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ZCDC bid to dodge US$10m debt fails



EFFORTS by the state-owned Zimbabwe Consolidated Diamond Company (ZCDC) to evade paying a US$10 million debt have hit a brickwall after the High Court ordered execution of a judgement handed down against it earlier this year.

The ZCDC was ordered to pay Adlecraft Investment US$10 718 373.51 by the High Court following a breach of contract in a mining deal.

The material facts from which the dispute between the parties arose are as follows:
In February 2016 the parties entered into a written agreement to which there was a third party, New Era Diamonds Limited, which is a sister company of Adlecraft.

New Era Diamonds Limited is a foreign-registered company.

In terms of that agreement, Adlecraft was to provide contract mining services to the ZCDC.

Services included supplying the ZCDC with daily ore, whose tonnage is specified in the agreement, extracting the ore, hauling it and stockpiling it at designated points.
The ZCDC, cited as the respondent in court papers, was enjoined to sell all its Boart Diamonds Limited during the subsistence of the agreement.

The details of how Adlecraft was to be paid as well as the applicable rates were specified in the written agreement. The initial duration of the contract was 12 months from the date of signature.

The agreement was subject to renewal on condition of satisfactory performance.
After the initial 12 months, the applicant continued to render services as per the agreement, pending negotiations on the contract rate to be applied.

“Owing to the failure to reach agreement on new contract rates the respondent terminated the agreement in April 2020 according to the letter dated 13 April 2021 . . .  By letter dated 13 April 2021, the respondent acknowledged liability of the applicant in the sum of US$I 979 590.65. In a letter of demand dated 14 December 2022 the applicant through the deponent to the founding affidavit, wrote a letter of demand to the respondent in which it acknowledged that a sum of US$1 300 486.67 had been paid leaving a balance of US$679, 103.98 from the admitted US$I 979 590.65,” reads the court document.

Two days later, on 16 December 2022, another letter was addressed to the ZCDC on behalf of  Adlecraft stating that the outstanding amount as at 31 December 2019 excluding interest was the sum of US$4 344 965.67.

The letter stated that when interest is factored in, the balance due would be US$13 824 163.22 as at 31 December 2022.

Adlecraft then asked the ZCDC to deposit the amount into the same account furnished by the letter of demand of December 2022.

“The two letters of 14 and 16 December 2022 were delivered to the respondent on the same date 19 December 2022.

“The two letters were followed by a series of email correspondence in which the respondent advised that the parties needed to agree on the exact figure or amount that remained outstanding.”

Justice Happias Zhou, presiding over the matter, ordered the ZCDC  to pay Adlecraft US$10 718 373.51 and interest at 2% per month from the date of the judgment. The ZCDC was also ordered to settle costs of suit on the attorney-client scale.

Disgruntled by the court order, the ZCDC noted an appeal to the Supreme Court.
It said the High Court grossly erred in assuming jurisdiction where the urgent court application filed on behalf of the respondent was invalid for want of compliance with rule 59(6) of the High Court Rules 2021 in that it called upon the appellant to file opposing papers within a period of two days with no court order having been obtained to permit the limited period to file opposing papers.

“The High Court further grossly erred in finding that commercial agency had been established by the respondent when it was apparent that the debt sued for arose from about 2018 and there was no basis for concluding that the alleged debt was the cause of the alleged insolvency of the respondent.

“The High Court further grossly erred in dismissing the point in limine that there were material disputes of fact which could not be resolved on the papers and at the same time, without an application from any party directing that oral evidence should be led to resolve material dispute of fact…” complained the ZCDC.

The ZCDC  also said Zhou grossly errred in finding that the debt which was sued for, other than the admitted amount, had not been extinguished on account of extinctive prescription it having been from as far back as the year 2018.

The High Court was further accused of irregularly awarding costs against ZCDC on an attorney- client scale where there was no justification for such an order.

On the other hand, in a bid to secure the judgement debt, Adlecraft filed an urgent chamber application seeking for leave to execute the judgment under HC 723/23 granted in its favour by Zhou pending appeal.

During the hearing, Advocate Thembinkosi Magwaliba, representing the ZCDC, raised a preliminary point of lack of urgency.

He also argued that the application was manifestly invalid.

Magwaliba argued that the certificate of urgency prepared by Gwinyai Ranganayi was undated and one cannot tell whether it was prepared before or after the founding affidavit was presented to Ranganayi.

“The same certificate of urgency wrongly spells out that the present application was filed on 6 March 2023. The certificate of urgency does not deal with the question of commercial urgency upon which the application is based.”

The lawyer also said, in any case, financial prejudice alone is not enough to found urgency.

He said there should have been evidence presented to demonstrate that Adlecraft faces possible liquidation and also the existence of pressing creditors.

But Adlecraft said its application was for leave to execute pending appeal.
Adlecraft argued that urgency was already dealt with by Zhou.

The lawyer so said in any case the issue of commercial urgency is raised on the notice of appeal and is to be fully ventilated before the Supreme Court.

Ndlovu representing Adlecraft also said the court is not bound by a certificate of urgency.

“The correctness or otherwise of a certificate of urgency should not concern the court. There is a valid certificate of urgency deposed to by an officer of court. There is no requirement in the rules that a certificate of urgency must be dated. A certificate of urgency is in any case different from an affidavit. It is not made under oath. An application for leave to execute pending appeal is almost always heard on an urgent basis,” he said.

In coming up with the present ruling, Justice Neville Wamabo sitting at the Harare High Court said the nature of the instant application deserved close attention.
“It is an application to enforce an order already granted albeit there being an appeal noted.

“The order was granted under urgent notice. By the very nature of the instant application, I am inclined to treat it with urgency.

“The appeal itself may be adjudicated upon before this application if not treated with urgency,” he said.

Wamambo said the ZCDC should pay Adlecraft even though a hearing before the Supreme Court was pending.

“Having read both documents I am of the view that the certificate of urgency highlights in the main the issue of urgency.

“The deponent to the certificate of urgency is indeed a practicing legal practitioner and this has not been disputed by respondent.

“There are some errors in the certificate of urgency but not sufficient to render the whole document as invalid. Without encouraging legal practitioners deposing to certificates of urgency not to focus and include appropriate and correct details, the errors may indeed be attributed to human error. Contrary to what I understand to be a submission by respondent’s counsel that the certificate of urgency does not address financial or commercial prejudice, it actually does in the aforementioned para(s) 1.6. to 2 of Gwinyai’s certificate of urgency.”

The judge said sight should not be lost that the debt in question amounts to US$10 718 373.51, adding that the amount is substantial.

“. . . and I take judicial notice that such an amount will negatively impact on any business enterprise.

“In the circumstances I am satisfied that urgency has been established. Further that ownership of applicant is suffering from ongoing disputes and there may be competing claims by the individuals engaged in the dispute of ownership of applicant.

“In any case it has not been shown to me that the harm potentially to be suffered by respondent if any is irreversible. The fact that respondent has no judgment in their favour follows from the nature and tenor of such an application.

“In this regard I find that the potentiality of irreversible harm to respondent is minimal.”

The judge said the potentiality of irreparable harm to Adlecraft if the application was refused, the long history of the litigation, the fact that the ZCDC has indeed owned up to owing a substantial amount to the firm, coupled with the fact that Adlecraft is holding a judgment in its favour, all tilt the scales of irreparable harm to be high on its side.

“The fact that applicant is a business enterprise which it is common cause expected services for substantial sums of money from respondent demonstrates potentiality of irreparable harm to applicant if the judgment is not executed and the delay will cost applicant financially,” he said.

The judge said he is alive to the fact that the Supreme Court may come to a different conclusion on findings of the court, but however noted that he considered the grounds of appeal by the ZCDC and thinks that the appeal may have been lodged for some other purpose.

“I am of the view that the chances of success on appeal appear slim.”

He ruled: “The application for leave to execute the judgment of the Honourable Court granted on 15 March 2023 in the matter under HC 723/23 pending appeal against the judgment noted by the first respondent under SC 201/2023 be and is hereby granted.

“Consequently, the applicant be and is hereby granted leave to carry the judgment of this court in HC 723/23 into execution notwithstanding the appeal filed by the respondent.

“The respondent shall pay the applicant’s costs.” — STAFF WRITER.

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