Specific Performance re: Approach, Impossibility of Performance and the Exceptio Non Adimpleti Contractus

HH41-08 : ZODELLA ENTERPRISES (PVT) LIMITED vs LUXMORE NDENDA
Ruled By: GOWORA J

The plaintiff is a duly registered company trading under the name Borrowdale Motor Sales. As the trade name suggests, it, the plaintiff, trades in motor vehicles. On 6 June 2006, the plaintiff entered into an agreement with the defendant, in terms of which the plaintiff agreed to purchase a vehicle owned by the defendant, to wit, a ...

The plaintiff is a duly registered company trading under the name Borrowdale Motor Sales. As the trade name suggests, it, the plaintiff, trades in motor vehicles.

On 6 June 2006, the plaintiff entered into an agreement with the defendant, in terms of which the plaintiff agreed to purchase a vehicle owned by the defendant, to wit, a Ford Taurus registration number 720-532L. A copy of the agreement, which is attached as Annexure A to the summons, reveals that the purchase price of the vehicle was $700,000= (revalued) payable as to a deposit of $300,000= and the balance payable in two installments of $200,000= each within a further period of five months.

In its declaration, the plaintiff avers that it paid the deposit of $300,000 and a further sum of $200,000 being the first instalment. The plaintiff further avers that on tendering the remaining instalment to the defendant, he, instead, made a verbal offer to buy back the vehicle from the plaintiff and that as a result a verbal agreement was concluded for the defendant to buy back the vehicle for the price of $3 million. The plaintiff avers, further, that the defendant breached the verbal agreement by paying a total amount of $570,000 instead of the agreed sum.

The plaintiff has therefore claimed for an order cancelling the verbal agreement with the defendant, and, further to that, for an order that it pay back the sum of $770,000 to the defendant being a reimbursement of the $570,000.00 paid under the verbal agreement by the defendant and the sum of $200,000 being the balance of the purchase price of the vehicle in terms of the written agreement concluded by the parties on 6 June 2006.

The defendant, in his plea, denied that the plaintiff was entitled to the relief being sought, and, instead, averred that the plaintiff had not performed its obligations in terms of the written agreement and has averred that the plaintiff breached the written agreement by failing to pay any of the installments due under the written agreement. Due to such breach, the defendant avers that the parties agreed to terminate the agreement on condition that the defendant would pay back to the plaintiff the sum of $570,000 and the latter would return the vehicle to the defendant.

The defendant further avers that he duly paid the agreed amount to the plaintiff but that the plaintiff refuses to return the vehicle. The defendant therefore has filed a counter-claim in which he prays for the return of the vehicle and payment of damages for unjustified enrichment in the sum of $800,000 for use of the vehicle and for the value lost on the use of the $570,000.

The plaintiff purchased the vehicle from the defendant and paid a deposit of $300,000 upon signature of the agreement. Subsequently, additional other sums, which the plaintiff puts at $200,000, were paid. The defendant puts the amount at $100,000 which amount he states is the first breach by the plaintiff of the terms of the written agreement.

The plaintiff has produced vouchers which bear the signature of the defendant and states that the defendant did receive the amount of $200,000. The defendant denies that he signed the vouchers although admitting the signature to be his.

The plaintiff then claims the existence of a verbal agreement in terms of which the defendant would repurchase the vehicle at a stipulated price. The plaintiff claims that the defendant breached the agreement and therefore prays for its cancellation and payment to the defendant of monies not paid under the first agreement and a refund to the defendant of monies paid under the second agreement.

Most of the facts are common cause. The dispute relates to the payment of the instalments by the plaintiff due on the written agreement.

It is common cause that the parties entered into a verbal agreement in respect to the vehicle, and the question for determination is what the terms of that verbal agreement were. Each of the parties has a version which differs from the version rendered by the other.

At the commencement of the trial the parties agreed to some of the issues agreed to at the pre-trial conference and captured in a joint pre-trial conference minute filed by them. The only issues left for determination at the trial were the following therefore:

(a) What were the material terms of the verbal agreement between the parties?

(b) Whether the defendant breached the verbal agreement by failing to pay the deposit timeously?

(d) Whether the defendant has suffered any damages and whether the plaintiff is liable to the defendant in the amount claimed or any other sum at all?

There were no issues to be decided on the written agreement, but, in the presentation of their evidence, it would seem as if the parties were focused on issues mainly to do with the written agreement.

The defendant, in its counter claim, alleges breach of the agreement by the plaintiff and denies the existence of a verbal agreement involving a buy back of the vehicle. The plaintiff, in turn, claims ownership of the vehicle based on the written agreement.

If the plaintiff premises its claim on the written agreement, the dispute, it appears to me, cannot be resolved without an examination, at the outset, of what the terms of the written agreement were and what rights the parties retained in the vehicle pursuant thereto.

It is clear, therefore, that the terms of the written agreement then are an issue for determination as to whether the defendant is entitled to a return of the vehicle or if ownership, by virtue of the agreement, vested in the plaintiff.

I propose to deal with the matter by examining each of the issues in turn based on the evidence adduced by the parties.

What were the terms of the written agreement?

The pertinent terms of the contract are contained in clause 2 of the written agreement. The clause is in the following terms;

“2. The parties have agreed on the following terms:

(i) The first agreed deposit payable on signing of this agreement shall be $300,000,000= (old currency) (Three Hundred Million Dollars) shall be paid in cash i.e.

(a) $192,000,000= directly to Legacy Financial Services, No.13 Van Praagh Avenue, Milton Park, Harare to clear a debt incurred with them by Mr Ndenda; and

(b) A cheque in favour of Old Mutual Properties for $50,000,000=. The balance of $58,000,000= shall be paid in cash to Mr Ndenda on the day of signature of this agreement.

(ii) The balance of $400,000,000= shall be paid at a rate of $200,000,000= (two hundred million dollars) after the first two weeks and the last payment from the third week of the second payment or at such time as shall be agreed by the parties and in a manner determinable and agreed and documented by the parties.

(iii) The parties to this agreement agree that ownership of the said vehicle shall pass on to the buyer on signing of this agreement of sale.”

The first two sub-clauses do not, in my view, require any examination as they are clear. They deal with the terms of the payment and it is obvious from the evidence of the parties that each of the parties understood the times within which the purchase price had to be paid by the plaintiff.

It is the clause providing for the passing of ownership that is at the root of the dispute.

Each of the parties is claiming the right of retention of the vehicle on the basis that it is the owner. Any rights that the plaintiff claims to ownership of the same can only have been acquired by virtue of the agreement of sale, and, specifically, clause 2(iii). The defendant, on the other hand, would claim that he owned the vehicle and that ownership of the same was not transferred to the plaintiff by virtue of the written agreement.

According to the plaintiff, the agreement in respect of the sale by the defendant of the vehicle to the plaintiff was a credit sale, and, as a result, bearing in mind the provisions of clause 2(iii), ownership passed when the agreement was signed and delivery made to the plaintiff.

In written submissions filed on its behalf, the plaintiff poses a further question as to whether, in the event that ownership passed on 6 June 2006, it would revert to the defendant assuming that the defendant has proved breach of the written agreement on the part of the plaintiff.

The defendant's view is however that the agreement was not a credit sale and that ownership did not pass to the plaintiff on delivery of the vehicle. It is accepted by the defendant that the agreement was not one for hire purchase. The stance by the defendant is that what was concluded was not a credit sale but a sale by installment and that, as such, ownership in the vehicle did not pass to the plaintiff until the full purchase price would have been paid. In his evidence, the defendant's stance was that ownership in the vehicle never passed to the plaintiff.

The defendant did not, in pleading to the summons and declaration filed and served upon him by the plaintiff, allege or aver that the agreement was an instalment sale governed by the provisions of the Act.

In the written submissions, the defendant accepts that ownership had passed to the plaintiff but that the agreement was cancelled due to breach on the part of the plaintiff.

This is one of those matters where the pleadings do not bring out clearly and concisely the facts upon which the cause of action is based.

It would have been appropriate for the plaintiff to have pleaded that ownership had passed in terms of the agreement of sale and the defendant would then have responded appropriately. The question of whether or not ownership had passed is central to the resolution of the dispute and should have been one of the issues extracted for trial. Unhappily it was not. However, with the defendant having accepted that ownership did pass, it then becomes necessary to determine if the agreement that was concluded was an instalment agreement as contended by the defendant.

In the written submission made on his behalf, it appears that a concession is made that ownership did pass but that the agreement, being an agreement of sale by installment, then, in the event of breach, the defendant would be entitled to the return of the vehicle.

The defendant has submitted that the court should tell the parties the nature of the agreement that they entered into. I take that to mean that the court is being asked to interpret the agreement placed before it. It cannot mean that the court should, in such exercise, rewrite the contract for the parties.

The defendant seeks reliance on a passage from WILLIE and MILLIN's Mercantile Law of South Africa 16ed…, which is as follows;

“If credit is given for part of the purchase price on condition that the balance is paid in cash, the sale is one for cash and delivery does not pass the ownership. It is otherwise if the sale is on credit for there the ownership of the goods passes to the buyer on delivery to him though he has not paid the price.”

The passages quoted by counsel for the defendant refers to the cases decided in South Africa but I have not been referred to any authorities in this jurisdiction dealing with installment sales other than those governed by the Hire Purchase Act in our jurisdiction. At page 164 of their book, WILLIE and MILLIN's Mercantile Law of South Africa 16ed, the learned authors state:

“Installment sale agreements are defined as agreements of sale where ownership passes on delivery and the price is to be paid in instalments, two or more of which are payable after delivery, and the buyer is prohibited from alienating or encumbering the goods sold until the purchase price has been paid in full, or, the full purchase price becomes payable if the buyer alienates or encumbers the goods sold, or the seller is entitled to return of the goods if the buyer fails to comply with any one or more of the provisions of the contract: section 1.”

A closer reading of that passage leads me to conclude that the learned authors were discussing a section of the South African Hire-Purchase Act.

That passage cannot have the meaning ascribed to it by counsel for the defendant that any agreement within this jurisdiction where payment has been provided for in instalments is an installment sale as provided for by the Hire Purchase Act of South Africa.

As I have mentioned earlier on, our own Hire Purchase Act [Chapter 14:09] makes reference to instalment sale agreements. These are defined, in section 3 of the Hire Purchase Act, as follows;

“Instalment sale agreement means any contract of sale under which -

(a) The ownership in the goods sold passes either before or upon delivery; and

(b) The purchase price is to be paid in installments of which one or more are payable after delivery; and

(c) The seller is entitled to the return of the goods sold if the purchaser fails to comply with any of the provisions thereof;

and includes any other contract which has, or contracts which together have the same import, whatever form such contract or contracts may take.”

A perusal of the Hire Purchase Act reveals that it is meant to apply to specified agreements whose provisions are regulated by the Act. A feature of these agreements is that there should be reservation about the passing of ownership to the buyer. Whereas in an agreement for Hire-Purchase the purchaser obtains ownership after payment in full of the purchase price, in an instalment sale agreement, the Hire Purchase Act provides that ownership passes to the purchaser on delivery whether or not an installment has been paid. In the event of breach on the part of the purchaser the seller is entitled to return of the goods that are the subject matter of the sale.

It is the submission of counsel for the defendant that in defending the claim, by implication, the defendant claimed the return of the vehicle when the plaintiff failed to pay the last instalment.

I do not think that the submission can stand scrutiny.

The agreement executed by the parties did not provide that in the event of breach on the part of the plaintiff ownership in the vehicle would revert to the seller. Instead, the plaintiff was granted unreserved right to ownership upon the signing of the agreement. No conditions were placed upon the passing of such ownership and it is my view that the conditions upon which the parties intended to perform their contract is different to the conditions or provisions governing an installment sale agreement as stipulated in the Hire Purchase Act. In an instalment sale, even if ownership passes, there is a reservation on the passing of such ownership and the Hire Purchase Act provides for the seller to be able to recover the property which is the subject of the contract upon breach by the purchaser. I do not regard the agreement as falling in the category or form of agreements that are described in the Hire Purchase Act as instalment sale agreements.

The next question is whether this agreement can be termed a credit agreement as claimed by the plaintiff.

Neither of the legal practitioners who appeared before me was able to point me to an authority in this country where the court had to decide what constitutes a credit sale. I have not been able myself to find one within this jurisdiction.

According to CHRISTIE,Business Law in Zimbabwe…, the contract for sale does not always state whether it is for cash or credit so the law presumes that the sale is for cash, which presumption is not rebutted by the mere fact that the seller has made delivery without receiving immediate payment.

In casu, ownership was to pass to the plaintiff upon the signing of the agreement. It was therefore not a cash sale. The agreement itself does not, despite that ownership is to pass to the plaintiff upon signature, state that the agreement is one for credit or that the plaintiff has been given credit for the payment of the purchase price. In the absence of the parties having made specific averment as to whether or not the contract is one for credit, the court would have to examine the contract and deduce what the intention of the parties was.

I was referred to a plethora of authorities from South Africa. It is clear from the South African authorities that I have had to consider that the courts have not always found it an easy task to decide whether or not an agreement is one for credit or when it is that ownership is said to have passed. It appears that the matter first received attention from the courts in South Africa in the cases of Daniels v Cooper (1 E.D.C. p. 174), Sadie v Standard Bank (7 J. 87), and Quirk's Trustees v Assignees of Liddle & Co (3 J. 322) which are referred to in Laing v South African Milling Co. Ltd1921 AD 387.

I have not been able to access the earlier authorities. It would appear however that those cases are the ones that settled the law as regards sales on credit in South Africa according to the dicta in Laing v South African Milling Co. Ltd1921 AD 387. JUTA JA…, summarized the law thus:

“The authorities in our law were fully considered in the cases of Daniels v Cooper (1 E.D.C. p.174), Quirk's Trustees v Assigness of Liddle & Co. (3.J.322.), and Sadie v Standard Bank (7 J.87), and are to this effect; that, on a sale of movables followed by delivery the property does not pass until the purchaser has paid the money or secured the seller for the same, or, unless the sale is on credit. And there is ample authority for the further proposition that in the case of a sale where nothing is said as to ready money or credit and the goods are delivered to and taken away by the purchaser, the property does not pass; in other words, delivery to the purchaser and his taking away of the goods raise no presumption of the sale being on credit. On the contrary, the presumption is that the sale was for cash.”

Laing v South African Milling Co. Ltd1921 AD 387 was followed by the case of Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton and Another1973 (3) SA 685 AD, in which the court found that even though there had been delivery to the purchaser and payment had been made by cheque despite the fact that the seller was aware that the vehicle was being sold to another person by the purchaser, the sale was for cash and credit had not been given.

In a cash sale, payment of the purchase price is made against delivery of the merx and where payment is made by cheque, even where it is drawn against a Bank in a different town, it is a cash sale with payment being made only when the cheque has been cleared. Even in these circumstances if the cheque is not met the property does not pass.

On the other hand, a credit sale is one where the purchaser has been given time for payment of the purchase price, which time has been postponed for a substantial period. Where the period for payment has been postponed for an insubstantial period, the courts have held that the sale was for cash and not credit and that therefore ownership had not passed. The courts in South Africa have said that a period of ten days would be a reasonable period to hold that a sale is for cash where the seller has made no attempt to collect payment from the purchaser. A period in excess of that ten days is sufficient for the courts to find that credit had been afforded to the purchaser and that therefore the property had passed. The rule is based on the requirement in the Insolvency Act that an unpaid seller for cash must claim his goods within ten days of delivery.

In terms of our own Insolvency Act [Chapter 6:04] a seller who has not been paid in full after delivery, where the purchaser has gone insolvent, is allowed to reclaim his property if he has given notice within ten days of delivery to the insolvent or the trustee of his intent to reclaim his property.

The principles that have been stated by the courts, therefore, are to the effect that unless there is a specific provision to the contrary, every sale is presumed to be for cash - even where delivery has been made. Where the seller has not granted credit to the purchaser or has not accepted security for payment by the purchaser, the sale is for cash unless the seller has not given the purchaser a period which is not in-substantial for payment of the purchase price.

As to whether or not the seller wanted to pass ownership, the intention of the parties can be gathered from the facts.

Where the seller contracts for passing of the property to the buyer, where payment in full has not been made nor secured, then it is a sale on credit and ownership would pass upon delivery of the goods.

In an instalment sale, even if ownership passes, there is a reservation on the passing of such ownership and the Hire Purchase Act provides for the seller to be able to recover the property which is the subject of the contract upon breach by the purchaser.

In the instant case, the contract provided for the unreserved passing of the property to the purchaser upon the signing of the agreement by the parties. There can be no other meaning to be ascribed to the clause “that ownership shall pass to the plaintiff upon the signing of the agreement.” The wording is clear and unambiguous and this court cannot ascribe any other meaning to that clause. There was no provision for ownership to revert to the defendant in the event of any alleged breach on the part of the plaintiff. There was no provision for the seller to reclaim the vehicle in the event of breach on the part of the buyer. The features of the contract between the plaintiff and the defendant have all the hallmarks of a credit sale.

I can understand the difficulties that counsel for the defendant faced in trying to argue that it was a cash sale. It was not a cash sale.

As to whether it can be termed an instalment sale, I believe the onus was on the defendant to place before the court facts such as would make me conclude that what I had before me was such. That was not done.

Instead, what the facts show is an agreement where one of the parties sold his property to a buyer where the buyer was afforded an opportunity to pay the balance of the purchase over a period in excess of ten days. The only conclusion that the court can come to in such a situation is that the defendant wished to pass ownership to the plaintiff and I find that indeed ownership passed.

In so far as the first agreement is concerned, the defendant stated that he had not been paid for the second instalment.

The plaintiff has provided vouchers allegedly signed by the defendant when he was paid the $200,000 which was due under the second installment. The vouchers bear what the defendant confirms is his signature but he claims that the plaintiff superimposed his signature on a document which he had not signed. The documents that were tendered in evidence were all originals. The signature itself has not been disputed but the plaintiff did not adduce evidence to show how his signature was affixed to an original document.

I find that the documents are genuine and show that the defendant was paid in full for the second instalment.

In so far as the payment by the plaintiff of the balance of the purchase price is concerned, it is surprising that the defendant did not at any stage prior to the plaintiff bringing these proceedings ever call upon the plaintiff to rectify its breach - if it was in breach.

Despite such alleged breach, having delivered the vehicle to the plaintiff when the agreement was executed, the defendant never demanded the return of the vehicle until the plaintiff sued for the cancellation of the second agreement on the basis that the defendant was in breach thereof.

I turn now to the terms and conditions of the verbal agreement.

According to the plaintiff, the verbal agreement concerned the buy-back of the vehicle by the defendant. The defendant's position however is that because of the breach of the terms of the written agreement the parties agreed to cancel the written agreement and for the defendant to pay back the sum of $570,000 which was the total amount paid by the plaintiff and interest and for the return of the vehicle to him.

I have already found that there was no breach on the part of the plaintiff in paying the installments under the written agreement.

It would therefore make sense for the plaintiff to state that the defendant offered to buy back the vehicle from the plaintiff at the increased price of $3 million, and that, as a result, an oral agreement was concluded whereby the defendant had to pay a deposit of $700,000. This is the only explanation for the deposit of $570,000 in the plaintiff's account by the defendant. According to the plaintiff's witness the deposit of $700,000 should have been made by the 17 July 2006. The defendant was given until 31 July to pay the balance on the deposit and when he failed the plaintiff cancelled the agreement between the parties.

In my view, the probabilities of the case favour the plaintiff's version.

It was in the business of selling vehicles and it would have no problems to sell back to the defendant a vehicle that had belonged to him. All it wanted was to make a profit out of the process. The version by the defendant that the amount deposited into the plaintiff was repayment of the amount paid by the plaintiff under the failed agreement of sale did not ring true.

On the defendant's version, the amount constituted repayment of the initial $300,000 paid by the plaintiff when the agreement was signed and another $100,000 which was paid instead of $200,000 as had been agreed. The additional $170,000 would then constitute interest. The defendant was unable to say what the rate of interest agreed was. As a result, he was not able to state with any conviction what the amount he had deposited represented.

It also turned up in the evidence that the plaintiff had in fact had the vehicle repaired and serviced. The plaintiff had required the defendant to pay for the costs of such repairs under the verbal agreement. The defendant admitted that the vehicle was indeed repaired and he had not reimbursed the plaintiff for the costs thereof.

It would be inconceivable, in my view, for the plaintiff to agree to an arrangement where it returns the vehicle to the defendant against a payment of $570,000. It would, at the least, demand that it be reimbursed for the sums expended on the vehicle, which, according to the evidence of the plaintiff's witness, were far in excess of $570,000.

The only verbal agreement entered into, in my view, is the one that the plaintiff told the court and the terms of which it was able to explain. The defendant was unable to state with certainty the terms upon which he was to have the vehicle returned to him by the plaintiff. He was unable to prove the existence of the verbal contract that he alleged had been formed by the parties….,.

Overall, I find that the version rendered by the plaintiff is to be preferred to the evidence of the defendant and I find for the plaintiff on all the issues. This means that the plaintiff succeeds in its claim and the counter-claim fails.

In the premises I make an order in the following terms:

It is ordered as follows:

1. The verbal agreement concluded between the plaintiff and the defendant on 4 July 2006 be and is hereby cancelled.

2. The plaintiff shall pay to the defendant the sum of $770,000 being the balance due on the purchase price of the vehicle and reimbursement of the amount deposited into the plaintiff's account by the defendant in respect of the second agreement.

3. The defendant's counter claim is hereby dismissed.

4. The defendant shall pay the costs of suit.

Appealed
HH307-16 : ASSWELL GURUPIRA and JEAN GURUPIRA vs EARTHMOVING & CONSTRUCTION COMPANY PL and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF and JOHN LEGGATTE
Ruled By: MAKONI J

The present application was filed on 7 March 2008 and has raged on with various twists and turns, culminating in the hearing before me. The background facts are that, on 25 May 2007, the applicants (the Gurupiras) and the second respondent (Muir) entered into an agreement whereby Muir sold to the Gurupiras two (2) issued shares ...

The present application was filed on 7 March 2008 and has raged on with various twists and turns, culminating in the hearing before me.

The background facts are that, on 25 May 2007, the applicants (the Gurupiras) and the second respondent (Muir) entered into an agreement whereby Muir sold to the Gurupiras two (2) issued shares in the first respondent (the company). The company is the registered owner of a certain piece of land situate in the District of Salisbury Town measuring 3,066 square metres commonly known as 98 Churchill Ave, Gunhill, Harare held under Deed of Transfer Number 39/76 (the property). The shares entitled the holder to an exclusive right of occupation and use of the property.

The applicants aver that they paid the purchase price in instalments. They then encountered problems when they intended to make the final payment as Muir became evasive. The Gurupiras then filed a court application, in HC6660/07, seeking to compel Muir to furnish them with her banking details to enable them to make payment of the balance of the purchase price. They finally paid the balance on 13 February 2008 by cheque.

On 11 December 2007 Muir and the sixth respondent (Leggatte) signed a Shareholders Agreement in terms of which 98 shares in the company were issued and allotted to Leggatte. The Gurupiras got wind of the agreement and they instituted the present proceedings on 7 March 2008 against the company and Muir seeking the following relief;

“Whereupon, after reading documents filed of record and hearing counsel it is hereby ordered that:-

IT IS ORDERED THAT:-

1. The 3^rd respondent is hereby interdicted from transferring the property known as No. 98 Churchill Avenue, Gunhill, Harare also known as a certain piece of land situate in District of Salisbury Town Lands measuring 3,066 square metres under Deed of Transfer dated 7 January 1976 (Registration Number 39/76).

2. The sale of the property to any unknown third party be and is hereby set aside.

3. The property in paragraph 1 above be transferred to Asswell Africa Gurupira and Jean Jane Gurupira and the 2^nd respondent is directed to sign all the necessary documents to transfer.

4. Should the 2^nd respondent fail or refuse to sign the necessary documents to effect transfer the 4^th of 5^th respondent is hereby directed to sign all the necessary documents to effect the transfer by 3^rd respondent to 1^st and 2^nd applicants.

5. The 1^st and 2^nd respondents shall bear all the costs of this application on an attorney client scale.”

The application was served by the Deputy Sheriff on both respondents by placing in a letter box. None of the respondents responded, and, on 21 May 2008, the Gurupiras obtained default judgement. On 16 June 2008, the Gurupiras took transfer of the property into their names. On 23 July 2008, they made an ex parte application, in the Magistrates' Court, for the eviction of the company and Muir and it was granted. On 24 July 2008 the company and Muir and all those claiming occupation through her were evicted.

That is when the company, as represented by Leggatte, became aware of the default judgment, and, on 22 August 2008, it applied for rescission of the default judgement in Case No. 4211/08. The matter was referred to trial after material disputes of fact became apparent. The trial was held before MAFUSIRE J, and, on 19 March, judgment was handed down. The court made the following order;

“DISPOSITION

In the circumstances, this matter is disposed of as follows:

1. The default judgment granted by this court on 21 May 2008, in HC1393/08, is hereby set aside.

2. The Registrar of Deeds is hereby ordered and directed to cancel Deed of Transfer No. 4778/08 over certain piece of land situate in the district of Salisbury, called Stand 12896 Salisbury Township of Salisbury Township Lands, measuring 3,066square metres, dated 16 June 2008 in the name of Asswell Africa Gurupira and Jean Jane Rudo Gurupira and to restore the prior Deed of Transfer No. 39/76.

3. The following residual issues shall be determined in the main application in HC1393/08:

3.1 Whether or not the agreement of sale between the first and second defendants, namely, Asswell Africa Gurupira, of the one part, and the third defendant, namely, Sandra Maureen Muir, of the other part, was duly performed.

3.2. Whether or not the first and second defendants should vacate the premises situate on the property more fully described in paragraph 2 above and which is also known as 98 Churchill Avenue, Gunhill, Harare.

3.3 Whether or not the transfer of shares in the plaintiff company, namely, Earthmoving & Construction Company (Private) Limited, by the third defendant to one John Leggatte, should be set aside.

4. The plaintiff shall file its notice of opposition or other such papers in HC1393/08 within ten (10) days of the date of this order, and, thereafter, the filing of any further documents shall be in accordance with the Rules.

5. The costs of the application and of the trial in HC4211/08, and the costs of the application in HC6660/07 shall all be borne by the first and second defendants jointly and severally, the one paying the other to be absolved.”

The company, in terms of paragraph 4 above, then filed its opposing papers to the present proceedings on 2 April 2014. It took the point in limine, that, the order sought by the Gurupiras was incompetent in that they sought transfer of the property and yet they only bought shares in the company. On the same date, the company filed a counter application for the eviction of the Gurupiras. Again, on the same date, Mr Stevenson filed a Notice of Opposition for Muir. The parties filed further papers up to Heads of Argument.

On 22 January 2015, the Gurupiras filed an application for joinder of Leggatte which he opposed. On 25 February 2016 an order granting joinder of Leggatte was granted. Further pleadings were filed pursuant to the order of joinder. Leggatte also adopted the point as raised by the company. The Gurupiras filed a supplementary affidavit wherein, inter alia, they sought an amendment to the draft order.

The matter was set down for hearing on 21 May 2015. A day before the hearing Mr Stevenson filed a document titled “Take notice that the 2^nd respondent hereby files of record a mandate given to her legal practitioners of record.”

A supporting affidavit by Mr Moyo, Leggatte's legal practitioner, is attached. To the affidavit, Mr Moyo attached a letter allegedly written by Muir and delivered to him by Leggatte who had allegedly received it from Muir's son.

On the day of hearing, Mr Mpofu moved for the amendment of the Draft Order. Both Mr De Bourbon and Mr Stevenson did not oppose the amendment. It was therefore granted. The amended Draft Order seeks the following relief;

“WHEREUPON, after reading the documents filed of record and hearing counsel:

IT IS ORDERED THAT:

1. An order declaring the 1^st and 2^nd applicant to be the lawful shareholders of the entire shares in the 1^st respondent (the company) and that any purported transfer or appointment of directors by the 1^st respondent to the 6^th respondent be deemed null and void.

2. An order declaring the 1^st and 2^nd applicants to be the lawful owners of the 1^st respondent (the company's) sole immovable property being Stand 12896 Salisbury Township situate in the district of Salisbury measuring 3,066 square metres known as No.98 Churchill Avenue, Gunhill, Harare and that the above property be transferred in favour of 1^st and 2^nd applicants.

3. An order that the 2^nd respondent be directed to sign all necessary documents to effect transfer of both the shares and the property.

4. Should the 2^nd respondent fail to sign the necessary documents to effect transfer of the shares and the property, the 4^th respondent is hereby directed to sign all necessary documents for 3^rd respondent to effect the transfer to 1^st and 2^nd applicants.

5. The 1^st, 2^nd and 6^th respondents shall bear all the costs of this application on an attorney and client scale jointly and severally each causing another to be absolved.”

The granting of the application to amend the Draft Order disposed of the point taken by the company and Leggatte regarding the competency of the order sought by the Gurupiras.

Mr Mpofu took the point, in limine, that the second respondent was not properly before the court. He submitted that the default judgment was taken against all respondents. The company applied for rescission of the judgment. In the order by MAFUSIRE J, only the company was given leave to defend the matter. Muir was in default and never applied for condonation.

He further submitted that Mr Stevenson deposed to the affidavit opposing the matter. He avers that after the granting of the default judgement he renounced agency after being instructed to hand over Muir's files to another legal practitioner. He was then prevailed upon by interested parties to act on behalf of Muir. Since the company was directed to file its opposing papers within 10 days of the order, he felt compelled to do the same for Muir.

Mr Mpofu further contended that Mr Stevenson did not have instructions to deal with this matter.

He tells some falsehoods on page 136 paragraph 12 when he said Muir's husband signed the agreement with Legatte on 27 May 2008 and yet, by then, Mr Muir had transferred his one share to his wife and had passed on.

The supplementary affidavit by Mr Moyo, in paragraph 2, is at variance with what appears in Mr Stevenson's affidavit in paragraphs 4 and 5. The position put forward by Mr Moyo is a false position.

In response, Mr De Bourbon submitted that the entire judgment was set aside for both the second and sixth respondents. The judgment dealt with the issue of service of the application on Muir and the company. All the issues that the court opined might be determined in the matter, in paragraph 3.2 of the order also involve Muir. She was therefore properly before the court.

Mr Stevenson submitted that at the time default judgment was taken the issue was transfer of the property and not of shares. He contended that in an emergency one acts to protect his or her neighbour. If the Gurupiras had been successful, it would reflect on his client as she is the one who sold the shares. He submitted that a legal practitioner is allowed to give evidence. He had sought authority from his client's relative and the letters had just been found by Mr Moyo. The fact that he had handed over file HC66660/08 to another legal practitioner did not prevent him to act in an emergency on behalf of his client. He was the one best placed to know the position.

In reply, Mr Mpofu submitted that the fact MAFUSIRE J opined that the issue of service might need determination does not make Muir a party. In any event, service was effected on the domicilium citandi in terms of the agreement. If Muir is not happy then she is the one who must attack it. A Notice of Opposition is filed by the respondent. The legal practitioner can file a supporting affidavit as witness. Mr Stevenson purports to act as an agent when he has no authority. When notice is given that the issue will be taken up, an attempt is made to validate the authority. Mr Stevenson does not do the affidavit himself. Instead, Mr Moyo, the sixth respondent's legal practitioners, deposes to the affidavit. Mr Stevenson filed an affidavit in his own name without purporting to represent Muir.

The issue for determination is whether the second respondent, Muir, is properly before me. I will examine the issue from two angles;

(i) Firstly, whether the judgment by MAFUSIRE J gave Muir leave to defend the matter.

(ii) Secondly, whether the affidavit by Mr Stevenson is properly before me. In other words, is there a Notice of Opposition on behalf of Muir?

In dealing with the first point, it is important to determine whether Muir was served with the court application. There is a Return of Service which was rendered by the Deputy Sheriff which reflects that the court application was served at No. 98 Churchill Avenue, Gunhill, Harare. It was served by placing in a letter-box. The service was on behalf of the first respondent, the company and the second respondent - Muir. In terms of clause 9 of the agreement between Muir and the Gurupiras, Muir chose that address as her domicilium citandi.

It is trite that the return of service of an officer of the court, whether he be the Sheriff, the Deputy Sheriff or the Messenger, has to be accepted as prima facie proof of what was stated therein, capable of being rebutted by clear and satisfactory evidence. See Gundani v Kanyemba 1988 (10) ZLR 226 (SC).

In casu, Muir has not placed any facts before this court, either in the application for rescission on in the present matter, that she was not served with the application. None of the witnesses, in the application for rescission, could testify on her behalf on that aspect. All that Mr Stevenson could say was that he wondered why the application was not served on his law firm. The answer is to be found in clause 9 of the agreement. Service of the process other than as stipulated in the agreement would have fallen foul of that clause.

Having been served, and after the expiry of 10 days, Muir was therefore barred. This is provided for in Rule 233(2) of the High Court Rules, 1971. She did not approach the court to seek upliftment of the bar.

The fact that the company successfully sought rescission of the judgment does not assist her.

MAFUSIRE J was clear in his order. He gave the company leave to file its opposing papers. He did not relate to the position of Muir as she had not made an application for the order to be set aside. She cannot therefore cling to the judgment made in favour of the company and allege that it paved the way for her to file her papers in opposition. MAFUSIRE J could not grant what had not been prayed for.

Coming to the second angle, Muir did not file an affidavit neither has one been filed by a party authorised by her.

In terms of Rule 227(2)(b), every written Notice of Opposition shall be signed by the respondent or by his legal practitioner. In terms of Rule 227(4)(a) an affidavit shall be made by the respondent or by a person who can swear to the facts or averments set out therein.

It is trite that where the Notice of Opposition or affidavit is to be signed by a person other than the respondent, that person must show that he is authorised to do so. The authors HERBSTEIN & Van WINSEN - The Civil Practice of the High Courts of South Africa, 5^th Ed…, put it this way;

“Where an application is made by an agent on behalf of a principal, an averment of the agent's authority is essential, unless it appears from the affidavits filed in the application that the principal is aware of and ratified the proceedings. A statement that the applicant is acting in the capacity of agent for the principal in question is a sufficient allegation of authority to make the application.”

In casu, Mr Stevenson filed an affidavit. It is not clear whether it is an opposing or supporting affidavit. In it he avers that he renounced agency after being asked by Muir to hand over her files to some other legal practitioners. In paragraph 7 he asserts;

“I have been prevailed upon by interested parties to the instant matter to act on behalf of the second respondent in the absence…,.”

It is a telling assertion. He filed the “affidavit” without a mandate from Muir but did so due to some pressure from interested parties.

After the matter had been postponed, Mr Moyo, for Leggatte, filed a supplementary affidavit whereby he asserted that he had discovered a letter from Muirs's son authorising Mr Stevenson to act for Muir.

It is clear that this is an attempt to validate the actions of Mr Stevenson.

Mr Stevenson does not depose to the supplementary affidavit to explain why he was quite categoric in his affidavit that “he had been prevailed upon”. This does not explain why he filed the affidavit in his name without an averment that he had been authorised by Muir to defend the proceedings and to depose to the opposing affidavit.

If the interested parties thought that his evidence would assist them, then he should have deposed to an affidavit which they would attach to their own papers.

In any event, Mr Stevenson does not have personal knowledge about some of the critical matters in this case. He has no independent knowledge of whether the Gurupiras discharged their obligations or not in terms of the agreement. He does not know whether Muir cancelled the agreement, and, if so, how.

Mr Stevenson is either mistaken on the facts or he did not tell the truth in his affidavit. In paragraph 12 of his affidavit he states;

“The agreement signed by the second respondent and her husband, Ramon Charles Muir, on 27 May 2008 with John Leggatte, who signed on 28 May 2008…,.”

It is common cause that the agreement with Leggatte was entered into by Sandra Muir only. By the time of that agreement, her husband was late. She owned the two issued shares in the company with her husband's share having been transferred to her in 2006. Whatever information that he placed before the court is hearsay and it is inadmissible - and such information does not constitute Muir's opposition.

In view of the above there is no opposition filed by Muir and the matter will be related to on that basis.

This leaves the court with the Gurupira's position and that of Leggatte in the main and the counter-application.

Mr De Bourboun contented that, at best, the Gurupiras own two shares of the 100 issued shares in the company. That right is in dispute as they failed to pay the purchase price and the agreement terminated in terms of clause 13. Leggatte owns the remaining 98 issued shares. The Gurupiras have no proof in the form of certificates that they own the two shares. There is no entry in the share register.

The other issues that he addressed, relating to the transfer of the company property to the Gurupiras, were taken care of by the amendment to the draft order.

It was further submitted that you cannot give any relief which impacts on Muir in her absence.

In respect of the counter-application, Mr De Borboun contended that the Gurupiras are in unlawful occupation of the property that belongs to the company in which Leggatte was the majority shareholder. There is no arrangement, contractual or otherwise, in terms of which the Gurupiras can claim a right to reside in or occupy the property.

The Gurupira's position is that they discharged their obligation in terms of the agreement. The agreement still subsists. It makes the agreement with Leggatte a double sale.

It was further submitted that once Muir had sold the two shares, she lost rights to deal with those two shares. She could not do the allotment of the other shares as that is done by directors and not shareholders. She would need a quorum of two (2) directors as provided for in terms of section 169(v) of the Companies Act [Chapter 24:03].

The Gurupira's position can only be responded to by Muir who is not before the court. The position of law is settled on this point. In Fawcett Security Operations (Pvt) Ltd v Director of Customs & Excise & Ors 1993 (2) ZLR 121 (SC) it has stated:

“The simple rule of the law is that what is not denied in affidavits must be taken to be admitted.”

In casu, no evidence has been placed before the court to controvert the Gurupira's assertion that they complied with their obligations. There is also no evidence that the agreement was cancelled. As it is, nothing stands in the way of the grant of the order as sought by the Gurupiras.

In my view, the applicants have not established a legal basis for the property to be transferred into their names. The property is the sole asset of the company. The applicants will be the shareholders of the company. They will have to deal with the property in terms of the Companies Act. Any reference to transfer of the property in the draft order will therefore be deleted.

In view of the findings I made above, Leggatte's counter application cannot succeed.

In the result, I will make the following order;

IT IS ORDERED THAT:

1. An order declaring the first and second applicants to be the lawful shareholders of the entire shares in the first respondent (the company) and that any purported transfer or appointment of directors by the sixth respondent to the first respondent be deemed null and void.

2. An order that the second respondent be directed to sign all necessary documents to effect transfer of the abovementioned shares.

3. Should the second respondent fail to sign the necessary documents to effect transfer of the shares, the fourth respondent is hereby directed to sign all necessary documents to effect transfer of the shares to the first and second applicants.

4. The first and sixth respondents shall bear all the costs of this application on an attorney and client scale jointly and severally each causing another to be absolved.

View Appeal
SC85-20 : JOHN LEGGETT and EARTHMOVING AND CONSTRUCTION COMPANY PL vs ASSWEL GURUPIRA and JEAN GURUPIRA and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF
Ruled By: GWAUNZA DCJ, GOWORA JA and PATEL JA

This is an appeal against a judgment of the High Court handed down on 18 May 2016. BACKGROUND FACTS The facts which gave rise to this appeal are somewhat convoluted. Earthmoving Construction Company (Private) Limited, the second appellant (hereinafter referred to as “the Company”), is a private limited company duly registered as such under the laws of Zimbabwe. The Company ...

This is an appeal against a judgment of the High Court handed down on 18 May 2016.

BACKGROUND FACTS

The facts which gave rise to this appeal are somewhat convoluted. Earthmoving & Construction Company (Private) Limited, the second appellant (hereinafter referred to as “the Company”), is a private limited company duly registered as such under the laws of Zimbabwe.

The Company had, at the time of incorporation, an authorized share capital of $32, divided into 32,000 ordinary shares with a nominal value of $0.001 each. Of those shares, only two had been issued. and were, at the time that these events evolved, owned by one Sandra Maureen Muir (“Mrs Muir”). This, in effect, gave 100 percent ownership of the issued shares to Mrs Muir.

In turn, the Company is the registered owner of an immovable piece of land, situate in Harare, identified as a certain piece of land situate in the district of SALISBURY TOWN LANDS measuring 3,066 square metres (also known as 98 Churchill Avenue, Gunhill, Harare). This property is the sole asset of the company.

On 27 May 2007, Mrs Muir concluded a written agreement of sale with Mr and Mrs Gurupira, in terms of which Mrs Muir sold to them the two shares in the Company. In terms of the agreement between the parties, the shares purchased by the Gurupiras' would entitle them to the “exclusive right of use and occupation” of the immovable property owned by the company. The purchase price for the shares was recorded as ZW$7,000,000,000= (seven billion dollars), payable as to a deposit of ZW$3,300,000= which was acknowledged as having been paid at the time of signing of the agreement. The balance of ZW$3,370,000,000= was to be paid within six (6) months from the date of the agreement. The rate at which the outstanding balance was to be paid as well as the frequency thereof were left to the discretion of the parties.

Although the purchase price was quoted in the local currency, it is common cause that the Gurupiras made sporadic payments sometimes in fuel, sometimes in US Dollars, and sometimes in Zimbabwe Dollars.

Up until the end of June 2007, the Gurupiras had made payment on eight occasions, with payment being made as described above. The total amount paid to Mrs Muir under this arrangement is in dispute between the parties.

On 4 August 2007, the Gurupiras addressed a letter to Mrs Muir indicating that they were encountering challenges raising the balance of the purchase price and sought an extension of the time to make payment but did not specify an exact date of expected payment. The last date for payment under the agreement was 25 November 2007.

A dispute ensued on the manner of payment, the currency of payment, and the place at which payment should be effected.

The Gurupiras alleged that at some point Mrs Muir started refusing payment in the local currency and demanded that the balance be paid in foreign currency. Mr Gurupira advised Mrs Muir that he could only pay foreign currency if he was able to access it and that he was not always in a position to obtain it. On 12 November 2007, Mr Gurupira instructed his legal practitioners to write to Mrs Muir to provide an account into which payment of the outstanding balance of the purchase price could be deposited. There was no response.

On 23 November 2007, the Gurupiras filed an application in the High Court seeking an order for Mrs Muir to provide a Bank account into which payment of the outstanding balance of the purchase price could be paid. In addition, they sought an order for specific performance by Mrs Muir for the transfer of shares in the company to themselves against a tender of payment of the balance of the purchase price.

This application never saw the light of day having been withdrawn before it could be set down.

The record shows that on 6 September 2007, the Gurupiras made a payment through wire transfer directly to Israel where Mrs Muir was now residing. Also on record is a cheque payment, in February 2008, into a Standard Chartered Bank account bearing Mrs Muir's name.

It is common cause that during the period following the filing of the above mentioned application Mrs Muir concluded a series of agreements with the first appellant, (“Leggett”).

On 11 December 2007, Mrs Muir and Leggett concluded an agreement in terms of which the latter would subscribe to 98 ordinary shares in the company. Subsequently, on 27 May 2008, Leggett concluded an agreement with Mrs Muir in terms of which the former purchased the entire shareholding in the company from Mrs Muir. Just as in the case of the Gurupiras, the purchase entitled him to “exclusive use and occupation” of the immovable property which is the subject matter of this appeal.

Subsequent to the conclusion of the first agreement, the Gurupiras became aware that Mrs Muir had placed advertisements for the sale of the immovable property. As a consequence, on 7 March 2008, under Case No. HC1393/08, the Gurupiras filed an application with the High Court in which they sought, variously, as against the company, interlocutory relief prohibiting the transfer of the immovable property, and, as against Mrs Muir, an order for specific performance in respect of the immovable property. The Registrar of Deeds, the Sheriff for Zimbabwe and his Deputy were also cited as third, fourth and fifth respondents respectively.

On 21 May 2018, the High Court granted an order in favour of the Gurupiras, in default of appearance from Mrs Muir and the company, as claimed in the draft order.

On 16 June 2008 the property was transferred to the Gurupiras under Deed of Transfer No. 4778/08. They proceeded to evict the occupant, one Diniwe Chinyani. She informed Leggett.

An urgent application for rescission of the default judgment was filed on behalf of the company. It was adjudged not urgent and was finally set down for hearing as an opposed matter. However, the matter was referred to trial on the premise that there existed material disputes of fact.

Pending the determination of the application for rescission, the company filed a counter application in which it sought an order for the eviction of the Gurupiras on the premise that it was the owner of the property in question.

On 19 March 2014, after a full trial, the High Court gave an order in terms of which the default judgment was set aside with leave being granted for “the respondent” in the main application to file opposing papers.

The main application was heard by the High Court on 21 May and 18 June 2015. By this time, pursuant to an application by the Gurupiras, Leggett had been joined as sixth respondent by order of the court. An issue arose as to whether Mrs Muir was before the court. The Gurupiras argued that she had not applied for the rescission of the default judgment in the sense that only the company had sought such rescission. It also transpired that Mr Stevenson, who purported to represent her on the day of the hearing, had not filed papers on her behalf nor did he appear to have the mandate to represent her.

On 18 May 2016 the High Court handed down its judgment and issued an order:

1. Declaring that the Gurupiras to be the lawful shareholders of the entire shareholding in the first respondent (the company) and that any purported transfer or appointment of directors by the sixth respondent (Leggett) be deemed to be null and void. (sic)

2. Directing the second respondent to sign all necessary documents to effect transfer of the above-mentioned shares. (sic)

3. That should the second respondent fail to sign the necessary documents to effect transfer of the shares, the Sheriff of the High Court be directed to sign all necessary documents to effect transfer of the shares to the Gurupiras.

4. The first and sixth respondents shall bear the costs of this application on an attorney and client scale jointly and severally each causing the other to be absolved. (sic)

5. Dismissing the sixth respondent's counter-application.

It is this decision that Leggett has brought on appeal...,.

ISSUES FOR DETERMINATION ON APPEAL

Although the Gurupiras obtained an order for specific performance against Mrs Muir, which is the main issue in contention in this appeal, the starting point revolves around the issue of rescission of the default judgment of 21 May 2018.

1. In this appeal, the court has to determine the effect of the order for rescission given by MAFUSIRE J.

2. Consequent thereto is the issue as to whether Mrs Muir, following upon the rescission of the default judgment, was before the court a quo for the determination of the main application.

3. Additionally, there should be a determination as to whether the court a quo was correct in finding that the Gurupiras were entitled to specific performance. For the proper determination of this aspect on the merits, it stands to reason that Leggett and the company could only appeal if Mrs Muir was a party to the proceedings. Her absence militates against their contentions in that regard.

4. Lastly, the court had to decide whether Leggett was entitled to relief in respect of the shareholding transferred to him by Mrs Muir....,.

AD GROUND 3 - WHETHER THE COURT A QUO ERRED IN FINDING THAT THE GURUPIRAS HAD ESTABLISHED AN ENTITLEMENT TO THE TRANSFER OF SHARES

Counsel for the appellants contended that the Gurupiras had not established an entitlement to the transfer of shares in their names.

In my view, this submission could only be made on behalf of Mrs Muir and not the two appellants.

Although Mrs Muir was adjudged not to be before the court a quo, a critical examination of the submissions, both in the High Court and this Court, will tend to show that almost all the points being raised related to Mrs Muir and her relationship with the Gurupiras. I can only say that this is an unfortunate development in the sense that, whatever the relationship between Leggett and Mrs Muir was, it was clear on the papers that counsel for the appellants appeared on behalf of the two appellants, Leggget and the company - and not Mrs Muir.

Leggett was not, and could not claim to be privy to the transaction between Mrs Muir and the Gurupiras. He concedes as much in all the affidavits deposed to by him. On that score, he is not in a position, nor would I find that he was, authorized to speak to it.

When the High Court granted the application for rescission of the default judgment, it set aside the interdict and the order for the transfer of the property to the Gurupiras. The learned judge however also ordered that the following pertinent issues be determined in the main application:

“3. The following residual issues shall be determined in the main application in HC1393/08:

3.2 Whether or not the transfer of shares in the plaintiff company (Private) Limited, by the third defendant to one John Leggett, should be set aside;

3.3 Whether or not the first and second defendants should vacate the premises situate on the property more fully described in paragraph 2 above and which is also known as 98 Churchill Avenue, Gunhill, Harare;

4 The plaintiff shall file its notice of opposition or other such papers in HC1393/08 within ten (10) days of the date of this order and thereafter the filing of any further documents shall be in accordance with the Rules.”

Pursuant to this, on 2 November 2009, the Gurupiras filed a counterclaim in which they sought an order for the setting aside of the transfer of shares in the company from Mrs Muir to Leggett. Concomitant with that prayer was a prayer for the transfer of those shares to the Gurupiras.

I note that at the commencement of the hearing in the court a quo counsel for the respondents moved an application for the amendment of the draft order on behalf of the Gurupiras.

The court a quo recorded that the application was granted with the consent of both counsel for the appellants and Stevenson. This is what the court said:

“On the day of hearing, Mr Mpofu moved for the amendment of the Draft Order. Both Mr de Bourbon and Mr Stevenson did not oppose the amendment. It was therefore granted.”

The granting of the application to amend the draft order disposed of the point taken by the company and Leggett regarding the competency of the order sought by the Gurupiras.

The coming into the picture of Leggett did not, in my view, change the substance of the agreement between Mrs Muir and the Gurupiras. The latter purchased the two issued shares that Mrs Muir had in the company. The purchase of those shares bestowed rights upon them. According to the agreement, they were entitled to certain rights in the immovable property owned by the company. The pertinent paragraphs of the agreement are set out hereunder and read:

“C. The authorized share capital of the Company is divided into 32,000 (thirty-two thousand) ordinary shares of $1.00 each, of which authorized share capital 2 (two) ordinary shares (the shares) have been issued as follows:

SANDRA MAUREEN MUIR 2 CERTIFICATE No 1 & 3. She being the sole beneficial owner thereof;

D. The said shares confer on the holders thereof an exclusive right of occupation and use of the property;

E. The parties warrant that at the date of execution hereof and at the date of payment in terms of clause 2 of this agreement they are and they will be residents of Zimbabwe;

F. The purchaser warrants that he is using Zimbabwe dollars;

G. The seller is desirous of selling the shares, which shares confer on the holder hereof the exclusive right of use and occupation of the property and the improvements thereupon;”

From a perusal of these pertinent clauses in the agreement, the purchase by the Gurupiras of the two issued shares at the time of the sale entitled them to the exclusive use and occupation of the immovable property owned by the company. There was no novation of the agreement. There was no evidence that the agreement was ever cancelled. If it was, Mrs Muir did not choose to establish such fact before the court a quo. This she was obliged to do in order to oppose the claim for specific performance brought against her by the Gurupiras.

As matters stand, that application was unopposed.

In disposing of this issue, the court a quo stated that no evidence had been placed before it to controvert the assertion by the Gurupiras that they had complied with their obligations in terms of the agreement. Also, the learned judge in the court a quo found, as a fact, that no evidence had been placed before the court that the agreement had been cancelled.

I have to agree.

It is also pertinent to note that there was no appeal against these findings of fact which are themselves critical as to the determination of the respective rights of Mrs Muir and the Gurupiras in the claim for specific performance. Instead, the appellants placed reliance on findings of fact made during the application for rescission of judgment. Those findings of fact, which did not include evidence from Mrs Muir, cannot be binding in this instance.

In the initial application filed under Case No. HC1393/08, the Gurupiras sought an order for the transfer of the immovable property to themselves. An order for the transfer of the immovable property to the Gurupiras affected the rights of the company in the immovable property and the company was within its right in approaching the court for the reversal of that order. Leggett called witnesses to testify and they could only testify on behalf of the company - but not on Mrs Muir's behalf. In everything he did, Leggett purported to act for the company. The substantive relief, premised on the sale of shares, contained in the draft order, was against Mrs Muir, the Registrar of Deeds and the Sheriff. Clearly, in the circumstances, they had no business testifying on matters not within their personal knowledge.

This ground has no merit and is accordingly dismissed.

HH392-16 : EUNICE DZANGARE and WISH PROPERTIES (PVT) LTD vs CHAMPION CONSTRUCTIONS (PVT) LTD and ELIZABETH CHIDAVAENZI and REGISTRAR OF DEEDS
Ruled By: TSANGA J

In this opposed matter before me, I find the African proverb that “the best way to eat an elephant in your path is to cut him into little pieces,” metaphorically apt in this instance (I assume, of course, that the proverb relates to a dead elephant). I say this because in order to decide on the matter, at whose nub is the transfer of certain property to the applicant, I must first unpack and deal, bit by bit, with the story within a story that stands in the path of transfer.

An equally rich African proverb that gives context to the dispute, also inspired by the elephant, is one that says “one sees all sorts of knives the day an elephant dies.”

The property at the heart of the dispute is described as Stand Number 1006, Remainder of Hilton Subdivision of Waterfalls of Salisbury measuring 1,987 square metres held under Deed of Transfer No. 7666/2001. The first applicant, Eunice Dzangare (hereinafter referred to as “Dzangare”), bought this property as an undeveloped piece of land through a company called Wish Properties (hereinafter be referred to as “Wish”), then represented by its Director Biriam Wabatagore who is since deceased. This sale is not disputed by Wish Properties. It is confirmed by the late Mr Wabatagore's widow, Audrey Wabatagore, who is now the director of Wish Properties.

At the time of the agreement of sale, and upon payment of the purchase price, Eunice Dzangare was given vacant possession by Wish Properties in 2003. She has remained in undisturbed possession of the immovable property from that time and has since developed the property by constructing a dwelling house.

The problem arises from the fact that the property was not transferred.

She has tried to obtain transfer but it became necessary to join Wish Properties to this application because the agreement with Champion Constructors was not with her but with Wish Properties.

Wish Properties says it had bought the immovable property from the first respondent, Champion Constructors (Private) Limited (hereinafter referred to as “Champion”) under a written agreement of sale. Champion Constructors held a Parent Deed to a property which it was in the process of subdividing into various Stands which included the one that Wish Properties had purchased and subsequently sold to Eunice Dzangare.

The late Mr Wabatagore was also a legal practitioner. Mrs Wabatagore says that the agreement of sale between Wish Properties and Champion Constructors unfortunately cannot be found as the document was misplaced in the takeover of her late husband's law firm. However, she draws on various annexures in support of her claim of the existence of an agreement. The annexures consist largely, though not exclusively, of various correspondence between Wish Properties and Champion Constructor's then legal practitioners, Messrs Mandizha and Partners who were handling the issue of the subdivision of the principal property into Stands.

What Wish Properties seeks is that the sale to it by Champion Constructors be recognised so that it, in turn, can transfer the Stand in question to Eunice Dzangare to whom it has since ceded the property. Wish Properties has ceded its rights to transfer to Eunice Dzangare.

At the core of Wish Properties legal argument is that it has proven its case on a balance of probabilities, this being the standard required in civil proceedings. It regards the denial of the sale by Champion Constructors as an afterthought, spurred by a quest to capitalise on the fact that the agreement cannot be found. Wish Properties points to the improbability that there was no agreement of sale, to Eunice Dzangare's occupation of the property for over nine years, at the very minimum, without any challenge.

Champion Constructor's director is Elizabeth Chidavaenzi and is the second respondent in the matter. She is opposed to the transfer on the basis of Wish Properties failure to produce the agreement of sale.

She says that Wish Properties should be put to the strictest proof of the alleged agreement of sale and that the documents that Mr Wabatagore's widow relies on do not prove the existence of an agreement of sale. The cases of H & Dwitkopipen Agencies & Fourways v De Sousa 1971 (3) SA 941 TPD^; and U-Freight Euromar (Private) Limited v Emmanuel Mutebuka HH05-03were cited in support of the contention that the authenticity of documents must be proven.

She also argues that, at the very least, the first applicant would have had copies of the agreement of sale.

The undisturbed occupation by Eunice Dzangare is denied on the basis that it has been subject to litigation since 2012 when, instead, of considering an offer to purchase, she instituted legal proceedings. It is also said that Wish Properties failed to prove critical elements of an agreement of sale such as the purchase price and whether it was paid.

At the heart of her legal argument is that the order sought against Champion Constructors, as the respondent, is not competent.

Champion Constructors also premises its argument on the rei vindicatio doctrine, aimed at protecting ownership and based on the principle that an owner cannot be deprived of his property without his consent. Alspite Investments (Private) Limited v Tendai Westerhoff HH99-09; Hwange Colliery Co. v Savanhu2013 (1) ZLR 555 (H); Hamtex Investments (Private) Limited v King2012 (2) ZLR 334 (H) were cited in support of the operation of this principle.

She also argued that the cession by Wish Properties of personal rights to the property in question was irregular as it was effected after pleadings had closed and without the approval of the court.

Wish Properties, on the other hand, argue that Champion Constructors's consent was not necessary to effect a valid cession. On its behalf, counsel drew on section 11(1)(v) of the Deeds Registries Act which provides an exception in that the court may validly effect transfer direct to a third person although section 11(2) provides that liability for any duties still remains. He also emphasised that in terms of section 11(1)(a) and (b) departures of transfers of land and cessions from following the sequence of the successive transactions is permitted in exceptional circumstances.

In view of the above, the first issue to be dispensed with in order to decide whether such transfer should be effected against this backdrop of its legal permissibility is whether the explanation for the absence of the agreement is acceptable.

The widow's explanation is that the document was most probably lost in the process involving the take over of her husband's law firm. The circumstances that led to the misplacement of the document are believable and highly probable. Papers and documents may indeed have been moved or became inadvertently destroyed in the takeover of his practice following the death of Mr Wabatagore. Documents do sometimes get lost in lawyers' offices - even without the spectre of re-arrangements necessitated by death. The explanation is therefore not one that stretches the imagination.

As such, secondary evidence can, in my view, be examined to establish whether there was an agreement.

In the case of Absa Bank v Zalvest Twenty (Pty) Limited & Anor2014 (2) SA 119 (WCC) it was accepted that secondary evidence can be produced of the existence of a contract where the contract had been destroyed or lost. This was explained as follows…,.:

“In regard to the substantive law of evidence, the original signed contract is the best evidence that a valid contract was concluded and the general rule is thus that the original must be adduced. But there are exceptions to this rule, one of which is where the original has been destroyed or cannot be found despite a diligent search. In such a case, the litigant who relies on the contract can adduce secondary evidence of its conclusion and terms (see Singh v Govender Brothers Construction 1986 (3) SA 613 (N) at 616J-617D). There are, in modern law, no degrees of secondary evidence (ie one does not have to adduce the 'best' secondary evidence). While a photocopy of the lost original might be better evidence than oral evidence regarding the conclusion and terms of the contract, both forms of evidence are admissible once the litigant is excused from producing the original.”

Placing the burden on Mrs Wabatagore, as the second applicant's director in this case, to prove that there was an agreement and to recount its terms, aims at reducing the dangers of fraud. I am, however, cognisant of the fact that her late husband was the actual party to the contract and that the only other party who would have the contract is the defendant who denies the existence of the contract.

I examine the evidence chronologically in terms of how it builds up the story or otherwise of the existence of an agreement.

On 7 August 2003 the deceased's law firm, Wabatagore and Company, wrote to Messrs Mandizha & Partners, Champion Constructor's conveyancers, enquiring about the transfer of three Stands from Champion Constructors to Wish Properties. One of these Stands was the Stand in dispute.

The letter indicated therein that the Stands had since been sold and sought to find out whether the Stands had been fully paid for. It must be remembered that this was at the height of the hyper-inflationary environment and it was not unusual for parties to seek clarifying on top ups of what had been paid particular where payment had been in instalments and where transfers were still outstanding. It was also clearly indicated in the letter of 7 August that one of the purchasers desperately needed to start construction.

This letter of 7 August was followed up with another one on 7 November 2003 expressing concern at the non-response to its enquiries and reiterating, again, that the Stands, identified as 1021, 1006 and 1046 had been sold. The letter, like the previous one, was copied to Eunice Dzangare, one Diana Mapingure and one Mercy Moyo. Another letter written on 3 March 2004 again lamented that no response had been received to any of the above-mentioned letters. Again, it demanded to know the transfer requirements for the three Stands.

Notably, Champion Constructors key reaction to this correspondence is not a denial that Messrs Mandizha & Partners were its lawyers. Instead, the denial is premised on whether the letters were ever received at Mandizha and Partners.

Champion Constructors also points out that the threat to report to the Law Society was not carried out.

Further, Champion Constructors says that confirmatory affidavits should have been sought from Mr Mandizha to prove service of these letters.

Champion Constructors also queries why Wish Properties was still asking if it owed anything if it had paid.

I have already stated there was nothing unusual about this enquiry in a hyperinflationary environment of the time. To bolster this view, on 11 May 2004, Champion Constructors itself wrote to Mr Wabatagore advising him that the long-awaited capital gains tax, presumably the cause of the long delay, had now been received from ZIMRA. The letter also outlined the amount that was outstanding, which Champion Constructors explained as owing to the accumulation of administrative costs as a result of inflationary costs for service maintenance. It asked every client on the Uplands Scheme to pay a stipulated additional amount to defray unforeseen costs.

In my view, this further proves that the enquiries to Messrs Mandizha and Partners had been on point.

Looked at in totality, the correspondence is convincing and the letters corroborate each other. They indicate that a sale had indeed taken place between Champion Constructors and Wish Properties and that there was every effort to follow up on transfer. Champion Constructors attack of the letter of May 11, 2004 on the grounds that it was a general circular and that it should, in any event, have been addressed to Wish Properties, and not to Mr Wabatagore, makes little sense since Mr Wabatagore was the Director of Wish Properties who had represented the latter in the agreement.

Furthermore, I agree with counsel for Wish Properties argument that once Mr Wabatagore had received assurances from Champion Constructors concerning the capital gains tax and outstanding sums to be paid, there was no reason to believe that the property would not now be transferred. The letter sufficiently affirms that impediments to transfer had been addressed. The allegation that the letter is possibly fabricated is not supported by any evidence.

Champion Constructors also disputes the Certificate of Development as having been issued on misrepresentation, but, again, nothing tangible is said in support of that contention.

Champion Constructors averments and challenges of these annexures are no more than vague objections.

The nature and content of the letters speak far more loudly and convincingly in support of a sale to Wish Properties than Champion Constructors bare denials of the existence of an agreement.

The inherent improbability of the sale not having taken place to Wish Properties is also supported by the fact that no evidence was placed before this court which shows that Champion Constructors has ever made any effort to vindicate its rights. Instead, at every turn, it has been Eunice Dzangare who has persistently taken action to enforce her rights.

The more recent letter, of August 2013, by Champion Constructors to the Sherriff, in which it indicated that it had long since subdivided the whole property and sold all Stands to individual owners, most who have already developed the Stands, is pertinent.

Champion Constructors cannot now simply wish this letter away because it suits it on the basis that was it written in respect of its Stands which do not form part of this litigation. It is a self-serving denial. Given its position that there was no agreement with Wish Properties regarding the Stand in question, it could just as easily have produced cogent evidence relating to whom it sold the Stand in question to and when.

Champion Constructors would however have had to explain how and why Eunice Dzangare has been on the property since 2003 with no disturbance.

To my mind, Champion Constructors is clearly taking advantage of the lost agreement.

Cases of developers failing to pass transfer have become an increasing headache before the courts. Where evidence supports, on a balance of probabilities, that the property in question was sold to a party, and the sale concluded, the court's primary concern is to ensure that justice is done between the parties.

Rather than lie about what she does not know, Mrs Wabatagore stuck to attesting to facts known to her and to producing what secondary evidence was in her possession.

On a balance of probabilities, the evidence averred points to an agreement between Wish Properties and Champion Constructors. In the circumstances, I conclude that the property should be transferred to Eunice Dzangare.

I grant the order as follows:

1. The application be and is hereby granted.

2. The first respondent shall sign transfer papers and take all necessary steps to pass transfer of the property called Stand 1006 of Certain Piece of Land Situate in the District of Salisbury, called remainder of Hilton of Subdivision A of Waterfall measuring 1,987 square metres, held under Deed of Transfer No. 7666/2001, into the first applicant's name, within 7 days of the service of this court order upon them, failing which the Sheriff for Zimbabwe or his lawful Deputy be and is hereby authorised to sign all transfer papers on the first respondent's behalf.

3. The second respondent shall pay costs of this application on a legal practitioner and client scale.

SC05-20 : GRANDWELL HOLDINGS PL vs ZIMBABWE MINING DEVELOPMENT CORPORATION and MARANGE RESOURCES PL and MBADA DIAMONDS PL
Ruled By: GWAUNZA DCJ, MAVANGIRA JA and MATHONSI JA

This is an appeal against the whole judgment of the High Court handed down on 26 October 2016 dismissing the appellant's application for specific performance with costs.

The facts are that the appellant and the second respondent are each the holders of fifty percent of the issued share capital in the third respondent, a special joint venture company incorporated in terms of a joint venture agreement entered into between the appellant and the second respondent on 21 July 2009.

In terms of the Joint Venture Agreement, the appellant would provide funding for the business of mining diamonds through the third respondent. The second respondent undertook to ensure that the mining rights held under special grants at Marange existed in perpetuity.

The first respondent, which is the sole shareholder in the second respondent, guaranteed the second respondent's performance of its obligations under the agreement.

Although the appellant performed its obligations under the agreement, the second respondent did not pay the special grants' renewal fees. The second respondent let the special grants, in terms of which the mining rights existed, expire.

When that happened, the second respondent did not secure the reinstatement of the special grants. The first respondent, which had guaranteed the second respondent's performance of its contractual obligations, also failed to do anything about that breach of the agreement.

On 30 September 2015, the first respondent addressed a letter to the Permanent Secretary for Mines and Mining Development which, because of its centrality in the resolution of this case, is reproduced hereunder:

“RE: RENEWAL OF THE MARANGE DIAMOND SPECIAL GRANTS: 4718, 4719, 4720, 4765, 5244, 5247, 5249 & 5769

Reference is made to the above matter. As per attached table below, ZMDC has five diamond Special Grants (SG) which expired in October 2013 and one in December 2010. These are SG Nos. 4718, 4719, 4720, 4765 and 5769.

From this date, the Corporation has to raise the required renewal fees, and, in 2014, the Ministry of Mines and Mining Development granted a 12 month exemption on the payment of the renewal fees for the said grants. Given the fact that ZMDC's financial position has remained severely constrained, the Corporation is applying for a further exemption on renewal fees for these SGs, which have currently expired.

Further, given the fact that actual mining is now taking place in the first four of the above SGs, it is necessary for the SGs to be converted from prospecting to mining SGs, a process that also requires cash outlay by ZMDC, which funds the Corporation is currently finding difficult to raise.

In addition, Marange Resources (Pvt) Ltd, a wholly owned subsidiary of ZMDC, which is currently mining on Block B under SG4720, has requested for a valid copy of SG4720, which it requires in its application for exemption of import duty for an X-Ray Transmography Machine (XRT machine) that it intends to import. Unfortunately, the Corporation is not able to assist, given the fact that the SG has expired.

Under these circumstances, therefore, the Corporation is appealing to the Ministry, for the Ministry to reconsider its earlier position not to extend the exemption of payment of renewal SG fees, and grant ZMDC an exemption to update its diamond SGs for a further period of 3 years to 2016, to allow Marange Resources to process its application for exemption of import duty.

Sir, we are kindly requesting for your favourable consideration to our submission of renewal of the ZMDC held diamond Special Grants Nos. 4718, 4719, 4720, 4765, 5244, 5247, 5249 & 5769 and conversion of SGs Nos. 4718, 4719, 4720 from prospecting to mining.

Yours faithfully
S. Simango General Manager.”…,.

It is clear from the contents of the letter that the special grants, in terms of which mining operations were to be carried out by the third respondent, had expired in 2010 and 2013.

The respondents did not have money to pay renewal fees and were thus asking for exemptions from the Secretary. They had relied on exemptions previously to renew the special grants because they again did not have money. If they were to be granted exemptions from paying renewal fees, only then would they apply for renewal or revival of the expired special grants.

The Secretary of Mines and Mining Development was not impressed. He rejected the request for exemptions in a letter to the first respondent dated 22 February 2016. It reads:

“RE: RENEWAL OF THE MARANGE DIAMOND SPECIAL GRANTS: 4718, 4719, 4720, 4765, 5244, 5247, 5249 AND 5769

The above matter refers.

We acknowledge receipt of your letter to our Ministry dated 30 September 2015 contents of which have been noted (copy attached for ease of reference). As clearly admitted and indicated by yourselves, you have neglected or failed to renew the Special Grants that were issued to you, some expired as far back as 2010 and others in 2013. An exemption had been extended to you but there has been no commitment on your part to rectify this anomaly which is in contravention of section 293 of the Mines and Minerals Act [Chapter 21:05].

Instead, you are requesting for a further exemption.

It has also come to our attention that there are some Special Grants that are purported not to have a duration period.

It is trite law that a Special Grant is issued upon application and its issuance is done in terms of section 291 of the Mines and Minerals Act [Chapter 21:05] which demands that a period for the subsistence of the Special Grant shall be specified failure of which renders the Special Grant void. In light of this, these Special Grants shall be deemed to have been granted for the period which the applicant had requested in its application.

After serious consideration of this matter, we do hereby notify you that the Ministry is not in a position to give any further exemptions for the renewal of all Special Grants, namely, 4718, 4719, 4720, 4765, 5244, 5247, 5249 and 5769 that were issued to you and neither are we renewing the same.

Prof. P.F. Gudyanga
Secretary for Mines and Mining Development.”…,.

After the rejection of the request for exemptions, it is common cause that the respondents did not do anything. They did not challenge the Secretary's decision. Neither did they raise money to pay for the renewal or revival of the expired Special Grants.

The appellant then launched an application in the High Court seeking an order directing the respondents to pay renewal fees for the Special Grants and to file renewal applications among other ancillary relief. The application was prompted by the third respondent's inability to carry out mining operations without regularisation of the special mining grants. The application was premised on the respondents' breach of the joint venture agreement.

The first and second respondents opposed the application.

They denied breaching the agreement asserting that they applied for both exemption to pay renewal fees and the renewal of the Special grants to the Secretary for Mines.

It therefore became an issue for determination by the court a quo whether the first and second respondents breached the terms of the Joint Venture Agreement by failing to perform specific acts in pursuance of their contractual obligations.

The court a quo held that the first respondent's letter of 30 September 2015 is indeed an application for renewal of the Special Grants. The court a quo found that the response to the application by the Secretary for Mines dealt with the issues of exemption and renewal of the Special Grants which had expired. The court a quo held that the Secretary for Mines had made a decision not to renew the Special Grants. It would therefore be incompetent, so the court a quo reasoned, for the court to order the Secretary to review his own decision by granting an order for specific performance.

This appeal is the fruit of the appellant's grief with that judgment of the court a quo. The grounds of appeal are that:

1. The court a quo erred and grossly misdirected itself in finding that an application for renewal of the Special mining grants had been filed by the first and second respondents in discharge of their contractual obligations to the appellant;

2. The court a quo erred and grossly misdirected itself in limiting the first and second respondents' contractual obligations to filing an application for renewal of the special mining grants whereas their obligation was to do all that was necessary to ensure the existence, in perpetuity, of the special mining rights.

Whether or not the court a quo correctly held the letter of the first respondent to the Secretary for Mines as an act of specific performance in terms of the parties' agreement

Generally, the policy of the law is to give effect to the contracts of the parties because it is salutary in our jurisdiction to uphold the freedom of the parties to contract lawfully. This notion is embodied in the principle of sanctity of contract.

Once the parties have contracted, it is not open to the courts to rewrite the contract they have entered into. In addition, the court will not excuse any of the parties from the consequences of the contract that they freely and voluntarily entered into with their eyes wide open. This is so even if the consequences are onerous or oppressive. See Magodora & Ors v Care International Zimbabwe 2014 (1) ZLR 397 (S)…,.

As to the remedy of specific performance in the Law of Contract, it is accepted that it is aimed at upholding the contract and obtaining the performance of the terms of the contract as agreed. Indeed, specific performance is the primary or default remedy for breach of contract and is usually claimable.

According to the learned author I MAJA, The Law of Contract in Zimbabwe, 2015, The Maja Foundation…,:

“The general rule, under Roman Dutch Law, is that an innocent party has a right, in every case of breach of contract, to a remedy of specific performance unless there are exceptional circumstances which justify refusal of an order for specific performance.

According to Farmers Co-operative Society (Reg) v Berry 1912 AD 343 at 350:

'Prima facie, every party to a binding agreement who is ready to carry out his own obligation under it has a right to demand from the other party, so far as it is possible, a performance of his undertaking in terms of the contract. As remarked by KOTZE CJ in Thompson v Pullinger the right of the plaintiff to the specific performance of a contract, where the defendant is in a position to do so, is beyond all doubt.'”

See also Smith & Ors v ZESA 2003 (1) ZLR 158 (H)…,; Savanhu v Marere N.O. & Ors 2009 (1) ZLR 320 (S).

However, the right to claim specific performance is predicated on the concept that the party claiming it must first show that he or she has performed all his or her obligations under the contract or is ready, willing and able to perform his or her side of the bargain.

Even then, the court has a discretion, which should be exercised judicially, to grant or refuse a decree of specific performance. It follows, therefore, that the court's discretion should not be exercised arbitrarily or capriciously. See Minister of Public Construction & National Housing v Zescon (Pvt) Ltd 1989 (2) ZLR 311 (S), where…, this Court stated:

“The law is clear. This is a remedy to which a party is entitled as of right. It cannot be withheld arbitrarily or capriciously.”

It is important to consider the specific terms of the contract entered into between the parties which the appellant wishes to enforce.

Clause 6.3 of the Joint Venture Agreement provides:

“6.3 Marange undertakes that it shall forthwith after the signature date and thereafter for the duration of this Agreement –

6.3.1 Pay all necessary fees and make application for the renewal and/or continued existence and do all that may be necessary so as to ensure that the special grants and rights thereunder are in good standing and remain valid for the duration of this Agreement allowing Marange to mine and prospect the concession area in perpetuity…,.”

The appellant's case is that the respondents breached that provision by failing to pay the necessary fees and to make the requisite application for the renewal of the Special Grants. As a result, the Special Grants lapsed.

The respondents submitted that the letter written by the first respondent to the Secretary of Mines, on 30 September 2015, constituted a valid application for the renewal of the Special Grants which application was rejected by the Secretary for Mines. They therefore fulfilled their part of the bargain.

It is common cause that the appellant fulfilled its own obligations in terms of the contract and was therefore entitled to demand specific performance. The court a quo found that the letter of 30 September 2015 was “an application for renewal” and that its heading was very clear needing no further explanation. The court said at p7 of the cyclostyled judgment:

“What is clear from the above is that it is an application for renewal. The heading is very clear and needs no further explanation. The first paragraph makes reference to the heading and therefore the renewal of the special grants.

The second paragraph relates to an exemption to pay renewal fees. Paragraphs 3 and 4 are not relevant to the determination of the issue at hand. Paragraph 4, again, relates to exemptions. The last paragraph puts paid to any doubt what the letter relates to. It talks about renewal.

I agree with Mr Tsivama that there is no procedure or format laid down in JVA as to how the application for renewal is to be submitted.”

With respect, the court a quo took a very simplistic, if not pedestrian, approach to the letter in question.

Clause 6.3.1 of the Joint Venture Agreement required the respondents, first and foremost, to pay all necessary fees for the renewal of the Special Grants. It also required them to make the necessary application for such renewal. It recognised the reality that the payment of fees was a pre-requisite for a valid and successful application for renewal. Such a situation is not what was obtaining on the ground, and, as such, the letter of 30 September 2015 cannot, by any stretch of the imagination, be regarded as a fulfilment of the respondents' obligations under Clause 6.3.1 of the Joint Venture Agreement.

Clearly, it was not a valid or competent application for renewal.

It is clear from the provisions of section 293 of the Mines and Minerals Act [Chapter 21:05] that the payment of renewal fees is central to the validity of an application for renewal. Section 293 of the Mines and Minerals Act provides:

“The person to whom a special grant is issued shall pay the prescribed fee in respect of the issue of a special grant or any renewal thereof.”

It is common cause that the respondents did not pay renewal fees. In fact, all the relevant special grants were allowed to expire years before the letter of 30 September 2015 was written. The contents of that letter are clear that the first respondent was seeking an exemption from paying renewal fees because of an incongruent financial position. Without the payment of renewal fees the renewal could only be done by the benevolence of the Secretary for Mines.

The respondents could not possibly be said to have performed their obligations of ensuring the mining rights existed in perpetuity. The rights had expired.

The court a quo fell into error in that aspect. The letter of 30 September 2015 did not constitute specific performance of the respondents' obligations in terms of the contract.

Whether the respondents did all that was necessary to ensure the Special Mining rights existed in perpetuity

Counsel for the appellant submitted that the obligations of the respondents set out in the contract were much broader than merely submitting an application for renewal of the Special Grants. They were required, so the argument goes, to ensure that the mining rights existed in perpetuity. They failed to perform to such an extent that the special grants expired in 2010 and 2013 - long before the respondents even submitted the letter they relied on.

I agree.

In fact, once it is accepted that the respondents did not pay renewal fees and that they allowed the grants to expire, it cannot be said at the same time that the respondents did all that was necessary to ensure the existence of the special mining rights in perpetuity. They could only so exist if there was full compliance with renewal requirements including the timeous payment of renewal fees and submission of the necessary applications.

Repeated requests for exemptions from payment would never ensure perpetuity as that left everything in the hands of the Secretary for Mines.

Whether the court should exercise its discretion in favour of granting specific performance

Counsel for the respondents submitted that the Secretary for Mines made a decision not to renew the Special Grants which decision is contained in his letter of 22 February 2016 quoted above. He submitted that the court a quo cannot be faulted for concluding that it would be incompetent for the court to direct him to review his own decision by granting specific performance.

Counsel for the appellant, on the other hand, sharply differed with that assertion.

In his view, there was no application for renewal placed before the Secretary for Mines. He could not grant an application which was not made and his response clearly showed his disquiet about the respondents' repeated failure to pay renewal fees.

I have said that the court has a discretion whether to grant specific performance but that discretion should be exercised judicially and not arbitrarily or capriciously. This is because specific performance is a remedy to which a party is entitled to as of right. See Minister of Public Construction & National Housing v Zescon (Pvt) Ltd 1989 (2) ZLR 311 (S).

The court a quo did not consider the circumstances that are relevant in deciding whether to grant a decree of specific performance or not. In its view that was unnecessary because it had come to the conclusion that the respondent's letter to the Secretary for Mines amounted to specific performance. I therefore do not agree with counsel for the respondents that the court a quo exercised judicial discretion and refused specific performance, which discretion can only be interfered with if exercised capriciously or upon a wrong principle.

The discretion was simply not exercised by the court a quo for obvious reasons, namely, its finding that specific performance had occurred.

There is no doubt that the Secretary for Mines was called upon to decide whether or not to grant the respondents exemption from paying renewal fees. He refused to do so because, according to him, an exemption had been granted previously but the respondents showed no commitment to rectify the anomalies. The respondents were not entitled to further exemptions.

What is significant to note is that the respondents' obligations, in terms of the contract, are not to apply for exemptions but to pay renewal fees.

It is clear from the letter of the Secretary for Mines dated 22 February 2016 that if renewal fees are paid the application will be favourably considered.

In light of that, I perceive no ground whatsoever for exercising the discretion reposed upon the court against the granting of specific performance. After all, it is the primary remedy for breach of contract. The appellant has shown that the respondents breached the contract. Specific performance is possible, and, as such, it should be granted.

In the result, it is ordered that:

1. The appeal succeeds with costs.

2. The judgment of the court a quo is set aside and substituted with the following order:

“2.1. The application be and is hereby granted.

2.2. The 1st and 2nd respondents be and are hereby directed to pay renewal fees in respect of the special grants constituting the concession on which the 3rd respondent was carrying out mining operations and which mining grants are referred to in the Joint Venture Agreement and the Shareholders Agreement attached to the application.

2.3. Thereafter, the 1st and 2nd respondents be and are hereby directed to file a renewal application in respect of the said special grants and to provide the renewing statutory authority with all that is required to enable the said authority to process the renewal application including a detailed written motivation to ensure urgent renewal of the special grants.

2.4. The 1st and 2nd respondents shall provide the applicant with copies of the renewal application together with proof of payment of fees.

2.5. The 1st and 2nd respondents shall pay the costs of this application jointly and severally the one paying the other to be absolved.

Appealed
SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC
Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

This is an appeal against the judgment of the High Court ordering the appellant to pay the outstanding amount due to the respondent in United States dollars (USD) as opposed to its Real Time Gross Settlement (RTGS) equivalent.

The relevant background to this matter is as follows;

On 25 February 2016, the parties entered into an agreement for the sale by the respondent to the appellant of its entire issued share capital in a company named Milchem Zambia Limited (Milchem) for the sum of USD46,347, payable on or before 31 March 2016.

The appellant then paid USD6,347 on an unspecified date and a further USD8,600 on 19 January 2018, leaving an outstanding balance of USD31,400. The appellant contended that the balance remaining as at 19 January 2018 was USD15,400 and not USD31,400 as claimed by the respondent.

On 15 July 2019, the parties concluded a Statement of Agreed Facts in which the appellant admitted that the sum of USD31,400.00 was still to be paid. However, it now argued that the sum was payable in RTGS and not in United States dollars.

The sole issue for determination by the High Court was whether the balance due was payable in United States dollars following the promulgation of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019 (S.I.33 of 2019) and the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019 (S.I.142 of 2019).

Judgment of the High Court

The court a quo found that the sum of USD31,400, payable by the appellant to the respondent, did not fall under the auspices of section 4(1)(d) but section 2(b) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019 S.I.33 of 2019. This was the appellant's obligation as denominated and payable in foreign currency to the respondent. The court noted that in 2016 and 2017 the respondent had written to the appellant providing the details of its Bank account and the relevant IBAN and SWIFT codes. These codes applied to the payments in foreign currency into Nostro FCA accounts.

Given that the two payments already made by the appellant were by way of cash in United States dollars, the conduct of the parties, and that of the appellant in particular, showed that it was obliged to pay in United States dollars, and, in fact, proceeded to do just that. Additionally, the appellant's plea a quo, which was filed after it became aware of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33/2019, stated that it would pay the sum of USD15,400 to the respondent. Thus, the obligation to settle the debt in United States dollars was both explicit and implied by conduct.

The currency governing the terms sheet (the written agreement) was United States dollars and this was confirmed by paragraph 5 of the Statement of Agreed Facts drawn up by the parties on 15 July 2019.

The court also found that payment in foreign currency would not contravene S.I.142/2019 and would therefore not constitute a brutum fulmen.

In the event, the appellant was ordered to pay the respondent the sum of USD31,400 together with interest at the prescribed rate from 19 January 2018 and costs of suit on the ordinary scale.

Grounds of Appeal

At the commencement of the hearing, the Court pointed out the mis-citation of a statutory provision referred to in the first ground of appeal. The provision in question was incorrectly cited as section 3(2)(b) of S.I.33 of 2019, instead of section 44C(2)(b) of the Reserve Bank of Zimbabwe Act [Chapter 22:15].

This error is understandable given the convoluted fashion in which S.I.33 of 2019 is structured and formulated.

In any event, the error was corrected by the Court by allowing the first ground to be appropriately amended, with the consent of counsel for the respondent.

The first and second grounds of appeal take issue with the finding of the court a quo that the outstanding debt of USD31,400 fell under the auspices of section 44C(2)(b) of the Reserve Bank Act, and was therefore a foreign obligation payable in foreign currency, rather than being a local obligation governed by section 4(1)(d) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33 of 2019, that was payable in RTGS dollars....,.

Foreign or Local Obligation

The critical provision to be interpreted in casu is section 44C of the Reserve Bank Act [Chapter 22:15] (as inserted by section 3(1) of S.I.33 of 2019).

Section 44C(1) of the Reserve Bank Act empowers the Reserve Bank to issue, or cause to be issued, electronic currency in Zimbabwe. Section 44C(2) provides as follows:

“The issuance of any electronic currency shall not affect or apply in respect of –

(a) Funds held in foreign currency designated accounts, otherwise known as 'Nostro FCA Accounts', which shall continue to be designated in such foreign currencies; and

(b) Foreign loans and obligations denominated in any foreign currency, which shall continue to be payable in such foreign currency.”…,.

Section 4(1)(a) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I.33 of 2019 provides for the issuance and operation of an electronic currency, dubbed “the RTGS Dollar”, with effect from the effective date, being the date of promulgation of S.I. 33 of 2019, i.e. 22 February 2019.

Paragraphs (c), (d) and (e) of section 4(1) of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations 2019, S.I. 33/2019 stipulate as follows:

“(c) That such currency shall be legal tender within Zimbabwe from the effective date; and

(d) That, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on and after the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar; and

(e) That after the effective date any variance from the opening parity rate shall be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS Dollar for the United States dollar on a willing-seller willing-buyer basis; and…,.”…,.

What emerges, clearly and unequivocally, from section 44C(2)(b) of the Reserve Bank Act, as read with section 4(1)(d) of S.I. 33 of 2019, is that foreign loans and obligations denominated in any foreign currency are excluded from the broad remit of S.I.33 of 2019. Thus, foreign loans and obligations continue to be valued and payable in the foreign currency in which they are denominated.

Counsel for the appellant submits that the debt in casu was a local obligation and not a foreign obligation within the meaning of section 44C(2)(b) of the Reserve Bank Act [Chapter 22:15].

For a debt to be a foreign obligation, the creditor must be resident outside Zimbabwe. The nationality of the creditor is irrelevant and it is his residence that matters.

The respondent's declaration, in the court below, admits that it is a resident of this country. It also has a registered office in Zimbabwe as its place of business, as accepted in its further particulars. Again, in terms of the written agreement between the parties, payment by the appellant was to be made “in Zimbabwean US Dollar bank account to be nominated” by the respondent. At the relevant time, all bank accounts in Zimbabwe were designated in United States dollars. The United Kingdom bank account details that were furnished by the respondent were provided on 6 December 2016 - well after the effective date of the agreement, i.e. 25 February 2016.

Counsel for the respondent observes that in the appellant's plea, which was filed on 28 February 2019, after the promulgation of S.I.33 of 2019, the appellant prayed for an order requiring it to pay the lesser “sum of US$15,400”. The court a quo found that the appellant was fully aware of the existence of S.I. 33 of 2019. The plea was not amended, and, so submits counsel for the respondent, it constitutes a firm irrevocable admission of the appellant's liability to pay the outstanding debt in United States dollars. Additionally, the two initial payments that were made by the appellant, totalling USD14,947, were made in cash in United States dollars.

The respondent initially supplied the details of a United Kingdom bank account, together with IBAN and SWIFT codes, which were recognised by the court a quo as pertaining to FCA accounts. At a later stage, in its further particulars, the respondent furnished the details of its local Nostro FCA account. Such accounts are specifically referred to and excluded from the scope of electronic RTGS transactions by section 44C(2)(a) of the Reserve Bank Act.

As regards the respondent's declaration a quo, counsel for the respondent argues that the respondent's statement that it is “a company duly [incorporated] according to the laws of the United Kingdom with an office in Zimbabwe where it is resident” is somewhat ambiguous. The Statement of Agreed Facts before the court a quo makes it clear that the respondent is “a foreign company registered in terms of the British laws with a registered office in Zimbabwe”. All that the respondent has is a business presence in Zimbabwe.

Having regard to the factual circumstances preceding the institution of proceedings a quo, coupled with the conduct of the parties, it is abundantly clear that it was the intention of both parties, from the onset of their transaction, that the appellant's contractual obligation to pay the respondent would be discharged in United States dollars.

Indeed, counsel for the appellant, in his replying submissions, quite properly conceded that until the promulgation of S.I.33 of 2019 the parties were fully agreed that payment would be made in foreign currency.

What is more contentious in casu is the status of the respondent in this country and the nature of the transaction between the parties. These two issues are obviously inter-related and need to be considered together in the context of this appeal.

The term “foreign loans and obligations denominated in any foreign currency”, as it appears in section 44C(2) of the Reserve Bank Act, is not defined in S.I.33 of 2019 or in any other relevant legislation that I am aware of. Its meaning, in any given case, must be ascertained from the factual circumstances of the parties involved and the material substance of the transaction that they have entered into.

It is common cause that the appellant is a local entity. On the other hand, the status of the respondent is not self-evident from the papers filed of record.

I agree with counsel for the respondent that the respondent's pleadings, i.e. its declaration and further particulars, are ambivalent in this regard. Its nationality, in as much as it is incorporated in the United Kingdom, is obviously foreign. What is less clear is the question of its residence and the nature of its physical presence in Zimbabwe. This is obviously a question of fact. Nevertheless, some guidance on this aspect can be gleaned from relevant statute law.

The commercial operations and transactions of all companies, whether foreign or local, are governed by our Company Law, both under statute and at common law. At the time when the transaction between the parties in casu was concluded, the relevant statutory provisions were contained in the Companies Act [Chapter 24:03]. (They are now to be found in the Companies and Other Business Entities Act [Chapter 24:31] which came into operation on 13 February 2020, ninety days after its publication on 15 November 2019).

Section 2 of the Companies Act [Chapter 24:03] (the repealed Act) defined a “foreign company” as “a company or other association of persons incorporated outside Zimbabwe which has established a place of business in Zimbabwe.” The term “place of business” was defined in section 329 to mean “any place where the company transacts or holds itself out as transacting business…,.” The formalities and requirements for the registration of a foreign company were stipulated in section 330. In essence, these included the submission of certified copies of the company's constituent instruments and the particulars of its directors resident in Zimbabwe. Thereafter, the responsible Minister would issue a certificate, subject to such conditions as he saw fit, authorising the foreign company to establish a place of business in Zimbabwe.

In the instant case, it is common cause that the respondent is a company incorporated in the United Kingdom with a registered office or place of business in Zimbabwe. The prescribed formalities for its registration do not form part of the record and were obviously not in issue in the proceedings a quo. In any event, it is undoubtedly a foreign company that was registered and entitled to operate in Zimbabwe.

The related question of residence in the country is indirectly addressed in the Exchange Control Regulations 1996, S.I.109 of 1996, as amended. Although these Regulations pertain principally to dealings in foreign currency, they are also relevant to the determination of questions of residence in Zimbabwe. In terms of section 3(1)(c) of the Exchange Control Regulations, a company or other body corporate is to be regarded as a Zimbabwean resident if “it is incorporated in Zimbabwe” or “it has its head office or principal place of business in Zimbabwe.”

In casu, it is abundantly clear that the respondent is neither incorporated in Zimbabwe nor does it have its head office or principal place of business in Zimbabwe.

By virtue of the Companies Act, as read with the Exchange Control Regulations, it is quite evidently a non-resident foreign entity operating in Zimbabwe.

As regards the transaction between the parties, it is not in dispute that what was sold by the respondent to the appellant was its entire share capital in a foreign company located in a foreign country, namely, Zambia. In short, a foreigner sold a foreign asset to a local company.

The asset consisted of shares in a foreign company that could presumably be sold abroad for foreign currency or, at any rate, in any currency other than the currency of Zimbabwe.

What the parties intended, and what they transacted, unquestionably gave rise to a foreign obligation.

In my view, it was not the intention behind S.I. 33 of 2019 to strike at an obligation of the kind involved in this case.

Section 44C(2)(b) of the Reserve Bank Act, as inserted by section 3(1) of the 2019 Regulations, makes it clear that the issuance of any electronic currency, i.e. RTGS dollars, shall not affect or apply to any foreign obligation. This is reinforced by section 4(1)(d) of the Regulations which explicitly excludes foreign obligations valued and expressed in United States dollars from the deemed parity valuation in RTGS dollars.

To conclude on this aspect, the currency of payment intended by the parties was United States dollars. Moreover, the obligation incurred by the appellant was a foreign obligation denominated in foreign currency within the contemplation of S.I.33 of 2019. That obligation therefore continued to be payable in foreign currency, even after the effective date, i.e. 22 February 2019.

It follows that the first and second grounds of appeal are without merit and must accordingly be dismissed.

Legality of Payment in Foreign Currency

Counsel for the appellant initially took the stance that S.I.33 of 2019 constituted a supervening obstacle to the continued payment of the appellant's obligation in United States dollars. He later conceded that, as at 22 February 2019, there was nothing to prevent the appellant from discharging its obligation in foreign currency.

However, he persisted with the argument that following the promulgation of the Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, S.I.142 of 2019, on 24 June 2019, the Zimbabwean dollar was the sole legal tender for all local transactions in Zimbabwe.

Counsel for the respondent submits that there was no supervening impossibility preventing payments in foreign currency at any material time.

It was legal for the parties to enter into an agreement for the payment of United States dollars or any other foreign currency. Neither S.I.33 of 2019 nor S.I.142 of 2019 prohibited or precluded any such payment.

Subject to the broad impact of later restrictive measures introduced by S.I.212 of 2019, I fully agree with the position taken by counsel for the respondent for the following reasons;

As regards S.I. 33 of 2019, I have already concluded that this instrument did not operate to prohibit the payment of any foreign obligation denominated in foreign currency in such foreign currency. The status quo ante was explicitly saved and preserved by those provisions of S.I.33 of 2019 that I have alluded to earlier.

Turning to S.I.142 of 2019, the relevant provisions, for present purposes, are contained in subsections (1) and (2) of section 2, which stipulate as follows:

“(1) Subject to section 3, with effect from the 24th June 2019, the British pound, United States dollar, South African rand, Botswana pula, and any other foreign currency whatsoever shall no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.

(2) Accordingly, the Zimbabwe dollar shall, with effect from the 24th June 2019, but subject to section 3, be the sole legal tender in Zimbabwe in all transactions.”…,.

Section 3(1) of S.I.142 of 2019 provides for savings from the ambit of section 2. In particular, it stipulates that nothing in section 2 shall affect the opening or operation of foreign currency designated accounts (Nostro FCA accounts) or the requirement to pay customs duties and import or value added tax in foreign currency in respect of such goods as are specified under the relevant tax legislation. Section 3(2) extends the exemption from the provisions of section 2 to the tender of foreign currency in payment for international airline services.

My reading of section 2 of S.I.142 of 2019 is that its operation and impact are confined to local transactions. It obviously cannot, and does not, apply to foreign transactions which ordinarily lie beyond the reach of purely domestic legislation. At any rate, this is clearly evident from the particular wording of the provision which expressly refers and relates to transactions in Zimbabwe.

By the same token, I take the view that section 2 of S.I.142 of 2019 does not extend to the discharge of foreign loans and obligations denominated in any foreign currency. This is so for two fairly obvious reasons;

(i) Firstly, it would be commercially incongruous and internationally unacceptable to attempt to settle any foreign loan or obligation in local currency - unless this is mutually agreed between the parties involved.

(ii) Secondly, and more importantly, the exemption from the scope of local currency in respect of foreign loans and obligations is explicitly preserved and embodied in section 44C(2)(b) of the Reserve Bank Act [Chapter 22:15] itself. The restrictions imposed by S.I.142 of 2019 are contained in Regulations made under the very same Act.

It is trite that subsidiary or subordinate legislation cannot override or purport to alter, whether expressly or impliedly, anything contained in its parent or enabling statute, or indeed in any other Act of Parliament. This proposition is so axiomatic that it requires no case law or other learned authority to support it.

There is yet a further reason for taking a restrictive view of the scope and operation of section 2 of S.I.142 of 2019. This arises from the juridical import of what is meant by “legal tender”.

In this context, it is the State, which is generally responsible for regulating its monetary system, that issues its own currency to serve as the universal means of exchange within its own boundaries. See PROCTOR: Mann on the Legal Aspect of Money, 7th ed, 2012…,..

To similar effect, GOLDBERG: Legal Tender SSRN (2008)…, observes that it is the Government which typically accords the status of legal tender to any currency which it has itself issued. Thus, when the law confers legal tender status only on the Government's currency, it implicitly allows the Government to reject any other currency as a medium of payment.

Insofar as concerns transactions between private persons and entities, GOLDBERG: Legal Tender SSRN (2008)…, points out that the “legal tender” concept originates in Contract Law and entitles the payer to settle a contractual obligation in whatever currency or medium of payment that has been declared, by law, as acceptable legal tender. Conversely, a buyer does not enjoy the same leeway in attempting to settle a contractual obligation through any medium of payment that is not recognised as legal tender within the State concerned.

The same point is underscored by PROCTOR: Mann on the Legal Aspect of Money, 7th ed, 2012 …,:

“If a country's system of trade and commerce is to be based on money as a means of exchange, then the law must buttress that position and allow for the assured discharge of monetary debts by payment in that medium. Thus, the law must require that creditors accept payment through that medium – in other words, the creditor must accept payment in legal tender.”…,.

To conclude on this aspect, the concept of “legal tender”, in its ordinary signification, denotes money or currency in official circulation that must be accepted if offered in payment of a debt.

In the realm of contractual relations, what this means is that the debtor is entitled to settle his debt through the medium of legal tender, and, conversely, the creditor is obliged to accept that tender.

The latter has no choice or latitude in the matter.

On the other hand, unless explicitly proscribed by statute…, there is nothing under the common law to preclude the debtor from discharging his debt in any currency or medium of exchange other than the officially designated legal tender, including any foreign currency, so long as the creditor is prepared to accept such payment in settlement of the debt.

This arises by virtue of the time-honoured doctrine of freedom of contract, which, in my view, remains intact and un-impaired by the provisions of S.I.142 of 2019.

In any event, as I have already emphasised, these provisions do not operate to override or detract from the explicit import of section 44C(2)(b) of the Reserve Bank Act in relation to the repayment or settlement of foreign loans and obligations in foreign currency.

I have earlier alluded to the wide impact of S.I.212 of 2019, to wit, the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) Regulations 2019, promulgated on 27 September 2019.

The term “domestic transaction” is very broadly defined in section 2(1) of the Exchange Control (Exclusive Use of Zimbabwe Dollar for Domestic Transactions) Regulations 2019, S.I.212 of 2019, subject to section 4, to encompass virtually every conceivable commercial transaction within Zimbabwe. Section 3(1), which is also subject to section 4, expressly prohibits the payment or receipt of any currency other than the Zimbabwe dollar, as the price or consideration payable or receivable in respect of any domestic transaction. Section 4 enumerates those transactions which are excluded from the scope of the definition of “domestic transaction”. Of particular relevance, for present purposes, is section 4(e), which excludes “transactions in respect of which any other law expressly mandates or allows for payment to be made in any or a specific foreign currency.”

As I have already concluded, the transaction in casu gave rise to a foreign obligation denominated in foreign currency. By virtue of section 44C(2)(b) of the Reserve Bank Act, as read with section 4(1)(d) of S.I.33 of 2019, that obligation continues to be, and is therefore allowed, by another law, to be payable in a specific foreign currency, i.e. the United States dollar.

It follows that the underlying transaction is excluded, by dint of section 4(e) of S.I. 212 of 2019, from the scope of the prohibition, imposed by section 3(1) of S.I. 212 of 2019, against the payment or receipt of any currency other than the Zimbabwe dollar in respect of any domestic transaction.

It follows from all of the foregoing that the third ground of appeal cannot be sustained.

Statutory Instrument 142 of 2019, or any other relevant or applicable law, did not make it impossible for the appellant to discharge its outstanding contractual obligation to pay the sum of USD31,400 to the respondent in foreign currency.

View Appeal
HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL
Ruled By: MUZENDA J

On 24 December 2018 the plaintiff issued summons against the defendant claiming the following:

1. Payment of US$31,400.

2. Interest thereon at the prescribed rate of interest per annum from 19 January 2018 to the date of payment in full and final settlement.

3. Interest at the prescribed rate from 1 March 2016 to 18 January 2018 on the sum of US$40,000.

4. Costs of suit on attorney-client scale.

From the plaintiff's declaration, on or about 25 February 2016, at Harare, the parties entered into an agreement in terms of which the plaintiff sold to the defendant its entire issued share capital of an entity known as Milchem Zambia Limited for US$46,347 which amount was payable to the plaintiff on or before 31 March 2016. The defendant paid US$6,347 on an unspecified date and a further US$8,600 on 19 January 2018 leaving a balance of US$31,400 which amount the defendant rejects or refuses to pay.

The defendant, on the other hand, admits the contents of the 2016 sale agreement but goes on to add that a new agreement was later concluded, more particularly, in that it paid both amounts of $6,347 and $8,600, but, on 2 September 2017, the defendant was using Leopard Rock Hotel for an amount of $23,285=48 being claimed under Case No. HC5580/17. Incidentally, the plaintiff owners or directors or shareholders had interests in Leopard Rock Hotel, the $23,285=48 that was owed to the defendant by Leopard Rock Hotel as US$16,000 for the purpose of off-setting and settling. Hence, the balance outstanding would be US$24,000. After the payment of $8,600, the defendant contends that the balance outstanding, as at 19 January 2018, was $15,400 not $31,400 as pleaded by the plaintiff.

After payment of the $8 600, a misunderstanding pertaining to interest arose as well as the 10% discount which the defendant thought applied to the $40,000 agreed as owing on 2 September 2017. The plaintiff argued that the discount applied to the time prior to 2 September 2017 when the debt was about $45,000 that was owed originally and was dependent on immediate payment which was not affected. The defendant tendered to refund the amount paid to it by Leopard Rock Hotel so as to revert to the 2 September 2017 agreement.

The defendant refutes being in breach of the 2016 sale agreement.

On 22 March 2019, the plaintiff filed its replication where it disputed any novation to the original sale agreement. It insisted that the balance, being the capital on the summons denominated in US dollars, should be paid by the defendant. There was never a set-off agreed by the parties relating to the Leopard Rock Hotel debt. In fact, the defendant was fully paid by Leopard Rock Hotel and accepted payment, and, lastly, it rejects the tendered amount for not being made in accordance with any agreement.

At the joint pre-trial conference held on 13 and 29 May 2019 the following issues were spelt out for trial:

(a) Whether or not the defendant is liable to pay to the plaintiff the sum of $31,400 and interest?

(b) Whether or not the defendant is liable to pay interest on the sum of $40,000 from 1 March 2016 to 18 January 2019?

(c) Whether or not the defendant is liable for the payment of costs at attorney-client scale?

(d) Whether or not there is a new contract between the parties supplanting the terms and conditions of the contract signed on 25 February 2016?

On 15 July 2019, the date of trial, the parties filed a Statement of Agreed Facts to the following effect:

1. The plaintiff is a foreign company registered in terms of the British Laws with a registered office in Zimbabwe and the defendant is a company registered in Zimbabwe.

2. On 25 February 2016, the plaintiff sold to the defendant the entire of its issued shares in Milchem Zambia with effective date of sale being 1 September 2015.

3. The purchase price was US$46,347 (forty six thousand three hundred and forty seven United States dollars); the term sheet agreement is already filed of record as part of the plaintiff's bundle of documents.

4. The defendant initially paid an amount of US$6,347 leaving a balance of US$40,000 of which US$8,600 was paid in cash to the plaintiff at Harare on 19 January 2018 leaving the balance of US$31,400 which is the subject of this claim.

5. The defendant admits the amount of US$31,400 has not been paid to the plaintiff but argues that the amount is now payable in RTGS dollars and not in US dollars as denominated in the term sheet agreement.

6. The issues the court is being called upon to determine are:

6.1. Whether or not the outstanding balance owing to the plaintiff, in terms of the term sheet agreement, is payable in United States dollars or not?

6.2. Whether or not the plaintiff is entitled to interest as acclaimed in the summons?

6.3. Whether or not the plaintiff is entitled to costs of suit on attorney-client basis?

Before the parties addressed the court it was further agreed that issues 6(2) and 6(3) on the Statement of Agreed Facts were no longer meant for determination by the court.

If the plaintiff succeeds, the issue of interest was going to follow the order and would be as acclaimed in the plaintiff's summons. Given the fact that the defendant had admitted owing the plaintiff the amount of US$31,400 and dispensed with the trial proceedings, counsel for the plaintiff, properly in the court's view, abandoned his insistence on claiming costs on attorney-client scale.

It was agreed that if the plaintiff succeeds, the defendant will pay wasted costs at an ordinary scale.

The remaining outstanding issue for determination is whether or not the outstanding balance owing to the plaintiff, in terms of the term sheet agreement, is payable in United States dollars or not?

THE ARGUMENTS

Counsel for the plaintiff submitted that contrary to what the defendant argues, Statutory Instrument 33 of 2019, Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019, S.I.33 of 2019 does not affect the parties' agreement.

The Statutory Instrument only introduces Real Time Gross Settlements Electronic Dollars (RTGS) as a currency to operate side by side with the bond note and coin as a form of settlement currency within Zimbabwe. At the time it was introduced, that is the RTGS dollar, it operated side by side with the multi-currency permitted in Zimbabwe.

The recently introduced Statutory Instrument, S.I.142 of 2019, Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019 does not bar the defendants from depositing the balance into the plaintiff's foreign account. The Statutory Instrument, 142 of 2019 still provides and allows payment into foreign accounts but payment made in Zimbabwe during transactions should be in local or domestic currency. He submitted that it will be in the interests of justice if the balance of US$31,400 should be paid in United States Dollars and cited the matter of Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd and 2 Others HH95-06 per PATEL J…,.

On the other hand, counsel for the defendant argued that there is a supervening impossibility. He cited CHRISTIE, The Law of Contract in South Africa, 6th edition, 2011…, and insisted on the defence of a vis major. The effect of the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019, S.I.33 of 2019, more particularly section 4(1)(d) which reads as follows:

“(d) That, for accounting and other purposes, all assets and liabilities that were immediately before the effective date valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on and after the effective date, be deemed to be valued in RTGS dollars, at a rate of one-to-one to the United States dollar; and...,.”

To the defendant, in terms of paragraph 4(1)(d) of S.I.33 of 2019, cited above, the amount due to the plaintiff in the sum of US$31,400 should now be deemed to be RTGS$31,400 because, to the plaintiff, in accounting terms, it will appear on the balance sheet as an asset and to the defendant it will appear as a liability.

Statutory Instrument 142 of 2019, the defendant argued, makes it specific that the Zimbabwe dollar shall be the sole legal tender for Zimbabwean transactions. It will be illegal for the defendant to settle its obligations in United States dollar denomination. If this court proceeds to grant the judgment in United States dollars, the judgment will be a brutum fulmen.

Counsel for the defendant submitted and if the court grants the order, as per the summons, the judgment will open a floodgate to many entities who would approach the court with similar claims denominated in United States dollars. He concluded by urging the court to return the judgment sounding in RTGS dollar and order payment of RTGS$31,400.

THE STATUTORY INSTRUMENTS 33 AND 142 OF 2019

Statutory Instrument 142 of 2019, Reserve Bank of Zimbabwe (Legal Tender) Regulations 2019, was issued in terms of section 64 as read with section 44A of the Reserve Bank of Zimbabwe Act [Chapter 22:15]. In principle, the statutory instrument effectively ended the multi currency system and promoted, established, and determined, the Zimbabwe dollar as the sole legal trading currency in the country…,.

It was introduced to declare that the sole currency for use within Zimbabwean borders is the Zimbabwean dollar and eliminated the multi currency.

Statutory Instrument 33 of 2019, Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations 2019 was introduced in terms of section 2 of the Presidential Powers (Temporary Measures) Act [Chapter 10:20] and the statutory instrument introduced a new baby currency code-named Real Time Gross Settlement Electronic Dollar (RTGS Dollars) to enjoin Ecocash and other versions of mobile banking services. The bond note, the bond coin, and RTGS dollar became three major forms of domestic currency permitted to trade under the banner of the Zimbabwe dollar.

Of great interest to this matter is paragraph 2(b) of S.I.33 of 2019 which provides as follows:

“Shall not affect or apply in respect of -

(b) Foreign loans and obligations denominated in any foreign currency which shall continue to be payable in such foreign currency.”…,.

I conclude that, contrary to counsel for the defendant's submission that US$31,400 falls under the auspices of paragraph 4(1)(d) of S.I. 33/ 2019, it falls under paragraph 2(b) of S.I.33 of 2019 and it is the defendant's obligation denominated in foreign currency and payable to the plaintiff.

WHETHER OR NOT DEFENDANT IS LIABLE TO PAY PLAINTIFF THE SUM OF US$31,400 IN FOREIGN CURRENCY

The caption extracted from the terms sheet dated 25 February 2016 titled “Purchase Consideration” provides as follows:

“US$46,347 (forty six thousand three hundred and forty seven US dollars) being the net asset value (excluding shareholders and inter-company loan accounts) evidenced by the attached signed balance sheet.”

Further, under the following subtitle “Payment” it provides:

“In Zimbabwean US dollar bank account to be nominated by Cambria (the Plaintiff). Payable by 31 March 2016.”

The last extract pertinent for consideration is subtitled “agreement” and provides thus:

“The parties agree that this term sheet is a legally binding document and accurately records the intention of the parties.”

On 6 December 2016 and 23 March 2017, the plaintiff wrote to the defendant providing the name of the account holder, the Bank, account number, and, more importantly, the IBAN and SWIFT code numbers. The IBAN and SWIFT codes apply to payment into Nostro accounts and payment in foreign currency and the communication relating to that account was for the depositing of the balance of US$40,000. The two payments of $6,347 and $8,600 were made in United States dollars - and this court does not write an agreement for the parties.

From the clauses extensively cited above herein, the parties' conduct, more particularly that of the defendant, clearly shows that it was obliged to meet its obligations in United States dollars and proceeded to do so.

The defendant's plea contains, in its prayer..., that it shall pay to the plaintiff the sum of US$15,400, it being fully aware of the existence of S.I.33 of 2019.

The debtor's obligation to settle its indebtedness in foreign currency need not be more explicit than in this case and may also be implied, moreso, when such conduct is in fulfilment of that party's performance of the agreement.

It is also abundantly clear from the foregoing logic that the currency governing the terms sheet is the United States dollar and I am more satisfied in that conclusion by paragraph 5 of the Statement of Agreed Facts dated 15 July 2019 filed of record. The defendant, I conclude, is desirous of meeting its obligation in United States dollars but its only concern is whether such payment would not contravene the law obtaining in Zimbabwe.

That's how I interpret the conduct of the defendant.

The only question which is pertinent is whether the judgment should be in foreign currency.

As per the judgment of the learned Judge PATEL in Zimbabwe Development Bank v Zambezi Safari Lodges (Pvt) Ltd and 2 Others HH95-06, citing the Supreme Court case of Makwindi Oil Procurement (Pvt) Ltd v National Oil Company of Zimbabwe (Pvt) Ltd 1988 (2) ZLR 482 (SC), stated that:

“Our courts are at liberty to give judgments in foreign currency. This follows the radical approach adopted in England by the House of Lords in 1975. As was observed by gubbay cj (as he then was), at 488 A-B;

'In Miliangos v Geroge Frank (Textiles) Ltd (1975) 3 All ER 801 (HL), the majority of the members of the House of Lords (Lord Sermon of Celaisdale dissenting) took the unusual steps, termed by some as “revolutionary”, of reversing their earlier decision. Their Lordships laid down a new rule that where the justice of the case so required the court should give judgment in favour of the plaintiff for the amount of the foreign currency due to him or its sterling equivalent at the time of payment. With regard to the proper conversion date, Lord Wilberforce noted that changes in the value of currency between the breach date and the date of judgment or payment were the rule rather than the exception.'

The Learned Judge continued:

'The rationale for this novel approach is explained, at 492B-C, as follows:

'That the majority of the Law Lords succeeded in surmounting such an obstacle and opted for a more realistic approach to modern economic conditions is strongly illustrative of the concept, never to be overlooked, that the law is a living system that adapts to the necessities of [present time and is to be given new direction] where, on principle and in reason, it appears right to do so.'

At 492C-F the Chief Justice concluded:

'I am firmly of the opinion that in the absence of any legislative enactments which require our courts to order payment in local currency only the innovative lead taken both in Miliangos and the subsequent extensions to the rule there enunciated and in the Murata Machinery case in South Africa is to be adopted. This will bring Zimbabwe into line with many foreign legal systems. See Mann, The Aspect of Money, 4th ed at pp 339-40.

Fluctuations in world currencies justify the acceptance of the rule not only that a court order may be expressed in units of foreign currency, but also that the amount of the foreign currency is to be converted into local currency at the date when leave is given to enforce the judgment. Justice requires that a plaintiff should not suffer by reason of a devaluation in the value currency between the due date on which the defendant should have met his obligation and the date of actual payment or the date of enforcement of the judgment. Since execution cannot be levied in foreign currency, there must be a conversion into the local currency for this limited purpose and the rate to be applied is that obtaining at the date of enforcement.'”…,.

I entirely subscribe to both the Learned Judge and the then Chief Justice.

The matter of AMI Zimbabwe (Pvt) Ltd v Casalee Holdings (Successors) (Pvt) Ltd 1997 (2) ZLR 77 (S)…, is apposite where it was held that it was proper not only to give judgment in a foreign currency but also to couple such award with standard order that interest on the amount be payable tempore morae at the rate applicable to the currency in question.

I do not agree with counsel for the defendant that a judgment in foreign currency will be a brutum fulmen in light of the cases extensively cited herein above and dismiss that argument.

This is an appropriate case which warrants a judgment in foreign currency as clearly reasoned by the Chief Justice in Makwindi Oil Procurement (Pvt) Ltd v National Oil Company of Zimbabwe (Pvt) Ltd 1988 (2) ZLR 482 (SC)…,.

The plaintiff succeeds in its claim and the following is my order;

DISPOSAL

(a) Defendant is ordered to pay the plaintiff the sum of US$31,400.

(b) Interest thereon at the prescribed rate of interest per annum from 19 January 2018 to the date of payment in full and final settlement.

(c) Costs of suit ordinary scale.

HH440-19 : INTRATREK ZIMBABWE (PVT) LTD vs ZIMBABWE POWER COMPANY (PVT) LTD
Ruled By: CHITAPI J

Specific performance is a discretionary remedy which the court may grant.

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE
Ruled By: PATEL J

The plaintiff in this matter claims the sum of US$24,100 as special damages, being loss of profits arising from an alleged breach of contract by the defendants.It also claims restitution of US$10,000 paid as a deposit to the first defendant under the same contract.The defendants deny any breach on their ...

The plaintiff in this matter claims the sum of US$24,100 as special damages, being loss of profits arising from an alleged breach of contract by the defendants.

It also claims restitution of US$10,000 paid as a deposit to the first defendant under the same contract.

The defendants deny any breach on their part and allege that it was in fact the plaintiff that acted in breach of contract.

Evidence for the Plaintiff

Wayne Victor Moss is the Chief Executive Officer of the plaintiff company which, together with CCC Pigs (Pvt) Ltd, is a subsidiary of Colcom Foods Limited. He testified as follows:

On the 18th of January 2010, he signed the Agreement in casu with the defendants. In essence, the Agreement was for the sale of 500 tons of maize (at US$235 per ton) for a total purchase price of US$117,500. The maize was to be sourced by the first defendant from the Grain Marketing Board (the GMB).

On the same date, the second defendant signed a contract of suretyship guaranteeing the delivery of maize in terms of the Agreement. He said that the first defendant had a credit facility with the Grain Marketing Board (GMB) for 2,000 tons.

On the 21st of January, he withdrew a total of US$100,000 from the bank. He paid the agreed deposit of US$10,000 to the second defendant and then proceeded with him to the Grain Marketing Board (GMB) with US$90,000 in cash.

The Grain Marketing Board (GMB) was not aware of the transaction and had no release orders in the name of the first defendant. He was told by the GMB's Credit Controller (Mawanza) that he could obtain only 300 tons of maize at a higher price of US$300 per ton if he paid the US$90,000 into the first defendant's account with the GMB. This was because the first defendant's facility was for a maximum of 300 tons and because its account with the GMB was in debit at that time.

The second defendant then undertook to resolve the matter the following day.

The witness subsequently visited the Grain Marketing Board (GMB) on four consecutive days and was given the same explanations by Mawanza. He then met the GMB Marketing Manager (Mandizvidza) who cautioned him against dealing with the first defendant. Mandizvidza later furnished a letter confirming the first defendant's credit standing with the GMB at the relevant time.

The plaintiff did not proceed with the transaction as it became evident that the first defendant did not have the capacity to deliver as agreed.

The Agreement was cancelled on the 2nd of February and this was confirmed by the plaintiff's lawyers in their letter of the 4th of March to the first defendant. The defendants offered to restitute the US$10,000 deposit in January and October 2010, but have not made any payment to date.

The plaintiff had a contract with CCC Pigs (Pvt) Ltd, signed immediately after the Agreement with the defendants, for the onward supply of 500 tons of maize at a price of US$290 per ton. This represented a profit margin of US$55 per ton equating to a total profit of US$22,500. The plaintiff had arranged for the transportation of the maize at a cost of US$200 per truck. In order to meet its contract with CCC Pigs the plaintiff had to order 508 tons of maize from South Africa at a price of US$317 per ton.

Under cross-examination, the witness conceded that the deposit of US$10,000 was not paid on signature of the Agreement but on the 21st of January and that the sum of US$90,000 was not deposited into the GMB's bank account as agreed. The payments were a few days late and not strictly in accordance with the terms of the Agreement. However, this was not unreasonable in the circumstances of the transaction and the second defendant had accepted the delays. Moreover, the witness did not have the Grain Marketing Board's (GMB) bank account details.

Odson Dzanga is the plaintiff's Financial Manager. He accompanied Wayne Victor Moss to the Grain Marketing Board (GMB) on the 22nd of January 2010. He confirmed that the GMB would only have released 300 tons of maize upon payment of the US$90,000 in cash. He added that the first defendant's account with the GMB was in arrears standing at about US$54,000 as at the 8th of January 2010.

Emson Mandizvidza has been employed by the Grain Marketing Board (GMB) as its Marketing Manager since 2003. His duties include checking the credit facilities of customers, and, in conjunction with the Credit Controller, authorising release orders on credit sales. He corroborated the testimony of Wayne Victor Moss and Odson Dzanga regarding their visit to the GMB on the 22nd of January and his discussion with Moss in the presence of the second defendant. He also confirmed the contents of his letter of the 13th of May 2010 concerning GMB prices and the first defendant's credit status.

Between the 18th and 22nd of January 2010, the first defendant's credit facility was on hold because of its outstanding arrears of US$54,000, and, in any event, that facility did not enable it to buy 500 tons of maize from the Grain Marketing Board (GMB). At that time, the first defendant's credit facility was limited to 300 tons per month.

In practice, a credit customer wishing to increase its credit limit would have to apply, in writing, and the application would then be assessed by the Risk Management Committee (the RMC) which meets once a week.

In December 2009, the first defendant applied to increase its credit limit to 2,000 tons per month. This application was turned down by the Risk Management Committee (RMC) before the 18th of January. As at that date, there was no application from the first defendant to increase its credit limit. Even if it had lodged an application, this would only have been processed the following week and it would not have been possible to approve any increase on the 22nd of January. The Grain Marketing Board (GMB) sued the first defendant for the outstanding US$54,000 in April 2010 in Case No. HC2191/10. At the present time, the first defendant is no longer a credit client of the Grain Marketing Board (GMB).

Wanda van den Bergh is a grain broker. Her evidence was that she introduced Wayne Victor Moss to the second defendant in January 2010. The agreement between them was for the first defendant to supply maize to the plaintiff for onward sale to CCC Pigs (Pvt) Ltd. She was not aware of the first defendant's credit facility with the Grain Marketing Board (GMB).

Evidence for the Defendants

Nelson Mahupete, the second defendant, is the Chairman and Managing Director of the first defendant.

His evidence was that in December 2009 he applied to the Grain Marketing Board's (GMB) credit controllers (Mawanza and Pfumbidza) to increase the first defendant's credit facility from 300 tons to 2,000 tons per month. They agreed to increase the facility to 1,500 tons - provided the outstanding debt of US$54,000 due to the GMB was cleared.

After the Agreement was concluded with the plaintiff, Wayne Victor Moss only paid the deposit of US$10,000 after three (3) days. Moreover, he did not effect transfer of the US$90,000 into the Grain Marketing Board's (GMB) account but arrived at the GMB offices with the cash equivalent. He then declined to pay that amount towards the first defendant's account with the GMB. If he had done so, the first defendant would have fulfilled the contract to deliver 500 tons of maize.

As regards the debt of US$54,000 owed to the Grain Marketing Board (GMB), the first defendant has already paid US$33,250 towards this and the balance is to be cleared as per an agreed payment plan.

Under cross-examination, the second defendant conceded that the 500 tons of maize in question was for pig feed but denied that it was intended for CCC Pigs (Pvt) Ltd.

He disputed the averment to that effect made by Mandizvidza in his statement to the CID Serious Fraud Squad on the 12th of February 2010.

As regards the release orders for 500 tons of maize, he admitted that he did not have them in his possession on signature of the Agreement on the 18th of January or at the Grain Marketing Board (GMB) offices on the 21st of January.

He has been charged with fraud in respect of the present contract. The criminal trial has commenced and is yet to be completed.

Vavavirayi Mawanza has been the Grain Marketing Board's (GMB) Credit Controller since January 1999.

His evidence was that Grain Marketing Board (GMB) release orders are first signed by him and then by the Marketing Manager before they are issued. In August 2009, the first defendant applied for a credit facility, and, in September, it was granted a facility for 150 tons per fortnight or 300 tons per month. In December 2009, the GMB released a total of 268 tons of maize to the first defendant. The latter then applied for a facility of 2,000 tons per month. On the 18th or 19th of December, he verbally advised the second defendant that he could only approve a facility of 1,500 tons on condition that the first defendant paid an additional US$200,000 towards its account with the GMB.

As at the 8th of January 2010, the first defendant's account was in debit of about US$54,000. On the 22nd of January 2010, Wayne Victor Moss came to the Grain Marketing Board (GMB) wanting to pay US$90,000 into the first defendant's account. The witness refused his request and said that the first defendant should make the payment itself. Moreover, it would not have been possible for Moss to have paid the GMB through its own bank account.

In his statement to the CID Serious Fraud Squad, dated the 15th of February 2010, he declared that “the accused (second defendant) has a buying limit of 150 tonnes at a time.”

There was no mention of an increased limit of 1,500 tons having been conditionally approved.

Tatenda Pfumbidza is an Assistant Credit Controller with the Grain Marketing Board (GMB).

He confirmed that an existing credit client must apply, in writing, for any increase in its credit facility and that, if its application is approved, the Marketing Department and the client must be advised of the increased limit in writing.

When the first defendant applied for an increased limit of 2,000 tons, in December 2000, it was told to make an additional payment of “more than US$100,000” towards its account with the Grain Marketing Board (GMB). This application was not approved because the additional payment was not made.

In February 2010, the second defendant approached him for a credit reference. He then wrote two reference letters dated the 5th and 8th of February. He conceded that the letters were silent as to the conditions of release and the tonnage that could be released to the first defendant. Moreover, he accepted that the letters were not addressed to the plaintiff or to Wayne Victor Moss and that they were written after the events giving rise to the plaintiff's action in casu.

Breach of Agreement by Plaintiff

It is a fundamental premise of every contract that both parties will duly carry out their respective obligations. See Green v Lutz 1966 RLR 633; ESE Financial Services (Pty) Ltd v Cramer 1975 (2) SA 805 (C)…,.

As is explained by CHRISTIE: Business Law in Zimbabwe…,.:

“There is a presumption that in every bilateral or synallagmatic contract, i.e. one in which each party undertakes obligations towards the other, the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations….,.

…,. Conversely, a party who has caused the other to commit a breach cannot found a claim on the breach…,.”

In terms of clause 3 of the Agreement in this case, the plaintiff undertook to pay a deposit of US$100,000 “upon the signing of this agreement”, US$90,000 into the bank account of the Grain Marketing Board (GMB) and US$10,000 in cash to the defendants.

It is common cause that Wayne Victor Moss did not pay the deposit of US$10,000 and did not transfer the sum of US$90,000 into the Grain Marketing Board's (GMB) bank account upon signature of the Agreement. Instead, he paid the US$10,000 deposit only on the 21st of January, and, on the same date, tendered US$90,000 in cash to the GMB.

It is therefore clear that the plaintiff did not perform its obligations strictly in accordance with clause 3 of the Agreement.

However, it is equally clear that the defendants accepted the late payment of the US$10,000, and, furthermore, they actively attempted to pressurise Wayne Victor Moss to pay the US$90,000 in cash to the Grain Marketing Board (GMB), particularly as it was not practically possible for him to make that payment into the GMB's bank account.

At that stage, he was obviously willing and able to make both payments in performance of the plaintiff's obligations.

Given the attitude and conduct of the parties, the delay of three (3) days in tendering the payments and the departure in the mode of payment to the Grain Marketing Board (GMB) were not material to the plaintiff's undertakings under the Agreement; and, although the plaintiff did not strictly comply with its payment obligations, such non-compliance was accepted by the defendants.

In short, they positively acquiesced in that non-compliance and are therefore estopped from raising it as a defence to the plaintiff's claim.

Breach of Agreement by Defendants

Turning to the defendants' undertakings, these were spelt out in clauses 4 to 7 of the Agreement.

(a) Firstly, once the plaintiff had paid the deposit, the first defendant was obliged, under clause 4, to cede its release orders for 500 tons of maize “which it has already received or will shortly receive from GMB.”

(b) Secondly, after paying the deposit, the plaintiff was authorised, by clause 5, “to immediately upload the maize from GMB.”

(c) Thirdly, by virtue of clause 6.1, the first defendant warranted that “it does currently, or it will, by Tuesday 19 January 2010, have a release order or release orders in its name from GMB for 500 tons of maize.”

(d) Finally, clause 7.1 entitled the plaintiff to cancel the contract “should the seller not have a release offer [sic] or release offers [sic] in its name by Friday 22 January 2010.”

It is submitted, for the defendants, that the undertakings stipulated in the Agreement are dubious in their meaning. Consequently, in as much as the Agreement was drafted by the plaintiff's lawyers, its provisions must be construed strictly as against the plaintiff on the one hand and leniently as against the defendants on the other.

While this may be the general purport of the so-called contra proferentem or contra stipulatorem rule of interpretation, it is trite that this rule may only be invoked where the provision to be applied is ambiguous in its meaning or effect. See CHRISTIE: Business Law in Zimbabwe…,.

In the instant case, I do not perceive any such ambiguity in the terms of the Agreement. In my view, the combined effect of clauses 4 to 7 of the Agreement was this:

The defendants warranted that they either had the requisite release orders or would have them in their possession by the 19th of January; they undertook to cede the release orders to the plaintiff upon payment of the stipulated deposit; the plaintiff would then take delivery of 500 tons of maize; and, in the event that the defendants did not have the release orders by the 22nd of January, at the latest, the plaintiff was entitled to cancel the Agreement.

The test for determining the repudiation of a contract by way of anticipatory breach was expounded by NIENEBAR JA in Datacolor International (Pty) Ltd v Intamarket (Pty) Ltd 2001 (1) SA 581 (A)…, as follows:

“…, the emphasis is not on the repudiating party's state of mind, on what he subjectively intended, but on what someone in the position of the innocent party would think he intended to do; repudiation is, accordingly, not a matter of intention, it is a matter of perception.

The perception is that of a reasonable person placed in the position of the aggrieved party. The test is whether such a notional reasonable person would conclude that proper performance (in accordance with a true interpretation of the agreement) will not be forthcoming. The inferred intention accordingly serves as the criterion for determining the nature of the threatened actual breach.

…, due to the co-contractant's repudiation, the innocent contractant is excused from any steps that he must take in preparation for his own performance…,. In these circumstances, the purchaser will not fall into mora by failing to tender performance…, as long as he signifies his willingness to perform.”

Similarly, LORD WRIGHT, cited with approval in Chinyerere v Fraser N.O. 1994 (2) ZLR 234 (H)…, observed as follows in Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1940] 3 All ER 60 (HL)…,.:

“I do not say that it is necessary to show that the party alleged to have repudiated should have an actual intention not to fulfil the contract. He may intend in fact to fulfil it, but, may be determined to do so only in a manner substantially inconsistent with his obligations, and in no other way.”

The evidence before the Court shows that the first defendant did not have the requisite release orders from the Grain Marketing Board (GMB), either by the 19th or the 22nd of January, nor did it hold a credit facility with the GMB for 500 tons of maize at that time. Conversely, on the 21st of January, the plaintiff had paid the cash deposit of US$10,000 to the defendants and was prepared to pay the remaining deposit of $90,000 in cash to the GMB.

It follows that the defendants were patently in breach of the warranty contained in clause 6.1, and, because of their evident inability to fulfil the contract timeously, they were in anticipatory breach of their obligations under clauses 4 and 5 to cede the release orders and deliver 500 tons of maize. Consequently, the plaintiff was entitled to withhold any further payment under the Agreement.

Cancellation of Agreement

At common law, an anticipatory breach ordinarily entitles the innocent contractant to cancel the contract. As is observed by KERR: The Principles of Contract Law (6th ed.)…,.:

“…, repudiation before the due date for performance by a party prospectively in default constitutes anticipatory breach of contract on which the aggrieved party may take action if he so elects.”

In the instant case, clause 7.1 of the Agreement expressly allowed the plaintiff to cancel the contract in the event of the first defendant's failure to have the requisite release orders in its name by the 22nd of January 2010.

Thus, as at that date, the plaintiff was entitled to cancel on two separate grounds, viz;

(i) The defendants' actual breach of warranty as well as;

(ii) Their anticipated failure to cede the release orders and deliver the stipulated tonnage of maize in breach of clauses 4 and 5 of the Agreement.

In the event, the plaintiff lawfully cancelled the Agreement on the 2nd of February 2010, as was confirmed by its lawyers in their letter of the 4th of March 2010 to the defendants.

Claim for Special Damages

Clause 7 of the Agreement stipulates the plaintiff's remedies in the event of cancellation.

Both counsel for the plaintiff and counsel for the defendants have opted not to proffer any enlightenment on what was intended by the parties, presumably because that intention is not easily discernible from the vague and seemingly contradictory elections set out in this clause.

It then becomes necessary to consider the plaintiff's rights and remedies at common law.

It is trite that an aggrieved contractant is entitled to claim damages arising from his co-contractant's breach of contract - including any breach of warranty.

As was stated in Evans & Plows v Willis & Co. 1923 CPD 496…,:

“In our law, if an express warranty…, has been given by the seller and this turns out to be untrue an action for damages for breach of contract lies.”

The plaintiff in casu has elected not to claim the expenses actually incurred by it in replacing the 500 tons of maize at US$317 per ton from the alternative source in South Africa. The difference in prices alone would derive a net loss of US$158,500 less US$117,500 amounting to US$41,000.

Instead, the plaintiff claims a lesser sum of US$24,100 as special damages, based on its anticipated loss of profits consequential upon the defendants' breach of contract. This amount is calculated as follows: the gross profit of US$145,000 that the plaintiff would have received from its contract with CCC Pigs (Pvt) Ltd less US$120,900, being the contract price of US$117,500 under the Agreement plus the notional cost of transport totalling US$3,400.

In United Air Charters (Pvt) Ltd v Jarman 1994 (2) ZLR 341 (S)…, cited with approval in Collective Self Finance Scheme v Asharia 2000 (1) ZLR 472 (S)…, GUBBAY JA described special damages as follows:

“Special damages…, are ordinarily regarded in law as being too remote to be recoverable unless, in the special circumstances attending the conclusion of the contract, it can be deduced that the parties actually or presumptively foresaw that they would probably flow from its breach (and thus, that it was within their contemplation).

…,. To ascertain what the parties actually contemplated, or may be supposed to have contemplated, it is of assistance to look to:

(a) The subject matter and terms of the contract itself;
(b) The special circumstances known to both parties at the time they contracted.”

The evidence in this case shows that the defendants were aware of the plaintiff's onward contract with CCC Pigs (Pvt) Ltd and the contemplated profit that the plaintiff would accrue from that contract. They therefore foresaw, either actually or presumptively, that the plaintiff would suffer loss of profits in the event of their breaching their undertakings in terms of the Agreement. They are accordingly liable for the special damages claimed by the plaintiff.

Claim for Restitution

In the event of non-delivery of the goods sold under a contract, the right of the aggrieved party to claim restitution from the defaulting party is ordinarily unchallengeable.

As was held by KORSAH JA in Nissan Zimbabwe (Pvt) Ltd v Hopitt (Pvt) Ltd 1997 (1) ZLR 569 (S)…,:

“Whether the wrongful act arises out of contract or tort, where there has been actual pecuniary loss which is capable of precise quantification, the rule which the law adopts is restitutio in integrum – the injured party is entitled to claim to be placed back in the same position as he would have been in had it not been for the defendant's wrongful act.”

In the present matter, the plaintiff's right to recover the deposit paid in the event of cancellation is also affirmed in clause 7 of the Agreement, notwithstanding the ambiguities in that clause that I have earlier referred to.

The evidence clearly shows that the plaintiff paid US$10,000 as a deposit to the defendants and that the latter gave nothing in return for that amount.

Indeed, the defendants specifically acknowledged their liability to refund the deposit in the subsequent dealings between the parties and their respective lawyers.

It follows that there is no defence to the plaintiff's right to restitution and that this claim must also be upheld.

Suretyship and Joint and Several Liability

The contract of suretyship attached to the Agreement, which contract was admittedly signed by the second defendant, binds him “as surety and co-principal debtor…, for the due performance by [the first defendant] of all its obligations under the agreement.”

Again, “in the event of [the first defendant] failing to perform any of its obligations under the said agreement”, the second defendant explicitly accepted “liability for the balance of its indebtedness and for all interest, costs, damages, losses and expenses which [the first defendant] might be liable for in terms of the said agreement.”

Having regard to these unambiguous provisions, I am unable to comprehend why it is necessary to determine the second defendant's status as surety under the Agreement or the joint and several liability of both defendants thereunder.

It is undeniably clear that the second defendant stood as surety for the first defendant, and, thereby, rendered himself liable for the full performance of the first defendant's obligations under the Agreement. It is also unquestionable that the first and second defendants are jointly and severally liable for the damages and legal costs incurred by the plaintiff.

Costs

As a rule, the courts are loathe to accede to a prayer for an award of costs beyond the ordinary scale. However, this rule may properly be departed from where the unsuccessful party's conduct has been particularly unreasonable and reprehensible; for instance, by obstinately refusing to resolve the dispute amicably and inexpensively. Such vexatious conduct fully justifies an award of costs on a higher scale in favour of the successful party. See Borrowdale Country Club v Murandu 1987 (2) ZLR 77 (H); Chioza v Sawyer 1997 (2) ZLR 178 (S); NUST v NUST Academic Staff & Others 2006 (1) ZLR 107 (H).

The evidence before the Court shows that this matter could, and should, have been resolved in January or soon thereafter. It was obvious, at that stage, that the defendants were unable to fulfil the terms of the Agreement, largely because of their own default in sustaining their credit account with the Grain Marketing Board (GMB). In light of their failure to deliver under the Agreement, there should have been no question of their liability to refund the deposit of US$10,000 to the plaintiff. Their exposure to an additional claim for damages might also have been averted had they restored that deposit or demonstrated their preparedness to restitute. Their recalcitrance was simply designed to delay and frustrate the plaintiff and compel it to seek recourse before this Court at considerable legal expense.

I am amply satisfied that they should recompense the plaintiff through a punitive award of costs.

Disposition

In the result, it is ordered that judgment be entered in favour of the plaintiff as against the defendants, jointly and severally, the one paying the other to be absolved, for:

(i) Payment of the sum of US$24,100 as special damages for loss of profits;

(ii) Payment of the sum of US$10,000 as restitution;

(iii) Interest on the aforesaid amounts at the prescribed rate calculated from the date of judgment to the date of full and final payment;

(iv) Costs of suit on a legal practitioner and client scale.

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD
Ruled By: MATHONSI J

The law and the courts are not there to protect poor and extremely unreasonable business decisions; decisions made by people knowing fully well they are unwise hoping that the courts will sympathise.

HH39-09 : WARREN PARK TRUST vs ANTHONY PAHWARINGIRA and NTOMBIZODWA PAHWARINGIRA and DAVY MUTINGWENDE and CHIPO MUTINGWENDE and SALTANA ENTERPRISES PL
Ruled By: BHUNU J

The applicant is a Trust duly registered in terms of the laws of this country whereas the fifth respondent is a limited liability company registered in terms of the laws of this country. The first to fourth respondents are sole shareholders and directors in the fifth respondent, Saltana Enterprises (Pvt) Ltd.

The fifth respondent is currently under judicial management. Its judicial manager, Mr C Madondo, has, however, since filed a letter saying that he has no interest in this case and will abide by the decision of this Court and has sent a representative for an observation brief.

That being the case, the question of the fifth respondent's locus standi, that is to say, the right to stand and be heard in court, becomes a non-issue.

The first and second respondents are husband and wife. The same applies to the third and fourth respondents.

At the commencement of this hearing, the first and third respondents requested that their wives be excused from the hearing and that they be allowed to represent and speak on behalf of their respective wives to save costs.

There being no objection from counsel for the applicant, I granted the two respondents permission to represent and speak on behalf of their wives.

In any case, the two wives were already in default and would have had default judgments entered against them anyway. It is highly unlikely that they can successfully apply for rescission of judgment seeing that the defaults appear to be willful and deliberate. For that reason, I cannot perceive any prejudice which cannot be redressed by an appropriate order of costs if their husbands are allowed to speak on their behalf with the applicant's consent.

In this regard, I find the applicant's attitude commendable in that it is not trying to snatch at default judgement but to obtain judgment on the merits.

In granting this unusual request, I was alive to the peculiar relationship between husband and wife in that they normally have a common interest and household.

Generally speaking, at common law, the husband is the head of the family and has the marital power although the position has been somewhat altered by statute. In Christian parlance, they are said to become one flesh and blood at marriage.

That being the case, I could perceive no impediment or impropriety in a husband representing his wife in a case in which they are jointly being sued and there is no objection from the other party.

The respondents objected to the matter being placed before this Court arguing that the dispute ought to have been referred for arbitration in terms of clause 13 of the contract which provides as follows:

“In the event of a dispute or a claim arising as a result of a breach of this agreement or other cause arising from this agreement, then, the purchaser shall be entitled, after notifying the seller beforehand, to have the dispute or claim or other cause referred to arbitration.”

My reading of the above clause is that it does not compel the applicant to refer the matter for arbitration in the event of a dispute arising. It merely entitles, without directing, the applicant to refer the dispute for arbitration.

In other words, the clause merely confers a discretion on the applicant whether or not to refer the matter to arbitration without impeding its right to approach the Courts for redress.

For that reason, I hold that the applicant was within its rights in referring the dispute to court for resolution.

Having said that, I now turn to determine the matter on the merits.

The facts giving rise to this application are to a large extent common cause. The undisputed facts are that some time in March 2005 the first to fourth respondents (hereinafter referred to as the respondents) concluded a written contract in terms of which they sold to the applicant their entire shareholding in the fifth respondent to the applicant.

The written contract of sale was subject to various suspensive conditions in favour of the applicant. The contract however conferred upon the applicant the right to waive the suspensive conditions thereby bringing the terms of the contract into force.

The applicant subsequently waived its rights under the suspensive conditions sometime in June 2005 and demanded that the respondents perform their part of the bargain in terms of the written contract.

The respondents took exception and objected on the basis that they had already cancelled the contract on account of breach of contract. In particular, they objected on the basis that the applicant had not discharged its obligations under clause 1. 2.18 of the contract. That clause falls under the definition section of the agreement and it provides as follows:

“'Signature date' means the date of signature of this agreement by the party last signing.

As soon as possible thereafter the amount of $100 million shall be paid to the Sellers in equal portion of $25 million each in such consideration as the Purchaser shall determine at its sole discretion. A further amount of $100 million shall thereafter be paid to the Sellers on similar terms, on the Effective Date.”

The respondents acknowledged having been paid the initial $100 million dollars in terms of the above clause but denied having been paid the remaining $100 million dollars.

The alleged non-payment of that amount forms the basis of the respondents' refusal to perform their part of the bargain and purported cancellation of the contract.

The applicant denies that it breached any material terms of the contract as alleged or at all thereby entitling the respondents to cancel the contract.

Firstly, it denies that it failed to pay the remaining $100 million dollars as alleged by the respondents.

This is a factual dispute incapable of determination on the papers. Fortunately, it is not necessary to resolve that factual dispute for the purpose of determining this matter.

Apart from denying that it failed to pay the amounts stipulated in clause 1. 2. 18 of the contract, the applicant also argued that the clause was not a material term of the contract but merely constituted a sweetener.

A sweetener, in my view, is payment calculated to raise the other party's appetite so as to induce him to contact.

Clause 1.2.18 of the contact appears to have all the hallmarks of a sweetener in that it is tied up with the definition of the word “signature”. It refers to payment of “such consideration as the purchaser shall determine at its sole discretion.”

It is inconceivable that had the payment under this clause been intended to be a material term of the contract the parties could have left its payment to the sole discretion of the parties.

This provision is different from clause 4 which places an obligation on the applicant to pay on pain of cancellation and heavy penalties in the event of failure to pay.

For that reason, I come to the conclusion that clause 1.2.18 is not a material term of the contact the breach of which would entitle the aggrieved party to cancel the contract.

It was the applicant's further argument that it is entitled to compel the respondents to perform their part of the bargain under clause before it becomes liable to pay the purchase price which is not yet due until the price is determined in terms of clause 4 of the agreement.

It might be necessary, at this juncture, to determine whether the parties concluded a binding contract in view of the fact that the agreement did not fix the price but merely provided a formula for fixing the price.

It is trite and a matter of elementary law that the essential elements of a valid contract of sale comprise:

1. Agreement (consensus ad idem) as to:-

(a) The thing sold, the (merx); and

(b) The price of the thing sold, the (pretium).

In other words, a contract of sale comprises three essential elements, that is to say:-

(i) An agreement between the parties to buy and sale.

(ii) An agreement on the thing or commodity sold known as the merx.

(iii) An agreement on the price known as a pretium.

R.H. CHRISTIE's Business Law in Zimbabwe…,; E KAHN's Contract and Mercantile Law Through the Cases…,; and P S ATIYAH's The Sale of Goods…, are instructive on this well established legal principle on the essential elements of a valid contract of sale.

The material terms of the written contract, which form the basis of the contract at hand, are to be found under clauses 3 and 4 which provide as follows:-

“3. Sale

3.1 Subject to the fulfillment or waiver of the suspensive conditions, the seller sell(s) to the Purchaser which purchases the shares from the Effective Date.

3.2 Should the suspensive conditions be fulfilled or waived, then ownership in and the risk and benefit attaching to the Shares will be deemed to have passed to the Purchaser on the Effective Date notwithstanding the fact that this agreement may have been signed after the Effective Date or that the suspensive conditions are fulfilled or waived.

3.3 Each of the Sellers confirms that it has, prior to the Signature Date, waived any and all pre-emptive rights it may have in respect of the Shares.

4. Purchase consideration and payment

4.1. The consideration for the shares shall be an amount equal in the aggregate to 20% (TWENTY PER CENTIUM) of the CVEM (City Valuer & Estates Manager) Price as at effective date less the development costs of the Stands and the standard commission payable to any estate agent after the said date.

4.2 The consideration is payable within ninety days from the date of receipt of the Certificate of Compliance issued by the City of Harare in terms of clause 10 of the agreement.”

Undoubtedly, the respondents agreed to sell to the applicant the shares stipulated in the written contract in terms of clause 3 for a price to be determined in terms of clause 4 of the written contract.

In the ordinary run of things, our law requires that the price be fixed before a valid contract comes into being: see VOET (18.1.1). This is, however, not a rule of thumb. Where the price, though not fixed, can easily be ascertained, a valid contract comes into being notwithstanding the fact that the actual price has not yet been fixed.

It is an everyday occurrence that people often transact perfectly valid contracts of sale leaving the price to be determined at a future date. This prompted LANSDOWN JP, in R v Pearson 1942 EDL 117…, to remark that:

“There are many transactions in which goods pass on sale without a price being stated and the transaction is nonetheless a sale, if the court can determine, from the conduct of the parties and the surrounding circumstances, how the price was to be determined.”

Likewise, the court, in the case of Dublin v Diner 1964 (1) SA 799 recognised a contract of sale where the purchaser had agreed to purchase the applicant's shares at a price to be determined by the company's auditors.

See also Gilling v Sonnenberg 1953 (4) SA 675 T.

The above two cases are on all fours with the case at hand where the parties agreed to sell each other shares at a price to be determined by a third party, the City Valuer & Estates Manager.

Undoubtedly, the price, though not stated in this case, it can easily be determined once the City Valuer Manager has carried out the necessary evaluations.

I accordingly hold that the parties' respective contracts of sale were perfectly valid and enforceable.

The respondents, however, resist performing their respective parts of the bargain arguing that they have already terminated the agreement in terms of the written contract on account of breach of contract.

The applicant, on the other hand, denies that the respondents ever terminated the agreement in the manner alleged or at all.

Clause 12 of the agreement lays down the procedure that has to be followed by a party wishing to effect cancellation on account of breach. The clause reads:

“12. Breach

Should either party commit a material breach of this agreement and fail to remedy such breach within 14 days (fourteen) days of written notice requiring the breach to be remedied, then. the party giving notice will be entitled, at its option, either to cancel this agreement and claim damages or to claim specific performance of all the defaulting party's obligations, together with damages if any whether or not such obligations have fallen due for performance.

The defaulting party shall become liable for all legal fees incurred by the aggrieved party (on a Legal Practitioner and Client scale) including collection fees incurred by the aggrieved party seeking such redress whether through the courts or arbitration. As provided for herein.”

The applicant denies having been given the requisite fourteen (14) days notice.

That being the case, the onus was squarely on the respondents to establish, on a balance of probabilities, that they complied with the mandatory requirements of clause 12 of the Agreement.

Apart from their mere say so, the respondents have not been able to produce any shred of evidence that they gave the applicant the necessary fourteen (14) days written notice. The respondents were obliged to produce a copy of the written notice, or, at least, tender an explanation as to why it was not available.

This they did not do.

When writing to counsel for the fifth respondent, Saltana Enterprises, on the issue of written notice, in a letter dated 10th January 2006, the respondents resorted to generalizations and subterfuge. This is what they had to say in paragraph 2 of their letter:

“Could you please give the lawyers the letter attached to this one where we cancelled the agreement because they failed to honour it. They were given their 14 days notice, and, even if they were not, surely by now, more than six months after the cancellation, they have been in a position to appreciate that we were carrying on without them.”

What emerges quite clearly from the above paragraph is that the respondents have proffered written evidence of the letter dated 11th July 2005 canceling the Agreement of Sale. They have, however, not proffered any evidence tending to show that they gave the vital fourteen (14) days written notice. They do not have any evidence as to when it was written and as to when, where, and how it was served or delivered to the applicant.

Our law requires not only that the notice to cancel be properly delivered but also proof that it was in fact received by the other party: see Cohen and Another v Lench 2007 (6) SA 132.

Thus, in the absence of any averments that the alleged notice was properly served and received, one cannot assume that it was so served and received.

In the circumstances of this case, I have therefore no hesitation, whatsoever, in concluding, on the papers before me, that the respondents have dismally failed to proffer any evidence tending to suggest that they gave the requisite fourteen (14) days notice to cancel the agreement.

It is now settled law that where the parties have agreed on a particular mode of termination of their contract it must be followed to the letter.

In the words of KORSAH JA, in Minister of Public Construction & National Housing v Zesco (Pvt) Ltd 1989 (2) ZLR 311…,:

“Where parties to a contract have agreed upon a procedure for terminating an agreement, they are bound by the provisions spelling out those procedures as if they have been imposed upon them by law, and a departure from the agreed procedure will not result in an effective termination of the contract.”

Those wise words signify the time honoured principle of the inviolability and sanctity of contract.

It is therefore in the public interest that agreements freely entered into must be honoured; and it is the unwavering duty of the courts to give effect to all lawful binding agreements; see Book v Davidson 1988 (1) ZLR 365…,.

For that reason, our courts lean in favour of upholding binding contracts rather than their abrogation. This prompted the Court, in Madoo (Pty) Ltd v Wallace 1979 (2) SA 957, to remark that:

“Our system of law pays great respect to the sanctity of contact. The Courts would rather uphold than reject them.”

On the papers before me, I am satisfied beyond question that the respondents' purported cancellation of the written contract was a nullity and of no force or effect in so far as they failed to observe the cancellation procedure laid down in the contract. More particularly, in that, they failed to give the requisite fourteen (14) days notice to cancel the contract on account of the alleged breach.

For the foregoing reasons, I therefore come to the conclusion that the respondents are firmly bound and are liable to perform their part of the bargain in terms of their written contract of sale.

As the first and third respondents' spouses did not appear to oppose the application they shall not be required to meet the costs of opposing the application.

It is accordingly ordered:

1. That upon receipt of the purchase price calculated in terms of clause 4 of the contract of sale and fulfillment of all the applicant's contractual obligations under the contract -

1.2 The first, second, third, and fourth respondents be and are hereby ordered to sign all documents necessary to transfer all their respective shares in the fifth respondent to the applicant.

1.2 The first, second, third, and fourth respondents be and are hereby ordered to deliver to the applicant:-

(a) All documents and books of accounts, registers, contracts, minute books, salary records, and other documents and records relating to the fifth respondent; and

(b) Such documents, powers of attorneys, and authorities as may be reasonably required by the applicant to enable it to acquire ownership of the fifth respondent's shares and/or beneficial interest therein, the business assets or the registration in the name of any of the business assets, should the need arise.

1.3 The first, second, third, and fourth respondents be and are hereby ordered to sign documents resigning as directors of the fifth respondent, failing which the Sheriff of Zimbabwe or his lawful deputy be and is hereby authorised to sign all necessary documents (in particular Form CR14) removing the current directors of the fifth respondent and substituting the same with the applicant's appointees.

1.4 The first, second, third, and fourth respondents and all those claiming through them, be and are hereby interdicted and/or restricted from carrying on any developments and/or works in furtherance of the fifth respondent's business operations without the applicant's written approval.

1.5 The first and third respondents be and are hereby ordered to pay the costs of this application.

2. For the avoidance of doubt, it is ordered that the applicant be and is hereby authorised to enforce its contractual rights against the respondents only upon due fulfillment and discharge of all its contractual obligations under the written contract annexture “A”.

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

This is an appeal against the decision of the High Court granting summary judgment against the appellant in the sum of US$8,330,470=52 together with interest at 2.5% per annum above the prime overdraft Bank rate and costs of suit.The claim against the appellant arose from a Service Provider Agreement concluded ...

The claim against the appellant arose from a Service Provider Agreement concluded between the parties on 10 March 2006 (the Agreement). The Agreement required the appellant to pay the sums due thereunder within thirty days of receiving the respondent's invoices.

It is common cause that the appellant owed the respondent the outstanding amount claimed as at 30 September 2010.

The respondent issued summons on 16 November 2010, and, following the appellant's appearance to defend, applied for summary judgement on 14 February 2011.

The court a quo held that the respondent's claim was unimpeachable and that the appellant had no plausible defences to the claim. In particular, the court found that there was no supervening impossibility due to the currency regime changeover between January and March 2009, entailing any objective impossibility of recovering debts from the appellant's customers. Additionally, there was no condition precedent in the Agreement that those customers should first pay the appellant before it became obliged to pay the respondent. Lastly, there was no principal and agent relationship between the parties to preclude the recovery of payments from the appellant upon presentation of the respondent's invoices.

The grounds of appeal herein arise from the defences raised in the High Court, viz: supervening impossibility of performance, recovery from customers as a condition precedent for payment, and the existence of a principal and agent relationship between the parties.

In essence, the question to be determined is whether the learned judge was correct in holding that the respondent's claim was unassailable and that the appellant had no bona fide defences to that claim....,.

GROUNDS OF APPEAL

The grounds of appeal set out in the notice of appeal appear to have conflated the three defences raised in the court a quo.

The essence of these grounds is that the relationship between the parties, based on their conduct after the inception of the Agreement, was one of principal and agent, whereby the appellant was an agent of the respondent in sourcing customers for post-paid cellular airtime usage, collecting payments for the airtime used or sold, and then remitting payments to the respondent after deducting its commission.

Consequently, since payments to the respondent would only be due upon the appellant recovering the same from its customers, payment by the latter was a condition precedent to any payment to the respondent. This applies to the entire amount of US$8,330,470=52 claimed by the respondent.

Again, on the same footing, the appellant's failure to recover the payments from its customers constituted a supervening impossibility suspending the appellant's obligation to remit payments to the respondent, there being nothing to remit until such time as payments had been made by or recovered from the customers.

PRINCIPAL AND AGENT RELATIONSHIP

The appellant's position, as I understand it, is as follows:

Although not expressly stated in the Agreement, the common understanding of the parties was that the appellant would be paid by its customers for network service usage and would then deduct its commission and pass on the balance to the respondent.

This position appears to be buttressed by paragraph 3 of the respondent's declaration which states that the appellant would collect payments for airtime used by its customers and remit the collected amounts less its commission to the respondent.

In this connection, counsel for the appellant submits that the Court must look at the true nature and substance of the Agreement and not merely at its form. The description of the parties contained in the Agreement is not necessarily conclusive as it disguises the true nature of their principal and agent relationship.

I note in this regard the remarks of SILKE: The Law of Agency in South Africa (3rd ed.)…, where the learned author adverts to the difficulties in ascertaining the true nature of an agency relationship.

Turning to the provisions of the Agreement itself, clause 2 thereof sets out the principal rights and obligations of the parties.

The respondent undertakes to supply and distribute terminal equipment and network services to the appellant's customers (clause 2.1). In turn, the appellant may from time to time order and purchase quantities of smartcards from the respondent (clause 2.2.1). The respondent is then obliged to make the network service available to the appellant for onward supply to the appellant's customers (clause 2.2.2 as read with clause 6.1). The smartcards ordered and purchased by the appellant are allocated by it to its own customers (clause 4.1). The appellant is liable to the respondent for all charges generated in respect of each smartcard activated by the appellant with effect from the date of such activation (clauses 4.5.1 and 4.5.2). The respondent is then entitled to raise call charges, monthly service charges, and all other charges for the account of the appellant (clause 8.1). Thereafter, all charges invoiced by the respondent to the appellant shall be paid by the appellant to the respondent within 30 days of the date of the relevant tax invoice (clause 8.3).

My reading of the afore-cited provisions of the Agreement is that they clearly spell out the true nature of the relationship between the parties.

In essence, it was agreed that the appellant would go to the airtime market and source its own customers for the network services to be provided by the respondent. The respondent did not decide who those customers would be or which of them would receive network service on credit. More significantly, it was the appellant itself that carried the risk of default by its customers.

As was quite correctly conceded by counsel for the appellant, the respondent had no right, except where this was ceded to it by the appellant, in terms of clause 17.1, to sue the appellant's customers in order to enforce and collect any payments due and outstanding from them. There was simply no nexus or privity of contract between the respondent and the appellant's customers. If the appellant was merely an agent for the respondent, as its principal, those customers would have been directly liable to the respondent.

The apparent admission of agency emanating from paragraph 3 of the respondent's declaration is not, in my view, of any material significance.

The importance of pleadings should not be unduly magnified so long as there is no likelihood of prejudice being occasioned to any of the parties. While the parties should ordinarily be restricted to the averments in their pleadings, the courts should not enslave themselves to the pleadings in complete disregard of their duty to decide the real dispute between the parties so that justice is eventually attained.

See, in this context, the very pertinent observations of CHATIKOBO J in Musadzikwa v Minister of Home Affairs & Another 2000 (1) ZLR 405 (H)…, and the authorities there cited, which were subsequently applied by this Court, per ZIYAMBI JA in Moyo & Another v Intermarket Discount House Ltd 2008 (1) ZLR 268 (S)…,.

In short, pleadings cannot be construed so as to compromise the delivery of justice.

In the instant case, although paragraph 3 of the declaration is somewhat ineptly worded, it cannot be elevated above the entire declaration and the clear terms of the Agreement itself.

In any event, that paragraph makes explicit reference to the Agreement itself. More importantly, it is immediately followed by paragraph 4 which captures the essence of the appellant's obligation to pay in terms of the Agreement, i.e. to make payment for all charges within thirty days of receiving the respondent's tax invoice.

Having regard to the Agreement as a whole, I am unable to discern from its express provisions anything approximating the principal and agent relationship espoused by the appellant. It was clearly contemplated by the parties that the appellant would be engaged as an independent contractor to distribute to its own customers the network services provided by the respondent.

CONDITION PRECEDENT FOR PAYMENT

The supposed common understanding between the parties is also relied upon by the appellant as the basis for its contention that payment by its customers was a condition precedent to any payment becoming due to the respondent.

Although this contention flies in the face of the express provisions of the Agreement, it is one that the appellant intends to substantiate by extrinsic evidence to be adduced should the matter be allowed to proceed to trial.

As is correctly argued by counsel for the respondent, this is clearly impermissible by virtue of the so-called parole evidence or integration rule.

Generally speaking, although the integration rule may not invariably apply where the true nature of an agreement is in issue, extrinsic evidence cannot be allowed to negate the express and clear terms of the agreement: see the remarks of ZIYAMBI JA in Nhundu v Chiota & Another 2007 (2) ZLR 163 (S)…,.

This is particularly so where, as in this case, the agreement constitutes the entire contract between the parties (clause 20.3) and any variation, addition, deletion, or waiver is ineffective unless reduced to writing and specifically subscribed by the parties (clause 20.5).

SUPERVENING IMPOSSIBILITY

The final defence advanced by the appellant is that of supervening impossibility – that, its failure to recover payments from its customers constituted a supervening event suspending its obligation to remit payments to the respondent.

This was occasioned, so it is argued, by the advent of dollarization between January and March 2009 when, for some unexplained reason, a significant number of the appellant's customers defaulted on their payments.

It is trite that the courts will be astute not to exonerate a party from performing its obligations under a contract that it has voluntarily entered into at arms length. Thus, the suspension of a contractual obligation by dint of vis major or casus fortuitus can only be allowed in very compelling circumstances.

The courts are enjoined to consider the nature of the contract, the relationship between the parties, the circumstances of the case, and the nature of the alleged impossibility: see Watergate (Pvt) Ltd v Commercial Bank of Zimbabwe 2006 (1) ZLR 9 (S)…,.

In particular, it must be shown that the impossibility is objective and absolute in contradistinction to one that is merely subjective or relative: see Chiraga v Msimuko 2002 (2) ZLR 368 (H)…, where it was held that shortage of foreign currency did not constitute an absolute supervening impossibility.

Again, the contract must have become finally and completely impossible of performance as opposed to the situation where one party is only temporarily disabled from fulfilling its obligations: see Beretta v Rhodesia Railways Ltd 1947 SR 48…,; NUST v NUST Academic Staff & Others 2006 (1) ZLR 107 (H)…,; Mutangadura v TS Timber Building Supplies 2009 (2) ZLR 424 (H)…,.

In the instant case, the appellant has dismally failed to demonstrate why its customers failed to meet their bills and how that alleged failure necessarily and definitively precluded it from meeting its payment obligations aliunde or from recovering the outstanding amounts from its customers at some later stage.

In other words, the appellant's subjective inability to pay its debts cannot be confused with the objective impossibility that must prevail for its plea of supervening impossibility to succeed.

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN
Ruled By: GOWORA J

On 1 January 2003, the applicant and the first respondent executed an agreement for the “supply of primary beverage transport services.”In terms of clause 8 of the agreement, the first respondent, Delta, appointed the services of the applicant, Pioneer, to distribute and deliver products on its behalf to various destinations.In ...

On 1 January 2003, the applicant and the first respondent executed an agreement for the “supply of primary beverage transport services.”

In terms of clause 8 of the agreement, the first respondent, Delta, appointed the services of the applicant, Pioneer, to distribute and deliver products on its behalf to various destinations.

In order to perform its obligations under the agreement, Pioneer undertook to supply vehicles to Delta for use in the distribution aforesaid. To that end, Pioneer had to make available to Delta twelve mechanical horses which would be used to draw thirty-four trailers, these being supplied by Delta.

The agreement also provided for the supply of additional horses, by Pioneer, on an ad hoc basis as the exigencies of the situation would have demanded.

As sometimes happens, the parties had a falling out.

The agreement, in terms of clause 18 thereof, provided for the settlement of disputes through an arbitration process.

In due course, the second respondent was appointed as arbitrator to the dispute and the matter referred to him. The parties were called before him, and, on 16 January 2010, he issued an award.

The applicant has, through these proceedings, brought an application to have the award set aside by this court in terms of Chapter VII, Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15]. The applicant also seeks costs against the first respondent.

The founding affidavit has been deposed to by a John Groves. He states that he is employed as a Managing Director by the applicant and that he is authorised to depose to the affidavit.

He states therein that the application was being brought to court in accordance with the provisions of section 2 of Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15].

The dispute is centred around the effect to be given to clause 9(f) of the agreement, in terms of which, upon termination of the agreement, Pioneer was supposed to return the trailers to Delta, and such return to be in “good working condition” and order fair wear and tear excepted.

The deponent states that, on 26 September, Delta commenced arbitration proceedings in terms of a Statement of Claim filed of record. Pioneer opposed the claim and the matter was set down for hearing before the arbitrator. Both parties adduced viva voce evidence.

According to the deponent to the affidavit the crystal issue before the arbitrator was the duration of the agreement.

The arbitrator found that the claim by Delta had not prescribed at the time that it submitted the dispute to arbitration. The deponent contends, therefore, that the arbitrator acted outside the enabling provisions of the agreement.

He contends, further, that the finding by the arbitrator that the agreement between the parties terminated on 30 November 2005 was not rationally linked to either the evidence adduced by the parties or submissions made by the same on the papers or during the hearing. He contends, further, that, in finding as he did, that the agreement terminated on 30 November instead of 31 December, as provided for in clause 2 of their agreement, the arbitrator had created a new contract for them.

In addition to the above, the applicant contended that the mandate of the arbitrator was limited to the duration of the agreement, and that consequently he was supposed to ascertain the obligations of the parties as at the date of termination of the agreement.

However, contends the applicant, the arbitrator seemed to have extended the applicant's obligations under the contract beyond the lifespan of the agreement.

It is further contended that the applicant's liabilities ought to have been ascertained as at the date.

According to the applicant, the award is not limited to the termination date, as found by the arbitrator, that is 30 November 2005, but goes beyond that. Therefore, the applicant contends, even on his own version, the arbitrator has acted outside the provisions of the contract. This, he suggests, is contrary to the Zimbabwean substantive law on the privity of contracts and therefore contrary to public policy.

The deponent also avers, that, by awarding specific performance in favour of a party who had, in terms of the contract, bilateral obligations which it had itself not performed, and was not in a position to perform, the arbitrator had unjustly enriched one of the parties at the expense of the other contrary to the positive law in Zimbabwe regarding bilateral obligations and further that this was contrary to public policy.

In the event, the applicant prayed for the setting aside of the arbitral award....,.

The applicant has attacked the award on three prongs;

(i) Firstly, that the arbitrator acted outside the provisions of the enabling agreement;

(ii) That the claim was prescribed; and

(iii) That the order for specific performance was contrary to the public policy of Zimbabwe regarding bilateral and reciprocal obligations and the principle of unjust enrichment.

According to the applicant, the award should therefore be set aside on the following grounds:

1. That the arbitrator acted outside the provisions of the enabling agreement;

2. That the claim was prescribed in terms of section 14 of the Prescription Act; and

3. That the order for specific performance, in the circumstances of this case, was contrary to the public policy of Zimbabwe regarding bi-lateral reciprocal obligations and the principles of unjust enrichment.

In relation to the first issue, the applicant contended that the arbitrator had acted outside the provisions of the enabling agreement.

It is contended that the first respondent had an onus to establish the duration of the agreement between the parties. Contrary to the provisions of the contract, so the applicant contends, the arbitrator placed the onus on the applicant to disprove the contentions of the claimant.

The applicant contends that, before the arbitrator, it put up the case that the agreement commenced on 1 January 2003 and terminated on 31 December 2004 and that the respondent, had, contrary to that assertion, contended that the agreement had not terminated up to the time that it instituted proceedings.

The applicant contends that the arbitrator disagreed with the versions that both parties placed before the arbitrator, and that, in approaching the matter as he did, he created a new contract between the parties based on what he termed practical considerations.

The applicant contends, in this regard, that the arbitrator unilaterally extended the duration of the contract where he held the date of termination as 30 November 2005.

The applicant contends, therefore, that the award is liable to be set aside on the grounds that it is in conflict with the public policy of Zimbabwe.

The applicant suggests that there was ambiguity in the contract and that in fact the arbitrator did confirm that the contract was ambiguous and that therefore he should have invoked the contra proferentum rule in favour of the applicant and this error on his part constituted a gross error on his part which further rendered the award unenforceable.

He suggests that the arbitrator must have found that clause 8(d) was ambiguous and contrary to the clear provisions of clauses 1 and 2 of the agreement which stated the commencement and termination dates. He suggests that the contract was prepared by Delta, and, as it was ambiguous in relation to clause 8(d), the arbitrator should have been guided by the contra proferentem rule and find that the contract had terminated as provided for in clause 2.

He stated that the arbitrator failed to apply the clear and positive principles of Zimbabwean law in resolving the dispute, and that, in the circumstances, the award was contrary to the public policy of Zimbabwe.

The first respondent has contended that it is not for this court to decide whether or not the arbitrator was correct to find that the agreement would have terminated on the date that the arbitrator said it terminated. It was suggested, by the respondent, that what this court must ask itself is whether the conclusions reached by the arbitrator offends the public policy of Zimbabwe in the sense of being so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider the conception of justice in Zimbabwe would be intolerably hurt by the award: see Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S).

The critical issue for determination before the arbitrator was the duration of the contract.

It is trite that the original UNCITRAL Model did not define the concept of public policy. It is accepted, however, that the concept covers fundamental principles of law and justice in substantive as well as procedural law.

In casu, the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) has not been met.

The applicant has chosen not to place the record of proceedings before for the court resulting in the court being unable to judge for itself whether or not the conclusions of the arbitrator are so outrageous in defiance of logic and accepted moral standards as to lead a fair minded person to believe that justice in Zimbabwe would be intolerably hurt by the award in favour of the first respondent.

The applicant has not, in the affidavit on which the application is premised, even alleged that the conclusions reached by the arbitrator defied logic to such unacceptable standards.

Instead, the applicant has sought to deal with the matter as if it were an appeal or application for review.

In Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) the court stated:

“An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact or law. In such a situation, the court would not be justified in setting the award aside. Under Article 34 or 36, the court does not exercise an appeal power and either uphold or decline to recognise an award having regard to what it considers should have been the correct decision.”

Whether or not the arbitrator arrived at the wrong decision is not an issue that this court is empowered, in terms of Article 34, to decide.

What the applicant should have established is that the decision and conclusions reached, based on the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) was so outrageous in its defiance of logic and reasoning that any fair-minded person would have a conception that justice in Zimbabwe would be hurt by that award.

This is not the case of the applicant.

There is no suggestion anywhere in the heads of argument pointing me to an aspect of the award that breached the rules of natural justice.

In any event, there is no principle that says that an arbitrator can have his award set aside on the basis that he erred or was wrong. If it is there I have not been made aware of it.

In Telcordia Technologies Inc v Telcom SA 2007 (3) SA 266 HARMS JA stated:

“…,. An arbitrator 'has the right to be wrong' on the merits of the case, and it is a perversion of the language to label mistakes of this kind as a misconception of the nature of the inquiry; they may be misconceptions about meaning, law, or the admissibility of evidence, but, that is far cry from saying that they constitute a misconception of the nature of the inquiry.

To adopt the quoted words of HOEXTER JA;

'It cannot be said that the wrong interpretation of the Integrated Agreement prevented the arbitrator from fulfilling his agreed function or from considering the matter left for him for decision. On the contrary, in interpreting the Integrated Agreement, the arbitrator was fulfilling the function assigned to him by the parties, and it follows that the wrong interpretation of the Integrated Agreement could not afford any ground for review by the court.'”...,.

The applicant states that the claim presented to the arbitrator was for specific performance and that is what the first respondent got in the award from the arbitrator.

However, argues the applicant, the agreement relied upon imposes bilateral and reciprocal obligations on the parties. Specific reference is made to clause 14 in this regard. Specifically, the applicant contends that the maintenance of the trailers was a recoverable cost from Delta and that this would depend upon the mileage covered on a monthly basis.

The applicant suggests that the arbitrator must have found that, due to the deteriorating economic situation in Zimbabwe, the parties were unable to perform on the contract as from 2005.

The applicant contends, further, that the maintenance of the trailers was intrinsically linked to the first respondent's ability to provide the stipulated monthly mileage in respect of each horse in accordance with the provisions of clause 14 of the agreement for the applicant to recover the full maintenance costs for the availed trailers in accordance with the costing module.

The applicant contends that it had furnished to the arbitrator schedules which showed that, from December 2004, the parties had operated on an ad hoc basis as opposed to the strict terms of the agreement and that in view of that evidence the arbitrator had found that the first respondent was not providing the requisite mileage post 31 December 2004.

Therefore, contends the applicant, in ordering specific performance retrospectively as he did, the arbitrator acted outside the positive law of Zimbabwe regarding the enforcement of bilateral obligations between the parties. Put differently, the applicant contends that it is against the law of contract of Zimbabwe to direct a party to specifically perform on a contract where the other party thereto was unable and remained unable to perform in terms of that contract.

In addition, it is contended that the order for specific performance amounts to unjustified enrichment in that the first respondent was now unjustly enriched retrospectively in respect of a contract which itself did not specifically perform. This was due to the fact that, in order to comply with the award, the applicant would have to incur pecuniary loss in multi-currency as opposed to the Zimbabwe dollar which was the currency for performance and payment under the agreement.

Accordingly, the order for specific performance would again be contrary to the public policy of Zimbabwe and the relief should not have been granted to the first respondent in the first place.

The first respondent contended that the applicant had been expected to return the trailers in good working order, fair wear and tear excepted. The tyres were, however, required to have, upon the return of the trailers, the same amount of rubber as at the date of take over by the applicant.

Further, it is denied that the second respondent ordered specific performance retrospectively.

It is averred that all the second respondent did was to give effect to the contract and determine the obligations of the applicant in terms of clause 9(f) of the service contract. It is consequently denied that the order for specific performance was contrary to public policy as the applicant did not allege undue influence, fraud, or a breach of the rules of natural justice.

It is averred that there were no bilateral obligations as at the date of termination of the contract as the applicant had the obligation to restore the trailers in good working condition and order. The first respondent's obligation had been defined in clause 9(c), to ensure that all the trailers were validated by a certificate of fitness. By providing the certificates, the first respondent contends that it had complied with its obligations under the contract.

In so far as the jurisdiction of the second respondent is concerned, the first respondent contends that it was wide and was not limited to ascertain the obligations of the parties as at the date of the termination of the agreement, but, included any questions regarding the existence, validity, or termination of the same.

The first respondent accepts that the claim it filed with the arbitrator was for specific performance and that this was in terms of the agreement between the parties.

The respondent is of the view that the applicant is raising issues that are specifically dealing with an appeal which issues should not be entertained by this court.

The point is also made that the applicant had not filed a counter application before the arbitrator to the effect that the first respondent had not performed its obligations in terms of the contract.

The court is being urged, as a result, not to have regard to any suggestion that the maintenance of the trailers was a recoverable cost in terms of the contract as that was not one of the factors for consideration under Article 34 of the Arbitration Act.

It is contended that the applicant's real grievance is that the second respondent came to a wrong conclusion on the facts and the law.

It is denied that the award unjustly enriched the first respondent at the expense of the applicant.

The nature of a contract is that two or more parties thereto reciprocally promise, or one of them promises to the other or others, to give some particular thing or to do or refrain from doing some particular act.

There is, consequently, a presumption, that, in every bilateral or synallagmatic contract the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations.

The parties to this dispute entered into a contract in terms of which each of them assumed obligations to the other, and, in return, also acquired rights flowing from the assumption of such obligations.

In terms of clause 8(d) of the contract herein, Pioneer was to assume the responsibility for the maintenance, licensing, and annual certificates of fitness in relation to the trailers supplied to it by Delta. In the event that Pioneer incurred any additional expenses in relation to this obligation, arising from the structural defects from the trailers, then, Delta would consider meeting part of a particular expense.

On termination of the agreement, the clause in (f) provided that Pioneer would return the trailers in good working condition, fair wear and tear excepted.

I am somewhat hampered by not having been provided with the record of the proceedings.

The first respondent has, however, availed copies of two letters which had been placed before the arbitrator and specifically dealt with the issue of prescription. The first is an e-mail written by Kelvin Motsi, of the applicant, on 24 October 2007, and is addressed to the first respondent. The pertinent part of the e-mail reads as follows:

“As per last mail below, and discussion with Delta yesterday, we are still working on your trailers and all efforts are being made to make such trailers available. Trailers T6554 and T6555 went to VID this weekend and did not pass the inspection; the issues raised have been rectified now and the trailers (sic) due for inspection again today.

T6244 and T6245 are also getting ready for VID. As per our discussion, once back from VID and passed (sic) we will advise your (Delta) workshops for a handover.

I fully understand the pressure you are going through to supply the country. We, at Pioneer, are putting in 100% to try and get these trailers ready under the difficult conditions of getting in the spares and other items required to bring them up to spec. if you have other ideas on how best we can source these items then we are open to discuss.

I however also do not take lightly the comments raised against myself on this issue, the reasons for the delays are not known by me alone. May I propose we sit round a table and air out all issue involved and identify responsibility to both parties in the smooth handover of such trailers and relations going forward.”

The second is a letter dated 27 March 2008, addressed to a Mr M Sekerani of Delta by Mark Dawson from Pioneer. It is appropriate to quote the full text of the letter;

“With great embarrassment, I write to you yet again apologising (sic) for the delay in the return of your trailers to you. We wish to state that we are not in any way trying to ignore or escape our obligation to you and are fully aware that we are testing your patience and leniency on this issue. We are still trying to recover from a huge hole that was left by previous employees as well as a huge skills gap that has emerged due to a skills flight of artisans.

We however intend to be delivering one trailer per week to you as from this week, whereas previously we had committed to two per month.

To achieve this, we have employed two coach builders from Deven Engineering who will start on our payroll on 1 April. We have imported a sand blaster from South Africa. We are also importing paint from South Africa.

We thank you for the loan of the paint and will return what we have borrowed next week. We thank you for your leniency so far and look forward to making good our obligation to you.”

I am persuaded, that, from the tenor of the two letters that were submitted to the arbitrator by the first respondent, it was never in doubt that the applicant was aware of its obligations under the contract and that it had expressed every intention to fulfil those obligations.

The email from Kelvin Motsi and the letter from Mark Dawson both clearly spelt out the acceptance by the applicant of returning the trailers to the first respondent in good working condition.

If the applicant had not accepted the obligation, or had misunderstood the obligation, it would not have taken upon itself the expense of hiring coach builders and a sand blaster to work on the trailers. It had also ensured that each of the trailers, prior to delivery to Delta, had to pass a fitness test with VID.

This, in my view, was clearly in accordance with the requirement in the contract that the trailers be returned to Delta in good working condition, fair wear and tear excepted.

I do not understand the applicant to suggest that the trailers should not have been returned.

The argument is that the second respondent should not have required that the applicant be made to perform in terms of the contract when the first respondent had itself not performed its own part of the contract.

The obligation of the first respondent was to provide the applicant with trailers to enable the latter to utilise them in the distribution of products on behalf of Delta. The parties' reciprocal obligations, during the life of the contract, are not in dispute. Once the agreement is terminated, the status quo ante had, of necessity, to be restored. This necessitated the return by the applicant of the first respondent's trailers in good working condition, fair wear and tear excepted.

I am of the view that the reasoning by the arbitrator, in requiring the applicant to comply with this contractual obligation, cannot be faulted.

I am unable to accept as cogent the argument by the applicant that the agreement had envisaged bilateral obligations on the parties and that, in awarding specific performance in the first respondent's favour, the arbitrator had imposed an obligation upon one party when the other party to the contract was clearly not in a position to perform its own part of the obligation.

I accept that during the currency of the agreement the first respondent was obliged to allocate trailers for the facilitation of the transportation of its goods by the applicant. Charges raised by the applicant for this service would permit the applicant to ensure that its horses and the first respondent's trailers would be maintained in a roadworthy condition and be certified fit by VID.

Upon termination of the agreement, however, it was the responsibility of the applicant to return the first respondent's trailers in good working condition, fair wear and tear excepted.

I cannot see how, by giving effect to the letter of the agreement regarding the obligation imposed upon the applicant to return the trailers in good and working condition, it can be suggested that the arbitrator imposed an obligation upon one party to the agreement.

HH09-09 : SKF ZIMBABWE P/L vs PARIS OLYMPIOUS
Ruled By: MAKARAU JP

Some day in or around October 2003, a businessman, who still believes in customer care, moved down the fuel queue that had formed at his forecourt to ensure that no one was jumping the queue. He would stop and chat with this or the other customer. He came across a white gentleman who was sitting in his car and awaiting his turn to have his car refueled. He spoke to this gentleman.

He went back to his manageress and asked who the gentleman was. He was told that it was the plaintiff's Managing Director. The plaintiff had an account with the service station.

The businessman went back and made a suggestion to the gentleman. The suggestion was well received. The parties parted company on this happy note. Each had an understanding of what had been discussed in the fuel queue.

The businessman is the defendant before me and the content of the suggestion that he made to the gentleman in the queue is the subject of the dispute that I have to determine.

On 30 October 2006, the plaintiff issued summons against the defendant claiming the sum of $77,206=48 together with interest thereon at the prescribed rate from the date of summons to date of judgment in full and delivery to it of 3390,5 litres of petrol and 6,462 litres of diesel.

The claim was accompanied by the usual prayer for costs of suit.

In its declaration, the plaintiff alleged that it had an arrangement with the defendant to draw fuel from the main tank at his service station. It further alleged that in or about November 2003, the defendant established a separate and different facility whereby the plaintiff could draw fuel from a reserve tank, which arrangement entailed the plaintiff paying for fuel in advance and the defendant storing the fuel for the plaintiff in his reserve tank. Finally, it was alleged, in the declaration, that, as at January 2006, the defendant held a deposit of $7,206,477 in respect of fuel to be drawn from the main tank and 3390,6 litres of petrol and 6462,02 litres of diesel in the reserve tank, which, despite demand, the defendant failed to avail to the plaintiff, prompting the plaintiff to approach the court.

The claim was defended.

In its plea, the defendant admitted that he had an arrangement with the plaintiff but averred that at all times the fuel in both tanks belonged to him and he did not owe the plaintiff fuel but cash balances in respect of each facility. In particular, the defendant denied that the reserve tank facility was exclusively for the plaintiff or that the plaintiff purchased the fuel stored in that tank in advance and in bulk. He further averred that the reserve tank was simply a preferential arrangement for account holders in the event that he did not have fuel in his main tank.

As to why the defendant could not supply the plaintiff with the fuel for which he held deposits, the defendant averred that he had been compelled by the National Task Force to sell all the fuel he had in his tanks to the public. The plaintiff had tried to fill drums with the fuel that was due to it, but, due to volatility of the period, this was not advisable.

Thus, at the pre-trial conference of the matter, the following issues were identified for trial:

1. Is the plaintiff entitled to specific performance, and, on what basis, and in what quantity?

2. What were the terms of the facility agreement between the plaintiff and the defendant?

3. Whether the defendant received oral or written directive from the Ministry of Industry and International Trade to sell the diesel and petrol that the plaintiff alleges it was holding for the plaintiff?

4. Whether the defendant requested the plaintiff to secure alternative petrol and diesel storage facilities to the facilities available at the defendant's service station?

At the trial of the matter, the plaintiff called four witnesses.

First to testify was Michael John Derry. At the time, he was the National Sales Manager for the plaintiff. His evidence was to the following effect:

The defendant approached him one day whilst he was in the fuel queue at the defendant's service station. The plaintiff was an account holder with the defendant. In terms of the arrangement between the parties, the plaintiff would deposit some money with the defendant and would then draw down fuel. When the defendant approached him in the queue, he suggested that the plaintiff could deposit a sum of money with the defendant who would then purchase fuel for the plaintiff when he purchased his own.

The witness told the plaintiff's Managing Director about this suggestion and an arrangement was then put in place.

When the defendant did not have fuel in his main tank, the plaintiff would then draw its own fuel from the reserve tank. He did not know the finer details of the arrangement as this was handled by the administration section of the plaintiff. His understanding was that, in the second arrangement, the plaintiff purchased its own fuel which was stored by the defendant in a separate tank. When there was no fuel in the main tank, the plaintiff would then draw fuel from this side tank, which the plaintiff took to be its fuel.

The witness impressed me as honest and reliable. He was not shaken under cross-examination and I shall rely on his evidence to the extent that it reveals that an offer to treat was made by the defendant to the plaintiff.

The second witness to testify on behalf of the plaintiff was Kevin James Shadwell. He is the Managing Director of the plaintiff. His evidence was to the following effect:

Historically, the plaintiff maintained an account with the defendant in terms of which the plaintiff would pay a deposit down and then draw fuel against the deposit. Thereafter, Mike Derry approached him and advised him of the alternative arrangement that had been suggested by the defendant. He understood that this arrangement would guarantee supply.

Under normal circumstances, the plaintiff would continue to draw fuel from the main tank under the historic arrangement. Under the second arrangement, the defendant was offering the plaintiff a reserve tank in which the plaintiff would store its fuel and from which the plaintiff would only draw fuel in the event that there was none in the main tank.

He gave the approval for the arrangement and instructed the administration office to put the arrangement in place.

Thus, according to his understanding, while the plaintiff deposited for fuel in the main tank, it purchased outrightly the fuel in the reserve tank.

The plaintiff was under the impression that the fuel in the reserve tank was exclusively its, and, if there was more fuel in the tank than the plaintiff had purchased, this did not concern the plaintiff.

The witness did not personally discuss the details of the second arrangement with the defendant.

Sometime in August 2006, the plaintiff received a call from the defendant that there was no more fuel and that the fuel that had been stored in the reserve tank had been sold to the public.

The witness held two meetings with the defendant over the issue. The plaintiff could not collect fuel that was due to it in drums as it was seen as inappropriate at the time as there was a critical shortage of fuel countrywide.

At some stage, the plaintiff furnished the defendant with a letter authorizing the defendant to sell the fuel in the reserve tank to the public. The letter was meant to protect the defendant from the task force so that he would not be seen to be hording fuel in times of shortages. The plaintiff's understanding was that the fuel, once sold to the public at the instance of the task force, would be replaced by the defendant.

At no stage did the parties discuss the issue of storage charges for the fuel in the reserve tank.

In my view, the witness gave his evidence well. He was clear as to the understanding that the plaintiff had of the two arrangements that it had with the defendant. He was also clear that he personally got this understanding from the report that he received from the first witness and the subsequent conduct of the parties. At no stage did he personally discuss the terms of the agreement with the defendant. At no stage did either party seek to keep a contemporaneous record of what had been agreed upon.

The third witness for the plaintiff was Ephraim Kundishora Mawonedzo. He was employed by the plaintiff as the Administration and Human Resources Manager.

In November 2004, he was approached by the plaintiff's Managing Director who told him that the plaintiff had agreed on a better deal with the defendant that would cushion the plaintiff in times of fuel shortages. The Managing Director informed him that the offer for the better fuel deal was made to Michael John Derry by the defendant. The witness then made out a cheque to the defendant. He gave this to Dorcas, the manageress of the defendant's service station.

The cheque was sufficient to cover 5,000 litres of petrol and 5,000 litres of diesel.

When making the payment to the defendant he communicated that the cheque was for the reserve facility. Thereafter, the facility was put in place.

Sometime in April/May 2005, there was a critical shortage of fuel. The defendant expressed concern about keeping large quantities of fuel in the reserve tank. The witness then wrote a letter, addressed to 'whom it may concern', allowing the defendant to sell the fuel stored on behalf of the plaintiff in the reserve tank to the public. The letter was meant to protect the defendant from the task force. The witness was never told that the task force on fuel had visited the defendant's service station and had ordered that he disposes of all the fuel that he was holding in his tanks. The defendant should still have left enough fuel in his tanks to service the needs of the plaintiff as such fuel was on reserve.

In May or June 2005, he ran around trying to get clearance from the Ministry of Energy and from the police to allow the defendant to store the plaintiff's fuel in bulk. He was not successful.

When he returned to the defendant's service station, he was advised that all the fuel had been sold.

The second witness and he arranged to meet with the defendant who promised to give them fuel when next he received a delivery.

At one stage, the witness heard that the defendant was once again dispensing fuel from his station. When he approached the defendant for fuel, as per the promise, the defendant denied owing the plaintiff fuel but money.

The defendant then tendered a cheque to the plaintiff in full and final settlement of the balance owing. The plaintiff did not accept the cheques which it sent back to the defendant.

Regarding whether it would be impossible for the defendant to procure the fuel that the plaintiff was claiming, the witness was of the view that the defendant could easily do so as he is a fuel dealer and has access to fuel suppliers.

The plaintiff had dealt with the defendant for years without any problems, which is why the arrangement between the parties was not reduced to writing.

Under cross examination, the witness admitted that he was not party to the negotiation of the arrangements between the plaintiff and the defendant but was informed of the details of the arrangement by his Managing Director.

In my view, the witness was being truthful in his evidence. He was not shaken in cross–examination and I have no reason to disbelieve him.

After the evidence of Ephraim Kundishora Mawonedzo, the plaintiff called one Kedius Mpiningo. At the time of testifying, he was employed by the plaintiff as a Human Resources and Administration Officer, working directly under the last witness. His duties included keeping records and allocating fuel to the plaintiff's vehicles.

He joined the plaintiff on 15 July 2005, well after the dispute between the parties had arisen.

He was made privy to the details of the arrangement between the parties by his immediate boss and from the records that he found in the office.

The witness gave his evidence well. To the extent that he narrated to the court what he had been made privy to, I have no reason to disbelieve his evidence. It however does not assist me much in establishing what it is that the parties had agreed upon in the first instance…,.

After leading evidence from Kedius Mpiningo, the plaintiff closed its case, prompting counsel for the defendant to apply for the defendant to be absolved on the basis that the plaintiff had failed to lead evidence to establish the terms of the arrangement between the parties that it was relying on.

The application was resisted, and, after hearing submissions, I declined the application and indicated that my reasons would appear in the main judgment.

In declining the application for absolution from the instance, I was guided by the sentiments expressed by BEADLE CJ in Supreme Service Station (1969) (Pvt) Ltd v Fox and Goodridge (Pvt) Ltd 1971 (1) RLR 1 (A) to the effect that if the plaintiff has made out a case that the defence is something peculiarly within the knowledge of the defendant, justice demands that the defendant be placed on his defence.

In my view, since the alleged agreement between the parties was oral, and the parties had related under the agreement for a period, the defendant had to give evidence on his understanding of the terms of the arrangement between the parties, and, if his understanding coincided with that of the plaintiff in a material respect, then, the agreement between the parties would have been established.

The defendant gave evidence.

He used to run the service station in Hatfield known as H.E.R. Bonanza. One day, he was walking up and down the fuel queue that had formed at the service station. He saw the plaintiff's second witness in the queue and stopped to talk to him. When he had ascertained the identity of the plaintiff's second witness from his manageress, he approached him again and asked him if he would like to open an account with the defendant to save some time in the queue. The witness promised to get back to him. The plaintiff's representatives came back a few days later and an account was opened for them.

The defendant then detailed his understanding of how the arrangement between the parties would work. In his view, the arrangement was an advance deposit system where the plaintiff would pay, in advance, a deposit for fuel and against which deposit it would then drawdown fuel.

Later, the defendant decided that one of the pumps at the service station would service commuter buses, one would service the public, while one was reserved for account holders and friends. This was referred to as the reserve facility.

The reserve facility was set up due to shortages in the supply of fuel. The plaintiff and other account holders were asked to pay a separate deposit for the use of this reserve facility. The facility allowed them to draw fuel from the reserve tank in times of shortages.

His understanding was that the fuel was always his and did not belong to the plaintiff after a deposit for such fuel was paid. He was holding cash and not fuel on behalf of the plaintiff. The plaintiff did not pre-pay for the fuel.

The defendant is a confident man. He gave his evidence confidently. He clearly was mistaken when he testified that the man he spoke to in the fuel queue on the forecourt of his service station was the plaintiff's Managing Director. He spoke to Michael John Derry. Despite this mistake in his evidence, I found him generally honest and easy to believe.

The defendant called Dorcas Sibindi, the manageress at the service station during the relevant time. Her evidence was brief and concise.

She knew the second and third plaintiff's witnesses as the plaintiff was one of the account holders at the service station. The station operated three tanks; one for commuter buses, one for the public, and another for account holders.

In operating its account, the plaintiff would issue cheques in favour of the defendant and she would deduct from that deposit each time the plaintiff drew down fuel. The parties operated two schemes. The main tank was used when there were no queues on the forecourt. The reserve tank was used when queues had formed on the forecourt for the preferred customers to avoid the queues.

The plaintiff paid a deposit to the defendant for both schemes and drew down against such deposits. The defendant never kept any fuel exclusively for the plaintiff.

The witness was not as forthcoming in her responses to questions put to her under cross-examination, leaving me with the impression that she was not telling me the entire truth.

For instance, she could not remember how the letter authorizing the defendant to sell all of the plaintiff's fuel got into the file she kept for the plaintiff yet she managed the account and kept the file. She denied any memory of the letter and would have me believe that she merely saw it in the file at the time she handed over the file to the defendant in preparation for the litigation.

She also denied having spoken to Kedius Mpiningo on the phone about the details of the account.

I have found Kedius Mpiningo to be generally truthful and reliable, and, in my view, he would not have had any reason to lie about the telephone call, which is innocuous by all regards.

On the basis of the above, I shall only rely on the evidence of this witness where it is corroborated by some other reliable testimony.

After the testimony of Dorcas Sibindi, the defendant closed his case.

The issue that falls to be determined in this matter is, in my view, simple. It is to establish whether the terms of the agreement that the parties entered into entitles the plaintiff to delivery of fuel in the volumes claimed.

The issue is captured in very broad terms in the second issue settled at the pre-trial conference.

It is trite that having come to court to assert and enforce a contract, the plaintiff bore the onus of proving not only the terms of such a contract, but breach of a material term thereof.

The plaintiff asserts that the second arrangement was a reserve facility in terms of which it pre-purchased fuels from the defendant who was obliged to keep such litreage in reserve for the plaintiff.

This is the case that the plaintiff has brought to court.

Counsel for the plaintiff submitted, that, on the evidence led, I must find that the parties reached consensus ad idem on the above terms when the defendant met with Michael John Derry in the fuel queue.

I find myself unable to agree with that submission.

I have accepted it, on a balance of probabilities, that, the defendant met with Michael John Derry and not with Kevin James Shadwell on the day the proposal was put to the plaintiff to set up a reserve facility. The testimony of Michael John Derry as to what was discussed during this brief and impromptu meeting is quite clear and concise in this regard.

It is important, in my view, that I analyze the evidence of Michael John Derry in this regard critically for it forms the offer that was communicated to the plaintiff.

In the words of Michael John Derry, the defendant suggested that the plaintiff could put down a whole lot (deposit a sum of money with the defendant), who would then purchase fuel for the plaintiff when he purchased his own. This is what Mr. Derry heard the defendant to be saying.

The issue remains to be determined whether the offer by the defendant was understood and communicated in the terms in which it was made.

It is pertinent, in my view, to note, at this stage, that, no further discussion was held between Michael John Derry and the defendant on where and how this fuel would be stored for and behalf of the plaintiff and how the plaintiff would take delivery of same.

It s not in dispute that Michael John Derry did not accept the offer that the defendant had put to the plaintiff. He took the offer to Kevin James Shadwell, the plaintiff's Managing Director.

When he received the offer, Kevin James Shadwell understood the defendant to be offering them an alternative facility to the one existing. He understood that this arrangement would guarantee supply.

Under normal circumstances, the plaintiff would continue to draw fuel from the main tank under the historic arrangement. Under the second arrangement, the defendant was offering the plaintiff a reserve tank in which the plaintiff would store its fuel and from which the plaintiff would only draw fuel in the event that there was none in the main tank.

This is the offer that he gave instructions to the plaintiff's administrative staff to accept.

I have observed above that Kevin James Shadwell gave his evidence well but that he did not personally discuss the terms of the new “deal” with the defendant. He took his understanding from Michael John Derry and instructed that the offer be accepted as he understood it.

It is trite that accepting an offer that has not been made does not bring into being a contract: see Couve and Another v Reddot International (Pty) Ltd and Others 2004 (6) SA 425 (W) Bourbon-Leftley en Andere (Landbous) BPK 1999 (1) SA 902 (C).

A contract is brought into being by the acceptance of a matching offer.

It thus remains for me to establish whether the plaintiff has established that the offer that it accepted was the one made by the defendant.

Again, words used by the defendant become of paramount importance in this matter.

The defendant testified that the reserve facility was set up due to shortages in the supply of fuel. The plaintiff and other account holders were asked to pay a separate deposit for the use of this reserve facility. The facility allowed them to draw fuel from the reserve tank in times of shortages.

His understanding was that the fuel was always his and did not belong to the plaintiff after a deposit for such fuel was paid. He was holding cash, and not fuel, on behalf of the plaintiff and all other account holders. The plaintiff did not pre-pay for the fuel.

In such circumstances, can I say that there was a meeting of the minds of the parties sufficient to establish the terms and conditions of the agreement that the plaintiff alleges and relies on?

I think not.

This was an arrangement that was entered into on the basis of a single chance discussion between two persons who were not directly involved in the implementation of the arrangement.

The defendant understood he was simply offering a reserve tank facility to the plaintiff. The plaintiff understood it was being offered a pre-paid fuel facility. No contemporaneous document of the agreement was kept by either side and the misunderstanding was perpetuated over a period, giving each side comfort in the belief that its understanding of the arrangement was the one more from the passage of time and less from a shared intention and the observance of the requisite legal formalities.

It is trite, that, in actions based on contract, the party alleging the contract must be able to establish, by evidence, the communication of an offer and acceptance of that offer. This is what establishes the contract and a cause of action for the plaintiff.

Where the defendant denies making the offer alleged by the plaintiff, the onus rests on the plaintiff to prove, by his conduct, that the defendant made the offer.

Where, however, the evidence adduced by the plaintiff regarding the defendant's conduct is consistent with either of the party's understanding of the agreement, as occurred in this matter, the conduct of the defendant cannot act as proof of the common intention of the parties.

I have not been able to establish, from the evidence of the plaintiff, any conduct on the part of the defendant consistent only with and corroborative only of the plaintiff's assertions. To the contrary, the parties maintained the two facilities and the plaintiff drew down fuel from the reserve tank when there was no fuel in the main tank. According to the plaintiff, when doing so, it was drawing down on its fuel reserves. According to the defendant, the plaintiff was simply drawing down fuel in accordance with the second account facility that gave it preference over members of the public and those who only had access to the main tank.

On the basis of the foregoing, I am unable to find for the plaintiff, as, in my view, insufficient evidence has been led to prove the terms of the second facility.

In the result, I make the following order:

1. The defendant is absolved from the instance.

2. The plaintiff shall pay the defendant's costs.

Appealed
HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS
Ruled By: KAMOCHA J

The plaintiff in this matter seeks:-“1. An order to declare that the sale agreement executed between him and first defendant on the 30th of September 2001 on Stand 378, Gorebridge Road, Killarney, Bulawayo is still binding and effectual as between the parties;2. An order to compel the first defendant to ...

The plaintiff in this matter seeks:-

“1. An order to declare that the sale agreement executed between him and first defendant on the 30th of September 2001 on Stand 378, Gorebridge Road, Killarney, Bulawayo is still binding and effectual as between the parties;

2. An order to compel the first defendant to transfer all her rights, title and interests in Stand Number 378 Gorebridge Road, Killarney, Bulawayo to plaintiff.

3. An order authorizing the Deputy Sheriff of Bulawayo to sign all the transfer documents for and on behalf of the first defendant in order to effect transfer of Stand 378 Gorebridge Road, Killarney, Bulawayo to plaintiff.

Alternative to 1, 2 and 3 above -

Plaintiff seeks an order:

4(a) To be refunded by first defendant $1,500,000 plus interest a tempore morae at the prescribed rate, effective from the 31st of October 2001; and

(b) To be compensated by first defendant in the sum of $2,500,000.

5. That the first defendant pays all costs of this action on an attorney and client scale.”

When the parties appeared before a judge for a pre-trial conference it was agreed that the issues to be determined by the trial court be as follows:-

“(1) Did plaintiff advise first defendant that plaintiff was no longer prepared to be held to the contract of sale, and, as a result thereof, did plaintiff cancel the contract of sale?

(2) Was the contract of sale perfected?

(3) Is the plaintiff entitled to tender $3,800,000 plus interest, and, in that event, at what rate is the interest to be calculated?

(3) In the alternative, is plaintiff entitled to:-

(a) A refund of $1,500,000 plus interest calculated from the 31st October 2001; and

(b) Compensation for improvements effects (sic) by plaintiff.”

Each party had the onus to prove two of the above issues. The plaintiff had to prove issues 3 and 4 while the defendant had to prove issues 1 and 2.

The plaintiff gave evidence himself and called two witnesses to support him.

The plaintiff's story was that he was a businessman in Bulawayo. Mr Thokozani Khumalo was his business partner who needed a house. Thokozani Khumalo (“Khumalo”) had been initially leasing House Number 378 Gorebridge Road, Killarney, Bulawayo. The house belonged to Ronnah Mafurirano, the first defendant.

The husband of the first defendant, Mr Davis Sunganayi Mafurirano, was the plaintiff's business associate. They knew each other from the time Davis Sunganayi Mafurirano used to work for CBZ Bank.

After Thokozani Khumalo had expressed his wish to purchase the house he was renting, the plaintiff conveyed the message to Davis Sunganayi Mafurirano who asked the plaintiff to make an offer to him.

When the plaintiff made an offer of $2.5 million, Davis Sunganayi Mafurirano said he needed time to go and discuss with his wife, the owner, and would come back to them.

Davis Sunganayi Mafurirano came back with a figure of $5.3 million which the parties agreed on.

Although the house was being purchased for Thokozani Khumalo, the negotiations were being done by the plaintiff, Naran, while Davis Sunganayi Mafurirano represented his wife, the first defendant.

The parties then had a memorandum of agreement of sale reduced to writing which reads in part:

“Purchase Price and Payment

The purchase price payable to the seller by the purchaser for the said Stand shall be the sum of $5,300,000 (five million three hundred thousand dollars). A deposit of $2,500,000 (two million five hundred thousand dollars) shall be paid upon signing of this agreement and the balance of $2,800,000, (two million eight hundred thousand dollars) shall be paid in monthly instalments of $1,500,000 with effect from on/or before the 31st of October 2001 finishing with the balance of $1,300,000. 30% per month interest shall be paid on $2,300,000.”

The plaintiff engaged Sibusiso Ndlovu to represent him.

The seller signed the agreement on 12 September 2001 while the buyer signed it on 30 September 2001.

The plaintiff conceded that he had failed to pay the deposit as stipulated in the agreement. He should have paid $2,500,000 when he signed the agreement on 30 September 2001, but he, instead, paid the sum of $1,500,000 on 26 October 2001.

The plaintiff was clearly in breach of what the parties had agreed on not so long back.

He however seems to take solace in his belief that the $1,500,000 was not rejected by the buyer despite the fact that it was less than what the parties had agreed and was even paid late. He said the money was never sent back to him or his lawyers.

It was his evidence, that, as a business associate in relation to the buying of paper he had given Davis Sunganayi Mafurirano the sum of one million dollars to import paper. That, however, did not materialize but Davis Sunganayi Mafurirano never returned the $1 million.

The plaintiff seemed to suggest that that amount replaced the shortfall of one million he was supposed to pay as a deposit.

The plaintiff denied ever taking any steps to cancel the agreement. Instead, he said it was Davis Sunganayi Mafurirano who appeared to be bent on cancelling the agreement in his letters to be found on pages 12 and 15 of the plaintiff's bundle of documents.

The first one is undated and addressed to Sibusiso Ndlovu & Associates and marked for the attention of Mr S Ndlovu and reads thus:-

“Dear Sir

Re: Sale of House Number 378 Gorebridge Road, Killarney

Further to our telephone conversation on Wednesday 19 September 2001, I wish to confirm that we would like to give your clients up to 24 September 2001, 1400 hours, to pay their deposit. Failing, which, will give us the freedom to allow those who have shown interest to view the house as from 1000 hours on Tuesday 25 September 2001.

Please be advised accordingly, and your client's co-operation will be assumed.

Yours faithfully
D S Mafurirano”

I pause to observe that the above letter did not spur the plaintiff into trying to pay the deposit timeously at all. Instead, an amount of $1,500,000 was paid more than a month later - on 26 October 2001.

The plaintiff still had problems in paying as agreed prompting Mr Mafurirano to address a letter direct to Thokozani Khumalo on 8 November 2001 in the following terms:

“Re: Sale of House Number 378 Gorebridge Road, Killarney

It is with regret that I write to inform you of our decision to cancel the sale of the above property. The sale of the property was linked to a project we wanted to undertake, but we have had to seek alternative financing sources at higher costs than initially anticipated.

This affair concerning the sale of the above property has been one great problem and waste of time to us, simple because we didn't know that we were dealing with not so-serious people or rather people with other interests but to buy a house.

The negotiations for the price and other conditions were concluded on the 12th September 2001, with Mr Ndlovu, Mr D Naran's appointed representative. The payment of $2.5 million deposit was supposed to be immediate, but we had to wait until 26/10/2001 when a down payment of only Z$1.5 million was made. Promises of similar payments every week were made.

The above payment was based on the price and conditions negotiated, and signed for on the 12th September 2001. Mr D Naran called me to discuss the issue of payment, only to tell me that Mr Ndlovu, his representative, had no authority to conclude the negotiations on price and conditions as he did, as such, he, Mr Naran, was not bound by that agreement, which effectively meant there was no agreement in the first place. In fact, there is no agreement as I write, because Mr Naran nullified the one which we thought was binding.

Further, Mr D Naran, indicated that the house was overpriced, and that the whole deal should be abandoned, and that we were to return $1.1 million, with $400,000,00 being payment for inconvenience suffered by us, and that we were to compensate Mr Khumalo for the improvement done.

Despite good intentions we had, we have finally decided not to dispose of this property because we no longer need to, and, most importantly, the problems we have gone through and which we may go through in future, if we carry on as we have done this far.

In this regard, please forward invoices/receipts for the improvements you have undertaken so far for re-imbursement. Further, as discussed with you before, please, no improvements without consulting us first. You can stay if you like, but please we do not want to chase anybody for rent money.

If, in the future, we decide to sell, you will obviously have the first refusal option.

Regards
D S Mafurirano”…,.

The tone of the above letter reveals that the seller was disappointed by the behavior of the buyer who did not appear to be serious to pay on signature of the agreement. When payment was made, more than a month later, the money was one million dollars less than the agreed deposit. According to the letter, Naran did not feel bound by the agreement as he allegedly accused his lawyer of concluding negotiations on the price and conditions without his client's mandate.

The plaintiff denied ever doing or saying what is contained in the letter. He instead alleged that the negotiations were done by him. He did not remember the meeting of 7 November 2001 where he was alleged to have made those remarks.

It was his evidence that although he may have asked for more time to pay, never did he, at any stage, indicate that he wanted to cancel the agreement. It was the defendant who was bent on wanting to cancel the agreement as illustrated by her letter of 17 October 2001 addressed to the plaintiff's legal practitioners marked for the attention of Mr S Ndlovu which reads:

“Re: Sell of House Number 378 Gorebridge Road, Killarney

Further to our various discussions and letters concerning the sale of the above property. It is now almost the anniversary of the signing of an agreement of sale of the above property whose deposit should have been paid immediately after signing. This has not happened for the past 29 days.

I feel you have had ample time to raise and pay the deposit amount, therefore, I wish to officially inform you of my withdrawal from the agreement. And also to inform you that with immediate effect, Mr Khumalo should give access to people wishing to view the house.

Yours faithfully
R. Mafurirano (Mrs)”

The plaintiff went on to say that he had never instructed his legal practitioner to cancel the contract and accordingly wanted it to be enforced.

He said he did not know anything about the letters of 7 February 2002 and 2 May 2002 addressed to him at 6 Hussor Road, Khumalo, Bulawayo as he did not live there. He had never lived, owned, or used that address.

Under cross examination, Naran told the court that he in fact only became aware of the two letters two weeks before the trial when they were sent to him by his legal practitioner. He was not even aware of the letters when he issued summons and emphasized that he could not have been influenced to issue summons by something that he was not even aware of.

Similarly, he claimed the letter of 8 November 2001, addressed to Thokozani Khumalo, was only brought to his attention two weeks before the trial commenced. It also could not have influenced him to institute these proceedings.

In a nutshell, his erstwhile legal practitioner, Sibusiso Ndlovu, never brought to his attention all these letters.

Naran was being untruthful when he said he was not aware of the said letters before he issued summons. That is contrary to what he said in paragraphs 6 and 7 of his declaration where he says the defendant purported to cancel the agreement by addressing two letters to him, copies of which were attached to the declaration marked “B” and “C”. He said he had never received those letters and had accordingly not been put in mora by the defendant.

As can be seem from his declaration, his concern was that he had not been put in mora since he had not received the said letters.

He was clearly aware of the letters before he issued summons.

Consequently, his suggestion that they were only brought to his attention two weeks before the trial commenced is rejected as it is false and so is his suggestion that he was not aware of the letter of 8 November 2001 and that it did not influence him to institute these proceedings.

Further, Naran could not give a satisfactory explanation, under cross-examination, why he was tendering the balance of $3.8 million for the house if he had treated the $1 million meant for the paper project as part of the purchase price for the house. If what he told the court was true he should have tendered $2.8 million. There would have been no reason for him to tender more than what was due and owing.

In any event, the paper project involved Naran and the defendant's husband and had nothing to do with the defendant herself. Hence the $1 million could not have been treated as part of the price for the house.

Naran was an unreliable witness who was not worth to be believed. His evidence was in conflict with that of Thokozani Khumalo who categorically stated, that, on receipt of the letter of 8 November 2001 he discussed the import of its contents telephonically with Naran who distanced himself from the contents and suggested that the letter should be handed over to their lawyer Sibusiso Ndlovu. Indeed, the letter was handed over to the lawyer as suggested by Naran.

Thokozani Khumalo told the court that Naran never told him that the $1 million was part payment for the purchase price. Instead, he said Naran told him that Davis Sunganayi Mafurirano had borrowed the money.

Thokozani Khumalo said he had effected some improvements at the property. He, however, admitted under cross examination that the improvements were made without the authority from the Mafuriranos.

Mr Sibusiso Ndlovu was a friend and business partner of Naran. He was also a friend of Thokozani Khumalo. He was the legal practitioner who drew up the agreement of sale and signed it on behalf of Naran – the plaintiff.

He knew Mrs Mafurirano who had been introduced to him by one Mathew Nhindiri and also had dealings with her from her bank – CBZ Bank. He said he only got to know Mr Mafurirano at the time he drafted the agreement of sale.

He confirmed that three letters were addressed to his law firm but the fourth one was directly addressed to Thokozani Khumalo, who, without delay, handed it to him.

Thokozani Khumalo was reported as having been still agitated as he handed the letter to Sibusiso Ndlovu who got concerned after going through the contents of the letter. The letter in question is the one dated 8 November 2001 quoted from page 4 and 5 supra.

Sibusiso Ndlovu, like Thokozani Khumalo, telephoned Naran about the contents of the letter. Naran denied having agreed to cancel the agreement and told Sibusiso Ndlovu to contact Davis Sunganayi Mafurirano which he did. He went further to advise Davis Sunganayi Mafurirano that Naran and Thokozani Khumalo were still committed to pay but did not have money at that stage because the money they had expected from the payment of a cement consignment from a Zambian buyer was not forthcoming. But, Davis Sunganayi Mafurirano still allegedly told Sibusiso Ndlovu to pressurize Naran to make payment for the house as he knew Naran's plight. He knew about the Zambian consignment and anticipated that Naran would be paid for the consignment at some stage.

Under cross examination, Sibusiso Ndlovu said he had never regarded the letter of 8 November 2001 as a cancellation of the agreement. He also conceded that the defendant still considered herself bound by the agreement in the letter of 7 February 2002. In it, the defendant wanted to know when the plaintiff was going to pay if he was still interested in the agreement. The letter was written by her legal practitioners addressed directly to Naran and sent to 6 Hussar Road, Khumalo which was a wrong address.

The main body of the letter reads:

“Re: Agreement of Sale with Ronnah Marurirano

We refer to the above matter in which we act for Ronnah Mafurirano with whom you entered into a sale agreement in respect of Stand 378 Gorebridge Road, Killarney.

The purchase price was in the sum of $5,300,000 payable as to a deposit of $2,500,000 and the balance of $2.8 million in monthly installments of $1.5 million starting end of October 2001.

You paid $1.5 million as a deposit on the 26th October 2001. This was $1 million less than the agreed deposit.

You have not paid anything further after the $1 million (sic) referred to.

Our clients instruct us to enquire from you, as we hereby do, whether it is still your intention to proceed with the purchase, and, if so, when they can expect to receive the balance which is overdue. If you are no longer interested in the purchase please advise to enable our clients to move forward. Please let us have your election either way within 7 days of this letter failing which we will approach court for an order to declare forfeit as a pre-estimate of damages the deposit paid.

Yours faithfully
Majoko and Majoko”…,.

The contents of this letter clearly establish that the defendant still considered herself bound to the agreement as at 7 February 2002.

This court, therefore, makes a specific finding to that effect.

Another letter addressed directly to Naran, but also sent to the wrong address, was dated 2 May 2002 and it reads this:-

“Dear Sir

Re: Agreement of Sale with Ronnah Mafurirano

We refer to the above matter.

In terms of your agreement, you were supposed to pay a deposit for the purchase price in the sum of $2,500,000 on the date of your signing the agreement. You failed to do so. In fact, you only paid the sum of $1,100,000 (sic).

Through several letters to you our client informed you that time of payment was of the essence. You have failed to make any other payment from the date you made the first installment. You have breached your contract.

Due to your breach of the contract by failing to pay on time and as stipulated in the contract our client now considers your contract cancelled.

Our client also wishes to notify you that he reserves the right to forfeit the installment paid to her.

Yours faithfully
Majoko and Majoko”

The above two letters were sent to a wrong address although they were directed at Naran personally.

Naran said he had never used that address and had never lived there. He went on to state that he did not even know anyone living at that address.

He was being untruthful on that point, because, when Sibusiso Ndlovu asked him if he had once lived there, or had once used the address, or if he knew anyone at that address, he denied ever living there or ever using the address but revealed that his distant cousin lived there but was quick to say he was not close to him.

Sibusiso Ndlovu's evidence also confirmed that Naran was well aware of the above two letters well before the summons was issued. He was in fact aware of all the four letters quoted in this judgment id est;

(a) The undated letter addressed to Sibusiso Ndlovu & Associates;

(b) The one addressed to Thokozani Khumalo dated 8 November 2001;

(c) The one dated 7 February 2002 addressed to himself but sent to the wrong address; and

(d) The last one dated 2 May 2002 also addressed to himself but sent to a wrong address.

Accordingly, Sibusiso Ndlovu's evidence belies Naran's story that he only became aware of the letters two weeks before the trial commenced.

Sibusiso Ndlovu admitted, under cross examination, that, Naran did not disclose to him that he himself had made a tender of the purchase price to the defendant. He further admitted that Naran, the plaintiff, was in material breach of the agreement. He, however, went on to state that despite the fact that Naran was in material breach of the agreement the defendant kept on accepting and granting extensions.

The defence case was closed after the evidence of Sibusiso Ndlovu.

Mrs Mafurirano, the first defendant, gave evidence and called her husband as a defence witness.

She herself did not have much to say as most of what took place in relation to the agreement of sale was done by her husband. He did all the negotiations relating to the sale.

She told the court that she and her husband had more than one property in Bulawayo. The property at the centre of this dispute was registered in her name. Sometime in September 2001 the couple was offered a farm to buy. They needed money to buy it. They then decided to dispose of one of their properties in order to raise the money. They decided to sell the property in question. The first offer was made to Thokozani Khumalo the sitting tenant.

After sometime, her husband brought an Agreement of Sale drawn up by Sibusiso Ndlovu & Associates legal practitioners for her signature.

She confirmed that the plaintiff was in breach of the contract as he failed to pay the deposit in terms of the agreement. The purchase price was also not paid.

Although she had not been involved in the writing of several letters to the plaintiff by her husband she was made aware of what was going on.

Under cross-examination, she maintained that she had not cancelled the contract despite indications in the letters that it would be cancelled. She said she still considered herself bound by the agreement although her attitude was that the whole deal had taken too long. Her major concern was to have the house sold so that they could raise money for the farm project.

Mrs Mafurirano gave her evidence in a simple and clear manner. She was worth to be believed.

She called her husband who was her key witness as he was the one involved in the negotiations for the sale of the house.

The husband, one Davis Sunganayi Mafurirano, had this to say:

He told the court that Thokozani Khumalo was their tenant who rented the house in question. At one stage, an opportunity arose whereby someone was selling a business and a farm. He and his wife got interested in that property. They decided, as a family, to raise some money by selling their Killarney house in an endeavour to acquire the farm and a business. They agreed, as a family, that the husband was going to handle all negotiations and transactions relating to the selling of their Killarney house.

They then approached the sitting tenant, Thokozani Khumalo, and informed him about their wish to dispose of the house. Thokozani Khumalo was interested in the house but said he would seek financial assistance from Naran who was his employer. Later, Thokozani Khumalo advised him to go and see his lawyer, Sibusiso Ndlovu.

He went and had a discussion with Sibusiso Ndlovu. They agreed on a price of $5.3 million for the house. The lawyer, Sibusiso Ndlovu, undertook to draft an Agreement of Sale and said Davis Sunganayi Mafurirano should return the next day to sign it. He returned to the lawyer's office whereat the lawyer and himself made some amendments to the draft Agreement of Sale. Thereafter, he was given the amended draft Agreement of Sale to take to his wife for signature.

His wife signed the Agreement of Sale on 12 September 2001 and Davis Sunganayi Mafurirano immediately returned it to the law firm for the buyer to sign it. Davis Sunganayi Mafurirano expected the buyer to also sign the agreement on 12 September 2001, but, to his surprise and disappointment, the buyer only signed it 18 days later - on 30 September 2001.

Davis Sunganayi Mafurirano's expectations were that Naran was going to pay a deposit of $2.5 million on signature as stipulated in the Agreement of Sale but that never happened. Payment of the deposit was not made even on the belated date of signature by the buyer.

That caused a lot of anxiety to the Mafuriranos as their plans to purchase a farm and business were thrown into disarray. Davis Sunganayi Mafurirano had to go to a Mr Turner to negotiate with him about the time they could pay him for the farm and business.

The deposit was paid in by Thokozani Khumalo on 26 October 2001. To the Mafurirano's further disappointment, Thokozani Khumalo paid in $1.5 million leaving a shortfall of $1 million. That payment was made on a Friday and Thokozani Khumalo had promised to pay the balance the next Monday but failed to do so.

The witness reminded Thokozani Khumalo of his promise but the reminder produced no result. He then decided to go and see Sibusiso Ndlovu who referred him to Naran whom the witness had not dealt with in relation to the sale of the house.

The witness said he embarked on fruitless efforts to have the outstanding part of the balance paid. He went to Thokozani Khumalo who referred him to Sibusiso Ndlovu who in turn referred him to Naran.

As if that was not enough trouble, Naran surprised him by allegedly saying:-

(a) Sibusiso Ndlovu had no right to enter into the agreement;

(b) He also pointed out that the house was over-priced and went on to say he could get a better house for that price in Ilanda or Famona; and

(c) He finally said of the $1.5 million that had been paid that far $1.1 million had to be returned (without specifying to whom) while the witness kept $400,000 for the inconvenience caused to him.

Naran allegedly made the above revelations at a meeting which he had with the witness on 7 November 2001.

The following day, Davis Sunganayi Mafurirano addressed the letter to Thokozani Khumalo quoted supra…,.

The witness denied that he meant to cancel the agreement by writing the letter. He contended that he was merely conveying to Thokozani Khumalo what his benefactor said at the meeting of the previous day. It was the witness' further contention that it was Naran, instead, who was canceling the agreement by revealing that he was not bound by it since Sibusiso Ndlovu had no mandate from him to conclude the agreement.

It was Davis Sunganayi Mafurirano's evidence that the series of letters written by him and his wife were merely intended to cajole Naran and Thokozani Khumalo into honouring their obligation. But, to their disappointment, no written response came from the buyers and their legal practitioners.

They were further disappointed by the fact that the buyers and their legal practitioners drew up the Agreement of Sale wherein they stipulated conditions which they never met. Hence their ultimate conclusion that Naran had cancelled the Agreement of Sale.

That was what prompted them to instruct their legal practitioners to write the final letter on 2 May 2002…,.

According to Davis Sunganayi Mafurirano, the letter was a mere acceptance of the fact that Naran had cancelled the Agreement of Sale.

Davis Sunganayi Mafurirano vehemently denied the suggestion that he was given $1 million dollars which was applied to the purchase of the house.

Davis Sunganayi Mafurirano was subjected to a lengthy and thorough cross-examination. He came out of the cross examination badly bruised as he could not give direct answers to questions and was evasive.

He, however, made it clear, under cross-examination, that, it was not correct that he had been given the $1 million for the purchase of bond paper which money was later applied to the purchase of the house. He said the issue of bond paper only involved $80,000 and not $1 million as had been suggested by the plaintiff. He then referred the court to a document attached to exhibit 3 reflecting that he indeed paid $80,000 for A4 paper on 18 October 2001.

He further emphasized, under cross examination, that, the various letters written to the buyers were not meant to cancel the agreement but were being used as a means to spur them into making payment. They were just a tactic to pressurize Naran and Thokozani Khumalo to honour their contractual obligations.

Davis Sunganayi Mafurirano maintained that the letter of 2 May 2002 was just an acceptance of the fact that Naran had cancelled the agreement.

There is merit in Davis Sunganayi Mafurirano's conclusion in the light of the following findings made by the court:

This court makes a finding that the plaintiff was in material breach of the agreement right from the onset.

He failed to pay the deposit on signing the agreement as stipulated. When he did so, a month later, what he paid was $1 million less than what the parties had agreed.

Although the plaintiff was in material breach of the agreement, the defendant, through desperation, kept on accepting and granting extensions resulting in the plaintiff taking advantage of her and grossly abused that advantage.

Demands for him to pay, coupled with repeated threats to cancel the Agreement of Sale, did not spur him into honouring his side of the bargain.

This court has already found that Naran was an unreliable witness who was not worth to be believed. He contradicted the evidence of Thokozani Khumalo and Sibusiso Ndlovu. He did not end there. He sought to distance himself from his pleadings.

This court further finds, that, the probabilities favour the story that the plaintiff said he was not bound by the agreement, and, in any event, the house was overpriced and he could get a better house for that price in Illanda or Famona.

Here is why:

He did not want to pay the deposit in terms of the agreement. When he did so, after a month, he only paid $1.5 million instead of $2.4 million. He claimed to have lent Davis Sunganayi Mafurirano a sum of $1 million which sum he alleged had been applied to the purchase of the house. As far as he was concerned a total of $2.5 million had been paid.

It is important to note that Naran said he had offered to buy the house for $2.5 million.

Interestingly, after he had paid an amount equal to $2.5 million he made no further payment towards the purchase of the house despite a series of letters urging him to pay. He was simply unwilling to pay more than $2.5 million.

He denied being aware of any of the letters claiming that he had only become aware of them two weeks before the trial.

He was clearly untruthful.

This court also finds that Davis Sunganayi Mafurirano did not answer questions directly and was evasive. He tended to give unsolicited explanations, but, the court cannot go so far as classifying him as a witness who was not worth to be believed.

He was just a seller who had been disappointed by the buyer who had no respect for the agreement the parties had entered into.

The buyer drafted the Sale Agreement and stipulated conditions therein which he thereafter disregarded with impunity.

The Mafuriranos urgently needed the money to purchase a farm and business which explains why they continued to grant extensions of time within which to pay.

In conclusion, this court finds, in the light of the foregoing, that, the plaintiff stated that he was no longer prepared to be held to the contract of sale hence his unwillingness to make any further payments beyond the sum of $2.5 million thereby cancelling the agreement.

He is therefore not entitled to tender the sum of $3,800,000 plus interest.

He is, however, entitled to a refund of $1,500,000 plus interest calculated from 31 October 2001.

He is further entitled to compensation for proved improvements, if any, effected to the said property.

The plaintiff is to blame for the failure of the Agreement of Sale and should accordingly bear the costs of suit.

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA
Ruled By: MAKARAU JP

The plaintiff is resident in the United Kingdom.

Sometime in 2003, he telephoned one Simbarashe Sagonda and Thomas Makwangudze, relatives of his, to proceed to view a property that was being offered for sale through the agency of the second defendant.

The property, whose description and location in Ruwa was known to the second defendant's property negotiator, “Nyasha”, is owned by the first defendant who holds freehold title to the land.

It is common cause that the instructions to sell the property did not emanate from the first defendant but from a fraudster, still at large, who was making out to be the first defendant and not only had with him a forged copy of the Deed of Transfer in respect of the property bearing the first defendant's name, but also a driver's licence and a passport with the names of the first defendant but bearing his picture.

It is further common cause that the two plaintiff's relatives viewed the property in the company of Nyasha, the property negotiator, and were satisfied with its condition in relation to the asking price. They accordingly, but separately, recommended to the plaintiff that he purchases the property.

An Agreement of Sale was duly drawn up and the plaintiff cautioned that he wanted the transaction to be supervised by a lawyer. Debut the third respondent in her capacity as a conveyancer and one who was well known to the second defendant and had done work for the second defendant previously.

On the date that the Agreement of Sale was signed, the fraudster, still making out to be the first defendant, attended at the third defendant's offices and not only did he sign the agreement as seller and first defendant, he also collected the deposit of the purchase price that had been paid in the sum of 8,000 pounds sterling. It is at this meeting that the fraudster exhibited the identity documents that he used to commit the fraud. The documents were inspected by all who were present, including the plaintiff's representative, who did not find anything amiss with the documentation.

A further payment in the sum of 6,000 pounds sterling was made some months thereafter.

Soon after the payment of the balance of the purchase price, transfer fees were called for in anticipation of transferring the property into the plaintiff's name. It was at this stage that the fraud was discovered as the Registrar of Deeds raised issues with the authenticity of the Deed of Transfer tendered with the transfer papers and advised that the matter be reported to the police.

Efforts to trace the purported seller of the property to obtain vacant possession of the property by the plaintiff's agent were in vain.

On 21 April 2004, the plaintiff issued summons claiming against all defendants, an order compelling them to transfer the property in dispute to him. In the alternative, the plaintiff sought an order against all the defendants jointly and severally for the payment of damages to be calculated as the purchase price of a similar stand in Ruwa at the time of payment less the Zimbabwe Dollar equivalent of 14,000 pounds sterling, $2,7 million, and interest a temporae morae on the two amounts at the prescribed rates.

The action was defended by all three defendants.

The first defendant denied that he ever put up his property for sale or connived with the fraudster to defraud the plaintiff. The second defendant denied conniving with the fraudster or misrepresenting any facts to the plaintiff. The third defendant also denied conniving with the fraudster or misrepresenting any facts to the plaintiff.

At the pre-trial conference of the matter, four issues were identified for trial. These were;

(i) Whether or not there was misrepresentation on the part of the defendants that led the plaintiff to lose his money;

(ii) The quantum of damages;

(iii) From whom such damages were recoverable; and

(iv) Who should bear costs of suit.

At the trial of the matter, the plaintiff called Simbarashe Sagonda and Thomas Makwangudze as witnesses. The testimonies of the two witnesses were to narrate what is essentially common cause in this trial.

It was Simbarashe Sagonda's testimony, that, when he went to view the property in the company of the property negotiator from the second defendant, Nyasha, they were shown around by a lady of middle age. Also present were a gardener who opened the gate for them, a maid who was busying herself in the kitchen, and some other young man. From the visit, he got the impression that Nyasha had been to the property before and knew all the faults and uncompleted details in the structure.

The witness gave his evidence well and I have no reason to disbelieve him.

As indicated above, his testimony was a narration of facts that are not in dispute as between the parties.

Thomas Makwangudze also testified as to how he went to view the property in the company of Nyasha and one Lovemore Hombarume who was held out to be the nephew of the seller of the property. He also testified as to how an Agreement of Sale was then drafted and that at the time of signing the agreement and paying the deposit, he met the fraudster, who produced a driver's licence and passport all bearing the names of the first defendant. He inspected the documents together with the third defendant, Nyasha, and a friend he had brought along to witness the transaction.

All four of them did not notice anything irregular with the identity documents and were duped into believing that they were dealing with the first defendant, the owner of the property.

He further testified as to how he paid the balance of the purchase price and transfer fees for the property.

Again, in my view, the witness gave his evidence well. I gained the impression that he is honest and reliable.

He found it difficult, on his observations, to categorically hold that the defendants were conniving with the fraudster. He only assumed there may have been connivance between the first defendant and the fraudster but had no basis for making this assumption save the fact that he and Nyasha freely viewed the first defendant's property in the presence of his maid and gardener.

After leading these two witnesses, the plaintiff closed its case.

At the close of the evidence, the plaintiff withdrew his claim against the first defendant, tendering costs. It is therefore unnecessary that I deal with the evidence led by the first defendant in his defence.

The second and third defendants applied for absolution from the instance arguing that the plaintiff had not established a prima facie case that the defendants had misrepresented to him any fact.

I granted the application and indicated that my reasons would follow. I now set them out.

Before I proceed to deal with the application for absolution from the instance, there are two issues that I wish to remark on. These relate to the standard of pleadings exhibited in this matter and the need for legal practitioners at pre-trial conferences to assess the cogency of the evidence they intend to adduce at the trial of the matter.

The purpose of pleadings is not only to inform the other party in concise terms of the precise nature of the claim they have to meet, but, pleadings also serve to identify the branch of the law under which the claim has been brought. Different branches of the law require different matters to be specifically pleaded for a claim to be sustainable under that action.

Thus, for example, in a divorce action, the allegation of irretrievable breakdown is imperative while in a delictual claim for bodily injury, fault has to be averred against the defendant.

This may appear trite but a number of matters coming before the courts seem to indicate that legal practitioners have abandoned the need to plead a cause of action by making the necessary averments to sustain such an action: see S Pilime v B Chisvo HH10-07.

In casu, the plaintiff's legal practitioner appears to have simply rehashed the instructions he had received from his client in the declaration without making an attempt to precisely and concisely lay out the cause of action and the averments necessary to sustain such. I gain this impression from the wording of the concluding paragraph of the declaration which is framed as follows:

“All the defendants were either conniving together or misrepresented facts to the Plaintiff in order to deprive the plaintiff of the said Stand and money.”

The defendants' legal practitioners did not fare any better in the matter.

Instead of seeking clarification of the claim and its basis by either a request for further particulars or an appropriate exception, the defendants were advised to file pleas to the merits which pleas read no better than the declaration as they seek to deny the statements made in the declaration (Mr Nhemwa was not representing the second defendant at the time the pleadings were exchanged).

In my view, the exchange of pleadings between the parties is what may pass as conversation at a social gathering between disagreeing parties but bears not the slightest resemblance to pleadings in a court of law.

Legal practitioners are urged to read on the law before putting pen to paper to draft pleadings in any matter so that what they plead is what the law requires their clients to prove to sustain the remedy they seek.

The duty of a legal practitioner to precisely and concisely draw up pleading is closely related to the duty to establish and assess the evidence necessary to sustain each important averment made in the pleadings.

This should be done before or at the pretrial conference stage when the summaries of evidence are drawn up. Gaps in the evidence should be identified at this stage and brought to the attention of the party who may thus avoid the loss occasioned by a dismissal or absolution from the instance at the close of the plaintiff's case at trial.

All too often, legal practitioners are heard in a pre-trial conference to whisper to their clients asking how many witnesses they will call at the trial of the matter. Preparedness is the hallmark of a good legal practitioner. It is no use for a legal practitioner to concede, at trial, that his client does not have sufficient evidence when pleading that the matter should not be dismissed but that absolution from the instance be granted.

It is my view, that, had the plaintiff's legal practitioner in this matter assessed the cogency of the evidence that he had, he may have avoided a trial in this matter and legal costs for his client as none of the plaintiff's witnesses testified as to a misrepresentation made to them, and, the second witness in particular, denied that there was any connivance by the defendants to deprive the plaintiff of his money. His testimony was to the effect, that, because the second and third defendants were professionals, they should have guarded against the loss. This, in my view, suggests a claim based on negligence rather than on misrepresentation or fraud.

Litigation in the High Court is serious business and the standard of pleadings in the court must reflect such.

In view of the evidence adduced on behalf of the plaintiff, it was clear, at the close of the plaintiff's case, that there was no need to call upon the defendants to testify.

Even if I were to be overly generous and hold that the plaintiff had pleaded misrepresentation as a cause of action against the defendants, the evidence adduced by the plaintiff revealed that it was the fraudster who misrepresented to both the plaintiff and to the defendants that he was the registered owner of the property that he was selling.

It is this fraud that induced the sale between the parties.

The fraudster went to the extent of producing cleverly forged documents to support his fraud. The defendants did not assist him in this fraud and were also the victims of the fraud.

In any event, it was not specifically pleaded in the papers whether the alleged fraud by the defendants was innocent, negligent, or fraudulent.

Having alleged that he was induced into the contract by misrepresentation, the plaintiff proceeded to pray for transfer of the property into his name.

I am not clear how the remedy of specific performance was pleaded after the alleged misrepresentation.

HH92-09 : SUPA PLANT INVESTMENTS (PVT) LTD vs EDGAR CHIDAVAENZI
Ruled By: MAKARAU JP

The facts giving rise to this application are largely common cause. They are as follows:

The applicant is in the farming business, operating a farm in Chakari. In October 2006, it set out to acquire a centre pivot irrigation system for its farm. Its Managing Director, duly authorized to act on behalf of the applicant, approached one Douglas Chihuri (“Chihuri”) who was selling a center pivot system on behalf of the respondent.

An agreement of sale was concluded between the plaintiff and Douglas Chihuri, acting for his principal, regarding a 140HA center pivot system belonging to the respondent.

A purchase price in the sum of $12,000,000 and installation charges of $3,000,000 were agreed upon.

Pursuant to the agreement, an invoice was made out to the applicant giving the total amount payable as $15 million.

It was made clear to Douglas Chihuri that payment would be made through the African Banking Corporation and would take a few weeks to be processed.

A month later, payment was effected in the agreed sum. This was made in favour of Chartered Enterprises, Douglas Chihuri's trading mantle.

A week after payment had been made, the applicant met with the respondent to discuss the details of the delivery of the centre pivot. Douglas Chihuri was in attendance. At the meeting, the respondent unilaterally increased the purchase price of the centre pivot. Instead of holding the respondent to the agreed price, the applicant agreed to pay an additional $5million and executed an acknowledgement of debt to this effect.

The seller also appended his signature to the acknowledgement. So did Douglas Chihuri.

Payment of the $15 million was then made to the respondent according to his instructions. Still acting as the seller's agent, Douglas Chihuri agreed to have the centre pivot delivered to the applicant.

The respondent did not deliver the centre pivot, prompting the applicant to bring this application seeking an order compelling the respondent to deliver a 140HA center pivot to it.

In opposing the application, the respondent denies knowledge of what transpired between the applicant and Douglas Chihuri, but admits that he was, at that time, selling two centre pivots, the details of which he gave to Douglas Chihuri. He further confirmed, that, in time, Douglas Chihuri advised him that he had secured a buyer for one of the centre pivots. He also confirmed that he received the sum of $14 million dollars for the centre pivot that Douglas Chihuri had sold to the applicant on his behalf and that a balance in the sum of $5 million would be paid in due course.

It was also suggested to him that a further $15 million would be paid for the same pivot after the applicant had sold his beasts or that he could collect the beasts himself as further payment for the sold pivot. He however opted for a cash payment. He did not agree to the delivery of the pivot in the absence of full payment and did not deliver the center pivot because he did not receive the full purchase price of $35 million.

At the hearing of the application, it emerged that the respondent had sold the centre pivot, the subject of this dispute, after being served with this application but before the matter was determined.

This emerged from supplementary affidavits filed by both parties days before the hearing and which were filed with my leave. I granted leave to the parties to file the supplementary affidavits as, in my view, they air the full dispute between the parties and bring out the real issue for determination in this matter.

In his supplementary affidavit, the respondent deposed, that, after the filing of the above application, a director of the applicant caused his arrest on allegations of fraud. It was alleged, in the criminal proceedings, that the respondent had fraudulently misrepresented to the said director that the centre pivot was available for sale when he knew that it was not as it was to be sold to a third party. The respondent was duly prosecuted but was acquitted at the close of the trial.

In it own supplementary affidavit, the applicant admitted the facts given in the respondent's additional affidavit but urged me to find the contents of the affidavit inadmissible on the basis of irrelevancy.

Before proceeding further, I will dispose of the admissibility of the contents of the affidavit.

In my view, once a court grants leave to a party to file an additional affidavit, that grant of leave necessarily implies that the contents of the affidavit are admissible. Supplementary affidavits should only be filed if their contents are relevant to the dispute before the court.

It is a general rule of evidence that irrelevant evidence is inadmissible.

Section 26 of the Civil Evidence Act [Chapter 8.01] provides that evidence that is irrelevant or immaterial and cannot lead to the proving or disproving of any point in issue shall not be admissible.

This section is simply a codification of the position at common law which holds that all facts relevant to the issue in legal proceedings may be proved and where a legally recognized exception to this rule is not invoked, relevancy remains the fundamental rule governing the admissibility of evidence.

As indicated above, this is the rule that a court summarily employs before granting leave to file additional affidavits in motion proceedings.

In my view, the rule against admissibility of irrelevant evidence is rooted more in common sense than in a legal principle. It is a common sense approach by the court to govern that which it will accept or reject lest it be inundated by evidence of all facts surrounding a dispute and trials will take longer than is necessary to resolve if the parties were left at liberty to drag in all they wish or think is necessary.

It however remains clear that the rule against irrelevant evidence is against evidence of facts that have little to do with the issue in dispute.

In casu, I was of the view that the disposal of the centre pivot pending litigation is the issue in dispute and thus facts tending to prove the disposal cannot be irrelevant. Further, and in any event, the facts sought to be rendered inadmissible by the applicant are common cause and thus no party will be prejudiced by its admission into evidence.

It is on the basis of the above that I ruled admissible the contents of the two supplementary affidavits.

I now turn to consider the merits of the application.

The issues that fall for determination in this application are mainly two in my view:

(i) Firstly, I have to determine whether or not there was an agreement between the applicant and the respondent for the sale of the centre pivot for $20 million.

The respondent has sought to argue that the agreed purchase price was $35 million. He deposed in his opposing affidavit that after the applicant had paid the first $15 million and had promised a further $5 million, by way of the acknowledgement of debt; the parties agreed to a further payment of $15 million after the applicant had sold its beasts.

Relying on these averments by the respondent, counsel for the respondent argued that the correct purchase price of the center pivot cannot, in the circumstances, be ascertained without the leading of oral evidence and thus the application should fail on this basis.

It is common cause that Douglas Chihuri, acting as the agent of the respondent, agreed to sell the centre pivot to the applicant for $15 million. The parties agreed, later, to vary the purchase price to $20 million, when, after making payment of the initial purchase price, the applicant promised, by way of an acknowledgement of debt, to pay an additional $5 million.

The agency of Douglas Chihuri to represent the respondent, whilst challenged in the opposing affidavit, was not advanced in argument.

In my view, counsel for the respondent was well advised not to advance the argument in view of the affidavit by Douglas Chihuri and the fact that the respondent accepted the sum of $15 million paid by the applicant through Chihuri.

By his own conduct, of accepting the payment, the respondent put paid to whatever argument he may have had against the agency of Douglas Chihuri. By this conduct, he gave out and confirmed that Douglas Chihuri was indeed selling the centre pivot on his behalf and is thus bound not only by what Douglas Chihuri did but by what he also personally did.

If there was any doubt about the agency of Douglas Chihuri, the respondent personally removed that doubt by accepting the part payment of the purchase price and agreeing with the applicant that the balance now stood at $5 million, thereby putting beyond doubt that the purchase price was $20 million.

In my view, he is thus condemned by his own actions as revealed by the papers filed of record.

I am aware that the respondent has repeatedly and vehemently denied, in his affidavit, that the purchase price of the centre pivot was $20 million.

It is my view that it is not the number of times a denial is made or the vehemence with which a denial is made that will create a conflict of fact such as was referred to by McNALLY J…, in Masukusa v National Foods Ltd and Another 1983 (1) ZLR 232 (H) and in all the other cases that have followed.

A material dispute of fact arises when material facts alleged by the applicant are disputed and traversed by the respondent in such a manner as to leave the court with no ready answer to the dispute between the parties in the absence of further evidence.

In casu, I believe the papers filed of record present ready answers to the questions posed by the respondent. He argues that he wanted more than the $20 million that the applicant contends was the agreed purchase price.

(a) Firstly, the papers filed of record clearly show that the respondent's agent negotiated and agreed to the sum of $20 million.

At law, the actions of the agent bind the principal - even if the agent is breaching his own contract of agency with the principal.

There is thus no need to lead evidence to show what the terms of the agency contract were regarding the purchase price he had to seek. The respondent, through the agency of Douglas Chihuri, agreed to $20 million that the applicant has paid in full.

(b) Secondly, it is common cause that the respondent received the sum of $15 million dollars through his agent, and, thereafter, acknowledged, in writing, that the balance due was $5 million.

He did not, at that stage, query the fact that the balance was only $5 million instead of $20 million according to his assertions.

By appending his signature to the acknowledgement of debt, which clearly indicates the balance as $5million, he gave out to the applicant that he agreed with the applicant in this regard.

Thus, in my view, on the basis of the papers, it is clear that the total purchase price agreed to between parties was in the sum of $20 million which was paid in full.

I find nothing on the papers to indicate that the parties may have agreed to a price other than $20 million.

The only suggestion that this may be so is the averment by the respondent, in his opposing affidavit, to this effect. It is not backed up by any other evidence. It is contradicted by the facts that are common cause and is thus clearly simply meant to introduce an illusory conflict where none exists.

Aligned to the alleged conflict of fact on the agreed purchase price is whether the respondent agreed to deliver the centre pivot before payment of the purchase price in full.

Again, counsel for the respondent urged me to find that I could not resolve this dispute in the absence of oral evidence.

I am afraid I cannot agree.

Having found that the agreed purchase price was $20 million which was paid in full, it matters not, in my view, if the respondent agreed to deliver the centre pivot as delivery is a legal consequence following the conclusion of a sale agreement. It cannot be the subject of a separate agreement between the parties.

It is therefore my finding, that, there is no material conflict of fact in this application.

The parties concluded an agreement of sale of the centre pivot for the sum of $20 million which has since been paid in full. The respondent is bound by the law of sale to deliver the centre pivot to the applicant.

(ii) Having disposed of the first issue, I now turn to the second issue. It concerns the relief that the applicant is entitled to in the circumstances of this matter.

It is common cause that the centre pivot that the respondent sold to the applicant has since been sold to a third party. It is also common cause that the respondent sold the centre pivot whilst fully aware that this application had not yet been determined and thereby sought to render the outcome of the litigation ineffective by disposing of the subject matter of the suit beforehand.

I find the conduct of the respondent, in this regard, a mockery of this court and its proceedings.

It was not put in issue by the respondent that the centre pivot was not res litigiosa at the time that he sold it to a third party. I will therefore proceed to deal with the matter on the basis that it was.

In doing so, I am aware that there is a possible distinction as to when the subject matter of litigation becomes res litigiosa depending on whether the suit before the court concerning the object is an action in rem or a personal action.

The authorities seem to suggest that in an action in rem, the subject matter becomes res litigiosa upon service of summons, whereas, in all other actions, the subject matter becomes res litigiosa upon litis contestatio or the closure of pleadings: see Opera House (Grand Parade) v Cape Town City Council 1986 (2) SA 656 (CPD)…,.

In any event, and for the avoidance of doubt, although the applicant is suing ex contractu, to enforce a personal right against the respondent, at the time the centre pivot was sold, the parties had filed both the application and the opposing affidavits and thus the matter had, in my opinion, reached litis contestatio and the application could have, at that stage, been set down for hearing.

The sale of res litigiosa has been dealt with by the courts for decades. The position at law appears settled. I believe I can do no better than refer to the words of INNES CJ in Caronel v Gordon Estate & G.M. Co 1902 T.S. 95…, when he had the following to say:

“Now, it is undoubtedly the case that under Roman law any right which was res litigiosa could not be alienated. But, a thing only became res litigiosa when there was an action in rem concerning it; the doctrine of litigiosity had no place in regard to merely personal action.

Coming to Roman-Dutch law, there is some authority for the proposition that the same rule prevailed….,. I think then that the weight of Roman-Dutch law authority does not forbid the alienation of res litigiosa: but, even if the doctrine of litigiosa is to be applied, it would be necessary to fix some point or stage in process of an action at which it shall begin to operate. This is desirable and necessary in the interests of the public who may have dealings with a litigant.

Now, the only point or stage in the process at which to fix the vesting of this right to prohibit alienation would be litis contestatio.”

My reading of the above remarks by INNES CJ is that prior to the right of litigiosity vesting, the res can be alienated, but, after litis contestio had been reached, litigiosity operates to prohibit the alienation of the res.

I am fortified in coming to this conclusion by the further but separate remarks made by BARRY J in Hall v Howe 1929 TPD 591, where, after referring to old Roman-Dutch authorities, the learned judge held that res litigiosa could be alienated provided that if the litigant succeeded in his claim against the seller, he, the litigant, could recover the property in dispute from the new possessor.

The doctrine was raised recently in PS Booksellers (Pty) Ltd and Another v Harrison and Others 2008 (3) SA 633 (C) where MEER J also referred to the old Roman Dutch authorities and to Opera House (Grand Parade) v Cape Town City Council 1986 (2) SA 656 (CPD) emphasized the right of the first buyer to recover the res from the third party by summary process. In paragraph 107 of his judgment, he had this to say:

“It seems to me, that, notwithstanding the different phraseology employed by different sources relating to the safeguarding of the third party's interest(s) in the res, extensive concern for such interest(s) is, in each case, the same and that there is what may be accepted as unanimity of this point.

The position is that it is now generally accepted that despite the fact that a thing is res litigiosa this does not preclude or prevent it from being alienated or similarly dealt with, so long as the rights of the non-alienating litigant in the res are protected…,.

This means, when applied to the instant case, that, respondent, albeit that the Rotunda Hotel site is res litigiosa, can only be restrained from dealing with it as it (respondent) proposes doing…, if applicant's rights in and to the site, viz as owner in the event that it is restored to it on the conclusion of the pending action, are not, and will not be, prejudiced by such dealing.”

While I have not been able to come across a case in point from the above authorities, I am coming to the conclusion, that, after litis contestaio has been reached, res litigiosa cannot be alienated and, where it has been alienated, the plaintiff, if successful, can recover it from the possessor.

The old authorities suggest that the non alienating party can summarily recover the res from the third party.

In Hall v Howe 1929 TPD 591, the point is made that, if successful, the non-alienating plaintiff, if successful, can recover the res by execution from the new possessor.

The authors SILBERBERG & SHOEMAN, in The Law of Property, 3rd Ed…, put the position lucidly, in my view, as follows:

“This means that the sale of a res litigiosa is valid inter partes, but the purchaser is bound by the judgment in the action and the successful plaintiff can recover it from the new possessor by execution and without fresh proceedings.”

In the result, and on the basis of the foregoing, I make the following order:

1. The applicant is, by execution, to take delivery of the 140HA centre pivot sold to it by the respondent.

2. The respondent shall bear the applicant's costs of suit on a legal practitioner and client scale.

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: PATEL JA, BHUNU JA and BERE JA

This is an appeal against the judgment of the High Court granting an application for specific performance lodged by the first respondent against the appellants. Apart from granting the relief sought, including the payment of damages in the alternative, the court a quo also ordered the appellants to pay costs ...

Background

The first respondent is an association of residents of the Knowe Housing Development based in the town of Norton. These residents purchased Stands on the development site from the first appellant whose business is to develop and sell housing Stands.

The second appellant is apparently the only active director of the first appellant.

The second respondent is the Norton Town Council. It did not appear at the hearing of this appeal, having filed heads of argument indicating that it would abide by the decision of this Court.

The first appellant, as the owner and seller of Lot 2 of Knowe Suburb, entered into sale agreements with the first respondent's members in 1998 (Phase 2) and later in 2003 (Phase 3). The Phase 2 residents complied with their respective agreements by paying the first appellant in full over a period of 30 months. The Phase 3 residents also duly complied by paying the first appellant in full within the agreed period of 60 months that ended on 1 February 2008.

The first respondent averred that the first appellant had breached its contract of sale with the Knowe residents. It filed an application for specific performance or the payment of damages in the alternative.

The appellants opposed the application on the merits and also raised three points in limine at the hearing a quo.

High Court Judgment

The court a quo dismissed all three points in limine.

As regards the first point, relating to prescription, the court found that the permits granted to the first appellant did not give any time limit within which the infrastructural development was to be completed and that the contracts with the residents did not specify any time limits for suing the first appellant. Whatever was to be done by the first appellant was to be done within a reasonable time.

With respect to the second point, the court found that there were no material disputes of fact and that, therefore, it was proper for the first respondent to proceed by way of application rather than by way of action.

Lastly, the court dismissed the third point objecting to the citation of the second appellant in his personal capacity on the basis that he was responsible for the first appellant's administrative affairs.

On the merits, the court a quo found that the members of the first respondent had duly performed their part of the agreements. Conversely, the first appellant had performed some part of the agreements but had not fully complied with the agreements and development permits. The court was not satisfied that this failure to perform was mainly because of inflation. The court further found that the first appellant had failed to establish that performance was now impossible in the era of dollarisation.

If the first appellant had serviced the Stands at the time the purchase prices were paid, between 1998 and 2008, there would have been no difficulty in the performance of the contracts. The court rejected the defence of impossibility of performance on the basis that any hardships now encountered by the appellants were self-created.

Finally, the court held, that, if the appellants were unable to comply with an order for specific performance, they must, in the alternative, pay damages.

In the event, the court ordered the appellants to fully service the Stands in Phases 2 and 3 within 90 days to the second respondent's satisfaction and specifications. The latter was ordered to ensure that the relevant statutory requirements were met. Alternatively, the appellants were ordered to pay the sum of US$192,901,995 to the first respondent's members within 30 days. If they failed to pay, the Sheriff was authorised to attach and sell the appellants' property in execution in satisfaction of the damages awarded. Lastly, the appellants were ordered to pay the costs of suit on an attorney and client scale.

Grounds of Appeal and Relief Sought

The 10 grounds of appeal hereunder are unduly prolix and repetitive. They attack the judgment a quo on the following broad bases:

(i) The appellants were not in breach of their obligations in the absence of a finding as to the time when performance was due, and, therefore, the application a quo was premature and not enforceable.

(ii) The claims in casu were prescribed following the execution of their obligations by the residents, and, in that respect, the court misconstrued the first appellant's contractual obligations and its duties in terms of the permits issued by the second respondent.

(iii) The claim for damages required the quantification of damages by way of action, and, consequently, the claim for damages was not proven according to law.

(iv) The court erred in ordering the second appellant to pay damages personally, and, in so doing, it mis-applied the doctrine of piercing the corporate veil.

(v) The court failed to deal with and pronounce upon the defence of currency nominalism and ordered the payment of damages in the currency of circulation and not the currency of performance.

(vi) The court improperly failed to consider the feasibility of performance against the defence of supervening impossibility.

The appellants pray that the appeal be allowed with costs and that the judgment a quo be set aside and substituted with an order dismissing the application with costs.

At the hearing of the appeal, counsel for the appellants moved an amendment to the relief sought, substituting the prayer for dismissal with one for remittal to the court a quo. Counsel for the first respondent had no difficulty with the prayer being substituted as amended. The prayer was accordingly amended, by consent, to provide for the remittal of the matter rather than the dismissal of the application a quo.

Material disputes of fact relating to performance

Counsel for the appellants submits that the matter should not have been dealt with on motion but as a trial case to resolve the material disputes of fact. Evidence was required in relation to prescription, damages, and specific performance.

In the latter respect, the first respondent has not identified the specific work that still remains to be performed and the extent of the works yet to be done remains in dispute. The appellants did comply with some of the conditions stipulated in the subdivision permit. It was on this basis that the second respondent issued title deeds to almost 90 per cent of the first respondent's members in Phase 2.

Ultimately, so it is submitted, the court a quo did not make any findings on what works remained to be carried out.

Counsel for the first respondent submits that a suit for specific performance does not have to proceed by way of trial. There is no material dispute of fact that the appellants have failed to perform. The works outstanding to be performed are clearly set out in the founding affidavit.

In dealing with this, the opposing affidavit does not dispute those averments but raises issues relating to prescription and currency nominalism.

At paragraph 7 of the founding affidavit, the first respondent sets out the nature of the application a quo, i.e. to compel the first appellant to service Phases 2 and 3 of Knowe Suburb and to complete such servicing within a reasonable time as per the agreements of sale between the first respondent's members and the first appellant.

The servicing that is required is specifically identified as including the grading and tarring of roads, the construction of a proper water drainage system, the laying of a proper water reticulation system, the erection of street lights, and the handing over of serviced Stands to the first respondent's members. Such servicing, so it is averred, must all meet the requirements and specifications of the second respondent, the Norton Town Council, as the supervising authority.

In response, at paragraph 21 of his opposing affidavit, the second appellant avers that the claims of the first respondent's members had prescribed in three years after each member completed his or her own obligations under his or her respective Agreement of Sale.

It is further averred that the first respondent is demanding performance in United States dollars, which is not the currency of performance in terms of the agreements of sale, contrary to those agreements.

Lastly, it is averred that the Phase 2 residents have received title to their properties, which is proof that the second respondent was satisfied that work had been done.

The opposing affidavit is deafeningly silent on the specific servicing to be performed, as identified in the founding affidavit. Again, the nature and extent of the works to be carried out are not refuted and there is no denial of the averment that they have not in fact been carried out.

In paragraph 10.6 of the founding affidavit, the first respondent avers that the Phase 2 residents have complied with their part of the contract by paying the first appellant in full over 30 months.

At paragraph 10.7, it is averred that the first appellant has not fulfilled its obligations in respect of the Phase 2 properties relating to the grading and tarring of roads, the connection of a proper water reticulation system, the construction of a proper water drainage and sanitary system, and the erection of street lights.

Similarly, in paragraph 15.3, the first respondent avers that the Phase 3 residents have made full payment to the first appellant within the agreed period of 60 months.

Again, at paragraph 15.4, it is averred that the first appellant has breached the contracts of sale by failing to finance the project and develop the suburb, i.e. by failing to construct tarred roads, connect water reticulation, drainage and sanitary systems, erect street lights, and construct public facilities and amenities as agreed.

In response, at paragraph 27.3 of his opposing affidavit, the second appellant relates to the use of 150mm instead of 350mm water pipes and the use of septic tanks as opposed to a sewer reticulation system. He further contends that “the roads are there but they have not been tarred because the funds for that purpose were obliterated.”

As regards the Phase 3 development, the first appellant's broad retort, at paragraph 36, is that “the purchase price paid by Applicant's members for purposes of development was obliterated and rendered valueless.”

Having regard to the pleadings, it is abundantly clear that the first respondent did identify the specific work that still remained to be performed and that the extent of the works yet to be carried out was not in dispute. In this respect, the court a quo correctly found that the first appellant had not fully complied with the agreements of sale and relevant permits and that most of the terms and conditions in respect of Phases 2 and 3 had not been complied with.

The court accordingly quite correctly ordered the appellants to fully service the residential areas in Phase 2 and 3 to the second respondent's satisfaction and specifications. Furthermore, in its order, the court clearly particularised the specific services to be provided by the appellants.

To conclude this aspect of the matter, I am unable to discern any material dispute of fact relative to the appellants' failure to perform their obligations in respect of Phases 2 and 3. Moreover, I cannot find any fault with the findings of the court a quo in this regard or its consequent order of specific performance in favour of the first respondent and its members.

Given the absence of any contractually stipulated period for the performance of the first appellant's contractual obligations, it was obviously not possible for the court to make any finding as to when such performance was due. By the same token, it cannot be said that the application a quo was premature and not ripe for enforcement.

It follows that the first and second grounds of appeal are devoid of merit and cannot be sustained.

Prescription of Claims

Counsel for the appellants submits that the question of prescription is also one that raises issues requiring evidence.

The cause of action of each member of the first respondent would vary according to individual circumstances pertaining to questions of demand of performance and the placing of the first appellant in mora. There was, so he contends, no evidence on these issues in the proceedings a quo.

He further submits that the first respondent's members could have become aware of the alleged breaches upon exercising reasonable care within the contemplation of section 16(3) of the Prescription Act [Chapter 8:11].

This was also a factual issue requiring further evidence.

I note that, in motivating the prescription argument, counsel for the appellants appears to have side-stepped the stated grounds of appeal premised on the position that the claims in casu were prescribed, in terms of section 15(d) of the Prescription Act, three years after the first respondent's members had executed their own obligations to pay the purchase price in full.

In any event, counsel for the first respondent submits that there is no merit in the prescription argument.

All the pleadings, including the opposing affidavit of the second appellant, are clear that the contracts of sale do not stipulate any time frames for the completion of works by the first appellant. She further notes that the second appellant appears to equivocate as to the running of prescription.

It is trite that for prescription to commence running regard must be had to the date when the cause of action first arose. This ordinarily occurs when the claimant becomes aware of all the relevant facts grounding his or her claim. Additionally, the claimant must make a demand for performance placing the other party in mora: see Brooker v Mudonda SC05-18.

In casu, the first respondent wrote a letter, dated 12 March 2015, addressed to the appellants, bemoaning the lack of activity on their part and enquiring when they would attend to the servicing of the Stands in Phases 2 and 3.

The contents of this letter obviously served to place the appellants in mora.

The response from the appellants' lawyers, dated 20 April 2015, purported to raise various evidently disingenuous queries as to the current status of development at Knowe Suburb.

On 15 May 2015, the first respondent's lawyers replied to those queries, and, additionally, sought a commitment date from the appellants, failing which the first respondent would deem such conduct as an unwillingness to comply on the part of the appellants and proceed to enforce its rights in terms of the law.

In my view, it was at this stage that the first respondent's cause of action arose against the appellants.

The court a quo relied on this correspondence to find, quite correctly, that the first respondent's claim, having been instituted on 15 December 2017, had not prescribed.

In the premises, I am satisfied that the third and fourth grounds of appeal also lack merit and must therefore be dismissed.

Quantification of Damages

As regards the quantification of damages a quo (calculated in the sum of US$192,901,995), counsel for the appellants submits that the court did not properly deal with this aspect inasmuch as it required the determination of factual issues. The matter should therefore be remitted for trial on this aspect.

Counsel for the first respondent concedes that the quantification of damages raises questions of evidence and that the approach of the court a quo in this respect was erroneous. She agrees that the matter be remitted for trial but only on this narrow issue.

I fully agree with both counsel.

The quantification of damages payable to the first respondent's members clearly required the adduction of relevant evidence. It should not have been dealt with on motion but by way of action. Consequently, this is an aspect that must be remitted to the court a quo for trial.

In the premises, the fifth and sixth grounds of appeal are obviously meritorious and must therefore be upheld.

In light of the remittal of this aspect, the ninth ground of appeal, challenging the grant of damages in United States dollars, becomes redundant and must fall away.

Supervening Impossibility

The appellants impugn the exercise of discretion by the court a quo for its failure to consider the feasibility of specific performance against the defence of supervening impossibility.

They contend that this failure to inquire into the first appellant's ability to perform or to pay the damages claimed led to a shocking award of damages. In this connection, counsel for the appellants submits that once supervening impossibility is pleaded, the court must then interrogate the matter.

In his opposing affidavit, the second appellant avers that the first appellant did what it could under the economic circumstances prevailing at the material time and that the period of hyperinflation was subsequently superseded by the multi-currency system. It is further averred that all these developments were not caused or in any way influenced by the first appellant.

In short, the changes in the economy affected the first appellant's ability to perform.

In its answering affidavit, the first respondent counters, that, once its members had paid in full all the funds required to carry out the development work, there was no vis major or any act of God that rendered performance impossible. To allege that dollarisation made performance impossible is unsustainable and it was the appellants, alone, who failed to perform their obligations. In any case, an unpaid debt or unperformed obligation is not wiped out by a change in the currency in use at the time the obligation to perform arises.

In my view, the appellants have failed to crisply articulate their defence of supervening impossibility.

They have clearly not succeeded in adequately substantiating that defence. I fully concur with the sentiments of the court a quo in this regard. It cannot be said that the first appellant failed to perform mainly because of inflation. The bulk of the payments by the first respondent's members were made years before any significant inflation took effect. There was no explanation as to why the first appellant failed to service the Stands between 1998 and 2009. If it had performed its obligations at the time when payments were made and received, there would have been little difficulty in fulfilling those obligations.

Having regard to the evidence adduced a quo, I cannot find any fault with the finding of the court that this was not the sort of scenario that the defence of supervening impossibility of performance was designed for.

Moreover, I am unable to perceive any misdirection, whether of fact or law, in the conclusion of the court that the first appellant had failed to discharge the onus of establishing that performance was rendered impossible in the era of dollarisation.

Accordingly, the tenth ground of appeal cannot be sustained and must be dismissed.

Personal Liability of Second Appellant

The remaining seventh and eighth grounds of appeal impugn the judgment a quo for having mis-applied the doctrine of piercing the corporate veil, and, consequently, visiting personal liability on the second appellant to pay damages as an alternative to the order for specific performance.

Counsel for the appellants submits, in this regard, that questions of fraud or dishonesty are relevant to lifting the corporate veil.

The only basis for citing the second appellant was that he is the director of the first appellant and responsible for the administrative affairs of the company. There was no evidence, whatsoever, to justify the citation of the second appellant in his personal capacity or lifting the corporate veil to render him personally liable.

Counsel for the first respondent submits that the courts can pierce the corporate veil in the interests of justice.

The founding affidavit clearly lays out the basis for piercing the corporate veil in casu and there is no specific attempt to contradict this in the opposing affidavit. The second appellant was the administrator of the company who took all the monies paid by the first respondent's members. The failure to hold him accountable would result in manifest injustice.

In response, counsel for the appellants reiterates that there is no basis for imputing liability to a director as opposed to a shareholder. It is only if the company was run grossly negligently that a director can be held personally liable. In casu, the doctrine of piercing the corporate veil simply does not apply.

In its founding affidavit, the first respondent avers that the first appellant is a family business with the second appellant being the sole active director for all practical purposes. According to the history of directorship in the company, as per the records availed in the Company's Registry, it is no more than the second appellant's alter ego. It is a one-man company with all its equipment, assets, and income belonging to the second appellant. Accordingly, the court a quo was urged to pierce the corporate veil to ensure that justice is done. The second appellant must not be allowed to benefit from his improper conduct by hiding behind the first appellant's corporate personality.

In his opposing affidavit, the second appellant does not dispute that he has been a director of the first appellant since 1980 and that the other directors, at different times, were or are his personal relations.

However, he denies that these allegations constitute an acceptable basis for lifting the corporate veil and disregarding the separate personality of the company. He contends that the first respondent does not cite a single incident in which the distinction between himself and the company was diluted. Consequently, none of the legal requirements for piercing the corporate veil have been pleaded or established. The first respondent's averments in this regard are characterised by nothing more than surmise and conjecture.

In its answering affidavit, the first respondent restates the averment that the second appellant is the sole active director of the first appellant and is responsible for taking up its administrative affairs. This reveals the capacity in which he was cited.

In any case, his citation was to ensure compliance with any order that the court a quo might have granted.

In Mkombachoto v CBZ Ltd & Anor 2002 (1) ZLR 21 (H)…, it was observed that the courts may lift the corporate veil and disregard the separate legal personality of a company in limited circumstances, for instance, so as to avoid manifest injustice.

Again, in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A), at 802, it was held that a court would be justified, in certain circumstances, in disregarding a company's separate personality and lifting or piercing the corporate veil. The focus then shifts from the company to the natural person behind it or in control of its activities. Personal liability is then attributed to someone who misuses or abuses the principle of corporate personality. Each case involves a process of enquiring into the facts which may be of decisive importance.

However, at 803-804, it was cautioned that the courts should not lightly disregard a company's separate personality but should strive to give effect to and uphold it. But, where fraud, dishonesty, or other improper conduct is found to be present, the need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil. A court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie.

The decision in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A) was followed in Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd & Anor HH121-11, and, more recently, by this Court in Chris Stylianou & Ors v Moses Mubita & Ors SC07-17.

In the latter case…, it was noted that no allegation of fraud, dishonesty, or other improper conduct was levelled against the first appellant which might have justified the lifting of the corporate veil of the other two appellants.

Indeed, no good explanation was given to justify the citation of the first appellant save to state that he was the owner of the two appellant companies.

In the instant case, the court a quo found that the second appellant had been properly cited in his personal capacity because he was solely responsible for the first appellant's administrative affairs.

On this basis, the court proceeded to hold the former jointly liable with the latter to fully service the residential areas in question, and, alternatively, to pay damages in the sum of US$192,901,995 within 30 days, failing which the appellants' property was to be attached and sold in execution in satisfaction of the damages.

In principle, the fact that the second appellant is the sole active director in charge of the first appellant's administrative affairs does not, per se, constitute an adequate basis for lifting the corporate veil.

There is no clear evidence on record to indicate that the second appellant was involved in any fraudulent or dishonest activity or other improper conduct. In the absence of such evidence, this Court should not lightly disregard the first appellant's separate corporate personality.

In this regard, I am mindful of the salutary caveat expressed in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A)…, that, to do so “would negate or undermine the policy and principles that underpin the concept of separate legal personality and the legal consequences that attach to it.”

However, the enquiry does not necessarily end there, as “each case involves a process of inquiring into the facts which, once determined, may be of decisive importance: and, in determining whether or not it is legally appropriate, in given circumstances, to disregard corporate personality, one must bear in mind 'the fundamental doctrine that the law regards the substance rather than the form of things'…,.”– ibid, at 802.

In casu, given the history of the first appellant's corporate directorship from 1980 to the present, it is relatively clear that the second respondent is its sole active director. He is quite evidently its alter ego and its paterfamilias, so to speak.

He was and continues to be the principal protagonist in the administrative and contractual arrangements underlying the development of Knowe Suburb.

In these circumstances, it becomes difficult to sustain the juridical dichotomy between the two appellants and to uphold the façade of their separate legal personality.

I am persuaded to agree with the first respondent's submission, that, citing the second appellant in the proceedings a quo was the only way of ensuring compliance with any order that might have been granted against the first appellant. Any such order would otherwise have constituted nothing more than a brutum fulmen.

Moreover, in the exceptional circumstances of this case, it would be manifestly unjust if the members of the first respondent, having timeously fulfilled their contractual obligations, by paying the full purchase price, were to be deprived of the ability to secure the effective enforcement of any judgment granted in their favour.

In the event, I am satisfied that the court a quo, in the exceptional situation before it, quite correctly pierced the corporate veil of the first appellant so as to attribute its liability jointly to the second appellant, not only for the performance of its contractual obligations but also in respect of any damages payable in the alternative.

It follows that the seventh and eighth grounds of appeal cannot be upheld. They are accordingly dismissed.

Disposition

The appellants have succeeded in sustaining only two of their grounds of appeal, i.e. grounds five and six pertaining to the erroneous basis upon which the court a quo proceeded to quantify and award the alternative claim for damages.

As I have already stated, this will entail the remittal of the matter to the court below to quantify the damages claim by way of action proceedings. It will also be necessary for the court, after consulting the parties, to issue specific directions on the procedure to be followed for that purpose.

As regards costs, counsel for the appellants submits that, once remitted, the lis between the parties is still alive and pending. Consequently, each party should bear its own costs.

Counsel for the first respondent, on the other hand, initially sought punitive costs on a higher scale, but, later, acceded to costs on the ordinary scale since the matter was to be remitted following the partial success of the appeal.

In my view, the partial success of the appeal, on an aspect that was readily conceded by the first respondent, does not warrant the latter being deprived of its costs in respect of this predominantly unsuccessful appeal. However, since the appellants have succeeded on the question of quantification of damages, it seems just and appropriate that there be an apportionment of costs in the ratio of 10:90 in favour of the first respondent.

It is accordingly ordered as follows:

1. The appeal is partially allowed in respect of grounds five and six, pertaining to the quantification of damages by the court a quo, and dismissed on the remaining grounds of appeal.

2. The costs of this appeal shall be apportioned between the appellants and the first respondent in the ratio of 10:90 in favour of the first respondent.

3. The judgment of the court a quo be and is hereby varied by the deletion of paragraphs 3 and 4 of the operative order.

4. The matter is remitted to the court a quo to determine, by way of trial proceedings, the first respondent's alternative claim for damages.

5. For the purposes of conducting the trial proceedings referred to in paragraph 4 above, the court a quo shall issue such directions as may be necessary and appropriate.

View Appeal
HH186-10 : CAFCA LIMITED vs RESERVE BANK OF ZIMBABWE
Ruled By: MTSHIYA J

On 29 July 2008, the plaintiff issued summons against the defendant for the following relief:-

“(a) Payment of the sum of US$750,000.

(b) Interest a tempore morae at the London Interbank rate for United States dollars, 3.5% per annum, from 1 September 2005 to date of payment.

(c) Costs of suit.”

The background to the relief sought can briefly be narrated as follows:-

The plaintiff is a manufacturer and supplier of exclusive range of cables for the transmission and distribution of energy and communications involving entities like the Zimbabwe Electricity Supply Authority, the Rural Electrification Agency, and Tel-One.

The plaintiff's business caters for both domestic and export markets. As at end of 2003, 50% of its sales volumes were largely in exports.

In October 2004, the plaintiff approached the defendant for assistance. The defendant was then operating a foreign currency auction system. Through that system, the defendant made available, each week, from 25% of export proceeds, an amount of foreign currency for which commercial banks would submit bids for their customers. On the basis of those bids, allocations would then be made to the highest bidder(s).

In line with the auction system, on 24 October 2004, the defendant, through its Governor, informed the plaintiff, that, if it (plaintiff) submitted bids to the auction, the defendant would ensure that it (plaintiff) succeeded to the extent of US$150,000 per week to enable it to pay for essential inputs in its operations.

That process was indeed put into place on a weekly basis as from 14 January 2005 up to June 2005.

This was a special arrangement where the plaintiff would, instead of placing a bid, it would merely be advised, through a telephone call, each week, from the defendant's officials, that, the said allocation of US$150,000 was ready. All the plaintiff was required to do, in turn, was to pay the Zimbabwe dollar equivalent within 24 hours. The plaintiff would then, in turn, transfer, through a Commercial Bank, the requisite Zimbabwean dollar amount and details of the foreign suppliers to be paid in foreign currency (i.e from the US$150,000 allocated to the plaintiff).

The allocation of US$150,000, was, with effect from 16 June 2005, increased to US$250,000.

Weekly allocations, at that new level, were made to the plaintiff until the end of July 2005.

The allocation system was continued in August 2005 resulting in the plaintiff making three transfers of undisputed payments in Zimbabwe dollars for the equivalent of the amount of US$750,000 - now being claimed by the plaintiff.

The payments were, in each case, accompanied by details of external creditors to be paid by the defendant.

Notwithstanding the payment of the equivalent amount in Zimbabwe dollars by the plaintiff, the defendant has, to date, not forwarded the foreign currency to the plaintiff's external creditors or refunded the plaintiff with the said amount of US$750,000. In fact, the plaintiff has already, through other sources, paid its suppliers.

The above, in brief, explains why the plaintiff has resorted to this court action claiming the said amount of US$750,000.

With both the plaintiff and the defendant having amended their pleadings at the pretrial conference, it was agreed that the issues for trial were:-

“(a) Whether defendant is contractually obliged to pay plaintiff the sum of US$750,000;

(b) Whether defendant is estopped from denying its obligation to pay plaintiff the sum of US$750,000;

(c) Whether defendant's tender to repay the sums of Zimbabwean currency paid to it by plaintiff is a proper tender which plaintiff is obliged to accept.”

At the commencement of the trial, I indicated to both parties that, given the fact that both parties were generally agreed on what transpired, my view was that the matter could be determined through merely hearing arguments from both sides.

The plaintiff was, however, opposed to that approach and preferred to lead evidence. The defendant then also adopted the same stance.

I therefore had no option but to allow the parties to lead viva voce evidence.

The plaintiff's only witness, Mr E.W. Turina (Turina) said he was the Chief Executive Officer of the plaintiff at the time of the purchase of US$750,000 from the defendant. He had, however, left the employ of the plaintiff in June 2006.

Mr Turina's evidence was, in the main, a confirmation of what was already contained in the pleadings.

He said due to the scarcity of foreign currency, the plaintiff had reached an agreement with the defendant whereby bids from the plaintiff would be given preferential treatment.

He confirmed, that, the information on the allocations was done telephonically and that once an allocation (ie the initial US$150,000 rising to $250,000) was made, the plaintiff was required to pay the equivalent in Zimbabwe dollars within twenty-four hours (24) hours.

The arrangement had worked well from January 2005 until August 2005 when the defendant failed/neglected to disburse US$750,000 to the plaintiff's customers/suppliers despite the fact that the plaintiff had paid the defendant the equivalent in Zimbabwe dollar as per the standing arrangement.

The Zimbabwe dollars had been paid in three transfers on 1, 11, and 19 August 2005. This was to cater for the increased weekly allocation of US$250,000.

He said when the first allocation was not released, after payment of the equivalent Zimbabwe dollars, the plaintiff had asked for an explanation but was promised that the money would be released.

The same had happened with respect to the two subsequent payments.

After failure by the defendant to forward payment to its suppliers, the plaintiff had then borrowed money from other sources so as to meet supplier requirements. This had led to the withdrawal of invoices from the defendant, which invoices were produced as exhibits 1, 2 and 3.

Mr. Turina confirmed, that, before he left the employ of the plaintiff, in 2006, negotiations for settlement were in progress and that the defendant had indicated that it would secure the US dollars at a later stage for the plaintiff or reimburse the plaintiff in Zimbabwe dollars.

He said some of the discussions were not directly conducted with him.

He had, however, later learnt, that, the defendant was not going to pay the US$750,000.

It was his view, that, once the plaintiff effected payment of the equivalent Zimbabwe dollar amount of the allocated foreign currency “the contract was completed.”

He said the company had opted to wait because the Zimbabwe dollar had become worthless.

Mr Turina stuck to his story under cross-examination.

The defendant also called only one witness, a Mr B. Musoso (Musoso).

The witness said he was employed by the defendant as its Head of Treasury Operations. He said the Treasury Division was responsible for settlement and payment of allocations. The auction system, he said, was run by a separate unit which was responsible for the allocations. The role of his department was to communicate with companies and advise them on foreign exchange rates.

He was aware of a list of special allotees who received payment on a weekly basis. These were companies considered key to the national economy. These included the plaintiff.

He said there were thirty-six (36) companies on the special list and the allocations were made by the auction unit. Some of these were Boc Gases, Quest Motors, Unilever, Olivine Industries, Dunlop, National Oil Company of Zimbabwe (NOCZIM) and the fertilizer companies.

Mr. Musoso said there were no formal contracts with the companies on the special list.

The role of his department was to effect payment when funds were made available.

The witness said his department dispatched foreign exchange quotations to various interested companies. The quotations were meant to enable companies to mobilize the necessary funds before allocations were made. He said payment to allotees depended on instructions from what he called “the front office” and the availability of foreign currency.

He said the non-availability of foreign currency explained why the three payments made by the plaintiff, in August, were not honoured.

Mr. Musoso said when the auction system ceased, in August 2005, there were many unpaid beneficiaries from the special list and the defendant decided to reimburse them in Zimbabwe dollars.

He said he had heard that the plaintiff wanted reimbursement in US dollars instead of the Zimbabwe dollar. It was his evidence, that, in reimbursing beneficiaries, the defendant did not take into account the devalued value of the Zimbabwe dollar because there was no financial obligation: “We were just returning whatever had been paid,” he said.

Under cross examination, Mr. Musoso maintained, that, the successful execution of the arrangement relied solely on the availability of foreign currency.

In addition to Mr. Musoso's evidence, the defendant also relied on responses by Dr G. Gono (Governor of the Reserve Bank of Zimbabwe) and Patience Aisam (Manager Compliance–Treasury Division) to the plaintiff's interrogatories filed on 29 September 2009.

Both responses to interrogatories were filed on 17 November 2009.

In his response, Dr Gono stated that he had, upon the specific request and representations from the plaintiff, advised that he would endeavour to source foreign currency for the plaintiff in the amounts mentioned (i.e initially US$150,000 rising to US$250,000).

He said this was in recognition of the strategic role played by the plaintiff in the national economy.

There was, however, no formal binding agreement.

He said he had indeed been advised that “the plaintiff had made payments totaling Z$13,535,110 being the quoted equivalent at the auction rate of US$750,000”, now being claimed by the plaintiff.

However, he said “due to many other competing and pressing national requirements, the defendant was unable to avail the foreign currency not only to the plaintiff but to many other companies in a similar situation who then accepted an offer for immediate refund. Plaintiff declined the refund.”

It was his evidence that his officers had informed him, that, during August 2005, no disbursements were made to any applicant for foreign currency under the auction system.

In response to the plaintiff's interrogatories, Miss Patience Aisam confirmed, that, from “14 January 2005 to August 2005, she would, on a weekly basis, telephone or instruct that plaintiff be telephoned advising it that its application for foreign currency allocation had been approved.”

She also confirmed, that, the approved amounts were US$150,000 per week from 14 January 2005 to mid-June 2005. Thereafter, the amount was increased to US$250,000 per week….,.

Counsel for the plaintiff submitted that the plaintiff's case was clear and did not warrant argument.

He submitted, that, the undisputed evidence of Mr. Turina had confirmed, that, upon approaching the Governor of the Reserve Bank, Dr Gono, for assistance in obtaining foreign currency, the plaintiff had been granted the status of a permanently successful bidder at the weekly foreign currency auctions.

The plaintiff, with that status, did not need to place bids at the auction, but, was merely telephonically advised of the agreed weekly allocations.

The practice, it was submitted, had been successfully operational from January 2005 to July 2005.

Payment(s) requirements were availed to the plaintiff who complied at all times by effecting the payment(s) of the equivalent amount of the foreign currency in Zimbabwe dollars.

The only condition was that “foreign currency will only be released after receipt of Zimbabwean dollars.”

Counsel for the plaintiff submitted, that, after the foreign currency amounts were not paid, in August 2005, the Deputy Governor, Mr Ncube, of the defendant, offered the plaintiff the choice of having the money paid by the plaintiff refunded in local currency or waiting for the foreign currency to be made available. That evidence was not contradicted.

I agree.

Counsel for the plaintiff further submitted, that, in practice, there were two initial contractual arrangements:

(i) The first was the undertaking by the defendant that the plaintiff would be allocated foreign currency without the need to make bids at the auction system.

(ii) The second was that once the plaintiff effected payment of the Zimbabwean dollars within twenty-four hours (ie equivalent of the foreign currency) the foreign currency allocated would be made available.

The plaintiff had, in all three instances in August 2005, complied with the payment requirements.

Counsel for the plaintiff said the third contractual arrangement, novating the August contracts, occurred when the defendant promised to pay the plaintiff the foreign currency when it became available.

The plaintiff had, in turn, agreed to wait for payment until it became necessary to institute these proceedings.

In support of the need for the plaintiff to institute legal proceedings, counsel for the plaintiff quoted from Asharia v Patel 1991 (2) ZLR 276 where the relevant part of the judgment of the former Chief Justice reads as follows:

“The general applicable rule is that where time for performance has not been agreed upon by the parties, performance is due immediately on conclusion of their contract or as soon as thereafter as is reasonably possible in the circumstances.

But, the debtor does not fall into mora ipso facto if he fails to perform forthwith or within a reasonable time. He must know that he has to perform.

This form or mora, known as mora ex persona, only arises if, after a demand has been made calling upon the debtor to perform by a specified date, he is still in default.

The demand or interpellatio, may be made either judicially by means of a summons or extra-judicially by means of a letter of demand or even orally; and to be valid it must allow the debtor a reasonable opportunity to perform by stipulating a period for performance which is not unreasonable. If unreasonable, the demand is ineffective….,.”

The promise to refund was made in 2005 and summons was issued on 29 July 2008.

It was counsel for the plaintiff's submission, that, the evidence of the defendant's witness (Mr. Musoso) was irrelevant since he had no direct dealings with the auction system. He said the defendant had failed to call witnesses who could have given meaningful testimony as to what actually happened.

The only credible evidence available was that of Mr Turina, he argued.

Counsel for the plaintiff concluded by submitting as follows:

“1. That, it was the uncontradicted and unchallenged evidence on plaintiff that Deputy Governor Ncube gave an undertaking to pay plaintiff US$750,000 at a future unspecified date.

2. That, this undertaking was accepted by plaintiff and formed a binding contract.

3. That, the binding contract so formed created an obligation on defendant to perform within a reasonable time.

4. That, after the lapse of a time, that defendant has never claimed is unreasonable, plaintiff made interpellation by the issue of summons, calling for the enforcement of the contract.

5. That, in the alternative, the second contractual event is binding on the parties.

6. In any event, defendant so conducted itself between January2004 and July 2005 as to cause plaintiff to believe that it had a contractual relationship on an occasion by occasion basis; that plaintiff did so believe, and, as a result of defendant's actions and words, plaintiff altered its position to its detriment.

7. That, in enforcing specific performance of a contract, the court is to treat the State like any other individual.

8. That, in the circumstances, defendant has done nothing to prevent plaintiff from being granted a judgment in terms of the summons.”

Counsel for the defendant submitted, that, due to the scarcity of foreign currency, the plaintiff and thirty-six (36) other complainants were placed on a list of companies considered as strategic in the national economy.

Depending on availability, the defendant then agreed to allocate foreign currency to these companies – which included the plaintiff.

He said no formal contracts were drawn in respect of the arrangements.

He said the plaintiff had been offered a refund of the money it had paid upon failure by the respondent to source the requisite foreign currency.

Counsel for the defendant emphasized the point, that, the arrangement between the parties was always subject to the availability of foreign currency which the defendant could disburse.

Arguing that there was no contractual obligation, on the part of the defendant, to pay the plaintiff the amount claimed, counsel for the defendant said it was never the consensus of the parties that the payment of the Zimbabwe dollars sealed the contractual arrangements.

The payment, he said, was subject to the availability of foreign currency.

The defendant, he submitted, could not have guaranteed payment because it did not know how much foreign currency would be generated from the auction system.

Counsel for the defendant said the defendant's witness had confirmed that his department had not been allocated with foreign currency for disbursement.

In the main, counsel for the defendant submitted, “the plaintiff had been favoured with an allocation that it be given foreign currency of US$250,000 per week if the same was available. There was no intention to create contractual obligations.”

He said quotations sent to the plaintiff were not offers.

Counsel for the defendant further submitted, that, the plaintiff had failed to prove that foreign currency was available at the time the allocations were made.

He blamed the plaintiff for refusing to accept a refund in Zimbabwean dollars as had been done by the other companies.

In conclusion, counsel for the defendant had this to say:

“The issue of who was a better witness between plaintiff and defendant's witness is, with respect, of no great moment.

Material facts are common cause. The court should take a holistic approach in the matter and determine what the intentions of the parties were and what relationship was created.

It is submitted, that, it could not have been within the contemplation of the parties, that, a failure by the defendant to disburse foreign currency to the plaintiff due to non-availability would ground a cause of action for specific performance.

In all the circumstances, the plaintiff's claim should be dismissed with costs and it is noted it has refused the tender of the refund in Zimbabwe dollars.”

I fully agree with counsel for the defendant, that, in casu, the material facts are common cause and I made that observation at the commencement of the hearing of this matter.

My assessment is that, apart from merely confirming what is already contained in the pleadings, nothing much turns on the oral evidence from the witnesses called by both parties.

However, my view, on the one hand, is that the evidence of the defendant's witness was totally irrelevant because he was clearly a distant player in what took place in the actual allocation process.

On the other hand, I find that Mr. Turina's evidence buttressed the respondent's responses to the interrogatories.

The responses do not deny the practice that operated smoothly from January 2005 to July 2005. The only issue highlighted is that the arrangement was anchored on the availability of foreign currency.

That is undeniable, and, indeed, no allocation could have been made without the availability of foreign currency.

However, the main issue, in my view, is whether by allocating to the plaintiff US$150,000 and later US$250,000, from the auction system, the defendant then became obligated to release the money to the plaintiff upon payment by the plaintiff, within twenty four (24) hours, of the Zimbabwe dollar equivalent at the defendant's instruction.

In interrogating that issue, one has to consider the following undisputed facts:-

(a) Every week, Patience Aisam, of the defendant, would telephone the plaintiff to advise on what had been allocated to the plaintiff and what had to be transferred through a Commercial Bank in Zimbabwe dollars - in fact, it was confirmation of the sale to the plaintiff of the allocated amount, in this case US$250,000.

(b) Upon advise from Patience Aisam, the plaintiff would, within twenty four (24) hours, transfer the Zimbabwe dollar equivalent. Indeed, in response to the interrogations, the Governor of the Reserve Bank of Zimbabwe says:

“I am advised that during the month of August 2005, plaintiff made payment totaling Z$13,535,110 being the quoted equivalent, at the auction rate, of US$750,000 which the defendant had hoped to pay to the plaintiff. Due to many other competing and pressing national requirements, the defendant was unable to avail the foreign currency, not only to plaintiff but to many other companies in a similar situation who then accepted an offer for immediate refund. Plaintiff declined the refund.”

This is supported by paragraph 4 of the defendant's plea which reads:

“The defendant admits that the sums of money, as set out in paragraph 2 of the plaintiff's further particulars, were deposited with the defendant. The amounts would have exchanged for US$750,000 once this money had been successfully sourced by the defendant. The foreign currency was not availed to the plaintiff because the defendant was unable to mobilize the same.”

It becomes crucial for the defendant to explain the reasons for Patience Aisam to set in motion the process, if foreign currency was unavailable.

My view is simply that the allocation was only made against funds that were already available from the auction.

Patience Aisam states:

“I confirm that during the period referred to, that is to say, from about the 14th January 2005 to August 2005 (the month of August included) I would, on a weekly basis, telephone or instruct that plaintiff be telephoned advising that its application for foreign currency had been approved.”

It is important to note that Patience Aisam spoke of an “approved allocation and not successful bid.” This was so because the plaintiff was on a special list that was not required to bid.

There could, in my view, be no approval or allocation of what was not already available.

Given the condition that the completion of each transaction was totally dependant upon the availability of foreign currency, the possibility of Patience Aisam confirming allocation and asking for payment of the Zimbabwe dollar equivalent, within 24 hours, when there was no foreign currency already earmarked for the plaintiff, is, in my view, very remote.

In addition to the above, it is important to determine at what stage a contract would be concluded between the parties.

The scenario in the operation was as follows:

(a) The Governor agreed to accord the plaintiff special treatment.

(b) The Governor allocated a specific amount to the plaintiff on a “permanent” basis.

(c) Patience Aisam would confirm the allocation and indicate the Zimbabwe dollar component to be paid within 24 hours; and

(d) The plaintiff would, within 24 hours, comply and then forward a list of its customers to the defendant for disbursement of funds.

The above scenario clearly fits into counsel for the plaintiff's submission, that, there were initially two contractual events (ie the Governor's undertaking and then the actual allocation accompanied by compliance on the part of the plaintiff).

I am therefore unable to accept that the above scenario did not create binding obligations on the part of the defendant.

To that end, I am of the view, that, upon compliance by the plaintiff, a binding contract was concluded and what remained was the release of the foreign currency purchased by the plaintiff.

The case of F.C. Hume (Pvt) Ltd v Minister of Natural Resources & Tourism 1989 (3) ZLR 55 indeed supports this view.

With the plaintiff having complied with all the requirements, the contract was already in place and the defendant was obliged to meet its obligation.

The existence of the contract is further strengthened by the fact, that, the defendant admits, that, in August 2005, the plaintiff bought from it US$750,000 for a sum of Z$13,535,110.

However, what the defendant is now saying is simply this:-

“Yes, you bought US$750,000 but give us time to mobilise it. We seem to have sold you what we did not have at the time.”

The defendant then places before the plaintiff two choices, namely, reimbursement in the actual amount paid in Zimbabwe dollars or waiting until it mobilizes the amount of foreign currency already purchased by the plaintiff.

That, in my view, is not to deny contractual obligation.

The plaintiff elected to wait until litigation became the only option.

The plaintiff's election is based on the basis that devaluation has rendered the Zimbabwe dollar worthless.

The defendant's witness confirmed, that, the refund was to be the actual Zimbabwe dollar paid without taking into account the issue of inflation and devaluation.

It would, in the circumstances, be unreasonable to fault the plaintiff's election to await payment of what it actually purchased.

The promise made by the Deputy Governor of the defendant was not disputed in evidence.

It was, in my view, not a novation of the earlier arrangements - but a confirmation of same.

In his submissions, counsel for the defendant merely stated:

“(vii) He believed that foreign currency was available for the simple reason that quotations for payment of Zimbabwe dollars were sent to plaintiff and the plaintiff paid on them.”

The above is in line with paragraph 5(b) of the plea which reads:-

“(c) The defendant denies that it has refused to compensate the plaintiff and avers that it has offered to refund the defendant what it paid as has been done with other companies who faced the same fate. The plaintiff has refused to be compensated in local currency and insisted on payment of US$750,000.

Wherefore, the plaintiff tendering to refund the defendant the amount it paid, with interest at the prescribed rate of 30% per annum, otherwise prays for the dismissal of the plaintiff's claim with costs.”

Having determined that the defendant was contractually obliged to pay the plaintiff the sum of US$750,000 which the plaintiff purchased, as agreed between the parties, it would be unreasonable to allow the defendant to dictate to the plaintiff the form of settlement the plaintiff should accept.

That being the case, the plaintiff's claim for specific performance is unassailable.

The defendant accepted the plaintiff's election for specific performance ie by giving the plaintiff two choices – whereby the plaintiff elected to await payment of the purchased foreign currency.

That position has not changed.

The fact that other companies accepted refunds in Zimbabwe dollars has no bearing on the agreement between the parties herein.

The defendant is estopped from abandoning its obligation.

In International Trading (Pvt) Ltd v Nestle Zimbabwe (Pvt) Ltd 1993 (1) ZLR 21 (H) the late ROBINSON J, in dealing with the issue of specific performance, had this to say:-

“I would wind up by saying, that, if the right of specific performance is to be shown to have real meaning to businessmen; then, the loud and clear message to go out from the courts is: businessmen beware. If you fail to honour your contracts, then, don't start crying if, because of your failure, the other party comes to court and obtains an order compelling you to perform what you undertook to do under your contract.

In other words, businessmen who wrongfully break their contracts must not think they can count on the courts, when the matter eventually comes before them, simply to make an award of damages in money, the value of which has probably fallen drastically compared to its value at the time of the breach.

Businessmen at fault will therefore, in the absence of good grounds showing why specific performance should not be decreed, find themselves ordered to perform their side of the bargain - no matter how costly that may turn out to be for them…,.”

I agree with the above.

Accordingly, the sanctity of contractual arrangements should continue to be protected by courts of law.

In view of the foregoing, I find in favour of the plaintiff and order as follows:-

1. The defendant be and is hereby ordered to pay the plaintiff the sum of US$750,000 together with interest a tempore morae at the London Interbank rate for United States dollars, 3.5% per annum, from 1 September 2005 to date of payment; and

2. The defendant be and is hereby ordered to pay costs of suit.

Appealed
SC36-12 : RESERVE BANK OF ZIMBABWE vs CAFCA LTD
Ruled By: MALABA DCJ, ZIYAMBI JA and OMERJEE AJA

This is an appeal against the judgment of the High Court granting with costs a claim by the respondent for:

(i) Payment of the sum of US$750,000.

(ii) Interest tempore morae at the London Interbank rate for United States dollars, at 3.5% per annum, from 1 September 2005 to the date of payment.

(iii) Costs of suit.

The factual background to this dispute, which is largely common cause, may be summarised as follows:

The appellant is a financial institution. The respondent is a manufacturer and supplier of an exclusive range of cables for the transmission of communication and distribution of energy used by such entities like the Zimbabwe Electricity Supply Authority, the Rural Electrification Agency, and Tel One.

The respondent's business caters for both domestic and export markets. As at end of 2003, 50% of its sales volumes were largely in exports.

In 2004, the respondent's business experienced slow growth due to inflation and the scarcity of foreign currency. During that year, the respondent's representatives met with the appellant's Governor, Dr. Gideon Gono, with a view of securing foreign currency to purchase imported inputs in order to sustain its business.

Dr Gono gave an oral undertaking to avail US$150.000 per week, to the respondent, from the foreign currency auction system.

In January 2005, the respondent began to receive the said sums of foreign currency against payment of a Zimbabwean dollar equivalent to the appellant via a commercial bank.

The special arrangement was extended to thirty-five (35) other companies selected as the recipients of foreign currency.

This allocation of US$150,000 was, with effect from 16 June 2005, increased to US$250,000.

Weekly allocations, at that new level, were made to the respondent until the end of July 2005.

In August 2005, the respondent made three transfers of money, in Zimbabwe dollars, to the appellant, for the equivalent of the amount of US$750,000. The payments were accompanied by details of external creditors to be paid by the defendant.

The appellant did not pay the foreign currency.

Its position, at the trial, was that foreign currency could not be paid because it was not available.

The respondent's witness, Mr. Turina, confirmed, in evidence, that, the appellant indicated that it did not have foreign currency for disbursement.

On 2, 11 and 19 August, respectively, the respondent made payments, in Zimbabwe dollars, equivalent to US$750,000.

In respect of these three payments, the respondent would receive a phone call from the appellant before making payment.

On 1 August, it received a call from the appellant before depositing a sum of Z$4,438,294,052=45 with the appellant the following day.

With regard to the second transaction, the respondent received a phone call on 5 August. In response thereto, it deposited the sum of Z$4,511,254,261=47 with the appellant on 11 August.

On the third occasion, the telephone call was made on 17 August. The respondent deposited an amount of Z$4,587,562,920=90 with the appellant on 19 August.

Bigboy Masoso, who was the Division Chief Treasury Officer testified on behalf of the appellant to the effect, that, the disbursement of foreign currency could only be made if the front office of the appellant made the funds available. He also stated that the telephone calls made to the respondent, and other companies, were meant to provide quotations to secure constance of the exchange rate.

In the affidavit filed of record, Dr Gono stated as follows at paragraph four thereof as follows:

“I advised them that the Bank would endeavour to source foreign currency for the plaintiff to the tune of USD$150,000 per week in recognition of the plaintiff company's strategic role in the national economy. No formal binding agreement was concluded in this regard and it was never the common understanding of the parties that we were concluding a formal agreement.”

At paragraph six of the affidavit, he stated as follows:

“As a result of further representations made by the plaintiff, the defendant increased the weekly allocation of foreign currency to the plaintiff to USD250,000 from or about the 8th June 2005. Again, it was never the common understanding and contemplation of the parties that they were entering into a formal binding transaction, hence no formal contractual documentation was executed.”

Again, at paragraph seven of his affidavit, he stated as follows:

“I am advised, that, during the month of August 2005, plaintiff made payments totalling Z$13,535,110 being the quoted equivalent at the auction rate of USD750,000 which the defendant had hoped to pay to the plaintiff. Due to many other competing and pressing national requirements, the defendant was unable to avail the foreign currency, not only to plaintiff but to many other companies in a similar situation who then accepted an offer for immediate refund. Plaintiff declined the refund.”

Following a trial, the learned Judge found as follows at p8 of the judgment:

“However, the main issue, in my view, is whether, by allocating to the plaintiff US$150,000 and later US$250,000 from the auction system, the defendant then became obligated to release the money to the plaintiff upon payment by the plaintiff, within twenty-four hours, of the Zimbabwe dollar equivalent at the defendant's instruction.”

At p9 of the judgement, the court a quo stated as follows:

“It becomes crucial for the defendant to explain the reasons for Patience Aisam to set in motion the process, if foreign currency was unavailable. My view is simply that the allocation was only made against funds that were already available from the auction.

It is important to note that Patience Aisam spoke of 'an approved allocation and not successful bid.'

This was so because the plaintiff was on a special list that was not required to bid.

There could, in my view, be no approval or allocation of what was not already available.

Given the condition that the completion of each transaction was totally dependant upon the availability of foreign currency, the possibility of Aisam confirming allocation and asking for payment of the Zimbabwe dollar equivalent, within 24 hours, when there was no foreign currency already earmarked for the plaintiff is, in my view, very remote.”

The learned Judge, at p9, made the following finding:

“I am therefore unable to accept that the above scenario did not create binding obligations on the part of the defendant.

To that end, I am of the view, that, upon compliance by the plaintiff, a binding contract was concluded and what remained was the release of the foreign currency purchased by the plaintiff.

The case of F.C. Hume (Pvt) Ltd v Minister of Natural Resources & Tourism 1989 (3) ZLR 55 indeed supports this view.

With the plaintiff having complied with all the requirements, the contract was already in place and the defendant was obliged to meet its obligation.”

The gist of the court a quo's reasoning was that, at the time the phone calls were made to the respondent, the foreign currency to which the call related was available and the call was an offer which the respondent accepted by depositing the money, in Zimbabwean dollars, with the appellant thereby giving rise to a binding contract.

The court a quo gave judgment in favour of the respondent as sought in the summons. It is against this judgment that the appellant now appealed to this Court.

In the grounds of appeal, the appellant contends that:

1. The court a quo erred in law and fact in not making a finding that the payment by the respondent of the Zimbabwe dollars, as directed by the appellant, did not create a binding contract which was an end itself but that performance was always subject to foreign currency being available.

2. The court a quo erred in law and fact in making a finding that the communications made by Patience Aisam, on behalf of the appellant, calling upon the defendant to pay the Zimbabwe dollars, meant or was evidence that the foreign currency being allocated was available for disbursement to the respondent.

3. The court a quo erred in fact and law in not making a finding that non-availability of foreign currency made performance impossible and that the appellant was entitled to refund the respondent the money it had paid as the suspensive condition, viz, the availability of foreign currency had failed to be met.

4. The court erred in law in allowing the claim for interest and in ordering the interest to run from 1 September 2005.

The primary question to be decided by this Court is: whether or not there existed a binding contract for the disbursement of a sum of foreign currency to the respondent's creditors upon payment by the respondent of an equivalent sum in Zimbabwean currency.

The following are undisputed facts:

As a result of an approach to the appellant's Governor, Dr Gono, on 27 October 2004, for assistance in obtaining foreign currency, the respondent was granted the status of a successful bidder at the weekly foreign currency auction.

Several other companies were on this special list.

The respondent was not required to place bids at the auction but was merely telephonically advised of the agreed weekly allocations.

The practice had been successfully operational from January 2005 to July 2005.

Payment requirements were availed to the respondent who complied by effecting payment of the equivalent amount of the foreign currency in Zimbabwe dollars.

There was no formal contract between the appellant and the respondent.

The respondent was amongst a list of thirty five (35) companies on this special list who had been identified as preferential recipients of foreign currency under the arrangement.

The court a quo correctly found, that, the arrangement between the parties was premised on the availability of foreign currency. As such, no allocation could be made without the availability of foreign currency.

Indeed, both parties were aware that the arrangement for the disbursement of foreign currency was subject always to a condition that foreign currency had to be available in the first instance.

Mr Turina stated, that, due to the scarcity of foreign currency, the respondent had reached an agreement with the appellant whereby bids from the respondent would be given preferential treatment.

He confirmed that the information on the allocations was done telephonically and that once an allocation (i.e. the initial US$150,000 rising to US$250,000) was made, the respondent was required to pay the equivalent in Zimbabwean dollars.

The arrangement had worked well from January 2005 until July 2005.

In August 2005, the appellant failed to disburse US$750,000 to the respondent's customers and suppliers after the respondent had deposited with the appellant an equivalent sum, in Zimbabwe dollars, in three separate tranches.

In this regard, the import of the affidavit of Patience Aisam was that a telephone call would be made to advise of an approved application and not allocation. In effect, the approval and the actual allocation of foreign currency were distinct processes - premised on the availability of foreign currency.

It was the evidence of Patience Aisam's superior, Bigboy Masoso that payments in foreign currency would only occur if the front office availed such funds.

This testimony accords with logic and probability.

Patience Aisam was not employed in the Front Office which was responsible for the allocation of foreign currency.

The court a quo found that there existed a binding contract between the parties.

When regard is had to Dr Gono's affidavit, it is clear that he advised the respondent that the appellant would “endeavour” to source foreign currency for the respondent.

Such assertion does not suggest that the appellant was binding itself to provide the respondent with foreign currency on an ongoing or permanent basis.

It is not in dispute that no allocation of foreign currency was made in August 2005. According to Bigboy Masoso, the system was discontinued because there was no foreign currency.

The 24 hours notice of payment of Zimbabwe dollars was not in fact adhered to by the respondent in August 2005.

The finding by the court a quo, that, upon payment by the respondent, a binding contract was concluded, is not borne out by the evidence with regard to the payments made following telephone calls of 5 and 17 August 2005.

It is to be noted, that, there was no formal contract between the parties.

Dr Gono offered to prioritise the respondent, and other companies, in the allocation and disbursement of foreign currency.

The Court finds that when Dr Gono put in place the special arrangement, there was no intention to create a binding contract to avail foreign currency to the respondent and the other companies on the special list.

The facility was put in place, at the time, because of the acute shortage of foreign currency.

It is highly unlikely, that, given that state of affairs, Dr Gono would seek to bind the appellant to avail foreign currency to the respondent, upon payment of the local currency, when the volume of inflows of foreign currency were unpredictable.

In the circumstances, it would not be logical for Dr Gono to enter into a binding contract to supply foreign currency to the respondent on the terms suggested.

It is not without significance that 35 other companies on the special list subsequently accepted refunds of Zimbabwe dollars deposited with the appellant in August 2005.

This fact is consistent with the position that the allocation of foreign currency was conditional upon its availability at any given time.

The effect of the evidence is that the agreement for the disbursement of foreign currency was predicated upon availability of foreign currency.

It was the respondent's testimony, that, the condition that foreign currency would be availed to the respondent, subject to availability, was expressed orally by the appellant's Governor when he entertained the respondent's request to be allocated foreign currency.

The agreement to accord the respondent preferential treatment, in the disbursement of foreign currency, together with 35 other companies, did not create a binding and enforceable contract between the parties.

The performance of the appellant's obligation, to provide foreign currency, was always qualified or conditional upon its availability.

Reliance by the respondent on previous dealings did not, in the circumstances, give rise to binding contractual obligations between the parties.

The parties understood, that, in the absence of foreign currency, there was no contract between them.

The Court is satisfied, that, the evidence does not establish that a binding contract existed between the parties regarding the disbursement of foreign currency, either formally or on past practice, upon payment by the respondent of the local currency equivalent.

It was found, by the court a quo, that, the Deputy Governor, Mr Ncube, gave an undertaking to make available the US$750,000 to the respondent as and when foreign currency became available.

The Deputy Governor's position was not part of the respondent's case on the pleadings in the court a quo.

The finding by the trial court that Mr Ncube's testimony, that he had promised the respondent that it would be paid the sum of US$750,000, was binding upon the appellant is a misdirection.

The fulfilment of the promise would still have depended upon availability of foreign currency.

By the time that promise was made, the appellant had made it clear to the respondent that it was terminating the special arrangement for all companies concerned and offered to refund the Zimbabwe dollars paid by them.

The appeal is accordingly allowed with costs.

The decision of the court a quo is set aside and is substituted with the following:

“The plaintiff's claim be and is hereby dismissed with costs.”

Appealed
SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

INTRODUCTIONThis appeal arises from the judgment of the High Court in which the court a quo ordered the appellant to pay the respondent the sum of US$89,000 with interest at the prescribed rate calculated from 11 December 2012 to the date of full payment.The appellant is a gold mining company. ...

INTRODUCTION

This appeal arises from the judgment of the High Court in which the court a quo ordered the appellant to pay the respondent the sum of US$89,000 with interest at the prescribed rate calculated from 11 December 2012 to the date of full payment.

The appellant is a gold mining company. It is registered in terms of the laws of Zimbabwe. It owns a gold mine located in Shurugwi (Sky Rocket 16485).

The respondent is a private individual of Chinese origin. He is a foreigner investor based in Zimbabwe.

BACKGROUND FACTS

On 13 January 2011, the appellant and the respondent entered into a joint venture agreement. In terms of the agreement, the parties would constitute a new company. The appellant would provide mining claims and the respondent would be responsible for exploration and providing investment of capital and equipment in respect to the mining venture.

In terms of the agreement, the respondent would get 75 per cent and the appellant 25 per cent of the proceeds from the mine.

The respondent was obliged to grant a loan to the new company in the sum of US$150,000. The loan was to be paid back to the respondent through deductions from profits that would accrue to the appellant when such profit was realized by the company.

The respondent had to pay a down payment in the sum of US$50,000 within ten days of coming into effect of the agreement. In return, the appellant would give the respondent 'blocks of claims' certificate and the company certificate “after agreement of signature of ten days.” (sic)

The new company was to be established before 1 March 2011, and, thereafter, the respondent would pay the remaining US$100,000 to the appellant within ten days after 1 March 2011.

Failure by the respondent to bring reasonable mining equipment and to have the project take off by July 2011 would entitle him to be paid back the loaned amount within six (6) months.

Following signing of this agreement, the respondent, through his erstwhile legal practitioners, wrote a letter to the appellant dated 13 May 2011. In this letter, the respondent informed the appellant that there was a misconception on the terms and conditions of the agreement which had been agreed to by the parties on 13 January 2011. As such, the respondent informed the appellant that he was cancelling the agreement and demanded a refund of the sum of US$88,099 which he had paid to the appellant as a loan amount in terms of the agreement.

Following the letter cancelling the agreement, the parties thereafter entered into a new agreement on 3 October 2011.

In terms of the new agreement, the appellant admitted that it owed the respondent the sum of US$89,000. It was also agreed that the full loan amount, as agreed by the parties, was US$150,000.

It was further agreed that the respondent would recover the loan amount through a tribute to operate and extract ores from the mine. The respondent was to take over the appellant's workers and general control of the mine and recover the amount due to him.

Payment of the loan balance of US$61,000 was to be made before the respondent could take up occupation of the mine.

On 11 December 2012, the respondent issued summons against the appellant claiming the sum of US$89,000 being the amount advanced to the appellant as well as interest at the prescribed rate and cost of suit.

In his declaration, the respondent averred that the new agreement between the parties did not come into fruition due to the appellant's (represented by Philemon Mubata who was cited as the second defendant a quo) failure to perform in terms of the agreement by excluding him from the operations at the mine and using the loan contrary to the provisions of the agreement.

The respondent further averred that he had no choice but to cancel the agreement as the appellant had breached it.

In its plea, the appellant did not dispute entering into a joint venture agreement with the respondent but argued, instead, that, the respondent had not sought to recover his money by mining ore equivalent to the loan sum of US$89 000. It was the appellant's argument that according to the agreement, the appellant was entitled to six months in which to repay the loan. The appellant thus stated that the issuance of summons proceedings was premature.

On 20 November 2013, the appellant amended its plea and averred that the respondent had breached the agreement and failed to provide equipment necessary to carry out exploration work at the mine.

Following breach of the first agreement by the respondent, the parties entered into a second agreement.

The appellant further averred that the second agreement had a suspensive provision to the effect that the respondent had to pay the full amount of US$150,000 before he could recover his monies from production on the mine.

The appellant also filed a counter claim against the respondent with the amended plea for the sum of US$61,000 being payment of the balance of the loan in fulfilment of obligations which the respondent had undertaken in order to fulfill the terms of the agreement.

In response to that claim, the respondent alleged that a condition had to be satisfied, prior to the payment of the US$61,000, which condition was his involvement in management and operations at the mine at the inception of the loan agreement. The respondent averred that he was frustrated by the actions of the appellant. This was the reason why he failed to fulfill his obligation and led to the cancellation of the whole agreement.

PROCEEDINGS BEFORE THE COURT A QUO

At a Pre-Trial Conference, the agreed issues for determination were stated as follows:

“(a) Whether or not the plaintiff was, in accordance with the joint venture agreement, obliged to pay the sum of US$150,000 towards financing the gold mining venture.

(b Whether or not the first and second defendants frustrated the contract resulting in non-fulfillment of the terms and conditions of the agreement between the parties.

(c) Whether or not the first and second defendants were in breach of the fundamental terms of the agreement causing the plaintiff to cancel the whole agreement and demand repayment of the loaned sum of US$89,000.”

During the trial the respondent, Ms. Ding (his assistant at the time when the agreement was made) and one Mr. Wei Ren (the respondent's mining manager from 2005 to 2010-2011) gave evidence.

The three witnesses all testified to the effect that the appellant and respondent entered into two agreements which never materialized and that the appellant denied the respondent access to the mine so that he would recover his monies. Ms Ding further clarified that the second agreement was prepared by Mr Mubata. She denied that the respondent had breached any of the terms of the agreement and insisted that it was the appellant which had breached the terms of the agreement by denying the respondent access to the mine.

Two witnesses led evidence on behalf of the appellant.

Mr. Mubata (the second defendant a quo) testified that the agreement failed to materialize because the respondent failed to bring the requisite equipment to the mine and that the respondent cancelled the agreement because the appellant had refused to sell the mine and transfer the registration certificates to him. The second witness was Mr. Mhere, the appellant's Finance and Administration manager. He testified that the respondent failed to pay the full loan amount which had been agreed between the parties leading to the breach of the agreement.

In its judgment, the court a quo found that the respondent had had the agreement explained to him in Chinese and therefore they were valid agreements.

The court believed the evidence of the appellant that the respondent paid the loan in 'dribs and drabs' contrary to the terms of the agreement. The court a quo also found that the respondent was in breach of both agreements.

The court, however, decided to apply the principle of equity on the basis that the respondent's grasp of English was so bad that he may not have understood the terms of the agreement and decided to reimburse the respondent the amount that he had loaned the appellant. The court stated as follows:

“I (sic) persuaded that it would be appropriate to utilize the equitable principle in coming to a resolution of this matter. I hold the view primarily because the court was uneasy with the plaintiff's level of understanding of the terms of both agreements.”

The court made the following order:

“In the result, it is ordered that:

1. The plaintiff's claim against the 2nd defendant be and is hereby dismissed with costs.

2. The defendant's counter-claim against the plaintiff, for payment of USD$61,000, be and is hereby dismissed with costs.

3. Plaintiff's claim, as against the 1st defendant, Big Valley Masters Private Limited, in the sum of US$89,000, is allowed, together with interest thereon at the prescribed rate calculated from 11 December 2012 to the date of payment in full.

4. 1st defendant shall bear the costs of suit.”

The appellant was dissatisfied and appealed on the following grounds:

1. The court a quo erred in law in deeming the partnership dissolved by a letter at a future date contrary to the principle that dissolution of a contract is exercised ex nunc.

2. The court grossly misdirected itself in adjudging that the respondent was entitled to recover US$89,000 when he was in clear breach of the parties' agreement.

3. The court a quo grossly misdirected itself by allowing the respondent to derive a benefit from his own wrong.

4. The court a quo erred in failing to uphold the appellant's defence of the exceptio non adimpleti contractus.

5. The court a quo further erred in allowing interest on the sum of US$89,000 to run up to the date of payment thus contravening the in duplum rule.

6. The court a quo grossly misdirected itself in awarding costs in favour of the respondent where it had failed to fully succeed in the matter.

In my view, from the appellant's grounds of appeal, and from submissions made, the issue that resolves the appeal is the following:

Whether or not the court a quo erred in applying the principle of equity in resolving the matter

SUBMISSIONS ON APPEAL

Counsel for the appellant…, submitted, in the main, that, the court a quo erred in determining the matter before it on the basis of the principle of equity as such principle is not part of the Zimbabwean law.

Counsel argued that the principle could only be resorted to where a statute provides for its application.

It was counsel's submission that the terms of the agreement were clear and should have been complied with. With these submissions, whilst not abandoning the other grounds, counsel prayed that the appeal be allowed.

Per contra, counsel for the respondent…, argued that the court a quo did not misdirect itself when it applied the principle of equity. It was his submission that the principle is part of our law in terms of the common law. Counsel further argued that the breach of the agreement by the respondent could be attributed to the fact that there had been difficulty in communication as the respondent could not communicate fluently in English. Counsel thus submitted that the case was one which justified the application of the principle of equity so as to ensure that the appellant would not be unjustly enriched.

The court a quo found in favour of the respondent on the basis of the principle of equity. The court stated as follows;

“A modern interpretation of the equitable principle, one that takes into account the situation prevailing in our economy, may not favor an insistence that the plaintiff cannot succeed in his claim until he has performed in full, the terms of the October agreement. The court can exercise its discretion in the plaintiff's favor despite his partial performance of the January agreement (by advancing a loan up to US$89,000) and his non-performance of the October agreement.”

The appellant has argued that the court a quo erred in applying the principle of equity in this matter as the principle is foreign to this jurisdiction. With that, the appellant seeks to show that the court misdirected itself in finding for the respondent resulting in him deriving a benefit from his own wrong.

The second agreement had a provision, under paragraph 8, which stated as follows:

“(8) PAYMENT OF LOAN BALANCE ($61,000) SHOULD BE PAID TO SUM IN FULL BEFORE OCCUPATION OF PLANT WILL BE TAKING AFTER MR SHI IS BACK”(sic)

It was not in dispute that the provision under paragraph 8 was not fulfilled by the respondent.

It was also an agreed fact that at no point did the respondent mine or recover any profits from the mine.

The appellant submits that the court a quo erred by ordering it to pay the respondent his money in circumstances where he had breached the contract.

The respondent argued, before the court a quo, that, he was denied entry on to the mine by the appellant. This prevented him from being productive to recover his monies as agreed between the parties in the second agreement. The appellant counter-argued that the respondent was never refused access to the mine from the date when the first agreement was signed to the signing of the second agreement.

The court a quo believed the appellant's arguments and found that the respondent failed to honor some of the provisions of the agreement and was never denied access to the mine.

It is a settled principle that this Court will not easily interfere with factual findings made by a lower court unless the findings are grossly unreasonable: see ZINWA v Mwoyounotsva 2015 (1) ZLR 935 (S); Hama v NRZ 1996 (1) ZLR 664 (S); Reserve Bank of Zimbabwe v Corrine Granger and Another SC34-01.

The lower court enjoys the opportunity to see the witnesses on the stand, assess their demeanour and credibility. Such findings of fact cannot easily be interfered with by an Appellate Court as it is limited to the record of proceedings: see Mtimukulu v Nkiwane and Another SC136-01.

The respondent, in making his claim for the amount which had been advanced to the appellant, had to prove that he was owed such money.

It is pertinent to note that the standard of proof in all civil matters is on a balance of probabilities.

The concept of proof on a balance of probabilities was enunciated in British American Tobacco Zimbabwe v Chibaya SC30-19 wherein the court quoted with approval the case of Miller v Minister of Pensions [1947] 2 All ER 372, 374 and explained the concept of balancing probabilities as follows:

“It must carry a reasonable degree of probability but not so high as is required in a criminal case. If the evidence is such that the tribunal can say 'we think it more probable than not', the burden is discharged, but if the probabilities are equal it is not.”

This was further emphasized in the book, Principles of Evidence, 4th ed (2016) Juta: Cape Town, wherein the authors SCHWIKARD PJ and Van der MERWE SE stated that:

“In civil proceedings, the inference sought to be drawn must also be consistent with all the proved facts, but it need not be the only reasonable inference: it is sufficient if it is the most probable inference.”

The rule on onus of proof was pronounced in ZUPCO Ltd v Pakhorse Services (Pvt) Ltd SC13-17 where the Court stated that:

“The cardinal rule on onus is that a person who claims something from another in a Court of law has to satisfy the Court that he is entitled to it.”

The respondent managed to discharge the onus of proof which was required of him in making his claim.

Indeed, it was conceded, by the appellant, that, the sum of US$89,000 was paid to it by the respondent. It was also conceded that during the subsistence of the agreement the respondent did not mine any gold or recover any profit from the use of that money.

The resultant effect was that the appellant ended up unjustly enriched by the respondent's US$89,000 which the respondent did not benefit from.

The appellant, in motivating the point that the court a quo erred in finding that the respondent could recover money he had paid to the appellant, relied on the ground that the court erred in failing to uphold its defense of exceptio non adimpleti contractus.

This point was not pursued in the appellant's heads of argument and was never pleaded a quo.

Clearly the appellant was wrong in submitting that the court a quo erred by not dealing with the point.

It is a trite principle that it is not open to the courts to rewrite a contract entered into between the parties or to excuse any of them from the consequences of the contract that they have freely and voluntarily accepted, even if they are shown to be onerous or oppressive as this is a matter of public policy: see Magodora and Others v Care International Zimbabwe SC24-14.

This Court must interpret the second agreement literally.

It can be deduced from the agreement that the respondent had to pay the full loan amount first before taking occupation of the mining claims. The respondent failed to do so and this resulted in a breach of the contract. Once the respondent failed to fulfil his end of the agreement, and a breach occurred, the agreement was terminated and the respondent would ordinarily not be entitled to recover his money.

However, for a wholesome resolution of this matter, it is in the interests of justice that the principle of equity be looked at as that was the basis of the court a quo's decision.

The scholar R.H. CHRISTIE, Business Law in Zimbabwe, 2nd Ed, Juta & Co Ltd…, provides that the principle of equity may be resorted to where there is incomplete performance of a contract. The principle is based on unjust enrichment.

The court, in Carlis v McCusker 1904 TS 917, observed that:

“In view of the well-known maxim of law, that no man should be allowed to enrich himself at the expense of another, this court would not permit a man who had verbally agreed to sell landed property, and had, on the faith of that agreement, received the whole or portion of the purchase price, to retain both the money and the land. It would, under such circumstances, come to the relief of the purchaser,”

See also Matipano v Gold Driven Inv (Pvt) Ltd SC225/12.

This principle is clearly discretionary and is applied by a court on the basis of the particular circumstances of a case which warrant the use of such a principle.

I would, however, venture to suggest that the principle of equity should be sparingly used as it has the effect of undermining the contract entered into between the parties.

In this case, the respondent paid a known sum of money to the appellant on the basis of the first agreement. The respondent never acquired any minerals from the appellant's mine. Although the first agreement was dissolved, the court a quo, in the exercise of its discretion, took into account that the second agreement did not have an operational clause to deal with what would happen if any of the parties breached the agreement.

In the first agreement, it was an agreed provision, that, in the event that the respondent failed to bring equipment to the mine he would be entitled to a refund of his money within six (6) months. The appellant, in its own plea, stated that it was an agreed provision that if there was failure to pay the debt it would settle the debt over a period of six months.

It seems to me that even though the second agreement did not have a provision for settlement between the parties, in the event that the respondent failed to fulfill his obligations, the court a quo was correct to exercise its discretion and be guided by the spirit of the provision in the first agreement. It was quite apparent that the second agreement flowed from the first agreement between the parties.

This is a matter where equity may properly be applied.

It would be unjust for the appellant to remain in possession of the US$89,000 which was paid to it by the respondent when the respondent himself did not get anything from the deal. The agreement between the parties was an investment on the part of the respondent that was going to jointly benefit both parties. The loan paid by the respondent was to be paid back through production on the mine.

Production did not happen.

Despite the respondent's breach of the agreement, justice will be met if the parties are returned to their status quo ante.

The appellant did not, either in its grounds or in argument, seek to challenge the application of discretion by the court a quo in applying the principle of equity in these circumstances.

Indeed, in my view, the appellant would have been hard pressed to make such a submission in view of the concession it had made that it had received the money.

It would appear, however, that an order for interest on the sum is not justified.

The respondent accepted, in his evidence, that he was in breach of the agreement between the parties. He did not fulfil his obligations which would have resulted in him occupying the mine and getting his money back.

He thus cannot benefit by being awarded interest in view of the fact that he did not comply with the terms of the agreement.

However, the special circumstance of the respondent justifies the approach by the court a quo.

The respondent's understanding of the English language was so bad that the court felt the need to intervene. It would be a travesty of justice to hold the respondent to the terms of the agreement in circumstances that clearly show that he did not grasp that he was obliged to pay the full amount before he could recover his money. This was in circumstances where the appellant not only retained the profits from the mining operations but also retained the respondent's money.

DISPOSITION

The court a quo did not err in finding that it was just and equitable for the appellant to return the respondent's loan of US$89,000. Indeed, it was clearly accepted by the appellant that it had received the money from the respondent. The court, however, erred in awarding interest on the sum at the prescribed rate when such interest was not justified where the court was applying principles of equity.

The appeal thus succeeds on this point.

With regards to costs, the respondent has successfully defended the appeal in the main and I thus find no reason why costs should not follow the cause.

In the result, it is accordingly ordered as follows:

1. The appeal be and is hereby partially allowed with costs.

2. Paragraph 3 of the judgment of the court a quo be and is hereby set aside and substituted with the following:

“3. Plaintiff's claim, as against the 1st defendant, Big Valley Masters (Private) Limited, in the sum of US$89,000 is allowed.”

View Appeal
HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA
Ruled By: CHIGUMBA J

Zimbabwe adopted a policy that was dubbed “look east” as a way of combating economic sanctions that were imposed on it by the international community. The “look east” policy encourages a forging of closer business and trade ties with countries in the east as opposed to the west, the traditional former business and trade partners.

When this policy was adopted, a lot of Chinese nationals came to our country in pursuit of business opportunities, especially in the mines and minerals sector. Unfortunately, the language barrier has caused a lot of difficulty in the conclusion of contracts and the implementation of business deals.

The plaintiff is a Chinese national who does not speak English. He relied on the interpretation of a business associate who told him of the terms of the contract that he entered into with a Zimbabwean company called Big Valley Masters (Private) Limited (the first defendant). The company owns gold mining claims in Shurugwi (Sky Rocket Mine 1645). Mr. Phillimon Mubata (second defendant) is a director and shareholder in the first defendant.

The plaintiff issued summons against the defendants on 11 December 2012, claiming payment of USD$89,000 being a sum outstanding in respect of a loan advanced to the defendants, as well as interest thereon at the prescribed rate, and costs of suit.

In his declaration, the plaintiff averred, that, on 13 January 2011 he and the first defendant entered into a written agreement. The first defendant was represented by the second defendant when the agreement was concluded. The terms of the agreement included, among other things, an obligation on the plaintiff's part that he would pay for exploration work at the mine, invest capital and mining equipment, and use the block of claims which constituted Sky Rocket Mine 1645 as surety.

The parties agreed that the block of claims would subsequently be transferred into the name of a new investment company in which they would have equal shares, and which would be exclusively managed by the plaintiff.

The plaintiff averred, further, that, the parties agreed that he would advance a loan in the sum of USD$150,000 to the defendants, subject to repayment on certain conditions, for purposes of discharging pressing debts owed by the first defendant.

On 3 October 2011, the parties entered into a second agreement, in terms of which the defendants allegedly admitted to being indebted to the plaintiff in the sum of USD$89,000 and agreed to repay the loan, while allowing the plaintiff to run the mine.

The plaintiff is aggrieved because none of these undertakings given by the defendants have been honored.

The defendants filed their plea on 15 January 2013.

They did not dispute that the parties had entered into what they called a joint venture agreement relating to gold mining. They averred that the plaintiff breached the terms of the joint venture agreement by failing to provide capital to fund their joint venture, in the agreed sum of USD$150,000.

The second defendant denied that he entered into a loan agreement with the plaintiff, or that he entered into any agreement at all with the plaintiff in his personal capacity. He stated, that, at all times; he dealt with the plaintiff in a representative capacity as a director and shareholder of the first defendant.

In the plea, it was averred that the parties had agreed that any loan sums advanced by the plaintiff would be repaid using the proceeds of production at the mine.

After clearing the loan sums, by offsetting against the proceeds of production, the parties would subsequently enter into a profit sharing agreement.

The defendants averred that the plaintiff breached the agreement by failing to finance production through the agreed USD$150,000, and that this breach caused the collapse of the joint venture.

The defendants averred that the joint venture resulted in loss, which should be borne equally with the plaintiff, as an equal partner in the joint venture.

On 20 May 2013, the defendants filed an amended plea, in which they averred that the terms of the second agreement entered into by the parties were such that the plaintiff was obliged to advance the full USD$150,000, as agreed, before any repayment of that loan could be made.

The averment was that the plaintiff was not entitled to repayment until he paid USD$150,000 to the first defendant in full.

The defendants denied that they prevented the plaintiff from assuming control of the mining operations.

The defendants filed a counterclaim for the payment of USD$61,000 which they alleged was still due and owing to the first defendant in terms of the parties' first agreement.

In his replication to the amended plea and counter claim, dated 22 May 2013, the plaintiff denied being in material breach of the terms of the parties' agreements. In his plea to the counter-claim, he reiterated that the defendants themselves breached the agreement, by refusing to relinquish control of the first defendant's mining operations to him, as agreed.

This matter was referred to trial for the determination of these issues:

1. Whether the plaintiff was obliged to provide USD$150,000 towards the financing of a joint venture agreement.

2. Whether the defendants frustrated the contract and caused the non-fulfillment of its terms and conditions.

3. Whether the defendants breached the contract and caused the plaintiff to cancel it and demand re-payment of the USD$89,000 which he had advanced.

In terms of the joint pre-trial conference minute filed of record, on 29 May 2013, the defendants admitted that they received the sum of USD$89,000 from the plaintiff.

At the trial of the matter, Mr. Shi Jinwu gave evidence and told the court that he met the second defendant in February 2010 at a petrol station. He said that the second defendant told him that he was looking for investors for his mineral claims because he was experiencing financial difficulties, and invited him to form a partnership with him.

The plaintiff said that the second defendant invited him to tour his mining operations. He said that he asked him for a loan of USD$150,000. The loan was to be disbursed in phases. The second defendant offered to give up the certificates to his mining claims as collateral. He offered to let the plaintiff take over the day to day running of the mining activities.

The plaintiff told the court that the parties agreed that if he paid an initial USD$50,000 he would be allowed to take over the mining operations of the first defendant.

He said that he was surprised when the second defendant refused to let him assume control of the mining operations of the first defendant after he had paid the fifty thousand as agreed.

The plaintiff referred to Annexure 'A' to the summons, the agreement which the parties signed on 13 January 2011.

The plaintiff signed on behalf of “Chinese”. The second defendant signed that agreement on behalf of the first defendant. In fact, the plaintiff and second defendant are referred to as representatives.

The plaintiff told the court, that, despite the express terms of the agreement, the defendants refused to let him assume control of the mining operations, and, consequently, he was now seeking re-payment of the USD$89,000 which he had advanced to them.

He referred to a second agreement entered into on 3 October 2011 in which the defendants agreed to let him run the mine for purposes of recovering the USD$89,000 which he had advanced to them.

The plaintiff told the court, that, despite the signature of that second agreement, he was never given a chance to enter the mine.

He said that the defendants never prepared the relevant paperwork towards establishing a tribute agreement. There were no environmental and other requisite mining licenses. The plaintiff said that the second defendant kept on giving him excuses as to why he could not allow him to enter the mine and begin mining operations.

The plaintiff told the court that the spirit of the agreement never materialized.

He decided to cancel the partnership and to get a refund of his USD$89,000.

Finally, the plaintiff told the court, that, in his opinion, the second defendant ought to be bound in his personal capacity because he first knew him in his personal capacity.

During cross examination, the plaintiff told the court that he entered into the agreement with the first defendant in a representative capacity, as a representative of a company which is registered here in Zimbabwe, which he is a director of. He conceded that the name of this company was not part of any of the agreements entered into by the parties.

The plaintiff told the court that the first agreement was drafted by his friend who understands English, and that his friend explained the exigencies of the agreement to him. The plaintiff conceded that due to lack of understanding of the English language, he needed to have the agreements explained to him in Chinese.

He said that he was told of the contents of the agreements before he signed them, so he knew what he was signing for.

He called exhibit 1 a mining partnership agreement.

The plaintiff insisted that the partnership fell apart because he was not allowed to gain entry and to start mining operations.

He denied that the agreement known as exhibit 1 had anything to do with the loan agreement.

The plaintiff told the court that exhibit 1 was never followed that's why the parties entered into a second agreement - which was also never fulfilled.

The plaintiff told the court that the second defendant demanded that he pay USD$100,000 to him before he could allow him to enter and begin mining operations.

The plaintiff could not recall the exact dates when he cancelled the agreements entered into by the parties.

He could not comment on the letter shown to him, of 13 May 2011, from Messrs Danziger & Partners, which letter suggested that the parties had been at cross-purposes from the outset regarding the terms and conditions of their respective agreements.

He was unable to provide a cogent reason why the letter of cancellation did not mention that he had been denied entry to the mine, and suggested that the lawyers possibly misunderstood his instructions because of the language barrier.

The court had no problem following the logic of the plaintiff's evidence.

He was sincere in his belief of the terms of the agreements between the parties as they were explained to him in his language. The court believed that he told the truth as he knew it.

The plaintiff called Ms Hua Ding as his second witness.

She is also a Chinese national currently resident in Zimbabwe and South Africa. She told the court that she and the plaintiff met the second defendant at Gweru service station in December 2010. She was employed by the plaintiff as his assistant at the time. Ms Ding told the court that the second defendant invited them to tour his mining operations in Shurugwi and proposed that he enter into a joint venture agreement with the plaintiff to mine gold. She said that when the parties signed their first agreement, on 13 January 2011, she was not present but she witnessed some of the payments made to the defendants.

Ms Ding told the court that the agreement collapsed because the second defendant frustrated the plaintiff by denying him entry onto the mine site. She said that the second defendant had voluntarily surrendered the registration certificates to the first defendant's mining claims, as collateral against payment in full of the money advanced to the defendants as a loan.

Ms Ding told the court that the second agreement entered into by the parties was prepared by the second defendant.

She denied that the plaintiff breached the terms of this agreement, and insisted that it was the defendants who breached the agreement by failing to allow the plaintiff access to the mining site for purposes of conduction explorations, and to commence mining activities.

During cross-examination, Ms Ding remained steadfast that the plaintiff was denied access to the mine. She was unclear as to the reasons advanced for cancellation of the agreements, but she insisted, that, as far as she knew, the plaintiff was aggrieved when he was denied access to the mine despite clear provisions to the contrary in the two agreements signed by the parties.

Again, the court found this witness to be believable, although she could not shed light on some material aspects of the dispute between the parties. Ms Ding was articulate in English. It's a pity that when some of the material aspects of this matter were taking place she was in South Africa and is unable to assist the court to determine the truth.

The plaintiff's last witness was another Chinese national who is currently resident in Zimbabwe, Mr. Wei Ren.

He told the court that he was the plaintiff's mining manager from 2006 to 2010-2011. He confirmed that he was involved in the signing of the agreement between the plaintiff and the defendants.

Mr. Ren was responsible for structuring the mining partnership agreement.

He confirmed that he personally explained the exigencies of that agreement to the plaintiff, and satisfied himself that the plaintiff had understood the contents, before allowing him to append his signature to the agreement.

Mr. Ren also confirmed that exhibit 10, the second agreement between the parties, had been prepared by the second defendant.

He said that he signed that agreement on the plaintiff's behalf.

Before signing, he had consulted widely with the plaintiff who was in China at the time.

This witness told the court that the second defendant was given a loan by the plaintiff and that, he, in turn, had surrendered the certificates of registration to his mining claims to the plaintiff, as collateral for the repayment of the loan.

Mr. Ren told the court that the partnership collapsed because the second defendant denied the plaintiff access to the mine.

He said that the second defendant kept making excuses, but, at the same time, making requests for money to pay the first defendant's debts, until the plaintiff had disbursed a total sum of USD$89,000 to the defendants.

The witness told the court that the plaintiff lost his confidence in the second defendant because of the numerous lies he was told, and that, consequently, he elected to cancel the agreement of partnership.

He said that the second defendant never gave his permission to the plaintiff to commence mining operations, but, instead, kept on making incessant demands for more money.

Mr. Ren disputed the assertion that it was the plaintiff who breached the agreement between the parties. He insisted that it was the second defendant who failed to hold up his end of the bargain.

During cross examination, Mr. Ren confirmed that the plaintiff understood the entire contents of both agreements.

He told the court that a technical team was denied entry onto the mine after the initial USD$50,000 deposit had been paid. This happened fifteen (15) days after 13 January 2011, when the first agreement was signed.

The witness was unable to give a satisfactory explanation as to why the letter of cancellation of the agreement, dated 13 May 2011, had not mentioned that the plaintiff had been denied entry onto the mine as part of the reasons for cancellation.

When he was pressed, he blamed the legal practitioner for not following the plaintiff's instructions.

When it was suggested to him that the plaintiff's breach of clause 8 of the second agreement was the cause of the failure of the partnership, Mr. Ren denied this strenuously.

The plaintiff then closed its case.

Mr. Phillimon Mubata, the second defendant, testified on behalf of both defendants.

He told the court that it was the plaintiff who approached him and proposed that they enter into a joint venture. He said that this was after the plaintiff had proposed to buy the first defendant's mining claims and he had refused.

The second defendant told the court that the plaintiff was involved in a chrome mining project near to where the first defendant's mining claims were. He said that, contrary to what had been asserted by the plaintiff, the first defendant's legal documents were up to date, and all the requisite mining licenses were in place, and had always been in place.

The second defendant told the court that the parties agreed that a total of USD$150,000 would be paid to the first defendant, with an initial USD$50,000 to be paid, where after the second defendant would go to China with the plaintiff where water purification equipment would be bought, and paid for by the plaintiff, using the balance of USD$100,000.

After that, the parties would mine together using a new company which would be jointly owned.

He said that the parties agreed that the USD$150,000 would be repaid to the plaintiff using the proceeds of their joint mining efforts.

The second defendant told the court that the plaintiff breached the parties' agreement by failing to mount an exploration exercise at the mine. He said that he formed the view that the plaintiff ran out of money and was unable to bring the requisite equipment onto the mine. He also said that the plaintiff failed to bring technical experts onto the mine to conduct viability surveys as agreed.

The second defendant denied that the plaintiff was ever denied access to the mine. He said that at all material times, the plaintiff had personnel from his company present at the mine, taking soil samples, and finishing construction of certain buildings on the mine which they intended to use to accommodate their employees.

The second defendant told the court that the reason why the plaintiff purported to cancel the parties' first agreement was because he had refused to sell the mine to the plaintiff or to transfer the claim registration certificates to him.

On exhibit eleven, the parties' second agreement, the witness told the court that the plaintiff was extensively consulted over the telephone by Mr. Wei, and that he authorized Mr. Wei to sign the agreement on his behalf.

According to the second defendant, part of the problem with this matter is that the plaintiff relied entirely on Mr. Ren's interpretation and understanding of things, and there is a possibility that Mr. Ren could have distorted some things in his interpretation from English to Chinese, because Mr. Ren had ambitions to go into business for himself.

During cross-examination, the second defendant denied that it had ever been the parties' intention that he be personally liable or a party to the agreements in his personal capacity. He denied ever receiving any money in his personal capacity, and insisted that all transactions were done in the name of the first defendant, and that he never bound himself as surety.

Mr. Isaac Mhere testified as the defendant's second witness.

He said that he is employed as a Finance and Administration manager by the first defendant, and that the plaintiff, together with a group of other Chinese investors, came to the mine in January 2011 and asked if they could tour the mine and look at the mining operations.

He knew the plaintiff from the mine next door, so he agreed.

Mr. Mhere asked the second defendant for permission to allow the Chinese investors to tour their mining operations, and permission was granted.

Later, he was involved in the discussions for a joint venture, and present at the signing of the first agreement.

The witness told the court that the plaintiff paid the initial deposit of USD$50,000 in bits and pieces, and not as a lump sum as agreed. He personally receipted the payments. He said that the fifty thousand was not paid by the agreed date; it was paid much later than that.

Mr. Mhere said that the plaintiff was never denied access to the mine. He is in charge of the day to day running of the mine, and, if access was to be denied to the plaintiff, it would have been denied by him because he was in charge at the mine site and the second defendant normally operated from offices in Gweru city.

Mr. Mhere told the court, that, the purpose of the second agreement entered into by the parties was to rescue the first agreement and make it workable.

He said that the plaintiff breached the second agreement by failing to pay USD$61,000 as it stipulated; he failed to form a joint venture company; he failed to bring in equipment; he failed to conduct an exploratory survey; and he failed to provide working capital.

During cross examination, Mr. Mhere was adamant that the plaintiff was allowed access to the mine immediately after the first agreement was signed. He said that daily meetings were held on the site at the mine with the plaintiff's employees. He said the plaintiff was never blocked from coming onto the mine.

The defendant closed its case at this juncture.

The question for determination is a simple one: the Court must decide who is telling the truth between the plaintiff and the second defendant, regarding the question of breach of the parties' respective agreements.

Once the court determines this question, the next matter for consideration will be whether the plaintiff is entitled to be refunded USD$89,000, or whether the defendant is entitled to specific performance, and to payment of USD$61,000.

The law that governs contractual relationships is clear.

In interpreting a contract, a court must determine what the intention of the parties was when they entered into a contract.

In this case, did the parties intend to enter into a joint venture agreement in terms of which the plaintiff loaned one or both the defendants the sum of USD$150,000, or did the parties enter into a mining partnership agreement, in terms of which the plaintiff agreed to loan the partnership USD$150,000 which was to be re-paid from the proceeds of the mining venture?

The evidence shows that the parties had different ideas about their rights and obligations which emanated from both agreements which they entered into.

Were they ever of one mind, or there was never any consensus ad idem?

In researching what the law says on how to interpret the intention of parties to a contract, I came across the following:

In the case of Chikoma v Mukweza 1998 (1) ZLR 541 (SC) the Supreme Court stated that:

“…, the approach that the courts will adopt to the issue of whether a contract is void for vagueness will be to help the parties towards what they both intended rather than obstruct them by legal subtleties and allow one of the parties to escape the consequences of all he has done and all he has intended. The courts will interpret contracts fairly and broadly, without being quick to find defects, following the principle ut res magis valeat quam pereat.”

The court said that:

“Against this scenario, the approach to be adopted to the issue of vagueness must be that expressed by PRICE J in Hoffmann & Carvalho v Minister of Agriculture 1947 (2) SA 855 (T) at 860, namely:

'Where parties intend to conclude a contract, think they have concluded a contract, and proceed to act as if the contract were binding and complete, I think the court ought rather to try to help the parties towards what they both intended rather than obstruct them by legal subtleties and assist one of the parties to escape the consequences of all that he has done and all that he has intended....'”

Not to be overlooked, as well, are the wise words of LORD WRIGHT in Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494 (HL) at 503I; (1932) 147 LT 503 (HL) at 514:

“Businessmen often record the most important agreements in crude and summary fashion; modes of expression sufficient and clear to them in the course of their business may appear to those unfamiliar with the business far from complete or precise. It is, accordingly, the duty of the court to construe such documents fairly and broadly, without being too astute or subtle in finding defects; but, on the contrary, the court should seek to apply the old maxim of English Law, verba ita sunt intelligenda ut res magis valeat quam pereat.”

The mutual intention of the parties, at the time of the contract, will govern the court's resolution of a contractual dispute if that intention can be determined and if that intention is lawful.

If possible, the mutual intent of the parties will be determined only from the written terms of the contract. If the language of the contract is clear and definite, that language will determine the mutual intent of the parties.

It is my view that the language of the parties' first agreement is clear.

It was an agreement to co-operate and operate the mine under the auspices of a new company which was to be incorporated and to be jointly-owned and controlled by the parties. The parties intended to conclude a contract. They thought that they had concluded a contract, and proceeded to act as if the contract were binding and complete.

The plaintiff proceeded to pay USD$50,000 in drips and drabs.

The parties went to China to look for water purification equipment. The plaintiff continued to give the first defendant money when requested to do so until he had paid USD$89,000.

There were no defects in the January agreement.

None were found in the second agreement.

The court discharged its duty and construed both documents fairly and broadly, without being too astute or subtle in finding defects. The court concluded, that, in respect of both documents, there was consensus as to the intention of the parties and a meeting of the minds in regards to the parties rights and obligations.

The evidence on record showed that the plaintiff had all the terms of both agreements explained to him, in Chinese, before appending his signature. Both agreements were valid and binding on the parties.

The court believed the evidence of the defendants that the plaintiff did not pay the initial USD$50,000 by 26 January 2011 as agreed. The evidence was that the plaintiff paid the USD$50,000 in drips and drabs and that, by 1 March 2011, the plaintiff had not fulfilled its obligation to form a joint venture company.

The court accepts, that, the plaintiff failed to pay the balance of USD$100,000 to the first defendant by 11 March 2011.

The court finds that the plaintiff breached the terms of the agreement entered into by the parties on 13 January 2011.

The plaintiff's excuse for non-performance of the contract appears to be an allegation of frustration of purpose.

However, the plaintiff's claims that he was not allowed to enter the mine are not supported by the evidence.

The court believed the first defendant's manager, that, the plaintiff had employees on the ground, immediately after the agreement was signed, who could come and go at their leisure on the site, and that the plaintiff even posted a guard at the gate to the mine to safeguard his interests.

That explanation is the most probable; given that the plaintiff was already operating on a neighboring mine; it would be absurd to find that his employees were barred entry onto the defendant's mine when they had previously come and gone without any hiccups.

The plaintiff was never prevented from entering the mine.

It is more probable that the plaintiff failed to raise the initial USD$50,000 tranche of the loan; he failed to register the joint venture company on time; and he failed to pay the USD$100,000 within the stipulated period.

The parties then decided to complicate matters by entering into a second agreement, which was described by the defendants' witness as “an attempt to rescue the first agreement.”

On 3 October 2011, nine months after the first agreement was entered into, the parties agreed to let the plaintiff operate the mine to recover the USD$89,000 that the first defendant had borrowed in terms of the first agreement.

Clause 3 of the second agreement stipulates that the USD$89,000 would be repaid using the proceeds of production from operating the mine.

It was agreed that the plaintiff would be offered a tribute to operate and extract ore from the first defendant's claims, and that if the USD$89,000 was paid in full before the expiry of the tributary period, then, a “percentage share structure” would be drafted by the parties.

It was agreed that the loan balance of USD$61,000 would be paid before the plaintiff could be given access to the mining area.

The author R. H. CHRISTIE, Business Law in Zimbabwe, 2nd ed, 1998…, has the following to say about reciprocal obligations:

“There is a presumption that in every bilateral or synallagmatic contract, i.e. one in which every party undertakes obligations towards the other, the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations. Whether this presumption applies and whether the reciprocal obligations are to be performed simultaneously or consecutively are questions of interpretation of the contract.

See ESE Financial Services (Pty) Ltd v Cramer 1975 (2) SA 805 @ 808-9.

In contracts to which this principle of reciprocity applies, a plaintiff who demands performance without himself having performed, or tendered to perform, may be met with the exceptio non adimpleti contractus in the form of a dilatory plea: see BK Tooling (Edms) Bpk v Scope Precision Engineering (Edms) Bpk 1979 (1) SA 391 (A).

What if, in a contract to which the principle of reciprocity applies, the plaintiff has partly, but not completely, performed?

If the wording of the contract makes it very clear that he has no claim until he has performed in full, the defendant will be entitled to rely on the exceptio: Van Rensburg v Straughan 1914 AD 317.

But, in any other case, an equitable principle comes into play, based on unjust enrichment: see Ambrose and Aitken v Johnson and Fletcher 1917 AD 327 and applied in Grizzel v P & W Erection Co (Pvt) Ltd 1972 (2) RLR 68 (A), 1972 SA 449 378, 1972 RLR 21.”

Clearly USD$61,000 was never paid to the first defendant, so, the plaintiff's excuse for non-performance, that of frustration of purpose, does not apply.

In my view, the plaintiff has brought these proceedings in an effort to anticipate the first defendant's repudiation of the contract.

The terms of the second agreement between the parties were clear.

The plaintiff was to pay USD$61,000 before he could be allowed onto the mining site, or be allowed to commence operations, or be granted a mining tribute.

The plaintiff cannot claim that the first defendant breached the second agreement, which superseded the first agreement, when it was clearly a condition precedent to entry on the mine, that the additional sum of USSD$61,000 be paid first.

Novation means the replacing of an existing obligation by a new one, the existing obligation being thereby extinguished.

It could be argued that the October agreement was a novation of the January agreement.

The January agreement is what is governing the parties reciprocal obligations. The wording of the agreement has no provision for breach.

This means that the equitable principle, which is based on unjust enrichment, comes into play.

It is my view that the plaintiff's breach of both agreements went to the root of the agreements.

He failed to pay the USD$50,000 on time; he failed to register a joint venture company within the agreed period; he failed to bring equipment and capital to the venture; he failed to conduct geological surveys as agreed; he failed to pay USSD$150,000 as agreed.

A reasonable person may conclude that the plaintiff repudiated the parties' agreements.

He clearly does not intend to pay the first defendant the remaining USD$61,000.

He told the court that he has lost confidence in the defendants and no longer wants to work with them.

One of the remedies for breach of contract is cancellation.

I find that the plaintiff repudiated the parties' agreements. The first defendant is entitled to cancel the agreements and claim damages.

It has elected, instead, to counterclaim for payment of USD$61,000.

In my view, such a claim, being one for specific performance, is not sustainable where the other party to the contract has repudiated it.

The parties agreements did not provide any breach clauses. They never applied their minds to what would happen in the event of breach.

I am persuaded that it would be appropriate to utilise the equitable principle in coming to a resolution of this matter.

I hold this view primarily because the court was uneasy with the plaintiff's level of understanding of the terms of both agreements.

The plaintiff is a Chinese national who came to invest in the mining business in this country. He does not understand English. He relied on the services of his employees to explain the terms of the agreements to him.

The evidence before the court is that some of the interpretation of the agreements was not entirely bona fide because Mr. Ren wanted to go into business for himself and could have misled the plaintiff on some material aspects of the contracts between the parties.

The court believed that evidence.

The plaintiff seemed adamant that he ought to have been allowed to commence mining operations. The terms of the October agreement are diametrically opposed to this belief.

Contracts are made by agreement. They can be unmade by agreement, but, they cannot be unilaterally varied or discharged: see Strachan v Lloyd Levy 1923 AD 670, 671.

It has been said that:

“…, waiver is a bilateral transaction and does not result from a unilateral declaration or a decision…,.:” see Alberts v Bryson 1976 (2) RLR 193 (A) 198, 1977 (1) SA 857 860.

A modern interpretation of the equitable principle, one that takes into account the situation that is currently prevailing in our economy, might not favor an insistence that the plaintiff cannot succeed in his claim until he has performed, in full, the terms of the October agreement.

The court can exercise its discretion in the plaintiff's favour, despite his partial performance of the January agreement (by advancing a loan up to USD$89,000), and his non-performance of the October agreement.

In weighing the equities, the court was guided by Ambrose and Aitken v Johnson and Fletcher 1917 AD 327 where it was stated that it is not for the court to remake a contract of the parties.

The first defendant would be unjustly enriched if it were allowed to keep the USD$89,000 advanced to it by the plaintiff.

The doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

Privity is the legal term for a close, mutual, or successive relationship to the same right of property or the power to enforce a promise or warranty: see Coalridge (Private) Limited v Peter Makawu & Mobil Zimbabwe (Private) Limited SC69-04.

It is my considered view that just because the second defendant signed the January agreement as a representative of the first defendant did not mean that he became a party to the agreement.

The evidence before the court was that the mining claim certificates are in the name of the first defendant. It was the first defendant which entered into the January and October agreements with the plaintiff.

Being a juristic person, the first defendant is unable to sign documents; it would have to rely on its director and shareholder, the second defendant, to sign the documents as its officer and on its behalf.

No evidence was led before the court to show that the parties intended that the second defendant be bound as surety with the first defendant for the due performance of its liabilities.

Accordingly, I find that there was no privity between the plaintiff and second defendant, and that there is no evidence of liability against the second defendant.

Having found that the plaintiff was obliged to provide USD$150,000 towards the financing of a joint venture agreement, and that the defendants did not frustrate the contract and cause the non-fulfillment of its terms and conditions, or breach the contract and cause the plaintiff to cancel it, the court finds, nonetheless, that, it would be just and equitable to allow the plaintiff to recover the USD$89,000 which he had advanced to the first defendant.

In the result, it is ordered that:

1. The plaintiff's claim against the second defendant be and is hereby dismissed with costs.

2. The defendant's counterclaim against the plaintiff, for payment of USD$61,000, be and is hereby dismissed with costs.

3. Plaintiff's claim, as against the first defendant, Big Valley Masters (Private) Limited, in the sum of USD$89,000, is allowed, together with interest thereon at the prescribed rate calculated from 11 December 2012 to the date of payment in full.

4. First defendant shall bear the costs of suit.

SC37-09 : EDDIES PFUGARI (PVT) LTD vs KNOWE RESIDENTS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: SANDURA JA, ZIYAMBI JA and GARWE JA

This is an appeal against the judgment of the High Court directing the appellant to fully service residential stands in Phase 1 of the Knowe Housing Development in Norton.

The facts of this case are these:

The appellant, a private company, is a property developer whilst the respondent is an association of residents of the Knowe Housing Development, who, in 1998, entered into agreements of sale with the appellant in their individual capacities for the purchase of residential Stands.

The association was formed by the residents in order to compel the appellant to carry out its obligations in terms of the various contracts it had entered into with the various individuals who form the association.

The High Court found that the appellant had breached the terms of agreement between itself and the residents in regard to Phase 1 of the development. Consequently, the court granted an order directing the appellant to fully service Phase 1 of the housing development within 90 days, and, in particular, to connect to all Stands reticulated water, sanitary systems, tarred roads, and a proper drainage system.

Dissatisfied with that order, the appellant appealed to this Court on the grounds that:

(a) The court a quo had erred in finding that the respondent had locus standi in judicio to institute the proceedings; and

(b) The court a quo had erred in rejecting the appellant's contention that it had complied with its obligations in terms of the relevant Development Permit.

At the hearing of the matter before this Court, counsel for the appellant abandoned the other grounds of appeal and attacked the judgment of the court a quo on the sole basis that there were material disputes of facts which were incapable of resolution on the papers, and, for that reason, the matter should either have been referred to trial or dismissed.

The sole issue for determination before this Court, therefore, is whether the court a quo erred in resolving the disputes raised on the papers without hearing evidence.

In terms of condition 27 of the Development Permit issued to the appellant by the second respondent, the appellant was obliged, at his own expense, to: “provide all infrastructural services viz roads, electricity, water mains, and sewerage disposal, to the specification approved by and to the satisfaction of Norton Town Council and all such services shall be handed over to Council at a date to be agreed upon by the two parties involved.”

In its founding papers before the High Court, the first respondent alleged that the appellant had breached the contract in various respects.

The first respondent alleged that although the appellant had tarred the roads in Phase 1, it had done so in a substandard manner; that no proper drainage system had been constructed; and tapped water was not available at all the Stands. The first respondent further alleged that no street lighting had been put in place and social amenities, such as schools and clinics, were still to be constructed.

In its opposing affidavit, the appellant asserted, that, it had done its best to carry out its obligations under the difficult economic conditions prevailing in Zimbabwe, and that it was on course to completing its obligations.

It further stated, that, although there were no tarred roads in Phases 1 and 2, it had acquired state of the art equipment in order to carry out this task.

The appellant further stated, that, the roads had not been tarred because of the scarcity of diesel and unavailability of tar in Zimbabwe.

However, the appellant also stated, that, the road network in Phase 1 had been done satisfactorily by a Chinese sub-contractor.

The appellant further remarked, that, no drainage system had been put in place because the tarring of the roads had to be completed first. Culverts too were to be constructed after the roads had been tarred. The drainage was not as bad as suggested by the first respondent.

The appellant also stated, that, water mains had been installed and what remained was for the individual Stand holders to apply for connections.

As regards street lighting, the appellant submitted, that, this could only be attended to once the roads had been tarred.

Lastly, the appellant remarked, that, it had not deliberately avoided fully servicing the area but had been constrained by factors beyond its control, and, that, if given three months, it would ensure that the roads are completed.

In its opposing papers, the second respondent highlighted the fact that the appellant had not successfully completed Phase 1, and, therefore, should not have embarked on Phases 2 and 3 of the development project.

In determining that the appellant was in breach of its contractual obligations, the court a quo remarked, at page 6 of the cyclostyled judgment:

“It was quite apparent, from the papers before me, that the first respondent was indeed in breach of the terms of his contract in regard to Phase One of the development.

The applicant, through its members, has complied with their part of the contract and paid for the Stands in full. In my view, they may properly seek an order for specific performance.

In its opposition, the first respondent argued that the court should not exercise its discretion in favour of the applicant as the obligation was too onerous for it to perform. The excuses made by the first respondent, relating to unavailability of diesel and tar, were, in my view, merely an excuse as the applicant could carry out its obligations if it was diligent in its efforts. Whilst the court takes judicial notice of the socio-economic hardships complained of, it also notes that other successful developments have continued in spite of these challenges.

The second issue raised by the first respondent was that there was no timeframe for performance in the permit and they were therefore still in the process of completing the task.

This, in my view, was no defence to the order sought by the applicants.

Whilst it is noted that the permit does not indeed give a time frame within which the infrastructural development must be carried out, it is an implied term of the contract that performance must be conducted within a reasonable time.

In reading an implied term into a contract, the court must of course be bound by the principles set out in case law: see Mullin (Pvt) Ltd v Benade Ltd 1952 (1) SA 211.

The applicants in this case entered into the contracts with the first respondent in 1998. This application was filed on 22 June 2005. Clearly, the time lapse between the time of entering into the contract and time for performance exceeds, by any stretch of the imagination, the definition of a reasonable time.

In my view, a period in excess of six years is no longer a reasonable time - even in these challenging times.”

On the facts of this case, I am in no doubt that the court a quo was correct in determining the dispute on the papers.

The appellant had obligations which it had failed to discharge - even at the time of the hearing of the matter before the High Court in November 2006. The second respondent had still not issued the appellant with a Certificate of Compliance.

The appellant does not dispute, in its papers, that it had not discharged all its obligations in terms of the permit. Instead, the appellant states that it did the best in the prevailing socio economic situation and that it was on course to discharging its obligations under the contract.

The second respondent, in its papers, states that the servicing of Phase 1 had not been completed.

The remark by the appellant, that the drainage is not as bad as portrayed, is an admission that the work was not complete. Indeed, the appellant admitted that work was still to be done in tarring the roads, constructing a drainage system, and providing amenities.

The dispute, on the facts, could be resolved without hearing evidence. The position is now well established that:

“In motion proceedings, a court should endeavour to resolve the dispute raised in affidavits without the hearing of evidence. It must take a robust and common sense approach and not an over fastidious one; always provided that it is convinced that there is no real possibility of any resolution doing an injustice to the other party concerned.”

See Zimbabwe Bonded Fibreglass (Pvt) Ltd v Peech 1987 (2) ZLR 338 (SC)…,.

I agree with the submission by the respondent that the dispute was not so much on the substance but rather on the extent of non-compliance. I find no basis upon which the approach taken by the court a quo can be impugned.

The appeal is without merit. It is accordingly dismissed with costs.

View Appeal
HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

The plaintiff issued summons claiming the following:

“(i) Payment of the sum of US$119,300 being the remaining balance of the agreed purchase price for one x 20 Tonne Hyundai Excavator, sold and delivered by the plaintiff to the defendant, at its specific instance and request.

(ii) Interest at the prescribed rate calculated from the date of delivery, being 19th of June 2014, to the date of full payment.

(iii) Costs of suit on a legal practitioner and client scale.”

In its declaration, the plaintiff averred the following:

In 2011, the parties entered into a procurement contract in which the defendant ordered one by 20 tonne hydraulic excavator from the plaintiff. The agreed purchase price was US$209,300 inclusive of VAT. The defendant was obliged to pay 50% deposit towards the purchase price. The remaining balance was payable upon delivery of the excavator.

In partial fulfilment of the agreement, the defendant paid, in instalments, the sum of US$90,000 as part deposit to the agreed purchase price.

The plaintiff accordingly delivered the excavator on 19 June 2014 which delivery was accepted. The excavator was accepted in good working order by the defendant at its premises.

The defendant has, despite demand, refused or neglected to pay the outstanding balance of US$119,300....,.

To the merits, the defendant averred, that, the plaintiff delivered a defunct Hyundai Excavator contrary to the undertaking that it made that it would deliver a new excavator. It had to incur unnecessary costs in having the excavator checked by an independent company. The defendant averred, that, it will only effect payment of the balance after delivery of a brand new and properly functioning machinery.

The defendant also made a counter claim. It averred the following:

On 16 May 2014, it advertised a Tender Notice in the Herald newspaper in terms of section 211 of the Urban Councils Act [Chapter 29:15]. The notice was inviting tenders for the supply of brand new machinery, viz:

(i) One Jet machine Chigu Velocity clearing machine.

(ii) One Tracked Excavator 30 tonne.

(iii) One Front End Loader.

On 18 July 2011, the defendant in reconvention won the tender to supply it with a 20 tonne Tracked Excavator and a 3 tonne Front End loader. It was a term of the agreement that:

(a) The defendant in reconvention would deliver a brand new excavator and a brand new front-end loader.

(b) The plaintiff in reconvention would pay the deposit of the agreed purchase price before delivery of the machinery.

(c) The plaintiff in reconvention would pay the outstanding purchase price upon delivery of the machine.

The plaintiff in reconvention paid the initial deposit to the defendant in reconvention on 29 January 2014 in the sum of US$140,000. On 19 June 2014, the defendant in reconvention delivered a dysfunctional excavator in breach of the agreement terms.

It has refused and failed to deliver a brand new machinery.

The plaintiff in reconvention has been prejudiced by the breach. The plaintiff in reconvention is entitled to specific performance of the agreed terms of the contract. Alternatively, it is entitled to restitution of US$140,000 being the deposit paid as part of the purchase price and damages for breach of contract. Consequently, it claims for:

“(a) An order compelling the defendant in reconvention to deliver brand new excavator and Frond End loader to the plaintiff in reconvention in terms of the agreement.

(b) Alternatively, an order compelling defendant in reconvention to pay the sum of US$140,000 being the deposit paid as part of the purchase price.

(c) An order compelling defendant in reconvention to pay US$30,000 as damages for breach of contract.

(d) An order compelling defendant in reconvention to pay US$20 per day from date of summons to date of collection being storage fees for the excavator.

(e) An order compelling defendant in reconvention to pay interest at the rate of 5% per annum from the date of demand to date of payment in full.

(f) Costs of suit on a legal practitioner client scale.”

The defendant in reconvention pleaded as follows to the counter-claim:

When the plaintiff in reconvention advertised its tender notice, the tender was not won by the deadline. The tender notice was then revised and extended.

It (the defendant in reconvention) submitted its bid during the extension.

According to the specifications of the re-advertised tender notice, it was not a requirement that the excavator be brand new. Even its tonnage had also been reduced. The tender that was won by the defendant in reconvention was not as per the initially advertised tender notice as evidenced by the discrepancy in tonnage of the excavator.

The defendant in reconvention averred, that, at all material times, the plaintiff in reconvention was fully aware that the excavator to be supplied would be pre-owned.

When the excavator was delivered, it was inspected by all responsible authorities and then certified to be in good working condition. The parties did not agree that the machinery to be supplied would be brand new.

The defendant in reconvention prayed for the dismissal of the counter claim with costs on a higher scale.

In its replication, the plaintiff in reconvention averred the following:

The excavator was supposed to be new. It disputes that the tender that was won by the defendant in reconvention was not the one that was initially advertised. The defendant in reconvention was paid the deposit for both the excavator and front end loader after a meeting was subsequently held. It disputes that the excavator that was delivered was in good working condition.

At the pre-trial conference, the parties agreed that the issues for trial were:

1(a) Whether or not the plaintiff should be compelled to deliver a brand new excavator; or, alternatively

1(b) Whether or not the defendant is entitled to a refund of the deposit paid.

2. Whether or not the plaintiff is entitled to payment of the outstanding amount.

To prove its case, the plaintiff led evidence from one witness, Darlington Chirara, who is its Managing Director since 2007.

His evidence was as follows:

In June 2011, he went to Chitungwiza Municipality head office chasing after his payment. At the Registry section notice board there was a tender notice asking for a refurbished 20 tonne Crawling Excavator and a 3 tonne Front End loader. Tender documents were going for US$5,000.

He went back the next day and bought the tender documents which included a tender form which was supposed to be filled in duplicate and attached to the quotation. He filled in the tender form for the excavator and attached it to his quotation and had them stamped by the defendant's registry section on 9 June 2011 on receipt.

The tender document, together with the tender form and the quotation, were produced as exhibit(s) 4 and 5…,.

The tender reference number for the supply of the excavator is CH.05/11.

Darlington Chirara said, that, on the tender form, he filled in the condition of the machinery as a 200g Model, a Hyundai Model which had already done 2,972 hours as it was a second hand. Its under-carriage life percentage was 76% meaning that 24% was already worn out or gone because of use.

He said that in exhibit 5, which is the quotation, he quoted a 20 tonne excavator valued at $182,000.

He said that, on 7 July 2011, he received a letter from the defendant saying that the plaintiff had won the tender to supply a refurbished 20 tonne excavator and a 3 tonne front-end loader.

The letter was produced by consent as exhibit 6 in the supplementary bundle.

The letter was written on 6 July 2011 to the directors of the plaintiff, by G. Tanyanyiwa, who was the then Town Clerk. It is on the defendant's letter head. It reads:

“REF: Supply of refurbished 20 tonne Crawling Excavator and 3 tonne Front Loader

Reference is made to the above.

You have been awarded the Tender to supply the Municipality with the above equipment.

You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks.

May you please treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of diseases.”

Darlington Chirara said, that, in August 2011 the plaintiff received a purchase order and a transfer copy of the RTGS from Metropolitan Bank dated 24 August 2011 showing that the defendant had paid the 50% deposit as per the plaintiff's request in the quotation.

The purchase order was produced as exhibit 7…,.

It is dated 18 July 2011, but it was signed on 1 August 2011. It is for the purchase of a tracked excavator 20 tonne for US$182,000.

The RTGS, exhibit 8…, shows that it is dated 24 August 2011 for US$91,000, for the benefit of the plaintiff by the defendant. However, on top of the date stamp it is crossed and written “not processed.”

Darlington Chirara said, that, to the plaintiff's surprise, the money never came through. It was only paid after the plaintiff had issued summons.

The defendant finished paying the deposit for both the excavator and the front loader in February 2014. $90,000 was paid for the excavator and $50,000 was paid for the front-end loader.

He then delivered a 20 tonne excavator on 19 June 2014.

On delivering the machinery, he saw the Director of Works, Mr Gwanzura, who called the now current Town Clerk, Mr George Mukunde, who in turn called seven (7) councillors who were there. They came and inspected it and then instructed the Chief Internal Auditor, Mr Chipunza, to accompany him to the workshop with the machine. At the workshop they saw Mr Musiwa and the Workshop Foreman who inspected the machine and tested it for almost two (2) hours. After that, they signed the delivery note, which was produced by consent as exhibit…,.

The delivery note shows, that, it was signed by one Innocent on behalf of the defendant and it states, that, the machinery was received in good working order.

Darlington Chirara said that the machinery had tips and a cigarette lighter. The fuel gauge and the wipers were working.

On the tender form, he had stated, that, the machinery which was going to be supplied was a 7 series model i.e. 210 LC-7.50. He said that the defendant knew from the onset about the type of machinery that was going to be supplied.

He said the defendant even had the Ministry of Local Government, Public Works and National Housing write a letter to ZIMRA indicating that it (the defendant) had been granted a duty free certificate to facilitate the delivery of a Robex 210 LC-7H Hyundai Excavator valued at US$182,000.

It was signed on 14 April 2014. The letter was produced by consent as exhibit 12…,.

Darlington Chirara said that after delivering the excavator, on 19 June 2014, he was then furnished with a report, dated 11 July 2014, from the defendant, listing the defects it said it found on the excavator.

He said that he was disputing all of them.

He said that he was not even aware of the qualifications of the person who did this report, but he suspected that this person was an interested party in the same business as the plaintiff, because, after issuing the report, he went on to issue a quotation to supply the same machinery to the defendant.

He said that when he delivered the excavator it was in good working order.

When the inspection was done and the report was compiled, three (3) weeks later, no one from the plaintiff's company was present. The plaintiff was not made aware of the inspection.

He said that there was need for him to train the defendant's employees on how to operate the machinery. He said that in his quotation he had indicated that he would provide Basic Operator Orientation under the heading “Handover”. He said that he has not yet trained them because he has not been paid the outstanding amount.

During cross examination, the witness said that he did not respond to the Tender Notice which was flighted in the Herald Newspaper, but the one on the notice board of the Registry section at the defendant's headquarters.

He said he did not have proof of such since it was on the notice board.

He admitted, that, the delivery note that was signed by Innocent, on behalf of the defendant, was prepared by the plaintiff.

He disputed that the excavator was not inspected on delivery as it was inspected by the defendant's employees and signed for by Innocent as to have been received in good working order.

He said that he would have done the commissioning of the excavator once the purchase price had been paid in full within seven (7) days from the date of delivery.

He was shown minutes of a meeting which was held on 17 September 2013 between the plaintiff's directors and the defendant's management. These minutes were later produced by the defendant as exhibit 20…,.

He admitted that he attended that meeting.

Although in those minutes it is stated, that, it was agreed that the plaintiff would supply and deliver brand new equipment, Darlington Chirara disputed this saying that these minutes were not a true record of what was agreed on.

He said that these minutes were prepared by the defendant.

He maintained, that, when he delivered the machinery, it had no defects and US$182,000.00 was its value.

He said that the minutes were not sent to him before they were confirmed.

Referring to exhibit 10…, which is a letter which he wrote to the defendant's Town Clerk, on 22 August 2011, he said that it was the defendant which was supposed to prepare the tender contract between the parties but it was never prepared.

He said that, instead, the defendant furnished the plaintiff with a purchase order.

During the defendant's case, Mary Mukonyora, who is its Acting Chamber Secretary testified as follows:

The Tender Notice by the defendant, inviting tenders to supply an excavator and a front end loader, was placed in the Herald Newspaper. The closing date which was set for the submission of tenders was 31 May 2011.

The Tender Notice was produced as exhibit 13…,.

It shows, that, the defendant advertised for the supply of a 30 tonne excavator and a 3 tonne front-end loader.

The witness said, that, on 23 June 2011, there was a procurement meeting that was held by the Procurement Committee, and, in that meeting, the Procurement Committee recommended the awarding of the tender for the supply of the excavator and front end loader to the plaintiff.

The minutes were produced as exhibit 14…,.

These minutes show, that, the plaintiff was accorded the tender to supply a 20-tonne Tracked Excavator for US$182,000 and a 3-tonne Front End Loader for US$105,000. However, it was specified that the machinery was supposed to be new.

The minutes also show, that, the Town Clerk, Mr. G Tanyanyiwa, was in attendance of the meeting.

The witness said, that, these recommendations were being made to the full Council which later held its meeting on 21 July 2011.

The minutes of the full Council meeting were also produced by consent as exhibit 15…,.

They show that G Tanyanyiwa, the Town Clerk, was in attendance again.

The full Council adopted the recommendations of the Procurement Board on the award of tenders for the supply of the machinery.

Mary Mukonyora said, that, when the plaintiff then delivered a second hand excavator, the new Town Clerk, Mr. G. Makunde, wrote to the plaintiff, on 11 July 2014, raising the issue.

The letter was produced as exhibit 16…,.

In that letter, Mr Makunde stated, that, the defendant noted with great disappointment that the excavator was second-hand.

The witness said, that, according to an expert the defendant engaged, the machinery was not in good working condition.

The report that was compiled by the expert was produced as exhibit 19…,.

It enumerates about 19 defects and states that key accessories were missing. It states that the machine is an old machine that was repaired and resprayed.

The witness disputed that the Tender Notice was ever flighted on the Registry notice board for the supply of a refurbished excavator.

She said, that, from the time the excavator was delivered, it has never been used by the defendant. It is at the defendant's workshop.

The witness also made reference to the minutes of a meeting which was held on 17 September 2013 involving the directors of the plaintiff and the defendant's management.

These minutes were produced as exhibit 20…,.

They show, that, the meeting was held following the issuance of summons by the plaintiff for breach of contract; in that the defendant had not paid the deposit for the supply of the machinery by the plaintiff despite the plaintiff having won the tender in 2011. The plaintiff was suing for damages for breach of contract or for the payment for the equipment since the machinery was already there.

The minutes show, that, the parties agreed that the defendant would pay for the machinery and the plaintiff was to supply brand new equipment after payment of 50% deposit of the total value.

During cross-examination, the witness said that she got employed by the defendant on 1 October 2012 as Head of Human Resources, and, in 2015, she assumed the position of Acting Chamber Secretary.

She admitted, that, the letter notifying the plaintiff of having won the tender to supply a 20 tonne refurbished excavator and a 3 tonne front end loader, which was written by G. Tanyanyiwa, the then Town Clerk, on 6 July 2011 (exhibit 6) and the minutes of the Procurement Board recommending that the plaintiff supplies a 20 tonne excavator and 3 tonne front end loader were consistent.

She said that she, however, doubted the authenticity of the letter of G. Tanyanyiwa. She said that she doubted if it was genuine.

She, however, admitted, that, other than this document which was written by G. Tanyanyiwa, there is no any other document from the defendant which notified the plaintiff of having won the tender.

She also said, that, she sent the minutes of 17 September 2013 to the plaintiff for authentication, but, admitted that she had no evidence to prove that she had indeed sent the minutes for confirmation.

She said that Innocent, who received the excavator on behalf of the defendant and signed the delivery note, is not an expert in such machinery, but is just a clerk who works at the Stores department.

She said that the machine had not even been commissioned, yet, its standard practice to have equipment demonstrated to be in good working order.

She said that all the defendant's Tender Notices are done through the newspapers.

She, however, explained, that, if all tenderers say they can supply a 20 tonne excavator instead of a 30 tonne excavator which would have been advertised for, the defendant can make adjustments and accept the supply of a 20-tonne.

She said that the excavator was received by the defendant on 19 June 2014. It was inspected by the expert on 30 June 2014. The letter of complaint to the plaintiff, about the defects on the excavator, was written on 11 July 2014.

She said that the tender number on the Tender Notice which was flighted by the defendant is 5/11, yet, on the tender documents that the plaintiff submitted quoted the tender number as CH/05/11. She said that showed that the plaintiff was responding to a different Tender Notice than the one advertised in the Herald Newspaper with a deadline for submissions of 31 May 2011.

George Makunde, the current Town Clerk of the defendant, testified as follows:

He said that he joined the defendant in August 2012 and got to know about this case through a perusal of the defendant's documents.

He outlined the procedure that is followed by the defendant in procuring equipment.

He said that a Tender Notice is flighted in a national newspaper guided by section 30 and 31 of the Procurement Act [Chapter 22:14] inviting the submission of tenders. The Procurement Committee/Board then deliberates on the submitted tenders and makes recommendations in terms of the award of the tender to the winner of that particular tender. The recommendation is made to a formally constituted full Council of the defendant in the form of a report. Full council then makes a resolution on the issue which resolution then allows or authorises the Town Clerk, as the Chief Executive Officer or Accounting Officer, to then notify the winning tenderer for the provision of the goods or service so required.

The witness alluded to the Tender Notice that was flighted by the defendant; the minutes of the Procurement Committee of 23 June 2011; and the minutes of the full Council meeting of 21 July 2011 that Mary Mukonyora referred to in her evidence.

His evidence on all these documents was similar to that of Mary Mukonyora in all material respects.

He also reiterated that the tender required that the plaintiff supplied a brand new 20 tonne excavator and a 3 tonne front-end loader.

He disputed that the excavator that was delivered was in good working order saying that although he saw the excavator on the day it was delivered, he did not inspect it to satisfy himself that it was in good working order as he lacked the expertise in testing the machinery.

He said that inspection of machinery is contained in the regulations that guide procurement and it is a process and not an event.

He also said that Innocent, the clerk who received the machinery, has no qualifications to test its condition.

He said that the excavator was not able to perform its obligations and was never used by the defendant.

The witness said that he suspected that the letter that was written by the then Town Clerk, G. Tanyanyiwa, on 6 July 2011, notifying the plaintiff that it had won the tender to supply a refurbished excavator and front-end loader was as a result of a collusion between Mr. Tanyanyiwa and the plaintiff because it was written before the full Council of the defendant had made a resolution on 21 July 2011 to award the tender as per recommendations by the Procurement Committee which had set on 23 June 2011.

The witness evidence with regards to the minutes of 17 September 2013 (exhibit 20) was similar to the evidence that was given by Mary Mukonyora. He also testified, that, in that meeting, it was agreed that the plaintiff would supply a brand new excavator and a brand new front end loader, but, the plaintiff did not deliver brand new machinery.

During cross examination, the witness explained, that, receiving machinery on its delivery and commissioning of the machinery are two different things.

He also explained that the delivery note that was signed by Innocent, the defendant's employee, is a document which was prepared by the plaintiff and it already had the words “received in good working order” printed on it and all that Innocent did was to affix his signature after those words.

It is not Innocent who wrote those words.

He said that, initially, it was the transport personnel who observed that the excavator was second hand and this prompted the defendant to invite an expert, Nicnel, to come and inspect it.

Before that, Automobile Association of Zimbabwe (AAZ) had been called to come and check if the equipment was new.

He explained that the defendant never invited the plaintiff to be in attendance because, in business ethics, you would not want to give the impression that you are dealing with a dubious institution. He said that the defendant wanted to satisfy itself about the excavator hence it called in the Automobile Association of Zimbabwe (AAZ) to inspect it.

The witness said that the plaintiff gave them the price of US$182,000 for an old excavator yet Nicnel gave the defendant a quotation for a new excavator from Hyundai going for US$159,275 on 30 June 2014. He said that although the models are different the disparity in prices showed that the plaintiff was not dealing with the defendant in good faith.

Ryan Edward Berry testified as follows:

He is and has been employed by Nicnel Plant and Equipment (Private) Limited as the Technical Sales Manager for four (4) years now.

He was called by the defendant to inspect the excavator which is in issue.

He noticed that it was a second-hand, having done over 6,000 hours yet the meter read that it had only done 6 hours. The bucket had no tips similar to a car delivered with no tyres. The engine pipes were damaged from the breather which would allow dust to enter if the engine was to run for an extended period. The machine could start and run, but it could not perform its functions properly because it did not have tips and the engine was in a poor state of repair.

He said that the excavator is an LC-7 model, which is an old model which was manufactured until 2012, but a 9 model was manufactured from 2012 onwards.

About his qualifications, he said that he has “O” Level with technical experience from being on the job for about eight (8) years in the industry.

He said that because of this, he took a technician with him to inspect the machine.

He said that as the Sales and Technical Manager, he oversees his technicians using their expertise.

He said that Wency is the technician who inspected the machine as he (witness) filled out the report. However, he admitted that his name does not appear on the report. He said that Wency refused to come to court as he had been phoned, harassed, and intimidated.

He admitted to supplying his own quotation for an excavator to the defendant - on the same day of 30 June 2014 the excavator supplied by the plaintiff was inspected.

Analysis of Evidence

It is necessary to first determine whether or not the parties entered into a contract for the supply and delivery of brand new or refurbished machinery.

Having listened to the evidence given by the witnesses of both parties, it is clear that there is a dispute as to which Tender Notice the plaintiff responded to when it submitted its tender documents and quotation to the defendant's registry section on 9 June 2011.

This is because although the defendant's witnesses said that the response was to the Tender Notice it flighted in the Herald Newspaper with a deadline for submissions of the tenders of 31 May 2011, the defendant's date stamp on the plaintiff's tender documents show that they were received by the defendant's registry section on 9 June 2011 and the Tender Notice reference number that is quoted which is CH/05/11 is different from the Tender Notice reference number which is on the Tender Notice that was flighted in the Herald Newspaper by the defendant.

Whilst the plaintiff's witness said that the plaintiff was responding to a revised Tender Notice that was flighted on the defendant's registry notice board, he did not furnish the proof thereof saying, that, since the tender notice was on the notice board he could not get a copy thereof as other people also needed to see the notice.

However, despite this explanation by the plaintiff, I am convinced by the evidence which was given by the defendant's witnesses, that, the defendant flights tender notices in the national newspapers and not on notice boards.

They made reference to the provisions of the Procurement Act [Chapter 22:14] which Act makes provision for the procurement of goods, construction work, and services by the State and statutory bodies.

Section 30(1)(a) of the Procurement Act states, that, the procurement of goods, construction work, and services by a procuring entity shall be done by means of tendering proceedings in accordance with section 31.

Section 31(1)(a)(ii) of the Procurement Act [Chapter 22:14] then reads:

“Subject to this Act, in any tendering proceedings conducted by a procuring entity, the invitation to suppliers to tender shall be published in a newspaper circulating in the area in which the procuring entity has jurisdiction or carries on business, where the procuring entity is not the State.”…,.

The use of the word 'shall' in section 31 of the Procurement Act means that it is peremptory for the Tender Notice to be flighted in a national newspaper.

I also looked at section 211(1) and (2) of the Urban Councils Act [Chapter 29:15] which deals with tender proceedings by municipals. It reads;

“211 Tenders

(1) In this section —

'municipal procurement board' means a municipal procurement board appointed by a municipal council in terms of section two hundred and ten.

(2) Subject to subsections (8) and (9), before entering into a contract for the execution of any work for the council or the supply of any goods or materials to the council which involves payment by the council of an amount exceeding such sum or sums as may be prescribed, the council, or, in the case of a municipal council, the municipal procurement board shall call for tenders, by notice posted at the office of the council and advertised in two issues of a newspaper…,.”…,.

Whilst in terms of the Urban Councils Act a tender notice shall be posted at the office of the municipal council, it should also be advertised in a newspaper.

The defendant must therefore flight tender notices in accordance with the provisions of the Procurement Act and the Urban Councils Act.

If the defendant only flighted a tender notice on its notice board and did not do so in the newspaper it did not comply with the law.

However, if this is what happened, the plaintiff ought to have produced proof of the advertisement of such tender notice.

In the absence of such proof, I am led to conclude, that, the plaintiff's director was not being honest with the court about having seen such a tender notice on the notice-board of the defendant on 8 June 2011. Such advertisement would not have been in compliance with section 31 of the Procurement Act and section 211(2) of the Urban Councils Act.

Besides, the defendant has no such tender notice in its files or records.

He who alleges must prove and the plaintiff failed to prove the existence of Tender Notice CH.05/11.

The only tender documents that were produced are those that came from the plaintiff which were said to be its copies.

The defendant's witnesses had no knowledge that the Tender Notice 05/11, which had a deadline of 31 May 2011, was ever revised and extended. There is nothing that shows that in the defendant's records.

With this, I am not satisfied that Tender Notice 05/11, which was flighted by the defendant in the Herald Newspaper, was ever revised and extended.

In any case, it defies logic that the defendant, a municipality, would invite tenders for the supply of second hand machinery. I cannot think of a reason why it would do that.

What is disturbing about this case is that, on 23 June 2011, when the defendant's Procurement Committee/Board set and recommended, in its report to full Council, that the tender for the supply of a brand new excavator and front end-loader be awarded to the plaintiff, Mr G. Tanyanyiwa, the then Town Clerk, was in attendance.

In terms of procedure, the recommendation was subject to adoption as a resolution by a full Council meeting. Such a meeting was only held on 21 July 2011.

The Town Clerk, Mr. G. Tanyanyiwa, even attended that meeting as well.

At that meeting, full Council passed a resolution that the plaintiff be awarded the tender to supply a brand new excavator and front end loader.

What is buffling is that, on 6 July 2011, well before full Council had sat, Mr. G. Tanyanyiwa wrote to the plaintiff notifying it that it had won the tender to supply a refurbished excavator and frond-end loader.

Two questions arise:

(i) Firstly, why did he notify the plaintiff that it had won the tender before full Council had held a meeting to pass the recommendation as a resolution?

(ii) Secondly, why did he tell the plaintiff that it had won the tender to supply refurbished machinery?

These queries or questions show that the then Town Clerk was not conducting himself properly in the discharge of his duties.

This is worsened by the fact, that, he was in attendance at the full Council meeting which was later held on 21 July 2011 which adopted the recommendations of the Procurement Committee/Board which stated that the plaintiff was to supply brand new equipment.

When the adoption of the recommendation was made, he knew that he had already notified the plaintiff that it had won the tender to supply refurbished equipment - but he did not inform the Council.

Obviously, that is a sign that he knew that what he had done was improper.

This is further evidenced by the fact, that, after full Council had passed the resolution to award the tender to the plaintiff, he did not write a letter notifying the plaintiff about it as he was supposed to do as per procedure.

The critical question now is: is the defendant bound by the irregular conduct of its employee, the Town Clerk, who told the plaintiff that it had won the tender to supply refurbished machinery when in fact it wanted to be supplied with brand new machinery?

The plaintiff's counsel submitted, that, by virtue of the turquand rule, the defendant is bound.

I must point out from the onset, that, the turquand rule is a principle of company law.

In terms of the turquand rule, if a party transacts with a company only to later discover that the director lacked the authority to bind the company, the company may be forced to honour the transaction if the transaction was completed in good faith by the other party.

The rule is based on the English case of Royal British Bank v Turquand 1856 119 ER 886, wherein it was held, that, people transacting with a company are entitled to assume that internal company rules have been complied with even if they are not. The exceptions to this rule are:

(i) Firstly, if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (in other words, he acted in bad faith).

(ii) Secondly, if the circumstances under which the contract was concluded on behalf of the company were suspicious.

Counsel for the plaintiff went on to cite the case of Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA…,. The case involved a municipality. The turquand rule was held to be applicable to municipalities.

In that case, the Town Clerk, just like in this case, had written a letter to the respondent cancelling the lease agreement between the municipality and the respondent when the municipality had not authorised the cancellation of the lease agreement. The municipality was now demanding money for rent from the respondent and a dispute arose as the respondent refused to pay saying that the lease agreement had been cancelled. The court held that:

“A municipality, in the normal exercise of its functions, necessarily concludes contracts with members of the public. It would be unbusiness-like if the respondent had been duly bound, when he received the Town Clerk's letter, to make enquiries to ensure that the Town Clerk was in fact authorised by the Town Council to convey the cancellation.”

Applying the law to the present case, counsel for the plaintiff submitted, that, the internal workings of Council are not known to the plaintiff, and, as such, there is a presumption of regularity in the adherence to Council procedures which makes it impossible for the defendant to escape liability on the basis that Mr. Tanyanyiwa had not been authorised by the defendant to write the letter that he wrote on 6 July 2011.

To begin with, with all due respect, I am not in agreement with the reasoning in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA that the turquand rule is applicable to municipalities.

I see no basis for saying that.

Municipalities and companies are different entities.

In terms of section 131 of the Urban Councils Act [Chapter 29:15], a Town Clerk is an employee of the defendant (municipality) and his duties are outlined in section 136. These involve the administration of council, managing operations and property of council, supervise the activities of council employees, and any other duties that may be assigned to him by the Council.

The Urban Councils Act does not give the Town Clerk powers to take over the functions of Council when it comes to procurement issues and make binding decisions on its behalf.

The Urban Councils Act has provisions which deal with how goods and services are procured and those provisions are worded in peremptory terms as they use the words 'shall' and 'shall not'.

In terms of section 210(1) of the Urban Councils Act, every municipal council shall appoint a Procurement Board which is responsible for arranging tenders and for making recommendations to Council in regard to the acceptance of tenders and the procurement of goods, materials, and services.

In terms of section 210(4) of the Urban Councils Act:

“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”…,.

I do not believe that a Town Clerk's actions have the power to override the wording of the provisions that is peremptory.

Therefore, the letter of Mr. G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force and consequence. It does not bind the defendant.

So the contract that was purportedly entered into by and between the plaintiff and the defendant pursuant to the letter which was written by G. Tanyanyiwa is a nullity.

Assuming that the turquand rule is applicable to municipalities, as was held in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA, it would not be proper to hold the municipality bound by the actions of a Town Clerk because a Town Clerk is not a functionary of the municipality but an employee.

A councillor, instead, would bind the municipality because a council is run by councillors, not by its employees.

I would equate a councillor to a director of a company.

In terms of the turquand rule, an employee of a company does not bind the company if he purports to act on behalf of the company.

So, in the present case, even assuming that the Tender Notice was properly advertised, the letter that was written by the then Town Clerk, Mr. G. Tanyanyiwa, would not bind the defendant because he had no authority to enter into contracts on behalf of the defendant as he was not a councillor, but just an employee.

In any case, even if the turquand rule was applicable, and even if the defendant, as a municipality, was bound by the actions of its Town Clerk, looking at the circumstances of this case, I would make a finding that the parties did not enter into a valid contract.

I say this because this is a contract which is supposed to be based on a tender notice which should have been properly advertised in terms of the Procurement Act and the Urban Councils Act.

Section 211(2) of the Urban Councils Act states, that, before entering into a contract for the execution of any work for the Council or the supply of any goods or materials to the Council, the Council shall call for tenders, by notice posted at the office of the Council and advertised in two issues of a newspaper.

The plaintiff was not able to produce the revised tender notice CH.05/11 which it said it responded to.

Since the defendant was disputing its existence, the plaintiff ought to have produced it to show that the contract which was entered into was entered into in compliance with the law.

The only tender notice that was produced is the one referenced 05/11, with a closing date for the submission of tenders of 31 May 2011, which the defendant is saying it is the only one it flighted in the Herald Newspaper.

The plaintiff's tender documents were submitted to the defendant's registry section on 9 June 2011 according to the date stamp on them. They were submitted way out of time - after the deadline of 31 May 2011.

To make matters worse, they only bear the date-stamp, but bear no name of the registry person who received them.

Mary Mukonyora even queried their authenticity on this basis alone.

I also query their authenticity.

It is my conclusion, that, these tender documents were submitted on the basis of a non-existent tender notice.

On this basis, alone, any contract that flowed from it is a nullity as it has no leg to stand on.

Clearly, the circumstances under which the contract was concluded are suspicious. This is even worsened by the fact, that, G. Tanyanyiwa, as the Town Clerk, mero motu wrote a letter to the plaintiff well before full Council had passed the resolution that the tender be awarded to the plaintiff.

To make matters worse, contrary to the recommendations of the Procurement Board, he said that the plaintiff had won a tender to supply refurbished machinery.

What this shows is that both Darlington Chirara, the director of the plaintiff, and G. Tanyanyiwa, the Town Clerk, were probably acting in connivance and were probably involved in underhand dealings because their actions are highly suspicious.

In light of the foregoing, I thus make a finding, that, there was never a contract between the plaintiff and the defendant.

Having concluded that there was never a contract between the parties, I will therefore not go on to deal with the issues of novation of the contract.

The defendant's second witness, Mr George Makunde, had said in his evidence, that, if it is held that the defendant is bound by the letter which was written by the then Town Clerk, Mr. G. Tanyanyiwa, then, that contract was novated by what the parties agreed upon in the meeting of 17 September 2013 (exhibit 20) that the plaintiff was to supply a brand new excavator and front end loader.

Novation is the substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement.

Since no contract was entered into in the first place, there is no novation to talk about.

Disposition

Since there was never a contract between the parties, the plaintiff is not entitled to payment of the remaining balance of US$119,300 that it is claiming. The plaintiff is entitled to collect its machinery from the defendant.

In respect of the counter-claim, the plaintiff in reconvention (the municipality) is entitled to a refund of US$140,000 being the money it paid as deposit of the purchase price.

Since there was no contract between the parties, I cannot order the defendant in reconvention (Upset Investments (Private) Limited) to deliver a brand new excavator and a brand new front end-loader. Consequently, the plaintiff in reconvention cannot be entitled to any damages for breach of contract or any storage charges.

In any case, the plaintiff in reconvention did not lead any evidence to prove its claim for US$20 per day for storage charges.

On costs of suit, the defendant prayed that the plaintiff's claim be dismissed with costs on a higher scale, but I see no justification for the award of such costs.

In the result, I order as follows:

1. The plaintiff's claim is dismissed.

2. The plaintiff pays to the defendant US$140,000 being the refund of the deposit paid by the defendant towards the purchase of the Excavator and Front End Loader.

3. The plaintiff pays to the defendant costs of suit.

SC138-21 : DIVVYLAND INVESTMENTS (PRIVATE) LIMITED vs DAVID CHIWEZA
Ruled By: PATEL JA, GUVAVA JA and BHUNU JA

It is a fundamental principle of every contract that both parties will duly carry out their respective obligations: see Blumo Trading (Private) Limited v Nelmah Mining Company (Private) and Another HH39-11. In the event that a party fails to carry out its obligation this will amount to a breach of ...

SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL
Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

Standard Chartered Bank Zimbabwe (“the appellant”) or (“the Bank”) is a commercial bank registered and operating in Zimbabwe.

The respondent is a company duly incorporated in terms of the laws of Zimbabwe and was carrying on business in Redcliff, Zimbabwe. It is a foreign investor whose specific purpose was the refurbishment of the blast furnaces of a Zimbabwean steel manufacturing company popularly known as Ziscosteel.

In October 2007, the respondent held two accounts with the Kwekwe branch of the appellant. As at 9 October 2007, there was, in the two accounts, an aggregate credit balance of US$47,739=86.

In terms of a directive issued by the Reserve Bank of Zimbabwe (sometimes referred to herein as “the RBZ”) sometime in October 2007, the appellant transferred, to the RBZ, the total credit balance of US$47,739=86 from the two accounts.

The directive does not form part of the record, but, it is common cause that it was purportedly issued in terms of section 35(1) of the Exchange Control Regulations 1996, SI109 of 1996 (“the Regulations”).

When the respondent demanded payment to it of the monies deposited in the accounts, the Bank refused to repay. It claimed that the intervention of the Reserve Bank of Zimbabwe (RBZ) had rendered it impossible for it to comply with its contractual obligation to make payment to the respondent.

The respondent applied to the High Court for an order compelling payment.

It alleged, that, the monies were wrongfully and unlawfully debited from its account without its consent and approval. It claimed, that, in terms of the law of banking, the Bank was contractually bound to repay the credit balances on demand.

The Bank contended, in its defence, that, upon receiving the directive by the Reserve Bank of Zimbabwe (RBZ), the funds held in the respondent's accounts ceased to be the property of the Bank and became that of the RBZ. It was contended further, that, the intervention of the Reserve Bank of Zimbabwe (RBZ) constituted an Act of State, and, therefore, a supervening impossibility which discharged the appellant from its obligations to the respondent.

The learned Judge granted the application. It is against his judgment that the Bank now appeals.

The main issue which falls for determination in this appeal is whether the Bank is liable to pay to the respondent the aggregate amount of US$47,739=86 transferred by it to the Reserve Bank of Zimbabwe.

THE LAW

The general rule relating to deposits made in a Bank account by a customer is that the money becomes the property of the Bank which can use such deposit as it pleases so long as it pays to the depositor, on demand, the equivalent of the amount deposited in the account.

In Standard Bank of South Africa v Echo Petroleum CC, Case No.192/11 (2012) ZASCA 18 (22 March 2012)…, it was said:

“The general rule is that, moneys deposited into a bank account fall into the ownership of the bank. The resulting credit belongs to the customer, the bank having a contractual obligation to pay the customer, on demand, and to honour cheques validly drawn on the account to the extent that it stands in credit.”

See also ABC Bank v Mackie Diamonds SC23-13; Foley v Hill (1848) 2 H.L. Cas 28.

The legal relationship between a Bank and its customer, whose account is in credit with it, is that of debtor and creditor.

Although the customer 'deposits' money to the credit of his account with the bank, the transaction is not one of depositum, but of loan: see Burg Trailers SA (Pty) Ltd v ABSA Bank Ltd 2004 (1) SA…,.; Ormerod v Deputy Sheriff, Durban 1965 (4) SA 670 (D)…,.; Absa Bank Ltd v Intensive Air (Pty) Ltd & Ors 2011 (2) SA 275.

If this legal position is followed to its logical conclusion, then, the deposits were the property of the Bank and what the Bank paid to the Reserve Bank of Zimbabwe (RBZ) was its own money.

That the Bank parted with the deposits in the account was of no import to the respondent whose right to be paid the equivalent of the deposits, on demand, remained unaffected by the Bank's dealings therewith.

The transfer to the Reserve Bank of Zimbabwe (RBZ), in terms of its directive, did not, therefore, extinguish the Bank's contractual obligation to make payment to the respondent.

THE DEFENCE

The Bank contends, that, it is discharged from its contractual obligations to the respondent by reason of a supervening impossibility otherwise known as a vis maior or casus fortuitus, namely, the Reserve Bank of Zimbabwe (RBZ) directive.

In support of its stance, it relies on the judgments in Peters, Flamman & Co v Kokstad Municipality 1919 AD 427 and Bob's Shoe Centre v Henneways Freight Services (Pty) Ltd 1995 (2) SA 421 (A).

The brief facts of Peters, Flamman & Co v Kokstad Municipality 1919 AD 427, as summarised in The Law of Contract in South Africa 3ed by RH CHRISTIE…, are that the appellant firm was contracted to light the streets of Kokstad for a period of years. During the currency of the contract, in wartime, the partners were interned as enemy aliens and their business wound up under the relevant war legislation. The Municipality's claim for damages for breach of contract and forfeiture of the firm's plant under a clause of the contract was rejected by the Appellate Division. At pp434-5 of the judgment of the court, SOLOMON ACJ remarked as follows:

“…,. Nor is it necessary to consider generally what are the circumstances in which it can be said that a contract has become impossible of performance. For the authorities are clear, that, if a person is prevented from performing his contract by vis maior or casus fortuitus, under which would be included such an Act of State as we are concerned with in this appeal, he is discharged from liability.”

In Bob's Shoe Centre v Henneways Freight Services (Pty) Ltd 1995 (2) SA 421 (A) the appellants were contracted to clear and deliver a consignment of shoes to the respondents factory in the city. A fire consumed the warehouse where the shoes were warehoused. The shoes were destroyed and it became impossible to complete performance of the contract.

Clearly, the facts of both these cases are distinguishable from those in casu.

The appellant herein has not shown, that, for some reason beyond its control, it cannot, from its resources, repay the debt. It has not proved impossibility.

It goes without saying, that, in order for its defence to succeed, the appellant must do more than merely allege impossibility. The impossibility must be proved, that is, it must be clear from the evidence that performance is impossible, not merely undesirable or uneconomical: see The Law of Contract in South Africa 3ed by R H CHRISTIE…,.

In any event, it would appear, that, where a Ministerial directive is given without statutory authority, obedience thereto will not qualify as a vis major or casus fortuitus.

The appellant has submitted, that, it was obliged to follow the Reserve Bank of Zimbabwe's directive and cites section 40 of the Exchange Control Regulations 1996, S.I.109 of 1996 (the Regulations).

It alleges, that, it did not oppose the directive because of its fear of the Reserve Bank of Zimbabwe (RBZ), which, in terms of section 37 of the Exchange Control Regulations 1996, SI109/1996, has the power to revoke its licence.

As the respondent submitted, the directive was issued without statutory authority. It was ultra vires the provisions of section 35 of the Exchange Control Regulations 1996, S.I.109/1996 (the Regulations) which grants no authority to the Reserve Bank of Zimbabwe (RBZ) to confiscate deposits in the accounts of customers of the Bank.

The correctness of this submission emerges quite clearly from a reading of the section which provides as follows:

“35. Authorised dealers and other persons to comply with directions

(1) Authorised dealers shall comply with such directions as may be given to them by an exchange control authority relating to -

(a) The exercise of any functions conferred on them by or under these regulations;

(b) The terms on which they are to exchange foreign currency for Zimbabwean currency;

(c) The offer of foreign currency in their possession for sale to the Reserve Bank.

(2) Persons concerned with —

(a) The keeping of any register in Zimbabwe; or

(b) The payment of capital moneys, dividends, or interest in Zimbabwe;
shall comply with such directions as may be given to them by an exchange control authority in relation to any function conferred or imposed on them by or under these regulations.”

Not only was the directive in violation of section 35 of the Regulations, but, the Bank had the option, if so minded, of resorting to the provisions of section 37 of the Regulations which provide for adequate opportunity to be given to the dealer concerned to make representations before any punitive measures were taken, as well as to the safeguards provided in section 40.

Both statutory provisions are set out below.

“37. Penalties for failure by authorised dealers to comply with regulations or directions

(1) Subject to this section, if an exchange control authority is satisfied that an authorised dealer has –

(a) Contravened any provision of these regulations; or

(b) Failed to comply with any order or direction with which it is its duty to comply;

The exchange control authority may direct the authorised dealer to cease all dealings in foreign currency, or such dealings as the exchange control authority may specify, for such period not exceeding twelve months as the exchange control authority may specify in the direction.

(2) Before giving a direction in terms of subsection (1), the exchange control authority shall give the authorized dealer concerned an adequate opportunity to make representations in the matter.”

“40. Orders

(1) Subject to subsection (3), the Reserve Bank may make orders for all or any of the following purposes —

(a) To protect or improve the value of Zimbabwean currency;

(b) To bring about and preserve stability in the currency market in Zimbabwe;

(c) To prescribe any matter, which, in terms of these regulations, is required or permitted to be prescribed or which, in the Reserve Bank's opinion, is necessary or convenient to be prescribed in order to give effect to these regulations.

(1) Orders made under subsection (1) may provide for —

(a) The manner in which authorized dealers shall conduct their business for the purposes of these regulations;

(3) Orders made under subs (1) shall not have effect until they have been approved by the Minister and published in the Gazette.”

At the hearing of the appeal, counsel for the appellant conceded, that, the Reserve Bank of Zimbabwe (RBZ) directive was ultra vires of the provisions of section 35(1) of the Exchange Control Regulations 1996, SI109/96 (the Regulations).

Paragraph (c), it will be seen, deals with the offer of foreign currency in their possession for sale to the Reserve Bank of Zimbabwe (RBZ).

He submitted, however, that, the defence of supervening impossibility was available to the Bank even where the directive was unlawful.

I disagree.

In The Law of Contract in South Africa 3ed by R H CHRISTIE…, the following observation is made by the author:

“The limits of vis maior and casus fortuitous have not been authoritatively defined for the purposes of this branch of the law, but, it is clear, from Peters, Flamman, where the internment and winding-up were carried out under statutory authority, that, any similar act of state would qualify.

Legislation subsequent to the making of the contract, making performance illegal either absolutely or without a specified consent which has been refused, will also qualify, as will refusal of a statutory consent, but not obedience to a ministerial directive given without statutory authority.

For the purposes of this branch of the law, there is no necessity to distinguish between vis maior and casus fortuitus, which, between them, include any happening, whether due to natural causes or human agency, that is unforeseeable with reasonable foresight and unavoidable with reasonable care.”…,.

And on page 528:

“Self-created impossibility, that is, impossibility resulting from the act of one of the parties, does not discharge the contract but leaves the party whose act created the impossibility liable for the consequences. This will be so whether the impossibility is complete or partial, and whether or not the act that causes the impossibility is wrongful.”

I respectfully associate myself with those views.

The acts complained of by the Bank do not qualify as vis maior or casus fortuitus and do not absolve the Bank from compliance with its contractual obligation to the respondent.

CONCLUSION

As has been shown above, the credit balance in the respondent's account is a debt that the appellant owes to the respondent.

The appellant has placed no evidence before the court which would establish that it has become impossible for it to make payment of its debt.

Its contention is that, having made payment to the Reserve Bank of Zimbabwe (RBZ) in terms of its directive, it no longer has the respondent's money in its possession and is consequently discharged from its obligation to make payment, upon demand, by the respondent.

The contentions by the appellant run contrary to the established principles of Banking Law, namely, that, the deposits became the Bank's property.

It seems that what the appellant's defence boils down to is that it ought not to be expected to pay in these circumstances.

But, as has been demonstrated above, the dealings by the appellant with the deposits in the accounts, namely, the payments to the Reserve Bank of Zimbabwe, were made at its own risk and did not affect its obligation in law to pay its debt to the respondent on demand.

The appeal is accordingly dismissed with costs.

HH79-12 : MARIANE SABETA vs COMMISSIONER GENERAL ZIMBABWE REVENUE AUTHORITY
Ruled By: MATHONSI J

This is an application for an order compelling the respondent to assess capital gains tax payable in respect of the sale of Stand 965 Mabelreign Township, Harare and to receive such tax from the Deputy Sheriff for Harare on the pain of costs of the application.

The said property is currently registered in the name of a company known as Ellseck Investments (Private) Ltd.

The genesis of the matter is that the applicant concluded a sale agreement with Ellseck Investments (Pvt) Ltd for the purchase of Stand 965 Mabelreign Township for US$48,000 on 14 January 2010. She says she paid the full purchase price to the seller through mortgage finance from ZB Building Society.

Conveyancers, Danziger & Partners, were instructed to attend to the transfer of the property into the applicant's name.

The applicant states, that, before purchasing the property aforesaid, she had diligently conducted a Deeds Office search and satisfied herself that indeed the property was registered in the name of the seller and was not encumbered in any way.

It turns out that the seller did not co-operate in the process of transfer of the property to the applicant resulting in the applicant approaching this court, in case No. HC6737/10, for an order compelling the seller to perform its obligations in terms of the agreement of the parties and the law.

On 8 December 2010, this court, per MAVANGIRA J, issued an order against Ellseck Investments (Pvt) Ltd in favour of the applicant which reads as follows:

“IT IS HEREBY ORDERED THAT:

1. The Respondent shall, within ten (10) days of service of this court order upon it, provide Messrs Danziger & Partners Legal Practitioners with all the information and documents necessary for the registration of transfer of Stand 965 Mabelreign Township, Harare into the name of the applicant.

2. The Respondent shall, also within ten (10) days of service of this court order upon it, appoint a representative and execute all the necessary legal documents authorizing such representative to do everything necessary for the purpose of effecting transfer of Stand 965 Mabelreign Township, Harare into the name of the applicant including complying with all the administrative requirements of the registration of the transfer.

3. In the event of the Respondent failing to comply with paragraphs 1 and 2 above, the Deputy Sheriff for Harare shall be authorized to carry out all the acts required of the respondent to enable transfer of Stand 965 Mabelreign Township, Harare to be registered into the name of the applicant.

4. The Respondent shall bear the costs of this application on the legal practitioner and client scale.”

One of the acts required to enable transfer of the property to the applicant is payment of capital gains tax, assessed by the respondent in this case in terms of the Capital Gains Tax Act [Chapter 23:01].

It would appear that Ellseck Investments (Pvt) Ltd did not comply with the court order issued by MAVANGIRA J. forcing the applicant to fall back on the alternative term of the order, that of the Deputy Sheriff performing the acts necessary to give transfer to the applicant.

When the Deputy Sheriff approached the respondent's office for assessment and payment of Capital Gains Tax, he did not get any joy. The respondent refused to perform his statutory duties according to the Deputy Sheriff's return of 20 April 2011;

“Attempted to obtain assessment of capital gains tax in the presents (sic) of instructing attorney; Mrs Dzangare, advised that they could not comply with the requirements since there were outstanding payments.”

In a letter written to the conveyancer, on 21 March 2011, on behalf of the respondent, his position on the matter was set out thus:

“We wish to draw your attention to the fact that the initial transfer of the above mentioned Stand, from Clyde Chitsinde to Ellseck Investments Private Limited, was done fraudulently as no capital gains tax was paid as is required by the law.

The Zimbabwe Revenue Authority is therefore not in a position to accept payment of capital gains tax from Ellseck Investments Private Limited or to issue a capital gains clearance certificate in respect of the transfer from Chivhu Property Limited to your client as the initial transfer was tainted with illegability.

Thus, the original seller of the property, that is, Clyde Chitsinde, should first come and pay capital gains tax in respect of the sale of the property to Ellseck Investments Private Limited before capital gains tax in respect of the sale in question.”

It was not explained why the sins of the previous seller should be visited upon the doorsteps of the current seller, or, indeed, the applicant, who, for all intents and purposes, is the only interested party to the whole exercise.

Neither was it explained what prejudice would be suffered by the collector of taxes if capital gains tax was assessed and paid by or on behalf of Ellseck (Pvt) Ltd, which tax is now due, the property having been sold to the applicant.

In his opposing affidavit, the respondent also made reference to the fact, that, his investigations have revealed that the applicant purchased the same property from Clyde Chitsinde and he wondered why she had to buy the same property again from Ellseck (Pvt) Ltd.

In support of that claim, he attached handwritten office notes of interviews whose author is not disclosed.

He did not explain why an affidavit could not be obtained from the author to buttress his case, especially as those notes have no evidentiary value whatsoever.

I therefore reject those notes.

Counsel for both parties are agreed, that, the only issue to be determined is whether the respondent is empowered, by the legislation that he administers, to refuse to assess and receive capital gains tax on the basis that it has come to his attention that the previous owner of the property sold did not pay capital gains tax when he sold the property himself.

Counsel for the applicant argued, that, neither the Revenue Authority Act [Chapter 23:11] or the Capital Gains Tax Act [Chapter 23:04] empower the respondent to refuse to assess and collect capital gains tax.

He further submitted, that, the respondent has both criminal and civil remedies to deal with tax defaulters without resorting to the unorthodox actions he has employed in this matter.

He is aware of the particulars and whereabouts of the defaulter, Clyde Chitsinde, and should pursue those remedies against him.

On the other hand, counsel for the respondent strongly argued, that, the respondent is not obliged to issue a tax clearance certificate to the applicant because she is not a person entitled to it in terms of section 34(c) of the Revenue Authority Act and is not covered by section 6 of the Capital Gains Tax Act, which is the charging section.

He took the view, that, only the seller, Ellseck (Pvt) Ltd was entitled to be issued with the clearance certificate. In terms of the court order referred to above, it is the Deputy Sheriff who is entitled to the clearance certificate.

When his attention was drawn to the Deputy Sheriff's return of service, to the effect that the respondent still refused to issue the clearance certificate to him, counsel for the respondent could not explain that.

In my view, there is a court order clothing the Deputy Sheriff with authority to enter the shoes of Ellseck Investments and pay Capital Gains Tax on its behalf in order to facilitate transfer of the property to the applicant.

That court order is still binding and must be complied with.

The respondent has refused to let the Deputy Sheriff satisfy the terms of that order. For him to then argue, that, the applicant is not entitled to a clearance certificate is a red herring.

The Zimbabwe Revenue Authority, which the respondent heads, is established in terms of section 3 of the Revenue Authority Act [Chapter 23:11] and its functions and authority are set out in section 4 as read with the 2nd Schedule thereof.

Its main function is to act as an agent of the State in assessing, collecting, and enforcing the payment of all revenues.

In respect of capital gains tax, section 6, as read with section 22B of the Capital Gains Tax [Chapter 23:01] provides for the charging, levying, and collection of it against any person receiving a capital gain.

As a creature of statute, the Zimbabwe Revenue Authority (ZIMRA) is required to act in terms of the enabling statute.

The relevant statutes enjoin it to assess and collect the tax that is due. On the face of it, it cannot set conditions for the performance of its statutory obligations.

Regarding proof of title to immovable property, section 14(a) of the Deeds Registries Act [Chapter 20:05] provides;

“Subject to this act, or any other law, the ownership of land may be conveyed from one person to another only by means of a deed of transfer executed or attested by the registrar.”

Section 8(1) of the Deeds Registries Act [Chapter 20:05] provides:

“Save as is otherwise provided in this Act, or in any other enactment, no registered deed of grant, deed of transfer, certificate of title or other deed confirming or conveying title to land, or any real right in land other than a mortgage bond, and no cession of any registered bond not made as security shall be cancelled by a registrar except upon an order of court.”

It is common cause, that, Ellseck Investments holds title to Stand 965 Mabelreign Township which is registered at the Deeds Office.

The Registrar is the custodian and keeper of such titles.

It must therefore be accepted, that, the title deed held by Ellseck Investments is prima facie proof of ownership and an announcement to the whole world to deal with the title holder in accordance with the Deed of Transfer.

The Registrar of Deeds had not questioned the validity of that Deed, which, in any event, cannot be cancelled without a court order in terms of section 8(1) of the Deeds Registries Act.

What we have here is a case in which the applicant has relied on the records at the Deeds Office to purchase the property. She has gone ahead to obtain an order authorizing the Deputy Sheriff to pay capital gains tax.

The respondent has refused to assess the tax thereby frustrating the execution of a court order.

His reasons for doing so are that the applicant may have colluded with a previous owner to avoid tax.

I have already said that the respondents claim is not only unsubstantiated but premised on the inadmissible evidence, the notes of an unnamed officer, and have rejected that claim.

Therefore, all that remains is evidence of a bona fide purchaser who is entitled to take transfer upon assessment and payment of tax.

I do not agree with counsel for the respondent, that, the respondent is entitled to refuse to assess and receive tax in the circumstances of this matter.

I agree with counsel for the applicant, that, if the respondent has proof that a previous owner avoided paying capital gains tax, he has the latitude, that, in terms of the Capital Gains Tax Act, to pursue the defaulter and recover that tax as he has both Criminal and Civil remedies in that regard.

The respondent should, in the meantime, collect capital gains tax from the current seller.

The issues arising out of this dispute are such that it would not have been obvious that the respondent could not contest the application. I am of the view, that, he was entitled to bring his argument before the court for adjudication and cannot be said to have acted unreasonably. For that reason, this is a case in which each party should bear its own costs.

In the result, I make the following order; that:

1. The respondent shall, within ten days of service of this order upon him, assess the capital gains tax payable in respect of the sale of Stand 965 Mabelreign Township, Harare by Ellseck Investments (Pvt) Ltd to the applicant.

2. The respondent should receive payment of the capital gains tax payable by Ellseck Investment (Pvt) Ltd from the Deputy Sheriff for Harare and issue a Capital Gains Tax Withholding Tax Certificate to the Deputy Sheriff upon receipt of the payment.

3. Each party shall bear its own costs.

HMA02-19 : JETINOS ZIVANOMOYO vs HELLEN DINGANI
Ruled By: MAWADZE J and MAFUSIRE J

This was an appeal from a decision of the Magistrate's Court. We dismissed it soon after argument and gave reasons ex tempore. The appellant has now sought written reasons.

In the court a quo, the respondent, hereafter referred to as “the purchaser” where appropriate, sued for specific performance in respect of a property that she had bought from the appellant in terms of a written agreement of sale.

She proceeded by way of a court application.

The draft order, apart from costs, sought an order directing the appellant, hereafter referred to as “the seller” where appropriate, to sign forthwith all the documents necessary to enable transfer of the property to herself, failing which the Messenger of Court should be empowered to stand in his stead and sign.

She said, in terms of the agreement, the parties had consented to the jurisdiction of the Magistrate's Court.

In his notice of opposition, the appellant took a point in limine, that, the remedy sought was not one contemplated by the Agreement of Sale. He said in terms of it, in the event of a breach by himself, the only remedy available to the respondent was cancellation of the agreement upon a prior demand to make good the breach within 14 days, and that this had not been done.

He said specific performance was a remedy alien to the written agreement.

An adjunct to the above objection was that, in terms of the Magistrates Court Act [Chapter 7:10], a Magistrates Court has no jurisdiction to grant specific performance in the absence of an alternative claim for damages. He cited section 14(1)(d) of the Magistrates Court Act.

On the merits, the appellant's basic defence was that the respondent had only paid part of the purchase price; that, as such, she was in breach of the Agreement of Sale; and that therefore she was not entitled to specific performance. He prayed for the dismissal of the application with costs.

The court a quo felt there was a dispute of fact that was incapable of resolution on the papers. It referred the matter to trial.

After a full scale trial, the court a quo found in favour of the respondent and granted specific performance.

The appellant appealed.

We felt the appeal had no merit. We dismissed it as aforesaid.

The seller's argument, that the remedy sought by the purchaser was not one contemplated by the agreement of sale was premised on clause 11. It read:

“Should the Seller breach any of the conditions of the Agreement, the Purchasers, shall, in writing, within fourteen (14) days, call upon the Seller to remedy, failure to which the Purchasers shall be entitled to cancel the Agreement and claim the return of the Purchase Price or damages.”

The point in limine was all smoke.

The approach by the seller was to skin and disembowel the agreement, yank individual clauses out, and hang them up to dry. The result was to turn an otherwise reasonably worded commercial agreement into a vain document that was an end in itself, instead of it being a means to an end.

The agreement of sale was an instrument for the seller to transfer real rights in the property sold and the purchaser to acquire them.

That was the object. That was the purpose. The court had to give effect to it. Otherwise the law would be damned.

As ROBINSON J would put it, in Intercontinental Trading (Pvt) Ltd v Nestle Zimbabwe (Pvt) Ltd 1993 (1) ZLR 21 (H):

“Let me add that to have found in this matter that there was no contract between the parties would have been artificial in the extreme and, I am sure, would have prompted any reasonable businessman to remark that if, before, he had thought the law was an ass, he now knew for certain that it was, since it had shown itself to be the domain of niggling academics out of touch with reality and to have nothing to do with the cut and thrust of the business world where one is concerned, not with the legal niceties pertaining to, but with the perceived existence of a contract.”…,.

The point is, a purchaser who buys a property and performs his side of the bargain, or is ready to perform, is entitled to take title. The seller is obliged to deliver. If he fails or neglects or refuses to do so, the purchaser is entitled to sue for specific performance.

This is quite elementary.

As long ago as 1912 INNES JA said, in Farmers Co-operative Society (Reg) v Berry 1912 AD 343…,:

“Prima facie, every party to a binding agreement who is ready to carry out his own obligation under it has a right to demand from the other party, so far as it is possible, a performance of his undertaking in terms of the contract.”

A plaintiff has the right to choose whether to hold a defendant to his contract and claim performance by him of what he bound himself to do, or to claim damages for the breach: see Haynes v Kingwilliamstown Municipality 1951 (2) SA 371 (A)…,.

The defendant has no such right of election.

He cannot claim to be allowed to pay damages instead of having an order for specific performance entered against him. In the exercise of its discretion, the court may grant or refuse specific performance. Specific performance will be refused if it will lead to an injustice, or, if it will be unduly harsh and burdensome on the defendant.

There was nothing like that in this case.

The court exercises its discretion to grant or refuse specific performance judiciously, not whimsically. The discretion is not confined to specific types of cases. It is not circumscribed by rigid rules. Each case depends on its own set of facts: see Intercontinental Trading (Pvt) Ltd v Nestle Zimbabwe (Pvt) Ltd 1993 (1) ZLR 21 (H).

In the present case, clause 11 of the agreement did not oust the purchaser's right to sue for specific performance. It merely pronounced one of the remedies available to her in the event of a breach by the seller.

A proper and holistic study of the agreement shows, that, it was the intention of the parties, that, upon her performing her side of the contract she would get transfer of the property. Otherwise why would clause 1(ii)(4) refer to the payment of capital gains tax, if not in contemplation of transfer? Or clause 1(iii) that said the balance of the sale proceeds would be released to the seller upon the registration of transfer? Or clause 5 that said risk and profit in the property would pass to the purchaser on the date of registration of transfer?

The court a quo was right to dismiss the point in limine.

Its adjunct that the claim for specific performance was incompetent because it was not accompanied by a claim for damages was equally properly dismissed.

HH420-15 : BRIGHTON MBERI vs SAVIOUS MBEWE and NORTON TOWN COUNCIL
Ruled By: MAFUSIRE J

In his application, the applicant said his claim was for “specific performance” against the second respondent. This was in respect of an immovable property, a house in one of the high density suburbs administered by the second respondent.

At the end of the hearing I dismissed the application with costs and promised to deliver the reasons later.

These are they.

The applicant said he had “bought” the house from the first respondent. The first respondent was the son to his late father (“the deceased”) and the heir to the estate.

The deceased had been buying the property from the second respondent under the usual rent-to-buy agreement common among the local authorities.

The applicant's case was that the respondent was refusing to “transfer” the property to him for the most unreasonable of reasons.

The second respondent was saying it could not consent to the “transfer” because it was aware that the deceased's widow, one Mlingo Mbewe, had certain rights over the house which the son, the first respondent, was trying to override or trample upon by surreptitiously “selling” it to a third party, the applicant.

The second respondent did not exactly use such words; but, that was clearly the import of its opposition.

It said until the widow was joined to the application, and until it was satisfied that the dispute between her and the son had been resolved, it was not going to consent.

It seems that previously the son had instituted an action to evict the widow from the house. However, the action had not been proceeded with. The matter had been resolved on the basis, that, the son would have entitlement to one of the rooms at the house and another room in the outbuilding, with both of them sharing the rentals from the remainder of the rooms.

To that, the applicant said the second respondent was not raising any defence valid at law but was merely trying to protect the widow out of sympathy for her. That was corruption and an abuse of office, he said.

The first respondent, the son, supported the applicant's case.

He filed a “Consent to Judgment” in terms of which he was consenting to be ordered by this court to “…, take all the necessary steps to transfer [the] right, title, and interest in [the] property…,.), failing which the Sheriff should be authorised to do that on his behalf.

What was remarkable in this case was the misconception exhibited by all the parties in relation to the true nature of their rights and obligations.

Terms such as “sale/purchase of rights, title and interest in” 'transfer' etc. were manifestly misguided.

Only somewhere in the second respondent's heads of argument was there a fleeting reference to the true legal position. In paragraph 21 it was said:

“21 The record must be correctly set. Ownership of the property in dispute vests in the 2nd Respondent. The 1st respondent, on his own, as asserted by Application (sic) or jointly with Mlingo Mbewe, in 2nd Respondent's view, only hold personal rights in the property.”

As long ago as 1992, the Supreme Court voiced concern over the use of such wrong terminology in such situations. That was in the case of Gomba v Makwarimba 1992 (2) ZLR 26 (SC). At pp27-28 McNALLY JA said:

“As so often happens, the parties have used the word 'sale' to describe what was in reality a cession of rights, since the house actually belongs to the Chitungwiza Town Council….,. It is unfortunate that legal practitioners persist in ignoring the distinctions between sale and cession of rights in these cases, both because there are many such cases and because there are many such distinctions.

In this case, the respondent was not the owner of the disputed immovable property but merely a 'lessee-to-buy'. The contract in terms of which the respondent acquired and held her rights in the property, and which defined her rights in the property, was not before the Court. Nor was the owner cited as a party.”

In the present case, although the owner, the second respondent, was cited as a party (undoubtedly because it was the one refusing to consent), the rent to buy agreement was not produced by any of the parties.

But, it was common cause that any rights in the property had devolved to the deceased, and subsequently to the first respondent, in terms of that agreement.

None of the parties gave any coherent answer why that agreement was not produced.

The applicant was content to start and end with his own agreement with the first respondent. But, that agreement was irrelevant, particularly given that the first respondent was actually supporting his cause.

The applicant's true grievance lay with the second respondent.

If he claimed that the second respondent's refusal to consent to the cession (not transfer) was unreasonable, then, he ought to have produced that agreement and pointed out those terms that showed that such refusal was unreasonable.

That was so because, among other things, the usual rent-to-buy agreement contains clauses expressly prohibiting the cession or assignment of rights under them, or the parting of rights of occupation of the property, or the alienation or disposal of the property without the prior written consent of the local authority.

In the case of Hundah v Murauro 1993 (2) ZLR 401 (SC) McNALLY JA said…,:

“It is surely a matter of general common knowledge, at least among lawyers, that land in the high density suburbs belonged to the local authority, or, occasionally, to central government. Occupants of the houses built in these suburbs fall into three categories (ignoring the fourth category of lodgers or dependants).
They were:

1. Simple tenants under a lease agreement with the local authority or central government;

2. Tenants-to-buy under an agreement which permitted them to take title once the property was surveyed and the full price paid;

3. Owners, who graduated from category two, in the fullness of time.

It is astonishing that no one thought to ask [the appellant] into which of these categories he fell. Even more astonishing when one remembers that he actually alleged 'it is still property of the City of Harare'.

[The appellant] was not the owner of the property. [He] is not now the owner of the property. At the time the estate agent drew up the agreement…, he was not even a tenant-to-buy. He was just a simple tenant….,.

In this situation we regularly hear the submission: 'But Roman-Dutch law does not require a seller to own the property he sells. He can enter into a valid agreement of sale as long as he realises he may face an action for damages if he is unable to give good title to the purchaser when the time comes to hand over vacant possession, and, in the case of immovable property, give transfer.'

This answer may score well in an examination, but, it overlooks the fact, which should be common knowledge among practitioners, that, the standard agreement of lease or lease to buy used by the Harare and Chitungwiza Municipalities (and many others) contains a clause designed to prevent such agreements.”

The pronouncement by the Supreme Court, in Hundah v Murauro 1993 (2) ZLR 401 (SC), all but sums up the applicant's insurmountable problems in this case.

In a great number of cases of this nature, the local authority is little concerned with what the tenant to buy does with his rights and interest in the property. The local authorities normally consent in advance of the alienation or disposal of such rights, or they subsequently ratify. When litigation ensues, often against the double-dealing or recalcitrant lessee-to-buy, the local authorities simply indicate their willingness to abide by the order of the court.

Unfortunately for the applicant in this matter, this was not the case.

In the present matter, not only had the local authority not given its consent to the intended cession, but, it was expressly refusing to grant it.

The applicant's situation was actually worse off than any of those in similar situations, for example, in Hundah v Murauro 1993 (2) ZLR 401 (SC) and Gomba v Makwarimba 1992 (2) ZLR 26 (SC).

There were others.

In Pedzisa v Chikonyora 1992 (2) ZLR 445 (SC) GUBBAY CJ had this to say…,:

“It is trite that where a contract of lease contains prohibitions against sub-letting, cession or assignment, either absolutely or without the lessor's consent, a sub-lease, cession or assignment, entered into without title to do so, is valueless and confers no rights on the third party; for he can acquire no greater rights in the property than the lessee has….,. A further obvious consequence of the prohibition is that the court will refuse to enforce the sub-lease, cession or assignment, at the instance of the lessee. To do otherwise would be to confer a right upon the lessee not given by the lessor….,.

Plainly enough, in the present case, the content of the lease-to-buy agreement was…, invalid because of a failure of the parties to it to request and obtain the written consent of the Council – a failure that related to a contractual formality….,.”

In Magwenzi v Chamunorwa & Anor 1995 (2) ZLR 332 (S), a case only marginally different from the present one in that the tenant-to-buy had since obtained title to the property even though at the time that he had purported to sell it to the third party he had not, EBRAHIM JA said this at pp335-336:

“Once the first defendant had taken transfer of the property, he was entitled to sell it. The first defendant had agreed to sell at a time when he was not the registered owner. All the time that the City of Harare remained the owner, the agreement to sell was unenforceable, because the first defendant could not transfer ownership without the consent of the Municipality. Once the Municipality's consent was not required, however, the contract became enforceable….,.

The agreement in Pedzisa's case supra was described as 'invalid' because it had failed to comply with a contractual formality….,.”

In Jangara v Nyakuyamba & Ors 1998 (2) ZLR 475 (HC) GILLESPIE J reviewed a number of decisions of both this court and the Supreme Court on the issue of “township houses” administered by local authorities under the lease-to-buy agreements and which are disposed of in breach of the terms of such agreements.

Some of those cases that the learned judge reviewed included Pedzisa v Chikonyora 1992 (2) ZLR 445 (SC); Hundah v Murauro 1993 (2) ZLR 401 (SC); Magwenzi v Chamunorwa & Anor 1995 (2) ZLR 332 (S); Guta v Chimbunde & Anor HH194-94; and Nkomo v Mujuru 1997 (1) ZLR 155 (H).

At p481 the learned judge said:

“I am therefore of the respectful view, that, the following statement of principle is to be gleaned from the Supreme Court decisions.

A cession of a right, originally acquired subject to a pactum de non cedendo, but in breach of that reservation, creates rights as between the parties to that subsequent cession, which rights, however, cannot bind the original holder of those rights.

The court may, at the instance of the third party, enforce that contract as against the lessee-purchaser; no order, however, may be given which can bind the original holder of those rights. Thus, no order of transfer can be given against that original holder.

An order of specific performance of transfer may, at the court's discretion, be given against the lessee-purchaser; such an order has the effect of obliging that party to effect transfer if he is in a position to do so, or to take transfer of the property in order to give it, if such be necessary.

Depending on the circumstances, however, the court may confine a third party to an alternative claim against the lessee-purchaser in damages.

This statement of principle explains completely the results in all the other judgments, and was the principle expressly applied by SMITH J and ROBINSON J in Guta and Magwenzi.”…,.

In the present case, whether the second respondent withheld its consent to the cession because the widow had not been cited, and whether or not such a reason was unreasonable under the circumstances, are issues that are immaterial, especially in the absence of the rent-to-buy agreement.

If the first respondent required the prior written consent of the second respondent before he could in any way alienate or dispose of his rights in the property to somebody else, and, if the first respondent had not obtained that consent prior to selling his rights to the applicant, then, that was the end of the road for the applicant in his claim against the second respondent.

Whether or not the applicant does have a remedy against the first respondent is an issue of no concern in the present application.

As stated in Pedzisa v Chikonyora 1992 (2) ZLR 445 (SC), the agreement between him and the first respondent was invalid or unenforceable against the second respondent for want of compliance with a contractual formality.

It was for that reason, that, at the end of the hearing, I dismissed the application with costs.

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Specific Performance re: Approach, Impossibility of Performance and the Exceptio Non Adimpleti Contractus

HH41-08 : ZODELLA ENTERPRISES (PVT) LIMITED vs LUXMORE NDENDA
Ruled By: GOWORA J

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Ruled By: MAKONI J

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HH440-19 : INTRATREK ZIMBABWE (PVT) LTD vs ZIMBABWE POWER COMPANY (PVT) LTD
Ruled By: CHITAPI J

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE
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HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD
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Ruled By: BHUNU J

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Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

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Ruled By: GOWORA J

HH09-09 : SKF ZIMBABWE P/L vs PARIS OLYMPIOUS
Ruled By: MAKARAU JP

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Ruled By: KAMOCHA J

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Ruled By: MAKARAU JP

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Ruled By: MAKARAU JP

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Ruled By: PATEL JA, BHUNU JA and BERE JA

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Ruled By: MTSHIYA J

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SC36-12 : RESERVE BANK OF ZIMBABWE vs CAFCA LTD
Ruled By: MALABA DCJ, ZIYAMBI JA and OMERJEE AJA

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Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

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HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA
Ruled By: CHIGUMBA J

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Ruled By: SANDURA JA, ZIYAMBI JA and GARWE JA

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Ruled By: MUREMBA J

SC138-21 : DIVVYLAND INVESTMENTS (PRIVATE) LIMITED vs DAVID CHIWEZA
Ruled By: PATEL JA, GUVAVA JA and BHUNU JA

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Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HH79-12 : MARIANE SABETA vs COMMISSIONER GENERAL ZIMBABWE REVENUE AUTHORITY
Ruled By: MATHONSI J

HMA02-19 : JETINOS ZIVANOMOYO vs HELLEN DINGANI
Ruled By: MAWADZE J and MAFUSIRE J

HH420-15 : BRIGHTON MBERI vs SAVIOUS MBEWE and NORTON TOWN COUNCIL
Ruled By: MAFUSIRE J

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Law Portal Zimbabwe

Specific Performance re: Approach, Impossibility of Performance and the Exceptio Non Adimpleti Contractus

HH41-08 : ZODELLA ENTERPRISES (PVT) LIMITED vs LUXMORE NDENDA Ruled By: GOWORA J

Appealed HH307-16 : ASSWELL GURUPIRA and JEAN GURUPIRA vs EARTHMOVING & CONSTRUCTION COMPANY PL and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF and JOHN LEGGATTE Ruled By: MAKONI J

View Appeal SC85-20 : JOHN LEGGETT and EARTHMOVING AND CONSTRUCTION COMPANY PL vs ASSWEL GURUPIRA and JEAN GURUPIRA and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF Ruled By: GWAUNZA DCJ, GOWORA JA and PATEL JA

HH392-16 : EUNICE DZANGARE and WISH PROPERTIES (PVT) LTD vs CHAMPION CONSTRUCTIONS (PVT) LTD and ELIZABETH CHIDAVAENZI and REGISTRAR OF DEEDS Ruled By: TSANGA J

SC05-20 : GRANDWELL HOLDINGS PL vs ZIMBABWE MINING DEVELOPMENT CORPORATION and MARANGE RESOURCES PL and MBADA DIAMONDS PL Ruled By: GWAUNZA DCJ, MAVANGIRA JA and MATHONSI JA

Appealed SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

View Appeal HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL Ruled By: MUZENDA J

HH440-19 : INTRATREK ZIMBABWE (PVT) LTD vs ZIMBABWE POWER COMPANY (PVT) LTD Ruled By: CHITAPI J

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE Ruled By: PATEL J

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD Ruled By: MATHONSI J

HH39-09 : WARREN PARK TRUST vs ANTHONY PAHWARINGIRA and NTOMBIZODWA PAHWARINGIRA and DAVY MUTINGWENDE and CHIPO MUTINGWENDE and SALTANA ENTERPRISES PL Ruled By: BHUNU J

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN Ruled By: GOWORA J

HH09-09 : SKF ZIMBABWE P/L vs PARIS OLYMPIOUS Ruled By: MAKARAU JP

Appealed HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS Ruled By: KAMOCHA J

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA Ruled By: MAKARAU JP

HH92-09 : SUPA PLANT INVESTMENTS (PVT) LTD vs EDGAR CHIDAVAENZI Ruled By: MAKARAU JP

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL Ruled By: PATEL JA, BHUNU JA and BERE JA

View Appeal HH186-10 : CAFCA LIMITED vs RESERVE BANK OF ZIMBABWE Ruled By: MTSHIYA J

Appealed SC36-12 : RESERVE BANK OF ZIMBABWE vs CAFCA LTD Ruled By: MALABA DCJ, ZIYAMBI JA and OMERJEE AJA

Appealed SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

View Appeal HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA Ruled By: CHIGUMBA J

SC37-09 : EDDIES PFUGARI (PVT) LTD vs KNOWE RESIDENTS ASSOCIATION and NORTON TOWN COUNCIL Ruled By: SANDURA JA, ZIYAMBI JA and GARWE JA

View Appeal HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY Ruled By: MUREMBA J

SC138-21 : DIVVYLAND INVESTMENTS (PRIVATE) LIMITED vs DAVID CHIWEZA Ruled By: PATEL JA, GUVAVA JA and BHUNU JA

SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HH79-12 : MARIANE SABETA vs COMMISSIONER GENERAL ZIMBABWE REVENUE AUTHORITY Ruled By: MATHONSI J

HMA02-19 : JETINOS ZIVANOMOYO vs HELLEN DINGANI Ruled By: MAWADZE J and MAFUSIRE J

HH420-15 : BRIGHTON MBERI vs SAVIOUS MBEWE and NORTON TOWN COUNCIL Ruled By: MAFUSIRE J

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Zimbabwe

HH41-08 : ZODELLA ENTERPRISES (PVT) LIMITED vs LUXMORE NDENDA
Ruled By: GOWORA J

Appealed
HH307-16 : ASSWELL GURUPIRA and JEAN GURUPIRA vs EARTHMOVING & CONSTRUCTION COMPANY PL and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF and JOHN LEGGATTE
Ruled By: MAKONI J

View Appeal
SC85-20 : JOHN LEGGETT and EARTHMOVING AND CONSTRUCTION COMPANY PL vs ASSWEL GURUPIRA and JEAN GURUPIRA and SANDRA MUIR and THE REGISTRAR OF DEEDS and THE SHERIFF and THE DEPUTY SHERIFF
Ruled By: GWAUNZA DCJ, GOWORA JA and PATEL JA

HH392-16 : EUNICE DZANGARE and WISH PROPERTIES (PVT) LTD vs CHAMPION CONSTRUCTIONS (PVT) LTD and ELIZABETH CHIDAVAENZI and REGISTRAR OF DEEDS
Ruled By: TSANGA J

SC05-20 : GRANDWELL HOLDINGS PL vs ZIMBABWE MINING DEVELOPMENT CORPORATION and MARANGE RESOURCES PL and MBADA DIAMONDS PL
Ruled By: GWAUNZA DCJ, MAVANGIRA JA and MATHONSI JA

Appealed
SC66-20 : BREASTPLATE SERVICE (PRIVATE) LIMITED vs CAMBRIA AFRICA PLC
Ruled By: GWAUNZA DCJ, PATEL JA and MAKONI JA

View Appeal
HMT55-19 : CAMBRIA AFRICA PLC vs BREASTPLATE SERVICES (PRIVATE) LIMITED T/A NEMCHEM INTERNATIONAL
Ruled By: MUZENDA J

HH440-19 : INTRATREK ZIMBABWE (PVT) LTD vs ZIMBABWE POWER COMPANY (PVT) LTD
Ruled By: CHITAPI J

HH39-11 : BLUMO TRADING (PVT) LTD vs NELMAH MILLING COMPANY (PVT) LTD and NELSON MAHUPETE
Ruled By: PATEL J

HH260-15 : DR PARTSON ZVANDASARA vs BELVEDERE NURSING HOME (PVT) LTD
Ruled By: MATHONSI J

HH39-09 : WARREN PARK TRUST vs ANTHONY PAHWARINGIRA and NTOMBIZODWA PAHWARINGIRA and DAVY MUTINGWENDE and CHIPO MUTINGWENDE and SALTANA ENTERPRISES PL
Ruled By: BHUNU J

SC01-15 : FIRSTEL CELLULAR (PRIVATE) LIMITED vs NETONE CELLULAR (PRIVATE) LIMITED
Ruled By: ZIYAMBI JA, GARWE JA & PATEL JA

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN
Ruled By: GOWORA J

HH09-09 : SKF ZIMBABWE P/L vs PARIS OLYMPIOUS
Ruled By: MAKARAU JP

Appealed
HB59-09 : DINESH MANILAL NARAN vs RONNAH MAFURIRANO and THE REGISTRAR OF DEEDS
Ruled By: KAMOCHA J

HH16-08 : CAVIN CHIFAMBA vs NORBERT MUTASA and GUARANTEE TRUST (PVT) LTD and M V CHIZODZA
Ruled By: MAKARAU JP

HH92-09 : SUPA PLANT INVESTMENTS (PVT) LTD vs EDGAR CHIDAVAENZI
Ruled By: MAKARAU JP

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: PATEL JA, BHUNU JA and BERE JA

View Appeal
HH186-10 : CAFCA LIMITED vs RESERVE BANK OF ZIMBABWE
Ruled By: MTSHIYA J

Appealed
SC36-12 : RESERVE BANK OF ZIMBABWE vs CAFCA LTD
Ruled By: MALABA DCJ, ZIYAMBI JA and OMERJEE AJA

Appealed
SC24-21 : BIG VALLEY MASTERS (PRIVATE) LIMITED vs SHI JINWU
Ruled By: GWAUNZA DCJ, GUVAVA JA and MAVANGIRA JA

View Appeal
HH601-14 : SHI JINWU vs BIG VALLEY MASTERS (PRIVATE) LIMITED and PHILLIMON MUBATA
Ruled By: CHIGUMBA J

SC37-09 : EDDIES PFUGARI (PVT) LTD vs KNOWE RESIDENTS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: SANDURA JA, ZIYAMBI JA and GARWE JA

View Appeal
HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

SC138-21 : DIVVYLAND INVESTMENTS (PRIVATE) LIMITED vs DAVID CHIWEZA
Ruled By: PATEL JA, GUVAVA JA and BHUNU JA

SC49-13 : STANDARD CHARTERED BANK ZIMBABWE LIMITED vs CHINA SHOUGANG INTERNATIONAL
Ruled By: ZIYAMBI JA, GARWE JA and HLATSWAYO JA

HH79-12 : MARIANE SABETA vs COMMISSIONER GENERAL ZIMBABWE REVENUE AUTHORITY
Ruled By: MATHONSI J

HMA02-19 : JETINOS ZIVANOMOYO vs HELLEN DINGANI
Ruled By: MAWADZE J and MAFUSIRE J

HH420-15 : BRIGHTON MBERI vs SAVIOUS MBEWE and NORTON TOWN COUNCIL
Ruled By: MAFUSIRE J