VENETIAN BLINDS SPECIALISTS LIMITED

versus

APEX HOLDINGS (PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE

PATEL J

HARARE, 9 March 2010 and 24 June 2010

Civil Trial

J.R. Tsivama, for the plaintiff

A. Chinake, for the defendant

            PATEL J:        The plaintiff herein seeks an order recognising as binding and enforceable as against the defendant a judgment granted by the Supreme Court of Appeal of Malawi on 11September 2007. Pursuant to that judgment, the plaintiff claims from the defendant the sums of US$848,662.50 (with interest) and MK241,957.00 as well as costs of suit on a legal practitioner and client scale. The defendant resists the claim on the ground that it has discharged its obligations under the judgment. In the alternative, the defendant avers that the Malawi Supreme Court misdirected itself to the extent that it would be contrary to public policy to recognise and enforce its judgment in this country.

            The issues for determination in casu, as reconsidered and confirmed at the commencement of trial, are as follows:

1. Whether the recognition of the judgment of the Malawi Supreme Court would be contrary to public policy under the law of Zimbabwe.
2. Whether that judgment has been wholly satisfied under the law of Zimbabwe.
3. What order of costs should be made by this Court in the circumstances of this case?

Evidence for the Plaintiff

            Mario de Angelis is the Managing Director of the plaintiff company and his evidence was as follows.

On 11 February 2003, the plaintiff succeeded in a counterclaim for breach of contract against the defendant in the High Court of Malawi. However, the plaintiff was aggrieved by the fact that only general damages were awarded by the High Court and immediately lodged an appeal against that determination. On appeal to the Supreme Court of Appeal, the plaintiff was awarded general as well as special damages, equating to the amounts claimed on the Summons in casu. The award of US$848,662.50 was by way of special damages for loss of profits from 1994 to 1999, stemming from the drastic reduction of the plaintiff’s share of the market occasioned by the defendant’s breach of contract. According to the plaintiff’s attorneys, the rate of 5% interest claimed on that amount arises by operation of law, viz. the Malawi Courts Act [Exh 1].  The sum of MK241,957.00 represents damages for loss of profit on the specific contract between the parties. This sum incorporates the interest component specifically awarded but doubled up to the maximum claimable under the in duplum rule.

The decision of the Supreme Court of Malawi was handed down on 11 September 2007. There is no appeal against that decision and it is a final judgment which the defendant has not satisfied. The defendant paid a sum of ZW$50 billion through this Court on 13 April 2008. The plaintiff rejected this payment as being valueless. The contract between the parties was initially invoiced in UAPTAs but after that currency lapsed the parties agreed to deal in United States Dollars. The Zimbabwe Dollar was never mentioned as part of the agreement and the plaintiff had no need to use that currency as it is a wholly Malawian company with no business interests in Zimbabwe.

            Under cross-examination, the witness conceded that on 16 February 2004 the defendant transferred a sum of MK4,817,862.25 to its own attorneys in Malawi [Exh 2]. The bulk of this money, though he could not state exactly how much, was received by the plaintiff and retained by it thereafter. He also accepted the contents of a letter from the defendant’s bank dated 27 October 2003 [Exh 3] confirming exchange control approval to remit that amount to satisfy the 2003 judgment of the Malawi High Court. The witness could not confirm with any certainty whether the Supreme Court of Malawi had taken that payment into account in calculating its award of special and general damages. He further conceded that the plaintiff’s claim for special damages before the Malawian courts was based on a profit mark-up of 30% on gross annual turnover. It did not take into account the plaintiff’s net profit, after deduction of taxes and other contingencies.

Evidence for the Defendant

            Icy Chasara is the Chief Executive Officer of William, Smith & Gourock (WS&G), which at the relevant time was the trading division of the defendant. He testified as follows.

WS&G was contracted to sell 34000 metres (30 tonnes) of PVC to the plaintiff. This material was found to be defective by the Malawi courts and the principal question before those courts was that of damages. The defendant accepted the Malawi High Court judgment ordering the payment of MK1.5 million as general damages together with interest on that amount and costs. Applying the exchange rate adopted by the High Court, the award of MK1.5 million converted to approximately US$330,000.

Consequently, a payment of MK4.8 million (equating to circa US$1,050,000), inclusive of interest and costs, was made through the defendant’s attorneys on 16February 2004. The plaintiff accepted this payment but still proceeded with its appeal against the High Court award of damages as being inadequate. The defendant only became aware of the appeal in 2006, after it had already effected payment, when its Malawi attorneys forwarded a copy of the notice of hearing before the Supreme Court [Exh 5]. The plaintiff did not refund the payment of MK4.8 million, despite the appeal, and the PVC supplied was never returned to the defendant.

The Supreme Court allowed the appeal and awarded general as well as special damages. Its award of special damages was based on a gross profit margin of 30% and was not related to net profit. Moreover, in making its award, the Supreme Court did not take into account the earlier payment of MK4.8 million made in satisfaction of the High Court award.

Due to the very lengthy and difficult process of approval involved in sourcing foreign currency at that time, the defendant did not attempt to access any convertible currency through the Reserve Bank in order to satisfy the Supreme Court judgment. Instead, on 16 April 2008, the defendant wrote to its legal practitioners enclosing a bank cheque for ZW$50.9 billion, representing the capital sum due plus in duplum interest. This amount was calculated by applying the rates of exchange confirmed by the ZB Bank. On 30 April 2008, the payment was transmitted to the Registrar of the High Court of Zimbabwe. It was intended as payment into court, in satisfaction of the Malawi Supreme Court judgment, and was duly receipted as such. [See Exhibits 4A-4E]. In effect, the defendant paid the plaintiff twice, once on the High Court award and for the second time on the Supreme Court award.

Under cross-examination, the witness was unable to indicate what the plaintiff could have done with the payment of ZW$50.9 billion. He assumed that the plaintiff might have been able to apply to the Reserve Bank for approval to convert and remit that sum to Malawi. In any event, his testimony as to the plaintiff having been paid and having retained MK4.8 million, and the relative value of that sum in United States Dollars, was not challenged in cross-examination.

Whether Malawi Judgment Contrary to Public Policy

            The defendant avers that it would be contrary to public policy for the Malawi Supreme Court judgment to be recognised in Zimbabwe because it is fundamentally erroneous in several respects. In essence, it is averred that the court’s award of special damages was based on the plaintiff’s gross profit margin rather than its net profit, contrary to established rules on the calculation of damages. It is therefore arbitrary, erroneous and inimical to the notion of justice and consequently contrary to public policy. In this regard, reference is made to Tobacco Finance (Pvt) Ltd v Zimnat Insurance Company Ltd 1982 (3) SA 55 (ZH) at 61, where a policy based enquiry into the concept of negligence was adopted and articulated as one that:

“is really governed by broader considerations such as the ordinary notion of justice, the interests of the claimant or the defendant as balanced against the community as a whole, and the economic or even social effects of the claim, all of which compendiously may be said to broadly reflect the policy of law.”

Reliance is also placed on the principles to be applied in determining damages for breach of contract as enunciated inZimbabwe Banking Corporation Ltd v Pyramid Motor Corporation (Pvt) Ltd 1985 (4) SA 553 (ZSC) at 564, where GUBBAY JA observed as follows:

“Each case must be assessed pragmatically on its own facts and merits, with primary weight being laid upon the policy of the law. The court must ask itself whether, paying due and proper regard to the notion of justice and the interests of litigants balanced against the community as a whole, it is socially desirable to impose liability in the particular circumstances.”

            The plaintiff’s case is that the law of Malawi is essentially the same as English law and that the Malawi Supreme Court properly relied upon the leading case of Hadley v Baxendale (1854) 9 Ex 341 [156 ER 145] in assessing special damages for consequential loss that was within the contemplation of the parties. This approach in distinguishing general or intrinsic damages from special or extrinsic damages recoverable in special circumstances also forms an established part of our law. See Christie: Business Law in Zimbabwe  at p. 128.

            As regards the non-recognition of foreign judgments on the ground of public policy, the uniform approach in common law jurisdictions is to be extremely chary about delving into questions of legal or factual correctness. It is generally inappropriate to review a judgment of a foreign court of competent jurisdiction and to deny or withhold recognition, even if there is shown to be a clear misapprehension by that court of the law or facts founding its judgment. In the United States, for instance, it was stated as follows in the case of Hilton v Guyot 159 US 113 (1895):

“Where there has been an opportunity for a full and fair trial abroad before a court of competent jurisdiction conducting the trial upon regular proceedings ………… and there is nothing to show either prejudice in the court or in the system of law under which it was sitting, or fraud in procuring the judgment, or any other special reason why the comity of this nation should not allow it full effect, the merits of this case should not, in an action brought in this country upon the judgment, be tried afresh, as on a trial or on appeal, upon the mere assertion of the party that the judgment was erroneous in law or in fact. The defendant cannot be permitted upon that general ground to contest the validity of the effect of the judgment sued on.”

            In similar vein, CARDOZO J in Loucks v Standard Oil Company of New York (1918) 224 NY 99 at 111, took the view that:

“The courts are not free to refuse to enforce a foreign right at the pleasure of the judges to suit the individual notion of expediency or fairness. They do not close their door unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep rooted tradition of the common weal.”

            In England, this view was echoed in Fender v St John Mildmay [1938] AC 1 at 12, where LORD AITKEN declared that:

“[public policy] should only be invoked in clear cases in which harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds.”

            The approach in South Africa is no different. Thus, in Jones v Krok 1995 (1) SA 677 (A) the Appellate Division overturned a decision of the court a quo which declined to recognise a foreign award because of the apparently arbitrary and unacceptable approach of the foreign court in awarding damages for breach of contract. As was stated by CORBETT CJ at 696:

“In my view there was no valid basis on the papers for these findings by the Court a quo; and, in any event, they seem to involve entering into the merits of the case adjudicated upon by the US Court, which, as I have pointed out, is not permissible. Accordingly, public policy afforded no ground for denying the appellant relief ………….”

            In the instant case, it is common cause that the defendant voluntarily participated in the trial and appeal before the Malawian courts. Moreover, there is no doubt that the Malawi Supreme Court is a court of competent jurisdiction, nor is there any claim that its proceedings on appeal were anything other than procedurally correct. Ultimately, there is no evidence or averment of illegality, partiality or other fundamental irregularity vitiating the propriety of those proceedings.

In the event, I am unable to perceive any persuasive justification for deviating from the circumspect approach expounded by the eminent jurists that I have cited above. While it might be accepted that the Malawi Supreme Court may have erred in calculating the quantum of special damages awarded to the plaintiff, it cannot be said that its decision was so fundamentally flawed as to entail an affront to our notion of justice or some irreparable harm to the economic or social well-being of the community as a whole. In short, the public policy argument cannot avail the defendant. I accordingly find that the recognition of the judgment of the Malawi Supreme Court would not be contrary to public policy under the law of Zimbabwe.

Interest Claims

            The Summons (as amended) incorporates two separate claims for interest. The first is in respect of the Malawi Kwacha award and is equivalent to the in duplum interest on the capital sum awarded. The second relates to the award of special damages denominated in United States Dollars, in respect of which the plaintiff seeks interest at the rate of 5% per annum from 12September 2007, being the day after the judgment of the Malawi Supreme Court was handed down.

            The relevant portion of the judgment of the court reads as follows:

“In the result the appellant is awarded special damages in the sum of US$848,662.50. The appellant is further awarded the sum of MK120,928.50 with interest at 1% above the bank base lending rate with effect from 24^th May 1994 to the date of payment.”

            The parties are not in dispute as to the interest claimed by the plaintiff on the Malawi Kwacha award. As regards the United States Dollar award, the judgment itself is silent on the question of interest. The plaintiff’s position is that the 5% interest component is automatically claimable, without having to be specifically stipulated, by virtue of the Courts Act [Cap 3:02] of the Laws of Malawi. Section 65 of that Act provides as follows:

“Every judgment in civil proceedings shall carry interest at the rate of five per centum per annum or such other rate as may be prescribed.”

            It seems to me that there are several compelling reasons for not allowing the interest claimed by the plaintiff on the sum of US$848,662.50. Firstly, in the absence of specific evidence to the contrary, it must be assumed that the above provision is confined to claims sounding in the official currency of Malawi, to wit, the Malawi Kwacha. There is nothing in section 65 or in any other provision of the Act to suggest that section 65 extends equally to claims sounding in all foreign currencies, in respect of which the permissible rate of interest applicable to civil claims will inevitably vary according to the currency concerned.

Secondly, and more importantly, what is sought in casu is the recognition of a foreign judgment. If this Court is to accord such recognition, it must do so on the judgment ex facie, as duly certified by an authorised official of the foreign court. Accepting the plaintiff’s argument involves having to materially modify the expressly stated terms of the foreign judgment on the basis of a point of foreign law that has not been properly proven in terms of section 25 of the Civil Evidence Act [Cap 8:01].

In my view, the interpretation that the plaintiff seeks to place on the meaning of section 65 of the Malawi Courts Act is not entirely incontestable. Apart from the statutory provision itself, nothing else has been adduced to support the plaintiff’s construction of that provision, either by way of expert evidence or a reported judgment from Malawi or this country, as is explicitly envisaged by section 25 of our Civil Evidence Act.

             In the premises, I am of the considered view that the plaintiff’s claim for interest on the sum of US$848,662.50 cannot be allowed upon the recognition of the judgment of the Malawi Supreme Court.

Whether Malawi Judgment Satisfied

            It is common cause that the defendant effected two separate payments to the plaintiff, one in Malawi Kwachas in satisfaction of the High Court judgment and the other in Zimbabwe Dollars pursuant to the Supreme Court judgment.

            As regards the tender of ZW$50.9 billion, Mr.Chinake’s argument runs as follows. This was a payment into court, in terms of Rule 144 of the High Court Rules 1971, made with Reserve Bank approval at the prevailing exchange rate. The defendant, as a locally registered company, was bound to comply with Zimbabwean exchange control laws in settling the Malawi Supreme Court judgment.

            As against this, Mr.Tsivama submits that the payment was not made in the currencies expressed by the court. Moreover, the plaintiff is a peregrine company with no business interests in Zimbabwe and it could not have utilised the Zimbabwe Dollars tendered by the defendant. As for the real value of the sum tendered, the evidence shows that it would have translated to circa US$500.00 on the parallel market and that it would have been practically impossible to convert it through official channels into anything approximating the judgment debt.

            In recent years, our courts have taken judicial notice of the existence of the parallel currency market and its glaring disparity with the official exchange rate. See Echodelta Ltd v Kerr & Downey Safaris (Pvt) Ltd 2002 (1) ZLR 632 (H); Lowveld Leather Products (Pvt) Ltd v International Finance Corporation Ltd & Another 2003 (1) ZLR 78 (S). Our courts have also acknowledged that currencies are bound to fluctuate in value and that it is necessary to protect creditors from being prejudiced by currency devaluations. See Makwindi Oil Procurement (Pvt) Ltd v National Oil Company of Zimbabwe 1988 (2) ZLR 482 (SC) at 492. The overall objective is to achieve restitutio in integrum, so as to ensure full and proper compensation, coupled with performance in forma specifica, in accordance with the intention of the parties. In the absence of contractual agreement between the parties or acquiescence by the creditor, a tender in local currency does not constitute sufficient discharge of an obligation sounding in foreign currency. See Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd & Others HH 95-2006 at pp. 10-11.

            In the instant case, the parties agreed to transact their contract initially in UAPTAs and subsequently in United States Dollars, without reference to any valuation or payment in Zimbabwe Dollars. In any event, the defendant’s tender of ZW$50.9 does not accord with the express terms of the Supreme Court judgment. Moreover, it did not and could not adequately compensate the plaintiff as contemplated by that judgment. In these circumstances, I am amply satisfied that the defendant’s tender in local currency did not constitute sufficient discharge of the judgment debt under consideration.

Turning to the payment of MK4.8 million effected by the defendant in February 2004, it is clear that this payment was made after the plaintiff had filed its notice of appeal against the High Court judgment. It appears that the defendant only became aware of the appeal in 2006. In any event, whatever may have transpired in that regard, what is relevant for present purposes is that the payment was accepted and retained by the plaintiff in satisfaction of the High Court judgment. In this regard, Mr.Tsivama admits that the payment made by the defendant must be taken into account and set-off in executing the Supreme Court judgment in the event of its recognition and enforcement in this country. Furthermore, the evidence also shows that the 34000 metres of PVC, valued at US$26,656.78, that was supplied to the plaintiff under the original contract was kept by the plaintiff and never returned to the defendant.

As regards the rate of exchange to be applied to the payment of MK 4.8 million, Mr. Tsivama submits that this figure should be converted at the rate prevailing in 2004 when the payment was received by the plaintiff. While this approach may be generally correct, as per the Makwindi Oil Procurement case, supra, there is nothing in either of the Malawi judgments to indicate that the awards denominated in Malawi Kwachas have devalued since the contract was entered into. In any event, it must be borne in mind that the defendant’s payment to the plaintiff included interest on the original award, exceeding MK3 million, covering the period from 1993 to 2003. Equally significantly, the plaintiff did not lead any evidence whatsoever at the trial before this Court as to the rate of exchange to be applied to the Malawi Kwacha awards. Moreover, as I have indicated earlier, the testimony of the defendant’s witness as to the United States Dollar value of the payment of MK4.8 million was entirely unchallenged and untested under cross-examination. The Court cannot reject that evidence and must place reliance upon it in the absence of any other evidence to controvert it having been adduced at the trial.

            According to the exchange rate applied by the High Court in relation to the contract price agreed between the parties, US$1 converted to MK4.4788 when the contract was concluded. The total amount paid by the defendant in satisfaction of the High Court judgment was MK4,819,512.00 – comprising general damages, 30% of the contract price, interest up to February 2003 and legal costs. Excluding the latter amount of MK150,000.00 renders the sum of MK4,669,512.00 which, at the exchange rate of 4.4788, converts to US$1,042,581.00. This figure equates to the total amount that was paid to and retained by the plaintiff, as damages and interest from 1993 to 2003, pursuant to the judgment of the High Court.

            In terms of the Supreme Court judgment, the plaintiff is entitled to payment of US$848,662.50 and MK120,928.50 with in duplum interest, i.e. MK241,857.00. Applying the exchange rate of 4.4788 to the latter amount, the sums payable to the plaintiff are US$848,662.50 plus US$54,000.40 – adding up to a total of US$902,662.90.

If the above calculations and resultant figures are correct, and there is nothing in the papers to evince the contrary, the defendant’s judgment debt in terms of the Supreme Court award has been fully discharged by virtue of its payment to the plaintiff pursuant to the High Court judgment. This would be so even if one were to add the interest component of 5% per annum on the United States Dollar award of US$848,662.50 (which I have already disallowed), i.e. US$42,433.125 x 2.75 years = US$116,691.09 + US$902,662.90 = US$1,019,353.99.

Disposition

As I have found earlier, the defendant has failed to demonstrate any public policy consideration in casu precluding the recognition of the Malawi judgment in Zimbabwe. However, as the evidence shows, the monetary award rendered by the Supreme Court has been fully satisfied by dint of the payment previously effected by the defendant in settling the High Court judgment. Although the latter judgment has been overtaken by the former, the payment already made by the defendant to the plaintiff clearly cannot be disregarded in determining the question of discharge. For that reason, the plaintiff’s claim for recognition of the Malawi judgment as binding and enforceable in Zimbabwe must fail. It is accordingly dismissed with costs.

Sawyer & Mkushi, plaintiff’s legal practitioners

Kantor & Immerman, defendant’s legal practitioners