Interfin Banking Corporation Limited t/a Interfin (Represented by Deposit Protection Corporation In its capacity as Liquidator) v Fenhaven Investments (Private) Limited and Kwanayi Kashangura

The plaintiff bank issued summons against the defendants claiming US$1,779,718.82 arising from credit facility loans. The first defendant operated corporate account number 1716-618006-180 and the second defendant operated personal account number 1703-241505-150. On 4 March 2010, the plaintiff and second defendant entered into an agreement for a corporate multi-purpose facility of up to US$700,000.00 to finance investment initiatives, secured by 3,043,479 Africom Holdings Limited shares. On 10 March 2010, the plaintiff and first defendant (represented by the second defendant) entered into another agreement for facilities not exceeding US$1,347,846.00, also for investment initiatives. On expiry of these facilities on 30 September 2011, the parties agreed to combine the borrowings under a new inclusive facility of US$3,100,000.00. The defendants failed to sign this combined facility but continued to withdraw funds. Money was transferred to Africom Holdings Limited for the defendants to exercise their rights issue. The first defendant pledged 5,860,200 Africom shares and the second defendant pledged 3,043,479 Africom shares as security. The net outstanding sum was US$3,915,326.44, of which US$2,135,607.62 was ceded to Al Shams Global (Private) Limited after the plaintiff was placed under curatorship, leaving US$1,779,718.82 claimed. The defendants breached the terms by failing to repay on demand.

• Whether the money transferred by the plaintiff to Africom Holdings Limited was for the acquisition of shares by the plaintiff itself or for the defendants to exercise their rights issue
• Whether the defendants were liable to repay the loan amounts advanced by the plaintiff
• Whether the loan agreements were valid and enforceable despite some documents being undated
• Whether the plaintiff deviated from its pleadings by leading evidence that funds were transferred to a third party (Africom Holdings Limited)
• Whether the defendants had applied for and received loans from the plaintiff for their investment purposes

The court ordered that the defendants, jointly and severally (the one paying the other to be absolved): (a) Pay the sum of US$1,779,718.82; (b) Pay interest on the above sum at the rate of 25% per annum calculated monthly in advance and compounded monthly in arrears reckoned from 5 October 2012 to the date of full and final payment; (c) The 5,860,200 ordinary shares held by the 1st defendant in Africom Holdings Limited and the 3,043,479 ordinary shares held by the 2nd defendant in Africom Holdings Limited pledged to the plaintiff be specially executable in favour of the plaintiff; (d) Pay legal costs on an attorney and client scale.

The binding legal principles established are: (1) Signed written contracts reflect the parties' free will and the law respects such choices by enforcing the contracts; (2) If a party to a contract creates the impression that the parties had reached consensus and the other party reasonably relies on this impression, the parties will be bound to the contract even if there was no subjective consensus; (3) Public policy demands as a fundamental principle to uphold the freedom and sanctity of contract and requires that commercial transactions not be unduly trammeled by restrictions on that freedom; (4) A duly signed agreement is not invalidated by reason of not being dated, especially when the issue of the date is not really material; (5) There is nothing legally wrong for a person to apply for a loan and then direct that the money be paid to a third party for the borrower's benefit; (6) Where documentary evidence establishes the terms of a loan agreement and the identity of the beneficiary, the burden is on the party disputing such evidence to provide satisfactory explanation or corroboration.

The court made several non-binding observations: (1) The second defendant benefitted from the fact that he was "well known to the bank" and hence the processing of his loan application was expedited to the extent that the likelihood of an advance having been made before all the normal paperwork had been signed cannot be discounted; (2) The second defendant's assertion that the loan application was rejected was "clearly false" and was made for the first time under cross-examination, not during evidence in chief; (3) If the application had been rejected, this should have been in writing as the application for a loan had been in writing; (4) Given the second defendant's close personal relationship with Farai Rwodzi who was a major shareholder of the bank at the time, the application could not have been conceivably rejected; (5) The court characterized the second defendant as "a self-confessed deceiver" whose evidence was "so manifestly unreliable and unbelievable that the court could not objectively rely on it"; (6) It was absurd to think that endorsements written on the application form were fraudulent or written to give a false impression.

This case is significant in Zimbabwean commercial and banking law for: (1) affirming the principle that courts will uphold the freedom and sanctity of contract in commercial transactions; (2) establishing that loan agreements need not be dated to be valid and enforceable where the parties have signed and the lack of date is not material; (3) confirming that a borrower may legitimately apply for a loan and direct the lender to pay the funds to a third party for the borrower's benefit; (4) demonstrating that where documentary evidence clearly establishes a contractual relationship, uncorroborated oral testimony contradicting such evidence will not be accepted; (5) reinforcing credibility assessments in commercial disputes where one party's evidence is found to be manifestly unreliable; (6) illustrating the court's approach to interpreting banking facility agreements and security arrangements involving share pledges.