Court name
Supreme Court of Zimbabwe
Case number
SC 86 of 2005
Civil Appeal 198 of 2005

Mobil Oil Zimbabwe (Pvt) Ltd. v Mashoko (98/05) (SC 86 of 2005, Civil Appeal 198 of 2005) [2006] ZWSC 86 (26 February 2006);

Law report citations
Media neutral citation
[2006] ZWSC 86













REPORTABLE
ZLR (74)





Judgment
No. SC 86/05


Civil
Appeal No. 198/05








MOBIL
OIL ZIMBABWE (PRIVATE) LIMITED v





ALBERT
MACHENGETE MASHOKO








SUPREME
COURT OF ZIMBABWE


ZIYAMBI
JA, MALABA JA & GWAUNZA JA


HARARE,
NOVEMBER 24 2005 & FEBRUARY 27, 2006








R
M Fitches
, for the
appellant





N
Madya
, for the
respondent








GWAUNZA
JA: This is an appeal against the judgment of the High Court, in
terms of which the appellant’s cancellation of a lease
agreement
between the parties, was set aside. In the same judgment, the court
a quo
also dismissed the appellant’s counter application for an order
confirming the cancellation of the lease agreement.





The
facts of the matter are largely not in dispute. The appellant,
which is a well known Oil Company in Zimbabwe, entered into
a lease
agreement with the respondent, in pursuance of which the latter
leased a Service Station belonging to the appellant. It
was a
condition of the lease agreement that the respondent would acquire
all its fuel, lubricants and related products from the appellant
and
sell only these, from the leased premises.






In an action that directly
violated this condition, the respondent’s senior employees
clandestinely bought fuel from a third party
and arranged for it to
be delivered at the leased premises in question. There seems to be
no dispute that their intention was to
later sell it without the
knowledge of either the appellant or the respondent. A
representative of the appellant was alerted to
this plan and
literally caught the respondent’s employees red-handed while they
were taking delivery of the fuel in the middle
of the night.





It
is not in dispute that a deposit of $7 million dollars paid by the
employees to the third party for the fuel, had been stolen
from the
respondent, in effect, taken from the day’s takings at the service
station.





The
appellant took a dim view of the conduct of the respondent’s
employees, which it attributed to lack of control over them by
the
respondent, and purported to cancel the agreement of lease, prompting
the respondent to have recourse to the High Court.






The appellant’s main ground
of appeal is that as the respondent had bound himself contractually
to be wholly responsible for the
control and conduct of all persons
employed at the service station, the court
a
quo
erred in allowing
the application, especially since there was an admitted breach of an
express and material term of the agreement
albeit
the respondent attributed it to his employees.






The appellant charges further
that the court
a quo
misdirected itself in not having regard to the fact that at least two
of the respondent’s employees were senior managers and that
what
they did was sufficiently closely linked to their employment so as to
render the respondent liable.





It
is clear from a reading of the appellant’s papers that it imputed
what it termed “vicarious liability” to the respondent,
on the
main ground that he had failed to exercise adequate control over the
conduct of his employees, thereby making it possible
for them to
commit the offence in question. Since the respondent had contracted
to be wholly responsible for the control and conduct
of his
employees, as specified in clause 18.5.2 of the Third Schedule to the
lease agreement, it was the appellant’s contention
that he had
breached a material term of the contract.





In
my view, the use of the words “vicarious liability” by the
appellant was misleading, in as much as it tended to disguise
the
true basis of the appellant’s claim. It is no wonder that the
thrust of the respondent’s defense was his denial of any
vicarious
liability – in the sense that the term is usually understood within
the area of delict – for actions taken by his employees
behind his
back. He made much of the theft from him of $7 million, the fact
that the fuel clandestinely bought from the third party
would have
been sold ahead of his own fuel stored at the same premises, and that
he had not authorized the conduct complained of.
The respondent did
not directly address his mind to the charge that he had been remiss
in exercising control over the conduct of
his employees, thus
breaching a term of the agreement. His response to the charge was
that the clause in question, that is 18.2.5,
was of no force or
effect since it made reference to a provision that did not exist in
the contract. I will revert to this argument
later.




Having, as I am persuaded he did,
misread or misconstrued the basis of the appellant’s charge, the
respondent correctly contends
that if he was to be held to have been
in breach of the agreement, it would only be on some recognizable
ground that “fixes”
him with the responsibility of his employees
conduct in the circumstances described.





My
view is that such other “recognizable ground” did exist and was
contained in clause 18.5.2 of the lease agreement.






In her judgment the learned
trial judge, in my view, fell into the same error as the respondent.
She noted that the issue that
fell for determination in this matter
was somewhat
res nova,
it being whether the doctrine of vicarious liability applied in
contract law to terminate a valid contract on the basis that the
breach complained of was occasioned by the employees of the
respondent. As already indicated, the appellant’s case against
the
respondent was not one of vicarious liability in contract, rather
that he had failed to control the conduct of his employees as he
had
contracted to do, leading to the conduct complained of.







The failure by the learned trial
judge and for that matter, the appellant’s counsel, to find any
authorities on the doctrine of
vicarious liability in contract is
hardly surprising. The fact that all the authorities cited by both
the appellant and the learned
trial judge, dealt with situations that
appropriately fell within the domain of delict law
1
is clear testimony that such authorities (on vicarious liability in
contract) do not exist. The learned trial judge was therefore
correct in concluding as follows in her judgment:








“I
would venture to hold that the doctrine of vicarious liability has no
equal application in the law of contract (as in delict)".




Like the respondent, the learned
trial judge proceeded on the basis that the appellant’s case
against the respondent was premised
solely on the issue of vicarious
liability in contract. She did not consider the appellant’s
argument that respondent’s breach
of the agreement was based on his
violation of the clause requiring him to exercise control over the
conduct of his employees.
Since this argument was clear on the
papers, I find that the court
a
quo
clearly
misdirected itself in this respect.






The
clause of the contract relied on by the appellant in its first ground
of appeal is contained in a section of the lease agreement
entitled
"Lessee’s Obligations”.






It reads as follows:


“18.5.2 To
be wholly responsible for the control and conduct of all persons
engaged and employed at the service station in terms of
Clause 4.8.1
above and to bear all losses or expenses arising out of





18.5.3…….


18.5.4…….(not
relevant)”.








The
respondent argues that clause 18.5.2 is of no force or effect since
the provision it makes reference to, i.e. 4.8.1 does not
exist in the
contract. I am not persuaded there is merit in this argument.
Both the appellant and the respondent signed the agreement
of lease.
The service station was to be run as a business. It must have been
understood between the parties that the respondent
would employ a
number of people to help him run that business. It is not unusual
in any business to expect the employer to exercise
control over the
conduct of his employees, at the business. Consequently I find it
unlikely that the parties’ intention was for
clause 18.5.2 to be
entirely without application. Read in context, the clause refers to
the employees that the respondent would
employ to help him run the
business. Reference in it to a non-existent provision does not and
should not, in my view, nullify the
whole clause. That reference
can properly be expunged or ignored without doing harm to the
parties’ intention, which was to make
the respondent responsible
for the control and conduct of his employees at the premises. This
is an interpretation which I am satisfied
is in harmony with the
section entitled “Lessee’s Obligations”. A contrary
interpretation would suggest a situation where
the respondent would
engage the services of the various employees he needed to effectively
run the business, and then leave such
employees to do whatever they
liked without any control from him. Since that would not make good
business sense, it is unlikely
to have been the parties’ intention.





Having
determined that the respondent did contract to be responsible for the
control and conduct of his employees working at the
premises
concerned, the question to be determined is did he or did he not
discharge this obligation?





The
appellant’s case is that he did not. It made this very clear in
its letter dated 9 March 2004, where the appellant’s Cluster
Retail
Manager, a Mr Goodmore Chatora, charged as follows:





“This
decision (to terminate the lease) has been taken in light of the fact
that we hold you wholly responsible for the control and
conduct of
all persons engaged and employed at the service station (clause
18.5.2) …..





Mobil
is very concerned about the lapse in controls and accountability on
your part leading ultimately to the alleged offenses by
your
employees.”








The effect of
these remarks is that the conduct in question,
albeit
carried out in the manner it was, by the respondent’s employees,
was a manifestation, or direct consequence, of the respondent's
breach of clause 18.2.5 to wit, his failure to exercise control over
their conduct.





In
order to determine whether or not the respondent breached the lease
agreement in such a manner as to warrant its cancellation
by the
appellant, a consideration of the nature and purpose of the contract
is pertinent.





Clause
2.2 of the Agreement provides as follows:





“2.2 The
purpose for which this Lease is granted are to enable the Lessee as
Principal and for the Lessee’s own account to carry
on upon the
premises:







2.2.1 The business of selling
(subject as hereinafter provided) Mobil’s Motor fuel, lubricants
and other petroleum products in accordance
with the provisions of the
Fifth Schedule hereto;





2.2.2 The
business of rendering the supplying (subject as hereinafter provided)
such services and commodities as are commonly rendered
and sold at
petrol filing and service stations.






2.3 During
the continuance of this Lease and subject to the provisions of
paragraph 6 of the Fifth Schedule hereto Mobil shall supply
or
procure to be supplied to the Lessee and the Lessee shall purchase
from Mobil the whole of the Lessee’s requirements of motor
spirits
and automotive diesel fuel for sale at or from the premises.”





The purpose of
the contract was therefore clear. Only Mobil’s products were to
be sold at the service station. According to
the definitions
sections of the agreement the service station was to be operated day
and night, that is, 24 hours a day. If the
conduct of the
respondent’s employees is to be viewed against this background, it
is evident that they brought onto the appellant’s
premises and into
its fuel tanks, fuel that had been bought from a third party. Their
intention was to then surreptitiously sell
the fuel from the
premises, during times that, according to the contract, they would
have been required to sell products sourced
from Mobil Oil. If it
is to be accepted that the Service Station was to operate for 24
hours a day, it follows that the said employees
took illicit delivery
of the fuel during working hours.






The thrust of the appellant’s
case against the respondent is that had he exercised control over his
employees, this action, which
constituted a breach going to the root
of the contract between the parties, would not have happened. There
is merit in this argument.
The very essence of the contract between
the parties was that only the appellant’s products were to be sold
at the premises,
24 hours a day. It follows that the control that
the respondent contracted to exercise over the conduct of his
employees had to
be continuous, day and night. Whatever measures
the respondent might have put in place in this respect clearly were
not adequate,
as evidenced by the fact that, but for the appellant’s
intervention, the culprits would have made good on their conduct.
All
in all, the conclusion that is difficult to escape is that there
was an obvious laxity in whatever controls the respondent may have
put in place to supervise the conduct of his employees. In other
words, the respondent created the basic environment in which the
conduct in question took place. That being the case, little doubt
remains that the respondent’s laxity constituted a breach of
a very
material term of the contract. I am satisfied the appellant was
within its rights to cancel the lease agreement.






The appellant’s main ground of
appeal is accordingly upheld and the appeal must succeed. I do not
consider it necessary after
this to consider the appellant’s other
grounds of appeal.






The appellant sought costs on the
higher scale. I am not persuaded a case has been made for such an
order. The appellant, as has
been observed above, must take part of
the blame for using the term “vicarious liability” in the wrong
context and to an extent
misleading the respondent as to the case
that he was facing. An ordinary order for costs would in my view,
be appropriate.





It
is in the result ordered as follows:





1. The
appeal be and is hereby allowed.







2. The decision of the court a
quo
is set aside and
substituted with the following:







“1. The application be and is
hereby dismissed with costs.







2. The respondent’s counter
application be and is hereby granted.”















ZIYAMBI JA: I agree.

















MALABA
JA: I agree.









Honey & Blanckenberg,
appellant's legal practitioners






Wintertons,
respondent's legal practitioners






















1
Among
others; Goodman Bros (Pty) Limited v Rennies Group Limited 1997(4)
SA 91 WLD;


Hotels,
Inns & Resort SA v Underwriters at Lloyds 1998(4) SA &
Zimmerman’s Law of Obligations at pages 1120, 397 - 399