This is an action instituted by the plaintiff claiming the following relief which is set out in the summons:
“1. An order declaring that:
(i) The purported sale between first and second defendants for the sale of 100% shareholding in second plaintiff, on or about 12th February 2009, and all actions flowing therefrom, including but not limited to the removal of directors and appointment of new directors; and
(ii) The sale and transfer of Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant, commonly known as 3 Justice McNally Close, Mount Pleasant, Harare to 5th defendant represented by 4th defendant, are null and void;
(b) The minor children, Panashe Ralph Rushesha and Tivonge Sacha Rushesha, remain the sole shareholders in 2nd plaintiff; and
(c) The directors of 2nd plaintiff, as at 12 February 2009, remain directors unless lawfully removed or through resignation (sic).
2. An order that:
2.1 4th defendant, or, failing it, the Deputy Sheriff, takes all necessary steps to transfer Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant, commonly known as 3 Justice McNally Close, Mount Pleasant, Harare, back into the name of the 2nd plaintiff;
2.2 4th defendant and all those claiming occupation through it vacate 3 Justice McNally Close, Mount Pleasant, Harare within fourteen (14) days from the date of judgment; and
2.3 2nd to 5th defendants, jointly and severally, the one paying the others to be absolved: pay for an assessment and report, within fourteen (14) days of such report, by an independent property expert appointed by the High Court, of 3 Justice McNally Close, Mount Pleasant, Harare of any structural changes or damage, other than fair wear and tear, caused to 3 Justice McNally Close, Mount Pleasant, Harare since 12th February 2009 and the costs of repairs or reconstruction; and
(ii) Pay 2nd plaintiff the amount recommended within thirty days of such assessment.
3. An order barring 6th defendant from transferring the property referred to in 6 (sic) above to any third party until transfer to 2nd plaintiff is concluded.
4. In any event, costs of suit on an attorney and client scale to be paid by 1st to 5th defendants, the one paying the others to be absolved.”...,.
Turning to the merits of the claim, the background to the dispute may be summarised as follows:
The first plaintiff is a medical practitioner of Zimbabwean origin. He is presently resident in the United Kingdom together with his wife and children. He is married to the second witness, Aquilina Rudo Rushesha. They had two sons together before they moved to the United Kingdom, namely, Panashe Ralph Rushesha (hereinafter referred to as “Panashe”) and Tivonge Sacha Rushesha (hereinafter referred to as “Tivonge”).
The first defendant, Alexious Mashingaidze Dera, is his brother-in-law, being a brother to his wife.
When the trial commenced, Panashe Ralph Rushesha had attained majority age, and was, by consent, substituted as the third plaintiff.
The first plaintiff's evidence was that before he went to the United Kingdom he acquired an immovable property known as Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant, also known as 3 Justice McNally Close, Mount Pleasant, Harare (hereinafter referred to as “the property”).
He asked the first defendant, who is an accountant by profession, to help him form a company in which the shareholders would be the two children mentioned above.
The second plaintiff is the company which was then established for the benefit of the children.
The reason for incorporating the company, according to the first plaintiff, was to have the immovable property registered in the name of the company.
The directors of the company were to be Acquilina Rudo Rushesha and the first defendant.
The property was duly registered in the name of the second plaintiff and was its only asset.
He stated that the name of the second plaintiff derives from the middle names of his two children. “Ra” is from the name 'Ralph; “Sa” is from the name 'Sacha'; while the “R” comes from their surname, Rushesha.
At the time that the property was acquired Panashe was ten years old while Tivonge was about a year old.
The witness paid the purchase price for the property using his own resources.
When the first plaintiff and his family moved to the United Kingdom, in 2003, they leased the property to the South African Embassy. The first defendant was their contact person on some matters relating to the property, but, the rentals were paid directly into his account.
Thus, the first defendant did not receive any rentals in respect of the property; neither did he spend any money on the property.
In or about June 2010, the first plaintiff and his family discovered that the first defendant had sold shares in the second plaintiff to the second defendant, represented by the third defendant. That discovery was only made when the first plaintiff's wife came to Zimbabwe from the United Kingdom.
They discovered that the shares had been sold for a sum of US$36,350.
Subsequent to the sale of the shares in the second plaintiff, the immovable property was then sold to the fourth defendant, represented by the fifth defendant.
The first plaintiff spoke to the fifth defendant by telephone. The fifth defendant advised him that he had purchased the property from the first defendant.
In that conversation, the fifth defendant admitted that he had known that the property belonged to the first plaintiff's wife.
The first plaintiff stated, that, different amounts were given as to the price at which the immovable property had been sold. Initially, a sum of US$90,000 was mentioned. Later on, a figure of US$125,000 was stated as having been paid for the immovable property.
The first plaintiff denied that he authorised the sale of the shares in the second plaintiff or the sale of the immovable property. He, in fact, still holds the original Deed of Transfer for the property.
The first plaintiff described the improvements on the property.
There is a house with three bedrooms. All three bedrooms have bathrooms and toilets; it has three lounges; a kitchen; and a garage on top of which is a tiled entertainment area. There are two rooms next to the garage which the witness stated that he intended to use as offices. The house is fully alarmed. There is a borehole on the property. The other amenities at the property include a gazebo; a swimming pool; a 75 metre driveway with lights; and car shades which can accommodate three motor vehicles.
The second witness for the plaintiff was Aquilina Rudo Rushesha, wife of the first plaintiff.
She is the mother of the two children, Panashe and Tivonge. She was one of the directors of the second plaintiff company at the time that it was incorporated. She never resigned her directorship. She came to Zimbabwe from the United Kingdom in June 2010. That was when she discovered that the immovable property had been alienated by her brother, the first defendant.
She approached the police to help her access the property. She also approached Gerald Mlotshwa, a legal practitioner. A meeting was held which culminated in an affidavit being prepared and sworn to by the first defendant.
The plaintiffs also called Fortune Tapiwa Chasi who is a relative of the first plaintiff's family.
He testified that he knew both the third and fifth defendants at a personal level. The witness was notified of the sale of the property to the Boka company by the first plaintiff. He spoke to the fifth respondent about the matter. From his conversation with the fifth defendant, the latter knew that the first defendant had borrowed money from the second plaintiff and used the immovable property as security for the loan.
The fifth defendant also stated to him, that, he was aware that the property did not belong to the first defendant but to the first plaintiff.
He also communicated to the third defendant, by telephone and e-mail, about the transactions relating to the immovable property. The third defendant stated to him, that, matters related to that were to be directed to his legal practitioners, and that his affairs should be separated from those of the second defendant.
The last witness called to testify for the plaintiffs was the first defendant, Alexious Mashingaidze Dera.
He was, at all material times, a director of the second plaintiff. As stated above, he is a brother to Aquilina Rudo Rushesha and a brother-in-law to the first plaintiff. Although he was cited as the first defendant he did not enter appearance to defend the matter. He only came as a witness at the instance of the plaintiffs after being subpoenaed to attend.
His testimony was that, in February 2009, he obtained a loan in the sum of US$36,350 from the third defendant in order to finance his business of purchasing sugar from Triangle for resale.
As security for the loan, the witness then entered into an agreement for the sale of the shares in the first plaintiff to the second respondent, a company in which the third defendant has an interest.
The agreement of sale was reduced to writing.
His name is recorded as the seller and beneficial owner of “the 2 issued shares in the company” the second plaintiff.
The memorandum acknowledges that the second plaintiff is the registered owner of the immovable property in dispute.
He stated that he repaid to the second and third defendants an amount of money between US$7,000 and US$10,000 in an attempt to liquidate the debt, but, could not catch up with the increasing interest which was being charged on the amount loaned.
He stated that he had known the fifth respondent as a friend prior to meeting the third defendant. He was introduced to the third defendant by the fifth defendant. He then approached the third respondent for a loan which he was duly given as stated above.
When he was having problems in repaying the loan, the third defendant approached the fifth defendant to inquire as to whether the witness had property which could be sold to raise money to repay the balance outstanding on the loan which had gone up to US$70,000.
Interest was being charged on the outstanding amount every month.
In his evidence, the fifth respondent then went and paid to the third respondent the amount outstanding. At the time that the fifth respondent paid off the amount, it had gone up to about US$90,000. The witness stated, that, the fifth defendant wanted to be paid US$100,000 for having settled the debt owed to the second and third defendants.
He deposed to an affidavit prepared by Mr Mlotshwa, a legal practitioner who had been instructed by the first plaintiff's wife, on 24 June 2010. The affidavit was produced as part of the plaintiff's documents.
The second defendant led evidence through one Simon Charehwa who is its Public Officer.
His evidence was that the second defendant, represented by Frank Buyanga, the third defendant, purchased shares in the second plaintiff from Alexious Mashingaidze Dera, the first defendant.
The witness stated, that, the person who dealt directly with the plaintiff was the third defendant.
He, the witness, was responsible for compilation of the information in the files of the second defendant.
He stated, that, Alexious Mashingaidze Dera handed over to Frank Buyanga share certificates relating to the shares as well as resolutions authorising the sale.
The share certificate, according to the witness, was taken to the United Kingdom.
The rest of the documents were kept in the file at the local office. The witness identified a document at page 7 of Exhibit 2 as the resolution which was given by Alexious Dera to the third defendant.
At the time that the transactions were conducted, he was a Clerk.
In cross-examination, he readily admitted that he was not involved when the agreement between the first defendant and the second defendant, acting through the third defendant, was concluded.
He stated that the shares in the first plaintiff were purchased for US$36,350.
He stated, that, the house in dispute, which was the only asset of the first plaintiff, was sold by the second defendant, to the fourth defendant, for a sum of US$110,000, in September 2009.
He stated, that, he knew the first defendant prior to the transaction relating to the shares of the first plaintiff as he used to render accounting services to the third defendant on a part-time basis.
The fifth defendant gave evidence on his behalf as well as on behalf of the fourth defendant.
He is a director of the fourth defendant which is a family company. He stated that he purchased the immovable property in dispute on 15 September 2009. At the time of the agreement, he was shown a Form CR14 and a Form CR6 and a resolution by one James Nqindi.
According to him, James Nqindi and Frank Buyanga were the directors of the second plaintiff at the time that he purchased the property.
He stated that he first knew the first defendant in 2007. He denied that they were friends, but that he was just someone he knew.
The witness stated, that, he had known the third defendant since 2004. He stated, that, the property was vacant at the time that he purchased it. He indicated to the Court, that, the fourth defendant was prepared to relinquish the property if it was paid back the money it had paid for the property. He stated that he purchased the property from the second plaintiff.
The fourth defendant took transfer of the property in 2010.
He described the main structure on the property as a four-bedroomed house, with four bathrooms, a kitchen, lounge, dining room and an additional lounge or office. There is an outbuilding for employees, as well as a swimming pool and a gazebo. At the time of the purchase, there was, according to him, a derelict tennis court. He removed the tennis court with the intention of resurfacing it. The property, which is about an acre, is walled and gated. The main house is partly a double storey, with a room upstairs. The main bedroom has a dressing area. There is a borehole.
The issues which were referred to trial are set out in the joint pre-trial conference minute as follows:
1. Whether or not a valid agreement of sale of shares, allegedly belonging to the minor children (herein represented by the first plaintiff), was entered into between the first and second and third defendants.
2. Whether or not the changes relating to second plaintiff's directors and shareholders, effected as a result of any such agreement, is valid. If not, whether or not such directors and shareholders should revert back (sic) to the period before the 12th of February 2009.
3. Whether or not the second defendant validly entered into an agreement for the sale of the immovable property, being Stand Number 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant with fourth and fifth defendants. If not, whether the registration of title into the fourth defendant (sic) must be set aside and the original deed reinstated.
4. Whether or not the plaintiffs have any claim for damages against the second to fifth defendants arising out of the structural alterations to the immovable property. If they have a claim, what the quantum of damages recoverable is.
5. Whether or not, if the plaintiffs succeed, the fourth defendant should remain in possession of the immovable property on the basis of a lien and until any such claim as it may have (has) been realized.
The question of the validity of the sale of shares to the second defendant must be considered in the context of the nature of the agreement between the first defendant, Alexious Dera, on the one hand, and, on the other hand, the second and third defendants.
If a finding is made that there was no sale, then, the legal consequences of that finding will ensue.
On the other hand, if the conclusion is that there was a sale, the Court will then consider whether such sale can be impeached on the grounds submitted by the plaintiffs.
The plaintiffs case is that the agreement was one of a loan in terms of which money was advanced to the first defendant by the second and third defendants. The shares were, according to the plaintiffs, surrendered to the second and third defendants as security for the repayment of the loan.
In determining the above issues, the Court must look at the evidence in its totality, or as a whole, and not piecemeal.
All the parties agree, that, the second plaintiff's sole asset was the immovable property at 3 Justice MacNally Close, Mount Pleasant, Harare.
They are also agreed that the immovable property is just over an acre in extent.
The developments on the property were described in evidence by both parties, albeit with minor variations. There is a main house and an outbuilding as described above. There is a borehole. The property is walled and has a gate. At the time of the sale, there was a tennis court, the condition of which was contested by the fifth defendant.
The defendants relied on an agreement of sale of shares signed on 12 February 2009 as proof that the second defendant purchased the entire shareholding in the second plaintiff from the first defendant.
In terms of that agreement, the entire shareholding was sold for a sum of US$36,350.
A document was also produced, signed by the first defendant, to acknowledge receipt of a sum of US$36,350 “being the purchase price for the entire shareholding in Rasar Enterprises (sic) (Pvt) Ltd”.
The first defendant's testimony was that the agreement of sale was a disguised loan transaction.
The third defendant, who was the person who was involved in the transactions on behalf of the first defendant did not testify.
That leaves the testimony of the first defendant unchallenged.
No explanation was given regarding the last minute default of the third defendant.
The witness who testified for the second defendant, Simon Charehwa, was not privy to the discussions leading to the agreement. He was only a Clerk at the material time.
In any event, the second and third defendants version does not accord with the probabilities in this case.
A purchase price of US$36,350 for the entire shareholding in the second plaintiff does not stand scrutiny; it being common cause that the transaction would, in essence, be a purchase of the immovable property - which was the only asset of the company.
Matthew Boka stated, that, a vacant piece of land within the area of Mount Pleasant would cost between US$30,000–US$50,000. Simon Charehwa stated, that, the immovable property was “sold” to the fourth and fifth respondents for a sum of US$110,000 some seven months after the second defendant acquired it for US$36,350.
There is no conceivable explanation as to how the value would have trebled within such a short time.
The only reasonable explanation is that the payment was meant to cover the debt owed by the first defendant to the second and third defendants which escalated rapidly because of interest charged.
The time that the multi-currency regime was introduced in the country would not, in my view, explain payment of a sum of US$36,350 for that property.
No evidence was tendered in support of that assertion.
The first defendant stated in his evidence, that, by the time the shares were appropriated by the second defendant, he had paid about US$7,000 towards reduction of the debt.
That assertion was not contested.
Simon Charehwa did not know about that payment.
I have considered, too, that, the parties involved were not strangers to one another.
Frank Buyanga was known to the first defendant after being introduced by the fifth defendant. Simon Charehwa stated, that, he used to see the first defendant “a lot” at the offices of the second defendant where he used to render accounting services to the third defendant on a part-time basis. Matthew Boka was also known to the first defendant prior to that transaction. When he proceeded with the registration of the immovable property, in the name of the fourth defendant, in July 2010, he had already become aware that the transactions were being disputed.
It is not uncommon for parties to enter into disguised transactions, where, as happened in the instant case, property which is given as security is disguised as the subject of a sale.
In the case of Hoffmeyer v Gous (1893) 10 SC 115…, the court remarked as follows:
“There is not a more common device than that by which a pledge is disguised as a sale.”
In such transactions, the approach of the Court is settled.
The court looks at the substance and not the form of a transaction: see Zandberg v Van Zyl 1910 AD 302…,.; MacAdams v Fiandies Trustees 1919 AD 207.
The rationale for that approach is easy to fathom.
Court proceedings are not a game of chess. They are a serious inquiry into and determination of the rights of the participants in the proceedings.
On the facts of this case, I have no difficulty in concluding, that, the agreement between the first defendant and the second and third defendants was not a sale of shares. Instead, the shares were given to secure a loan given to the first defendant by the second and third defendants.
The taking of ownership of the shares by the second defendant makes the transaction a pactum commissorium: see Vasco Dry Cleaners v Twycross 1979 (1) SA 603 (A).
In the case of Chimutanda Motor Spares (Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…, this Court, citing with approval a passage from the case of Van Rensberg v Weiblen 1916 OPD 247…, embraced the following definition:
“A pactum commissorium is defined as 'a pact by which the parties agree that if the debtor does not within a certain time release the thing given in pledge, by paying the entire debt, after the lapse of the time fixed, the full property in the thing will irrevocably pass to the creditor in payment of the debt.'”
See also Kufandirori v Chipuriro & Ors 2004 (1) ZLR 74 (H)…,.; Upper Class Enterprises (Pvt) Ltd v Oceaner (Pvt) Ltd & Ors 2002 (2) ZLR 599 (S)…,.
The simple position of the law is that a pactum commissorium is illegal and unenforceable: see Upper Class Enterprises (Pvt) Ltd v Oceaner (Pvt) Ltd & Ors 2002 (2) ZLR 599 (S)…,.; Kufandirori v Chipuriro & Ors 2004 (1) ZLR 74 (H)…,.; Chimutanda Motor Spares (Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…,.; Sun Life Assurance Co. of Canada v Kuranda 1924 AD 20…,.
The jurisprudential principles which underpin the unenforceability of a pactum commissorium and the circumstances in which exceptions may be accepted have been the subject of academic and judicial discourse: see Mapenduka v Ashington 1919 AD 343…,.; Chimutanda Motor Spares (Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…,.; Oceaner (Pvt) Ltd & Anor v Upperclass Enterprises (Pvt) Ltd & Anor 2001 (2) ZLR 130 (H)…,.; SILBERBERG & SCHOEMANN, The Law of Property 3rd Ed by Kleyn & Boraine; WILLE's Principles of South African Law, 8th Ed…,.
They need no further discussion in casu.
In the light of the settled position of the law, the sale and transfer of shares in the second plaintiff, by the first defendant to the second defendant, was therefore illegal, and, consequently, null and void ab initio.
The illegality necessarily invalidates the Form No. CR14 in terms of which Frank Buyanga, the third defendant, and one James Nqindi were appointed as directors of the second plaintiff.
The fate of the sale and transfer of the immovable property to the fourth respondent, in terms of a memorandum of agreement of sale dated 15 September 2009, is decidedly sealed in the words of LORD DENNING MR in the celebrated case of MacFoy v United Africa Co. Ltd [1961] 3 All ER 1169…,.:
“If an act is void, then, it is, in law, a nullity. It is not only bad, but incurably bad….,. And, every proceeding which is founded upon it is also bad and incurably bad. You cannot put something on nothing and expect it to stay there. It will collapse.”
Accepting the above exposition of the law, the Supreme Court, in Muchakata v Netherburn Mine 1996 (1) ZLR 153 (S), held, that, an act which is void ab initio is “void at all times and for all purposes. It does not matter when and by whom the issue of its (in) validity is raised; nothing can depend on it.”
In short, the sale of the immovable property to the fourth respondent is a legal nullity.
The effect of my conclusion is to dispose of issues 1, 2 and 3 as set out in the joint pre-trial conference minute in favour of the plaintiffs and against the defendants....,.
(i) The purported sale and transfer of shares in Rasar Investments (Private) Limited, by the first defendant, to the second defendant, is hereby declared to be illegal and null and void ab initio.
(ii) The Form No. CR14 presented for filing with the Registrar of Companies by Mutamangira & Associates, on 11 February 2009, in terms of which the third defendant and James Nqindi were appointed as directors of the second plaintiff, is hereby declared to be null and void ab initio and the directors of the second plaintiff, prior to the filing of that Form, are hereby declared to be in office.
(iii) The sale and transfer to the fourth defendant of the immovable property known as Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant, otherwise known as 3 Justice McNally Close, Mount Pleasant, Harare, is hereby declared to be null and void, and is set aside.
(iv) The Deed of Transfer in terms of which Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant is registered in the name of the second plaintiff is hereby declared to be valid.
(v) The Sheriff is hereby directed to sign all documents necessary to reinstate ownership of the immovable property described in paragraph 4 hereof to the second plaintiff.
(vi) The fourth and fifth defendants, and all persons claiming occupation through them, be and are hereby ordered to vacate Stand 671 Mount Pleasant Township 20 of Lot 57 of Mount Pleasant, otherwise known as 3 Justice McNally Close, Mount Pleasant, Harare, within fourteen days from the date of service of this order, failing which the Sheriff be and is hereby directed to take all steps necessary to eject them from the property.
