Joina Development Company (Pvt) Ltd v Newgale Investments (Private) Limited

On 29 May 2003, the parties entered into an agreement whereby the first respondent sold property to the applicant for $206 million, payable by 30 June 2003. The applicant failed to pay by the due date, and the parties extended the payment date to 30 September 2003. The applicant again failed to pay. On 9 March 2004, the parties novated the agreement into a Deed of Sale with an increased purchase price of $400 million, with instalments due on 15 March and final payment by 16 April 2004. The applicant again failed to pay on time. Despite a purported cancellation letter on 14 April 2004, negotiations continued and the applicant eventually paid $400 million in May 2004. Further negotiations resulted in a meeting on 31 August 2004 where a new offer of $2.5 billion was made and accepted by the applicant, with payment terms agreed. The applicant failed to pay as agreed and sent a letter marked "Without Prejudice" on 3 September 2004 cancelling the agreement citing inability to secure funding. The first respondent attempted to refund the $400 million but the applicant refused to accept the refund. The applicant then sought specific performance or alternatively payment of $2.5 billion as market value of the property.

• Whether the parties were governed by the Deed of Sale of 9 March 2004 or the novated agreement of 31 August 2004
• Whether a letter marked 'Without Prejudice' was admissible in evidence
• Whether the requirements for 'without prejudice' privilege were met
• Whether the applicant was entitled to specific performance of the agreement
• Whether section 8 of the Contractual Penalties Act applied to the agreement

The application was dismissed with costs.

The binding principles established are: (1) A letter marked 'without prejudice' is only protected from admission in evidence where there is a dispute or negotiations and terms are offered for settlement of that dispute; (2) The 'without prejudice' rule does not apply to a document which may prejudice the person to whom it is addressed if they reject the offer - the rule is intended to protect the writer from prejudice, not to allow the writer to prejudice the recipient; (3) A court is entitled to examine a document marked 'without prejudice' to determine whether the conditions for the rule's application exist; (4) Where parties novate an earlier agreement through subsequent negotiations resulting in new terms, the new agreement governs the relationship between the parties.

The court observed that it was unnecessary to determine whether the Deed of Sale fell within the purview of section 8 of the Contractual Penalties Act [Chapter 8:04] since the parties had novated that agreement. The court also made observations about the applicant's repeated failure to meet payment obligations under successive agreements, noting this pattern of fundamental breach, though this was not strictly necessary for the decision. The court noted that the history of breaches would have meant the applicant suffered no prejudice if its suggested cancellation was not accepted by the first respondent.

This case is significant in Zimbabwean contract law for clarifying the scope and limits of 'without prejudice' privilege in correspondence. It establishes that merely marking a letter 'without prejudice' does not automatically render it inadmissible if it does not meet the substantive requirements of the rule. The case reinforces that the privilege only applies where there are genuine negotiations offering settlement terms, and not where a document would prejudice the recipient. The case also illustrates principles of novation in contract law and the consequences of repeated fundamental breaches of payment obligations in property sale agreements.