HH-224-24
REF: HCHC126/24
BLAMAN SEKETE
And
GRACE PUMHU
And
VIMBAINASHE MAHWIRIDI
And
DR. AYANDA CHAKAWA
And
FELIX WITNESS MAMBONDIANI
Versus
AFRICAN BUSINESS WOMEN’S ASSOCIATION
And
SHAMISO FRED
HIGH COURT OF ZIMBABWE
Commercial Division
CHIRAWU-MUGOMBA J
Harare, 22, 30 May, 3, 4, 5 June 2024.
R. T Mutero with J. Mutevedzi, for the applicants
R. Mabwe, for the respondents
OPPOSED COURT APPLICATION FOR LEAVE TO INSTITUTE A CLASS ACTION SUIT
CHIRAWU-MUGOMBA J
. This matter was placed before me as a court application for leave to institute a class action, in terms of s3 of the Class Actions Act [Chapter 8:17], the “Act”. The basis of the application is set out in the affidavit deposed to by the first applicant as confirmed and supported by the second to the fifth applicants. It is summarised below.
. The applicants aver that the cause of action arises from numerous joint venture agreements, [JVA] concluded across the globe between the first respondent as represented by the second respondent. The first respondent received funds from numerous investors for the purpose of collective investment and to manage such investment for the account of investors.
. The first respondent concluded JVAs with investors, some of whom are listed in schedule 1. The material terms were that the investors would pay a capital sum as initial contribution into the first respondent’s various business projects which were to run for a period of between 22-28 months. They would be entitled to an agreed monthly profit share and a dividend payment. None of this has materialised. As a result, the investors have lost not only their initial capital contributions but are owed money for the monthly profits and dividends. Should the JVAs be found to be unenforceable, the first respondent would have been unjustly enriched whilst the investors are impoverished.
. They aver that, a prima facie cause of action has been set. The investors are seeking specific performance or alternatively unjust enrichment. The applicants and other investors constitute a class of people sharing a common cause. The first respondent has flighted advertisements in various media targeting this class of people. They all have JVAs with the first respondent, they invested money and have gotten nothing in return. They cannot be expected to file individual law suits.
. The applicants propose that they all be appointed as representatives of the investors including those that have not yet come forward. They contend that they are well educated and have invested time and effort in pursuing the matter and bringing investors together.
. The applicants therefore seek an order as amplified below.
IT IS ORDERED THAT
Leave be and is hereby granted to the Applicants in terms of the Class Actions Act [Chapter 8: 17) to bring a class action against the 1st and 2nd Respondents.
That the Applicants be and are hereby appointed to represent the class of persons concerned in the class action.
In terms of section 7 (l)(a) of the Class Action Act [Chapter 8: 17], the applicants shall by the ........................ day of ............................ .2024.
Cause to be published in The Herald and The Daily News on three (3) different dates a notice in the form attached hereto.
Cause the abovementioned notice to be broadcast in Shona, Ndebele and English on Radio Zimbabwe and Zimbabwe Television of the Zimbabwe Broadcasting Corporation on two (2) different dates.
That the costs of this application shall form part of the costs of the class action to be instituted by the Applicants on behalf of the persons concerned unless there is opposition by the Respondents.
The respondents strenuously oppose the application. They raise preliminary issues as follows.
There has been misjoinder of the second respondent. It is common cause that she is cited as having represented the first respondent in the agreements. She cannot breach a contract to which she is not a party to. In other words, she is ‘non-suited’.
The applicants have failed to arbitrate which is what the parties contracted to do in the JVAs.
There is no prima facie cause of action.
There is failure to plead issues of fact or law which are likely to be common to the claims of individual members of the class of persons concerned.
There is failure to plead the existence and nature of the class of persons concerned.
The applicants failed to tender security for costs as per s6(1) of the Class Actions Act.
. On the merits, the respondents make the following averments. That there is no requirement of mora by reason of default. The conditions precedent have not been specified. The relief sought is not in tandem with the facts that the applicants rely on. These are payment of an initial sum of money, monthly returns and dividends. The claim ignores the fundamentals of a partnership which is that of sharing of profits and losses.
. A partner cannot institute a claim against another partner. A bald claim for profits cannot constitute a cause of action. The losses suffered are not as a result of ill-will on the part of the respondents. The projects fell victim to operational issues and disease. Efforts were made to fulfil the expectations of the investors to no avail.
.There is an added danger of parallel litigation where some investors may pursue the respondents separately. The claim by the applicants that they can represent all the other applicants is not supportable. They therefore seek the dismissal of the application with costs.
In the answering affidavit, the first applicant on behalf of all the applicants raised its own preliminary issue relating to the opposing affidavit. They averred that there is no valid notice of opposition before the court. This, they said is due to the fact that there is no date that appears as being the date on which the oath was administered. The date that appears is a computer generated one. In my view, this preliminary objection must be considered first as it has a bearing on whether or not this matter will proceed with or without regard to the notice of opposition. Reliance is placed in the heads of argument on the following cases; Ndoro and anor. Vs. Conjugal Enterprises (pvt) Ltd, HH-814-22; Twin Castle Resources (pvt) Ltd vs. Paarl Mining HH-151-21 and Mandishayika vs. Sithole, HH-798-15. My reading of the respondents affidavit however is that the wording of the Commissioner is that the affidavit was sworn and signed before him on the 10th day of March 2024 by the deponent and that the latter took oath. From that basis, this matter is distinguishable from the ones cited. I therefore find no merit in the preliminary point taken by the applicants and will proceed to treat the opposing affidavit as being validly before the court.
At the hearing, the court and as also submitted by Ms. Mabwe, interrogated the question of the arbitration clause that appears in all the JVAs between the applicants and the first respondent. This is because it has a dispositive effect if granted. It reads as follows,
13. Dispute Resolution
All disputes arising out of or relation to this Agreement will be resolved in the following manner:
(a) Any dispute shall first be re referred to a Mediator for resolution.
(b) If the Mediator is unable to resolve the matter within 30 days of the dispute being referred, the dispute shall be referred to an arbitrator for final adjudication.
(c) The mediation and arbitration proceedings shall both be conducted under the auspices of the Commercial Arbitration Centre in Harare.
(d) This arbitration clause shall survive the termination of this agreement for any reason whatsoever.
Per Ms. Mabwe on arbitration, the starting point is s171 of the Constitution. There are instances where court will defer its jurisdiction and these are circumscribed as in casu. Whilst the arbitration clause does not oust the jurisdiction of the court, it defers it until certain things are done. It is clear that in casu, the parties contracted on a specific dispute resolution mechanism to the effect that if mediation failed, they would go for arbitration. The operative word is ‘shall’ and it behoves them to honour the agreement- Bhebhe and ors vs. ZEC and ors, 2011(2)ZLR 274. In clause 9 of the JVAs, an amendment is not valid until reduced to writing. An attempt to bring this matter using the courts as the forum of first instance is one that is akin to varying the contract.
Per contra, Mr. Mutero submitted as follows. That class actions can only be litigated in the High Court in terms of s3 of the Act and as per CFU vs. Mhuriro and ors, 2002(2) ZLR 405 (S). The nature of the action cannot be dealt with by an arbitrator. In any event, mediation is not the first port of call, rather it is mediation. In view of the seemingly conflicting position of the law as amplified in Conplant Technology (pvt) vs, Wentspring Investments (pvt) Ltd, HH-965-15.and Shell Zimbabwe [Pvt] Ltd v Zimsa [Pvt] Ltd, 2007 [2] ZLR 366 [H], the court should lean more towards granting the application for leave- Chikafu vs Dodhill, SC-28-09. In other words, the court ought to err on the side of caution.
I posed a question to the legal practitioners regarding whether or not the existence of a dispute resolution mechanism in an agreement is a bar to an application for leave to file a class action suit. It is an issue that despite considerable time and effort I spent on researching, there is no ready answer. The submissions by the legal practitioners and the research I conducted, related more to arguments that would be advanced in a matter where actual leave has been granted. I would rather err on the side of caution and not non-suit a party based simply on the existence of a dispute resolution mechanism which is subject to interpretation. The focus of the court, barring other preliminary issues should be on whether or not, the requirements of the Act have been met.
The respondents advanced other preliminary grounds that I outlined in paragraph seven above.
It is difficult to comprehend some of the other preliminary issues advanced. It is baffling on how they can be categorised as preliminary issues. Most touch on the merits of the matter. As for security for costs, the Act is clear on when these can be ordered as follows:
6. Security for costs
(1) When granting leave to institute a class action or at any time thereafter, the High Court may order the
representative concerned to provide security for costs.
In casu, until leave has been granted, the issue of costs becomes superfluous.
The only ground worth considering is that of misjoinder. Ms. Mabwe made the following submissions. That there is no specific relief sought against the second respondent. That there is no cause of action against her. She is not party to the contracts and her name does not appear anywhere and she has not signed any document.
Per contra, Mr. Mutero submitted that the second respondent has always represented the first respondent. She is therefore its alter ego. Further that it is trite that a Trust is sued through its Trustee. The second respondent must therefore account for the funds received through her.
I agree with Mr. Mutero that indeed the second respondent is a trustee of the first respondent. This is confirmed in paragraph 1.1 of the opposing affidavit. I do not see how the second respondent can distance herself from the matter. In any event, R 32(11) of the High Court Rules, 2021 make it clear that no cause or matter shall be defeated by reason of the misjoinder or non-joinder of any party.
Having disposed of all the preliminary issues, I now turn to the merits of the matter. The starting point is section 3 of the Class Actions Act [Chapter 8.17] (the Act), which provides:
“3. Application for leave to institute class action
Subject to this section, the High Court may on application grant leave for the institution of a class action on behalf of any class of persons.”
The nature of the application is prescribed in the Act as follows;-
“3 Application for leave to institute class action
(2) An application for the institution of a class action—
(a) may be made by any person, whether or not he is a member of the class of persons concerned; and
(b) shall be made in the form and manner prescribed in rules of court.
(3) The High Court shall grant leave in terms of subsection (1) if it considers that in all the circumstances of the case a class action is appropriate, and in determining whether or not this is so the court shall take into account—
(a) whether or not a prima facie cause of action exists; and
(b) the issues of fact or law which are likely to be common to the claims of individual members of the class of persons concerned; and
(c) the existence and nature of the class of persons concerned, having regard to—
(i) its potential size; and
(ii) the general level of education and financial standing of its members; and
(iii) the difficulties likely to be encountered by the members enforcing their claims
individually; and
(d) the extent to which the members of the class of persons concerned may be prejudiced by being bound by any judgment given in the class action; and
(e) the nature of the relief claimed in the class action, including the amount or type of relief that each member of the class of persons concerned might claim individually; and
(f) the availability of a suitable person to represent the class of persons concerned; and
(g) any other relevant factor.
. In Gombera and anor vs. Mazowe Rural District Council and anor, HH-776-21, TAGU J disposed of the application before him on a preliminary point. MUNANGATI -MANONGWA J in Lytton Investments (pvt) Ltd vs. Standard Chartered Bank Zimbabwe Limited, HH-35-17 dismissed an application for leave to file a class action suit. In Zimbabwe Tobacco Association vs. The Reserve Bank, HH-77-13, MTSHIYA J also dismissed one such application. The illustrative part of that judgment is that the court is largely guided by the facts put before the court by the applicant (s). The same approach was adopted by MUNANGATI MANONGWA J in Lytton investments. The learned Judge recognised that there is a dearth of cases on the law in Zimbabwe as follows,
“At present there are hardly any considerable decisions in this jurisdiction which deal with class actions. Suffice to note that whilst the case of Zimbabwe Tobacco Association v Reserve Bank of Zimbabwe (cited supra) considered to some extent the provisions of section 3 of the Act, the ultimate decision rested on the fact that the applicants had taken the wrong party to court. Incidentally in Petho v Minister of Home Affairs & Anor,2002 (2) ZLR 436 (5) where class action was in issue, the decision rested upon whether applicant was a suitable representative of all the members of the class of persons concerned.”
. Borrowing from the Charleston School of Law1,
“The origins of modern-day class-action lawsuits can be traced to Anglo-Saxon and Norse tradition during medieval times. Often called "group litigation," these cases often involved towns, villages, and other hamlets bringing their complaints against the government, mostly the monarch. This procedure remained unchanged from the 1400s until its downfall in the mid -1800s. The economic and political landscape of England changed during the centuries as, by 1850, Parliament had enacted several statutes to deal with issues of certain organizations bringing claims to the courts, so group litigation ceased after 1850.
In 1820, class actions were implemented into American jurisprudence due to the opinion of West v. Randall, one of the earliest class actions in the United States. Two years after West, in 1842, the Supreme Court established the Federal Equity Rules, a precursor to the Federal Rules of Civil Procedure, In 1842, the Supreme Court amended the rules to add rule 48: a recognition of representative suits where the parties were too numerous to be conveniently brought before the court. The Rules were once again amended in 1912, and the Federal Rules of Civil Procedure would passed twenty-six years later, being largely based on the 1912 amendments. The origins of class actions have even been recognized by courts. In 2020, in the case of Murphy v. Aaron's, Inc., the United States District Court for the District of Colorado stated, “Concomitantly, class actions portray a relic of representational litigation that has long existed in equity. ” Murphy v. Aaron's, Inc., Civil Action No. 19-cv-00601-CMA-KLM, 21 (D. Colo. Apr. 30, 2020).”
The basis therefore is that of equity. This is the recognition that certain class of persons may of necessity band together and seek relief. However, I could not find any comparative jurisdiction cases on the impact of a dispute resolution mechanism in a contract on an application such as the one in casu.
. In casu, the relevant question is this – based on the facts placed before the court, have the applicants made a case for the granting of the relief sought? The answer lies in the pleadings filed of record.
. The applicants have submitted in their application that they all hold JVAs with the first respondent. They therefore seek an order of specific performance or alternatively, relief on the basis of unjust enrichment. The common features amongst them is that they all hold the JVAs, they have invested, they have been promised returns and dividends but so far nothing has been forthcoming. This is what brings them together. Schedule 1 identifies up to 307 individuals as well as the various amounts and schemes that they invested into. This class can also be identified through the fact that some of them engaged legal practitioners to address a letter to demand to the respondents. Additionally the first respondent put up a press notice specifically targeting this group. Given the sheer numbers, it will be impractical if not near impossible for each one to proceed individually. The group is described as coming from a diverse educational background ranging from the elementary to the intellectually sophisticated. The deponent to the founding affidavit states that they are a High School teacher and one of the applicants holds the title of Doctor. The applicants propose that they be jointly appointed the representatives. They are involved already in identifying the investors and bringing them together. They possess the characteristics and attributes that are expected of representatives. Suitable arrangements have been made to fund the law suit and a communication group has since been set up. This forms the basis of the applicants’ clamour for the application to succeed.
. The respondents on the other hand quite apart from the preliminary issues raised, strenuously oppose the relief sought. In my view however, the respondents have failed to rebut the applicant’s assertions as amplified above. They have not denied that JVAs exist, that various persons invested money and that none of these have come to fruition. I do not agree with Ms. Mabwe’s assertion that the issue of profit and loss must have a material bearing on the outcome of this application. The response by the respondents reads more like a challenge to the actual class action lawsuit than to an application for leave to institute one. The premise upon which the applicants seek relief is very clear. There is also no proof of a pending action or application by other concerned investors in courts of law. My reading of the Lytton matter suggests that there should be a pending case or cases. None have been placed before the court.
. I am not persuaded by the respondents’ attempt to tear down the JVAs. Section 4 of the Act is very clear as follows,
The High Court may grant leave of subsection (1) notwithstanding that—
(a) the claims of individual members of the class of persons concerned involve different issues of fact or law; or
(b) the relief sought by individual members of the class of persons concerned may require individual determination; or
(c) members of the class of persons concerned seek different forms of relief.
. The various attachments to the respondents’ opposing affidavit, outlining what they perceive as the challenges faced, in my view, boost the applicants’ contention of a prima facie case. They reveal a trail of a venture(s) that has literally fallen apart. How can the respondents then boldly claim that there is no prima facie case?
. In my view the pleadings filed of record and for reasons amplified above, I am convinced that the applicants have met the requirements outlined in s3 of the Act for the granting of leave to institute a class action suit. In summary, the specific class of persons has been identified and these span the globe. Apart from the 307, there are likely to be more investors who still have not been identified. 307 is on its own a huge number and these investors all have a real and substantial interest in the outcome of the class action suit. They all possess JVAs and questions of fact and law relating to partnerships come into the fray. The level of education has been identified. I have also taken into account the seemingly huge sums of money that the investors identified so far have put in as per the first schedule. The nature of the relief sought that of specific performance or alternatively unjust enrichment is legally competent.
. The applicants have all proposed that they be appointed jointly to represent the potential litigants. In that regard, I am guided by the provisions of s5 that read as follows,
(1) Where the High Court grants an application under section three for leave to institute a class action it shall appoint the applicant or any other suitable person to be the representative of the class of persons concerned in the class action.
(2) In making an appointment for the purpose of subsection (1), the High Court shall have regard to—
(a) the suitability of the appointee to represent the best interests of all the members of the class of persons concerned; and
(b) any conflict of interest between the appointee and the members of the class of persons concerned; and;
(c) the ability of the appointee to make satisfactory arrangements to pay for the class action and to pay any order of costs that may be made.
My reading of the section speaks to the appointment of a person (not persons) and appointee (not appointees). This means that only one person can be appointed. I am convinced that the first applicant possesses the attributes expected of him in terms of s5. He is already in the thick of the matter. I do not perceive of any conflict since he is also an investor who is seemingly well-versed with the issues at hand. Compiling a list of 307 investors so far is no small task. In my view, he is able to raise the funds for the class action. I have also had regard to s6(1) and I do not perceive of any reason why an order of security for costs to be paid by the applicants should be made at this stage.
[32]. Section 7 of the Act requires that a notice of the class action be flighted. I have had regard to the proposed notice and in my view it has shortcomings. Rather than grant an order that there should be compliance with s7, I will amend the proposed notice and include it as part of this judgment as Annexure A. It appears to me that some of the investors are resident outside Zimbabwe. The representative selected, that is the first applicant is resident in the United Kingdom. It seems prudent that a notice be published in a newspaper circulating within the United Kingdom as well and he can through the communication channels, bring this to the attention of many others.
[33]. As for costs, it is trite that they follow the cause. However, the order for costs sought is that of costs in the cause, that is the class action suit unless there is opposition to the application. I have previously frowned upon such orders on costs. I call it the, “ carrot and stick” approach. Every litigant is entitled to defend themselves in a court of law. No litigant should decide that costs should be paid on the basis that a litigant has defended themselves. I will thus grant an order that costs should be in the cause.
DISPOSITION
It is ordered that:-
Leave be and is hereby granted to the applicants in terms of the Class Actions Act [Chapter 8: 17) to bring a class action against the first and second respondents.
The first applicant be and is hereby appointed to represent the class of persons concerned in the class action.
In terms of section 7 (l)(a) of the Class Action Act [Chapter 8: 17], the first applicant shall by the 8th day of July 2024; -
Cause to be published in The Herald and The Daily News, both newspapers circulating within Zimbabwe on three (3) different dates, once in each newspaper, a notice as per annexure A of this judgment.
Cause to be published in the Sunday Times, a newspaper circulating within the United Kingdom, once, a notice as per annexure A.
Cause the notice in Annexure A to be broadcast in Ndebele, Shona and English on Radio Zimbabwe and Zimbabwe Television of the Zimbabwe Broadcasting Corporation once for each language.
Costs shall be in the cause.
Mutamangira and Associates, applicants’ legal practitioners.
Mahini Gidiri Law Chambers, respondents’ legal practitioners.
ANNEXURE A
In the High Court of Zimbabwe HH-224-24
Ref: Case no. HCHC 126/24
Commercial Division
In the matter of
BLAMAN SEKETE
And
GRACE PUMHU
And
VIMBAINASHE MAHWIRIDI
And
DR. AYANDA CHAKAWA
And
FELIX WITNESS MAMBONDIANI
Versus
AFRICAN BUSINESS WOMEN’S ASSOCIATION
And
SHAMISO FRED
NOTICE IN TERMS OF SECTION 7 OF THE CLASS ACTIONS ACT [ Chapter 8:17].
Notice to all persons who invested funds in the African Business Women’s Association (ABWA) in various projects pursuant to the conclusion of Joint Venture Agreements.
TAKE NOTICE that on the 5th day of June 2024, before the Honourable Mrs. Justice Chirawu-Mugomba, the Commercial Division of the High Court of Zimbabwe, sitting at Harare, Zimbabwe, granted an application in terms of s3 of the Class Actions Act for leave to institute a class action suit against AWBA and Shamiso Fred. BLAMAN SEKETE was appointed as a representative of the class of persons concerned in terms of section 5 of the Class Actions Act.
The cause of action is that all affected persons entered into Joint Venture Agreements with ABWA, invested money for various projects but despite maturity time frames set out in the agreements, have not received monthly payouts or dividends. The relief sought is that of specific performance of the Joint Venture Agreements, or alternatively unjust enrichment. This means that the affected persons seek that the joint venture agreements terms be enforced. In the event that this relief is not granted, the affected persons seek an order that the respondents be ordered to pay back money on the basis that they should not be enriched and that the affected persons should not be impoverished. The class of persons in Zimbabwe and globally consists of all those who entered into joint venture agreements with AWBA, invested money into various projects but have not received monthly returns of dividends.
FURTHER TAKE NOTICE THAT in terms of s7 (2) (i) of the Class Actions Act, each member of the class in question will be bound by the class action and its results unless the member notifies the Registrar of the High Court, Harare, Zimbabwe (Commercial Division) within sixty days (60) days of the date of publication of the last of this notice that s/he wishes to be excluded from the action.
AND FURTHER TAKE NOTICE THAT each member of the class in question has the right to apply for leave to intervene in the class in order to protect hers or his interests in terms of s7 (2) (ii) of the Class Actions Act.
Inserted by: Blaman SEKETE
END.
1 Available from http//:charlestonlaw.libguides.com (last accessed on the 4th of June 2024).
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