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REPORTABLE (6)

Judgment No. SC. 9/05

Civil Appeal No. 90/03

ZIMBABWE ELECTRICITY SUPPLY AUTHORITY

v DARRYL SMITH AND FIFTY-FIVE OTHERS

SUPREME COURT OF ZIMBABWE

SANDURA JA, ZIYAMBI JA & GWAUNZA JA

HARARE, FEBRUARY 10, 2005

L Mazonde, for the appellant

J B Colegrave, for the respondents

SANDURA JA: This is an appeal against the judgment of the High Court which granted the respondents’ application for an order compelling the appellant to transfer to them certain houses purchased by the respondents from the appellant. After hearing both counsel, we dismissed the appeal with costs, and indicated that the reasons for that decision would be given in due course. I now set them out.

The factual background in this matter is as follows –

At the relevant time the respondents were employees of the appellant (“ZESA”) and were based at Kariba where they occupied houses belonging to ZESA.

In March 2001 the respondents were offered the right to purchase from ZESA the houses which they were occupying. The offer letter reads as follows:

“Dear Sir/Madam,

Re: OFFER TO PURCHASE … (the house occupied)

This note serves to inform you that the Authority is offering you the ‘right of first refusal’ to purchase the above-mentioned property at a selling price of $ … .

Please advise us whether you are interested in buying it or not. Your response should reach us no later than three weeks from the date indicated above. In your response, please indicate your method of payment and the source of finance to enable the Agreement of Sale to be signed. If your response fails to reach us within three weeks from the above date, it will be assumed that you are not interested and the offer will be extended to other members of staff.

Please note that apart from the purchase price, there are other costs involved in the transaction which include –

Transfer and Conveyancer’s fees – about 7% of the purchase price.

If you feel that the selling price is higher than what you expect, you are free to advise the Chief Estates Officer who will then appoint an independent Estate Agent to value the property at your own cost.

If you are not interested in purchasing the house, the Authority will give you two months notice to vacate the premises.”

All the respondents informed ZESA timeously that they wished to purchase the houses they were occupying.

Thereafter, agreements of sale were prepared, and were duly completed and signed by ZESA and by the respondents. Some of the respondents had to sell their motor vehicles, cattle and other property at low prices to ensure that sufficient funds were raised timeously to avoid losing the right to purchase the houses.

Once the purchase price had been paid, ZESA wrote to its legal practitioners instructing them to attend to the transfer of the houses on its behalf. The letter reads as follows:

“Dear Sir,

Re: TRANSFER OF STAND …

FROM ZESA TO …

Could you please attend to the transfer of the above-mentioned property. Attached please find a copy of the Agreement of Sale, a receipt being proof of payment of the full purchase price, and the original title deed.”

Thereafter, the legal practitioners wrote to all the respondents calling upon them to pay the transfer fees as well as the stamp duty that was payable. All the sums demanded by the legal practitioners were paid timeously by the respondents.

In addition, the consent of the responsible Minister, which was required in terms of the Electricity Act [Chapter 13:05], had already been obtained.

However, when all the necessary papers were ready for lodging with the Registrar of Deeds, and the conveyancers asked ZESA to sign the Power of Attorney to pass transfer, ZESA declined to do so, alleging that the houses in question were not supposed to be sold.

A resolution was subsequently passed by the ZESA Board “to withdraw the sale of Authority houses in Kariba that should have been retained for operational purposes, and reimburse the affected employees accordingly”.

ZESA then purported to cancel the agreements of sale and refund the money which had been paid by the respondents, but the respondents refused to accept the refunds.

Thereafter, on 8 March 2002, the respondents filed a court application in the High Court seeking an order compelling ZESA to transfer to them the houses which they had purchased from ZESA. That order was granted on 12 February 2003. Aggrieved by that result, ZESA appealed to this Court.

The main issue which arose for determination by this Court was whether there was any legal basis on which ZESA was entitled to cancel the agreements of sale. I do not think that there was.

The basis on which ZESA purported to cancel the agreements of sale was set out in paras 2, 5, 6, 7 and 9 of its opposing affidavit. The relevant parts of those paragraphs read as follows:

“2. The chronology of events as narrated by Mr Smith is basically correct. It is also correct that the respondent (ZESA) has withdrawn instructions for the conveyance of the properties in question to the applicants (now the respondents). This withdrawal is the correction of a very big mistake on the part of respondent’s Management. …

5. In or about September 2000, the respondent’s Management decided to sell certain immovable properties around the country, which properties were either not crucial to its operations and/or could not fit into the process of unbundling the respondent. Such properties are commonly referred to as ‘non-designated’. …

6. The respondent’s Board having resolved to sell non-designated houses, and having obtained the requisite Ministerial authority, the implementation was then left to the respondent’s Management to identify the non-designated properties and offer same for sale in accordance with specifications from the parent Ministry

It was at this stage that a terrible mistake was made, that of offering the houses at Kariba to sitting tenants. ..

7. The houses at Kariba are integral to the operations of the power station, and should never have been offered to the applicants or anyone for that matter. …

9. The sale of the houses in question, as I stated before, was a terrible mistake on the part of the respondent’s Management. This mistake ought to be understood in (the) light of the fact of it happening at a time of relative confusion within the respondent’s ranks, with people being moved from one office or department of the mother body to this or other division or department of one of the several business units. …”

Before commenting on the above averments, I would like to indicate that on 22 October 2004 a court application was filed in this Court on behalf of the respondents, seeking leave to place additional evidence before this Court. The evidence was in the form of five documents whose existence the respondents did not know of at the time the matter was heard in the court a quo on 27 September 2002, and for a considerable period thereafter. The application was not opposed and, accordingly, at the hearing of the appeal it was granted with no order as to costs.

Having said that, I would like to comment on the averments made by ZESA in its opposing affidavit.

In my view, the allegation by ZESA that once Ministerial authority had been obtained it was left to ZESA’s management to identify the non-designated houses and offer them for sale cannot be true. I say so because when the Minister’s consent to the sale was granted on 13 September 2000 the houses to be offered for sale (i.e. the non-designated houses) had already been identified.

Three of the documents placed before this Court as part of the additional evidence clearly indicated that before 13 September 2000, when the Minister’s consent was granted, the question of which houses were to be retained (i.e. designated houses) and which houses were to be sold (i.e. non-designated houses) was canvassed. The most important of these documents was a memorandum, dated 21 June 2000, from Mr G T Woods, ZESA’s station manager at Kariba, to the acting corporate services director. The memorandum set out the precise location of each house which was to be retained as well as the occupant’s post.

In my view, the averments in ZESA’s opposing affidavit indicated that the only basis relied upon by ZESA in the purported cancellation of the agreements of sale was that its management had made a mistake in selling the houses in question. What was relied upon was, therefore, a unilateral mistake, a mistake which exists when one party to the contract is mistaken but the other is not.

However, even if it were accepted that there was a unilateral mistake on the part of ZESA, I do not think that such a mistake would justify the cancellation of the sale agreements. I say so because it is clear from a perusal of the sale agreements that ZESA agreed to sell and did sell the houses in question to the respondents who paid the purchase prices in full. That is what the parties intended doing and that is what they did.

As WESSELS  JA said in South African Railways and Harbours v National Bank of South Africa Ltd 1924 AD 704 at 715-716:

“The law does not concern itself with the working of the minds of parties to a contract, but with the external manifestation of their minds. Even therefore if from a philosophical standpoint the minds of the parties do not meet, yet, if by their acts their minds seem to have met, the law will, where fraud is not alleged, look to their acts and assume that their minds did meet and that they contracted in accordance with what the parties purport to accept as a record of their agreement.”

The law relating to the effect of a unilateral mistake on a contract has been set out in a number of cases.

In George v Fairmead (Pty) Ltd 1958 (2) SA 465 (A) FAGAN  CJ said the following at 471 A-D:

“When can an error be said to be justus for the purpose of entitling a man to repudiate his apparent assent to a contractual term? As I read the decisions, our Courts, in applying the test, have taken into account the fact that there is another party involved and have considered his position. They have, in effect, said: Has the first party – the one who is trying to resile – been to blame in the sense that by his conduct he has led the other party, as a reasonable man, to believe that he was binding himself? … If his mistake is due to a misrepresentation, whether innocent or fraudulent, by the other party, then, of course, it is the second party who is to blame and the first party is not bound.”

In National and Overseas Distributors Corporation (Pty) Ltd v Potato Board 1958 (2) SA 473 (A) SCHREINER  JA considered the effect of a unilateral mistake on a contract and said the following at 479 E-H:

“If the respondent had been a natural person who had accepted a tender according to its terms, there is no doubt that a contract would have been made when the acceptance was communicated to the tenderer, as by posting it. It would not be possible for such a natural person, if he repudiated, to escape liability by proving that he had posted the wrong letter or the like. That follows from the generally objective approach to the creation of contracts which our law follows. …

No other approach would be consistent with fairness or practicality. Our law allows a party to set up his own mistake in certain circumstances in order to escape liability under a contract into which he has entered. But where the other party has not made any misrepresentation and has not appreciated at the time of acceptance that his offer was being accepted under a misapprehension, the scope for a defence of unilateral mistake is very narrow, if it exists at all. At least the mistake (error) would have to be reasonable (justus) and it would have to be pleaded.”

In our own jurisdiction, the same principles were stated by this Court in University of Zimbabwe v Gudza 1996 (1) ZLR 249 (S). The headnote in that case reads as follows:

“… where an offeror mistakenly makes an offer that is accepted by the offeree, the offeror will only be able to rescind the contract if (a) the offer was induced by fraudulent misrepresentation by the offeree; or (b) the mistake was a material one and the offeree knew or ought to have known that the offer had been made in error.”

Finally, in The Law of Contract in South Africa 4 ed at 365, Professor Christie considered the effect of a unilateral mistake on a contract and stated as follows:

“Unless the mistaken party can prove that the other party knew of his mistake, or that as a reasonable person he ought to have known of it, or that he caused it, the onus of showing that the mistake was a reasonable one justifying release from the contractual bond will not be easy to discharge.”

Applying the above principles to the facts of the present case, we were satisfied beyond doubt that ZESA had failed to discharge the onus of showing that the alleged mistake was a reasonable one justifying the cancellation of the sale agreements.

In the circumstances, the appeal was devoid of merit and was, therefore, dismissed with costs.

ZIYAMBI JA: I agree.

GWAUNZA JA: I agree.

Muzangaza, Mandaza & Tomana, appellant's legal practitioners

Coghlan, Welsh & Guest, respondents' legal practitioners

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