CALVIN SHANNE WEST
MERCYLIN MASILINA MUGADZA
HIGH COURT OF ZIMBABWE
HARARE, 25 June 2016 and 29 March 2017
T Magwaliba, for the applicant
Mrs B Mtetwa, for the 2nd respondent
MAKONI J: The applicant approached this court seeking confirmation of cancellation of an agreement of sale entered into between the parties and consequential relief following therefrom.
The background to the matter is that in or about May 2004 the respondents were leasing applicants property being stand no. 472 Glen Lorne Township 14 of Lot 14 Glen Lorne Township also known as No 2 Byrn Close Glen Lorne Harare (the property), entered into an agreement of sale whereby the applicant sold to the respondents the property. The purchase price agreed to was the sum of US$120 000.00. The agreement was entered into on the basis of a written offer made by the respondents to the applicant. In terms of the agreement, the purchase was due to have been paid in full at the expiration of the lease agreement in December 2005. By 10 February 2006 the respondents had paid US$80 000. This left a balance of US$40 000.00.
Efforts to get payment of the balance of the purchase price from the respondents proved fruitless resulting in the applicant issuing a notice dated 13 September 2011 to the respondents calling upon them to pay the balance the purchase price of US40 000.00 within a period of thirty days(30 days).
The first respondent was indifferent judging by this response to the notice. The second respondent responded by tendering the balance of the purchase price subject to various conditions.
On 28 February 2012 the second respondent was called upon to deliver on the tender of the balance of the purchase price. She was given the bank details into which the amount should be paid on behalf of the applicant. A follow up letter was done on 27 March 2012 asking the second respondent to make good the tender of 17 October 2011. There was no response. On 10 April 2012 the applicant, through his legal practitioner then advised the respondents of the cancellation of the agreement. It is this cancellation that the applicant seeks confirmation from this court.
The basis for seeking such relief is that the respondents have failed to comply with their obligations in terms of the agreement in that they have failed to pay the balance of the purchase price.
The application is opposed by the second respondent on the basis that
- The agreement was not validly cancelled as the second respondent was never in mora.
- That agreement was illegal.
I must, at the outset, point out that the applicant dwelt at length, on the applicability or otherwise of the Contractual Penalties Act [Chapter 8:04]. As was pointed out by the second respondent in her Heads of Argument, she was not perusing that argument. She did not make any reference to it in her opposing papers. It was mentioned in correspondence by her legal practitioners before the present proceedings were instituted. I will therefore not make a determination on that issue.
I will first of all deal with the issue of the illegality of the contract. Mrs Mtetwa on behalf of the second respondent submitted that the agreement between the parties was tainted with illegality on the part of the applicant who required exchange control authority to receive the purchase price in United States dollars outside Zimbabwe. The illegality makes the contract unenforceable and therefore this court cannot grant the relied sought. It was further submitted that whilst it was conceded that at the time the agreement was concluded the law did not proscribe agreements of sale of goods or property quoted in foreign currency, the manner in which the applicant, who was resident in Zimbabwe, then conducted the agreement in this matter, falls under the species of proscribed conduct within the ambit of the Exchange Control Regulations SI 109/1996 (the Regulations).
She further submitted that it is not in dispute that the parties agreed to conduct their contractual obligations in foreign currency and that the applicant received a payment in United Stated dollars in an offshore account without the requisite approval.
She contended that the court cannot enforce an agreement tainted with illegality. She urged the court to apply the exception to the general rule that where both parties are in the wrong, he who is in possession must prevail.
On the other hand, Mr Magwaliba submitted that there is no illegality. He referred the court to para 3 of the second respondent’s opposing affidavit. He contended that it is the only sentence in the opposing affidavit which suggests that there could be an issue regarding payment in foreign currency. There are no other facts upon which the agreement will be regarded as illegal. In terms of the offer by the respondents, there was going to be an agreement regarding currency of payment. Most of facts are contained in the Heads of Argument. The payment made by the respondents was made in 2006. The regulations relied on by the second respondent did not apply to the applicant as he had taken residence in South Africa. He contended that it was lawful for a non-resident to contract to receive payment in foreign currency from free funds.
He further submitted that if the court were to find for the second respondent, then the loss fell where it lies. The applicant remains the owner of the property and the relief of ejectment will be available to him. The respondents took occupation of the property on the basis of a lease agreement and not on the basis of the sale agreement.
The question that confronts me is whether the agreement entered into between the parties is tainted with illegality.
It is trite position that the regulations do not forbid the parties from entering into agreements for sale of goods or property quoted in foreign currency. See Matsvika v Jumvea Zimbabwe Ltd & Anor 2003 (1) ZLR 71 (H) and Gambiza v Taziva 2008 (2) ZLR 107 H. It is the respondent’s contention that the manner in which the applicant, who was resident in Zimbabwe, conducted the agreement in the matter falls, under the species of proscribed conduct within the ambit of the regulations.
Section 4 (1) of the Regulations provide:
“Subject to subs (3), unless permitted to do so by an exchange control authority;
- no person shall in Zimbabwe
- buy any foreign currency from or sell any foreign currency to any person other than authorised dealer or foreign exchange bureau de change; and
- borrow any foreign currency, lend any foreign currency to or exchange any foreign currency with any person other than an authorised dealer.”
In my view the relevant part in the above section is as underlined above. The word ‘exchange’ was defined in Gambiza supra at 112 E as follows:
“In the context in which ‘exchange’ is used by the legislature in the regulations, the meaning that can therefore be ascribed to it, it is ‘to pay’ and ‘to receive’”.
The second respondent complains about the manner in which the applicant ‘conducted
the agreement in this matter’. The question that comes to mind is, how did the applicant conduct the agreement? I would want to agree with Mr Magwaliba that the second respondent did not place facts before the court upon which the agreement can be regarded as tainted with illegality. The only mention made by the second respondent regarding this issue is found in para 3 of the opposing affidavit where she states:
“3 Ad Paragraph
Although this is correct, it was of course subject to agreement on the currency for the payment as at the time the Z$ was the currency used in Zimbabwe and as we intended settling back in Zimbabwe, we were not sure what the legal position would be although at the time were using free funds.
Nowhere else in the affidavit does she give a factual conspectus of how the applicant conducted the agreement which is proscribed by the regulations. If one were to go by what the second respondent says in para 3 above, there was going to be an agreement regarding the currency of payment.
Most of the facts which suggests that the contract was illegal are contained in the second respondent’s Heads of Argument such as
- That the applicant required exchange control authority to receive the purchase price in US outside Zimbabwe. The question that comes to mind is did the applicant obtain the requisite authority? This aspect was not challenged by the second respondent in her opposing affidavit and therefore was not related to in the answering affidavit.
- The second respondent states the following in para 15 of her Heads of Argument
“In the present matter, there is no doubt that the applicant and the respondents agreed to conduct their contractual relationship in United States dollars and to exchange the agreed sums in United States dollars and applicant has not produced any authority from the exchange control authorities showing that the transaction had been authorised. In fact, the record is clear that the applicant in this matter did receive payment in United States dollars in an off shore account without the requisite exchange control approval. On this basis applicant cannot seek to enforce or cancel an agreement whose terms and conditions lack of material and necessary approval which it was his duty to procure.”
Did the parties agree to conduct their relationship in US dollars and to exchange the agreed sum in US dollars. No such averments were made by the second respondent. To the contrary, the second respondent refers to the agreement which mentions that the parties were to agree on the currency of payment.
- Did the applicant receive payment in US dollars in an offshore account? We are hearing it for the first time in the Heads of Argument. The applicant was not given an opportunity to relate to this issue.
It is trite that Heads of Argument do not found a case. See Nehowa v Barep Investments (Pvt) Ltd 2012 ZLR (2) 176.
Further there is no counter-claim regarding the illegality. As was stated in Indium Investments (Private) Limited v Kingshaven (Private) Limited & 2 Ors 2015 (2) ZLR 40 at 44F:
“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.”
I will therefore make a finding that the second respondent has not placed facts before the court to establish that the contract was tainted with illegality and that contract was not tainted with any illegality.
The agreement is therefore enforceable.
Whether the agreement was validly cancelled
Mrs Mtetwa submitted that the agreement was not validly cancelled as the second respondent was never in mora. Any delay in payment was not occasioned by the second respondent but by the applicant who consistently disregarded the status of the second respondent as a party to the agreement.
She cited the following incidences:
“(i) In the draft order, para 3, the applicant seeks that he refunds the first respondent the sum of $80 000.00.
- In his founding affidavit, para 7 he states that he received $80 000.00 from the first respondent.
- In para 10 he states that he got in touch with the first respondent and requested the balance of the purchase price. The first respondent maintained that the second respondent had nothing to do with the agreement.
- In Paragraph 22, of the founding affidavit he stated that he would set off what he is owed from what he owes the first respondent.
- In a letter dated 8 May 2011 by his legal practitioners to the second respondent’s legal practitioners, they wrote that the applicant entered into an agreement of sale with Shanne West. In that letter it was further stated:
‘from the correspondence that we have seen, it would appear your client has some interest arising purportedly from her status as a wife of Shanne West.’”
Mr Magwaliba submitted that the second respondent was placed in mora. There is correspondence that proves that the second respondent was related to as the purchaser. He cited the following:
- Letter to Messrs Mtetwa & Nyambirai dated 14 June 2009. From Messrs Mark Stonier Legal Practitioners.
- The response by Messrs Mtetwa & Nyambirai dated 26 June 2009
- The letter of demand of the purchase price dated 22 February 2012 from the applicant’s current legal practitioners to the second respondent’s legal practitioners.
- A letter giving final notice of intention to cancel the agreement if the purchase price was not paid was addressed to the second respondent’s legal practitioners.
- A letter dated 10 April 2012 from the applicant’s legal practitioners to the second respondent’s legal practitioners cancelling the agreement of sale.
He further submitted that the second respondent only made attempts to try and comply with notice in September 2012. This was in the form of a Letter Undertaking dated 23 September 2012 by Messrs Ziumbe & Mutambanengwe to register a first mortgage bond over the property in favour of FBC Building Society. The letter created the impression that the second respondent was the only purchaser.
He concluded by saying that the second respondent has no defence to the claim as she was placed in mora.
When can a party to a contract be said to have been placed in mora. The Supreme Court has occasion to deal with this issue in Asharia v Patel & Ors 1991 (2) ZLR 276 (SC) at 279 G-H and 280 A-D.
“The general applicable rule is that where time for performance has not been agreed upon by the parties, performance is due immediately on conclusion of their contract as soon thereafter as is reasonably possible in the circumstances. But the debtor does not fall into mora ipso facto if he fails to perform forthwith or within a reasonable time. He must know that he has to perform. This form of mora, known as mora persona, only arises if, after a demand has been made calling upon the debtor to perform by a specified date, he is still in default. The demand, or interpellation, may be either judicially by means of a summons or extra-judicially by means of a letter of demand or even orally; and to be valid it must allow the debtor a reasonable opportunity to perform by stipulating a period for performance which is not unreasonable. If unreasonable, the demand is ineffective.
Where a debtor has fallen into the mora ex persona after demand, the creditor can acquire a right to cancel the contract by serving notice of rescission in which a second reasonable time limit is stipulated, making time of the essence. Both demand and notice of rescission are necessary in order to allow for cancellation for non- performance. The two may be, and commonly are, contained in the same notice. Such notice will then fulfil a double function: It will fix a time for performance after which the debtor will be in mora, and create a right in the creditor to rescind the contract on account of that mora. See Nel v Cloete 1972 (2) SA 150 (A) at 163E; Flegel v Swart 1979 (4) SA 493 (FCD) at 502E-H; and generally Joubert General Principles of the Law of Contract at pp 202-203; Kerr The Principles of the Law of Contract 4 ed at pp 461-462; des Vos Mora Debitoris and Rescission (1970) 87 SALJ at pp 310-311.”
The learned author Sir J.W Wessels in Law of Contract 2nd ed Vol II p 777 stated:
“The word mora means delay or default. In its technical sense it means a culpable delay in making or accepting performance.”
Further down on the same page he states:
“Before there can be mora
(1) there must be a valid and enforceable claim,
(2) the debtor must have failed to perform at the time when he should have done so;
(3) the failure or delay must have been due to the culpa of the debtor.”
The next question to consider is whether, in the circumstances of this matter the second respondent was placed in mora.
It cannot be seriously disputed, by the applicant, that at some stage, he disregarded the second respondent as party to the contract but rather regarded her as someone who an interest in the sale agreement by virtue of being a spouse to the first respondent. However from 10 May 2011, the second respondent was engaged by the applicant through her legal practitioners. From May to 13 September 2011, the applicant was demanding performance from the second respondent of their obligations in terms of the agreement. That did not yield results culminating in the applicant giving the second respondent thirty days’ notice to cancel the agreement, by letter dated 13 September 2011. The second respondent responded by letter dated 17 October 2011 wherein she indicated her desire to regulate the sale. Given the appearance of reluctance on the applicants to deal with the second respondent, they sought confirmation of the following:
“a) That upon payment of the balance to yourselves, the Title Deed to the property will be handed over to ourselves;
b) That the property will not be transferred to any third party without our client’s written consent given through ourselves; and
c) That the Swifts will not be involved in any way in the matrimonial dispute between our clients and her husband.”
Parties continued to exchange correspondence until 10 April 2012 when the applicant cancelled the agreement.
In between, the second respondent sought for mortgage finance. This is confirmed by letter dated 3 April 2012 from Kingdom Bank.
Even after the cancellation of the agreement, the second respondent continued to seek mortgage finance which she obtained from FBC Bank. However, FBC Bank required that the property be registered in the name of the second respondent only.
All the above clearly indicates that the second respondent was placed in mora and she failed to remedy he breach. She failed to perform her obligations in terms of the agreement and the applicant is entitled to cancel the agreement. Her fears that she might pay and have the property transferred to the first respondent only are unfounded, especially after the letter dated 10 May 2011 when the applicant’s legal practitioners started communication with her legal practitioners regarding the contract.
From the above circumstances, it is clear that the failure to perform was due to the culpa of the second respondent.
The applicant in para 3 of the draft order claims a set off against the sum of $80 000-00 for certain amounts. This is a damages claim and would require viva voce evidence to be led. I will therefore not grant the relief in para 3.
In the result, I will make the following order.
- The cancellation of the oral sale agreement between the applicant and the respondents in respect of the property known as No. 2 Bryn Close, Glen Lorne, Harare be and is hereby confirmed.
- The respondents and all those claiming occupation of the property through them be and are hereby ordered to vacate No. 2 Bryn Close Glen Lorne, Harare upon service of this order.
- The respondents pay the costs of suit.
Wintertons, applicant’s legal practitioners
Maunga Maanda & Associates, 1st defendant’s legal practitioners
Mtetwa & Nyambirai, 2nd respondent’s legal practitioners