Matrix Realty (Private) Limited v Trustees for the time being of Tongogara Community Share Ownership Trust

### Preamble
Judgment No. SC 130/20
1
Civil Appeal No. SC 932/18
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REPORTABLE:    (122)

MATRIX     REALTY     (PRIVATE)     LIMITED

v

TRUSTEES     FOR     THE     TIME     BEING     OF     TONGOGARA     COMMUNITY     SHARE     OWNERSHIP     TRUST

SUPREME COURT OF ZIMBABWE

GWAUNZA DCJ, GARWE JA, & MAKONI JA

HARARE: JUNE 14, 2019 & OCTOBER 9, 2020

S. Ushewokunze, for the appellant

E.T. Moyo, for the respondent

GARWE JA

[1]	This appeal is against the decision of the High Court of Zimbabwe handed down on 14 November 2018 upholding a preliminary point taken by the respondent that the appellant, who was the applicant in those proceedings, had no locus standi to institute legal proceedings against the respondent.  At the centre of the dispute between the parties was the question whether the appellant was entitled to sue the respondent on the basis of the stipulatio alteri doctrine.

[2]	Having considered the facts of this case together with the applicable case law, I have concluded that indeed the appellant had no locus standi to sue the respondent and that, consequently, the court a quo was correct in dismissing the application with costs. The reasons for this conclusion follow hereunder.

FACTUAL BACKGROUND

[3]	On 12 August 2015 the respondent and a company known as Kelor Investments (Pvt) Ltd (“Kelor”} entered into an agreement of sale in respect of an immovable property owned by Kelor known as Stand 403 Salisbury Township held under Deed of Transfer Number 9510/89.  As an agent for Kelor, the appellant brokered the agreement in question.  In terms of the agreement, Kelor sold its rights, title and interest in the property to the respondent.  The Board Chairperson of the respondent signed the agreement of sale on behalf of the respondent whilst two other trustees signed as witnesses.  One Thulani Ngwenya signed on behalf of Kelor. The purchase price was agreed to be the sum of US$950 000.

[4]	Clause 6.1 of the agreement of sale, which lies at the centre of the dispute between the parties, provided as follows:

“The agent’s commission in respect of this sale shall be payable by the seller and the seller hereby authorise their said agent (Matrix Realty (Pvt) Ltd) to deduct the commission from the purchase money when the same becomes payable to him.  Commission shall be deemed to be earned upon the parties to this agreement appending their signatures to this agreement.  The parties to this agreement acknowledge that the commission shall be deducted from the purchase price.  Should any party to this agreement breach the terms of such agreement causing the agreement to be cancelled, the defaulting party shall be liable for the agent’s commission.”

[5]	The respondent was, in terms of the agreement of sale, required to pay the purchase price within seven (7) days of the date of signature.  The respondent did not pay within the agreed time frame. Instead, on 13 October 2015, the respondent wrote a letter to Kelor advising that its board of trustees had met the previous day and had resolved to cancel the agreement of sale.  It is unclear whether Kelor accepted the repudiation.  Unhappy with this turn of events, the appellant filed a court application seeking an order directing the respondent to pay to it the sum of US$54 625.00 representing the 5 per cent commission agreed between Kelor and the respondent in terms of the agreement of sale.

[6]	The respondent opposed the application on the basis that the appellant lacked the requisite standing to sue upon the contract as it was neither a party to the agreement nor did it have any relationship with the respondent upon which it could make a claim.  The respondent further averred that there were material disputes of fact in the matter, and that, for that additional reason, the application should be dismissed with costs.  The respondent further disputed that the board chairperson had the requisite authority to sign the agreement on its behalf.

[7]	At the hearing of the matter before the court a quo, the first issue that fell for determination was the locus standi of the appellant to institute proceedings against the respondent for the payment of agent’s commission to itself in a contract of sale to which it was not a party.  The appellant, in its answering affidavit, had submitted that it had such locus standi to sue the respondent on the basis of the stipulatio alteri principle.

DETERMINATION BY THE COURT A QUO

[8]	In its determination, the court a quo was persuaded by the submission of the respondent that the appellant had no locus standi to sue on a contract to which it was not a party.  Relying on the decision of this Court in Whaley and Ors (Law Society of Zimbabwe Intervening) v Cone Textiles (Pvt) Ltd 1989 (1) 54 (SC), the court a quo found that, although the appellant was ultimately the beneficiary of the commission once the sale was concluded, one had to look to the pertaining circumstances and more importantly the contractual setting.  The court found that it was Kelor, as seller, which was the aggrieved party because the respondent breached the agreement of sale that the two parties had entered into by failing to pay the purchase price as agreed and thereafter purporting to cancel the agreement.  The right to claim the commission due therefore lay with Kelor and not the appellant.

[9]	The court a quo considered that it was not bound by earlier decisions of the superior courts of this country in cases such as Flashco (Pvt) Ltd v Fox and Carney (Pvt) Ltd 1980 (1) ZLR 235 and Gilchrist and Cooksey Ltd v Smith 1948 SR 69.  The court also found that South African decisions on the matter were not consistent with the decision of this Court in the Whaley case (supra).  Consequently it upheld the preliminary point taken by the respondent and further determined that it was no longer necessary to deal with the second preliminary point taken as well as the merits of the matter.

[10]    Having upheld the first preliminary issue taken by the respondent and having determined that it was unnecessary to deal with the other issues raised, the court a quo, inexplicably, proceeded to deal with those issues.  First, it found that there were no disputes of fact such as would have warranted the adoption of the action procedure for the reason that the commission, at five per cent of the purchase price and fifteen per cent value-added tax, was readily ascertainable. Second, the court found, on the papers, that there was sufficient evidence that the conclusion of the agreement had been authorised by the respondent, notwithstanding the fact that not all the trustees had signed the agreement of sale.  Having made findings on those two issues, the court a quo proceeded to make the order upholding the preliminary point taken on the issue of the locus standi of the appellant to institute proceedings against the respondent.  Consequently it dismissed the application with costs.

PROCEEDINGS BEFORE THIS COURT

[11]	Dissatisfied with the dismissal of its claim for agent’s commission, the appellant noted an appeal to this Court.  In its grounds of appeal, the appellant attacked the judgment of the court a quo on the basis that the court had:-

“1. … erred at law and in fact by dismissing the appellant’s application for

payment of agent’s commission.

2. … erred by ruling that appellant does not have locus standi in judicio to sue the respondent.”

At the hearing of the appeal, the appellant conceded that the first ground of appeal was vague and meaningless.  Counsel for the appellant indicated that the appellant was no longer relying on that ground and moved for its striking out.  That ground, having been abandoned, was accordingly struck out.

[12]	Perhaps not unexpectedly, the respondent had also filed a cross–appeal.  In the cross–appeal, the respondent sought to attack two findings made by the court a quo.  Firstly, that the contract document had been read to all the trustees and that three of those trustees had then signed the document.  Secondly, that the absence of a stand-alone written resolution authorising the three trustees to sign the agreement did not mean they were on a frolic of their own.  On it being pointed out by this Court during the hearing that the cross-appeal was impugning findings of fact made by the court a quo and not the operative part of the judgment, the respondent, quite properly, also abandoned the cross-appeal.

SUBMISSIONS BY APPELLANT ON APPEAL

[13]	In oral argument, the appellant submitted that it had the locus standi to sue the respondent on the basis of the stipulatio alteri principle.  It submitted that the court a quo wrongly relied on the Whaley case (supra) as the facts in that case were different and distinguishable from the facts of this case.  In the present case, the appellant’s entitlement to the agent’s commission was known to both parties.  Relying on a number of South African cases such as Mmabothini Victoria Xaba & Others v Nobantu Pascaline Ruth Xaba & Others ZAHCCA 279;  Eldacc (Pty) Ltd v Bidvest Properties (Pty) Ltd ZASCA 1144-2011; Pam Golding Properties (Pty) Ltd v Nkosi, Hosea & Anor ZAHC 08585J-2013 and Christie,  The law of contract in South Africa, it submitted that it had the locus standi to sue the respondent for payment of the commission due. It also relied on two local cases, namely, Flashco (Pvt) Ltd v Fox & Carney (Pvt) Ltd, supra, and Gilchrist and Cooksey Limited v Smith, supra, which suggest that an agent, as in this case, who prepares the contract of sale on its letterhead, presents it for signature by the two contracting parties, becomes a party to the agreement and is therefore entitled to sue the buyer as the appellant did in this case.

[14]	The appellant further submitted that reliance on the Whaley case was wrong.  The cause of action in that case was the condictio indebiti which is enforceable against the recipiens of an undue payment whilst in the present matter the cause of action was founded on the stipulatio alteri.  Further, the Whaley case involved a legal service that was to be rendered in the future by nominated conveyancers whilst in the present matter the service had already been rendered.  The court a quo had therefore misunderstood the import of the decision in the Whaley case.  That decision did not alter the stipulatio alteri principle as espoused in the Flashco case and R.H. Christie, Business Law in Zimbabwe.

RESPONDENT’S SUBMISSIONS ON APPEAL

[15]	The respondent disputes the correctness of the appellant’s submissions.  It submits that, from authorities such as R.H. Christie, Business Law in Zimbabwe op. cit. and the South African appellate court decision in Crookes, N.O and Anor v Watson and Ors 1956(1) S.A. 277 (AD) the mere fact that a contract may inure to the benefit of a third party does not make such a contract one for the benefit of such third party which he is open to accept, thereby becoming a party thereto.  The intention by the two contracting parties must be to enable a third person to come in as a party to the contract with one of the other two.  The decision in the Flashco case supra is distinguishable as the estate agent was suing the seller, who had mandated it to find a buyer, and not the purchaser, as in this case.  Further, and in any event, in the Flashco case the party sued had agreed to pay the agent’s commission to Fox and Carney, the estate agent.  In the Pam Golding Properties case, supra, the third party was able to come in as a party because the contracting parties had agreed they would be liable to the estate agent in their personal capacities.

ISSUES ARISING FOR DETERMINATION

[16]	On a careful consideration of the facts of this case and the competing submissions by the parties, it seems to me that the issues that arise for determination are the following; first, what is a stipulatio alteri; second, what are the requirements of that doctrine; third, the application of the doctrine both in this country and South Africa; and last, whether on the facts, and the law, the appellant did, as a matter of law, have the locus standi to institute proceedings against the purchaser.  I deal with each of these issues ad seriatim.

THE STIPULATIO ALTERI DOCTRINE

[17]	Whilst it is the correct position at law that the stipulatio alteri principle does not derive from Roman law, there can be no doubt that the doctrine is part of the law of South Africa and indeed this country.  Various decided cases both in South Africa and this country, as well as publications by respected authors, have confirmed this position.

[18]	In McCullogh v Fernwood Estate Ltd 1920 AD 204 INNES CJ, stated as follows:

“An agreement for the benefit of a third person is often referred to in the books as a stipulation.  This must not be taken, however, in the narrow meaning of the Civil Law, for in that sense the stipulation did not exist in Holland.  It is merely a convenient expression to denote that the object of the agreement is to secure some advantage for the third person…..”

[19]   R.H. Christie, Business Law in Zimbabwe, op. cit. states at p 75:-

“A person who is not a party to a contract cannot be held liable or claim on it because, as is usually expressed, he is not privy to the contract: PTC Pension Fund v Standard Chartered Merchant Bank Zimbabwe Ltd 1993 (1) ZLR 55. The doctrine of privity of contract is, however, sufficiently elastic to encompass the rules of agency, under which a principal becomes a party to a contract made on his behalf by his agent….

Roman-Dutch law, unlike English law and the Old Roman law, recognizes a further extension of the doctrine of privity of contract, by accepting the validity of what is variously known as a contract for the benefit of a third party, a stipulatio alteri or a ius quaesitum tertio.

The concept of a contract for the benefit of a third party fills two gaps in the law which are left by the law of agency.  First it enables a contractual opportunity to be secured for a third party without the third party’s prior authorisation or even knowledge.  Second, the opportunity can be secured for a third party who is not in existence, such as an unformed company or an unborn child….”

[20]	In Callisto Chirenje v (1) Vendfin Investments (Private) Limited (2)HSM Ushewokunze (3) Divine Homes (Private) Limited SC 13/09, this Court confirmed that a contract for the benefit of a third party is indeed part of law.  In doing so this Court relied on the South African Appellate Division decision in McCullogh v Fernwood Estate, supra. But even before the decision of this Court in the Callisto Chirenje case supra, this Court as well as the High Court of Zimbabwe had accepted this to be the position.  See for example the following cases – Old Mutual Fire & General Insurance Co. of Rhodesia (Pvt) Ltd v Springer 1963 R&N 90; Salisbury Bottling Co. (Pvt) Ltd v Lomagundi Distributors (Pvt) Ltd 1965 RLR 268; Flashco (Pvt) Ltd v Fox & Carney (Pvt) Ltd, supra, and Whaley & Ors (Law Society of Zimbabwe intervening) v Cone Textiles (Pvt) Ltd, supra.

THE REQUIREMENTS OF THE STIPULATIO ALTERI

[21]	It is important to determine what the requirements of a stipulatio alteri are because it is now settled, both in this country and South Africa, that the fact that a contract inures to the benefit of a third party does not, on its own, make it a contract for the benefit of that party. RH Christie, Business Law in Zimbabwe makes this very clear.  At p 75, the learned author remarks:-

“The relationship between the parties is that A and B enter into a contract which C, the third party, may at his option adopt as his own.  The intention that the third party should have this option must appear from the contract. This is the true nature of what is sometimes misleadingly called intention to benefit the third party.  Misleadingly because it is clear that when the third party adopts the contract as his own he is not only entitled to its benefits but bound by its obligations.”

[22]   In the McCullogh case, supra, at p 206, INNES CJ remarked:

“And in such a case it follows that the two would go together.  The third person could not take advantage of one term of the contract and reject the other.  The acceptance of the benefit would involve the undertaking of the consequent obligation.  The third person having once notified his acceptance and thus established a vinculum juris between himself and the promisor would be liable to be sued, as well as entitled to sue. If, for instance, the stipulated benefit took the form of an option to purchase specified property at a certain price, the acceptance of the offer would involve a liability to pay the price which could be legally enforced.  Otherwise the third person would be in the position of being able to sue upon a contract involving reciprocal obligations without being liable to an action if he refused to discharge his part of them.”

[23] 	In Salisbury Bottling Co (Pvt) Ltd v Lomagundi Distributors (Pvt) Ltd, supra, a decision of the General Division of the High Court of Rhodesia, Davies J qualified the above statement in the following terms:

“But the mere fact that a contract may inure to the benefit of a third party does not make it a contract for the benefit of such party which he is open to accept, thereby becoming a party thereto….. such a contract is not simply a contract designed to benefit a third person; it is a contract between two persons that is designed to enable a third person to come in as a party with one of the other two.”

[24]  	In similar vein, Schreiner JA in his dissenting judgment in Crookes, NO and Another v Watson and Others, supra, at 291 B-C, remarked as follows:-

“But in the legal sense, which alone is here relevant, what is not very appropriately styled a contract for the benefit of a third person is not simply a contract designed to benefit a third person, it is a contract between two persons that is designed to enable a third person to come in as a party to a contract with one of the other two.”

[25]	In Old Mutual Fire and General Insurance Co. of Rhodesia (Pvt) Ltd v Springer, supra, Lewis J remarked at p 94 H – I:

“Our law, unlike English law, recognizes, of course, the validity of a contract made between A and B for the benefit of C, provided that the intention to benefit C is clear and C has accepted and given notice of his acceptance of the benefit either expressly or by conduct… this presupposes that A intended to give rights to C and to subject himself to liability to C…..”

[26] 	Case law authority is therefore agreed that, to become a party to the contract, the third party must accept the option or offer contained in the contract and further that he must communicate such acceptance to the promisor. RH Christie, Business Law in Zimbabwe, op cit, at p 76.  Further, such acceptance and notification can take place by conduct.

[27]  	On a consideration of all the above authorities, I agree with the appellant’s submission that three essential elements stand out and that these must exist in any given case for the stipulatio alteri doctrine to apply. First, there must be a stipulation or benefit contained in a contract which is in favour of a third party.  Second, the two contracting parties must expressly or tacitly intend that the benefit should accrue to the third party and that the third party, on acceptance, comes in as a party to the contract.  Third, the third party must accept the stipulation and communicate such acceptance.  The acceptance may be express or tacit.  These requirements, in my considered view, are clear and should pose no real difficulty.  Perhaps it is in the application of these requirements that cracks may start to emerge as a result of which inconsistencies and, in some instances, nuances have been encountered.

APPLICATION OF THE DOCTRINE IN VARIOUS DECIDED CASES

[28] 	The court a quo was of the view that there was a line of cases which it was not bound to follow and that it would be guided by the decision of this Court in the Whaley case.  The court a quo appears to have been of the further view that there are conflicting decisions on the subject, both in this country and South Africa.   A definitive pronouncement by this Court on what constitutes a stipulatio alteri is therefore necessary.  To this end I deem it desirable to do a comparative analysis of the various cases and texts by distinguished authors on the application of the doctrine.  I propose to start with approach by the courts in South Africa.

THE SOUTH AFRICAN APPROACH

[29] 	In McCullogh v Fernwood Estate, supra, the South African Appellate Division, whilst rejecting the English doctrine of valuable consideration, accepted that in law, it is possible to contract independently for the benefit of a third person and that it is not necessary to do so as an agent. Such a contract, once duly accepted by the person for whose benefit it was made, may be enforced by him.  For this reason a man may properly stipulate in favour of an unborn child or a company still to be formed, leaving it to the beneficiary in due time to decide whether or not he will accept the benefit offered.

[30] 	In the Crookes case, supra, the settlor in a deed of trust, in consideration of his love and affection for his daughter, gave and donated irrevocably upon trust certain shares to two trustees, one of them being himself.  The trustees decided to apply for an order declaring that it was competent for the trust deed to be amended by mutual agreement between the settlor and the trustees.  The application was dismissed but on appeal the court determined, in a majority decision, that the general rule applied, namely that beneficiaries acquired no rights under a trust until they had accepted and that the trust was revocable until accepted. The court further determined that the acceptance by the first donee did not enure for the benefit of and was not considered an acceptance by all the donees.

[31] 	In the Pam Golding case, the applicant, an estate agent, sought payment of commission from the respondents who were the purchasers of an immovable property. The claim was premised on a breach by the respondents of an agreement and the cancellation of that agreement by the sellers.  A clause in the agreement provided that the seller was to pay brokerage commission to the estate agent either on transfer or on the date of cancellation by mutual consent between the seller and the purchaser.  The agreement further provided that if the sale was cancelled as a consequence of default by the purchaser the purchaser “acknowledges that he/she/it shall be liable to PGP for payment of the equivalent of the brokerage by way of liquidated damages without prejudice to the rights of PGP against the seller…”.  A similar clause was inserted to cover possible default by the seller.  The clause made it clear it was inserted for the benefit of the estate agent.

[32] 	In rejecting the stipulatio alteri defence, the South Gauteng High Court remarked at para 10 of its judgment:-

“In the present instance, the contract is in fact a tripartite contract.  It is signed, not only by the sellers and the respondents, but also by the applicant. Clause 9 of the agreement specifically contemplates the payment of commission to the applicant by either the sellers or the respondents depending on the circumstances.  The … agreement is thus not a contract for the benefit of a third party.  The third party, being the applicant is very much party to the agreement itself.  In the result, the respondent’s reliance on a stipulatio alteri is misplaced….”

[33] 	I pause here to observe that the conclusion by the court in the above matter accords with the law on the stipulatio alteri doctrine.  The estate agent, on the facts, was party to the agreement and clearly the same contract could not inure to its benefit as a third party.

[34] 	In Mmabothini Victoria Xaba & Two Ors v Nobantu Pascaline Ruth Xaba N O & Ors, supra, the Gauteng Division of the High Court of South Africa accepted that a nomination of a beneficiary under an insurance policy is a species of stipulatio alteri and that in such a contract, one of the parties (the stipulator) agrees with another (the promisor) that the promisor will render a performance to a beneficiary.  The beneficiary acquires rights under the contract when the beneficiary accepts the benefit stipulated in his favour.  On the facts the court found that no benefits were stipulated in favour of any beneficiary in relation to the Sanlam policy which had replaced the Old Mutual Pension Fund and Group Life Assurance Scheme of the SABC to which the deceased (who had nominated the appellants as beneficiaries) had become a member.  The court accordingly determined that there were no benefits under the Sanlam Policy that any of the beneficiaries could accept because it was not part of the contract, to which Sanlam and the deceased became parties, that nominations made by the deceased under the Old Mutual Policy would be carried over to the Sanlam Policy.

[35] 	Again I have no difficulty with the application of the requirements of the stipulatio alteri principle in the above matter.  If a stipulator agrees with his insurance company that on his death his insurance policy will inure (also spelt “enure”) to the benefit of a third party and that the third party can enforce the agreement, then clearly that would constitute a stipulatio alteri.  The court found that, on the facts, Sanlam was not a promisor as certain steps had not been taken by SABC to make this possible.

[36] 	It is the comments by RH Christie and G.B. Bradfield in their text, Christies Law of Contract in South Africa which may have been misunderstood by the appellant. At p 302-3, the learned authors state:-

“… a party who at first sight does not appear to be privy to a contract may turn out to be so on further investigation.  One example of this situation is when a contract for the sale of land, signed by the buyer and seller, contains words to show that the estate agent is a party to the contract in respect of his claim for commission and this may be so whether or not the estate agent’s signature appears on the document ….” (underlining is my own)

[37]	 At p 311 the learned authors further state:

“Acceptance by the third party may be express or tacit and, where the contract is a beneficial one, will not require strong evidence to support it.  If in a contract for sale of land a clause providing for payment of the estate agent’s commission is analysed as a contract for the benefit of the estate agent, the agent may accept at the outset by presenting the contract for signature.”

[38] 	Again the above remarks must be understood in their proper context.  The learned authors were here discussing the issue of acceptance of the benefit by the beneficiary.  It is quite clear from the above remarks that the other requirements for a stipulatio alteri, namely that there must be a stipulation in favour of a third party and that the two contracting parties must intend to bring in the third party as a party to the contract, must also be present, bearing in mind that it is not every situation in which a contract enures to the benefit of a third party that a stipulatio alteri comes into existence.  In other words, and importantly so, there must be an intention by the two contracting parties to bring in the third party as a party to the contract, the result being that he assumes not only rights but also obligations under the contract.

[39] 	In all the circumstances therefore, the approach of the courts in South Africa is in accord with the requirements of the stipulatio alteri doctrine.  I now proceed to look at the application of the doctrine by the courts in this country.

THE ZIMBABWEAN APPROACH

[40] 	In Flashco (Pvt) Ltd v Fox and Carney (Pvt) Ltd, supra, the respondent, an estate agent, had been given a mandate by the appellant to find a tenant for the appellant’s house.  The respondent introduced one C as a tenant and C signed a written agreement of lease in respect of the property for a period of six months.  A clause in the agreement provided that if the lessee wished to purchase the property during the subsistence of the lease, the lessee was to negotiate such sale through the respondent.  The lessor also agreed to pay the normal agent’s commission in the event of the conclusion of such sale to the respondent.  The appellant subsequently sold the property to C without the involvement of the respondent.  The Magistrates’ Court gave judgment for the respondent.

[41] 	On appeal to the Zimbabwe Rhodesia Appellate Division, the court found that the agreement, which conferred rights and obligations on all three parties was in the nature of a tripartite agreement and that, at the very least, the clause constituted an agreement between the seller and the buyer for the benefit of the estate agent.  The court further found that the respondent had accepted the benefit right from the outset.  It was the respondent which was responsible for drafting the lease on its own letter head which it had then presented to the parties for their approval and signature.  In short the court found that acceptance and notification can take place by conduct.  In the result the court dismissed the appeal.

[42] 	I pause again to note that the above decision was, generally speaking, in accord with principle.  There was a benefit in the form of commission payable to the estate agent. A clause in the agreement of sale made it clear that the lessor was to pay commission to the estate agent (Fox & Carney) upon conclusion of the sale of the property.  In other words the agreement made it abundantly clear that upon conclusion of the sale, commission would be payable directly to the estate agent.  This clause evinced a clear intention to make the estate agent a party to the agreement.  The remarks made by the court that the estate agent had accepted right from the beginning related to the question whether the estate agent had accepted the benefit and notified the seller of such acceptance.

[43]	The only difficulty I have with the above decision is that, having found as it did that the agreement was in the nature of a tripartite agreement, the court went further to state that the agreement was, at the very least, an agreement for the benefit of a third party.  As noted in the Pam Golding case, supra, the third party, being very much a party to the agreement, cannot seek to rely on the stipulatio alteri to enforce any rights it may have in terms of the agreement to which it is already a party.

[44] 	In Whaley & Ors (Law Society of Zimbabwe Intervening) v Cone Textiles (Pvt) Ltd, supra, the respondent (Cone Textiles) entered into a contract with another company, Karina Textiles (Pvt) Ltd, for the purchase of an immovable property.  One clause of the agreement provided that the conveyancing would be carried out by the appellants, a firm of legal practitioners, at the cost of the respondent.  The respondent regarded the fees, based on the prevailing Law Society of Zimbabwe tariff, as excessive and paid under protest.  The respondent later instituted proceedings in the High Court based on the conditio indebiti for the recovery of the amount in excess of what it considered was reasonable for such work.  The High Court gave judgment in favour of the respondent, subject to the condition that the amount of fees overpaid be held in trust pending the issuance of a properly promulgated scale of fees by the Law Society.

[45] 	On appeal, this Court found that the agreement between the respondent and Karina was not intended to be a contract for the benefit of the appellants.  Further, that it created no contractual liability on the part of the respondent towards the appellants and that the liability of the respondent was to meet the costs incurred by Karina in the registration of the transactions.  The appellants were the agents of Karina which was liable to them for their fees and the payment of the fees by the respondent to the appellant was a matter of convenience only. The true recipient of the fees was the principal, Karina Textiles.

[46] 	In Callisto Chirenje v (1) Vendfin Investments (Pvt) Ltd (2) HSM Ushewokunze (3) Divine Homes (Private) Ltd, supra, the appellant and other purchasers had bought serviced residential stands from the third respondent, Divine Homes.  Before title could pass to the appellant and the other purchasers, the property was sold in execution by the Deputy Sheriff and title was transferred to the first respondent, Vendfin Investments.  Vendfin Investments was a nominee of HSM Ushewokunze, the second respondent.  The transfer triggered legal battles between Divine Homes, the Sheriff and Ushewokunze.  An order by consent was granted in terms of which Divine Homes withdrew its application against the respondents.  In terms of the order, the Sheriff of Zimbabwe was authorised to effect transfer to Ushewokunze upon compliance with the terms of the agreement.  The appellant and other purchasers, who were not parties to the agreement but had become aware of the consent order, were invited by Vendfin to purchase the property at $200 000 per square metre instead of the $60 000 stipulated in the original agreement.  The appellant and other purchasers found this unacceptable and filed an application with the High Court seeking interim relief interdicting Vendfin from disposing of or in any way alienating the properties pending the outcome of the main action in which they sought an order compelling Vendfin to make them an offer at the original price of $60 000 per square metre.  They claimed that they had acquired the right to be offered the property at that price under the contract between Divine Homes and Ushewokunze.  It was common cause that the appellant and other purchasers had not been party to the agreement between Divine Homes and Ushewokunze in terms of which Ushewokunze had agreed with Divine Homes to offer the appellant and other purchasers the stands at a price of $60 000 per square metre.  The agreement between Divine Homes and Ushewokunze gave the parties the right to amend or vary the agreement and no reference was made to the need to consult the appellant and the other purchasers before doing so.  Divine Homes and Ushewokunze signed an addendum amending the price per square metre.  It was in terms of that amendment that Ushewokunze offered to sell the stands to the appellant and others at $200 000 per square metre which was the prevailing market price at the time.

[47] 	This Court accepted in that case that the agreement between Divine Homes and Ushewokunze was a contract for the benefit of a third party.  It did not however state why it had come to that conclusion.  The court however found that no offer was ever made to the appellant and others before the contract was amended.  Consequently, no vinculum juris was ever created entitling the appellant to sue Ushewokunze on the undertaking to sell the stands at $60 000 per square metre.  No offer having been communicated to the appellant for the purchase of the stands at $60 000 per square metre, the appellant and other purchasers were not in a position to accept any benefit in terms of that agreement.  In the result, the appeal was dismissed with costs.

[48] 	Except for the blanket statement that this was a contract for the benefit of a third party, there can be little doubt that this Court was correct at the end of the day in finding that the requirements of a stipulatio alteri had not been satisfied in that case. In particular, although the court did not say so specifically, there was nothing to suggest that, at the time of the conclusion of the agreement between Divine Homes and Ushewokunze, the intention was to make the appellant and other buyers parties to the original agreement.  As no offer was ever made to them, there was therefore nothing that they could accept.  In other words, the facts did not disclose a stipulatio alteri.

[49] 	In Trustees (for the time being) of Tongogara Community Share Ownership Trust v Matrix Realty HH 247/18, an application for rescission of a default judgment involving the same parties to this appeal and based on the same facts as in this case, the High Court of Zimbabwe agreed that the facts did not “seem to meet” the requirements of the stipulatio alteri principle.  In this regard, the court remarked at p 9 of the judgment:

“The clause simply dealt with which party would be liable for paying the agent’s commission in the event of a breach of the contract between the applicant and Kelor Investments (Pvt) Ltd.  It seems to me that the purpose of the provision was not to benefit the respondent but to regulate the issue of breach between themselves so that the defaulting party would meet the costs of the commission due to the respondent instead of the innocent party meeting such costs.  It does not look like the parties ever intended to make the respondent a party to the contract.  This is evidenced by the fact that the respondent was never given the option to adopt this contract as his own and become a party to it.  Furthermore, the respondent did not adduce anything by way of evidence to show that it adopted the contract as its own and that it communicated its acceptance to the contracting parties.  It is thus my considered view that the appellant has a bona fide defence which carries some prospects of success.”

[50] 	For reasons that follow, I agree with the above remarks by the High Court except in so far as it found that there was no acceptance of the benefit by the appellant.  There never was an intention on the part of the two contracting parties to make the appellant a party to this agreement.

APPELLANT’S RELIANCE ON THE STIPULATIO ALTERI MISCONCEIVED

[51] 	It is common cause that it was the appellant which prepared the agreement of sale between Kelor and the respondent.  It did so on paper bearing its letterheads.  The agreement was signed and witnessed by the two parties to the agreement.  The appellant was not party to the agreement.  Clause 6.1 of the agreement made it clear that the agent’s commission was, in the first instance, payable by the seller.  That clause authorised the seller’s agent, the appellant in this case, to deduct from the purchase price the amount due by way of commission once the parties had signed the agreement and the purchase price paid.  The same clause then provided that “should any party to this agreement breach the terms of such agreement causing the agreement to be cancelled, the defaulting party shall be liable for the agent’s commission.”  The clause does not state that the commission is payable to the appellant.  It states clearly that the obligation to pay commission is on the seller but in the event the purchaser breaches the agreement causing it to be cancelled, then the purchaser, “shall be liable for the agent’s commission”.

[52] 	Had the intention been to make the appellant a party to the agreement, the agreement would have said so or, at the very least, indicated that the commission was payable to the appellant itself.  There is nothing in the language of clause 6.1 that would tend to suggest that the parties intended to make the appellant, upon acceptance and notification of such acceptance, a party to the agreement.  As the High Court of Zimbabwe correctly noted in its judgment in the application for rescission of judgment involving the same parties, the intention that comes out clearly from clause 6.1 was to regulate the issue of liability inter se in the event of breach. Indeed Kelor remains contractually bound to pay the agent’s commission to the appellant, even in the event of breach by the purchaser.  Clause 6.1 does not in any way suggest that once the two contracting parties sign the agreement, the seller, upon acceptance of the benefit by the appellant, drops out of the picture in so far as the payment of agent’s commission is concerned.

[53] 	The emphasis by the appellant on the fact that it prepared the agreement on its letterheads, forwarded the same for signature by both parties and that in the circumstances it became a party is misplaced.  The preparation of the agreement of sale on its letterheads and presentation for signature by the parties, as case law has shown, would be evidence of acceptance and notification of such acceptance by conduct.  It certainly is not evidence that the two original contracting parties intended to make the appellant a party to the contract.

[54] 	The suggestion by the court a quo that there are inconsistences, possibly contradictions in case law in this country and South Africa is, as has been shown, not entirely correct.  There was failure on the part of the court a quo to appreciate that, for a stipulatio alteri to exist, all the three requirements necessary for the principle to apply must be present and that if any one of these requirements is not met or is missing, then there cannot be reliance on the stipulatio alteri doctrine. The court concentrated on the third requirement that there must be acceptance and notice of such acceptance and mistakenly concluded that this one requirement constituted a stipulatio alteri.

DISPOSITION

[55]	 As indicated at the beginning of this judgment, the two contracting parties never intended to make the appellant a party to the agreement of sale, notwithstanding the fact that it was the appellant, as seller’s agent, who prepared the agreement on its letterhead and presented it to the parties for signature.  The fact that the contract enured to the benefit of the appellant was also not, on its own, sufficient.

[56] 	In view of the above conclusion, it follows that the appeal has no merit and must therefore fail.  Costs follow the event.

[57] 	The findings made by the court a quo on the merits, having been improperly made, must be set aside, in the exercise of our powers of review.  Were this Court not to do so, in the event of further litigation between the two parties or between the seller and the respondent, any possible challenges by the respondent could be met by the res judicata or issue estoppel defences.

[58] 	It is accordingly ordered as follows:

The appeal is dismissed with costs.

Pursuant to the powers of this Court under s 25 of the Supreme Court Act, the findings made by the court a quo on the validity of the agreement of sale are set aside.

GWAUNZA DCJ		:		I agree

MAKONI JA			:		I agree

Ushewokunze Law Chambers, appellant’s legal practitioners

Scanlen & Holderness, respondent’s legal practitioners