PATEL
J: The plaintiff herein seeks an
order recognising as binding and enforceable as against the defendant a
judgment granted by the Supreme Court of Appeal of Malawi on 11 September
2007. Pursuant to that judgment, the plaintiff claims from the defendant the
sums of US$848,662.50 (with interest) and MK241,957.00 as well as costs of suit
on a legal practitioner and client scale. The defendant resists the claim on
the ground that it has discharged its obligations under the judgment. In the
alternative, the defendant avers that the Malawi Supreme Court misdirected
itself to the extent that it would be contrary to public policy to recognise
and enforce its judgment in this country.
The issues for determination in casu, as reconsidered and confirmed
at the commencement of trial, are as follows:
1.
Whether the recognition of the
judgment of the Malawi Supreme Court would be contrary to public policy under
the law of Zimbabwe.
2.
Whether that judgment has been
wholly satisfied under the law of Zimbabwe.
3.
What order of costs should be made
by this Court in the circumstances of this case?
Evidence for
the Plaintiff
Mario
de Angelis is the Managing Director of the plaintiff company and his
evidence was as follows.
On
11 February 2003, the plaintiff succeeded in a counterclaim for breach of
contract against the defendant in the High Court of Malawi. However, the
plaintiff was aggrieved by the fact that only general damages were awarded by
the High Court and immediately lodged an appeal against that determination. On
appeal to the Supreme Court of Appeal, the plaintiff was awarded general as
well as special damages, equating to the amounts claimed on the Summons in casu. The award of US$848,662.50 was
by way of special damages for loss of profits from 1994 to 1999, stemming from
the drastic reduction of the plaintiff's share of the market occasioned by the
defendant's breach of contract. According to the plaintiff's attorneys, the
rate of 5% interest claimed on that amount arises by operation of law, viz. the Malawi Courts Act [Exh 1]. The sum of MK241,957.00 represents damages
for loss of profit on the specific contract between the parties. This sum
incorporates the interest component specifically awarded but doubled up to the
maximum claimable under the in duplum
rule.
The
decision of the Supreme Court of Malawi was handed down on 11 September 2007.
There is no appeal against that decision and it is a final judgment which the
defendant has not satisfied. The defendant paid a sum of ZW$50 billion through
this Court on 13 April 2008. The plaintiff rejected this payment as being
valueless. The contract between the parties was initially invoiced in UAPTAs
but after that currency lapsed the parties agreed to deal in United States
Dollars. The Zimbabwe Dollar was never mentioned as part of the agreement and the
plaintiff had no need to use that currency as it is a wholly Malawian company
with no business interests in Zimbabwe.
Under cross-examination, the witness
conceded that on 16 February 2004 the defendant transferred a sum of
MK4,817,862.25 to its own attorneys in Malawi [Exh 2]. The bulk of this money,
though he could not state exactly how much, was received by the plaintiff and
retained by it thereafter. He also accepted the contents of a letter from the
defendant's bank dated 27 October 2003 [Exh 3] confirming exchange control
approval to remit that amount to satisfy the 2003 judgment of the Malawi High
Court. The witness could not confirm with any certainty whether the Supreme
Court of Malawi had taken that payment into account in calculating its award of
special and general damages. He further conceded that the plaintiff's claim for
special damages before the Malawian courts was based on a profit mark-up of 30%
on gross annual turnover. It did not take into account the plaintiff's net
profit, after deduction of taxes and other contingencies.
Evidence for
the Defendant
Icy
Chasara is the Chief Executive Officer of William, Smith & Gourock
(WS&G), which at the relevant time was the trading division of the
defendant. He testified as follows.
WS&G
was contracted to sell 34000 metres (30 tonnes) of PVC to the plaintiff. This
material was found to be defective by the Malawi courts and the principal
question before those courts was that of damages. The defendant accepted the
Malawi High Court judgment ordering the payment of MK1.5 million as general
damages together with interest on that amount and costs. Applying the exchange
rate adopted by the High Court, the award of MK1.5 million converted to
approximately US$330,000.
Consequently,
a payment of MK4.8 million (equating to circa
US$1,050,000), inclusive of interest and costs, was made through the
defendant's attorneys on 16 February 2004. The plaintiff accepted
this payment but still proceeded with its appeal against the High Court award
of damages as being inadequate. The defendant only became aware of the appeal
in 2006, after it had already effected payment, when its Malawi attorneys
forwarded a copy of the notice of hearing before the Supreme Court [Exh 5]. The
plaintiff did not refund the payment of MK4.8 million, despite the appeal, and
the PVC supplied was never returned to the defendant.
The
Supreme Court allowed the appeal and awarded general as well as special
damages. Its award of special damages was based on a gross profit margin of 30%
and was not related to net profit. Moreover, in making its award, the Supreme
Court did not take into account the earlier payment of MK4.8 million made in
satisfaction of the High Court award.
Due
to the very lengthy and difficult process of approval involved in sourcing
foreign currency at that time, the defendant did not attempt to access any
convertible currency through the Reserve Bank in order to satisfy the Supreme
Court judgment. Instead, on 16 April 2008, the defendant wrote to its legal
practitioners enclosing a bank cheque for ZW$50.9 billion, representing the
capital sum due plus in duplum
interest. This amount was calculated by applying the rates of exchange
confirmed by the ZB Bank. On 30 April 2008, the payment was transmitted to the
Registrar of the High Court of Zimbabwe. It was intended as payment into court,
in satisfaction of the Malawi Supreme Court judgment, and was duly receipted as
such. [See Exhibits 4A-4E]. In effect, the defendant paid the plaintiff twice,
once on the High Court award and for the second time on the Supreme Court
award.
Under
cross-examination, the witness was unable to indicate what the plaintiff could
have done with the payment of ZW$50.9 billion. He assumed that the plaintiff
might have been able to apply to the Reserve Bank for approval to convert and
remit that sum to Malawi. In any event, his testimony as to the plaintiff
having been paid and having retained MK4.8 million, and the relative value of
that sum in United States Dollars, was not challenged in cross-examination.
Whether
Malawi Judgment Contrary to Public Policy
The defendant avers that it would be
contrary to public policy for the Malawi Supreme Court judgment to be
recognised in Zimbabwe because it is fundamentally erroneous in several
respects. In essence, it is averred that the court's award of special damages
was based on the plaintiff's gross profit margin rather than its net profit,
contrary to established rules on the calculation of damages. It is therefore
arbitrary, erroneous and inimical to the notion of justice and consequently
contrary to public policy. In this regard, reference is made to Tobacco Finance (Pvt) Ltd v Zimnat Insurance
Company Ltd 1982 (3) SA 55 (ZH) at 61, where a policy based enquiry into
the concept of negligence was adopted and articulated as one that:
“is really
governed by broader considerations such as the ordinary notion of justice, the
interests of the claimant or the defendant as balanced against the community as
a whole, and the economic or even social effects of the claim, all of which
compendiously may be said to broadly reflect the policy of law.”
Reliance
is also placed on the principles to be applied in determining damages for
breach of contract as enunciated in
Zimbabwe Banking Corporation Ltd v Pyramid Motor Corporation (Pvt) Ltd 1985
(4) SA 553 (ZSC) at 564, where GUBBAY JA observed as follows:
“Each case must
be assessed pragmatically on its own facts and merits, with primary weight
being laid upon the policy of the law. The court must ask itself whether,
paying due and proper regard to the notion of justice and the interests of
litigants balanced against the community as a whole, it is socially desirable
to impose liability in the particular circumstances.”
The plaintiff's case is that the law
of Malawi is essentially the same as English law and that the Malawi Supreme
Court properly relied upon the leading case of Hadley v Baxendale (1854) 9 Ex 341 [156 ER 145] in assessing
special damages for consequential loss that was within the contemplation of the
parties. This approach in distinguishing general or intrinsic damages from
special or extrinsic damages recoverable in special circumstances also forms an
established part of our law. See Christie: Business
Law in Zimbabwe at p. 128.
As regards the non-recognition of
foreign judgments on the ground of public policy, the uniform approach in
common law jurisdictions is to be extremely chary about delving into questions
of legal or factual correctness. It is generally inappropriate to review a
judgment of a foreign court of competent jurisdiction and to deny or withhold
recognition, even if there is shown to be a clear misapprehension by that court
of the law or facts founding its judgment. In the United States, for instance,
it was stated as follows in the case of Hilton
v Guyot 159 US 113 (1895):
“Where there has
been an opportunity for a full and fair trial abroad before a court of
competent jurisdiction conducting the trial upon regular proceedings ………… and
there is nothing to show either prejudice in the court or in the system of law
under which it was sitting, or fraud in procuring the judgment, or any other
special reason why the comity of this nation should not allow it full effect,
the merits of this case should not, in an action brought in this country upon
the judgment, be tried afresh, as on a trial or on appeal, upon the mere
assertion of the party that the judgment was erroneous in law or in fact. The
defendant cannot be permitted upon that general ground to contest the validity
of the effect of the judgment sued on.”
In similar vein, CARDOZO J in Loucks v Standard Oil Company of New York
(1918) 224 NY 99 at 111, took the view that:
“The courts are
not free to refuse to enforce a foreign right at the pleasure of the judges to
suit the individual notion of expediency or fairness. They do not close their
door unless help would violate some fundamental principle of justice, some
prevalent conception of good morals, some deep rooted tradition of the common
weal.”
In England, this view was echoed in Fender v St John Mildmay [1938] AC 1 at
12, where LORD AITKEN declared that:
“[public policy]
should only be invoked in clear cases in which harm to the public is
substantially incontestable, and does not depend upon the idiosyncratic
inferences of a few judicial minds.”
The approach in South Africa is no
different. Thus, in Jones v Krok 1995
(1) SA 677 (A) the Appellate Division overturned a decision of the court a quo which declined to recognise a
foreign award because of the apparently arbitrary and unacceptable approach of
the foreign court in awarding damages for breach of contract. As was stated by
CORBETT CJ at 696:
“In my view there
was no valid basis on the papers for these findings by the Court a quo; and, in any event, they seem to
involve entering into the merits of the case adjudicated upon by the US Court,
which, as I have pointed out, is not permissible. Accordingly, public policy
afforded no ground for denying the appellant relief ………….”
In the instant case, it is common
cause that the defendant voluntarily participated in the trial and appeal
before the Malawian courts. Moreover, there is no doubt that the Malawi Supreme
Court is a court of competent jurisdiction, nor is there any claim that its
proceedings on appeal were anything other than procedurally correct.
Ultimately, there is no evidence or averment of illegality, partiality or other
fundamental irregularity vitiating the propriety of those proceedings.
In
the event, I am unable to perceive any persuasive justification for deviating
from the circumspect approach expounded by the eminent jurists that I have
cited above. While it might be accepted that the Malawi Supreme Court may have
erred in calculating the quantum of special damages awarded to the plaintiff,
it cannot be said that its decision was so fundamentally flawed as to entail an
affront to our notion of justice or some irreparable harm to the economic or
social well-being of the community as a whole. In short, the public policy
argument cannot avail the defendant. I accordingly find that the recognition of
the judgment of the Malawi Supreme Court would not be contrary to public policy
under the law of Zimbabwe.
Interest
Claims
The Summons (as amended)
incorporates two separate claims for interest. The first is in respect of the
Malawi Kwacha award and is equivalent to the in duplum interest on the capital sum awarded. The second relates
to the award of special damages denominated in United States Dollars, in
respect of which the plaintiff seeks interest at the rate of 5% per annum from
12 September 2007, being the day after the judgment of the Malawi
Supreme Court was handed down.
The relevant portion of the judgment
of the court reads as follows:
“In the result the appellant is awarded
special damages in the sum of US$848,662.50. The appellant is further awarded
the sum of MK120,928.50 with interest at 1% above the bank base lending rate
with effect from 24th May 1994 to the date of payment.”
The parties are not in dispute as to
the interest claimed by the plaintiff on the Malawi Kwacha award. As regards
the United States Dollar award, the judgment itself is silent on the question
of interest. The plaintiff's position is that the 5% interest component is
automatically claimable, without having to be specifically stipulated, by
virtue of the Courts Act [Cap 3:02]
of the Laws of Malawi. Section 65 of that Act provides as follows:
“Every judgment
in civil proceedings shall carry interest at the rate of five per centum per
annum or such other rate as may be prescribed.”
It seems to me that there are
several compelling reasons for not allowing the interest claimed by the
plaintiff on the sum of US$848,662.50. Firstly, in the absence of specific
evidence to the contrary, it must be assumed that the above provision is
confined to claims sounding in the official currency of Malawi, to wit, the
Malawi Kwacha. There is nothing in section 65 or in any other provision of the
Act to suggest that section 65 extends equally to claims sounding in all
foreign currencies, in respect of which the permissible rate of interest
applicable to civil claims will inevitably vary according to the currency
concerned.
Secondly,
and more importantly, what is sought in
casu is the recognition of a foreign judgment. If this Court is to accord
such recognition, it must do so on the judgment ex facie, as duly certified by an authorised official of the
foreign court. Accepting the plaintiff's argument involves having to materially
modify the expressly stated terms of the foreign judgment on the basis of a
point of foreign law that has not been properly proven in terms of section 25
of the Civil Evidence Act [Cap 8:01].
In
my view, the interpretation that the plaintiff seeks to place on the meaning of
section 65 of the Malawi Courts Act is not entirely incontestable. Apart from
the statutory provision itself, nothing else has been adduced to support the
plaintiff's construction of that provision, either by way of expert evidence or
a reported judgment from Malawi or this country, as is explicitly envisaged by
section 25 of our Civil Evidence Act.
In the premises, I am of the considered view
that the plaintiff's claim for interest on the sum of US$848,662.50 cannot be
allowed upon the recognition of the judgment of the Malawi Supreme Court.
Whether
Malawi Judgment Satisfied
It is common cause that the
defendant effected two separate payments to the plaintiff, one in Malawi
Kwachas in satisfaction of the High Court judgment and the other in Zimbabwe
Dollars pursuant to the Supreme Court judgment.
As regards the tender of ZW$50.9 billion,
Mr. Chinake's argument runs as
follows. This was a payment into court, in terms of Rule 144 of the High Court
Rules 1971, made with Reserve Bank approval at the prevailing exchange rate.
The defendant, as a locally registered company, was bound to comply with
Zimbabwean exchange control laws in settling the Malawi Supreme Court judgment.
As against this, Mr. Tsivama submits that the payment was
not made in the currencies expressed by the court. Moreover, the plaintiff is a
peregrine company with no business interests in Zimbabwe and it could not have
utilised the Zimbabwe Dollars tendered by the defendant. As for the real value
of the sum tendered, the evidence shows that it would have translated to circa US$500.00 on the parallel market
and that it would have been practically impossible to convert it through
official channels into anything approximating the judgment debt.
In recent years, our courts have
taken judicial notice of the existence of the parallel currency market and its
glaring disparity with the official exchange rate. See Echodelta Ltd v Kerr & Downey Safaris (Pvt) Ltd 2002 (1) ZLR
632 (H); Lowveld Leather Products (Pvt)
Ltd v International Finance Corporation Ltd & Another 2003 (1) ZLR 78
(S). Our courts have also acknowledged that currencies are bound to fluctuate
in value and that it is necessary to protect creditors from being prejudiced by
currency devaluations. See Makwindi Oil
Procurement (Pvt) Ltd v National Oil Company of Zimbabwe 1988 (2) ZLR 482
(SC) at 492. The overall objective is to achieve restitutio in integrum, so as to ensure full and proper
compensation, coupled with performance in
forma specifica, in accordance with the intention of the parties. In the
absence of contractual agreement between the parties or acquiescence by the
creditor, a tender in local currency does not constitute sufficient discharge
of an obligation sounding in foreign currency. See Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd &
Others HH 95-2006 at pp. 10-11.
In the instant case, the parties
agreed to transact their contract initially in UAPTAs and subsequently in
United States Dollars, without reference to any valuation or payment in
Zimbabwe Dollars. In any event, the defendant's tender of ZW$50.9 does not
accord with the express terms of the Supreme Court judgment. Moreover, it did
not and could not adequately compensate the plaintiff as contemplated by that
judgment. In these circumstances, I am amply satisfied that the defendant's
tender in local currency did not constitute sufficient discharge of the
judgment debt under consideration.
Turning
to the payment of MK4.8 million effected by the defendant in February 2004, it
is clear that this payment was made after the plaintiff had filed its notice of
appeal against the High Court judgment. It appears that the defendant only
became aware of the appeal in 2006. In any event, whatever may have transpired
in that regard, what is relevant for present purposes is that the payment was
accepted and retained by the plaintiff in satisfaction of the High Court
judgment. In this regard, Mr. Tsivama
admits that the payment made by the defendant must be taken into account and
set-off in executing the Supreme Court judgment in the event of its recognition
and enforcement in this country. Furthermore, the evidence also shows that the
34000 metres of PVC, valued at US$26,656.78, that was supplied to the plaintiff
under the original contract was kept by the plaintiff and never returned to the
defendant.
As
regards the rate of exchange to be applied to the payment of MK 4.8 million,
Mr. Tsivama submits that this figure
should be converted at the rate prevailing in 2004 when the payment was
received by the plaintiff. While this approach may be generally correct, as per
the Makwindi Oil Procurement case, supra, there is nothing in either of the
Malawi judgments to indicate that the awards denominated in Malawi Kwachas have
devalued since the contract was entered into. In any event, it must be borne in
mind that the defendant's payment to the plaintiff included interest on the
original award, exceeding MK3 million, covering the period from 1993 to 2003.
Equally significantly, the plaintiff did not lead any evidence whatsoever at
the trial before this Court as to the rate of exchange to be applied to the Malawi
Kwacha awards. Moreover, as I have indicated earlier, the testimony of the
defendant's witness as to the United States Dollar value of the payment of
MK4.8 million was entirely unchallenged and untested under cross-examination.
The Court cannot reject that evidence and must place reliance upon it in the
absence of any other evidence to controvert it having been adduced at the
trial.
According to the exchange rate
applied by the High Court in relation to the contract price agreed between the
parties, US$1 converted to MK4.4788 when the contract was concluded. The total
amount paid by the defendant in satisfaction of the High Court judgment was
MK4,819,512.00 – comprising general damages, 30% of the contract price,
interest up to February 2003 and legal costs. Excluding the latter amount of
MK150,000.00 renders the sum of MK4,669,512.00 which, at the exchange rate of
4.4788, converts to US$1,042,581.00. This figure equates to the total amount
that was paid to and retained by the plaintiff, as damages and interest from
1993 to 2003, pursuant to the judgment of the High Court.
In terms of the Supreme Court
judgment, the plaintiff is entitled to payment of US$848,662.50 and
MK120,928.50 with in duplum interest,
i.e. MK241,857.00. Applying the
exchange rate of 4.4788 to the latter amount, the sums payable to the plaintiff
are US$848,662.50 plus US$54,000.40 – adding up to a total of US$902,662.90.
If
the above calculations and resultant figures are correct, and there is nothing
in the papers to evince the contrary, the defendant's judgment debt in terms of
the Supreme Court award has been fully discharged by virtue of its payment to
the plaintiff pursuant to the High Court judgment. This would be so even if one
were to add the interest component of 5% per annum on the United States Dollar
award of US$848,662.50 (which I have already disallowed), i.e. US$42,433.125 x 2.75 years = US$116,691.09 + US$902,662.90 =
US$1,019,353.99.
Disposition
As
I have found earlier, the defendant has failed to demonstrate any public policy
consideration in casu precluding the
recognition of the Malawi judgment in Zimbabwe. However, as the evidence shows,
the monetary award rendered by the Supreme Court has been fully satisfied by
dint of the payment previously effected by the defendant in settling the High
Court judgment. Although the latter judgment has been overtaken by the former,
the payment already made by the defendant to the plaintiff clearly cannot be
disregarded in determining the question of discharge. For that reason, the plaintiff's
claim for recognition of the Malawi judgment as binding and enforceable in
Zimbabwe must fail. It is accordingly dismissed with costs.
Sawyer
& Mkushi, plaintiff's legal practitioners
Kantor & Immerman, defendant's legal practitioners
