Maranatha Ferrochrome (Private) Limited v RioZim Limited

The plaintiff and defendant are registered companies involved in mining. In June 2003, the defendant sold three subdivisions of land (totaling 11,328 m²) in Eiffel Flats, Kadoma to the plaintiff for ZWD$117,881,000. The plaintiff paid the full purchase price and occupied the premises for 14 years. However, the defendant could not pass transfer as the land had been sold without subdivision permits required under s 39(1) of the Regional, Town and Country Planning Act. In 2016, disputes arose as the defendant's mining operations expanded. Negotiations for an "exit agreement" whereby the defendant would pay USD135,000 for the plaintiff to vacate did not conclude. In February 2017, the defendant demolished the buildings on the properties without warning using heavy machinery. The plaintiff sued for USD450,000 (replacement cost of buildings) or alternatively USD143,588.22 (equivalent value of purchase price paid in 2003).

• Whether the 2003 sale agreement was void and unenforceable for contravening s 39(1) of the Regional, Town and Country Planning Act by selling land without subdivision permits
• Whether the ex turpi causa rule barred enforcement of an illegal contract
• Whether the in pari delicto rule should be relaxed to permit recovery based on unjust enrichment
• What quantum of compensation, if any, the plaintiff was entitled to
• Whether the plaintiff's claim was prescribed
• Whether the plaintiff could denominate its claim in United States dollars

The plaintiff's main claim for USD450,000 was dismissed. The plaintiff's alternative claim succeeded. The defendant was ordered to pay the plaintiff USD143,582.22 (one hundred and forty-three thousand, five hundred and eighty-two United States dollars and twenty-two cents), together with costs of suit and interest at the prescribed rate from the date of judgment to date of final payment, to be paid in Zimbabwean dollars at the interbank rate prevailing at time of payment.

1. A contract for the sale of subdivided land concluded without the requisite subdivision permit under s 39(1) of the Regional, Town and Country Planning Act is void ab initio and unenforceable. 2. The ex turpi causa non oritur actio rule is absolute and admits of no exception - no action arises from an illegal cause and courts will not enforce contracts prohibited by law. 3. A plaintiff cannot claim damages that would place them in the position they would have occupied had an illegal contract been performed, as this would recognize the validity of the void contract. 4. The in pari delicto rule (where parties are equally at fault, the loss lies where it falls) is not inflexible and may be relaxed by courts on grounds of public policy to do justice between the parties. 5. Where one party to an illegal contract would be unjustly enriched by retaining both the subject matter and the purchase price, and the other party acted in good faith without knowledge of the illegality, the court may relax the in pari delicto rule to order a refund of the purchase price to prevent unjust enrichment.

The court made observations that: (1) The defendant's evidence was poorly delivered, with witnesses being hesitant and evasive, though this did not affect the ultimate findings on the existence of subdivision permits. (2) The defendant's approach of resorting to "the austerity of tabulated legalism" after 14 years of treating the plaintiff as owner was noteworthy. (3) The plaintiff could not be expected to pay rent for premises it genuinely believed it owned during the 14-year occupation period. (4) The defendant's demolition of the buildings was carried out in a callous manner without proper warning, though this did not justify costs on an attorney-client scale. (5) The monetary regime permitting denomination in USD under SI 85 of 2020 was applicable despite earlier provisions of the Finance (No. 2) Act, No. 7 of 2019.

This case is significant in Zimbabwean jurisprudence (applicable in South African context by analogy) for demonstrating the interplay between the absolute ex turpi causa rule and the flexible in pari delicto principle in contracts void for illegality under planning legislation. It affirms that courts will not enforce illegal contracts or award damages that would place a party in the position they would have occupied had the illegal contract been performed. However, it establishes that courts retain discretion to relax the in pari delicto rule to prevent unjust enrichment where one party would otherwise retain both the property and the purchase price, particularly where the illegality was not apparent to the innocent party for an extended period. The judgment balances the policy against enforcing illegal contracts with the equitable principle of preventing one party from benefiting unconscionably from an illegal transaction.