Ben Raymond Mundangepfupfu and Alban Tachiyirweyi Mundangepfupfu v Innocent Chisepo

On 10 October 2008, the defendant sold a Nissan Hardbody truck to Samuel Raymond Manatsa for US$22,000.00. On 8 October 2008, the plaintiffs agreed to act as guarantors for Manatsa, surrendering their title deed for Stand 2846 Highfield Township, Harare (Deed of Transfer 6291/1998) as security. Neither the sale agreement nor the guarantee sought statutory approval for payment in foreign currency as required by Statutory Instrument 109/1996 (Exchange Control Regulations). Manatsa failed to pay the purchase price. The defendant obtained default judgment against Manatsa in HC 1640/2010. The defendant then instituted proceedings against the plaintiffs under HC 9295/10 seeking payment of US$22,000.00 and declaration of the plaintiffs' property as specially executable. That application was dismissed for want of prosecution in February 2015, but another court granted it as a default judgment in June 2015, which was subsequently rescinded. The defendant applied for rescission of that rescission order under HC 2692B/2016, which remained pending. In April 2011, the plaintiffs instituted the current proceedings seeking return of their title deed. The defendant opposed and filed a counterclaim for payment and special executability of the property.

• Whether the agreements were null and void for non-compliance with Exchange Control Regulations SI 109/1996 requiring statutory clearance for transactions in foreign currency
• Whether the guarantee agreement could be enforced if the principal agreement was illegal
• Whether the defendant's counterclaim was res judicata given the pending matter in HC 9295/10
• If not res judicata, whether the counterclaim should be granted

1. The plaintiffs' claim is dismissed. 2. The defendant's counterclaim is dismissed. 3. Each party is to bear its own costs.

1. Under Exchange Control Regulations (SI 109/1996 s4(1)(a)(ii)), entering into an agreement or contract denominated in foreign currency is lawful; only the actual payment or exchange of foreign currency without obtaining permission from the exchange control authority is unlawful. 2. Where a principal contract is lawful, a guarantee agreement relating to that contract is also lawful and enforceable against the guarantor. 3. For the special plea of res judicata to succeed, there must be (i) the same parties, (ii) the same subject matter, (iii) the same cause of action, and (iv) a final and definitive judgment. A default judgment that is subject to a pending rescission application is not a final and definitive judgment and therefore does not establish res judicata. 4. The doctrine of lis alibi pendens applies where litigation is pending elsewhere between the same parties, based on the same cause of action, and in respect of the same subject matter. A court cannot determine a claim that is already pending before it under a different case number to avoid the risk of inconsistent decisions.

The court noted that even if exchange control authority was subsequently declined or refused, that would not nullify the agreement itself; payment would simply have to await a change in law or Reserve Bank policy (following McNally JA in Macape). The court also observed that the defendant would not be prejudiced by dismissal of his counterclaim because he already had a default judgment against the principal debtor Manatsa under HC 1640/16, providing him with recourse for recovery. The court further noted that the motor vehicle had been delivered to Manatsa, not the plaintiffs, so there was no issue of unjust enrichment to the plaintiffs. The court identified the purposes of the res judicata doctrine as preventing (i) injustice to parties in supposedly finished cases, (ii) unnecessary waste of court resources, and (iii) contradictory judgments.

This case clarifies an important distinction in Zimbabwean exchange control law that has significance for South African jurisprudence dealing with exchange control regulations and illegal contracts. The judgment establishes that contractual obligations denominated in foreign currency are not automatically void for illegality merely because the parties failed to obtain exchange control approval. The case distinguishes between the legality of making a contract (which may be lawful) and the legality of performance (which may require regulatory approval). This has important implications for guarantors and sureties, confirming that they remain bound by guarantee agreements even where the principal debtor fails to perform. The case also provides guidance on the procedural requirements for the special pleas of res judicata and lis alibi pendens, particularly the requirement of a final and definitive judgment for res judicata.