Alec Avacalos v David Riley

The plaintiff issued summons against the defendant on 7 April 2006, claiming US$64,000 or its equivalent in Zimbabwean Dollars at the market rate prevailing on the date of payment, plus interest and costs. The claim arose from an alleged breach of an agreement for the sale of shares in a Zimbabwean company. The defendant filed a plea raising legal points and denying indebtedness, as well as a counterclaim for removal of attachment of his shares (which had been attached to found jurisdiction). Two days before a scheduled pre-trial conference on 8 June 2007, the defendant filed a consent to judgment in the alternative prayer, specifically consenting to judgment for $16,000,000 (representing US$64,000 at the official exchange rate), plus interest and costs. At the pre-trial conference, the plaintiff refused to accept the consent to judgment, seeking to argue that the "market rate" referred to in the summons meant the parallel or black market rate, not the official rate.

• Whether the court should grant judgment in foreign currency (US dollars) rather than local currency equivalent
• Whether the court can recognize and apply the parallel/black market exchange rate instead of the official exchange rate
• What date of conversion should apply when converting a foreign currency debt to local currency - the date of consent to judgment or the date of enforcement

1. Judgment is entered for the plaintiff in the sum of $16 million together with interest thereon at 30% per annum from the date of summons to date of payment in full. 2. The defendant shall pay the plaintiff's costs up to the date of the filing of the consent to judgment.

The binding legal principles established are: (1) While courts have competence to grant judgment in foreign currency where the obligation is in that currency, this discretion cannot be exercised where a defendant has properly consented to judgment in local currency pursuant to an alternative prayer in the summons; (2) Courts cannot recognize or apply parallel/black market exchange rates, regardless of economic reality, as this would validate illegal activity - only official exchange rates can be applied; (3) Where judgment is to be expressed in local currency (as opposed to foreign currency), the conversion date is fixed at the date consent to judgment is filed, not the date of enforcement; (4) A plaintiff who pleads alternative prayers for foreign currency or local currency equivalent gives the defendant the right to elect which form of judgment to consent to.

Makarau JP made several important observations: The court acknowledged that "the judgment in this matter is harsh upon the plaintiff" and expressed sympathy for the plaintiff's monumental loss, noting that the plaintiff was partly to blame for pleading in the alternative and wrongfully refusing the earlier tender. The judge observed that differences between official and parallel exchange rates "will continue to work hardships on people in the position of the plaintiff" and expressed hope that "the situation will normalize in the near future so that litigants will not lose faith in the legal system." Significantly, the judge noted that the official rate "is not only unrealistic but is never part of the parties consideration when they enter into transactions involving foreign currency." However, the judge emphasized it is not the function of courts to make policy or address foreign currency shortages: "The law cannot be changed to address the shortage of foreign currency in the country, for it is not the function of the court to address such issues."

This case is significant in Zimbabwean jurisprudence for establishing the limits of judicial recognition of parallel market exchange rates during periods of currency instability. It confirms that courts cannot give effect to illegal parallel market rates despite their economic reality, and must apply official exchange rates. The case also clarifies the procedural implications of consent to judgment, particularly that pleading alternative prayers in foreign currency matters gives defendants the option to consent to the less onerous local currency alternative. It demonstrates the harsh consequences that can flow from improper pleading and tactical decisions in currency dispute cases during periods of exchange rate volatility.