HIGH COURT OF ZIMBABWE
HARARE, 27 May 2015 and 24 June 2015
T.M Hungwe, for the applicant
T.E. Gumbo, for the respondent
MTSHIYA J: This is an opposed application wherein the applicant seeks the following relief:
“1. 1st and 2nd Respondents shall pay Applicant $58 000-00 together with interests at the rate of 15% per annum calculated from 5 December2012 the date of loan to the date of payment.
- As well as costs of suit on attorney-client scale”.
The basis of the relief sought is a written agreement between the parties dated 5
The relevant parts of the brief and precise agreement provide as follows:-
“Whereas the lender has agreed to lend to the borrower as stated above the sum of US$60000-00 being the money advanced to the borrower in terms of the conditions stated below:
TERMS AND CONITIONS
- Amount Lent
The lender has agreed to lend US$6000-00 to the borrower
- Terms of payment
The borrower is to pay the lent US$60000-00 back to the lender as follows:-
- US$2500-00 on 5 January 2013
- US$ 2500-00 on 5 February 2013
- US$2500-00 on 5 March 2013
- US$52500-00 on 5 April 2013.
In the event that the borrower fails to meet his obligation:
- The Borrower hereby cedes his rights, title and interests in the Deed of Transfer No. 08177/2004 dated 27th day of September 2004 for stand 3385 Glen Norah Township fo Glen Norah situate in the District of Salisbury measuring 237 square metres into the Lender’s name.
- The Guarantor also hereby cedes his rights, title and interests in the Deed of transfer No. 1284/11 dated 22 March 2011 for Stand 3852 Tynwald Township of Lot 5 of Tynwald measuring 549 square metres.
- The title Deeds of the properties bonded shall be lodged with and remain in the custody of Denford Mahachi during the subsistence of this Bond and the said property shall not be further burdened in any way without the consent in writing of the Lender”.
Both the applicant and the surety/guarantor signed the agreement.
Whilst admitting the existence of the loan agreement, in his opposing papers, the first
respondent, supported by the second respondent, argues that there were prior agreements which impacted on the agreement signed on 5 December 2015.
The applicant admits the existence of prior agreements but points out that the respondents cleared their liabilities with respect to earlier agreements.
The respondents also claim that usurious interest was charged on all the agreements that were entered into by the parties.
The applicant, on his part, says as the loans were between family friends, no interest was charged. The loans, he argues were interest free.
In his heads of argument, he first respondent raised two points in limine. He said there are several disputes of facts in the matter and therefore the matter must have been brought by way of summons. He also argued that the agreement violated s 12 of the Money Landing and Rates of Interest Act [Chapter 14:14] (“the Act”) which provides as follows:
“12 Requirements in connection with instruments of debt
- Every instrument of debt, other than a mortgage or general covering bond, executed within Zimbabwe in respect of a loan of money shall separately and distinctly set forth-
- That it is executed for money lent; and
- The amount actually paid to the borrower; and
- The rate of interest which is to be charged in respect of the loan.
- Any person who makes or executes or is a party to the making or execution of, or who was cessionary or otherwise knowingly accepts or holds, any such instrument of debt which does not comply with the requirements of Subsection (1) shall be guilty of an offence and liable to a fine not exceeding level six or to imprisonment for a period not exceeding six months or to both such fine and such imprisonment”.
The above points in limine would have merited great attention if one were to deny that
the applicant’s claim is anchored on only one agreement, namely the agreement of 5 December 2012. That position of the applicant is unassailable.
The points in limine, although well argued, do not have a place in the matter before me as facts herein shall prove.
The first respondent admits being the author of all agreements between the parties. To that end he states:
“All the agreements after the first one were drafted by myself. We drafted the last agreement on the 5th of December 2012 although the previous agreement had not expired”.
It is important to note that whether or not the previous agreements had expired, the applicant raises no issue over those agreements. Furthermore, notwithstanding the alleged issue of interest, the last agreement that the first respondent drafted and wanted the applicant to accept, acknowledged indebtedness to the applicant. It should further be noted that, despite the attraction of interest amounting to US$2200-00placed on that draft agreement, the applicant still rejected it and insisted on having the agreement of 5 December 2012 honoured. These developments are confirmed by the respondents themselves.
In view of the above facts, I refuse to believe that the respondents did not appreciate the legal basis of the 5 December 2012 agreement and their obligation(s) under it. They signed the agreement freely and voluntarily. They further proceeded to execute same by making two payments totalling US$2000-00 on 28 April 2014 and 7 June 2014 respectively. That reduced the amount of US$60000-00 to US$58000-00 which is being claimed by the applicant. Surely, 5 December 2012 to 7 June 2014 was ample time to question the agreement. They waited until 19 August 2014 when they filed opposing papers to this application.
Given the fact that the applicant’s claim is based on a written instrument, I fully agree with the applicant’s submissions on the issue. I shall for the sake of clarity and emphasis, quote the submissions at length. He submits as follows:-
“1.4 It is submitted that the issue of interest on previous loan agreement, etc, does not arise. If such things/facts exist, they should have been embodied in the agreement.
2.1 The parol evidence rule or the integration rule applies to a situation where the parties decide that their agreement should be reduced in writing. A quote from page 65 of Christie aforesaid:
‘When the parties to a contract have decided that it should be in writing, they are securing for themselves the advantages which a written contract offers, namely an opportunity to study the terms before committing themselves, simplification of proof of the terms and a drastic reduction of the scope for argument about the terms.
These advantages would be lost if, in the event of a dispute, the parties were permitted to give evidence to vary or contradict the written contract. Hence the parol evidence or integration rule, thus stated by Watermeyer JA:
‘Now this Court has accepted the rule that when a contract has been reduced to writing, the writing is, in general regarded as the exclusive memorial of the transaction and in suit between the parties no evidence to prove its terms may be given, save the document or secondary evidence of its contents, nor may the contents of such document be contradicted, altered, added to or varied by parol evidence’.
Necessary as such a rule obviously is, to exclude evidence of prior negotiations
Thomson (Pvt) Ltd –v –Bennett 1962 R & N 689)
However, the above quotation is cited whilst Applicant is aware that the rule does not exclude
evidence to show that the contract was vitiated by misrepresentation, fraud, duress, undue
influence, illegality or mistake. A quote from page 65 of Christie aforesaid:
‘Thus the rule does not exclude evidence to show that the contract was vitiated by misrepresentation, fraud, duress, undue, influence, illegality or mistake’”.
It is clear to me that the intentions of the parties, in casu, were embodied in the written agreement which the parties signed freely and voluntarily. There has been no allegation of fraud or misrepresentation. This court cannot therefore create a new contract for the parties. The contract makes no reference to previous agreements. This, I believe, was due to the fact that those agreements had been honoured as the applicant indicated. The applicant does not dispute the existence of those earlier agreements. His claim is restricted to the agreement of 5 December 2012, whose provisions do not include interest. That is, in my view, what the parties agreed to.
Apart from the fact that the provisions of the Act apply to registered money lenders, the Act was never violated because the agreement signed by the parties did not provide for interest. That is why the point in limine on that issue has no merit at all. This was an interest free loan.
With the finding that:
- the points in limine raised by the first respondent cannot be upheld.
- the applicant’s claim is based on one single agreement that the respondents accept, namely the agreement of 5 December 2012,
- the agreement made no provision for interest
- only US$2000-00 was paid by the respondents on the basis of the existence of the 5 December 2012 agreement and thus leaving the claimed balance of US$58000-00; and
- there are no disputes of fact raising the need for parole evidence:
I find it difficult to reject the applicant’s claim.
I also do not find any reason to absolve the second respondent who stood as
guarantor. The agreement, drawn up by the first respondent does not create a separate surety agreement. It creates a situation where the guarantor, who in casu, signed the said agreement, placed himself in the position of a co-principal debtor.
I am satisfied that each of the three parties cited in this case were fully aware of their obligations under the agreement of 5 December 2012 and that the said agreement was binding on all of them.
In view of the foregoing, my finding is that the applicant’s claim has merit and ought to be granted.
I therefore order as follows:
IT IS ORDERED THAT:
1. The respondents, the one paying the other to be absolved, shall pay Applicant US$58 000-00 together with interests at the rate of 5% per annum calculated from 5 December 2012 to the date of full payment; and
2. The respondents shall pay costs of suit on attorney-client scale.
Hungwe & Partners, applicant’s legal practitioners
Chinawa Law Chambers, respondents’ legal practitioners