Schweppes Zimbabwe (Pvt) Ltd v Blakey Investments (Pvt) Ltd

Schweppes Zimbabwe Limited (plaintiff), a Zimbabwean company, entered into a supply agreement with Blakey Investments (Pty) Ltd (defendant), a South African company, on 8 May 2018 for the supply of packaging materials. The agreement was subsequently varied on 30 May 2018, 26 June 2018, and 19 March 2019, extending the duration from 18 months to 5 years and varying quantities and prices. The plaintiff's auditors highlighted the agreement in October 2019. The plaintiff sought a declaration that the agreement was illegal, invalid, and of no force and effect on the basis that neither party obtained Exchange Control approval prior to entering into the agreement, allegedly contravening section 11 of the Exchange Control Regulations S.I. 109/1996. The defendant disputed the claim, arguing that the agreement contained warranties that all necessary approvals had been obtained, that South African law governed the agreement, and that an arbitration clause required disputes to be referred to arbitration. Arbitration proceedings were ongoing in South Africa at the time of the trial.

• Whether the supply agreement contravened section 11 of the Exchange Control Regulations S.I. 109/1996
• Whether the agreement was illegal, invalid and of no force and effect due to alleged non-compliance with Exchange Control Regulations
• Whether the court had jurisdiction to hear the matter given the arbitration clause in the agreement
• Whether the requirements for granting declaratory relief were met
• What constitutes sufficient proof of contravention of Exchange Control Regulations

The plaintiff's claim was dismissed with costs.

A party seeking a declaration that a contract is illegal and void for contravening section 11 of the Exchange Control Regulations must prove the alleged contravention on a balance of probabilities. This requires: (1) evidence from an Exchange Control Authority establishing the nature and modalities of approval required under section 11; (2) proof that the specific transaction fell within the scope of section 11 and did not fall within any exceptions; (3) evidence that no such approval was obtained; and (4) demonstration that the transaction actually created an obligation to make payment outside Zimbabwe. The mere allegation that no Exchange Control approval was obtained, without expert evidence from the relevant authority or proof of what was required, is insufficient to establish illegality. A court will not grant declaratory relief on an academic or assumed basis without proper evidence. The burden lies on the party alleging illegality to prove it - he who alleges must prove.

The court observed that it would not be in the interests of justice or public policy to grant declaratory relief that would render ongoing judicial processes in another jurisdiction academic. The court noted that Exchange Control Regulations should not be used as a mechanism for contracting parties to renege on business obligations arising from concluded contracts. The court indicated that while an agreement in breach of a peremptory provision of a statute is void and courts lack equitable discretion to dispense with strict statutory compliance, there must first be cogent evidence that the law was actually contravened. The court also commented that the issue of whether the Supply Chain Director had authority to enter into the agreement was not material to the main issue, as the real question was whether the agreement contravened the Exchange Control Regulations. The court noted that the defendant's failure to raise the jurisdictional objection by way of special plea, exception, or application could be condoned in the absence of prejudice to the plaintiff.

This case establishes important principles regarding the burden of proof when alleging that a contract is void for contravening Exchange Control Regulations in Zimbabwe. It emphasizes that parties seeking to avoid contractual obligations on the basis of statutory non-compliance must lead concrete evidence, including expert evidence from the relevant regulatory authority, to establish both the nature of the requirement and the fact of non-compliance. The case confirms that courts will not declare contracts invalid on generalized allegations without proper proof. It also reinforces that Exchange Control Regulations are not intended as a mechanism for parties to escape commercial obligations they have voluntarily undertaken. The judgment highlights the importance of expert evidence when dealing with foreign law and regulatory requirements, and demonstrates judicial reluctance to interfere with ongoing proceedings in other jurisdictions through declaratory relief.