Jonathan Gapare v MBCA Bank Ltd & 2 Ors

### Preamble
1
HB 221/20
HC 3285/18
XREF HC 270/17, SSB 45/18
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JONATHAN GAPARE

Versus

MBCA BANK LTD

And

RODNEY GOMIWA

And

SHERIFF OF THE HIGH COURT N.O

HIGH COURT OF ZIMBABWE

KABASA J

BULAWAYO 23 SEPTEMBER AND 8 OCTOBER 2020

Opposed Application

J Sibanda, for the applicant

D Matawu, for the 1st respondent

T Tavengwa, for the 2nd respondent

KABASA J:		This is an application brought in terms of section 359 (8) of the High Court Rules, 1971, to set aside the decision of the 3rd respondent, which decision confirmed the sale in execution of the applicant’s immovable property to the 2nd respondent.

The background facts are these.  The applicant owns a company called TLP Agencies (Pvt) Ltd.  The company owed money to the 1st respondent and the applicant was surety and co-principal debtor.  The 1st respondent obtained judgment which resulted in the sale of the applicant’s immovable property in satisfaction of the debt.

The immovable property, known as Stand number 2254 Bulawayo North of Bulawayo Township Lands aka No. 9 Carnegie Road Northend and was sold for $94 000 and the 2nd respondent was duly declared the highest bidder.

Aggrieved by the sale, the applicant invoked the provisions of Rule 359 (1) of the High Court Rules, 1971.  The rule provides that:-

(1)	“Subject to this rule, any person who has an interest in a sale in terms of this order may request the Sheriff to set it aside on the ground that –

(a)	the sale was improperly conducted : or

(b)	the property was sold for an unreasonably low price: or on any other good ground.”

The applicant’s objection was premised on the provisions of Rule 359 (1) (b), that the property was sold at an unreasonably low price.  The gist of the argument was that $94 000 paid through RTGS would not fetch $94 000 in United States Dollars as the prevailing unstable macro-economic environment within the country meant that $94 000 transferred through RTGS would fetch less than $10 000 United States Dollars.

The 3rd respondent found that the applicant was basing his argument on illegal “black market” rates and concluded that it was therefore not a sound legal argument.  Secondly the applicant had not provided a willing buyer who was prepared to offer a price surpassing the $94 000.  Consequently the 3rd respondent dismissed the objection and confirmed the sale in execution.

Still aggrieved, the applicant brought the present application in terms of Rule 359 (8) which provides that:-

(8)	“Any person who is aggrieved by the Sheriff’s decision in terms of subrule (7) may, within one month after he was notified of it, apply to the court by way of a court application to have the decision set aside.”

The issue is whether the applicant was able to show that the property was sold at an unreasonably low price thereby justifying the setting aside of the 3rd respondent’s decision.

The applicant’s argument before the 3rd respondent and before this court is essentially that $94 000 paid through RTGS is not really $94 000 in real terms.  He chronicled the macro-economic situation from the introduction of the multi-currency system in 2009 which was dominated by the use of the United States Dollar as the currency of choice by most Zimbabweans, to the introduction of the bank notes through the promulgation of SI 133/2016 and finally the RTGS electronic money transfers.

SI 133/2016 which amended the Reserve Bank of Zimbabwe Act, Chapter 22:15 provides that:-

“The tender of payment of bond notes issued by the bank shall be legal tender in all transactions as if each unit of a bond note is exchangeable for one United States Dollar.”

The bond note had the same value as a United States dollar.  The RTGS was later introduced as a mode of payment and refers to a funds transfer system which is essentially an electronic funds transfer that took away the use of cash.

The applicant argues that in reality the bond note was not equivalent in value to the USD and the RTGS system was meant to address the scarcity of bond notes but in reality RTGS is phantom money.

To quote from the applicant’s founding affidavit would adequately capture the import of his argument.  He says:-

“This present application is predicated more in that background because my property was sold at an auction on 28 October 2018 by 3rd respondent with payment to be made by 2nd respondent by way of RTGS.

I want to make it abundantly clear that it is the method of payment to be utilized in this matter that is the source of anguish.

If payment can be made by US dollars or equivalent in Bond notes of the amount bidded, I would have no cause to complain.  That way value would have been maintained.”

Is this argument sound at law?  Mr Sibanda for the applicant was at pains to show that the reality is that the US dollar is not at par value to the bond note and RTGS is virtual money.  The payment of $94 000 through RTGS can therefore not be regarded as equivalent to $94 000.

Equity demands that the sale be set aside as the RTGS payment means the property would have been sold at a fraction of its value, so argued Mr. Sibanda.

Asked by the court whether he was asking the court to go against the law and consider the market distortions introduced by the illegal “black market” rates, his response was:-

“It is all to do with equity, all to do with fairness.”

Is this tantamount to say the court must violate the law in the name of equity?  Is equity not supposed to follow the law?  Can the Court act outside the law for the purposes of achieving equity?

Mr Matawu for the 1st respondent had an answer to these questions.  He argued that the applicant did not tender any proof that the property was sold at an unreasonably low price and proffered no valid legal argument to support the setting aside of the sale.

As at the time of the sale, 28th September 2018, bond notes were at par value with the USD and RTGS as a mode of payment was premised on the fact that bond notes were legal tender.  Payment in bond notes was equivalent to payment in USD.

A valuation report by Bard Real Estate gave the open market value of the applicant’s property at US$55 000 and a forced sale value of US$ 35 00.  The $94 000 the property was sold for was therefore much more than these values.  It can therefore not be said the property was sold at an unreasonably low price.

The court must look to the law and the law is clear as regards the value of $94 000, whether paid as bond notes, USD or through RTGS, so argued Mr. Matawu.

Mr Tavengwa for the 2nd respondent’s argument was the same.  Counsel submitted that $94 000 was paid, whether it was bond notes, USD or RTGS makes no difference as the law is clear and settled.  The 2nd respondent actually held United States Dollars in his bank account which were electronically transmitted to the 3rd respondent and $94 000 represents a fair value of the property.

I am persuaded by the arguments made by counsel for the 1st and 2nd respondent.  This is why:-

In Marfopolous v Zimbabwe Banking Corporation Ltd and Others 1996 (1) ZLR 626 (H) the learned Judge made the point that there is need to protect a judgment debtor on one hand and on the other hand to ensure that the judgment creditor who has been forced to go to court to obtain satisfaction of his debt secures just relief.

“It is also crucial to ensure that the reliability and efficacy of sales in execution are 	upheld.”

The applicant in applications of this nature must therefore show good cause to set aside sales in execution lest the public loses confidence in the judicial system which allows for such sales.

In Bobby Maparanyanga v The Sheriff of the High Court and 4 Others SC 32-02, GWAUNZA AJA (as she then was) made the following remarks:-

“There is one argument advanced on behalf of the second respondent that calls for comment.  It is contended for him that for public policy reasons as a result allowing the sale in casu to be set aside would bring the entire system of judicial sales in execution into disrepute.  It is submitted further in this regard that the public at large would lose entirely the confidence which it has had up to now in this well established device which for decades facilitated the recouping of debts owed to banks and the like.”

This argument was worth comment, in my view, because all things being equal, this submission was sound and spoke to the importance of not unnecessarily setting aside sales in execution unless there is a valid reason to do so.

Whilst the circumstances in the Maparanyanga case (supra) are different from the ones in casu and in the Maparanyanga case there was good and valid reason for the setting aside of the judicial sale as proper procedures had not been followed, the point to be made is, it is only where the facts and circumstances of a case justify such setting aside of a sale in execution that a court accedes to such a course.  Public policy would otherwise dictate that such sales in execution be not undermined so as to preserve the efficacy of these sales.

Equally in Smith and Another v Acting Sheriff of the High Court and Another 1995 (1) ZLR 158 (S) McNally JA had this to say regarding sales in execution:-

“Current public concern over the fate of people who lose their houses because of economic misfortune is a good example of the clash between the stricter western legal mentality and the gentler, more compromising, customary law outlook.  We must be careful not to drift into maudlin sentimentality and excessive sympathy for the hard-luck stories.  If we do, we undermine the very efficient and effective mechanisms by which housing is funded.  But there is no reason why the courts should not take account of the fact that forced sales generally realise a lower price than ordinary sales, and that the judgment debtor’s interests rank low in the scale of priorities in those sales.  Perhaps too low.”

The thread which runs through these cases speaks to the need to balance the interests of the debtor and the creditor whilst ensuring that the efficacy of judicial sales in execution is not undermined.

That said, in casu, the applicant seeks to have the sale set aside because of the method of payment of the $94 000.  If the $94 000 was to be paid in USD or its equivalent in bond notes, he would not have issues with the 3rd respondent’s confirmation of the sale.

This to me shows an acknowledgment of the fact that the $94 000 the house was sold for is not an unreasonably low price.  The 1st respondent submitted a valuation of the property which showed that the $94 000 was more than the open market value and the forced value of the applicant’s property.  The applicant did not submit any valuation of the property or proof of a buyer whose offer exceeded the $94 000.

The unreasonably low price claim is therefore not supported by any legal argument.  The 3rd respondent’s reasoning was as follows:-

“What is clearly coming out from the above is that the applicant wishes to justify the value of this property based on the unconfirmed rates on the black market.  The judgment creditor, which is a registered banking institution, was more than willing to recoup the debt outstanding and readily accept the funds realised from the judicial sale in settlement of the outstanding debt.”

I found no fault with such reasoning.  Counsel for the applicant must have appreciated this and decided to push the equity argument.

In The President v Bhebhe and Others 2013 (1) ZLR 288 (H) CHIWESHE JP had this to say:-

“Advocate Mpofu (for the respondent) argues that the court, being a court of law, has no jurisdiction to grant relief based on equity and other practical considerations.  I disagree.  This is as much a court of law as it is a court of justice and equity.  In any event it is trite that this court has inherent jurisdiction to manage the execution of its own orders, ensuring whenever necessary that the execution of the same does not lead to absurd or irrational outcomes.”

Whilst the learned Judge President ruled that the court had jurisdiction to grant relief based on equity, I however do not interpret the learned JP’s remarks to mean the court can do violence to the law in the name of equity.

The issue here is not that $94 000 is unreasonably low such that it will be unfair to the applicant to lose his house for a ridiculously low price.  The applicant is in essence asking the court, in the name of equity, to disregard the legal position and hold that $94 000 paid through RTGS is not money when the law says it is.

Mr. Sibanda cited SANDURA JA’s decision in Zimunhu v Gwati and Others 2002 (1) ZLR 602 (SC).  The learned JA made the point that:

“... It is only when the balance of equities is in favour of the judgment debtor that a sale in execution should be set aside on equitable grounds.”

It is however important to note that the equitable grounds advanced in the Zimunhu case (supra) did not seek to violate the law in the name of equity.  The equitable grounds raised in that case were that (i) the proceeds from the sale would not meet all the debts the applicant owed, (ii) the applicant was arranging a sale by private treaty which would realise more than what the sale in execution realised, (iii) the applicant intended to sell one of his properties to settle the debt and (iv) the other creditors who stood to be paid from the proceeds of the sale of the applicant’s immovable property had not opposed his application seeking the setting aside of the sale.  The learned JA proceeded to dismiss all four grounds for reasons I need not go into for purposes of this judgment.

The long and short of it is that the applicant in casu’s equitable grounds is not in any way related to the ones raised in the Zimunhu case.

The issue of RTGS payments as they relate to the value to be accorded to such in relation to United States Dollars was decided and settled in Zambezi Gas Zimbabwe (Private) Limited v NR Barber (Private) Limited and Another SC 3/20

The learned MALABA CJ put it thus:-

“Section 4 (1) (d) of SI 33/19 provides that all assets and liabilities that were valued and expressed in United States Dollars immediately before the effective date shall “on and after” the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.  The word is “values” and not “valued”.  “Values” and “valued” are two different concepts.  The former presents a notion of a set value which remains even where it is subjected to a certain conversion.  The latter, on the other hand, suggests a value which can be changed according to the circumstances under which the value is being applied.  The values referred to in section 4 (1) (a) of SI 33/19 show that after a one-to-one conversion the RTGS dollar takes the value and character of the United States dollar.”

The payment of $94 000 through RTGS was therefore the payment of $94 000 United States dollars.  Sight must not be lost of the fact that this payment was done in 2018 and counsel for the 2nd respondent’s submission that the 2nd respondent actually had USD in that account was not controverted.  The 2nd respondent therefore transferred $94 000 through RTGS and that mode of payment did not change the value of the $94 000.

In the circumstances, the remarks made by MATHONSI J (as he then was) in Chiutsi v The Sheriff and Others HH 604-18 would apply with equal force in casu:-

“The rights of 3rd parties who would have purchased properties from the Sheriff should also be protected and cannot be defeated by fanciful arguments as the ones made by the applicant relating to the rate of exchange between the bond notes and the United States Dollars which do not make sense at all.”

In casu, such argument does not make sense in so far as it seeks this court to take judicial notice of what is obtaining on the illegal parallel market and ignore what the legal position is.

The court cannot deem a $94 000 RTGS payment as any less a payment because the applicant would rather have the amount paid in United States dollars or in bond notes.

The fact that the Reserve Bank of Zimbabwe subsequently directed that banking institutions open nostro accounts for foreign currency denominated accounts whilst keeping bond notes and RTGS accounts separate so as to denote the different values to be attached to these currencies does not extend to the purchase of the applicant’s property on 28th September 2018 and the subsequent payment of the $94 000 by the highest bidder.

The fluidity of the monetary policies as dictated by the unstable macro-economic forces is no reason to justify a setting aside of a sale in execution which was properly conducted.

The 3rd respondent dismissed the applicant’s argument thus:-

“In interrogation of such argument (sic), it is notable that the applicant had sought to lure this tribunal into a precarious legal position in which the office of the Sheriff was to usurp the duties of the banking institutions at large and confirm or otherwise refuse the values obtained at auctions as contrary to the legal position stated in the Reserve Bank Act.  It is my considered view that such argument will result in a legal absurdity that would inadvertently affect the efficacy of judicial sales and would drag the Sheriff into the murky realm of illicit money trades that ply the parallel markets.”

I would say even if the equity argument had been argued before the 3rd respondent, the remarks made would still be relevant and correct.

The applicant has failed to show that a higher price could have been obtained for his property or that the price obtained was unreasonably low.

The 3rd respondent’s decision cannot be faulted and there is no basis to set it aside. Mr.Sibanda sought to argue that there was another ground that was not on the papers justifying the setting aside of the sale and that being the fact that the capital amount has since been paid. Mr. Matawu confirmed that a payment had been made but there are still amounts that are outstanding. In any event such payment was made after a valid sale had already been conducted.

I would say the fact that this argument was not presented before the 3rd respondent shows that such payment had not been made as at the time the sale was confirmed. If Courts were to set aside sales in execution on the basis that some money was paid well after the conclusion of the sale in execution and the confirmation of such sale, would this not erode public confidence in such sales and work against the efficacy of such sales? I think it would.

The applicant ought not to have challenged the 3rd respondent’s decision.  The challenge was really a “cry for mercy” and not based on legal argument.  The law does not follow equity but equity follows the law.

The respondents were put out of pocket in opposing an application which the applicant ought not to have filed.

The respondents have therefore made a case for an order for punitive costs.  A litigant must not take a chance and drag other parties to court, thereby unnecessarily putting them out of pocket.

In the result I make the following order:-

1.	The application for the setting aside of the decision of the Sheriff to confirm the sale in execution of the applicant’s immovable property, stand number 2254 Bulawayo Township Lands be and is hereby dismissed.

2.	The applicant shall pay costs at an attorney-client scale.

Job Sibanda and Associates, applicant’s legal practitioners

Coghlan, Welsh & Guest c/o Coghlan & Welsh, 1st respondent’s legal practitioners

Mutuso Taruvinga and Mhiribidi, 2nd respondent’s legal practitioners