- September 13, 2022
- |Concise Law Reports (CLR), Contracts
CONTRACTS – BREACH & CANCELLATION – RESTORING BENEFITS RECEIVED UNDER CONTRACT
The plaintiff sued the defendants for refund of contributions made towards the renovations of a building earmarked to be used as an office for their ‘mega law firm’ merger.
During 2018, the 2nd plaintiff and the 1st defendant entered into an oral agreement for the creation of a “mega” law practice. To this end, the parties incorporated Shakumu & Samuel Inc., and which company entered into a lease agreement with a third party, and from which premises the law practice was set to operate. The lease agreement was conditioned on the term that the parties would be entitled to set-off the monthly rental of N$25 000, against the costs of the renovations.
During the finalisation of the merger, the 1st plaintiff approached the 2nd plaintiff with a similar merger proposal, whereupon the 2nd plaintiff informed the 1st plaintiff that she was in the process of a merger with the 1st defendant. The 1st defendant having agreed, the 1st plaintiff then joined the merger agreement, but at no stage were the incorporation documents amended to include the 1st plaintiff as director, save that his name was added to the trade name. The parties each paid N$100 000, into the trust account of the 2nd defendant for purposes of defraying the costs of establishing the law firm and renovating the premises from which the new firm was set to operate, with the 1st plaintiff paying an additional N$50 000 to cover some urgent work.
The agreement to form a ‘mega law firm’, however, collapsed during May 2018. The plaintiffs attributed the collapse of the agreement to Shakumu. They alleged that during May 2018 Shakumu without the knowledge of the other two parties paid an amount of N$20 000 from the funds earmarked for the expenses of the merger towards his rental costs. Shakumu, on the other hand attributes the collapse of the agreement to the alleged inability and refusal of the plaintiffs to raise further funds to fund the renovations of the building when they realized that the N$300 000 that they had contributed was insufficient. After the collapse of the agreement the three parties could not agree on how to utilize the building. Shakumu and Kishi Shakumu & Co took occupation of the building and operated from the building.
UEITELE J had to determine whether whether the plaintiffs repudiated the oral agreement concluded between the parties or whether the plaintiffs cancelled the oral agreement as a result of Shakumu’s breach of the oral agreement. Following that determination the Court was required to determine what remedies are available to the defendants if the plaintiffs repudiated the oral agreement and if Shakumu breached the agreement what remedies are available to the plaintiffs. Held that:
- It was more likely to be true than not that Shakumu utilized money meant for the renovation of the building to pay for Kishi Shakumu & Co Inc.’s office rent without the consent of Kamuhanga and Samuel, thus breaching the agreement between the parties.
- The breach of the contract by Shakumu was so serious and goes to the root of the contract that it is fair to allow the plaintiffs to cancel the contract and undo all its consequences.
- The plaintiffs having cancelled the contract, were entitled to seek return to the status quo ante.
In the result, the defendants were ordered to, jointly and severally, the one paying the other to be absolved, refund the plaintiff with interests and costs.
Kamuhanga and Another v Shakumu and Another NAHCMD 13 September 2022