MAKONI J: The above matters were filed as case numbers
HC 3855/09, HC 3846/09 and HC 3891/09. At the hearing of the matter, the
parties agreed that the matters be consolidated as all the matters raised the
same issues. I consolidated all three matters.
The background
to the matters is that the applicants bought residential units from the first
respondent in a cluster housing scheme being developed by the second respondent
on land owned by the first respondent. They also entered into building
contracts with the second respondent.
The first applicant (Dr Dudka) bought share
number 9. She paid the full purchase price. A dispute arose due to failure of
the second respondent to fulfil its obligations in terms of the agreement. By
mutual agreement, the dispute was referred to arbitration. The arbitral award
was to the effect that the agreement of sale was valid. Since the second
respondent had failed to comply with its obligations in the terms of the
building contract, Dr Dudka was entitled to take over the construction of the
house. The respondents were to transfer to Dr Dudka share in the first
respondent which would confer ownership and right to possession of unit 9.
Following the
award, Dr Dudka engaged building contractors to complete the house. The
contractors were confronted by certain persons who claimed ownership of the
unit. A deeds search was done and it revealed that the unit had been
transferred to the first respondent (Khan).
The second
applicant (Russell) bought share number 5 from the first respondent. He also
entered into a building contract with the second respondent. The third
applicant (Fairclot) bought shares
number 6 and 12 from the first respondent. It also entered into a building
contract with the second respondent. A dispute arose between the parties and
was referred to arbitration. On 23 October 2008, Russell obtained an interim
order to the effect that pending the finalisation of his matter and that of
Fairclot, the first and second respondent were interdicted from selling,
disposing of or transferring in whole or in part by way of share transfer or
any one method the property in issue which is the remaining extent of lot 3
Lewisam of Lot E of Colne Valley of Rietfontein situate in the district of
Salisbury and measuring 26638 hectares. It was also ordered that the copy of
the award be served on the Registrar of Deeds, Registrar of Companies and
Messrs Enerst & Young. The order was served on the Registrar of Dees on 23
October 2008.
The dispute was
finally resolved by an award in favour of Russell and Fairclot. This award was
registered with this court on 21 May 2009. The order provided inter alia, for the issue to Russell of
share number 5 of Cheni Estates (Pvt) Ltd giving Russell right of ownership of
unit 5. It also ordered the issue of share number 4 and 12 of Cheni Investments
(Pvt) Ltd to Fairclot giving it the right of ownership over unit 4 and 12. It
further ordered the Deputy Sheriff to give effect to the order by signing
necessary documents to effect transfer to Russell and Fairclot.
The fourth
applicant (“John”) bought share number 3 from the first respondent and also
entered into a building contract with the second respondent. The respondents
failed to comply with their obligations in terms of the building contract. John
took over the construction. Around June 2009, he discovered that the first
respondent had transferred his unit to Khan. The applicants then filed the
present proceedings seeking the setting aside of the transfer of their units to
the third, fourth and fifth respondents and an order to have the units transferred
into their names.
The first and
second respondents did not file heads of argument and they were automatically
barred. They did not appear on the day of hearing.
The applicants
seek their orders based on three main grounds. First they contend that when
transfer was effected, same proceeded in defiance of a judicial caveat placed
against the property. Secondly, the property transferred was res litigiosa and incapable of being
alienated to the prejudice of the applicant. Thirdly they contend that the third,
fourth and fifth respondents are not innocent third parties as they were or
ought to have been aware of the dispute between the applicants and the first
and second respondents.
The third,
fourth and fifth respondents contend that they were not part to the arbitration
proceedings and could not have known of the arbitration award and could not be
bound by it. They also contend that they are innocent purchasers who purchased
their units for value.
THE CAVEAT
It is common
cause that on 23 October 2008, the arbitrator, granted an interim arbitral
award which inter alia, interdicted
the transfer of the property and that the order be served on the Registrar of
Deeds. The order was served on the same day. Although the award was made in
respect of the second and third applicants, it barred the selling or disposing
of the whole property which included the units of the other applicants.
It was submitted
on behalf of the applicants that the interim award constituted the caveat and
is a judgment in rem. It stands on the
same footing as an order of court and it must be obeyed unless it is set aside.
The arbitral award took effect upon its grant.
It was submitted
on behalf of the third, fourth and fifth respondents that an award, standing on
its own does not have the force of a judicial order. It has to be registered
with the appropriate court for purposes of execution. If the court were to find
that the caveat was in the form of the award, then the fraud or negligence on
the part of the Registrar of Deeds cannot be attributed to the respondents. The
balance of convenience favoured that the application be dismissed as the
respondents purchased the properties for value. The applicants have not
established a basis for averring that the respondents had knowledge of the sale
from the first and second respondents to them.
In terms of
Article 17 of the schedule to the Arbitration Act [Cap 7:03] an arbitrator
has power to order interim measures which, inter
alia include an interdict. In terms of Article 35 an arbitral award shall be
recognised as binding and upon application in writing to the High Court shall
be enforced.
Article 35
brings out two distinctive features of an arbitral award. The first one is its
binding nature and the second one its enforceability. I agree with the submissions
made on behalf of the applicants that an award takes effect upon its grant. Its
execution has no effect on whether it is binding or not. A party can chose to
obey an award such that there would not be need for the award to be registered.
Registration allows for execution. The respondents cannot therefore succeed in
their argument that when registration of transfer was effected to them, the
award had not yet been registered with the High Court.
It is common
cause that the award was served on the Registrar of Deeds. What is not clear is
whether it was endorsed on the title deeds. The respondents argue that the
negligence or fraud on the part of the Registrar of Deeds in registering the
transfers when the caveat was in place, cannot be attributed to them.
A case which is
almost on all fours with the present matter is that of Mwayipaida Family Trust v
Madoroba & Ors 2004 (1) ZLR 439 (S). The brief facts of the matter were
that the appellant was an innocent second purchaser of an immovable property.
The first purchaser had obtained an interdict against the seller, restraining
her from transferring the property to anyone else. He served a copy of the
order on the Registrar of Deeds who was instructed to endorse a caveat upon the
deeds of the property. The Registrar failed to do so. A search of the register
revealing no caveat, the property was transferred to the appellant. The
aggrieved first purchaser obtained a High Court order setting aside the
transfer with costs.
On appeal it was
held that the circumstances of the case placed is somewhere in between the two
extremes (the traditional approach to double sales) because, even though the
appellant was ignorant of the respondent's prior claim to the property at the
time transfer into its name was effected, such ignorance was due solely to the
oversight or incompetence of a public official. It would not be fair and just
to rule that the failure by the Deeds office to register the caveat had the
effect of nullifying the respondent's prior claim to the property.
The same can be
said in the present matter. The negligence or incompetence of the Deeds Office
by failing to register the caveat resulted in the property in issue being
transferred to the respondents. I agree entirely with the findings expressed in
the Mwayipaida Family Trust case supra that it would not be fair and just
to rule that the failure by the Deeds Office to register the caveat had the
effect of nullifying the applicants' prior claim to the property.
The other point taken by the applicant is that
the property in dispute was res litigiosa
at the time it was sold and transfer effected.
The question
that exercised my mind is whether the principle of res litigiosa can be extended to arbitration proceedings and if so at
what stage does the subject matter become res litigiosa. In action
proceedings there are two schools of thought. One is that the subject matter of
litigation becomes res litigiosa at litis contestatio and the other is that
the subject matter becomes res litigosa from
the time that the citation is issued and notice is given to the defendants. See
Zimbank Ltd & Anor v consolidated Pipe Fittings (Pvt) Ltd
& Anor 2000 (1) ZLR 672 (H) at 677 B – C.
The parties did
not present argument regarding the stage at which a subject matter becomes res litigiosa in arbitration
proceedings. I will therefore leave the issue open and not make a
determination. However the applicant's argued that there was an interim
arbitral award at the time that the property was sold and transferred. The
property was therefore res litigiosa.
I agree with the position taken by the applicants. At the time the property was
sold and transferred, there was an interim order bearing on how it was to be
dealt with. The first and second respondents had no authority to deal with the
property the manner they did. I can conclude that in the circumstances of this
matter, must the property res litigiosa
as there was an interim award barring the transfer of the property pending the
determination of the dispute between the applicant and the first and second
respondents.
It is settled in our law that the fact that a
thing is res litigiosa does not
preclude or prevent it from being alienated or similary dealt with, as long as
the rights of the non-alienating litigant in the res are protected. See Supa
Plant Investments(Pvt) Ltd v Edgar Chidavaenzi HH 92-09 at p 6-7 and Edward Collin Gardiner v Dampier
Development & Ors HH 72-10 at p 4.
In the Edward Collin Gardiner(supra) at p 5, in dealing with the issue
of res litigiosa I made the following
remarks:
“The
authors Silberberg and Shoeman in the Law of Property 3rd ed at p
304 made the point that the agreement of sale of the res litigiosa between the litigating party and a third party is
valid inter partes. They go further
to say that the purchaser is bound by the judgment in the action and the
successful party can recover it from the new possessor by execution and without
fresh proceedings”.
The respondents
find themselves in the position of the purchaser referred to in the above
quotation. The sale between them and the first and second respondents is valid inter partes only. The applicant can
recover the property from them.
The other point
taken by the applicants is that the respondents were aware or ought to have
known the applicants' interest in the property.
The applicants
contend that the respondents must have been aware by diligent enquiry, through
their conveyance, of the caveat which was clearly endorsed over the property by
the fourth respondent. John did not file an answering affidavit but his Heads
of Argument makes reference to caveat number 189/08 having been noted on the
title deed. The other applicants did not mention the caveat by number but
state, in their answering papers, that a caveat was endorsed on the title deed.
They also contend that the proper procedure would have been for the respondents
to acquire shares in the first respondent until the completion of the project
where sectional title will be issued to each owner. Had they made a diligent
enquiry with the first respondent's transfer secretaries Messrs Enerst and
Young, they would have noted the applicants' interest.
The respondents'
position is that they were not aware of the disputes between the applicants and
the first and second respondents. If they had been made aware, they would not
have parted with their money with full knowledge of such disputes.
As I have
already alluded to earlier on in the judgment, it is not clear whether the
caveat was endorsed on the title deed. The fourth applicant mentions the caveat
number in its heads of argument. The other applicants do not and none of them
filed a copy for the benefit of the court. I cannot therefore made a finding
that the respondents were aware that there was a caveat when it is not clear
from the papers.
It is common cause
that the transfers to the respondents were not done in terms of the proper
procedure. The respondents did not acquire shares in the first respondent.
Again, in my view, this does not establish
that the respondents ought to have been aware of the applicants' interest in
the property.
In my view, the
present case does not turn on whether the respondents were or ought to have
been aware of the applicants' interest or not. As I have already alluded to, it
turns on the failure of the Deeds office to registered the caveat and if they
did, transferring the property when the title deeds is endorsed with a caveat.
The other point
taken by the applicant was that the transfer to the respondents is invalid as
there was no valid cause. The properties could only be acquired by acquisition
of shares they being properties held under sectional title. None of the
respondents hold the relevant class B shares. This point has not been contested
by the respondents in their heads of argument.
In view of the
above the application must succeed.
In the result I
swill make the following order:
- The
transfer of unit/share 9 of certain piece of land called the Remainder of
Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to Pervaz Khan under
Deed of Transfer number 8952/08 be and is hereby set aside.
- The
first respondent be and is hereby ordered to transfer to the first
applicant shares in Cheni Investments (Pvt) Ltd which will confer on her
ownership and the right to possession of unit 9.
- The
transfer of unitshare number 5 of certain piece of land called the
remainder of Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to
Brighton Matikiti be and is hereby set aside.
- The
transfer of units/shares 4 and 12 in certain piece of land called the
Remainder of Lot 3 of Lewisam of Lot
E of Colne Valley of Reitfontein to Ian Khumjalo be and is hereby set
aside.
- The
first respondent be and is hereby ordered to transfer:
(a) Shares
in Cheni Investments (Pvt) Ltd which will confer ownership of unit 5 to
Allan Tilling Russell or his nominees.
(b) Shares
in Cheni Investments (Pvt) Ltd which will confer ownership of units 4 and 12 to
Fairclot Investments (Pvt) Ltd or its nominees.
- The
transfer of Unit/Share 3 of certain piece of land called the remainder of
Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to Pervaz Khan under
Deed of Transfer No. 8950/08 be and is hereby set aside.
- The
first respondent be and is hereby ordered to transfer to the fourth
applicant shares in Cheni Investments (Pvt) Ltd which will confer
ownership of unit 3 to fourth applicant.
- In
the event of the first respondent failing to effect transfer in terms of
para 2, 4 and 5, the Deputy Sheriff be and is hereby authorised to sign
the necessary papers to effect transfer.
- The
first, second, third, fourth and fifth respondents, are hereby ordered to
pay costs of suit.
Mutumbwa
Mugabe & Partners, applicant's legal practitioners
Matipano
& Associates, 1st & 2nd respondents'
legal practitioners
Chiganga & Company, 3rd respondent's legal practitioners
