Eva Muzuva v FBC Bank Limited

DUNLETH ENTERPRISES (PVT) LTD obtained banking facilities from FBC Bank Limited (the respondent). As security, the respondent obtained signed guarantees and deeds of hypothecation over immovable properties from the appellant and three other sureties. The appellant was not a director of DUNLETH but was related to one of its directors, Duncan Mukondiwa. The appellant signed a guarantee dated 18 September 2009, which on its face stated her liability as "UNLIMITED" for all present and future debts of DUNLETH. On 21 October 2009, she also registered a deed of hypothecation over her property (Stand 156 Groombridge) limiting her liability in respect of that security to US$150,000. When DUNLETH defaulted, the respondent sued for US$685,442.46. The other defendants did not defend, but the appellant defended on three grounds: (1) the word "UNLIMITED" was not in the guarantee when she signed it, so she was only liable for US$150,000; (2) the deed of hypothecation limited her liability to US$150,000; and (3) payments by other defendants exceeding US$150,000 had extinguished her liability.

• Whether the appellant's liability under the guarantee was unlimited or limited to US$150,000
• Whether the caveat subscriptor principle applied where a guarantor signed a document with blank spaces that were allegedly filled in later
• Whether the limitation in the deed of hypothecation limited the appellant's liability under the separate guarantee
• Whether payments made by co-debtors in excess of US$150,000 discharged the appellant from further liability
• What defences are available to a party who signs a contract in blank

The appeal was dismissed with costs. The High Court's judgment granting the respondent US$685,442.46 plus interest at 6.5% per month and a 5% penalty rate per month from 1 June 2011, as well as costs on an attorney-client scale, was upheld. The appellant's liability remained joint and several with the other defendants.

The binding legal principles established are: (1) Under the caveat subscriptor rule, a person who signs a document with blank spaces is bound by the terms as completed unless they establish one of the recognized defences (misrepresentation, fraud, illegality, duress, undue influence, or mistake). (2) Where a guarantee is worded to cover "all sums of money which the Debtor may now or from time to time hereafter owe," the liability is unlimited in the absence of a specific figure being inserted. (3) A deed of hypothecation that limits liability with respect to specific security (e.g., immovable property) does not limit the surety's liability under a separate, unlimited guarantee - these are distinct forms of security. (4) A surety who guarantees present and future debts remains liable for all unpaid debts regardless of partial payments made by co-debtors, where the guarantee creates joint and several liability. (5) A surety is bound by admissions or acknowledgments of indebtedness made by the principal debtor where the guarantee so provides.

The Court made non-binding observations that: (1) The word "UNLIMITED" did not even grammatically accord with the sentence in which it appeared, suggesting the blank space was intended for a specific monetary figure if one was agreed upon. (2) If the appellant genuinely believed her liability was limited to US$150,000, she should have filled in that figure herself rather than leaving the space blank. (3) The appellant could have terminated the guarantee by giving notice under paragraph 4 if she believed the debt would be paid within three months, but failed to do so. (4) This approach is consistent with the dictates of modern commercial convenience. (5) The exact amount owing could be ascertained by the parties themselves through calculations, and there was no misdirection in the court not determining the precise amount given the joint and several nature of the liability.

This case is significant in Zimbabwean (and by extension South African, given the common legal heritage) law of suretyship and contract for confirming the strict application of the caveat subscriptor principle in commercial guarantees. It establishes that: (1) a surety who signs a guarantee with blank spaces is bound by what is subsequently filled in absent recognized defences; (2) the deed of guarantee and deed of hypothecation are separate instruments that may provide different limits on liability; (3) a limitation in a security instrument does not necessarily limit liability under a separate unlimited guarantee; and (4) courts will enforce unlimited guarantees according to their plain terms to promote commercial certainty. The judgment reinforces that commercial parties, particularly sureties, must exercise caution before signing documents and cannot later escape liability by claiming blanks were improperly filled in without raising proper defences.