The defendant contends that the accountant did not have its mandate to write the letter, referencing words stated in.as follows:

"The law as I understand it from a reading of the authorities on the point is that if the defendant denies that the signature of the document is that of himself or his agent or denies the authority of his agent, the onus would be on the plaintiff to establish these facts."

Section 12(c) of the Companies Act [Chapter 24:03] provides that anyone deriving title from a company shall be stopped from denying that a representative of the company has been duly authorised and has authority to exercise the functions customarily exercised by an officer or agent in his position. The section provides:

"12 Presumption of Regularity

Any person having dealings with a company or with someone deriving title from a company shall be entitled to make the following assumptions, and the company and anyone deriving title from it shall be stopped from denying their truth-

...

(c) That every person whom the company, acting through its members in general meeting or through its board of directors or its manager or secretary, represents it to be an officer or agent of the company, has been duly appointed and has the authority to exercise the functions customarily exercised by an officer or agent of the kind concerned.

The plaintiff in this matter seeks an order requiring the defendant to vacate Stands 322 and 324 in Beitbridge Township and pay holding over damages from the 1^st of April 2006 to the date of vacation.

The defendant avers that it is the lawful purchaser of both houses in terms of written agreements of sale and counterclaims for the transfer of the Stands.

The plaintiff disputes the validity of the agreements of sale and pleads, in any event, that the defendant's claim in reconvention has prescribed.

At the trial of this case, the first witness (Peter Lewis Bailey) was called by the defendant. At the conclusion of this witness's testimony, it was agreed by both counsel that there were no material disputes of fact and that no further evidence would be adduced by either party.

Background Facts

In February 1998, Peter Bailey was appointed as the plaintiff's liquidator. Subsequently, in October 1999, a Deed of Compromise (the Deed) was concluded with the creditors and Bubye Minerals (Pvt) Ltd, and, thereafter, sanctioned by this Court in Case No. HC15191/99 [Exhibit 1].

Under the Deed of Compromise, Bubye Minerals was to take transfer of all claims of the creditors against the plaintiff. By virtue of the Court order, Peter Bailey was appointed as agent of the parties; firstly, to effect the transfer of claims in terms of the Deed, and, secondly, in order to receive, administer, and make payments of all amounts payable to the creditors in terms of the Deed. The Court order operated to set aside the winding up of the plaintiff.

Peter Bailey testified that he was approached by Bubye Minerals to sell the two houses in Beitbridge to the defendant. Peter Bailey then authorised both sales which took place in September 2002. At that time, one of the houses was occupied by a third party who had been given notice to vacate by the plaintiff, while the other house was already occupied by the defendant as lessee.

Thereafter, the defendant paid the purchase price in cash and this was immediately transferred to Bubye Minerals. The money was to be used to continue the running of the plaintiff's mines and thereby generate more income for the benefit of all the creditors. Peter Bailey's evidence was that the agreements of sale [Exhibits 2A and 2B] were entirely open and above board. Moreover, there was no indication, at the time, that the parties did not intend the sale of the houses or that the sales should be cancelled and the money paid by the defendant be refunded. On the contrary, after the purchase price was paid, the plaintiff gave vacant possession of both Stands to the defendant who then duly took occupation of the houses.

Authority to Sell

According to Peter Bailey, clause 2.3 of the Deed of Compromise, as read with clauses 4.1.1.3 and 4.2.1, empowered him to authorise Bubye Minerals to effect the sales in casu. Moreover, the disposal of the houses did not require any resolution of the plaintiff's Board of Directors whilst the Deed was in place.

By virtue of clause 2.3 of the Deed of Compromise, for so long as any amount payable to the preferred or concurrent creditors remained unpaid, Bubye Minerals was prohibited from alienating any of the plaintiff's assets “without the prior written consent of the Liquidator having first been obtained.”

In terms of clause 4.2.1, “the Liquidator shall exercise sole and absolute discretion in relation to the interpretation and implementation of this Deed and in the event of a dispute arising thereon, his decision shall be final and binding on all the parties hereto.”

In my view, although Article 2.3 is negatively couched in the form of a prohibition against alienation, when read in conjunction with clause 4.2.1, its necessary implication is that the liquidator was empowered to authorise the disposal of the plaintiff's assets if and when he deemed it appropriate to do so in the execution or furtherance of his general mandate.

In the agreements of sale concluded in September 2002 [Exhibits 2A and 2B] the plaintiff, as the seller, was represented by Adele Farquhar as “being duly authorised thereto”. At that time, Adele Farquhar was the Managing Director of Bubye Minerals. As appears from certain correspondence between March 1998 and March 2006, Adele and Michael Farquhar and/or Bubye Minerals were assumed to be the majority shareholders in the plaintiff [Exhibits 5, 6 and 7], while the Farquhars also evidently became directors of the plaintiff [Exhibits 4A, 4B and 4C].

Article 78 of the plaintiff's Articles of Association [Exhibit 9] provides for the appointment of Board of Directors. It empowers the existing directors to fill casual vacancies or appoint additional directors. Every such appointment is “subject to confirmation by the members at the next ordinary meeting.”

In the instant case, a former Director (one Cowper) gave notification, by letter dated the 30^th of August 2002, of his resignation as director of the plaintiff with immediate effect and his replacement in that capacity by Adele Farquhar. However, no evidence was placed before the Court as to whether the existing directors had concurred in this appointment or whether it was subsequently ratified at the next ordinary meeting of members.

In any event, the agreements of sale in casu were entered into by Adele Farquhar on the 5^th of September 2002 - after her ostensible appointment as a Director of the plaintiff. In this regard, according to Article 101 of the Articles of Association, “all acts done…, by any person acting as a Director shall, notwithstanding that it shall afterwards be discovered that there was some defect in the appointment of the Directors or persons acting as aforesaid, or that they or any of them are disqualified, be as valid as if every person had been duly appointed or was qualified.”

Under the law of agency, it is trite that the agent's actions operate to create a contractual or other legal tie between the principal and the third party. The agent's authority to act may arise either by dint of actual authority, whether express or implied, or by way of ostensible or apparent authority or authority by estoppel.

According to CHRISTIE: Business Law in Zimbabwe (1985)…,:

“In the language of the law of agency, apparent and ostensible authority are synonymous…, and ostensible authority is sometimes said to be created by the principal holding out the agent as having authority…, although sometimes a distinction seems to be drawn between apparent authority (flowing from the capacity in which the agent is employed) and holding out (by particular words or actions)…,.

Ostensible authority may arise otherwise than from the capacity in which the agent is employed, as exemplified by:…, from a course of dealing;…., from the third party's knowledge that the agent had authority to pay certain debts and presumption that he had authority to pay others;…, where the presumption of continuity was applied and the third party was entitled to assume that an agent to whom (unknown to the third party) the principal had transferred his business was still the principal's agent.

What is not clear is whether apparent authority, ostensible authority and authority by holding out are all synonymous with authority by estoppel, which requires not only a representation by the principal but that the third party has acted on it to his prejudice. No doubt, in ninety-nine cases out of a hundred the third party will have no difficulty in establishing prejudice, but it is suggested that it is not necessary for him to do so, as the situation contains all the elements of quasi-mutual assent, for which proof of prejudice is unnecessary.”

As regards the principal's right to vindicate property disposed of without his authority, the learned author states as follows…,:

“A principal whose agent has, without authority, disposed of property entrusted to his care may recover that property from third parties unless estopped from doing so, as by having given the agent ostensible authority to deal with the property.”

Applying these general principles of agency to the facts of this case, it seems to me that Adele Farquhar was duly authorised to represent the plaintiff as the seller of the two houses in September 2002.

Adele Farquhar's authority to do so derives, firstly, from the sales having been authorised by Peter Bailey in terms of clause 2.3 as read with clause 4.2.1 of the Deed of Compromise, and, secondly, from her ostensible appointment and subsequent acts as a Director of the plaintiff under Article 78 as read with Article 101 of the plaintiff's Articles of Association.

In my view, the cumulative effect of these provisions, coupled with the conduct of the parties before and after the disputed sales, affords the requisite authority to sell the houses in question.

It is to be noted in this regard that the first intimation of the sales being challenged was only provided in a letter from the plaintiff's lawyers addressed to the defendant on the 7^th of September 2004 [Exhibit 8] - over two years after the houses had been sold. In the intervening period, the plaintiff did not question the propriety of the sales and in fact gave vacant possession of the houses to the defendant. The latter, on its part, paid the agreed purchase price in full and took occupation of the houses. If the sales were to be reversed at this juncture, the defendant would be significantly prejudiced in terms of its monetary outlay for the Stands in 2002.

In the premises, I am satisfied that Adele Farquhar did possess the requisite ostensible authority to represent the plaintiff in the agreements of sale and that they were therefore validly concluded. The plaintiff is accordingly bound by the agreements and thereby estopped from recovering the Stands in question.

It follows that the plaintiff's claim for the eviction of the defendant cannot be sustained and it is accordingly dismissed with costs.

It also follows that the defendant is entitled to enforce the binding agreements of sale and therefore succeeds in its counterclaim for the transfer of the two Stands, subject to the determination of the plaintiff's special plea of prescription of the counterclaim.

In Walenn Holdings (Pvt) Ltd v Intergrated Contracting Engineers (Pvt) Ltd & Anor 1998 (1) ZLR 333 (H)..., SIBANDA J quoted with approval the words of LORD SIMON in Morris v Kanssen 1946 (1) ALLER 586 (HL)..., when he said that –

“The rule in Royal British Bank v Turquand (The Turquand or Indoor Management Rule) provides that persons contracting with a company, and dealing in good faith, may assume that acts within its constitution and powers have been properly, and duly performed, and one is not bound to inquire whether acts of internal management have been regular. The rule renders proof by the company that the internal formalities have not been complied with insufficient to enable it to escape liability under the contract, hence the rule is not merely on applications of the rebuttable presumption omnia praesumuntur rite esse acta.”

In HAHLO's South African Company Law through the Cases, 5^th ed..., the rule is repeated wherein it is stated that –

“Under the rule, also known as the Indoor Management Rule, persons dealing with the Director, or Manager, of a company, who openly exercises authority which he could have, under the constitution of a company provided that some act of internal management was performed are entitled to assume that that act was performed.”

In Zimbabwe, the point is made clear by section 12 of the Companies Act [Chapter 24:03]. That section provides that –

“Any person having dealings with a company, or with someone deriving title from a company, shall be entitled to make the following assumptions, and the company, and anyone deriving title from it, shall be estopped from denying this truth –

(a) That the company's internal regulations have been duly complied with;

(b) That every person described in the company's register of Directors and Secretaries, or in any return delivered to the Registrar by the company in terms of section 187, as a Director, Manager, or Secretary, of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a Director, Manager, and Secretary, as the case may be, of a company carrying on business of the kind carried on by the company; and

(c) That every person whom the company, acting through its Members in general meeting, or through its Board of Directors, or its Manager, or Secretary, represents to be an officer or agent of the company , has been duly appointed, and has authority to exercise the functions customarily exercised by an officer, or agent, of the kind concerned.”

The second issue is whether the said Agreement of Sale is a nullity.

The first respondent is splitting hairs by seeking to say that though Mr. Michael Hanyani had authority to instruct Nandi Properties (Private) Limited, he had no authority to do other acts that generally, or naturally, go with such a mandate, that is the issue of purchase price.

I am of the view that the first respondent is estopped from contending that Mr. Michael Hanyani, as the Managing Director, did not have the usual ostensible authority expected of any company Managing Director to enter into contracts on behalf of a company.  

It is further estopped from denying that it was aware that its Managing Director had signed the irrevocable offer letter and had, by virtue of the special power of attorney in favour of Messrs. Magwaliba & Kwirira Legal Paractitioners, entered into a valid Agreement of Sale with the applicant.

It is my further view that the first respondent had no good reason to seek to resile from the Agreement of Sale, or to seek to have such Agreement of Sale nullified.

Accordingly, it is hereby ordered that –

Evidence was also led tending to establish that Sibangilizwe Moyo did not follow the correct procedure before selling the subdivisions to the defendants in that he did not obtain the necessary company resolutions before selling the subdivisions on the two farms. What this means is that he sold the subdivisions without authorization from the owner - Mabonde Agricultural Enterprises (Pvt Ltd.

While the rule in Royal Bank v Turquand 119 ER 886 and adopted in Walenn Holdings (Pvt) Ltd v Integrated Contracting Engineers (Pvt) Ltd & Another 1998 (1) ZLR 333 (H) to the effect that strangers dealing with a company are entitled to assume that the necessary internal company procedures have been complied with is correct, such assumption is no answer to the plaintiffs' claim that Sibangilizwe Moyo sold their respective shares without their consent.

This matter involves two separate claims by the applicant as against the same respondent in Case Nos. HC11737/11 and HC279/12. The two claims emanate from the same cause of action and involve the same facts in issue between the same parties. They were accordingly consolidated, by consent, on 19 November 2012 through a chamber application filed under Case No.13310/12.

The applicant's consolidated claim is for summary judgment in Case Nos. HC11737/11 and HC279/12. He seeks the payment of two tranches of US$83,500= each and BUPA medical aid subscriptions in the sum of GB£1,332=92 together with interest at the prescribed rate and costs of suit on a legal practitioner and client scale.

Background

The applicant is the former Managing Director of the respondent and a former Director of Meikles Ltd, having resigned from both positions with effect from 30 June 2011. His claim arises from a severance package totalling US$334,000= which was executed on 22 June 2011. The agreement in question was signed by one Brendan Beaumont, representing the respondent in his capacity as Group Chief Executive of Meikles Ltd and being duly authorised thereto. Meikles Ltd owns the entire shareholding in the respondent company. The applicant avers that the respondent has complied with certain aspects of the agreement, relating to payments in lieu of notice and leave and the transfer of the applicant's motor vehicle and cellphone. However, it wishes to resile from the principal element pertaining to severance pay. Its defence, as to the absence of proper authority to conclude the agreement and non-compliance with statute, is merely a dilatory tactic and an abuse of court process.

The respondent accepts that the applicant did report to Brendan Beaumont as his immediate boss. However, it denies that the latter had authority to execute the agreement with the applicant in the absence of resolutions from Meikles Ltd and the respondent authorising him to bind the respondent to the agreement. According to a supporting affidavit from its erstwhile lawyer (now deceased), the agreement was drafted on the instructions of Brendan Beaumont in collaboration with the applicant's counsel herein. Its defence, as per its plea, is that Meikles Ltd is a distinct legal entity quite separate from the respondent company. In any event, the agreement is invalid because of the absence of due authorisation to conclude it and because its principal features would entail non-compliance with certain provisions of the Companies Act.

The applicant avers that Brendan Beaumont, in his several capacities, held himself out to possess the requite authority and that he relied upon that representation. Brendan Beaumont therefore had ostensible authority to bind the respondent to the agreement with the applicant. Moreover, the provisions of the Companies Act which are relied upon by the respondent do not apply to the applicant as an employee who assumed the position of Director due solely to his contract of employment….,.

Authority to Conclude Agreement

Section 12 of the Companies Act [Chapter 24:03] codifies the so-called turquand rule or presumption of regularity in corporate affairs. It provides that any person dealing with a company is entitled to make certain assumptions and that the company is estopped from denying their truth. In particular, it may properly be assumed that the company's internal regulations have been duly complied with. See, in this regard, Wolpert v Uitzigt Properties (Pty) Ltd & Others 1961 (2) SA 257 (W)…, and the authorities there cited.

In terms of section 12 of the Companies Act [Chapter 24:03], it may also be assumed that every person described in the company's register or returns as a director, manager or secretary of the company, and every person whom the company represents to be an officer or agent of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a director, manager or secretary, or by an officer or agent of the kind concerned. However, a person is not entitled to make any such assumptions if he has actual knowledge to the contrary or if he ought reasonably to know the contrary. Section 13 of the Companies Act stipulates that a company shall be bound in terms of section 12 notwithstanding that the officer or agent concerned acted fraudulently or forged a document purporting to be sealed or signed on behalf of the company.

In essence, what these provisions enact, in the corporate context, are the common law rules governing ostensible or apparent authority entitling third parties to enforce contracts concluded with the agents or employees of their principals. See Reed N.O. v Sager's Motors (Pvt) Ltd 1970 (1) SA 521 (RAD); Stewart v Zagreb Properties (Pvt) Ltd 1971 (2) SA 346 (RAD); Seniors Service (Pvt) Ltd v Nyoni 1986 (2) ZLR 293 (S); Mine Consultants and Supply Company v Borrowdale Motors (Pvt) Ltd 1990 (2) ZLR 281 (S).

Counsel for the applicant contends that the benefits of sections 12 and 13 of the Companies Act apply not only to outsiders but also to the Directors of a company, particularly where the termination of their contracts of employment are in issue. He further submits that Brendan Beaumont, by virtue of his position, had ostensible authority to act for the respondent and bind it to the agreement that he entered into on its behalf with the applicant.

Counsel for the respondent submits to the contrary that sections 12 and 13 are not intended for the benefit of any insider who ought to have known of the alleged irregularity.

I fully agree with that submission.

As I have already indicated, section 12 of the Companies Act legislates the rule in Royal British Bank v Turquand (1856) 6 E & B 327; [1843-60] All ER Rep 435. However, it is well-established that the rule does not protect any person, who, by reason of his position within the company, ought to have known of the irregularity in question. See Mahony v East Holyford Mining Co. (1875) LR 7 HL 869…,.; Howard v Patent Ivory Manufacturing Co. (1888) 38 ChD 156; Mineworkers Union v J.J. Prinsloo 1948 (3) SA 831 (A). Moreover, Wolpert v Uitzigt Properties (Pty) Ltd & Others 1961 (2) SA 257 (W) does not establish the broad proposition contended on behalf of the applicant, having regard to what was stated in that case at pp. 264F and 266.

In the instant case, the applicant was clearly not an outsider or mere employee of the respondent, but its Managing Director. He alleges that he was precluded from attending Board meetings of Meikles Ltd and the respondent at the relevant time. Even if this were true, he could quite easily have obtained the minutes of relevant Board meetings so as to ascertain decisions taken concerning his resignation and severance package. In any event, in his position as Managing Director, he must have known that any decision in that regard would require a Board resolution from the respondent authorising Brendan Beaumont to negotiate and conclude his severance package. For these reasons, I take the view that the applicant is not entitled to take advantage of the presumption of regularity embodied in section 12 of the Companies Act.

For the same reasons, I do not think that there is any basis for invoking ostensible authority in relation to Brendan Beaumont's actions. Firstly, the fact that he was the Group Chief Executive of Meikles Ltd does not mean that he had the requisite ostensible authority, by virtue of that position, to negotiate and conclude severance packages on behalf of the respondent. There is nothing in the papers to suggest that he normally exercised that function in that particular capacity. Secondly, as I have already emphasised, the applicant was not some third party dealing with an agent or employee of the respondent. He was its Managing Director, and, given that position, I can see no justification for extending the doctrine of ostensible or apparent authority to the facts of this case.

It was further contended that estoppel, as pleaded by the seventh respondent does not arise. The acts done by the third respondent were not lawful in that he disposed of the whole undertaking of the second applicant (without a resolution from the Shareholders) in contravening of section 183(1)(b) of the Companies Act [Chapter 24:03].

It was contended, on behalf of the seventh respondent, in his heads of argument and in submissions, that the applicants did not adduce evidence that satisfactorily excludes the third respondent's authority to represent the second applicant in the first transfer. There is, therefore, no basis for impeaching the transfer. The seventh respondent acquired the property innocently and for value. It was further contended that the inaction on the part of the applicant from the time they uncovered the fraud to the time they filed the present proceedings estops them from denying the third respondent's authority to effect the transfers. It was further contended that ownership of the property lawfully passed to the seventh respondent. The applicants are restricted to pursuing a personal claim against the third respondent.

The circumstances giving rise to the transfers, as outlined by the applicants in their founding papers, have not been controverted due to the absence of the first to sixth respondents. These are that the third respondent did not perform in accordance with the agreed terms of the Cession and Assignment Agreement. As a consequence, the Cession Agreement was cancelled and no cession of rights, title, benefits, interests and obligations attached to the second applicant took place. The third respondent did not have any rights to the immovable properties at the time he transferred the same to the first respondent.

The absence of the first to sixth respondents put the seventh respondent in a difficult situation. He cannot stave off the allegations that the first transfer to the first respondent was void. Therefore, no rights derive from that transfer, and, in turn, the transfer to him.

However, the seventh respondent advanced argument that the third respondent had authority to act on behalf of the second applicant and that by their inaction the applicants are estopped from pursuing a vindicatory claim. 

The records at the Registrar of Companies reflected the third respondent as a Director….,.

The applicant's own papers suggest that they co-operated with the third respondent in relation to the CR14. The applicants handed over the entire secretarial file to the third respondent. Thereafter, the third respondent changed the company documents. It should therefore be held, on a balance of probabilities, that there was no want of authority on the part of the third respondent in effecting the first transfer.

It was further submitted that it took the applicants four years to file the present application after uncovering the fraud. This supports the inference that the applicants co-operated with the third respondent but it is also such as estops them from denying his authority to effect the first transfer.

PLAINTIFFS' REPLICATION TO DEFENDANT'S PLEA ON THE MERITS

The plaintiffs maintained that Mr Cross and Mr Spooner had the authority of the defendant to enter into a contract on its behalf. In the event that it was found that they had no authority to represent the defendant it was averred that they had ostensible authority to do so by reason of the following facts:-

1. On or about November 2007, in anticipation of the 28^th March 2008 Zimbabwe Presidential Elections, Mr Cross, who at the material time was a member of the Defendant's National Executive Committee, and, by widely disseminated public knowledge, was a senior member of the defendant's hierarchy, acting on behalf of the defendant, allegedly entered into a similar contract with the second plaintiff for the manufacture and supply of garments that the second plaintiff manufactures within its normal business. The order was for 60,000 T-shirts, 60,000 bandanas and 40,000 wraps, known colloquially as “Zambians”.

That the contract/order was performed by the second plaintiff and paid for by the defendant without demur or deviation. Such payment was allegedly effected through the defendant's hierarchical process. At no time did the defendant deny Mr Cross's authority to represent it in that transaction. In upholding the said earlier contractual obligation entered into by Mr Cross, and by making such payment, the defendant thereby represented to the second plaintiff, by its conduct, that Mr Cross was duly authorized to enter into such agreements on behalf of the defendant.

It was alleged that the second plaintiff was induced, to its prejudice, by the said representation to believe that Mr Cross was duly authorized to enter into the subsequent agreement on behalf of the defendant, concluded in April 2008, which pertained to the re-run of the said Presidential Election, and, acting on the strength of that belief, the second plaintiff, to its detriment and prejudice, entered into the agreement concluded in April 2008, and the said transaction was confirmed and ratified by Mr Cross. The second plaintiff transacted the April 2008 contract, to its detriment, on the basis of the aforesaid representation, inducement and belief.

In the result, the defendant was estopped from denying that Mr Cross and Mr Spooner had the authority to represent it, more particularly, as the payment for the March Election and April re-run were matters not only of enormous public interest and debate, but the payment for the contract transacted by Mr Cross had been obviously released as a result of processing through the defendant's payment process. Moreover, it was alleged that Mr Cross and Mr Spooner had, in fact, admitted that they had been duly authorized.

The plaintiffs alleged that an arrangement had been made whereby the goods were collected by the defendant as and when they were manufactured and required by the defendant. The second plaintiff would advise the defendant when goods were ready for delivery and the defendant would, in turn, collect them as it wished to. As and when significant volumes had been manufactured, the second plaintiff would advise the defendant, thereby tendering delivery, whereafter, the defendant would determine when to collect in whole or in part.

The plaintiffs averred that they had documentary evidence of the goods collected and such documents had been repeatedly made available to the defendant. In addition, contemporaneous electronic mail correspondence between Mr Cross, Mr Spooner and Chris Mbanga, affirmed that there had been complete verification of the numbers and that distribution was complete. In respect of goods for which delivery thereof had been tendered, but collection by the defendant had not been effected, such goods still awaited collection.

It was the plaintiffs' averments that the goods had been manufactured and delivery thereof tendered to the defendant in terms of the contract long before the defendant decided, on 20 June 2008, to withdraw from the Presidential run-off Election. The fact that the defendant effected ten collections after that date was wholly in the defendant's hands and did not mean that manufacture was after that date. In fact, manufacture had been effected long before that date and delivery tendered in accordance with the on-going interactions with the defendant's representatives. It was contended that the fact that the defendant collected goods on 25 June 2008 and 13 August 2008 constituted their acknowledgement that they were bound by the terms of the contract which they were still implementing. The plaintiffs denied any voluntary assumption of risk as inferred by the defendant.

Finally, it was alleged that Mr Spooner had requested the second plaintiff to diminish the original order, which the plaintiff did, and to hold certain manufactured stocks of which delivery had been tendered pending later collection. It was, accordingly, submitted that the parties had indeed entered into a contract through their duly authorized representative….,.

The plaintiffs also submitted that estoppel operated against the respondent in this matter.

The submission is also devoid of any merit as the plaintiffs are seeking to enforce a contract prohibited by law. See York Estates Ltd v Wareham 1950 (1) SA 125 (SR)…, where the court stated that it was bound to refuse to enforce a contract even though no objection to illegality of the contract is raised by the parties. It went on to state that it would not enforce such a contract even though the plaintiff is innocent and the defendant is setting up illegality.

Moreover, the defendant cannot be prevented from relying on the illegality or unenforceability as a defence, no matter how unfair that may be to the plaintiff.

The applicant, during oral submissions, attempted to disown Mr Beaumont as having had authority to represent the applicant. He was referred to as having been the Chief Executive of Meikles and then a Board member for the Meikles Group of Companies which is the holding company of the applicant. 

However, it is clear that as at 1 October 2010, he was a Director of the applicant and wrote a letter in relation to the applicant's business and on the applicant's letterhead. 

The applicant contended that he lawfully entered into a written Agreement of Sale which was signed by the first respondent on behalf of Hayler and Company. On that basis, it was submitted that he acquired “just and lawful rights against the 1^st to 4^th respondent (sic) entitling him to sue for specific performance.”

As regards fraud allegations against the applicant, it was argued that these attempts are “scandalous and baseless.” In his answering affidavit, and in the heads of argument, the applicant stated that the criminal charges were 'withdrawn by the National Prosecuting Authority for lack of merit and evidence.'

Turning to the Agreement of Sale, the applicant submitted that even if there are any irregularities in the “first respondent's representation of the company in concluding the written agreement of sale such irregularities cannot affect the validity of the agreement in light of the provisions of section 12(a) as read with section 13 of the Companies Act [Chapter 24:03].”

The applicant relied on the legal principle in Coronsel Investments (Pvt) Ltd v Spar Harare (Pvt) Ltd 2008 (1) ZLR 430 (H) where it was stated…, that;

“[T]he fraud of an employee, working within the bounds of his authority, does not render a contract invalid. Section 12(a) of the Companies Act [Chapter 24:03] provides that any person dealing with a company is entitled to assume that the internal regulations of that company have been complied with. Section 13 provides specifically that liability under section 12 is not affected by fraud.”

By parity of reasoning, the applicant argued that he was entitled to assume that the internal regulations of the company had been complied with….,.

(i) As regards the applicant's wobbling argument that even if there were any irregularities in the first respondent's representation of the company, such irregularity cannot affect the validity of the agreement in light of the provision of section 12(a) as read with section 13 of the Companies Act [Chapter 24:03]; my view is that the sections are inapplicable to the case in casu for the simple reason that the applicant in casu is not an innocent third party dealing with a company official.

The letter and spirit of section 12(a) of the Companies Act [Chapter 24:03] is to protect the interests of a third party who innocently deals with an official of a company who is not clothed with the requisite authority, or one who fraudulently enters into a contract with a third innocent party. See the words of LORD SIMON in Morris v Kanssen [1946] 1 ALL ER (HC)…, when he said that:

“The rule in Royal British Bank v Turquand (The Turquand or Indoor Management Rule) provides that persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed and one is not bound to inquire whether acts of internal management have been regular. The rule renders proof by the company that the internal formalities have not been complied with insufficient to enable it to escape liability under the contract; hence, the rule is not merely an application of the rebuttable presumption omnia praesumun