REPORTABLE (2)

Judgment No. SC 5/09

Civil Appeal No. 199/07

(1) FLOWERDALE INVESTMENTS (PRIVATE) LIMITED

(2) AUSTERLANDS (PRIVATE) LIMITED v

(1) BERNARD CONSTRUCTION (PRIVATE) LIMITED

(2) THE SHERIFF OF ZIMBABWE

(3) GENESIS INVESTMENT BANK LIMITED

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, SANDURA JA & GWAUNZA JA

HARARE, FEBRUARY 19, 2008 & FEBRUARY 18, 2009

J C Andersen SC, for the appellants

E T Matinenga, for the first respondent

No appearance for the second and third respondents

CHIDYAUSIKU CJ: This is an appeal against a judgment of the High Court. The facts of this case are set out in some detail in a judgment of this Court, no. SC 92/05, which was an appeal involving the same parties. The following is a brief summary of the facts –

On 23 September 1998 the third respondent obtained judgment against the first and second appellants over a debt, consequent to which judgment the immovable property known as Stand 90 Bulawayo Township (hereinafter referred to as “the property”) was offered for sale by public auction. The property in question belongs to the second appellant who had stood as guarantor to the first appellant for the judgment debt.

At the public auction sale, which took place on 11 November 1999, the first respondent emerged the highest bidder for the property, having offered an amount of $3.5 million. It was a requirement in terms of r 356 of the High Court Rules (“hereinafter referred to as “the Rules”) that the second respondent (hereinafter referred to as “the Sheriff”) declare the first respondent (hereinafter referred to as “Bernard Construction”) the purchaser to complete the auction sale. Rule 356 of the Rules provides 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, and that the sale was properly conducted, he shall declare the highest bidder to be the purchaser, subject to confirmation as hereinafter prescribed.”

It was peremptory for the Sheriff to declare Bernard Construction the purchaser to complete the auction sale. Failure by the Sheriff to declare Bernard Construction the purchaser rendered the auction sale incomplete or imperfecta.

The Sheriff not only refused to declare Bernard Construction the purchaser of the property but directed that the property be sold by private treaty. The Sheriff’s Report, which appears at pp 22-25 of the record, makes this point abundantly clear. In the first application the Sheriff’s position was equivocal. Bernard Construction has not disputed the alleged rejection of its bid by the Sheriff. Bernard Construction has not disputed that the Sheriff directed that the property be sold by private treaty.

Following the rejection of Bernard Construction’s bid, the second appellant applied to the High Court in case no. HC 1769/2000 to have the sale set aside in terms of r 359 of the Rules on the sole ground that the property had been sold at an unreasonably low price. Rule 359 provided at the relevant time as follows:

“359 Setting aside sales

Any person having an interest in the sale may make a court application to have it set aside on the ground that the sale was improperly conducted or the property was sold for an unreasonably low sum or any other good ground. Any such person shall give due notice to the sheriff of the application stating the grounds of his objection to confirmation of the sale. On the hearing of the application the court may make such order as it deems just.”

Rule 359 of the Rules has since been repealed and substituted by a new provision in Statutory Instrument 80/2000. I shall revert to this aspect of the matter later in this judgment.

It is quite clear on the facts that the second appellant’s application to the High Court was misconceived, in that it assumed that the auction sale was complete. The High Court adjudicated the matter on the erroneous assumption that the auction sale was complete and the only issue for determination was the reasonableness or otherwise of the purchase price. The High Court determined that the second appellant had not discharged the onus on it of establishing that the purchase price was unreasonably low.

The second appellant appealed to this Court against the decision of the learned Judge in the court a quo. At the hearing of the appeal the second appellant sought to have the judgment of the court a quo set aside on two grounds, namely –

(1) that the Sheriff had not declared Bernard Construction the purchaser of the property in terms of r 356 of the High Court Rules and therefore the sale by auction was incomplete or imperfecta; and

(2) that in the event of the appeal Court holding that the auction sale was perfecta the court a quo had erred in concluding that the second appellant had not discharged the onus of proving that the purchase price was grossly unreasonable.

This Court declined to determine the first ground of appeal because the issue of the incomplete auction sale had been raised for the first time on appeal. It had not been raised in the court a quo. That ground of appeal was not dismissed as it were. It was simply left open. A proper reading of judgment SC 92/05 makes the above point very clear.

The second ground of appeal was determined. This Court agreed with the court a quo that the second appellant had not discharged the onus of establishing that the property had been sold for an unreasonably low purchase price. It was on this basis that the appeal was dismissed.

The Sheriff understood the judgments of both the High Court and the Supreme Court to direct him to rescind his refusal to declare Bernard Construction the purchaser of the property. He then in effect rescinded his previous determination and declared Bernard Construction the purchaser of the property in terms of r 356 of the Rules. I have some reservations regarding the correctness of the Sheriff’s understanding of the judgments of the Supreme Court and the High Court. I will advert to these reservations later on in this judgment.

The Sheriff, after rescinding his previous determination, proceeded to declare Bernard Construction the purchaser of the property in terms of r 356 of the Rules. He did this on 2 June 2006. On 19 June 2006 the appellants filed an objection to the Sheriff’s declaration of Bernard Construction as the purchaser. The appellants’ objection was in terms of r 359 of the Rules (as amended by SI 80/2000). The relevant part of r 359 of the Rules (as amended) provides as follows:

“359 Confirmation or setting aside of sale

(1) Subject to this rule, any person who has an interest in a sale in terms of this Order may request the Sheriff to set it aside on the ground that –

(a) the sale was improperly conducted; or

(b) the property was sold for an unreasonably low price;

or on any other good ground.

(2) A request in terms of subrule (1) shall be in writing and lodged with the Sheriff within fifteen days from the date on which the highest bidder was declared to be the purchaser in terms of rule 356 or the date of the sale in terms of rule 358, as the case may be:

Provided that the Sheriff may accept a request made after that fifteen-day period but before the sale is confirmed, if he is satisfied that there is good cause for the request being made late.

(3) A request in terms of subrule (1) shall –

(a) set out the grounds on which, according to the person making the request, the sale concerned should be set aside; and

(b) be supported by one or more affidavits setting out any facts relied on by the person making the request;

and copies of the request shall be served without delay on all other interested parties.

(4) …

(5) …

(6) …

(7) On receipt of a request in terms of subrule (1) and any opposing or replying papers filed in terms of this rule, the Sheriff shall advise the parties when he will hear them and, after giving them or their legal representatives, if any, an opportunity to make their submissions, he shall either –

(a) confirm the sale; or

(b) cancel the sale and make such order as he considers appropriate in the circumstances;

and shall without delay notify the parties in writing of his decision.

(8) Any person who is aggrieved by the Sheriff’s decision in terms of subrule (7) may, within one month after he was notified of it, apply to the Court by way of a court application to have the decision set aside.

(9) In an application in terms of subrule (8), the Court may confirm, vary or set aside the Sheriff’s decision or make such other order as the Court considers appropriate in the circumstances.

(10) Where no request has been lodged with the Sheriff in terms of subrule (1) within fifteen days from (the) date on which the highest bidder was declared to be the purchaser in terms of rule 356 or the date of the sale in terms of rule 358, as the case may be, he shall, subject to the proviso to subrule (2), confirm the sale.”

Rule 359 (as amended) vests in the Sheriff the power to confirm or deny confirmation of an auction sale in respect of which he has declared a purchaser in terms of r 356. Rule 359 (as amended) vests in the Sheriff a fairly wide discretion to confirm or deny confirmation of an auction sale. This discretion was previously vested in the High Court prior to the amendment of r 359.

The second appellant objected to the Sheriff’s declaration of Bernard Construction as the purchaser on the following grounds –

(a) the second appellant had since paid the judgment creditor and there was therefore no cause of action at the date of acceptance, i.e. 2 June 2006;

(b) that Bernard Construction was never declared the highest bidder in terms of r 356 of the Rules;

(c) that the said sale was never confirmed as is required by r 359 of the Rules; and

(d) that no payment at all was made by Bernard Construction towards the purchase price of the property.

Bernard Construction opposed the objection on the following grounds –

(1) that the citation of the parties was wrong and that the proceedings were procedurally wrong;

(2) that the application cited both the old and the new Rules and this was fatal;

(3) that the new Rules were not applicable in this case as our law does not allow retrospective effect;

(4) that the application was out of time; and

(5) that the second appellant had failed dismally to reverse the sale in both the High Court and the Supreme Court.

The Sheriff, after considering submissions by both parties, upheld the second appellant’s objection to the Sheriff’s declaration and refused to confirm the auction sale. He declined to confirm Bernard Construction’s bid for a number of reasons set out in some detail in his Report filed of record. In brief the Sheriff’s reasons for declining confirmation are that –

(1) Bernard Construction’s bid for the property was too low;

(2) the Sheriff himself had declined to confirm the auction sale and had directed that the property be sold by private treaty;

(3) Bernard Construction had not paid any of the purchase price to the Sheriff despite demand for payment by the Sheriff; and

(4) the appellants had since discharged their indebtedness to the judgment creditor.

Following the Sheriff’s determination, Bernard Construction applied to the High Court to have the Sheriff’s determination set aside on review on the ground that the Sheriff had no jurisdiction to entertain the matter as it had been finalised by the Supreme Court and the High Court. Bernard Construction also contended that the Sheriff had erred in applying r 359 of the Rules as amended by SI 80/2000 when the sale in question took place prior to the amendment. The learned Judge in the court a quo upheld Bernard Construction’s objection and set aside the Sheriff’s determination refusing to confirm the sale. His reasoning in setting aside the Sheriff’s determination appears at p 3 of the cyclostyled judgment (HC 6463/06). The learned Judge reasoned as follows:

“I am in agreement with the arguments advanced on behalf of the applicant. The respondents have indeed revived issues that were finalised by the Supreme Court. The sole issue upon which (the) third respondent challenged the sale before the High Court and later on appeal to the Supreme Court was the price offered by the applicant. The first respondent had no jurisdiction to entertain the objection again. I cannot see how the second and third respondents can seek a reconsideration of the same subject-matter that was determined by the Supreme Court In this case the subject-matter is the sale in execution of stand number 90, Bulawayo Township. One cannot select issues arising from the same subject-matter and seek their resolution piecemeal. There is need to uphold the principle of finality to litigation.

For the above reasons I find merit in the application. (The) applicant has sought costs on a higher scale against (the) first and third respondents.”

The appellants now appeal against this judgment. The grounds of appeal are set out in the Notice of Appeal, which reads as follows:

“GROUNDS OF APPEAL

(1) The learned Judge erred and misdirected himself in making a ruling that the dispute placed before the Sheriff of Zimbabwe was the same dispute with proceedings in case number HC 1769/00 and SC 92/05 and hence the defence of res judicata was successfully raised by the first respondent.

(2) The learned Judge ignored the fact that the Supreme Court disposed of the proceedings in case number HC 1769/00 and SC 92/05 on the sole ground of whether or not the price was unreasonably low and declined to deal with the question of whether or not the sale was perfecta since the papers filed of record did not raise the issue.

(3) The learned Judge failed to appreciate that the Sheriff of Zimbabwe clearly had jurisdiction to entertain the objection raised after the Supreme Court judgment in case number HC (this should be SC) 92/05 and that the decision by the Sheriff was not challenged on the merits by any of the respondents herein.

(4) The learned Judge ought to have dismissed the application brought by (the) first respondent in light of the fact that the judgment creditor had been paid in full and the cause of action had been extinguished and that (the) first respondent had not paid anything for the property since 1999 and that the balance of convenience was in favour of the decision not to confirm the sale.

(5) The learned Judge erred and misdirected himself in that he was unnecessarily influenced by the need to uphold the principle of finality in litigation.

(6) There was no justification in awarding an adverse order (of costs) as against the second appellant.”

Although the notice of appeal sets out several grounds of appeal, this matter turns on the one issue, namely whether the Sheriff adjudicated upon and determined a matter that had already been finalised by this Court and the High Court. In other words, the issue is whether the defence raised by the first respondent of res judicata should have prevailed in this matter.

The learned Judge in the court a quo accepted Bernard Construction’s contention that the dispute between the parties was res judicata. I respectfully disagree with this conclusion. In my view, the defence of res judicata raised by Bernard Construction should not prevail.

I disagree with the learned Judge’s conclusion for the following reasons -

The essential elements of res judicata are –

(1) the two actions must be between the same parties;

(2) the two actions must concern the same subject-matter; and

(3) the two actions must be founded upon the same cause of action.

See Hiddingh v Dennysen 3 SC 424 at 450; Bertram v Wood 10 SC 180; Pretorius v Divisional Council of Barkly East 1914 AD 407 at 409; Mitford’s Exors v Elden’s Exors 1917 AD 682; Le Roux v Le Roux 1967 (1) SA 446 (AD); and Voet 44.2.3.

I accept that both applications concern the same parties and the same subject-matter. Accordingly, two of the three requirements for res judicata have been met. The third requirement has not been met because the two actions are based upon two different causes of action. The first application had as its cause of action the averment that the auction sale price was unreasonably low. The second application has as its cause of action the averments set out in the appellants’ objection. Among these is the averment that the auction sale was incomplete or imperfecta, in that Bernard Construction was never declared the purchaser of the property in terms of r 356 of the Rules, rendering the auction sale in the first instance incomplete.

A proper reading of Supreme Court judgment no. SC 92/05 relating to the first application reveals that the issue of the auction sale being incomplete or not was specifically left open. It would be a contradiction in terms to assert that an issue that has been left open was determined and is res judicata.

According to the Sheriff’s Report, he rescinded his determination refusing to declare Bernard Construction as the purchaser in terms of r 356 in the first instance in compliance with the judgments of the High Court and this Court. That was his understanding of the two judgments.

The Sheriff’s interpretation of the two judgments is open to doubt. I, however, do not wish to make a determination on the meaning of the judgments because the parties did not canvass this issue on appeal. I merely wish to make the observation that it is common cause that the Sheriff initially declined to confirm Bernard Construction as the purchaser of the property in terms of r 356 of the Rules. Having declined to do so, the Sheriff directed that the property be sold by private treaty. Why the property was not sold by private treaty as directed by the Sheriff is not clear on the record. It would appear the appellants only became aware of the Sheriff’s refusal to confirm the auction sale in the course of the first application upon reading the Sheriff’s report. The appellants, in my view, should have then amended their pleadings to include the newly discovered cause of action. They did not. Instead they unsuccessfully sought to do this on appeal.

As I have already stated, the Sheriff refused to declare Bernard Construction the purchaser in terms of r 356, following which the second appellant launched an application seeking to set aside the auction sale on the ground that Bernard Construction’s bid was unreasonably low. It is quite clear that the first application was misconceived for reasons I have already stated in this judgment. This Court and the High Court determined the first application on the erroneous assumption that the auction sale was perfecta. The two judgments did not set aside the Sheriff’s determination in the first instance. If the Sheriff’s determination still stands, then the auction sale to Bernard Construction is imperfecta.

However, even if I were to proceed, as I will do, on the basis accepted by both parties in this application, that the Sheriff correctly rescinded his original determination, reconsidered the matter afresh and declared Bernard Construction the purchaser, I will arrive at the same conclusion.

The Sheriff rescinded his original determination and declared Bernard Construction the purchaser on 2 June 2006. The Sheriff accepted the objection of the appellants to his 2 June 2006 declaration on 19 June 2006. He adjudicated on the objection and declined to confirm the auction sale. The fact that the auction sale had taken place prior to that date does not render r 359 (as amended) inapplicable. The critical time, in my view, is the date of the relevant declaration, namely 2 June 2006. Accordingly, the issue of retrospectivity does not arise.

Finally, this matter was determined by the court a quo on the basis of res judicata. The merits of the Sheriff’s determination, firstly in refusing to declare Bernard Construction as the purchaser in the first instance and, secondly, the Sheriff’s refusal to confirm the auction sale in terms of r 359 (as amended) have never been adjudicated upon on the merits.

This matter has been going on for about ten years. Referring this matter back to the High Court for the purpose of determining the matter on the merits would not be in the interests of justice as that would merely prolong litigation in this matter. Even more importantly, none of the parties has asked this Court to refer the matter back to the High Court for determination on the merits. The need to bring finality to litigation in this matter is imperative. The High Court would be in no better position to determine the application on review than this Court.

The facts of this matter are virtually common cause. Rule 356 and r 359 confer some measure of discretion on the Sheriff to declare and confirm purchasers in auction sales. The Sheriff exercised that discretion in terms of r 356 and r 359 of the Rules. There is nothing on the record that remotely suggests that he misdirected himself in the exercise of that discretion. There is absolutely no basis for suggesting that that discretion was exercised in a grossly unreasonable manner. In short, there is no basis for possible judicial interference on review on the merits.

In the result, the appeal is allowed with costs. The judgment of the court a quo is set aside and substituted with the following –

“The application is refused. The decision of the Sheriff in refusing to confirm the sale is allowed to stand. Costs follow the result.”

SANDURA JA: I agree

GWAUNZA JA: I agree

Chinamasa, Mudimu, Chinogwenya & Dondo, appellants' legal practitioners

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