DELTA Beverages (Private) Limited v Borcherds and Another (322 of 2024) [2024] ZWHHC 322 (2 August 2024)

1 HH 322 - 24 HC 2518/20 DELTA BEVERAGES (PRIVATE) LIMITED versus SARAH BORCHERDS and JULIAN WILLIAM GERARD BORCHERDS HIGH COURT OF ZIMBABWE MHURI J. HARARE, 27 May and 2nd August 2024 SPECIAL CASE Adv. T. Mpofu, for the plaintiff Mr. V. Masaiti, for the 1st and 2nd defendants MHURI J: This is a special case in terms of Rule 52 of the High Court Rules, 2021. The agreed facts to this stated case are as follows: 1. The plaintiff is Delta Beverages Private Limited, a registered company in accordance with the laws of Zimbabwe whose address of service is c/o its legal practitioners of record. 2. The first defendant is Sarah Borcherds, an individual whose address of service is No. 12 Arundel Road, Alexandra Park, Harare. 3. The second defendant is Julian William Gerard Borcherds, an individual whose address of service is No. 12 Arundel Road, Alexandra Park, Harare. 4. The first and second defendants are husband and wife 5. The first defendant was employed by the plaintiff on 5 May 2004 as a Personal Assistant to the Company Secretary and was promoted to an Executive Payroll Assistant until she resigned on 16 January 2020. 6. In the course of her employment duties, the first defendant was responsible for inter alia liaising with the plaintiff’s bankers and providing them with details to facilitate the transfer of salaries to the plaintiff’s executive staff and making other payroll executive related payments. 7. The following were, among other things, the express and/or implied terms of first defendant’s contract of employment: HH 322 - 24 HC 2518/20 that all and any instructions issued by her to the plaintiff’s bankers would be a. lawful and would accord with her mandate from the plaintiff; and/or b. that she would deal with all the business affairs of the plaintiff in a fair and honest manner. 8. In breach of her employment contract, during the period 3 November 2016 to 21 February 2019 the first defendant fraudulently instructed the plaintiff’s bankers to transfer certain sums of money from the plaintiff’s account to an account operated by the first and second defendants. The total sum transferred is US$ 1 093 648.12 9. The first defendant had no authority to transfer the funds to her personal account. 10. The first and second defendants accessed the funds from their bank and utilized the full sum. 11. The first defendant admitted liability to the plaintiff and paid the sum of ZW$ 1 093 648.12 on 20 January 2020. The sum paid by the first defendant was equivalent to US$61 950.78 at the interbank rate of 17.6535 applicable on the date of payment. 12. Plaintiff claims that the balance due from the defendants is US$1 031 697.34 and further contends that the defendants have been unjustly enriched at its expense. 13. Defendants contend that the sum owed to the plaintiff has been paid in full. These above agreed facts were signed for by the parties Legal Counsel on 18 October 2023. The issues for determination by this Court are as follows: 1. Whether defendant discharged the debt owed to the plaintiff 2. Whether plaintiff is entitled to payment of the sum of US$1 093 648.12 in foreign currency 3. Whether defendants were unjustly enriched at the expense of the plaintiff. Whether the defendants discharged the debt owed to the plaintiff? The agreed facts show conclusively in the table provided in paragraph 8, that the amount owed to the plaintiff by the defendants was US$1 093 648.12 and for the avoidance of doubt this amount is denominated in US Dollars. According to the same agreed facts this debt owed to the plaintiff by the defendants arises from a fraud orchestrated by the latter against the former between 3 November 2016 and 21 February 2019. According to these agreed facts the first defendant acted in breach of contract when they diverted the plaintiff’s funds from the plaintiff’s bank account to their personal accounts. HH 322 - 24 HC 2518/20 This breach of contract happened between 3 November 2016 and 19 February 2019 and the terms of contract breached are outlined in paragraph 7 of the agreed facts. Paragraph 11 of the same facts also show that the defendants also admitted liability and paid the plaintiff the amount due in RTGS at the rate of 1:1 in accordance with S. I 33/19, s. 4(1) d on 20 January 2020. The amount paid by the defendants on this date was ZW $1 093 648.12. The plaintiff disputes the defendants’ decision to pay the amount owed in RTGS instead of US dollars. The relevant provision s.4(1) of S. I 33/19 and s.22 (1) of The Finance Act No.2, 2019 speak to all assets and liabilities including financial and contractual obligations as convertible at parity(one-to-one) with the United States dollar as long as they were valued and expressed in United States dollars prior to the date of promulgation. The amounts allegedly acquired fraudulently by the defendants as a result of the first defendant’s breach of contract during the period of November 2016 to February 2019 constitute a liability for them and an asset for the plaintiff, therefore, they fall within the remit of s.4(1)d of S. I 33/19. The plaintiff contests that the defendant’s liability arose in January 2020 when the fraud became known, and this occurs well after the effective date of 22 February 2019. Prior to January 2020 and most specifically during the period of accumulation, the plaintiff suggests emphatically that the defendants had no known liability to them as the plaintiff was unaware of the fraud and had no reason to suspect that anything untoward was happening to their money. Upon discovery, the defendant admitted liability and agreed to return the money. The plaintiff believes it is only at this point that the defendants’ liability arose and according to the agreed facts that debt was then discharged by the defendant on 20 January 2020 in ZW dollars. Section 4(1)d of S. I 33/19 is engaged as it refers to assets and liabilities that were valued and expressed in United States dollars before the effective date of 22/02/2019. The facts of this matter suggest that the defendants’ liability came into existence at the onset of the fraud and not after the date of promulgation because during that period and according to paragraphs 7b and 8 of the agreed facts the first defendant was under a contractual obligation to deal honestly with all the plaintiff’s business affairs. She breached that contractual obligation from the 3rd of November 2016 to 19 February 2019. This contractual obligation is the basis of her liability which comes to life from the moment the dishonesty commences. That the fraud was discovered well after the effective date of 22 February 2019 is immaterial in my considered view as liability is established the moment the HH 322 - 24 HC 2518/20 defendants breached their contractual obligations, that is from 3 November 2016, until 19 February 2019. The case of Zambezi Gas Zimbabwe (Pvt) Ltd v N. R. Barber (Pvt) Ltd & Another SC 3 - 20 though it refers to a civil dispute in which a judgment debt accrued before the date of promulgation and clearly defined in terms of Part V of section 20 of the Finance Act (No.2), 2019 as a financial or contractual obligation was the object of the dispute, its application in this instance remains relevant. The liabilities arising from financial or contractual obligations also fall within the remit of s.4(1)d of S. I.33/19 according to s.22(1)d of the Finance Act No.2, 2019. Zambezi Gas Zimbabwe supra also offers an insight into the interpretation and application of section 4(1)d of S.1 33/19. The fact that criminal liability according to section 9 and 18 of the Criminal Law (Codification and Reform) Act only arises once the elements of guilt outlined in that section have been established beyond all reasonable doubt is again immaterial at this point. Liability in this matter first arose from the breach of contract established from the date the first defendant began to deal dishonestly with the business affairs of the plaintiff. The fact that the admission of liability only occurs in January 2020 and is evidenced by the subsequent payment made by the defendants on 20 January 2020 in their attempt to dispense off the debt does not vitiate the contractual liability that ensues from the fact that the defendants breach of her contractual obligations commenced on 3 November 2016. It only makes sense then in this matter that the liability of the defendant arising from her breach of contract be distinguished from criminal liability which arguably arises in January 2020 when she admits liability for the fraud. If criminal liability was the only liability established in this matter, then the court could have been in a position to consider construing it as having arisen in January 2020 when the plaintiff discovered the fact of the fraud and the respondent admitted liability for the pursuant debt. The plaintiff’s contention that the debt was not known and therefore liability should be construed as having arisen in January 2020 when the fraud was established, and the defendant admitted liability is immaterial to this matter as the defendant’s liability is both contractual and criminal and according to the facts the former precedes that latter. The former stems from the breach of her contractual obligation and therefore comes to life on the date the breach of contract commences and continues throughout the period of accumulation which is prior to the date of promulgation. In Zambezi Gas Zimbabwe supra, the Supreme Court makes the point that: HH 322 - 24 HC 2518/20 “The origin of the liabilities is not a criterion for exclusion. In other words, the fact that the liability is based on a court order does not exempt the liability from the application of the provisions of s4(l)(d) of S. I. 33/19. 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 principal Act”)…” This court has established that despite the presence of criminal liability arising from the first defendant’s admission of fraud the first defendant is liable for breach of contract and that liability commences on the date the breach begins which according to the agreed facts is 3 November 2016. Pangoline Mines and Minerals (Private) Limited & Anor v Afrochine Smelting (Private) Limited HH-782-19 raised in the plaintiff’s heads of arguments dealt with a matter regarding an arbitral award for damages and concluded that despite the existence of a court order granted prior to the date of promulgation, s.4(1)d of S. I.33/19 was disapplied on the basis that the quantum of damages had not yet been determined by the date of the court order and were only determined on a date after the effective date. The result in this matter was that the amount for the damages had to be paid in accordance with s.4(1)e of S. I 33/19 as the quantum of damages was only determined after the effective date. The difference in this matter is that even though the fraud was only discovered after the effective date, the value of the liability arising from the breach of contract was ‘valued’ and ‘expressed’ in United States dollars prior to the date of promulgation. The fraud may not have been known but the defendant was already in breach of contract and therefore liable and the value of what was defrauded was ascertainable upon detection of the fraud, that amount was valued and expressed in United States dollars prior to the effective date. It is this fact alone that defeats the claim of the plaintiff, what was defrauded, though unknown was valued and expressed in US dollars prior to the effective date and therefore ascertainable as such on the date of discovery. In view of the above, it is my finding that the defendant fully discharged the debt owed to the plaintiff when it paid the latter the sum of RTGS $1 093 648.12 in accordance with section 4(1)d of S. I 33/19. Whether plaintiff is entitled to payment of the sum of US$1 093 648.12 in foreign currency? Taking into account the finding established above the court is of the view that section 4(1)d of S. I 33/19 is fully engaged in this matter as the debt in question was only created on 3 November 2016 when the breach of contract commenced and according to paragraph 11 of HH 322 - 24 HC 2518/20 the agreed facts the defendant admitted liability for the breach of contract and consequently paid the amount due in ZW dollars on 20 January 2020. In addition, section 4(1)d of S. I 33/19 is engaged for ALL liabilities [including financial or contractual obligations] arising prior to the effective date. This section is worded in clear and unambiguous language and reads as follows. “…. for accounting and other purposes (including the discharge of financial or contractual obligations), all assets and liabilities that were, immediately before the first 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 the first effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.” It is clear that the plaintiff is entitled to the payment for the amount due in either foreign currency or the equivalent RTGS dollars at the rate of one-to one since the liability arising from the breach of contract was valued and expressed in United States dollars prior to the date of promulgation. Reference is made to section 22(1)c of the Finance Act No.2 of 2019 which confirms that the ZW dollar used by the defendant to discharge of the plaintiff’s debt on 20 January 2020 is legal tender in Zimbabwe, therefore the use thereof by the defendant to discharge the defendants debt paid on 20 January 2020 in accordance with s.4(1)d of S. I 33/19 is not prohibited. The court therefore takes the view that the plaintiff in this matter is not entitled to payment of the sum of US$1 093648.12 in foreign currency only. The defendants can pay the sum owed either in foreign currency or in ZW dollars using the exchange rate prescribed in s.4(1)d of S. I 33/19. Paragraph 11 and 13 of the agreed facts categorically states that this has been done and so the court considers this plaintiff’s debt discharged in full as of 20 January 2020. Whether respondents were unjustly enriched at the expense of the appellant? In Gamanje (Pvt) Ltd v City of Bulawayo SC 94/04 at p 8 the court listed the requirements for a claim of unjust enrichment to succeed as follows: the allow “The requirements for an action for unjust enrichment are, firstly, that the defendant has been enriched by the receipt of a benefit; secondly, that he has been so enriched at the expense of plaintiff; thirdly, that the enrichment is unjustified (in the sense that it would be unjust to the defendant to retain the benefit); fourthly, that the enrichment must not come within the scope of one of the classical enrichment actions; and fifthly, there must be no positive rule of law which refused an action to the impoverished person.” It is clear in paragraph 8 of the agreed facts that the first defendant committed fraud by instructing the plaintiff’s bankers to transfer the sums outlined in the same paragraph to an account operated by them as the first and the second defendants. Paragraph 10 of the agreed HH 322 - 24 HC 2518/20 facts also makes it clear that they proceeded to access the siphoned funds and converted them to their personal use. On this fact alone the element of unjust enrichment should be duly satisfied but for the imposition of s.4(1)d of S. I 33/19. The plaintiff argues that in allowing the defendants to pay back the sum due in RTGS dollars the court has allowed them to benefit from the proceeds of crime[fraud] and only disgorgement of such benefit can cure this illegality. The plaintiff contends further that the sum paid by the defendants on 20 January 2020 constitutes only a fraction of the value of the debt created by the plaintiff in January 2020. Paragraph 11 of the agreed facts states that the value of the sum paid by the defendants on 20 January 2020 stood at US$61 950.78 according to the prevailing interbank rate as at that date of payment. It is evident from paragraph 12 of the agreed facts that the plaintiff believes that the defendants were unjustly enriched to the tune of US$1 031697.34 and the plaintiff prejudiced of this outstanding balance. Irrespective of the agreed facts suggesting unjust enrichment, the defendants continue to insist on the interpretation and application of section 4(1)d of S.1 33/19, and that, based on that application their debt to the plaintiff was lawfully discharged in full satisfaction. The plaintiff makes the following point in paragraph 1.8 of their heads of argument; “…The principles set out [above] dictate that the court must in interrogating the validity of position, ensure at the end of the day, that they do not benefit from their own wrongdoing. Indeed, this has to be so particularly where criminal conduct is involved, for a court of law never countenance an illegality…” their must Even if the court is to consider that the interpretation and application of the relevant provision in S. I 33/19 would lead to a result that is manifestly unjust or illegal, the question remains, should the alleged benefit obtained by the respondents be deemed so, taking into account that such benefit originates from the interpretation and application of a provision of the law (s.4(1)d of S. I 33/19)? Should such application of a provision of law be interpreted as allowing unjust enrichment, especially where the application of its ordinary meaning to a set of facts such as the ones subsisting in this matter may potentially produce a result that is manifestly unjust or illegal? It should be noted that an illegality is something that is not supported by law or by a provision of law. The payment made by the defendants on 20 January 2020 cannot be construed as leading to an illegality as such payment is anchored on an application of a provision of law, in this case that law is s. 22(1)d of the Finance Act No.2 of 2019. HH 322 - 24 HC 2518/20 The court is therefore inclined to believe that the defendants were not unjustly enriched. The defendant has clearly benefited according to the agreed facts, but their benefit arises from an interpretation and application of the law as outlined in section 22(1)d of the Finance Act No. 2 of 2019. The last element in establishing unjust enrichment according to Gamanje (Pvt) Ltd supra states that for the claim of unjust enrichment to succeed there must not be any positive rule of law which refused an action to the impoverished person. The requirement suggests that in the presence of a positive rule of law that refused an action to an impoverished person such as the plaintiff the claim of unjust enrichment may fail at such instance. The benefit acquired by the defendants borrows its legitimacy from S. I 4(1)d of S. I 33/19 and therefore the claim of unjust enrichment fails on this point. The court therefore takes the view that the defendant’s benefit is not illegal or unjust as it borrows its legitimacy from a positive rule of law, in this case s.4(1)d of S. I 33/19. The defendants paid the sum due to the plaintiff in RTGS dollars because that is what the applied relevant rule of law permitted them to do. The respondent’s payment was in accordance with the law, and it is just because the law assumes it to be so. The court is therefore of the view that the respondents have discharged their debt in accordance with the relevant provision of law specified in s.22(1)d of the Finance Act No.2 of 2019. The argument of unjust enrichment is thereby dismissed. In the premise, plaintiff’s case therefore fails and it is ordered that its claim be and is hereby dismissed with each party bearing its own costs. MHURI J:……………………………………………… Scanlen & Holderness, plaintiff’s legal practitioners Titan Law, defendants’ legal practitioners