MBCA Bank Limited v African Farmer (Private) Limited & 2 Ors

### Preamble
1
HH 676-18
HC 1468/16
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MBCA BANK LIMITED

versus

AFRICAN FARMER (PRIVATE) LIMITED

and

LEON NOTIER

and

TAKESURE MAGOKO

HIGH COURT OF ZIMBABWE

KWENDA J

HARARE, 24, 25 September 2018 & 17 October 2018

Civil trial

G Gapu, for the plaintiff

1st and 2nd defendants in default

3rd defendant in person

KWENDA J: Even in circumstances where client’s case presents itself to counsel preparing the claim as beyond question, there is always need to pay attention to detail, for failure to do so may result in errors of omission or commission  fatal to client’s case.

There is a limit to what a court can do even if it were to be robust. I doubt that the Court has the leeway to grant a plaintiff leave to amend pleadings after both parties to the dispute have closed their cases without an order for the reopening of the trial. Where the evidence led by the plaintiff is inconsistent with the claim, the claim must fail.

In this case the plaintiff is a bank. The claim as initially stated in the summons and declaration is that plaintiff granted an overdraft fatality of $200 000 to the first defendant at the latter’s request and instance subject to terms and conditions. When the facility expired on 31 October 2015 first defendant owed the plaintiff a sum of $120 555-00. It was alleged, further, that the second and third defendants guaranteed repayment of the debt as sureties and co-principal debtors. When the debt remained unpaid, the plaintiff sued the defendants jointly and severally for the payment of the debt and costs on the higher scale. In this judgment the plaintiff will be referred to as ‘the bank’, 1st defendant as ‘African Farmer (Pvt) Ltd’ or African Farmer and second defendant as ‘Leon Notier’.

African Farmer (Pvt) Ltd, from its citation, appears to be a registered company. However the plaintiff’s declaration does not provide details of its incorporation and country of registration. That situation would not have concerned this court because African Farmer failed to defend the claim and default judgment was entered against it on 12 July 2016. However there was a twist to the case at the end of the trial which renders the issue of the persona of the first defendant very significant. That will be discussed later.

Leon Notier, too, failed to defend the plaintiff’s claim and default judgment was entered against him (presumably, as there are no further particulars of the second defendant in the declaration).

Execution against African Farmer yielded a nulla bona return. Leon Notier’s whereabouts are not known. He is believed to have skipped the country. Accordingly this trial involved the third defendant only.

The third defendant filed a notice of opposition and opposing affidavit as a self-actor. The notice of opposition was treated by the plaintiff and allowed by the Honourable judge, who presided at the pre-trial conference, to stand as an appearance to defend.

The plaintiff’s declaration is silent on how third defendant provided surety as co-principal debtor for the repayment of the sums advanced to African Farmer. Third defendant requested further particulars and of importance is her request to be furnished with a “loan application that was signed by both parties”. Clearly she was requesting proof of the allegation that she had any liability arising from the loan agreement entered into between the plaintiff and African Farmer.

The plaintiff’s legal practitioner furnished the third defendant with a facility letter addressed to “African Farmer (Pvt) Ltd”. The further particulars explained that the loan agreement was signed by the Leon Notier. No explanation was given concerning how the third defendant’s liability arose from a document signed by Leon Notier. The facility was subject to security in various forms, one of which was a validly registered first surety mortgage bond for $105 000 over on a residential property known as stand 6073 Ruwa Township belonging to the third defendant.( Clause 5.1.) The facility was also subject to an “unlimited … guarantee” to be signed by the third defendant. The facility letter specifically provided that the unlimited guarantee to be signed by the third defendant was “REQUIRED”. (Clause 5.6)  In other words it was contemplated that African Farmer would only be able to draw on the facility on two conditions, firstly, after third defendant had signed a guarantee as surety and secondly, upon valid registration of a surety mortgage bond.

It is common cause that the third defendant did not sign any document at the bank. At the trial the plaintiff relied on a document titled “Special Power of Attorney pertaining to consulting and management Agreement” purportedly drawn by the third defendant appointing African Farmer (a company) as her agent for managing and transacting her business in Zimbabwe at Plot 3 Munene Extension-Farm, Banket. That document does not bear third defendant’s signature.

The third defendant pleaded as follows:

“(i)	She was not a party to the loan agreement entered into between plaintiff and African farmer (Pvt) Ltd.

(ii)	She was not a surety and co-principal to the loan and put plaintiff to the proof thereof.

(iii)	She neither signed the loan agreement between plaintiff and African Farmer (Pvt) Ltd nor was she a party to it.

(iv)	She did not give anyone power of attorney to sign the loan agreement.

(v)	She never pledged her property on 6023 Kapfunde Street as security for the repayment of the loan.

(vi)	She never gave Leon Notier or any other person power of attorney to use her house as collateral for the said loan.

(vii)	She only got to know of the loan when she received a final demand from plaintiff. That is when plaintiff disclosed that her property had been used as collateral.

(viii)	She reported the fraudulent use of her title deeds to the Police under Harare Central CR 132/02/16.

(ix)       Leon Notier  had approached her offering to sponsor her farming project at Munene farm under Ricky Christine Investments. During discussions Leon Notier indicated that he could facilitate a loan of $60 000-00 be availed by MBCA bank and deposited into her company Ricky Christine Investments MBCA account.

(x)	Leon Notier took her documents without her realising it and disappeared. Presumably that is when he used them during the application for the loan facility granted to the 1st defendant

(xi)	The plaintiff never sent anyone to her for the purpose valuating her property.

As stated before, the plaintiff’s declaration does not disclose how the third defendant provided surety for the repayment of the funds advanced by African farmer (Pvt) Ltd by the plaintiff. It is not surprising the judge who presided at pre-trial conference raised that issue whereupon the plaintiff amended its summons and declaration to add the following:

“(a)	On the 16th December 2014, a surety mortgage bond was registered in favour of the plaintiff over 3rd defendant’s immovable property being stand 6073 Ruwa Township of dispute estate measuring 840m2 and held under Deed of Transfer No. 7120/2001.

(b)	The surety mortgage bond was registered as security for a loan advanced to first defendant in the sum of $102 845-75 and interest.

(c)	In terms of surety mortgage bond, 3rd defendant is indebted to plaintiff in the sum of $105 000-00.

(d)	It was a term of the mortgage bond that interest due on the capital sum would be charged …..

(e)	It was a term of the agreement that the sum due would be paid on demand.

(f)	The 3rd defendant failed to pay the debt on demand.

The third defendant pleaded to the amendment. She averred that she had not passed the surety mortgage bond. She had nothing to do with the arrangements or agreements entered into by and between plaintiff and the first and second defendants. She puts the plaintiff to the proof of its allegations. She averred that she never ‘registered’ her property as security for a debt and that was done fraudulently by ‘other parties.’ She averred that she does not owe the plaintiff any amount.

At the commencement of the trial the plaintiff insisted that the onus was on the third defendant to prove that she did not provide her property as security for the repayment of the loan advanced to African Farmer (Pvt) Ltd. The plaintiff’s counsel submitted that all the plaintiff was required to prove was the surety mortgage bond. Once the court is presented with a bond issued by the Registrar of Deeds, the presumption of regularity arises and onus shifts to the third defendant to prove her defence that the registration of the bond was a fraud. He undertook to furnish the court with case authority for the stance with the closing submissions. I read the cases ( FBC Bank Ltd v Aman HH/459/17 and Niemand v van Heerden 1998 (3) ALL SA 616 NC.) As will be discussed in more detail later on in this judgment, plaintiff’s counsel misunderstood the principle laid down in the cases. A mortgage bond can only be valid if it is backed by a guarantee signed by the owner of the property at the bank clearly committing to pay the debt if the principal debtor fails. In other words the offer does not become effective and loan funds are not released to the borrower (in this case, first defendant) until the surety attends at the bank to sign an undertaking that he or she binds himself or herself to pay back the loan if the borrower fails to do so and that the surety offers his or her immovable property as security. The guarantee is signed at the bank and constitutes the contract between the owner of the property offered as security and the bank. Such an agreement precedes the attendance at the office of the conveyancer by the surety to sign a power of attorney authorising the registration of the bond. Thus guarantee is a condition precedent to the registration of the surety mortgage bond. See L Mhishi : A Guide to The Law and Practice of Conveyancing in Zimbabwe 2004 at p 41 para 5.3.5

“….

…..

The first requirement of a bond is that there must be a legal or valid debt or an obligation.

Here are different types of causa for mortgage bonds. We deal with some of them here.

Loan of money……..

Money due and owing or to become due and owing out of an obligation agreed on

…..

…….”

What is clear to me is that the mortgager must necessarily enter into an agreement/contract with the creditor and that becomes the causa for the registration of the bond. See also Caney’s Law of Suretyship JUTA 5th edition

AT PAGE 61

“Suretyship is a consensual contract; it is a contact between the creditor and the surety and, 	subject to the requirements in regard to formalities, can be made in any manner in which a 	contract is made.”

AND AT PAGE 63

“In making the contract there must be a deliberate intention to enter into a binding contract of 	suretyship. “

Clearly a property owner cannot wake up to find that a surety bond was registered on his or her property without a causa and the onus is thrust on him or her to prove that the bond is invalid. If there is no causa, the bond cannot have validity.

THE EVIDENCE

The plaintiff called only one witness, one Mr Abel Zvobgo. He is a senior business manager within the plaintiff’s corporate banking division. His duties involve processing applications for lending. He said the first defendant (African Farmer Pvt Ltd) was granted an overdraft facility in the sum of $200 000-00.

The sum of $105 000-00 was secured by the third defendant’s property. The other amount of $95 000-00 was supposed to be secured by another person’s immovable property but the person, one Michael Pheneas, as it turned out, was deceased. The witness never dealt with the third defendant. She did not come to the bank. All paper work was done by one Leon Notier (2nd defendant).

The witness produced the overdraft facility letter as exhibit one. Its provisions have already been discussed above. Suffice it to say, plaintiff offered the overdraft facility to African Farmer Pvt Ltd (first defendant) which drew money on the facility and at the time of issuing summons, the sum of $120 555-00 owed.

The witness produced, as exh 2, a surety mortgage bond passed on the third defendant’s immovable property on 16 December 2014. The bond identified the principal debtor as African Farmer Pvt Ltd. An endorsement dated the 11th September 2015 changed the name of the principal debtor to African Farmer Exports (Pvt) Ltd. Plaintiff did not lead evidence to explain the endorsement. Plaintiff’s pleadings remained un-amended up to the end of the trial. Accordingly, the company known as African Farmer Exports (Pvt) Ltd is not a party to this case.

Exhibit 3 was a copy of the third defendant’s title deed. At the time of production, the third defendant agreed that it is her title deed but pointed out that she never took it to the bank or the conveyancer. She said she never authorised anyone to submit the Deed of Transfer to the bank or the conveyancer.

Exhibit 4 was a document describing itself as a Special Power of Attorney Pertaining to Consulting and Management Agreement. It purports to be a document executed by the third defendant appointing first defendant (African Farmer Pvt Ltd) as her lawful agent to manage and transact her business in Zimbabwe pertaining to Plot 3 Munene Extension, Farm Banket with powers ordinarily given in a general power of attorney (like general power to sue, manage affair, manage properties, collect money act in disputes, settle, compromise, carry out agreements and generally act on behalf of the principal). The signature on the document (Exhibit 4) was not identified and does not in any way purport to be or resemble that of the third defendant.  A company usually acts through the agency of natural persons.  How a natural person can appoint a company to sign documents and act as his agent boggles the mind. Exhibit 4 was presented to the bank by Leon Notier and plaintiff did not lead any evidence linking it with third defendant.

Exhibit 5 was a letter of appointment purporting to appoint African Farmer Exports (Pvt) Limited to manage third defendant’s affairs at Plot 3 Munene Extension and to negotiate and sign contracts on her behalf, submitted to the bank by Leon Notier. Once again plaintiff did not prove the connection of the exhibit with third defendant because it is common cause that she never attended at the bank in connection with the application of the overdraft facility.

Exhibit 6 was a copy of letter in terms of which third defendant appeared to authorise the use of her title deed as “security for raising of funding for farming activities” It bears a  signature which resembles that of the third defendant.  That is as far as the court can go because the third defendant disowned the signature. The plaintiff did not lead any evidence to prove who created that document.

Exhibit 7 was a special power of attorney to pass mortgage bond in terms of which third defendant appears to appoint either Francis Chirimuuta  or Oscar Tafadzwa Gasva, as her alternate attorneys or agents to appear before the Registrar of Deeds to pass and execute a surety mortgage Bond for $105 000 against her immovable property aforementioned. At the time of production of exhibit, third defendant pointed out that she never appeared before the mentioned lawyers to sign a power of attorney.  The plaintiff did not lead evidence to link the power of attorney with the third defendant.  The signature on the Power of Attorney does not resemble that of the third defendant. (Plaintiff’s counsel caused her to sign on a piece of paper under cross examination). Third defendant’s assertion that she never appeared before the lawyers is borne out by the plaintiff’s bundle of documents. At page 47 of the bundle is a letter addressed to African Farmer Private Limited (for the attention of the third defendant):

“We act for and on behalf of MBCA Bank Limited please note our interests. We were given instructions to register a 1st surety Mortgage on their behalf and in that regard, please find attached 2 x draft copies of power of attorney for your signature thereof. We now await return of the duly signed copies to enable us to proceed with bond registration ….”

The letter was addressed to

“African Farmer (Pvt) Ltd

Box HG 267

Highlands

Harare”

The plaintiff did not lead further evidence to prove that the letter and the copies of the Power of Attorney to be signed reached third defendant in view of the fact that the correspondence and the unsigned power of attorney were directed to African Farmer (Pvt) Ltd. There is therefore a gap in the plaintiff’s evidence. The correspondence confirms third defendant’s assertion that she never attended at the conveyancer’s office to sign a power of attorney. I must observe that the procedure adopted by the conveyancer is strange. A conveyancer must require the person who is alienating or burdening his/her property to appear before him/her and satisfy himself or herself of the identity of that person. If the owner cannot appear then a properly executed power of attorney is necessary. There is no such credible power of attorney. The conveyancer had no basis therefore to believe that the person who presented the original of third defendant’s title deed and identification particulars had authority to do so or that the power of attorney had been signed by third defendant.

Other exhibits were produced but nothing much turns on them. Counsel explained that some documents were being produced to demonstrate that the third defendant’s signature is not constant. I do not think that absolves the plaintiff from proving that documents attributed to the third defendant were indeed authorized and signed by her. Plaintiff’s witness said Leon Notier presented all the documents to the bank. I find that there is no evidence adduced by the plaintiff to prove that he (Leon Notier) had authority to deal with the bank on behalf of third defendant. The witness stated that Leon Notier gave out to the witness at the bank that he had entered into a partnership with the third defendant. There is no evidence of the partnership. Plaintiff attempted to produce a form of guarantee which is a standard form signed by a surety as guarantor. The operative part reads as follows:

“in consideration of MBCA Ltd allowing certain banking facilities to African Farmer (Pvt) 	Ltd of Harare (hereinafter referred to as the principal), I the undersigned TAKESURE 	MAGOKO (hereinafter called “the guarantor) do hereby guarantee as an independent 	undertaking and jointly and severally interpose and bind myself as surety and co-principal 	debtor ….”

The guarantee form is a condition precedent to the registration of the mortgage bond. On the face of it, it is a standard form constituting the contract between the bank and a third party who agrees to bind himself or herself as surety and co-principal debtor to repay a loan advanced by the bank to another person (an identified principal debtor). Astonishingly the Guarantee form was signed, not by third defendant but by Leon Notier. The court queried the regularity of the form whereupon upon plaintiff withdrew it.  The net effect of the withdrawal of the exhibit is that there is no suretyship contract between bank and third defendant. Actually, it was common cause that Leon Notier did not engage in any farming activities at third defendant’s farm. Plaintiff’s witness conceded that second defendant did some farming at one Mr Nyadonda’s farm. Third defendant submitted that she could not possibly agree to finance Leon Notier’s farming activities at another person’s farm.

Third defendant cross-examined plaintiff’s witness. She put it to the witness that she did not sign any documents at the bank or at the bank’s lawyers whereupon the witness conceded that he was unable to say it was third defendant who signed since all papers were presented to the bank by Leon Notier and appeared to be genuine. She queried why the bank dealt with Leon Notier yet the documents produced by it did not nominate him as an agent. Third defendant maintained that she could not possibly give her documents to Leon Notier so that he could farm at Mr Nyabonda’s farm. The witness was unable to contradict the third defendant meaningfully.

Plaintiff closed its case after calling one witness.

The third defendant gave evidence. She was steadfast that she was never a party to the loan agreement. She maintained that the mortgage bond was registered without her involvement and consent. She repeated her averments contained in her plea as her evidence under oath. She said she only got to know of the loan when she received a letter of demand from the bank. She said she had been waiting for Leon Notier to bring back her documents after she discovered that he had surreptitiously taken her documents. Leon Notier had proposed a cooperation agreement with her to farm under a company she had registered known as Ricky Christine (Pvt) Ltd. Documents relating to the company and the banks business application forms signed by third defendant, Exzevia Magoko and Leon Notier were produced by the plaintiff. However that account was not operated. Third defendant said she did not finalise the arrangement with Leon Notier because it was heavily tilted in his favour. She asked him to go and reconsider the terms. That is when he stole her documents. As he left, he picked her envelope containing title deeds and other personal documents. When she realised it and followed up, he undertook to return the documents but never did. It is common cause that second defendant fled the country.

She closed her case.

During oral closing submissions I asked plaintiff’s counsel what the implication of the endorsement on the surety mortgage bond was since it introduced a completely new legal person who was not contemplated in the proceedings, that is African Farmer Experts (Pvt) Ltd. The plaintiff’s case was that third defendant had guaranteed repayment of a loan advanced to African Farmer (Pvt) Ltd and not African Farmer Experts (Pvt) Ltd.

Plaintiff’s counsel argued that the court was not entitled to raise that issue mero motu since the third defendant had not raised it. I was not convinced.

The plaintiff’s case in that all it needs to prove is a registered mortgage bond which then speaks for itself. He cited FBC Bank Ltd v Aman HH/459/17 and Niemand v van Heerden 1998 (3) ALL SA 616 NC.

As stated above, I read the cases and I am satisfied counsel misunderstood the cases.

I will quote from p 3 of the cyclostyled judgment of FBC Bank Ltd v Amani HH 458/17.

“Once the plaintiff established by production of documentation proving that--- defendant had provided the two forms of security i.e. personal guarantee and mortgage bond --- a prima facie case is --- established---”

That is clearly not the situation in this case. It is common cause that third defendant did not set foot at the bank to sign documents in connection with the facility. It is common cause that she did not sign the guarantee form. It was signed, by Leon Notier. There was therefore no need for her to call evidence to prove what common cause is. It was up to the plaintiff to prove that Leon Notier had the authority of the third defendant to commit or use her property or title deed as collateral. Plaintiff failed to lead such evidence. Third defendant never appeared before the lawyer who registered the bond.

Concerning the endorsement plaintiff’s counsel submitted written submissions. He submitted that the endorsement was to correct a “misdescription of the principal debtor.” He submitted as evidence; an affidavit submitted by the plaintiff to the Registrar.

It is unprocedural for a party to submit fresh evidence with closing submissions. See Civil Practice of the High Court of South Africa, Herbstein and van Winsen 5 ED AT P 906. The plaintiff had the option to apply to reopen its case. The explanation given by the plaintiff after the trial has concluded is inadmissible. In any event it would not have helped plaintiff’s case in any way. Section 6 (b) of Deeds Registries Act [Chapter 20:05] is unambiguous to the extent that it provides that any endorsement to correct on an error on a registered bond can only be valid if all interested persons have consented thereto in writing. Third defendant did not give any consent to the endorsement.

Counsel also submitted that the change is insignificant and cited Masuku v Delta Beverages 2012 (2) ZLR 112 where an omission of the word ‘limited’ was held inconsequential.

The submission is without merit. The earlier submission is that the principal debtor’s name was ‘misdescribed’ necessitating an endorsement. Correction would not have been necessary if it is of no importance. In any event I do not accept that African Farmer (Pvt) Ltd is the same as African Farmer Exports (Pvt) Ltd. Plaintiff therefore failed to prove that r third defendant guaranteed repayment of a loan and if so the identity of the principal debtor.

Alternatively, plaintiff’s counsel applied to amend plaintiff’s summons, in the alternative, by correcting the’ misdescription’ of first defendant’s name to Africa Farmers Exports (Pvt) Ltd.

The application is astonishing. Order 20 of the rules of this court deals with amendment of pleadings. In the absence of consent by the other party a party seeking to amend pleadings is required to apply for leave of the Court. The other party has a right to respond to the application. Amending a pleading after a party has closed its case is can only be done after leave has been granted to reopen a case. The prejudice is obvious after defendant has closed her case.

In all the circumstances of this case I find that the plaintiff failed to prove its claim against the third defendant at all. The standard required is a balance of probabilities. In this case the plaintiff took too much comfort in the registered mortgage bond. However the principle is that it must speak for itself. It must speak to the plaintiff’s case. In other words there must be no inconsistence between what appears on the face of the mortgage bond and plaintiff’s case. It must also be backed by a guarantee signed by the surety.

In the result plaintiff’s claim is dismissed with costs.

Scanlen and Holderness, plaintiff’s legal practitioners