Turquand Rule or Indoor Management Rule, the Presumption of Regularity in Corporate Affairs & the Doctrine of Estoppel

HH49-09 : DYNAMOS FOOTBALL CLUB (PRIVATE) LIMITED and DYNAMOS FOOTBALL CLUB vs RICHARD CHIMINYA and OTHERS
Ruled By: CHATUKUTA J

This is an opposed application in which the applicant sought the following relief, that:

“1. The affairs of the Second Applicant shall be run by the Board of Directors of the First Applicant.

2. The Ninth Respondent (the Premier Soccer League) shall forthwith recognize any person appointed by the First Applicant and the two representative (sic) of the Second Applicant.

3. The First (Richard Chiminya), Second (Sunday Chidzambwa), Third (Charles Gwatidzo), Fourth (Jairos Banda), Fifth (George Shaya), Sixth (Simon Sachidi), Seventh (Brian Kashangura) and Eighth (Eric Mvududu) Respondents shall cease to run the affairs of Dynamos otherwise than through the structures set by the First Applicant.

4. First to Eighth Respondent (sic) shall pay the costs of this application.”

The second applicant is a football club (herein referred to as the Club). It is an un-incorporated voluntary organization. It was established in 1963 under the Constitution of the Dynamos Football Club of Salisbury Rhodesia (the Constitution). A Board of Trustees was established in terms of clause 5 of the Constitution. The Board of Trustees was constituted of the founder members and former players who joined the Club within the first year of its existence.

The Board of Trustees was mandated to be the policy organ of the Club (Clause 5.1.3). It was further empowered to appoint the executive committee, managers, head coach, and other committees of the club. The executive committee was mandated to administer and manage the affairs of the Club.

Clause 16 of the Constitution provided for the registration of a company, Dynamos Football Club (Pvt) Ltd (the Company). Upon registration of the Company, the Board of Trustees was to constitute the Board of Directors of the Company.

The first applicant is the company that was formed pursuant to clause 16 of the Constitution.

The applicants averred that the first respondent, in connivance with the second to the eighth respondents, formed an association which they termed the “Board of Trustees”. They proceeded to appoint an executive committee which is now illegally running the affairs of the Company.

It was contended that the Board of Trustees and the executive committee are illegally running the affairs of the club as it has usurped the powers of the Board of Directors of the Company.

The application was opposed by the first to the eighth respondents whom I shall refer to as “the respondents”.

The respondents raised two points in limine:

(i) The first point is that Morris Longstaff Sifelani (Sifelani), who deposed to the founding affidavit, did not have the authority to represent both applicants. It was contended that Sifelani purported to act for two separate entities and was required to satisfy the court, in the founding affidavit, that he had the authority to represent the applicants.

The applicants filed minutes of a meeting of Board of Directors of the company, held on 22 May 2007, which purported to authorise Morris Longstaff Sifelani to institute the proceedings in the Answering Affidavit.

I say “purported” because the legality of the Board of Directors is challenged by the respondents.

The respondents contended that the proof of authority only arose in the Answering Affidavit instead of the Founding Affidavit. This amounted to introducing new evidence. The applicants should therefore have applied for leave of the court to introduce the new evidence. It was contended that an application must stand or fall by its founding affidavit.

The applicants contended that the minutes were adequate to cure the irregularity raised by the respondents. It was further contended that section 12 of the Companies Act [Chapter 24:03] raises a presumption that the acts of the company are regular. Outsiders should therefore not inquire if the rules of the company have been complied with....,.

I will deal first with the applicant's contention that the decision that Morris Longstaff Sifelani represents the first applicant in these proceedings is covered by section 12 of the Companies Act.

It appears to me that the presumption of regularity of the acts of a company does not apply in this case and the applicants' reliance on the rule is misplaced.

As stated by MALABA JA in Ngatibataneyi (Private) Limited v Tobias Venganayi Moyo and Anor SC13-07, section 12 of the Companies Act embodies the common law principles of estoppel enunciated in the case of Royal British Bank v Turquand (1856) 119 E.R. 886 (generally known as the Turquand Rule).

The Turquand Rule is intended to protect the rights of third parties dealing with companies. It is therefore a rule that a third party would rely on when a company or office bearer of a company seeks to avoid liability.

It is my view that section 12 of the Companies Act was a red herring.

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

The defendant contends that the accountant did not have its mandate to write the letter, referencing words stated in.as follows: "The law as I understand it from a reading of the authorities on the point is that if the defendant denies that the signature of the document is that of himself or his agent or ...

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

Section 12(c) of the Companies Act [Chapter 24:03] provides that anyone deriving title from a company shall be stopped from denying that a representative of the company has been duly authorised and has authority to exercise the functions customarily exercised by an officer or agent in his position. The section provides: "12 Presumption of Regularity Any ...

HH01-10 : RIVER RANCH LIMITED vs DELTA CORPORATION LIMITED
Ruled By: PATEL J

The plaintiff in this matter seeks an order requiring the defendant to vacate Stands 322 and 324 in Beitbridge Township and pay holding over damages from the 1st of April 2006 to the date of vacation. The defendant avers that it is the lawful purchaser of both houses in terms of written agreements of sale and counterclaims ...

The plaintiff in this matter seeks an order requiring the defendant to vacate Stands 322 and 324 in Beitbridge Township and pay holding over damages from the 1^st of April 2006 to the date of vacation.

The defendant avers that it is the lawful purchaser of both houses in terms of written agreements of sale and counterclaims for the transfer of the Stands.

The plaintiff disputes the validity of the agreements of sale and pleads, in any event, that the defendant's claim in reconvention has prescribed.

At the trial of this case, the first witness (Peter Lewis Bailey) was called by the defendant. At the conclusion of this witness's testimony, it was agreed by both counsel that there were no material disputes of fact and that no further evidence would be adduced by either party.

Background Facts

In February 1998, Peter Bailey was appointed as the plaintiff's liquidator. Subsequently, in October 1999, a Deed of Compromise (the Deed) was concluded with the creditors and Bubye Minerals (Pvt) Ltd, and, thereafter, sanctioned by this Court in Case No. HC15191/99 [Exhibit 1].

Under the Deed of Compromise, Bubye Minerals was to take transfer of all claims of the creditors against the plaintiff. By virtue of the Court order, Peter Bailey was appointed as agent of the parties; firstly, to effect the transfer of claims in terms of the Deed, and, secondly, in order to receive, administer, and make payments of all amounts payable to the creditors in terms of the Deed. The Court order operated to set aside the winding up of the plaintiff.

Peter Bailey testified that he was approached by Bubye Minerals to sell the two houses in Beitbridge to the defendant. Peter Bailey then authorised both sales which took place in September 2002. At that time, one of the houses was occupied by a third party who had been given notice to vacate by the plaintiff, while the other house was already occupied by the defendant as lessee.

Thereafter, the defendant paid the purchase price in cash and this was immediately transferred to Bubye Minerals. The money was to be used to continue the running of the plaintiff's mines and thereby generate more income for the benefit of all the creditors. Peter Bailey's evidence was that the agreements of sale [Exhibits 2A and 2B] were entirely open and above board. Moreover, there was no indication, at the time, that the parties did not intend the sale of the houses or that the sales should be cancelled and the money paid by the defendant be refunded. On the contrary, after the purchase price was paid, the plaintiff gave vacant possession of both Stands to the defendant who then duly took occupation of the houses.

Authority to Sell

According to Peter Bailey, clause 2.3 of the Deed of Compromise, as read with clauses 4.1.1.3 and 4.2.1, empowered him to authorise Bubye Minerals to effect the sales in casu. Moreover, the disposal of the houses did not require any resolution of the plaintiff's Board of Directors whilst the Deed was in place.

By virtue of clause 2.3 of the Deed of Compromise, for so long as any amount payable to the preferred or concurrent creditors remained unpaid, Bubye Minerals was prohibited from alienating any of the plaintiff's assets “without the prior written consent of the Liquidator having first been obtained.”

In terms of clause 4.2.1, “the Liquidator shall exercise sole and absolute discretion in relation to the interpretation and implementation of this Deed and in the event of a dispute arising thereon, his decision shall be final and binding on all the parties hereto.”

In my view, although Article 2.3 is negatively couched in the form of a prohibition against alienation, when read in conjunction with clause 4.2.1, its necessary implication is that the liquidator was empowered to authorise the disposal of the plaintiff's assets if and when he deemed it appropriate to do so in the execution or furtherance of his general mandate.

In the agreements of sale concluded in September 2002 [Exhibits 2A and 2B] the plaintiff, as the seller, was represented by Adele Farquhar as “being duly authorised thereto”. At that time, Adele Farquhar was the Managing Director of Bubye Minerals. As appears from certain correspondence between March 1998 and March 2006, Adele and Michael Farquhar and/or Bubye Minerals were assumed to be the majority shareholders in the plaintiff [Exhibits 5, 6 and 7], while the Farquhars also evidently became directors of the plaintiff [Exhibits 4A, 4B and 4C].

Article 78 of the plaintiff's Articles of Association [Exhibit 9] provides for the appointment of Board of Directors. It empowers the existing directors to fill casual vacancies or appoint additional directors. Every such appointment is “subject to confirmation by the members at the next ordinary meeting.”

In the instant case, a former Director (one Cowper) gave notification, by letter dated the 30^th of August 2002, of his resignation as director of the plaintiff with immediate effect and his replacement in that capacity by Adele Farquhar. However, no evidence was placed before the Court as to whether the existing directors had concurred in this appointment or whether it was subsequently ratified at the next ordinary meeting of members.

In any event, the agreements of sale in casu were entered into by Adele Farquhar on the 5^th of September 2002 - after her ostensible appointment as a Director of the plaintiff. In this regard, according to Article 101 of the Articles of Association, “all acts done…, by any person acting as a Director shall, notwithstanding that it shall afterwards be discovered that there was some defect in the appointment of the Directors or persons acting as aforesaid, or that they or any of them are disqualified, be as valid as if every person had been duly appointed or was qualified.”

Under the law of agency, it is trite that the agent's actions operate to create a contractual or other legal tie between the principal and the third party. The agent's authority to act may arise either by dint of actual authority, whether express or implied, or by way of ostensible or apparent authority or authority by estoppel.

According to CHRISTIE: Business Law in Zimbabwe (1985)…,:

“In the language of the law of agency, apparent and ostensible authority are synonymous…, and ostensible authority is sometimes said to be created by the principal holding out the agent as having authority…, although sometimes a distinction seems to be drawn between apparent authority (flowing from the capacity in which the agent is employed) and holding out (by particular words or actions)…,.

Ostensible authority may arise otherwise than from the capacity in which the agent is employed, as exemplified by:…, from a course of dealing;…., from the third party's knowledge that the agent had authority to pay certain debts and presumption that he had authority to pay others;…, where the presumption of continuity was applied and the third party was entitled to assume that an agent to whom (unknown to the third party) the principal had transferred his business was still the principal's agent.

What is not clear is whether apparent authority, ostensible authority and authority by holding out are all synonymous with authority by estoppel, which requires not only a representation by the principal but that the third party has acted on it to his prejudice. No doubt, in ninety-nine cases out of a hundred the third party will have no difficulty in establishing prejudice, but it is suggested that it is not necessary for him to do so, as the situation contains all the elements of quasi-mutual assent, for which proof of prejudice is unnecessary.”

As regards the principal's right to vindicate property disposed of without his authority, the learned author states as follows…,:

“A principal whose agent has, without authority, disposed of property entrusted to his care may recover that property from third parties unless estopped from doing so, as by having given the agent ostensible authority to deal with the property.”

Applying these general principles of agency to the facts of this case, it seems to me that Adele Farquhar was duly authorised to represent the plaintiff as the seller of the two houses in September 2002.

Adele Farquhar's authority to do so derives, firstly, from the sales having been authorised by Peter Bailey in terms of clause 2.3 as read with clause 4.2.1 of the Deed of Compromise, and, secondly, from her ostensible appointment and subsequent acts as a Director of the plaintiff under Article 78 as read with Article 101 of the plaintiff's Articles of Association.

In my view, the cumulative effect of these provisions, coupled with the conduct of the parties before and after the disputed sales, affords the requisite authority to sell the houses in question.

It is to be noted in this regard that the first intimation of the sales being challenged was only provided in a letter from the plaintiff's lawyers addressed to the defendant on the 7^th of September 2004 [Exhibit 8] - over two years after the houses had been sold. In the intervening period, the plaintiff did not question the propriety of the sales and in fact gave vacant possession of the houses to the defendant. The latter, on its part, paid the agreed purchase price in full and took occupation of the houses. If the sales were to be reversed at this juncture, the defendant would be significantly prejudiced in terms of its monetary outlay for the Stands in 2002.

In the premises, I am satisfied that Adele Farquhar did possess the requisite ostensible authority to represent the plaintiff in the agreements of sale and that they were therefore validly concluded. The plaintiff is accordingly bound by the agreements and thereby estopped from recovering the Stands in question.

It follows that the plaintiff's claim for the eviction of the defendant cannot be sustained and it is accordingly dismissed with costs.

It also follows that the defendant is entitled to enforce the binding agreements of sale and therefore succeeds in its counterclaim for the transfer of the two Stands, subject to the determination of the plaintiff's special plea of prescription of the counterclaim.

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

In Walenn Holdings (Pvt) Ltd v Intergrated Contracting Engineers (Pvt) Ltd Anor 1998 (1) ZLR 333 (H)..., SIBANDA J quoted with approval the words of LORD SIMON in Morris v Kanssen 1946 (1) ALLER 586 (HL)..., when he said that – “The rule in Royal British Bank v Turquand (The Turquand or ...

In Walenn Holdings (Pvt) Ltd v Intergrated Contracting Engineers (Pvt) Ltd & Anor 1998 (1) ZLR 333 (H)..., SIBANDA J quoted with approval the words of LORD SIMON in Morris v Kanssen 1946 (1) ALLER 586 (HL)..., when he said that –

“The rule in Royal British Bank v Turquand (The Turquand or Indoor Management Rule) provides that persons contracting with a company, and dealing in good faith, may assume that acts within its constitution and powers have been properly, and duly performed, and one is not bound to inquire whether acts of internal management have been regular. The rule renders proof by the company that the internal formalities have not been complied with insufficient to enable it to escape liability under the contract, hence the rule is not merely on applications of the rebuttable presumption omnia praesumuntur rite esse acta.”

In HAHLO's South African Company Law through the Cases, 5^th ed..., the rule is repeated wherein it is stated that –

“Under the rule, also known as the Indoor Management Rule, persons dealing with the Director, or Manager, of a company, who openly exercises authority which he could have, under the constitution of a company provided that some act of internal management was performed are entitled to assume that that act was performed.”

In Zimbabwe, the point is made clear by section 12 of the Companies Act [Chapter 24:03]. That section provides that –

“Any person having dealings with a company, or with someone deriving title from a company, shall be entitled to make the following assumptions, and the company, and anyone deriving title from it, shall be estopped from denying this truth –

(a) That the company's internal regulations have been duly complied with;

(b) That every person described in the company's register of Directors and Secretaries, or in any return delivered to the Registrar by the company in terms of section 187, as a Director, Manager, or Secretary, of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a Director, Manager, and Secretary, as the case may be, of a company carrying on business of the kind carried on by the company; and

(c) That every person whom the company, acting through its Members in general meeting, or through its Board of Directors, or its Manager, or Secretary, represents to be an officer or agent of the company , has been duly appointed, and has authority to exercise the functions customarily exercised by an officer, or agent, of the kind concerned.”

In this case, the first respondent is estopped from denying that its Managing Director had the necessary authority to sign the irrevocable offer letter, and to negotiate the price, when from its own admission, that Managing Director had been authorised to instruct Nandi Properties (Private) Limited to dispose the property.

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

The second issue is whether the said Agreement of Sale is a nullity. The first respondent is splitting hairs by seeking to say that though Mr. Michael Hanyani had authority to instruct Nandi Properties (Private) Limited, he had no authority to do other acts that generally, or naturally, go with such a mandate, that is the ...

HH201-10 : MABONDE AGRICULTURAL SERVICES and JACOB MABONDE and HAZEL MOYO vs SENTRIDGE INVESTMENTS (PRIVATE) LIMITED and PK CHIVAURA and O CHIKONYORA and OTHERS
Ruled By: BHUNU J

Evidence was also led tending to establish that Sibangilizwe Moyo did not follow the correct procedure before selling the subdivisions to the defendants in that he did not obtain the necessary company resolutions before selling the subdivisions on the two farms. What this means is that he sold the subdivisions without authorization from the owner ...

HH12-13 : ANDREW MILLS vs TANGANDA TEA COMPANY LIMITED
Ruled By: PATEL J

This matter involves two separate claims by the applicant as against the same respondent in Case Nos. HC11737/11 and HC279/12. The two claims emanate from the same cause of action and involve the same facts in issue between the same parties. They were accordingly consolidated, by consent, on 19 November 2012 through a chamber application ...

The applicant's consolidated claim is for summary judgment in Case Nos. HC11737/11 and HC279/12. He seeks the payment of two tranches of US$83,500= each and BUPA medical aid subscriptions in the sum of GB£1,332=92 together with interest at the prescribed rate and costs of suit on a legal practitioner and client scale.

Background

The applicant is the former Managing Director of the respondent and a former Director of Meikles Ltd, having resigned from both positions with effect from 30 June 2011. His claim arises from a severance package totalling US$334,000= which was executed on 22 June 2011. The agreement in question was signed by one Brendan Beaumont, representing the respondent in his capacity as Group Chief Executive of Meikles Ltd and being duly authorised thereto. Meikles Ltd owns the entire shareholding in the respondent company. The applicant avers that the respondent has complied with certain aspects of the agreement, relating to payments in lieu of notice and leave and the transfer of the applicant's motor vehicle and cellphone. However, it wishes to resile from the principal element pertaining to severance pay. Its defence, as to the absence of proper authority to conclude the agreement and non-compliance with statute, is merely a dilatory tactic and an abuse of court process.

The respondent accepts that the applicant did report to Brendan Beaumont as his immediate boss. However, it denies that the latter had authority to execute the agreement with the applicant in the absence of resolutions from Meikles Ltd and the respondent authorising him to bind the respondent to the agreement. According to a supporting affidavit from its erstwhile lawyer (now deceased), the agreement was drafted on the instructions of Brendan Beaumont in collaboration with the applicant's counsel herein. Its defence, as per its plea, is that Meikles Ltd is a distinct legal entity quite separate from the respondent company. In any event, the agreement is invalid because of the absence of due authorisation to conclude it and because its principal features would entail non-compliance with certain provisions of the Companies Act.

The applicant avers that Brendan Beaumont, in his several capacities, held himself out to possess the requite authority and that he relied upon that representation. Brendan Beaumont therefore had ostensible authority to bind the respondent to the agreement with the applicant. Moreover, the provisions of the Companies Act which are relied upon by the respondent do not apply to the applicant as an employee who assumed the position of Director due solely to his contract of employment….,.

Authority to Conclude Agreement

Section 12 of the Companies Act [Chapter 24:03] codifies the so-called turquand rule or presumption of regularity in corporate affairs. It provides that any person dealing with a company is entitled to make certain assumptions and that the company is estopped from denying their truth. In particular, it may properly be assumed that the company's internal regulations have been duly complied with. See, in this regard, Wolpert v Uitzigt Properties (Pty) Ltd & Others 1961 (2) SA 257 (W)…, and the authorities there cited.

In terms of section 12 of the Companies Act [Chapter 24:03], it may also be assumed that every person described in the company's register or returns as a director, manager or secretary of the company, and every person whom the company represents to be an officer or agent of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a director, manager or secretary, or by an officer or agent of the kind concerned. However, a person is not entitled to make any such assumptions if he has actual knowledge to the contrary or if he ought reasonably to know the contrary. Section 13 of the Companies Act stipulates that a company shall be bound in terms of section 12 notwithstanding that the officer or agent concerned acted fraudulently or forged a document purporting to be sealed or signed on behalf of the company.

In essence, what these provisions enact, in the corporate context, are the common law rules governing ostensible or apparent authority entitling third parties to enforce contracts concluded with the agents or employees of their principals. See Reed N.O. v Sager's Motors (Pvt) Ltd 1970 (1) SA 521 (RAD); Stewart v Zagreb Properties (Pvt) Ltd 1971 (2) SA 346 (RAD); Seniors Service (Pvt) Ltd v Nyoni 1986 (2) ZLR 293 (S); Mine Consultants and Supply Company v Borrowdale Motors (Pvt) Ltd 1990 (2) ZLR 281 (S).

Counsel for the applicant contends that the benefits of sections 12 and 13 of the Companies Act apply not only to outsiders but also to the Directors of a company, particularly where the termination of their contracts of employment are in issue. He further submits that Brendan Beaumont, by virtue of his position, had ostensible authority to act for the respondent and bind it to the agreement that he entered into on its behalf with the applicant.

Counsel for the respondent submits to the contrary that sections 12 and 13 are not intended for the benefit of any insider who ought to have known of the alleged irregularity.

I fully agree with that submission.

As I have already indicated, section 12 of the Companies Act legislates the rule in Royal British Bank v Turquand (1856) 6 E & B 327; [1843-60] All ER Rep 435. However, it is well-established that the rule does not protect any person, who, by reason of his position within the company, ought to have known of the irregularity in question. See Mahony v East Holyford Mining Co. (1875) LR 7 HL 869…,.; Howard v Patent Ivory Manufacturing Co. (1888) 38 ChD 156; Mineworkers Union v J.J. Prinsloo 1948 (3) SA 831 (A). Moreover, Wolpert v Uitzigt Properties (Pty) Ltd & Others 1961 (2) SA 257 (W) does not establish the broad proposition contended on behalf of the applicant, having regard to what was stated in that case at pp. 264F and 266.

In the instant case, the applicant was clearly not an outsider or mere employee of the respondent, but its Managing Director. He alleges that he was precluded from attending Board meetings of Meikles Ltd and the respondent at the relevant time. Even if this were true, he could quite easily have obtained the minutes of relevant Board meetings so as to ascertain decisions taken concerning his resignation and severance package. In any event, in his position as Managing Director, he must have known that any decision in that regard would require a Board resolution from the respondent authorising Brendan Beaumont to negotiate and conclude his severance package. For these reasons, I take the view that the applicant is not entitled to take advantage of the presumption of regularity embodied in section 12 of the Companies Act.

For the same reasons, I do not think that there is any basis for invoking ostensible authority in relation to Brendan Beaumont's actions. Firstly, the fact that he was the Group Chief Executive of Meikles Ltd does not mean that he had the requisite ostensible authority, by virtue of that position, to negotiate and conclude severance packages on behalf of the respondent. There is nothing in the papers to suggest that he normally exercised that function in that particular capacity. Secondly, as I have already emphasised, the applicant was not some third party dealing with an agent or employee of the respondent. He was its Managing Director, and, given that position, I can see no justification for extending the doctrine of ostensible or apparent authority to the facts of this case.

HH348-13 : THE TRUSTEES OF THE LACEROSE TRUST and LACEROSE INVESTMENT (PRIVATE) LIMITED vs ZIMCOR TRUSTEES (PRIVATE) LIMITED and FRANK BUYANGA and TENDAI MUPFURUTSA and OTHERS
Ruled By: MAKONI J

It was further contended that estoppel, as pleaded by the seventh respondent does not arise. The acts done by the third respondent were not lawful in that he disposed of the whole undertaking of the second applicant (without a resolution from the Shareholders) in contravening of section 183(1)(b) of the Companies Act [Chapter 24:03]. It ...

It was contended, on behalf of the seventh respondent, in his heads of argument and in submissions, that the applicants did not adduce evidence that satisfactorily excludes the third respondent's authority to represent the second applicant in the first transfer. There is, therefore, no basis for impeaching the transfer. The seventh respondent acquired the property innocently and for value. It was further contended that the inaction on the part of the applicant from the time they uncovered the fraud to the time they filed the present proceedings estops them from denying the third respondent's authority to effect the transfers. It was further contended that ownership of the property lawfully passed to the seventh respondent. The applicants are restricted to pursuing a personal claim against the third respondent.

The circumstances giving rise to the transfers, as outlined by the applicants in their founding papers, have not been controverted due to the absence of the first to sixth respondents. These are that the third respondent did not perform in accordance with the agreed terms of the Cession and Assignment Agreement. As a consequence, the Cession Agreement was cancelled and no cession of rights, title, benefits, interests and obligations attached to the second applicant took place. The third respondent did not have any rights to the immovable properties at the time he transferred the same to the first respondent.

The absence of the first to sixth respondents put the seventh respondent in a difficult situation. He cannot stave off the allegations that the first transfer to the first respondent was void. Therefore, no rights derive from that transfer, and, in turn, the transfer to him.

However, the seventh respondent advanced argument that the third respondent had authority to act on behalf of the second applicant and that by their inaction the applicants are estopped from pursuing a vindicatory claim.

The records at the Registrar of Companies reflected the third respondent as a Director….,.

The applicant's own papers suggest that they co-operated with the third respondent in relation to the CR14. The applicants handed over the entire secretarial file to the third respondent. Thereafter, the third respondent changed the company documents. It should therefore be held, on a balance of probabilities, that there was no want of authority on the part of the third respondent in effecting the first transfer.

It was further submitted that it took the applicants four years to file the present application after uncovering the fraud. This supports the inference that the applicants co-operated with the third respondent but it is also such as estops them from denying his authority to effect the first transfer.

Most of the facts relied upon by the seventh respondent for the above submissions were not canvassed in his opposing affidavit. They are alluded to in the Heads of Arguments and in submissions. The applicant was not given an opportunity to deal with them in the answering papers. However, the point made by the applicants remains which is that what is not disputed in affidavits is taken to be admitted, ie the fact that the third respondent did not have any rights to pass transfer to the first respondent and that he did not have authority to represent the second the applicant.

HB201-11 : CABAT TRADE & FINANCE (PTY) LTD and SECURITY MILLS (PTY) LTD vs THE MOVEMENT FOR DEMOCRATIC CHANGE (MDC-T)
Ruled By: KAMOCHA J

PLAINTIFFS' REPLICATION TO DEFENDANT'S PLEA ON THE MERITSThe plaintiffs maintained that Mr Cross and Mr Spooner had the authority of the defendant to enter into a contract on its behalf. In the event that it was found that they had no authority to represent the defendant it was averred that they had ostensible authority to ...

PLAINTIFFS' REPLICATION TO DEFENDANT'S PLEA ON THE MERITS

The plaintiffs maintained that Mr Cross and Mr Spooner had the authority of the defendant to enter into a contract on its behalf. In the event that it was found that they had no authority to represent the defendant it was averred that they had ostensible authority to do so by reason of the following facts:-

1. On or about November 2007, in anticipation of the 28^th March 2008 Zimbabwe Presidential Elections, Mr Cross, who at the material time was a member of the Defendant's National Executive Committee, and, by widely disseminated public knowledge, was a senior member of the defendant's hierarchy, acting on behalf of the defendant, allegedly entered into a similar contract with the second plaintiff for the manufacture and supply of garments that the second plaintiff manufactures within its normal business. The order was for 60,000 T-shirts, 60,000 bandanas and 40,000 wraps, known colloquially as “Zambians”.

That the contract/order was performed by the second plaintiff and paid for by the defendant without demur or deviation. Such payment was allegedly effected through the defendant's hierarchical process. At no time did the defendant deny Mr Cross's authority to represent it in that transaction. In upholding the said earlier contractual obligation entered into by Mr Cross, and by making such payment, the defendant thereby represented to the second plaintiff, by its conduct, that Mr Cross was duly authorized to enter into such agreements on behalf of the defendant.

It was alleged that the second plaintiff was induced, to its prejudice, by the said representation to believe that Mr Cross was duly authorized to enter into the subsequent agreement on behalf of the defendant, concluded in April 2008, which pertained to the re-run of the said Presidential Election, and, acting on the strength of that belief, the second plaintiff, to its detriment and prejudice, entered into the agreement concluded in April 2008, and the said transaction was confirmed and ratified by Mr Cross. The second plaintiff transacted the April 2008 contract, to its detriment, on the basis of the aforesaid representation, inducement and belief.

In the result, the defendant was estopped from denying that Mr Cross and Mr Spooner had the authority to represent it, more particularly, as the payment for the March Election and April re-run were matters not only of enormous public interest and debate, but the payment for the contract transacted by Mr Cross had been obviously released as a result of processing through the defendant's payment process. Moreover, it was alleged that Mr Cross and Mr Spooner had, in fact, admitted that they had been duly authorized.

The plaintiffs alleged that an arrangement had been made whereby the goods were collected by the defendant as and when they were manufactured and required by the defendant. The second plaintiff would advise the defendant when goods were ready for delivery and the defendant would, in turn, collect them as it wished to. As and when significant volumes had been manufactured, the second plaintiff would advise the defendant, thereby tendering delivery, whereafter, the defendant would determine when to collect in whole or in part.

The plaintiffs averred that they had documentary evidence of the goods collected and such documents had been repeatedly made available to the defendant. In addition, contemporaneous electronic mail correspondence between Mr Cross, Mr Spooner and Chris Mbanga, affirmed that there had been complete verification of the numbers and that distribution was complete. In respect of goods for which delivery thereof had been tendered, but collection by the defendant had not been effected, such goods still awaited collection.

It was the plaintiffs' averments that the goods had been manufactured and delivery thereof tendered to the defendant in terms of the contract long before the defendant decided, on 20 June 2008, to withdraw from the Presidential run-off Election. The fact that the defendant effected ten collections after that date was wholly in the defendant's hands and did not mean that manufacture was after that date. In fact, manufacture had been effected long before that date and delivery tendered in accordance with the on-going interactions with the defendant's representatives. It was contended that the fact that the defendant collected goods on 25 June 2008 and 13 August 2008 constituted their acknowledgement that they were bound by the terms of the contract which they were still implementing. The plaintiffs denied any voluntary assumption of risk as inferred by the defendant.

Finally, it was alleged that Mr Spooner had requested the second plaintiff to diminish the original order, which the plaintiff did, and to hold certain manufactured stocks of which delivery had been tendered pending later collection. It was, accordingly, submitted that the parties had indeed entered into a contract through their duly authorized representative….,.

The plaintiffs also submitted that estoppel operated against the respondent in this matter.

The submission is also devoid of any merit as the plaintiffs are seeking to enforce a contract prohibited by law. See York Estates Ltd v Wareham 1950 (1) SA 125 (SR)…, where the court stated that it was bound to refuse to enforce a contract even though no objection to illegality of the contract is raised by the parties. It went on to state that it would not enforce such a contract even though the plaintiff is innocent and the defendant is setting up illegality.

Moreover, the defendant cannot be prevented from relying on the illegality or unenforceability as a defence, no matter how unfair that may be to the plaintiff.

HH327-14 : TM SUPERMARKET (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and THE SHERIFF OF ZIMBABWE
Ruled By: CHATUKUTA J

The applicant, during oral submissions, attempted to disown Mr Beaumont as having had authority to represent the applicant. He was referred to as having been the Chief Executive of Meikles and then a Board member for the Meikles Group of Companies which is the holding company of the applicant. However, it is clear that as ...

HB105-16 : MAXWELL SIBANDA vs GAVIN HAYLER and HAROLD HAYLER and MARGARET MEEK and AUDREY BENEDICT and REGISTRAR OF DEEDS N.O. and BULAWAYO CITY COUNCIL
Ruled By: TAKUVA J

The applicant contended that he lawfully entered into a written Agreement of Sale which was signed by the first respondent on behalf of Hayler and Company. On that basis, it was submitted that he acquired “just and lawful rights against the 1st to 4th respondent (sic) entitling him to sue for specific performance.” As regards fraud allegations against the ...

The applicant contended that he lawfully entered into a written Agreement of Sale which was signed by the first respondent on behalf of Hayler and Company. On that basis, it was submitted that he acquired “just and lawful rights against the 1^st to 4^th respondent (sic) entitling him to sue for specific performance.”

As regards fraud allegations against the applicant, it was argued that these attempts are “scandalous and baseless.” In his answering affidavit, and in the heads of argument, the applicant stated that the criminal charges were 'withdrawn by the National Prosecuting Authority for lack of merit and evidence.'

Turning to the Agreement of Sale, the applicant submitted that even if there are any irregularities in the “first respondent's representation of the company in concluding the written agreement of sale such irregularities cannot affect the validity of the agreement in light of the provisions of section 12(a) as read with section 13 of the Companies Act [Chapter 24:03].”

The applicant relied on the legal principle in Coronsel Investments (Pvt) Ltd v Spar Harare (Pvt) Ltd 2008 (1) ZLR 430 (H) where it was stated…, that;

“[T]he fraud of an employee, working within the bounds of his authority, does not render a contract invalid. Section 12(a) of the Companies Act [Chapter 24:03] provides that any person dealing with a company is entitled to assume that the internal regulations of that company have been complied with. Section 13 provides specifically that liability under section 12 is not affected by fraud.”

By parity of reasoning, the applicant argued that he was entitled to assume that the internal regulations of the company had been complied with….,.

(i) As regards the applicant's wobbling argument that even if there were any irregularities in the first respondent's representation of the company, such irregularity cannot affect the validity of the agreement in light of the provision of section 12(a) as read with section 13 of the Companies Act [Chapter 24:03]; my view is that the sections are inapplicable to the case in casu for the simple reason that the applicant in casu is not an innocent third party dealing with a company official.

The letter and spirit of section 12(a) of the Companies Act [Chapter 24:03] is to protect the interests of a third party who innocently deals with an official of a company who is not clothed with the requisite authority, or one who fraudulently enters into a contract with a third innocent party. See the words of LORD SIMON in Morris v Kanssen [1946] 1 ALL ER (HC)…, when he said that:

“The rule in Royal British Bank v Turquand (The Turquand or Indoor Management Rule) provides that persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed and one is not bound to inquire whether acts of internal management have been regular. The rule renders proof by the company that the internal formalities have not been complied with insufficient to enable it to escape liability under the contract; hence, the rule is not merely an application of the rebuttable presumption omnia praesumuntar rite esse acta.”

HAHLO's South African Company Law Through The Cases, 5ed…, repeats the rule thus:

“Under the rule, also known as the indoor management rule, persons dealing with the director or manager of a company who openly exercises authority which he could have under the constitution of a company provided that some act of internal management was performed, are entitled to assume that that act was performed.”

In our law, the rule is captured in section 12 of the Companies Act [Chapter 24:03] which states;

“Any person having dealings with a company, or with someone deriving title from a company, shall be entitled to make to following assumptions, and the company and anyone deriving title from it shall be estopped from denying their truth:

(a) That the company's internal regulations have been duly complied with;

(b) That every person described in the company's register of directors and secretaries or in any return delivered to the Registrar by the company in terms of section one hundred and eighty-seven, as director, manager or secretary of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a director, manager and secretary as the case may be, of a company carrying on business of the kind carried on by the company; or

(c) That every person whom the company, acting through its members in a general meeting or through its board of directors or its manager or secretary, represents to be an officer or agent of the company has been duly appointed and has authority to exercise the functions customarily exercised by an officer or agent of the kind concerned.”

The spirit of these statutory provisions is that the 'person/s' dealing with the company must do so in good faith. Where there is mala fides or illegality, then, as a matter of justice and morality, the third party cannot be protected or assisted to benefit from his own criminal enterprise.

In casu, the totality of the evidence points to one conclusion, namely, that the applicant has engaged in nefarious activities amounting to criminal conduct.

HH161-15 : MCR VENGESAYI and AGNES VENGESAYI T/A VENGESAYI ARHITECTS vs BELVEDERE NURSING HOME (PRIVATE) LIMITED
Ruled By: DUBE J

On 13 March 2012, the plaintiff issued summons against the defendant claiming payment of $1,071,992=05 being architectural fees for architectural services allegedly rendered to the defendant. The salient facts surrounding this claim are as follows. On 19 September 2005, the defendant, represented by its Managing director, Dr Zvandasara, entered into an agreement for the provision of architectural services and ...

On 13 March 2012, the plaintiff issued summons against the defendant claiming payment of $1,071,992=05 being architectural fees for architectural services allegedly rendered to the defendant.

The salient facts surrounding this claim are as follows.

On 19 September 2005, the defendant, represented by its Managing director, Dr Zvandasara, entered into an agreement for the provision of architectural services and upgrading of Belvedere Maternity Home with the plaintiff. The plaintiff, together with some consultants, provided the services. The defendant has refused to settle the fee notes presented and denies that it ever hired the plaintiff to provide the architectural services in issue.

The following issues were referred for trial:

1. Whether or not the plaintiff and defendant entered into a memorandum of agreement.

2. Whether or not the memorandum of agreement is a valid agreement which binds the defendant.

3. Whether or not the plaintiff rendered architectural services to the defendant.

4. Whether the defendant is liable to pay the plaintiff the sum claimed.

5. Whether interest on the sum should be paid at the rate of 16% per annum.

The plaintiff called three witnesses in support of its case. The first witness M.C.R. Vengesayi, an architect with the plaintiff, testified as follows;

He entered into an agreement for the provision of architectural services with the defendant which was represented by its Managing Director, Professor Zvandasara (the MD). The agreement was witnessed by the defendant's Company Secretary. The plaintiff worked on the project between 2006 and 2010.The initial stages of the work involved consolidation of two Stands into one and this was done with the knowledge of the defendant. The work done includes designing and additions and alteration to the existing hospital, submitting plans to the municipality for approval, consolidation of the two Stands as well as carrying out sewerage capacity tests. No one objected to their work.

In the year 2006, the plaintiffs submitted a fee note. They were paid in dribs and drabs. At some stage Dr Mazonde was drafted in to help. The plaintiff also dealt with Mrs Chitemerere, the Company Secretary, and Dr Saungweme.

The witness insisted that the plaintiffs had no reason to doubt that Professor Zvandasara (the MD) had authority to enter into the agreement.

The disbursements were being paid by the defendant and not Dr Zvandasara personally. After the dispute, Dr Zvandasara started paying them from his own funds. He indicated that he would recover the money from the defendant. The disbursements towards the project were paid by the defendant to the consultants, the town planner, surveyor and the municipality for submission of the plans. All this money was official payment and was in the form of transfers. If these monies had not been authorised, this fact would have been picked. The defendant's Board of Directors has always been aware of what was happening. He persisted with the claim of $1,071,992=05.

The witness was not aware, at the time the agreement was entered into, or at any later stage, that the internal processes in the defendant company may not have been adhered to or completed….,.

Dr Zvandasara, the erstwhile Managing Director, was called as a witness for the plaintiff. His evidence may be summarised as follows;

He was the Managing Director and Executive Chairman of the defendant in 2005. He ceased to be the Executive Chairman in 2006. He is also a founder member and major shareholder of the hospital. The defendant has two shareholders which are companies and individuals, in turn, have shares in the companies. He entered into an agreement for the alteration and extension of Belvedere Maternity Hospital with the plaintiff witnessed by Mrs. Chitemere the hospital Administrator and Company Secretary. He had the express and implied authority to enter into the agreement and kept the defendant's Board advised of the developments taking place. His authority also stems from his appointment as the Managing Director and Executive Chairman. He could have found the authority in the hospital records but he has not had access to the hospital since 2011. All he did was done on behalf of the defendant. Everyone was aware of this arrangement.

The plaintiff was going to draw diagrams to be used to construct the hospital. The work also entailed consolidation of two Stands to which the defendant gave its consent. After the drawings were done, they were posted at the entrance to the hospital reception area for five (5) years for everyone to see. The final plans were displayed in the boardroom. All Board members were aware of what was happening. Some of the sketches were provided by some of the Board members and the matron. He kept other members of the Board informed about the developments. There was an item at every Board meeting dealing with these developments. He has no access to all the Board minutes and is unable to prove that assertion. None of the Board members objected to the development. The plaintiff did its work in broad daylight.

The hospital paid the disbursement pertaining to materials and vouchers payments were prepared by the hospital's accounting department. Cheques were signed by two signatories who are Board members, Ms Ngwerume, Drs Mbiriri and Kambarami or himself and there were no objections. When the 2006 fee note was presented no-one objected to it. Payment of $8,000= has already been made on that fee note which was approved by the Board after a request. This was after the plaintiffs had requested for $13,000=. This request was discussed in the Board and he was specifically asked to approach the architects for a payment plan. He paid $50,000= from his own pocket after the defendant had refused to settle the fee notes. The witness insisted that he had authority to enter into the contract….,.

The defendant called two (2) witnesses in support of its case, Drs Chipato and Chiware. Both are founding members and shareholders of the defendant. Their evidence may be summarized as follows;

They own shares in the defendant through Mainbrain (Pvt) Ltd and Finpower (Pvt) Ltd. Both companies did not approve the extension of the project. They became aware of the project in the year 2010. This was when the witnesses attended a shareholders meeting called by Dr Zvandasara when he wanted to go to South Africa and requested for two other shareholders to accompany him to South Africa to raise money for the project. The shareholders refused. The shareholders were not consulted over the project and members of the Board did not approve the project. The next thing they saw were bills emanating from the plaintiff. The two defence witnesses maintained their version that the project was embarked on without the authority of the Board of Directors and shareholders. The witnesses corroborated each other.

The plaintiff maintains that the agreement between the parties is valid and was entered into with the express and implied authority of the defendant's Board of Directors. The defendant denies this assertion and contends that no authority was sought from the shareholders of the defendant whose Articles of Association require a valid resolution of the shareholders before any diversification, modernisation or expansion of the principal business of the company is carried out.

The defendant contends that its Managing Director was on a frolic of his own and hence the defendant is not bound by the agreement the parties entered into….,.

At the close of the plaintiff's case, the defendant applied for absolution from the instance. I dismissed the application and directed that the matter proceeds. I would give my reasons for this decision in this judgment.

The court, at that stage, formulated the view that there was evidence upon which a reasonable court might give judgment in favour of the plaintiff and that the plaintiff had established a prima facie case. The court, in coming up with this decision, considered that an agreement had been entered into and executed. The indications, at that stage, were that Dr Zvandasara (the MD) had ostensible authority to enter into the contract in issue and there was work done, after the first fee note, which the plaintiff may be entitled to claim for. The analysis below will further elucidate why I formulated that opinion.

It is common cause that the plaintiff and the defendant's Managing Director entered into an agreement for the provision of architectural services. The plaintiff, together with different consultants, carried out part of the work agreed on to the tune of 75% of the project. The issues are;

(i) Whether the defendant's Managing Director had authority to enter into this agreement.

(ii) Secondly, whether the agreement is contractually binding on the parties.

(iii) Thirdly, whether the plaintiff is entitled to payment for the work carried out.

In determining whether the Managing Director had authority to enter into the agreement, I will examine three types of authority. Express authority exists in a situation where there is actual or express authority to do a thing. Implied authority is defined, in LEE and HONORE, The South African Law of Obligations 2^nd ed…, as follows:

“Every agent, unless the contrary manifestly appears to be the intention of his principal, has implied authority to employ all lawful means necessary and usual for the execution of his express authority. An agent having authority to conduct a particular trade or business or undertaking, has authority to do every lawful thing necessary or usually incidental thereto.”

This type of authority stems from an agent's actual or express authority.

The third category is that of ostensible authority. This type of authority was defined in River Ranch Limited v Delta Corporation Limited HH01-10 as follows;

“In the language of the Law of Agency, apparent and ostensible authority is synonymous…,; and ostensible authority is sometimes said to be created by the principal holding out the agent as having authority…, although sometimes a distinction seems to be drawn between apparent authority (flowing from the capacity in which the agent is employed) and holding out (by particular words or actions)…,.”

There is a presumption that where an agent, manager, managing director or other senior official of a company enters into a contract on behalf of a company, he is clothed with the necessary authority to bind the company and that the internal regulations of the company have been complied with. Section 12(a)(b) and (c) of the Companies Act [Chapter 24:03] provides for the presumption of regularity. It reads as follows:

“12 Presumption of regularity

Any person having dealings with a company or with someone deriving title from a company shall be entitled to make the following assumptions, and the company and anyone deriving title from it shall be estopped from denying their truth -

(a) That the company's internal regulations have been duly complied with;

(b) That every person described in the company's register of directors and secretaries, or in any return delivered to the Registrar by the company in terms of section one hundred and eighty-seven, as a director, manager or secretary of the company, has been duly appointed and has authority to exercise the functions customarily exercised by a director, manager or secretary, as the case may be, of a company carrying on business of the kind carried on by the company;

(c) That every person whom the company, acting through its members in general meeting or through its board of directors or its manager or secretary, represents to be an officer or agent of the company, has been duly appointed and has authority to exercise the functions customarily exercised by an officer or agent of the kind concerned;”

In HAHLO, South African Company Law Through Cases 5^th ed…, the author states the following on authority;

“Under the rule also known as the indoor management rule persons dealing with the director or manager of a company who only exercises authority which he could have under the constitution of a company who openly exercises authority which he could have under the constitution of a company provided that some act of internal management was preferred and are entitled to assume that an act was performed.”

In Walenn Holdings (Pvt) Ltd v Intergrated Contracting Engineers (Pvt) Ltd & Anor 1998 1 ZLR 333 (H) the court endorsed the sentiments expressed in Morris v Kanssen (1946) 1 All ER 586 (HL)…, per LORD SIMON, which stated the following about the rule;

“The rule in Royal British Bank v Turquant (the Turquant on Indoor Management Rule) provides that persons contracting with a company, and dealing in good faith, may assume that acts within its constitution and powers have been properly and duly performed and one is not bound to inquire whether acts of internal management have been regular. The rule renders proof by the company that the internal formalities have not been compiled with insufficient to enable it to escape liability under the contract, hence, the rule is not merely on applications of the rebuttable presumption omnia praesumtur rite esseacta.”

Section 12 of the Companies Act [Chapter 24:03] codifies the Turquand Rule.

In any case, where there are business relations between the parties after a disputed contract has been concluded, stemming from it, it is incumbent upon the court to have regard to the conduct of the parties after the contract was entered into in order to determine the state of mind of the parties. In Levy v Banket Holdings Pvt Ltd R&N 98, TREDGOLD CJ relied on the remarks of CENTLIVRES JA in Collen v Rietfontein Engineering Works 1948 (1) SA 413 (AD) and said the following;

“In considering whether a contract is concluded between two parties, a court is not interested in the state of mind of the parties considered in the abstract. It must decide the issue on the state of mind of the parties as manifested by word or deed. It is idle for a party to avow mental reservations or unspoken qualifications if these are inconsistent with what is said or done.”

In Monzali v Smith 1929 AD 345 the court stated as follows regarding ostensible authority;

“Where any person, by words or conduct, represents or permits it to be represented that another has authority to act on his behalf he is bound by the acts of such persons with respect to any dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had authority which he so represented.”

See also Powerspeed Electrical Ltd v Enfield Zimbabwe HH107-13, where this court discussed the need to consider the conduct of the warring parties, especially that of the one challenging the contract, where there is evidence of continued association.

No resolution was produced to prove express or actual authority to carry out the project. Dr Zvandasara's position was that he had express authority from the Board and that the defendant refused him access to hospital records and hence he failed to have access to the resolution issued to carry out the project. Having failed to produce the resolution, I am not satisfied that Dr Zvandasara (the MD) showed that he had actual authority to carry out the project. The evidence points towards the suggestion that Dr Zvandasara, being Managing Director of the defendant, had ostensible authority to enter into the contract in issue.

The plaintiff was bona fide when dealing with Dr Zvandasara as the Managing Direcotr of the defendant and believed that he had the necessary authority to enter into the contract. No evidence was led to show that the plaintiff was aware that Dr Zvandasara had no authority of the defendant to enter into the agreement. The plaintiff's representative had no legal duty to neither enquire into the regularity of Dr Zvandasara's authority nor request for a resolution authorising the Managing Director to enter into an agreement on behalf of the defendant. When Dr Zvandasara entered into a contract with the plaintiff, he held out that he was carrying out normal functions within his domain as the Managing Director. The defendant is estopped from denying that he had authority to carry out the project.

Where a person in the position of the Managing Director deals with a third party, it is presumed that the company's internal regulations have been duly compiled with.

The defendant has not alleged and shown that the plaintiff knew that the alleged internal processes had not been followed or were irregular. The plaintiff was entitled to assume that acts within the defendant's Constitution and powers had been properly and duly performed, and, further, that Dr Zvandasara had the necessary authority to enter into the agreement in issue. The defendant cannot escape liability simply because it has proved that the internal formalities were not complied with.

The conduct and deeds of the parties, after the contract was entered into and during the progression of the project, confirms that the defendant's Board of Directors was aware of the project and gave it its thumbs up. The evidence led discloses the following;

(i) An agreement, which was witnessed by the defendant's Administrator and Company Secretary, was entered into between the parties.

(ii) A letter dated 21 September 2005, written by the Company Secretary to the plaintiff, states that permission to construct a maternity clinic was granted on 6 June 2006.

(iii) The plaintiff worked closely with various individuals, namely, a Dr Mazonde, Dr Sangweme and Dr Kambarami who were Board members of the defendant, the Company Secretary, and other members of staff.

(iv) Sketch plans relating to the work to be carried out were provided by Doctors Mbiriri and Mazonde with their comments endorsed on them.

(v) Small interim payments were made by the hospital and approved by two Board members, thus Dr Mbiriri and Kambarami.

(vi) Minutes of Board meetings, all chaired by Drs Makonese and Zvandasara, were produced. One of the Board meetings was held on 25 October 2005; minutes captured show that a Development Committee reported on its analysis of the plans and gave recommendations for improvements. Present were representatives of the two shareholders of the defendant, Mainbrain (Pvt) Ltd and Finpower (Pvt) Ltd, namely, Drs, Mujuru, Mabulala, Shumbairerwa, Nyaumwe, Mazonde, Mburiri, Chirenje and Makonese. Another meeting was held the next day. The minutes record that plans for the proposed second phase expansion programme were presented in the meeting and discussed. That these would be discussed in detail once permission to develop is granted by the city council.

The plans were discussed on 25 October 2006. Minutes of a Board meeting held on 26 October 2005, attended by Doctors Mazonde, Mbiriri, Chirenje and others, shows, without any doubt, that the Board was aware of the project.

A follow-up meeting was called for 23 November 2006 to discuss and revise the plans for the hospital. The same members of the Board, with the exception of Dr Mabulala, attended that meeting. The same Board, on 7 May 2014, met and discussed the consolidation of the two properties on Stand 17 and 19 Princes Road. Dr Mazonde submitted handwritten comments on the architect's drawings. He proposed changes to the structure.

The Board meeting chaired by Dr Kambarami, dated 6 September 2010, considered investors to sponsor the project. The Board resolved to accommodate an investor group led by Dr Mbizvo. The meeting observed that the expansion of the hospital was essential in order to remain competitive. A meeting held on 2 March 2011 was held in order to update the Board on the progress made in the proposed expansion project. The two defence witnesses attended this meeting. The minutes report that members expressed concern that the activity had reached this stage without Board members meeting to discuss it. There were concerns that the project was financially high risk and not properly timed in view of the prevailing economic climate. The meeting resolved to suspend the expansion project.

This analysis does not reveal that anyone objected to the project until the year 2010.

This is contrary to evidence which reveals that the defendant's Managing Director worked in close liaison with the Board of Directors; with them being given an opportunity to contribute to the developments that were taking place. The Board of Directors steered the project. The plaintiff's disbursement costs were paid by the defendant. The plans were posted at the entrance to the hospital reception area for 5 years for everyone to see. The final plans were displayed in the boardroom for everyone to see.

The court has also considered that after the year 2006 Dr Zvandasara ceased to be the chairperson of the Board and yet the Board continued to sit and maintain the project.

Evidence also reveals that the defendant was aware of the payments towards the project as the signatories to the defendant's account, Dr Nyaumwe, Dr Kambarami and Dr Mbiriri would have been required to approve the payments. An amount of $8,000= had already been paid as part of the first fee note. It does not appear that anyone objected to the payments.

There was a suggestion that the defendant only disowned the project when the 2010 fee note was submitted. The impression created is that the defendant was aware of the developments that were taking place. It is only when problems over payment arose in the defendant's camp that the defendant disowned the project. The defendant's shareholders, realizing the magnitude of the project and realising that their shareholding would be affected if they brought in sponsors of the project resulting and fall from 100% to 30%, decided to disown the project.

The Board members who sat in these meetings were deliberately not called to give their side of the story. The defendant did not challenge the minutes of Board meetings during the trial and only sought to do so in its closing submissions. Dr Makonese, who appears to have taken over from Dr Zvandasara, seemed to also have continued with the project without protest. He was not called as a witness.

When one considers the nature of the activities that took place and the fact that plans of this project were displayed at the reception and boardroom for years - and displayed for all to see; that the Board members sat and discussed the plans of the hospitals; the objections that were filed against the proposed consolidation; and the fact that the hospital actually paid for the posts of the project, the reasonable inference to be drawn from the proved set of circumstances is that the hospital staff, shareholders, as well as the Board of Directors were aware of the developments that were taking place. They did not object to the project over the 6 years that the project was carried out. Dr Mazonde submitted handwritten comments on the architect's drawings. He proposed changes to the structure.

I find, therefore, that the Board of Directors was aware of the developments that were taking place at the defendant's hospital and approved the developments.

The shareholders of the defendant are the two companies (Mainbrain (Pvt) Ltd and Finpower (Pvt) Ltd).

The Board members that attended the Board meetings are directors in the two companies that hold the shareholding in the defendant. The shareholders were effectively, through its members, aware of the developments. It is un-imaginable that none of the directors in the shareholder companies, who constituted the Board meetings, would fail to object to the project if indeed the shareholders were opposed to the project and that representatives of the shareholders would fail to notice the developments taking place. The same representatives of the shareholders and Board members sat and discussed the project and approved its bills.

The conduct of the defendant, after the signing of the agreement, is consistent with a party that is aware and approves of the agreement and project. It facilitates the contract and project and makes financial provision for it. What appears to have happened is that the project became too costly and the defendant decided to renege from it. I am persuaded that the parties entered into a binding contract for the alteration, addition, and refurbishment of the hospital.

In any case, where the existence of a contract is challenged on the basis of lack of authority and the parties continue to engage each other with respect to the contract in issue and perform in terms of the contract, it is pertinent and sensible, in order to discern the real intention of the parties, to consider the word or deed of the parties after the aftermath of the contract.

I find, therefore, that the Board of Directors were aware of the developments that were taking place at the defendant's hospital and approved the developments.

HH107-13 : POWERSPEED ELECTRICAL LTD vs ENFIELD ZIMBABWE
Ruled By: DUBE J

This is contractual a claim for a debt and interest arising therefrom. The plaintiff sold various electrical goods to the defendant on credit. The defendant fell into arrears amounting to $22,968=. On 5 May 2010, the defendant's erstwhile Managing Director signed a final demand agreeing to interest being charged on the overdue account at 4% per month. ...

This is contractual a claim for a debt and interest arising therefrom.

The plaintiff sold various electrical goods to the defendant on credit. The defendant fell into arrears amounting to $22,968=. On 5 May 2010, the defendant's erstwhile Managing Director signed a final demand agreeing to interest being charged on the overdue account at 4% per month. The plaintiff commenced charging interest on the outstanding amount and payments made were appropriated first to interest and then to the capital amount. At the time of trial, the amount claimed was $12,162=.This figure was revised down to $11,751= following adjustments to the account.

The defendant denies that it agreed to pay interest on the outstanding debt and disputes that the debt was one bearing interest. The defendant further avers that the payments it has made so far suffice to liquidate the debt. The defendant denies that its erstwhile Managing Director had authority to enter into an agreement on interest without approval of the other directors. It further denies that the final demand is an agreement to pay interest and that it is binding on the defendant as it is not signed by a representative of the plaintiff; that there are errors in the calculations and the amount claimed has not been proved.

The plaintiff called two witnesses. John Breyten Reid is a Financial Director for the plaintiff. His evidence is to the following effect;

The defendant purchased stock from the plaintiff and a total of $22,968= was outstanding as at May 2010. When the defendant could not settle the debt, the account was suspended. The parties agreed that the defendant pay interest on the account after the plaintiff made a demand for that money. He communicated with Mr Wallbridge, who was the Managing Director of the defendant at the time, who verbally agreed with the plaintiff that the defendant would pay interest on the account at 4% per month on the outstanding balance. The account had been suspended and after the agreement to pay interest, the credit facility that had been suspended was resumed and the defendant continued trading with the plaintiff. There was a verbal agreement between the parties before the final demand was reduced to writing. The oral agreement was entered into between Mr Moran and Mr Wallbridge after Mr Moran consulted him. The written agreement is in the form of a final demand to pay interest. He produced a final demand generated by the plaintiff's Credit Department dated 5 May 2010 which was signed by Mr Wallbridge. Subsequent to the final demand and the summons, certain payments were made. The plaintiff began to charge interest on the outstanding debt and the payments made on the account were appropriated first to interest. The outstanding amount was US$12,162= and was revised downwards to $11,751=. The plaintiff adjusted the claim to comply with the in duplum rule.

He explained that the agreement is not signed by the plaintiff because the plaintiff needed it signed by the defendant only….,.

The next witness to be called is the defendant's former Managing Director, Ross Grantly Wallbridge. He left the defendant company in January 2011 after he refused to take a reduction in salary.

His evidence is as follows;

He was the Managing Director of the defendant at the time that the debt in issue was created. The defendant approached the plaintiff to supply it with goods for resale. The defendant owed US$22,968=. He was approached by Mr Moran, an employee of the plaintiff, and the two discussed the overdue account, and, further, that a final demand would be issued and interest would be charged on the overdue account. He signed the final demand and agreed to interest being charged in his capacity as the Managing Director and had a discretion over the issue. He had authority to sign the final demand by virtue of his authority as the Managing Director. After he agreed to interest, the plaintiff continued to supply them. Interest was supposed to be calculated from 5 May 2010 on $22,968=. The final demand refers to outstanding amounts accrued before this date. Any subsequent purchases are not covered by this final demand. The witness accepted that it was a requirement that there be two signatories on purchase orders but contended that this practice was introduced after he had already signed the final demand.

He resigned from the company because they wanted him to take a reduction in salary. He refuted claims that he was testifying in favour of the plaintiff because he had left the defendant's company and had a labour case pending against the defendant. He also refuted the suggestion that he was conniving with the plaintiff. He contended that his labour issue with the defendant has nothing to do with the parties' dispute. He stated that he has no current dealings with the plaintiff and no personal interest in the matter….,.

The defendant called Gift Marufu who is the current Managing Director of the defendant company. His evidence is as follows;

He was the Financial Director of the defendant when this final demand was signed by Mr Wallbridge. The defendant never agreed to pay interest at the rate of 4% over the debt. When Mr Wallbridge signed the final demand he was not authorized to sign the document. A system had been put in place requiring all matters that have financial implications on the company to be authorised by two signatories. This policy was put in place in December 2009. The purpose of the new system was to ensure control of all purchases and financial matters - including the final demand in issue.

The witness was not involved in the agreement concerning interest. He testified that the signature of Mr Wallbridge is not binding on the defendant as he had no authority to sign the final demand on his own. He contended that even assuming that the final demand is binding, it is improper for the plaintiff to claim interest over new purchases made after 5 May 2010. He testified that Mr Wallbridge left the defendant company after a series of losses which emanated from his management style. He deliberately sacrificed the company by putting it into the liability as he was aware that the company had no capacity to pay even the capital amount at the time. As a result, the defendant decided to reduce the salaries of all Board members. The company is not liable to pay the amount claimed as there is no agreement between the parties to pay interest of 4% over the debt. He was not sure how the figure of $11,751= was arrived at. The witness admitted that the relationship between him and Mr Wallbridge was sour. The witness was at times evasive.

The issues referred to trial are as follows:-

“1. Whether or not the plaintiff is entitled to charge interest at the rate claimed in the summons, namely, 4% per month.

2. Whether or not the defendant is liable to pay interest claimed by the plaintiff.”

It is common cause that there was a debtor/creditor relationship between the parties in respect of a thirty day credit facility where the defendant would draw stock from the plaintiff. As at May 2010, the defendant owed US$22,968=84 and Mr Wallbridge signed a final demand acknowledging the debt and agreeing to interest at 4% per month.

The defendant continued to do business with the plaintiff.

The final demand is on a Powerspeed Electrical letterhead and is for US$22,968=84. Part of the letter of demand reads as follows:-

“In accordance with our agreement, this overdue amount will attracted a 4% interest charge per month.

Your credit facilities are hereby suspended until full settlement of overdue monies is received by Powerspeed Electrical Limited. You have 7 calendar days in which to settle this overdue amount or further steps, as is deemed necessary by Powerspeed Electrical Limited, will be taken to recover these monies…,.”

The final demand refers to an agreement where the parties agreed that the overdue account will attract a 4% interest charge per month. Not much detail is known about the agreement referred to in the final demand.

The defendant submitted that when the defendant's Managing Director signed the final demand, he had no authority to enter into the arrangement in that he failed to get another Director to countersign and authorize the final demand. The plaintiff contends that they were not aware that he did not have the authority to enter into such an agreement. The final demand was signed by Mr Wallbridge in his capacity as the Managing Director of the defendant company. The plaintiff proposed to charge interest at 4% and the defendant, by signing the final demand, agreed to be bound by its contents. Its conduct signifies assent to the terms proposed.

Any person who deals with a director or manager of a company who did not have actual authority to enter into a contract with third parties may be excused from making assumptions that internal company procedures have been followed.

This position is well captured in section 12 of the Companies Act [Chapter 24:03]. The section reads as follows:-

“12 Presumption of regularity

(a) That the company's internal regulations have been duly complied with…,.”

This section has been interpreted in a number of cases.

In Royal British Bank v Turquand (1856) 6E and B327 it was held that even if a director of a company did not have actual authority to enter into a contract to bind third parties, he had ostensible authority by virtue of his office to so act.

The defendant's erstwhile Managing Director held himself out as having authority to represent the company when he signed the final demand. If the internal procedures of the defendant company were not followed, the rule in Royal British Bank v Turquand (1856) applies in this case. The court is satisfied that Mr Wallbridge had ostensible authority to bind the defendant.

Appealed
SC17-19 : ECONET WIRELESS (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL
Ruled By: MALABA DCJ, GOWORA JA and MAVANGIRA JA

It follows that the letters under discussion were therefore competent as they were written by agents of the second respondent. The case of Gwafa v Small Enterprises Development Corporation Anor 1999 (2) ZLR 261 (SC) reasoned that: “The principles on which a seller can be bound by the ostensible authority of his agent have been set ...

“The principles on which a seller can be bound by the ostensible authority of his agent have been set out in a number of cases which have come before this Court. In Stewart Zagreb Properties (Pvt) Ltd 1971 1 RLR 180 (RA) at 184C-F; 1971 (2) SA 346 (RA) at 349 F-H, BEADLE CJ said:

'The principles on which a seller or a principal can be bound by the ostensible authority of an agent have been set out recently by this Court in the case of Reed NO v Sager's Motors (Pvt) Ltd 1970 (1) SA 521 (RA). The headnote to that case, which accurately sets out the judgment, is as follows:

'If a principal employs a servant or agent in a certain capacity, and it is generally recognized that servants or agents employed in this capacity have authority to do certain acts, then any of those acts performed by such servant or agent will bind the principal because they are within the scope of his 'apparent' authority. The principal is bound even though he never expressly or impliedly authorized the servant or agent to do these acts, nor had he by any special act (other than the act of appointing him in his capacity) held the servant out as having this authority. The agent's authority flows from the fact that persons employed in the particular capacity in which he is employed normally have authority to do what he did. Whether an act is or is not within the scope of the apparent authority of an agent is essentially a question of fact.'”

On the reasoning in Gwafa v Small Enterprises Development Corporation & Anor 1999 (2) ZLR 261 (SC), the authors of the letters related to had the ostensible authority to write them on behalf of the second respondent....,.

For the appellant to succeed in proving estoppel, it has to prove, and the authority for this proposition is the case of Andrew Phillips (Pvt) Ltd v GDR Pneumatics (Pvt) Ltd 1986 (2) ZLR 65 (SC) 67, that the respondents or their officers made a representation in word or deed which might have reasonably misled the appellant; that the appellant was misled; and that the representation induced the appellant to act as it did.

View Appeal
HH964-15 : ECONET WIRELESS (PVT) LTD vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL and STEWARD BANK LTD and CBZ BANK LTD and NMB BANK LTD and STANBIC BANK LTD
Ruled By: MUSAKWA J

The defence of estoppel was explained by McNALLY JA in Mashave v Standard Bank of SA Ltd 1998 (1) ZLR 436 (SC)…, as follows: “The Roman-Dutch law protects the right of an owner to vindicate his property, and, as a matter of policy, favours him as against an innocent purchaser. See for instance Chetty v Naidoo 1974 (3) SA 13 ...

SC37-17 : TM SUPERMARKETS (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and SHERIFF OF ZIMBABWE
Ruled By: CHIDYAUSIKU CJ

On 1 October 2010, one B J Beaumont wrote to the first respondent on behalf of the applicant indicating that it would not contest the first respondent's right to take back its premises upon the expiry of the lease, that is, on 28 February 2014. The subsequent letters by the applicant's legal practitioner to the first respondent, ...

HH196-15 : G CHIPARAUSHE and 66 OTHERS vs TRIANGLE LIMITED and TRIANGLE SENIOR STAFF PENSION FUND
Ruled By: CHIGUMBA J

In the celebrated case of Ais Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd 1981 (3) SA 274 (A)…, the court had this to say: “The essence of the doctrine of estoppels by representation is that a person is precluded, i.e. stopped, from denying the truth of a representation previously made by him to another person if the latter, believing ...

HH223-13 : HWANGE COLLIERY CO. LTD and HWANGE COAL GASIFICATION CO. PL vs HWANGE COAL GASIFICATION CO. PL and TENDAI SAVANHU and KINGDOM BANK LTD and STANBIC BANK LTD and GUO FENG and ORS
Ruled By: MAFUSIRE J

There has been ferocious litigation in a space of four months pitting several protagonists. The dispute was convoluted and the issues multi-faceted. At the centre was a company called Hwange Coal Gasification Company (Private) Limited. For ease of reference I shall refer to this company as the Coal Gasification Company. The one protagonist was a Chinese company by the name of Taiyuan Company Limited. The variants to that name, vehemently disputed by the other protagonists, were Taiyuan Sanxing Company Limited and Taiyuan Sanxing Economic and Trade Company Limited….,.Hereafter I shall refer to it as “Taiyuan”.

The other protagonists were two Chinese nationals and businessmen called Guo Feng (“Feng”) and Su Longmin (“Longmin”).

In the hearing before me, and for convenience, the two were referred to as the “Samukange faction”.The reason shall soon become apparent.

The next lot of protagonists were Zimbabwean nationals and businessmen Cephas Msipa (“Msipa”) and Gilbert Chahwanda or Chawanda (“Chawanda”). In the hearings they were referred to as the “Dzvetero faction”.

The next lot was Hwange Colliery Company Limited (“Hwange Colliery”). Three commercial Banks, Stanbic Bank Zimbabwe (“Stanbic”), Kingdom Bank Zimbabwe (“Kingdom”), and Allied Bank Zimbabwe (“Allied Bank”) were cited in some of the cases.

The last protagonist was one Tendai Savanhu (“Savanhu”).

Apart from the urgent chamber applications listed as cases 1 to 6 above there had been two others before them. They had pitted essentially the same parties. At the time of the hearing three other proceedings, in the form of a court application and two actions, were still pending.

The litigation related to the protagonists' investment in, and control of the two companies Taiyuan and the Coal Gasification Company.

The brief background is that in October 2006 some Chinese nationals, including Feng and Longmin, got associated in a joint venture with some Zimbabwean nationals that included Msipa, Chawanda and one Leo Mugabe (“Mugabe”). The object of the joint venture was to invest in various ventures. For that purpose, the Chinese nationals used Taiyuana as the special purpose vehicle. Both Feng and Longmin were directors. The special purpose vehicle used by the Zimbabwean nationals was a company called Stoat Mining (Private) Limited (“Stoat”) in which Mugabe, Msipa and Chawanda were directors.

In 2007, Taiyuan, now comprising both the Chinese and the Zimbabwean nationals, on the one part, and Hwange Colliery on the other, entered into a written agreement for the construction of a coke oven and a battery at Hwange Colliery on the basis of build, operate, own, and transfer (“the BOOT agreement”). In June 2011 the parties obtained an investment licence from the Zimbabwe Investment Authority (“the ZIA licence”). The ZIA licence stipulated a shareholding configuration of 75% for Taiyuan and 25% for Hwange Colliery.

The Coal Gasification Company was the special purpose vehicle formed by both Taiyuan and Hwange Colliery. The shares were held 75% by Taiyuan and 25% by Hwange Colliery.

The principal object of the Coal Gasification Company was the processing and carbonization of coal from resources within Zimbabwe. In terms of the BOOT agreement, the configuration of the Board of Directors for the Coal Gasification Company would be five (5) from Taiyuan and two (2) from Hwange Colliery. The chairman of the Board would be a Taiyuan appointee. Taiyuan's representatives on the first Board comprised Feng and Longmin as executive directors; Msipa and Chawanda as non-executive. Another Chinese national by the name of Zhang Jin Yuan (“JinYuan”) was the chairman. From Hwange Colliery came Savanhu and one Fred Moyo (“Fred Moyo”) then chairman and managing director respectively.

Taiyuan and Hwange Colliery soon clashed.

One of the points of contention by Hwange Colliery was that the Coal Gasification Company had breached the BOOT agreement. Hwange Colliery moved to cancel that agreement and to seek damages. Under HC537/13 it sued both Taiyuan and the Coal Gasification Company for damages amounting to $21 million. The matter was still pending at the time of the urgent chamber applications.

The other bone of contention by Hwange Colliery was that it had been induced to enter into an agreement with a non-existent company. This allegation stemmed from the confusion surrounding the identity of Taiyuan. The BOOT agreement and the ZIA licence identified Taiyuan as Taiyuan Sanxing Company Limited. However, Hwange Colliery alleged that such a company did not exist and that only after the BOOT agreement had been executed was a company called Taiyuan Sanxing Economic and Trade Company Limited formed in China.

Hwange's further bone of contention was that its BOOT partner, Taiyuan, was in turmoil. Its shareholders were at each other's throat. This allegation stemmed from the fact that the Chinese and the Zimbabwean nationals were bringing a series of applications against each other in the name of the Coal Gasification Company with both factions claiming to be the legitimate and authorised representatives of that company. Hwange Colliery was apprehensive that its investment in the Coal Gasification Company would be dissipated.

Hwange Colliery further claimed that Taiyuan had reneged on its pledge to bring into the country an amount of US$40 million as part of its injection into the joint venture. Therefore, Hwange Colliery was seeking cancellation of the BOOT agreement.

Within the Coal Gasification Company itself matters soon came to a head.

In March 2013 JinYuan, as chairman, called for the holding of an Annual General Meeting. It was scheduled for 24 April 2013. Feng and Longmin were vehemently opposed to that meeting. They moved to block it. On 19 April 2013 they filed an urgent chamber application under case no HC3003/13 in the name of Taiyuan Sanxing Economic and Trade Company Limited. Messrs G N Mlotshwa & Co represented the applicant. Hwange Colliery was cited as the substantive respondent. One Ananias Banda, the Company Secretary, and the Registrar of Deeds, were cited as nominal respondents.

The matter came before MAWADZE J.

A point in limine was taken that the Taiyuan as cited was not the Taiyuan as was recorded on the ZIA licence and with which Hwange Colliery had entered into an agreement. Mr Mlotshwa conceded. The application was dismissed with costs on the point in limine.

The Annual General Meeting (AGM) went ahead as scheduled. Among other resolutions, Feng and Longmin would be suspended from the Coal Gasification Company.

A day after the Annual General Meeting (AGM), i.e. on 25 April 2013, Feng and Longmin, in the name of Taiyuan Sanxing Economic and Trade Company Limited, filed an ordinary court application under HC3160/13 for an order nullifying the AGM and all the resolutions taken thereat. At the time of the hearings that application was still pending.

In May 2013 Feng and Longmin were formally suspended and called to a disciplinary hearing to answer various charges including one of fraud. The suspension letters were signed by Msipa as director. Feng and Longmin were eventually dismissed as executive directors in default of appearance at the disciplinary committee.

The Coal Gasification Company reconstituted its Board of Directors. The new Board wrote to the Banks, Stanbic, Kingdom and Allied Bank to “freeze” the company's accounts.

On 5 June 2013 Feng and Longmin, together with three other Chinese nationals, were barred access to some Harare premises rented by the Coal Gasification Company from Hwange Colliery. The one letter was signed by Chawanda. The other, in long hand, was signed by one Chininga who was said to be from Hwange Colliery. But this was disputed.

Feng and Longmin went on the attack.

They threatened the Banks and warned them not to take instructions from persons that were not signatories to the accounts. Feng reminded them that he was the signatory and that the signing instructions had been given by him. On 6 June 2013, before BERE J, Feng and Longmin obtained a spoliation order in the name of the Coal Gasification Company against Mugabe and Hwange Colliery. They were granted unhindered possession and control of the aforesaid premises. Mugabe and all those claiming rights through him were ordered to maintain peace and to allow undisturbed access to the applicant and to return any company documents and office keys. However, in subsequent proceedings, Hwange Colliery claimed that Feng and Longmin had been mala fide in that they had obtained the spoliation order not with any genuine intention to re-occupy the premises but merely to gain access in order to pilfer company assets such as office furniture and to cart them away to unknown destinations.

On 20 June 2013 Feng and Longmin filed two further urgent chamber applications (“the twin applications”). They were almost identical. They were both in the name of the Coal Gasification Company as the applicant. The applicant, in reality Feng and Longmin, was now represented by Venturas and Samukange. The one application was under HC4861/13. It is case no. 4 above. In that application it was sought to “unfreeze” the account at Kingdom Bank. The respondents were Kingdom, Chawanda and Msipa. Antonio & Dzvetero represented Chawanda and Msipa. Hwange Colliery was not cited. Kingdom remained neutral and sought to abide by the court order.

The other application was filed under HC4895/13. It is case no. 5 above. In that application the first respondent was Stanbic. That Bank also remained neutral and agreed to abide by the order of the court. Again, Hwange Colliery was not cited. HC4895/13 came before DUBE J. She heard it on 24 June 2013. The matter was settled by consent. The parties agreed to an interim order. The freeze on the Stanbic account would be uplifted. The authorised signatories would be Fred Moyo, one Tafara Gadzirai (“Gadzirai”) and Feng. These would have unconditional access to the account. Gadzirai would countersign for all withdrawals. The actual wording of the material portion of the order was as follows:

“That pending the final determination of this matter, Applicant is granted the following relief:

1. The 1^st Respondent be and is hereby ordered immediately and forthwith upon service of this order to unfreeze the Applicant's account being 0240057759001 held by the 1^st Respondent.

2. Applicant's authorised signatories named Fred Moyo, Tafara Gadzirai and Feng Guo shall have unconditional access to the account for the purposes of transacting on behalf of applicant provided that Tafara Gadzirai shall counter-sign for all payments.”

HC4861/13 came before MATHONSI J. He heard it on 26 June 2013. The parties also agreed to an interim order. It was almost identical to the one by DUBE J. However, before MATHONSI J could consider the application and the draft order by consent, Hwange Colliery applied to be joined to the proceedings. This was granted. The matter was postponed to the following week. As the Samukange faction filed the twin applications aforesaid the Dzvetero faction also filed its own. This was done on 21 June 2013, i.e. a day after the twin applications.

The Dzvetero application was filed under HC4897/13. It is case no.6 above. It was also in the name of the Coal Gasification Company as the applicant. The respondents were Feng, Longmin, Hwange Colliery, Allied Bank, Stanbic, Kingdom and a firm of chartered accountants called Welsa International Chartered Accountants. The Dzvetero application came before me. The basic relief sought was also to unfreeze the Bank accounts but to appoint the accountants as the sole administrators of those accounts pending the determination of the court application by the Samukange faction under HC3160/13. That was the application in which the validity of the Annual General Meeting (AGM) and the resolutions made thereat were being challenged.

It was upon perusal of the Dzvetero application that I became aware of the one Samukange application under HC4895/13 which had been placed before DUBE J. At that stage, I was neither aware of the other Samukange application under HC4891/13 that had been placed before MATHONSI J nor of the rest of the other proceedings referred to above. I did not immediately set down the Dzvetero application.

I had queries.

One of the averments in that application was that an Extraordinary General Meeting to resolve the entire shareholder issues in the Coal Gasification Company had been scheduled for 24 June 2013. Excluding the intervening weekend, the 24^thofJune 2013 was the next business day. So, in my view, there could have been no reasonable apprehension of an irreparable harm ensuing in that short space of time. Furthermore, it was common cause that it was the Dzvetero faction that had ordered the freeze on the Bank accounts. Therefore, I wondered why the intervention of the courts was being sought when the issue was now properly set for resolution in the boardroom by the “corporate parliament” of the company.

The supreme rule-making authority of a company rests with a general meeting of the members; see GOWER's Principles of Modern Company Law, 4^th ed…,.

At that stage, I was unaware that one of the issues that had triggered the twin Samukange applications was that the Banks had taken the position that given the apparent turmoil in the Coal Gasification Company, and that given the conflicting instructions and threats that they were receiving in respect of those accounts, the Banks would not unfreeze the accounts in the absence of a court order.

I called for the record of the one Samukange application under HC4895/13. But, by that time, the aforesaid order by consent by DUBE J had already been granted. However, I then became aware of the other Samukange application under HC4861/13 which had been placed before MATHONSI J and of the rest of the other applications referred to above. I then called for all the records.

Only thereafter did I get to appreciate the multifaceted disputes.

I set down the Dzvetero application for hearing on 27 June 2013. Mr T Mawere represented Hwange Colliery. Mr T Dzvetero represented the Dzvetero faction and the Coal Gasification Company. Mr J Samukange represented the Samukange faction and also the Coal Gasification Company.

At the hearing, Mr Mawere expressed concern that Hwange Colliery had not been cited in the twin Samukange applications and that the consent order by DUBE J had far reaching consequences that were prejudicial to Hwange Colliery in that, among other things, Fred Moyo, whom the two warring factions had selected as a co-signatory to the Bank accounts, was no longer employed by Hwange Colliery and that therefore he could not possibly represent it. It was further pointed out by Mr Mawere that the resolutions that the Samukange faction had used as authority to bring their twin applications in the name of the Coal Gasification Company had been signed by Savanhu - yet Savanhu had since been dismissed from the Board of Hwange Colliery.

In the premises, Mr Mawere gave notice that Hwange Colliery had filed, or would be filing, three urgent chamber applications;

(1) For an order that Hwange Colliery be joined to HC4895/13 and to vary the consent order by DUBE J so that Fred Moyo would be removed from the list of signatories and replaced by someone else properly appointed by Hwange Colliery;

(2) For an anti-dissipation interdict to prohibit the disposal of any of the assets of the Coal Gasification Company, especially the coal stocks, coking oven, and battery, by anyone purporting to act on behalf of that company until Hwange Colliery's claim for the cancellation of the contract and for damages under HC537/13 was determined; and

(3) For an interdict against Savanhu to stop him from masquerading as a director, representative, and appointee of Hwange Colliery on the Board of the Coal Gasification Company because he had been dismissed.

Mr Samukange vehemently opposed the intended applications.

Essentially, Mr Samukange's submission was that the choice of Fred Moyo as a co-signatory to the Bank accounts, in terms of the consent orders, was motivated not by his previous connection to Hwange Colliery but by the fact that he was a neutral person and that he was still a director of the Coal Gasification Company anyway even though he might have lost his employment with Hwange Colliery. Mr Samukange further submitted that, in terms of the agreement between the parties, Hwange Colliery would not be involved in the day to day management of the Coal Gasification Company; that the issue of signing on Bank accounts was one of management and that therefore Hwange Colliery was in effect seeking to sneak into the management of the Coal Gasification Company by the back door. He further submitted that the dispute between the two factions was not one for shareholders but one involving company management and that the interdict against Savanhu would be opposed on essentially the same basis, namely, that until Savanhu was properly removed from the Board of the Coal Gasification Company by that company itself Hwange Colliery had no right to do so especially given that it was just a minority shareholder.

The anti-dissipation order would be opposed on the basis that its effect would virtually paralyse and collapse the Coal Gasification Company the business of which was essentially the processing and disposal of coal.

Given the multi-faceted nature of the dispute and the issues between the parties, and given that they were so intertwined, it was readily agreed that all the matters would be consolidated and heard by a single judge.

Barring any unforeseen objections or complications it was agreed that I would hear the matters myself. The hearing was adjourned to a later date to be advised.

Hwange Colliery's three applications were subsequently filed under HC5171/13, being case no.1 above; HC5105/13, being case no.2 above and HC5331/13, being case no.3 above.

Eventually, I caused the matters to be set down for hearing on 5 July 2013.

Hwange Colliery was now represented by Advocate T Mpofu and Stanbic by Mr I Chagonda.

On that day, a new issue arose. It was on the consent order by DUBE J. It was for that single issue that Mr Chagonda was appearing. The new issue was this: it transpired that the parties could not agree on the interpretation of that order. Stanbic thought that the order could either mean that the three signatories Feng, Fred Moyo and Gadzirai had all to sign for any bank withdrawals but that the order could also mean that any two of them could sign for as long as one such signatory was Gadzirai.

The two factions favoured the interpretation that allowed any two to sign for as long as one of the signatories was Gadzirai. On the other hand, Hwange Colliery was vehemently opposed to that interpretation as it was feared that there could be connivance just to facilitate withdrawals. Consequently, Hwange Colliery favoured a restrictive interpretation that would allow withdrawals only when all the three signatories would sign.

On behalf of Stanbic, Mr Chagonda submitted that given the several threats for damages against it, the Bank would not permit any withdrawals until such time that the new signing arrangement was clarified.

The matter was adjourned to 11 July 2013 because Mr Samukange did not have some of the papers in the applications by Hwange Colliery. Before the resumption of the hearing on 11 July 2013 the Dzvetero faction had withdrawn its application under 4897/13. Therefore, the issue as to whether the interim management of the Bank accounts could be placed in the hands of the chartered accountants had automatically fallen away.

But, yet again, a new issue had arisen! It was also on the consent order by DUBE J.

Previously, on the day that the order had been granted, i.e. 24 June 2013, the Samukange faction had been represented by Advocate Firoz Girach. When the parties had come unstuck at Stanbic, as aforesaid, they had convinced themselves that what really they had consented to was the arrangement that any two of the three signatories could sign for any withdrawals for as long as one of such signatories was Gadzirai. Thus, the parties had then arranged to instruct Advocate Girach to approach DUBE J and seek an amendment of the consent order so that it would align with what allegedly was their true intention and true agreement. With Mr Dzvetero's consent, DUBE J had amended the order.

But there was a problem. Hwange Colliery had not been consulted.

Both factions had become aware, during the second sitting before me, that Hwange Colliery was disagreeing with such an interpretation and that not only would it be opposed to such an amendment but also that in its own application to be joined to those proceedings and for an amendment to that order it would move for an express provision that all the three signatories would have to sign for any withdrawals. Furthermore, since all the matters had been consolidated and would be heard by me, the propriety of pulling out the single record for purposes of amending the single order in terms which were disputed and in the absence of such an interested party as Hwange Colliery and without disclosing to both Advocate Girach and DUBE J that Hwange Colliery had in fact since filed its urgent chamber applications aforesaid was questioned.

Advocate Mpofu, for Hwange Colliery, expressed serious concern on the development. Be that as it may, I concluded the hearing on 11 July 2013. The crisp issues were;

(1) Whether Hwange Colliery was entitled to have the consent order by DUBE J amended in such a way as to remove Fred Moyo from the list of the Bank signatories and have him replaced by someone else from its stable;

(2) Whether Hwange Colliery was entitled to have that consent order further amended so that it would reflect that all withdrawals from the Bank accounts would be signed for by all the three signatories, whoever they would eventually be;

(3) Whether Hwange Colliery was entitled to the anti-dissipation interdict against the property of the Coal Gasification Company pending the resolution of its action for the cancellation of the contract and for damages in HC537/13; and

(4) Whether Savanhu should be interdicted from holding himself out as one with authority to represent the Coal Gasification Company and from attending meetings of, signing documents for and on behalf of and representing himself as one with authority to represent that company....,.

(4) WHETHER SAVANHU SHOULD BE INTERDICTED FROM HOLDING HIMSELF OUT AS ONE WITH AUTHORITY TO REPRESENT THE COAL GASIFICATION COMPANY AND FROM ATTENDING MEETINGS OF, SIGNING DOCUMENTS FOR AND ON BEHALF OF, THAT COMPANY

In resisting Hwange Colliery's application, Mr Samukange relied on the Articles of Association of the Coal Gasification Company. He argued that in terms of Article 17 the directors were appointed for life unless they resigned or were removed in terms of the specific circumstances outlined therein. He submitted that the court should bind the parties to their agreement.

He said Hwange Colliery was not entitled to recall Savanhu from the Coal Gasification Company even if he might no longer be with Hwange Colliery. It was up to the Coal Gasification Company itself to properly remove him from its Board in terms of its Articles of Association.

Article 17 reads as follows:

“17 NO ROTATION OF DIRECTORS

The provisions of Regulations 90 to 96 or Part 1 of Table 'A' shall not apply. A Director shall not be subject to retirement by rotation, and shall continue to hold office until he or she dies, resigns or is disqualified in terms of Regulation 89 of Part 1 of Table 'A' or removed from the office in terms of Regulation 97 of Part 1 of Table 'A'."

In brief, Regulations 90 to 96 of Table A in the First Schedule to the Companies Act [Chapter 24:03] provide for the rotation of directors of a company. In terms of those Regulations all the directors of a company retire from office at the first Annual General Meeting (AGM). One third of them retire in subsequent Annual General Meetings (AGMs) in the order specified. Retiring directors are eligible for re-election. The company may fill the vacancies of retired directors. The company can increase or reduce the number of its directors. The directors themselves can fill casual vacancies.

Thus, the net effect of the exclusion of Regulations 90 to 96 of Table A by Article 17 of the Articles of Association of the Coal Gasification Company and replacing them with its own peculiar provision was that any person appointed as director of that company held office for life unless he or she resigned or became disqualified in terms of Regulations 89 or 97.

It was common cause that Savanhu had neither resigned from the Coal Gasification Company nor had become disqualified in terms of Regulation 89 or 97.

Regulation 89 of Table A provides for the disqualification of a director on various grounds. These include the failure of a director to acquire a specified shareholding in the company where he or she is required to do so; a director becoming afflicted by a legal, mental or physiological disability such as insolvency, insanity or conviction of specified offences; a director who is under-age or who a court has removed from office; or a director with prolonged absenteeism from Board meetings.

None of these were issues before me in respect of Savanhu.

Regulation 97 of Table A provides for the removal of a director by a company itself through an ordinary resolution which is preceded by a special notice.

It was common cause that as far as Savanhu's directorship in the Coal Gasification Company was concerned this had not happened. On the contrary, it was submitted that he was still very much wanted and that he was still being called to that company's meetings.

On the Savanhu issue, the crisp point for determination was the effect to be given to Article 17 vis-a-vis clause 4.5 of the BOOT agreement. I should point out that clause 4.5 had, in essence, been duplicated in Article 11 of the same Articles. It was couched as follows:

“11 DIRECTORS

Hwange Colliery Company to appoint 2 [two] directors and Taiyuan Sanxing Company to appoint 5 (five).”

It was most unsatisfactory for me to have to determine the respective rights of the BOOT partners in such a summary fashion as the urgent chamber applications obliged me to do. The legal issues were of considerable importance. But they were not, and could not, have been properly canvassed or ventilated when the matters had come to court under certificates of urgency. Therefore, the conclusion that I have come to in this matter should be understood only in the context of the peculiar facts and circumstances of the matter.

As pointed out earlier, the Samukange faction was able to claim the authority to bring proceedings in the name of the Coal Gasification Company largely on the basis of a purported resolution of the Board of Directors for that company signed by Savanhu. Hwange Colliery's application to interdict Savanhu was based on what it claimed to be the harmful effects of Savanhu's conduct. Dealing specifically with this point, Hwange Colliery's deponent to the founding affidavit in HC5331/13, after setting out how Fred Moyo and Savanhu had been removed from its own Board and how that removal had been communicated to the Coal Gasification Company, through the Company Secretary, and how at the same time replacement names had been forwarded, went on to aver as follows:

“14. It is therefore beyond dispute that the 1^st Respondent (i.e. Savanhu) was removed from 2^nd Respondent's Board (i.e. the Coal Gasification Company) by his former appointee, the Applicant (i.e. Hwange Colliery).

15. However, sometime in June 2013, 1^st Respondent attended an opaque Board meeting which culminated in him signing a certain resolution authorising one Guo Feng to represent the company in certain litigation matters.

16….,.

17. After 1^st Respondent was dismissed by the Applicant, the term of office of Mr. Fred Moyo with whom 1^st Respondent formerly served on the Board of 2^nd Respondent as Applicant's appointees expired. The said Fred Moyo also ceased to be part of both Applicant and 2^nd Respondent.

18….,.

19. While all this happened, Mr. Guo Feng and Su Longmin, the other Board members of the 2^nd Respondent, being representatives of the Taiyuan Sanxin (sic) Company Limited were also dismissed by their principals and replaced….,.

20….,.

21. The harmful effects of 1^st Respondent's actions are seen by what resulted from this action. Armed with this resolution, Guo Feng filed a series of urgent chamber applications for control of signing rights over the 2^nd Respondent's Bank accounts. Applicant was conveniently not cited in any of these applications in spite of being a major shareholder in 2^nd Respondent….,.”

In my view, the directorship of the Coal Gasification Company was a closed shop if regard is had to clause 4.5 of the BOOT agreement and Article 11 of the Articles of Association.

The directors were appointed, not elected, by the two shareholders in terms of the agreed ratio. An appointee is one who is chosen or placed by someone else in a job or position of responsibility. This does not follow the process of an election which entails a formal appointment following a formal process of voting.

Article 17 referred to elected directors who would otherwise retire by rotation in terms of the provisions of the Regulations to the Companies Act.

In my view, the exclusion by Article 17 of the application of Regulations 90 to 96 in Table A did not take away the shareholders' rights to appoint their own directors to the Board of the Coal Gasification Company.

I accept the argument that Fred Moyo and Savanhu held office as directors of the Coal Gasification Company at the pleasure of Hwange Colliery. I consider that the power to appoint must have entailed the power to remove or to recall.

Having been removed from the Board of Hwange Colliery, and having been expressly recalled from the Board of the Coal Gasification Company, Fred Moyo and Savanhu no longer represented anyone in that company.

To hold that once having been appointed to the Board of that company they occupied the office for life unless removed in the circumstances proscribed by Article 17 would lead to absurd results. Among other things, it would mean Hwange Colliery would cease to have any representation on that Board. Even Taiyuan itself, the majority shareholder, would also cease to have any representation in the event that it also recalled its own appointees as was alleged in respect of Feng and Longmin.

I do not think that it was ever intended that the Coal Gasification Company would, at any time, be controlled by anyone else other than the appointees of the two respective shareholders in the prescribed proportion until the expiry of the BOOT agreement.

In the circumstances, I am prepared to grant the relief sought. After all, it is only an interim measure. The matter shall properly be argued on the return day....,.

1....,.

2....,.

3. Mr Tendai Savanhu is hereby interdicted and restrained from holding himself out to any person or body whatsoever as one with authority to represent Hwange Colliery Company Limited in any manner or capacity.

4. Mr Tendai Savanhu is hereby further interdicted and restrained from attending any Board meetings of the Hwange Coal Gasification Company (Private) Limited or from signing any documents or making any representations or statement of authority in relation to that company.

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

The plaintiff, N.R Barber (Private) Limited (hereinafter referred to as “plaintiff”) is a company duly registered in terms of the laws of Zimbabwe, whose registered office is 114 Seke Road, Graniteside, Harare. The plaintiff specialises in mining operations, underground, open cast, mining plans, transport logistics for ferrying the ore from one place to the supplier and related business.

The first letters of the plaintiff stand for Nolan Robert whose surname is Barber. Incidentally, he is the Managing Director and alter ego of the plaintiff.

The defendant, Zambezi Gas Zimbabwe (Private) Limited (hereinafter referred to as the “defendant”) is equally a duly registered company in terms of the law of Zimbabwe whose offices are situated at Number 28 Transtobac Complex, Hillside Road Extension, Msasa, Harare.

Mr Francis Chirimuuta, the Managing Partner of Chirimuuta and Associates, is the Board Chairman of the defendant; Mr E. Raradza is the Managing Director; Mr Thomas Nherera is the Executive Director for Finance and Administration; Mr M. Raradza is the Executive Director for Operations and Marketing; Mrs R.M Kajese being the fifth Director.

The defendant is a proprietor and hence holder of a coal mine situated in Hwange under a special Grant Number 4084 in respect of coal reserves which comprise of approximately 20,000,000 (twenty million) tonnes mineable and extractable in situ tons of coal. The defendant then formed a Special Purpose Vehicle under the name of Entuba Coal Fields of Zimbabwe (Private) Limited whose registered office address is given as 28 Hillside Road Extension Transtobac Complex, Msasa, Harare whose directors are Dr C. Msipa, Mr Hlongwani, Mr E. Raradza, Mr T. Nherera and Mr M. Raradza.

Dr C. Msipa and Mr Hlongwani are directors of another entity called Coal Brick which company is known to the plaintiff. Hence, Mr E. Raradza and Mr T. Nherera are both directors of the defendant and Entuba Coal Fields of Zimbabwe (Private) Limited.

On 28 August 2017, the plaintiff issued summons against the defendant for the following relief;

(a) Payment of the amount of USD3,885,000, being payment of money due and owed to the plaintiff by the defendant in terms of an acknowledgment of debt which was executed by the defendant in favour of the plaintiff on the 15th of February 2017;

(b) Interest on the amount at the prescribed rate of 5% per annum calculated from the date of summons to the date of payment in full; and

(c) Costs of suit on attorney client scale.

In paragraph 3 of the plaintiff's declaration it summarises the plaintiff's cause of action as follows:

“3. On the 15th of February 2017 the defendant executed an acknowledgement of debt in favour of the plaintiff wherein it admitted that the amount of $3,885,000 (three million eight hundred and eighty five thousand United States dollars) was due and owed to the plaintiff as a debt arising from the work done by the plaintiff at Entuba Mine at the instance and request of the defendant.”

In paragraph 5 of its declaration the plaintiff adds:

“The defendant failed to pay the monthly instalments as per the acknowledgement of debt and the amount of US$3,885,000 is now due and owed to the plaintiff.”

The defendant entered appearance and filed its plea and the gravamen of its plea is contained in paragraph 3 which states the following:

“3: Ad Paragraph 3 Defendant denies;

(a) The existence of any privity of contract between plaintiff and itself and denies that any work was allegedly performed on its behalf.

(b) That plaintiff performed work on its behalf or for whomsoever at its special instance and request. It puts plaintiff to the proof thereof.

Defendant, consequently, denies that there was any legal cause for the alleged acknowledgement of debt.”

On the strength of this plea, the defendant prays that the plaintiff's claim be dismissed with costs.

On 29 January 2018 the parties signed a joint pre-trial conference minute which streamlined issues for trial as follows:

“1. Whether there was legal cause for the acknowledgement of debt.

2. Whether the debt acknowledged by the defendant arises from work done by the plaintiff at the instance and request of the defendant.

3. What amount is due by the defendant to the plaintiff?”

On 13 June 2018 the matter proceeded to trial.

Mr N R Barber, the plaintiff's Managing Director, gave evidence. He stated that between 2013 and 2014 he was tasked to do work at Hwange by Entuba Mine, a company owned by the defendant company. The total amount due from Entuba was $3,012,493=46, and, on 12 May 2016, the defendant's Chief Executive Officer, Mr Thomas Nherera, wrote to the plaintiff acknowledging its indebtedness to the plaintiff for that amount.

The first acknowledgement of debt, authored and signed by the defendant's Directors, was produced by the plaintiff in court and accepted as exhibit number 1.

In the contents of exhibit 1, the witness pointed out that the defendant thought it acknowledged its indebtedness to the plaintiff in the sum of $3,012,493=46, a reconciliation of the total capital owed was going to be carried out and factor in any amount towards fuel expense issued to the plaintiff during the operations, thereafter, interest was going to be added to the capital.

On 15 February 2017, Mr N.R. Barber told the court that indeed a second acknowledgement of debt showing a deduction in capital and a figure of interest was signed by the defendant. The second acknowledgement of debt, exhibit 2, was produced in court.

Mr NR Barber further clarified and confirmed that although all the invoices were reflecting Entuba Coal Mine, those were subsequently accepted by the defendant and the defendant acknowledged its indebtedness to the plaintiff and what was more crucial to the plaintiff were the acknowledgements of debt specifically created, authored, and signed, by the defendants which formed the plaintiff's cause of action.

He clearly testified that Entuba Mine was a special purpose vehicle formed by the defendant and he was not surprised when the defendants delivered to him exhibit(s) 1 and 2. He believed the defendant when it told him that it was going to take over the debt.

In any case, according to the witness, the defendant was the beneficiary of the product the plaintiff produced.

He added that at all material times Mr T Nherera was aware of all the invoices issued to Entuba and Mr T. Nherera used the same invoices to prepare and reconcile figures which he ultimately used to compile the acknowledgement of debts.

Mr N.R. Barber was extensively cross examined by the defendant's counsel but he maintained his stance, and, further, added that although the defendant was joined by Linos Masimura, well after the signing of the acknowledgement of debt, the defendant did not challenge the authenticity of the acknowledgment.

Mr NR Barber was actually surprised when Mr E Raradza and Mr T Nherera refused to honour the defendant's indebtedness. The amount of $3,885,000 was calculated and reconciled by the defendant and it ought to be honoured he contended.

The plaintiff's second witness was Mr Antiock Kuraone who was appointed as agent by the plaintiff to recover the outstanding debt.

When the witness was appointed he engaged the Directors of the defendant, the Managing Director, Mr E Raradza, and Mr T. Nherera. The defendants unreservedly acknowledged owing the plaintiff an amount of $3,885,000 and they produced exhibit no. 2 where the defendant indicated the proposed date of payment with a cut-off date for last payment being February 2020.

The witness reiterated the fact that in as far as the legal cause of the acknowledgement of debt was concerned, the acknowledgements themselves, prepared by the defendant, succinctly disclosed the cause, that is, for payment of money for the work done for the defendants at Entuba Mine in Marange.

Exhibit 2 was signed by the Managing Director, Mr E Raradza, and Director Finance and Administration, Mr T Nherera.

The two were not forced and co-operated throughout the engagement, he said.

He also clarified that at no time did the defendant raise the issue of liability; the sticking issue that arose when he came into the matter was basically reconciliation, more particularly, of factoring in the fuel aspect. Otherwise, the parties were in agreement as to the amount.

During cross examination by the defendant's counsel, the witness remained adamant that the issue of legal causa did not arise during the engagement.

Mr T. Nherera was fully aware of all the verifications and he (Mr T Nherera) is the one who did the reconciliation.

Mr Kuraone rejected the amount of $896,884 as the correct amount and denied that Mr Masimura engaged him for a revisit on the alleged reconciliation of the figures contained on the acknowledgements.

After the acknowledgement, what Mr Kuraone and the plaintiff were waiting for was payment. When the defendant did not honour the payment he advised the plaintiff to take legal action, which the plaintiff did.

Mr Antiock Kuraone impressed the court as an honest witness, he did not exaggerate but remained forthright. He actually confirmed Mr N.R. Barber's testimony and both witnesses were credible. Their evidence tallies with the exhibits produced in court....,.

Defendant's Evidence

The defendant called Mr Edward Raradza, its Managing Director; to give evidence. I will deal with portions of his evidence relevant to the matter before me.

He told the court that sometime in September 2013 the defendant and Coal Producers and Processors Trust Zimbabwe entered into a joint venture agreement where the two parties formed a Special Purpose Vehicle, Entuba Coalfields (Private) Limited. The defendant was to avail its mining concession to the joint venture and Coal Producers Trust was to provide resources to mine the coal.

The plaintiff was brought on site to Entuba Coalfields to provide mining contractor services.

According to the witness, it was Coal Producers Trust which brought the plaintiff to Entuba and payment of work done by the plaintiff, per Entuba, was Coal Producers Trust's responsibility. He repeated what is contained in the defendant's plea, that there was no contractual arrangement between the plaintiff and the defendant.

In July 2015, the Special Purpose Vehicle, Entuba Coal Mine Company, became dysfunctional and the defendant repossessed its mining concession. The defendant was aware of the plaintiff's debt, and, according to Mr E Raradza, the defendant, without any legal obligation thereto, executed an acknowledgement of debt in favour of the plaintiff in the amount that the plaintiff had indicated was wrong subject to a reconciliation being conducted.

He added that the defendant could not pay because the income flows from the mining operations did not permit fulfilment of such undertakings that the defendant had made.

During cross-examinations by the plaintiff's legal practitioner, Mr Raradza unequivocally admitted that the Directors and the defendant company confirm that the plaintiff is owed but the only contentious issue was the amount. He accepted the authenticity of both exhibit 1 and 2, and, per exhibit 2, he accepted that he co-signed it but he was not familiar with issues relating to costing mining invoices. He admitted that efforts were made to reconcile the figures acknowledged but was not clear as to when such efforts were made before the drafting of exhibit 2 or after it was already signed.

Most of his evidence actually substantiated the plaintiff's case.

The defendant's second witness was Mr Thomas Nherera. In principle, the witness dwelt more on corporate divisibility, that, as long as there are two existing companies, the liability of one does not cross the demarcating line to the other side. Each company is accountable to its own liabilities. Hence, the defendant did not enter into any contractual relationship with the plaintiff, and, as such, there was no pretext for the writing of the acknowledgement of debt.

He however brought a very crucial revelation which greatly assisted this court. He admitted, under cross examination, that the Managing Director of the defendant and himself were both directors of Entuba. He was its Chief Executive Officer and he is the one who received all the invoices from the plaintiff. Using those invoices, he prepared exhibit 1 and 2. However, when exhibit 1 and 2 were prepared and signed, the real motive was to retain business relationship and rapport with Mr NR Barber but thus far.

He also admitted that Entuba had no assets at all and was fictitious in principle.

Mr T Nherera was evasive during cross-examination and had difficulties in answering simple questions. He contradicted Mr E Raradza especially on the aspect of liability of the defendant to the plaintiff.

Mr Linos Masimura was the defendant's third witness.

He holds a Masters in Business Leadership and is involved in mining operations in Zimbabwe and South Africa. He is the Deputy Managing Director of the defendant from June 2017. When he joined the defendant he was briefed about the defendant's status, its employees and liabilities. He was shown exhibit 1 and 2 and undertook to do a verification exercise. He visited the mine at Hwange with Mr E Raradza, the Mining Manager, and Mr Kurauone. He worked out a reconciliation thereafter and came out with a figure of $896,884 as being the “real” amount per the work done by the plaintiff. He also worked out the total sum of payments made to the plaintiff by Entuba or payments made to the plaintiff for work done.

He strengthened the defendant's plea that there was no legal causa between the plaintiff and the defendant.

During “conciliation” of figures, he worked with Mr Kurauone who was representing the plaintiff but when the witness engaged Mr Kurauone with the figure of $896,884 Mr Kurauone could not accept it.

The witness is not an accountant, he did not produce a comprehensive audit report based upon the acknowledgement figures and show the deductions of double invoicing. The document shown by the witness is but scanty. It does not show the reconciliation process for one to come up with the amount of $896,884.

The witness was cross-examined by the plaintiff's counsel and was at pains to explain how he arrived at that figure of $896,884.

He did not agree with the Managing Director's evidence that the defendant owes the plaintiff money.

After the testimony of Mr L Masimura, the defendant closed its case....,.

Analysis of plaintiff's Exhibits

Exhibit 1

Exhibit 1 is the first acknowledgment of debt dated 12 May 2016. The exhibit reads as follows:

“AGREEMENT OF INDEBTEDNESS

We acknowledge our indebtedness to your company, N R Barber (Pvt) Ltd, in regards to the contract mining work your company carried out for us at Zambezi Gas's Entuba Coal Concession in Hwange, Zimbabwe.

We acknowledge the capital amount of USD3,012,493=46 (USD Three million and twelve thousand four hundred and ninety three dollars and forty six cent) subject to the reconciliation of the total amount of fuel issued out to NR Barber (Pvt) Ltd mining team during the period between 16 May 2014 to 4 June 2014. This amount excluding interest. This interest will be added after reconciliation of total capital amount owing as per the contract.

We are also agreeable to your proposal that as soon as inflows of income from our mining operations start to come in the proceeds will be shared amongst us at the agreed percentages that shall be agreed between Zambezi Gas and NR Barber (Pvt) Ltd at that time. We are also agreeable to giving you full access to our books of accounts so as to have full transparency between us.

This agreement is without prejudice to prior contracts made between our two parties….,.”

The letter was written by the defendant company and signed by Mr Thomas Nherera, its Chief Executive Officer, the defendant's second witness in this trial. It originates from the defendant company written on the defendant's letter head. The defendant's witnesses acknowledge same.

Exhibit 2

This letter was written and signed by Mr E Raradza (the Managing Director of the defendant) and Mr Thomas Nherera (Executive Director Finance and Administration) dated 15 February 2017 on behalf of the defendant.

It is equally central to this matter and it needs extensive quotation and analysis. It is necessary to quote it as is:

“Zambezi Gas Zimbabwe Private Limited

15 February 2017, Mr J.M Kurauone, Harare, Attn: Mr Kurauone

Dear Sir

REPAYMENT PROPOSAL FOR THE PAYMENT OF N.R BARBER (PVT) LTD

We, as Zambezi Gas Zimbabwe (Pvt) Ltd, are committed to the repayment of the principle debt of USD2,715, 000 (two million seven hundred and fifteen thousand dollars) and an interest amounting USD1,170,000 (one million one hundred seventy thousand dollars) to the work done at Entuba Coal Mine in Hwange between 2014 and 2015. We are proposing the following repayments starting from February 2017 onwards to February 2020.

MONTH AMOUNT (USD)
February 2017 10,000
March 2017 10,000
April 2017 15,000
May 2017 15,000
June 2017 20,000
July 2017 20,000
August 2017 30,000
September 2017 30,000
October 2017 40,000
November 2017 40,000
December 2017 40,000
Total 265,000

January 2018 50,000
February 2018 50,000
March 2018 70,000
April 2018 70,000
May 2018 90,000
June 2018 90,000
July 2018 100,000
August 2018 100,000
September 2018 100,000
October 2018 100,000
November 2018 100,000
December 2018 100,000
Total 1,020,000

January 2019 150,000
February 2019 150,000
March 2019 200,000
April 2019 200,000
May 2019 200,000
June 2019 200,000
July 2019 200,000
August 2019 200,000
September 2019 200,000
October 2019 200,000
November 2019 200,000
December 2019 200,000
Total 2,300,000

January 2020 150,000
February 2020 150,000
Total 300,000

Total all arrears $ 3,885,000

We are hopeful that you will find this a fair way of settling this outstanding debt.

Yours faithfully

E RARADZA (ER)
T NHERERA (TN)
MANAGING DIRECTOR, EXECUTIVE DIRECTOR FINANCE & ADMINISTRATION”

Exhibit 1 and 2 gave rise to the action taken by the plaintiff. The following aspects seem not to be controverted by the parties;

(a) The defendant and the plaintiff are known to each other in business.

(b) The defendant's own agents/Directors, Mr E Raradza (the Managing Director) and Mr T Nherera (Executive Director: Finance & Administration) wrote exhibit 2 above proposing to settle the debt of the exact amount owed by the defendant to the plaintiff in the sum of $3,885,000.

(c) The defendant unconditionally undertook, and promised, to pay specified amounts of money per month from 2017 to the month of February 2020.

(d) The acknowledgments of debt are of a specific sum of money and made in writing by the defendant's authorised agents and accepted by the plaintiff.

(e) The defendant is bound by the actions of its agents, Mr E Raradza and Mr T Nherera; resultantly, the defendant, through, the actions of its agents, rendered itself liable as the principal.

SC25-14 : DAVID GOVERE vs ORDECO (PRIVATE) LIMITED and REGISTRAR OF DEEDS
Ruled By: ZIYAMBI JA, HLATSHWAYO JA and PATEL JA

The principal issue for determination is whether the court a quo misdirected itself by finding that the appellant was a Director of Coldrac (Pvt) Ltd t/a Tacoola Beverages at the material time....,.In paragraph 6 of his opposing affidavit, the appellant admits that he was a Director of Coldrac (Pvt) Ltd ...

Appealed
SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED
Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

This is an appeal against the decision of the High Court handed down under HH253-16 wherein the court a quo found the appellant liable to pay to the respondent the sum of US$847,847=65 together with costs of suit and interest at the prescribed rate from the date of the granting of the judgment to the date of payment in full.

The appellant is a statutory corporation set up in terms of the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] (“the IDBZ Act”). The respondent is an oil company registered in accordance with the Companies Act [Chapter 24:03].

The background to the matter may be summarized as follows:

A company known as Wedzera Petroleum (Private) Limited (“Wedzera”) entered into a verbal agreement with the respondent wherein the respondent would sell bulk petroleum fuels to it from time to time. The respondent would supply the petroleum products on credit and raise invoices to be settled by Wedzera Petroleum. Wedzera Petroleum would, in turn, settle the invoices within ten days from the date on which the invoices would be raised.

In November 2010, the respondent sold to Wedzera, petroleum products worth US$847,847=65. The sale of the petroleum products was made on the basis of two guarantees made by the appellant binding itself to pay in the event that Wedzera Petroleum failed to honour the debt. The two guarantees were drafted on 5 November 2010 and 19 November 2010 for the sums of US$500,000 and US$450,000 respectively.

The guarantees issued by the appellant were in the form of a letter, which bore the letter head of the Infrastructural Development Bank of Zimbabwe. It was addressed to the respondent and signed by one Francis Mugwara (“Mugwara”) the Head of the Short Term Loans Unit.

Part of the first guarantee, dated 5 November 2010, read as follows:

“In consideration of Wedzera Petroleum (Pvt) Ltd…, agreeing to the submission of a guarantee for the supply of fuel products by Engen Petroleum Zimbabwe (Pvt) Ltd, we, Infrastructure Development Bank of Zimbabwe – IDBZ…, do hereby guarantee full payment of USD500,000.00…, being the total amount of the Bank Guarantee to Engen Petroleum Zimbabwe (Pvt) Limited. The payment of the USD500,000 will be after a period of 10 (ten) days from the date of fuel drawdown and is on revolving basis…,.”

The second guarantee, dated 19 November 2010, read as follows:

“In consideration of Wedzera Petroleum (Pvt) Ltd…, agreeing to the submission of a guarantee for the supply of fuel products by Engen Petroleum Zimbabwe (Pvt) Ltd, we, Infrastructure Development Bank of Zimbabwe – IDBZ…, do hereby guarantee full payment of USD450,000…, being the total amount of the Bank Guarantee to Engen Petroleum Zimbabwe (Pvt) Limited. The payment of the USD450,000 will be after a period of 10 (ten) days from the date of fuel draw-down and is on revolving basis…,.”

After the guarantees had been issued, Wedzera Petroleum failed to pay the debts arising from the petroleum products which were sold to it on credit by the respondent.

On 8 March 2011, Wedzera Petroleum wrote to the respondent informing that it (Wedzera Petroleum) was experiencing negative cash flows due to the unavailability of fuel during the months of December 2010 and January 2011 and that it was aware of its indebtedness to the respondent. Wedzera Petroleum further informed the respondent that it would pay its entire indebtedness within 14 days.

Wedzera Petroleum failed to honour its indebtedness as promised.

The respondent wrote to the appellant on 15 March 2011 informing it to liquidate Wedzera Petroleum's debt in accordance with the two guarantees.

The appellant, through a letter dated 31 of March 2011, informed the respondent that upon checking its records it found that it had not issued the guarantees in favour of the respondent against any debts incurred by Wedzera Petroleum. The appellant further informed the respondent that it was unsure of the circumstances under which the purported guarantees had been drafted and issued to the respondent on behalf of Wedzera Petroleum.

Following the failure by Wedzera Petroleum to make due payment of the debt, and the repudiation of the guarantees by the appellant, the respondent issued summons against Wedzera Petroleum and the appellant for the payment of the sum of US$847,847=65.

PROCEEDINGS BEFORE THE COURT A QUO

In the court a quo, Wedzera Petroleum, in its plea, admitted its indebtedness to the respondent but denied liability as it argued that liability had passed to the appellant who undertook to settle the debt due in terms of the two guarantees.

The appellant, in its plea, denied being indebted to the respondent at all. It indicated that according to their records there was no indication that Wedzera Petroleum had applied for, or had been granted any guarantees. It further alleged that the guarantees had been generated through fraud.

At the pre-trial conference, the main issue which was referred to trial was: whether or not the appellant was liable to pay Wedzera Petroleum's debt on the basis of the two guarantees.

At the trial, Wedzera Petroleum was in default. The court a quo, upon application from the respondent, granted default judgment against Wedzera Petroleum in favour of the respondent for the sum of US$847,847=65 together with costs of suit and interest at the prescribed rate.

The trial proceeded against the appellant.

In analysing closing submissions made by counsel, the court a quo noted that the appellant's counsel sought to introduce a new argument which had not been pleaded.

The argument was based on the fact that the appellant was a statutory corporation which derived its powers from the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] and that the provisions of the Companies Act [Chapter 24:03] (“the Companies Act”), which codified the Turquand Rule, could not be applied against the appellant in terms of section 30 of the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14].

The court held that in spite of the provisions of section 30 of the Infrastructure Development Bank of Zimbabwe Act (IDBZ Act) which made the appellant immune to the provisions of the Companies Act, the actions of Francis Mugwara fell squarely within the scope of the presumptions of ostensible authority.

The court found that Francis Mugwara held a senior position in the Bank; that he had subordinate staff under him; he had access to and used the appellant's stationery. He was the Head of the Short Term Loans Unit which Unit had, amongst others, a mandate to issue guarantees.

The court further found that Francis Mugwara's job description empowered him: “…, to generate, manage and control the Bank's short-term lending portfolio as well as [to] supervis[e]…, Regional Offices.”

Further, that his key duties included decision making authority, authority to approve departmental expenses and the budgets for the Unit and the Regional Offices.

The court found that the onus was on the appellant to prove that Francis Mugwara did not have any form of authority to facilitate guarantees and to prove any form of fraud and bribery on his part.

The court found the appellant liable to the respondent for the guarantees which were issued by Francis Mugwara in respect of Wedzera Petroleums's indebtedness. The appellant was thus ordered to pay the respondent the sum of US$847,847=65, or the remaining amount after payment was made by Wedzera Petroleum, together with costs of suit and interest at the prescribed rate from the date of the granting of the judgment to the date of payment.

PROCEEDINGS ON APPEAL

Aggrieved by the findings of the court a quo the appellant noted this appeal on the basis of the following grounds of appeal:

(i) Having found, as it did, that there was no conclusive evidence to establish that one Francis Mugwara had authority to issue the two guarantees relied upon by the respondent on his single signature, the court a quo erred in law in placing a further negative onus of proof on the appellant to establish that one Francis Mugwara had no such authority.

(ii) Having found, as it did, that there was no conclusive evidence to establish that one Francis Mugwara had authority to issue the two guarantees relied upon by the respondent on his single signature, the court a quo erred and misdirected itself on the facts, and in law, in finding, as it did, that Francis Mugwara had actual and/or implied authority to issue the two guarantees relied upon by the respondent in its cause of action.

(iii) The court a quo erred and misdirected itself in law in finding the appellant liable to the respondent on the basis of ostensible authority when such was not pleaded by the respondent in the Summons and Declaration.

(iv) The court a quo grossly erred and misdirected itself on the facts in finding, as it did, or must be taken to have done that the appellant represented to third parties, in particular to the respondent, that one Francis Mugwara had authority to issue the guarantees relied upon by the respondent in its cause of action.

(v) The court a quo erred in law in failing to find that the two guarantees relied upon by the respondent were fraudulently procured and thereafter tendered to the respondent by Wedzera Petroleum (Private) Limited, and, as such, no liability could flow from such fraudulent instruments.

(vi) The court a quo erred on the facts and in law in finding, as it did, that the respondent had acted diligently in accepting the two guarantees tendered to it by Wedzera Petroleum (Private) Limited in the absence, inter alia, of any facility between the appellant and Wedzera Petroleum (Pvt) Ltd.

(vii) The court a quo erred on the facts and in law in failing to find that the conduct of Francis Mugwara, in purporting to issue the two guarantees in the absence, inter alia, of any facility agreement between the appellant and Wedzera Petroleum (Pvt) Ltd and/or the respondent not only offended the internal processes of the appellant but also the procedure set out in the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14]. Consequently, the court a quo ought to have found that his conduct was a legal nullity and no liability attached to the appellant.

(viii) The court a quo erred in law in effectively finding the appellant liable on the two guarantees on the basis of the Turquand Rule when the application of such rule is specifically ousted by the provisions of section 30 of the Infrastructure Development Bank of Zimbabwe Act.

In my view, it is apparent from the appellant's grounds of appeal that three issues arise for determination. These are the following:

A. Whether or not the court a quo erred in finding that Francis Mugwara had authority to issue the two guarantees relied upon by the respondent.

B. Whether or not the court a quo erred in finding the appellant liable to pay the respondent on the basis of ostensible authority.

C. Whether or not the appellant was liable to pay the respondent on the basis of the Turquand Rule when such was never pleaded by the respondent in its summons and declaration.

I will proceed to deal with each of these issues.

Whether or not the court a quo erred in finding that Francis Mugwara had authority to issue the two guarantees relied upon by the respondent

The appellant argued that Francis Mugwara's contract of employment did not give him authority to act on behalf of the Bank. It also submitted that the court a quo erred in its factual findings to the effect that he had implied authority to act on behalf of the appellant.

In order to fully understand the authority Francis Mugwara possessed there is need to make reference to his key duties in the Bank.

Francis Mugwara held the title of the 'Head of Short Term Loans'. Under this title, he was the second in charge after the office of the Director of Private Sector Projects as shown from the organogram of the Short Term Loans Unit. A summary of Francis Magwara's job was stated as:

“To generate, manage, and control the Bank's short term lending portfolio as well as supervision of Regional Offices.”

Among his key tasks was “marketing of Bank products to achieve bankable portfolio of clients, disbursements of funds on approved facilities, and making presentations to the Private Sector Projects Committee (PSPC) on projects for approval.”

In addition, Francis Mugwara's job description had an incidental clause on error of judgment and the consequences which would affect the Bank if the Head of Short Term Loans made a wrong decision. The clause stated as follows:

“Catastrophic as bad decisions can lead to the insolvency of the Bank through the creation of a Bad Loan portfolio. Reputation of the Bank can be on the line if prompt and correct decisions are not made.”

The court made factual findings that Francis Mugwara had authority to act on behalf of the appellant. The court a quo noted the following:

“…, notwithstanding the Bank's argument that Mugwara's power might have been limited, I find that as much as between himself and the Bank, Mugwara had actual or implied authority to issue those guarantees. I find that as between Engen and the Bank, Mugwara had ostensible authority to issue the guarantee and to bind the Bank to third party recipients.”

A clear reading of Francis Mugwara's key tasks shows that he worked under a Unit which controlled the manner in which guarantees were issued. He was the senior personnel in the Bank as he was second in command from the Director of the Unit. He had access and control of the appellant's stationery to an extent that he had business cards to identify himself. He had the task of marketing Bank products and disbursements of funds on approved loan facilities.

The court a quo found that on these factual findings the key tasks done by Francis Mugwara were enough evidence to show that he had authority to act on behalf of the appellant.

The court a quo also took into account that although criminal proceedings were instituted against Francis Mugwara by the appellant, on the basis of fraud and bribery, the office of the Prosecutor General refused to prosecute the matter on the basis that it was a labour matter. That, in any event, the appellant had failed to provide adequate evidence to sustain a conviction.

The court a quo, in determining the impact of the criminal charges laid against Francis Mugwara, found that the onus to prove fraud and bribery was on the appellant and that the prosecutor had failed to prove that Francis Mugwara had been fraudulent or had received any bribe.

The proof to be proffered by the appellant for fraud and bribery in casu would be proof on a balance of probabilities as the fraud and bribery were being alleged in a civil trial after the criminal charges had failed to materialise.

Proof in civil proceedings is always on a balance of probabilities.

In the case of Zimbabwe Electricity Supply Authority v Dera 1998 (1) ZLR 500 (SC), the court stated the following:

“…, in a civil case, the standard of proof is never anything other than proof on the balance of probabilities. The reason for the difference in onus between civil and criminal cases is that in the former the dispute is between individuals, where both sides are equally interested parties. The primary concern is to do justice to each party, and the test for that justice is to balance their competing claims.

In a criminal matter, on the other hand, the trial is an attack by the State, representing society, on the integrity of an individual. The main concern is to do justice to the accused. If the prosecution fails, the State does not lose.”

Francis Mugwara, having admitted that he issued the guarantees and having alleged that he did so lawfully, it was for the appellant to prove all the allegations laid against him of fraud and bribery.

The appellant did not adduce any proof to the contrary, but, rather, stood on the argument that he had no authority to individually sign a guarantee.

The appellant produced sample guarantees which it alleged were lawfully facilitated for other parties. These sample guarantees were juxtaposed with the guarantees which Francis Mugwara had facilitated and affixed a single signature instead of two signatures as appeared on the sample guarantees. The appellant argued that the fact that the guarantees issued on behalf of Wedzera Petroleum were not counter-signed meant that the guarantees were fake and invalid.

Sample guarantees produced before the court a quo showed that Francis Mugwara would countersign a guarantee with other personnel of the Bank. It is of importance to note, however, that such other personnel would be junior personnel and Francis Mugwara would counter sign to give effect to the validity of the guarantee facilitated by his subordinates.

It thus could not have been extensively irregular that on the two guarantees made in favour of the respondent Francis Mugwara signed the guarantees with no other counter signature as he was the head of the Unit from which such guarantees originated.

The arguments raised by the appellant, that absence of a second signature rendered the guarantees ineffective, thus lacks merit.

The appellant did not adduce any evidence to show that the facilitation of the guarantee was not carried out in-house. The appellant's witnesses could have brought the register for credit facilities issued by the Bank to show that no entry was ever made in favour of Wedzera Petroleum to the respondent.

Francis Mugwara vehemently denied that he had not followed proper procedures in processing the guarantees and stated that records of the guarantees were with the appellant.

In examination in chief, Francis Mugwara admitted to having recorded the guarantees in the Bank's register. The court a quo, in assessing these facts, found that:

“The evidence on whether or not Mugwara could issue guarantees on his single signature was inconclusive. Mugwara said he could. The Bank said he could not. The onus was on the Bank to prove that he could not. It did not refute, satisfactorily, Mugwara's claim that it was only guarantees initiated by subordinates that required to be counter-signed for validity. I find that the Bank failed to discharge the onus on such a key aspect of defence.”

In finding that Francis Mugwara had authority to act on behalf of the appellant, the court a quo made reference to the incidental clause in his job description document. A reading of the clause shows that Francis Mugwara, as the Head of Short Term Loans, had to take due diligence and not make an error of judgment as such error in creating a bad loan portfolio would have catastrophic consequences which could lead the appellant to insolvency.

This clause, in itself, crystalizes the point that he had authority to act on behalf of the appellant in a manner which could extend to issuing guarantees. Only a senior officer of the Bank could possess authority to act on its behalf to an extent where an error of judgment would lead to catastrophic results.

It is a settled principle that this Court will not easily interfere with factual findings made by a lower court unless the findings are grossly unreasonable. See ZINWA v Mwoyounotsva 2015 (1) ZLR 935 (S); Hama v NRZ 1996 (1) ZLR 664 (S); Reserve Bank of Zimbabwe v Corrine Granger and Another SC34-01.

The lower court enjoys the opportunity to see the witnesses on the stand, assess their demeanour and credibility. Such findings of fact cannot easily be interfered with by an Appellate Court as it is limited to the record of proceedings. See Mtimukulu v Nkiwane and Another SC136-01.

It is my view that the court a quo's factual findings cannot be impugned.

Francis Mugwara was a senior employee who could carry out credit facilitation and represent the appellant.

All the above findings lead to the inescapable conclusion that the court a quo's factual findings were correct.

The next inquiry that arises from this finding is the extent of the authority Francis Mugwara had in issuing the guarantees to the respondent; that is, whether or not it was implied or express authority.

Whether or not the court a quo erred in finding the appellant liable to pay the respondent on the basis of ostensible authority

The court a quo found that the authority exercised by Francis Mugwara, in issuing the guarantees, was implied (apparent or ostensible) authority.

The respondent based its arguments for the claim of payment of the guarantees on the ostensible authority which had been exercised by Francis Mugwara. Counsel for the respondent submitted that it was on the basis of this apparent authority exercised in the issuing of the guarantees that the respondent agreed to issue Wedzera Petroleum fuel.

It was the appellant's argument that no such implied authority existed and that on the basis of Francis Mugwara's job description such authority was not given to him.

The appellant also argued that in terms of the Bank's Lending Policy, Francis Mugwara did not have authority to single-handedly facilitate a credit facility, sign it, and issue it without proper procedure being followed.

Ostensible authority, or apparent authority, exists where an agent's words or conduct lead a reasonable person in a third party's position to believe that the agent is authorized to act, even if the principal and the purported agent have never discussed such a relationship.

The effect and meaning of ostensible authority was discussed in Makate v Vodacom Ltd 2016 (4) SA 121 (CC)…, in which the case of Hely-Hutchinson CA v Brayhead Ltd and Another [1968] 1 QB 549 (CA)…, was referred to with approval. The court stated the following:

“Actual authority and ostensible or apparent authority are the opposite sides of the same coin. If an agent wishes to perform a juristic act on behalf of the principal, the agent requires authority to do so, for the act to bind its principal. If the principal had conferred the necessary authority, either expressly or impliedly, the agent is taken to have actual authority. But, if the principal were to deny that she had conferred authority, the third party who concluded the juristic act with the agent may plead estoppel in replication.

In this context, estoppel is not a form of authority but a rule to the effect that if the principal had conducted herself in a manner that misled the third party into believing that the agent has authority, the principal is precluded from denying that the agent had authority.”

The court went on to state the importance of ostensible authority and made the following remarks..,.:

“The concept of apparent authority, as it appears from the statement by, Lord Denning, was introduced into law for purposes of achieving justice in circumstances where a principal had created an impression that its agent has authority to act on its behalf.

If this appears to be the position to others, and an agreement that accords with that appearance is concluded with the agent, then justice demands that the principal must be held liable in terms of the agreement.

It cannot be gainsaid that, on present facts, there is a yearning for justice and equity.”

In Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147, SLADE J noted as follows:

“Ostensible or apparent authority which negatives the existence of actual authority is merely a form of estoppel; indeed, it has been termed agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients:

(i) A representation;

(ii) A reliance on the representation; and

(iii) An alteration of your position resulting from such reliance.”

See also Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480.

Ostensible authority thus binds a principal over actions done by its agent with relation to third parties. Such principal can thus be estopped from denying liability of the actions of the agent.

In casu, Francis Mugwara was an agent of the appellant; he was the head of the Short-Term Loans Unit and had subordinates under him. His key duties included a mandate to approach companies and commercial institutions in a bid to facilitate that these companies and institutions acquired loan facilities from the appellant.

It was not in dispute that at the time the two guarantees were issued to the respondent on behalf of Wedzera Petroleum, the appellant was running off-balance sheet facilities due to the economic situation which was prevailing in the country at that time. On the basis of such off balance sheet facilities the appellant would issue credit facilities to finance different business ventures.

It is important to note that the first encounter under which Francis Mugwara and the respondent met was not on the issuance of the guarantees. Francis Mugwara had previously made presentations before Mr Mudzengerere, who was the respondent's Managing Director. Francis Mugwara approached the respondent to issue the guarantees on fuel procurement and disbursement. The intended business venture between Francis Mugwara and the respondent did not materialise at that time but a relationship had been formed.

It thus cannot be taken as being irregular that, upon being presented with the guarantees in favour of Wedzera Petroleum, for fuel allocation, Mr Mudzengerere, on behalf of the respondent, accepted these guarantees.

The respondent duly accepted the guarantees on the basis of the conduct and representations which had been made by Francis Mugwara - even before Wedzera Petroleum sought a credit facility from the appellant.

The respondent's cause of action against the appellant, for payment, was on the basis of ostensible authority which had been exercised by Francis Mugwara.

The court a quo duly made factual findings on the exercise of this authority. Clearly, there is nothing illogical or unreasonable from the court a quo's findings.

Francis Mugwara confirmed that he had authority to carry out his duties and the respondent could not be faulted for honouring the guarantees which were issued on behalf of the appellant by its Head of Short Term Loans.

The court a quo found Francis Mugwara to be a reliable witness.

On the basis of the above finding it is therefore my view that the appellant is liable to pay the respondent the sums of money arising from the guarantees....,.

The importance of the Turquand Rule was stated in Arinaitwe v Africana Clays Ltd [2017] UGCOMMC 93 wherein the court stated that:

“The rule in Turquand's case, also known as the indoor management rule, is premised not on logic but on business convenience because a third party dealing with a company has no access to the company's indoor activities. It would be very unfair to the company's creditors if their company could escape liability on the ground that its officials acted irregularly when it was unaware of the internal procedures.

The Turquand Rule flows from the celebrated case of Royal British Bank v Turquand [1943-60] ALL ER Rep. 435 at page 437 H- 438 A where the court held the following:

'We may now take for granted that the dealings with these companies are not like dealings with other partnerships, and that the parties dealing with them are bound to read the statute and the deed of settlement. But they are not bound to do more. And the party here, on reading the deed of settlement, would find, not a prohibition from borrowing, but a permission to do so on certain conditions. Finding that the authority might be made complete by a resolution, he would have a right to infer the fact of a resolution authorizing that which, on the face of the document, appeared to be legitimately done.'

The Turquand Rule thus provides that when there are persons conducting the affairs of a company in a manner which appears to be perfectly consonant with the Articles of Association, those so dealing with them externally are not to be affected by irregularities which may take place in the internal management of the company. See Mahony v East Holyford Mining Co. (1874 - 75 LR 7 HL 869).

The exceptions to this rule are;

(i) Firstly, if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (in other words, he acted in bad faith); and

(ii) Secondly, if the circumstances under which the contract was concluded on behalf of the company were suspicious, then the Turquand Rule cannot be raised as a defence.

The Turquand Rule is similar to the principle of ostensible authority in that both tenets seek to protect a third party against a principal or company which refutes actions done by agents or representatives without express authority.

A difference between the two appears to be based on the point that the Turquand Rule functions as a defence for the principal.

Where the principal argues that the third party was aware that internal procedures were not followed by the agent and that the contract was concluded on behalf of the company under suspicious means, such third party cannot be heard to claim that the principal is liable for the actions of the agent.

The third party should take due diligence in contracting with the principal through the agent.

Ostensible authority, on the other hand, acts as a defence for the third party who claims that, on the basis of the conduct and presentations of the agent on behalf of the principal, such conduct amounts to apparent authority justifying the third party's belief to contract.

In One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty) Ltd and Another 2015 (4) SA 623 (WCC); [2015] 4 All SA 88 (WCC) the court, at paragraph 25, stated the following in a bid to explain the difference between the Turquand Rule and ostensible authority:

'I think it will be found, from an analysis of these and other leading authorities, that the Turquand Rule is simply an adjunct, in the context of companies and other entities with Constitutions available to the public, of the law on ostensible authority, which is, in turn, a particular form of estoppel by representation.

(In Northside 10 Developments supra Brennan J said that Diplock LJ's lucid exposition in Freeman of the general principles of estoppel 'provides the framework within which the specifically “indoor management” cases are to be placed').'”…,.

Section 12 of the Companies Act codifies the common law principle of the Turquand Rule. See Govero v Ordeco (Private) Limited and Another SC25-14; Andrew Mills v Tanganda Tea Company Limited HH12-13.

The section provides for the presumption of regularity to an extent that any person who deals with a representative of a company is taken to presume that all procedures are regular.

Section 12 is further reinforced by section 13 of the same Act which provides that such liability is not affected even where the company alleges that the representative acted in a fraudulent way.

View Appeal
HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE
Ruled By: MAFUSIRE J

This was a civil trial.

The first defendant [“Wedzera”] was in default. On application by the plaintiff [“Engen”] in respect to which the second defendant [“the Bank” or “IDBZ”] had nothing to say, I entered a default judgment against Wedzera, in favour of the plaintiff, in the sum of $847,847=65, together with costs of suit and interest at the prescribed rate.

Most of the material facts were common cause.

Engen was an oil company. It sold bulk fuels. Wedzera operated filling stations at which it retailed fuels. IDBZ was a statutory corporation set up in terms of its enabling Act, the Infrastructure Development Bank of Zimbabwe Act [Chapter 24:14] [“IDBZ Act”].

Engen's claim arose out of petroleum fuels sold and delivered to Wedzera in terms of an agreement between them. Wedzera had failed or neglected to pay. Engen claimed IDBZ had guaranteed the due payment by Wedzera up to an amount in the sum of $950,000. That amount was made up of two guarantees, one for $500,000 and the other for $450,000.

But, IDBZ disowned them. It argued that one of its ex-employees had issued them fraudulently or without authorisation.

Engen called two witnesses.

The first, Johannes Mudzengerere [“Mudzengerere”] had been Engen's Managing Director at the relevant time. He had been in charge of Engen's entire operations, including the procurement and disposal of fuel stocks.

Engen's second witness, Francis Mugwara [“Mugwara”], was the man at the centre of the guarantees. He had been subpoenaed just before the trial commenced. He was the one who had signed and issued the impeached guarantees. Figuratively, and perhaps not unexpectedly, the Bank sought to lynch him.

For the Bank, there were also two witnesses.

At the relevant time, Norbert Munengwa [“Munengwa”] had been an Assistant Director in charge of a unit or division called Private Sector Projects. He reported to the Chief Executive Officer. His portfolio covered the crafting of strategies, policy formulation, and business development. Within that sector Francis Mugwara had, at all relevant times, been the Head of the unit called Corporate Banking. It was formerly called the Short Term Loans Unit. He had joined it as Assistant Head, and had subsequently been promoted. He reported to Norbert Munengwa.

The Bank's second witness was Desmond Matete [“Matete”]. He was a qualified lawyer. At the relevant time he was the Director for Legal and Corporate Services. Amongst other duties, he was the custodian of the Bank's legal documents.

There was much convergence, or little controversy, on such key aspects of the evidence as would, in my view, decide the matter. Differences were mainly on peripheral issues and on the parties' application of the law to the facts.

Wedzera used to buy bulk fuels from Engen for cash. As its sales increased, it wanted more fuels - but on credit. Engen obliged. Wedzera signed Engen's standard credit facility application form. Johannes Mudzengerere ran it past Engen's agent for credit rating. He also sought and obtained clearance from Engen's head office in South Africa. Everything seemed in order.

Wedzera had to provide a Bank guarantee to guarantee the due payment for the fuels. These came from IDBZ.

During this period, 2010, the country's economy had just “dollarized”. A multi-currency system had been introduced following the demise of the local currency. Most companies' balance sheets had almost reduced to zero. As a re-capitalisation strategy, the Bank had decided to offer non-traditional or non-generic products that either avoided or minimised direct cash outlays, or that brought in quick income. The witnesses said the Bank was trading off-balance sheet. The Bank's new strategy concentrated on non-direct cash products such as short to medium term loans, Bankers' acceptances, Bills discounting and Bank guarantees. This strategy also involved the bulk importation of petroleum products and the procurement of fertilisers for disposal on the local market.

The Bank had set up a body known as the Private Sector Projects Committee [“the PSPC”]. This committee would grant global approvals and cap the upper monetary limits for any new projects. The members of this committee were the Bank's senior officials, including Norbert Munengwa and Desmond Matete. But heads of divisions, such as Francis Mugwara, were also members. Francis Mugwara was a member.

It was common cause that Francis Mugwara had the Bank's authority to market this new strategic innovation. He had the authority to procure new business, to manage, and grow it.

The point of departure between Francis Mugwara, on the one side, and Nobert Munengwa and Desmond Matete on the other, was the extent of Francis Mugwara's authority - specifically with regards to the issuing of guarantees.

Francis Mugwara claimed he had the authority to issue guarantees in favour of third parties and binding on the Bank, for as long as the amounts on them did not exceed the limits set by the Private Sector Projects Committee (PSPC). He claimed he could issue such guarantees on his single signature. He had access to the Bank's stationery - including sample guarantee forms. He managed Harare, Bulawayo and other towns. He was in charge of all staff falling under his unit. He insisted he had complied with all the standard operating procedures, not least opening an account for Wedzera and issuing it with a facility letter; raising bank charges and completing all other relevant documents. He claimed all the paper work had been placed in the relevant Bank records which Desmond Matete kept. He challenged Desmond Matete to produce those records.

Of some guarantees that were produced in evidence bearing two signatures and which the Bank gave as an example of what a valid guarantee was like, Francis Mugwara said these had been initiated by his subordinates who also had the authority to issue guarantees. However, guarantees by subordinates had to be countersigned by himself, as head of the unit, or else they would be invalid.

Nobert Munengwa and Desmond Matete vehemently disputed that Francis Mugwara could issue guarantees on his single signature and bind the Bank. They said all the Bank's guarantees had to be counter-signed. They said there were elaborate internal standard operating procedures. These had to be followed at all times that the Bank would offer any credit facility to anyone. Of the two guarantees in question, and some two others that Francis Mugwara had also issued on his single signature in favour of other third parties, Nobert Munengwa and Desmond Matete said they were invalid for lack of authority. They had never been brought up to the Private Sector Projects Committee (PSPC) for specific approval.

Nobert Munengwa and Desmond Matete also accused Francis Mugwara of fraud. They said when they had confronted him after Johannes Mudzengerere had called up the guarantees and was pressing for payment, Francis Mugwara had broken down and confessed to having been paid by Wedzera's Managing Director, one Eric Nhodza [“Nhodza”], an amount in the sum of $10,000 in return for the guarantees. The Bank had raised misconduct charges against him. However, he had ducked out of the disciplinary process by resigning.

Francis Mugwara denied the fraud. He denied the confession. He maintained he had issued the guarantees within the scope of his mandate.

It was common cause that the Bank had reported Francis Mugwara to the police. However, it was also common cause that the State had declined to prosecute for lack evidence.

For Engen, Johannes Mudzengerere said his first encounter with Francis Mugwara was when, a few days before the guarantees, Francis Mugwara had arrived at his office offering Engen two million litres of fuel. Francis Mugwara had introduced himself as the Bank's Head of Corporate Unit. He had produced his business card. However, the fuel deal had subsequently fallen through. When Wedzera was increasing its fuel purchases and was asking for supplies on credit, Johannes Mudzengerere had required the provision of security in the form of assets or guarantees from a reputable Bank. A few days later a Wedzera representative and Francis Mugwara had returned to Johannes Mudzengerere's office with a sample guarantee from IDBZ. Johannes Mudzengerere had been satisfied with the wording. He had been comfortable with IDBZ as a “Government Bank”.

The first guarantee had been issued. It was for $300,000. Engen never had to call it up. Wedzera had paid in accordance with the agreement. Wedzera had further increased its fuel purchases. It had provided further guarantees from IDBZ for $500,000 and $450,000.

It was on these last two guarantees that the case before me was all about. Wedzera had failed to pay. Its debt at the time of the default stood at $847,847=65. That was the amount claimed in the summons.

There was no issue about the wording of the guarantees.

When Johannes Mudzengerere called up the guarantees, Francis Mugwara got in touch with Wedzera. Wedzera wrote something to assuage Engen. Johannes Mudzengerere was un-impressed. He pressed for payment. Eventually, he got through to Nobert Munengwa. Nobert Munengwa disowned the guarantees. The Bank's position was that Wedzera was not, and had never been, a customer of the Bank. Among other things, and contrary to standard operating procedures, there was no record of any account having been opened for Wedzera before or after the guarantees had been incepted. No bank charges had been raised as fees for the guarantees. There was simply no paper trail relating to them. As far as the Bank was concerned, the purported guarantees had been an abuse of the Bank's stationery by Francis Mugwara. They were invalid.

Having faced a brick wall, Engen sued. That was essentially the case before me.

Counsel for the plaintiff argued that the Bank's defence was misconceived. From the facts, Francis Mugwara had the actual authority to issue the guarantees in question. He was the Head of the Bank's unit that had the requisite mandate to issue such type of Bank products. Francis Mugwara's contract of employment empowered him to issue such guarantees. Counsel for the plaintiff further argued that if it should be said that Francis Mugwara had no actual authority to issue the guarantees, then he undoubtedly had ostensible authority. The Bank had held him up as one with such authority. He had started off as Assistant Head in the Short Term Loans Unit. He had interacted with the public in that capacity. This unit had subsequently changed its name to Corporate Banking. Francis Mugwara had subsequently been promoted to head it. All this had been in the eyes of the public.

Counsel for the plaintiff highlighted that Francis Mugwara had access to the Bank's stationery. It had provided him with business cards, obviously to assist in the marketing of its products. One such product had been the non-generic, off balance sheet facility that involved minimal cash outlay. There were also other innovations, such as the non-traditional trade in fuels and fertilizers. Francis Mugwara had been mandated to market and manage them. Third parties, like Engen, could hardly be faulted for accepting Francis Mugwara's authority and his guarantees. Nothing warned them that he might be unauthorised. That he might have breached the Bank's in-house standard operating procedures, or that he might have exceeded the bounds of his authority, could not dis-entitle Engen from holding the Bank to the guarantees.

Counsel for the Bank explored Francis Mugwara's contract of employment in some detail and argued that nothing said therein could be said to amount to authority for Francis Mugwara to issue such guarantees on his single signature.

Counsel for the Bank further explored the Bank's standard operating procedures and concluded that Mr Mugwara had manifestly breached all the important check-lists. Among other things, Wedzera had never been a customer of the Bank. There was nothing on record to show that any of the account opening and account operating procedures had been put in place. No fees had been raised. No facility letter had been issued. No customer vetting had been done. The guarantees had never been brought up to the Private Sector Projects Committee (PSPC) for approval. There was not a single meeting convened for this business, let alone any minutes taken in respect of it.

To the Bank, Francis Mugwara was just a rogue.

He had taken a bribe for $10,000 in return for the guarantees. When confronted by Messrs Nobert Munengwa and Desmond Matete, he had confessed. To avoid disciplinary action he had simply resigned. He had an axe to grind with the Bank. He had been blacklisted and was no longer employable in the finance industry.

According to counsel for the Bank, Francis Mugwara had neither the actual nor the ostensible authority to issue those guarantees. Engen had been negligent in accepting them without verification. It should have checked with the Bank for their authenticity. On this particular point, Desmond Matete claimed, in his evidence, that it was the practice and custom in the capital markets that a third party who is given a guarantee, such as the type Francis Mugwara had issued, would run them past its own bankers. The bankers would know how to go about verifying them for authenticity.

Counsel for the Bank discredited Engen's credit rating process of Wedzera. He pointed out that on the credit facility application form, the Standard Chartered Bank, not IDBZ, had been listed as Wedzera's bankers. If Engen had been diligent or prudent enough, it should have been suspicious to be receiving from Wedzera guarantees from IDBZ instead of the Standard Chartered Bank....,.

Section 12 of the Companies Act codifies the common law rule of Company Law, also known as the Turquand Rule, after the 19th century English case of Royal British Bank v Turquand (1856) 6 E & B 327; (1843-60) 119 ER 886 in which the rule was first succinctly expounded.

This rule says that any person dealing with a company is entitled to make certain assumptions, such as that the company's internal regulations have been duly complied with. The company is estopped from denying the truth of such assumptions. Anyone is entitled to assume that every person whom the company represents to be its officer or agent has been duly appointed and has authority to exercise the functions customarily exercised by him: see Mills v Tanganda Tea Company Ltd 2013 [1] ZLR 38 [H]…,.

In terms of section 13 of the Companies Act, a company shall be bound in terms of section 12 notwithstanding that the person held out to be the officer or agent for it might have acted fraudulently or forged a document purporting to be sealed or signed on behalf of the company....,.

LORD DENNING MR, in Hely-Hutchinson v Brayhead Ltd & Another [1968] 1 QB 549; [1967] 3 All ER 98 [CA] [quoted with approval by MPATI P in Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA]…, explained actual or implied authority as follows:

“[Actual authority] is express when it is given by express words, such as when a Board of Directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the Board of Directors appoint one of their number to be Managing Director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office.”

BEADLE CJ, in Reed NO v Sager's Motors (Pvt) Ltd [1969] [2] RLR 519 [AD]…,; 1970 [1] SA 521 [RAD] [quoted with approval in Seniors Service [Pvt] Ltd v Nyoni 1986 [2] ZLR 293 [SC]] explained apparent or ostensible authority as follows:

“The word 'ostensible', in the Rhodes Motor Company case (1965 (4) SA 40), is used in the sense of 'apparent' and in the language of the law of agency these two terms are synonymous.

If a principal employs a servant or agent in a certain capacity, and it is generally recognised that servants or agents employed in this capacity have authority to do certain acts, then any of those acts performed by such servant or agent will bind the principal because they are within the scope of his 'apparent' authority. The principal is bound even though he never expressly or impliedly authorised the servant or agent to do these acts, nor had he by any special act [other than the act of appointing him in this capacity] held the servant or agent out as having this authority.

The agent's authority flows from the fact that persons employed in the particular capacity in which he is employed, normally have authority to do what he did.”

The principles that emerge from case authority in relation to the ostensible authority of employees in general, and Bank managers in particular, are that the principal [the employer] must have created an impression in the mind of the third party, even though that impression might be wrong, that his agent [the employee] had the requisite authority to transact on behalf of the principal. The third party must show a representation by words or conduct by the principal, not merely by the agent. The representation must have been in such form as would reasonably lead outsiders to act on the strength of it to their prejudice.

The court considers the façade of regularity of the employee's actions purporting to act on behalf of the employer, given all the trappings of his appointment as set in a context.

The branch manager of a Bank is a senior employee. He is the face of the Bank to the world. He is its local spokesman. The outside world is normally entitled to assume or believe that he has the authority to issue out letters of credit binding on the Bank: see Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA]; NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA]; Africa Life Assurance Company Limited v NBS Bank Limited 2001 [1] SA 432 [W] 432; and Glofinco v ABSA Bank Ltd t/a United Bank & Ors [2002] ZASCA 91.

In NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA], SCHULTZ JA,, holding the Bank liable for deposits stolen by a rogue manager at one of its branches, said:

“[The branch manager] was appointed the local head of this business at Kempton Park. He commanded the staff, including his secretary, who typed the letters and then deleted them from her computer on his instructions, keeping qualms to herself - whether out of fear, or loyalty, or both. The letterhead on which the letters were typed was provided by the NBS. The facility was created, and it functioned, for the NBS to take Cape Produce's cheques into its bank account, and for its cheques to be issued in repayment. The state of affairs continued for some 18 months with numerous repayments, without the NBS's own system of control detecting the abuse.”

One of the cases on which counsel for the Bank relied was the judgment of the court of first instance in Glofinco v ABSA Bank Ltd t/a United Bank & Ors Reported in 2001 [2] SA 1048.

In that case, the trial court held the Bank not liable where a manager at one of its branches was in the habit of endorsing certain post-dated cheques from one of its customers in favour of a factoring agent, in effect making the Bank a surety and co-principal debtor in solidum with the customer. The manager's actions were inimical to the interests of the Bank. She had no authority to commit the Bank in that manner.

The trial court held that the powers of a Bank manager are not limitless. The decision was upheld on appeal.

It was found that the transactions were not ordinary transactions of a kind a branch manager would do as a matter of course. Other than the fact of her appointment, the Bank had made no other representation that the manger might have been authorised to carry out such peculiar transactions. Furthermore, in spite of its own serious misgivings about the authority of the manager to bind the Bank in the manner she was doing, the factoring agent had purposefully chosen to rely on her word and had refrained from verifying with her employer.

The appeal judgment was a split decision: three for and two against.

Even then, the majority judgment made it clear from the outset that the case would turn on its own peculiar set of facts; it being analogous to two other cases that the court had recently dealt with and in which the Banks had been found liable. These two other cases were NBS Bank v Cape Produce Company [Pty] Ltd and Others 2002 [1] SA 369 [SCA] and South Eagle Insurance Company Ltd v NBS Bank Ltd 2002 [1] SA 560 [SCA].

In my view, Glofinco v ABSA Bank Ltd t/a United Bank & Ors Reported in 2001 [2] SA 1048 is distinguishable from the instant case on the facts.

In Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA], the court freed the Metropolitan Council from liability for the contracts signed by some security personnel, one Du Plessis. He was a mere superintendent. He was No.2 from the bottom in the order of administrative authority. His immediate boss, one Van Wyk [senior superintendent], had purported to approve the contracts. Du Plessis and Van Wyk both operated from a side structure outside of the main offices. It was not clear how they had got hold of Council's stationary and equipment like letterheads and stamps. There was no evidence of what the trappings of their positions were, or what would normally go with those positions. The court found that the third party had dealt very casually and superficially with Du Plessis. Among other things, it had relied on a clumsily worded and open-ended resolution, signed by Van Wyk, and which purported to give Du Plessis limitless powers to contract on behalf of the Council. The conduct of the third party had not been reasonable, especially given the experience that its witnesses said they had in dealing with local authorities.

Northern Metropolitan Coal Council v Company Unique Finance [Pty] Ltd & Ors 2012 [3] All SA 498 [SCA] is also distinguishable from the instant case.

Du Plessis and Van Wyk were, respectively, the last and second last from the bottom.

In casu, Nobert Munengwa and Francis Mugwara were, respectively, No.1 and No.2 from the top in the Corporate Banking Unit.

The Unit, among other things, had the requisite mandate to issue guarantees.

Francis Mugwara was the Head. He had layers of staff below him. He managed other regions, not just Harare. He had the authority to use the Bank's stationery. He was expressly entitled and empowered to market the Bank's new innovative trade in non-traditional products in the new multi-currency dispensation. In the overall administrative structure of the Bank, he was No.4 from the Chief Executive Officer, the top most officer.

Francis Mugwara's job description empowered him “to generate, manage and control the Bank's short term lending portfolio as well as [to] supervis[e]…, Regional Offices.”

Expressly, he was tasked with ensuring that his unit achieved its set business volumes, and, significantly, he was also tasked with the “disbursements of funds on approved facilities.”…,.

Among Francis Mugwara's key decision making authority aspects was the approval of departmental expenses and the budgets for the Unit and the Regional Offices.

There was one further subtle detail on Francis Mugwara's job description.

Listed as one of the consequences of an error of judgment on his part in relation to, for example, financial/material loss, etc., i.e. what could happen to the organization if he made a wrong decision or failed to perform his job, was this:

“Catastrophic, as bad decisions can lead to the insolvency of the Bank through the creation of a bad Loan portfolio;” and:

“Reputation of the Bank can be on the line if prompt and correct decisions are not made”…,.

During trial, the Bank tried desperately to downgrade Francis Mugwara's position. It tried to strip him of all manner of authority.

I totally disagree.

The evidence on whether or not Francis Mugwara could issue guarantees on his single signature was inconclusive.

Francis Mugwara said he could. The Bank said he could not.

It did not refute, satisfactorily, Francis Mugwara's claim that it was only guarantees initiated by subordinates that required to be counter signed for validity. I find that the Bank failed to discharge the onus on such a key aspect of its defence.

Francis Mugwara was by no means a junior employee. I have found nothing from his contract of employment, or his job description, that precluded him from issuing those guarantees on his single signature.

Admittedly, these documents did not expressly say he could. But, equally, they did not expressly say he could not.

There was simply nothing in them that was specific to any type of product the Bank was offering at the time. But, when one considers, objectively, the overall job description and the trappings of his appointment; when one considers that an error of judgment on his part could lead to the Bank going bankrupt or putting its reputation at risk, I find that the issuing of the guarantees in the manner Francis Mugwara did, fell squarely within the scope of the risk the Bank had assumed when it appointed him to that position.

That, in my view, was implied authority for what Francis Mugwara did....,.

The Bank's complaint was only that he had to have had the guarantees counter-signed and that he did not follow the standard operating procedures.

But, to the rest of the world, like Engen, those were minute details. They could not be of concern to it. Francis Mugwara's position, as Head of Corporate Banking, who had business cards issued to him by the Bank confirming such status, was not a “nude appointment”. It was an appointment that had to be considered with “all its trappings”: see NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA].

I find nothing unreasonable in Johannes Mudzengerere's reliance on Francis Mugwara's job description as one who had the requisite authority to issue the guarantees. I find nothing that should have put him on his guard.

When Francis Mugwara called at his office for the first time, it was to interest Johannes Mudzengerere in a bulk fuel deal worth over a whopping $2 million. So when Francis Mugwara came back a few weeks later, now in the company of a representative from Wedzera, with a guarantee for a trifle $300,000, it was not unreasonable for him to accept the guarantee. Francis Mugwara's actions had a “façade of regularity.” This particular guarantee ran its life without the Bank's system of control detecting it: see NBS Bank Ltd v Cape Produce Co [Pty] Ltd & Ors 2002 [1] SA 396 [SCA]; [2002] 2 All SA 262 [SCA]. So, again, Johannes Mudzengerere cannot be faulted for accepting the two subsequent guarantees.

The Bank's reliance on fraud or bribery was problematic.

Nothing was proved. The criminal case that the Bank had reported against Francis Mugwara had collapsed.

In casu, the Bank had no records or document of any sort to support the allegations. Its witnesses said that some of its records had been misplaced or had become unavailable when it had changed offices sometime after the incident. They further said that they had been unaware that Francis Mugwara would testify for Engen until a few days before the trial.

That was rather lame.

Whether or not Francis Mugwara had been lined up to testify for Engen did not detract from the fact that the onus would always lie on the Bank to prove fraud or bribery. It was the Bank making those allegations.

Furthermore, the Bank had reported Francis Mugwara to the police soon after the guarantees had surfaced. Nobert Munengwa's witness' statement to the police did not contain any reference to Francis Mugwara having received a cash inducement from Eric Nhodza. The complaint was concealment by Francis Mugwara of his transactions of which Nobert Munengwa concluded amounted to fraudulent misrepresentation.

No wonder the State had declined to prosecute.

In his testimony, Francis Mugwara maintained that the allegations of fraud or bribery had never been made to him at any time before the trial.

The Bank did not satisfactorily refute this.

For these reasons, I find the Bank liable to Engen for the guarantees issued by Francis Mugwara in respect of Wedzera's indebtedness. Therefore, I make the following Order:

The second defendant shall pay the plaintiff the sum of US$847,847=65, or so much of it as has remained unpaid by the first defendant, together with costs of suit and interest at the prescribed rate from the date of this judgment to the date of payment.

SC48-20 : EMMA KUNDISHORA vs ZIMBABWE RED CROSS SOCIETY
Ruled By: HLATSHAWO JA, MAKONI JA and BERE JA

This is an appeal against part of the judgment of the Labour Court setting aside an arbitral award in terms of which the respondent was ordered to pay the appellant the sum of US$17,500.THE BACKGROUNDThe appellant was employed by the respondent as a Secretary General. On 2 June 2012, the ...

This is an appeal against part of the judgment of the Labour Court setting aside an arbitral award in terms of which the respondent was ordered to pay the appellant the sum of US$17,500.

THE BACKGROUND

The appellant was employed by the respondent as a Secretary General. On 2 June 2012, the National Governing Council (the Council) of the respondent held a meeting in which Council members expressed concerns regarding the performance, by the appellant, of her work. As a result, it was recommended that the appellant be suspended from work pending investigations into her conduct, or, alternatively, that she be given the option to resign.

The appellant elected to resign and did so by letter dated 3 June 2012.

On the same date the resignation was acknowledged, in writing, by the respondent's Acting President. The following was set out in the letter;

“The Board resolved that in the event of you resigning, instead of a suspension with pay, that you will be entitled to all your benefits. Outlined hereunder are all your benefits; Leave days accrued; Gratuity One month's notice salary; Toyota Prado registration number ABH3278 that you have been using; Phone handset; Laptop you are currently using.”

On 6 June 2012, the Honorary Treasurer of the respondent, one Mr Gotora, who was tasked with overseeing the handover takeover process between the appellant and the new office bearer, wrote a letter to the appellant stating that the respondent was to meet the costs related to the change of ownership of the vehicle.

As a result, the appellant made a claim of US$17,500, being the residual duty payable to ZIMRA upon the disposal of the vehicle by the respondent, that is, the cost of the change of ownership.

On 2 March 2013, the Council convened a meeting to deliberate on the appellant's claim.

Mr Gotora was reprimanded for generating the communication as he had no authority to do so. It was stated that considering the level of the employee in issue, communication was to be done by either the President or the Secretary General.

On 5 March 2013, Mr Gotora wrote a letter to the Acting President and copied same to the appellant, retracting the statement that he had made regarding the respondent meeting the change of ownership costs for the motor vehicle. He also conceded that he had acted without the mandate of the Board.

Following the retraction, the appellant referred the matter to a Labour Officer claiming the sum of US$17,500 from the respondent.

Conciliation failed and the matter was referred to an arbitrator who ordered the respondent to honour the undertaking made on its behalf by the Honorary Treasurer. The arbitrator held that the Honorary Treasurer's undertaking remained valid and binding on the respondent. He referred to the case of Royal British Bank v Turquand (1856) 6 E & B 327, ER 886 and reasoned that the appellant was not supposed to know the legitimacy of the undertaking made by the Honorary Treasurer on behalf of the respondent. As such, the Honorary Treasurer bound the respondent.

Aggrieved by the arbitral award, the respondent appealed to the Labour Court.

It challenged the decision of the arbitrator on the basis that the communication in issue had been made without the approval of the Board, and that, in any event, the communication had been retracted and could not be given effect to. The respondent further argued that there was no basis for the arbitrator to rely on the letter by Mr Gotora as it could not give benefits not outlined in the initial letter by the Acting President wherein all the benefits due to the appellant had been expressly stipulated. Further to that, the practice was that employees who received such a benefit would meet their own costs of transfer.

The respondent also expressed the view that the Turquand Rule was inapplicable because the appellant knew or ought to have reasonably known that the Honorary Treasurer was not an executive member and could not make binding decisions on behalf of the respondent.

The respondent also averred that, should the amount be due, it was payable to the Commissioner or ZIMRA and not to the appellant.

The respondent also contended that the arbitrator had cast upon it an obligation cast by law on a transferee of property.

The appellant opposed the appeal.

She contended that the respondent sought to interfere with the findings of fact made by the arbitrator. She argued that the arbitrator correctly found that the undertaking was never retracted and remained valid. The appellant further contended that the undertaking to pay the transfer costs was an employment benefit, and, as such, arguments on the law of transfer or taxation were irrelevant.

DETERMINATION OF THE COURT A QUO

The court a quo found that the appellant was not entitled to the transfer costs of the motor vehicle. It held that the communication by the Honorary Treasurer could not bind the respondent. It found that the turquand rule was in-applicable and neither could it be said that Mr Gotora had ostensible authority to bind the respondent.

The court reasoned that the appellant was not some innocent third party but occupied the highest post in the respondent and was aware or ought to have been aware of the authoritative communications in the organisation.

The court further explained that even if it was to be assumed that Mr Gotora was acting under delegated authority, there was no evidence of such delegation.

In any event, Mr Gotora had also confirmed that he had made the communication without the required authority.

The court also noted that the letter of 3 June 2012, by the Acting President, which set out all the benefits the appellant was to get, made no mention of transfer costs. As such, Mr Gotora's letter could not be read to vary or supplement the package already offered to the respondent by the Board and properly transmitted to the respondent by the Acting President.

The court further held that the transfer costs were payable to the Zimbabwe Revenue Authority and not the respondent.

It also found that there was no law that precluded parties to deviate from the provisions of the Customs and Excise Act [Chapter 23:02] by paying another's transfer costs since what the law requires is that the transfer costs be paid.

The appellant, dissatisfied with the outcome, launched the present appeal based on the following grounds:

GROUNDS OF APPEAL

1. That the court a quo erred in granting the respondent's appeal as regards the award of US$17,500 and thus upsetting, without legal basis, the arbitrator's factual finding that the evidence furnished by the respondent to prove the Treasurer's lack of authority was stage-managed.

2. That the court a quo grossly erred in interfering with the arbitrators discretion to award the appellant US$17,500 as evidence placed before him showed that there was never any valid retraction on the respondent's commitment to pay the US$17,500.

3. That the court a quo grossly erred in granting the respondent's appeal with respect to award of US$17,500 as the finding by the arbitrator that the undertaking to meet the costs of transfer was validly made cannot be faulted given that the respondent accepted provisions in the letter of undertaking by the Honorary Treasurer.

4. That the court a quo grossly erred in granting the respondent's appeal with respect to the award of US$17,500 as it erroneously made a finding that the mention of ZINARA cost instead of transfer costs in the letter of retraction by the Honorary Treasurer was an error by the respondent when no such evidence of a mistake or error was alleged or argued before it by the respondent or any of the parties.

5. That the court a quo erred by making a finding that the US$17,500 should have been paid to the Zimbabwe Revenue Authority and not to the appellant when such issue was not properly before the court a quo in terms of the grounds of appeal that were before it, and, when such issue did not affect the appellant's eventual entitlement to the benefit.

SUBMISSIONS IN THIS COURT

I now turn to the arguments of the parties on the merits.

Counsel for the appellant made the following submissions;

The court a quo dealt with the matter afresh and re-assessed the evidence and made its own determination. The court a quo, in setting aside the arbitral award, upset the arbitrator's factual findings. In particular, the arbitrator's finding that the treasurer had the authority to make the communication as the treasurer's lack of authority was stage-managed. The arbitrator's finding could only be upset on the basis of gross unreasonableness. Once the arbitrator held that the turquand rule applied in the circumstances of the matter, the court a quo was not at liberty to re-hear the matter but to assess whether the factual findings of the arbitrator were grossly unreasonable. This does not feature anywhere in the judgment of the court a quo.

In considering the turquand rule, the court a quo ignored one fundamental aspect - that the employer communicated through its Honorary Treasurer. Thereafter, the organisation was silent for a year. It then retracted the offer after a meeting where the appellant did not attend. The respondent allowed the appellant to have no doubt that the transfer costs would be met by the respondent. The turquand rule was designed to protect the appellant in the circumstances. The appellant was now an outsider on the basis of her resignation. Her ability to relate to the internal mechanism had been cut.

Counsel for the respondent, on the other hand, contended that there were no factual issues which arose in the appeal before the court a quo. She argued that the full list of benefits due to the appellant were approved by the Board and communicated by the Acting President. These benefits did not include transfer costs of the motor vehicle. She also contended that the court a quo properly identified the issue for consideration as to whether the turquand rule was applicable in the circumstances of the case. Counsel for the respondent further submitted that a person in the position of the appellant could not claim the benefits of the turquand rule since the appellant knew how the respondent was run. Had the benefits been revised, the Acting President, being the person who had communicated the benefits, was the one to communicate the change in those benefits.

ISSUES FOR DETERMINATION

From the grounds of appeal, and the submissions above, two issues fall for determination and these are;

1. Whether or not the court a quo's finding that the Honorary Treasurer lacked authority to make the undertaking unduly interfered with the arbitrator's factual findings.

2. Whether the undertaking made by the treasurer is binding on the respondent by virtue of the provisions of the turquand rule.

THE LAW

It is settled law that an Appellate Court can only interfere with the findings of fact made by a lower court in exceptional circumstances.

In Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S)…, KORSAH JA remarked:

“The general rule of the law, as regards irrationality, is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at such a conclusion….,.”

In Susan Rich v Jack Rich SC16-01, EBRAHIM JA cited with approval the remarks in HOFFMAN and ZEFFERT, The South African Law of Evidence, 4th ed…, that:

“There are no rules of law which define circumstances in which a finding of fact may be reversed, but, as a matter of common sense, the Appellate Court must recognize that the trial court was in some respects better situated to make such findings. In particular, the trial court was able to observe the demeanor of the witnesses, and courts of appeal are therefore very reluctant to disturb findings which depend upon credibility.

The Appeal Court has rather more latitude in criticizing the reasons which the court a quo has given for its decision.

The reasons given for accepting certain evidence may be unsatisfactory, eg. they may involve a clear non sequitur. Alternatively, it may be plain from the record that the reasons are based upon a false premise, eg. a mistake of fact, or that the trial judge has ignored some fact which is clearly relevant. Errors of this kind are generally referred to as misdirections of fact.

Where there has been no misdirection of fact by the trial court, the Appeal Court will only reverse it when it is convinced that it is wrong.”…,.

In Reserve Bank of Zimbabwe v Granger and Anor SC34-01…, the court held that if an appeal is to be related to the facts “there must be an allegation that there has been a mis-direction on the facts which is so unreasonable that no sensible person who had applied his mind to the facts would have arrived at such a decision; and, a misdirection of fact is either a failure to appreciate a fact at all, or a finding of fact that is contrary to the evidence actually presented.”

In Zvokusekwa v Bikita Rural District Council SC44-15 this Court clarified this obvious but often misunderstood position. It said;

“[20] It is correct, as submitted by the appellant, that an appeal to this Court must be based on a point of law.

What constitutes a point of law has been stated and restated in a number of decisions of this Court. See for example Muzuva v Limited Bottlers (Pvt) Ltd 1994 (1) ZLR 217 (S); Hama v NRZ 1996 (1) ZLR 664; RBZ v Granger & Anor SC34-01.

[21] It is also correct that in RBZ v Granger & Anor (supra), this Court stated that if an appeal is to be related to the facts, 'there must be an allegation that there has been a misdirection on the facts which is so unreasonable that no sensible person who has applied his mind to the facts would have arrived at such a decision. And a mis-direction of fact is either a failure to appreciate a fact at all, or a finding of fact that is contrary to the evidence actually presented.'

[22] In my view, the remarks made in Granger's case (supra) need to be qualified, to the extent that they may be interpreted as saying that, to constitute a point of law, in all cases where findings of fact are attacked, there must be an allegation that there was a misdirection on the facts which was so unreasonable that no sensible person properly applying his mind would have arrived at such a decision.

One must, I think, be guided by the substance of the grounds of appeal and not the form.

Legal practitioners often exhibit different styles in formulating such grounds. What is important at the end of the day is that the grounds must disclose the basis upon which the decision of the lower court is impugned in a clear and concise manner.

If it is clear that an appellant is criticising a finding by an inferior court on the basis that such finding was contrary to the evidence led, or was not supported by such evidence, such a ground cannot be said to be improper merely because the words 'there has been a misdirection on the facts which is so unreasonable that no sensible person…, would have arrived at such a decision' have not been added thereto.

If it is evident that the gravamen is that an inferior court mistook the facts and consequently reached a wrong conclusion, such an attack would clearly raise an issue of law and the failure to include the words referred to above would not render such an appeal defective. After all, there is no magic in the above stated phrase and very often the words are simply regurgitated without any issue of law being raised. See, for example the case of Sable Chemical Industries v David Peter Easterbrook SC18-10 where it was noted that the words 'erred on a question of law' are sometimes included in grounds of appeal but without any question of law actually being raised.”

See also Kukwenge v Clan Transport Co. 2001 (1) ZLR 199 (S) and Mutsuta and Another v Cagar (Pvt) Ltd 2009 (2) ZLR (S).

APPLICATION OF THE LAW TO THE FACTS

The court a quo properly identified the issue to be determined as follows:

“The issue that falls for determination in this appeal is whether the Honorary Treasurer of the appellant had ostensible authority to bind the appellant. In other words, the issue is whether the Turquand Rule applies in the circumstances of this matter.”

This was an issue of law which the court a quo dealt with based, as it is, on facts that are essentially common cause.

In light of the authorities cited above, one can conclude that failure to appreciate a fact at all or a finding of fact contrary to evidence actually presented constitutes a misdirection which warrants interference by an appellate body.

The arbitrator found that the treasurer had authority by virtue of occupation of that post; his attendance in meetings involving important decision making by the respondent; that the authority had been delegated to him by the Acting President; and that the letter of retraction was 'stage managed', as it came nine months after the initial letter, in anticipation of a civil suit.

These findings were not based on evidence presented before him but were based on suppositions.

The fact that someone occupies what he termed an important position in the organisation does not clothe that person with authority to make decisions on behalf on the organisation. No evidence was led to confirm that the Acting president had delegated his functions to the Honorary Treasurer. His finding regarding the letter of retraction is a clear indication that he did not appreciate that the respondent was run by a Board which met when the need arose.

It is my view that the arbitrator's findings, that the treasurer had authority, in light of the evidence presented before him, was a misdirection.

In making that finding, he completely ignored the fact that it was not in dispute that “all the benefits” due to the appellant upon her resignation were outlined by the Acting President in a letter dated 3 June 2012 as follows:

(i) Leave days accrued.

(ii) Gratuity.

(iii) One-month notice salary.

(iv) Toyota Prado that you have been using.

(v) Phone handset.

(vi) Laptop you are currently using.

It is apparent that the benefits did not include the costs of transfer.

It is also not in dispute that, the letter by which the Honorary Treasurer stated that the respondent was going to meet the cost relating to change of ownership of the motor vehicle awarded to her was not authorised. This emerged from the meeting of 2 March 2013. The Honorary Treasurer acknowledged that he had no authority to do so and took “full responsibility” of the mistake.

Once the statement was duly retracted, its validity and enforceability necessarily fell away.

The communication made by the Honorary Treasurer could not bind the respondent neither could it be enforced against it.

Further to that, no Board meeting was convened neither is there a resolution on record authorizing Mr Gotora to make the undertaking he made.

The subject matter of the communication being a significant financial undertaking by the respondent, it was obligatory for Mr Gotora to obtain the approval of the Board. Further to that, Mr Gotora's letter highlighted that the communication was a “follow up” on the Acting President's letter of 3 June 2013. There was no approval by the Board or the Acting President who had initially communicated to the appellant nor was there ratification after it had been made. He also rejected the established precedent, that the respondent did not pay for such costs, without any justification.

Accordingly, it is my view that the decision of the court a quo was well founded. The arbitrator's decision was a misdirection in that he made findings contrary to evidence actually presented.

WHETHER THE UNDERTAKING MADE BY THE TREASURER IS BINDING ON THE RESPONDENT BY VIRTUE OF THE PROVISIONS OF THE TURQUAND RULE

Having found that the undertaking by the Honorary Treasurer was not binding on the respondent, it is necessary to determine whether the turquand rule can aid the appellant's case.

I am of the view that it cannot.

The arbitrator invoked the principles of the turquand rule to show that the respondent was liable to pay the costs of transfer. It is also the appellant's argument that where a person is dealing with another, in fair dealing, the turquand rule should apply.

In Mills v Tanganda Tea Company Ltd HH12-13, which is almost on all fours with this case, in the following instructive dictum, it was stated…,;

“…,. I do not think that there is any basis for invoking ostensible authority in relation to Beaumont's actions. Firstly, the fact that he was the Group Chief Executive of Meikles Limited does not mean that he had the requisite ostensible authority, by virtue of that position, to negotiate and conclude severance packages on behalf of respondent. There is nothing in the papers to suggest that he normally exercised that function in that particular capacity…, the applicant was not some third party dealing with an agent or employee of the respondent. He was its Managing Director, and, given that position, I can see no justification for extending the doctrine of ostensible or apparent authority to the facts of this case.”

The turquand rule is a company law principle emanating from the old case of Royal British Bank v Turquand (1856) 6E & B327. Simply put, the rule states that where a person conducts the affairs of the company in a manner which appears to be perfectly consonant with the Articles of Association, those so dealing with him, externally, are not to be affected by irregularities which may exist in the internal management of the company.

The turquand rule was aptly captured in the case of Victoria Falls Steam Train Co (Pvt) Ltd v Wankie Colliery Co Ltd HH03-04, where the court stated the following:

“The rule in Royal British Bank v Turquand (1856) 6E & B327, 119 ER 886, which prevents a corporation from relying on non-compliance with its internal procedures to avoid contractual liabilities towards a third party, applies only where the third party was a genuine outsider acting in good faith, and where the transaction was carried out in good faith and was a legitimate one within the powers of the corporation though lacking completeness in terms of the corporation's internal arrangements.

The rule does not apply in cases where there has been a forgery, nor should it apply in the analogous case where the transaction has been carried out in deliberate violation of the internal procedures of the corporation.”…,.

H.S CILLIERS and M.L BENADE in their book Company Law, Practitioner's edition…, state the rationale behind the rule as put across in Royal British Bank v Turquand (1856) 6E & B327 as follows:

“For third parties, it is an impossible task to investigate all the internal proceedings of a company in order to ascertain whether someone, who could potentially be a representative in terms of the Articles, in fact had the necessary authority. He would not find any prohibition of the relevant act - an authority to act subject to compliance with certain formalities but nevertheless a clear authority.”

The turquand rule has since been codified in our company law as section 12 of the Companies Act [Chapter 24:03] which provides that:

“12. Presumption of Regularity

Any person having dealings with a company or with someone deriving title from a company shall be entitled to make the following assumptions, and the company and anyone deriving authority title from it shall be estopped from denying their truth;

(a) That the company's internal regulations have been complied with;

(b)…,.

(c) That every person whom the company, acting through its members in general meeting or through its board of directors or its manager or secretary, represents to be an officer or agent of the company, has been duly appointed and has authority to exercise the functions customarily exercised by an officer or agent of the kind concerned;

(d)…,.

(e)…,.

Provided that -

(i)…,.

(ii) A person shall not be entitled to make such assumptions if he has actual knowledge to the contrary or if he reasonably ought to know the contrary.

(iii)…,.”

From the above cited authorities, it is clear that the turquand rule is meant to protect genuine outsiders who deal with a company in good faith, and where the transaction was carried out in good faith and was a legitimate one within the powers of the corporation.

In casu, the appellant was clearly not some third party dealing with an agent or employee of the respondent but occupied the highest post in the respondent as its Secretary General.

As at 6 June 2012, the appellant was still an employee given that her contract terminated on 8 June 2012. She knew how the respondent was run. She had the letter from the Acting President outlining all the benefits approved by the Board. She could not have assumed, and had no basis, for assuming that the Board had met again inside the two days to revise the benefits as already offered. Even if it did, the revision would have been communicated by the person who communicated the benefits to her in the first place.

In any event, in her position as Secretary General, she must have known that any decision in that regard would require a Board resolution from the respondent authorising the Honorary Treasurer to generate the communication to her.

Further to that, the rule does not operate where the transaction has been carried out in deliberate violation of the internal procedures of the corporation.

What can be derived from the papers filed of record is that the communication was carried out in breach of the internal procedures of the corporation in that, the Honorary Treasurer had no mandate to generate such communication, which role was the preserve of the Acting President or the Secretary General pursuant to a Board meeting.

By virtue of this, the binding nature of the communication fell away.

What further militates against the application of the rule is the fact that the Secretary General had actual knowledge, or was reasonably expected to know, that the internal procedures of the company had not been met. This is so because having worked for the respondent for a period of eleven years, the appellant was well aware of how the internal procedures of the respondent were carried out. It therefore follows that, due to the fact that the Honorary Treasurer had not been given the mandate to make the communication, there is no justification for the application of the turquand rule.

I also associate myself with the court a quo's decision that there is no basis for invoking ostensible authority in relation to the Honorary Treasurer's actions.

(a) Firstly, the fact that he was the Honorary Treasurer did not confer him with the requisite ostensible authority, by virtue of that position, to make an offer for the payment of the transfer costs on behalf of the respondent without the mandate from the Board to do so.

(b) Secondly, there is also nothing on the papers to suggest that he normally exercised that function in that particular capacity. See Mills v Tanganda Tea Company Ltd HH12-13.

In light of the above, the court a quo cannot be faulted for holding that the appellant was not entitled to the transfer costs as the Honorary Treasurer's undertaking did not bind the respondent. It had no legal effect.

Neither the turquand rule nor the principle of ostensible authority aid the appellant's case.

The appellant has failed to establish a basis for interfering with the decision reached by the court a quo. The appeal must fail.

Both parties prayed for costs but the respondent put a rider that “to the extent that the appeal is indubitably vexatious, the court is at large to consider an award of costs on the higher scale.”

The appeal cannot be described as indubitably vexatious. There is therefore no basis for awarding costs on a higher scale.

In the result, l make the following order:

The appeal be and is hereby dismissed with costs.

Appealed
SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

This is an appeal against the judgment of the High Court dismissing the appellant's claim for US$119,300 being the balance of the purchase price for a 20-tonne Hyundai Excavator sold and delivered by the appellant to the respondent.

In dismissing the appellant's claim, the court a quo upheld the respondent's counterclaim and ordered the appellant to refund US$140,000 to the respondent, being the deposit paid towards the purchase of the excavator and front-end loader.

The brief summary of the case

The facts giving rise to the claim and counterclaim are hotly contested. The brief facts of the case are that the respondent is a Municipal Council duly constituted as such in terms of the Urban Councils Act [Chapter 29:15], whereas the appellant is a company in the business of selling excavators and front-end loaders.

Sometime in 2014, the parties concluded a contract of sale of a twenty-tonne excavator. The terms of the contract are in dispute.

The appellant's claim is, that, sometime in 2014, it sold and delivered, in good working order, a refurbished 20-tonne excavator for US$209,300 at the respondent's instance and request. The purchase price was payable in instalments with an initial deposit of US$90,000 and the balance of US$119,300 payable on delivery.

The appellant's complaint is, that, despite effecting delivery at the respondent's premises, on 19 June 2014, the latter refused or neglected to pay the balance of the purchase price.

The respondent denies breaching the contract of sale as alleged or at all and has counterclaimed for a refund of the deposit it paid on account of defective performance.

Its defence is that, on 16 May 2014, it floated a tender for the purchase of a brand new twenty-tonne Tracked Excavator to the tune of US$182,000. The advertisement read:

“MUNICIPALITY OF CHITUNGWIZA TENDER NOTICE NO. 05/11

Tenders are hereby invited, in terms of section 211 of the Urban Councils Act (Chapter 29:15) from reputable and legally registered companies and institutions to provide specified brand new plant and machinery to the Municipality of Chitungwiza….,.

Supply and Provision of Specified Plant and Machinery

1. Jet Machine (high velocity clearing machine).

2. Tracked Excavator (30 tonne).

3. Front End loader (3 tonne).

Tender specifications are available at Chitungwiza Municipality Head Office.”

The appellant won the tender to supply the respondent with a brand new 20-Tonne Tracked Excavator at the cost price of US$182,000 and a brand new 3-Tonne Front End Loader at the cost price of US$105,000.

It was therefore a material term of the contract that the appellant was to deliver a brand new excavator and front end loader.

The appellant, however, in breach of contract, delivered a refurbished dysfunctional excavator.

It was also a material term of the contract that the respondent would pay US$140,000 deposit for both machinery and the balance upon delivery. The respondent paid the deposit in terms of the contract but the appellant, in breach of contract, delivered a pre-owned, dysfunctional excavator without the necessary accessories.

To date, the appellant has not delivered the brand new machinery in terms of the contract.

That being the case, the respondent counterclaimed for specific performance in terms of the contract, or, alternatively, a refund of the deposit of US$140,000 paid in anticipation of the fulfilment of the terms and conditions of the contract.

The respondent also claimed payment of damages in the sum of US$30,000 for breach of contract as well as storage charges at the rate of US$20 per day from the date of summons to the date of collection of the defective refurbished excavator.

The claims for damages and storage charges were not persisted with and are not the subject of this appeal.

Thus, the court a quo was left with only two issues for determination. The issues were defined at the pre-trial conference as follows:

“1(a) Whether or not plaintiff (appellant) should be compelled to deliver a brand new excavator.

OR ALTERNATIVELY

(b) Whether or not the defendant (respondent) is entitled to a refund of the deposit paid.

2. Whether or not the plaintiff (appellant) is entitled to payment of the outstanding amount.”

Determination of the two issues by the court a quo

Upon consideration of the evidence before it, the court a quo found, that, the appellant was guilty of breach of contract. It dismissed the appellant's claim and sustained the respondent's counter-claim. Consequently, it ordered as follows:

“In the result, I order as follows:

1. The plaintiff's claim is dismissed.

2. The plaintiff pays the defendant US$140,000, being the refund of the deposit paid by the defendant towards the purchase of the Excavator and Front End Loader.

3. The plaintiff pays to the defendant costs of suit.”

The Appeal

Aggrieved by the above order, the appellant appealed to this Court for relief on five grounds. The five grounds of appeal attack the judgment a quo basically on failure to appreciate the sufficiency of evidence and failure to apply the turquand rule in its favour.

Analysis of the Facts and the Law

It is clear right from the outset, that, the cardinal question to be answered is the validity and fulfilment of the contracts allegedly concluded by the parties. In simple terms, the court a quo had to determine whether the contract was for brand new or refurbished machinery.

The parties relied on different contracts for their competing claims.

The terms of the two contracts are incompatible and at variance with each other. The respondent relied on the tender as advertised in the Herald newspaper with a wide circulation in the area. The appellant, however, denied having responded to the notice floated in the newspaper. Its Managing Director, Darlington Chirara, testified that he responded to a different notice pinned on the notice board at the respondent's registry office. It was his testimony that the notice was a tender for the procurement of a refurbished twenty-tonne crawling excavator and a refurbished three-tonne front end loader.

The appellant's sole witness, Darlington Chirara, was however unable to verify or prove the existence of the notice he claimed to have responded to on behalf of the appellant. Under cross-examination by counsel for the respondent, this is what he had to say:

“Q. Do you have proof to show that there was such a notice?

A. I do not have any documentary evidence. I could not have removed the notice that was on the notice board because others were supposed to come and see that notice.”…,.

What the appellant said under cross examination is ample proof, that, apart from his mere say so, he has no evidence of the existence of the offer he says he accepted for the provision of refurbished second hand machinery.

It is trite, that, a valid contract is constituted by an offer and acceptance.

The appellant, by his own admission, failed to establish the existence of the tender for the provision of refurbished second hand machinery. The onus was on the appellant to establish the existence of all the essential elements of a valid contract. Failure to establish the existence of such tender, on the alleged terms and conditions, was fatal to its case as there can be no acceptance without an offer.

The respondent's version was, that, it tendered for the procurement of a brand new twenty-tonne excavator and three-tonne front end loader by floating a tender in the Herald Newspaper. After observing all the legal requirements and procedures, it awarded the appellant the tender, as amended for the acquisition of a twenty-tonne tracked excavator instead of a thirty-tonne as originally tendered. The appellant duly accepted the tender and undertook to perform the contract in accordance with the given terms and conditions.

The respondent proffered evidence of the described tender notice by producing a copy of the relevant Herald newspaper cutting. It further produced copies of the related minutes of the procurement Board duly constituted in terms of section 210 of the Urban Councils Act [Chapter 29:15]. The meeting was held at the respondent's offices on 17 September 2013. It was attended by the appellant's two directors, namely, S. Mlambo and D. Chirara, who were accompanied by its legal practitioner Mr Mucheriwesi of Mushangwe and Company Legal practitioners. The respondent was represented by its Chamber Secretary, Human Resources Manager, Deputy Finance Director of Works and a medical doctor.

The minutes of that meeting speak for themselves.

The record of proceedings captures the recommendations of the Procurement Board as follows:

“…, that the tenders for the tenders of the supply of new machinery/equipment be awarded as follows:

“1. Scotia Steel (Pvt) Limited – jet machine for US$119,113=50.

2. Upset Investments (Pvt) Ltd – Tracked Excavator, 20 tonne for US$162,000.

3. Upset Investments (Pvt) Ltd Front End Loader, 3–ton for US$105,000.”

The meeting, having been apprised of the recommendations of the Procurement Board, agreed that:

“Upset investments (is) to supply and deliver brand new equipment within 10 days after receipt of 50% deposit of the total value. Further, the Chitungwiza Municipality undertook to pay legal fees as the lawyer's invoice sic). All payments were to be made through Upset Investments lawyers, Mushangwe and Company Legal Practitioners.”…,.

The documentary evidence proffered by the respondent was corroborated in every material respect by oral evidence from four witnesses.

In its plea, in reconvention, before the court a quo, the appellant however gave the impression that it responded to an amended extended tender of the original advertised tender. It was its plea in reconvention, that, the amended tender did not require the provision of new machinery. Paragraphs 4 and 5 of its plea in reconvention read:

“Ad paragraph 4

It is denied, when plaintiff in reconvention advertised its tender, it was not won by its deadline. It was then extended and revised.

Ad paragraph 5

The defendant, in reconvention, will aver that it submitted its bid during the extension. According to the specifications, it was not a requirement that the excavator ought to be brand new. The tonnage of same was also reduced.

It affirms that the tender won by the defendant in reconvention is not the same with the one initially advertised as evidenced by the discrepancy in tonnage of the excavator.”

While the Procurement Board minutes record the amendment downsizing the weight of the excavator from 30 tonnes to 20 tonnes, there is no record of the amendment of the requirement for the provision of brand new machinery. On the other hand, the appellant contended, without proof, that it responded to a notice pinned on the respondent's notice board for the supply of refurbished second hand machinery.

It is noteworthy, that, the appellant vacillated between saying that it responded to a notice pinned on the notice board and saying that it responded to an amended tender revised notice.

Such vacillation and inconsistency undermines the appellant's case.

The appellant's assertion, that the respondent offered to buy refurbished second hand machinery is not backed up by any proof of recommendations from the Procurement Board as is required by law.

Section 210(4) of the Urban Councils Act [Chapter 29:15] requires that any procurement of goods, materials, or services be subject to recommendations of the Procurement Board. The section provides as follows:

“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”

The section is couched in peremptory terms because it constitutes a prohibition coupled with the use of the mandatory term 'shall not'.

The appellant was unable to proffer any evidence of the Procurement Board having tendered for the procurement of second hand refurbished machinery. The evidence on record shows, that, before the full Council met to adjudicate over that tender, the then Town Clerk G. Tanyanyiwa, had, fifteen days earlier, written to the appellant advising him that he had won the tender to supply second hand refurbished machinery. The letter reads:

“Date 6/07/2011
Dear Sir/ Madam

REF: SUPPLY OF REFURBISHED TWENTY TONNE CRAWLING EXCAVATOR AND 3 TONNE FRONT END LOADER

Reference is made to the above.

You have been awarded the tender to supply the municipality with the above equipment. You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks. May you treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of disease.”

It is needless to say, that, the above letter was false and in fact misleading, because, no such tender had been awarded by the respondent at that stage.

On the basis of the summation of the evidence in this case, no fault can be laid at the learned judge a quo's door for holding that the ruling contractual terms were as advertised in the Herald newspaper. The letter by G. Tanyanyiwa was pre-emptive and patently unlawful as he had no mandate to award such tender to the appellant without authority from Council.

In dealing with the unlawful and unbecoming conduct of G. Tanyanyiwa, the learned judge a quo had this to say:

“I do not believe that a Town Clerk's actions have the power to override the provisions that is (sic) peremptory. Therefore, the letter of Mr G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force or consequence. It does not bind the defendant. So the contract that was purportedly entered into and between the plaintiff and the defendant, pursuant to the letter which was written by G. Tanyanyiwa, is a nullity.”

In apparent concession that the Town Clerk acted unlawfully and unprocedurally, the appellant sought to rely on the Turquand rule in an attempt to sanitise and regularise G. Tanyanyiwa's unlawful and irregular conduct.

The Turquand rule is derived from the famous British case of Royal British Bank v Turquand 1856 199 ER 886.

In that case, the directors of the respondent company could borrow on behalf of the company under a company resolution. Two directors of the company signed a bond on behalf of the company, under the company seal, without the requisite company resolution. When pressed for payment, the company objected on the basis that the directors had signed without company resolution. The court held, that, when dealing with a corporate body, parties are not bound to do more than peruse the statutes of the company: and if the power to transact is given in the statute, then, the party so contracting has the right to infer that the authority to so contract on the part of the corporation has been perfected by the necessary resolutions.

In other words, a party contracting with a company is entitled to assume that all the internal procedures have been complied with, provided the company has the power to transact.

This case can easily be distinguished from Royal British Bank v Turquand 1856 199 ER 886 on two grounds:

(a) First, the respondent, being a Municipality, was expressly prohibited by section 210(4) of the Urban Councils Act from contracting without the necessary recommendations from the Procurement Board and approval from Council.

A statutory prohibition is mandatory and binding on the parties as everyone is presumed to know the law regardless of whether one has read and understood the law.

No such statutory prohibition bound the respondent in Royal British Bank v Turquand 1856 199 ER 886.

The finding by the learned judge in the court a quo, that the unsanctioned contract to provide refurbished machinery was a legal nullity, as it was prohibited by law, is beyond reproach.

The argument, that section 210 of the Urban Councils Act constitutes internal issues unbeknown to the appellant is therefore baseless and without any foundation at law. The respondent had therefore no capacity to transact in contravention of the law.

(b) Second, the letter written to the appellant by the Town Clerk, G. Tanyanyiwa, conveying the message that the appellant had won the tender to supply the machinery was false in fact and misleading. It was written without Council authority fifteen days before the adjudication of the tender. The letter was fraudulently calculated to prejudice other bidders, and the respondent, because it was meant to abort the whole purpose of the tender to identify the most suitable bidder for the supply of the advertised new machinery.

As correctly observed by the learned judge a quo, the Turquand rule cannot override a statutory prohibition. This is for the simple reason that the rule was not designed to promote and perpetuate illegality. It is meant to protect gullible members of the public who innocently contract with company agents oblivious of their failure to observe internal procedures.

Reliance on case law where the rule was applied in our jurisdiction was therefore misplaced, because, in this case, the purported contract was void ab initio and a nullity at law on account of fraud and statutory prohibition.

View Appeal
HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

The plaintiff issued summons claiming the following:

“(i) Payment of the sum of US$119,300 being the remaining balance of the agreed purchase price for one x 20 Tonne Hyundai Excavator, sold and delivered by the plaintiff to the defendant, at its specific instance and request.

(ii) Interest at the prescribed rate calculated from the date of delivery, being 19th of June 2014, to the date of full payment.

(iii) Costs of suit on a legal practitioner and client scale.”

In its declaration, the plaintiff averred the following:

In 2011, the parties entered into a procurement contract in which the defendant ordered one by 20 tonne hydraulic excavator from the plaintiff. The agreed purchase price was US$209,300 inclusive of VAT. The defendant was obliged to pay 50% deposit towards the purchase price. The remaining balance was payable upon delivery of the excavator.

In partial fulfilment of the agreement, the defendant paid, in instalments, the sum of US$90,000 as part deposit to the agreed purchase price.

The plaintiff accordingly delivered the excavator on 19 June 2014 which delivery was accepted. The excavator was accepted in good working order by the defendant at its premises.

The defendant has, despite demand, refused or neglected to pay the outstanding balance of US$119,300....,.

To the merits, the defendant averred, that, the plaintiff delivered a defunct Hyundai Excavator contrary to the undertaking that it made that it would deliver a new excavator. It had to incur unnecessary costs in having the excavator checked by an independent company. The defendant averred, that, it will only effect payment of the balance after delivery of a brand new and properly functioning machinery.

The defendant also made a counter claim. It averred the following:

On 16 May 2014, it advertised a Tender Notice in the Herald newspaper in terms of section 211 of the Urban Councils Act [Chapter 29:15]. The notice was inviting tenders for the supply of brand new machinery, viz:

(i) One Jet machine Chigu Velocity clearing machine.

(ii) One Tracked Excavator 30 tonne.

(iii) One Front End Loader.

On 18 July 2011, the defendant in reconvention won the tender to supply it with a 20 tonne Tracked Excavator and a 3 tonne Front End loader. It was a term of the agreement that:

(a) The defendant in reconvention would deliver a brand new excavator and a brand new front-end loader.

(b) The plaintiff in reconvention would pay the deposit of the agreed purchase price before delivery of the machinery.

(c) The plaintiff in reconvention would pay the outstanding purchase price upon delivery of the machine.

The plaintiff in reconvention paid the initial deposit to the defendant in reconvention on 29 January 2014 in the sum of US$140,000. On 19 June 2014, the defendant in reconvention delivered a dysfunctional excavator in breach of the agreement terms.

It has refused and failed to deliver a brand new machinery.

The plaintiff in reconvention has been prejudiced by the breach. The plaintiff in reconvention is entitled to specific performance of the agreed terms of the contract. Alternatively, it is entitled to restitution of US$140,000 being the deposit paid as part of the purchase price and damages for breach of contract. Consequently, it claims for:

“(a) An order compelling the defendant in reconvention to deliver brand new excavator and Frond End loader to the plaintiff in reconvention in terms of the agreement.

(b) Alternatively, an order compelling defendant in reconvention to pay the sum of US$140,000 being the deposit paid as part of the purchase price.

(c) An order compelling defendant in reconvention to pay US$30,000 as damages for breach of contract.

(d) An order compelling defendant in reconvention to pay US$20 per day from date of summons to date of collection being storage fees for the excavator.

(e) An order compelling defendant in reconvention to pay interest at the rate of 5% per annum from the date of demand to date of payment in full.

(f) Costs of suit on a legal practitioner client scale.”

The defendant in reconvention pleaded as follows to the counter-claim:

When the plaintiff in reconvention advertised its tender notice, the tender was not won by the deadline. The tender notice was then revised and extended.

It (the defendant in reconvention) submitted its bid during the extension.

According to the specifications of the re-advertised tender notice, it was not a requirement that the excavator be brand new. Even its tonnage had also been reduced. The tender that was won by the defendant in reconvention was not as per the initially advertised tender notice as evidenced by the discrepancy in tonnage of the excavator.

The defendant in reconvention averred, that, at all material times, the plaintiff in reconvention was fully aware that the excavator to be supplied would be pre-owned.

When the excavator was delivered, it was inspected by all responsible authorities and then certified to be in good working condition. The parties did not agree that the machinery to be supplied would be brand new.

The defendant in reconvention prayed for the dismissal of the counter claim with costs on a higher scale.

In its replication, the plaintiff in reconvention averred the following:

The excavator was supposed to be new. It disputes that the tender that was won by the defendant in reconvention was not the one that was initially advertised. The defendant in reconvention was paid the deposit for both the excavator and front end loader after a meeting was subsequently held. It disputes that the excavator that was delivered was in good working condition.

At the pre-trial conference, the parties agreed that the issues for trial were:

1(a) Whether or not the plaintiff should be compelled to deliver a brand new excavator; or, alternatively

1(b) Whether or not the defendant is entitled to a refund of the deposit paid.

2. Whether or not the plaintiff is entitled to payment of the outstanding amount.

To prove its case, the plaintiff led evidence from one witness, Darlington Chirara, who is its Managing Director since 2007.

His evidence was as follows:

In June 2011, he went to Chitungwiza Municipality head office chasing after his payment. At the Registry section notice board there was a tender notice asking for a refurbished 20 tonne Crawling Excavator and a 3 tonne Front End loader. Tender documents were going for US$5,000.

He went back the next day and bought the tender documents which included a tender form which was supposed to be filled in duplicate and attached to the quotation. He filled in the tender form for the excavator and attached it to his quotation and had them stamped by the defendant's registry section on 9 June 2011 on receipt.

The tender document, together with the tender form and the quotation, were produced as exhibit(s) 4 and 5…,.

The tender reference number for the supply of the excavator is CH.05/11.

Darlington Chirara said, that, on the tender form, he filled in the condition of the machinery as a 200g Model, a Hyundai Model which had already done 2,972 hours as it was a second hand. Its under-carriage life percentage was 76% meaning that 24% was already worn out or gone because of use.

He said that in exhibit 5, which is the quotation, he quoted a 20 tonne excavator valued at $182,000.

He said that, on 7 July 2011, he received a letter from the defendant saying that the plaintiff had won the tender to supply a refurbished 20 tonne excavator and a 3 tonne front-end loader.

The letter was produced by consent as exhibit 6 in the supplementary bundle.

The letter was written on 6 July 2011 to the directors of the plaintiff, by G. Tanyanyiwa, who was the then Town Clerk. It is on the defendant's letter head. It reads:

“REF: Supply of refurbished 20 tonne Crawling Excavator and 3 tonne Front Loader

Reference is made to the above.

You have been awarded the Tender to supply the Municipality with the above equipment.

You are required to supply the equipment within 30 days from receipt of deposit which is going to be paid within the next 2 weeks.

May you please treat this order with urgency since there are disease outbreaks and we would like to use the equipment to arrest the spread of diseases.”...,.

During cross-examination, Mary Mukonyora, who is the defendant's Acting Chamber Secretary, said that she got employed by the defendant on 1 October 2012 as Head of Human Resources, and, in 2015, she assumed the position of Acting Chamber Secretary.

She admitted, that, the letter notifying the plaintiff of having won the tender to supply a 20 tonne refurbished excavator and a 3 tonne front end loader, which was written by G. Tanyanyiwa, the then Town Clerk, on 6 July 2011 (exhibit 6) and the minutes of the Procurement Board recommending that the plaintiff supplies a 20 tonne excavator and 3 tonne front end loader were consistent.

She said that she, however, doubted the authenticity of the letter of G. Tanyanyiwa. She said that she doubted if it was genuine.

She, however, admitted, that, other than this document which was written by G. Tanyanyiwa, there is no any other document from the defendant which notified the plaintiff of having won the tender....,.

George Makunde, the current Town Clerk of the defendant, testified as follows:

He said that he joined the defendant in August 2012 and got to know about this case through a perusal of the defendant's documents.

He outlined the procedure that is followed by the defendant in procuring equipment.

He said that a Tender Notice is flighted in a national newspaper guided by section 30 and 31 of the Procurement Act [Chapter 22:14] inviting the submission of tenders. The Procurement Committee/Board then deliberates on the submitted tenders and makes recommendations in terms of the award of the tender to the winner of that particular tender. The recommendation is made to a formally constituted full Council of the defendant in the form of a report. Full council then makes a resolution on the issue which resolution then allows or authorises the Town Clerk, as the Chief Executive Officer or Accounting Officer, to then notify the winning tenderer for the provision of the goods or service so required.

The witness alluded to the Tender Notice that was flighted by the defendant; the minutes of the Procurement Committee of 23 June 2011; and the minutes of the full Council meeting of 21 July 2011 that Mary Mukonyora referred to in her evidence.

His evidence on all these documents was similar to that of Mary Mukonyora in all material respects....,.

The witness said that he suspected that the letter that was written by the then Town Clerk, G. Tanyanyiwa, on 6 July 2011, notifying the plaintiff that it had won the tender to supply a refurbished excavator and front-end loader was as a result of a collusion between Mr. Tanyanyiwa and the plaintiff because it was written before the full Council of the defendant had made a resolution on 21 July 2011 to award the tender as per recommendations by the Procurement Committee which had set on 23 June 2011....,.

What is disturbing about this case is that, on 23 June 2011, when the defendant's Procurement Committee/Board set and recommended, in its report to full Council, that the tender for the supply of a brand new excavator and front end-loader be awarded to the plaintiff, Mr G. Tanyanyiwa, the then Town Clerk, was in attendance.

In terms of procedure, the recommendation was subject to adoption as a resolution by a full Council meeting. Such a meeting was only held on 21 July 2011.

The Town Clerk, Mr. G. Tanyanyiwa, even attended that meeting as well.

At that meeting, full Council passed a resolution that the plaintiff be awarded the tender to supply a brand new excavator and front end loader.

What is buffling is that, on 6 July 2011, well before full Council had sat, Mr. G. Tanyanyiwa wrote to the plaintiff notifying it that it had won the tender to supply a refurbished excavator and frond-end loader.

Two questions arise:

(i) Firstly, why did he notify the plaintiff that it had won the tender before full Council had held a meeting to pass the recommendation as a resolution?

(ii) Secondly, why did he tell the plaintiff that it had won the tender to supply refurbished machinery?

These queries or questions show that the then Town Clerk was not conducting himself properly in the discharge of his duties.

This is worsened by the fact, that, he was in attendance at the full Council meeting which was later held on 21 July 2011 which adopted the recommendations of the Procurement Committee/Board which stated that the plaintiff was to supply brand new equipment.

When the adoption of the recommendation was made, he knew that he had already notified the plaintiff that it had won the tender to supply refurbished equipment - but he did not inform the Council.

Obviously, that is a sign that he knew that what he had done was improper.

This is further evidenced by the fact, that, after full Council had passed the resolution to award the tender to the plaintiff, he did not write a letter notifying the plaintiff about it as he was supposed to do as per procedure.

The critical question now is: is the defendant bound by the irregular conduct of its employee, the Town Clerk, who told the plaintiff that it had won the tender to supply refurbished machinery when in fact it wanted to be supplied with brand new machinery?

The plaintiff's counsel submitted, that, by virtue of the turquand rule, the defendant is bound.

I must point out from the onset, that, the turquand rule is a principle of company law.

In terms of the turquand rule, if a party transacts with a company only to later discover that the director lacked the authority to bind the company, the company may be forced to honour the transaction if the transaction was completed in good faith by the other party.

The rule is based on the English case of Royal British Bank v Turquand 1856 119 ER 886, wherein it was held, that, people transacting with a company are entitled to assume that internal company rules have been complied with even if they are not. The exceptions to this rule are:

(i) Firstly, if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (in other words, he acted in bad faith).

(ii) Secondly, if the circumstances under which the contract was concluded on behalf of the company were suspicious.

Counsel for the plaintiff went on to cite the case of Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA…,. The case involved a municipality. The turquand rule was held to be applicable to municipalities.

In that case, the Town Clerk, just like in this case, had written a letter to the respondent cancelling the lease agreement between the municipality and the respondent when the municipality had not authorised the cancellation of the lease agreement. The municipality was now demanding money for rent from the respondent and a dispute arose as the respondent refused to pay saying that the lease agreement had been cancelled. The court held that:

“A municipality, in the normal exercise of its functions, necessarily concludes contracts with members of the public. It would be unbusiness-like if the respondent had been duly bound, when he received the Town Clerk's letter, to make enquiries to ensure that the Town Clerk was in fact authorised by the Town Council to convey the cancellation.”

Applying the law to the present case, counsel for the plaintiff submitted, that, the internal workings of Council are not known to the plaintiff, and, as such, there is a presumption of regularity in the adherence to Council procedures which makes it impossible for the defendant to escape liability on the basis that Mr. Tanyanyiwa had not been authorised by the defendant to write the letter that he wrote on 6 July 2011.

To begin with, with all due respect, I am not in agreement with the reasoning in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA that the turquand rule is applicable to municipalities.

I see no basis for saying that.

Municipalities and companies are different entities.

In terms of section 131 of the Urban Councils Act [Chapter 29:15], a Town Clerk is an employee of the defendant (municipality) and his duties are outlined in section 136. These involve the administration of council, managing operations and property of council, supervise the activities of council employees, and any other duties that may be assigned to him by the Council.

The Urban Councils Act does not give the Town Clerk powers to take over the functions of Council when it comes to procurement issues and make binding decisions on its behalf.

The Urban Councils Act has provisions which deal with how goods and services are procured and those provisions are worded in peremptory terms as they use the words 'shall' and 'shall not'.

In terms of section 210(1) of the Urban Councils Act, every municipal council shall appoint a Procurement Board which is responsible for arranging tenders and for making recommendations to Council in regard to the acceptance of tenders and the procurement of goods, materials, and services.

In terms of section 210(4) of the Urban Councils Act:

“A municipal council shall not procure any goods, materials, or services unless its municipal procurement board has made recommendations to the council thereon and the council has considered such recommendations.”…,.

I do not believe that a Town Clerk's actions have the power to override the wording of the provisions that is peremptory.

Therefore, the letter of Mr. G. Tanyanyiwa, which was written on 6 July 2011, before the full Council meeting had been held on 21 July 2011, notifying the plaintiff that it had won the tender to supply refurbished machinery is therefore of no force and consequence. It does not bind the defendant.

So the contract that was purportedly entered into by and between the plaintiff and the defendant pursuant to the letter which was written by G. Tanyanyiwa is a nullity.

Assuming that the turquand rule is applicable to municipalities, as was held in Potchefstroom se Stadsraad v Kotze 1960 (3) SA 616 AA, it would not be proper to hold the municipality bound by the actions of a Town Clerk because a Town Clerk is not a functionary of the municipality but an employee.

A councillor, instead, would bind the municipality because a council is run by councillors, not by its employees.

I would equate a councillor to a director of a company.

In terms of the turquand rule, an employee of a company does not bind the company if he purports to act on behalf of the company.

So, in the present case, even assuming that the Tender Notice was properly advertised, the letter that was written by the then Town Clerk, Mr. G. Tanyanyiwa, would not bind the defendant because he had no authority to enter into contracts on behalf of the defendant as he was not a councillor, but just an employee.

View Appeal
SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

In a judgment handed down in January 2014, the court a quo upheld the plea of prescription raised by the respondents, and, consequently, dismissed the claim against the respondents with costs.Against that order, the appellant now appeals to this court.BACKGROUNDIn October 2012, the appellant, as plaintiff, issued summons against both ...

In a judgment handed down in January 2014, the court a quo upheld the plea of prescription raised by the respondents, and, consequently, dismissed the claim against the respondents with costs.

Against that order, the appellant now appeals to this court.

BACKGROUND

In October 2012, the appellant, as plaintiff, issued summons against both respondents before the High Court, Harare, claiming payment of the sum of $30,094=98 being arrear rentals in respect of the respondents tenancy of premises known as Shop 5, Zimre Centre, Corner Kwame Nkrumah Avenue and Leopold Takawira Street, Harare.

The second respondent had bound himself as surety and co-principal debtor in respect of the first respondent's indebtedness.

In their plea, the respondents, as defendants, raised the defence of prescription. More specifically, they averred, that, in instituting proceedings on 19 October 2012, more than three years after the debt became due, the claim had become time-barred.

The plea was not set down for hearing. Instead, the defendants pleaded over to the merits in the same plea.

In its replication, the appellant denied that the claim had prescribed. It averred, that, the first defendant had, on 22 October 2009, acknowledged the debt and had undertaken to pay the outstanding amount in full by 10 November 2009.

There was no rejoinder by the respondents.

In a joint pre-trial conference minute, the parties agreed, that, the issues requiring determination at trial were:

(a) Whether the plaintiff's claim had prescribed;

(b) Whether the first respondent had breached the lease agreement by failing to pay rental and other costs;

(c) Whether the respondents were liable to pay the sum of US$30,094=98 together with interest and costs of suit;

(d) Whether there had been mutual termination of the agreement between the parties and whether the appellant had unlawfully and unilaterally ejected the respondents from its premises; and

(e) Whether such conduct had resulted in the respondents suffering damages “in respect of the first respondent's assets and business” and, if so, the quantum thereof.

PROCEEDINGS BEFORE THE COURT A QUO

At the hearing of the matter, the respondents, through their lawyer, sought the leave of the court to deal with the issue of prescription first and lead evidence on it.

Despite opposition from the appellant, the court a quo decided that the issue of prescription be determined first, and, thereafter, depending on the outcome, the court would again hear evidence on the remaining issues.

In its judgment, the court a quo was of the view, that, the issue that fell for determination was the authenticity of the letter purportedly written by one Annet Mbedzi on behalf of Saintcor Holdings in October 2009.

In this regard, it made a number of observations.

The letter was not written on any letterhead, unlike in previous correspondence; it reflected the appellant's postal address; the letter was also written on behalf of Saintcor Holdings, a company both parties were agreed does not exist and was not a party to the lease agreement; the letter was addressed to a Mr Muringani, but, the name had been cancelled in black ink and in its place the name Muringi inserted; nowhere in the letter is it suggested that Saintcor Holdings was acknowledging indebtedness on behalf of Saintcor (Pvt) Ltd.

On a consideration of all these features, the court a quo concluded, that, the letter had not been written on behalf of the first respondent.

Consequently, the court upheld the plea of prescription and dismissed the plaintiff's claim with costs, hence this appeal.

GROUNDS OF APPEAL

In its grounds of appeal, the appellant has attacked the decision of the court a quo on the basis that it:

(a) Erred in fact and at law in holding that the appellant's claim had prescribed;

(b) Misdirected itself by holding that the letter that was received by the appellant on 22 October 2012 was not authentic;

(c) Misdirected itself by making a finding that the author of the letter that was received by the appellant on 22 October 2009 did not have authority to author the same.

It is apparent from the above grounds, that. it is the conclusion reached by the court a quo, that the letter in question had not been written on behalf of the respondent that the appellant is challenging.

PRELIMINARY ISSUES RAISED BY THE RESPONDENTS

In their heads of argument, the respondents raised two points in limine:

(i) The first was that the judgment of the court a quo reflects three different dates as the dates when the judgment was handed down.

The date of the judgment reflected in the Notice of Appeal is at variance with the date appearing ex facie the judgment itself, and, consequently, there has been no compliance with Rule 29 of the Rules of this Court.

(ii) Secondly, the relief sought is defective as it seeks to substitute the decision of the court a quo with one referring the matter back to the court a quo itself.

In his response, counsel for the appellant drew the attention of the court to a letter from the Registrar of the High Court which states, that. the ex-tempore judgment was handed down on 10 February 2015, which is the date appearing in the Notice of Appeal.

On the prayer, he conceded, that, the wording was inelegant but argued that the relief sought was clear. He submitted that the inelegance does not invalidate the appeal as ultimately the court will make an order it deems appropriate in the circumstances.

After hearing argument on the two preliminary issues, this court was of the view, that, the issues be rolled over for determination together with the issues that arise on the merits.

APPELLANT'S SUBMISSIONS ON APPEAL

In both his heads of argument and oral submissions, counsel for the appellant raised the following issues:

(i) First, that the judgment of the court a quo does not derive from the pleadings.

(ii) Second, the appellant's cause of action was predicated upon a valid cancellation of the lease agreement. Such cancellation was effected on 18 November 2009 and the cause of action would have accrued on that day. Therefore, when the appellant issued summons on 22 October 2012, the debt had not prescribed.

(iii) Third, that the appellant would have had no reason to cause the letter of 22 October 2012 to be generated. Once it had accepted that the letter had not been generated by the appellant, the court should have concluded that the letter had indeed been authored by the respondents.

(iv) Fourth, that the second respondent knew how to contact Annet Mbedzi, the author of the letter in question. Annet Mbedzi had been involved in the goings-on at the premises of the first respondent, and yet both respondents had not found it proper to call him.

(v) Lastly, counsel for the appellant submitted, that, it was improper for the court to have heard evidence piecemeal. Once the plea of prescription had not been set down and the respondent had then proceeded to plead over to the merits, the court should have heard evidence on all the issues and an assessment of the credibility and integrity of the witnesses undertaken only after all the evidence had been led.

RESPONDENTS SUBMISSIONS ON APPEAL

In response, counsel for the respondents made the following submissions:

(i) First, that, what is being attacked by the appellant are findings of fact which cannot be interfered with on appeal in the absence of a finding of irrationality on the part of the trial court.

(ii) Second, that, the court a quo was correct in its findings that the letter received by the appellant on 22 October 2009 had not been written by or for the respondents. This is because the appellant had admitted that, by that date, the first respondent had been evicted from the premises, and, consequently, the first respondent would not have used that address in correspondence with the appellant.

(iii) Third, that, the appellant has not established a lawful basis for the suggestion that the judgment does not derive from the pleadings as no leave of the court had been sought to advance argument on this ground, contrary to the Rules of this court. In any event, the respondents, in their plea, had placed prescription in issue.

(iv) Lastly, that, the debt did not become due on cancellation since rent was due monthly in advance, and, therefore, the cause of action arose whenever such rental was not paid on due date. The appellant had, in any event, evicted the first respondent in August 2009 for non-payment of rent and the “debt” included outstanding rentals up to the date of such eviction.

ISSUES FOR DETERMINATION

It is clear from the above, that, a number of issues arise before this court. These will be dealt with in turn....,.

WHETHER THE COURT A QUO ERRED IN MAKING FINDINGS OF FACT

The appellant has attacked various findings made by the court a quo on the facts, and, in particular, the finding that the letter received by the appellant on 22 October 2009 was not authentic and that the author of the letter did not have authority to write the same.

The court a quo made the following findings of fact:

(i) First, that the letter was written for and on behalf of an entity called Saintcor Holdings and not Saintcor (Pvt) Ltd.

(ii) Second, the name of the addressee had been incorrectly spelt.

(iii) Third, the letter was not written on the first respondent's letter head.

(iv) Fourth, the appellant's address, reflected in the letter, was incorrect.

(v) Fifth, the letter of acknowledgment had been written in October 2009 and yet purported to use the same address from which the first respondent had been evicted.

(vi) Sixth, the company that the author, Annet Mbedzi, purported to represent in the capacity of Financial Director does not in fact exist, and the company does not, in any event, purport to act on behalf of the first respondent.

On the basis of the above observations, the court reached the conclusion, that, the letter had not been written on behalf of the first respondent and that the letter did not specify which debt was being acknowledged.

The above conclusion cannot be said to be irrational: nor can it be said that it is not supported by the evidence.

The position is now settled, that, an Appellate Court will not interfere with the findings of fact made by a trial court unless the court comes to the conclusion, that, the findings are so irrational that no reasonable tribunal, faced with the same facts, would have arrived at such a conclusion.

Where there has been no such misdirection, the Appeal Court will not interfere.

This position was aptly captured by this court in Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S). At 670, KORSAH JA remarked:

“The general rule of law, as regards irrationality, is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied, that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at such a conclusion….,.”

DISPOSITION

In my view, this appeal lacks merit and must therefore fail.

The appeal is accordingly dismissed with costs.

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Turquand Rule or Indoor Management Rule, the Presumption of Regularity in Corporate Affairs & the Doctrine of Estoppel

HH49-09 : DYNAMOS FOOTBALL CLUB (PRIVATE) LIMITED and DYNAMOS FOOTBALL CLUB vs RICHARD CHIMINYA and OTHERS
Ruled By: CHATUKUTA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

HH01-10 : RIVER RANCH LIMITED vs DELTA CORPORATION LIMITED
Ruled By: PATEL J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

HH201-10 : MABONDE AGRICULTURAL SERVICES and JACOB MABONDE and HAZEL MOYO vs SENTRIDGE INVESTMENTS (PRIVATE) LIMITED and PK CHIVAURA and O CHIKONYORA and OTHERS
Ruled By: BHUNU J

HH12-13 : ANDREW MILLS vs TANGANDA TEA COMPANY LIMITED
Ruled By: PATEL J

HH348-13 : THE TRUSTEES OF THE LACEROSE TRUST and LACEROSE INVESTMENT (PRIVATE) LIMITED vs ZIMCOR TRUSTEES (PRIVATE) LIMITED and FRANK BUYANGA and TENDAI MUPFURUTSA and OTHERS
Ruled By: MAKONI J

HB201-11 : CABAT TRADE & FINANCE (PTY) LTD and SECURITY MILLS (PTY) LTD vs THE MOVEMENT FOR DEMOCRATIC CHANGE (MDC-T)
Ruled By: KAMOCHA J

HH327-14 : TM SUPERMARKET (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and THE SHERIFF OF ZIMBABWE
Ruled By: CHATUKUTA J

HB105-16 : MAXWELL SIBANDA vs GAVIN HAYLER and HAROLD HAYLER and MARGARET MEEK and AUDREY BENEDICT and REGISTRAR OF DEEDS N.O. and BULAWAYO CITY COUNCIL
Ruled By: TAKUVA J

HH161-15 : MCR VENGESAYI and AGNES VENGESAYI T/A VENGESAYI ARHITECTS vs BELVEDERE NURSING HOME (PRIVATE) LIMITED
Ruled By: DUBE J

HH107-13 : POWERSPEED ELECTRICAL LTD vs ENFIELD ZIMBABWE
Ruled By: DUBE J

Appealed
SC17-19 : ECONET WIRELESS (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL
Ruled By: MALABA DCJ, GOWORA JA and MAVANGIRA JA

View Appeal
HH964-15 : ECONET WIRELESS (PVT) LTD vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL and STEWARD BANK LTD and CBZ BANK LTD and NMB BANK LTD and STANBIC BANK LTD
Ruled By: MUSAKWA J

SC37-17 : TM SUPERMARKETS (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and SHERIFF OF ZIMBABWE
Ruled By: CHIDYAUSIKU CJ

HH196-15 : G CHIPARAUSHE and 66 OTHERS vs TRIANGLE LIMITED and TRIANGLE SENIOR STAFF PENSION FUND
Ruled By: CHIGUMBA J

HH223-13 : HWANGE COLLIERY CO. LTD and HWANGE COAL GASIFICATION CO. PL vs HWANGE COAL GASIFICATION CO. PL and TENDAI SAVANHU and KINGDOM BANK LTD and STANBIC BANK LTD and GUO FENG and ORS
Ruled By: MAFUSIRE J

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

SC25-14 : DAVID GOVERE vs ORDECO (PRIVATE) LIMITED and REGISTRAR OF DEEDS
Ruled By: ZIYAMBI JA, HLATSHWAYO JA and PATEL JA

Appealed
SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED
Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

View Appeal
HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE
Ruled By: MAFUSIRE J

SC48-20 : EMMA KUNDISHORA vs ZIMBABWE RED CROSS SOCIETY
Ruled By: HLATSHAWO JA, MAKONI JA and BERE JA

Appealed
SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

View Appeal
HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

View Appeal
SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

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Law Portal Zimbabwe

Turquand Rule or Indoor Management Rule, the Presumption of Regularity in Corporate Affairs & the Doctrine of Estoppel

HH49-09 : DYNAMOS FOOTBALL CLUB (PRIVATE) LIMITED and DYNAMOS FOOTBALL CLUB vs RICHARD CHIMINYA and OTHERS Ruled By: CHATUKUTA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED Ruled By: MAVANGIRA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED Ruled By: MAVANGIRA J

HH01-10 : RIVER RANCH LIMITED vs DELTA CORPORATION LIMITED Ruled By: PATEL J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE Ruled By: CHITAKUNYE J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE Ruled By: CHITAKUNYE J

HH201-10 : MABONDE AGRICULTURAL SERVICES and JACOB MABONDE and HAZEL MOYO vs SENTRIDGE INVESTMENTS (PRIVATE) LIMITED and PK CHIVAURA and O CHIKONYORA and OTHERS Ruled By: BHUNU J

HH12-13 : ANDREW MILLS vs TANGANDA TEA COMPANY LIMITED Ruled By: PATEL J

HH348-13 : THE TRUSTEES OF THE LACEROSE TRUST and LACEROSE INVESTMENT (PRIVATE) LIMITED vs ZIMCOR TRUSTEES (PRIVATE) LIMITED and FRANK BUYANGA and TENDAI MUPFURUTSA and OTHERS Ruled By: MAKONI J

HB201-11 : CABAT TRADE & FINANCE (PTY) LTD and SECURITY MILLS (PTY) LTD vs THE MOVEMENT FOR DEMOCRATIC CHANGE (MDC-T) Ruled By: KAMOCHA J

HH327-14 : TM SUPERMARKET (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and THE SHERIFF OF ZIMBABWE Ruled By: CHATUKUTA J

HB105-16 : MAXWELL SIBANDA vs GAVIN HAYLER and HAROLD HAYLER and MARGARET MEEK and AUDREY BENEDICT and REGISTRAR OF DEEDS N.O. and BULAWAYO CITY COUNCIL Ruled By: TAKUVA J

HH161-15 : MCR VENGESAYI and AGNES VENGESAYI T/A VENGESAYI ARHITECTS vs BELVEDERE NURSING HOME (PRIVATE) LIMITED Ruled By: DUBE J

HH107-13 : POWERSPEED ELECTRICAL LTD vs ENFIELD ZIMBABWE Ruled By: DUBE J

Appealed SC17-19 : ECONET WIRELESS (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL Ruled By: MALABA DCJ, GOWORA JA and MAVANGIRA JA

View Appeal HH964-15 : ECONET WIRELESS (PVT) LTD vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL and STEWARD BANK LTD and CBZ BANK LTD and NMB BANK LTD and STANBIC BANK LTD Ruled By: MUSAKWA J

SC37-17 : TM SUPERMARKETS (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and SHERIFF OF ZIMBABWE Ruled By: CHIDYAUSIKU CJ

HH196-15 : G CHIPARAUSHE and 66 OTHERS vs TRIANGLE LIMITED and TRIANGLE SENIOR STAFF PENSION FUND Ruled By: CHIGUMBA J

HH223-13 : HWANGE COLLIERY CO. LTD and HWANGE COAL GASIFICATION CO. PL vs HWANGE COAL GASIFICATION CO. PL and TENDAI SAVANHU and KINGDOM BANK LTD and STANBIC BANK LTD and GUO FENG and ORS Ruled By: MAFUSIRE J

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED Ruled By: MUZENDA J

SC25-14 : DAVID GOVERE vs ORDECO (PRIVATE) LIMITED and REGISTRAR OF DEEDS Ruled By: ZIYAMBI JA, HLATSHWAYO JA and PATEL JA

Appealed SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

View Appeal HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE Ruled By: MAFUSIRE J

SC48-20 : EMMA KUNDISHORA vs ZIMBABWE RED CROSS SOCIETY Ruled By: HLATSHAWO JA, MAKONI JA and BERE JA

Appealed SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

View Appeal HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY Ruled By: MUREMBA J

View Appeal SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA

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HH49-09 : DYNAMOS FOOTBALL CLUB (PRIVATE) LIMITED and DYNAMOS FOOTBALL CLUB vs RICHARD CHIMINYA and OTHERS
Ruled By: CHATUKUTA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

HH39-12 : GULA-NDEBELE AND PARTNERS LEGAL PRACTITIONERS vs AG-VENTURE (PRIVATE) LIMITED
Ruled By: MAVANGIRA J

HH01-10 : RIVER RANCH LIMITED vs DELTA CORPORATION LIMITED
Ruled By: PATEL J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

HH93-09 : HAVEN CHIKUMBU vs BRYDEN TECHINICAL SERVICES (PRIVATE) LIMITED AND THE REGISTRAR OF DEEDS AND THE DEPUTY SHERIFF FOR HARARE
Ruled By: CHITAKUNYE J

HH201-10 : MABONDE AGRICULTURAL SERVICES and JACOB MABONDE and HAZEL MOYO vs SENTRIDGE INVESTMENTS (PRIVATE) LIMITED and PK CHIVAURA and O CHIKONYORA and OTHERS
Ruled By: BHUNU J

HH12-13 : ANDREW MILLS vs TANGANDA TEA COMPANY LIMITED
Ruled By: PATEL J

HH348-13 : THE TRUSTEES OF THE LACEROSE TRUST and LACEROSE INVESTMENT (PRIVATE) LIMITED vs ZIMCOR TRUSTEES (PRIVATE) LIMITED and FRANK BUYANGA and TENDAI MUPFURUTSA and OTHERS
Ruled By: MAKONI J

HB201-11 : CABAT TRADE & FINANCE (PTY) LTD and SECURITY MILLS (PTY) LTD vs THE MOVEMENT FOR DEMOCRATIC CHANGE (MDC-T)
Ruled By: KAMOCHA J

HH327-14 : TM SUPERMARKET (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and THE SHERIFF OF ZIMBABWE
Ruled By: CHATUKUTA J

HB105-16 : MAXWELL SIBANDA vs GAVIN HAYLER and HAROLD HAYLER and MARGARET MEEK and AUDREY BENEDICT and REGISTRAR OF DEEDS N.O. and BULAWAYO CITY COUNCIL
Ruled By: TAKUVA J

HH161-15 : MCR VENGESAYI and AGNES VENGESAYI T/A VENGESAYI ARHITECTS vs BELVEDERE NURSING HOME (PRIVATE) LIMITED
Ruled By: DUBE J

HH107-13 : POWERSPEED ELECTRICAL LTD vs ENFIELD ZIMBABWE
Ruled By: DUBE J

Appealed
SC17-19 : ECONET WIRELESS (PRIVATE) LIMITED vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL
Ruled By: MALABA DCJ, GOWORA JA and MAVANGIRA JA

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HH964-15 : ECONET WIRELESS (PVT) LTD vs ZIMBABWE REVENUE AUTHORITY and COMMISSIONER GENERAL and STEWARD BANK LTD and CBZ BANK LTD and NMB BANK LTD and STANBIC BANK LTD
Ruled By: MUSAKWA J

SC37-17 : TM SUPERMARKETS (PVT) LTD vs AVONDALE HOLDINGS (PVT) LTD and SHERIFF OF ZIMBABWE
Ruled By: CHIDYAUSIKU CJ

HH196-15 : G CHIPARAUSHE and 66 OTHERS vs TRIANGLE LIMITED and TRIANGLE SENIOR STAFF PENSION FUND
Ruled By: CHIGUMBA J

HH223-13 : HWANGE COLLIERY CO. LTD and HWANGE COAL GASIFICATION CO. PL vs HWANGE COAL GASIFICATION CO. PL and TENDAI SAVANHU and KINGDOM BANK LTD and STANBIC BANK LTD and GUO FENG and ORS
Ruled By: MAFUSIRE J

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

SC25-14 : DAVID GOVERE vs ORDECO (PRIVATE) LIMITED and REGISTRAR OF DEEDS
Ruled By: ZIYAMBI JA, HLATSHWAYO JA and PATEL JA

Appealed
SC16-20 : INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE vs ENGEN PETROLEUM ZIMBABWE (RIVATE) LIMITED
Ruled By: GUVAVA JA, MAVANGIRA JA and ZIYAMBI AJA

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HH253-16 : ENGEN PETROLEUM ZIMBABWE [PVT] LTD vs WEDZERA PETROLEUM [PVT] LTD and INFRASTRUCTURE DEVELOPMENT BANK OF ZIMBABWE
Ruled By: MAFUSIRE J

SC48-20 : EMMA KUNDISHORA vs ZIMBABWE RED CROSS SOCIETY
Ruled By: HLATSHAWO JA, MAKONI JA and BERE JA

Appealed
SC110-21 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: GARWE JA, HLATSHWAYO JA and BHUNU JA

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HH100-17 : UPSET INVESTMENTS (PRIVATE) LIMITED vs CHITUNGWIZA MUNICIPALITY
Ruled By: MUREMBA J

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SC59-16 : ZIMRE PROPERTY INVESTMENTS LIMITED vs SAINTCOR (PVT) LTD t/a V. TRACK and JOHN SHUMBA
Ruled By: ZIYAMBI JA, GARWE JA and GOWORA JA