3
HH 279 - 17
HC 1196/12
AFRASIA BANK ZIMBABWE
versus
RIOZIM ZIMBABWE LIMITED
HIGH COURT OF ZIMBABWE
MAKONI J
HARARE, 6 October 2016 and 3 May 2017
Opposed Matter
F Siyakurima, for the applicant
T Mpofu, for the respondent
MAKONI J: The applicant approached this court, by way of Chamber Book seeking an order in the following terms:
“1. The defendant shall pay to Plaintiff the sum of US$3 629 586.57 together with interest thereon at the rate of 15% per annum calculated from 1st October 2014 to date of full payment.
2. Defendant shall pay Plaintiff’s costs of suit on a legal practitioner and client scale”
The background to the matter is that the applicant in HC 1196/12 instituted action proceedings against the respondent. The applicants’ claim was payment of the sum of US $8 511 956-49 together with interest and legal costs. The respondent defendant the matter.
On 2 August 2013 the parties entered into a Deed of Settlement (Deed) in terms of which the respondent agreed to pay the sum of $4 556 777-76 in full and final settlement, through instalments.
After the signing of the Deed, the respondent made some payments in terms of the Deed. For reasons which are relevant to the determination of the matter, the respondent engaged Interest Research Bureau Pvt Ltd (IRB) to independently verify the amounts due to the applicant. The report by IRB indicated that the applicant had over charged the respondent on both interest and bank charges. The respondent then stopped making payments to the applicant in terms of the Deed.
After the respondent defaulted in its obligations in terms of the Deed, the applicant then instituted the present proceedings which are opposed by the respondent. The applicant’s basis for seeking relief is that the respondent is bound by the terms of the Deed. The parties agreed to the amount to be paid in the Deed. There was no common error on the part of the parties.
The respondent opposes the application on the basis that the agreement sought to be enforced by the applicant is a product of a serious mistake and thus would lead to the unjust enrichment of the applicant.
Mr Siyakurima contended that the Deed is a compromise which contains a variation clause. The respondent intends to vary the Deed without the applicants consent. The respondent is bound by the Deed. Public policy demands that the agreement, voluntarily entered into by the parties, must be enforced. He further contended that even assuming that there may have been an overcharge of interest as alleged the respondent would still be held to the agreement. He relied on, for his submissions, Georgias & Another v Standard Chartered Finance Limited 1998 (2) ZLR 488 (S).
He further submitted that there was no common mistake between the parties. The respondent was represented by its Financial Manager and counsel with “the fine brains” in the legal fraternity. There is no allegation of misrepresentation of the part of the applicant.
Mr Mpofu submitted that the compromise was concluded Justus error and such a compromise can be vacated and cannot be enforced. The respondents’ raise a bona fide issue for which the applicant has no answer. No contrary expert evidence has been placed before the court.
He further contended that there is a dispute of fact. He suggested that the court dismisses the application or adopts a robust approach and resolve the dispute. He further suggested that the court proceeds in terms of s 19 A of the High Court Act [Chapter 7] and refer the matter to experts.
A compromise was defined in Georgias (supra) at p 496 E – F where it was stated:
“Compromise, or transactio, is the settlement by agreement of disputed obligations, or of a lawsuit the issue of which is uncertain. The parties agree to regulate their intention in a particular way, each receding from his previous position and conceding something – either diminishing his claim or increasing his liability. See Cachalia v Harberer & Co 1905 TS 457 at 462 in fine; Tauber v von Abo 1984 (4) SA 482 (E) at 485 G – I; Karson v Minister of Public Works 1996 (1) risk inherent in resorting to the methods of resolving disputes. Its effect is the same as res judicata on a judgment given by consent. It extinguishes ipso jure any cause of action that previously may have existed between the parties, unless the right to rely thereon was reserved. See Nagar v Nagar 1982 (2) SA 263 (ZH) at 268 E – H. As it brings legal proceedings already instituted to an end, a party sued on a compromise is not entitled to raise defences to the original cause of action. See Hamilton v van Zyl 1983 (4) SA 379 (E) at 383 H.”
From the above definition it is clear that for a compromise to be valid, it must be concluded by parties, who are clear as to what their rights are. If parties are not clear as to what rights they are settling then the compromise would not have been properly concluded. The court in Georgias (supra) at 496 G observed:
“But a compromise induced by fraud, duress, Justus error, misrepresentation, or some other ground for rescission, is voidable at the instance of the aggrieved party, even if made an order of court. See Gollach & Gomperts (1967) (Pty) Ltd v Universal Mills & Produce Co ltd & Ord 1978 (1) SA 914 (A) at 922H.”
In casu the parties are agreed that thy entered into a compromise. The point of departure is on the legal effect of the compromise. The applicant contends that even assuming, which it denies, it was entered into as a result of a mistake, the respondent is still bound. He relied on Georgias (supra) at p 497 C – E where the following was stated:
“Where there is a dispute about moneys owing and the debtor, knowing that he cannot be forced to pay accrued interest over the double for good cause, agrees to settle his obligation and pay the creditor a sum which include or embraces such interest, he must put himself outside the purpose of the rule. He is no longer exposed to the “perceived evils which the rule is formulated to combat”. He is not being exploited and does not need protection against himself. He is now making an informed choice. If the creditor is able to secure such a compromise, the policy of the law is not being defeated…… In short, where an obligation to pay accrued interest in excess of the unpaid capital is included in a compromise, the public policy behind the original causa no longer applies…….”[Emphasis added)
In my view, what the court had in mind is a debtor who is conscious and has full knowledge that his accrued interest is over the double and agrees to pay the creditor a sum which includes or embraces such interest.
The question that comes to mind is whether the respondent, fully conscious that it had been overcharged on interest and bank charges, proceeded to conclude the compromise. This raises a dispute of fact.
In Adbro Investment Co Ltd v Minister of the Interior 1956 (3) SA 345 (AD) at 350 A the following was stated:
“Where the facts are in dispute the court has a discretion as to the future course of the proceedings. It may dismiss the application with costs or order the parties to go to trial or order or al evidence in terms of any Rule of any Rule of Court. The first course may be adopted when the applicant should have realised when launching his application that a serious dispute of fact was bound to develop.”
In casu the applicant can be excused for proceeding by way of motion. This is what is provided for in clause 2 of the Deed. It never anticipated that the respondent would make a right about turn on what they had agreed on. The option of dismissing the application will be unduly harsh on the applicant.
The second option is to adopt a robust approach and resolve the dispute of fact on the papers. This is the option which I will adopt.
From the papers filed of record, it does not appear to me that the respondent was aware, at the time it concluded the deed, that it had been overcharged on interest. It was later on when new directors came on board that a query was raised regarding the amounts that had been paid and those that were still outstanding. There is when a decision was node to engage IRB. I will therefore make a finding that at the time when the respondent concluded the compromise it was not aware of the fact that it had been overcharged on interest and bank charges. It would not have objected to that it did not know.
As was observed in Georgias’ (supra) at 469 G: a compromise, such as the one in casu is voidable at the instance of the aggrieved party.
In view of the above, the Deed cannot be given effect to.
In the result, I make the following order:
1. The application is dismissed.
2. The applicant to pay the respondent’s costs.
Sawyer And Mkushi, applicant’s legal practitioners
Wintertons, respondent legal practitioners