National Social Security Authority v Metbank Limited

On 18 December 2017, the plaintiff (National Social Security Authority) and defendant (Metbank Limited) signed a document titled "Term Sheet – Security Lending Agreement to Metbank." In terms of this document, the plaintiff lent the defendant three Treasury Bills with a total face value of US$20 million for the defendant to use as security for third-party borrowings. The defendant paid an upfront arrangement fee of 0.75% (US$150,000) as agreed. The term sheet provided that the facility would be for 6 months from the date of signing, after which the defendant would settle (return) the Treasury Bills. It also stipulated that failure to return the bills on expiry would attract a penalty fee of 5% per annum on the face value, compounded daily. When the 6-month period expired on 18 June 2018, the plaintiff demanded return of the bills, but the defendant refused. The defendant instead sought renewal of the agreement. No other formal agreement was ever signed between the parties, and the term sheet remained the only written memorial of their transaction. The parties had previously engaged in similar lending and securitization arrangements.

• Whether the term sheet signed on 18 December 2017 constituted a binding and enforceable security lending agreement obliging the defendant to return the treasury bills or their face value
• Whether the defendant had any lawful basis to retain possession of the plaintiff's treasury bills valued at US$20 million
• Whether the plaintiff's claim was properly pleaded in contract or should have been brought as an actio rei vindicatio or under unjust enrichment
• Whether the term sheet was void for vagueness or constituted an incomplete and unenforceable contract requiring a subsequent formal agreement

1. The defendant was directed to return to the plaintiff the three Treasury Bills with total face value of US$20,000,000. 2. The defendant was ordered to pay a penalty fee of 5% per annum on US$20,000,000 compounded daily from 18 June 2018 to the date of return of the bills or payment of the alternative sum. 3. Alternatively, if the defendant failed to return the Treasury Bills, it was ordered to pay US$20,000,000 together with a coupon at 5% per annum from 18 June 2018 to date of full payment. 4. The defendant was ordered to pay costs of suit on a legal practitioner and client scale.

A term sheet or preliminary agreement can constitute a binding and enforceable contract where: (1) it contains all essential terms of the agreement (parties, subject matter, price, duration); (2) the parties' objective conduct demonstrates they treated it as binding by performing their obligations under it; and (3) the language of the document, properly interpreted, indicates it was intended to be a stand-alone agreement rather than merely an agreement to agree. The court must apply an objective test in determining whether a contract exists, looking at what the parties said and did rather than their subjective mental reservations. Where parties have reduced their agreement to writing and acted upon it, the parol evidence rule and integration rule prevent them from contradicting, adding to, or varying the written terms through extrinsic evidence. The subsequent conduct of parties provides the best evidence of how they interpreted an ambiguous contractual provision, and courts will hold parties to their common interpretation as demonstrated by their conduct. A party cannot retain possession of property belonging to another without lawful basis once the contractual period authorizing such possession has expired.

The court observed that an owner of property held by another without permission may have multiple remedies available, including both vindication and contractual claims, and is not limited to pursuing only an actio rei vindicatio. The court noted that the defendant's argument that no agreement existed was a "self-destruct button" that undermined any possible defense, as without any agreement the defendant would have no right whatsoever to retain property it did not own. The court commented that the reasons for the defendant's resistance to returning the treasury bills "continued to vex the mind" and characterized the defense as engaging in "a Sunday morning kick around, except that this is a court of law transacting serious business." The court emphasized that punitive costs awards serve an important function in discouraging abuse of court process and similar conduct in future cases.

This case is significant in Zimbabwean contract law for establishing important principles regarding the interpretation of preliminary agreements and term sheets. It demonstrates that courts will look beyond labels and formal objections to determine the true nature of contractual relationships based on the objective conduct of parties. The judgment reinforces the parol evidence rule and integration rule in Zimbabwean law, confirming that when parties reduce their agreement to writing and act upon it, that writing constitutes the exclusive memorial of their transaction. The case also clarifies that parties cannot escape contractual obligations by arguing that a document labeled as preliminary was intended to be superseded by a formal agreement, particularly where their conduct demonstrates they treated the preliminary document as binding. The award of punitive costs serves as a deterrent against litigants pursuing hopeless defenses while retaining valuable assets belonging to others, thus discouraging abuse of court process.