This is an appeal against the whole judgement of the High Court (the court a quo) sitting at Harare, dated 11 January 2023, wherein it declared that the procurement contract entered into between the appellant and the respondent was valid and binding between them. The court a quo proceeded, consequently, ...
This is an appeal against the whole judgement of the High Court (the court a quo) sitting at Harare, dated 11 January 2023, wherein it declared that the procurement contract entered into between the appellant and the respondent was valid and binding between them. The court a quo proceeded, consequently, to grant an order of specific performance of the contract.
It also dismissed the appellant's counter claim and ordered that the appellant pays the respondent's costs in the claim in reconvention.
Aggrieved by the decision of the court a quo, the appellant has noted the present appeal.
THE FACTS
On 23 October 2015, the parties entered into a Public Procurement Engineering, Procurement and Construction Contract (the contract). In terms of that contract, the respondent was required to construct one solar Photovoltaic Power Station to the capacity of 100MV in Gwanda (the project).
A dispute arose during the implementation of the project.
The respondent issued summons in the court a quo seeking the following relief:
“1. An order declaring that the procurement contract for the Engineering, Procurement and Construction (EPC) of the 100 MV Gwanda Solar Project (ZPC 304/2015) between the parties, as amended, is valid and binding between the parties.
2. Consequent to the declaration of the validity of the EPC contract, an order for specific performance.
Alternatively:
Damages in the sum of US$25,000,000 (twenty five million United States dollars) for repudiatory breach of the EPC contract by the defendant.
3. Costs of suit at the attorney and client scale.”
In its declaration, the respondent amplified its claim as follows:
The agreed contract price for the project was US$172,848,597=60 exclusive of taxes. The respondent was to secure and facilitate the funding of the project as well as bear most of the risks associated with the construction of the plant up to the point of commissioning.
The contractual terms were derived from the FIDIC Silver Book (General Conditions of Contract for EPC/Turnkey Project) 1999, First Edition. The General Conditions were applicable to the extent that they were amended by the Particular Conditions of contract agreed to by the parties.
The appellant was to borrow the funds sourced by the respondent in its name, superintend over both the construction works, and facilitate payments due to the respondent.
The appellant would only take over the risk and liability in the power infrastructure upon successful completion of the solar plant, that is, at the “turn of the key”.
The commencement of the contract was subject to certain suspensive conditions which were to be satisfied or achieved by both parties within a period of 24 months reckoned from 23 October 2015, the date of signature of the contract. The period within which the suspensive conditions were to be satisfied (the Conditions Precedent Satisfaction Period”) could be extended by a period of 6 months through an amendment to the contract. Such extension was to be done before the expiry of the tenure of the conditions precedent satisfaction period.
Beyond the conditions precedent satisfaction period, either party became entitled to terminate the contract, provided that the party seeking to terminate the contract was not responsible for the delays in the fulfilment of the conditions precedent.
Before the expiry of the conditions precedent satisfaction period, on 23 October 2017, the parties agreed to enter into an addendum to the contract, the terms of which would allow the appellant to pay some of the respondent's subcontractors directly in order to carry out the pre-commencement works at the project site.
The arrangement was in anticipation of the commencement of the contract.
The addendum was executed on 21 September 2017, prior to the expiry of the conditions precedent satisfaction period set for 23 October 2017.
The addendum set different timelines for the conclusion of the pre-commencement works. The appellant undertook to pay for that work.
The appellant, however, failed to pay for such works, and, as a result, these were not executed at all or were not executed timeously.
The appellant sought to extend the conditions satisfaction period by a period of six months, on 29 November 2017. The extension was to be reckoned from 23 October 2017.
The respondent objected to the extension, which it regarded as a breach of the contract, given the new terms of the addendum to the contract and the appellant's failure to perform its obligations under the addendum.
According to the respondent, the appellant unilaterally demanded that the suspensive conditions be completed on or before 23 April 2018, a demand that the respondent viewed as a material breach of the express provisions of the contract.
By way of notices dated 10 April 2018, 6 July 2018, and 31 July 2018, the appellant informed the respondent that the contract had expired by operation of law.
All contractual obligations between the parties were, in terms of these notices, terminated.
The appellant insisted on such termination despite its admission that it had failed to perform its obligations to pay the respondent's sub-contractors.
The respondent further contended, that, the termination was also unlawful in view of the appellant's direct liability in causing delays in the fulfilment of the conditions precedent within the agreed time frames.
It was thereafter that the respondent approached the court a quo, by way of application, seeking a declaration of validity of the contract and an order for specific performance.
The application was granted on 13 December 2018 under HC8159/18.
The appellant appealed that determination to this Court under SC39/21.
In the meantime, the respondent applied for leave to execute judgment pending appeal.
The court a quo granted that application on 19 June 2019 under HC2425/19.
The respondent claims, that, during the two year period in which the parties awaited the outcome of the appeal at the Supreme Court, the parties implemented the contract, as amended, and engaged in a series of meetings that culminated in the drafting of an amended and restated contract.
On 13 May 2021, this court upheld the appellant's appeal and set aside the judgment of the court a quo. This Court determined, that, the matter was replete with material disputes of fact which could not have been resolved on the papers before the court a quo.
It was for that reason that the respondent returned to the court a quo and instituted action procedure, seeking the same relief.
In its plea in the court a quo, the appellant raised two points:
(i) Firstly, it contended that the contract never took off because the conditions precedent were not fulfilled. There was thus no basis at law for the respondent to seek the declaration of validity.
(ii) Secondly, it averred that this court had dismissed the respondent's claim. It therefore pleaded res judicata.
The appellant also filed a counter-claim seeking an order in the following terms:
“(a) An order that the EPC contract, and the Addendum entered into by the parties, did not commence due to the plaintiff's failure to meet the prescribed conditions precedent.
(b) Damages for breach of contract and misrepresentation in the sum of US$96,673,236=30 (ninety-six million six hundred and seventy-three thousand two hundred and thirty-six United States dollars thirty cents.”
The matter was referred to trial on the following agreed issues:
In respect of the main claim:
“(a) Is the procurement contract entered into by and between the plaintiff and the defendant, dated 23 October 2015, valid and binding on the parties?
(b) Depending on the conclusion reached on the above question, did the plaintiff suffer damages, and what is the quantum thereof?
In respect of the claim in reconvention:
(a) Was the agreement entered into by and between the parties induced by misrepresentation on the part of the plaintiff?
(b) If the plaintiff breached the agreement, then, did the defendant suffer damages as pleaded by it or at all and what is the quantum?”
At the commencement of the trial in the court a quo, the appellant abandoned the claim in paragraph (b) of its prayer, that is, the claim for damages for breach of contract and misrepresentation action in the sum of US$96,673,236.
The appellant, however, persisted with the claim for US$3,330,736=30, being the advance payment made to the respondent in respect of the pre-commencement works.
PROCEEDINGS BEFORE THE COURT A QUO
The respondent's evidence
The respondent's sole witness was its Managing Director, Wicknell Munodaani Chivhayo. His evidence was summarized by the court a quo as follows:
He told the court, that, when the tender for the project was flighted, the appellant had no funds for the project. For that reason, the appellant was looking for a contractor that would also assist it in raising funds for the project.
The respondent's partner, CHINT, was roped into the project to bring in the required funds. He told the court, that, CHINT had the required financial and technical capacity to execute the project.
The contract price was US$172,848,597=60.
Mr Chivhayo said, that, the commencement of the contract was subject to the satisfaction of the conditions precedent set out in clause 5 of the contract. These included the sourcing of the funds for the project and the completion of the feasibility studies. The appellant was responsible for funding the pre-commencement works and the respondent was required to assist with the fundraising.
To that end, the respondent had engaged financial consultants and financial partners such as the China Exim Bank and the Ministry of Finance and Economic Development. These engagements were done before the commencement of the project.
The witness blamed the appellant for the collapse of the engagements that were intended to birth the necessary financial agreements.
China Exim Bank required that the Government of Zimbabwe guarantees the loan facility.
The witness approached the Ministry of Finance on behalf of the appellant. The Ministry indicated its interest to support the project and had agreed, at the witness's suggestion, that the project be given national status.
The Ministry of Finance undertook to provide the Government guarantees required by China Exim Bank and had written a letter, dated 10 March 2016, addressed to the Export-Import Bank of China, undertaking to issue a sovereign guarantee for the project in the sum of US$147,000,000.
However, the Government of Zimbabwe had been blacklisted for defaulting on a loan of US$400 million. For that reason, the China Export and Credit Insurance Corporation (China Sinosure), a state funded insurance company established to support China's foreign and trade development co-operation, refused to secure the loan.
Thereafter, the parties mooted other sources from which to raise capital.
One of these was the proposed raising of energy bond through the CBZ Bank. This proposal had the full support of the SPB (State Procurement Board). However, the appellant was not interested, even after its own Ministry directed it to pursue that route.
The witness further told the court, that, the appellant frustrated the signing of the financial arrangements, contrary to the spirit of clause 5(a) of the contract.
The witness had this to say about the advance payment demand guarantee:
During meetings with the appellant's officials, feasibility studies had been carried out and the appellant owed the respondent funds for the work done. There was no need for such guarantee once work had been completed and payment now due to the plaintiff. The advance payment received was therefore in respect of the feasibility studies that had been performed.
With regards the performance security, the witness said it was not provided for, partly because the appellant still had some outstanding amounts still to be paid, and that, at any rate, it had not been asked for.
He also confirmed, that, the appellant had carried out its due diligence in terms of clause 5(f) of the contract.
Both parties representatives travelled to China for the purpose of evaluating the respondent's partner, CHINT. Both parties were aware that CHINT had successfully carried out some projects in Zimbabwe.
The witness stated, that, the production of the Environmental Impact Assessment was the responsibility of the appellant. It was only produced through his intervention, when he directly engaged the responsible Ministry.
The land for the project was also acquired through his efforts when he approached the Ministry of Lands.
He confirmed that both parties had secured the necessary authorizations as required by clause 5(f) of the contract.
Only one condition remained outstanding, that is, the financing agreements.
He said that the amendments of the contract, through the addendum, were occasioned by the loss of time.
In terms of the agreement, as re-affirmed by the addendum, the total cost of the pre-commencement works was US$5,111,224=50. The respondent was supposed to contribute to that amount in the sum of US$1,000,000 with the appellant contributing the remainder.
The respondent did not pay its contribution as it was only required to perform work of an equivalent value.
He said that after the payment of the feasibility studies, and part of the fee for the pre-commencement works, the appellant still had an outstanding liability in the sum of US$1,232,322=87 for part of the pre-commencement works carried out.
The respondent's sub-contractors were to be paid from that outstanding amount.
He stated that the appellant caused his arrest by ZACC officials for non-performance of the contract. He wrote to the appellant's Managing Director complaining about the unfounded allegations of corruption. His arrest negatively affected the execution of some of the works by the respondent's subcontractors.
He insisted that the conditions precedent satisfaction period was extended by the parties, and yet, the appellant went on to raise a criminal complaint for non-performance.
He made reference to clause 5(i) of the contract which provided, that, if the conditions precedent were not satisfied on or before 24 months after the date of signature of the contract, the parties should meet, and, if need be, the appellant could, in its sole discretion on or at any time before the lapse of the 24 month period, elect to extend the conditions precedent satisfaction period by a further six months.
He referred to a letter from the appellant to the respondent, dated 29 November 2017, in terms of which the period was extended by a further 6 months from 23 October 2017 to 23 April 2018.
The witness made reference to various correspondences between the parties, and other stakeholders, tending to show that the appellant was responsible for the failure to sign financial agreements during the extended period.
He averred, that, in terms of clause 5(i) of the contract, the appellant was estopped from relying on its own breach to cancel the contract.
He said that the respondent declared a dispute between the parties in terms of the contract. The dispute was declared through a letter dated 15 January 2018. In terms of the contract, the dispute was to be adjudicated by the Dispute Adjudication Board, which was duly constituted.
The appellant's attitude was that there was no need for the constitution of the Board as the parties could meet and resolve the dispute.
The respondent then sought to refer the matter to arbitration, but, the appellant objected saying that it was not an arbitration matter. It was then that the respondent approached the court a quo for an order of specific performance, alternatively, damages.
