This is an appeal against the entire Judgment of the High
Court at Harare dated 27 August 2008.
BACKGROUND
The facts which gave rise to this matter are mainly common
cause and may be summarized as follows.
The respondent was an employee of the appellant from 2003
to 2007. During this period, he resided in a house belonging to the appellant.
The dispute between the parties emanates from two agreements. The first
agreement was a Memorandum of Agreement in which the appellant agreed to sell
its houses to employees who were residing in the houses at the relevant time.
The second was an agreement of lease entered into a few days after signing the
first agreement, the terms of which set out the specific amounts to be paid by
each employee depending on the type of house that they resided in.
The appellant contends that occupation was in terms of the
lease agreement that it entered into with the respondent that was effective
from 1 January 2004. It is submitted, by the appellant, that the terms of the
agreement were subject to the respondent's continued employment.
The respondent, on the other hand, argued that he entered
into an Agreement of Sale with the appellant and that the lease agreement was
merely a vehicle regulating how payment would be made. The respondent argued
that his occupation was subject to the lease agreement as read with the
Memorandum between the appellant and members of the Housing Committee. The
agreement provided that the appellant had agreed to sell its houses to sitting
tenants. The tenants referred to were identified in a document attached to the
agreement and the respondent's name was part of the list.
It was the respondent's understanding that the lease
agreement operated as a lease-to-buy agreement.
It was not in dispute that in 2005 a committee known as the
Housing Committee had been set up by the appellant. It was constituted of
employee representatives. The committee's mandate was to advance the interests
of the employees with respect to their occupation of the company houses. After
the establishment of the committee, the appellant entered into negotiations
with the Housing Committee resulting in a Memorandum of Agreement. The terms of
this Memorandum read as follows:
“Ashanti Goldfields Zimbabwe agrees to dispose of its
housing units situated in Chiwaridzo, Grey Line Flats and Low density to its
employees who are sitting tenants effective 1 December 2003. Find the agreed
prices attached.”
It was agreed that attached to this Memorandum was a list
of the appellant's employees, their respective units and the purchase price for
the unit they lived in. There was also a column which divided the total
purchase price into instalments which would be paid on a monthly basis by each
employee.
Following the Memorandum of Agreement, the appellant and
the respondent entered into a lease agreement. From the time the lease
agreement was signed by the parties, the appellant deducted an amount in
compliance with the payment method indicated in the attachment to the
Memorandum of Agreement, from the respondent's salary. These deductions were
itemized on the respondents pay slip as “rent to buy.”
On 4 June 2007, the respondent's contract of employment was
terminated, and, on 12 of September of the same year he received a letter
terminating the lease agreement and requiring him to vacate the premises by 31
of August 2007. The respondent, believing he had paid the full purchase price
by that time, refused to vacate the premises. On 17 September, the respondent's
legal practitioners wrote to the appellant claiming the property in issue had
been purchased and the full purchase price paid.
The appellant then sought the eviction of the respondent in
the High Court. The respondent resisted the eviction and the court found in his
favor and dismissed the claim, giving rise to this appeal.
The appellant has appealed to this court on the following
grounds of appeal:-
1. The Honorable Court a quo fundamentally misdirected
itself in finding that the agreement of the 1st day of December 2003 was a
valid Agreement of Sale.
2. The Honorable Court a quo further fundamentally misdirected
itself in finding that the amount paid by the Respondent to the Appellant
subsequent to the 9th day of December 2003 was the purchase price in
respect of the immoveable property in issue.
3. The Honorable Court a quo further [erred] in finding that
the lease agreement concluded between the plaintiff and the defendant was void
ab initio.
THE ISSUE
The pertinent question which arises from the grounds of
appeal, in my view, is whether or not the second contract which was entered
into by the parties was a lease agreement in the pure sense, or a lease to buy
agreement based on the Memorandum of Agreement.
THE LAW
It is an accepted principle of our law that courts are not
at liberty to create contracts on behalf of parties, neither can they purport
to extend or create obligations, whether mandatory or prohibitory, from
contracts that come before them. The role of the court is to interpret the
contracts and uphold the intentions of the parties when they entered into their
agreements provided always that the agreement meets all the elements of a valid
contract.
This principle was set out clearly in the case of Kundai
Magodora & Ors v Care International Zimbabwe SC24-14 by PATEL JA when he stated the following:
“In principle, 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. This is so as a matter of
public policy. See Wells v South African Alumenite Company 1927
AD 69 at 73; CHRISTIE: The Law of
Contract in South Africa (3rd ed.) at pp. 14-15. Nor
is it generally permissible to read into the contract some implied or tacit
term that is in direct conflict with its express terms. See South African Mutual Aid Society v Cape Town Chamber of Commerce 1962
(1) SA 598 (A) at 615D; First
National Bank of SA Ltd v Transvaal Rugby Union & Another 1997 (3) SA 851 (W) at
864E-H.”…,.
See also Simbi (Steelmakers) (Pvt) Ltd v Shamu & Ors SC71-15.
WHETHER OR NOT
MEMORUNDUM OF AGREEMENT WAS AN AGREEMENT OF SALE
In this case, the appellant largely sought to rely on the
decision in the case of Ashanti Goldfields Zimbabwe Ltd v Clements Kovi SC07-09.
The facts of that case are very similar to the ones in
casu. Clements Kovi was also an employee of the appellant. He was employed in
June of 1990 and resigned in March of 2007. He alleged that he entered an Agreement
of Sale with the appellant, being the very same Memorandum of Agreement referred
to as the first contract in casu signed by the Housing Committee. His case also
had a lease agreement signed pursuant to the Memorandum and Mr. Kovi's name
appeared on the list that specified the amounts payable on a monthly basis per
employee attached to the Memorandum.
In Ashanti Goldfields Zimbabwe Ltd v Clements Kovi SC07-09, however, the appellant never
deducted money from Clements Kovi's salary as “rent to buy.” The Court, on
appeal, in that case, therefore, determined that;
“It is difficult to understand how the Memorandum of
Understanding can be said to be an Agreement of Sale. What is clear is that the
Appellant was offering the houses to the sitting tenants who were its
employees. There is nothing to show that the Respondent took up the offer…,. At best, the document can only be read as
showing who occupied which house and the price they could pay if they accepted
the offer to purchase.”
In my view, this is what distinguishes this case from Ashanti
Goldfields Zimbabwe Ltd v Clements Kovi SC07-09.
There was no indication that Clements Kovi accepted the
offer to purchase the property in question from the appellant. No money was
deducted from his salary in terms of the lease agreement. This view remains un-impeachable
and is supported by the case of Hativagoni v CAG SC42-15 wherein the parties
entered into what they called an 'Irrevocable Memorandum of Understanding.' In
Hativagoni v CAG SC42-15, the court a quo accepted there was no valid contract
of sale as the Memorandum of Understanding was merely a vehicle through which
an agreement would be concluded. Its exact sentiments were as follows:
“This scenario is distinguishable from a contract of sale
subject to a suspensive condition which comes into effect on fulfillment of a
specified condition. In this case, there was no contract of sale entered into
as envisioned.”
In Hativagoni v CAG SC42-15, as to the legal effect of such
agreements, GOWORA JA concluded as follows:
“In this jurisdiction, it is settled law that agreements
akin to the one in casu are not enforceable primarily due to the uncertainty
which accompanies such contracts…,.
In Premier, Free State and Ors v Firedom Free Estate (Pvt.)
Ltd 2000 (3) SA 413 (SCA), the court
held:
'An agreement that parties will negotiate to conclude
another agreement is not enforceable because the absolute discretion is vested
in the parties to agree or disagree.'”
These authorities are on all fours with Ashanti Goldfields
Zimbabwe Ltd v Clements Kovi SC07-09
where all the parties did was to agree that they may enter into an agreement at
a later date.There was nothing done by either party to bring into operation the
Memorandum of Agreement.
In the present case, the parties went further than to
merely sign the Memorandum of Understanding. The respondent signed the lease
agreement in an effort to bring the Memorandum into operation. The appellant
went on to effect deductions on the respondent's pay-slip in accordance with
the Agreement. The respondent's pay slip was endorsed 'rent to buy' against the
deductions made. Clearly, in my view, there can be no greater indication than
that there was acceptance of the offer and the parties had come to an agreement
on lease-to-buy terms in accordance with the Memorandum.
It seems to me that the deductions betrayed a clear intention
on the part of the appellant to uphold the contract of sale as envisioned by
the Agreement of 1 December 2003. I am persuaded that this is the correct
position by the case of Hoffmann & Carvalho v Minister of Agriculture 1947
(2) SA 855 (J)…, where PRICE J stated that;
“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 intended…,.”…,.
The intentions of the parties are clear and the reasoning
of the court a quo cannot be faulted.
The Memorandum of Agreement, in my view, constitutes a
valid contract of sale as all the elements for a valid contract are met. These
were set out in the case of Warren Park Trust v Pahwaringira & Ors HH39-09 as follows:
“It is trite and a matter of elementary law that the
essential elements of a valid contract of sale comprise:
Agreement (consensus ad idem) as to:-
1. The thing sold, the (merx); and
2. The price of the thing sold, the (pretium).”
In other words, a contract of sale comprises three
essential elements, that is to say:-
“1. An agreement between the parties to buy and sell.
2. An agreement on the thing or commodity sold known as
the merx.
3. An agreement on the price known as a pretium.”
These elements were met in that there was an understanding
that the appellant was undertaking to sell the property to its employees. The appellant
entered into negotiations with the Housing Committee, whose sole purpose was to
protect the housing rights of its employees. The appellant took the negotiations
seriously enough to have the undertaking committed to writing and sworn to by
the Financial Director when he affixed his signature.
Why then would they purport to enter an agreement with the
Housing Committee if they were of the opinion that they had no authority to
represent the employer? What then was the intended effect of the entire process
if the understanding was, in their mind, of no effect?
If the appellant is to persist with the argument, it can
only be construed as contracting in bad faith, and, as stated in the above
cases, courts are not there to absolve one party of its obligations to another
particularly where the other party contracted in good faith and carried out its
side of the agreement.
R. H. CHRISTIE, in his book, Business Law in Zimbabwe…, has
this to say:
“The business world has come to rely on the principle that
a signature on a written contract binds the signatory to the terms of the
contract and if this principle were not upheld any business enterprises would
become hazardous in the extreme. The general rule, sometimes known as the
caveat subscriptor rule, is therefore that a party to a contract is bound by
his signature, whether or not he has read and understood the contract…, and
this will be so even if he has signed in blank…, or it is obvious to the other
party that he did not read the document.”…,.
This principle has been upheld in a plethora of Zimbabwean
case authorities and forms an accepted rule in practice. In the case of
Muchabaiwa v Grab Enterprises (Pvt) Ltd 1996
(2) ZLR 691 (SC), the court stated…,;
“The general principle which applies to contracts, and
commonly designated as caveat subscriptor,
is that a party to the contract is bound by his signature, whether or not
he has read or understood the contract, or that the contract was signed with
blank spaces later to be filled in. Expatiating on this principle is National
and Grindlays Bank v Yelverton 1972
(1) RLR 365 (G) @ 367; 1972 (4) SA 114 (R) @ 116G-H, DAVIES J cited with
approval the following statement by INNES
CJ in Burger v Central South African
Railways 1903 TS 571 and 578 (decided before the promulgation of s 6 of the
General Laws Amendment Act):
'It is a sound principle of law that a man, when he signs a
contract, is taken to be bound by the ordinary meaning and effect of the words
which appear over his signature.'”
The other requirements for a valid contract of sale were
met in that the attachment to the Memorandum of Agreement specified the
property with respect to each employee (being the merx) and the “purchase
price.” It went so far as to break down the amount to be paid in installments
which was the amount later deducted as 'rent to buy' as reflected on the
respondent's pay slip which was authored by the appellant.
WHETHER OR NOT THE LEASE
AGREEMENT WAS A LEASE IN THE STRICT SENSE
It was the appellant's assertion that the second contract
was a lease agreement in the strict sense and that the respondent was wrong to
interpret it to be a lease to buy agreement. On this basis, the appellant, in
their heads of argument, address the matter of “unilateral mistake” which they
claim was made by the respondent.
The respondent argued that the appellant could not claim
this defense because the agreement was “comprehensive and in writing.”
The requirements for this defense to succeed are stated in
National and Grindlays Bank Limited v Yelverton 1972 (1) RLR 364…, where it says:
“…, for the defense of justus error to succeed, he must
prove that the error was reasonable and justifiable and on a material matter.”
I am inclined to agree with the respondent that there was
no justus error in this case, but for different reasons.
Unilateral mistake occurs where one party enters a contract
motivated by a material and genuine mistake but the other party is clear on the
import of the contract being entered into. It would be more readily sustainable
if the appellant had alleged mutual mistake which is defined by R.H. CHRISTIE,
in Business Law in Zimbabwe, as a situation where each party mistakenly thinks
the other is agreeing with his version or understanding of the contract.
In casu, both
parties allege to have entered the contract on the basis of a material error in
fact. One thought it was a lease agreement while the other thought it was
essentially a contract of sale. Therefore, such conduct does not amount to
justus error but to a mutual mistake which may be said to result in the absence
of consensus ad idem which would vitiate the contract.
The appellant contends it was a lease agreement in the
strict sense. However, it perplexes the mind why the respondent would seek to
enter a lease agreement about a week after he has acquired the right to
purchase the property?
The respondent has justified his reasoning for his belief
and substantiated it with evidence.
The critical clauses of the lease agreement suggest the
appellant knew exactly what it was drafting and that this was in no way a lease
agreement in the strict sense but completely dependent on the earlier Memorandum.
(a) Section 2.4 of the contract states that -
“Upon the lessee opting to pay the deposit, the balance
outstanding shall be spread over the lease period as indicated in 1.1.”…,.
In making rent payments there is no “balance” to be paid.
Monthly payments of an agreed amount are paid without
paying a deposit which has a balance spread over a period. This section, in my
view, aptly describes an instalment sale. It only makes sense if interpreted to
mean the balance of the purchase price in the “rent to buy” agreement as
supported by the evidence of the respondent. In my view, the interpretation
that the appellant seeks to place on the agreement clearly leads to an
absurdity and that could not have been the intention of the parties….,.
An examination of section 3.2 of the lease agreement clearly
illustrates this point. It reads as follows:
(b) Section 3.2 of the contract relates to a “purchase
price”:
“The rentals paid by the lessee in terms hereof shall be
taken into account and be deducted from the amount due in respect of the
purchase price determined in accordance with the provisions of Clause 3.1…,.”
It is clear that the respondent was not contracting with
the intention of leasing the property but in enforcing the Agreement of Sale.
Such an interpretation was accepted by the appellant when it deducted the
amount as 'rent to buy.'
To now claim that they had no intention to sell the
property in question to the respondent is clearly absurd.
The rationale applied in Ashanti Goldfields Zimbabwe Ltd v
Clements Kovi SC07-09 was that, at
most, the Memorandum constituted an offer which was not accepted. In casu, the
conduct of the appellant, in the drafting of the 'lease agreement' and
effecting deductions to the respondent's salary made the sale perfecta.
DISPOSITION
On this basis, I am of the firm view that the court a quo
was correct in dismissing the appellant's claims. If anything, the court a quo
may have been lenient in giving the appellant the benefit of the doubt with
respect to its feigning ignorance as to the true import of the contracts it
entered into. This conclusion is based on the fact that the deductions made
from the respondent's salary were clearly marked “rent to buy.”
There was no mistake of any sort.
Both parties knew the import of the contract they signed.
Therefore, any ambiguities existent in the contract being called a “Lease”
Agreement should be interpreted against the appellant by application of the
contra proferentem rule.
The evidence, as a whole, in my view, leads to one logical
conclusion; that the appellant was well aware of what it was doing when it
entered into the contracts and the legal consequences thereof. This appeal is
therefore nothing more than an attempt to depart from a valid and legally
binding agreement.
Courts frown upon attempts to skirt one's legal obligation
and it is therefore proper that the appellant be made to pay the respondent's
costs.
Accordingly, I make the following order:
1. The appeal be and is hereby dismissed.
2. The appellant shall pay the respondent's
costs of suit.
