The plaintiff sued the first defendant for specific performance of an alleged agreement of sale dated 16 December 2011 for transfer of an undivided 0.76% share in Stand 2143 Marlborough Township. The plaintiff claimed he paid the defendant $15,000 cash for the property and produced an agreement of sale, power of attorney to pass transfer, and declaration by seller as proof. The first defendant admitted signing these documents but contended they constituted a sham agreement used merely as security for a loan of $1,500 from the plaintiff, not a genuine sale. The defendant testified he repaid the loan and recovered his deed of transfer. Evidence showed the plaintiff was a money lender who had advanced multiple loans to the defendant on previous occasions, sometimes secured by acknowledgments of debt and sometimes on a gentleman's agreement basis. Tawanda Martin Kanengoni, a legal practitioner and cousin of the plaintiff, testified that both parties came to his office and told him they wanted to lend each other money, and that money was exchanged in his presence (an amount closer to $2,000, not $15,000). The plaintiff never inspected the property, did not know its street address or internal features, never paid rates, never collected rent, and took no possession.
The plaintiff's claim for specific performance was dismissed with costs.
For documents to constitute a sham, all parties thereto must have a common intention that the documents are not to create the legal rights and obligations which they give the appearance of creating. It is the duty of the court to look behind the form of any transaction and ascertain its real substance. A sham or disguised transaction is dishonest insofar as the parties do not really intend it to have inter partes the legal effect which its terms convey to the outside world. The onus of proving that a facially valid written agreement is a sham rests on the party alleging it to be so. The conduct of parties before and after the execution of documents is relevant evidence in determining whether the documents reflect the true nature of their transaction or constitute a sham.
The court observed that it is always advisable that where parties agree that the duty to begin should be varied from the plaintiff to the defendant, this should be recorded as part of the joint pre-trial conference minute in the interest of saving time at the commencement of trial. The court noted that as a legal practitioner and officer of the court, it would not augur well for Kanengoni's professional reputation to be found to have been party to unsound advice which had the potential of exposing him to disciplinary action for unprofessional conduct, which explained why his evidence appeared significantly edited. The court commented on the improbability that someone heavily involved in real estate business would purchase property worth $45,000 for $15,000 without physical inspection or knowledge of basic features such as the street address, number of bedrooms, or condition of the property.
This case is significant in Zimbabwean (and relevant to South African) contract law for its application of the doctrine of sham transactions. It demonstrates that courts will look behind the form of documents to ascertain their true substance and purpose. The case establishes that where parties create documents with a common intention not to create the legal rights those documents appear to create, but rather to deceive third parties or achieve a different purpose, such documents will be declared shams. The judgment reinforces that the conduct of parties before and after an alleged transaction is crucial evidence of their true intentions. It also addresses the burden of proof in cases where a defendant alleges a facially valid written agreement is a sham, and shows how courts assess credibility when documentary evidence conflicts with witness testimony about the true nature of a transaction.