Maverick Properties Limited v MC Construction & General Dealers (2016/HP/2373) [2023] ZMHC 40 (6 March 2023)

t IN THE HIGH COURT OF ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: 2016/HP/2373 MA VERIK PROPERTIES LIMITE PLAINTIFF AND MC CONSTRUCTION & GENERAL DEALERS LIMITED DEFENDANT Coram: Mikalile, J this 6 th day of March, 2023 For the Plaintiff: Mr. K. M. Simbao - Messrs Mulungushi Chambers For the Defendant: Mr. H. M. Mulunda - Messrs L. M Chambers JU.. DGJVCBNT Cases referred to: 1. Ngulube v. Malipenga SCZ Judgment No. 3/2015 2. Fercometal SARL v Mediterranean Shipping Co SA (1988) 2 All ER 742 (H. L) 3. Gideon Mundanda v. Timothy Mulwani & Others (1987) ZR 29 (SC)3 Texts referred to: I. Chitty on Contracts Volume 1 (30th edition) 2. Halsbury's Laws of England (5th edition) volume 22, 2012 Introduction I will begin by apologizing for the delay in the delivery of this Judgment. It was as a result of pressure of work. (1) At the center of this dispute is a botched sale of property known as stand number 36354, Lusaka, belonging to the defendant. The plaintiff rescinded the contract of sale entered into with the defendant when a third party made a claim to the property but subsequently sought to reverse. the rescission. The defendant refused to go ahead with the transaction and further refused to refund the deposit received hence this suit. Pleadings (2)The Plaintiff commenced the action on g th December, 2016 by way of Writ of Summons and Statement of Claim claiming the following reliefs: (i) Specific performance of contract of sale made between the plaintiff and defendant dated 20th October, 2016 for the purchase by the plaintiff of the defendant's property known as stand number 36354, Lusaka. (ii) A refund of K 320,000.00 which amount was paid as deposit to the defendant's advocates by the plaintiff and which amount was to be held by the said advocates as stakeholders for the parties pending completion. (iii) Interest damages for breach of contract (iv) Costs (3) The statement of claim reveals that the plaintiff is a prospective purchaser of property known as stand number 36354, Lusaka belonging to the defendant. The parties entered into a formal contract of sale regarding the said property on 20th October, 2016. A sum of K 320,000.00 was released to the defendant's advocates in pursuance of the contract to be held by them as stakeholders for the parties pending completion. (4) By a letter dated 26th October, 2016, the plaintiff decided to rescind the contract of sale on grounds that there was a third party purporting to have title to the same property. On further investigations, it was established that there was no other certificate of title issued in respect of the piece of land in issue. (5) Upon being satisfied that the certificate of title was clean and that the issue of squatters was not serious, the plaintiff wrote to the defendant of its decision to reverse the rescission. The defendant, however, has refused to go ahead with the transaction and is holding on to the plaintiff's deposit. (6) For the foregoing reasons, the plaintiff claims specific performance of the contract of sale or in the alternative a refund of K 320,000.00 plus interest at bank lending rate from 1st November, 2016 to the date of payment and a sum of K 110,000.00 being legal fees (10% of the purchase price) plus cost. (7) The defendant entered appearance on 19th December, 2016. The d efendant asserted that the plaintiff was not a prospective purchaser. It was averred that the contract of sale was entered into after several meetings between the parties. On 11th October, 2016, the defendant's advocates sent a copy of the certificate of J3 title to the plaintiff's advocates. The plaintiffs advocates, however, sent their employee to physically inspect the original title. (8) Following searches at the Ministry of Lands which confirmed that the defendant is the owner of the property, a . draft contract of sale was prepared by the defendant's advocates. On 17th October, 2016, the amended contract of sale was delivered to the plaintiff's advocates. The plaintiff executed the contract on 20th October, 2016 and delivered it via a letter dated 21 st October together with the bank transfer letter. (9) On 26th October, 2016, however, the plaintiff's advocates wrote a letter rescinding the contract on the ground that their client was confronted by another Indian who claimed to have purchased the property earlier. ( 10) It was also averred that the plaintiffs advocates made numerous calls to the defendant's advocates insisting that the plaintiff had rescinded the contract and wanted to be refunded the deposit in the sum of K320,000.00. (11) On 31 st October, 2016, the defendant's advocates advised the plaintiff's advocates to furnish the requisite documents for obtaining consent to assign within 5 days insisting that the property \. Vas not encumbered but the plaintiff declined. (12) In furtherance of the contract of 20th October, 2016, the defendant had agreed that 10% of the consideration price of K J4 1,100,000.00 as legal fees for the conveyance be deducted from source. It was agreed between the defendant and its advocates that the defendant would meet all disbursements which as at 8 th November, 2016 were at K 8,000.00. (13) By a letter dated 8 th November, 2016, the defendant advised the plaintiff that it had accepted the rescission of the contract and had thus treated the plaintiff as being in breach of the contract. As such, the defendant advised that it would refund the deposit amount subject to the following deductions: K 110,000.00 as legal fees for the conveyance; K 8,000.00 as disbursements; K 110,000.00 as 10% forfeiture as a result of breach of contract. (14) Further, the defendant is now made to incur further expenses in terms of legal fees for the within suit in the sum of K 50,000.00 for the entire matter and disbursements in the sum of K 10,000.00. (15) The defendant denied the assertion that its advocates are stakeholders for the parties pending completion. It was averred that there is no clause in the contract requiring the defendant's advocates to retain the money till completion nor is there a clause stopping disbursement of funds to the defendant. (16) According to the defendant, the plaintiff admitted 1n its statement of claim that it acted in breach of contract when it terminated the contract of sale dated 20th October, 2016 by JS rescission via a letter dated 26th October, 2016 as there was no ground for doing so. The plaintiff through its advocates had already conducted a search or ought to have conducted a search at the Ministry of Lands before entering into the contract. ( 17) That there were squatters is not only otiose but a fabrication as the property in issue is unencumbered bare land with no squatters and the plaintiff knew or ought to have known before entering into the contract. Thus, the plaintiff's decision to reverse the rescission is of no consequence as the plaintiff of its own volition terminated the contract albeit in breach and the defendant cannot go ahead with the transaction. (18) It was further the defendant's averment that on 17th November, 2016, the plaintiff purported to revive the contract and chose to ignore the letter by the defendant's advocates of 8 th November stipulating deductions to be made from the deposit. The plaintiff commenced this action having clearly indicated that it was not willing to receive the reduced refund and purporting to revive a rescinded contract without the consent of the defendant. ( 19) According to the defendant, the plaintiff is not entitled to the relief of specific performance as it voluntarily terminated the contract, thus coming to equity with dirty hands. The defendant has been put to great expense and inconvenience as it has to meet legal expenses for the failed conveyance and this legal action. Further, the defendant had to forego offers from other J6 prospective purchasers in order to offer the property to the plaintiff. (20) The plaintiff acted in breach when it rescinded the contract as it had no justifiable grounds. The property is not in any way encumbered. By reason of the breach, the defendant has suffered damage and inconvenience as it has to meet legal fees for the conveyance and K 50,000.00 being the agreed upfront payment of this legal suit. Further, the defendant is entitled to compensation at 10% of the consideration of K 110,000.00. (21) The defendant counterclaims the following: i) K 110,000 as legal fees to be paid to the vendor's advocates being 10% of purchase price. ii) K 110,000 deductible as compensation for breach (per Law Association Conditions of Sale. iii) K 8,000 as disbursements for the conveyance as at 8 th November, 2016 iv) K 60,000 being the agreed legal fees and disbursements paid to the defendant's advocates for the matter hereof. v) Interest vi) Any other relief the court may deem fit vii} Costs. (22} The plaintiff filed a reply and defence to counterclaim on 11th June, 2017. (23) It was averred that upon the discovery of a fake certificate of title and presence of some squatters, the plaintiff was entitled to inquire more into the defendant's title before proceeding with the transaction. (24) Upon advise that the defendant's advocates were a reputable firm and that moneys in the transaction would be held by the firm as stakeholders until completion, the plaintiff gave instructions for the transaction to proceed to completion. (25) It was contended that there was no agreement between the parties that the plaintiff would pay the defendant's legal costs and disbursements. According to the plaintiff, no security for costs has been ordered and the defendant was not entitled to retain the money until after being sued for the refund of the balance which remained after the unjustified deductions. (26) The plaintiff thus denied the claim and deduction of K 50,000.00 as deposit paid by the defendant to his advocates in the absence of an order for security for costs. (27) The plaintiff denied the allegation that the defendant suffered damages or that it is entitled to any monetary claims. Evidence at trial (28) Each party called 1 witness. Plaintiffs case (29) The plaintiffs witness (PW) was Mubarak Hussein Patel, a director in the plaintiff company who testified in line with the statement of claim. He clarified that the contract price was K 1,100,000.00. (30) After a few days, they came across a duplicate title of the same piece of land and where at a loss as to which was the correct document. PW identified the title at page 26 of the plaintiff's bundle of documents as the one given by the defendant and the one at page 33 as the one from the agent. The documents had different certificate of title numbers. (31} According to PW, their advocates sought clarity over the issue and eventually asked for a refund of the deposit of K320,000. The defendant's advocates then wrote saying the plaintiff had no basis to cancel the contract and went on to tabulate the deductions they would effect totaling K 228,000.00. Nothing was said about the balance of K 92,000.00. (32) It was PW's testimony that they never heard anything thereafter and their lawyer requested to complete the sale. This was via a letter dated 17th November, 2016 at page 14 of the plaintiffs bundle. Efforts to complete the sale proved futile .. (33) PW prayed for an order to complete the sale and costs. He also told court that the money had been held for no reason hence seeking interest as well. (34) When cross examined, PW admitted that the defendant had accepted the offer and forwarded a copy of the title to the plaintiff J9 so that the plaintiff could conduct a search. He also admitted that he signed the contract of sale and that there were no issues up to this stage. He further admitted that they found that there was no other title issued in respect of the piece of land. He confirmed that the defendant had engaged lawyers who do not work for free. (35) Further in cross examination, PW admitted to rescinding the contract in the face of red flags. He stated that the letter at page 11 entreats that allegations were baseless and asked the plaintiff to respect the contract. (36) PW clarified that the plaintiff was claiming K 110,000.00, which is 10% of the purchase price. ·He admitted that the property was being sold free of encumbrances and searches established this fact. The contract was signed after due diligence. (37) PW confirmed that at the time of the transaction, the land was bare. He further confirmed that the second title deed he saw also had the defendant's name and not an Indian's name. It was, however, established that no other title was issued in respect of the land. (38) In re-examination, PW told court that the defendant's letter asking the plaintiff to respect the contract came after the plaintiff's letter rescinding the contract. Defendant's case JlO (39) Defence Witness (DW) was Mcleans Sinyangwe, a Director in the defendant company. It was his evidence that he availed the certificate of title to the plaintiff's agent who conducted a search at Lands after which the plaintiff was ready to proceed with the transaction. He then engaged counsel of record who drafted the contract of sale and down payment was made. (40) However, a few days after executing the contract, DW was informed that the transaction would not proceed as there was another person claiming the same property. According to DW, he pleaded with the plaintiff to avail the person making a claim but to no avail. The plaintiff instead asked for a refund. (41) After some weeks, the plaintiff intimated that it wished to go on with the transaction. However, at this point, DW had already changed his mind as he had managed to source the money he had wanted to get from the sale, elsewhere. He then instructed his lawyer to deduct the money he was supposed to pay him from the plaintiff's deposit, a move the plaintiff did not agree with. (42) As a result of the failed transaction, he incurred legal fees as shown by the retainership agreement dated 12th October, 2016 in the defendant's supplementary bundle of documents in the sum of K 110,000.00. Following this suit, he incurred a further K 60,000.00 as per retainer dated 19th December, 2016. J11 (43) In concluding, DW told court that there were no squatters on the land. It was bare land. He prayed that the claims in the counterclaim be granted. (44) Under cross examination, DW stated he was not shown anything to prove that someone else was making a claim over the land. DW stated that his certificate of title is numbered 2184 7 and is dated 1st April, 2016. The other title is dated July, 2014 and numbered 304774. He then admitted that the property did have two titles. He also admitted that he saw the second title at the time the plaintiff was rescinding the contract. He also said the presence of two titles justified one not to proceed with the transaction. (45) DW testified that he reported the second title deed to the police in November. The matter was investigated and that title was found to be forged. The plaintiff's agent was informed accordingly. (46} DW denied the assertion that he was in breach by refusing to proceed with the sale. He said he had sourced money elsewhere. (4 7) DW stated that according to special condition 10, each party was to bear own costs meaning he was supposed to pay his lawyer. He, however, instructed his lawyers to get Kl 10,000 as legal fees from the deposit because there was a breach. The money he should have paid his lawyer was supposed to come from the transaction which did not materialize. J12 (48) DW admitted that he did not receive any bill from the lawyers. He also admitted that the works for which he instructed them was not complete as the sale did not go through. (49) Still in cross examination, DW stated that he instructed his advocates to deduct the K 8,000.00 and K 10,000.00 after a discussion with them. He said he never got a bill for disbursements so he does not know how amounts were arrived at. The total deductions were K 228,000.00. He is aware that the balance of K 92,000.00 was not returned to the plaintiff. {50) In re-examination, DW maintained that the plaintiff was not justified to rescind the contract. (51) This is all the evidence heard in this matter. Submissions (52) Both parties filed written submissions for which I am most grateful. I shall not reproduce the submissions but will ref er as and when required. Analysis and decision (53) From the evidence adduced, it is undisputed that a contract of sale was entered into by the parties for the purchase by the plaintiff of property known as stand number 36354 Lusaka belonging to the defendant. J13 (54) The contract price was K 1,100,000.00 and the plaintiff paid a deposit of K320,000.00 via bank transfer. (55) A few days after the deposit was made, the plaintiff wrote to the defendant stating that it had decided to rescind the contract and conditions of sale. It cited the existence of a third party and further demanded a refund. (56) The defendant did not make the refund but decided to treat the recession as breach and went on to deduct legal fees plus compensation totaling K 228,000.00. The defendant held on to the balance of K 92,000.00. (57) According to the defendant, there was no basis for the rescission and was therefore justified to deduct legal costs. The plaintiff of course denies this assertion arguing that it had every right to react as it did especially in the face of prevalent fraud in land transactions. (58) Thus, the issues for consideration as I see them are as follows: i) Whether or not the plaintiff was in breach of the contract of sale. ii) Whether or not the defendant was entitled to effect the deductions or withhold the deposit in the manner that it did. Whether or not the plaintiff was in breach (59) Both counsel referred to the case of Ngulube v. Malipenga1 which holds that as part of his due diligence, an advocate should J14 conduct a detailed search of the Lands Register and verify the authenticity of the title deed relating to the property in issue. (60) It is common cause that the plaintiff did conduct due diligence and established that the land was unencumbered. The record shows that when it stumbled upon the second title deed, the plaintiff went ahead to write (on 26th October, 2016) that it had decided to rescind the contract. It appears that the defendant was not given an opportunity to make the necessary verifications. As it turns out, the second title was not authentic. (61) I am of the considered view that the plaintiff acted prematurely and there was absolutely no basis for the recession. (62) In the English case of Fercometal SARL v Mediterranean Shipping Co SA2 it was held that: Where a party to a contract wrongfully repudiated his contractual obligations before he was required to perfonn those obligations, the innocent party could either affinn the contract by treating it as still in force or treat it as being conclusively discharged, but if he elected to affinn the contract he was not absolved from· tendering further perfonnance of his own obligations under the contract. Accordingly, if a repudiation by anticipatory breach was fallowed by affirmation of the contract the repudiating party could escape liability if the affirming party was subsequently in breach of the contract. (63) On the facts of the case at hand, the defendant chose to the affirm the contract through its letter of 31 st Octa ber, 2016 and asked the plaintiff to respect the contract. The defendant gave J15 the plaintiff time (5 days) to submit its certificate of incorporation and ZRA TPIN number in order for the defendant to process the application for consent to assign. (64) It is evident that the plaintiff did not avail those documents by 5 th November, 2016, a clear indication that it had opted to stand by it decision to rescind the contract. This means that the plaintiff had made it impossible to abide by special condition No. 3 of the con tract of sale. (65) It is established at law that a breach occurs when one party fails to perform at all or does less than is required or does not perform satisfactorily or wrongly repudiates his obligation under the contract. (See Chitty on Contracts) (66) In light of the foregoing, and to answer the first question posed, the plaintiff was in breach of contract. (67) Upon the failure of the plaintiff to avail the documents required to obtain consent, the defendant was at liberty to treat itself as discharged from the contract, which it did. {68) In the circumstances, the plaintiff cannot claim specific performance. Specific performance is an equitable remedy and can only be successfully claimed by one with clean hands. The contract was cancelled due to the plaintiff's own action, that is premature decision to rescind. The defendant effectively communicated the cancellation in its letter of 8 th November, 2016 and further by its refusal to proceed with the sale. J16 Whether or not the defendant was entitled to effect the deductions or withhold the deposit {69) It was argued on behalf of the plaintiff that the withholding of the deposit is premised on the argument that the 1st defendant accepted the plaintiff's rescission of the contract. However, by holding on to a good part of the deposit, the defendant cannot be said to have accepted the rescission. (70) I have already made a finding that the defendant ultimately accepted the rescission and withheld the deposit to cover the moneys it thought it was entitled to. (71) According Halsbury's Laws of England volume 22 paragraph 5752 : Whether or not a breach of contract gives rise to a right to terminate, it gives the injured party a right of action for damages. Of course the amount of damages recoverable depends on what has been promised and performed, because the primary purpose of damages for breach of contract is to offer the promisee the value of the peiformance. Whilst the innocent party is entitled to damages as of right, to recover more than · nominal damages he must prove loss. The contract may provide for a sum payable as liquidated damages in the event of breach. (72) While I agree that the plaintiff was 1n breach and the defendant is entitled to damages on that account, in view of the above authority, I am of the view that the defendant went about recovering the damages and legal fees the improper way. As stated, there was no agreement between the parties that provided for the recovery of damages 1n the manner that the defendant did. (73) The defendant ought to have taken out an action for the recovery of damages. Only the court can determine the damages due under the circumstances. (74) The answer to the second question posed, therefore, is that the defendant was not entitled to withhold the deposit and to effect the deductions as it did. If follows, therefore, that the claim for the recovery of the deposit has merit. (75) The plaintiff also prayed for interest. An award of interest is premised on the fact that· the claimant has been kept out of his money and it is the duty of the court to award interest unless there is good reason for the exercise of its discretion not to do so. (76} Section 4 of the Law Reform (Miscellaneous Provisions) Act states: In any proceedings tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rates as it thinks fit on {he whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment. (77) In light of the foregoing authority, and having found that the plaintiff has been kept from its money, it is only just that I order interest. J18 The counterclaim (78) The defendant counterclaims K 110,000 as legal fees to be paid to the vendor's advocates. However, I agree with the plaintiff's argument that the defendant's advocates were entitled to 10% of the contract price as legal fees upon successful completion of the transaction. The contract was abruptly brought to an end before all other duties could be performed by the defendant's advocates. (79) I note the plaintiffs argument that the contract and conditions of sale provided that each part shall bear its own costs. However, as rightly argued by the defendant, the condition is predicated on the assumption that the contract would be performed to completion. It will, therefore, be unfair to expect the defendant to foot the legal fees of the botched sale, botched at the instance of the plaintiff. (80) The plaintiff is liable for the costs incurred in the failed sale. What I do not agree with is 100% payment to the defendant's advocates for work that was partially done. That amounts to unjust enrichment and there is no justification for such an award. (81) The defendant is also claiming K 110,000 deductible as compensation for breach. This has been addressed above. This amount can only be determined by the court. J19 (82) As guided by Halsbury's Laws, whilst the innocent party is entitled to damages as of right, to recover more than nominal damages he must prove loss. I have carefully perused the record and note that damages have not really been proved. Thus, a nominal sum is recoverable under the circumstances. {83) As for the claims of K 8,000 as disbursements for the conveyance as at 8 th November, 2016 and K 60,000 being the agreed legal fees and disbursements paid to the defendant 1s advocates for the matter hereof, I am of the view that the defendant cannot whimsically recover the same as it did. Costs are in the court's discretion. When awarded, the parties are at liberty to either agree on the costs to be paid by the successful party or proceed to taxation. (84) I note that both parties prayed for costs. I am, however, of the view that this was unnecessary action that could have been avoided had both parties conducted themselves properly. Thus, none of them deserves an award of costs. Conclusion (85) The plaintiff rescinded the contract and was in breach of contract. As such, the remedy of specific performance is not available to it. The plaintiff is, however, entitled to a refund of the deposit paid. J20 (86) In light of the breach, the defendant is entitled to recover nominal damages and legal fees incurred by it in the failed sale agreement. Final Orders (i) The plaintiff shall be refunded the deposit of K 320,000.00 with interest at the average of the short-term deposit rate from the date of writ until judgment and thereafter at the ruling commercial bank lending rate until full settlement. (ii) The defendant is awarded damages for breach of contract in the sum of K 15,000.00. (iii) The defendant is awarded legal fees for the failed agreement to be assessed by the Registrar. (iv) Each party shall bear its own costs in this action. Leave to appeal is granted. Delivered at Lusaka this 6 th day of March, 2023 ~~ J21