David Ephrage Tafangenyasha Muchinguri and Others v Frank Buyanga and Others

On 1 December 2008, the first plaintiff obtained a loan of US$20,000 from the second defendant. Because the second defendant was not a registered money lender (being a UK-registered company), the parties entered into a simulated (sham) agreement of sale of the third plaintiff's shares valued at ZWL 1 trillion to disguise the loan transaction. Thereafter, the first defendant allegedly fabricated shareholding and directorship documents and fraudulently sold stand 1860 Marlborough Township to the third defendant in July 2009. A fraudulent Capital Gains Tax Clearance Certificate was allegedly used to effect the transfer. The plaintiffs only issued summons in May 2023, seeking to set aside the simulated agreement, the transfer of shareholding and directorship, and the property transfer. The third defendant raised a special plea of prescription, arguing that the claims based on the December 2008 agreement and July 2009 transfer had prescribed under sections 14 and 15 of the Prescription Act.

• Whether a claim based on a fraudulent agreement is subject to prescription
• Whether a declaratory order seeking to set aside a fraudulent transaction prescribes
• Whether the plaintiffs' claims, brought more than 12 years after the simulated agreement and 10 years after the property transfer, were prescribed
• Whether claims based on fraud constitute 'debts' under the Prescription Act

The special plea of prescription raised by the third defendant was dismissed with costs.

Claims based on fraud do not prescribe under the Prescription Act because fraud is an illegality and a nullity from which nothing legal can flow. A fraudulent agreement is void and remains void regardless of the passage of time. While declaratory orders can generally be subject to prescription if the underlying claim has prescribed, this principle does not apply where the underlying claim is based on fraud. Fraud is not a 'debt' within the meaning of the Prescription Act and therefore claims to set aside fraudulent transactions are not subject to the time bars in sections 14 and 15 of the Prescription Act.

The court noted that if the agreement of sale had been a genuine agreement rather than a sham, suing on that agreement would be futile as the cause of action would have prescribed and consequently the declaratur would also be time-barred. The court also observed that the first and second defendants did not file any plea to the plaintiffs' claims. The court referenced the general legal position that a claim for a declaratur seeking a declaration of rights can be subject to prescription under the Prescription Act, and that the substance of the claim giving rise to the need for a declaratur is often a debt or obligation subject to prescription.

This case affirms an important principle in Zimbabwean law that claims based on fraud do not prescribe under the Prescription Act. It reinforces the principle that fraud vitiates all transactions and that a fraudulent agreement is a nullity from which no legal consequences can flow. The judgment clarifies the interaction between declaratory relief and prescription, establishing that while declaratory orders may be subject to prescription when based on prescribed underlying claims, this does not apply when the underlying claim is based on fraud. The case is significant for protecting parties from being time-barred when seeking to set aside fraudulent transactions, regardless of how much time has elapsed.