6
HH 287-24
HCHC 555/22
EMMANUEL & SONS SOLUTIONS (PVT) LTD
And
EMMANUEL MAKAMBA
And
IVY BANDA
Versus
AKILI CAPITAL (PVT) LTD
HIGH COURT OF ZIMBABWE
COMMERCIAL DIVISION
MANZUNZU and CHILIMBE JJ
HARARE 19 October 2023 & 10 July 2024
Commercial appeal
P. Uriri with K. Ncube for the appellants
C.F. Nyamundanda for respondent
CHILIMBE J
BACKGROUND
[1] This is an appeal against the whole judgment of the Magistrates Court. The short history of the matter is that first appellant borrowed a sum of US$40,000 from respondent on 31 May 2021. First appellant defaulted on the due date of 30 June 2021 but reduced its indebtedness by a payment of US$20,000 in September 2021.Thereafter, first appellant`s commitment to settle the balance became markedly diffident.
[2] On 10 February 2022, respondent instituted proceedings in the court a quo claiming US$370,000 as capital,50% per month as interest,3% default as well as collection and attorney-client scale legal costs. The claim was successful in the following respects; -the court a quo awarded the capital sum of US$370,000, interest on that amount at the rate of 50% per month, together with a default penalty of 15 % per month plus collection commission and costs as prayed for.
[3] It is not quite apparent from the record why default interest shot from the 3% claimed in the summons, to 15% awarded in the judgment. That aside, both sets of interest were ordered to run, not from 22 February 2022 being the date of summons, but a month earlier. A further award of collection commission plus legal costs at attorney-client scale was granted.
THE LOAN AND SECIRITY AGREEMENTS
[ 4] The fuller background is that by written agreement dated 31 May 2022, respondent advanced a sum of US$40,000 to first appellant. The loan was to be settled as a bullet payment of US$60,000 30 June 2022. Clause 10.1 provided for interest on the principal sum at 50% per month for every calendar year. A default penalty of 3% per month was added per clause 10.3. By clause 14, the first appellant agreed to pay legal fees at attorney client scale plus collection commission in the event on proceedings being instituted to recover the debt.
[5] On the same date, second and third appellants personally issued irrevocable unlimited liability guarantees in favour of respondent. This security was a requirement in terms of clause 11.1 of the loan agreement. Additionally, first respondent executed an acknowledgement of debt on the same day.
THE GROUNDS OF APPEAL
[6] The appellants raised a total of eight (8) grounds of appeal which went thus; -
The court a quo erred and misdirected itself in that it totally failed to apply its mind to the question of whether or not section 26 (1) (a) as well as section 26 (1) (c) of the Micro-Finance Act (Chapter 24:29) as amended had been complied with , with the result that it then failed to address the question as to whether or not in the result Plaintiff was entitled to judgement in light of section 26 (3) (b) of the same Act.
In granting the judgement in the sum of US$ 370 000.00 the court a quo misdirected itself and erred as it acknowledged and applied an unlawful interest rate of 65% per month thereby failing to take into account the provisions of section 8 of the Money – Lending and Rates Interest Act (Chapter 14:14) which pegs the interest rate at the prescribed rate.
In the holding that the Duplum Rule does not apply and as such failing to take it into account in its judgement, the court a quo misdirected itself at law as the Duplum Rule is still part of our law and the court a quo to have applied it.
In the granting judgement to the Respondent in the sum of US$370 000.00 the court a quo misdirected itself in that it failed to take into account the provisions of Section 9 of the Money-Lending & Rates of Interest Act (Chapter 14:14), which prohibits courts from granting judgement premised on a rate above the prescribed rate and also prohibits courts from granting judgement in an amount in excess of double the capital sum advanced.
The court a quo erred and misdirected itself in that it totally failed to apply its mind to and consequently did not address the question of whether or not section 16(2)(b) and (c) of the Microfinance Act (Chapter 24:29) as amended had been complied with.
In granting judgement in favor of the Respondents in the sum of US$370 000.00, the court a quo erred at law in that it failed to bear cognizance of the fact that the Respondent had not complied with the provisions of section 16 (2) (b) and (c) of the Micro-Finance Act (Chapter 24:29) as amended as well as section 26 (1) (a) and (c) of the same statute and as such precluded from recovering any interest on the loan advanced in terms of section 26 (3) (a) and section 16 (4) of the same statute.
The court a quo erred and misdirected itself in awarding legal costs to Respondent thereby losing sight of the fact that the Respondent was precluded from recovering costs by reason of it having violated section 16 (2) (b) and (c) of the Micro – Finance Act (Chapter24:29) as amended.
The court a quo erred and misdirected itself at law in ordering interest to run at the rate of 65% per month on the capital sum and on the judgement debt without any supporting legal provision.
[ 7] I will return to these grounds of appeal in the succeeding paragraphs. But it is critical to note that counsel from both sides did acknowledge that the issues for determination before this court essentially crystallised into three (3) points. These three heads are important in that they are conjunctive and potentially dispositive of each other in nature. Each forms a gateway into the next. I list them hereunder; -
Was the matter properly before the court a quo?
Did the trial court consider and decide all matters placed before it?
Did the court a quo correctly decide the issues of (a) currency (b) interest as well as (c) the in duplum rule?
PROCEEDINGS IN THE COURT A QUO
[8] In determining the arguments presented before us, it is necessary that we take a step back and recount the proceedings in the court a quo. It is apparent that the parties elected to proceed as “a stated case”. Clearly, this was the common understanding of both the court a quo on one side, and the two protagonists on the other. But the procedure adopted was incorrect as further discussed hereunder. That error has significant implications of the matter before us and forms a key determinant in addressing the grounds of appeal.
[9] I turn to the proceedings in the court a quo. On 9 November 2022, the parties filed a jointly executed “Statement of Agreed Facts and Issues for Determination”. This document firstly listed the “agreed facts” before setting out the longer list of issues for determination. The agreed facts were listed as follows; -
The 1st Defendant applied for and was granted loan facilities by the Plaintiff in terms of a loan agreement dated 31 May 2021.
The sum advanced was US$ 40 000.00.
That of this amount, the 1st Defendant repaid the sum of US$20 000.00
[10] In the same document, the parties then framed what they considered matters for determination in the court a quo and these may be paraphrased as follows; -
Whether the respondents` were liable,
Whether the interest charged under the loan agreement and suit were legally competent,
Whether the loan agreement violated the Consumer Contracts Act [ Chapter 8:03],
Validity of the US dollar claim in the absence of a local currency alternative,
Whether the claim complied with the in duplum rule,
Whether appellants secreted funds elsewhere in violation of contractual terms,
Whether the loan agreement was compliant with the provisions of s16 (2) (b) and (c) of the Micro Finance Amendment Act [ Chapter 24:29],
Whether the loan agreement was compliant with the provisions of s 26 (1) (a) and (c) of the Micro Finance Act [ Chapter 24:29],
Whether the absence of an application in terms of section 20 (3) (b) of the Micro Finance Act invalidated the proceedings in the court a quo,
Whether the claim was compliant with the provisions of s 23 (1) and (2) of the Finance Act No 2 of 2019,
Propriety of a claim for both collection commission and punitive costs in a contested matter.
[ 11] In response to this consensus by the parties and setting the next course, the court a quo then decided as follows1; -
“All pleadings were filed and closed and the matter was set down for trial. The parties then resolved and agreed that the bundle of pleadings filed of record shall stand as the complete relevant pleadings (sic) for the disposal of the matter. Parties then filed a statement of agreed facts which stated that;”
[12] The meaning of the rather vacuous underlined statement is not immediately clear. But as noted above, it suggests an intention to proceed without leading nor examining evidence. The court a quo then proceeded to list the eleven (11) questions set out in the parties` 9 November pre-trial consensus as “the statement of agreed facts”. The court a quo deigned to comment on the three (3) items packaged in the same document as the parties` “agreed facts”.
[13] Two issues rise to the fore. Firstly, the three (3) items listed as “agreed facts” were hardly sufficient for purposes of resolving the factual disputes raised in the pleadings before the court a quo. Those factual contestations still stood as neither side had ameliorated them via admissions. Secondly, the eleven (11) items listed as “agreed facts” were, quite plainly, not agreed facts at all.
[14] Those items constituted questions or issues which the parties requested the court a quo to decide. They were not agreed facts at all but matters in contention. Unsurprisingly, the court a quo`s judgment reflects an attempt to resolve those stated issues. But in doing so, the court a quo proceeded bereft of an essential component of a stated case; - the statement of agreed facts.
MATERIAL DISPUTE OF FACT
[15] And as matters stood, the court a quo soon stumbled on a hurdle in its path. There was an acutely contested fact which required prior resolution before the matter could proceed. The appellants had challenged the validity of the loan agreement on the basis of noncompliance with section 26 (1) (a) and (c) the Act. Such non-compliance triggered the procedural requirements set out in section 26 (1) (b).
[16] The respondent opposed that position and insisted instead, that it had complied fully with section 26 (1) (a) and (c) of the Act. It laid out the grounds to support its contentions. The court a quo was faced with two unresolved positions on a key issue that affected the procedure to be adopted. Section 26 (1) (a) and (c) of the Micro Finance Act. This section provides as follows; -
26 Requirements for lending by microfinance institutions
(1) Before a microfinance institution makes a loan or advances credit to a borrower, the institution shall take reasonable steps to ensure that—
(a) the borrower will be able to fulfil his or her obligations under the agreement while still being able to meet the necessary living expenses of himself or herself and his or her family; and
(b) the capital sum of the loan or advance shall be recoverable from the borrower in a manner that will be agreed upon between the microfinance institution and borrower, failure of which, the loan or advance will be recoverable through an application by the lender to a competent court on the terms that safeguard the interests of both parties
[Paragraph amended by Act 6 of 2019]
(c) a credit control advisor provides the borrower with the necessary information to enable him or her to manage his or her credit.
(2) A microfinance institution shall allow a borrower an opportunity to read the loan agreement or to have it read to him or her, before he or she signs it, and shall provide the borrower with a copy of the agreement when he or she had signed it.
(3) If a microfinance institution makes a loan or advances credit without complying with subsection (1) or (2)—
(a) no interest shall be payable on the loan or advance; and
(b) the capital sum of the loan or advance shall not be recoverable from the borrower unless a competent court, on application by the microfinance institution, has condoned the institution’s failure to comply with the provision concerned.
[17] The requirements under paragraphs (a) and (c) of section 26 (1) translate to a series of technical credit assessment formalities which a lender is obliged to conduct in terms of the Act. The details thereof are not in the Act specified. Which renders the entire exercise a matter of the facts and circumstances dictated by the standards applicable to the lending industry. Such standards are partly the responsibility of the Registrar of Micro Finance institutions appointed in terms of Part II of the Act. The said Registrar`s functions include, per section 5 of the same Act, cascading relevant policy directives from the Reserve Bank of Zimbabwe (RBZ).
[18] These include the National Microfinance Policy2 which addresses a number of policy matters that ought to guide the operation of microfinance institutions such as respondent. Drawing down from these observations, it was therefore up to the parties to present and test evidence confirming adherence with section 26 (1) (a) and (c) of the Act. As matters stand, respondent argued that it carried out all the necessary steps. The appellants dispute that averment and argue that loading second and third appellants with further obligations is not the sort of creditworthiness checks envisaged by the Act. These contentions threw the matter wide open on the disputed facts.
“THE STATED CASE” IN TERMS OF THE MAGISTRATES COURT CIVIL RULES
[19] Against the above conclusion, I advert to the provisions of Order 19 (6) as read with Order 19 (10) (1) (b) of the Magistrates Court Civil Rules. The court a quo was enjoined to follow the directions set out in the rules on a truncated trial procedure. It needed ahead of all else, to confirm the agreed facts and legal issues to be determined. Next, the court a quo was obliged to establish whether or not it would dispense with evidentiary issues and resolve the dispute on legal matters only. In either instance, the court a quo had to document its reasons and process.
[20] This was the guidance issued by the Supreme Court in Leathout Investments (Pvt) Ltd v Future Chirangano Muvirimi & Anor SC 60-21, GOWORA JA (as she then was) discussed the leading case on the stated case procedure; - Kunonga v The Church of Central Africa SC 25-17. The learned Judge of Appeal concluded her discourse with the following statement [ at page 12]; -
“A stated case must set out the facts as agreed by the parties. The facts must not be in contention nor should a material dispute of fact be manifest on the statement constituting the agreed facts.”
EFFECT OF THE COURT A QUO`S FAILURE TO CONSIDER THE PRELIMINARY ISSUE ON SECTION 26 (1) (a) and (c) OF THE ACT
[21] By failing to follow the correct stated case procedure, the court a quo automatically trammelled itself. It could neither resolve the dispute of fact that emerged, nor address the legal points in contention as they were married to the factual conspectus. That failure amounts to a gross misdirection. Especially considering that the entire progression of the dispute was predicated on resolution of the question of compliance with section 26 (a) and (c) of the Act.
[ 22] It is an established principle of law that failure by a court to consider matters placed before it for resolution is a fatal misdirection. See PG Industries (Zimbabwe) Ltd v Bvekerwa & Ors 2016 (2) ZLR 14 (S) at 18 H where it was held that; -
“The position is settled that where there is a dispute on a question, be it on a question of fact or point of law, there must be a judicial decision on the issue in dispute. The failure to resolve the dispute vitiates the order given at the end of the proceedings. Although the learned judge may have considered the question as to whether or not there was an irregularity in the citation of the employer, there was no determination on that issue. In the circumstances, this amounts to an omission to consider and give reasons, which is a gross irregularity.”
DISPOSITION
[23] This misdirection impinged on the court a quo`s treatment and reasoning of the facts and law. It resulted in the court a quo`s failure to resolve a matter before it; -namely whether or not the loan agreement was invalid for want of compliance with section 26 (1) (a) and (b) of the Act. Given the primacy of the milestone at which the court a quo stumbled, the above observation renders the rest of the issues nugatory. We were referred to the Supreme Court decision of Gwaradzimba v C.J Petron and Company (Pty) Ltd SC where it was held thus on this very point, at [23]; -
“The position is well settled that a court must not make a determination on only one of the issues raised by the parties and say nothing about other equally important issues raised, “unless the issue so determined can put the whole matter to rest” – Longman Zimbabwe (Pvt) Limited v Midzi & Ors 2008 (1) ZLR 198, 203 D (S).” [ underlined for emphasis]
[24] In the absence of the resolution of that matter, the rest of the issues were improperly addressed and adjudicated upon. In that regard, it is necessary to remit the matter back to the court a quo to remedy the defects noted. In particular, the court a quo must commence with the pretrial procedure and progress the matter correctly in terms of the rules.
It is hereby ordered that; -
The appeal succeeds in part and the judgment of the court a quo is set aside in its entirety.
The matter is remitted to the court a quo to be placed before a different magistrate with directions to progress proceedings from the pre-trial stage.
The respondent to pay the costs.
MANZUNZU J ___________________I agree
Kossam Ncube and Partners-appellants` legal practitioners
Nyamundanda & Mutimudye Attorneys-respondent`s legal practitioners
[CHILIMBEJ___10/7/24]
1 Page 13 of the record a quo and page 27 herein.
Cited documents 2
Act 2
| 1. | Appropriation (2019) Act, 2019 | 15 citations |
| 2. | Microfinance Amendment Act, 2019 | 2 citations |