Arthur Fernando Pereira Dias and Rosalie Mercedes Dias v Dawid Johannes Erasmus and Others

The plaintiffs were shareholders and directors of Monomotapa Garden Furniture (Pvt) Ltd (the seventh defendant), which owned immovable property at Stand 16985 Graniteside, Harare. In or about 2005, the plaintiffs orally agreed to sell their shareholding in the company to Shomet Industrial Development (Pvt) Ltd (the fifth defendant), represented by Zhaosheng Wu (now deceased, second defendant) and Yan Yu (third defendant). The precise purchase price was disputed, but a written agreement dated 24 November 2008 titled "Agreement on the finally solution" confirmed a final outstanding balance of US$200,000 to be paid by 8 December 2008. Prior to payment, the plaintiffs surrendered control of the company and its assets to the defendants. The defendants failed to pay the US$200,000 by the deadline. By letter dated 7 December 2009, the plaintiffs cancelled the sale agreement for non-payment and demanded vacant possession. The defendants tendered payment on 8 December 2009 (one year late), which was rejected. Through the involvement of the first and fourth defendants (Dawid Erasmus and Eras Accounting & Executor Services), the plaintiffs were removed as directors and replaced by the defendants, and shareholding was purportedly transferred without proper authorization or payment of the purchase price.

• Whether the fifth defendant breached the agreement of 24 November 2008 by failing to pay US$200,000 by the agreed date
• Whether the plaintiffs validly cancelled the sale agreement
• Whether the defendants proved payment of the purchase price for the shares
• Whether the first and fourth defendants acted fraudulently in transferring directorship and shareholding without proper authorization
• Whether the plaintiffs are entitled to reinstatement as directors and shareholders of the seventh defendant

1. Cancellation of the sale agreement confirmed. 2. Second, third and fifth defendants ordered to vacate the immovable property, with Sheriff authorized to evict if necessary. 3. Defendants ordered to surrender all movable property of the seventh defendant. 4. Defendants' counterclaim dismissed. 5. Forms CR14 reflecting defendants as directors set aside; plaintiffs reinstated as directors. 6. All instruments purporting to transfer shareholding from plaintiffs to defendants declared unlawful and set aside. 7. Plaintiffs' shareholding reinstated. 8. First, second, third, fourth and fifth defendants ordered to pay costs on attorney-client scale, jointly and severally.

A sale agreement may be validly cancelled for breach where the purchaser fails to pay the purchase price by the agreed deadline. A tender of payment made after cancellation is ineffective. The onus is on a defendant alleging payment to prove such payment on credible evidence, particularly in commercial transactions involving substantial sums. Uncorroborated oral evidence of cash payments without receipts or bank records will not discharge this onus, especially where smaller payments were receipted. Company secretaries and accounting professionals owe fiduciary duties and may not unilaterally appoint directors, issue share certificates, or transfer shares without proper resolutions, particularly where they are in a position of conflict of interest. Such unauthorized acts are fraudulent and will be set aside. Forms CR14 and CR2 and share certificates issued without proper authorization are void and of no legal effect.

The court noted that the pleadings were unnecessarily bulky and lacked clarity, were not properly bound and paginated, and the evidence was convoluted. The court criticized the reference in the joint pre-trial conference minute to the 2005 agreement when the parties had admitted the existence of the 2008 agreement which implicitly confirmed that the purchase price had not been fully paid by 2008. The court observed that it was inconceivable that parties would insist on written receipts for small amounts (US$20,000) but not for much larger alleged payments (US$50,000, US$150,000). The court noted the inappropriate use of nicknames in formal company documents (Frank and Willa for the second and third defendants) and that these were listed as if they were one person. The court also commented on the implausibility of a witness claiming not to know amounts paid by her husband initially, then later providing specific figures.

This case illustrates important principles regarding cancellation of sale agreements for breach, the requirement of proof of payment in commercial transactions, and the fiduciary duties of company secretaries and accounting professionals. It demonstrates that courts will set aside fraudulent transfers of shares and directorships, particularly where there is clear conflict of interest and lack of proper corporate authorization. The case reinforces that self-help remedies (such as unilateral appointment as director and issuance of share certificates) without proper resolutions or authority will be set aside. It also confirms that attorney-client costs may be awarded where defendants engage in reprehensible conduct, including fraudulent transfers and vexatious defenses where they knew the purchase price had not been paid.