Hilary Muza 
THIS week we will be discussing the parate executie (or summary execution) clause in contracts, what it is and whether it is a part of Zimbabwe law.
This clause is a useful tool for the efficient recovery of debts pursuant to business transactions.
Knowledge of what it is and how it can be used in business can be a key tool for improving liquidity and cashflow for businesses.
There is often a conflict between businesspeople and their legal advisers because the former seek to do what is efficient and expedient, while the latter seek to do what is lawful.
Oftentimes what is lawful will not make the most business sense. Parate executie applies in a lot of instances where there is exchange for value and a debt ensues. The creditor will want the option to hold on to property given as a pledge and be able to sell said property should the debtor default. Ordinarily such a creditor would want to avoid going through a legal process before being able to sell the pledged property.
In law, there exists a principle against self-help in that an individual cannot implement their rights without resorting to legal processes or without consulting a higher authority that then entitles them to implement the said right.
The thinking behind this principle is that individuals with economic power stand to abuse those without it and the victims will not have the protection of the law.
Smart business would be able to deal with assets without having to resort to formal court proceedings.
This article explains the position of the law in Zimbabwe in this regard.
What is parate executie?
Parate executie is the exception to the general rule in debt enforcement that a creditor must first make use of formal court processes to enforce its rights, as well as having a court order and specific permission from the court to have the property attached and sold in execution.
A parate executie clause generally seeks to entitle the secured creditor to dispose of the hypothecated (or pledged) property through a private sale, that is, without going through the normal court process when the debtor defaults on his obligations under the loan agreement.
The validity of parate executie clauses has been debated for a long time in our law.
The position is clarified in the case of Chidawu & Ors v Shah & Ors HH 137/15, which involved a business transaction in which an asset management company bought shares in a listed company for value from a seller who had received the shares in the form of pledged security for a loan.
The initial owners of the shares sought a declaratur that the sale of the shares to the asset management company “constituted unlawful parate executie”. The applicants also sought the return of the shares to them among other relief.
Is it part of our law?
In dismissing the application and finding in favour of the asset management company, the court confirmed that the doctrine of parate executie is part of our law and that a person who takes transfer of pledged instruments in good faith and for value receives title to those rights free from any defences.
The case was a classic in its restatement of the law of securities as derived from our common law. This position was confirmed in Farmers World Holdings (Pvt) Ltd v Manica Zimbabwe Limited HH 297/12 where the court said, “that our law recognises parate executie, subject to qualifications, cannot be doubted.”
Is it subject to any qualifications?
A parate executie clause is valid in an agreement where movables are delivered in pledge to a creditor but that the debtor can seek the court’s protection if the creditor acts in a way that prejudices his rights.
As was explained in the South African case of Aitken v Miller 1957 (1) SA 153 (SR): “It is however, open to the debtor to seek the protection of the court if, upon any just ground he can show that, in carrying out the agreement and effecting a sale, the creditor has acted in a manner which has prejudiced him in his rights.”
Does parate executie violate the constitutional right to access the courts?
Section 69(3) of the Constitution of Zimbabwe, 2013, provides that every person has the right of access to the courts, or to some other tribunal or forum established by law for the resolution of any dispute.
It was argued in the case of Glens Removal and Storage Zimbabwe (Private) Limited v Patricia Mandala CCZ 6/17 that parate executie violates section 69(3) of the constitution.
The Constitutional Court dismissed this argument, saying, “it is declared that parate executie is part of our common law and that it does not contravene s 69(3) of the Constitution as being contrary to public policy in the context of the right of access to the courts.”
This article has dealt with parate executie in the context of movable property.
In next week’s article, I shall be dealing with whether or not parate executie applies in respect of immovable property.
Muza is a duly admitted lawyer with expertise in business law, labour law and commercial litigation. He writes in his personal capacity. For feedback, email him at hilarykmuza@gmail.com or call on +263719042628.
