Michael Maposa v CFX Bank (Private) Limited

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                                                                HC 1964/09
MICHAEL MAPOSA
versus
CFX BANK (PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE
PATEL J

Civil Trial

HARARE, 19 to 26 October 2010 and 11 January 2011

T. Mpofu, for the plaintiff
A. Chinake, for the defendant



       PATEL J:     The plaintiff herein claims damages in the sum of

US$50,000 representing the market value of a house that the defendant

had sold to the plaintiff as well as a third party. The defendant pleads

that the agreement relied upon by the plaintiff is not legally enforceable.

       The issues for determination in this matter are as follows: whether

the agreement between the parties is legally enforceable and has been

breached by the defendant; if so, whether the defendant is liable to the

plaintiff in contractual damages; and, if so, the quantum of such

damages.


Evidence for the Plaintiff

       Michael Maposa, the plaintiff, testified as follows. He was

employed by the defendant as its Branch Manager in Zvishavane until he

was retrenched in 2006. He first took occupation of the CFX house in

March 2004. On the 7 th of July 2006, he received a letter from CFX offering

to sell him the house for ZW$7 billion. He accepted the offer within the

stipulated period of 7 days and, after paying for the house on the 27 th of

July, he signed an agreement of sale with the defendant on the 28 th of

July. The defendant then instructed a conveyancer to effect transfer and a
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rates clearance certificate was duly issued by the Zvishavane Town

Council. However, on the 18 th and 24th of August 2006, the defendant and

its lawyers wrote two separate letters cancelling the agreement of sale

on the ground that the property had already been sold to and paid for by

the POSB before the plaintiff had accepted the offer to purchase.

        The prior letter of offer from the defendant to the POSB, dated the

20th of June 2006, was signed by the same person who had signed his

offer letter. Again, the agreement of sale between the POSB and the

defendant, concluded on the 30 th of June 2006, was signed by the

defendant’s Managing Director, as was the agreement of sale with the

plaintiff.

        The defendant then issued a cheque for ZW$8 million on the 25 th of

August 2006. The letter of the 24 th of August 2006 from the defendant’s

lawyers, which was sent to his Harare address, stated that the cheque

was attached to the letter. However, it was not so attached and he only

received the cheque on the 30 th of October 2006, when it was delivered at

the Zvishavane house through a Swift Express transfer. He did not accept

the cheque because it had lost its value.

        On the 1st of November 2006, he applied to enforce transfer to

himself in Case No. HC 6890/06. The application was dismissed because

of the law governing double sales, but the Court noted that it was open

to him to claim damages from the defendant. He now seeks contractual

damages equivalent to the value of the property in Zvishavane (i.e.

US$50,000) based on two valuations obtained in March and October

2010.

        Under cross-examination, the plaintiff accepted that he did not

submit the details of his bank account as requested by the defendant in

its letter of the 18th of August. This was because the letter was sent to the
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Zvishavane house and he only received it on the 30 th of August. He also

accepted that he received the letter of the 24 th of August from the

defendant’s lawyers served through the Deputy Sheriff on the 28 th of

August. However, he did not pursue the non-enclosure of the defendant’s

cheque either with its lawyers or the Deputy Sheriff. Moreover, his

lawyers wrote to the defendant’s lawyers on the 30 th of August rejecting

the refund, but not making any mention of the cheque not having been

attached. He then explained that the cheque was returned in the first

week of November 2006, but was unable to produce the covering letter

accompanying the cheque. He conceded that if the refund together with

interest as reflected on the cheque had been timeously paid, the

defendant would have discharged its obligation under the agreement of

sale. He also conceded that he kept full possession and control of the

house in question from March 2004 to January 2010 and that neither the

defendant nor the POSB have been able to utilise it during that period.

Lastly, when he was shown a third valuation for US$40,000 that he

himself had obtained in July 2010, he was unable to explain the disparity

between that amount and the sum of US$50,000 that he was now

claiming.



Evidence for the Defendant

      Patricial Tsitsi Ndoro joined the defendant in 1999 and has been its

Company Secretary and Legal Adviser since 2006. She was previously a

magistrate for 9 years. In June 2006, the defendant sold its Zvishavane

branch to the POSB together with the house. After discovering the

double sale, she promptly wrote to the plaintiff on the 18 th of August

cancelling the sale to the plaintiff. She further indicated that there was no

option but to refund the purchase price with interest, in terms of clause
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9(d) of the agreement of sale. She also referred the matter to the

defendant’s lawyers and computed the amount of the refund with

interest at the best prevailing CFX investment rate. A cheque for ZW$8

million (revalued) was then drawn and sent to the lawyers, who in turn

wrote to the plaintiff on the 24 th of August tendering that cheque. The

letter was received by the Deputy Sheriff on the 28 th of August and served

on the plaintiff’s gardener at his Harare address on the 29 th of August.

The refund was rejected by the plaintiff’s lawyers in their letter of the 30 th

of August, but without any mention of the cheque. The original cheque

was never returned to the defendant.

      The plaintiff has his own residence in Harare but did not surrender

the Zvishavane house until the beginning of 2010. The defendant paid

out ZW$167,000 (revalued) in September 2006 to the POSB for lodge

expenses incurred by the latter in respect of its Branch Manager in

Zvishavane. A letter from the plaintiff’s lawyers to the POSB in March

2007 shows that the plaintiff’s relative was staying at the house at that

time. According to this witness, the value of the refund with interest

(exceeding 100% per annum) that was tendered to the plaintiff equated

to the sum paid by the defendant to purchase the property.

      Under cross-examination, she accepted that the double sale in casu

was entirely the defendant’s fault and that it exposed itself to a claim for

damages. She also accepted that the plaintiff himself did not demand any

refund. However, the defendant decided that the best remedy was to

tender a refund with interest as specific performance was not possible.

The plaintiff was adamant on enforcement and did not give any

alternative for settling the matter.

      As regards the Swift Express transfer note, this was originally

dated the 25th of August 2006. On the face of it, the defendant’s lawyers
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sent one parcel, comprising inter-company documents, to the plaintiff at

the house in Zvishavane, and this was received on the 30 th of October

2006. The witness could not say what was contained in the parcel or why

its delivery took over two months. At that time, the plaintiff had two

claims against the defendant, one for the house and the other in respect

of a motor vehicle. The latter was commenced before the former and the

defendant had engaged the same law firm to deal with both claims. It

was possible that the Swift Express transfer note related to the plaintiff’s

motor vehicle claim.


Findings

      The defendant sold the property in question to the POSB in June

2006 and duly received payment of the purchase price. In July 2006, the

same property was erroneously offered and sold to the plaintiff. He paid

ZW$7 billion for it and signed the agreement of sale in the same month.

The error in concluding the double sale was grossly unreasonable and

entirely attributable to the defendant.

      As soon as the error was discovered, in August 2006, the

defendant wrote to the plaintiff, cancelling the agreement of sale and

offering a refund of the purchase price with interest. The plaintiff

immediately rejected the refund and applied for specific performance in

November 2006 under Case No. HC 6890/06. That application was

dismissed in September 2008 and the plaintiff then instituted the present

action in March 2010.

      The above facts are common cause and do not warrant any further

analysis. What is fundamentally in dispute is the actual date when the

plaintiff received the refund. The defendant asserts that the refund

cheque was attached to their lawyers’ letter of the 24 th of August and was

served through the Deputy Sheriff on the plaintiff at his Harare address
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on the 29th of August. The plaintiff admits having received the letter but

denies that the cheque was attached to the letter. He maintains that the

cheque was only delivered to him at the Zvishavane house on the 30 th of

October by way of a Swift Express transfer.

      The defendant’s version bears two difficulties. The first is that the

refund cheque is dated the 25 th of August, but their lawyers’ letter is

dated the 24th of August. The second is that the Deputy Sheriff’s return of

service refers to a letter and does not expressly refer to any cheque. The

first difficulty is explicable on the basis that the letter might have been

prepared before the cheque was drawn or that the cheque was

intentionally post-dated before it was handed to the lawyers. The second

difficulty is also explicable if it is accepted that the return of service need

not have specifically mentioned the cheque as it was attached to the

letter and was to be simultaneously delivered. It is hard to imagine that

the defendant’s lawyers should have falsified the contents of their letter

and deliberately weakened their client’s position by not attaching the

cheque to the letter in circumstances where a prompt tender of the

refund was essential.

      On the other hand, the plaintiff’s version is fraught with greater

difficulties. These stem primarily from the contents of his lawyers’ letter

of the 30th of August, in response to the defendant’s lawyers. The

pertinent paragraph reads as follows:

             “We are also in possession of a letter from yourselves
      purportedly cancelling the sale. We have read the contents therein.
      We would like to advise that our client does not accept the refund
      and is not giving vacant possession to anyone and awaits any legal
      proceedings intended.” (The emphasis is mine).

      Firstly, it is extremely strange that the plaintiff’s lawyers, having

read the contents of the letter and its explicit indication of the cheque
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having been attached, should make no mention whatsoever of the fact

that the cheque was not attached, if that indeed was the case. Secondly,

the words underlined demonstrate that the refund, i.e. the cheque, had

in fact been received but was not accepted by the plaintiff. As for the

Swift transfer, there is no clear indication of what was contained in the

parcel delivered to the plaintiff on the 30 th of October. Having closely

observed the plaintiff’s testimony under cross-examination, I am inclined

to disbelieve his contention that he only received the cheque on that day.

      On balance, I am of the view that the probabilities favour the

defendant’s version of what transpired. I accordingly find that the

plaintiff received the refund cheque on the 29 th of August, i.e. 33 days

after he paid the purchase price for the property, and not on the 30 th of

October.


Disposition

      In light of the above findings of fact, the principal issues for

determination are whether the refund that was tendered by the

defendant was properly made and, if so, whether it was adequate in the

circumstances of the case. In this regard, I am entirely in agreement with

the position taken by Adv. Mpofu. In the case of a double sale, the

innocent buyers have different remedies. One is entitled to demand

specific performance, while the other is entitled to damages. It is trite

that a plaintiff aggrieved by a breach of contract is entitled to claim such

damages as will put him in the position that he would have been in had

the contract been properly performed by the defendant. In my view, the

submissions put forward by Mr. Chinake as to the distinction between

contractual damages and delictual damages, and the sufficiency of the

plaintiff’s pleadings in that context, are somewhat tangential and not

particularly germane to the resolution of the matter at hand.
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      It is not disputed that the defendant’s error in selling the property

twice within one month and through the same functionaries was

absurdly unreasonable. Moreover, the refund cheque was tendered

without the plaintiff’s input as to the modality and quantum of payment.

In effect, the defendant’s conduct in this respect was unilateral and not

consensual. The remedy prescribed in clause 9(d) of the agreement of

sale, in the event of the seller’s default, is contingent upon the purchaser

making the requisite demand. In the instant case, the plaintiff did not any

stage make any demand for a refund. On the other hand, looking at the

matter from the defendant’s perspective, upon becoming aware of its

error, it knew that it was in breach of its contract with the plaintiff and

that it had to take prompt remedial action. Specific performance having

been rendered impossible, and given the spectre of rampant inflation,

the only remaining option was to promptly compute and tender a refund

that would adequately compensate the plaintiff. (In this respect, neither

the plaintiff nor his counsel was able to proffer any meaningful

alternative that might have been available to the plaintiff). Consequently,

despite the fact that the defendant’s decision to refund the purchase

price was taken unilaterally, it seems to me that it acted expeditiously

and properly in the prevailing circumstances to rectify its own breach of

contract.

      Turning to the adequacy of the amount that was tendered by way

of refund, it is common cause that the defendant relied upon clause 9(d)

of the agreement of sale to calculate that amount. Applying the

prevailing 91 day interest rate offered by the defendant, the amount

tendered was a sum of ZW$7 million (revalued) together with interest

amounting to ZW$1.1 million, making a total of ZW$8.1 million. As I have

already noted, this refund was tendered 33 days after the plaintiff had
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paid the purchase price. Thus, the interest component equated to a rate

of circa 14.2% per month or 170% per annum. Given the highly volatile

nature of the money market at that time, it cannot be said that amount of

ZW$8.1 million equated precisely in value to the purchase price paid 33

days before. Nevertheless, the interest element represented an

unquestionably appreciable return on the sum originally paid by the

plaintiff. In my assessment, the global amount tendered by the

defendant would have constituted fair and reasonable (though not exact)

compensation for the contractual damages suffered by the plaintiff.

      At that stage, the plaintiff was fully aware that the property had

been previously sold to and paid for by a third party and, being legally

represented, ought to have been aware that in those circumstances a

claim for specific performance would not succeed. Instead of accepting

the refund, he elected not to do so and held on to the cheque (as is borne

out by the fact that the cheque itself was listed in the plaintiff’s schedule

of discovered documents, filed on the 15 th of June 2010) and later

instituted   an   application   for   specific   performance.   In   all   the

circumstances of the case, I take the view that the plaintiff ought to have

accepted the refund at the time when it was tendered as adequate

compensation in lieu of specific performance or contractual damages. His

failure to do so is exacerbated by the fact that he retained beneficial

possession and control of the property for over 3 years thereafter,

contrary to the rights and interests of the defendant and the prior

purchaser.

      In addition to the above conclusions, there is a further reason why

the plaintiff’s claim cannot succeed, which reason I shall deal with briefly.

It concerns the quantum of damages claimed by the defendant, i.e.

US$50,000, for which he relies upon the two valuations that he obtained
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in March and October 2010. However, there was a third valuation,

obtained in July 2010, for a much lesser amount of US$40,000. The

plaintiff was unable to justify this disparity which clearly undermines the

validity of his claim for US$50,000. Again, if one were to consider the sum

of money that the plaintiff originally paid for the property, no evidence

was lead to show that the sum of ZW$7 billion equated to US$50,000 in

July 2006, whether at the official exchange rate or at the prevailing

parallel rates of exchange. Equally significantly, the valuations that were

produced were all obtained in 2010. The plaintiff did not adduce any

evidence to compare these 2010 market values to those obtaining at the

time of the breach of contract in 2006, which is the time at which his

claim for damages must be assessed. It cannot be accepted that the

property in casu has retained the same value in the property market from

2006 to 2010. It should have been perfectly possible, as is undoubtedly

possible for the purpose of determining liability to capital gains tax, to

have obtained a valuation in US$ terms in respect of the property in 2006.

The plaintiff’s failure to do so is also fatal to his claim for damages.

      In view of all of the foregoing, it seems quite unnecessary to delve

into the broad question of currency nominalism raised by counsel in their

submissions or the correctness of the decision rendered by this Court in

Kwindima v Mvundura HH 25-2009. This is a matter that is peripheral to

the issues in this case and, as such, it does not warrant any definitive

determination for present purposes.

      It follows that the present action must be dismissed. As for costs,

although the defendant’s Plea claims costs de bonis propriis against the

plaintiff’s legal practitioner of record, there is nothing in Mr. Chinake’s

closing submissions to justify such an award of costs. In the result, the

plaintiff’s claim is dismissed with costs on the ordinary scale.
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Mutombeni, Mukwesha & Muzawazi, plaintiff’s legal practitioners
Kantor & Immerman, defendant’s legal practitioners