Lin Zhongmin v Goodliving Real Estate (Private) Limited & Anor

### Preamble
1
HH 1-12
HC 5405/10
---------


LIN ZHONGMIN

versus

GOODLIVING REAL ESTATE (PRIVATE) LIMITED

and

JEROME NDUBUISI OKEKE

HIGH COURT OF ZIMBABWE

MAVANGIRA J

HARARE, 4 and 5 July 2011 and 11 January 2012

Civil Trial

C W Gumiro, for the plaintiff

R  Chingwena, for the defendants

MAVANGIRA J: The plaintiff’s claim against the defendants jointly and severally, the one paying the other to be absolved, is for a refund of US$10 000-00 an amount which the plaintiff paid to the defendants as an initial deposit towards a commitment fee in the sum of $35 000-00.

In his summons and declaration the plaintiff avers that at all material times the second defendant purported to be acting for and on behalf of the first defendant. He avers that the second defendant made the following representations to him. Firstly, that the first defendant was an estate agent company with the mandate to manage the building that was under renovations at Stand 151 Mbuya Nehanda Street, Harare. In the alternative, that the first defendant had the authority to enter into a lease agreement with the plaintiff in respect of the building.

The plaintiff avers that he was induced by the said representations to enter into a verbal memorandum of understanding in terms of which the parties agreed on the following. Firstly, that upon completion of renovations the parties would enter into a lease agreement in respect of the property. Secondly, that in the meantime the plaintiff was to pay to the defendants a deposit of US$35 000-00 as a commitment fee.

The plaintiff further avers that he paid to the second defendant the sum of US$10 000-00 as an initial deposit towards the commitment fee of US$35 000-00. He avers that before paying the outstanding balance of US$25 000-00 to the defendants, he discovered that the representations made by the second defendant were false. He thus contends that he parted with his money as a result of misrepresentations made by the defendants and that the first defendant did not have the authority or the mandate to receive the money in its own capacity as it was not the owner of the building. He contends that the first defendant was unjustly enriched by the payment of the US$10 000-00 as, consequently, the parties did not eventually enter into the envisaged lease agreement for the premises at Stand 151 Mbuya Nehanda Street.

In his evidence however, the plaintiff said that the full deposit required by the defendants was US$30 000-00 and that after payment of the US$10 000-00 the balance of US$20 000-00 was to be paid upon completion of renovation of the building at the premises. The renovation was to be completed by May 2010. He said that as at the end of May the renovation of the property was not completed and therefore the balance of US$20 000-00 was thus not due and payable to the defendants.

It was also the plaintiff’s evidence that as the parties did not enter into the anticipated lease agreement because of the non-completion of the renovations at the premises, he did not get any value for the US$10 000-00 that he had paid to the defendants. He therefore informed his legal practitioners to demand a refund of the said amount. As the defendants did not pay back the US$10 000-00 pursuant to such demand, this action was instituted.

The defendants on the other hand deny making any of the misrepresentations alleged by the plaintiff. The second defendant stated in evidence that during his discussions with the plaintiff about the intended lease of a shop from the defendants, he told the plaintiff that he needed to pay US$35 000-00 as goodwill for the shop. He also told the plaintiff that the rental for the shop would be US$1 500-00 per month. The second defendant said that when the plaintiff paid the US$10 000-00 to him, he issued him with a receipt, exh 4 which reads:

“CASH RECEIPT

11th March 2010

I J.N. Okeke received the sum of $10 000-00 USD from Mr Lin Zhongmin, the sum received is non-refundable deposit for goodwill in respect of the shop.

Total amount of goodwill is $35 000-00.

Balance is $25 000-00.

Lin promised to pay another $10 000-00 after two weeks, then the balance of $15 000-00 on handing over the keys. Two years lease to be prepared on full payment of goodwill. Any default is tantamount to forfeiture. Agreed rental = $1 500-00 USD.”

The said document, exh 4, is signed by the second defendant and below his signature appear the words “On behalf of Goodliving Real Estate Pvt Ltd.” (sic). The second defendant also said that the plaintiff expressed concern as well as a need for the second defendant’s ID number and mobile phone number to be recorded. As a result exh 2 was drafted and it reads:

“11th March 2010

Given the Shop No 1 to Mr Lin Zhongmin. Lease to be prepared on completion. Corner Mbuya Nehanda and Union Avenue Harare”.

Below these words appear the following: a signature said to be that of one Sherewa, the ID number “63 – 1216213 D 63”, the name “Jerry Okeke”, the mobile number “0912 446 543” and the ID number “24 – 001179 M 24”.

The defendants in their plea contend that it was always known to the plaintiff that the second defendant transacted in the agreement, not in his personal capacity but as a representative of the first defendant and that there is therefore no basis for citing the second defendant in his personal capacity. The defendants also deny ever making any misrepresentations as to ownership of the property. They aver that the plaintiff was always aware that the transaction was being done for and on behalf of the owner who is in partnership with the first defendant. They further aver that the first defendant is a developer and has the mandate to lease the building.

The defendants also aver that it is evident from the plaintiff’s own declaration that the plaintiff breached the agreement in that he speculatively and without any basis decided not to pay up the “agreed fees” also referred to as commitment fees or goodwill. It is averred that it was a term of the agreement that the commitment fees would not be refundable if the plaintiff breached the agreement. It is contended that for this reason the plaintiff cannot now claim the repayment that he seeks before this court.

In evidence the second defendant said that the plaintiff breached the agreement in that when the offer to take occupation of the shop was extended to the plaintiff in July 2010, he refused to take it up. The defendants’ stance is therefore that the plaintiff cannot in the circumstances now claim a refund of the US$10 000-00 which they had agreed would be non- refundable.

The joint pre-trial conference minute records the issues for determination by the trial court as:

“(a) 	Whether or not the defendants are the property owners or managers of Stand 151 Mbuya Nehanda Street, Harare;

(b)	Whether or not the defendants are authorized to enter into a lease agreement with tenants in respect of Stand 151 Mbuya Nehanda Street, Harare;

(c)	Whether or not the parties herein entered into any contract and if so, what were the terms of the contract;

(d)	In the event that the answer to (c) above is in the affirmative, whether or not there was any breach of the agreement by the plaintiff and the effect thereof to these proceedings; and

(e)	Whether or not the defendants were unjustly enriched by the plaintiff in respect of the sum of US$10 000-00 paid by the plaintiff to the defendants.”

With regard to issue (a) the defendants adduced evidence in the form of a partnership agreement dated 10 January 2010, exh 8, which records that Adam & Company (Pvt) Ltd is the owner of Stand No. 1514 of 151 Mbuya Nehanda Street. The first defendant as represented by the first defendant is recorded therein as the developer of the property. There has been no challenge by the plaintiff to the authenticity of this document. I find therefore that on the basis of the evidence adduced before this court on this issue, the defendants are not the owners of the premises. The defendants are developers and in terms of clause 2 of the agreement, also the managers of the premises.

Issue (b) is answered by clause 3 of the agreement which states that the developer shall have the right to contract and lease the property either in the first defendant’s name or in the owner’s name. Issue (b) is thus answered in the affirmative.

Regarding issue (c), insofar as this issue may relate to a lease agreement, it seems clear on the evidence adduced before this court that a lease agreement was not entered into. Whilst the parties appear to have had some discussion regarding possible rentals for the property, a lease agreement was to be entered into after fulfillment of certain conditions. Even though there may appear to be controversy as to what those terms were, it is evident that the anticipated lease agreement never materialized. If the issue is not limited to a lease agreement, the evidence before the court would need to be examined to ascertain whether or not the parties entered into any agreement.

It is common cause that the plaintiff paid US$10 000-00 to the defendants. It is also common cause that this was only part payment of an agreed sum. In my view, whether the agreed sum be US$30 000-00 or US$35 000-00 is neither here nor there. Similarly, the issue of whether it was referred to as “goodwill”, or a “commitment fee” or a “deposit” is inconsequential. The question to be determined is whether it was a term of the agreement that the agreed sum, whether US$30 000-00 or US$35 000-00, which was to be paid by the plaintiff before the execution of the anticipated lease agreement would be non-refundable. The parties differ on this with the plaintiff saying that it is refundable and the defendants saying it was agreed to be non-refundable. The defendants rely on exh 4 the contents of which have already been quoted earlier.

Besides stating that the US$10 000-00 paid by the plaintiff is non-refundable, exh 4 also states that the outstanding balance of US$25 000-00 was to be liquidated by way of firstly, a payment of another US$10 000-00 in two weeks time and secondly, payment of the balance of US$15 000-00 “on handing over the keys.” It further states that a two years lease will be prepared on full payment of goodwill.

On the basis of the contents of exh 4 the plaintiff would have been in default by the end of March 2010 for non-payment of the second sum of US$10 000-00. Yet the defendants purported to cancel an agreement between them and the plaintiff by letter dated 14 July 2010, some two weeks after the letter of demand for the refund of the US$10 000-00 paid by the plaintiff. It is also significant to note that exh 4 clearly states that a two years lease agreement was to be prepared on “full payment of goodwill”, that is US$35 000-00. It is common cause that only US$10 000 was paid, yet the defendants purported, or claim to have done so, to invite the plaintiff to take up occupation of the premises in July 2010. It appears to me highly improbable that the defendants, in the face of a breach which the plaintiff would have committed by the end of March 2010, would proceed to call upon the plaintiff to take up occupation of the premises some three months later and without having first called upon the plaintiff to rectify the alleged breach by paying up the full amount of US$35 000-00. It also appears to be highly improbable that the defendants would in such circumstances call upon the plaintiff to take occupation without a lease agreement being first prepared as stated in exh 4. Furthermore, there is no indication as to the stance adopted by the defendants or any discussions that may have taken place in regard thereto regarding the plaintiff’s alleged breach, between the end of March 2010 and July when the invitation to take up occupation was then made.

Exhibit 4 also appears to be self contradictory in the respect that after stating in the first paragraph that the sum of US$10 000 is non refundable, it then goes on to state, at the end of the next paragraph that “any default is tantamount to forfeiture”. If the agreement was that the money was non refundable, it does not make sense for the parties to thereafter link any possible forfeiture of that same money to breach. If the money was non refundable, that would be the end of the matter insofar as its refundability or otherwise is concerned.

It is for the above reasons that I find the plaintiff’s claim that exh 4 is a forged document to be highly probable. I do not find the defendants’ version on this aspect to be credible. The falsity or unreliability of exh 4 also appears to be buttressed by the purported cancellations of a lease agreement in exh 7, a letter dated 14 July 2010 from the defendants’ legal practitioners to the plaintiff’s. If the lease agreement purported to be so cancelled is exh 4, then clearly exh 4 is not a lease agreement between the parties. Rather exh 4 makes reference to a lease agreement which was to be prepared at a future date or on fulfillment of certain conditions that were yet to be fulfilled.

The plaintiff and his witness, one Kudzanai Matimwa, both testified that exh(s) 1 and 2 were the only authentic documents issued to the plaintiff by the defendants. This was further confirmed by the defendants’ witness one Sherewa. Exhibit 2 has already been quoted earlier in this judgment. Exhibit 1 reads:

“11 March 2010

I Jerry Okekehas given (sic) Shop No 1 Mbuya Nehanda to Mr Lin Zhongmin. Paid US10 000-00 for deposite (sic). They will be paid the balance when we fish (sic) (finish?) 20. 000-00. ID 24 – 001179 M 24”

After these words appear what purports to be a signature by Sherewa and thereafter the word “witness” as well as what appears to be a signature.

The above quoted contents of exh 1 cover about eight lines at the top of the page. At the bottom of the page are some markings or writings which the plaintiff stated to have been written by him in his native Chinese language.

Neither exh 1 nor exh 2 make any reference to the non-refundability or otherwise of the US$10 000-00 acknowledged to have been paid by the plaintiff. This tends to lend credence to the plaintiff’s claim that there was no discussion or agreement that the said sum was non- refundable. I also find in favour of the plaintiff in this regard, for reasons also discussed above.

I also find in favour of the plaintiff with regard to his evidence that it was agreed that the renovations of the premises would be completed by the end of May 2010. The defendants’ denial of this term of the agreement appears to be devoid of merit. This is so because in their letter dated 8 July 2011 the defendants’ legal practitioners stated to the plaintiff’s legal practitioners inter alia:

“May your client rectify the breach and honour up to the agreed terms. Further your client owes our client rentals for the months of June to July 2010 each month at the rate of USD1 500-00 to give a total of USD3 000-00 plus the remaining goodwill deposit balance of USD25 000-00 and other miscellaneous charges” (emphasis added).

If the offer for the plaintiff to take occupation of the premises was made in July, there is no explanation why the plaintiff is in the said letter said to owe rentals also for the month of June 2010. A demand for rentals for the month of June would make sense if renovations had been completed by the end of May which is what the plaintiff claims to have been the agreement yet the defendants dispute it. This inconsistency in the defendants’ version is also to be found in another statement made in the same letter, viz:

“It is not correct that certain discussions were made on the 11th March 2010 rather your client and our client entered into a lease agreement that required payment of a goodwill deposit of USD35 000-00 and was to be reduced in writing after payment of the agreed deposit amount.” (sic)

What the evidence placed before this court shows is that the parties were desirous of entering into a lease agreement upon fulfillment of certain conditions. Furthermore that the parties had preliminary discussions regarding the premises to be leased; exh 1 refers to Shop No 1 Mbuya Nehanda. The plaintiff’s evidence also confirmed that the parties discussed the likely rentals per month. However, the exact months to constitute the two year period that was to be covered by the lease agreement do not appear to have been agreed upon. Presumably, all the other relevant and essential terms of the lease agreement, besides the premises to be leased and the exact period of the duration of the lease agreement, would be discussed and agreed once the conditions precedent had been met. In the circumstances, any alleged breach by the plaintiff insofar as the allegation is that he breached a lease agreement, is in my view not supported by the evidence. It has not been shown that the plaintiff breached the agreement regarding the payment by him of the agreed sum and if the plaintiff was in breach as alleged, the defendants by their conduct appear to have decided to waive any rights they may have had.

On the evidence adduced before this court I find that there was no agreement that the US$10 000-00 was non-refundable. It follows therefore that as the anticipated lease agreement did not materialise and as this was due to the defendants’ failure to complete renovations by the end of May 2010 as agreed, the plaintiff did not receive any value for his money and the defendants have no justification for refusing to refund it. For these reasons I am in agreement with the plaintiff’s contention that the defendants have been unjustly enriched by the US$10 000-00 paid to them in the circumstances discussed above. Issues (d) and (e) are thus hereby determined.

The plaintiff’s legal practitioners aptly cited the case of Goncalvesv Rodrigues 2004 (1) ZLR 122 (H) at 136 in which the requisites for liability in an action based on unjust enrichment were stated to be:

“(a)	 the defendant must be enriched;

(b) 	the plaintiff must have been impoverished by the enrichment of the defendant;

(c)	the enrichment must be unjustified;

(d)	the enrichment should not come within the scope of one of the classical enrichment actions; and

(e)	there must be no positive rule of law which refused an action to the impoverished person. See also Kommissaris van BinnelandseInkomste en ‘n Ander v Willers ‘en Andere1994 (3) SA 283 (A)”

On the basis of the discussion herein, the matter in casuis one in which the doctrine of unjust enrichment would properly be applied. The defendants were enriched by the US$10 000-00 which was paid to them by the plaintiff. The plaintiff parted with his money for no corresponding value from the defendants as the lease agreement did not materialise for reasons not attributable to the plaintiff. The enrichment was thus unjustified. No contention has been made that any of the listed requirements is not met. The second defendant stated that the tenant who eventually leased the premises paid an amount of US$20 000-00 as “goodwill”. I am in agreement with the plaintiff’s legal practitioners’ submission that the mere fact that the defendants were not paid an amount of US$35 000-00 as goodwill by the sitting tenant does not detract from the validity of the plaintiff’s claim against the defendants.

For the above reasons, the plaintiff’s claim must succeed. Costs will follow the cause. I do not however find it necessary to grant an award of costs on the higher scale as claimed by the plaintiff. Costs will be awarded on the ordinary scale.

In the result it is ordered as follows:

The defendants shall jointly and severally, the one paying the other to be absolved:

Pay the plaintiff the sum of US$10 000-00.

Pay interest thereon at the prescribed rate calculated from date of demand to date of payment in full.

Pay the plaintiff’s costs of suit.

Musarira Law Chambers, plaintiff’s legal practitioners

Mtombeni, Mkwesha, Mzawazi& Associates, defendants’ legal practitioners