Nyaradzo Florence Mahlaba v Matinginde Holdings (Private) Limited

### Preamble
1
HH 193-18
CIV ‘A’ 148/16
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NYARADZO FLORENCE MAHLABA

versus

MATINGINDE HOLDINGS (PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE

CHITAKUNYE & MUREMBA JJ

HARARE, 22 February 2018 & 28 March 2018

Civil Appeal

Ms D Sanhanga for the appellant

K Manika for the respondent

MUREMBA J: The respondent sued the appellant in the Magistrates Court sitting at Gweru for payment of arrear rentals in the sum of US$5 081.89, interest and costs of suit. It is common cause that the appellant was in occupation of Unit 10 Somerset Mews, Newlands, Harare in terms of a written lease agreement which was entered into by and between the appellant and a company called Allu-Mix Investments (Pvt) Ltd. The lease agreement was signed on 10 April 2014 at Gweru. However, by the time the summons for arrear rentals was issued, the appellant had vacated the property in question.

In response to the claim, the appellant raised 2 points in limine. The two points in limine are that:

the magistrates court sitting at Gweru has no jurisdiction to hear the matter and

the respondent not being the party which entered into the lease agreement with the appellant has no locus standi to sue the appellant.

The points in limine were argued at trial and were dismissed. Aggrieved by the determination, the appellant filed the present appeal against that determination. The proceedings in the main action were postponed sine die pending the outcome of this appeal.

At the hearing of this appeal, the respondent raised a point in limine to the effect that the ruling on the points in limine which was made by the Magistrates Court must not be subjected to an appeal before the main matter is decided upon. It was submitted that the appellant should have waited for the trial to be concluded first before filing an appeal because there is a distinction between review procedure and appeal procedure. In making this submission the respondent’s counsel relied on the case of Gillespies Monumental Works (Pvt) Ltd v Zimbabwe Granite Quaries (Pvt) Ltd 1997 (2) ZLR 436 (H) and s 40 (2) of the Magistrates’ Court Act [Chapter 7:10]. He submitted that the ruling by the magistrate is not final and definitive in nature, so no appeal can be made against it before the main matter is finalised.

In opposing the point in limine Ms Sanhanga for the appellant argued that the ruling that was given by the trial magistrate is appealable before the trial is finalised because the issues of the court lacking jurisdiction and the plaintiff not having locus standi have the effect of a final and definitive judgment. She submitted that on that basis the appellant’s appeal does not fall foul of s 40 (2) of the Magistrates Court Act. The provision reads:

“(2) Subject to subsection (1), an appeal to the High Court shall lie against—

(a) any judgment of the nature described in section eighteen or thirty-nine;

(b) any rule or order made in a suit or proceeding referred to in section eighteen or thirty-nine and having the effect of a final and definitive judgment, including any order as to costs” (My underlining).

In order to unpack this provision it is important to look at the distinction between s 40 (2) (a) and s 40 (2) (b). S 40 (2) (a) states that judgments that are appealable are described in sections 18 and 39.

Section 18 Judgments,

“The court may, as the result of the trial of an action grant—

(a) judgment for the plaintiff in respect of his claim in so far as he has proved the same;

(b) judgment for the defendant in respect of his defence in so far as he has proved the same;

(c) absolution from the instance, if it appears to the court that the evidence does not justify the court in giving judgment for either party;

(d) such judgment as to costs as may be just, including an order that one party pay the costs of the other party on a legal practitioner and client basis.”

Section 39 Rescission and alteration of judgment

“(1) In civil cases the court may—

(a) rescind or vary any judgment which was granted by it in the absence of the party against whom it was granted;

(b) rescind or vary any judgment granted by it which was void ab origine or was obtained by fraud or by mistake common to the parties;

(c) correct patent errors in any judgment in respect of which no appeal is pending.

(2) The powers given in subsection (1) may only be exercised after notice by the applicant to the other party and any exercise of such powers shall be subject to appeal.

The judgments described in these two sections are final and definitive judgments in the true sense of the word. In terms of s 40(2)(b) an appeal lies against rules or orders of a magistrate having the effect of a final and definitive judgment. Clearly, s 40(2)(b) refers to interlocutory orders having  the effects of final and definitive judgments as the ones that are appealable. What it means is that interlocutory orders that do not have final and definitive effect are not appealable. It is important to define what an interlocutory order is. Herbstein & Van Winsen Civil Practice of the High Courts of South Africa 5 ed p 1204 define an interlocutory order as:

“An order granted by a court at an intermediate stage in the course of litigation, settling or giving directions with regard to some preliminary or procedural question that has arisen in the dispute between the parties. Such an order may be either purely interlocutory or an interlocutory order having final or definitive effect. The distinction between a purely interlocutory order and an interlocutory order having final effect is of great importance in relation to appeals.”

In casu it is important to determine whether the order that was made or given by the learned magistrate is purely interlocutory or an interlocutory order having final and definitive effect. In Blue Ranges Estates (Pvt) Ltd v Muduvuri & Anor 2009 (1) ZLR 368 (S) a spoliation order was granted by this court in a provisional order. Aggrieved by the decision the appellant did not wait for the return day, but took up the matter on appeal to the Supreme Court without first obtaining the leave of this court. The question now was whether the order by this court was an interlocutory order not appealable in terms of s 43(2)(d) of the High Court Act without the leave of the judge who made it. Malaba DCJ (as he then was) @ 376 said:

“To determine the matter one has to look at the nature of the order and its effect on the issues or cause of action between the parties and not its form. An order is final and definitive because it has the effect of a final determination on the issues between the parties in respect to which relief is sought from the court. An order for discovery or extension of time within which to appeal, for example, is final in form but interlocutory in nature. The reason is that it does not have the effect of determining the issues or cause of action between the parties.”

He went on to conclude that a spoliation order is final and definitive because in granting it this court had been satisfied that all the elements of spoliation had been established by the applicant (respondent). At p 377 D-E he said,

“The finding of fact in issue was a final and definitive determination of the fact in question. There would have been no other final determination of the issue of spoliation on the return day……Once the order was made and fully executed, it was discharged. There would have been no order to discharge on the return day. The fact that the order was in the form of the interim relief is irrelevant to the consideration of the question whether it is final or interlocutory. The issue of an order in the form in which it was applied for does not make the order itself a provisional order.”

At p 379D in holding that the appellant had the right to appeal to the Supreme Court without first obtaining the leave of this court he ended by saying,

“The test is whether the order made is of such a nature that it has the effect of finally determining the issue or cause of action between the parties such that it is not a subject of any subsequent confirmation or discharge.”

Applying the test that was used in the Blue Ranges Estates (Pvt) Ltd v Muduvuri & Anor case to the present matter, it is our conclusion that the ruling or order of the learned magistrate on both the issues of jurisdiction and locus standi is of final and definitive effect. It does not matter that the trial was supposed to continue after he ruled that Gweru Magistrates Court has jurisdiction and that the plaintiff has locus standi. Even if the trial is to continue between the parties, it will not deal with the issues of jurisdiction or locus standi again because these have already been determined. Instead, as the trial continues what the parties will now deal with is how much does the appellant (defendant) owe to the respondent in arrear rentals, if any? In other words, it is only the amount owed which is outstanding. Clearly, the issues of jurisdiction and locus standi that have been disposed of have the effect of determining the issues or cause of action between the parties. We are therefore not persuaded by the respondent’s argument that this appeal against the dismissal of the points in limine was brought prematurely.

Jurisdiction

It was the applicant’s averment that the learned magistrate erred and misdirected herself at law in finding that the magistrates court sitting at Gweru has jurisdiction to hear the matter when the cause of action arose in Harare where the leased property is situated and the appellant also resides in Harare. The appellant further averred that without having consented to the jurisdiction of Gweru Magistrates Court, the court has no jurisdiction to hear the matter.

In response, the respondent averred that its claim is for unpaid rentals and not the eviction of the appellant from the leased property which is situated in Harare. It averred that in terms of the lease agreement payment of rentals was supposed to be made in Gweru and this was not done resulting in the breach. Mr. Manika argued that as such the cause of action arose in Gweru thereby giving Gweru Magistrates court jurisdiction. He further argued that the lease agreement having been signed in Gweru, this further gives Gweru jurisdiction. He further argued that in the lease agreement the parties had consented to the jurisdiction of the Magistrates Court, so by virtue of that clause, Gweru Magistrates Court was one such court.

It is common cause that although the leased property is situated in Harare, the lease agreement was signed in Gweru. It is also common cause that clause 3:2 of the lease agreement states that,

“The rent shall be paid directly to the lessor at 6 Lobengula Avenue, Gweru or at such place as the lessor may from time to time direct….”

It is further common cause that the parties consented to the jurisdiction of the Magistrates Court.

In its ruling the court a quo found in favour of the respondent by holding that the Magistrates Court sitting at Gweru has jurisdiction because the lease agreement was signed and concluded at Gweru. The court a quo was correct in its finding as I will demonstrate below.  The Magistrates Court jurisdiction in civil cases is determined by s 11 of the Magistarates Court Act [Chapter 7:10] which reads:

“(1) Every court shall have in all civil cases, whether determinable by the general law of Zimbabwe or by customary law, the following jurisdiction—

(a) excepting any other jurisdiction assigned to any court by this Act or any other enactment, the persons in respect of whom the court shall have jurisdiction shall be—

(i) any person who resides, carries on business or is employed within the province;

(ii) any partnership whose business premises are situated, or any member whereof resides, within the province;

(iii) any person whatever, in respect of any proceedings incidental to any action or proceedings instituted in the court by such person himself;

(iv) any person, whether or not he resides, carries on business or is employed within the province, if the cause of action arose wholly within the province (my emphasis).

It has been held that a court will have jurisdiction if the facts of the matter show a sufficient connection to the court’s area of jurisdiction. See Herbstein & Van Winsen Civil Practice of the High Courts of South Africa 5 Ed p 76. At that same page it is said,

“Thus where a plaintiff claims damages for breach of contract, either the fact that the contract was concluded within the area of jurisdiction, or the fact that the breach occurred within the area will generally be sufficient for the court to assume jurisdiction on the basis that the cause arose within its area.”

The lease agreement which gave rise to the claim for arrear rentals was signed at Gweru. On this basis Gweru has jurisdiction. Furthermore, the alleged breach of payment of rentals occurred at number 6 Lobengula Avenue, Gweru. On the basis of these two factors the cause of action arose in Gweru. That the leased property is situated in Harare is neither here nor there in respect of the present claim for arrear rentals. However, I need to point out that the fact that the parties agreed that the Magistrates Court shall have jurisdiction in the event of a dispute does not mean that any magistrates court in the country has jurisdiction. It has to be a magistrates’ court subject to the provisions of s 11 of the Magistrates Court Act.

Locus standi

The appellant averred that she never entered into a lease agreement with the respondent, but with Allu-Mix Investments (Pvt) Ltd and as such the respondent has no locus standi to sue it.

The respondent’s counsel submitted that Allu-Mix Investments (Pvt) Ltd is a subsidiary of the respondent and all rental payments that were made by the appellant were to the credit of the respondent. It was further submitted that it is the respondent that kept the appellant’s rental account and would generate the rental statements and write letters of demand to the appellant. Citing the case of Bindura Nickel Corporation v Zimbabwe Revenue Authority 2008 (1) ZLR 152, the respondent’s counsel submitted that as long as there is a financial interest a holding company can sue on behalf of its subsidiary.

In answer, the appellant’s counsel submitted that both companies are companies with limited liabilities and as such one cannot be a subsidiary of the other, each can sue on its own. She submitted that there is no evidence that the companies are related.

Relying on the case of Bindura Nickel Corporation Limited v Zimbabwe Revenue Authority supra, the court a quo ruled that the respondent in casu can sue in place of Allu-Mix Investments (Pvt) Ltd its subsidiary company because it has direct interest in the matter since it had engaged with the respondent in connection with rental issues before. The court a quo said that on 3 August 2015, the respondent had written a letter of demand to the appellant which the appellant never objected to, but acknowledged receipt of.

At the hearing of this matter in this court, the appellant’s counsel submitted that the respondent is not privy to the lease agreement and has no direct interest in the matter as the lease agreement was not signed by it. She submitted that a person who is not a party to a contract cannot be held liable or claim on it. She further submitted that a party cannot sue upon a contract it did not enter into merely because it is a holding company or because it sent statements to the appellant.

The respondent cannot sue the appellant in this matter because it is suing in contract. In contract law there is a doctrine called “privity of contract” which means that a person who is not a party to the contract cannot sue for carrying out the promise made by the parties to the contract. Put differently, a person who is not a party to a contract cannot enforce it. See PTC Pension Fund v Standard Chartered Merchant Bank Zimbabwe Ltd & Anor 1993 (1) ZLR 55 (HC). This is because the underlying principle of the doctrine is that a contract is always a privity relationship between the parties who make it.  No other person can acquire rights or incur liabilities under it. Of course there are certain exceptions to the rule of privity of contract recognised by our law, under which a person, who is not a party to a contract can sue on it. Privity of contract will not apply in cases of an undisclosed principal and in statutory exceptions. It also has limited application in trusts and in instances where contracts are made for the benefit of third parties (stipulation alteri). See Maja The Law of Contract in Zimbabwe @ p28. At the hearing of the appeal Mr Manika sought to argue that there was a clause at the end of the lease agreement to the effect that:

“For and on behalf of Matinginde Holdings.”

This argument was being raised for the first time on appeal. It was never raised in the court a quo.   Mr Manika argued that this showed that Allu-Mix Investments Private Limited had entered into this contract on behalf of Matinginde Holdings. It is our considered view that that clause is inadequate as it does not state who was signing the agreement on behalf of Matinginde Holdings. The agreement clearly states that the lessor is Allu-Mix Investments (Pvt) Ltd and Nyaradzo Mahlaba is the lessee. With Allu-Mix Investments being indicated as the lessor in the whole agreement it cannot be said that Allu-Mix entered into this agreement on behalf of Matinginde Holdings on the basis of that stand alone clause which is not explained at all.

The scenario in the present matter does not fall under any of the exceptions. The party which entered into the contract with the appellant is Allu-mix Investments (Pvt) Ltd, a subsidiary of the respondent. Normally when businesses grow and become more complex, holding companies often choose to own subsidiary companies. The holding company is thus the primary and sole holder of stocks belonging to the subsidiary company. Whilst the holding company makes decisions such as the election and appointment of the board of directors in the subsidiary company, the subsidiary company remains an independent and separate legal entity from the holding company. Holding companies and subsidiary companies being separate legal entities, each may be sued or they may sue in their own right. The fact that the holding company as the principal or sole shareholder is incidentally injured by an injury to the subsidiary company does not confer on it the standing or locus standi to sue on the basis of either that indirect injury to it or the direct injury to the subsidiary company. A holding company cannot therefore bring legal suits aimed at vindicating injuries suffered by its subsidiaries. It does not have any inherent standing to assert the subsidiaries’ legal rights. See Gumbo v Steelnet (Zimbabwe) (Private) Limited & Anor HB 84/13 wherein it was held,

“ As regards liability of a holding company for the debts of a subsidiary, the legal principle is clear: “the separate legal existence of the constituent companies of the group has to be respected” per Lord Wilberforce in Ford & Carter Ltd v Midland Bank Ltd (1979) 129 N L J 543, 544.  The rule in Salomon v Salomon & Co. Ltd supra thus prevails.”

Therefore, in casu the respondent has no locus standi to sue the appellant in respect of a contract which was entered into by and between the appellant and its subsidiary, All-umix Investments (Pvt) Ltd. The respondent is a stranger to that contract.

The case of Bindura Nickel Corporation Ltd v Zimbabwe Revenue Authority supra which the learned magistrate relied on in arriving at her decision that the respondent has locus standi to sue is distinguishable from the present case. Bindura Nickel Corporation Ltd being the holding company of 2 subsidiary companies sued ZIMRA for the recovery or refund of excess VAT (Value Added Tax) allegedly charged and withheld by ZIMRA from its own account on behalf of its 2 subsidiaries. A point in limine to the effect that Bindura Nickel Corporation had no locus standi was raised by ZIMRA. It was held that for a party to sue it must have an interest in the subject matter of the suit and such interest must be a direct one. In that case the court held that Bindura Nickel Corporation Ltd had a direct interest.

The bottom line is that Bindura Nickel Corporation Ltd did not sue ZIMRA in contract. Moreover its own money from its account had been withheld by ZIMRA. The learned magistrate in the present matter thereof erred in law in placing reliance on this case. Resultantly, she arrived at a wrong decision that the respondent in this matter has locus standi to sue the appellant. With the respondent having no locus standi to sue the appellant, its’ claim cannot not therefore succeed.

In the result, it is ordered that

The appeal is upheld.

The magistrate’s order is set aside in its entirety and substituted with the order that ‘the plaintiff’s claim is dismissed with costs’.

The respondent shall pay the costs of this appeal.

CHITAKUNYE J agrees…………………….

Mabhundu Law Chambers, appellant’s legal practitioners

Jomo Mashoko & Partners, respondent’s legal practitioners