The first appellant, who is the appellant in case no.
SC453/13, is Zimcor Trustees Ltd (Zimcor), while the second and third
appellants, who are the appellants in case no. 446/13, are Boka Investments
(Pvt) Ltd (Boka Investments) and Matthew Boka
(Boka).
The first respondent is also the first respondent in both
appeals. He is Dr. Webster Tongoona Rushesha (Rushesha) acting in his capacity
as the legal guardian of his minor children Panashe and Tivonge.
For the sake of convenience, I shall refer to the parties
concerned by name rather than their citation as appellants or respondents
respectively.
The Background
It is not in dispute that Rushesha acquired Stand 671,
Mount Pleasant Township, before proceeding to the United Kingdom for
professional employment. What is in dispute is what transpired after the
property was initially acquired.
According to Rushesha, he asked his brother-in-law, Alexio
Dera, to set up a company called Rasar Investments (Pvt) Ltd (Rasar
Investments). The immovable property was then registered in the name of Rasar
Investments as its only asset. The Directors of the company were Rushesha, his
wife, and Dera, and the registered shareholders were the two Rushesha minors.
When the Rusheshas moved to the United Kingdom in 2003, the property was leased
to the South African embassy and the rental income was paid directly into
Rushesha's bank account.
In February 2009, Dera concluded an Agreement for the Sale
of shares in Rasar Investments to Zimcor, which was represented by its Director,
Frank Buyanga. The Directors of Zimcor then replaced the previous Directors of Rasar Investments. Subsequently, in September
2009, the new Directors of Rasar Investments sold the property to Boka
Investments, represented by its Director, Matthew Boka.
A year later, in September 2010, Rushesha issued summons in
the High Court to reclaim the shares in Rasar Investments and the property
itself. The claim was founded on the assertions that the sale of shares to
Zimcor was a fraudulent sham perpetrated by Dera and that the subsequent sale
of the property to Boka Investments was consequently invalid.
The court a quo found
that the agreement for the sale of shares was a disguised transaction to secure
a loan advanced to Dera by Zimcor and Buyanga. Therefore, the transfer of
shares to Zimcor, pursuant to Dera's default on his loan, was effected by way
of a pactum commissorium which
rendered the entire transaction illegal and unenforceable. This invalidated the
initial sale of shares in Rasar Investments and the consequential alteration of
its directorship, as well as the subsequent sale of the property to Boka
Investments. The court accordingly declared that the previous directors of
Rasar Investments be reinstated and that the original Deed of Transfer in the
name of Rasar Investments remained valid. All the defendants were ordered to
bear the costs of suit….,.
The Issues
on Appeal
The principal issue for determination by the High Court, as
set out in the Joint Pre-Trial Conference Minute, and upon which all the other
major issues were dependent, was framed as follows:
“Whether or not a valid agreement of sale of shares allegedly
belonging to the minor children (herein represented by first plaintiff) was
entered into between first and second and third defendants.”…,.
No doubt, the core question arising from this issue relates
to the validity of the agreement for the sale of shares between Dera and
Zimcor. Nevertheless, the words underlined above make it clear that the alleged
ownership of the shares was intrinsic to the dispute between the parties. This
is particularly so in light of the initial representation by Dera as the Seller,
in the preamble to the sale agreement, that he was the beneficial owner of the two
(2) issued shares in Rasar Investments, followed by his subsequent retraction
and admission of fraud in the affidavit relied upon by Rushesha to challenge
the validity of the sale. Moreover, none of the appellants admitted or
accepted, either in their pleadings or in their evidence, that the minor
children were the legal or beneficial owners of the shares.
The grounds of appeal herein, in respect of both appeals,
raise several other issues which are ancillary to the validity of the agreement
between Dera and Zimcor. However, they all derive from the correctness of the
decision a quo on that specific point.
Disposition
It cannot be disputed that Rushesha's claims were premised
on the assertions that the total issued share capital of Rasar Investments was
two (2) shares registered in the names of his minor children and that they were
the only persons vested with title to sell the shares. This appears clearly
from paragraphs 1(a) and 1(b) of the Summons and paragraphs 9.1 and 9.2 and
Prayer 1 of the Declaration. In my view, this contention was an essential
element of Rushesha's cause of action in the court below. It was therefore
necessary for him to adduce the requisite proof, on a balance of probabilities,
to establish that element or, at the least, to counter the appellant's
averments to the contrary.
In the proceedings before the court a quo, ownership of the
shares in question was canvassed by reference to the share certificates issued
in respect of Rasar Investments, through the testimony of Simon Chareva,
who took over from Buyanga as
Zimcor's public officer. Under cross-examination, Simon Chareva accepted that Dera had handed over the share
certificates upon sale of the shares. However, he was unable to produce the
certificates because, according to him, they had been taken to England by
Buyanga for safe-keeping and he had not taken any steps to secure them despite
the proceedings in the court a quo. In these
circumstances, it seems reasonably clear that Rushesha himself would have been
unable to tender the share certificates in order to establish ownership of the
shares in Rasar Investments.
Therefore, he cannot be found wanting in that regard.
The only materially relevant documentary evidence adduced
on the point in the court below was Rasar Investments's Memorandum of
Association (the Memorandum). It is trite that such Memorandum is an essential
document for the formation of every company and constitutes a public document
accessible through the Companies Registry. In terms of section 8(3) of the
Companies Act [Chapter 24:03], each subscriber to a company must sign its Memorandum
of Association and in his own handwriting state the number of shares being
taken by him in that company.
The Memorandum in casu
was tendered as part of Rushesha's bundle of documents in the court below. It is dated 13 February 2003 and
purportedly bears the signatures of the two minor children, Panashe and
Tiwonge, each of whom is described by occupation as being a “Manager”. The
number of shares taken up by each subscriber is stated to be “fifty”. It is common
cause that, as at the date of signature of the Memorandum of Association, Panashe was aged 9 years and 8 months and Tivonge was not yet 7
months of age.
Whatever one might surmise as to the authenticity of their
respective signatures, their capacity as emancipated adults was quite obviously
misrepresented in the Memorandum of
Association.
This misrepresentation was acknowledged by Dera under
cross- examination at the trial. He was unable to explain how the minor
children could have appended their signatures to the Memorandum of Association.
He also confirmed that it had not been signed on their behalf by their
guardian. Eventually, he grudgingly conceded that the Memorandum of Association
was probably invalid….,.
There is a further anomaly that arises from the Memorandum
of Association. As I have already indicated, it states that the minor children
had subscribed to 50 shares each. This appears to be confirmed by the share
transfer certificate signed by Dera in favour of Zimcor on 10 February 2009. The
supposed existence of 100 shares in Rasar Investments clearly contradicts the
assertion of only 2 shares as being the total issued share capital of the
company, not only in the Summons and Declaration but also in the agreement for
the sale of shares concluded between Dera and Zimcor and signed by Dera on 11
February 2009.
None of these discrepancies was satisfactorily explained by
Rushesha, either in his testimony or in the documentary evidence furnished to
the court a quo.
For the sake of completeness, it is necessary to scrutinise
Dera's evidence insofar as it purported to corroborate and buttress Rushesha's
claim that the sale of shares to Zimcor was invalid. Dera deposed to an
affidavit in June 2010, three months before Rushesha instituted proceedings in
the High Court. The nub of his affidavit is that the 2 shares in Rasar
Investments were beneficially owned by the minor children, that he purported to
sell the shares to Zimcor without being duly authorised to do so, and that the
sale agreement was, in reality, a loan agreement.
Apart from the uncertainty as to the actual number of
shares issued in Rasar Investments, which Dera does not even attempt to dispel,
his allegation that the sale transaction was a disguised loan is utterly belied
by the fact that the amount in question (US$36,350=) was not paid to him but to
a company owned by Rushesha's brother in South Africa. Equally significantly,
there is a crucial and unexplained discrepancy in the receipt that Dera signed
to acknowledge the payment allegedly made to him. The receipt, which was
produced in Rushesha's bundle of documents, is dated 12 February 2008, a full
year before the disputed sale agreement was executed, while the receipt forming
part of Zimcor's bundle is correctly dated 12 February 2009.
What is also critical is Dera's admission, in his affidavit,
of having committed several very serious offences. These include his alleged
misrepresentation to Zimcor as to the beneficial ownership of the shares, his
fraudulent and corrupt acquisition of replacement title deeds, and his failure
to pay capital gains tax or obtain exchange control authority for the sale of
the shares.
In my view, all of the foregoing demonstrates that Dera was
not a credible or reliable witness. Apart from the contents of his dubious
affidavit, there is nothing of probative value to show that he was not the
legitimate owner of the shares in Rasar Investments. Having regard to the
totality of the evidence before the court a quo, I am inclined to agree with
counsel for the appellants that Rushesha decided, for purely tactical reasons,
to cite Dera as a defendant and not to seek any relief from him, other than an
order for costs.
To sum up, the net effect of all of the aforementioned
evidential deficiencies was to irremediably undermine Rushesha's case as
pleaded in the Summons and Declaration. They demonstrate that the formation of
Rasar Investments, and its subsequent control and administration, were severely
afflicted by misrepresentation, probably fraudulent, rendering it almost
impossible to ascertain the precise status and ownership of the company's
shareholding. In short, Rushesha failed to establish his core contention that
his minor children were the lawfully registered owners of the total issued
share capital of Rasar Investments.
The court a quo clearly
erred in upholding his claim and consequently invalidating the sale and
transfer of shares to Zimcor and the subsequent sale of the property to Boka Investments.
In light of this conclusion, it is unnecessary to consider
the additional and ancillary grounds of appeal raised by the appellants. It is accordingly ordered that:
1. The appeals in Case No. SC453/13 and Case No. SC446/13
be and are hereby allowed with costs.
2. The judgment
of the court a quo is set aside and
substituted with the following:
“The plaintiffs' claims are dismissed with costs.” 