Construction Resources Africa (Private) Limited v Central African Building and Construction Company (Private) Limited t/a Central African Building Construction

The appellant and respondent entered into two separate but interrelated agreements on 29 November 2004: (1) an agreement of sale for movable assets worth US$219,000, and (2) a deed of sale for three immovable properties worth US$481,000. The deed of sale required payment in instalments with 45% in hard currency and 55% in local currency at the prevailing auction rate. The appellant took possession and use of the assets and properties but failed to pay the full purchase price. The respondent's directors (the Vieiras) undertook to transfer company shares and directorship upon full payment. The appellant's directors (the Musukuma brothers) claimed they became directors of the respondent on 3 January 2005 based on purported meeting minutes and a CR14 form, but evidence showed these documents were forged. The respondent gave 30 days' notice on 7 November 2006 to rectify breach of non-payment, which the appellant failed to remedy. The respondent cancelled the deed of sale on 12 December 2006 and instituted vindicatory proceedings on 9 January 2007. Between May 2008 and March 2009, the appellant purportedly sold and transferred the properties to third parties while the matter was pending.

• Whether the respondent was properly before the court in the absence of a prior resolution authorizing the institution of proceedings
• Whether the purported appointment of the Musukuma brothers as directors was valid based on forged documents
• Whether the notice of cancellation complied with section 8 of the Contractual Penalties Act
• Whether the deed of sale was validly cancelled
• Whether the requirements for actio rei vindicatio were established
• Whether payment in foreign currency between two local parties was lawful under Exchange Control Regulations
• Whether the appellant had paid the purchase price in full

The appeal was dismissed with costs on the legal practitioner and client scale. The High Court's order for eviction of the appellant from the three immovable properties was upheld.

The binding legal principles established are: (1) A forged or fake CR14 form lodged with the Registrar of Companies is a nullity and does not require a court order to be set aside; it cannot confer directorship rights. (2) The principle of unanimous assent applies where all directors of a company agree to a course of action (such as instituting litigation) even without a formal resolution, provided the action is intra vires the company's constitution. (3) Ratification of previously unauthorized litigation by proper directors operates retrospectively to validate the proceedings from their inception. (4) Under section 8(2) of the Contractual Penalties Act, a notice of cancellation must adequately identify "the breach concerned" but is not required to specify the exact amount owing; the contextual setting and factual circumstances determine adequacy. (5) For actio rei vindicatio, once the plaintiff proves ownership and possession by the defendant at litis contestatio, the onus shifts to the defendant to prove a right of retention. (6) Under Exchange Control Regulations, an agreement to pay in foreign currency between local parties is lawful, though actual payment without Reserve Bank authority may be unlawful; courts may order payment subject to obtaining authority. (7) Property that becomes res litigiosa after litis contestatio cannot be validly alienated to defeat the plaintiff's vindicatory claim; judgment in rem binds third parties who acquire the property after pleadings close. (8) Sections 12, 13, and 170 of the Companies Act (the Turquand Rule) protect outsiders dealing with a company, not purported directors themselves.

The Court made several non-binding observations: (1) It commented on the distinction between sale of assets and sale of a company as a going concern, noting that the latter requires disposal of shareholding, assumption of trade creditors and debtors, and human resources, not merely assets. (2) The Court noted that expert evidence from organizations like the Interest Bureau of Zimbabwe would have been helpful in computing interest payable on outstanding amounts. (3) The Court observed that the conduct of the appellant in forging documents and alienating res litigiosa property was "unconscionable and unacceptable abuse of the respondent and the legal system," justifying costs on the higher scale beyond the contractual provision. (4) The Court noted that third parties who acquired the properties after litis contestatio could be pursued in separate proceedings without needing to be joined to the original vindicatory action. (5) The Court commented that non-joinder of third party transferees does not preclude judgment against the original defendant who alienated property after close of pleadings. (6) The Court observed that the risk and profit clauses in the agreements passed only the use and occupation of assets to the purchaser, not ownership, which would only transfer upon full payment.

This case is significant for: (1) Clarifying the application of the principle of unanimous assent in Zimbabwean company law, where informal agreement by all directors can validate actions even without a formal resolution. (2) Establishing that ratification of unauthorized proceedings can operate retrospectively to validate litigation instituted by proper directors. (3) Interpreting section 8 of the Contractual Penalties Act to clarify that a notice of cancellation need not specify the exact amount owing, but must adequately identify the nature of the breach. (4) Confirming that actio rei vindicatio can be granted against a possessor who cannot prove a right of retention, and that alienation of res litigiosa property after litis contestatio does not defeat the vindicatory action. (5) Distinguishing between unlawful agreements and unlawful payments under Exchange Control Regulations, confirming that agreements to pay in foreign currency are lawful while actual payment without authority is not. (6) Addressing the sale of business assets versus sale of a company as a going concern. (7) Confirming that forged corporate documents (CR14 forms and minutes) are nullities requiring no court order to set aside and cannot confer rights.