Delta Beverages (Private) Limited v Honeytech Investments (Pvt) Ltd (In liquidation) and Trenchtower Farming (Pvt) Ltd

### Preamble
1
HH 310-21
HC 2188/19
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DELTA BEVERAGES (PRIVATE) LIMITED

versus

HONEYTECH INVESTMENTS (PVT) LTD (In liquidation)

and

TRENCHTOWER FARMING (PVT) LTD

HIGH COURT OF ZIMBABWE

CHIWESHE JP

HARARE, 24 July 2019 & 23 June 2021

INTERPLEADER

B S Ziwa, for the applicants

K Mutyasira, for the 1st claimant

P C Paul, for the 2nd claimant

CHIWESHE JP:  The applicant has filed an interpleader notice in terms of order 30 Rule 205 A as read with r 207 of the High Court Rules, 1971.

The background facts to this matter are outlined by the applicant as follows.  The 1st claimant leases a farm owned by the 2nd claimant.  In 2018 it entered into a finance agreement with Honeytech Investments Pvt Ltd (the 1st claimant) in terms of which the applicant extended to the 1st claimant a loan in the sum of US$384 000.00.  The 1st claimant was obliged to utilize the finance to plant a barley crop.  The 1st claimant planted the crop and delivered to the applicant 730.30 tons of barley valued at US$444 022.40.

On 15 May 2018 the 1st claimant wrote to the applicant instructing it to register a stop order in favour of the 2nd claimant (Trenchtower Farming Pvt Ltd) and to pay 2nd claimant the sum of US$132 600.00.  The first claimant also instructed the applicant to similarly pay the sum of US$29 000.00.  This second instruction was given on 11 October 2018.  Both letters of instruction were delivered to the applicant by the 2nd claimant.

On 22 November 2018 the 1st claimant wrote to the applicant indicating that it was withdrawing its instructions for the payment of the funds to the 2nd claimant.  On the other hand the 2nd claimant insisted that it was entitled to receive the funds.  The claims of the 1st and 2nd claimant being adverse and mutually exclusive, the applicant filed this interpleader notice calling upon the court to determine the validity of the respective claims.

The applicant avers that it does not collude with either party and that it has no interest in the matter save for its costs incurred in this application.  It seeks an order for costs on the higher scale and a further order that it be authorised to recover such costs from the money it holds but presently deposited with the Registrar as required by the Rules of Court.

It is common cause that the 1st claimant did give the instructions referred to by the applicant and that subsequently the 1st claimant sought to withdraw these instructions.  It is also common cause that by order of this court dated 13 March 2019 the 1st claimant was placed under liquidation.

It is the liquidator who has filed an affidavit of claim on behalf of the 1st claimant.  The liquidator states that his interest in this matter is to safeguard the 1st claimant’s interests in terms of the Insolvency Act [Chapter 6:07].  The liquidator’s position is captured under paragraphs 7.2 and 7.3 of its affidavit which reads as follows:

“7.2.  I am advised by my legal practitioners of record, which advice I accept, that any disposition by a debtor of his property at a time when its liabilities exceed its assets and made with the intention of preferring any one creditor above the others can be set aside. I believe this is to ensure an equitable distribution of the insolvent estate among its creditors.

7.3. I believe I am fortified in my stance because the dispositions by first claimant were made within twelve months preceding the placement of first claimant into liquidation at a time first claimant’s liabilities were in excess of its assets.  The disposal was therefore clearly to prefer second claimant above all other creditors.”

The liquidator has placed reliance on the supporting affidavit filed by the 1st claimant. It is sworn to by Dennis Annadale, its managing director, who agrees that he wrote applicant a stop order instruction on 15 May 2018 in favour of 2nd claimant.  The instruction was not irrevocable.  The deponent states that he did so under threat by Mr G.P.  Killilea that the lease agreement would be cancelled after which he and his family would be evicted from the farm.

In August 2018 Mr Killilea threatened to cut off the ZESA supply to the farm if the 1st claimant’s ZESA account was not paid.  This would have meant that there would be no electricity to power the irrigation system thereby threatening the loss of 130 hectares of the barley crop which was at its flowering stage.  As a result of that threat the deponent had no  choice but to write another instruction to the applicant to pay the 2nd claimant the sum of         $75 000.00.  The instruction is dated 17 August 2018.

On 9 August 2018 the 1st claimant signed a contract with Seedco for the supply of seed for the summer crop.  Mr Killilea again intimated that he would not allow 1st claimant to plant that crop unless the 1st claimant secured 2nd claimant’s claim by issuing an irrevocable stop order in 2nd claimant’s favour.  He then signed the irrevocable stop order under duress.  All the stop order instructions were delivered to the applicant not by the 1st claimant but by the 2nd  claimant, an indication according to the 1st claimant, of the immense pressure brought to bear upon it by the 2nd claimant.

Having sought legal advice, the first claimant, acting upon such advice, withdrew all the stop order instructions.  It did so on 22 November 2018.  It now joins the liquidator in support of the claim that the funds held by the applicant belong to the 1st claimant and should be paid over to it and that 2nd claimant should join the queue with the rest of the creditors and lodge its claim according to due process.

There are two issues that fall for determination by this court.  These are whether in  instructing the applicant to register stop orders in favour of the 2nd  claimant, the 1st claimant acted under duress exerted upon it by the 2nd  claimant.  In addition, whether by indicating that its instruction was irrevocable, the 1st claimant acted under duress exerted upon it by the 2nd  claimant.  The second issue is whether the dispositions made by the 1st claimant in the stop orders made in favour of the 2nd claimant ran foul of the provisions of s 26 of the Insolvency Act [Chapter 6:07[.

The onus of proving duress rests on the 1st claimant.  In this regard the first claimant has a mountain to climb.  In the case of Muza v Agricultural Bank of Zimbabwe Ltd SC 70/03 the Supreme Court held that:

“Contracts that are void ab initio by reason of duress are very rare, as the duress required to render an agreement void ab initio has to be extremely severe.  It has to be so severe as to negative any element of voluntariness ………”

In the South African case of Paragon Business Forms (Pty) Ltd v Du Preez 1994 (1) SA 434 it was held that each of the following five requirements have to be established by a party pleading duress:

The fear must be a reasonable one.

It must be caused by the threat of some considerable evil to the person concerned or his family.

It must be the threat of an imminent evil or inevitable evil.

The threat or intimidation must be unlawful or contra bonos mores.

The moral pressures used must have caused damage.

This court in Mlambo v Mupfiga HH 65/14 also confirmed the above requirements.  The defendant had claimed that he signed an acknowledgement of debt and a deed of pledge under duress because he feared prolonged incarceration.  It was held that “The test in determining the validity of an acknowledgment of debt procured under a threat of a criminal prosecution is whether by such a threat the creditor exacted or extorted something to which he was otherwise not entitled.”  Further it was stated thus:

“The threat of an arrest or criminal prosecution to induce a promise to pay that which was due is not contra bonos mores.  It is the threat to extort a promise to pay that which was not due or was unknown which is illegal”

In casu the 1st claimant does not dispute his indebtedness to the second claimant, nor does it allege that the second claimant is not entitled to the moneys the subject of the stop orders.  In other words, the 1st claimant is legitimately indebted to the 2nd claimant.  Any threats or duress exacted on the 1st claimant must be weighed in light of these facts.  In my view the duress complained of was exerted for purposes of recovering that which was properly owed to the 2nd claimant.  The papers show that 1st claimant was a bad debtor.  The 2nd claimant was entitled to recover its money.  It aggressively took steps to do so.  The 1st claimant has failed to show that the fear induced by the 2nd claimant was a reasonable one nor was it caused by the threat of some considerable evil to it.  There was no threat of an imminent or inevitable evil nor was such threat unlawful or contra bonos mores.  No damage was caused by the moral pressure brought to bear upon the 1st claimant.

I conclude therefore that the first claimant’s defence in that regard does not meet the test spelt out in various authorities.  It must be dismissed.

The 1st claimant’s second line of defence is premised on the provisions of s 26 of the Insolvency act [Chapter 6:07] which provides:

“(1) Every disposition of his or her property made by a debtor which has the effect that any one of his

or her creditors receives a benefit to which he or she would not have been entitled had the debtor’s

estate been under liquidation at the time of the making of the disposition may be set aside by the

court if—

the debtor’s liabilities exceeded the value of his or her assets immediately after the making of

the disposition; and

the disposition was made within six months before the presentation of the application for

liquidation of the debtor’s estate to the registrar……………………………..”

The 1st claimant’s argument arising from these provisions is that the 2nd claimant would not have been entitled to the funds claimed if 1st claimant had been in liquidation at the time the stop orders were made.  It is submitted that it is common cause that at the time of that disposition, 1st claimant’s liabilities exceeded its assets.  It is further submitted that the application for 1st claimant’s liquidation was filed barely four months after the disposition was made.  It is argued that from the above assertions, the 1st claimant’s position falls squarely within the ambit of s 26 of the Insolvency Act.  For that reason, the disposition falls foul of the provisions of that section and must be set aside.

The 1st claimant has not cited any further authorities to shed light as to the approach by the courts in the interpretation and application of s 26.  Further, I do not believe that it is common cause that the 1st claimant’s liabilities exceeded its assets at the time of the dispositions.  In fact, no evidence to that effect has been adduced by the 1st claimant, nor has there been such an admission by the 2nd claimant.

In its supplementary heads of argument, the 2nd claimant has raised three preliminary issues vis a vis the intervention of the liquidator for the 1st claimants. In raising these preliminary issues, the 2nd claimant relies on “Mars: The law of Insolvency in South Africa” pp 283 to 285.  The second and third preliminary issues deserve particular attention.  The liquidator’s position is that 1st claimant’s actions in issuing the stop orders amounts to preference of 2nd claimant above its other creditors.  In other words, the granting of such stop orders constitutes a voidable preference in terms of the Insolvency Act [Chapter 6:07].  I agree that by taking that position the liquidator has put the cart before the horse.  It is for this court in the present interpleader application to determine the fate of the stop orders.  Only after this court’s determination as to whom the applicant should forward the amount of $161 000.00 would it be prudent for the liquidator to chart the way forward.

Accordingly, the liquidator cannot be a claimant in interpleader proceedings in anticipation of the court’s decision in this application.  Prima facie the applicant is obliged to honour the stop orders made in favour of the 2nd claimant.  The amount of $161 600.00 is presently not an asset of the estate.  If the liquidator wishes to recover that money, he will have to institute separate proceedings against the 2nd claimant in terms of section 26 of the Insolvency Act.

In any event it is improper for the liquidator to assume that matters of insolvency can be properly dealt with in an interpleader application.  I agree with the 2nd claimant that the liquidator has approached the wrong forum.  I would accordingly uphold the preliminary issues and dismiss the liquidator’s claims.

It is for these reasons that the following order is made:

The 2nd claimant’s claim to the sum of $161 600.00 be and is hereby upheld.

The 1st claimant is to pay the 2nd claimant’s and the applicant’s costs on a legal practitioner and client scale.

Gill Godlonton & Gerrans, applicant’s legal practitioners

Messrs Mubangwa & Partners, 1st claimant’s legal practitioners

Messrs Wintertons, 2nd claimant’s legal practitioners