Hothfield Enterprises (Pvt) Ltd and Tony Renato Sarpo v Triangle Limited t/a Tongaat Hullet Triangle Limited or Triangle Sugar Corporation Limited and Tungamirai Isaac Rukatya and TIV Estate and CBZ Bank Limited

### Preamble
1
HH 383-21
HC 9202/17
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HOTHFIELD ENTERPRISES (PVT) LTD

and

TONY RENATO SARPO

versus

TRIANGLE LIMITED t/a Tongaat Hullet Triangle Limited

or Triangle Sugar Corporation Limited

and

TUNGAMIRAI ISAAC RUKATYA

and

TIV ESTATE

and

CBZ BANK LIMITED

HIGH COURT OF ZIMBABWE

CHINAMORA J

HARARE, 7 August 2020, 15, 24, 25 and 29 September 2020, 7 October 2020 & 22 July 2021

Civil trial – special plea of prescription

T S Dzvetero with T Dzvetero and Phatisani, for the plaintiffs

E T Moyo with M Moyo, for the 1st, 2nd and 3rd defendants

No appearance for 4th defendant

CHINAMORA J:  On 4 October 2017 the plaintiff issued summons seeking the following relief:

An order declaring the 1st to 3rd defendants creation of grower number 346 in the name of TIV Rukatya Estate (3rd respondent) and/or to the benefit of the 2nd and 3rd defendants and all subsequent payments of funds and proceeds into that account to be unlawful and null and void.

An order declaring the creation of grower number 346 in the name of TIV Rukatya Estate to have been intended to be (and/or resulted in) an unlawful diversion of proceeds and revenue to grower number 591 and or the 1st plaintiff.

Judgment against the 1st to 3rd defendants jointly and severally one or each paying, the other to be absolved in the sum of US$1,499,353-96 into grower number 591 or to the plaintiffs, being reimbursement of funds and proceeds unlawfully paid into the said grower number 346 and to the benefit of the 1st plaintiff.

An order directing the 1st defendant to direct all other revenue from the month of July 2017 to the date of the judgment into grower number 591 and/or the 1st plaintiff.

Costs of suit.

In the declaration, the plaintiffs said that the 2nd plaintiff was the major shareholder and director of the 1st plaintiff (Hothfield Enterprises (Pvt) Ltd), with the 2nd defendant being a minority shareholder. The 1st plaintiff grew its sugar cane on Lot 1 of Chiredzi Ranch North and the Remainder of Chiredzi Ranch South. Under the joint venture, the 1st plaintiff opened an agreed grower number 591 with the 1st defendant in terms of which all revenue of any sugar cane grown on the said pieces of land would be paid through the said grower number.  The plaintiffs also asserted that the 1st defendant and/or the 2nd defendant unlawfully diverted funds due to the 1st plaintiff into grower number 346 which had been unlawfully created by the 1st defendant sometime in 2014. It was further averred by the plaintiffs that the 1st to 3rd defendants or one or more of them acted in connivance and/or were each negligent and failed to exercise proper due care in changing or replacing grower number 591 with grower number 346.

The 1st, 2nd and 3rd defendants entered an appearance to defend the claim and later filed a special plea stating that grower number 346 was issued on or about 4 August 2014, and that summons in the matter was only served on the 1st, 2nd and 3rd defendants on 6 October 2017. As a result, they said that the plaintiffs’ claim had been extinguished by operation of prescription, and prayed for its dismissal with costs.

In their replication to the special plea, the plaintiffs averred that the claim had not yet prescribed, because the plaintiff’s cause of action is ongoing in that the unlawful divergence of funds into grower number 346 instead of grower number 591 is continuing. In this respect, the plaintiffs argued that the prescriptive period is calculated when all facts that constitute the cause of action are completed. Additionally, the plaintiffs stated that the running of prescription was interrupted by judicial process, namely, the institution of proceedings under HC 12692/16, which initially involved the plaintiffs and the 4th defendant. They proceeded to argue that HC 12692/16 was finalised on 13 July 2018 by way of an order by consent. The plaintiffs further stated that there were other proceeding under HC 7249/17 instituted by the plaintiffs and the 4th defendant against the 1st and 2nd defendants, which resulted in this court granting an interim order on 9 August 2017. Accordingly, the plaintiffs submitted that these proceedings interrupted the running of prescription, as did court process under HC 8130/17.

This matter was set down for trial before me on 7 August 2020. The parties were agreed that the issue of whether or not the claim by the plaintiffs had been extinguished by the operation of prescription had to be disposed of first. I therefore directed that evidence be led to establish when prescription began to run. I wish to state from the onset that it seems to be common cause that what gave rise to the cause of action is the creation of grower number 346, which the plaintiffs averred was used to divert funds which should have been directed to grower number 591. That is evident from the pleadings on record.

The plaintiff led evidence from the 2nd plaintiff (Mr Tony Renato Sarpo), who testified that the grower number created by the 1st defendant from the inception was 591, and that was the grower number through which sugar cane proceeds were paid into the 1st defendant’s account at CBZ Bank Limited (4th defendant). Mr Sarpo testified that the 1st plaintiff had a loan facility with CBZ Bank which was serviced by proceeds from the sugar cane crop. He stated that he was not aware that a new grower number (346) had been created until he got a letter from the 4th respondent, sometime in 2015, advising that the 1st plaintiff’s loan account was heavily in arrears. The said letter appears on page 253 of the record and reads as follows:

“Mr Tony Sarpo

14 Martin Drive

Msasa

HARARE

Dear Sir

REF: DEMAND FOR REGULARISATION OF YOUR HOTHFIELDS ENTERPRISES PL ACCOUT 02820684200027

We refer to the above and would like to express our concern on the growth of your debt which currently stands at US118 106.47 DR as at 1 June 2015.

Of great concern is the lack of any significant deposits into the account and thus the account remains inadequately serviced and interest is accruing without being provided for. You also have not furnished the bank with an acceptable repayment plan.

In view of the foregoing, the bank demands as we hereby do, that you repay your debt in full within 21 days from the date of this letter. Please note, failure to comply will leave us with no option but to hand over your account to attorneys for collection. Kindly note that all legal costs will be for your account.

This letter constitutes our First Letter of Demand and should be given the urgency and seriousness it deserves. We await your response.

Yours sincerely

For and on behalf of CBZ Bank Limited”

Mr Sarpo’s evidence was that he then investigated why the 4th respondent made a demand for payment when all along he believed that the account was funded from sugar cane proceeds deposited via grower number 591. It is as result of those investigations that he became aware that grower number 346 had been created without his knowledge or consent. The 2nd plaintiff also said that the 2nd defendant filed to comply with the terms and conditions set out in the letter dated 2 July 2014 from the 1st defendant to the 2nd defendant. That letter, which is on pages 123-4 of the record, states in the relevant parts as follows:

“Dr TIV Rukatya

TIV Rukatya Estates

CHIREDZI

Dear Sir

We are in receipt of your letter as hand delivered by yourself to our Mr Siziba on this date. We note your advice that Hothfield (Pvt) Limited has since stopped farming given the dissolution of the dissolution of the partnership between yourself and Mr T Sarpo, and requesting the amendment of the previous cane purchase agreement/quota from Hothfield (Pvt) Limited to IV Rukatya Estate.

Given the previous quota and cane purchase agreement was in the name of T Sarpo as the owner of Hothfield Enterprises (Pvt) Limited (which presumably is one and the same as Hothfield (Pvt) Limited, and in order to protect both Triangle Limited and Hippo Valley Estate from any future possible counter claims emanating from the requested changes, we will require the following documents and written undertaking to be presented:

A resolution signed by the directors of Hothfield Enterprises confirming that they have stopped farming sugar cane and accordingly authorise and approve the cancellation of their sugar cane purchase agreement with Triangle Limited and

That they have no objection to a replacement cane purchase agreement being entered into by and between Triangle Limited and IV Rukatya Estate, whereby the quota previously afforded to Hothfield Enterprises be transferred to the said IV Rukatya Estate. The previous quota was based on 100 hectares of cane land producing 12000 tonnes of cane during the milling season.

A full description of the land upon which IV Rukatya Estate is farming, and its estimated total cane production (in tonnes) which may be available for milling during the season (for the purpose of quantifying the quota to be allocated), and proof of ownership of the land (presumably the Chiredzi South Ranch referred to in your letter upon which it is growing this sugar cane (in the form of certified copies of any relevant title deed, offer letter or valid lease agreement).

…

Yours faithfully

GM Richards

COMPANY SECRETARY”

In his evidence, the 2nd plaintiff said that none of the conditions stipulated in the first defendant letter (aforesaid) was complied with, confirming the plaintiffs’ contention that the creation of grower number 346 to replace grower number 591 was done unlawfully so as to divert funds meant for the 1st plaintiff to the 2nd defendant through the mechanism of the newly created grower number. In addition, Mr Sarpo testified in relation to the email on page 140 of the record, that the 1st plaintiff had only allowed the 2nd defendant to use the 1st plaintiff’s quota in the name of the 1st plaintiff’s name and grower number (591) without changing that grower number. The email which dated 31 July 2014 written by the then lawyers of the plaintiffs (Wintertons) is couched in the following terms:

“On behalf of our client, we confirm that the parties have resolved their differences and Dr Rukatya has been allowed to use the Hothfield/Tony Sarpo quota”.

Mr Sarpo also testified that the plaintiffs were never copied in any of the emails dealing with the change of grower number. The emails on page 140 of the record, which are contained in the defendants’ bundle documents confirm this. The email sent by Mr Ushe Chimhuru to Mr Tawanda Vharetah and Mr Luis Mashaira on 4 August 2014, which was not copied to the plaintiffs, states:

“Please note the new grower code for TIV Rukatya (former Hothfield). Please ensure the account details are appropriately changed, including the banking details per letter I submitted last week”.

The second plaintiff also referred the court to the document on page 144 of the record, which was issued by the 1st defendant confirming that grower number 346 had been issued to the 2nd defendant. He stated that from August 2014 to date the 1st defendant did not communicate with the 1st plaintiff advising of the change of the grower number from 591 to 346.

The evidence of the 1st, 2nd and 3rd defendants confirmed that sometime in July 2014, the 2nd and 3rd defendants wrote to the 1st defendant asking for the grower number 591 to be changed to a different number. These defendants also stated that the 1st defendant had advised the 2nd and 3rd by letter which appears on pages 122 to 123 of the record to provide a resolution confirming that there were no objections to the change which they sought.  Mr Chinhuru who gave evidence for the 1st defendant did not deny the letter and its contents. In addition, Mr Chinhuru conceded that the resolution required by the 1st defendant was not provided. He further testified that the terms grower code and quota were used interchangeably, and that the plaintiffs must have known of the change of grower number. Under cross examination, Mr Chinhuru accepted that from 4 August 2014 the 1st defendant did not furnish the plaintiffs with sugar cane delivery notes, and that they were not aware of the purchase agreement signed between the 1st and 2nd defendants.

From the respective evidence of the parties, it is clear that the matter stands to be resolved by the answer to the question: When did the plaintiff become aware that grower number 346 had been created? In this respect, it is pertinent to note that section 16 (3) of the Prescription Act [Chapter 8:11] is in the following terms:

“When prescription begins to run –

(1) Subject to subsections (2) and (3), prescription shall commence to run as soon as a debt is due.

(2) If a debtor wilfully prevents his creditor from becoming aware of the existence of a debt, prescription shall not commence to run until the creditor becomes aware of the existence of the debt.

(3) A debt shall not be deemed to be due until the creditor becomes aware of the identity of the debtor and of the facts from which the debt arises:

Provided that a creditor shall be deemed to have become aware of such identity and of such facts if he could have acquired knowledge thereof by exercising reasonable care”.

[My own emphasis]

What section 16 of the Prescription Act means is that prescription begins to run when the debt becomes due, and a debt is due from the moment the cause of action is complete i.e. when the facts from which the claim arises have all occurred. Indeed, this is what this court stated in Peebles v Dairibord Zimbabwe (Pvt) Ltd 1999 (1) ZLR 41 (H) at 44 H-45F. There is no dispute as to what the law says.

The 1st to 3rd defendants submitted that the debt became due on 4 August 2014 when grower number 346 was created. On the other hand, the argument by the 2nd plaintiff is that he was not aware of the creation of grower number 346 until he received the letter from the 4th defendant (dated 4 June 2015) which appears on page 253 of the record. The contention that plaintiffs ought to have been aware that the grower number in issue was created in August 2014 should be examined against the contents of the letter from the 1st defendant to the 2nd defendant (dated 2 July 2014) which is on pages 122 to 123 of the record. That letter explicitly stipulated the conditions which the 2nd defendant had to comply with in order for the 1st defendant to effect a change of the grower number from the existing one. In fact, in the said letter the 1st defendant gave the reason why it required a resolution of the directors of Hothfield Enterprises (Pvt) Limited. The 1st defendant said their conditions were informed by the following:

“Given the previous quota and cane purchase agreement was in the name of T Sarpo as the owner of Hothfield Enterprises (Pvt) Limited (which presumably is one and the same as Hothfield (Pvt) Limited, and in order to protect both Triangle Limited and Hippo Valley Estate from any future possible counter claims emanating from the requested changes”.

Evidently, the 1st defendant knew that the previous quota and cane purchase agreement were in the name of the 2nd plaintiff as the owner of Hothfield Enterprises (Pvt) Ltd (the 1st plaintiff). However, despite its requirements not being met, the 1st defendant nonetheless went on to create a new grower number (346) for the 2nd defendant, as well as allowing him to provide new bank details. The email of 4 August 2014 from Mr Ushe Chimhuru to Mr Tawanda Vharetah and Mr Luis Mashaira is unambiguous that the account details and bank details had to be changed as per a letter he provided the previous week. In my view, without providing the resolution from the 1st plaintiff’s directors, one cannot impute knowledge of the change in grower number on the plaintiffs. On the contrary, the failure to provide the resolution meant that the plaintiffs were unaware of the change in grower number and that new bank details had been given to the 1st defendant. If a resolution had been signed by the 1st plaintiff’s directors, it would have been testimony that the plaintiffs knew of the change of grower number. Its absence begs the question: Was the document not supplied because the plaintiffs were not meant to know about the change desired by the 2nd defendant?

I do not agree with the submission by the 1st to 3rd defendants that the actual change in the grower number has nothing to do with the plaintiffs’ cause of action as they could have claimed damages based on anticipated future loss. Knowledge of the change in grower number was critical to completing to cause of action, as that would have been an obvious indicator that funds meant to be paid through grower number 591 were now going to be processed via a new grower number. In this context, the change of bank details is telling. I am therefore satisfied that the evidence of the 2nd plaintiff that it the letter from CBZ Bank Limited (dated 2 June 2015) that alerted him to the change in grower number is the more probable version. I find it incredible that the 1st, 2nd and 3rd defendants would not have complied with the conditions given by the 1st defendant if the plaintiffs were meant to know about the changes sought by the 2nd defendant. No plausible explanation was proffered in evidence by either Mr Chinhuru or the 2nd defendant why a resolution of the directors of the 1st plaintiff was not provided as requested. I also note that the evidence of the 1st, 2nd and 3rd defendants did not say that a request for the resolution was made and refused.

If one looks at the authorities in this jurisdiction and elsewhere, they debunk the notion that knowledge of the change in grower number is irrelevant to the issue of when the cause of action arose. This point was extensively addressed by the Supreme Court in Nan Brooker v Mudhanda & Another; Pierce v Mudhanda & Anor SC 05/18. In South Africa, in Abrahams & Sons v SA Railways & Harbours 1933 CPD 626 at 637, the court appositely observed:

“The proper meaning of the expression ‘cause  of action’ is the entire set of facts which give rise to an enforceable claim and includes every fact which is material to be proved to entitle the plaintiff to succeed in his claim”

I perceive the issue of cause of action as follows. The plaintiffs’ claim is based on an alleged unlawful creation of a new grower number by the 1st and 2nd defendants which enabled funds for the 1st applicant under grower number 591 to be diverted to that grower number to the prejudice of the plaintiffs. It is difficult to conceive how a cause of action would have been completed without an averment relating to when the plaintiffs had knowledge of the creation of the new grower number (346). The view I take is that it is the creation of the new grower number and channelling of payments through that number and not grower number 591 that completes the cause of action. From the evidence placed before me, I find that the 1st, 2nd and 3rd defendants failed to establish on a balance of probabilities that as at 4 August 2014 the plaintiffs new that a new grower number had been created. Consequently, I am unable to conclude that the cause of action arose in August 2014 or earlier than June 2015 when the 2nd plaintiff received a letter of demand from the 4th defendant. Since I have come to the conclusion that the cause of action did not arise on the date suggested by the 1st, 2nd and 3rd defendants, it is unnecessary for me to deal with plaintiffs’ argument that there was judicial interruption of prescription. I am therefore not inclined to grant the 1st, 2nd and 3rd defendant’s special plea of prescription.

In the result, it be and is hereby ordered that:

The special plea of prescription raised by the 1st, 2nd and 3rd defendants is dismissed.

The 1st, 2nd and 3rd defendants are to pay costs jointly and severally, the one paying the others to be absolved.

Antonio & Dzvetero, plaintiffs’ legal practitioners

Scanlen & Holderness, 1st defendant’s legal practitioners

Dube-Banda, Nzarayapenga & Partners, 2nd and 3rd defendants’ Legal Practitioners