PATEL
J: The
plaintiff in this matter claims the sum of US$24,100 as special
damages, being loss of profits arising from an alleged breach of
contract by the defendants.
It
also claims restitution of US$10,000 paid as a deposit to the 1st
defendant under the same contract.
The
defendants deny any breach on their part and allege that it was in
fact the plaintiff that acted in breach of contract.
Evidence
for the Plaintiff
Wayne
Victor Moss is the Chief Executive Officer of the plaintiff company
which, together with CCC Pigs (Pvt) Ltd, is a subsidiary of Colcom
Foods Limited. He testified as follows.
On
the 18th
of January 2010, he signed the Agreement in
casu
with the defendants. In essence, the Agreement was for the sale of
500 tons of maize (at US$235 per ton) for a total purchase price of
US$117,500. The maize was to be sourced by the 1st
defendant from the Grain Marketing Board (the GMB).
On
the same date, the 2nd
defendant signed a contract of suretyship guaranteeing the delivery
of maize in terms of the Agreement. He said that the 1st
defendant had a credit facility with the GMB for 2,000 tons.
On
the 21st
of January, he withdrew a total of US$100,000 from the bank. He paid
the agreed deposit of US$10,000 to the 2nd
defendant and then proceeded with him to the GMB with US$90,000 in
cash.
The
GMB was not aware of the transaction and had no release orders in the
name of the 1st
defendant. He was told by the GMB's Credit Controller (Mawanza)
that he could obtain only 300 tons of maize at a higher price of
US$300 per ton if he paid the US$90,000 into the 1st
defendant's account with the GMB. This was because the 1st
defendant's facility was for a maximum of 300 tons and because its
account with the GMB was in debit at that time.
The
2nd
defendant then undertook to resolve the matter the following day.
The
witness subsequently visited the GMB on four consecutive days and was
given the same explanations by Mawanza. He then met the GMB Marketing
Manager (Mandizvidza) who cautioned him against dealing with the 1st
defendant. Mandizvidza later furnished a letter confirming the 1st
defendant's credit standing with the GMB at the relevant time.
The
plaintiff did not proceed with the transaction as it became evident
that the 1st
defendant did not have the capacity to deliver as agreed.
The
Agreement was cancelled on the 2nd
of February and this was confirmed by the plaintiff's lawyers in
their letter of the 4th
of March to the 1st
defendant. The defendants offered to restitute the US$10,000 deposit
in January and October 2010, but have not made any payment to date.
The
plaintiff had a contract with CCC Pigs, signed immediately after the
Agreement with the defendants, for the onward supply of 500 tons of
maize at a price of US$290 per ton. This represented a profit margin
of US$55 per ton equating to a total profit of US$22,500. The
plaintiff had arranged for the transportation of the maize at a cost
of US$200 per truck. In order to meet its contract with CCC Pigs the
plaintiff had to order 508 tons of maize from South Africa at a price
of US$317 per ton.
Under
cross-examination, the witness conceded that the deposit of US$10,000
was not paid on signature of the Agreement but on the 21st
of January and that the sum of US$90,000 was not deposited into the
GMB's bank account as agreed. The payments were a few days late and
not strictly in accordance with the terms of the Agreement. However,
this was not unreasonable in the circumstances of the transaction and
the 2nd
defendant had accepted the delays. Moreover, the witness did not have
the GMB's bank account details.
Odson
Dzanga is the plaintiff's Financial Manager. He accompanied Moss to
the GMB on the 22nd
of January 2010. He confirmed that the GMB would only have released
300 tons of maize upon payment of the US$90,000 in cash. He added
that the 1st
defendant's account with the GMB was in arrears standing at about
US$54,000 as at the 8th
of January 2010.
Emson
Mandizvidza has been employed by the GMB as its Marketing Manager
since 2003. His duties include checking the credit facilities of
customers and, in conjunction with the Credit Controller, authorising
release orders on credit sales. He corroborated the testimony of Moss
and Dzanga regarding their visit to the GMB on the 22nd
of January and his discussion with Moss in the presence of the 2nd
defendant. He also confirmed the contents of his letter of the 13th
of May 2010 concerning GMB prices and the 1st
defendant's credit status.
Between
the 18th
and 22nd
of January 2010, the 1st
defendant's credit facility was on hold because of its outstanding
arrears of US$54,000 and, in any event, that facility did not enable
it to buy 500 tons of maize from the GMB. At that time, the 1st
defendant's credit facility was limited to 300 tons per month.
In
practice, a credit customer wishing to increase its credit limit
would have to apply in writing and the application would then be
assessed by the Risk Management Committee (the RMC) which meets once
a week.
In
December 2009, the 1st
defendant applied to increase its credit limit to 2,000 tons per
month. This application was turned down by the RMC before the 18th
of January. As at that date, there was no application from the 1st
defendant to increase its credit limit. Even if it had lodged an
application, this would only have been processed the following week
and it would not have been possible to approve any increase on the
22nd
of January. The GMB sued the 1st
defendant for the outstanding US$54,000 in April 2010 in Case No.
HC2191/10. At the present time, the 1st
defendant is no longer a credit client of the GMB.
Wanda
van den Bergh is a grain broker. Her evidence was that she introduced
Moss to the 2nd
defendant in January 2010. The agreement between them was for the 1st
defendant to supply maize to the plaintiff for onward sale to CCC
Pigs. She was not aware of the 1st
defendant's credit facility with the GMB.
Evidence
for the Defendants
Nelson
Mahupete, the 2nd
defendant, is the Chairman and Managing Director of the 1st
defendant.
His
evidence was that in December 2009 he applied to the GMB's Credit
Controllers (Mawanza and Pfumbidza) to increase the 1st
defendant's credit facility from 300 tons to 2,000 tons per month.
They agreed to increase the facility to 1,500 tons, provided the
outstanding debt of US$54,000 due to the GMB was cleared.
After
the Agreement was concluded with the plaintiff, Moss only paid the
deposit of US$10,000 after 3 days. Moreover, he did not effect
transfer of the US$90,000 into the GMB's account but arrived at the
GMB offices with the cash equivalent. He then declined to pay that
amount towards the 1st
defendant's account with the GMB. If he had done so, the 1st
defendant would have fulfilled the contract to deliver 500 tons of
maize.
As
regards the debt of US$54,000 owed to the GMB, the 1st
defendant has already paid US$33,250 towards this and the balance is
to be cleared as per an agreed payment plan.
Under
cross-examination, the 2nd
defendant conceded that the 500 tons of maize in question was for pig
feed but denied that it was intended for CCC Pigs.
He
disputed the averment to that effect made by Mandizvidza in his
statement to the CID Serious Fraud Squad on the 12th
of February 2010.
As
regards the release orders for 500 tons of maize, he admitted that he
did not have them in his possession on signature of the Agreement on
the 18th
of January or at the GMB offices on the 21st
of January.
He
has been charged with fraud in respect of the present contract. The
criminal trial has commenced and is yet to be completed.
Vavavirayi
Mawanza has been the GMB's Credit Controller since January 1999.
His
evidence was that GMB release orders are first signed by him and then
by the Marketing Manager before they are issued. In August 2009, the
1st
defendant applied for a credit facility and in September it was
granted a facility for 150 tons per fortnight or 300 tons per month.
In December 2009, the GMB released a total of 268 tons of maize to
the 1st
defendant. The latter then applied for a facility of 2,000 tons per
month. On the 18th
or 19th
of December, he verbally advised the 2nd
defendant that he could only approve a facility of 1,500 tons on
condition that the 1st
defendant paid an additional US$200,000 towards its account with the
GMB.
As
at the 8th
of January 2010, the 1st
defendant's account was in debit of about US$54,000. On the 22nd
of January 2010, Moss came to the GMB wanting to pay US$90,000 into
the 1st
defendant's account. The witness refused his request and said that
the 1st
defendant should make the payment itself. Moreover, it would not have
been possible for Moss to have paid the GMB through its own bank
account.
In
his statement to the CID Serious Fraud Squad dated the 15th
of February 2010, he declared that “The accused (2nd
defendant) has a buying limit of 150 tonnes at a time”. There was
no mention of an increased limit of 1,500 tons having been
conditionally approved.
Tatenda
Pfumbidza is an Assistant Credit Controller with the GMB.
He
confirmed that an existing credit client must apply in writing for
any increase in its credit facility and that, if its application is
approved, the Marketing Department and the client must be advised of
the increased limit in writing.
When
the 1st
defendant applied for an increased limit of 2,000 tons in December
2000, it was told to make an additional payment of “more than
US$100,000” towards its account with the GMB. This application was
not approved because the additional payment was not made.
In
February 2010, the 2nd
defendant approached him for a credit reference. He then wrote two
reference letters dated the 5th
and 8th
of February. He conceded that the letters were silent as to the
conditions of release and the tonnage that could be released to the
1st
defendant. Moreover, he accepted that the letters were not addressed
to the plaintiff or to Moss and that they were written after the
events giving rise to the plaintiff's action in
casu.
Breach
of Agreement by Plaintiff
It
is a fundamental premise of every contract that both parties will
duly carry out their respective obligations. See Green
v Lutz
1966 RLR 633; ESE
Financial Services (Pty) Ltd
v Cramer
1975 (2) SA 805 (C) at 808-809.
As
is explained by Christie: Business
Law in Zimbabwe
at pp. 106 & 119:
“There
is a presumption that in every bilateral or synallagmatic contract,
i.e.
one in which each party undertakes obligations towards the other, the
common intention is that neither should be entitled to enforce the
contract unless he has performed or is ready to perform his own
obligations. …
…Conversely,
a party who has caused the other to commit a breach cannot found a
claim on the breach ….”
In
terms of clause 3 of the Agreement in this case, the plaintiff
undertook to pay a deposit of US$100,000 “upon the signing of this
agreement”, US$90,000 into the bank account of the GMB and
US$10,000 in cash to the defendants.
It
is common cause that Moss did not pay the deposit of US$10,000 and
did not transfer the sum of US$90,000 into the GMB's bank account
upon signature of the Agreement. Instead, he paid the US$10,000
deposit only on the 21st
of January and on the same date tendered US$90,000 in cash to the
GMB.
It
is therefore clear that the plaintiff did not perform its obligations
strictly in accordance with clause 3 of the Agreement.
However,
it is equally clear that the defendants accepted the late payment of
the US$10,000 and, furthermore, they actively attempted to pressurise
Moss to pay the US$90,000 in cash to the GMB, particularly as it was
not practically possible for him to make that payment into the GMB's
bank account. At that stage, he was obviously willing and able to
make both payments in performance of the plaintiff's obligations.
Given the attitude and conduct of the parties, the delay of 3 days in
tendering the payments and the departure in the mode of payment to
the GMB were not material to the plaintiff's undertakings under the
Agreement. And although the plaintiff did not strictly comply with
its payment obligations, such non-compliance was accepted by the
defendants. In short, they positively acquiesced in that
non-compliance and are therefore estopped from raising it as a
defence to the plaintiff's claim.
Breach
of Agreement by Defendants
Turning
to the defendants' undertakings, these were spelt out in clauses 4
to 7 of the Agreement.
Firstly,
once the plaintiff had paid the deposit, the 1st
defendant was obliged under clause 4 to cede its release orders for
500 tons of maize “which it has already received or will shortly
receive from GMB”.
Secondly,
after paying the deposit, the plaintiff was authorised by clause 5
“to immediately upload the maize from GMB”.
Thirdly,
by virtue of clause 6.1, the 1st
defendant warranted that “it does currently, or it will by Tuesday
19 January 2010, have a release order or release orders in its name
from GMB for 500 tons of maize”.
Finally,
clause 7.1 entitled the plaintiff to cancel the contract “should
the seller not have a release offer [sic]
or release offers [sic]
in its name by Friday 22 January 2010”.
It
is submitted for the defendants that the undertakings stipulated in
the Agreement are dubious in their meaning. Consequently, inasmuch as
the Agreement was drafted by the plaintiff's lawyers, its
provisions must be construed strictly as against the plaintiff on the
one hand and leniently as against the defendants on the other.
While
this may be the general purport of the so-called contra
proferentem
or contra
stipulatorem
rule of interpretation, it is trite that this rule may only be
invoked where the provision to be applied is ambiguous in its meaning
or effect. See Christie, op.cit.,
at pp. 72 & 238.
In
the instant case, I do not perceive any such ambiguity in the terms
of the Agreement. In my view, the combined effect of clauses 4 to 7
of the Agreement was this: the defendants warranted that they either
had the requisite release orders or would have them in their
possession by the 19th
of January; they undertook to cede the release orders to the
plaintiff upon payment of the stipulated deposit; the plaintiff would
then take delivery of 500 tons of maize; and, in the event that the
defendants did not have the release orders by the 22nd
of January at the latest, the plaintiff was entitled to cancel the
Agreement.
The
test for determining the repudiation of a contract by way of
anticipatory breach was expounded by Nienebar JA in Datacolor
International (Pty) Ltd
v Intamarket
(Pty) Ltd
2001 (1) SA 581 (A) at 591, as follows:
“…
the
emphasis is not on the repudiating party's state of mind, on what
he subjectively intended, but on what someone in the position of the
innocent party would think he intended to do; repudiation is
accordingly not a matter of intention, it is a matter of perception.
The
perception is that of a reasonable person placed in the position of
the aggrieved party. The test is whether such a notional reasonable
person would conclude that proper performance (in accordance with a
true interpretation of the agreement) will not be forthcoming. The
inferred intention accordingly serves as the criterion for
determining the nature of the threatened actual breach.
…due
to the co-contractant's repudiation, the innocent contractant is
excused from any steps that he must take in preparation for his own
performance…. In these circumstances the purchaser will not fall
into mora
by failing to tender performance …as long as he signifies his
willingness to perform.”
Similarly,
Lord Wright, cited with approval in Chinyerere
v Fraser
N.O.
1994 (2) ZLR 234 (H) at 250, observed as follows in Ross
T. Smyth & Co. Ltd
v T.D.
Bailey, Son & Co.
[1940] 3 All ER 60 (HL) at 73:
“I
do not say that it is necessary to show that the party alleged to
have repudiated should have an actual intention not to fulfil the
contract. He may intend in fact to fulfil it, but may be determined
to do so only in a manner substantially inconsistent with his
obligations, and in no other way.”
The
evidence before the Court shows that the 1st
defendant did not have the requisite release orders from the GMB,
either by the 19th
or the 22nd
of January, nor did it hold a credit facility with the GMB for 500
tons of maize at that time. Conversely, on the 21st
of January, the plaintiff had paid the cash deposit of US$10,000 to
the defendants and was prepared to pay the remaining deposit of
$90,000 in cash to the GMB.
It
follows that the defendants were patently in breach of the warranty
contained in clause 6.1 and, because of their evident inability to
fulfil the contract timeously, they were in anticipatory breach of
their obligations under clauses 4 and 5 to cede the release orders
and deliver 500 tons of maize. Consequently, the plaintiff was
entitled to withhold any further payment under the Agreement.
Cancellation
of Agreement
At
common law, an anticipatory breach ordinarily entitles the innocent
contractant to cancel the contract. As is observed by Kerr: The
Principles of Contract Law
(6th
ed.) at p. 592:
“…repudiation
before the due date for performance by a party prospectively in
default constitutes anticipatory breach of contract on which the
aggrieved party may take action if he so elects.”
In
the instant case, clause 7.1 of the Agreement expressly allowed the
plaintiff to cancel the contract in the event of the 1st
defendant's failure to have the requisite release orders in its
name by the 22nd
of January 2010. Thus, as at that date, the plaintiff was entitled to
cancel on two separate grounds, viz.
the defendants' actual breach of warranty as well as their
anticipated failure to cede the release orders and deliver the
stipulated tonnage of maize in breach of clauses 4 and 5 of the
Agreement. In the event, the plaintiff lawfully cancelled the
Agreement on the 2nd
of February 2010, as was confirmed by its lawyers in their letter of
the 4th
of March 2010 to the defendants.
Claim
for Special Damages
Clause
7 of the Agreement stipulates the plaintiff's remedies in the event
of cancellation.
Both
Ms. Theron
and Mr. Macheyo
have opted not to proffer any enlightenment on what was intended by
the parties, presumably because that intention is not easily
discernible from the vague and seemingly contradictory elections set
out in this clause.
It
then becomes necessary to consider the plaintiff's rights and
remedies at common law.
It
is trite that an aggrieved contractant is entitled to claim damages
arising from his co-contractant's breach of contract, including any
breach of warranty.
As
was stated in Evans
& Plows
v Willis
& Co.
1923 CPD 496 at 502:
“In
our law if an express warranty …has been given by the seller and
this turns out to be untrue an action for damages for breach of
contract lies.”
The
plaintiff in
casu
has elected not to claim the expenses actually incurred by it in
replacing the 500 tons of maize at US$317 per ton from the
alternative source in South Africa. The difference in prices alone
would derive a net loss of US158,500 less US$117,500 amounting to
US$41,000.
Instead,
the plaintiff claims a lesser sum of US$24,100 as special damages,
based on its anticipated loss of profits consequential upon the
defendants' breach of contract. This amount is calculated as
follows: the gross profit of US$145,000 that the plaintiff would have
received from its contract with CCC Pigs less US$120,900, being the
contract price of US$117,500 under the Agreement plus the notional
cost of transport totalling US$3,400.
In
United
Air Charters (Pvt) Ltd
v Jarman
1994 (2) ZLR 341 (S) at 344, cited with approval in Collective
Self Finance Scheme
v Asharia
2000 (1) ZLR 472 (S) at 475, Gubbay JA described special damages as
follows:
“Special
damages…are ordinarily regarded in law as being too remote to be
recoverable unless, in the special circumstances attending the
conclusion of the contract, it can be deduced that the parties
actually or presumptively foresaw that they would probably flow from
its breach (and thus, that it was within their contemplation)
….To
ascertain what the parties actually contemplated, or may be supposed
to have contemplated, it is of assistance to look to:
(a)
the subject matter and terms of the contract itself;
(b)
the special circumstances known to both parties at the time they
contracted.”
The
evidence in this case shows that the defendants were aware of the
plaintiff's onward contract with CCC Pigs and the contemplated
profit that the plaintiff would accrue from that contract. They
therefore foresaw, either actually or presumptively, that the
plaintiff would suffer loss of profits in the event of their
breaching their undertakings in terms of the Agreement. They are
accordingly liable for the special damages claimed by the plaintiff.
Claim
for Restitution
In
the event of non-delivery of the goods sold under a contract, the
right of the aggrieved party to claim restitution from the defaulting
party is ordinarily unchallengeable.
As
was held by Korsah JA in Nissan
Zimbabwe (Pvt) Ltd
v Hopitt
(Pvt) Ltd
1997 (1) ZLR 569 (S) at 572-573:
“Whether
the wrongful act arises out of contract or tort, where there has been
actual pecuniary loss which is capable of precise quantification, the
rule which the law adopts is restitutio
in integrum
– the injured party is entitled to claim to be placed back in the
same position as he would have been in had it not been for the
defendant's wrongful act.”
In
the present matter, the plaintiff's right to recover the deposit
paid in the event of cancellation is also affirmed in clause 7 of the
Agreement, notwithstanding the ambiguities in that clause that I have
earlier referred to.
The
evidence clearly shows that the plaintiff paid US$10,000 as a deposit
to the defendants and that the latter gave nothing in return for that
amount. Indeed, the defendants specifically acknowledged their
liability to refund the deposit in the subsequent dealings between
the parties and their respective lawyers. It follows that there is no
defence to the plaintiff's right to restitution and that this claim
must also be upheld.
Suretyship
and Joint and Several Liability
The
contract of suretyship attached to the Agreement, which contract was
admittedly signed by the 2nd
defendant, binds him “as surety and co-principal debtor … for the
due performance by [the 1st
defendant] of all its obligations under the agreement”. Again, “in
the event of [the 1st
defendant] failing to perform any of its obligations under the said
agreement”, the 2nd
defendant explicitly accepted “liability for the balance of its
indebtedness and for all interest, costs, damages, losses and
expenses which [the 1st
defendant] might be liable for in terms of the said agreement”.
Having
regard to these unambiguous provisions, I am unable to comprehend why
it is necessary to determine the 2nd
defendant's status as surety under the Agreement or the joint and
several liability of both defendants thereunder.
It
is undeniably clear that the 2nd
defendant stood as surety for the 1st
defendant and thereby rendered himself liable for the full
performance of the 1st
defendant's obligations under the Agreement. It is also
unquestionable that the 1st
and 2nd
defendants are jointly and severally liable for the damages and legal
costs incurred by the plaintiff.
Costs
As
a rule, the courts are loath to accede to a prayer for an award of
costs beyond the ordinary scale. However, this rule may properly be
departed from where the unsuccessful party's conduct has been
particularly unreasonable and reprehensible, for instance, by
obstinately refusing to resolve the dispute amicably and
inexpensively. Such vexatious conduct fully justifies an award of
costs on a higher scale in favour of the successful party. See
Borrowdale
Country Club
v Murandu
1987 (2) ZLR 77 (H); Chioza
v Sawyer
1997 (2) ZLR 178 (S); NUST
v NUST
Academic Staff & Others
2006 (1) ZLR 107 (H).
The
evidence before the Court shows that this matter could and should
have been resolved in January or soon thereafter. It was obvious at
that stage that the defendants were unable to fulfil the terms of the
Agreement, largely because of their own default in sustaining their
credit account with the GMB. In light of their failure to deliver
under the Agreement, there should have been no question of their
liability to refund the deposit of US$10,000 to the plaintiff. Their
exposure to an additional claim for damages might also have been
averted had they restored that deposit or demonstrated their
preparedness to restitute. Their recalcitrance was simply designed to
delay and frustrate the plaintiff and compel it to seek recourse
before this Court at considerable legal expense. I am amply satisfied
that they should recompense the plaintiff through a punitive award of
costs.
Disposition
Before
spelling out the order of this Court, I am constrained to register my
deep concern about the quality of Mr. Macheyo's
legal representation of the defendants. Quite apart from his
unhelpful and shabby performance in court, his Closing Submissions
qualify as the most appalling that I have seen hitherto. They
comprise almost 20 pages of ungrammatical and repetitive drivel,
punctuated with occasional forays into the irrelevant and riddled
with patent falsities as to the actual testimony presented at the
trial. They are as singularly unpersuasive as they are obtusely
unhelpful to the Court. For his gross disservice to his clients, Mr.
Macheyo
ought to be penalised with an award of costs on a higher scale de
bonis propriis.
However, I am reluctant to make such an award because it has not been
sought by any of the parties. What I will do instead is to direct the
Registrar to forward a copy of his submissions to the Secretary of
the Law Society for its Council to be regaled by their content and to
consider such disciplinary measures as it deems fit in the
circumstances.
In
the result, it is ordered that judgment be entered in favour of the
plaintiff as against the defendants jointly and severally, the one
paying the other to be absolved, for:
(i)
payment of the sum of US$24,100 as special damages for loss of
profits;
(ii)
payment of the sum of US$10,000 as restitution;
(iii)
interest on the aforesaid amounts at the prescribed rate calculated
from the date of judgment to the date of full and final payment;
(iv)
costs of suit on a legal practitioner and client scale.
Scanlen
& Holderness,
plaintiff's legal practitioners
Macheyo
Law Chambers,
defendants' legal practitioners
