THE FACTUAL BACKGROUNDThe appellants are the owners of a certain immovable
property, known as WAMICA Farm measuring 644,795 ha, (“the farm”). It is
rural land. The first respondent (hereinafter referred to as the
respondent) is a private company duly registered as such under the laws of
Zimbabwe. It carries on business in the agricultural ...
THE FACTUAL BACKGROUND
The appellants are the owners of a certain immovable
property, known as WAMICA Farm measuring 644,795 ha, (“the farm”). It is
rural land. The first respondent (hereinafter referred to as the
respondent) is a private company duly registered as such under the laws of
Zimbabwe. It carries on business in the agricultural sector.
On 5 December 2012, the respondent made a written 'Final
Offer' for the acquisition of the farm to the appellants. The offer
describes the farm, outlines how valuation of the price was conducted, and
specifies the price offered together with the proposed payment terms. The
appellants accepted the offer on 6 December 2012. On the same date, pursuant to
the acceptance of the offer, the parties concluded an “Irrevocable Memorandum
of Understanding' (hereinafter referred to as the “MOU”) in relation to the
same.
In view of the statutory legal requirement attendant upon
the sale of rural land, the appellants immediately made an application to the
Ministry of Lands for the issuance of a Certificate of No Present
Interest. The application was acknowledged by letter of the same date. The
Certificate of No Present Interest was issued sometime in the same month.
In the meantime, in anticipation of the issuance of the
certificate, the respondent had, through its legal practitioners, prepared a
written Agreement of Sale. However, the agreement was not signed due to alleged
unwillingness to co-operate on the part of the appellants.
On 16 March 2013, the respondent became aware that the farm
was being advertised for sale as subdivided plots. The respondent, being of the
view that a valid Sale Agreement had been concluded between itself and the
appellants, approached the High Court on a certificate of urgency seeking an
interim interdict against transfer of the farm, and a final order declaring that
a valid agreement of sale of the farm had been concluded between the parties,
and, consequent thereto, an order for specific performance of the sale
agreement in its favour. The respondent sought, ultimately, an order for
the transfer of title in the farm to itself. The matter was found not to
be urgent and was subsequently re-set down on the normal roll. The court a quo found that an agreement of sale had been entered into
and it ordered specific performance in favour of the respondent.
The appellants were aggrieved by that decision and have
entered the present appeal on the following grounds:
1. The learned judge a quo erred and
misdirected herself by failing to appreciate that the 1st respondent
was not entitled to the relief of specific performance. In particular, that the
learned judge ignored the evidence that the property in dispute had been
subdivided, advertised and sold prior to the commencement of proceedings in
court and at the time of hearing counsel.
2. The learned judge a quo erred and misdirected
herself by making an order for specific performance yet the evidence put before
the court did not show the existence of a valid and binding agreement between
the parties.
3. The learned judge a quo erred and
misdirected herself by making a finding that the appellants were in breach of
contract yet no valid Agreement of Sale was put before the court.
4. The learned judge a quo erred and
misdirected herself by failing to appreciate that both the offer and acceptance
document and the Memorandum of Understanding were both void ab initio at the time of their signing as these were
entered into before the issuance of a Certificate of No Present Interest by the
Ministry of Lands and Rural Resettlement.
5. The learned Judge a quo erred and misdirected herself by
failing to appreciate that the dies induciae
of signing the actual agreement of sale, as contemplated in the
offer document and Memorandum of Understanding, lapsed before the parties could
sign therefore no valid and binding agreement existed as between the parties.
There are three factual issues which are common cause in
this case;
(i) Firstly, that the respondent made a valid offer to
purchase the farm from the appellants, which offer was accepted by the
appellants, the proof whereof lies in the offer document to which all the
parties appended their signatures on 6 December 2012.
(ii) Secondly, that the parties proceeded to execute a Memorandum
of Understanding on the same day.
(iii) The last is that the agreement of sale that was
dependent upon the issuance of a Certificate of No Present Interest from the
relevant Ministry was not concluded by the parties.
Counsel for the appellants argued that the court a quo,
contrary to its comments as stated above, clearly misdirected
itself when it then made a finding that the series of documents agreed to by
the parties, metamorphosized into an agreement of sale of the farm, a position
postulated by the respondent. It was argued, further, on behalf of the
appellants that the judgment of the court a quo remained
unclear as to which agreement the court considered to be binding on the
parties. The passage which is the subject of the attack is at page 5 of
the cyclostyled judgment and reads:
“The agreements entered into by the parties are
enforceable. All the key terms were agreed to in the final offer and the MOU.
In fact, all the essential elements of a contract were present and all that
remained was for the parties to prepare the contract document and sign it. It
is for these reasons that I conclude that the parties intended to be bound by
these agreements.”
The court a quo refers to the
offer and the Irrevocable Memorandum of Understanding as the contract between
the parties, and it took these separate agreements as one when it granted
specific performance based on the Irrevocable Memorandum of Understanding. The
parties themselves were not agreed that the Irrevocable Memorandum of
Understanding would be the agreement of sale. This is evident from the Irrevocable
Memorandum of Understanding itself. The thrust of the Irrevocable Memorandum of
Understanding was:
“…, to set out the basis upon which the transaction shall
be concluded and to set out rights and obligations upon each party leading to
the signing of a SALE AGREEMENT between the parties. It is the parties
understanding that the sale agreement be concluded immediately upon the
successful completion of the necessary regulatory approvals by the Ministry of
Agriculture, Land and Rural Resettlement.”
In my view, the dispute stands to be resolved by the determination
of the following issues:
1. Whether the court a quo made the
correct finding that a valid agreement of sale existed between the parties.
2. Whether any legal rights flow from the Irrevocable
Memorandum of Understanding signed by the parties.
3. Whether the court could order transfer of the farm
notwithstanding the subdivision of the same into plots pursuant to a permit.
DID A VALID AGREEMENT OF SALE EXIST BETWEEN THE
PARTIES
In essence, there were two contracts envisaged after the
offer for the purchase of the farm was accepted. The first was the Irrevocable
Memorandum of Understanding itself which would lay the basis for the conclusion
of the agreement of sale of the land, the second, the contract of sale itself.
The court a quo properly undertook a process
under which it scrutinised and analysed each of the documents executed by the
parties. It commented thus in relation to the Final Offer:
“It is clear from the offer that an agreement of sale would
be concluded at a subsequent stage. The offer was subject to the acquisition of
a certificate of no present interest from the relevant authority. In order to
record this fact, the parties entered into a Memorandum of Understanding. The
MOU recorded that a contract would only be concluded after the certificate of
no present interest had been granted. The contract was subject to the happening
of a future event.”
The court a quo also found
that:
“….,. The final offer constitutes a preliminary agreement
where the parties would sign another contract. The parties had agreed on the
key terms of the contract but had not signed the actual contract and had agreed
to be bound to carry out, in good faith, all the actions as may be necessary to
expedite the transfer and registration of the farm.”
As a consequence, the court accepted that there was no
contract of sale entered into through the Final Offer. The Irrevocable
Memorandum of Understanding was a vehicle through which the agreement of sale
would be concluded. The Irrevocable Memorandum of Understanding specifically
provided that a contract would be concluded upon the obtaining of a Certificate
of No Present Interest. In discussing the terms of the Irrevocable Memorandum
of Understanding, the court remarked:
“These facts
disclose an agreement to agree in future in good faith. The objective, which
was to bind the parties to agree to enter into a final contract, did not
happen. No agreement of sale was entered into. This scenario is distinguishable
from a contract of sale subject to a suspensive condition which comes into
effect on fulfilment of a specified condition. In this case, there was no
contract of sale entered into as envisaged.”…,.
It is abundantly clear that the court's analysis of the
offer and the Irrevocable Memorandum of Understanding cannot be faulted nor can
the conclusion by the court that a contract would be concluded after a Certificate
of No Present Interest would have been obtained from the relevant Ministry. The
court a quo was alive to the condition upon
which an agreement would be entered into and that in fact no agreement of sale
was ever entered into.
Its finding in the face of all the above observations that
an enforceable agreement existed through a series of agreements was a clear
misdirection.
WHETHER ANY LEGAL RIGHTS FLOWED FROM THE IRREVOCABLE
MEMORANDUM OF UNDERSTANDING
It is evident that the court accepted that the offer was
subject to a condition precedent, and, further, that no agreement of sale was
entered into. This finding emerges clearly in the judgment, wherein it is
stated as follows:
“The
objective which was to bind the parties to agree to enter into a final contract
did not happen. No agreement of sale was entered into…,. In this case, there
was no contract of sale entered into as envisaged.”
However, the court then departed from this pertinent
finding and fell into error when it held, as it did, that:
“…, the agreement to agree contains key or sufficient and
definite terms of agreement even though a few details still have to be worked
out and there is a dispute resolution mechanism provided for in this case, this
renders the agreement certain and enforceable. The agreements entered into by
the parties are enforceable. All the key terms were agreed to it in the final
offer and the MOU. In fact, all the essential elements of a contract were
present and all that remained was for the parties to prepare a contract
document and sign it. It is for these reasons that I conclude that the parties
intended to be bound by these agreements.”…,.
The courts are enjoined to give effect to contracts between
parties in the manner the parties agreed. The aim of the Irrevocable Memorandum
of Understanding was to set out the basis upon which a sale would later be
concluded. This is apparent from section 1 of the Irrevocable Memorandum
of Understanding. It is worded as follows:
“The aims and objectives of this Memorandum of
Understanding shall be to set out the basis upon which the transaction shall be
concluded and to set out the rights and obligations of each party leading to the
signing of a SALE AGREEMENT between the parties. it is the parties (sic)
understanding that the Sale Agreement be concluded immediately upon the
successful completion of the necessary regulatory approvals by the Ministry of
Agriculture, Land and Rural Resettlement.”
It stands to reason, therefore, that the sale agreement was
to be effected at a later date, subject to the terms and conditions set out in
the Irrevocable Memorandum of Understanding, and, subject also to further
negotiations by the parties. The wording of the Irrevocable Memorandum of
Understanding itself lends support to an interpretation which is only consonant
with a finding that the Irrevocable Memorandum of Understanding was not the
agreement of sale in itself.
Section 5 of the Irrevocable Memorandum of Understanding
reads as follows:
“The parties shall assign personnel on a mutually agreed
basis, on terms and conditions which they shall agree to, separate from this
memorandum for the purpose of cooperating in concluding the Sale Agreement.”
Further, and in addition to the above, section 7 of the Irrevocable
Memorandum of Understanding confirms that the Irrevocable Memorandum of
Understanding was not in itself the Sale Agreement:
“Both parties shall use their best endeavour and make all
efforts to ensure the Sale is concluded and to best advantage.”
The court could not therefore hold that the sale of the
farm had been concluded in the face of these provisions of the Irrevocable
Memorandum of Understanding.
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. The court a quo was alive to this principle and commented that in
agreements to agree in the future the parties thereto retain a discretion as to
whether or not to agree or disagree in the future. 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.”
If it were to be accepted, for reasons stated by the court,
that the Irrevocable Memorandum of Understanding is a binding agreement, the
respondent could not have successfully sued for specific performance solely
based on the same. The only binding agreement between the parties was an
undertaking to agree. In upholding the Irrevocable Memorandum of Understanding,
the court a quo needed to make a specific finding
on what could be enforced in terms of the same. And yet, despite its
earlier finding that no agreement of sale had been concluded, the court then
went on to find that there was an enforceable agreement. This what the
court said:
“Where the parties have agreed on key elements of the
contract, it is essential that the court enquire into whether the parties
intended to enter into a binding contract. It is essential to examine the terms
of the MOU and the final offer to determine if there were any binding terms.
This will assist the court in determining what the intention of the parties was
when they entered into the agreements.”
It seems that the court was persuaded to find that once the
parties had agreed on essential terms, and where the agreement contains terms
to negotiate in the future, and the agreement provides dispute resolution
mechanisms, the parties should be held to the contract. The court concluded,
further, that the parties had expressed an intention to be bound once the
regulatory approvals were obtained, and that, when these were to hand, the
agreement would be enforceable.
Accordingly, it was the judge a quo's
reasoning that the existence of the pretium, the merx and the
payment terms, coupled with the provision of a dispute settlement mechanism,
rendered the offer document and Irrevocable Memorandum of Understanding
enforceable. The court premised its conclusions on the following
authorities; Southernport Developments (Pty) Ltd v
Transnet Ltd ZASCA
94 2 ALL SA 16 (SCA), and the Australian case of R & D
Construction Group Ltd v Hallam Land Management Ltd (2009) CSO H 128.
Before us, counsel for the first respondent advanced the
same principle and sought to rely on the authorities on which the High Court
based its judgment.
The court went on to state:
“What is clear from the foregoing is that an agreement to
agree or negotiate on a future contract is enforceable where the parties have
agreed on essential terms of the contract and the agreement provides for a
dispute resolution mechanism to resolve the unresolved issues. I intend to
determine whether the agreements by the parties are enforceable.”
The dispute resolution mechanism which fortified the
court's conviction that an agreement of sale had been entered into related to
the Irrevocable Memorandum of Understanding itself and not a sale agreement
which was to be concluded later. The dispute resolution mechanism was only
applicable in relation to issues arising from the enforceability of the Irrevocable
Memorandum of Understanding itself. As a result, any remedies emanating from
the mechanism in the Irrevocable Memorandum of Understanding were restricted to
the Irrevocable Memorandum of Understanding and could not be extended to a
further agreement of sale which would be concluded later.
Thus, the court contradicted itself in material respects.
I therefore find that the court, in effect, prematurely
found that an agreement of sale had been entered into when both parties agreed
that the agreement of sale had not yet been concluded and would only be
executed at a later stage….,.
In the event, the court a quo grossly
misdirected itself in granting specific performance in the absence of an
agreement of sale upon which such order would be legally justifiable. In Reserve Bank of Zimbabwe v Corrine Granger and Anor SC34-01…, the court held, in part, that:
“An appeal to this
Court is based on the record. If it is to be related to the facts, there
must be an allegation that there has been a misdirection on the facts which is
so unreasonable that no sensible person who applied his mind to the facts would
have arrived at such a decision. And
a misdirection of fact is either a failure to appreciate a fact at all, or a
finding of fact that is contrary to the evidence actually presented. See Hama v National Railways of Zimbabwe
1996 (1) ZLR 664 (S) at 670; and S v Pillay 1977 (4)
SA 531 (AD) at 535 C-E.”…,.
