Court name
Harare High Court
Case number
HC 3114 of 2013
Case name
Fairdrop (Pvt) Ltd v Capital Bank Corporation Ltd & Ors
Law report citations
Media neutral citation
[2014] ZWHHC 305
Judge
Mathonsi J

HH 305-14

HC 3020/13

HC 3114/13

FAIRDROP (PVT) LTD

versus

CAPITAL BANK CORPORATION LIMITED

and

JOURNET TRADING (PRIVATE) LIMITED

and

ELSPENCE INVESTMENTS (PRIVATE) LIMITED

and

PEDAL BALL INVESTMENTS (PRIVATE) LIMITED

and

MILL HILL INVESTMENTS (PRIVATE) LIMITED

and

TRINTESH ENTERPRISES (PRIVATE) LIMITED

and

DEF INVESTMENTS (PRIVATE) LIMITED

and

KOALAC (PRIVATE) LIMITED

and

ATHLEYFORD INVESTMENTS (PRIVATE) LIMITED

and

DOISNE INVESTMENTS (PRIVATE) LIMITED

and

PROPERTY LEADERS CONTRACTORS (PRIVATE) LIMITED

and

ROCK FOUNDATION TRUST

and

MUNYARADZI KEREKE

and

VIALOGY INVESTMENTS (PRIVATE) LIMITED

and

EASTERN AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT (PTA) BANK

 

 

 

HIGH COURT OF ZIMBABWE

MATHONSI J

HARARE, 28 May 2014 and 18 June 2014

 

 

 

Opposed application

 

 

 

L Uriri, for the applicant

T Magwaliba, for the first respondent

 

 

            MATHONSI J: At the request of the parties to these 2 applications I agreed to hear both of them simultaneously given that the matters are related and arise from the same issue. In the first application, namely HC 3020/13 the applicant seeks to join the 15th respondent, the Eastern and Southern African Trade and Development (PTA) Bank (“the PTA Bank”) as a party to the proceedings brought by the first respondent (“Capital Bank”) in HC 999/13.

            In the second application, namely HC 3114/14, the same applicant seeks leave to serve process in HC 999/13 upon the PTA Bank at Chaussee du Prince Loise Rwangasore, Bujumbura in Burundi, by edictal citation. This judgment therefore disposes of both applications.   

            Capital bank sued the applicant and 13 others on the basis of agreements entered into on 19 July 2010, 2 September 2010 and 9 December 2010 in terms of which the applicant was loaned sums of money the balance of which allegedly stood at US$ 2 575 038-70 as at 31 March 2012. The other defendants in that matter who are also respondents herein were sued as sureties and co-principal debtors in that action.

The defendants contested that suit and in due course the applicant, who is the first defendant in that action, filed a plea in which, pleading rectification, prayed that the action be stayed pending the determination of its counterclaim for the rectification of the contract upon which Capital Bank sued as well as the determination of another matter being HC 5427/12 in which it had sued Capital Bank and others for certain damages.

The applicant then filed a counterclaim in that matter wherein it cited the PTA bank as the 15th defendant. It averred that itself and Capital Bank had executed the loan agreements I have already referred to but that such agreements do not correctly record the agreement of the parties in that it records Capital Bank as the lender when in actual fact the lender was the PTA Bank which granted the applicant a loan facility of US$2,5 million. It averred further that the PTA Bank could not register the loan in its books because; Munyaradzi Kereke who is the 13th defendant in that matter and is associated with the applicant, was on the European Union sanctions list. The PTA Bank had then appointed Capital Bank’s predecessor, Renaisance Merchant Bank Limited as its escrow or disbursement agent as a sanctions bursting measure. The applicant then sought an order rectifying the contracts by the substitution of the PTA Bank in the place of Renaisance Merchant Bank and costs of suit on the legal practitioner and client scale.

      For completeness I must mention that the action in HC 999/13 is still to be set down for trial. Meanwhile, the applicant has brought these 2 applications. In HC 3020/13, Munyaradzi Kereke, reiterated what is contained in the plea in HC 999/13 in his founding affidavit, that the applicant applied to the PTA Bank for an offshore line of credit of US$2,5 million. He attached a copy of the application which is headed “PTA Bank, $2,5 Million Loan Application” dated 21 July 2010. He deposed that the PTA Bank granted the facility and as proof of that he attached what is termed “Indicative Term Sheet; Proposed Structured Amortized Medium Term Import Financing Facility for Fairdrop Trading Private Limited Trading as Rock Foundation Medical Centre July 2010.”

Kereke stated that although Capital Bank has issued summons as the principal lender, there is no privity of contract between the parties. As the applicant has pleaded rectification and counterclaimed for it and cited the PTA Bank as a defendant, leave was being sought to join the PTA Bank in the proceedings. In the event of the counterclaim being granted, the dispute in the claim in convention cannot be decided without PTA Bank. For that reason the applicant sought to invoke third party procedure to join the PTA Bank as a party.

The application is strongly opposed by Capital Bank and in the opposing affidavit of Lawrence Tamayi, its Managing Director, it denied the allegation that it was the escrow or disbursing agent of the PTA Bank. He stated that clause 19 of the credit facility letters specifically excludes any other terms or conditions or agreements which are not recorded in the credit facility letters. The said clause reads:

“This offer, once accepted, constitutes the entire agreement between the parties who acknowledge that there are no other oral or written undertakings or agreements between them relating to the subject matter of this agreement. No amendment, consensual cancellation or other modification of this agreement shall be valid or binding on a party hereto unless reduced to writing and executed by both parties hereto.”

 

As Kereke signed the agreement on behalf of the applicant, he being an accomplished banker, he knew the import of that provision and it bound the applicant to the agreement and nothing else. Tamayi vehemently denied that the application form to PTA Bank relied upon by the applicant is a binding contract between the applicant and the PTA Bank as it makes it clear that the PTA Bank was not making any undertaking to legally bind itself to lend on the terms set out therein and that any agreement reached would be subject to the written approval of the PTA Bank. 

In any event, Tamayi argued, the document applicant relies on, makes it clear that it is governed by the laws of England. In addition, the applicant and sureties provided security to Capital Bank in the form of mortgage bonds, notarial bonds and unlimited guarantees. These securities were not given in favour of the PTA Bank. Significantly, the applicant made loan payments amounting to US$ 634 794-95 to Capital Bank and not the PTA Bank. According to Capital Bank the application is designed to delay the finalisation of the action and nothing else. It accessed funds from the PTA Bank by a separate arrangement and lent the funds to its clients including the applicant which explains why its predecessor made reference to the “PTA Bank credit facility” in correspondence.

The second application, HC 3114/13, is made in terms of Order 6 r 44 for edictal citation. The applicant insists that this court has jurisdiction over the matter because:

“8.1.    the court has already assumed jurisdiction in respect of the claim in convention, in which rectification has been pleaded, and

8.2.      the rectification necessarily requires that the PTA Bank be a party in the counter claim, and

 

8.3.      the PTA Bank is the principal lender, and

 

8.4       the PTA Bank’s loan to the applicant constitutes sufficient assets to found jurisdiction in addition to the fact that it has other numerous assets in Zimbabwe.”

 

            The issues for determination in this matter are whether this is a proper case in which the PTA Bank should be joined as a party to the proceedings and whether this court does have jurisdiction over the PTA Bank and the agreement, if any which was entered into between the applicant and the PTA Bank, which is an entity cherishing its domicile in Burundi.

            Mr Uriri for the applicant submitted that the applicant seeks third party joinder in respect of the claim in reconvention which it has already filed and in which it has gone on to cite the PTA Bank as a defendant.  For that reason the PTA Bank is already in court and it would be undesirable to have it as a party in reconvention and not a party in convention.  He conceded that a joinder is discretionary on the court.

            I take the view that in order for the court to exercise its discretion in favour of the applicant, it must be satisfied, not only in the procedure adopted but also on the question of jurisdiction.  It would be pointless to join a party to the proceedings when the court enjoys no jurisdiction over that party.  In fact, even the grant of leave for edictal citation is predicated upon the existence of jurisdiction.  In terms of r 44 (3) of the High Court of Zimbabwe Rules, 1971:

 

“Application for leave of the court or of a judge shall be made by application in terms of Order 32 setting out concisely –

 

(a)                the facts upon which the cause of action is based;

 

(b)               the grounds upon which the court has jurisdiction to entertain the claim;

 

(c)                the manner of service which the court or judge is asked to authorise, and if personal service cannot be effected the last-known whereabouts of the person to be served and the inquiries made to ascertain his present whereabouts.”

 

Mr Uriri submitted that while the PTA Bank is a foreign entity domiciled in Bujumbura Burundi, it has valuable property within this jurisdiction which can found or confirm jurisdiction.  In addition, the debt which is the subject of the litigation is itself sufficient to found jurisdiction.  The court having already assumed jurisdiction in the main lis, it should do so in respect of the counter claim.  I have serious difficulties with that argument.

I stand by the pronouncement that I made in Wong & Ors v Tsoi & Anor HH 380/13 (as yet unreported) where at p 5 of the cyclostyled judgment, I stated:

 

“The first respondent was therefore proceeding rough shod against all procedures set out in the rules, disregarding the rules and the law in razzmatazz fashion.  I say so because our civil practice and procedure is clear that a person domiciled and resident in a foreign country cannot be sued in this court as it does not have jurisdiction over that person.  For that reason there is need for an attachment ad fundandam jurisdictionem of that person or his property in order to make him amenable to the jurisdiction of the court.  Such person or his property can only be attached while he or it is within the jurisdiction of the court and only after an attachment order has been issued by the court.  It is important to point out that the attachment order should be issued by the court before the summons is issued against that person.” 

 

            The point is also made by the authors of The Civil Practice of the Superior Courts of South Africa, Herbstein and Van Winsen, 3rd ed (1979) at pp 788-789 that where an in cola wishes to sue a peregrinus and none of the usual grounds upon which the court might have jurisdiction is present, attachment is a condition precedent to the action for it is upon the attachment that the court’s jurisdiction is founded.

            I therefore, do not agree with Mr Uriri that the presence of unspecified and undefined property belonging to the PTA Bank or the debt which is the subject of the dispute is enough for the court to exercise jurisdiction.  Where a peregrinus is being sued, even if it has property in Zimbabwe, the plaintiff must first seek and obtain an attachment order to found or confirm jurisdiction, as the case may be.  Even if the court were to act in terms of s 15 of the High Court Act [Cap 7:06] which allows the court to direct service of process without an attachment order, it can only do so if satisfied that the person or his property is within Zimbabwe and is capable of attachment or arrest.  Chirongoma v Tdg Logistics & Anor 2011 (1) ZLR 98 (H) 101H and 102A – B.

            The existence of a claim in Zimbabwe which claim is the subject of the dispute, no matter how substantial that claim is, cannot satisfy the requirement relating to jurisdiction.  Bowes & Ors v Manolakakis 2011 (2) ZLR 59(H) 63C; Ginsbera v Estate Kulf 1924 SNA 1 at 2.   

            Mr Uriri for the applicant sought to rely on the authority of Voicevale Ltd v Freightlink (Malawi)Ltd 1987 (2) ZLR 22 (S) to submit that the subject matter of the litigation can be a basis upon which jurisdiction is founded.  In that case both parties were peregrini and the peas which were the subject of the contract were in Harare when one of them terminated the contract.  The other party had sought an order for attachment of the consignment of peas to found jurisdiction for an order of specific performance against the respondent.  The Supreme Court held that the High Court had jurisdiction by virtue of being the forum rei sitae, the court within whose area of jurisdiction the subject matter of the dispute is situated.

            In my view that case is clearly distinguishable from the present.  There the matter involved an application for leave to attach in order to found jurisdiction.  The goods sought to be attached were pointed out and firmly located in Harare, Zimbabwe.  This is not an application for leave to attach in order to found jurisdiction.  It is an application for leave to serve process outside Zimbabwe, a process which has been issued before an order of attachment and without leave.  The case of Ex Parte Mor-tal Construction Co (Pvt) Ltd 1962 (2) SA 664 (SR) does not advance the applicant’s cause either because in that case the court already had jurisdiction against the peregrinus not dependant solely on attachment of property, as the cause of action arose within its jurisdiction.

            Mr Magwaliba for the first respondent submitted that this is not a case in which I should exercise my discretion in favour of joinder because Capital Bank, which is the plaintiff, does not have any claim against the PTA Bank.  What has happened is that one of the 14 defendants in the main suit, the applicant herein, seeks the joinder in order to substitute a creditor. Strange indeed.  The 2 applications are a grand scheme in order to avoid liability.  He maintained that the applicant’s counter-claim, apart from it having been issued without the leave of the court where leave was required, cuts against the provisions of r 120 of the High Court Rules.  That rule allows a defendant in an action to set up by way of claim in re-convention any right or claim he may have against the plaintiff.  In casu, the applicant’s claim is against the PTA Bank and should be made separately.

            To my mind these applications are meant to cloud an otherwise straight forward case.  They bring inconvenience to the parties which is as unnecessary as it is undesirable.  The applicant seeks to import into the dispute an intended transaction with the PTA Bank which does not appear ex facie the papers, to have been consummated.  It was proposed and as to when it transformed into a fully-fledged agreement, we are not told.  Significantly, not only is the PTA Bank a peregrinus whose property has not been attached to found jurisdiction, the intention of the parties in the document relied upon was to be governed by the “Laws of England” not of this court.  It had certain conditions precedent which do not appear to have been fulfilled.

            The applicant does not dispute that it paid substantial sums to Capital Bank towards satisfaction of the debt without demanding that payment be made to the PTA Bank.  It is noteworthy that the securities given for the debt were given in favour of Capital Bank and not the PTA Bank.  It is difficult to comprehend what the rectification the applicant is seeking would achieve.

            In my view, the balance of convenience favours the refusal to grant the indulgence of joinder.  To the extent that third party joinder is discretionary upon the court, I cannot exercise such discretion to cause inconvenience under circumstances where the applicant can still rely on the defence it has elected without the need of having the PTA Bank in court.

            It occurs to me that these applications should not have been made at all.  They are an attempt to frustrate and harass the first respondent by a litigant trying to construct a defence which is probably as limping as it is non-existent.  It is a matter be fitting an award of costs on the punitive scale.  It is only that way that such conduct can be discouraged.

            In the result, I make the following order that:-

1.                  The application in case number HC 3020/13 is hereby dismissed.

2.                  The application in case number HC 3114/13 is hereby dismissed.

3.                  The applicant shall bear the costs of suit in respect of both applications on the legal practitioner and client scale.

 

 

 

Honey and Blackenberg, applicant’s legal practitioners

Danziger and Partners, respondent’s legal practitioners