Turning
to the merits of the claim, the background to the dispute may be
summarised as follows:
The
first plaintiff is a medical practitioner of Zimbabwean origin. He is
presently resident in the United Kingdom together with his wife and
children. He is married to the second witness, Aquilina Rudo
Rushesha. They had two sons together before ...
Turning
to the merits of the claim, the background to the dispute may be
summarised as follows:
The
first plaintiff is a medical practitioner of Zimbabwean origin. He is
presently resident in the United Kingdom together with his wife and
children. He is married to the second witness, Aquilina Rudo
Rushesha. They had two sons together before they moved to the United
Kingdom, namely, Panashe Ralph Rushesha (hereinafter referred to as
“Panashe”) and Tivonge Sacha Rushesha (hereinafter referred to as
“Tivonge”).
The
first defendant, Alexious Mashingaidze Dera, is his brother-in-law,
being a brother to his wife….,.
The
first plaintiff's evidence was that before he went to the United
Kingdom he acquired an immovable property known as Stand 671 Mount
Pleasant Township 20 of Lot 57 of Mount Pleasant, also known as 3
Justice McNally Close, Mount Pleasant, Harare (hereinafter referred
to as “the property”). He asked the first defendant, who is an
accountant by profession, to help him form a company in which the
shareholders would be the two children mentioned above. The second
plaintiff is the company which was then established for the benefit
of the children. The reason for incorporating the company, according
to the first plaintiff, was to have the immovable property registered
in the name of the company. The directors of the company were to be
Acquilina Rudo Rushesha and the first defendant. The property was
duly registered in the name of the second plaintiff and was its only
asset….,.
At
the time that the property was acquired, Panashe was ten years old
while Tivonge was about a year old. The witness paid the purchase
price for the property using his own resources.
When
the first plaintiff and his family moved to the United Kingdom in
2003 they leased the property to the South African Embassy. The first
defendant was their contact person on some matters relating to the
property but the rentals were paid directly into his account. Thus,
the first defendant did not receive any rentals in respect of the
property; neither did he spend any money on the property.
In
or about June 2010 the first plaintiff and his family discovered that
the first defendant had sold shares in the second plaintiff to the
second defendant represented by the third defendant. That discovery
was only made when the first plaintiff's wife came to Zimbabwe from
the United Kingdom. They discovered that the shares had been sold for
a sum of US$36,350=. Subsequent to the sale of the shares in the
second plaintiff the immovable property was then sold to the fourth
defendant represented by the fifth defendant. The first plaintiff
spoke to the fifth defendant by telephone. The fifth defendant
advised him that he had purchased the property from the first
defendant. In that conversation the fifth defendant admitted that he
had known that the property belonged to the first plaintiff's wife.
The first plaintiff stated that different amounts were given as to
the price at which the immovable property had been sold. Initially a
sum of US$90,000= was mentioned. Later on, a figure of US$125,000=
was stated as having been paid for the immovable property. The first
plaintiff denied that he authorised the sale of the shares in the
second plaintiff or the sale of the immovable property. He, in fact,
still holds the original Deed of Transfer for the property….,.
The
second witness for the plaintiff was Aquilina Rudo Rushesha, wife of
the first plaintiff. She is the mother of the two children, Panashe
and Tivonge. She was one of the directors of the second plaintiff
company at the time that it was incorporated. She never resigned her
directorship. She came to Zimbabwe from the United Kingdom in June
2010. That was when she discovered that the immovable property had
been alienated by her brother, the first defendant. She approached
the police to help her access the property. She also approached
Gerald Mlotshwa, a legal practitioner. A meeting was held which
culminated in an affidavit being prepared and sworn to by the first
defendant.
The
plaintiffs also called Fortune Tapiwa Chasi who is a relative of the
first plaintiff's family. He testified that he knew both the third
and fifth defendants at a personal level. The witness was notified of
the sale of the property to the Boka company by the first plaintiff.
He spoke to the fifth respondent about the matter. From his
conversation with the fifth defendant the latter knew that the first
defendant had borrowed money from the second defendant and used the
immovable property as security for the loan. The fifth defendant also
stated to him that he was aware that the property did not belong to
the first defendant but to the first plaintiff. He also communicated
to the third defendant, by telephone and e-mail, about the
transactions relating to the immovable property. The third defendant
stated to him that matters related to that were to be directed to his
legal practitioners, and that his affairs should be separated from
those of the second defendant.
The
last witness called to testify for the plaintiffs was the first
defendant, Alexious Mashingaidze Dera. He was, at all material times,
a director of the second plaintiff. As stated above, he is a brother
to Aquilina Rudo Rushesha and a brother-in-law to the first
plaintiff. Although he was cited as the first defendant he did not
enter appearance to defend the matter. He only came as a witness at
the instance of the plaintiffs after being subpoenaed to attend.
His
testimony was that in February 2009 he obtained a loan in the sum of
US$36,350= from the third defendant in order to finance his business
of purchasing sugar from Triangle for resale. As security for the
loan, the witness then entered into an agreement for the sale of the
shares in the first plaintiff to the second respondent, a company in
which the third defendant has an interest. The agreement of sale was
reduced to writing. His name is recorded as the seller and beneficial
owner of “the 2 issued shares in the company”, the second
plaintiff. The memorandum acknowledges that the second plaintiff is
the registered owner of the immovable property in dispute. He stated
that he repaid to the second and third defendants an amount of money
between US$7,000= and US$10,000= in an attempt to liquidate the debt,
but could not catch up with the increasing interest which was being
charged on the amount loaned. He stated that he had known the fifth
respondent as a friend prior to meeting the third defendant. He was
introduced to the third defendant by the fifth defendant. He then
approached the third respondent for a loan which he was duly given as
stated above. When he was having problems in repaying the loan the
third defendant approached the fifth defendant to inquire as to
whether the witness had property which could be sold to raise money
to repay the balance outstanding on the loan which had gone up to
US$70,000=. Interest was being charged on the outstanding amount
every month. In his evidence, the fifth respondent then went and paid
to the third respondent the amount outstanding. At the time that the
fifth respondent paid off the amount it had gone up to about
US$90,000=. The witness stated that the fifth defendant wanted to be
paid US$100,000= for having settled the debt owed to the second and
third defendants. He deposed to an affidavit prepared by Mr Mlotshwa,
a legal practitioner who had been instructed by the first plaintiff?s
wife, on 24 June 2010. The affidavit was produced as part of the
plaintiffs documents.
The
second defendant led evidence through one Simon Charehwa who is its
Public Officer. His evidence was that the second defendant,
represented by Frank Buyanga, the third defendant, purchased shares
in the second plaintiff from Alexious Mashingaidze Dera, the first
defendant. The witness stated that the person who dealt directly with
the plaintiff was the third defendant. He, the witness, was
responsible for compilation of the information in the files of the
second defendant. He stated that Dera handed over to Frank Buyanga
share certificates relating to the shares as well as resolutions
authorising the sale. The share certificate, according to the
witness, was taken to the United Kingdom. The rest of the documents
were kept in the file at the local office. The witness identified a
document…, as the resolution which was given by Alexious Dera to
the third defendant. At the time that the transactions were conducted
he was a clerk. In cross-examination, he readily admitted that he was
not involved when the agreement between the first defendant and the
second defendant, acting through the third defendant, was concluded.
He stated that the shares in the first plaintiff were purchased for
US$36,350=. He stated that the house in dispute, which was the only
asset of the first plaintiff, was sold by the second defendant to the
fourth defendant for a sum of US$110,000= in September 2009. He
stated that he knew the first defendant prior to the transaction
relating to the shares of the first plaintiff as he used to render
accounting services to the third defendant on a part-time basis.
The
fifth defendant gave evidence on his behalf as well as on behalf of
the fourth defendant. He is a director of the fourth defendant which
is a family company. He stated that he purchased the immovable
property in dispute on 15 September 2009. At the time of the
agreement he was shown a Form CR14 and a Form CR6 and a resolution by
one James Nqindi. According to him, James Nqindi and Frank Buyanga
were the directors of the second plaintiff at the time that he
purchased the property. He stated that he first knew the first
defendant in 2007. He denied that they were friends but that he was
just someone he knew.
The
witness stated that he had known the third defendant since 2004. He
stated that the property was vacant at the time that he purchased it.
He indicated to the Court that the fourth defendant was prepared to
relinquish the property if it was paid back the money it had paid for
the property. He stated that he purchased the property from the
second plaintiff. The fourth defendant took transfer of the property
in 2010….,. At the time of the purchase there was, according to
him, a derelict tennis court. He removed the tennis court with the
intention of resurfacing it….,.
The
issues which were referred to trial are set out in the joint
pre-trial conference minute as follows:
1.
Whether or not a valid agreement of sale of shares, allegedly
belonging to the minor children (herein represented by the first
plaintiff), was entered into between the first and second and third
defendants.
2.
Whether or not the changes relating to the second plaintiff?s
directors and shareholders effected as a result of any such agreement
is valid. If not, whether or not such directors and shareholders
should revert back (sic) to the period before the 12th
February 2009.
3.
Whether or not the second plaintiff validly entered into an agreement
for the sale of the immovable property, being Stand Number 671 Mount
Pleasant Township 20 of Lot 57 of Mount Pleasant, with the fourth and
fifth defendants. If not, whether the registration of title into the
fourth defendant (sic) must be set aside and the original Deed
reinstated.
4.
Whether or not the plaintiffs have any claim for damages against the
second to fifth defendants arising out of the structural alterations
to the immovable property. If they have a claim, what the quantum of
damages recoverable is.
5.
Whether or not if the plaintiffs succeed, the fourth defendant should
remain in possession of the immovable property on the basis of a lien
and until any such claim as it may have (has) been realised.
The
question of the validity of the sale of shares to the second
defendant must be considered in the context of the nature of the
agreement between the first defendant, Alexious Dera, on the one hand
and, on the other hand, the second and third defendants. If a finding
is made that there was no sale then the legal consequences of that
finding will ensue. On the other hand, if the conclusion is that
there was a sale the Court will then consider whether such sale can
be impeached on the grounds submitted by the plaintiffs.
The
plaintiffs case is that the agreement was one of a loan in terms of
which money was advanced to the first defendant by the second and
third defendants. The shares were, according to the plaintiffs,
surrendered to the second and third defendants as security for the
repayment of the loan.
In
determining the above issues, the Court must look at the evidence in
its totality or as a whole and not piecemeal. All the parties agree
that the second plaintiff's sole asset was the immovable property
at 3 Justice MacNally Close, Mount Pleasant, Harare….,. The
defendants relied on an agreement of sale of shares signed on 12
February 2009 as proof that the second defendant purchased the entire
shareholding in the second plaintiff from the first defendant. In
terms of that agreement, the entire shareholding was sold for a sum
of US$36,350=. A document was also produced, signed by the first
defendant, to acknowledge receipt of a sum of US$36,350= “being the
purchase price for the entire shareholding in Rasar Enterprises (sic)
(Pvt) Ltd”.
The
first defendant's testimony was that the agreement of sale was a
disguised loan transaction.
The
third defendant, who was the person who was involved in the
transactions on behalf of the second
defendant, did not testify. That leaves the testimony of the first
defendant unchallenged. No explanation was given regarding the last
minute default of the third defendant.
The
witness who testified for the second defendant, Simon Charehwa, was
not privy to the discussions leading to the agreement. He was only a
clerk at the material time.
In
any event, the second and third defendants version does not accord
with the probabilities in this case. A purchase price of US$36,350=
for the entire shareholding in the second plaintiff does not stand
scrutiny, it being common cause that the transaction would, in
essence, be a purchase of the immovable property which was the only
asset of the company. The
fifth defendant
stated that a vacant piece of land within the area of Mount Pleasant
would cost between US$30,000= – US$50,000=. Simon Charehwa stated
that the immovable property was “sold” to the fourth and fifth
respondents for a sum of US$110,000= some seven months after the
second defendant acquired it for US$36,350=. There is no conceivable
explanation as to how the value would have trebled within such a
short time. The only reasonable explanation is that the payment was
meant to cover the debt owed by the first defendant to the second and
third defendants which escalated rapidly because of interest charged.
The time that the multi-currency regime was introduced in the country
would not, in my view, explain payment of a sum of US$36,350= for
that property. No evidence was tendered in support of that assertion.
The
first defendant stated, in his evidence, that by the time the shares
were appropriated by the second defendant he had paid about US$7,000=
towards reduction of the debt. That assertion was not contested.
Simon Charehwa did not know about that payment.
I
have considered, too, that the parties involved were not strangers to
one another. Frank Buyanga was known to the first defendant after
being introduced by the fifth defendant. Simon Charehwa stated that
he used to see the first defendant “a lot” at the offices of the
second defendant where he used to render accounting services to the
third defendant on a part-time basis. The
fifth defendant
was also known to the first defendant prior to that transaction. When
he proceeded with the registration of the immovable property in the
name of the fourth defendant, in July 2010, he had already become
aware that the transactions were being disputed.
It
is not uncommon for parties to enter into disguised transactions
where, as happened in the instant case, property which is given as
security is disguised as the subject of a sale. In the case of
Hoffmeyer v Gous (1893) 10 SC 115…, the court remarked as follows:
“There
is not a more common device than that by which a pledge is disguised
as a sale.”
In
such transactions the approach of the Court is settled. The court
looks at the substance and not the form of a transaction. See
Zandberg v Van Zyl 1910 AD 302…,.; MacAdams v Fiandies' Trustees
1919 AD 207. The rationale for that approach is easy to fathom. Court
proceedings are not a game of chess. They are a serious inquiry into
and determination of the rights of the participants in the
proceedings.
On
the facts of this case, I have no difficulty in concluding that the
agreement between the first defendant and the second and third
defendants was not a sale of shares. Instead, the shares were given
to secure a loan given to the first defendant by the second and third
defendants. The taking of ownership of the shares by the second
defendant makes the transaction a pactum commissorium. See Vasco Dry
Cleaners v Twycross 1979 (1) SA 603 (A). In the case of Chimutanda
Motor Spares (Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…,
this Court, citing with approval a passage from the case of Van
Rensberg v Weiblen 1916 OPD 247…, embraced the following
definition:
“A
pactum commissorium is defined as 'a pact by which the parties
agree that if the debtor does not within a certain time release the
thing given in pledge by paying the entire debt, after the lapse of
the time fixed, the full property in the thing will irrevocably pass
to the creditor in payment of the debt'.”
See
also Kufandirori v Chipuriro & Ors 2004 (1) ZLR 74 (H)..,.; Upper
Class Enterprises (Pvt) Ltd v Oceaner (Pvt) Ltd & Ors 2002 (2)
ZLR 599 (S)…,.
The
simple position of the law is that a pactum commissorium is illegal
and unenforceable. Upper Class Enterprises (Pvt) Ltd v Oceaner (Pvt)
Ltd & Ors 2002 (2) ZLR 599 (S)…,.; Kufandirori v Chipuriro &
Ors 2004 (1) ZLR 74 (H)…,.; Chimutanda Motor Spares (Pvt) Ltd v
Musare & Anor 1994 (1) ZLR 310 (H)…,.; Sun Life Assurance Co
of Canada v Kuranda 1924 AD 20…,.
The
jurisprudential principles which underpin the unenforceability of a
pactum commissorium and the circumstances in which exceptions may be
accepted have been the subject of academic and judicial discourse.
See Mapenduka v Ashington 1919 AD 343…,.; Chimutanda Motor Spares
(Pvt) Ltd v Musare & Anor 1994 (1) ZLR 310 (H)…,.; Oceaner
(Pvt) Ltd & Anor v Upperclass Enterprises (Pvt) Ltd & Anor
2001 (2) ZLR 130 (H)…,.; SILBERBERG & SCHOEMANN, The Law of
Property 3rd
Ed. by Kleyn & Boraine; WILLES's Principles of South African
Law 8th
Ed…,.
They
need no further discussion.
In
casu, in the light of the settled position of the law, the sale and
transfer of shares in the second plaintiff by the first defendant to
the second defendant was therefore illegal, and, consequently, null
and void ab initio. The illegality necessarily invalidates the Form
No. CR14 in terms of which Frank Buyanga, the third defendant, and
one James Nqindi were appointed as directors of the second plaintiff.
The fate of the sale and transfer of the immovable property to the
fourth respondent in terms of a memorandum of agreement of sale dated
15 September 2009 is decidedly sealed in the words of LORD DENNING MR
in the celebrated case of MacFoy v United Africa Co Ltd [1961] 3 All
ER 1169…,:
“If
an act is void, then it is, in law, a nullity. It is not only bad,
but incurably bad…,.. And every proceeding which is founded upon it
is also bad and incurably bad. You cannot put something on nothing
and expect it to stay there. It will collapse.”
Accepting
the above exposition of the law, the Supreme Court, in Muchakata v
Netherburn Mine 1996 (1) ZLR 153 (S) held that an act which is void
ab initio is “void at all times and for all purposes. It does not
matter when and by whom the issue of its (in) validity is raised;
nothing can depend on it.”
In
short, the sale of the immovable property to the fourth respondent is
a legal nullity. The effect of my conclusion is to dispose of issues
1, 2 and 3, as set out in the joint pre-trial conference minute, in
favour of the plaintiffs and against the defendants….,.
In
the circumstances, judgment is given in favour of the plaintiffs
against the defendants. It is accordingly ordered as follows:
1.
The purported sale and transfer of shares in Rasar Investments
(Private) Limited by the first defendant to the second defendant is
hereby declared to be illegal and null and void ab initio.
2.
The Form No. CR 14 presented for filing with the Registrar of
Companies by Mutamangira & Associates, on 11 February 2009, in
terms of which the third defendant and James Nqindi were appointed as
directors of the second plaintiff is hereby declared to be null and
void ab initio and the directors of the second defendant, prior to
the filing of that Form, are hereby declared to be in office.
3.
The sale and transfer to the fourth defendant of the immovable
property known as Stand 671 Mount Pleasant Township 20 of Lot 57 of
Mount Pleasant, otherwise known as 3 Justice McNally Close, Mount
Pleasant, Harare, is hereby declared to be null and void, and is set
aside.
4.
The Deed of Transfer in terms of which Stand 671 Mount Pleasant
Township 20 of Lot 57 of Mount Pleasant, registered in the name of
the second plaintiff, is hereby declared to be valid.
5.
The Sheriff is hereby directed to sign all documents necessary to
reinstate ownership of the immovable property described in paragraph
4 hereof to the second plaintiff.
6.
The fourth and fifth defendants and all persons claiming occupation
through them be and are hereby ordered to vacate Stand 671 Mount
Pleasant Township 20 of Lot 57 of Mount Pleasant, otherwise known as
3 Justice McNally Close, Mount Pleasant, Harare, within fourteen days
from the date of service of this order, failing which the Sheriff be
and is hereby directed to take all steps necessary to eject them from
the property.