Dees Engineering (Pvt) Ltd v Stanley Nyamhuka and Fortunate Munemba and Logmuc Elect (Pvt) Ltd

### Preamble
HH 5-2006
HC 10411-04
DEES ENGINEERING (PVT) LTD
versus
STANLEY NYAMHUKA
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DEES ENGINEERING (PVT) LTD
versus
STANLEY NYAMHUKA
and
FORTUNATE MUNEMBA
and
LOGMUC ELECT (PVT) LTD

PATEL J
HARARE, 26 July 2005 and 16 January 2006

Civil Trial

Mr. Magwaliba, for the plaintiff
Defendants in person

PATEL J:

The Facts

The plaintiff in this case claims payment in the sum of $29 million, together with interest at the prescribed rate, in respect of a cheque drawn on the account of the 3rd defendant and signed by the 1st and 2nd defendants.

At the trial of this matter, evidence was given by Farai Malunga, the Managing Director of the plaintiff company. Evidence for the defendants was presented by Stanley Nyamhuka and Fortunate Munemba, the 1st and 2nd defendants, who are both Directors of the 3rd defendant company.

The 2nd defendant was initially cited as P. Chiremba, as opposed to Fortunate Munemba. This anomaly was checked and corrected at the trial without any objection by the defendants. The plaintiff subsequently filed a notice of amendment, on the 5th of September 2005, substituting Fortunate Munemba as the 2nd defendant.

The material facts in this case are not in dispute. In April 2004, the defendants approached the plaintiff’s Managing Director (Malunga) to finance an order to supply goods worth $75 million to the Ministry of Health. The plaintiff was to provide $29 million by way of capital investment and receive a profit of $18 million. The arrangement was based on profit-sharing and on profits being realised. The agreement between the parties was purely verbal and was not reduced to writing.

The plaintiff then provided $29 million in cash to the defendants. In return, the defendants drew and delivered two post-dated cheques, payable on the 31st of May 2004, for $18 million and $29 million respectively (Exhibits 1 and 2). The understanding was that on the 31st of May 2004, the defendants would either confirm payment on the cheques already drawn or provide a fresh bank certified cheque for $47 million.

Subsequently, the defendants realised that the anticipated profit on the Ministry of Health order would not materialise. They then contacted Malunga indicating that there were insufficient funds in their bank account to meet the cheques *in casu* and offered to repay the capital sum of $29 million only. Malunga declined to re-negotiate the transaction and insisted on fulfilment of the original agreement. Subsequent attempts by the parties to settle were to no avail.

On the 9th of June 2004, the plaintiff received a cheque payment of $15 million and later, on the 20th of July 2004, a cash payment of $3 million from the defendants. The plaintiff appropriated these payments towards its claim for $18 million *qua* profit on the transaction. Malunga then followed up the claim on the capital amount of $29 million. The defendants were unable to tender payment. The plaintiff has therefore instituted this action for payment based on the defendants’ cheque for $29 million.

**The Issues**

The issues for determination in this case, as I perceive them, are as follows:

(a) When is a company director personally liable for his or her signature on a cheque drawn in the company’s name?


(b) What is the liability of the drawer and the right of the payee to sue on a cheque which is delivered to the payee but not thereafter presented for payment and dishonoured on presentment?

(c) To what extent is extrinsic evidence admissible of the circumstances surrounding the delivery of and payment by way of a cheque?

The Law

Section 72 of the Bills of Exchange Act [Chapter 14:02] declares that a cheque is a bill of exchange drawn on a banker payable on demand. Except as otherwise provided in Part III of the Act, the provisions of the Act applicable to bills of exchange also apply to cheques.

Section 25(1) of the Act provides that a person who draws a cheque indicating that he signs it in a representative capacity or on behalf of another is not personally liable. Such representative capacity must be clearly indicated on the cheque itself (Clan Transport Co. (Pvt) Ltd v Pemhenayi & Anor 1999 (1) ZLR 520, at 521-523). A person who appends his unqualified signature to a cheque cannot lead extrinsic evidence to show that he signed it in a representative capacity (ibid. at 521-522). Where a person signs a cheque on behalf of a company, the corporate status of the principal company must be reflected on the instrument (ibid. at 523-524).

Section 44 of the Act stipulates that a cheque must be duly presented for payment. If it is not duly presented, the drawer and any endorser are discharged from any liability on the cheque. However, section 45(2)(e) provides that presentment for payment is dispensed with by an express or implied waiver of presentment. An express communication by the drawer that presentation of the cheque should not be effected obviously qualifies as an exception to the presentation requirement. See Malan on Bills Cheques and Notes (3rd ed. 1997) at pp.252-253.


In terms of section 46(1)(b) of the Act, a cheque is dishonoured by non-payment when presentment is excused and the cheque is overdue and unpaid. Section 46(2) of the Act states that when a cheque is dishonoured by non-payment, an immediate right of recourse accrues to the holder as against the drawer and any endorser.

The general principle governing contracts is that a written agreement constitutes the exclusive record of the transaction between the parties. By virtue of the so-called parol evidence or integration rule, extrinsic or parol evidence cannot be admitted to contradict, alter or vary the terms of a written agreement. However, this rule does not apply where the written memorial is not accepted as it stands but is verbally modified before its acceptance. Moreover, the rule does not bar evidence which is necessary to establish the existence of suspensive conditions or implied provisions. Such evidence may include evidence of what the parties said to each other during negotiations. See generally Kerr: *The Principles of the Law of Contract* (3rd ed. 1982) at pp. 217-220 and 226.

**Judgement**

In the present matter, there was no indication by the 1st and 2nd defendants that they signed the cheques (Exhibits 1 and 2) in a representative capacity on behalf of the 3rd defendant. Again, the typed description of the 3rd defendant on the cheques, i.e. “Logmuc Elect”, is incomplete and does not reflect its corporate status. Moreover, signature of the cheques as “authorised signatory” does not suffice for the obvious reason that every bank account operated for a corporate entity must have an authorised signatory so as to render the company itself liable. This feature is clearly designed to protect the banker, as the manager of the account, but not the company or its signatories. Accordingly, I find that both the 1st and
 2\textsuperscript{nd} defendants are personally liable as signatories on both cheques for the amounts inscribed and tendered thereon.

It is common cause *in casu* that the plaintiff did not present the two cheques for payment as required by section 44 of the Bills of Exchange Act. However, this was specifically because the 1\textsuperscript{st} defendant telephoned the plaintiff on the 31\textsuperscript{st} of May 2004 to say that there were insufficient funds in the relevant bank account to meet payment on the two cheques. In effect, the defendants advised the plaintiff not to present the cheques and thereby expressly waived the presentment thereof in terms of section 45(2) (e) of the Act.

The simple and straightforward approach in this case is that the defendants drew two post-dated cheques for $18 million and $29 million respectively in favour of the plaintiff. The plaintiff did not present the cheques for payment because their presentment was expressly waived by the defendants. Presentment of the cheques was therefore excused and the cheques were accordingly dishonoured by non-payment when they became overdue and unpaid. At that juncture, the plaintiff accrued an immediate right of recourse for the value of the cheques as against the defendants *qua* drawers of the cheques. On this basis alone, the plaintiff is entitled to judgement against the defendants.

In examining the facts before it, the Court is entitled to have regard to evidence of what the parties said to each other as well as other surrounding circumstances at the time when the transaction was concluded. But the Court must also take into account the parties’ pleadings and the extent of the evidence supporting their respective positions. In their pleadings, the defendants did not aver or in any way suggest that the original arrangement was conditional upon the projected profit being realised. Nor did they provide any persuasive proof, either in their pleadings or in their evidence in court, corroborating their allegation that no profit was in fact realised.


The plaintiff conceded under cross-examination that the arrangement between the parties was based on profits being realised. However, his evidence was that, when the defendants issued their post-dated cheques, they explicitly promised that on the due date of the 31st of May 2004 they would either confirm payment on the cheques already drawn or provide another bank certified cheque for the combined amount of $47 million. This evidence was not challenged or contradicted by the defendants. Subsequently, the defendants sought to resile from the arrangement and attempted to re-negotiate the transaction, but the plaintiff insisted on full payment of the original $47 million.

As I see the facts in casu, whatever may have been the original understanding of the parties, the defendants agreed by their own statements and conduct to pay the full sum of $47 million to the plaintiff on the due date of the 31st of May 2004. By drawing two cheques for $47 million and specifically agreeing to full payment of that sum on the 31st of May 2004, any prior understanding as to the anticipated profit being realised was superseded and became irrelevant and redundant. Accordingly, the defendants are bound by their undertaking as embodied in the cheques and are liable to the plaintiff in the full contract sum of $47 million, less the amount of $18 million already paid, viz. the balance of $29 million.

**Order**

In the result, it is ordered that:-

Judgement be and is hereby granted in favour of the plaintiff as against the defendants jointly and severally, the one paying the others to be absolved, for:-

(i) payment of the sum of $29,000,000.00 (twenty-nine million dollars);

(ii) interest thereon at the prescribed rate from the date of service of summons, being the 31st of August 2004, to the date of payment in full;


(iii) costs of suit.

*Magwaliba, Matutu & Kwirira*, plaintiff’s legal practitioners
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