Tadious Nyika & 152 Others v City of Kwekwe

The plaintiffs were 153 former employees of Carslone Enterprises (Pvt) Ltd, a gold mining company. In 2008, the employees agreed to pool resources to purchase residential stands. Carslone entered into an agreement with the City of Kwekwe (defendant) on 21 August 2008 to purchase 158 residential stands in Mbizo Section 18 Extension. The plaintiffs alleged that Carslone acted as their nominee and that the defendant knew the stands were being purchased for the employees. Each employee allegedly paid $18 million (old currency) which was deducted from their salaries and paid to the defendant by Carslone. The agreement required Carslone to fully service the stands within 24 months, failing which the stands would revert to the defendant. Carslone failed to complete servicing within the stipulated period. The defendant cancelled the agreement by letter dated 6 September 2011. Carslone was subsequently liquidated in February 2012. The plaintiffs sued, claiming the defendant should complete designs for roads, water and sewerage, enter into sale agreements with them, or alternatively pay them the current value of the stands and refund monies paid, based on unjust enrichment.

• Whether the plaintiffs had a recognizable cause of action against the defendant
• Whether Carslone acted as a nominee of the plaintiffs when purchasing the stands from the defendant
• Whether the defendant was aware that the stands were being purchased for the plaintiffs
• Whether the agreement between Carslone and the defendant was validly cancelled
• Whether the plaintiffs were entitled to relief based on unjust enrichment
• Whether the defendant was obliged to transfer the stands to the plaintiffs or refund payments made

The plaintiffs' claim was dismissed in its entirety, both the main claim and the alternative claim. The plaintiffs were ordered to pay costs of suit.

The binding legal principles established are: (1) A party who is not mentioned in a written agreement and is not a signatory thereto cannot enforce rights under that agreement based on an alleged nominee relationship, unless the nominee relationship is expressly stated in the agreement or the counterparty was aware of and consented to such arrangement. (2) For a claim based on unjust enrichment to succeed, the plaintiff must prove four elements: the defendant was enriched; the plaintiff was impoverished; the enrichment was at the plaintiff's expense; and the enrichment was without legal justification. Payment made by a third party (even if ultimately funded by the plaintiff) does not constitute enrichment at the plaintiff's expense where the contractual relationship was with that third party. (3) Knowledge by individual officials of a local authority does not constitute knowledge by the local authority as a corporate entity, particularly where the Urban Councils Act requires decisions and resolutions to be formally recorded. (4) A validly cancelled agreement cannot form the basis for specific performance or other remedies by parties who were not party to the original agreement.

The court made several non-binding observations: (1) The court noted that the plaintiffs' declaration, while not framed in elegant terms, provided a factual basis for the claim and should not be struck out on exception, reflecting a generous approach to pleadings. (2) The court observed that exception proceedings are not the forum to decide complex factual and legal issues, and exceptions should be used to weed out clearly bad claims, not to resolve substantive disputes. (3) The court commented that it cannot order parties to enter into agreements - such relief is incompetent as a matter of law. (4) The court expressed some sympathy for the plaintiffs' position, noting the argument that "justice demands that the plaintiffs should have homes of their own," but held that technical legal requirements such as sanctity of contract and privity cannot be ignored in favor of equitable considerations where the legal requirements are not met. (5) The court noted that the proper party for the plaintiffs to pursue would have been Carslone (or its liquidator), not the City of Kwekwe, as any nominee relationship or obligation to account would have been between the employer and employees.

This case is significant in Zimbabwean law (applicable to South African jurisprudence by analogy) for its clarification of several important legal principles: (1) the doctrine of privity of contract - parties cannot enforce rights under contracts to which they are not party, even if the contract was allegedly entered into for their benefit; (2) the requirements for establishing a nominee relationship and that such relationship must be evident from the agreement itself or known to the counterparty; (3) the strict requirements for establishing a claim based on unjust enrichment, particularly the need to prove enrichment at the plaintiff's expense; (4) the principle that knowledge by individual officials of a local authority does not constitute knowledge by the local authority as a corporate entity; and (5) the importance of proper documentary evidence in establishing contractual relationships. The case serves as a cautionary tale about informal arrangements and the need for employees to ensure their interests are properly protected in writing when employers act on their behalf.