Industry Pension Fund v United Refineries Limited and 2 Others

### Preamble
1
HH 313-2012
HC 1130-2011
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INDUSTRY PENSION FUND

versus

UNITED REFINERIES LIMITED

AND 2 OTHERS

HIGH COURT OF ZIMBABWE

ZIMBA-DUBE J

HARARE 16 March 2012, and 31 July 2012

Advocate Uriri, for the Applicant

Advocate T.Mpofu, for the Respondent

Opposed Chamber Application

DUBE J: This is a chamber application for leave to admit into evidence a supplementary opposing affidavit earlier filed without the leave of the court.

BACKGROUND

The background to this matter is that the respondent filed an application under HC 1130/11 to compel the applicant to transfer stand 13981 Khami Road Extension, Kelvin West,  Bulawayo into its name on 3 February 2011.Following this the applicant in this application who is the respondent in HC 1130/11 filed its opposing papers followed by an answering affidavit from the first respondent. The applicant subsequently filed a supplementary opposing affidavit[hereinafter referred to as the supplementary or further affidavit] on 9 May 2011without the leave of court. This was followed by a chamber application to admit the same affidavit filed on 19May2011. Both the chamber and the opposed applications were consolidated by consent of both parties on 10 November 2011. At the commencement of the hearing of the matter the court heard argument on the application to admit the supplementary affidavit first and it reserved its ruling.

The applicant’s explanation for filing the further affidavit without the leave of the court and the reasons for failing to include the  information sought to be introduced at this stage may be summarised as follows;

The applicant states that the opposing affidavit filed by the applicant did not deal with the full details of the applicant’s defence to the principal matter because its legal practitioner did not agree to include the full details of its opposition as instructed by the applicant. That the agreement between the parties was a loan disguised as a sale rather than a sale agreement and that its legal practitioners failed to detail the exact nature of the transaction. The applicant claims that it had no capacity to take a loan and the respondent had no legal authority to give a loan resulting in the parties resolving to disguise the loan as a sale. Following disagreement over the exclusion of that detail in the opposing affidavit with Mr Pattison of Messrs Webb Low and Barry Legal Practitioners, he renounced agency. On 8 April 2011 the applicant’s new legal practitioners advised the first respondent’s legal practitioners that they were instructed to file a supplementary affidavit and requested the respondent’s consent in writing, to file the further affidavit. They were advised that the first respondent would not address the request pending the regularisation of the notice of renunciation by the applicant’s former legal practitioners. After the filing of the renunciation of agency the applicant filed the supplementary affidavit with the registrar of this court in anticipation of the consent of the first respondent. That consent never came. The further or supplementary affidavit was thus filed without the leave of court.

The applicant states that it is essential that the court adjudicate on the real dispute between the parties with the full facts of what transpired to ensure that justice is done between the parties. Advocate Uriri who represented the applicant submitted that the pleadings in the principal application portray a misleading impression as they omit the full statement of the facts of the true transaction entered into between the parties. He submitted that the overriding consideration in a matter such as this is whether the further affidavit relates to the real issue between the parties. The applicant maintained that the supplementary affidavit relates to the real issue between the parties and will enable the court to adjudicate upon the true dispute between the parties as the admission of the supplementary affidavit ensures that all the facts are placed before the court thereby doing justice between the parties. The applicant asserted that the further affidavit does not introduce anything new as the fact that the transaction was a loan appears on the Agreement of Sale. Advocate Uriri drew the court’s attention to paragraph 3 of the sale agreement which he contended is clear that a loan was advanced to the applicant and outlines the details of the payment. That the affidavit tells the story already appearing ex facie the agreement which is that the applicant was given a loan and the sale was one with a buyback option. The applicant claimed that the lease arrangement makes it clear that this arrangement was a loan and the sale was entered into to disguise the loan. He submitted further that the intention was that the applicant would get a loan and pay back and this is the reason why the applicant was not required to vacate the premises. The applicant contends that the admissions made regarding the existence of the agreement of sale and its binding effect are not being withdrawn as the applicant does not deny that the agreement was signed but that it is simply saying that this is not the whole story and the supplementary affidavit tells the correct story that already appears ex facie the Agreement of Sale.

The first respondent represented by Advocate Mpofu is opposed to the application and submitted that the further affidavit sought to be admitted was irregularly filed and that an application for admission of a further affidavit filed without the leave of the court is an incompetent application as rule 235 prescribes the filing of an affidavit and not its admission. That as the applicant has already filed the affidavit, any application it makes is no longer an application to file an affidavit in terms of rule 235 and it becomes an unknown application which finds no support at law and that the court should insist on the observance of its rules. That the applicant cannot remedy ex post facto, its failure to seek the leave of the court to file the supplementary affidavit as required by rule 235 by making a chamber application.  He also contended that if the further affidavit sought to be admitted is allowed at this stage, it will have the effect of withdrawing the following facts in paragraph 14 of the founding affidavit which it  did not dispute in paragraph 8 of its  opposing affidavit and consequently admitted thus,

a)  That the parties entered into a valid and binding relationship which remains binding.

b)   That the first respondent in HC1130\11 is obliged to transfer the property in terms of

that agreement and that it cannot resile from that agreement.

That the conveyancers have the responsibility to prepare transfer documents in order to pass transfer.

The respondent is opposed to the proposition that the supplementary affidavit be admitted at this stage and asserts that the applicant has failed to provide a satisfactory explanation for the failure to put the facts before the court at an earlier stage and for the late filing of the affidavit. The respondent submitted that the story it tells is a simple story. Advocate Mpofu maintained that the transaction was an agreement of sale and refuted that the agreement was a loan agreement disguised as a sale. He argued that the applicant has failed to explain why its legal practitioner hearing such a simple story could refuse to record such an arrangement. He took issue with what he termed an attempt by the applicant to withdraw the admissions it made concerning the agreement of sale without making an application to do so as required at law. He relied on the case of Munhuwa v Mukahuru Bus Services (Pvt) Ltd 1994 (2)382 (HC) for the principle that a pleader cannot be permitted to withdraw an admission without making a formal application for that purpose. The respondent also contended that the withdrawal of these admissions will prejudice the respondent to the extent that an order of costs will not compensate it. The court was also referred to the case of DD Transport (Pvt) Ltd v Abbot 1988 (2) ZLR 92 for the same proposition. The respondent suggested further that the applicant has failed to provide a satisfactory explanation for the failure to put the facts before the court at an earlier stage. That this could have been achieved by a supporting affidavit from the legal practitioner concerned. That the information sought to be placed before the court was known to the applicant at the time it deposed to its opposing affidavit and that the court cannot permit the admission of such averments. Advocate Mpofu in addition submitted that the information sought to be admitted offends the parole evidence rule in that the applicant seeks to add new details to the agreement of sale and that the applicant has failed to make an application for the rectification of the agreement of sale. He argued that admitting the further affidavit will lead to parole evidence being led and in the absence of an application for it. The respondent contended further that the application was not made in good faith and that the applicant aims to avoid the agreement of sale and create a dispute of fact which will prolong the matter and ensure that the applicant will continue to enjoy the property in issue without paying any rentals for the property. That the applicant proceeded after filing this application, to file a summons matter which seeks the dismissal of the main application and this reveals bad faith on the part of the applicant. That if the applicant is allowed to change its position, the prejudice to be suffered by the respondent is colossal.

THE ISSUES

There are a number of issues involved in this dispute. The first issue is whether the applicant can ex post facto remedy its failure to seek leave of the court to file a further affidavit as required by rule 235 by making a chamber application to admit the affidavit already filed on record. Secondly, whether the applicant has provided a satisfactory explanation for the failure to put the facts sought to be introduced by the further affidavit before the court at an earlier stage and for the late filing of the affidavit. Thirdly whether the application amounts to a withdrawal of admissions previously made and lastly whether the information contained in the supplementary affidavit offends the parole evidence rule.

THE LAW

LEAVE TO ADMIT A FURTHER AFFIDAVIT

The practice at law is that only three affidavits are permissible in an application.Herbsteinand Van Winsen, The Civil Practice of the Supreme Court of South Africa 5thed at 433 states this position as follows:

‘The ordinary rule is that three sets of affidavits are allowed, i.e. supporting affidavits, answering affidavits and replying affidavits.  The Court may in its discretion permit the filing of further affidavits.’

Further affidavits may only be filed with the leave of the court in terms of r235. It is only in ‘’exceptional circumstances’’ or if the court considers such a course advisable that a fourth set of affidavits may be received. This approach was enunciated in Kasiyamhuru v Minister of Home Affairs[1998] 3 All SA 116 9(W).The purpose of allowing a further or supplementary affidavit is to enable a litigant to file additional information that he becomes aware of after the filing of the three affidavits as required in terms of the rules. In Silver Trucks (Pvt) Ltd & Anor v Director of Customs and Excise 1999 (1) ZLR 490a supporting affidavit was filed by a respondent after the applicant had filed its answering affidavit. There was no application to file an additional affidavit and no explanation why it was not filed earlier or why it was filed late. The court ruled the supporting affidavit inadmissible. SMITH J discussed extensively the law pertaining to additional affidavits and remarked as follows;-

’’It is only in exceptional circumstances that the court will allow the filling of an additional affidavit. There must be an application for leave to file such affidavit. The party applying for the leave must provide a satisfactory explanation for the failure to put the information or facts before the court at an earlier stage and for the late filing of the affidavit. The explanation must be one that negatives bad faith or culpable failure to act timeously.The court must also be satisfied that no prejudice will be caused to the opposing party which cannot be remedied by an appropriate order as to costs. In the present case, a day after the applicants filed their answering affidavit and a few hours before the matter was heard, the respondents filed a so called supporting affidavit. This affidavit was not admissible as there was no application for leave to file the additional affidavit and no explanation was offered as to why it was not filed with respondent’s opposing affidavit or why it was late.’’

Another relevant case is Transvaal Racing Club v Jockey Club of South Africa 1958 (3) SA 599 whereWILLIAMSON J, as he then was, at 604A-E, said the following;-

“I think that if there is an explanation which negatives mala fides or culpable remissness as the cause of the facts or information not being put before the court at an earlier stage, the court should incline towards allowing the affidavits to be filed. As in the analogous cases of the late amendment of pleadings or the leading of further evidence in a trial, the court tends to (take) that course which will allow a party to put his full case before the court. But there must be a proper and satisfactory explanation as to why it was not done earlier, and, what is also important, the court must be satisfied that no prejudice is caused to the opposite party which cannot be remedied by an appropriate order as to costs.”

The cases referred to reveal that where a litigant makes an application to file a further affidavit without the leave of the court, the court may on application by the party, determine whether special circumstances exist justifying that  leave  be granted to formally file or admit that affidavit as part of the record. The court may in exercising its discretion, take into account the following;-

Whether a satisfactory explanation has been given explaining the reasons for leave

to file the further affidavit.

Whether the information was available at the time the recognized affidavits were

filed.

c) Whether the information sought to be introduced does not bring a new cause of

action or defence

The prejudice likely to be suffered by the other party if the further affidavit is

introduced.

ADMISSIONS

Where a party makes an admission in its pleadings, the admission is admitted and binding and it is unnecessary for the other party to prove such admission. A party wishing to resile from such an admission may amend or withdraw such pleadings in terms of rule189 which permits a withdrawal of an admission. Where a party seeks to withdraw an admission he is required to apply to the court for such a withdrawal. He must give a reasonable explanation of the circumstances under which the admissions were made and the reasons for the withdrawal. The court in its discretion may allow such amendment or withdrawal on such terms as it deems fit. The court has a discretion which it is required to be exercised judiciously.

In Moresby-White v Moresby-White1972 (1) RLR 199 (AD) at 203E-H; 1972 (3) SA 222 (RAD) at 224.The court in dealing with an amendment involving a withdrawal of admissions held that;-

“An amendment which involves the withdrawal of an admission will not be granted by the court simply for the asking, for it is an indulgence and not a right. See Zarug v Paravathie NO 1962 (3) SA 872 (D) at 876C. Before the court will exercise its discretion in favour of the desired amendment it will require a reasonable explanation, of both the circumstances under which the pleader came to make the admission and the reasons why it is sought to resile from it. If persuaded that to allow the admission to be withdrawn will cause prejudice or injustice to the other party to the extent that a special order for costs will not compensate him, it will refuse the application. See Amod  v SA Mutual Fire and General Insurance Co Ltd 1971 (2) SA 611 (N) at 614H-615A; Beck's Theory and Principles of Pleadings in Civil Actions 5 ed para 83 p 191. And, of course, the court will have to be satisfied that the amendment sought is a bona fide one. The question must always be posed: "Is the applicant acting mala fide in seeing to withdraw his admission?” See  E  Rishton v Rishton 1912 TPD 718 at 722; Moolman v Estate Moolman&Anor1927 CPD 27 at 29; Trans-Drakensberg Bank Ltd v Combined Engineering (Pty) Ltd & Anor 1967 (3) SA 632 (D) at 642A.’’   See also Munhuwa v Mhukahuru bus services (supra)”.

This approach was also followed in Chimutanda Motor S pares v (Pvt) Ltd v Musare 1994 (1) ZLR 310 (HC).The same principles are applicable in this case as the filing of the further affidavit involves making changes to pleadings already filed may involve the withdrawal of admissions.

THE PAROLE EVIDENCE RULE

The parole evidence rule is a common law rule that prohibits a party to a written contract from introducing extrinsic evidence that either contradicts or adds further information to the contract. Where a written contract has been entered into, the agreement falls within the four corners of the document. No extrinsic evidence is allowed .The parties should confine themselves to the four corners of the document. See Canaric No v Shervil's Garage 1932 TPD 196 at 199 (per GREENBERG J) and Van Deventer's case supra, at 76A.

THE MERITS

It is common cause that the applicant filed its supplementary affidavit without the consent of the respondent and without leave of the court. There seems to have been confusion as to whether the respondent was prepared to consent to the filing of the affidavit. There is no need for the court to determine this issue as ultimately what is required to be determined is whether the further affidavit is properly before me and whether leave to admit or file the affidavit should be granted. The applicant seeks the court’s indulgence for the admission of the affidavit into evidence. The applicant is in fact seeking leave to regularise the filing of a further affidavit filed without leave. The first issue is whether this application is competent at law. There seems to me to be no real distinction between leave to file and leave to admit a further affidavit. It is a distinction without a difference and is a question of terminology and amounts to splitting of hairs. The fact remains that the applicant seeks to file a further affidavit. I understand this to be an application to file although the applicant applied for leave to admit the affidavit. In ANZv Media & Information Commission 2006 (1) ZLR 128 (H), an application was made to admit further affidavits filed in circumstances similar to this case and the court did not deal with semantics and went on to consider the application on the merits and considered whether leave to file the further affidavits should be granted. I will adopt the approach taken in this case. The facts of that case are briefly that the respondent filed a further affidavit without leave of the court .The supplementary affidavit included an averment not made in its founding affidavit and the applicant alleged that its legal practitioner had omitted to include the averment. The applicant in that matter also filed a further affidavit without leave of the court. In total three affidavits were filed without leave of court. Leave to admit the three additional affidavits was applied for. The court fittingly expressed its abhorrence at the approach adopted and remarked as follows;-

“ Leave to file additional affidavits cannot be had for the asking. The court will insist on the observance of its rules regarding the sequencing of affidavits to be filed in an application, the uniformity of practice and certainty in the system, unless in the view of the court , justice will miscarry. In particular, the court will not readily grant leave to file an additional affidavit to deal with facts that were available to the parties at the time the permitted affidavits were drawn up and deposed to.”

The court proceeded and considered each of the further affidavits in turn. It considered, the reasons for leave to file each supplementary affidavit, whether the information sought to be introduced did not bring in a new cause of action or defence, whether the information was available at the time they filed the recognized affidavits, the failure to include certain averments in one of the affidavits and the prejudice likely to be suffered by the other party if each of the affidavits was admitted.

In order to determine if there are exceptional circumstances justifying the admission of the further affidavit, the court will consider firstly the explanation for the failure to include the information sought to be admitted now, at an earlier stage. The applicant’s reason for failing to include the information sought to be introduced now is attributable to its erstwhile legal practitioners conduct and attitude. The blame is laid squarely on the shoulders of its former legal practitioners who ostensibly refused to include that information in the opposing affidavit. This affirmation is not supported on the papers. The applicant’s former lawyer is the only and best person who can best inform the court in detail, the circumstances under which the information disputed was omitted and his reasons for doing so. The applicant has failed to file a supporting affidavit from its former lawyer who prepared the opposition papers giving a chronology of his involvement in this matter and the reasons why he refused to set out the applicant’s full defence. This failure presents a difficulty to the applicant’s case. Ultimately, there is no comprehensive and inclusive explanation for the omission of this information. There is no suggestion that the legal practitioner refused to depose to a supporting affidavit. There is a plethora of cases where it was decided that in any case where a party seeks to redress or explain a procedural omission, irregularity or wrongful conduct which he attributes to the conduct of his legal practitioner, it is imperative to outline fully that position in its papers. The best way to achieve this is to request such legal practitioner to depose to a supporting affidavit outlining the role that he or she played in that matter. The court is not satisfied that the applicant has advanced a full and satisfactory explanation for the failure to include this information in its opposing affidavit.

The court has also considered that the applicant took from 2006 when it entered into the agreement of sale to May 2011 when the further affidavit and chamber application were filed to remedy the situation and set the record clear. The opposing affidavit in the main matter was filed on 24 February 2011 and the supplementary affidavit on 9 May 2011.Thereis no explanation why this information was not brought to the attention of the court much earlier. Even after the applicant supposedly had disagreement with its former legal practitioners over the inclusion of the new detail in the opposing affidavit, it took more than two months to file the supplementary affidavit. The applicant’s failure to file the supplementary affidavit on time is not acceptable. This analysis shows that the applicant is not serious as well as bona fide when it claims that the agreement is not what it appears to be and that they now want to set the record straight.

There are two agreements at the centre of this dispute. The parties entered into a written agreement of sale on 17 October 2006, for a fixed amount payable in instalments .The agreement provides that applicant would lease back the property sold. Although the agreement of sale was signed on this date, the agreement discloses that the purchase price had earlier been agreed to, on 25 August 2005 when the parties signed a memorandum of understanding for the purchase of the property in issue. The lease back agreement entitles the applicant to remain in the premises whilst the applicant leases the property and the seller has the right of first refusal to purchase the property should the buyer decide to sell the property.

A close look at the Agreement of Sale reveals that it refers to a “loan” in  paragraph 3 as  follows;-

“AND FURTHER WHEREAS The purchaser has in terms of the written Memorandum of Understanding advanced to the seller a loan in the amount of $ 17000000 000.00 The said amount being paid as follows……”

The contract further stipulates that the $ 17 000 000 000.00 referred to in the recitals shall be appropriated by the seller in payment of the purchase price. The memorandum of association filed on record is silent on the issue of the loan. If there is another memorandum of association, it does not form part of the record. The issue of a loan agreement is not captured anywhere else. The reference to a loan was explained by the respondents in their submissions. The respondents submitted that whilst the applicant asserts that the relationship started as a loan, the applicant fails to tell the court that it received the money as a loan but instead of paying the money back, it would use it as the purchase price of the property. This position is supported in the purchase clause which provides that the money loaned to the applicant shall be appropriated by the seller as the purchase price.

The facts sought to be introduced at this stage are facts that were available to the applicant at the time the dispute erupted and when the opposing affidavit was deposed to. This information did not come to the applicant’s attention after the opposing affidavit had been deposed to. The averments sought to be introduced are therefore not new facts. In the opposed application, the respondents claimed transfer of the property in issue on the basis of a contract of sale. If the further affidavit is admitted, the respondent will be required to deal with a new set of facts based on the claim that the agreement was a loan disguised as a sale. It will be required to defend its position and these calls for it to answer the averments which could have been outlined in the opposing affidavit. The applicant omitted to include this information as part of its opposing affidavit and no satisfactory explanation has been given for this omission. No exceptional circumstances have been advanced to justify the filing of the further affidavit.

The averments in the further affidavit sought to be introduced contradict the terms of the written contract. It seeks to add additional information by seeking to introduce information to the effect that the sale was disguised as a sale. The applicant is in breach of the parole evidence rule. There is no justification for admitting this affidavit in order to further examine whether this arrangement was a sale or a loan as the agreement speaks for itself. Reference to the loan is explained in the purchase clause. The applicant has resorted to trickery to change the terms of this sale by seeking to introduce new averments through the supplementary affidavit.  The agreement of sale should be confined to the four corners of the agreement of sale.

The respondent admits in its opposing affidavit that it bought the property from the respondent and agreed to transfer it into the respondent’s name. These indications amount to admissions of the respondent’s averments that the first respondent bought the property from it and that the applicant agreed to be bound by the terms of the Agreement of Sale. The applicant argues that the further affidavit will not have the effect of withdrawing admissions made.  The applicant seeks to introduce evidence by way of a supplementary affidavit to the effect that this arrangement was never a sale. The supplementary affidavit supposedly paints a completely different picture of the transaction. The applicant has not followed the correct procedure outlined in rule 189 which provides for the withdrawal of the admissions it made. No formal application for the withdrawal of admissions was made. There is no doubt in my mind that once the supplementary affidavit is admitted, the applicant will effectively be saying ,yes we made the admissions but that, that is not  a correct reflection of the transaction as it was a loan agreement. The admissions earlier made are therefore being challenged and will fall away on the filing of the further affidavit. The applicant has not laid a basis for the filing of a further affidavit that has the effect of withdrawing admissions earlier made. In Northern Mounted Rifles v O’Callaghan 1909 TS 174, the court in dealing with an amendment that had the effect of withdrawing admissions earlier made, held that an admission can only be withdrawn if it has been made in error and secondly if it arises out of a clerical error or misunderstanding by the client’s lawyer of what the client is prepared to admit. In addition it must be a bona fide application to submit a supplementary affidavit.

It is this court’s view that allowing the applicants to file a supplementary affidavit would amount to withdrawing the admissions without leave of the court. See Cobra & The Wild Cat (Pvt)Ltd v Tundu Distributors (Pvt)Ltd 1990 (1)ZLR133 (H), and Diocesan Trustees For the Diocese of Harare v The Church of Central Africa SC-9-10.The applicant does not claim that the admissions were made in error. Unfortunately, in the absence of a supporting affidavit by the applicant’s erstwhile legal practitioners explaining the role it played, the court is not satisfied that a full and reasonable explanation has been proffered for the withdrawal of the admissions.

It is this court’s view that the applicant is not bona fide when it says that this transaction was not a sale but rather a loan disguised as a sale. It failed to assert its rights timeously and has failed to avail to the court sufficient information to enable the court to make a decision. The suggestions of a loan, raised now are clearly an afterthought. Besides not being serious, this opposition is suggestive of a malice and bad faith on the part of the applicant.

In the circumstances, I am unable to find the existence of special circumstances justifying the granting of leave to file a further affidavit. There is no basis upon which I should receive a further affidavit and I decline to do so. The court has already found that the applicant’s explanation is not satisfactory.

There is no doubt that the respondent will suffer an injustice if this affidavit is admitted at this stage. The court is of the view that the admission or filing of the affidavit would clearly prejudice the applicant which relied on these admissions in the main matter as it will not be able to maintain its position on the merits. The respondent will be placed in a worse position if the affidavit is admitted than he would have been had the pleading in its amended form, been filed in the first instance, see DD Transport (Pvt) Ltd v Abbot (supra) for the proposition. Once this happens the matter will change its course. The main matter will have a completely different outlook as the applicant is raising a defence as opposed to admissions it made in the opposing affidavit. The cause of action will fall away. If the further affidavit is allowed, this signals the end of the matter. The new averments sought to be admitted disposes of the respondent’s claim to the property. This prejudicial outcome cannot be cured or compensated by a special order award of costs.

The application for leave to admit a further affidavit is refused.

Costs follow the event. The respondent asked for costs on a higher scale. I have decided that the applicant should pay the respondent’s costs on an attorney – client scale. The court does not take lightly the conduct of the applicant in this matter. The information in the further affidavit could have been included at an earlier stage without causing unnecessary costs to the respondent by having to defend this matter. The respondent has had to incur unnecessary costs to defend this application. The applicant was sloppy in the manner in which it handled this matter. The court must express its displeasure at such conduct by awarding costs at a higher scale.

Gill, Godlonton & Gerrans, Applicant’s legal practitioners

Magwaliba & Kwirira, First respondent’s legal practitioners