Sibanda v Masanga (90 of 2024) [2024] ZWSC 90 (30 September 2024)

Judgment No. SC 90/24 Civil Appeal No. SC 211/22 1 REPORTABLE

(90) GERALD SIBANDA v LAWRENCE MASANGA SUPREME COURT OF ZIMBABWE GWAUNZA DCJ, GUVAVA JA & CHIWESHE JA HARARE: 23 FEBRUARY 2024 & 30 SEPTEMBER 2024 R. G. Zhuwarara, for the appellant F. Mahere, for the respondent GUVAVA JA:

[1] This is an appeal against part of a judgment of the High Court (‘court a quo’) handed down on 13 December 2021 in HH 702/21, in which the court granted the respondent an order to evict the appellant and all those claiming occupation through him from No. 60 Circular Drive, Burnside, Bulawayo. The court a quo, in the same judgment, dismissed the appellant’s claim in reconvention seeking a declaratur that the purported cancellation of the agreement was invalid, that payment of the purchase price to the conveyancer be declared full performance of the appellant’s obligations under the agreement and finally an order that the respondent be compelled to sign all relevant papers in order to pass transfer to him within seven days of the grant of the order. FACTUAL BACKGROUND

[2] The respondent is the registered owner of a certain piece of land situated in the District of Bulawayo being subdivision A of Matsheumhlope also known as No. 60 Circular Judgment No. SC 90/24 Civil Appeal No. SC 211/22 2 Drive, Burnside Bulawayo (‘the property’). Sometime in July 2006 the respondent, who was based in South Africa, engaged Business Exchange Estate Agents (‘Business Exchange’) to sell his immovable property for an asking price of ZWD16 billion. Business Exchange duly placed an advert in The Herald newspaper seeking buyers for the property. The appellant responded to the advert and negotiations culminated in a reduced purchase price of ZWD15 billion.

[3] On 23 August 2006, the appellant and the respondent entered into an agreement of sale and in terms of clause 1 payment was to be effected in the following manner: “(a) An initial deposit in the sum of ZWD 1.5 billion shall be paid to Business Exchange (Private) Limited on signature of this Agreement of Sale. (b) The balance in the sum of ZWD 13.5 billion to be paid directly to the Conveyancers on registration of transfer.” Soon after the parties had signed the agreement the Zimbabwean currency was revalued by the Reserve Bank of Zimbabwe by dropping three zeroes through “Operation Sunrise”. The amount of ZWD15 billion was therefore revalued to ZWD15 million. The appellant paid a deposit of ZWD1.5 million on 30 August 2006. The respondent gave the appellant vacant possession of the property. The appellant has been living in the property for the past 18 years.

[4] When the deposit was paid, the conveyancers, being Coghlan, Welsh and Guest Legal Practitioners, proceeded to carry out the transfer process, which process included obtaining Capital Gains Tax (CGT) assessment from the Zimbabwe Revenue Authority (‘ZIMRA’). ZIMRA however declined to issue the CGT assessment on the basis that the value of the property in the agreement of sale was too low. In order to assure ZIMRA that the value was indeed a market value, the appellant requested a valuation of Judgment No. SC 90/24 Civil Appeal No. SC 211/22 3 the property from Bulawayo Real Estate. They assessed the value to be ZWD$18 million. This value was again declined by ZIMRA as being too low.

[5] In an effort to save the agreement the appellant filed an urgent chamber application in the High Court under HC 1183/07 seeking interim relief barring the property from being sold to any other person and compelling ZIMRA to accept the value of the property as had been agreed to by the parties. A provisional order was granted by C HEDA J on 1 June 2007. On 4 May 2011, M ATHONSI J (as he then was) discharged the provisional order and dismissed the application for a final order. The dismissal was granted in default as the appellant did not appear on the return date. The appellant did not seek rescission of the default judgment. As at the date of discharge of the provisional order ZIMRA had not issued a CGT assessment for the property.

[6] In the meantime, the respondent requested that the appellant authorize the release of the balance of the purchase price of the property to avoid the effects of hyper-inflation. The appellant wrote back saying this could only be done after the respondent had complied with the ZIMRA obligations. On 19 February 2007 the appellant however finally agreed to release the entire purchase price to the respondent at the same time demanding transfer. The respondent thereafter wrote to the conveyancers advising them to halt the entire process of the sale of the property and refund the purchase price as the process was taking too long due to the unavailability of the CGT assessment and also due to the fact that the value of the money had been severely diminished by hyperinflation. Consequently, the conveyancers returned the full purchase price and transfer costs that had been paid by the appellant into his bank account and returned the title deed of the property to the respondent. PROCEEDINGS BEFORE THE COURT A QUO Judgment No. SC 90/24 Civil Appeal No. SC 211/22 4

[7] On 27 October 2009 the respondent instituted proceedings in the court a quo under HC 5222/09 seeking the eviction of the appellant from the property. It appears nothing significant happened to that process until twelve years later on 15 July 2021 when the respondent amended his summons and declaration to include a claim for holding over damages at the rate of US$20 (or Zimbabwe dollar equivalent at the current bank rate) per day with effect from 31 August 2018 to date of eviction. In the claim the respondent averred that performance of the agreement of sale had been made impossible by the refusal by ZIMRA to issue a CGT assessment so as to enable transfer. The respondent further averred that due to hyperinflation the purchase price had become negligible. He further alleged that due to changes in currency the Zimbabwean dollar had ceased to be a medium of exchange thus the original agreement could not be implemented. It was on this basis that the respondent averred that the agreement between the parties had terminated and the appellant had to be evicted from the property.

[8] The appellant entered appearance to defend and, in his plea, averred that the respondent had sold his rights, title and interest in the property and had therefore divested himself of ownership rights. The appellant further averred that he had complied with his obligations in terms of the agreement as he had duly paid the initial deposit of ZWD1.5 million and the balance of ZWD13.5 million. He maintained that he had kept to his side of the agreement as he paid the balance directly to the conveyancers before transfer had taken place. He further averred that the duty to obtain a CGT assessment rested squarely upon the respondent as the seller of the property. He pointed out that the balance of the purchase price including transfer fees had been paid between 18 October 2006 and 17 November 2006. He stated that the erosion of the purchase price was not a valid basis to resile from the agreement as the principle of laesio enormis was not part of Zimbabwean Judgment No. SC 90/24 Civil Appeal No. SC 211/22 5 law. It was his position that the agreement was still valid and the purported termination by the respondent was of no force and effect as the respondent had not cancelled the agreement in terms of clause 7 which sets out the procedure to be followed in the event of breach of contract. He denied that the respondent was entitled to holding over damages as he had sold the house to him.

[9] The appellant also filed a counterclaim in which he sought a declaratur that the purported cancellation of the agreement was invalid, that payment of the purchase price to the conveyancer be declared full performance of the appellant’s obligations under the agreement. To enforce the declaratur the appellant sought an order that the respondent be compelled to sign all papers necessary to pass transfer of the property to him within seven days of the order being granted, failing which the deputy sheriff would be authorized to sign all the relevant transfer papers in the respondent’s place.

[10] The respondent filed a plea to the appellant’s counter-claim and averred that the matter was res judicata as it had been finalized under case number HC 1183/07 when MATHONSI J (as he then was) had discharged the interim order compelling ZIMRA to accept the purchase price agreed to by the parties for the purpose of assessing CGT. He also denied that the appellant was entitled to transfer of the property as the purchase price had been returned to him and he had accepted it. The parties proceeded to Pre- Trial Conference and agreed on the following issues for determination during trial: “1. Whether or not a valid sale of agreement was concluded and performed?

2. Whether or not the plaintiff is entitled to the remedy of eviction in this matter?

3. Whether or not the plaintiff effected valid refund of the purchase price? Judgment No. SC 90/24 Civil Appeal No. SC 211/22 6

4. Whether or not the defendant is liable to the plaintiff for holding over damages in the sum of US$450-00 per month from 31 August 2018 to date of giving vacant possession?”

[11] On 14 March 2014, DUBE J (as she then was) heard the matter under HC 5222/09. The respondent was in default and the court granted a default judgment in favor of the appellant. On 19 March 2015 the default judgment was rescinded by M AKONI J (as she then was). The judge further directed that the matter be set down for trial.

[12] At the trial the appellant and respondent both led evidence and were the sole witnesses for their respective cases. The court a quo in determining the matter held, inter alia, that the performance of the agreement had become impossible as ZIMRA declined to accept the purchase price agreed to as between the parties as the true value of the property. It further held that transfer could not be effected based on that agreement of sale and that even if the Commissioner General had determined a value, the parties still had to enter into another agreement or vary the original agreement to reflect the new purchase price. This would have the effect of the Commissioner General imposing an agreement upon the parties which he could not do.

[13] The court a quo further held that a refund of the purchase price amounted to repudiation of the contract by the respondent. The court noted that the purchase price was deposited into the appellant’s bank account and it was not returned to the respondent. The court a quo thus found that the appellant accepted the repudiation and the respondent remained the owner of the property. It also found that the respondent was entitled to recover the property under rei vindicatio. With regards to the respondent’s claim for holding over damages, it found that the respondent failed to prove the amount of US$450.00 as claimed and dismissed it. On the appellant’s Judgment No. SC 90/24 Civil Appeal No. SC 211/22 7 counterclaim, the court a quo held that, having found for the respondent it naturally followed that the counterclaim could not be granted. On this basis, the court a quo granted an order for the eviction of the appellant from the property, dismissed the claim for holding over damages and dismissed the appellant’s counter claim.

[14] Aggrieved by the decision of the court a quo, the appellant appealed to this Court on the following grounds of appeal:

1. The court a quo grossly erred at law in dismissing the Appellant’s claim in reconvention without deliberating on the declarateur sought. The court a quo did not relate to the declarateur in its determination or give reasons for the dismissal of the claim.

2. The court a quo erred at law by failing to apply the correct test relating to supervening impossibility. The court erroneously assessed whether there was a ‘meeting of the minds´ with regards to impossibility instead of ascertaining whether the contract had been rendered unenforceable on account of impossibility of performance.

3. The Court a quo grossly misdirected itself in concluding that impossibility was objective and absolute in the face of evidence establishing that compliance with Capital Gains Tax laws (CGT) could be achieved. Impossibility was never established.

4. The court a quo grossly misdirected itself in disregarding that; 4.1. The value paid by the Appellant was ascertained by the respondent. 4.2. The respondent did not ascertain what ZIMRA considered a fair valuation of the property. 4.3. The respondent opposed a petition compelling ZIMRA to calculate CGT and secured a discharge of the provisional order resolving the tax hurdle. Judgment No. SC 90/24 Civil Appeal No. SC 211/22 8 The court a quo failed to consider evidence establishing that Respondent was temporarily disabled from performance. The evidence led cannot substantiate a conclusion that impossibility was objective and absolute.

5. The court a quo erred in finding that the agreement inter partes had terminated on account of supervening impossibility yet the respondent purportedly (and wrongfully) cancelled the agreement on the basis of economic hardship.

[15] From the above grounds, it seems that this appeal turns on three main issues which are: (i) Whether or not the court a quo erred in holding that the contract could not be performed due to a supervening impossibility. (ii) Whether or not the court a quo erred in holding that the contract had been properly cancelled; and (iii) Whether or not the court a quo erred in dismissing the appellant’s claim in reconvention without making findings on the declarateur sought. APPELLANTS’ SUBMISSIONS ON APPEAL

[16] Mr Zhuwarara for the appellant, submitted that the court a quo erred in concluding that the respondent was excused from performing the contract based on a supervening impossibility. It was his argument that the court a quo applied the wrong test in determining whether or not there was supervening impossibility as it erroneously focused on the wrong principle. Counsel argued that the test for supervening impossibility did not involve a meeting of the minds but rather that the party alleging the impossibility should prove that there was a supervening impossibility. Counsel argued further that the real reason why the respondent cancelled the agreement was that the purchase price paid by the appellant had been eroded by hyperinflation. Judgment No. SC 90/24 Civil Appeal No. SC 211/22 9

[17] Counsel further submitted that the court a quo ignored the fact that the appellant had made an application to compel ZIMRA to accept the value of the property as agreed by the parties but the respondent had sought the discharge of the provisional order when the appellant failed to attend the court hearing thus creating the impossibility. It was the appellant’s argument that the impossibility alleged by the respondent was temporary and could have been overcome if ZIMRA had been compelled to issue the CGT assessment. Counsel argued that the evidence before the court could not sustain a defence of supervening impossibility and, therefore, the purported cancellation of the contract should not stand. It was further submitted that the court a quo should have entertained the claim in reconvention and not dismissed it out of hand. RESPONDENT’S SUBMISSIONS ON APPEAL

[18] On the other hand, Ms Mahere for the respondent, submitted that the relief sought by the appellant could not be enforced as it did not address the issue of how the CGT assessment would be calculated considering the agreement of sale was in a currency that was no longer in existence. She further submitted that the evidence proved that the supervening impossibility was absolute. ZIMRA had declined to issue a CGT assessment and thus the property could not be transferred to the appellant. She submitted that the respondent had not contemplated such an eventuality and could not be blamed for the actions of ZIMRA. It was her submission that an application compelling ZIMRA to issue a CGT assessment would in turn have altered the contract between the parties thus creating a new contract for the parties.

[19] Counsel further argued that the respondent returned the purchase price which was accepted by the appellant who placed it in an investment account. Counsel argued that the act of accepting the purchase price by the appellant was a tacit acceptance that the Judgment No. SC 90/24 Civil Appeal No. SC 211/22 10 contract was impossible to perform. Counsel further argued that it could not be denied that ZIMRA had refused to accept the contracted value of the property and it had refused to issue the CGT assessment. Counsel thus maintained that the impossibility was no one’s fault as both parties wanted the transfer of the property but ZIMRA made such transfer impossible. Counsel submitted that ZIMRA could not come up with a value for the property as this would have amounted to it rewriting the contract for the parties.