OLD MUTUAL LIFE ASSURANCE COMPANY
OLD MUTUAL PROPERTY INVESTMENT CORPORATION
ZIMBABWE EXPRESS SERVICES (PVT) LTD
GLOWEAVE (PVT) LTD
HIGH COURT OF ZIMBABWE
HARARE, 24 June and 31 August 2011
Opposed Court Application
T Mpofu,for the applicants
N Moyo, for the respondents
GOWORA J: At the commencement of the hearing of this matter Mr Mpofu, on behalf of the applicant, moved for an amendment of the draft orders to include a prayer for the eviction of all respondents from the premises leased by each respectively. There being no objection to the application the amendments to the draft orders was granted.
The applicants herein, despite the apparent difference in name, constitute one entity. This entity owns certain immovable properties of a commercial nature in Bulawayo. As the applicant appeared to be the same entity, it was requested that the court deal with the applications at the same time. It also transpired that the respondents, except for Mnyandu all shared the same principal shareholder and in fact the decisions regarding rentals and payments in respect thereof were emanating from the same administrator. The respondents all occupy the immovable properties under different lease agreements. The respondents are entities with the one common feature, their controlling shareholders are the same. The executives managing the corporate respondents tend to deal with them as one when it comes to the lease arrangements with the applicant. It is for these reasons that the two matters were heard at the same time.
On 15 September 2010, under Case No HC 6501/10 the applicant caused to be issued out of this court an application for an order wherein it for prays for the confirmation of cancellation of the agreement of lease with Merspin. It also prays for payment of the sums of US$427,520.45 and US$12,267.24 together with interest thereon at the prescribed rate. In addition the applicant seeks an order for the payment of holding over damages in the amounts equivalent to current rentals and operating costs plus interest at 5% per annum from 1 September 2010 to the date of payment in full. Finally the applicant prays for costs on the higher scale.
The basis for the claim is set out in the founding affidavit as follows. In or about October or December 2002, the respondent, Merspin, which was then under judicial management, entered into a written agreement of lease with the applicant in respect of certain immovable premises, namely Stands 13772 and 3618 Bulawayo Township wherein it undertook to pay rent for its occupation for the same. At the time rent was payable in Zimbabwe currency. With the advent of the multi-currency regime in 2009 the parties renegotiated the rent. For the period 1 January 2009 to 30 June 2009 the parties agreed that rental would be US$10,073.76 plus Value Added Tax. For 1 July 2009 to 30 September 2009 the monthly rental was fixed at US$16,249.00 plus Value Added Tax. From 1 October 2009 to 31 December 2009 Merspin was obliged to pay a monthly rental of US$21,122.40 plus Value Added Tax thereon. In respect of the last period from 1 January 2010 to 31 December 2010 the agreed rental remained at US$21,122.40 monthly.
The applicant contends that Merspin has failed to pay such sums as were agreed by the parties and has made token payments of US$1,739.13 in respect of rent, and US$9,760.87 in respect of operating costs. After the payments described above it is the contention of the applicant that Merspin owes the applicant the sum of US$427,520.45 in respect of arrear rental and US$12,267.24 for operating costs. Applicant further contends that it has made demand for payment but Merspin has indicated that due to the poor performance of its business and a general lack of resources it is unable to meet its obligations. The applicant has therefore cancelled the agreement and has sought an order confirming the cancellation as well as payment of the outstanding sums and the ejectment of Merspin from the leased premises.
Under Case No HC 6502/10 the applicant has filed a court application against Zimbabwe Express Services (Pvt) Ltd (Zimbabwe Express) and Gloweave (Pvt) Ltd (Gloweave) also for the confirmation of the cancellation of the lease agreements. In addition the applicant also sought payment of the following sums, as against Zimbabwe Express US $5 436.76 and US $2 934.17 and interest at the prescribed rate from 1 September 2010 to date of payment. As against Gloweave, the applicant sought payment of US $192 696.89 and US $18 381.19 together with interest at the prescribed with effect from 1 September 2010 to date of payment. In addition the applicant has cited one Anele Mnyandu for the payment of amounts claimed by applicant from Zimbabwe Express on the basis of a deed of suretyship executed by Mnyandu in favour of the applicant for the due payment by Zimbabwe Express of its indebtedness under the lease agreement, such payment being sought jointly and severally against Zimbabwe Express and Mnyandu, the one paying the other being absolved.
The applicant has averred in the founding affidavit that with effect from I January 2009 to 1 January 2010 it was agreed and it became the obligation of Zimbabwe Express to pay a monthly rental of US$225.00 and operating costs in such amount as the applicant would notify the respondent and Value Added Tax on both sums. It is further contended by the applicant that the rental from 1 February 2010 was reviewed by the parties and it was agreed that Zimbabwe Express pay an annual sum of US$9,598.16 to be paid by no later than 30 April 2010. Zimbabwe Express, it is further contended, was unable to pay the agreed sum by 30 April resulting in the parties altering the arrangement so that it was obliged to pay monthly rental of US$825.00 and Value Added Tax with effect from 1 February 2010 to 31 December 2010. Zimbabwe Express was also provided with a parking bay for which it was required to pay US$40 monthly.
The applicant contends that Zimbabwe Express has failed to meet its obligations as detailed above. A schedule attached to the applicant’s papers reveals that a total sum of US$5,436.76 is alleged to be owed in respect of unpaid rentals. Operating costs are reflected as US$2,934.17.
As regards Gloweave it is the case for the applicant that the parties concluded an agreement of lease in November 2007 in respect of a portion of Lot 3 Stand 5033A Steeldale Khami Road Bulawayo. In respect of the period 1January 2009 to June 2009 it was agreed that monthly rental would be in the sum of US$4,604.74 together with Value Added Tax. The applicant avers that for the period 1 July 2009 to 30 September 2009 monthly rental was agreed in the sum of US$7,427.00 plus Value Added Tax and for the period 1 October 2009 to 31 December 2009 the agreed monthly rental was fixed at US$ 9,655.10 plus Value Added Tax. In the period between 1 January 2010 and 31 December 2010 the monthly rental remained fixed at US$9,655.10 plus Value Added Tax.
The applicant avers that notwithstanding the agreement between the parties as stated above, the management of Gloweave refused to sign an addendum to the lease agreement containing the agreed rentals. The applicant further contends that on 5 March 2010 its representatives addressed a letter to D Nkomo an Executive Director for both Gloweave and Zimbabwe Express in terms of which confirmed the arrangement in respect of the rentals for the stated period. The letter was received by the said Nkomo on the same date and he appended his signature thereto.
The third respondent under this case number is Anele Mnyandu. The applicant avers in the founding affidavit that Mnyandu bound herself as surety and principal co-principal debtor jointly and severally with Zimbabwe Express for the due performance of its indebtedness under the lease agreement. Consequently, she was liable jointly and severally with it for the payment of the sums of US$5,436.76 in arrear rentals and US$2,934.17 for outstanding operational costs.
All the respondents oppose the application. Apart from Mnyandu all the other respondents have raised a point in limine to the effect that there are numerous fundamental disputes of fact which militate against this court deciding the matter on the papers before it. In so far as Merspin is concerned, the contention is made that there has been no agreement on the rental to be charged for the period July 2009 to December 2010. It contends that the applicant has made proposals which it has countered. Additionally it is contended that there was no written lease agreement between the parties. It prays that the application be dismissed on alleged dispute of fact.
In respect of Zimbabwe Express and Gloweave the averment made is that there has been no agreement between the respondents and the applicant in respect of rentals payable for the period February to December 2010. It is further alleged that the applicant had made proposals to which the respondents had made counter offers which applicant had not responded to. Consequently the quantum of rentals and operating costs had not been agreed to. On that basis the respondents pray that the application against them be dismissed without proceeding to the merits.
Indeed it is correct that there is no written agreement of lease in respect of Merspin. The lease agreement for Zimbabwe Express was set to terminate on 31 October 2009 and the one for Gloweave on 31 October 2010. The agreements are however of no assistance as regards the amounts of rents to be paid. They were all concluded prior January 2009, which marks the date when the currency regime changed from Zimbabwe dollar to multi-currencies.
It is argued by the applicant that there are in fact no disputes of fact as rentals were agreed by the applicant and all the three corporate tenants. The applicant argued that there are sufficient documents on the papers that establish what it was that the parties agreed to in terms of rent for the properties it was leasing to each of the respondents.
The positions of the respective respondents are the following. Zimbabwe Express states that the lease expired on 31 October 2010 and the applicant had offered a new lease agreement to which the respondent had made a counter offer. It was still awaiting the response to the counter offer. It denied that the quantum of rentals had been agreed for the period 1 February 2010 to December 2010 notwithstanding that the parties had agreed to extend the lease to 31 December 2010. It is suggested by Zimbabwe Express that when it received the letter with the draft lease it realised that the applicant was proposing to increase rentals by 387.55%. It was then that it made a counter proposal a set out in the letter of 21stApril 2010 to which the applicant has still not responded.
Regarding the meeting referred to in the letter of the 5thMarch 2010, it admits that there was a meeting and it was agreed at the meeting that the respondent would pay the arrears and a new draft lease would be prepared by the applicant for consideration by Zimbabwe Express. It states that the respondent paid an amount of US$10 180 for operating costs and rent when the sum should in fact have been US$7 245. It contended that the quantum had been incorrectly computed by the applicant. The contention was made that the applicant had unlawfully appropriated a large portion of the money paid toward operating costs instead of rent. Most importantly, however, there is a concession is made that the rent was in arrears and that the respondent had shown good faith by paying the said arrears. It also states that the applicant was not entitled to cancel the lease as rentals were still being negotiated.
The respondents all rely on the letter of 21stApril 2010 which it seems was written in respect of all the respondents raising issues to do with the increases in rent proposed by the applicant in the draft agreements. All of them in the said letter make counter-claims as to the rental each is prepared to pay under the proposed lease agreements. In so far as Zimbabwe Express is concerned, in the letter it proposes that it pays rental of US$225.00 per month for the period 1stFebruary 2010 to 31stDecember 2010 instead of the US$872.00 suggested by the applicant.
I turn now to deal with the defence proffered by Gloweave. It denies that rental for the period 1 July 2009 to 30 September 2009 was agreed in the sum of US$7,427.00 plus value added tax. It further denies that rental for the period 1October 2009 to 31 December 2009 was agreed in the sum of US$9,655.10 plus value added tax and that rental for 1 January 2010 to 31 December 2010 was fixed at US$9,655.10 as suggested by the applicant. It avers that its position was set out in the letter of 21stApril 2010 written by D Nkomo to the applicant on behalf of Gloweave and Merspin. In so far as Gloweave is concerned, the letter contains two paragraphs which are of assistance in the resolution of this dispute. Therein the writer stated the following:
“Clause 4: Rental Amount: We note that the rental has been increased for the period 1stJuly 2009 to 30thDecember 2009 from US$4,604. 74 per month to US$7,427.00 per month meaning a 161.29% increase and a further increase to US$9,655.10 meaning a further 130% increase aggregating over 209% over the year. The increase in rental amount is too high and unsustainable and therefore we counter offer the same rental of US$4,604.74 from I July 2009 to 31 December 2010.
Clause 6: The rental is calculated on month by month basis and therefore the security deposit should be equivalent to a month’s rental and not a quarter.”
Indeed the letter in question does query the increase in rental from US$4,604.74 per month to US$7,427.00 per month. The additional increase to US$9,655.10 does not escape comment in the letter. A counter offer for the respondent to pay the going rent of US$4,604.74 is made. It however admits that rentals for January 2009 to June 2009 had been agreed at US$4,604.74 plus value added tax. It denies that rentals for other periods up to December 2010 had been agreed and fixed.
The position adopted by Merspin is exactly the same as the other two. It admits that the rental for 1 January 2009 to 30 June 2009 was agreed at US$10, 073.76 per month plus value added tax. It denies that the rental for the period extending from 1 July 2009 to 30 September 2009 was agreed at US$16,249.00 as averred by the applicant. It denies further that from 1 October 2009 up to 31 December 2010 the parties had agreed on a monthly rental of US$21,122.40. It makes reference to a letter dated 21 April 2010 written by D Nkomo allegedly challenging the entitlement of the applicant to raise the level of rentals. In the same letter of 21 April 2010 written on behalf of Merspin, an issue is raised on the level by which the monthly rental has been increased from US $10,073.76 to US $16, 248.00 per month for the period 1stJuly 2009 to 30 September 2009. The further increase to US$21,122.40 is also queried. It is suggested that the respondent pay instead the rental of US$10,073.76 for the period 1 July 2009 to 31 December 2010.
Mr Mpofu on behalf of the applicant submitted that the substance of the letter of 21 April 2010, a copy of which was written in respect of each of the respondents, was that the respondents were seeking or attempting to negotiate the rentals from July 2009 going forward and that this was not possible. He also suggested that there was no evidence that the rentals for July 2009 to December 2009 were ever put in issue. He submitted that what evidence there was on record constituted an admission of liability on the part of each of the respondents. Mr Mpofu contended that the respondents had all admitted breaching their respective leases by being in arrears. Such breach, he suggested, entitled the applicant to cancel the lease agreements and further to require that they all be evicted from the premises.
On 5 March 2010 the applicant addressed a letter to D Nkomo an executive director for Merspin and made reference to a meeting held on the same day with the said D Nkomo, Z Chizura, Mrs G Mukahanana and T Ngara. The meeting was held to discuss the outstanding rentals for Merspin, Gloweave and Zimbabwe Express. The letter sought to confirm that the representatives for the respondents had explained the problems that they were encountering during the year 2009 and that a new investor had been brought in and further to that, that the respondents were committed to meet their obligations under the various lease agreements. The letter then went on to tabulate the indebtedness of each of the three under the lease agreements. Arrear rentals for Merspin amounting to US$285 772.12 and operating costs in the sum of US$9,023.42 and those for Gloweave US$ 128 924.20 in arrear rental and US$12 287.63 for operating costs had to be paid by 19 March 2010. In respect of Zimbabwe Express the letter indicated that arrears for rent amounted to US$5,092.54 and operating costs were in the sum of US$2,703.42 which amounts had to be paid by 5 March 2010. In terms of that letter, once the arrears of rent for Zimbabwe Express had been paid the applicant was prepared to conclude an annual lease with Zimbabwe Express at an annual rental of US$9, 598.16 which had to be paid by 30 April 2010. The letter concluded by stating that new lease agreements would be drawn up for signature by the parties based on the agreed rental up to 30 June 2010.
All three respondents accept that rentals for January to June 2009 had been agreed. In respect of Gloweave, the total rental for the period in question amounted to US$32,027.50. The cumulative total sum being claimed by the applicant including interest is US$192 692.89. Of this sum the respondent has paid an amount of US$3,200.00. It is clearly in default of its obligations under the agreement of lease.
When the position of Merspin is examined, the period of January 2009 to June 2009 the rent had been agreed. The total rental required by the applicant for that period is US$36,495.02. Mespin has only paid US$1,739.13.There can be no dispute on these figures that it has breached its obligations under the lease by failing to pay rent at least for that period that it admits that rent had been settled between the parties.
The position regarding Zimbabwe Express is not as clear cut as the other two. According to the applicant Zimbabwe Express is indebted in the sum of US5,436.76 for arrear rentals and US$2934.17 in respect of operating costs. During the period at issue the respondent had paid US$6,092.54 towards rentals and an amount of US$4,087.46 towards operating costs. In the opposing affidavit filed on its behalf, the respondent states that it cleared the arrears that had accumulated even though the amount constituting the arrears had been wrongly computed. This statement is made in answer to an averment by the applicant that the respondent had failed to pay accrued monthly rentals timeously, operating costs and rental for a parking bay. Indeed a letter dated 5 March 2010 had been written to all three respondents requiring them to pay off all arrears of rentals. When the letter was written the arrears that Zimbabwe Express owed were as follows US$5,092.54 for rent and US$2,703.42 for operating costs. It is pertinent to note that the breach alleged by the applicant has been admitted to the effect that Zimbabwe Express had accumulated arrears which it paid. It matters not whether the said arrears were in respect of operating costs or rentals, it was obliged in terms of the lease to pay both timeously. It failed to do so.
In Parkside Holdings (Pvt) Ltd v Londoner Sports Bar HH 66/05 PATEL J had this to say:
“The failure to pay rent on time is critical, not only in the case of a statutory tenant but also in the case of a contractual lease……In both cases, the lessee’s failure to pay rent timeously amounts to a major breach of the lease justifying its cancellation and the ejectment of the lessee. (See Kerr, supra, at pp 92 & 96-97).”
An enquiry to the respondents’ counsel as to the proof of payment in respect of the agreed rental resulted in an answer that there was no such proof on the papers before me. As submitted by Mr Mpofu there can be no issue where there is no dispute. The respondents admit being in arrears in respect of rentals and are thus in breach entitling the applicant to an order confirming the cancellation of the lease agreements and the ejectment of the respondents from the same.
It only remains for me to decide on whether the applicant has made out a case for payment of the arrears being claimed. As part of its papers the applicant has filed a schedule reflecting the rentals charged for specific periods ending at August 2010, the amounts paid and the balances being claimed. The applicant has on the same schedule tabulated the amounts allegedly owed as operating costs. This schedule has to be read in conjunction with the letter of 5 March from the applicant to the respondents. In the letter, the indebtedness of Zimbabwe Express is stated to be US$5,092.54 for arrear rent and US$2,703.42 for operating expenses. In the schedule the amounts do not change vastly, being reflected as US$5,436.76 for rent and US$2,943.17 operating costs.
For Merspin the letter states the arrears as at 5 March as US$285 772.12 for arrear rentals and US$9 023.42 for operating costs. In the schedule the balance owed by the respondent for October 2009 up to August 2010 is reflected as US$267,198.36. Added to this is the cumulative total from January 2009 to September 2009 in the sum of US$125,566.12. Operating costs are reflected as US$12,267.24. After adding interest the total claimed from Merspin as arrear rentals is US$427,520.45.
Arrears for Gloweave were reflected in the letter as US$128,924.20 in respect of rental and US$12,287.63 for operating costs. In the schedule the cumulative total owing as at the end of August 2010 is US $192,945.89. Operating costs are indicated as US$18,381.19.
It is fair to say that none of the respondents responded to the letter from the applicant in which the arrears were tabulated. If any of them responded to the same none has bothered to produce to this court such response. In the absence of denial it therefore has to be accepted that the amounts being demanded by the applicant in terms of the schedule described above were admitted. As such there is no evidence by the respondents, or more precisely none has been produced to show that rentals set July 2009 to December 2009 were ever put in issue by the respondents. On 29 January 2010 one N Ncube, acting on behalf of Gloweave and Merspin addressed a letter to N Ngara for the applicant admitting liability in respect of arrear rental and proposing to pay off the arrears at the rate of US$30 000 every fortnight. The arrangement was to cover both Glweave and Merspin. These arrears would have included rentals from July 2009 to December 2009. It is my view that this letter puts paid to the contention by the respondents that rentals from July 2009 to December 2009 had not been fixed. If such was the case then there is no doubt that there would not have been an unequivocal acceptance of arrears and an offer to settle the same at specified sum. The rentals set for the period July to December are the same amounts allegedly agreed by the parties according to the applicant. Since I have found that the rentals for July 2009 to December 2009 had not been queried by any of the respondents, it stands to reason therefore that there is no issue in regard to those of January to August 2010. I find therefore that the applicant has established that the sums claimed as arrear rentals and operating costs are due and payable by the respondents.
It only remains to deal with the alleged liability of Mnyandu for the indebtedness of Zimbabwe Express. On 15 November 2007 Anele Mnyandu executed and signed a deed of suretyship for the due and proper fulfilment of all obligations of Zimbabwe Express (Pvt) Ltd as surety and co-principal debtor. In her opposing affidavit she admits having bound herself as surety for the due performance of its obligations by Zimbabwe Express. She avers however that the lease agreement terminated on 31 October 2009 and that whilst it was renewed for a brief period there had been no proper agreement between the applicant and Zimbabwe Express in respect of quantum and operating costs. On that basis she prays that she is not liable to the applicant and prays for the claim against her to be dismissed with costs.
I have found that the lease agreement was renewed in that rentals were agreed even though Zimbabwe Express refused to sign the addendum. In any event whether the lease was renewed or not is not the issue. The issue is whether or not Zimbabwe Express owes any monies to the applicant under the lease agreement. In terms of the deed Mnyandu undertook to pay “any debt or liability from whatever cause arising and in particular arising from or out of or in terms of an agreement of Lease between the landlord and the tenant, or any renewal, amendment, breach or cancellation of that lease and in particular any agreed or imposed increase in rental.”
My understanding of that clause leads me to conclude that as long as the applicant claims money from Zimbabwe Express under the lease agreement and if the court finds that Zimbabwe Express is liable to pay to the applicant such monies, and as long as those monies remain unpaid, then Mnyandu is legally bound together with Zimbabwe Express for the due payment of such indebtedness until it has been settled in full.
In the premises it is my finding that the applicant is entitled to an order in terms of the amended draft. I will issue an order as follows:
CASE NO HC 6501/10
IT IS HEREBY ORDERED THAT:
- The cancellation of the lease agreement between Old Mutual Life Assurance Company Zimbabwe Ltd and Merspin Ltd be and is hereby confirmed and consequently the respondent (Merspin), and all those claiming occupation through it, be and is hereby ordered to vacate the leased premises, namely Stands 13772 and 3618 Bulawayo Township, upon service of this order failing which the Sheriff for Zimbabwe or his lawful Deputy be and is hereby authorised to evict it from the same.
- Merspin shall pay to the applicant;
- The sums of US427,520-45 and US$12,267-24
- Interest on the above sums at the rate of 5% per annum calculated from 1 September 2010 to the date of payments in full,
- Holding over damages in the amounts equivalent to current rent and operating costs plus interest at 5% per annum from 1 September 2010 to the date of payment in full, and
2.4 Costs of suit on a scale of legal practitioner and client.
CASE NO HC 6502/10
IT IS HEREBY ORDERED THAT
- The cancellation of the lease agreements between Old Mutual Property Investment Corporation and the Zimbabwe Express Services (Pvt) Ltd be and is hereby confirmed.
- Consequent thereto the respondent (Zimbabwe Express Services (Pvt) Ltd, and all those claiming occupation through it, be and is hereby ordered to vacate the leased premises, namely Shop No 3 Old Mutual Centre located at Stand No 236 Bulawayo Township upon service of this order failing which the Sheriff for Zimbabwe or his lawful Deputy is hereby authorised to evict the respondent from the said premises.
- Zimbabwe Express Services (Pvt) Ltd and Anele Mnyandu shall, jointly and severally the one paying the other to be absolved, pay to the applicant the sums of US$5,436.76 and US$2,934.17 together with interest thereon at the prescribed rate from 1stSeptember 2010 to the date of payment in full.
- The respondents shall, jointly and severally, the one paying the other to be absolved pay the applicant’s costs of suit on a scale as between legal practitioner and client.
- The cancellation of the lease agreement between Old Mutual Property Investment Corporation (Pvt) Ltd be and is hereby confirmed.
- Consequent thereto, the respondent, Gloweave (Pvt) Ltd, and all those claiming occupation through it, be and is hereby ordered to vacate the leased premises, namely, Lot 3 of Stand No 5033A Steeldale Kame Road, Bulawayo, upon service of this order failing which the Sheriff for Zimbabwe or his lawful Deputy be and is hereby authorised to evict the respondent and all those claiming through it from the leased premises.
- The respondent shall pay to the applicant the respective sums of US$192,692.89 and US$ 18,381.19 together with interest thereon at the prescribed rate calculated from 1stSeptember 2010 to date of payment in full.
3 The respondent shall pay the applicant’s costs on a scale as between legal practitioner and client.
Gill, Godlonton & Gerrans, applicant’s legal practitioners
James, Moyo-Majwabu and Nyoni respondents’ legal practitioners