MTSHIYA J: On 1 may 2003 the
applicant entered into a lease agreement with the first respondent in respect
of the ground floor of premises known as Building No. 3 Located on Lots 24 and
26 Arundel Office park, Norfolk Road Mount Pleasant, Harare (the property). The
lease agreement was for a period of three years, terminating on 30 April 2006.
The lease agreement was, in terms of clause 2, renewable. Clause 2 of the lease
agreement provides as follows:-
“2 LEASE
2.1. The Lessor lets to the Lessee who hires
the premises for the lease period.
2.2. At lease three calendar months prior to
the last day of the lease period the Lessee
shall advise the Lessor in writing whether
–
2.2.1 the
Lessee intends to vacate on the termination date in which event the Lessee
undertakes to vacate on such date; or
2.2.2 the
Lessee wishes to renew the lease in which event a written agreement of renewal
shall be entered into by the Lessor and Lessee on such terms as may be agreed.
2.3. If
the Lessee fails to give notice as provided in clause 2.2 hereof the Lease will
continue from the termination date of the lease or option period on the same
terms and conditions other than the rent payable but subject to two months'
written notice of termination of either side being given”.
In terms of clause 1.7 of the lease
agreement the lessee (applicant) was to provide three
sureties. The said clause provided
as follows:-
“1.7 The
Lesses shall provide three sureties with a traceable financial history who will
bind themselves as sureties and co-principal debtors for the Lessee's due
performances of its obligations in terms of this Lease Agreement”.
On 1 May 2003, the date on which the first
respondent signed the lease agreement, the
second and third respondents, as
directors of the first respondent, signed Deeds of Suretyship as sureties and
Co-Principal Debtors of the first respondent. The relevant Deeds of Suretyship
provided as follows:-
“I/We under renunciation of the legal exception – beneficium ordinis seu excussionis, with
the meaning and effect which I/We am/are fully acquainted do hereby bind
myself/ourselves jointly and severally as surety and co-principal debtor for
the due and faithful performance by the Tenant, BUSINESS ASSOCIATES (PRIVATE) LIMITED of all obligations imposed in
terms of the Agreement of Lease entered into between the TENANT and the
LANDLORD in respect of premises being the
land known as Lots 24 and 26, Arundel Office Park, Norfolk Road, Mount Pleasant,
Harare and the improvements thereon”.
There
can be no doubt that the sureties were for the lease agreement signed on 1 May
2003.
There
is no documentation in the file relating to renewals of the lease agreement
after 30 April 2006. However, on 3 February 2009, a Mr John Ndere, representing
the applicant, wrote the following letter to the first respondent.
“03
February 2009
Business
Associates
1st
Floor, Building 3
Arundel Office
Park
Mt Pleasant
HARARE
Att: Mr Mahaka
Dear Sir/Madam
RE: FEBRUARY 2009 RENT
Your rentals for the month of February 2009 shall be an equivalent
of 1419USD units at 6.00 units per square metre (incl vat). This is payable on or before the first day of the month
(1 February 2009).
We would like to thank you in advance for your cooperation.
Yours faithfully
John Ndere
PROPERTY PORTFOLIO MANAGER”
The
letter was addressed to a Mr Mahaka, who, on 27 February 2009, accepted the
proposed rental on behalf of the first respondent. In para 10 of the founding
affidavit, the applicant states as follows:-
“In breach of the lease agreement first respondent failed to pay
rent and accumulated arrears for rent from January, 2009 to August, 2009 in the
sum of US$14 054.74”
Clearly
the arrears refer to the period after 30 April 2006 when the three year lease
agreement under which the second and third respondents had bound themselves
jointly and severally as sureties and co-principal debtors had expired.
In
August 2009 the first respondent vacated the property on its own accord. At the
time of vacating the property some arrear rentals were still outstanding for
the period after February 2009.
On
25 August 2010 the applicant filed this application seeking the following
relief:-
“IT
BE AND IS HEREBY ORDERED THAT:-
The
respondents shall pay to applicant jointly and severally one paying the other
to be absolved:-
(a) The sums of US$14 884,41 and US$3 381.28.
(b) Interest on the above sums at the rate of 5% per annum from August,
2010 to date of payment in full.
(c) Payment of collection commission on all amounts claimed herein
calculated in accordance with By-Law 70 (2) of the Law Society of Zimbabwe
By-Laws 1982.
(d) Costs of suit at Legal Practitioner and Client Scale.”
On 3 September 2010 the third respondent filed a notice of
opposition to the relief sought.
The first and second respondents did
not file any opposing papers.
In his opposing
affidavit the third respondent states, in part:
“I do not dispute that indeed I bound myself as surety and
co-principal debtor for the obligations of first respondent. My obligation as surety
and co-principal debtor for the first respondent terminated when the attached
lease agreement terminated on 30th April 2006. After the expiry date
of this lease agreement I was no longer bound as the surety and co-principal
debtor.
The Deed of Suretyship I signed on 1st of May, 2003 was
signed during the Zimbabwe Dollar era and thus was valid for that period. The
applicant and the first respondent indeed entered into a new United States
Dollar agreement for rent on the 27th of February 2009. At the relevant
time of the signature of the new agreement I was on longer the surety and
co-principal debtor for the first respondent as I had long parted ways with the
said company in 2006.”
In
court, the third respondent, who appeared in person, stuck to the above defence
and urged the court to dismiss the application. He said his obligations
terminated at the end of the lease period (i.e 30 April 2006). He further
stated that he had nothing to do with the renewed lease agreement whose terms
and conditions he did not know.
In response to the
submissions made by the third respondent, Mr Pasirayi, for the applicant, argued that in terms of clause 2.3 of
the lease agreement, the third respondent could not escape liability because
all terms and conditions on the renewed lease still subsisted. He said that
there was no evidence that the lease had been terminated.
With respect to the
law relating to suretyship Mr Pasirayi,
in his heads of argument, opined:
“9. The
duration of a contract of Suretyship is a matter of construction. Broadly
speaking, a Suretyship is likely to be either of a fixed period, in which case
it cannot attach to a debt incurred after the period has elapsed; or to be a
continuing guarantee, in which case, in the absence of some clear indication to
the contrary, it is terminable by the Surety by notice to the Creditor that we
will not be responsible for any liabilities incurred after receipt of the
notice, or it will relate to a particular obligation in each case it will
continue until the obligation is fully discharged. See Christie, Business Law in Zimbabwe at page 457.
10. In
the case of Rauf Haroon Mhandu v Sctfin
Limited 64/03 it was held that to determine the extent of a sureties
liability, regard must be made to the contract of suretyship and its
interpretation as a whole.
11. In
applying the law to the facts the argument is that the contract of Suretyship
that appears on p23 of the Court application is a continuing Guarantee by third
respondent for the payment of rent to the applicant by the first respondent as
the third respondent bound himself for the due and faithful performance by the
first respondent of all obligations imposed in terms of the lease agreement
entered into with the applicant. On this basis it is clear therefore that:
11.1 First
respondent had an obligation to pay agreed rent in United States dollars to the
applicant. First respondent failed to pay the rent and operating coats thereby
accumulating arrears. Therefore this obligation is still outstanding and on
that basis third respondent is liable for the obligation of the first
respondent to pay the arrears for rent and operating costs.
11.2 No
evidence has been placed on record by the first respondent to show that he
terminated the Suretyship or that it was for a fixed period”.
The
above submissions are helpful in the determination of this matter. In
constructing the proper import of the Deed of Suretyship that was signed by the
third respondent, I come to the conclusion that what he was binding himself to
were obligations that fell under the lease that was signed on the date he also
signed the Deed of Suretyship namely 1 May 2003. That is the lease referred to
in the Deed of Suretyship and that is the lease that expired on 30 April 2006.
The Deed of Suretyship did not extend to renewals. It does not state so. My
view is that the financial obligations that the third respondent was aware of
at the time of signing the Deed of Suretyship were as expressed in clause
1.8.
“1.8 the
rent for the leased premises for the first year as provided in Clauses 3
and 4 of the Lease is made up of a “basic” rent and an “operating cost” rent
and is broken down as follows:-
1.8.1 The basic rent is:
$477
200 per month from 01/05/2003 to 30/04/2004
1.8.2 The
proportionate share of the property's operating costs having been
estimated as:
$102
800 per month from 01/05/2003 to 31/12/2003
Operating
Costs for the 2nd and 3rd year will be reviewed in
January of each year
1.9. the
rent review date is 31 January 2005;
1.10 the
authorised use of the leased premises is for offices;
1.11 the
additional charges are electricity, contents and plate glass insurance
and internal maintenance and repairs;
1.12 the
common areas are the steps, entrances, passages, services, servitudes
and loading bays in the Building;
1.13 the
deposit is $580 000 or one month's rent, including operating costs,
whichever is the greater
1.14 the
place of payment is CB Richard Ellis, 8th Floor, Beverley
Court, 100 Nelson Mandale Avenue corner Fourth Street, Harare or such other
place in Zimbabwe designated in writing by the Landlord.
1.15 The
Directors of the Company are
FRANCIS
HALE
SHINGAI
MTEZO”
The
above provision in the lease agreement should be read together with all other
financial clauses therein. It would, in my view, be absurd to reason that the
third respondent would guarantee what he did not know. It was therefore the
applicant's obligation to ensure that clause 1.7. of the lease agreement was
complied with at each time of any renewal. Any renewal, in my view, brought in
different financial obligations. It was therefore imperative that the surety
should agree to the new financial obligations. There is no evidence of that in
the papers before me. There is, however, evidence that the third respondent bound
himself as surety for financial obligations of a lease that commenced on 1 May
2003 and expired on 30 April 2006. Indeed, the third respondent would, in terms
of the Deed of Suretyship, be liable for “all obligations” of the first
respondent falling under that fixed period. In the circumstances I find merit
in the third respondent's submissions. The relief sought against him must fail.
I am unable to say
the same with respect to the second respondent because his Deed of Suretyship
does not form part of the papers before me. I therefore do not know how it was
worded.
In
view of the foregoing, the application, as it relates to the third respondent,
should fail. The first and second respondents did not oppose the application. I
therefore believe the applicant is entitled to default judgment against the
first and second respondents.
I
therefore order as follows:-
1. The application, against the third respondent be and is hereby
dismissed with costs.
2. The first and second respondents be and are hereby ordered to pay
the applicant jointly and severally the one paying the other to be absolved,
US14 884-41 and US$3 381-28 in respect of rent and operating costs.
3. The first and second respondents be and are hereby ordered to pay
jointly and severally the one paying the other to be absolved, collection
commission on all amounts claimed in accordance with By-law 70(2) of the Law
Society of Zimbabwe By-Laws 1982, and
4. The first and second respondents shall pay, jointly and severally
the one paying the other to be absolved, costs of suit on a Legal Practitioner
and Client Scale.
Gill, Godlonton & Gerrans, applicant's
legal practitioners
Business Associates (Pvt) Limited,
1st respondent, 9 Delamere Crescent, Avondale, Harare
Mr Francis Hale, 2nd
respondent, 5 Sunningdale Court, Avondale West, Harare
Mr
Shingai J. Mtezo, 3rd respondent, 445 Wickham Road, Waterfalls,
Harare
