GOWORA
JA: On
28 February 2008, under Case No HC1239/08, the appellant caused
summons to be issued against the respondents seeking an order for the
cancellation of a lease and, consequent thereto, the eviction of the
respondents from the leased premises.
On
10 December 2008 a second summons was issued by the appellant under
Case No 6969/08 wherein it sought the eviction of the respondents due
to the expiry of the lease.
The
High Court dismissed the claims with costs.
The
appellant was aggrieved by the dismissal and has noted this appeal.
THE
FACTUAL BACKGROUND
The
basic facts surrounding the dispute are the following:
The
appellant (hereinafter referred to as “Indium”) is the registered
owner of certain immovable property, being Stand 450 Avondale West
Township of Stand 390 Avondale West, also known as 108 West Road,
Strathaven, Harare, hereinafter referred to as (“the premises”).
The first respondent (hereinafter referred to as “Kingshaven”) is
a private company registered as such under the laws of Zimbabwe. The
second respondent, hereinafter referred to as Shumba and the third
respondent, his wife, are the only shareholders of and directors in
Kingshaven.
Kingshaven
carries on business in the hospitality sector and is in occupation of
the premises by virtue of a lease concluded on 14 December 2007 with
Indium. Notwithstanding the date of signing, the agreement was to
come into force on 10 December 2007 and was to endure for a period of
365 days, terminating automatically on 9 December 2008.
Shumba
and his wife are shareholders in a Close Corporation, ERF Bryanstan
Cc, which is duly registered as such under the laws of South Africa.
ERF
Bryanstan is the registered owner of an immovable property, being
Portion 2 of ERF 825 Bryanstan Township also known as 17 Portman
Road, Bryanstan Sandton, Johannesburg.
In
2007 ABSA Bank in whose favour ERF Bryanstan had registered a
mortgage against the property, called up the mortgage and executed
against the same.
In
an effort to save the property, Shumba approached Jayesh Shah
(hereinafter referred to as “Shah”) for financial assistance and
this culminated in a number of agreements.
The
first agreement consists of a loan between Shah on the one part as
lender, and Shumba and ERF Bryanstan Cc on the other as borrowers.
The loan amount is UD$500,000.
The
second agreement is for the sale of the entire shareholding in Indium
concluded by Shumba and his wife on the one part as sellers, and Shah
and Shaleetha Mahabeer on the other as purchasers.
The
last agreement is the lease agreement concluded between Indium as
lessor and Kingshaven, as lessee on 14 December 2007.
The
two matters instituted by Indium were by consent of the parties
consolidated for trial before the High Court.
In
dismissing the claims the court a
quo
stated:
“He
intended to secure a windfall by all means legally possible. His
legal practitioner advised a web of agreements to ensure he remained
within the realms of the law. A loan here, a purchase of shares there
and a lease with a buy-back option to crown it all, was all it took
to secure apparent control of the debtor's immovable property in
Zimbabwe without any reference to its true value. Clearly, whatever
the parties decided to call it, the agreement to take over control of
the plaintiff company from Shumba without paying for it amounted, in
my view, to a pactum
commissorium.
It
is the substance not the form to which the court looks when deciding
the true nature of an agreement.
Consequently,
therefore, the second issue, whether annexure “C” amounts to a
pactum
commissorium
is determined in defendants' favour.
I
have already found that the payment in South Africa by Shah was
intended as a loan, as pleaded by plaintiff therefore there is no
evidence to suggest that the same payment doubled as payment for
shares in Indium Investments (Private) Limited.
That
issue is resolved in favour of the defendants as well.
The
transactions were clearly in fraudum
legis.
The law in this jurisdiction is clear. Where the contract which is in
fraudum
legis
is performed the court cannot come to either party's assistance.”
The
appeal is premised on the following grounds:
1.
That the court a
quo
erred in not finding that in the absence of a plea for rectification
of a contract, the parole evidence rule operates to exclude extrinsic
evidence to disprove the contents of a written contract. (sic)
2.
The court a
quo
erred in not finding that returns lodged with the Registrar of
Companies are prima facie proof of the correctness thereof, and the
same cannot be impugned without the joinder of the Registrar of
Companies.
3.
Consequently, and for the stronger reason in view of grounds of
appeal 1 and 2 above, the court a
quo
erred in holding that the respondents had discharged the onus of
justifying possession of the appellant's property within the
context of the actio
rei vindicatio.
4.
The court a
quo
erred in fact and in law in holding that the agreements in question
were simulated agreements which “mimicked” the South African
agreements.
5.
The court a
quo
erred in any event in holding that the agreements the subject of the
litigation were in fraudem
legis
in that they sought to evade the exchange control legislation, in
view of the fact that free funds were paid to the credit of a South
African resident, and in not finding that the fact that such South
African resident was a citizen of Zimbabwe and did not give rise to
the need for exchange control approval.(sic)
6.
The court a
quo
erred in fact and in law in holding that the agreements the subject
of the litigation a
quo
were a pactum
commissorium.
Mr
Uriri,
on behalf of the appellant urged us to find that the learned judge in
the court a
quo
had not dealt with the case that was placed before him.
It
was his contention that the matter before the court was principally
for the cancellation of the lease agreement between Indium and
Kingshaven and consequential relief. He argued that it was
essentially a rei
vindicatio.
What
the court a
quo
did however, it is argued, was to turn its focus on a completely
different issue which it could not competently determine and made
findings which cannot be supported.
It
is contended that the court thereby misdirected itself.
In
my view the dispute can be resolved by this court having regard to
the manner in which the court a
quo
dealt with what it referred to as the simulated agreements and
secondly dealing with the actio
rei vindicatio
in accordance with the claims in the summons.
THE
ALLEGEDLY SIMULATED AGREEMENTS
In
answer to the claim for the eviction of Kingshaven from the premises
the respondents raised various defences, namely that Shumba and his
wife had borrowed a specified sum of money from Shah, and that, as
security for their due performance thereon, the latter had demanded
security in Zimbabwe in the form of shares in Indium. They pleaded
further that the parties entered into a simulated agreement for the
sale of shares in Indium which ultimately resulted in the lease
agreement providing for a buy back option in favour of Shumba and his
wife.
There
is no suggestion on the papers that Indium participated in any of the
agreements except the lease.
It
then begs the question which parties the court a
quo
referred to when it concluded that the agreements were fraudum
legis.
It
is common cause that the loan agreement was between ERF 825 Bryanston
Cc, in which Shumba and his wife owned shares, and Shah.
ERF
Byanston Cc was not cited as a party to the proceedings before the
court a
quo.
Shah
only appeared in the proceedings in the court a
quo
as a witness on behalf of Indium.
In
the circumstances the court could not have properly considered the
loan agreement or its legality in the absence of the parties thereto.
I
turn next to the “share sale” agreement in relation to the shares
in Indium.
The
parties to the sale of the shares were on the one part, Shumba and
his wife as sellers and, on the other part, Jayesh Shah and Shaleetha
Mahabeer.
The
last two were never before the court as parties and the agreement for
the sale of shares could therefore not be scrutinised to any extent
by a court in their absence.
Consequently
the determination by the court of the issues related to the lease
agreement concluded by Indium and all the respondents in reference to
the share sale agreement was highly irregular.
It
follows therefore that any issues referred to the trial court for
determination in relation thereto would be irregular. It is therefore
logical to conclude that the court a
quo
dealt with matters and issues that were not before it.
This
leaves Indium, Kingshaven, Shumba and his wife.
They
were parties to a document being the lease agreement, which is the
only document properly before the court.
Those
were the parties that were before the court and therefore the only
dispute for determination was that arising from the lease agreement
in respect of which the court had to determine the respective rights
and obligations of the parties before it.
In
the absence of a counter-claim for declarations of invalidity in
respect of the agreements discussed above, the court could not grant
relief to the effect that the agreements were invalid. At best, it
was argued, the court ought to have granted absolution from the
instance.
I
think the criticism is well taken.
At
p8 of the cyclostyled judgment the learned judge in the court a
quo
stated:
“In
my view of the facts, the defendants have adduced sufficient evidence
to rebut the presumption of legality of the transactions described
above. Generally, one of the most common forms of tax avoidance is
where the parties to a contract attempt to disguise its true nature
in order to qualify for a tax benefit that would not be available if
the true contract between them were revealed. The courts require no
statutory powers to ignore pretence of this kind and the law will
always give effect to the real transaction between the parties.”
The
court a
quo
then went on to consider the agreements in question and at p11 of the
judgment concluded:
“In
my view the true nature of the Zimbabwean agreements was that they
were additional securities to the South African loan despite the fact
that they in effect apparently passed ownership and control to Shah.
The buy-back option as well as the fact that the loan had been
secured by a mortgage bond gave Shumba the belief (that) these
agreements will be respected by the parties as pledged to the
underlying loan agreement. I therefore find for the defendant in
respect of the first issue.
As
to whether annexure “C” amounts to a pactum
commissorium,
it follows from my reasoning that once the interpretation given by
the defendant is upheld, the court must find in his favour on this
point as well.
I
do so for the following reasons.
A
pactum
commissorium
has been 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 ownership in the thing will invariably pass to the creditor
in payment of the debt.' See Chimutanda
Motor Spares (Pvt) Ltd v Musare
&
Another
1994 (1) ZLR 310; Van
Rensberg v Wieblen
1916 OPD 247 at 252.”
Undoubtedly
the court was correct in its statement of the principle of a pactum
commissorium.
However,
it was incorrect in applying that principle to the facts of this
case.
It
gave the respondents far reaching relief which they had neither
sought nor prayed for.
If
the respondents were under the impression that the underlying
agreements which gave rise to the lease agreement were invalid, it
behoved them to bring proceedings as a pre-emptive attack on the
agreements.
This
they chose not to do.
It
is common cause that in their plea to the claim for eviction, the
respondents raised the issue related to the loan between Shah and
Shumba and his wife, the agreement for the sale of shares in respect
of Indium and the lease agreement in terms of which Kingshaven, and
through it, Shumba and his wife occupied the premises.
A
plea is a defence and as such can be likened to a shield. It is not a
weapon or a sword. No relief can attach to a party through a plea.
In
the same plea the respondents averred that by separate process Shumba
and his wife would approach the High Court for a declaration of
invalidity of the two Zimbabwean agreements.
No
such process was ever launched.
Clearly,
the court a
quo
misdirected itself in that it resolved a dispute that was not before
it.
Some
of the parties to the dispute in question were not before it and they
were denied the right to be heard in their own cause.
The
ratio
of the decision of the court strikes at the rights of Shah and
Mahabeer without affording them the right to be heard.
I
say so for the reason that a judgment in which the court stated that
the acquisition of shares by the two was a nullity could not be made
in their absence and in proceedings in which they have not been cited
as parties.
The
question that arises for determination is whether such a judgment can
be said to be valid and binding as against Shah and Mahabeer.
In
Hundah
v Murauro
1993 (2) ZLR 401 the point was made that for a party who has a real
interest in the matter in dispute before a court to be bound by a
judgment of the court such party should be cited. At p404E-G the
court stated:
“We
have drawn attention to this point previously on a number of
occasions (see e.g. Munemo
v Muswera
1987 (1) ZLR 20 (S) at 21G-H), often in conjunction with the other
important point that the local authority should be cited in
proceedings of this kind since it has real interest in the property
in dispute (see e.g. Ncube
v Mkandla
S-123-89). If it indicates in writing before hand that it is happy to
accept whatever the court decides, well and good. But otherwise it
should be cited, if only to ensure that it is bound by whatever
judgment is given. Such an order does not bind it if it was not a
party.”
Additionally
the court only had regard to the Zimbabwean agreements.
In
the event that its conclusion that the lease agreement was a
simulation and that the “share sale” agreement was security for
the loan, such finding could not be arrived at without considering
the South African agreements.
The
court declined to have regard to them on the basis that the order
sought did not depend upon their validity.
This
was despite the fact that the pactum
commissorium
depended on the loan agreement which was a South African agreement
and which the court had properly declined to consider.
The
contradiction is obvious and the misdirection can thus not be in
dispute.
THE
VALIDITY OF THE LEASE AND THE REI
VINDICATIO
I
turn then to discuss the real issue before the court a
quo,
that is the claim for the eviction of Kingshaven and through it
Shumba and his wife, from its premises.
The
preamble to the lease agreement acknowledges that Jayesh Shah and
Shaleetha Mahabeer have become the beneficial owners of shares in
Indium Investments (Private) Limited. The relevant provision states:
“Whereas
by a sale of shares agreement between JAYESH SHAH and SHALEETHA
MAHABEER on the one part, and DANIEL SHUMBA and LINDA SHUMBA on the
other, JAYESH SHAH and SHALLETHA MAHABEER have become the beneficial
owners of shares in INDIUM INVESTMENTS (PRIVATE) LIMITED.”
In
turn Indium is the registered owner of the premises.
In
terms of clause 3.1 of the lease agreement, the lessee undertook to
deposit an amount of Z$ One Billion as security for the due
performance by it of its obligations under the lease. Rental for the
premises was set at Z$ One Billion per month payable in advance and
reviewable from time to time.
In
recognition of the prior ownership of the shares in Indium by Shumba
and his wife, in terms of clause 13.1 of the lease, the latter were
granted an option to repurchase the shares in Indium. The option was
to expire on 9 October 2008.
It
is common cause that the option was not exercised.
In
February 2008 Indium advised Kingshaven that it was in breach of its
obligations under the lease to pay rentals and cancelled the lease.
On 10 December 2008 the lease also expired through the effluxion of
time. Indium again issued summons this time claiming return of the
premises by virtue of the expiry of the lease through the effluxion
of time.
In
the plea to the claim for their eviction from the premises, the
respondents admitted that the appellant was the registered owner of
the premises.
The
claim as pleaded by the appellant was a simple actio
rei
vindicatio.
The
nub of the actio
rei vindicatio
is that an owner is entitled to reclaim possession of his property
from whosoever is in possession thereof. As was stated in Chetty
v
Naidoo
1974 (3) SA 3 at p13:
“It
may be difficult to define dominium
comprehensively (cf. Johannesburg
Municipal Council v Rand Townships
Registrar
& Ors
1910 TS 1314 at 1319), but there can be little doubt……..that one
of its incidents is the right to exclusive possession of the res,
with the necessary corollary that the owner may claim his property
wherever found, from whomsoever holding it.
It
is inherent in the nature of ownership that possession of the res
should normally be with the owner, and it follows that no other
person may withhold it from the owner unless he is vested with some
enforceable right against the owner (e.g. a right of retention or a
contractual right).”
As
a consequence once the ownership by Indium of the premises was
acknowledged and accepted by the respondents, all that the court a
quo
had to determine was whether Kingshaven had any legal right to remain
in possession of the same.
Therefore,
the simple task before the court a
quo
was to decide whether or not a lease agreement existed between the
parties as alleged, and, thereafter to determine whether or not the
claim for eviction on the lease was well founded.
This,
the court failed to do.
It
went on to make wider pronouncements on relationships that were not
before it. It thereby misdirected itself.
The
principle of rei
vindicatio
was applied in Stanbic
Finance Zimbabwe Ltd v Chivhungwa
1999 (1) ZLR 262 (H) by MALABA J (as he then was) where he remarked
as follows:
“The
principle on which the actio
rei vindicatio
is based is that an owner cannot be deprived of his property against
his will and that he is entitled to recover it from any person who
retains possession of it without his consent.
The
plaintiff in such a case must allege and prove that he is the owner
of a clearly identifiable movable or immovable asset and that the
defendant was in possession of it at the commencement of the action.
Once
ownership has been proved its continuation is presumed.
The
onus is on the defendant to prove a right of retention: Chetty
v Naiddo
1974 (3) SA 13 (A) at 20A-C: Makumborensa
v Marini
S130/95 p 2.
It
follows that the action is based on the factual situation that
prevailed at the time of the commencement of the legal proceedings.”
Once
an owner proves that the property is his and that the defendant
originally obtained possession of the res
pursuant to a contract, the owner is obliged to prove that such a
contract has expired or that he was entitled to cancel it and has
indeed terminated it.
In
Chetty
v Naidoo
(supra) it was emphasised that:
“… a
plaintiff who claims possession by virtue of his ownership must ex
facie
his statement of claim prove the termination of any right which he
concedes the defendant would have had but for the termination.”[1]
The
only defences available to a defendant in the position of the
respondent are the following;
(i)
that he had a right to possess;
(ii)
that he was not in possession; or
(iii)
that the plaintiff is not the owner.
It
is worth noting that the respondents did not plead any of these
defences.
In
truth they could not have as they had a lease with Indium the
termination of which they did not deny or place in issue. The
validity of the lease agreement is confirmed.
Mr
Uriri
has however further submitted that the court in the face of this
clear claim then went on to grant judgment in favour of the
respondents in the absence of a counter-claim.
In
African
Farms and
Townships
v C.T. Municipality
1963 (20) SA 555 (AD) STEYNE CJ made the following remarks:
“Counsel
for the appellant further argued that the order in the original
proceedings, which as such is an order dismissing the application, is
to be equated with absolution from the instance, leaving the issue
undecided.
In
my view there is no substance in that argument.
As
Sande, De
Diversis Regulis ad l.
207, points out, the res
judicata
is not so much the sentential,
the
sentence or the order made, as the lis
or
negotium,
the matter in dispute or question at issue about which the sententia
is
given, or the causa
which is determined by the sententia
judicis.
As
pointed out in Purchase
v Purchase, 1960
(3) S.A. 383 (N) at p 385, dismissal and refusal of an application
have the same effect, namely a decision in favour of the respondent.
The
equivalent of absolution from the instance would be that no order is
made, or that leave is granted to apply again on the same papers.
In
Commissioner
of Customs v Airton Timber Co Ltd 1926
C.P.D. 351 at p 359, WATERMEYER J, draws a distinction between the
actual judgment and the reasons for judgment, and expresses the view,
in effect, that where the decision of a particular question, although
dealt with in the reasons for judgment, is not incorporated in the
actual judgment, and the question is not necessarily determined by
the judgment, the matter is not res
judicata.
I
do not understand this to mean that where a Court decides the
particular issue raised and dismisses the application, the question
decided is not res
judicata. If
that is what it does mean or imply, I would be unable to agree with
it.
In
the present case, having regard to the judgment, the import of the
order is clearly that on the issues raised the Court found against
the appellant and in favour of the respondents.”
A
dismissal of the plaintiff's claim is a judgment in favour of a
defendant.
It
is my view that the dismissal had the effect of awarding the
respondents judgment in their favour.
I
turn next to the relief being sought.
In
the prayer the appellant seeks an order for the setting aside of the
judgment of the court a
quo
and its substitution with an order entering judgment in its favour in
terms of the summons.
In
addition to the cancellation of the lease, Indium sought the
following relief:
“2.
An order directing the defendants, and all those claiming occupation
through them, to vacate the premises situate Stand 450 Avondale West
Township of Stand 390 Avondale West, otherwise known as 108 West
Road, Strathaven, Harare (“the
premises”).
3.
An order that in the event that within forty-eight (48) hours of the
date of the above order being issued and the defendants failing
and/or neglecting and/or refusing to comply, the Sheriff for
Zimbabwe, or his lawful deputy for Harare, duly assisted by the
Zimbabwe Republic Police if need be, be authorised empowered and
directed to eject the defendants from the premises, and all those
claiming occupation through them, and to hand over vacant occupation
of the premises to the plaintiff or its authorised agent or
representative.
4.
An order precluding and restraining the defendants from removing any
item of property from the premises.
5.
An order for payment of the sum of $Z2,567,000,000,00 (two billion
five hundred and sixty seven million dollars) together with interest
thereon calculated at the prescribed rate to the date of payment as
follows;
5.1
On Z$567,000,000,00 (five hundred and sixty seven million dollars)
with effect from 10 December 2007;
5.2
On Z$1,000,000,000,00 (one billion dollars) with effect from 1
January 2008; and
5.3
On Z$1,000,000,000,00 (one billion dollars) with effect from 1
February 2008.
6.
An order for holding-over damages at the rate of Z$4,000,000,000,00
(four billion dollars) per month with effect from 1 March 2008 to the
date that the plaintiff recovers vacant occupation of the premises
aforesaid, such rate to be adjusted from time to time in accordance
with market rates.
7.
An order for interest on the sum of holding-over damages aforesaid at
the prescribed rate from the date each amount becomes due and
payable.
8.
An order for payment of the sum of Z$10,000,000,000,00 (ten billion
dollars) together with interest thereon at the prescribed rate from
the date of judgment to the date of payment.
9.
Costs of suit as between legal practitioner and client.”
The
appellant sought for an order confirming the cancellation of the
lease.
It
is common cause that the lease has expired through the effluxion of
time. Its expiry is not in dispute and it is not necessary to confirm
its cancellation.
As
a consequence an order for the eviction of the respondents from the
premises will issue.
The
interdict against the removal of items from the premises was never
put in issue.
However,
the claim for the payment of sums under various heads was not
considered by the court a
quo.
Neither
counsel addressed us on the issue.
The
record is clear, however, that no evidence was adduced by Indium in
respect of the sums of money being claimed under the various heads.
The
claim for holding over damages is premised on the lease agreement and
it would follow from a confirmation of the cancellation of the lease.
The
same considerations would apply to the claim for arrear rentals as
that would be a consequence of the finding that a valid lease existed
between Kingshaven and Indium.
The
amounts claimed were denominated in the local currency and were never
converted to the United States Dollar currency in the trial below.
They therefore remain an issue for determination by the court a
quo.
In
view of the position taken by the court a
quo
not to delve into the merits of the claim for ejectment and
consequential relief flowing therefrom it seems in order that the
parties be given an opportunity to have that aspect of the dispute
fully ventilated and determined by the court.
In
the premises it is only appropriate to grant relief in respect of the
eviction and the interdict and to remit the matter to the court a
quo
for the determination of what sums of money, if any, may be due to
Indium.
The
trial court can take judicial notice of the fact that the country and
indeed every person in the country uses foreign currency to transact
and that the country adopted a multi-currency regime with effect from
February 2009.
It
is also worthy to note that the Zimbabwe Dollar has since been
demonetized.
To
that end justice would best be served if the parties were to adduce
evidence from experts in the field of real estate as to any sums that
may be owing under the headings on which the matter is remitted for
the adduction of evidence.
With
regard to the sums being claimed for payment of costs on the various
agreements concluded between the parties no evidence was led in the
court a
quo
either as to the amounts being claimed in the local currency, if any,
or the rate of exchange that should be applied in converting the said
sums to the US Dollar.
This
claim must fail.
Accordingly
the appeal succeeds to the extent that the lease agreement is held to
be valid and an order for the eviction of the respondents shall
ensue.
The
matter is remitted for the determination of the arrear rentals and
holding over damages before the court a
quo.
Accordingly
the following order will issue:
“IT
IS ORDERED THAT:
1.
The appeal is allowed with costs to the extent provided for
hereunder.
(i)
The judgment of the court a
quo
is set aside and substituted with the following:
(a)
It is declared that the lease agreement between the plaintiff and the
first respondent has terminated through the effluxion of time.
(a)
The defendants and all those claiming occupation through them shall
vacate the premises, being Stand 450 Avondale West Township of Stand
390 Avondale West, otherwise known as 108 West Road, Strathaven,
Harare within seven (7) days of the date of this judgment, failing
which the Sheriff for Harare or his lawful deputy is hereby
authorised to eject them from the same and give vacant possession to
the plaintiff or its duly authorised agent or representative.
(b)
The defendants be and are hereby precluded and prevented from
removing, with the exception of personal items belonging to them, any
item of property from the premises.
(c)
The claim for payment of Z$10,000,000,000.00 being costs for the
preparation of various agreements concluded by the parties is hereby
dismissed with costs.
2.
The issue relating to the payment of sums of money claimed under
paras (e) to (g) of the prayer in the declaration are remitted to the
court a
quo
for a determination on the substance of what sums are due and owing.”
CHIDYAUSIKU
CJ: I agree
GWAUNZA
JA: I agree
HLATSHWAYO
JA: I agree
MAVANGIRA
AJA: I agree
Messrs
Uriri Attorneys,
appellant's legal practitioners
Messrs
Kantor & Immerman,
respondents' legal practitioners
1.
At p34
