Honeycomb Hill (Pvt) Ltd v Herentals College (Pvt) Ltd

The plaintiff, Honeycomb Hill (Pvt) Ltd, owned land known as 7 Cowie Road, Tynwald, Harare, measuring 8.0706 hectares. The defendant, Herentals College (Pvt) Ltd, operated educational institutions and wanted to acquire 3 hectares to build a primary school. The parties initially agreed on a sale for $140,000, but when the defendant's lawyers reviewed the draft agreement, they discovered it would contravene s 39 of the Regional, Town and Country Planning Act (which prohibits sale without a subdivision permit). To circumvent this, the parties entered into a two-year lease agreement on 12 January 2012 for $20,000, while the defendant paid the full $140,000 ($20,000 as rent, $120,000 disguised as a loan), with the understanding that once the subdivision permit was granted, the transaction would be formalized as a sale. The defendant built a school worth approximately $1,741,417. When the lease expired in December 2013, the plaintiff refused to renew and sought to evict the defendant, claiming the lease had expired by effluxion of time. The defendant counter-claimed for specific performance of the sale agreement.

• Whether the parties had entered into a valid agreement of sale for the property
• Whether an illegal agreement entered into in fraudem legis (to defeat the law) can be enforced by the court
• Whether the ex turpi causa principle applies to prevent enforcement of the sale agreement
• Whether the in pari delicto rule applies to prevent recovery of money paid under an illegal agreement
• Whether the plaintiff was entitled to evict the defendant on the basis of expiry of the lease
• Whether the defendant was entitled to remain in occupation until compensated for improvements in terms of clause 8 of the lease
• Whether s 22 of the Commercial Premises (Rent) Regulations SI 676/1983 prohibited eviction in the circumstances
• Whether the plaintiff was entitled to holding over damages and at what rate

1. The plaintiff's claim for ejectment was dismissed. 2. The defendant was absolved from the instance regarding holding over damages. 3. The defendant's counter-claim for transfer was dismissed. 4. Each party to bear its own costs.

The binding legal principles established are: (1) An agreement entered into in deliberate contravention of statutory prohibitions (such as subdivision requirements under planning legislation) is void and unenforceable under the ex turpi causa non oritur actio principle, regardless of whether it has been performed in whole or in part. (2) While courts will not enforce illegal agreements, the in pari delicto rule (which normally leaves losses where they fall) may be relaxed where necessary to prevent unjust enrichment and to do justice between the parties. (3) A party cannot rely on a sham agreement (such as a lease that was actually designed to disguise an illegal sale) as the basis for legal relief - the court will determine the true nature of the transaction. (4) Where a lease contains an express term entitling the tenant to remain in occupation until compensated for improvements, the landlord cannot obtain eviction without satisfying that obligation. (5) Under commercial rent regulation provisions prohibiting eviction based on lease expiry, a landlord must establish "good and sufficient grounds" for wanting the premises back, which requires specificity about intended use and demonstration that such use is reasonable and lawful.

The court made several non-binding observations: (1) Mafusire J noted that it would not condemn a $1.7 million infrastructure as illegal without proper evidence, suggesting that where substantial investment has been made with apparent regulatory knowledge, courts should be slow to find illegality without clear proof. (2) The court observed that both parties had "swapped positions" during the litigation, with each at different times relying on the lease versus the sale, which undermined their credibility. (3) The judge commented that Mr Hashiti's accusation that the plaintiff wanted to "have its cake and eat it" (by keeping both the money and the property) was "not an improper accusation", indicating judicial disapproval of the plaintiff's conduct. (4) The court noted that even under the lease interpretation, the $140,000 could be treated as rent paid in advance, which would satisfy statutory tenant obligations. (5) The court quoted with approval the graphic language from Makarau JP (as she then was) that "Justice will not soil its hands" with dirty transactions, emphasizing the moral foundation of the ex turpi causa rule.

This Zimbabwean High Court judgment provides important guidance on several principles applicable in South African law: (1) It illustrates the strict application of the ex turpi causa non oritur actio principle - courts will not enforce illegal agreements, particularly those designed to circumvent statutory prohibitions (similar to provisions in South African planning legislation). (2) It demonstrates the flexibility of the in pari delicto rule and when courts will relax it to prevent unjust enrichment, even where both parties participated in an illegal transaction. (3) It confirms that the ex turpi causa and in pari delicto rules, though related, are distinct - the former being absolute and prohibiting enforcement, the latter being flexible regarding restitution. (4) It shows how courts will look beyond the formal written agreement to the true substance of the transaction and surrounding circumstances. (5) It applies the principle that a lessee who effects improvements with the landlord's knowledge may have a lien over the property until compensated. (6) It interprets statutory tenant protection provisions requiring landlords to show "good and sufficient grounds" for eviction beyond mere ownership.