DUDKA & ORS v CHENI INVESTMENTS (PVT) LTD & ORS 2011 (1) ZLR 1 (H)

Flynote

Arbitration “ award “ when becomes effective “ takes effect when granted “ not necessary for award to be registered to become binding “ registration of award “ only necessary for execution of award

D Property and real rights “ Deeds Registry “ caveat “ failure of Deeds Registry to register a caveat “ has no effect on the prior claim of the purchaser to the property

Property and real rights “ res litigiosa “ when res can be said to become litigiosa “ interim arbitral award barring transfer of property “ property res litigiosa “ alienation of property which is res litigiosa “ may be alienated as long as the rights of the non alienating litigant are protected “ sale valid inter partes only “ right of recovery of such property by litigant

Headnote

In a consolidation of three cases, the evidence disclosed that the applicants had bought residential units from the first respondent in a cluster housing scheme being developed by the second respondent on land owned by the first respondent. The applicants had then entered into building contracts with the second respondent. In one of the three cases, D, one of the applicants, made due payment of the purchase price. A dispute, however, arose due to the failure of the second respondent to fulfill his obligations in terms of the building contract. This resulted in the matter being referred to arbitration. The arbitral award was to the effect that the agreement of sale was valid and, as the second respondent was in breach of his obligations in terms of the building contract, D was entitled to take over the construction of the house. She was entitled to her share in the first respondent which would confer on her ownership and possession of the house. The new building contractor, however, was unable to complete the house because other persons were claiming ownership of the house. A search of the Deeds Registry revealed that the unit had been transferred to one of the respondents. Further disputes arose between two other applicants and the second respondent.

During the course of the resulting arbitration, they obtained an interim order that, pending the finalization of the matter, the first and second respondents were interdicted from selling or otherwise disposing by way of share transfer of the property in issue. Although this interim order was served on the Registrar of Deeds (the sixth respondent), transfer of the property by way of share transfers in defiance of or in negligent disregard of the order were effected by him to various other respondents. All three applicants, together with a fourth, who was a victim of similar irregularities, sought orders against these other respondents setting aside the share transfers. The applicants argued that the transfers were effected in spite of a caveat placed against the property and, in any event, the property was res litigiosa and incapable of being alienated to their prejudice. It was the case of the various respondents, who had purchased the property, that they were unaware of the arbitral proceedings and were innocent purchasers for value of their respective units.

Held, that in terms of art 17 of the Schedule, an arbitrator has power to order interim measures which include, inter alia, an interdict. In terms of art 35 an arbitral award shall be recognised as binding and upon application in writing to the High Court shall be enforced. Article 35 brings out two distinctive features of an arbitral award. The first one is its binding nature and the second one its enforceability. An award takes effect upon its grant. Its execution has no effect on whether it is binding or not. A party can choose to obey an award, in which event there would not be need for the award to be registered. Registration allows for execution. The respondents could not, therefore, succeed in their argument that when registration of transfer was effected to them, the award had not yet been registered with the High Court.

Held, further, that although the negligence or incompetence of the Deeds Office in failing to register the caveat resulted in the property in issue being transferred to the respondents, it would not be fair and just to rule that the failure by the Deeds Registry to register the caveat had the effect of nullifying the applicants' prior claim to the property.

Held, further, that it was not necessary to decide the stage at which a subject matter becomes res litigiosa in arbitration proceedings. However, at the time that the property was sold and transferred, there was an interim arbitral award barring the transfer of the property pending the determination of the dispute between the applicant and the first and second respondents. The property was therefore res litigiosa. The first and second respondents thus had no authority to deal with the property the manner they did. The fact that a thing is res litigiosa does not preclude or prevent it from being alienated or similarly dealt with, as long as the rights of the non-alienating litigant in the res are protected. The agreement of sale of the res litigiosa between the litigating party and a third party is valid inter partes. The purchaser is bound by the judgment in the action and the successful party can recover the res from the new possessor by execution and without fresh proceedings. The sale between the third, fourth and fifth respondents and the first and second respondents, while valid inter partes only, was to the prejudice of the applicants, who should therefore, recover their respective units from them without the need for fresh proceedings.