The second applicant (Lacerose Investment) owned three properties in Glen Lorne, with ownership vested in the first applicant (The Trust). On 24 May 2007, the trustees entered into a Cession and Assignment Agreement with the third respondent for $240,000, with full payment due by 15 September 2007. The third respondent breached the agreement by failing to make payments and refusing to sign a renegotiated agreement. In May 2008, the second applicant discovered that the third respondent had fraudulently filed a CR14 on 25 June 2007, listing himself and the third, fourth and fifth respondents as directors without consent. Using fraudulent documents, the third respondent pledged the properties to the first respondent to secure a personal debt, and transferred the properties from the second applicant to the first respondent. Stand 90 was further transferred to the seventh respondent. The third respondent had also fraudulently uplifted caveats registered against the properties. The applicants sought cancellation of the fraudulent transfers and restoration of title.
The court ordered: (1) cancellation of Deeds of Transfer registered in the names of the first respondent (Stands 91 and 92) and the seventh respondent (Stand 90); (2) revival of the original Deeds of Transfer in the name of the second applicant for all three properties; (3) the Registrar of Deeds to effect the cancellations and revivals; (4) the Registrar of Companies to reinstate John Dillistin Humphreys and Sandra Jean Humphreys as Directors and Sandra Jean Humphreys as Company Secretary of the second applicant; (5) costs against all respondents except the 8th and 9th respondents on a legal practitioner/client scale, jointly and severally.
A transfer of immovable property effected by a fraudulently appointed director without proper authority is void ab initio. Where a transfer is void, ownership does not pass and the true owner is entitled to vindicate the property from any person in possession, including a bona fide purchaser, unless estopped. A director cannot dispose of the whole undertaking or the greater part of assets of a company without shareholder approval as required by section 183(1)(b) of the Companies Act. Fraudulent transfers are nullities and all subsequent transactions founded on them are similarly void. The vindication right of the true owner prevails over claims of innocent purchasers where the transferor had no power to pass transfer.
The court noted that the seventh respondent would face manifest hardships as a result of losing the property, similar to the respondents in Mngadi v Ntuli, but that such hardships do not prevent the true owner's vindication right from succeeding. The court observed that most of the facts relied upon by the seventh respondent regarding cooperation and authority were raised only in heads of argument and submissions, not in the opposing affidavit, and the applicants were not given opportunity to respond to them in answering papers. The court noted that what is not disputed in affidavits is taken to be admitted.
This case is significant in Zimbabwean property and company law for affirming the principle that fraudulent transfers are void ab initio and that an owner's vindication right prevails even against innocent purchasers where the transferor had no authority to pass transfer. It confirms the application of section 183(1)(b) of the Companies Act, which prohibits directors from disposing of the whole undertaking of a company without shareholder approval. The case emphasizes that fraud vitiates all transactions and that void acts cannot form the foundation for valid subsequent transactions, following the principle that "you cannot put something on nothing and expect it to stay there."