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

Appealed
SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL
Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

Standard Chartered Bank Zimbabwe (“the appellant”) or (“the Bank”) is a commercial bank registered and operating in Zimbabwe.

The respondent is a company duly incorporated in terms of the laws of Zimbabwe and was carrying on business in Redcliff, Zimbabwe. It is a foreign investor whose specific purpose was the refurbishment of the blast furnaces of a Zimbabwean steel manufacturing company popularly known as Ziscosteel.

In October 2007, the respondent held two accounts with the Kwekwe branch of the appellant. As at 9 October 2007, there was, in the two accounts, an aggregate credit balance of US$47,739=86.

In terms of a directive issued by the Reserve Bank of Zimbabwe (sometimes referred to herein as “the RBZ”) sometime in October 2007, the appellant transferred, to the RBZ, the total credit balance of US$47,739=86 from the two accounts.

The directive does not form part of the record, but, it is common cause that it was purportedly issued in terms of section 35(1) of the Exchange Control Regulations 1996, SI109 of 1996 (“the Regulations”).

When the respondent demanded payment to it of the monies deposited in the accounts, the Bank refused to repay. It claimed that the intervention of the Reserve Bank of Zimbabwe (RBZ) had rendered it impossible for it to comply with its contractual obligation to make payment to the respondent.

The respondent applied to the High Court for an order compelling payment.

It alleged, that, the monies were wrongfully and unlawfully debited from its account without its consent and approval. It claimed, that, in terms of the law of banking, the Bank was contractually bound to repay the credit balances on demand.

The Bank contended, in its defence, that, upon receiving the directive by the Reserve Bank of Zimbabwe (RBZ), the funds held in the respondent's accounts ceased to be the property of the Bank and became that of the RBZ. It was contended further, that, the intervention of the Reserve Bank of Zimbabwe (RBZ) constituted an Act of State, and, therefore, a supervening impossibility which discharged the appellant from its obligations to the respondent.

The learned Judge granted the application. It is against his judgment that the Bank now appeals.

The main issue which falls for determination in this appeal is whether the Bank is liable to pay to the respondent the aggregate amount of US$47,739=86 transferred by it to the Reserve Bank of Zimbabwe.

THE LAW

The general rule relating to deposits made in a Bank account by a customer is that the money becomes the property of the Bank which can use such deposit as it pleases so long as it pays to the depositor, on demand, the equivalent of the amount deposited in the account.

In Standard Bank of South Africa v Echo Petroleum CC, Case No.192/11 (2012) ZASCA 18 (22 March 2012)…, it was said:

“The general rule is that, moneys deposited into a bank account fall into the ownership of the bank. The resulting credit belongs to the customer, the bank having a contractual obligation to pay the customer, on demand, and to honour cheques validly drawn on the account to the extent that it stands in credit.”

See also ABC Bank v Mackie Diamonds SC23-13; Foley v Hill (1848) 2 H.L. Cas 28.

The legal relationship between a Bank and its customer, whose account is in credit with it, is that of debtor and creditor.

Although the customer 'deposits' money to the credit of his account with the bank, the transaction is not one of depositum, but of loan: see Burg Trailers SA (Pty) Ltd v ABSA Bank Ltd 2004 (1) SA…,.; Ormerod v Deputy Sheriff, Durban 1965 (4) SA 670 (D)…,.; Absa Bank Ltd v Intensive Air (Pty) Ltd & Ors 2011 (2) SA 275.

If this legal position is followed to its logical conclusion, then, the deposits were the property of the Bank and what the Bank paid to the Reserve Bank of Zimbabwe (RBZ) was its own money.

That the Bank parted with the deposits in the account was of no import to the respondent whose right to be paid the equivalent of the deposits, on demand, remained unaffected by the Bank's dealings therewith.

The transfer to the Reserve Bank of Zimbabwe (RBZ), in terms of its directive, did not, therefore, extinguish the Bank's contractual obligation to make payment to the respondent.

THE DEFENCE

The Bank contends, that, it is discharged from its contractual obligations to the respondent by reason of a supervening impossibility otherwise known as a vis maior or casus fortuitus, namely, the Reserve Bank of Zimbabwe (RBZ) directive.

In support of its stance, it relies on the judgments in Peters, Flamman & Co v Kokstad Municipality 1919 AD 427 and Bob's Shoe Centre v Henneways Freight Services (Pty) Ltd 1995 (2) SA 421 (A).

The brief facts of Peters, Flamman & Co v Kokstad Municipality 1919 AD 427, as summarised in The Law of Contract in South Africa 3ed by RH CHRISTIE…, are that the appellant firm was contracted to light the streets of Kokstad for a period of years. During the currency of the contract, in wartime, the partners were interned as enemy aliens and their business wound up under the relevant war legislation. The Municipality's claim for damages for breach of contract and forfeiture of the firm's plant under a clause of the contract was rejected by the Appellate Division. At pp434-5 of the judgment of the court, SOLOMON ACJ remarked as follows:

“…,. Nor is it necessary to consider generally what are the circumstances in which it can be said that a contract has become impossible of performance. For the authorities are clear, that, if a person is prevented from performing his contract by vis maior or casus fortuitus, under which would be included such an Act of State as we are concerned with in this appeal, he is discharged from liability.”

In Bob's Shoe Centre v Henneways Freight Services (Pty) Ltd 1995 (2) SA 421 (A) the appellants were contracted to clear and deliver a consignment of shoes to the respondents factory in the city. A fire consumed the warehouse where the shoes were warehoused. The shoes were destroyed and it became impossible to complete performance of the contract.

Clearly, the facts of both these cases are distinguishable from those in casu.

The appellant herein has not shown, that, for some reason beyond its control, it cannot, from its resources, repay the debt. It has not proved impossibility.

It goes without saying, that, in order for its defence to succeed, the appellant must do more than merely allege impossibility. The impossibility must be proved, that is, it must be clear from the evidence that performance is impossible, not merely undesirable or uneconomical: see The Law of Contract in South Africa 3ed by R H CHRISTIE…,.

In any event, it would appear, that, where a Ministerial directive is given without statutory authority, obedience thereto will not qualify as a vis major or casus fortuitus.

The appellant has submitted, that, it was obliged to follow the Reserve Bank of Zimbabwe's directive and cites section 40 of the Exchange Control Regulations 1996, S.I.109 of 1996 (the Regulations).

It alleges, that, it did not oppose the directive because of its fear of the Reserve Bank of Zimbabwe (RBZ), which, in terms of section 37 of the Exchange Control Regulations 1996, SI109/1996, has the power to revoke its licence.

As the respondent submitted, the directive was issued without statutory authority. It was ultra vires the provisions of section 35 of the Exchange Control Regulations 1996, S.I.109/1996 (the Regulations) which grants no authority to the Reserve Bank of Zimbabwe (RBZ) to confiscate deposits in the accounts of customers of the Bank.

The correctness of this submission emerges quite clearly from a reading of the section which provides as follows:

“35. Authorised dealers and other persons to comply with directions

(1) Authorised dealers shall comply with such directions as may be given to them by an exchange control authority relating to -

(a) The exercise of any functions conferred on them by or under these regulations;

(b) The terms on which they are to exchange foreign currency for Zimbabwean currency;

(c) The offer of foreign currency in their possession for sale to the Reserve Bank.

(2) Persons concerned with —

(a) The keeping of any register in Zimbabwe; or

(b) The payment of capital moneys, dividends, or interest in Zimbabwe;
shall comply with such directions as may be given to them by an exchange control authority in relation to any function conferred or imposed on them by or under these regulations.”

Not only was the directive in violation of section 35 of the Regulations, but, the Bank had the option, if so minded, of resorting to the provisions of section 37 of the Regulations which provide for adequate opportunity to be given to the dealer concerned to make representations before any punitive measures were taken, as well as to the safeguards provided in section 40.

Both statutory provisions are set out below.

“37. Penalties for failure by authorised dealers to comply with regulations or directions

(1) Subject to this section, if an exchange control authority is satisfied that an authorised dealer has –

(a) Contravened any provision of these regulations; or

(b) Failed to comply with any order or direction with which it is its duty to comply;

The exchange control authority may direct the authorised dealer to cease all dealings in foreign currency, or such dealings as the exchange control authority may specify, for such period not exceeding twelve months as the exchange control authority may specify in the direction.

(2) Before giving a direction in terms of subsection (1), the exchange control authority shall give the authorized dealer concerned an adequate opportunity to make representations in the matter.”

“40. Orders

(1) Subject to subsection (3), the Reserve Bank may make orders for all or any of the following purposes —

(a) To protect or improve the value of Zimbabwean currency;

(b) To bring about and preserve stability in the currency market in Zimbabwe;

(c) To prescribe any matter, which, in terms of these regulations, is required or permitted to be prescribed or which, in the Reserve Bank's opinion, is necessary or convenient to be prescribed in order to give effect to these regulations.

(1) Orders made under subsection (1) may provide for —

(a) The manner in which authorized dealers shall conduct their business for the purposes of these regulations;

(3) Orders made under subs (1) shall not have effect until they have been approved by the Minister and published in the Gazette.”

At the hearing of the appeal, counsel for the appellant conceded, that, the Reserve Bank of Zimbabwe (RBZ) directive was ultra vires of the provisions of section 35(1) of the Exchange Control Regulations 1996, SI109/96 (the Regulations).

Paragraph (c), it will be seen, deals with the offer of foreign currency in their possession for sale to the Reserve Bank of Zimbabwe (RBZ).

He submitted, however, that, the defence of supervening impossibility was available to the Bank even where the directive was unlawful.

I disagree.

In The Law of Contract in South Africa 3ed by R H CHRISTIE…, the following observation is made by the author:

“The limits of vis maior and casus fortuitous have not been authoritatively defined for the purposes of this branch of the law, but, it is clear, from Peters, Flamman, where the internment and winding-up were carried out under statutory authority, that, any similar act of state would qualify.

Legislation subsequent to the making of the contract, making performance illegal either absolutely or without a specified consent which has been refused, will also qualify, as will refusal of a statutory consent, but not obedience to a ministerial directive given without statutory authority.

For the purposes of this branch of the law, there is no necessity to distinguish between vis maior and casus fortuitus, which, between them, include any happening, whether due to natural causes or human agency, that is unforeseeable with reasonable foresight and unavoidable with reasonable care.”…,.

And on page 528:

“Self-created impossibility, that is, impossibility resulting from the act of one of the parties, does not discharge the contract but leaves the party whose act created the impossibility liable for the consequences. This will be so whether the impossibility is complete or partial, and whether or not the act that causes the impossibility is wrongful.”

I respectfully associate myself with those views.

The acts complained of by the Bank do not qualify as vis maior or casus fortuitus and do not absolve the Bank from compliance with its contractual obligation to the respondent.

CONCLUSION

As has been shown above, the credit balance in the respondent's account is a debt that the appellant owes to the respondent.

The appellant has placed no evidence before the court which would establish that it has become impossible for it to make payment of its debt.

Its contention is that, having made payment to the Reserve Bank of Zimbabwe (RBZ) in terms of its directive, it no longer has the respondent's money in its possession and is consequently discharged from its obligation to make payment, upon demand, by the respondent.

The contentions by the appellant run contrary to the established principles of Banking Law, namely, that, the deposits became the Bank's property.

It seems that what the appellant's defence boils down to is that it ought not to be expected to pay in these circumstances.

But, as has been demonstrated above, the dealings by the appellant with the deposits in the accounts, namely, the payments to the Reserve Bank of Zimbabwe, were made at its own risk and did not affect its obligation in law to pay its debt to the respondent on demand.

The appeal is accordingly dismissed with costs.

HB36-15 : BULAWAYO CITY COUNCIL vs BUTTON ARMATURE WINDING (PVT) LTD
Ruled By: MUTEMA J

This is an application for summary judgment in the sum of US$86,927=90 said to represent arrear rates for the period spanning from June 2012 to June 2014.

The statement for the bill for what the applicant contends is owed was attached to the founding affidavit as annexure “A”.

The founding affidavit was deposed to by one Spekiwa T. Guta, who, in paragraph 1 thereof stated:

“1. I am the city legal officer of the applicant in this matter and all the facts I depose hereto are to the best of my knowledge true and correct.”

Over and above the amount claimed stated above, the applicant, in the draft order, also seeks an order for collection commission on the said amount; interest at the prescribed rate; costs of suit on an attorney-client scale.

The application was opposed on the following grounds:

In Limine

1. The deponent to the founding/supporting affidavit did not establish authority to depose to the affidavit or that the facts she deposed to are with her knowledge;

2. The relief sought for collection commission is incompetent;

3. In the draft order, the applicant is seeking interest at the rate of 5% per annum yet annexure “A” shows that interest was being charged on the account at 6% per month. In the result, the interest that was levied on the account was therefore unlawful; and

4. The claim is defective for want of compliance with Rule 13(4) of Order 3 of the High Court Rules 1971 in that it does not set out separately the interest component from the capital sum.

On the Merits

1. The respondent has a bona fide defence as advanced in the preceding points in limine;

2. Via publication in the press, the applicant offered a special dispensation whereby if the respondent paid off half the amount owed, the other half would be written off. The respondent accepted the offer and the arrangement became binding on the parties and the agreement is still to run its course;

3. The calculations in annexure “A” are flawed. They are effective from February 2009 to July 2014 yet the claim avers that the period runs from June 2012 to June 2014 and is for arrear rates only, but annexure “A” factored in water levy, rates, road levy, sewage, solid waste and monthly interest of 6%. This informs on the question of whether or not part of the claim has not prescribed as well as the accuracy of the computation of the amount due.

It is proposed to deal first with the points raised in limine....,.

CLAIM DEFECTIVE FOR WANT OF COMPLIANCE WITH RULE 13(4) OF ORDER 3 OF THE HIGH COURT RULES 1971

Rule 13(4) of the High Court Rules provides as follows:

“(4) Subject to sub-rule (5), where the amount claimed includes capital and interest on the capital, the particulars endorsed on the summons in terms of subrule (1) shall state clearly –

(a) The capital amount claimed; and

(b) The total amount of interest claimed on the capital as at the date of the summons or as at an earlier date specified in the particulars; and

(c) Whether or not interest is claimed on the total amount of capital and interest referred to in paragraph (a) and (b), and, if not, the amount in respect of which any interest is claimed and the date which interest is to run.”

It is not disputed that the claim, as particularized in the summons, does offend against the provisions of Rule 13(4) of the High Court Rules quoted above.

The amount of interest claimed on the capital is not stated, and, also, the effective date from which interest is supposed to run.

View Appeal
SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

In a judgment handed down in January 2014, the court a quo upheld the plea of prescription raised by the respondents, and, consequently, dismissed the claim against the respondents with costs.Against that order, the appellant now appeals to this court.BACKGROUNDIn October 2012, the appellant, as plaintiff, issued summons against both ...

In a judgment handed down in January 2014, the court a quo upheld the plea of prescription raised by the respondents, and, consequently, dismissed the claim against the respondents with costs.

Against that order, the appellant now appeals to this court.

BACKGROUND

In October 2012, the appellant, as plaintiff, issued summons against both respondents before the High Court, Harare, claiming payment of the sum of $30,094=98 being arrear rentals in respect of the respondents tenancy of premises known as Shop 5, Zimre Centre, Corner Kwame Nkrumah Avenue and Leopold Takawira Street, Harare.

The second respondent had bound himself as surety and co-principal debtor in respect of the first respondent's indebtedness.

In their plea, the respondents, as defendants, raised the defence of prescription. More specifically, they averred, that, in instituting proceedings on 19 October 2012, more than three years after the debt became due, the claim had become time-barred.

The plea was not set down for hearing. Instead, the defendants pleaded over to the merits in the same plea.

In its replication, the appellant denied that the claim had prescribed. It averred, that, the first defendant had, on 22 October 2009, acknowledged the debt and had undertaken to pay the outstanding amount in full by 10 November 2009.

There was no rejoinder by the respondents.

In a joint pre-trial conference minute, the parties agreed, that, the issues requiring determination at trial were:

(a) Whether the plaintiff's claim had prescribed;

(b) Whether the first respondent had breached the lease agreement by failing to pay rental and other costs;

(c) Whether the respondents were liable to pay the sum of US$30,094=98 together with interest and costs of suit;

(d) Whether there had been mutual termination of the agreement between the parties and whether the appellant had unlawfully and unilaterally ejected the respondents from its premises; and

(e) Whether such conduct had resulted in the respondents suffering damages “in respect of the first respondent's assets and business” and, if so, the quantum thereof.

PROCEEDINGS BEFORE THE COURT A QUO

At the hearing of the matter, the respondents, through their lawyer, sought the leave of the court to deal with the issue of prescription first and lead evidence on it.

Despite opposition from the appellant, the court a quo decided that the issue of prescription be determined first, and, thereafter, depending on the outcome, the court would again hear evidence on the remaining issues.

In its judgment, the court a quo was of the view, that, the issue that fell for determination was the authenticity of the letter purportedly written by one Annet Mbedzi on behalf of Saintcor Holdings in October 2009.

In this regard, it made a number of observations.

The letter was not written on any letterhead, unlike in previous correspondence; it reflected the appellant's postal address; the letter was also written on behalf of Saintcor Holdings, a company both parties were agreed does not exist and was not a party to the lease agreement; the letter was addressed to a Mr Muringani, but, the name had been cancelled in black ink and in its place the name Muringi inserted; nowhere in the letter is it suggested that Saintcor Holdings was acknowledging indebtedness on behalf of Saintcor (Pvt) Ltd.

On a consideration of all these features, the court a quo concluded, that, the letter had not been written on behalf of the first respondent.

Consequently, the court upheld the plea of prescription and dismissed the plaintiff's claim with costs, hence this appeal.

GROUNDS OF APPEAL

In its grounds of appeal, the appellant has attacked the decision of the court a quo on the basis that it:

(a) Erred in fact and at law in holding that the appellant's claim had prescribed;

(b) Misdirected itself by holding that the letter that was received by the appellant on 22 October 2012 was not authentic;

(c) Misdirected itself by making a finding that the author of the letter that was received by the appellant on 22 October 2009 did not have authority to author the same.

It is apparent from the above grounds, that. it is the conclusion reached by the court a quo, that the letter in question had not been written on behalf of the respondent that the appellant is challenging.

PRELIMINARY ISSUES RAISED BY THE RESPONDENTS

In their heads of argument, the respondents raised two points in limine:

(i) The first was that the judgment of the court a quo reflects three different dates as the dates when the judgment was handed down.

The date of the judgment reflected in the Notice of Appeal is at variance with the date appearing ex facie the judgment itself, and, consequently, there has been no compliance with Rule 29 of the Rules of this Court.

(ii) Secondly, the relief sought is defective as it seeks to substitute the decision of the court a quo with one referring the matter back to the court a quo itself.

In his response, counsel for the appellant drew the attention of the court to a letter from the Registrar of the High Court which states, that. the ex-tempore judgment was handed down on 10 February 2015, which is the date appearing in the Notice of Appeal.

On the prayer, he conceded, that, the wording was inelegant but argued that the relief sought was clear. He submitted that the inelegance does not invalidate the appeal as ultimately the court will make an order it deems appropriate in the circumstances.

After hearing argument on the two preliminary issues, this court was of the view, that, the issues be rolled over for determination together with the issues that arise on the merits.

APPELLANT'S SUBMISSIONS ON APPEAL

In both his heads of argument and oral submissions, counsel for the appellant raised the following issues:

(i) First, that the judgment of the court a quo does not derive from the pleadings.

(ii) Second, the appellant's cause of action was predicated upon a valid cancellation of the lease agreement. Such cancellation was effected on 18 November 2009 and the cause of action would have accrued on that day. Therefore, when the appellant issued summons on 22 October 2012, the debt had not prescribed.

(iii) Third, that the appellant would have had no reason to cause the letter of 22 October 2012 to be generated. Once it had accepted that the letter had not been generated by the appellant, the court should have concluded that the letter had indeed been authored by the respondents.

(iv) Fourth, that the second respondent knew how to contact Annet Mbedzi, the author of the letter in question. Annet Mbedzi had been involved in the goings-on at the premises of the first respondent, and yet both respondents had not found it proper to call him.

(v) Lastly, counsel for the appellant submitted, that, it was improper for the court to have heard evidence piecemeal. Once the plea of prescription had not been set down and the respondent had then proceeded to plead over to the merits, the court should have heard evidence on all the issues and an assessment of the credibility and integrity of the witnesses undertaken only after all the evidence had been led.

RESPONDENTS SUBMISSIONS ON APPEAL

In response, counsel for the respondents made the following submissions:

(i) First, that, what is being attacked by the appellant are findings of fact which cannot be interfered with on appeal in the absence of a finding of irrationality on the part of the trial court.

(ii) Second, that, the court a quo was correct in its findings that the letter received by the appellant on 22 October 2009 had not been written by or for the respondents. This is because the appellant had admitted that, by that date, the first respondent had been evicted from the premises, and, consequently, the first respondent would not have used that address in correspondence with the appellant.

(iii) Third, that, the appellant has not established a lawful basis for the suggestion that the judgment does not derive from the pleadings as no leave of the court had been sought to advance argument on this ground, contrary to the Rules of this court. In any event, the respondents, in their plea, had placed prescription in issue.

(iv) Lastly, that, the debt did not become due on cancellation since rent was due monthly in advance, and, therefore, the cause of action arose whenever such rental was not paid on due date. The appellant had, in any event, evicted the first respondent in August 2009 for non-payment of rent and the “debt” included outstanding rentals up to the date of such eviction.

ISSUES FOR DETERMINATION

It is clear from the above, that, a number of issues arise before this court. These will be dealt with in turn....,.

WHETHER DEBT BECAME DUE ON CANCELLATION OF THE AGREEMENT

It was counsel for the appellant's submission, that, the appellant's cause of action in the court a quo was predicated upon a valid cancellation of the lease agreement. Put differently, he sought to argue, that, the debt which was sought to be recovered would have become due upon cancellation of the lease agreement.

In my view, this contention also lacks merit.

It was common cause, that, rental payments were due and payable monthly in advance. Indeed, following the failure by the first respondent to pay rentals on due date, the appellant caused the eviction of the first respondent in August 2009.

In the circumstances, I agree with the respondents, that, the debt became due each time the first respondent failed to pay rent on due date and that the debt would include all rentals owing up until eviction in August 2009.

WHETHER THE COURT A QUO ERRED IN MAKING FINDINGS OF FACT

The appellant has attacked various findings made by the court a quo on the facts, and, in particular, the finding that the letter received by the appellant on 22 October 2009 was not authentic and that the author of the letter did not have authority to write the same.

The court a quo made the following findings of fact:

(i) First, that the letter was written for and on behalf of an entity called Saintcor Holdings and not Saintcor (Pvt) Ltd.

(ii) Second, the name of the addressee had been incorrectly spelt.

(iii) Third, the letter was not written on the first respondent's letter head.

(iv) Fourth, the appellant's address, reflected in the letter, was incorrect.

(v) Fifth, the letter of acknowledgment had been written in October 2009 and yet purported to use the same address from which the first respondent had been evicted.

(vi) Sixth, the company that the author, Annet Mbedzi, purported to represent in the capacity of Financial Director does not in fact exist, and the company does not, in any event, purport to act on behalf of the first respondent.

On the basis of the above observations, the court reached the conclusion, that, the letter had not been written on behalf of the first respondent and that the letter did not specify which debt was being acknowledged.

The above conclusion cannot be said to be irrational: nor can it be said that it is not supported by the evidence.

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….,.”

DISPOSITION

In my view, this appeal lacks merit and must therefore fail.

The appeal is accordingly dismissed with costs.

HH412-21 : ZIMBABWE LEAF TOBACCO vs KEVIN COOKE
Ruled By: DUBE J

The plaintiff issued summons for civil imprisonment against the defendant for failure to pay a debt in terms of an order granted against him.

On 29 November 2017, the plaintiff obtained judgment against the defendant for payment of US$360,000 together with interest at the rate of 12% per annum plus US$8,625 together with VAT thereon. Upon execution, the Sheriff returned a nulla bona return prompting the plaintiff to file for civil imprisonment.

The plaintiff's case is that the tobacco growing loan giving rise to this debt was financed using offshore funding and is payable in United States dollars in terms of applicable legal instruments. The plaintiff insists that the defendant ought to pay the outstanding debt in United States dollars and refutes that the defendant has paid back the loan in full.

The defendant has refused to pay the debt in United States dollars and insists that the loan ought to be paid in RTGS dollars.

The defendant resists civil imprisonment on the basis that he paid the debt in full.

According to the defendant, he has paid a sum of $426,325=69 and an additional $50,0000. He submitted that the plaintiff has sought to apply a rate of exchange to repayments made on 18 September 2019 and 18 June 2020 respectively in violation of the law which is that all debts that existed prior to 22 February 2019 are payable at the rate of 1:1 to the RTGS dollar and this includes judgment debts.

He contended, that, the claim for civil imprisonment is misguided as the plaintiff has no cause of action against him and urged the court ought to dismiss the summons for civil imprisonment.

The Nature of Civil Imprisonment

A summons for civil imprisonment calls upon a debtor to show cause why he should not be imprisoned for failure to pay a debt.

The new High Court Rules 2021, published under Statutory Instrument 202 of 2021, SI202 of 2021, make provision for imprisonment for a debt in Rule 73.

In terms of Rule 73(4) of the High Court Rules, before a court makes an order for civil imprisonment, it should satisfy itself that the judgment debt has not been paid. In most civil imprisonment proceedings, liability is not an issue, in which case the court's enquiry is limited to the debtor's ability to service the debt and the appropriateness of civil imprisonment.

Where a debtor challenges civil imprisonment proceedings on the basis that he does not owe a contractual obligation or has cleared it, it is incumbent upon the court to resolve the dispute regarding liability first before delving into appropriateness of civil imprisonment.

In these proceedings, the issue is whether the balance due and outstanding by the defendant, as at 22 February 2019, was due in RTGS dollars at the rate of 1:1 and whether the respondent has discharged his liability for the debt.

The court must resolve, first, the question of the applicable currency and decide whether the defendant has cleared the debt. If this question is answered in the affirmative, that is the end of the matter.

If the court finds that the defendant owes in terms of the court order granted against him and has neglected and failed to pay in terms of the order, the court will be required to enquire into the respondent's ability and willingness to pay the debt in compliance with section 49(2) of the Constitution of Zimbabwe.

The new rules make specific reference to section 49(2) in Rule 73(1), unlike Rule 370, its predecessor, thereby giving guidance on the subject.

Section 49(2) of the Constitution stipulates as follows:

“(2) No person may be imprisoned merely on the grounds of inability to fulfil a contractual obligation.”

The Constitution bars imprisonment of a person simply on the basis of a failure to fulfil a contractual obligation. Section 49(2) of the Constitution protects the right to personal liberty and enjoins a court dealing with a summons for civil imprisonment, where it is satisfied that the debtor has not paid the amount due, to enquire into the question of the judgment debtor's failure to pay the amount due.

What this entails is that an indigent person will not be imprisoned for a debt simply because she owes.

In terms of Rule 73 of the High Court Rules, it must be shown, that, the debtor has the means to pay, earn the amount due, and that his failure or refusal to pay the amount due is wilful.

The fact that a debtor owes a contractual obligation does not necessarily call for his civil imprisonment.

Civil imprisonment is a drastic measure which should be resorted to only as a last resort and only in instances where a debtor is able to service the debt but has shown an unwillingness to discharge the obligation. It is for this reason that the court is enjoined to carry out an enquiry to establish the financial position of the debtor and attitude to payment of the debt. The manner in which the debt will be cleared is considered in a case where the debtor is able to service the debt and shows a willingness to settle it.

The Legal Framework

The plaintiff is in the business of financing tobacco growing projects. Sometime, in May 2013 and July 2014, the defendant was advanced money and crop inputs in terms of a tobacco grower contract agreement. It obtained exchange control approval for the 2013-2014 and 2014-2015 tobacco growing seasons and was able to source foreign currency and purchase inputs to advance to tobacco growers: see Annexure C1and C2.

The defendant failed to pay back the grower debt. The loan advanced to the respondent was offshore funds advanced in United States dollars and is a foreign obligation denominated in foreign currency.

There are a number of instruments that permit tobacco merchants to recover tobacco growing loans advanced in United States dollars.

Financing and repayment of tobacco production is regulated by section 4(1)(a) of the Exchange Control (Tobacco Finance) Order, 2004, SI61 of 2004 which states, that, all auction and contract tobacco shall be paid for in United States Dollars. Section 5(3) provides that where a contractor has financed a tobacco grower by accessing offshore funds for that purpose, the amount used to finance the grower may be set off against the price of tobacco sold to the contractor by the grower.

The purpose of the Exchange Control Order is to ensure that where offshore funds are used to finance tobacco production, the contractor is able to recover the money from growers, in foreign currency, to enable the contractor to repay the foreign loan. A repayment in United States dollars or set off against the price of tobacco sold to the contractor enables the tobacco merchant to recoup his United States dollar investment.

The Zimbabwean dollar was re-introduced on 24 June 2019 in terms of SI142 of 2019.

On 29 July 2019, the Reserve Bank issued the Clarification to the Tobacco Industry, Circular No.7 of 2019, states in section 2 as follows:

“2. Treatment of US$ Denominated Inputs Advanced to Growers:

2.1 Tobacco merchants have the option to use foreign currency sourced from local banks (through global facilities) or offshore financing to procure inputs for distribution to tobacco growers under contract arrangements.

2.2 Where tobacco growers receive US$ input loans, repayment to the tobacco merchant shall be in foreign currency in order to protect the tobacco merchant's investment.”

Circular number 7 was issued in terms of section 35(1) of the Exchange Control Regulations, SI106 of 1996.

Section 2 of Circular No.7 states, that, a tobacco grower who obtains USD denominated input loans from a tobacco merchant is obligated to pay back in foreign currency.

The purpose of the section is to provide clarification on payment to tobacco merchants, by growers, where a tobacco merchant has accessed offshore funding to finance the tobacco growing. The rationale of section 2 of the Clarification to the Tobacco Industry, Circular No.7 of 2019 is to protect a tobacco merchant's investment. It would be absurd to expect that the merchant recovers the loan in RTGS when he obtained a USD-denominated input loan himself to finance the tobacco growing.

The legal framework available entitles a tobacco merchant, who has advanced United States dollars denominated input loans to a tobacco grower, to recover the loan in foreign currency.

Section 4(1)(d) of Statutory Instrument 33 of 2019, SI33 of 2019 deems all assets and liabilities, including judgment debts denominated in United States dollars, immediately before 22 February 2019, to be valued in RTGS dollars at a rate of 1:1: see Zambezi Gas Zimbabwe (Pvt) Ltd v NR Barber (Pvt) Ltd SC03-20.

There was agreement over the import of this section.

The parties disagreed over the applicability of this section to this case.

The defendant 's contention, that, upon the introduction of the RTGS dollar, on 22 February 2019, all assets and liabilities that were expressed in United States dollars were converted to RTGS at the rate of 1:1 and therefore that this particular loan is payable in RTGS lacks merit.

The defendant lost sight of the fact, that, there are instances when this section does not apply.

Finance Act No.2 amended the Reserve Bank of Zimbabwe Act [Chapter 22:15] and introduced section 21(1) as section 44C. Section 21(1) of Finance Act No.2 of 2019 makes it clear that the conversion at the rate of 1:1 does not apply in the case of foreign loans and foreign obligations denominated in any foreign currency and stipulates as follows:

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

All these instruments ought to be read in harmony with the Finance Act.

The defendant submitted, that, Exchange Control (Tobacco Finance) Order, S.I.61 of 2004 being subsidiary legislation, has the undesirable effect of overriding the provisions of Finance Act No.2 of 2019, being the enabling legislation.

It is a fundamental rule of law that the purpose of subsidiary legislation is to supplement primary legislation. Subsidiary legislation must not be ultra vires the enabling Act. Subsidiary legislation must not conflict with, run counter to, or replace enabling legislation.

Whilst debts pre-existing 22 February 2019 are payable at the rate of 1:1 in RTGS, foreign obligations are ring-fenced under section 21 of Finance Act No.2 of 2019. Foreign loans and obligations are an exception.

The Exchange Control (Tobacco Finance) Order makes provision for foreign loans and foreign obligations denominated in any foreign currency and provides that these shall continue to be payable in the currency involved.

This setup is contemplated under the Finance Act.

Consequently, the Exchange Control (Tobacco Finance) Order, SI61 of 2004 supplements Finance Act No.2 of 2019 and has no effect of breaching its provisions or replacing it. The two pieces of legislation are not in conflict with each other and ought to be read in harmony.

In Zimbabwe Leaf Tobacco (Pvt) Ltd v Valentine T. Mushayakarara HH220-20, the court dealt with a matter with similar facts to this case. The court considered the implications of section 4(1)(d) of S.I.33 of 2019, Finance Act No.2 of 2019, the Exchange Control (Tobacco Finance) Order of 2004, and Exchange Control Circular No.7 of 2019 and held, that, where a tobacco contractor has utilised offshore funds to finance tobacco growers, he is entitled to recover the loan in United States dollars.

The decision of the court was upheld on appeal.

In casu, the plaintiff does not dispute, that, the plaintiff sourced offshore funds in United States dollars and advanced United States dollar-denominated inputs to the defendant. The respondent did not refute that the money advanced to the defendant was part of a foreign loan obtained by the plaintiff in accordance with the 2013-2014 and 2014-2015 tobacco farming season with exchange control approvals.

In Breastplate Service (Pvt) Ltd v Cabria Africa PLC SC66-20, the court zeroed in on issues regarding the intention of the parties in a contract and held, that, where the parties have agreed and expressed their intention that payment must be made in foreign currency, a court must give effect to that intention.

The defendant entered into an agreement well aware of the nature of the agreement he was binding himself to. The contract defines “grower debt as the value of the crop finance.''

It expressly states, that, payment to the plaintiff would equate to the crop finance.

The defendant signed an acknowledgment of debt, in June 2015, acknowledging owing sums in United States dollars.

The issue of value and recovery has always been within the parties minds.

The nature of the debt entitles the plaintiff to recover the loan in United States dollars. There is a correlating foreign obligation to repay a foreign loan in United States dollars. The loan advanced, being a foreign obligation, the defendant is expected to pay the money back in United States dollars. This obligation is payable in United States dollars and is an exception to section 4(1)(d) of S.I.33 of 2019 which is not applicable to the circumstances of this case.

I must conclude, that, based on Zimbabwe Leaf Tobacco (Pvt) Ltd v Valentine T. Mushakarara HH220-20, the defendant was required to pay back the loan in United States dollars because the tobacco growing contract was financed from off-shore funds. The defendant has an obligation to pay the debt in foreign currency. The plaintiff has an entitlement to insist on payment in United States dollars.

The plaintiff denied that the defendant has discharged the judgment debt in full and submitted, that, what appears on p13 of the record is a repayment plan and that the debt has not been discharged.

This assertion was not disputed.

The summons for civil imprisonment is for USD$360,000. The plaintiff's explanation for claiming the entire debt, despite that the defendant has been servicing the debt, is that the repayment plan is silent on the issue of interest, which has not been paid and hence claims the entire sum granted in terms of the order.

The repayment plan produced shows instalments due, payments made, and the balance outstanding.

It shows, that, the plaintiff continued to receive payments after the order was granted.

As at 23 July 2018, the balance outstanding was US$193,844=31. The defendant claims that he had paid a total of UD$161,355 as at this date. The defendant submitted, that, entries of Z$50,000 instalments of 31 December 2018 and 31 December 2019 were made in error.

The defendant needed to show that the payments made after this cleared the debt.

On 18 September 2019, the defendant paid Z$25,000 which was converted to US$1,804=34. On 18 June 2020, Z$190,000 (9,600) was paid. On 25 June 2020 the defendant paid Z$50,000 and it is not known how much this amount translated to in United States dollars as at that date. This amount does not, even if one takes into account the Z$50,000 paid later on and the Z$100.000 purportedly paid in error, clear the debt.

The amounts paid, albeit in RTGS dollars, reduce the balance but are not sufficient to discharge the debt in full.

The appearance is that the defendant still owes the plaintiff part of the debt which he has failed to pay.

According to the plaintiff, there is a balance of USD$182,414.

The defendant has failed to show that he settled the debt in full. The court has considered, that, in addition to the capital debt, it has not been shown that the interest, VAT, and additional sum of US$8,625 has been paid.

The defendant contended, that, because the plaintiff accepted payment in RTGS, it is estopped from claiming in United States dollars.

No authority was advanced for the proposition, that, because the plaintiff accepted payment in RTGS dollars, it is estopped from claiming payment in United States dollars.

The fact remains, that, the debt is a foreign obligation liable to be paid in foreign currency.

The law permits settlement of debts in RTGS dollars for obligations sounding in United States dollars at the interbank rate.

In any event, the applicant is amenable to receiving payment in RTGS dollars at the interbank rate.

The parties are to set down the matter for an enquiry to be carried out in terms of the Rules.

It is at this hearing that the court will determine how much has been paid so far, consider how much the interest component of the debt is, and determine the exact figure owed.

Accordingly, it is ordered as follows:

1. The parties are to set the matter down for an enquiry to be conducted in terms of Rule 370 of the High Court Rules, 1971.

2. Costs shall be in the cause.

HB60-15 : JABULANI NCUBE vs INNOCENT NYATHI
Ruled By: MOYO J

This is an application for condonation of the late filing of an application for rescission of judgment.

The parties have been engaged in protracted litigation dating far back as 2006.

The parties, in 2006, entered into a loan agreement. Part of the terms of the loan agreement were that:

“That the loanee offers his house, being Stand 32699 Bulawayo Township of Bulawayo Township Lands as security.”

Clause 10 of the loan agreement also provides as follows:

“In the event the loanee breaches any content of this agreement, the house that he has given as security to the loaner shall hold him to this agreement (sic) and claim transfer of the pledged stand number 32699 Entumbane area (above-named).”

In this matter, the applicant was the loanee and the respondent was the loaner.

The applicant did make some payments towards the loan, although it looks like they were not made timeously. It is also not clear as to whether the loan was paid up or not.

In such applications, what is central are the following principles:

“It is well established, that, in considering application for condonation, the court has a discretion to be exercised judicially upon a consideration of all the facts, and that, in essence, it is a question of fairness to both sides.

In this enquiry, relevant considerations may include the degree of success…, (agreements); the importance of the case; the respondent's interest in the finality of his judgment; and the avoidance of an unnecessary delay in the administration of justice.

The list is not exhaustive.

These factors are not individually decisive but are inter-related and must be weighed one against the other; thus, a slight delay and a good explanation, may help compensate for prospects of success which are not strong.”

Per the case of United Plant Hire (Pvt) Ltd v Hills & Ors 1976 (1) SA 717 (A)…,.

Our Supreme Court also listed the considerations relevant to the determination of such an application in the case of KM Auctions (Pvt) Ltd v Adanesh Samuel & Anor SC15-12.

In this case, they were listed as:

(i) The degree of non-compliance.

(ii) The explanation for it.

(iii) The importance of the case.

(iv) The prospects of success.

(v) The respondent's interest in the finality of the case.

(vi) The convenience of the court.

(vii) The avoidance of unnecessary delay in the administration of justice.

Apparently, the delay in this matter has been quite lengthy; initially, a default judgment against the applicant was rescinded in 2008, the applicant did nothing, prompting the respondent to seek directions on how to proceed.

Eventually, default judgment awarding the respondent Stand 32699 Entumbane Township was granted on 10 November 2011.

The applicant states, in his founding affidavit, that, he learnt of the default judgement in February 2012, when the respondent intended to evict him from the said property. He states, that, his legal practitioner relocated and went to Botswana and that he never was aware that the legal practitioner had relocated and that there were court proceedings against him. He then approached another firm of lawyers who filed an urgent application for stay of execution that was eventually dismissed.

He says he then had financial problems and could not approach lawyers for assistance.

He then approached his current legal practitioners who advised him, that, condonation had to be sought in order to file an application for rescission of judgment.

The applicant has not gone into much detail as to the specific times he approached these different firms of lawyers. His explanation lacks information and is very slippery. He does not volunteer much information on the delay of more than two (2) years counting from February 2012 to October 2014 when this application was filed.

He tries to blame the departure of his legal practitioner from Zimbabwe to Botswana.

However, he had a duty to check on his matter and not wait until when he hears from the Deputy Sheriff upon execution of the order. A diligent litigant does not wait for his lawyer to communicate with him - especially when the lawyer becomes silent. The litigant is duty bound to enquire from his legal practitioner the status of his case.

In any event, the legal practitioner in question was no longer in the picture from February 2012 when the applicant became aware of the judgment against him.

In this regard, STEYN CJ, in the case of Salajee & Anor NNO v Minister of Community Development 1965 (2) SA 135…, said:

“A litigant…, is not entitled to hand over a matter to his attorneys and then wash his hands of it. If, as here, the stage is reached where it must become obvious also to a layman that there is a protracted delay, he cannot sit passively by, without so much as directing any reminder or enquiry to his attorney…,.”

I accordingly make a finding that:

The applicant was negligent in the prosecution of his own case. He has difficulty explaining the delay. What he has attempted to throw in as an explanation for the delay does not hold any water.

Having found, that, the delay has not been explained to the satisfaction of the court, I therefore move on to find if there are any other factors that could find favour in the applicant's situation, for, the enquiry does not end with the reasonableness or otherwise of the explanation for the delay.

It goes beyond that.

In the case of Mahachi v Barclays Bank of Zimbabwe SC06-06, it was held, that, in a case where no acceptable explanation for non-compliance with the Rules has been given, the applicant must show very good prospects of success.

In the case of Melane v Santana Insurance Co. Ltd 1962 (4) SA 531 (A)…, it was stated thus:

“In deciding whether sufficient cause has been shown, the basic principle is, that, the court has a discretion, to be exercised judicially upon a consideration of all the facts, and, in essence, it is a matter of fairness to both sides.

Among the facts usually relevant are the degree of lateness, the explanation therefore, the prospects of success, and the importance of the case. Ordinarily, these facts are interrelated, they are compatible with a true discretion, save of course that if there are no prospects of success there would be no point in granting condonation.

An attempt to formulate a rule of thumb would only save to harden the arteries of what should be a flexible discretion. What is needed is an objective conspectus of all the facts.

Thus, a slight delay and a good explanation may help to compensate for prospects of success which are not strong or the importance of the issue may tend to compensate for a long delay. And the respondent's interest in finality must not be overlooked.”…,.

I now turn to assess the merits.

In this case, the parties entered into a loan agreement, on the face of it which strikes as an agreement that has certain terms, like clause 10, that may be found to be unlawful.

Clause 10 of the agreement, in my view, is a pactum commissorium.

A pactum commissorium is defined, in the case of Chimutanda Motor Spares (Pvt) Ltd v Musare & Anor 1994 ZLR 310 (H), as:

“A pact by which the parties agree, that, if the debtor does not, within a certain time, release the thing given in pledge by paying the entire debt, after the lapse of the time fixed, the full property in the thing will irrevocably pass to the creditor in payment of the debt.”

WILLES, Principles of South African Law, 8th Edition…, established, that, a valid pledge merely confers the right to retain possession of the thing pledged as security by the pledgor as long as the debt remains unpaid - it does not confer the right of ownership. The pledger retains ownership of the pledged property.

It would appear, that, from the afore-stated authorities, there is a well grounded contention, prima facie, that the agreement between the parties, and the subsequent transfer of the property to the respondent, was in fact premised on an illegality.

There is also a problem raised by a reading of the two (2) letters written by both the applicant's former legal practitioner to the respondent's legal practitioner and the respondent's legal practitioner's response thereto.

These are annexure C on page 28 and the unmarked annexure on page 29 of the bound record.

Annexure C is a letter written by the applicant's former legal practitioner to the respondent's legal practitioner. It is dated 21 March 2007. It reads as follows:

“Re: Jabulani Ncube vs Innocent Nyathi

The above matter refers.

Please find attached the sum of $630,000 (Zim Dollars) being the full and final payment of ours indebtedness to yours.

We accordingly await receipt of your notice of withdrawal.”

On 26 March 2007, the respondent's legal practitioners responded in the following manner:

“Re: Jabulani Ncube & Innocent Nyathi

Your letter of 21st instant refers.

We have receipted your client's payment and wish to quickly indicate that:

There is the issue of costs which your client has to settle, and these, on a comprise, are, $370,000 +15% VAT = $425,000.

There is the issue of inflation, as discussed by clients, which, however, is not part of the summons.

Therefore, if your client pays ours within 7 days of the date of this letter we shall withdraw the matter.

Your client's payment is not full and final bill (sic).”

It is important to note, that, these letters give an impression that the debt was paid up save for costs.

The interest referred to in the letter from the respondent's lawyers, is, by their own admission, not part of the summons.

The immediate question that arises therefore is: what then was the cause of the transfer of the house from the applicant to the respondent when the debt was seemingly paid up save for costs?

Is there not a danger that the respondent was paid the debt in cash and also took the immovable property?

Even if a balance could be found to have been owing on the loan, would it equate to the appropriation of the immovable property whose value was not even established for purposes of settlement of the loan?

I am of the considered view, that, the applicant has a good case on the merits.

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against ...

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.

The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against a contrary determination of the respondent.

Introduction

The appellant is an International Business Company incorporated on 19 May 2005 in the British Virgin Islands in Guernsey in the Channel Islands but is not permitted to trade in that jurisdiction. The respondent is a body corporate responsible for the collection, amongst other imposts, of value added tax in Zimbabwe.

The Facts

The original intention of the appellant in Zimbabwe, prior to 1992, was to invest in property and participate in the construction of the Chitungwiza road…,.

Instead, the appellant became a supplier of basic commodities to local companies that included the WG (hereinafter referred to as the holding company).

It concluded an agency agreement with D & T, a subsidiary of the holding company, in 1992.

By 1999, it was supplying basic commodities under a US$10 million line of credit registered with the Reserve Bank of Zimbabwe to the holding company and other local customers…,.

On 1 October 2007, the Governor of the Reserve Bank of Zimbabwe unveiled the Basic Commodities Supply Side Intervention, BACOSSI, facility designed to end the chronic shortages of basic commodities in Zimbabwe…,.

The facility commenced in May 2008 and continued until the introduction of the multi-currency regime on 29 January 2009.

In May 2008, officials of the Reserve Bank of Zimbabwe (RBZ) amongst whom was the Governor and the Senior Division Chief Strategic Planning and Special Projects (SDC) visited the warehouse of D & T in Chitungwiza. The RBZ was referred to the appellant by D & T.

The appellant and the Reserve Bank of Zimbabwe (RBZ) commenced negotiations which culminated in the purchase of the non-Bacossi basic commodities that were in the D & T warehouse valued at US$7,987,207=54. The two parties also concluded an agreement in which the appellant supplied basic commodities to the RBZ, in Zimbabwe, the bacossi goods, valued at US$11,698,174 between July and September 2008.

The Baccossi Agreement was reduced to writing…, but was not signed by the parties apparently because the appellant was unhappy with the preamble to the agreement.

A verbal agreement, purportedly concluded between the Reserve Bank of Zimbabwe (RBZ), represented by the Governor, and the appellant, represented by a named Ukrainian lady, governed the supply relationship between them.

The respondent conducted a tax investigation of the purchases, in foreign currency, of the Reserve Bank of Zimbabwe from the appellant for the period between May 2006 and September 2008. The investigations revealed non-payment of value added tax (VAT) on the supplies made in that period…,.

They also revealed that D & T was paid commission, in terms of an agreement between them, on the invoiced supplies from 1 January 2006 to 31 January 2009.

On 9 February 2009…, the respondent made written demand on the Finance Director of the holding company, who was also the public officer of D & T, for the payment of value added tax (VAT) on the invoiced income paid to the appellant during that period.

On 13 February, a meeting was held at the Reserve Bank of Zimbabwe (RBZ) between the Senior Division Chief Strategic Planning and Special Projects, the investigators of the respondent, and the liaison officer of the appellant, who was also the Sales and Marketing Director of the holding company of D & T, the appellant's agent.

On 12 March, the respondent appointed the CEO of the holding company of D & T as the public officer for the appellant in terms of section 61 of the Taxes Act on the ground that his company was closely linked and connected to the appellant's local trading activities.

The CEO objected to the appointment on 17 and 20 March 2009 on the ground, that, he was not an agent, employee, director, or signatory to the bank account of the appellant; but, the respondent did not relent in its demand.

On 20 March 2009, at the respondent's offices, a meeting was held between three representatives of the respondent and two tax advisors from a local firm of accountants.

In reply to counsel for the respondent's oral submissions, counsel for the appellant disputed that the appellant was represented at the meeting and suggested that the tax accountants represented D & T.

The purpose of the meeting was to get the respondent's version on the value added tax (VAT) issues pertaining to both the appellant and D & T.

The VAT head from the tax advisors provided the respondent with two letters of his firm's mandate to represent the client.

It is inconceivable that he would not have received full instructions from his client, as he indicated, were that client D & T.

I am satisfied, from the heading of the minutes minuted by the tax advisors, that, they represented the appellant and not D & T.

In any event, the briefing given him by the respondent related to the alleged activities of the appellant, including the payment of 0.1% commission on the gross sales of the appellant in Zimbabwe to D & T.

On 30 March, the public officer of D & T disputed the legality of the appointment of his CEO as a public officer for the appellant. He, nonetheless, compiled and delivered the monthly breakdowns of the income received by D & T during the period from January 2006 to 31 January 2009 requested in the letter of 9 February.

On 25 March 2015…, the appellant wrote to the respondent objecting to the appointment of the public officer outside its registered place of business in Guernsey and to the tax liability claim.

The basis of the objection was that it did not maintain offices nor employ staff nor was it a value added tax (VAT) registered operator obligated to charge VAT on goods purchased from its foreign based operations and supplied to clients in Zimbabwe.

The relevant part of the letter reads:

“We object to your claim that we have a tax liability in Zimbabwe as we do not have a self-established presence in the country. Our involvement with Zimbabwe clients, and the West Group, is limited to the supply of our stock to agents who operate on a commission basis to store and handle our stock that we hold in Zimbabwe, for which we have always operated with Reserve Bank Approval.”

The objection by the appellant, of 25 March, and the further objection of its compulsorily appointed public officer, were dismissed by the respondent on 31 March 2009.

On 1 April, the respondent proceeded to appoint the holding company, and its subsidiaries, as an agent for the collection of value added tax (VAT) due from the appellant, purportedly in terms of section 48 of the Value Added Tax Act…,.

On 3 April 2009, the appellant, through its authorised signatories, wrote to the CEO of the holding company appointed as its public officer and copied the letter to the head of investigations of the respondent, and the Senior Division Chief Strategic Planning and Special Projects on the tax enquiry conducted by the respondent disputing tax liability on two grounds:

(i) The first was that it was not the importer; and

(ii) The second was that the sale to the importer, the Reserve Bank of Zimbabwe (RBZ), took place outside Zimbabwe.

I believe exhibit 2 may have been written by the compulsorily appointed public officer for the appellant between May 2009 and 17 June 2009, and not on 15 April 2008, as it is highly unlikely that the author possessed prescient powers to predict the events that were to take place between January and May 2009.

It was addressed to the prospective external legal practitioner of the Reserve Bank of Zimbabwe (RBZ).

The writer summarised the history of the relationship between the appellant and the holding company and one of its subsidiaries, D & T, before and during the bacossi period. He also dealt with the relationship between these parties and the Reserve Bank of Zimbabwe and exonerated the appellant from value added tax (VAT) liability.

In response, on 17 June 2009, the external legal practitioner of the Reserve Bank of Zimbabwe (RBZ) wrote a six page legal opinion to the Senior Division Chief on the US$4m tax dispute….,.

The legal practitioner in question had apparently held a meeting, on 21 April, with the Senior Division Chief of the central bank and two representatives of the holding company. He believed, that, his mandate to protect the interests of the Reserve Bank of Zimbabwe (RBZ) coincided with the interests of the appellant. He had engaged the lawyers of record of the appellant.

He identified the common problem to be the demand for value added tax (VAT) on the appellant in respect of the supply of Bacossi goods and its agent on commission received from the appellant.

Apparently, the appellant declined to supply him with information on its business profile, shareholders and directors, summary of significant business activities in the 12 months to the date of the letter and on the nature and extent of its business activities in Zimbabwe, its certificate of registration, any Board resolutions on Bacossi transactions, and its local call account.

In the absence of this information, he could not state, with certainty, that the appellant was not conducting local trading activities nor exclude it from value added tax (VAT) liability other than on the mere say so of its agent, D & T.

He advised that the Reserve Bank of Zimbabwe (RBZ) was liable for the payment of value added tax (VAT), in local currency, on the basis of the bills of entry that identified it as the importer.

He urged the Reserve Bank of Zimbabwe (RBZ), for strategic reasons that he set out in the opinion, to tender the duty in local currency hoping, that, if the respondent accepted the payment, the appellant would automatically be exempted from liability.

On 1 July 2009, the Senior Division Chief wrote to the appellant's legal practitioner of record. She confirmed the importation of Bacossi goods and the acceptance of liability for value added tax (VAT) by the Reserve Bank of Zimbabwe (RBZ)….,.

On 20 August 2009, three members of the respondent investigations team held a meeting with four RBZ employees at the RBZ amongst whom was the Senior Division Chief (SDC).

In that meeting, the Reserve Bank of Zimbabwe (RBZ) repudiated the concession made by the Senior Division Chief (SDC) and laid liability at the doorstep of the appellant.

However, in view of the national importance of the project and the profile of the major beneficiaries, the Reserve Bank of Zimbabwe (RBZ) resolved to seek exemption for payment of value added tax (VAT) on these goods from the Ministry of Finance by 25 August 2009.

A further meeting was held on 7 October 2009, in the Governor's boardroom at the Central Bank, between the Reserve Bank and the holding company, to discuss the appellant/RBZ value added tax (VAT) liability of US$3.2m….,.

In attendance were the Governor, his advisor, bank secretary, and a strategic planning executive for the Reserve Bank of Zimbabwe (RBZ) and the Sales and Marketing Director, indicated in exhibit 2 as the liaison officer of the appellant, and another officer of the holding company.

Notwithstanding that the respondent was not claiming value added tax (VAT) from the central bank, the Governor prevaricated on whether the Reserve Bank of Zimbabwe (RBZ) accepted liability or not. In one vein he accused the Senior Division Chief (SDC) of erroneously accepting liability for the central bank without his express authority, and, in the other, he was prepared to pay the VAT as long as it was charged in Zimbabwe dollars.

The Sales and Marketing Director for the holding company declined to answer for the appellant insisting that D & T acted as liaison for the appellant as the foreign supplier and local buyers.

The underlying suggestion from her contribution was that the appellant was not liable for value added tax (VAT).

In addition, the concluding remarks of the meeting suggested the existence of minutes of meetings between the Reserve Bank of Zimbabwe (RBZ) and the appellant.

The investigation prompted the respondent to raise against the appellant schedules for outstanding value added tax (VAT) on both the non-Bacossi and Bacossi transactions, initially on 17 March and later on 15 July 2009, in the sum of US$6,302,712=13 inclusive of interest and penalties, which it corrected by the exclusion of zero rated products on 13 October 2009 by reducing the amount to the sum of US$6,249,496=70.

The computations of the principal value added tax (VAT) due in each month for the non Bacossi commodities were in the sum of US$1,198,081=13. The respondent added an equal amount in penalties and a further amount of US$206,799=52 in interest and requested payment of US$2,602,961=79 for the non-Bacossi commodities.

In regards to the Bacossi commodities, it claimed a principal sum of US$1,754,726=10 and a penalty in an equal amount and interest from 21 July 2008 to 23 October 2009 in the sum of US$137,082=72 totalling US$3,646,534=92….,.

The appellant lodged an objection to the assessment in terms of section 32 of the Value Added Tax Act [Chapter 23:12] through its legal practitioners of record on 25 September 2009.

It also applied for condonation from the Commissioner for filing the objection outside the normal time limits. It set out four grounds for condonation and eight grounds of objection.

The respondent dismissed the condonation and disallowed the objection.

The appellant appealed both decisions to this Court on 12 October 2009. The respondent filed its reply on 12 November 2009.

In the objection, the appellant denied ever doing business in Zimbabwe and indicated, that, the local transactions were imports carried out by the holding company, the Reserve Bank of Zimbabwe (RBZ), and other local companies.

It averred, that, the appellant was authorised by the Reserve Bank of Zimbabwe (RBZ) to sell the goods in foreign currency using free funds from non-resident entities.

It supplied goods in bond to its local agent, D & T, for commission.

The local buyer took delivery of the goods after paying the appellant from free funds.

On receipt of payment, the appellant instructed D & T to pay duty and value added tax (VAT) before releasing the goods.

The appellant averred, that, the value added tax (VAT) claim on non-Bacossi goods constituted a double claim for VAT already paid by D & T.

The appellant called the evidence of the founder and chairman of the holding company and director of D & T.

He confirmed the foreign status of the appellant and its relationship with D & T before the Reserve Bank of Zimbabwe came onto the scene.

The holding company, D &T, and the appellant, were not related companies.

The contact between the appellant and D & T was facilitated by his Russian partners in 1992.

The relationship between the appellant and D & T was one of principal and agent.

The Central Bank appeared on the scene in May 2008. At that time, the agent, D & T, imported the goods into Zimbabwe that were supplied by its principal, the appellant.

The Central Bank concluded two agreements with the appellant:

(a) The first related to the purchase of the goods stored in the warehouse that had been imported by D & T, referred to in the appeal as the non Bacossi goods.

(b) The second agreement concerned the Bacossi goods under which the Central Bank directly imported in excess of 400 truckloads of goods from South Africa between July and September 2008.

At Beitbridge, the goods were checked against the bill of entry before they were taken to the bonded warehouse, and, unlike direct home consumption imports, the bill of entry was not surrendered at that stage.

D &T stored the Bacossi goods for the Reserve Bank for a fee.

The relationship between the appellant and D & T was suspended during the duration of the Bacossi imports.

The goods were received and secured by the Reserve Bank of Zimbabwe (RBZ).

The Reserve Bank of Zimbabwe (RBZ) would take the goods from the warehouse once D & T received a release order from the appellant confirming receipt of the purchase price, and, after D & T had paid duty and value added tax (VAT) for the goods.

The clearing agent invoiced D & T for clearance fees; D & T, in turn, added these to the storage fees for the account of the Reserve Bank of Zimbabwe.

He identified the South African export documents and the Zimbabwean import documents encompassing pp33-90 of exhibit 1. Amongst these documents were local bills of entry that identified the importer as the Reserve Bank of Zimbabwe.

The witness confirmed his managing director's assertion, in the letter of 30 March to the respondent, that, D & T was not paid commission by the appellant during the subsistence of the Bacossi imports.

It was on the basis of this evidence, that, counsel for the appellant submitted, that, the sole witness was credible and reliable in all material respects.

I do not agree with the contention by counsel for the appellant, that, the witness was a credible and reliable witness who gave his evidence well.

Under cross examination, he contradicted material parts of his evidence-in-chief.

He abandoned his earlier version that the relationship of principal and agent between the appellant and D & T was suspended during the Bacossi imports. He categorically stated, in cross-examination, that, the relationship did not change for both the Bacossi and non Bacossi imports as the appellant continued to pay D & T, in foreign currency, commission at the rate of 1% of the value of each transaction.

The appellant maintained its grip on the goods in the warehouse and directed its agent to pay duty and value added tax (VAT), and, thereafter, release the goods after confirming receipt of the transaction value of each consignment from the Reserve Bank of Zimbabwe.

He incorrectly stated that value added tax (VAT) was paid for the non-Bacossi goods.

That VAT was never paid was demonstrated by the abandonment of the double claim ground at the hearing of this appeal.

He did not participate in the discussions that culminated in the agreement between the appellant and the Central Bank. He was not privy to the terms and conditions of the agreement. He did not interact with any of the directors and authorised signatories of the appellant.

He had met an officer of the appellant whose name appears in the last paragraph on p112 of exhibit 1 once in Harare.

He was not a director, employee, or official of the appellant or the clearing agent.

His version on the motivation of the clearing agent to invoice D & T rather than the Reserve Bank of Zimbabwe (RBZ) was not confirmed by evidence from the clearing agent or the Central Bank.

He did not produce any evidence to show that D & T included the charges of the clearing agent in the storage fees levied on the Central Bank.

The evidence of the sole witness left gaps that could only be filled by the directors, employees, officials, or agents of the appellant.

His averments preceding the incorporation of the appellant, on 19 May 2005, underscored his unreliability and the need for the testimony of the active officers or agents of the appellant.

It is simply incomprehensible how he could have dealt with the appellant before it was incorporated.

The respondent's investigation established that the Reserve Bank of Zimbabwe (RBZ) purchased non Bacossi goods between May 2006 and June 2008 contrary to his testimony that the purchase started in May 2008.

I am satisfied that he was not a credible and reliable witness.

Rule 5(c) Documents

The respondent did not file Rule 5(c) documents within 14 days of entering his reply as required by Rule 5.

The material correspondence contemplated by Rule 5(c) would consist of the notice claiming the outstanding value added tax (VAT), the letter of objection, and the Commissioner's response to the objection.

Rather, at the hearing, and soon after the appellant had closed its case, counsel for the respondent produced the purported documents from the bar.

The documents consisted of a letter of objection dated 21 October 2014, a set of original value added tax (VAT) assessments issued by the respondent against the appellant on that date for the period May 2006 to August 2008, the letter of objection of 25 September 2009, and the unsigned agreement on the supply of basic commodities between the appellant and the Reserve Bank of Zimbabwe.

It did not file the ruling dismissing the condonation sought and disallowing the objection.

In the letter of objection, the appellant refers to “assessments, the last of which are dated 15 July 2009.”

The earlier assessments of 17 March and 22 May and the letters of 24 June and 10 September 2009, referred to in the notice of appeal, were not produced in evidence nor did they form part of the Rule 5(c) documents or the pleadings.

The respondent must simply comply with the law to obviate unnecessary delays associated with his failure to abide by the law in this regard.

The documents constitute a type of record of proceedings, which helps this Court understand the real dispute between the parties and the basis on which the determination appealed against was made.

That the objection was dismissed on the ground that it was filed out of time was only disclosed in the respondent's reply to the notice and grounds of appeal.

Rule 5(c) documents are simple documents that the respondent always has in its possession - even before filing his reply. This kind of dilatoriness on its part is totally inexcusable.

The respondent is directed to comply with Rule 5(c) in all future cases.

Condonation

At the pre-trial hearing of 17 September 2014, by consent of the parties, the delay in the filing of the notice of objection by the appellant and the failure to file Rule 5(c) documents timeously by the respondent were condoned.

The Issues

The four issues referred for appeal were:

(a) Was the appellant the importer of the goods in question into Zimbabwe?

(b) Does the appellant operate a business in Zimbabwe?

(c) In terms of section 6 of the Value Added Tax Act [Chapter 23:12] who was responsible for the payment of value added tax (VAT) on the imported BACOSSI goods, and, separately, on the imported non-BACOSSI goods?

(d) Was the appellant liable to pay any outstanding value added tax (VAT) in foreign currency?

I proceed to resolve each issue in turn....,.

Use of an arbitrary exchange rate

In his written heads, counsel for the appellant contended, that, the respondent used an arbitrary exchange rate to convert Rand denominated transactions to United States dollar values.

The respondent averred, in paragraph 13 of the reply, that, the invoice values were supplied by the appellant's agents in both Rands and United States dollars together with the appropriate conversions.

Counsel for the appellant submitted, that, the respondent had failed to establish how it converted the Rands into United States dollars.

It seems to me, that, the respondent bore no such onus. Rather, the onus was on the appellant to establish that the conversions were arbitrary.

The appellant did not lead any evidence in this regard.

HH62-14 : JOHANNES MAKONYE vs KENAE RAMODIMOOSI and ENTREDEV PROPERTY GROUP and C.H. LUKAS
Ruled By: CHIGUMBA J

This is an application in terms of section 34 of the Model Law as set out in the Second Schedule to the Arbitration Act [Chapter 7:15] for the setting aside of an arbitral award dated 23 February 2012, granted by the third respondent.

The second respondent was the applicant's estate agent.

At the hearing of the matter, I dismissed the application with costs on a legal practitioner client scale, being of the view that the application was entirely devoid of merit. I have now been asked to provide detailed reasons for judgment for purposes of appeal.

These are they.

The arbitral award that is sought to be impugned reads as follows:

“IT IS AND IS ORDERED THAT:

1. The termination of the agreement of lease in respect of Number 7 Westcott Road, Mount Pleasant, Harare signed by the parties on the 6th of September 2011 is confirmed.

2. The respondent (applicant in the matter now under consideration) refunds and pays to the claimant the sum of US$16,800 plus interest thereon from the 1st of November 2011 to the date of receipt of payment.

3. The costs of the Arbitrator, amounting to US$2,000, and covered by a deposit paid by the claimant, be refunded to the claimant by the respondent.”

The background giving rise to the dispute between the applicant and the first respondent involved the termination of a lease agreement entered into by the parties on 6 September 2011.

The parties had agreed that the first respondent would occupy the leased premises on 1 November 2011. The premises were under renovation, and the applicant gave an assurance that the renovations would be complete by the date of occupation.

The first respondent paid a sum of US$16,800, being a deposit and six months rent in advance, to the applicant.

Both parties submitted voluminous written statements to the arbitrator, the applicant, as the respondent, on 31 December 2011. The second respondent, the letting agent, also submitted a written statement to the arbitrator, on 9 February 2012.

The arbitrator found, that, the rental amount had been assessed based on the size of the kitchen, which the applicant had promised to extend and make bigger according to the first respondent's specifications.

This is the reason why the first respondent had agreed to pay six months rent in advance.

The applicant was unable to complete the renovations by the agreed date of occupation.

The parties entered into further negotiations which broke down after the applicant demanded more money which the first respondent refused to advance.

On 1 November 2011, the date of occupation, the premises were still under renovation.

The first respondent terminated the lease agreement and claimed a refund of the US$16,800 that had been advanced.

The arbitrator found, that, the applicant's inability to renovate the kitchen by the agreed date went to the root of the lease agreement, and confirmed that the lease agreement had been correctly terminated, and ordered that the applicant refund the monies advanced to him by the first respondent.

The basis of the application to set aside the arbitral award is that the applicant was not given an opportunity to be heard by the arbitrator.

He averred, that, he never agreed that the arbitrator could determine the mater on the papers filed by the parties. He averred, further, that, the third respondent only remitted US$12,800 to him, and that the first respondent had already been reimbursed US$3,840 by the second respondent.

The applicant averred, that, the arbitral award should be set aside on the basis that it had been awarded contrary to public policy in Zimbabwe, and in breach of the rules of natural justice.

The first respondent opposed the application on the basis, that, the applicant had given a mandate to the respondents to file a written report before the arbitrator in an electronic mail dated 7 January 2012.

The first respondent averred further, that, the arbitrator, had, in an electronic mail communication to all the parties, dated 5 January 2012, asked the parties how they wished to proceed and the parties agreed to make written submissions to the arbitrator.

The first respondent pointed out, that, the applicant, in the email dated 7 January 2012, to the arbitrator, stated that:

“…, written submissions only are fine, more focused and cheaper financially and time wise by me.”

The first respondent admitted, that, the amount outstanding was US$12,800 and averred, that, when the arbitral award is registered, it will be registered in that sum.

The first respondent reiterated, that, it was not fatal to an arbitral award if parties agreed to forgo an oral hearing and mandated the arbitrator to make a determination on the basis of written submissions.

The second respondent opposed the application and averred that it had no interest in the outcome of the matter, but merely wished to protect itself against an adverse order as to costs.

The second respondent averred, that, it was given a mandate to manage the applicant's property, Number 7 Westcott Road, Mt Pleasant, Harare, in August 2011.

Pursuant to that mandate, it secured the first respondent as a tenant for those premises. It averred that a dispute arose between the parties which resulted in the first respondent terminating the lease agreement and to demand a refund of rentals and deposit paid in advance.

The second respondent confirmed that both the applicant and the first respondent requested that it submit a written report to the arbitrator....,.

In regards to the merits of the matter, the second respondent averred that it failed to find any justification in the applicant's complaints against its report - which the applicant had specifically requested that it be submitted to the arbitrator.

Copies of e-mails between the parties were attached to confirm the second respondent's version of events.

The second respondent reiterated that the applicant's contention, that it was not given an opportunity to be heard, were entirely devoid of merit....,.

The question that the court must determine is whether the arbitral award handed down by the third respondent is contrary to public policy in Zimbabwe as envisaged by Article 34 of the Model Law, Arbitration Act [Chapter 7:15].

In other words, did the third respondent grant the arbitral award without proper consideration of the terms of the lease agreement between the parties; without affording the applicant an opportunity to be heard; or with fraud and corruption?

Article 34 of the Model Law provides that:

“Article 34 Application for setting aside as exclusive recourse against arbitral award

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

(2) An arbitral award may be set aside by the High Court only if —

(a) The party making the application furnishes proof that —

(i)…,.

(ii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii)…,.

(iv)…,.

(b) The High Court finds, that —

(i)…,.

(ii) The award is in conflict with the public policy of Zimbabwe.”

“Article 19 Determination of Rules of Procedure

(1) Subject to the provisions of this Model Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.

(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Model Law, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.”

Article 24 of the Model Law provides that:

“Article 24 Hearings and Written Proceedings

(1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials.”

The test applies to an arbitral award, in order to set it aside on the basis that it is contrary to public policy is that:

“An arbitral decision can only be held to be contrary to public policy if some fundamental principle of law or morality or justice is violated or if it is so defiant of logic or accepted moral standards that the concept of justice in Zimbabwe would be intolerably hurt.”

See Chanakira v Mapfumo & Anor HH155-10; and Husaihwevanhu & Ors v USF Collaborative Research Programme HH237-10, where the court stated that:

“The courts in this country have construed the defense of public policy very restrictively so that the objective of finality to arbitration is achieved.

It follows, that, the grounds upon which an award may be set aside…, are very narrow. The import of Article 34 and Article 36 of the First Schedule to the Act is not to endow the court before which the award is set aside with powers of appeal to determine the correctness of the decision of the arbitrator;…, an award by the Arbitrator is not contrary to public policy merely because it wrong in law or in fact in reaching the conclusion arrived at…, award…, goes beyond mere faultiness or incorrectness and constitutes a palpable iniquity that is so far reaching…,.”

See Pioneer Transport (Private) Limited v Delta Corporation Ltd & Anor HH18-12.

Based on the provisions of Article 19 of the Model Law, I find that it was entirely proper and permissible for the arbitrator and the applicant and the first respondent to agree on the procedure to be followed.

The arbitrator was even at liberty to conduct the arbitration in such manner as it considered appropriate if the parties failed to agree on which procedure could be used (Article 19(2) of the Model Law).

The power conferred on the tribunal included the power to: “determine the admissibility, relevance, materiality and weight of any evidence.”

There is nothing in the papers filed of record which suggests that the arbitrator did not have these powers.

The evidence placed before this court, via copies of electronic mail communication between the parties, clearly shows that the applicant consented to the matter being determined on the basis of written submissions placed before the arbitrator. The applicant is on record as celebrating the advantages of this course of action as being cheaper and less time consuming.

To turn around now and ask this court to find that the arbitral award was made without affording the applicant an opportunity to be heard is downright dishonest and dishonorable.

Article 24 of the Model Law gives the arbitrator the power to override any agreement between the parties themselves in regards to how the matter should proceed, and stipulates that the arbitral tribunal SHALL decide whether to hold an oral hearing or whether the proceedings shall be conducted on the basis of documents or other materials.

In essence, the conduct of the hearing is entirely at the tribunal's discretion.

There is no onus on the tribunal to hear oral submissions. The onus on the tribunal relates to notification of the hearing; and, an arbitrator has exclusive jurisdiction, contrary to the parties wishes, to decide how to collate evidence. There is no provision to compel the arbitrator to hear oral evidence.

What is required is for all the parties to be notified of the hearing, to be given an opportunity to present their case as stipulated by the arbitrator, and to have sight of the submissions made by the other parties, if in writing.

The second respondent was clearly implored by all the parties to submit a written report to the arbitrator.

A careful reading of the party's emails will confirm this.

There is therefore no basis on which the applicant can aver, that, despite advising the arbitrator that he preferred being heard verbally, his request was denied or ignored. In fact, the evidence before the court is that the applicant submitted the most voluminous written submissions before the arbitrator.

The court has also been unable to find any evidence of fraud on the part of the arbitrator in determining the arbitral award.

There is no evidence that the offence of fraud was committed or reported to the police by the applicant.

Fraud is a criminal offence which involves an element of misrepresentation to deceive another to his prejudice.

There is no evidence that the applicant was operating under any misrepresentation by the arbitrator, or of any prejudice which he may have suffered as a result of such misrepresentation.

According to Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (SC)…, Article 34 of the Model Law “…, means that, if, for example, if the arbitrator was fraudulently misled or bribed by a party, the award, however innocuous, would be contaminated in the process of making and contrary to public policy. There is simply no evidence before the court that the third respondent misrepresented himself in order to deceive or cause prejudice to any of the parties, or that he received a gift or benefitted in any way in reaching the decision that he did.”

The allegations of fraud and corruption against the third respondent, by the applicant, are clearly baseless and without foundation.

The Court has been unable to find any evidence that the arbitrator mis-interpreted the terms of the lease agreement between the parties.

Clearly, the applicant has been unjustly enriched by the deposit and rental in advance paid by the first respondent.

On the termination of the lease agreement, it was just and equitable that the first respondent be re-imbursed US$16,800, in the absence of evidence of fraud, corruption, breach of public policy, breach of the rules of natural justice, as provided in Article 34 of the Model Law.

The test for contravening public policy, that: “…, some fundamental principle of law or morality or justice is violated or if it is so defiant of logic or accepted moral standards that the concept of justice in Zimbabwe would be intolerably hurt” was not established.

There was nothing immoral about the arbitral award that the applicant return monies given to him pursuant to a lease agreement which was terminated before it commenced, due to failure on his part to complete renovations to the property by an agreed date.

That award did not defy logic, or intolerably hurt the concept of justice in Zimbabwe.

In fact, the opposite is true; the concept of justice in Zimbabwe would have been hurt by allowing the applicant to keep the US$16,800. The applicant would have been unjustly enriched at the expense of the first respondent, who was innocent of any wrongdoing which resulted in the termination of the lease agreement.

The applicant is not entitled to have the arbitral award set aside.

Further, the basis of the application before the court is so flimsy; it would appear the application was conceived as a gimmick to frustrate the first respondent by delaying payment. It is for that reason that the court acceded to the application that costs be awarded on a higher scale, to discourage such conduct in future, and to mark its displeasure at the blatant abuse of court process.

This application is entirely devoid of merit and is dismissed with costs on the higher scale of legal practitioner and client.

It is ordered that the second respondent cease to be a party to these proceedings, and that the applicant pay the second respondent's costs on a legal practitioner client scale.

HH109-08 : LLOYD GAMBIZA vs PIKIRAI TAZIVA
Ruled By: GOWORA J

On 1 March 2007, the plaintiff issued summons out of this court for an order as follows:

“(a) An order declaring the agreement, Annexure A to the particulars of the claim, dated 18 December 2006, to have been validly cancelled and incapable of performance.

(b) An order for the return to the plaintiff of motor vehicle Mitsubishi Chariot Reg number AAN 8616, or, alternatively;

(c) Payment of the sum of R17,000 being the balance of the purchase price due to the plaintiff.

(d) Costs of suit.”

The facts which give rise to the dispute are these:

The plaintiff and the defendant were not only friends, they were also business partners. On 18 December 2006, the parties entered into a written agreement of sale in respect of a Mistubishi Chariot owned by the plaintiff. It was agreed between the parties that the vehicle would be sold to the defendant for a price of ZAR25,000 or Z$6 million. A deposit of R8,000 was recorded as having been paid with the balance of R17,000 being paid in two or more installments on or before 20 January 2007.

In his declaration, the plaintiff avers, that, the defendant has not paid any other amount aside from the initial R8,000. He therefore sues for the return of the vehicle or payment of the outstanding amount.

The defendant admits the existence of the agreement and the terms of the written agreement. He agrees that the balance had to be paid by 20 January 2007, but denies that he had breached the agreement as claimed by the plaintiff.

He avers that he tendered payment within the stipulated period but that the plaintiff refused to accept payment because it was not in Rand.

The defendant states, that, the offered payment, in Zimbabwe dollars, as an alternative amount, had been stipulated in the agreement. He tendered, in his plea, payment of the balance owing to the plaintiff against delivery to him of the registration book in respect of the vehicle.

He has also filed a counter-claim where he seeks delivery of the registration book to him against payment by him of the outstanding balance payable in local currency.

I will now deal with the evidence which was common cause between the parties.

The agreement concluded was for the defendant to purchase the vehicle for the sum of the R25,000. The defendant paid an amount of R8,000 on the date that the agreement was signed. The defendant was obliged to have paid the balance by 20 January 2007. However, payment was not effected by the stipulated date. The balance was stated as R17,000 on the agreement.

The Zimbabwe dollar equivalent was not stated in the agreement.

As to the dispute between them, the plaintiff indicated that the defendant had not tendered payment.

During cross-examination, it was clear, however, that the defendant had tendered payment of the Zimbabwe dollar component based on official rates of exchange but the plaintiff had refused to accept any payment in local currency.

There is no indication as to how much the defendant had tendered.

Although in the summons and declaration, the plaintiff had an alternative claim for him to be paid the sum of R17,000 when he gave evidence he indicated that he had abandoned that claim as he said that he had been advised that an individual could receive any payment in foreign currency and that he understood that the agreement was illegal to that extent. He said it was not capable of execution and said that it was, as a result, null and void.

Initially, it was contended, on behalf of the plaintiff, that, the agreement was per se illegal and incapable of enforcement due to the same.

It was further submitted on his behalf, that, not only was the purchase price quoted in foreign currency but that the equivalent in the local currency was calculated by the use of the parallel market rate of exchange which in itself is illegal.

The plaintiff further contended, that, the parties were illegally dealing in foreign currency and that the court was, as a result, precluded from giving effect to the agreement.

The defendant, through his counsel, also conceded that the agreement was illegal and that both parties participated in the illegality. Counsel prayed that I find that the in pari delicto principle applied and that I should let the loss lie where it falls.

Effectively, this would mean that the defendant would retain a vehicle for which he contracted to pay ZAR25,000 and for which he only paid ZAR8,000.

The defendant would thus be enriched at the expense of the plaintiff.

I was not convinced that both counsel had properly addressed the legal issues before me and I requested that they address me further by way of supplementary submissions.

These have now been filed and I am grateful to counsel for acceding to my direction.

The plaintiff now contends, that, the agreement executed by the parties is legal and valid and that the court can give effect to the same. He relies on the provisions of section 4(1) of the Exchange Control Regulations SI109 of 1996, which he says, prescribes the buying, selling, borrowing, lending or exchange of any foreign currency without permission from the Exchange Control authority.

It is contended on his behalf, that, although the agreement provided for payment of the purchase price in foreign currency, this was not illegal as it was not an offence to receive foreign currency.

The defendant has submitted, contrary to the plaintiff, that, the agreement, as it provides for payment of the purchase price in foreign currency, is illegal, and that this court should not give effect to it as that would encourage parties to such agreements to commit illegal acts.

Section 4(1) of the Exchange Control Regulations, S.I.109 of 1996 (“the Regulations”) is in the following terms:

“Subject to subs (3), unless permitted to do so by an exchange control authority;

(a) No person shall, in Zimbabwe -

(i) Buy any foreign currency from or sell any foreign currency to any person other than an authorized dealer or foreign exchange bureau de change; and

(ii) Borrow any foreign currency, lend any foreign currency to, or exchange any foreign currency with any person other than an authorized dealer.”

It is not in dispute, that, when the agreement between the plaintiff and the defendant was concluded the defendant had paid an amount of ZAR8,000 as deposit on part of the purchase price.

In terms of the agreement between the parties, the equivalent of the ZAR8,000 in local currency was $6 million. The rate of exchange was not given, but, it is accepted by both parties that the conversion rate was not the authorized one.

The balance outstanding was stated to be ZAR17,000. The equivalent in local currency was not stated.

Counsel for the plaintiff is correct when he says that the law does not proscribe the conclusion by parties of agreements where prices are quoted in foreign currency.

A careful scrutiny of section 4(a)(ii) of the Exchange Control Regulations, SI109/1996 leads me to the conclusion that his submission is correct. The Regulations do not forbid parties from transacting in foreign currency in general terms, but, they detail specific conduct that involves foreign currency which is then prohibited.

What is pertinent is to determine whether the manner in which the parties herein conducted their agreement falls under the species of proscribed conduct within the ambit of the Exchange Control Regulations, S.I.109/1996. The only word that would apply to the present is 'exchange' and what meaning can be ascribed to it.

The Shorter Oxford Dictionary defines exchange, as a noun, variously, as follows:

“The action, or an act, of reciprocal giving and receiving; a mutual grant of equal interest, the one in consideration of the other.”

In respect of the verb, the dictionary ascribes the following meanings to 'exchange' -

“To change away; to dispose of by exchange; to give or part with (something) for something in return; to give and receive reciprocally; to interchange.”

In Matsika v Jumvea & Anor HH09-03, CHINHENGO J had to consider whether or not an agreement for the purchase of a motor vehicle, within Zimbabwe, in currency other than the local currency was legal.

It is not my intention to traverse the path taken by the learned judge in his examination of the matter, for, to do so, would be repetitive and disrespectful.

He concluded, that, in accordance with the Decimal Currency Act [Chapter 22:04], the legal tender in this country is the Zimbabwe dollar. He also concluded, that, according to the provisions of the Reserve Bank Act [Chapter 22:10], a tender of notes and coins issued by the Reserve Bank, which has not been demonetized shall be legal tender in Zimbabwe. He also found, that, the Reserve Bank Act does not prohibit the transaction by Zimbabweans of business in foreign currency.

With regard to the application before him, on the facts, as presented, the learned judge had no hesitation in finding, that, when the applicant paid US$1,700 and US$1,730, to the respondent, for the purchase price of a vehicle, without first having obtained the permission of an exchange authority, the parties had contravened the Exchange Control Regulations, SI109 of 1996.

In the context in which 'exchange' is used by the legislature in the Exchange Control Regulations, the meaning that can therefore be ascribed to it is “to pay” and “to receive”.

The defendant paid ZAR8,000 without the permission of an exchange control authority, and, in the circumstances, there can be no doubt that this is prohibited by the Exchange Control Regulations.

Thus, the agreement is tainted with illegality and cannot be enforced.

It is trite that there must be no illegality in a contract. An agreement is illegal if the making of the agreement, the performance agreed upon, or the ultimate purpose of both parties in contracting is prohibited by common or statute law, that is, if it is contrary to public policy or is contra bonos mores: see Sasfin (Pty) Ltd v Beukes 1989 (1) SA 1 (A).

A contract will be contrary to public policy if its performance, even though not illegal or immoral, is one which the courts will not enforce because performance would be detrimental to the interests of the community.

From the evidence given by the parties, it emerged that one of the parties, if not both, was aware that their transaction might not have been exactly above board.

The defendant gives as his reason for refusing to pay the balance in Rand the knowledge that the payment in foreign currency was illegal. This, he averred, was the reason why he did not pay, as he was afraid of committing an offence. He does not say when he became aware of the illegality attached to the payment in foreign currency in view of his initial payment of the deposit in foreign currency.

In his declaration, the plaintiff makes the averment, that, the contract was illegal as it contravened the Exchange Control Regulations and thus it was incapable of being enforced.

Whilst the agreement itself is not per se illegal, it has nevertheless been tainted by illegality in that the parties breached the Exchange Control Regulations when they were giving effect to its terms and conditions.

Instead of exchanging Rand, the parties could have calculated the official rate of the local currency and payment made accordingly and thus there would have been legal performance of the agreement.

Whilst the plaintiff has prayed that the agreement be cancelled, and for the return of the motor vehicle, the defendant has counter-claimed for the delivery to him of the registration book of the motor against a tender of payment by the defendant of an amount of $3,840,000 which he states is the outstanding balance on the purchase price.

The question that now confronts me is whether or not the contract can be cancelled or whether it is capable of being enforced thus entitling the defendant to an order in terms of the counterclaim.

I would, on this point, respectfully refer to the comments of GUBBAY CJ in Dube v Khumalo 1986 (2) ZLR 103 (SC)…, where he stated:

“There are two rules which are of general application. The first is that an illegal agreement which has not yet been performed, either in whole or in part, will never be enforced. This rule is absolute and admits no exception: see Mathews v Rabinowitz 1948 (2) SA 876 (W) at 878; York Estates Ltd v Wareham 1950 (1) SA 125 (SR) at 128. It is expressed in another maxim ex turpi causa non oritur actio.

The second is expressed in another maxim in pari delicto est potior conditio possidentis, which may be translated as meaning 'where parties are equally in the wrong, he who is in possession will prevail'.

The effect of this rule is that where something has been delivered pursuant to an illegal agreement, the loss lies where it falls.

The objective of the rule is to discourage illegality by denying judicial assistance to persons who part with money, goods, or incorporeal rights, in furtherance of an illegal transaction.

But, in suitable cases, the courts will relax the par delictum rule and order restitution to be made. They will do so in order to prevent injustice, on the basis that public policy 'should properly take into account the doing of simple justice between man and man.'”

The agreement before me has only been partially performed by either of the parties.

Whilst the defendant had paid less than half of the purchase price, the plaintiff had not really effected delivery in that the registration book had not been given to the defendant and thus he cannot assume ownership of the vehicle.

Although the agreement itself is not illegal, the manner in which the parties performed part of the agreement has rendered it illegal, and, any order on my part that would lead to the performance of the remaining part of the same would have the effect of giving sanction to the actions of the parties in violating the Exchange Control Regulations.

As a court, I am precluded from encouraging, through orders of court, the commission of acts that are proscribed by the law or the further perpetuation of such acts in clear violation of statutory provisions.

I am therefore of the view, that, this is not an agreement that can be given effect to and this, in my view, disposes of the counter claim of the defendant.

The question remaining on this issue is whether I should then declare the agreement duly cancelled.

When something is illegal, it is in fact null and void.

Thus, a declaration that it has been duly cancelled would clothe the agreement with legality. The only logical manner to treat the agreement is therefore to declare that it is of no force and effect.

What remains now is what is to be done with the vehicle.

The defendant, having acknowledged the unlawful nature of the agreement, has submitted that the court has several options on how to dispose of the matter:

(i) The first is to dismiss the plaintiff's claim in its entirety.

(ii) The second option is strike out the quotation of the price in Rand is not appropriate in view of the illegality of the agreement.

(iii) The defendant has also suggested that the defendant be made to pay the equivalent of ZAR17,000 calculated in accordance with the prevailing rates of exchange, and that, consequentially, the plaintiff be ordered to surrender the registration book to the defendant.

The last three options suggested by the defendant would result in the court giving effect to an illegal agreement. This would run counter to the two maxims that were pronounced by GUBBAY CJ in Dube v Khumalo 1986 (2) ZLR 103 (SC).

The usual manner of treating illegal agreements, where the parties to the same are equally to blame, is to let the loss lie where it fell. However, the courts have a discretion, in suitable cases, to relax the par delicto rule in order to do justice between man and man.

The rationale for this discretion is to prevent injustice where one party is enriched at the expense of another.

In Jajbhay v Cassim 1939 AD 537…, STRATFORD CJ stated the following:

“Courts of law are free to reject or grant a prayer for restoration of something given under an illegal contract, being guided in each case by the principle which underlies and inspired the maxim.

And, in this last connection, I think a court should not disregard the various degrees of turpitude in delictual contracts. And, when the delict falls within the category of crimes, a civil court can reasonably suppose that the criminal law provided an adequate deterring punishment, and, therefore, ordinarily speaking, should not, by its order, increase the punishment of the one delinquent and lessen it of the other by enriching one to the detriment of the other.

And, it follows from what I have said above, in cases where public policy is not foreseeably affected by a grant or refusal of the relief claimed, that a court of law might well decide in favour of doing justice between the individuals concerned and so prevent unjust enrichment.”

It is trite, therefore, that, where an agreement is illegal, a court has the discretion to relax the par delicto rule in order to do justice between man and man where the relief granted would be contrary to public policy.

I was not addressed by either counsel on the question whether granting the relief sought would be contrary to public policy, and, as a consequence, I find that I am not constrained from relaxing the par delicto rule.

Considering the circumstances of the case, it is only proper that I do so in order to do justice between man and man.

The plaintiff parted with a valuable item against payment of an amount which was less than half the purchase price. The defendant thereafter did not pay the outstanding amount within the stipulated period. The agreement provided, that, the full purchase price should have been paid before 20 January 2007.

The defendant readily admitted having failed to pay as stipulated therein.

In his evidence, he alluded to an agreement between himself and the plaintiff, concluded in South Africa, where the plaintiff agreed to extend the period by which payment could be made.

The defendant, however, was unable to state the date by when he was supposed to have made payment under the alleged verbal contract.

It is highly improbable, in my view, that the plaintiff, having in the agreement of sale stipulated a time period for payment of the purchase price, would be so accommodating as to allow the defendant an unlimited extension of time by which to pay the balance.

The defendant was already in mora and it would only be sensible and reasonable if the plaintiff was to allow more time to put the defendant on terms about payment.

In his evidence, which was not seriously challenged by the defendant, the plaintiff said he wanted to use the money for a business venture hence his stipulation for a time period on when balance was to have been paid in full.

The plaintiff denied that he had extended the time to the defendant for payment of the balance or that he had given an impression to that effect.

Under cross-examination, the plaintiff had admitted that the defendant had tendered payment of the balance of the purchase price in local currency, at the official rate, and, at that stage, the plaintiff had refused to accept the tender. The plaintiff said the offer to pay in local currency came after he had issued summons against the defendant.

My assessment of the evidence, as a whole, leads me to conclude, that, the plaintiff's version is to be preferred to that of the defendant. Neither he nor his brother impressed me as a witness. I find the plaintiff's version more probable given the prevailing circumstances.

In the premises, I find for the plaintiff.

I therefore make an order in the following terms:

1. The plaintiff's claim is granted to the extent that the defendant be and is ordered to restore possession to the plaintiff of a Mistubishi Chariot motor vehicle registration number AAN 8616 within ten (10) days of the date of service of this order failing which the Deputy Sheriff is hereby authorized to seize and recover the same from wherever it is situate and from whomsoever is in possession of the same.

2. The defendant be and is hereby ordered to pay the costs of suit.

HH128-06 : DOBROCK HOLDINGS (PVT) LTD and TURNER AND SONS (PVT) LTD vs TURNER AND SONS (PVT) LTD and ANTHONY TURNER and MARTIN KING and ZAMBEZI PADDLE STEAMER (PVT) LTD and DOBROCK (PVT) LTD
Ruled By: KUDYA J

An order for the consolidation of these two matters was granted by UCHENA J, by consent, with no order as to costs, on 2 June 2006, for hearing before me on 7 June 2006 in Case Number 3157/06.

The first application, Case No. HC5186/05, concerns an order for specific performance while the second one, Case No.5264/05 seeks an order for the provisional liquidation of Zambezi Paddle Steamer (Pvt) Ltd (hereinafter called ZPS).

On 7 June 2006, at the request of the parties, I postponed the hearing to 13 July 2006.

When the hearing resumed, Mrs Wood, for Turner and Sons (Pvt) Ltd, applied for the forced recusal of Mr de Bourbon, for Dobrock (Pvt) Ltd, on the basis that he had been an arbitrator between these parties in 1994.

She referred to Pertisilis v Calaterra & Anor 1999 (1) ZLR 70 (H) as authority for the proposition that the legal practitioner who acted for a former client is precluded from representing a different client in circumstances where a conflict of interest is likely to arise between the former and present client. SMITH J set out the basis of the rule…, as being that:

“A legal practitioner who represents the adversary of his own client in litigation would clearly be violating his or her duty of loyalty and the common law rules against conflict of interest.”

He proceeded to survey American, English, South Africa, and Zimbabwean decided cases on the point at pages 74C–77F.

While he held that neither a partner nor his employee could represent an opponent of a former client in order to fulfill the adage that justice must not only be done but that it must manifestly and undoubtedly be seen to be done, he nevertheless permitted a partner to represent the opponent on the basis that there was no allegation that the other partner had acquired information from the papers in the possession of his firm which could be used to the former client's disadvantage.

Mrs Wood contended, that, justice will not be seen to be done if Mr de Bourbon was allowed to represent Dobrock (Pvt) Ltd, especially on the liquidation case, where Turner and Sons allege a deadlock has manifested itself between the joint shareholders, a fact found by Mr de Bourbon, as arbitrator, to exist in his 25 June 1994 ruling.

She further foresaw a need to call Mr de Bourbon on the deadlock issue in the liquidation case.

Mr de Bourbon countered by contending that he did not represent either Dobrock (Pvt) Ltd or Turner and Sons (Pvt) Ltd but acted in a quasi-judicial capacity.

He knew of no law which debarred him from representing either party as long as he had not possessed confidential information which could be used to the detriment of his client's adversary. He referred to Benmac Manufacturing (Pvt) Ltd v Angelique Enterprises (Pvt) Ltd 1988 (2) ZLR 52 (H).

In that case, Mr de Bourbon accepted a general retainer from Angelique Enterprises in a matter in which that company was involved in a dispute with Albco. He was, at that time, already seized with a retainer for Benmac Manufacturing in its contest with Angelique Enterprises, supra. He had accepted the retainer in the matter against Albco after assurance from his instructing attorney that there would be no conflict of interest.

It was accepted, in that case, by that attorney, that, he had not come into contact with any confidential information which would prejudice Angelique Enterprises in its contest with Benmac. The Law Society, and two other counsel, had absolved him of any impropriety, but, the Managing Director of Angelique Enterprise, Mr Holland, was not satisfied with their findings and advice.

REYNOLDS J held, that, Angelique Enterprises had not shown that Mr de Bourbon had in fact become acquainted with information that could be used to its detriment which would result in real mischief and real prejudice if he continued to act for Benmac Manufacturing. He did express his reservation on a legal practitioner acting for and against his client in the same or different matters.

Mr de Bourbon submitted that he had not acquired any information that he could possibly utilize to the prejudice of Turner and Sons (Pvt) Ltd and that his impartiality in 1994 had not been impugned by any of the parties.

I went through the arbitral award.

It concerned and dealt with the share of each joint shareholder in the extra costs, which were above the original cost of construction of the large commercial houseboat which Zambezi Paddle Steamer (Pvt) Ltd (ZPS) was to own.

Turner and Sons (Pvt) Ltd was not able to show what information Mr de Bourbon accessed which could prejudice its present defence and claim. If anything, I was satisfied that the arbitral award stands on its own and there would be no need to call the arbitrator to testify on it.

I accordingly dismissed the application for the forced withdrawal of Dobrock (Pvt) Ltd's counsel.

I also postponed the hearing sine die and granted, by consent, authority to Turner and Sons (Pvt) Ltd to file a further affidavit in response to Dobrock (Pvt) Ltd's supplementary affidavit.

I further reserved the question of costs in the provisional liquidation claim to which these additional affidavits pertained.

I eventually set down the matter for hearing on 1 November 2006. I directed that the parties argue the specific performance case first and thereafter proceed to argue the liquidation case.

On 12 October 2005, Dobrock (Pvt) Ltd filed the court application for specific performance against Turner and Sons (Pvt) Ltd and two others. It sought the following order:

“1. That, the respondents, jointly as well as severally, the one paying the other to be absolved shall forthwith undertake all that is necessary and required, including making all payments and completion and signing all documents required in order to procure transfer, without delay, by first respondent to applicant of first respondent's entire shareholding in Zambezi Paddle Steamer (Pvt) Ltd.

2. That, immediately upon registration of transfer in the share register of Zambezi Paddle Steamer (Pvt) Ltd (ZPS) applicant shall pay to first respondent the balance of the purchase price for the said shares; such balance being the sum of $138 million.

3. That, the respondents, jointly as well as severally, the one paying the other to be absolved, shall pay the costs of this application on the scale of legal practitioner and own client.”

The application was served on the three respondents on 13 October 2005 (see Peter Dobson's opposing affidavit of 9 November 2005 for which this averment was accepted by Antony Turner on 2 December 2005).

The three respondents filed their opposition papers on 27 October 2005 and prayed for the dismissal of the applicant's case with costs on the higher scale and made reference to the liquidation claim, case number HC5264/2005.

Case number 5264/05 is a court application brought on 17 October 2005 by Turner and Sons (Pvt) Ltd against Zambezi Paddle Steamer (Pvt) Ltd and Dobrock (Pvt) Ltd. It prayed for the winding up of Zambezi Paddle Steamer (Pvt) Ltd and that a liquidator be appointed in the following terms:

“1. That, first respondent, Zimbabwe Paddle Steamers (Pvt) Ltd be provisionally wound up pending the granting of an order in terms of paragraph 3 hereof or the discharge of this order.

2. That, Mrs Theresa Grimmel, of KPMG Chartered Accountants, Mutual Gardens, 100 The Chase, Emerald Hill, Harare be appointed as provisional liquidator of first respondent company with the powers set out in section 221 of the Act.

3. Any interested party appear before this court sitting at Harare on (a date sixty days from the date of the order) to show cause why an order should not be made placing first respondent's company in liquidation and order that the costs of these proceedings all be costs of the liquidation.

4. That, this order shall be published once in the Government Gazette and once in the Herald Newspaper. Publication shall be in the short form annexed to this order.

5. Any person intending to oppose or support the application on the return day of this order shall:

5.1. Give due notice to the applicant at Messrs Byron Venturas & Partners, 2nd Floor Tanganyika House, Corner 3rd Street/Kwame Nkrumah Avenue, Harare.

5.2. Serve on the applicant, at the address given above, a copy of any affidavit which he files with the Registrar of the High Court.”

The application for provisional liquidation was served on the respondents on 17 October 2005, who entered opposition on 31 October 2005 and filed, on that day, their opposing affidavit by fascimile. The actual opposing affidavit was filed on 9 November 2005.

These two applications were consolidated on the bases that the principal parties were the same and that the fundamental issue in each matter related to the ownership and management control of Zambezi Paddle Steamer (Pvt) Ltd (ZPS).

The pleadings in these consolidated matters are voluminous.

The founding, opposing, answering and supplementary affidavits are reinforced by an assortment of attachments which consists of the Memorandum of Association of Zambezi Paddle Steamer (Pvt) Ltd, electronic mail between the parties, and other documents raised by various people who worked for the parties in various capacities.

I have read all these documents.

It is apparent from these documents that there are areas in which the parties agree and others where they are at variance.

It is appropriate that I first deal with the facts as I have determined them to be from the wealth of information that is set out in the pleadings in both these cases.

The preliminary details on the formation of Zambezi Paddle Steamer (Pvt) Ltd (ZPS), on 3 April 1989, are set out in detail by Anthony Turner (Antony) in his founding affidavit in the liquidation matter, case HC5264/05 (Case No.2). Those details were admitted to by Peter Jameson Dobson (Peter) in his opposing affidavit in that case.

Turner and Sons (Pvt) Ltd agreed with Dobrock (Pvt) Ltd, in 1988, on a joint venture to construct and thereafter operate a 'Mississippi River Boat' for commercial use on Lake Kariba.

The concept of the “Southern Belle” was created by Turner and Sons (Pvt) Ltd who approached Dobrock (Pvt) Ltd.

Dobrock (Pvt) Ltd agreed to become its joint partner in the venture and to provide working capital and investment in the project.

Zambezi Paddle Steamer (Pvt) Ltd was incorporated as the special purpose vehicle through which the large commercial houseboat, MV Southern Belle, would be owned and operated.

Zambezi Paddle Steamer (Pvt) Ltd was incorporated in terms of the Companies Act [Chapter 24:03] with an issued share capital of $30,000 divided into 30,000 shares of $1 each fully paid up. Each of the two joint partners subscribed to 15,000 shares of $1 each in Zambezi Paddle Steamer (Pvt) Ltd.

The joint shareholders agreed that Turner and Sons (Pvt) Ltd would first build a model of the craft, and, thereafter, carryout the necessary construction work and interior design of the vessel at a contracted price. Dobrock (Pvt) Ltd would source both local and foreign raw materials for this construction. The total costs of both these operations would be the total cost of the vessel and would be met equally by the joint shareholders.

The agreement was reduced to writing and signed on 31 May 1991.

The arbitral award, of 15 June 1994, indicated that the vessel was completed in 1994. The original construction price was set at $5,950,000.

The issue before the arbitrator centred on the amount by which the original contract price increased, which issue he resolved.

Zambezi Paddle Steamer (Pvt) Ltd was run for 18 months, from the completion of the vessel in 1994, by Turner and Sons (Pvt) Ltd. Dobrock (Pvt) Ltd thereafter took over the management control of Zambezi Paddle Steamer (Pvt) Ltd and appointed a Managing Director, Adamson, to run it.

It was common cause, that, from 2000, the tourism industry went into decline and this affected the bottom line of the MV Southern Belle operations of Zambezi Paddle Steamer (Pvt) Ltd.

There is evidence, in the form of electronic mail exchanged between Peter Jameson Dobson and Anthony Turner, the principal shareholders in Dobrock (Pvt) Ltd and Turner and Sons (Pvt) Ltd, respectively, between 19 January 2003 and 7 April 2004, that, the joint shareholders were prepared to sell their respective shareholdings in Zambezi Paddle Steamer (Pvt) Ltd to the right suitor - if one came along.

On 4 May 2004, Zambezi Paddle Steamer (Pvt) Ltd Managing Director presented a report which highlighted the difficult circumstances the commercial houseboat operations were in. It required urgent maintenance and refurbishment to attain its former glittering glory.

On 6 June 2004, Anthony Turner indicated his decision to sell his shares in the commercial houseboat to Peter Jameson Dobson. This was a clear pointer to his unwillingness to inject funds for maintenance and refurbishment of the houseboat.

On 18 June 2004, Peter Jameson Dobson indicated his willingness to inject $250 million, for this purpose, provided his shareholding in Zambezi Paddle Steamer (Pvt) Ltd increased by 10% while that of Anthony Turner was reduced by the same percentage. He suggested that the houseboat was valued at approximately $3.5 billion. He followed up this by another e-mail of 25 June 2004.

He received a response on that same day (contained in an email wrongly dated as 6 June 2004) from Anthony Turner in which he offered him his shareholding in Zambezi Paddle Steamer (Pvt) Ltd for the sum of $250 million.

Peter Jameson Dobson duly accepted the offer.

He came to Harare, and, during the period 28 June to 14 July 2004, discussed with Anthony Turner on the terms of payment of Antony's entire shareholding.

He agreed to procure payment where and when Anthony Turner wanted.

The purchase price was agreed at $250 million. It was to be paid by Peter Jameson Dobson into the account of Antony's daughter, Jenny, in the United Kingdom, the bank account details of which he received.

The following day, after the terms of payment had been agreed, Anthony Turner requested part payment of the purchase price in local currency.

Peter Jameson Dobson alleged that he made out cheque payments to Chitekeshe of $115 million and to Vretto of $25 million, as part payment, a total of $140 million which Anthony Turner used to buy a pick-up truck.

This averment was not disputed by Anthony Turner, yet, he maintained, in his other affidavits, that, he was paid $138 million and $112 million remained outstanding.

Peter Jameson Dobson, in his prayer, and in Mr de Bourbon's submissions on behalf of Peter's company, accepted that the outstanding purchase price was $112 million.

No cheques or proof of payment in the sum of $140 million was produced.

I am therefore prepared to hold, that, Peter Jameson Dobson paid $138 million and had an outstanding balance of $112 million.

Anthony Turner averred, in his opposing affidavit, that, he required £12,000 to import a new engine for the craft that he was building, known as the “Zambezi Trader”. This craft would not be in competition with the houseboat at all and he was building it for his own account with the moral support and blessing of Peter Jameson Dobson.

Peter Jameson Dobson agreed to pay this amount into his daughter's bank account in the United Kingdom.

He repeated this allegation in paragraphs 31 and 32 of his founding affidavit in Case No. HC5264/05.

This was to be in lieu of the balance of the purchase price of $112 million.

In Case No. 5264/05, in paragraphs 26 and 27 of his opposing affidavit, Peter Jameson Dobson did not respond to these averments in so far as they refer to the alleged mode of payment in foreign currency.

That payment was to be in foreign currency is clear from Peter Jameson Dobson's own founding affidavit.

In paragraph 18, he averred, that, even when he met Anthony Turner, per chance, at the Borrowdale Race Course, in November 2004, he reassured him, that, notwithstanding the fall in the value of the Zimbabwean dollar against the Pound Sterling, the amount outstanding as the purchase price remained £12,000 being the amount in pounds in July 2004.

The two gentlemen agreed, that, the accountant and company secretary of Zambezi Paddle Steamer (Pvt) Ltd, Paul Turner (Paul), a partner in Ernst and Young Chartered Accountants, would effect the share transfer and receive Anthony Turner's letter of resignation as a director therein.

There was a delay in the transfer of the shares which was occasioned by Paul Turner's attempts to structure a tax avoidance scheme for the benefit and at the insistence of Antony Turner.

I make this finding based on Antony Turner's deliberate failure to respond to Paul Turner's affidavit, which was filed in support of Peter Jameson Dobson's founding affidavit.

It was agreed, that, on 3 August 2004 and 21 August 2004, Peter Jameson Dobson wrote to Anthony Turner enquiring whether or not he had signed the necessary transfer documents and resigned as a director of Zambezi Paddle Steamer (Pvt) Ltd - the two factors which would trigger the payment of the balance of the purchase price by Peter.

It also appears, that, even on 5 November 2004, a date disputed by Athony Turner, who put it as being sometime in September 2004, when the two met at Borrowdale Race Course, Antony intimated that he had been too busy to visit Paul Turner. The parties re-affirmed, that, despite an adverse movement of the Zimbabwe dollar since July 2004, the balance of the purchase price would be paid into Antony's daughter's account in the United Kingdom at the exchange rate agreed in July 2004.

On 17 January 2005, Antony Turner proceeded to appoint Peter Drummond and Martin King as directors of Turner & Sons (Pvt) Ltd, in his stead, who were charged with the responsibility of overseeing Turner & Sons (Pvt) Ltd's interests in the Southern Belle.

A flurry of e-mails followed which attempted to resolve the issue of the sale of Antony Turner's shares in Zambezi Paddle Steamer (Pvt) Ltd, who was claiming, that, the failure by Peter Jameson Dobson to pay the balance of the purchase price timeously amounted to repudiation of the contract.

He therefore regarded himself released from the contract.

The negotiations by the parties culminated in a letter of 23 August 2004 by Turner & Sons (Pvt) Ltd's erstwhile legal practitioners to Dobrock (Pvt) Ltd's legal practitioners which set out the history of their association.

In that letter, Turner & Sons (Pvt) Ltd indicated that it would seek an order to wind up the company in terms of section 206(g) of the Companies Act [Chapter 24:03].

Dobrock (Pvt) Ltd held the firm belief that it had purchased Turner & Sons shareholding and was therefore the sole shareholder in Zambezi Paddle Steamer (Pvt) Ltd.

These disagreements resulted in the two applications, for specific performance and liquidation, that are now before me.

The first issue for determination is whether or not a binding contract of sale was reached between Dobrock (Pvt) Ltd and Turner & Sons (Pvt) Ltd.

It is, I believe, common cause that an agreement of sale was entered into.

In its opposing affidavit, in paragraph 17, Turner & Sons (Pvt) Ltd acknowledges that the parties had a loose gentleman's agreement. Antony Turner concludes that paragraph by stating that "I believe, with respect, that the only explanation that is reasonable in the circumstances is that applicant repudiated the contract."

Paragraph 49(iii), in Case No. HC5264/05, by Turner & Sons (Pvt) Ltd, is to the same effect.

Turner & Sons (Pvt) Ltd's defence was, in the main, predicated on repudiation by conduct of the contract that was executed between the parties. Indeed, Mrs Wood, for Turner & Sons (Pvt) Ltd, in paragraph 2 of her written heads of argument, wrote:

"It is apparent from the applicant's own case that the agreement in question was very loose even if it was binding between the parties."

Counsel concentrated their submissions on the question whether time was of the essence in the performance by Dobrock (Pvt) Ltd of the term relating to payment of the outstanding purchase price.

It was on the assumption that it was of the essence that Turner & Sons (Pvt) Ltd alleged repudiation.

The onus, in my view, lies on Turner & Sons (Pvt) Ltd to show that time was of the essence and that the failure by Dobrock (Pvt) Ltd to act timeously entitled it to rescind the contract.

Turner & Sons (Pvt) Ltd blamed Dobrock (Pvt) Ltd for the delay in paying the balance of the purchase price.

The facts, as I find them, do not bear out the correctness of Turner & Sons (Pvt) Ltd's view.

Paul Turner indicated, in his unchallenged affidavit, that, the tax avoidance scheme was initiated at the instance of Antony Turner, and was for Turner & Sons (Pvt) Ltd's benefit.

My view is that, at that stage, Paul Turner was working as an agent of Turner & Sons. It became, in my finding, the duty of Turner & Sons to impress on him to act with speed if time was of the essence to it.

It is clear to me, that, Antony Turner understood and appreciated that the balance of the purchase price would not be paid out until the share transfer had been effected by Paul Turner; until Antony Turner had resigned as a director of Zambezi Paddle Steamer (Pvt) Ltd; and, until Antony Turner had obtained a capital gains clearance certificate from the Zimbabwe Revenue Authority (ZIMRA).

The delay cannot, therefore, be attributed to Dobrock (Pvt) Ltd.

Peter Jameson Dobson, after all, was desirous that transfer be effected with speed as shown by his enquiries of 4 August and 21 August 2004 which Antony Turner did not acknowledge.

Antony Turner never did challenge the averment, that, when they met at Borrowdale Race Course, he indicated that he was responsible for the delay for he was too busy to make a follow up with Paul Turner.

Paul Turner, after all, was acting, as regards the tax avoidance scheme only, as an agent of Antony Turner.

It is therefore my finding, on the papers, that, it was in fact Antony Turner who was responsible for the delay. He could not, therefore, lawfully repudiate the contract by projecting his own inaction onto Dobrock (Pvt) Ltd.

Mrs Wood contended, with reference to Concrete Products Co. (Pty) Ltd v Natal Leather Industries 1946 NPD 377…, and Broderick Properties v Rood 1962 (4) SA 447 that the mere fact that the agreement did not provide a particular date of performance did not mean that time was not of the essence.

She submitted, that, to Peter Jameson Dobson's knowledge, Antony Turner had to purchase an engine for another boat that he was building for £12,000 immediately, that is, at the time that they concluded the agreement.

In her view, though not spelt out in the oral agreement, the nature of that agreement, and the purpose to which Antony Turner wanted to utilize the funds were inherently indicative that both parties contemplated that payment had to be speedily made.

Speed payment was inherent in the agreement itself.

The proposition, in my view, conforms with the examples that were highlighted in Broderick Properties v Rood 1962 (4) SA 447 concerning the purchase of theatre tickets and repairs of a motor vehicle at a garage which are required for use within a set time frame.

The appreciation that I attribute to Antony Turner, of the conditions that had to be fulfilled before payment was made, in my view, removes his case from one relating to mora ex re (time set out in the contract) to one of mora ex persona, which requires demand before the time limits for performance are reached.

I associate myself with the statement of law that was propounded by GUBBAY CJ in Asharia v Patel 1991 (2) ZLR 276…,. He stated thus:

"The general applicable rule is that where time for performance has not been agreed upon by the parties, performance is due immediately on conclusion of their contract or as soon as is reasonably possible in the circumstances. But, the debtor does not fall into mora ipso facto if he fails to perform forthwith or within a reasonable time. He must know that he has to perform.

This form of mora, known as mora ex persona, only arises if, after a demand has been made calling upon the debtor to perform by a specified date, he is still in default.

The demand, or interpellatio, may be made either judicially, by means of a summons, or extra-judicially by means of a letter of demand, or even orally; and to be valid, it must allow the debtor a reasonable opportunity to perform by stipulating a period of performance which is not unreasonable - if unreasonable, the demand is ineffective.

Where a debtor has fallen into the mora ex persona after demand, the creditor can acquire a right to cancel the contract by serving notice of rescission, in which a second reasonable time limit is stipulated, making time of the essence. Both demand and notice of rescission are necessary in order to allow for cancellation for non-performance. The two may be, and commonly are, contained in the same notice. Such notice will then fulfil a double function. It will fix a time for performance after which the debtor will be in mora, and create a right in the creditor to rescind the contract on account of the mora."

In the present case, payment of the purchase price was not due immediately on conclusion of the contract. It was due as soon thereafter as was reasonably possible in the circumstances.

The circumstances related to the transfer of Turner & Sons (Pvt) Ltd's shareholding by Paul Turner; receipt by him of Antony Turner's resignation letter; and of a clearance certificate from the Zimbabwe Revenue Authority (ZIMRA).

It was within Antony Turner's power to expedite these matters.

Indeed, that it was not immediate was clearly demonstrated by the use put by Antony Turner of the part payment which was made of $138 million. He bought a pick up vehicle.

He also was duty bound to place Peter Jameson Dobson in mora if he believed that a delay had been occasioned in paying up the outstanding balance of the purchase price.

CHRISTIE, in The Law of Contract in South Africa, 3rd edition, Butterworths, 1996 deals with the line of cases culminating in Broderick Properties v Rood 1962 (4) SA 447 at pages 556 to 557. At page 555 he stated:

"The general rule will be seen in the next section, is that, when the contract does not fix a time for performance there can be no mora ex re, only mora ex persona; so, a demand by the creditor is necessary in order to place the debtor in mora. Whether there are exceptions to this general rule is a question that has led to differences of judicial opinion, but the present law can be stated with a fair degree of confidence."

It seems to me, that, in Zimbabwe, Asharia v Patel 1991 (2) ZLR 276 has provided the answer.

It confirms the correctness of the general rule as set out by CHRISTIE.

It appears to me too, that, the differences of judicial opinion that CHRISTIE noted may be resolved by applying the general rule to the particular facts of each matter in order to ascertain its validity to the time frames as contemplated by the parties. It is only after this has been done that a decision on whether mora ex re or mora ex persona applies can be made.

I, therefore, hold, in the present matter, that, Turner & Sons (Pvt) Ltd could not lawfully repudiate the contract without first placing Dobrock (Pvt) Ltd in mora.

Mrs Wood further submitted, with reference to section 11(1) of the Exchange Control Regulations 1996, SI109 of 1996, that, on the applicant's own case, the agreement was illegal because payment of the balance of the purchase price was to be made outside the country.

Mr de Bourbon, on the other hand, submitted that the contract was not illegal.

He contended, that, there was nothing on the papers to show that the obligations of Dobrock (Pvt) Ltd would be met by it. Rather, so he opined, it was only in the nature of assistance between friends, between Peter Jameson Dobson and Antony Turner which was permissible in terms of the Exchange Control Regulations.

There is a plethora of cases which have been determined by both the High and Supreme Court which are in point.

My starting point is section 11 of the Exchange Control Regulations 1996, S.I.109 of 1996. It reads:

"11(1) Subject to subsection (2) unless otherwise authorized by an exchange control authority, no Zimbabwean resident shall -

(a) Make payment outside Zimbabwe; or

(b) Incur any obligation to make payment outside Zimbabwe.

(2) Subsection (1) shall not apply to:

(a) Any act done by an individual with free funds which were available to him at the time of the act concerned;

(b) Any lawful transaction with money in a foreign currency account."

Mrs Wood contended that Dobrock (Pvt) Ltd was registered in Zimbabwe and was therefore resident in this country.

This contention is, in my view, correct, as it reflects the position set out in section 3(1) of the Exchange Control Regulations 1996, SI109/1996 for artificial persons.

She further contended that Dobrock (Pvt) Ltd had not shown that it had been authorized by the Exchange Control Authority before it incurred the obligation to make payment outside Zimbabwe. It had not demonstrated that this was a lawful transaction with money in a foreign currency account. She contended further, that, the free funds exception was applicable to individuals and not to companies, and that Dobrock (Pvt) Ltd could not save the agreement on that basis as it was inapplicable to it.

In International Who's Who Ltd v Bernstein Clothing (Pvt) Ltd SC28-99, MUCHECHETERE JA, considered the effect of section 8(1) of the Exchange Control Regulations RGN 399/77 where the respondent, a limited liability company, registered locally, incurred an obligation to pay 20,450 Swiss francs to the appellant, a limited liability company registered in England, in Johannesburg, for transmission to Vaduz, Switzerland.

The respondent raised a point in limine averring illegality.

At page 4-5 of the cyclostyled judgment, the learned judge of appeal stated as follows:

"At the outset, I should state that I agree with Mr Moyo's submission, that, the contract between the parties was illegal, invalid, and unenforceable because it was in breach of section 8(1) of the said Regulations. The provisions of the section are peremptory: see Abreu v Campos 1975 (1) RLR 198 and Swart v Smuts 1971 (1) SA 819 at 829-30.

As already indicated above, the appellant conceded that no authority had been obtained by the parties from the relevant authority for any payment outside Zimbabwe when the contract was entered into.

On the law, see Macape (Pty) Ltd v Executrix, Estate Forrester 1991 (1) ZLR 315 at 320D-E where McNALLY JA said:

'In other words, when one is concerned with payments INSIDE Zimbabwe (section 7 of the said Regulations) it is perfectly lawful to enter into the agreement to pay. But, without authority from the Reserve Bank, the actual payment may not be made. By contrast, when dealing with payments OUTSIDE Zimbabwe (section 8 of the said Regulations) it is unlawful even to enter into the agreement to pay without first obtaining the authority of the Minister which has been delegated to the Reserve Bank.' (my emphasis)

See also Abreu v Campos, supra; Young v Van Resnburg 1991 (2) ZLR 149 (S) at 155; Adleu v Elliot 1988 (2) ZLR 283 (S) at 287.”

The facts in Young v Van Resnburg 1991 (2) ZLR 149 (S) are distinguishable from the present matter.

It involved individuals who were foreign residents.

Its importance, in my view, lies in the sentiments of KORSAH JA, at page 153G-154A, where he agreed with Mr de Bourbon, in that case, that, subparagraph 8(1)(a), which barred a Zimbabwean resident from doing any act, outlawed the doing of even a single act.

It is noteworthy that section 8 of the 1977 Regulations is the precursor to section 11 in the 1996 Regulations, even though there are some variations in the wording of the two sections in these respective Regulations.

In International Who's Who Ltd v Bernstein Clothing (Pvt) Ltd SC28-99, MUCHECHETERE JA agreed with the observation of McNALLY JA in Macape (Pty) Ltd v Executrix, Estate Forrester 1991 (1) ZLR 315 that an agreement to pay outside Zimbabwe by a resident, without Exchange Control authority, where the resident was not an individual without free funds or where the resident was not utilising money in a foreign currency account, was void ab initio.

In Hattingh and Others v Van Kleek 1997 (2) ZLR 240 where a foreign visitor to Zimbabwe, Van Kleek, who was not aware that the Exchange Control Regulations prohibited local residents from incurring obligations to pay money abroad, agreed to give a loan to a Zimbabwean to be used to develop a Safari business and the money loaned was to be paid into that Zimbabwean's bank account outside Zimbabwe, and that Zimbabwean, and two other locals, signed a promissory note to repay the loan, the High Court then ordered the locals to repay the loan.

They appealed on the basis that they acted illegally by incurring an obligation to make payment outside Zimbabwe without the requisite Exchange Control authority.

The appeal was dismissed.

KORSAH JA held at page 244D that:

“Section 8 of the Regulations only prohibits, but does not declare void or illegal, the transactions enumerated therein” and found that the transactions did not contravene section 8 of the Regulations.

At page 246B he stated:

“The cases clearly show, that, where a contract is, on the face of it, legal but, by reason of a circumstance known to one party only, is forbidden by statute, it may not be declared illegal so as to debar the innocent, party relief, for to deprive the innocent person of his rights would be to injure the innocent, benefit the guilty, and put a premium on deceit.”

The facts of Hattingh and Others v Van Kleek 1997 (2) ZLR 240 are distinguishable from the present matter.

In addition, in casu, both parties were aware that their agreement fell foul of the Exchange Control Regulations.

In Greebe & Another v Famaps Investments (Private) Limited & Anor HH124-04, MAVANGIRA J dealt with the question whether a local resident could withhold and keep the assets that accrued to him from a sale by another local resident of those assets situated in Zimbabwe in circumstances where no payment was made abroad as agreed, on the basis that to do so would violate section 11(1)(b) of the Exchange Control Regulations 1996, S.I.109/1996.

She held that while the agreement contravened section 11 of the Exchange Control Regulations, the facts called for a relaxation of the par delictum rule, for, if she were to decline to do so, she would reward the purchaser by giving him a premium for deceit.

In Adleu v Elliot 1988 (2) ZLR 283 (S) GUBBAY JA…, recognised, that, in oral contracts, the court had the power to determine whether the terms of that contract required exact performance or the performance of some equivalent act. He stated thus:

“The application of this broad principle [that it is not for the court to remake a contract of the parties in line with INNES CJ in Ambrose and Aitken v Johnson and Fletcher 1917 AD 327 at 343 and the remarks of BEADLE CJ in Holmes v Palley 1975 (2) RLR 98 (AD) at 105C that one party to a contract was not entitled to expect that it will be carried out in a different manner than agreed because of the absence of prejudice] does not, of course, preclude a court from determining whether the parties to an agreement intended that a particular term thereof was to be fulfilled in forma specifica, that is, in the exact manner agreed upon by the parties or per acquipollens, that is, by some equivalent act.

Where the agreement is in writing, and the language employed is sufficiently clear, the common intention of the parties must be extracted from the agreement itself. But, if the language is ambiguous or where the agreement of the parties was oral, then, the court is obliged to have regard to the surrounding circumstances, and to any other admissible evidence in order to ascertain whether the common intention of the parties was to be fulfilled in forma specifica or whether performance thereof by some equivalent act would suffice.”

In Adleu v Elliot 1988 (2) ZLR 283 (S) the parties entered into an agreement of sale in which part of the purchase price was payable abroad in foreign currency and the remainder at home in local currency. GUBBAY JA approved the four factors outlined by CLAASEN J in Diggelen v de Bruin and Another 1954 (1) SA 188 SWA…, that:

“1. If the surrounding circumstances, and other admissible evidence, afford no clue as to what was in the contemplation of the parties, then, there is a rebuttable presumption in favour of performance in forma specifica. But, the presumption cannot be rebutted where it is clear from the terms of the contract that performance in forma specifica had been stipulated.

2. In case of doubt, the court will be more likely to find in favour of performance per acquipollens if the manner of performing the term is not material and also where performance in forma specifica is impossible through no serious fault on the promissor's part.

3. The act or performance tendered per acquipollens, where such is permissible, must be an equivalent act to that stipulated for or be of such a nature that it can make no material difference to the promise.

4. Where the promissor succeeds in rebutting the presumption mentioned above, there may be circumstances falling short of impossibility and even where there may be some fault on the part of the promissor; a court may be justified in concluding that the promissor's perfomance, or tendered performance, amounted to substantial performance.”

It seems to me, as appears from Dobrock (Pvt) Ltd 's averment, that, the parties contemplated that payment would be in sterling pounds in England into the account of Antony Turner's daughter, Jenny.

Dobrock (Pvt) Ltd was willing to pay “where and when” Turner & Sons (Pvt) Ltd desired it be made.

The agreement was sealed when Dobrock (Pvt) Ltd agreed to make payment in foreign currency in England.

The parties thus contemplated exact performance and not some substantial performance.

That exact performance was, however, illegal.

There is no room for the application of CLAASEN J's formulation in Diggelen v de Bruin and Another 1954 (1) SA 188 SWA in these circumstances.

It is my view, that, Hattingh and Others v Van Kleek 1997 (2) ZLR 240 does not apply to the present matter.

Dobrock (Pvt) Ltd was aware that it was contravening the Exchange Control Regulations when it promised to pay “where and when” and agreed to pay in England.

This is clear from the lack of particularity on the decision on the mode of payment that is apparent in its affidavits.

I cannot allow this court to be an accomplice to an illegality by enforcing this illegal contract, as prayed for by Dobrock (Pvt) Ltd.

I agree with Mrs Wood, that, Dobrock (Pvt) Ltd's claim on specific performance, and other subsequent relief related thereto, should be dismissed.

After all Dobrock (Pvt) Ltd is not an individual so the free funds exception would not avail it.

The oral agreement was transacted between the parties by individuals who were representing them respectively.

Peter Jameson Dobson did not aver, nor even suggest, that he had free funds from which he would pay Turner & Sons (Pvt) Ltd.

Even though he was an individual, he was acting for Dobrock (Pvt) Ltd. He had no Exchange Control approval to incur the liability to pay on behalf Dobrock in foreign currency in England.

The agreement reached is illegal, invalid, and unenforceable: see also Barker v African Homesteads Touring and Safaris (Pvt) Ltd & Anor SC18-03.

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

The facts, which are fairly straightforward and common cause in this matter, can safely be summarised as follows:

The applicant is a company duly registered and incorporated in terms of the laws of Zimbabwe. The respondent is a registered commercial bank with a number of branches in Zimbabwe.

The applicant runs two distinct corporate bank accounts with the respondent's Kwekwe branch. As of October 2007, the applicant's two accounts had an aggregate credit balance of forty-seven thousand seven hundred and thirty nine dollars and eighty six cents (US$47,739=86).

The applicant's accepted position is that it is a foreign investor company which is legally in Zimbabwe carrying out a specific purpose, viz, the refurbishment of the blast furnaces of a Zimbabwean Company called Zisco Steel.

The applicant maintained it was not involved in any “foreign exchange” activities.

In October 2007, the applicant's two corporate accounts were debited with an aggregate amount of forty seven thousand seven hundred and thirty nine dollars and eighty six cents (US$47,739=86) without its consent and approval.

The applicant engaged the respondent with a view to recovering its money, to no avail, hence the instant application.

The Respondent's Position

The respondent has offered a two-pronged defence to the application filed by the applicant for the recovery of its money:

(i) Firstly, the respondent has contended, as a point in limine, that, it is improper for the applicant to file a Court Application to recover a debt that is due to it. The correct position is that the applicant ought to have instituted proceedings by way of summons, so the argument went.

(ii) The second point raised in limine is that the applicant has targeted the wrong respondent. It was contended, on behalf of the respondent, that, since the funds in issue are held by the Reserve Bank of Zimbabwe, it is against the Reserve Bank of Zimbabwe that this application should have been directed.

Intricably linked to the second point in limine is the argument, that, by debiting the applicant's corporate foreign currency account, the respondent was merely complying with a directive issued by the Reserve Bank of Zimbabwe to so act.

In elaboration, the respondent's position is that in October 2007, the respondent, together with all other Commercial Banks in Zimbabwe, were directed, by the Reserve Bank of Zimbabwe, to lodge all foreign currency accounts balances in respect of corporate and non-governmental organization accounts with the Reserve Bank of Zimbabwe and to maintain mirror accounts in its own books for purposes of keeping track with these accounts....,.

Was it competent for the applicant to institute proceedings by way of motion proceedings as opposed to issuing out summons?

It is not a rule of thumb that proceedings to recover a debt due must be instituted by way of summons as opposed to motion proceedings. It is clear to me, that, what determines the nature of the proceedings to initiate is whether or not there are material disputes of facts in the action contemplated.

Where the action contemplated is likely to have material disputes of facts, motion proceedings would be incompetent. Institution of proceedings would have to be by way of summons.

With respect, it is not the correct position of law, that, a creditor, in a proper case for a claim sounding in money owing to him, cannot initiate its recovery by way of notice of motion as argued by the respondent's counsel in the instant case.

DE VILLIERS J summed up the correct legal position in Regal Trading Co. (Pvt) Ltd v Coetzee 1956 (1) SA 766 after carrying out a survey of a number of South African decisions when he stated as follows:

“I have come to the conclusion, that, legally, it is not incompetent for a creditor, in a proper case, to claim money owing to him by way of notice of motion, provided, at least, that, the facts are not in dispute. This does not, however, refer to un-liquidated claims for damages. The court has a discretion whether it will allow a creditor to depart from the more usual procedure of rauw actie, and that discretion will depend upon all the circumstances of the case….,.”

It is correct that application procedure is inappropriate where disputes of facts exist.

Where a party alleges the existence of dispute of facts, one is expected to clearly spell out the basis of such dispute as it must be distinct from an “illusory dispute of fact”: see Zimbabwe Bonded Fibreglass (Pvt) Ltd v Peech 1987 (2) ZLR 338 (SC)…,.

That explanation must be rooted in the respondent's opposing papers as opposed to giving them a magnified stature in the heads of argument like what seems to have happened in this case.

I am unable to locate any dispute of facts in this matter except that the parties are unable to agree on the legal implications of the directive given to the respondent. That is certainly not a dispute of facts but a legal issue that must be determined on the papers.

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

The Respondent's Position

The agreed facts are fairly simple and straightforward in this matter:

The respondent, as a commercial banker, undertook to keep the applicant's money and pay it out to the applicant upon demand. The respondent failed to do so when called upon to do so by the applicant. The respondent claimed it had transferred the money into another third party's account....,.

I was not persuaded, at all, by the points in limine and it was for the above reasons that I had no hesitation, at the hearing, in ordering that the matter be heard on the merits.

On Merits

The main thrust of the respondent's position is that it debited the applicant's account pursuant to a directive given by the Reserve Bank of Zimbabwe, and, reference was made to the Exchange Control Regulations of 1996 as the authority behind this directive and section 35 up to section 40 contained in SI109 of 1996 were relied upon as the specific sections which the Reserve Bank of Zimbabwe relied upon in literally ordering the expropriation of the applicant's deposits.

It will be noted, that, the legislature, in its wisdom, qualified the operations of the Exchange Control Regulations, S.I.109 of 1996 by making a specific provision of section 40(3) thereof which read as follows:

“40(3) Orders made under subsection 1 shall not have effect until they have been approved by the Minister and published in the Gazette.”

It appears to me such checks and balances were meant to guard against improper use of the Exchange Control Regulations, and, it follows, that, non-compliance with this mandatory requirement would render any directive unlawful.

It has not been demonstrated to me, by the respondent's counsel, that, the directive by the Reserve Bank of Zimbabwe was lawful or above board.

It occurs to me, that, given the special relationship that existed between the respondent and the applicant, the decision by the former, to interfere with the applicant's deposits, was not one that could have been taken lightly.

In my view, the onus was on the respondent to ascertain the lawfulness of the Reserve Bank of Zimbabwe's directive instead of blindly, or religiously, following the same. The respondent could have satisfied itself by simply relying on its Compliance Division within its institution or by simply seeking counsel's views before taking such a drastic action with the applicant's deposits.

Counsel for the respondent put up a spirited and persuasive argument in support of what she referred to as the predicament faced by the respondent pursuant to a directive given to it by the Reserve Bank of Zimbabwe which required all authorised dealers (respondent inclusive) to transfer to the Reserve Bank of Zimbabwe all corporate foreign currency account balances and to maintain a mirror account for tracking purposes.

In support of her position, counsel relied on the views of MW JONES and HC SCHOEMAN, An Introduction to South African Banking and Credit Law, who described the relationship between a banker and a customer in the following terms:

“…, the banker customer relationship is not based solely on contract, but, imposes many additional duties on banks and customers alike. These duties are established by banking practice and custom, legislation, and court decisions. The relationship between a bank and its customer can thus be described as a contract sui generis or a unique type of contract.”

Building on the views of the two authors, the respondent's counsel argued, that, the directive given by the Reserve Bank was decisive at the material time as the respondent could not have risked losing its banking licence by refusing to comply with the directive in question.

With respect, I am unable to agree with the simplistic interpretation of the relationship between the Bank (the respondent) and the customer (the applicant in the instant matter) by counsel. That interpretation is too narrow and dangerous. It is dangerous and risky in the banking business because it turns to depart from the legitimate expectations of the two contractual parties when they entered into a contract, a unique type of contract.

I take a very strong view, that, the respondent had a natural obligation thrust upon it to protect the applicant's deposits.

As already highlighted elsewhere in this judgment, that duty entailed, inter alia, verifying the legality or otherwise of the directive given by the Reserve Bank of Zimbabwe because the Reserve Bank of Zimbabwe was not privy to the contractual relationship between the applicant and the respondent.

I am extremely impressed by the view taken by their Lordships in the case of Attorney-General for Canada and Attorney-General for the Province of Quebec (and Connected Appeal); Attorney-General for Saskat-Chewan, Alberta and ManiToba 1946 AC p33 at 44 (Privy Council) 1946 AC 33 at 44 when they described the relationship between the bankers and customer in the following terms:

“Their Lordships cannot but think, that, the receipt of deposits and the repayment of the sums deposited to the depositors or their successors, as defined, is an essential part of the business of banking. The relationship between bankers and customer who pays money into the bank is stated in Foley v Hill (1) as 'the ordinary relation of debtor and creditor, with a super added obligation arising out of the custom of bankers to 'honour the customer's drafts'. No question of possession of or property in the deposit arises. The obligation is mutuum not commodatum. Once a deposit is made, there remains only a debt due from the banker to the customer.”

It is clear to me, and it must be the most logical conclusion, that, once money is placed in the custody of a banker, that banker must be held accountable to the depositor of that money. The banker must be able to repay the depositor upon demand.

It is as simple as it comes. It requires no complicated interpretation.

It therefore naturally follows, that, the respondent must account to the applicant of the deposits made to it by the applicant. To hold otherwise would be to create chaos in the banking sector. It would be to allow banks, like the respondent, to ride roughshod on innocent and unsuspecting customers, like the applicant, and would, in addition, severely undermine the assumed integrity of the banking sector.

The penalty which the respondent feared would have visited it, if it had not blindly followed the directive, was specifically provided for.

In terms of section 37 the Exchange Control Regulations, SI109 of 1996, the respondent, as an authorised dealer, was to be given an adequate opportunity to make representations if it felt it had an obligation to protect the deposits made by the applicant. Not only that, but, the Exchange Control Regulations further provided for the process of appeal by the respondent against any decision by the Reserve Bank of Zimbabwe.

It occurs to me, that, what the respondent did in this case was to blindly expropriate the applicant's deposits without due regard to the law and this was obviously ultra vires even the Constitution of this country.

In conclusion, I find that it is inevitably befitting that the respondent should be ordered to reimburse the monies due to the applicant without putting the applicant into further unnecessary cost of insisting that it joins the Reserve Bank of Zimbabwe in these proceedings for the simple reason, that, there was never any privy of contract between the applicant and the Reserve Bank of Zimbabwe.

It is up to the respondent to take appropriate action against the Reserve Bank of Zimbabwe if it so desires.

Costs

It was ironic, that, despite what appears to be reckless execution of its mandate by the respondent, in transferring the applicant's deposits to a third party's account without the consent and/or approval of the applicant, the respondent had the audacity to ask for costs on attorney-client scale against the applicant as its counsel argued for the dismissal of the claim.

I am convinced, that, the inverse must in fact be true.

The respondent has been stubborn in refusing to accede to the applicant's claim. The respondent took an extremely dangerous or casual approach in paying out the applicant's deposits to a third party without the approval and/or consent of the latter let alone before attempting to verify the lawfulness or otherwise of the Reserve Bank of Zimbabwe directive.

I believe the conduct exhibited by the respondent is deplorable and must be punished by an appropriate order for costs.

Accordingly, I grant the following order:

1. That, the respondent pays to the applicant US$38,843=88 and US$8,895=98 being monies unlawfully debited from the applicant's accounts, namely, Account number 8740064001800 and 8740064001801, respectively, totalling to US$47,739=86 (forty seven thousand seven hundred and thirty nine dollars and eighty six cents) within seven (7) days of this order.

2. The respondent be and is hereby ordered to pay interest at the prescribed rate from the date of this application to date of full payment.

3. The respondent be and is hereby ordered to pay costs of suit at a higher scale.

HH636-15 : SALTLAKES HOLDINGS (PVT) LTD and TEMBA MLISWA vs CBZ BANK LIMITED and THE SHERIFF OF ZIMBABWE N.O.
Ruled By: CHIGUMBA J

McNALLY JA said, that, in Deweras Farm (Private) Limited Ors v Zimbabwe Banking Corporation (Private) Limited 1988 (1) ZLR 368 (SC), had the applicants put forward an authoritative affidavit explaining detailed errors in calculation by the Bank, accompanied by a fresh calculation showing the “correct” amount due; and ...

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Law Portal
Zimbabwe

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

Appealed
SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL
Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HB36-15 : BULAWAYO CITY COUNCIL vs BUTTON ARMATURE WINDING (PVT) LTD
Ruled By: MUTEMA J

View Appeal
SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

HH412-21 : ZIMBABWE LEAF TOBACCO vs KEVIN COOKE
Ruled By: DUBE J

HB60-15 : JABULANI NCUBE vs INNOCENT NYATHI
Ruled By: MOYO J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

HH62-14 : JOHANNES MAKONYE vs KENAE RAMODIMOOSI and ENTREDEV PROPERTY GROUP and C.H. LUKAS
Ruled By: CHIGUMBA J

HH109-08 : LLOYD GAMBIZA vs PIKIRAI TAZIVA
Ruled By: GOWORA J

HH128-06 : DOBROCK HOLDINGS (PVT) LTD and TURNER AND SONS (PVT) LTD vs TURNER AND SONS (PVT) LTD and ANTHONY TURNER and MARTIN KING and ZAMBEZI PADDLE STEAMER (PVT) LTD and DOBROCK (PVT) LTD
Ruled By: KUDYA J

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

HH636-15 : SALTLAKES HOLDINGS (PVT) LTD and TEMBA MLISWA vs CBZ BANK LIMITED and THE SHERIFF OF ZIMBABWE N.O.
Ruled By: CHIGUMBA J

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Law Portal Zimbabwe

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

Appealed SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HB36-15 : BULAWAYO CITY COUNCIL vs BUTTON ARMATURE WINDING (PVT) LTD Ruled By: MUTEMA J

View Appeal SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

HH412-21 : ZIMBABWE LEAF TOBACCO vs KEVIN COOKE Ruled By: DUBE J

HB60-15 : JABULANI NCUBE vs INNOCENT NYATHI Ruled By: MOYO J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY Ruled By: KUDYA J

HH62-14 : JOHANNES MAKONYE vs KENAE RAMODIMOOSI and ENTREDEV PROPERTY GROUP and C.H. LUKAS Ruled By: CHIGUMBA J

HH109-08 : LLOYD GAMBIZA vs PIKIRAI TAZIVA Ruled By: GOWORA J

HH128-06 : DOBROCK HOLDINGS (PVT) LTD and TURNER AND SONS (PVT) LTD vs TURNER AND SONS (PVT) LTD and ANTHONY TURNER and MARTIN KING and ZAMBEZI PADDLE STEAMER (PVT) LTD and DOBROCK (PVT) LTD Ruled By: KUDYA J

View Appeal HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD Ruled By: BERE J

View Appeal HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD Ruled By: BERE J

HH636-15 : SALTLAKES HOLDINGS (PVT) LTD and TEMBA MLISWA vs CBZ BANK LIMITED and THE SHERIFF OF ZIMBABWE N.O. Ruled By: CHIGUMBA J

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Law Portal
Zimbabwe

Appealed
SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL
Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HB36-15 : BULAWAYO CITY COUNCIL vs BUTTON ARMATURE WINDING (PVT) LTD
Ruled By: MUTEMA J

View Appeal
SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

HH412-21 : ZIMBABWE LEAF TOBACCO vs KEVIN COOKE
Ruled By: DUBE J

HB60-15 : JABULANI NCUBE vs INNOCENT NYATHI
Ruled By: MOYO J

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

HH62-14 : JOHANNES MAKONYE vs KENAE RAMODIMOOSI and ENTREDEV PROPERTY GROUP and C.H. LUKAS
Ruled By: CHIGUMBA J

HH109-08 : LLOYD GAMBIZA vs PIKIRAI TAZIVA
Ruled By: GOWORA J

HH128-06 : DOBROCK HOLDINGS (PVT) LTD and TURNER AND SONS (PVT) LTD vs TURNER AND SONS (PVT) LTD and ANTHONY TURNER and MARTIN KING and ZAMBEZI PADDLE STEAMER (PVT) LTD and DOBROCK (PVT) LTD
Ruled By: KUDYA J

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

View Appeal
HH310-11 : CHINA SHOUGANG INTERNATIONAL vs STANDARD CHARTERED BANK ZIMBABWE LTD
Ruled By: BERE J

HH636-15 : SALTLAKES HOLDINGS (PVT) LTD and TEMBA MLISWA vs CBZ BANK LIMITED and THE SHERIFF OF ZIMBABWE N.O.
Ruled By: CHIGUMBA J