MUTEMA J: The first applicant is a subsidiary of the
second applicant. Both companies are Namibian-based.
On 17 August,
2010 the first applicant and the respondents concluded a tripartite agreement
in terms of which the first applicant undertook to provide the first respondent
with certain software and support services to facilitate provision of free life
insurance cover to Zimbabwean cellular phone users and customers of the first
respondent against the purchase of cellular airtime from the first respondent.
In terms of the agreement, the first applicant would procure, for and on behalf
of the first respondent, such life cover from the second respondent at no cost
to the first respondent's customers against payment of a fee to the first
applicant by the first respondent, prescribed and calculated in terms of that
agreement. The project would be known in Zimbabwe as “Ecolife”.
The business
model for the provision of free life cover as against the purchase of airtime
amounts to an intellectual property (whose copyright and international patent
has been applied for) known as Transaction Facilitation System. This business
system and software is called the Trustco Mobile Concept.
The agreement
was to endure for an initial fixed duration of 18 months. There is no consensus
on the papers as to the extent of the success of the implementation of the
system but what can be gleaned is that substantial revenue running into
millions of US dollars was reaped from it to the benefit of the three parties
to the agreement. Matters came to a head when the first applicant and first
respondent could not agree on the mode of calculating the royalty fees payable
to the former. Following a series of correspondence between the two parties,
through its group managing director, the first applicant wrote to the first
respondent on 31 May, 2011 advising that the latter was formally in breach of
the agreement for non-payment of royalties to it and premiums to the second
respondent. The operative part of that correspondence reads:
“Therefore
be advised that all obligations of Trustco will be suspended on 3 June 2011 at
12 00 hours Namibian time if all overdue payments are not received by then. …
Kindly be further advised that if all overdue amounts, of which you have been
advised, are not received within 14 days from date hereof Trustco will deem the
contract cancelled in terms of clause 17.1 of the main agreement”.
The
clause reads:
“17.1 If either of the parties breaches any
provision of this agreement and fails to remedy the breach within fourteen (14)
days of dispatch of a written notice to do so, the Party not in default may,
not withstanding any provision to the contrary in this Agreement, without
prejudice to any of its other rights in law, cancel the agreement forthwith;”
On 1 June, 2011
the first respondent through its chief executive officer replied to the first
applicant's letter of 31 May, 2011 in this vein:
“We
acknowledge receipt of your letter dated 31 May 2011 regarding the above. Your
intention to terminate the agreement has been noted and accepted.
Econet
maintains that it has discharged all its obligations under our agreements with
you. We repeat our averment that royalties are only payable in respect of
subscribers who buy airtime of a value exceeding $3-00 per month. Those
subscribers who buy airtime of a value amounting to $3-00, but do not buy any
additional airtime are not entitled to cover.
Consequently,
no royalties are payable in respect of such subscribers. …” (my emphasis).
On 3 June, 2011
the first applicant replied to the first respondent's letter of 1 June 2011. In
the letter the dispute over payment of royalties and interpretation of the
agreement raged on. The first respondent
was called upon to provide three names of people from whom an arbitrator could
be chosen to enable referral of the dispute to arbitration in terms of clause
19 of the agreement. The peroration of that letter reads:
“Legal
advice received indicated that we are not entitled to switch off the system
until 14 working days have lapsed since 31 May 2011. Hence the system will
remain operative until then”.
On 5 June, 2011
the first respondent's chief executive officer replied to the above letter
saying inter alia:
“We
refer to your letter of 3 June 2011 and advise that we stand by our letter of 1
June 2011 in terms of which we accepted your notice of termination of our
agreement. Therefore, we consider the agreement terminated. We shall proceed to
make arrangements to ensure that our subscribers are not prejudiced by the
termination of the agreement that was initiated by you.. We do not owe the
amounts that you claim to be outstanding…. Your request for a referral of our
dispute to arbitration was made on the assumption that the agreement between us
was going to remain in force.
Your
assumption was misguided because you had already given us notice to terminate
the agreement in your letter of 31 May 2011, and we had accepted such notice in
our letter of 1 June 2011. Because you made your election to terminate the
agreement, you cannot withdraw such election, more particularly as we had
accepted and communicated to you our acceptance of the termination of the
agreement.”
About the time
this letter was written the first respondent terminated the first applicant's
link to the former's mobile platform. The parties then sought the services of
legal practitioners. The first applicant's legal practitioners Rudolph,
Bernstein and Associates wrote to the first respondent's chief executive
officer on 8 June, 2011 explaining that their client's letter of 31 May, 2011
was misconstrued because the intention to cancel the agreement should the first
respondent fail to remedy the breach within the fourteen day period did not and
was never intended to constitute an invitation to the first respondent for a
consensual termination of the agreement which it purported to accept. In the
event, the first respondent's conduct amounted to an attempt to repudiate the
agreement whereas any dispute should be referred to arbitration in terms of
clause 19 of the agreement. The letter gave the first respondent 9 June 2011 as
deadline for restoration of the first applicant's electronic links to the former's
mobile platform to facilitate resumption of service provision in terms of the
agreement failing which “urgent injunctive relief” would be sought in order to
restore the status quo ante pending
institution of arbitration proceedings.
On 9 June 2011
the first respondent's legal practitioners of record responded to the first
applicant's legal practitioners' letter alluded to supra. Therein the stance was adopted that as it was the first
applicant which sought the termination of the agreement which the first
respondent accepted, therefore the first applicant cannot be heard to allege
that it was the first respondent which repudiated the agreement. In the result,
the first applicant cannot tender performance of an agreement which it has
cancelled and
which cancellation
has been accepted.
The foregoing
narration culminated in the filing of the urgent chamber application on 24
June, 2011. The provisional order being sought is worded in the following
terms:
“Final
Relief Sought
That you show
cause why the following final order must not be granted.
- Pending
the determination of the dispute between the parties by the process of
Arbitration in terms of the provisions of the Arbitration Act, the first
respondent shall not take any steps neither shall it act in any such
manner as is inconsistent with the rights of the applicants arising from
the agreement between the parties (as amended), and shall not act in any
such way unless entitled to so act in terms of any Arbitral Award that may
be handed down.
- The
costs of this application shall be costs in the envisaged arbitration
proceedings.
Interim Relief Granted
That pending
determination of this matter on the return date, applicants are granted the
following
relief:
- The
first respondent is directed to restore to the first applicant the
internet based reporting links and all access to Trustco Mobile hardware
and software, thus enabling it to monitor and process airtime purchase
transactions and otherwise perform its obligations in terms of the
agreement; and
- The
first respondent be directed to refrain from undertaking and implementing
a competing, infringing service to that provided by the first applicant in
terms of the agreement.
Service of the
Provisional Order
The applicants'
legal practitioners be and are hereby granted leave to effect service of this
provisional
order upon all respondents.”
The application
was vigorously opposed by the first respondent while the second respondent's
response was that since no relief was being sought against it, it will abide by
any decision of the court.
Mr Nyambirai, who took over from Mrs Zindi after the latter's indication that
she was indisposed, opposed the application on five main planks. They are the
following:
- That
the matter is not urgent;
- That
the draft order, even as amended, remains defective in that the interim
relief sought is substantially the same as the final one;
- Part
of the relief sought is by way of interdict which in effect amounts to a
interdict and the requirements of an interdict have not been met;
- It
is the applicants who repudiated the agreement and the case of Waste Management Services (Pvt) Ltd v City of Harare 2003 (1) ZLR 571 (S)
relied upon by the applicants is distinguishable; and
- In
the event of a finding being made that the first respondent repudiated the
agreement, so far as relief related to specific performance being sought
is concerned, the court is urged to exercise its discretion and disallow
specific performance.
I
will deal with the five broad issues raised in opposition seriatim.
WHETHER
OR NOT THE MATTER IS URGENT
The case relied
upon by both sides is the often cited one of Kuvarega v Registrar General
& Anor 1998 (1) ZLR 188 (H).
On the papers
before me, the need to act arose on 5 June, 2011 when the first respondent
switched of the first applicant's access to the IT platform. This prompted the
first applicant to contact its attorneys in Johannesburg, South Africa on 6
June, 2011 and travelling to that country for consultations. The attorneys then
wrote to the first respondent on 8 June, 2011 clarifying the first applicant's
position regarding the purported cancellation of the agreement by the first
respondent and threatening urgent injuctive relieve to restore the status quo ante.
On 9 June, 2011
the first respondent's attorneys wrote a letter to the first applicant's
attorneys indicating that the agreement was considered cancelled. Between then
and 24 June, 2011 when this application was filed the first applicant explained
the reason for the delay as follows:
- It
briefed its South African attorneys in respect of the highly technical
aspects of its Trustco Mobile System in relation to the copyright, patent
and other intellectual property related issues;
- Had
to seek the input of a further South African advocate experienced in
intellectual property-related issues;
- Had
to secure and appoint and obtain advice from local attorneys and counsel
relating to various procedural and substantive aspects of Zimbabwean law
in order to draft and finalise the application papers;
- The
first draft of the application papers was received by it on 13 June, 2011
for consideration, comment and review. This was done over the next three
days since various versions were exchanged and the first applicant's
Namibian based technical development employees had to be roped in; various
amendments were effected;
- After
briefing Messrs Bhana SC and Puckrin SC who previously were admitted to
practise in Zimbabwe, it was realised following advice from Messrs Gill,
Godlonton and Gerrans – the local correspondent attorneys – that the
briefed South African counsels would need to apply for a residency
exemption to be allowed audience in Zimbabwean courts and its granting was
not guaranteed and its application would further prolong the delay;
- On
16 June, 2011 Advocate Erik Morris (local counsel) was briefed and on 17
June, 2011 (a Friday) Advocate Morris indicated that he needed the weekend
to consider a few technical issues he had reservations about;
- On
the same Friday the first applicant's group managing director Quinton van
Rooyen and Jan Jones came to Zimbabwe to consult with Advocate Morris.
Their South African attorney also came and consulted with the same
advocate and the local correspondent attorneys on 20 and 21 June, 2011;
- The
papers were ultimately finalised on 22 June, 2011 and the application
filed on 24 June, 2011. Given the logistical difficulties encountered in
the preparation, drafting and issuing the application over three different
jurisdictions, the delay did not defeat the urgency of the matter.
The orbiter in the Kuvarega case supra is
that where there has been a delay in bringing the application to court, either
the certificate of urgency or the supporting affidavit must always contain an
explanation of the non-timeous action. Law, unlike mathematics, is not an exact
science. Whatever the length of the delay, if a reasonable or credible
explanation for the delay is tendered, that delay should not detract from the
urgency of the matter. In casu I
consider that the explanation tendered for the delay is not only reasonable but
understandable. In the event, the delay should not detract from the urgency of
the matter.
DEFECT
OF THE DRAFT ORDER IN THAT THE INTERIM RELIEF SOUGHT IS SUBSTNTIALLY THE SAME AS THE FINAL ONE
The argument
advanced in this connection is that paragraphs 1 and 2 of the interim relief
sought when compared with para 1 of the final order sought amount to the same
relief. The danger here, so the argument went, is that the applicants will be
allowed to get away with proving their case on a prima facie basis and get a relief of a final nature.
Article 9 of the
Arbitration Act, [Cap 7:15] empowers the High Court via ss 1, 2,
and 3 to grant, upon request, an interim measure of protection in the form of
an interdict or other interim measure to ensure that any award which may be
made in the arbitral proceedings is not rendered ineffectual where the arbitral
tribunal has not yet been appointed and the matter is urgent.
In casu the matter is urgent, the
arbitration tribunal has not yet been appointed and the relief being sought is
designed to ensure that any award which may be made in the arbitral proceedings
in favour of the applicants will not be rendered ineffectual.
The
interim relief sought is merely to have the status
quo in terms of the agreement between the feuding parties restored while
the final relief is to show cause, on the return date, why the applicants'
rights arising from the agreement should not be preserved pending the
determination of the dispute between the parties by way of arbitration in terms
of the Arbitration Act. One cannot seriously contend that the two reliefs being
sought amount to the same relief as contended for by Mr Nyambirai who, in endeavouring the elucidate the alleged
similarity, said the interim relief's substance is “get us connected and do not
use another competing system” while The final relief means “once connected
remain so”. While language can never be
accurate the two reliefs are clearly not the same.
THAT REQUIREMENTS FOR
AN INTERDICT HAVE NOT BEEN MET
The requirements for a temporary
interdict are trite and there exists a plethora of case law authorities on this
subject. They are these:
1. a
prima facie right, even though open
to some doubt;
2. a
well-grounded apprehension of injury;
3. the
absence of some other adequate and ordinary remedy; and
4. the
balance of convenience.
It
is common ground that the parties entered into an agreement whose terms are
spelt
out
in the agreement document. The first applicant's mobile concept was to be used
for the purpose of providing life cover insurance to first respondent's mobile
cellular phone subscribers. That agreement was to endure for 18 months with the
first applicant receiving royalties.
Only 9 months have gone. This clearly constitutes a prima facie right accruing to the first applicant. It is not even
open to some doubt. First applicant, via being connected to first respondent's
IT platform, used to monitor the number of subscribers to ecolife so as to be
able to determine the amount of royalties it was entitled to. The first respondent, due to some dispute
between the parties, which dispute should go for arbitration, has switched off
the first applicant's access to the platform. Over and above that the first
respondent contends that the agreement has since been terminated/cancelled at
the instance of the first applicant but the first applicant contends that the
agreement still subsists. First applicant apprehends the injury that it can no
longer monitor the amount of subscription to ecolife and it has also been
weaned off its dues in the form of royalties before the agreement has run its
full life or has been lawfully terminated. It also fears that by moving to an
alternative system five days after “terminating” the agreement, first
respondent has infringed on its concept. I find this to constitute a well
grounded apprehension of injury. It is idle for the first respondent to argue
that it is not infringing on applicants' mobile concept which it alleges has
defects and that it is not subject to intellectual property rights because the application
to patent it was refused. While the applicants attached documentation of the
application to ARIPO (African Regional Intellectual Property Organisation)
including acknowledgment of receipt thereof, the first respondent simply
averred in its opposing affidavit that such application was not successful
without any attachment from ARIPO to that effect. If applicants' system was
defective why take 9 months to terminate? Why agree to use the system in the
first place if the first respondent had its own mobile concept and why the
capability now to move to an alternative system five days following
“cancellation?” Where, such as in this case, a clear right is established which
is not open to doubt, it is not necessary for an applicant to prove irreparable
injury: Charuma Blasting &
Earthmoving Services (Pvt) Ltd v Njainjai & Ors 2000(1) ZLR 85 (SC).
Regarding absence
of other adequate remedy available, none other is available to the applicants
to achieve the preservation of the status
quo pending determination of the dispute by way of arbitration.
The balance of convenience clearly
favours the applicants as the prejudice to them would be very much greater than
to the first respondent. Damages will be difficult to prove on the part of the
applicants.
WHO REPUDIATED THE
AGREEMENT
This seems to be the crux of the
matter. The first respondent's argument is that it was the first applicant
which repudiated the agreement via its letter of 31 May, 2011 whose “intention
to terminate the agreement” the former “noted and accepted” via its letter
dated 1 June, 2011.
In
Jackson v Unity Insurance Co. Ltd 1999(1) ZLR 381(S) GUBBAY CJ ,relying on the ratio
in Ganief v Hoosen 1977 (4) SA 458(C)
held that a valid notice of cancellation must clearly inform the guilty party
of the wronged party's unqualified, immediate and final decision to treat the
contract as being at an end. The right to resile from the contract must be
exercised immediately. What the landlord purported to do was to declare that
the contract was to terminate at some future date and hold the tenant bound
until that date arrived. Since this was not a valid notice of cancellation,
ejectment could not be ordered.
The case which laid to rest the
notion that a notice of cancellation which takes effect in the future is
invalid only applies to contracts of lease is the one of Waste Management Services (Pvt) Ltd v City of Harare 2003 (1) ZLR
571 (S) at p 573 G-H where SANDURA JA with the concurrence of CHEDA JA said:
“It
is pertinent to note that De KOCK J (in Ganief supra) referred to the right to resile from a contract, and not the
right to resile from a contract of lease. Had the intention been to restrict
the principle to leases he would have said:
'In my view, the right to resile
from a contract of lease is one that must be exercised ex nunc.' In any event, I cannot see any logical basis for
restricting the principle to a contract of lease. In addition, it is clear from
the judgment of this court in Jackson v
Unity Insurance Co. Ltd 1999 (1) ZLR
381(S) that the court was of the view that the principle in Ganief v Hoosen supra applied to the
cancellation of any contract”.
A close look at the first
applicant's letter of 31 May, 2011, the basis upon which the first respondent
purported to “note and accept” the intention to terminate the agreement by its
letter of 1 June, 2011, clearly shows that the notice to terminate the
agreement was in the future. The pertinent paragraphs in the first applicant's
letter of 31 May, 2011 are 4 and the last one.
Paragraph 4 reads:-
“Therefore
be advised that all obligations of Trustco will be suspended 3 June, 2011 at
12hoo Namibian time if all overdue payments are not received by then”.
The
penultimate paragraph reads:
“Kindly
be further advised that if all overdue amounts, of which you have been advised,
are not received within 14 days from date hereof Trustco will deem the contract
cancelled in terms of Clause 17.1 of the main agreement”.
In
the result, on the weight of the authorities cited above, the first applicant's
notice of
cancellation
was in the future. The right to resile from the agreement was not exercised ex nunc therefore since the notice was
not valid, there was no cancellation which the first respondent could note and
or accept. In the event the agreement still subsists, and by extension, the
first respondent's 5th plank of opposition, viz that in the event of
the court finding that it was the first respondent who repudiated the
agreement, the specific performance being sought by the applicants is in the
court's discretion and the court should decline that relief, should not detain
me. Having found that there was no valid cancellation of the agreement and that
the agreement is still alive, specific performance ought to be ordered to
restore the status quo ante.
The application is accordingly
granted in terms of the amended draft order.
Quaere:
whether Mr Tawanda Nyambirai being the chairman of the first respondent, can
represent the latter without staining some ethical considerations.
Gill,
Godlonton and Gerrans, applicants' legal practitioners
Mtetwa
and Nyambirai, 1st respondent's legal practitioners
Scanlen & Holderness, 2nd respondent's legal practitioners
