This is an appeal against the whole judgment of the High Court handed down on 8 September 2020, declaring “that payment by the applicant (respondent) of the sum of RTGS$235,620=99 together with interest at the prescribed lending rate calculated from 19 February 2020 to the date of final payment shall be the full and final settlement of the respondent's (appellant's) debt.”...,.
FACTUAL BACKGROUND
The appellant is Homelink (Private) Limited, a registered money-lender in terms of the law. The respondent is a Zimbabwean national living in the diaspora.
On 17 August 2018, the parties entered into a loan agreement which came into effect on 30 October 2018. In terms of the agreement, the respondent was granted a loan in the sum of US$450,000 to purchase an immovable property, being a certain piece of land situate in the district of Salisbury called the remainder of Stand 251 Helensvale Township measuring 8,242 square metres in extent also known as 2 Denys Close, Helensvale, Harare.
The same Stand was also to be used as security for the loan. A mortgage bond was accordingly registered in favour of the appellant in the sum of US$450,000.
The parties also agreed that the interest applicable to the loan “shall be at a variable rate currently pegged at 10 percent per annum or at such rate as shall be determined by the Lender from time to time.”
Furthermore, that the interest “shall be calculated on the outstanding balance (at all times expressed in United States Dollars) at the prevailing interest rate.”
It was also agreed that repayments would commence on 30 October 2018 and that “the principal balance, interest, and charges accruing thereon shall have been paid in full by 30 September 2033.”
The parties also agreed, in clause 10, as follows:
“10 CHANGES IN CIRCUMSTANCES
10.1 If by reason of:
10.1.1 The introduction of any change in any applicable law or regulation, or any change in the interpretation or application thereof; or
10.1.2 Compliance by the Lender with any directive, request or requirement (whether or not having the force of law) of any Central Bank, Government, fiscal, or other authority;
10.1.3 It becomes unlawful or it is prohibited or it is contrary to such directive, request or requirement for the Lender to maintain the Loan or to give effect to any of its obligations, as contemplated by this Agreement, then, the Lender may notify the Borrower and the Borrower shall promptly prepay the Loan, together with all interest costs and expenses accrued thereon.”
At the time that the loan agreement was concluded, the United States dollar was the dominant legal tender along with other multi currencies.
Although the loan was expressed in United States dollars, it was disbursed in two parts or tranches.
US$5,685=85 was disbursed on 13 September 2018. The greater part of the loan, in the amount of US$444,341=15 was disbursed on 16 November 2018 - after the separation of the RTGS dollars and nostro foreign currency bank accounts and it was disbursed in RTGS dollars or local currency at the rate of one-to-one to the United States dollar.
The reason for disbursement of the greater part of the loan in RTGS dollars is unexplained in the papers.
In its opposing affidavit a quo, the respondent merely states as follows:
“The correct position is that S.I.33 of 2019 came into force on 22 February 2019. The sum of US$444,341=15…, was disbursed on 16 November 2018 as stated above.”
In his application in the court a quo, the respondent stated the crisp issue before the court as follows:
“The legal issue is whether or not the loan agreement, or the liability arising therefrom, falls within the ambit of section 4(1)(d) of S.I.33/2019 now incorporated in terms of section 22(1)(d) the Finance (No.2) Act 2019 and is therefore deemed to be in RTGS dollars at a rate of one-to-one to the United States dollar.”
As stated at the commencement of this judgment, the court a quo found in the respondent's favour. The court stated, at p8 of its judgment:
“The difficulty of the dispute of the parties is exacerbated by the fact that neither the Principal Act nor the Finance (No.2) Act of 2019 appears to have defined the phrase foreign loan and/or obligation.
However, insights into the same can be gleaned from what the Cambridge Dictionary states on that issue: dictionary.cambridge.org defines a foreign loan as a loan to, or from, a Government or an organisation in another country. The Longman Business Dictionary defines foreign loan as a loan to a country or organisation made by a foreign Government or financial institution.
It is evident, from the definitions which have been examined, that, the loan which the respondent advanced to the applicant does not fall under the definition of a foreign loan. Nor can the obligation which arises from the contract of the parties be classified/defined as a foreign obligation to the applicant. The loan has all the characteristics of a domestic loan which falls under the ambit of the provisions of the Act.”
The court found, at p9:
“The loan cannot, by any stretch of imagination, be defined as a foreign loan. It is, to all intents and purposes, a local loan which is classified as such because of the characteristics which are apparent on its face. It is, accordingly, properly covered under the provisions of the Act.”
THIS APPEAL
The appellant was aggrieved by the court a quo's decision granting the declaratur sought by the respondent and it filed this appeal on the following grounds:
“1. The court a quo erred and misdirected itself in not giving effect to the parties agreement, namely, that, all repayments would be made in United States Dollars. Consequently, the court a quo made a contract on the parties behalf;
2. The court a quo erred and misdirected itself in not finding that the parties loan agreement was a foreign obligation within the contemplation of section 21(2)(b) of the Finance (No.2) Act 2019 and therefore continued to be payable in foreign currency.”
The appellant prayed for the success of his appeal and for the setting aside of the decision of the court a quo and the substitution thereof with an order dismissing the application with costs.
Counsel for the appellant submitted, that, the issue arising from the appellant's second ground of appeal is dispositive of this matter; the narrow issue being whether the court a quo was correct in finding that the loan agreement was not a foreign loan, within the contemplation of section 21(2)(b) of the Finance (No.2) Act of 2019, that continued to be payable in foreign currency.
It was his submission, that, the first ground of appeal will either be upheld or fall away depending on the finding thus made regarding the nature of the loan agreement. If it is a foreign loan, the first ground of appeal must succeed, but if not, then the first ground falls away, so he contended.
Counsel sought to buttress the appellant's stance, that the loan is a foreign obligation, by submitting that the loan in casu was issued on the strength of exchange control approval given by the Reserve Bank of Zimbabwe. He referred the court to a document at p65 of the record.
It is a letter dated 2 August 2019 authored by the Deputy Director, Foreign Investment, at the Reserve Bank of Zimbabwe and addressed to the Managing Director of the appellant. The body of the letter reads:
“Thank you for your letter dated 09 July 2019 regarding the request to continue issuing diaspora mortgages in foreign currency. We wish to advise that Homelink (Pvt) Ltd can continue to issue mortgages denominated in foreign currency to diaspora clients as authorised under Exchange Control authority GR4268 dated 26 October 2016.”…,.
To his credit, counsel readily conceded that the appellant's failure to attach to its papers the authority referred to as GR4268 placed the court a quo, and, by extension, this Court, in an invidious position as its contents are and remain unknown.
Counsel argued, that, the court a quo ought to have accepted and adopted a wider and more generous definition of a foreign loan or foreign obligation and that if it had done so, it would have found that the loan agreement in casu was a foreign obligation on the part of the respondent and that it therefore continued to be payable in United States dollars.
It was also counsel's submission, that, the disbursement of the loan in local currency was immaterial to the determination of the dispute as that was in accordance with the dictates of the agreement which clearly stipulated that repayments were to be made in United States dollars.
He placed reliance for this submission on the case of Magodora & Ors v Care International Zimbabwe 2014 (1) ZLR 397…, SC24-14 where this Court held that:
“In principle, it is not open to the courts to rewrite a contract entered into between the parties or to excuse any of them from the consequences of the contract that they have freely and voluntarily accepted, even if they are shown to be onerous or oppressive. This is so as a matter of policy.”
Counsel for the respondent, on the other hand, submitted that the appellant's second ground of appeal relates to findings of fact and the conclusion made by the court a quo that the loan was a domestic loan. That being so, the principle relating to appellate courts not lightly upsetting findings of fact by lower courts applies.
Counsel submitted, that, the factual findings made by the court a quo were based on and supported by the evidence that was placed before the court.
He further submitted, that, on an application of the definitions that the court a quo had regard to and applied to the facts, one of the parties to the contract had to be a foreigner, and, in casu, neither of the parties was a foreigner.
Although the respondent was working in Ethiopia, the mere fact of him coming home to enter into the contract showed that it was a domestic loan. Furthermore, the respondent's domicilium citandi et executandi did not change his Zimbabwean domicile.
He further submitted, that, the agreement having been signed in Harare, Zimbabwe, by a Zimbabwean national and a Zimbabwean moneylender, for the sole purpose of the purchase of an immovable property in Zimbabwe, the loan was undoubtedly not a foreign loan.
Counsel argued, that, the disbursement of the greater part of the loan in RTGS dollars was another telling factor, further justifying and fortifying the court a quo's findings.
He submitted, that, there was thus nothing to warrant a finding by this Court that the court a quo's findings were irrational and therefore called for interference.
Regarding the appellant's first ground of appeal relating to sanctity of contract, counsel submitted, that, by enacting section 22(1)(d) of the Finance (No.2) Act, Parliament abrogated the said common law principle.
For convenience, the provision is reproduced hereunder:
“That, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first 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 the first effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.”
ISSUE FOR DETERMINATION
The issue for determination by this Court is whether or not the loan agreement entered into by and between the parties is a foreign loan which gave rise to a foreign obligation payable in foreign currency by the respondent.
This stated issue is dispositive of the appeal. This is so because, as rightly pointed out by the court a quo at pp10-11 of its judgment:
“Where the law speaks in clear and unambiguous terms about the substance of any matter, the intention of the Legislature should be respected as well as given respect to. That intention takes precedence over the parties intention as expressed in their contract.”
Section 4 of S.I. 33/2019 provides in relevant part:
“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)…,.
(b) That, Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C of the principal Act) immediately before the effective date, shall, from the effective date, be deemed to be opening balances in RTGS dollar at par with the United States dollar; and
(c)…,.
(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.”
The provisions in section 4(1)(d) of SI 33/2019 (supra) were incorporated in the Finance (No.2) Act 2019, section 22(1)(d) of which provides:
“(1) Subject to section 5, for the purposes of section 44C of the principal Act, the Minister shall be deemed to have prescribed the following with effect from the first effective date -
…,.
(d) That, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first 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 the first effective date, be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.”…,.
The Finance (No.2) Act 2019 further provides, in section 22(4)(a), that:
“(4) For the purposes of this section -
(a) It is declared for the avoidance of doubt, that, financial or contractual obligations concluded or incurred before the first effective date, that were valued and expressed in United states dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act), shall, on the first effective date, be deemed to be values in RTGS dollars at a rate of one to one to the United States dollar.”…,.
The appellant contends, that, by virtue of the provisions of section 44C(2)(b) of the principal Act, the respective assets and liabilities of the parties in casu are excluded from the effects of section 4(1)(d) of SI 33 of 2019.
Section 44C(2) of the principal Act (the Reserve Bank of Zimbabwe Act [Chapter 22:15] provides as follows:
“(2) For the avoidance of doubt, it is declared that the issuance of any electronic currency shall not affect or apply in respect of -
(a) Funds held in Nostro foreign currency accounts, which shall continue to be designated in such foreign currencies; and
(b) Foreign loans and foreign obligations in any foreign currency, which shall continue to be payable in such foreign currency.”
In Zambezi Gas Zimbabwe (Pvt) Ltd v N.R. Barber (Pvt) Ltd & Anor SC03-20 (Zambezi Gas), at p9, this Court concluded:
“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 SI33/19 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….,.
It is the assessment and expression of the value of assets and liabilities in United States dollars that matters.
Section 4(1)(d) of SI 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….,.
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)….,.”
It is without doubt, that, Zambezi Gas Zimbabwe (Pvt) Ltd v N R Barber (Pvt) Ltd & Anor SC03-20, having interpreted and clarified the law, the appellant can only succeed in this appeal if it can show, that, the loan agreement in casu is a foreign loan and that the court a quo therefore erred and misdirected itself in coming to a contrary conclusion.
The inescapable facts that the court a quo properly paid regard to are that the lender and the borrower in the loan agreement were both Zimbabweans, albeit an institution and an individual; the loan agreement was executed in Zimbabwe; the sole purpose of the loan was the purchase of an immovable property situated in Zimbabwe; the loan was largely disbursed in local currency, except for a small portion that was disbursed earlier in United States dollars at a time when the United States dollar was one of the legal tender currencies.
Sight is not lost to the fact, that, the above are factual findings made by the court a quo.
No irrationality was alleged or shown in the making of such findings. No specifics were provided as to the nature and source of the “generous” or 'wider' definition of “foreign loan” or 'foreign obligation' that the court a quo is criticised for not having had regard to.
The contention, that, the exchange control approval that was given by the Reserve Bank of Zimbabwe (RBZ) was proof that this was a foreign loan was not supported by documentary evidence. No explanation was proffered as to why the alleged document, which does not form part of the papers, was not relied on and availed by the appellant.
In any case, it is beyond the scope of the Reserve Bank of Zimbabwe (RBZ) to convert what is factually a domestic loan into a foreign loan.
In view of the strenuous submissions made in urging this Court to consider this aspect favourably for the appellant, this would appear to be an omission by the appellant of a crucial document.
It is trite, that, a court decides a matter on the basis of the evidence that is placed before it.
It therefore follows, that, the court a quo cannot be faulted for failing to take into account evidence that was not placed before it. The court a quo would face severe criticism if it had done so.
The court thus correctly found, that, the loan agreement was not a foreign loan and did not create a foreign obligation on the respondent's part.
In Breastplate Service (Private) Limited v Cambria Africa PLC SC66-20, at pp9-10, this Court stated:
“Section 44(C)(2)(b) of the Reserve Bank Act, as inserted by section 3(1) of the 2019 Regulations, makes it clear that the issuance of any electronic currency, i.e. RTGS dollars, shall not affect or apply to any foreign obligation. This is reinforced by section 4(1)(d) of the Regulations which explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.”
With the factual finding made a quo, that, the loan agreement was not a foreign loan which created a foreign obligation, and the appellant having failed to show the error or misdirection therein, the appellant must accept and submit to the clear dictates of the law.
No basis having been established for this Court to upset the court a quo's findings and consequent conclusion, it is our view that this appeal has no merit.
The emphasis on motivating the appellant's second ground of appeal, and the submission that the first ground would only become relevant if the appellant succeeded on the second ground of appeal effectively translates to the above discourse sealing the appellant's fate.
Notably, it would also be absurd for the appellant to be paid United States dollars for a loan that it largely disbursed in local currency.
The argument that it must be so because the loan agreement stipulated that repayments were to be in United States dollars is a roundabout way of surreptitiously resorting to the first ground of appeal which the appellant clearly realized did not stand scrutiny.
Costs will follow the cause.
We are not satisfied that they should be on the scale of legal practitioner and client as urged by the respondent. In our view, there is no legal basis that has been given that would warrant an award of costs on a higher scale.
It is accordingly ordered as follows:
The appeal be and is hereby dismissed with costs.
