Munatsi Shoko v Old Mutual Zimbabwe Limited

On 1 October 1993, the plaintiff entered into a retirement annuity policy agreement with the defendant (Old Mutual Zimbabwe Limited), investing $19,704.31 Zimbabwean dollars (ZWD), equivalent to approximately $2,990 USD at the time. The policy was to mature in October 2014 at a value of $86,485 ZWD plus profit. During Zimbabwe's hyperinflationary period around 2004, the defendant offered the plaintiff $207,000 ZWD (equivalent to approximately $36 USD at that time), which the plaintiff refused as inadequate. In 2011, the defendant offered $167.16 USD, blaming the hyperinflationary environment that prevailed between 2003-2009. The plaintiff rejected this offer and sued for payment of the maturity value equivalent, claiming $13,123.67 USD based on the 1993 exchange rate applied to the maturity value. The defendant pleaded supervening impossibility due to hyperinflation and regulatory constraints.

• Whether the hyperinflationary environment constituted supervening impossibility (vis major) that rendered the retirement annuity contract impossible to perform
• Whether the plaintiff was entitled to payment in United States dollars under the multicurrency regime
• How to calculate the appropriate amount due to the plaintiff when converting a Zimbabwean dollar-denominated contract into United States dollars after hyperinflation and currency change
• Whether the defendant had a duty to warn the plaintiff about the effects of hyperinflation and the erosion of his investment
• Whether economic recession and commercial difficulties constitute impossibility of performance in contract law

Judgment granted in favor of the plaintiff for: (a) Payment of $13,123.67 USD together with interest at the prescribed rate from the date summons were issued to the date of payment; (b) Costs of suit.

The binding legal principles established are: (1) Hyperinflation and adverse economic conditions do not constitute supervening impossibility (vis major) that renders contractual performance impossible, as such commercial circumstances are foreseeable in the business world at the time contracts are concluded; (2) Parties are entitled to payment in the functional currency (USD in Zimbabwe's multicurrency regime) where this most truly expresses their loss and fully compensates them, even where the original contract was denominated in Zimbabwean dollars; (3) A party's conduct demonstrating continued acknowledgment of contractual obligations (such as making reduced payment offers) negates a defence of impossibility of performance; (4) In the absence of express contractual provisions allocating economic risk or allowing cancellation for economic reasons, the original contractual terms remain binding and enforceable; (5) When converting historical ZWD-denominated obligations to USD, courts should apply the contractual growth/multiplication factor to the original USD equivalent investment rather than applying historical exchange rates to the maturity value.

The court observed that it would have been prudent for the defendant to seek cancellation of the contract between 1993 and 2004 when the Zimbabwean dollar was gradually losing value, rather than waiting until the plaintiff's funds were valueless. The court also noted that the defendant failed to explain why performance remained impossible between 2009 (when dollarization occurred) and 2014 (the maturity date), a period of five years during which the defendant could have taken steps to salvage the situation. The court commented that the defendant's case would have been stronger if it had presented evidence showing what investments were made after dollarization and provided mathematical calculations of what the plaintiff should be entitled to based on actual performance. The court further observed that there was no evidence that the plaintiff was advised of how his monies would be invested and the attendant risks, with the defendant's witness suggesting this was the responsibility of the plaintiff's personal financial advisor rather than the defendant itself.

This case is significant in Zimbabwean jurisprudence for addressing the legal treatment of contracts entered into during the Zimbabwean dollar era in the post-hyperinflation multicurrency regime. It establishes that hyperinflation and economic difficulties do not automatically constitute supervening impossibility that discharges contractual obligations. The judgment reinforces the principle that investment companies and regulated institutions cannot escape contractual obligations merely due to economic downturns that could be foreseen in commercial dealings. It provides guidance on converting historical Zimbabwean dollar-denominated obligations to United States dollars by applying the contractual growth rate to the original USD equivalent rather than simply applying historical exchange rates. The case also emphasizes the duty of financial institutions to timeously advise clients of material changes affecting their investments and the consequences of failing to do so.