KAMOCHA J: The
applicant in this matter was seeking an order of this court in the following
terms:-
“It is ordered that:-
1)
Respondent,
at its costs, do (sic) all things and sign all such documents as may be
necessary to transfer to applicant a portion of stand 5453A Salisbury Township
as approved by the City of Harare under authority of sub-divisional permit N.O.
SD 1337/02.
2)
Should
respondent fail, for whatever reason, to give effect to this order within 7
days from the date of service on it of this order, then the deputy sheriff be
and is hereby directed and authorized to sign all such documents as may be
necessary to give effect to the transaction.
3)
Respondent
pay the costs of this application on the scale as between attorney and client
save that respondent will be entitled to recover such costs from George
Maulidi.”
The background information of this matter is that National
Blankets Limited and David Whitehead Textiles Limited were at one time
subsidiaries of Lonrho Africa which owned 88.06% of the shares in David
Whitehead Textiles Limited through a company known as Textile Investments
Company. David Whitehead in turn owned
100% of the shares in National Blankets Limited.
According to Jeremy Musgrave, who
deposed to an affidavit on behalf of the applicant, in 2001 Lonrho made a decision
to disinvest from Zimbabwe and decided to sell its interest in both National
Blankets Limited and David Whitehead Textiles Limited.
A National Blankets consortium
headed by the deponent was formed which made a bid for national Blankets and
had no interest in David Whitehead.
However, because Lonrho was in a hurry to finalize its business it was
agreed that the national Blanket consortium would make a bid for both National
Blankets and David Whitehead. It was
further agreed with Lonrho that national Blankets would purchase the entire
interest of Lonrho in Textile Investment Company which held 88.06% of the
shares in David Whitehead thereby becoming its controlling shareholder.
The management of both National
Blankets Limited and David Whitehead Textiles Limited hereinafter referred to
as “National Blankets” and “David Whitehead” respectively had formed
consortiums to purchase Lonrho's shares in the respective entities. National Blankets formed a company known as
Intaglio which was the vehicle through which it put a bid for Lonrho's shares
while David Whitehead vehicle through which it put a bid for Lonrho's shares
was called Guscole Investments (Pvt) Limited.
It was alleged that after acquiring
Lonrho's shares in Textile Investment Company Intaglio entered into
negotiations in terms of which Intaglio was to dispose of its interest in
Textile Investment Company to Guscole Investments (Pvt) Limited.
At the end of the negotiations Ernst
& Young Accountant were engaged to carry out the separation of the two
companies. Part of the unbundling
involved the transfer to national Blankets of a portion of land in Workington,
Harare. The property in question was a
portion of stand 5453 A Salisbury Township.
It was necessary to apply for sub divisional authority from the City of
Harare.
The parties allegedly agreed that
the unbundling would proceed and the transfer of the portion of land would be
attended to in due course. In August
2002 applications were made to City of Harare and permission to subdivide stand
5453A Salisbury Township was granted.
The portion to be transferred to national Blankets was named as stand
19100 Harare Township.
It was alleged that survey diagrams
were prepared and approved by the Surveyor General and David Whitehead
allegedly instructed legal practitioners Gill, Godlonton & Gerrans to
attend to the transfer to national Blankets of stand 19100 Harare Township.
Musgrave contended that the fact
that National Blankets continued and continues to occupy the said premises
rent-free and has in fact let a portion of the premises while David Whitehead
paid all service charges levied by the utility providers for the property
pointed to the fact that the transaction was entered into. That was so because the transfer to national
Blankets had been delayed due to David Whitehead dire financial status.
In 2006 and before transfer to
applicant could be effected David Whitehead was placed under judicial
management with Cecil Madondo of Tudor House Consultants (Pvt) Ltd as judicial
manager.
In 2007 Triumphant Enterprises (Pvt)
Ltd acquired controlling shares in National Blankets which for years through
correspondence had sought to be advised of the progress that was being made
about transferring stand 19100 to it. It
was each time being advised the transfer process was in progress and cited a
number of reasons for the delay.
Due to what National Blankets
“applicant” believed to be in ordinate delays in transferring the property it
then launched this application seeking specific performance by David Whitehead.
The application was vehemently
opposed by David Whitehead “respondent” which raised a point in limine wherein it alleged that there
were glaring irreconcilable disputes of facts in the matter. The defendant contended that the applicant had
submitted at least four argumentative affidavits from no less than three
deponents in an endeavour to support its application. Surely, there was need for the veracity of
such conflicting affidavits to be tested by the court. Moreso, when the applicant was unable to
produce documentary evidence to clearly demonstrate the existence of the
transaction. The case was loudly calling
for viva voce evidence from the
authors of the conflicting statements to explain the glaring discrepancies
under cross examination. The court was
denied the opportunity to have the conflicting statements relating to the
transaction clarified through viva voce
evidence from the deponents of the statements.
Further, the deponent of the
applicant's founding affidavit averred that the parties held meetings between
themselves whereat respondent's representatives denied knowledge of the
existence of the said transaction. In
particular, George Maulidi professed ignorance of the said transaction. The fact that the applicant was unable to
produce a single document where the alleged transaction was recorded
exacerbated the confusion in the matter.
In light of the foregoing the
respondent concluded that the applicant knew or ought to have known that there
were glaring serious disputes of facts but nevertheless instituted this court
application and moved that this court should not stand over the matter for
trial for oral evidence to be heard but should simply dismiss the application
with costs on a punitive scale. This
court was referred to the case of Masukusa
v National Foods Ltd & Anor 1983
(1) ZLR 232 (H) at 234D-E where McNALLY J
(as he then was) quoted with approval the South African case of Tamarillo (Pty) Ltd v B N Aitken (Pty) Ltd 1982 (1) SA 398 at
430G – H where MILLER JA had this to say:
“A litigant is entitled to seek relief by way of notice of
motion. If he has reason to believe that
facts essential to the success of his claim will probably be disputed, he
chooses that procedural form at his peril, for the court in the exercise of its
discretion, might decide neither to refer the matter for trial nor to direct
that oral evidence on the disputed facts be placed before it, but to dismiss
the application.”
Jeremy Musgrave stated in paragraph
36 of the applicant's founding affidavit that:-
“To applicant delegates' utter shock and disbelief, at the
meeting George Maulidi the author of the letters I have referred to professed
ignorance of the transaction.
Upon being asked to explain why he had written the letters he
had in support of the transfer to applicant he claimed to have acted on
instructions given by Chinyame and was otherwise unaware of the reason behind
the transfer.
This is surprising because in his letter to Miss Coyne dated
22nd October 2003, he said David Whitehead Textiles and national
Blankets demerged in October, 2001 and it was resolved that the above property
be split … and requested the split be effected “soonest”.
It therefore admits of no doubt that
Jeremy Musgrave and his delegation knew that the transaction was being hotly
disputed and ought to have known that a full trial was the only way applicant
could prove its claim.
Yet it was submitted on behalf of
the applicant that the following factors taken either singly or cumulative
point to the transaction having been entered into:-
i)
The
affidavits of Jeremy Musgrave;
ii)
The
supporting affidavit of Vernon Lapham;
iii)
The
supporting affidavit of Edwin Chimanye;
iv)
The
supporting statement of Daphne Ritson;
v)
The
application to the City of Harare by the respondent for a sub divisional
permit;
vi)
Letter
by Maulidi to Gill, Godlonton & Gerrans giving instructions for the
transfer to applicant and confirming there was such a resolution;
vii)
Letter
by E Chivaura confirming the transaction;
viii)
Use
and occupation of the property rent-free by applicant at all material times;
ix)
Failure
by respondent to demonstrate by what transaction, if not this transaction of
how respondent ceased being a 88.06% subsidiary of the applicant.
The applicant attacked the averments made by Zivaishe Mangena
who deposed to the opposing affidavit on behalf of the respondent. The applicant complained that Mangena had
very limited knowledge about the transaction due to the fact that he had come
onto the scene some 6 years after the transaction had been allegedly entered
into. The applicant is correct in that
submission.
Mangena, however, made one valid point. He said he had gone through all the company
records but was unable to see a company resolution to transfer the said piece
of land and there was no record of any consideration having been paid for
it. Whatever arrangement applicant had
with the former executives of the respondent, was not shown in the company
records and was not supported by any resolution and hence illegal.
I pause to observe that the applicant was unable to produce
any company resolution. The respondent
cited the provisions of section 183 (1) (b) of the Companies Act [Chapter
24:03] which restrict the sale of undertaking by directors which recites thus:-
“183 (1) Notwithstanding anything in the articles, the directors of a
company shall not be empowered, without the approval of the company in a
general meeting –
(a)
…
(b)
To
dispose of the undertaking of the company or of the whole or the greater part
of the assets of the company.”
See also Mason vs Timore Trading Service (Pvt) Ltd and Ors 2004
(2) ZLR 347 where it was held that, “under section 183 (1) (b) of the Companies
Act [Chapter 20:03], the directors of a company are not empowered, without the
approval of the company in a general meeting, to dispose of the company's
undertakings or of the whole or greater part of the assets of the company.
The applicant still contended that the letter by Maulidi of
22 October 2003 to Gill Godlonton & Gerrans suggested that there was a
resolution but failed to produce and file such a resolution. This court finds no proof of any
resolution. If it had been there it
would have been easily produced. Such
resolutions should be reflected in the minutes of the proceedings of the
meeting at which the resolution was passed in terms of section 138 of the
Companies Act [Chapter 24:03]. The
applicant would have produced the minutes of such a meeting and a copy of such
resolution. It admits of no doubt that
there was no resolution of the board of directors of the respondent at the time
of the alleged transaction approving the transaction and authorizing a party to
negotiate and sign the required documents.
Neither was there a special resolution of the shareholders of the
company in terms of section 183 (1) (b) of the Act.
It was argued on behalf of the respondent that the averments
of Jeremy Musgrave do not disclose the nature of the alleged transaction. He produced no written proof of the alleged
transaction when a transaction of such a magnitude was reasonably expected to
have been reduced to writing despite the fact that there is no law which
mandates an agreement of sale of property to be reduced to writing.
Edwin Chimanye like Jeremy Musgrave had no written proof of
the transaction but wanted the court to rely on the “so many pointers to the
transactions.”
Vernon Lapham does not seem to assist the applicant as he
wrote in his letter dated 3 August 2009 marked to the attention of Jeremy
Musgrave “Unfortunately I have not been able to locate detailed information
relating to this transaction and hence this letter sets out my recollection and
hence may be somewhat vague …”
Daphne Ritson was not of any assistance either as she stated
in her e-mail to Jeremy Musgrave of Friday 28 August 2009:-
“I have been through my file and cannot find any written
reference to the agreement to split the property.
I do however, remember hearing that it was part of the deal
that you would keep the part of the Southerton property, at that stage occupied
by NBL.”
While Maulidi purported to instruct the respondent's legal
practitioners by letter dated 22 October 2003 to effect the split “soonest” the
legal practitioners addressed Mr Majoko by e-mail on 31 March 2009 wherein they
said:- “Please also verify with your client what form this transfer will take,
that is, if it is a sale, donation or scheme of reconstruction.”
Messrs Majoko & Majoko did not respond to the e-mail
explaining the form the transfer would take.
Their clients seem to have been unable to provide evidence showing what
form the transfer would take. No
evidence was proffered to show whether it was a sale, donation or scheme of
reconstruction. That question remains
unanswered as the evidence of Jeremy Musgrave does not disclose the nature of
the alleged transaction. When dealing
with the letters of E Chivaura and G Maulidi coupled with correspondence from
Gill, Godlonton and Gerrans it was submitted on behalf of the respondent that
those documents only served to reflect a fraud on the respondent as the
documents amounted to an attempt to transfer a property without the authority
of the company i.e. no recorded company resolution.
In response to the assertion that the use and occupation of
the property rent-free by applicant at all material times pointed to the claim
that the transaction had been entered into, the respondent stated that apart
from the fact that the applicant did not have any written proof to support its
claim what applicant did was a fraud on the respondent. It was submitted that the fraud became
apparent when paragraph 5 (ix) of the applicant's heads of argument is
considered. It was alleged that a close
reading of that clause revealed that applicant claimed that stand 19100 Harare
Township was part of the payment towards the purchase of 88.06% of the
shareholding of respondent by Guscole Investments (Pvt) Ltd which amounted to
assistance by respondent to Guscole Investments to purchase respondent's shares
in contravention of section 73 of the Companies Act [Chapter 24:03]. The respondent concluded that the fact that
the alleged transaction was illegal probably explained the reason it was not
included in the agreement of sale.
I pause to observe that the evidence placed before the court
falls far short of proving the existence of the alleged transaction. This court has found that there was no
written company resolution to authorize the alleged transaction. It is also the finding of this court that the
applicant was unable to produce any recorded information relating to the
alleged transaction. The court was being
urged to rely on factors which pointed to the transaction having been entered
into. Quite clearly the applicant was
ignoring the fact that Vernon Lapham and Daphne Ritson were unable to find any
written reference to the agreement to split the property. Abundant confusion surrounds the alleged
agreement to split the property.
Finally, the respondent submitted that the transaction would
have been, in any event, null and void ab
initio even if the applicant had proved the existence of the alleged
agreement as it would have been in contravention of the provisions of section
39 of the Regional and Town Planning Act [Chapter 29:12] section 39 recites
thus:
“39. No
subdivision or consolidation without permit
1) Subject to subsection (2) no person
shall –
(a) Subdivide any property; or
(b) Enter into any agreement –
i)
For
the change of ownership of any portion of a property; or
ii)
…
iii)
…
iv)
…
or
(c) Consolidate two or more properties
into one property;
except
in accordance with a permit granted in terms of section forty.”
It is common
cause that the alleged agreement to split the said property was allegedly
entered into in October 2001. Se G
Maulidi's letter dated 22 October 2003 at page 31 of the application and
paragraph 36 of Jeremy Musgrave founding affidavit.
The permit
to subdivide the property was only granted on 15 August 2002 and is filed of
record as annexure “B” at page 29 of the application.
The
agreement in casu was entered into
before a permit was granted in terms of section 40. Section 39 (1)(b) supra prohibits the entering into such an agreement as was stated
in X- Trend-A-Home (Pvt) Ltd vs Hoselaw Investments (Pvt) Ltd 2000 (2)
ZLR 348 (S). The respondent is therefore
correct in submitting that even if it had been proved that the alleged
transaction had been entered into it would have been null and void ab initio as it would have fallen foul
of section 39(1)(b) supra.
Conclusion
This
application must fail because of the following findings by the court:-
1) This matter should not have been
brought to court by way of a court application as there were glaring serious
disputes of fact;
2) The applicant failed to provide
written proof of any company resolution giving authority to negotiate the
alleged transaction;
3) The applicant failed to provide any
written reference to the agreement to split the property;
4) The applicant failed to show what
form the transfer would take i.e. was it a sale, donation or scheme of
reconstruction;
5) The alleged transaction falls foul of
the provisions of section 39(1)(b) of the Regional and Town Planning Act
[Chapter 29:12].
6) The evidence placed before the court
was contradictory for the court to make a reasonable judgment. For instance Vernon Lapham was unable to
locate detailed information relating to the transaction and confessed that his
recollection would be somewhat vague while Daphne Ritson stated that she had
been through her file and could not find any written reference to the agreement
to split the property.
In the light of the foregoing
findings I hold the view that this is a proper case where an award for costs on
an attorney and client scale is appropriate.
In
the result I would dismiss the application with costs on an attorney and client
scale.
Majoko & Majoko, applicant's legal practitioners
C. Nhemwa & Associates,
respondent's legal practitioners
