High Court throws out US$617k Budiriro housing project claim

A dispute over more than US$617,000 linked to a major housing development in Harare has collapsed after the Harare High Court ruled that the company sued for the money was not legally responsible for the alleged debt.

In a judgment delivered by Justice Vivian Ndlovu, the court dismissed a claim by Mutual Construction (Private) Limited against Old Mutual Construction Zimbabwe (Private) Limited for US$617,815.29 arising from the Budiriro Housing Project.

The claim related to retention fees, interest, security costs and other payments allegedly tied to the construction of 613 houses in Budiriro.

"The Plaintiff seeks payment of US$617,815.29 being retention, accrued interest, security cost and client snag list claims emanating from Budiriro Housing Project," the court recorded.

According to the judgment, the dispute dates back to a 2013 building contract under which Mutual Construction said it was engaged to construct the houses. The company said the works were completed in November 2019 but maintained that significant amounts remained unpaid.

The project was carried out with Central Africa Building Society (CABS) as the contracting party, while CNM-YBJ Consulting Engineers were appointed to supervise the works.

Mutual Construction argued that despite repeated demands, the outstanding claims were not settled. It told the court that a meeting was held on June 25, 2021, to resolve the matter amicably, but no further discussions took place.

In November 2023, a payment of US$36,289.66 was made as part of the retention amount, leaving the disputed US$617,815.29 unpaid.

The builder claimed it was entitled to the balance together with interest, arguing that the part payment amounted to an acknowledgement of the debt.

However, the defendant denied liability, insisting it had never been a party to the construction contract.

Its lawyers argued that the agreement had been concluded with CABS and not Old Mutual Construction Zimbabwe, saying the company's role was limited to project management.

"The contract relied upon was executed between the Plaintiff and CABS, not with the Defendant," Justice Ndlovu said in the ruling.

The court found that Mutual Construction had failed to provide documentary evidence showing that Old Mutual Construction Zimbabwe had assumed responsibility for the alleged debt.

"What is before the court is merely proof of payment and minutes, neither of which establishes the Defendant as the contracting party," the judge ruled.

"In the absence of documentary proof, the Plaintiff's assertion remains unsubstantiated."

Justice Ndlovu further held that the defendant had only acted as a project manager, which did not create contractual liability.

"The defendant has managed to show that it was acting merely as Project Manager for CABS… Agency does not render the Defendant liable under the contract; liability rests with the principal, CABS," the court said.

The court also ruled that it lacked jurisdiction to hear the dispute because the contract required disagreements to be resolved through arbitration.

Clause 25 of the agreement states that any dispute "shall be referred to arbitration," the court noted.

"The jurisdiction of this court is ousted by the arbitration clause, and the dispute must be referred to arbitration," Justice Ndlovu ruled.

In addition, the judge found that some of the claims were legally unsustainable because they sought interest beyond what is permitted under the in duplum rule, which prevents interest from exceeding the original debt.

"The in duplum rule prohibits interest from exceeding the capital debt and equally bars claims that seek to disguise ‘interest upon interest' as damages," the judgment said.

Justice Ndlovu concluded that the plaintiff had failed to establish a valid claim against the defendant.

"The Plaintiff's Declaration fails to disclose a valid cause of action against the Defendant," she ruled.

"The plaintiff's claim against the defendant is dismissed in its entirety."

The court also ordered that costs follow the cause, meaning Mutual Construction must pay the defendant's legal costs.