MTSHIYA J: On 29 July 2008
the plaintiff issued summons against the defendant for the following
relief:-
“(a) payment of the sum of
US$750,000.00.
(b) interest a tempore
morae at the London
Interbank rate for United States dollars 3.5% per annum from 1
September 2005 to date of payment.
(c) Costs of suit.”
The background to the relief sought can briefly be narrated as
follows:-
The plaintiff is a manufacturer and supplier of exclusive range of
cables for the transmission and distribution of energy and
communications involving entities like the Zimbabwe Electricity
Supply Authority, the Rural Electrification Agency and Tel-One. The
plaintiff's business caters for both domestic and export markets.
As at end of 2003, 50% of its sales volumes were largely in exports.
In 2004 the plaintiff's business experienced slow growth. This was
due to inflation and other factors.
In October 2004 the plaintiff approached the defendant for
assistance. The defendant was then operating a foreign currency
auction system. Through that system the defendant made available,
each week, from 25% of export proceeds, an amount of foreign currency
for which commercial banks would submit bids for their customers. On
the basis of those bids allocations would then be made to the highest
bidder(s).
In line with the auction system, on 24 October 2004, the defendant,
through its Governor, informed the plaintiff that, if it (plaintiff)
submitted bids to the auction the defendant would ensure that it
(plaintiff) succeeded to the extent of US$150,000 per week to enable
it to pay for essential inputs in its operations.
That process was indeed put into place on a weekly basis as from 14
January 2005 up to June 2005.
This was a special arrangement where the plaintiff would, instead of
placing a bid, it would merely be advised through a telephone call
each week from the defendant's officials that the said allocation
of US$150,000 was ready. All the plaintiff was required to do in turn
was to pay the Zimbabwe dollar equivalent within 24 hours. The
plaintiff would then in turn transfer, through a commercial bank, the
requisite Zimbabwean dollar amount and details of the foreign
suppliers to be paid in foreign currency (i.e from the US$150,000
allocated to the plaintiff).
The allocation of US$150,000 was, with effect from 16 June 2005,
increased to US$250,000.
Weekly allocations at that new level were made to the plaintiff until
the end of July 2005. The allocation system was continued in August
2005 resulting in the plaintiff making three transfers of undisputed
payments in Zimbabwe dollars for the equivalent of the amount of
US$750,000 now being claimed by the plaintiff.
The payments were in each case accompanied by details of external
creditors to be paid by the defendant.
Notwithstanding the payment of the equivalent amount in Zimbabwe
dollars by the plaintiff, the defendant has to date not forwarded the
foreign currency to the plaintiff's external creditors or refunded
the plaintiff with the said amount of US$750,000. In fact the
plaintiff has already, through other sources, paid its suppliers.
The above, in brief, explains why the plaintiff has resorted to this
court action claiming the said amount of US$750,000.
With both the plaintiff and the defendant having amended their
pleadings at the pretrial conference it was agreed that the issues
for trial were:-
“(a) whether defendant is
contractually obliged to pay plaintiff the sum of US$750,000.00;
(b) whether defendant is estopped
from denying its obligation to pay plaintiff the sum of
US$750,000.00;
(c) whether defendant's tender
to repay the sums of Zimbabwean currency paid to it by plaintiff is a
proper tender which plaintiff is obliged to accept.”
At the commencement of the trial I indicated to both parties that,
given the fact that both parties were generally agreed on what
transpired, my view was that the matter could be determined through
merely hearing arguments from both sides.
The plaintiff was, however, opposed to that approach and preferred to
lead evidence. The defendant then also adopted the same stance.
I therefore had no option but to
allow the parties to lead viva
voce evidence.
The plaintiff's only witness, Mr E.W. Turina (Turina) said he was
the Chief Executive Officer of the plaintiff at the time of the
purchase of US$750,000 from the defendant. He had, however, left the
employ of the plaintiff in June 2006.
Mr Turina's evidence was in the main a confirmation of what was
already contained in the pleadings.
He said due to the scarcity of foreign currency the plaintiff had
reached an agreement with the defendant whereby bids from the
plaintiff would be given preferential treatment.
He confirmed that the information on the allocations was done
telephonically and that once an allocation (ie the initial US$150,000
rising to $250,000) was made, the plaintiff was required to pay the
equivalent in Zimbabwe dollars within twenty four hours (24) hours.
The arrangement had worked well from January 2005 until August 2005
when the defendant failed/neglected to disburse US$750,000 to the
plaintiff's customers/suppliers despite the fact that the plaintiff
had paid the defendant the equivalent in Zimbabwe dollar as per the
standing arrangement.
The Zimbabwe dollars had been paid in three transfers on 1, 11, and
19 August 2005. This was to cater for the increased weekly
allocation of US$250,000.
He said when the first allocation was not released after payment of
the equivalent Zimbabwe dollars the plaintiff had asked for an
explanation but was promised that the money would be released.
The same had happened with respect to the two subsequent payments.
After failure by the defendant to forward payment to its suppliers,
the plaintiff had then borrowed money from other sources so as to
meet supplier requirements. This had led to the withdrawal of
invoices from the defendant, which invoices were produced as exh 1, 2
and 3.
Turina confirmed that before he left the employ of the plaintiff in
2006, negotiations for settlement were in progress and that the
defendant had indicated that it would secure the US dollars at a
later stage for the plaintiff or reimburse the plaintiff in Zimbabwe
dollars. He said some of the discussions were not directly conducted
with him.
He had, however, later learnt that the defendant was not going to pay
the US$750,000.
It was his view that once the plaintiff effected payment of the
equivalent Zimbabwe dollar amount of the allocated foreign currency
“the contract was completed”.
He said the company had opted to wait because the Zimbabwe dollar had
become worthless.
Mr Turina stuck to his story under cross examination.
The defendant also called only one witness, a Mr B. Musoso (Musoso).
The witness said he was employed by the defendant as its Head of
Treasury Operations. He said the treasury division was responsible
for settlement and payment of allocations. The auction system, he
said, was run by a separate unit which was responsible for the
allocations. The role of his department was to communicate with
companies and advise them on foreign exchange rates.
He was aware of a list of special allotees who received payment on a
weekly basis. These were companies considered key to the national
economy. These included plaintiff.
He said there were thirty six (36) companies on the special list and
the allocations were made by the auction unit. Some of these were Boc
Gases, Quest Motors, Unilever, Olivine Industries, Dunlop, National
Oil Company of Zimbabwe (NOCZIM) and the fertilizer companies.
Musoso said there were no formal contracts with the companies on the
special list.
The role of his department was to effect payment when funds were made
available.
The witness said his department dispatched foreign exchange
quotations to various interested companies. The quotations were meant
to enable companies to mobilize the necessary funds before
allocations were made. He said payment to allotees depended on
instructions from what he called “the front office” and the
availability of foreign currency. He said the the non-availability
of foreign currency explained why the three payments made by the
plaintiff in August were not honoured.
Musoso said when the auction system ceased in August 2005, there were
many unpaid beneficiaries from the special list and the defendant
decided to reimburse them in Zimbabwe dollars.
He said he had heard that the plaintiff wanted reimbursement in US
dollars instead of the Zimbabwe dollar. It was his evidence that in
reimbursing beneficiaries the defendant did not take into account the
devalued value of the Zimbabwe dollar because there was no financial
obligation. “We were just returning whatever had been paid”, he
said.
Under cross examination Musoso maintained that the successful
execution of the arrangement relied solely on the availability of
foreign currency.
In addition to Musoso's evidence the defendant also relied on
responses by Dr G. Gono (Governor of the Reserve Bank of Zimbabwe)
and Patience Aisam (Manager Compliance–Treasury Division) to
plaintiff's interrogatories filed on 29 September 2009.
Both responses to interrogatories were filed on 17 November 2009.
In his response Dr Gono stated that he had, upon the specific request
and representations from the plaintiff, advised that he would
endeavour to source foreign currency for the plaintiff in the amounts
mentioned (i.e initially US$150,000 rising to US$250,000).
He said this was in recognition of the strategic role played by the
plaintiff in the national economy.
There was, however, no formal binding agreement.
He said he had indeed been advised that “the plaintiff had made
payments totaling Z$13,535,110 being the quoted equivalent at the
auction rate of US$750,000”, now being claimed by the plaintiff.
However, he said “due to many other competing and pressing national
requirements, the defendant was unable to avail the foreign currency
not only to the plaintiff but to many other companies in a similar
situation who then accepted an offer for immediate refund. Plaintiff
declined the refund.”
It was his evidence that his officers had informed him that during
August 2005 no disbursements were made to any applicant for foreign
currency under the auction system.
In response to the plaintiff's interrogatories, Miss Patience Aisam
confirmed that from “14 January 2005 to August 2005, she would, on
a weekly basis, telephone or instruct that plaintiff be telephoned
advising it that its application for foreign currency allocation had
been approved.”
She also confirmed that the approved amounts were US$150,000 per week
from 14 January 2005 to mid June 2005. There after the amount was
increased to US$250,000 per week.
In terms of the joint pretrial conference minute the issues for trial
are those already listed at p2 of this judgment.
Advocate Morris
for the plaintiff submitted that the plaintiff's case was clear and
did not warrant argument.
He submitted that the undisputed evidence of Turina had confirmed
that upon approaching the Governor of the Reserve Bank, Dr Gono, for
assistance in obtaining foreign currency the plaintiff had been
granted the status of a permanently successful bidder at the weekly
foreign currency auctions.
The plaintiff, with that status, did not need to place bids at the
auction but was merely telephonically advised of the agreed weekly
allocations.
The practice, it was submitted, had been successfully operational
from January 2005 to July 2005.
Payment(s) requirements were availed to the plaintiff who complied at
all times by effecting the payment(s) of the equivalent amount of the
foreign currency in Zimbabwe dollars.
The only condition was that “foreign currency will only be released
after receipt of Zimbabwean dollars.”
Advocate Morris
submitted that after the foreign currency amounts were not paid in
August 2005 the Deputy Governor, Mr Ncube, of the defendant offered
the plaintiff the choice of having the money paid by the plaintiff
refunded in local currency or waiting for the foreign currency to be
made available. That evidence was not contradicted.
I agree.
Advocate Morris
further submitted that in practice there were two initial contractual
arrangements;
(i) The first was the undertaking
by the defendant that the plaintiff would be allocated foreign
currency without the need to make bids at the auction system.
(ii) The second was that once the
plaintiff effected payment of the Zinbabwean dollars within twenty
four hours (ie equivalent of the foreign currency) the foreign
currency allocated would be made available.
The plaintiff had, in all three instances in August 2005, complied
with the payment requirements.
Advocate Morris
said the third contractual arrangement, novating the August
contracts, occurred when the defendant promised to pay the plaintiff
the foreign currency when it became available.
The plaintiff had in turn agreed to wait for payment until it became
necessary to institute these proceedings.
In support of the need for the
plaintiff to institute legal proceedings Advocate Morris
quoted from Asharia v
Patel 1991 (2) ZLR 276
where the relevant part of the judgment of the former Chief Justice
reads as follows:
“The general applicable rule is
that where time for performance has not been agreed upon by the
parties, performance is due immediately on conclusion of their
contract or as soon as thereafter as is reasonably possible in the
circumstances.
But the debtor does not fall into
mora ipso facto
if he fails to perform forthwith or within a reasonable time. He must
know that he has to perform.
This form or mora,
known as mora ex
persona, only arises
if, after a demand, has been made calling upon the debtor to perform
by a specified date, he is still in default.
The demand or interpellatio, may be made either judicially by means
of a summons or extra-judicially by means of a letter of demand or
even orally; and to be valid it must allow the debtor a reasonable
opportunity to perform by stipulating a period for performance which
is not unreasonable. If unreasonable, the demand is
ineffective……………………..”
The promise to refund was made in 2005 and summons was issued on 29
July 2008.
It was Advocate Morris
submission that the evidence of the defendant's witness (Musoso)
was irrelevant since he had no direct dealings with the auction
system. He said the defendant had failed to call witnesses who could
have given meaningful testimony as to what actually happened.
The only credible evidence available was that of Mr Turina, he
argued.
Advocate Morris
concluded by submitting as follows:
“1. That it was the
uncontradicted and unchallenged evidence on plaintiff that Deputy
Governor Ncube gave an undertaking to pay plaintiff US$750,000.00 at
a future unspecified date.
2. That this undertaking was
accepted by plaintiff and formed a binding contract.
3. That the binding contract so
formed created an obligation on defendant to perform within a
reasonable time.
4. That after the lapse of a time
that defendant has never claimed is unreasonable, plaintiff made
interpellation by the issue of summons, calling for the enforcement
of the contract.
5. That in the alternative, the
second contractual event is binding on the parties.
6. In any event, defendant so
conducted itself between January2004 and July 2005 as to cause
plaintiff to believe that it had a contractual relationship on an
occasion by occasion basis; that plaintiff did so believe and as a
result of Defendant's actions and words, plaintiff altered its
position to its detriment.
7. That in enforcing specific
performance of a contract, the court is to treat the state like any
other individual.
8. That in the circumstances
defendant has done nothing to prevent plaintiff from being granted a
judgment in terms of the summons.”
Mr Chitapi
for the defendant
submitted that due to the scarcity of foreign currency the plaintiff
and thirty (36) other complainants were placed on a list of companies
considered as strategic in the national economy.
Depending on availability, the defendant then agreed to allocate
foreign currency to these companies – which included the plaintiff.
He said no formal contracts were drawn in respect of the
arrangements.
He said the plaintiff had been offered a refund of the money it had
paid upon failure by respondent to source the requisite foreign
currency.
Mr Chitapi
emphasized the point that the arrangement between the parties was
always subject to the availability of foreign currency which the
defendant could disburse.
Arguing that there was no
contractual obligation on the part of the defendant to pay the
plaintiff the amount claimed, Mr Chitapi
said it was never the consensus of the parties that the payment of
the Zimbabwe dollars sealed the contractual arrangements.
The payment, he said, was subject to the availability of foreign
currency.
The defendant, he submitted, could not have guaranteed payment
because it did not know how much foreign currency would be generated
from the auction system.
Mr Chitapi
said the defendant's witness had confirmed that his department had
not been allocated with foreign currency for disbursement.
In the main, Mr Chitapi
submitted, “The plaintiff had been favoured with an allocation that
it be given foreign currency of US$250,000.00 per week if the same
was available. There was no intention to create contractual
obligations.”
He said quotations sent to the plaintiff were not offers.
Mr Chitapi
further submitted that
the plaintiff had failed to prove that foreign currency was available
at the time the allocations were made.
He blamed the plaintiff for refusing to accept a refund in Zimbabwean
dollars as had been done by the other companies.
In conclusion Mr Chitapi
had this to say:
“The issue of who was a better
witness between plaintiff and defendant's witness is with respect
of no great moment.
Material facts are common
cause. The court should take a holistic approach in the matter and
determine what the intentions of the parties were and what
relationship was created.
It is submitted that it could not have been within the contemplation
of the parties that a failure by the defendant to disburse foreign
currency to plaintiff due to non availability would ground a cause of
action for specific performance.
In all the circumstances the plaintiff's claim should be dismissed
with costs and it is noted it has refused the tender of the refund in
Zimbabwe dollars”.
I fully agree with Mr Chitapi
that in casu
the material facts are common cause and I made that observation at
the commencement of the hearing of this matter.
My assessment is that apart from merely confirming what is already
contained in the pleadings, nothing much turns on the oral evidence
from the witnesses called by both parties.
However, my view, on the one hand, is that the evidence of the
defendant's witness was totally irrelevant because he was clearly a
distant player in what took place in the actual allocation process.
On the other hand, I find that Turina's evidence buttressed the
respondent's responses to the interrogatories.
The responses do not deny the practice that operated smoothly from
January 2005 to July 2005. The only issue highlighted is that the
arrangement was anchored on the availability of foreign currency.
That is undeniable and indeed no allocation could have been made
without the availability of foreign currency.
However, the main issue, in my view, is whether by allocating to the
plaintiff US$150,000 and later US$250,000 from the auction system,
the defendant then became obligated to release the money to the
plaintiff upon payment by the plaintiff within twenty four hours of
the Zimbabwe dollar equivalent at the defendant's instruction.
In interrogating that issue one has to consider the following
undisputed facts:-
(a) Every week Patience Aisam of
the defendant would telephone the plaintiff to advise on what had
been allocated to the plaintiff and what had to be transferred
through a Commercial Bank in Zimbabwe dollars - in fact it was
confirmation of the sale to the plaintiff of the allocated amount, in
this case US$250,000.
(b) Upon advise from Patience
Aisam, the plaintiff would, within twenty four (24) hours, transfer
the Zimbabwe dollar equivalent. Indeed in response to the
interrogations the Governor of the Reserve Bank of Zimbabwe says:
“I am advised that during the
month of August 2005, plaintiff made payment totaling Z$13,535,110.00
being the quoted equivalent at the auction rate of US$750,000 which
the defendant had hoped to pay to the plaintiff. Due to many other
competing and pressing national requirements the defendant was unable
to avail the foreign currency, not only to plaintiff but to many
other companies in a similar situation who then accepted an offer for
immediate refund. Plaintiff declined the refund.”
This is supported by para 4 of the defendant's plea which reads:
“The defendant admits that the
sums of money as set out in paragraph 2 of the plaintiff's further
particulars were deposited with the defendant. The amounts would have
exchanged for US$750,000.00 once this money had been successfully
sourced by the defendant. The foreign currency was not availed to the
plaintiff because the defendant was unable to mobilize the same.”
It becomes crucial for the defendant to explain the reasons for
Patience Aisam to set in motion the process, if foreign currency was
unavailable.
My view is simply that the allocation was only made against funds
that were already available from the auction.
Patience Aisam states:
“I confirm that during the
period referred to, that is to say, from about the 14th
January 2005 to August 2005 (the month of August included) I would,
on a weekly basis telephone or instruct that plaintiff be telephoned
advising that its application for foreign currency had been
approved.”
It is important to note that Patience Aisam spoke of an “approved
allocation and not successful bid.” This was so because the
plaintiff was on a special list that was not required to bid.
There could, in my view, be no approval or allocation of what was not
already available. Given the condition that the completion of each
transaction was totally dependant upon the availability of foreign
currency, the possibility of Aisam confirming allocation and asking
for payment of the Zimbabwe dollar equivalent within 24 hours when
there was no foreign currency already earmarked for the plaintiff is,
in my view, very remote.
In addition to the above it is important to determine at what stage a
contract would be concluded between the parties.
The scenario in the operation was as follows:
(a) The Governor agreed to accord
the plaintiff special treatment.
(b) The Governor allocated a
specific amount to the plaintiff on a “permanent” basis.
(c) Patience Aisam would confirm
the allocation and indicate the Zimbabwe dollar component to be paid
within 24 hours; and
(d) The plaintiff would within 24
hours comply and then forward a list of its customers to defendant
for disbursement of funds.
The above scenario, clearly fits
into Advocate Morris'
submission that there were initially two contractual events (ie the
Governor's undertaking and then the actual allocation accompanied
by compliance on the part of the plaintiff).
I am therefore unable to accept that the above scenario did not
create binding obligations on the part of the defendant.
To that end, I am of the view that upon compliance by the plaintiff,
a binding contract was concluded and what remained was the release of
the foreign currency purchased by the plaintiff.
The case of F.C.
Hume (Pvt) Ltd v Minister of Natural Resources & Tourism
1989 (3) ZLR 55 indeed supports this view.
With the plaintiff having complied with all the requirements, the
contract was already in place and the defendant was obliged to meet
its obligation.
The existence of the contract is further strengthened by the fact
that the defendant admits that in August 2005, the plaintiff bought
from it US$750,000 for a sum of Z$13,535,110. However, what the
defendant is now saying is simply this:-
“Yes you bought US$750,000 but
give us time to mobilise it. We seem to have sold you what we did not
have at the time.”
The defendant then places before the plaintiff two choices, namely
reimbursement in the actual amount paid in Zimbabwe dollars or
waiting until it mobilizes the amount of foreign currency already
purchased by the plaintiff.
That, in my view, is not to deny contractual obligation.
The plaintiff elected to wait until litigation became the only
option.
The plaintiff's election is based on the basis that devaluation has
rendered the Zimbabwe dollar worthless.
The defendant's witness confirmed that the refund was to be the
actual Zimbabwe dollar paid without taking into account the issue of
inflation and devaluation.
It would, in the circumstances, be unreasonable to fault the
plaintiff's election to await payment of what it actually
purchased.
The promise made by the deputy Governor of the defendant was not
disputed in evidence. It was, in my view, not a novation of the
earlier arrangements but a confirmation of same.
In his submissions Mr Chitapi
merely stated:
“(vii) He believed that foreign
currency was available for the simple reason that quotations for
payment of Zimbabwe dollars were sent to plaintiff and the plaintiff
paid on them.”
The above is in line with para 5(b) of the plea which reads:-
“(c) The defendant denies that
it has refused to compensate the plaintiff and avers that it has
offered to refund the defendant what it paid as has been done with
other companies who faced the same fate. The plaintiff has refused to
be compensated in local currency and insisted on payment of
US$750,000.00.
Wherefore the plaintiff tendering to refund the defendant the amount
it paid with interest at the prescribed rate of 30% per annum
otherwise prays for the dismissal of the plaintiff's claim with
costs”.
Having determined that the defendant was contractually obliged to pay
the plaintiff the sum of US$750,000 which the plaintiff purchased as
agreed between the parties, it would be unreasonable to allow the
defendant to dictate to the plaintiff the form of settlement the
plaintiff should accept.
That being the case the plaintiff's claim for specific performance
is unassailable.
The defendant accepted the plaintiff's election for specific
performance ie by giving the plaintiff two choices – whereby the
plaintiff elected to await payment of the purchased foreign currency.
That position has not changed.
The fact that other companies accepted refunds in Zimbabwe dollars,
has no bearing on the agreement between the parties herein.
The defendant is estopped from abandoning its obligation.
In International
Trading (Pvt) Ltd v Nestle Zimbabwe (Pvt) Ltd
1993 (1) ZLR 21 (H) the late ROBINSON J, in dealing with the issue of
specific performance had this to say:-
“I would wind up by saying that
if the right of specific performance is to be shown to have real
meaning to businessmen, then the loud and clear message to go out
from the courts is: businessmen beware. If you fail to honour your
contracts, then don't start crying if, because of your failure, the
other party comes to court and obtains an order compelling you to
perform what you undertook to do under your contract.
In other words, businessmen who wrongfully break their contracts must
not think they can count on the courts, when the matter eventually
comes before them, simply to make an award of damages in money, the
value of which has probably fallen drastically compared to its value
at the time of the breach.
Businessmen at fault will therefore, in the absence of good grounds
showing why specific performance should not be decreed, find
themselves ordered to perform their side of the bargain, no matter
how costly that may turn out to be for them . . .”
I agree with the above.
Accordingly the sanctity of contractual arrangements should continue
to be protected by courts of law.
In view of the foregoing find in favour of the plaintiff and order as
follows:-
1. The defendant be and is hereby
ordered to pay the plaintiff the sum of US$750,000 together with
interest a tempore
morae at the London
Interbank rate for United States dollars 3.5% per annum from 1
September 2005 to date of payment; and
2. The defendant be and is hereby
ordered to pay costs of suit.
Messrs Coghlan, Welsh & Guest, plaintiff's legal
practitioners
T.H. Chitapi & Associates, defendant's legal
practitioners
