PATEL J: The plaintiffs herein claim provisional sentence founded on an
Agreement of Settlement (the Agreement) concluded between the parties on the 22nd
of July 2008 followed by an Acknowledgement of Debt (the Acknowledgement)
signed on the 15th of November 2008. The total claim is for the sum
of US$90,000 together with interest thereon at the rate of 20% per annum
calculated from the due date of the 14th of December 2008. The
defendant resists the claim on various grounds relating to the nature and
correctness of the capital sum claimed under the Agreement, the application of
the in duplum rule, the liquidity of
the Acknowledgement and the legality of the entire transaction.
The terms of the Agreement refer to a
failed investment made by the plaintiffs through the defendant and the
defendant's consequent indebtedness to the plaintiffs in the sum of US$80,000,
payable in two instalments of US$70,000 and US$10,000, due by the 31st
of October and the 30th of November 2008 respectively. The Acknowledgement
cites the defendant's failure to pay as agreed and recalculates the defendant's
indebtedness to be the sum of US$90,000, payable by the 14th of
December 2008, together with 20% interest on the outstanding amount. In the
event that the money debt is not settled, the defendant is obligated to
transfer “a property of like value or more”.
Submissions
Mr. Govere for the plaintiff was unable
to explain how the original debt of US$80,000 was arrived at in the Agreement,
but argues that this is irrelevant as the Acknowledgement clearly stipulates an
agreed debt of US$90,000. He submits that both the Agreement and the
Acknowledgement refer to investments as opposed to any loan and that,
therefore, the in duplum rule does
not apply. He further submits that the Acknowledgement is a liquid document
signed by both parties and that it clearly indicates the capital sum, interest
and costs owing by the defendant. In this regard, he relies upon several case
authorities for the proposition that the alternative obligation to transfer
immovable property also constitutes a liquid claim. Finally, he contends that
even if the original transaction between the parties is found to be contrary to
statute, the Court has a discretion to enforce the agreement despite its illegality
in order to avoid the unjust enrichment of one party at the expense of the
other.
As
against this, the defendant avers that there was a fundamental error in
calculating the debt in the Agreement. The original sum owing in 2006 was
US$2284 and the defendant paid back a total of US$14,913 from July 2006 to
November 2008. In any event, the defendant's basic position is that the debt in casu did not arise from any
investment but was essentially a disguised loan of several amounts borrowed
from the plaintiffs in 2006. The defendant was not a registered asset manager
and therefore could not invest funds on behalf of the plaintiffs or anyone
else. In this respect, Mr. Zhakazha
submits that the so-called investment agreement between the parties was
designed to circumvent the relevant statutory provisions governing the
management of assets and permissible rates of interest. He therefore submits
that the Agreement and Acknowledgement, having been premised on an illegal
transaction, must be declared null and void and consequently unenforceable.
Disposition
Rule 20 of the High Court Rules
provides as follows:
“Where the plaintiff is the
holder of a valid acknowledgement in writing of a debt, commonly called a
liquid document, the plaintiff may cause a summons to be issued claiming
provisional sentence on the said document.”
It
is reasonably clear from the papers that the Acknowledgement in casu constitutes a liquid document
within the ordinary meaning of Rule 20. It is in writing and signed by both
parties and it clearly stipulates the amounts owed by the defendant to the
plaintiffs. As to whether the alternative obligation to transfer immovable
property also constitutes a liquid claim, it seems to me that this obligation
is not entirely satisfactorily formulated. Nevertheless, it is not necessary
for me to decide this point as the Summons is based solely on the monetary debt
due and does not make any claim for transfer of property in the alternative.
What
does not emerge clearly from the papers is whether the Acknowledgement is a valid acknowledgement for the
purposes of granting provisional sentence. If it is founded on a genuine
investment, as the plaintiffs contend, it falls foul of section 5(1) of the
Asset Management Act [Chapter 24:26].
Section 5(1) stipulates that no person shall carry on the business of asset
management, as defined in section 3(1) of the Act, unless the person is
incorporated as a private or public company and is registered in terms of
Statutory Instrument 16 of 2004 or in terms of the Act. Section 5(6) makes it
an offence for any person to contravene section 5(1). It is common cause that
the defendant is neither an incorporated company nor registered as an asset
manager under Chapter 24:26.
If, on the other hand, the
Acknowledgement is premised on a disguised loan, as is contended by the
defendant, the total sum inclusive of capital and interest claimed by the
plaintiffs may well exceed the amount legally claimable under the in duplum rule. More significantly, the
Acknowledgement and the loan underlying it fall to be governed by the
provisions of the Moneylending and Rates of Interest Act [Chapter 14:14]. This Act regulates the moneylending activities of
licensed or professional moneylenders as well as unlicensed lenders who lend
money otherwise than in the course of business. In terms of section 3 of the
Act, a lender is defined to mean any person making a loan of money, including
the holder of any instrument of debt. Section 19 makes it clear that the Act
applies to every transaction which, whatever its form may be, is substantially
one of moneylending and whether or not the transaction forms part of any other
transaction. Section 8 of the Act provides that no lender shall stipulate for,
demand or receive from the borrower interest at a rate greater than the
prescribed rate of interest and that any lender who contravenes this
prohibition shall be guilty of an offence. Insofar as concerns civil claims,
section 9 of the Act precludes the recovery of excess interest and, where a
borrower has paid excess interest, section 11 entitles him to recover such
excess.
As
I have recently held, in Funding
Initiatives International (Pvt) Ltd v Mabaudi HH 20-2007, at p. 7:
“The
established principle of our law is that anything done contrary to a direct
statutory prohibition is generally void and of no legal effect. The mere
prohibition operates to nullify the act, particularly where it is visited with
a criminal sanction. See Schierhout v
Minister of Justice 1926 AD 99, at 109; Metro
Western Cape
(Pty) Ltd v Ross 1986 (3) SA 181 (AD) at 188-189. …………………………….
Having
regard to the direct and unambiguous prohibition spelt out in section 8 of the
Act, I am in no doubt that its provisions cannot be waived by agreement and
that any contractual stipulation to the contrary must be treated as being null
and void ab initio. Moreover, as is
made crystal clear in section 9, any interest charged or agreed in excess of
the prescribed maximum is unenforceable and irrecoverable, whether through
civil proceedings or otherwise. Consequently, where usurious interest is
charged in contravention of the Act, the borrower is entitled, in terms of
section 11, to recover the excess amount paid within a period of two years
after the date of payment.”
It
follows, therefore, whether the transaction in
casu was a genuine investment or a disguised loan, that the transaction and
the Acknowledgement premised upon it are susceptible to scrutiny for compliance
with the in duplum rule as well
conformity with the governing statutes. Moreover, if the transaction is found
to be tainted with illegality, it will be necessary to consider the relevant
facts surrounding its conclusion as well as the respective degrees of turpitude
attributable to the parties in order to determine the extent of its illegality
and its enforceability under the par
delictum rule. See Jajbhay v Cassim
1939 AD 537 at 544-545; Young v van
Rensburg 1991 (2) ZLR 149 (SC) at 156-157; Hattingh & Ors v van Kleek 1997 (2) ZLR 240 (S) at 246.
In
my view, all of the above-mentioned aspects of this case cannot be properly
determined on the papers before the Court. They require thorough ventilation by
way of viva voce evidence in a full
trial of the matter. Moreover, it would be patently improper for the Court to
grant provisional sentence on a liquid document that is evidently fraught with
illegality. The granting of provisional sentence in this case is therefore not
justified and must be refused.
In the result, the application for
provisional sentence in terms of Rule 20 is hereby dismissed and the case is
ordered to stand over for trial in terms of Rule 34. The Summons herein shall
stand as summons in an ordinary action and the defendant shall enter appearance
to defend within five days of the handing down of this judgment. Thereafter,
the rules of procedure in an ordinary action shall apply unless the Court gives
other directions. The costs of this application shall be costs in the cause.
Coghlan, Welsh & Guest,
plaintiffs' legal practitioners
Chinamasa, Mudimu,
Chinogwenya & Dondo, defendant's legal
practitioners
