Anderson Learnmore Danda v Sub-Saharan Management Consultants (Private) Limited and Registrar of Deeds (N.O.) and Sheriff of Zimbabwe (N.O.)

### Preamble
1
HH 290-21
HC 3148/20
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ANDERSON LEARNMORE DANDA

versus

SUB-SAHARAN MANAGEMENT CONSULTANTS (PRIVATE) LIMITED

and

REGISTRAR OF DEEDS (N.O.)

and

SHERIFF OF ZIMBABWE (N.O.)

HIGH COURT OF ZIMBABWE

MUSITHU J

HARARE: 20 November 2020 & 11 June 2021

Opposed application

N. Ngongone, for the applicant

S. Simango, for the 1st respondent

MUSITHU J:

INTRODUCTION

The applicant seeks an order compelling 1st respondent to consent to the cancellation of a mortgage bond No. 2181/2004. The mortgage bond was registered in 1st respondent’s favour in 2004. The mortgage bond was securing a loan that the 1st respondent advanced to the applicant in the same year. The founding affidavit was deposed to by Agnes Danda, by virtue of a special power of attorney granted to her by the applicant. The relief sought reads as follows:

“IT IS HEREBY ORDERED THAT:-

The Applicant shall forthwith deposit the sum of RTGS 11 029.09 into the Sheriff’s Account as full and final payment in respect of Applicant’s indebtedness to the 1st Respondent in terms of Mortgage Bond Number 2181/2004 dated 25 February 2004.

The 1st Respondent shall forthwith consent to the cancellation of Mortgage Bond Number 2181/2004 dated 25 February 2004 registered in the 2nd Respondent’s registry by the Applicant in favour of the 1st Respondent within thirty (30) days of the granting of this order failing which the 3rd Respondent be and is hereby authorised and directed to sign the consent to the cancellation of the mortgage bond on behalf of the 1st Respondent.

The 1st Respondent be and is hereby ordered and directed, within ten (10) days of the granting of this order to return and surrender to the Applicant the original Deed of Transfer Number 9273/2003 dated 20 November 2003, in respect of a certain piece of land situate in the District of Goromonzi called stand 2402 Seki Township measuring 748 square metres.

The 1st Respondent shall pay costs of this application on the legal practitioner and client scale.”

FACTUAL BACKGROUND

In 2004 the applicant borrowed ZWL 30 486 250.00 (Thirty Million Four Hundred and Eighty-Six Thousand Two Hundred and Fifty Dollars) from the 1st respondent. The debt was secured by a mortgage bond No. 2181/04 (the bond), registered against applicant’s property known as Stand No. 2402 Seki Township measuring 748 Square metres (the property). Applicant claimed that he repaid the full loan amount. He then assumed that the 1st respondent would agree to have the mortgage bond cancelled. Applicant also claimed to have lost all receipts confirming the repayments made, as well as other key documentation.

The applicant averred that he only discovered in February 2020 that his original title deed was missing, and assumed that it was lost. He approached 2nd respondent intending to apply for a replacement deed. That is when he allegedly discovered that the bond had not been cancelled. He instructed his legal practitioners to engage 1st respondent to seek its consent to cancel the bond. The 1st respondent declined to give its consent. Its reason for declining the request was that the applicant had not repaid the loan in full. Meetings were held between the parties’ legal practitioners but they failed to reach an agreement.

In a letter of 28 February 2020 addressed to the 1st respondent, the applicant through his legal practitioners, offered to pay the sum of US$500.00 or the ZWL equivalent in full and final settlement of whatever amount remained outstanding. 1st respondent allegedly rejected the offer on the basis that the amount offered was nowhere near the outstanding debt.  The 1st respondent approached the Reserve Bank of Zimbabwe (RBZ) requesting data on the prevailing exchange rate between the US$ and the ZWL at the time the bond was registered. The data availed by the RBZ showed that the exchange rate was 1USD to ZWL3, 80230.  Based on that exchange rate, the 1st respondent computed an amount of US$11, 029.09, as the outstanding debt. The information was conveyed to the applicant’s legal practitioners. On 23 March 2020, the applicant’s legal practitioners wrote to the respondent’s legal practitioners as follows:

“OUR CLIENT: ANDERSON L.R DANDA-MORTGAGE BOND REGISTERED IN FAVOUR OF SUB-SAHARAN MANAGEMENT CONSULTANTS (PVT) LTD (MB2181/04)

1…………

2.  We hereby acknowledge receipt of your email dated 20 March 2020 to which you attached the Reserve Bank of Zimbabwe confirmation of the Exchange Rate as at the time when the mortgage bond was registered as well as your calculation of the value of the loan. See attached.

3.	We hereby confirm that your calculation on the value of the loan and the interest thereon is not disputed. However, in view of SI 33 of 2019 the debt is payable in RTGS currency. Therefore, the debt is RTGS 11 029.09 which we hereby tender in full and final settlement of the debt.

4.	To that end, may you kindly furnish us with your banking details to enable us to effect the payment from our Trust Account. Also kindly advise us on the date and time when you will be free to sign the Consent to Mortgage Bond Cancellation so that we send our clerk at your office…….”

Following this communication, the parties appear to have met to discuss the matter. On 21 May 2020, the applicant’s legal practitioners wrote to the 1st respondent’s legal practitioners referring to their meeting of 11 May 2018. The reference to 2018 appears to have been a typo. I believe the meeting must have been held on 11 May 2020 since all the communication started in 2020. The letter of 21 May 2020 reads in part as follows:

“1……………

2. Your client’s assertion that the amount due in terms of the mortgage bond is USD11 029.09 has been rejected by our client.

3. Our instructions are that your client’s debt should be calculated using the RBZ prevailing rate as at that time and that your client correctly calculated the same and got ZWD11 029.09. There is no basis whatsoever for your client to claim USD11 029.09 in the given circumstances.

4. Our client is willing to pay the ZWD11 029.09 in full and final settlement of the debt. To that end, kindly provide us with the banking details to enable us to effect the payment. Should we not hear from you before end of day Friday Wednesday 27 May 2020, we have strict instructions to file a Court application compelling your client to cancel the mortgage…….”

There appears to have been no response to that letter.

Applicant’s Case

The applicant’s contention is that the debt was originally in ZWL and it must remain so. The applicant further contends that even assuming that the debt was in US$, it metamorphosed into a ZWL debt by operation of Statutory Instrument 33 of 2019. That instrument prescribed that all liabilities expressed in US$ prior to 22 February 2019, were to be deemed to be liabilities valued in ZWL after the effective date at a rate of one-to-one to the US$. It was for that reason that the applicant offered to pay ZWL11,029.09 in full and final settlement of the 1st respondent’s claim. The 1st respondent rejected the offer.

Applicant construed the 1st respondent’s attitude as unreasonable and tantamount to extortion. He reasoned so considering that he was willing to settle the amount claimed by the 1st respondent notwithstanding that the amount had already been paid in full. He accused the 1st respondent of attempting to cash in on his predicament following his loss of receipts which would have all but confirmed that the debt was repaid in full. The applicant urged the court to grant the order as prayed for.

Respondent’s Case

1st respondent denied that applicant had repaid the full loan amount. It challenged the applicant to prove that he did so. The bond was not going to be cancelled until the debt was cleared. Cancelling the bond at this stage would result in unjust enrichment to the applicant. The fact that the transaction occurred some sixteen years back did not help mitigate the applicant’s obligations. 1st respondent also contended that since the ZWL was demonetised, the amount owing could only be established through applying the RBZ exchange rates. 1st respondent was adamant that the amount owing was US$11 029-09, consistent with the RBZ exchange rates applicable at the material time.

1st respondent denied accusations of trying to overreach and taking advantage of applicant’s predicament. It further contended that the demonetisation of the ZWL did not result in the termination of ZWL obligations. It is in the last paragraph of its opposing affidavit that 1st respondents stated the ZWL amount that the applicant failed to pay. It averred that the applicant did not liquidate its debt of ZWL 30 486 250.00. The only way to ascertain the present value of the debt was through the application of the RBZ exchange rate formula, which yielded the sum of US$11 029.09. 1st respondent claimed that it had suffered financial prejudice as a result of the applicant’s failure to pay off the debt in the past sixteen years. It would only accept payment of ZWL 30 486 250.00 instead of ZWL11, 029.09, assuming the court were to find that the debt was to be repaid in ZWL. It asked the court to dismiss the application with costs on the higher scale.

The Answering Affidavit

The applicant averred that the failure by the 1st respondent to provide a mortgage statement to show the amount outstanding was quite revealing. That confirmed the applicant’s contention that the debt was paid off. The applicant asserted that the 1st respondent would have long foreclosed on the mortgaged property instead of keeping mum all these years. Be that as it may, the applicant was willing to pay the amount that the 1st respondent claimed was outstanding. The payment could only be made in the currency which constituted legal tender in Zimbabwe.

The applicant contended that had the debt not been paid in full, the 1st respondent would not have asked the applicant to make an offer to settle the debt. There would have been no need to negotiate an amount which was legally due and for which the applicant had mortgaged his property. The 1st respondent would have easily proceeded to seek execution of the property. The applicant further denied that he would be unjustly enriched by paying the alleged outstanding amount in ZWL. The debt arose before SI 33 of 2019 came into effect. It fell within the purview of that law. It had to be repaid in the local currency.

The Issue

The only issue that arises for determination is the currency in which the alleged debt of US$11 029.09 should be repaid.

The Submissions

Ms Ngongone for the applicant submitted that the debt fell within the scope of section 4 (1)(d) of SI 33 of 2019. She referred to recent Supreme Court judgments which declared that all local debts that arose before SI 33 of 2019 became law were to be repaid in ZWL at the rate of one as to one with the US$. Ms Ngongone further submitted that the debt did not fall under any of the exceptions provided under the law, which permitted the payment of certain transactions in US$. To further motivate her submission, counsel argued that the debt arose from a local loan transaction. It was advanced in local currency. There was no agreement that the loan would be paid back in any other currency other than the ZWL.

In his heads of argument, the applicant referred to the case of (1) Terence Alan Blake (2) Edward Graham Burroughs v Tabs-Avon Lighting (Private) Limited, in which the Supreme Court upheld the lower court’s refusal to grant judgment in a foreign currency. The court reasoned that the agreement was for payment in Zimbabwe dollars and no legal basis had been established for the claim for payment in US$. Counsel for the applicant submitted that it was crucial to note that the 1st respondent had not explained why it did not follow up on the alleged outstanding debt all these years, more so considering the negative effects of the incessant currency fluctuations. According to counsel, the only conceivable explanation for the reluctance to pursue the debt was because it had been paid in full.

For the 1st respondent, Mr Simango urged the court to dismiss the application since no evidence was placed before the court to show that the debt was discharged. He cited the case of Zimbabwe Revenue Authority v Conduit Investments (Private) Limited to support the contention that the outstanding debt ought to be paid in US$, regardless of the provisions of SI 33 of 2019 and SI 142 of 2019. He asked the court to dismiss the application with costs on the punitive scale, arguing that the applicant’s conduct of failing to honour its obligations timeously deserved censure.

The Applicable Law

It is common cause that on 22 February 2019, the Government of Zimbabwe introduced a new currency called the Real Time Gross Settlement Electronic dollar (RTGS), through the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations, 2019, (hereinafter referred to as "S.I. 33/19" or the instrument). The instrument was gazetted on 22 February 2019. That date became the first effective date as defined in the Finance Act (No.2) Act, No.7 of 2019 (the Finance Act). The new currency ran parallel with other currencies that were accepted as legal tender, under what was known then as the multi-currency basket.

On 24 June 2019, the Minister of Finance and Economic Development caused to be gazetted Statutory Instrument 142 of 2019 (Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019) (SI 142/2019). The 24th June 2019 became the second effective date as defined in the Finance Act. This instrument abolished the multi currencies and declared the ZWL to be the sole legal tender in Zimbabwe. The two instruments were later incorporated into the Finance Act. The Finance Act was gazetted on 21 August 2019. The key parts of the Finance Act which assimilated some of the provisions of the two instruments are sections 22 and 23. The two sections state in part as follows:

“22 Issuance and legal tender of RTGS dollars, savings, transitional matters and validation

1) Subject to section 5, for the purposes of section 44C of the principal Act, the Minister shall be deemed to have prescribed the following with effect from the first effective date—

(a) that the Reserve Bank has, with effect from the first effective date, issued an electronic  currency called the RTGS dollar; and

(b) ……………..; and

(c) that such currency shall be legal tender within Zimbabwe from the first effective date; and

(d) that, for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C (2) of the principal Act) shall on the first effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar; and

(e) that after the first effective date any variance from the opening parity rate shall be determined from time to time by the rate or rates at which authorised dealers exchange the RTGS dollar for the United States dollar on a willing-seller willing-buyer basis; and

(f) every enactment in which an amount is expressed in United States dollars shall, on the first effective date (but subject to subsection(4)), be construed as reference to the RTGS dollar, at parity with the United States dollar, that is to say, at a one-to-one rate.

(2) From the first effective date, the bond notes and coins referred to in the Reserve Bank of Zimbabwe Amendment Act, 2017 (No. 1 of 2017) shall continue to be legal tender within Zimbabwe, exchangeable with the RTGS dollar at parity with each bond note unit, that is to say, at a one-to-one rate.

(3)The use of the RTGS currency with effect from the first effective date is hereby validated.

(4) For the purposes of this section—

(a) it is declared for the avoidance of doubt that financial or contractual obligations concluded or incurred before the first effective date, that were valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on the first effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar;

(b) ………………..; (Underlining for emphasis)

23 Zimbabwe dollar to be the sole currency for legal tender purposes from second effective date

(1) For the avoidance of doubt, but subject to subsection (4), it is declared that with effect from the second effective date, the British pound, United States dollar, South African rand, Botswana pula and any other foreign currency whatsoever are no longer legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.

(2) Accordingly, the Zimbabwe dollar shall, with effect from the second effective date, but subject to subsection (4), be the sole legal tender in Zimbabwe in all transactions.

(3) ………………...

(4)	Nothing in this section shall affect—

(a) 	the opening or operation of “nostro foreign currency accounts”, as defined in section 44C(5) of the principal Act as inserted by this Act, which shall continue to be designated in the foreign currencies with which they are opened and in which they are operated, nor shall this section affect the making of foreign payments from such accounts;

(b)	the requirement to pay in any of the foreign currencies referred to in section 2(1) duties in terms of the Customs and Excise Act [Chapter 23:02]that are payable on the importation of goods specified under that Act to be luxury goods, or, in respect of such goods, to pay any import or value added tax in any of the foreign currencies referred to in subsection (1) as required by or under the Value Added Tax Act [Chapter 23:12].

(5) Notwithstanding subsection (1) and (2), it is permissible to tender any of the foreign currencies referred to in subsection (1) in payment for international airline services”. (Underlining for emphasis).

The principal Act referred to in sections 22 and 23 above is the Reserve Bank of Zimbabwe Act.

THE ANALYSIS

It is not in dispute that the outstanding debt in casu arose prior to the enactment of both SI 33 of 2019 and SI 149 of 2019. As already noted, these two instruments significantly changed the country’s monetary regime by introducing a new currency known as the RTGS dollar and then entrenching the ZWL as the sole legal tender in Zimbabwe. The provisions of the two instruments were re-enacted through the Finance Act with some modifications. The application before the court was filed on 23 June 2020, by which time the two instruments had already been incorporated into the Finance Act. For that reason, I shall be referring to the provisions of the two instruments in the form in which they were reproduced in the Finance Act.

The debt which is the subject of the present dispute arose from a loan advanced to the applicant in ZWL pursuant to what was essentially a local transaction. Without addressing the implications of the new currency regime, Mr Simango insisted that the debt should be paid in US$. In the heads of argument, the 1st respondent contended that since the ZWL was demonetized at a time that the debt ought to have been repaid, it was not illegal that the payment be made in US$ or alternatively at the prevailing interbank bank rate. Mr Simango further submitted that this position was fortified by the judgment of MAFUSIRE J in ZIMRA v Conduit Investments (Pvt) Ltd (supra). According to Mr Simango, in that case the court refused to grant an order for performance to be rendered in local currency where doing so would cause undue hardship to the party against whom specific performance was being sought. Mr Simango construed that to mean that the court could order that a debt should be repaid in US$ in instances, where a repayment in local currency would result in an unjust enrichment to the debtor. He did not progress the argument any further. This was the nub of the 1st respondent’s case.

The ZIMRA v Conduit Investments case was concerned with a claim for specific performance. The parties had entered into a fix and supply contract. The respondent was required to equip six boreholes at the applicant’s Beitbridge Border Post. It was also required to install water tanks, submersible pumps amongst other works. The contract price was US$96 691-68. The respondent failed to deliver and commission the project within the agreed timeframes. It sought a variation of the contract price, which was declined. The project was also affected by the new currency regime. What was initially a US$ contract became a ZWL contract. The contract price of US$96 691-68 became RTGS96 691-68. This was confirmed by an arbitrator when the dispute went to arbitration. The issue that the court was required to consider was whether it was practical and realistic to grant an order for specific performance to be rendered in local currency under the circumstances. At page 7 of the judgment, MAFUSIRE J said:

“[19]	The conversion by the monetary authorities of United States dollar denominated bank balances, assets or liabilities on a one-to-one ratio with the Zimbabwean currency evidently compounded the situation between the parties. It bore no resemblance to the situation on the ground. But it is the law. The courts are obliged to enforce the law as is, unless it is struck down for want of constitutional validity. ……..Nonetheless, in the circumstances of this case, I consider that specific performance will be unduly harsh on the respondent. It will be unconscionable to order it to perform the contract at a price which, on the ground, is a minute fraction of the value of its bargain.”

The ZIMRA v Conduit Investments case is clearly distinguishable from the present case. The court was dealing with a contract that had not been fully performed. The respondent therein had requested an adjustment of the contract price when it became clear that original contract price had become insignificant. In casu, the applicant claimed that he liquidated the debt, but misplaced the relevant documents confirming payment. 1st respondent denied that the applicant liquidated the debt. Crucially, 1st respondent did not assert that the applicant never paid anything. It merely denied that the debt was liquidated. It would be highly bizarre and perplexing that 1st respondent would remain aloof for 16 years without making any move to enforce payment if indeed applicant paid nothing towards the liquidation of the debt. The debt was secured through a bond registered in the 1st respondent’s favour. All that it needed to do was to make a claim. If no payment was made, then the mortgaged property would become executable.

It appears 1st respondent was only galvanised to act, or rather reminded of the debt after applicant sought its consent to have the mortgage bond cancelled through his letter of 17 February 2020. The parties agreed on an amount they perceived to represent the outstanding debt. More importantly, the sum of US$11 029.09 represented the present value of the loan in the US$ currency based on the average exchange rate for 2004, plus the interest component which was computed at the rate of 5% for 16 years. In the court’s view, the applicant’s repayment obligation fell within the scope of section 22 (1) (d) of the Finance Act, as further ensconced by section 22 (4)(a) of the same Act. Mr Simango did not submit that the debt fell within any one of the exceptions recognised under the Finance Act. He could not dare argue so because section 44C (2) of the principal Act is clear on that point. It states as follows:

“44C Issuance and legal tender of electronic currency

(1)………………

(2) 	For the avoidance of doubt it is declared that the issuance of any electronic currency shall not affect or apply in respect of –

(a) 	funds held in nostro foreign currency accounts, which shall continue to be designated in such foreign currencies; and

(b)  	foreign loans and foreign obligations denominated in any foreign currency, which shall continue to be payable in such foreign currency.”

Clearly the debt herein does not fit within the above exceptions. The law regarding the treatment of debts or financial obligations that arose before the first effective date as defined in the Finance Act has been settled by the Superior Court. The transaction between applicant and the 1st respondent, which in turn yielded the debt of US$11 029.09 falls within the purview of section 22(1)(d), as read with section 22(4)(a) of the Finance Act.

I find the 1st respondent’s arguments devoid of merit. The tender by the applicant to discharge its indebtedness cannot be impinged on the basis that it would result in unjust enrichment to the applicant. The tender accords with the position of the law. To the contrary, it is the 1st respondent that may be unjustly enriched. It has failed to demonstrate that the applicant did not pay anything towards the discharge of his indebtedness.

The court also finds the 1st respondent’s alternative submission that payment of an amount equivalent to US$11 029.09 be made in the RTGS dollar at the prevailing interbank rate to be without merit. No further submissions were made by 1st respondent’s counsel to justify the treatment of the debt under section 22(1) (e) of the Finance Act. The obligation to repay the debt arose before the first effective date. The exact amount advanced to the applicant was also known. The fact that the present value of that amount in US$ was only agreed to after the first effective date does not make the amount susceptible to treatment under section 22(1) (e) of the Finance Act.  Had the 1st respondent not been sluggish in its approach, then this amount would have long been paid before the first effective date.

COSTS

The general rule is that the successful party is entitled to costs on a scale determined by the nature of the case and the manner in which litigation was conducted. This court is profoundly convinced that the 1st respondent was aware or ought to have been aware of the imprudence of its avowed position. This is certified by its counsel’s failure to advance meaningful submissions on the legality of demanding payment in a currency that belies the existing law. In the exercise of my discretion, I have however considered that the dispute revolved around an important area of the law, and an order of costs on the attorney and client scale would not be justified.

DISPOSITION

Resultantly it is ordered that:-

The application succeeds.

The applicant shall forthwith pay the sum of RTGS 11 029.09 into an account to be nominated by the 1st respondent, in full and final payment of his indebtedness to the 1st Respondent in respect of a debt secured by mortgage Bond Number 2181/2004 dated 25 February 2004.

In the event of the 1st respondent failing to provide an account for purposes of the applicant complying with paragraph (1) above within seven (7) days of service of this order, the applicant shall deposit the said amount into the 3rd respondent’s account, who shall hold it in trust for the credit of and payment to the 1st respondent.

The 1st respondent shall complete all the formalities required to facilitate the cancellation of Mortgage Bond Number 2181/2004 dated 25 February 2004 registered against the applicant’s property known as a certain piece of land situate in the district of Goromonzi Called Stand 2402 Seki Township Measuring 748 square metres Held under Deed of Transfer No. 9273/2003 dated 20 November 2003, within fourteen (14) days of the service of this order, failing which the 3rd respondent be and is hereby authorised and directed to sign the consent to the cancellation of the mortgage bond on behalf of the 1st Respondent.

The 1st respondent is hereby ordered and directed, within seven (7) days of service  of this order to return and surrender to the applicant the original Deed of Transfer Number 9273/2003 dated 20 November 2003, in respect of a certain piece of land situate in the District of Goromonzi called stand 2402 Seki Township measuring 748 square metres.

The 1st respondent shall pay the applicant’s costs of suit.

Marian F. & Company Legal Practitioners, legal practitioners for the applicant

Nyikadzino, Simango & Associates, legal practitioners for the 1st respondent