Robert Morley Tindwa v ZB Bank Ltd

### Preamble
Judgment No. SC 3 /19|1
Civil Appeal No. SC 485/17
REPORTABLE (2)
Civil Appeal No. SC 485/17
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REPORTABLE	(2)

ROBERT     MORLEY    TINDWA

v

ZB     BANK     LTD

SUPREME COURT OF ZIMBABWE

GUVAVA JA, BHUNU JA & UCHENA JA

HARARE: NOVEMBER 2, 2017 AND JULY 25, 2019

L Madhuku, for the appellant

O Mutero, for the respondent

BHUNU JA:  	This is an appeal against the entire judgment of the High Court sitting at Harare dated 25 November 2015. The bulk of the facts are by and large common cause.  The undisputed facts are that the appellant at all material times was a shareholder and non-executive director of a company known as Oxford Agrochemicals (Pvt) Ltd (hereinafter referred to as Agro Chemicals).

Agro Chemicals entered into a revolving short-term loan facility with the respondent ZB Bank, a registered commercial bank. The loan facility was for the initial capital sum of US$250 000.00.  The appellant was a shareholder and member of the Board of Directors running the affairs of Agro Chemicals.  It is the Board of Directors that decided to apply for the credit facility. The appellant and another shareholder and director Lawrence Munyiwa were signatories to the loan agreement for and on behalf of the company.

The appellant stood as guarantor, surety and co-principal debtor to the loan facility. He provided additional security in the form of a continuing covering bond. In fulfilment whereof he mortgaged his immovable property being Stand 262 Mount Pleasant Township 9 of Lot 50 Mount Pleasant deed of transfer No: 1593/88 for the total sum of $102 000.00.

On the strength of the guarantee and surety bond, the respondent advanced and disbursed the capital sum of US$223 903.15 to Agro Chemicals. Agro Chemicals defaulted in servicing its debt. After factoring interest and bank charges, the total outstanding balance came up to US$403 157,97.

Consequently, the respondent sued and recovered US$214 525.00 from Agro Chemicals.  Following the recovery of that amount, the appellant sought a declarator in the court a quo discharging him from liability as a surety and co-principal debtor in respect of the short-term loan facility between the respondent and Agro Chemicals. The relief sought was couched in the following terms:

“An order for the cancellation of a first Mortgage Bond number 1794/2009 passed by Plaintiff as mortgagor in favour of the Defendant as mortgagee, the said bond being over the following property owned by Plaintiff:

CERTAIN: piece of land in the District of Salisbury

BEING:  Stand 262 Mount Pleasant Township 9 of Lot 50 Mount Pleasant.

MEASURING: 4144 square metres.

HELDUNDER:  Deed of Transfer No. 1593/88 dated 11 March 1988.

An order that the Sheriff or his appointed officer shall sign all such documents as are necessary to cancel the mortgage bond number 1794/2009.

An order that Plaintiff’s Legal Practitioners, Mundia & Mudhara shall cancel the mortgage number 1794/2009.

Cost of suit.”

In seeking the above relief, the appellant contended that his liability was limited to the secured maximum loan value of US$250 000.00 which had already been repaid by Agro Chemicals. It was his further argument that in any case the respondent had been paid more than the maximum value of the loan facility. The appellant therefore denied any liability as surety and co-principal debtor beyond the maximum capital amount of US$250 00.00 arguing that the respondent was at fault in allowing Agro Chemicals to exceed the secured maximum capital amount.

The appellant further contended that in any event the security bond he provided was only limited to an amount of US$102 000.00.

In its defence and counterclaim, the respondent disputed that the appellant’s liability as surety and co-principal debtor is limited to US$250 000.00 as alleged by the appellant. It submitted that in terms of the guarantee and surety bond signed by the appellant his liability as guarantor, surety and co-principal debtor in respect of Agro Chemicals’ debts to the respondent is infact limitless.  For that reason, the respondent counterclaimed for payment of the total amount of US$403 157.97 being the amount it obtained in a court judgment against Agro Chemicals.

The court a quo was presented with two issues for determination as defined at the pre-trial conference. The two issues for determination were:

Whether the Plaintiff (Appellant) is entitled to release from both the surety bond and guarantee executed in favour of the Defendant (Respondent).

Whether the Plaintiff (Appellant) is indebted to the Defendant (Respondent) as per Defendant’s (Respondent’s) claim in reconvention at all.

The court a quo found that the appellant was liable for Agro Chemicals’ judgment debts to the respondent in terms of his guarantee and surety bond in favour of the respondent. It rejected the appellant’s argument that his liability was limited to a maximum of US$250 000 which had already been paid by Agro Chemicals. It equally rejected the appellant’s plea that the surety bond it issued in favour of the respondent was limited to US$102 000.00.  The long and short of it all, is that the court a quo found that both the guarantee and surety bond issued by the appellant were limitless as to the amount proffered by appellant as cover for Agro Chemicals’ debts to the respondent.

Consequently, the court a quo dismissed the appellant’s claim and upheld the respondent’s counterclaim, whereupon it issued the following order:

“The Plaintiff’s claim is dismissed. The Defendant’s counterclaim succeeds. The covering bond provides for costs on a higher scale.

In the result it is ordered as follows:

The Plaintiff’s claim is dismissed.

The Defendant’s counter claim succeeds.

The Plaintiff is to pay

US$223 903-15 being capital

US$147 153-00 being interest.

US$132 10i-00 being bank charges

Interest on the sum of US$223 903-5 at plaintiff’s overdraft rate with effect from 1 May 2014 to date of payment.

Costs on a legal practitioner and client scale and collection commission.”

Disgruntled by the above judgment the appellant has now approached this Court on appeal on the following six grounds of appeal:

“The learned judge in the court a quo erred in failing to find, as a matter of law, that the surety bond, being for a maximum value of US$ 102 000 was automatically discharged at the point the Respondent was paid back any amount in excess of US$102 000.

The learned judge a quo erred in law in finding that the guarantee executed by the Appellant in favour of the Respondent covered a judgment debt. As a result of that error of law:

the learned judge failed to find the Appellant was discharged from the guarantee at the point the Respondent was paid in excess of the capital amount.

The learned judge in the court a quo erred in failing to find, as a matter of law, that the surety bond, even if not discharged, cannot secure the appellant’s liability arising from the guarantee.

The learned judge in the court a quo grossly misdirected herself in making the finding that the Appellant’s defence relating to material variation had not been pleaded in circumstances where that defence was the bedrock of the Appellant’s declaration.

The learned judge in the court a quo erred in law in failing to find, as a matter of both law and fact, that there had been a prejudicial variation consisting of extending to the principal debtor additional roll over relief without the consent of the Appellant, thereby discharging the later from liability.

Alternatively the learned judge erred in both law and fact in granting the Respondent’s counterclaim when there was absolutely no evidence upon which that counterclaim could be granted.”

The court a quo based its judgment primarily on the interpretation of the two contractual documents admitted by both parties as forming the basis of their contractual relationship and the evidence adduced before it. That is to say, the guarantee and the continuing covering bond of security and witnesses’ evidence. The learned judge in the court a quo hardly needed any evidence to interpret both contractual documents as each document spoke for itself. For that reason, the main issue for determination by this court is whether or not the learned judge correctly interpreted both documents in rendering her judgment. It is trite that resort to extraneous evidence in interpreting contractual documents is excluded by the parole evidence rule.

The terms of the guarantee provided by the appellant for the benefit of the respondent are set out at p 64 of the record of proceedings. It reads in part:

“GUARANTEE

In consideration of ZB BANK LIMITED (hereinafter referred to as “the said Bank” allowing OXFORD AGRO CHEMICALS (PRIVATE) LIMITED (who are hereinafter referred to as “the said debtors” certain banking facilities subject to the terms and conditions hereinafter set out. I the undersigned TINDWA ROBERT MORLEY do hereby guarantee and bind MYSELF, jointly as well as severally, as surety and co-principal debtors for the repayment on demand of all or any such sum or sums of money which the said debtors may now or from time to time hereafter owe or be indebted to the said Bank, its successors or assignees ,…”  provided nevertheless that the total amount to be recovered from ME hereunder shall not exceed in whole, the sum of ALL LIABILITIES dollars  together with such further sum or sums for interest, charges and costs as from time to time have accrued or become due and payable thereon.

It is further agreed and declared, that it shall always be in the discretion of the bank to determine the extent, nature and duration of the facility to be allowed the said debtors”. (My emphasis)...

The above contractual document is couched in plain unambiguous language without any vestiges of absurdity, incongruity or disharmony. The golden rule of interpretation of legal documents prescribes that the language in the document is to be given its literal grammatical ordinary meaning unless doing so would lead to some absurdity, repugnancy or inconsistency with the rest of the contractual document. (See Coopers and Lybrand 1995 (3) SA 761 (A) at 767E to F).

In this case the above caption of the guarantee given its natural grammatical meaning connotes that, the appellant undertook to indemnify Agro Chemicals, as surety and co-principal debtor for the repayment on demand of all or any such sum or sums of money which Agro Chemicals may presently or in future owe to the respondent as debtor. (Underlining

is my own) It is plain that by so doing, the appellant was voluntarily assuming the legal obligation to pay on demand all appellant’s debts to the respondent without limit as to amount or time. In other words, the appellant’s obligation to pay was perpetual with no limit as to time or amount. The learned judge in the court a quo was therefore correct when she observed at p 4 of her judgment that:

“In the guarantee signed by the plaintiff (Appellant), he undertakes to pay all amounts outstanding on the account together with interest charges. It is an all liabilities guarantee.”

Turning to the surety mortgage bond, it is common cause that the total amount payable is US$102 000.00 comprising US$8 000.00 and US$17 000 being the principle amount, costs, insurance and any other charges and disbursements. The appellant however, stood as surety for the respondent’s credit facility in the initial amount of US$102 000.00 but bound himself further in the same document for all Agro Chemicals’ debts to the respondent without limit.

The relevant part of the preamble of the surety bond as read with Clauses 5 (i) provide as follows:

“And whereas the Mortgagor has guaranteed as surety and co-principal debtor the payment by the Principal Debtor of monies advanced to it and interest thereon in an amount not exceeding the value of the bond.

And whereas the Mortgagor as a continuing covering security for the repayment of monies lent and advanced by the Mortgagee to the Principal Debtor, has agreed to hypothecate as a first Mortgage Bond the property described herein, subject to the terms and conditions set out hereunder and the facilities Agreement between the mortgagor and the Principal Debtor.

…

5 (i) 	That this bond shall be a continuing covering security to the amount of the capital and the additional sum herein before mentioned for costs and charges for

all and any sum or sums of money which shall now or in the future may be owing to or claimable by the Mortgagee from whatever cause arising for money

lent and advances and which may hereafter lent and advanced by the Mortgagee and for future debts generally including any payments made by the Mortgagee under the provisions of this bond. The Mortgagee may advance further sums or may readvance to his Principal under security hereof such sums or portions thereof as may have been previously repaid, provided such advances or readvances shall not exceed the amount of the principal sum and the additional sum

(j)	This bond is further subject to the special condition that upon payment and discharge of all obligations under the Principal Debt this bond shall until cancelled remain as a continuing covering security for any subsequent advances under the Principal Debt and which any amounts are owing in the future under the Principal Debt then this bond shall be and remain in full force and effect;”. (My emphasis)

It is plain that by signing the above bond the appellant undertook and bound himself to provide a continuing covering bond not only for the principal debt of US$102 000.00, but any other monies lent to Agro Chemicals by the respondent now and in the future for whatever cause.

Clause 5 (j) of the bond continues to bind the appellant for Agro Chemicals’ additional indebtedness to the respondent notwithstanding payment of the principal debt of US$102 000.00. The appellant’s endeavour for release from liability on the basis that the principal debt had been paid while Agro Chemicals was still indebted to the respondent was therefore ill advised and misplaced.

The appellant’s argument that his indebtedness to the respondent is limited to US$250 000.00 which has since been paid is inconsistent with the language and import of both the guarantee and the covering bond of security he signed in favour of the respondent. Had he intended to limit his liability to that amount, he should have ensured that the language of those

documents, said so in clear and unambiguous terms. This he did not do. On the contrary he freely and voluntarily signed both documents which render him liable for Agro Chemicals’ debts to the respondent without limit.

The courts cannot extricate him from a liability voluntarily assumed.

The adage that the courts assist the vigilant and not the sluggard is apt. In the case of Magodora v Care International Zimbabwe SC 24/14 this Court had occasion to remark that:

“It is not open to the courts to rewrite a contract entered into between the parties or to excuse any of them from the consequences of the contract that they have freely and voluntarily accepted even if they are shown to be onerous or oppressive. This is so as a matter of public policy. Nor is it generally permissible to read into the contract some implied or tacit term that is in direct conflict with its express terms.”

The above remarks resonate well with the time honoured caveat subscriptor rule which cautions contracting parties to exercise extreme caution before putting pen to paper as signatories to contractual documents. Thus a contracting party who blindly signs a document without subjecting it to scrutiny and satisfying himself that it accords with his intention and

requirements does so at his own peril, as he is bound by his signature regardless of whether or not he has read and understood its contents.

The rationale for the caveat subscriptor rule was amply captured by RH Christie in his book Business Law in Zimbabwe, 1998, Juta & Co p63 – 64, where the learned author says:

“The business world has come to rely on the principle that a signature on a written contract binds the signatory to the terms of the contract and if this principle were not upheld any business enterprise would become hazardous in the extreme. The general rule, sometimes known as the caveat subscriptor rule is therefore that a party to a contract is bound by his signature whether or not he has read and understood the contract…”

The caveat subscriptor rule is however not cast in stone. It may be vitiated by misrepresentation, fraud, illegality or undue influence. See Georges v Fairmead (Pty) Ltd (1958) (2) SA 468 at p 472. The appellant’s complaint under the fourth ground of appeal is that the leaned judge in the court a quo grossly erred in not addressing his defence of unilateral material variation of contract on the wrong premise that it had not been pleaded.  His complaint is that the respondent unilaterally granted Agro Chemicals time to pay without recourse to him.

While it is correct that the learned judge erred in remarking that the defence of unilateral material variation had not been pleaded, she nevertheless went on to address the defence extensively at p 7-8 of her judgment. This is what she had to say:

“Evidence is clear that a request for time to pay was made by the plaintiff (Appellant) and Mr Onamusi when the debt was due. Mrs Kumirai was clear in her evidence that time to pay was granted at the specific request of the plaintiff and that the plaintiff participated in the request for time to pay which was granted when payment was already due. The extension of the time to pay does not constitute a variation of the contract….

The plaintiff was aware of the default as he was involved in the negotiation of time to pay. The defence witness was emphatic that the plaintiff came to her office to negotiate the time to pay and participated in meetings that addressed the debt rollover which resulted in the time to pay…

He benefitted from the time to pay as the property he gave as security for the debt was not sold at that stage. There is no evidence to suggest that there was a variation of the company’s credit facility entitling release of the plaintiff from the surety…. This point fails.”

The above quotation from the judgment of the court a quo puts to rest the appellant’s complaint that the learned judge did not address his defence of unilateral material variation of his contract. It is clear that the defence was considered and rejected on sound and cogent factual evidence which stands unchallenged before this Court.

For a cause of action based on unilateral material variation of contract to succeed, it is incumbent on the aggrieved party to prove on a balance of probabilities that:

The variation was done without his knowledge or consent.

The variation was to his loss and prejudice.

The appellant dismally failed to discharge the onus as he failed to challenge the damning factual findings made by the learned trial judge in the court a quo to the effect that the variation was done with his full knowledge and active participation for his benefit.

Considering that the appellant admits having concluded both contracts, he is hit by the revered doctrine of sanctity of contract. In Madoo (Pty) Ltd v Wallace 1979 (2) SA 957 T, it was held that:

“Our system of law pays great respect to the sanctity of contract. The courts would rather uphold than reject them.”

For that reason, where a party admits having concluded a contract the law casts the onus on the party wishing to resile from the contract to justify on a balance of probabilities why he must not be bound by his own contract. In Drewtons (Pty) Ltd v Carlie 1981 SA 305, it was held that:

“He who has seriously concluded an agreement from the consequences of which he wishes to escape should satisfy the court that there is a good reason why the normal consequences of a contract which is neither illegal nor immoral should not follow.”

In both the court a quo and this Court the appellant failed to give a cogent and satisfactory reason why he must not be bound by the natural consequences of his contracts. For that reason, there is no merit in this appeal.

It is accordingly ordered that the appeal be and is hereby dismissed with costs in its entirety.

GUVAVA JA:		I agree

UCHENA JA:		I agree

Messrs Mundia & Mudhara, the respondent’s legal practitioners.

Sawyer & Mkushi, the respondent’s legal practitioners.