REPORTABLE (80)

Judgment No. SC 92/05

Civil Appeal No. 68/05

AUSTERLANDS (PRIVATE) LIMITED v

(1) TRADE AND INVESTMENT BANK LIMITED

(2) THE SHERIFF OF ZIMBABWE

(3) BERNARD CONSTRUCTION (PRIVATE) LIMITED

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, SANDURA JA & MALABA JA

HARARE, OCTOBER 17, 2005 & MARCH 27, 2006

T Biti, for the appellant

No appearance for the first respondent

No appearance for the second respondent

E T Matinenga, for the third respondent

CHIDYAUSIKU CJ: The facts of this matter are as follows –

1. The first respondent obtained judgment against the appellant on 23 September 1998.

2. The second respondent sold the appellant’s property to the third respondent for $3.5 million on 11 November 1999.

3. On 22 February 2000 the appellant launched a court application challenging the sale.

4. The appellant obtained a default judgment setting aside the sale on 14 May 2003.

5. On 23 May 2003 the third respondent successfully applied for rescission of the default judgment and was allowed to oppose the application for the setting aside of the sale.

6. Justice Mavingira heard the application on 16 July 2004 and handed down judgment on 2 March 2005 dismissing the application.

The appellant was aggrieved by the dismissal of the application and noted an appeal to this Court on the grounds set out in the notice of appeal, which read as follows:

“GROUNDS OF APPEAL

1. The court a quo as grossly (sic) ignored the fact that the Sheriff’s report dated the 16th February 2000 … indicated that the sale in execution has never been confirmed and that a directive had been issued by the same Sheriff that the property be sold by private treaty, a fact unknown to the appellant at the time that it made its application.

2. A fortiori the court a quo thus erred in not holding that indeed in (the) light of the Sheriff’s report and in (the) light of the fact that the sale had not been confirmed by the Sheriff, there was no need for the appellant to make the application.

3. Even assuming that the sale had been properly confirmed, the court a quo ignored the fact that the property was sold for an unreasonably low price.

4. Furthermore, the court a quo ignored the fact that there were serious delays in this matter brought (about) precisely by the third respondent which meant that the equities no longer favoured the refusal of the application.

5. The court also ignored the fact that the appellant had cleared its indebtedness to the judgment creditor, Trade and Investment Bank Limited.

WHEREFORE the appellant will pray that this appeal succeed with costs and the decision of the court a quo is upturned (overturned?) to read as follows:

“In the circumstances it is declared that the sale in execution on the 11^th November 1999 was never confirmed by the Sheriff and therefore the application to set it aside was unnecessary or, alternatively, that the sale in execution of the 11th November 1999 is hereby set aside.”

After submissions by both counsel, judgment in this matter was reserved. In the notice of appeal, and indeed during submissions, the appellant contended that the sale in execution was not perfecta by reason of the fact that the third respondent was never declared the purchaser in terms of rule 356 of the High Court Rules. It was also contended by the appellant that there was never confirmation of the sale in terms of rule 360 of the High Court Rules.

The respective rules provide as follows:

“356. Declaration of purchaser by sheriff

If the Sheriff is satisfied that the highest price offered is reasonable, having regard to the circumstances of time and place and to the state of the property market, he shall declare the highest bidder to be the purchaser, subject to confirmation as hereinafter prescribed.

360. Confirmation of sale

If no objection is made to the court within seven days from the date that the sheriff declares the highest bidder to be the purchaser in terms of rule 356 or from the date of a sale by private treaty in terms of rule 358, as the case may be, the sheriff shall confirm the sale.”

While awaiting judgment, and by way of a letter to the registrar of this Court, the third respondent sought to place before the Court a document from the Sheriff declaring the third respondent the purchaser of the property in terms of rule 356 of the High Court Rules. The appellant objected to the production of the document.

The third respondent then made a formal Court application to lead further evidence, namely, to produce the declaration from the Sheriff. The application was set down and argued before this Court. The Court reserved judgment. I do not intend to make a determination on that application because the appeal can be determined without reference to the document that the third respondent sought to introduce in evidence.

The appellant’s cause of action in the court a quo is succinctly set out in paras 7 and 8 of the applicant’s founding affidavit. Those paragraphs read:

“7. The said property is an attractive commercial land that houses many vibrant commercial tenants. This application is made in terms of rule 359 of the esteemed rules of this honourable court. It (is) the applicant’s contention that the property was sold for an unreasonably low price. I base the open market value of Stand 90 to be at $4.8 million. The forced market value being anything between $3 780 000.00 and $4 million. I attach hereto marked Annexure(s) ‘A’ and ‘B’ open valuation reports by Land & General Owen Mica & Associates, registered valuers of Bulawayo, which (confirm) my views. Indeed I maintain that during the time of the auction, which I attended, there were not many bidders and presumably this is due to the depressed market in Zimbabwe.

8. I maintain that it will be unjust and inequitable that this valuable commercial property goes for such a pittance. I maintain that this honourable court should set aside the same on the basis that the property was sold for an (unreasonably) low price.”

In the court a quo the appellant sought the relief that the sale in execution be set aside because the property was sold for an unreasonably low price. Nowhere in the founding affidavit of the applicant is it alleged that the sale in execution was not perfecta.

The suggestion that the sale in execution was not perfecta arises from the report of the Sheriff to the court a quo. The report states in part as follows:

“I read through the applicant’s founding affidavit and the reason why (for?) an application to stay the sale of the property in question is that the price of $3 500 000.00 realised at the auction is too low.

According to the auctioneer’s report the ‘Open Market Value’ of the property is $5 950 000.00 and the ‘Forced Sale Value’ of the property is $3 850 000.00. The price realised at the auction is slightly lower than the Forced Sale Value. Although the Deputy Sheriff, who happens to be my commissioner at the auction, indicated in his report that the price was reasonable the Sheriff directed the auctioneer to sale (sell) the property by private treaty for any price above the Forced Sale Value according to the auctioneer’s report.

The applicant in its application attached a valuation report showing that the ‘Open Market Value’ of the property stands at $4 000 000.00.

I will, however, not oppose the relief being sought by the applicant and will abide by the decision of the court.”

Although the Sheriff in the report does not categorically state that he did not declare the third respondent the purchaser, it is contended that his directive that the property be sold by private treaty suggests that he did not confirm the sale in terms of rule 356 of the High Court Rules. It is also quite clear that the report of the Sheriff is made in the context that the issue before the court a quo was whether or not the purchase price was reasonable, and not that the third respondent had not been declared the purchaser.

Given that situation, I am not entirely satisfied that the implication that there was no such declaration was deliberate as opposed to being inadvertent. The precise circumstances of the directive that the sale of the property be by private treaty are not clear.

It is quite clear from the founding affidavit in the court a quo that the appellant’s cause of action was the unreasonably low price at which the property was sold. Indeed, the application ex facie was made in terms of rule 359 of the High Court Rules, which permits the setting aside of the sale of property sold by auction at an unreasonably low price.

The court a quo proceeded to determine the application on the basis that the issue before it was the price at which the property was sold. The learned Judge in the court a quo concluded as follows:

“The onus to show that the price realised at a sale in execution is unreasonably low is upon the applicant. See Morfopoulos v Zimbabwe Banking Corporation 1996 (1) ZLR 626 at 633C. This was said to be ‘a formidable task’ in Benma Enterprises v Benjamin and Others SC 49/99 at p 6. In the Morfopoulos case supra at p 631 G-H the learned judge pointed out that such sales are not easily set aside and gave the reasons therefor at p 627 F-H as:

‘(a) the judgment creditor is provided with his just relief; and

(b) the reliability and efficacy of sales in execution should be upheld so that potential bidders at auction sales (are) not discouraged from bidding, and thus reducing the potential sale price to be realised.’

The learned judge went on to point out at p 633B that the court should be reluctant ‘to accept the theoretical evidence of (a) valuator against the specific evidence of a price offered in open competition at an auction sale, property (properly?) advertised and property (properly?) conducted’. Reference was made therein to Lalla v Bhura 1973 (2) RLR 280 and Zvirawa v Makoni and Anor 1988 (2) ZLR 15 at 18E.

In his heads of argument the applicant’s counsel properly conceded that judicial sales are not lightly set aside.

The learned judge in the Morfopoulos case (supra) further stated at p 6325(?)D that he would ‘attach only slight weight to the assessments … for the reasons (reason?) that they are unsworn’. The two valuations in casu are similarly unsworn and I agree with the third respondent’s counsel’s submission that only slight weight should be accorded to them. In any event the percentage differences between the forces sale values given in the two reports and the price obtained for the property are, in my view, not of such magnitude as to warrant a finding that the price obtained for it is unreasonably low as contended by the applicant. As submitted by the third respondent’s counsel, no evidence has been placed before the court of the sale of (a) comparable property (properties) at the prices set out in the two valuation reports. Needless to say, the valuation report of 14 May 2003 is of no relevance whatsoever in the determination of whether or not $3 500 000.00 is an unreasonably low price. That price, on the evidence before the court, cannot be said to be ‘substantially less than the market price’ (Zvirawa v Makoni supra).

In the result and for the above reasons the application is dismissed with costs.”

The reasoning and the conclusion of the learned Judge in the court a quo cannot be faulted.

It is contended in the notice of appeal and in the submissions to this Court by the appellant’s counsel that the court a quo erred in not considering the report of the Sheriff and in not concluding that the sale in execution was not perfecta.

I am unable to accept this contention for a number of reasons –

Firstly, the legal inadequacy of the sale in execution was not the cause of action set out in the founding affidavit. The general rule that has been laid down in this regard is that an application stands or falls on the founding affidavit and the facts alleged in it. This is how it should be, because the founding affidavit informs the respondent of the case against the respondent that the respondent must meet. The founding affidavit sets out the facts which the respondent is called upon to affirm or deny. See Pountas’ Trustee v Lahamas 1924 WLD 67 at 68. Nowhere in the founding affidavit is it alleged that the third respondent was called upon to affirm or deny that the sale in execution was imperfecta.

Secondly, the issue of the sale being imperfecta was being raised for the first time on appeal. Is this permissible? The general rule, as I understand it, is that a question of law may be advanced for the first time on appeal if its consideration then involves no unfairness to the party at whom it is directed. See Estate Lala v Mohamed 1994 AD 324. The principles applicable to the raising of a point of law for the first time on appeal were succinctly set out by KRIEGLER J in the case of Donelly v Barclays National Bank Ltd 1990 (1) SA 375 at 380H-381B, where the learned judge had this to say:

“Secondly, it is clearly a wholly new line of defence now being taken. It was not mentioned in the summary judgment proceedings nor in the plea. It was never referred to in evidence or argument at the trial. Its mere novelty, of course, is no ground per se for rejecting it. However, generally speaking, a Court of Appeal will not entertain a point not raised in the court below and especially one not raised on the pleadings in the court below. In this regard I need do no more than to refer to Herbstein & Van Winsen The Civil Practice of the Superior Courts in South Africa 3 ed at 736-737. In principle, a Court of Appeal is disinclined to allow a point to be raised for the first time before it. Generally it will decline to do so unless –

(1) the point is covered by the pleadings;

(2) there would be no unfairness to the other party;

(3) the facts are common cause or well-nigh incontrovertible; and

(4) there is no ground for thinking that other or further evidence would have been produced that could have affected the point.

See Cole v Government of the Union of South Africa 1910 AD 263; Van Ryn Wine and Spirit Co v Chandos Bar 1928 TPD 417 at 421; and Paddock Motors (Pty) Ltd v Igesund 1976 (3) SA 16 (A) at 23.”

Applying the above principles to the facts of this case leads me to the conclusion that this is not a proper case to allow the appellant to raise for the first time on appeal this new point of law.

The Sheriff in his report states that there was a directive for the sale of the property by private treaty. It was argued that this directive by implication means that the third respondent was never declared the purchaser in terms of rule 356 of the High Court Rules. I have serious doubts that this reference to the directive in the Sheriff’s report satisfies the first principle set out in Donelly’s case supra, that the point in question must be covered by the pleadings.

The second principle set out in Donelly’s case supra is that there should be no unfairness to the other party. I have no doubt that the raising of this point of law on appeal for the first time is very unfair to the third respondent. The third respondent went to court in the court a quo to meet the case that the purchase price of the property was too low. He was entitled to assume at that point in time that the appellant was conceding that all the requirements of the High Court Rules, including rules 356 and 360, had been complied with.

It is grossly unfair to raise for the first time on appeal that rules 356 and 360 of the High Court Rules had not been complied with. I accept the appellant’s contention that it was not aware of this alleged non-compliance until the report of the Sheriff was filed. If the appellant wished to take advantage of this revelation, he should have applied to the court a quo to file a supplementary affidavit setting out its newly found cause of action. The court, no doubt, would have allowed the third respondent to answer the new allegation. This would have been the fairest way to proceed. This procedure would have made it quite clear to the third respondent that he was facing two causes of action, the unreasonably low price of the purchase price and the incomplete sale in execution.

The third requirement in terms of the principles set out in Donelly’s case supra is that the facts should be common cause. There is a dispute between the parties on whether or not the agreement of the sale in execution was perfecta. The Court application I have referred to earlier in this judgment makes it abundantly clear that the point is contested.

The fourth principle set out in Donelly’s case supra requires that there should be no grounds for thinking that further or other evidence would have been required or produced in the lower court. In casu, it is quite clear that such evidence would have been led because there has been an application to lead further evidence on the issue in this Court.

Applying the principles set out in Donelly’s case supra, the appellant cannot be allowed to raise for the first time on appeal the new point of law that the sale in execution was not perfecta.

The appellant also raised in its notice of appeal the ground that the court a quo failed to take into account the equities of this matter. The short answer to this submission, as was correctly submitted by the third respondent’s counsel, is that the court a quo was never asked to consider or to take into account those other considerations, nor were the factors placed before the court a quo. There is no basis for challenging the court a quo for not having determined something that was never placed before it to determine. Accordingly, this ground of appeal cannot succeed.

In the result, I would dismiss the appeal with costs.

SANDURA JA: I agree.

MALABA JA: I agree.

Honey & Blanckenberg, appellant's legal practitioners

James, Moyo-Majwabu & Nyoni, third respondent's legal practitioners