Online Reporter
Fidelis Munyoro
Chief Court Reporter
THE High Court has declared null and void an agreement of sale involving Stand 1507 Picnic Park, Waterfalls, Harare, ruling that the transaction was a disguised loan-security arrangement and not a genuine sale.
Justice Joel Mambara also declared that the property belongs to Osias and Netsai Mutasa and ordered Ngonidzashe Emmanuel Mbauya and Alison Patience Mbauya to pay the costs of the application.
The dispute arose after the Mutasas challenged an agreement recording the sale of the property for US$80 000, arguing that the document had been used to secure a loan.
The Mutasas told the court that they had approached Alison Mbauya for financial assistance and that the property documents were requested as security for the money advanced.
They said the sale agreement was introduced to give the loan arrangement the appearance of a property sale.
The respondents, however, maintained that the transaction was an outright sale and that the Mutasas had sold the property for US$80 000, after which they were allowed to remain in occupation for six months subject to monthly rentals of US$600.
But the respondents failed to produce proof that the US$80 000 purchase price had been paid.
Justice Mambara said the failure was significant because payment of the purchase price was central to the alleged sale.
“The alleged purchase price is not a trivial detail; it is the core performance that breathes life into a true sale,” the judge said.
The court also considered a bank deposit slip for US$600 bearing the narration “loan repayment”.
The respondents sought to characterise the payment as rent, but the court noted that there was no lease agreement or contemporaneous rental structure supporting their position.
The judge said the applicants’ continued occupation of the property, the absence of proof of the purchase price and inconsistencies in the documentary record all pointed away from a genuine sale.
The court also considered proceedings instituted by the first respondent in the Magistrates Court seeking eviction, arrear rentals and holding-over damages.
Justice Mambara said that conduct was more consistent with a debt-security arrangement than an outright property sale.
The judge found that the transaction amounted to a simulated agreement which could not be enforced according to its stated terms.
The court further held that, even if the document was treated as a security arrangement, it could not be used to allow a creditor to acquire the secured property upon default.
“If, as I find on a balance of probabilities, the agreement was never intended to embody a true sale, then it was simulated and cannot be enforced according to its ostensible terms,” Justice Mambara said.
The court relied on the principle against “pactum commissorium”, under which a creditor cannot simply appropriate secured property following default instead of recovering the debt through lawful proceedings.
Justice Mambara said the respondents remained entitled to pursue any lawful monetary claim arising from the financial dealings between the parties.
“What they may not do is enforce an ostensible sale that is not genuine, or whose security function offends the common-law prohibition against pacta commissoria,” the judge said.
The court held that the declaratory relief sought by the Mutasas was appropriate because it clarified the parties’ legal position and prevented further proceedings based on the disputed agreement.
