Tian Ze Tobacco Company (Pvt) Ltd v Adtandem Vimbayi Gotora

On 8 July 2014, the applicant (Tian Ze Tobacco Company) and the respondent (Gotora) entered into a Tobacco Farming Contract for the 2014-2015 farming season. The applicant provided the respondent with a loan facility in the form of inputs and cash flow for tobacco farming. The contract was a novation of past similar contracts between the parties for outstanding amounts. On 24 August 2015, the respondent signed an acknowledgement of debt acknowledging her indebtedness to the applicant in the sum of US$33,621.34. The total loan amount was due and payable on or before 30 September 2015, failing which interest at 5% per annum would be levied. On 27 June 2016, the applicant issued summons demanding payment. The respondent entered appearance to defend. In July 2021, the respondent deposited ZWL$40,000.00 into her legal practitioners' trust account in full and final settlement of the outstanding amount. The applicant rejected this payment, arguing the debt must be repaid in United States dollars as per the original contract.

• Whether the respondent had a bona fide defence to warrant dismissal of the summary judgment application
• Whether the debt could be discharged in Zimbabwe dollars (ZWL) or whether it had to be repaid in United States dollars
• Whether the loan advanced to the respondent constituted a 'foreign loan' or 'foreign obligation' within the meaning of section 44C(2)(b) of the Reserve Bank of Zimbabwe Act
• Whether SI 33 of 2019 and SI 142 of 2019 converted the USD-denominated debt into a local currency obligation
• Whether the applicant had placed sufficient evidence before the court to prove the source of funds was from an offshore/foreign source

1. The application for summary judgment is hereby dismissed. 2. Costs shall be in the cause.

In applications for summary judgment on tobacco loan contracts where the plaintiff seeks repayment in foreign currency based on the exception in section 44C(2)(b) of the Reserve Bank of Zimbabwe Act for 'foreign loans and foreign obligations', the plaintiff bears the burden of placing before the court evidence proving that the funds advanced to the defendant were sourced from an offshore/foreign source. The mere fact that: (a) a tobacco farming contract exists; (b) an acknowledgment of debt denominates the obligation in foreign currency; or (c) the Exchange Control Finance Order requires tobacco buyers to source funds offshore, is insufficient to prove that the specific funds advanced constituted a foreign loan or foreign obligation. The source of funds must be established with documentary evidence (such as letters from foreign lenders, drawdown authorizations, etc.). Where the source of funds is not established or is obscure, this constitutes a triable issue that cannot be determined on summary judgment. Section 44C(2)(b) of the Reserve Bank of Zimbabwe Act, being a provision in an Act of Parliament, takes precedence over subordinate instruments such as Exchange Control Orders and Circulars.

The court made several obiter observations: (1) It acknowledged that the status of tobacco contracts based on offshore funding had been settled by Supreme Court precedents in Mushayakarara v Zimbabwe Leaf Tobacco and Zimbabwe Leaf Tobacco v Vengesai, which held that such obligations remain payable in foreign currency. (2) The court noted that tobacco grower agreements are sui generis contracts that cannot be examined without reference to the source of funding, as the nature of funds advanced must be preserved where they are sourced solely for tobacco growing purposes. (3) The court observed that Exchange Control Circular No. 7 of 2019, being an administrative document subordinate to Acts of Parliament, cannot override the requirements of section 44C(2)(b) of the Reserve Bank Act. (4) The court emphasized the drastic nature of summary judgment as a remedy and reiterated that even a 'mere possibility of success', a 'plausible case', or a 'triable issue' is sufficient to defeat an application for summary judgment.

This case is significant in Zimbabwean jurisprudence as it clarifies the evidentiary burden on plaintiffs seeking to enforce tobacco loan contracts in foreign currency following the currency reforms of 2019. While previous cases established that tobacco loans funded from offshore sources remain payable in foreign currency despite SI 33 of 2019 and SI 142 of 2019, this case emphasizes that applicants cannot rely on the mere existence of a tobacco contract or acknowledgment of debt denominated in foreign currency. They must affirmatively prove through documentary evidence that the specific loan was sourced from offshore/foreign funding to fall within the section 44C(2)(b) exception. The case demonstrates that the courts will not presume foreign funding simply because the Exchange Control Finance Order requires tobacco buyers to source funds offshore. It reinforces procedural safeguards in summary judgment applications and establishes that where the source of funds is unclear or disputed, this constitutes a triable issue that must be determined at trial with full evidence, not summarily disposed of.