Judgment No. SC 59/04

Civil Appeal No. 33/03

ST. TROPEZ RESIDENTS’ ASSOCIATION v

(1) THE COMMISSIONER OF POLICE

(2) NATIONAL SOCIAL SECURITY AUTHORITY

SUPREME COURT OF ZIMBABWE

SANDURA  JA, CHEDA JA & MALABA JA

HARARE, MARCH 25 & SEPTEMBER 9, 2004

E W W Morris, for the appellant

Ms Y Dondo, for the first respondent

J M Mafusire, for the second respondent

CHEDA JA:

INTRODUCTION

The appellant is an association of residents of a property known as St. Tropez Flats (“the property”), which is owned by the second respondent. I shall refer to the appellant as “the residents”. The first respondent is the Commissioner of the Zimbabwe Republic Police (“the Commissioner”). The second respondent is the National Social Security Authority (“NSSA”). The appellant consists of a total of sixty residents who occupy the property.

When NSSA decided to sell the property, it offered the residents an option to purchase as they were the tenants in occupation. The option was to be exercised on or before 31 March 2000. There is nothing in the papers to show the detailed conditions of this option and it seems to have been made verbally at some meetings.

On 30 December 1999 the Commissioner entered into an agreement with NSSA for the purchase of the property. The contract recorded clearly that the tenants held a first option to purchase the flats and that the option was to expire on 31 March 2000. The Commissioner, as the purchaser in the agreement of sale, paid the sum of $24 million to NSSA.

The sale was made subject to the following conditions:

“CONDITIONS

The sale is subject to the Seller’s tenants currently occupying the property not exercising their option to purchase the property by 31 March 2000. It is recorded that in the event that the tenants exercise their option to purchase the property this agreement shall be of no force or effect.”

The Commissioner was to be given occupation of the property by 1 April 2000 if this option was not exercised.

Meanwhile meetings were held between the residents or their representative and NSSA. There is no record of the actual meetings; but the letter from Mr Chonzi (“Chonzi”), the chairman of NSSA, dated 16 February 2000 to the chairman of the residents was written to confirm the meeting of 14 February 2000, attended by some members. One of the important issues agreed on at that meeting was:

“That the Association be given an extension of time to make funds available and to allow the process of sectional title deeds to be completed since diagrams had already been done.”

On 14 April 2000 Chonzi wrote yet another letter to the chairman of the residents, seeking confirmation that the other members agreed to the conditions discussed at the meeting of 14 February 2000, and advised that:

“… it might be very difficult to extend this deadline further as already indicated to you at our meeting of 14 February 2000.”

According to the record, once the date of 31 March 2000 expired, the Commissioner called upon NSSA to transfer the property to him and give him occupation in accordance with their agreement. NSSA would not agree.

The Commissioner then made an application to the High Court to compel NSSA to comply with their agreement of sale. The High Court granted the Commissioner’s application. The residents have now appealed against that decision and NSSA has also cross-appealed.

Most of the background facts in this case are common cause. The existence of the option in favour of the residents is not disputed. The terms of the agreements between NSSA and the Commissioner are accepted by all the parties.

I will deal with the issues that arise in this case under the following heads –

1. What is an option to purchase?;

2. How is the option exercised?;

3. Did NSSA extend the period to exercise the option to purchase the property or the period for payment?

1. WHAT IS AN OPTION TO PURCHASE?

In Van Pletsen v Henning 1913 AD 82 at 98, SOLOMON J said:

“An option is an offer to sell, which remains open during the stipulated period, and if the offer is accepted at any time before the time has elapsed, a binding contract of sale is concluded between the parties.

When an option is given by a seller, he is bound and cannot withdraw his offer; the contract is a unilateral one, and becomes bilateral only when the offer is accepted.”

The importance of the option contract was highlighted by LORD DENNAN CJ in Boyd v Nel 1992 AD 4145, where he said at :

“I think the plaintiff here has a right to say to the defendant –

‘You have, by your own act, placed yourself in a condition which prevents you from performing the contract into which you have entered with me, a contract which gives me the option, during the space of seven years, of calling on you to assign these premises to me. I, therefore, now demand damages for the breach of the contract. I am neither ready, nor willing, nor able, at this moment, to pay the money for the assignment you engaged to make to me, but, however that may be, I had a right to expect that you would keep yourself in a condition to fulfil your promise whenever I should want to exercise the option I possessed.’”

See also Owsianick v African Consolidated Theatres (Pty) Limited 1967 (3) SA 310 (AD); and De Ujfalussy v De Ujfalussy 1989 (3) SA 18 (AD), where JOUBERT JA at 23 E-G held that:

“The ordinary meaning of an option to purchase a certain thing at a certain price … is an agreement whereby the granter undertakes to keep open an offer to sell for a period of time within which the grantee, by exercising the option, may elect to purchase it at the fixed price. See Hersch v Nel 1948 (3) SA 686 (A) at 695. In my judgment, the clearly stated intention of the parties in the relevant provisions was to confer until 31 August 1985 on the wife as grantee a right to purchase the half share of her husband in Berg-en-Dal for the sum of R60 000 subject to the terms regarding payment of the R60 000.”

This case, as well as that of Boyd v Nel supra, shows that the option is an important contract on its own, completely separate from payment which can be subject to the terms arranged or agreed to by the parties.

2. HOW IS THE OPTION EXERCISED?

It was suggested by the first respondent that the option to purchase the property was not properly exercised, as no payment was made.

There is no authority that says payment is part of the exercise of the option.

The option to purchase has to be exercised by communication. The exercise of the option must be communicated to the offeror of the option. There is no set method of doing it unless there is a written agreement stating how it is to be done. It can be verbal or written.

3. DID NSSA EXTEND THE PERIOD TO EXERCISE THE OPTION TO PURCHASE THE PROPERTY OR THE PERIOD FOR PAYMENT?

I now deal with the issue of the extension granted by NSSA.

In his letter dated 16 February 2000 to the chairman of the residents, Chonzi said:

“This letter serves to confirm our meeting of 14 February 2000 attended by some members of your association and our chairman. The main points were –

(a) That NSSA had taken the decision to dispose of the flats in order to maximise its cash returns;

(b) That NSSA would not finance or deal with the sixty individual families at the complex but with the Association;

(c) That the Association be given an extension of time to make funds available and to allow the process of sectional title deeds to be completed since diagrams had already been done;

(d) It was agreed that the process would require not more than six (6) months from the date of the meeting; and

(e) That NSSA agreed to extend the option date from 31 March 2000 to 31 July 2000, and that this extension shall be final.

Can you please confirm that this was the agreed way forward by signing a copy of this letter attached.”

On 4 April 2000 Chonzi wrote again to the residents’ chairman as follows:

“We refer to our various meetings and our letter dated 16 February 2000 to which we have not had the courtesy of a reply. (Copy attached).

Please may you confirm what we agreed at the meeting involving your members and our chairman.”

Mr Chonzi’s letter of 4 April 2000 also stated:

“Specifically we would like to know whether the terms and conditions for the extension of time to exercise your option to purchase the flats were agreed to by other members of your Association and that you will honour upon 31 July 2000.

It was important for us to have this confirmation as it might be very difficult to extend this deadline further as already indicated to you at our meeting of 14 February 2000.

We wait to hear from yourselves soon.”

On 11 May 2000 a letter from the residents was addressed to Chonzi. It is not clear if this was the reply to Chonzi’s two letters, but the letter advised Chonzi that the diagrams had been completed by the surveyors and had been approved, the drawing of the notarial deeds was in progress and a financier had been found.

Nowhere in this letter does the writer talk about exercising the option. The letter gives the impression that the option had already been exercised, bearing in mind that exercising the option simply means accepting the option and advising the person who has granted the option. The writer’s letter shows that the residents were then dealing with issues which could only follow the exercise of the option, not before.

Mr Chonzi could not have been asking the residents to confirm the meeting of 14 February 2000 if the residents had not exercised the option. It is clear that the residents had indicated their intention to purchase the flats. That is why Chonzi was referring to dealings with the residents as opposed to the sixty individual families and giving the residents:

“… an extension of time to make funds available and to allow the process of sectional title deeds to be completed since diagrams had already been done.”

The above are issues which can only be discussed with someone who is buying property and not with a person who is not, or has not yet decided to buy.

The only confusion created by Chonzi’s letter is that, having correctly made reference to extending the time to make funds available, he then refers to an extension of the option instead of the extension of time for payment to 31 July 2000.

If in fact the residents had not exercised their option to purchase the property, Chonzi would not be talking about making funds available.

It is clear from the above that the option to purchase the property must have been made at, or during, the various meetings referred to in Chonzi’s letters.

Even if it were argued that the residents were expected to make payment on exercising the option, that does not affect the arrangement made, since an extension of time for payment was granted once the option had been exercised. The Commissioner cannot attack the extension for payment on that basis because the agreement between the residents and NSSA related to exercising the option to purchase and has no condition about payment.

Payment is a completely different issue. There is nothing to show that exercising the option included making payment. Payment could be made in instalments, or later, or through a bond.

CONCLUSION

To sum up, the residents held meetings with NSSA. The option to purchase was clearly exercised at the meeting of 14 February 2000. That is why Chonzi wrote to the residents seeking assurance that the residents would be able to pay by 31 July 2000. He could not have been seeking such assurance from the residents if they had not exercised the option to purchase. One does not claim payment from a person who is not purchasing anything. NSSA clearly kept the two issues separate. There was a time limit to exercise the option. There was an extension of time to pay the purchase price. I am satisfied that once the residents exercised their option the agreement between NSSA and the Commissioner fell away.

Accordingly the appeal and cross-appeal succeed with costs. The order of the court a quo is set aside and is substituted by the following –

“The application in case no. 114/01 at the High Court, Harare, is dismissed with costs”.

SANDURA  JA: I agree.

MALABA JA: I agree.

Gill, Godlonton & Gerrans, appellant's legal practitioners

Civil Division of the Attorney-General’s Office, first respondent's legal practitioners

Scanlen & Holderness, second respondent's legal practitioners