Court name
Supreme Court of Zimbabwe
Case number
SC 66 of 2004
Civil Appeal 207 of 2002

United Refineries (Pvt) Ltd. v UCB Commodities Brokers (Pvt) Ltd. (07/02) (SC 66 of 2004, Civil Appeal 207 of 2002) [2004] ZWSC 66 (29 September 2004);

Law report citations
Media neutral citation
[2004] ZWSC 66










DISTRIBUTABLE
(65)


Judgment
No. SC 66/04


Civil
Appeal No. 207/02








UNITED
REFINERIES (PRIVATE) LIMITED v





U.C.B.
COMMODITIES BROKERS (PRIVATE) LIMITED








SUPREME
COURT OF ZIMBABWE


CHEDA
JA, MALABA JA & CHEDA AJA


BULAWAYO,
MARCH 29 & SEPTEMBER 30, 2004








P
Dube
, for the
appellant





R
M Fitches
, for the
respondent





MALABA
JA: This is an appeal from a judgment of the High Court dated
22 August 2002, in terms of which summary judgment
in the sum of
$2 750 000.00 was granted against the appellant with costs
on the legal practitioner and client scale.





The
appellant (“United Refineries”) is a company incorporated in
terms of the laws of Zimbabwe and carrying on the business
of
producing and selling cooking oil. On 19 February 2001 one
Danish Naran (“D Naran”), to whom United Refineries
had
sold goods on credit, signed an acknowledgement of debt in the sum of
$2 860 000.00 which he undertook to pay.





On
11 September 2001 D Naran ordered from United Refineries
cooking oil valued at $12 757 424.00. The letter
in terms
of which the order was made read:





“VCB
Commodity Brokers


6 000
tins x 20 l


4 000
tins x 750 ml.





Please
could you kindly supply us with the above and may you kindly make out
a
pro forma
invoice. Include discount.





Many
thanks.





Mr
D Naran.”





The
order was signed by D Naran in his own name without any
qualification to indicate that he was making the order on behalf
of
anyone else. It was accompanied by a bank cheque in the sum of
$12 757 424.00 drawn in favour of United Refineries.





On
21 September 2001 United Refineries delivered to D Naran
cooking oil valued at $4 268 160.00 on an invoice
addressed
as follows:





“VCB
Commodity Brokers


c/o
Danish Naran”.





More
cooking oil valued at $4 821 840.00 was delivered before
further deliveries were stopped. Out of the balance of the
amount
paid for the goods ordered, United Refineries set off the sum of
$2 750 000.00 to recover the debt due to it from
D Naran
personally. It paid the balance, in the sum of $661 944.00, to
Sibusiso Ndlovu, a firm of legal practitioners
representing
D Naran.





In
December 2001 Sibusiso Ndlovu demanded the payment of the sum of
$2 750 000.00 from United Refineries on behalf
of the
respondent, claiming that D Naran had acted as its agent when he
ordered the cooking oil. He alleged that the purchase
price thereof
was paid out of his own personal account. He alleged that the
purchaser of the goods was “UCB Commodity Brokers
(Private)
Limited”, whose shareholders were Violet Sibanda and himself.





The
contention was that United Refineries had no right to set off the
debt incurred by D Naran, acting in his personal capacity,
against money paid by him as an agent. United Refineries rejected
the demand. Summons was issued on behalf of the respondent
on
18 December 2001, claiming payment of the amount of
$2 750 000.00, with costs on a legal practitioner and
client
scale. The declaration alleged that D Naran acted as
the respondent’s agent in ordering the goods from United Refineries
and paying for them.





On
19 December 2001 United Refineries entered appearance to defend
the action. Its defence was that it contracted with D Naran
personally and had no knowledge of the respondent’s existence. It
claimed that it had a right to set off the debt due to it from
D Naran against the money it believed he paid to it in his
personal capacity.





On
8 January 2002 the respondent applied for summary judgment,
which was opposed by United Refineries. Dismissing the defence
raised and granting summary judgment, the learned judge said:





“The
respondent alleged that as far as it was aware the person it was
dealing with was Naran. It was not aware of Naran’s relationship
with the applicant company. It believed that the money that was
paid to it for the cooking oil belonged to Naran. That was why
it
was setting it off against his old debt.






The respondent’s assertions are
clearly without foundation. Its agents Grappletec and Associates
said it was known that Naran
was the broker and agent of the
applicant company. They also paid the cheque for $12 757 424.00
to be drawn from Sibusiso Ndlovu’s
account.






It is clear that there was no
basis for the respondent company to believe that the money belonged
to Naran and it was entitled to
make a set off. It in fact has no
bona fide
defence to the applicant’s claim.”





I
do not agree with the learned judge in the conclusion reached on the
evidence before him. The cause of action against the appellant
was
that without any right to do so it had set off a debt due to it from
D Naran personally against money paid to it by him
when to its
knowledge he was acting as an agent of the respondent to whom the
money belonged. The question for determination was
therefore
whether or not at the time the appellant effected the set off it knew
that the money did not belong to D Naran as
a principal.





The
extraordinary relief of summary judgment could only be granted if the
respondent’s case was unanswerable. It was for the
respondent to
place before the court, through the founding affidavit and supporting
documents, evidence which verified the cause
of action to the extent
that any reasonable court would be able to say the appellant had no
bona fide
defence to the claim but had raised a defence for purposes of delay.





In
Timnda Truck Parts
(Pvt) Ltd v Autolite Distributors (Pvt) Ltd

1996 (1) ZLR 244 (H) at 245C CHATIKOBO J said:





“The
requirement that the cause of action must be verified means that it
must be substantiated by proof. The affidavit should contain
evidence which establishes the facts upon which reliance is placed
for the assertion that the applicant’s claim is unimpeachable.”





See
also
Scropton Trading
(Pvt) Ltd v Khumalo

1988 (2) ZLR 313 (S) at 315F.





The
facts alleged by the appellant in its defence, on the basis of which
it contended that it had a “good
prima
facie
defence to the
action”, were that at the time it set off the debt due to it from
D Naran against the money paid by him it
believed that he had
contracted with it in his personal capacity. It had no knowledge
that the money belonged to the respondent.





The
cause of action, in my view, was not verified. It was not
substantiated by proof. The founding affidavit and supporting
documents did not contain evidence of the fact that, at the time
United Refineries set off the debt due to it from D Naran
personally
against the money paid to it for the cooking oil, it knew
that he had ordered the goods as an agent of the respondent and the
money
belonged to the latter. The order letter showed that it was
signed by D Naran in his own name without any qualification
indicating
that he was acting on behalf of another person. There
was no evidence to contradict the allegation that the goods were
delivered
to D Naran’s premises and credit given to him
personally. The bank cheque by which the debt was set off did not
contain
any evidence that the money belonged to the respondent.





Mr Fitches,
who appeared for the respondent, argued that the fact that the
invoice was addressed to “VCB Commodity Brokers C/o
Danish Naran”
proved that United Refineries knew that D Naran
was acting as an agent of the respondent. The contention was not
supported
by evidence disclosed by the papers. The respondent is
not "“VCB Commodity Brokers". The order letter written
by
D Naran did not have the words “VCB Commodity Brokers C/o
Danish Naran”. The invoice was prepared in this manner
by
United Refineries, which denied that it intended it to convey
acceptance on its part that D Naran was acting as an agent
of a
disclosed principal. The words “VCB Commodity Brokers”,
containing as they did no indication that a legal
persona
was being referred to, would not be the basis for an inference that
United Refineries knew that D Naran was acting as an agent
of a
legal
persona
known as “UCB Commodities Brokers (Private) Limited”.





The
respondent did nothing to reveal to the appellant in its dealings
with D Naran that he was acting as its agent. The appellant
would, in the circumstances, be entitled to the same right of set off
in respect of any debt due from D Naran personally as
it would
have been entitled to if D Naran had been the principal,
provided that at the time the set off was effected it had
not
received notice that he was not in fact the principal.





The
court
a quo
imputed to United Refineries knowledge of the managing director of
“Grappletec and Associates” which he claimed to have had of
the
fact that D Naran acted as an agent of the respondent at the
time he contracted with it. It is not clear from the papers
whether
or not “Grappletec and Associates” is a legal
persona.
I assume, for the purposes of determining the question whether the
knowledge of the managing director (“Mr Walker”) could
in
the circumstances be imputed to United Refineries, that it is a legal
persona.





It
is common cause that “Grappletec and Associates” was contracted
by United Refineries in 2000 to collect a debt of $2 000 000.00
due to it from D Naran. The specific authority given to
“Grappletec and Associates” was to collect the particular debt
on
behalf of United Refineries. It was not authorised to, and did not,
represent United Refineries in the sale of goods to customers.





As
it was common cause that the knowledge which the managing director of
“Grappletec and Associates” claimed to have obtained
was not
communicated to United Refineries, it could be imputed to it only on
proof that the knowledge of the fact that D Naran
contracted
with United Refineries as an agent of the respondent was acquired in
a transaction with respect to which “Grappletec
and Associates”
had authority to act on behalf of United Refineries.





Knowledge
of a fact acquired by an agent on a matter not within the scope of
his authority cannot be imputed to his principal. As
a general
rule, in order that the principal may be deemed to have notice of
facts coming to the knowledge of his agent, the facts
must come to
the agent’s knowledge in the course of the transaction or business
with respect to which the question of knowledge
or notice arises.
Wells v Smith
(1914) 3 KB 722;
Trucar
Finance & Acceptance Corporation Ltd v Jones’ Garage and
Service Station
1963
(1) SA 588 (T).





The
question of the knowledge of the fact of the capacity in which
D Naran contracted with United Refineries arises with respect
to
the sale and purchase of cooking oil. “Grappletec and Associates”
had no authority to represent United Refineries in such
a
transaction. Its mandate was to collect a specific debt from
D Naran on behalf of United Refineries. The knowledge remained
Mr Walker’s own knowledge which could not be imputed to United
Refineries. Mr Walker was not under a duty to communicate
his
knowledge to United Refineries.





The
requirements for imputing to a principal knowledge of a fact acquired
by the agent were not satisfied. The cause of action
remained
unsubstantiated by proof. The claim was not unanswerable. The
defence was a good
bona fide
defence. Summary judgment ought not to have been granted.





The
appeal is allowed with costs. The order of the court
a quo
is altered to read:






“1. The application for summary
judgment is dismissed with costs.







2. The defendant is granted leave
to defend the action.”











CHEDA
JA: I agree.











CHEDA
AJA: I agree.











Coghlan
& Welsh
,
appellant's legal practitioners


Sibusiso
Ndlovu & Partners
,
respondent's legal practitioners