The plaintiff issued summons claiming the following:
“(i) Payment of the sum of US$119,300 being the remaining balance of the agreed purchase price for one x 20 Tonne Hyundai Excavator, sold and delivered by the plaintiff to the defendant, at its specific instance and request.
(ii) Interest at the prescribed rate calculated from the date of delivery, being 19th of June 2014, to the date of full payment.
(iii) Costs of suit on a legal practitioner and client scale.”
In its declaration, the plaintiff averred the following:
In 2011, the parties entered into a procurement contract in which the defendant ordered one by 20 tonne hydraulic excavator from the plaintiff. The agreed purchase price was US$209,300 inclusive of VAT. The defendant was obliged to pay 50% deposit towards the purchase price. The remaining balance was payable upon delivery of the excavator.
In partial fulfilment of the agreement, the defendant paid, in instalments, the sum of US$90,000 as part deposit to the agreed purchase price.
The plaintiff accordingly delivered the excavator on 19 June 2014 which delivery was accepted. The excavator was accepted in good working order by the defendant at its premises.
The defendant has, despite demand, refused or neglected to pay the outstanding balance of US$119,300....,.
To the merits, the defendant averred, that, the plaintiff delivered a defunct Hyundai Excavator contrary to the undertaking that it made that it would deliver a new excavator. It had to incur unnecessary costs in having the excavator checked by an independent company. The defendant averred, that, it will only effect payment of the balance after delivery of a brand new and properly functioning machinery.
The defendant also made a counter claim. It averred the following:
On 16 May 2014, it advertised a Tender Notice in the Herald newspaper in terms of section 211 of the Urban Councils Act [Chapter 29:15]. The notice was inviting tenders for the supply of brand new machinery, viz:
(i) One Jet machine Chigu Velocity clearing machine.
(ii) One Tracked Excavator 30 tonne.
(iii) One Front End Loader.
On 18 July 2011, the defendant in reconvention won the tender to supply it with a 20 tonne Tracked Excavator and a 3 tonne Front End loader. It was a term of the agreement that:
(a) The defendant in reconvention would deliver a brand new excavator and a brand new front-end loader.
(b) The plaintiff in reconvention would pay the deposit of the agreed purchase price before delivery of the machinery.
(c) The plaintiff in reconvention would pay the outstanding purchase price upon delivery of the machine.
The plaintiff in reconvention paid the initial deposit to the defendant in reconvention on 29 January 2014 in the sum of US$140,000. On 19 June 2014, the defendant in reconvention delivered a dysfunctional excavator in breach of the agreement terms.
It has refused and failed to deliver a brand new machinery.
The plaintiff in reconvention has been prejudiced by the breach. The plaintiff in reconvention is entitled to specific performance of the agreed terms of the contract. Alternatively, it is entitled to restitution of US$140,000 being the deposit paid as part of the purchase price and damages for breach of contract. Consequently, it claims for:
“(a) An order compelling the defendant in reconvention to deliver brand new excavator and Frond End loader to the plaintiff in reconvention in terms of the agreement.
(b) Alternatively, an order compelling defendant in reconvention to pay the sum of US$140,000 being the deposit paid as part of the purchase price.
(c) An order compelling defendant in reconvention to pay US$30,000 as damages for breach of contract.
(d) An order compelling defendant in reconvention to pay US$20 per day from date of summons to date of collection being storage fees for the excavator.
(e) An order compelling defendant in reconvention to pay interest at the rate of 5% per annum from the date of demand to date of payment in full.
(f) Costs of suit on a legal practitioner client scale.”
The defendant in reconvention pleaded as follows to the counter-claim:
When the plaintiff in reconvention advertised its tender notice, the tender was not won by the deadline. The tender notice was then revised and extended.
It (the defendant in reconvention) submitted its bid during the extension.
According to the specifications of the re-advertised tender notice, it was not a requirement that the excavator be brand new. Even its tonnage had also been reduced. The tender that was won by the defendant in reconvention was not as per the initially advertised tender notice as evidenced by the discrepancy in tonnage of the excavator.
The defendant in reconvention averred, that, at all material times, the plaintiff in reconvention was fully aware that the excavator to be supplied would be pre-owned.
When the excavator was delivered, it was inspected by all responsible authorities and then certified to be in good working condition. The parties did not agree that the machinery to be supplied would be brand new.
The defendant in reconvention prayed for the dismissal of the counter claim with costs on a higher scale.
In its replication, the plaintiff in reconvention averred the following:
The excavator was supposed to be new. It disputes that the tender that was won by the defendant in reconvention was not the one that was initially advertised. The defendant in reconvention was paid the deposit for both the excavator and front end loader after a meeting was subsequently held. It disputes that the excavator that was delivered was in good working condition.
At the pre-trial conference, the parties agreed that the issues for trial were:
1(a) Whether or not the plaintiff should be compelled to deliver a brand new excavator; or, alternatively
1(b) Whether or not the defendant is entitled to a refund of the deposit paid.
2. Whether or not the plaintiff is entitled to payment of the outstanding amount.
To prove its case, the plaintiff led evidence from one witness, Darlington Chirara, who is its Managing Director since 2007.
His evidence was as follows:
In June 2011, he went to Chitungwiza Municipality head office chasing after his payment. At the Registry section notice board there was a tender notice asking for a refurbished 20 tonne Crawling Excavator and a 3 tonne Front End loader. Tender documents were going for US$5,000.
He went back the next day and bought the tender documents which included a tender form which was supposed to be filled in duplicate and attached to the quotation. He filled in the tender form for the excavator and attached it to his quotation and had them stamped by the defendant's registry section on 9 June 2011 on receipt.
The tender document, together with the tender form and the quotation, were produced as exhibit(s) 4 and 5…,.
The tender reference number for the supply of the excavator is CH.05/11.
Darlington Chirara said, that, on the tender form, he filled in the condition of the machinery as a 200g Model, a Hyundai Model which had already done 2,972 hours as it was a second hand. Its under-carriage life percentage was 76% meaning that 24% was already worn out or gone because of use.
He said that in exhibit 5, which is the quotation, he quoted a 20 tonne excavator valued at $182,000.
He said that, on 7 July 2011, he received a letter from the defendant saying that the plaintiff had won the tender to supply a refurbished 20 tonne excavator and a 3 tonne front-end loader.
The letter was produced by consent as exhibit 6 in the supplementary bundle.
The letter was written on 6 July 2011 to the directors of the plaintiff, by G. Tanyanyiwa, who was the then Town Clerk. It is on the defendant's letter head. It reads:
“REF: Supply of refurbished 20 tonne Crawling Excavator and 3 tonne Front Loader
Reference is made to the above.
You have been awarded the Tender to supply the Municipality with the above equipment.
You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks.
May you please treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of diseases.”
Darlington Chirara said, that, in August 2011 the plaintiff received a purchase order and a transfer copy of the RTGS from Metropolitan Bank dated 24 August 2011 showing that the defendant had paid the 50% deposit as per the plaintiff's request in the quotation.
The purchase order was produced as exhibit 7…,.
It is dated 18 July 2011, but it was signed on 1 August 2011. It is for the purchase of a tracked excavator 20 tonne for US$182,000.
The RTGS, exhibit 8…, shows that it is dated 24 August 2011 for US$91,000, for the benefit of the plaintiff by the defendant. However, on top of the date stamp it is crossed and written “not processed.”
Darlington Chirara said, that, to the plaintiff's surprise, the money never came through. It was only paid after the plaintiff had issued summons.
The defendant finished paying the deposit for both the excavator and the front loader in February 2014. $90,000 was paid for the excavator and $50,000 was paid for the front-end loader.
He then delivered a 20 tonne excavator on 19 June 2014.
On delivering the machinery, he saw the Director of Works, Mr Gwanzura, who called the now current Town Clerk, Mr George Mukunde, who in turn called seven (7) councillors who were there. They came and inspected it and then instructed the Chief Internal Auditor, Mr Chipunza, to accompany him to the workshop with the machine. At the workshop they saw Mr Musiwa and the Workshop Foreman who inspected the machine and tested it for almost two (2) hours. After that, they signed the delivery note, which was produced by consent as exhibit…,.
The delivery note shows, that, it was signed by one Innocent on behalf of the defendant and it states, that, the machinery was received in good working order.
Darlington Chirara said that the machinery had tips and a cigarette lighter. The fuel gauge and the wipers were working.
On the tender form, he had stated, that, the machinery which was going to be supplied was a 7 series model i.e. 210 LC-7.50. He said that the defendant knew from the onset about the type of machinery that was going to be supplied.
He said the defendant even had the Ministry of Local Government, Public Works and National Housing write a letter to ZIMRA indicating that it (the defendant) had been granted a duty free certificate to facilitate the delivery of a Robex 210 LC-7H Hyundai Excavator valued at US$182,000.
It was signed on 14 April 2014. The letter was produced by consent as exhibit 12…,.
Darlington Chirara said that after delivering the excavator, on 19 June 2014, he was then furnished with a report, dated 11 July 2014, from the defendant, listing the defects it said it found on the excavator.
He said that he was disputing all of them.
He said that he was not even aware of the qualifications of the person who did this report, but he suspected that this person was an interested party in the same business as the plaintiff, because, after issuing the report, he went on to issue a quotation to supply the same machinery to the defendant.
He said that when he delivered the excavator it was in good working order.
When the inspection was done and the report was compiled, three (3) weeks later, no one from the plaintiff's company was present. The plaintiff was not made aware of the inspection.
He said that there was need for him to train the defendant's employees on how to operate the machinery. He said that in his quotation he had indicated that he would provide Basic Operator Orientation under the heading “Handover”. He said that he has not yet trained them because he has not been paid the outstanding amount.
During cross examination, the witness said that he did not respond to the Tender Notice which was flighted in the Herald Newspaper, but the one on the notice board of the Registry section at the defendant's headquarters.
He said he did not have proof of such since it was on the notice board.
He admitted, that, the delivery note that was signed by Innocent, on behalf of the defendant, was prepared by the plaintiff.
He disputed that the excavator was not inspected on delivery as it was inspected by the defendant's employees and signed for by Innocent as to have been received in good working order.
He said that he would have done the commissioning of the excavator once the purchase price had been paid in full within seven (7) days from the date of delivery.
He was shown minutes of a meeting which was held on 17 September 2013 between the plaintiff's directors and the defendant's management. These minutes were later produced by the defendant as exhibit 20…,.
He admitted that he attended that meeting.
Although in those minutes it is stated, that, it was agreed that the plaintiff would supply and deliver brand new equipment, Darlington Chirara disputed this saying that these minutes were not a true record of what was agreed on.
He said that these minutes were prepared by the defendant.
He maintained, that, when he delivered the machinery, it had no defects and US$182,000.00 was its value.
He said that the minutes were not sent to him before they were confirmed.
Referring to exhibit 10…, which is a letter which he wrote to the defendant's Town Clerk, on 22 August 2011, he said that it was the defendant which was supposed to prepare the tender contract between the parties but it was never prepared.
He said that, instead, the defendant furnished the plaintiff with a purchase order.
During the defendant's case, Mary Mukonyora, who is its Acting Chamber Secretary testified as follows:
The Tender Notice by the defendant, inviting tenders to supply an excavator and a front end loader, was placed in the Herald Newspaper. The closing date which was set for the submission of tenders was 31 May 2011.
The Tender Notice was produced as exhibit 13…,.
It shows, that, the defendant advertised for the supply of a 30 tonne excavator and a 3 tonne front-end loader.
The witness said, that, on 23 June 2011, there was a procurement meeting that was held by the Procurement Committee, and, in that meeting, the Procurement Committee recommended the awarding of the tender for the supply of the excavator and front end loader to the plaintiff.
The minutes were produced as exhibit 14…,.
These minutes show, that, the plaintiff was accorded the tender to supply a 20-tonne Tracked Excavator for US$182,000 and a 3-tonne Front End Loader for US$105,000. However, it was specified that the machinery was supposed to be new.
The minutes also show, that, the Town Clerk, Mr. G Tanyanyiwa, was in attendance of the meeting.
The witness said, that, these recommendations were being made to the full Council which later held its meeting on 21 July 2011.
The minutes of the full Council meeting were also produced by consent as exhibit 15…,.
They show that G Tanyanyiwa, the Town Clerk, was in attendance again.
The full Council adopted the recommendations of the Procurement Board on the award of tenders for the supply of the machinery.
Mary Mukonyora said, that, when the plaintiff then delivered a second hand excavator, the new Town Clerk, Mr. G. Makunde, wrote to the plaintiff, on 11 July 2014, raising the issue.
The letter was produced as exhibit 16…,.
In that letter, Mr Makunde stated, that, the defendant noted with great disappointment that the excavator was second-hand.
The witness said, that, according to an expert the defendant engaged, the machinery was not in good working condition.
The report that was compiled by the expert was produced as exhibit 19…,.
It enumerates about 19 defects and states that key accessories were missing. It states that the machine is an old machine that was repaired and resprayed.
The witness disputed that the Tender Notice was ever flighted on the Registry notice board for the supply of a refurbished excavator.
She said, that, from the time the excavator was delivered, it has never been used by the defendant. It is at the defendant's workshop.
The witness also made reference to the minutes of a meeting which was held on 17 September 2013 involving the directors of the plaintiff and the defendant's management.
These minutes were produced as exhibit 20…,.
They show, that, the meeting was held following the issuance of summons by the plaintiff for breach of contract; in that the defendant had not paid the deposit for the supply of the machinery by the plaintiff despite the plaintiff having won the tender in 2011. The plaintiff was suing for damages for breach of contract or for the payment for the equipment since the machinery was already there.
The minutes show, that, the parties agreed that the defendant would pay for the machinery and the plaintiff was to supply brand new equipment after payment of 50% deposit of the total value.
During cross-examination, the witness said that she got employed by the defendant on 1 October 2012 as Head of Human Resources, and, in 2015, she assumed the position of Acting Chamber Secretary.
She admitted, that, the letter notifying the plaintiff of having won the tender to supply a 20 tonne refurbished excavator and a 3 tonne front end loader, which was written by G. Tanyanyiwa, the then Town Clerk, on 6 July 2011 (exhibit 6) and the minutes of the Procurement Board recommending that the plaintiff supplies a 20 tonne excavator and 3 tonne front end loader were consistent.
She said that she, however, doubted the authenticity of the letter of G. Tanyanyiwa. She said that she doubted if it was genuine.
She, however, admitted, that, other than this document which was written by G. Tanyanyiwa, there is no any other document from the defendant which notified the plaintiff of having won the tender.
She also said, that, she sent the minutes of 17 September 2013 to the plaintiff for authentication, but, admitted that she had no evidence to prove that she had indeed sent the minutes for confirmation.
She said that Innocent, who received the excavator on behalf of the defendant and signed the delivery note, is not an expert in such machinery, but is just a clerk who works at the Stores department.
She said that the machine had not even been commissioned, yet, its standard practice to have equipment demonstrated to be in good working order.
She said that all the defendant's Tender Notices are done through the newspapers.
She, however, explained, that, if all tenderers say they can supply a 20 tonne excavator instead of a 30 tonne excavator which would have been advertised for, the defendant can make adjustments and accept the supply of a 20-tonne.
She said that the excavator was received by the defendant on 19 June 2014. It was inspected by the expert on 30 June 2014. The letter of complaint to the plaintiff, about the defects on the excavator, was written on 11 July 2014.
She said that the tender number on the Tender Notice which was flighted by the defendant is 5/11, yet, on the tender documents that the plaintiff submitted quoted the tender number as CH/05/11. She said that showed that the plaintiff was responding to a different Tender Notice than the one advertised in the Herald Newspaper with a deadline for submissions of 31 May 2011.
George Makunde, the current Town Clerk of the defendant, testified as follows:
He said that he joined the defendant in August 2012 and got to know about this case through a perusal of the defendant's documents.
He outlined the procedure that is followed by the defendant in procuring equipment.
He said that a Tender Notice is flighted in a national newspaper guided by section 30 and 31 of the Procurement Act [Chapter 22:14] inviting the submission of tenders. The Procurement Committee/Board then deliberates on the submitted tenders and makes recommendations in terms of the award of the tender to the winner of that particular tender. The recommendation is made to a formally constituted full Council of the defendant in the form of a report. Full council then makes a resolution on the issue which resolution then allows or authorises the Town Clerk, as the Chief Executive Officer or Accounting Officer, to then notify the winning tenderer for the provision of the goods or service so required.
The witness alluded to the Tender Notice that was flighted by the defendant; the minutes of the Procurement Committee of 23 June 2011; and the minutes of the full Council meeting of 21 July 2011 that Mary Mukonyora referred to in her evidence.
His evidence on all these documents was similar to that of Mary Mukonyora in all material respects.
He also reiterated that the tender required that the plaintiff supplied a brand new 20 tonne excavator and a 3 tonne front-end loader.
He disputed that the excavator that was delivered was in good working order saying that although he saw the excavator on the day it was delivered, he did not inspect it to satisfy himself that it was in good working order as he lacked the expertise in testing the machinery.
He said that inspection of machinery is contained in the regulations that guide procurement and it is a process and not an event.
He also said that Innocent, the clerk who received the machinery, has no qualifications to test its condition.
He said that the excavator was not able to perform its obligations and was never used by the defendant.
The witness said that he suspected that the letter that was written by the then Town Clerk, G. Tanyanyiwa, on 6 July 2011, notifying the plaintiff that it had won the tender to supply a refurbished excavator and front-end loader was as a result of a collusion between Mr. Tanyanyiwa and the plaintiff because it was written before the full Council of the defendant had made a resolution on 21 July 2011 to award the tender as per recommendations by the Procurement Committee which had set on 23 June 2011.
The witness evidence with regards to the minutes of 17 September 2013 (exhibit 20) was similar to the evidence that was given by Mary Mukonyora. He also testified, that, in that meeting, it was agreed that the plaintiff would supply a brand new excavator and a brand new front end loader, but, the plaintiff did not deliver brand new machinery.
During cross examination, the witness explained, that, receiving machinery on its delivery and commissioning of the machinery are two different things.
He also explained that the delivery note that was signed by Innocent, the defendant's employee, is a document which was prepared by the plaintiff and it already had the words “received in good working order” printed on it and all that Innocent did was to affix his signature after those words.
It is not Innocent who wrote those words.
He said that, initially, it was the transport personnel who observed that the excavator was second hand and this prompted the defendant to invite an expert, Nicnel, to come and inspect it.
Before that, Automobile Association of Zimbabwe (AAZ) had been called to come and check if the equipment was new.
He explained that the defendant never invited the plaintiff to be in attendance because, in business ethics, you would not want to give the impression that you are dealing with a dubious institution. He said that the defendant wanted to satisfy itself about the excavator hence it called in the Automobile Association of Zimbabwe (AAZ) to inspect it.
The witness said that the plaintiff gave them the price of US$182,000 for an old excavator yet Nicnel gave the defendant a quotation for a new excavator from Hyundai going for US$159,275 on 30 June 2014. He said that although the models are different the disparity in prices showed that the plaintiff was not dealing with the defendant in good faith.
Ryan Edward Berry testified as follows:
He is and has been employed by Nicnel Plant and Equipment (Private) Limited as the Technical Sales Manager for four (4) years now.
He was called by the defendant to inspect the excavator which is in issue.
He noticed that it was a second-hand, having done over 6,000 hours yet the meter read that it had only done 6 hours. The bucket had no tips similar to a car delivered with no tyres. The engine pipes were damaged from the breather which would allow dust to enter if the engine was to run for an extended period. The machine could start and run, but it could not perform its functions properly because it did not have tips and the engine was in a poor state of repair.
He said that the excavator is an LC-7 model, which is an old model which was manufactured until 2012, but a 9 model was manufactured from 2012 onwards.
About his qualifications, he said that he has “O” Level with technical experience from being on the job for about eight (8) years in the industry.
He said that because of this, he took a technician with him to inspect the machine.
He said that as the Sales and Technical Manager, he oversees his technicians using their expertise.
He said that Wency is the technician who inspected the machine as he (witness) filled out the report. However, he admitted that his name does not appear on the report. He said that Wency refused to come to court as he had been phoned, harassed, and intimidated.
He admitted to supplying his own quotation for an excavator to the defendant - on the same day of 30 June 2014 the excavator supplied by the plaintiff was inspected.
Analysis of Evidence
It is necessary to first determine whether or not the parties entered into a contract for the supply and delivery of brand new or refurbished machinery.
Having listened to the evidence given by the witnesses of both parties, it is clear that there is a dispute as to which Tender Notice the plaintiff responded to when it submitted its tender documents and quotation to the defendant's registry section on 9 June 2011.
This is because although the defendant's witnesses said that the response was to the Tender Notice it flighted in the Herald Newspaper with a deadline for submissions of the tenders of 31 May 2011, the defendant's date stamp on the plaintiff's tender documents show that they were received by the defendant's registry section on 9 June 2011 and the Tender Notice reference number that is quoted which is CH/05/11 is different from the Tender Notice reference number which is on the Tender Notice that was flighted in the Herald Newspaper by the defendant.
Whilst the plaintiff's witness said that the plaintiff was responding to a revised Tender Notice that was flighted on the defendant's registry notice board, he did not furnish the proof thereof saying, that, since the tender notice was on the notice board he could not get a copy thereof as other people also needed to see the notice.
However, despite this explanation by the plaintiff, I am convinced by the evidence which was given by the defendant's witnesses, that, the defendant flights tender notices in the national newspapers and not on notice boards.
They made reference to the provisions of the Procurement Act [Chapter 22:14] which Act makes provision for the procurement of goods, construction work, and services by the State and statutory bodies.
Section 30(1)(a) of the Procurement Act states, that, the procurement of goods, construction work, and services by a procuring entity shall be done by means of tendering proceedings in accordance with section 31.
Section 31(1)(a)(ii) of the Procurement Act [Chapter 22:14] then reads:
“Subject to this Act, in any tendering proceedings conducted by a procuring entity, the invitation to suppliers to tender shall be published in a newspaper circulating in the area in which the procuring entity has jurisdiction or carries on business, where the procuring entity is not the State.”…,.
The use of the word 'shall' in section 31 of the Procurement Act means that it is peremptory for the Tender Notice to be flighted in a national newspaper.
I also looked at section 211(1) and (2) of the Urban Councils Act [Chapter 29:15] which deals with tender proceedings by municipals. It reads;
“211 Tenders
(1) In this section —
'municipal procurement board' means a municipal procurement board appointed by a municipal council in terms of section two hundred and ten.
(2) Subject to subsections (8) and (9), before entering into a contract for the execution of any work for the council or the supply of any goods or materials to the council which involves payment by the council of an amount exceeding such sum or sums as may be prescribed, the council, or, in the case of a municipal council, the municipal procurement board shall call for tenders, by notice posted at the office of the council and advertised in two issues of a newspaper…,.”…,.
Whilst in terms of the Urban Councils Act a tender notice shall be posted at the office of the municipal council, it should also be advertised in a newspaper.
The defendant must therefore flight tender notices in accordance with the provisions of the Procurement Act and the Urban Councils Act.
If the defendant only flighted a tender notice on its notice board and did not do so in the newspaper it did not comply with the law.
However, if this is what happened, the plaintiff ought to have produced proof of the advertisement of such tender notice.
In the absence of such proof, I am led to conclude, that, the plaintiff's director was not being honest with the court about having seen such a tender notice on the notice-board of the defendant on 8 June 2011. Such advertisement would not have been in compliance with section 31 of the Procurement Act and section 211(2) of the Urban Councils Act.
Besides, the defendant has no such tender notice in its files or records.
He who alleges must prove and the plaintiff failed to prove the existence of Tender Notice CH.05/11.
The only tender documents that were produced are those that came from the plaintiff which were said to be its copies.
The defendant's witnesses had no knowledge that the Tender Notice 05/11, which had a deadline of 31 May 2011, was ever revised and extended. There is nothing that shows that in the defendant's records.
With this, I am not satisfied that Tender Notice 05/11, which was flighted by the defendant in the Herald Newspaper, was ever revised and extended.
In any case, it defies logic that the defendant, a municipality, would invite tenders for the supply of second hand machinery. I cannot think of a reason why it would do that.
What is disturbing about this case is that, on 23 June 2011, when the defendant's Procurement Committee/Board set and recommended, in its report to full Council, that the tender for the supply of a brand new excavator and front end-loader be awarded to the plaintiff, Mr G. Tanyanyiwa, the then Town Clerk, was in attendance.
In terms of procedure, the recommendation was subject to adoption as a resolution by a full Council meeting. Such a meeting was only held on 21 July 2011.
The Town Clerk, Mr. G. Tanyanyiwa, even attended that meeting as well.
At that meeting, full Council passed a resolution that the plaintiff be awarded the tender to supply a brand new excavator and front end loader.
What is buffling is that, on 6 July 2011, well before full Council had sat, Mr. G. Tanyanyiwa wrote to the plaintiff notifying it that it had won the tender to supply a refurbished excavator and frond-end loader.
Two questions arise:
(i) Firstly, why did he notify the plaintiff that it had won the tender before full Council had held a meeting to pass the recommendation as a resolution?
(ii) Secondly, why did he tell the plaintiff that it had won the tender to supply refurbished machinery?
These queries or questions show that the then Town Clerk was not conducting himself properly in the discharge of his duties.
This is worsened by the fact, that, he was in attendance at the full Council meeting which was later held on 21 July 2011 which adopted the recommendations of the Procurement Committee/Board which stated that the plaintiff was to supply brand new equipment.
When the adoption of the recommendation was made, he knew that he had already notified the plaintiff that it had won the tender to supply refurbished equipment - but he did not inform the Council.
Obviously, that is a sign that he knew that what he had done was improper.
This is further evidenced by the fact, that, after full Council had passed the resolution to award the tender to the plaintiff, he did not write a letter notifying the plaintiff about it as he was supposed to do as per procedure.
The critical question now is: is the defendant bound by the irregular conduct of its employee, the Town Clerk, who told the plaintiff that it had won the tender to supply refurbished machinery when in fact it wanted to be supplied with brand new machinery?
The plaintiff's counsel submitted, that, by virtue of the turquand rule, the defendant is bound.
I must point out from the onset, that, the turquand rule is a principle of company law.
In terms of the turquand rule, if a party transacts with a company only to later discover that the director lacked the authority to bind the company, the company may be forced to honour the transaction if the transaction was completed in good faith by the other party.
The rule is based on the English case of Royal British Bank v Turquand 1856 119 ER 886, wherein it was held, that, people transacting with a company are entitled to assume that internal company rules have been complied with even if they are not. The exceptions to this rule are:
(i) Firstly, if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (in other words, he acted in bad faith).
(ii) Secondly, if the circumstances under which the contract was concluded on behalf of the company were suspicious.
Counsel for the plaintiff went on to cite the case of Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA…,. The case involved a municipality. The turquand rule was held to be applicable to municipalities.
In that case, the Town Clerk, just like in this case, had written a letter to the respondent cancelling the lease agreement between the municipality and the respondent when the municipality had not authorised the cancellation of the lease agreement. The municipality was now demanding money for rent from the respondent and a dispute arose as the respondent refused to pay saying that the lease agreement had been cancelled. The court held that:
“A municipality, in the normal exercise of its functions, necessarily concludes contracts with members of the public. It would be unbusiness-like if the respondent had been duly bound, when he received the Town Clerk's letter, to make enquiries to ensure that the Town Clerk was in fact authorised by the Town Council to convey the cancellation.”
Applying the law to the present case, counsel for the plaintiff submitted, that, the internal workings of Council are not known to the plaintiff, and, as such, there is a presumption of regularity in the adherence to Council procedures which makes it impossible for the defendant to escape liability on the basis that Mr. Tanyanyiwa had not been authorised by the defendant to write the letter that he wrote on 6 July 2011.
To begin with, with all due respect, I am not in agreement with the reasoning in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA that the turquand rule is applicable to municipalities.
I see no basis for saying that.
Municipalities and companies are different entities.
In terms of section 131 of the Urban Councils Act [Chapter 29:15], a Town Clerk is an employee of the defendant (municipality) and his duties are outlined in section 136. These involve the administration of council, managing operations and property of council, supervise the activities of council employees, and any other duties that may be assigned to him by the Council.
The Urban Councils Act does not give the Town Clerk powers to take over the functions of Council when it comes to procurement issues and make binding decisions on its behalf.
The Urban Councils Act has provisions which deal with how goods and services are procured and those provisions are worded in peremptory terms as they use the words 'shall' and 'shall not'.
In terms of section 210(1) of the Urban Councils Act, every municipal council shall appoint a Procurement Board which is responsible for arranging tenders and for making recommendations to Council in regard to the acceptance of tenders and the procurement of goods, materials, and services.
In terms of section 210(4) of the Urban Councils Act:
“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”…,.
I do not believe that a Town Clerk's actions have the power to override the wording of the provisions that is peremptory.
Therefore, the letter of Mr. G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force and consequence. It does not bind the defendant.
So the contract that was purportedly entered into by and between the plaintiff and the defendant pursuant to the letter which was written by G. Tanyanyiwa is a nullity.
Assuming that the turquand rule is applicable to municipalities, as was held in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA, it would not be proper to hold the municipality bound by the actions of a Town Clerk because a Town Clerk is not a functionary of the municipality but an employee.
A councillor, instead, would bind the municipality because a council is run by councillors, not by its employees.
I would equate a councillor to a director of a company.
In terms of the turquand rule, an employee of a company does not bind the company if he purports to act on behalf of the company.
So, in the present case, even assuming that the Tender Notice was properly advertised, the letter that was written by the then Town Clerk, Mr. G. Tanyanyiwa, would not bind the defendant because he had no authority to enter into contracts on behalf of the defendant as he was not a councillor, but just an employee.
In any case, even if the turquand rule was applicable, and even if the defendant, as a municipality, was bound by the actions of its Town Clerk, looking at the circumstances of this case, I would make a finding that the parties did not enter into a valid contract.
I say this because this is a contract which is supposed to be based on a tender notice which should have been properly advertised in terms of the Procurement Act and the Urban Councils Act.
Section 211(2) of the Urban Councils Act states, that, before entering into a contract for the execution of any work for the Council or the supply of any goods or materials to the Council, the Council shall call for tenders, by notice posted at the office of the Council and advertised in two issues of a newspaper.
The plaintiff was not able to produce the revised tender notice CH.05/11 which it said it responded to.
Since the defendant was disputing its existence, the plaintiff ought to have produced it to show that the contract which was entered into was entered into in compliance with the law.
The only tender notice that was produced is the one referenced 05/11, with a closing date for the submission of tenders of 31 May 2011, which the defendant is saying it is the only one it flighted in the Herald Newspaper.
The plaintiff's tender documents were submitted to the defendant's registry section on 9 June 2011 according to the date stamp on them. They were submitted way out of time - after the deadline of 31 May 2011.
To make matters worse, they only bear the date-stamp, but bear no name of the registry person who received them.
Mary Mukonyora even queried their authenticity on this basis alone.
I also query their authenticity.
It is my conclusion, that, these tender documents were submitted on the basis of a non-existent tender notice.
On this basis, alone, any contract that flowed from it is a nullity as it has no leg to stand on.
Clearly, the circumstances under which the contract was concluded are suspicious. This is even worsened by the fact, that, G. Tanyanyiwa, as the Town Clerk, mero motu wrote a letter to the plaintiff well before full Council had passed the resolution that the tender be awarded to the plaintiff.
To make matters worse, contrary to the recommendations of the Procurement Board, he said that the plaintiff had won a tender to supply refurbished machinery.
What this shows is that both Darlington Chirara, the director of the plaintiff, and G. Tanyanyiwa, the Town Clerk, were probably acting in connivance and were probably involved in underhand dealings because their actions are highly suspicious.
In light of the foregoing, I thus make a finding, that, there was never a contract between the plaintiff and the defendant.
Having concluded that there was never a contract between the parties, I will therefore not go on to deal with the issues of novation of the contract.
The defendant's second witness, Mr George Makunde, had said in his evidence, that, if it is held that the defendant is bound by the letter which was written by the then Town Clerk, Mr. G. Tanyanyiwa, then, that contract was novated by what the parties agreed upon in the meeting of 17 September 2013 (exhibit 20) that the plaintiff was to supply a brand new excavator and front end loader.
Novation is the substitution of a new contract for an old one. The new agreement extinguishes the rights and obligations that were in effect under the old agreement.
Since no contract was entered into in the first place, there is no novation to talk about.
Disposition
Since there was never a contract between the parties, the plaintiff is not entitled to payment of the remaining balance of US$119,300 that it is claiming. The plaintiff is entitled to collect its machinery from the defendant.
In respect of the counter-claim, the plaintiff in reconvention (the municipality) is entitled to a refund of US$140,000 being the money it paid as deposit of the purchase price.
Since there was no contract between the parties, I cannot order the defendant in reconvention (Upset Investments (Private) Limited) to deliver a brand new excavator and a brand new front end-loader. Consequently, the plaintiff in reconvention cannot be entitled to any damages for breach of contract or any storage charges.
In any case, the plaintiff in reconvention did not lead any evidence to prove its claim for US$20 per day for storage charges.
On costs of suit, the defendant prayed that the plaintiff's claim be dismissed with costs on a higher scale, but I see no justification for the award of such costs.
In the result, I order as follows:
1. The plaintiff's claim is dismissed.
2. The plaintiff pays to the defendant US$140,000 being the refund of the deposit paid by the defendant towards the purchase of the Excavator and Front End Loader.
3. The plaintiff pays to the defendant costs of suit.
