National Social Security Authority v City of Mutare

### Preamble
1
HH 495-18
HC 8044/14
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NATIONAL SOCIAL SECURITY AUTHORITY

versus

CITY OF MUTARE

HIGH COURT OF ZIMBABWE

CHIKOWERO J

HARARE, 9 , 10 and 16 July and 22 August 2018

Trial

J.R Tsivama, for the plaintiff

J. Zviuya with T.G Mukwindidza, for the defendant

CHIKOWERO J: I will refer to the parties as “NSSA” and “Council” respectively.

The facts of this matter are set out in my judgment in HH 385/18 wherein I disposed of Council’s defence of prescription.

For convenience, I will briefly summarise the facts. They are to a large extent common cause.

In April 2002 and at Mutare the parties entered into two separate written agreements of sale.

The provisions of the agreements were identical.

The major difference was that the first agreement was in respect of the sale of 950 residential stands in Fernhill, Mutare whereas the second had the sale of 5458 residential stands in Gimboki South, Mutare, as the subject matter.

The other difference was in the quantum of the purchase prices payable.

The purchase prices were paid in full, on the date each agreement was entered into and signed.

Clause 18 of both agreements reads:

“18 Period of Development

The purchaser undertakes to commence developing and servicing the stands within 12 months of signing this agreement.

Such development shall be completed within 36 months of signing this agreement.”

Clause 19, in relevant part, provided as follows:

“19 Breaches

Should the purchaser breach any of the terms of this agreement the seller shall on giving the purchaser two weeks notice be entitled in addition to claiming damages to cancel this agreement and retain 10% of the purchase price paid by the purchaser for administrative costs and repossess the land provided that the seller may on good cause shown exercise its discretion to extend the period of development or condone such breach. In the event of any such condonation for it to be valid it shall have to be in writing and duly signed by an authorised council official in terms of this agreement.

…

Should the seller breach or fail to meet its obligations in terms of this Agreement the purchaser shall be entitled to:

Refund of any monies paid by it towards the purchase price together with interest at the prevailing commercial bank rate.”

Further, clause 24 is the “whole agreement” provision. It states thus:

“This agreement constitutes the entire agreement between the parties …. and no alteration or amendment shall be of any force or effect unless reduced to writing and signed by both parties.”

Clause 32 is also material. It was couched this way:

“32 Provision of Water and Sewerage Points

The seller shall provide adequate connection points for water and sewerage outside the stand boundary and the Purchaser shall met (sic) the connection expense provided. Council shall have at its expense brought the water and sewerage connection points within the boundary of the land sold.”

On 8 and 14 March 2007 Council wrote to NSSA cancelling the agreements of

sale in respect of the Gimboki South and Fernhill stands respectively.

The letters of cancellation are identical.

Relevant provisions of both letters read:

“2.	The Committee (Executive Committee for City of Mutare) noted the following points

from the agreements,

….

In terms of clause 18 (a) the parties agreed that development and servicing of the stands would commence within 12 months calculated from  … To date, development and servicing of the stands has not even commenced.

The parties agreed that development and servicing of the stands would be completed within 36 months calculated from …. To date development and servicing of the stands has not even started.

In terms of clause 32 of the agreement City of Mutare, was supposed to provide off-site infrastructure for water and sewerage reticulation. To date no such off-site infrastructure has been provided.

The Committee noted that City of Mutare has no capacity financially to provide such off-site infrastructure and has lacked such capacity since entering into the sale agreements (sic) on … The incapacity in turn disables NSSA from fulfilling clauses 18(a) and (b) of the agreement.

(3)	The Committee resolved that the sale agreement was void for vagueness because:

The amount and other terms of the performance bond mentioned in clause 22 of the agreement were not agreed on yet the agreement makes the issue of the performance bond a sine qua non for the validity of the agreement.

The parties did not agree on the time frame within which City of Mutare should perform its obligation under clause 32.

(4)	The Committee further resolved that assuming that the agreement was validly entered into, City of Mutare cannot fulfill its obligations under clause 32 of the agreement because it lacks the financial capacity to fulfil its obligations under the clause and has lacked the capacity since the time it entered into the agreement.

(5)	For the reasons stated in paragraph 3 and 4 above, City of Mutare hereby cancels the agreement.”

Each cancellation letter was concluded by paragraph 6. In respect of the Gimboki

South Stands, it reads:

“6. Enclosed find a cheque for refund of the purchase price of $27 444-44 (revalued) you paid.”

As for the Fernhill stands, the same clause made reference to an enclosed cheque for refund of the purchase price of $72 176-25 (revalued).

Separate letters were addressed to Council by NSSA. The letters were similar. They contested the cancellation of the agreements.

In relevant part, each letter read:

“Please be advised that the Authority does not accept the position that you have taken.

We therefore consider your cancellation of agreement as null and void, in view of the fact that you are responsible for providing the off-site infrastructure first before NSSA services the area…

You should therefore consider the agreement as still existing.”

In relation to Fernhill, NSSA prays among other remedies, for an order declaring that

the agreement for the sale and development of those 950 residential stands still validly subsists.

Put differently, it seeks a declator to that effect.

For me to grant such an order I will first have to make a finding, in favour of NSSA, that the cancellation of the agreement of sale in respect of the Fernhill stands was unlawful.

As for Gimboki South, the following relief is prayed for:

“Plaintiff claims against defendant:-

An order declaring that the defendant’s purported cancellation of the agreement between plaintiff and defendant for the sale of 5458 residential stands was wrongful and unlawful,

That defendant be ordered to replace the 5458 Gimboki South residential stands with an equal number of stands in Gimboki North on the same terms and conditions of the agreement of sale. Annexure “A” approximately adjusted Alternatively;

That defendant pay (sic) plaintiff the current value of the undeveloped 5458 Gimboki South residential stands as determined at the date of judgment.”

Costs of suit are sought relative to both matters, on the higher scale.

It is clear that cancellation of both agreements was unlawful.

Council cancelled both agreements on the basis of its own failure to put up offsite infrastructure.

It is only an innocent party who is allowed by law, on breach of a material contractual provision by the other party, to elect, within a reasonable period, whether to terminate or abide by the contract: Guardian Security Services (Pvt) Ltd v Zimbabwe Broadcasting Corporation 2002 (1) ZLR (S) 1.

Council’s averments both in the pleadings and attempt in evidence to show that NSSA breached the agreements were misplaced.

This is so because council’s own letters of cancellation clearly gave out the reason for the cancellation as its own failure to put up offsite infrastructure.

Such failure, that is breach, disabled NSSA from developing the stands. I accepted Joyline Murekachiro’s evidence in this regard. It is in sync with council’s own position as spelt out in the cancellation letters. Richard Simbi, the defendant’s second witness confirmed that the practice is for offsite infrastructure to precede on-site infrastructure in carrying out development. That practice was acknowledged by the parties and made a contractual provision in the form of clause 32.

Joyline is a holder of a first Degree in Rural and Urban Development and a Master’s Degree in Valuation and Survey. She gave her evidence well and I had no reason to disbelieve her. She was NSSA’s second witness.

The cancellation of both agreements was also unlawful on another ground. It is this. If NSSA were in breach Council was required to give the former two weeks’ notice to remedy such breach before it could cancel the agreements.

This is what is provided for in Clause 19 (a) of both agreements of sale.

In his written submissions, the plaintiff’s counsel has referred me to the case of Minister of Public Construction v ZESCOU (Pvt) Ltd 1989 (2) ZLR 311 (S) where KORSAH JA had this to say at p 316:

“…..but where parties to a contract have agreed upon procedures for terminating an 	agreement, they are bound by the provisions spelling out those procedures as if they had been 	imposed upon them by law and a departure from the agreement procedures will not result in 	an effective termination of the contract….”

Clause 19 (a) does not require any interpretation. All it needs is perusal. A reading of that clause shows that the cancellation procedure spelt out therein was not complied with by Council.

Accordingly, on the basis of the dicta of Korsah JA in Minister of Public Construction v ZESCOU (supra) I am fortified in finding that the cancellation of the agreements of sale was unlawful.

It was common cause that the rights and interest in the 950 Fernwood stands which were sold to NSSA in April 2002 are still available. They have not been resold to anyinnocent third party.

In the exercise of my discretion I pronounce the legal position in respect of the agreement of sale vis-à-vis the 950 Fernwood stands. That agreement of sale validly exists.

It is settled law that the innocent party may elect to demand specific performance, subject to the discretion of the Court: RH Christie Business Law in Zimbabwe Juta and Company, Ltd 1998 at p 121.

Specific performance is not impossible to comply with in this matter.

All that is required is for Council to mobilise the necessary financial resources to put up the offsite infrastructure.

This agreement was entered into in April 2002. Council has had in excess of sixteen (16) years to procure the necessary funds.

I will therefore order council to put up the offsite infrastructure for the 950 Fernwood stands, but will afford it ninety (90) days from the date of this judgment within which to do so failing which NSSA may put up such offsite infrastructure but recover the costs thereof from council. Such costs will be part of the costs of this suit.

Slightly different considerations apply to Gimboki South.

The agreement of sale was in that case also unlawfully cancelled.

But the rights and interests in the 5458 residential stands were resold to an innocent third parties.

Houses have been put up thereon.

Specific performance is no longer appropriate.

The rights and interest in those stands had been sold to NSSA in April 2002. They had been sold at intrinsic value.

The defendant’s two witnesses explained what intrinsic land value is. It is the value of undeveloped land as resolved, in casu, by Council. The value is informed by government policy to afford housing to the people. No profit motive is involved in arriving at the intrinsic value of land.

Intrinsic land value is therefore not the same as market value. It is actually below market value.

In my view, NSSA sought to prove the market value of the Gimboki South stands as at 18 May 2018 and 1 April 2017. The values were put at US$9 443 200 and $ZW$28 500 000 000-00 respectively.

On the other hand, Councils testimony was that the current intrinsic value of both high and low density stands in Mutare is US$3-20 per square metre.

Council’s two witnesses corroborated each other in this regard. Their viva voce evidence was in line with exhibits 9 and 10. Exhibits 9 and 10 are a letter and Memorandum from Council respectively. Both speak to the current intrinsic land value in Mutare as US$3-20 per square metre.

I pause to remark that the purported refund of the purchase price paid in respect of both agreements is for the purposes of this judgement immaterial.

It is foreign to the provisions of the two agreements of sale.

It was also specifically rejected by NSSA in the two letters wherein it contested cancellation of the agreements of sale.

NSSA is not obliged to accept “compensation” which would result in a monetary loss due to hyperinflation: Mutangadura v TS Timber Building Supplies 2009 (2) 424 (H) 424 (H).

The following was said in Mutangadura (supra) at p 430 in respect of the measure of contractual damages:

…..“it cannot be disputed that the plaintiff’s entitlement to damages must entail him 	being placed in the position he would have been in but for the defendant’s breach of 	contract. The plaintiff’s unchallenging evidence was that, in order to complete his 	building project, he borrowed the requisite cement and presently remains obliged to 	replace the borrowed cement.

More particularly, he rejected the defendant’s offer to refund the purchase price 	original	ly paid specifically because the amount tendered would not have placed him in the position he was in at the time that the contract was concluded due to the 	hyperinflationary economic environment that prevailed at the time. No evidence was 	adduced on behalf of the defendant to counter the plaintiff’s testimony in the above 	respects.”

If council had not breached the Gimboki South agreement of sale NSSA’s position

would not be possession in its portfolio of equal stands to the intrinsic land value of 5458 Gimboki South stands either in April 2002, 2007 (when the agreement was cancelled) or the current intrinsic land value of such stands given by council as US$3.20 per square metre.

Instead, its position would be possession in its portfolio of the current market value of 5458 Gimboki South stands.

The only current market value of unserviced Gimboki South stands on record is that given by NSSA. Expert evidence put it at US$9443 200-00.

No competing current market value was adduced in evidence by council.

No expert evidence was led by council to contradict the current market value as given by NSSA.

I am unable to order that council avails to NSSA comparable stands in Gimboki North. I have two reasons for this. Courts cannot order litigants to enter into contracts. Secondly, even if the whole agreement clause were of any assistance, the contract of which that clause is a provision is no longer capable of being altered because the contract itself no longer exists.

Although unlawfully cancelled, its subject matter has been disposed of. That was the final nail on the coffin of that contract.

I do not believe it appropriate to comment on what council may do in the event that it is minded to recoup, if it could, the then United States dollar equivalent of the “refund” that it may have paid to NSSA. That is not an issue which is before me.

In the result, I make this order:

The agreement of sale and development entered into between the parties on 9 April 2002 at Mutare in respect of the unsurveyed, undeveloped and unserviced piece of land being a portion of the remainder of Fernhill, Mutare District, as shown on the layout plan number 1/B/235, consisting of 950 stands measuring on average approximately 1.500 square metres still validly exists.

Defendant shall within the next ninety (90) days provide the offsite infrastructure to enable plaintiff to service and develop the residential stands referred to in clause (1) above failing which the plaintiff may do so in which event the costs incurred by plaintiff in so doing shall be part of the costs of this suit.

Defendant’s cancellation of the agreement of sale and development entered into between the parties on 9 April 2002 at Mutare in respect of unsurveyed, undeveloped and unservied piece of land being a portion of the remainder of Gimboki South, Mutare District as shown on the layout plan number 1/D/282 consisting of 5458 stands be and is hereby declared unlawful.

Defendant shall pay to the plaintiff the sum of US$9 443 200.00.

Defendant shall pay the plaintiff’s costs of suit.

Sawyer & Mkushi, plaintiff’s legal practitioners

Bere Brothers, defendant’s legal practitioners