GUVAVA
JA:
This
is an appeal against the whole judgment of the High Court (court a
quo)
dated 18 October 2018. The court a
quo
granted an application for absolution from the instance made jointly
by the respondents, granted claims in reconvention and ordered the
appellant to pay costs of the counterclaims on a legal practitioner
and client scale.
The
court a
quo
erred in this regard and the appellant was correctly aggrieved by
the judgment of the court a
quo.
There is no evidence in the record that first, third, fourth, fifth,
sixth, and seventh respondents had filed counterclaims and the court
a
quo
erred in granting counterclaims that were not before the court.
Although the second respondent was properly before the court a
quo
the requirements for the grant of absolution from the instance were
not met. Accordingly, the judgment must be vacated. I set out
hereunder the reasons for this finding.
BACKGROUND
FACTS
The
appellant is a registered commercial bank operating in Zimbabwe. The
first respondent is a private company registered in accordance with
the laws of Zimbabwe. The third to seventh respondents are private
individuals who bound themselves as sureties and co-principal
debtors in respect of a loan granted to the first respondent. The
second respondent is a private limited company duly incorporated in
Zimbabwe.
The
appellant issued summons against the respondents on 13 March 2017
for the payment of US$368,706.62 being capital and US$20,654.10
being interest on the sum of US$368,706.62 at the rate of 18% per
annum, which rate was subject to change from time to time, with
effect from 26 November 2016 to date of payment in full and costs of
suit on a legal practitioner and client scale. At the commencement
of trial, by consent of the parties, the claim was amended to read
as follows:
“(i)
by deletion of the capital amount of US$368,706.62 and the
substitution thereof with the amount of US$361,034.23.
(ii)
by deletion of the interest amount of US$20,654.10 and the
substitution thereof with the amount US$28,246.49.”
5.
The total amount claimed by the appellant amounted to
US$389,362.72. In its particulars of claim the appellant averred that
in or around November 2015, the appellant and the first respondent
entered into an agreement in terms of which the appellant extended to
the first respondent a loan for the sum of US$373,000.00. The loan
was accessed through the first respondent's operating account and
was for the purpose of assisting the first respondent in financing
its working capital requirements. Interest was to accrue on the
facility at the rate of 12% per annum subject to change from time to
time and 18% per annum in the event of default by the first
respondent in making due and punctual payment of any instalment. The
loan advanced was repayable to the appellant as follows:
“(a)
US$2,000.00 on the 30th
November 2015;
(b) US$1,500.00 on the 30th
December 2015;
(c) US$2,000.00 on the 30th
January 2016; and thereafter
US$15,200.00
per month with effect from the 28th
of February 2016 until full payment.”
6.
It was a term of the agreement that in the event of the first
respondent defaulting in making due and punctual payment of any
instalment, the total outstanding amount would immediately become due
and payable. The second, third, fourth, fifth, sixth and seventh
respondents bound themselves jointly and severally as sureties and
co-principal debtors with the first respondent for payment of any and
all monies due to the appellant. The respondents defaulted in making
due payment of the loan under the agreement giving rise to the total
outstanding amount claimed by the appellant of US$389,362.72.
7.
All the respondents jointly entered an appearance to defend and
in their plea denied that the amount claimed by the appellant arose
from the agreement dated 2 November 2015. The first respondent denied
owing the appellant any money as it argued that the loan advanced
through the loan agreement was repaid in full on the 30th
of December 2015. The first respondent further denied owing the
appellant any interest under the loan facility and maintained that
the appellant actually recovered more interest from it than was
lawfully due.
8.
The second to the seventh respondents averred that all the
suretyship deeds held by the appellant were void for vagueness as
they covered an unlimited liability. They contended that a suretyship
deed must contain a limit in monetary terms so as to be valid. The
second respondent averred that the deed of suretyship between it and
the appellant was void as it was not authorised by its board of
directors. The first respondent further stated that the
acknowledgment of debt executed by it in favour of the appellant was
unenforceable as it was not signed by its representatives. The second
respondent also averred that it never authorised the registration of
a mortgage bond in favour of the appellant over its property known as
Subdivision A of Subdivision H of N'Thaba of Glen Lorne situate in
the District of Salisbury held under Deed of Transfer number 1998/95
('the property').
9.
Together with its plea, the second respondent filed a claim in
reconvention against the appellant and averred that the appellant
fraudulently procured a suretyship and mortgage bond in its favour
over the second respondent's property. The second respondent prayed
that the suretyship deed and mortgage bond be cancelled. The
appellant entered a plea against the claim in reconvention and denied
all the averments made by the respondents.
10.
On 30 May 2017, the third to seventh respondents indicated their
intention to apply to amend their pleas and file a claim in
reconvention at the pre-trial conference. The amendments sought
alleged that all the respondents purported suretyships had expired by
effluxion of time, having been signed more than three years before
the loan was granted. It was also averred that the suretyships were
in contravention of section 12 of the Moneylending and Rates of
Interest Act [Chapter
14:14]
('the Moneylending Act') and as such were invalid and
unenforceable. In the proposed claim in reconvention, the third to
seventh respondents sought an order that their respective suretyships
be declared null and void. The second, third and fourth respondents
prayed that the mortgage bonds in their names be cancelled. There
is, however, no evidence in the record that the amendment was ever
granted at the pre-trial conference or at the trial.
11.
On 27 July 2017, the parties signed a Joint Pre-Trial Conference
Minute and the issues for determination by the court a
quo
were stated as follows:
“1.
Whether 2nd,
3rd,
4th,
5th,
6th,
and 7th
Defendants Deeds of Suretyship are valid and enforceable.
2.
Whether 2nd
Defendant's 1st
and 2nd
Mortgage Bonds (numbers 1557/13 and 1656/13) in favour of Plaintiff
are valid and enforceable or whether they should be cancelled.
3.Whether
1st
Defendant is indebted to Plaintiff under the Loan Agreement dated 2
November 2015 in the sums of US$368,706.62 as capital and
US$20,654.10 as interest and was there novation or termination of
the loan agreement.
4.
Whether 1st,
2nd,
3rd,
4th,
5th,
6th
and 7th
Defendants, jointly and severally one paying the others to be
absolved are indebted to Plaintiff as alleged or at all.”
12.
At the trial, the appellant led evidence through two witnesses,
namely, Mr. C. Gunundu (Gunundu) the appellant's Account
Relationship Manager and Mr. V.S. Nyangulu (Nyangulu) a registered
legal practitioner and conveyancer. Gunundu testified that the
appellant and the first respondent had a long business history
spanning many years. They agreed that the bank would advance a loan
to the first respondent which loan would, in turn, re-finance the
existing loan already held by the first respondent. He further
testified that the first respondent and its sureties had failed on
numerous occasions to fulfil the loan obligations which it owed to
the appellant. The new arrangement was meant to assist the
respondents. Gunundu maintained that the surety deeds and mortgage
bonds made by the second to seventh respondents in the appellant's
favour were all valid and properly constituted. He further maintained
that the sureties were open and unlimited and as such covered all the
money obtained through loans by the first respondent from the
appellant.
13.
The second witness, Nyangulu, testified that the mortgage
bonds he registered on behalf of the second respondent in favour of
the appellant were valid and were registered after due process and
board resolutions had been passed.
14.
At the close of the appellant's case, the first to seventh
respondents made an application for absolution from the instance. In
making the application the first and third to seventh respondents
averred that the appellant sued the respondents on a cause of action
which had already been discharged on 31 December 2015. They also
alleged that their sureties were not valid. In making its application
the second
respondent
averred that the appellant failed to prove a valid cause of action
that the mortgage bonds against its property, registered in favour of
the appellant, were valid.
15.
In response to the applications for absolution from the instance,
the appellant argued that the applications were frivolous. It
vehemently denied receiving any payment from the first respondent in
repayment of the loan. It also maintained that all the documents in
respect of the security for the loan were valid and that the
obligation of the sureties had not been extinguished by prescription
or on any other basis.
16.
The court a
quo,
in dealing with the matter, found that the appellant's first
witness Gunundu was not a credible witness and that he contradicted
himself on material issues. The court further found that the
appellant failed to prove a prima
facie
case against the respondents. The court went on to find that the
first respondent repaid the loan of US$ 350,000 on 31 December 2015
as evidenced by the appellant's own books of account and
statements. The court a
quo
also found that the suretyships made in favour of the appellant by
the second to seventh respondents were invalid and unenforceable as
they were not in compliance with section 12 of the Moneylending Act.
Further, that the sureties did not relate to the 2 November 2015 loan
facility and as such could not be relied upon by the appellant in
making a cause of action for the repayment of a loan under that
facility.
17.
The court a
quo
further held that the mortgage bonds executed in the second
respondent's name were invalid as they were not made in compliance
with the law and that the sureties and mortgage bonds could not be
held to have an unlimited clause to their operation as such a clause
was contrary to public policy. The court concluded that, as the
appellant had failed to prove a prima
facie
case against the respondents, the respondents claims in reconvention
had merit and that there was no need to put the respondents to their
defence. In the result the court made the following order:
“1.
The application for absolution from the instance made by the
defendants succeeds with costs.
2.
The surety ships (sic)
in favour of the plaintiff entered into by 2nd,
3rd,
4th,
5th,
6th
and 7th
defendant and plaintiff be and are hereby cancelled.
3.
The mortgage bonds passed by 2nd,
3rd
and 4th
defendants in favour of plaintiff namely Numbers 2416/2011,
4889/2011, 1557/2013 and 1656/2013 be and are hereby cancelled.
4.
The plaintiff to pay costs of counterclaim to the defendants on
attorney-client scale.”
18.
Dissatisfied with the decision of the court a
quo,
the appellant noted the present appeal on the following grounds of
appeal:
“1.
The court a
quo
erred in holding that any amounts which were due to Appellant under
the agreement dated 2 November 2015, were repaid in full and that
Plaintiff sued on a cause of action that was discharged in full on
the 30th
of December 2015, in so doing, the court a
quo
failed to appreciate that the agreement (dated 2 November 2015) was
entered into to enable the 1st
respondent to settle previously existing debts.
The
court a
quo
erred in strictly evaluating and rejecting the appellant's
evidence and effectively demanding of it more than a prima
facie
(sic)
as if it had (sic) evidence from defendants.
The
court a
quo
erred in granting respondents 1, 3 to 7 counter-claims which were
not before it.
The
court a
quo
erred in granting the counter-claims by respondents 1, 3 to 7 when
those respondents had not moved it to grant same as at that stage.
The
court a
quo
erred in itself cancelling the parties agreements when it was not a
party thereto and in violation of the sanctity thereof.
The
court a
quo
erred in holding that:
The
Suretyship agreements executed by 2nd,
3rd,
4th,
5th,
6th
and 7th
Respondents did not relate to the agreement dated 2 November 2015,
and that neither did they cover any amounts due thereunder.
The
Suretyship agreements had prescribed. In so holding, the court a
quo
grossly failed to appreciate that at law, a Surety's obligations
only arise upon demand.
The
2nd,
3rd,4th,
5th,
6th
and 7th
Respondents were released from their Suretyship due to material
variation of the principal obligation, when this was not pleaded and
no evidence proving actual prejudice was placed.
That
2nd,
3rd,
4th,
5th,
6th
and 7th
Respondents suretyship agreements were void for being contrary to
public policy.
In
agreeing with 2nd,
3rd,
4th,
5th,
6th
and 7th
Respondents entire submissions on the application for absolution
from the instance, the court a
quo
grossly erred in holding 2nd
to 7th
Respondents averment that the suretyship agreements are invalid for
violation of Section 12 of the Money Lending (sic)
and Rates of Interest Act [Chapter
14:14].
The
court a
quo
erred in holding that the Mortgage Bond passed by 2nd
Respondent, and 3rd
and 4th
Respondents are invalid and grossly failed to appreciate that at
law, the Mortgage Bonds are valid as an instrument of both debt and
hypothecation.
Consequent
to the gross misdirection referred to in Paragraph 1, 2, 3 and 4
above, the court a
quo
erred in granting 1st
to 7th
Respondents application for absolution from the instance and
entering Judgment in favour of Respondents as per their claim in
reconvention for cancellation of the suretyship agreements and
Mortgage Bonds.
The
court a
quo
erred in awarding costs against Appellant in respect of the
Respondents claim in reconvention on a higher scale, when there was
no legal basis for so doing.”
PROCEEDINGS
BEFORE THIS COURT
19.
Counsel for the second respondent, Mr Uriri,
raised a preliminary point to the effect that the notice of appeal
was fatally defective and incapable of amendment. On the other hand,
counsel for the appellant, Mr Mubaiwa,
made an application to amend the appellant's grounds of appeal and
relief sought. In making the application counsel argued that he was
raising legal issues which would not prejudice the respondents.
20.
Counsel for the first, third to seventh respondents, Mr Ncube,
agreed with Mr Uriri
who opposed the application for the amendment and argued that the
notice of appeal was not in compliance with Rule 37(1)(d) as read
with Rule 44 of the Supreme Court Rules, 2018 ('the Supreme Court
Rules') in that the grounds of appeal were not clear and concise.
Counsel argued that the 2nd
ground of appeal was invalid as it was vague. He also submitted that
the grounds of appeal attacked all the findings of the court a
quo
which rendered the notice of appeal fatally defective.
21.
As indicated above, Mr Uriri
raised a preliminary point to the effect that the appellant's
grounds of appeal were not clear and concise and sought a striking
off of the appeal.He
further submitted that the relief sought by the appellant was
defective as it did not pray for a remittal of the matter for
continuation of the trial on the merits of the matter in the event
that the appeal succeeds. Counsel submitted that this rendered the
appeal fatally defective.
22.
The amendment sought by the appellant was made by way of notice
and in terms of the Rule 41 of the Supreme Court Rules. Rule 41
provides as follows:
“Power
to allow amendment
41.
The court may upon application by notice or upon oral application by
counsel during the course of any hearing allow, upon such terms as it
may think fit to impose, amendment of the grounds of appeal or of any
pleadings or other document and may similarly permit a party to
appear or be represented notwithstanding any declaration in terms of
rule 50 to the effect that the party does not intend to appear or be
represented.”
23.
With regard to the issue of whether or not the appellant's
grounds of appeal were fatally defective on the basis that they were
not clear and concise as required by the rules of this Court, we
found that the grounds of appeal could have been more elegantly
crafted, however, they were not fatally defective. This Court has
pronounced itself on the test to be applied in determining whether or
not grounds of appeal are valid. In
Zvokusekwa v Bikita Rural District Council SC
44/15 the Court noted that:
“One
must, I think, be guided by the substance of the grounds of appeal
and not the form. Legal practitioners often exhibit different styles
in formulating such grounds. What is important at the end of the day
is that the grounds must disclose the basis upon which the decision
of the lower court is impugned in a clear and concise manner.”
Also,
in Dr
Kunonga v Church of the Province of Central Africa
SC 25/17 at pg18 the Court stated that:
“…where
the court is faced by some of the grounds of appeal that are not
clear and concise and by others that are, the courts should proceed
to determine the appeal on the basis of the valid grounds.”
24.
The Court must be guided by the substance and not the form of the
grounds of appeal. At the end of the day the determining factors of
whether or not grounds of appeal are valid and compliant with the
rules of the court can be set out as follows:
(a)
the grounds of appeal must relate to the judgment appealed against;
(b)
must clearly and concisely show how the decision of the court a
quo
is erroneous; and
(c)
must show the basis upon which the decision should be vacated.
In
this regard a proper reading of the appellant's grounds of appeal
clearly reveal the basis upon which the judgment of the court a
quo
is being challenged. The only ground of appeal which is unclear and
meaningless and cannot be allowed to stand is ground 1.4. Indeed, it
was accepted that the grounds could have been crafted in a more
elegant manner. However, at the end of the day, it was our view that
they met the threshold as set out in the rules and in the case
authorities, except for ground 1.4 which we struck out.
25.
The additional grounds of appeal in the notice of amendment were
predicated on the same facts which were before the court a
quo.
The appellant in its heads of arguments had already made submissions
on the basis of the amended grounds. The respondents had responded to
the heads of argument. In the circumstances of this case, however it
did not appear that the respondent would suffer any prejudice if the
application was granted. As the amendment was not prejudicial to the
respondents and any prejudice could adequately be compensated with an
appropriate order of costs, we saw no reason to refuse the
application.
On
the basis of the above reasons we accordingly made the following
order:
“The
preliminary point raised by counsel for the respondents is dismissed.
The application to amend the grounds of appeal and prayer is granted,
save for ground 1.4 in the notice of amendment. The appellant is
ordered to pay the respondents wasted costs.”
26.
On the merits, counsel for the appellant argued that it was
improper for the court a
quo
to grant counterclaims that were not filed in terms of Rule 121 of
the High Court Rules, 1971 ('the High Court Rules'). Counsel
further argued that the judgment of the court made factual findings
without hearing the evidence of the first respondent. The factual
findings could only have been made after hearing the defence case. He
also argued that the inference drawn by the court in respect of the
statement of account was not the only inference in the circumstances
of the case and, in any event did not prove that the debt owed by the
respondents had been repaid. It was also counsel's argument that
the appellant proved a prima
facie
case in establishing that the loan facility was disbursed to the
first respondent and it was for the respondents to prove that the
loan was repaid in full. He prayed that the appeal be allowed with
the matter being remitted to the court a
quo
for continuation of trial and an order for costs.
27.
Per
contra,
counsel for the first, third to seventh respondents argued that the
court a
quo
correctly found that the appellant failed to establish a prima
facie
case as there was no valid cause of action. Counsel further argued
that the documentary evidence produced before the court a
quo
showed that the loan was repaid in full on 31 December 2015 and as
such the appellant had no basis to sue. He also argued that the
appellant's witness Gunundu contradicted himself in his evidence
and as such a prima
facie
case could not have had been established by the appellant. Counsel
further argued that the purported sureties made in the names of the
third to seventh respondents were invalid and void. Counsel prayed
for the dismissal of the appeal.
28.
Counsel for the second respondent also prayed for the dismissal of
the appeal and argued that the appellant had no cause of action
against the second respondent as no loan facility was ever advanced
to it. Counsel submitted that the loan was repaid on 31 December 2015
and that the appellant had admitted that this was the position in
evidence. He further submitted that there was no valid mortgage bond
in the name of the second respondent upon which the appellant could
execute. The mortgage bond made by the second respondent in favour of
the appellant related to a 2011 loan facility and not the 2015 loan
facility. Counsel further maintained that the second respondent had
only one director in Zimbabwe and as such no valid resolution could
have been made in the absence of the second director. As such counsel
argued that the power of attorney and mortgage bond were not properly
executed.
29.
It is my view that the appellant's grounds of appeal raise a
single issue, i.e. whether or not the court a
quo
erred in granting the application for absolution from the instance.
ANALYSIS
Whether
or not the court a
quo
erred in granting the application for absolution from the instance
30.
The cause of action of the appellant against the first respondent
was based on a credit facility dated 2 November 2015. It was alleged
that the first respondent had failed to repay the loan advanced to it
under that facility. The cause of action as against the second to
seventh respondents was based on the various surety and mortgage
bonds filed of record which were made in favour of the appellant by
the respondents at different times. The court a
quo
in granting the respondents application for absolution from the
instance found that the loan advanced to the first respondent was
repaid on 31 December 2015. The basis of this finding was an
accounting entry made by the appellant in its statement of accounts
which showed a credit entry in the sum borrowed as having been paid.
On the basis of this entry the court reasoned that there was no cause
of action upon which the appellant could claim as there was no
outstanding debt.
31.
The law to be applied in an application for absolution from the
instance is well settled. In United
Air Charters (Pvt) Ltd v Jarman
1994 (2) ZLR 341 (S) at pg343 the Court held that:
“The
test in deciding an application for absolution from the instance is
well settled in this jurisdiction. A plaintiff will successfully
withstand such an application if, at the close of his case, there is
evidence upon which a court, directing its mind reasonably to such
evidence, could or might (not should or ought to) find for him.”
(see also Oesthuizen
v Standard General Versekeringsmaa & Kappy BPK
1981
(A) 1035 (H)).”
In
Gordon
Lloyd Page & Associates and Rireira & Another
2001 (1) SA 88 (SCA) at 92 E-93 A it was held that:
“The
test for absolution to be applied by a trial court at the end of
plaintiff's case was formulated in Claude
Neon Lights (SA) Ltd v Daniel
1976 (4) SA 403 (A) at 409G-H in these terms:
'… when
absolution from the instance at the close of plaintiff's case, the
test to be applied is not whether the evidence led by the plaintiff
established what would finally be required to be established but
whether there is evidence upon which a court applying its mind
reasonably to such evidence could or might (not should or ought) find
for the plaintiff…'
This
implies that the plaintiff has to make out a prima
facie
case in the sense that there is evidence relating to all elements of
the claim…”
32.
Absolution from the instance is thus granted by the court when an
application has been made by a defendant at the close of a
plaintiff's case who fails to prove a prima
facie
case.
A
prima
facie
case
was noted in
Fillieks and Others v S
[2014] ZAWHC 34 as follows:
“Prima
facie
evidence in its more usual sense, is used to mean prima
facie
proof of an issue the burden of proving which is upon the party
giving that evidence. In the absence of further evidence from the
other side, the prima
facie
proof becomes conclusive and the party giving it discharges his
onus…”
In
granting the application for absolution from the instance the court a
quo
thus had to be guided by the question of whether or not the appellant
made out a prima
facie
case against the respondents on the basis of which the court could or
might have found for the appellant. The appellant's cause of action
was based on the credit facility which it advanced to the first
respondent on the 2nd
of November 2015 for the sum of US$350,000. The purpose of the
facility was to assist the first respondent in financing its working
capital requirements. The facility further provided under clause 6
that the security for the amount advanced as the loan was secured by
sureties and mortgage bonds registered in the names of the
respondents in favour of the appellant. Under clause 12 of the
facility all previous facility letters advanced to the first
respondent by the appellant were cancelled.
33.
The accounting statements of the appellant filed of record show
that, on 17 November 2015 under transaction number LD1532460482 and
described as “Loan Drawdown” the appellant credited the first
respondent's account with the sum of US$350,000. On the 30th
of December 2015 under transaction number LD1532460482 and described
as “Payment of Principal” the sum of US$350,000 was reversed from
the first respondent's account into the appellant's account. The
first respondent remained with a debit balance of US$375,671.35.
34.
The appellant's witness, Gunundu, explained that the first entry
meant that the appellant was crediting the first respondent with the
proceeds of the loan. The second entry showed that those proceeds
were meant to pay off an existing debt that the first respondent
already had with the bank. It is important to quote the exchange
between counsel for the appellant and the witness where he states
that:
“Q.
If you move further down you will see that the same $350,000.00
appears on that page?
A.
Yes the second entry for $350,000.00 which in this instance now
appears as a debit on the borrowers account was passed on 30th
December 2015. The second entry that was passed by the bank on the
30th
of December 2015 for 350,000.00 entailed that the bank was now
debiting the customer's account to confirm that this was now a new
loan agreement with terms as contained in the facility letter offer
of 2nd
November 2015.”
35.
The first respondent however maintained the argument a
quo
and before this Court that the loan was repaid on the 30th
of December 2015 under the transaction description of “Payment of
Principal”.
On
the basis of the above exchange, the court a
quo
found
that the witness of the appellant did not establish its claim at all.
The court concluded that Gunundu was not a credible witness and found
that the appellant had failed to make out a prima
facie
case upon which the respondents could be placed on their defence. It
is our view, however, that the court a
quo
fell into error in arriving at this finding.
36.
It should be noted from the onset that the appellant and the first
respondent have had a long standing relationship of a banking nature.
The record shows that from 2011 to 2015 when the credit facility
which is the subject of this appeal was entered into, the appellant
was advancing the first respondent different loan facilities and
overdrafts. These loan facilities were advanced on the basis of the
securities which were made by the second to seventh respondents. For
over 5 years the appellant was advancing money to the first
respondent on the basis of those securities with no issues arising.
Emails filed of record further show correspondence between the third
respondent, the first respondent's Finance Manager one Jill
Ngwerume Gunundu on behalf of the appellant and Nyangulu, which
correspondence shows how some of the securities were registered.
Emails between Rodney Callaghan and Darryn Blumears (acting on behalf
of the second respondent) are also part of the record which shows the
parties acknowledging that certain sums of money were owed and that
the respondents would raise money to pay the debts. Although these
emails were written in 2013 to 2014, this confirms the nature of the
relationship between the appellant and the respondents, and that as
at 2014 there was a debt owed to the appellant.
37.
Having found that there existed a banking relationship between the
appellant the respondents, the next question relates to the credit
facility advanced to the first respondent on 2 November 2015 and
whether or not that facility was repaid. There is no documentary
evidence in the record which shows that the first respondent wrote to
the appellant seeking a refinancing loan to cover its existing debts.
However, given the history between the parties on how the appellant
advanced several loans to the first respondent over the years, it can
be taken that the first respondent must have approached the appellant
seeking a loan to repay its outstanding debts.
38.
A reading of the appellant's accounting statement shows that
before the “loan drawdown” was made to the first respondent's
account the account showed a debit balance of US$367, 981.74. When
the loan sum was deposited the balance was reduced to US$17,981.74.
This means that the loan reduced an existing debt. When the loan was
reversed back to the appellant's account on 30 December 2015 the
balance returned to US$375,671.35. This summary shows that the loan
was advanced by the appellant to refinance an existing debt.
39.
The credit facility, though not clearly labelled as a refinancing
loan, appears to have been made in order to give the first respondent
time to repay the loan. This explains the creation of a repayment
plan on how the first respondent would repay its debt. In my view,
the credit facility, though not specified as a refinancing loan, must
have been made for the purpose of extending the period in which the
first respondent had to repay its debts. It is important to borrow
the words quoted with approval by Gubbay CJ in Chikoma
v Mukweza
1998 (1) ZLR 541 (SC) at pg 544 wherein the Court noted that:
“Not
to be overlooked, as well, are the wise words of Lord Wright in
Hillas
& Co Ltd v Arcos Ltd
[1932]
All ER Rep 494 (HL) at 503I; (1932) 147 LT 503 (HL) at 514:
'Businessmen
often record the most important agreements in crude and summary
fashion; modes of expression sufficient and clear to them in the
course of their business may appear to those unfamiliar with the
business far from complete or precise. It is accordingly, the duty of
the court to construe such documents fairly and broadly, without
being too astute or subtle in finding defects; but, on the contrary,
the court should seek to apply the old maxim of English law,
verba
ita sunt intelligenda ut res magis valeat quam pereat.'
See
also Burroughs
Machines Ltd v Chenille Corp of SA (Pty) Ltd
1964 (1) SA 669 (W) at 670G-H.”
40.
Thus, essentially what was before the court a
quo
was a claim for the repayment of a loan. The appellant had a duty,
after all the evidence had been led by both appellant and the
respondents, to prove its case on a balance of probabilities.
41.
The argument in the respondents plea that the loan was repaid in
less than a month does not carry much weight and is an argument which
the respondents had to prove in evidence. It is important to note
that there was nothing in the record showing a deposit from the
respondents to indicate that the first respondent had paid off the
loan.
42.
The court a
quo
fell into error in making its decision solely on the entry made on 30
December 2015 in the appellant's statement of account. That entry
had to be read in conjunction with all the facts of the matter and
the banking history which existed between the parties. The first
respondent never denied owing the appellant but rather denied the sum
claimed by the appellant and averred in its plea that if at all it
owed the bank its debit balance was less than US$109 000. All these
are issues which the court a
quo
could not determine without putting the first respondent to its
defence.
43.
The court a
quo
further erred in making a finding that the appellant's witness was
not a credible witness in circumstances when it had not heard
evidence from the respondents. This was a clear error as there was
nothing upon which the court could measure the appellant's
evidence. In Megalink
Investments (Pvt) Ltd v Reserve Bank of Zimbabwe
HH 4/17 at pg 5 the court held that:
“I
need to point out, too, that at this stage the court is not so much
concerned with questions of the credibility of the witnesses and the
probabilities of the case as there is nothing to measure those
aspects against in the absence of the defendant's evidence. The
court at this stage is presented with only one side of the story
which alone must be examined to determine whether the requirements
for absolution have been satisfied.”
In
the case of Professor
Charles Nherera v Jayesh Shah
SC 51/19, GARWE JA as he then was, quoted the case of Supreme
Service Station 1969 (Pvt) Ltd v Fox & Goodridge (Pvt) Ltd
1971 (1) ZLR 1, in which BEADLE CJ highlighted some of the
considerations that a court, faced with an application for absolution
from the instance, ought to bear in mind. He pointed out that the
court should always bear in mind that the defendant has not yet given
evidence, or been cross-examined. Thus, the court should not dismiss
the plaintiff's evidence unless it is glaringly incredible.
44.
The court a
quo
thus misdirected itself by making a finding on the credibility of the
appellant's witnesses in the absence of evidence from the
respondents witnesses. Gunundu explained how the transactions under
the credit facilities were made and how they operated. He further
explained how the appellant had always worked with the first
respondent in trust and on the basis of the securities which had been
lodged with the bank by the first respondent over the years. It seems
to me that his evidence was sufficient to establish a prima
facie
case for the appellant with regard to whether or not the respondent
owed the appellant.
45.
It is common cause that the respondents agreed to be sureties and
co-principal debtors in the event that the first respondent failed to
repay the appellant. The security documents are part of the record.
They have the signatures of the respondents. In making its claim in
reconvention a
quo
the second respondent averred that the mortgage bonds in favour of
the appellant were fraudulently acquired by the appellant.
Nyangulu
testified on how he processed the registration of the mortgage bonds
through the bank. Counsel for the second respondent however put him
to task on the effect of the mortgage bonds registered against the
second respondent's property in favour of the appellant. The court
a
quo
reasoned that, as Nyangulu had admitted under cross examination that
there may have been shortcomings in the manner in which the mortgage
bonds were registered, therefore they were invalid.
46.
However, the record shows that as at 29 May 2014 Darryn Blumears,
in an email to Rodney Callaghan, was having conversations as to “a
figure breakdown for the loan against Pagomo”. Pagomo was one of
the properties upon which a mortgage bond was registered by the
second respondent in favour of the appellant. On the same day, in an
email from Rodney Callaghan to Darryn Blumears, he was informed that:
“The total loan is $450,000 to NMB of which $325,000 is against
Pagomo and the balance of $125,000 is against Tarlington Road.”
This email is just but one of the correspondence in the record which
suggest that there existed debts between the first respondent and the
appellant and that those debts were covered by securities in the form
of sureties and mortgages. This evidence in my view shows that there
was an acceptance by the respondents that the loans were covered by
the sureties and mortgage bonds. Thus, any denial of the proposition
by the appellant that the mortgage bonds were valid should have been
contradicted by the respondents in evidence.
47.
It should also be noted that in making their pleas a
quo,
the respondents jointly made averments with regards to the sureties
and mortgage bonds. Of note are the material allegations made by the
respondents that the surety signed by the second respondent was
signed by the daughter of the third and fourth respondents without a
valid board resolution for her to do so. Further, the acknowledgment
of debt was not signed by the first respondent and that an official
of the appellant fraudulently made the third and fourth respondent's
daughter sign as surety on behalf of the second respondent. It was
further averred that the appellant thus registered unauthorised
mortgage bonds against the second respondent. All these averments
made by the respondents in their pleas raise issues which were
disputed by the appellant and therefore needed to be proved by way of
viva
voce
evidence from the respondents. As such the court a
quo
could not grant absolution, as it did, without allowing the
respondents to take to the stand to prove their claims.
48.
The court a
quo
in making its determination found that the first and third to seventh
respondents made claims in reconvention as to the invalidity of the
sureties in their names. However, as submitted by counsel for the
appellant, these respondents did not make any claims in reconvention
in their pleas. The claim in reconvention which is in the record
relates only to the second respondent. No amendment to the claim in
reconvention was made to show that this was to cover all the
respondents. As such the court a
quo
was clearly wrong and made a determination on an issue which was not
properly placed before it. Rule 121(1) of the High Court Rules
provides that:
“A
claim in reconvention shall be so described and shall be bound and
filed with the defendant's plea.”
49.
Only the second respondent properly made its claim in reconvention
in its plea. The rest of the respondents only filed a notice of
application to amend their pleas and claims in reconvention on the
30th
of May 2017. The respondents notice stated that at the pre-trial
conference the respondents would apply to amend the pleas and make
claims in reconvention. The record does not reflect whether or not
the application for an amendment was motivated and if it was granted.
More specifically, there is no order in the record to show that the
amendment was granted at the pre-trial conference. The Pre Trial
Conference Minute is also silent on this issue. It seems to us that
the court a
quo
could not make any finding on claims which were never raised in the
papers before it by the respondents.
50.
A court must determine a matter based on the papers and evidence
placed before it by the parties. It cannot go on a frolic of its own
(see
Nzara
and Ors v Kashumba N.O. and Ors
SC
18/18 at pg 13). The court a
quo
fell into error when it granted claims in reconvention which were not
properly pleaded by the respondents.
51.
The sureties and mortgage bonds were signed by the respondents and
they all had a provision for unlimited cover. The question of whether
these sureties and mortgages were valid can only be answered when the
issue of whether or not the first respondent owes the appellant the
claimed sum of money has been answered. The invalidity of the
security documents is an issue which the respondents should prove in
their defence. In the same way that the appellant made its case that
the security documents were valid as they were always used by the
first respondent in acquiring loans over the years and were never
questioned by the second to seventh respondents as being invalid, so
too must the respondents show that the security documents were
invalid and cannot relate to the loan facility dated 2 November 2015.
52.
It is thus imperative that the court a
quo
makes
a determination on whether or not the first respondent is liable to
repay the loan advanced to it by the appellant on 2 November 2015.
The determination will deal with the issue of whether or not the
suretyships and mortgage bonds in favour of the appellant are valid
or invalid. As long as the suretyships remained signed with a
provision that they are of an unlimited nature and the appellant
remains in possession of the title deeds to the properties under the
mortgage bonds, the security documents must be held as being valid. A
final resolution of the matter can only be made after the defence
case is heard.
DISPOSITION
53.
The court a
quo
misdirected itself in granting the respondents application for
absolution from the instance in a case where the appellant had made a
prima
facie
case upon which judgment might or could have been entered in its
favour. The court a
quo
also erred in cancelling the surety and mortgage agreement in
circumstances where there were no counterclaims filed by the third to
seventh respondents seeking such relief. The justice of the case was
one which required that the respondents be put to their defence. The
appellant, having succeeded in the appeal, is entitled to its costs.
In
the result, it is ordered as follows:
1.
The appeal be and is hereby allowed with costs.
2.
The judgment of the court a
quo
is set aside and substituted with the following:
“The
defendants application for absolution from the instance and second
defendant's application for its claim in reconvention to be granted
at the close of the plaintiff's case be and are hereby dismissed
with costs.”
3.
The matter is hereby remitted to the court a
quo
for continuation of trial.
GARWE
JA: I
agree
PATEL
JA: I
agree
Sawyer
& Mkushi,
appellant's legal practitioners
Sheshe
& Mutonono Attorneys,
1st,
3rd
-7th
respondents legal practitioners
Thompson
Stevenson & Associates,
2nd
respondent's legal practitioners
