EL ELION INVESTMENTS (PVT) LTD v AUCTION CITY (PVT) LTD

SUPREME COURT, HARARE

[Civil Appeal SC 29-16]

January 22 and June 21, 2016

MALABA DCJ, GUVAVA AND UCHENA JJA

Contract law  – Agent  – Whether entitled to commission upon conclusion of contract or its performance  – Contractual penalties  – When court can interfere with a penalty stipulation.

Practice and procedure  – Closing submissions  – Whether can be a substitute for pleadings.

The respondent, an auctioneer, had sold certain equipment to appellant on behalf of its principal. The conditions of sale stipulated that respondent was entitled to an agent’s commission upon the conclusion of the sale. After paying a deposit, appellant breached the contract by failing to pay the remainder of the purchase price leading to respondent cancelling the contract. The contract having been cancelled, appellant sued for the return of the deposit it had paid arguing that since the contract had not been fully performed, appellant had not earned a right to its commission. Appellant also argued without founding the argument on the pleadings but on its closing submissions, that the retention by the respondent of the deposit paid was an oppressive penalty stipulation which could not be enforced.

Held, that an auctioneer is entitled to his commission on the conclusion of the sale. It is the sale and not its performance that entitles an auctioneer to its commission. The auctioneer’s commission has nothing to do with the performance of a contract. It is earned the moment a sale through him/her/it comes into existence.

Held, further, that a closing submission made at the end of a trial on an issue not pleaded or canvassed in evidence does not constitute a pleading or evidence on that issue. Where the issue has to be pleaded the comment on it in closing submissions does not cure the need for it to be pleaded. Closing submissions are not pleadings. A party is required, through pleadings to place on record its case or defence before the trial starts. This is especially so when a party intends to rely on issues which have to be proved.

Held, further, that points of law come in different forms. Some come as settled law to which proven facts are applied to determine the result. Some call for the leading of evidence to establish their applicability. This usually applies to statutory provisions whose applicability depends on stated conditions. A point of law can only be taken for the first time on appeal if it is based on established facts and is not dependant on the leading of further evidence for its resolution.

Held, further, that s 4 (1) of the Contractual Penalties Act [Chapter 8:04], provides that a court can, in the absence of limitations imposed by the Act, enforce penalty stipulations. If the proportionality of the penalty stipulation is apparent to the court and it can from the known facts determine that there is no disproportionality between the penalty stipulation and the prejudice suffered by the creditor, the court may enforce the penalty stipulation.

Cases cited:

Benson and Simpson v Robinson 1917 WLD 126, referred to

Crusader Real Estate Consultancy (Pvt) Ltd v CABS 1999 (2) ZLR 257 (S), not followed

Martin v Currie 1921 TPD 50, referred to

Muchakata v Netherburn Mine 1996 (1) ZLR 153 (S), referred to

Muskwe v Nyajina & Ors SC 17-12 (unreported), referred to

Trope v South African Reserve Bank and Two Other Cases 1992 (3) SA 208 (T), referred to

Legislation considered:

Contractual Penalties Act [Chapter 8:04], s 4, 4 (1), (2), (2)(a), (b), (4)

L Madhuku, for the appellant

F Mahere, for the respondent

UCHENA JA:

The appellant EL Elion Investments (Pvt) Ltd was the plaintiff in the Magistrates’ Court and respondent in the appeal to the High Court by Auction City (Pvt) Ltd the respondent in this appeal.

The appellant submitted a tender for the purchase of shoe manufacturing equipment which was being sold by the respondent on behalf of Mrs Grimmel in her capacity as the liquidator of Conte Shoes (Pvt) Ltd. The respondent, who is an auctioneer, floated a tender for the sale of the shoe manufacturing equipment. The appellant’s tender for the equipment was in the sum of US$ 100 000. The respondent accepted it. The appellant paid a deposit of US$ 10 000 in terms of the conditions of sale. The conditions of sale obliged the appellant to pay a deposit of 10 per cent and the balance in seven days. The appellant failed to pay the balance within the stipulated period. It was granted several extensions but still failed to pay the balance of the purchase price. The respondent’s principal cancelled the sale. The appellant demanded a refund of the deposit from the respondent. The respondent refused to refund the deposit stating that it was entitled to its commission and to recover its principal’s expenses.

The appellant issued summons in the Magistrates’ Court claiming the refund of the US$ 10 000 deposit. The Magistrates’ Court ordered the appellant to refund US$ 8 277 to the respondent. It reasoned that an auctioneer is only entitled to a commission when a sale is successfully performed. The respondent appealed to the High Court which upheld the appeal and set aside the Magistrate’s decision. The appellant appealed to this Court against the High Court’s decision. The following are the appellant’s grounds of appeal:

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