NATIONAL MERCHANT BANK (PVT) LTD v THE COLD CHAIN (PVT) LTD 2008 (2) ZLR 177 (H)

Flynote

Exchange control — exchange rate — judgment sounding in foreign currency — when such judgment may be granted — need for loss to have been felt in foreign currency — exchange rate to be used — not competent for court to grant judgment at any rate other than official exchange rate

Practice and procedure — judgment — judgment sounding in foreign currency — when may be granted — need for loss to have been felt in foreign currency — exchange rate to be used — not competent for court to grant judgment at any rate other than official exchange rate

Headnote

The plaintiff, an authorised dealer in foreign currency, used to source currency to enable the defendant company to import goods. The defendant had no foreign currency and could only access it through the plaintiff. The practice was that the plaintiff would source foreign currency from the market and credit it to its customers in return for payment in Zimbabwe currency. The defendant paid the plaintiff, in Zimbabwe currency, to source South African currency to pay for a shipment from its supplier in that country. Two months later, the plaintiff, believing that the payment had not gone through, paid the supplier again. The supplier used the duplicated payment to supply another shipment.

The plaintiff initially demanded repayment in Zimbabwe dollars. The defendant tendered payment at the official rate of exchange, which at the time was about a quarter of the "parallel" or market rate that the plaintiff actually had to use to acquire currency. The plaintiff then demanded payment of the South African currency it had sourced, alternatively, payment in Zimbabwe currency at the market rate. The questions that arose for determination were (1) whether or not the defendant was obliged to return the overpayment in rands; and (2) if not, what was the applicable rate of exchange to determine the Zimbabwe currency equivalent.

Held, that the court has the power to give a judgment sounding in foreign currency. This would normally obtain where there is evidence or agreement that the loss suffered by a plaintiff was indeed felt in foreign exchange. While the options for how to recover a foreign debt must be left to the judgment creditor's discretion, such options should, however, be spelt out at the time of making the transaction and should be in compliance with foreign exchange regulations. Only then will a court proceed to enforce a claim in the agreed currency. Here, the established dealings between the parties dictated that the plaintiff's payment should be in local currency. The practice was for the plaintiff to source foreign currency for the defendant from the market and in return the defendant would pay the plaintiff in Zimbabwe currency. That position did not change because of the duplicated amount. The defendant was still expected to meet his obligation in local currency. Held, further, that while in the current inflationary environment, the use of the parallel market rate made a lot of sense, that route remained illegal and could not be endorsed by the court. The court could only recognize the official exchange rate that was used by the defendant.