KAMOCHA J: The
applicant sought and was granted a provisional order on 11 July 2005 which she
now seeks to have confirmed. The amended
final order reads as follows:
“It is ordered that:
1.
The
purported cancellation of the agreement of sale dated the 24th of September 2004 between applicant and first
and second respondents by the first respondent is hereby declared null and
void;
2.
The
said agreement of sale between applicant and first and second respondents dated
the 24th of September 2004 in respect of stand 157 Burnside Township
8 of subdivision 10 of Matsheumhlophe situate in the District of Bulawayo
measuring 4070 square metres otherwise known as number 157 Red Robin Close
Burnside, Bulawayo is hereby declared valid and of full force and effect.
2(a) The total purchase price of the said
property described in clause 2 above, be and is hereby declared to be a sum of
$130 000 000,00 (one hundred and thirty million dollars), which sum has been
paid in full by the applicant to the first and second respondents.
3.
First
and second respondents be and are hereby ordered to sign all the documents
and/or transfer papers necessary to effect the transfer of the said house number
157 Red Robin Close, Burnside, Bulawayo from Warren Vincent Pearce to first and
second respondents and from first and second respondents to the applicant.
4.
Alternatively,
should first and second respondents fail to sign any of the above documents on
demand, that the Deputy Sheriff be and is hereby authorized to sign all the
necessary papers to enable the transfer to go through.
5.
That
first and second respondents be and are hereby ordered to surrender the Title
Deeds of number 157 Red Robin Close Burnside, Bulawayo to Messrs Ben Baron and Partners
within 14 days of the date of this order.
6.
That
Messrs Ben Baron and Partners be and are hereby authorised to proceed with the
transfer of number 157 Red Robin Close Burnside, Bulawayo from Warren Vincent
Pearce to first and second respondents and from first and second respondents to
the applicant.
7.
That
first and second respondents pay the costs of suit on an attorney and client
scale.”
The background of this matter may be summerised like
this. On 24 September 2004 the first and
second respondents entered into an agreement of sale whereby they sold to the
applicant a certain piece of land in extent 4070 square metres being number 157
Burnside Township 8 of subdivision 10 of Matsheumhlophe situate in the district
of Bulawayo, otherwise known as number 157 Red Robin Close, Burnside, Bulawayo.
According to clause 2 of the memorandum of agreement of sale
which was signed by the parties “… the full purchase consideration for the said
property is in the sum of $70 000 000,00 (seventy million dollars) payable by
the purchaser direct to the seller which shall be paid in full upon signing
this agreement of sale …” However,
according to the applicant the total purchase price was $130 million when
transfer costs and other costs are included.
After the applicant had paid a sum
of $77 274 000,00 the parties agreed that applicant would pay $28 000 000,00
for transfer fees and the balance of $24 720 000,00 would be paid on or before
18 October 2004. The parties then
recorded the information as follows in annexure “B”:-
“Nomalanga
Sibanda being the buyer of stand number 157 Red Robin Close to Burnside (sic).
The side (sic) of the stand is
130 000 000,00
77
274 000,00 has been paid
28
000 000,00 to remain for the transfer
24
720 00,00 being the balance to be in (sic)
on the 18-10-2004”
The document was signed by Mrs
Nyathi whose identity number was given as 08-534841 A 73. The parties further recorded in annexure “C”
certain information relating to their agreement in the following terms:-
“Buying Price $130 000 000,00
Nomalanga
Sibanda buyer for No. 157 Red Robin Close to Burnside from Mr and Mrs G Nyathi
Less $28 000 000,00
Bal $102 000 000,00
Less $87 684 000,00
Bal $14 316 000,00 to be paid on 18th October
2004”
Annexure “D” reflects that the buyer
paid the last installment on 18 October 2004 as agreed by the parties. The receipt reads as follows:
“I
have received the last and final payment for No. 157 Red Robin Close to
Burnside.
$14 316 000,00 paid on 18th October 2004
Paid to Mr and Mrs Nyathi
08-534841
A 73”
A signature was appended before the identification
number. Pursuant to the provisions of
clause 6 of the memorandum of agreement of sale which stipulates that “the
seller shall give vacant possession of the property to the purchaser by the 24th
September 2004” the first and second respondents handed the keys to the house
to the buyer on that day. They delivered
vacant possession to the applicant who has been in occupation ever since.
Applicant averred that the first and
second respondents had in fact also handed to her the title deeds of the
property but because the transfer was going to be handled by Messrs Ben Baron
and Partners, the parties agreed that the title deeds be left with that firm to
facilitate the transfer.
Applicant paid in full the $28
million transfer fees to Messrs Ben Baron and partners and was ready to take
transfer of the property but to her shock and dismay she received the following
letter dated 19 May 2005.
“Dear Madam
Re:
Cancellation of sale of agreement of stand No. 157 Burnside Township 8 of
subdivision 10 of Matsheumhlophe situated in the district of Bulawayo
I
refer to the sale of agreement (sic)
between myself and yourself sometime in 2004.
You
will note that the from (sic) the
onset, you had promised to pay the sum of $90 000 000,00 in cash towards
purchasing the said immovable property.
You however failed to pay in installments which was a breach of
contract. This made me fail to use the
money on what I had intended to do. At
the same time ZIMRA was asking for about $9 000 000,00 from me. As you had already breached the contract the
amount – needed by ZIMRA is still accruing which should not be done by me.
You
are therefore advised that from the date of this letter, the said agreement has
been cancelled and that I am in a position to re-emburse you what you paid
according to the Contractual Penalties Act.
Be guided accordingly
Yours faithfully
G Nyathi “
It is difficult to understand what
the first and second respondents were trying to achieve in the light of
annexure “B” supra which they
signed. In it the parties stipulate the
terms of the sale by installments. The
cash payment of $90 000 000,00 does not appear in that document. That the sale was a sale of immovable
property by installments admits of no doubt.
It is accordingly not true that the
first and second respondents were cancelling the agreement in terms of the
Contractual Penalties Act. What is true
is that the purported cancellation was contrary to the provisions of section 8
of that Act. Not only does the purported
cancellation fall foul of these provisions but it was also contrary to clause 8
of the memorandum of agreement which provides that:-
“Should
any party fail to remedy any serious breach of this agreement within fourteen
days of demand to that effect the aggrieved may elect to cancel this agreement
without prejudice to this right to recover any damage suffered, nonpayment of
the purchase price to constitute a serious breach.”
If the respondents believed the
applicant was in serious breach of the contract, they should have demanded that
she remedied such breach within 14 days.
Instead, it is common cause that they did not do that. In the result this court makes a specific
finding that the purported cancellation was of no force or effect. The parties' agreement is still extant and
enforceable.
This court has now got to determine
whether or not the agreement is contra
legem. The first and second
respondents submitted that the agreement of sale that applicant sought to rely
on was contra legem and was ipso facto unenforceable. They contended that it was entered into and
signed solely for the purpose of tax evasion.
The respondents argued that what the parties had concluded was an illegal
contract which was void or at least voidable at law.
They submitted that the agreement of
sale was for the purchase price of $130 000 000,00. The applicant only paid $102 000 000,00
towards the purchase of the property.
The $28 000 000,00 paid to Ben Baron and Partners did not form part of
the purchase price as it was for transfer fees and ZIMRA charges. They then concluded on that point that the
full purchase price had not been paid in full.
The applicant was accordingly not entitled to any transfer.
The applicant on the other hand had
averred that inclusive of transfer costs and other costs, the total purchase
price was the sum of $130 000 000,00.
The applicant's averments are supported by what is contained in annexure
“B” at page 3 supra. The respondents' argument that the full
purchase price had not been paid is devoid of any merit in the light of the
acknowledgement of receipt of the last and final payment for the property made
by both respondents in annexure “D” on page 4 supra.
The respondents asserted that the
agreement was concluded for the sole purpose of avoiding payment of the Capital
Gains Tax and the stamp duty.
Indeed there can be no doubt an
agreement concluded for the sole purpose of avoiding payment of the Capital
Gains Tax and the Stamp Duty is illegal and ipso
facto null and void ab initio. Section 44 of the Stamp Duties Act [Chapter
23:09] provides thus:
“44 Agreements
to evade duty shall be void
Every
contract, agreement or undertaking made for the purpose of evading, defeating
or frustrating the requirements of this Act as to the stamping of instruments,
or with a view to preclude objection or inquiry relative to the due stamping of
any instrument shall be void.”
It is now settled law that “an
illegal agreement which has not yet been performed either in whole or in part,
will never be enforced,” by the courts.
Per GUBBAY JA (as
he then was) in Dube v Khumalo 1986(2) ZLR 103 at 109D-F in
terms of the maxim ex turpi causa non
aritur actio – a rule which is absolute and admits of no exception.
In
casu the agreement of sale is almost complete – it has been performed in
part as it is common cause that the applicant has paid the purchase price in
full as acknowledged by the respondents in documents quoted supra.
The applicant was given vacant possession of the house by the
respondents on 24 September 2004 and has been in possession ever since. The agreement of sale is almost
complete. It has been performed in part.
It admits of no doubt that the sale
was a genuine one. It could not have
been made for the sole purpose of evading payment of tax, as suggested by the
respondents, since the applicant paid the purchase price in full and has been
in vacant possession of the house since 24 September 2004. The agreement of sale was therefore not a
sham but a reality. All that is left is
for the property to be transferred to her.
Transfer fees have already been paid to Messrs Ben Baron and Partners.
What is illegal in the agreement of
sale is the portion of clause 2 wherein the parties state that “… the full
purchase consideration for the said property is the sum of $70 000 000,00
payable by the purchaser direct to the seller …” when in fact the correct amount should have
been reflected as $130 000 000,00. The
rest of the agreement of sale document reflects the true and correct intention
of the parties.
The South African court had occasion
to deal with an analogous case in Brits
v Van Heerden 2001(3) SA 257. The parties in that case reflected the
purchase price as being R160 000 only and made declarations to that effect when
in fact the purchase price was R160 000 plus a cession of an insurance policy
of R33 000. (The equivalent of section 44
of the Stamp Duties Act in South Africa is section 14 of their Act). KNOLL J had this to say at page 272A.
“It
is the agreement to omit the particular portion of the agreement referring to
the balance of the purchase consideration which is in fact the illegal
agreement.”
Undoubtedly what is null and void in
this case is the agreement to reflect the purchase price as $70 million instead
of $130 million. In my view, this court
is at liberty to properly declare to true purchase price as being $130 million
so as to reflect the true agreement between the parties.
The applicant has, right from the
onset, sought to enforce the true purchase price of $130 million which she has
paid in full, not the $70 million. She,
therefore, sought the very opposite of enforcing an illegal agreement. The court must come to her assistance.
Costs
It was argued on behalf of the
applicant that the 1st and 2nd respondents had no
conceivable defence to the applicant's case.
It was pointed out to them that their purported letter of cancellation
was a nullity. They were also advised of
the correct legal position in the matter but still persisted with their mala fide defence. They did not stop there, but they went on to
make serious unsubstantiated allegations against the legal practitioner
representing their opponent. Finally,
they raised as an afterthought the defence of contra legem which they had not pleaded.
There is merit in the applicant's
submission that they should be ordered to pay punitive costs. This court shall show its displeasure at
their conduct by an award of punitive costs.
In the result I would grant the
order sought in terms of the amended draft.
Coghlan and Welsh, applicant's legal practitioners
Messrs Cheda and Partners 1st
and 2nd respondents' legal practitioners
