Sammy's Group (Private) Limited t/a Kings Auction Centre v John Bourcher Meyburgh (NO) and Others

Sammy's Group (Pvt) Ltd, trading as Kings Auction Centre, was a tenant occupying stand 1396 Bulawayo Township under a lease agreement. The plaintiff alleged that in June 2006, it entered into a verbal agreement with Nuglo Investments (Pvt) Ltd (2nd defendant), represented by its director Graham Leonard Elston, granting the plaintiff a right of first refusal to purchase the property. A purchase price of ZW$5 billion was allegedly agreed. However, before the transaction could be finalized, Elston's wife Elana (also a director and shareholder of the 2nd defendant) died in October 2006, and Graham Elston later died in July 2008. In April 2010, the 1st defendant, as executor of the Elston estates, sold all the issued shares in the 2nd defendant to the 3rd defendant (CW Electrical). The plaintiff contended this sale of shares effectively disposed of the immovable property in breach of its alleged right of first refusal. A complication arose in that the lease agreement was actually with Auction Centre (Pvt) Ltd, not the 2nd defendant, and the plaintiff was unaware of the 2nd defendant's existence until after Elston's death.

• Whether the plaintiff's declaration disclosed a cause of action
• Whether the sale of shares in a company amounts to the sale of immovable property owned by that company
• Whether a right of first refusal was validly granted by the 2nd defendant to the plaintiff
• Whether the plaintiff's pleadings were vague, embarrassing and contradictory
• Whether section 183 of the Companies Act [Chapter 24:03] was applicable to the sale of shares
• Whether the exception was filed timeously
• Whether the plaintiff should be granted leave to amend its declaration

The 1st and 2nd defendants' exception and special plea were upheld. The plaintiff's claims were dismissed with costs.

The sale of shares in a company does not amount to the sale of immovable property owned by that company. Shares are incorporeal movable assets and are legally distinct from the company's assets. A person or entity cannot grant a valid right of first refusal over property they do not own, even if they mistakenly believe they have such authority. Where a lease agreement and alleged right of first refusal are entered into with one entity (Auction Centre (Pvt) Ltd), a different entity (Nuglo Investments (Pvt) Ltd) that actually owns the property is not bound by such agreements in the absence of proof of proper representation and mandate. Pleadings that are fundamentally defective, vague, embarrassing, contradictory and bad in law may be dismissed on exception without leave to amend where the defects are incurable.

The court noted that the general practice of allowing a plaintiff to amend defective pleadings should not apply where the claims are so incurably bad at law that amendment would be futile. The court observed that the purpose of exception procedure is to avoid the leading of unnecessary evidence and to dispose of cases in an expeditious and cost-effective manner. The court also remarked that rules of civil procedure do not provide for an automatic bar against a defendant who files an exception outside prescribed time limits, and no prejudice would be suffered by the plaintiff where the basis of the exception was always known to them.

This case clarifies important principles in Zimbabwean law regarding the distinction between shares in a company and the assets owned by that company. It reinforces the principle that the sale of shares in a company does not constitute a sale of the company's immovable property, as shares are incorporeal movable assets. The case also demonstrates the strict requirements for establishing a valid right of first refusal over immovable property, particularly the need for the grantor to have proper authority and mandate. It illustrates circumstances where pleadings may be so fundamentally defective that leave to amend should not be granted, and emphasizes the importance of accurately identifying the correct contracting parties in property transactions.