Elen Olivia Lock v Alan Charles Patrick Ingram Lock (2) The Sheriff of Zimbabwe

### Preamble
Judgment No. SC 127/22
1
Civil Appeal No. SC 164/21
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REPORTABLE   (112)

ELEN     OLIVIA     LOCK

v

ALAN     CHARLES     PATRICK     INGRAM     LOCK     (2)    THE     SHERIFF     OF     ZIMBABWE

SUPREME COURT OF ZIMBABWE

BHUNU JA, KUDYA JA & MWAYERA JA

HARARE: 25 NOVEMBER 2021 & 18 NOVEMBER 2022

T. Mpofu, for the appellant

D. Tivadar, for the first respondent

No appearance for the second respondent

MWAYERA JA:	This is an appeal against the judgment of the High Court handed down on 14 May 2021.  In that judgment, the court a quo held that monetary assets in offshore accounts forming part of the matrimonial assets to be divided between the appellant and the first respondent, following their divorce did not constitute a foreign obligation.

FACTUAL BACKGROUND

The appellant is the first respondent’s former wife.  Their marriage was dissolved by a decree of divorce issued on 27 September 2017.  The court order included ancillary relief for the distribution of the assets of the parties. The relevant part of the order on distribution of assets reads as follows:

“f. The matrimonial estate of the parties shall be divided and distributed in accordance with s 7(1)(a) of the Matrimonial Causes Act [Chapter 5:13] as follows:

(i)   The defendant shall, subject to sub paragraph (ii) below, at his expense transfer to or cause to be transferred to, the plaintiff the two immovable properties situated at 10 Redhill Road, Highlands, Harare, 22 Aboynne Drive, Highlands, Harare.

(ii)     Any liability in respect of capital gains tax arising from the transfer of any of the aforesaid properties to the plaintiff shall be shared equally between the plaintiff and the defendant;

(iii)     The defendant shall, at his expense, cause to be registered in the name of the plaintiff the Prado motor vehicle, registration number AAR 5574;

(iv)     The defendant shall pay the plaintiff into an account nominated by her, and subject to any exchange control laws applicable in Zimbabwe, the sum of US$575 000.00. The parties shall agree on a payment plan for this amount within 30 days from the date of this order; (sic)

(v)     The plaintiff shall retain as her personal property all movable property presently in her possession;

(vi)     The defendant shall retain as his personal property all other property forming part of the matrimonial estate.”

The appellant, aggrieved by the judgment of the court a quo specifically appealed against paragraphs f(i), (ii) and (iv) of the order. In the appeal in SC 812/17, the appellant raised four grounds of appeal which read as follows:

“(1)     The court a quo erred at law and in fact in not finding that No. 6 Valyonga Land was paid for by the defendant prior to the marriage and as a consequence of such error included Valyonga as part of the matrimonial estate, subject to distribution in terms of s 7(1) of the Matrimonial Causes Act [Chapter 5:13] when in actual fact No. 6 Valyonga Land fell outside matrimonial estate.

The court a quo erred at law and fact in including the USD$160 000.00 compensation from the compulsory acquisition of Leyland farm, as part of the matrimonial estate, when the plaintiff (herein respondent) actually conceded that the farm and by extension any compensation for the same, was inherited by the appellant and this could not form part of the matrimonial estate.

The learned judge in the court a quo erred in refusing, (sic) the appellant to call a witness to establish that the immovable properties (the distribution of which the respondent sought) were trust property, on the basis that the witness’s name did not feature in the pre-trial conference minutes and by holding that in such circumstances the respondent’s consent to the calling of witness by the appellant was necessary.

The learned Judge in the court a quo erred in awarding the plaintiff US$575 000.00 as cash balance, without seeking to detail how such a figure was arrived at or what considerations were taken into account.” (sic)

On appeal this Court, in SC 812/17, dismissed the other grounds of appeal raised by the first respondent and found that he had only properly appealed against para f (iv) of the court a quo’s order.  This Court adjusted the amount awarded in para f (iv) to US$495 000.00. The court a quo‘s order of para f (iv) was substituted as follows:

“The defendant shall pay the plaintiff, into an account nominated by her, the sum of USD$495 000. Such payment shall be and subject to any exchange control laws applicable in Zimbabwe. The parties shall agree on a payment plan for this amount within thirty days from the date of this order.”

It is this order that forms the basis of the dispute in the present appeal.  The parties interpreted the order differently giving rise to the dispute.  The first respondent was of the view that the money in issue is a judgment debt payable in local currency or at a rate of one is to one, whilst the appellant contended that the order is in United States dollars and therefore, if payable in the local currency, it must be paid at the prevailing bank rate on the date of payment.  The first respondent made two payments, the first was the capital judgment debt and the second was 5% interest, amounting to ZWL495 000.00 and ZWL68 083.00 respectively.  The appellant accepted the payments but maintained that there was an outstanding balance since the money had to be paid at the interbank rate and not the one as to one rate. In order to recover the balance from the first respondent who maintained his stance that the payment made was in full and final settlement, the appellant issued a writ of execution for USD$495 000.00 together with interest thereon at the rate of 5% per annum from 27 September 2017 to the date of final payment.

PROCEEDINGS A QUO

In response to the writ of execution, the first respondent successfully sought and obtained a provisional order suspending the execution of the writ.  On the return date, the parties made submissions to the court a quo.

The first respondent argued that the court order created a judgment debt despite the fact that the order was granted pursuant to division of matrimonial property.  He further asserted that the court order was subject to the provisions of s 4 (1) (d) of Statutory Instrument 33 of 2019 and s 22 (1) (d) of the Finance Act [Chapter 23:04].  He further argued that in the case of Zambezi Gas (Pvt) Ltd v N. Barber Pvt Ltd & Anor SC 3/20, the Supreme Court clearly interpreted the said provisions.  The first respondent thus argued the debt had been discharged in full.

The appellant, in opposing the stay of execution, argued that the court order sounded in foreign currency and as such the order gave rise to a foreign obligation.  The appellant relied on the case of Breastplate Services (Pvt) Ltd v Cumbria Africa PLC SC 66/20.  It was contended by the appellant that the Zambezi Gas matter was inapplicable since the claim was based on a foreign obligation.

FINDINGS A QUO

The court a quo found in favour of the first respondent and thus it confirmed the stay of execution on the return day.  The court a quo reasoned that the court order fell into the ambit of a judgment debt as defined in the Finance Act.  It held that the order did not give rise to any foreign obligation since the appellant had made reference to monies expressed in United States Dollars including balances in local banks. Further the court placed reliance on the fact that the writ issued by the appellant was for an equivalent of US$495 000.00 in RTGS$ at the exchange rate on the date of execution.  The court held that since the court order in US dollars was issued on 27 September 2017, it was in existence immediately before the effective date. The operative date being 22 February 2019, it qualified to be extinguished at the rate of one is to one.  The order did not fall within the class of assets and liabilities referred to in s 44C (2) of the Reserve Bank of Zimbabwe Act [Chapter 22:18].  The court a quo thus ruled in favour of the first respondent and accepted that the debt had been extinguished.  It thus granted the application.

Aggrieved by this decision of the court a quo, the appellant approached this Court with the present appeal.

GROUNDS OF APPEAL

Having come to the inevitable conclusion that it could consider the nature of the obligation embodied in a court order, the court a quo erred in not finding that the obligation pronounced upon in the matrimonial cause was a foreign obligation and was consequently unaffected by Statutory Instrument 33 of 2019 and all the related legislation.

The court a quo erred in coming to the conclusion that the use by the parties of the United States of America currency denomination in respect of their funds sitting off shore converted the nature of the first respondent’s liability and rendered it susceptible to the currency changes brought about by Statutory Instrument 33/2019.

The court a quo erred at any rate in failing to come to the conclusion that reference to the exchange control approval in the order of the court issued in the matrimonial cause meant that the court contemplated that the obligation it had imposed was a foreign obligation.

The court a quo erred in not coming to the conclusion that the manner in which the writ of execution taken by the appellant was couched was in accordance with the law and was consistent with the case made by the appellant.

SUBMISSIONS BEFORE THIS COURT

Mr Tivadar for the first respondent raised two preliminary points to the effect that the appeal was fatally defective for want of compliance with the Rules of this Court, in that all the four grounds of appeal were not set out clearly and concisely.  Further, that the heads of argument seek to motivate arguments outside the grounds of appeal. Mr Mpofu, for the appellant, vehemently opposed the preliminary objections arguing that all the grounds were clear and concise and properly motivated in the heads.

On the merits, counsel for the appellant submitted that the decision of the court a quo ought to be set aside for the reason that it was in direct violation of the principle applicable to the obligation.  He further submitted that in the cases of Mushayakurara v Zimbabwe Leaf Tobacco Company (Pvt) Ltd SC 108/21 and Breastplate Service (Pvt) Ltd v Cambria Africa PLC SC 66/20 the principle that S.I. 33/19 could not operate extra territorially was well-articulated. Counsel averred that the court had properly found that there were funds offshore and parties had assets outside Zimbabwe.  As such S.I. 33/19 could not operate extra-territorially.  He further submitted that for the reason that the first respondent had not disputed the fact that he was still in control of those funds, it was only right that the appellant be awarded what belongs to her at a fair exchange control rate. Upon enquiry by the court on whether or not the order by the court formed a foreign obligation, counsel submitted that the court order was a foreign obligation.  He submitted that the order created an obligation to pay money which amount is sitting off shore thus making it a foreign obligation.

Per contra, Mr Tivadar, for the first respondent, submitted that a judgment debt in terms of the Finance Act is not a foreign obligation.  He submitted that the parties were married and divorced in Zimbabwe and both resided in Zimbabwe.  He further contended that such circumstances create a local obligation and not a foreign obligation.  He further submitted that since the judgment of the court a quo  which forms the subject of this appeal was handed down on 27 September 2017 the judgment debt or obligation came into being before the effective date 19 February 2019, and does not therefore fall within assets and liabilities referred to in s 44C (2) of the Act.  He submitted that the obligation did not qualify as a foreign obligation as held by the court a quo.

ISSUE FOR DETERMINATION

There is only one issue which commends itself for determination in this case.  The issue is whether or not the first respondent’s debt (as created by the court a quo’s order) to the appellant constitutes a foreign obligation.

THE LAW

The applicable Statutory Instrument in this matter is the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019 (“S.I. 33/2019”) and the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019 “S.I. 142/2019”.

S.I. 33/19 (4) is instructive.  It states,

“4. Issuance and legal tender of RTGS and saving

4(1) For the purposes of section 44C of the Principal Act as inserted by these regulations, the Minister shall be deemed to have prescribed the following with effect from the date of promulgation of these regulations (“the effective dates”)-

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(d)  that, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States Dollars (other than assets and liabilities referred to in section 44C (2) of the principal (Act) 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; and

(e)    that after the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS Dollar for the United States dollar on a willing seller willing buyer basis.” (Underlining my emphasis)

The other relevant portion of law relates to S.I. 142/19, being the Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019 which provides as follows:

“44C Issuance and legal tender of RTGS Dollars

In addition to its powers to issue bank notes and coins in terms of this Act and subject to subsection (3), the Bank shall have the sole power to issue or cause to be issued electronic currency in Zimbabwe.

The issuance of any electronic currency shall not affect or apply in respect of –

Funds held in foreign currency designated accounts otherwise known as “Nostro FCA Accounts”, which shall continue to be designated in such foreign currencies; and

Foreign loans and obligations denominated in any foreign currency which shall continue to be payable in such foreign currency.”

Also relevant is Part V of the Finance Act (No. 2) Act, 2019, which defines financial or contractual obligations to include judgment debts.  A judgment debt is defined as follows:

“judgment debt means a decision of a court of law upon relief claimed in an action or application which, in the case of money, refers to the amount in respect of which execution can be levied by the judgment creditor; and, in the case of any other debt, refers to any of the steps that can be taken by the judgment creditor to obtain satisfaction of the debt (but does not include a judgment debt that has prescribed, or been condoned or compromised.”

The case of Zambezi Gas Zimbabwe (Private) Limited v NR Barber (Private) Limited & Anor, supra, clearly outlines the applicable law on liabilities arising either before or after the effective date as stipulated in S.I. 33/19.  At p 9 of the judgment, this Court stated the following:

“What brings the asset or liability within the provisions of the statute is the fact that its value was expressed in United States Dollars immediately before the effective date and did not fall within the class of assets and liabilities referred to in s 44C (2) of the Reserve Bank of Zimbabwe Act [Chapter 22:15] (“the Principle Act”).”

At p 11 of the judgment this Court further stated that:

“The phrase immediately before” means that the liability should have existed at a date before the effective date and that such liability should have been valued and expressed in United States Dollars, the issue of the time frame within which the liability arose in relation to the effective date of 22 February 2019 does not matter; what is of importance is the fact that the liability should have been valued before the effective date in United States Dollars and was still so valued and expressed.”

APPLICATION OF THE LAW TO THE FACTS AND ANALYSIS

It is imperative at this stage that I allude to our finding on the preliminary points raised by Mr Tivadar and opposed by Mr Mpofu.  We do not agree that all the grounds of appeal raised by the appellant are not clearly, precisely and concisely set out as to render the whole appeal fatally defective.  We also find that the appellant’s heads of argument do not offend against the rules of this Court.  Mr Mpofu’s argument that this Court ought to be guided more by substance rather than form with regard to the grounds of appeal is persuasive.  It is settled that an appeal can only be invalid if it is in breach of the rules of this Court. See Zvokusekwa v Bikita Rural District Council SC 44/15. A close look at the grounds of appeal and heads of argument does not reveal that the appeal is fatally defective.  The preliminary points raised are therefore dismissed.

Turning to the merits of the matter, the crisp issue for determination has been identified as whether or not the obligation or debt owed by the first respondent to the appellant is a foreign obligation.

That the issuance of a court order directing the respondent to pay money to the appellant created a judgment debt is common cause. The first respondent owes a legal obligation to the appellant to pay the debt.  It is common cause that both parties are Zimbabweans domiciled and resident in Zimbabwe.  Having contracted their marriage in Zimbabwe, they also divorced in Zimbabwe under the Zimbabwean laws.  The monetary assets of the parties were in and outside Zimbabwe.  The judgment of the court a quo created a legal obligation for the first respondent to pay the stated amount of money to the appellant.  This obligation cannot be termed a foreign obligation because it did not arise from a foreign debt.  None of the parties was a resident of a foreign jurisdiction.  This, coupled with the provision contained in s 44C (2) (b) of the Act, that is, the exception clause, sheds light that the monetary assets in question cannot be considered as a foreign obligation which should be payable in foreign currency.  The court a quo therefore, correctly assessed that the debt was not a foreign obligation and that the debt ought to be discharged in local currency.

However, the question of the quantum of local currency has to be assessed in the light of the prevailing law and the date of the discharge of the obligation.  In addition to the statutory guidelines provided in S.I. 33/19, further reliance will be had to the Zambezi Gas case (supra).  The case clearly spells and sets out the criteria used to determine whether a United States of America dollars denominated debt is payable at the rate of one is to one or at the applicable interbank rate.  A judgment debt becomes enforceable and executable at the date on which judgment is handed down.

It is not in dispute that the respondent lodged an appeal with this court after the High Court issued a decree of divorce and ancillary issues on 27 May 2017.  This Court, on 16 March 2020, varied clause f (iv) of the order relating to the judgment debt.  Consequently, the court order only became executable after the effective date of 19 February 2019 as contemplated in S.I. 33/19. This then brings the judgment debt under the auspices of s 4 (1) (e) and not 4 (1) (d) of S.I. 33/19. The liability is valued in US dollars but subject to exchange control laws of Zimbabwe.  The debt is dischargeable in Zimbabwean dollars.  Since the liability as outlined by the court order only became executable after the effective date, in terms of s 4 (1) (e), the judgment debt as ordered by this Court on 20 March 2020 is payable in RTGS dollars at the prevailing interbank rate

The court a quo ought to have ordered that the USD$495 000 be discharged at the prevailing interbank rate.  This Court in the case of Ingalulu Investments & Anor v National Railways of Zimbabwe & Anor SC 43/22 at p 4, made the following pertinent remarks:

“Section 22 (1) (d) and (e) as read with s 22 (4) (a) of the Act prescribe the values of assets and liabilities that were expressed or any financial or contractual obligations other than foreign obligations that were concluded or incurred in United States Dollars on or before 22 February 2019 (the effective date or cut-off date), were deemed to have been expressed, concluded or incurred in RTGS dollars at the rate of one to one to the United States dollar.  Further, that the value of all assets accrued or liabilities incurred after the cut-off date would be payable at the prevailing interbank rate of the local currency to the United States Dollar. (Underlining my emphasis)

Since the judgment debt was after the effective date, the court a quo erred and misdirected itself by finding that ZWL 495 000.00 together with interest paid by the first respondent extinguished the debt of USD$495 000.00 together with interest.  The judgment debt being a local obligation expressed in USD was executable after the effective date. It could only be paid up in full once the amount together with interest was paid in local currency at the prevailing interbank rate.

DISPOSITION

The court a quo correctly found that the debt payable by the first respondent was not a foreign obligation.  It however, misdirected itself when it failed to appreciate that the debt would only be discharged in full by payment in local currency at the interbank rate.  The appeal accordingly succeeds in part.

As regards costs, I find no reason to depart from the general trend that costs follow the result.

Accordingly, it is ordered that:

The appeal partly succeeds with costs.

The judgment of the court a quo is set aside and in its place substituted the following:

“i.    The provisional order is discharged.

ii.     The application is dismissed with costs.

iii.    The first respondent shall pay USD$495 000.00 together with interest at the rate of 5% at the prevailing interbank rate at the time of payment.”

BHUNU JA		:	I agree

KUDYA JA		:	I agree

Atherstone & Cook, appellant’s legal practitioners

Gill Godlonton & Gerrans, 1st respondent’s legal practitioners