Hwange Colliery Company Ltd. v Ele Resources (Pvt) Ltd. & Anor (HC 5601 of 2010) [2015] ZWHHC 763 (30 September 2015)

1 HH 763-15 HC 5601/10 HWANGE COLLIERY COMPANY LIMITED versus ELE RESOURCES (PRIVATE) LIMITED and ALLIANCE INSURANCE COMPANY (PRIVATE) LIMITED HIGH COURT OF ZIMBABWE MTSHIYA J HARARE, 28 July 2015, 3, 8 August 2015 & 30 September 2015 Trial T. Magwaliba, for the plaintiff C. Chinyama, for the 1st defendant T. Nyaluma, for the 2nd defendant MTSHIYA J: On 16 August 2010 the plaintiff issued summons against the first and second defendants. The plaintiff’s claim, as amended on 3 March 2011, was laid out as follows: “Plaintiff’s claim as against 1st and 2nd Defendants jointly and severally, the one paying the other to be absolved is for payment in the sum of US$588 733-00, being the purchase price of a coal product known as coke peas supplied and delivered by Plaintiff to 1st Defendant at 1st Defendant’s special instance and request between the 4th August 2009 and the 13th January 2010, with the 2nd Defendant liability in respect of that amount being limited to sum of US$300 000-00, which amount 2ns defendant bound itself as surety in solidium and co- principal debtor for the timeous discharge by the 1st Defendant’s of its obligations to Plaintiff by executing a credit facility bond. Despite demand 1st and 2 Defendants refuse and/or have failed to repay the said amount. As stated in the summons the amount claimed arose from an agreement entered into between the plaintiff and the first defendant in August 2007 whereby the plaintiff undertook to supply/deliver 3000 tonnes of a coal product, described as “coke peas”, to the first defendant. The price for the coke pleas was agreed as US$230-00 per tonne. On 3 August 2009, the second defendant executed a surety agreement guaranteeing payment by the first defendant. The guaranteed amount was only to the extent of US$3000 000-00 (Three hundred thousand United States Dollars). In its declaration the plaintiff states the following: HH 763-15 HC 5601/10 “9. 10. 11. 12. 13. 14. In fulfilment of its contractual obligations Plaintiff duly supplied and delivered 1 914-35 tonnes of coke peas to 1st Defendant between the 4th August 2009 and the 13th January 2010. From the 4th August 2009 to the 21st October 2009 the purchase price charged by Plaintiff for its coke peas per tonne was US$230-00 The plaintiff’s purchase price for the coke peas per tonne changed from US$230-00 per tonne to US$280-00 per tonne from the 22nd October 2009 to the 14th January 2010. The total amount due to Plaintiff including value added tax for the goods delivered to 1st Defendant is the sum of US$588 773-00. Plaintiff presented its involve for the sum of US$588 733-00 to 1st Defendant on the 14th January 2010. A copy of the invoice is attached hereto marked ‘B1’. In breach of the terms of the contract between the parties and notwithstanding demand, 1st Defendant and 2nd Defendant have failed to pay to Plaintiff the sum of US$588 733-00 the 2nd Defendant’s liability in respect of that amount being limited to a sum of US$300 00-00. Although the first defendant initially resisted the claim, the above facts are not in dispute. This is confirmed by the fact that, on 3 August 2015, the first defendant consented to judgment in terms of the relief sought by the plaintiff namely: “(a) Payment in the sum of US$588 733-00, with 2nd Defendant’s liability in respect of that amount being limited to a sum of US$300 000-00; (b) Interest on the sum of US$ 588 733-00 at the prescribed rate which currently is 5% per annum calculated from the 25th February 2010 to date of payment in full; and (c) Costs of suit on the legal practitioner and client scale”. However, the second defendant argues that its liability does not include payment of interest but is only limited to the sum of US$300 000-00 which it guaranteed. It further argues that if interest is payable, the accrual date of such interest should be determined. In brief the issues for determination, in casu, are clearly spelt out in the plaintiff’s heads of argument wherein it is stated: “1. The 1st and 2nd Defendants having realised that the Plaintiff’s claim was incontestable both consented to judgment. The 1st Defendant consented to the full judgment claimed in terms of the summons. However, the 2nd Defendant consented to the principal amount and seeks to argue that it is not obligated to pay interest in respect of the sum of US$300 00-00 in terms of the deed of suretyship which constitutes the Plaintiff’s cause of action against. HH 763-15 HC 5601/10 2. The issues for determination in that regard are set out in the 2nd Defendant’s heads of argument as the following: -Whether the 2nd Defendant is liable to pay interest at the prescribed rate as claimed on (in) the summons with reference to the credit facility bond that it signed -If any interest is payable, then from what date should it be calculated?” Indeed, upon the first defendant consenting to judgment on 3 August 2015 the plaintiff and the second defendant agreed that I should proceed to determine the above two issues on the basis of their filed heads of argument. The second defendant filed its heads of argument on 6 August 2015 whilst the plaintiff also filed its heads of argument on 7 August 2015. Given the relief sought, the immediate observation I make is that the sum of US$300 000-00 is part of the capital sum of US$588 733-00. The entire capital sum is subject to default interest as prayed for in para (b) of the plaintiff’s prayer. Due to the guarantee or surety put in place by the second defendant, the two defendants became jointly liable for the capital amount claimed with the second defendant’s portion of that capital debt being limited to the sum of US$300 000-00. That guaranteed amount fell due upon demand and failure to pay it upon demand gave the plaintiff the right to demand interest from the second defendant. That interest would, in my view, obviously be restricted to the guaranteed but unpaid sum of US$300 000-00. In its heads of argument, the second defendant correctly states: “2.10 One, however, needs to be alive to the point made by the learned authors in Carney’s The Law of Suretyship 6th Edition, at page 116 namely that a surety is “in any event liable for interest from the time he himself is in mora”. The important consideration will be at the point at which the surety is considered to be in mora. 2.11 It is submitted that this will be a matter of fact. On the facts of this case, the principal debtor, the 1st Defendant originally disputed liability on the basis of non-delivery by the creditor, the Plaintiff. In such circumstances the surety would have no choice but to dispute liability as well and therefore would not be in mora. It is settled law that any defences available to the principal debtor, other than those personal to him, are also available to the surety. Further, the surety also has available to him those defences derived from the surety’s own contract – Carney (op. cit. supra) at page 170. However, once the principal debtor, the 1st Defendant has accepted liability as it has done, 2nd Defendant, the surety, would be in mora if it disputes liability from that point and interest would start to run against it”. Apart from the qualification, I take the above concession as reflecting the correct HH 763-15 HC 5601/10 position in law. The factual position is that the second defendant’s refusal to pay was not based on the initial defence(s) raised by the first defendant. As at 28 September 2010 the second defendant’s defences were: “3. Ad Para 7-8 (i) (ii) 2nd Defendant denies the validity of the said Credit Facility Bond as some was signed for and issued by an unauthorised officer who had no mandate to issue or sign the Bond on behalf of the 2nd Defendant. Further, the facts surrounding issuance and use of the Bond point to it having been obtained and used fraudulently 4. Ad Para 9-13 This is not known to 2nd Defendant and Plaintiff is put to the strict proof thereof. 5. Ad Para 14-15 2nd Defendant denies receiving any demand from Plaintiff prior to Summons and puts Plaintiff to the strict proof thereof”. On 17 September 2012 the 2nd defendant filed the following notice: “TAKE NOTICE THAT at the Commencement of Trial, 2nd Defendant shall make an Application to amend its Plea as follows: 1. By deleting paragraph 3(i) in its entirety and adding the following to Paragraph 3(ii) “In any event, the fraudulently obtained Insurance Policy giving rise to the Credit facility Bond was cancelled on 7 January 2010 which cancellation was accepted by 1st Defendant. The Credit Facility Bond therefore fell away with the cancellation of the Insurance Policy. The 2nd Defendant’s Summary of Evidence would consequently be amended accordingly”. Apart from the issue of demand, the above defences are not similar to the 1st defendant’s main earlier defence which was anchored on the issue of price. It cannot therefore be argued that the second defendant’s defence was dictated by that of the first defendant. The second defendant explains the law properly when it states: “….. However, once the principal debtor, the 1st Defendant has accepted liability as it has done, 2nd Defendant, the surety, would be in mora if it disputes liability from that point and interest would start to run against it”. The first defendant has accepted liability, including payment of interest from 25 HH 763-15 HC 5601/10 February, 2010 to the date of payment in full. That acceptance of liability is binding on the second defendant. In para 15 of its heads of argument, the plaintiff correctly submits as follows: “15. The date of mora is specified in the deed of suretyship. It is indicated that payment was due within 30 days of the 1st Defendant taking delivery in accordance with the contract. Strictly speaking therefore, interest became due on each consignment set out on the statement of account at pages 12 and 13 of the Honourable Court’s record. The last delivery was however made on 13 January 2010. 30 days from that date was he 13th of February 2010. However, the Plaintiff chose to claim interest not from the date when each of the invoices fell due, which would have been more onerous to the 2nd Defendant and indeed the 1st Defendant but claimed from the 25th of February 2010. Effectively therefore, the Plaintiff waived any interest that accrued on each of the invoices prior to the 25th of February 2010 and chose only to claim interest on the whole amount from a date, within a reasonable time after the Defendants had been placed in mora”. There is nothing before me which controverts the above submission. I therefore agree that the due date (i.e 13 February 2010) was contractual and was clearly spelt out in the surety agreement. Assuming that as at that date the 2nd defendant had forgotten about its obligations, it is worth noting that as at 25 August 2010, the second defendant knew the plaintiff wanted payment. That is when it then proceeded to (a) file an appearance to defend (26/8/10) (b) request for further particulars (15/9/10); and (c) plea (28/9/15). In its plea, the second defendant averred that it had never received ‘any demand’ from the plaintiff. However, I hold the view that the due date is indisputable and that position is in line with the provision of the surety agreement where the second defendant states: “.. We agree that all admissions and acknowledgments or indebtedness by the contractor shall be binding upon us..”. The contractor referred to in the above quotation is the first defendant. As demanded by the plaintiff, the first defendant has consented to payment of interest on the judgment amount as from 25 February 2010. That consent is, in my view, binding on the second defendant. Furthermore there is nothing that exempts the second defendant from paying default interest on the amount it guaranteed (i.e. the portion of the amount admitted to be owing is not exempt from interest). Accordingly once the issue of default in payment is accepted, the payment of interest on the accepted portion of the total judgment amount cannot be avoided. HH 763-15 HC 5601/10 Of the total amount consented to by the first defendant, the second defendant accepts that it owes the plaintiff US$300 000-00. The plaintiff has asked for interest on the total amount yet to be paid. The interest rate asked for is 5% per annum as from 25 February 2010. That position has been accepted by the guaranteed party. That, in my view, places the liability to pay interest on the second defendant with respect to the unpaid amount it guaranteed (i.e US$300 000-00) as from 25 February 2010 as accepted by the first defendant. In view of the foregoing, wherein I make a finding that the second defendant is indeed liable to pay interest at the prescribed rate as from 25 February 2010, and with the first defendant having consented to judgment on 6 August 2015, I now order as follows: 1. The 1st and 2nd defendants jointly and severally, the one paying the other to be absolved, be and are hereby ordered to pay the plaintiff the sum of US$588 733- 00, with the 2nd defendant’s liability in respect of this amount being limited to the sum of US$300 000-00 on which the 2nd defendant shall pay interest at the rate of 5% per annum from 25 February 2010 to the date of payment in full. 2. The 1st defendant be and is hereby ordered to pay interest on the sum of US$288 733-00 at 5% per annum from 25 February 2010 to the date of payment in full; and 3. The 1st and 2nd defendants, jointly and severally, the one paying the other to be absolved, be and are hereby ordered to pay costs of suit on a legal client scale. Mawere & Sibanda, plaintiff’s legal practitioners Chinyama and Partiners, 1st defendant’s legal practitioners P. Takawadiyi & Associates, 2nd defendant’s legal practitioners