PATEL
JA: This
is an appeal against the judgment of the High Court dismissing
an application for the rescission of an earlier judgment granted in
favour of the fourth respondent in Case No. HC1589/13. The
application was dismissed with costs to be borne by the estate of the
late Brian James Rhodes, of which estate the applicant (the appellant
herein) is the executor dative.
Background
Prior
to his demise on 29 July 2006, the deceased, B.J. Rhodes, had
established two companies, namely, Beverly East Properties (Pvt) Ltd
and Karoi Properties (Pvt) Ltd. The appellant, as I have said, is the
executor dative of the deceased estate. He was not a party to the
proceedings in Case No. HC1589/13 wherein the court granted a
declaratory order in favour of the fourth respondent.
In
his application before the court a
quo,
the appellant sought the rescission of that order on the ground that
it had been obtained through fraud and, alternatively, that it had
been granted in error.
In
Case No. HC1589/13, the court dismissed the claims over the two
companies by the first respondent, who had purported to appoint the
fifth to the tenth respondents as directors in the companies in order
to protect his own interests.
The
court ruled that the lawful shareholder of the two companies was the
Phoenix Trust, the assets of which included corporate stock in the
two companies.
It
found that the fourth respondent was a trustee of the Trust and a
Director in both companies owned by the Trust. The court also found
that the fourth respondent as trustee had legal title to the trust
property and that any benefits accruing to the companies, including
accumulated rentals in the sum of US$70,000.00, in turn accrued to
the Trust as the shareholder of the companies.
In
granting its order, the court imposed the condition that the fourth
respondent should furnish evidence that the Trust legally owned the
companies before the Registrar could release to the Trust the sum of
US$70,000.00 that was deposited with him.
In
the application a
quo,
the appellant adduced the supporting affidavit of the deceased's
widow (Elizabeth Anne Rhodes). The admission of this affidavit was
challenged by the fourth respondent on the ground that it did not
comply with the provisions of the High Court (Authentication of
Documents) Rules 1971. The court a
quo
agreed and held that the affidavit was not admissible as it had not
been properly authenticated.
More
importantly, the fourth respondent also took the point in
limine
that the applicant did not have locus
standi to
bring the application because he was only the curator
bonis
of the deceased estate.
The
appellant had initially deposed in his founding affidavit that he was
acting in his capacity as the executor dative of the estate. However,
he had attached the letters of his confirmation as curator
bonis
rather than his letters of administration in respect of the estate.
Subsequently, through his answering affidavit, he then attached the
letters of administration appointing him as the executor dative of
the estate. The letters of confirmation were issued on 1 November
2013, while the letters of administration were issued on 26 February
2014.
High
Court judgment
As
regards the appellant's locus
standi,
the court a
quo
found that, as at 20 November 2013, the appellant could not have
engaged in Case No. HC1589/13 in terms of s22(2) of the
Administration of Estates Act [Chapter
6:01].
He would therefore not have had locus
standi
to seek the rescission of the order granted in that matter. That
rendered his actions in
casu
nugatory as the absence of a cause of action could not be cured
through the substitution of his capacity in his answering affidavit.
He could not properly cure the defect in the founding affidavit
pertaining to locus
standi
through the production of an authorising document in his answering
affidavit. The court accordingly held that his case must fail due to
lack of legal standing.
Having
found that the application should be dismissed for want of locus
standi,
the court nevertheless proceeded to address the merits of the matter.
As
regards the alleged fraud, the court observed that this was not a
ground for setting aside the earlier judgment under r449(1)(a) of the
High Court Rules 1971. The court found that there was clearly no
error committed as envisaged in the Rules, as the earlier judgment
had directed that the fourth respondent was to furnish proof that the
deceased had transferred the shares in the two companies to the
Trust.
With
reference to the allegation that the fourth respondent had
fraudulently claimed that the deceased had transferred the shares,
the court found that the appellant did not produce any authentic
documents to counter the alleged fraudulent documents. No documentary
evidence was adduced to prove what the appellant alleged to be the
correct shareholding in the two companies. The appellant simply
attacked the authenticity of the official documents produced by the
fourth respondent, which showed that the Trust owned the entire
shareholding in the companies, without any proof to controvert the
fourth respondent's evidence.
Consequently,
the earlier judgment must stand because it had not been shown that
the court had relied on fraudulent evidence in assessing the facts
before it.
In
the event, the court a
quo
held that the relief of rescission sought by the appellant must be
refused and accordingly dismissed the application on the merits.
Grounds
of appeal and relief sought
There
are three grounds of appeal in this matter.
(i)
The first is that the court a
quo
erred in holding that the appellant had no authority to institute the
application a
quo
but nevertheless proceeding to dismiss the matter on the merits.
(ii)
The second impugns the court a
quo
for holding that the appellant had no authority to institute
proceedings, despite the presence of letters of appointment evincing
such authority, and for refusing to accord the appellant an
opportunity to furnish further evidence and proof of authority.
(iii)
The third ground is that the court erred in holding that no basis had
been established for seeking rescission on the ground of fraud,
despite the absence of proof of the donation or transfer of the
shares in the company to the Trust.
The
relief sought by the appellant is that the appeal be allowed and that
the order of the court a
quo
be set aside and substituted with an order dismissing the point in
limine
relating to authority and granting the application for rescission
with costs or, alternatively, striking the matter off the roll for
want of proof of authority.
Issues
for determination
In
the course of argument, Mr Zhuwarara,
for the appellant, submitted that the court a
quo
erroneously conflated issues relating to cause of action and locus
standi
by disregarding the correct letters of administration annexed to the
appellant's answering affidavit. In any event, even though the
widow's supporting affidavit was defective, the facts therein were
made available to the appellant as the administrator of the estate
and he was therefore entitled to make averments relating to the
status of the estate. The averments contained in the founding
affidavit were stated to be within his personal knowledge, without
reference to the contents of the supporting affidavit.
Mr
Zhuwarara
also argued that there was an error within the contemplation of
r449(1) of the High Court Rules relating to the details of the Trust
deed. Had all the material facts been presented to the High Court in
the earlier matter, it would not have granted the order that it did.
Furthermore, the appellant had a direct interest in safeguarding the
assets of the estate and should therefore have been cited as a party
in the first case.
In
reply, Mr Tivadar,
for the fourth respondent, submitted that the first ground of appeal
was irrelevant. There was no impropriety or harm occasioned by the
court a
quo
declining locus
standi
and still dealing with the merits of the matter.
As
regards the second ground of appeal, Mr Tivadar
initially took the position that the court was correct in finding
that the appellant had no locus
standi.
However, at the close of his submissions, he was prepared to concede
this ground of appeal.
With
reference to the alternative argument premised on supposed error in
the earlier proceedings, Mr Tivadar
quite correctly submitted that the third ground of appeal only
related to the alleged fraud. There was no appeal founded on error
within the scope of r449(1) of the High Court Rules.
In
his response, Zhuwarara
agreed that the first ground of appeal was irrelevant. He also
conceded that the third ground of appeal was confined to the
allegations of fraud and that sub-ground (c) of the third ground was
meaningless and was therefore to be abandoned.
In
light of these concessions by both counsel on what are essentially
technical issues, which concessions were properly made so as to
obviate the trappings of formalism, the Court remains seized with the
critical and substantive nub of this appeal. And that is whether or
not the appellant had established an adequate basis for seeking the
rescission of the earlier judgment on the ground that it had been
obtained by fraud.
Rescission
on the ground of fraud
It
is trite that he who alleges any positive fact carries the burden of
proving that fact. Put differently, a party who makes a positive
allegation bears the onus of proving such allegation. See Astra
Industries Ltd
v Chamburuka
SC258/11; ZUPCO
Ltd
v Pakhorse
Services (Pvt) Ltd
SC13/17.
In
the particular context of an application for the rescission of a
judgment at common law, it is settled that the party seeking
rescission must demonstrate sufficient cause for the relief sought to
be granted. A judgment can only be rescinded under the common law on
one of the grounds upon which restitutio
in integrum
would be granted, such as fraud or some other just cause, including
justus
error.
See Mudzingwa
v Mudzingwa
1991 (4) SA 17 (ZS).
It
is also well established that an appellate court will not readily
interfere with findings of fact made by a lower court. See Beckford
v Beckford
2009 (1) ZLR 271 (S). The appellate court will only interfere with
such findings in very limited circumstances, for instance, where the
lower court has misdirected itself by failing to appreciate the facts
at all or by making findings of fact that are contrary to the
evidence presented. See Reserve
Bank of Zimbabwe
v Corrine
Granger
SC34/2001.
Mr
Zhuwarara
refers to the condition imposed by the High Court in the earlier
judgment requiring the fourth respondent to lodge the Trust deed in
question. What this deed shows is that the properties concerned were
never transferred to the Trust by the deceased. This, so he submits,
is where there was fraudulent misrepresentation by the fourth
respondent.
Mr
Tivadar
refers to the relevant share certificates and register of share
allotments and transfers. He argues that the first two shares were
probably issued in anticipation of the Trust being created two months
later. The remaining bulk of the shares were issued to the Trust a
year later. This is the reason why the list of Trust assets only
includes the assets of the Trust when it was created and does not
cover the assets acquired by the Trust thereafter.
Mr
Tivadar
further submits that the appellant never produced any evidence,
including the forensic audit that he allegedly carried out, to prove
that the Trust was a sham. The onus was on the appellant to make out
his case and he did not produce any document or affidavit to prove
that there was any fraud.
Mr
Zhuwarara
retorts that not all the relevant share certificates have been
produced by the fourth respondent. The duty of the appellant, as
executor dative of the estate, is to ensure that all the relevant
documents and assets are accounted for. The facts placed before the
court in the first case were not correct. There was clear
misrepresentation and the court in that case would not have granted
the order in favour of the fourth respondent had it been made aware
of all the relevant facts.
It
is pertinent, at this juncture, to capture the two critical
components of the order granted by the court in the first case.
(i)
Firstly, it was declared that the fourth respondent “as claimant in
his capacity as Trustee of Phoenix Trust in whom [sic]
the companies are held is the lawful shareholder of the two
companies”.
(ii)
Secondly, it was ordered that the fourth respondent “upon lodging
with this court a valid Trust document effected by the deceased
during his life time transferring the properties to the Trust”
would become entitled to the sum of US$70,000.00 deposited with the
Registrar.
The
crucial instrument in
casu
is the notarial deed of donation and trust, executed by its
signatories on 13 April 1988.
It
was signed by the deceased, B. J. Rhodes, as the donor and as trustee
and also as a beneficiary of the trust. The deceased appointed
himself and two others, namely, N. J. MacDonald and N. C. Ralston, as
trustees. The beneficiaries, apart from the deceased himself, were
his children and their lawful issue. In the event of the deceased
ceasing to be a trustee for any reason, T. C. Rhodes, the fourth
respondent, was to succeed him as a trustee.
In
terms of clause 4 of the Trust deed, the settlement and donation took
effect on the date of execution of the deed. By virtue of clauses 3
and 5, the Trust fund was constituted by the assets set forth in the
Schedule, as well as any further assets or shares or income accrued
or received by the fund from time to time, including any further
assets donated by the deceased before his demise.
As
at 13 April 1988, the Schedule of Assets listed two items, i.e.
a loan account of $110,720.93 in Brian Rhodes (Pvt) Ltd and a loan
account of $41,052.93 in Karoi Properties (Pvt) Ltd.
The
company known as Beverly East Properties (Pvt) Ltd was not mentioned
in the Schedule.
Turning
to the relevant share certificates, the record shows two certificates
executed on 1 February 1988.
The
first certificate (No.3) states that Phoenix Trust is the registered
proprietor of one fully paid share (No. 1).
The
second certificate (No.4) states that B. J. Rhodes, as nominee for
the Trust, is the registered proprietor of another fully paid share
(No.2).
Both
certificates relate to the shareholding in Beverly East Properties
(Pvt) Ltd.
The
third certificate (No.5), also relating to the shareholding in the
same company, states that Phoenix Trust is the registered proprietor
of 499,998 shares (Nos.3 to 500,000 inclusive).
It
is common cause that the first two certificates were executed before
the Trust was created, on 13 April 1988, while the third certificate
was executed thereafter, on 20 July 1989.
A
further relevant document is a special resolution of the company,
passed on 14 April 1988 and confirmed on 21 April 1988, increasing
the nominal share capital of the company from $32,000.00 to
$500,000.00 by the addition of 468,000 shares, to rank pari
passu
with the existing shares.
The
resolution was passed by B. J. Rhodes (the deceased) and N. J.
MacDonald and signed by the former as Chairman of the company.
The
Form CR14 signed by the Secretary of the company on 29 March 1988,
shows that the abovenamed two individuals were Directors of the
company, appointed to those positions on 1 February 1988.
The
Form CR2, i.e.
return of allotments, filed on 20 July 1989, shows that there were 2
shares previously allotted and 499,998 shares freshly allotted to
Phoenix Trust.
This
is confirmed by the minutes of a Directors meeting, held on 20 July
1989 and attended by the same two directors, B. J. Rhodes and N. J.
MacDonald, where it was resolved to allot 499,998 shares to Phoenix
Trust.
The
above status of directorships and total shareholding in the company
is further confirmed by various company returns filed between 14 July
1989 and 17 April 1997.
Lastly,
there is the company's register of allotments and transfers.
This
shows that two individuals, N. C. Ralston and C. A. Mollatt, the
original holders of the first two shares (Nos.1 and 2), held those
shares by virtue of the founding share certificates (Nos.1 and 2)
executed on 25 January 1988.
These
two shares were then transferred to Phoenix Trust and B. J. Rhodes,
as nominee for the Trust, under new share certificates (Nos. 3 and 4)
executed on 1 February 1988.
The
register also reflects the allotment of 499,998 shares (Nos.3 to
500,000 inclusive) to Phoenix Trust under the last share certificate
(No.5) executed on 20 July 1989, resulting in the Trust holding the
total of 500,000 shares in the company.
As
is evident from the appellant's letters of confirmation and
administration, B. J. Rhodes died on 29 July 2006. The foregoing
analysis of the documents furnished by the fourth respondent
demonstrates that, during the deceased's lifetime, Phoenix Trust
became the sole shareholder of all 500,000 shares in Beverly East
Properties (Pvt) Ltd.
In
this regard, the appellant's assertion that the relevant share
certificates and company resolutions are fraudulent and/or fabricated
is difficult to comprehend.
The
special resolution of the company confirmed on 21 April 1988 was
signed by the deceased himself, while the share certificates executed
on 1 February 1988 and 20 July 1989 were signed by N. J. MacDonald.
The latter also signed the minutes of the Directors meeting held on
20 July 1989, whereat it was resolved to allot 499,998 shares to
Phoenix Trust. It is not in dispute that he was a Director of the
company at the relevant time as well as being a trustee of Phoenix
Trust.
While
it is clear that the Trust was, at the relevant time, the sole
shareholder of Beverly East Properties (Pvt) Ltd, there is nothing in
the documents filed of record to demonstrate the shareholding of the
Trust in the second company, Karoi Properties (Pvt) Ltd.
This
is obviously a critical issue in satisfying the condition imposed by
the High Court in the earlier Case No. HC1589/13.
As
I have already indicated, the order granted in that case requires the
fourth respondent to lodge with the court “a valid Trust document
effected by the deceased during his life time transferring the
properties to the Trust”.
What
the court presumably intended was for the fourth respondent to
furnish proof that the shareholding in both companies had been
transferred to the Trust.
Although
this is strictly not an issue for consideration in the present
appeal, it may well arise for determination in any future litigation
between the parties, insofar as concerns ownership of the properties
held by the two companies and entitlement to the rentals accrued from
those properties.
Be
that as it may, what is clear for present purposes is that the
appellant has failed to substantiate his allegation of fraudulent
misrepresentation by the fourth respondent as the basis for seeking
the rescission of the earlier judgment on the ground of fraud.
In
short, the appellant has made the allegation of fraud but failed to
discharge the onus of proving that allegation.
Consequently,
it cannot be said that the court a
quo
misdirected itself, whether grossly or otherwise, by failing to
appreciate the facts at all or by making findings of fact contrary to
the evidence presented, in dismissing the application for rescission
on the ground of fraud.
It
follows that the third ground of appeal lacks merit and must
therefore be dismissed.
Disposition
As
I have stated earlier, the first ground of appeal was found to be
irrelevant, while the second ground was conceded. The third ground
has been dismissed. In the event, I think it just and equitable that
each party should bear its own costs.
It
is accordingly ordered that:
1.
The appeal is allowed in respect of the second ground of appeal,
relating to the appellant's locus
standi
in the proceedings a
quo,
and dismissed in respect of the first and third grounds of appeal.
2.
Each party shall bear its own costs.
BHUNU
JA: I
agree
BERE
JA: (No
longer in office)
C.
Nhemwa & Associates,
appellant's legal practitioners
Bherebhende
Law Chambers,
1st
respondent's legal practitioners
Honey
& Blanckenberg,
2nd
respondent's legal practitioners
Kevin
Arnott,
3rd
and 4th
respondents' legal practitioner
Tavenhave
& Machingauta,
5th,
6th,
7th,
8th,
9th
and 10th
respondents' legal practitioners
