UNOPPOSED
APPLICATION
MAKARAU
JP: This
matter came before me in motion court as an application for default
judgment in terms of Rule 58 of the High Court Rules 1971.
The
facts of the matter as set out in the plaintiffs' affidavit of
evidence are as follows:
The
plaintiffs are husband and wife. On 12 April 2005, they sold their
rights title and interests in a certain piece of land in Budiriro
Township in Harare. The agreement of sale was in writing.
It
was a specific term of the agreement that the full purchase price
would be financed from the proceeds of a staff loan to be advanced to
the defendant from his employer.
It
was also specifically agreed between the parties that the purchase
price would be paid in full against the registration of a mortgage
bond within 21 days of the signing of the agreement of sale.
On
13 July 2005, the 21 day period having long expired, the plaintiffs
caused a letter to be sent to the defendant calling upon him to
rectify the breach failing which the contract of sale would be
considered cancelled.
In
the letter, the plaintiffs also reserved to themselves the right to
claim damages for the breach.
Unbeknown
to the plaintiffs, the property had been transferred to the purchaser
on 21 June, 2005, weeks before the letter of demand was sent.
Payment
of the purchase price was only made on 2 August 2005 less certain
deductions that were detailed in the letter from the conveyancers
enclosing the cheque.
The
cheque was sent back with a letter alleging that the agreement of
sale had been cancelled and a reversal of the transfer would be
sought.
On
3 March 2006, the plaintiffs issued summons against the defendant,
claiming the sum of $366,503,000-00, being damages for breach of
contract.
The
summons was duly served personally on the defendant at his place of
residence. The dies
induciae
limited in the summons expired without the defendant taking any steps
to defend the claim. The plaintiffs then applied for judgment,
arguing that due to inflation, the amount of the cheque sent to them
had been eroded by about 75%. They further argued that the purchase
price of the property was meant for an investment in a farming
venture where the plaintiffs anticipated growing wheat for the 2005
season. Due to the delay in the payment of the funds, they missed
their target and the tractor they intended to purchase had since
increased in price.
In
support of their claim, the plaintiffs attached a valuation report
showing the value of the property as at 28 January 2006, months after
the purchase price was tendered to the plaintiffs and months after
the purchase price was due in terms of the agreement of sale.
When
the matter was called up before me as an unopposed application for
default judgment, I raised a number of issues with the plaintiffs'
legal practitioners and requested him to file heads of argument to
address those issues.
Heads
were only brought to my attention on 29 March 2007, hence the delay
in the handing down of the judgment.
Two
issues have exercised my mind in this matter:
(i)
Firstly, it is whether by allowing transfer of ownership in the
property to pass to the defendant well aware of the breach, the
plaintiffs can still claim damages based on the same breach.
(ii)
Secondly, it has been advanced on behalf of the plaintiffs and is
indeed clear from the wording of the claim and the nature of the
proof tendered in support of that claim, that the plaintiffs are
raising inflation and the devaluation of the local currency as the
basis of their claim and of calculating the damages allegedly due to
them.
I
shall deal with each in turn.
It
is common cause that the plaintiffs sent a letter placing the
defendant in mora
on
13 July 2005.
At
the time, it is further common cause that the plaintiffs had passed
transfer of the property sold to the defendant well knowing of the
breach. Transfer of the property by the plaintiffs was performance of
their side of the bargain under the agreement of sale.
It
matters not in my view that transfer was effected by the conveyancers
as such conveyancers were acting on a power of attorney drawn in
their favour by the plaintiffs. Such power of attorney was not
revoked even after it became clear to the plaintiffs that the
defendant had committed a breach of the terms of the contract of sale
entitling them to cancel.
Plaintiffs'
legal practitioners did not refer me to any authority where the
performance of the contract by the aggrieved party, well aware of the
breach by the other, still entitled the aggrieved party to claim for
damages based on the same breach.
In
my view, the conduct of the plaintiffs amounts to approbating and
reprobating at the same time.
By
allowing transfer to go through in the circumstances of this matter,
the plaintiffs arguably gave out to the defendant that they had
condoned the delay in the payment of the purchase price.
While
I am of the firm view that the plaintiffs cannot rely on the breach
by the defendant to claim damages in the circumstances of this
matter, it is not necessary that I resolve the matter on this basis.
As
stated above, the plaintiffs are aggrieved that the purchase price
for the property as agreed upon had been eroded by inflation by the
time payment was received such that in August 2005 it could only
purchase 25% of what it could have purchased in April 2005.
In
support of the amount of their claim, they attached a valuation
report showing the amount the property would have fetched as at the
date payment was finally tendered to them.
In
my view, two issues immediately arise from the argument advanced by
the plaintiffs:
(i)
Firstly, whether inflation is a basis for calculating contractual
damages; and
(ii)
secondly, the time when damages for breach of contract are to be
assesses.
The
second issue is easy of determination. It is settled law that damages
under contract are to be assesses as at the date performance was due
and not as at the date of judgment.
In
casu,
the plaintiffs have sought to calculate their damages as at the date
of the late payment by attaching a report showing the price that the
property would have fetched at a date later than the date performance
was due. They have thus approached the issue of quantifying their
damages incorrectly.
In
my view, they ought to have assessed their damages as 21 days after
the agreement was signed in April 2005.
Thus,
the valuation report showing the value of the property as at 2 August
2005 on its own is of no import and does not assist the court in
assessing the damages due to them.
The
plaintiffs have not addressed me adequately regarding the second
issue.
In
my view, the issue involves a detailed discussion of “currency
nominalism” and “revalorization” and the place of such concepts
in Zimbabwean law.
In
SA
Eagle Insurance Co Ltd v Hartley
1990 (4) SA 833, it was held that currency nominalism underlies all
aspects of South African law.
Currency
nominalism holds that a debt sounding in money has to be paid in
terms of its nominal value, irrespective of any fluctuations in the
purchasing power. Thus, where currency nominalism is upheld,
inflation has no role to play. Where however, “revalorization” is
upheld, the current purchasing power of the currency is established
and the amount of the debt is increased to take into account this
“appreciation”. (See Eden
and Another v Pienaar
2001 (1) SA 158 (W)).
Due
to my limited research and in the absence of meaningful assistance
from the plaintiffs, I have not been able to come across any
Zimbabwean case where these concepts are discussed in detail for me
to establish the position in Zimbabwean law.
I
merely flag the concepts for fuller argument in an appropriate case.
In
casu,
it is my view that the plaintiffs have not adequately shown how they
are calculating the damages due to them if any and in doing so, how
they have factored in inflation and what rate of inflation they have
used and whether this is acceptable under our law.
It
is not enough in my view to show that had the defendant paid in time,
the plaintiffs would have had amount equal to the value of the
property as at the date of the late payment. That is not the correct
measure of the rate of inflation and it does not answer the question
whether the difference in the purchasing power of money, especially
in this hyperinflationary environment, constitutes a basis for
claiming damages under contract law.
Further,
it does not answer the question whether currency nominalism as it
applies to the purchase price under a contract of sale, does not
underlie the law of contractual damages in this jurisdiction.
It
is my view that the plaintiffs need to address these issues further
and possibly lead more evidence in support of their claim.
On
the basis of the foregoing, the plaintiffs' application for default
judgment cannot succeed.
In
the result, I make the following order:
1.
Absolution from the instance is granted.
2.
There shall be no order as to costs.
C
Nhemwa & Associates,
plaintiffs' legal practitioners
