Deluxe International School (Pvt) Ltd t/a Quality Junior School v Damofalls Investments (Private) Limited and Registrar of Deeds N.O. and Sheriff of the High Court of Zimbabwe N.O.

### Preamble
1
HH-20-22
HC 6184/20
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DELUXE INTERNATIONAL SCHOOL (PVT ) LTD

t/a QUALITY JUNIOR SCHOOL

versus

DAMOFALLS INVESTMENTS (PRIVATE) LIMITED

LAND DEVELOPERS

and

REGISTRAR OF DEEDS N.O.

and

SHERIFF OF THE HIGH COURT OF ZIMBABWE N.O.

HIGH COURT OF ZIMBABWE

MANZUNZU J

HARARE, 14 June & 11 January 2022

COURT APPLICATION

A Mufari with W Mafusire, for the applicant

T W Nyamakura, for the 1st respondent

MANZUNZU J:  In this court application the applicant seeks an order in the following terms;

“IT IS HEREBY ORDERED THAT:

The application be and is hereby granted.

The agreement of sale entered into by and between the applicant and the first respondent dated 3 September 2013 in respect of immovable property subdivision called stand 18102 Ruwa measuring 34 895 square metres situate in the District of Goromonzi be and is hereby declared and confirmed as valid, binding and enforceable.

The first respondent be and is hereby directed to sign the ZIMRA Capital Gains Tax form 1, Power of attorney to pass transfer, declaration by seller and all the necessary documents for the purposes of effecting the transfer of the immovable property subdivision called stand 18102 Ruwa measuring 34 895 square metres situate in the District of Goromonzi, held by first respondent under Deed of Transfer No. 12717/2001 to the Applicant within ten days of the granting of this Order.

In the event first respondent failing, neglecting and/or refusing to comply with para 2 of this order, the third respondent , Sheriff of the High Court of Zimbabwe be and is hereby directed and authorized to forthwith do all acts required to effect the transfer and attend to the signing of all the relevant and necessary documents for the purposes of effecting  transfer to the applicant of title, rights and interests in the said subdivision stand  No, 18102 Ruwa measuring 34 895 square metres situate in the district of Goromonzi held in the name of first respondent under Deed of Transfer No. 12717/2001 in terms of this order.

Pursuant to paragraphs (1), (2) and (3) above, the second respondent, the Registrar of Deeds be and is hereby directed to register the applicant’s name, interests, rights and title in the immovable property called subdivision stand No. 18102 Ruwa measuring 34 895 square metres situate in the district of Goromonzi held in the name of first respondent under Deed of Transfer No. 12717/2001.

Pursuant to the provisions of this order, the first respondent be and is hereby ordered to pay the assessed rates, assessed capital gains tax, stamp duty and all other costs relating to the transfer of the said immovable property into applicant’s name.

The first respondent be and is hereby ordered to refund the applicant the sum of ZW$420 284.17 from the overcharged ZW$706 782.50 and paid to it in the form of VAT and interest charges.

The first respondent be and is hereby ordered to pay applicant’s costs on a legal practitioner and client scale from the date of demand 8 July 2020 to the date of transfer of the said immovable property into the applicant’s name.”

BACKGROUND

The first respondent is the registered owner of a certain piece of land situate in the district of Goromonzi measuring 329 0960 hectares held under Deed of Transfer No. 12717/2001 (the property).  In 2001 the first respondent obtained a subdivision permit from the responsible authority upon which it started to subdivide its property.  One of the subdivisions is stand 18102 Ruwa measuring 34 895 square metres (the subdivision).  On 3 September 2013 the applicant and first respondent entered into an agreement of sale for the subdivision for the sole purpose of constructing an independent private primary school.  Some of the material terms of the agreement as agreed to by the parties are that;

The purchase price was US$1 078 000 including VAT.

A deposit of US$18 000 was to be paid upon signature.

The balance of the purchase price in the sum of US$1 060 000 was to be paid in monthly instalments of not less than US$8 840 per month over a period of 180 months.

All instalment payments were due by the first day of each month.

Each instalment shall first be appropriated towards any indebtedness, then towards interest then due and balance towards reduction of the capital debt.

An interest rate of 5% per annum was to apply on the balance outstanding.

An interest rate applied by ZB bank as minimum lending rate was to apply to all arrears.

A default penalty fee at the rate of 0.5% was to be levied.

The agreement also sets out the seller and purchaser’s obligations.

The source of the dispute between the applicant and the first respondent (the parties) according to the applicant, is because the first respondent has levied VAT onto the purchase price and charged interest therein, when the purchase price ought to be VAT inclusive.  The applicant’s case is that the first respondent has been imposing and effecting illegal interest rates and VAT thereby distorting the outstanding balance in violation of the in duplum rule.

The applicant said it has significantly developed the subdivision into a school which is now registered with the Ministry of Education. The school is now operational. Applicant’s cause of complaint is when the first respondent, on 28 December 2015 started levying VAT on the purchase price in contravention of clause 3 of the agreement.  The applicant also said any outstanding debt as at February 2019 was converted to RTGS/ZWL at the rate of 1:1.

The applicant referred the issue of interest recalculation with the Interest Research Bureau Zimbabwe (Pvt) Ltd (IRB) on 8 July 2020.  The IRB produced its report on 12 August 2020 which report carries the following findings as at 31 July 2020.

that the total amount of ZW$2 113 558 was unlawfully charged by the first respondent.

that the illegal interest and overcharge was ZW$2 400 056.33 on the account as at 30 June 2020 by the first respondent.

that the total outstanding lawful interest was ZW$3 028,85 which is due and payable to the first respondent.

that the total outstanding capital amount was ZW$283 469.48 which is due and payable to the first respondent.

that the total illegal VAT charged was in the sum of ZW$122 627.10 paid to first respondent yet it was not due under the contract.

that the illegal interest charged on the illegal VAT was ZW$584 155.40.

that the total illegally charged and paid as VAT was ZW$706 782.50 which ought to be refunded to the applicant.

The summary of this report shows that as at 31 July 2020 the applicant owed the first respondent (ZW$283 469.48 + ZW$3 028.85) a total of ZW$286 498.33.  However, the first respondent is said to owe the applicant the sum of ZW$706 782.50 as a refund of the illegally charged and actually paid VAT together with interest charged on such VAT.  It is on the basis of this scenario that the applicant now seeks a refund of ZW$420 284.17 on the basis of a set off.

The applicant seeks to compel the transfer of the subdivision in its name on the basis that the purchase price was fully paid on 31 July 2020.

The first respondent opposed the application and in the process raised a point in limine that there are material disputes of fact which cannot be resolved on paper without the aid of oral evidence.  On the merits, the first respondent opposed the application on the basis that the applicant has not fully performed its own obligation in terms of the agreement of sale in that; applicant has not yet paid in full the purchase price, VAT, interest and penalty charges.  Furthermore, that applicant has not paid transfer costs and any other costs attendant thereto in terms of the agreement.  It is also alleged by the first respondent that the applicant has failed to show that it performed its own obligations in terms of the agreement such as to entitle it to specific performance.  The first respondent urged the court to dismiss the application with costs on a higher scale as it is prematurely before the court.

While the first respondent agreed with the material terms of the agreement as set out above in this judgment, it said a default penalty fee of 0.5% was levied on the prevailing selling price for each month that the applicant was in default.

The first respondent denied that VAT was levied on the purchase price instead it remained a component of the purchase price as the purchase price stood at US$937 391.30 with US$140 608.70 being VAT. VAT only started to show on the statement in December 2015 when the instalment paid would be apportioned to VAT and purchase price.  Even during the period 2013 to 2015 when the statement showed no VAT, VAT was still charged and separated when payment was done to ZIMRA.  The first respondent alleged that applicant defaulted paying the agreed instalment many times to the extent that by February 2019 the balance stood at US$126 424.25 equating to 14 months of non-payment.  This is against the applicant’s averment that it religiously paid its instalment.  The first respondent did its own computation, a schedule attached to the opposing affidavit as annexure R5.  The schedule shows that the applicant is still indebted to first respondent to the tune of   $5 725 818.00 as at 31 October 2020. In respect to the findings and conclusions by the IRB in its report, the first respondent said there was failure to accurately apply the penalty charges as per clause 3.6.1 of the agreement.  It stated that there were 83 months from inception of agreement to 31 July 2020 when the report was computated.  Of those 83 months applicant is said to have paid the agreed instalment 13 times leaving 70 months subject to penalty charges. It is further alleged that the ZB bank minimum lending rate was to be factored on the arrears.

The first respondent denies that it owes the applicant the sum of ZW$706 782.50.

In its answering affidavit the applicant maintained its position as per founding affidavit.

I will now turn to the preliminary point raised by the first respondent, whether there are material disputes of fact.  At the hearing I allowed this point to be argued together with the merits.  This approach, in so far as the circumstances of this case are concerned, was necessary to resolve the issue of this point in limine. What then are the principles governing this point. In Supa Plant Investment (Pvt) Ltd v Edgar Chidavaenzi 2009 (2) ZLR 132 (H) Makarau J, as she then was, described what amounts to material dispute of fact as;

“A material dispute of fact arises when material facts alleged by the applicant are disputed and traversed by the respondent in such a manner as to leave the court with no ready answer to the dispute between the parties in the absence of further evidence.”

The facts in dispute must be material. This means they must sit at the root of the resolution of the dispute. It is not every factual dispute which graduate to be material. Courts do take a robust approach in resolving disputes of fact as long as that does not cause an injustice to either party.  In Muzanenhamo v Officer-in-Charge CID Law and Order & Others , CCZ 3/13 the court had this to say;

“As a general rule in motion proceedings, the courts are enjoined to take a robust and common sense approach to disputes of fact and to resolve the issues at hand despite the apparent conflict.  The prime consideration is the possibility of deciding the matter on the papers without causing injustice to either party.  See Masukusa v National Foods Ltd & Another 1983 (1) ZLR 232 (S) at 235A; Zimbabwe Bonded Fibreglass v Peech 1987 (2) ZLR 338 (S) at 339C-D; Ex-Combatants Security Co. v Midlands State University 2006 (1) ZLR 531 (H) at 534E-F.”

This was also the position taken in Zimbabwe Bonded Fibreglass (Pvt) Ltd v Peech 1987 (2) ZLR 338 (SC) where GUBBAY JA, as he then was, stated at page 339:

“It is, I think, well established that in motion proceedings a court should endeavour to resolve the dispute raised in affidavits without the hearing of evidence. It must take a robust and common sense approach and not an over fastidious one; always provided that it is convinced that there is no real possibility of any resolution doing an injustice to the other party concerned. Consequently there is a heavy onus upon an applicant seeking relief in motion proceedings, without the calling of evidence, where there is a bona fide and not merely an illusory dispute of fact. See Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 [3] SA 1155 (T) at 1165; Soffiantini v Mould 1956 (4) SA 150 (E) 154; Joosab & Ors v Shah 1972 (1) RLR 137G at 138G –

The first step is therefore to see if there are material disputes of fact.  A mere allegation of their existence by the respondent does not suffice.  The second step is whether the matter, despite the existence of the material dispute of facts, can possibly be resolved on paper without causing an injustice to either party.

In casu, the applicant took the position that there are no material disputes of fact let alone that cannot be resolved on papers filed of record.  The first respondent’s position is that the application contain inherent material disputes of fact which cannot be resolved on the papers.

It is apparent on the papers that the parties are in total disagreement on the issues of VAT, interest, penalty charges,  and whether or not the applicant has discharged its obligations in terms of the agreement.  The findings in the IRB report are also disputed. The first respondent did not just proffer a bare denial in defence but has detailed what it said is the correct position.  At the end of it all the applicant says it discharged its obligations and is even entitled to a refund, and first respondent says applicant has not discharged its obligations as its performance is fraught with breaches and still owes the balance of the purchase price.  In the final analysis, I am of the considered view that the conflicting positions of the parties in casu are irreconcilable on the papers in several critical respects. There are indeed material disputes of fact which cannot be resolved on paper.

Given the above finding, the question is what is the future course of these proceedings. In Musevenzo v Beji and another HH 268/13 the court dealt with the options available to court as follows;

“Where there is a genuine dispute of fact on the papers the court can proceed in one of several ways:

(1) 	The court can take a robust view of the facts and resolve the dispute on the papers; see Masukusa v National Foods Ltd & Anor 1983 (1) ZLR 232 (H); Zimbabwe Bonded Fibreglass (Pvt) Ltd v Peech (supra); Van Niekerk v Van Niekerk&Ors 1999 (1) ZLR 421 (SC) and Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd (supra)

(2)	the court can permit or require any person to give oral evidence in terms of r 229B of the Rules if it is in the interests of justice to hear such evidence;

(3)	the court can refer the matter to trial with the application standing as the summons or the papers already filed of record standing as pleadings; see Masukusa’s case above,

(4)	the court can dismiss the application altogether if the applicant should have realised the dispute when launching the application; see Masukusa’s case above; Savanhu v Marere NO &Ors 2009 (1) ZLR 320 (S); Plascon- Evans Paints Ltd v van Riebeeck Paints (Pty) Ltd 1984 (3) SA 623 (A).”

The robust approach in my view will result in an injustice to the parties given the different and conflicting positions they have taken.

In the event of a finding that material disputes of fact exist, the applicant urged the court to either call for oral evidence or refer the matter to trial.  The first respondent said the application must be dismissed with costs on a higher scale.  The calling of oral evidence is one permitted under rule 229B of the old High Court Rules 1971, now. Rule 58 (12) of the current High Court Rules 2021 which provide that;

“In any application the court or a judge may permit or require any person to give oral evidence if the court or judge, as the case may be, considers it will be in the interests of justice to hear such evidence.”

Given the several areas of dispute, it is not ideal for the court to call oral evidence in this matter.

In urging the court to dismiss the application the first respondent relied on the authorities of Zimbabwe Bonded Fibre Glass (Pvt) Ltd v Peech 1987 (2) ZLR 338 (S) and Mashingaidze v Mashingaidze 1995 (1) ZLR 219 where the court said;

“It is necessary for the courts to discourage the too often recurring practice whereby applicants, who know or should know that real and substantial disputes of fact will arise or are likely to arise on the papers, nevertheless resort to application proceedings on the basis that, at worst, they can   count on the court to stand the matter over for trial. Unless this practice is curbed, applicants will continue to believe that they have nothing to lose and, indeed, everything to gain tactically by embarking upon application proceedings, notwithstanding their knowledge or belief at the time of doing so that the respondent will be able to show that genuine and serious disputes of fact exist on the papers.”

In Dewa v Sibanda and Others HB 110/08 the court had this to say;

“The legal position is that where there is a foreseeable dispute of fact, it is inappropriate to proceed by way of motion proceedings.  The proper procedure should be by action as this will allow the parties’ evidence to be tested under cross-examination, see Nyazorwe v Guta and Others  HH 234/88 and Masukusa v National Foods Ltd and another 1983 (1) ZLR 232 (H).”

The first respondent argued that the applicant foresaw the dispute of fact but nonetheless proceeded with the application procedure.  That cannot possibly be correct.  This is for the obvious reason that the applicant through its legal practitioners wrote a letter on 8 July 2020 to engage the first respondent by stating its position.  The letter was not responded to causing applicant to write a follow up letter on 16 August 2020.  In a letter of 31 August 2020 the first respondent’s legal practitioners acknowledged the applicant’s correspondence but asked for time to substantively reply by 4 September 2020 after consultation with their client.  By 4 September 2020 the applicant was not honoured with the response.  This caused a follow up letter by the applicant on 17 September 2020 which was not responded to.  This application was then filed on 26 October 2020.  In the circumstances, the first respondent had the opportunity to show the applicant that it was materially disputed to the position taken by the applicant. The dismissal of the application as prayed for by the first respondent is not justified.

The only appropriate course to take is to refer the matter to trial with costs in the cause.

Disposition:

This application be and is hereby referred for trial.

For the purposes of trial, the notice of application and notice of opposition filed of record herein shall respectively stand as the summons and notice of appearance and plea.

The answering affidavit shall stand as the replication to the plea.

The matter shall thereafter proceed in accordance with the Rules of the High Court

The costs of this application shall be costs in the cause.

Muhonde attorneys, applicant’s legal practitioners

Wilmot and Bennet , 1st respondent’s legal practitioners