Section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05] as read with section 4(1)(a)(ii) of the Exchange Control Regulations S.I.109 of 1996 penalizes exchange of any foreign currency with any person other than an authorized dealer.

Section 4(1)(a)(ii) and (3) of the Regulations states:

"(1) Subject to subsection (3), unless permitted to do so by an exchange control authority-

(a) No person shall, in Zimbabwe-

(i) .

(ii) Borrow any foreign currency from, lend any foreign currency to or exchange any foreign with any person other than an authorized dealer;

(b).

(2).

(3) Subsections (1) and (2) shall not apply to-

(a) The acquisitions of foreign currency outside Zimbabwe by an individual who is a Zimbabwean resident, where the foreign currency is acquired with free funds which were available to him at the time of the acquisition; or

(b) The sale or loan of free funds by an individual who is a Zimbabwean resident to a foreign resident, where the free funds were available to the individual at the time of the sale or loan;

(c) .

(d)."

The section delegitimizes the payment of the purchase price in foreign currency by a local resident to another local resident without exchange control approval provided the funds are not free funds.

In the present matter, the second defendant did not disclose his source of the rands.he did not demonstrate that the rands were free funds. By exchanging those rands with the plaintiffs.he contravened section 4(1)(a)(ii) of the Exchange Control Regulations.

Share prices are based on a variety of factors. These are grouped under the headings of fundamentals and sentiment. The historical and future performance of the businesses in which Old Mutual operates in, the strength of its management team, the economic environment in which they operate, and the strength of those business units, are some of the fundamentals that affect its share price.

Sentiment is often driven by speculation which may, or may not, have a basis in the fundamentals of the business units. Sentiment may cause a share to go north without any fundamental basis. The term irrational exuberance best captures the rise in share prices that is not based on fundamentals.

The use of the share price of one company, however widespread its tentacles, to determine the value of the currency of a country, undermines the power often arrogated, by law, to monetary authorities of that country. Countries are often in varying stages of economic development. A comparison of the share price of the same behemoth corporation operating in such disparate countries cannot be an accurate measure of the values of the currencies of those countries as against each other. In any event, the factors that are used by monetary authorities to fix the value of the currency are different from those used by investors to buy and sell shares. Small volumes of shares changing hands may cause the share price in a country to rise, while the absence of interest in another market may cause it to fall.

In my view, the value of the Old Mutual share cannot be an accurate barometer of the value of the local currency against other currencies for the reason that Old Mutual is not a microcosm of the macroeconomic conditions in Zimbabwe, or even, for that matter, of the other economies in which it operates. It is for these reasons that I am not satisfied that it is an acceptable method of assigning value to the local currency.

Further, in opposing the application, the respondent avers that, in any event, it was not lawful, in October 2008, for the parties to transact in foreign currency without the approval of the exchange control regulator.

Neither of the parties had this prior approval.

It is common cause that at the time that the parties entered into the Agreement, the legal tender in Zimbabwe was the Zimbabwean currency. This was prior to the introduction of the multi-currencies that are now legal tender in the country. Due to the ravages of inflation, the local currency had lost ground as a currency of transacting business but the monetary policy was slow in changing to catch up with the reality on the ground. As such, transactions concluded prior to February 2009, when the multi-currency system was formally introduced, had to be effected, or consummated, in local currency to avoid being tainted with illegality.

Having found that the binding agreement between the parties is the first Agreement, in which the price was denominated in foreign currency, the next issue that arises is whether such a contract can find expression in this court.

The defendant has argued that the contract is illegal and that this court should apply the ex turpi causa rule against it. The plaintiffs argue that the contract was not illegal as they were not dealing in foreign currency but had simply sold their properties for foreign currency. In this regard, counsel for the plaintiff's urged me to construct the meaning of the provisions of section 4(1)(a)(ii) of the Exchange Control Regulations 1996 (S.I.109 of 1996).

Section 4(1)(a)(ii) of the Exchange Control Regulations 1996 (S.I.109 of 1996) prohibits any Zimbabwean from borrowing, lending, or exchanging any foreign currency with any person other than an authorised dealer.

In Matsika v Jumvea Zimbabwe (Private) Limited and Another 2003 (1) ZLR (H), CHINHENGO J had occasion to comment on the application of the section. In that case, both parties, as in this case, were resident in Zimbabwe. The one sold to the other a motor vehicle. The price of the vehicle was denominated in foreign currency. The court held that the transaction was illegal as it contravened the provisions of the Exchange Control Regulations 1996 (S.I.109 of 1996).

I agree.

There is no doubt that the first respondent can statutorily fix fees without appraising the second respondent and the Reserve Bank – see section 4(2)(c) of the National University of Science and Technology Act [Chapter 25:13].

I am aware of the difficulties which have dissuaded the executor from relying on the tariffs for 2005, 2006, and 2007.

The effect of relying on such tariffs is that the executor will be laden with a bill in local currency – which currency has been rendered obsolete, or otiose, by the advent of dollarization. Although officially the local currency remains legal tender in this country, it is not a secret that the introduction of the multi-currency regime has literally led to the debasement of the Zimbabwe dollar and its subsequent and unceremonious disappearance from circulation.

In my view, the issues to do with the current value of the Zimbabwe dollar are issues which require the intervention of the legislature, and not the courts. The legislature must come up with an acceptable method of giving value to the Zimbabwe dollars that have literally been locked out of circulation. This has affected almost every citizen or enterprise in the country. The predicament the executor finds himself in is, therefore, not peculiar to him.

The first respondent..., insisted that it had a right to carry out a post importation clearance audit because it was not satisfied that -

(a) The applicant was the owner of the vehicle at the time of arrival;

(b) The applicant had purchased the vehicle through his own free funds; and

(c) The applicant was exempted from paying duty in foreign currency.

As for (c) above, I think the law stands clearly pronounced in the case of (1) Zimbabwe Revenue Authority and (2) The Minister of Finance v Murowa Diamonds (Pvt) Ltd SC41-09 where GARWE JA confirmed that “as a matter of law, if a Zimbabwean resident obtains the funds from an authorised dealer then he or she becomes exempt from paying duty in foreign currency.”

The relevant provision of the law (i.e. sections 2 and 3 of the Customs & Excise (Designation of Luxury Items) Notice 2007, S.I.80A of 2007 relied on by the applicant and given a different meaning by the first respondent provides as follows -

“2(1) Subject to s3, the Minister of Finance designates the items of goods whose tariff codes and rates of customs duty are listed in the first and third columns of the schedule below as luxurious items for the purposes of section 115(2) of the Act.

(2) Payment of customs duty and value-added tax on the importation of any item of goods designated as luxury item under subs(1) shall be payable in United States dollars, Euros, or any other currency denominated under the Exchange Control (General) Order, 1996 (S.I.110 of 1996).

3. The following persons shall be liable to pay duty and value-added tax on luxury items in terms of s2:

(a) Every resident of Zimbabwe who imports luxury items that were purchased using funds obtained otherwise than through an authorised dealer; and

(b) .....,.”

It is not disputed that in casu the execution of the financial arrangement between the applicant and Dr.E.Nhodza was through an authorised dealer.

Given the Supreme Court's interpretation of the above provisions of the law, and the acceptance that the applicant was indeed a returning resident, whose financial dealings were through an authorised dealer, there can be no doubt that the applicant fell within the ambit of the exemption clause. He was therefore entitled to pay duty in local currency, and that is exactly what he did – through lawful channels.

With regards to the question of funds, I do not find that the first respondent's argument is sustainable because there is no suggestion that the applicant handled his funds in an illegal manner. There is also no suggestion that the applicant lacked free funds. The applicant did not deny that the funds indeed came from Dr.E.Nhodza's account. The applicant gave the following explanation -

“I also explained that the funds used to purchase the vehicle were my own and held in account Dr.E.Nhodza. The payment indeed was effected through Standard Chartered Bank Zimbabwe, an authorized dealer in terms of S.I.80A of 2007.”

I do not find anything in the Customs and Excise (General) Regulations 2001 barring the applicant from entering into legal financial arrangements with any other person for the importation of the vehicle into Zimbabwe. The law merely requires the parties to proceed through an authorized dealer.

The Deed of Sale did not state where the payment was to be made...,. If it was to be in Zimbabwe it was still going to be contrary to the Zimbabwe laws.

Section 10(1) of the Exchange Control Regulations S.I.109 of 1996 states that -

“10(1) Unless authorized by any exchange control authority, no person shall, in Zimbabwe -

(a) Make any payment to or for the credit of a foreign resident; or

(b) Place any money to the credit of a foreign resident.”

Section 10(2) of the Exchange Control Regulations S.I.109 of 1996 states that -

“Subsection (1) shall not apply to:

(a) Any payment lawfully made from money held in a foreign currency account; or

(b) Such other transactions as may be prescribed.”

In his evidence, the plaintiff said he had no money a in foreign currency account and so he was not exempted from seeking authority.

It was his evidence that at the time of entering into the Deed of Sale he had not obtained authority from the Exchange Control Authority. There was no denying that the Deed of Sale obligated him to make payment for the credit of a foreign resident. It was also his evidence that at the time he attempted to make the first payment in Zimbabwe dollars he had not obtained the requisite authority.

Indeed, as at the date of the trial, which was well after the date when the last instalment was due, he still had not obtained the requisite Exchange Control authority. Even his purported tender of the full purchase price in Zimbabwe dollars was done without such authority. Such purported tender was therefore illegal and of no force or effect.

In Macape (Pty) Ltd v Executrix, Estate Forrester 1991 (1) ZLR 315 (S)..., McNALLY JA had this to say about the situation -

“In other words, where one is concerned with payments inside Zimbabwe, it is perfectly lawful to enter into the agreement to pay. But without authority from the Reserve Bank, the actual payment may not be made.”

In Barker African Homes Homesteads Touring & Safaris (Pvt) Ltd & Anor 2003 (2) ZLR 6 (S) SANDURA JA had this to say on payment in Zimbabwe dollars but for the credit of a non-resident..., -

“Whilst the agreement to pay Z$15,000,000= to or for the credit of Barker in Zimbabwe would not be unlawful, the actual payment would be unlawful unless authorized by the exchange control authority.This is so because of the wording of s10(1)(a) of the Regulations which read as follows -

'Unless otherwise authorized by an exchange control authority, no person shall, in Zimbabwe:

(a) Make any payment to or for the credit of a foreign resident.'”

I am of the view that even if the court were for some reason to accept that payment was to be in Zimbabwe dollars, which I am not accepting, any purported payment in furtherance of the Deed of Sale, or for the credit of the defendant, was unlawful.

This court cannot be seen to be sanctioning such purported payment as valid for the purposes of enforcing the Deed of Sale.

The plaintiff's purported tender was without authority and, so, unlawful.