Kenneth Chiguvare v Maffack Asset & Fund Managers (Private) Limited

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KENNETH CHIGUVARE
versus
MAFFACK ASSET & FUND MANAGERS (PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE
PATEL J

Civil Trial

HARARE, 25 to 27 October 2011 and 19 March 2012

N.D. Munharira, for the plaintiff
M.T. Maja, for the defendant



       PATEL J:     This is a property dispute emanating from an

agreement of sale concluded between the parties in September 2003.

The plaintiff’s claim, as amended, is for damages in the sum of US$63,000

(being the cost of obtaining a similar property) or repayment of the sum

of US$42,000 (being the total amount paid by the plaintiff to the

defendant).

       The issues for determination were revised at the commencement

of the trial. They are as follows: (i) whether it was the plaintiff or the

defendant who breached the agreement of sale; (ii) which party was

entitled to cancel the agreement of sale; (iii) whether the defendant is

liable to pay the plaintiff on either of his claims; and (iv) whether the

defendant is entitled to retain the sums paid by the plaintiff as pre-

estimated damages.


The Evidence

       Sam Chiguvare represented the plaintiff under a general power of

attorney. His evidence was as follows. The agreement of sale for the

property in question was concluded on18 September 2003. The agreed
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purchase price was ZW$92,147,000 in respect of the land and the

construction of a cluster house in conformity with clause 14.2 of the

agreement. The purchase price was subject to construction cost

escalation, payable by the plaintiff before registration of transfer. In

terms of clause 14.6 of the agreement, barring any supervening

impossibility, the defendant undertook to complete construction in or

before June 2004 or any other date thereafter agreed between the

parties.   The   initial   deposit   of   ZW$6,000,000   and   the     sum   of

ZW$21,536,750 (25% of the balance due) were paid on or before

signature. The 75% balance of ZW$64,610,250 was payable in 12 monthly

instalments. He stopped paying in April 2004 because there was no

progress on construction. He only saw a road and the sewage trenches.

At that stage, he had paid a total of ZW$58,536,774 being about two-

thirds of the purchase price. He did not make any written complaint but

advised the defendant’s representative (Lovemore Mafutah) regarding

the cessation of payments. The agreement provides for the payment of

interest and the submission of monthly statements showing the

instalments due and the interest rates applicable. Mafutah did not

furnish any such statements at the relevant time. The plaintiff’s claim for

US$63,000 is based on a valuation report (compiled by Empire Properties)

in respect of a similar sized property in the same area, with the same

style and size of cluster house. As he had only paid two-thirds of the

purchase price, he withdrew his claim for US$63,000 and persisted with

the claim for US$42,000. This sum was also equivalent to the total paid in

Zimbabwe Dollars at the exchange rate prevailing in 2003 and 2004.

      Under cross-examination, the plaintiff accepted that by the end of

April 2004 he should have paid 7 instalments totalling ZW$37,689,312

plus interest and that he had paid only ZW$31,000,024 at that time.
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Nevertheless, his primary objective was to complete full payment within

12 months. He also maintained his denial of having received any monthly

statements until May 2004, after he had reported the matter to the

police, which lead to Mafutah’s arrest.

      Lovemore Mafutah is a Director of the defendant company. His

evidence was that the plaintiff was to pay ZW7,000,000 per month. This

was verbally agreed but not recorded in the agreement of sale itself. The

witness attempted to explain the interest clause in the agreement as

requiring the payment of 30% interest on the outstanding monthly

balance. The plaintiff’s payments after signature were always late and did

not equate to the agreed monthly amount of ZW$7,000,000. His lawyers

wrote to the plaintiff on 26 May 2004 giving him 30 days to rectify his

breach, in terms of clause 7.1 of the agreement. Subsequently, on 10 July

2004, his lawyers wrote to cancel the agreement. Thereafter, he became

entitled to retain the payments already made, as security for damages to

be established, in accordance with clause 7.1.3 of the agreement. At that

stage, the construction completed on the plaintiff’s stand consisted of

sewer and water reticulation pipes. It was not possible to complete the

project because of the plaintiff’s failure to remedy his breach by the

stipulated deadline. The plaintiff’s stand was then sold to a third party in

October or November 2004. The witness stated that he did furnish

monthly statements to the plaintiff. However, he was unable to produce

any copies as these were lost when the case files were moved from his

former lawyers to the current lawyers. The pre-estimated damages in

respect of the plaintiff’s stand amounted to US$5,500. This included the

cost of re-advertising, re-designing and replacing vandalised pipes.

      Under cross-examination, he conceded that there was no

reference to the monthly statements or the costs incurred as pre-
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estimated damages in the discovered schedule of documents filed by his

erstwhile lawyers in October 2006. He also conceded that as the verbal

stipulation to pay ZW$7,000,000 per month was not reduced to writing,

as required by clause 13 of the sale agreement, the plaintiff was not

bound by it and was only obliged to pay a reasonable amount every

month. When questioned by the Court, he accepted that it would not

have been necessary to fix the monthly payment as the interest clause

would have covered any amount overdue on monthly balances. He

further accepted that by 27 April 2004 the plaintiff had paid a total of

ZW$58,536,774. However, he was not able to say what interest was owed

by the plaintiff as at that date, nor could he explain the interest and other

calculations on the May 2004 statement of account submitted to the

plaintiff.

       In 2003 and 2004, he had spent about ZW193,000,000 on the 30

stands comprising the project. He had completed servicing the stands

and they were all equally developed as at 30 June 2004. Therefore, the

amount spent on the plaintiff’s stand would have been just over

ZW$6,400,000. The trial was adjourned to enable the witness to produce

documents supporting the defendant’s claim for pre-estimated damages.

These were then produced in respect of expenses incurred for the whole

project comprising 30 stands, covering the costs of re-advertising, re-

designing and re-planning. The payments were made through the trust

account of his former lawyers. They only submitted reports and kept the

receipts, which could not presently be located.

       At the close of the trial, counsel for both parties were directed to

incorporate in their closing submissions the following calculations: (a) the

total amount paid by the plaintiff divided by the total capital and interest

due by the plaintiff under the agreement of sale (in Zimbabwe Dollars)
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multiplied by US$63,000; and (b) the total expenditure incurred by the

defendant after April 2004 (calculated in Zimbabwe Dollars and converted

to United States Dollars) divided by 30. Regrettably, neither counsel has

addressed these issues satisfactorily, making it very difficult for the Court

to compute the parties’ respective claims. Indeed, their submissions were

generally inadequate and of very little assistance to the Court.


Who Breached the Agreement of Sale and Who was Entitled to Cancel

      Under clause 7.1 of the agreement of sale, the defendant was

entitled to cancel the agreement in the event of the plaintiff failing to

effect any payment due and thereafter failing to rectify any such breach

within 30 days of a written notice calling upon him to do so. It is not in

dispute that the plaintiff duly paid the initial deposit and 25% of the total

balance due on or before signature. The mode of payment thereafter is

stipulated in the agreement as follows:

             “The remaining balance shall be paid by 12 monthly
      instalments commencing 29 October 2003 and thereafter on or
      before the last day of each succeeding month with 3% interest on
      monthly balance below the building society lending rate. Should
      the Seller finish construction before the end of the twelve (12)
      month period the total balance due shall become payable within
      fourteen (14) days in terms of clause 5. The Seller shall provide at
      the end of each month the instalment due and the interest rate
      applicable.”

      It is evident that no fixed monthly payment was prescribed in the

agreement itself. In this regard, Mafutah conceded that the verbal

agreement for the plaintiff to pay ZW$7,000,000 per month was

unenforceable and that he was only obliged to pay a reasonable amount

every month. As for interest, it is not at all clear from the agreement how

the interest component was to be calculated at the end of each month.

Mafutah himself could not satisfactorily explain the interest clause, nor
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was he able to say what interest was owed as at the end of April 2004. He

could not even explain the interest and other calculations on the May

2004 statement of account submitted by his lawyers to the plaintiff.

      The evidence shows that the plaintiff’s payments were somewhat

erratic and not always made at the end of each month. He also admitted

that by the end of April 2004 he should have paid a total of

ZW$37,689,312 plus interest and that he had paid only ZW$31,000,024 at

that time. Nevertheless, his testimony in this respect, which I am inclined

to accept, was that he did not receive any monthly statements showing

the instalment due and the interest rate applicable. He was therefore

unable to determine what specific amount was due at any given time and

was only intent on completing full payment within the agreed period of

12 months.

      On these facts, given the imprecision of the agreement between

the parties, it cannot be said that the plaintiff was in breach of his

payment obligations as at the end of April 2004, when he decided to

cease further payments and terminate the agreement. Thereafter, at the

end of May 2004, the defendant’s lawyers wrote to the plaintiff calling

upon him to remedy the shortfall “as projected to June 2004 in terms of

the attached statement”. However, this letter was only written after the

plaintiff had reported the matter to the police and after Mafutah was

arrested. Moreover, by that stage, the plaintiff had already resiled from

the agreement and the threatened cancellation of the agreement within

30 days had consequently become academic. In any event, even if there

was a subsisting right of cancellation, there was no explanation of the

figures contained in the statement relating to the capital and interest

comprising the supposed shortfall of over ZW$70 million. Very

significantly, that explanation was not availed by the defendant even at
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the trial of this matter. In the premises, I am unable to find that the

plaintiff breached the agreement at any relevant stage or that the

defendant became entitled to cancel the agreement at any time.

       Turning to the plaintiff’s case, his evidence was that he stopped

making further payments after April 2004 because there was no progress

on the construction work on his stand. He only saw a road and the

sewage trenches. The defendant’s evidence was that by the beginning of

July 2004, when his lawyers purported to cancel the agreement, he had

completed the installation of sewer and water reticulation pipes on the

plaintiff’s stand. I do not perceive that these two versions are necessarily

inconsistent. It is perfectly possible that the defendant had installed the

pipes in question in the two months period after the plaintiff had viewed

the stand.

       What is more critical is that in terms of clause 14.6 of the

agreement, the defendant undertook to complete construction in or

before June 2004 or any date thereafter agreed between the parties,

subject to any supervening impossibility. On the ground, as at the end of

June 2004, the defendant had not even begun the construction of the

house let alone completed it. It is also pertinent to note that the permit to

subdivide the entire property was only granted by the City of Harare in

January 2005. Thus, the defendant could not have lawfully developed the

30 stands and completed construction work by the end of June 2004. This

further demonstrates that the defendant was not in any position to fulfil

the contract that it had entered into with the plaintiff. There is nothing in

the evidence to show that the parties had agreed to extend the deadline

for completion of construction. Moreover, the defendant has not pleaded

or established any supervening impossibility precluding or frustrating the

fulfilment of its contract with the plaintiff.
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      One of the difficulties with the plaintiff’s case is that he stopped

making any payment after April 2004, without giving the defendant any

formal warning or written notice of cancellation. He should certainly have

done so in order to safeguard his rights. Again, arguably, he should have

waited until the end of June 2004 before taking any decisive action.

Nevertheless, having regard to the absence of any meaningful

development on the stand as at the end of April 2004, it was obvious that

the defendant was nowhere near completion of construction by June

2004. Given this scenario, it seems to me that the plaintiff was amply

justified in terminating the agreement of sale in view of the defendant’s

anticipated failure to perform its obligations timeously in terms of the

agreement. Accordingly, I am satisfied that the defendant was in

anticipatory breach of the agreement as at the end of April 2004 and that

the plaintiff was entitled, as he did, albeit verbally, to terminate the

agreement of sale.


Claim for Pre-estimated Damages and Claim for Refund

      In terms of clause 7.1.3 of the agreement of sale, in the event of

any material breach by the plaintiff, the defendant would have been

entitled to cancel the agreement and claim damages, retaining any

payments made as security until the quantum of such damages had been

established. In view of my finding that the plaintiff was not in breach of

his payment obligations, the defendant’s claim for pre-estimated

damages cannot be sustained and must therefore be dismissed. For the

sake of completeness, however, I should point out that the approach

adopted by defendant’s counsel in his closing submissions, i.e. applying a

single exchange rate of US$1 to ZW$100,000 as an average rate in

calculating the expenditure incurred by the defendant after April 2004, is
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as unhelpful as it is untenable. There is no reference to official banking

rates applied at the relevant time, and I cannot accept that there was any

average rate of exchange applicable to the expenditure incurred over the

entire period in question, i.e. from November 2004 to July 2006.

      As regards the plaintiff’s claim, his original claim in September

2004 was for payment in Zimbabwe Dollars. This was amended at the

commencement of the trial to one sounding in United States Dollars.

Counsel for the defendant submits that this amendment was improper

because no explanation was proffered as to why it was sought. He

further contends that the change in currency from Zimbabwe Dollars to

United States Dollars amounts to a change in the cause of action and that

this new cause of action has now prescribed since 2004. With great

respect, I see very little to commend these arguments. The explanation

for the amendment of the plaintiff’s claim to a currency presently in use

was quite obvious. There would have been no point in the plaintiff

persisting with a claim sounding in an inoperative currency. Moreover, it

cannot validly be argued that a change in the currency of claim entails

the institution of an entirely new cause of action. In the circumstances of

this case, the cause of action remains the same and cannot be said to

have prescribed merely because it is expressed in a currency that is

different from the one in which it was originally instituted.

      Having said that, I must also declare my great dissatisfaction with

the submissions filed by counsel for the plaintiff. They contain no attempt

whatsoever to substantiate the claim for US$42,000 by way of refund, it

being baldly asserted that the plaintiff is entitled to two-thirds of the

current valuation of the completed property because he had paid

approximately two-thirds of the original purchase price. This approach

entirely ignores the interest component stipulated in the agreement of
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sale. At the end of the day, it would appear that neither the plaintiff nor

the defendant is in any position to provide a proper calculation of the

total amount, inclusive of capital and interest, that was due under the

agreement.

      Given these deficiencies in the evidence and submissions before

me, I am unable to adopt the proposed approach of computing the

plaintiff’s claim as a proportion of the present value of the property, i.e.

US$63,000. The only other approach that seems to present itself is to

award the plaintiff a refund of the total amount that he actually paid in

Zimbabwe Dollars (ZW$58,536,774) converted to United States Dollars,

applying to the ten payments (from September 2009 to April 2004) the

appropriate exchange rate prevailing at the time that each payment was

made. As a matter of procedure, the plaintiff’s claim should be quantified

by way of a chamber application, filed on notice to the defendant,

enabling it to respond should it wish to do so.

   In the result, judgment is entered in favour of the plaintiff as against

the defendant as follows. It is ordered that:

   1. The defendant shall repay the plaintiff the equivalent in United

       States Dollars of the sum of ZW$58,536,774 (to be computed and

       quantified in the manner set out in this judgment) together with

       interest thereon at the prescribed rate, calculated from the date of

       the summons to the date of payment in full.

   2. The defendant shall pay the costs of suit.



Legal Aid Directorate, plaintiff’s legal practitioners
Kawonde & Partners, defendant’s legal practitioners