SAKUNDA HOLDINGS (PVT) LTD
CHARLES NHAMO NYAMBUYA
HIGH COURT OF ZIMBABWE
HARARE,10 – 12 MAY & 16 NOV. 2022
Adv. T. Magwaliba, for the Plaintiff
Mr K. Rangarirai, for the 1st Defendant
Mr K. Maeresera, for the 2nd Defendant
NDLOVU J: The Plaintiff issued summons against the 2 (two) Defendants jointly and severally out of this Court. It is seeking specific performance in the form of delivery of 4 (four) brand new Toyota Land Cruiser LC200 motor vehicles which they failed or neglected to deliver despite being paid. Alternatively, payment of a sum of US$633 257.00 payable in its equivalent in the local currency at the official rate being the purchase price for the 4 (four) motor vehicles in question. Leave to amend the claim to reflect the above claim was granted at the pre-trial conference.
The critical and relevant facts in this matter are largely common cause. Sometime around 2016, the 2nd Defendant approached the Plaintiff seeking a business opportunity. An agreement was struck that an order be placed with the 1st Defendant for several, motor vehicles. At the material time the 2nd Defendant was a shareholder, Executive Chairman, and Director in the 1st Defendant.
The agreement consummated and the Plaintiff received from one Brighton Matsaira, a dealer principal in the 1ST Defendant’s employ, quotations for motor vehicles on 26 January and 10 February 2017 being Toyota Prado and Toyota Land Cruiser LC200 motor vehicles. On 13 February 2017 the Plaintiff deposited into the 1st Defendant’s Bank Account the sum of US$1 274 000.54 the price for the purchase of 3 Toyota Prado motor vehicles and 5 Land Cruiser LC200 motor vehicles. Brighton Matsaira then wrote to the Plaintiff acknowledging receipt of payment and indicating that the motor vehicles would be delivered by 28 February 2017. Later, 3 (three) Toyota Prados and one Toyota Land Cruiser LC200 motor vehicle were delivered to the Plaintiff. The other 4 Toyota Land Cruiser LC200 motor vehicles were never delivered and their purchase price was never returned.
In the meantime, the 2nd Defendant was negotiating a separation from the 1st Defendant with the remaining Director and this was kept under wraps away from the public and customers of the 1st Defendant’s knowledge. From the beginning, the 2nd Defendant was personally in the transaction. He used his personal email address. He continued to deal with the issue long after stepping down from the 1st Defendant on 31 March 2017 by trying to place an order for the motor vehicles with a Thailand supplier. In his personal capacity, he pursued a South African supplier of motor vehicles Phloem Trading, and Xsigma, a Zimbabwean entity. In a statement to the police, he stated that he had personally been defrauded by the director of Xsigma. During a Pre-Trial Conference (PTC) on this matter, the Judge implored the 1st Defendant to pass a Board Resolution to enable the 2nd Defendant to pursue a refund proposal that was being made by Phloem (Pvt) Ltd. A meeting was held between the Defendants and their legal practitioners, and the 2nd Defendant refused to get that Board Resolution.
The existence of a binding contract between the Plaintiff and at least one of the Defendants is not denied by either of the Defendants.
Central to the resolution of this matter is the determination of; who contracted with the Plaintiff between the 2Defendants, and by extension who is liable in this claim.
THE PLAINTIFF’S CASE
Both in evidence and argument, the Plaintiff’s case is that it established or proved the existence an agreement between it and the Defendants represented by the 2nd Defendant, and the liability of the Defendants is joint and several. The Plaintiff argues that because the Defendants are not denying the existence of the contract upon which the Plaintiff is suing and instead are arguing whether or not the 2nd Defendant had the authority to enter into a contract which is binding on the 1st Defendant this is, therefore, a textbook example of a confession and avoidance, and the onus shifts to the Defendants to prove what they assert. 1st Defendant must prove that the 2nd Defendant did not have the authority to enter into a contract on its behalf. On his part, the 2nd Defendant must prove that he was acting on behalf of the 1st Defendant. See Pillay -v- Krishna & Anor 1946 AD 946, Lasagne Investments (Pvt) Ltd & Ors-v- Hydon Investment (Pvt) Ltd & Ors 2010(1) ZLR 296(H).
Plaintiff bases its case on the law of agency and company law. Where a company employee did not have express or implied authority but had ostensible authority, such ostensible authority is sufficient to bind the principal. Reed N.O -v- Sager’s Motors (Pvt) Ltd 1969(2) RLR 519 (A). Caronsel Investments (Pvt) Ltd -v- Spar Harare (Pvt) Ltd 2006 (1) ZLR 430 (H)
In the circumstances, therefore, the conduct of the 2nd Defendant even if it were to be found to have exceeded his authority does not absolve the 1st Defendant of its liability to Plaintiff, so argues Plaintiff. At the time of the contract, the then Companies Act [Chapter 24:03] was operational and applicable. Section 12(a) provided that any person dealing with a company was entitled to assume that the internal processes of that company had been complied with and the company was estopped from denying that internal regulations were complied with. This position of the law is now found in Section 24(1) (a) and (b) of the Companies and Other Business Entities Act [Chapter 24:31]
In the circumstances, by virtue of his position in the 1st Defendant, the 2nd Defendant had more than ostensible or actual authority to bind the 1st Defendant because company law binds the 1st Defendant to the 2nd Defendant’s actions. Even if the 1st Defendant’s case that the 2nd Defendant was acting fraudulently were to be accepted, that fraud would not absolve the 1st Defendant from liability in terms of the law. The fraud would in fact also make the 2nd defendant liable in his personal capacity for the fraudulent acts in terms of both the common and statute law.
The Plaintiff further argues and says in the circumstance of this matter the court should in addition to taking into account the 2nd Defendant’s conduct, also consider that of the 1st Defendant, particularly that: -
(1) Its letterhead was used in respect of the quotations sent to Plaintiff which induced the payment.
(2) The payments were made into its banking account.
(3) Its principal dealer (Brighton Matsaira) generated the quotations and dealt with the Plaintiff.
1ST DEFENDANT’S CASE
The 1st Defendant’s case is that it was never contracted to supply the said motor vehicles by Plaintiff. It avers that Plaintiff contracted with the 2nd Defendant who was acting in his personal capacity. According to the 1st Defendant, the 2nd Defendant used the 1st Defendant’s Bank account details letterhead to cover his tracks. He moved the money from its Bank Account a day after it was deposited as he was in control of the 1st Defendant’s Bank accounts and transferred it to Xsigma (Pvt) Ltd, a company he chose himself. The 4 (four)motor vehicles that were delivered never went to the 1st Defendant’s premises for the pre-delivery inspection contrary to the procedure normally done by it after the vehicles arrive in the country and these particular vehicles were never entered into the 1st Defendant’s books and this slows that they were not ordered by the 1st Defendant.
2nd Defendant continued dealing with this contract beyond 31 March 2017 when he left the 1st Defendant despite the fact that the Separation Agreement clearly stated that he would have nothing to do with the 1st Defendant after that date and this transaction was not listed as 1st Defendant’s liability in the separation agreement because it was the 2nd Defendant’s personal transaction. He was aware that he was not representing the 1st Defendant because he had requested a Board Resolution to give him the mandate to act on behalf of the company to recover the money and it was turned down. This was an illegal contract deserving dismissal because Plaintiff did not go through a tender process. No exemption letter was tendered. The contract was between the 2ndDefendant and Mr Kuda Tagwireyi who did not testify and on that basis alone the claim should fail. Plaintiff was offered a refund but refused with its Bank details when requested by the 2nd Defendant’s lawyer, therefore Plaintiff authored its misery. By communicating directly with Phloem (Pvt) Ltd without the involvement of the 1st Defendant in those direct discussions, an implied new contract was created.
2ND DEFENDANT’S CASE
The 2nd Defendant’s case is that he only contracted with Plaintiff as a representative of the 1st Defendant and not in his personal capacity. He had ostensible authority to contract with Plaintiff on behalf of the 1st Defendant. By failing or omitting to call Mr. Kuda Tagwireyi who concluded the oral agreement with the 2nd Defendant as a witness, Plaintiff failed to prove its allegation that the 2nd Defendant contracted in his personal capacity. Only Mr Tagwireyi could tell in what capacity the 2nd Defendant contracted. He had approached Mr Chitambo and Mr Kahiya, both of Plaintiff, as a representative of the 1st Defendant. In his personal capacity, he was not a known dealer of Toyota motor vehicles which is what Plaintiff was looking for. He had the authority to act for the 1st Defendant as one of its 2 Directors and Chairman. Having secured the business on behalf of the 1st Defendant, those delegated to handle other related issues within the 1st Defendant took over and played their part. He advised his then co-director Mr Mtisi of this contract and Mr Mtisi was aware of the payment into the company bank account. The 1st Defendant is trying to hide behind a finger via an afterthought and now claims that he abused the company bank account yet it did nothing about that since 2017 to date.
The contract was not his personal transaction. It was not spelt out in the agreement of cession of shares and rights of action but Mr Mtisi was aware of this transaction as of 31 March 2017. His continued involvement in the matter beyond 31 March 2017 did not mean that he contracted in his personal capacity. He was trying to ensure that the matter was resolved amicably because he had a reputation to protect for the sake of future business dealings with the plaintiff and government departments. He was bound him by the Separation Agreement terms. He could not simply fold his arms and let the Plaintiff and 1st Defendant chase the issue alone when he actively participated in the transaction when he was still with the 1st Defendant, despite his now strained relations with the 1st Defendant’s Mr Mtisi. That at one time he engaged lawyers to try and chase up Xsigma and Phloem (Pvt) Ltd for the delivery of the outstanding motor vehicles or refund is neither he nor there and all this does not mean that he contracted in his personal capacity.
In June 2017 (long after he left the 1st Defendant) he had requested a Board Resolution of the 1st defendant to try and assist pursue the matter, (it was refused). At the PTC this court suggested that he be given a Board Resolution by the 1st Defendant to try and pursue the refund. He refused that suggestion and offer because he was now being touted as having contracted in his personal capacity. All he did after leaving the 1st Defendant was to try and be a proper businessman and ensure that the transaction he had started while representing the 1st Defendant was brought to finality.
The conduct of Mr Mtisi after the despatch of the quotation to the Plaintiff is consistent with a party that is aware and approves of the agreement, and therefore the 1st Defendant is bound.
As already indicated earlier in this judgment the facts of this matter are largely common cause, and the issues are clear.
DID THE FIRST DEFENDANT CONTRACT WITH THE PLAINTIFF?
It admits to no reasonable argument that Plaintiff sought to engage reputable Toyota motor vehicles supplier(s). That is its uncontroverted evidence. The 1st Defendant is a Toyota motor vehicles supplier. Neither Defendant has put in issue the existence of a binding contract. The closest that has been done or attempted is by the 1st Defendant when it describes the contract as having been illegal. That argument is without merit because the Plaintiff is a private company and therefore is not governed by the procurement laws of Zimbabwe.
Corporate entities like the Plaintiff and the 1st Defendant act through living human beings, because at law a company is a separate entity distinct from its members. Star African Corporation Ltd -v- Zimbabwe Sugar Refineries Workers Union SC65/21.
The 1st Defendant posits that the 2nd Defendant, its former Shareholder, Director, and Executive Chairman acted without resolution or any other form of authority from the 1st Defendant to enter into the agreement. On the authorities already referred to above, that argument is without merit. He had authority. What the 1st Defendant is saying, in essence, is that Mr. Nyambuya acted without the authority of the other Director Mr. Mtisis, and nothing more. Mr. Nyambuya was the highest executive officer of the 1st Defendant. He was in the position of Managing Director. All other officers were his subordinates. To turn around and say he had no authority to act as he did is keen to attempt to redefine the business customs.
In addition to that, the 1st Defendant’s officers went on to act on the contract by sending Plaintiff quotations and giving him the 1st Defendant’s banking details, using the 1st Defendant’s letterheads. How were the Plaintiff and the world supposed to know or suspect that Mr. Nyambuya did not have the mandate to contract, assuming he did not, in light of the conduct of the 1st Defendant through its officers? There is no evidence that those officials acted under duress. To say Mr. Nyambuya abused the 1st Defendant’s bank account when no fraud charges were laid against him is an excuse of a lame nature. Mr. Nyambuya in any case told the court that he informed his co-director Mr. Mtisi of the contract. Mr. Mtisi did not tell the court that he protested and took Mr. Nyambuya to task over anything related to this contract.
All the 1st Defendant did through Mr. Mtisi was to later agree and contract with the 2nd Defendant to hide from Plaintiff and the rest of the world that the 2nd Defendant had parted ways with the 1st Defendant on 31 March 2017. I, therefore, conclude that the 2nd Defendant had the authority to act on behalf of and bind the 1st Defendant in the manner he did when he concluded the contract in issue with Plaintiff. The 1st Defendant, therefore, contracted with Plaintiff and is liable to the claim by Plaintiff.
IS THE 2ND DEFENDANT LIABLE?
There is no evidence that can be relied upon to conclude that the 2nd Defendant personally bound himself in this contract when he negotiated it with Plaintiff. The contract was verbal. The evidence of those who concluded the contract was material and critical in the circumstances. Mr. Kuda Tagwireyi with whom the 2nd Defendant concluded the contract and was representing Plaintiff was not called to testify. His evidence would have assisted the court immensely in this aspect. However, the facts of this matter present an angle I find difficult to ignore.
The 2nd Defendant at one time sought a Board Resolution of the 1st Defendant to pursue a refund on this transaction. The request was turned down. It is common cause that the relations between the 2 Directors of 1st Defendant were acrimonious. Long after he left the 1st Defendant, the 2nd Defendant kept his involvement in this transaction alive. I am not convinced by what he gave as his reason for doing so. He told the court that he kept involving himself because he wanted to maintain good business relations. Good business had been compromised when he and the 1st Defendant failed to deliver the motor vehicles paid for by Plaintiff on 28 February 2017 contrary to the promise by 1st Defendant’s Dealer General. He went on to say that he kept meddling in the transaction because he wanted to secure future contracts with the Plaintiff and the government. I find a drought of merit in that explanation.
After fully paying for the motor vehicles pre-delivery, Plaintiff legally expected delivery and timeous delivery by 28 February 2017 as promised. Grandwell Holdings (Pvt) Ltd -v- ZMDC & Otrs SC05/20. Plaintiff has had to litigate to conclude the transaction. At the PTC having been upraised that Phloem (Pvt) Ltd were willing to refund the Judge gave directions that the 1st Defendant avail to the 2nd Defendant a Board Resolution facilitate the refund, the 2nd Defendant, however, declined the Board Resolution, a Board Resolution he had earlier sought himself. To tell the court that he refused the Board Resolution to get the refund because he had been sued by the Plaintiff challenges logic immensely. The net effect of his conduct has delayed Plaintiff from getting justice earlier and cheaper. He prolonged the non-performance by the 1st Defendant. In all probability, post the PTC stage in this matter, Plaintiff has not been refunded because of the frustrating conduct of the 2nd Defendant. In my view, the 2nd Defendant cannot escape liability in this claim as a result of the totality of his conduct throughout the life of the controversy between the parties.
The Plaintiff is entitled to specific performance. In the event that specific performance is not possible the Plaintiff is entitled to damages. The liability of the 2 (two) Defendants is joint and several. Neither Defendant has claimed that specific performance is no longer possible or would be unduly harsh. It is therefore to be assumed that they are in a position to perform. I therefore order as follows: -
IT IS HEREBY ORDERED THAT: -
1. Judgment be and is hereby entered in favour of Plaintiff against the Defendants jointly and severally, one delivering, the other to be absolved, for the delivery of four (4) brand new Toyota Land Cruiser LC200 motor vehicles to the Plaintiff within thirty (30) days of the grant of this Order, failing which the Defendants shall pay Plaintiff the sum of US$633 257.00 or its equivalent in ZWL$ at the prevailing auction rate at the time of payment plus interest at the prescribed rate from the date of service of summons to date of full and final payment.
2. The Defendants shall pay the Plaintiff’s costs of this suit.
Chimukamafunga Commercial Lawyers, Plaintiff’s Legal Practitioners
DI Mtisis Law Chambers, 1st Defendant’s Legal Practitioners
Chizengeya Maeresera & Chikumba, 2nd Defendant Legal Practitioners