Luke Adam Munyawarara v Sam Rindai Bhande

The plaintiff and defendant are brothers who were shareholders in Central African Forge Company (Pvt) Ltd (CAFCO) through Sam Bee Engineering (Pvt) Ltd since 1997. The plaintiff held 9.9% of the shares. On 15 September 2012, they entered into a shareholder's agreement wherein the plaintiff sold his shareholding to the defendant for US$94,403.00. The defendant paid the full purchase price together with interest. However, a dispute arose regarding dividends allegedly owed to the plaintiff totaling US$19,731.00 (comprising US$13,417.00 in dividends due as at 30 September 2012 and US$6,314.00 in earnings from May to September 2012). The defendant paid US$5,000.00 on 24 February 2016. After deducting this payment, the plaintiff claimed US$14,731.00 in outstanding dividends. The defendant denied liability, arguing that the claim had prescribed and that no dividend was payable as none was declared by the board of directors, and that the US$5,000.00 payment was a loan, not payment toward dividends.

• Whether the plaintiff's claim had prescribed
• Whether the plaintiff was entitled to dividends in terms of the shareholders agreement and if so, how much
• Whether the US$5,000.00 payment constituted acknowledgment of debt that interrupted prescription
• Whether the defendant was bound by the terms of the sale agreement despite claiming not to have read it fully
• Whether dividends could be claimed from a shareholder rather than the company

The court ordered: (1) The defendant shall pay the plaintiff US$14,731.00; (2) The defendant to pay interest on the amount at 20% per annum calculated from 1 October 2012 to date of full and final payment; (3) The defendant to pay costs of suit.

A party who signs a written contract is bound by its terms whether or not he has read and understood the contract (caveat subscriptor rule). Where a shareholder in a sale of shares agreement specifically undertakes to pay dividends owed by the company to the selling shareholder, that shareholder becomes personally liable for such payment. Part payment of a debt constitutes acknowledgment of liability which interrupts the running of prescription. A party who substantially complies with the terms of a written agreement cannot deny liability for specific obligations contained therein by claiming ignorance of those particular terms.

The court observed that while ordinarily dividends are due from a company and not a shareholder, in this case the defendant, as the major shareholder wanting to protect his interests, elected to shoulder the responsibility of paying the dividends personally. The court also noted that the defendant's defence that there was no money available and that ZIMRA penalties were heavy did not constitute an adequate defence without producing financial statements to prove there was no net profit. The court commented that the defendant's denial of payment of dividends was an attempt to escape liability, and that his case was not probable given the documentary evidence showing he understood and complied with other terms of the agreement.

This case demonstrates the application of the caveat subscriptor rule in Zimbabwean commercial law, establishing that parties are bound by contracts they sign regardless of whether they claim not to have read or understood the terms, particularly in business transactions between sophisticated parties. The case also illustrates how acknowledgment of debt through part payment can interrupt prescription, and clarifies that shareholders may contractually agree for one shareholder to assume the company's obligation to pay dividends to another shareholder in the context of a share sale transaction. It reinforces the principle that parties who substantially comply with most terms of an agreement cannot selectively deny liability for specific provisions they later find inconvenient.