Court name
Supreme Court of Zimbabwe
Case number
SC 9 of 2005
Civil Appeal 90 of 2003

Zimbabwe Electricity Supply Authority v Smith and Others (90/03) (SC 9 of 2005, Civil Appeal 90 of 2003) [2005] ZWSC 9 (09 February 2005);

Law report citations
Media neutral citation
[2005] ZWSC 9







REPORTABLE
(6)


Judgment
No. SC. 9/05


Civil
Appeal No. 90/03








ZIMBABWE
ELECTRICITY SUPPLY AUTHORITY





v
DARRYL SMITH AND FIFTY-FIVE OTHERS








SUPREME
COURT OF ZIMBABWE


SANDURA
JA, ZIYAMBI JA & GWAUNZA JA


HARARE,
FEBRUARY 10, 2005








L
Mazonde
, for the appellant





J
B Colegrave
, for the respondents






SANDURA
JA: This is an appeal against the judgment of the High Court which
granted the respondents’ application for an order
compelling the
appellant to transfer to them certain houses purchased by the
respondents from the appellant. After hearing both
counsel, we
dismissed the appeal with costs, and indicated that the reasons for
that decision would be given in due course. I now
set them out.






The
factual background in this matter is as follows –





At
the relevant time the respondents were employees of the appellant
(“ZESA”) and were based at Kariba where they occupied houses
belonging to ZESA.





In
March 2001 the respondents were offered the right to purchase from
ZESA the houses which they were occupying. The offer letter
reads
as follows:






“Dear Sir/Madam,






Re: OFFER TO PURCHASE …
(the house occupied)






This
note serves to inform you that the Authority is offering you the
‘right of first refusal’ to purchase the above-mentioned
property
at a selling price of $ … .






Please
advise us whether you are interested in buying it or not. Your
response should reach us no later than three weeks from the
date
indicated above. In your response, please indicate your method of
payment and the source of finance to enable the Agreement
of Sale to
be signed. If your response fails to reach us within three weeks
from the above date, it will be assumed that you are
not interested
and the offer will be extended to other members of staff.





Please
note that apart from the purchase price, there are other costs
involved in the transaction which include –





Transfer
and Conveyancer’s fees – about 7% of the purchase price.






If
you feel that the selling price is higher than what you expect, you
are free to advise the Chief Estates Officer who will then
appoint an
independent Estate Agent to value the property at your own cost.






If
you are not interested in purchasing the house, the Authority will
give you two months notice to vacate the premises.”






All
the respondents informed ZESA timeously that they wished to purchase
the houses they were occupying.






Thereafter,
agreements of sale were prepared, and were duly completed and signed
by ZESA and by the respondents. Some of the respondents
had to sell
their motor vehicles, cattle and other property at low prices to
ensure that sufficient funds were raised timeously to
avoid losing
the right to purchase the houses.





Once
the purchase price had been paid, ZESA wrote to its legal
practitioners instructing them to attend to the transfer of the
houses
on its behalf. The letter reads as follows:






“Dear Sir,





Re:
TRANSFER OF STAND …


FROM
ZESA TO …






Could
you please attend to the transfer of the above-mentioned property.
Attached please find a copy of the Agreement of Sale, a
receipt being
proof of payment of the full purchase price, and the original title
deed.”





Thereafter,
the legal practitioners wrote to all the respondents calling upon
them to pay the transfer fees as well as the stamp
duty that was
payable. All the sums demanded by the legal practitioners were paid
timeously by the respondents.





In
addition, the consent of the responsible Minister, which was required
in terms of the Electricity Act [
Chapter 13:05],
had already been obtained.





However,
when all the necessary papers were ready for lodging with the
Registrar of Deeds, and the conveyancers asked ZESA to sign
the Power
of Attorney to pass transfer, ZESA declined to do so, alleging that
the houses in question were not supposed to be sold.





A
resolution was subsequently passed by the ZESA Board “to withdraw
the sale of Authority houses in Kariba that should have been
retained
for operational purposes, and reimburse the affected employees
accordingly”.





ZESA
then purported to cancel the agreements of sale and refund the money
which had been paid by the respondents, but the respondents
refused
to accept the refunds.





Thereafter,
on 8 March 2002, the respondents filed a court application in
the High Court seeking an order compelling ZESA to
transfer to them
the houses which they had purchased from ZESA. That order was
granted on 12 February 2003. Aggrieved by
that result, ZESA
appealed to this Court.





The
main issue which arose for determination by this Court was whether
there was any legal basis on which ZESA was entitled to cancel
the
agreements of sale. I do not think that there was.





The
basis on which ZESA purported to cancel the agreements of sale was
set out in paras 2, 5, 6, 7 and 9 of its opposing affidavit.
The
relevant parts of those paragraphs read as follows:






“2. The chronology of events as
narrated by Mr Smith is basically correct. It is also correct
that the respondent (ZESA) has
withdrawn instructions for the
conveyance of the properties in question to the applicants (now the
respondents). This withdrawal
is the correction of a very big
mistake on the part of respondent’s Management. …





5. In
or about September 2000, the respondent’s Management decided to
sell certain immovable properties around the country, which
properties were either not crucial to its operations and/or could not
fit into the process of unbundling the respondent. Such properties
are commonly referred to as ‘non-designated’. …





6. The
respondent’s Board having resolved to sell non-designated houses,
and having obtained the requisite Ministerial authority,
the
implementation was then left to the respondent’s Management to
identify the non-designated properties and offer same for sale
in
accordance with specifications from the parent Ministry






It
was at this stage that a terrible mistake was made, that of offering
the houses at Kariba to sitting tenants. ..






7. The houses at Kariba are
integral to the operations of the power station, and should never
have been offered to the applicants
or anyone for that matter. …






9. The sale of the houses in
question, as I stated before, was a terrible mistake on the part of
the respondent’s Management.
This mistake ought to be understood
in (the) light of the fact of it happening at a time of relative
confusion within the respondent’s
ranks, with people being moved
from one office or department of the mother body to this or other
division or department of one of
the several business units. …”





Before
commenting on the above averments, I would like to indicate that on
22 October 2004 a court application was filed in
this Court on
behalf of the respondents, seeking leave to place additional evidence
before this Court. The evidence was in the
form of five documents
whose existence the respondents did not know of at the time the
matter was heard in the court
a quo
on 27 September 2002, and for a considerable period thereafter.
The application was not opposed and, accordingly, at the hearing
of
the appeal it was granted with no order as to costs.





Having
said that, I would like to comment on the averments made by ZESA in
its opposing affidavit.





In
my view, the allegation by ZESA that once Ministerial authority had
been obtained it was left to ZESA’s management to identify
the
non-designated houses and offer them for sale cannot be true. I say
so because when the Minister’s consent to the sale was
granted on
13 September 2000 the houses to be offered for sale (i.e. the
non-designated houses) had already been identified.





Three
of the documents placed before this Court as part of the additional
evidence clearly indicated that before 13 September
2000, when
the Minister’s consent was granted, the question of which houses
were to be retained (i.e. designated houses) and which
houses were to
be sold (i.e. non-designated houses) was canvassed. The most
important of these documents was a memorandum, dated
21 June
2000, from Mr G T Woods, ZESA’s station manager at
Kariba, to the acting corporate services director.
The memorandum
set out the precise location of each house which was to be retained
as well as the occupant’s post.





In
my view, the averments in ZESA’s opposing affidavit indicated that
the only basis relied upon by ZESA in the purported cancellation
of
the agreements of sale was that its management had made a mistake in
selling the houses in question. What was relied upon was,
therefore, a unilateral mistake, a mistake which exists when one
party to the contract is mistaken but the other is not.





However,
even if it were accepted that there was a unilateral mistake on the
part of ZESA, I do not think that such a mistake would
justify the
cancellation of the sale agreements. I say so because it is clear
from a perusal of the sale agreements that ZESA agreed
to sell and
did sell the houses in question to the respondents who paid the
purchase prices in full. That is what the parties
intended doing
and that is what they did.





As
WESSELS  JA said in
South
African Railways and Harbours v National Bank of South Africa Ltd

1924 AD 704 at 715-716:





“The
law does not concern itself with the working of the minds of parties
to a contract, but with the external manifestation of their
minds.
Even therefore if from a philosophical standpoint the minds of the
parties do not meet, yet, if by their acts their minds
seem to have
met, the law will, where fraud is not alleged, look to their acts and
assume that their minds did meet and that they
contracted in
accordance with what the parties purport to accept as a record of
their agreement.”





The
law relating to the effect of a unilateral mistake on a contract has
been set out in a number of cases.





In
George v Fairmead (Pty)
Ltd
1958 (2) SA 465
(A) FAGAN  CJ said the following at 471 A-D:





“When
can an error be said to be
justus
for the purpose of entitling a man to repudiate his apparent assent
to a contractual term? As I read the decisions, our Courts,
in
applying the test, have taken into account the fact that there is
another party involved and have considered his position. They
have,
in effect, said: Has the first party – the one who is trying to
resile – been to blame in the sense that by his conduct
he has led
the other party, as a reasonable man, to believe that he was binding
himself? … If his mistake is due to a misrepresentation,
whether innocent or fraudulent, by the other party, then, of course,
it is the second party who is to blame and the first party is
not
bound.”





In
National and Overseas
Distributors Corporation (Pty) Ltd v Potato Board

1958 (2) SA 473 (A) SCHREINER  JA considered the effect of
a unilateral mistake on a contract and said the following at
479 E-H:





“If
the respondent had been a natural person who had accepted a tender
according to its terms, there is no doubt that a contract would
have
been made when the acceptance was communicated to the tenderer, as by
posting it. It would not be possible for such a natural
person, if
he repudiated, to escape liability by proving that he had posted the
wrong letter or the like. That follows from the
generally objective
approach to the creation of contracts which our law follows. …





No
other approach would be consistent with fairness or practicality.
Our law allows a party to set up his own mistake in certain
circumstances in order to escape liability under a contract into
which he has entered. But where the other party has not made any
misrepresentation and has not appreciated at the time of acceptance
that his offer was being accepted under a misapprehension, the
scope
for a defence of unilateral mistake is very narrow, if it exists at
all. At least the mistake (
error)
would have to be reasonable (
justus)
and it would have to be pleaded.”





In
our own jurisdiction, the same principles were stated by this Court
in
University of
Zimbabwe v Gudza
1996
(1) ZLR 249 (S). The headnote in that case reads as follows:





“… where
an offeror mistakenly makes an offer that is accepted by the offeree,
the offeror will only be able to rescind the contract
if (a) the
offer was induced by fraudulent misrepresentation by the offeree; or
(b) the mistake was a material one and the offeree
knew or ought to
have known that the offer had been made in error.”





Finally,
in
The Law of Contract
in South Africa
4 ed
at 365, Professor Christie considered the effect of a unilateral
mistake on a contract and stated as follows:





“Unless
the mistaken party can prove that the other party knew of his
mistake, or that as a reasonable person he ought to have known
of it,
or that he caused it, the
onus
of showing that the mistake was a reasonable one justifying release
from the contractual bond will not be easy to discharge.”





Applying
the above principles to the facts of the present case, we were
satisfied beyond doubt that ZESA had failed to discharge
the
onus
of showing that the alleged mistake was a reasonable one justifying
the cancellation of the sale agreements.





In
the circumstances, the appeal was devoid of merit and was, therefore,
dismissed with costs.


ZIYAMBI
JA: I agree.


GWAUNZA
JA: I agree.


Muzangaza,
Mandaza & Tomana
,
appellant's legal practitioners


Coghlan,
Welsh & Guest
,
respondents' legal practitioners