Jeremy Stander v Neltra Investments t/a Douglas Car Sales

The plaintiff, a Zimbabwean citizen, was the registered owner of a Toyota Hiace vehicle (registration AAZ 7054). On 10 October 2007, the plaintiff and defendant (a motor vehicle sales company) entered into a written agreement whereby the defendant would sell the plaintiff's vehicle and pay him USD 14,000 from the proceeds. The agreement was subsequently amended on 4 February 2008 to reduce the payment to USD 12,000, with both parties signing to confirm this amendment (Exhibit 1). The parties disputed the nature of the amendment - the plaintiff contended it was merely a reduction to USD 12,000, while the defendant claimed it was to pay the equivalent of USD 12,000 in Zimbabwe dollars (Z$96 billion). The defendant failed to pay the plaintiff, who then sued for USD 12,000. The parties had previously conducted two similar transactions without difficulty (Exhibits 2 and 3), both involving payment in foreign currency.

• Whether the agreement between the parties was governed by Exhibit 1 (as claimed by plaintiff) or Exhibit 4 (as claimed by defendant)
• Whether the agreement was legal or in violation of Exchange Control Regulations, specifically section 4(1)(a)(ii) of SI 109/1996
• Whether the court should enforce an illegal contract
• Whether the par delictum rule should be relaxed to grant relief to the plaintiff
• Whether costs should follow the event

The plaintiff's claim was dismissed. There was no order as to costs.

An agreement between two Zimbabwean residents to transact in foreign currency without exchange control authority violates section 4(1)(a)(ii) of the Exchange Control Regulations (SI 109/1996) and is illegal. An illegal agreement which has not been performed will never be enforced by the courts - this rule is absolute and admits no exception (ex turpi causa non oritur actio). The par delictum rule will not be relaxed where: (1) a party seeks to enforce (rather than unwind) an illegal contract; (2) the parties have systematically and deliberately transgressed regulatory provisions with full knowledge of the illegality; and (3) granting relief would amount to aiding and abetting unacceptable conduct. Courts have discretion to depart from the general rule that costs follow the event where special circumstances warrant such departure, including where denying costs serves to partially disgorge unjust enrichment arising from an illegal transaction.

The court observed that entering into illegal agreements is inherently hazardous, and almost invariably involves an element of unjust enrichment where one party benefits at the expense of the other. The court noted that "it is an elusive concept to try and do justice between man and man but an attempt should be made" to prevent complete injustice. The court also observed that photocopied documents have compromised evidential value under the Civil Evidence Act, Chapter 8:11, section 11, particularly where no convincing explanation is provided for the absence of the original. The court noted that the main reason parties prefer written and signed agreements is to be bound by them in the event of disputes, making it highly unlikely that a party who had signed one agreement would consent to amendments without signing to acknowledge those amendments.

This case is significant in Zimbabwean law (applicable to South African jurisprudence on similar principles) for clarifying the strict approach courts take to illegal contracts involving exchange control violations. It demonstrates that even where a plaintiff establishes the facts of their case, courts will not enforce contracts that violate exchange control regulations between domestic parties transacting in foreign currency without proper authorization. The case also illustrates the limited circumstances in which the par delictum rule will be relaxed - particularly emphasizing that relief will not be granted where a party seeks to enforce (rather than unwind) an illegal agreement, and where parties have systematically and deliberately transgressed regulatory provisions. The judgment on costs demonstrates judicial discretion to achieve substantial justice where strict application of the rule that costs follow the event would result in unjust enrichment.