Court name
Supreme Court of Zimbabwe
Case number
SC 49 of 2005
Civil Appeal 46 of 2004

Nyika Investments v Zimasco Holdings and Another (46/04) (SC 49 of 2005, Civil Appeal 46 of 2004) [2005] ZWSC 49 (23 October 2005);

Law report citations
Media neutral citation
[2005] ZWSC 49










DISTRIBUTABLE
(45)








Judgment
No. SC 49/05


Civil
Appeal No. 46/04











NYIKA
INVESTMENTS v (1) ZIMASCO HOLDINGS (2)
ZIMASCO CONSOLIDATED ENTERPRISES LIMITED








SUPREME
COURT OF ZIMBABWE


CHIDYAUSIKU
CJ,ZIYAMBI JA & MALABA JA


HARARE,
MAY 23 & OCTOBER 24, 2005








E
T Matinenga
, for the
appellant





J
C Andersen
, for the
respondents












ZIYAMBI
JA: On 4 January 2002, the appellant issued summons out of the
High Court against the respondents claiming,
inter
alia
, specific
performance of an agreement allegedly concluded between the parties
on 26 February, 2001. It was alleged that the agreement
was
contained in two documents annexed to the declaration as “A” and
“B”.








Prior
to that, on 6 December, 1999 the appellant had sought an order in the
High Court interdicting the respondents from disposing
of their
shares to a company called Zim Alloys or any other person.
CHATIKOBO J, who heard the application, dismissed it on the
basis
that the appellant had failed to prove the existence of the agreement
they sought to rely on, both agreements being inchoate.
Thus it was
held that the appellant had failed to prove a
prima
facie
right deserving
of protection by an interdict.









On March 12, 2002, the
respondents excepted to the summons and declaration on the grounds
that it disclosed no cause of action. It
was alleged that Annexures
“A” and “B” to the declaration constitute inchoate agreements
not capable of enforcement more
particularly in that:





“Plaintiff’s
summons and declaration constitute an abuse of process having regard
to judgment HH 53/01 in Case No. HC. 17919/99 between
the parties
against which no appeal was noted”.











The
High Court upheld the exception and dismissed the appellant’s
claims with costs on a legal practitioner and client scale.
Aggrieved by the order of the High Court, the appellant has appealed
to this Court.








The
issue to be determined in this appeal is whether the two documents
annexures “A” and “B” on which the appellant’s claim
is
based, constitute a binding agreement between the parties. If the
documents constitute binding agreements then the learned Judge
was,
of course, wrong in upholding the exception.








It
was the appellant’s contention that looking at the agreements one
cannot find that they are inchoate without hearing evidence.

However, as Mr Andersen
contended on behalf of
the respondent, the appellant faces the difficulty that the parole
evidence rule does not permit evidence to
be led of the agreement.
See
Johnston v Leal
1980 (3) SA 927 A at
943 B where the rule was expressed by CORBETT JA as follows:-





“It
is clear to me that the aim and effect of this rule is to prevent a
party to a contract which has been integrated into a single
and
complete written memorial from seeking to contradict, add to or
modify the writing by reference to extrinsic evidence and in
that way
to redefine the terms of the contract.





To
sum up, therefore, the integration rule prevents a party from
altering, by the production of extrinsic evidence, the recorded terms
of an integrated contract in order to rely upon the contract as
altered”.








Thus,
the appellant can only establish a cause of action by pleading a
binding agreement. If the agreement pleaded is inchoate,
then there
is no cause of action.








I
turn to examine the agreement Annexure “A” which the appellant
alleges is complete. (Annexure “B”, so it was submitted
by Mr
Matinenga,
relies on Annexure “A” for its completeness).





Annexure
“A” is a document headed “Heads of Agreement”. It
commences as follows:






“The
following represent the main points of agreement reached between (the
parties)”.









Paragraph 1
of the agreement provides:








“The
purpose of this agreement is to set out heads of agreement. The
agreement given on behalf of Nyika is subject to Nyika having
received a signed copy of the audited accounts for the year ended 30
September 1996 and being satisfied that the information contained
therein does not prejudice its decision to invest in Zimasco”.








Clearly
the receipt of the audited accounts by Nyika and his satisfaction
therewith was a condition precedent to the agreement coming
into
effect.








Paragraph 2
provides:








“The
intention of the parties is to incorporate these terms and conditions
in a legally drafted agreement which
inter
alia
will incorporate
the following warranty by Zimasco.”








The
term
inter
alia

on its own indicates that there were terms, other than those stated
in the agreement, which were to be incorporated in the legally
drafted agreement. This is another indication that the agreement
under discussion was not yet complete.





Paragraphs 3,
4 and 5
of the agreement provide:










“3. Zimasco Consolidated
Enterprises Limited (ZCE), the sole shareholder of Zimasco has
communicated its wish that the Board of Directors
of Zimasco proceed
with the localisation and indigenisation of 50% of the Company as set
out in 5 below.





4. In
pursuance of this, it is the intention of the Board to achieve this
goal by issuing additional shares in Zimasco to Zimbabwean
indigenous
individuals, Zimbabwean indigenous institutions and on to the
Zimbabwe Stock Exchange, thus diluting the ZCE shareholding.



No payment will be made or accrue
to ZCE as a result of this localisation process other than through
normal dividend payments.






5. On completion of the exercise,
the percentage shareholding relative to the Company’s enlarged
share capital will be as follows:-








Shareholding Percentage Comment






ZCE 50 Diluted Shareholding






Nyika
Group 27 Private placing at terms


Tributors, advantageous
to the



Co-operatives indigenous
investors



and Organised



Indigenous



business 5






Nyika
22





Workers
Trust 5 Donation by ZCE – no payment






Management
Share






Options
3 Payment into Zimasco at market


value







Stock Exchange 15 Payment
into Zimasco at market



Issue value (with preference
given to indigenous individuals and institutions)






----


100”






The
intention expressed herein to issue additional shares to Zimbabwean
indigenous individuals and institutions had clearly not been
fulfilled. That much is confirmed by paragraph 5 which sets out
what the percentage shareholding would be upon completion of the
exercise.









The learned Judge in the court a
quo
commented on
clause 4 as follows:






“What
seems to be quite clear from the above clause is that the goal of
localization was yet to be achieved. The issuing of additional
shares in Zimasco to Zimbabwean indigenous individuals, Zimbabwean
indigenous institutions and on the Zimbabwean Stock Exchange,
and
thus diluting the ZCE shareholding, was a process yet to be done and
completed.






It
therefore admits of no doubt the identification of shareholders was
another process which was yet to be done.





Moreover
government’s seal of approval had not yet been granted since the
plaintiff had to agree to a process of indigenisation
acceptable to
government or else Zimasco would be taken over by government”.











Clearly,
the agreements are incomplete. The following statement of the law
taken from the Law of Contract in South Africa 3
rd
Edition by R H Christie at p 36 is applicable here.





“Especially
in complicated or protracted negotiations it is not uncommon for the
parties to record the progress they have made in a
partial agreement,
thus clearing the points on which they are agreed out of the way and
facilitating discussion on the points that
remain outstanding. If
agreement is eventually reached on the outstanding points and a
complete contract drawn up and signed, the
prior partial agreement is
usually forgotten, but if for one reason or another the intended
contract is never concluded one party
will sometimes seek to hold the
other to the partial agreement. Obviously he cannot be permitted to
do so, because although the
partial agreement may have taken the form
of an accepted offer it lacked
animus
contrahendi
, being
designedly incomplete or provisional”.





See
also
Printing &
Packaging (Private) Limited & Ors v Lavin & Anor

1996(1) ZLR 82 (S).





It
is not surprising, then, that the respondents asserted in the court
a
quo
, as now before
this Court, that the continuation of the proceedings by the appellant
constituted an abuse of court process in the
light of the clear
findings in the judgment of CHATIKOBO J, against which there was no
appeal by the appellant, to the effect that,
firstly, the two
documents represented inchoate agreements which were subject to
further negotiations hence the appellant could not
claim to have
concluded a binding agreement prior to the processes mentioned being
complete; and secondly, the facts advanced by
the respondents in
contradiction of the appellant’s case cast such a serious doubt on
the existence of a binding agreement that
it could not be said that a
prima facie
right, though open to doubt, had been established and it was doubtful
whether the appellant would succeed at the trial.








On
the question of costs, no misdirection has been alleged and there is
none. In the result I conclude that the judgment of the
court
a
quo
is unassailable
and the appeal is accordingly dismissed with costs.














CHIDYAUSIKU
CJ: I agree.





























MALABA
JA: I agree.























Dube
Manikai & Hwacha
,
applicant legal practitioners





Mark
Stonier
, respondents’
legal practitioners