HLATSHWAYO
JA: This
is an appeal against the entire judgment delivered by the Honourable
Justice Zhou in the High Court of Zimbabwe.
The
order sought to be impugned reads as follows:
“IT
IS ORDERED THAT:
1.
Judgment be and is hereby given in favour of the plaintiff against
the first, second and third defendants jointly and severally the one
paying the others to be absolved for:
(a)
Payment of US$1,105,748.90 plus interest at the rate of 15 per cent
per annum from the 9 September 2015 such interest calculated monthly
and in advance on the said sum and capitalized to the date of payment
in full.
(b)
Payment of collection commission in accordance with the Law Society's
By-Laws.
(c)
Payment of plaintiff's costs of suit on the legal practitioner and
client scale.
(d)
A declaration that the immovable property being a certain piece of
land situate in the district of Salisbury called Remainder of Lot 6
Rietfontein, measuring, 1,2129 hectares held by the second defendant
under Deed of Transfer No. 4388/1991 is executable.
2.
The first defendant's claim in reconvention be and is hereby
dismissed with costs on the legal practitioner and client scale.”
The
background of this matter may be summarised as follows:
The
second appellant is a shareholder in the respondent and has
previously occupied the positions of Chief Executive Officer,
Executive Director and Director therein.
The
respondent in this matter issued summons against the appellants in
the court a
quo
claiming USD$1,105,748.90 being indebtedness arising from a loan
agreement between the first appellant and the respondent.
The
second and third appellants bound themselves as guarantors/sureties
and co-principal debtors of the first appellant in relation to the
loan agreement.
As
security, the second appellant gave Power of Attorney to register a
mortgage bond over his property, in favour of the respondent. As
further security, the third appellant pledged certain executable
shares.
It
was the respondent's case a
quo
that the first appellant defaulted in the performance of its
obligations in terms of the loan agreement, necessitating the
institution of legal proceedings for the recovery of the outstanding
amount.
The
respondent sought that the appellants be held jointly and severally
liable for the indebtedness.
The
appellants disputed the respondent's claim on two main premises.
It
was argued for the first appellant that the person who purported to
enter into the loan agreement with the respondent was not authorised
to do so.
Additionally,
the second appellant disputed that he granted the Power of Attorney
used to register the mortgage bond over his property.
The
appellants further lodged a counterclaim against the respondent's
claim, which counterclaim was subsequently sought to be withdrawn
during the course of the proceedings a
quo.
The application for withdrawal was unsuccessful and the counterclaim
was eventually dismissed.
At
the conclusion of proceedings, the court a
quo
made
adverse credibility findings against the second appellant, who it
determined was untruthful.
It
was found that the first appellant was the alter
ego
of the second appellant, who used the former to secure funds for his
benefit from the respondent.
Additionally,
the court a
quo
was
of the view that the second appellant had signed a Power of Attorney
for the registration of a mortgage bond in order to secure an advance
from the respondent.
With
regard to the third appellant it was found that it had properly bound
itself as surety to the loan facility agreement.
Resultantly,
it was determined that the appellants were jointly and severally
liable for the indebtedness and that the respondent was entitled to
recover from the appellants the principal sum owing in terms of the
loan facility agreement.
Aggrieved,
the appellants have lodged the present appeal on the following
grounds:
GROUNDS
OF APPEAL
1.
With respect, the court a
quo
erred at law in dismissing the first appellant's
Claim-In-Reconvention; which claim was withdrawn before the
conclusion of leading evidence. At law the Respondent was not
entitled to insist on judgment pertaining a disputation to which not
all datum had been made available and the contestation
inter parties
not
finalised.
2.
The court a
quo
also erred in sustaining the respondent's claim as against the
appellants. At law the respondent was enjoined to prove the existence
of loan agreement and that the attendant funds were advanced in terms
of that agreement. In
casu
the evidence led a
quo
clearly demonstrated that the monies claimed to have been advanced
were never paid out in accordance to the structures of the agreement
on which the claim was predicated; resultantly no sustainable claim
could have been mounted by the Respondent.
3.
The court a
quo
grossly misdirected itself in conflating the affairs of the first
appellant with those of the second appellant. At law the first and
second appellant's obligation to the respondent were independent of
each other. More critically, no evidence was led substantiating the
notion that first appellant ever received funds from the respondent
thereby actuating the need to resort to the second and third
Respondent's suretyship and securitisation.
4.
The court a
quo
grossly misdirected itself in dismissing the second appellant's
evidence on the back of its anomalous finding that he was dishonest
and not a credible witness. Such findings are palpably irregular in
that the court a
quo
did not take full cognisance of all the second appellant's evidence
and attendant explanation regarding the existence of his independent
loan with the respondent which loan the respondent was not relying
on.
From
the foregoing, two identifiable issues are before the court:
(i)
Firstly, there is need to determine whether or not the court a
quo
properly
dismissed the appellants counterclaim given their application for
withdrawal of the same.
(ii)
The second issue for determination is whether or not the court a
quo
misdirected
itself in holding the appellants jointly and severally liable to the
respondent for the indebtedness arising from the disputed loan
facility agreement.
On
the first point for consideration, it is common cause that the
appellants withdrew their counterclaim pursuant to the commencement
of proceedings but prior to the close of their case.
It
is also common cause that the respondent objected to the purported
withdrawal.
It
is accepted by both parties that a party is only entitled to withdraw
a claim after the matter has been set down and the hearing has
commenced subject to the court's leave or the parties consent to do
so. The position of the law is well articulated in the case of
Liberal
Democrats & Ors v President of the Republic of Zimbabwe E.D
Mnangagwa N.O & Ors
CCZ7/18
at page 8 of the judgment wherein it was stated:
“The
case of Meda
v Sibanda and Ors
2016 (2) ZLR 232 (CC) is authority for the principle that a
party cannot withdraw at will a matter that has been set down for
hearing.
The
party intending to withdraw the matter must obtain the consent of the
other party and the leave of the Court. The purported withdrawal
would otherwise have no legal effect.
Rule 53(2) of the Rules gives effect to the principle by providing as
follows:
'53.
Withdrawal
(2)
A person instituting any proceedings may, at any time before the
matter has been set down and thereafter, by consent of the parties or
leave of the Court, withdraw such proceedings, in either of which
event he or she shall deliver a notice of withdrawal and shall embody
in such notice an undertaking to pay costs.'” (Emphasis added)
In
urging the court to exercise its discretion in their favour, the
appellants submitted that a court ought to except to an application
for withdrawal in cases where, for instance, the withdrawal amounts
to an abuse of court process.
While
the position of the law as captured by the appellants cannot be
faulted, a court is imbued with wide discretionary powers in
determining whether or not an application for withdrawal will be
granted. The said discretionary powers include a variety of
considerations by the court in the pursuance of ensuring justice
between litigating parties.
The
respondent submitted that the application for withdrawal of the
appellants counterclaim was appropriately denied, given the fact that
evidence had already been led thereon.
It
is apparent from the record that at the time that the appellants
sought to withdraw their counterclaim, the matters therein had
already been substantively canvassed in evidence.
The
court a
quo's
refusal to grant the application for withdrawal was predicated on a
consideration of the very same fact, namely that the counterclaim was
already the subject of the hearing before it and substantive
submissions had already been made thereon.
In
my view, there is no palpable misdirection in the court a
quo's
decision
to deny the appellants application for withdrawal. Given the broad
discretionary powers conferred upon the court in electing to grant or
deny said application, there do not appear to me justifiable grounds
to interfere with the determination of the court a
quo
in
that regard.
With
regard to the second issue for consideration before the court, that
is, whether or not the court a
quo
misdirected
itself in holding the appellants jointly and severally liable to the
respondent for the indebtedness arising from the disputed loan
facility agreement, the findings made a
quo
turned
on considerations of fact.
It
is settled at law that this Court will only interfere with factual
findings of a lower court in limited circumstances. The case of Zimre
Property Investments Limited v Saintcor t/a V. Track & Anor
SC59/2016
at page 11 para 36 of the judgment is instructive, wherein it was
stated:
“The
position is now settled that an appellate court will not interfere
with the findings of fact made by a trial court unless the court
comes to the conclusion that the findings are so irrational that no
reasonable tribunal, faced with the same facts, would have arrived at
such a conclusion. Where there has been no such misdirection, the
appeal court will not interfere. This position was aptly captured by
this Court in Hama
v National Railways of Zimbabwe
1996 (1) ZLR 664 (S). At 670, Korsah JA remarked:
'The
general rule of law as regards irrationality is that an appellate
court will not interfere with a decision of a trial court based
purely on a finding of fact unless it is satisfied that, having
regard to the evidence placed before the trial court, the finding
complained of is so outrageous in its defiance of logic that no
sensible person who had applied his mind to the question to be
decided could have arrived at such a conclusion…'”
Remaining
mindful of the foregoing, it is evident from the record that there
existed a loan facility agreement between the first appellant and the
respondent, and to which the second and third appellants were
sureties.
Although
the first and second appellants disputed the authority upon which the
loan facility and the mortgage bond were entered into on their
behalf, they did not challenge the allegation that they were indebted
to the respondent and that the said indebtedness had not been
extinguished.
In
terms of the law, it is generally accepted that what is not denied is
taken to be admitted. See Fawcett
Security Operations P/L v Director of Customs and Excise and Ors
1993 (2) ZLR 121 (S) at 127F; Nhidza
v Unifreight Ltd
SC-27-99; and Minister
of Lands and Agriculture v Commercial Farmers Union
SC-111-2001 at 60.
In
view of the factual nature of the findings of the court a
quo,
it is necessary to consider the evidence presented and the relevant
findings made thereon.
On
the issue of the validity of the loan facility, the evidence of
record establishes that a trustee of the first appellant, named Mr D.
Higginson, concluded the loan facility agreement on behalf of the
first appellant.
The
second appellant sought to dispute Mr Higginson's authority to
enter into the purported agreement with the respondent and,
ultimately, the validity of the entire loan facility agreement.
A
perusal of the record makes it apparent that there was scant evidence
to support the submissions of the second appellant.
It
was found a
quo
that
the second appellant accessed and utilised the loan overdraft
facility on numerous occasions, leading the court to the conclusion
that there was no merit to the second appellant's contention that
Mr D. Higginson entered into the loan agreement without the requisite
authority to do so.
Further
to that, it was the court's view that the first appellant was
merely a vehicle of the second appellant in order to access funds
from the respondent.
I
am of the view that the finding of the court a
quo
is
supported by the fact that the second appellant utilised the accessed
loan facility funds (through the medium of the first appellant) to
attend to his personal expenses.
In
light of the foregoing considerations, it does not appear to me, that
the second appellant can seek to avoid liability on the premise that
the loan facility was not validly entered into.
To
do so would essentially constitute an exercise in which the second
appellant seeks to approbate and reprobate. In other words, the
second appellant cannot seek to dispute the validity of the loan
facility agreement from which he consistently sought and derived
benefit.
The
position was well articulated in the case of S
v
Marutsi
1990
(2) ZLR 370
at page 374B wherein it was stated that:
“It
is trite that a litigant cannot be allowed to approbate and reprobate
a step taken in the proceedings. He can only do one or the other, not
both.”
Moreover
in the case of
Alliance
Insurance v Imperial Plastics (Pvt) Ltd. & Another
SC30/2017,
the court took the view that such conduct amounts to a classic
display of mala
fides.
An
application of the mind to the facts would dictate that had the loan
agreement been improperly concluded, the second appellant would have,
at the very first opportunity have alerted the respondent to the fact
and sought to resolve the situation as opposed to accessing and
deriving benefit from the agreement, then denying liability when
called upon to service the said debt.
Significantly,
the second appellant undertook to repay the outstanding loan when
called upon to do so by the respondent, which makes plain the fact
that the second appellant was aware and a willing participant to the
loan agreement.
The
evidence is overwhelming and the conclusions of the court a
quo
in
that regard cannot be said to have been improperly arrived at.
In
determining that the first appellant acted as the second appellant's
alter ego
for the purpose of accessing funds from the respondent; the court a
quo
took
cognisance of witness evidence that established that the
funds availed to the first appellant by the respondent were utilised
by the second appellant for his personal expenses.
As
both the Founder and Director of the first appellant and the
respondent respectively, the second respondent was, in my view not
only involved in a conflict of interest but actively abusing his
status and position in order to access funds from the respondent.
It
is equally telling that the loan facility was regarded as an “insider
loan” by the respondent when it sought recovery of the indebtedness
due to it from the second appellant. It is also established that the
second appellant did not seek to dispute that it was indeed an
insider loan.
In
the circumstances, the court a
quo's
findings appear well grounded in evidence and cannot be said to be
irrational or a misdirection.
It
is worth mentioning that the court a
quo
took a step further in determining that the Power of Attorney granted
by the second appellant to register a mortgage bond over his property
in favour of the loan facility agreement was properly concluded.
The
court a
quo
arrived
at that decision pursuant to an identification of the second
appellant's signature on the disputed Power of Attorney.
The
fact that the registration of the mortgage bond was directly
beneficial to the second appellant does not help his case.
With
regard to the third appellant, its liability as surety was never
challenged and therefore remains extant.
In
the light of the above considerations, it is the court's view that
the appeal lacks merit and is hereby dismissed with costs following
the cause.
PATEL
JA: I
agree
MAVANGIRA
JA: I
agree
Thompson
Stevenson & Associates,
appellants
legal practitioners
Gill,
Godlonton & Gerrans,
respondent's
legal practitioners
