No. S.C. 40/02
Appeal No. 379/00
AFRICAN PROCESSED EXPORTS (PRIVATE) LIMITED (2)
ALAN GRAHAM HUGH GULLAN
CAROLINE GULLAN v
MACDONALD (2) NANCY MARGARET MACDONALD (3)
G H MUTSEYEKWA
COURT OF ZIMBABWE
CHEDA JA & MALABA JA
MARCH 7 & MAY 6, 2002
P de Bourbon SC,
for the appellants
C Andersen SC,
for the first and second respondents
for the third and fourth respondents
On 5 May 1999 the third and fourth respondents entered into an
agreement of sale with the first respondent,
in terms of which they
bought stand no. 65 Crowhill Road, Borrowdale, Harare, for
$2 million. The first respondent
acted on behalf of the second
respondent, the owner of the property. The third and fourth
respondents had paid the full purchase
price and transfer fees when,
on 27 September 1999, the first and second appellants obtained
from the High Court a provisional
order interdicting the first and
second respondents jointly and severally from transferring or in any
way encumbering the property
pending determination of proceedings to
be instituted against them by the appellants claiming the transfer of
the property. On
24 November 2000 the High Court discharged
the provisional order with costs. This appeal is against that
essential facts of the case are as follows. The second and third
appellants are husband and wife. So are the third and fourth
respondents. The second appellant is the director of the first
appellant (hereinafter referred to as Central African).
will refer to the second and third appellants as Mr Gullan
and Mrs Gullan respectively. The first respondent
(Mr MacDonald) is the second respondents son. They
both resided in England and were represented in the agreement
with the third and fourth respondents by the estate agent, Tony Baker
& Co (the estate agent).
1 July 1994 Central African, represented by Mr Gullan,
leased stand no. 65 Crowhill Road, Borrowdale, (the
property) from the second respondent, through the estate agent,
for a period of six months with an option to renew the lease.
written lease did not contain a clause granting Central African a
right of first refusal to purchase the property should the
decide to sell it.
15 February 1996 Mr Gullan wrote to the estate agent
enquiring whether such a right existed. The letter, which was
addressed to Mr P Scallan, reads:
told Mr Holmes and others of your staff, on numerous occasions
in the past, that we would be interested in buying the property
the landlord were to consider selling it. We were told that we
would have the first option to buy it. The lease makes
mention of this option. Is it in fact a right of first refusal and
does it operate by law? If yes, on what terms? For example,
there a time limit after which the right becomes inoperative? We
should be grateful if you would let us have full details.
admitted in the founding affidavit that he did not receive a reply to
July 1996 Mr MacDonald put the property on the market. A price
of $1.35 million had been suggested by the estate
agent but his
legal practitioner advised that a second valuation be done.
meantime, Mr Gullan went to England where he met with
Mr MacDonald. He expressed interest in purchasing the property
for $1.15 million. The offer was rejected. Mr Gullan alleged
that he increased the price at which he offered to purchase
property to $1.15 million plus £5 000. The balance of
£5 000 was to be obtained from his employer. He said
Mr MacDonald accepted the offer and an agreement of sale was
reached on condition he obtained the loan of £5 000 from
employer. It was Mr Gullans averment that his employer
agreed to give him the money. He said on his return to Zimbabwe
communicated the news to Mr MacDonalds secretary.
denied that he reached an agreement of sale of the property with
Mr Gullan. A few days after his meeting
with Mr Gullan,
he instructed the estate agent to sell the property for $1.6 million.
A second valuation of the property
had been done. Mr MacDonalds
secretary denied that she received a telephone call from Mr Gullan
to the effect that
the latter had been offered a loan of £5 000
by his employer towards the purchase of the property.
however, instructed the estate agent to give Mr Gullan an option
to purchase the property at a price of
£100 000. On
6 November 1996 one Rozalind Baker (Roz Baker)
wrote to Mr Gullan on behalf of the
estate agent as follows:
have validated that you have a first refusal once the highest offer
was formally made.
18 November 1996 Roz Baker told Mr Gullan over the
telephone that a third party had made an offer to purchase the
property for $1.6 million. She offered the property to him at
that price. The following day Mr Gullan wrote to the
reference to our telephone conversation yesterday morning, during
which you advised that another party had tabled a higher offer
the purchase of the house, please be advised that we do not wish to
increase the amount of our offer.
29 November 1996 the estate agent advised Mr Gullan that
the seller was keen to conclude an agreement of sale with a
party as he had refused the offer to purchase the house. He was
asked to state when his family would vacate the property.
6 December 1996 Mr Gullan wrote back to the estate agent,
drawing the attention of its officials to the fact that his
had an option to renew the lease and that they intended to exercise
that right. The intended sale to the third party fell
because of the disclosure by Mr Gullan of the intention to
exercise the option to renew the lease when it expired on
25 February 1997 Mr Gullan made an offer to purchase the
property for $1.45 million. He was advised by the estate
on 25 March 1997 that the owner had decided to withdraw the
property from the market. He went on to renew the lease
period of six months.
negotiating the terms of the new lease, Mr Gullan asked to have
a clause included in the written lease granting the first
right of first refusal to purchase the property in the event that the
lessor decided to sell the property to a third
person. In a fax
message dated 16 July 1997, Mr MacDonald made it clear that
the lessor did not want to grant the first
appellant a right of first
refusal. He said:
tenant does not have any right of first refusal to purchase the
property or to match any such offer made to us by a third party.
such there is no need to amend clause 30.
in the company of Mr Penny Coventry from the estate agent,
visited the property on 13 April 1999.
He told Mr Gullan
that the property was to be put on the market again. The visit was
followed by a letter dated 14 April
1999, confirming the
decision to sell the property. Mr Gullan was advised to
contact the estate agent if he was interested
in purchasing the
property. He did not remind Mr MacDonald that they had entered
into an agreement of sale; nor did he protest
against the decision to
put the property on the market. Mr Coventry said he took
fifteen prospective purchasers to view the
property after his visit
to the house with Mr MacDonald. Each time he went to the house
Mr Gullan or his wife was at
home. Neither of them mentioned
to him that an agreement of sale had been reached between Mr Gullan
and Mr MacDonald
in respect of the property.
question to decide is whether or not the learned judge was correct in
holding that the appellants had failed to show a
right of first refusal.
v Retco Poyntons (Pty) Ltd
1985 (2) SA 922 (A) at 932 B-G NICHOLAS JA said:
right of first refusal is well known in our law. In the context of
sale it is usually called a right of pre-emption. The
such a right cannot be compelled to sell the property concerned.
But if he does sell, he is obliged to give the grantee
of purchasing, and consequently he is prevented from selling to a
third person without giving the first refusal.
(See Van Pletsen
v Henning 1913 AD 82
at 95; Owsianick v
African Consolidated Theatres (Pty) Ltd
1967 (3) SA 310 (A) at 321F). So, a right of pre-emption involves a
negative contract not to sell the property to a third person
giving the grantee the first refusal; and the grantee has the
correlative legal right against the grantor that he should
This is a right which is enforceable by appropriate remedies.
imports an offer. As FARWELL J said in Manchester
Ship Canal Co v Manchester Racecourse Co
 2 Ch 352 at 364:
a refusal, to my mind, implies an offer. A thing is not in ordinary
parlance refused before it is offered.
facts show that no right of first refusal was granted to Central
African by the owner of the property in any of the numerous
leases the parties entered into.
am prepared, in the circumstances of this case, to accept that the
letter from Roz Baker to Mr Gullan dated 6 November
1996 granted him a right of first refusal and an offer to exercise
that right. Mr Gullan exercised the right by refusing to
purchase the property at the price of $1.6 million which the
seller was prepared to accept from a third person.
offer of first refusal could not remain open after it had been
refused. The right fell away. In Crossroads
Properties (Pvt) Ltd v A1 Taxi Service Co (Pvt) Ltd
1954 (4) SA 514 (SR), stand 2346, Salisbury, was on 2 February
1950 leased to the respondent by its owners, Patel &
The lease agreement contained a right of first refusal granted to the
respondent by the owners of the leased property.
In March 1952
Patel & Company received an offer of purchase which was duly
communicated to the respondent. The respondent
was asked to
indicate whether it accepted the offer to purchase the property at
the price offered by the applicant. To the letter
of offer dated
29 March 1952 the respondent had replied:
thank you for offering us the first option to purchase Stand No. 2346
Salisbury. We wish to inform you that this company
interested in the purchase of the above Stand.
question for the decision of the Court was whether the seller was
obliged to keep the offer open to the respondent to purchase
property after it had refused the offer to purchase the property at
the price offered by a third person. QUENET J at 516B
agree with Mr Oshry,
for the applicant, that having rejected the March offer the
respondent was not entitled to be kept advised of every subsequent
received by Patel and Company. As I read clause 4 it
means that once an offer has been submitted and has been refused, the
lessors were at liberty to sell to whomsoever they pleased.
learned authors of Normans
Purchase and Sale in South Africa
4 ed at 98 support the view that the grantor of a right of first
refusal is not bound to keep on offering the property to the
if he refuses to purchase because on refusal by the grantee, the
grantor could immediately sell and even if he does not
do so, the
grantees right must fall away. See also Sawyer
v Chioza & Ors
1999 (1) ZLR 203 (H) at 208 C-E.
must follow from the falling away of the right of first refusal
exercised by Mr Gullan on 19 November 1996 that, at
time Mr MacDonald entered into the agreement of sale with the
third and fourth respondents in respect of the property, he
bound by a right of first refusal in favour of any of the appellants.
The learned judge was correct in holding that the
failed to show a prima
facie right of first
refusal to justify confirmation of the provisional order granted to
second question for determination is whether or not the learned judge
erred in holding that the appellants had also failed to
show a prima
facie right of
purchase of the property in Mr Gullan.
there was an agreement of sale reached between Mr Gullan and
Mr MacDonald in August 1996 in respect of the property,
former could not on 19 November 1996 have talked about an offer
he was not prepared to increase to match the offer made
by a third
person to purchase the same property.
would have been clear to Mr Gullan at the time that Mr MacDonald
was offering the property for sale to a third person.
The sale to
the third party fell through, not because Mr Gullan protested
against the sale of the property on the ground that
he had purchased
it. The third party withdrew from the sale because Mr Gullan
and his family refused to vacate the property
on the ground that
Central African had an option to renew the written lease which it
intended to exercise. If Mr Gullan had
a right of purchase he
would have asserted it against Mr MacDonald.
the letter of 6 December 1996 Mr Gullan indicated that he
had accepted the decision by Mr MacDonald to sell the
to a third party. That was a clear statement of the acceptance by
him of the fact that he did not have a right of purchase
based on an
agreement of sale. As late as 25 February 1997, Mr Gullan
was making an offer to purchase the property for
As a businessman he would have known that an offer was an invitation
to the other party to contract. The offer
could be rejected.
withdrawal of the property from the market by Mr MacDonald on
25 March 1997 shows that he enjoyed the sellers rights
it. When Mr MacDonald told Mr Gullan on 13 April
1999 that he had decided to put the property on the market,
latter accepted the decision without demur. There was no protest
based upon the alleged agreement of sale. Mr Gullan
instead, to let prospective purchasers view the property. True to
his word, Mr Gullan allowed fifteen prospective
including the third and fourth respondents, into the house to view
it. The prospective purchasers were not told by
Mr Gullan or
his wife, one of whom was on the premises, that the property had been
bought. It would have become apparent to
Mr Gullan or his wife
that one of the prospective purchasers could make an acceptable offer
to purchase the property.
absence of an agreement of sale between Mr MacDonald and
Mr Gullan, at the time the third and fourth respondents bought
the property, was confirmed by the willingness on the part of
Mr Gullan to enter into new written leases on behalf of Central
African after August 1996. No explanation was given for the
decision to continue to occupy the property as a tenant if Mr Gullan
was a bona fide
purchaser. It is hard to believe that for a period of
two-and-a-half years Mr Gullan failed to see the need to assert
rights of a purchaser against Mr MacDonald. I agree with
that Mr Gullans conduct after August 1996 was not that of a
person who believed he had a right of purchase in respect of
Mr de Bourbon
properly conceded that he was unable to advance any argument against
the submission by Mr Colegrave
that the agreement of sale would, in any case, have prescribed by the
time the appellants made the application for the provisional
interdicting the first and second respondents from transferring the
property to the third and fourth respondents. As I hold
that no agreement of sale was reached between Mr MacDonald and
Mr Gullan in August 1996, it is not necessary to
question of prescription in detail.
is also not necessary to consider the legal effect of the defence
raised by the third and fourth respondents that they are bona
fide purchasers for
value without notice.
appeal is accordingly dismissed with costs.
appellants' legal practitioners
first and second respondents' legal practitioners
Welsh & Guest,
third and fourth respondents' legal practitioners