Golf Consultancy and Tourism Limited v Chainama Hills Golf Club Limited (Appeal No. 162/2014; SCZ/8/184/2014) [2015] ZMSC 195 (27 November 2015)

, r SELECTED JUDGMENT NO. 39 OF 2015 IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: P . 955 Appeal No.162/2014 SCZ/8/184/2014 GOLF CONSULTANCY AND TOURISM LIMITED APPELLANT AND CHAINAMA HILLS GOLF CLUB LIMITED RESPONDENT Coram: Hamaundu, Wood and Kaoma, JJS. On 7 th October, 2015 and on 27th November, 2015. For the Appellant: Mr. M. M. Mundashi, S. C. and Mr. M. Chiteba of Mulenga Mundashi and Kasonde Legal Practitioners. .... For the Respondent: Mr. F. S. Mudenda of Chonta, Musaila & Pindani Advocates. JUDGMENT Kaoma, JS, delivered the Judgment of the Court. Cases referred to: • I J2 P,. 956 1. Ringford H bwanda v Zambian •~ w ri -·. Plc Vo,l 3 (2012) Z - 7 . 2.. Gid on Mundanda v Timothy Mulwani and 3·_ Zambia E po·rt and Imp,ort - ank Ltd v W uyu _· arm . imit d , t.h -, . ( - -7) z - 2 . li _· .· An.dr; 'W ,pyron an _ Mary ·nn Langl, y pyron (Mam d Woman)' (1 · . -1 4) Z. R. d to· .of'th · .. upr m ·, o,urt, 1 ·_,9 Ord r14Aand . rd r -;10. -ank of Zambia f . urr -n ·y) R gulation -- -. tatutory In - rnm -- nt No . . 3 of 1. Th - ul - 2. Th 2'012 r; gulation 4 ,(1) .and (2)'. 3. Th ank of Zambi ( · rr . ncy) (. -m ndm, nt) -gu.latio,n . <tatuto,ry Jn _,trnm ·nt No. 7,8 of 2012, ~ gul tion. 4 (1)' (. ) n · (b'). -t -ap 2 4. Th Int rpr t tion nd , - n -.ral rovi -i·o,n- 5 .. The• pr m · -,ourt A t , ap 25 ti.on 2'5 - io 1 '(l}(a). Th · p • p -1 - t of 1 w "-"-... writing b . • :l,d buy fro. nown I ' ' D, 11 r J3 P.957 th 1 n d h m . f th _ p OJ - . • - . r - or 1 ,ary . ;; --omp-1 • - . t 0 1 - ' t I • · mp . - . pit nd - dy i .· 2014 ,, th - ,_ umm - kin and proJ · - -, i - th · um f ZM • 1 . . - h ' k , rit r '_ 0 J4 P. 9 58 Th th . . utation tutory In · trum nt ( .. I.) No. 3 if 2012 . n • ·o n ppli d to h = v h ro .nd h r h - s p,ri, , i Unit· d · ' min .1· h I . . ., 1 ·n n 1 1\..-L'- grou -ds .. In .· ,r und 1, -pp 11 .· .- t ck d t 1al J hol,din . . . ,. JS P.959 fth - • ... ....__ 1v m ,o t __ k t ' f ''' -- -,Ilan tri-. L . d J on r ct, -tatu ■ pr h Bank if Zambi'a ( urr n ,y}(Am ndment) -- gulati 1n -, . I. No. 78 of2012w, 1 h c - An • ompl with and Mr. ,. W 1 , hy h n bri f, h • VI W h ,- • J6 P. 960 quoting or selling of goods and or services of a domestic nature in a foreign currency and hence was void. It was submitted that the judge relied on the case of Ringford Habwanda v Zambian Breweries Plc1 in which the High Court held that where a contract is illegal as formed, or it is intended that it should be performed in a legally prohibited manner, the courts will not enforce that contract or provide any remedies arising out of the contract. It was submitted that the holding by the trial judge would have been correct if the contract price was solely or exclusively expressed in United States Dollars; and that the judge did not properly construe the consideration clause. It was also the appellant's argument that what the judge was invited to consider was whether the contract was capable of being enforced or whether it was possible for the parties to comply with the contract legally but the trial judge did not consider whether the consideration was capable of being paid in Kwacha. To buttress this point, the case of Gideon Mundanda v Timothy Mulwani and others2 was cited in which we emphasised that the determination of whether a provision of a statute renders a contract null and void is ... J7 valid .. W _ · of 2012· an 'U $ ,000,0000 .. 0·0 , .· th Kw. ch . qu1v 1 n , .. Furth r ,, th ·. • . 1 of 2012 by i ·. tio f r ph (- ) h ·ct tzo,n 1 -(l)(a)' of Int r -r t.ati.on and ~ · n -ral Provi' ion Act · ap 2 of t.h , L w . of Zambia ·r - wh r ,, - • I 1n if 2012 onl ... JB pr don _. T r . I , t of ,dvo , thi __ h ' th · t • oul . ll · r ·rov _ . tin • . · 1 or "''-''---" - J9 P . 963 amendment of regulation 4(1) of S. I. No. 33 of 2012, indexing of the Kwacha price to the Dollar price was not specifically prohibited. Counsel for the appellant further submitted that even if the exchange rate was not specified by the parties under the contract, Regulation 4(2) of S. I. No. 33 of 2012 allowed conversion of the foreign currency by reference to the 'prevailing spot rate', so it is possible to convert the US$6,000,000.00 price to the Kwacha price and to get the parties to perform in line with their agreement. In opposing the appeal, Mr. Mudenda, counsel for the respondent, also relied on his written Heads of Argument which he • augmented with oral submissions. He argued grounds 1 and 3 together. He submitted that it is trite that illegality arises both as to formation or performance; that the trial judge was right when he approached the matter from the view of illegality as to formation; and that the issue of illegality as to performance does not arise. It was further argued that the appellant has admitted that the contract quoted the purchase price in United States Dollars, which violated S . I. No. 33 of 2012. Further, that this was sufficient to render the contract illegal and the illegality remains albeit the use .... ..... • • • JlO P.964 of the words ''Kwacha equivalency''; and that the mere inclusion of these words does not eliminate the illegality; and allowing such a situation would clearly defeat the purpose of S.l. No. 33 of 2012. It was also argued that quoting the price in United States Dollars or ''Kwacha equivalency'' was intended to circumvent S. I. No. 33 of 2012. We were invited to uphold the High Court decision in the case of Ringford Habwanda v Zambian Breweries Plc1 as the contract expressly flouted the law, and also to invoke the principle espoused in the case of Gideon Mundanda v Timothy Mulwani and others2 that courts will never condone the flouting of the law. In addition, it was submitted that the contract provided no mechanism for determining the ''Kwacha equivalent'' price, and so it is not possible to determine the price. Further, that even if the question of legal performance of the contract had required ..... determination, it would not be possible for the parties to comply with the contract legally. In response to ground 2, Mr. Mudenda submitted that the ground is misconceived in that the trial judge did not ref er to Regulation 4(1) (b) of S.l. No. 78 of 2012 nor did the r espondent in its Jll P.965 application; and that the provisions of S. I. No. 78 of 2012 had no bearing on the court's decision. Thus, the appellant should not be allowed to profit from having misled the court into considering S. I. No. 78 of 2012. We were urged to dismiss the appeal with costs. In his oral submissions, Mr. Mudenda added that the 'alternative mode of payment' issue being raised now was not raised in the court below and that in its Skeleton Arguments the appellant had admitted that the contract was expressed only in United States Dollars which was prohibited by S. I. No. 33 of 2012. On the argument by State Counsel that Regulation 4(2) of S. I. No. 33 of 2012 provided for the conversion rate of a foreign currency to Kwacha, Mr. Mudenda submitted that this only applied to contracts that were in existence prior to the commencement of the S. J and does not apply to this contract. He contended that S.l. No. 33 of 2012 clearly prohibited the quotation of prices in United States Dollars while the effect of S~l. No. 78 of 2012 was to ban the indexation and quotation of prices for domestic transactions in foreign currency. He further argued that courts must not condone P.966 · o Jl.2 h h b .. d pr Vl~ . ourt A t allow - - - · on L ---'-" · • th - - ' ,e tion 25 oF th · ·_ upr·- m · 'J ,gul ti n J13 P.967 We have considered the record of appeal and the arguments by the parties. In our view, the three grounds of appeal raise one major issue of whether the learned trial judge was on firm ground when he dismissed the matter on ground that the contract of sale was prohibited by S . I. No. 33 of 2012, was null and void and unenforceable. We shall deal with all the three grounds at once. Firstly, Regulation 4(1) of S. I. No. 33 of 2012 read as follows: ''A person shall not quote, pay or demand to be paid or receive foreign currency as legal tender for goods, services or any other domestic transactions. '' It is clear from the above provision that quoting prices in foreign currency was specifically prohibited. However, this provision did not proscribe the indexing of a foreign currency to the Zambian Kwacha. The prohibition was expressly introduced by S. I. No. 78 of 2012 which under Regulation 4 (l) (a) and (b) provided as follows: ''A person shall not - (a) quote, demand, pay or receive foreign currency as legal tender for a domestic transaction; or (b) engage in any pricing mechanism t o circumvent these regulations which would have the effect of causing any quoted price to fluctuate from day-to-day by reason of its indexation to a foreign currency'' (Emphasis is ours) intended II - J14 ... P.968 From the above, it is clear that before the coming into effect of S. L No. 78 of 2012, on 19th November, 2012, indexation of foreign currency prices to the Kwacha was not expressly prohibited. Therefore, at the time the contract was executed; indexation of foreign currency to the Kwacha was not illegal. So, by stating the contract price as '' US$6, 000, 000. 00 or its Kwacha equivalency'', the parties were in effect indexing the Dollar price to the Kwacha, meaning the contract price was capable of being ascertained in Kwacha and could be paid in Kwacha. Mr. Mudenda had argued that the issue of indexing the foreign currency to the Kwacha was not raised in the court below and cannot be raised now. Our view is that the argument is devoid of merit. While we agree with the respondent that the appellant did not argue this point, we cannot ignore the fact that the consideration clause was specific that the Dollar price was indexed to the Kwacha. We do not even need to resort to section 25 of the Supreme Court Act or Order 59 / 10 of the RSC 1999. In the case of Gideon Mundanda v Timothy Mulwani and others2 , we put the matter as follows: • 1, • JlS P.969 ''As to the question of the possible illegality of the contract we respectfully agree with the principle set out in Kulamma v Manadan (1) that parties to a contract should be presumed to contemplate a legal rather than an illegal course of proceedings .... It must be made quite clear that the courts will never in a.ny circumstances condone the flouting of the law; but we must approach this matter by considering whether it was possible for the parties to comply with their contract legally, in which event we must encourage such compliance.'' We stand by the above decision and reiterate that as much as we abhor the flouting of the law, if a contract can be performed legally, then we must encourage such legal performance particularly in this case, where the contract was not illegal as to formation. As regards the mechanism or exchange rate for determining the Kwacha equ ivalent of the US$6,000,000.00 contract price, we agr ee entirely with Mr . Mudenda's argument ·that Regulation 4(2) of S . I. No. 33 of 2012 applied only to contracts that were made prior to its enactment. Regulation 4(2) provided as follows: '' Any contract, agreement, sale, payment, bill, note, instrument or security for money and any transaction, dealing for money or the payment of, or the liability to pay, any money, existing on the date of commencement of these Regulations, and which is to be executed or discharged in the Republic, shall be deemed to be a reference to the corresponding amount of money expressed in terms of the Kwacha and calculated at the commercial bank prevailing spot selling rate.'' . : • . , . • • J16 • • • I I • ,{ • P. 970 ' . In: the case of Zambia Export and Import Bank Ltd v Mkuyu .. ' . . ~ Farms Limited and others3 we stated that in a case where payment of a judgment debt has to be converted from or to a foreign currency the rate of exchange applicable is the one ruling at the time of enforcing the judgment. Although, this case does not involve enforcement of a foreign currency judgment, t h e principle in the case just cited can be applied to determine the exchange rate. Thus, we hold that the exchange rate s h all be the prevailing rate as at the ,_ date of payment of the contract price. In a ll, we uphold the appeal and set aside t h e order dismissing the case on a point of law and we remit th e matter back to the High Court to be tried before a different judge. Costs of the appeal shall abide the outcome of the matter in the court below. ..._ E. M. HAMAUNDU SUPREME COURT JUDGE • A. M. W SUPREME , OURT JUDGE ~ D ~ - R. M. C. KAOMA SUPREME COURT JUDGE • . • " •