Clement Kovi v Ashanti Goldfields Zimbabwe Ltd

### Preamble
HH 83-2007
HC 1612/07
CLEMENT KOVI
versus
ASHANTI GOLDFIELDS ZIMBABWE LTD
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CLEMENT KOVI
versus
ASHANTI GOLDFIELDS ZIMBABWE LTD
AND
REGISTRAR OF DEEDS

HIGH COURT OF ZIMBABWE
KUDYA J
HARARE, 8 and 28 November 2007

Opposed Application

Mr H. Mucheche, for the applicant
Mr T. Magwaliba, for the respondent

KUDYA J: This application involves the interpretation and effect of two agreements that were executed by the Ashanti Goldfields Zimbabwe Limited (“Ashanti”) with the applicant. The applicant seeks the transfer of Stand number 591 Waterbury Crescent Bindura from Ashanti and costs of suit. It is opposed.

The facts are common cause. It all started on 1 November 2003. Ashanti, represented by its general manager and finance director executed a memorandum of agreement with its employees, represented by the chairman and two committee members of the workers committee. It states as follows:

“Ashanti Goldfields Zimbabwe agrees to dispose of its housing units situated in Chiwaridzo, Grey Line Flats and Low Density to its employees who are sitting tenants effective 01 December 2003. Find the agreed prices attached.”

The attachment, which was compiled by Kingstone Mujati under the instructions of the finance director, is three pages long. It contains the name, house number, new valuation and monthly repayment columns. The applicant’s name appears in section 3 under the low density disposal price list. The house number is given as 591 Mt Darwin Road, the new valuation is $6 839 145 000.00 and the monthly repayment is $113 985.75.

On 10 December 2003, Ashanti, represented by its financial director, entered into a 5 year lease agreement commencing on 1 January 2004 with the applicant. Rent, with a provision for escalation, was chargeable at $113 985.75. It was to be deducted from the applicant’s salary by Ashanti. It gave the applicant, in clause 3, the option to buy the property after sixty months and further provided that the rentals paid would reduce the purchase price. Clause 15 was a non-waiver clause which protected Ashanti’s rights. Clause 16 dealt with termination of the lease agreement. It could be terminated for breach that was not remedied within seven days. It could be terminated on death or if the applicant for any reason left the employment of Ashanti, but only after Ashanti consulted the applicant or his legal representative.

Ashanti never deducted any rentals from the applicant’s salary. It received payment of a total of $7 million from the applicant between 1 October 2005 and 26 January 2006. I find that the first payment of $1 million was paid on 1 October 2005. It could not have been in 2006 as by then our currency had been reconfigured nor could it have been in 2007 as the application had already been filed. The receipt number precedes those of 10 November 2005 where an amount of $1 million was paid and 26 January 2006 where $5 million was paid. The last and first receipts are written “for payment of a house”.

On 25 July 2006 the applicant wrote to Ashanti seeking transfer. The erstwhile legal practitioners of Ashanti responded on 9 August 2006 disputing that an agreement of sale had been concluded. They averred that the subsequent lease agreement complemented the original agreement, which they viewed as an expression of intent. By the time the applicant resigned from employment on 26 March 2007, the dispute had not been resolved. Ashanti indicated that he was obliged to vacate the house as he had resigned.

The applicant filed the present matter on 3 April 2007.

He filed heads of argument on 1 July 2007. At the hearing the failure to file heads timeously by the first respondent was, by consent, condoned. The supplementary affidavit filed by the applicant to show that the house had title deeds was also admitted by consent.

Three issues were raised and argued at the hearing. These were whether the original agreement constitutes an agreement of sale; whether the lease agreement is a valid and binding agreement and whether the relief sought is available to the applicant.

Mr Mucheche, for the applicant, contended that the original agreement was a valid and enforceable agreement of sale. He anchored his submission in the definition of sale that is found in Christie, Business Law in Zimbabwe, 2nd edition at page 141. The essential requirements of a sale are a thing that is capable of being sold, a price and an agreement. Mr Magwaliba, for Ashanti, contended that the original agreement was a valid agreement of an intention to sale and not of sale. He sought to distinguish an agreement to dispose from an agreement of sale.

Counsel found common ground in the approach the Courts use in interpreting commercial contracts in the case of Chikoma v Mukweza 1998 (1) ZLR 542 (S). It is that the common intention of the parties must prevail notwithstanding that the document is not couched in formal legalese. Gubbay CJ, quoted with approval Colman J in Burroughs Machines Ltd v Chenille Corp of SA (Pty) Ltd 1964 (1) SA 669 (W) at 670G-H that “inelegance, clumsy draftsmanship or the loose use of language in a commercial document purporting to be a contract, will not impair its validity as long as one can find therein, with reasonable certainty, the terms necessary to constitute a valid contract.”

Mr Magwaliba submitted that the absence of the terms and conditions that are normally associated with an agreement of sale such as the conditions of payment of the purchase price; interest; transfer and breach indicate an absence of an agreement of sale. His submission in this regard runs contrary to the sentiments expressed in Chikoma’s case, supra. It seems to me that as long as the essential requirements of an agreement of sale are present, the absence of detail does not vitiate the agreement.

It is correct that in interpreting contracts, courts give effect to the grammatical and ordinary meaning of the words used in the particular contract. See Presbyterian Church of Southern Africa v Shield of Zimbabwe Insurance Ltd 1991 (2) ZLR 261 at 267B and Malaba v Takangovada 1991 (1) ZLR 1 (H) at 5E. It is however not the duty of the court to make the contract for the parties.

The memorandum of agreement uses two words which are couched in the present participle tense. These are “agrees” and “are”. Ashanti was agreeing to dispose its housing units. The phrase “to dispose” when read together with “find the agreed prices attached”, means “to sell”. I therefore agree with Mr Mucheche that “to dispose” in the context of the memorandum of agreement should be interpreted to mean “to sell”. It is noteworthy that Mr Magwaliba did not suggest any other meaning that can possibly be rendered to it, in context. The beneficiaries of the agreement were its employees. It seems to me that the phrase “who are sitting tenants effective 01 December 2003” is a single phrase which describes the employee who is eligible to qualify for the scheme. This is because of the absence of a comma between “tenants” and “effective 01 December 2003.” I therefore agree with Mr Magwaliba that the date on which the sale was to commence was not indicated in the memorandum of agreement. It was neither the date of signature nor 1 December 2003. The sale would, thus, commence on some unknown future date to those employees who were sitting tenants as from 1 December 2003.

It was not in dispute that between 20 June 1990 and 9 December 2003, the applicant gratuitously occupied the house in question as an employee of the first respondent. He did not pay any rentals. He was therefore not a sitting tenant. He could only become a sitting tenant after the conclusion of a lease agreement. In this regard see Kerr: The Law of Lease, 2nd edition at pages 1 and 18; and Lee and Honore: The South African Law of Obligations 2nd edition paragraphs 305 and 314.

Mr Mucheche submitted that the memorandum of agreement satisfied the two essential elements of a sale. He identified these as the thing to be sold and the price at which it was sold. In his written heads of argument he did not address the third essential element of a sale, that is, animus contrahendi. In his oral submissions he obliquely referred to it by contending that “a mere reading of the memorandum indicates the presence of animus contrahendi to enter into a valid and enforceable agreement of sale.” He contended that the detailed nature of the price in the attachment to the memorandum, the signatures of the employees (through their representatives) and of Ashanti was evidence that a firm offer had been made to sell the house at the stated price, which offer had been accepted by the applicant. He therefore argued that both parties exhibited a genuine intention to be bound by their undertakings.

Mr Magwaliba made three contentions on the nature and character of the memorandum of agreement in question. The first was that it was an inchoate agreement in which the parties contracted to contract. He submitted that it was a record of the first respondent’s statement of intention. Secondly he contended that animus contrahendi was not present in the memorandum and thirdly that the absence of material terms to the agreement consigned it to the realm of void agreements.

I deal first with the issue of animus contrahendi. Christie, in The Law of Contract in South Africa, 3rd edition at pages 30-33 deals with this concept. He defines it at page 30 as “the expressed or implied intention to be bound by the offeree’s acceptance”. Macekurtain’s
 Sale of Goods in South Africa 5th edition by Dr. Hackwill at pages 5-6 also deals with the same concept. The learned author states that there are three essential requirements of a contract of sale. These are agreement (consensus ad idem); a thing sold (merx); and a price (pretium). He warns that neither delivery nor payment is necessary to the creation of the contract, for they both fall within the category of its performance.

Dr. Hackwill writes thus:

“The requirements of agreement in the contract of sale do not differ in principle from those governing other contracts….. In relation to sale they may be briefly stated as follows:

1. There must be an agreement of the minds of the contracting parties, mutually communicated, with the intention of contracting a sale—or in other words a ‘concursus animorum animo contrahendi’.

2. It must exist with certainty as to:

   (a) the subject-matter of the sale and its essential characteristics;
   
   (b) the price to be paid;
   
   (c) any other term raised in the negotiations and expressly or impliedly regarded by the parties as material.

3. The agreement must be free in the sense that it must not be induced by fraud, misrepresentation, duress or undue influence.

4. It must be rational. It cannot therefore exist in cases of extreme youth, irrational intoxication or insanity.

If these essentials are complied with there will be consensus ad idem; but subject to the qualification that though the external indicia of agreement are present, it may not exist as a fact because of mistake or other factors vitiating consent.”

In casu, it seems to me that both the price and the thing to be sold are clearly identifiable in the memorandum. The question that presents itself for determination is whether both parties mutually evinced an intention to be bound by the agreement. It seems to me that the first respondent agreed to sell the house to the applicant for the agreed price of $6 839 145.00, once he became a sitting tenant.

It appears to me that the first respondent evinced a genuine intention to sell the house for the set price once the applicant became a sitting tenant, hence the endorsement on the annexure to the memorandum “please amend tenancy changes”. The applicant also evinced a genuine intention to buy the house once he became a sitting tenant, through the signatures of his agents, members of the workers committee. A binding contract was therefore concluded between the parties.

Mr Magwaliba based his contention that the memorandum was a statement of intent to sell at some future date on the case of Sawyer v Chioza & Ors 1999 (1) ZLR 203 (H). The case involved a lease which gave the lessee the right of first refusal. It is correct that such a right is made in the contract of lease. It embodies an offer to the lessee to purchase the property first at a price often set by a third party. If the lessor exercises the right at the appropriate future date, then a second contract contemplated in the first contract is concluded.

It is the same “as a contract to bring into being a contract of sale” that was noted by Greenland J in Malaba’s case, supra, at page 6G.

Mr Magwaliba further described the memorandum as an inchoate agreement. He buttressed his contention by reference to Christie’s book, supra, at page 36(page 37 in 2nd edition). He argued in like manner that the memorandum was a partial agreement that recorded the progress that the parties made in their complicated and protracted negotiations; leaving out other points, which would form the basis of the complete contract outstanding. He contended that as the complete contract was never concluded; the applicant could not sue on the partial contract, as the parties genuinely intended to be bound by the complete contract and not the partial contract.

The existence of an inchoate agreement is founded on animus contrahendi. Christie, 3rd edition, at page 37 states the method used by courts to analyze whether an agreement is inchoate. He writes thus:

“The most satisfactory analysis of such cases is to isolate the offer and ascertain whether the evidence shows that the offeree knew or ought to have known that it was intended to be accepted on a provisional basis only and that the conclusion of a binding contract was to be dependent on agreement on further points.”

It seems to me that the memorandum was a complete agreement and not a proposal that awaited the birth of a full agreement.

Reference was made by Mr Magwaliba to Margate Estates Limited v Moore 1943 TPD at 58-59, Dijkstra v Janowsky 1985 (3) SA 560 (C) at 564G-565A and Jammine v Lowrie 1958 (2) SA 430 (T) at 431B and Patel v Adam 1977 (2) SA653 at 666A-C for the proposition that the method of payment of the purchase price is a material term of the contract of sale of immovable property whose absence in a contract would invalidate it.

The cases relied on by Mr Magwaliba all involved the sale of land in South Africa. In Patel’s case, supra, at 665G-665A Rabie JA outlined the relevant statutory provisions of section 30 of Proclamation 8 of 1902(T) and section 1(1) of the Contracts of Sale of Land Act, 71 of 1969. He stated that these statutory provisions required the contract of the sale of land to be in writing for it to be valid and held that all such terms as are essential to the creation of a valid contract of sale, like the manner of payment, must be in writing.

There is no requirement that a contract of sale be in writing in Zimbabwe. The absence of the method of payment in the memorandum would not make the agreement void as long as the essential requirements of a contract of sale are present. See the sentiments of Mackeurtan’s Sale of Goods in South Africa, supra at page 5. It would appear to me that the position outlined in Voet 19. 1. 17 that where parties to an agreement of sale agree that the purchaser may pay the purchase price when he wishes or after he shall have set out for Rome gives a purchaser a wide discretion on when to pay, which is ended by his death, may very well still be part of our law. If it is not, then the duty would lie on the seller to place the buyer in mora.

I therefore hold that the parties entered into a valid agreement of sale on 1 November 2003. That agreement would however come into effect on the execution of a lease agreement. The execution of the lease, as the future uncertain event that suspended the obligations flowing from the contract requiring fulfillment before the contract of sale came into being, became a condition precedent of the agreement of sale. I accordingly determine the first issue in the applicant’s favour.

The second issue for determination is whether the lease agreement of 10 December 2003 was valid and binding between the parties.

Mr Mucheche abandoned his earlier submission that the lease of 10 December 2003 was not a lease. It was therefore common cause that it was a lease.

It was entered into by the applicant in the full knowledge of the pre-existing agreement of sale. That he had such full knowledge is apparent from the fact that he signed it. The party who represented the first respondent was its financial director while the persons who witnessed for the applicant were the workers committee members who signed the agreement of sale on his behalf. The suggestion made by the applicant in his answering affidavit that he was tricked into signing the lease by the first respondent is an afterthought, and is without merit. He must have signed the lease with the encouragement of the members of the workers committee, who represented him in the earlier agreement, in order to activate the agreement of sale. At the time of execution, it correctly depicted the first respondent as the owner. It set out the rental and method of payment.

The important clauses for our purposes are clauses 3 and 16. These are the option to purchase and termination clauses, respectively. Clause 3 states as follows:

3. OPTION TO PURCHASE

3.1 The lessee shall have the option to purchase the property after sixty months.

3.2 The rentals paid by the lessee to the lessor in terms hereof shall be taken into account and be deducted from the amount due in respect of the purchase price determined in accordance with the provisions of clause 3.1 (above).

Clause 16 reads as follows:

16. TERMINATION

In the event of the lessee committing any breach of this agreement and failing to remedy such breach within seven (7) days after the receipt from the lessor of written notice requiring the lessee so to remedy such breach, or in the event of any attachment being effected of any of the lessee’s property or any execution being levied against such property or the lessee taking any steps to place himself or have himself placed in sequestration or any bona fide application being made to Court for the placing of the lessee in sequestration or any application being made to the Court for an order convening a meeting of creditors of the lessee then in such event the lessor shall be entitled forthwith to cancel this lease without prejudice to any action for the recovery of rent or for any loss or damages arising out of any antecedent breach of this agreement by the lessee or otherwise howsoever.

16.1 in the event of the death of the lessee or in the event of the lessee leaving the employ of the lessor for any reason including ill health, retirement, dismissal, or resignation, the lessor shall be entitled to terminate this agreement, but only after consultation with the lessee or his legal representative.

16.2 in the event of a separation the lessee shall be entitled to receive from the lessor any excess amount which he may have paid during the period of this agreement over and above any minimum rental payable for such premises in terms of any relevant legislation in force in Zimbabwe provided that the manner of such payment shall be within the sole discretion of the lessor.

Both counsel were agreed that the lease agreement did not novate the agreement of sale. Mr Mucheche submitted that the lease agreement did not annul the agreement of sale. He stated that it could not alter the greater rights that the applicant derived from the earlier agreement. Mr Magwaliba argued that the lease agreement was an extension of the earlier agreement. He contended that both agreements were valid. He asked me to call in aid the rule of interpretation that generalia specialibus non deroganti. This rule was discussed in Wizard Pools (Pvt) Ltd v Mashonaland Turf Club 1996 (2) ZLR 293 and the cases therein cited at page 296G-297A. It was discussed in most and applied in some of these cases, which all dealt with conflicting statutes. The discussion centered on whether a general statute that was promulgated after a special statute could override the special statute. The general rule was that it could not but there were exceptions to the maxim. In the Wizard case, supra MCNALLY JA at 300G interpreted the words to mean “general provisions do not override pre-existing particular provisions” and compared his interpretation to the one by Claassen’s Dictionary that “general provisions do not derogate from special”. At 300H he suggested that the maxim could not be reversed to mean “special provisions do derogate from general”. The suggestion by Mr Magwaliba that special provisions in the lease agreement overrode the general ones in the agreement of sale is not borne out by any of the cases that are cited in Wizard’s case, supra. It must be borne in mind that the duty of the court is to effect the intention of the parties as revealed in the documents under discussion.

In casu, it seems to me that the coming into existence of the lease agreement was presaged by the agreement of sale. The terms and conditions in the lease agreement must be read in conformity with the contents of the earlier agreement.

As I understand clause 3.1, it postponed the exercise of the option to buy by 5 years. It did not set the purchase price or the formula for calculating it. Clause 3.2 other than guaranteeing that the rentals would go towards reducing the purchase price was a rather meaningless clause. It seems to me that it could not seek to alter the purchase price that the first respondent had consented to on 1 November 2003. It was fixed in perpetuity and could not be altered by the first defendant at will.

The intention of the parties that I discern from the lease agreement was that the first defendant sold its houses to those employees with whom it executed lease agreements. The employees accepted the sale by fulfilling the condition precedent. The duty fell on the employer to deduct rentals, which it never did, from the applicant’s salary. These deductions would go towards the payment of the purchase price. The rentals were never reviewed upwards but remained static, confirming the fact that the purchase price was fixed. It was also not coincidental that it equated to the monthly repayments agreed to on 1 November 2003.

The lease agreement in my view did not supplant the agreement of sale. It was designed to make the payment of the purchase price easier for the employee. It was a document designed for the employee’s advantage. See Malaba v Takangovada, supra, at 6G-7D. In casu the employee paid the full purchase price in three installments before the expiration of the 5 years. The money was accepted not as rentals but as payment of the purchase price. The failure to deduct rentals appears to me to have been a deliberate act by the first respondent, which gives credence to the view that it was not really interested in the rentals but in fulfilling the condition in the agreement of sale for the creation of a tenancy relationship between the parties. The fulfillment of this condition precedent led the applicant to pay the purchase price, which amount was accepted by the first respondent as payment of a house. It must have been clear to the first respondent that the payment was not for rentals as the manner of paying rent was stipulated in the lease agreement. It does not appear to me that the first respondent ever intended the lease agreement to operate as a lease agreement.

I therefore hold that to the extent that the option clause conflicted with the greater rights he had in the original agreement; it was of no effect. But even if I am wrong, it seems to me that by accepting the full amount in circumstances were it was clear that it was not for rental but for the payment of the house, the first respondent is deemed to have waived the operation of clause 3.1 of the lease agreement. Once the applicant had paid the purchase price in full, he fell out of reach of clause 16 of the lease agreement. He could not be evicted.

I accordingly find that the lease agreement was only valid for the purpose of making the applicant a sitting tenant.

The last issue devolves on whether the applicant is entitled to specific performance. I am satisfied that he fulfilled his part of the bargain by paying the purchase price in full. The first respondent abandoned its pretensions that the house could not be transferred due to the absence of title. The applicant demonstrated that it has title, which was surrendered to first respondent by Messrs Coghlan, Welsh and Guest on 11 January 2005 in anticipation of transfer of title to its employees.

Accordingly, it is ordered that:

1. The first respondent signs all such necessary documents to transfer title in Stand number 591 Waterbury Crescent, Bindura to the applicant within 7 days of the service of this order upon it, failing which the Deputy Sheriff be and is hereby authorized to sign all the necessary documents to effect such transfer of the property in question on its behalf.

2. The first respondent shall pay the applicant’s costs.

Messrs Donsa-Nkomo Legal Practice, applicant’s legal practitioners
Messrs Magwalimba and Kwirira, 1st respondent’s legal practitioners


12
HH 83-2007
HC 1612/07
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