If
there is anything to which all the parties in this matter are
generally in agreement about, it is that the first applicant is a
businessman of repute, of commendable experience, who has been
conducting business in this country and South Africa for a
considerable period and he is good at what he does.
The
second and third applicants are his companies which he registered in
South Africa while the fourth applicant is yet another company of his
which he controls and is registered in Zimbabwe.
In
the normal conduct of his business, the first applicant acquired
certain shares in the third respondent, registered at the Zimbabwe
Stock Exchange, which he held in the names of his companies which he
has joined as applicants in this matter. The registered shares total
358,207,502 made up of 100,000,000 held by the second applicant under
share certificate number 9945; 8,666,586 held by the third applicant
under share certificate number 12306; and 174,540,961 held by the
fourth applicant under eight (8) different share certificates.
Finding
himself in need of money the first applicant entered into a loan
agreement with the first respondent who had the money and was willing
to give it out on certain terms and conditions. This was in February
2011 and the amount involved was $3,000,000= which the parties agreed
would be repaid by 20 February 2011. As security for the loan, the
first applicant was to surrender, as pledge, the Pelhams shares held
by him through his companies. The delivery was in the form of the
share certificates relating to those shares.
The
first respondent must have been a shrewd business man as well who
went to great lengths in ensuring that he held proper and negotiable
security in the usual and almost predictable event that the debtor
defaulted in payment. In addition to getting the first applicant to
sign two (2) agreements on 9 and 10 February 2011 recording the loan
agreement and the terms, including clauses 3 to 5 of the agreement
signed on 9 February 2011 and clauses 3 and 5.1 of the one signed the
following day, on 10 February 2011…., the first respondent caused
the first applicant to sign further Securities' Transfer Forms
transferring the pledged shares to him.
Clauses
3 to 5 of the 9 February 2011 agreement read:
“3.
The parties agree that such terms and conditions shall include,
inter
alia,
the following:
3.1
The repayment of the debt within a period of 10 days from the date of
lending or within such time the lender, upon receiving satisfactory
explanation from Premier Bank, may prescribe. It is recorded that the
maximum period within which the debt shall be paid is 30 days.
3.2
The borrower has agreed to procure the following securities;
3.2.1…,.
3.2.2…,.
3.2.3…,.
3.2.4
Cause the surrender of Pelhams Limited shares totalling to
380,000,000 held by the entities mentioned in 3.2.1, 3.2 (2) and
3.2.3 to the lender in negotiable form.
3.2.5…,.
4.
The borrower acknowledges and accepts that the lender has disbursed
the aforesaid amount on understanding and condition that the above
named security will be provided.
5.
The borrower warrants that he is the beneficial owner of the security
mentioned and that no other person has an interest or claim to any of
the security mentioned.”
The
second agreement, signed on 10 February 2011, contains Clause 3
thereof which reads;
“Acknowledgment
The
borrower acknowledges that he is truly and lawfully indebted to the
lender in the total sum of USD3,000,000= (Three Million United States
Dollars) (hereinafter referred to as 'the debt).”
Clause
5 provides;
“5.
Security
As
security for the prompt repayment of the debt, the borrower
undertakes and shall procure to provide the following securities:-
5.1.1
Provide a Deed of Suretyship by Dannov Investments (Pty) Ltd.
5.1.2
Provide a Deed of Suretyship by Danoct (Pty) Ltd.
5.1.3
Provide a Deed of Suretyship by Broadway Investments (Pvt) Ltd.
5.1.4
Cause the surrender of Pelhams Limited shares totalling 380,000,000
held by the entities mentioned above to the lender in negotiable
form.
5.1.5…,.”
Clearly,
therefore, the first respondent was not content with a mere surrender
of the shares. He wanted them in “negotiable form.” Writing about
negotiable instruments, the learned author R.H. CHRISTIE, Business
Law in Zimbabwe,
ed 2, Juta & Co Ltd stated…,:
“In
outline, this concept is simply that provided a written instrument
complies with the prescribed formalities, the legal rights which are
written on the instrument may be transferred from person to person
either by mere delivery or by the transferor's signing his name on
the back of the instrument (endorsement) followed by delivery. A
person who takes transfer of the instrument in good faith and for
value then receives title to those rights free from any defences
which might have been available against previous holders ('free
from equities.')”…,.
The
first applicant duly signed on behalf of the other applicants, in
whose names the shares were held, transfer forms in which they
transferred all the shares that had been given as security.
There
can be no doubt, therefore, that in that form and with the transfer
certificates signed by the first applicant, the shares given to the
first respondent were in negotiable form. He could negotiate them
further to other parties.
As
happens so often in this country, the first applicant failed to pay
the debt only succeeding in repaying a small fraction of it - the sum
of $300,000= paid on 21 March 2011. Indeed, up to now, the applicants
have not paid anything further towards liquidating the debt and only
hold on to a vague statement that the amount claimed is disputed.
They have not even begun to explain how a claim based on all the
unequivocal acknowledgments of indebtedness could be disputed.
Be
that as it may, when the first applicant defaulted, the first
respondent negotiated the share instruments, promptly selling all of
them to the second respondent who accepted the shares for value. The
applicants would have none of that. They have brought several
applications, initially trying to prevent the sale and transfer of
the shares and now trying to reverse the transfer. They have been to
the Supreme Court and back still pursuing the same issue.
In
the present application, the applicants seek a declaratur that the
sale of the shares by the first respondent to the second respondent
“constituted unlawful parate
executie”;
that the securities transfer form executed by the fourth applicant in
respect of shares held by it was invalid by reason that the
certificate was defective and that ownership of the shares did not
lawfully pass to the second respondent. The applicants also seek the
return of the shares to them among other relief.
In
his founding affidavit, the first applicant insists that he did not
authorise the first defendant to transfer the shares and that he had
given the documents I have referred to as “a security interest in
the shares” and that he did not pass ownership. For that reason the
first respondent had no right to sell the shares without instituting
legal proceedings against him. Selling the shares as the first
respondent did is a case of parate
executie
which is unlawful self-help. According to the applicants, parate
executie
is unlawful and this should entitle them to the order that they seek.
The
application has been strongly opposed by the first and second
respondents.
The
former insists that he acted lawfully and within his rights conferred
upon him by the agreements of the parties. When he was approached by
the first applicant for the loan he had insisted on negotiable
security being tendered as he did not want security which would be
difficult to dispose of in the event of a default. He wanted the
shares to be in negotiable form to enable him to sell them without
resort to the applicants. This explains the documents the first
applicant had to sign in order to get the loan.
On
its part, the second respondent's position is that considering that
the issues raised by this application have already been subject of
earlier judicial pronouncements, particularly by the Supreme Court,
the present application is an abuse of process.
The
second respondent maintained that when it purchased the shares it had
been shown the agreements entered into between the first respondent
and the applicants including the share transfer forms executed by
them authorising the first respondent to transfer the shares to third
parties. It therefore acted on those and purchased the shares in good
faith and for value meaning that the applicants are estopped from
denying the existence of authority for the first respondent to sell.
Counsel
for the applicants had a difficult time indeed in moving the
application mainly because the application was predicated on a wrong
principle that parate
executie
is unlawful. When he could not sustain that line of argument he was
forced to swing round, almost full circle, to argue that by
contending, in the absence of any contractual provision to that
effect, that the first applicant authorized the sale, the respondents
were effectively saying that parate
executie
was a tacit term of the agreement. It is a remedy that cannot be
inferred.
The
difficulty with that argument lies in the fact that it does not arise
from the applicant's case as contained in the founding affidavit
and supporting documents where they insisted that parate
executie
was unlawful self help. In addition, parate
executie
cannot possibly be said to be implied when the first applicant did
sign securities transfer forms clearly authorising the first
respondent to sell. It was a specific term of the agreement.
For
what it is worth, I must state that parate
executie
is now accepted as lawful in our law. Let me restate the passage in
Farmers
World Holdings (Pvt) Ltd v Manica Zimbabwe Limited
HH297-12…,.;
“The
fallacy of that argument is self-evident. The respondent relies on a
consent by the applicant, firstly, in the original agreement signed
in May 2009, and, secondly, in the Acknowledgment of Debt penned in
March 2010, to parate
execution.
That our law recognises parate
execution,
subject
to qualifications, cannot be doubted. As stated by BECK JA in Changa
v Standard Finance Ltd
1990
(2) ZLR 412 (S) 414 A-C:
'It
was settled in Osry
v Hirch, Loubser & Co Ltd
1922
CPP 531 that, as far as movables are concerned, an agreement for
their delivery to the creditor and sale by him be means of
parate
execution
is valid and binding. That decision was approved and followed by
BEABLE J (as he then was) in Aitken
v Miller
1957
(1) SA 153 (SR); 1950 SR 227. The recognition extended under the
civil law to such agreement is subject, however, to the
qualifications expressed at p547 of Osry
case
(supra),
in these terms:
'It
is, however, open to the debtor to seek the protection of the court
if, upon any just ground, he can show that, in carrying out the
agreement and effecting a sale, the creditor has acted in a manner
which has prejudiced him in his rights.'”
To
the extent that the applicants have based their application on a
mistaken view that parate
executie
is unlawful, the application is sitting on sinking ground. It simply
cannot succeed.
Even
the attempt by counsel for the applicants
to
resuscitate it by trying to argue that even if the first respondent
had the power to transfer the shares, such power did not mean
authority, he still needed authority of the first applicant before he
could transfer. While it is the typical spirit of advocacy, it cannot
save this application. It is an unnecessary splitting of hairs. There
is no doubt in my mind that the first respondent acted lawfully and
in accordance with the agreement of the parties.
Counsel
for the second respondent made the additional point that the issue
has long been settled by the Supreme Court and that the applicant is
asking me to make a decision on matters already decided by the Apex
Court.
I
agree.
We
are covering ground that has already been traversed merely because
the applicants think they can try their luck. CHIDYAUSIKU CJ made
findings adverse to the applicants in Chidawu
& Ors v Shah & Ors
SC13-12
when he said:
“The
first applicant delivered the Pelhams Limited shares to the first
respondent in negotiable form as security for the loan he received.
The inescapable inference to be drawn from this is that the first
applicant freely consented to the shares being sold or negotiated in
the event of his failure to repay the loan. He failed to repay the
loan and the shares were sold by the first respondent. The applicant
wants the transfer interdicted. The sale, as stated above, had
already been concluded. What remained was transfer of the shares by
the stock broker to the purchaser. The papers in this matter show
that the loan agreement between the parties, voluntarily signed by
the first applicant and the first respondent was transparent. The
parties were ad
idem
in respect of all the terms and conditions of the loan agreement. The
loan agreement correctly reflects the contractual intentions of the
parties. There is no allegation or suggestion of any form of coercion
or underhand dealings. The loan agreement appears to be a normal
business transaction between businessmen of substance. For the first
applicant to now seek the assistance of the law to renege on a
contract he openly and willingly entered into, smacks of duplicity
and deceit. It sounds crooked.”
See
also Chidawu
& Ors v Shah & Ors
SC12-13.
It
ought to have been apparent to the applicants that this court is
bound by the pronouncements of the Supreme Court. When they
prosecuted this application knowing what the Supreme Court had
already determined without even putting forward any new facts upon
which a different conclusion could be made, they were abusing
process. It is the kind of conduct which should be frowned upon with
a good measure of punitive costs.
In
the result, the application is hereby dismissed with costs on the
scale of legal practitioner and client.
