N.R Barber (Private) Limited, a mining operations company, performed contract mining work at Entuba Coal Mine in Hwange between 2014 and 2015. Entuba Coalfields (Private) Limited was a Special Purpose Vehicle formed by the defendant Zambezi Gas Zimbabwe (Private) Limited and Coal Producers and Processors Trust Zimbabwe as a joint venture. The defendant held the mining concession and availed it to the joint venture. Directors of the defendant, including Managing Director E. Raradza and Executive Director T. Nherera, were also directors of Entuba. All invoices were sent to the defendant's address for the attention of Mr. Nherera. On 12 May 2016, the defendant executed the first acknowledgement of debt for USD 3,012,493.46, subject to reconciliation of fuel expenses. On 15 February 2017, the defendant executed a second acknowledgement of debt for USD 3,885,000 (comprising principal debt of USD 2,715,000 plus interest of USD 1,170,000) and proposed a repayment plan from February 2017 to February 2020. The defendant failed to make the payments, and the plaintiff sued for the full amount.
Judgment entered for the plaintiff in the sum of USD 3,885,000.00, with interest at the rate of 5% per annum calculated from the date of summons to the date of payment in full, and costs of suit on an attorney-client scale.
It is competent to sue a debtor on an admission of liability as set out in an acknowledgement of debt without founding the action on the original transaction giving rise to that acknowledgement. The legal causa for an acknowledgement of debt is contained within the acknowledgement itself. Where a company's authorized directors voluntarily execute written acknowledgements of debt on the company's letterhead, acknowledging specific amounts due and proposing payment terms, the company is bound by those acknowledgements. Where a Special Purpose Vehicle shares the same registered address, has overlapping directorship with the parent company, and the parent company's directors receive invoices and author acknowledgements of the debt, the Special Purpose Vehicle will be treated as an alter ego of the parent company and the parent company will be held liable for the debts incurred.
The court observed that rules of procedure are made to ensure justice is done between parties and should not be used to cause injustice. A defendant who might be afraid to go into the witness box should not be permitted to shelter behind the procedure of absolution from the instance. The court noted that where a defense is peculiarly within the knowledge of a defendant and the plaintiff has made out some case to answer, the plaintiff should not lightly be deprived of remedy without first hearing what the defendant has to say. The court commented that attempts to introduce reconciled figures through witnesses who joined the company after acknowledgements were signed, without comprehensive audit reports showing the reconciliation process, should be treated with skepticism. The court also observed that defendant's witnesses, particularly Mr. T. Nherera, were evasive during cross-examination and had difficulties answering simple questions, while the plaintiff's witnesses were credible and forthright.
This case is significant in Zimbabwean commercial law for establishing that: (1) a plaintiff can successfully sue on an acknowledgement of debt without having to prove the underlying original transaction that gave rise to the debt; (2) written acknowledgements of debt signed by authorized directors on company letterheads bind the company; (3) courts will pierce the corporate veil where a Special Purpose Vehicle is found to be an alter ego of the parent company's directors, particularly where there is overlapping directorship, shared registered addresses, and evidence that the parent company was the actual beneficiary of services; (4) the legal causa for an acknowledgement of debt is contained in the acknowledgement itself, and courts need not look behind it to examine the motive or original basis; (5) attempts to reconcile figures after formal acknowledgements have been executed and accepted will not be entertained to vary the acknowledged amount; and (6) in applications for absolution from the instance, courts should lean toward allowing cases to proceed where there is evidence upon which a reasonable court might find for the plaintiff.