The first respondent (Luna Estates) owned a 200.72 hectare property in Zvimba district. In 2012, it entered into a land development agreement with the second respondent (Devine Aid Trust Company) to develop the property into residential and business stands and to sell the subdivided stands as agent of the first respondent. The 163 applicants purchased stands from the first respondent through the second respondent as agent. The relationship between the first and second respondents soured, and an arbitration award confirmed the cancellation of the land development agreement on 20 July 2017. Despite this termination, the second respondent continued to sign agreements of sale on behalf of the first respondent with 21 of the applicants after 20 July 2017. The first respondent did not publish or give notice to the public about the termination of the agency relationship. The applicants sought a declaratory order confirming the validity of their agreements of sale.
The court declared that the agreements of sale entered into between the applicants and the first respondent represented by the second respondent are valid. The first respondent was ordered to pay costs of the application on a legal practitioner and client scale.
Where a principal employs an agent in a certain capacity and it is generally recognized that agents in that capacity have authority to do certain acts, the principal is bound by those acts even after terminating the agency relationship if the principal fails to give notice to the public of the termination. The doctrine of ostensible authority protects third parties who reasonably believe an agent continues to act within the scope of their authority based on the principal's prior conduct. A principal cannot escape liability by claiming the agent acted fraudulently after termination where the principal failed in its duty to warn the public of the termination and where fraud is not proved on a balance of probabilities.
The court observed that courts will ordinarily not grant punitive costs unless it is shown that the losing litigant was not genuine in pursuing litigation. However, where a losing party's attitude in proceedings impacts negatively on the expenses of the successful litigant, and where the losing party had no valid defense but forced litigation through an arrogant attitude and attempts to use superior bargaining power, it is just and proper that costs on a legal practitioner and client scale be awarded to compensate the successful party for being unnecessarily put out of pocket.
This case is significant in South African (and Zimbabwean) law for affirming the doctrine of ostensible authority and establishing that a principal cannot escape liability for an agent's actions within the apparent scope of authority merely by terminating the agency relationship without giving public notice. The case emphasizes the duty of a principal to notify the public when an agent's authority is terminated, particularly where the agent has been publicly acting on behalf of the principal for an extended period. The judgment also provides guidance on when punitive costs are appropriate, particularly where a litigant adopts an unreasonable attitude and forces unnecessary litigation despite having no valid defense.