This
is an opposed application wherein the applicant seeks the following
relief:
“1.
The purported cancellation of the agreement of sale dated 17th
October 2006 between the applicants and the respondents be and is
hereby set aside.
2.
The respondent be and is hereby ordered to forthwith transfer the
undivided share in a certain piece of land situate in the district of
Salisbury being land share number 13 of Stand number 195 Monavale
Cluster Homes, also known as subdivision A, portion of Mayfield
Estate to the applicants upon respondent satisfying the minimum
service requirements set out in its development permit.
3.
The respondent shall bear costs of suit on a legal
practitioner/client scale.”
It
is common cause that on 17 October 2006 the parties entered into an
Agreement
of Sale.
The respondent sold to the applicants its property known as an
undivided share in a certain piece of land situate in district of
Salisbury being land share number 13 of Stand number 195 Monavale
Cluster Homes also known as Subdivision A, Portion of Meyfield Estate
measuring 704 square metres (the property). The price for the
property was $4,928,000= (old Zimbabwean currency) and the agreed
mode of payment of the purchase price was:
“Deposit
of $3,000,000= payable upon signing this agreement of sale of which
an amount of $2,630,400= is payable to Bvekwa Legal Practice and an
amount of $369,600= is payable to Maffack Properties representing
7.5% of the purchase price. The balance to be paid over 3 months in
three (3) equal instalments. Any delays will attract an interest of
300% per annum.”
It
is not in dispute that by 31 January 2007 the applicants had fully
paid the agreed purchase price. However, on 27 February 2008 the
respondent's legal practitioners addressed the following letter to
the first applicant:
“WITHOUT
PREJUDICE
Dear
Sir/Madam
RE:
PROPERTY: SHARE NO. 13 OF SUBDIVISION A, PORTION OF MAYFIELD ESTATE
(MONAVALE CLUSTER HOMES): VARIATION OF AGREEMENT OF SALE
Our
client has instructed us to communicate to you regarding the above
issue as follows:
As
you may be aware, the construction works at the Monavale Cluster
Homes site has come to a halt. This has been caused by an order given
by the Environmental Management Authority to stop the works pending
the production of an Environmental Impact Assessment Report. This has
since been complied with. However, in the interval, inflation has
eroded the value of the amounts paid thus far. This has made it
impossible for the further works to continue. Without the completion
of the works, it is not possible for our client to transfer ownership
of the property sold to you.
In
these circumstance, our client makes the following without prejudice
offer to you. It is that you enter into a variation of the agreement
of sale entered into between yourselves and our client. In terms
thereof, you would agree to an increase in the amount needed to
complete the servicing works. This amount is in the sum of $36
billion dollars. This amount would be payable by the end of March
2008. In return, our client would begin a programme to complete
servicing the property. This programme shall be completed within 90
days reckoned from the 1st
of April 2008.
The
alternative to the above is the cancellation of the agreement of
sale. You would be refunded 60% of the current market value of the
property the subject of the agreement of sale, minus administrative
expenses so far incurred e.g. agents commission and administration
fees. The amount in question would be paid within a reasonable time
of your acceptance of cancellation.
We
have been requested to furnish you with up to 31st
of March 2008 to signify your election. This may be done by
delivering, in writing, your response at our offices.
Should
you fail to make an election or reject the above proposals, be
advised that our client shall apply to court for an order of
cancellation of the agreements entered into on the amount of the
purchase price paid in the manner the court may deem fit.
We
await your consideration.
Yours
faithfully
___________________
Kawonde
and Company”
On
1 July 2008,
the applicants' legal practitioners responded
to the above letter as follows:-
“Dear
Sir
RE:
PROPERTY: SHARE NO.13 SUBDIVISION & PORTION OF MAYFIELD ESTATE
(OUR CLIENT MR & MRS HAMANDISHE)
The
above two are our clients, who, from instructions, purchased the
above property from yours. We have been shown the agreement of sale
between the concerned parties together with your minute to our
clients dated 27th
February 2008.
In
the context of your said minute we felt that there may be need for us
to get some clarifications viz issues raised therein.
(a)
Is it your client's attitude that the delay in the completion of
the project was occasioned by ours, and, if so, how?
(b)
At what stage of development has the project reached and what are the
minimum stages required before the properties may be transferred to
the individual purchasers.
(c)
On what grounds does your client believe that in the event of
cancellation of the agreement ours can only get 60% of the paid
purchase price?
(d)
What guarantees are there that in the event of our client paying and
the others refusing to do so, the project will still be completed
within ninety days as suggested in your minute?
You
will possibly appreciate the assistive extent of your client's
responses to the above, and, more importantly, how such responses
could enable us to cut a seemingly long story short.
We
kindly wait to hear from you by return of post.
Yours
faithfully
___________________
Mufadza
and Associates”
On
8 July 2008, the respondents' legal practitioners again wrote to
the applicants' legal practitioners in the following terms:-
“Dear
Sir or Madam
RE:
OUR CLIENT MAFFACK PROPERTIES (PVT) LTD: YOUR CLIENT MR AND MRS
HAMANDISHE: SHARE NO. 13 OF SUBDIVISION 195 A, PORTION OF MAYFIELD
ESTATE
We
thank you for your letter of 1 July 2008.
We
have been instructed to reply as follows:
The
delay in the completion of the development was not occasioned by your
client. At the time the project stalled, it was 60% complete. Our
client believes that it is just and equitable that your client gets
60%, as the amount reflects the extent of the improvement of the
property as of now.
Regrettably,
your client declined to accept the offer by ours. Accordingly, the
agreement is hereby cancelled. Our client offers to pay to yours the
full amount he paid, adjusted for inflation using the CPI as at the
date of payment, in full and final settlement of all its obligations
in respect of the above transaction.
Yours
faithfully
__________________
Kawonde
& Company”
It
is the attitude of the respondent, as emerges from correspondence
quoted above, that caused the applicants to file this application on
30 July 2008 seeking the relief indicated on the first page of this
judgment.
At
the hearing of this matter the applicants abandoned clause 2 of their
relief and persisted that they wanted the court to determine the
status of the Agreement of Sale.
Counsel
for the applicants submitted that the applicants had complied with
their obligations arising out of the Agreement of Sale, and, as such,
there was no basis for the agreement to be cancelled. He correctly
submitted that the attempted variation of the Agreement of Sale did
not comply with clause 12 thereof which provides as follows:
“12.
WHOLE
AGREEMENTS
This
agreement constitutes the entire contract between the parties hereto
otherwise than as may be recorded herein and:-
13.1
No warranty, representation, promise or undertaking has been given or
made by either party to the other except as recorded in this
Agreement;
13.2
There are no conditions precedents suspending the operation of this
Agreement which is not referred to herein;
13.3
No
variation in this Agreement shall be valid unless reduced to writing
and signed by or on behalf of the parties hereto.”…,.
He
also said the parties had categorically stated what was covered by
the purchase price through clause 14 which provides as follows:
“14.
SPECIAL
CONDITIONS
14.1
It is agreed that the amounts so paid shall be used for purposes of
servicing the land, administrative expenses, professional fees and
any other incidental expenses since the Stand is being sold off-plan.
For this purpose, the Purchaser has agreed and authorized the release
of the money to the seller.
14.2
The purchase price of Z$4,928,000= includes the cost of architectural
and structural designs.
14.3
The Seller undertakes to complete servicing, that is, provision of
sewer and water reticulation, drainage and surface water management
system on or before December, 2006 or any other date thereafter
agreed between the parties.”
All
in all, counsel for the applicants submitted it was the respondent
who was in breach of the agreement of sale. He said, whilst claiming
impossibility of performance due to inflation, the respondent had not
taken the route of seeking formal liquidation and thereby protecting
the interests of people such as the applicants. He therefore urged
the court to declare the purported cancellation of the agreement as
null and void.
Counsel
for the respondent submitted that the relief sought (ie declaring the
cancellation of the agreement of sale null and void) would not assist
the applicants in any way, and, as such the applicants should have
simply withdrawn the application. He said the property in question
was not registered in the respondent's name. That aspect would
certainly stand in the way of specific performance (i.e. transfer of
property to applicants). In any case, he argued in his heads of
argument:
“It
is common cause that the respondent had to comply with regulatory
conditions after it had commenced infrastructural works in terms of
the permit. It is undeniable that hyperinflation gripped Zimbabwe and
intensified with each succeeding year. The phenomenon of top ups is
now known from school fees to ordinary purchases of goods and
services. So notorious has this become that the monetary authorities
have, in certain cases, allowed settlement of obligations in some
other currency, say US dollar.”
Relying
on WILLIE & MILLIN's Mecantile
Law SA
15ed,
counsel for the respondent
quoted
from page 69 of the edition as follows:
“When
a contract has become impossible of performance after it has been
entered into the position is the same as if it had been impossible
from the beginning.”
He
therefore did not see merit in the relief sought by the applicants
and called for the dismissal of the application.
The
papers in
casu
clearly confirm that as at 31 January 2007 the applicants had
satisfied clause 2 of the Agreement of Sale as read together with the
mode of payment already spelt out on first the page of this judgment.
Apart from unilaterally creating new obligations for the applicants,
the respondent does not dispute that by 27 February 2008, when it
sought to vary the Agreement of Sale, the applicants had long fully
discharged their obligations under the said Agreement of Sale. The
purported variation, without the consent of the applicants who
already had complied with the contract, and without court
confirmation, was, in my view, clearly in violation of clause 12 of
the agreement. The respondent had no basis upon which to justify
cancellation of the agreement of sale. The best that the respondent
could have done was to seek a legal route for confirmation of its
inability to perform due to an intervening impossibility.
In
its letter of 27 February 2008, the respondent had said:-
“Should
you fail to make an election or reject the above proposals, be
advised that our client shall apply to court for an order of
cancellation of the agreements entered into on the amount of the
purchase price paid in the manner the court may deem fit.”
That
was never done.
The
position is simply that the respondent is in breach of the Agreement
of Sale, and, as a way out, now seeks to unilaterally cancel the
agreement citing inflation and intervening impossibility. To allow
such a move to succeed would certainly destroy the sanctity of
contractual relationships. The purported cancellation is, in my view,
clearly intended to avoid specific performance. However, economic
hardships cannot be used as automatic weapons to defeat contracts.
In
a similar situation, in International Trading (Pvt) Ltd 1993 (1) ZLR
21 (H), the late ROBINSON J had this to say:
“I
would wind up by saying that if the right of specific performance is
to be shown to have real meaning to businessmen, then the loud and
clear message to go out from the courts is 'businessmen beware.'
If you fail to honour your contracts, then don't start crying, if,
because of your failure, the other party comes to court and obtains
an order compelling you to perform what you undertook to do under
your contract. In other words, businessmen who wrongfully break their
contracts must not think they can count on the courts, when the
matter eventually comes before them, simply to make an award of
damages in money, the value of which has probably fallen drastically
compared to its value as the time of breach. Businessmen at fault
will therefore, in the absence of good grounds showing why specific
performance should not be decreed, find themselves ordered to perform
their side of the bargain no matter how costly that may turn out to
be for them…,.”
Admittedly,
the above sentiments were echoed specifically in relation to the
issue of specific performance. However, I am here quoting the same
because the respondent's action (ie unilateral cancellation of the
Agreement of Sale) is clearly intended to avoid specific performance.
The applicant in
casu
seeks a declaration which is meant to save the Agreement of Sale. The
applicants can only proceed to demand specific performance if the
purported cancellation is declared null and void. That explains the
applicants' position in abandoning clause 2 of the original relief
sought.
I
have, in this judgment, made a finding that the applicants complied
with the terms of the agreement and were therefore not in breach, if
anything the respondent was in breach of the agreement. The
applicants are therefore saying there is no justification on the part
of the respondent to run away from the agreement and that any
variation of the agreement can only be effected in terms clause 12 of
the Agreement of Sale. I am unable to fault the applicants'
reasoning and therefore I find merit in their application. I
therefore find it proper to grant the relief sought.
I
accordingly order as follows:-
It
is ordered that:
1.
The purported cancellation of the Agreement of Sale dated 17 October
2006, between the applicants and the respondent, be and is hereby
declared null and void; and
2.
The respondent shall pay costs of suit.
