Rydale Ridge Park (Private) Limited v Justice Chikomwe and Marygrace Chikomwe

### Preamble
1
HH 367-21
HC 4426/20
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RYDALE RIDGE PARK (PRIVATE) LIMITED

versus

JUSTICE CHIKOMWE

and

MARYGRACE CHIKOMWE

HIGH COURT OF ZIMBABWE
MUREMBA J
HARARE, 25 June & 8 September 2021

Opposed Application

K Gama, for the applicant 
T Chagudumba, for the respondents

MUREMBA J: The applicant is seeking cancellation or confirmation of cancellation of an agreement of sale which the parties entered into on 19 January 2015. In terms of that agreement the applicant sold an immovable property known as Stand 1584 Rydale Ridge Park measuring 588 square metres to the two respondents for USD16 700.

The parties agreed that the respondents would pay an initial deposit of USD6 000 on signing the agreement and the balance of USD10 700 by way of monthly instalments of US$300. These instalments would be paid in cash directly to the applicant. It was also a term of agreement that any extension of time, indulgence or concession granted to the respondents by the applicant would not prejudice or constitute waiver of, any of the applicant’s contractual rights.

It is common cause that the respondents breached the contract by failing to pay the monthly instalments in accordance with the agreement of sale. They fell into arrears of $4 700 having paid a total of $12 000 as at 3 December 2018. By letter dated 23 April 2019 which the second respondent received on 30 April 2019, the applicant served the respondents with a notice to rectify the breach within 30 days.

On 27 May 2019 the respondents replied acknowledging receipt of the notice to rectify the breach. They were also admitting to having breached the contract and proposed to rectify the breach by paying $500 per month with effect from 27 May 2019 until they finished the debt. The applicant refused the proposal by the respondents. In a letter dated 31 October 2019 the respondents alleged that they had transferred $500 RTGS to the applicant’s bank on 29 May 2019 but were advised by someone at the applicant’s offices that the applicant would not accept a bank transfer. They made a new offer of paying $1000 RTGS by bank transfer per month until the debt was extinguished stating that cash was scarce. It is the applicant’s contention that by that time the agreement of sale had been cancelled on 12 June 2019 on the basis that the 30-day period accorded to the respondents to the rectify the breach had expired.

It is the applicant’s contention that by proposing to pay $500 per month in the letter dated 27 May 2019, the respondents showed conclusively that they were unable to rectify the breach within 30 days as required by the notice. The applicant averred that all other events that ensued after the expiration of the 30 days’ notice were a nullity as the agreement of sale had already been cancelled.

The respondents opposed the application for the following reasons. The respondents averred that the notice to rectify the breach was invalid because it demanded payment in US dollars at a time when SI 33/19 had been promulgated and had effectively made the amount being demanded RTGS dollars. They averred that the demand for payment in US dollars was illegal and contrary to the law. Mr Chagudumba for the respondents submitted that a thing done contrary to the direct prohibition of the law is void and of no effect. However, as was correctly refuted by the applicant, its notice of 23 April 2019 did not demand payment in US dollars. It only demanded payment of “all instalments due”. It reads,

“The attached account statement shows that you committed a fundamental breach of the agreement 	of sale by failing, neglecting or refusing to pay monthly instalments in accordance with the 	agreement of sale. In keeping with the law our client hereby gives you thirty days’ notice to rectify 	the breach by paying all instalments due.”

Let me hasten to point out that the account statement that was attached was not denominated in USD. Against the amount is only a dollar sign ($) without indicating whether it is USD or RTGS. There is therefore no basis for the respondents to argue that there was a demand for payment in USD. The notice was thus valid and legal.

The respondents further averred that the applicant caused the breach by refusing to accept payments through bank transfers and insisting on cash payments. Thus, the applicant frustrated the contract and made it impossible to rectify the breach. The first respondent averred that on 29 May 2019 she made payment of $500 RTGS by bank transfer. She averred that she took proof of that payment to the applicant’s offices at Globe House, but that payment was not accepted. The first respondent averred that this payment was made within the notice period and it was part payment. The first respondent further averred that she intended to pay the rest of the balance owing before 12 June 2019 which was the deadline for the 30 days’ notice. In the answering affidavit the applicant disputed that there was payment of $500.00 by bank transfer whose proof was tendered. It averred that in any case that alleged instalment payment would not have done anything to rectify the breach because it was not full payment of the arrears as was required by the notice. The applicant contended that that in any case it was entitled to demand payment in cash in terms of the contract. The applicant further averred that in terms of the respondents’ letter of 27 May 2019, the respondents had not intended to pay all the arears by 12 June 2019 as they alleged in their opposing affidavit. This is because in their letter they had proposed to pay $500 per month until they finished the debt. The letter read,

“We propose to pay $500 per month from here on i.e. (27 May 2019) until we have finished the debt”.

Clearly the foregoing shows that the respondents made an unequivocal admission of breach of contract. In terms of the contract, the parties had agreed that payment of the instalments would be in cash. So, if there was a demand for payment in cash, that demand was lawful. The doctrine of freedom of contract means that a person has the freedom to choose with whom to contract, whether or not to contract and on what terms to contract. Freedom of contract also entails freedom of the parties to vary their contract. In casu the term that the instalments would be paid in cash was not varied by the parties even when cash became scarce. It is therefore wrong for the respondents to say that by demanding payment of instalments in cash, the applicant caused them to fail to rectify the breach. The applicant was simply asking the respondents to fulfil their obligations in terms of the contract. It is a rule of law that parties to a contract freely and voluntarily entered into, must honour their obligations under it.

ON 22 February 2019 S.I 33/2019 was promulgated. It provides as follows.

“4(1) For the purposes of section 44C of the principal Act as inserted by these regulations, the Minister shall be deemed to have prescribed the following with effect from the date of promulgation of these regulations (“the effective date”)—

(a) that the Reserve Bank has, with effect from the effective date, issued an electronic currency called the RTGS Dollar;

(b) that Real Time Gross Settlement system balances expressed in the United States dollar (other than those referred to in section 44C (2) of the principal Act), immediately before the effective date, shall from the effective date be deemed to be opening balances in RTGS dollars at par with the United States dollar; and

(c) that such currency shall be legal tender within Zimbabwe from the effective date; and

(d) that, for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall on and after the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar;”

Pursuant to the promulgation of S.I 33/19, a debtor could thus pay their debt either in USD or RTGS as the rate of exchange between the USD and RTGS was 1:1. What is pertinent is that payment in USD was still lawful. With the notice having not made a specific demand for payment in US dollars, the respondents could have tendered cash payment in the local currency or in US dollar. However, it is common cause that after being served with the notice to rectify their breach, the respondents never tendered payment of the arrears of $4700.00 in either form. Mr Gama for the applicant submitted that the issue of whether payment should have been done in USD or in RTGS does not even arise because the respondents tendered neither of the two.  The respondents cannot therefore argue that they were frustrated by the applicant. The applicant was therefore correct in averring that the respondents’ failure to perform in terms of the contract and to rectify the breach was due to their own lack of funds and nothing else. Proof thereof is the averment made by the respondents that when they were given 30 days’ notice to rectify the breach, they made a bank transfer of RTGS $500.00. They also wrote a letter to the applicant making an offer to clear the outstanding amount at the rate of $500.00 per month.  Clearly the respondents did not have enough money. Even if the applicant had allowed them to pay the outstanding $4700 by way of bank transfer, they would not have been able to pay. Otherwise, why else would they make a bank transfer of RTGS $500.00 and offer to clear the balance at the rate of $500 per month instead of simply transferring the outstanding amount in full? They had been served with a notice to rectify their breach in 30 days and they knew that they needed to comply.

The other argument that the respondents advanced is that the applicant never cancelled the contract as they received no letter from the applicant demonstrating the cancellation. The applicant in its answering affidavit averred that the contract was automatically cancelled when the respondents failed to rectify the breach. I am in agreement that indeed the agreement was automatically cancelled when the respondents failed to rectify the breach. This is because the notice to rectify reads as follows.

“Kindly note that if you fail to rectify the breach as per this notice, the agreement of sale shall be automatically cancelled and you shall be served with a summons seeking confirmation of such cancellation by the court.”

With this it is clear that the applicant should be seeking confirmation of cancellation of the agreement as opposed to seeking cancellation of the agreement as reflected in its draft order. I thus asked Mr Gama why the applicant was seeking cancellation of the contract instead of confirmation of cancellation. Relying on R.H Christie, The law of Contract in SA 4th edition, he submitted that if the court finds that there was no cancellation of the contract, it can cancel it. If the court finds that there was cancellation it can confirm the cancellation. R.H Christie, The law of Contract in SA 4th edition at p 625 says that an act of cancellation may be performed by an innocent party without the assistance of the court and a subsequent court order will simply confirm the cancellation already carried out, but a claim for cancellation is normal and the desirability of having an order for cancellation so that the status of the contract is not in doubt is well recognised.

So, the court can either cancel an agreement of sale or confirm its cancellation. I believe that the appropriate order is determined by the circumstances of the case. If it is shown that the agreement was properly cancelled, the court can simply confirm its cancellation. R H Christie in Law of Contract in South Africa, 6th ed, on p 562, states that where a contract lays down procedures for cancellation of a contract, these must be followed otherwise the purported cancellation becomes ineffective.  In casu clause 7 of the agreement of sale provides that in the event of the purchaser failing to rectify a breach upon being given notice to rectify, “the seller shall be entitled to cancel this agreement without further notice.” The wording is consistent with the wording in the notice to rectify the breach. It says that in the event of the respondents failing to rectify the breach, the agreement will be automatically. It was not a term of the agreement of sale that the seller would be required to write to the respondents notifying them that the agreement had been cancelled upon the expiry of the notice to remedy the breach.  I am thus satisfied that the agreement of sale between the parties was automatically cancelled at the expiration of the 30-day notice period when the respondents failed to remedy the breach. The cancellation was proper. So, the order that this court is going to give is for the confirmation of cancellation of the agreement of sale. The applicant’s founding affidavit has averments that support this order.

Lastly, the respondents averred that the applicant cannot seek relief based on breach when

it has also violated the terms of the agreement. They averred that in the event of breach of the agreement of sale, clause (b) allows for review of the purchase price by the seller (applicant) to the current market value of the property. In response the applicant averred that reviewing the purchase price upwards did not make sense because the respondents had proved beyond a shadow of doubt that they were unable to meet the original cost of the stand. The applicant averred that the review or variation of the price was an option available to it which it decided not to exercise. I am in agreement with the applicant’s interpretation of that clause. It gave the applicant a right and not an obligation and a person cannot violate a right that they are entitled to. It is only an obligation that can be violated. So, the applicant was at liberty not to exercise its right as it did. By exercising that option, it did not in breach of the agreement as the respondents averred.

Costs shall be awarded on the ordinary scale because at the hearing the applicant’s counsel made no submissions justifying costs at a higher scale.

In view of the foregoing, it is ordered that:

The cancellation of the agreement of sale entered into and signed by applicant and the respondents on 19 January 2015 in respect of Stand 1584 Rydale Ridge Park measuring 588 square metres be and is hereby confirmed.

The respondents shall, jointly and severally, the one paying the other to be absolved, pay costs of suit.

Gama & Partners, applicant’s legal practitioners

Atherstone & Cook, respondents’ legal practitioners.