Automated Summary
Key Facts
The Court of Appeal of Zambia dismissed Forefront Industrial Solutions Limited's appeal against the High Court's judgment. The lower court found in favor of the respondents (Bernard Makungu, Mutale Makungu, Mambwe Makungu, and Isaac Teza Kabwe) because the appellant failed to meet its evidentiary burden. Key issues included an alleged breach of the tenancy agreement's option to purchase clause, disputes over the agency relationship between respondents, and claims for specific performance and damages. The appellate court confirmed the lower court's findings that the counter-offer terminated the initial agreement, no loss was proven for breach, and the sale to the third party was not irregularly pleaded. The appeal was dismissed with costs to the first three respondents.
Transaction Type
Tenancy Agreement with Option to Purchase
Issues
- The Court examined whether the Appellant's claim for specific performance should have been granted, given the irregularity of the sale between the 2nd Respondent and 4th Respondent. The lower court dismissed the claim, finding no evidence to annul the sale. The appellate court upheld this decision, emphasizing that unpleaded issues (e.g., irregularities in the sale) cannot be raised on appeal and citing Atlantic Bakery Limited v ZESCO Limited to affirm that contested matters must be properly pleaded.
- The Court reviewed the award of costs to the respondents, with the Appellant arguing it was incorrect since three legal issues were resolved in its favor. The appellate court rejected this, noting that the Appellant only succeeded on one academic finding (agency relationship) and that costs are awarded at the Court's discretion. References to cases like B.P. Zambia Plc v Zambia Competition Commission supported the view that costs generally follow success, and the Appellant's argument was deemed 'highly mischievous.'
- The Court considered whether the lower court was correct in dismissing the Appellant's claim for damages after finding a breach of Clause 4(p). The Appellant argued that every breach must be redressed with damages, but the lower court held there was no evidence of loss. The appellate court agreed, noting the Appellant failed to present any material evidence of financial loss, and referenced the principle from Galaunia Farms Limited v National Milling Company Limited that an appellant must prove their case to warrant judgment.
- The Court addressed whether the lower court's interpretation of Clause 4(p) in the Tenancy Agreement was correct. Clause 4(p) required the landlord to fix a notice at the property if the parties failed to agree on the purchase price. The Appellant argued the notice requirement was mandatory and linked to the agency relationship, but the lower court found no connection. The appellate court affirmed the lower court's analysis, citing settled principles from cases like Hyde v Clyde and Julika Enterprise v Zambia State Insurance Corporation, which established that a right of pre-emption creates an opportunity, not a guarantee, to purchase under the offeror's terms.
- The Court addressed the cross-appeal challenging the lower court's finding of an agency relationship between the 1st Respondent (agent) and the 2nd and 3rd Respondents (principals). The lower court held the agency relationship bound the principals to the lease agreement. The appellate court affirmed this finding but deemed the cross-appeal moot given the dismissal of the Appellant's appeal and the academic nature of the issue.
Holdings
- Ground 3 was dismissed as the Appellant did not establish any financial loss from the breach of Clause 4(p), and the lower Court correctly declined to refer the matter for damages assessment.
- Ground 4 was dismissed due to the Appellant's failure to plead the irregularity of the 4th Respondent's contract of sale, rendering the argument a 'red herring' not raised in the lower Court.
- The Court dismissed grounds 1 and 2 of the appeal, affirming the lower Court's finding that the Appellant failed to prove any connection between the right of first refusal and the notice requirement in Clause 4(p), and that the breach did not result in proven loss.
- Ground 5 was rejected as the Appellant was only successful on one of six reliefs (agency relationship finding), which did not affect the case outcome, and costs were appropriately awarded to the Respondents.
Remedies
- Costs were awarded to the Respondents as part of the Court's decision.
- The Court found that there was an agency relationship between the 1st Respondent and the 2nd and 3rd Respondents, who were consequently bound by the lease agreement.
Contract Value
1500000.00
Legal Principles
- The Appellant failed to discharge its evidentiary burden to prove resultant loss from the breach of clause 4(p) of the Tenancy Agreement. The lower Court and appellate Court both found no evidence of damages, leading to the dismissal of the claim for damages.
- The Court upheld the award of costs to the Respondents as the successful party in the appeal, referencing precedents such as B.P. Zambia Plc vs Zambia Competition Commission. The Appellant's argument that all three legal issues were resolved in its favor was rejected as misrepresenting the trial Court's findings.
- The court applied the principle that a counter-offer terminates the initial offer, as established in cases like Galaunia Farms Limited v National Milling Company Limited. The Appellant's right of first refusal was extinguished by its counter-offer, leaving no enforceable entitlement to purchase the property under the original terms.
Precedent Name
- YB And F Transport Limited vs Supersonic Motors Limited
- The Attorney-General v Ndhlovu
- Nkhata and Others v The Attorney General
- Galaunia Farms Limited v National Milling Company Limited & Another
- Atlantic Bakery Limited v ZESCO Limited
- Wilson Masauso Zulu vs Avondale Housing Project Limited
- Match Corporation Limited v Edward Choolwe and Khalid Mohammed
- Premesh bhai M Patel v Rephidim Institute Limited
- Hyde v Clyde
- Finance Bank Zambia Limited and Rajan Mahtani v Simataa Simataa
- Ndongo vs Moses Mulyango & Anr
- Anne Scott v Oliver Scott
- Julika Enterprise v Zambia state Insurance Corporation, Zambia State Insurance Pension Fund and GBM Milling Company
- B.P. Zambia Plc vs Zambia Competition Commission & others
- Susan Mwale Harman vs Bank of Zambia
- Zambia Extract Oils and Colourants Limited & Anr v Zambia State Insurance Pension Trust Fund Board of Trustees
- Doyle B Kapambwe v Machona Kapambwe, Henry Machina & Rose M Kamungu
Key Disputed Contract Clauses
Clause 4(p) of the Tenancy Agreement required the landlord to fix a notice at the property if the parties failed to agree on the purchase price. The Appellant argued this notice requirement was mandatory and connected to the agency relationship finding, while the lower court held there was no such nexus. The appellate court affirmed the lower court's interpretation, citing settled principles that a right of first refusal creates an opportunity, not a guarantee, to purchase under the offeror's terms.
Cited Statute
- Banking and Financial Services Act
- Lands and Deeds Registry Act
Judge Name
- A.N. Patel S.C.
- F.M. Chishimba
- M.J. Siavwapa
Passage Text
- "An Appellant must prove his case and if he fails to do so, the mere failure of the opponent's defence does not entitle him to judgment."
- "We are guided by the decisions of the Supreme Court rendered in the cited case of Galaunia Farms... where the Court held that an offer, once declined, is discharged."
- "The law in sections 4 (1) and 6 of the LDRA is that a document purporting to grant, convey or transfer land... must be registered and that if it is not registered, the document shall be null and void..."
Damages / Relief Type
- Specific performance of the lease agreement dated 1st December 2017.
- Declaration that the property sale was null and void (dismissed).
- Interim injunction to restrain eviction and property conveyance (dismissed).
- Damages for breach of contract (no amount awarded due to lack of evidence).