Edmore Light Dzoma v Luna Estates (Pvt) Ltd and Registrar of Deeds

### Preamble
1
HH 113/21
HC 761/20
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EDMORE LIGHT DZOMA

versus

LUNA ESTATES (PVT) LTD

and

REGISTRAR OF DEEDS

HIGH COURT OF ZIMBABWE

MUNANGATI J

HARARE, 6 October 2020 & 17 March 2021

Opposed Matter

H.S.Tsara, for the applicant

G.R.Sithole, for the respondent

MUNANGATI –MANONGWA J: The promulgation of Statutory Instrument 33 of 19 namely  Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars) Regulations, 2019 has had a profound effect on instalment sales of immovable properties for  contracts  concluded prior to 22 February 2019 the instrument’s effective date. Of late this court has been inundated by applications by parties whose agreements were instalment sales with purchase prices expressed in United States dollars prior 22 February 2019, either contesting what is presumed to be due or asserting that they have discharged their liability by way of payment in RTGS dollars at the rate of one on one to the United States dollar. Such is the case herein.

The applicant herein seeks the following relief:

The agreement of sale between the applicant and the first respondent in respect of Lot 37of the remainder of Paarl also known as Plot 37 Paarl Farm, Nyabira be and is hereby declared to be valid, legally binding and enforceable against the first respondent and any other third party who may have a claim towards the property.

The first respondent and all those acting through it or upon its instructions be and are hereby interdicted from disturbing/interfering with applicant’s possession/occupation of Plot 37 Paarl Farm, Nyabira also known as Lot 37 of the Remainder of Paarl pending transfer of the plot into the applicant’s name.

The second respondent be and is hereby ordered not to transfer Lot 37 of the Remainder of Paarl also known as Plot 37 Paarl Farm to any other person natural or juristic other than the applicant herein.

The first respondent to pay Applicant’s costs of suit on a legal practitioner and client scale.

First respondent is opposing this application.

The facts of this matter are as follows: On 5 May 2016 the applicant and the first respondent entered into an agreement of sale of immovable property wherein the applicant purchased from the first respondent Lot 37 of the Remainder of Paarl also known as Plot 37 Paarl Farm, Nyabira (hereinafter referred to as “the property”). The purchase price was pegged at USD$57 400 being payable by way of an initial deposit of USD$5000 upon signature of the agreement, with the balance of US$52 400 paid in equal monthly instalments of US$874 over a period of 60 months.  On 10 September 2019 the first respondent wrote to the applicant advising that with effect from 31 June 2019 all payments by the applicant were to be rated on the prevailing interbank rate of the day which was in line with the monetary announcement made by the Reserve Bank of Zimbabwe on 24 June 2019. In that regard, the applicant’s balance was indicated as US$20 522.47. The applicant challenged the legal basis of the position adopted by the first respondent and she continued to pay her monthly instalments at the rate of RTGS $874.

On 14 October 2019 the first respondent wrote to the applicant alleging that she was in breach of the agreement of sale by failing to pay US$874 per month hence she was asked to pay her arrears in full within 7 days failure of which the agreement was to be cancelled. The applicant responded disputing any breach on her part and insisting she was up to date with her payments further stating that the Statutory Instrument that the first respondent sought to rely on did not have a retrospective effect and that threats to cancel the agreement were to be defended. The first respondent purportedly cancelled the agreement of sale by letter of 31 October 2019. The applicant by letter of 4 November 2019 challenged the cancellation and advised the respondent that any attempts to evict her would be vehemently defended.

In seeking an interdict the applicant has alleged in her affidavit that after the parties disagreed on payments, the first respondent has threatened to advertise the property for sale and to forcibly evict her. She alleges in her affidavit that Mr F.K. Kangai and the respondent’s accountant whose details she does not know have abused her over the phone and brought potential buyers to the property to view the property. She asserts that she now leaves in constant fear that her property may be disposed to innocent third parties much to her prejudice. She avers that she raised the issue with her legal practitioners who have had to raise issue with the respondent’s legal practitioners to no avail. It is her evidence that she has since developed the property by building a house and a foul run since she took occupation as soon as she paid a deposit. She thus prays that the respondent or any person acting on its instruction be barred from disturbing her right of possession and occupation of the property.

Insisting that she has complied with the terms of the agreement, the applicant prays for a caveat to be placed upon the property particularly Plot 37 to prevent transfer of it, with the caveat  to be uplifted upon transfer of Lot 37 of the remainder of Paarl farm into her name. In contesting cancellation of the agreement of sale, the applicant entreats the court that the agreement of sale be declared valid and enforceable as against the first respondent and other parties.

The 1st respondent has denied that it threatened to advertise and sell the property. Mr Kangai the deponent to the respondent’s affidavit denied verbally abusing the applicant and challenged applicant to place before the court proof of the alleged harassment. In opposing the granting of the relief sought, the 1st respondent contends that the agreement was cancelled after proper notice was granted and the applicant failed to remedy the breach. The breach referred to pertains to the applicant’s failure to pay the balance of the purchase price being US$20 552.47 using the RBZ interbank rate of the day of payment. The respondent had also opposed the prayer for the placement of a caveat on the entire Deed of Transfer 1673/94. This was however not taken further as the parties agreed that only the portion thereof being plot 37 needed protection if the court were to grant the relief sought.

Submissions

The applicant submitted that the demand by the first respondent that it pays the balance of the purchase price at the interbank rate of the day was not supported by law. Mrs Tsara for the applicant submitted that in terms of S.I. 33/19 as duly interpreted in the case of Zambezi Gas Zimbabwe (Pvt) Ltd v N.R. Barber & Anor SC3/20, the applicant was supposed to pay the balance outstanding at the rate of one to one to the United States dollar. She contended that  the payment of  the remaining instalments were in terms of the contract given that the outstanding balance was immediately before the effective date of 22 February 2019, valued and expressed in United States dollars hence the amount was deemed to be RTGS dollars payable on one to one to the United States dollar. She submitted that the refusal by the applicant to have the amount rated at the interbank rate of the day of payment was not breach of contract. As there was no breach, the contract remained alive. She further submitted that the purported notice of cancellation was not proper in that being an instalment sale, the notice of cancellation had to comply with provisions of Section 8 (1) of the Contractual Penalties Act [Chapter 8.04] which stipulates that in such sales notice cannot be for a period of less than 30 days. She argued that the cancellation was null and void.

Regarding the interdict, it was submitted on behalf of the applicant that the applicant had entered into a valid contract wherein she purchased the property and duly invested in it by way of developments. Her occupation thereat was at risk as the property could be sold to a third innocent party much to her prejudice as she could suffer irreparable harm. The applicant further submitted that in the highly inflationary environment chances of recovering full value of her improvements were close to nil.

Mr Sithole for the first respondent submitted that the Zambezi Gas case cited above does not apply herein. He submitted that what was considered in the Zambezi Gas was the validity and applicability of S.I.33/19, which regulations were temporary measures and have fallen away although what it intended to achieve is now in the Finance Act No 2/19. Mr Sithole submitted that post the enactment of S.I. 33/19, the new enactment being S.I.42/19 which became effective on 24 June 2019 as read together with the Finance Act No 2 of 2019, payments for domestic debts which used to be denominated in the United States Dollars were now being settled in RTGS dollars at the prevailing interbank rate. He submitted that by continuing to pay RTGS$874 per month instead of paying a sum in RTGS dollars reflective of the interbank rate when rated to US$874, the applicant was in breach of the agreement. He submitted that, such payment constituted defective performance. In light of the breach of terms of the agreement in so far as the discharge of the balance of the purchase price is concerned, the cancellation of the agreement of sale by the first respondent was proper.

It was further submitted on behalf of the first respondent that the agreement was validly cancelled. Mr Sithole referred to the notice of intention to cancel that was given to the applicant on 24 October 2019 wherein the applicant was called upon to remedy her breach within 7(seven) days. He submitted that there was nothing wrong in that notice as s 8 of the Contractual Penalties Act is not peremptory but directive as it gives an election. Referring to s 8 ss (2) (i), he submitted that one could give notice as per the contractual terms. He further submitted that if the applicant was to resort to the provisions of the aforementioned Act there has to be an acknowledgment that there was a breach.

It was submitted on behalf of the first respondent that the applicant had not given sufficient evidence as would justify an interdict. Mr Sithole submitted that nothing showed that the applicant was to suffer irreparable harm or that there were no alternative remedies available to her. He referred to an initial proposal by the applicant that the agreement be cancelled and that she be refunded her dues. He argued that the balance of convenience favoured dismissal of the application. He further urged the court to consider that it was not necessary to grant a caveat on the entire Remainder of Paarl Farm instead of the area which pertains to the dispute.

Analysis

It is clear that the facts of this matter are common cause. The climax being that the applicant paid the balance of US$ 20 552.47 due as at 30 June 2019 by way of instalments of $874 in RTGS dollars with the final payment made in March 2020. The point of departure is whether the payments done by the applicant extinguished the debt in light of the operative law. The parties’ positions are equally clear. The applicant maintains that it paid the balance of the purchase price as per the contract. The first respondent maintains that the payment by the applicant post June 2019 were not in terms of the contract hence it properly cancelled the agreement of sale after giving due notice.

It is trite that S.I. 33/19 categorically made all assets and obligations denominated in United States dollars immediately before 22 February 2019 to be valued in RTGS on a one to one rate on or after the effective date of 22 February 2019.  In interpreting s 4 (1) (d) MALABA CJ in the Zambezi Gas case cited supra stated as follows:

“In interpreting s 4 (1) (d), regard should be had to assets and liabilities which existed immediately before the effective date of the promulgation of S.I.33/19. The value of assets and liabilities should have been expressed in United States dollars immediately before 22 February for the provisions of s 4 (1) (d) of S.I.33/19 to apply to them.”

It is common cause that as of 22 February 2019 the applicant owed the 1st respondent part of the purchase price which as per the contract was expressed in United States Dollars. At that point in time whatever was owing under the agreement of sale became RTGS dollars valued on one to one to the United States dollar. The court held in the that case that:

“The effect of the phrase “on and after” is that the conversion of the values of all assets and liabilities” which were valued and expressed in United States Dollars immediately before the effective date to values in RTGS at a rate of one United States dollar to one RTGS dollar would apply at the time the value of the asset or liability is liquidated or discharged. Assets and liabilities covered by s 4 (1) (d) of S.I. 33/19 are of a sui generis nature. They accrue immediately before the effective date and continue to exist after the effective date.”

The above statement by the highest court of appeal expresses the effect of the provisions of S.I. 33/19.  It is clear that the conversion and the rate does not change until the obligation is liquidated. It is because of that status that the court termed such assets or liabilities sui generis. They are of a special kind, of a different status. In continuing to exist after the effective date it cannot be said that there was room for fluctuation. This could not have been the intention of the legislature.

Cognisant of the changes that followed particularly S.I.42/19 can it be said that the provisions thereof affected the existing obligations already provided for under S.I.33/19. If these obligations are sui generis by virtue of the manner in which they were covered by S.I.33/19 they cannot be affected by subsequent legislation. Moreso, when the promulgated legislation has no retrospective effect. Thus, were the law had provided for the manner in which the assets and the obligations were to be handled until liquidation or discharge, it cannot be correct that such liabilities would have to be affected by fluctuations introduced by the introduction of interbank rates.

Given the aforegoing, it cannot be said that the obligation that arose when the applicant entered into the instalment agreement of sale prior to 22 February 2019 is now affected by the new provisions post 22 February 2019. In the court’s mind, the date of liquidation is not relevant. That being so, the continued discharge of the debt by way of instalments of RTGS $874 was in compliance with the terms of the contract given that the United States dollar was at par with RTGS dollar as per S.I.33/19. Since it is admitted that the applicant paid all the instalments irrespective of the currency, she therefore discharged her obligation as per the contract. That being so, there cannot be any breach justifying cancellation of the contract.

The court having arrived at the decision that the applicant discharged her obligations as per the contract the issue of whether the notice given was in terms of s 8 of the Contractual Penalties Act falls away. It is however imperative that the court dispels the notion created by Mr Sithole that the provisions of s 8 (2) (c) (i) are not peremptory but directive. The section reads

“8 Restriction of sellers’ rights

(1) No seller under an instalment sale of land may, on account of any breach of contract by the purchaser—

(a) enforce a penalty stipulation or a provision for the accelerated payment of the purchase price; or

(b) terminate the contract; or

(c) institute any proceedings for damages; unless he has given notice in terms of subsection (2) and the period of the notice has expired without the breach being remedied, rectified or discontinued, as the case may be.

(2) Notice for the purposes of subsection (1) shall—

(a) be given in writing to the purchaser; and

(b) advise the purchaser of the breach concerned; and

(c) call upon the purchaser to remedy, rectify or desist from continuing, as the case may be, the breach concerned within a reasonable period specified in the notice, which period shall not be less than—

(i) the period fixed for the purpose in the instalment sale of the land concerned; or

(ii) thirty days;

whichever is the longer period.”

The fact that s 8 ss (1) starts with the words “No seller.” means that the law prohibits a seller who relying on breach of contract elects to either enforce a penalty stipulation or a provision for the accelerated payment of the purchase price or terminate a contract or institute any proceedings for damages to do so, unless notice of not less than 30 days has expired without the errant party having rectified or remedied the breach. The provisions of s 8 (2) (c) clearly spell that if a party is to rely on the  notice period fixed in the instalment sale of land it shall not be less than 30 days. It can only be more for it to be compliant. The determining phrase is “whichever is longer” meaning if the notice period in the contract is less than 30 days the minimum period of notice is 30 days. If however the contract provides for a notice period of over 30 days then such notice will be applicable. When the section prescribing the notice period says “...shall not be less than...” then it is peremptory. Thus Mr Sithole’s argument that a notice period of 7 days in an instalment sale of land was proper cannot by any imagination be correct in view of the peremptory provisions of the aforementioned section. As indicated earlier, there was no breach by the applicant hence there is no need to dwell further on this aspect.

Given the aforegoing the applicant is certainly entitled to the relief she seeks that she has fully discharged her liability to the respondent.

The applicant’s prayer that an interdict be granted against the first respondent equally has merit. She does not want her possession and occupation of the property interfered with pending transfer. The applicant fully discharged her legal obligations and is entitled to transfer. Her rights are threatened by the first respondent’s conduct. She averred that prospective purchasers visit the property and the first respondent’s officials have threatened her with forceful removal. She thus has reasonable apprehension of harm coming her way. The first respondent cannot rely on her proposal on a without prejudice basis when the parties where haggling over payment. In any case in all her letters placed before the court she was challenging the stance adopted by the 1st respondent questioning the legality of the demand that she was supposed to pay at the interbank rate of the day. She challenged the notice of cancellation of the agreement and vowed to fight her cause. It cannot be said because of the options made on a without prejudice basis she will not suffer irreparable harm and has alternative remedies to her claim. The applicant not only paid for the land but has heavily invested in the property which has become her livelihood, such that, loss of the property cannot be adequately compensated. In that regard the court finds that the granting of an interdict is justified in the circumstances.

It is noted that the applicant realized that seeking a caveat over the whole property was untenable hence her concession that it is only that part that forms her plot that needs to be protected. This accorded with the first respondent’s contention that protection needed to be restricted to the contentious portion of the whole property. An order to that effect would thus be proper.

The applicant seeks an order for costs on legal practitioner client scale. The court finds that this is not justified. The issues pertaining to instalment sales in view of the recently introduced monetary regulations have presented legal challenges in terms of applicability. There seems to be no pronouncement by the Supreme Court on the issue at the time of writing this judgment. That being so, the area presents ground for debate. A litigant cannot be penalized for joining in that debate where repayments have gone into a period covered by legislation subsequent to 22 February 2021.

In the result the following order is granted as per the amended draft order:

The agreement of sale between the applicant and the First respondent in respect of Lot 37of the remainder of Paarl also known as Plot 37 Paarl Farm, Nyabira be and is hereby declared to be valid, legally binding and enforceable against the First respondent and any other third party who may have a claim towards the property.

The First respondent and all those acting through it or upon its instructions be and are hereby interdicted from disturbing/interfering with applicant’s possession/occupation of Plot 37 Paarl Farm, Nyabira also known as Lot 37 of the Remainder of Paarl pending transfer of the plot into the applicant’s name.

The Second respondent be and is hereby ordered not to register any transfer in respect of Lot 37 of the Remainder of Paarl also known as Plot 37, Paarl Farm, Nyabira held under Deed of Transfer No 1673/94 to any other person, natural or juristic other than the Applicant.

The First Respondent shall pay the Applicant’s costs.

Tsara & Associates, applicant’s legal practitioners

Muza & Nyapadi, 1st respondent’s legal practitioners