KAMOCHA J: When the
parties in this matter attended a pre-trial conference they agreed that the
following issues should be determined by the trial court.
“(a) Whether or not there was a valid
cancellation of agreement of sale between the parties.
(b)
Whether or not there was novation of the original
agreement of sale warranting validation of the agreement of sale.
(i) If there was a novation, whether or not
the Contractual Penalties Act
applies to the novation.
(ii)
Whether or not the cancellation was in accordance with
the Contractual Penalties Act.
(c)
Whether or not defendant is not entitled to enforcement
of the agreement.”
At the trial the
parties agreed that there was only one issue for the determination of the court
which was whether or not the cancellation of the agreement was in terms of the
Contractual Penalties Act [Chapter 8:04].
In
brief the facts giving rise to this dispute were these. The plaintiff in this matter has emigrated to
New Zealand
but she, by power of attorney, appointed one Herman Bannister to manage her
affairs, property and interests in this country. Mr Herman Bannister – “Bannister” testified
in this court.
His
evidence was that the defendant initially rented the plaintiff's property known
as Lot 113 Hillside. As a tenant the
defendant's cheque relating to the deposit and first rental was dishonoured by
his bank. When contacted about that the
defendant said that was a mix up and ended up making a cash payment.
As
time went by the defendant offered to purchase the property. He offered one billion dollars payable in ten
equal installments of $100 million dollars per
mensem. The first installment was
payable by the end of April 2005. The
defendant's offer was acceptable to the plaintiff. Defendant, however, failed to make the first
payment by the end of April as agreed.
The defendant struggled to pay the amount for two months but still
failed to pay the amount he was expected to pay for the two months. When the witness confronted him about the
payment he simply told him that he did not have the money.
When
the witness wrote to the defendant canceling the agreement the defendant filed
a court application in case number HC 994/05.
The witness handed the matter to his lawyers. Later his lawyers presented him with a new
proposal from the defendant which he accepted.
The
terms of the new agreement were that defendant would pay $500 million by the
end of September 2005 and the balance payable in ten equal monthly
installments. Defendant would pay a
further $133 million over and above because he had failed to perform his part
of the bargain.
The
situation did not improve at all as the defendant either made part payments out
of time or completely failed to pay in terms of the new agreement.
On
16 August 2005 a letter was written by the plaintiff's legal practitioners to
the defendant's legal practitioners. The
letter reads in part:
“Further to our letter dated the 14th
July last our client informs us that yours gave us a cheque dated the 3rd
August 2005 for $12 000 000,00 endorsed to the effect that his bank should cash
the cheque for Mr Bannister.
Our client duly took the cheque to
the bank and was informed by the cashier that there were no funds to meet it,
therefore it could not be cashed.
Your client is in constant default
and ours is not prepared to tolerate it any longer.
We hereby give you formal notice
that unless your client pays arrears of rent totaling $16 000 000,00 plus $20
000 000,00 arrears of interest plus the balance amounting to $66 500 000,00 by
the end of this month our client will apply to court for an order canceling the
agreement of sale and for the eviction of your client.”
The
defendant was not moved by the contents of the above letter as he still failed
to honour his obligation by the end of August 2005. He did not end there, but went further and
did not pay the $500 million at the end of September 2005. The terms of a new agreement were contained
in a letter dated 21 September 2005 written by plaintiff's legal practitioners
addressed to the defendant's legal practitioners in the following terms:-
“Our client has reluctantly agreed
to give your client one more chance to pay what he owes so please immediately
send to our client at 23 Chilam Court which is just around the corner from your
offices, the bank cheque for $102 500 000,00 and also the cheque for $500 000
000,00 by the end of this month and in addition $6 000 000,00 for the September
rent which should have been paid in advance.
When these payments have been made
your client will still owe the purchase price and he will have to pay rent from
the 1st of October at the agreed rate of $6 000 000,00 a month and
he will have to pay interest on the full purchase price of one billion dollars
at the rate of 10% per month from the 1st August, 2005.
If he makes the payments referred to
above he will still have to pay interest on the balance of the purchase price
Five hundred million at the rate of 10% per month from the 1st
October, 2005, until the full purchase price is paid and he will have to pay
rent at $6 000 000,00 a month until the date of transfer.
If your client defaults the
contract will be cancelled and your client will get back the capital
payments he has made but none of the rent and none of the interest and our
client will reserve the right to claim damages for your client's default.
Please confirm by return that the
position is as stated above and immediately send the bank cheque for $102 500
000,00 directly to our client and confirm that the other payments will be made
when they fall due.” (Emphasis added)
When
confronted by Bannister he still had the audacity to say he had no money but
all the same did not want the agreement to be cancelled. Instead, he offered to pay a billion dollars
in January 2006.
That
prompted the plaintiff to instruct his lawyers to write to defendant's lawyers
in the following terms on 21 October 2005.
“Your
client is playing games
If your client wanted to acquire
the property he should have paid $500 000 000,00 on the 30th
September.
Our client is not prepared to grant
any further indulgence so we give you final notice that unless we receive $500
000 000,00 together with interest as agreed from the 1st August by
9am on Tuesday the 25th instant the contract will be cancelled and
your client will be evicted.
Please do
not ask for further indulgence because it will not be granted.”
Needless
to say that as usual defendant failed to meet the deadline. Instead he sent a cheque for $400 million
instead of $500 million which was received by the plaintiff's lawyers after the
deadline on 26 October 2005.
The
plaintiff's legal practitioners wrote a letter of cancellation that same day in
these terms:
“Your letter dated 24th
instant was delivered on the morning of the 26th October too late to
comply with the deadline we had imposed.
We return
your cheque and confirm that the sale has been cancelled.”
Even
if the cheque had been received in time the defendant would still have been in
breach as the cheque was in the sum of $400 million instead of the agreed amount
of $500 million.
There
can be no doubt that the defendant is a perpetual defaulter. He seems to be a man of straw who wants to
live far beyond his means.
At
the end of the plaintiff's case the defendant applied for absolution from the
instance. The application was dismissed
with costs being in the cause.
The
defendant had no witnesses to call but he gave evidence. His testimony was basically that he was not
given sufficient time to rectify the breach.
He accepted that he was in breach of the agreement while contending that
he was not given the required 30 days to redress the breach. He alleged that he was only given 4 days
which was contrary to what the law stipulated which brings us to the sole issue
that the parties wanted the court to determine.
The
issue to be determined is whether or not the cancellation complies with the
provisions of the Contractual Penalties Act [Chapter 8:04] “the Act”. It is common cause that the sale in this
matter was an installment sale of land.
The seller's rights in such sales are restricted by section 8 of the Act
which provides thus:
“8. Restriction of seller's rights
(1)
No seller under an installment sale of land may on
account of any breach of contract by the purchaser-
(a)
enforce a penalty stipulation or a provision for the
accelerated payment of the purchase price; or
(b)
terminate the contract; or
(c)
institute any proceedings for damages;
unless he has given notice in
terms of subsection (2) and the period of the notice has expired without the
breach being remedied, rectified or discontinued, as the case may be.
(2)
Notice for the purposes of subsection (1) shall:-
(a)
be given in writing to the purchaser; and
(b)
advise the purchaser of the breach concerned; and
(c)
call upon the purchaser to remedy, rectify, or desist
from continuing, as the case may be, the breach concerned within a reasonable
period specified in the notice, which period shall not be less than-
(i)
the period fixed for the purpose in the installment
sale of land concerned; or
(ii) thirty days;
Whichever is the longer period.
(3)
Without derogation from section 40 of the
Interpretation Act [Chapter 1:01], a notice shall be regarded as having been
duly given to the purchaser for the purposes of subsection (i)-
(a)
if it has been delivered to the purchaser personally or
to an agent chosen by the purchaser for the purposes of receiving such notices;
or
(b)
if it has been posted by registered post to the address
chosen by the purchaser for the delivery of correspondence or legal documents
relating to the installment sale of land concerned or, in the absence thereof,
to the purchaser's usual or last known place of residence or business.”
Under
cross-examination which was brief and to the point the plaintiff admitted that
when he received the letter of 21 October 2005 he had already made payment and
that the letter had only indulged him the period of payment to 9am on Tuesday
25 October 2005. He admitted failing to
pay the $500 million by 9am. He further
admitted that instead he sent a letter with a cheque for $400 million. He confirmed that as at 26 October 2005 when
he received the letter of cancellation he had not yet tendered the balance of
$100 million. He finally admitted that
the agreement was as a matter of fact cancelled after a period of more than 30
days. The period is reckoned from 21
September 2005 to 26 October 2005 and works out to be 35 days.
In
light of the fact that the defendant was a perpetual defaulter the plaintiff
was entitled to cancel the agreement. He
did so in terms of the provisions of section 8 of the Act.
In
the result I would issue the following order:-
(a) The
cancellation of the agreement of sale entered between plaintiff and defendant
in respect of house number 12 Hillside Road, Hillside, Bulawayo for reasons of
failure by defendant to pay the purchase price timeously as specified in the
agreement and per the parties' subsequent indulgences be and is hereby
confirmed.
(b) The
defendant and all those claiming through him be and are hereby evicted
forthwith from house number 12 Hillside Road, hillside, Bulawayo.
(c) Defendant
shall bear the costs of suit.
(d) The
defendant's counter-claim be and is hereby dismissed with costs.
Messrs Webb, Low &
Barry, plaintiff's legal practitioners
Dube & Partners, defendant's legal practitioners
