Gordon Savanhu v Untu Micro Finance

The plaintiff was employed by the defendant company in April 2011 as an Executive Director for a fixed three-year term. On 30 September 2011, he tendered his resignation after receiving an offer from MBCA Bank. To retain him, the defendant, after consulting its board, proposed an improved remuneration package which the plaintiff accepted. This package, communicated by letter dated 4 October 2011, included a salary increase, car loan, mortgage loan, school fees assistance, and "an immediate allocation of 2000 shares in Defendant valued as US$40,000.00" with "normal good leaver and bad leaver covenants" applying. By letter dated 1 January 2012, the defendant's Remuneration Committee wrote to the plaintiff explaining the mechanism for exercising share options. The plaintiff never paid for the 2,000 shares. His employment was terminated by the defendant on 30 September 2013, effective 31 December 2013. When the plaintiff queried the computation of his terminal benefits, the defendant responded that the shares had never been offered at no value. The plaintiff instituted action in September 2015. The parties agreed to proceed by way of a stated case.

• Whether the plaintiff and defendant entered into an agreement in terms of which the plaintiff was allocated US$40,000.00 worth of shares at no financial cost
• Whether the allocation of shares in the letter of 4 October 2011 referred to actual shares or merely share options
• Whether the letter of 1 January 2012 regarding share options related to the same shares allocated in October 2011 or constituted a separate offer
• What value should be ascribed to the shares if the plaintiff was entitled to them
• Whether extrinsic evidence could be admitted to interpret the terms of the October 2011 offer

1. The plaintiff and defendant entered into an agreement in terms of which the plaintiff was allocated 2,000 worth of shares then valued at US$40,000.00 at no financial cost. 2. A financial expert agreed to by both parties shall be engaged at defendant's costs to ascertain the value of the shares as they stood at December 2013, this being the required time of appraisal. 3. Defendant to pay costs of suit.

Where an employer makes a definite offer of a remuneration package containing an immediate allocation of shares (not share options) to retain an employee, and the employee accepts by remaining in employment, a binding contract is formed. The terms of such acceptance must be found within the four corners of the written offer, and extrinsic evidence cannot be admitted to redefine those terms. There is a material distinction between an allocation of shares and the grant of share options: share options are contingent upon exercise of the option and create a right but not an obligation, whereas an allocation of shares creates immediate entitlement subject only to any stated conditions (such as good leaver/bad leaver provisions). A company's failure to comply with statutory requirements for share transfer and registration constitutes the company's own breach and cannot defeat an employee's contractual entitlement. The value of shares in unlisted companies must be determined at the date of appraisal (not the date of allocation) taking into account relevant valuation factors including company performance, market conditions, and economic environment.

The court made observations on the nature of "good leaver" and "bad leaver" covenants commonly found in shareholder agreements. Good leaver conditions generally apply in instances of death, incapacitation through physical or mental causes, redundancy, or voluntary retirement after a prescribed time. Bad leaver conditions generally apply in situations of dismissal for gross misconduct, voluntary departure before expiration of the agreed period, or non-constructive dismissal. The court also commented on valuation principles for unlisted company shares, noting that book value has no direct relation to fair market value, and explaining that various factors must be considered including market conditions, economic environment, past records and financial data, and the value of shares of companies engaged in similar operations. The court observed that only cash has book value equal to its true market value, while other assets including securities may be worth more or less than their book values.

This case is significant in Zimbabwean contract and employment law as it reinforces the parol evidence rule and the principle that where parties have integrated their agreement into a complete written document, extrinsic evidence cannot be used to redefine the terms of that contract. It demonstrates the importance of clear drafting in employment contracts, particularly regarding employee share schemes and the distinction between share allocations and share options. The case also addresses valuation principles for unlisted company shares, establishing that such shares must be valued at the date of appraisal (termination of employment) rather than at the date of allocation, taking into account factors such as company performance, market conditions, and economic environment. It confirms that a company's failure to comply with statutory obligations regarding share registration and transfer cannot be used as a defense against an employee's contractual entitlement to shares. The judgment emphasizes that acceptance of a counter-offer to retain an employee creates binding contractual obligations.