Civil
Trial
ZHOU
J:
The
plaintiff, a commercial bank, claims against the three defendants
payment of a sum of money amounting to US$1,105,748.90 together with
interest thereon at the rate of 15% per annum calculated from the 9th
September 2015 to the date of payment in full, such interest to be
calculated monthly and in advance and capitalized.
The
plaintiff also claims collection commission and costs of suit on the
legal practitioner and client scale, as well as an order declaring a
certain immovable property described in the summons as a certain
piece of land situate in the District of Salisbury called the
Remainder of Lot 6 of Reitfontein, measuring 1,2129 hectares to be
specially executable.
The
claim is for money advanced to the first defendant pursuant to loan
and overdraft facilities and in respect of which the second and third
defendants are said to have executed deeds of suretyship and
guarantorship.
The
claim is contested by all the defendants.
The
first defendant also made a claim in reconvention against the
plaintiff for payment of a sum of US$1,672,010.00.
The
claim in reconvention was abandoned by the first defendant during the
course of the trial. Mr Zhuwarara
indicated
that the first defendant was withdrawing the claim in reconvention.
The
plaintiff, as it is entitled to do, insisted that notwithstanding the
withdrawal the court must give judgment in favour of the plaintiff in
respect of the counterclaim.
That
attitude is supportable at law: see A
v B and C
1976
(4) SA 31 (RA); Abramacos
v Abramaos
1953 (4) SA 474 (SR) at 478; Huggins
v Ryane NO & Ors
1978
(1) SA 216 (R).
In
A
v and C, supra,
at
32H-33A GOLDIN J said:
“Generally,
notice of withdrawal does not automatically end litigation, because
defendant or respondent may be entitled to insist upon judgment in
their favour after the merits have been considered and argued so as
to enable the court to arrive at its decision. Notwithstanding notice
of withdrawal by an applicant or plaintiff, the court has a
discretion to give defendant or respondent an opportunity to
establish his right to judgment.”
The
withdrawal of the claim in reconvention was sought after evidence had
been led on it by both the plaintiff and the first defendant.
In
fact, the plaintiff had to lead evidence from a handwriting expert,
Leonard Tendai Nhari, in respect of the claim in reconvention. His
evidence was that the loan agreement allegedly entered into between
LTB Limited and the plaintiff upon which the claim in reconvention
was founded was not signed by a representative of the plaintiff.
The
evidence of the signature when compared with the usual signatures of
Mario dos Remedios who was alleged to have signed on behalf of the
plaintiff, is clearly different and bears no resemblance to his usual
signature.
It
is irrelevant that the first defendant had not yet closed its case
when it sought to withdraw the claim.
The
plaintiff is therefore entitled to judgment in its favour in respect
of the claim in reconvention.
On
the main claim, the plea which was filed on behalf of the defendants
is very brief. In that plea the defendants deny that the person who
entered into the agreements pursuant to which the plaintiff advanced
money to the first defendant had the authority to represent the first
defendant.
The
other aspect which is denied is that the second defendant executed
the power of attorney which was used to register a mortgage bond over
his immovable property in favour of the plaintiff.
Going
by the pleadings, the other material allegations made in the
plaintiff's declaration are not disputed and must therefore be
taken as admitted. These include:
(i)
The existence of the facilities (save for the alleged lack of
authority of the person who represented the first defendant).
(ii)
Tthe terms of the loan facility as set out in paragraph 6 of the
plaintiff's declaration.
(iii)
The facts alleged in para 7 of the plaintiff's declaration that the
second and third defendants executed deeds of suretyship and
guarantees by which they bound themselves as sureties and
co-principal debtors for performance of the first defendant's
contractual obligations to the plaintiff under the facilities.
(iv)
There is also no denial of the failure by the first defendant to pay
the amount due to the plaintiff in terms of the agreements.
(v)
The amount claimed in the summons and declaration is also not
disputed in the plea.
Although
three issues were outlined in the joint pre-trial conference minute,
a resolution of those issues depends on the determination of whether
the loan facilities were validly concluded on behalf of the plaintiff
and whether the mortgage bond over the immovable property known as a
Certain Piece of Land Situate in the District of Salisbury Called the
Remainder of Lot 6 of Rietfontein measuring 1,2129 hectares held by
the second defendant under Deed of Transfer Number 4388/1994, was
validly executed.
The
plaintiff led evidence, oral and documentary, from Alwyn Tafadzwa
Chinyoka, Leonard Tendai Nhari, Lazarus Marume, Benson Ndachena, and
Lionel Chinyamutangira, all of whom are its employees save for
Leonard Tendai Nhari who is a handwriting expert.
The
essence of the evidence of these witnesses is that the second
defendant, Julius Tawona Makoni, was a founder and director of the
plaintiff. He was still a director of the plaintiff when the facility
upon which the claim arose was granted to the first defendant.
A
composite facility of call loans and overdraft of US$760,000.00 was
extended to the first defendant. The first defendant is the second
defendant's trust through which he operated to access money from
the plaintiff.
Alwyn
Tafadzwa Chinyoka testified that Dr Makoni signed the power of
attorney to pass a mortgage bond over his property. The guarantee
executed by the third defendant was signed by Dr Higginson, who
together with the second defendant was the authorized signatory. The
two were also the signatories for the first defendant.
The
second defendant would give instructions to the plaintiff's
employees for drawdowns on the facility.
He
stated that the plaintiff engaged the second defendant about recovery
of the amounts owed following a directive from the Reserve Bank of
Zimbabwe that all insider loans be settled by 31 December 2014.
When
the second defendant was approached about the debt he acknowledged it
and advised that he was making arrangements to settle it.
The
matter was discussed at some board meetings of the plaintiff in the
presence of the second defendant. The minutes of board meetings were
produced in evidence.
The
witness also gave evidence of the emails which were exchanged between
the second defendant and the plaintiff's officials in connection
with the debt in which the second defendant acknowledged the debt.
The
witness disputed the signatures on the alleged loan agreement upon
which the first defendant's counterclaim was based.
He
also gave evidence of payments made on behalf of and at times on the
instructions of the second defendant from the account of the first
defendant.
He
testified that the facility availed to the first defendant was to
cater for the personal needs of the second defendant.
The
first defendant held shares in the plaintiff on behalf of the second
defendant, according to the witness.
Lazarus
Marume who was employed by the plaintiff as Branch Manager at Mutare
stated that he knew the second defendant as the founder of the
plaintiff and as a Bishop of the Church of the Province of Central
Africa.
He
confirmed that the second defendant signed the power of attorney to
pass a mortgage bond at Mutare.
The
witness had always known the second defendant's signature as he had
dealt with him many times before that. He signed as a witness after
the second defendant had signed in his presence. The document was
signed at the second defendant's office to which the witness had
taken the document.
Significantly,
at no time during cross-examination was it suggested to this witness
that the signature on the document was not that of the second
defendant; neither was it suggested that the second defendant had not
signed the document.
The
evidence of Leonard Tendai Nhari and Benson Ndachema pertains to the
first respondent's claim in reconvention which, as already noted,
has been abandoned.
In
relation to the main claim Benson Ndachema's evidence confirmed the
instruction from the Reserve Bank of Zimbabwe for the recovery of
insider loans. He also stated that the second defendant as
representative of the first defendant owed money to the plaintiff,
and that he resigned from his directorship owing to his failure to
repay the loan.
The
second defendant, according to the witness, had indicated that he
would settle his indebtedness to the plaintiff from the proceeds of
his shares in the MBCA Bank which he would dispose of.
Lionel
Chinyamutangira was Chief Banking Officer at the plaintiff at the
time that he gave his evidence.
When
he was Relationships Manager he reported directly to the second
defendant, and got to deal with the first and third defendants as
well. He explained that the purpose of the facility extended to the
first defendant was in fact to take care of the second defendant's
affairs when he was away, such as paying for his family's expenses
and motor vehicle expenses. The second defendant would instruct him
and the other employees of the plaintiff on the transactions to be
performed, and Higginson would do the paperwork.
He
identified some emails exchanged between him and the second defendant
in terms of which the second defendant would sometimes instruct him
to debit the first defendant's account for the purposes of paying
his (second defendant's) expenses.
This
witness identified various documents pertaining to payments to or on
behalf of the second defendant made from the account of the first
defendant. He confirmed that the second defendant stepped down from
the board of the plaintiff because of his failure to discharge his
financial obligations to the plaintiff.
Two
witnesses testified on behalf of the defendants. These are James
Friedlander and the second defendant, Julius Makoni.
James
Friedlander's evidence pertained to the claim in reconvention. It
is therefore not necessary to consider it in any detail in view of
the abandonment of that claim.
The
second defendant's evidence was that he is the one who founded the
plaintiff. He was its Chief Executive Officer, Executive Director and
non-Executive director at different times. He is also a shareholder
of the plaintiff.
His
evidence was that he was not clear as to what the basis of his
liability for the first defendant's debts to the plaintiff was.
He
recognized and identified the signature on the deed of suretyship
executed on 10 July 2002 to be his. He then sought to state that he
did not understand why he was to act as surety for the first
defendant's obligations to the plaintiff.
He
stated that he never enjoyed any benefit from the facility granted to
Cornerstone.
He
stated that he resigned voluntarily from the board of the first
defendant and that his resignation was unconnected to the debt owed
by the first respondent.
The
first issue of whether or not there was a valid loan agreement
between the plaintiff and the first defendant can be easily disposed
of.
The
facility letter dated 19 June 2013 was duly signed on behalf of the
first defendant. The person who signed on behalf of the defendant,
David Higginson was a duly authorized signatory on the account.
Both
the first and second defendants benefited from the facilities as
shown by the evidence of the witnesses for the plaintiff.
There
is documentary evidence, in the form of emails, exchanged with the
second defendant in which instructions to make payments from the
account of the first defendant were given by the second defendants.
It
is clear that both the first defendant was a just vehicle by which
the second defendant accessed loan facilities from the plaintiff
using his position in the plaintiff.
It
was clear that the second defendant is a dishonest person who was
being deliberately untruthful, and sought to mislead the court about
his involvement in the financial transactions of the first defendant.
He is the typical businessman who started the business of a bank in
order to give money from the bank to himself.
The
unchallenged evidence of the witnesses for the plaintiff was that
when the second defendant was approached about the need to settle the
loan account he advised that he would do that from the proceeds of
the sale of his shares in the MBCA.
At
no time did he dispute the amount or that he owed it.
Minutes
of a meeting of the plaintiff's Board of the Credit Committee held
on 30 January 2015 deliberated on the first defendant's debt and
the undertaking by the second defendant to settle it. Under item
12.7 of the minutes the following is recorded:
“CORNERSTONE
$1 059, 432:
Management advised that Dr Makoni had advised that he intended to
repay the loan from proceeds of a share sale as he held shares in
another financial institution.”
In
the same minutes under item 14 (from 14.1 to 14.10) the second
defendant is the subject of discussion, and the resolution that he
must resign his directorship owing to his non-performing loan is
recorded.
The
second defendant feigns ignorance of that resolution in the face of
such documentary evidence.
His
evidence is unconvincing.
The
first defendant pretended not to know anything about the Reserve Bank
of Zimbabwe's directive concerning insider loans. Yet that matter
was discussed at a board meeting which he attended on 19 March 2014
and appears as item 5.4 in the minutes of that meeting.
The
evidence led establishes that the first defendant entered into a
valid facility agreement in terms of which it accessed funds availed
by the plaintiff.
The
court finds that the first defendant was an entity established and
controlled by the second defendant for the purposes of accessing
money from the plaintiff. Through the first defendant, the second
defendant accessed money from the plaintiff and from time to time
gave instructions to bank officials to pay his expenses from the
account of the first defendant.
The
second defendant signed a deed of suretyship for the first
respondent's obligations to the plaintiff. He is accordingly liable
on the basis of that deed of suretyship.
The
third defendant is equally liable to the plaintiff for the debts of
the first defendant on the basis of the suretyship agreement.
As
noted above, the existence of these deeds of suretyship is not
challenged by the defendants.
On
the power of attorney used to register the mortgage bond over the
second defendant's property, the document was duly signed by the
second defendant on 10 July 2013.
The
second defendant did not dispute the signature on that power of
attorney when he gave evidence.
It
is clearly his signature.
The
court finds that he is the one who signed the power of attorney to
pass a mortgage bond on his immovable property.
The
debt secured by the mortgage bond has been proved. The plaintiff is
accordingly entitled to recover the debt through the sale of the
mortgaged property.
In
terms of clause 5.7 of the facility agreement the plaintiff is
entitled to recover collection charges and its legal fees on the
attorney-client scale.
In
any event, such costs would still have been justified by the
vexatiousness of the defence to the claim in the instant case.
In
the result, IT IS ORDERED THAT:
1.
Judgment be and is hereby given in favour of the plaintiff against
the first, second and third defendants jointly and severally the one
paying the others to be absolved for:
(a)
Payment of US$1,105,748.90 plus interest thereon at the rate of 15%
per annum from the 9th
September 2015 such interest calculated monthly and in advance on the
said sum and capitalized to the date of payment in full.
(b)
Payment of collection commission in accordance with the Law Society
By-Laws.
(c)
Payment of plaintiff's costs of suit on the legal practitioner and
client scale.
(d)
A declaration that the immovable property being a certain piece of
land situate in the district of Salisbury called the Remainder of Lot
6 of Rietfontein, measuring 1,2129 hectares held by the second
defendant under Deed of Transfer No.4388/1994 is executable.
2.
The first defendant's claim in reconvention be and is hereby
dismissed with costs on the legal practitioner and client scale.
Gill
Godlonton & Gerrans,
plaintiff's legal practitioners
Thompson
Stevenson & Associates,
defendants legal practitioners
