Zimbabwe High Court: Credsure Denied Absolution in Cannabis Financing Lawsuit

• Credit Insurance Zimbabwe Limited (Credsure) failed to stop a US$1.25 million lawsuit over a failed medicinal cannabis export financing deal.
• The Zimbabwe High Court, under Justice Joseph Chilimbe, found Harare Receivables Exchange established a prima facie case of misrepresentation against Credsure.
• The lawsuit stems from Credsure's alleged assurances to Harare Receivables that no adverse circumstances existed, despite having informed Nhimbe Fresh Exports of policy non-compliance days earlier.
• Harare Receivables claims it released US$1.25 million to Nhimbe Fresh based on Credsure's assurances, which the insurer later disavowed.
• Nhimbe Fresh Exports faced a default judgment of US$1.875 million plus interest in August 2024 for its failure to defend the initial claim.

The court underscored that this apparent inconsistency demands an explanation from Credsure during the trial, stating that the insurer has a duty to clarify the issuance of those assurances within the context of the contractual relationships.

A significant legal battle has emerged in Zimbabwe involving Credit Insurance Zimbabwe Limited (Credsure), Harare Receivables Exchange, and Nhimbe Fresh Exports, centered on a failed medicinal cannabis export venture. The dispute stems from a financing arrangement where Harare Receivables advanced US$1.25 million to Nhimbe Fresh. This funding was intended to support Nhimbe Fresh's efforts to produce and sell medicinal cannabis biomass to an international buyer, with the entire transaction underpinned by a credit insurance policy issued by Credsure.

Harare Receivables acquired receivables valued at US$1.875 million at a discount, paying US$1.25 million upfront to Nhimbe Fresh. The financier asserts that it released these funds only after receiving explicit assurances from Credsure that no circumstances existed which could lead to the rejection of an insurance claim. However, the anticipated payment from the cannabis buyer never materialized, and Credsure subsequently indicated that the policy could not be honored, citing Nhimbe Fresh's failure to meet certain conditions, including securing a cross-company guarantee.

Initially, Harare Receivables sued both Credsure and Nhimbe Fresh, seeking US$1.875 million due to alleged misrepresentations and breaches. Nhimbe Fresh did not defend the case, resulting in a default judgment against it in August 2024 for US$1.875 million, plus monthly interest of 4% from August 2023. Despite this, Harare Receivables continued its pursuit against Credsure, contending that the insurer's assurances were the direct inducement for releasing the US$1.25 million.

Credsure recently attempted to halt the US$1.25 million lawsuit by applying for absolution from the instance at the close of Harare Receivables' case. The insurer argued that the financier had failed to establish the essential elements of misrepresentation and lacked a basis for claiming restitution from an entity with which it purportedly had no direct contractual relationship. Credsure also contended that Harare Receivables risked recovering more than its alleged loss by pursuing claims against both defendants.

However, on August 25, Justice Joseph Chilimbe of the Zimbabwe High Court dismissed Credsure's application with costs. The court found that Harare Receivables had successfully established a prima facie case of alleged misrepresentation, meaning there was sufficient evidence for the case to proceed to a full trial. Justice Chilimbe emphasized that the procedural issues raised by Credsure could not be resolved through an application for absolution, necessitating a comprehensive examination of the facts.

A critical piece of evidence highlighted by the court was a stark contradiction in Credsure's communications. Justice Chilimbe noted that Credsure had written to Nhimbe Fresh on November 4, 2022, expressing concerns about non-compliance with policy conditions. Yet, just three days later, on November 7, 2022, Credsure provided Harare Receivables with assurances that it was unaware of any adverse circumstances. The court underscored that this apparent inconsistency demands an explanation from Credsure during the trial, stating that the insurer has a duty to clarify the issuance of those assurances within the context of the contractual relationships.

This ruling in the Credsure cannabis financing lawsuit in Zimbabwe carries significant implications for credit insurers and financiers involved in complex, multi-party deals, particularly within emerging sectors like medicinal cannabis export. Justice Chilimbe's decision reinforces the principle that even without direct contractual privity, conflicting statements can form the basis of a prima facie case for misrepresentation, compelling an insurer to defend its actions in court.

The court explicitly acknowledged that the "no-adverse circumstances assurances were issued by Credsure." Furthermore, it found prima facie evidence that these assurances were material, relied upon by Harare Receivables, induced the US$1.25 million payment, and ultimately caused the financier a loss for which it now seeks restitution. The testimony of Harare Receivables' former chief executive, Tinashe Tamba, confirming that the funds would not have been released without Credsure's assurances, was crucial in establishing this.

This development underscores the critical importance for insurers like Credit Insurance Zimbabwe Limited to maintain consistent and accurate communication across all parties in a financing chain. The requirement for Credsure to explain the discrepancy between its internal knowledge of policy non-compliance and its external assurances to Harare Receivables highlights the potential legal exposure when such inconsistencies arise, setting a precedent for future cases involving misrepresentation in credit insurance.

This ruling underscores the significant risk for insurers providing assurances in complex, multi-party financing deals, particularly when those assurances contradict known policy non-compliance. Lawyers advising financiers or insurers should meticulously review all communications and ensure consistency, as conflicting statements can establish a prima facie case for misrepresentation, even without direct contractual privity between the insurer and the financier.

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