REPORTABLE ZLR (93)

Judgment No. SC 114/02

Civil Appeal No. 277/02

LOWVELD LEATHER PRODUCTS (PRIVATE) LIMITED

v (1) INTERNATIONAL FINANCE CORPORATION LIMITED

(2) DEPUTY SHERIFF, MARONDERA, N.O.

SUPREME COURT OF ZIMBABWE

SANDURA  JA, CHEDA JA & ZIYAMBI JA

HARARE, NOVEMBER 21, 2002 & JANUARY 16, 2003

P Nherere, for the appellant

A P de Bourbon SC, for the first respondent

No appearance for the second respondent

SANDURA  JA: This is an appeal against a judgment of the High Court which dismissed with costs the appellant’s application for an interim interdict restraining the respondents from proceeding with the sale in execution of the appellant’s property, pending the determination of an application for certain declaratory relief.

The relevant facts are these. The appellant is an exporter of wet blue hides from Zimbabwe, for which it earns foreign currency. On 10 March 1997 the appellant and the first respondent (“the IFC”) concluded a loan agreement, in terms of which the IFC disbursed to the appellant US$300 000.00 to enable the appellant to conduct its export business. The agreement specifically provided that the loan was to be repaid in United States dollars.

After conducting its export business, the appellant reneged on the agreement and did not pay the loan as previously agreed. Consequently, the IFC instituted legal proceedings against it in the High Court and obtained a judgment for payment of –

(a) US$300 000.00;

(b) US$155 122.05, being interest on the sum of US$300 000.00 up to 1 January 2002;

(c) US$62 111.26, being interest on overdue capital and interest;

(d) Further interest on the sum of US$300 000.00, calculated from 2 January 2002 to the date of payment in full;

(e) Commitment fees of US444.41; and

(f) Collection commission and costs of suit on a legal practitioner and client scale.

When the judgment was not satisfied, the IFC sued out a writ of execution and the appellant’s property was subsequently attached. Thereafter, negotiations aimed at reaching a settlement were embarked upon but without success. The appellant then tendered payment of the full judgment debt in Zimbabwe dollars, the United States dollars payable in terms of the judgment having been converted to Zimbabwe dollars at the official exchange rate of US$1 = Z$55. The tender was rejected by the IFC which insisted that payment had to be in foreign currency as agreed. Consequently, the appellant filed an urgent application in the High Court seeking an interim interdict restraining the respondents from proceeding with the sale in execution, pending the determination of an application for an order directing that payment of the judgment debt be made in the Zimbabwe dollar equivalent of the foreign currency due, the conversion being at the official rate obtaining on the date of payment.

The urgent application was dismissed with costs. Aggrieved by that decision, the appellant appealed to this Court.

The requisites for the grant of an interim interdict are well established. They are: (a) a prima facie right; (b) a well-grounded apprehension of irreparable harm if the interim interdict is not granted and the ultimate relief is eventually granted; (c) that the balance of convenience favours the granting of an interim interdict; and (d) that the applicant has no other satisfactory relief.

The learned judge in the court a quo dismissed the appellant’s application because, in his view, the appellant had not established a prima facie right to the ultimate relief sought in the main application, i.e. an order directing that payment of the judgment debt be made in the Zimbabwe dollar equivalent of the foreign currency due. In the circumstances, he was of the view that the appellant’s application for the ultimate relief was unlikely to succeed.

In my view, the learned judge was correct. According to the loan agreement, the appellant did not have the right to repay the loan in Zimbabwe dollars. In terms of that agreement, the appellant accepted the following condition:

“Currency Indemnity

The obligation of the Company (i.e. the appellant) is to pay in Dollars the aggregate amount of the principal of, and interest, front-end fee and commitment fee on the loan, and any other amounts payable in Dollars under this Agreement shall not be deemed to have been novated, discharged or satisfied by any tender of (or recovery under judgment expressed in) any currency other than Dollars, except to the extent to which such tender (or recovery) shall result in the effective payment of such aggregate amount in Dollars at the place specified pursuant to this Agreement and, accordingly, the amount (if any) by which such tender (or recovery) shall fall short of such aggregate amount shall be and remain due to IFC as a separate obligation, unaffected by judgment having been obtained (if such is the case) for any other amounts due under or in respect of this Agreement.”

The term “Dollars” was defined as “the lawful currency of the United States of America”.

Quite clearly, the parties specifically agreed that the loan would be repaid in United States dollars and not in any other currency. This special stipulation distinguishes the present case from the case of Makwindi Oil Procurement (Private) Limited v National Oil Company of Zimbabwe 1988 (2) ZLR 482 (S). In addition, unlike Makwindi Oil Procurement (Private) Limited, a local company, the IFC is an international financial institution with its headquarters in the United States of America and normally conducts its business in United States dollars.

In the circumstances, the performance must be in forma specifica, i.e. exactly in the manner specified in the loan agreement, unless the appellant alleged and proved impossibility of performance, which it did not do.

Mr de Bourbon, who appeared for the IFC, submitted that the law would fail the parties if the appellant were permitted to pay the judgment debt in Zimbabwe dollars, bearing in mind the existence of a parallel market on which the exchange rate is more attractive than the fixed statutory exchange rate, as disclosed by the evidence led in Echodelta Limited v Kerr & Downey Safaris (Private) Limited HH-94-2002 (not yet reported). He submitted as follows:

“The capital sum due in terms of the judgment is US$517 677.72 with further interest from 2 January 2002. That capital sum at 55:1 converts to $28 472 274.60.

Thus, in effect, the appellant is saying that it will pay $28 472 274.60 in full satisfaction of its obligation to the first respondent.

However, to pay that sum at the current parallel market rate (approximately 900:1) would mean an expenditure of US$31 635.86, or 10.54% of the original disbursement of US$300 000.00.

Put differently, the appellant stands to make a profit from the loan of US$268 364.14 …”.

I agree that that result would be grossly unfair and unjust and should not be sanctioned by this Court.

Mr Nherere, who appeared for the appellant, submitted that the learned judge in the court a quo erred in holding that it was possible in this country to levy execution in foreign currency. With respect, the learned judge did not say that. On the contrary, he was alive to the fact that execution could not be levied in foreign currency. In his judgment he said the following:

“Mr Mutero also added that his client (i.e. the IFC) was aware that execution was to be carried out in local currency. The issue of foreign currency would be between it and the Government of Zimbabwe, in terms of Articles of Agreement between it and the Zimbabwe Government. …

The applicant (i.e. the appellant) also could not challenge the fact that despite the fact that the sale in execution was to be in local currency, the first respondent (the IFC) was to negotiate with the Zimbabwe Government in order to effectively have the judgment debt satisfied in full as ordered in HC-1130-2002 without contravening any provisions of the Exchange Control Act and Regulations.”

My understanding of Mr de Bourbon’s argument was that after the sale in execution the proceeds thereof would be converted to United States dollars in terms of an agreement between the IFC and the Government of Zimbabwe. The submission that such an agreement existed was not challenged in the court a quo and in this Court. I must, therefore, accept that such an agreement exists, although the details thereof have not been given. However, the fact that the appellant did not ask for the details of the agreement must mean that it is aware of the terms of the agreement and that Mr de Bourbon’s submission is correct.

In the circumstances, the appeal is devoid of merit and is, therefore, dismissed with costs.

CHEDA JA: I agree.

ZIYAMBI JA: I agree.

Kantor & Immerman, appellant's legal practitioners

Sawyer & Mkushi, first respondent's legal practitioners