MAHOMED v BREDENKAMP

HIGH COURT, HARARE

[Civil Trial HH 130-16]

January 25, 26, 27 and February 17, 2016

CHIGUMBA J

Contract law  – Compromise  – An outline  – Principles from decided cases.

Words and phrases  – Without prejudice  – Meaning of.

In a meeting held before the former Attorney General at his instance, defendant had committed to paying plaintiff a sum of money which he claimed was owed by one of his companies. He said he did so out of a moral obligation and during proceedings that were privileged. The matter before the court required it to determine whether defendant had assumed a valid legal obligation under the circumstances and whether he could be sued thereon.

Held, that an examination of the authorities dealing with a compromise shows an application of the following principles:

1. Parties to a dispute can agree to resolve that dispute for whatever reason.

2. The resolution of the dispute under such circumstances results in the setting out of the parties’ intention and extinguishes the old cause of action.

3. The parties are involved in a give and take where each part abandons its old position and makes a concession which may diminish his claim or increase his liability.

4. A compromise creates a new liability. Once a compromise is reached a party sued may not raise defences to the original cause of action.

5. Once a compromise is reached the original cause become res judicata.

Held, further, that in resolving a matter where the existence of a compromise is asserted the court must ask itself whether there was an offer and an acceptance. What is material to the resolution of the issue of offer and acceptance is that the defendant says he/she would pay the agreed sum by an agreed date. His/her reasons for agreeing to pay are irrelevant. A compromise can result in an increase in liability or in a diminution of a claim. There is no reason why a compromise cannot result in an assumption of liability to pay.

Held, further, that once a matter has been resolved, it matters not that the negotiations commenced on a without prejudice basis. The details of the negotiations between the parties cease to be privileged. The details would be privileged if the meeting did not result in a resolution of the dispute.

Held, further, that an agreement cannot be without prejudice or privileged, it is only the negotiations that can.

Cases cited:

Bande v Muchinguri 1999 (1) ZLR 476 (H), referred to

Beckenstrater v Rottcher and Theunissen 1955 (1) SA 129 (A), referred to

Davies v Premier Finance Group Ltd HH 235-10 (unreported), referred to

Econet Wireless & Ors v Sanangura 2013 (1) ZLR 401 (S), referred to

Georgias & Anor v Standard Chartered Finance Zimbabwe Ltd 1998 (2) ZLR 488 (S), referred to

Kazingizi & Anor v Equity Properties (Pvt) Ltd HH 797-15 (unreported), applied

Lederman v Moharal Investments (Pty) Ltd 1969 (1) SA 190 (A), referred to

Millward v Glasser 1950 (3) SA 547 (W), referred to

Minister for Justice and Constitutional Development v Moleko 2008 (3) All SA 47 (SCA), referred to

Moaki v Reckitt & Colman (Africa) Ltd 1968 (3) SA 98 (A), referred to

Musadikwa v Minister of Home Affairs & Anor 2000 (1) ZLR 405 (H), referred to

Naidoo v Marine & Trade Insurance Co Ltd 1978 (3) SA 666 (A), referred to

PG Industries (Zimbabwe) Ltd v Machawira 2012 (1) ZLR 552 (H), referred to

Pioneer Transport (Pvt) (Ltd) v Delta Corporation & Anor 2012 (1) ZLR 58 (H), referred to

Robinson v Randfontein Estate Gold Mining Co Ltd 1921 AD 168, referred to

Rudolph v Minister of Safety & Security 2007 (3) All SA 271 (T), referred to

S v Bredenkamp 2013 (2) ZLR 228 (H), referred to

Sanangura v Econet Wireless & Ors 2012 (2) ZLR 304 (H), referred to

Shill v Millner 1937 AD 101, referred to

South African Railways & Harbours v National Bank of SA Ltd 1924 AD 704, referred to

Sullivan v Constable (1932) 48 TLR 267, referred to

Van der Merwe v Strydom 1967 (3) SA 460 (A), referred to

Legislation considered:

Criminal Law (Codification and Reform) Act [Chapter 9:23]

Exchange Control Regulations, 1996 (SI 109 of 1996)

High Court Rules, 1971 (RGN 1047 of 1971)

Books cited:

Christie RH and Bradfield G Christies The Law of Contract in South Africa (6th edn, Lexis Nexis, Durban, 2011)

Christie RH Business Law in Zimbabwe (1st edn, Juta & Co Ltd, Cape Town, 1998)

Feltoe G A Guide to the Zimbabwean Law of Delict (3rd edn, Legal Resources Foundation, Harare, 2006)

Harms LTC Amler’s Precedents of Pleadings (7th edn, Lexis Nexis, Durban, 2009)

T Mpofu, for the plaintiff

ET Matinenga, for the defendant

CHIGUMBA J:

If a man is motivated by moral, religious, cultural, or other beliefs to agree to pay a sum of money which is owed to another, can the law enforce such an assumption of liability against this man personally? Should the law allow such a man, many years after the date on which he agreed to pay, to evade liability on the basis that he only agreed to pay because of these beliefs, and that therefore the legal liability to pay remained at all times rooted in the second man? We must determine whether the man’s moral obligation was translated into a legal obligation, an assumption of liability, when he agreed to settle the debt on behalf of the second man by a certain date. The court is entitled to look at extrinsic evidence of the behavior of the parties, to determine whether it reveals evidence of an intention to be bound by the agreement. It all boils down to whether there was a meeting of the parties’ minds.

We must also determine whether the meeting held by the parties, at which the man agreed to settle the debt, was held on a without prejudice basis and therefore privileged. It is a matter of law whether a plaintiff can found a cause of action on an agreement that was made during the course of a privileged discussion. It is a matter of fact whether both parties clearly understood that the meeting was privileged. This is where we enter the slippery slope of human foibles and ability to remember accurately and without bias in one’s favor, events which took place a long time ago. To compound matters, the legal practitioners for the plaintiff and defendant in their wisdom, saw fit to testify on behalf of their respective clients.

On 12 September 2014, the plaintiff issued summons against the defendant for US$ 3 872 123 (three million eight hundred and seventy two thousand one hundred and twenty three United States dollars), payable in terms of an agreement between the parties dated 12 August 2012, plus interest thereon at the prescribed rate calculated from 28 February 2013 to the date of payment in full, as well as costs of suit on a legal practitioner and client scale. Both parties are businessmen of note, with multimillion dollar empires that span the region and the globe. They used to hold each other in high regard until the money came between them, as it is wont to do.

According to the plaintiff’s declaration, on 28 August 2008, the plaintiff and a South African company Sahawi International (Pty) Ltd (“Sahawi”) issued summons against defendant and a Zimbabwean company, Breco International (Pvt) Ltd (“Breco”) under case number HC 4221-08 for the repayment of a loan advanced to them between 1st February 2001 and 9th November 2002 in the sum of US$ 3 872 123 (three million eight hundred and seventy two thousand one hundred and twenty three United States dollars), plus interest thereon at six per cent per annum capitalised monthly and calculated from 1 February 2001 to the date of payment in full. On 17 August 2012 the parties entered into a verbal agreement in terms of which they settled the dispute by the defendant agreeing to personally pay the plaintiff the amount in question by the 28th of February 2013. On 3 November 2013, the defendant raised a special plea of lis alibi pendens that the proceedings in HC 4221-08 were still pending, so litigation was pending between the same parties, on the same cause of action and in respect of the same subject matter. The defendant prayed that the present action be stayed pending determination of HC 4221-08. The defendant’s plea on the merits was to deny having entered into an agreement to settle the amount outstanding by 28 February 2013 or at all. The defendant averred that entering into such an agreement would have contravened the Exchange Control Regulations, 1996 (SI 109 of 1996) and been illegal.

The defendant filed a counter-claim in which he alleged that on 20 January 2011 the plaintiff maliciously and wrongfully set the law in motion by laying false charges against him of fraud and contravening Exchange Control Regulations with the police. In particular the defendant accused the plaintiff of complaining to the police that he had secured a loan of US$ 4 million by means of making a false representation to him, and that defendant had not obtained exchange control authority for the borrowing. The defendant averred that when plaintiff made these complaints he had no reasonable/probable cause for doing so, and he did not have any reasonable belief in the truth of the information that he gave to the police. As a result of plaintiff’s conduct, defendant was arrested and arraigned before the magistrate’s court, and indicted for trial before the High Court on 1 July 2013. The defendant was detained in custody until his admission to bail on 4 July 2013. He was tried and acquitted by the High Court on 12 September 2013. The defendant’s claim for damages for contumelia, deprivation of freedom and discomfort was in the sum of US$ 30 000. He also claimed a sum of US$ 50 000 for his legal costs.

On 20 November 2014, the plaintiff filed his replication to the defendant’s special plea, in which he denied that the proceedings in HC 4221-08 were currently still pending, and denied that the parties were the same in both matters, or that the cause of action was the same. In the replication to the plea on the merits, the plaintiff denied that the agreement between the parties violated Exchange Control Regulations and joined issue with the defendant. The plaintiff’s plea to defendant’s counter-claim was an admission that he laid charges against the defendant, and a denial that he maliciously set the law in motion, or that the charges were false, or that the information given was false. The plaintiff prayed that the defendant’s counter-claim be dismissed with costs. The parties filed a joint pre-trial conference minute on 5 August 2015 in terms of which four issues were referred to trial in the main matter and three issues in the counter-claim. The following issues were referred to trial in the main matter:

1. Whether the current proceedings can be proceeded with despite the pending nature and the non-conclusion of proceedings in HC 4221-08.

2. Did defendant agree on the 17th of August 2012 to personally assume the indebtedness of KMC to the plaintiff?

3. Are there admissions of liability by defendant in legal correspondence between plaintiff and defendant? If so are they admissible?

4. To what extent is defendant liable to the plaintiff?

The following issues were referred to trial in the defendant’s counter-claim:

1. Did plaintiff lay fake criminal charges with the police against the defendant?

2. Did the laying of the fake charges by the plaintiff cause the arrest, detention and prosecution of the defendant?

3. What amount of damages, if any, did defendant suffer as a result of his arrest, detention and prosecution?

The issue that arises for determination in the main matter is whether the defendant assumed liability to settle the sum of US$ 3 872 123, to the plaintiff, in his personal capacity, and if he did so during the course of privileged negotiations, such an assumption can be used against him to recover that sum in court. With regards to the defendant’s counter-claim, the issue that falls for determination is whether the complaint raised by the plaintiff to the police against the defendant was deliberately and intentionally based on falsehoods, the aim being to cause the arrest, detention and prosecution of the defendant, knowing full well that such arrest, detention and prosecution was unjustified. At the hearing of the matter, a notice of withdrawal was tendered, dated 25 January 2016, in terms of which the plaintiff withdrew its action in case HC 4221-08 and tendered wasted costs. The parties agreed that the notice of withdrawal was properly drawn and filed in terms of the High Court Rules, 1971 (RGN 1047 of 1971) and that this effectively disposed of the special plea and of the first issue that had been referred to trial.

The plaintiff opened its case by leading the evidence of Mr Yakub Mahomed, who told the court that he is an accountant by profession, and a businessman who has had business interests in Zimbabwe for the last 25 years. His claim was based on the agreement entered into by the parties on 17 August 2012, at a meeting convened by the former Attorney General (“the AG”) Mr Tomana. The meeting had been convened in order to see if the parties could not resolve their differences out of court after the AG had refused to prosecute the defendant in the criminal court. The AG had told the plaintiff that he was under political pressure not to prosecute the defendant, who was allegedly involved in assisting the military with the war in the Democratic Republic of Congo (“the DRC”), and had been placed on the sanctions list for assisting our government.

The plaintiff referred to a letter dated 8 March 2011, on p 105 of the record as proof of the AG’s refusal to prosecute the defendant and the reasons why. The letter is apparently from the defendant to the Ministry of Defence. In para 3 of the letter, the defendant writes that he “borrowed US$ 3.5 million from Mahomed. At no time was my company Breco International involved in any way whatsoever, or the other applicant Sahawi International who alleges that meetings were held between them and Breco International, which is simply not true. The dealings in this matter were entirely between me and Mahomed”. The defendant acknowledged owing the money to the plaintiff in his personal capacity in this letter. The letter was given to the plaintiff by Mr Chris Mutangadura a Chief Law Officer in the AG’s office. The defendant made an undertaking to settle the amount outstanding at the meeting with the AG. He promised to pay by 28 February 2012. He needed time to dispose of some assets as he was experiencing cash flow problems due to being placed on the sanctions list.

The defendant did not pay by 28 February 2012. In the letter dated 1 November 2012 at record p 113, it was confirmed that a meeting had taken place before the AG. The letter from the defendant’s legal practitioners Atherstone & Cook at record p 117 dated 14 December 2012 advised that the defendant was causing the sale of property in Mozambique in efforts to settle his indebtedness to the plaintiff. In a letter dated 18 February 2013, from Venturas & Samkange, which appears at record p 118 payment details were given so that the plaintiff could deposit the money into a trust account. The defendant did not write back to dispute liability but by 15 March 2013 no payment had been made (see letter from Venturas & Samkange at record p 120). In para 3 of the letter to the AG dated 27 March 2013 (record p 125), the defendant’s legal practitioner made an undertaking to make good the prejudice “without admission of liability”. He said that the defendant was in the process of selling his house in the United Kingdom.

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