On
12 September 2014, the plaintiff issued summons against the defendant
for USD$3,872,123= (three million eight hundred and seventy two
thousand one hundred and twenty three United States dollars), payable
in terms of an agreement between the parties dated 12 August 2012,
plus interest thereon at the prescribed rate calculated from 28
February 2013 to the ...
On
12 September 2014, the plaintiff issued summons against the defendant
for USD$3,872,123= (three million eight hundred and seventy two
thousand one hundred and twenty three United States dollars), payable
in terms of an agreement between the parties dated 12 August 2012,
plus interest thereon at the prescribed rate calculated from 28
February 2013 to the date of payment in full, as well as costs of
suit on a legal practitioner and client scale.
Both
parties are businessmen of note, with multi-million dollar empires
that span the region and the globe. They used to hold each other in
high regard until the money came between them - as it is wont to do.
According
to the plaintiff's declaration, on 28 August 2008, the plaintiff
and a South African company, Sahawi International (Pty) Limited
(Sahawi) issued summons against the defendant and a Zimbabwean
company, Breco International (Private) Limited (Breco) under case
number HC4221/08 for the repayment of a loan advanced to them between
1st
February 2001 and 9th
November 2002 in the sum of USD$3,872,123= (three million eight
hundred and seventy two thousand one hundred and twenty three United
States dollars), plus interest thereon at six percent per annum
capitalized monthly and calculated from 1 February 2001 to the date
of payment in full.
On
17 August 2012, the parties entered into a verbal agreement in terms
of which they settled the dispute by the defendant agreeing to
personally pay the plaintiff the amount in question by the 28th
of February 2013. On 3 November 2013, the defendant raised a special
plea of lis
alibi pendens
that the proceedings in HC4221-08 were still pending; so litigation
was pending between the same parties, on the same cause of action and
in respect of the same subject matter. The defendant prayed that the
present action be stayed pending determination of HC4221/08. The
defendant's plea on the merits was to deny having entered into an
agreement to settle the amount outstanding by 28 February 2013 or at
all. The defendant averred that entering into such an agreement would
have contravened the Exchange Control Regulations and been
illegal….,.
The
parties filed a joint pre-trial conference minute on 5 August 2015 in
terms of which four issues were referred to trial in the main matter
and three issues in the counterclaim. The following issues were
referred to trial in the main matter:
1.
Whether the current proceedings can be proceeded with despite the
pending nature and the non-conclusion of proceedings in HC4221-08?
2.
Did the defendant agree, on the 17th
of August 2012, to personally assume the indebtedness of KMC to the
plaintiff?
3.
Are there admissions of liability by the defendant in legal
correspondence between the plaintiff and defendant? If so, are they
admissible?
4.
To what extent is the defendant liable to the plaintiff?…,.
The
issue that arises for determination in the main matter is whether the
defendant assumed liability to settle the sum of USD$3,872,123= to
the plaintiff, in his personal capacity, and if he did so during the
course of privileged negotiations such an assumption can be used
against him to recover that sum in court….,.
The
plaintiff opened its case by leading the evidence of Mr Yakub
Mahomed, who told the court that he is an accountant by profession
and a businessman who has had business interests in Zimbabwe for the
last twenty five years. His claim was based on the agreement entered
into by the parties on 17 August 2012, at a meeting convened by the
former Attorney General (AG) Mr Tomana. The meeting had been convened
in order to see if the parties could not resolve their differences
out of court after the Attorney General (AG) had refused to prosecute
the defendant in the Criminal Court. The AG had told the plaintiff
that he was under political pressure not to prosecute the defendant,
who was allegedly involved in assisting the military with the war in
the Democratic Republic of Congo (DRC), and had been placed on the
sanctions list for assisting our Government.
The
plaintiff referred to a letter dated 8 March 2011…, as proof of the
Attorney General's refusal to prosecute the defendant and the
reasons why. The letter is apparently from the defendant to the
Ministry of Defence. In paragraph three of the letter, the defendant
writes that he;-
“…,
borrowed USD$3.5 million from Mahomed. At no time was my company,
Breco International, involved in any way whatsoever, or the other
applicant, Sahawi International, who alleges that meetings were held
between them and Breco International, which is simply not true. The
dealings in this matter were entirely between me and Mahomed.”
The
defendant acknowledged owing the money to the plaintiff in his
personal capacity in this letter.
The
letter was given to the plaintiff by Mr. Chris Mutangadura, a Chief
Law
Officer in the Attorney General's office. The defendant made an
undertaking to settle the amount outstanding at the meeting with the
Attorney General (AG). He promised to pay by 28 February 2012. He
needed time to dispose of some assets as he was experiencing cash
flow problems due to being placed on the sanctions list.
The
defendant did not pay by 28 February 2012.
In
the letter dated 1 November 2012…, it was confirmed that a meeting
had taken place before the Attorney General (AG). A letter from the
defendant's legal practitioners, Atherstone & Cook…, dated 14
December 2012, advised that the defendant was causing the sale of
property in Mozambique in efforts to settle his indebtedness to the
plaintiff. In a letter dated 18 February 2013, from Venturas &
Samkange…, payment details were given so that the plaintiff could
deposit the money into a trust account. The defendant did not write
back to dispute liability but by 15 March 2013 no payment had been
made…,.
In
paragraph 3 of the letter to the Attorney General (AG), dated 27
March 2013…, the defendant's legal practitioner made an
undertaking to make good the prejudice 'without admission of
liability'. He said that the defendant was in the process of
selling his house in the United Kingdom.
The
defendant had admitted liability and acknowledged indebtedness in his
personal capacity to Shortie Mahomed, Haji Kalil, Ayoub Doud, and
Shingai Mutasa up to the day before trial….,.
During
cross-examintion, he reiterated that nothing was said about the
meeting at the Attorney
General's
office being without prejudice.
Mr
Jonathan
Samkange
testified on behalf of the plaintiff.
He
told the court that;- he is a senior partner with Venturas &
Samkange, a legal practitioner, a member of Parliament for Mudzi
South constituency, Chairman of the Parliamentary Legal Committee,
and has been admitted to practice law in Namibia from 2003 to date.
He was present at a meeting held on 17 August 2012 which was convened
by Mr Tomana, the Attorney
General (AG),
for the express purpose of settling the dispute between the plaintiff
and the defendant. The Attorney
General (AG)
had declined to prosecute the defendant because it was not in the
national interest to do so. He believed that the defendant was
helping our army with the war in the Democratic Republic of Congo
(DRC). He had refused to issue a certificate of no intention to
prosecute to enable the plaintiff to mount a private prosecution. He
decided to bring the parties together at a round table conference to
facilitate an out of court settlement. The defendant was willing to
pay but not what the plaintiff was asking for. The plaintiff agreed
to forgo interest.
A
figure of USD$3.8 million was agreed on. The defendant shook the
witnesses hand to seal the deal. The defendant was happy that
interest had not been charged to his personal liability; he advised
the plaintiff to pursue interest payments from his company.
There
was no discussion or mention of the privileged nature of the meeting
at the outset or at any other stage or during any of the preliminary
meetings held by the parties.
The
contents of his letters were correct…, and a summary of what was
agreed; that is why the letters were marked without prejudice….,.
He
further averred that the defendant was making offers to settle the
matter out of court the day before this trial commenced.
During
cross examination, Mr Samkange
refused to accept that the substance of out of court settlement
negotiations which took place a few days before trial commenced were
privileged or that they had been conducted on a without prejudice
basis. He said the discussion was immaterial it was the substance of
the discussion which was material to a determination of the
privileged nature….,.
The
plaintiff closed its case….,.
The
defendant opened his case by taking the witness stand in his own
defence. The defendant told the court that;- the money which was
borrowed from the plaintiff between 2000-2001 was borrowed not by him
personally, but by him on behalf of a company called KMC which was
operating in the Democratic Republic of Congo (DRC) at that time. The
plaintiff was aware of this as evidenced by his admission to that
effect in the e-mail…, to Mr. Cassell, a trustee of the Maitland
Trust. Tromult (Private) Limited was the company which was handling
operations in the Democratic Republic of Congo (DRC). The plaintiff
was not a director of Tromult (Private) Limited. He had been placed
on the sanctions list, and, consequently, was removed as a
beneficiary of the Maitlands Trust. On 3 May 2009, criminal charges
were put to him and a warned and cautioned statement recorded…,. In
that statement, the plaintiff denied that he borrowed the money in
his personal capacity and told the police that the money was lent to
KMC which was based in the Democratic Republic of Congo (DRC)…,.
At
the meeting convened by the Attorney General in 2012, no personal
liability to repay the money was assumed. He agreed to pay USD$3.8
million by 28 February 2013 because he felt morally obligated to do
so. He denied that he penned the letter of 8 March 2011…, in which
he admitted to owing the money….,.
During
cross examination, the witness denied having accepted personal
liability to settle the debt. He said that he is 76 years old and has
a short spasm memory so he forgets things. He accepted that he has a
moral obligation to pay the plaintiff. He admitted to having agreed
to pay by 28 February 2013. He has no recollection of shaking hands
with Mr Samkange
to seal the deal in 2012. He said his inability to pay by the agreed
date was because of sanctions, not unwillingness to pay. He said that
he tried to sell assets to pay and failed but he cannot recall the
details due to his faulty memory. He denied that when he instructed
the trustees of the Maitland Trust to deposit money into the
plaintiff's account in Jersey he already knew that he was on the
sanctions list and under investigations and that the money would be
returned to the Trust…,. The
letter of
8 March 2011…,
may have been written by him; he cannot recall whether he wrote it or
he didn't.
Mr
Innocent
Chagonda
testified on the defendant's behalf. He told the court that he is
the defendant's legal practitioner of record and a partner at
Messrs Atherstone & Cook. He confirmed that he was present when
warned and cautioned statements…, were recorded from the defendant
in 2009 in connection with fraud and contravening Exchange Control
Regulations charges were put to him. In 2009, the docket was closed
because the police view was that the matter was civil, not criminal.
In 2011, the Attorney General, again, declined to prosecute…,.
Several meetings were held from 26 July 2012. On 27 July 2012, Mr
Tomana said that the meeting was without prejudice. From the letter
on rp131 the agenda was set and the impression created was that the
meeting would be without prejudice. On 17 August 2012, the meeting
was said to be without prejudice. The defendant felt morally
obligated to pay the money owed to the plaintiff by the company in
the Democratic Republic of Congo (DRC).
The
defendant was placed in a difficult position by the sanctions imposed
on him and his companies. He felt responsible for the prejudice
suffered by the plaintiff. The defendant made it clear that his offer
to pay was made without an admission of liability on his part. The
witness could not recall details of who suggested which figure or
whether the defendant shook Mr Samkange's
hand but could testify that eventually an agreement was reached. The
defendant refused to pay interest and the plaintiff agreed to that.
The defendant would cause payment to be made on the basis of
morality. He needed six months to raise the money because he was on
the sanctions list. The draft agreement…, was not an accurate
reflection of what the parties agreed and for that reason it was
never shown to the defendant or signed by him. The witness was taken
aback at the suggestion that he dictated the letter…, to himself
and he denied doing so.
During
cross-examination, the witness said that at the time when the meeting
was held before the Attorney General (AG), he was not aware of the
fresh pending criminal charges against the defendant. He said that
the dispute between the parties emanated from the circumstances in
which the meeting was held before the AG, that the discussions were
held without prejudice and are therefore privileged, and should not
be relied on to found a cause of action. He insisted that the
defendant's intention was 'to cause money to be availed to the
plaintiff'. The witness denied ever having made an undertaking to
chase up payment or to ensure that the defendant paid. He said that
only two letters were marked without prejudice because the agenda for
the meeting set by the Attorney General (AG) made it clear that all
discussions were to be without prejudice….,.
The
defendant closed its case…,.
The
court must determine whether there was a compromise agreement whereby
the defendant agreed to pay the amount in question to the plaintiff
in his personal capacity; whether the compromise agreement is
privileged information which cannot be used to found a cause of
action against the defendant….,.
It
was submitted, on behalf of the plaintiff, that the defendant
accepted the existence of the agreement sued upon both expressly and
through conduct. The court was referred to the case of Sullivan
v Constable
48
T.L.R. 267,
where it was held that:
“It
seems to me that the defendant, by his conduct and that of his agent,
has so acted that the plaintiff was reasonably entitled to believe
that the defendant was assenting to the position which he so plainly
asserted in the correspondence; and, consequently, that the rule in
Freeman v Cooke, 2Ex.254, governs this case. This rule is stated in
Smith
v Hughes, L.R. 6 Q.B. 597 @ p607,
as follows;-
If,
whatever a man's real intention may be, he so conducts himself that
a reasonable man would believe that he was assenting to the terms
proposed by the other party, and that other party upon that belief
enters into the contract with him, the man thus conducting himself
would be equally bound as if he had intended to agree to the other
party's terms.”
It
is arguable that the defendant's conduct of:
(a)
Attempting
to sell assets;
(b)
Causing payment of USD3.5 million be forwarded to the plaintiff's
Jersey account;
makes
him bound as if he intended to be legally bound by his undertaking to
cause funds to be availed to the plaintiff.
The
court was also referred to S.A.
Railways & Harbours v National Bank of SA Ltd 1924
AD 704..,
where it was held that:
“The
law does not concern itself with the workings of the minds of parties
to a contract, but with the external manifestation of their minds.
Even, therefore, if from a philosophical standpoint the minds of the
parties do not meet, the law will, when fraud is not alleged, look at
their acts and assume that their minds did meet and that they
contracted in accordance with what the parties purport to accept as a
record of their agreement. This is the only practical way in which
courts of law can determine the terms of a contract.”
It
was submitted, on behalf of the plaintiff, that the meeting before
the Attorney General (AG) resulted in a resolution that the defendant
was to pay the plaintiff an agreed sum by the 28th
of February 2013. The defendant has not disputed this, he accepted
that he was to pay and set out to liquidate his assets and conducted
himself in a manner consistent with diligent efforts to pay. He was
disappointed when the plaintiff seemed to distrust him. He felt
morally obliged to pay.
Was
his moral obligation irrelevant to his obligation to pay after
agreeing to do so?
The
defendant, on the question of whether an agreement was reached on 17
August 2012, before the Attorney General (AG), submitted that a
compromise is described as a settlement agreement of disputed
obligations whether contractual and otherwise, and referred to; The
Law of Contract in South Africa
6th
ed…,.
and
Georgias & Anor v Standard Chartered Finance Zimbabwe Ltd 1998
(2) ZLR 488 (S)…,.
It
was submitted, further, that for a compromise to be valid, there must
be offer and acceptance, the hallmarks of a contract. The court was
referred to PG Industries (Zim) Ltd v Machawira
2012
(1) ZLR 552 (H),
which quoted with approval from R.H. CHRISTIE, Business Law in
Zimbabwe,
2nd
ed…,
as follows:
“To
be effective in creating a contract, acceptance must be so clear and
unequivocal as to leave no reasonable doubt in the offeror's mind
that his offer has been affected: Selected Mines & Marketing
(Rhodesia) Ltd v Trees Asbestos Mining Co. Ltd 1952 SR 5.
The reason for requiring a higher degree of certainty than the
standard proof on the preponderance of probability that is
universally accepted in civil as opposed to criminal cases is that
the offeror is entitled to expect an answer on which he can
immediately act, without interrupting his business while he weighs up
conflicting probabilities, in order to decide whether he has a
contract or not.
A purported acceptance in the form of 'Yes, but…, will not do,
because by seeking to add or subtract from the terms of the offer it
does not create the necessary agreement but leaves negotiations
open.”…,.
The
defendant submitted that the plaintiff failed to discharge the onus
of proving that a contract existed between the parties, for the
reason that even though the defendant agreed to pay before the
Attorney General (AG), his acquiescence was qualified by his
reference to a moral obligation to pay and to his reference to the
fact that he was not assuming legal liability to pay, he was assuming
a moral obligation to pay because the Democratic Republic of Congo
company was on the sanctions list and incapable of fulfilling its
obligation to the plaintiff.
We
must decide if, in effect, that qualification left negotiations open,
whether it added or subtracted from the terms of the offer resulting
in there not being any legally binding agreement. In other words, was
the defendant's acceptance of the plaintiff's offer clear and
unequivocal leaving no doubt in the plaintiff's mind that the offer
had been accepted?
It
was submitted, on behalf of the plaintiff, on the law of compromise,
that:
“Our
law of contract has for long recognized that a new agreement that
settles a dispute operated as res
judicata
in respect of the old agreement and in itself becomes a valid and
binding contract between the parties. Not only can the original cause
of action no longer be relied upon but a defendant is not entitled to
go beyond a compromise and raise defences to the original cause of
action when sued on compromise (see Road
Accident Fund v Ngulube 2008 (1) SA 432 (SCA);
Lieberman
v Santam Ltd @ 000 (4) SA 321 (SCA) pa 11-12;
Hamilton
v Van Zyl 1983 (4) SA 379 (E);
Majora
v Kuwirirana Bus Service (Pvt) Ltd 1990 (1) ZLR 87 (SC).
This,
in our law, is referred to as a compromise.
The
Courts in South Africa have moved on to hold that a compromise need
not necessarily, however, follow a disputed contractual claim. Any
kind of a doubtful right can be the subject of a compromise. A valid
compromise may even be entered to avoid a spurious claim. In
establishing whether a claim has been compromised one is concerned
simply with the principles of offer and acceptance.
See E Bob A Lula Manufacturing & Printing CC Kingtex Marketing
(Pvt) Ltd 2008 (2) SA 327 (SCA)”…,.
The
court was also referred to the case of Georgias & Anor v Standard
Chartered Finance Zimbabwe Ltd 1998 (2) ZLR 488 (S) on the principles
that govern a valid compromise agreement. It was held that:
“Compromise,
or transactio, is the settlement by agreement of disputed
obligations, or of a lawsuit the issue of which is uncertain. The
parties agree to regulate their intention in a particular way, each
receding from his previous position and conceding something - either
diminishing his claim or increasing his liability. See Cachalia v
Harberer & Co 1905 TS @ 457 @ 462;
Tauber
v Von Abo 1984 (4) SA 482 (E) @ 485 G-I;
Karson
v Minister of Public Works 1996 (1) SA 887 (E) @ 893F-G.
The
purpose of compromise is to end doubt and to avoid the inconvenience
and risk inherent in resorting to the methods of resolving disputes.
Its effect is the same as res judicata on a judgment given by
consent. It extinguishes ipso jure
any
cause of action that previously may have existed between the parties,
unless the right to rely thereon was reserved. See Nagar v Nagar 1982
(2) SA 263 (ZH) @ 268 E-H.
As
it brings legal proceedings already instituted to an end, a party
sued on a compromise is not entitled to raise defences to the
original cause of action.”
I
accept the submissions made on behalf of the plaintiff that these
authorities set out the following principles;-
1.
Parties
to a dispute can agree to resolve that dispute for whatever reason.
2.The
resolution of the dispute under such circumstances results in the
setting out of the parties' intention and it extinguishes the old
cause of action.
3.
The parties are involved in a give and take where each part abandons
its old position and makes a concession which may diminish his claim
or increase his liability.
4.
A compromise creates a new liability. Once a compromise is reached a
party sued may not raise defences to the original cause of action.
5.
Once a compromise is reached issues become res
judicata.
6.
The court must ask itself whether there was an offer and an
acceptance in determining whether a compromise was reached.
The
defendant addressed two scenarios on offer and acceptance;
(i)
The
first, in which the plaintiff is the offeror and averred that the
plaintiff's negative offer was that the defendant accepts personal
liability to pay, or, in
the alternative, be prosecuted privately in a criminal suit if the
State declined to prosecute.
Both
the defendant and Mr Chagonda
denied
that he agreed to be bound personally, which is why he claims to have
refused to sign the draft agreement which was prepared by Mr
Samkange.
It was submitted, on behalf of the defendant, that the sum of USD$3.8
million was not a compromise figure because the same sum was claimed
in the original summons under HC4221-08.
(ii)
The
second scenario, in which the defendant was the offeror, was to offer
to cause payment to be made.
The
differences in the letters of 1 November 2012 and 14 December 2012,
was submitted to exhibit evidence that there was no meeting of the
minds regarding the issue of personal liability. It was submitted
that the defendant denied personal liability in paragraphs 2.4 and
2.5 of his plea in HC4021/08 filed on 20 January 2009 and in his
warned and cautioned statements of 3rd
May 2009 and 17 June 2011.
The
failure by the plaintiff to withdraw criminal charges against the
defendant was submitted to be further evidence that there was no
meeting of the minds between the parties because that term of the
compromise was not complied with. The defendant cited the case of
Pioneer
Transport (Pvt) Ltd v Delta Corporation & Anor
2012
(1) ZLR 58 (H)…,
where it was held that;-
“The
nature of a contract is that two or more parties thereto reciprocally
promise, or one of them promises to the other or others, to give some
particular thing to do or to refrain from doing some particular act.
There is, consequently, a presumption that in every bilateral or
synallagmatic contract the common intention is that neither should be
entitled to enforce the contract unless he has performed or is ready
to perform his own obligations.”
I
am persuaded by the submissions made on behalf of the plaintiff that
what is material to the resolution of the issue of offer and
acceptance is that the defendant said he would pay the agreed sum by
an agreed date at the meeting with the Attorney General (AG). His
reasons for agreeing to pay are irrelevant, that fact that he does do
is material.
A
compromise can result in an increase in liability or in a diminution
of a claim. There is no reason why a compromise cannot result in an
assumption of liability to pay. The evidence supports the finding
that the defendant assumed liability to settle the debt.
With
all due respect to counsel for the defendant, it is trite that when a
compromise is reached, defences to the original claim can no longer
be relied upon.
There
was not much evidence adduced before the court as to the
existence of the company based in the Democratic Republic of Congo,
KMC. No documents were placed before the court to show whether this
is a duly registered company and whether the defendant had a
resolution authorizing him to borrow money from the plaintiff on its
behalf at the material time. The defendant admitted to using 'some'
of the money in the Democratic Republic of Congo (DRC) and did not
take the court into his confidence as to whether he was authorized by
KMC to utilize the loan elsewhere or for other business not related
to KMC.
In
my considered view, the defendant is hiding behind a finger when he
stipulates that the money was borrowed on behalf of KMC. When the
trustees of the Maitland Trust sent payment to the plaintiff's
account in Jersey, which payment was subsequently rejected by the
plaintiff's Bank, there was no mention of KMC. When the trustees
advised the plaintiff that the defendant had instructed them not to
make another attempt to send the money, there was no mention of KMC.
In each letter when the defendant has admitted that he agreed to pay
the money there is no mention of KMC. The company, in my view, was
used by the defendant as a shield to evade liability for Exchange
Control violations, which formed part of his defence in the original
claim and may not be used by him as a defence in these proceedings
after extinguishing the old cause of action and creating a new one
when he agreed to pay.
There
was an offer. There was an acceptance by the defendant.
The
fact that the plaintiff subsequently failed to withdraw the criminal
charges against the defendant, as promised, may give rise to a cause
of action of failure to fulfill the compromise terms. It does not, on
its own, support the assertion that there was no meeting of the
minds, or an offer and acceptance, because one of the terms was
subsequently not complied with. Similarly, the defendant failed to
pay by the agreed date. That does not mean there was no compromise
agreement.
It
is the finding of this court that the parties entered into a
compromise agreement on 17 August 2012, in terms of which the
defendant assumed liability to pay to the plaintiff the sum of
USD$3,872,123= by 28 February 2013. The fact that he agreed to pay
because of a perceived moral liability, because he and his companies
had been placed on the sanctions list, because his attempt to deposit
the plaintiff's money into an account in Jersey had failed, because
he was a gentleman and a man of honor, a man of his word, became
irrelevant as soon as he agreed to extinguish the old cause of action
and to create a new one….,.
