DR BOZENA DUDKA

and

ALLAN TILLING RUSSELL

and

FAIR COAT INVESTMENTS (PVT) LIMITED

and

JOHN MUKONO

versus

CHENI INVESTMENTS (PVT) LIMITED

and

IAN JOHN HAWTHORNE

and

PERVAZ KHAN

and

BRIGHTON MATIKITI

and

INNOCENT KHUMALO

and

REGISTRAR OF DEEDS

HIGH COURT OF ZIMBABWE

MAKONI J

HARARE, 6 May 2010 and 15 June 2010

T Mpofu, for the 1^st applicant

L Uriri, for the 2^nd and 3^rd applicants

L Mazonde, for the 4^th applicant

S Tsaurayi, for the 3^rd, 4^th and 5^th respondents

MAKONI J:    The above matters were filed as case numbers HC 3855/09, HC 3846/09 and HC 3891/09. At the hearing of the matter, the parties agreed that the matters be consolidated as all the matters raised the same issues. I consolidated all three matters.

The background to the matters is that the applicants bought residential units from the first respondent in a cluster housing scheme being developed by the second respondent on land owned by the first respondent. They also entered into building contracts with the second respondent.

 The first applicant (Dr Dudka) bought share number 9. She paid the full purchase price. A dispute arose due to failure of the second respondent to fulfil its obligations in terms of the agreement. By mutual agreement, the dispute was referred to arbitration. The arbitral award was to the effect that the agreement of sale was valid. Since the second respondent had failed to comply with its obligations in the terms of the building contract, Dr Dudka was entitled to take over the construction of the house. The respondents were to transfer to Dr Dudka share in the first respondent which would confer ownership and right to possession of unit 9.

Following the award, Dr Dudka engaged building contractors to complete the house. The contractors were confronted by certain persons who claimed ownership of the unit. A deeds search was done and it revealed that the unit had been transferred to the first respondent (Khan).

The second applicant (Russell) bought share number 5 from the first respondent. He also entered into a building contract with the second respondent. The third applicant  (Fairclot) bought shares number 6 and 12 from the first respondent. It also entered into a building contract with the second respondent. A dispute arose between the parties and was referred to arbitration. On 23 October 2008, Russell obtained an interim order to the effect that pending the finalisation of his matter and that of Fairclot, the first and second respondent were interdicted from selling, disposing of or transferring in whole or in part by way of share transfer or any one method the property in issue which is the remaining extent of lot 3 Lewisam of Lot E of Colne Valley of Rietfontein situate in the district of Salisbury and measuring 26638 hectares. It was also ordered that the copy of the award be served on the Registrar of Deeds, Registrar of Companies and Messrs Enerst & Young. The order was served on the Registrar of Dees on 23 October 2008.

The dispute was finally resolved by an award in favour of Russell and Fairclot. This award was registered with this court on 21 May 2009. The order provided inter alia, for the issue to Russell of share number 5 of Cheni Estates (Pvt) Ltd giving Russell right of ownership of unit 5. It also ordered the issue of share number 4 and 12 of Cheni Investments (Pvt) Ltd to Fairclot giving it the right of ownership over unit 4 and 12. It further ordered the Deputy Sheriff to give effect to the order by signing necessary documents to effect transfer to Russell and Fairclot.

The fourth applicant (“John”) bought share number 3 from the first respondent and also entered into a building contract with the second respondent. The respondents failed to comply with their obligations in terms of the building contract. John took over the construction. Around June 2009, he discovered that the first respondent had transferred his unit to Khan. The applicants then filed the present proceedings seeking the setting aside of the transfer of their units to the third, fourth and fifth respondents and an order to have the units transferred into their names.

The first and second respondents did not file heads of argument and they were automatically barred. They did not appear on the day of hearing.

The applicants seek their orders based on three main grounds. First they contend that when transfer was effected, same proceeded in defiance of a judicial caveat placed against the property. Secondly, the property transferred was res litigiosa and incapable of being alienated to the prejudice of the applicant. Thirdly they contend that the third, fourth and fifth respondents are not innocent third parties as they were or ought to have been aware of the dispute between the applicants and the first and second respondents.

The third, fourth and fifth respondents contend that they were not part to the arbitration proceedings and could not have known of the arbitration award and could not be bound by it. They also contend that they are innocent purchasers who purchased their units for value.

THE CAVEAT

It is common cause that on 23 October 2008, the arbitrator, granted an interim arbitral award which inter alia, interdicted the transfer of the property and that the order be served on the Registrar of Deeds. The order was served on the same day. Although the award was made in respect of the second and third applicants, it barred the selling or disposing of the whole property which included the units of the other applicants.

It was submitted on behalf of the applicants that the interim award constituted the caveat and is a judgment in rem. It stands on the same footing as an order of court and it must be obeyed unless it is set aside. The arbitral award took effect upon its grant.

It was submitted on behalf of the third, fourth and fifth respondents that an award, standing on its own does not have the force of a judicial order. It has to be registered with the appropriate court for purposes of execution. If the court were to find that the caveat was in the form of the award, then the fraud or negligence on the part of the Registrar of Deeds cannot be attributed to the respondents. The balance of convenience favoured that the application be dismissed as the respondents purchased the properties for value. The applicants have not established a basis for averring that the respondents had knowledge of the sale from the first and second respondents to them.

In terms of Article 17 of the schedule to the Arbitration Act [Cap 7:03] an arbitrator has power to order interim measures which, inter alia include an interdict. In terms of Article 35 an arbitral award shall be recognised as binding and upon application in writing to the High Court shall be enforced.

Article 35 brings out two distinctive features of an arbitral award. The first one is its binding nature and the second one its enforceability. I agree with the submissions made on behalf of the applicants that an award takes effect upon its grant. Its execution has no effect on whether it is binding or not. A party can chose to obey an award such that there would not be need for the award to be registered. Registration allows for execution. The respondents cannot therefore succeed in their argument that when registration of transfer was effected to them, the award had not yet been registered with the High Court.

It is common cause that the award was served on the Registrar of Deeds. What is not clear is whether it was endorsed on the title deeds. The respondents argue that the negligence or fraud on the part of the Registrar of Deeds in registering the transfers when the caveat was in place, cannot be attributed to them.

A case which is almost on all fours with the present matter is that of Mwayipaida Family Trust vMadoroba & Ors 2004 (1) ZLR 439 (S). The brief facts of the matter were that the appellant was an innocent second purchaser of an immovable property. The first purchaser had obtained an interdict against the seller, restraining her from transferring the property to anyone else. He served a copy of the order on the Registrar of Deeds who was instructed to endorse a caveat upon the deeds of the property. The Registrar failed to do so. A search of the register revealing no caveat, the property was transferred to the appellant. The aggrieved first purchaser obtained a High Court order setting aside the transfer with costs.

On appeal it was held that the circumstances of the case placed is somewhere in between the two extremes (the traditional approach to double sales) because, even though the appellant was ignorant of the respondent’s prior claim to the property at the time transfer into its name was effected, such ignorance was due solely to the oversight or incompetence of a public official. It would not be fair and just to rule that the failure by the Deeds office to register the caveat had the effect of nullifying the respondent’s prior claim to the property.

The same can be said in the present matter. The negligence or incompetence of the Deeds Office by failing to register the caveat resulted in the property in issue being transferred to the respondents. I agree entirely with the findings expressed in the Mwayipaida Family Trust case supra that it would not be fair and just to rule that the failure by the Deeds Office to register the caveat had the effect of nullifying the applicants’ prior claim to the property.

 The other point taken by the applicant is that the property in dispute was res litigiosa at the time it was sold and transfer effected.

The question that exercised my mind is whether the principle of res litigiosa can be extended to arbitration proceedings and if so at what stage does the subject matter become res litigiosa. In action proceedings there are two schools of thought. One is that the subject matter of litigation becomes res litigiosa at litis contestatio and the other is that the subject matter becomes res litigosa from the time that the citation is issued and notice is given to the defendants. See Zimbank Ltd & Anor v consolidated Pipe Fittings (Pvt) Ltd & Anor 2000 (1) ZLR 672 (H) at 677 B – C.

The parties did not present argument regarding the stage at which a subject matter becomes res litigiosa in arbitration proceedings. I will therefore leave the issue open and not make a determination. However the applicant’s argued that there was an interim arbitral award at the time that the property was sold and transferred. The property was therefore res litigiosa. I agree with the position taken by the applicants. At the time the property was sold and transferred, there was an interim order bearing on how it was to be dealt with. The first and second respondents had no authority to deal with the property the manner they did. I can conclude that in the circumstances of this matter, must the property res litigiosa as there was an interim award barring the transfer of the property pending the determination of the dispute between the applicant and the first and second respondents.

 It is settled in our law that the fact that a thing is res litigiosa does not preclude or prevent it from being alienated or similary dealt with, as long as the rights of the non-alienating litigant in the res are protected. See Supa Plant Investments(Pvt) Ltd v Edgar Chidavaenzi HH 92-09 at p 6-7 and Edward Collin Gardiner v Dampier Development & Ors HH 72-10 at p 4.

In the Edward Collin Gardiner(supra) at p 5, in dealing with the issue of res litigiosa I made the following remarks:

“The authors Silberberg and Shoeman in the Law of Property 3^rd ed at p 304 made the point that the agreement of sale of the res litigiosa between the litigating party and a third party is valid inter partes. They go further to say that the purchaser is bound by the judgment in the action and the successful party can recover it from the new possessor by execution and without fresh proceedings”.

The respondents find themselves in the position of the purchaser referred to in the above quotation. The sale between them and the first and second respondents is valid inter partes only. The applicant can recover the property from them.

The other point taken by the applicants is that the respondents were aware or ought to have known the applicants’ interest in the property.

The applicants contend that the respondents must have been aware by diligent enquiry, through their conveyance, of the caveat which was clearly endorsed over the property by the fourth respondent. John did not file an answering affidavit but his Heads of Argument makes reference to caveat number 189/08 having been noted on the title deed. The other applicants did not mention the caveat by number but state, in their answering papers, that a caveat was endorsed on the title deed. They also contend that the proper procedure would have been for the respondents to acquire shares in the first respondent until the completion of the project where sectional title will be issued to each owner. Had they made a diligent enquiry with the first respondent’s transfer secretaries Messrs Enerst and Young, they would have noted the applicants’ interest.

The respondents’ position is that they were not aware of the disputes between the applicants and the first and second respondents. If they had been made aware, they would not have parted with their money with full knowledge of such disputes.

As I have already alluded to earlier on in the judgment, it is not clear whether the caveat was endorsed on the title deed. The fourth applicant mentions the caveat number in its heads of argument. The other applicants do not and none of them filed a copy for the benefit of the court. I cannot therefore made a finding that the respondents were aware that there was a caveat when it is not clear from the papers.

It is common cause that the transfers to the respondents were not done in terms of the proper procedure. The respondents did not acquire shares in the first respondent.

 Again, in my view, this does not establish that the respondents ought to have been aware of the applicants’ interest in the property.

In my view, the present case does not turn on whether the respondents were or ought to have been aware of the applicants’ interest or not. As I have already alluded to, it turns on the failure of the Deeds office to registered the caveat and if they did, transferring the property when the title deeds is endorsed with a caveat.

The other point taken by the applicant was that the transfer to the respondents is invalid as there was no valid cause. The properties could only be acquired by acquisition of shares they being properties held under sectional title. None of the respondents hold the relevant class B shares. This point has not been contested by the respondents in their heads of argument.

In view of the above the application must succeed.

In the result I swill make the following order:

1. The transfer of unit/share 9 of certain piece of land called the Remainder of Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to Pervaz Khan under Deed of Transfer number 8952/08 be and is hereby set aside.
2. The first respondent be and is hereby ordered to transfer to the first applicant shares in Cheni Investments (Pvt) Ltd which will confer on her ownership and the right to possession of unit 9.
3. The transfer of unitshare number 5 of certain piece of land called the remainder of Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to Brighton Matikiti be and is hereby set aside.
4. The transfer of units/shares 4 and 12 in certain piece of land called the Remainder of Lot 3  of Lewisam of Lot E of Colne Valley of Reitfontein to Ian Khumjalo be and is hereby set aside.
5. The first respondent be and is hereby ordered to transfer:
   1.  Shares  in Cheni Investments (Pvt) Ltd which will confer ownership of unit 5 to Allan Tilling Russell or his nominees.
   2. Shares in Cheni Investments (Pvt) Ltd which will confer ownership of units 4 and 12 to Fairclot Investments (Pvt) Ltd or its nominees.
6. The transfer of Unit/Share 3 of certain piece of land called the remainder of Lot 3 Lewisam of Lot E of Colne Valley of Reitfontein to Pervaz Khan under Deed of Transfer No. 8950/08 be and is hereby set aside.
7. The first respondent be and is hereby ordered to transfer to the fourth applicant shares in Cheni Investments (Pvt) Ltd which will confer ownership of unit 3 to fourth applicant.
8. In the event of the first respondent failing to effect transfer in terms of para 2, 4 and 5, the Deputy Sheriff be and is hereby authorised to sign the necessary papers to effect transfer.
9. The first, second, third, fourth and fifth respondents, are hereby ordered to pay costs of suit.

Mutumbwa Mugabe & Partners, applicant’s legal practitioners

Matipano & Associates, 1^st & 2^nd respondents’ legal practitioners

Chiganga & Company, 3^rd respondent’s legal practitioners