Infrastructural Development BANK OF Zimbabwe Versus EASY Credit (Private) Limited AND Justin Artwell Tichiwangana AND Maxine Manyowa AND Shingirayi Mafara AND Kudakwashe Zumbika AND Tinashe Herbert Dzaramba AND Bruce Taruvinga

### Preamble
1
HH 84-18
HC 8486/16
---------


INFRASTRUCTURAL DEVELOPMENT BANK OF ZIMBABWE

versus

EASY CREDIT (PRIVATE) LIMITED

and

JUSTIN ARTWELL TICHIWANGANA

and

MAXINE MANYOWA

and

SHINGIRAYI MAFARA

and

KUDAKWASHE ZUMBIKA

and

TINASHE HERBERT DZARAMBA

and

BRUCE TARUVINGA

HIGH COURT OF ZIMBABWE

TAGU J

HARARE, 31 January, 1 & 28 February 2018

Civil Trial

O Mutero, for plaintiff

P Kawonde, for defendants

TAGU J: The plaintiff issued summons against the defendants claiming jointly and severally the one paying the other to absolved payment of US$501092.34 being capital, US$54 695,59 being interest, US$180.00 being Bank charges, interest on the sum of US$501 092.34 at the rate of 23% per annum subject to variation from time to time with effect from the 16th of August 2016 to date of payment and costs of suit on a legal practitioner and client scale and collection commission as provided for under the Law Society of Zimbabwe by –laws (1982).

The facts are that the plaintiff is Infrastructure Development Bank of Zimbabwe, a body corporate duly constituted in accordance with the laws of Zimbabwe. The first defendant is Easy Credit (Private) Limited, a company incorporated in accordance with the laws of Zimbabwe. The second to the seventh defendants are directors of the first defendant. In or around August 2015 and at Harare the plaintiff and the first defendant entered into a written agreement in terms of which the plaintiff extended to the first defendant a revolving credit facility of US$500 000.00 as shown on Annexure “A” to the plaintiff’s buddle documents. Interest was to accrue on the facility at the rate of 15% per annum subject to change from time to time. The second to the seventh defendants bound themselves jointly and severally as sureties and co-principal debtors with the first defendant for payment of any and all monies due to the plaintiff by the first defendant under the facility. It was a further term of the agreement that in the event of the plaintiff instituting legal proceedings against the first defendant for the recovery of any monies due thereunder, the first defendant would be obliged to re-imburse to the plaintiff all the legal costs incurred including those on a legal practitioner and client scale and collection commission.

Under the agreement the plaintiff dully disbursed and advanced to the first defendant on a revolving basis a total capital sum of US$504 707.98 and charged total interest of US$57 893.06 and Bank charges of US$77.38 thereby producing a total payable amount of US$563 373.42. The defendants then defaulted on making due and punctual repayments under the agreement and as at the 15th of August 2016 had paid a total sum of US$7 705.49 leaving a balance of US$555 967.93 which amount is due and payable. This is the total amount the plaintiff is now claiming from the defendants.

In their plea the defendants do not deny having received the funds. Their defense is basically that it was a condition precedent to the delivery of a utilization request to the plaintiff by the first defendant that no default would be continuing or would result from the proposed loan. They said the sub-borrowers of the loans defaulted. According to them this was a disguised joint venture hence the parties ought to share the risk.

Three issues came up for trial as follows-

What is the nature of the agreement between the parties?

Whether 1st, 2nd, 3rd, 4th, 5th, 6th and 7th defendants jointly and severally are indebted to the plaintiff as alleged or at all? And

Who is liable for payment of costs of suit and on what scale?

One Tichaona Kaseke the plaintiff’s Credit Control Officer testified on behalf the plaintiff. On the other hand one Bruce Nhamo Taruvinga the first defendant’s Chief Executive Officer testified on behalf of the defendants. These two witnesses gave very simple, short and straight forward evidence.

Mr Tichaona Kaseke told the court that sometime in August 2015 the first defendant approached the Bank and second to seventh defendants guaranteed the first defendant to access funds as a micro-lending company. The bank approved a revolving loan of US$500 000.00. At the time the interest rate was around 30% but the defendants requested for a lesser amount of interest. As a result a concessionary rate of interest of 15% was agreed between the parties. To compensate the bank for loss due to reduction in the interest rate the parties agreed to share the profits at a ratio of 60:40. After the disbursement of the funds the defendants defaulted and only paid an amount of US$7 405.49 leaving a balance of US$555 967.93 which is due and payable. He denied in his evidence in chief as well as under cross examination that this was a joint venture agreement and maintained that the sharing of profits with the defendants was to compensate the Bank for loss as a result of reduced interest rate. He further denied the suggestion that the interest rate had been set by the Reserve Bank of Zimbabwe at 15% in a monetary policy and alleged that at that time the plaintiff fell under the supervision of the Ministry of Finance. To confirm his evidence that this was a loan agreement as opposed to a joint venture agreement he referred to Annexure “A”, which showed that the plaintiff was the lender and the first defendant was the borrower.

In his evidence Mr Bruce Nhamo Taruvinga told the court that in 2015 they came up with a viable scheme to offer salary based loans to employees of qualifying organizations on salary deduction model. They would advance loans and repayment deductions would be deducted on payroll model at source thereby reducing the risk of defaulting. Since they did not have financial power to service the business they approached the plaintiff to assist them in funding their clients they would have identified. The plaintiff was interested and agreed to work in a joint venture form to roll out loans to participating clients. He further told the court that they indeed entered into a written agreement with the plaintiff which he said was disguised as a loan agreement because the plaintiff was not authorized to enter into a joint venture agreement with a client in which the bank would share profits with someone they would have advanced money to. He conceded that the bank granted them an amount of more than US$500 000.00. They would then sent a utilization report to the bank with a list of approved sub-borrowers so that the bank after further verification would approve and sent the money direct to sub-borrowers. He therefore denied that they were given loan money to capitalize their business. He insisted that the rate of interest of 15 % was as a directive from the Reserve Bank’s monitory policy of July 2015 and denied it was a concessionary rate. According to him they were to share the risks and the Bank being the funder had to approve the sub-borrowers. He maintained and denied that the US$7 405.49 paid by them to the Bank was for repayment but said it was the Bank’s share of profits.

ANALYSIS OF THE EVIDENCE

My analysis of the evidence showed that it was the first defendant that came up with the idea of giving loans to employees of qualifying organizations and not the plaintiff Bank. It was the first defendant which came out with a list of approved sub-borrowers. The first defendant would direct the Bank to fund the first defendant’s clients. The first defendant did not have funds to roll out the scheme. It is the first defendant that approached the Bank for funding. The Bank in turn gave the first defendant a revolving fund of more than US$500 000.00. The first defendant did not provide a cent to what it termed a joint venture. I am not convinced that this was a joint venture. The agreement signed by the parties clearly spells out that the Bank was lending money to the first defendant’s clients. The agreement between the parties clearly shows that this was not a joint venture where both sides were to share the risks. It was the first defendant who proposed the clients to the Bank. Any risk of defaulting by the sub-borrowers was the baby of the first defendant. It was up to the first defendant to pursue defaulters. While the plaintiff entered into a sharing ratio of 60:40 it was mainly to carter for its loss as a result of accepting a concessionary rate of 15% as opposed to a rate above 30%.

I am not persuaded that this was pursuant to the directive issued by the Reserve Bank of Zimbabwe. While the Reserve Bank of Zimbabwe issued a Mid-term monetary policy in July 2015, the plaintiff by then was not under the supervision of the Reserve Bank of Zimbabwe but under the Ministry of Finance. I therefore dismiss the suggestion that the Bank and the first defendant entered into a joint venture agreement. If it was so then the agreement should not have contained clauses that clearly shows that the first defendant was the borrower and the plaintiff was the lender of funds.

The plaintiff managed to prove its case on a balance of probabilities and I will grant the following orders with costs on a higher scale.

IT IS ORDERED THAT

The 1st, 2nd, 3rd, 4th, 5th 6th, and 7th Defendants jointly and severally, the one paying the other to be absolved, pay to the Plaintiff-

US$501 092.34 being capital;

US$54 695.59 being interest;

US$180.00 being Bank Charges;

Interest on the sum of US$501 092.34 at the rate of 23% per annum subject to variations from time to time with effect from the 16th of August 2016 to date of payment; and

Costs of suit on a legal practitioner and client scale and collection commission as provided for under the Law Society of Zimbabwe by-laws (1982).

Sawyer & Mkushi, plaintiff’s legal practitioners

Kawonde Legal Services, defendants’ legal practitioners.