Bedrock Estates Limited v Africa Retail Properties Limited (APPEAL NO. 216/2006; SCZ/8/199/2006) [2009] ZMSC 181 (4 February 2009)

Jl IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 216/2006 HOLDEN AT LUSAKA {Civil Jurisdiction) BETWEEN SCZ/8/199/2006 BEDROCK ESTATES LIMITED APPELLANT AND AFRICA RETAIL PROPERTIES LIMITED RESPONDENT Coram: Mumba, Chitengi, JJS and Kabalata ,AJS On 13th May 2008 and 4th February, 2009 For the Appellant: Mr. N. Mubonda, D. H. Kemp and Company For the Respondent: Mr. A. J. Wright, Wright Chambers JUDGMENT Kabalata, AJS, delivered the judgment of the court. Cases referred to: {1) GF Construction (1976} Limited vs. Rudnap (z) Limited (1999} ZR 134 Other works: (1) Halsbury Laws of England 4th edition vol. 27 paragraph 255 and Clerk and Lindsell on Torts, 24th edition paragraph 1362 and 1363 In this judgment we shall continue to refer to the Respondent and Appellant as Plaintiff and Defendant respectively as this is what they were in the court below. J2 This appeal arises after a claim in which the Plaintiff, Bedrock Estates, Limited had sued the Defendant, African Retail Properties Limited for the following reliefs:- "(i) Damages in the sum of KS33,568,335-00 being damages for breach of collateral warranty to the contract of sale of Stand No. 120, Lusaka between the Plaintiff and the Defendant dated the 20th July 2005 Further and in the alternative the Plaintiff claims damages for misrepresentation in the sum of K533,568,335~00 made orally as an inducement for the Plaintiff to purchase Stand No. 120, Lusaka (i) The Plaintiff further claims against the Defendant the sum of USD39,000-00 being loss of mesne profits from 1st September to 30 th November, 2005 upon the said Stand No. 120, Lusaka. {iii) Interest and any other further relief the court shall deem fit and costs" The facts of case can be briefly stated. The Defendant advertised for sale of property No. 120 Lusaka. By agreement dated 20th July 2005, the Defendant sold and the Plaintiff bought the said property at the sum of USDl,250,000-00. Prior to entering into the said agreement, the Plaintiff inspected the property which the Plaintiff alleged had the following fixtures and fittings:- J3 "(a) 10 Air Conditioners affixed to the property {b) Demarcating Boards and sales floor partitions Floor carpet and aluminum ends (d) Electrical fittings (e) Doors and Lock (f} Ceiling Board (g) Carpeted Boards on walls (h} Stair case tiling (i) Distribution Box" The Defendant is alleged to have given a collateral warranty to the Plaintiff that the said property would be sold "on as is basis" with all the fixtures and fittings. The Plaintiff however alleged that it was induced to enter into the purchase contract by the said collateral warranty which the Plaintiff argued it relied upon and paid the purchase price. The Plaintiff alleged further that on taking possession of the property, it discovered that the following fixtures and fittings had been removed, broken or damaged:- J4 "(a) All air conditioners removed {b) Floor carpets and aluminium { c) Boards demarcating offices and sales floor/ partitions all removed (d) All electrical fittings removed (e) Doors and locks vandalized and/or removed (f) Ceiling board damaged and/or vandalized (g) Carpeted boards on walls all removed completely (h) Tiling on the staircase removed, damaged and/or broken (i) Distribution Box- cables removed, damaged and vandalized." The Defendant is alleged to have induced the Plaintiff to enter into the said contract through its Estate Manager, DW2 who is alleged to have told the Plaintiff that the property would be sold ''on as is basis" with all the fixtures and fittings stated above. The Plaintiff alleged that the Defendant made the said representation fraudulently while knowing that the same was false or reckless and not caring whether this was true or false. The Plaintiff pleaded Section 2 of the Misrepresentation Act, Chapter 69 of the Laws of Zambia. That as a result of JS the Defendant's conduct, the Plaintiff has suffered loss and damage as pleaded in paragraph 14 of the Statement of Claim. The Plaintiff claims further that as a result of the Defendants mis-presentation, it has lost USD39,000,000-00 from 1st September to 30th November 2005 as mesne profits from rentals. On the other hand, the Defendant denied liability claiming that it only orally warranted that the property would be sold with fixtures and fittings on the premises that belonged to it and in the condition in which they were in. The Defendant averred that not all the items claimed belonged to it as the items claimed to have been removed were the property of the previous tenant. Further that only 7 air conditioners were on the premises and not 10 as claimed by the Plaintiff. The Defendant refuted the allegations that the Plaintiff relied on the alleged collateral warranty to complete the contract. The Defendant averred further that any representations made were not made to induce the Plaintiff to complete the contract. The Defendant also refuted the claim for mesne profits. After considering all the evidence adduced in this case together with the arguments advanced in the respective skeleton arguments and the submissions by Counsel and the authorities cited, the learned trial judge found that the J6 Plaintiff had established on the balance of probabilities that the property in question was being sold on "as is basis" by the Defendant as was represented by the Defendant sales consultant, DW2. As to what amounts to "on as is basis", the learned trial judge found that the property was being sold together with all the fittings and fixtures on the property at the time and that the state or condition in which the said fixtures and fittings at the time was immaterial. The learned trial judge also found that even if the fixtures and fittings appeared to be very old and in poor state, this did not vitiate the fact that those items were removed or damaged. She therefore came to the conclusion that the Plaintiff was entitled to recover the value of the items removed, damaged or vandalized. She also found that the Plaintiff was entitled to recover mesne profits in the sum of USD39,000,000-00 in form of rentals. She referred the issue of assessment of mesne profits to the Deputy Registrar and entered judgment in favour of the Plaintiff against the Defendant in the sum to be assessed with interest. She also awarded costs to the Plaintiff to be taxed in default of agreement. Dissatisfied with the decision of the lower court, the Defendant now appeals against this decision to this court. There are 3 grounds of appeal and these are that:- J7 1. The learned trial judge misdirected herself in law in holding that the state or condition and fixtures and fittings at the time was immaterial. 2. The learned trial judge erred in law in not giving clear and full details or particulars of the items whose value should be assessed by the Deputy Registrar. 3. The learned trial judge misdirected herself in law in holding that the Respondent was entitled to recover mesne profits against the Appellant in the form of rentals for the 2 months period during which the respondent allegedly carried out repairs to the property and replaced the items removed or vandalized. These three grounds of appeal were supported in the appeal by detailed written heads of argument and authorities which were relied upon at the hearing of the appeal. The gist of the argument in the first ground of appeal is that the state or condition of the fixtures and fittings at the time was material for purposes of determining:- J8 (i) At the completion of the sale as to whether the Appellant had performed its obligations under the contract. The building was handed over to the Respondent at completion. (ii} The correct value of the compensation in the event of Breach on the part of the appellant. In the event of a breach on the part of the Appellant, the correct value of the compensation should be on the basis of second hand or used fixtures and fittings as the same were not new. The gist of the argument in the second ground of appeal is that the reference by the learned trial judge of the matter to the Deputy Registrar for assessment was not clear and lacked the necessary details i.e .. :- (i) The list of the items whose value is to be assessed is not stated. (ii) The basis of the assessment of the value of the items is not stated. Having agreed and accepted that the items were not new the learned trial judge should have ordered and directed that the assessment of the value should be on the basis of "second hand or used fixtures and fittingsn. J9 The gist of the argument in the third ground of appeal is that the learned trial judge misdirected herself in law in holding that the Respondent was entitled to recover mesne profits against the appellant in the form of rentals for the 2 months period during which the Respondent allegedly carried out repairs to the property and replaced the items removed, damaged or vandalized. According to the Appellant the building was handed over to the Respondent by the Appellant at completion in terms of the contract of sale for the same. There was no complaint at all by the Respondent that the Appellant held over possession of the said building beyond the contracted date for completion. Therefore, the claim for mesne profits, and the grant thereof by the learned trial judge was erroneous as these are damages awarded only to a landlord for holding over a tenancy by a tenant. We were referred to the case of GF Construction (1976) Limited vs. Rudnap(z) Limited1 and Unitechna Limited (1999) ZR 134 and Halsbury Laws of England 4th edition vol. 27 paragraph 255 and Clerk and Lindsell on Torts, 24 th edition paragraph 1362 and 1363. In reaction to these heads of argument, Counsel for the Plaintiff has also filed detailed heads of argument and relied on them at the hearing of the appeal. He submitted that the court should take Judicial Notice of the fact that when goods and/or properties are said to be sold, "on as is basis", a buyer takes the goods J10 and/or property as he finds them. The defendants contention that compensation should be on the basis of second hand or used fixtures and fittings is rather baffling. If the items removed were indeed old, worn out and dirty, why did the defendant take the trouble to remove them, when in fact they had earlier covenanted to sell the property with the said items? Therefore, the argument advanced by the defendant that damages should be paid on a second hand basis is misconceived . On ground 2, the Plaintiff submits that they do not agree with the learned trial court in referring the matter for assessment on the basis that, she had no reason not to believe the Defendants that some items were old and worn out. With regard to ground three, it was argued that the measure of damages in cases involving fraudulent misrepresentation is to compensate the Plaintiff as far as possible for the damage suffered as a consequence either directly or indirectly of the Defendants wrongful and fraudulent acts. The Defendant has also cross appealed against the judgment of the lower court. Mr. Wright, the learned counsel for the Defendant informed us that he was abandoning ground one as they had agreed to go for assessment. With regard to Jll ground two Mr. Wright asked whether they would adopt the items to be assessed as old and worn out or on the basis of new items. Mr. Mubonda the learned Counsel for the Defendant submits in ground two that the learned trial judge was correct when she held that the value of the items should be at the time the items were removed from the premises in September 2005. With regard to ground three of the cross appeal, Mr. Mubonda submits that the learned judge was correct to order an assessment. We have carefully considered the evidence on record, the submissions of Counsel and the judgment of the lower court. We are satisfied and do accept the principle of "as is basis" as a collateral for warranty. Since the parties are agreed that the process of assessment should proceed before the learned Deputy Registrar, what remains to be resolved are the issues raised in ground 1,2 and 3. In our view, there is no merit in ground 1 and 2 since the damages of the items in issue will be assessed by the learned Deputy Registrar. As regards the order made by the learned trial judge in respect of the claim for mesne profits, we entirely agree with the argument by Counsel for the Defendant and the decision in GF. Construction (1976 Limited vs. Rudnap (z) Limited and Unitechna Limited 1 that mesne profits are damages awarded to a Landlord for Jl2 holding over a tenancy by a tenant. In this case, there was no relationship of Landlord and tenant between the Plaintiff and the Defendant. Nor was there an agreement between them that before completion, the Defendant would pay rent to the Plaintiff. Consequently, the order made by learned trial judge that the Plaintiff was entitled to recover mesne profits against the Defendant in the form of rentals for the 2 months period during which the Plaintiff allegedly carried out repairs to the property cannot stand. We set aside this order accordingly. Since the parties have agreed to go for assessment, we therefore find no merit in the cross appeal and the cross appeal is hereby dismissed with costs to the • Defendant. ~ / F. N. M. Mumba ,_ SUPREME COURT JUDGE SUPREME COURT JUDGE ACTING SUPREME COURT JUDGE