S & B Holdings (Private) Limited v Zambuko Properties (Private) Limited

The applicant (S & B Holdings) was the holder of title to Stand 45A Ardbennie Industrial Township in the District of Salisbury. On 27 September 2016, the parties entered into an agreement of sale for the property at a purchase price of US$330,000. The payment terms required: (i) US$120,000 by bank transfer upon signing; (ii) 15 undeveloped stands in Mainway Meadows valued at US$118,000; (iii) payment of maximum US$67,000 to Banc ABC to settle the mortgage bond; (iv) US$15,000 to be retained for capital gains tax; and (v) US$8,500 for rates clearance. The respondent (Zambuko Properties) was to receive vacant possession upon: paying the initial deposit, arranging for Banc ABC to release the applicant from being principal debtor, and securing certificates of compliance for the 15 Mainway Meadows stands. The respondent paid the initial US$120,000 but failed to fulfill the other obligations. The applicant issued a notice of breach on 4 January 2017 giving 14 days to remedy the breach. The respondent responded on 23 January 2017 acknowledging it could not rectify the breaches and stating the applicant was free to act. However, the applicant did not cancel the agreement but instead instituted proceedings seeking specific performance.

• Whether effective notice of breach was given when service was effected on the respondent's legal practitioners rather than at the chosen domicilium citandi et executandi
• Whether the respondent breached the terms of the agreement of sale
• Whether having issued a notice of breach calling upon the respondent to rectify at risk of cancellation, the applicant could insist on specific performance
• Whether specific performance was the appropriate remedy in the circumstances
• Whether the agreement had been mutually terminated such that specific performance was no longer available

1. The agreement of sale dated 27 September 2016 in respect of Stand 45A Ardbennie Industrial Township was confirmed. 2. The Respondent was ordered to render specific performance of its obligations within 30 days of the order. 3. The Applicant was ordered to do all things necessary to enable Respondent to meet obligations with Banc ABC. 4. Upon the Respondent's full compliance, the Applicant was to render transfer within 30 days, failing which the Sheriff was authorized to sign all necessary documents to effect transfer. 5. The Respondent was ordered to pay the Applicant's costs of suit.

1. Service of a notice of breach is effective where it comes to the actual attention of the party concerned, even if not served at the specified domicilium, particularly where the party responds substantively without objection. A party who responds to a notice without protesting improper service is estopped from later challenging the validity of such notice. 2. A notice of intention to cancel that gives the defaulting party time to remedy breaches does not constitute actual cancellation of the contract. The innocent party retains the right to elect between cancellation and specific performance after expiry of the notice period. 3. A party's response acknowledging inability to rectify breaches constitutes an admission of breach that estops the party from later denying such breach. 4. In exercising discretion to grant specific performance, the court must consider whether performance is impossible, would produce an unfair result, or would operate unduly harshly on the debtor. The onus is on the party resisting specific performance to establish impossibility. Temporary impediments do not constitute impossibility of performance. 5. Courts will not permit a party to profit from their own breach or use their own default as a basis to escape contractual obligations. Specific performance will be granted where it is fair, just and equitable to enforce the contract.

The court made several obiter observations: (1) It noted that legally the applicant would remain the recognized debtor to Banc ABC although practically the bank would not care who pays as long as the obligation is discharged. (2) The court observed that the respondent's technical argument about clause numbering (referring to non-existent clause 3(b) versus actual clause 3.3) was 'a red herring' and 'mischievous' given the respondent had acknowledged the obligation in its opposing papers. (3) The court remarked that the respondent 'sought to profit from its own breaches and ensure the demise of the contract' and that the defenses raised 'lacked merit but were a desperate attempt to wriggle out of the contract'. (4) The court noted it did not find it necessary to consider the alternative claim for damages having concluded specific performance was appropriate, and observed that damages would be more appropriately dealt with at trial where such relief is applicable. (5) The court cited with approval Christie's statement that forfeiture clauses are interpreted to give the innocent party the option to cancel or enforce, since giving plain meaning would enable the wrongdoer to profit from his own wrong.

This case provides important guidance on several aspects of contract law in Zimbabwe: (1) it clarifies the principles governing service of notices at a domicilium citandi et executandi, confirming that service on legal practitioners who respond substantively on instructions is effective even if the specified domicilium was not used, and that a party is estopped from objecting to irregular service if they responded without protest; (2) it confirms that an innocent party who issues a notice of breach with opportunity to remedy retains the right to elect between cancellation and specific performance, and that responding to such notice does not constitute mutual termination; (3) it reinforces that specific performance remains an available remedy in Zimbabwe courts exercised according to judicial discretion based on fairness, justice and equity; (4) it emphasizes that courts will not allow parties to benefit from their own breaches or escape contractual obligations through technical defenses; (5) it clarifies that temporary impediments (like weather conditions or administrative delays) do not constitute impossibility of performance sufficient to deny specific performance.