Bvirakure v Shoko & Ors (HC 732 of 2013) [2015] ZWHHC 330 (1 April 2015)

1 HH 330-15 HC 732/13 RUFARO RUTH BVIRAKURE versus DENNIS SHOKO and ONGAI SHOKO and PRISCA MABIKA and MOREFIELDS INVESTMENTS (PVT) LTD HIGH COURT OF ZIMBABWE DUBE J HARARE, 2 March & 2 April 2015 Trial A Muchandiona, for the plaintiff A M Mvuu, for the 3rd defendant DUBE J: The plaintiff brought this delictual claim for monies she allegedly lost as a result of failed investments which she claims were induced by false misrepresentation. The brief allegations to this dispute are as follows. On 29 January 2013 the plaintiff issued summons against the four defendants claiming $97 502.00 being the maturity value of the plaintiff’s two investments with the defendants. The fourth defendant is an investment company through which the plaintiff invested her monies. The first and second defendants are husband and wife and are directors of fourth defendant. The third defendant is the young sister of the second defendant. This claim is contested only by the third defendant. The plaintiff has already obtained default judgement against the first, second and fourth defendants. The allegations are that on or about January 2012, the first to third defendants represented to the plaintiff that they were directors of the fourth defendant company and that the company was licensed to do investment business whereby depositors would invest money with the fourth defendant for fixed periods of time and earn interest at stipulated rates. When the defendants made this representation, they knew it to be false in that the third defendant was not a director of the fourth defendant and the fourth defendant did not hold an investment licence to carry out the business which they claimed it was licensed to do. That when the defendants made this representation, they knew that third defendant was not a director of the HH 330-15 HC 732/13 fourth defendant and that the fourth defendant did not hold an investment licence to carry out the business they claimed it was licensed to do. Further that when the defendants made the representation, they intended that the plaintiff act thereon and pay substantial amounts to them. The plaintiff claims that she was induced by the aforesaid representations to deposit amounts of $21 000.00 on 14 May 2012 and $15 500.00 on 20 January 2012 for investment purposes and on two separate occasions. When the plaintiff’s investments matured, the defendants failed to pay the agreed amounts resulting in her bringing this action. The plaintiff no longer claims the maturity value of her investments and limits her claim to the monies actually invested totalling $36 500.00. The issues referred to trial are summarised as follows. 1. Whether the third defendant made a misrepresentation to the plaintiff that she was a director of the fourth defendant 2. Whether the third defendant is liable, jointly and severally with the other defendants in the sum of $15 500.00 and $21 000.00 together with interest. For ease of reference, the third defendant will be referred to as the defendant. The plaintiff testified in her own case and her evidence may be summarised as follows. She used to work with the defendant at a named company. After she left the company she continued to communicate work with the defendant. During one of their conversations the defendant told her that she was a director in an investment company, the fourth defendant based in Bulawayo that the sister and her husband owned. The defendant had invested her own money in the company and she had received good results. If she was interested in investing in the company, the defendant told her, she was required to fill in forms and choose the duration of the investment. She signed the agreements in exhibit 1 and 2 in Harare. The first defendant would sign his part of the agreement form in Bulawayo. She deposited the monies into a Stanbic account that the defendant had given her on the two occasions she invested the money. She would then fax the deposit slips to the defendant who was based in Chegutu. They would prepare a fax for her to sign. She invested $21 000.00 and $15 000.00 on two occasions. When she wanted to withdraw her money she called the defendant. The defendant referred her to the first defendant. She failed to get her money back. There are a number of directors who are listed on the deal notes marked exhibits 1 and 2. The defendant, P. Mabika, is listed there as a director. She did not enquire if they had a licence. She had confidence that everything was in order as she had worked with the defendant previously. HH 330-15 HC 732/13 Both the defendant and the first defendant denied that she was a director of the fourth defendant. She denied that the defendant was merely a consultant of the fourth defendant. She claims $15 500.00 and $21 000.00 and has abandoned the claim for the maturity value of the investments. The witness maintained her story and was a good witness. At the close of the plaintiff’s case the defendant applied for absolution from the instance. I dismissed the application and indicated that my reasons would be part of the main judgment. The evidence that had emerged at the close of the plaintiff’s case was that she had invested her money with the defendants and that she was induced to enter into such investment contract after the defendant misrepresented to her that she as director. The defendant’s position was that she never misrepresented that she was a director of the fourth defendant nor that such representation had induced her to enter into the two transactions in issue. It was the plaintiff’s word against that of the defendant. I did not get the impression that this was a clear case where the plaintiff had dismally failed to prove her case at the close of her case. The defendant in his address concentrated on issues of credibility and probability of were the truth lies. This approach was discouraged in Chiwawa v A Mutsuris& Anor and 4 Ors 2009 (1) ZLR (HC) 72 at p 77 B-C where the court remarked as follows’, “At this stage I wish to point out that I agree with the observation ...that at this stage of the trial, I may not make recourse to any findings I may have made on the credibility of the plaintiff as a witness. I also cannot determine the application for absolution on the basis of probabilities as I cannot justly arrive at these without hearing the other side . I take the view that the exercise I have to undertake at this stage is to simply but critically analyse the evidence adduced by the plaintiff and assess whether on the basis of such, without passing a judgment on whether I believe it or not, I can make a reasonable mistake and pass judgment in her favour” I agree with this approach. I decided not to decide this case on probabilities and hear the other side. The defendant opened her case and testified in her own case. She testified as follows. She works with the plaintiff at a named company. The fourth defendant is a company run by the first and second defendant. She used to do consultancy work for her sister’s shops. The plaintiff got to know about the micro finance company from other colleagues at the company the two used to work for. She had distributed some flyers from the first defendant for those who wanted to borrow money from the fourth defendant. The company had a licence to borrow money. The plaintiff called her about the investments and she explained how it HH 330-15 HC 732/13 worked. She denies that she gave out that she was a director of the company. She gave her the first defendant’s telephone number. All dealings were done between the plaintiff and the first defendant and she was copied the investments through Mr Shoko. She denied that the plaintiff dealt with her for all the three investments. She was only aware of the first investment of $10 000.00. After this money matured the plaintiff spoke to her about re- investing the money. The second transaction was done between her the first defendant. She understands that when the plaintiff made the third investment, she met with the first defendant in town (Harare). She was not involved in this transaction. She was not aware that the plaintiff had two portfolios outstanding. The first and second defendant ran away to South Africa after they failed to re-imburse people’s monies. She only saw the deal notes after the case started. The first defendant was the only person who would sign the deal notes and then send them from Bulawayo. She was based in Chegutu, had no fax and could not have faxed the deal notes to the defendant. The letter head of the deal note only had the names of the first and second defendant. While P. Mabika appears on the deal note produced in court, there are many P. Mabikas in her family. She does not know to which member that name refers to. She is an economist and a CIMA student, not an ACCA professional. She is unaware of that designation. She did not know about the two deal notes before the court but got to know of them after the dispute erupted. The first deal note only had second and first defendants as directors at the bottom. The first and second defendants signed those deal notes with P. Mabika as a director because they wanted to convince a certain man to invest with them. That directorship was made up. Although the defendant maintained her story under cross examination, she was very fidgety during her evidence. The versions of the two witnesses are irreconcilable. The two witnesses slung mud at each other. This is a single witness case. It is competent for a court in terms of s 52 of the Civil Evidence Act [Chapter 8:01] to base its decision on the evidence of a single competent and credible witness. The court has considered that the plaintiff gave her evidence well. Her demeanour was good. She gave a clear and straight forward version of the events leading to her investing her money with the defendants. The court did not note any major contradictions in her evidence. She gave a clear and straight forward story. I believed her when she said that the defendant told her that she was a director of the fourth defendant. What could work against her is that she did not disclose the first transaction involving $10000.00 in her pleadings in her evidence in chief. The defendant on HH 330-15 HC 732/13 the other hand maintained her story looking at the evidence. I can safely say that the defendant facilitated the transactions in issue. The deal notes produced in respect of the transactions also seem to suggest that the defendant may have pretended or gave out that she was a director of the company. That representation that she was director was obviously false. The defendant failed to satisfactorily explain why her name was used in the deal notes The defendant sought to distance herself from the letterheads or indications at the bottom of the deal notes showing that she was a director. Her explanation that there are many P Mabikas in her family is not good enough as she did not indicate exactly who these other P Mabikas are. The defendant made no effort in her plea and summary of evidence to deal with the allegation that her name was indicated on Exhibit 1 and 2 as one of the directors. It was only during the trial that she sought to suggest that the person named as P Mabika and a director of the company is not herself. The defendant ailed to cross-examine the plaintiff on the suggestion that she is not the P Mabika referred to in the two deal notes. The suggestion that the plaintiff was introduced to the company by Nathan Chataika is not part of her plea. She failed to concisely set forth the nature of her defence and the facts on which she relied on. I find that the suggestions are after thoughts. The defendant sought to distance herself from those two deal notes by suggesting that she was not involved in those two transactions but that instead she was only involved in the first investment of $10 000 .00 which went well. The inference to be drawn is that she was lying and was making up her defence as the trial progressed. She cannot be allowed to take the other side by surprise by raising fresh issues at the trial. The probabilities favour the plaintiff’s version that the defendant misrepresented that she was a director of the fourth defendant . The allegation that the company was not licensed to do investment business was not pursued. A misrepresentation is a false statement of fact made to another party which has the effect of inducing the other party to enter into a contract. The elements of misrepresentation were enunciated in Novick v Comair Holdings Ltd 1979 (2) SA 116 (W) where the court laid out the requirements to be established in a case of misrepresentation as follows: 1. That the misrepresentation relied upon was made 2. That it was representation as to a fact as opposed to a promise, prediction, and opinion of estimate. 3. That the representation was false 4. That it was material in the sense that such would have influenced a reasonable man to enter into the contract. HH 330-15 HC 732/13 5. That it was intended to induce the person to whom it was made to enter into the transaction sought to be avoided; and 6. That the representation did induce the contract A party wishing to rely on a false misrepresentation is required to go further than just prove that the representation relied on was made and is false. He must show that the representation complained against was of fact, and was material in the sense that it is the sort of representation that would influence a reasonable man to contract. He should show further that it was made with the intention to induce the other party to enter into a contract and that it did indeed induce the other party to contract. It is not every misrepresentation that is actionable. I have already found that the misrepresentation was made and was false. The misrepresentation was of fact. The court will now consider whether the misrepresentation was material in the sense that it would influence a reasonable man to enter into an agreement to invest in the company and whether it did induce the contract. In R H Christie Business Law in Zimbabwe. (Juta and Company Limited 1985) at p 82 the author deals with the requirement for the representation to be material and states the following, “to permit a party to reside from a contract because a misrepresentation had been made to him on some entirely insignificant matter would obviously be unsatisfactory :so he must show that the misrepresentation was material … in the objective sense that it would have induced a reasonable man in his positions to enter into a contract.” What the defendant told the plaintiff was that she was a director of the company and that she had also invested her own money into the company and used the proceeds to buy a stand and encouraged the plaintiff to do the same. The complaint is limited to the representation regarding the defendant’s directorship. I find that the misrepresentation was not so material such as to influence her over whether or not to contract. Whether or not she was a director was not material and was of no consequence but rather whether or not this was a lucrative or worthwhile deal. Even if she had not indicated that she was a director, one would have expected her to still enter into the transactions simply on the basis that the deals appeared profitable. The misrepresentation relating to her directorship was not so material such that a reasonable man would have been induced to enter into the transactions purely on the basis that the defendant was a director in that company. The question to ask is whether if she had been told that the defendant was not part of the directorship but that it was a good investment opportunity, she would have desisted from entering into the contract. I do not HH 330-15 HC 732/13 consider that whether the defendant was a director or not would have had any influence over whether to enter into the contract or not. The exact nature of the representation made is not known. The plaintiff just remembers that she was told that the defendant was a director in the company and does not remember the exact words employed in that statement. That is not good enough. There must be more said about the directorship that would have induced her to contract. It makes it difficult for the court to conclude that the representation was made with the intention to mislead the plaintiff and induce her to enter into the two transactions. A misrepresentation is only actionable if it induces the other party to enter into a contract in a case where he would not have entered into such a contract or transaction. What the plaintiff would have been interested in is whether the deal was lucrative. The fact that the defendant may have been a director on its own did not make the deal more lucrative and did not cause the plaintiff to enter into the contract. The court has considered that the transactions which constitute the cause of action are not the first and only contracts entered into. The plaintiff had previously invested $10 000.00 and had been paid interest to the tune of $5 000.00. It appears that what caused the plaintiff to contract with the fourth defendant and to enter into the two later transactions is the successful outcome of the first investment. I do not find that the indication that the defendant was a director induced the plaintiff to enter into the contract. It appears that the plaintiff was induced to enter into the contracts more by what she was to reap from the investments than the directorship of the respondent. The plaintiff was not candid with the court. In her pleadings she does not refer to this first investment. The first transaction only emerged during cross-examination. I am unable to find that the plaintiff has proved her case on a balance of probabilities. The plaintiff’s claim is dismissed with costs. Danziger & Partners, plaintiff’s legal practitioners Gunje & Chakasara Law Firm., 3rd defendant’s legal practitioners