Company of South Africa Limited v Registrar of Banks 1957 (2) SA 167, cited in para 30 of its heads of argument, that “a deposit of money on the understanding that the same amount, but not the same coins and notes, will be returned is not a depositum but rather a loan.”

The first respondent cannot claim, as it seems to do, that the money it owed to the applicant was not in United States dollars.

The debt is in United States dollars because the account is denominated in that currency. If it was in some other currency, such as the South African Rand or the Botswana Pula, then, that would have been the currency of the account.

The debt which the first respondent owes to the applicant is therefore in the sum of US$142,000 and not some other currency.

Banking would be meaningless if a person deposited a certain sum of money or has money credited into their account only to be told, when they demand withdrawal, that they can only be paid in some other means of exchange whose value is determined by authorities without recourse to the holder of the account.

In such a case, the debtor will not be repaying the debt. A debtor cannot unilaterally change the value of its indebtedness.

But, the situation of the first respondent is complicated by the authority which the second respondent exercises over it as the monetary authority of this country.

The first respondent is correct in its submission that it could not defy the directive of the second respondent.

The second respondent is established in terms of section 317 of the Constitution…,which states:

“(1) There is a central bank, to be known as the Reserve Bank of Zimbabwe, whose objects are -

(a) To regulate the monetary system;

(b) To protect the currency of Zimbabwe in the interest of balanced and sustainable economic growth; and

(c) To formulate and implement monetary policy.

(2) An Act of Parliament may provide for the structure and organization of the Reserve Bank of Zimbabwe and confer or impose additional functions on it.”

In issuing the impugned Exchange Control Directive No. RT120/2018, the second respondent was exercising its powers as conferred by the Constitution and the Reserve Bank of Zimbabwe Act [Chapter 22:15].

This court accepts, that, as long as the Exchange Control Directive has not been set aside, the first respondent could not comply with the applicants demand without incurring the penalties and other consequences threatened by the second respondent.

On this basis, the court cannot order the first respondent to make the payment in the face of the Exchange Control Directive which is to the contrary, hence, the need for an inquiry into the constitutionality of that directive and/or the section in terms of which it was issued.

The Constitutionality of Exchange Control Directive RT120/18

On 4 October 2018, the second respondent issued Exchange Control Directive RT120/18 which was addressed to all Authorised Dealers. The Directive was issued in terms of section 35(1) of the Exchange Control Regulations, 1996 which are contained in SI109 of 1996.

The material portions of the Directive read as follows:

“1. Introduction

Reference is made to the Monetary Policy Statement announced by the Reserve Bank Governor on 01 October 2018, which presented measures aimed at strengthening the multicurrency system, enhancing business viability, price stability, increasing export generation capacity, and improving market confidence.

In order to operationalize these measures, Authorised Dealers are advised as follows:

2. Separation of Foreign Currency Accounts (FCAs) based on source of funds.

2.1 Given the need to enhance market confidence, promote transparency, preserve value, incentivize generators of foreign exchange, promote effective and efficient utilization of foreign currency, and strengthen the multi-currency system, with immediate effect, FCAs are now separated according to the source of funds.

2.2 In this regard, foreign currency realized from offshore or foreign currency cash deposits shall be eligible for crediting into the individual or corporate Nostro FCA, while all Real Time Gross Settlement or mobile money transfers and bond notes and coins deposits, shall be credited into the individual or corporate RTGS FCA.

2.3…,.

2.4…,.

2.5 In line with the Monetary Policy Statement, all existing account balances should be separated into Nostro FCAs and RTGS FCAs by October 2018 and these accounts should be opened at no cost using information already with banks. In separating the FCAs, Authorised Dealers are required to use the customer Due Diligence (CDD) and Know Your Customer (KYC) principles to ensure a smooth transition of this process.”

The applicant challenges the constitutional validity of the Directive on various grounds which include illegality, irrationality, and gross unreasonableness.

The review sought is clearly not under the common law but under the constitutional law of Zimbabwe and these grounds must be understood in that context.

Constitutional review differs from common law review, as was held in the case of Commissioner of Customs and Excise v Container Logistics (Pty) Ltd; Commissioner of Customs and Excise v Rennies Group Ltd t/a Renfreight 1999 (3) SA 771 (SCA) 1999 (8) BCLR 833 (SCA)…,.:

“Judicial review under the Constitution and under the common law are different concepts…,. Constitutional review is concerned with the constitutional legality of administrative action, the question in each case being whether it is or is not consistent with the Constitution, and the only criterion being the Constitution itself.

Judicial review under the common law is essentially also concerned with the legality of administrative action, but, the question in each case is whether the action under consideration is in accordance with the behests of the empowering statute and the requirements of natural justice.

The enquiry in this regard is not governed by a single criterion.

The grounds of review which the courts have developed over the years can never be regarded as a numerus clausus for the simple reason that Administrative Law is not static. As new notions develop and take root, so must new measures be devised to control the exercise of (official) functions….,."

However, the distinction is now only of academic interest given the pronouncement by the Constitutional Court of South Africa, in the case of Ex Parte President of the Republic of South Africa: In re Pharmaceutical Manufacturers Association of South Africa 2000 (2) SA 674 (CC) 2000 (3) BCLR 241 (CC).

ln that case, the Constitutional Court of South Africa held, that, given the entrenchment of the supremacy of the Constitution, there is only one system of law and that law is shaped by the Constitution.

All law, including the common law, derives its authority from the Constitution and is subject to constitutional control. There are therefore no separate common law grounds of review which are distinct from the constitutional grounds of review.

There is remarkable merit in this interpretation of the relationship between the constitution and the common law scope of judicial review which commends itself.

I respectfully endorse the approach embraced by the Constitutional Court of South Africa for the reason, that, the constitutional supremacy clause in this jurisdiction is worded in similar terms to that in the Constitution of the Republic of South Africa.

Thus, in considering the legality, rationality, and reasonableness of the impugned Exchange Control Directive, the court must measure it against the constitutional provisions.

The Constitutional Provisions

The Constitution of Zimbabwe enshrines the principle of constitutional supremacy, firstly, as a rule in section 2, and, secondly, as one of the founding values and principles upon which the Republic is founded in section 3.

The other “founding values and principles enshrined” include the rule of law, fundamental human rights and freedom, and good governance.”

Section 2 of the Constitution provides as follows:

“2. Supremacy of Constitution

(1) This Constitution is the supreme law of Zimbabwe, and, any law, practice, custom or conduct inconsistent with it is invalid to the extent of the inconsistency.

(2) The obligations imposed by this Constitution are binding on every person, natural or juristic, including the State and all executive, legislative, and judicial institutions and agencies of government at every level, and must be fulfilled by them.”

Section 3(1) of the Constitution provides that:

“Zimbabwe is founded on respect for the following values and principles:

(a) Supremacy of the Constitution;

(b) The rule of law;

(c) Fundamental human rights and freedoms;

(d)…,.

(e)…,.

(f)…,.

(g)…,.

(h) Good governance…,.”

The entrenchment of constitutional supremacy as a rule, and as one of the foundational values and principles of our Constitution, has empowered the courts in this jurisdiction in the exercise of their judicial review powers to interrogate, analyse, and examine the basis upon which every decision made or action taken by the executive, legislative, judicial arms of Government, and by other State agencies to ensure compatibility with the Constitution and the values which underpin it. The idea is to ensure that every decision or conduct does not impinge upon fundamental rights or other provisions and values and principles of the Constitution.

These values and principles must therefore shape the interpretation of the Constitution, including assessment of the constitutional validity of any law, practice, custom or conduct.

The supremacy of the Constitution means that every law, practice, custom, or conduct is subservient to all the provisions of the Constitution, including the founding values and principles articulated in section 3 of the Constitution.

The Exchange Control Directive of the first respondent, which is an agency of the State, is therefore also subject to the supremacy of the Constitution and its validity can be tested using the standard of the Constitution.

The rule of law (which includes in it the principle of legality) is a principle that is meant to circumscribe the power of those in authority by placing it under control in order to prevent abuse or arbitrary use of power. The principle has its foundation in the common law, but obviously assumes a different status because of its constitutionalisation by the current Constitution.

It has both procedural and substantive components:

(i) The procedural aspect of the rule of law means that all law and conduct must be rationally connected to a legitimate Government purpose, otherwise it would be arbitrary. As was held by the Constitutional Court of South Africa, in Prinsloo v Van der Linde & Another 1997 (3) SA 1012 (CC) 1997 (6) BCLR 759 (CC)…,:

“(T)he constitutional State…, should not regulate in an arbitrary manner…, that serve(s) no legitimate governmental purpose, for that would be inconsistent with the rule of law…,.”

In the case of Pharmacentical Manufacturers Association of SA: In re: Ex Parte President of the Republic of South Africa 2000 (2) SA 674 (CC)…, the Constitutional Court of South Africa expressed this principle as follows:

“(I)t is a requirement of the rule of law, that, the exercise of public power by the executive, and other functionaries, should not be arbitrary.

Decisions must be rationally related to the purpose for which the power was given, otherwise they are in effect arbitrary and inconsistent with this requirement. It follows, that, in order to pass constitutional scrutiny, the exercise of public power by the executive, and other functionaries, must, at least, comply with this requirement. If it does not, it falls short of the standards demanded by our Constitution for such action.”

A court faced with a challenge to action or a decision founded on rationality must examine the means selected and employed to determine whether they are rationally related to the objective sought to be achieved: Albutt v Centre for Violence and Reconciliation and Others [2010] ZACC 4 2010 (3) SA 293 (CC), 2010 (5) BCLR 391 (CC)…,; Democratic Alliance v President of the Republic of South Africa and Others [2012] ZACC 24…,.

The substantive component of the rule of law directs that Government, its functionaries, or any other authority for that matter, must respect the individual's basic rights: see IAIN CURRIE and J. de WAAL, The Bill of Rights Handbook, 5th Ed…,.

This aspect of the rule of law has also been entrenched as a rule in section 44 of the Constitution of Zimbabwe as follows:

“The State, and every person, including juristic persons, and every institution and agency of the Government at every level must respect, protect, promote, and fulfil the rights and freedoms set out in this Chapter.”

In light of the constitutional provisions, every decision taken by the respondents should not exceed the bounds of rationality, but must comply with the doctrine of legality which is encapsulated in the value and principle of the rule of law.

If it is found to be irrational or arbitrary then it would fail the legality test and is liable to be judicially reviewed and set aside for being unconstitutional: see Movement for Democratic Change and Another v Chinamasa and Another NNO 2001 (1) ZLR 69 (S); also the South African cases of Albutt v Centre for the Study of Violence and Reconciliation and Others 2010 (3) SA 293 (CC)…,; Minister of Military Veterans v Motau 2014 (5) SA 69 (CC)…,.; Democratic Alliance v Ethekwini Municipality 2012 (2) SA 151 (SCA)…,.; Democratic Alliance v President of the Republic of South Africa and Others Case No. 24396/2017 (High Court of South Africa Gauteng Provincial Division, Pretoria) (Per VALLY J)…,.

Reasonableness, in the context of constitutional review, is concerned with the merits of the impugned decision; in this case, the Exchange Control Directive No. RT120/18.

A decision would fail to pass the test of reasonableness if it is not “one that a reasonable decision-maker could reach:, see Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others [2004] ZACC 15, 2004 (4) SA 490 (CC), 2004 (7) BCLR 687 (CC); Democratic Alliance v President of the Republic of South Africa and Others [2012] ZACC 24…,.

In other words, a decision would transcend the bounds of reasonableness if a reasonable person, applying their mind thereto, would not have taken such a decision.

Application of the Constitutional provisions and principles to the facts

The impugned Exchange Control Directive has retrospective application, in that it arbitrarily converts an existing United States Dollar account balance into something else by arbitrarily imposing an RTGS value on the United States dollar value of the credit balance in the applicants account.

Equality of value is not something that can be arbitrarily or capriciously imposed in the manner that the Governor of the second respondent sought to do in relation to the balance in the applicants account.

The value of money is its acceptability and can only be fairly determined by the market.

If the first respondent intended to introduce an RTGS account with a value equal to or different from the United States dollar account held by the applicant, then, that decision ought to have affected future transactions rather than existing balances.

It is offensive to any sense of justice that a person who holds money in a bank can wake up on any day to be told that his money means something else different from what it has always been.

The applicants would have been entitled to withdraw United States dollars from their account prior to this Directive being issued.

The Directive effectively disables any withdrawal of United States dollars from that account. They can only withdraw bond notes. That reality cannot be altered by renaming the account as 'an RTGS FCA'.

This drastic deprivation of existing rights is not what is contemplated by section 317 of the Constitution of Zimbabwe as constituting regulation of the monetary system, protecting the currency of Zimbabwe, and formulating and implementing monetary policy.

For it to pass the test of rationality “conduct must not only be legally but also morally justified; it must be shown to be just, reasonable, or correct or defensible", not just by reference to the procedure invoked but also by reference to its merit and outcome: see Carephone (Pty) Ltd v Marcus NO and Others 1999 (3) SA 304 (LAC)…,.

The democratic founding values of accountability, responsiveness, justice, and transparency would be violated by a decision which, without recourse to any affected individual, businessperson, or investor, changes the currency of money in a bank.

If the decision of the first respondent was to be allowed to stand, the effect of it is that the applicants money is now ZW$142,000 which is probably less than 4% of its value at the prevailing official rates which this court cannot ignore.

A decision which reduces US$142,000 to a small fraction of its value cannot be defended in a democratic society founded upon the values enshrined in the Constitution of Zimbabwe. It, in substance, manifestly violates the right to property.

Further, the effect of the first respondent's directive is to make the second respondent breach the contractual terms of its banker-customer relationship as explained above. This is achieved by turning the applicant's United States Dollar account into an “RTGS FCA", a contradiction in itself because RTGS is not a foreign currency and one wonders how it could be hosted in a foreign currency account.

The sovereignty of any Government to determine currency cannot extend to arbitrarily changing the currency of money in a bank to another currency as that would not only be unlawful deprivation of property, in contravention the right protected in section 71(2) of the Constitution of Zimbabwe, but compels a party, the first respondent, to breach its contractual obligations.

It would be contrary to all notions of justice and fairness, and to the rule of law and good governance, if the State, or the first respondent, was to be allowed to simply rename money in an account and decide that it has become something else different from what is in the account.

This makes the Exchange Control Directive not only arbitrary and irrational, but fail the test of reasonableness. The decision is an incursion of vested rights.

No reasonable person who had applied his or her mind to the matters in question would have taken the decision which has the effect of eroding a person's investment or savings in this manner.

When regard is had to the loss which would be involved if the applicants were to be paid a sum of Z$142,000 or even the 'equivalent' thereof at the official exchange rate, the Exchange Control Directive reflects insensitivity and unresponsiveness which offends against the values espoused by the Constitution.

The Constitution, in section 1, proclaims that Zimbabwe is, inter alia, a democratic Republic.

In the preambular section “the need to entrench democracy” is recognized.

Good governance, which is enshrined in section 3(1)(h) of the Constitution, is an essential feature of democracy. Good governance, which, according to section 3(2)(g) of the Constitution, binds the State and all institutions, includes “transparency, justice, accountability, and responsiveness.”

The value of good governance is a new feature of our constitutional dispensation having been introduced by the 2013 Constitution. It demands that a new approach to decision-making be embraced by all arms of the Government and other public institutions. Power must be exercised with sensitivity to fairness and justice, and in a manner that does not unnecessarily deprive persons of their rights.

The Exchange Control Directive is, in my view, illegal, irrational, and unreasonable for offending against the rule of law and the constitutional values of good governance.

It is therefore unconstitutional.

The Constitutionality of section 44B(3) and (4) of the Reserve Bank Act

In view of the conclusion reached in respect of the constitutionality of Exchange Control Directive RT120/2018, it is unnecessary for the court to determine the constitutionality of section 44B(3) and (4) of the Reserve Bank of Zimbabwe Act [Chapter 22:15].

This is so because the matter stands to be disposed of on the basis of this court's conclusion that the impugned directive is unconstitutional and consequently invalid.

Costs

The applicants have succeeded in obtaining the relief which they sought before this court. There are no special reasons warranting departure from the usual conclusion that costs should follow the result.

The applicants are therefore entitled to recover their costs of suit.

Disposition

In the result, IT IS ORDERED THAT:

1. Exchange Control Directive No. R120/2018 issued by the second respondent, through its Governor, on 4 October 2018, be and is hereby declared to be invalid and is accordingly set aside.

2.The first respondent shall pay to the applicant the sum of US$142,000 in the currency of the United States of America or transfer that amount into a Nostro Foreign Currency Account as may be directed by the applicants within seven days from the date of this order, together with interest thereon at the prescribed rate of 5 percent per annum from the 17th October 2018, being the date of the letter of demand, to the date of full payment or transfer into the Nostro Foreign Currency Account as directed herein.

3. The respondents shall pay the costs jointly and severally the one paying the others to be absolved.

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

This is an appeal against the judgment of the High Court sitting at Masvingo, delivered on 24 June 2020, which dismissed with costs the application made by the two appellants for a declaratory order and an interdict.FACTUAL BACKGROUNDThe two appellants are sugar-producing giants in the Lowveld while the first respondent ...

FACTUAL BACKGROUND

The two appellants are sugar-producing giants in the Lowveld while the first respondent (Zimbabwe Revenue Authority) is the statutory body charged with revenue collection in Zimbabwe. The remainder of the respondents are either sugar cane farmers or associations representing such farmers (Zimbabwe Sugarcane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers, Farai Dumo Augustine Musikavanhu and Roy Bhila).

The respondents will be referred to in this judgment, for convenience, as Zimbabwe Revenue Authority and the farmers respectively.

The appellants and the farmers entered into two types of agreements, either a “Cane Milling Agreement” or a “Cane Purchase Agreement” in terms of which the appellants would either provide milling services to the farmers and market their sugar and molasses or outrightly purchase the sugar cane.

The dispute which arose between the parties did not involve the outright purchase and sale of sugar cane. As such this judgment does not deal with that scenario at all. The judgment concerns itself with the cane milling agreements entered into between the parties.

In terms of the cane milling agreements, the charge for milling and marketing services, payable by the farmers to the appellants, was calculated in terms of a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. It was fixed at 23 percent of the proceeds the farmers would get; meaning that, the appellants would retain 23 percent of the proceeds while remitting the balance of 77 percent to the farmers.

Regrettably, in fixing the milling and marketing charge, the appellants did not include Value Added Tax (VAT) as required by law. It follows, that, no Value Added Tax was paid by the appellants to the Zimbabwe Revenue Authority in that regard.

It was in the process of auditing the appellants Value Added Tax (VAT) assessments for the period 2009 to 2017 that the Zimbabwe Revenue Authority decided that the milling and marketing charges of 23 percent of the proceeds levied by the appellants against the farmers attracted VAT.

The Zimbabwe Revenue Authority proceeded to issue assessments of value added tax (VAT) for those years and demanded payment of same from the appellants. These assessments related to the past supplies where the appellants ought to have, but failed, to collect and remit VAT to the Zimbabwe Revenue Authority.

The appellants objected to the assessments which objections were all disallowed by the Zimbabwe Revenue Authority. The appellants appealed to the Fiscal Appeals Court but paid the assessed value added tax (VAT) to the Zimbabwe Revenue Authority notwithstanding.

An appeal does not exonerate a tax payer from paying the assessed tax.

After effecting payments to the Zimbabwe Revenue Authority, the appellants sought to recover such value added tax (VAT) from the farmers on the basis that they were obliged to charge and collect the VAT from the consumers of the service, the farmers, but had not done so.

The appellants were of the view, that, it was only fair and reasonable that the farmers should re-imburse them of the value added tax (VAT) paid by them to the Zimbabwe Revenue Authority.

There being no convergence between the farmers, who had obtained advice from the Zimbabwe Revenue Authority, that, the 23 percent Division of Proceeds ratio was inclusive of value added tax (VAT), and the appellants, the latter filed an application in the court a quo.

In their application, the appellants sought declaratory relief that they were legally entitled to continue charging and collecting value added tax (VAT) from the farmers - over and above the 23 percent milling charge.

The appellants also sought to be reimbursed the monies they paid to the Zimbabwe Revenue Authority on past assessments.

In addition, they accused the Zimbabwe Revenue Authority of interfering with contractual issues between them and the farmers by rendering advice to the farmers on the value added tax (VAT) dispute.

Accordingly, the appellants sought an order interdicting the Zimbabwe Revenue Authority from what they called “gratuitously interfering in pricing and contractual issues” between them and the farmers.

The application was opposed by the Zimbabwe Revenue Authority and most of the respondents.

DECISION A QUO

It was the view of the court a quo, that, the entire dispute revolved around the interpretation of section 69 and section 72 of the Value Added Tax Act [Chapter 23:12].

Regarding the past supplies of sugar cane to the appellants, the court a quo found, that, the literal meaning of section 69 of the Value Added Tax Act suggests, that, it is irrelevant whether the registered operator has charged VAT or not. If the price does not reflect the tax component, section 69 of the Value Added Tax Act operates such that there is a presumption that a price not reflecting VAT included that tax.

It was the finding of the court a quo, that, the section serves to “estop” a registered operator, who has not reflected value added tax (VAT) on the price, from denying that the price includes that tax.

It also found, that, section 69 of the Value Added Tax Act precludes such registered operator from subsequently claiming VAT not reflected on the price.

In the court a quo's view, permitting the appellants to recoup value added tax (VAT) in retrospect would render nugatory the deeming provision of section 69 of the Value Added Tax Act as the deeming provision cannot be interpreted to mean different things to two different people.

Regarding the claim for value added tax (VAT) on present and future supplies of sugarcane, which the contracts of the parties are still silent on, the court a quo took the view, that, it was up to the parties to re-negotiate or clarify the terms of their contracts in order to plug the existing lacunae.

If they do not, then, section 69 of the Value Added Tax Act will continue to apply.

The court a quo was not persuaded that a case was made for an interdict against the first respondent.

It recognised, that, the appellants had made a formal request to the first respondent to intervene and educate the farmers on the tax implications of their agreement. They could not, thereafter, cry foul after such intervention.

In addition, the court a quo found no evidence of the first respondent's interference with the pricing issues between the appellants and the farmers.

On the question of costs, the court a quo found no basis for departing from the general rule, that, costs follow the result. It dismissed the application with costs granted in favour of only those respondents who participated in the suit.

The appellants were aggrieved. They noted this appeal to this Court on the following grounds;

GROUNDS OF APPEAL

1. The learned judge of the court a quo erred and misdirected himself in finding that section 69 of the Value Added Tax Act [Chapter 23:12] operated to preclude the appellants from recovering value added tax (VAT) for past supplies on an alleged milling service which the first respondent considered to have been rendered to farmers.

2. Further, the court a quo erred and misdirected itself in failing to pronounce, definitively, on the appellants right and entitlement to charge, levy, and collect value added tax (VAT), and the farmers respective obligation to pay same, in addition to the value of the alleged milling service, with respect to current and future supplies pursuant to the first respondent's decision to impose tax.

3. The learned Judge of the court a quo erred and misdirected himself in failing to find, that, the letter by the first respondent to the farmers, with respect to the farmers tax obligations, strayed upon purely contractual matters which it was not competent for the first respondent to prescribe to parties.

4. The court a quo erred in awarding costs against the appellants, and in favour of the respondents in general, and, at any rate, most especially as it relates to the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents in particular.

ISSUES

The grounds of appeal may be four, but they speak to essentially two narrow issues for determination in this appeal. They are:

1. Whether or not the court a quo erred in refusing to grant the declaratur and the interdict.

2. Whether or not the court a quo erred in granting costs against the appellants.

SUBMISSIONS ON APPEAL

Counsel for the appellants anchored his arguments on the legal effects of the decision taken by the first respondent, contained in its letter dated 9 September 2019. Following meetings held by the parties, the first respondent determined that:

“1. The VAT Act, under section 6, provides that VAT shall be charged and levied where a service is provided. Facts at hand indicated that millers provide milling services to the farmers and they retain 23% from the sugar proceeds…,.

Given the above legislative requirements, VAT is therefore applicable on the milling fees, and, as discussed in the meeting, VAT is recovered as depicted in the following scenario…,.”

It was submitted, that, the moment the first respondent made the decision to commence recovering value added tax (VAT) on milling services, when, prior to that, it had not done so, the provisions of section 72(1) of the Value Added Tax Act [Chapter 23:12] were triggered.

The section provides:

“(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax on increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

To the extent that value added tax (VAT) was only imposed on the milling fees, by letter quoted above, so the argument goes, when it had not been claimed previously, the appellants were entitled to recover it from the recipients of the milling services by virtue of that provision.

It was submitted, further, that, the deeming provisions of section 69 of the Value Added Tax Act do not preclude the appellants from recovering the value added tax (VAT) paid to the first respondent. This is so because the section is a shield in the hands of the revenue collector. It is an administrative tool for the facilitation of easy collection of taxes without disruptive disputes with registered operators.

In counsel for the appellants view, section 69 of the Value Added Tax Act cannot be used to estop the operator from recovering value added tax (VAT) paid to the collector.

Per contra, counsel for the first respondent submitted, that, given that the contracts for milling services did not reflect value added tax (VAT), section 69 of the of the Value Added Tax Act applies. To that extent, in respect of past supplies, the contract price is deemed to be inclusive of VAT.

It was submitted further, that, in the absence of an agreement with the farmers to vary the contract price, even by the application of basic principles of Contract Law, the appellants could not unilaterally vary the price by levying value added tax (VAT).

On the effects of section 72 of the Value Added Tax Act, it was submitted, that, the section may be regarded as a law–changing provision. In the event that the law changes to include value added tax (VAT), where it was not applicable, so it was argued, or to increase the applicable VAT, then, by dint of section 72 of the Value Added Tax Act, the agreement is varied accordingly.

The net effect of those submissions is that the section has no application where value added tax (VAT) was excluded in the agreement when it should have been included.

Regarding the alleged interference with contractual rights and obligations by the first respondent, counsel for the first respondent submitted, that, the advice rendered by the first respondent was not only at the invitation of the appellants themselves but also in fulfilment of a statutory obligation. The first respondent is obliged to educate taxpayers on their tax obligations.

The requirements for an interdict were not met.

Counsel for the rest of the respondents in attendance, in chorus, associated themselves with submissions made on behalf of the first respondent.

ANALYSIS

In as much as the record of appeal and the submissions made by counsel are heavy, what has to be decided has become very narrow indeed. The entire appeal turns on the effect of the deeming provision in section 69 of the Value Added Tax Act [Chapter 23:12].

In particular, whether it operates to prevent a registered operator who has fallen foul of the law, by not reflecting value added tax (VAT) on the price of goods and services, from later recouping the VAT demanded by the first respondent from the consumer.

A fortiori, whether section 72 of the Value Added Tax Act applies to a situation where the registered operator has excluded or not reflected value added tax (VAT) on the price of goods and services even though the law required such registered operator to levy and reflect VAT on the price.

Section 72 of the Value Added Tax Act varies the contract price by the margin of value added tax (VAT) imposed or increased subsequent to the contract being concluded.

I agree with counsel for the first respondent, that, it is a law-changing provision as it clearly relates to the imposition of a new tax or the increase of an existing tax.

It is common cause that the burden of paying value added tax (VAT) lies with the consumer of goods and services.

The system of value added tax (VAT) collection existing in this jurisdiction was succinctly summarised by the court in Zimbabwe Revenue Authority v Packers International (Private) Limited 2016 (2) ZLR 84 (S)…, thus:

“The system of collection of VAT, as embodied in the VAT Act, involves the imposition of tax at each step along the chain of manufacture of goods or the provision of services subject to VAT.

Consequently, every registered operator is required, in terms of section 28 of the VAT Act, to submit returns to the Commissioner of Taxes ('the Commissioner') every month, calculate the VAT due on the return, and make payment of such VAT.

Due to the sheer volume and complexity of the VAT collection system, ZIMRA lacks the capacity and manpower to effectively monitor each and every transaction liable to VAT, and, as a consequence, it is heavily reliant on the self-assessment process by registered operators.

However, in order to ensure that operators comply with the requirements to render returns and collect VAT, ZIMRA conducts periodic investigations as well as audits.”

In terms of the value added tax (VAT) collection system which is in place, while the burden to pay resides with the consumer of goods and services, the registered operator bears the burden of collecting VAT and remitting it to the revenue collector.

Where the registered operator has omitted, as required by section 6(1) of the Value Added Tax Act, to include value added tax (VAT) on the price, section 69(1) of the Value Added Tax Act is activated to deem VAT to be included in whatever price is pegged by the operator.

Section 6(1) of the Value Added Tax Act is very clear in its wording, it provides:

“Subject to this Act, there shall be charged, levied, and collected, for the benefit of the Consolidated Revenue Fund, a tax, at such rate as may be fixed by the Charging Act, on the value of -

(a) The supply, by any registered operator, of goods or services supplied by him on or after the 1st January 2004, in the course or furtherance of any trade carried on by him:”

What it means is, that, by failing to charge, levy, and collect value added tax (VAT) from the consumers of their milling services, the appellants breached, to their peril, the peremptory provisions of section 6(1) of the Value Added Tax Act.

By operation of section 69(1) of the Value Added Tax Act, the 23 percent charge for milling services was taken to include VAT for all intents and purposes.

The court a quo cannot be faulted for finding, that, whether by inadvertence, oversight, or misinterpretation of the nature of the contract, the consequence of the failure to specifically include value added tax (VAT) are that it is deemed included in the milling price.

The deeming provision cannot be applied differently on the registered operator and the consumer.

As regards the question whether section 72(1) of the Value Added Tax Act rescues the appellants from the consequences of their failure to comply with the peremptory provisions of section 6(1)(a) of the Value Added Tax Act, it is clearly a matter of statutory interpretation.

In my view, the simple grammatical meaning of the words “whenever the value added tax is imposed or increased in respect of any supply of goods and services…,” is that, in the first instance, there would be no tax on such supply and the law steps in to impose a tax.

In the second instance, the law would have imposed a tax on the supply but it moves in to increase the value of tax.

In both instances, the parties would have contracted in certain terms before the law changes.

Upon change of the law, section 72(1) of the Value Added Tax Act comes in to vary the terms of a pre-existing contract to either impose or increase the tax.

I do not agree with counsel for the appellants submission, that, upon conducting an audit which revealed that the appellants were rendering a taxable milling service while not levying and collecting tax, the first respondent imposed a tax.

In my view, the law had already imposed the tax, but the appellants were committing an infraction by not reflecting it.

Again, the court a quo was correct in concluding, that, there was no imposition of a “new tax” nor an increase of chargeable tax.

Accordingly, section 72(1) of the Value Added Tax Act has no application and is certainly not available to the appellants.

Counsel for the appellants did not prosecute the issue of the interdict sought against the first respondent with any degree of enthusiasm.

It is not without reason that this is so:

(a) Firstly, evidence placed before the court a quo shows, that, the appellants invited the first respondent to intervene and educate the farmers on the tax implications of their contracts with the appellants. That the first respondent interpreted their contracts in a manner not favourable to the appellants can scarcely found a cause of action.

(b) Secondly, and more importantly, the requirements for the grant of an interdict were not met.

I can only advert to the fact that the court a quo made factual findings relating to the failure by the appellants to prove that the first respondent had interfered with the contractual issues.

It also made a finding that the advice rendered by the first respondent was only confined to value added tax (VAT) matters falling within the statutory province of the first respondent as a revenue collector.

Surely, one cannot be interdicted from carrying out a lawful duty.

The court a quo also made a finding that the use of the term “gratuitously interfering” was too imprecise and unenforceable.

On appeal, the appellants failed to set out a basis for interference with those findings.

It is trite, that, it is only where the factual findings of the lower court are clearly irrational, to an extent that no sensible court seized with the same facts could have reached such a conclusion, that the Appellate Court will interfere: see Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S); Shuro v Chiuraise SC20-19.

No such threshold was attained in the present case. As such, this Court cannot interfere.

It remains for me to deal with the question of costs.

The court a quo granted costs against the appellants in favour of those respondents who participated in the proceedings.

It premised its decision on the general rule that costs follow the result.

Its attention was not drawn to the widely held principle, in tax cases, that, the High Court or the Special Court, is loathe to make an order as to costs save where the claim is held to be unreasonable or the grounds of appeal are frivolous: see section 65(12) of the Income Tax Act [Chapter 23:06].

On appeal, counsel, again, did not address that issue at all.

It occurs to me, that, the court a quo was incapacitated in respect of costs by the failure to bring its attention to the prevailing jurisprudence on such costs. As a result, it misdirected itself, a misdirection entitling this Court to interfere with its exercise of discretion.

There is nothing in this case suggesting that the appellants case was unreasonable or that it was frivolous.

Quite to the contrary, they raised quite pertinent issues which required the court to embark on a detailed interpretation of the law. The same applies to the appeal.

In my view, this is a classic case in which the costs, both a quo and in this Court, should not be awarded to any party.

In the result, it be and is hereby ordered as follows:

1. The appeal, in respect of grounds of appeal 2.1, 2.2, and 2.3 is dismissed with each party to bear its own costs.

2. The appeal, in respect of ground of appeal 2.4, is upheld.

3. The judgment of the court a quo is amended by the deletion of paragraph 5 and its substitution with the following:

“5. Each party shall bear its own costs.”

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

The parties in this application are embroiled in a bitter dispute over the implications of their failure to specifically include Value Added Tax (abbreviated herein as “VAT”) matters in agreements for the milling of sugarcane.

The applicants are both companies duly incorporated in terms of the laws of Zimbabwe whose names over the years have become synonymous with sugar and sugar cane production in Zimbabwe. They grow, source, and mill sugar-cane and market its products. They carry on this agro-based business in and around the Lowveld towns of Triangle and Chiredzi.

The first respondent is the Zimbabwe Revenue Authority (ZIMRA): a statutory body whose chief mandate is to assess, collect, and enforce the payment of all revenues on behalf of the State. It is established in terms of the Revenue Authority Act [Chapter 23:11].

Save for the 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila), the rest of the respondents are organisations representing the interests of sugarcane farmers in the Lowveld (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugar Cane Farmers Trust, Commercial Sugar Cane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugar Cane Development Association Royal Trust, Chipiwa Mpapa Mill Group and Chiredzi Productive Cane Growers Association).

The 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila) respondents are individual sugar cane farmers.

They were probably singled out on account of the positions they hold as Members of Parliament for the Chiredzi South and Chiredzi North constituencies respectively over and above their roles as sugar-cane farmers. They also occupy and serve in specialised Parliamentary capacities.

BACKGROUND

Solely for purposes of convenience and brevity, the second to eleventh respondents (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers Association, Farai Dumo Augustine Musikavanhu and Roy Bhila) will be referred to simply as “the farmers” and the first respondent as “ZIMRA”.

It is common cause, that, pursuant to the terms of either of two types of written agreements between them, the farmers supply the sugar cane that they produce to the applicants. These contracts are generally referred to by the parties as the “Cane Milling Agreement” and the “Cane Purchase Agreement.”

Under the former, the basic idea (as is implicit in the name) is that the applicants merely provide a milling service to the farmers. In addition, the applicants also proceed to market, on behalf of the farmers, the sugar and molasses thereby produced as well as other by-products, and, thereafter, remit to the farmers the proceeds thereof after deducting the expenses associated with the milling of the sugarcane and marketing of the sugar and the other by-products.

It is further common cause, that, under the cane milling arrangement, there is an existing agreement that the charge for the milling is calculated according to a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. This ratio currently stands at 23 percent of the proceeds which the applicants retain in the wake of the marketing of the products of the milling process. The farmer gets the remainder.

The Cane Purchase Agreement operates differently.

According to the parties, this agreement involves a direct and complete sale of the sugar cane by the farmers to the applicants with risk and benefits passing to the latter upon the delivery of the cane.

During oral submissions in court, counsel for the applicants referred to a rather convoluted method by which the purchase price of the cane is computed under this arrangement; suffice it to say that there is no convergence as among the parties as to whether the supplies of cane that gave rise to the current dispute constitute a Cane Milling Agreement or a Cane Purchase Agreement.

Be that as it may, it is common cause, that, in a decision (which has since been appealed against to the Fiscal Appeals Court), the first respondent determined that the set-up which currently obtains, chiefly characterised by the distribution of proceeds arrangement, constitutes one which attracts value added tax (VAT).

Therein lies the genesis of the dispute.

This is because the simple question to be answered is whether the 23 percent retained by the applicants, post the milling and marketing, incorporates value added tax (VAT) (as contended by the farmers) or it does not (as maintained by the applicants).

It is further common cause that the Zimbabwe Revenue Authority (ZIMRA), having made the decision that the aforementioned arrangement was one that attracts value added tax (VAT) in terms of the law, and that the applicants were therefore legally obligated to have, all along, charged and collected from the consumers (i.e. the farmers) and remitted the amounts so collected to it, directed that the said amounts be paid to it.

In compliance with that decision, the applicants aver, that, they have since calculated the outstanding amounts in this regard and remitted the same to the first respondent.

Through the current application, the applicants seek;

(i) A declaratory order to the effect that they are legally entitled to recover from the farmers the value added tax (VAT) which they have since paid to the first respondent; and

(ii) Secondly, that they are legally entitled to continue charging and collecting value added tax (VAT) from the farmers over and above the 23 percent milling charge.

The applicants also take exception to the fact that the first respondent (through some of its officials) took it upon itself to render certain advice to the farmers which advice they contend amounts to an unwarranted interference in matters that are purely contractual.

Part of that advice related to the first respondent's interpretation of the tax implications of the failure to include value added tax (VAT) matters in the cane supply agreements.

The terms of the declaratur sought by the applicants are captured in the draft order annexed to the application which reads:

“Wherefore, after reading papers filed of record and hearing counsel, IT IS ORDERED THAT:

1. The application succeeds with costs.

2. It be and is hereby declared that -

(a) The conduct by the first respondent to give advice to the applicants and the second to eleventh respondents on what are purely contractual matters is ultra vires its functions and responsibilities as an administrative authority and therefore unlawful.

(b) To the extent that they are liable to pay VAT for milling costs, the applicants are entitled to charge, levy, and collect such VAT in accordance with the VAT Act on and in addition to the value for the milling charge.

3. The first respondent be and is hereby ordered and directed to refrain from gratuitously interfering in pricing and contractual issues between the applicants and the second to eleventh respondents.

4. The respondents shall, jointly and severally, the one paying the others to be absolved, pay the applicants costs of suit on an attorney–client scale.”

The applicants raised a number of arguments in support of their contention that they should be permitted to recover that which they have since paid to the Zimbabwe Revenue Authority (ZIMRA) in the wake of the latter's aforementioned determination.

The main thrust of their argument, as I see it, however, is that the very fact that the Act makes it clear that the burden to pay the tax in question rests on the consumers, who in this case are the farmers, yet it was them (applicants) who were compelled to pay it, necessarily implies that they can recover the same from the farmers.

Reliance was placed, inter alia, on the elucidation by GOWORA JA, of the tripartite relationship in the value added tax (VAT) equation. This was in the case of ZIMRA v Packers International (Private) Limited SC28-16 where the following exposition was made:

“The system of collection of VAT, as embodied in the VAT Act, involves the imposition of tax at each step along the chain of manufacture of goods or the provision of services subject to VAT;”

And further that:

“…, tax under the VAT Act consists of monies that have been taxed on goods and services paid by consumers for onward transmission to the Commissioner. All that is required of an operator is to calculate the amount so paid, submit a return, and make payment.”

Flowing from this basic premise, according to the applicants, are two applicable precepts that emanate therefrom, namely, unjust enrichment and equity.

The latter, though not specifically pleaded in their papers, was nevertheless amply canvassed during the oral submissions in court.

Regarding unjust enrichment, it was averred, that, should the court not find in the applicants favour, an injustice will ensue in that the respondents will have been unjustly enriched at their expense.

For the requirements and application of the principle of unjust enrichment, the following cases were cited as authority; Industrial Equity v Walker 1996 (1) ZLR 269 (H); Chioza A.M. v Siziba S.W. SC04-15; and Trojan Nickel Mine Ltd v Reserve Bank of Zimbabwe HH169-13.

It was contended, that, the facts of this case point to the fact that all the pre-requisites for a finding for the applicant on the basis of unjust enrichment have been met.

The nub of the equity argument is that justice and fairness simply demand that the applicants be allowed to recoup from the farmers that which they paid to the Zimbabwe Revenue Authority (ZIMRA) in compliance with the latter's determination.

It is clear that this is merely an extension or adjunct of the unjust enrichment contention.

The applicants further referred to various sections of the Act which, in their view, fortify their position. Reliance was placed in this regard to section 9(2) which provides as follows:

“The value placed on any supply of goods or services shall, save as is otherwise provided in this section, be the value of the consideration for such supply, as determined in accordance with subsection 3, less so much of such value as represents tax: Provided that -

(a)…,.;

(b) Where the portion of the value of the said consideration which represents tax is not accounted for separately by the registered operator, the said portion shall be deemed to be an amount equal to the tax fraction of that consideration.”

Similarly, reliance was placed on section 9(5) of the Act which provides:

“Where goods or services are deemed to be supplied by a registered operator in terms of subsection (2) or (8) of section 7, the supply shall be deemed to be made for a consideration in money equal to the lesser of -

(a) The cost to the registered operator of the acquisition, manufacture, assembly, construction, or production of goods or services, including -

(i) Any tax charged in respect of the supply to the registered operator of such goods or services or of any components, materials, or services utilised by him in such manufacture, assembly, construction or production;

(ii) Where such goods or any right referred to in subsection (2) of section seven, when held by the registered operator, constituted trading stock as defined in section 2 of the Taxes Act, any further costs, including tax incurred by him in respect of such goods or right;

(iii) Any costs, including tax, incurred by the registered operator in respect of the transportation or delivery of such goods or the provision of such services in connection with the transfer of such goods or the provision of such services as contemplated in subsection (8) of section seven; and

(iv) Where such goods or services were acquired under a supply in respect of which the consideration in money was in terms of subsection (4) of this section deemed to be the open market value of the supply or would in terms of that provision have been deemed to be the open market value of the supply were it not for the fact that the recipient would have been entitled under subsection (3) of section fifteen to make a deduction of the full amount of tax in respect of that supply, such open market value to the extent that it exceeds the consideration in money for that supply: or

(b) The open market value of such supply.”

THE POSITION OF THE RESPONDENTS

The third (Zimbabwe Cane Farmers Association) and fourth (Mkwasine Sugar Cane Farmers Trust) respondents did not ultimately participate in the proceedings on account of the fact that the former did not file any opposing papers and the latter filed its heads of argument outside the prescribed time and was therefore barred.

In a similar vein, there was no appearance by or on behalf of the sixth (Hippo Valley Productive Farmers Association), ninth (Chiredzi Productive Cane Growers Association) and eleventh (Roy Bhila) respondents on the day of the hearing.

Effectively, therefore, only the positions of the first (Zimbabwe Revenue Authority), second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were before the court.

ZIMBABWE REVENUE AUTHORITY's POSITION (ZIMRA)

Regarding the implications of the failure by the applicants and the farmers to specifically incorporate value added tax (VAT) matters in their Division of Proceeds (DoP) arrangements, ZIMRA articulated two distinct positions, namely;

(i) That which relates to past supplies of cane; and

(ii) That which attends to present and future supplies of cane.

In respect of past supplies of sugarcane, the Zimbabwe Revenue Authority (ZIMRA) averred that a proper construction of section 69 of the Value Added Tax Act shows, that, in the absence of the express mention of value added tax (VAT) component in any price for goods or services, then the price will be deemed to contain the said tax.

As far as the alleged impropriety of the advice it rendered to the farmers, it contended that whatever advice it gave to the farmers was not only within its legal powers to give but also that it did so at the behest of the applicants.

It further averred, that, it has a duty to provide education to taxpayers not only to impart knowledge of the same but also to inculcate and engender a spirit of compliance.

First (ZIMRA) respondent's position on VAT implications for present and future supplies of cane

In its papers opposing this application, the Zimbabwe Revenue Authority (ZIMRA) does not commit itself on what the tax implications in respect of present and future supplies are. It opted, instead, to confine itself to the question of past supplies.

However, it soon became apparent that its position is that the applicants are not only at liberty to charge, levy, and collect from the farmers the said tax, but that they are in fact obligated to do so.

It suffices, however, to note that this does not address the issue of whether this will be over and above the 23 percent being charged for the milling of the cane.

THE FARMERS POSITION

As earlier stated, only the positions of the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were effectively before court.

Save for a few instances of divergence (which will be highlighted below) the farmers were united not only in their resistance to the application but also on the grounds thereof.

The rallying point in their opposition to the quest by the applicants to recover the tax for past supplies was section 69 of the Value Added Tax Act. Their position essentially mirrors that of the Zimbabwe Revenue Authority (ZIMRA).

Over and above the import of section 69 of the Value Added Tax Act, however, a few additional arguments were presented to buttress their position and these are:

1. The very fact that the Zimbabwe Revenue Authority (ZIMRA) has determined that the 23 percent milling charge includes value added tax (VAT) as far as the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents are concerned, is dispositive of the whole dispute.

They go as far as contending that the decision of ZIMRA is binding.

They further assert, that, in their view, the applicants have merely abdicated from their responsibility to remit the value added tax (VAT) so collected to ZIMRA and the consequences attendant thereto cannot be visited on them.

2. That the endeavour, on the part of the applicants, to recover the value added tax (VAT) they paid from them amounts to an attempt to vary the implied terms of their contract.

3. That, as far as the fifth (Commercial Sugar Cane Farmers Association of Zimbabwe) respondent is concerned, its cane supply arrangement with the applicants is governed by neither a cane milling agreement nor a cane purchase agreement, but, rather, by what it terms a “memorandum of understanding.” A copy of which was attached.

4. A further point raised by the fifth respondent (Commercial Sugar Cane Farmers Association of Zimbabwe) was that the very fact that invoices relating to disbursements of the individual farmer's share of proceeds is silent on the collection of value added tax (VAT) necessarily implies that VAT was included in the 23 percent milling charge.

During oral addresses in court, yet another argument was presented, namely, that, the Division of Proceeds (DoP) ratio was decided upon by the Minister responsible for the superintendence of the sugar sector, namely, the Minister of Industry and Commerce.

It was averred, in this regard, that, during the negotiations leading up to those figures (of 23 percent and 77 percent) it was in the contemplation of the parties that value added tax (VAT) was incorporated in the 23 percent milling charge.

In apparent departure from the positions held by the other respondents, the seventh respondent (Zimbabwe Sugar Cane Development Association Royal Trust) maintained that section 69 of the Value Added Tax Act applies to all supplies of cane; past, present, and future.

THE ISSUES

In my view, there are two broad issues up for determination in this dispute, and, from each, two sub-questions arise. The two broad questions are:

(1) Whether the 23 percent cane milling charge includes or excludes value added tax (VAT); and

(2) Whether there has been an unjustifiable interference by the first respondent the Zimbabwe Revenue Authority (ZIMRA) in purely contractual matters between the applicants and the farmers.

The sub-questions in respect of (1) above are:

(a) Whether or not the applicants are entitled to recover from the farmers value added tax (VAT) which they (i.e. applicants) paid to ZIMRA for past supplies; and

(b) Whether or not the applicants are entitled to charge, levy, and collect from the farmers value added tax (VAT) over and above the 23 percent milling charge.

The sub-questions from (2) above are:

(a) Whether the applicants have satisfied the requirements for the declaratur sought in paragraph 2(a) of the draft order; and

(b) Whether the applicants have satisfied the requirements for the interdict sought in paragraph 3 of the draft order.

WHETHER THE 23% CANE MILLING CHARGE INCLUDES OR EXCLUDES VALUE ADDED TAX (VAT)

This is arguably the most significant question as it lies at the very heart of the dispute.

As indicated above, the applicants used various arguments in support of their contention that the 23 percent milling charge must be taken as excluding value added tax (VAT).

They relied, inter alia, on subsections 2 and 5 of section 9 of the Value Added Tax Act.

I however fail to see how section 9(2)(b) of the Value Added Tax Act assists the applicants.

Section 9 of the Value Added Tax Act, in general, is aimed at the determination of the value of supply of goods or services. Paragraph 2(b), in particular, is a proviso to the general provision that the value to be placed on any supply of goods or services is the value of the consideration.

This proviso however addresses a situation where the registered operator neglects to separately account for the value of the consideration which represents tax in which case it will be deemed to be the tax fraction of the consideration.

Implicit in this proviso is that the tax fraction is to be calculated from that consideration: not in addition to the consideration. A fraction of something is a piece, part, portion, or component of something. Put in context, therefore, the tax fraction is incorporated in not excluded from or to be added to the 23 percent milling charge which is the consideration.

Sub-section (5) of section 9 of the Value Added Tax Act equally does not avail the applicants.

It is simply a method aimed at assisting in the computation of the consideration of the supply of the goods or services in question in instances of “deemed supply”. The basic idea being that this involves a calculation of all the expenses incurred in or attendant to the acquisition of the goods or services (or any lesser amount) or simply the open market value of such supply.

Needless to say that this provision does not even come close to unlocking the current legal logjam, let alone assist the applicants....,.

UNJUST ENRICHMENT

The applicants averred, that, if they are not permitted to recoup that which they have since paid to the Zimbabwe Revenue Authority (ZIMRA) by way of value added tax (VAT) emanating from past supplies of cane, then, the farmers would have been unjustly enriched at their (applicants) expense. This is because the ultimate responsibility to pay value added tax (VAT) rests on the farmers who are the consumers of the milling service.

All things being equal, this argument would perhaps have carried the day for the applicants had it been established, one way or the other, that, the 23 percent milling charge does not include value added tax (VAT).

What has to be established, first, is whether or not it does.

It is only after that determination that one can legitimately argue that placing the burden on the applicants to foot this tax when the milling charge did not include tax as amounting to unjustly enriching the farmers at the applicants expense, or, conversely, that, permitting the applicants to recoup from the farmers what they (applicants) have since paid to ZIMRA when it is established that the 23 percent actually incorporated the tax can one argue the applicants as having been unjustly enriched at the expense of the farmers.

EQUITY

Counsel for the applicants made an impassioned plea for the court, in the name of equity, to find that the applicants are entitled to recoup the value added tax (VAT) in question which they have already paid.

In Sanudi Masudi v David Jera HH67-07 MAKARAU JP…, made short shrift of an argument based entirely on equity (a position I adopt in casu) she had this to say:

“That argument would have won the day were we a court of equity. We are but a court of law, and, as correctly advanced by both counsel, we are to be restricted by the pleadings filed by the parties to establish the cause of action that was before the trial court and the defense that was raised to meet that cause of action.”

Although the circumstances of that case were admittedly different from the present one, the fact remains, that, the court is confined to an application of the letter of the law to the facts and not necessarily the parties subjective views of what is right or wrong....,.

The real issue as I see it, lies in the interpretation of sections 69 and 72 of the Value Added Tax Act and their application to the facts of this matter....,.

REGARDING PAST SUPPLIES OF CANE

As indicated earlier, in this regard, the Zimbabwe Revenue Authority (ZIMRA) relied almost exclusively on the provisions of section 69 of the Value Added Tax Act (and the farmers adopt a similar stance) which provides as follows:

“69 Prices deemed to include tax

(1) Any price charged by the registered operator in respect of any taxable supply of goods or services, shall, for the purposes of this Act, be deemed to include any tax payable in terms of paragraph (a) of subsection (1) of section six in respect of such supply, whether or not the registered operator has included tax in such price.”

According to ZIMRA, the significance of this section is that where the price/charge (which, in this case, the milling price which is pegged at 23 percent of the value of the proceeds from the cane) is silent on the value added tax (VAT) component thereof, it is deemed, ex lege that VAT is included in that price.

Put in perspective, therefore, according to the first respondent, the Zimbabwe Revenue Authority (ZIMRA), it is deemed that the consumer of the goods or service (in this case the farmer) has already paid value added tax (VAT) in that price, and, by logical extension, all the registered operator (in this case the applicants) needs to do is to remit it to ZIMRA.

Any purported attempt to recover the same from the consumer is untenable because that would not only amount to taxing the consumer twice but also runs contrary to the tenor and spirit of that section.

The Zimbabwe Revenue Authority (ZIMRA) further contended, that, doing so would inevitably lead to a fresh computation of the value added tax (VAT) payable because the one calculated and subsequently paid by the applicants was on the basis of section 69 of the Value Added Tax Act.

In a nutshell, accepting the position adopted by the applicants would yield higher figures for the value added tax (VAT) payable.

The applicants took a contrary view and argued;

(i) Firstly, that there is no need to resort to the deeming provision of any legislation when in fact the issue in question is adequately provided for elsewhere in that Act.

This is because, so the argument goes, it should only be resorted to in instances of omission on the part of a party with the duty to comply with a statutory obligation.

(ii) Secondly, they contended that section 69 of the Value Added Tax Act only serves to remove as a potential defence in situations such as the present when ZIMRA demands from it the value added tax (VAT) component of any price where same is not expressly stated therein.

However, according to them, it offers no sanctuary to a consumer when the registered operator now seeks to recover from him (i.e. consumer) that which they paid pursuant to ZIMRA's decision.

In my view, the position adopted by the applicants cannot be sustained.

Firstly section 9(2) and section 9(5) of the Value Added Tax Act, which they relied on, have already been found to be of no application to the current dispute.

Secondly, the plain and literal meaning of the section suggests that it is irrelevant whether or not the registered operator has in fact charged the tax in question; where the price does not reflect the tax component thereof it is presumed that the tax is incorporated in that price.

In other words, the phrase “whether or not the registered operator has included tax in such price” operates a twin blow to the registered operator: it serves to estop him from denying that the price in reality did not include tax in a bid to avoid accounting for the tax to the Commissioner. At the same time, it precludes him from purporting to claim from the consumer the tax that he may or may not have collected from the consumer.

The question of who bears the obligation under the Value Added Tax Act to pay the tax (who is obviously the consumer), which the applicants expended so much effort on, is hardly the issue.

To contend that section 69 of the Value Added Tax Act should be construed so as to permit the registered operator to pursue the consumer for the recovery of the tax they paid to the Zimbabwe Revenue Authority (ZIMRA) would, in my view, run contrary to the clear intention of the legislature.

The legislature must obviously have been alive to the fact, that, in most day to day supply of goods and services, the customer disappears without trace soon after the transaction.

How then would the registered operator be able to recoup the tax that he claims he did not in fact charge and collect?

Even if the customer could be traced, there would be an unnecessary proliferation of disputes between him and the registered operator as to whether the price included value added tax (VAT) or not.

It would create unnecessary uncertainty and confusion in the market place where the consumer will never know whether or not the price charged includes value added tax (VAT) and where he always runs the risk of being informed ex post facto that the price he paid actually did not include tax.

If the applicants are permitted to recover the tax in question from the farmers then the deeming provision will be rendered nugatory. It would mean the price cannot then be deemed to include tax - it is as simple as that.

Further, related to the above, the deeming provision cannot be interpreted to mean two different things to two different people.

The interpretation that the applicants want to foist on section 69 of the Value Added Tax Act will result in a mathematical or accounting incongruence and an absurdity in logic.

The Zimbabwe Revenue Authority (ZIMRA), in its papers, vividly illustrate the mathematical inconsistency that will arise when they juxtapose the outcomes of the two contrasting positions using the hypothetical figure of $1,000 as proceeds for the sale of sugar thus:

(a) Where section 69 of the Value Added Tax Act is invoked

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30

(b) Where the applicants recover the section 69 ($30) VAT from the farmers

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30
VAT due after the applicants recover the $30 VAT from the farmers = 15% ($230-30+30) = $34.50

What the applicants are moving the court to accept will also yield a further absurd result in the following context:

Where, from the standpoint of the first respondent, the Zimbabwe Revenue Authority (ZIMRA), vis a vis the applicants, value added tax (VAT) is deemed to be included in the price; yet, from the standpoint of the applicants vis-a-vis the farmer, the price is deemed not to include the tax.

It could never have been the intention of the legislature to produce such an absurd or anomalous situation.

The net result of the interpretation should be uniform, consistent, and certain not only to the parties but also to other persons similarly situated.

Section 69 of the Value Added Tax Act effectively places the registered operator on guard on the consequences of his failure to specifically include in his price the value added tax (VAT) component thereof.

Viewed differently, it is the responsibility of the registered operator to ensure that value added tax (VAT) matters are addressed in his dealings with the consumer. It is not a responsibility that the registered operator jointly shares with the consumer because the duty to account to the Commissioner ultimately rests with him (i.e. Registered Operator).

There can never be a conflation of the roles, duties, and responsibilities among the various parties: the burden to pay the tax lies with the consumer (the farmer), the duty to charge, collect, and remit the tax lies with the registered operator (the applicants).

In the context of this case, whether occasioned by inadvertence, oversight, or a mis-interpretation of the nature of the contract, the consequences of the failure to specifically include the value added tax (VAT) are that VAT is deemed included in the milling price.

During the proceedings, resort was made by the applicants to section 72(1) of the Value Added Tax Act which provides as follows:

“72 Contract price or consideration may be varied according to rate of value-added tax

(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax or increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

In my view, this provision is meant to address the adjustments that may have to be made in contractual situations wherein, at the time the offer was made, there was no value added tax (VAT) imposable on that contract or it stood at a certain level; however, by the time the acceptance is made, that type of contract, by operation of the law, now attracts VAT or had been increased.

The imposition of or the increase in the value added tax (VAT) was not in the contemplation of the parties thereby necessitating an adjustment in the price.

This provision is clearly not applicable to the current dispute.

There was no imposition of a “new” tax which hitherto did not exist, nor was there an increase of the value added tax (VAT) chargeable and payable.

The parties merely failed to take into account a tax which was already in existence.

PRESENT AND FUTURE SUPPLIES OF CANE

Therefore, against the backdrop of a finding that the parties (whether through inadvertence, oversight, or mis-apprehension) failed to address value added tax (VAT) matters in their contracts, one cannot legitimately vouch for the perpetuation of the status quo.

It behoves the parties to re-negotiate or clarify the terms of their contract to plug that lacuna.

It suffices to state, that, failure to do so may very well result in section 69 of the Value Added Tax Act being continuously invoked.

I did not get the impression from the concession made on behalf of the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents that they are necessarily agreeable to the charging of value added tax (VAT) by the applicants over and above the 23 percent milling charge.

What I gathered was a concession merely that the applicants can charge, levy, and collect value added tax (VAT) from the farmers in compliance with the requirements of the Value Added Tax Act....,.

1....,.

2. The application for a declaratur, as sought in paragraph 2(b) of the draft order, as it relates to past supplies of sugar cane, be and is hereby dismissed.

3. In respect of present and future supplies of sugar cane, it is hereby ordered that the applicants and the 2nd-11th respondents are at liberty to re-negotiate and/or clarify the terms of their contracts to specifically incorporate value added tax (VAT) issues and proceed on that basis.

Appealed
SC87-21 : RIO ZIM (PVT) LIMITED vs TRUST BANK CORPORATION LIMITED (In Liquidation)
Ruled By: MAKARAU JA, HLATSHWAYO JA and UCHENA JA

On 19 September 2018, the High Court, sitting at Harare, dismissed with costs, on a legal practitioner and client scale, an application by the appellant for leave to sue the respondent, a banking corporation in liquidation.This is an appeal against that order.BackgroundThe dispute between the parties arises from a loan ...

Background

The dispute between the parties arises from a loan transaction. In 2011, the appellant borrowed the sum of US$3,875,000 from the respondent. By 2012, the loan had ballooned to US$5,789, 262 resulting in the parties concluding a written agreement to restructure the loan. Thereafter, the appellant made certain payments towards the restructured loan.

In March 2014, before it was placed in liquidation, the respondent issued summons against the appellant claiming the balance due under the loan. It obtained a default judgment in the sum of $1,824,505=05 together with interest thereon at the rate of 45 per cent per annum.

A few months later, in September 2014, it was placed in provisional liquidation.

Before the order winding up the respondent was made final, the appellant approached the court a quo seeking rescission of the default judgment.

It brought the application under Rule 449 of the High Court Rules 1971, alleging that the default judgment against it had been granted in error.

The application, which was prosecuted without the prior leave of the court, was granted in the absence of the respondent and its provisional liquidator.

In 2017, the defective order against the respondent was set aside at the instance of the liquidator.

An appeal to this Court against that decision, was, with the consent of both parties, dismissed with costs.

Still desirous of having the default judgment against it varied or corrected, the appellant filed an application for leave to sue the respondent in terms of section 213 of the Companies Act [Chapter 24:03].

Attached to the application for leave was the proposed application, again to be brought under Rule 449 of the High Court Rules, 1971.

In the proposed application, the appellant avers, that, the default judgment against it was granted in error as it did not take into account payments made subsequent to the granting of the order in the sum of US$1,381,166. The appellant further avers that the default judgment erroneously levies interest on the outstanding amount at the rate of 45 per cent per annum when there is no contractual basis for such a rate.

Giving nine reasons for doing so, the court a quo dismissed the application, as stated above, giving rise to this appeal.

The Appeal

Before this Court, the appellant raised four grounds of appeal as follows:

“1. The High Court grossly misdirected itself in determining the substantive merits of the intended application for rescission of judgment in terms of Rule 449 of the High Court Rules 1971 instead of considering whether, on a prima facie basis, the application was not frivolous or vexatious.

2. The High Court further erred in finding, that, the appellant's cause of action in the intended application was for the correction of the writ of execution when, in fact, its cause of action was for the correction of the judgment which was erroneously granted without having regard to amounts paid by the appellant subsequent to the issuance of summons but before judgment.

3. Further, the High Court grossly erred in finding, that, the appellant was not contesting the rate of 45 per cent per annum when that was one of the grounds upon which the intended application for rescission of judgement would be based.

4. Further, the High Court erred in finding, that, the Deposit Protection Corporation, which had filed an affidavit in opposition, was not a party before the High Court, and, therefore, ought to have been cited in both the appealed proceedings and intended proceedings for correction of judgment.”

From the above grounds, the appellant raises four potential arguments. These are that;

(i) The court a quo determined the proposed application instead of finding whether or not the application for leave to sue the respondent was prima facie not frivolous or vexatious;

(ii) That the court a quo misconstrued the cause of action in the proposed application;

(iii) That the court a quo erred in finding that the appellant was not contesting the interest rate levied in the default judgment; and

(iv) Finally, that the court a quo erred in finding that the liquidator of the respondent had not been cited in the proposed application.

The Issue

It appears to me, that, the appellant has indiscriminately attacked each and every finding of fact that the court a quo made.

This has tended to obfuscate the real issue that falls for determination in this appeal.

Accepting, as we must, that, leave to sue a company in liquidation is not a right enforceable upon demand but is an indulgence or latitude granted in the discretion of the court; then, the real issue that falls for determination in this appeal is: whether or not the court a quo properly exercised that discretion in denying the indulgence sought.

The rest of the arguments raised by the grounds of appeal are red herrings.

The Law

The application before the court a quo was one for leave to sue the respondent in terms of section 213 of the Companies Act [Chapter 24:03].

The Companies Act simply provides, that, the leave of the court is required before a company in liquidation can be sued. It does not lay out the test, or factors, that a court granting such leave must take into account, leaving the matter in the discretion of the court - which discretion the court must exercise judiciously.

The factors that a court may take into account in determining an application for leave to sue a company in liquidation are not exhaustive. The broad consideration remains the need for the court to protect the interests of all the creditors of the company under liquidation and to ensure the orderly administration of the process of liquidating such debts.

The bedrock of the law on the winding up of companies is that once concursus creditorum is established, the business of the company being wound up is thereafter carried on solely for the purpose of distributing its assets amongst its creditors and not for gain or for the benefit of the shareholders.

The oversight function of the court is similarly focused on ensuring that this ensues as expeditiously as is practicable.

Thus, by operation of law, all legal processes against the company in liquidation are stayed and can only proceed with the leave of the court.

It is the duty of the court to ensure not only the smooth and orderly administration of the assets of the company, but, more importantly, that, after winding up has commenced, no creditor obtains an advantage over other creditors as a result of any conduct on the part of the company or its debtors: see Meaker N.O. v Campbell's New Quarries (Pvt) Ltd 1973 (3) SA 157 (R); and Letsilele Stores (Pty) Ltd v Roets 1958 (2) SA 224 (T).

Analysis

In dismissing the application a quo, the court put out nine reasons.

A reading of the reasons indicates, that, the court formed the view, that, the intended application had no merit, was unnecessary, and amounted to an abuse of process which would prejudice the interests of the respondent.

Five out of the nine reasons have a bearing on the intended application and discuss, in detail, its alleged shortcomings. This may explain the argument by the appellant, in its first ground of appeal, that, the court a quo determined the intended application.

The court a quo appears to have been greatly influenced in its reasoning by the averment in the appellant's founding affidavit, that, it had made payments towards the reduction of the debt subsequent to the granting of the default judgment.

The court a quo therefore reasoned, and correctly so in my view, that, if this was indeed the case, then the default judgment was correct and what needs revision is the amount to be collected by way of writ as the outstanding judgment debt.

I pause momentarily to note, that, there is an obvious disconnect between the averments in the appellant's founding affidavit and the grounds of appeal regarding when the payments reducing the appellant's indebtedness to the respondents were made.

In the founding affidavit, as stated above, the appellant avers, that, the payments were made subsequent to the granting of the default judgment.

This explains the finding by the court a quo, that, the figure to be corrected is the amount of the judgment debt on the writ of execution rather than the amount in the order of court.

In the second ground of appeal reproduced above, the appellant argues, that, the payments were made subsequent to the issue of summons but before the judgment was granted.

Whatever the correct position may be, the appellant is bound by the averments made in the founding affidavit and not by what is alleged in the grounds of appeal.

The appellant cannot, therefore, escape the finding by the court a quo that the correctness of the amount awarded in the order of the court is not affected by any payment that the appellant may have made subsequently.

It is the one that alleged that all further payments were made subsequent to the judgment.

View Appeal
HH534-18 : RIOZIM (PVT) LTD vs TRUST BANK CORPORATION LTD (IN LIQUIDATION)
Ruled By: KWENDA J

This is application made in terms of section 213 of the Companies Act [Chapter 24:03] for leave to institute proceedings against the respondent, a company in liquidation.

Should leave be granted, the applicant intends to file an application in terms of Rule 449 of the High Court Rules 1971, for correction of a default judgment entered against it in favour of the respondent on 12 March 2014 (the respondent was placed under provisional liquidation on 8 October 2014).

A draft of the application to be filed once the anticipated leave be granted was submitted with the applicant's papers.

The application, should leave be granted, will be a second bite since an earlier attempt, in the year 2015, succeeded initially but collapsed on appeal in the Supreme Court on 26 January 2018.

At the hearing, I complained that the applicant's case was difficult to follow.

The founding affidavit is unnecessarily long and winding. It contains information largely irrelevant. The error necessitating the intervention of the court, in terms of Rule 449, is not clearly decipherable since it is not correctly articulated.

The impression created in the applicant's founding affidavit, as read with the prayer in the application to be filed, is that the judgment debt was overstated because the respondent applied an inflated rate of interest of 45 percent per annum as opposed to 15 percent per annum: see paragraph 7 of the applicant's founding affidavit and the draft order at page 89 of 1 case No. HC1405/13 of the consolidated papers.

However, that position cannot be reconciled with the applicant's assertion in an earlier case that the correct rate of interest is 25% per annum.

At the hearing, a lot of energy and time was expended on extracting from the huge mass of documents submitted with the application what it is that the applicant says went wrong in case No. HC1405/13 which needs correction by this Court.

After lengthy deliberations, it turned out the applicant's case could be stated clearly and concisely.

I will summarise it below:

On 7 May 2015, the applicant filed an application for the variation of the default judgment. The application was filed and prosecuted without the leave of this court notwithstanding the provisional order for liquidation.

In addition to that, the applicant failed to cite the Deposit Protection Corporation despite its direct and substantial interest as liquidator: Final liquidation was confirmed by this Court on 19 May 2016 whereupon the Deposit Protection Corporation was appointed liquidator.

Be that as it may, the application succeeded and the judgment in case HC1405/13 was rescinded on 27 May 2015.

Subsequently, the Deposit Protection Corporation approached the court, in terms of Rule 449(1) for rescission of judgment on the grounds that the applicant had erred in failing to cite it in the case yet it was clearly an interested party.

This court granted the application and rescinded the judgment in case No. HC4155/15.

The effect of the rescission of judgment was that the original court order in case no. HC1405/13 entered against the applicant for the payment to the respondent of $1,824,505=05 popped up again and became operational: prior to provisional liquidation, on 12 March 2014, this Court had entered default judgment against the applicant in favour of the respondent for the payment of $1,824,505=05.

In his reasons for the judgment, the Honourable CHIWESHE JP, in case no. HH390-17 (HC4203/16) observed as follows:

(a) The failure by the applicant to obtain leave of the court before instituting proceedings against the respondent in case no. HC4155/15 was fatal.

(b) Section 213 of the Companies Act [Chapter 24:03] is peremptory and proceedings instituted against the respondent, without leave of the Court, and the resultant court order, were a nullity.

(c) In addition to being liquidator, the Deposit Protection Corporation is an interested party by operation of section 57 of the Banking Act, and failure to cite it in proceedings against the respondent, which is under liquidation, rendered such proceedings fatally defective.

The applicant's appeal to the Supreme Court against the judgment of the Honourable Judge President was dismissed on 26 January 2018 meaning that the default judgment in case No. HC1405/13 remains extant.

The applicant is still aggrieved by the judgment in case No. HC1405/13 and wants it corrected in terms of Rule 449(1).

However, it can only file its application with leave of this Court.

It is alleged, that, when the respondent applied for judgment in case No. HC1405/13 it did not disclose to this court that the applicant had made payments to the respondent after summons had been issued thereby reducing the debt by $1,381,166.

The argument, therefore, is that when judgment was entered, on 12 March 2014, the correct amount owing was around $500,000 and not $1,824,505=05 and the respondent had the obligation to advise the court of the payments.

In other words, the complaint is not about the interest rate applied, but an act of non-disclosure by the respondent of payments effected subsequent to the summons.

After hearing both counsel, I concluded that this application for leave is without merit. My reasons are as follows:

1. The intended application to correct judgment has no prospects of success at all.

2. The alleged payments are said to have been made after judgment had been entered. I will quote paragraph 7 of the founding affidavit…, of the application:

“…, respondent caused a writ in the sum of $1,824,505=05 to be issued against the applicant. This is an incorrect balance as applicant had made subsequent payments of $1,381,166.”

The applicant's complaint, therefore, is not against the judgment but the writ.

If the applicant made certain payments after judgment, it is the writ that requires correction and not the judgment.

In practice, when payments are made after judgment has been entered, the judgment needs no correction but the judgment creditor simply issues a writ for a lesser amount, or, if the writ has already been issued, instructs the Sheriff to collect a lesser amount.

If the judgment creditor collects more than necessary, that can only give rise to an enrichment claim.

The correctness of an order is not affected by payments subsequent to its issuance.

The applicant boldly asserts, in paragraph 7 of its founding affidavit, that it paid a sum of $1,381,166 but fails to attach proof.

The payment is disputed.

Indeed, in argument, counsel for the applicant failed to point to any proof of alleged payment.

All payments on the papers preceded the summons.

In papers filed in case no. HC4155/15, the provisional liquidator of the respondent, one John Mafungei Chikura, justified the figure of $1,824,505=…,. He said:

“On 2 April 2014, the then applicant's legal practitioners wrote to Chihambakwe, Mutizwa & Partners saying:

'Our client has been effecting payment(s) to your client and has paid to your client a total of $1,381,166. Please confirm by return that you will not be seeking to recover from our client the amount reflected in the order dated 12 March 2014…,.'”

On 23 April 2014, Chihambakwe, Mutizwa & Partners responded:

'…, if payments were made which reduced the debt, then, certainly, our client will not be entitled to execute on the judgment debt but appropriate instructions will be issued to the Sheriff to recover only the amount which will be outstanding.'

The difference between the parties respective positions arose from the fact that the applicant was using interest rate of 25 percent which was never agreed upon by the parties….,. The liquidator took into account all the payments made by the applicant.

The respondent has therefore always insisted, since the year 2014, that the amount due to it, as stated in the judgment debt, is correct.”

After the position taken by the provisional liquidator of the respondent, in the correspondence quoted above, the applicant could have applied for rescission of judgment as early as 2014 if it was aggrieved by the judgment.

It did not.

The correspondence reveals, that, the judgment debt in HC1405/13 is correct, but, the applicant simply wanted certain payments claimed by it to be deducted from the writ.

SC89-21 : KENNEDY NGIRAZI and NAN JIANG MINE (PVT) LTD vs EMMANUEL RENSBURG and MEGAMANIA AUCTIONEERS and SHERIFF OF THE HIGH COURT N.O.
Ruled By: BHUNU JA, MATHONSI JA and CHIWESHE JA

This is an appeal against the whole judgment of the High Court handed down on 23 July 2020 which declared the first respondent the rightful owner of a Cat Caterpillar Dump Truck 769C. The Caterpillar was purchased by the first respondent at a judicial auction conducted by the Sheriff on 18 October 2019 at Devuli Farm in Bikita.

After hearing arguments, we issued the following order:

“1. The appeal be and is hereby dismissed.

2. By consent, the appellant shall pay costs at the ordinary scale.

3. The reasons for judgment will be delivered in due course.”

What follows hereunder are the reasons for judgment.

FACTUAL BACKGROUND

The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) obtained judgment against Nan Jiang Mine (Pvt) Ltd in case number HC564/17. In due course, a writ of execution was issued against its property and the Sheriff was instructed to sell the property in execution of the judgment of the court.

The Cat Caterpillar which now forms the basis of this appeal was one of the properties placed under attachment on the instructions of Chihambakwe, Mutizwa and Partners, the legal practitioners representing the Zimbabwe Electricity Transmission and Distribution Company (ZETDC). The sale of the properties was duly advertised for 18 October 2019. It was to be conducted in situ at Devuli Farm, in Devuli Range, Bikita.

On that date, the first respondent participated at the auction and made a bid for the caterpillar.

He was declared the highest bidder and paid the sum of $141,500 as the purchase price for it.

He could not immediately collect it after the sale as he had to return to his home in Gweru to make arrangements for transport to convey it to his place.

Upon the first respondent's return to the site, on 3 November 2019, he found that the first appellant had removed the Caterpillar and taken it away to an address in Southerton, Harare.

After lodging a criminal complaint with the police, the first respondent filed an application at the High Court in Masvingo for a declaratory order that he was the lawful owner of the Caterpillar.

The first respondent also sought consequential relief that it be transported to his address in Gweru.

The basis of the application was that the first respondent had lawfully purchased the machine at an auction conducted in accordance with the law. The first respondent contended, that, he concluded a valid sale agreement with the Sheriff which had the effect of transferring ownership to him. The conduct of the first appellant, in removing his property to a location in Harare, was unlawful.

In opposing the application, the appellants raised a number of issues not relevant in the determination of this appeal. What was germane to the dispute was their contention, that, after receiving information of the pending auction they made arrangements to settle the judgment debt and the Sheriff's costs.

In that regard, the appellants stated, that, they had paid to the judgment debtors legal practitioners a sum of money which cleared all that was due in terms of the judgment of the court.

They alleged that full payment was made on 18 October 2019 - the very date of the auction sale.

In their view, it was then incumbent upon the Sheriff to immediately stop the sale in execution and release their property from the shackles of attachment.

It was further contended by the appellants, that, proceeding with the sale when the judgement debt, together with the Sheriffs costs, had been liquidated yielded an invalidity. For that reason, the first respondent could not enforce a nullity.

The court a quo found, that, notwithstanding the appellants frantic, but belated, effort to clear the debt, the judgment creditor had accepted the proceeds of the sale from the Sheriff. It found that the judgment creditor had so accepted the proceeds because the appellants had been untruthful. More importantly, the court a quo found, that, the correspondence from the judgment creditor's legal practitioners, purporting to stop the sale, had only been received by the Sheriff on 30 October 2019 - several days after the auction. Accordingly, there had been no attempt to stop the sale by auction.

In light of that, the court a quo concluded that due process had been followed in executing the sale. As such, the court could not interfere with the judicial sale. It granted the application for a declaratory order and consequential relief.

THE APPEAL

The appellants were aggrieved by that turn of events. They noted an appeal on six grounds.

The first three grounds of appeal seek to impugn the court a quo's finding that the first respondent was the rightful owner of the Caterpillar on the basis that the auction sale was invalid. It ought to have been stopped because the debt had been cleared.

The remaining grounds, which seek to attack the judgment a quo on an alleged “serious dispute of facts” and the alleged citation of a non-existent litigant, are clearly extraneous.

This is in light of the court a quo having resolved any perceived disputes on the papers and the fact that the appellants complaint, that the property belonged to Nan Jiang Africa Resources (Pvt) Ltd and not Nan Jiang Mine, was misplaced.

If indeed that was the case, the appellants, or is it Nan Jiang Africa Resources (Pvt) Ltd, had an alternative remedy. It should have made a claim to the property before it was sold. That way, the Sheriff would have instituted interpleader proceedings.

It was not open to the present appellants, not being Nan Jiang Africa Resources (Pvt) Ltd, to use the alleged misjoinder to try and ward off the enforcement of the Sale Agreement.

Only one issue emerges from the remaining grounds of appeal: it is whether the first respondent and the Sheriff concluded a valid sale on 18 October 2019.

WHETHER THERE WAS A VALID SALE

Two critical principles are central in the determination of this appeal:

(i) First, where the lower court has made factual findings in resolving the dispute between the parties, as a general rule, an Appellate Court will not interfere with such findings unless they are grossly unreasonable to the extent that no reasonable tribunal applying its mind to the same facts could have reached that conclusion.

It is sometimes said, that, for the Appellate Court to interfere with factual findings, such finding must be irrational. The finding complained of must be so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his or her mind to the question to be decided could have arrived at such a conclusion: see Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S)…,; Metallon Gold Zimbabwe v Golden Million (Pvt) Ltd SC12-15.

The court a quo made a factual finding, that, despite the electronic mail from Chihambakwe, Mutizwa and Partners, bearing the date of 18 October 2019, it was only delivered to the Sheriff on 30 October 2019.

This was 12 days after the sale.

It was not suggested, either before the court a quo or this Court, that, the legal practitioner had used any other means to communicate their instruction to suspend the sale.

I mention, in passing, that, a diligent person, be it the debtor or the legal practitioner, would have contacted the Sheriff by telephone to alert him of the settlement of the debt. This is so, because, on the date of the alleged payment, an auction was taking place, to the knowledge of all concerned.

The court a quo cannot be faulted for finding that the auction sale was not stopped and the writ of execution was never withdrawn.

In the absence of evidence of stopping the sale timeously and/or withdrawing the writ from the Sheriff, it follows that a valid sale was conducted on 18 October 2019.

It led to the lawful transfer of ownership in the caterpillar to the first respondent.

In addition, the court a quo made a finding, that, in fact, the appellants claim that they paid off the debt was not established.

This is because the judgment creditor had accepted payment of the proceeds of the sale from the Sheriff.

I should add, that, in arriving at that conclusion, the court a quo had examined correspondence between the Sheriff and the judgment debtor's lawyers. It also had the benefit of the Sheriff's report.

Submissions made on appeal, on behalf of the appellants, do not come anywhere near suggesting that those factual findings were irrational.

In my view, they are sound and based on credible evidence. No basis for interference is established.

(ii) The second principle central to the determination of the appeal is that courts of law will not readily interfere with judicial sales in execution in order to protect their efficacy - especially after confirmation or transfer: see Kanoyangwa v Messenger of Court & Others SC68-06.

The remarks of this Court in Walezim Investments (Pvt) Ltd v The Sheriff of the High Court SC44-21 are opposite:

“Sales in execution should not be easily interfered with after they have been confirmed because this can render the execution process nugatory as the general public will lose confidence in the same. Judgment debtors are given ample time to settle their debts, and, if they fail to utilize such opportunities, they should not be allowed to frustrate the consequent process that follows.”

In my view, the court a quo was correct in finding that due process was followed in conducting the sale. The sale could not be interfered with on the fanciful reasons advanced by the appellants.

There is demonstrably no merit in the appeal.

On the issue of costs, counsel for the appellants made a tender of costs on the ordinary scale.

The view of the court is that the tender was properly made.

I should point out, that, after the interventions of the court, counsel for the appellants could not advance any meaningful argument to motivate what was clearly a meritless appeal. His hands were, however, tied in that his instructing counsel restrained him from making any further concessions.

It is for these reasons that we issued the order set out above.

SC91-21 : ELPHAS MAPHISA vs CITY OF BULAWAYO
Ruled By: GUVAVA JA, UCHENA JA and CHITAKUNYE AJA

This is an appeal against the whole judgment of the High Court Bulawayo, dated 23 July 2020, which dismissed the appellant's appeal against the decision of the Magistrate's Court granting the respondent summary judgment against him.BACKGROUND FACTSThe appellant is the owner of a residential property known as Number 18 Pingstone ...

BACKGROUND FACTS

The appellant is the owner of a residential property known as Number 18 Pingstone Road, Kumalo within the City of Bulawayo. His property's account number is 34452705. He, as is the norm, was billed for water and rates between August 2013 and November 2018. He did not pay his bills leading to an accumulated debt of US$4,601=50.

He says he did not pay the bills because:

1. He wanted to be billed separately for water and rates, citing section 281 of the Urban Councils Act [Chapter 29:15].

2. That he should not be billed in US dollars when that currency was not available; and

3. That the respondent had not disclosed the particulars of the Urban Councils Act under which the bill was based.

In terms of section 281(1) of the Urban Councils Act, the respondent sent a final letter of demand to the appellant on 16 March 2018. The appellant did not pay. As a result, on 1 November 2018, the respondent issued summons against the appellant in the Magistrates Court. He still did not pay, for the reasons already explained above.

On 13 November 2018, he entered an appearance to defend. Thereafter, on 16 May 2019, the respondent applied for summary judgement.

After taking into consideration the changes which had taken place due to the coming into force of the Magistrate's Court Rules 2019, the Magistrates Court granted the respondent's application for summary judgment. It held, that, the appellant did not have a bona fide defence to the respondent's claim and that he had entered appearance to defend for purposes of delaying the inevitable eventual payment of the respondent's claim.

Aggrieved by the granting of summary judgement, the appellant appealed to the court a quo.

In his grounds of appeal, he raised two issues;

(i) That he had not been billed separately for rates and water; and

(ii) That the application for summary judgment had been made more than seven (7) days after entry of his appearance to defend.

The respondent opposed the appeal.

On hearing the appeal, the court a quo held, that, the application for summary judgment was made in terms of the Rules and the appellant had no bona fide defence to the respondent's claim. He dismissed the appeal with costs on the higher scale holding that the appeal marks vexatious conduct and an abuse of the process of court.

Undeterred, the appellant appealed to this Court on four grounds which raise the following issues:

1. Whether the application for summary judgment was made in terms of the Rules.

2. Whether the appellant had a defence to the respondent's claim.

SUBMISSIONS ON APPEAL

The appellant, who appeared in person, submitted that:

1. He should have been billed separately for rates and water; and

2. That the summary judgment granted by the Magistrate's Court, and was upheld by the court a quo, was irregularly granted, because, according to the 1980 Rules, summary judgment should be applied for within seven days after the defendant's entry of appearance to defend.

In response, counsel for the respondent submitted, that, the Magistrate's Court Rules 1980 were no longer applicable when summary judgment was applied for, on 16 May 2019, as they had been replaced by the Magistrates Court Rules 2019 on 1 February 2019.

On the issue of sections 279 and 281 of the Urban Councils Act, he submitted that these sections do not entitle the appellant to be billed separately for rates and water but merely provide for the procedure to be followed by the respondent when suing for unpaid rates and water bills.

THE LAW

Sections 279 and 281 of the Urban Councils Act, which the appellant relied on for his submission that he was entitled to separate rates and water bills, provide as follows:

“279 Liability to pay rate

1. The person who is the owner of any property on the date on which any rate fixed and levied by the council becomes due and payable shall be primarily liable for that rate.

2. If, on the date on which a rate becomes due and payable, the owner primarily liable has failed to pay that rate, a demand in writing may be served on him requiring him to pay the amount stated therein within fourteen days of the service of the demand.

3. If the owner primarily liable for a rate fails to comply with the demand referred to in subsection (2), then any person, who, at any time during the period in respect of which such rate was fixed and levied —

(a) Is the occupier of the property concerned, shall, if a demand in writing is served on him by the council, be liable for such rate together with any other unpaid rates in respect of such property, not exceeding the amount of any rent in respect of such property due by him but not yet paid at the time of the demand and shall thereafter continue to pay such rents to the council until the amount of the unpaid rates has been paid off;

(b) As agent or otherwise, receives any rent in respect of such property, shall, if a demand in writing is served on him by the council, be liable for such rate, together with any other unpaid rates in respect of that property, not exceeding the amount of any such rent paid to him subsequent to that demand, subject to the deduction by the agent of commission due to him for the collection of that rent.

(c) The persons referred to in paragraphs (a) and (b) of subsection (3) shall be liable for the rates to the amount specified therein jointly and severally with each other and with the owner primarily liable.

4. Any person referred to in subsection (3) who has paid any rate in terms of that subsection may deduct from any rent payable by him to the owner so much as was so paid by him to the council, and the production of the receipts for the rates so paid shall be a discharge for the amount so paid as payment of rent to the owner:

All property within a council area shall be rateable by the council, except property which is —
Provided that an occupier of property who has entered into an agreement whereby he has accepted liability for payment of the rates due in respect of that property shall not be entitled to make any deduction in terms of this subsection.

281 Legal proceedings for recovery of rates

No legal proceedings for the recovery of rates shall be instituted against any person referred to —

1. In subsection (2) of section two hundred and seventy-nine unless the council has complied with that subsection and the owner has failed, within fourteen days, to comply with the demand served on him in terms of that subsection requiring him to pay the amount stated therein; or

2. In subsection (3) of section two hundred and seventy-nine, unless he has failed, within thirty days, to comply with the demand served on him in terms of that subsection requiring him to pay the amount stated therein, subject to the maximum amount provided for in that subsection.”

These sections merely provide for who should pay Council's bills on demand being made, and the procedure to be followed when legal proceedings are instituted....,.

WHETHER THE APPELLANT HAD A DEFENCE TO THE RESPONDENT'S CLAIM

As regards the interpretation of sections 279 and 281 of the Urban Council Act, the court a quo correctly held, that, they do not provide that the appellant should be billed separately for rates and water. It further held that the bills sent to the appellant had all the information he required for the payment of his rates and water bills. The appellant therefore had no bona fide defence to the respondent's claim. The court a quo therefore correctly upheld the granting of summary judgment by the Magistrate's Court.

DISPOSITION

The appellant's appeal has no merit. The appellant has unfortunately continued with vexatious litigation. The respondent is entitled to costs at the legal practitioner and client scale.

The appeal is dismissed with costs on the legal practitioner and client scale.

Appealed
SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD
Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

This is an appeal against the entire judgment delivered by the Honourable Justice Zhou in the High Court of Zimbabwe.The order sought to be impugned reads as follows:“IT IS ORDERED THAT:1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly ...

This is an appeal against the entire judgment delivered by the Honourable Justice Zhou in the High Court of Zimbabwe.

The order sought to be impugned reads as follows:

“IT IS ORDERED THAT:

1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly and severally the one paying the others to be absolved for:

(a) Payment of US$1,105,748=90 plus interest at the rate of 15 per cent per annum from the 9 September 2015; such interest calculated monthly and in advance on the said sum and capitalized to the date of payment in full.

(b) Payment of collection commission in accordance with the Law Society's By-Laws.

(c) Payment of plaintiff's costs of suit on the legal practitioner and client scale.

(d) A declaration that the immovable property, being a certain piece of land situate in the district of Salisbury called Remainder of Lot 6 Rietfontein, measuring, 1,2129 hectares held by the second defendant under Deed of Transfer No.4388/1991 is executable.

2. The first defendant's claim in reconvention be and is hereby dismissed with costs on the legal practitioner and client scale.”

The background of this matter may be summarised as follows:

The second appellant is a shareholder in the respondent and has previously occupied the positions of Chief Executive Officer, Executive Director, and Director therein.

The respondent in this matter issued summons against the appellants in the court a quo claiming USD$1,105,748=90 being indebtedness arising from a loan agreement between the first appellant and the respondent.

The second and third appellants bound themselves as guarantors/sureties and co-principal debtors of the first appellant in relation to the loan agreement.

As security, the second appellant gave Power of Attorney to register a mortgage bond over his property, in favour of the respondent. As further security, the third appellant pledged certain executable shares.

It was the respondent's case a quo that the first appellant defaulted in the performance of its obligations in terms of the loan agreement, necessitating the institution of legal proceedings for the recovery of the outstanding amount.

The respondent sought that the appellants be held jointly and severally liable for the indebtedness.

The appellants disputed the respondent's claim on two main premises:

It was argued, for the first appellant, that, the person who purported to enter into the loan agreement with the respondent was not authorised to do so.

Additionally, the second appellant disputed that he granted the Power of Attorney used to register the mortgage bond over his property.

The appellants further lodged a counter claim against the respondent's claim, which counter-claim was subsequently sought to be withdrawn during the course of the proceedings a quo.

The application for withdrawal was unsuccessful and the counterclaim was eventually dismissed.

At the conclusion of proceedings, the court a quo made adverse credibility findings against the second appellant, who it determined was untruthful.

It was found, that, the first appellant was the alter ego of the second appellant, who used the former to secure funds for his benefit from the respondent.

Additionally, the court a quo was of the view, that, the second appellant had signed a Power of Attorney for the registration of a mortgage bond in order to secure an advance from the respondent.

With regard to the third appellant, it was found that it had properly bound itself as surety to the loan facility agreement.

Resultantly, it was determined that the appellants were jointly and severally liable for the indebtedness and that the respondent was entitled to recover from the appellants the principal sum owing in terms of the loan facility agreement.

Aggrieved, the appellants have lodged the present appeal on the following grounds:

GROUNDS OF APPEAL

1. With respect, the court a quo erred at law in dismissing the first appellant's claim in reconvention; which claim was withdrawn before the conclusion of leading evidence. At law, the respondent was not entitled to insist on judgment pertaining a disputation to which not all datum had been made available and the contestation inter parties not finalised.

2. The court a quo also erred in sustaining the respondent's claim as against the appellants. At law, the respondent was enjoined to prove the existence of loan agreement and that the attendant funds were advanced in terms of that agreement. In casu, the evidence led a quo clearly demonstrated that the monies claimed to have been advanced were never paid out in accordance to the structures of the agreement on which the claim was predicated; resultantly, no sustainable claim could have been mounted by the respondent.

3. The court a quo grossly misdirected itself in conflating the affairs of the first appellant with those of the second appellant. At law, the first and second appellant's obligation to the respondent were independent of each other. More critically, no evidence was led substantiating the notion that the first appellant ever received funds from the respondent thereby actuating the need to resort to the second and third respondent's suretyship and securitisation.

4. The court a quo grossly misdirected itself in dismissing the second appellant's evidence on the back of its anomalous finding that he was dishonest and not a credible witness. Such findings are palpably irregular in that the court a quo did not take full cognisance of all the second appellant's evidence and attendant explanation regarding the existence of his independent loan with the respondent which loan the respondent was not relying on.

From the foregoing, two identifiable issues are before the court:

(i) Firstly, there is need to determine whether or not the court a quo properly dismissed the appellants counterclaim given their application for withdrawal of the same.

(ii) The second issue for determination is whether or not the court a quo misdirected itself in holding the appellants jointly and severally liable to the respondent for the indebtedness arising from the disputed loan facility agreement....,.

With regard to the second issue for consideration before the court, that is, whether or not the court a quo misdirected itself in holding the appellants jointly and severally liable to the respondent for the indebtedness arising from the disputed loan facility agreement, the findings made a quo turned on considerations of fact.

It is settled at law that this Court will only interfere with factual findings of a lower court in limited circumstances. The case of Zimre Property Investments Limited v Saintcor t/a V. Track & Anor SC59-16…, is instructive, wherein it was stated:

“The position is now settled, that, an Appellate Court will not interfere with the findings of fact made by a trial court unless the court comes to the conclusion that the findings are so irrational that no reasonable tribunal, faced with the same facts, would have arrived at such a conclusion. Where there has been no such misdirection, the Appeal Court will not interfere. This position was aptly captured by this Court in Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S). At 670, KORSAH JA remarked:

'The general rule of law as regards irrationality is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied, that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at such a conclusion….,.'”

Remaining mindful of the foregoing, it is evident from the record, that, there existed a loan facility agreement between the first appellant and the respondent, and to which the second and third appellants were sureties.

Although the first and second appellants disputed the authority upon which the loan facility and the mortgage bond were entered into on their behalf, they did not challenge the allegation that they were indebted to the respondent and that the said indebtedness had not been extinguished.

In terms of the law, it is generally accepted, that, what is not denied is taken to be admitted: see Fawcett Security Operations P/L v Director of Customs and Excise and Ors 1993 (2) ZLR 121 (S)…,.; Nhidza v Unifreight Ltd SC27-99; and Minister of Lands and Agriculture v Commercial Farmers Union SC111-01…,.

In view of the factual nature of the findings of the court a quo, it is necessary to consider the evidence presented and the relevant findings made thereon.

On the issue of the validity of the loan facility, the evidence of record establishes, that, a trustee of the first appellant, named Mr D. Higginson, concluded the loan facility agreement on behalf of the first appellant.

The second appellant sought to dispute Mr Higginson's authority to enter into the purported agreement with the respondent, and, ultimately, the validity of the entire loan facility agreement.

A perusal of the record makes it apparent that there was scant evidence to support the submissions of the second appellant.

It was found a quo that the second appellant accessed and utilised the loan overdraft facility on numerous occasions, leading the court to the conclusion that there was no merit to the second appellant's contention that Mr D. Higginson entered into the loan agreement without the requisite authority to do so.

Further to that, it was the court's view that the first appellant was merely a vehicle of the second appellant in order to access funds from the respondent.

I am of the view that the finding of the court a quo is supported by the fact that the second appellant utilised the accessed loan facility funds (through the medium of the first appellant) to attend to his personal expenses.

In light of the foregoing considerations, it does not appear to me, that, the second appellant can seek to avoid liability on the premise that the loan facility was not validly entered into.

To do so would essentially constitute an exercise in which the second appellant seeks to approbate and reprobate. In other words, the second appellant cannot seek to dispute the validity of the loan facility agreement from which he consistently sought and derived benefit.

The position was well articulated in the case of S v Marutsi 1990 (2) ZLR 370…, wherein it was stated that:

“It is trite that a litigant cannot be allowed to approbate and reprobate a step taken in the proceedings. He can only do one or the other - not both.”

Moreover, in the case of Alliance Insurance v Imperial Plastics (Pvt) Ltd & Another SC30-17, the court took the view that such conduct amounts to a classic display of mala fides.

An application of the mind to the facts would dictate, that, had the loan agreement been improperly concluded, the second appellant would have, at the very first opportunity, alerted the respondent to the fact and sought to resolve the situation as opposed to accessing and deriving benefit from the agreement, then denying liability when called upon to service the said debt.

Significantly, the second appellant undertook to repay the outstanding loan when called upon to do so by the respondent, which makes plain the fact that the second appellant was aware and a willing participant to the loan agreement.

The evidence is overwhelming and the conclusions of the court a quo, in that regard, cannot be said to have been improperly arrived at.

In determining that the first appellant acted as the second appellant's alter ego for the purpose of accessing funds from the respondent; the court a quo took cognisance of witness evidence that established that the funds availed to the first appellant by the respondent were utilised by the second appellant for his personal expenses.

As both the Founder and Director of the first appellant and the respondent respectively, the second respondent was, in my view, not only involved in a conflict of interest but actively abusing his status and position in order to access funds from the respondent.

It is equally telling that the loan facility was regarded as an “insider loan” by the respondent when it sought recovery of the indebtedness due to it from the second appellant. It is also established that the second appellant did not seek to dispute that it was indeed an insider loan.

In the circumstances, the court a quo's findings appear well grounded in evidence and cannot be said to be irrational or a misdirection.

It is worth mentioning that the court a quo took a step further in determining that the Power of Attorney granted by the second appellant to register a mortgage bond over his property in favour of the loan facility agreement was properly concluded.

The court a quo arrived at that decision pursuant to an identification of the second appellant's signature on the disputed Power of Attorney.

The fact that the registration of the mortgage bond was directly beneficial to the second appellant does not help his case.

With regard to the third appellant, its liability as surety was never challenged and therefore remains extant.

In the light of the above considerations, it is the court's view that the appeal lacks merit and is hereby dismissed with costs following the cause.

View Appeal
HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST
Ruled By: ZHOU J

The plaintiff, a commercial Bank, claims against the three defendants payment of a sum of money amounting to US$1,105,748=90 together with interest thereon at the rate of 15% per annum calculated from the 9th September 2015 to the date of payment in full; such interest to be calculated monthly and in advance and capitalized.

The plaintiff also claims collection commission and costs of suit on the legal practitioner and client scale, as well as an order declaring a certain immovable property, described in the summons as a certain piece of land situate in the District of Salisbury called the Remainder of Lot 6 of Reitfontein, measuring 1,2129 hectares, to be specially executable.

The claim is for money advanced to the first defendant pursuant to loan and overdraft facilities and in respect of which the second and third defendants are said to have executed deeds of suretyship and guarantorship.

The claim is contested by all the defendants....,.

On the main claim, the plea which was filed on behalf of the defendants is very brief. In that plea, the defendants deny that the person who entered into the agreements pursuant to which the plaintiff advanced money to the first defendant had the authority to represent the first defendant.

The other aspect, which is denied, is that the second defendant executed the power of attorney which was used to register a mortgage bond over his immovable property in favour of the plaintiff.

Going by the pleadings, the other material allegations made in the plaintiff's declaration are not disputed and must therefore be taken as admitted. These include:

(i) The existence of the facilities (save for the alleged lack of authority of the person who represented the first defendant).

(ii) The terms of the loan facility as set out in paragraph 6 of the plaintiff's declaration.

(iii) The facts alleged in paragraph 7 of the plaintiff's declaration that the second and third defendants executed deeds of suretyship and guarantees by which they bound themselves as sureties and co-principal debtors for performance of the first defendant's contractual obligations to the plaintiff under the facilities.

(iv) There is also no denial of the failure by the first defendant to pay the amount due to the plaintiff in terms of the agreements.

(v) The amount claimed in the summons and declaration is also not disputed in the plea.

Although three issues were outlined in the joint pre-trial conference minute, a resolution of those issues depends on the determination of whether the loan facilities were validly concluded on behalf of the plaintiff and whether the mortgage bond over the immovable property known as a Certain Piece of Land Situate in the District of Salisbury Called the Remainder of Lot 6 of Rietfontein measuring 1,2129 hectares, held by the second defendant under Deed of Transfer Number 4388/1994, was validly executed.

The plaintiff led evidence, oral and documentary, from Alwyn Tafadzwa Chinyoka, Leonard Tendai Nhari, Lazarus Marume, Benson Ndachena, and Lionel Chinyamutangira, all of whom are its employees save for Leonard Tendai Nhari who is a handwriting expert.

The essence of the evidence of these witnesses is that the second defendant, Julius Tawona Makoni, was a founder and director of the plaintiff. He was still a director of the plaintiff when the facility upon which the claim arose was granted to the first defendant.

A composite facility of call loans and overdraft of US$760,000 was extended to the first defendant. The first defendant is the second defendant's Trust through which he operated to access money from the plaintiff.

Alwyn Tafadzwa Chinyoka testified, that, Dr Makoni signed the power of attorney to pass a mortgage bond over his property. The guarantee executed by the third defendant was signed by Dr Higginson, who, together with the second defendant, was the authorized signatory. The two were also the signatories for the first defendant.

The second defendant would give instructions to the plaintiff's employees for draw-downs on the facility.

He stated that the plaintiff engaged the second defendant about recovery of the amounts owed following a directive from the Reserve Bank of Zimbabwe that all insider loans be settled by 31 December 2014.

When the second defendant was approached about the debt, he acknowledged it and advised that he was making arrangements to settle it.

The matter was discussed at some Board meetings of the plaintiff in the presence of the second defendant. The minutes of Board meetings were produced in evidence.

The witness also gave evidence of the emails which were exchanged between the second defendant and the plaintiff's officials in connection with the debt in which the second defendant acknowledged the debt.

The witness disputed the signatures on the alleged loan agreement upon which the first defendant's counter-claim was based.

He also gave evidence of payments made on behalf of, and, at times, on the instructions of the second defendant from the account of the first defendant.

He testified that the facility availed to the first defendant was to cater for the personal needs of the second defendant.

The first defendant held shares in the plaintiff on behalf of the second defendant, according to the witness.

Lazarus Marume, who was employed by the plaintiff as Branch Manager at Mutare, stated that he knew the second defendant as the founder of the plaintiff and as a Bishop of the Church of the Province of Central Africa.

He confirmed, that, the second defendant signed the power of attorney to pass a mortgage bond at Mutare.

The witness had always known the second defendant's signature as he had dealt with him many times before that. He signed as a witness after the second defendant had signed in his presence. The document was signed at the second defendant's office to which the witness had taken the document.

Significantly, at no time during cross-examination was it suggested to this witness that the signature on the document was not that of the second defendant; neither was it suggested that the second defendant had not signed the document.

The evidence of Leonard Tendai Nhari and Benson Ndachema pertains to the first respondent's claim in reconvention, which, as already noted, has been abandoned.

In relation to the main claim, Benson Ndachema's evidence confirmed the instruction from the Reserve Bank of Zimbabwe for the recovery of insider loans. He also stated, that, the second defendant, as representative of the first defendant, owed money to the plaintiff, and that he resigned from his directorship owing to his failure to repay the loan.

The second defendant, according to the witness, had indicated that he would settle his indebtedness to the plaintiff from the proceeds of his shares in MBCA Bank which he would dispose of.

Lionel Chinyamutangira was Chief Banking Officer at the plaintiff at the time that he gave his evidence.

When he was Relationships Manager he reported directly to the second defendant, and got to deal with the first and third defendants as well. He explained that the purpose of the facility extended to the first defendant was in fact to take care of the second defendant's affairs when he was away, such as paying for his family's expenses and motor vehicle expenses. The second defendant would instruct him, and the other employees of the plaintiff, on the transactions to be performed, and Higginson would do the paperwork.

He identified some e-mails exchanged between him and the second defendant in terms of which the second defendant would sometimes instruct him to debit the first defendant's account for the purposes of paying his (second defendant's) expenses.

This witness identified various documents pertaining to payments to or on behalf of the second defendant made from the account of the first defendant. He confirmed that the second defendant stepped down from the Board of the plaintiff because of his failure to discharge his financial obligations to the plaintiff.

Two witnesses testified on behalf of the defendants. These are James Friedlander and the second defendant, Julius Makoni.

James Friedlander's evidence pertained to the claim in reconvention. It is therefore not necessary to consider it in any detail in view of the abandonment of that claim.

The second defendant's evidence was that he is the one who founded the plaintiff. He was its Chief Executive Officer, Executive Director, and Non-Executive Director at different times. He is also a shareholder of the plaintiff.

His evidence was that he was not clear as to what the basis of his liability for the first defendant's debts to the plaintiff was.

He recognized and identified the signature on the Deed of Suretyship, executed on 10 July 2002, to be his. He then sought to state that he did not understand why he was to act as surety for the first defendant's obligations to the plaintiff.

He stated that he never enjoyed any benefit from the facility granted to Cornerstone.

He stated that he resigned voluntarily from the Board of the first defendant and that his resignation was unconnected to the debt owed by the first respondent.

The first issue, of whether or not there was a valid loan agreement between the plaintiff and the first defendant, can be easily disposed of.

The facility letter, dated 19 June 2013, was duly signed on behalf of the first defendant. The person who signed on behalf of the defendant, David Higginson, was a duly authorized signatory on the account.

Both the first and second defendants benefited from the facilities as shown by the evidence of the witnesses for the plaintiff.

There is documentary evidence, in the form of emails, exchanged with the second defendant in which instructions to make payments from the account of the first defendant were given by the second defendant.

It is clear that the first defendant was a just vehicle by which the second defendant accessed loan facilities from the plaintiff using his position in the plaintiff.

It was clear that the second defendant is a dishonest person who was being deliberately untruthful and sought to mislead the court about his involvement in the financial transactions of the first defendant. He is the typical businessman who started the business of a Bank in order to give money from the bank to himself.

The unchallenged evidence of the witnesses for the plaintiff was that when the second defendant was approached about the need to settle the loan account he advised that he would do that from the proceeds of the sale of his shares in MBCA Bank.

At no time did he dispute the amount or that he owed it.

Minutes of a meeting of the plaintiff's Board of the Credit Committee held on 30 January 2015 deliberated on the first defendant's debt and the undertaking by the second defendant to settle it. Under item 12.7 of the minutes, the following is recorded:

“CORNERSTONE $1,059,432: Management advised that Dr Makoni had advised that he intended to repay the loan from proceeds of a share sale as he held shares in another financial institution.”

In the same minutes, under item 14 (from 14.1 to 14.10) the second defendant is the subject of discussion, and the resolution that he must resign his directorship, owing to his non-performing loan, is recorded.

The second defendant feigns ignorance of that resolution in the face of such documentary evidence.

His evidence is unconvincing.

The first defendant pretended not to know anything about the Reserve Bank of Zimbabwe's directive concerning insider loans. Yet, that matter was discussed at a Board meeting which he attended on 19 March 2014, and appears as item 5.4 in the minutes of that meeting.

The evidence led establishes that the first defendant entered into a valid facility agreement in terms of which it accessed funds availed by the plaintiff.

The court finds, that, the first defendant was an entity established and controlled by the second defendant for the purposes of accessing money from the plaintiff. Through the first defendant, the second defendant accessed money from the plaintiff, and, from time to time, gave instructions to Bank officials to pay his expenses from the account of the first defendant.

The second defendant signed a Deed of Suretyship for the first respondent's obligations to the plaintiff. He is accordingly liable on the basis of that Deed of Suretyship.

The third defendant is equally liable to the plaintiff for the debts of the first defendant on the basis of the suretyship agreement.

As noted above, the existence of these deeds of suretyship is not challenged by the defendants.

On the power of attorney used to register the mortgage bond over the second defendant's property, the document was duly signed by the second defendant on 10 July 2013.

The second defendant did not dispute the signature on that power of attorney when he gave evidence.

It is clearly his signature.

The court finds, that, he is the one who signed the power of attorney to pass a mortgage bond on his immovable property.

The debt secured by the mortgage bond has been proved. The plaintiff is accordingly entitled to recover the debt through the sale of the mortgaged property.

In terms of clause 5.7 of the facility agreement, the plaintiff is entitled to recover collection charges and its legal fees on the attorney-client scale.

In any event, such costs would still have been justified by the vexatiousness of the defence to the claim in the instant case.

In the result, IT IS ORDERED THAT:

1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly and severally the one paying the others to be absolved for:

(a) Payment of US$1,105,748=90 plus interest thereon at the rate of 15% per annum from the 9th September 2015; such interest calculated monthly and in advance on the said sum and capitalized to the date of payment in full.

(b) Payment of collection commission in accordance with the Law Society By-Laws.

(c) Payment of plaintiff's costs of suit on the legal practitioner and client scale.

(d) A declaration that the immovable property, being a certain piece of land situate in the district of Salisbury called the Remainder of Lot 6 of Rietfontein, measuring 1,2129 hectares, held by the second defendant under Deed of Transfer No.4388/1994, is executable.

2. The first defendant's claim in reconvention be and is hereby dismissed with costs on the legal practitioner and client scale.

SC102-21 : DOVES FUNERAL ASSURANCE (PVT) LTD vs FERNABY INVESTMENTS (PVT) LTD and QUECOM ENGINEERING (PVT) LTD and DENNIS NGORIMA and STANDARD CHARTERED BANK LTD and HOMELAND REAL ESTATE and THE SHERIFF
Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE JA

On 7 October 2020, the High Court handed down judgment in an application made by the first and third respondents in terms of Rule 359(8) of the High Court Rules, 1971.

It set aside the Sheriff's sale of a property known as Lot 8 Brooke Estate, Harare in execution of a judgment in favour of Standard Chartered Bank Limited and granted the first, second, and third respondents three months to either satisfy the judgment debt or find another purchaser willing to pay more than USD260,000 for the same property.

This is an appeal against that judgment of the High Court (the court a quo).

After hearing submissions by counsel, this Court issued the following order:

“1. The appeal succeeds.

2. By consent, the first, second, and third respondents shall bear the costs of suit.

3. The judgment of the court a quo be and is hereby set aside and substituted with the following:

'(i) The application to set aside the Sheriff's sale be and is hereby dismissed with costs.

(ii) The sale of the applicant's property, being certain piece of land situate in the district of Salisbury called the remainder of lot Brooke Estate, measuring 7258 square meters, held under Deed of Transfer No.4935/2004, sold by public auction to the third respondent, in the sum of $260,000 be and is hereby confirmed.'”

After issuing the order, we stated that the reasons for doing so would follow. What follows hereunder are those reasons.

THE FACTS

Quecom Engineering (Private) Limited, which is the second respondent herein, entered into a loan agreement with Standard Chartered Bank Limited, the fourth respondent herein, in terms of which the latter extended a revolving credit facility to it with a limit of USD800,000.

The first and third respondents, together with the third respondent's now deceased wife, bound themselves as sureties and co-principal debtors for the due performance by the second respondent of its obligations under the loan agreement.

In addition, the first respondent executed a deed of hypothecation over its immovable property, which is now the subject of the dispute between the parties, as security for the second respondent's indebtedness to the Bank.

In due course, the second respondent benefited from the loan but failed to pay the sum of $241,056 which remained owing.

The Bank sued and obtained judgment against the first, second, and third respondents in the sum of $292,272=12 together with ancillary relief.

A writ of execution against property was issued leading to the attachment by the sheriff of the immovable property forming the basis of the current dispute.

Then, began the haggling over the sale of the property, which, when put on sale, would attract unreasonably low prices.

The first attempt at selling the property, on 24 January 2015, attracted a sale price of US$150,000. The first, second, and third respondents filed a request to set aside the sale, which, by consent, was not confirmed by the sheriff.

On 6 August 2015, the judgment debtors were given an opportunity to sell the property by private treaty. They failed to do so, resulting in the property being placed on public auction, where, on 12 January 2017, it only fetched a price of $150,000.

Again, the judgment debtors requested the setting aside of the sale by the Sheriff.

At that stage, the parties agreed that they be given a further four (4) months to sell the property by private treaty failing which the sale for $150,000 would be confirmed.

Again, the judgment debtors failed to find a purchaser. As a result, the sale was confirmed by the Sheriff.

Unhappy, the judgment debtors filed an application to set aside the Sheriff's confirmation in terms of Rule 359(8). This was under case number HC7151/17.

They obtained an order, on 27 September 2017, setting aside the sale by private treaty. The court gave them another period of six (6) months to try and sell the property for a price above the $150,000 previously achieved, and, if they failed, the court directed that the property be sold by public auction.

The judgement debtors again failed to sell the property.

On 6 September 2018, the Sheriff sold the property by public action to the appellant for $260,000.

The judgment debtors would have none of it.

They still filed with the Sheriff a request in terms of Rule 359(1) for the setting aside of the sale on two grounds, namely, that:

(a) The sale was improperly conducted; and

(b) The property was sold for an unreasonably low price.

The Sheriff dismissed the request to set aside the sale and proceeded to confirm it on 29 November 2018.

PROCEEDINGS IN THE COURT A QUO

On 12 December 2018, the judgment debtors launched a court application in the court a quo, in terms of Rule 359(8), for the setting aside of the Sheriff's decision to confirm the sale. They cited two grounds for seeking that relief, namely, that;

(i) The property was sold for an unreasonably low price; and

(ii) That they had found a financier who was willing to pay the full judgment debt on their behalf from the proceeds of the sale of its property.

The financier was said to be in the process of selling its own property to raise funds.

The application was opposed by the appellant which set out the chequered history of the matter making it clear that the so-called financier was in fact a company known as Retour Investments (Private) Limited.

It had, in 2015, been touted by the judgment debtors as a potential financier - without any headway.

In the course of preparing its judgment, the court a quo came up with issues not raised by the parties.

It mero motu invited the parties to address it on two legal issues;

(i) Firstly, whether the application before it was one for a review of the Sheriff's decision.

(ii) Secondly, it desired to know whether it was open to the Sheriff to depart from the provisions of Rule 359 by allowing an oral hearing without the parties having filed formal pleadings.

Having done that, the court a quo refrained from determining the merits of the application before it but disposed of the application entirely on the issues raised by it mero motu.

The court a quo found, that, once a request to set aside the sale is made to the Sheriff, any person intending to oppose it should indicate the grounds for opposition and submit affidavits to support the grounds for opposition.

It found, further, that, as the appellant had failed to file written submissions opposing the objection to the sale, but appeared before the Sheriff to make oral submissions, the hearing by the Sheriff was a nullity.

Having concluded that the Sheriff's proceedings were a nullity, the court a quo set aside the decision to confirm the sale.

It however proceeded to grant the judgment debtors a further period of three (3) months to either satisfy the judgment debt or find another purchaser willing to pay more than $260,000 for the property failing which the sale to the appellant would be deemed confirmed and the property transferred to the appellant.

PROCEEDINGS BEFORE THIS COURT

The appellant was aggrieved by the judgment of the court a quo. It noted the present appeal on two grounds, namely, that:

1. The court a quo erred in granting the first to third respondents a further three months to sell the attached property by private treaty without considering the merits of their objection and whether the objection constituted good cause to justify such order.

2. The court a quo erred at law in granting the first to third respondents the right to sell the attached property by private treaty when such right no longer existed having been granted such opportunity several times before and when there was no firm offer from a prospective purchaser to pay a price higher than the public auction.

This appeal requires the court to determine one issue, namely, whether the court a quo erred in setting aside the confirmation proceedings of the Sheriff and affording the judgment debtors three (3) months period to secure a buyer by private treaty.

WHETHER THE COURT A QUO ERRED IN SETTING ASIDE CONFIRMATION OF THE SALE

Counsel for the appellant submitted, that, the court a quo erred in determining the matter on grounds other than those provided for in Rule 359(1) as read with Rule 359(8) and (9).

He submitted, further, that, the court a quo did not focus on the relevant grounds but on points that it raised mero motu and then relied on those points to dispose of the matter.

It was further submitted, on behalf of the appellant, that, where a request is made by an interested party, to the Sheriff, in terms of Rule 359(1), for the setting aside of a sale, the Sheriff has no power to grant default judgment as suggested by the court a quo.

In all the circumstances, the Sheriff is required, even where no opposing papers are filed, to consider the request and decide whether there is a basis for setting aside the sale.

In advancing that argument, counsel for the appellant relied on the authority of Zimunhu v Gwati & Ors SC43-02 which held, that, even if no opposing papers have been filed following a request to set aside the sale, the Sheriff still has a duty to consider the papers before him or her and decide whether they provide a basis for setting aside the sale.

In addition, the point was made, on behalf of the appellant, that, once an application in terms of Rule 359(8) had been made, the court a quo was enjoined to consider its merits. It could not set aside the sale on mere technicalities.

In this case, the property had been sold on a number of occasions previously but the sales were set aside on the basis of low price.

The sum of $260,000 offered by the appellant was the highest price ever achieved.

The judgment debtors had been accorded opportunities before to sell the property by private treaty. They failed to secure a buyer offering more than what was achieved at the Sheriff's sale.

The valuation report relied upon by the judgement debtors, which placed the forced sale value of the property at $307,500 was done on 5 December 2018 - long after the Sheriff's sale. It was therefore of no use in determining the application.

Per contra, counsel for the first, second, and third respondents submitted, that, the court a quo found an irregularity in the proceedings before the Sheriff. The irregularity was the failure by the appellant to file opposing papers to the request for the setting aside of the sale.

He submitted further, that, having found an irregularity, the court a quo was correct in concluding that the proceedings were a nullity and setting aside the sale. It was correct in not relating to the merits of the matter.

Regarding the issue of whether the judgment debtors have a right to procure a new purchaser, counsel for the first, second, and third respondents submitted, that, the Sheriff's price was unreasonably low. As such, nothing stopped them from doing so.

He however conceded, that, the valuation report submitted by the judgment debtors was irrelevant.

After the interventions of the court directed at whether the jurisdiction of the court a quo, in an application of that nature, could be triggered if the proceedings before the Sheriff were a nullity, counsel for the first, second, and third respondents capitulated; he then suggested that the matter be remitted to the court a quo for a determination on the merits.

The dispute which gave rise to this appeal was initiated by a request made to the Sheriff by the judgment debtors in terms of Rule 359(1) of the High Court Rules. It provides:

“(1) Subject to this rule, any person who has an interest in a sale in terms of this Order may request the Sheriff to set it aside on the ground that:

(a) The sale was improperly conducted; or

(b) The property was sold for an unreasonably low price, or on any other good ground.”

Subrule (1) of Rule 359 therefore imposes limitations on the grounds upon which an interested party may approach the Sheriff with a request to set aside the sale of property in execution of a judgment.

In his affidavit in support of the objection to the sale which was submitted to the Sheriff, the third respondent set out the grounds at paragraphs 20 and 21 as follows:

“20 The purchase price of US$260,000 is a slight improvement from the price of US$150,000 fetched in July 2015 which was roundly condemned by the parties and subsequently set aside by consent of the parties.

21. Applicant is still objecting to the confirmation of the sale on the basis that the purchase price that is being offered by third respondent is below the forced sale value and the actual market value.”

The Sheriff dismissed the objection and confirmed the sale.

The judgment debtors approached the court a quo, in terms of Rule 359(8), for an order setting aside the sale.

They did not seek to be given three months to sell the property by private treaty - which relief the court a quo granted mero motu.

I mention, in passing, that, the court a quo could not grant relief which was neither prayed for nor established in the application.

It is a cardinal principle of our civil practice and procedure, that, the onus is on a person who claims something from another in a court of law to satisfy the court that he or she is entitled to it: see ZUPCO Limited v Pakhorse Services (Private) Limited SC13-17.

Equally important is the principle, that, where there is a dispute on some question of law or fact, there must be a judicial decision or determination on the issue in dispute. A failure to resolve the dispute is a misdirection that vitiates the order given: see Gwaradzimba v CJ. Petron & Co (Proprietary) Limited 2016 (1) ZLR 28…,.

By the same token, it is a grave misdirection for a court to determine an issue not placed before it by the parties and proceed to grant relief not sought by any of the parties.

A party interested in a Sheriff's sale can only approach the court in terms of Rule 359(8) where the Sheriff has refused a request made in terms of Rule 359(1).

In terms of Rule 359(7);(8) and (9):

“(7) On receipt of a request in terms of subrule (1), and any opposing or replying papers filed in terms of this Rule, the Sheriff shall advise the parties when he will hear them, and, after giving them or their legal representatives, if any, an opportunity to make their submissions, he shall either -

(a) Confirm the sale; or

(b) Cancel the sale and make such order as he considers appropriate in the circumstances, and shall, without delay, notify the parties in writing of his decision.

(8) Any person who is aggrieved by the Sheriff's decision, in terms of subrule (7), may, within one month after he was notified of it, apply to the court by way of court application to have the decision set aside.

(9) In an application in terms of sub-rule (8), the court may confirm, vary, or set aside the Sheriff's decision or make such other order as the court considers appropriate in the circumstances.”

The court a quo found that the Sheriff deviated from the rules of court rendering the proceedings irregular and the “decision reached thereon a nullity.”

It however went on to issue an order giving the judgment debtors more time to sell the property.

The jurisdiction of the court a quo to exercise power reposed to it by Rule 359(9) arises from an application being made to it in terms of sub rule (8). Such an application can only be made following a decision by the Sheriff refusing to set aside the sale in terms of subrule (7).

The Sheriff can only make a decision in terms of sub-rule (7) upon a request made to him by an interested party in terms of subrule (1).

Where the proceedings before the Sheriff are a nullity, as the court a quo found, erroneously in my view, the jurisdiction of the court a quo, in terms of subrule (9), cannot be engaged.

It can only be engaged where there were valid proceedings conducted by the Sheriff.

There was a glaring misdirection in granting the judgment debtors relief as the court a quo did.

In any event, it occurs to me, that, the failure by the appellant to file written opposition to the request for setting aside the sale made to the Sheriff, as required by Rule 359(4), could not give rise to a default judgment.

I do not read subrules (4) and (7) as giving rise to an automatic bar against an interested party from contesting the request made to the Sheriff. The use of the word “may” in sub-rule (4) suggests discretion on the party to lodge written notice to the Sheriff.

Equally so, the expression: “On receipt of a request in terms subrule (1) and any opposing or replying papers” in subrule (7) is indicative of the fact, that, opposing papers may or may not be filed.

All that does not detract from the duty of the Sheriff to consider the request and decide whether there is a basis for setting aside the sale.

The Sheriff did that.

I am aware that having concluded that the proceedings before the Sheriff were a nullity, the court a quo did not fully engage the merits.

The court a quo however granted three (3) months for the judgment debtors to satisfy the judgment or find another purchaser.

One can therefore safely say that it regarded the price as being unreasonably low - without giving reasons.

This is therefore not a case in which the matter can be remitted to the court a quo for a determination on the merits. Either it determined the merits or its judgment had that effect.

More importantly, this case has a chequered history wherein a beneficiary of a court judgment has struggled to execute it since 2014. The judgment debtors have had ample time given to them by the court to either pay the debt or sell the property in question at a higher price. They have failed to do so.

There must be finality to this long standing case.

No case whatsoever was made, either before the Sheriff or the court a quo, for the setting aside of the sale.

It is for these reasons that we issued the order mentioned above.

SC107-21 : METALLON GOLD ZIMBABWE (PVT) LTD and OTHERS vs SHATIRWA INVESTMENTS (PVT) LTD and ASSOCIATED MINE WORKERS UNION OF ZIMBABWE and MASTER OF THE HIGH COURT and REGISTRAR OF COMPANIES
Ruled By: MALABA CJ, BHUNU JA and CHIWESHE AJA

This is an appeal against the decision of the High Court (“the court a quo”) which placed the first (Metallon Gold Zimbabwe (Pvt) Ltd), the second (Goldfields of Shamva (Pvt) Ltd) and the third (Goldfields of Mazowe (Pvt) Ltd) appellants under corporate rescue proceedings in terms of section 124(1)(a) of the Insolvency Act [Chapter 6:07] (“the Insolvency Act”).

The judgment of the High Court dealt with two separate applications, numbers HC2619/19 and HC2696/19, which were consolidated for the purposes of hearing them.

The Court holds, that, the respondents did not comply with the mandatory provisions of section 124 of the Insolvency Act, which required them to notify each affected party of the application by standard notice.

The respondents failed to notify each affected party by “standard notice” as is prescribed by section 2 of the Insolvency Act.

Such non-compliance with peremptory provisions of the Insolvency Act rendered the application for corporate rescue fatally defective.

This Court finds, that, the second respondent (Associated Mine Workers Union of Zimbabwe), being the only respondent before this Court, had no locus standi to make the application for corporate rescue as it does not meet the definition of “affected person” in terms of section 120 of the Insolvency Act [Chapter 6:07].

The second respondent is a registered trade union representing employees in the mining industry and not a registered trade union representing employees of the company as envisaged by section 120 as read with section 124 of the Insolvency Act.

Further, the second respondent (Associated Mine Workers Union of Zimbabwe) fails to meet the criteria of a creditor, as the judgment it relied upon is not against the first appellant but against a different party.

It bears mentioning, that, the first respondent was in default at the hearing of the appeal as it realised it could not possibly defend the judgement of the court a quo.

FACTUAL BACKGROUND

The first respondent (Shatirwa Investments (Pvt) Ltd) (being a creditor of the appellant companies) and the second respondent (Associated Mine Workers Union of Zimbabwe) (being a registered trade union in the mining industry) sought an order in the court a quo that the appellants (Metallon Gold Zimbabwe (Pvt) Ltd, Goldfields of Shamva (Pvt) Ltd, Goldfields of Mazowe (Pvt) Ltd) and Mazowe Mining Company (Pvt) Ltd) be placed under corporate rescue in terms of section 124(1) of the Insolvency Act [Chapter 6:07].

They alleged, that, the appellants were failing to pay creditors and that it was very likely that the appellants would become insolvent within the immediately ensuing six months, making them worthy candidates for corporate rescue.

The first respondent, armed with an order against the appellants for US$6,394,232 issued in case HC6197/18, made the application for corporate rescue as an “affected person” being a creditor of the appellants, in terms of section 121(1)(a)(i) of the Insolvency Act.

The second respondent (Associated Mine Workers Union of Zimbabwe), in making its application, averred that it was an “affected person” in that it was a registered trade union in the industry.

The second respondent further stated, that, it also derived its locus standi from its status as a creditor of the second (Goldfields of Shamva (Pvt) Ltd) and the fourth (Mazowe Mining Company (Pvt) Ltd) appellants.

No judgment against the second and the fourth appellants was attached to the founding affidavit before the court a quo to support the claim of locus standi. It attached a copy of a judgment obtained against the first appellant (Metallon Gold Zimbabwe (Pvt) Ltd) but no claim was made against the first appellant in the court a quo on the basis of that judgement.

SC108-21 : VALENTINE MUSHAYAKURARA vs ZIMBABWE LEAF TOBACCO COMPANY (PRIVATE) LIMITED
Ruled By: MALABA CJ, UCHENA JA and CHIWESHE AJA

At the hearing of the appeal, the Court found, that, the appeal was devoid of merit, as the funds advanced to the appellant, by the respondent, to finance the production of his 2016–2017 tobacco crop were from offshore funding.

The decision of the Court was based on the interpretation of the agreement for tobacco growing and financing entered into by the parties on 19 July 2016, the acknowledgement of debt dated 19 September 2017, and the Deed of Settlement dated 18 September 2018.

The three documents show that the parties agreed on three important matters. These were –

(1) The respondent advanced to the appellant funds to finance tobacco production for the 2016/2017 growing season;

(2) The money advanced to the appellant, by the respondent, was part of funds it raised from offshore lines of credit for the specific purpose of financing tobacco production. The currency to be utilised in light of the underlying source of the funds in the denomination of the obligations of the parties was the United States dollar; and

(3) The respondent had to recover the money from the appellant in the currency that would enable it to repay its foreign obligations.

In the result, the Court dismissed the appeal with costs and indicated that reasons for the decision would follow in due course. These are they.

The appeal is against a decision of the High Court (“the court a quo”) handed down on 18 March 2020.

The issue in the court a quo was whether the respondent advanced United States dollars in cash and in the form of inputs to the appellant as crop financing for the June 2016 to April 2017 tobacco farming season.

It was the appellant's position, that, the funds advanced to him by the respondent were in the form of Real Time Gross Settlement cash (hereinafter referred to as “RTGS dollars”) transferred into his local bank account and inputs procured using RTGS dollars.

The court a quo found, that, there was overwhelming documentary evidence proving that off-shore funds were employed by the respondent to finance the appellant's 2016/2017 tobacco crop.

It further found, that, the amount in question could not be repaid in RTGS dollars, as section 44C(2)(b) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] (hereinafter referred to as “the Reserve Bank Act”) explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.

As a result, it found in favour of the respondent and ordered that the appellant should repay the advanced funds in United States dollars.

The respondent is a company duly incorporated in terms of the laws of Zimbabwe. Its business includes accessing off shore funds and using them to finance tobacco farming. The appellant is a tobacco farmer.

In 2016, the respondent accessed offshore funding to lend to tobacco growers for the 2016/2017 tobacco season.

On 19 July 2016, the appellant and the respondent entered into a tobacco growers agreement, in terms of which the former accessed crop financing from the latter in the form of cash, as working capital, as well as inputs.

On 19 September 2017, the appellant signed an acknowledgement of debt in favour of the respondent. In that document, the appellant acknowledged being indebted to the respondent in the sum of US$101,089=46.

The appellant failed to repay the debt. This prompted the respondent to issue a summons for provisional sentence in the sum of US$101,089=46 and interest at the agreed rate.

The appellant did not defend the action.

The parties signed a Deed of Settlement, in terms of which the sum of US$101,089=46, plus interest at the agreed rate, and costs in the sum of US$3,000 together with 15% Value Added Tax on the costs, had to be paid in annual instalments of US$30,000. Each instalment was payable on or before 31 August of each year, commencing 31 August 2019.

On 31 August 2019, the appellant tendered an initial instalment payment of RTGS$30,000.

The respondent rejected the tender. It insisted that the correct currency was United States dollars and consequently demanded payment in that currency.

The respondent invoked clause 5 of the Deed of Settlement. The clause reads:

“5. In the event that the defendant fails to pay any of the amounts due in terms of this deed of settlement on the due date, the plaintiff shall be entitled to apply for default judgment for payment of the outstanding amount from the defendant without notice to the defendant. In that regard, the plaintiff shall be entitled to seek any further costs incurred by it from the defendant on a legal practitioner and client scale.”

Accordingly, the respondent filed a chamber application for default judgement.

In the court a quo, the respondent contended, that, it advanced United States dollars-denominated inputs and cash to the appellant as crop financing for the June 2016 to April 2017 growing season.

On the other hand, the appellant argued, that, the cash he received was in the form of RTGS dollars transferred into his local bank account and inputs procured using RTGS dollars.

The court a quo found, that, offshore funds were employed by the respondent to finance the appellant's 2016/2017 tobacco crop.

It also noted, that, the appellant failed to substantiate his averment that the funding that he obtained was in RTGS dollars.

The court a quo found in favour of the respondent and granted the application with costs.

THE APPELLANT'S SUBMISSIONS

At the hearing, the Court requested the parties to address it on the question whether the contract arrangement entered into between the appellant and the respondent gave rise to the performance by the respondent of the obligation under the offshore loan agreement.

In his heads of argument and oral submissions, the appellant submitted, that, Clause 3 of the loan agreement, relating to the grower's obligations, did not specify the denomination of the currency in which the funds would be advanced to a tobacco grower. The appellant submitted, that, the agreement between the parties was silent with regards to the currency to be used to repay the loan.

He argued, that, the court a quo was not entitled to go behind the Deed of Settlement entered into between the parties in resolving the matter.

He submitted that the Deed of Settlement constituted a compromise or a transactio.

He argued that the Deed of Settlement made no mention of offshore funding.

It was further submitted, that, by tendering RTGS$30,000 the appellant lawfully discharged his liability to the respondent in terms of Statutory Instrument 33 of 2019 (SI33/19). This was on the basis that section 4(1)(d) of SI33 of 2019 provided that liabilities that were valued and expressed in United States dollars immediately before the effective date were deemed to be valued in RTGS dollars at a rate of one-to-one to the United States dollar.

THE RESPONDENT'S SUBMISSIONS

Counsel for the respondent submitted, that, the funds advanced to the appellant were from offshore funding and the amount in question had to be repaid in United States dollars.

It was further submitted, that, the argument that the Deed of Settlement constituted a compromise was of no legal consequence, as the issue of the currency in which the debt was to be repaid was never in issue. The issue of the currency was never compromised.

APPLICATION OF THE LAW TO THE FACTS

In the case of Zambezi Gas (Pvt) Ltd v N.R. Barber & Anor SC03-20, in interpreting section 4(1)(d) of S.I.33/19 the Court held, that, contractual obligations valued in United States dollars immediately before the effective date were to be paid in RTGS dollars at parity or at a one-to-one rate. The court stated the following at p13 of the cyclostyled judgment:

“Section 4(1)(d) of SI33/19 states, that, for such sui generis liabilities, including judgment debts, a rate of one-to-one between the United States dollar and the RTGS dollar will apply. The transactions entered into after the effective date would fall under the provisions of section 4(1)(e) of SI33/19.”

However, section 44C of the Reserve Bank of Zimbabwe Act [Chapter 22:15] reads as follows:

“44C Issuance and legal tender of electronic currency

(1)…,.

(2) For the avoidance of doubt, it is declared, that, the issuance of any electronic currency shall not affect or apply in respect of –

(a)…,.

(b) Foreign loans and foreign obligations denominated in any foreign currency, which shall continue to be payable in such foreign currency.”…,.

Section 44C of the Reserve Bank Act is an exception to the parity rate.

In Breastplate Service (Pvt) Ltd v Cambria Africa Plc SC66-20 the Court stated as follows at p5 of the judgement:

“What emerges clearly and unequivocally from section 44C(2)(b) of the Reserve Bank Act, as read with section 4(1)(d) of SI33 of 2019, is that foreign loans and obligations denominated in any foreign currency are excluded from the broad remit of S.I.33 of 2019. Thus, foreign loans and obligations continue to be valued and payable in the foreign currency in which they are denominated.”

The term “foreign loans and obligations denominated in any foreign currency” as it appears in section 44C(2) of the Reserve Bank Act, is not defined in SI33 of 2019.

As stated in Breastplate Service (Pvt) Ltd v Cambria Africa Plc SC66-20, its meaning, in any given case, must be ascertained from the factual circumstances of the parties involved and the material substance of the transaction that they have entered into.

Section 44C(2)(b) of the Reserve Bank Act makes it clear, that, the issuance of any electronic currency, that is RTGS dollars, shall not affect or apply to any foreign obligation, as the provision explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.

It is settled, that, the effect of SI33/19 was to render all assets and liabilities, except those referred to in section 44C(2)(b) of the Reserve Bank Act, as values in RTGS dollars at the exchange rates prescribed.

It was the appellant's position, that, since the parties had concluded a Deed of Settlement, the court a quo was not entitled to take into consideration agreements that preceded the Deed of Settlement.

The appellant argued that the Deed of Settlement constituted a compromise.

It was the appellant's further submission, that, it did not matter that the debt had been expressed in United States dollars. The argument was that the issue was whether the appellant could discharge his liability in RTGS dollars at the rate of one-to-one in terms of SI33 of 2019.

The Deed of Settlement, and the preceding contracts, have to be read together for a proper understanding of the arrangement the parties entered into.

The source of the funds had to be established first for the Court to be able to make a determination of the issue of the currency in which the debt, admittedly due, had to be repaid.

The court a quo stated as follows in relation to its findings on the source of funding at p4 of its judgment:

“In proving its source of funding for the 2016–2017 tobacco cropping season, the applicant had attached a letter dated 28 May 2015 by Standard Chartered Bank addressed to the Export Finance Manager of the applicant.

In that letter, the bank confirmed, that, the Reserve Bank of Zimbabwe had authorised the applicant to draw down US$25,494,506 from their offshore lines of credit to finance the 2015–2016 tobacco growing season.”

It is on record, that, the appellant accepted that if evidence was presented establishing that the loan he received was from offshore funding, the debt would have to be settled in United States dollars.

The court was seized with a sui generis contract.

The tobacco grower agreement cannot be examined without reference to the source of funding.

This is so because the nature of the funds advanced to tobacco growers under offshore funding contract arrangements must be preserved, as the funds are sourced solely for the purposes of tobacco growing.

The term “Crop Finance” as provided for in the Tobacco Grower Contract Agreement, clearly links the money involved to off shore funds.

If the respondent is an authorised dealer, the understanding is that funds obtained and advanced in United States dollars are repayable in the denominated currency.

Tobacco is a crop that is sold in the market in foreign currency to enable beneficiaries of off-shore funding arrangements to repay their creditors in foreign currency so that the latter are able to service their offshore funding contractual obligations.

A party enters into a tobacco growers contract, knowing that he or she or it is to be funded by an offshore loan denominated in United States dollars. He or she or it undertakes the obligation to repay the loan in that currency. As a consequence, the contract arrangements entered into by the individual tobacco growers and the respondent are an execution of the obligation to perform the offshore funding contracts entered into by the respondent and its creditors.

If payment were to be made in RTGS dollars, contrary to the clear and unambiguous language of section 44C(2)(b) of the Reserve Bank Act, the purpose of the provision of ensuring that tobacco farmers benefit from offshore funding lines of credit accessible to the respondent and others in similar business would be defeated to the detriment of the national interest in the protection and promotion of the development of the tobacco industry.

The court a quo cannot be faulted for holding, that, the funds advanced to the appellant had to be repaid in United States dollars.

Zambezi Gas (Pvt) Ltd v NR Barber & Anor SC03-20 is distinguishable from the present matter.

The present case relates to offshore funding.

The obligation incurred by the respondent was a foreign obligation denominated in foreign currency within the contemplation of section 44C of the Reserve Bank of Zimbabwe Act [Chapter 22:15].

The Deed of Settlement was entered into for the purpose of allowing the appellant to repay the debt he acknowledged to be owing in instalments in United States dollars. The Deed of Settlement was for the benefit of the appellant. The appellant cannot escape the obligation he voluntarily undertook to repay the funds advanced to him in United States dollars for the specific purpose of financing the production of the tobacco crop by calling the Deed of Settlement a compromise.

There was no dispute between the parties over the currency in which the offshore funds received by the appellant, from the respondent, had to be repaid.

The respondent was entitled to invoke the provisions of section 44C(2)(b) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] to protect its rights to the repayment of the offshore funds advanced to the appellant in United States dollars under the Deed of Settlement.

Appealed
SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

This is an appeal against the judgment of the High Court dismissing the appellant's claim for US$119,300 being the balance of the purchase price for a 20-tonne Hyundai Excavator sold and delivered by the appellant to the respondent.

In dismissing the appellant's claim, the court a quo upheld the respondent's counterclaim and ordered the appellant to refund US$140,000 to the respondent, being the deposit paid towards the purchase of the excavator and front-end loader.

The brief summary of the case

The facts giving rise to the claim and counterclaim are hotly contested. The brief facts of the case are that the respondent is a Municipal Council duly constituted as such in terms of the Urban Councils Act [Chapter 29:15], whereas the appellant is a company in the business of selling excavators and front-end loaders.

Sometime in 2014, the parties concluded a contract of sale of a twenty-tonne excavator. The terms of the contract are in dispute.

The appellant's claim is, that, sometime in 2014, it sold and delivered, in good working order, a refurbished 20-tonne excavator for US$209,300 at the respondent's instance and request. The purchase price was payable in instalments with an initial deposit of US$90,000 and the balance of US$119,300 payable on delivery.

The appellant's complaint is, that, despite effecting delivery at the respondent's premises, on 19 June 2014, the latter refused or neglected to pay the balance of the purchase price.

The respondent denies breaching the contract of sale as alleged or at all and has counterclaimed for a refund of the deposit it paid on account of defective performance.

Its defence is that, on 16 May 2014, it floated a tender for the purchase of a brand new twenty-tonne Tracked Excavator to the tune of US$182,000. The advertisement read:

“MUNICIPALITY OF CHITUNGWIZA TENDER NOTICE NO. 05/11

Tenders are hereby invited, in terms of section 211 of the Urban Councils Act (Chapter 29:15) from reputable and legally registered companies and institutions to provide specified brand new plant and machinery to the Municipality of Chitungwiza….,.

Supply and Provision of Specified Plant and Machinery

1. Jet Machine (high velocity clearing machine).

2. Tracked Excavator (30 tonne).

3. Front End loader (3 tonne).

Tender specifications are available at Chitungwiza Municipality Head Office.”

The appellant won the tender to supply the respondent with a brand new 20-Tonne Tracked Excavator at the cost price of US$182,000 and a brand new 3-Tonne Front End Loader at the cost price of US$105,000.

It was therefore a material term of the contract that the appellant was to deliver a brand new excavator and front end loader.

The appellant, however, in breach of contract, delivered a refurbished dysfunctional excavator.

It was also a material term of the contract that the respondent would pay US$140,000 deposit for both machinery and the balance upon delivery. The respondent paid the deposit in terms of the contract but the appellant, in breach of contract, delivered a pre-owned, dysfunctional excavator without the necessary accessories.

To date, the appellant has not delivered the brand new machinery in terms of the contract.

That being the case, the respondent counterclaimed for specific performance in terms of the contract, or, alternatively, a refund of the deposit of US$140,000 paid in anticipation of the fulfilment of the terms and conditions of the contract.

The respondent also claimed payment of damages in the sum of US$30,000 for breach of contract as well as storage charges at the rate of US$20 per day from the date of summons to the date of collection of the defective refurbished excavator.

The claims for damages and storage charges were not persisted with and are not the subject of this appeal.

Thus, the court a quo was left with only two issues for determination. The issues were defined at the pre-trial conference as follows:

“1(a) Whether or not plaintiff (appellant) should be compelled to deliver a brand new excavator.

OR ALTERNATIVELY

(b) Whether or not the defendant (respondent) is entitled to a refund of the deposit paid.

2. Whether or not the plaintiff (appellant) is entitled to payment of the outstanding amount.”

Determination of the two issues by the court a quo

Upon consideration of the evidence before it, the court a quo found, that, the appellant was guilty of breach of contract. It dismissed the appellant's claim and sustained the respondent's counter-claim. Consequently, it ordered as follows:

“In the result, I order as follows:

1. The plaintiff's claim is dismissed.

2. The plaintiff pays the defendant US$140,000, being the refund of the deposit paid by the defendant towards the purchase of the Excavator and Front End Loader.

3. The plaintiff pays to the defendant costs of suit.”

The Appeal

Aggrieved by the above order, the appellant appealed to this Court for relief on five grounds. The five grounds of appeal attack the judgment a quo basically on failure to appreciate the sufficiency of evidence and failure to apply the turquand rule in its favour.

Analysis of the Facts and the Law

It is clear right from the outset, that, the cardinal question to be answered is the validity and fulfilment of the contracts allegedly concluded by the parties. In simple terms, the court a quo had to determine whether the contract was for brand new or refurbished machinery.

The parties relied on different contracts for their competing claims.

The terms of the two contracts are incompatible and at variance with each other. The respondent relied on the tender as advertised in the Herald newspaper with a wide circulation in the area. The appellant, however, denied having responded to the notice floated in the newspaper. Its Managing Director, Darlington Chirara, testified that he responded to a different notice pinned on the notice board at the respondent's registry office. It was his testimony that the notice was a tender for the procurement of a refurbished twenty-tonne crawling excavator and a refurbished three-tonne front end loader.

The appellant's sole witness, Darlington Chirara, was however unable to verify or prove the existence of the notice he claimed to have responded to on behalf of the appellant. Under cross-examination by counsel for the respondent, this is what he had to say:

“Q. Do you have proof to show that there was such a notice?

A. I do not have any documentary evidence. I could not have removed the notice that was on the notice board because others were supposed to come and see that notice.”…,.

What the appellant said under cross examination is ample proof, that, apart from his mere say so, he has no evidence of the existence of the offer he says he accepted for the provision of refurbished second hand machinery.

It is trite, that, a valid contract is constituted by an offer and acceptance.

The appellant, by his own admission, failed to establish the existence of the tender for the provision of refurbished second hand machinery. The onus was on the appellant to establish the existence of all the essential elements of a valid contract. Failure to establish the existence of such tender, on the alleged terms and conditions, was fatal to its case as there can be no acceptance without an offer.

The respondent's version was, that, it tendered for the procurement of a brand new twenty-tonne excavator and three-tonne front end loader by floating a tender in the Herald Newspaper. After observing all the legal requirements and procedures, it awarded the appellant the tender, as amended for the acquisition of a twenty-tonne tracked excavator instead of a thirty-tonne as originally tendered. The appellant duly accepted the tender and undertook to perform the contract in accordance with the given terms and conditions.

The respondent proffered evidence of the described tender notice by producing a copy of the relevant Herald newspaper cutting. It further produced copies of the related minutes of the procurement Board duly constituted in terms of section 210 of the Urban Councils Act [Chapter 29:15]. The meeting was held at the respondent's offices on 17 September 2013. It was attended by the appellant's two directors, namely, S. Mlambo and D. Chirara, who were accompanied by its legal practitioner Mr Mucheriwesi of Mushangwe and Company Legal practitioners. The respondent was represented by its Chamber Secretary, Human Resources Manager, Deputy Finance Director of Works and a medical doctor.

The minutes of that meeting speak for themselves.

The record of proceedings captures the recommendations of the Procurement Board as follows:

“…, that the tenders for the tenders of the supply of new machinery/equipment be awarded as follows:

“1. Scotia Steel (Pvt) Limited – jet machine for US$119,113=50.

2. Upset Investments (Pvt) Ltd – Tracked Excavator, 20 tonne for US$162,000.

3. Upset Investments (Pvt) Ltd Front End Loader, 3–ton for US$105,000.”

The meeting, having been apprised of the recommendations of the Procurement Board, agreed that:

“Upset investments (is) to supply and deliver brand new equipment within 10 days after receipt of 50% deposit of the total value. Further, the Chitungwiza Municipality undertook to pay legal fees as the lawyer's invoice sic). All payments were to be made through Upset Investments lawyers, Mushangwe and Company Legal Practitioners.”…,.

The documentary evidence proffered by the respondent was corroborated in every material respect by oral evidence from four witnesses.

In its plea, in reconvention, before the court a quo, the appellant however gave the impression that it responded to an amended extended tender of the original advertised tender. It was its plea in reconvention, that, the amended tender did not require the provision of new machinery. Paragraphs 4 and 5 of its plea in reconvention read:

“Ad paragraph 4

It is denied, when plaintiff in reconvention advertised its tender, it was not won by its deadline. It was then extended and revised.

Ad paragraph 5

The defendant, in reconvention, will aver that it submitted its bid during the extension. According to the specifications, it was not a requirement that the excavator ought to be brand new. The tonnage of same was also reduced.

It affirms that the tender won by the defendant in reconvention is not the same with the one initially advertised as evidenced by the discrepancy in tonnage of the excavator.”

While the Procurement Board minutes record the amendment downsizing the weight of the excavator from 30 tonnes to 20 tonnes, there is no record of the amendment of the requirement for the provision of brand new machinery. On the other hand, the appellant contended, without proof, that it responded to a notice pinned on the respondent's notice board for the supply of refurbished second hand machinery.

It is noteworthy, that, the appellant vacillated between saying that it responded to a notice pinned on the notice board and saying that it responded to an amended tender revised notice. Such vacillation and inconsistency undermines the appellant's case.

The appellant's assertion, that the respondent offered to buy refurbished second hand machinery is not backed up by any proof of recommendations from the Procurement Board as is required by law.

Section 210(4) of the Urban Councils Act [Chapter 29:15] requires that any procurement of goods, materials, or services be subject to recommendations of the Procurement Board. The section provides as follows:

“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”

The section is couched in peremptory terms because it constitutes a prohibition coupled with the use of the mandatory term 'shall not'.

The appellant was unable to proffer any evidence of the Procurement Board having tendered for the procurement of second hand refurbished machinery. The evidence on record shows, that, before the full Council met to adjudicate over that tender, the then Town Clerk G. Tanyanyiwa, had, fifteen days earlier, written to the appellant advising him that he had won the tender to supply second hand refurbished machinery. The letter reads:

“Date 6/07/2011
Dear Sir/ Madam

REF: SUPPLY OF REFURBISHED TWENTY TONNE CRAWLING EXCAVATOR AND 3 TONNE FRONT END LOADER

Reference is made to the above.

You have been awarded the tender to supply the municipality with the above equipment. You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks. May you treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of disease.”

It is needless to say, that, the above letter was false and in fact misleading, because, no such tender had been awarded by the respondent at that stage.

On the basis of the summation of the evidence in this case, no fault can be laid at the learned judge a quo's door for holding that the ruling contractual terms were as advertised in the Herald newspaper. The letter by G. Tanyanyiwa was pre-emptive and patently unlawful as he had no mandate to award such tender to the appellant without authority from Council.

In dealing with the unlawful and unbecoming conduct of G. Tanyanyiwa, the learned judge a quo had this to say:

“I do not believe that a Town Clerk's actions have the power to override the provisions that is (sic) peremptory. Therefore, the letter of Mr G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force or consequence. It does not bind the defendant. So the contract that was purportedly entered into and between the plaintiff and the defendant, pursuant to the letter which was written by G. Tanyanyiwa, is a nullity.”

In apparent concession that the Town Clerk acted unlawfully and unprocedurally, the appellant sought to rely on the Turquand rule in an attempt to sanitise and regularise G. Tanyanyiwa's unlawful and irregular conduct.

The Turquand rule is derived from the famous British case of Royal British Bank v Turquand 1856 199 ER 886.

In that case, the directors of the respondent company could borrow on behalf of the company under a company resolution. Two directors of the company signed a bond on behalf of the company, under the company seal, without the requisite company resolution. When pressed for payment, the company objected on the basis that the directors had signed without company resolution. The court held, that, when dealing with a corporate body, parties are not bound to do more than peruse the statutes of the company: and if the power to transact is given in the statute, then, the party so contracting has the right to infer that the authority to so contract on the part of the corporation has been perfected by the necessary resolutions.

In other words, a party contracting with a company is entitled to assume that all the internal procedures have been complied with, provided the company has the power to transact.

This case can easily be distinguished from Royal British Bank v Turquand 1856 199 ER 886 on two grounds:

(a) First, the respondent, being a Municipality, was expressly prohibited by section 210(4) of the Urban Councils Act from contracting without the necessary recommendations from the Procurement Board and approval from Council.

A statutory prohibition is mandatory and binding on the parties as everyone is presumed to know the law regardless of whether one has read and understood the law.

No such statutory prohibition bound the respondent in Royal British Bank v Turquand 1856 199 ER 886.

The finding by the learned judge in the court a quo, that the unsanctioned contract to provide refurbished machinery was a legal nullity, as it was prohibited by law, is beyond reproach.

The argument, that section 210 of the Urban Councils Act constitutes internal issues unbeknown to the appellant is therefore baseless and without any foundation at law. The respondent had therefore no capacity to transact in contravention of the law.

(b) Second, the letter written to the appellant by the Town Clerk, G. Tanyanyiwa, conveying the message that the appellant had won the tender to supply the machinery was false in fact and misleading. It was written without Council authority fifteen days before the adjudication of the tender. The letter was fraudulently calculated to prejudice other bidders, and the respondent, because it was meant to abort the whole purpose of the tender to identify the most suitable bidder for the supply of the advertised new machinery.

As correctly observed by the learned judge a quo, the Turquand rule cannot override a statutory prohibition. This is for the simple reason that the rule was not designed to promote and perpetuate illegality. It is meant to protect gullible members of the public who innocently contract with company agents oblivious of their failure to observe internal procedures.

Reliance on case law where the rule was applied in our jurisdiction was therefore misplaced, because, in this case, the purported contract was void ab initio and a nullity at law on account of fraud and statutory prohibition.

In this case, no contract came into existence because there was no meeting of the minds regarding the object of the sale.

The respondent intended to purchase brand new machinery whereas the appellant was bent on providing refurbished second hand machinery. It is clear that both parties did not intend to contract on the basis of each other's terms.

Consensus being the essence of contract there can be no contract in the absence of agreement on all material terms of the contract. In the absence of agreement on the nature and quality of the object of the intended sale no binding obligations came into being.

In the absence of a valid enforceable contract, the learned judge a quo cannot be faulted for dismissing the appellant's claim for payment of the balance of the purchase price of a non-existent contract.

Turning to the respondent's counter-claim, it is clear that it paid the deposit of US$140,000 in anticipation of a valid contract that never came into being. The obligation to refund the deposit paid is a natural consequence of the respondent's failure to supply the brand new machinery in terms of the respondent's offer.

No dispute arose regarding the appellant's right to collect his unwanted refurbished excavator.

In the result, the appeal can only fail. It is accordingly ordered as follows:

1. The appeal be and is hereby dismissed.

2. The appellant shall bear costs of the appeal.

View Appeal
HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

The plaintiff issued summons claiming the following:

“(i) Payment of the sum of US$119,300 being the remaining balance of the agreed purchase price for one x 20 Tonne Hyundai Excavator, sold and delivered by the plaintiff to the defendant, at its specific instance and request.

(ii) Interest at the prescribed rate calculated from the date of delivery, being 19th of June 2014, to the date of full payment.

(iii) Costs of suit on a legal practitioner and client scale.”

In its declaration, the plaintiff averred the following:

In 2011, the parties entered into a procurement contract in which the defendant ordered one by 20 tonne hydraulic excavator from the plaintiff. The agreed purchase price was US$209,300 inclusive of VAT. The defendant was obliged to pay 50% deposit towards the purchase price. The remaining balance was payable upon delivery of the excavator.

In partial fulfilment of the agreement, the defendant paid, in instalments, the sum of US$90,000 as part deposit to the agreed purchase price.

The plaintiff accordingly delivered the excavator on 19 June 2014 which delivery was accepted. The excavator was accepted in good working order by the defendant at its premises.

The defendant has, despite demand, refused or neglected to pay the outstanding balance of US$119,300....,.

To the merits, the defendant averred, that, the plaintiff delivered a defunct Hyundai Excavator contrary to the undertaking that it made that it would deliver a new excavator. It had to incur unnecessary costs in having the excavator checked by an independent company. The defendant averred, that, it will only effect payment of the balance after delivery of a brand new and properly functioning machinery.

The defendant also made a counter claim. It averred the following:

On 16 May 2014, it advertised a Tender Notice in the Herald newspaper in terms of section 211 of the Urban Councils Act [Chapter 29:15]. The notice was inviting tenders for the supply of brand new machinery, viz:

(i) One Jet machine Chigu Velocity clearing machine.

(ii) One Tracked Excavator 30 tonne.

(iii) One Front End Loader.

On 18 July 2011, the defendant in reconvention won the tender to supply it with a 20 tonne Tracked Excavator and a 3 tonne Front End loader. It was a term of the agreement that:

(a) The defendant in reconvention would deliver a brand new excavator and a brand new front-end loader.

(b) The plaintiff in reconvention would pay the deposit of the agreed purchase price before delivery of the machinery.

(c) The plaintiff in reconvention would pay the outstanding purchase price upon delivery of the machine.

The plaintiff in reconvention paid the initial deposit to the defendant in reconvention on 29 January 2014 in the sum of US$140,000. On 19 June 2014, the defendant in reconvention delivered a dysfunctional excavator in breach of the agreement terms.

It has refused and failed to deliver a brand new machinery.

The plaintiff in reconvention has been prejudiced by the breach. The plaintiff in reconvention is entitled to specific performance of the agreed terms of the contract. Alternatively, it is entitled to restitution of US$140,000 being the deposit paid as part of the purchase price and damages for breach of contract. Consequently, it claims for:

“(a) An order compelling the defendant in reconvention to deliver brand new excavator and Frond End loader to the plaintiff in reconvention in terms of the agreement.

(b) Alternatively, an order compelling defendant in reconvention to pay the sum of US$140,000 being the deposit paid as part of the purchase price.

(c) An order compelling defendant in reconvention to pay US$30,000 as damages for breach of contract.

(d) An order compelling defendant in reconvention to pay US$20 per day from date of summons to date of collection being storage fees for the excavator.

(e) An order compelling defendant in reconvention to pay interest at the rate of 5% per annum from the date of demand to date of payment in full.

(f) Costs of suit on a legal practitioner client scale.”

The defendant in reconvention pleaded as follows to the counter-claim:

When the plaintiff in reconvention advertised its tender notice, the tender was not won by the deadline. The tender notice was then revised and extended.

It (the defendant in reconvention) submitted its bid during the extension.

According to the specifications of the re-advertised tender notice, it was not a requirement that the excavator be brand new. Even its tonnage had also been reduced. The tender that was won by the defendant in reconvention was not as per the initially advertised tender notice as evidenced by the discrepancy in tonnage of the excavator.

The defendant in reconvention averred, that, at all material times, the plaintiff in reconvention was fully aware that the excavator to be supplied would be pre-owned.

When the excavator was delivered, it was inspected by all responsible authorities and then certified to be in good working condition. The parties did not agree that the machinery to be supplied would be brand new.

The defendant in reconvention prayed for the dismissal of the counter claim with costs on a higher scale.

In its replication, the plaintiff in reconvention averred the following:

The excavator was supposed to be new. It disputes that the tender that was won by the defendant in reconvention was not the one that was initially advertised. The defendant in reconvention was paid the deposit for both the excavator and front end loader after a meeting was subsequently held. It disputes that the excavator that was delivered was in good working condition.

At the pre-trial conference, the parties agreed that the issues for trial were:

1(a) Whether or not the plaintiff should be compelled to deliver a brand new excavator; or, alternatively

1(b) Whether or not the defendant is entitled to a refund of the deposit paid.

2. Whether or not the plaintiff is entitled to payment of the outstanding amount.

To prove its case, the plaintiff led evidence from one witness, Darlington Chirara, who is its Managing Director since 2007.

His evidence was as follows:

In June 2011, he went to Chitungwiza Municipality head office chasing after his payment. At the Registry section notice board there was a tender notice asking for a refurbished 20 tonne Crawling Excavator and a 3 tonne Front End loader. Tender documents were going for US$5,000.

He went back the next day and bought the tender documents which included a tender form which was supposed to be filled in duplicate and attached to the quotation. He filled in the tender form for the excavator and attached it to his quotation and had them stamped by the defendant's registry section on 9 June 2011 on receipt.

The tender document, together with the tender form and the quotation, were produced as exhibit(s) 4 and 5…,.

The tender reference number for the supply of the excavator is CH.05/11.

Darlington Chirara said, that, on the tender form, he filled in the condition of the machinery as a 200g Model, a Hyundai Model which had already done 2,972 hours as it was a second hand. Its under-carriage life percentage was 76% meaning that 24% was already worn out or gone because of use.

He said that in exhibit 5, which is the quotation, he quoted a 20 tonne excavator valued at $182,000.

He said that, on 7 July 2011, he received a letter from the defendant saying that the plaintiff had won the tender to supply a refurbished 20 tonne excavator and a 3 tonne front-end loader.

The letter was produced by consent as exhibit 6 in the supplementary bundle.

The letter was written on 6 July 2011 to the directors of the plaintiff, by G. Tanyanyiwa, who was the then Town Clerk. It is on the defendant's letter head. It reads:

“REF: Supply of refurbished 20 tonne Crawling Excavator and 3 tonne Front Loader

Reference is made to the above.

You have been awarded the Tender to supply the Municipality with the above equipment.

You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks.

May you please treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of diseases.”

Darlington Chirara said, that, in August 2011 the plaintiff received a purchase order and a transfer copy of the RTGS from Metropolitan Bank dated 24 August 2011 showing that the defendant had paid the 50% deposit as per the plaintiff's request in the quotation.

The purchase order was produced as exhibit 7…,.

It is dated 18 July 2011, but it was signed on 1 August 2011. It is for the purchase of a tracked excavator 20 tonne for US$182,000.

The RTGS, exhibit 8…, shows that it is dated 24 August 2011 for US$91,000, for the benefit of the plaintiff by the defendant. However, on top of the date stamp it is crossed and written “not processed.”

Darlington Chirara said, that, to the plaintiff's surprise, the money never came through. It was only paid after the plaintiff had issued summons.

The defendant finished paying the deposit for both the excavator and the front loader in February 2014. $90,000 was paid for the excavator and $50,000 was paid for the front-end loader.

He then delivered a 20 tonne excavator on 19 June 2014.

On delivering the machinery, he saw the Director of Works, Mr Gwanzura, who called the now current Town Clerk, Mr George Mukunde, who in turn called seven (7) councillors who were there. They came and inspected it and then instructed the Chief Internal Auditor, Mr Chipunza, to accompany him to the workshop with the machine. At the workshop they saw Mr Musiwa and the Workshop Foreman who inspected the machine and tested it for almost two (2) hours. After that, they signed the delivery note, which was produced by consent as exhibit…,.

The delivery note shows, that, it was signed by one Innocent on behalf of the defendant and it states, that, the machinery was received in good working order.

Darlington Chirara said that the machinery had tips and a cigarette lighter. The fuel gauge and the wipers were working.

On the tender form, he had stated, that, the machinery which was going to be supplied was a 7 series model i.e. 210 LC-7.50. He said that the defendant knew from the onset about the type of machinery that was going to be supplied.

He said the defendant even had the Ministry of Local Government, Public Works and National Housing write a letter to ZIMRA indicating that it (the defendant) had been granted a duty free certificate to facilitate the delivery of a Robex 210 LC-7H Hyundai Excavator valued at US$182,000.

It was signed on 14 April 2014. The letter was produced by consent as exhibit 12…,.

Darlington Chirara said that after delivering the excavator, on 19 June 2014, he was then furnished with a report, dated 11 July 2014, from the defendant, listing the defects it said it found on the excavator.

He said that he was disputing all of them.

He said that he was not even aware of the qualifications of the person who did this report, but he suspected that this person was an interested party in the same business as the plaintiff, because, after issuing the report, he went on to issue a quotation to supply the same machinery to the defendant.

He said that when he delivered the excavator it was in good working order.

When the inspection was done and the report was compiled, three (3) weeks later, no one from the plaintiff's company was present. The plaintiff was not made aware of the inspection.

He said that there was need for him to train the defendant's employees on how to operate the machinery. He said that in his quotation he had indicated that he would provide Basic Operator Orientation under the heading “Handover”. He said that he has not yet trained them because he has not been paid the outstanding amount.

During cross examination, the witness said that he did not respond to the Tender Notice which was flighted in the Herald Newspaper, but the one on the notice board of the Registry section at the defendant's headquarters.

He said he did not have proof of such since it was on the notice board.

He admitted, that, the delivery note that was signed by Innocent, on behalf of the defendant, was prepared by the plaintiff.

He disputed that the excavator was not inspected on delivery as it was inspected by the defendant's employees and signed for by Innocent as to have been received in good working order.

He said that he would have done the commissioning of the excavator once the purchase price had been paid in full within seven (7) days from the date of delivery.

He was shown minutes of a meeting which was held on 17 September 2013 between the plaintiff's directors and the defendant's management. These minutes were later produced by the defendant as exhibit 20…,.

He admitted that he attended that meeting.

Although in those minutes it is stated, that, it was agreed that the plaintiff would supply and deliver brand new equipment, Darlington Chirara disputed this saying that these minutes were not a true record of what was agreed on.

He said that these minutes were prepared by the defendant.

He maintained, that, when he delivered the machinery, it had no defects and US$182,000.00 was its value.

He said that the minutes were not sent to him before they were confirmed.

Referring to exhibit 10…, which is a letter which he wrote to the defendant's Town Clerk, on 22 August 2011, he said that it was the defendant which was supposed to prepare the tender contract between the parties but it was never prepared.

He said that, instead, the defendant furnished the plaintiff with a purchase order.

During the defendant's case, Mary Mukonyora, who is its Acting Chamber Secretary testified as follows:

The Tender Notice by the defendant, inviting tenders to supply an excavator and a front end loader, was placed in the Herald Newspaper. The closing date which was set for the submission of tenders was 31 May 2011.

The Tender Notice was produced as exhibit 13…,.

It shows, that, the defendant advertised for the supply of a 30 tonne excavator and a 3 tonne front-end loader.

The witness said, that, on 23 June 2011, there was a procurement meeting that was held by the Procurement Committee, and, in that meeting, the Procurement Committee recommended the awarding of the tender for the supply of the excavator and front end loader to the plaintiff.

The minutes were produced as exhibit 14…,.

These minutes show, that, the plaintiff was accorded the tender to supply a 20-tonne Tracked Excavator for US$182,000 and a 3-tonne Front End Loader for US$105,000. However, it was specified that the machinery was supposed to be new.

The minutes also show, that, the Town Clerk, Mr. G Tanyanyiwa, was in attendance of the meeting.

The witness said, that, these recommendations were being made to the full Council which later held its meeting on 21 July 2011.

The minutes of the full Council meeting were also produced by consent as exhibit 15…,.

They show that G Tanyanyiwa, the Town Clerk, was in attendance again.

The full Council adopted the recommendations of the Procurement Board on the award of tenders for the supply of the machinery.

Mary Mukonyora said, that, when the plaintiff then delivered a second hand excavator, the new Town Clerk, Mr. G. Makunde, wrote to the plaintiff, on 11 July 2014, raising the issue.

The letter was produced as exhibit 16…,.

In that letter, Mr Makunde stated, that, the defendant noted with great disappointment that the excavator was second-hand.

The witness said, that, according to an expert the defendant engaged, the machinery was not in good working condition.

The report that was compiled by the expert was produced as exhibit 19…,.

It enumerates about 19 defects and states that key accessories were missing. It states that the machine is an old machine that was repaired and resprayed.

The witness disputed that the Tender Notice was ever flighted on the Registry notice board for the supply of a refurbished excavator.

She said, that, from the time the excavator was delivered, it has never been used by the defendant. It is at the defendant's workshop.

The witness also made reference to the minutes of a meeting which was held on 17 September 2013 involving the directors of the plaintiff and the defendant's management.

These minutes were produced as exhibit 20…,.

They show, that, the meeting was held following the issuance of summons by the plaintiff for breach of contract; in that the defendant had not paid the deposit for the supply of the machinery by the plaintiff despite the plaintiff having won the tender in 2011. The plaintiff was suing for damages for breach of contract or for the payment for the equipment since the machinery was already there.

The minutes show, that, the parties agreed that the defendant would pay for the machinery and the plaintiff was to supply brand new equipment after payment of 50% deposit of the total value.

During cross-examination, the witness said that she got employed by the defendant on 1 October 2012 as Head of Human Resources, and, in 2015, she assumed the position of Acting Chamber Secretary.

She admitted, that, the letter notifying the plaintiff of having won the tender to supply a 20 tonne refurbished excavator and a 3 tonne front end loader, which was written by G. Tanyanyiwa, the then Town Clerk, on 6 July 2011 (exhibit 6) and the minutes of the Procurement Board recommending that the plaintiff supplies a 20 tonne excavator and 3 tonne front end loader were consistent.

She said that she, however, doubted the authenticity of the letter of G. Tanyanyiwa. She said that she doubted if it was genuine.

She, however, admitted, that, other than this document which was written by G. Tanyanyiwa, there is no any other document from the defendant which notified the plaintiff of having won the tender.

She also said, that, she sent the minutes of 17 September 2013 to the plaintiff for authentication, but, admitted that she had no evidence to prove that she had indeed sent the minutes for confirmation.

She said that Innocent, who received the excavator on behalf of the defendant and signed the delivery note, is not an expert in such machinery, but is just a clerk who works at the Stores department.

She said that the machine had not even been commissioned, yet, its standard practice to have equipment demonstrated to be in good working order.

She said that all the defendant's Tender Notices are done through the newspapers.

She, however, explained, that, if all tenderers say they can supply a 20 tonne excavator instead of a 30 tonne excavator which would have been advertised for, the defendant can make adjustments and accept the supply of a 20-tonne.

She said that the excavator was received by the defendant on 19 June 2014. It was inspected by the expert on 30 June 2014. The letter of complaint to the plaintiff, about the defects on the excavator, was written on 11 July 2014.

She said that the tender number on the Tender Notice which was flighted by the defendant is 5/11, yet, on the tender documents that the plaintiff submitted quoted the tender number as CH/05/11. She said that showed that the plaintiff was responding to a different Tender Notice than the one advertised in the Herald Newspaper with a deadline for submissions of 31 May 2011.

George Makunde, the current Town Clerk of the defendant, testified as follows:

He said that he joined the defendant in August 2012 and got to know about this case through a perusal of the defendant's documents.

He outlined the procedure that is followed by the defendant in procuring equipment.

He said that a Tender Notice is flighted in a national newspaper guided by section 30 and 31 of the Procurement Act [Chapter 22:14] inviting the submission of tenders. The Procurement Committee/Board then deliberates on the submitted tenders and makes recommendations in terms of the award of the tender to the winner of that particular tender. The recommendation is made to a formally constituted full Council of the defendant in the form of a report. Full council then makes a resolution on the issue which resolution then allows or authorises the Town Clerk, as the Chief Executive Officer or Accounting Officer, to then notify the winning tenderer for the provision of the goods or service so required.

The witness alluded to the Tender Notice that was flighted by the defendant; the minutes of the Procurement Committee of 23 June 2011; and the minutes of the full Council meeting of 21 July 2011 that Mary Mukonyora referred to in her evidence.

His evidence on all these documents was similar to that of Mary Mukonyora in all material respects.

He also reiterated that the tender required that the plaintiff supplied a brand new 20 tonne excavator and a 3 tonne front-end loader.

He disputed that the excavator that was delivered was in good working order saying that although he saw the excavator on the day it was delivered, he did not inspect it to satisfy himself that it was in good working order as he lacked the expertise in testing the machinery.

He said that inspection of machinery is contained in the regulations that guide procurement and it is a process and not an event.

He also said that Innocent, the clerk who received the machinery, has no qualifications to test its condition.

He said that the excavator was not able to perform its obligations and was never used by the defendant.

The witness said that he suspected that the letter that was written by the then Town Clerk, G. Tanyanyiwa, on 6 July 2011, notifying the plaintiff that it had won the tender to supply a refurbished excavator and front-end loader was as a result of a collusion between Mr. Tanyanyiwa and the plaintiff because it was written before the full Council of the defendant had made a resolution on 21 July 2011 to award the tender as per recommendations by the Procurement Committee which had set on 23 June 2011.

The witness evidence with regards to the minutes of 17 September 2013 (exhibit 20) was similar to the evidence that was given by Mary Mukonyora. He also testified, that, in that meeting, it was agreed that the plaintiff would supply a brand new excavator and a brand new front end loader, but, the plaintiff did not deliver brand new machinery.

During cross examination, the witness explained, that, receiving machinery on its delivery and commissioning of the machinery are two different things.

He also explained that the delivery note that was signed by Innocent, the defendant's employee, is a document which was prepared by the plaintiff and it already had the words “received in good working order” printed on it and all that Innocent did was to affix his signature after those words.

It is not Innocent who wrote those words.

He said that, initially, it was the transport personnel who observed that the excavator was second hand and this prompted the defendant to invite an expert, Nicnel, to come and inspect it.

Before that, Automobile Association of Zimbabwe (AAZ) had been called to come and check if the equipment was new.

He explained that the defendant never invited the plaintiff to be in attendance because, in business ethics, you would not want to give the impression that you are dealing with a dubious institution. He said that the defendant wanted to satisfy itself about the excavator hence it called in the Automobile Association of Zimbabwe (AAZ) to inspect it.

The witness said that the plaintiff gave them the price of US$182,000 for an old excavator yet Nicnel gave the defendant a quotation for a new excavator from Hyundai going for US$159,275 on 30 June 2014. He said that although the models are different the disparity in prices showed that the plaintiff was not dealing with the defendant in good faith.

Ryan Edward Berry testified as follows:

He is and has been employed by Nicnel Plant and Equipment (Private) Limited as the Technical Sales Manager for four (4) years now.

He was called by the defendant to inspect the excavator which is in issue.

He noticed that it was a second-hand, having done over 6,000 hours yet the meter read that it had only done 6 hours. The bucket had no tips similar to a car delivered with no tyres. The engine pipes were damaged from the breather which would allow dust to enter if the engine was to run for an extended period. The machine could start and run, but it could not perform its functions properly because it did not have tips and the engine was in a poor state of repair.

He said that the excavator is an LC-7 model, which is an old model which was manufactured until 2012, but a 9 model was manufactured from 2012 onwards.

About his qualifications, he said that he has “O” Level with technical experience from being on the job for about eight (8) years in the industry.

He said that because of this, he took a technician with him to inspect the machine.

He said that as the Sales and Technical Manager, he oversees his technicians using their expertise.

He said that Wency is the technician who inspected the machine as he (witness) filled out the report. However, he admitted that his name does not appear on the report. He said that Wency refused to come to court as he had been phoned, harassed, and intimidated.

He admitted to supplying his own quotation for an excavator to the defendant - on the same day of 30 June 2014 the excavator supplied by the plaintiff was inspected.

Analysis of Evidence

It is necessary to first determine whether or not the parties entered into a contract for the supply and delivery of brand new or refurbished machinery.

Having listened to the evidence given by the witnesses of both parties, it is clear that there is a dispute as to which Tender Notice the plaintiff responded to when it submitted its tender documents and quotation to the defendant's registry section on 9 June 2011.

This is because although the defendant's witnesses said that the response was to the Tender Notice it flighted in the Herald Newspaper with a deadline for submissions of the tenders of 31 May 2011, the defendant's date stamp on the plaintiff's tender documents show that they were received by the defendant's registry section on 9 June 2011 and the Tender Notice reference number that is quoted which is CH/05/11 is different from the Tender Notice reference number which is on the Tender Notice that was flighted in the Herald Newspaper by the defendant.

Whilst the plaintiff's witness said that the plaintiff was responding to a revised Tender Notice that was flighted on the defendant's registry notice board, he did not furnish the proof thereof saying, that, since the tender notice was on the notice board he could not get a copy thereof as other people also needed to see the notice.

However, despite this explanation by the plaintiff, I am convinced by the evidence which was given by the defendant's witnesses, that, the defendant flights tender notices in the national newspapers and not on notice boards.

They made reference to the provisions of the Procurement Act [Chapter 22:14] which Act makes provision for the procurement of goods, construction work, and services by the State and statutory bodies.

Section 30(1)(a) of the Procurement Act states, that, the procurement of goods, construction work, and services by a procuring entity shall be done by means of tendering proceedings in accordance with section 31.

Section 31(1)(a)(ii) of the Procurement Act [Chapter 22:14] then reads:

“Subject to this Act, in any tendering proceedings conducted by a procuring entity, the invitation to suppliers to tender shall be published in a newspaper circulating in the area in which the procuring entity has jurisdiction or carries on business, where the procuring entity is not the State.”…,.

The use of the word 'shall' in section 31 of the Procurement Act means that it is peremptory for the Tender Notice to be flighted in a national newspaper.

I also looked at section 211(1) and (2) of the Urban Councils Act [Chapter 29:15] which deals with tender proceedings by municipals. It reads;

“211 Tenders

(1) In this section —

'municipal procurement board' means a municipal procurement board appointed by a municipal council in terms of section two hundred and ten.

(2) Subject to subsections (8) and (9), before entering into a contract for the execution of any work for the council or the supply of any goods or materials to the council which involves payment by the council of an amount exceeding such sum or sums as may be prescribed, the council, or, in the case of a municipal council, the municipal procurement board shall call for tenders, by notice posted at the office of the council and advertised in two issues of a newspaper…,.”…,.

Whilst in terms of the Urban Councils Act a tender notice shall be posted at the office of the municipal council, it should also be advertised in a newspaper.

The defendant must therefore flight tender notices in accordance with the provisions of the Procurement Act and the Urban Councils Act.

If the defendant only flighted a tender notice on its notice board and did not do so in the newspaper it did not comply with the law.

However, if this is what happened, the plaintiff ought to have produced proof of the advertisement of such tender notice.

In the absence of such proof, I am led to conclude, that, the plaintiff's director was not being honest with the court about having seen such a tender notice on the notice-board of the defendant on 8 June 2011. Such advertisement would not have been in compliance with section 31 of the Procurement Act and section 211(2) of the Urban Councils Act.

Besides, the defendant has no such tender notice in its files or records.

He who alleges must prove and the plaintiff failed to prove the existence of Tender Notice CH.05/11.

The only tender documents that were produced are those that came from the plaintiff which were said to be its copies.

The defendant's witnesses had no knowledge that the Tender Notice 05/11, which had a deadline of 31 May 2011, was ever revised and extended. There is nothing that shows that in the defendant's records.

With this, I am not satisfied that Tender Notice 05/11, which was flighted by the defendant in the Herald Newspaper, was ever revised and extended.

In any case, it defies logic that the defendant, a municipality, would invite tenders for the supply of second hand machinery. I cannot think of a reason why it would do that.

What is disturbing about this case is that, on 23 June 2011, when the defendant's Procurement Committee/Board set and recommended, in its report to full Council, that the tender for the supply of a brand new excavator and front end-loader be awarded to the plaintiff, Mr G. Tanyanyiwa, the then Town Clerk, was in attendance.

In terms of procedure, the recommendation was subject to adoption as a resolution by a full Council meeting. Such a meeting was only held on 21 July 2011.

The Town Clerk, Mr. G. Tanyanyiwa, even attended that meeting as well.

At that meeting, full Council passed a resolution that the plaintiff be awarded the tender to supply a brand new excavator and front end loader.

What is buffling is that, on 6 July 2011, well before full Council had sat, Mr. G. Tanyanyiwa wrote to the plaintiff notifying it that it had won the tender to supply a refurbished excavator and frond-end loader.

Two questions arise:

(i) Firstly, why did he notify the plaintiff that it had won the tender before full Council had held a meeting to pass the recommendation as a resolution?

(ii) Secondly, why did he tell the plaintiff that it had won the tender to supply refurbished machinery?

These queries or questions show that the then Town Clerk was not conducting himself properly in the discharge of his duties.

This is worsened by the fact, that, he was in attendance at the full Council meeting which was later held on 21 July 2011 which adopted the recommendations of the Procurement Committee/Board which stated that the plaintiff was to supply brand new equipment.

When the adoption of the recommendation was made, he knew that he had already notified the plaintiff that it had won the tender to supply refurbished equipment - but he did not inform the Council.

Obviously, that is a sign that he knew that what he had done was improper.

This is further evidenced by the fact, that, after full Council had passed the resolution to award the tender to the plaintiff, he did not write a letter notifying the plaintiff about it as he was supposed to do as per procedure.

The critical question now is: is the defendant bound by the irregular conduct of its employee, the Town Clerk, who told the plaintiff that it had won the tender to supply refurbished machinery when in fact it wanted to be supplied with brand new machinery?

The plaintiff's counsel submitted, that, by virtue of the turquand rule, the defendant is bound.

I must point out from the onset, that, the turquand rule is a principle of company law.

In terms of the turquand rule, if a party transacts with a company only to later discover that the director lacked the authority to bind the company, the company may be forced to honour the transaction if the transaction was completed in good faith by the other party.

The rule is based on the English case of Royal British Bank v Turquand 1856 119 ER 886, wherein it was held, that, people transacting with a company are entitled to assume that internal company rules have been complied with even if they are not. The exceptions to this rule are:

(i) Firstly, if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (in other words, he acted in bad faith).

(ii) Secondly, if the circumstances under which the contract was concluded on behalf of the company were suspicious.

Counsel for the plaintiff went on to cite the case of Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA…,. The case involved a municipality. The turquand rule was held to be applicable to municipalities.

In that case, the Town Clerk, just like in this case, had written a letter to the respondent cancelling the lease agreement between the municipality and the respondent when the municipality had not authorised the cancellation of the lease agreement. The municipality was now demanding money for rent from the respondent and a dispute arose as the respondent refused to pay saying that the lease agreement had been cancelled. The court held that:

“A municipality, in the normal exercise of its functions, necessarily concludes contracts with members of the public. It would be unbusiness-like if the respondent had been duly bound, when he received the Town Clerk's letter, to make enquiries to ensure that the Town Clerk was in fact authorised by the Town Council to convey the cancellation.”

Applying the law to the present case, counsel for the plaintiff submitted, that, the internal workings of Council are not known to the plaintiff, and, as such, there is a presumption of regularity in the adherence to Council procedures which makes it impossible for the defendant to escape liability on the basis that Mr. Tanyanyiwa had not been authorised by the defendant to write the letter that he wrote on 6 July 2011.

To begin with, with all due respect, I am not in agreement with the reasoning in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA that the turquand rule is applicable to municipalities.

I see no basis for saying that.

Municipalities and companies are different entities.

In terms of section 131 of the Urban Councils Act [Chapter 29:15], a Town Clerk is an employee of the defendant (municipality) and his duties are outlined in section 136. These involve the administration of council, managing operations and property of council, supervise the activities of council employees, and any other duties that may be assigned to him by the Council.

The Urban Councils Act does not give the Town Clerk powers to take over the functions of Council when it comes to procurement issues and make binding decisions on its behalf.

The Urban Councils Act has provisions which deal with how goods and services are procured and those provisions are worded in peremptory terms as they use the words 'shall' and 'shall not'.

In terms of section 210(1) of the Urban Councils Act, every municipal council shall appoint a Procurement Board which is responsible for arranging tenders and for making recommendations to Council in regard to the acceptance of tenders and the procurement of goods, materials, and services.

In terms of section 210(4) of the Urban Councils Act:

“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”…,.

I do not believe that a Town Clerk's actions have the power to override the wording of the provisions that is peremptory.

Therefore, the letter of Mr. G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force and consequence. It does not bind the defendant.

So the contract that was purportedly entered into by and between the plaintiff and the defendant pursuant to the letter which was written by G. Tanyanyiwa is a nullity.

Assuming that the turquand rule is applicable to municipalities, as was held in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA, it would not be proper to hold the municipality bound by the actions of a Town Clerk because a Town Clerk is not a functionary of the municipality but an employee.

A councillor, instead, would bind the municipality because a council is run by councillors, not by its employees.

I would equate a councillor to a director of a company.

In terms of the turquand rule, an employee of a company does not bind the company if he purports to act on behalf of the company.

So, in the present case, even assuming that the Tender Notice was properly advertised, the letter that was written by the then Town Clerk, Mr. G. Tanyanyiwa, would not bind the defendant because he had no authority to enter into contracts on behalf of the defendant as he was not a councillor, but just an employee.

In any case, even if the turquand rule was applicable, and even if the defendant, as a municipality, was bound by the actions of its Town Clerk, looking at the circumstances of this case, I would make a finding that the parties did not enter into a valid contract.

I say this because this is a contract which is supposed to be based on a tender notice which should have been properly advertised in terms of the Procurement Act and the Urban Councils Act.

Section 211(2) of the Urban Councils Act states, that, before entering into a contract for the execution of any work for the Council or the supply of any goods or materials to the Council, the Council shall call for tenders, by notice posted at the office of the Council and advertised in two issues of a newspaper.

The plaintiff was not able to produce the revised tender notice CH.05/11 which it said it responded to.

Since the defendant was disputing its existence, the plaintiff ought to have produced it to show that the contract which was entered into was entered into in compliance with the law.

The only tender notice that was produced is the one referenced 05/11, with a closing date for the submission of tenders of 31 May 2011, which the defendant is saying it is the only one it flighted in the Herald Newspaper.

The plaintiff's tender documents were submitted to the defendant's registry section on 9 June 2011 according to the date stamp on them. They were submitted way out of time - after the deadline of 31 May 2011.

To make matters worse, they only bear the date-stamp, but bear no name of the registry person who received them.

Mary Mukonyora even queried their authenticity on this basis alone.

I also query their authenticity.

It is my conclusion, that, these tender documents were submitted on the basis of a non-existent tender notice.

On this basis, alone, any contract that flowed from it is a nullity as it has no leg to stand on.

Clearly, the circumstances under which the contract was concluded are suspicious. This is even worsened by the fact, that, G. Tanyanyiwa, as the Town Clerk, mero motu wrote a letter to the plaintiff well before full Council had passed the resolution that the tender be awarded to the plaintiff.

To make matters worse, contrary to the recommendations of the Procurement Board, he said that the plaintiff had won a tender to supply refurbished machinery.

What this shows is that both Darlington Chirara, the director of the plaintiff, and G. Tanyanyiwa, the Town Clerk, were probably acting in connivance and were probably involved in underhand dealings because their actions are highly suspicious.

In light of the foregoing, I thus make a finding, that, there was never a contract between the plaintiff and the defendant.

Having concluded that there was never a contract between the parties, I will therefore not go on to deal with the issues of novation of the contract.

The defendant's second witness, Mr George Makunde, had said in his evidence, that, if it is held that the defendant is bound by the letter which was written by the then Town Clerk, Mr. G. Tanyanyiwa, then, that contract was novated by what the parties agreed upon in the meeting of 17 September 2013 (exhibit 20) that the plaintiff was to supply a brand new excavator and front end loader.

Novation is the substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement.

Since no contract was entered into in the first place, there is no novation to talk about.

Disposition

Since there was never a contract between the parties, the plaintiff is not entitled to payment of the remaining balance of US$119,300 that it is claiming. The plaintiff is entitled to collect its machinery from the defendant.

In respect of the counter-claim, the plaintiff in reconvention (the municipality) is entitled to a refund of US$140,000 being the money it paid as deposit of the purchase price.

Since there was no contract between the parties, I cannot order the defendant in reconvention (Upset Investments (Private) Limited) to deliver a brand new excavator and a brand new front end-loader. Consequently, the plaintiff in reconvention cannot be entitled to any damages for breach of contract or any storage charges.

In any case, the plaintiff in reconvention did not lead any evidence to prove its claim for US$20 per day for storage charges.

On costs of suit, the defendant prayed that the plaintiff's claim be dismissed with costs on a higher scale, but I see no justification for the award of such costs.

In the result, I order as follows:

1. The plaintiff's claim is dismissed.

2. The plaintiff pays to the defendant US$140,000 being the refund of the deposit paid by the defendant towards the purchase of the Excavator and Front End Loader.

3. The plaintiff pays to the defendant costs of suit.

SC127-21 : MIDLANDS STATE UNIVERSITY vs GALAXY ENGINEERING DESIGN CONSULTANTS (PRIVATE) LIMITED
Ruled By: GWAUNZA DCJ, BHUNU JA and MATHONSI JA

This is an appeal against the judgment of the High Court (the court a quo) rendered in favour of the respondent on 24 July 2019 following a full trial. The judgment directed the appellant to pay to the respondent interest on the sum of $84,827=17 at the rate of 19.5% per annum from 1 November 2010 to the date that amount was paid to the respondent.

In addition, the appellant was ordered to pay to the respondent the sum of US$3,207,450=68 together with interest thereon at the rate of 19.5% per annum from 1 November 2010 to date of payment and costs of suit.

This Court observes, that, the dispute between the parties was resolved purely on findings of credibility of the two witnesses pitted against each other in respect of whose evidence the trial court made factual findings.

That led the court a quo to conclude, that, at the time the appellant gave instructions for cessation of work which was being performed by the respondent, in terms of the contracts, the latter had already completed its mandate of designs and drawings for the appellant. Payment in terms of the contracts entered into by the parties was therefore due.

The court finds, that, on appeal, the appellant has not made a case for interference by the Appellate Court with the credibility and factual findings of the court a quo. The appellant has not even begun to set out any valid grounds for impugning the findings of the court a quo in that regard.

Regarding the relief in United States dollars granted a quo, the court finds that it was incompetent as the court a quo was precluded from granting relief denominated in foreign currency. The liability of the appellant fell due several years before 22 February 2019, the effective date.

In terms of section 4(1)(d) of Statutory Instrument 33/19, SI33 of 2019, as interpreted by this Court in Zambezi Gas Zimbabwe (Pvt) Ltd v N.R. Barber (Pvt) Ltd & Anor SC03-20, the liability of the appellant having been expressed in United States dollars immediately before the effective date of 22 February 2019, fell within the remit of that provision.

As such, relief should have been granted in Zimbabwe dollars at the rate of one to one to the Unites States dollar.

The court also finds that the question of interest on the sum of US$84,827=17 paid by the appellant following admissions it made at the pre-trial conference of the parties before a judge, was an issue placed before the court a quo for determination. That court was obliged to determine it.

Having found the appellant liable, the court a quo was correct to award interest on that amount. The court however finds. that, as with the rest of the liability, that interest should also be reckoned in the local currency at the same rate.

BACKGROUND FACTS

The appellant, a tertiary institution established in terms of section 3 of the Midlands State University Act [Chapter 25:21], engaged the respondent, a company involved in the business of providing civil engineering services, to design civil and engineering works for it on 3 September 2003.

The appellant desired the respondent to design and produce drawings for the construction of certain buildings and Master Site Services at its main University Campus in Gweru. As a result, the parties concluded and signed seven contracts, four of which form the basis of the present dispute. These are:

(a) Contract 1 - for the construction of the Faculty of Commerce and Information Systems, Faculty of Law and Administration on Block;

(b) Contract 2 - for the Faculty of Architecture, Art and Design;

(c) Contract 3 - for the Vice Chancellor's House; and

(d) Contract 4 - being the Master Site Service Design for the whole site, that is, the Master Plan.

Contract 5 - for the Faculty of Natural Resources; Contract 6 - for the Faculty of Science & Technology; and Contract 7 for the Commercial Centre and Sports facilities fall outside the scope of the present case.

The contracts entered into by the parties comprised of the Standard Form Zimbabwe Association of Consulting Engineers (ZACE) contracts and memorandum of agreement for each of them.

The conditions of engagement prescribed the manner in which the engineering works contained in the contracts were to be undertaken. These included:

(i) Stage one; a report relating to consultation between the parties, inspection of the site, and collation of data.

(ii) Stage two related to the preliminary design involving preparation of plans, drawings, and making modifications on the designs.

(iii) Stage three related to the establishment of final design criteria and included the development of the design.

(iv) In stage four, the consultant would work on the drawings themselves.

The respondent performed certain work in terms of the contracts although there is no convergence between the parties as to the stage reached by the works at the time of disengagement.

What is however common cause is that the construction of the relevant buildings had advanced when, on 14 June 2005 and 5 August 2005, the appellant addressed letters to the respondent instructing it to stop work on all the projects.

It is at that point that the dispute arose as to the amount of work the respondent had already performed in fulfilment of the contracts when it was instructed to stop working. The balance due by the appellant for what had been done was also disputed.

The position taken by the respondent was that, at that point, it had already completed all the work that needed to be done on all the four contracts. The respondent insisted, that, having fulfilled its contractual mandate, it was entitled to payment for the full services rendered within the scope of clause 18 of the Zimbabwe Association of Consultant Engineers Standard Contract.

On the other hand, the appellant was adamant, that, the respondent had not completed the work as per the contracts. It contended, that, when it directed the respondent to stop all work on the project on 5 August 2005, it had not completed its mandate.

The appellant insisted, that, the respondent had continued to work after being instructed to stop, and, as such, any work performed by the respondent after the instruction to stop had been given could not be paid for - the respondent having been on a frolic of its own.

The appellant also took the position, that, an amendment had been effected to the original contracts to introduce a clause which placed the obligation to pay for the projects on a third party, the Government of Zimbabwe; until such time that the third party gave a signal that it had allocated funds for payment, no payment was due to the appellant in terms of the contracts.

In any event, so the appellant continued, the respondent had been paid in full for the works that it performed.

PROCEEDINGS BEFORE THE HIGH COURT

On 16 July 2015, the respondent instituted summons action against the appellant based on the four contracts mentioned above. The respondent claimed payment of the sum of $3,292,277=90 together with interest on that amount at the rate of 19,5% per annum calculated from 1 November 2010 to date of payment. It also claimed collection commission.

The basis of the claim was that the respondent had provided professional consulting civil engineering services in respect of the first, second, third, and fourth construction projects for the appellant in fulfilment of all its contractual obligations. The respondent averred, that, following its issuance of invoices for settlement, the appellant failed or neglected to pay in breach of the contracts between the parties.

The appellant contested the action.

It refuted that the respondent fulfilled all its contractual obligations. The appellant asserted, that, it stopped the respondent from carrying out any further work on the project on 5 August 2005 before completion of the mandate.

As such, so the appellant contended, the respondent was not entitled to payment for any additional work performed after that date.

Regarding payment, the appellant relied on an addendum to the agreement which was signed by the parties and introduced clause 4.1 to it. According to the appellant, the clause in question regulated how the respondent was to be paid. It contained a suspensive condition which was not satisfied. For that reason, no further payment was due to the respondent.

In terms of clause 4:

“4. Fees Chargeable and Reimbursements

Notwithstanding the provisions in paragraph 17 (under the heading Fees and Expenses) of the Conditions of Engagement ZACE Forum 2 1999:

4.1 The parties herein agree that the client is a public institution, wholly funded in its operations by the Government of Zimbabwe and that it is wholly dependant on the national budget for its funding, which budget is announced once every year. It is therefore agreed that the Consultant will hold in abeyance all invoices until advised by the client that funds are now available. In this case, the client will act in good faith and advise the Consultant to submit invoices within 14 days of receiving funds. Thereafter the client shall settle invoices within 60 days of receipt from the Consultant.

If such accounts are then not paid within 60 days from date of invoice, interest may be charged at 1.2 times the prevailing bank overdraft rate available to the Consulting Engineer.”…,.

At the pre-trial conference of the parties before a judge, the appellant made an admission recorded in the Statement of Agreed Facts, later prepared and submitted to the trial court, as follows:

“7 It is also common cause that defendant paid the sum of US$84,827=17 of Project 1. The parties agree that, this was in full and final payment in respect of that project and it is no longer in contention save for…, only the interest amount that remains upaid.”…,.

Following the submission of a Statement of Agreed Facts, in terms of which the matter was referred to trial, only three (3) narrow issues were placed before the court a quo for determination. These are:

“(a) Whether or not the plaintiff had completed all the works as at the 5th of August 2005 when the defendant gave instruction to stop all work.

(b) If so, what is the quantum of fees due to the plaintiff.

(c) If not, what stage of work had plaintiff reached by the 5th of August 2005 and what quantum of fees is it entitled (to) for such work, if any.”

FINDINGS OF THE COURT A QUO

At the trial, each party led evidence from one witness. The respondent relied on the evidence of Engineer Wilfred Tamayi Vengesai to prove its case while the appellant brought in Engineer Innocent Masunungure to disprove it.

In assessing the credibility of the two witnesses, the court a quo found;

“It is Engineer Wilfred Tamayi Vengesai's evidence which accords with the documentary evidence. It accords also with the statement of agreed facts.

His testimony was clear and straight forward. It was not dented under cross-examination.

The same cannot be said of defendant's evidence. It went against the grain of documentary evidence.

The defendant's witness contradicted the Statement of Agreed Facts in fundamental respects. I also was not impressed with the demeanor of the defendant's witness. He was evasive under cross examination. It was clear to me that he was simply ducking and diving in a desperate endeavour to avoid the truth.

The net result is that I will accept the plaintiff's testimony wherever it conflicts with that of the defendant.”

The court a quo went on to find, that, the appellant had commissioned the respondent to design and produce drawings for use by contractors in erecting the structures so designed. It further found, that, by November 2004 the designs had been completed and forwarded to the appellant.

The court a quo based its finding in that regard on the fact, that, after completion of the contractual mandate, the respondent had proceeded to break down the designs into nine sub-contracts to allow for stage implementation of the works to suit priority and funding of the appellant.

In the court a quo's view, this could not have been done if the contractual mandate had, by then, not been fulfilled.

In addition, the court a quo applied the doctrine of fictional fulfilment to conclude that the appellant, having acted in bad faith in failing to invite the respondent to submit estimates of fees owed, and in not bidding for funding from the Government of Zimbabwe for an unreasonably long time, the suspensive condition in clause 4:1 had been fulfilled.

The court a quo then entered judgment in favour of the respondent as already stated.

PROCEEDINGS BEFORE THIS COURT

The appellant was aggrieved. It noted the present appeal on the following grounds:

1. The court a quo erred and misdirected itself in granting an order denominated in United States dollars when it was incompetent to do so.

2. The court a quo erred and misdirected itself in awarding the respondent interest on the sum of US$84,827=17 when such an issue was not among the issues which were submitted to the court a quo for determination by the parties.

3. The court a quo further erred in holding that the respondent had completed all its contractual obligations when the appellant instructed the respondent to stop work in circumstances where the evidence showed that the respondent had not completed all the work.

4. The court a quo erred in awarding the respondent's claim for an amount for the completion of the work in full, whereas, the evidence before it pointed to the fact that the work was incomplete as at the cut-off date.

5. It was an error of law on the part of the court a quo to apply the doctrine of fictional fulfilment against the appellant in circumstances where a third party (Government of Zimbabwe) was the one which had an obligation to fulfil the suspensive condition.

6. The High Court misdirected itself in ignoring that the respondent neither pleaded nor proved the fulfilment of the suspensive condition.

The grounds of appeal may be six but they are generally repetitive and speak to only two issues for determination in this appeal. They are:

(i) Whether the court a quo erred in entering judgment in favour of the respondent and ordering the appellant to pay interest; and

(ii) Whether the court a quo erred in granting judgment denominated in the United States dollars.

(a) Whether the court a quo erred in entering judgment in favour of the respondent

Counsel for the appellant submitted, that, the finding of the court a quo, that the respondent had completed all its contractual obligations at the time it was instructed to stop work cannot withstand scrutiny. In counsel's view, such a finding runs counter to documentary evidence on record which indicates the contrary.

To support that assertion, counsel for the appellant drew attention to correspondence exchanged between the parties which discussed the works performed by the respondent. The letters in question, so it was argued, tend to show, that, right up to 5 August 2005, the parties were still discussing work which had not been completed.

Per contra, counsel for the respondent submitted, in the main, that, the appellant's case at the trial, and on appeal, remains vexing in that while on one hand the appellant argues that the mandated work was not completed, on the other hand, it argues that payment is not yet due. This is by virtue of the suspensive condition in clause 4.1 reposing the duty to pay on the Government of Zimbabwe.

Counsel for the respondent drew attention to a letter dated 6 November 2004, written by the appellant's own architects, Maboreke Architects, as proof that the work of producing drawings had been completed. He also referred to another letter, dated 29 May 2015, to the Permanent Secretary in the Ministry of Higher & Tertiary Education, Science & Technology Development by the appellant's Vice Chancellor. The latter entreats the Ministry to assist with funds to settle the debt which had been demanded.

By virtue of their importance in the resolution of this appeal, I produce the letters hereunder.

On 6 November 2004, Maboreke Architects wrote to the appellant as follows:

“RE: MSU - PROPOSED CONTRACT FOR THE IMPLEMENTATION OF THE MASTER SITE SERVICES

Forwarded herewith is a set of drawings from the Civil Engineer depicting the proposed works in eight different contracts for the realisation of the Master Site Services for your approval.

We are in concurrence with the Civil Engineer that the development of the structure precedes the building programme in order that the buildings will be adequately serviced on completion.”

It was submitted, on behalf of the respondent, that, the contents of that letter suggest, that, as early as November 2004, work on the drawings had been completed. It is for that reason that the drawings had been forwarded to the architects who relayed them to the appellant.

On 29 May 2015, Professor N. M. Bhebe, the Vice Chancellor, wrote to the Ministry in the following:

“RE: OUTSTANDING FEES FOR GALAXY ENGINEERING CONSULTANCY SERVICES: MIDLANDS STATE UNIVERSITY

The following matter refers.

Following our telephone conversation, please find attached demand letters from Gill, Godlonton & Gerrans Legal Practitioners who are representing Galaxy Engineering.

The demands are arising from the non-payment of services provided for the development of Midlands State University Master Plan (Civil Engineering Works, preliminary designs), services which were rendered in September 2003. The total bill was ZWD33,114,907,800=.

As discussed, please kindly go through the letters and determine how far the Ministry had paid for the services rendered. By copy of this letter, Galaxy Engineering Consultancy are being advised, through their lawyers, that their claim has been submitted to our parent Ministry for actioning.”

In the respondent's view, the foregoing letter was a clear acceptance that work was performed fully and that payment was due.

Regarding the issue of the suspensive condition, counsel for the appellant submitted, that, it was an error on the part of the court a quo:

(i) Firstly, to invoke the doctrine of fictional fulfilment because it was not pleaded by the respondent.

(ii) Secondly, the doctrine does not apply in circumstances where the party accused of having deliberately prevented the fulfilment of the obligation had no such obligation in the first place.

This is so, it was submitted, because the obligation to pay lay with the Government of Zimbabwe.

To counter that argument, counsel for the respondent submitted, that, the court a quo was invited to relate to the doctrine by none other than the appellant itself.

This is so because, in its closing submissions, the appellant had, citing the authority of R.H. CHRISTIE, Business Law in Zimbabwe…, argued that clause 4.1 of the contract was a condition precedent or suspensive condition. It suspended the payment of fees due to the respondent until such time that the appellant was placed in funds for the project by the Government of Zimbabwe.

To that extent, according to the respondent's counsel, the court a quo was within its mandate to inquire into the issue. In doing so, the court a quo concluded, that, the appellant had deliberately frustrated the fulfilment of the condition precedent. For that reason, fictional fulfilment applied.

On the order for payment of interest on the sum of $84,827=17, it was submitted on behalf of the appellant, that, the question whether the respondent was entitled to claim interest on that sum was not one of the issues placed before the court a quo for determination.

Relying on the authority of Nzara v Kashumba N.O. & Ors SC18-18, counsel made the point, that, the function of the court is to determine only those disputes placed before it by the parties.

Again, counsel for the respondent was of a different view.

He pointed to a passage in the Statement of Agreed Facts, which I have already quoted above, placing the issue of that interest squarely within the ambit of what the court a quo was asked to determine.

Finally, on the relief granted in United States dollars, counsel for the appellant submitted that it was incumbent upon the court a quo, in terms of section 4(1)(d) of Statutory Instrument 33/19, SI33/19 to pronounce an order that does not conflict with that provision. Accordingly, so it was argued, the judgment should have sounded in the local currency.

While conceding the effect of section 4(1)(d) of S.I.33/19, counsel for the respondent sought to defend the judgment a quo on the basis, that, the United States dollars denominated judgment shall be converted on the day of execution.

ANALYSIS

What was before the court a quo were two mutually destructive positions of the disputants.

The respondent took a position, using documentary as well as viva voce evidence, that, at the time it was instructed to cease operation, it had completed the work. On the other hand, the appellant, again using documentary and viva voce evidence, took the position, that, the work had not been completed.

I have related to both the viva voce and documentary evidence which confronted the court a quo above.

The court a quo resolved the dispute on the basis of credibility of witnesses.

It found the appellant's witness to be evasive and unreliable. It embraced the evidence of the respondent's witness as being reliable and in sync with the documentary evidence.

On the letters I have reproduced above, the court a quo cannot be faulted for making those findings.

More importantly, neither the grounds of appeal relied upon by the appellant, nor its submissions on appeal, advert to the basis upon which an Appellate Court may interfere with factual and credibility findings of the lower court.

As stated in Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S)…,:

“The general rule of the law, as regards irrationality, is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied, that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic or of acceptable moral standards that no sensible person, who had applied his mind to the question to be decided, could have arrived at such a conclusion…,.”

On the issue of credibility of witnesses, again, it is trite that an Appellate Court will not lightly interfere with findings of fact based on the credibility of witnesses. This is so, because, the trial court is eminently better placed to assess credibility than an Appellate Court.

In my view, no foundation has been laid to allow this Court to interfere with the findings made a quo, that, at the time that the appellant gave instructions for cessation of work, the respondent had already completed its mandate.

In that regard, it was entitled to payment in full.

The issue of interest on the money paid by the appellant following its admission at the pre trial conference resolves itself upon reference to the Statement of Agreed Facts. I have quoted the part wherein the parties invited the court to determine interest.

In any event, a claim for interest on the whole amount claimed was pleaded and was prayed for. The appellant made a partial admission.

The court a quo was correct to grant interest on the sum of $84,827=17 which was paid without interest.

That then brings me to the question of fictional fulfilment which was given undue attention by counsel.

The way I understand it, the appellant seeks to be excused from liability on the basis that it inserted clause 4:1 in the contract through an addendum. The clause, quoted verbatim above, only recognises that the appellant is funded by a third party. It is not a novation or a substitution of the third party as a party to the contract.

Significantly, it does not absolve the appellant, as the contracting party, from liability.

It occurs to me, that, the mere fact that a creditor may agree to receive payment from a third party on behalf of a debtor does not absolve the debtor from liability to perform in terms of the agreement: see Dube v Mbokazi (15843/ 2017) [2018] ZAGPPHC 699 (28 September 2015).

The reason why that is so is pretty obvious.

It is because there is no privity of contract between the respondent and the Government which remained firmly outside the contract.

In that regard, whether the funding came from the Government or not paled. The appellant remained liable. It was its responsibility to lobby for funding and settle its debt. It cannot seriously argue that it is still awaiting funding - 16 years later.

I reject that argument.

Finally, there is the issue of currency.

I agree with counsel for the appellant, that, it was incompetent for the court a quo to grant judgment sounding in United States dollars. It is common cause that the liability of the appellant arose several years prior to 22 February 2019.

In terms of section 4(1)(d) of SI33/19 all assets and liabilities due immediately before that date, and in United States dollars, were to be paid in the local currency at the rate of 1:1.

This court has already interpreted that provision in the case of Zambezi Gas Zimbabwe (Pvt) Ltd v N.R. Barber (Pvt) Ltd & Anor SC03-20.

In that case, the court held, that, contractual obligations valued in United States dollars, immediately before the effective date were to be paid in RTGS dollars at parity or at a one-to-one rate.

DISPOSITION

Accordingly, there is merit in the first ground of appeal which is hereby upheld. The remaining grounds are completely devoid of merit and cannot succeed.

Regarding the issue of costs, a prayer was made, on behalf of the respondent, for costs to be awarded at an adverse scale. In submissions made before the court, that prayer was not motivated.

In any event, the appellant has been partially successful.

Accordingly, this is a case in which each party should bear its own costs.

In the result, it be and is hereby ordered as follows:

1. The appeal partially succeeds with each party to bear its own costs.

2. The judgment of the court a quo is amended by the deletion of paragraphs 1 and 2 and their substitution with the following:

“1. Interest on the sum of RTGS$84,827=17 at the rate of 19,5% per annum from 1 November 2010 to the date that sum was paid.

2. RTGS$3,207,450=68 together with interest thereon at the rate of 19,5% per annum from 1 November 2010 to date of payment.”

View Appeal
SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD
Ruled By: GARWE JA, GOWORA JA and UCHENA JA

This is an appeal and cross-appeal against parts of the judgment of the High Court dated 4 September 2014 granting a decree of divorce and ancillary relief for and against the appellant (the plaintiff in the court a quo and the appellant in this appeal) and the cross-appellant (the defendant ...

FACTUAL BACKGROUND

The facts of the case can be summarised as follows:

On 1 September 1990, the appellant and the first respondent were married in terms of the then Marriages Act [Chapter 37].

During the subsistence of the marriage, the parties were blessed with three children, namely, Murray John Coumbis, who was already an adult at the commencement of divorce proceedings, and the twins, Julian Ronald Coumbis and Anton Phillip Coumbis. Julian and Anton were minors when divorce proceedings were instituted.

They are now adults, but, Julian remains a perpetual minor on account of his mental incapacity.

On 5 August 2010, the appellant instituted divorce proceedings against the first respondent. As Julian and Anton were minors, the appellant claimed their custody and maintenance. She also claimed personal maintenance and a share of the assets of the parties.

The appellant also claimed €10,400 from the respondent which she had advanced as a loan to Stir Crazy (Pvt) Ltd, a family business. She contended that the money was part of her inheritance. She claimed to have loaned it to the first respondent through Stir Crazy (Pvt) Ltd. She claimed the money from him alleging that the aforementioned company was an alter ego of the first respondent.

The first respondent opposed the appellant's claims and made a claim in reconvention wherein he claimed the custody of the minor children and their maintenance. He contested the appellant's claim for personal maintenance and matrimonial property. He alleged that some of the properties claimed by the appellant did not form part of their matrimonial estate.

The matter proceeded to a joint pre-trial conference where the following issues were identified and referred to trial:

“(a) The custody of Julian and Anton;

(b) What amount of maintenance was to be paid to the plaintiff if custody is awarded to her;

(c) Whether the plaintiff could be awarded the right to reside in the matrimonial home until both children became self-supporting;

(d) Whether the defendant was obliged to pay personal maintenance to the plaintiff;

(e) Which properties constituted the matrimonial estate;

(f) What appropriate order the High Court was supposed to make for the sharing of property.”

PROCEEDINGS IN THE HIGH COURT

When the trial commenced, Julian and Anton were no longer minors. However, the parties agreed that Julian was to be treated as a perpetual minor due to his mental incapacity.

The parties claim for custody and maintenance, therefore, only related to Julian.

The parties adduced a lot of documentary evidence to support their respective claims.

During examination-in-chief, the appellant admitted that she had a broken relationship with Julian. She admitted that she had exchanged nasty emails with him. The appellant also admitted to smoking marijuana. The fact that she smokes marijuana was confirmed by Dr Chibanda who pointed out its adverse effect on her health and especially on her recovery from temporal lobe epilepsy.

After hearing the evidence, the judge a quo interviewed Julian in his chambers.

The court a quo found that Julian was closer to the first respondent and took into consideration the fact that the two had been staying together after the parties separation.

It also found, that, the appellant needed to start a new life independent from the first respondent but still needed financial assistance to cushion her from the effects of the divorce.

The court a quo found that the first respondent was dishonest and not credible in respect of evidence relating to the matrimonial estate.

The order granted by the court a quo, quoted verbatim, reads as follows:

“Accordingly, it is ordered as follows:

1. A decree of divorce be and is hereby granted.

2. Custody of the perpetual minor child, Julian Ronald Coumbis, born on 3 July 1994, be and is hereby awarded to the defendant.

3. The plaintiff be and is hereby granted reasonable access rights to the said perpetual minor child which shall be exercised as follows:

3.1 She shall have the right to stay with the said perpetual minor child on alternate weekends.

3.2 She shall have the perpetual minor child on any other special occasions, including, but not limited to, each alternate Easter holidays and Christmas holidays.

4. The defendant shall solely be responsible for the upkeep of the said perpetual minor child.

5. The defendant shall pay maintenance in respect of the plaintiff in the sum of US$2,000 per month, as per the order granted by the Magistrate's Court, for a period of six (6) months from the date of granting of this order inclusive of the month of September 2014.

5.1 Payments shall be made directly into the plaintiff's Bank Account whose details shall be provided forthwith to the defendant by the plaintiff.

6. The plaintiff is awarded as her sole and exclusive property all household furniture, contents and effects, inclusive of all her personal items and jewellery, at the matrimonial house, No.6 Northwood Rise, Mt Pleasant Harare, excluding the TV set, dinning suite, and lounge suite which are awarded to the defendant.

7. The defendant shall transfer into the plaintiff's name a motor vehicle, Nissan Navara Registration Number ABD 6847, presently being used by the plaintiff, at his sole cost, within thirty (30) days of the grant of this order.

8. The defendant is awarded, as his sole and exclusive property, immovable property known as No.6 Northwood Rise, Mt Pleasant, Harare currently registered in the names of the plaintiff and the defendant.

8.1 The defendant shall transfer, against payment by him of all transfer costs, the said property into his names and the plaintiff shall sign all relevant papers to effect such transfer within 30 days of being requested, failure of which the Sheriff shall sign all the documents.

8.2 The defendant shall be solely responsible for any encumberances, mortgages, or other obligations duly existing or registered by law over the said property.

9. The defendant shall transfer all shares of OPIUM INVESTMENTS (PVT) LTD, a property-owning company whose sole asset is an immovable property known as No.13 Bates Street, Milton Park, Harare to the plaintiff within thirty (30) days of the grant of this order at his cost.

9.1 The defendant shall be solely responsible for any encumberancies or obligations duly existing or duly registered by law over the said property.

9.2 The defendant shall sign all the relevant documents to effect such transfer failure of which the Sheriff is authorised to sign all such documents.

10. The plaintiff is awarded, as her sole and exclusive property, an immovable property known as No.6 Rosefriars, Avondale, Harare.

10.1 The plaintiff shall transfer, against payment by her of all transfer costs, the rights, title, and interest in the said property, No.6 Rosefriars, Avondale Harare.

10.2 The defendant, shall, within thirty (30) days of being requested to, sign all relevant documents to effect such transfer, failure of which the Sheriff is authorized to sign all such documents.

11. The plaintiff's claim for cash, in the sum of US$100,000, be and is hereby dismissed.

12. Absolution from the instance be and is hereby granted in respect of the distribution of the following assets:

(a) 94 Matumi Sands Lonehill (Pty) Ltd.

(b) 112 Matumi Sands, Lonehill (Pty) Ltd.

(c) 182 Shingara (Pty) Ltd.

(f) Theright Investments (Pvt) Ltd.

(g) Stir Crazy (Pvt) Ltd.

(h) Incavat Enterprises (Pvt) Ltd.

(i) Telehic Investments (Pvt) Ltd.

(j) Natsbury Trading (Pvt) Ltd.

(k) Plaintiff's claim of £10,400.

13. The defendant shall bear the costs of suit.”

Aggrieved by parts of the court a quo's decision, the appellant and the first respondent noted the present appeal and cross-appeal respectively.

GROUNDS OF APPEAL

The appeal involved an appeal and a cross-appeal, but, the cross appeal was withdrawn during the hearing of the appeal.

The appellant's grounds of appeal attack the court a quo's decision on the following issues:

1. Custody and maintenance of Julian, the perpetual minor;

2. Her claim for inheritance money loaned to a company from the respondent;

3. The propriety or otherwise of the decision handed down by the court a quo concerning the distribution of the assets of the parties;

4. Her claim for a lump sum maintenance payment in the sum of US$100,000;

5. The granting of absolution from the instance mero motu by the court a quo at the end of the defence case; and

6. Whether or not the respondent should be heard in view of his contemptuous conduct against proceedings in this Court, the court a quo, and its orders.

APPLICATION BY THE APPELLANT

In September 2018, the appellant made an application to adduce further evidence to prove that the respondent had, pending the determination of the appeal, interfered with and defied the High Court's orders.

We, in terms of section 22(1)(b)(ii) and (v) of the Supreme Court Act [Chapter 7:13], ordered that the matter be remitted to MAWADZE J (the trial judge), for him to conduct an enquiry into the appellant's allegations and submit a report to us.

On 3 April 2019, after holding an enquiry, in compliance with our order, MAWADZE J submitted to us his report in which he made the following factual findings:

FINDINGS OF FACT MADE BY MAWADZE J

“1(a) The perpetual minor, Julian Ronald Coumbis (born on 3 July 1994), was removed from Zimbabwe by the respondent and taken to South Africa in 2013 well before the judgment of the court on 4 September 2014.

(b) The respondent has not placed any credible evidence before this Court for such conduct.

(c) Julian remains in South Africa to date.

(d) The appellant, Philippa, has not been able to exercise any access rights in respect of Julian (the perpetual minor) as awarded to her in terms of para 3 of this Court's order.

2(a) The respondent sold two immovable properties in South Africa, being No.94 Matumi Sands and No.112 Matumi Sands and transferred them to third parties.

(b) The only available immovable property in South Africa is No.182 Shingara against which the appellant successfully placed a caveat.

3. The respondent removed all movable household goods which had been awarded to the appellant, Philippa, in terms of para 6 of this Court's order from No.6 Northwood Rise, Mt Pleasant, Harare and took them to South Africa without the appellant's knowledge or consent.

The respondent has not explained his conduct.

4. The motor vehicle, a Nissan Navara, Registration Number ABD 6847, awarded to the appellant, Philippa, in terms of para 7 of this Court's order, was taken by the Vehicle Theft Squad as it was deemed to be subject to criminal investigations for which the respondent is allegedly accountable.

5. The respondent has not done anything to remove the encumbrances on immovable properties either awarded to him or the appellant as per this Court's order.

6. After the order of this Court, the respondent transferred about USD$2.8 million from Stir Crazy (Pvt) Ltd to Incavat Enterprises (Pvt) Ltd.

7. The respondent has not complied with the maintenance order granted in favour of the appellant, Phillipa, in terms of para 5 of this Court's order and has not paid a single cent.

8. Lastly, the following assets are still available;

(a) No.6 Northwood Rise, Mt Pleasant, Harare, Zimbabwe but is still encumbered.

(b) Belgravia House, Harare but is still encumbered.

(c) No.6 Rosefrias, Avondale, Harare, Zimbabwe.

(d) No.13 Bates Street, Milton Park, Harare but is still encumbered.

(e) No.182 Shingara in South Africa.”

APPELLANT'S SUBMISSIONS ON APPEAL

In submissions before this Court, counsel for the appellant argued, that, the report to the Supreme Court, following due inquiry by MAWADZE J, dated 3 April 2019, confirmed that the first respondent was in contempt of the court a quo's order. He further submitted that such disobedience went to the root of the matter.

Counsel for the appellant further submitted, that, the court a quo's decision, on custody, was influenced by the first respondent's alienation of Julian against the appellant and that the decision does not promote a bond between the appellant and the perpetual minor.

Counsel for the appellant submitted, that, from 4 September 2014 to the last date of the hearing, the appellant had not enjoyed access to the perpetual minor because he had been removed from the jurisdiction of this court. He submitted, that, it was in the best interests of the perpetual minor that he be in the custody of the appellant.

In respect of the court a quo granting the first respondent absolution from the instance mero motu, counsel for the appellant submitted, that, the court a quo erred in view of the fact that the first respondent had made offers which were equivalent to an admission. He also submitted, that, the first respondent had given evidence of his shareholding in some of the companies which could have enabled the court a quo to distribute those shares between the parties.

Counsel for the appellant submitted, that, the distribution of the matrimonial assets was limited to three properties.

He contended that evidence led before the court a quo on these assets established that the assets belonged to companies owned by the parties. He further submitted, that, the properties had been encumbered by the first respondent, and, consequently, the appellant was disabled from acquiring any title in them in spite of their having been awarded to her by the court a quo.

In relation to the appellant's inheritance funds loaned to Stir Crazy (Pvt) Ltd, counsel for the appellant argued, that, the latter, being the respondent's alter ego, they had to be returned to the appellant by the first respondent.

He prayed that the appeal succeeds with costs.

THE FIRST RESPONDENT'S SUBMISSIONS ON APPEAL

Counsel for the first respondent submitted, that, even though the first respondent had breached the order of the court a quo, he had a right to be heard in terms of section 69 of the Constitution of Zimbabwe 2013 (the Constitution).

Counsel for the first respondent argued, that, it was in the best interest of the perpetual minor that the first respondent be heard.

He contended, that, even if it was found that the first respondent had no right of audience before this court, there were no documents relating to the companies proving that the court a quo was handicapped in making its determination.

Regarding the issue of the court a quo granting absolution from the instance mero motu, counsel for the first respondent argued, that, the court a quo came to that conclusion because there was no evidence on the ownership of the companies as the appellant failed to present it to the court a quo.

In concluding his submissions, counsel for the first respondent submitted, that, the first respondent was withdrawing his cross-appeal.

APPELLANT'S RESPONSE

In response, counsel for the appellant contended, that, the enjoyment of the constitutional right to be heard comes with an obligation to obey court orders. He argued, that, the first respondent is in court to protect something yet he disobeys court orders.

Counsel further argued, that, the court has inherent jurisdiction in terms of section 176 of the Constitution to determine who can or cannot be heard.

He submitted, that, the perpetual minor's best interests remained with the court as the first respondent's contempt dis-entitles him from saying anything that benefits him.

Counsel for the appellant submitted that an Appellate Court does not only deal with the direct dictates of the judgment but also deals with its effects.

FURTHER SUBMISSIONS

By letter dated 31 January 2020, Musekiwa and Associates, Legal Practitioners for Doves Funeral Assurance (Pvt) Ltd, informed the Registrar of this Court that its client had bought a half share of No.6 Northwood Rise, Mt Pleasant, Harare (the matrimonial home) from a sale in execution conducted by the Sheriff and that that half share of the property had been transferred to their client on 20 February 2019.

As a result of this information, which had not been placed before us when we heard the appeal on 23 January 2020, parties were invited to appear before us on 24 June 2020 to give them an opportunity to address us on this issue. At that hearing we granted the following order:

“IT IS ORDERED BY CONSENT THAT:

1. Doves Funeral Assurance be and is hereby joined as a party to these proceedings as 2nd Respondent with Ronald John Coumbis becoming the 1st Respondent.

2. Mr Musekiwa, for Doves Funeral Assurance, is to avail documentation confirming the transfer of the half share in the property to itself and file heads of argument in connection therewith by the 30th June 2020 and serve the same immediately on the appellant and first respondent's legal practitioners.

3. Advocate Mpofu is to file additional heads of argument in response to the heads of argument filed by Doves Funeral Assurance by Friday 3rd July 2020.

4. Mr Ndlovu, for the 1st Respondent, Ronald John Coumbis, is to file his additional heads of argument, if any, by Wednesday 8 July 2020.”

In his additional heads of argument, counsel for the appellant submitted, that, the matrimonial home, which was jointly owned by the appellant and the first respondent, be awarded to the appellant who will thereafter institute proceedings in the High Court to claim back the half share sold to Doves Funeral Assurance (Pvt) Ltd.

He submitted, that, Doves Funeral Assurance (Pvt) Ltd took a risk when it bought the half share without the consent of the appellant.

The first respondent, whose conduct caused the sale of his half share to Doves Funeral Assurance (Pvt) Ltd, did not file additional heads.

In their heads, Musekiwa & Associates, for Doves Funeral Assurance (Pvt) Ltd, submitted, that, it bought the respondent's half share through the Sheriff's sale in execution after due notice had been given to the appellant. They submitted, that, the half share is no longer part of the appellant and first respondent's matrimonial assets and is no longer available for distribution to either of them.

ISSUES FOR DETERMINATION BY THIS COURT

The appellant raised several grounds of appeal, but, the material issues for determination are as follows:

1. Whether or not the first respondent should be heard in view of his contempt of proceedings of the court a quo and its orders and proceedings before this Court.

2. Whether or not the court a quo erred in awarding custody of Julian to the first respondent.

3. Whether or not the court a quo erred in granting absolution from the instance against part of the appellant's claims.

4. Whether or not the appellant is entitled to claim her monetary inheritance from the first respondent.

5. Whether or not the court a quo erred in distributing the immovable property without taking into account the value of the properties.

6. Whether or not the distribution of the immovable property was fair.

7. Whether or not the appellant's claim for a lump sum maintenance payment in the sum of US$100,000 was correctly dismissed....,.

Whether or not the appellant is entitled to claim her inheritance money from the first respondent

The appellant contends that she advanced a loan of €10,400, which was part of her inheritance, to the first respondent through a company called Stir Crazy (Pvt) Ltd.

She claimed the money from the first respondent alleging that the aforementioned company was his alter ego.

The first respondent disputed that he borrowed the money in his personal capacity and argued that the loan was advanced to Stir Crazy (Pvt) Ltd hence the appellant cannot seek to recover this money pursuant to section 7(1)(a) of the Matrimonial Causes Act but has to claim it as a debt owed by Stir Crazy (Pvt) Ltd.

The appellant did not dispute this clear position of the law.

In his submissions before us, counsel for the appellant did not persist with this ground of appeal. He in fact submitted, that, the value of the claim was not worth pursuing as it has been affected by this Court's decision in Zambezi Gas Limited v NR Barber (Pvt) Ltd & Another SC03-20.

The evidence on record does not prove that Stir Crazy (Pvt) Ltd was an alter ego of the first respondent.

In evidence, the appellant claimed that she used to hold 49 percent shares in that company.

It is trite, that, a company, duly incorporated, is a separate legal entity endowed with its own legal personality. The acts of a company are attributable to it, and not to any one else, as a company is a separate legal persona with a separate existence from its shareholders. It can sue or be sued in its own right: see Salomon v Salomon & Co Ltd [1897] AC 22.

While there are instances in which the court may pierce or lift the corporate veil, as held in Van Niekerk v Van Niekerk & Ors 1999 (1) ZLR 421 (S)…, I do not believe that a case has been made for such an approach as the appellant did not give evidence in that regard.

The appellant should claim her money from Stir Crazy (Pvt) Ltd as it is a distinct and separate legal entity which can sue and be sued in its own right.

The court a quo therefore correctly granted absolution from the instance against the appellant's claim on this issue.

HB32-15 : ANDREW NDLOVU and CHIHWA TOURS vs THEMBINKOSI SIBINDI
Ruled By: MUTEMA J and MOYO J

By the time the appeal was heard, on 2 February 2015, the respondent had, on 15 January 2015, filed a document headed “CONSENT TO JUDGMENT” wherein he indicated that he was consenting to the order sought in the appeal.

We allowed the appeal in terms of the consent and indicated that for the benefit of the trial magistrate, as well as other judicial officers who may be in the same predicament, we felt constrained to do a judgment write up.

This is it.

This is an appeal from a decision of the Magistrates Court sitting at Victoria Falls. The first appellant was a driver employed by the second appellant. The respondent is a former mayor of the resort town and also a former Member of Parliament.

On 2 October 2011, the first appellant was in Bulawayo driving the second appellant's IVECO vehicle registration number ABS 4838. The respondent averred, that, he telephonically contracted with the first appellant to pull his trailer with tins of paint and other hardware goods from Bulawayo to Victoria Falls for a fee to be paid at destination.

Along the way, so the argument went, the first appellant negligently caused an accident which resulted in damage to some of the respondent's consigned goods. Goods valued at US$2,411=90 were damaged.

In order to bring his claim within the monetary jurisdiction of the Magistrates Court, the respondent abandoned his claim to $411=90 and sued the appellants jointly and severally, one paying the other to be absolved for $2,000,00, interest at the prescribed rate effective from date of issue of summons, and costs of suit.

The second appellant was roped into the suit on the basis of alleged vicarious liability.

Both appellants strenuously denied liability.

The appellants denied, that, the first appellant was negligent and that his negligence caused the accident and that the second appellant was vicariously liable.

They also both denied that the respondent contracted with the first appellant for the carriage of the goods, let alone for a fee, since such was beyond the first appellant's mandate.

They averred, that, the respondent used his political muscle and forced the first appellant to pull his trailer at no cost thereby taking the risk; for the second appellant is not a licenced carrier, not insured, and not authorized to carry goods.

In her judgment, in which she found for the respondent, the trial magistrate, in a somewhat Wednesday decision, reasoned, in pertinent part, thus:

“Concerning the issue of negligence that was not expressly been (sic) proven however there are references to same (sic) type of negligence being there. In terms of how the accident occurred in addition to the realization of it (sic). However, to my mind, even if some negligence had been there. It doesn't then allow that the liability falls away.

Since vicarious liability covers even negligent actions. Mungofa v Muderede and Others 2003.

Defence counsel was dwelling on the fact, that, the contract was flawed. What has come out is that there was an agreement for delivery of goods after which payment would be made. So that was the verbal contract.

In this instance the first defendant started (sic) that as drivers they regularly carry goods for passengers on the agreement that the people would pay later. This was an arrangement he said the manager knew about. He added that after receiving payment he would take the money to the company office. So in saying this first defendant is saying he had a verbal contract with plaintiff.

A director at Chihwa tours testified saying he did not know goods were being carried without passengers.

Now, in coming up with a judgment. One has (sic) to look at the purpose of the doctrine of various (sic) liability Gwalinga v Jaredzo 2001 which includes that members of the public. Be protected from activities does (sic) by employees. Furthermore the employer is in a far better position to compensate the injured party than the employee. Looking at the purposes one has to apply it (sic) to this case. That Chihwa tours is better able to compensate customers for losses than the driver.

I now go into the operation of the doctrine in relation to this case which is 2 pronged. First that the employee is a servant not an independent contractor. In this instance the first defendant was a servant not an independent contract (sic). Since he is a driver who is subject to the employers control and direction. Secondly was he acting within the scope of his duties? His duties include driving the company vehicle to ferry passengers and their goods to their destination. Whether there was a deviation from duty Nott v ZANU PF 1983.

This is what he was doing on that day. When he carried passengers for Chihwa tours to Victoria Falls. Using the company's vehicle. So at his reason (sic) for travelling to Victoria Falls was for work. To further clarify if he was acting in the course of his employment. One has to ask if first defendant was on a frolic of his own. During proceedings no one alleged that this trip was of accused (sic) own making. It was agreed he was sent on a trip for work. So I find that he was within the course of his employment.

Whether he exercised his duties well or not as to the satisfaction of his employer is something else. But for the purposes of this case. The second part of the 2 fold doctrine of the operation of this doctrine has been satisfied. So I find that defendant carried goods for plaintiff. During his duty as an employee whilst acting in the course of his employment as envisaged in Bande v Boregone 2003.

Concerning the qualification (sic) of plaintiff's loss plaintiff is claiming for all drivers and plaintiff's employee (sic) as defence counsel rightly points out agree that some tins of paint that were recovered (sic). Which were at least 10 in number. So there is a need for plaintiff compensation to be lessened in that respect.

So I award judgment for the plaintiff less ten tins of paint of 5 litre (sic) which first defendant and plaintiff's witness approximated were recovered. Each party to bear its own costs.”

Before delving into the gist of the legal issues that emanate from the facts and the judgment, I must utter some strictures regarding the several grammatical and punctuation errors exitant in the portion of the judgment quoted above. This explains why I was constrained to quote it in extenso.

It is not known if these errors should be ascribed to the trial magistrate or the typist, or both, but, the bottom line is that the trial magistrate should shoulder the blame for obvious reasons - it is her judgment.

It is sad to remark, that, in fact, this is her style of judgment writing as gleaned from appeals and reviews emanating from her one-person station.

Now, to the pith of the appeal and the law.

The following legal issues emanate from the court a quo's judgment:

1. Propriety of citing the second appellant.

2. Vicarious liability of the second appellant.

3. Claim founded on lex aquilia but liability founded on contract.

4. The relief that was awarded.

I would deal with the above issues seriatim....,.

3. CLAIM FOUNDED ON LEX AQUILIA BUT LIABILITY FOUNDED ON CONTRACT

The respondent sued the appellants in delict based on alleged negligence.

The court a quo correctly found, on the facts, that negligence was not proven.

Instead of simply dismissing the claim on that score, the trial magistrate, from some incomprehensible remote source, replete with Wednesday reasoning, found that the respondent's claim must succeed on the basis of contract.

Who then were the contracting parties?

The respondent could not sue both appellants. He had to choose one, and, if that one were the first appellant, the respondent could not impute duty of care upon the second appellant. If the respondent chose the second appellant, he could not sue the first appellant on account of the maxim qui facit per alium facit per se (he who acts through another does the act himself).

This is a fundamental maxim of the Law of Agency.

There is no evidence that the first appellant (who would be the agent) was authorized by the second appellant (the principal) to contract with the respondent so as to ground invocation of the above maxim.

This legal principle escaped the trial magistrate's mind.

It is difficult to comprehend how a claim purportedly based on negligence by an employee, which negligence was found not proven, would legally metamorphose itself from delictual to contractual and still have the same vicarious liability attaching to a party who neither contracted with the respondent nor authorized the contract.

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Debt re: Contractual and Judgment Debt iro Approach, Proof of Claim, Execution, Revalorization and Civil Imprisonment

SC03-20 : ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED vs N.R. BARBER (PRIVATE) LIMITED and THE SHERIFF FOR ZIMBABWE Ruled By: MALABA CJ, MAVANGIRA JA and MATHONSI JA

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED Ruled By: MUZENDA J

Appealed SC04-20 : NICKOLAS VAN HOOGSTRATEN vs TAPIWA NELOMWE Ruled By: GARWE JA, MAVANGIRA JA and MATHONSI JA

View Appeal HH444-18 : TAPIWA NALOMWE vs NICHOLAS VAN HOOGSTRATEN Ruled By: ZHOU J

SC07-20 : FARAI BWATIKONA ZIZHOU vs THE TAXING OFFICER and RITA MARQUE MBATHA Ruled By: MAKARAU JA

Appealed SC12-20 : ZIMASCO (PVT) LTD vs CASPER TSVANGIRAI and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS BULAWAYO Ruled By: GARWE JA, HLATSHWAYO JA and GUVAVA JA

View Appeal HB16-14 : CASPER TSVANGIRAI vs ZIMASCO (PVT) LTD and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS, BULAWAYO Ruled By: MUTEMA J

Appealed SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

View Appeal HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE Ruled By: MAFUSIRE J

View Appeal SC47-20 : ROBSON MAKONI vs CBZ LIMITED Ruled By: GWAUNZA DCJ, GUVAVA JA and MAKONI JA

View Appeal HB179-18 : YUSUF GAIBIE and MAHMOUD GAIBIE vs ALEXANDER CASTANHEIRA and RACHEL CASTANHEIRA Ruled By: MAKONESE J

HH69-10 : COTTON COMPANY OF ZIMBABWE LIMITED vs MOBIL OIL ZIMBABWE (PVT) LTD AND TOTAL ZIMBABWE (PVT) LTD Ruled By: MAKARAU JP

Appealed SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

View Appeal HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL Ruled By: MUZENDA J

Appealed SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

View Appeal HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA Ruled By: MUZOFA J

HH454-18 : YAKUB MAHOMED vs JOHN BREDENKAMP Ruled By: CHIKOWERO J

HH604-18 : PUWAYI CHIUTSI and ELLIOT RODGERS vs SHERIFF OF HIGH COURT and ELLIOT RODGERS and REGISTRAR OF DEEDS and BARIADIE INVESTMENTS PL and MC DUFF MADEGA N.O. and PUWAYI CHIUTSI Ruled By: MATHONSI J

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE Ruled By: PATEL J

HH755-15 : CHIKUDZA MANGWENDE vs LIBERTY MACHODO Ruled By: UCHENA J and MWAYERA J

HH95-10 : TIISO HOLDINGS (PTY) LIMITED vs ZIMBABWE IRON & STEEL COMPANY LIMITED Ruled By: PATEL J

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD Ruled By: MATHONSI J

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

HH44-09 : BLESSMOE CHANAKIRA and AUXILIA DANAYI MYNYEZA vs MAI KAI REAL ESTATE DEVELOPMENT TRUST and BERNARD MUTANGA Ruled By: BERE J

SC40-15 : INDIUM INVESTMENTS (PVT) LTD vs KINGSHAVEN (PVT) LTD and DANIEL SHUMBA and LINDA SHUMBA Ruled By: CHIDYAUSIKU CJ, GWAUNZA JA, GOWORA JA, HLATSHWAYO JA and MAVANGIRA AJA

Appealed HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS Ruled By: KAMOCHA J

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA Ruled By: MAKARAU JP

HH90-10 : LOCAL AUTHORITIES PENSION FUND vs F & R TRAVEL TOURS AND CAR SALES (PVT) LTD and FREEJOY CHIGWIDA and RAPHAEL MAKWARA Ruled By: MAKARAU JP

HH164-10 : KENNETH PATRICK McCOSH vs PIONEER CORPORATION AFRICA LIMITED Ruled By: KUDYA J

HH688-14 : GERALD CHIWESHE and SAMEER KHAN and BRUCE THOMAS vs AIR ZIMBABWE HOLDINGS (PVT) LTD Ruled By: MTSHIYA J

HH224-22 : MUTSA DENHERE and DEMMUSK ENTERPRISES (PVT) LTD vs FAENSA FRISCO LIMITED Ruled By: CHIRAWU-MUGOMBA J

Appealed SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

View Appeal HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA Ruled By: CHIGUMBA J

Appealed HH287-20 : PENELOPE STONE and RICHARD BEATTIE t/a THE STONE/BEATTIE STUDIO vs CENTRAL AFRICAN BUILDING SOCIETY and RESERVE BANK OF ZIMBABWE and MINISTER OF FINANCE & ECONOMIC DEVELOPMENT Ruled By: ZHOU J

Appealed SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

View Appeal HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: ZISENGWE J

Appealed SC87-21 : RIO ZIM (PVT) LIMITED vs TRUST BANK CORPORATION LIMITED (In Liquidation) Ruled By: MAKARAU JA, HLATSHWAYO JA and UCHENA JA

View Appeal HH534-18 : RIOZIM (PVT) LTD vs TRUST BANK CORPORATION LTD (IN LIQUIDATION) Ruled By: KWENDA J

SC89-21 : KENNEDY NGIRAZI and NAN JIANG MINE (PVT) LTD vs EMMANUEL RENSBURG and MEGAMANIA AUCTIONEERS and SHERIFF OF THE HIGH COURT N.O. Ruled By: BHUNU JA, MATHONSI JA and CHIWESHE JA

SC91-21 : ELPHAS MAPHISA vs CITY OF BULAWAYO Ruled By: GUVAVA JA, UCHENA JA and CHITAKUNYE AJA

Appealed SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

View Appeal HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST Ruled By: ZHOU J

SC102-21 : DOVES FUNERAL ASSURANCE (PVT) LTD vs FERNABY INVESTMENTS (PVT) LTD and QUECOM ENGINEERING (PVT) LTD and DENNIS NGORIMA and STANDARD CHARTERED BANK LTD and HOMELAND REAL ESTATE and THE SHERIFF Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE JA

SC107-21 : METALLON GOLD ZIMBABWE (PVT) LTD and OTHERS vs SHATIRWA INVESTMENTS (PVT) LTD and ASSOCIATED MINE WORKERS UNION OF ZIMBABWE and MASTER OF THE HIGH COURT and REGISTRAR OF COMPANIES Ruled By: MALABA CJ, BHUNU JA and CHIWESHE AJA

SC108-21 : VALENTINE MUSHAYAKURARA vs ZIMBABWE LEAF TOBACCO COMPANY (PRIVATE) LIMITED Ruled By: MALABA CJ, UCHENA JA and CHIWESHE AJA

Appealed SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

View Appeal HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY Ruled By: MUREMBA J

SC127-21 : MIDLANDS STATE UNIVERSITY vs GALAXY ENGINEERING DESIGN CONSULTANTS (PRIVATE) LIMITED Ruled By: GWAUNZA DCJ, BHUNU JA and MATHONSI JA

View Appeal SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD Ruled By: GARWE JA, GOWORA JA and UCHENA JA

HB32-15 : ANDREW NDLOVU and CHIHWA TOURS vs THEMBINKOSI SIBINDI Ruled By: MUTEMA J and MOYO J

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SC03-20 : ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED vs N.R. BARBER (PRIVATE) LIMITED and THE SHERIFF FOR ZIMBABWE
Ruled By: MALABA CJ, MAVANGIRA JA and MATHONSI JA

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

Appealed
SC04-20 : NICKOLAS VAN HOOGSTRATEN vs TAPIWA NELOMWE
Ruled By: GARWE JA, MAVANGIRA JA and MATHONSI JA

View Appeal
HH444-18 : TAPIWA NALOMWE vs NICHOLAS VAN HOOGSTRATEN
Ruled By: ZHOU J

SC07-20 : FARAI BWATIKONA ZIZHOU vs THE TAXING OFFICER and RITA MARQUE MBATHA
Ruled By: MAKARAU JA

Appealed
SC12-20 : ZIMASCO (PVT) LTD vs CASPER TSVANGIRAI and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS BULAWAYO
Ruled By: GARWE JA, HLATSHWAYO JA and GUVAVA JA

View Appeal
HB16-14 : CASPER TSVANGIRAI vs ZIMASCO (PVT) LTD and BAOBAB REAL ESTATE and THE REGISTRAR OF DEEDS, BULAWAYO
Ruled By: MUTEMA J

Appealed
SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED
Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

View Appeal
HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE
Ruled By: MAFUSIRE J

View Appeal
SC47-20 : ROBSON MAKONI vs CBZ LIMITED
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAKONI JA

View Appeal
HB179-18 : YUSUF GAIBIE and MAHMOUD GAIBIE vs ALEXANDER CASTANHEIRA and RACHEL CASTANHEIRA
Ruled By: MAKONESE J

HH69-10 : COTTON COMPANY OF ZIMBABWE LIMITED vs MOBIL OIL ZIMBABWE (PVT) LTD AND TOTAL ZIMBABWE (PVT) LTD
Ruled By: MAKARAU JP

Appealed
SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC
Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

View Appeal
HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL
Ruled By: MUZENDA J

Appealed
SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA
Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

View Appeal
HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA
Ruled By: MUZOFA J

HH454-18 : YAKUB MAHOMED vs JOHN BREDENKAMP
Ruled By: CHIKOWERO J

HH604-18 : PUWAYI CHIUTSI and ELLIOT RODGERS vs SHERIFF OF HIGH COURT and ELLIOT RODGERS and REGISTRAR OF DEEDS and BARIADIE INVESTMENTS PL and MC DUFF MADEGA N.O. and PUWAYI CHIUTSI
Ruled By: MATHONSI J

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE
Ruled By: PATEL J

HH755-15 : CHIKUDZA MANGWENDE vs LIBERTY MACHODO
Ruled By: UCHENA J and MWAYERA J

HH95-10 : TIISO HOLDINGS (PTY) LIMITED vs ZIMBABWE IRON & STEEL COMPANY LIMITED
Ruled By: PATEL J

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD
Ruled By: MATHONSI J

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

HH44-09 : BLESSMOE CHANAKIRA and AUXILIA DANAYI MYNYEZA vs MAI KAI REAL ESTATE DEVELOPMENT TRUST and BERNARD MUTANGA
Ruled By: BERE J

SC40-15 : INDIUM INVESTMENTS (PVT) LTD vs KINGSHAVEN (PVT) LTD and DANIEL SHUMBA and LINDA SHUMBA
Ruled By: CHIDYAUSIKU CJ, GWAUNZA JA, GOWORA JA, HLATSHWAYO JA and MAVANGIRA AJA

Appealed
HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS
Ruled By: KAMOCHA J

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA
Ruled By: MAKARAU JP

HH90-10 : LOCAL AUTHORITIES PENSION FUND vs F & R TRAVEL TOURS AND CAR SALES (PVT) LTD and FREEJOY CHIGWIDA and RAPHAEL MAKWARA
Ruled By: MAKARAU JP

HH164-10 : KENNETH PATRICK McCOSH vs PIONEER CORPORATION AFRICA LIMITED
Ruled By: KUDYA J

HH688-14 : GERALD CHIWESHE and SAMEER KHAN and BRUCE THOMAS vs AIR ZIMBABWE HOLDINGS (PVT) LTD
Ruled By: MTSHIYA J

HH224-22 : MUTSA DENHERE and DEMMUSK ENTERPRISES (PVT) LTD vs FAENSA FRISCO LIMITED
Ruled By: CHIRAWU-MUGOMBA J

Appealed
SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

View Appeal
HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA
Ruled By: CHIGUMBA J

Appealed
HH287-20 : PENELOPE STONE and RICHARD BEATTIE t/a THE STONE/BEATTIE STUDIO vs CENTRAL AFRICAN BUILDING SOCIETY and RESERVE BANK OF ZIMBABWE and MINISTER OF FINANCE & ECONOMIC DEVELOPMENT
Ruled By: ZHOU J

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

Appealed
SC87-21 : RIO ZIM (PVT) LIMITED vs TRUST BANK CORPORATION LIMITED (In Liquidation)
Ruled By: MAKARAU JA, HLATSHWAYO JA and UCHENA JA

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HH534-18 : RIOZIM (PVT) LTD vs TRUST BANK CORPORATION LTD (IN LIQUIDATION)
Ruled By: KWENDA J

SC89-21 : KENNEDY NGIRAZI and NAN JIANG MINE (PVT) LTD vs EMMANUEL RENSBURG and MEGAMANIA AUCTIONEERS and SHERIFF OF THE HIGH COURT N.O.
Ruled By: BHUNU JA, MATHONSI JA and CHIWESHE JA

SC91-21 : ELPHAS MAPHISA vs CITY OF BULAWAYO
Ruled By: GUVAVA JA, UCHENA JA and CHITAKUNYE AJA

Appealed
SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD
Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

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HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST
Ruled By: ZHOU J

SC102-21 : DOVES FUNERAL ASSURANCE (PVT) LTD vs FERNABY INVESTMENTS (PVT) LTD and QUECOM ENGINEERING (PVT) LTD and DENNIS NGORIMA and STANDARD CHARTERED BANK LTD and HOMELAND REAL ESTATE and THE SHERIFF
Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE JA

SC107-21 : METALLON GOLD ZIMBABWE (PVT) LTD and OTHERS vs SHATIRWA INVESTMENTS (PVT) LTD and ASSOCIATED MINE WORKERS UNION OF ZIMBABWE and MASTER OF THE HIGH COURT and REGISTRAR OF COMPANIES
Ruled By: MALABA CJ, BHUNU JA and CHIWESHE AJA

SC108-21 : VALENTINE MUSHAYAKURARA vs ZIMBABWE LEAF TOBACCO COMPANY (PRIVATE) LIMITED
Ruled By: MALABA CJ, UCHENA JA and CHIWESHE AJA

Appealed
SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

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HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

SC127-21 : MIDLANDS STATE UNIVERSITY vs GALAXY ENGINEERING DESIGN CONSULTANTS (PRIVATE) LIMITED
Ruled By: GWAUNZA DCJ, BHUNU JA and MATHONSI JA

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SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD
Ruled By: GARWE JA, GOWORA JA and UCHENA JA

HB32-15 : ANDREW NDLOVU and CHIHWA TOURS vs THEMBINKOSI SIBINDI
Ruled By: MUTEMA J and MOYO J