Blessmoe Chanakira and Auxilia Danayi Mynyeza and Mai Kai Real Estate Development Trust v Bernard Mahari Mutanga

On 9 November 2004, the plaintiffs entered into an agreement of sale with the first defendant (represented by the second defendant) to purchase subdivision "A" of subdivision "C" of Kingsmead extension of Borrowdale Estates for $700 million (old currency). The plaintiffs paid the full purchase price. However, transfer could not occur because the previous owner, Mr Geoffrey Andrew Harrel, claimed the first defendant still owed him $460 million (old currency), which the first defendant disputed. To protect their rights and ensure smooth transfer of the purchased property, the plaintiffs paid the disputed $460 million to Mr Harrel. The first and second defendants admitted liability to the plaintiffs but disputed the quantum. The plaintiffs claimed unjust enrichment, while the defendants argued they were only liable for the $460 million plus interest at the prescribed rate.

• Whether the plaintiffs' claim for unjust enrichment was sustainable in the circumstances
• Whether the debt of $460 million constituted a simple debt sounding in money subject to the principle of currency nominalism
• Whether the court could award damages at current values taking into account inflation in an unjust enrichment claim
• Whether the impact of inflation and currency debasement on the nominal value of the debt affected the defendants' liability

The plaintiffs' claim for unjust enrichment was dismissed. The plaintiffs were entitled only to the sum of $460 million (revalued) together with interest at the prescribed rate of 30% as tendered by the defendants. Each party was ordered to bear their own costs given the legal significance of the stated case.

A debt sounding in money must be paid at its nominal value irrespective of any fluctuation in the purchasing power of currency, in accordance with the principle of currency nominalism. A claim for unjust enrichment cannot be sustained where the parties' intention at the time of the transaction was to create a simple debt repayable at its nominal value. The risk of currency depreciation falls on the creditor, not the debtor. Courts cannot recharacterize a simple debt as unjust enrichment merely to compensate for the effects of inflation or currency debasement. The nature of an obligation is determined by the consensus ad idem of the parties at the time the obligation arose, as manifested by their external conduct, not by unexpressed intentions or subsequent economic changes.

The court observed that the issue of inflation and appropriate rates of interest are matters for the legislature, which is empowered to review and set the prescribed rate of interest from time to time. The court noted that it would represent a revolutionary transformation of the legal system if courts were called upon to determine the true economic value (in terms of purchasing power) of all obligations sounding in money. The court commented that the stated case was of great legal significance, which explained why neither party asked for costs. The court noted that even if there had been material non-disclosure by the first defendant, this would not advance the plaintiffs' claim under unjust enrichment as long as the claim remained a simple debt sounding in money, because the principle of currency nominalism would still apply.

This case is significant in Zimbabwe (and relevant to South African jurisprudence given the shared legal principles) because it confirms the strict application of the principle of currency nominalism in the law of obligations, even during periods of extreme currency depreciation and hyperinflation. It establishes that courts will not circumvent currency nominalism principles by allowing creditors to recharacterize simple debts sounding in money as claims for unjust enrichment merely to avoid the effects of inflation. The case demonstrates judicial restraint in economic matters, affirming that the determination of the true economic value of money is a legislative rather than judicial function. It reinforces that the intention of the parties at the time of contracting (consensus ad idem) is paramount in determining the nature of their obligations, and that subsequent economic changes cannot be used to retrospectively alter the character of those obligations.