MALABA
CJ: This
is an appeal against the decision of the High Court (“the court a
quo”)
dismissing an urgent chamber application for an order declaring that
the payment made to the first respondent in terms of a court order
was a full and final settlement of the liability owed by the
appellant.
The
appeal succeeds.
The
Court holds that the Presidential Powers (Temporary Measures)
(Amendment of Reserve Bank of Zimbabwe Act & Issue of Real Time
Gross Settlement Electronic Dollars (RTGS Dollars)) (“S.I.33/19”)
expressly provides that assets and liabilities, including judgment
debts, denominated in United States dollars immediately before the
effective date of 22 February 2019 shall on or after the
aforementioned date be valued in RTGS dollars on a one-to-one rate.
The
order in terms of which the appellant was obliged to pay the judgment
debt owed to the first respondent, denominated in United Stated
dollars, was made before the effective date. The judgment debt and
its evaluation fell within the ambit of the provisions of section
4(1)(d) of S.I.33/19. The payment made by the appellant in fulfilment
of the judgment debt is a full and final settlement of the liability
owed by the appellant. The reasons for the decision now follow.
BACKGROUND
FACTS
The
facts are largely common cause.
The
first respondent instituted proceedings against the appellant for
payment of USD$3,885,000.00. The payment was for services which had
been rendered by the first respondent to the appellant. On
25 June 2018 the appellant was ordered by the High Court to pay the
first respondent the amount claimed, together with interest at the
prescribed rate and costs of suit on an attorney client scale.
The
appellant noted an appeal against the judgment. The appeal was
dismissed on 13 May 2019.
On
21 May 2019 the appellant deposited an amount of RTGS$4,136,806.54
into the first respondent's account as settlement of the judgment
debt plus interest and costs of suit.
The
first respondent, through its legal practitioners, wrote to the
appellant on the day of receipt of the funds, complaining that the
amount deposited was less than the amount ordered by the court. The
first respondent said that the amount deposited was equivalent to
US$144,788.23. It used the interbank rate as at 21 May 2019. The
contention was
that
the appellant still owed an amount of US$3,992,018.31. The first
respondent advised the appellant that it was instructing the second
respondent to proceed with the attachment of its property for sale in
execution.
The
appellant responded by a letter dated 24 May 2019, stating that the
payment of RTGS$4,136,806.54 satisfied the judgment debt. It referred
to the provisions of section 4(1)d) of S.I.33/19 for authority that
the payment was a full and final settlement of the judgment debt.
On
4 July 2019 the first respondent instructed the second respondent to
attach the appellant's properties in Hwange to recover an amount of
US$3,992,018.31. The appellant filed an urgent chamber application in
the court a
quo
seeking an order for stay of execution and a declaratory order to the
effect that the judgment debt had been fully discharged in terms of
S.I.33/19.
The
matter of the dispute between the parties was the correct
interpretation of section 4(1)(d) of S.I.33/19.
The
court a
quo
dismissed the application with costs on a legal practitioner and
client scale. The holding was that, had the Legislature intended to
alter all court orders and writs that had been made prior to the
promulgation of S.I.33/19, it should have expressly said so. The
court a
quo
held further that the payment made by the applicant did not discharge
the judgment debt, as the payment ought to have been made at the
Interbank rate prevailing on 21 May 2019. The court a
quo
accepted the evidence that the Interbank rate was 1 United States
dollar to 3.5 RTGS dollars. The court a
quo
interpreted the provisions of section (4)(1)(d) of S.I.33/19 in a way
that excluded judgment debts from the application of S.I.33/19.
Aggrieved
by the decision of the court a
quo,
the appellant appealed. The grounds of appeal were as follows:
“1.
The High Court erred in failing to find that the judgment debt for
the sum of USD3,885,000.00 together with costs of suit and interest
in case number HC7882/17 was a liability to the applicant valued in
United States dollars before the effective date as specified in
Statutory Instrument 33/19.
2.
The High Court further erred in failing to find that the United
States dollar denominated debt was capable of being discharged at the
rate of One United States dollar to One RTGS dollar as specified in
section 4(1)(d) of Statutory Instrument 33/19 and therefore failing
to find that the appellant fully discharged the debt on 21 May 2019.
3.
The High Court further erred in finding that section 4(1)(d) of the
Statutory Instrument 33/19 was not applicable to assets and
liabilities arising from court orders.
4.
The High Court further grossly erred in awarding costs of suit
against the appellant on attorney and client scale having decided to
dismiss the application.”
SUBMISSIONS
BEFORE THE COURT
PRELIMINARY
POINT
The
preliminary point raised by the first respondent need not detain the
Court. It was to the effect that the appellant did not seek leave of
the court a
quo
before instituting action against the first respondent, which was a
company under judicial management.
The
contention was that, as the proceedings in the court a
quo
were instituted without the appellant having first sought and
obtained the leave of the court a
quo
to institute proceedings against the first respondent, which was
under judicial management, the subsequent proceedings were a nullity.
The
contention was based on the interpretation of the order of the High
Court in case number HC11194/18 (“the order”), placing the first
respondent under judicial management. Paragraph 3 of the order reads
as follows:
“3.
All actions and applications and the execution of all writs, summons
and other processes against the applicant Company shall be stayed and
not proceeded with without the leave of this Honourable Court.”
The
appellant's argument was that the application for a declaratur
had no adverse effect on the rights of the first respondent. The
contention was that, upon a proper interpretation, paragraph 3 of the
order placing the first respondent under judicial management did not
mean that any application, even one not against the first respondent,
cannot be made without leave of the court having first been sought
and obtained.
The
Court finds that there are two ways of interpreting the provisions of
paragraph 3 of the court order.
(i)
Firstly, leave should be sought where the company under judicial
management is actively involved in the proceedings, that is, where
the relief sought affects the rights of the company under judicial
management.
(ii)
Secondly, the purpose of seeking leave should be seen as a means for
the protection of the company under judicial management. Litigation
involving monetary claims would have an adverse effect on the status
of the company in relation to its shareholders and creditors.
The
court order placing the first respondent under judicial management
was granted on 12 December 2018. The application for the relief
sought by the appellant was made on 5 June 2019, almost six months
after the granting of the court order.
Paragraph
3 of the order placing the first respondent under judicial management
operated against proceedings pending before any court at the time the
order was made. The order prohibited the issuance or execution of any
process against the first respondent in respect of the institution of
proceedings or the giving effect to relief granted in those
proceedings. The determining factor is that the proceedings or
processes concerned must be against
the first respondent in the sense of making its financial position
worse.
The
application made by the appellant was for a declaratory order
declaring that the money it had paid in fulfilment of the judgment
debt was a full and final settlement of the liability owed to the
first respondent. The order sought was for a declaration of rights in
relation to the appellant's property, which had been attached by
the second respondent. The application made by the appellant before
the court a
quo
was not prohibited by the provisions of paragraph 3 of the order
placing the first respondent under judicial management, as it was not
against the first respondent.
The
application was, in any case, not a proceeding to be stayed and not
proceeded with as a result of the order, because it was made six
months after the order placing the first respondent under judicial
management was granted.
In
seeking the declaratory order, the appellant sought an authoritative
statement on the discharge of the financial obligations it owed to
the first respondent in terms of the order of the court a
quo
following payment of the amount of money it considered was at an
exchange rate statutorily prescribed for the kind of debt in
question.
As
the application by the appellant did not fall within the provisions
of paragraph 3 of the order, there was no obligation on the appellant
to first seek and obtain the leave of the court to involve the first
respondent in the proceedings.
VALIDITY
OF STATUTORY INSTRUMENT 33 OF 2019
Section
4 of S.I.33/19 provides as follows:
“4.
(1) For the purposes of section 44C of the principal Act as inserted
by these regulations, the Minister shall be deemed to have prescribed
the following with effect from the date of promulgation of these
regulations ('the effective date') -
(a)
that the Reserve Bank has, with effect from the effective date,
issued an electronic currency called the RTGS Dollar;
(b)
that Real Time Gross Settlement system balances expressed in the
United States dollar (other than those referred to in section 44C(2)
of the principal Act), immediately before the effective date, shall
from the effective date be deemed to be opening balances in RTGS
dollars at par with the United States dollar; and
(c)
that such currency shall be legal tender within Zimbabwe from the
effective date; and
(d)
that, for accounting and other purposes, all assets and liabilities
that were, immediately before the effective date, valued and
expressed in United States dollars (other than assets and liabilities
referred to in section 44C(2) of the principal Act) shall on and
after the effective date
be
deemed to be values in RTGS dollars at a rate of one-to-one to the
United States Dollar; and
(e)
that after the effective date any variance from the opening parity
rate shall be determined from time to time by the rate at which
authorised dealers under the Exchange Control Act exchange the RTGS
Dollar for the United States Dollar on a willing
seller-buyer-basis….”
In
interpreting section 4(1)(d) of S.I.33/19 the court a
quo
said:
“In
my view while the debt to the first respondent may be treated as a
liability as against the applicant and an asset as against the first
respondent for accounting purposes, this debt was not valued
immediately before the effective date. The effective date is the 22nd
of February 2019. The debt was due on the 25th
of June 2018 despite that it was appealed against. Even if I may be
wrong I am not convinced that the legislature intended to alter all
court orders made by the court. If the court had not made any
pronouncement as to what denomination the debt should be paid in on
25 June 2018, then the applicant's argument may make sense. It was
not made immediately before, on or after the effective date. If the
legislature wanted it to include court orders and writs, then it
should have expressly said so.”
The
court a
quo
went on to say:
“As
I have said above, section 4(1)(d) of S.I.33 of 2019 cannot be
construed as giving the legislature power to alter court orders. To
allow that would be a violation of the separation of powers that is
enshrined in the Constitution.”
Neither
party questioned the validity of S.I.33/19.
The
question for determination on appeal was whether the court a
quo
correctly interpreted and applied the provisions of section 4(1)(d)
of S.I.33/19 in the light of the facts of the case. The
constitutionality of section 4(1)(d) of S.I.33/19 was not in dispute.
It was not an issue before the court a
quo.
There was no basis on which the court a
quo
found it necessary to allude to the suggested violation by the
Legislature of the fundamental constitutional principle of separation
of powers in the enactment of S.I.33/19.
The
argument raised by the first respondent in its heads of argument that
the Legislature could not enact law which had an effect on the manner
in which judgments are executed is devoid of merit.
INTERPRETATION
OF SECTION 4(1)(d) OF STATUTORY INSTRUMENT 33 OF 2019
It
is the duty of a court to interpret statutes. Where the language used
in a statute is clear and unambiguous, the words ought to be given
the ordinary grammatical meaning. However, where the language used is
ambiguous and lacks clarity, the court will need to interpret it and
give it meaning. There is enough authority for this rule of
interpretation.
In
Endeavour
Foundation and Anor
v Commissioner
of Taxes
1995 (1) ZLR 339 (S) at p356F-G the Supreme Court stated:
“The
general principle of interpretation is that the ordinary, plain,
literal meaning of the word or expression, that is, as popularly
understood, is to be adopted, unless that meaning is at variance with
the intention of the Legislature as shown by the context or such
other indicia as the court is justified in taking into account, or
creates an anomaly or otherwise produces an irrational result.”
In
Natal
Joint Municipal Pension Fund
v Endumeni
Municipality
2012
(4) SA 593 (SCA)
the
Supreme Court of Appeal of South Africa noted the following at para
18:
“Interpretation
is the process of attributing meaning to the words in a document be
it legislation, some other statutory instrument, or contract, having
regard to the context provided by reading the particular provision or
provisions in the light of the document as a whole and the
circumstances attendant upon its coming into existence.
Whatever
the nature of the document, consideration must be given to the
language used in the light of the ordinary rules of grammar and
syntax; the context in which the provision appears; the apparent
purpose to which it is directed; and the material known to those
responsible for its production.”
(the underlining is for emphasis)
In
Chihava
and Others
v The
Provincial Magistrate Francis Mapfumo N.O and Another
2015 (2) ZLR 31 (CC) at pp 35H-37B the Constitutional Court said:
“The
starting point in relation to the interpretation of statutes
generally would be what is termed 'the golden rule' of statutory
interpretation. This rule is authoritatively stated thus in the case
of Coopers
and Lybrand & Others
v Bryant
1995
(3) SA 761 (A) at 767:
'According
to the “golden rule” of interpretation, the
language in the document is to be given its grammatical and ordinary
meaning, unless this would result in some absurdity, or some
repugnancy or inconsistency
with the rest of the instrument.'”
(the underlining is for emphasis)
A
reading of section 4(1)(d) of S.I.33/19 does not reveal any ambiguity
in the language used by the Legislature
in
the expression of its intention in enacting S.I.33/19. The purpose
and object of the statute can easily be ascertained from the ordinary
and grammatical meaning of the language used.
The
liabilities referred to in section 4(1)(d) of S.I.33/19 can be in the
form of judgment debts and such liabilities amount to obligations
which should be settled by the judgment debtor.
In
interpreting section 4(1)(d), regard should be had to assets and
liabilities which existed immediately before the effective date of
the promulgation of S.I.33/19. The value of the assets and
liabilities should have been expressed in United States dollars
immediately before 22 February 2019 for the provisions of section
4(1)(d) of S.I. 33/19 to apply to them.
Section
4(1)(d) of S.I.33/19 would not apply to assets and liabilities, the
values of which were expressed in any foreign currency other than the
United States dollar immediately before the effective date.
If,
for example, the value of the assets and liabilities was, immediately
before the effective date, still to be assessed by application of an
agreed formula, section 4(1)(d) of S.I.33/19 would not apply to such
a transaction even if the payment would thereafter be in United
States dollars.
It
is the assessment and expression of the value of assets and
liabilities in United States dollars that matters.
Section
4(1)(d) of S.I.33/19 is specific as to the type of assets and
liabilities that are excluded from the reach of its provisions. The
origin of the liabilities is not a criterion for exclusion. In other
words, the fact that the liability is based on a court order does not
exempt the liability from the application of the provisions of
section 4(1)(d) of S.I.33/19.
What
brings the asset or liability within the provisions of the statute is
the fact that its value was expressed in United States dollars
immediately before the effective date and did not fall within the
class of assets and liabilities referred to in section 44C(2) of the
Reserve Bank of Zimbabwe Act [Chapter
22:15]
(“the principal Act”).
Section
44C(2) of the principal Act provides as follows:
“(2)
The issuance of any electronic currency shall not affect or apply in
respect of —
(a)
funds held in foreign currency designated accounts, otherwise known
as 'Nostro FCA accounts', which shall continue to be designated
in such foreign currencies; and
(b)
foreign loans and obligations denominated in any foreign currency,
which shall continue to be payable in such foreign currency.”
As
a matter of correct interpretation of section 4(1)(d) of S.I.33/19,
it would not be possible to exclude a judgment debt expressed in
United States dollars immediately before the effective date from the
application of its provisions. The fact that the source of the
liability, the value of which was expressed in United States dollars,
was a judgment of a court was immaterial for the purposes of the
Statutory Instrument.
The
Legislature put the matter beyond any doubt when it enacted the
Finance (No.2) Act, 2019.
In
section 20, under Part V of the Act, “financial or contractual
obligations” were defined to include judgment debts.
Section
20 provides:
“'financial
or contractual obligations' includes (for the avoidance of doubt)
judgment debts; …
'judgment
debt' means a decision of a court of law upon relief claimed in an
action or application which, in the case of money, refers to the
amount in respect of which execution can be levied by the judgment
creditor; and, in the case of any other debt, refers to any other
steps that can be taken by the judgment creditor to obtain
satisfaction of the debt (but does not include a judgment debt that
has prescribed, been abandoned or compromised);”.
A
judgment debt is thus a contractual obligation which can either be an
asset to the party in whose favour it is made or a liability on the
party against whom it is made.
Section
4(1)(d) of S.I.33/19 made it clear that it applied to all assets and
liabilities that shared the prescribed characteristics, except those
referred to in section 44C(2) of the principal Act.
The
court a
quo
construed the words “immediately before the effective date” to
mean that the expression of the value of the liability in United
States dollars ought to have occurred as an event at a time
“immediately before the effective date”.
The
court a
quo
misdirected itself because the words “immediately before the
effective date” refer to the state in which the assets and
liabilities, to which the provisions of section 4(1)(d) of S.I.33/19
apply, should be in relation to the effective date, irrespective of
how far back in time the asset or liability valued and expressed in
United States dollars came into existence. The phrase “immediately
before” means that the liability should have existed at a date
before the effective date and that such liability should have been
valued and expressed in United States dollars.
The
issue of the time-frame within which the liability arose in relation
to the effective date of 22 February 2019 does not matter.
What
is of importance is the fact that the liability should have been
valued before the effective date in United States dollars and was
still so valued and expressed.
The
judgment debt was ordered against the appellant on 25 June 2018. It
was valued and expressed in United States dollars and was still so
valued and expressed immediately before 22 February 2019.
Section
4(1)(d) of
S.I. 33/19
provides that all assets and liabilities that were valued and
expressed in United States dollars immediately before the effective
date shall “on and after” the effective date be deemed to be
values in RTGS dollars at a rate of one-to-one to the United States
dollar.
The
word used is “values” and not “valued”. “Values” and
“valued” are two different concepts. The former presents a notion
of a set value which remains even where it is subjected to a certain
conversion. The latter, on the other hand, suggests a value which can
be changed according to the circumstances under which the value is
being applied.
The
values referred to in section 4(1)(d) of S.I.33/19 show that after a
one-to-one conversion the RTGS dollar takes the value and character
of the United States dollar.
The
effect of the phrase “on and after” is that the conversion of the
values of “all assets and liabilities” which were valued and
expressed in United States dollars immediately before the effective
date to values in RTGS dollars at a rate of one
United States dollar to one RTGS dollar
would apply at the time the value of the asset or liability is
liquidated or discharged. Assets and liabilities covered by section
4(1)(d)
of
S.I.33/19 are of a sui
generis
nature. They accrue immediately before the effective date and
continue to exist after the effective date.
EXCHANGE
RATE
Counsel
for the first respondent submitted that, in interpreting S.I.33/19,
the Court should have regard to the principle of parity. Counsel
further enjoined the Court to have regard to the fact that a judgment
is a judicial fact that results from adjudication. The contention was
that, in interpreting the statute, the Court ought to place the first
respondent in the position it would have been in had S.I.33/19 not
been enacted. Counsel also argued that the Statutory Instrument is a
bridge between the United States dollar and the RTGS dollar and that
in that regard the Court ought to have regard to the Interbank
exchange rate as a means of arriving at parity.
The
Court finds that the arguments by counsel are devoid of merit.
Counsel
would like the Court to believe that a conversion of a foreign
currency denomination to a local currency denomination amounts to a
lesser value in the local currency. This reasoning is wrong at law.
There can be no parity to talk about once it is accepted that the
RTGS dollar is a currency denomination with a set legal value. It is
the legal tender used in Zimbabwe and as such carries a specific
value.
Once
a conversion of the value of an asset or liability denominated in
United States dollars is made to the value of RTGS dollars, the
converted value remains the same, as the two different currency
denominations both carry value. No exchange rate can be applied as
the judgment debt remains a judgment debt with a value after it is
converted to the local currency.
The
RTGS dollar has the value given under the one-to-one rate and it
remains on that value even after the effective date.
The
first respondent and likewise the court a
quo
were wrong at law in trying to find parity by adding value on the
RTGS dollar through the Interbank rate.
Section
4(1)(d) of S.I.33/19 states that for such sui
generis
liabilities, including judgment debts, a rate of one-to-one between
the United States dollar and the RTGS dollar will apply. The
transactions entered into after the effective date would fall under
the provisions of section 4(1)(e) of S.I. 33/19.
CONCLUSION
The
payment of RTGS$4,136,806.45 made by the appellant as settlement of
the judgment debt was a full and final settlement of the judgment
debt in terms of section 4(1)(d) of S.I.33/19.
DISPOSITION
In
the result it is ordered as follows -
1.
The appeal is allowed with no order as to costs.
2.
The order of the court a
quo
is set aside and substituted with the following -
“1.
It is declared that the appellant's payment of RTGS$4,136,806.45 is
a full and final settlement of the first respondent's judgment
debt.
2.
There shall be no order as to costs.”
MAVANGIRA
JA: I agree
MATHONSI
JA: I agree
Jera
& Moyo,
appellant's legal practitioners
Mafongoya
& Matapura,
first respondent's legal practitioners
