Approach re: Contract of Hire, Letting, Supply of Goods and Services, Service Agreements and Fiscal Considerations

HH88-09 : ALLIANCE FRANCAISE vs ADRIEN ORFORD and LESLEY ORFORD (T/A ALO ALO RESTAURANT)
Ruled By: PATEL J

Under the common law, an essential ingredient of a contractual lease is that the amount of the rent payable by the lessee must be fixed or that some definite mode of fixing the rent must be agreed upon. In other words, the rental must be in an ascertained or ascertainable amount. See Totoyi v Ncuka 1909 EDC ...

HB72-09 : RADAR INVESTMENTS (PVT) LTD t/a RADAR METAL INDUSTRIES vs K.A. AGENCIES AND DISTRIBUTORS (PVT) LTD
Ruled By: NDOU J

The plaintiff has issued summons against the defendant for the return of its trailer registration number 467-556M which had been leased to the defendant and which lease agreement has now been cancelled.Despite demand, the defendant has failed and/or refused to return the said trailer. Alternatively, the plaintiff prays that the value of the trailer should be ...

Despite demand, the defendant has failed and/or refused to return the said trailer. Alternatively, the plaintiff prays that the value of the trailer should be paid to it.

The basis of the claim is that the trailer belongs to the plaintiff. Upon the expiry of the lease the trailer should have been returned to the owner.

The issues for determination were agreed upon by the parties at the pre-trial conference. These are:

(a) Whether the trailer in question was stolen at all or alternatively lost as a result of negligence or any other actionable wrong on the part of the defendant.

(b) Whether the fact that the trailer was supposed to be insured absolves the defendant of his duty of care and/or risk in respect of the said trailer.

The onus of proof for issues (a) and (b) is on the defendant and (c) on the plaintiff.

The plaintiff called Martin Jonathan Rowland as a witness. He is the Managing Director, Commercial and Industrial Holdings of the plaintiff company. He said at the time of the transaction, Mr Mhaka dealt with the late Mr Schoffield. At some stage, the plaintiff became aware of the fact that vehicles leased out to the defendant were not being properly maintained and they were damaged in some instances. When they realized that the agreement was not working, they called for the return of the final vehicle i.e. the trailer subject matter of these proceedings.

The defendant informed them that the vehicle had been stolen. The plaintiff was only informed, in 2003, that the trailer was stolen. He said the duty to insure the trailer was on the plaintiff company. Although the risk of loss was on the plaintiff company, he said the defendant had a duty to timeously inform the plaintiff of the theft, which the defendant did not do in this case. This deprived the plaintiff company the right to claim from its insurers and this seems to be the argument.

This witness said if the report of theft had been made to the late Mr Schoffield, the latter would have reported at their company monthly meetings where legal issues are discussed. He said for an insurance claim to be made, the defendant was supposed to give full details of the theft and do so on time. He said the defendant did not provide the date of the theft. They were not provided with police initial report details. They were not sure whether the trailer was stolen or not. They demanded the return of the trailer, failing which replacement value of the trailer.

Under cross-examination, he conceded that there is no clause in the agreement which imposes a duty on the defendant to report theft to the plaintiff, let alone doing so timeously. He stated that the plaintiff did not, on its own, report the theft of the trailer to the police because they were not sure there was a theft; it was up to the defendant to report as the custodian of the trailer. When asked whether the plaintiff had bought a replacement trailer he said it was difficult to say because the plaintiff buys trailers regularly but from 2002 they bought trailers in 2004.

The plaintiff also called Dabpson Kanyoka, the Bulawayo Branch Manager, Zimnat Lion Insurance Company. He placed the value of the trailer at $20 million at the time he testified. Under cross-examination he conceded that he is not an expert in such assessments and that he relied on assessments done by engineers.

His testimony does not take the matter any further.

The plaintiff then called Vongai Gapare, a former senior underwriter at Zimnat. She authored the letter, exhibit 3, which gave the current market value of the trailer as Z$2.2 million in September 2006. She conceded that she did not consult the experts as the matter was urgent. She said she just used “information at hand” to arrive at that figure. She, however, later consulted an engineer who placed the value at $9 million.

Her testimony does not take the matter any further. Her evaluation is “off-the-cuff” and she is not, in any event, an expert in the field.

The plaintiff then called Bhekimpilo Moyo. He said he does vehicle valuation in assessments. He is a qualified vehicle body repairer and has been in the industry for over ten (10) years. He did a desk evaluation for the trailer in question at the behest of Zimnat Lion. He arrived at the conclusion that a similar trailer would be valued at Z$9,5 million.

The Managing Director of the defendant company, Amos Mhaka, testified. He said at the time the agreement was entered into it was not explained to him that he had a duty to notify the plaintiff on time of any theft or loss of the trailer. He said this was not put in black and white either. He said the trailer was stolen and he reported the theft to the police. He took the police reference number to the late Mr Schoffield. He said the trailer was stolen between August and October 2004. He said the trailer was stolen when it was en route from Harare to Bulawayo. The trailer developed mechanical problems around Battlefields area. His employee, the late Jonathan Mhlanga, was driving at the time. When Jonathan became aware of the theft of the trailer, he reported the matter to Battlefields Police before he contacted him.

The late Constable Mashati was dealing with the matter and he required that the registration book and the insurance policy be submitted. This information was recorded by then Constable Mushati on a piece of paper. When Jonathan Mhlanga gave him this piece of paper he (i.e. the witness) telephoned Mr Schoffield and eventually went to see him at his Harare office. Mr Schoffield told him that he had some urgent business to attend to in Mutare and told him to leave the police reference note in his office and he indicated that he would attend to the matter. When, in 2003, the defendant started receiving letters from the plaintiff demanding the return of the trailer, he assigned a driver to get the police reference details at Battlefields Police Station. The driver was informed that the police detail dealing with the matter had passed on. He said this demand for the return of the trailer was after he had given the police reference to the late Mr Schoffield. He did not keep a copy thereof.

He said that at the time of the issuance of summons in this matter the defendant was no longer paying rental for the trailer. The defendant last paid rentals in 2002.

Under cross-examination it became apparent that he was not being truthful on the fate of the piece of paper allegedly obtained from the late Constable Mushati. Whilst in his testimony, as alluded to above, he said he gave it to the late Mr Schoffield, in the pleadings it is the defendant's case that it was lost or misplaced. In fact, the pleadings are that the original was given to Mr Schoffield and he remained with a copy yet he now disputes ever remaining with a copy.

This discrepancy is on a material issue of whether the plaintiff was ever notified of the alleged theft prior their demand for the return of the trailer.

Mr Mhaka is the sole witness for the defendant.

As alluded to above, he confirmed the existence of the lease agreement and that he personally dealt with the plaintiff concerning this lease agreement. He, however, does not have first-hand knowledge of the theft of the trailer. He never personally made efforts to verify whether or not the driver had indeed made a report to the police. All his evidence around that issue is hearsay.

The driver of the truck on that day in question is Jonathan Mhlanga who is late. The other person who could have enlightened the court about the police report is a constable who is also late.

He said enquiries made at the Battlefields Police Station by the defendant have not yielded anything. There is no record at the police station that any report was ever made.

Against this background, the plaintiff denies that the trailer was stolen and demands that the defendant should prove that fact by at least producing a police report.

Mr Mhaka does not have anything in his files on the police report i.e. references. Mr Mhaka said he notified director, Mr Schoffield, who, like other key witnesses, is late. The late Mr Schoffield did not usually deal with such matters and Mr Mhaka could not give a satisfactory explanation why he did not deal with the other officials with whom he had dealt with on a day-to-day basis before. He simply gave the reasons that the relations between them had soured hence the need to deal with defendant's director, Mr Schoffield.

It seems highly unlikely that people who only know all the evidence of whether or not the trailer was stolen and the police report that was made, and Mr Schoffield, have taken those secrets to their graves. It is also highly unlikely that upon receiving information about the theft of the 20 tonne trailer, which was so central or important to the business and the particular contract, Mr Mhaka would not himself have personally made a follow-up. This is moreso in view of the fact that the relations between the plaintiff and the defendant have soured.

Mr Mhaka confirmed, under cross-examination, that at that point he did not trust the plaintiff as he felt that they had treated the defendant badly before. He felt that the plaintiff had swindled the defendant on the payment for the trailer. All this is more reason why he should have been more meticulous in keeping records and in dealing with the plaintiff.

In short, the defendant has failed to discharge the onus resting on it to prove the theft.

It is common cause that the plaintiff would be responsible for insuring the trailer and not the contents of the trailer. The trailer was insured according to the evidence of Mr Rowland. A claim could not be made because a report to the plaintiff was not made timeously. To date, there is no evidence of any police report - which is the main requirement of the insurers. In any event, this is neither here nor there and does not have a bearing on this matter;

(i) Firstly, the defendant has not proved, on a balance of probabilities, that the trailer was stolen. As alluded to above, such onus was on the defendant.

(ii) Secondly, even if it was, the plaintiff was not timeously informed of the alleged theft.

(iii) Thirdly, even if the plaintiff had been informed, this would not absolve the liability of the defendant.

In Principles of Delict by JONATHAN BURCHELL (1993), Juta & Co…, the learned author rightly stated:

“The general principle underlying the award of damages under the aquilian action (and the law of delict as a whole) is one of compensation to the plaintiff. But, frequently, a person injured may have his losses partially or wholly met from outside or collateral sources other than the said damages. Examples of such collateral benefits are: gifts or donations, pension, sick pay benefits, insurance (both indemnity and none indemnity) and medical and…,.

The general rule is that the receipt of money by the plaintiff from an insurance company is not deductable from his damages. The plaintiff has to exercise foresight in taking out insurance cover, for which he has paid premiums on a regular basis and shall not be deprived of the benefit of the cover. Nor should the defendant be spared for liability for his negligence simply because he has, by chance injured a foresighted individual whose losses are covered by insurance.”

Within the context of indemnity insurance, with the rules of subrogation applying, the insurer, once it has paid out the insurance cover to the plaintiff, is placed in the shoes of the plaintiff and can pursue the claim against the defendant to recoup its own loss. In so doing, the insurer can claim in the name of the plaintiff.

It is clear, therefore, that the negligence of the defendant is not absolved by the new effect insurance – Mackenzie v SA Taxicab 1910 WLD 323 and Dippenaar v Shield Insurance Co. 1979 (2) SA 904 (A).

Benefits in terms of indemnity insurance, which a plaintiff has received or will probably receive on account of his loss, are seen as res inter alios acta i.e they are not taken into account in reducing his damages – Ackerman v Loubser 1918 OPD 31; Teper v McGees Motors 1956 (1) SA 738 (C); Van Dyk v Cordier 1965 (3) SA 723 (O); Law of Delict by J NEETHLING, J M POTGIETER and P J VISSER (2^nd Ed).., and A Guide to the Zimbabwean Law of Delict by G FELTOE (3^rd Ed)..,.

All in all, the defendant remains in possession of the plaintiff's trailer and has not returned it.

In the absence of any other probable explanation, which is supported by direct evidence, an award must be made in favour of the plaintiff.

On the question of the quantum of damages the onus is on the plaintiff.

Different valuations of the trailer were given during the pleadings and the trial on account of the rapid escalating rate and re-denomination of the currency. The Zimbabwean dollar is no longer in use. The court has taken judicial notice of this notorious fact – Ndawana v Nasho & Ors 2000 (1) ZLR 23 (H) and Reza v Nyangani 2001 (1) ZLR 202 (S). This court has to strive to arrive at an equitable remedy based on recent valuation. The difficulty is that the recent value given during the trial was denominated in Zimbabwean dollars which is no longer in use. The court has to find a way of obviating the problem created by this intervening event.

Accordingly, it is ordered that:

(1) The defendant be and is hereby ordered to return the plaintiff's trailer registration number 467-556M within seven days of service of this order.

(2) Failing compliance with paragraph (1) above, the defendant is hereby ordered to pay the plaintiff the current market value of a similar trailer as assessed by the average of evaluations of three independent qualified motor vehicle evaluators, with interest on the figure tempore morae from 16 March 2005.

(3) The defendant will bear the costs of this suit on the ordinary scale.

HH43-13 : FORM SCAFF (PRIVATE) LIMITED vs CHARLES LINZI
Ruled By: KUDYA J

The plaintiff company issued summons against the defendant, a building contractor, on 16 February 2011, seeking payment of US$1,340= per month hire costs from 1 February 2009 to the date, the defendant returns scaffolding equipment and the return, or alternatively, the value of that equipment in the sum of US$30,777=55. The defendant contested the action. The plaintiff ...

The defendant contested the action.

The plaintiff called the evidence of two witnesses. These were its Credit Controller, Geraldine Mountford, and Clerk, Munorwei Sibanda. In addition, two documentary exhibits, the fifty-paged bundle of documents, exhibit 1, and the Form Scaff Current Item Based Price List Catalogue for February 2009, exhibit two, were produced. The defendant testified and called one other witness. In addition, he produced one documentary exhibit, exhibit 3.

Most of the facts in this matter were common cause. On 22 October 2007 the defendant completed a Form Scaff processing form…, that set out his name, physical home address and postal address and the site address where the scaffolding material was to be used, his identification number, telephone and cellular numbers. He gave the site address as Stand 2751 Hay Hill, Glen Lorne, Harare. He paid a deposit of ZW$49 million. On dates ranging from 22 October to 2 November 2007 the defendant hired scaffolding equipment from the plaintiff listed in paragraph 3 of the declaration. The hire advice notes listing this property form pages 26 to 31 of exhibit 1. He was aware of the fourteen conditions of hire at the back of each hire advice note that are reproduced on page 25 of exhibit 1. He agreed to pay the hire rates for the equipment during the period the equipment was out of the plaintiff's premises. He also agreed to pay the current full catalogue price on the property not returned or lost. On 27 February 2008 he returned some of the property, as listed in the hire return note on page 32 of exhibit 1 but did not return the property listed in paragraph 6 of the plaintiff's declaration.

All the above facts were agreed.

Geraldine Mountford prepared the reconciliation of outstanding equipment…, as at 27 February 2008. The defendant did not challenge its accuracy. Munorwei Sibanda and Godfrey Ngomani collected the property listed in the hire return notes…., on 14, 21 and 22 July 2008 from Nicetime Supermarket Glenary, Snake Park, Harare. Pages 49 and 50 of exhibit 1 extrapolate the equipment that was collected from Nicetime Supermarket. The scaffolding equipment in question had been hired by Fourth Fort whose site address had been 837 Jacana Drive, Borrowdale. The hirer, one Tome, signed the hirer return notes for the equipment collected from Nicetime Supermarket. The equipment tallied with that which had been hired out by Fourth Fort. Apparently, Tome had been duped by a yard checker employed by the plaintiff, one Norman Kapofu, who collected the equipment from his site to Nicetime Supermarket. Munorwei Sibanda left the property at Nicetime Supermarket that Norman Kapofu alleged belonged to other hirers.

In her testimony, Geraldine Mountford used the plaintiff's catalogue price dated 4 January 2010…, of the equipment on hire to calculate the weekly hire charges of each piece of equipment that was not returned. She calculated the charges at US$344=79. She multiplied the figure by four to calculate the monthly hire charges of US$1,340=00. Her arithmetic was not challenged. She stated that she dispatched invoices to the defendant at his postal address for payment of hire charges for the outstanding equipment such as the one dated 1 June 2010…,..

In his testimony, the defendant admitted to receiving such invoices until May 2009. He produced exhibit 3, a similar invoice of 13 June 2008.

In his defence the defendant stated that he diverted the property he remained with to Nicetime Supermarket where he was constructing the deck of the supermarket in partnership with Norman Kapofu. The partnership commenced in May 2008. He advised some coloured man at the plaintiff of his intention to relocate some of the equipment to some place he did not identify. He averred that it was collected by the plaintiff in December 2008 in the presence of Norman Kapofu. At the beginning of 2009, he advised the plaintiff that it had collected property that he had hired. He continued to receive invoices in US$ until May 2009. He did not pay up because the equipment had been collected. He advised the plaintiff to stop sending him invoices as it had collected the equipment he had remained with.

He did not know how the plaintiff became aware of the presence of the equipment at Nicetime Supermarket. He did not have a hire return note from the plaintiff to show the property in dispute was surrendered or the list signed by the collecting driver.

It became clear that the property collected in July 2008 was not the property that the defendant had in his custody. He maintained the equipment in dispute was collected in December 2008. He denied liability on the basis that the property had all been collected. He did not understand how the catalogue price was determined and whether it was in accordance with the rates stipulated by the construction industry…..,.

It is on the basis of the totality of the evidence led that I have to determine the three issues that were referred to trial on 20 October 2011.

1. Whether the plaintiff collected the alleged outstanding scaffolding equipment from the defendant or any other person in 2008

The onus was on the defendant to prove, on a balance of probabilities, that the plaintiff collected the equipment in issue. In Manley Van Niekerk v Assegai Safaris & Film Productions (Pty) Ltd 1977 (2) SA 416 (A)…, VILJOEN AJA stated that -

“In a case such as the present where the claim is brought ex contractu for the return of the leased article or its value, all that the lessor need to allege is that it hired the article out, that the lessee was obliged to return it and that he failed to return the article or its value. The lessee has to allege and prove that his failure to return it is due to some cause for which he is not to blame.”

See also Nel v Dobie 1966 (3) SA 352(N)…,.

It was common cause that the equipment in issue was not returned to the plaintiff on 27 February 2008. The defendant averred that the equipment was forcibly collected in December 2008 by the plaintiff's agents who included Munorwei Sibanda. The defendant was not personally present when the collection took place. He relied on the testimony of Norman Kapofu. Norman Kapofu stated that Munorwei Sibanda and Chiwanza left a signed collection list of the items that they removed. He failed to produce the list in question notwithstanding that he gave it, on that very day, to his employer, Crispen Thomu, who had also contracted the defendant to construct Nicetime Complex. The defendant has had four years to collect the list from Crispen Thomu since it was given to him and two years to do so since summons was served on him. Norman Kapofu did not follow Munorwei Sibanda to the plaintiff's premises on the day of the alleged collection, or soon thereafter, to sign for and collect the hire return note for the equipment. The defendant did not do so on his return from Bindura in December 2008 or even in January 2009. The defendant and Norman Kapofu, did not, as expected seek the hire return note. These shortcomings confirm the plaintiff's version that the equipment in issue was not collected in December 2008. The mistake in Munorwei Sibanda's summary of evidence that he collected some items hired out by Fourth Fort in December 2008 was corrected by the hire return notes compiled by the plaintiff and signed for on behalf of Fourth Fort by Mr Tome. The evidence of Munorwei Sibanda that he collected the equipment hired out by Fourth Fort was unwittingly confirmed by Norman Kapofu. He agreed with Munorwei Sibanda that he was in the company of Godfrey Ngomani. That he did so on three different days to obviate the collapse of the deck. The documentation confirmed the accuracy of Munorwei Sibanda's testimony.

I am satisfied that the defendant has failed to discharge the onus on him to show that the equipment in issue was collected by the plaintiff. I find that the scaffolding equipment in question was neither collected by the plaintiff nor surrendered by the defendant.

It is deemed to be still in his custody.

HB158-13 : KERRIES ENGINEERING (PVT) LTD vs MAKOMO RESOURCES (PVT) LTD
Ruled By: MAKONESE J

The plaintiff's claim against the defendant is for the following relief:- ''(i) Payment of the sum of US10,649= being the price agreed upon by the parties for the hire of the plaintiff's 40 tonne mobile crane by the defendant to offload 4 containers including the cost of the crane moving to and from Bulawayo to defendant's ...

The plaintiff's claim against the defendant is for the following relief:-

''(i) Payment of the sum of US10,649= being the price agreed upon by the parties for the hire of the plaintiff's 40 tonne mobile crane by the defendant to offload 4 containers including the cost of the crane moving to and from Bulawayo to defendant's place of business at Hwange, which defendant confirmed by way of a purchase order number 1336 dated 24^th January 2012, and which crane was supplied to defendant in terms of the contract, and despite demand refuses to pay the aforesaid sum of US$10,649=.

(ii) Interest a temporae morae at the prescribed rate calculated from 7^th February 2012, when defendant was placed in mora, to date of final payment.

(iii) Costs of suit.''

The defendant opposed the plaintiff's claims and filed a plea in the following terms:-

''Defendant admits entering into a contract with the plaintiff and further pleads as follows:-

2.1 That it was a term of the contract that Plaintiff's crane would be available to offload Defendant's cargo at the Defendant's workshop in Hwange by 2:00pm on Wednesday the 25^th January 2012.

2.2 That time was of the essence as the transporter of Defendant's cargo was going to levy charges for delays occasioned by the defendant in unloading the cargo or if the delay was unreasonable, to return with the cargo to the source.

2.3 That, in breach of the term aforesaid, plaintiff's crane only arrived at the defendant's mine on Thursday 26^th January 2012.

2.4 That prior to arrival of plaintiff's crane, in order to mitigate its damages, Defendant accepted the breach and concluded a contract with Hwange Colliery Company around 4:00 pm on Wednesday 25^th January 2012 for the hiring of the alternative crane.

3. Defendant admits refusing to comply with the plaintiff's demand as the payment demanded was not due in consequence of plaintiff's breach as aforesaid.”

The issues for determination by the court are relatively narrow and are as set out below:

ISSUES

1. Was it an essential term of the contract that the plaintiff's crane would be available to offload the defendant's cargo at the defendant's workshop in Hwange by 2pm, Wednesday, 25^th January 2012?

2. Was the arrival of the plaintiff's crane at the defendant's mine, on Thursday, 26^th January 2012, a breach of the contract?

3. Did the defendant enter into a contract with Hwange Colliery Company on Wednesday 25^th January 2012, for hire of another crane, in order to mitigate its damages?

4. Is the plaintiff entitled to claim $10,649= from the defendant?

Most of the facts in this matter are common cause, or at least beyond dispute.

There is agreement by both parties that on the 24^th January 2012 the defendant, based in Hwange, through the agency of a third party by the name Emmanuel, contracted with the plaintiff (based in Bulawayo) for the hire of a 40 tonne crane to offload certain containers in Hwange. The parties negotiated the contract price for the work and eventually settled for US$10,649=, representing the cost of mobilising the crane from Bulawayo to Hwange and a daily rate of US$2,994=. The crane did arrive at Hwange on the morning of the 26^th January 2012 but did not do any work as the defendants had already secured and hired an alternative crane from Hwange Colliery Company at a much lower rate of $1,800=. The plaintiff insists that it made the crane available and incurred expenses in mobilising the crane and driving the said crane all the way from Bulawayo to Hwange and back.

THE PLAINTIFF'S CASE

Donovan Jones is the plaintiff's Managing Director. He testified on behalf of the plaintiff.

He explained that on the morning of the 24^th January 2012 one Emmanuel and Sam Omar visited his workplace at Bulawayo. They indicated that we are acting for and on behalf of Victor Mutokonyi of the defendant company. They intended to hire a crane from the plaintiff. They had a low-bed trailer ready to transport the crane to Hwange that same day. Donovan Jones advised Emmanuel and his colleague that it was necessary to prepare a formal contract with the defendant setting out the terms and conditions of the crane hire. Donovan Jones asked to speak directly to Victor Mutokonyi and the two spoke on the phone. Donovan Jones informed Victor Mutokonyi that they needed a 40 tonne crane for the kind of containers they wanted to offload. Donovan Jones could not finalise the transaction with Victor Mutokonyi who referred him to one Hennie Diedricks. Eventually, Donovan Jones and Hennie Diedricks agreed that the crane would be driven, at the very latest, the following morning around 5am and would possibly arrive at Hwange sometime in the afternoon. It is not disputed that Hennie Diedricks wanted the crane urgently and even tried to persuade Donovan Jones to cause the crane to be driven overnight to Hwange. Donovan Jones flatly refused insisting that the crane could not be driven during the night. From the evidence of Donovan Jones, it emerged that there were various logistical problems connected with the movement of the crane to Hwange. The following is a summary of the problems highlighted by Donovan Jones:-

(a) The plaintiff was concerned that they had never driven that type of crane over long distances (It had never been driven more that 40km outside Bulawayo).

(b) The plaintiff had no previous experience of driving the crane over long distances.

(d) The crane could only be driven during day time.

(e) They could not be sure what time the crane would arrive at Hwange.

Donovan Jones and Hennie Diedricks agreed that the crane would leave Bulawayo the following morning and it was expected in Hwange on the afternoon of the 25^thJanuary 2012. The defendant forwarded a Purchaser Order to the plaintiff that same day via e-mail, the 24^th January 2012, and payment was to be made to the plaintiff as soon as the crane had arrived at Hwange and before the work could be undertaken. Donovan Jones said that he was out of his office the rest of the day on the 25^th January 2012 and that he did not have his mobile phone whose number he had used to communicate with Victor Mutokonyi and Hennie Diedricks.

As things turned out, the crane driver could not make it to Hwange that same day the 25^thJanuary. He was forced to put up at Dete because it had become dark and he needed to top-up his engine oil. Donovan Jones said that he communicated with Victor Mutokonyi on the night of the 25^thJanuary. Victor Mutokonyi expressed disappointment and told Donovan Jones that they had let him down. The mobile communication between Donovan Jones and Victor Mutokonyi was interrupted by a failure in the network signal. Donovan Jones testified that on the morning of the 26^th January 2012, around 10 am, he received a call from Victor Mutokonyi who told him that the contract had been cancelled because the defendant had secured a crane from elsewhere. Donovan Jones advised Victor Mutokonyi that the defendant still had to pay for the crane. Victor Mutokonyi referred Donovan Jones to Hennie Diedricks who stated that he was not going to pay for the crane but, instead, suggested that Donovan Jones could leave the crane in Hwange for a week and attend to other work to recover the expenses. This was not acceptable to the plaintiff and the crane was subsequently driven back to Bulawayo.

At that stage, it was clear that the deal had turned sour.

Donovan Jones was extensively cross-examined but he maintained his version of events. He specifically refused any suggestion that he gave an actual arrival time for the crane. He stated that there was no way he could give an undertaking to have the crane by a specific time because he told Hennie Diedricks that he had no previous experience of driving the crane over a long distance….,.

The last witness for the plaintiff was the crane driver Ngwabi Gumbo.

He indicated that he left Bulawayo at around 5am on his way to Hwange. He had to stop every 80km to 100km to rest the crane's tyres. His average speed was 30 - 50 km/per hour on open road but went as slow as 12km/per hour on inclines. He arrived at Dete on the evening of the 25^th January 2012 and since he could not drive at night he slept there. On the morning of the 26^th January 2012, whilst he was looking for engine oil, he received a call from Victor Mutokonyi who asked him where he was. He told him he was at Dete and as soon as he procured oil he would be on his way. Victor Mutokonyi did not advise him to return to Bulawayo, neither did he advise him that the crane was no longer required, so he proceeded to Hwange. Upon arrival at Hwange, the crane driver was told that he had been late and another crane had been hired. He stated that the alternative crane had not started off-loading when he arrived at Hwange because Victor Mutokonyi came and asked him for slings since the crane they had hired did not have slings. The witness said he refused to give them the slings for fear that they could break.

THE DEFENDANT'S CASE

The defendant led viva voce evidence from Victor Mutokonyi. He is employed by the defendant as the Transport and Logistics Manager. He took up employment with the defendant company in October 2010. He confirmed that he sent Emmanuel, whom he referred to as his transport contractor, to look for a crane. The defendant required the crane for the purposes of off-loading 4 X 40 feet containers from certain haulage trucks. The owners of the haulage trucks were threatening to return with the said containers if they were not off-loaded by the afternoon of the 25^th January 2012. Victor Mutokonyi testified that he commenced negotiations with Donovan Jones on the phone but the final contractual terms and conditions were concluded by Donovan Jones and Hennie Diedricks. His understanding was that the plaintiff had agreed to have the crane available at Hwange by 3pm on the 25^th January 2012. He says the telephone conversation between Donovan Jones and Hennie Diedricks was conducted in his presence and hearing although he could only confirm one side of the story as related by Hennie Diedricks. Victor Mutokonyi testified that during the morning of the 25^th January 2012 he had phoned Donovan Jones on his mobile phone several times and Donovan Jones was not picking up the phone. He says that what he quickly concluded was that he was dealing with fraudsters. Victor Mutokonyi confirms that he had a telephone discussion with Davina Porter on the morning of the 25^th January 2012 but says Davina Porter did not confirm that the crane had left Bulawayo.

Victor Mutokonyi's testimony on this aspect contradicted the contents of the defendant's Synopsy of Evidence which suggested that Victor Mutokonyi had failed to locate Davina Porter on her mobile phone. It is therefore clear that Victor Mutokonyi could have told Davina Porter that the contract was being terminated, if that was the defendant's intention, because he was in communication with Davina Porter.

Victor Mutokonyi confirmed that he spoke to the crane driver on the morning of the 26^th January 2012. One wonders why Victor Mutokonyi did not advise the crane driver not to bother looking for engine oil and to simply return to Bulawayo. The suggestion by Victor Mutokonyi that he informed the crane driver to return to Bulawayo was evidently an afterthought. This view is strengthened by the fact that upon arrival at Hwange, Victor Mutokonyi told the crane driver to park the crane whilst he spoke to the plaintiff's employers. If Victor Mutokonyi had told him not to proceed with his journey he would have confronted him at once and asked him why he had come to Hwange.

The defendant's version of events does not read well and there are material inconsistencies. Victor Mutokonyi could not be certain of the final terms as agreed between Hennie Diedricks and Donovan Jones. Donovan Jones must be believed by the court when he stated that he could not give an exact time of arrival because the crane had never been driven for long distances. This information was communicated to the defendant.

The evidence of Victor Mutokonyi is not supported by the facts. If the plaintiff could not be certain how long the crane would take to arrive at Hwange there is no conceivable reason why the plaintiff would have undertaken to be at Hwange by 3pm on the 25^th January 2012. By his own admission, Victor Mutokonyi said that when he resolved to enter into a contract for an alternative crane with Hwange Colliery Company, on the 25^th January 2012, he had not terminated his contract with the plaintiff. Victor Mutokonyi failed to explain why he did not use the other available means of communication, namely, the plaintiff's landline or e-mail.

HHH224-15 : THE STATE vs HENRY GANDA
Ruled By: MAFUSIRE J and MWAYERA J

This matter came up for review via referral by the Regional Magistrate in terms of section 58(3)(b) of the Magistrates Court Act [Chapter 7:10].

On scrutiny, the Regional Magistrate declined to confirm the proceedings of the trial court. He felt that they were not in accordance with real and substantial justice.

The accused was charged with theft (of trust property) as defined in section 113(2)(d) of the Criminal Law (Codification and Reform) Act [Chapter 9:23] (“the Criminal Code”).

He pleaded guilty and was convicted.

He was sentenced to six months imprisonment of which five months were suspended for five years on the usual condition of good behaviour. The remaining one month was suspended on condition of restitution.

On scrutiny, the Regional Magistrate asked the trial court whether it had been proper to convict the accused on a plea of guilty in spite of his allegation that he had left the property (a push cart) outside the house from where it had subsequently been stolen. The Regional Magistrate also enquired whether the accused's plea of guilty should not have been altered to one of not guilty so that a full trial would have been conducted. He further inquired whether gross negligence on the part of the accused had sufficed as the form of intent required on a conviction of theft of trust property.

In reply, the trial magistrate said the accused had failed to account for the property; that he had left it outside knowing full well that it would be stolen; and that such conduct amounted to dolus “eventually” (sic). He also said that the accused's admission convinced the court that he had the requisite mens rea. The trial magistrate argued that the accused's circumstances were clearly different from those of a person whose property had unfortunately been stolen. He concluded by saying that probably the reference to “gross negligence” could have created the impression of a lack of intent but that ultimately the accused's conduct was deliberately carried out with a reasonable realisation that the property would be stolen.

Not having been satisfied with the trial magistrate's response, the Regional Magistrate referred the matter as aforesaid.

I find myself in agreement with the Regional Magistrate.

In terms of the charge sheet, the accused, allegedly in violation of a trust agreement which required him to hold the trust property (the push-cart) on behalf of the complainant to whom he had been obliged to hand it back on demand, had, on the date and at the place mentioned, unlawfully and intentionally converted the property to his own use.

The State Outline, after identifying the complainant, stated that on the date, and at the place mentioned, the complainant had given the accused the push cart “…, for hire to sell his products since July 2014…,” but that the accused had failed to return it to the owner.

The State Outline went on to state that since the accused had been the person with the property the complainant had approached him to take it back but that the accused had told the complainant that it had gone missing since the end of July 2014. The total value was put at $80. Nothing was recovered. The accused was said to have had no right to act in the manner he had.

At trial, after the charge and the facts had been read out to the accused, and after his plea of guilty had been entered, the trial court went on to canvass the essential elements as follows:

“Q. Admit [that] on 20/07/14, and at Tanganyika 3 Flats, you were given a cart by [complainant] on a rent to buy?…,.

A. Yes.

Q. You disposed of the cart?

A. I left it outside my house and it was stolen at night.…,.

Q, You left it outside your house at night?

A. Yes.

Q. Was it guarded?

A. No.

Q. Was it secured in any manner?

A. No.

Q. You realized the possibility that it may be stolen?

A. Yes.

Q. You admit you were…, [indecipherable]…, grossly negligent and failed to account?

A. Yes.

Q. Any right?

A. No.

Q. Any legal defence?

A. No.”

After that, the accused was found guilty as charged.

Clearly, the accused did not admit to the crime of theft of trust property. Instead, he was saying he was himself the victim of theft.

In terms of the Criminal Code, theft is the taking of property capable of being stolen, knowing that another person is entitled to own, possess or control it, or realizing that there is a real risk or possibility that another person may be so entitled, and intending to deprive that other person permanently of his or her ownership, possession or control, or realising that there is a real possibility that he or she may be so deprived.

In this case, neither the actus reus nor the mens rea was established.

Theft of trust property occurs where a person holding trust property, in breach of the terms under which he holds it, omits to account for the property; or accounts incorrectly; or hands over the trust property to someone else other than the owner; or uses the trust property, or part of it, for a purpose other than that for which he or she is obliged to use it; or converts it to his or her own use.

There was no evidence that the accused had converted the push cart to his own use.

Trust property is defined to mean property held, whether under a Deed of Trust or by agreement or under any enactment, on terms requiring the holder to hold the property on behalf of another; or to account for it to another; or to hand the property over to a specific person; or to deal with the property in a particular way.

Significantly, property received on terms expressly or impliedly stipulating that the recipient is entitled to use it as his or her own, and where there would only be a debtor and creditor relationship between the parties, does not constitute trust property for the purposes of the offence.

In this case, the State Outline made an ambiguous reference to the “hire” of the push cart by the accused to sell “his” products “…, since July 2014.” It is not clear whether “his” was referring to the accused or the complainant.

But, in canvassing the essential elements, the magistrate referred to a “…, rent to buy” arrangement to which the accused admitted.

If that was the case, then the push cart was not trust property. The relationship between the accused and the complainant would have been one of debtor and creditor respectively. That is not a criminal relationship in terms of the Criminal Code.

The accused ought not to have been convicted of theft of trust property without a proper trial.

Furthermore, the accused may have been grossly negligent or reckless in leaving the property outside unsecured or unattended. However, that could not amount to mens rea if it was not him that stole it, or caused it to be stolen for his own purposes.

Negligence, however gross, or recklessness, cannot amount to mens rea or dolus eventualis as the trial magistrate meant to say: see Attorney-General v Munganyi 1986 (2) ZLR 137 (SC).

In that case, in the context of reckless driving within the meaning of the Road Traffic Act, then No.48 of 1976 (now Chapter 13:11), where driving “recklessly” and “negligently” are now listed separately and seemingly disjunctively following an amendment to that Act, the court held that these categories of negligent driving involve a gross and aggravated degree of negligence which, however, does not require any element of dolus.

It was not clear why the accused had the push cart in his possession in the first place. But, from the scanty facts, it seems that the relationship between him and the complainant was one of creditor and debtor. That relationship can stem either from agreement, as envisaged by the definition of “trust property” in section 112 of the Criminal Law (Codification and Reform) Act [Chapter 9:23] (the Criminal Code), or from delict in terms of the common law. But, in either case, the failure to return the item that is the subject of such an arrangement does not constitute theft of trust property.

The accused's plea of guilty should have been altered to one of not guilty and a full trial should have been conducted.

In the circumstances, the conviction and sentence in the court a quo are hereby set aside.

Appealed
SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA
Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

This is an appeal against the whole judgment of the High Court handed down on 24 September 2018 wherein it granted the first respondent's claim against the appellant.BACKGROUND FACTSThe following facts are common cause;The second respondent, Bernard Chiswa (“Bernard”), entered into a car hire agreement with the first respondent, Car ...

This is an appeal against the whole judgment of the High Court handed down on 24 September 2018 wherein it granted the first respondent's claim against the appellant.

BACKGROUND FACTS

The following facts are common cause;

The second respondent, Bernard Chiswa (“Bernard”), entered into a car hire agreement with the first respondent, Car Rental Services (Private) Limited (“Car Rental Services”), in October 2015. In terms of the agreement, he was issued with a motor vehicle, a Ford Everest, and was expected to make payments as per the vehicle hire agreement. He failed to do so until the motor vehicle was withdrawn from him.

The first respondent sought the services of the police for the second respondent to return the motor vehicle by laying criminal charges against him.

The appellant, sister to the second respondent, offered to settle the debt and the criminal charges were withdrawn. She signed an acknowledgement of debt and a payment plan. In due course, she withdrew the offer to settle the debt. The first respondent thereafter caused summons to be issued against the appellant and Bernard, jointly and severally, claiming the sum of US$13,868=90.

The appellant applied for the appointment of a curator ad litem on behalf of Bernard on the grounds that he was not of sound mind. On 17 March 2017, a provisional order was granted and a curator ad litem was appointed.

The matter was not prosecuted further.

As a result of the provisional appointment of a curator ad litem, the first respondent withdrew its claim against Bernard and proceeded against the appellant.

PROCEEDINGS BEFORE THE COURT A QUO

Car Rental Services sued the appellant, and Bernard, jointly and severally, for the payment of US13,868=90 for the rental charges due to it. The basis for the claim, in respect of Bernard, was that he had entered into an agreement with Car Rental Services for the hire of a motor vehicle and had failed to pay in terms of the agreement.

In respect of the appellant, it was averred that she had agreed “to take over the debt due by the first defendant (Bernard) and had assumed full responsibility of it which undertaking the plaintiff (Car Rental Services) agreed and accepted (sic).”

In their joint plea the appellant and Bernard disputed liability.

Bernard pleaded that he did not have the requisite mental capacity to enter into a contract. The appellant put in issue the validity of the acknowledgement of debt she signed on the basis that the initial agreement, which gave rise to the acknowledgement of debt, was void ab initio.

TWO ISSUES WERE REFERRED TO TRIAL, NAMELY:

1. Whether or not the agreement entered into between Bernard and Car Rental Services was valid.

2. Whether the obligation assumed by the appellant, in an acknowledgement of debt and payment plan, dated 2 March 2016, is valid and binding.

Regarding the first issue, the court found that the agreement of sale between Car Rental Services and Bernard was invalid for the reason that he was not compos mentis at the time he entered into the contract.

In respect of the second issue, the court a quo quoted from the declaration the basis of the appellant's liability as follows:

“The second defendant (appellant) herein agreed, on 2 March 2016, to take over the debt due by the first defendant (Bernard) and assumed full responsibility of it which undertaking the plaintiff agreed and accepted.”

The court found that the validity or otherwise of the agreement between Car Rental Services and Bernard is irrelevant.

The appellant, after being advised of how investigations proceeded in respect of mentally incapacitated persons, offered to pay the debt to avoid the incarceration of her brother.

It opined that the debtor was replaced and that it was a case of delegation. It defined delegation as a form of novation in which, by agreement between all parties concerned, a third party is introduced as a debtor in substitution of the original debtor, who is discharged. It further opined that the new agreement was not dependent on the validity of the agreement between Car Rental Services and Bernard. It, therefore, found the appellant liable and made an order that she pays the respondent the amount due in terms of that agreement.

Aggrieved by this decision, the appellant noted an appeal to this Court seeking an order reversing the decision of the court a quo.

THE APPEAL

The appellant attacks the judgment of the court a quo on the following grounds: I quote these verbatim;

“1. The Honourable court a quo erred when it found, as it did, that the second defendant was liable to the plaintiff in the sum of US$13,868=90 with interest at the rate of 3.5 percent from 1 April 2016 after having made the finding, as she did, that the agreement between the plaintiff and the first defendant was invalid due to his mental incapacity to contract.

1.1 For the stronger reason that once a finding was made that the initial agreement was null and void, the subsequent agreement, which purported to replace the non-existent agreement, was itself null and void, it being premised on a nullity.

2. The Honourable court a quo erred at law when it found, as it did, that the parties had novated the initial agreement by delegation.

2.1 For the stronger reason that novation by delegation requires agreement of all parties to the initial agreement, which the first defendant, in his mental state, could not possibly give. To that end, there was no novation to talk about.

3. The Honourable court a quo erred at law when it concluded, as it did, that the plaintiff had sued the second defendant based on the novated agreement when the summons and declaration clearly show that the defendants were sued jointly and severally with one paying the other to be absolved.

3.1 For the stronger reason that if the plaintiff was suing the second defendant based on the subsequent agreement, it would not have sued the first defendant or demanded judgment against them jointly and severally, and, more important, it would have been apparent from the pleadings.

4. The court a quo erred when it found, as it did, that the second defendant was liable for payment of anything or at all when regard is had to the fact that she unilaterally offered to pay the debt and subsequently unilaterally withdrew the offer which fact was not disputed by the plaintiff.”

SUBMISSIONS BEFORE THIS COURT

Counsel for the appellant submitted as follows;

The court a quo could not competently come to the conclusion that there was a delegation. Delegation is a novation which pre-supposes that there is a pre-existing agreement which is binding - which was not the case in this matter. It found that the agreement between the respondent and Bernard was not binding. No rights or obligations could be transferred from the agreement. It could not be novated. In any event, for delegation to take place, all the parties have to agree. This could not competently take place as when the acknowledgement of debt was signed, Bernard was admitted into a mental institution. The acknowledgement of debt is a unilateral document. It cannot be an agreement which falls in the confines of delegation.

Counsel for the respondent filed extensive heads of argument where he advanced argument that there was a compromise in the circumstances of this matter. In the last paragraphs of the heads of argument, under the heading: “Whether the court order can be supported on grounds which were rejected by the trial court” he advanced argument that when the second respondent signed the Acknowledgement of Debt an expromissio occurred. He concluded by submitting that the doctrine of compromise was applicable in the circumstances of the present matter. Alternatively, the judgment of the court can be supported on the basis of expromissio.

In his submissions before this Court, he totally abandoned the argument in respect of the doctrine of compromise.

His submissions were as follows:

The appellant interposed herself as between the first and second respondents. This is where an outsider intervenes between two parties and undertakes to satisfy that which is demanded by one party from the other party. Such an undertaking is independent of the underlying obligations or issues between the parties. He relied on the authority of Baker NO vs Total South Africa (Pvt) Ltd 1990 (3) SA 159 for this proposition. It is a step through which a novation can be achieved. The one who originally owed can plead that the debt was extinguished by the interceder. This arrangement does not depend on whether the underlying agreement was valid or not.

On being engaged by the court regarding the issue of the doctrine of compromise, he conceded that there was no involvement of Bernard when the new agreement was entered into. He could not, therefore, argue, with confidence, that a proper compromise was concluded when the original debtor was not involved. He could not argue that the acknowledgement of debt was a compromise but rather that it was an expromissio.

In rebuttal, counsel for the appellant took note of the concession made that there was no compromise in the circumstances of this matter.

On the doctrine of expromissio, he relied on Black's Law Dictionary, 2nd ed, where it was defined as an act in which a creditor accepts a new debtor who becomes bound instead of the old debtor with the latter being released. It is a species of novation. The underlying agreement has to be valid. The creditor must accept the new debtor.

Nothing was advanced in this matter to show that the new debtor was accepted by the creditor. The first respondent went on to sue both the old and the new debtor jointly and severally.

ISSUE

With the argument regarding the doctrine of compromise having been abandoned, the issue for determination is whether the doctrine of expromissio applied to the circumstances of this matter.

THE LAW

An expromissio is a type of novation by which a creditor accepts a new debtor in place of a former one, who is then released; Black's Law Dictionary, 8th ed. 2004…,..

The new debtor, known as an expromissor, becomes solely liable for the original debtor's debt. Thus, an expromissio has been described as an assumption of liability for the debt of another; See Total South Africa (Pty) Limited v Bekker NO 1992 (1) SA 617.

An expromissio has the following characteristics:-

(i) It occurs with the consent of the creditor.

(ii) At the instance of the new debtor.

(iii) The effect being that the old debtor is released from the obligation.

An expromissor differs from a surety in that a surety is bound together with his principal to the creditor. See Bouvier Law Dictionary, 6th ed, CHILDS & PETERSON, Philadelphia, 1856…,. Since an expromissio is a form of novation, it is dependent on the validity of the principal agreement.

An expromissio was defined in Total South Africa (Pty) Limited v Bekker NO 1992 (1) SA 617 where the court, in contextualizing the concept of intercessio, quoted with approval the following extract from WESSELS' Law of Contract in South Africa, 2nd edition..,:

"3778. There are several ways in which a person, without being compelled to do so by law, may intervene in a contract between two parties ob maiorem creditoris securitatem. The Roman jurists called this intervention an intercessio on the part of the stranger to the contract ('per intercessionem aes alienum suscipiens' (D.14.3.19.3). 'Se medium inter debitorem et creditorem interponere' (Voet, 16.1.8)).3779.

3779. The term intercession is a convenient one to denote the intervention of one person (intercessor) in the obligation of another either by way of substituting or adding a new debtor (Nov., 4.1; C.8.40 (41).19).

3780. The stranger may either intervene by contracting with the creditor in such a way that the original debtor is completely liberated, or else he may promise the creditor to become liable for the debt, the original debtor continuing to remain bound.

In the former case, called expromissio by the glossators, there is a complete novation - the old debtor and intercessor are liable, they may either both be principally bound to the creditor or else the debtor may be principally liable, whilst the intercessor is only bound in subsidium, ie., in case the creditor cannot obtain payment from the principal debtor."…,.

An expromissio is, therefore, a form of intercessio.

Intercessio is the general act of assuming liability for another person's debt by contract with his creditor. It can either be privative or cumulative depending on the extent of intervention.

With privative intercessio, the intercessor takes upon himself an existing obligation of a debtor thereby liberating the debtor of his obligations in the principal agreement. Thereafter, the debtor can, if sued, plead that the debt was extinguished by the intercession of the third party. Such is the case of an expromissio.

While, with cumulative intercessio, the intercessor, together with the original debtor, become principally bound to the creditor as in cases of suretyship; see SMITH et AL, A Dictionary of Greek and Roman Antiquities, 1890.

Since an expromissio is a species of novation, the principles applicable to novation are apposite in determining the fate of an expromissio where the original agreement is invalid.

In Mupotola v Southern African Development Community SC07-06 ZIYAMBI JA made the following pertinent remarks regarding novation…,:

“Novation means replacing an existing obligation by a new one, the existing obligation being thereby discharged; see, The Law of Contract in South Africa, Third Ed, by R.H. CHRISTIE at p498.

The above definition pre-supposes that both the existing obligation and the new one arise out of valid contracts.

'When parties novate, they intend to replace a valid contract by another valid contract.' See Swadif (Pvt) Ltd v Dyke 1978 (1) SA 928 (A) at 940 quoted by CHRISTIE in the Law of Contract in South Africa, supra.

The starting point, therefore, in determining this issue is to consider whether the first agreement constituted a valid contract.

This being so, the first agreement was a non-event and there could be no novation of a contract which did not exist...,.”...,.

It is evident that the validity of the former obligation determines the validity of an expromissio.

In line with the reasoning adopted by the court in Mupotola v Southern African Development Community SC07-06, it would mean that the original agreement has to be valid for an enforceable expromissio to come into existence.

An expromissio cannot, therefore, stand on an invalid principal agreement.

The court, in Hamilton v Van Zyl 1983 (4) SA 379 (ECD)…, in distinguishing between novation and compromise stated:

“In pointing out the difference between novation and compromise (transactio) WESSELS on The Law of Contract in South Africa, 2nd ed. Vol. II para. 2458 states:

'There is a great similarity between transactio and novation, and, as a rule, the principles which apply to the latter apply to the former. (Voet 46.2.3).

There is, however, this difference between the two;

When parties novate they intend to replace a valid contract by another valid contract, and, if therefore the novated contract is invalid, the novating contract is, as a general rule, of no effect. If, however, a claim is made upon a contract, about the validity of which the defendant has a doubt, and a transactio follows, the defendant cannot upset the compromise on the ground that the agreement which was compromised was in fact invalid.'”…,.

Consequently, the principal agreement has to be valid for a legally enforceable expromissio to ensue. Where the initial agreement is invalid, the subsequent contract is of no force and effect.

The remarks of LORD DENNING, in MacFoy v United Africa Co Ltd [1961] 3 All ER 1169 (PC)…, to the effect that nothing can ensue from a nullity, apply.

ANALYSIS

The first respondent, in paragraph 36 of the Heads of Argument, sought to argue as follows:

“The undertaking by the appellant was based on the appreciation that second respondent was liable to first respondent such liability exposed the second respondent to a potential detention.

On the appellant's part, the undertaking was an overture to the first respondent to stop the process that might lead to the second respondent detention. Rather, the undertaking was made on the basis of the appellant's belief that second respondent might not survive detention in a mental institution. It was motivated by the desire to protect the second respondent; it cannot be invalidated by the same condition that motivated its being made.

What the appellant did, in her undertaking, was to independently assume an obligation for the payment of money in favour of the plaintiff. It therefore is of no consequence if the second respondent was under a mental incapacity when he took the plaintiff's vehicle in terms of the rental agreement.”

All he has succeeded in doing is clouding an otherwise very clear issue.

Once the court a quo made a finding that the agreement between the first respondent and Bernard was void, no expromissio can ensue. Expromissio is a species of novation which entails the replacing of an existing obligation by a new one.

In casu, the court a quo having found that the original agreement was void, there was no obligation in existence and therefore the appellant could not intervene or intercede in a non-existent obligation.

Further, as is clear from the summons, the second respondent was not released as a debtor by the alleged intercession by the appellant. The first respondent sued both the original debtor and the intercessor jointly and severally in terms of the original agreement and in terms of the new agreement.

In an expromissio, the debtor is liberated of his obligations in terms of the original agreement. The debt is extinguished by the intercession and he cannot, therefore, be sued on the basis of that debt. The suit against both the intercessor and the original debtor also demonstrates that the creditor, the first respondent, had not accepted the new debtor in the place of the former one.

As is clear from the above, the first respondent did not manage to establish that an expromissio ensued. He abandoned the argument regarding compromise. The appeal has merit and must succeed. There is no basis why costs should not follow the cause.

In the result, I will make the following order:

1. The appeal succeeds with costs.

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

“The plaintiff's claim be and is hereby dismissed with costs.”

View Appeal
HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA
Ruled By: MUZOFA J

The plaintiff issued summons against the defendants claiming payment of US$13,868=90 for car rental charges due to the plaintiff and interest thereon at the rate of 3.5% from 1 April 2016 to date of full payment.

The undisputed facts are that the first defendant entered into a car hire agreement with the plaintiff in October 2015. In terms of the agreement, he was issued with a motor vehicle, a Ford Everest, that he used and was expected to make payments. He failed to do so until the motor vehicle was withdrawn from him.

The plaintiff had to seek the services of the police for the first defendant to return the motor vehicle. The plaintiff laid criminal charges against the first defendant. The second defendant, a sister to the first defendant, offered to settle the debt and the criminal charges were withdrawn.

In due course, the second defendant withdrew the offer to settle the debt. It is then that the summons was issued. The second defendant applied for the appointment of a curator ad litem over the first defendant.

On 17 March 2017 a provisional order was granted. No final order was sought by the second defendant.

As a result of the appointment of the curator ad litem persona the plaintiff withdrew its claim against the first defendant.

This trial therefore relates to the second defendant only.

At the pre-trial conference meeting held after the withdrawal of charges against the first defendant the parties agreed that the following issues would determine the case;

1. Whether or not the agreement entered into between the first defendant and the plaintiff was valid.

2. Whether the obligation assumed by the second defendant in an acknowledgement of debt and payment plan dated 2 March 2016 is valid and binding.

The plaintiff led evidence through two witnesses.

Trevor Chakawata “Trevor” gave evidence first; he is the Operation Manager at plaintiff company.

He said the first defendant,, Bernard, entered into a monthly rental contract of a motor vehicle in October 2015 with the plaintiff. Payments were done on a monthly basis. Bernard went to Binga in December 2015. He wanted to make a pre-payment but the network was down; no payment was made. While in Binga, Bernard was reminded of the unpaid bill; he advised Trevor to use his credit card he had left with the plaintiff to pay off the amount due, however, the credit card was blocked. Trevor said he communicated with Bernard on the phone by voice calls and text messages. When the payment was not made, Trevor advised Bernard to return the car. Bernard promised to do so but did not return the car. He then reported the matter to the police. He advised Bernard of the police report; Bernard was surprised at this turn of events as he questioned why the matter was reported yet he was a reliable customer.

The police communicated with Bernard who promised to return the car in a week's time. He did not. The police then opened a docket.

Trevor then advised Bernard that the matter had been handed over to the police. Bernard came to Harare in February 2016. He advised the police that he had returned the car and promised to settle the bill the following day. On the following day he did not turn up at the police station where Bernard and Trevor were supposed to meet. Trevor and the policeman went to his residence where they were referred to Mr Chanakira, who also referred them to Mrs Chanakira. They called Mrs Chanakira who agreed to meet them in Eastlea. At the meeting, after being told about the case, Mrs Chanakira, the second defendant, advised them that Bernard had a mental problem. When the policeman advised her of the criminal charges against Bernard and how the police deal with mentally ill accused persons, Mrs Chanakira offered to settle the bill.

Trevor said he advised her to put the offer in writing. This was done. In terms of that offer, she was to pay $1,000 a month from March 2016 until the debt was fully paid. She did not pay anything.

Initially, on being asked about the payment, she said she was in South Africa. However, later, Mr Chanakira called Trevor and said they should leave Mrs Chanakira but pursue Bernard who was well and was selling cell phones in town. Eventually, Mrs Chanakira withdrew the offer to settle the bill.

Trevor denied that at the time of contracting, Bernard was mentally incapacitated. He said Bernard knew that every month end he was supposed to pay - and he did. The car that he hired, a Ford Everest, is a unique car such that if one is of an unsound mind he could not drive it - but he did. In December, he was double billed and he was able to pick it; this cannot be done by a mentally incapacitated person.

He also said the acknowledgement of debt by Mrs Chanakira was valid because she offered to pay the debt. The acknowledgement of debt was drafted by her lawyers.

Mrs Chanakira asked them to leave Bernard she would pay the debt. The police could not confirm Bernard's mental capacity through their processes because Mrs Chanakira undertook to pay the debt.

Under cross examination, he said he saw Bernard when he signed the initial agreement and he looked normal. He also said a report from Parirenyatwa Annex Hospital indicated that Bernard had a history of mental disorder. He was not sure why the matter was withdrawn against Bernard. He confirmed that the undertaking was made on the understanding that Bernard was mentally unstable.

The second witness was Constable Nelson Mungati whose evidence was to the following effect;

He is a member of the Zimbabwe Republic Police with fifteen years in service stationed at R.G. Mugabe Airport. He received a report in this case and opened a docket. He phoned Bernard who indicated he was stuck in Gokwe but will return the car. On 7 February 2016 Bernard phoned him advising that he had returned the car. This was confirmed by Trevor Chakawata (Trevor).

When the bill remained unsettled he proceeded to Bernard's residence in the company of Trevor. They were referred to Mr Chanakira who referred them to Mrs Chanakira. They arranged to meet. When they met, he advised Mrs Chanakira about the investigations. She advised him that Bernard was of an unsound mind and offered to settle the bill. It took some time for the acknowledgment of debt to be drawn up; when it was submitted he advised his superiors. He was advised to check at Parirenyatwa Annex Hospital if the history is documented. He made a formal request for the report; he did not get it but was given a record that showed that Bernard was detained some time at the hospital.

Under cross examination he said, from his physical appearance, Bernard did not exhibit signs of mental incapacity. He said after explaining the process of dealing with mentally incapacitated persons to Mrs Chanakira, Mrs Chanakira offered to settle the bill to save Bernard from incarceration. He then summarised the docket and closed it.

Eventually, he learnt that Bernard had been hospitalized. The plaintiff then closed its case.

The second defendant, 'Shaillon' (Mrs Chanakira), called two witnesses in evidence. She gave evidence first.

She is Bernard's brother and she was staying with him. On a date she cannot remember she was phoned by a police officer looking for Bernard. She was advised that Bernard was wanted for a car rental matter. She agreed to meet the police officer and Trevor. The police officer explained that Bernard would be arrested and detained at Chikurubi until the investigations were over. She did not want to see her brother detained; she had lost another brother who had a similar mental condition. He advised the officer that Bernard had a mental disorder. She then offered to settle the bill to avoid the incarceration of Bernard.

They came to an understanding; an acknowledgment of debt was prepared and signed leading to the release of Bernard.

She said his mental condition caused him to think that he had a lot of money and he became irresponsible with money. At one time she met Bernard at the South African border with an agreement of sale to buy a house and an agreement to buy a Mercedes Benz in South Africa. He said he was to pay the money after the British government paid him his millions of pounds that it owed him.

She said his mental condition started when he was about 20-22 years, and, at the time, he was 33 years. He is a Parirenyatwa Annex patient.

She confirmed that she signed the acknowledgement of debt, but it was under pressure from the police officer.

She later withdrew the offer after receiving advice that people like Bernard, with mental incapacities, are not liable at law.

Bernard was on medication, and, when he adhered to his medication, he was fine. If he defaulted, he would relapse and became withdrawn, very violent, and would exhibit a lot of strength; at one time he emptied a swimming pool overnight using a bucket.

After this incident she caused a curator to be appointed, the court order was produced as an exhibit. She said she was not indebted to the plaintiff because she withdrew her offer.

Under cross-examination, she said she signed the acknowledgment of debt to avert the incarceration of Bernard. She said Bernard stayed with her for about six years; he would do some home chores and escort their driver on errands. Bernard received a stipend from the family in cash. He was usually treated in South Africa. She denied that Bernard operated a cell phone shop. She saw Bernard with the Ford Everest and was told it belonged to a friend whom Bernard was assisting in a mining venture. She did not probe further because, at that time, he had become withdrawn; he was not bathing, not changing clothes, and would not come home at times.

This was over three months.

She could not probe too much about his behaviour because he turned violent if put under pressure - at one time he stabbed her daughter.

She could not confirm or deny that Bernard went to Binga and Gokwe.

In respect of the appointment of the curator, she confirmed that she was the applicant and that after obtaining the provisional order she did not do anything.

On re-examination, she said it was unnecessary to have a report on Bernard's capacity since the matter had been withdrawn against him.

The second witness was Dr Patience Maunganidze. She is a medical doctor, a psychiatrist, based at Parirenyatwa Psychiatrist Unit. She wrote a letter setting out Bernard's condition based on the examination she carried out on Bernard in 2016 and the records kept at the Unit. The letter was produced as an exhibit.

She said Bernard's condition was called bipolar disorder. It's a problem with mood.

Bernard exhibited mania in that he believed he was excessively wealthy. Generally, such persons should not manage their affairs or make decisions but they do so. Under cross-examination, she said when a patient is examined, and an opinion is expressed, it relates only to the time of examination. It does not apply in retrospect or for the future. The assessment in casu was correct only as on 25 October 2016. She did not examine Bernard between August 2015 and August 2016.

She expressed an opinion that if Bernard signed a contract for a car hire and paid the money he could have entered into the agreement with a sound mind. She also said if a patient adheres to medication he or she can lead a normal life.

The defence case was then closed.

I directed counsel for the parties to file written submissions on stated dates.

Counsel for the plaintiff chose not to abide by the timelines. l therefore write the judgment without the benefit of the submissions.

I now determine the issues in view of the evidence and the law.

The first issue turns on whether Bernard had the mental capacity to contract with the plaintiff.

The onus to prove such mental incapacity is on the party relying on it.

The issue whether a contracting party had the requisite mental capacity is a question of fact to be determined by the court. See Blamire's Executrix v Milner and Wirsing 1969 NLR 39. It is for the court to assess the surrounding circumstances of the making of the contract. In Pheasant v Wayne 1922 AD 481…, INNES CJ made the following observation;

“And a court of law called upon to decide a question of contractual liability depending upon mental capacity must determine whether the person concerned was or was not, at the time, capable of managing the particular affair in question – that is to say, whether his mind was such that he could understand and appreciate the transaction into which he purported to enter.”

Case law has established three principles of testing the existence or lack of corpus mentis.

The three principles were summarised succinctly in Executive Hotel (Pvt) Ltd v Bennet NO SC 2007 (1) ZLR 343 (S) that;

1. At the time of contracting was the state of mind of the contracting party whose capacity is at issue such that he was incapable of estimating what was or what was not a fair and beneficial bargain?

2. Was the state of mind of the contracting party whose capacity is at issue such as would, in common honesty, not make him liable or responsible for such an act or contract; and

3. Whether the contracting party whose capacity is at issue was of such unsound mind as to be incapable of understanding and appreciating the transaction into which he purported to enter.

In this case, it is not in dispute that Bernard suffered from a bi-polar mental disorder. He believed he was an important person with a lot of money. He was on medication but would have periods of relapses. He had been admitted into Parirenyatwa Annex Hospital three times. His condition was not easily discernible unless if it is at its peak.

Although Trevor gave evidence that he attended to Bernard when he hired the motor vehicle, I believe Bernard had relapsed.

He used the allowances from the family to hire a top of the range motor vehicle, a Ford Everest. His source of income was the family which income was not consistent according to the first defendant. He lied about the motor vehicle to Shaillon, the second defendant.

Shaillon's evidence on Bernard's conduct, while he had the motor vehicle, is important.

She had stayed with Bernard for about five years and could tell the onset of a relapse. Bernard's mood at home had charged; she could not even cross examine him on the motor vehicle he brought for fear he would turn violent when put under pressure. She was also afraid because at one point in the past he stabbed her daughter. I do not doubt Shaillon's evidence on the conduct of Bernard in so far as his behaviour is concerned and his mental capacity.

However, it was clear that she was untruthful when she said she was under pressure from the police to sign the acknowledgement of debt.

This is because, in her evidence, she set out her love and concern for her brother, Bernard; she did not want him arrested. In fact, it turns out now that she did not want the brother to even go through this court process that is why she applied for the appointment of a curator which process she did not pursue to its logical conclusion when the claim was withdrawn against him. It is therefore unbelievable that the police forced her to sign the acknowledgement of debt.

It is my view that she freely took over the obligation to pay off the debt so that Bernard would not be held liable.

Indeed, this happened, because Bernard was not prosecuted to establish his liability and was not even before this court.

At the time that she signed the acknowledgment of debt, in March 2016, Bernard had been admitted at Parirenyatwa Annex Hospital.

It is my considered view that Bernard's mental incapacity confines itself to the use of money.

His belief that he had a lot of money would naturally lead him to overspend; this case is an example of his mental disorientation. He rented a car which incurred a bill of $13,600, an amount which can buy a car. This is exactly the upshot of his mental condition; he believed he had the money yet he was a man living on inconsistent allowances from the family.

At the time of contracting, Bernard believed, due to his mental disorder, that he had money to meet his obligations.

There was no evidence placed before the court on Bernard's mental condition at the time of contracting.

However, the evidence by Shaillon, which described Bernard's behaviour for the period proximate to the time of contracting, gives me an inclining that Bernard had relapsed at the time of contracting with the plaintiff. He knew what he was doing but the knowledge was based on a mental incapacity which has not been denied. I believe this is where, in common honesty, Bernard should not be made liable or responsible for his conduct as set out in the second principle in Executive Hotel (Pvt) Ltd v Bennet NO SC 2007 (1) ZLR 343 (S).

To that extent, the agreement between the plaintiff and Bernard is invalid.

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN
Ruled By: GOWORA J

On 1 January 2003, the applicant and the first respondent executed an agreement for the “supply of primary beverage transport services.”

In terms of clause 8 of the agreement, the first respondent, Delta, appointed the services of the applicant, Pioneer, to distribute and deliver products on its behalf to various destinations.

In order to perform its obligations under the agreement, Pioneer undertook to supply vehicles to Delta for use in the distribution aforesaid. To that end, Pioneer had to make available to Delta twelve mechanical horses which would be used to draw thirty-four trailers, these being supplied by Delta.

The agreement also provided for the supply of additional horses, by Pioneer, on an ad hoc basis as the exigencies of the situation would have demanded.

As sometimes happens, the parties had a falling out.

The agreement, in terms of clause 18 thereof, provided for the settlement of disputes through an arbitration process.

In due course, the second respondent was appointed as arbitrator to the dispute and the matter referred to him. The parties were called before him, and, on 16 January 2010, he issued an award.

The applicant has, through these proceedings, brought an application to have the award set aside by this court in terms of Chapter VII, Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15]. The applicant also seeks costs against the first respondent.

The founding affidavit has been deposed to by a John Groves. He states that he is employed as a Managing Director by the applicant and that he is authorised to depose to the affidavit.

He states therein that the application was being brought to court in accordance with the provisions of section 2 of Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15].

The dispute is centred around the effect to be given to clause 9(f) of the agreement, in terms of which, upon termination of the agreement, Pioneer was supposed to return the trailers to Delta, and such return to be in “good working condition” and order fair wear and tear excepted.

The deponent states that, on 26 September, Delta commenced arbitration proceedings in terms of a Statement of Claim filed of record. Pioneer opposed the claim and the matter was set down for hearing before the arbitrator. Both parties adduced viva voce evidence.

According to the deponent to the affidavit the crystal issue before the arbitrator was the duration of the agreement.

The arbitrator found that the claim by Delta had not prescribed at the time that it submitted the dispute to arbitration. The deponent contends, therefore, that the arbitrator acted outside the enabling provisions of the agreement.

He contends, further, that the finding by the arbitrator that the agreement between the parties terminated on 30 November 2005 was not rationally linked to either the evidence adduced by the parties or submissions made by the same on the papers or during the hearing. He contends, further, that, in finding as he did, that the agreement terminated on 30 November instead of 31 December, as provided for in clause 2 of their agreement, the arbitrator had created a new contract for them.

In addition to the above, the applicant contended that the mandate of the arbitrator was limited to the duration of the agreement, and that consequently he was supposed to ascertain the obligations of the parties as at the date of termination of the agreement.

However, contends the applicant, the arbitrator seemed to have extended the applicant's obligations under the contract beyond the lifespan of the agreement.

It is further contended that the applicant's liabilities ought to have been ascertained as at the date.

According to the applicant, the award is not limited to the termination date, as found by the arbitrator, that is 30 November 2005, but goes beyond that. Therefore, the applicant contends, even on his own version, the arbitrator has acted outside the provisions of the contract. This, he suggests, is contrary to the Zimbabwean substantive law on the privity of contracts and therefore contrary to public policy.

The deponent also avers, that, by awarding specific performance in favour of a party who had, in terms of the contract, bilateral obligations which it had itself not performed, and was not in a position to perform, the arbitrator had unjustly enriched one of the parties at the expense of the other contrary to the positive law in Zimbabwe regarding bilateral obligations and further that this was contrary to public policy.

In the event, the applicant prayed for the setting aside of the arbitral award.

The first respondent has opposed the application. It has raised a number of points in limine.

(i) Firstly, the first respondent contends that the applicant has approached the court with dirty hands and ought not to be accorded a hearing by this court until such time as it would have purged its default.

The first respondent contends that the filing of an application for review has not suspended the operation of the award by the arbitrator but that the applicant has not complied with the award.

A letter was addressed to the applicant's legal practitioners, by the respondent's legal practitioners, putting them on terms to abide by the arbitration award by a specified date. To date, there has been no compliance and the respondent is of the view that the applicant has approached the court with dirty hands and should not, as a consequence, be heard by the court.

Effectively, therefore, this court must find that the applicant has dirty hands and should, as a consequence, refuse to hear the applicant until such time as it would have complied with the award.

The first respondent argued that the decision of the Supreme Court in Associated Newspapers of Zimbabwe (Pvt) Ltd v The Minister of State for Information and Publicity & Ors 2004 (1) ZLR 538 is apposite herein. This is what CHIDYAUSIKU CJ had to say:

“…,. That case does not seek to define the extent of that principle. It certainly is not an authority for the proposition that denial of relief will be confined only to those litigants whose conduct lacks probity or honesty or is tainted with moral obliquity.

In S v Nial 1982 (1) ZLR 142 (H) and S v Nkosi 1963 (4) SA 87 (T) the court refused to hear appeals of the appellants who had absconded or failed to comply with bail conditions.

Defiance of a court order does not involve dishonesty or moral obliquity, yet litigants in defiance of court orders, more often than not, are denied relief by the court until they have purged their contempt. In my view, there is no difference, in principle, between a litigant who is in defiance of a court order and a litigant who is in defiance of the law. The court will not grant relief to a litigant with dirty hands in the absence of good cause being shown or until such defiance or contempt has been purged.”

The applicant, on the other hand, denies that it has dirty hands as contended by the first respondent, and suggests that the contention by the first respondent that it, the applicant, should have first complied with the award before instituting these proceedings is ill-conceived.

It disputes the application of the dirty hands principle to this dispute and to the refusal by itself to first comply with the award before applying for the award to be set aside. It contends that to deny the applicant audience and opportunity to be heard would defeat the very basis of Article 34 of the Model Law upon which the applicant seeks recourse.

It contends, further, that if the applicant were requested by the court to comply with the arbitral award first and then seek an order for its setting aside, any court order granted to it thereafter would be of academic interest especially in circumstances such as this where the first respondent had sought and obtained an award for specific performance.

The application has been brought under Article 34 of the Model Law which has been incorporated in our Arbitration Act.

I am in agreement with the contention by the applicant that the right of an aggrieved party under Article 34 is not qualified except for the provision that a party is not entitled to bring an application thereunder after the lapse of three months after the award has been made.

The Arbitration Act bestows upon a party the right to apply for the setting aside of an award on the grounds set out therein.

To require a party to comply with the award before launching an application under the Article would be tantamount, in my view, to denying such party the right to have recourse in terms of the Article. In the circumstances of this case. the award against the applicant was one for specific performance.

I am also of the view that the first respondent is taking a simplistic and narrow view of the dicta in Associated Newspapers of Zimbabwe (Pvt) Ltd v The Minister of State for Information and Publicity & Ors 2004 (1) ZLR 538.

In that case, what was at issue was whether a party could be heard by a court whilst refusing to comply with a statutory provision of the Act which required that media houses be registered.

There was, in that case, an open and clear defiance to comply with a statutory provision applicable to the litigant to permit it to operate as a media house. The applicant was, despite the requirement, operating without a licence or permit as required under the enabling Act.

So too was the situation in Commercial Farmers Union & Ors v Minister of Lands and Rural Resettlement and Ors SC31-10. CHIDYAUSIKU CJ had this to say at p26 of the cyclostyled judgment:

“Apart from this, there is the principle that a litigant who is acting in open defiance of the law cannot approach a court for assistance: see Associated Newspapers of Zimbabwe (Private) Limited v The Minister of State for Information and Publicity and Ors SC110/04. Indeed, if this point had been raised as a preliminary point, the probabilities are that this application would have been dismissed on that point alone. A former owner who is in occupation of acquired land, in open defiance of the law, cannot approach the courts for assistance.”

Again, as in the case of Associated Newspapers of Zimbabwe (Pvt) Ltd v The Minister of State for Information and Publicity & Ors 2004 (1) ZLR 538 the issue before the court was the clear and open defiance by the applicant in complying with a statutory provision of an Act of Parliament.

In casu, the applicant has taken, on review, an arbitral award in terms of a right accorded under an Act which does not require compliance with the award before approaching the court for redress.

The situation of the applicant herein is distinguishable from the authorities referred to above.

Therefore, in the circumstances of this case, I am not persuaded to find that the applicant has dirty hands and that it is not entitled to be heard.

(ii) In relation to the second point in limine, the first respondent contends that clause 18 of the agreement provides that the parties irrevocably agreed that the decision of the arbitrator in any arbitration proceedings brought under the agreement would be binding upon each of them and that this was in respect of any dispute arising out of or in connection with the agreement including any dispute regarding its existence, validity, or termination.

Accordingly, the first respondent contends, the parties are bound by the provisions of clause 18 of the agreement, and, consequently, the applicant cannot have recourse against the award by virtue of these proceedings.

The first respondent contends, further, that, assuming that the parties do have recourse against the award, notwithstanding the provisions of clause 18, the application filed in casu does not disclose a cause of action as contemplated in Chapter 7 Article 34 of the First Schedule to the Arbitration Act as modified by S.I.208 of 1996.

The first respondent contends that, in terms of Article 34(5), it is only if the award was induced or effected by fraud that it can be said to have been contrary to public policy. However, so the argument goes, the applicant has made no such allegation. Accordingly, so contends the first respondent, there is no cause of action exhibited on the papers.

A party to an agreement which provides for relief by way of an award by an arbitrator has a right to have the award set aside as provided for in Article 34. It has been given legislative imprimatur under the Arbitration Act, and the respondent has not pointed out any authority which allows parties to an agreement to override provisions that have been spelt out in an Act of Parliament.

In this connection, I would want to quote from comments I made in Recoy Investments (Pvt) Ltd v Tarcon (Pvt) Ltd HH159-11 to the following effect:

“In my view, the respondent has a mis-apprehension of the law. The court has the jurisdiction to hear the matter where none of the parties has applied for a stay of the proceedings and a consequential referral to arbitration. Article 8 is clear and admits of no ambiguity. I am bolstered in this view by dicta from CLOETE JA in PCL Consulting (Pty) Ltd v Tresso Trading 119 (Pty) Ltd 2009 (4) SA 68 at 71G-72C to the following effect:

'The mere fact that parties have agreed that disputes between them shall be decided by arbitration does not mean that court proceedings are incompetent. If a party institutes proceedings in a court despite such an agreement, the other party has two options:-

(i) It may apply for a stay of the proceedings in terms of section 6 of the Arbitration Act 42 of 1965; or

(ii) It may, in a special plea (which is in the nature of dilatory plea), pray for a stay of proceedings pending the final determination of the dispute by arbitration.'

The definitive statement of the law in this regard is to be found in Rhodesian Railways Ltd v Mackintosh 1932 AD 359 at 370-371 where WESSELS ACJ said:

'All that section 6(1) lays down is that you cannot adopt the cheaper and speedier procedure therein provided when once you have delivered pleadings or taken any other step in the proceedings. If you have taken any step in the proceedings, then you can no longer adopt the speedier and less costly procedure of applying to the court to stay proceedings but you must file your pleadings in the ordinary way. In pleading, however, you can raise the defence that the case ought to be decided by arbitration, this can be done by a special preliminary plea.'”

The High Court, being a superior court of jurisdiction, has the power to hear any matter and any party unless its jurisdiction has been specifically ousted by statute.

In addition, Article 8 of the Arbitration Act permits the parties who have submitted a dispute for arbitration, and which process has now been brought before this court for the setting aside of any award resulting from such process, to apply to the court for a stay of those proceedings.

The powers granted to the court under such application are as follows:

“Arbitration agreement and substantive claim before court

(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests, not later than when submitting his first statement on the substance of the dispute, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed.

(2) Where proceedings referred to in para (1) of this article have been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.”

A reading of Article 8 above makes it clear that the court must stay proceedings upon the application of a party who wishes that the matter proceed to arbitration for resolution on the dispute. That, in my view, appears to be the only reason for the court's jurisdiction to be temporarily suspended.

Once the parties have referred the dispute to arbitration, and an award has been made, the jurisdiction of the court to decide on the award is unfettered.

This court is however seized with an application for the setting aside of an arbitral award. I therefore hold that this court has the jurisdiction to determine this matter on its merits.

Article 34 of the First Schedule to the Arbitration Act [Chapter 7:15] allows for the setting aside of an arbitral award by this court in very restricted circumstances.

In casu, the applicant contends that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or that it contains decisions or matters beyond the scope of the submission to arbitration and that the award itself is contrary to the public policy of Zimbabwe.

Clause 18.1 of the service contract made a provision for the reference of any dispute thereunder to arbitration and that such arbitration proceedings would be final and binding upon the parties herein.

The exercise of power by the High Court, under Article 34 of the Arbitration Act, has already been discussed in the case of Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) where GUBBAY CJ said the following:

“Under Article 34 or 36, the court does not exercise an appeal power and either uphold or set aside or decline to recognise and enforce an award by having regard to what it considers should have been the correct decision. Where, however, the reasoning or conclusion in an award goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far reaching in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award, then, it would be contrary to public policy to uphold it.

The same consequence applies where the arbitrator has not applied his mind to the question or has totally misunderstood the issue, and the resultant injustice reaches the point mentioned above.

Although no moral turpitude whatsoever attached to the conduct of the arbitrator, I am satisfied that his award bears the adverse characteristics I have referred to. It is my belief that, in the circumstances pertaining, the award made results in so palpable and substantial an injustice to ZESA that for this court to uphold it would be to sanction a conflict with the public policy of Zimbabwe.”…,.

The principle enunciated in this judgment was confirmed in Delta Operations (Pvt) Ltd v Origen Corporation SC86-06.

It is therefore trite, that, under the law, the court is empowered to set aside an arbitral award if the applicant who wishes to have it set aside can establish that the award is in conflict with the public policy of Zimbabwe.

The applicant has attacked the award on three prongs;

(i) Firstly, that the arbitrator acted outside the provisions of the enabling agreement;

(ii) That the claim was prescribed; and

(iii) That the order for specific performance was contrary to the public policy of Zimbabwe regarding bilateral and reciprocal obligations and the principle of unjust enrichment.

According to the applicant, the award should therefore be set aside on the following grounds:

1. That the arbitrator acted outside the provisions of the enabling agreement;

2. That the claim was prescribed in terms of section 14 of the Prescription Act; and

3. That the order for specific performance, in the circumstances of this case, was contrary to the public policy of Zimbabwe regarding bi-lateral reciprocal obligations and the principles of unjust enrichment.

In relation to the first issue, the applicant contended that the arbitrator had acted outside the provisions of the enabling agreement.

It is contended that the first respondent had an onus to establish the duration of the agreement between the parties. Contrary to the provisions of the contract, so the applicant contends, the arbitrator placed the onus on the applicant to disprove the contentions of the claimant.

The applicant contends that, before the arbitrator, it put up the case that the agreement commenced on 1 January 2003 and terminated on 31 December 2004 and that the respondent, had, contrary to that assertion, contended that the agreement had not terminated up to the time that it instituted proceedings.

The applicant contends that the arbitrator disagreed with the versions that both parties placed before the arbitrator, and that, in approaching the matter as he did, he created a new contract between the parties based on what he termed practical considerations.

The applicant contends, in this regard, that the arbitrator unilaterally extended the duration of the contract where he held the date of termination as 30 November 2005.

The applicant contends, therefore, that the award is liable to be set aside on the grounds that it is in conflict with the public policy of Zimbabwe.

The applicant suggests that there was ambiguity in the contract and that in fact the arbitrator did confirm that the contract was ambiguous and that therefore he should have invoked the contra proferentum rule in favour of the applicant and this error on his part constituted a gross error on his part which further rendered the award unenforceable.

He suggests that the arbitrator must have found that clause 8(d) was ambiguous and contrary to the clear provisions of clauses 1 and 2 of the agreement which stated the commencement and termination dates. He suggests that the contract was prepared by Delta, and, as it was ambiguous in relation to clause 8(d), the arbitrator should have been guided by the contra proferentem rule and find that the contract had terminated as provided for in clause 2.

He stated that the arbitrator failed to apply the clear and positive principles of Zimbabwean law in resolving the dispute, and that, in the circumstances, the award was contrary to the public policy of Zimbabwe.

The first respondent has contended that it is not for this court to decide whether or not the arbitrator was correct to find that the agreement would have terminated on the date that the arbitrator said it terminated. It was suggested, by the respondent, that what this court must ask itself is whether the conclusions reached by the arbitrator offends the public policy of Zimbabwe in the sense of being so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider the conception of justice in Zimbabwe would be intolerably hurt by the award: see Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S).

The critical issue for determination before the arbitrator was the duration of the contract.

It is trite that the original UNCITRAL Model did not define the concept of public policy. It is accepted, however, that the concept covers fundamental principles of law and justice in substantive as well as procedural law.

In casu, the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) has not been met.

The applicant has chosen not to place the record of proceedings before for the court resulting in the court being unable to judge for itself whether or not the conclusions of the arbitrator are so outrageous in defiance of logic and accepted moral standards as to lead a fair minded person to believe that justice in Zimbabwe would be intolerably hurt by the award in favour of the first respondent.

The applicant has not, in the affidavit on which the application is premised, even alleged that the conclusions reached by the arbitrator defied logic to such unacceptable standards.

Instead, the applicant has sought to deal with the matter as if it were an appeal or application for review.

In Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) the court stated:

“An award will not be contrary to public policy merely because the reasoning or conclusions of the arbitrator are wrong in fact or law. In such a situation, the court would not be justified in setting the award aside. Under Article 34 or 36, the court does not exercise an appeal power and either uphold or decline to recognise an award having regard to what it considers should have been the correct decision.”

Whether or not the arbitrator arrived at the wrong decision is not an issue that this court is empowered, in terms of Article 34, to decide.

What the applicant should have established is that the decision and conclusions reached, based on the standard set in Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (S) was so outrageous in its defiance of logic and reasoning that any fair-minded person would have a conception that justice in Zimbabwe would be hurt by that award.

This is not the case of the applicant.

There is no suggestion anywhere in the heads of argument pointing me to an aspect of the award that breached the rules of natural justice.

In any event, there is no principle that says that an arbitrator can have his award set aside on the basis that he erred or was wrong. If it is there I have not been made aware of it.

In Telcordia Technologies Inc v Telcom SA 2007 (3) SA 266 HARMS JA stated:

“…,. An arbitrator 'has the right to be wrong' on the merits of the case, and it is a perversion of the language to label mistakes of this kind as a misconception of the nature of the inquiry; they may be misconceptions about meaning, law, or the admissibility of evidence, but, that is far cry from saying that they constitute a misconception of the nature of the inquiry.

To adopt the quoted words of HOEXTER JA;

'It cannot be said that the wrong interpretation of the Integrated Agreement prevented the arbitrator from fulfilling his agreed function or from considering the matter left for him for decision. On the contrary, in interpreting the Integrated Agreement, the arbitrator was fulfilling the function assigned to him by the parties, and it follows that the wrong interpretation of the Integrated Agreement could not afford any ground for review by the court.'”

The next point to consider is whether or not the claim before the arbitrator had prescribed and that the award by the arbitrator, therefore, in the circumstances, was contrary to the public policy of Zimbabwe.

The deponent to the founding affidavit contends that the agreement terminated on 31 December 2004. Prescription then started running on 1 January 2005 and completed its course on 31 December 2008.

The claim was instituted on 26 September, well after it had become prescribed.

He states that the date of termination of the agreement cannot be in doubt as the first respondent sought a renewal in a letter dated 12 September 2005. It is further contended, by the applicant, that the new contract, save for alterations to the dates for commencement and termination, is in exactly the same terms as that concluded on 1 January 2003.

The applicant has argued that the arbitrator correctly identified the critical issue for determination as being the duration of the agreement and that once this had been established the issue of liability would be settled. It was in the view of the applicant, up to the claimant to establish the duration of the agreement but that surprisingly the onus appeared to have been placed on the applicant.

The applicant further contends that it is against the public policy of Zimbabwe to enforce obligations which have become extinguished through prescription. Therefore, the applicant contends, the relief granted to the first respondent was contrary to the provisions of sections14 and 15 of the Prescription Act [Chapter 8:11].

Further to this, the applicant is alleged to have admitted liability in terms of two documents admitted as exhibits before the arbitrator.

These documents, according to the first respondent, served to interrupt any alleged prescription as claimed by the applicant.

In addition to this, the first respondent contended that despite the protestations by the applicant, the parties had not executed a subsequent agreement and yet they continued to deal with each other leading to the conclusion that the contract did not terminate on 31 December 2004, as alleged by the applicant, but continued beyond the stipulated date as found by the second respondent.

The respondent denied that the second respondent had sought refuge in clause 8(d) of the contract and it denies, further, that this clause contradicts clauses 1 and 2 of the same.

In the premises, the first respondent denied that there had been a contravention of sections 14 and 15 of the Prescription Act.

Clauses 1 and 2 of the agreement provide for a commencement as well as a termination date. However, clause 8(d) also speaks of the duration of the agreement notwithstanding the provisions of the two clauses referred to above.

This is what it provides:

“Notwithstanding the date of signature of this agreement, this agreement shall be deemed to have commenced on the commencement date and shall be relevant after two years. After this review period, the agreement shall continue indefinitely save that either party may withdraw from this agreement on giving three months notice in writing to the other.”

In addition, the evidence adduced before the arbitrator seemed to suggest that the parties continued trading with each other long after the agreement would have been terminated.

If indeed the arbitrator came to the conclusion that the matter had not prescribed when in fact it had, such a finding is not, in my view, a breach of section 14 of the Prescription Act. The Act does not create a criminal offence in the event that a debt that has prescribed is found by a court or tribunal not to have prescribed.

As to the alleged date of termination of the agreement, the first respondent denies that the agreement terminated on 31 December 2004 and contends that the finding by the second respondent cannot be faulted.

The first respondent contends that the allegations by the applicant, in regard to this aspect, amount to an appeal.

It also contends that the evidence adduced before the arbitrator confirmed that the agreement continued beyond 31 December as the applicant did not return any of the trailers by that date.

The first respondent makes reference to evidence given by one Dawson, of the applicant, who stated that the parties carried on dealing with each other until mid 2007. This witness is alleged to have confirmed, under cross examination, that no trailers were handed back to the first respondent on 31 December 2004.

Despite an allegation in the opposing papers over this issue, the applicant did not find it necessary to adduce evidence by way of affidavit to contradict the averment.

One Kevin Motsi, of the applicant, is also alleged to have given evidence that he had been employed by the applicant in 2005 and that, at the time, the applicant was towing the first respondent's trailers. The relationship, according to him, had continued until 2007.

The applicant states that the claim presented to the arbitrator was for specific performance and that is what the first respondent got in the award from the arbitrator.

However, argues the applicant, the agreement relied upon imposes bilateral and reciprocal obligations on the parties. Specific reference is made to clause 14 in this regard. Specifically, the applicant contends that the maintenance of the trailers was a recoverable cost from Delta and that this would depend upon the mileage covered on a monthly basis.

The applicant suggests that the arbitrator must have found that, due to the deteriorating economic situation in Zimbabwe, the parties were unable to perform on the contract as from 2005.

The applicant contends, further, that the maintenance of the trailers was intrinsically linked to the first respondent's ability to provide the stipulated monthly mileage in respect of each horse in accordance with the provisions of clause 14 of the agreement for the applicant to recover the full maintenance costs for the availed trailers in accordance with the costing module.

The applicant contends that it had furnished to the arbitrator schedules which showed that, from December 2004, the parties had operated on an ad hoc basis as opposed to the strict terms of the agreement and that in view of that evidence the arbitrator had found that the first respondent was not providing the requisite mileage post 31 December 2004.

Therefore, contends the applicant, in ordering specific performance retrospectively as he did, the arbitrator acted outside the positive law of Zimbabwe regarding the enforcement of bilateral obligations between the parties. Put differently, the applicant contends that it is against the law of contract of Zimbabwe to direct a party to specifically perform on a contract where the other party thereto was unable and remained unable to perform in terms of that contract.

In addition, it is contended that the order for specific performance amounts to unjustified enrichment in that the first respondent was now unjustly enriched retrospectively in respect of a contract which itself did not specifically perform. This was due to the fact that, in order to comply with the award, the applicant would have to incur pecuniary loss in multi-currency as opposed to the Zimbabwe dollar which was the currency for performance and payment under the agreement.

Accordingly, the order for specific performance would again be contrary to the public policy of Zimbabwe and the relief should not have been granted to the first respondent in the first place.

The first respondent contended that the applicant had been expected to return the trailers in good working order, fair wear and tear excepted. The tyres were, however, required to have, upon the return of the trailers, the same amount of rubber as at the date of take over by the applicant.

Further, it is denied that the second respondent ordered specific performance retrospectively.

It is averred that all the second respondent did was to give effect to the contract and determine the obligations of the applicant in terms of clause 9(f) of the service contract. It is consequently denied that the order for specific performance was contrary to public policy as the applicant did not allege undue influence, fraud, or a breach of the rules of natural justice.

It is averred that there were no bilateral obligations as at the date of termination of the contract as the applicant had the obligation to restore the trailers in good working condition and order. The first respondent's obligation had been defined in clause 9(c), to ensure that all the trailers were validated by a certificate of fitness. By providing the certificates, the first respondent contends that it had complied with its obligations under the contract.

In so far as the jurisdiction of the second respondent is concerned, the first respondent contends that it was wide and was not limited to ascertain the obligations of the parties as at the date of the termination of the agreement, but, included any questions regarding the existence, validity, or termination of the same.

The first respondent accepts that the claim it filed with the arbitrator was for specific performance and that this was in terms of the agreement between the parties.

The respondent is of the view that the applicant is raising issues that are specifically dealing with an appeal which issues should not be entertained by this court.

The point is also made that the applicant had not filed a counter application before the arbitrator to the effect that the first respondent had not performed its obligations in terms of the contract.

The court is being urged, as a result, not to have regard to any suggestion that the maintenance of the trailers was a recoverable cost in terms of the contract as that was not one of the factors for consideration under Article 34 of the Arbitration Act.

It is contended that the applicant's real grievance is that the second respondent came to a wrong conclusion on the facts and the law.

It is denied that the award unjustly enriched the first respondent at the expense of the applicant.

The nature of a contract is that two or more parties thereto reciprocally promise, or one of them promises to the other or others, to give some particular thing or to do or refrain from doing some particular act.

There is, consequently, a presumption, that, in every bilateral or synallagmatic contract the common intention is that neither should be entitled to enforce the contract unless he has performed or is ready to perform his own obligations.

The parties to this dispute entered into a contract in terms of which each of them assumed obligations to the other, and, in return, also acquired rights flowing from the assumption of such obligations.

In terms of clause 8(d) of the contract herein, Pioneer was to assume the responsibility for the maintenance, licensing, and annual certificates of fitness in relation to the trailers supplied to it by Delta. In the event that Pioneer incurred any additional expenses in relation to this obligation, arising from the structural defects from the trailers, then, Delta would consider meeting part of a particular expense.

On termination of the agreement, the clause in (f) provided that Pioneer would return the trailers in good working condition, fair wear and tear excepted.

I am somewhat hampered by not having been provided with the record of the proceedings.

The first respondent has, however, availed copies of two letters which had been placed before the arbitrator and specifically dealt with the issue of prescription. The first is an e-mail written by Kelvin Motsi, of the applicant, on 24 October 2007, and is addressed to the first respondent. The pertinent part of the e-mail reads as follows:

“As per last mail below, and discussion with Delta yesterday, we are still working on your trailers and all efforts are being made to make such trailers available. Trailers T6554 and T6555 went to VID this weekend and did not pass the inspection; the issues raised have been rectified now and the trailers (sic) due for inspection again today.

T6244 and T6245 are also getting ready for VID. As per our discussion, once back from VID and passed (sic) we will advise your (Delta) workshops for a handover.

I fully understand the pressure you are going through to supply the country. We, at Pioneer, are putting in 100% to try and get these trailers ready under the difficult conditions of getting in the spares and other items required to bring them up to spec. if you have other ideas on how best we can source these items then we are open to discuss.

I however also do not take lightly the comments raised against myself on this issue, the reasons for the delays are not known by me alone. May I propose we sit round a table and air out all issue involved and identify responsibility to both parties in the smooth handover of such trailers and relations going forward.”

The second is a letter dated 27 March 2008, addressed to a Mr M Sekerani of Delta by Mark Dawson from Pioneer. It is appropriate to quote the full text of the letter;

“With great embarrassment, I write to you yet again apologising (sic) for the delay in the return of your trailers to you. We wish to state that we are not in any way trying to ignore or escape our obligation to you and are fully aware that we are testing your patience and leniency on this issue. We are still trying to recover from a huge hole that was left by previous employees as well as a huge skills gap that has emerged due to a skills flight of artisans.

We however intend to be delivering one trailer per week to you as from this week, whereas previously we had committed to two per month.

To achieve this, we have employed two coach builders from Deven Engineering who will start on our payroll on 1 April. We have imported a sand blaster from South Africa. We are also importing paint from South Africa.

We thank you for the loan of the paint and will return what we have borrowed next week. We thank you for your leniency so far and look forward to making good our obligation to you.”

I am persuaded, that, from the tenor of the two letters that were submitted to the arbitrator by the first respondent, it was never in doubt that the applicant was aware of its obligations under the contract and that it had expressed every intention to fulfil those obligations.

The email from Kelvin Motsi and the letter from Mark Dawson both clearly spelt out the acceptance by the applicant of returning the trailers to the first respondent in good working condition.

If the applicant had not accepted the obligation, or had misunderstood the obligation, it would not have taken upon itself the expense of hiring coach builders and a sand blaster to work on the trailers. It had also ensured that each of the trailers, prior to delivery to Delta, had to pass a fitness test with VID.

This, in my view, was clearly in accordance with the requirement in the contract that the trailers be returned to Delta in good working condition, fair wear and tear excepted.

I do not understand the applicant to suggest that the trailers should not have been returned.

The argument is that the second respondent should not have required that the applicant be made to perform in terms of the contract when the first respondent had itself not performed its own part of the contract.

The obligation of the first respondent was to provide the applicant with trailers to enable the latter to utilise them in the distribution of products on behalf of Delta. The parties' reciprocal obligations, during the life of the contract, are not in dispute. Once the agreement is terminated, the status quo ante had, of necessity, to be restored. This necessitated the return by the applicant of the first respondent's trailers in good working condition, fair wear and tear excepted.

I am of the view that the reasoning by the arbitrator, in requiring the applicant to comply with this contractual obligation, cannot be faulted.

I am unable to accept as cogent the argument by the applicant that the agreement had envisaged bilateral obligations on the parties and that, in awarding specific performance in the first respondent's favour, the arbitrator had imposed an obligation upon one party when the other party to the contract was clearly not in a position to perform its own part of the obligation.

I accept that during the currency of the agreement the first respondent was obliged to allocate trailers for the facilitation of the transportation of its goods by the applicant. Charges raised by the applicant for this service would permit the applicant to ensure that its horses and the first respondent's trailers would be maintained in a roadworthy condition and be certified fit by VID.

Upon termination of the agreement, however, it was the responsibility of the applicant to return the first respondent's trailers in good working condition, fair wear and tear excepted.

I cannot see how, by giving effect to the letter of the agreement regarding the obligation imposed upon the applicant to return the trailers in good and working condition, it can be suggested that the arbitrator imposed an obligation upon one party to the agreement.

The first respondent contends, further, that it has been advised by its legal representatives that no appeal lies against an arbitral award.

It contends that the applicant wants the award set aside on the premise that the arbitrator came to a wrong conclusion on the facts and on the law. The applicant is however camouflaging these proceedings to have the aspect of a review when what the applicant seeks is an appeal. There is not a single ground for review on the papers. Accordingly, the first respondent prays that the application be dismissed on that ground alone, specifically that the applicant does not have a cause of action.

Finally, the first respondent avers that the applicant has embarked on vexatious and frivolous litigation and that in order for the court to show its displeasure, it is only proper that the applicant be mulcted with an appropriate order of costs on a punitive scale.

The record of proceedings of the arbitration process was not before the court.

The submission from the applicant's counsel was that it was understood that it was the responsibility of the second respondent, the arbitrator, to furnish the record to the Registrar of this court.

As matters stand, the arbitrator did not appear or file any documents.

The arbitration process is completely separate from the court system, and, without any effort expended by the applicant to secure the provision of the record of proceedings by the arbitrator, I am not aware how else this was to be achieved.

The applicant has failed to establish that the award given in favour of the first respondent was contrary to public policy in any of the respects alleged. I am therefore not persuaded that there is any merit in the application.

As for the costs, the first respondent prayed for a punitive order of costs. I have not been addressed on the reasons why the first respondent considers the application frivolous and meriting an award of costs on the higher scale.

The mere fact that a party has decided to take on review a decision it is not happy with does not reflect, in my view, a frivolous attitude. The first respondent needed to show that the applicant did not have faith in its litigation and had instituted such litigation mala fide with an intention other than a desire to have the award properly set aside. There is no abuse of court process alleged on the papers, and, in the event I am not persuaded that an order of costs on the higher scale is warranted.

The application is dismissed with costs on an ordinary scale.

SC13-21 : MOSES MAWIRE vs RIO ZIM LIMITED (PRIVATE) LIMITED
Ruled By: GOWORA JA, PATEL JA and MAVANGIRA JA

After hearing the parties on 9 March 2018, the court was of the unanimous view that the appeal was devoid of any merit and accordingly ordered as follows:“The appeal be and is hereby dismissed with costs. Full reasons will be available in due course.”The following are the reasons:BACKGROUND FACTSThe appellant ...

After hearing the parties on 9 March 2018, the court was of the unanimous view that the appeal was devoid of any merit and accordingly ordered as follows:

“The appeal be and is hereby dismissed with costs. Full reasons will be available in due course.”

The following are the reasons:

BACKGROUND FACTS

The appellant was employed by the respondent as a Human Resources Superintendent on 1 November 2006. He was based at the Head Office in Harare. In February 2009 he was transferred to Renco Mine. His contract of employment provided for, amongst other things, locality allowance, leave bonus, and a company vehicle which was to be fuelled and maintained by the company.

In February 2009, as happened nationwide, the respondent shifted from the use of the Zimbabwean dollar to the United States dollar when the Zimbabwean dollar became moribund.

On 19 February 2009, the respondent wrote a letter to the appellant notifying him, that, following the adoption of the United States dollar, his salary would be US$4,147=43 per month.

The letter was silent on allowances.

On 21 March 2009, through an office memorandum, all the respondent's employees were notified of the changes in their salaries and allowances. The memorandum provided, that, the respondent had implemented salary scales based on regional 'SADC' rates for employees in all grades. Consequently, transport and meals allowances, together with leave bonus payable when employees proceeded on annual leave, were to fall away with effect from 1 March 2009 for all employees in Grade 10 and above. Transport and meals allowances were also removed for employees in Grade 10 and above.

The respondent further indicated that the employees would be kept abreast of further changes.

Following the adoption of the United States dollar, the appellant was being paid a globular salary without any allowances. The respondent did not provide the appellant with the motor vehicle, but, rather, supplied him with fuel and paid for the maintenance of his personal car.

This was regardless of the fact that the respondent's contract of employment stated that he was entitled to allowances and a motor vehicle maintained by the company.

In June 2014, the appellant raised a complaint of unfair labour practice with the Labour Officer. He demanded payment of the following:

1. Outstanding locality allowance for the period from February 2009, when he was transferred to Renco Mine, up to the time when he made the complaint in June 2014;

2. Leave bonus from 2009 to 2013; and

3. Mileage for use of his personal motor vehicle from 1 March 2007 up to the time of the making of the claim.

At conciliation, the parties failed to reach a settlement and the matter was referred to arbitration.

Before the arbitrator, the appellant argued, that, he was entitled to payment of outstanding locality allowances and leave bonus and to a motor vehicle coupled with its maintenance and repairs. The appellant had been using his personal vehicle for the respondent's business as the respondent had failed to provide the motor vehicle. For this reason, he claimed compensation on the mileage of his vehicle on the same basis as if it was on hire to the respondent.

The appellant also contended, that, the respondent had unilaterally varied the contents of the contract of employment.

The respondent raised a preliminary point.

It was to the effect, that, in the event that the appellant's contract was found to have been violated, the appellant's claims had prescribed in terms of section 94(1)(b) of the Labour Act [Chapter 28:01] (herein after referred to as 'the Act').

The respondent also argued, that, none of the respondent's contractual benefits were being violated.

The arbitrator dismissed the preliminary point.

In his award, he made the finding, that, all the claims made by the appellant had been sustained. He thus ordered the respondent to pay the sum of US$197,563 for compensation as had been claimed by the appellant. This was to be paid in two equal monthly instalments of US$98,781=50 with the final payment being paid not later than 1 October 2014.

APPEAL TO THE LABOUR COURT

Dissatisfied with the arbitrator's ruling and award, the respondent appealed to the Labour Court.

A number of grounds of appeal were raised. The court a quo summarized them to amount to:

1. That prescription applied to the claims and those claims that were older than two years had prescribed in terms of section 94(2) of the Labour Act [Chapter 28:01].

2. That the contract of employment was varied by the office memorandum, and by conduct, and that the arbitrator therefore erred at law in his interpretation of the facts.

3. That, there was no prejudice to the employee's remuneration as occasioned by the new method of payment.

4. That, the arbitrator had grossly misdirected himself in the relevant findings of fact so much as to amount to a misdirection at law.

After hearing the parties, the Labour Court allowed the appeal and set aside the arbitral award.

The Labour Court accepted the argument presented by the respondent. It came to the conclusion, that, once an infraction has occurred, and becomes known by the affected party, it prescribes if it is not actioned within two years from the date when the dispute first arose.

The court ruled, that, all the outstanding claims that were more than two years when the claim was instituted by the appellant had prescribed.

On whether or not there was unilateral variation of the contract, the Labour Court found, that, the contract had been unilaterally varied by the respondent.

In its judgment, the Labour Court stated, that, although there was unilateral variation of the contract by the respondent - for five years the appellant received his salary without any complaint. By so doing, the appellant, who was a human resources practitioner, had demonstrated, by conduct, that he accepted the new salary structures.

As a result, the allowances claimed by the respondent were no longer claimable as there was now a new contract in existence.

The Labour Court further found no merit in the appellant's claim which was based on the contention that he had been hiring out his personal motor vehicle to the respondent.

The court a quo found, that, there was no standing agreement between the parties to that effect, and, therefore, to say that the appellant had hired out his vehicle to the respondent would amount to overstretching the contract.

THIS APPEAL

The appellant was aggrieved by the judgment of the court a quo and appealed against its decision on the following grounds:

1. The Labour Court fundamentally misdirected itself on a question of law in failing to find that the claims of the Appellant had not prescribed, they being claims arising from unfair labour practices of a continuing nature covered by section 94(2) of the Labour Act.

2. The Labour Court further erred on a question of law in finding that the contract of employment between the Appellant and the Respondent had been varied such that the appellant would not be paid the claimed allowances.

3. The Labour Court further erred in law in failing to award the Appellant compensation in respect of the usage of his motor vehicle for the business purposes of the respondent.

At the beginning of the hearing, counsel for the appellant indicated that he was abandoning the third ground of appeal which related to the issue of the motor vehicle.

Notably, this ground formed the bulk of the appellant's claim. He therefore restricted his argument to the first two grounds which relate to the claims for outstanding locality allowance and leave bonus.

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

This is an appeal against the judgment of the High Court sitting at Masvingo, delivered on 24 June 2020, which dismissed with costs the application made by the two appellants for a declaratory order and an interdict.FACTUAL BACKGROUNDThe two appellants are sugar-producing giants in the Lowveld while the first respondent ...

FACTUAL BACKGROUND

The two appellants are sugar-producing giants in the Lowveld while the first respondent (Zimbabwe Revenue Authority) is the statutory body charged with revenue collection in Zimbabwe. The remainder of the respondents are either sugar cane farmers or associations representing such farmers (Zimbabwe Sugarcane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers, Farai Dumo Augustine Musikavanhu and Roy Bhila).

The respondents will be referred to in this judgment, for convenience, as Zimbabwe Revenue Authority and the farmers respectively.

The appellants and the farmers entered into two types of agreements, either a “Cane Milling Agreement” or a “Cane Purchase Agreement” in terms of which the appellants would either provide milling services to the farmers and market their sugar and molasses or outrightly purchase the sugar cane.

The dispute which arose between the parties did not involve the outright purchase and sale of sugar cane. As such this judgment does not deal with that scenario at all. The judgment concerns itself with the cane milling agreements entered into between the parties.

In terms of the cane milling agreements, the charge for milling and marketing services, payable by the farmers to the appellants, was calculated in terms of a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. It was fixed at 23 percent of the proceeds the farmers would get; meaning that, the appellants would retain 23 percent of the proceeds while remitting the balance of 77 percent to the farmers.

Regrettably, in fixing the milling and marketing charge, the appellants did not include Value Added Tax (VAT) as required by law. It follows, that, no Value Added Tax was paid by the appellants to the Zimbabwe Revenue Authority in that regard.

It was in the process of auditing the appellants Value Added Tax (VAT) assessments for the period 2009 to 2017 that the Zimbabwe Revenue Authority decided that the milling and marketing charges of 23 percent of the proceeds levied by the appellants against the farmers attracted VAT.

The Zimbabwe Revenue Authority proceeded to issue assessments of value added tax (VAT) for those years and demanded payment of same from the appellants. These assessments related to the past supplies where the appellants ought to have, but failed, to collect and remit VAT to the Zimbabwe Revenue Authority.

The appellants objected to the assessments which objections were all disallowed by the Zimbabwe Revenue Authority. The appellants appealed to the Fiscal Appeals Court but paid the assessed value added tax (VAT) to the Zimbabwe Revenue Authority notwithstanding.

An appeal does not exonerate a tax payer from paying the assessed tax.

After effecting payments to the Zimbabwe Revenue Authority, the appellants sought to recover such value added tax (VAT) from the farmers on the basis that they were obliged to charge and collect the VAT from the consumers of the service, the farmers, but had not done so.

The appellants were of the view, that, it was only fair and reasonable that the farmers should re-imburse them of the value added tax (VAT) paid by them to the Zimbabwe Revenue Authority.

There being no convergence between the farmers, who had obtained advice from the Zimbabwe Revenue Authority, that, the 23 percent Division of Proceeds ratio was inclusive of value added tax (VAT), and the appellants, the latter filed an application in the court a quo.

In their application, the appellants sought declaratory relief that they were legally entitled to continue charging and collecting value added tax (VAT) from the farmers - over and above the 23 percent milling charge.

The appellants also sought to be reimbursed the monies they paid to the Zimbabwe Revenue Authority on past assessments.

In addition, they accused the Zimbabwe Revenue Authority of interfering with contractual issues between them and the farmers by rendering advice to the farmers on the value added tax (VAT) dispute.

Accordingly, the appellants sought an order interdicting the Zimbabwe Revenue Authority from what they called “gratuitously interfering in pricing and contractual issues” between them and the farmers.

The application was opposed by the Zimbabwe Revenue Authority and most of the respondents.

DECISION A QUO

It was the view of the court a quo, that, the entire dispute revolved around the interpretation of section 69 and section 72 of the Value Added Tax Act [Chapter 23:12].

Regarding the past supplies of sugar cane to the appellants, the court a quo found, that, the literal meaning of section 69 of the Value Added Tax Act suggests, that, it is irrelevant whether the registered operator has charged VAT or not. If the price does not reflect the tax component, section 69 of the Value Added Tax Act operates such that there is a presumption that a price not reflecting VAT included that tax.

It was the finding of the court a quo, that, the section serves to “estop” a registered operator, who has not reflected value added tax (VAT) on the price, from denying that the price includes that tax.

It also found, that, section 69 of the Value Added Tax Act precludes such registered operator from subsequently claiming VAT not reflected on the price.

In the court a quo's view, permitting the appellants to recoup value added tax (VAT) in retrospect would render nugatory the deeming provision of section 69 of the Value Added Tax Act as the deeming provision cannot be interpreted to mean different things to two different people.

Regarding the claim for value added tax (VAT) on present and future supplies of sugarcane, which the contracts of the parties are still silent on, the court a quo took the view, that, it was up to the parties to re-negotiate or clarify the terms of their contracts in order to plug the existing lacunae.

If they do not, then, section 69 of the Value Added Tax Act will continue to apply.

The court a quo was not persuaded that a case was made for an interdict against the first respondent.

It recognised, that, the appellants had made a formal request to the first respondent to intervene and educate the farmers on the tax implications of their agreement. They could not, thereafter, cry foul after such intervention.

In addition, the court a quo found no evidence of the first respondent's interference with the pricing issues between the appellants and the farmers.

On the question of costs, the court a quo found no basis for departing from the general rule, that, costs follow the result. It dismissed the application with costs granted in favour of only those respondents who participated in the suit.

The appellants were aggrieved. They noted this appeal to this Court on the following grounds;

GROUNDS OF APPEAL

1. The learned judge of the court a quo erred and misdirected himself in finding that section 69 of the Value Added Tax Act [Chapter 23:12] operated to preclude the appellants from recovering value added tax (VAT) for past supplies on an alleged milling service which the first respondent considered to have been rendered to farmers.

2. Further, the court a quo erred and misdirected itself in failing to pronounce, definitively, on the appellants right and entitlement to charge, levy, and collect value added tax (VAT), and the farmers respective obligation to pay same, in addition to the value of the alleged milling service, with respect to current and future supplies pursuant to the first respondent's decision to impose tax.

3. The learned Judge of the court a quo erred and misdirected himself in failing to find, that, the letter by the first respondent to the farmers, with respect to the farmers tax obligations, strayed upon purely contractual matters which it was not competent for the first respondent to prescribe to parties.

4. The court a quo erred in awarding costs against the appellants, and in favour of the respondents in general, and, at any rate, most especially as it relates to the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents in particular.

ISSUES

The grounds of appeal may be four, but they speak to essentially two narrow issues for determination in this appeal. They are:

1. Whether or not the court a quo erred in refusing to grant the declaratur and the interdict.

2. Whether or not the court a quo erred in granting costs against the appellants.

SUBMISSIONS ON APPEAL

Counsel for the appellants anchored his arguments on the legal effects of the decision taken by the first respondent, contained in its letter dated 9 September 2019. Following meetings held by the parties, the first respondent determined that:

“1. The VAT Act, under section 6, provides that VAT shall be charged and levied where a service is provided. Facts at hand indicated that millers provide milling services to the farmers and they retain 23% from the sugar proceeds…,.

Given the above legislative requirements, VAT is therefore applicable on the milling fees, and, as discussed in the meeting, VAT is recovered as depicted in the following scenario…,.”

It was submitted, that, the moment the first respondent made the decision to commence recovering value added tax (VAT) on milling services, when, prior to that, it had not done so, the provisions of section 72(1) of the Value Added Tax Act [Chapter 23:12] were triggered.

The section provides:

“(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax on increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

To the extent that value added tax (VAT) was only imposed on the milling fees, by letter quoted above, so the argument goes, when it had not been claimed previously, the appellants were entitled to recover it from the recipients of the milling services by virtue of that provision.

It was submitted, further, that, the deeming provisions of section 69 of the Value Added Tax Act do not preclude the appellants from recovering the value added tax (VAT) paid to the first respondent. This is so because the section is a shield in the hands of the revenue collector. It is an administrative tool for the facilitation of easy collection of taxes without disruptive disputes with registered operators.

In counsel for the appellants view, section 69 of the Value Added Tax Act cannot be used to estop the operator from recovering value added tax (VAT) paid to the collector.

Per contra, counsel for the first respondent submitted, that, given that the contracts for milling services did not reflect value added tax (VAT), section 69 of the of the Value Added Tax Act applies. To that extent, in respect of past supplies, the contract price is deemed to be inclusive of VAT.

It was submitted further, that, in the absence of an agreement with the farmers to vary the contract price, even by the application of basic principles of Contract Law, the appellants could not unilaterally vary the price by levying value added tax (VAT).

On the effects of section 72 of the Value Added Tax Act, it was submitted, that, the section may be regarded as a law–changing provision. In the event that the law changes to include value added tax (VAT), where it was not applicable, so it was argued, or to increase the applicable VAT, then, by dint of section 72 of the Value Added Tax Act, the agreement is varied accordingly.

The net effect of those submissions is that the section has no application where value added tax (VAT) was excluded in the agreement when it should have been included.

Regarding the alleged interference with contractual rights and obligations by the first respondent, counsel for the first respondent submitted, that, the advice rendered by the first respondent was not only at the invitation of the appellants themselves but also in fulfilment of a statutory obligation. The first respondent is obliged to educate taxpayers on their tax obligations.

The requirements for an interdict were not met.

Counsel for the rest of the respondents in attendance, in chorus, associated themselves with submissions made on behalf of the first respondent.

ANALYSIS

In as much as the record of appeal and the submissions made by counsel are heavy, what has to be decided has become very narrow indeed. The entire appeal turns on the effect of the deeming provision in section 69 of the Value Added Tax Act [Chapter 23:12].

In particular, whether it operates to prevent a registered operator who has fallen foul of the law, by not reflecting value added tax (VAT) on the price of goods and services, from later recouping the VAT demanded by the first respondent from the consumer.

A fortiori, whether section 72 of the Value Added Tax Act applies to a situation where the registered operator has excluded or not reflected value added tax (VAT) on the price of goods and services even though the law required such registered operator to levy and reflect VAT on the price.

Section 72 of the Value Added Tax Act varies the contract price by the margin of value added tax (VAT) imposed or increased subsequent to the contract being concluded.

I agree with counsel for the first respondent, that, it is a law-changing provision as it clearly relates to the imposition of a new tax or the increase of an existing tax.

It is common cause that the burden of paying value added tax (VAT) lies with the consumer of goods and services.

The system of value added tax (VAT) collection existing in this jurisdiction was succinctly summarised by the court in Zimbabwe Revenue Authority v Packers International (Private) Limited 2016 (2) ZLR 84 (S)…, thus:

“The system of collection of VAT, as embodied in the VAT Act, involves the imposition of tax at each step along the chain of manufacture of goods or the provision of services subject to VAT.

Consequently, every registered operator is required, in terms of section 28 of the VAT Act, to submit returns to the Commissioner of Taxes ('the Commissioner') every month, calculate the VAT due on the return, and make payment of such VAT.

Due to the sheer volume and complexity of the VAT collection system, ZIMRA lacks the capacity and manpower to effectively monitor each and every transaction liable to VAT, and, as a consequence, it is heavily reliant on the self-assessment process by registered operators.

However, in order to ensure that operators comply with the requirements to render returns and collect VAT, ZIMRA conducts periodic investigations as well as audits.”

In terms of the value added tax (VAT) collection system which is in place, while the burden to pay resides with the consumer of goods and services, the registered operator bears the burden of collecting VAT and remitting it to the revenue collector.

Where the registered operator has omitted, as required by section 6(1) of the Value Added Tax Act, to include value added tax (VAT) on the price, section 69(1) of the Value Added Tax Act is activated to deem VAT to be included in whatever price is pegged by the operator.

Section 6(1) of the Value Added Tax Act is very clear in its wording, it provides:

“Subject to this Act, there shall be charged, levied, and collected, for the benefit of the Consolidated Revenue Fund, a tax, at such rate as may be fixed by the Charging Act, on the value of -

(a) The supply, by any registered operator, of goods or services supplied by him on or after the 1st January 2004, in the course or furtherance of any trade carried on by him:”

What it means is, that, by failing to charge, levy, and collect value added tax (VAT) from the consumers of their milling services, the appellants breached, to their peril, the peremptory provisions of section 6(1) of the Value Added Tax Act.

By operation of section 69(1) of the Value Added Tax Act, the 23 percent charge for milling services was taken to include VAT for all intents and purposes.

The court a quo cannot be faulted for finding, that, whether by inadvertence, oversight, or misinterpretation of the nature of the contract, the consequence of the failure to specifically include value added tax (VAT) are that it is deemed included in the milling price.

The deeming provision cannot be applied differently on the registered operator and the consumer.

As regards the question whether section 72(1) of the Value Added Tax Act rescues the appellants from the consequences of their failure to comply with the peremptory provisions of section 6(1)(a) of the Value Added Tax Act, it is clearly a matter of statutory interpretation.

In my view, the simple grammatical meaning of the words “whenever the value added tax is imposed or increased in respect of any supply of goods and services…,” is that, in the first instance, there would be no tax on such supply and the law steps in to impose a tax.

In the second instance, the law would have imposed a tax on the supply but it moves in to increase the value of tax.

In both instances, the parties would have contracted in certain terms before the law changes.

Upon change of the law, section 72(1) of the Value Added Tax Act comes in to vary the terms of a pre-existing contract to either impose or increase the tax.

I do not agree with counsel for the appellants submission, that, upon conducting an audit which revealed that the appellants were rendering a taxable milling service while not levying and collecting tax, the first respondent imposed a tax.

In my view, the law had already imposed the tax, but the appellants were committing an infraction by not reflecting it.

Again, the court a quo was correct in concluding, that, there was no imposition of a “new tax” nor an increase of chargeable tax.

Accordingly, section 72(1) of the Value Added Tax Act has no application and is certainly not available to the appellants.

Counsel for the appellants did not prosecute the issue of the interdict sought against the first respondent with any degree of enthusiasm.

It is not without reason that this is so:

(a) Firstly, evidence placed before the court a quo shows, that, the appellants invited the first respondent to intervene and educate the farmers on the tax implications of their contracts with the appellants. That the first respondent interpreted their contracts in a manner not favourable to the appellants can scarcely found a cause of action.

(b) Secondly, and more importantly, the requirements for the grant of an interdict were not met.

I can only advert to the fact that the court a quo made factual findings relating to the failure by the appellants to prove that the first respondent had interfered with the contractual issues.

It also made a finding that the advice rendered by the first respondent was only confined to value added tax (VAT) matters falling within the statutory province of the first respondent as a revenue collector.

Surely, one cannot be interdicted from carrying out a lawful duty.

The court a quo also made a finding that the use of the term “gratuitously interfering” was too imprecise and unenforceable.

On appeal, the appellants failed to set out a basis for interference with those findings.

It is trite, that, it is only where the factual findings of the lower court are clearly irrational, to an extent that no sensible court seized with the same facts could have reached such a conclusion, that the Appellate Court will interfere: see Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S); Shuro v Chiuraise SC20-19.

No such threshold was attained in the present case. As such, this Court cannot interfere.

It remains for me to deal with the question of costs.

The court a quo granted costs against the appellants in favour of those respondents who participated in the proceedings.

It premised its decision on the general rule that costs follow the result.

Its attention was not drawn to the widely held principle, in tax cases, that, the High Court or the Special Court, is loathe to make an order as to costs save where the claim is held to be unreasonable or the grounds of appeal are frivolous: see section 65(12) of the Income Tax Act [Chapter 23:06].

On appeal, counsel, again, did not address that issue at all.

It occurs to me, that, the court a quo was incapacitated in respect of costs by the failure to bring its attention to the prevailing jurisprudence on such costs. As a result, it misdirected itself, a misdirection entitling this Court to interfere with its exercise of discretion.

There is nothing in this case suggesting that the appellants case was unreasonable or that it was frivolous.

Quite to the contrary, they raised quite pertinent issues which required the court to embark on a detailed interpretation of the law. The same applies to the appeal.

In my view, this is a classic case in which the costs, both a quo and in this Court, should not be awarded to any party.

In the result, it be and is hereby ordered as follows:

1. The appeal, in respect of grounds of appeal 2.1, 2.2, and 2.3 is dismissed with each party to bear its own costs.

2. The appeal, in respect of ground of appeal 2.4, is upheld.

3. The judgment of the court a quo is amended by the deletion of paragraph 5 and its substitution with the following:

“5. Each party shall bear its own costs.”

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES
Ruled By: MATHONSI J

Valued Added Tax (VAT) is a statutory levy which should be paid by operation of the law. The tenant does not have to agree to pay it in order for it to be levied.

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

The parties in this application are embroiled in a bitter dispute over the implications of their failure to specifically include Value Added Tax (abbreviated herein as “VAT”) matters in agreements for the milling of sugarcane.

The applicants are both companies duly incorporated in terms of the laws of Zimbabwe whose names over the years have become synonymous with sugar and sugar cane production in Zimbabwe. They grow, source, and mill sugar-cane and market its products. They carry on this agro-based business in and around the Lowveld towns of Triangle and Chiredzi.

The first respondent is the Zimbabwe Revenue Authority (ZIMRA): a statutory body whose chief mandate is to assess, collect, and enforce the payment of all revenues on behalf of the State. It is established in terms of the Revenue Authority Act [Chapter 23:11].

Save for the 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila), the rest of the respondents are organisations representing the interests of sugarcane farmers in the Lowveld (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugar Cane Farmers Trust, Commercial Sugar Cane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugar Cane Development Association Royal Trust, Chipiwa Mpapa Mill Group and Chiredzi Productive Cane Growers Association).

The 10th (Farai Dumo Augustine Musikavanhu) and 11th (Roy Bhila) respondents are individual sugar cane farmers.

They were probably singled out on account of the positions they hold as Members of Parliament for the Chiredzi South and Chiredzi North constituencies respectively over and above their roles as sugar-cane farmers. They also occupy and serve in specialised Parliamentary capacities.

BACKGROUND

Solely for purposes of convenience and brevity, the second to eleventh respondents (Zimbabwe Sugar Cane Development Association, Zimbabwe Cane Farmers Association, Mkwasine Sugarcane Farmers Trust, Commercial Sugarcane Farmers Association of Zimbabwe, Hippo Valley Productive Farmers Association, Zimbabwe Sugarcane Development Association Royal Trust, Chipiwa Mpapa Mill Group, Chiredzi Productive Cane Growers Association, Farai Dumo Augustine Musikavanhu and Roy Bhila) will be referred to simply as “the farmers” and the first respondent as “ZIMRA”.

It is common cause, that, pursuant to the terms of either of two types of written agreements between them, the farmers supply the sugar cane that they produce to the applicants. These contracts are generally referred to by the parties as the “Cane Milling Agreement” and the “Cane Purchase Agreement.”

Under the former, the basic idea (as is implicit in the name) is that the applicants merely provide a milling service to the farmers. In addition, the applicants also proceed to market, on behalf of the farmers, the sugar and molasses thereby produced as well as other by-products, and, thereafter, remit to the farmers the proceeds thereof after deducting the expenses associated with the milling of the sugarcane and marketing of the sugar and the other by-products.

It is further common cause, that, under the cane milling arrangement, there is an existing agreement that the charge for the milling is calculated according to a pre-determined ratio referred to as the “Division of Proceeds” (DoP) ratio. This ratio currently stands at 23 percent of the proceeds which the applicants retain in the wake of the marketing of the products of the milling process. The farmer gets the remainder.

The Cane Purchase Agreement operates differently.

According to the parties, this agreement involves a direct and complete sale of the sugar cane by the farmers to the applicants with risk and benefits passing to the latter upon the delivery of the cane.

During oral submissions in court, counsel for the applicants referred to a rather convoluted method by which the purchase price of the cane is computed under this arrangement; suffice it to say that there is no convergence as among the parties as to whether the supplies of cane that gave rise to the current dispute constitute a Cane Milling Agreement or a Cane Purchase Agreement.

Be that as it may, it is common cause, that, in a decision (which has since been appealed against to the Fiscal Appeals Court), the first respondent determined that the set-up which currently obtains, chiefly characterised by the distribution of proceeds arrangement, constitutes one which attracts value added tax (VAT).

Therein lies the genesis of the dispute.

This is because the simple question to be answered is whether the 23 percent retained by the applicants, post the milling and marketing, incorporates value added tax (VAT) (as contended by the farmers) or it does not (as maintained by the applicants).

It is further common cause that the Zimbabwe Revenue Authority (ZIMRA), having made the decision that the aforementioned arrangement was one that attracts value added tax (VAT) in terms of the law, and that the applicants were therefore legally obligated to have, all along, charged and collected from the consumers (i.e. the farmers) and remitted the amounts so collected to it, directed that the said amounts be paid to it.

In compliance with that decision, the applicants aver, that, they have since calculated the outstanding amounts in this regard and remitted the same to the first respondent.

Through the current application, the applicants seek;

(i) A declaratory order to the effect that they are legally entitled to recover from the farmers the value added tax (VAT) which they have since paid to the first respondent; and

(ii) Secondly, that they are legally entitled to continue charging and collecting value added tax (VAT) from the farmers over and above the 23 percent milling charge.

The applicants also take exception to the fact that the first respondent (through some of its officials) took it upon itself to render certain advice to the farmers which advice they contend amounts to an unwarranted interference in matters that are purely contractual.

Part of that advice related to the first respondent's interpretation of the tax implications of the failure to include value added tax (VAT) matters in the cane supply agreements.

The terms of the declaratur sought by the applicants are captured in the draft order annexed to the application which reads:

“Wherefore, after reading papers filed of record and hearing counsel, IT IS ORDERED THAT:

1. The application succeeds with costs.

2. It be and is hereby declared that -

(a) The conduct by the first respondent to give advice to the applicants and the second to eleventh respondents on what are purely contractual matters is ultra vires its functions and responsibilities as an administrative authority and therefore unlawful.

(b) To the extent that they are liable to pay VAT for milling costs, the applicants are entitled to charge, levy, and collect such VAT in accordance with the VAT Act on and in addition to the value for the milling charge.

3. The first respondent be and is hereby ordered and directed to refrain from gratuitously interfering in pricing and contractual issues between the applicants and the second to eleventh respondents.

4. The respondents shall, jointly and severally, the one paying the others to be absolved, pay the applicants costs of suit on an attorney–client scale.”

The applicants raised a number of arguments in support of their contention that they should be permitted to recover that which they have since paid to the Zimbabwe Revenue Authority (ZIMRA) in the wake of the latter's aforementioned determination.

The main thrust of their argument, as I see it, however, is that the very fact that the Act makes it clear that the burden to pay the tax in question rests on the consumers, who in this case are the farmers, yet it was them (applicants) who were compelled to pay it, necessarily implies that they can recover the same from the farmers.

Reliance was placed, inter alia, on the elucidation by GOWORA JA, of the tripartite relationship in the value added tax (VAT) equation. This was in the case of ZIMRA v Packers International (Private) Limited SC28-16 where the following exposition was made:

“The system of collection of VAT, as embodied in the VAT Act, involves the imposition of tax at each step along the chain of manufacture of goods or the provision of services subject to VAT;”

And further that:

“…, tax under the VAT Act consists of monies that have been taxed on goods and services paid by consumers for onward transmission to the Commissioner. All that is required of an operator is to calculate the amount so paid, submit a return, and make payment.”

Flowing from this basic premise, according to the applicants, are two applicable precepts that emanate therefrom, namely, unjust enrichment and equity.

The latter, though not specifically pleaded in their papers, was nevertheless amply canvassed during the oral submissions in court.

Regarding unjust enrichment, it was averred, that, should the court not find in the applicants favour, an injustice will ensue in that the respondents will have been unjustly enriched at their expense.

For the requirements and application of the principle of unjust enrichment, the following cases were cited as authority; Industrial Equity v Walker 1996 (1) ZLR 269 (H); Chioza A.M. v Siziba S.W. SC04-15; and Trojan Nickel Mine Ltd v Reserve Bank of Zimbabwe HH169-13.

It was contended, that, the facts of this case point to the fact that all the pre-requisites for a finding for the applicant on the basis of unjust enrichment have been met.

The nub of the equity argument is that justice and fairness simply demand that the applicants be allowed to recoup from the farmers that which they paid to the Zimbabwe Revenue Authority (ZIMRA) in compliance with the latter's determination.

It is clear that this is merely an extension or adjunct of the unjust enrichment contention.

The applicants further referred to various sections of the Act which, in their view, fortify their position. Reliance was placed in this regard to section 9(2) which provides as follows:

“The value placed on any supply of goods or services shall, save as is otherwise provided in this section, be the value of the consideration for such supply, as determined in accordance with subsection 3, less so much of such value as represents tax: Provided that -

(a)…,.;

(b) Where the portion of the value of the said consideration which represents tax is not accounted for separately by the registered operator, the said portion shall be deemed to be an amount equal to the tax fraction of that consideration.”

Similarly, reliance was placed on section 9(5) of the Act which provides:

“Where goods or services are deemed to be supplied by a registered operator in terms of subsection (2) or (8) of section 7, the supply shall be deemed to be made for a consideration in money equal to the lesser of -

(a) The cost to the registered operator of the acquisition, manufacture, assembly, construction, or production of goods or services, including -

(i) Any tax charged in respect of the supply to the registered operator of such goods or services or of any components, materials, or services utilised by him in such manufacture, assembly, construction or production;

(ii) Where such goods or any right referred to in subsection (2) of section seven, when held by the registered operator, constituted trading stock as defined in section 2 of the Taxes Act, any further costs, including tax incurred by him in respect of such goods or right;

(iii) Any costs, including tax, incurred by the registered operator in respect of the transportation or delivery of such goods or the provision of such services in connection with the transfer of such goods or the provision of such services as contemplated in subsection (8) of section seven; and

(iv) Where such goods or services were acquired under a supply in respect of which the consideration in money was in terms of subsection (4) of this section deemed to be the open market value of the supply or would in terms of that provision have been deemed to be the open market value of the supply were it not for the fact that the recipient would have been entitled under subsection (3) of section fifteen to make a deduction of the full amount of tax in respect of that supply, such open market value to the extent that it exceeds the consideration in money for that supply: or

(b) The open market value of such supply.”

THE POSITION OF THE RESPONDENTS

The third (Zimbabwe Cane Farmers Association) and fourth (Mkwasine Sugar Cane Farmers Trust) respondents did not ultimately participate in the proceedings on account of the fact that the former did not file any opposing papers and the latter filed its heads of argument outside the prescribed time and was therefore barred.

In a similar vein, there was no appearance by or on behalf of the sixth (Hippo Valley Productive Farmers Association), ninth (Chiredzi Productive Cane Growers Association) and eleventh (Roy Bhila) respondents on the day of the hearing.

Effectively, therefore, only the positions of the first (Zimbabwe Revenue Authority), second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were before the court.

ZIMBABWE REVENUE AUTHORITY's POSITION (ZIMRA)

Regarding the implications of the failure by the applicants and the farmers to specifically incorporate value added tax (VAT) matters in their Division of Proceeds (DoP) arrangements, ZIMRA articulated two distinct positions, namely;

(i) That which relates to past supplies of cane; and

(ii) That which attends to present and future supplies of cane.

In respect of past supplies of sugarcane, the Zimbabwe Revenue Authority (ZIMRA) averred that a proper construction of section 69 of the Value Added Tax Act shows, that, in the absence of the express mention of value added tax (VAT) component in any price for goods or services, then the price will be deemed to contain the said tax.

As far as the alleged impropriety of the advice it rendered to the farmers, it contended that whatever advice it gave to the farmers was not only within its legal powers to give but also that it did so at the behest of the applicants.

It further averred, that, it has a duty to provide education to taxpayers not only to impart knowledge of the same but also to inculcate and engender a spirit of compliance.

First (ZIMRA) respondent's position on VAT implications for present and future supplies of cane

In its papers opposing this application, the Zimbabwe Revenue Authority (ZIMRA) does not commit itself on what the tax implications in respect of present and future supplies are. It opted, instead, to confine itself to the question of past supplies.

However, it soon became apparent that its position is that the applicants are not only at liberty to charge, levy, and collect from the farmers the said tax, but that they are in fact obligated to do so.

It suffices, however, to note that this does not address the issue of whether this will be over and above the 23 percent being charged for the milling of the cane.

THE FARMERS POSITION

As earlier stated, only the positions of the second (Zimbabwe Sugar Cane Development Association), fifth (Commercial Sugar Cane Farmers Association of Zimbabwe), seventh (Zimbabwe Sugar Cane Development Association Royal Trust), eighth (Chipiwa Mpapa Mill Group), and tenth (Farai Dumo Augustine Musikavanhu) respondents were effectively before court.

Save for a few instances of divergence (which will be highlighted below) the farmers were united not only in their resistance to the application but also on the grounds thereof.

The rallying point in their opposition to the quest by the applicants to recover the tax for past supplies was section 69 of the Value Added Tax Act. Their position essentially mirrors that of the Zimbabwe Revenue Authority (ZIMRA).

Over and above the import of section 69 of the Value Added Tax Act, however, a few additional arguments were presented to buttress their position and these are:

1. The very fact that the Zimbabwe Revenue Authority (ZIMRA) has determined that the 23 percent milling charge includes value added tax (VAT) as far as the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents are concerned, is dispositive of the whole dispute.

They go as far as contending that the decision of ZIMRA is binding.

They further assert, that, in their view, the applicants have merely abdicated from their responsibility to remit the value added tax (VAT) so collected to ZIMRA and the consequences attendant thereto cannot be visited on them.

2. That the endeavour, on the part of the applicants, to recover the value added tax (VAT) they paid from them amounts to an attempt to vary the implied terms of their contract.

3. That, as far as the fifth (Commercial Sugar Cane Farmers Association of Zimbabwe) respondent is concerned, its cane supply arrangement with the applicants is governed by neither a cane milling agreement nor a cane purchase agreement, but, rather, by what it terms a “memorandum of understanding.” A copy of which was attached.

4. A further point raised by the fifth respondent (Commercial Sugar Cane Farmers Association of Zimbabwe) was that the very fact that invoices relating to disbursements of the individual farmer's share of proceeds is silent on the collection of value added tax (VAT) necessarily implies that VAT was included in the 23 percent milling charge.

During oral addresses in court, yet another argument was presented, namely, that, the Division of Proceeds (DoP) ratio was decided upon by the Minister responsible for the superintendence of the sugar sector, namely, the Minister of Industry and Commerce.

It was averred, in this regard, that, during the negotiations leading up to those figures (of 23 percent and 77 percent) it was in the contemplation of the parties that value added tax (VAT) was incorporated in the 23 percent milling charge.

In apparent departure from the positions held by the other respondents, the seventh respondent (Zimbabwe Sugar Cane Development Association Royal Trust) maintained that section 69 of the Value Added Tax Act applies to all supplies of cane; past, present, and future.

THE ISSUES

In my view, there are two broad issues up for determination in this dispute, and, from each, two sub-questions arise. The two broad questions are:

(1) Whether the 23 percent cane milling charge includes or excludes value added tax (VAT); and

(2) Whether there has been an unjustifiable interference by the first respondent the Zimbabwe Revenue Authority (ZIMRA) in purely contractual matters between the applicants and the farmers.

The sub-questions in respect of (1) above are:

(a) Whether or not the applicants are entitled to recover from the farmers value added tax (VAT) which they (i.e. applicants) paid to ZIMRA for past supplies; and

(b) Whether or not the applicants are entitled to charge, levy, and collect from the farmers value added tax (VAT) over and above the 23 percent milling charge.

The sub-questions from (2) above are:

(a) Whether the applicants have satisfied the requirements for the declaratur sought in paragraph 2(a) of the draft order; and

(b) Whether the applicants have satisfied the requirements for the interdict sought in paragraph 3 of the draft order.

WHETHER THE 23% CANE MILLING CHARGE INCLUDES OR EXCLUDES VALUE ADDED TAX (VAT)

This is arguably the most significant question as it lies at the very heart of the dispute.

As indicated above, the applicants used various arguments in support of their contention that the 23 percent milling charge must be taken as excluding value added tax (VAT).

They relied, inter alia, on subsections 2 and 5 of section 9 of the Value Added Tax Act.

I however fail to see how section 9(2)(b) of the Value Added Tax Act assists the applicants.

Section 9 of the Value Added Tax Act, in general, is aimed at the determination of the value of supply of goods or services. Paragraph 2(b), in particular, is a proviso to the general provision that the value to be placed on any supply of goods or services is the value of the consideration.

This proviso however addresses a situation where the registered operator neglects to separately account for the value of the consideration which represents tax in which case it will be deemed to be the tax fraction of the consideration.

Implicit in this proviso is that the tax fraction is to be calculated from that consideration: not in addition to the consideration. A fraction of something is a piece, part, portion, or component of something. Put in context, therefore, the tax fraction is incorporated in not excluded from or to be added to the 23 percent milling charge which is the consideration.

Sub-section (5) of section 9 of the Value Added Tax Act equally does not avail the applicants.

It is simply a method aimed at assisting in the computation of the consideration of the supply of the goods or services in question in instances of “deemed supply”. The basic idea being that this involves a calculation of all the expenses incurred in or attendant to the acquisition of the goods or services (or any lesser amount) or simply the open market value of such supply.

Needless to say that this provision does not even come close to unlocking the current legal logjam, let alone assist the applicants....,.

The real issue as I see it, lies in the interpretation of sections 69 and 72 of the Value Added Tax Act and their application to the facts of this matter....,.

REGARDING PAST SUPPLIES OF CANE

As indicated earlier, in this regard, the Zimbabwe Revenue Authority (ZIMRA) relied almost exclusively on the provisions of section 69 of the Value Added Tax Act (and the farmers adopt a similar stance) which provides as follows:

“69 Prices deemed to include tax

(1) Any price charged by the registered operator in respect of any taxable supply of goods or services, shall, for the purposes of this Act, be deemed to include any tax payable in terms of paragraph (a) of subsection (1) of section six in respect of such supply, whether or not the registered operator has included tax in such price.”

According to ZIMRA, the significance of this section is that where the price/charge (which, in this case, the milling price which is pegged at 23 percent of the value of the proceeds from the cane) is silent on the value added tax (VAT) component thereof, it is deemed, ex lege that VAT is included in that price.

Put in perspective, therefore, according to the first respondent, the Zimbabwe Revenue Authority (ZIMRA), it is deemed that the consumer of the goods or service (in this case the farmer) has already paid value added tax (VAT) in that price, and, by logical extension, all the registered operator (in this case the applicants) needs to do is to remit it to ZIMRA.

Any purported attempt to recover the same from the consumer is untenable because that would not only amount to taxing the consumer twice but also runs contrary to the tenor and spirit of that section.

The Zimbabwe Revenue Authority (ZIMRA) further contended, that, doing so would inevitably lead to a fresh computation of the value added tax (VAT) payable because the one calculated and subsequently paid by the applicants was on the basis of section 69 of the Value Added Tax Act.

In a nutshell, accepting the position adopted by the applicants would yield higher figures for the value added tax (VAT) payable.

The applicants took a contrary view and argued;

(i) Firstly, that there is no need to resort to the deeming provision of any legislation when in fact the issue in question is adequately provided for elsewhere in that Act.

This is because, so the argument goes, it should only be resorted to in instances of omission on the part of a party with the duty to comply with a statutory obligation.

(ii) Secondly, they contended that section 69 of the Value Added Tax Act only serves to remove as a potential defence in situations such as the present when ZIMRA demands from it the value added tax (VAT) component of any price where same is not expressly stated therein.

However, according to them, it offers no sanctuary to a consumer when the registered operator now seeks to recover from him (i.e. consumer) that which they paid pursuant to ZIMRA's decision.

In my view, the position adopted by the applicants cannot be sustained.

Firstly section 9(2) and section 9(5) of the Value Added Tax Act, which they relied on, have already been found to be of no application to the current dispute.

Secondly, the plain and literal meaning of the section suggests that it is irrelevant whether or not the registered operator has in fact charged the tax in question; where the price does not reflect the tax component thereof it is presumed that the tax is incorporated in that price.

In other words, the phrase “whether or not the registered operator has included tax in such price” operates a twin blow to the registered operator: it serves to estop him from denying that the price in reality did not include tax in a bid to avoid accounting for the tax to the Commissioner. At the same time, it precludes him from purporting to claim from the consumer the tax that he may or may not have collected from the consumer.

The question of who bears the obligation under the Value Added Tax Act to pay the tax (who is obviously the consumer), which the applicants expended so much effort on, is hardly the issue.

To contend that section 69 of the Value Added Tax Act should be construed so as to permit the registered operator to pursue the consumer for the recovery of the tax they paid to the Zimbabwe Revenue Authority (ZIMRA) would, in my view, run contrary to the clear intention of the legislature.

The legislature must obviously have been alive to the fact, that, in most day to day supply of goods and services, the customer disappears without trace soon after the transaction.

How then would the registered operator be able to recoup the tax that he claims he did not in fact charge and collect?

Even if the customer could be traced, there would be an unnecessary proliferation of disputes between him and the registered operator as to whether the price included value added tax (VAT) or not.

It would create unnecessary uncertainty and confusion in the market place where the consumer will never know whether or not the price charged includes value added tax (VAT) and where he always runs the risk of being informed ex post facto that the price he paid actually did not include tax.

If the applicants are permitted to recover the tax in question from the farmers then the deeming provision will be rendered nugatory. It would mean the price cannot then be deemed to include tax - it is as simple as that.

Further, related to the above, the deeming provision cannot be interpreted to mean two different things to two different people.

The interpretation that the applicants want to foist on section 69 of the Value Added Tax Act will result in a mathematical or accounting incongruence and an absurdity in logic.

The Zimbabwe Revenue Authority (ZIMRA), in its papers, vividly illustrate the mathematical inconsistency that will arise when they juxtapose the outcomes of the two contrasting positions using the hypothetical figure of $1,000 as proceeds for the sale of sugar thus:

(a) Where section 69 of the Value Added Tax Act is invoked

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30

(b) Where the applicants recover the section 69 ($30) VAT from the farmers

Proceeds from sale of sugar = $1,000
Price for milling services at 23% of the proceeds = ($1,000 x 23%) = $230
VAT due after deeming that that price includes VAT = ($230 x 15/115) = $30
VAT due after the applicants recover the $30 VAT from the farmers = 15% ($230-30+30) = $34.50

What the applicants are moving the court to accept will also yield a further absurd result in the following context:

Where, from the standpoint of the first respondent, the Zimbabwe Revenue Authority (ZIMRA), vis a vis the applicants, value added tax (VAT) is deemed to be included in the price; yet, from the standpoint of the applicants vis-a-vis the farmer, the price is deemed not to include the tax.

It could never have been the intention of the legislature to produce such an absurd or anomalous situation.

The net result of the interpretation should be uniform, consistent, and certain not only to the parties but also to other persons similarly situated.

Section 69 of the Value Added Tax Act effectively places the registered operator on guard on the consequences of his failure to specifically include in his price the value added tax (VAT) component thereof.

Viewed differently, it is the responsibility of the registered operator to ensure that value added tax (VAT) matters are addressed in his dealings with the consumer. It is not a responsibility that the registered operator jointly shares with the consumer because the duty to account to the Commissioner ultimately rests with him (i.e. Registered Operator).

There can never be a conflation of the roles, duties, and responsibilities among the various parties: the burden to pay the tax lies with the consumer (the farmer), the duty to charge, collect, and remit the tax lies with the registered operator (the applicants).

In the context of this case, whether occasioned by inadvertence, oversight, or a mis-interpretation of the nature of the contract, the consequences of the failure to specifically include the value added tax (VAT) are that VAT is deemed included in the milling price.

During the proceedings, resort was made by the applicants to section 72(1) of the Value Added Tax Act which provides as follows:

“72 Contract price or consideration may be varied according to rate of value-added tax

(1) Whenever the value added tax is imposed or increased in respect of any supply of goods or services in relation to which any agreement was entered into by the acceptance of an offer made before the tax was imposed or increased, as the case may be, the registered operator may, unless agreed to the contrary in any agreement in writing and notwithstanding anything to the contrary contained in any law, recover from the recipient, as an addition to the amounts payable by the recipient to the registered operator, a sum equal to any amount payable by the registered operator by way of the said tax or increase, as the case may be, and any amount so recoverable by the registered operator shall, whether it is recovered or not, be accounted for by the registered operator under this Act as part of the consideration in respect of the said supply.”

In my view, this provision is meant to address the adjustments that may have to be made in contractual situations wherein, at the time the offer was made, there was no value added tax (VAT) imposable on that contract or it stood at a certain level; however, by the time the acceptance is made, that type of contract, by operation of the law, now attracts VAT or had been increased.

The imposition of or the increase in the value added tax (VAT) was not in the contemplation of the parties thereby necessitating an adjustment in the price.

This provision is clearly not applicable to the current dispute.

There was no imposition of a “new” tax which hitherto did not exist, nor was there an increase of the value added tax (VAT) chargeable and payable.

The parties merely failed to take into account a tax which was already in existence.

PRESENT AND FUTURE SUPPLIES OF CANE

Therefore, against the backdrop of a finding that the parties (whether through inadvertence, oversight, or mis-apprehension) failed to address value added tax (VAT) matters in their contracts, one cannot legitimately vouch for the perpetuation of the status quo.

It behoves the parties to re-negotiate or clarify the terms of their contract to plug that lacuna.

It suffices to state, that, failure to do so may very well result in section 69 of the Value Added Tax Act being continuously invoked.

I did not get the impression from the concession made on behalf of the second (Zimbabwe Sugar Cane Development Association), eighth (Chipiwa Mpapa Mill Group) and tenth (Farai Dumo Augustine Musikavanhu) respondents that they are necessarily agreeable to the charging of value added tax (VAT) by the applicants over and above the 23 percent milling charge.

What I gathered was a concession merely that the applicants can charge, levy, and collect value added tax (VAT) from the farmers in compliance with the requirements of the Value Added Tax Act....,.

1....,.

2. The application for a declaratur, as sought in paragraph 2(b) of the draft order, as it relates to past supplies of sugar cane, be and is hereby dismissed.

3. In respect of present and future supplies of sugar cane, it is hereby ordered that the applicants and the 2nd-11th respondents are at liberty to re-negotiate and/or clarify the terms of their contracts to specifically incorporate value added tax (VAT) issues and proceed on that basis.

SC98-21 : M COMPANY (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: HLATSHWAYO JA, GUVAVA JA and GOWORA JA

This is an appeal against the whole judgment of the Fiscal Appeal Court handed down on 1 November 2016 under judgment number HH661-16 of case number FA08/14, in terms of which the court handed down judgment in favour of the respondent.The appellant seeks relief in the following terms:“WHEREFORE Appellant prays ...

This is an appeal against the whole judgment of the Fiscal Appeal Court handed down on 1 November 2016 under judgment number HH661-16 of case number FA08/14, in terms of which the court handed down judgment in favour of the respondent.

The appellant seeks relief in the following terms:

“WHEREFORE Appellant prays that the appeal be allowed with costs and that the order of the court a quo be set aside and substituted with the following:

The appeal be and is hereby allowed as prayed.”

The material facts of this matter are as follows:

The appellant is a locally registered company that operates as an exporter and seller of processed tobacco from Zimbabwe. On 1 April 2004 and 1 April 2011, respectively, the appellant entered into two successive "Sales and Marketing Commission Agreements" with two foreign companies domiciled in Bermuda and Switzerland respectively. The appellant was identified in both documents as the "Principal" whilst the foreign companies were specifically termed "agents" in the sale of the appellant's export tobacco to foreign markets.

The initial sales commission agreed upon by the appellant and the agents was 8.5 per cent of the aggregate net export sales and Foreign Currency Account (FCA) Zimbabwe sales value of each export. The sales commission was subsequently reduced to 7.5 per cent in compliance with the Zimbabwe Exchange Control Regulations.

In 2007, the respondent undertook an audit of the affairs of the appellant. It was subsequently determined, that, the commission paid in respect of the Sales and Marketing Commission Agreements for the year 2005 qualified as fees for services of a technical and administrative nature, performed by an overseas agent, on behalf of the appellant.

In light thereof, the respondent determined, that, the appellant was liable for withholding non-resident tax as provided for in the Seventeenth Schedule of the Income Tax Act [Chapter 23:06] (the Act).

On 5 April 2007, the respondent issued an assessment of withholding tax to the appellant, which assessment the appellant objected to.

On 10 August 2007, the respondent disallowed the objections lodged by the appellant leading to an appeal being filed on 24 August 2007. The appeal subsequently lapsed, having been filed outside of the prescribed time limits, and the appellant continued to remit non-resident tax fees to the respondent.

On 24 October 2013, the appellant indicated to the respondent that it would cease any further remittals of non-resident tax fees pending a resolution of its 2007 appeal.

The parties conducted a meeting on 5 December 2013, in terms of which the respondent produced a schedule of payable withholding tax fees from the period of January 2009 to October 2013. In terms of the schedule, the principle amount of the non-resident's withholding tax fees that was due was US$4,252,647=57. An equivalent amount was imposed as a penalty and a further US$795,988=62 was imposed as interest. The penalty fee was later reduced, leaving the appellant with a revised total liability of US$5,974,959=97.

The appellant objected to the revised schedule of non-resident's withholding tax by means of an objection letter dated 16 December 2013. The appellant disputed liability on the basis that commissions constituted fees as contemplated in section 30 as read with the Seventeenth Schedule of the Income Tax Act.

Eventually, the appellant undertook to pay the outstanding principal amount by way of four separate instalments spanning between 13 December 2013 and 20 January 2014.

As a result of the undertaking, the respondent elected to further waive the reduced penalty and interest through an e-mail sent on 19 December 2013.

The appellant, however, managed to settle the entire principal amount by 20 December 2013.

On 13 December, a meeting was held between the appellant's tax advisors and the respondent. It appeared, that, in the course of the meeting, the parties agreed that the objections noted by the appellant had been improperly made.

In any event, however, the appellant proceeded to file its Notice of Appeal in the court a quo on 25 March 2014 and served the respondent with the same on the following day. The appeal was premised on the failure of the respondent to make a response to the appellant's objection letter within the prescribed three month time frame.

At the hearing, the respondent raised a preliminary objection to the appeal on the basis, that, it did not issue any written decision of the Commissioner to the appellant on 5 December 2013 or any other date. Consequently, the objection of 10 December 2013, and subsequent notice of appeal issued on 25 March, was invalid and of no force or effect.

The appellant contended, inter alia, that the appeal was validated in terms of paragraph (y) of the Eleventh Schedule of the Income Tax Act which prescribes the decisions of the Commissioner that may be subjected to objection and appeal.

It was established as common cause, that, the appellant abandoned its 2007 appeal with the effect that the appellant accepted liability for the non-resident tax on fees which it had failed to withhold and remit to the respondent.

Moreover, both parties accepted that the subsequent commissions paid by the appellant, during the period prior to August 2007, constituted fees for services of a technical, administrative, managerial, or consultative nature.

Having established the fact, it was determined, that, the appellant was not precluded from objecting, as it did, to the respondent's assessment of liability for its failure to remit non-residents tax fees for the period January 2009 to October 2013.

In view thereof, the court a quo determined that the appeal was properly before it.

On the merits, it was determined, that, it was not a term of agreement between the appellant and the foreign agents that they would deduct commission before remitting the balance to the appellant's FCA.

However, it was evident that the agents invoiced customers, collected payments, and retained their commissions before remittance of the balance to the appellant.

It was the position of the court that the agents main function was to establish and maintain foreign market customer relations and to facilitate the sale of export tobacco on behalf of the appellant.

The appellant argued, that, the commissions were not fees as defined in the Seventeenth Schedule of the Income Tax Act, and, as a result, it had no obligation to withhold non-residents tax.

Additionally, the appellant contended, that, the commissions were deducted by the agents from its gross foreign currency account value incurred outside of Zimbabwe, therefore, it could not withhold any non-residents tax nor could it be obliged to remit the said tax to the respondent.

Conversely, the respondent adopted the position, that, the commissions were fees as defined in the Seventeenth Schedule of the Income Tax Act as read with section 30 of the Income Tax Act. Resultantly, the respondent contended that the appellant was liable, being the principal, to withhold and remit non-residents tax fees to it.

On the question of whether or not the commissions constituted fees, as contemplated in the Seventeenth Schedule as read with section 30 of the Income Tax Act, the court a quo found in favour of the respondent.

It was determined that the agents provided services of a technical, managerial, administrative or consultative nature to the appellant in the sale of its export tobacco. The finding was made on a consideration of the specific functions of the agents in facilitating and concluding the sales and their relationship with the appellant thereon. It was determined that the true essence of a sale involved the technical, managerial, administrative, and consultative competencies of the agent.

In light thereof, the court adopted the view, that, there were hardly any activities undertaken by a taxpayer that could escape the wide ambit of definition of "fees" as provided for in the Seventeenth Schedule of the Income Tax Act.

Resultantly, it was determined that the commissions constituted fees as envisaged in section 30 as read with paragraph 1 of the Seventeenth Schedule of the Income Tax Act.

The court a quo proceeded to consider whether or not the appellant was liable for withholding and remittal of non-residents tax on fees arising from the deduction of commissions retained outside of Zimbabwe.

It was determined, that, the appellant was required, by the Exchange Control Authority, to pay the fees from its local foreign currency account having negotiated and executed the Sales and Marketing Commission Agreements in accordance with Zimbabwean law.

Moreover, the court a quo found, that, the appellant was considered as a "payer of fees" as contemplated in the Seventeenth Schedule of the Income Tax Act being the principal of the agents.

In light thereof, it was determined, that, the appellant was obligated, by law, to withhold non-residents tax on fees and pay any amount so withheld to the respondent.

In light of the findings a quo, the appeal was subsequently dismissed.

Aggrieved by the decision of the court a quo, the appellant has filed the present appeal. The grounds of appeal, as amended by consent, are as follows:

1. The court a quo erred in not applying the amendment to the Seventeenth Schedule introduced by the Finance Act (No.3), 11/2014 as "legislatively interpreting" the concept of "fees" as defined in the said Schedule.

2. The court a quo erred and misdirected itself at law in interpreting the commission paid by the appellant to its agents, respectively, as falling within the concept of "fees" as defined in the Seventeenth Schedule.

3. The court a quo erred and misdirected itself at law in declining to follow the precedent in Sunfresh Enterprises (Pvt) Ltd t/a Rulembi Safaris v Zimbabwe Revenue Authority 2004 (1) ZLR 506 (H) in regards to the source of the funds from where the commission was paid.

The initial matter that presents itself for determination in this Court is whether, in terms of section 30 of the Income Tax Act as read with the Seventeenth Schedule of the Income Tax Act; the appellant is liable to have withheld non-residents tax on commissions paid to certain foreign companies providing sales and marketing services to it for the sale of its export tobacco in overseas markets.

The argument of the appellant turns on the applicability of the amendment introduced to paragraph 1(1) of the Seventeenth Schedule of the Income Tax Act in terms of the Finance (No.3) Act, 2014 which came into effect on 1 January 2015.

It is accepted, as submitted by both parties, that there is a general presumption against retrospectivity of legislation. The principle is well articulated in the case of S v Mzanywa 2006 (1) ZLR 179 (H)..., wherein it states:

"It is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in terms of the Act or arises by necessary and distinct implication."

The appellant contends, however, that the amendment had retrospective effect to the extent that it referred to the legislative interpretation of the word "fees".

The amendment to paragraph 1(1) of the Seventeenth Schedule as introduced by the Finance (No.3) Act, 2014 reads as follows:

“'export services' means services rendered wholly or exclusively for the purpose of seeking and exploiting opportunities for the export of goods from Zimbabwe, sustaining or increasing the demand for such exports, and, without derogation from the generality of the foregoing, includes any of the following services -

(a) Research into, or the obtaining of information relating to markets outside Zimbabwe;

(b) Research into the packaging or presentation of goods for sale outside Zimbabwe;

(c) Advertising goods outside Zimbabwe or otherwise securing publicity outside of Zimbabwe for goods;

(d) Soliciting business outside Zimbabwe;

(e) Investigating or preparing information, designs, estimates, or other material for the purpose of submitting tenders for the sale or supply of goods outside Zimbabwe;

(f) Bringing prospective buyers to Zimbabwe from outside Zimbabwe;

(g) Providing samples of goods to persons outside Zimbabwe;

(b) In the definition of 'fees' by the insertion of the following paragraph after paragraph (g) -

'(h) Export market services rendered by an agent of a company that exports goods from Zimbabwe;'”

The wording of the Seventeenth Schedule of the Income Tax Act, prior to the aforementioned amendment, read as follows:

"(1) In this Schedule, subject to sub-paragraph (2) —

…,.

'fees' means any amount from a source within Zimbabwe payable in respect of any services of a technical, managerial, administrative, or consultative nature, but does not include any such amount payable in respect of —

…,."

The appellant seeks to persuade the Court that the definition of fees was not well defined in the Seventeenth Schedule of the Income Tax Act, prior to the enactment of the amendment.

As a result, the appellant contends, that, the subsequent amendment justifies a retrospective legislative interpretation of the term.

Whilst not binding upon this Court, the South African case of Clan Transport Co. (Pvt) Ltd & Ors v Road Services Board & Ors 1956 (4) SA 26 (SR)…, persuasively considers the principle of legislative interpretation is wherein it states:

"I find it difficult to appreciate the appropriateness of the invocation of the later Act of 1956 as a means of construing Act/1953. In the first place, if the wording of proviso (1) is clear and unambiguous in referring to all vehicles intended to be substituted, there is no justification for the invocation. Apart from this, and apart from the consideration that this legislative interpretation, if such it be, is contained in a statute not in operation at the time the Board was called upon to construe the earlier statute, this later statute is not either expressly or by implication interpreting the earlier statute or attempting to clarify it. It was, as its title says, an Act to amend Act 50/1953. It introduced a number of entirely new alterations to various sections, alterations to introduce new features of legislation."…,.

In the circumstances, the amending Act did not purport to interpret the earlier definition of fees as contained in the Seventeenth Schedule of the Income Tax Act - neither can any such inference be drawn.

The definition of "export market services" constitutes a distinctly new concept altogether.

The definition of fees, prior to the amendment, specifically relates to any amount incurred in respect of services of a "technical, managerial, administrative, or consultative nature."

The nature of the fees contemplated thereon are, in my view, clear and unambiguous. The amending Act cannot therefore be applied retrospectively on the basis of legislative interpretation.

The argument proffered by the appellant thereon is devoid of merit.

Additionally, the appellant has challenged the determination a quo that the commission it paid to its agents fell within the concept of "fees" as defined in the Seventeenth Schedule of the Income Tax Act as read with section 30 of the Income Tax Act.

Having established the applicable provision of the Seventeenth Schedule, the provisions of section 30 of the Income Tax Act must be stated; it provides as follows:

"30 Non-residents tax on fees

There shall be charged, levied, and collected throughout Zimbabwe for the benefit of the Consolidated Revenue Fund a non-residents tax on fees in accordance with the provisions of the Seventeenth Schedule at the rate of tax fixed from time to time in the charging Act."

The matter of Z Pvt) Ltd v Commissioner General, ZIMRA 2016 (1) ZLR 1 (FAC)..., considers the definition of fees in the following terms:

"In my view, the respondent was correct in its interpretation of the words 'any amount' to include commission. From the above definition, it is clear that the legislature intended 'fees' to cover any sum of money, by whatever name called, paid for services rendered of a technical, managerial, administrative or consultative nature save for those that are expressly excluded."

The term "amount" is defined in section 2 of the Income Tax Act as:

“'amount' for the purposes of the provisions of this Act relating to the determination of the gross income, income, or taxable income, as defined in subsection (1) of section eight, of a person, means —

(a) money; or

(b) Any other property, corporeal or incorporeal, having an ascertainable money value;"

Guided by the foregoing considerations, it is my view, that, there is no magic in the use of the word 'fees'. The term connotes any payment made for services of a specific nature.

Having stated thus, it becomes necessary to consider whether the fees incurred by the appellant, in favour of its agents, was for services of a technical, managerial, administrative, or a consultative nature.

The golden rule of interpretation has been well canvassed in the case of Endeavour Foundation and Anor v Commissioner of Taxes 1995 (1) ZLR 339 (S)..., in the following terms:

“The general principle of interpretation is that the ordinary, plain, literal meaning of the word or expression, that is as popularly understood, is to be adopted, unless that meaning is at variance with the intention of the Legislature as shown by the context or such other indicia as the court is justified in taking into account, or creates an anomaly or otherwise produces an irrational result.”

It is established that the findings of the court a quo, in relation to the nature of services extended to the appellant, employed the Oxford Advanced Learner's Dictionary and the Shorter Oxford English Dictionary, respectively, to construe the meaning of the terms 'technical' 'managerial' 'administrative' and 'consultative.'

In brief, the term 'technical' was defined as "connected with the skills needed for a particular job"; "an adjective relating to a particular subject, art or craft or its techniques" and "of a person; skilled in or practically conversant with some particular art or subject, belonging to or relating to an art or arts, appropriate or peculiar to or characteristic of a particular art, science, profession, or occupation; also pertaining to the mechanical arts and applied sciences generally."

In light of the above definition, the court a quo proceeded to determine, that, the function of the agents, in providing practical knowledge of the climatic and soil conditions, the style and smoking characteristics of the export leaf necessary for the determination of the appropriate blend required by the customers, constituted services of a technical nature.

The finding was further supported by documentary evidence provided in the form of a bill of lading, EUR 1 certificates, fumigation certificates, detailed weight lists, container packing lists, and invoices attended to by the agents on behalf of the appellant.

The court a quo went on to find, that, in any event, the appellant had failed to establish, on a balance of probabilities, that the agents did not require knowledge of the type of export blending leaf required in the manufacture of cigarettes in order to make a sale.

On the evidence of record, there is no patent misdirection discernible in the finding a quo that the agents had indeed provided services of a technical nature.

The term 'managerial' was further determined to be synonymous with the directing of activities whilst the term 'administrative' was held to mean "relating to the running of a business, organisation etc."

The two concepts were determined as being interlinked to the extent that they could be deemed as inseparable. It was found, that, the agents were responsible for "price negotiations and other marketing logistics" on behalf of the appellant and a range of other services for its activities abroad.

Due regard being had to the foregoing definitions, the finding that the practical activities of the agents fell within the ambit of "managerial and administrative services" is not outrageous or defiant of logic to the extent that it would warrant the interference of this Court.

Similarly, the applied definition of 'consultative' was "pertaining to consultation, deliberative, advisory, take counsel, deliberate, confer, to plan, advise, have recourse to professional advice."

The court a quo considered the nature of the agreement between the parties and considered that even the preamble of the agreements between them specifically stated that the agents were recruited for their ability to promote, supply, safeguard, and maintain personnel and materials required to make a sale.

In view of the adopted definition, there is no absurdity in the finding that the agents offered services of a consultative nature to the appellant.

In the absence of a patent misdirection on the part of the court a quo, I find that the second ground of appeal is without merit.

The final matter for consideration need not detain the court much longer.

The appellant contends that the court a quo ought to have been guided by the case of Sunfresh Enterprises (Pvt) Ltd t/a Rulembi Safaris v Zimbabwe Revenue Authority 2004 (1) ZLR 506 (H) in determining the proper interpretation of the term "fees" with particular regard to the amending Act of the Seventh Schedule of the Income Tax Act.

In light of the finding on the first ground of appeal, it stands to reason that the premise of the third ground of appeal falls away.

DISPOSITION

Giving due regard to the circumstances of the case, it is the position of the court, that, the determination a quo was properly arrived at to the extent that it does not warrant an interference by the court.

The appeal lacks merit and is accordingly dismissed, with costs following the cause.

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against ...

The answer sought in this appeal is whether, the appellant, a foreign registered company is liable to pay value added tax in Zimbabwe.

The appellant disputed liability for value added tax (VAT) arising from the purported importation of goods into and the carrying on of trade in Zimbabwe and appealed against a contrary determination of the respondent.

Introduction

The appellant is an International Business Company incorporated on 19 May 2005 in the British Virgin Islands in Guernsey in the Channel Islands but is not permitted to trade in that jurisdiction. The respondent is a body corporate responsible for the collection, amongst other imposts, of value added tax in Zimbabwe.

The Facts

The original intention of the appellant in Zimbabwe, prior to 1992, was to invest in property and participate in the construction of the Chitungwiza road…,.

Instead, the appellant became a supplier of basic commodities to local companies that included the WG (hereinafter referred to as the holding company).

It concluded an agency agreement with D & T, a subsidiary of the holding company, in 1992.

By 1999, it was supplying basic commodities under a US$10 million line of credit registered with the Reserve Bank of Zimbabwe to the holding company and other local customers…,.

On 1 October 2007, the Governor of the Reserve Bank of Zimbabwe unveiled the Basic Commodities Supply Side Intervention, BACOSSI, facility designed to end the chronic shortages of basic commodities in Zimbabwe…,.

The facility commenced in May 2008 and continued until the introduction of the multi-currency regime on 29 January 2009.

In May 2008, officials of the Reserve Bank of Zimbabwe (RBZ) amongst whom was the Governor and the Senior Division Chief Strategic Planning and Special Projects (SDC) visited the warehouse of D & T in Chitungwiza. The RBZ was referred to the appellant by D & T.

The appellant and the Reserve Bank of Zimbabwe (RBZ) commenced negotiations which culminated in the purchase of the non-Bacossi basic commodities that were in the D & T warehouse valued at US$7,987,207=54. The two parties also concluded an agreement in which the appellant supplied basic commodities to the RBZ, in Zimbabwe, the bacossi goods, valued at US$11,698,174 between July and September 2008.

The Baccossi Agreement was reduced to writing…, but was not signed by the parties apparently because the appellant was unhappy with the preamble to the agreement.

A verbal agreement, purportedly concluded between the Reserve Bank of Zimbabwe (RBZ), represented by the Governor, and the appellant, represented by a named Ukrainian lady, governed the supply relationship between them.

The respondent conducted a tax investigation of the purchases, in foreign currency, of the Reserve Bank of Zimbabwe from the appellant for the period between May 2006 and September 2008. The investigations revealed non-payment of value added tax (VAT) on the supplies made in that period…,.

They also revealed that D & T was paid commission, in terms of an agreement between them, on the invoiced supplies from 1 January 2006 to 31 January 2009.

On 9 February 2009…, the respondent made written demand on the Finance Director of the holding company, who was also the public officer of D & T, for the payment of value added tax (VAT) on the invoiced income paid to the appellant during that period.

On 13 February, a meeting was held at the Reserve Bank of Zimbabwe (RBZ) between the Senior Division Chief Strategic Planning and Special Projects, the investigators of the respondent, and the liaison officer of the appellant, who was also the Sales and Marketing Director of the holding company of D & T, the appellant's agent.

On 12 March, the respondent appointed the CEO of the holding company of D & T as the public officer for the appellant in terms of section 61 of the Taxes Act on the ground that his company was closely linked and connected to the appellant's local trading activities.

The CEO objected to the appointment on 17 and 20 March 2009 on the ground, that, he was not an agent, employee, director, or signatory to the bank account of the appellant; but, the respondent did not relent in its demand.

On 20 March 2009, at the respondent's offices, a meeting was held between three representatives of the respondent and two tax advisors from a local firm of accountants.

In reply to counsel for the respondent's oral submissions, counsel for the appellant disputed that the appellant was represented at the meeting and suggested that the tax accountants represented D & T.

The purpose of the meeting was to get the respondent's version on the value added tax (VAT) issues pertaining to both the appellant and D & T.

The VAT head from the tax advisors provided the respondent with two letters of his firm's mandate to represent the client.

It is inconceivable that he would not have received full instructions from his client, as he indicated, were that client D & T.

I am satisfied, from the heading of the minutes minuted by the tax advisors, that, they represented the appellant and not D & T.

In any event, the briefing given him by the respondent related to the alleged activities of the appellant, including the payment of 0.1% commission on the gross sales of the appellant in Zimbabwe to D & T.

On 30 March, the public officer of D & T disputed the legality of the appointment of his CEO as a public officer for the appellant. He, nonetheless, compiled and delivered the monthly breakdowns of the income received by D & T during the period from January 2006 to 31 January 2009 requested in the letter of 9 February.

On 25 March 2015…, the appellant wrote to the respondent objecting to the appointment of the public officer outside its registered place of business in Guernsey and to the tax liability claim.

The basis of the objection was that it did not maintain offices nor employ staff nor was it a value added tax (VAT) registered operator obligated to charge VAT on goods purchased from its foreign based operations and supplied to clients in Zimbabwe.

The relevant part of the letter reads:

“We object to your claim that we have a tax liability in Zimbabwe as we do not have a self-established presence in the country. Our involvement with Zimbabwe clients, and the West Group, is limited to the supply of our stock to agents who operate on a commission basis to store and handle our stock that we hold in Zimbabwe, for which we have always operated with Reserve Bank Approval.”

The objection by the appellant, of 25 March, and the further objection of its compulsorily appointed public officer, were dismissed by the respondent on 31 March 2009.

On 1 April, the respondent proceeded to appoint the holding company, and its subsidiaries, as an agent for the collection of value added tax (VAT) due from the appellant, purportedly in terms of section 48 of the Value Added Tax Act…,.

On 3 April 2009, the appellant, through its authorised signatories, wrote to the CEO of the holding company appointed as its public officer and copied the letter to the head of investigations of the respondent, and the Senior Division Chief Strategic Planning and Special Projects on the tax enquiry conducted by the respondent disputing tax liability on two grounds:

(i) The first was that it was not the importer; and

(ii) The second was that the sale to the importer, the Reserve Bank of Zimbabwe (RBZ), took place outside Zimbabwe.

I believe exhibit 2 may have been written by the compulsorily appointed public officer for the appellant between May 2009 and 17 June 2009, and not on 15 April 2008, as it is highly unlikely that the author possessed prescient powers to predict the events that were to take place between January and May 2009.

It was addressed to the prospective external legal practitioner of the Reserve Bank of Zimbabwe (RBZ).

The writer summarised the history of the relationship between the appellant and the holding company and one of its subsidiaries, D & T, before and during the bacossi period. He also dealt with the relationship between these parties and the Reserve Bank of Zimbabwe and exonerated the appellant from value added tax (VAT) liability.

In response, on 17 June 2009, the external legal practitioner of the Reserve Bank of Zimbabwe (RBZ) wrote a six page legal opinion to the Senior Division Chief on the US$4m tax dispute….,.

The legal practitioner in question had apparently held a meeting, on 21 April, with the Senior Division Chief of the central bank and two representatives of the holding company. He believed, that, his mandate to protect the interests of the Reserve Bank of Zimbabwe (RBZ) coincided with the interests of the appellant. He had engaged the lawyers of record of the appellant.

He identified the common problem to be the demand for value added tax (VAT) on the appellant in respect of the supply of Bacossi goods and its agent on commission received from the appellant.

Apparently, the appellant declined to supply him with information on its business profile, shareholders and directors, summary of significant business activities in the 12 months to the date of the letter and on the nature and extent of its business activities in Zimbabwe, its certificate of registration, any Board resolutions on Bacossi transactions, and its local call account.

In the absence of this information, he could not state, with certainty, that the appellant was not conducting local trading activities nor exclude it from value added tax (VAT) liability other than on the mere say so of its agent, D & T.

He advised that the Reserve Bank of Zimbabwe (RBZ) was liable for the payment of value added tax (VAT), in local currency, on the basis of the bills of entry that identified it as the importer.

He urged the Reserve Bank of Zimbabwe (RBZ), for strategic reasons that he set out in the opinion, to tender the duty in local currency hoping, that, if the respondent accepted the payment, the appellant would automatically be exempted from liability.

On 1 July 2009, the Senior Division Chief wrote to the appellant's legal practitioner of record. She confirmed the importation of Bacossi goods and the acceptance of liability for value added tax (VAT) by the Reserve Bank of Zimbabwe (RBZ)….,.

On 20 August 2009, three members of the respondent investigations team held a meeting with four RBZ employees at the RBZ amongst whom was the Senior Division Chief (SDC).

In that meeting, the Reserve Bank of Zimbabwe (RBZ) repudiated the concession made by the Senior Division Chief (SDC) and laid liability at the doorstep of the appellant.

However, in view of the national importance of the project and the profile of the major beneficiaries, the Reserve Bank of Zimbabwe (RBZ) resolved to seek exemption for payment of value added tax (VAT) on these goods from the Ministry of Finance by 25 August 2009.

A further meeting was held on 7 October 2009, in the Governor's boardroom at the Central Bank, between the Reserve Bank and the holding company, to discuss the appellant/RBZ value added tax (VAT) liability of US$3.2m….,.

In attendance were the Governor, his advisor, bank secretary, and a strategic planning executive for the Reserve Bank of Zimbabwe (RBZ) and the Sales and Marketing Director, indicated in exhibit 2 as the liaison officer of the appellant, and another officer of the holding company.

Notwithstanding that the respondent was not claiming value added tax (VAT) from the central bank, the Governor prevaricated on whether the Reserve Bank of Zimbabwe (RBZ) accepted liability or not. In one vein he accused the Senior Division Chief (SDC) of erroneously accepting liability for the central bank without his express authority, and, in the other, he was prepared to pay the VAT as long as it was charged in Zimbabwe dollars.

The Sales and Marketing Director for the holding company declined to answer for the appellant insisting that D & T acted as liaison for the appellant as the foreign supplier and local buyers.

The underlying suggestion from her contribution was that the appellant was not liable for value added tax (VAT).

In addition, the concluding remarks of the meeting suggested the existence of minutes of meetings between the Reserve Bank of Zimbabwe (RBZ) and the appellant.

The investigation prompted the respondent to raise against the appellant schedules for outstanding value added tax (VAT) on both the non-Bacossi and Bacossi transactions, initially on 17 March and later on 15 July 2009, in the sum of US$6,302,712=13 inclusive of interest and penalties, which it corrected by the exclusion of zero rated products on 13 October 2009 by reducing the amount to the sum of US$6,249,496=70.

The computations of the principal value added tax (VAT) due in each month for the non Bacossi commodities were in the sum of US$1,198,081=13. The respondent added an equal amount in penalties and a further amount of US$206,799=52 in interest and requested payment of US$2,602,961=79 for the non-Bacossi commodities.

In regards to the Bacossi commodities, it claimed a principal sum of US$1,754,726=10 and a penalty in an equal amount and interest from 21 July 2008 to 23 October 2009 in the sum of US$137,082=72 totalling US$3,646,534=92….,.

The appellant lodged an objection to the assessment in terms of section 32 of the Value Added Tax Act [Chapter 23:12] through its legal practitioners of record on 25 September 2009.

It also applied for condonation from the Commissioner for filing the objection outside the normal time limits. It set out four grounds for condonation and eight grounds of objection.

The respondent dismissed the condonation and disallowed the objection.

The appellant appealed both decisions to this Court on 12 October 2009. The respondent filed its reply on 12 November 2009.

In the objection, the appellant denied ever doing business in Zimbabwe and indicated, that, the local transactions were imports carried out by the holding company, the Reserve Bank of Zimbabwe (RBZ), and other local companies.

It averred, that, the appellant was authorised by the Reserve Bank of Zimbabwe (RBZ) to sell the goods in foreign currency using free funds from non-resident entities.

It supplied goods in bond to its local agent, D & T, for commission.

The local buyer took delivery of the goods after paying the appellant from free funds.

On receipt of payment, the appellant instructed D & T to pay duty and value added tax (VAT) before releasing the goods.

The appellant averred, that, the value added tax (VAT) claim on non-Bacossi goods constituted a double claim for VAT already paid by D & T.

The appellant called the evidence of the founder and chairman of the holding company and director of D & T.

He confirmed the foreign status of the appellant and its relationship with D & T before the Reserve Bank of Zimbabwe came onto the scene.

The holding company, D &T, and the appellant, were not related companies.

The contact between the appellant and D & T was facilitated by his Russian partners in 1992.

The relationship between the appellant and D & T was one of principal and agent.

The Central Bank appeared on the scene in May 2008. At that time, the agent, D & T, imported the goods into Zimbabwe that were supplied by its principal, the appellant.

The Central Bank concluded two agreements with the appellant:

(a) The first related to the purchase of the goods stored in the warehouse that had been imported by D & T, referred to in the appeal as the non Bacossi goods.

(b) The second agreement concerned the Bacossi goods under which the Central Bank directly imported in excess of 400 truckloads of goods from South Africa between July and September 2008.

At Beitbridge, the goods were checked against the bill of entry before they were taken to the bonded warehouse, and, unlike direct home consumption imports, the bill of entry was not surrendered at that stage.

D &T stored the Bacossi goods for the Reserve Bank for a fee.

The relationship between the appellant and D & T was suspended during the duration of the Bacossi imports.

The goods were received and secured by the Reserve Bank of Zimbabwe (RBZ).

The Reserve Bank of Zimbabwe (RBZ) would take the goods from the warehouse once D & T received a release order from the appellant confirming receipt of the purchase price, and, after D & T had paid duty and value added tax (VAT) for the goods.

The clearing agent invoiced D & T for clearance fees; D & T, in turn, added these to the storage fees for the account of the Reserve Bank of Zimbabwe.

He identified the South African export documents and the Zimbabwean import documents encompassing pp33-90 of exhibit 1. Amongst these documents were local bills of entry that identified the importer as the Reserve Bank of Zimbabwe.

The witness confirmed his managing director's assertion, in the letter of 30 March to the respondent, that, D & T was not paid commission by the appellant during the subsistence of the Bacossi imports.

It was on the basis of this evidence, that, counsel for the appellant submitted, that, the sole witness was credible and reliable in all material respects.

I do not agree with the contention by counsel for the appellant, that, the witness was a credible and reliable witness who gave his evidence well.

Under cross examination, he contradicted material parts of his evidence-in-chief.

He abandoned his earlier version that the relationship of principal and agent between the appellant and D & T was suspended during the Bacossi imports. He categorically stated, in cross-examination, that, the relationship did not change for both the Bacossi and non Bacossi imports as the appellant continued to pay D & T, in foreign currency, commission at the rate of 1% of the value of each transaction.

The appellant maintained its grip on the goods in the warehouse and directed its agent to pay duty and value added tax (VAT), and, thereafter, release the goods after confirming receipt of the transaction value of each consignment from the Reserve Bank of Zimbabwe.

He incorrectly stated that value added tax (VAT) was paid for the non-Bacossi goods.

That VAT was never paid was demonstrated by the abandonment of the double claim ground at the hearing of this appeal.

He did not participate in the discussions that culminated in the agreement between the appellant and the Central Bank. He was not privy to the terms and conditions of the agreement. He did not interact with any of the directors and authorised signatories of the appellant.

He had met an officer of the appellant whose name appears in the last paragraph on p112 of exhibit 1 once in Harare.

He was not a director, employee, or official of the appellant or the clearing agent.

His version on the motivation of the clearing agent to invoice D & T rather than the Reserve Bank of Zimbabwe (RBZ) was not confirmed by evidence from the clearing agent or the Central Bank.

He did not produce any evidence to show that D & T included the charges of the clearing agent in the storage fees levied on the Central Bank.

The evidence of the sole witness left gaps that could only be filled by the directors, employees, officials, or agents of the appellant.

His averments preceding the incorporation of the appellant, on 19 May 2005, underscored his unreliability and the need for the testimony of the active officers or agents of the appellant.

It is simply incomprehensible how he could have dealt with the appellant before it was incorporated.

The respondent's investigation established that the Reserve Bank of Zimbabwe (RBZ) purchased non Bacossi goods between May 2006 and June 2008 contrary to his testimony that the purchase started in May 2008.

I am satisfied that he was not a credible and reliable witness.

Rule 5(c) Documents

The respondent did not file Rule 5(c) documents within 14 days of entering his reply as required by Rule 5.

The material correspondence contemplated by Rule 5(c) would consist of the notice claiming the outstanding value added tax (VAT), the letter of objection, and the Commissioner's response to the objection.

Rather, at the hearing, and soon after the appellant had closed its case, counsel for the respondent produced the purported documents from the bar.

The documents consisted of a letter of objection dated 21 October 2014, a set of original value added tax (VAT) assessments issued by the respondent against the appellant on that date for the period May 2006 to August 2008, the letter of objection of 25 September 2009, and the unsigned agreement on the supply of basic commodities between the appellant and the Reserve Bank of Zimbabwe.

It did not file the ruling dismissing the condonation sought and disallowing the objection.

In the letter of objection, the appellant refers to “assessments, the last of which are dated 15 July 2009.”

The earlier assessments of 17 March and 22 May and the letters of 24 June and 10 September 2009, referred to in the notice of appeal, were not produced in evidence nor did they form part of the Rule 5(c) documents or the pleadings.

The respondent must simply comply with the law to obviate unnecessary delays associated with his failure to abide by the law in this regard.

The documents constitute a type of record of proceedings, which helps this Court understand the real dispute between the parties and the basis on which the determination appealed against was made.

That the objection was dismissed on the ground that it was filed out of time was only disclosed in the respondent's reply to the notice and grounds of appeal.

Rule 5(c) documents are simple documents that the respondent always has in its possession - even before filing his reply. This kind of dilatoriness on its part is totally inexcusable.

The respondent is directed to comply with Rule 5(c) in all future cases.

Condonation

At the pre-trial hearing of 17 September 2014, by consent of the parties, the delay in the filing of the notice of objection by the appellant and the failure to file Rule 5(c) documents timeously by the respondent were condoned.

The Issues

The four issues referred for appeal were:

(a) Was the appellant the importer of the goods in question into Zimbabwe?

(b) Does the appellant operate a business in Zimbabwe?

(c) In terms of section 6 of the Value Added Tax Act [Chapter 23:12] who was responsible for the payment of value added tax (VAT) on the imported BACOSSI goods, and, separately, on the imported non-BACOSSI goods?

(d) Was the appellant liable to pay any outstanding value added tax (VAT) in foreign currency?

I proceed to resolve each issue in turn.

Was the appellant the importer of the goods in question into Zimbabwe?

It was common cause, that, the onus was on the appellant to establish the identity of the importer of the basic commodities in question.

Counsel for the appellant submitted, that, the evidence of the sole witness called by the appellant, and the documentation produced, established, on a balance of probabilities, that, the Reserve Bank of Zimbabwe, rather than the appellant, was the importer.

Counsel for the respondent submitted, that, the evidence and documentation showed the appellant as the importer.

The Import Documentation in Exhibit 1

The exportation of goods from South Africa is facilitated by the production of the Republic of South Africa Exchange Control Declaration F178…, also known as the foreign currency payment declaration and the South African bill of entry.

The F178 foreign currency payment declarations in exhibit 1 were marked SL15 to SL20 for ease of reference….,.

These were issued to the appellant for the basic commodities destined for Zimbabwe.

Attached to the foreign currency declarations are commercial invoices of the South African vendor, indicating both the purchaser and vendor and the purchase price….,.

The South African vendor is indicated as the exporter/consignor. The appellant is shown as the consignee.

Attached to some of the foreign currency declaration forms are customs road consignment notes/delivery notes CIF Harare and export clearing and forwarding instructions raised by the transporter.

The vendor is described as the shipper while the appellant is described as the consignee….,.

The customs road manifest placed the responsibility for customs clearance and delivery of the goods under official supervision at the destination on the appellant as consignee.

The appellant paid the South African clearing agent….,.

The customs road freight manifest…, identified the two different clearing agents in South Africa and Zimbabwe. The consignee in Zimbabwe, on one of the road manifests, was D & T.

The Zimbabwe Customs and Excise require the South African exchange control declaration and the commercial invoice of the South African vendor and their attachments for the goods to enter Zimbabwe.

Zimbabwe Revenue Authority Bills of Entry, Form 21, together with commercial invoices issued in the name of the appellant, were presented, accepted, and processed by Zimbabwe Customs at Beitbridge.

The commercial invoices, from the appellant, were generated by the appellant under its letter head….,.

The importer is shown as the Reserve Bank of Zimbabwe (RBZ), delivery CIF Harare to the agent of the appellant on condition the goods are not released unless pre-paid to the offshore account in the appellant's name with the Royal Bank of Scotland.

The local bills of entry, Form 21, are marked SL and WP in exhibit 1….,.

All the SL bills of entry were generated by the clearing agent MCFZ between 25 July and 8 August 2008 while all the WP bills of entry were generated by a different clearing agent, BCS, between 20 and 28 June 2008.

These bills identify the appellant as the exporter/consignor and the Reserve Bank of Zimbabwe as the importer/consignee.

No duty was charged for all the SL consignments while duty was demanded from the declarant/clearing agent for two (2) of the WP consignments.

The ones for which no duty was levied were released on the strength of the customs release orders attached to each bill of entry. There are invoices issued by MCFZ to D & T account Reserve Bank of Zimbabwe (RBZ) for import handling fees….,.

The invoices of 31 July and 26 August 2008 show that the clearing fees submitted to D & T were inclusive of value added tax (VAT).

It was on the basis of the bills of entry that counsel for the appellant submitted that the appellant was not liable for value added tax (VAT) as it was not the importer.

In his supplementary written heads of argument, filed with the leave of the Court on 27 January 2015, he relied on section 12 of the Civil and Evidence Act and R v Karge & Anor 1971 (3) SA 470 (T)…,.

Section 12 of the Civil Evidence Act reads:

“12 Public and Official Documents

In this section —

'public document' means a document —

(a) Which was made by a public officer pursuant to duty to ascertain the truth of the matters stated in the document and to make an accurate record thereof for public use; and

(b) To which the public have a right of access;

'public officer' means a person holding or acting in a paid office in the service of the State or a local authority.

(2) A copy of or extract from a public document which is proved to be a true copy or extract or which purports to be signed and certified as a true copy or extract by the official who has custody of the original, shall be admissible in evidence on its production by any person and shall be prima facie proof of the facts stated therein.”

In R v Karge & Anor 1971 (3) SA 470 (T)…, HIEMSTRA J stated that:

“A public document is one made by a public officer in the execution of a public duty; it must be intended for public use and the public must have a right of access to it (Northern Mounted Rifles v O'Callaghan 1909 TS 174 at pp176-177). The mere production will furnish prima facie proof of the contents, provided that it is the public duty of the person who keeps the register or the records to make entries satisfying himself of the correctness thereof.”

Counsel for the appellant submitted, that, these bills of entry were public documents that were proffered and accepted, in terms of the Customs and Excise Act, established that the Reserve Bank of Zimbabwe (RBZ), and not the appellant, was the importer.

In his response of 4 February 20105, counsel for the respondent conceded, that, the bills of entry were public documents provided by the respondent for the entry of goods into Zimbabwe.

He, however, forcefully argued, that, the other evidence led by the appellant, together with the unsigned agreement of the supply of basic commodities between the appellant and the Reserve Bank of Zimbabwe (RBZ) eclipsed all reference in the bills of entry of the RBZ as the importer.

It is indisputable that Customs officials employed by the respondent are public officers who hold paid office in the service of the State. The bills of entry are public documents whose contents are prima facie correct.

I accept, that, the evidentiary onus to disprove the correctness of the contents of the bills of entry shifted to the respondent.

The respondent used the unsigned agreement as an antidote for the bills of entry.

The preamble indicates, that, the appellant was represented by the liaison officer, who it will be recalled was also the Sales and Marketing Director of the holding company, while the Reserve Bank of Zimbabwe (RBZ) was represented by its Senior Division Chief, Strategic Planning and Special Projects.

The preamble further suggested local incorporation and a local business address for the appellant.

The main body of the agreement identified the products, their quantities and transactional values.

The main features were that the appellant was responsible for delivering the goods CIF Harare or any other destination in Zimbabwe and was to be paid cash on delivery weekly for three (3) months. It was also responsible for weighing, inspection, and packaging at loading sites outside Zimbabwe where the Reserve Bank of Zimbabwe (RBZ) could conduct random inspections at the appellant's expense. The RBZ undertook to facilitate expeditious clearance of the goods at the Zimbabwe ports of entry.

While the respondent had the duty to disprove that the importer was the Reserve Bank of Zimbabwe (RBZ), the true, overall, and unchanging onus to prove the correct terms and conditions in the agreement reached between the appellant and the RBZ lay on the appellant.

In other words, the onus to establish that the terms and conditions in their agreement were different from those captured in the unsigned agreement was on the appellant.

The appellant did not lead any evidence on this aspect.

The evidence placed before the court, by the appellant, was that the agreement was not signed because of what counsel termed “erroneous information in the preamble.”

The erroneous information related to its place of incorporation and business address.

I agree with counsel for the respondent, that, the unsigned agreement placed the duty to import the goods into Zimbabwe on the appellant.

Again, the delivery of the goods, cost insurance and freight Harare, strongly suggests that the appellant imported the goods into Zimbabwe.

It would not make sense for the Reserve Bank of Zimbabwe (RBZ) to undertake to expeditiously facilitate the quick clearance of its imports.

The obligatory cost, insurance and freight Chitungwiza bonded warehouse delivery clause and the expeditious clearance clause suggests that the appellant was the importer.

The strategic planner for the Reserve Bank of Zimbabwe (RBZ) stated, in the minutes of 13 February 2009, that, the appellant was responsible for the importation of basic commodities under the bacossi project and that the goods in the Chitungwiza bonded warehouse belonged to the appellant from where they were received, secured, and dispatched by the RBZ.

She also stated that D & T was a representative of the appellant that looked after all the interests of the appellant in Zimbabwe.

She was supported by other officials of the Reserve Bank of Zimbabwe (RBZ) such as the Special Advisor to the Governor, in the minutes of 20 August 2009, and the Governor on 20 October 2009.

She even intimated the existence of cross-shareholding between the appellant and D & T preceding the bacossi project.

She, however, subsequently confirmed, that, the Reserve Bank of Zimbabwe (RBZ) imported the Bacossi goods from the appellant and accepted liability for value added tax (VAT) in her letter of 1 July 2009.

The concession reinforced the assertions of the public officer for D & T in his letter to the respondent of 30 March 2009, the testimony of the sole witness, the letter of the appellant of 3 April 2009 to the purported public officer and copied to both the Reserve Bank of Zimbabwe (RBZ) and the respondent, the purported public officer's letter to the prospective external legal advisor of the RBZ, erroneously dated 15 April 2008, and that legal advisor's letter to the RBZ of 17 June 2009.

The onus to call evidence to establish what the correct factual position of the Reserve Bank of Zimbabwe (RBZ) was lay on the appellant.

This much was admitted by counsel for the appellant, in his heads of argument, by reference to Commissioner of Taxes v 'A' Company 1979 (1) RLR 29 (A)…,; 1979 (2) SA 409 (RAD)…,; 41 SATC 59 (RAD)…,.

The appellant did not produce the bill of entry from South Africa which would have shown who the exporter of the goods from South Africa was.

The sole witness stated, that, the importer of the non-bacossi goods was D & T.

The definition of 'export' and 'exporter' in section 2 of the Customs and Excise Act [Chapter 23:02] and 'exported' and 'export country' in section 2 of the Value Added Tax Act denote the removal of goods from Zimbabwe.

Exporter is defined in the Customs and Excise Act as “any person in Zimbabwe who takes goods or causes goods to be taken out of Zimbabwe and includes any employee or agent of such person and the owner of such goods as are exported.”

On the other hand, to import is “to bring goods or cause goods to be brought into Zimbabwe” and an “importer in relation to goods includes any owner of or other person possessed of or beneficially interested in any goods at any time before entry of the same has been made and the requirements of this Act fulfilled.”

In my view, the business activities of the appellant fell outside the definition of “exporter” but squarely fit the definition of “importer.”

It was a misnomer to refer the appellant, in the bill of entry, as an exporter.

An importer is identified with ownership or possession of the goods or beneficial interest in the goods before entry and the fulfilment of the requirements of the Customs Act.

Entry is defined, in section 2 of the Customs Act “in relation to clearance of goods for importation, means the presentation in accordance with this Act of a correctly completed and signed declaration on a bill of entry in writing.”

The documents generated in South Africa show that the Reserve Bank of Zimbabwe (RBZ) was not the owner nor possessor nor beneficiary of the goods before the correctly filled and signed bills of entry were presented to customs officials of the respondent.

Rather, these South African derived documents show, beyond even a shadow of doubt, that, the goods were for the benefit of the appellant who owned and possessed them before any of the bills of entry were presented to customs officials.

Even though the sole witness stated that D & T was the importer of the non-bacossi goods, it was clear that it was operating as an appendage of the appellant.

There was preponderance of evidence establishing that D & T acted at all times as an agent importer on behalf of the appellant.

I am satisfied, that, notwithstanding the contents of the bills of entry and other documents complied by or at the instance of the appellant to the contrary, the appellant was the owner or possessor of the goods; who also had a beneficiary interest in them before they entered Zimbabwe; who brought them or caused them to be brought into Zimbabwe.

I hold, that, the appellant was the importer of both the non-Bacossi and the Bacossi goods....,.

In terms of section 6 of the Value Added Tax Act [Chapter 23:12] (VAT Act) who was responsible for the payment of VAT on the imported BACCOSSI goods and separately on the imported non-BACCOSSI goods?

Both counsel were agreed, that, the obligation to pay duty and value added tax (VAT) rested with the importer.

Counsel for the appellant contended, that, the Reserve Bank of Zimbabwe was the importer and submitted that it had the obligation to pay value added tax (VAT). Counsel for the respondent, on the other hand, identified the appellant as the importer who had the duty to pay VAT.

Section 6(1) and (2) of the Value Added Tax Act state:

“6 Value Added Tax

(1) Subject to this Act, there shall be charged, levied and collected, for the benefit of the Consolidated Revenue Fund a tax at such rate as may be fixed by the Charging Act on the value of —

(a) The supply by any registered operator of goods or services supplied by him on or after the 1st January 2004, in the course or furtherance of any trade carried on by him; and

(b) The importation of any goods into Zimbabwe by any person on or after the 1st January 2004; and

(c) The supply of any imported services by any person on or after the 1st January 2004; and

(d) Goods and services sold through an auctioneer (as defined in section 56(6)) by persons who are not registered operators.

(2) Except as otherwise provided in this Act, the tax payable in terms of -

(a) Paragraph (a) of subsection (1) shall be paid by the registered operator referred to in that paragraph; and

(b) Paragraph (b) of subsection (1) shall be paid by the person referred to in that paragraph; and

(c) Paragraph (c) of subsection (1) shall be paid by the recipient of the imported services; and…,.”

I have already found, that, the appellant was the importer.

It was liable for payment of value added tax (VAT) in the pre-Bacossi and during the Bacossi era.

Whether value added tax (VAT) was due on entry or on release of the goods from the bonded warehouse, for home consumption, does not exonerate the appellant from payment of VAT.

Again, on the basis of my findings in regards to registration, I am also satisfied, that, it was liable even under section 6(1)(a) of the Value Added Tax Act. It supplied goods after 1 January 2004 in the course or furtherance of its business activities.

I am satisfied, that, the appellant was liable to pay value added tax (VAT).

Was the appellant liable to pay any outstanding Value Added Tax (VAT) in foreign currency?

It was common cause, that, the appellant received payment for the goods that it supplied in foreign currency.

Counsel for the appellant contended, that, the provisions of section 38(4) of the Value Added Tax Act, promulgated by section 16 of the Finance Act 2006 (No.6 of 2006), rather than the present section 38(4) of the Value Added Tax Act, substituted by section 29 of the Finance Act (Act 3 of 2009), is applicable in determining the appropriate currency of payment for value added tax (VAT).

The 2006 section 38(4) of the Value Added Tax Act reads:

“(4) Notwithstanding section 41 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] and the Exchange Control Act [Chapter 22:05]; where a registered operator receives payment of any amount of tax in foreign currency in respect of the supply of goods or services, that operator shall pay that amount to the Commissioner in foreign currency.

In this subsection 'foreign currency' means United States dollars, Euros or any other currency denominated under the Exchange Control (General) Order, 1996, published in Statutory Instrument 110 of 1996, or any other enactment that may be substituted for the same.”

The 2009 amendment introduced a new paragraph (b) and extended the definition of foreign currency to include the British pound, South African rand, and Botswana pula.

Section 38(4) of the Value Added Tax Act presently reads:

“(4) Notwithstanding section 41 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] and the Exchange Control Act [Chapter 22:05]; where a registered operator —

(a) Receives payment of any amount of tax in foreign currency in respect of the supply of goods or services, that operator shall pay that amount to the Commissioner in foreign currency;

(b) Imports or is deemed, in terms of section 12(1), to have imported goods into Zimbabwe, that operator shall pay any tax thereon to the Commissioner in foreign currency.

In this subsection 'foreign currency' means the euro, British pound, United States dollar, South African Rand, Botswana Pula or any other currency denominated under the Exchange Control (General) Order 1996, published in Statutory Instrument 110 of 1996, or any other enactment that may be substituted for the same.”

Counsel for the appellant submitted, that, the appellant was not obliged to pay value added tax (VAT) in foreign currency as it was not a registered operator and did not receive payment of any tax.

I have already determined, that, the appellant was required to be registered under section 23(1) and (3) and (4)(b) as read with section 56(1) and (3) of the Value Added Tax Act and can be treated as would a registered operator.

In my view, in terms of section 69(1) of the Value Added Tax Act, the failure to charge or receive value added tax (VAT) does not exonerate the appellant from liability as VAT is deemed to be included in the purchase price.

Section 69(1) of the Value Added Tax Act reads:

“69 Prices deemed to include tax

(1) Any price charged by any registered operator in respect of any taxable supply of goods or services, shall, for the purposes of this Act, be deemed to include any tax payable in terms of paragraph (a) of subsection (1) of section six in respect of such supply, whether or not the registered operator has included tax in such price.”

I have already found that section 6(1)(a) of the Value Added Tax Act applies with equal force to the appellant.

Value added tax (VAT) is deemed to be included in the purchase price.

The appellant bears the obligation to remit value added tax (VAT), in foreign currency, to the respondent.

Thus, even if section 38(4)(b) of the Value Added Tax Act is held to have come into force on 30 January 2009, after the non-bacossi and bacossi importations, the appellant remained liable for payment of value added tax (VAT) in foreign currency under the 2006 amendment.

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Ruled By: MATHONSI J

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

SC98-21 : M COMPANY (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: HLATSHWAYO JA, GUVAVA JA and GOWORA JA

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J

Categories

Law Portal Zimbabwe

Approach re: Contract of Hire, Letting, Supply of Goods and Services, Service Agreements and Fiscal Considerations

HH88-09 : ALLIANCE FRANCAISE vs ADRIEN ORFORD and LESLEY ORFORD (T/A ALO ALO RESTAURANT) Ruled By: PATEL J

HB72-09 : RADAR INVESTMENTS (PVT) LTD t/a RADAR METAL INDUSTRIES vs K.A. AGENCIES AND DISTRIBUTORS (PVT) LTD Ruled By: NDOU J

HH43-13 : FORM SCAFF (PRIVATE) LIMITED vs CHARLES LINZI Ruled By: KUDYA J

HB158-13 : KERRIES ENGINEERING (PVT) LTD vs MAKOMO RESOURCES (PVT) LTD Ruled By: MAKONESE J

HHH224-15 : THE STATE vs HENRY GANDA Ruled By: MAFUSIRE J and MWAYERA J

Appealed SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

View Appeal HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA Ruled By: MUZOFA J

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN Ruled By: GOWORA J

SC13-21 : MOSES MAWIRE vs RIO ZIM LIMITED (PRIVATE) LIMITED Ruled By: GOWORA JA, PATEL JA and MAVANGIRA JA

Appealed SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES Ruled By: MATHONSI J

View Appeal HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS Ruled By: ZISENGWE J

SC98-21 : M COMPANY (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY Ruled By: HLATSHWAYO JA, GUVAVA JA and GOWORA JA

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY Ruled By: KUDYA J

Categories

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Law Portal
Zimbabwe

HH88-09 : ALLIANCE FRANCAISE vs ADRIEN ORFORD and LESLEY ORFORD (T/A ALO ALO RESTAURANT)
Ruled By: PATEL J

HB72-09 : RADAR INVESTMENTS (PVT) LTD t/a RADAR METAL INDUSTRIES vs K.A. AGENCIES AND DISTRIBUTORS (PVT) LTD
Ruled By: NDOU J

HH43-13 : FORM SCAFF (PRIVATE) LIMITED vs CHARLES LINZI
Ruled By: KUDYA J

HB158-13 : KERRIES ENGINEERING (PVT) LTD vs MAKOMO RESOURCES (PVT) LTD
Ruled By: MAKONESE J

HHH224-15 : THE STATE vs HENRY GANDA
Ruled By: MAFUSIRE J and MWAYERA J

Appealed
SC74-20 : SHAILLON CHISWA vs CAR RENTAL SERVICES PL t/a AVIS RENT A CAR and BERNARD CHISWA
Ruled By: GARWE JA, MAVANGIRA JA and MAKONI JA

View Appeal
HH563-18 : CAR RENTAL SERVICES (PVT) LTD T/A AVIS RENT A CAR vs BERNARD CHISWA and SHAILLON CHISWA
Ruled By: MUZOFA J

HH18-12 : PIONEER TRANSPORT (PVT) LTD vs DELTA CORPORATION LTD and DAVID LESLIE CRUTTEDEN
Ruled By: GOWORA J

SC13-21 : MOSES MAWIRE vs RIO ZIM LIMITED (PRIVATE) LIMITED
Ruled By: GOWORA JA, PATEL JA and MAVANGIRA JA

Appealed
SC82-21 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES LIMITED vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: GWAUNZA DCJ, MATHONSI JA and CHITAKUNYE AJA

HB95-16 : NATIONAL RAILWAYS OF ZIMBABWE CONTRIBUTORY PENSION FUND vs EKUTULENE INVESTMENTS t/a WALKERS PUB AND RESTAURANT and WAYNE ALLAN JONES
Ruled By: MATHONSI J

View Appeal
HMA28-20 : TRIANGLE LIMITED and HIPPO VALLEY ESTATES vs ZIMBABWE REVENUE AUTHORITY and OTHERS
Ruled By: ZISENGWE J

SC98-21 : M COMPANY (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY
Ruled By: HLATSHWAYO JA, GUVAVA JA and GOWORA JA

HH823-15 : AT INTERNATIONAL LTD vs ZIMBABWE REVENUE AUTHORITY
Ruled By: KUDYA J