Blessing Mashangwa V Mcdowells International (Pvt) LTD AND Registrar OF Deeds

### Preamble
1
HH 288-13
HC 2771/13
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BLESSING MASHANGWA

versus

McDOWELLS INTERNATIONAL (PVT) LTD

and

REGISTRAR OF DEEDS

HIGH COURT OF ZIMBABWE

TAKUVA J

HARARE, 23 July and 2 September 2013

Opposed Application

T. Govere, for the applicant

D. Kanokanga, for the respondents

TAKUVA J: This is an application for summary judgment in terms of order 10 r 64 of the High Court Rules 1971. It is based on the following facts, “On 20 March 2013, the applicant caused summons to be issued for an order compelling the first respondent to pay the applicant the sum of US$162 870-24 and interest thereof at the rate of 13% per month capitalised on a monthly basis reckoned from the 20th day of March 2012 to the date and month of full payment.

It was contended that the first respondent has no bona fide defence to the action. Indeed during the hearing, it became apparent that the first respondent has no bona fide defence to the claim on the merits. The first respondent relied on the illegality of the transaction as a defence on one hand and that the Investment Agreement was not entered into with the first respondent but with Mcdowells International Properties Investments. The first respondent also denied that it was unjustly enriched to the tune of US$1 628 704-28. As regards immovable property the applicant wanted to be declared executable, it was submitted that the properties were not executable since they were never surrendered to the applicant as security.

In my view the real issues are:

Whether the Investment Agreement was unlawful

Whether the pari delictum rule should be relaxed

Whether the first respondent has a bona fide defence.

The first issue is easier to dispose of. The argument here is that the first respondent

was never licensed as a banker. It is common cause that it was a licensed money lender. Therefore when it took deposits from the applicant, this was unlawful in that it amounted to a contravention of ss 5 and 7 of the Banking Act [Cap24:20]. The first respondent’s money lending licence was subsequently cancelled.

Mr Govere, for the applicant conceded properly in my view that the Investment Agreement was illegal. He however quickly pointed out that the court should use its discretion to relax the in pari delictum rule in order “to do justice between man and man”. From the submissions of both parties, it is quite clear the agreement was unlawful. It is trite that anything done contrary to a direct statutory prohibition is generally void and of no legal effect. It is also an established principle of our law that if a transaction is found to be tainted with illegality, it will be necessary to consider the relevant facts surrounding its conclusion as well as the respective degrees of turpitude attributable to the parties in order to determine the extent of its illegality and its enforceability under the pari delictum rule -  See Young v van Rensbung 1991(2) ZLR 149(SC) at pp 156-157 and Hattingh & Ors v van Kleek 1997 (2) ZLR 240 (S) at p 246.

In Dube v Khumalo 1986 (2) ZLR 103 (S) GUBBAY JA (as he then was) said at p 109 D-G:-

“There are two rules which are of general application: the first is that an illegal agreement which has not yet been performed either in whole or in part, will never be enforced. This rule is absolute and admits no exception. See Mattews v Rabinowitz 1948 (2) SA 879 @ 878; York Estates Ltd v Wareham 1950 (1) SA 1255R @ 128, 1949 SR 197. It is expressed in the maxim exturpi causa non oritur action. The second is expressed in another maxim in pari delicto potcor est condition possidentis which may be translated as meaning ‘where the parties are equally wrong, he who is in possession will prevail’. The effect of this rule is that where something has been delivered pursuant to an illegal agreement the loss lies where it falls. The objective of the rule is to discourage illegality by denying judicial assistance to persons who part with money, goods or incorporeal rights, in furtherance of illegal transactions. But in suitable cases the courts will relax the par delictum rule and order restitution to be made. They will do so in order to prevent injustice on the basis that public policy ‘should properly take into account the doing of simple justice between man and man”.

In deciding where the justice of the matter lies, it is proper to consider that if the relief were to be refused to the applicant the respondent would be unjustly enriched at his expense. The requirements for liability under the unjust enrichment doctrine were crisply stated by NDOU J in Goncalves v Rodrigues 2004 (1) ZLR 122 (H) at p 136 as;

“(a) the defendant must be enriched

the plaintiff must have been impoverished by the enrichment of the defendant

the enrichment must be unjustified,

the enrichment should not come within the scope of one of the classical enrichment actions; and

there must be no positive rule of law which refuses an action to the impoverished person. See also Kommissaris van Binnelandse Inkomste en nAnder v Williers en Wndere 1994 (3) SA 283 (A)”.

In casu, it is abundantly clear that the applicant duly gave the first respondent the total

amount of $1 628 704-14 as at 20th March 2012. This amount was paid in terms of the Investment Agreement. The first respondent received the money and used it for its own purposes. Quite clearly the first respondent was enriched. As regards the second requirement, the applicant gave the first respondent notice to withdraw her money in terms of clause 3.2 of the investment agreement but the first respondent did not avail even a cent to the applicant. Quite evidently the applicant was impoverished by the enrichment of the first respondent. There is no justification for this enrichment. The enrichment is not within the scope of one of the classical enrichment actions. Also, there is no positive rule of law which bars an action to the applicant.

In the case of Jajbhay v Cassim 1939 Ads 37 @ 544-545, STRATFORD CJ had this to say:

“Courts of law are free to reject or grant a prayer for restoration of something given under an illegal contract, being guided in each case by the principle which underlies and inspired the maxim. And in this last connection I think a court should not disregard the various degrees of turpitude in delictual contracts……. And it follows from what I have said above, in cases where public policy is not foreseeably affected by a grant or a refusal of he relief claimed, that a court of law might well decide in favour of doing justice between the individual concerned and so prevent unjust enrichment”. (my emphasis)

In Hattingh’s case supra, KORSAH JA (as he then was) stated at 245E to 256B that:

“The cases clearly show that where a contract is on the face of it legal but by reason of a circumstance known to one party only, is forbidden by statute, it may not be declared illegal so as to debar the innocent party from relief; for to deprive the innocent person of his rights would be to injure the innocent, benefit the guilty and put a premium on deceit”. (my emphasis).

In the present case the first respondent new that it was not licensed to take deposits

from the applicant. This was not known or ought to have been reasonably known to the applicant at the time. The first respondent deceitfully allowed the applicant to deposit huge sums into its account. The first respondent then withdrew the money and spent it. In my view, to deprive the applicant of her rights would be to injure her and benefit the first respondent thereby putting a premium on the deceitful party. Even the Roman law frowned upon such conduct – see Pomponius’ excerpts in the Digest where he says:-

“Cum alterius detrimento – it is indeed by nature fair, that nobody should be made richer through loss to another”.

‘cum alterius detriment et injuria – it is fair by the law of nature that nobody should be made richer through loss and wrong to another”.

For these reasons, I find that it is fair and just that an order for restitution in favour of

the applicant be made. I would therefore relax the in pari delicto rule to prevent injustice.

The final issue is whether the first respondent has a bona fide defence. I must point out that while the applicant has attached documentary evidence to substantiate her averments the first respondent’s opposing affidavit is awash with bare denials without any credible shred of evidence to buttress its averments. The applicant filed bank statements as proof of the various amounts that were deposited into the first respondent’s account. Notwithstanding this, the first respondent insisted that the following are its “several defences”;

that the Investment agreement was entered into between the applicant and McDowells International Properties Investments and not Mcdowells International (Pvt) Ltd – the first respondent.

the agreement was illegal

that some of the deposits were not made by the applicant but by Ocean Hair

and Beauty (Pvt) Ltd

that applicant has failed to split the amount into capital and interest

that the immovable properties are not executable

that there is no basis upon which the applicant can claim collection commission

that, applicant deposited amounts that are different from those reflected on bank statements and proceeded to withdraw certain amounts.

The first so-called defence is not a defence at all. I say so because the first

respondent’s name is Mcdowells (Pvt) Ltd and not Mcdowells International Properties Investment. The latter is just a trading name and more importantly, the bank account is in the name Mcdowell’s International or simply Mcdowells. What is essential is that the first respondent received the amounts from the applicant. It is neither here nor there what name it chooses to call itself.

I have already dealt with the second defence relating to the issue of the legality of the agreement. The fact that the amounts were deposited by Ocean Hair and Beauty (Pvt) Ltd does not, in my view constitute a defence in this case. The heart of the matter is whether or not the first respondent received the money. As regards the separation of the amounts into two categories, I find this not to be a defence at all because the summons and declaration have precisely done that. Further the applicant has tabulated dates and amounts that were deposited.

The applicant has abandoned the prayer in respect of an order declaring the first respondent’s immovable properties executable. The applicant also conceded that if a finding is made that the investment agreement was illegal, then the prayer for an order compelling the respondent to pay both collection commission and interest at the rate of 13% per month is not legally sustainable.

The final purported defence is that the applicant’s figures are inaccurate in that it withdrew some amounts thereby reducing the respondent’s indebtedness. This in my view is just a bare assertion in that the first respondent did not support this averment with proof in the form of documents showing firstly what it says was deposited and secondly how much was subsequently withdrawn.

For these reasons, I am satisfied that the applicant has shown that the first respondent has not bona fide defence to its claim. As regards costs, both parties have asked the court to award costs on a legal practitioner and client scale. The first respondent’s argument is that the applicant should have foreseen the inappropriateness of the summary judgement procedure. On the other hand, the applicant argued that it is the first respondent’s conduct that has “unnecessarily and unreasonably precipitated and catapulted” the present litigation where it had neither modicum not scintilla of defence to the action. It was further submitted that the first respondent’s conduct amounts to an abuse of court process in that it is mendacious and mala fide

According to Herbstein and van Winsen, The Civil Practice of the Superior Courts in South Africa, 3rd ed, Juta and Co. Ltd 1979 at p 487, such costs will not be lightly granted as the court looks upon such orders with disfavour and is loath to penalise a person who has exercised his right to obtain a judicial decision on any complaint he may have. Attorney and client costs may be granted, according to these two learned authors, on the grounds of an “abuse of the process of the court, vexations, unscrupulous, dilatory, mendacious conduct on the part of an unsuccessful litigant, absence of bona fides in conducting litigation …” .

In casu, I find the first respondent’s conduct to be mendacious and vexatious in that its denial of receipt of the money and its failure to substantiate its claim that applicant withdrew some of the money are not only simple lies but annoying lies indicative of a high degree of unscrupulousness amounting to an abuse of the process of the court.

Accordingly, it is ordered that:-

The application for summary judgment be and is hereby granted in the following terms:

The first respondent be and is hereby ordered to pay the sum of US$1 628 704-24 (one million six hundred and twenty eight thousand seven hundred and four United States dollars and twenty-four cents) to the applicant with costs at attorney and client scale.

The first respondent be and is hereby ordered to pay interest on the above sum at the prescribed rate of 5% a tempore morae from the date of judgment to the date of payment in full.

Govere Law Chambers, applicant’s legal practitioners

McDowells International (Private) Limited c/o Messrs Kanokanga & Partners

1st respondent’s legal practitioners