Gerasimos Fillipatos v Minister of Foreign Affairs (Appeal 64 of 2001) [2002] ZMSC 115 (20 February 2002)

IN THE SUPREME COURT FOR ZAMBIA Appeal No. 64/2001 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: GERASIMOS FILLIPATOS Appellant AND THE MINISTER OF FOREIGN AFFAIRS Respondent (Being sued on his own behalf as well as on behalf of and as representing the Government of the Republic of South Africa) Coram: Ngulube, C. J., Lewanika, D. C. J. and Chirwa JS. On 18th October 2001 and 20th February 2002 For appellant - J. P. Sangwa, of Simeza, Sangwa and Co. For respondent - N. K. Mubonda, of D. H. Kemp and Co. JUDGMENT Ngulube C. J. delivered the judgment of the Court. The issue before the trial court was whether or not there had been a lease agreement concluded between the parties. There was no dispute that discussions and negotiations took place in the period April to August 1992 between the parties whereby it was envisaged that the respondent would rent the appellant’s property. A figure of US$21,000 was mentioned by the parties in the pleadings as possible rent per month if and when the lease would be concluded and signed. There was also evidence that the respondent’s people inspected the property; took photographs and later informed the appellant what alterations and modifications they wanted for the property to meet their requirements. The appellant undertook such alterations and renovations at a cost of K4,230,000 (according to the statement of claim). The respondent’s people apparently changed their minds; they did not sign any lease and they did not take possession of the property which the appellant had held vacant for their anticipated occupation. By his writ and statement of claim, the appellant claimed the sum of K900,000=00 incurred in removing his goods from the property in readiness for the expected lease which would have run from 1st September 1992; he claimed K4,230,000=00 as the cost of alterations asked for by the respondent; and US$63,000 being rent or mesne profits for the three months the property remained vacant after the respondent’s refusal or failure to take occupation under the agreement for a lease. In the defence, the respondent pleaded the lack of the State’s consent to the transaction; and that there was neither a signed lease agreement nor any definite binding contract. According to the defence, the renovations were carried out by the appellant at his own risk and without the respondent’s approval and that in any case they were not completed in due time to enable occupation by 1st September 1992 as the parties had agreed, subject to a lease. The loss and damage pleaded was denied. The learned trial Judge had to decide whether or not (to use his expression) - the parties had sealed a deal; whether there was a contract between them. In a turn of events for which there is no apparent explanation, the learned judge decided that instead of resolving the issue, he would proceed as if it had been resolved in favour of the landlord so that there was a contract between the parties under which the respondent would rent the property of the appellant. On such assumption, the learned trial judge proceeded to examine the defence of lack of state consent as required those days under the since repealed Land (Conversion of Titles) Act which required landlord leaseholders to obtain prior presidential consent to a subletting. The Judge relied on our decision in MUTWALE - v - PROFESSIONAL SERVICES LTD (1984) ZR 72 when holding that, as the transaction required prior state consent and since the appellant had not shown that he had obtained such prior consent, the transaction was null and void and so unenforceable. In the appeal before us, one of the complaints was that the learned Judge should have specifically resolved the issue whether there was any concluded agreement. Counsel for the respondent informed us that he agreed with his learned opponent that the learned Judge ought to have resolved the issue which fell crisply for his decision instead of simply assuming the existence of the contract. Presumably, this was because the argument concerning state consent had been accepted and the court was about to hold that the transaction was an unenforceable nullity. The complaint has merit and we will examine the unresolved issue. Counsel for the appellant tried hard to convince that the appellant had not pleaded a concluded lease agreement but only an agreement for a lease where all the essential terms had been fixed: The property was known; the rent of US$21,000 was known, the commencement date was known; and the lease was to be for four years. Although the agreement was subject to contract or lease, it was Mr. Sangwa’s submission that there was sufficient part performance and sufficient evidence to show the existence of an agreement for a lease as opposed to a lease agreement itself. That being the case, the appellant was asking for damages equal to three months’ of the proposed rent and reimbursement of the costs incurred. In response, Mr. Mubonda pointed out that the claim for rent or mesne profits could only be competent in a landlord and tenant situation so that the claim now for damages allegedly for breach of an agreement for a lease was being canvassed for the first time and only before this Court. He urged that we reject such a fresh claim and fresh argument. There was no concluded lease and any expenditure incurred in alleged renovations was the appellant’s own fault since he should have waited until after a lease had been signed. This latter argument of Mr. Mubonda’s was not correct and flew in the teeth of the pleaded defence which alleged a failure on the part of the appellant to complete the renovations by due date. Finally, Mr. Sangwa claimed to be granted relief in equity, pointing out that the respondent had led the appellant to believe and reasonably to expect that they would rent his property; otherwise, why else would they have taken photographs and then indicated to him the changes he must effect to his property. We have considered the detailed written heads of argument as well as the oral submissions which we have endeavoured to summarise, perhaps too drastically. The point about state consent can be dealt with first. We do not think that the decision should have turned on the question of state consent as such. Certainly, our decision in MUTWALE should have been understood in light of subsequent pronouncements in later cases. For instance, we offered an explanation of that decision in the case of JEAN MWAMBA MPASHI -v - AVONDALE HOUSING PROJECT LTD (1988 — 89) ZR 140, a case concerning a vendor and purchaser and where the Judge - as in this case - had considered that the then Land (Conversion of Titles) Act, had, in Section 13, absolutely prohibited the entering into contracts without prior state consent. After noting that we had in an earlier case stated that there was nothing to prevent parties entering into contracts conditionally upon the obtaining of Presidential Consent under the repealed Act, we went on to say, at pages 142 to 143 — “It is, therefore, not correct to strike down such contracts out of hand nor to consider that specific performance must be refused simply for want of Presidential consent at a time when the party obliged to apply for consent has not even done so yet. In a suitable case, it is competent to decree specific performance of a contract the performance of which will necessarily entail application for State consent by the appropriate party. Refusal of consent, or appropriate consent, whether the transaction is litigated or not, would of course, raise entirely different problems, as for instance frustration of the contract. The learned trial judge understood our decision in Mutwale v Professional Services (3) as suggesting that all contracts entered into without prior State consent must be regarded as null and void. Our decision in that case related to a contract which was performed without State consent and it was the entering into such contracts — which the parties then perform or purport to perform - which we said offended the Statute. We repeat: it is perfectly lawful to enter into a contract conditionally upon obtaining State consent since such contract cannot be performed, or is not intended for performance, in breach of the statute or otherwise than in accordance with the statute. ” Respectfully, we still abide by the foregoing. However, as we see it, the appellant’s problem here was that there were discussions and an agreement to agree when the whole process was made subject to lease. There was thus no independent agreement for a lease distinct from a lease agreement as stoutly urged before us. Be that as it may, there was an irresistible case in equity based on the conduct of the parties, specifically, when the respondent’s people gave photographs and specifications of the alterations and modifications to be effected to the property. The appellant had to add improvements such as five garages; screen walls around the swimming pool; and various other works as detailed in the documents on the record before the Court. Calling in aid if necessary the principles of quantum meruit, we have no difficulty in imposing an obligation to reimburse the appellant his costs in respect of money expended for the anticipated benefit of the respondent at their request and instance. It would be totally unthinkable harsh and unconscionable to deny the appellant at the very least reimbursement of the cost of the alterations. Of course, we do not award any other damages such as those based on lost rental income. We are unable to award such damages the effect of doing which would amount to elevating an agreement to agree to the status of a binding agreement, which it is not. The amount to be reimbursed for alterations will carry interest at the average short term deposit rate. In sum, the appeal succeeds to the extent indicated. Costs follow the event and will be taxed if not agreed. DEPUTY CHIEF JUSTICE D. K. Chirwa SUPREME COURT JUDGE