The Matanhires (husband and wife) sold their Marondera property to Mrs Chapendama for US$65,000 in terms of a written agreement dated 8 June 2011. The agreement provided for payment via mortgage from Commercial Bank of Zimbabwe. Mrs Chapendama paid US$10,000 upon signing, later secured a mortgage of US$48,000 (75% of the amount applied for), and paid US$50,000 into Mrs Matanhire's account on 3 August 2011. Between 29 August and 12 October 2011, she paid the remaining US$5,000 by: (a) paying US$3,250 to ZIMRA for capital gains tax; (b) paying US$1,105.80 to Marondera Municipality for rates; (c) paying US$410 to Mawere & Sibanda for bond cancellation; and (d) paying US$234.22 to Mrs Matanhire's account. The property transferred to Mrs Chapendama on 13 October 2011. She gave notice to vacate but the Matanhires refused, claiming breach of contract as Mrs Chapendama had not paid the US$5,000 directly to them and had allegedly prejudiced their entitlement to roll-over capital gains tax and rates discount. The Matanhires sued for cancellation of the sale. Mrs Chapendama counter-claimed for declaratory relief, eviction, and holding over damages. The matters were consolidated.
1. The plaintiffs' (Matanhires') claims in HC 1546/12 were dismissed in their entirety. 2. The applicant's (Mrs Chapendama's) claims in HC 1703/12 were granted: (2.1) Declaratory order that she paid the full purchase price; (2.2) Eviction order requiring the Matanhires to vacate within 7 days, failing which the Sheriff may evict them; (2.3) Holding over damages of US$500 per month from 15 December 2011 until vacation; (2.4) Respondents to pay all utility charges from 15 December 2011 until vacation; (2.5) Costs awarded against the respondents in both cases; (2.6) Joint and several liability for all payments.
A debtor's payment to his creditor's creditor discharges the debtor's obligation where the creditor benefits from such payment and the creditor's affairs have been advantageously managed. In determining whether breach of contract justifies rescission, courts must apply a value judgment balancing the competing interests of both parties, with the test being whether the breach is so serious that it goes to the root of the contract and makes it unfair to require the innocent party to retain the defective performance. Trivial breaches of material terms, even if constituting malperformance, do not justify cancellation of a contract. The measure of holding over damages is the rental value of similar premises.
The court observed that the Matanhires' behavior was "quite callous" in receiving the purchase money, using it to buy alternative property, while refusing to hand over the purchased property to Mrs Chapendama for almost three years. The court noted that even if the Matanhires had been entitled to a capital gains tax roll-over (which the court found they were not), they still had six years from the date of payment to apply to ZIMRA for a refund under section 22I(1) of the Capital Gains Tax Act. The court also commented that the original written agreement was "replete with grammatical and spelling errors" and that the execution of the agreement was "anything but in terms of the written word."
This case establishes important principles in Zimbabwean contract and property law regarding: (1) the circumstances in which payment by a debtor to third parties (creditor's creditors) discharges contractual obligations where the creditor benefits; (2) the application of the test for rescission based on seriousness of breach - trivial breaches of material terms do not justify cancellation; (3) the proper interpretation and application of capital gains tax obligations in property sales; (4) the measure of holding over damages based on rental value. The judgment reinforces that rescission is a radical remedy requiring a value judgment balancing competing interests, and that breaches must go to the root of the contract to justify cancellation. It also clarifies the legal requirements for property transfer documentation including capital gains tax and rates clearance certificates.