National Housing Authority v Tumelo (Appeal 19 of 2007) [2008] ZMSC 128 (16 May 2008)

IN THE SUPREME COURT OF ZAMBIA Appeal No. 19/2007 HOLDEN AT NDOLA (CIVIL JURISDICTION) B ETWEEN NATIONAL HOUSING AUTHORITY APPELLANT AND CHALITUMELO RESPONDENT Coram: Mumba, Mushabati, JJS, Kabalata, AJS 5th June 2007 and 16th May 2008 For the Appellant: Mr M. Nyirenda of Messrs Kafunda 8s Company For the Respondent: Mr C. K. Chisunka of Messrs Chibangu Chisunka 8s Company JUDGMENT Mumba, JS, delivered the Judgment of the court. Cases referred to: 1. Stickney Vs Keeble (1915) AC 386 2. City of Westminster Council Vs Jarvis (1970) 1 ALL. E. R 943 3. Charles Rickards Limited Vs Oppenheim (1950) 1 K. B 616 4. Tool Metal Manufacturing Company Vs Tungsten Electric Company (1955) 2 ALLE. R657 5. Crown Cork Company (Zambia) Limited Vs Pamela Helen Jackson (1988) Z. L. R 88 6. Woods Vs Mackenzie Hill Ltd (1975) 2 ALL E. R 170 7. Canas Property Co Ltd Vs K L Television Services Ltd (1970) ALL E. R 795 8. Jaffco Limited Vs Nothern Motors Limited (1971) Z. R 75 -J2- 9. Heibutter Vs Hickson (1972) L. R 7 CP 438 Legislation referred to: 10. Supreme Court Rules 1999, Order 13/4/9 Works referred to: 11. George Applebey Contract Law, 2001 12. Halsbury’s Laws of England, Volumes 4 and 27 13. John Burke Osborn’s Concise Law Dictionary, 6th Edition 14. Oxford Dictionary of Law, 1997 Edition This is an appeal against the judgment of the High Court of the 17th March 2006 whereby damages were awarded to the respondent for breach of contract, loss of goods and mesne profits. The respondent, Chali Tumelo sought and bought two houses at the Bennie Mwiinga complex from National Housing Authority, the appellant herein. The appellant is a property developer and had a programme of building houses for a residential complex known as the Bennie Mwiinga complex at the material time. The houses were built by the appellant generally, after a purchaser paid part of the purchase price. -J3- In September 2003, the respondent paid the full purchase price for a high cost house to be built by the appellant, she also paid for a second high cost house in 2004 on the same terms. The agreements were reduced to writing whereby the conditions were set by the appellant as they were building various houses at the Bennie Mwiinga complex for different types of customers. The terms of the contracts which the respondent accepted and signed in September 2003 and February 2004 were that if 60% of the purchase price were paid within 21 days of the offer, the appellant would build the house to completion stage in about 6months. It was also a term of the contracts that the appellant would accept to rectify any defects on the said houses within a specified period. Handover of the houses was to be done once both parties were agreed upon the status of the houses. The respondent was offered properties on plots 22999/22998 and 22994/22995. She paid the full price at K221,370,000=00 and K259,050,000=00 for both properties, respectively, through bank transfers. The first payment for property 22999/22998 -J4- was made in September 2003 soon upon offer and the second payment for property 22994/22995 was made in February 2004, again soon after the offer was made. Both houses were not completed within the agreed period of Gmonths and were not handed over to the respondent according to the terms of the contracts. When attempts were made to handover the same houses to the respondent she found a lot of defects which she demanded be rectified. Finally, the houses were handed over on 30th October 2004 and 26th August 2005, respectively, in both cases, well over the period of 6months from the date of payment of the purchase price. In the meantime, the respondent’s family was offered alternative accommodation in a medium cost house at the same complex from May to July 2004 and again in a bigger house in Ibex Hill from July till October 2004 when thieves broke into the house and stole some household property. At the time the contracts were running and the building of the houses was going on, the respondent was working abroad and only came to Zambia occasionally to follow up on progress -J5- with the appellant. When she arrived in Zambia in July 2004 that is when the house in Ibex Hill was made available. According to the respondent, she had asked for a security guard to be provided and the appellant had agreed but according to the respondent she never saw the security guard. According to the appellant, the security guard was provided whilst the respondent was in Zambia, after she left the countiy the security guard was no longer made available even though her family still occupied the house, that was when the Ibex Hill house was broken into by thieves who stole the respondent’s household goods and damaged her car. The appellant, through its witnesses, explained that the delay in the construction of the houses was caused by a countrywide shortage of cement, a fact which the appellant asserted it had been communicated by letter to the respondent but which was denied by the respondent. The respondent insisted that the security services were supposed to be provided throughout the period when her family remained in the alternative accommodation provided by the appellant. -J6- Throughout her negotiations with the appellant, the respondent sometimes acted through her sister, Yombwe Tumelo, who was PW2 at trial. Some of the terms of the contracts relevant to this appeal were as per following clauses:- a • • • • 4. That National Housing Authority undertakes to handover the completed house to you in six months from the date of payment of the 60%. 10. You may withdraw from the sale, provided you give National Housing Authority one month written notice of your intention to do so. At this point National Housing Authority shall have the right to then advertise and sale the property to the Public, and you shall then be refunded any amount you have paid without interest less 1% to cover administrative costs. The refund will only be done when National Housing Authority finds another buyer and is paid for the property. 15. The defects liability period shall run for nine months from the date of handover of the property to yourself. The defects liability period is the guarantee period in which all defects in this period will be corrected at the contractor’s expense. 17. This conditional offer is only valid for 30 days from the date of offer, and thereafter it will lapse. 18. If you accept this conditional offer, kindly complete, sign and date the form of acceptance below, and return to National Housing Authority, P. O Box 50074, Lusaka. 19. The terms of this conditional offer form part of the Sale Agreement which will be signed by the two parties to this contract.” Because the respondent had paid for the purchase price on cash basis, she was granted 5% discount on both properties. The evidence of DW1, Bwalya Makasa, DW2, Thomas Musonda Kufika and DW3, Baldwin Mbuzi, on behalf of the appellant, in the main, was that the contracts signed by the appellant and the respondent would have been met but for the shortage of cement. When the two houses were ready for handing over, the respondent refused and insisted on rectification of all the defects before she could accept the houses even though the contracts had provided for rectification of defects within a specified period after handover, as was -J8- contained in clause 15. These witnesses also pointed out that it was a term of the contracts that if the client was not happy they were at liberty to opt out but the respondent chose to go on with the project until the houses were completed even though she was aware that the completion period had expired in both cases. The other reason offered for the delay in completing the second house, according to DW2, was that the contractor who was building the house was behind schedule. On the delay in completing the two houses, the learned trial Judge did critically look at the period that it took the appellant to complete the houses. He examined what was meant by a period of “about 6months”. He found that in such a contract, a period of 6months could have meant a month before or a month after, but no more than that. The learned trial Judge found that there was a breach of contract in that both houses were not completed on schedule. The learned trial Judge found that the shortage of cement was not communicated to the respondent as was claimed by the -J9- appellant. On the claim for a refund of the money paid to ZESCO to connect electricity to the two properties, the appellant’s witnesses explained that it was a term of both contracts that the client would pay for ZESCO services, the appellant’s duty was to fix the electrical connections in the two houses. This claim was rejected. On the claim for household goods stolen from the Ibex Hill house, damage to the motor vehicle and the cement stolen at the time the respondent’s family was accommodated in a medium cost house at the Bennie Mwiinga complex, the learned trial Judge found the appellant liable because it failed to provide security. The respondent was also awarded mesne profits between the period when the houses were supposed to be completed upto the time the houses were actually handed over, less the periods when alternative accommodation was provided. The claim for airfares when respondent used to come to Zambia to check on progress was also rejected as remote. -J10- The appellant appealed and filed three grounds of appeal as follows: (( 1. The learned trial Judge in the court below erred in law in finding that the appellant was in breach of the 2 contracts for construction of 2 houses for the respondent as the time of completion/delivery of the houses was not of the essence. 2. The learned trial Judge fell in gross error when he awarded mesne profits in the sum of K3,000,000 per month as this amounted to unjust enrichment having already awarded damages for breach of Contract and, in any event there was no evidence to support the quantum of the award. 3. The learned trial Judge misapprehended the evidence when he ordered that the appellant pays the respondent for the loss of 5 bags of cement plus damages of K500,000 as compensation for the loss suffered by the respondent at her Ibex Hill house as the appellant was not responsible for provision of security to the respondent at the time of the loss. ” -J11- The parties filed heads of argument on which they relied. In supporting the 1st ground of appeal, the appellant submitted that going by the language in which clause 4 and clause 15 of both contracts were couched, time for completion of the houses was not of essence. If time were of essence on the delivery of completed houses, the material clauses would have been couched in a more strict and precise language. It was submitted that the court below erred in interpreting the period of 6months in the manner it did. It was submitted that going by the evidence in the record of appeal, in particular, page 118 lines 19 to 25 and page 126 lines 13 to 21, the appellant could not guarantee completion of the houses within a specified because of the surrounding circumstances and the nature of contracts. It was submitted that the evidence showed that there was a shortage of cement and that the respondent was informed, therefore, in arriving at what was a reasonable time for completing both houses, the nature of the contract should have been considered because it was different from an ordinary mercantile contract where time was ordinarily of essence. -J12- In support of this submission, the case of Stickney Vs Keeble(l) was cited. It was submitted, therefore, that in any case, beyond the period of 6months, in both cases, the respondent lost the right to insist on delivery within 6months when she allowed the appellant to proceed with completion of the houses since she had the power to repudiate the contracts pursuant to clause 10 in both contracts. The respondent’s conduct, it was argued, constituted a waiver which resulted in an estoppel that she could no longer insist on the 6months post payment period for delivery of completed houses. It was pointed out that the respondent did not give notice of a further period of completion date in both contracts after the initial 6months period had elapsed. In support of this submission, the appellant cited the cases of City of Westminster Council Vs Jarvis(2), Charles Rickards Limited Vs Openheim(3) and Tool Metal Manufacturing Company Vs Tungsten Electrict Company(4). Finally, it was submitted that in any case the two houses were completed though they -J13- had some defects which were contained by clause 15 of both contracts by which the appellant was obliged to rectify. The delay in the actual handover was due to the respondent’s insistence that the defects be rectified. Before she could accept the houses, thus, the trial Judge was in error when he found that the delay by the appellant to handover the houses was a breach of contract recognized by law, upon which damages ensued. In response of the first ground of appeal, the respondent submitted that the learned trial Judge was entitled to find that there was a breach of Contract because clause 4 was clear and that in fact the respondent had effected 100% payment of the purchase price in both cases yet there was delay in handing over the houses. It was submitted that the trial Judge’s analysis of the period “about 6months” was correct. In making this submission, the respondent also cited learned Author George Applebey(ll) “...a breach of a warranty gives a right to damages, while allowing the contract to continue.” After referring to several other authorities on the -J14- effect of clause 4 of the contracts, it was finally submitted that the appellant’s contention that completion and delivery of the houses was not of essence was misconceived in law because there was no provision in both contracts for service of notices to suggest other dates or different completion periods, therefore, the undertaking on the part of the appellant to deliver the two completed houses in about 6months remained binding on the appellant. The respondent also cited the case of Crown Cork Company (Zambia) Limited Vs Pamela Helen Jackson(5), where this court held as follows: u (i) Where a contract contains provisions for the giving of notice to complete the right to rescind would arise on failure to comply with such notice. (ii) Where there is no express repudiation by the party in default and where time is not the essence of the contract because a notice to complete has not been properly served, a party can only rely upon implied repudiation if it can be shown that the party in default has so conducted herself as to lead a reasonable person to believe that she would not perform or would be unable to perform the contract n -J15- It was submitted that the holding in the case cited above, was that time was not of essence because the notice provided in the contract was not properly served. It was argued that in the case before the court there was no provision in the contracts to serve any other notices for completion. It was submitted that in any case, even if the contracts had provisions for service of notices for delivery or completion of the houses, that would not have absolved the appellant from the obligation to deliver completed houses in about 6months. The case of Woods Vs Mackenzie Hill Ltd(6) was cited, in particular, the observations of Mergarry J, at page 172, “I do not for one moment think that the inclusion of express provision for completion notices, as now contained in both The Law Society’s conditions and the National conditions of Sale, has the effect of excluding the contractual obligation to complete on the date fixed for completion, or within a reasonable time thereafter.” I We have considered the submissions on the first ground of appeal including the authorities cited. We are of the view that the contractual period in both contracts was set by the -J16- appellant as these two contracts were standard contracts by which people, who wanted their houses constructed, as was the case with the respondent, had no right to negotiate terms, they simply signed and accepted what was presented to them by the appellant. We take judicial notice of the fact that the appellant was in the business of building houses for a long time and that the programme involving the houses paid for by the respondent in this appeal, was well defined. Problems of constructing houses were well known to the appellant yet it stuck its head out on such tight terms in its contracts. After receiving full purchase price from the respondent, the appellant should have applied itself in completing the houses better than it did as the facts show in this case. The issue of non-availability of cement was rejected by the learned trial Judge and rightly so because there was no evidence to show that that fact was communicated to the respondent or even her family. No witness was called from the cement factory or cement manufacturers and retailers to support this assertion by the appellant. Shortage of cement -J17- could not be used as a valid reason for the delay in completing the two houses. On the contrary, the evidence does show that at the time the respondent’s family was placed in a medium cost house in Bennie Mwiinga complex, the respondent was able to purchase cement which she was using to construct a boundary wall around the house at the time the appellant was completing the house which the respondent had paid for at stand no. 22998/22999. That evidence, in our view, shows that cement was available at the material time. That the contractor was behind schedule was neither here nor there. The first ground of appeal therefore fails. In support of the second ground of appeal, it was submitted that the learned trial Judge was in error in awarding damages for mesne profits because the facts of the case show that the respondent was never a landlord in possession; that according to Halsbury’s Laws of England( 12), Fourth Edition, Vol. 27, paragraph 258, the measure of damages for mesne profits was the rent paid under an expired tenancy. It was submitted that the houses -J18- in issue were under construction, it was therefore a gross error in awarding K3,000,000=00 per month for each house for the period of delay; that in the final analysis, awarding damages for breach of contract as well as damages for mesne profits amounted to double compensation which was, in effect, unjust enrichment of the respondent. It was submitted that since the respondent was given alternative accommodation, the award for mesne profits in any event was erroneous. In response to the second ground of appeal, it was submitted, on behalf of the respondent, that in awarding mesne profits at the rate of K3,000,000=00 per month, the learned trial Judge did not fall into error and that such an award did not amount to unjust enrichment because an award of damages for breach of contract was distinct from an award for mesne profits; that it was a notorious fact that rentals for high cost houses in Lusaka were high. It was submitted, therefore, that it was trite law that remedies for breach of contracts comprised rescission or damages; that the claim for -J19- mesne profits was pleaded separately in the writ of summons and in the statement of claim. The sum of K3,000,000=00 per month was endorsed in both documents. The claim was premised on the failure on the appellant’s part to honor contractual obligations to complete and deliver the houses within the period of 6months and that that resulted in loss of profits on the part of the respondent. In support of this submission Osborn’s Concise Law Dictionary! 13) was quoted as defining mesne profits as “ The profit lost to the owner of land by reason of his having been wrongfully dispossessed of his land”. Oxford Dictionary of Law(14), 1997 edition, was also resorted to on the definition of mesne profits and was cited as stating that mesne profits were “Money that a landlord can claim from a tenant who continues to occupy property after his tenancy ends, the amount being equivalent to the current market rent of the property.” The respondent also cited Order 13/49 of the Supreme Court Rules 1999 Edition! 10). -J20- It was finally submitted that the ultimate objective of the two contracts signed by the respondent was possession of both properties at the Bennie Mwiinga housing complex. It was argued that the fact of inordinate delay in completing the two properties on the terms of the contracts was synonymous to wrongful dispossession of the said properties by the appellant, in the circumstances, the claim for mesne profits was a remedy well founded in law and that the rent of K3,000,000=00 per month for a high cost house at Bennie Mwiinga housing complex in Lusaka was not unreasonable. To buttress their submissions, the case of Canas Property Co Ltd Vs K L Television Services Ltd(7) was also cited. Upon examination of the record of appeal, we find that indeed, the two properties were under construction and the respondent was never in possession. There is no evidence either that there was anything in writing by the respondent that her objective was to rent the two properties upon completion. No evidence from any estate agent was adduced to indicate any market value. We agree though that even using -J21- the two properties for living accommodation, depending on the circumstances, would entitle one to mesne profits in the event of a breach, however, we do not agree that the circumstances in this case entitled the respondent to an award for mesne profits because the claim was not substantiated. The second ground of appeal succeeds. In support of the third ground of appeal, it was submitted that the cement that was lost was the property of the respondent although the appellant allowed her to keep the cement in the house under construction by the appellant, that is, property at 22998/22999, there was no duty to provide security on the part of the appellant. The finding of liability in this regard by the learned trial Judge was erroneous, as the same was not supported by evidence. As for liability for the loss of goods at Ibex Hill house, it was submitted that it was not the duty of the appellant to provide security after the respondent had left the country. The letter at page 51 of the record of appeal by the appellant was cited in support. It was submitted that since the loss occurred when the respondent -J22- was not in actual occupation of the house, the loss complained of could not be laid on the appellant. In response to the submissions of the appellant on the third ground of appeal, it was submitted that the respondent was building a boundary wall at the said property which had not yet been handed over to the respondent, thus, the cement was in the custody of the appellant. It was also submitted that at trial, the appellant did not deny that the said cement went missing before the said property was handed over to the respondent. It was pointed out that at page 128 of the record of appeal, the evidence of DW3, in cross-examination, was to the effect that the respondent was permitted to store her cement there while the appellant retained the keys to the property. On security at the Ibex Hill house, the respondent cited correspondence between the parties which showed that the respondent had notified the appellant of her imminent arrival in Zambia and the appellant had offered accommodation at -J23- Ibex Hill with a night guard for the duration of the respondent’s stay at the house. It was submitted that contrary to the appellant’s undertaking on security, there was no night guard at all for the Ibex Hill house. The letters cited appear at pages 49 and 51 of the record of appeal. It was pointed out by the respondent that the security promised was not in form of a bodyguard for the respondent, it was a night guard for the time respondent remained in occupation of the Ibex Hill house, it did not matter that the respondent was not physically in occupation, her family and property were there. The respondent submitted, therefore, that the storage of cement and the provision of a night guard were additional terms to the contracts and were not honoured by the appellant. To buttress this submission, the case of Jaffco Limited Vs Nothern Motors Limited(8), in which the case of Heibutter Vs Hickson(9) was relied upon, was cited. We have scrutinized the evidence on record, in particular, the correspondence between the parties as shown at pages 49, 51 and 54 of the record of appeal. We have also looked at the -J24- evidence of DW3 at page 128 of the record of appeal. It was the position of the appellant that the Ibex Hill house was comparable to the high cost house paid for by the respondent and the undertaking to provide a night guard was to assure the respondent of the appellant’s recompense for failing to deliver on time. The respondent was justified to rely on the appellant’s undertaking and was in order to keep her family and goods in the Ibex Hill house. It is not even necessary to examine whether or not the cement issue at Bennie Mwiinga complex and the security issue at Ibex Hill were new terms because it is clear that these were new terms to the contracts because the failure of the appellant created difficulties for the respondent and the appellant had to bear the consequences. The contracts on both properties were drawn on the appellant’s own terms as we have already pointed out, when appellant made new terms to cushion the effects of its failure to complete construction of the houses on time, the terms became binding on the appellant. The third ground of appeal also fails. -J25- The respondent filed notice of cross-appeal whereby she sought a variation on the order for mesne profits in respect of the property at 22999/22998 Bennie Mwiinga complex, that the damages should include reasonable mesne profits for the period when the respondent’s family occupied the medium cost house. On the cross-appeal, the respondent submitted that the arguments on mesne profits be adopted for the period she was provided with a medium cost house in Bennie Mwiinga complex, a house which was not the same as a high cost house which she had paid for which appellant had failed to complete on time. It was submitted that half the rate claimed for mesne profits , that is KI,5000,000=00, per month, be awarded to the respondent during the period her family occupied the medium cost house. The respondent submitted that the award for mesne profits be varied to include the half rate claim. The appellant filed written heads of argument entitled, “HEADS OF ARGUMENT AND RESPONSE TO CROSS- -J26- APPEAL”, although the response to the cross-appeal was not separated from the other submissions, we take it that the response on mesne profits in the second ground of appeal is repeated in response to the cross-appeal. The cross-appeal is for a variation of the awards on mesne profits so as to include the period the respondent’s family spent in the medium cost house. We have already discussed the ground of appeal on mesne profits, that the claim were not substantiated. The cross-appeal cannot succeed, it is dismissed. In sum, the appeal has only succeeded against awards for mesne profits, which are set aside, all other awards are upheld. The cross-appeal has also failed. We make no order for costs. -J27- F. N. M MUMBA SUPREME COURT JUDGE C. S. MUSHABATI SUPREME COURT JUDGE ACTING SUPREME COURT JUDGE