On 28 February 2008, under case no. HC1239/08, the appellant caused summons to be issued against the respondents seeking an order for the cancellation of a lease, and, consequent thereto, the eviction of the respondents from the leased premises.On 10 December 2008, a second summons was issued by the appellant ...
On 28 February 2008, under case no. HC1239/08, the appellant caused summons to be issued against the respondents seeking an order for the cancellation of a lease, and, consequent thereto, the eviction of the respondents from the leased premises.
On 10 December 2008, a second summons was issued by the appellant under case no.6969/08 wherein it sought the eviction of the respondents due to the expiry of the lease.
The High Court dismissed the claims with costs.
The appellant was aggrieved by the dismissal and has noted this appeal....,.
The basic facts surrounding the dispute are the following:
The appellant (hereinafter referred to as “Indium”) is the registered owner of certain immovable property, being Stand 450 Avondale West Township of Stand 390 Avondale West, also known as 108 West Road, Strathaven, Harare, (hereinafter referred to as “the premises”). The first respondent (hereinafter referred to as “Kingshaven”) is a private company registered as such under the laws of Zimbabwe. The second respondent (hereinafter referred to as “Shumba” and the third respondent, his wife, are the only shareholders of and directors in Kingshaven.
Kingshaven carries on business in the hospitality sector and is in occupation of the premises by virtue of a lease concluded on 14 December 2007 with Indium. Notwithstanding the date of signing, the agreement was to come into force on 10 December 2007 and was to endure for a period of 365 days, terminating automatically on 9 December 2008.
Shumba and his wife are shareholders in a Close Corporation, ERF Bryanstan Cc, which is duly registered as such under the laws of South Africa.
ERF Bryanstan is the registered owner of an immovable property, being Portion 2 of ERF 825 Bryanstan Township also known as 17 Portman Road, Bryanstan Sandton, Johannesburg.
In 2007, ABSA Bank, in whose favour ERF Bryanstan had registered a mortgage against the property, called up the mortgage and executed against the same.
In an effort to save the property, Shumba approached Jayesh Shah (hereinafter referred to as “Shah”) for financial assistance, and this culminated in a number of agreements.
The first agreement consists of a loan between Shah, on the one part, as lender, and Shumba and ERF Bryanstan Cc, on the other, as borrowers. The loan amount is UD$500,000.
The second agreement is for the sale of the entire shareholding in Indium concluded by Shumba and his wife, on the one part, as sellers, and Jayesh Shah and Shaleetha Mahabeer, on the other, as purchasers.
The last agreement is the lease agreement concluded between Indium, as lessor, and Kingshaven, as lessee on 14 December 2007.
The two matters instituted by Indium were, by consent of the parties, consolidated for trial before the High Court.
In dismissing the claims, the court a quo stated:
“He intended to secure a windfall by all means legally possible. His legal practitioner advised a web of agreements to ensure he remained within the realms of the law. A loan here, a purchase of shares there and a lease with a buy-back option to crown it all, was all it took to secure apparent control of the debtor's immovable property in Zimbabwe without any reference to its true value.
Clearly, whatever the parties decided to call it, the agreement to take over control of the plaintiff company from Shumba, without paying for it, amounted, in my view, to a pactum commissorium.
It is the substance, not the form, to which the court looks when deciding the true nature of an agreement.
Consequently, therefore, the second issue, whether annexure “C” amounts to a pactum commissorium is determined in defendants' favour.
I have already found that the payment, in South Africa, by Shah, was intended as a loan, as pleaded by plaintiff; therefore, there is no evidence to suggest that the same payment doubled as payment for shares in Indium Investments (Private) Limited.
That issue is resolved in favour of the defendants as well.
The transactions were clearly in fraudum legis. The law in this jurisdiction is clear. Where the contract which is in fraudum legis is performed, the court cannot come to either party's assistance.”
The appeal is premised on the following grounds:
1. That, the court a quo erred in not finding, that, in the absence of a plea for rectification of a contract, the parole evidence rule operates to exclude extrinsic evidence to disprove the contents of a written contract. (sic)
2. The court a quo erred in not finding, that, returns lodged with the Registrar of Companies are prima facie proof of the correctness thereof, and the same cannot be impugned without the joinder of the Registrar of Companies.
3. Consequently, and for the stronger reason in view of grounds of appeal 1 and 2 above, the court a quo erred in holding that the respondents had discharged the onus of justifying possession of the appellant's property within the context of the actio rei vindicatio.
4. The court a quo erred in fact and in law in holding that the agreements in question were simulated agreements which “mimicked” the South African agreements.
5. The court a quo erred in any event in holding, that, the agreements the subject of the litigation were in fraudem legis in that they sought to evade the exchange control legislation, in view of the fact that free funds were paid to the credit of a South African resident, and in not finding, that, the fact that such South African resident was a citizen of Zimbabwe and did not give rise to the need for exchange control approval.(sic)
6. The court a quo erred in fact and in law in holding, that, the agreements the subject of the litigation a quo were a pactum commissorium.
Counsel for the appellant urged us to find, that, the learned judge in the court a quo had not dealt with the case that was placed before him.
It was his contention, that, the matter before the court was principally for the cancellation of the lease agreement between Indium and Kingshaven and consequential relief. He argued that it was essentially a rei vindicatio.
What the court a quo did, however, it is argued, was to turn its focus on a completely different issue which it could not competently determine and made findings which cannot be supported.
It is contended, that, the court thereby misdirected itself.
In my view, the dispute can be resolved by this court having regard to the manner in which the court a quo dealt with what it referred to as the simulated agreements, and, secondly, dealing with the actio rei vindicatio in accordance with the claims in the summons....,.
In answer to the claim for the eviction of Kingshaven from the premises, the respondents raised various defences, namely, that Shumba and his wife had borrowed a specified sum of money from Shah, and that, as security for their due performance thereon, the latter had demanded security in Zimbabwe in the form of shares in Indium. They pleaded, further, that the parties entered into a simulated agreement for the sale of shares in Indium which ultimately resulted in the lease agreement providing for a buy-back option in favour of Shumba and his wife.
There is no suggestion on the papers that Indium participated in any of the agreements except the lease.
It then begs the question which parties the court a quo referred to when it concluded that the agreements were fraudum legis.
It is common cause, that, the loan agreement was between ERF 825 Bryanston Cc, in which Shumba and his wife owned shares, and Shah.
ERF Byanston Cc was not cited as a party to the proceedings before the court a quo.
Shah only appeared in the proceedings in the court a quo as a witness on behalf of Indium.
In the circumstances, the court could not have properly considered the loan agreement, or its legality, in the absence of the parties thereto.
I turn next to the “share sale” agreement in relation to the shares in Indium.
The parties to the sale of the shares were, on the one part, Shumba and his wife, as sellers, and, on the other part, Jayesh Shah and Shaleetha Mahabeer.
The last two were never before the court as parties and the agreement for the sale of shares could therefore not be scrutinised to any extent by a court in their absence.
Consequently, the determination by the court of the issues related to the lease agreement concluded by Indium and all the respondents in reference to the share sale agreement was highly irregular.
It follows, therefore, that, any issues referred to the trial court for determination in relation thereto would be irregular. It is therefore logical to conclude that the court a quo dealt with matters and issues that were not before it.
This leaves Indium, Kingshaven, Shumba and his wife.
They were parties to a document, being the lease agreement, which is the only document properly before the court.
Those were the parties that were before the court, and, therefore, the only dispute for determination was that arising from the lease agreement in respect of which the court had to determine the respective rights and obligations of the parties before it.
In the absence of a counter-claim for declarations of invalidity in respect of the agreements discussed above, the court could not grant relief to the effect that the agreements were invalid. At best, it was argued, the court ought to have granted absolution from the instance.
I think the criticism is well taken.
At p8 of the cyclostyled judgment, the learned judge in the court a quo stated:
“In my view of the facts, the defendants have adduced sufficient evidence to rebut the presumption of legality of the transactions described above. Generally, one of the most common forms of tax avoidance is where the parties to a contract attempt to disguise its true nature in order to qualify for a tax benefit that would not be available if the true contract between them were revealed. The courts require no statutory powers to ignore pretence of this kind and the law will always give effect to the real transaction between the parties.”
The court a quo then went on to consider the agreements in question, and, at p11 of the judgment, concluded:
“In my view, the true nature of the Zimbabwean agreements was that they were additional securities to the South African loan despite the fact that they in effect apparently passed ownership and control to Shah. The buy-back option as well as the fact that the loan had been secured by a mortgage bond gave Shumba the belief (that) these agreements will be respected by the parties as pledged to the underlying loan agreement. I therefore find for the defendant in respect of the first issue.
As to whether annexure “C” amounts to a pactum commissorium, it follows from my reasoning, that, once the interpretation given by the defendant is upheld, the court must find in his favour on this point as well.
I do so for the following reasons:
A pactum commissorium has been 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 ownership in the thing will invariably pass to the creditor in payment of the debt:' see Chimutanda Motor Spares (Pvt) Ltd v Musare & Another 1994 (1) ZLR 310; Van Rensberg v Wieblen 1916 OPD 247 at 252.”
Undoubtedly, the court was correct in its statement of the principle of a pactum commissorium.
However, it was incorrect in applying that principle to the facts of this case.
It gave the respondents far reaching relief which they had neither sought nor prayed for....,.
It is common cause, that, in their plea to the claim for eviction, the respondents raised the issue related to the loan between Shah and Shumba and his wife, the agreement for the sale of shares in respect of Indium, and the lease agreement in terms of which Kingshaven, and through it, Shumba and his wife occupied the premises.
A plea is a defence, and, as such, can be likened to a shield. It is not a weapon or a sword. No relief can attach to a party through a plea.
In the same plea, the respondents averred, that, by separate process, Shumba and his wife would approach the High Court for a declaration of invalidity of the two Zimbabwean agreements.
No such process was ever launched.
Clearly, the court a quo misdirected itself in that it resolved a dispute that was not before it.
Some of the parties to the dispute in question were not before it and they were denied the right to be heard in their own cause.
