Court name
Supreme Court of Zimbabwe
Case number
SC 47 of 2006
Civil Appeal 140 of 2005

Nerger Properties (Pvt) Ltd. v R Chitrin & Company (Pvt) Ltd. (40/05) (SC 47 of 2006, Civil Appeal 140 of 2005) [2006] ZWSC 47 (12 November 2006);

Law report citations
Media neutral citation
[2006] ZWSC 47










REPORTABLE
ZLR (43)


Judgment
No. SC 47/06


Civil
Appeal No. 140/05








NERGER
PROPERTIES (PRIVATE) LIMITED





v





R
CHITRIN & COMPANY (PRIVATE) LIMITED








SUPREME
COURT OF ZIMBABWE


CHIDYAUSIKU
CJ, CHEDA JA & ZIYAMBI JA


BULAWAYO,
JULY 31 & NOVEMBER 13, 2006








E.T.
Matinenga
,
for the appellant





R
Fitches
,
for the respondent








CHEDA
JA: The respondent was a tenant of a commercial property owned by a
company known as Potential Investments (Private) Limited,
the sixth
respondent in the original High Court case (hereinafter referred to
as “Potential”). The company had five shareholders,
one of whom
was Mrs Humpage.






The company
was generally administered by one of its directors a Mr Reymond Paul
Louw, through a company under his control named
F & CS Accounting
(Private) Limited (“F & CS”). F & CS also administered
certain immovable property owned by Potential
known as Jemeson
Buildings, situated at the corner of Jason Moyo Street and Sixth
Avenue, collecting rentals from the tenants and
dealing with the
tenants and their leases in general.






F & CS
employed a bookkeeper named Sheena Zurnamer who dealt directly with
Potential’s immovable property.






The
appellant, Nerger Properties (Private) Limited, entered into an
agreement of sale with the directors of Potential in respect
of the
shareholdings and loan accounts of Potential.






The
respondent contested this sale at the High Court and got a judgment
in its favour on the basis that it had a right of first
refusal to
acquire the property from Potential. The High Court ordered that
transfer of the property and its shares to the appellant
be stopped.
It is against this decision that the appellant appeals.





At the High
Court the respondent’s case, according to the founding affidavit of
Raphael Howard Chitrin (hereinafter referred to
as “Chitrin”) was
as follows -





He is
the director of R. Chitrin & Company Zimbabwe (Private) Limited,
a company registered according to the laws of Zimbabwe,
which has
registered offices at No. 68, Jason Moyo Street in Bulawayo.







On 28 January
1997 the respondent and Potential entered into a lease agreement in
terms of which the respondent hired a portion of
Stand 188 of
Bulawayo Township Lands at the corner of Jason Moyo Street and Sixth
Avenue. Potential was represented by Louw who
was authorised by a
resolution of Potential’s directors.







On 23 April
the respondent received a notice addressed by F & CS Accounting
Services to all its tenants, inviting offers for the
purchase of the
whole of Stand 188 Bulawayo Township (hereinafter referred to as “the
property”). Chitrin immediately telephoned
Louw and reminded him
of the fact that previously he had verbally agreed to grant to the
respondent the right of first refusal should
the property come up for
sale.







Mr Louw had
agreed to this a year before. Since he used to deal with Mr Louw on
matters pertaining to the property, Mr Louw had
agreed that the
respondent would have the right of first refusal if the premises ever
came up for sale and it was implied that the
right could be exercised
whether the sale was by way of a sale of the property or the shares
and any loan account in the company.







Mr Louw
acknowledged that he had indeed given that right but thought it fair
to make an offer to all the tenants. At that time there
was no
specific time limit within which the offer was to be accepted and at
that stage the offer was for the purchase of the property
and not the
shares in the company. He later telephoned Louw and asked for a
copy of the Deed of Transfer. Louw telephoned a few
days later
asking about Chitrin’s offer and was once again reminded of the
right of first refusal. Chitrin also asked for the
list of tenants
of the property and the rentals they were paying.







On 7 May 2003
Chitrin received from Louw the information that he had requested.
Chitrin was also asked to make a proposal, if the
respondent was
interested in purchasing the shareholding in Potential, within
fourteen days.






Chitrin
advised Louw that he was going to South Africa and requested Louw to
await Chitrin’s return.






On his return
he telephoned Louw and was advised that another tenant was also
interested in the property and was pressing Louw on
the matter.
Louw asked Chitrin to revert to him by Wednesday 25 June 2003.







On Friday 20
June 2003 Chitrin received a letter from Zurnamer advising that the
sellers were looking for at least $100 000 000,00
net and would
require at least $130 000 000,00. In that letter Chitrin was asked
to make an offer before 1 pm that day as the other
party was sending
a cheque with its offer.







Although
Chitrin says this other party turned out to be the sixth respondent,
this is obviously an error as it appears this is a reference
to the
appellant who was at the time the seventh respondent.







Louw had also
advised Chitrin that the appellant’s representatives were members
of the Affirmative Action Group who were exercising
undue pressure on
Louw to sell the property to them.







Upon Chitrin’s
instructions, the respondent’s legal practitioners made a written
offer on 20 June 2003 to purchase both the property
and the entire
shareholding of the company which owned the property for $151 000
(
sic).







The letter was
delivered by Chitrin personally at about 1 pm on 20 June 2003 to the
offices of F & CS Accounting. Chitrin was
told by Zurnamer that
Louw was in his office with some people at the time. Louw later
telephoned Chitrin about 4.30 pm and confirmed
that he had been with
members of the AAG (Affirmitive Action Group) who had been harassing
and intimidating him and his staff and
had offered to purchase the
property for $130 000 000.







On Monday 23
June 2003 Louw advised Chitrin that the appellant was only interested
in acquiring a small portion of the property and
enquired whether
Chitrin would consider subdividing the property and selling that
portion to the appellant. This proposal was not
acceptable to
Chitrin.







On Tuesday 24
June 2003 Louw telephoned Chitrin to advise that Mrs Humpage had
decided to accept the appellant’s offer because of
the
intimidation. Chitrin advised Louw that the respondent would go to
litigation on the matter.







A meeting was
arranged between Chitrin and Humpage, at which she did not deny the
respondent’s right of first refusal and said she
had always
contemplated that the property would be offered to the respondent
because it was a tenant. She was advised by Chitrin
to consult
legal practitioners on the matter but on 25 June 2003 she telephoned
to say that F & CS were going to remove the property
from the
market.







On Wednesday
25 June, 2003 at 10 a.m., she telephoned to say she would really have
liked the respondent to have the property, but
that they had
succumbed and decided to accept the lower offer of the appellant
which was $21 000 lower than that of the respondent.







Despite their
being reminded of the respondent’s right of first refusal,
Potential and the appellant proceeded to sign an agreement
of sale on
24 and 25 June 2003.







This is the
background that led to the litigation which followed. Most of the
facts are common cause.







It is not
denied that Chitrin asked for and was granted the right of first
refusal. Mr Louw does not dispute having done so. Instead
he
tried to put on it his own interpretation suggesting that it only
meant that when the property came up for sale Chitrin was to
be
informed. Mrs Zurnamer does not deny it. Instead she sought to
argue that Louw had no authority to grant it. Mr. Louw's
mistaken
interpretation of the right of first refusal does not change the
position.







Mrs Zurnamer’s
contention that Louw did not have authority to grant it does not
assist. Potential had long authorised Louw to
deal with the
property on its behalf. Indeed when Louw granted this right to the
respondent he genuinely believed he was entitled
to do so, and,
similarly, Chitrin was entitled to believe that a right granted by
Louw was proper as he always dealt with Louw in
matters regarding the
property. It does not assist Potential to attempt to place any
limitations on Louw’s mandate at this stage.
Louw was at all
material times an agent of Potential concerning the property.







Mrs Humpage
averred that out of the tenants she expected Chitrin to be the most
likely to make an offer on behalf of the respondent
as she had learnt
that the respondent had expressed to Louw an interest in purchasing
the property if it ever came up for sale.







Although she
used different words, her averments in this regard confirm Chitrin’s
claim about having asked Louw for a right of first
refusal. She,
however, goes on to say she was disappointed that although the
respondent through Chitrin had expressed an interest,
the latter had
not made an offer though he had more than enough time to do so. She
does not say at what stage it was decided that
the respondent had
failed to make an offer.







The
respondent’s offer was made, not to her but to Louw. If there was
a delay in transmitting the respondent’s offer to her,
such delay
should be attributed to Louw.







Although she
admitted that Louw advised her that he had on an earlier occasion
granted to the respondent the right of first refusal,
she denied any
knowledge as to what the term meant, and yet it is so simple and self
explanatory. Further, the complaint that the
respondent delayed in
making an offer is not valid because of the different time limits
that were granted to it. Mr Louw had in
fact given Chitrin up to
Wednesday 25 June 2003 to make an offer on behalf of the respondent.






Having
established that the respondent had the right of first refusal, it
remains to examine the legal position regarding the right
of the
appellant:-





“An
option is an offer to sell, which remains open during the stipulated
period, and if the offer is accepted at any time before the
time has
lapsed, a binding contract of sale is concluded between the parties.






When
an option is given by a seller, he is bound and cannot withdraw his
offer …”






See Boyd
v Nel
,
1922 AD 414.





I
should point out here that the right of first refusal is the same as
the right of an option.






See also
Mackeurtan’s
Sale of Goods in South Africa,
5th
Edition at p 277 – 17G.1.6. where it is stated as follows:





“The
rights of the holder of an option, or of a pre-emptive right, to
interdict the delivery of the thing in question to a subsequent
purchaser and
to
obtain specific performance are the same in law as those of a prior
purchaser. The right of the holder of an option or of a pre-emptive
right to exercise it remains prior in time to the personal right of a
subsequent purchaser, even where the latter was ignorant of
the
option or right of pre-emption.”






See Sher
v Allan
,
1929 OFS 137,
Archibald
& Company Limited v Strachan & Company Limited

1944 NPD 40 and
Le
Roux v Odendaal & Ors

1954 (4) SA 432.





These
authorities establish very decisively the respondent’s right to
interdict the sale of the property to the appellant and
to seek
transfer to itself on tendering payment of the purchase price that it
offered.





I
find that there is therefore no merit in the appeal and it is
dismissed with costs.











CHIDYAUSIKU
CJ: I agree.













ZIYAMBI JA: I
agree









James
Moyo-Majwabu & Nyoni
,
appellant's legal practitioners


Joel
Pincus Konson & Wolhuter
,
respondent's legal practitioners