African Export-Import Bank v RioZim Limited

### Preamble
1
HH 464-13
HC 8117/13
AFRICAN EXPORT-IMPORT BANK
versus
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AFRICAN EXPORT-IMPORT BANK
versus
RIOZIM LIMITED

HIGH COURT OF ZIMBABWE
CHIGUMBA J
HARARE, 23 October 2013 and 4 December 2013

Opposed application-Provisional Sentence

Mr. T. Magwaliba, for Plaintiff
Mr. S. Takundwa, for Defendant

CHIGUMBA J: On 23 October 2013, on the unopposed roll, provisional sentence was granted in favour of the plaintiff against the defendant in the sum of USD$8 000 000, 00 (eight million United States Dollars), together with interest thereon at the prescribed rate of 5% per annum calculated from 29 December 2010 being the due date of the Promissory Note to the date of payment in full, as well as costs of suit. The order was granted after hearing full argument by counsel for both parties. The court granted the order on the basis that the signature on the Promissory note had not been denied, the Promissory note was valid and binding, no viable defence had been placed before the court, and the question of jurisdiction raised by the Defendant had no merit. The court has now been asked to provide detailed reasons for its judgment. These are they:

Summons (Provisional Sentence) was filed out of the High Court on 1 October 2013. The plaintiff’s claim was for provisional sentence in the amount of eight million dollars (US$8 000 000, 00). The plaintiff’s claim was based on a liquid document, a Promissory Note which was executed and issued on behalf of the defendant on 29 December 2010, in favor of the plaintiff, in terms of which defendant promised to pay to the plaintiff, or its order, the sum of USD$ 8 000 000,00. In terms of the Promissory Note, defendant waived demand, diligence, presentment, protest and notice of every kind and confirmed that the Promissory Note represented its legal and valid obligation to pay plaintiff that sum.

Plaintiff claimed that the capital amount it claimed had become due and payable because it had presented the Promissory Note for payment at BancABC, Endeavour Crescent, Mount
 Pleasant Harare on 9 August 2013, and it was not discharged. Plaintiff attached a letter dated 9 August 2013 in which BancABC confirmed that defendant’s account with it was not funded and that consequently they were unable to pay the amount on the Promissory Note. Plaintiff also attached its letter to defendant dated 9 August 2013 in which it advised that the Promissory Note had been dishonored by non-payment, on presentation to BancABC on that same date.

Summons (Provisional Sentence) was served on the defendant on 4 October 2013. On 17 October 2013, plaintiff issued a Notice of Set Down of the matter on the unopposed roll on 23 October 2013. On 18 October 2013, defendant filed a Notice of opposition, deposed to by its finance director, in which the following points were raised. Defendant submitted that the 3rd paragraph of the Promissory Note ousted the jurisdiction of the High Court in Zimbabwe in favour of the courts of England. It was alleged that not only had the plaintiff approached the wrong court, it had applied the wrong laws in construing the terms of the Promissory Note. It was submitted further, that the Plaintiff had misconstrued para 4 of the Promissory Note in that, the courts of whatever jurisdiction referred to are the courts of England.

Defendant averred further that the domicilium citandi et executandi specified in the Promissory Note in para 2 makes it clear that summons ought to have been served in England, and consequently, service of the summons in Zimbabwe was improper and invalid at law. Defendant also averred that its liability to the plaintiff had been reduced from US$7 642 523 as at 31 December 2012 to US$7 398 856 as at 31 August 2013. It was submitted that a claim for the full amount of US$8 000 000, 00 would result in plaintiff being unjustly enriched at the defendant’s expense. Defendant attached a term sheet to prove that the loan facility in terms of which the Promissory Note was issued had been replaced by subsequent loan facilities.

Order 4, rr21 and 27 of the High Court rules 1971, provides as follows:

21. Contents of summons for provisional sentence
A summons claiming provisional sentence shall state the amount and any interest due by virtue of the said liquid document or other such demand as by virtue of the said liquid document is legally claimable, and shall call upon the defendant to satisfy the plaintiff’s claim, or in default to appear before the court at the hour and on the day and at the place stated in the summons to show why he has not done so, and to acknowledge or deny the signature to the said liquid document or the validity of the said claim.


27. Court may permit personal appearance of person summoned
Notwithstanding anything hereinbefore contained, the court may permit any person, summoned to answer a claim for provisional sentence, to appear personally on the floor of the court and acknowledge or deny the same.”

Defendant is required to show cause why it has not satisfied the plaintiff’s claim, and to acknowledge or deny the signature to the liquid document, and to acknowledge or deny the validity of the claim.

The question that the court must answer is whether there is anything in the opposing affidavit filed of record on defendant’s behalf and the attachments thereto, or in the oral submissions made by counsel on defendant’s behalf on 23 November 2013, that satisfies the requirements stipulated by Order 4 of the rules of this court, to show cause why Plaintiff’s claim has not been satisfied, or that constitutes a denial of the signature on the Promissory Note, or a denial of the validity of the claim.

The Promissory Note was issued in Harare Zimbabwe, on the 29th of June 2010. It was typed on defendant’s letterhead, and signed by defendant’s authorized signatory. It reads as follows:

“For valuable consideration, receipt of which is hereby acknowledged, RioZim Limited) the “issuer” hereby promises to pay or to the order of African Export-Import Bank the sum of US$8 000 000, 00 (US Dollars eight million) on 29 December 2010) without set off, counterclaim, restrictions or conditions of any nature and free and clear of any deductions or withholdings.

The Issuer hereby waives demand, diligence, presentment, protest and notice of every kind and represents to the holder that this Promissory Note constitutes its legal, valid independent and binding obligations.

This promissory note shall be governed by and construed in accordance with the laws of England. The courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Promissory Note.

The holder at its discretion may bring any suit, action or proceeding in the courts of whatever jurisdiction that it may that it may select and the Issuer submits for this purpose to the jurisdiction of each court selected as aforesaid.

To the extent that the Issuer may be entitled in any jurisdiction to claim for itself or its assets immunity or protection of whatever nature in respect of its obligations under this Promissory Note from service of process, jurisdiction, suit, judgment, execution, attachment(whether before judgment, in aid of execution or otherwise) or legal process or to the extent that in any such jurisdiction there may be attributed to the Issuer or to its property or assets such immunity or protection (whether or not claimed) the Issuer hereby irrevocably agrees not to claim and hereby irrevocably waives any such immunity (including sovereign immunity) or protection.


The issuer hereby appoints Law Debenture Corporate services Limited of fifth floor, 100 Wood Street, London EC2V 7EX England to accept service of process on its behalf in England.

This Promissory Note shall be presented for payment at: BancABC, Endeavour Crescent, Mount Pleasant Business Park, Mount Pleasant, and Harare, Zimbabwe”.

A Promissory Note is a negotiable instrument. It has been defined as an unconditional promise in writing, made by one person to another, signed by the maker, and engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money, to a specified person or his order, or to bearer. See The Law of Negotiable instruments in South Africa by Cowen & Gering, Fourth ed, p 35.

There are rules for interpreting written contracts in the event of a dispute among the parties to the contract. The courts look for the intent of the parties at the time they entered into the contract. The mutual intention of the parties at the time of the contract will govern the court's resolution of a contractual dispute if that intention can be determined. If the language of the contract is clear and definite, that language will determine the mutual intent of the parties. In determining whether contract language is clear and definite, the court will give the words their ordinary and common meaning. Contracts are interpreted as a whole, if possible, in order to give effect to all parts of the contract. The court will not look outside the contract unless there is ambiguity in a contract provision. In National Railways of Zimbabwe Contributory Pension Fund v National Railways of Zimbabwe 1984(1) ZLR 322 @ 325D, 326H, and the question of interpretation of a written contract was considered. The court stated that:

“A cardinal rule of construction, which is in accordance with reason and with common sense, was stated thus by LORD HALSBURY in Leader v Duffey (1888) 13 AC 294 @ p 301

“…whatever the instrument, it must receive a construction according to the plain meaning of the words and sentences therein contained. But I agree that you must look at the whole instrument, and, inasmuch as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole, in order to give effect, if it be possible to do so, to the intention of the framer of it…”

In my view, the wording of clauses 3 and 4, of the Promissory Note is clear and unambiguous. The language used is plain and ordinary. The clauses, read together, and with the rest of the Promissory Note, clearly do not purport to exclude the jurisdiction of the Zimbabwean courts in favour of the courts of England. The clauses state that:
 “This promissory note shall be **governed by and construed in accordance with the laws of England.** The courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Promissory Note.

**The holder at its discretion may bring any suit, action or proceeding in the courts of whatever jurisdiction that it may select** and the Issuer submits for this purpose to the jurisdiction of each court selected as aforesaid.

In *Leader v Duffey supra*, we are enjoined to construe the Promissory Note as a whole, and to look at the plain meaning of the words. A consideration of the plain meaning of the operative words of clauses 3 is instructive. Clause 3, “...governed by and construed in accordance with the laws of England...” together with clause 4 “...The holder may at its discretion bring any suit, action or proceeding in the courts of whatever jurisdiction that it may elect..” My construction of these clauses is that the parties intended that the holder of the Promissory Note, at its sole and exclusive discretion, had a right to elect to bring any action or suit in courts of any jurisdiction of its choice, but that the laws of England be used to govern and interpret the Promissory Note. I am unable to agree with Defendant’s contention that the jurisdiction being referred to is territorial jurisdiction of England. Clause 4 clearly belies this argument. In my view the parties intended that the English law that governs Promissory Notes be used, to the exclusion of laws in other jurisdictions, whenever a dispute arose in regards to the terms of the Promissory Note. In other words, that the applicable law be the English law of Negotiable Instruments. If the holder of the Promissory Note has exclusive discretion to decide to bring an action or suit in any jurisdiction, then the plain and ordinary meaning of clauses 3 and 4 is that, only the laws of England may be used to govern the Promissory Note, in whichever court of whatever jurisdiction the Holder of the Promissory Note elected to bring its suit or action.

A reading of clause 4 will show that, the defendant gave an undertaking to submit to a court of any jurisdiction as elected by the plaintiff and is accordingly precluded from reneging and seeking to challenge the unfettered discretion of the plaintiff to elect to bring this suit in this court. The wording of the Promissory Note is clear and unambiguous. The literal meaning of the words and sentences does not give rise to an absurdity. There is no need to invoke any other cannons of construction in my view.


Defendant contended that the summons ought to have been served on the domicilium citandi et executandi, at Law Debenture Corporate Services Limited of Fifth Floor, 100 Wood Street, London EC2V 7EX England. With respect, I disagree. The defendant appointed that agent to accept service of process on its behalf in England. There is nothing in the wording of that clause, which supports the contention that any and all legal process in regards to the Promissory Note, ought to be served in England, at that address. Clause 4 clearly gives unfettered discretion to the plaintiff to choose any court in any jurisdiction. Even if I am wrong in my view on this issue, I note that defendant accepted service of the letter dated 9 August 2013 addressed to it by Plaintiff, in which Plaintiff advised that the Promissory Note had been dishonored by non-payment, at its Harare address. No effort was made to disabuse plaintiff of the notion that it had effectively placed defendant in mora by delivery of the letter to that address. Defendant ought to have advised plaintiff to deliver the letter to its domicilium citandi et executandi. In the absence of such warning, plaintiff was entitled to rely on previous conduct between the parties and continue to serve process at that address.

It is trite that Provisional sentence may be granted where: “When a plaintiff sues on a liquid document, the Court will ordinarily grant provisional sentence unless the defendant produces proof that the probability of success in the principal case is against the plaintiff”. It is therefore necessary to decide whether or not there is a balance of probabilities in favor of Defendant in this case, which would justify the refusal of an order for provisional sentence. If there is no balance of probabilities in favour of either party in any principal case that may eventuate, then the law is that plaintiff is entitled to provisional sentence. See Allied Holdings Ltd. v Myerson, 1948 (2) SA 961 (W) at p. 966; Abraham v Du Plessis, 1962 (3) SA 162 (T) at p. 169). It follows that the question of onus is important in determining whether or not there is a balance of probabilities in favour of either party. There are two distinct aspects or types of onus. Firstly, there is the onus in the provisional sentence proceedings and, secondly, there is the onus in the principal case. If the onus in the principal case is on the plaintiff, then of course it may be easier for the defendant to discharge the onus resting upon him in these proceedings of showing that there is a balance of probabilities in his favour. (See Allied Holdings Ltd. v. Myerson, supra at p. 966). These cases were followed in this jurisdiction in Hicks v Dobriskey 1976 (2) SA 792 (R)


The question that the court must answer is whether defendant has discharged the onus on it in the provisional sentence proceedings, and whether the plaintiff has discharged its onus in the main proceedings. Put simply, is the plaintiff likely to succeed in its claim in the main matter, or does the defendant have a valid defence to that claim, which is likely to succeed, rendering the granting of provisional sentence premature and incompetent?

Based on the papers filed of record, it is my view that the Promissory Note is valid and binding on the parties. Defendant has not challenged its authenticity. Defendant has not denied that a Promissory Note, by definition a negotiable instrument is a liquid document at law, and valid for purposes of Order 4, r 20 of the rules of this court. Defendant has not denied that the Promissory Note was dishonored by nonpayment, on 9 August 2013. It follows that Plaintiff has discharged the onus on it to show that it has a good case in the main matter. Plaintiff is more likely than not, to succeed in the main matter. Defendant’ submissions in regards to jurisdiction have already been dismissed by the court. We are left with averments that defendant will be prejudiced if provisional sentence is granted in the sum of eight million United States Dollars, because defendant owed less than that, it owed US$7 398 856,00 as at 31 August 2013. Defendant is quibbling with the quantum of the plaintiff’s claim. Does this constitute a balance of probabilities in defendant’s favour that would defeat a claim for provisional sentence?

Order 4, r21 requires that a defendant show cause why he has not honored the liquid document, or acknowledge or deny the validity of the claim. Defendant impliedly acknowledged its signature on the Promissory note, by failing to deny same. The question of the quantum of the debt due, in my view falls short of the requirement to show cause why defendant has not honored the promissory note. It falls short of the requirement that defendant deny the validity of the plaintiff’s claim. In my view defendant has failed to discharge the onus on it to prove that it has a good defence to the validity of the plaintiff’s claim. It is my view that the question of quantum is not a valid defence capable at law, of defeating a claim for provisional sentence, in the circumstances of this case, regard being had to the terms of the Promissory Note. Further, defendant has not tendered payment of the US$7 398 856, 00 that it admits to owing.

Paragraph 7 of the notice of opposition is an admission by the defendant, that it was indebted to the plaintiff in the sum of US$7 398 856, 00 as at 31 August 2013. If regard is had to the terms of the Promissory Note, defendant, as the Issuer, in Clause 2, waived “demand,diligence, presentment, protest and notice of every kind”. In my view this entitles the Plaintiff to claim in terms of the Promissory Note as at 29 June 2010. The terms of the Promissory Note, as at that date were deemed to constitute “legal, valid, independent and binding obligations”

A look at clause one of the Promissory Note will reveal that defendant promised to pay eight million United States Dollars to the order of the plaintiff, “without set off, counterclaim, restrictions or conditions of any nature and free and clear of deductions or withholdings. In my view, the defendant effectively bound itself to pay eight million dollars first, and then ask questions later. It cannot defeat a claim for provisional sentence for the reason that it has paid off some of the eight million dollars. That is an issue that can be ironed out at trial. Defendant entered appearance to defend on 18 October 2013. In terms of Order 4, r33:

“33. Where provisional sentence granted and defendant enters appearance to defend action

Where a defendant against whom a provisional sentence has been granted enters appearance to defend the action, the summons shall stand as the plaintiff’s declaration, and the defendant shall file his plea within ten days after his entry of appearance, and thereafter the matter shall proceed as in an ordinary action.”

Defendant ought to have filed its plea on or about the 1st November 2013. After that, the matter proceeds as an ordinary action where the question of the actual amount due and owing can be thrashed out and witnesses can testify and be cross examined to test the efficacy of their evidence. As it is, on the papers filed of record, the court is unable to test the veracity of the contention that the defendant has discharged part of its indebtedness to the plaintiff, or to determine the actual amount allegedly paid by the defendant. A defendant against whom provisional sentence has been granted is not without rights. Such rights are provided for in order 4, r28. Defendant already entered appearance to defend the matter so the effect of that is to ensure that the provisional sentence remains an interlocutory judgment until the trial determines whether it should be made into a final judgment, and on what terms.

In conclusion, this court finds that, in the absence of a denial of the signature by the defendant on the Promissory Note, in the face of an unsatisfactory and legally unsustainable defence to the dishonoring of a Promissory Note, which is a negotiable instrument, and in the lack of a viable defence to the plaintiff’s claim, Provisional sentence be and is hereby granted in favor of the plaintiff against the defendant in the sum of USD$8 000 000,00 (eight million
 United States dollars), together with interest thereon at the prescribed rate calculated from 29 December 2010, to the date of payment in full, and to costs of suit.

Messrs Dube, Manikai & Hwacha, plaintiff’s legal practitioners
Messrs Takundwa & Co, defendant’s legal practitioners
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