Stanbic Bank Zimbabwe Limited v Ceezed Construction (Private) Limited and Costain Africa (Private) Limited and Southview Investments (Private) Limited

### Preamble
1
HH 8-18
HC 7641/12
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STANBIC BANK ZIMBABWE LIMITED

versus

CEEZED CONSTRUCTION (PRIVATE) LIMITED

and

COSTAIN AFRICA (PRIVATE) LIMITED

and

SOUTHVIEW INVESTMENTS (PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE

CHAREWA J

HARARE, 13, 20, 21 February, 3, 4 April, 12 June, 13 July,

7 August 2017 & 10 January 2018

Trial

T Mpofu, for the plaintiff

T Magwaliba, for defendant

CHAREWA J: Plaintiff issued summons against the defendants claiming $3 070 207.04 representing money lent and advanced to the first defendant in terms of a short term overdraft facility agreement between plaintiff and the first defendant and in respect of which second and third defendants acted as sureties and co-principal debtors.

Background

At the pre-trial conference, first defendant entered into a Deed of Settlement dated 14 November 2013 and filed of record on 18 November 2013 for $4 000 000, plaintiff having agreed to write off interest amounting to $700 000. As a consequence, first defendant signed a consent to judgment on 15 November 2013, the result of which was an Order by Consent granted by this court on 8 May 2014.

There is therefore no dispute that the first defendant was lent and advanced money by plaintiff in terms of the overdraft facility agreement between plaintiff and the first defendant. The second issue on the joint pre-trial minute agreed on 19 January 2015, whether or not any monies were lent and advanced to first defendant by plaintiff, is thus effectively disposed of.

Further, the first issue on the joint pre-trial minute, whether or not the deed of settlement entered into between the first defendant and the plaintiff, and the resultant order by consent had the effect of terminating or extinguishing the sureties’ (second and third defendants) liability, was disposed of by judgment of Mtshiya J (which judgment was confirmed by the Supreme Court), to the effect that the sureties remained liable to the plaintiff so long as the debt remained unpaid.

The issues

The only issues that are germane to the present hearing therefore are whether or not

There are valid and legally binding deeds of surety ship by second and third defendant; and

If so, what is the amount second and third defendant must pay to the plaintiff’.

In addition, second and third defendants sought and obtained leave to amend their plea by raising two preliminary points:

That the judicial management order in respect of first defendant had the effect of suspending proceedings against second and third defendant; and that

The summons and declaration did not comply with r13(5) as the total amount of interest and bank charges claimed are not specified, and further that no account has been taken of payments made by first defendant and their allocation to capital and interest.

The facts

The indisputable facts are that, in August 2010, first defendant obtained an overdraft facility from the plaintiff in the amount of $2 100 000. Security for the facility was by provided by way of unlimited guarantee executed by second defendant in 2006. The facility was subsequently rolled over on 2 March 2011 and revised up to a maximum of $2 500 000. The facility was reduced to writing on 28 March 2011 and was drawn down in full. The facility was duly covered by deeds of surety ship executed on 28 March 2011. Interest at 20% per annum and related charges were raised against the facility leading to the total amount claimed in the summons as at 11 July 2012.

The dispute

The plaintiff avers that the deeds of surety are valid and legally binding against the second and third defendants, having been signed by persons with requisite executive powers on the strength of board resolutions signed by persons with the necessary authority to sign such board resolutions.

Second and third defendants, argue that they are not liable under the deeds of surety ship as they are not valid, having been signed by persons who had no authority to bind second and third defendants, in circumstances where plaintiff knew or ought to have known that the mandates presented by those persons were defective. Further, the circumstances surrounding the negotiation for and the signing of the surety deeds were suspect such that plaintiff ought to have been on its guard in that the same persons who signed the surety deeds also signed the board resolutions empowering such signatures.  In addition, defendants argue, it was public knowledge that the erstwhile managers of first defendant had acquired the company, correspondence existed that first defendant had ceased to be a subsidiary of second defendant and finally that the deeds of surety ship were in fact signed on 2 August 2011 and backdated to 28 March 2011 by plaintiff.

Besides, the purported board resolution by second defendant was fraudulent in that it was executed on 1 February 2011, long before the details of the facility agreement had been agreed.

Plaintiff’s evidence

The plaintiff called two witnesses, its relationship manager in charge of second defendant’s banking business Batsirayi Manyange, who was involved in this matter from inception, having joined plaintiff in 2006; and Richard Tichaona Chapanga who was plaintiff’s collateral manager responsible for verification of security documents for compliance purposes.

Batsirayi Manyange testified that first defendant has been a customer of plaintiff since 2004. On the basis of that longstanding relationship, first defendant was accorded an increased overdraft facility from its 2010 facility of $2 100 000 to $2 500 000 on 2 March 2011, and which it was allowed to draw down on before the facility was reduced to writing on 28 March 2011. Prior to this roll-over, second defendant was the sole guarantor of the facility accorded to first defendant. However, upon the roll over being agreed on 2 March 2011, plaintiff required additional security due to the increase in the overdraft facility and further because of dollarisation. Third defendant therefore became the second surety on deeds of surety ship executed on 28 March 2011.

The witness, as the person responsible for ensuring signature of the facility agreement and surety documents, denied that the deeds of surety were signed in August (or October as claimed in the plea) and backdated to March. He further denied that plaintiff was the author of any such alleged backdating. He testified that the plaintiff had always held a mandate for first defendant with the names of the signatories to the surety documents as the authorised signatories for second and third defendant in terms of CR14 filed of record. No new CR14 documents for second or third respondents were signed to show that there was a break in the relationship between second defendant and Costain Zimbabwe, prior to 28 March 2011.  Further, he testified that the signatories of all three defendants being the same, the plaintiff routinely communicated with them using the physical address of 87 Plymouth Road, Southerton, Harare.

In addition the witness attested that plaintiff never received any communication that the signatories on the board resolution and the surety agreements were no longer board members or had their mandates to sign on behalf of second and third respondent withdrawn. The first time the witness became aware of the change in status of first defendant was upon sight of letter dated 12 April 2011 from CZL Incorporated (Private) Limited addressed to his colleague, Gift Dzvova. This communication was not accompanied by any notification by second defendant that it was terminating its surety agreement with the plaintiff with respect to the debts owed to Costain Zimbabwe or its replacement, first defendant. Therefore the surety deeds were valid.

The witness conceded that there is nowhere on the bank statement showing that first defendant drew down on $2 500 000, but clarified the apparent misconception held by defence counsel with regard thereto by stating that an overdraft facility is not a loan facility. A customer accorded an overdraft facility does not have to draw down on the entire amount, but is only entitled to draw down any amounts up to the limit of the facility, unlike a loan facility where the entire amount of the loan is shown as drawn down.

He also clarified that negotiations to roll over the facility started in January 2011, and therefore that it was not strange at all that the board resolutions regarding the facility and the sureties were executed in February 2011.

He further testified that first defendant having breached the facility agreement; plaintiff was entitled to proceed against second and third defendants as co-principal debtors regardless of the status of first defendant. In that regard, second and third defendant were liable to pay the capitol of $2 500 000 and interest thereon in the amount of $570 207.04, together with interest on the whole at 20% per annum from 28 March 2011 until the date of payment in full. He concluded his testimony by averring that as at 20 February 2017, the debt due is $5 129 593.35 inclusive of interest and charges.

Richard Tichaona Chapanga reiterated the testimony of Batsirayi Manyange and traversed the steps he took, as compliance manager, to ensure that plaintiff’s procedures were followed with regard to the overdraft facility advanced to first defendant, and in particular, that the facility was properly guaranteed. He refuted any allegation of backdating of the documents from August or October 2011 to March 2011 and confirmed that he received duly signed facility and surety documents on 30 March 2011, examined them and affixed his verification stamp, initials and signature on 31 March 2011. The witness demonstrated his initials and signature from the witness’ stand and they are entered into the record as exh 3. He asserted that, as per plaintiff’s standard operating procedures, he was the final and third verifier of the documents after two of his subordinates had checked and verified the documents. He has 11 years’ experience in plaintiff’s collateral department and is well versed in his responsibilities.

The witness further testified that he checked the signatories on the facility letter and the surety documents against the defendants’ founding documents, that is current CR14 and Articles of Association for the defendants and verified that these were the properly authorised signatories. He also confirmed that the official communication on the change in status of 1st defendant was by letter dated 12 April 2011, well after the facility documents had been executed.

I must state that both witnesses gave their evidence well, logically and with the conviction of people well versed in their work and knowledgeable about what they were talking about. They were not shaken in cross examination. In fact, both witnesses fared even better under cross-examination than in their examination in chief as their evidence was delivered with the honest conviction of persons well competent in their duties. Contrary, to Mr Magwaliba’s final submissions, nothing in their testimony gave me reason to believe them to be glib liars, but that their testimony largely tallied with the documentary evidence at hand.

Defendants’ evidence

On their part, the defendants called four witnesses:  Martin Burdes, who is the group property director resident in the United Kingdom, James Worsfold, a director of second and third defendants with effect 1 March 2011, Nozipho Guzha, the finance director of second and third defendants until 1 April 2011 and Tendai Phineas Chimuriwo, the executive chairman of second and third defendants until 31 March 2011.

The last two witnesses were the signatories to the board resolutions authorising the deeds of surety ship on behalf of second and third defendants, and also signed on the deeds of surety as executive directors of the two defendants. They also happen to be the managers who bought into first defendant and are alleged to have perpetrated the fraud against second and third defendant.

I will start with the evidence of Chimuriwo because I found his evidence, which was thoroughly discredited, to be totally incredulous as he contradicted himself and his fellow witnesses in material respects, and peddled clear falsehoods in other respects.

He testified that he was asked to resign from the board of second defendant in March 2011 because he had fraudulently signed surety documents on behalf of second defendant without proper authority. The date of termination of his directorship conflicts with the testimony of Burdes who asserts that Chimuriwo was only forced off the second and third defendants boards in March 2012. His testimony also conflicts with that of Nozipho Guzha who averred that the she and Chimuriwo only relinquished their executive directorships on 1 April 2011 because of the unbundling of first defendant but remained non-executive directors.

Chimuriwo also testified that he fraudulently signed the surety documents in August 2011. He could not explain how he could have been asked to resign in March 2011 for fraudulently signing documents in the future: August 2011. Nor could he explain why, if he had committed a fraud which he admitted, and for such a huge amount, the second and third defendants saw it fit to let it slide by not reporting him for prosecution. He could not explain why the plea asserts that the documents were signed in October 2011, rather than August as he asserts.

He confirmed, under cross examination, that he was an executive director with signing powers until 31 March 2011 and a non-executive director until October 2011, thus contradicting his evidence in chief that he had no authority to sign surety documents for second and third defendants as at March 2011 as he was no longer an executive director. He also contradicts Burdes who asserts that he was forced off the boards as non-executive director in March 2012.

While insisting that the surety documents were signed in August 2011 and backdated to 28 March 2011, he admitted that the witness to the documents W.Shumba had left first defendant’s employ sometime before August 2011. While conceding that Shumba could not have possibly come back to witness the documents, he could not explain how Shumba could have witnessed these documents in August when according to the uncontroverted evidence of plaintiff; the date of the witness’s termination of employment with first defendant’s was June 2011. He also claimed that he was certain the documents were signed after the Heroes Holiday, but could not explain why in the defendants’ plea, which he claimed was drafted after a full explanation and narration of events to the Legal Practitioners, it is averred that the surety documents were signed on 2 August 2011, well before Heroes Holiday.

However, he did confirm that the management buyout agreement of first defendant was drafted on 4 April 2011 and signed on 8 April 2011. Yet he also asserted that the plaintiff was informed a year earlier, in March 2010, in three separate meetings, that first defendant had been bought by the management after a $100 000 deposit for the purchase price had been paid. Such alleged change in ownership in 2010 and payment therefor was not supported by any company documents produced to the court. In any event, the witness’s averments are contradicted by the evidence of defendants’ second witness, Nozipho Guzha, who claimed that the plaintiff was informed of the intended change in ownership in December 2010, and further, that the payment of $100 000 deposit in the management buyout was only effected in February 2011.

Chimuriwo was the only defence witness to claim that surety ships had to be confirmed annually by the group Chief Treasurer of the Costain Group and that the surety deeds in this case were not so confirmed. To put into further question the veracity of his testimony, he went on to give false evidence that second defendant had never issued any guarantees/security from 1947, and that the plaintiff had never provided any facilities to first defendant prior to March 2011, yet the record shows that on 14 July 2006, 20 May 2009, 9 September 2009 and 4 August 2010 facilities had been approved and security for them provided.

The witness sought to climb out of the hole he had dug for himself by asserting that it was a Botswana Company which in fact gave surety ship for the July 2006 facility, yet the document clearly states “Costain (Africa) Ltd, which is the second defendant. In any event, he failed to prove the existence of any Botswana Company, and besides he was the only defence witness to testify to that effect. Further, nothing on the documents showed that they were executed by a foreign company or that a Botswana company provided any collateral in circumstances where the witness conceded that it was meaningless to have a surety ship without the necessary collateral.

The witness was unable to explain why his letter dated 4 April 2011 referred to bonds and sureties if there were none. He therefore claimed that his letter was inaccurate. However, he conceded that he never wrote to plaintiff to correct his letter that there were no sureties as alleged, and that when the plaintiff sought to enforce the sureties, he never informed the plaintiff that no sureties existed, but only sought an appointment to discuss a moratorium.

He claimed that no board resolutions existed purporting that he had any authority to act, yet p18 and 23 of plaintiff’s bundle marked as exh I does contain those resolutions, which signatures he did not dispute.

He also made the false statement that plaintiff sought security for the first time in 2011 because of dollarization, yet facility documents in 2006, 2008, 2009 and 2010 consistently required security, contrary to the witnesses’ statement that there was a policy shift in 2011. In any event judicial notice is taken that dollarization occurred fully two years earlier in 2009; lending credence to plaintiff’s witnesses’ testimony that what was sought because of dollarization was additional security. Chimuriwo eventually capitulated under cross examination and admitted that the 2011 facility required security in two parts: for the renewal of the existing security and for new security by third defendant and further that at the time, in March 2011, he was still a properly authorised executive director.

On the averment that the management buyout was public knowledge and therefore that plaintiff ought to have been on guard, he also conceded that what the other defence witnesses had said was the truth: that the deal was confidential and was only publicised after it was concluded on 8 April 2011. He also conceded that Nozipho Guzha had the requisite authority, to plaintiff’s knowledge, to sign for 3rd defendant.

This witness’s testimony was so thoroughly discredited on cross-examination that Mr Magwaliba made no attempt to re-direct. Consequently, save where he confirms the plaintiff’s averments, I find this witness’ testimony to be totally unreliable.

Nozipho Guzha

Nozipho Guzha confirms Tendai Phineas Chimuriwo’s testimony that the plaintiff asserted that it holds guarantees for the 2011 facility and that neither she nor he have ever challenged this position in pleadings or correspondence. She also confirmed that the issue of backdating of surety deeds never arose until second and third defendant challenged the deed of settlement between plaintiff and first defendant.

She confirmed that the 2006 facility duly guaranteed by second defendant was valid even though it was not authorised by the United Kingdom office of second defendant as she and Chimuriwo, as executive directors, could give valid guarantees without such authorisation. She confirmed that the authorisation process was an internal procedure within the Costain Group which was known to her and Chimuriwo but which plaintiff could not have known about as they did not inform it. She could not say why the authorisation was required for the 2011 facility and not for the 2006 facility.

She confirmed the March 2011 facility had six month tenure and as at October 2011, first defendant was in default. Therefore she clarified that first defendant in October 2011 wanted a moratorium in the form of a 12 month facility and for which plaintiff sought further security from Costain Zimbabwe. Thus, she averred, the security required by plaintiff in October 2011 was because of this proposed change and had nothing to do with the validity of security given in March 2011 or 2006.

She further averred that the plaintiff was informed in October –December 2010 about the offer for a management buyout which management was considering. The offer was only accepted in 2011 and the first payment of $100 000 was made in February 2011. She was adamant that the management buyout agreement was reached certainly not earlier as claimed by Chimuriwo, and definitely not in March 2010 as alleged by second and third defendant.

She confirmed that negotiations for the management buyout were private and no cautionary notice was issued, though it was public knowledge that first defendant had been acquired by management. She also confirmed that the facility letter dated 28 March 2011 was in fact a renewal of an overdraft balance which already existed and the signatures were required only to so acknowledge, and therefore she signed without any qualms. However she denies signing the surety deeds as she knew that would be fraudulent. Contradictorily, she confirms the signature is hers. She could not explain how her signature appears on a document which she did not sign. Eventually, she conceded that she signed the surety deeds but claims she only did so in October 2011 to protect bank employees.

I find it incredible that one would knowingly commit a fraud to protect third parties, at the risk of arrest and/or prosecution. Perhaps, realising how ridiculous her assertions were, she later made an about turn and claimed that her signature was not fraudulent as money had been accessed by first defendant, and for which security was required.

Further, she denied making any fraudulent resolutions authorising the execution of surety deeds by second and third defendants. She denied that surety is security, but then recanted to state that surety ship is security. She refused to answer that the validity of the surety by second defendant in favour of Costain Zimbabwe had never been challenged or that it bound second defendant for present and future debts of Costain Zimbabwe. She insisted that there never was any security by second defendant for Costain Zimbabwe’s debts, but could not explain why the March 2011 facility letter talked of renewal of guarantees or why she signed for a non-existent guarantee.

She however confirmed being a properly authorised director of third defendant and that plaintiff was aware that she and Chimuriwo were properly authorised to act for third defendant. She would not commit herself with regard to the termination of employment of the witnesses to the surety documents in circumstances where, as the Finance Director ultimately responsible for the allocations of money to salaries and terminal benefits, she ought to have known exactly when these witnesses left first defendant’s employ.

She initially denied that first defendant had any pre-existing facilities prior to 28 March 2011, thus contradiction her assertion that the March 2011 facility was a mere renewal of an existing loan. She later recanted to state that facilities in 2006, 2008 and 2009 existed, but claimed that these facilities and their guarantees were not related to the 2011 facility. In the face of exh 7-9, it is clear that the witness gave false testimony, in circumstances where she was the finance director responsible for dealings with plaintiff.

Certainly, the witness tied herself in knots as it makes no sense that she claims that the 2011 facility was a renewal of an existing facility, when on the other hand she claims that there were no prior facilities related to the 2011 renewal. How one renews something that does not exist boggles the mind.

She also averred that there were no sureties/guarantees in existence prior to March 2011, and the witness Chimuriwo is “mad” to so concede, something which is obviously untrue.

She claimed that she did not inform plaintiff that as of 1 March 2011 she could no longer represent second defendant, but contradicted herself by claiming that she told Batsirayi Manyange that she could not sign the surety deeds as she no longer represented second defendant. In any case, this testimony contradicted her evidence in chief that she was only divested of her role as second defendant’s finance director on 1 April 2011 upon the unbundling of first defendant.

She however confirmed that as at 28 March 2011, the plaintiff was owed the sum of $2 500 000 exclusive of interest and charges and that no payments have been made on the debt due since 15 March 2011.

Like Chimuriwo, I found this witness to be extremely unreliable and dishonest in her testimony. I am therefore inclined to disregard most of her evidence where it contradicts the plaintiff’s because of the falsehoods and recapitulations she was forced to make when cornered. Indeed, the contradictions between her testimony and that of Chimuriwo make for a very sorry case for the defendants.

Mr Worsfold

I do not understand why the defendants called this witness. He only became a director of second defendant on 1 March 2011 and clearly had no personal knowledge of what transpired prior to that, or the relationships and responsibilities between the defendants and their directors prior to his appointment. Save to unnecessarily prolong the trial, the only value I gleaned from his testimony was that he confirmed that no cautionary notice was ever issued on the management buyout of first defendant; that Chimuriwo and Guzha were still executive directors of all three defendants at the relevant time, i.e. up to 31 March 2011 and that the Costain Group have not seen it fit to sue them for the alleged fraud.

He was not competent to testify as to the validity or otherwise of resolutions passed on 1 February 2011, before his appointment, nor did he produce anything to show that directors with an interest in a resolution were disqualified from voting. He claims he was at work on 28 March 2011 and documents could not have been signed without his knowledge or that of one Janet Mutasa, but he also testified that said Janet Mutasa only took over from Nozipho Guzha as finance director and was appointed company secretary on 1 April 2011. It is not clear what role and authorisations Janet Mutasa had over the actions of executive directors prior to 1 April 2011.

And considering that he himself was only appointed director after all the necessary resolutions had been done, and was in effect a non-executive director, it is not clear from his testimony what he could have done to reverse decisions made prior to his appointment. He did not produce any minutes of alleged meetings he attended after his appointment to confirm the veracity of what came out of those meetings. I cannot even make much of the fact that no minutes of directors’ meetings or notices calling for such meetings exist when even the resolution on his own appointment as director is not in evidence.

His testimony was based mostly on what he was told by other persons, viz, that Chimuriwo and Guzha committed a fraud or that the surety deeds were executed solely for audit purposes rather than to provide security for the overdraft facility advanced to first defendant. I find his testimony, therefore, to be  of little probative value.

Mr Burdes

As the first witness for the defendant, it appears that his prime role was to put into question, as fraudulent and unauthorised, the guarantees signed by Chimuriwo and Guzha on behalf of the second and third defendants. However he could not explain why defendants had not caused the arrest of these “fraudsters”.

The difficulty Mr Magwaliba faced was that, this witness, like Worsfold, was not an executive director or even based in Zimbabwe and thus had no first hand knowledge of the day to day activities of the executive directors, i.e. Chimuriwo and Guzha.

However, he at least confirmed that the two remained directors up until March 2012 as the management buyout did not affect directorships, and that Chimuriwo was still an executive chairperson of second defendant and an executive director of third respondent as at 2 March 2011 when the facility to first defendant was agreed and the issue of additional security mooted.

He could not independently verify the incorrectness of the dates on the surety documents as he was not party to their execution, nor could he commit himself as to whether or not it was Chimuriwo and Guzha who made the allegations of the incorrectness of the dates on the surety documents.

However, the witness did confirm the validity of the 2006 guarantee, the width of its ambit, its currency and provided no evidence of its termination. He agreed that no facility could have been extended with no security and that no rectification was being sought by any of the defendants.

He also accepted that the internal procedures regarding the issuance of guarantees had nothing to do with the plaintiff which could not be expected to know when authorisation had to be sought for the purpose.

The law

It is trite that where a litigant gives false testimony his story will be discarded and adverse inferences drawn. Both Chimuriwo and Guzha gave obviously false testimony, entitling the court to draw whatever adverse inferences it considers appropriate.

It is also trite that where there is a legal duty to speak, and one fails to do so, the maxim “qui tacet consentive videtur” applies. Upon default on the overdraft facility, first defendant did not, when notified that plaintiff would call in the guarantees, raise any alleged invalidity thereof, and this silence has not, to date, been explained. Ergo, the sureties were not invalid.

It is further trite that the execution of guarantees is an executive act which directors of a company are empowered to take. Therefore, any person dealing with a company is entitled to believe or assume that the executive directors of a company have been duly appointed and have authority to exercise the functions ordinarily exercised by an executive director, and the company is estopped from denying the same. The company will thus be bound by a contract even where internal procedures and authorisations have not been complied with.

Even where a fraud is committed against a company, by a normally authorised officer, s 13 of the Companies Act provides that such fraud shall not affect the rights of third parties. This rule is only inapplicable where the third party knows the truth to the contrary and ignores it.

It is also clear that the law provides that where a surety agreement is worded in so wide a manner as to include future indebtedness, it is not necessary that the obligation should be in existence at the time of the contract of surety. Further, as long as the surety contract is not for a fixed duration, then it has to be terminated on due notice.

Finally, a surety agreement is only terminated upon due notice or discharge of indebtedness. Change in status of the principal debtor is irrelevant to the obligations of a surety unless such change has the effect of expunging indebtedness.

Analysis

I must commend Mr Magwaliba for making a spirited fight of an untenable case for the defendant and trying his best to confuse and obfuscate the issues as evidenced by his bundles (Exhibit 5 and 6) in which he made no effort to select and synthesise only those documents necessary for trial. But in the final analysis, he held a very bad hand which was not helped by the quality of the testimony of his witnesses, particularly Mr Chimuriwo, Ms Guzha and Mr Worsfold.

Firstly, I will dispose of the preliminary point raised by Mr Magwaliba that the judicial management order against 1st defendant suspended proceedings against second and third defendant. I cannot believe that Mr Magwaliba, as a seasoned lawyer, seriously made this submission. I can only surmise that he did this in the hope that if he threw in enough flotsam and jetsam, the court will become befuddled. Unfortunately, it did not work.

Second and third defendants are co-principal debtors with first defendant. To that extent, and for essentially the same reasons that the court concluded that first defendant’s deed of settlement and order by consent did not extinguish second and third defendant’s liability, as long as the debt is not extinguished they remain jointly and severally liable for the payment of the debt. The fact of the judicial management status of first defendant is irrelevant to second and third defendants’ liability.

In his second preliminary point, Mr Magwaliba submitted that plaintiff had not established the quantum of its claim, and in particular, had not accounted for payments made by first defendant or specified the amounts for interest or bank charges in the summons. Clearly, this argument is misplaced. There is no requirement to plead, in the summons, to the amount of interest as long as it is clear what rate interest accrues at. Further, with respect to bank charges, I do not believe it necessary to specify in the summons each aspect of the debt making up the whole. This becomes a matter of evidence as to how the whole debt was arrived at. In my view, as long as it is clear how the total due was arrived at, then the summons is sufficiently pleaded.

The question of evidentiary quantification is addressed by my comment regarding Mr Magwaliba’s futile attempts to obfuscate issues. Defendants are co-principal debtors on a debt which is clearly acknowledged by the principal debtor, including the interest and charges thereon. It is thus trite that second and third defendants are therefore liable to the extent of the principal debtor’s indebtedness. In this case, the principal debtor acknowledged the debt as claimed in the summons and entered into a deed of settlement and acceded to an order by consent. All this is on the record such that I do not believe that any further evidentiary quantification is necessary.

Further, perhaps Mr Magwaliba missed part of the testimony of his own witness, Nozipho Guzha. As the executive finance director of first defendant, she clearly stated that as at 28 March 2011 plaintiff was owed the capital of $2 500 000 and nothing has been paid to plaintiff since. It then becomes obvious that of the total amount claimed in the summons of $3 070 207.04, the excess of $570 207.04 (after deducting the capital) was interest and charges, as at the date of summons.

In addition, the deed of settlement by first respondent is part of the record, and it shows that as at 14 November 2013 plaintiff was owed $4 700 000 including interest and charges. Clearly, should defendants fear being overcharged on interest, it is obvious that the in duplum limit had not been reached. Of this amount, plaintiff agreed to write off interest of $700 000.

Further the order by consent granted on 8 May 2014 showed that the total amount owing was $4 100 000, upon the whole of which interest continued to accrue at 20% per annum. The second and third defendants being co-principal debtors with first defendant are therefore indebted to plaintiff to the same extent as the first defendant.

The record clearly shows that monies claimed by plaintiff were lent and advanced to Costain Zimbabwe (Pvt) Ltd before any management buyout, and on guarantees provided by other companies within the Costain Group, viz: second and third defendants. At the time of the management buyout, no communication was made to plaintiff as to the termination and/or substitution of the securities it held regarding the loans, apart from the letter of 4 April 2011, which confirmed that the securities plaintiff held remained valid.

No evidence was produced to support that the media was “awash” with reports of the management buyout. And in the face of the defence witnesses’ testimony that the negotiations were private and outside of the public glare, I am of the view that Mr Magwaliba is flogging a dead horse. Nor was any proof tendered that as at 2 March 2011, when the debt restructuring agreement was concluded, or 28 March 2011 when the surety documents and facility letter were signed, Chimuriwo and Guzha had ceased to be executive directors of second and third defendants. In fact, as already alluded to in the summation of the witnesses’ testimony, they attest to the contrary position.

And having found the evidence of Chimuriwo and Guzha to be thoroughly discredited, because of the pervasive contradictions and falsehoods therein, except in so far as it supports the plaintiff’s evidence, I am of the view that these two witnesses were properly authorised to act as they did, including to enter into facility agreements and bind the defendants in deeds of surety in the manner they did. If they were not so authorised, then it was an internal process which third parties could not have been expected to know or guard against. In this respect, the defendants’ witnesses conceded that plaintiff had no way of knowing the internal authorisation processes within the Costain Group of companies. More particularly, the long standing relationship that existed between plaintiff, Chimuriwo and Guzha, wherein, for years, plaintiff knew and understood that the two witnesses were the face of second and third defendants in Zimbabwe, in circumstances where no formal or official communication of any change was made, absolves plaintiff of any blame for its ignorance of any position to the contrary.

My view is bolstered by the conduct of the second and third defendants, in failing to hold Chimuriwo and Guzha, or even first defendant accountable for any alleged fraudulent conduct and the concession by both Ms Guzha and Mr Burdes that the internal processes of second defendant were unknown to plaintiff.

In any event, even if Chimuriwo and Guzha fraudulently bound defendants as surety and co-principal debtors, this is irrelevant in so far as plaintiff’s rights are concerned, in view of the fact that the law only forbids reliance on fraudulent conduct of an officer of a company where a third party was aware that the officer did not have requisite authority. This is more so since the issue of fraud was only raised more than a year later, in circumstances where Guzha and Chimuriwo conducted themselves within the powers, which they had exercised consistently for several years, incumbent upon them as directors, and which power had not been withdrawn to plaintiff’s knowledge.

Defendants made much of the fact that the March 2011 facility required renewal of the 2006 surety, thus presupposing that it had terminated. I cannot agree with this position. The 2006 surety was so widely worded as to include future debts of indeterminate amounts, and did not have a fixed period of effluxion. No notice to terminate it was given or received by either party. Therefore the reference to its renewal cannot be presumed to suggest that it had terminated. I can only assume that plaintiff’s reference to its renewal was out of an abundance of caution, and nothing more. In my view, the 2006 surety was still valid and in existence and it was not even necessary for plaintiff to want to renew it. This is more so in light of the fact that the 2006 guarantee was a written contract which could not be ignored but could only be terminated upon appropriate termination processes being followed.

Nor do I agree that a request by plaintiff for additional security (according to the ordinary meaning of the term) to be granted by third defendant amounts to confirmation of absence of security or termination of the original security arrangement. The attempted gymnastics by Mr Magwaliba that the letters at pp 1-5 of exh 6 amount to agreements for advances based on cash-flows are at best puerile. Those letters are not agreements between the parties, and defendants did not produce any letter written to first defendant by plaintiff advancing loans on the terms in first defendant’s requests. A customer may write to a bank in whatever terms they want, but at the end of the day, the bank advances money on appropriate procedures and agreements.

I will briefly deal with defendant’s assertion that the facility letter dated 28 March 2011 dealt with advances which were not made to first defendant. Unfortunately for Mr Magwaliba he was shot in the foot by his own witnesses. Firstly, first defendant acknowledged its indebtedness in terms of this facility and entered into a deed of settlement and order by consent. Secondly, both Chimuriwo and Guzha averred that they received the advance first in that they obtained more funds than were entitled to on the previous facility letter which was then topped up with more funds. The facility letter dated 28 March 2011 was therefore only meant to recognise the debt restructuring that had been agreed on 2 March 2011.

Therefore the reciprocity alluded to by Mr Magwaliba exists: first defendant received its restructured facility first, and in turn, subsequently signed and ensured guarantees thereof.

Finally, I will briefly address the question posed by Mr Magwaliba why second and third defendants would encumber themselves by providing sureties to a company that they had disposed of. With respect, this is a question which is best answered by the second and third defendants; in the same manner they should answer the question why they have not taken any action against alleged “fraudsters’. After all, second and third defendants are the only ones who know best and understand the nature and extent of their relationship with Chimuriwo and Guzha to the extent that these two witnesses would be prepared to perjure themselves and admit to fraudulent activities which they know second and third defendants will do nothing about. Further, the defendants’ witnesses are the only ones who know the content of their negotiations for the management buyout, which was a private process outside the public domain.

In the premises, I find that plaintiff has proved its case against the defendants on a balance of probabilities and that second and third defendant ought to be ordered to make payment to the plaintiff as claimed in the summons.

Costs

The issue of costs is in terms of the facility agreement and surety documents between the parties.

Disposition

Accordingly, it is ordered that

The second and third defendants shall pay to the plaintiff the sum of $3 070 2017.04 and interest thereon at the rate of 20% per annum above the bank’s base rate calculated from the 2nd of May 2012 to the date of payment in full.

The second and third defendants shall pay costs of suit on the scale of attorney and client.

Mawere & Sibanda, plaintiff’s legal practitioners

Wintertons, Defendant’s legal practitioners

List of Exhibits

Exhibit 1 Plaintiff’s bundle of documents

Exhibit 2 first defendant’s loan account statement

Exhibit 3 Specimen initial and signature for Richard Tichaona Chapanga, plaintiff’s then collateral manager.

Exhibit 4 Proof of receipt and verification of securities held by plaintiff

Exhibit 5 second and third defendants first bundle of documents

Exhibit 6 second and third defendants second bundle of documents

Exhibit 7 Facility letter dated 20 May 2009

Exhibit 8 Facility letter dated 9 September 2009

Exhibit 9 Facility letter dated 4 August 2010