CONSTRUCTION
The appellant appeals against the whole judgment of the High Court dated 14 March 2012, wherein the court a quo granted an order for the eviction of the appellant.
The appellant was evicted from the respondent's three immovable properties situated in Harare.
The eviction awarded punitive costs as against the appellant and its legal practitioner, Mr D. Chinawa.
THE FACTS
The appellant and the respondent are both companies that are duly incorporated in Zimbabwe. The two companies signed two separate and distinct but inter-related agreements of sale on 29 November 2004, wherein the respondent was the seller while the appellant was the purchaser.
The respondent was represented by Jose Eduardo Vieira, who, together with his father (Luis Vieira), were its sole shareholders and directors.
The appellant was represented by Danny Musukuma, who, together with his brother, Lincewesi Musukuma, were also its sole shareholders and directors.
The parties denoted the first agreement as “the Agreement of Sale” and the second “the Deed of Sale” which terms I hereinafter adopt in this judgment.
The Agreement of Sale encompassed the sale of specified movable assets for the sum of US$219,000 payable on the date of signature, in Zimbabwean dollars, at the auction rate prevailing on 26 November 2004 (the effective date).
In terms of clause 5, interest would accrue from the due date of payment at the rate of 7 and a half per centum per annum calculated on a daily basis.
The assets comprised office furniture and fittings, motor vehicles, radios, water pumps, generators, and “workshop assets”.
It was, however, common cause that the appellant did not pay the purchase price for the movables on the date of signature but had managed to do so in the local currency equivalent as at the date of summons.
The Deed of Sale, whose effective date was 29 November 2004, comprised the sale of three immovable properties for the total sum of US$481,000.
These are identified in clause 1 of the agreement as:
“(a) Certain piece of land situated in the District of Salisbury, Stand 272, measuring 3,145 square metres (8 Whites Way, Msasa, Harare) and held under Deed of Transfer No.6884/92 together with the permanent improvements situate thereon valued at US$296,000 (two hundred and ninety-six thousand United States Dollars).
(b) Certain piece of land situated in the District of Salisbury, Stand No.195, measuring 4,794 square metres (8 Lorely Close, Msasa, Harare) and held under Deed of Transfer No.05691/94 valued at US$97,000 (ninety-seven thousand United States Dollars).
(c) Certain piece of land situated in the District of Salisbury, Stand No.8 measuring 8,790 square metres (8 Comet Close, Mount Pleasant, Harare) held under Deed of Transfer No.3404/78 valued at US$88,000 (eighty-eight thousand United States Dollars), together with all permanent improvements thereto (hereinafter referred to jointly as 'the Property')”.
The purchase price of US$481,000 was payable in instalments on the dates and in the amounts specified in the attachment to the Deed of Sale, Annexure A.
The amounts payable were apportioned between the United States dollar and Zimbabwe dollar.
Default interest accrued at the rate of seven (7) and a half per cent per annum from the date of default to the date of payment.
By letter dated 30 November 2004, the respondent undertook “upon settlement of the full purchase price for the Deed of Sale and Agreement of Sale” to deliver to the appellant “all share certificates of shares of the Company” and duly signed and stamped share transfer forms, the Certificate of Incorporation, Memorandum and Articles of Association, the share register, the minute book and other company documents, hold the requisite meetings of directors and shareholders to transfer the company to the appellant and thereby procure the resignation of the directors, secretary, public officer and other officers of the company.
In the same letter, the respondent further promised to procure the transfer of the company's post office box and all telephone and mobile communication lines to the appellant “upon signature” of the Agreement of Sale.
It was common cause that the letter did not alter, amend, or supplant the terms stipulated in the agreements.
It, however, appears to have clarified that the respondent was not sold as a going concern.
In December 2004, the appellant commenced the utilization of the movable assets, and, by 25 January 2005, the respondent had effected the undertakings premised upon the signature of the Agreement of Sale.
On an undisclosed date, Luis Vieira, as the Chairman of the respondent's Board of Directors, purportedly “read, approved, and signed 'Minutes of Meeting of Members of the Company held at Harare on 3 January 2005.'”
The minutes recorded that the Chairman, Managing Director, Jose Vieira, Danny Musukuma, and Mrs F Maio attended the meeting.
The only business dispatched at that meeting was the appointment of Danny Musukuma “as a new director of the company with immediate effect.”
On 20 September 2005, Luis Viera also signed a CR14 form which showed, that, on 3 January 2005, he and Jose Vieira resigned their directorships and were replaced by Danny and Lincewesi Musukuma while LAWAI resigned as Secretaries and were replaced by Samerstone Services.
The CR14 was, however, lodged with the Registrar of Companies, by Samerstone Services, on 14 September 2006.
Between 11 March 2005 and 27 October 2006, the parties exchanged correspondence in which the respondent demanded payment of and the appellant invariably undertook to pay the outstanding purchase price.
On 1 August 2006, the Zimbabwe dollar was revalued by the removal of three (3) zeroes under the Presidential Powers (Temporary Measures) (Currency Revaluation) Regulations, 2006 SI 199/2006.
As at 4 January 2006, the appellant had paid ZW$2,530,000,000, which, as my computation will show later on in this judgment, was equivalent to US$242,624=25 and purportedly owed ZW$1,480,578,188. These amounts were exclusive of interest.
A further payment of ZW$500,000 (revalued) was rejected and returned to the appellant on 2 August 2006.
The purported sum of ZW$1,480,578,188 was still owing on 25 October 2006.
By letter dated 7 November 2006, the respondent accorded the appellant 30 days notice within which to rectify the breach failing which the agreement would be deemed cancelled.
On 6 December 2006, the appellant tendered a cheque payment of ZW$2.5m “in full and final settlement.”
The cheque was rejected and returned to the appellant.
On 12 December 2006, the respondent duly cancelled the Deed of Sale.
The cancellation was premised on the appellant's failure to pay the United States dollar denominated portion of the purchase price, either in hard currency or in local currency at the agreed rate of conversion.
On 9 January 2007, at the instance of Jose Eduardo Vieira, the respondent issued summons for the vindication of the immovable properties and concomitant eviction of the appellant therefrom.
In its amended plea of 17 May 2007, the appellant conceded that the three immovable properties were owned by the respondent, but, denied being in occupation thereof.
The matter failed to commence on the initial trial date on 12 July 2007 but eventually did so on 14 June 2010.
However, between 28 May 2008 and 9 March 2009, notwithstanding that the properties were res litigiosa and pleadings had been closed in the matter, the immovable properties were purportedly sold and transferred by the appellant, at the instance of the Danny Musukuma board, to some third parties.
These third parties did not join and were not joined to the vindicatory proceedings.
THE CONTENTIONS A QUO
The proceedings in the court a quo, and in this Court, primarily revolved upon the Deed of Sale. Specious references were made to the Agreement of Sale in a bid to establish whether or not the appellant purchased the respondent “as a going concern” and whether or not it paid the aggregate purchase price for the immovable properties.
The respondent submitted, that, as it was the common cause owner of the immovable properties at the time of litis contestatio (the close of pleadings) by the appellant's rejoinder of 7 June 2007, and, as it had established that the property was possessed by the appellant or its privies against its will, it was entitled to recover possession from whomsoever was in possession.
Per contra, the appellant contended, that, its sole shareholders and directors became the sole shareholders and directors of the respondent on 3 January 2005, and, thereafter, ran the respondent's affairs.
It relied on the purported minutes of even date and the CR14 signed by Luis Vieira on 20 September 2005 and lodged by the appellant's secretaries (Samerstone Services) with the Registrar of Companies on 24 January 2006.
It further contended, that, the common cause fact that the immovable properties were either occupied by the respondent's “current directors” or had been sold by the respondent at the instance of the new directors, negated the vindicatory action instituted at the instance of the former directors, long after they had vacated office.
It also took the alternative contention, that, in the absence of a resolution by the Vieiras, as directors of the respondent, the institution of the proceedings was unauthorized, and, therefore, an irredeemable nullity.
The appellant, additionally, contended that the 30 days notice was defective in that it did not state “the exact sum due and owing” as envisaged by section 8(1) and (2) of the Contractual Penalties Act [Chapter 8:04].
In reply, the respondent contended that the purported minutes were forged, the signature of Luis Viera on the CR14 was procured by Danny Musukuma by deceit and its lodgment with the Registrar of Companies a nullity.
Its contention was premised on the appellant's failure to fulfill the conditions precedent necessary for the transfer of its equity and directorship embodied in the Deed of Sale and amplified in the letter of 30 November 2004.
It also argued, that, the appellant's failure to establish the validity of the CR14 further proved that the Vieiras never lost their directorship and shareholding to the Musukuma brothers. Consequently, the acts undertaken at the instance of the Vieiras were valid while those that were instigated by the Musukumas were null and void and of no force or effect.
In respect of the alternative contention, the respondent argued, on the authority of Smith v Kwanonqubela Town Council 1999 (4) SA 947…, and Uitenhage Municipality v Uys 1974 (3) SA 800 (E)…, that, the defect had been cured by, and at, its Extraordinary General Meeting held on 17 February 2009.
The respondent further disputed the construction rendered by the appellant to section 8(1) of the Contractual Penalties Act.
THE FINDINGS OF THE COURT A QUO
At the close of the respondent's case, in a separate judgment handed down on 2 May 2011, the court a quo dismissed the application to absolve the appellant from the instance.
In the appealed judgment, the court a quo held that the appellant had paid the Zimbabwe dollar component under the first agreement in full.
Regarding the Deed of Sale, it adjudged the sole witness called by the appellant, Danny Musukuma, to be an un-impressive and evasive witness, and generally accepted the evidence of the respondent's sole witness, Jose Vieira.
It further held, that, the appellant had not paid the full purchase price in the currency apportionments and manner specified in Annexure A.
It, consequently, found that the Vieiras could not have relinquished either their directorships or shareholding to the appellant's sole directors and shareholders.
This finding was buttressed by the concession elicited from Danny Musukuma, in cross examination, that the purported minutes of 3 January 2005, which he produced in evidence, were fake.
It was common ground, that;
(i) Firstly, no such meeting was ever convened;
(ii) Secondly, Danny Musukuma never attended the said meeting; and
(iii) Lastly, Jose Vieira did not, and could not have been in attendance as his passport showed that he was not in Zimbabwe between 1 December 2004 and 1 November 2009.
The court a quo further held, that, the transfer taken at the instance of the Musukuma brothers constituted a fraudulent act, which could not bar the appellant from recovering its property from whosoever was in possession thereof.
This was because the Musukumas knew that the appellant had not discharged the contingent obligation upon it to pay the full purchase price, which would have triggered the transfer of the equity of and power to run the respondent to them.
They also knew that they were alienating res litigiosa properties.
On the authority of Chatrooghoon v Desai & Ors 1951 (4) SA 122 (N)…, and Rautenbach v Venner 1928 T.P.D. 26, it upheld the respondent's contention, that, section 8(2) of the Contractual Penalties Act [Chapter 8:04] did not require a plaintiff to state “the exact sum due and owing by the defendant” in the notice of cancellation.
It reasoned, that, the exact amount of the local currency payable could only be known on the date the appellant elected to make payment.
It upheld the cancellation of the Deed of Sale on two grounds:
(i) The first was that the notice was in compliance with the provisions of section 8(1) of the Contractual Penalties Act.
(ii) The second was that the appellant had demonstrably failed to prove that the amount tendered on 6 December 2006 would have adequately discharged the outstanding debt.
The court a quo also upheld the respondent's contention, that, Annexure A required the appellant to pay the United States dollar denominated purchase price in the specified ratio of 45 per cent hard currency to 55 per cent local currency.
It found that while the United States dollar monthly component was static, the local currency component, being dependent on the prevailing auction rate on the date of payment, could not, and was not intended by the parties to be constant.
The likelihood of the fluctuation of the local currency component of the purchase price over the payment period, in its view, militated against a constant instalment figure.
Consequently, the constant local currency figures embodied in Annexure A were only given as an example of what the appellant would pay if the future auction rates remained static.
The court a quo, therefore, found that the appellant had not paid the hard currency component of the purchase price, either in that currency or in the equivalent local currency amount.
The court a quo found the requirements for actio rei vindicatio, which are set out in Chetty v Naidoo 1974 (3) SA 13 (A)…, were met.
It further found, that, the appellant had failed to establish its right to retain possession of the properties which had passed to it on 29 November 2004.
It, accordingly, granted the vindicatory relief and ordered the eviction of the appellant and its privies from the three immovable properties in question.
GROUNDS OF APPEAL
On 28 March 2012, the appellant filed 18 grounds of appeal. On 20 October 2014, it gave notice of its intention to substitute them with 6 grounds.
At the commencement of the appeal hearing, the Court, by consent of the parties, duly substituted the former grounds of appeal with the following:
“1. The court a quo erred in law in relating to a matter which had not been properly authorized and under circumstances in which those who could properly authorize it had not brought the proceedings.
2. The court a quo a fortiori erred in concluding that the plaintiff (respondent) was properly before it, particularly given that those who litigated under its name had executed an extant public document in which they surrendered their interests in respondent.
3. The court a quo further erred in effectively invalidating the respondent's CR14 at no one's motion and instance.
4. The court a quo erred in coming to the conclusion that the agreement between the parties had been properly cancelled under circumstances where no valid notice of cancellation had been given and there had been no jural act of cancellation exercised ex nunc.
5. The court a quo further erred and misdirected itself in coming to the conclusion that cause existed for the termination of the agreement between the parties (on the false prompting of Mr. Vieira) and in then making an order which was not sensitive to the equities of the matter.
6. The court a quo erred in coming to the conclusion that “respondent” had met the requirements for an actio rei vindicatio and in even taking the view that respondent could sue for the vindication of immovables, the subject matter of the litigation.
PRAYER
The appellant prays for the setting aside of the order of the court a quo and the substitution therein with an order that the claim for eviction, as per the summons, be and is hereby dismissed with costs.”
THE ISSUES
The six grounds of appeal raise the following issues:
1. Whether the respondent was properly before the court a quo.
2. Whether:
(i) The notice to cancel was precise;
(ii) The Deed of Sale was cancelled.
3. Whether the requirements of the actio rei vindicatio were established.
THE ARGUMENTS BEFORE THIS COURT
THE APPELLANT'S CONTENTIONS
Counsel for the appellant submitted, that, in the absence of a resolution issued prior to the institution of action, on 9 January 2007, the respondent could not properly litigate a quo.
He anchored his submission on the CR14, the public document wherein the Musukumas, and not the Vieiras, were depicted as the only subsisting directors of the appellant.
He argued, that, in the absence of a resolution by the subsisting directors to institute the vindicatory action, the proceedings under appeal were improperly taken by the former directors.
He also took the alternative point, that, even if the Vieiras were the subsisting directors of the respondent, the proceedings would have been afflicted by the absence of a resolution authorizing the institution of the proceedings.
He further contended, that, the improperly instituted proceedings could not be cured by the purported ratification done at the instance of the Vieiras on 17 February 2009.
He took the further alternative point, that, even if the appointment of the Musukumas was found to be defective, the acts undertaken by them, as directors, were not only deemed to be valid by the provisions of sections 12 and 13 of the Companies Act [Chapter 24:03] but were also saved by the provisions of section 170 of the Companies Act.
Counsel for the appellant also relied on the “immediate delivery” of the movables and goodwill on 30 November 2009 and subsequent delivery of the motor vehicles on 14 December 2004 and the telephones and postal box on 25 January 2005 to argue that the respondent had been disposed of as “a going concern” a term he interchangeably substituted with the disposal of the Vieiras shareholding in the respondent.
He argued, that, on the authority of CHRISTIE's Business Law in Zimbabwe (Juta 1985…,.) and Laing v South African Milling Co. Ltd 1921 AD 387…, the delivery of the movables transformed the Agreement of Sale into a credit sale, the effect of which was twofold:
(i) Firstly, ownership of the movables passed to the appellant on the date of delivery and not on the envisaged date of full payment.
(ii) Secondly, such a credit sale evinced a clear intention to not only dispose of movable assets and immovable properties separately, but of the respondent itself as a going concern.
He sought to buttress his contention by reference to the immediate delivery of occupation of the immovable properties on the date of signature, the passing of profit in both agreements, and the purported appointment of Danny Musukuma as the principal officer of the respondent.
Counsel for the appellant further contended, that, the purported cancellation of the Deed of Sale was a nullity.
He argued, firstly, that the phrase “of the breach concerned” in section 8(2)(b) and (c) of the Contractual Penalties Act denoted the specification of the exact amount owing and not the mere generalization of the breach.
Secondly, that the payment tendered, on 6 December 2006, which was rejected and returned on 12 December 2006, adequately remedied the purported breach.
That, in any event, the court a quo overlooked the important fact that payment of the purchase price in foreign currency, without the requisite exchange control authority, was, at the time, illegal, hence the discharge of the payment obligation in local currency.
He therefore submitted, that, the respondent erroneously cancelled the Deed of Sale while the court a quo also erroneously confirmed the cancellation.
Finally, counsel for the appellant submitted, that, the respondent having failed to meet the requirements for vindicatory relief, the court a quo erred in ordering the eviction of the appellant.
He therefore prayed for the success of the appeal, vacation of the order, and its substitution by a dismissal order.
THE RESPONDENT'S CONTENTIONS
Per contra, counsel for the respondent made the following contentions:
The action instituted by the respondent, at the instance of the Vieiras, on 9 January 2007, without the requisite resolution of the Vieiras as the lawfully appointed directors of the respondent, was ratified by them on 17 February 2009.
In terms of the pronouncement articulated by NICHOLAS AJA in Moosa & Cassim NNO v Community Development Board 1990 (3) SA 175 (A)…, such ratification validated the proceedings, retrospectively, to 9 January 2007.
The appellant failed to discharge the onus on it to show that it had paid the full purchase price in the manner and method stipulated in Annexure A.
The respondent had shown, by credible and uncontroverted evidence, that, the CR14 lodged with the Registrar of Companies, on 24 January 2006, was a fake document that was predicated on false minutes of a non-existing meeting.
The averments in Luis Vieira's affidavit of 6 August 2009, that Danny Musukuma had taken advantage of his advanced age (85years old) and lack of fluency in the English language and company procedures, and tricked him into appending his signature on the fake minutes and fake CR14 were not controverted by Danny Musukuma in his oral testimony a quo.
The CR14, upon which the appellant nailed its defence, was a proven nullity, which could not confer any rights of directorship on the Musukuma brothers.
Clause 12 of the Agreement of Sale, and the letter of 30 November 2004, precluded the appellant's appointees from exercising the rights of shareholders and directors prior to the full payment of the purchase price in respect of the two agreements.
He also argued, that, the two agreements did not transform the sale of the movable assets and immovable properties into the sale of the respondent as a going concern.
A sale of assets, which precludes the passing of ownership and transfer of equity in the seller prior to the payment of the purchase price in full and the assumption of the seller's debts and human resources, could not be regarded as the sale of a going concern.
He also argued, on the authority of Macape (Pty) Ltd v Executrix Est Forrester 1991 (1) ZLR 315 (S)…, that, the prescribed payments in foreign currency for the immovable properties did not contravene the provisions of the Exchange Control Regulations 1996.
That, the specific text of clause 4 of the Deed of Sale denominating a portion of the purchase price in foreign currency rendered the agreement valid.
On the construction of section 8(2) of the Contractual Penalties Act, he maintained that the notice, as worded, was in full compliance with the phrase “the breach concerned.” The respondent was not required to quantify the breach.
The appellant's conduct and response, of 6 December 2006, exhibited an appreciation of the ascertainable nature of the debt.
The appellant breached the Deed of Sale by failing to pay the instalments delineated in both currencies and the concomitant municipal and utility bills in both alternative currencies, and failed to remedy the breach in the 30 days prescribed in clause 13 of the agreement and section 8 of the Contractual Penalties Act.
Regarding the granting of the actio rei vindicatio, he submitted that the order could not be defeated by the disposal of the property after litis contestatio, as, at that stage, the property would have become res litigiosa.
He strongly argued for the dismissal of the appeal with costs on the higher scale.
RESOLUTION OF THE ISSUES
I proceed to resolve the issues seriatim.
WHETHER THE RESPONDENT WAS PROPERLY BEFORE THE COURT A QUO
In our law, it is trite that an artificial person, and especially a registered company, is a legal person distinct from its members, which can only litigate through an authorized natural person.
The authority of such a person is generally conferred by a properly promulgated resolution issued by the artificial entity in accordance with its constitutive instruments comprising Articles of Association, a Charter or Constitution or even a legislative enactment.
Where the institution of the proceedings is impugned, sufficient evidence must be availed, which satisfies the court that the litigation in the name of the artificial entity is being brought by an authorized natural person at its behest: see Mall (Cape) (Pty) Ltd v Merino Ko-Operasie BPK 1957 (2) SA 347 (C)….,.; Cuthbert Elkana Dube v PSMAS SC73-19…,.; Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Ors 1995 (4) SA 790…,.; Madzivire & Ors v Zvariwadzwa & Ors 2005 (2) ZLR 148; and TFS Management Co. (Pvt) Ltd v Graspeak Investments (Pvt) Ltd & Ors 2005 (1) ZLR 333…,.
In terms of Article 13(f) of the respondent's Articles of Association, a minimum quorate of two (2) directors is empowered to institute proceedings in its name.
It is axiomatic that a company, such as the respondent, acts through its directors.
It must therefore follow, that, the answer to the first issue must perforce depend, in part, on who, between the Vieiras and the Musukumas, were the true directors of the respondent.
Counsel for the appellant impugned the finding made a quo in favour of the Vieiras.
He argued, that, the finding was contrary to the CR14, a public document lodged with the Registrar of Companies, which showed that the Vieiras resigned their directorships and were simultaneously replaced by the Musukumas on 3 January 2005. He therefore contended, that, the Vieiras could not direct the respondent to institute proceedings, some two (2) years after the termination of their tenure as directors.
It was, however, common cause that the CR14 in question was based on nothing.
It was derived from the purported minutes of 3 January 2005. The minutes were a record of a meeting purportedly held on that date. The minutes were produced by the appellant's sole witness, Danny Musukuma, and signed at his instance, by Luis Vieira.
At the time, Luis Vieira was aged 85. He was proficient in Portuguese but not in English. He claimed that he was deceived into signing the purported minutes and the CR14 by Danny Musukuma.
His claims were not disputed by Danny Musukuma.
The probabilities also favoured his claims.
It was common ground, that, at the time Luis Vieira purportedly resigned, the full purchase price had not been paid.
It is highly unlikely that he would have resigned his directorship and handover his company to the Musukuma brothers before the appellant had paid the purchase price in full.
