MAKONESE
J: The parties in this matter appeared before the Honourable Ndou, J on
the 4th September 2012 for a Pre-trial Conference under case No. HC
2104/10. It was agreed that the matters under case No. 2104/10 and HC
2734/10 be consolidated and heard together.
In case No. HC 2104/10, the parties were Nuglo Investments
(Pvt) Ltd being the Applicant and the Respondent is Irene King, t/a Kings
Auction Centre. This matter which had commenced as a Court Application
was referred to trial on the 20th of June 2011 after both parties
agreed that the matter could not be resolved on the papers. The parties
proceeded to file their pleadings up to Pre-Trial stage when the matter was
then consolidated with case No. HC 2734/10. On the other hand the parties
under case No. HC 2734/10 were Sammy's Group (Pvt) Ltd t/a as Kings Auction as
the Plaintiff, and John Bourcher Meyburgh (NO), Nuglo Investments (Pvt) Ltd, CW
Electrical (Pvt) Ltd and Registrar of Deeds were 1st, 2nd,
3rd and 4th Defendants respectively.
It is noted that at the time the two matters were
consolidated, both parties overlooked the fact that pleadings under case No. HC
2734/10 were not complete in that, there was no Pre-Trial memorandum of issues,
and further the parties had both not filed their Synopsis of Evidence.
This meant that for the purpose of trial, the issues for determination were not
set out in that particular matter.
I resolved, with the consent of both Mrs H. Moyo
and Mr N. Mazibuko for the Plaintiff and Defendants respectively that
we hear submissions first on the Exception and Special Plea filed by the 1st
and 2nd Defendants under case No. 2734/10 before hearing evidence on
the merits in the consolidated cases.
This judgment therefore deals with the Exception and
Special Plea.
Plaintiff's Claims
The Plaintiff in this matter, Sammy's Group (Pvt) Ltd, t/a
Kings Auction is a registered company carrying on the business of auctioneers
at stand 1396 Bulawayo. The Plaintiff alleges in its declaration that it
entered into a lease agreement with 2nd Defendant (Nuglo
Investments) Pvt Ltd in terms of which the 2nd Defendant let to the
Plaintiff certain premises known as stand 1396, Bulawayo Township, held by the
2nd Defendant under Deed of Transfer number 1686/53, also known as
Kings Auction Centre. The Plaintiff further alleges that sometime on or
about 30th June 2006, the 2nd Defendant, represented by
one of its directors and shareholder, the late Graham Leonard Elston (DR
810/08) in his lifetime, entered into a verbal agreement with the Plaintiff,
represented by one of its directors, Irene King, in terms of which the 2nd
Defendant granted the Plaintiff, as a sitting tenant, a right of first refusal
in respect of the immovable property known as stand 1396 Bulawayo Township,
held by the 2nd Defendant under Deed of Transfer number 1686/53
should the property be put up for sale. The Plaintiff contended further,
that as consideration for the right of first refusal it was agreed that the
Plaintiff would at its own cost undertake all necessary repairs and maintenance
of the immovable property in 2nd Defendant's stead, and pay
instalments towards the eventual purchase of the property. The Plaintiff
further averred that following the conclusion of the right of first refusal
agreement the parties got to a point where they negotiated and agreed a
purchase price of ZW$5 billion (five billion Zimbabwe dollars). Before
the parties finalised the sale transaction, the Plaintiff avers that the
representative of 2nd Defendant, the late Graham Leonard Elston,
suffered a tragedy in that his wife Elana Elston, who was the other director
and shareholder of the 2nd Defendant died on the 8th
October 2006. The Plaintiff avers that this further delayed the
finalisation of the sale transaction between the 2nd Defendant and
the Plaintiff in terms of the right of first refusal. Whilst the late
Graham Elston was still mourning his wife's death, he suffered yet another
mishap in that he was burnt in a fire and was hospitalised for several
months. He subsequently died on 3rd July 2008 before the
conclusion of the sale transaction pursuant to the right of first refusal.
After the death of Elana Elston and Graham Leonard Elston who were the two
directors and shareholders of the 2nd Defendant. The Plaintiff
continued in occupation of the immovable property at stand 1396, Bulawayo,
Township as tenants.
The Plaintiff contends in the declaration that on or about
15th and 21st April 2010, 1st Defendant, in
his capacity as the Executor of the estates of Elana Elston and Graham Leonard
Elston entered into a written agreement of sale of shares in terms of which all
the issued shares in 2nd Defendant were sold to the 3rd
Defendant. The sale of shares agreement had the effect of disposing of
the immovable property known as stand 1396, Bulawayo Township, held by 2nd
Defendant under Deed of Transfer number 1686/53, to the 3rd
Defendant, in breach of the right of first refusal granted by the 2nd
Defendant to the Plaintiff, so the Plaintiff argued. The Plaintiff
alleged that by purchasing all the issued shares in the 2nd
Defendant the 3rd Defendant effectively acquired ownership of the
immovable property as the said property was the sole major asset of the 2nd
Defendant. The Plaintiff contended that as the sale of shares agreement
was in violation of the right of first refusal granted by the 2nd
Defendant to the Plaintiff, it was invalid and of no force and effect
whatsoever and should be so declared and cancelled. It is the Plaintiff's
assertion that the sale of shares agreement, which had the effect of disposing
of the sole asset of the 2nd Defendant or disposing of the entire
undertaking of the 2nd Defendant, was entered into without
compliance with the provisions of section 183 of the Companies Act [Chapter
24:03] and the sale was therefore invalid and of no force and effect. The
Plaintiff avers, therefore, that the agreement between the 2nd
Defendant and the Plaintiff in terms of which Plaintiff was granted the right
of first refusal is binding on both parties and prays for a declaratory order
that Plaintiff has a right of first refusal upon the disposal of the immovable
property known as stand 1396, Bulawayo Township. The Plaintiff also seeks
a declaratory order that the agreement of sale of shares of Nuglo Investments
(Pvt) Ltd entered into by the 1st Defendant and 3rd
Defendant on the 1st and 21st April 2010, is in breach
of the Plaintiff's right of first refusal and therefore invalid and must be
cancelled. The Plaintiff prays for an order directing the 2nd
Defendant to sell the immovable property in question to the Plaintiff in terms
of the right of first refusal.
The basis of the Exception
The first and second Defendant filed an Exception and
Special Plea in response to the Plaintiff's claims. The Defendants submit
that the Plaintiff's claim is bad at law and discloses no cause of action and
is also contradictory, vague and embarrassing. They argue that the
Plaintiff in its declaration as amplified by the Further Particulars admits
that what was sold to the 3rd Defendant by 1st Defendant
were shares in the 2nd Defendant. It follows, so the
Defendants argue, that since the property is owned by the 2nd
Defendant and has been so owned since 1953 upon the death of Graham Leonard
Elston and Elana Elston, the property remained in the name of the 2nd
Defendant and could not fall into either estates. The Defendants argue that
effectively what could only be sold was in fact, the shares in the 2nd
Defendant. In not so many words what the Defendants are asserting is the
principle that shares are an incorporeal movable asset and do not amount to the
equivalent of the immovable property owned by the company being sold or
disposed of.
It seems to me, that the correct legal position is that
since the immovable property remains in the name of the 2nd
Defendant, it follows that the immovable property has not been disposed of and
the Plaintiff's claim is therefore bad in law and discloses no cause of
action. The definition of “share” in the Companies Act makes it quite
clear that a share is not immovable property. “Share” is defined in the
Companies Act as follows:-
“means as share in the share
capital of a company and includes stock, except where a distinction between
stock and shares is expressed or implied.”
In both papers under case No. HC
2734/10 and HC 2104/10, the Plaintiff
alleges that it entered into a lease agreement with the 2nd
Defendant which subsequently granted it the right of first refusal.
Herein lies the problem.
The lease agreement referred to was in fact between the Plaintiff and Auction
Centre (Pvt) Ltd. At no stage did the Plaintiff deal with the late Graham
Leonard Elston in his capacity as representing the 2nd
Defendant. Indeed, from the papers, it is clear that Plaintiff was not
even aware of the existence of the 2nd Defendant until after the
death of Mr Elston. It follows therefore, that if at all Mr Elston gave a
right of first refusal, he did so either in his personal capacity or as an
officer of Auction Centre (Pvt) Ltd, in which case such right was of no force
and effect as neither Mr Elston nor Auction Centre had the mandate to grant a right
over the property which they did not own. The fact that Mr Elston may
have thought that he owned the property in his personal capacity or through
Auction Centre (Pvt) Ltd does not assist the Plaintiff as the court must look
at the facts and the circumstances surrounding the transaction. See Felistano
Khumalo v Lizzie Mandeya and Bulawayo City Council 2008 (2) ZLR 203 (S)
where MALABA JA held that even when the parties purported to be selling each
other immovable property when in fact they were selling each other rights in
the property the court had to look beyond that as agreeing with the parties
could accord no legal effect at all to a nullity.
The Defendants further contend that the Plaintiff's claim for the right of
first refusal is vague and embarrassing and contradictory more particularly in
that it is unclear when such right was accorded to the Plaintiff. In any
event, as a company can only act through the medium of a Resolution made in
terms of the Companies Act, the alleged right of first refusal cannot therefore
be sustainable in the absence of such resolution or irrefutable proof that the
Late Mr Elston was acting on behalf of and on the authority of the 2nd
Defendant and not in his personal capacity. There is no dispute that when
Mr Elston signed the lease agreement he signed it on behalf of Auction Centre
(Pvt) Ltd. The reason for this could be that he thought (mistakenly
though) that he could enter into the lease agreement in his personal capacity
or on behalf of Auction Centre (Pvt) Ltd. As it turned out the property
belonged to the 2nd Defendant, which was not a party to the lease
agreement.
The Defendants aver that they are embarrassed in that, whilst alleging a right
of first refusal, the Plaintiff in the same breath suggested that an agreement
was subsequently concluded with Mr Elston. The Defendants say they are
embarrassed because on the one hand the Plaintiff alleges it has a right of
first refusal, which it was never given an opportunity to exercise, whilst in
the same breath it alleges that as a result of the right of first refusal, an
agreement of sale was concluded. The Plaintiff argues that the purported
agreement of sale was never finalised adding confusion to the whole case.
I am of the firm view that that Plaintiff's submission in paragraph 14 of its
declaration is vague and embarrassing and bad in law as it is not correct to
say the sale of shares in the company amounted to the sale of the immovable
property. The confusion of the Plaintiff alleging a right of first
refusal and the existence of contract was compounded not only by its
admission that a final agreement was not reached but by the fact that the
alleged terms of either the right of first refusal or the agreement are vague and
unclear. The averments by the Plaintiff do not therefore disclose or
establish a cause of action. See the case of: Nestoros v Innscor
Africa Ltd 2007(2) ZLR 267.
The Plaintiff sought to argue that 2nd Defendant filed the exception
to the Plaintiff's summons and declaration outside the time limits stipulated
in the rules in that the papers were filed five and half months after the
Plaintiff's Further Particulars were served on the 2nd Defendant.
Order 18 Rule 119 provides as follows:
“The Defendant shall file
his plea, exception or special plea within ten days of the service of the
Plaintiff's declaration:
Provided that where the
Plaintiff has served his declaration with the summons as provided for in rule
113 there shall be added to the period of ten days above referred to the time
allowed a defendant to enter appearance is calculated in terms of rule 17.”
It is beyond argument that the rules do not provide for an automatic bar
against a defendant who files an exception outside the prescribed time
limits. In any event the Plaintiff did confirm that 1st
Defendant's Notice of Exception was timeously filed. The 1st
Defendant also pleaded over the merits and the same matters raised in 1st
Defendant's exception relate to the same issues which fall for determination in
the exception.
I am satisfied that the 1st and 2nd Defendant's exception
and Special Plea are properly before the court and that there is no prejudice
to be suffered by the Plaintiff because the basis of the exception and Special
Plea have always been known to them.
Whether the
Defendants have established that plaintiff's claims are excepiable.
I am satisfied that the Plaintiff's claims are vague and embarrassing and do
not disclose a cause of action for these reasons:
(1)
There is no evidence that the Plaintiff and second Defendant entered into a
lease agreement in respect of stand 1396 Bulawayo Township.
(2)
There is no evidence to support the assertion that at the time Auction Centre
(Pvt) Ltd entered into a lease agreement with the Plaintiff, Mr Elston was
mandated to represented 2nd Defendant.
(3)
There is no legal basis for asserting that the sale of shares in 2nd
Defendant amounted to the sale of the immovable property in dispute.
(4)
The Plaintiff did not lay any solid and firm legal basis for the so-called
right of first refusal either against 2nd Defendant or Mr Elston.
(5)
The Plaintiff's claims are contradictory in that on the one hand they claim
that an agreement of sale was concluded and a price was agreed for the property
and in the very same breath they aver that at the time of Mr Elston's death the
transaction had not been finalised.
(6)
The defects in the Plaintiff's claims as particularized in the Declaration
cannot be cured by an amendment.
Mrs H. Moyo for the Plaintiff argued that even if an exception is
upheld, this does not mean that automatically the Plaintiff's claim should be
dismissed. She contended that as a matter of practice the Plaintiff
should be given leave to amend the offending pleadings within a specified
time. Mrs H Moyo referred me to the cases of: Adler v Elliot
1988 (2) ZLR 283 and Auridiam Zimbabwe (Pvt) Ltd vs Modus Publications
(Pvt) ltd 1993 (2) ZLR 359.
In the case of Adler v Elliot (spura) and at page 292, GUBBAY JA (as
he then was stated as follows:-
“A claim should not be dismissed
on an exception where it is possible that the party affected may be able to
allege further facts that would disclose a cause of action.” (emphasis is
mine)
Mr Mazibuko on behalf of the Defendants argued that it is not
desirable in this case to order the Plaintiff to amend their claim as it is
incurably bad at law. I tend to agree with Mr Mazibuko that the
general practice of affording the Plaintiff the opportunity to amend their
claims should not apply in this case. The Plaintiff's claims are not only
vague and embarrassing and contradictory. The claims are bad at law and
are so incurably bad that it would in my view be undesirable to grant Plaintiff
the leave to amend its declaration within a stipulated period. Herbstein
and Van Winsen, in Civil Practice of the High Courts of South Africa 5th
Edition (Vol 1) at page 630 summarise the position as follows:-
“The aim of the exception
procedure is thus to avoid the leading of unnecessary evidence and to dispose
of a case in whole or in part in an expeditious and cost – effective
manner. Thus pleadings whose contents are so vague and it is impossible
to determine the nature of the claim or the defence and pleadings which are bad
in law in that their contents do not support a discernible and legally
recognised cause of action or defence are struck out.”
In the result I would accordingly make the following order:
(1)
The 1st and 2nd Defendants' exception and Special Plea be
and are hereby upheld.
(2) The Plaintiff's
claims are dismissed with costs.
Messrs Cheda and partners, plaintiff's legal practitioners
Calderwood,
Bryce and partners, defendants' legal
practitioners
