KUDYA J: The
plaintiffs are husband and wife. On 26 February 2008, they issued summons out
of this court seeking the declaration of nullity on the agreement executed
between them and the second defendant with respect to number 45 Maviyani Street
Mbare, Harare; the setting aside of the cession effected over the same property
by the third defendant to the second defendant and costs of suit. The first and
second defendants contested the action and in addition the second defendant
filed a counterclaim seeking the eviction of the plaintiffs and all those
claiming right of occupation through them together with costs on the scale of
legal practitioner and client.
At the
commencement of trial, it was common cause that the first defendant was not a
party to the agreement and did not take part in the dispute between the
plaintiffs and the second defendant. It was common cause that the second
defendant and the plaintiffs concluded a verbal agreement of sale of the first
plaintiff's rights, title and interest in the property in dispute on 3 December
2007. Exhibit 1 is the memorial of the agreement and is dated 3 December 2007
even though it was compiled on 12 February 2008. The parties proceeded from Moses
Chioniso, the plaintiff's eldest son's residence with Moses to the third
defendant's Mbare offices where they confirmed through exh 8, the deed of sale
between first plaintiff and the third defendant dated 1 January 1981, that the
first plaintiff was the holder of cession in the property in dispute. The first
plaintiff with written consent of second plaintiff applied for the cession of
his rights to the second defendant on that date as recorded in exh 9, the
application for cession. The third defendant approved cession on the same date
as shown in exhibit 2, the agreement of assignment.
The agreement of
sale, exh 1 and the application for cession, exh 9, indicate that the rights
were sold and purchased for $5 billion, in local currency. In their oral testimonies
both the plaintiffs and the second defendant agreed that at the plaintiffs'
request part of the purchase price was paid in South African rands while the
remainder was paid in local currency.
After the
approval of cession, on 24 January 2008 the third defendant wrote exh 10 to
second defendant and his wife confirming the cession and enclosing the
agreement of assignment for their attention. The second defendant sued Joel
Mawacha, the son of the plaintiffs who remained ensconced in the house for eviction
in the magistrates' court. He attached exh(s) 3 and 4 as proof of his
entitlement to the property in question. Exhibit 3 is the affidavit deposed to
by the first plaintiff on 12 February 2008. He stated that he sold the property
for $5 billion to the second defendant and together with his wife ceded the
property to him on the date of the sale, being 3 December 2008. The suit was
dismissed, as appears in exh 11, on 8 April 2008 on the basis that the present
action was already before this court. He further averred that his son Joel had
no authority to stop cession. Exhibit 4 was an affidavit deposed to by Moses
Chioniso, the first son of the plaintiffs on 12 February 2008. He averred that
the property in dispute was sold to the second defendant with the agreement of
the whole family and further stated that his young brother Joel did not have
authority to stop the cession.
In his oral
testimony, the 73 year old first plaintiff who once worked as a painter for
ZESA before his retirement stated that he could neither read nor write. The
property consisted of a three roomed aged house with peeling plaster and
cracked walls. It was durawalled. He wanted to use the proceeds to construct
another house in Harare, and another in his communal home and the balance for his
upkeep. He maintained that he sold the property for $500 000-00 notwithstanding
that all documents (exh(s ) 1, 3 and 9) indicated the purchase price was $5
billion. He indicated that the purchaser handed the money to him in the
presence of his wife, son and a council official, one Mr Jack. The money
consisted of a component in local currency and a component in foreign currency.
He averred that Mr Jack took a portion of the local currency purportedly as
council and cession fees but did not issue him with a receipt. He could only
say he was paid ten in foreign
currency. At the suggestion of his counsel he stated that it was US$10.00-00.
He gave the impression in his evidence in chief that due to poor eyesight he
was unable to identify his signature in exh 1 or his wife's thumb mark in exh
2. It was at the instigation of Joel that he brought these proceedings seeking
cancellation of cession and refund of the amount he received.
It transpired
under cross examination that though he did not go to school, he was literate.
He could sign his signature and knew letters of the alphabet and Arabic
numerals. He had the sense to appreciate words such as spelling, guess and
common. He easily identified his wife and his signatures in exh(s) 1 and 2. He
intimated that he was assisted by Moses in the sale of the property but accused
Moses of acting in cahoots with the purchaser to undervalue the property. He
however indicated that at the time of the sale he believed that $5 billion was
an appropriate price for the property. He was shown exh 12, the Herald
Newspaper cutting of 1 December 2007 that indicated that a core house in
Chitungwiza was selling for $2.8 billion; a seven roomed house in Unit N
Chitungwiza was selling for $6.9 billion and another seven roomed house in Unit
D was priced at $7 billion while a four roomed house in Zengeza 1 was pegged at
$3.8 billion. He preferred the prices in exh 5, a copy of the Herald of 27
December 2007 that indicated that a two roomed core house in Unit D was pegged
at $15 billion while a 4 roomed house in the same area, Unit D was selling for
$15 billion. Under cross examination he conceded that the present suit was the
brained child of Joel.
His wife the second
plaintiff basically confirmed his version. She stated that the decision to sell
the property originated from her husband. The amount of sale was set at $5
billion by the two spouses and their eldest son Moses. They declined to reduce
the price to $3 billion suggested by the second defendant who then paid the
requested $5 billion at the council offices. They received part of the money in
rands and the other in local currency. She did not recall the exact amount
received as foreign currency. She equated the amount in foreign currency to the
height of seven A4 sheets of paper and indicated that she shared the foreign
currency in equal amounts with her husband. At first she said they each took
ten rands but later corrected herself by stating that each took ten notes of
the rands paid. She indicated they left with $3 billion in local currency after
the council official deducted council and cession fees. She indicated they
wanted to settle in their communal home and disposed the property to build a
better rural home and buy livestock. She confirmed that Joel was the one who
advised them of the bad deal they had concluded. She indicated that the second
defendant declined to accept the purchase price in exchange for the
cancellation of cession. She was not able to read or write as clearly
demonstrated by the X and thump print used as her signature on the agreement of
assignment, exh 2 and the application for cession exh 9. In cross examination
she revealed that the second defendant negotiated for a reduction of the
purchase.
The last witness
for the plaintiff's was Joel. He was not aware that his parents were selling
the property yet he was the son who lived at the property. He did not have
sight of the purchase price. He relied on what his parents and Moses told him. He was the source of the figure of ZAR2 500-00
allegedly paid as part of the purchase price. He was involved in the two
attempts to settle the dispute out of court in May 2008 recorded in exh(s) 6
and 7 that were rebuffed by the second defendant who refused to accept US$1 500-00
or ZAR10 000-00 from the plaintiffs for the cancellation of cession. He stated
that the second defendant with the help of Moses and the council official
cheated his parents of their property by buying their rights at a ridiculously
low price.
The second
defendant was the only witnesses who testified for the defendants. He was
looking for a house to buy. He was referred to three houses by officials of the
third defendant. He was interested in the property in dispute. He came into
contact with the second plaintiff and Moses at Moses's residence. They
introduced him to the first plaintiff. They were selling the property for $5
billion. He offered to buy it for $3.8 billion and left the plaintiffs to
consider his offer. Three days later they phoned him whilst he was at a funeral
in Chitungwiza. He rushed to Mbare. The plaintiffs and Moses stuck to $5
billion. They went to council offices at
instance of the plaintiffs who were in a hurry to return to their rural home.
All the formalities were done at the third defendant's offices. He paid the
money to the first plaintiff who handed it to Moses for verification. He was in
the business of purchasing fruits from South Africa and was awash with rands.
The plaintiffs requested him to pay part of the purchase price in rands to
hedge against the free fall of the local currency. He obliged them by paying them $2.5 billion
in local currency and the balance in the sum of ZAR10 000-00 at the black
market cross rate of $250 000-00 to the rand. The cession was granted on that
day. It was only when he wanted vacant possession that Joel came onto the
scene. He refused to vacate. The second defendant was accompanied by Moses to
the plaintiffs' rural home on 11 February 2008. On 12 February 2008, exh 1, 3
and 4 were executed in order to evict Joel from the house. The documents were
voluntarily executed by the first plaintiff and Moses. The eviction failed on
the basis that the plaintiffs had launched the present proceedings. He disputed
that he bought the property for a song and produced exh 12, the Herald of 1
December 2007 to show that he paid a higher price than the prevailing market
rate. He denied that he took advantage of the age and unsophistication of the
plaintiffs. He regarded the plaintiffs as sophisticated people. He was not
aware that the first plaintiff could not read or write. He was not known to
either Moses or Mr Jack before he dealt with them over the sale of the
property.
I found the
second defendant generally more truthful than the plaintiffs and their witness
Joel. The onus to establish that he was known to Mr Jack and Moses lay with the
plaintiffs. They failed to discharge that onus. It was incorrect to suggest as
did Mr Bakasa, for the plaintiffs,
that merely because they could not read and write they were unsophisticated.
The prices of houses in exh 12, the Herald of 1 December 2007 demonstrate that
they sold the property above the prevailing market prices. That they were alive
to prices of property was demonstrated by the wife's evidence that they
declined the offer of $3.8 billion. They were also alive to the ravages of
hyperinflation on the local currency and demanded part payment in foreign
currency. They benefited from the foreign currency. They also had the services
of their trusted son Moses. I agree with Mr Hungwe,
for the first and second defendants, that the plaintiffs sold their property
freely and voluntarily without any undue influence. The evidence led does not
reveal that they were deceived, defrauded or acted on any misrepresentation.
Rather they were the ones who firmly drove the deal.
At the end of
the trial, neither party gave satisfactory evidence on the amount paid in
rands. The plaintiff's did not state the actual figure. The second defendant
did so for the first time in his evidence in chief. What the actual amount was
is of no consequences, as all the parties were agreed that part of the purchase
price equivalent to $2.5 billion was paid in foreign currency.
The first issue
for determination is whether the parties concluded a valid contract of sale.
Both counsel agreed with the three essential elements of a contract of sale set
out in Kovi v Ashanti Goldfields Zimbabwe Limited & Anor 2007 (2) ZLR 354 at
359F. These are a meting of minds, the
merx and the pretium. Mr Bakasa
contended that the pretium was not agreed. He was wrong. Both plaintiffs stated
in their evidence in chief that they sold the property for $5 billion. The
amount is captured in exh(s) 1, 3 and 9. The existence of an agreement of sale
is not dependent on delivery or payment.
I find that a valid agreement was contracted between the sellers and the
purchaser. The absence of the second plaintiff's signature did not vitiate the
agreement. She testified that she consented to the cession. She signed the
assignment as a holder of cession. In reality, however, only the first
plaintiff held rights and interest in the property as shown by exh 8. In any
event, the position in our law is that property registered in the husband's
name belongs only to him. See Nyandoro
& Anor v Nyandoro & Ors
2008 (2) ZLR 219 (H) at 223E-F and the cases cited thereat.
The next issue
to determine is whether the contract is vitiated by what the plaintiff termed a
ridiculously low price. The basis by the plaintiff for setting aside was that
the price was too low. I have found that it was actually higher than the
prevailing market prices for similar properties at the time. It was improper
for the plaintiffs to rely on figures in exh 5, the Herald of 27 December 2007
when they were fully aware that at the time hyperinflation was taking its toll
on values. Rather the values in the Herald of 1 December 2007 provide a useful
comparison of the prevailing market prices.
The third issue
was whether the part payment in foreign currency was an illegality that
nullified the contract. Mr Bakasa submitted
that payment of the purchase price contravened s 5 of the Exchange Control Act
[Cap 22:05]. He had in mind the
contravention of s 5 (1) (a) (ii) of the Act as read with s 4 (1)(a) (ii) of
the Exchange Control Regulations SI 109/96 that penalizes exchange of any
foreign currency with any person other than an authorised dealer.
Section
4 (1) (a) (ii) and (3) of the regulations states:
(1) Subject to subs (3), unless permitted to
do so by an exchange control authority-
(a) no
person shall, in Zimbabwe-
(i) . not relevant
(ii) borrow any foreign currency from, lend
any foreign currency to or exchange any foreign currency with any person other
than an authorised dealer;
(b) .
not relevant
(2) . not relevant
(3) Subsections (1) and (2) shall not apply
to-
(a) the
acquisitions of foreign currency outside Zimbabwe by an individual who is a
Zimbabwean resident,
where the
foreign currency is acquired with free funds which were available to him at the
time of the acquisition; or
(b) the
sale or loan of free funds by an individual who is a Zimbabwean resident to a
foreign resident, where the free funds were available to the individual at the
time of the sale or loan; or
(c) .
not relevant
(d) .
not relevant
I agree that the
section delegitimises the payment of the purchase price in foreign currency by
a local resident to another local resident without exchange control approval
provided the funds are not free funds. See Matsika
v Jumvea Zimbabwe Ltd & Anor 2003
(1) ZLR 71 (H) at 74G.
In the present
matter the second defendant did not disclose his source of the rands. All he
stated was that he was in the business of buying fruits from South Africa for
sale in Zimbabwe. He did not demonstrate that the rands paid were free funds.
By exchanging those rands with the plaintiffs for the property in question he
contravened s 4(1) (a) (ii) of the Exchange Control Regulations. Accordingly I
agree with Mr Bakasa's submission that the payment of part of
the purchase price in local currency was illegal.
Mr Bakasa submitted that the contract of
sale was void for illegality. Mr Hungwe correctly
submitted that the contract was not illegal as it was concluded with a pretium
in local currency. In my view what was unlawful was the payment in foreign
currency. I found that payment in foreign currency was at the special instance
of the plaintiffs.
It
seems to me that the approach of our courts in such circumstances is provided
in Dube v Khumalo 1986 (2) ZLR 103 (S) at 109D-F where GUBBAY CJ stated:
"There
are two rules which are of general application: The first is that an illegal
agreement which has not yet been performed, either in whole or in part, will
never be enforced. This rule is absolute and admits no exception. See Mathews v Rabinowitz 1948 (2) SA 876 (W) at 878; York Estates Ltd v Wareham
1950 (1) SA 125 (SR) at 128. It is expressed in the maxim ex turpi causa non oritur actio. The second is expressed in another
maxim in pari delicto potior est conditio
possidentis, which may be translated as meaning "where the parties are
equally in the wrong, he who is in possession will prevail." The effect of
this rule is that where something has been delivered pursuant to an illegal
agreement the loss lies where it falls. The objective of the rule is to
discourage illegality by denying judicial assistance to persons who part with
money, goods or incorporeal rights, in furtherance of an illegal transaction.
But in suitable cases the courts will relax the par delictum rule and order restitution to be made. They will do so
in order to prevent injustice, on the basis that public policy "should
properly take into account the doing of simple justice between man and
man.""
In the present
matter, the illegal agreement has been performed. The plaintiffs delivered the
property to the second defendant by authorising third defendant to pass cession
to him and this was done on 3 December 2007. The ex turpi causa maxim does not apply in the present matter. Rather
the in pari delicto rule applies in
the present matter. The property was delivered in pursuant to an illegal
payment agreement. The parties are equally in the wrong. The loss must lie
where it fell.
The plaintiffs
did not suffer loss as they received a sum equivalent to $5 billion that they
sold their rights for. The second defendant received transfer of the property.
The property is in his name and he is saddled with rates and municipal charges
amounting to US$1 317-15. The plaintiffs have failed to establish the need to
relax the in pari delicto rule.
Cancelling the cession would not be equitable. The plaintiffs do not recall the
amount in rands that they received. Paying back $2.5 billion in local currency
would not be fair to the second defendant as local currency has been
demonetised. The rate of exchange to be used to repay the local currency in USD
would be the official exchange rate prevailing on that day and not the parallel
rate. On 3 December 2007 the official cross rate of the local currency to the
United States dollar was $30 000-00: $1.
$2.5 billion was equivalent at the official exchange rate to US$83 333-33.
It would be ridiculous to request the plaintiffs to pay the second defendant
US$83 333-33.
In the premises,
the plaintiff's claims for a declaration of nullity of the agreement of sale
and cancellation of the cession cannot succeed.
The second
defendant counterclaimed for the eviction of the plaintiffs and those who are
in occupation through them. The factual position shown in exh 3 and 4 is that
the plaintiffs consented to the eviction of Joel who remains ensconced in the
property. The effect of my finding on the in
pari delicto maxim is that the
property fell into the lap of the second defendant. If the plaintiffs or Joel
were to remain on the property, they would be unjustly enriched. It is
equitable to relax the in par delicto maxim
for the second defendant and grant him the order of eviction that he seeks.
It
is also appropriate to grant the second defendant the costs he prayed for as it
is apparent to me that the plaintiffs were motivated by greed rather than
principle in bringing the main claim and contesting the counter claim.
Accordingly
it is ordered that:
1. The
plaintiffs' claims be and are hereby dismissed.
2. The
plaintiffs, together with all those who claim the right of occupation through
them, be and are hereby evicted from Stand No. 6380 Mbare, otherwise known as
45 Maviyani Street Mbare.
3. The
plaintiffs shall jointly and severally one paying the other to be absolved pay
the first and second defendants' costs of suit for both the main claim and
counter claim on the scale of legal practitioner and client.
Muza &
Nyapadi,
plaintiffs' legal practitioners
Hungwe & Partners, first and second
defendants' legal practitioners
