GAMBIZA v TAZIVA 2008 (2) ZLR 107 (H)

Flynote

Contract — illegality — agreement to pay foreign currency for item purchased in Zimbabwe — breach of exchange control laws — par delictum rule — relaxation of — when appropriate

Exchange control — offences — Exchange Control Regulations 1996 (SI 109 of 1996) — s 4(1)(a)(ii) — exchanging foreign currency without approval — meaning — includes paying foreign currency to purchase item in Zimbabwe — prices quoted in foreign currency in agreement between parties — not illegal — manner of performance of agreement rendering agreement illegal

Words and phrases — "exchange" — Exchange Control Regulations 1996 (SI 109 of 1996) — s 4(1) — meaning — in context includes "to pay" and "to receive"

Headnote

Section 4(1)(a)(ii) of the Exchange Control Regulations 1996 (SI 109 of 1996) does not proscribe the conclusion by parties of agreements where prices are quoted in foreign currency. In general terms, the Regulations do not forbid parties from transacting in foreign currency but they do, however, detail specific conduct, involving foreign currency, which is then prohibited.

— The parties entered into an agreement whereby the plaintiff would supply a motor car to the defendant. The purchase price was stated in South African currency. An initial deposit of nearly a third of the full purchase was paid in rand, with the balance to be paid within a month. In the meantime, the plaintiff kept the registration book. The defendant failed to pay the balance in rand and tendered payment in Zimbabwean currency at the official exchange rate. The plaintiff refused the tender and sued for the return of the vehicle or, alternatively, payment of the balance in rand. On behalf of plaintiff, it was argued that the agreement was not unlawful, as s 4(1) of the Exchange Control Regulations 1996, which proscribed the buying, selling, borrowing, lending or exchange of any foreign currency without proper permission, did not make it an offence to receive foreign currency. The defendant argued that the agreement was illegal and that the in pari delicto rule should apply. Accordingly, he argued, the loss should lie where it fell. The defendant counterclaimed for the delivery of the registration book against payment of the balance owing, in Zimbabwean currency.

Held, that although the Regulations did not forbid the parties from transacting in foreign currency, the question to be asked was whether they could be said to have been "exchanging" foreign currency. In the context in which the word "exchange" is used in the Regulations, the meaning that can be ascribed thereto is "to pay" and "to receive." Because of this, the agreement was tainted with illegality and could not be enforced.

Held, further, that the agreement had only been partially performed by each of the parties. Although the agreement itself was not illegal, the manner in which the parties performed part of the agreement had rendered it illegal and any order of the court that would lead to the performance of the remaining part of the agreement would have the effect of giving sanction to the actions of the parties in violating the regulations. This meant that the counterclaim could not be entertained.

Held, further, that the usual way of treating illegal agreements, where the parties were equally to blame, is to let loss lie where it falls. However, the courts have a discretion, in suitable cases, to relax the par delictium rule in order to do justice between man and man and to prevent the injustice of one party being enriched at the expense of another. The plaintiff having parted with a valuable item against payment of an amount which was less than half the purchase price, it would be just to order that the vehicle be returned to the plaintiff.