Value Chain Trading (Private) Limited v Pentecostal Assemblies of Zimbabwe

The plaintiff and defendant entered into a lease agreement on 24 July 2014 for commercial premises (a supermarket) for a term from 1 August 2012 to 31 July 2016. The plaintiff paid USD30,000 as goodwill, USD7,500 as security deposit, and USD7,500 per month as rental. Four months into the contract, the plaintiff cancelled the lease and gave vacant possession back to the defendant. The plaintiff then sought a refund of the goodwill and security deposit paid. The parties agreed by consent that USD6,457.21 of the security deposit should be refunded. The disputed issue was whether the goodwill payment of USD30,000 should be refunded upon cancellation of the lease.

• Whether upon cancellation of the lease agreement the plaintiff was entitled to a refund of goodwill paid to the defendant
• Whether section 19 of the Commercial Premises (Rent) Regulations S.I. 676/83 applied to prohibit the charging of goodwill
• Whether the Supreme Court interpretation in Goodliving Real Estate (Pvt) Ltd & Anor v Lin Zhongmin SC 61/13 was binding on the court
• Whether the forfeiture of goodwill amounted to a contractual penalty contrary to the Contractual Penalties Act
• Whether the in pari delicto rule prevented the plaintiff from recovering the goodwill payment
• Whether it was necessary to specifically plead unjust enrichment

1. By consent, the defendant shall refund to the plaintiff the balance of the security deposit in the amount of USD6,457.21; 2. The defendant shall refund to the plaintiff USD30,000.00, being payment of goodwill levied contrary to the law; 3. The defendant shall pay the plaintiff's costs of suit on the ordinary scale.

1. Section 19 of the Commercial Premises (Rent) Regulations S.I. 676/83 prohibits landlords from charging any payments other than rent and security deposits for commercial leases, and this prohibition includes goodwill payments. 2. Where an agreement to pay goodwill contravenes section 19, such agreement is illegal and null and void. 3. The in pari delicto rule does not prevent recovery where the equities favour the plaintiff and public policy would be offended by allowing the defendant to retain both the property and the illegal payment. 4. Once it is established that a party retains both the subject matter of a lease and money paid under an illegal agreement, the onus shifts to that party to show it has not been unjustly enriched. 5. It is not necessary to specifically plead unjust enrichment or relaxation of the in pari delicto rule where the facts alleged show that the defendant retained both the property and the money.

The court observed that if the lease agreement were to be regarded as valid, the forfeiture of USD30,000 goodwill against only 4 months' occupancy would amount to a disproportionate penalty contrary to the Contractual Penalties Act, and at best only a proportionate amount commensurate with the period of tenancy would be appropriate. The court also noted that neither party merited costs on the higher scale as parties should not profit from their illegal acts, and higher costs are exceptional in any event. The court stated that it would not concern itself with whether the goodwill agreement was severable from the lease as the lease had been terminated, and in any event such an agreement would still be illegal as it could only flow from the landlord/tenant relationship.

This case is significant in Zimbabwean commercial law as it reinforces the Supreme Court's interpretation that goodwill payments in commercial lease agreements are prohibited under section 19 of the Commercial Premises (Rent) Regulations S.I. 676/83. It confirms that landlords may only lawfully charge rent and security deposits, and any other payments (including goodwill, commitment fees, or lease consideration fees) are illegal. The case also demonstrates the application of the in pari delicto rule in circumstances where public policy favours allowing recovery despite both parties participating in an illegal agreement, particularly where one party would be unjustly enriched by retaining both the property and illegal payments. It establishes that specific pleading of unjust enrichment is not necessary where the facts show one party retained both the subject matter and the money paid under an illegal agreement.