BHUNU
JA:
[1] This
is an appeal against the judgment of the High Court dismissing the
appellant's claim for US$119,300.00 being the balance of the
purchase price for a 20-tonne Hyundai Excavator sold and delivered by
the appellant to the respondent.
[2] In
dismissing the appellant's claim the court a
quo
upheld
the respondent's counterclaim and ordered the appellant to refund
US$140,000.00 to the respondent, being the deposit paid towards the
purchase of the Excavator and Front-End Loader.
The
brief summary of the case
[3] 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.
[4] Sometime
in 2014 the parties concluded a contract of sale of a twenty-tonne
excavator. The terms of the contract are in dispute.
[5] The
appellant's claim is that sometime in 2014 it sold and delivered,
in good working order, a refurbished 20-tonne excavator for
US$209,300.00 at the respondent's instance and request. The
purchase price was payable in instalments with an initial deposit of
US$90,000.00 and the balance of US$119,300.00 payable on delivery.
[6]
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.
[7]
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$182,000.00. 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. (Emphasis provided).
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.”
[8] The
appellant won the tender to supply the respondent with a brand new
20-Tonne Tracked Excavator at the cost price of US$182,000.00 and a
brand new 3-Tonne Front End Loader at the cost price of
US$105,000.00. 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.
[9] It
was also a material term of the contract that the respondent would
pay US$140,000.00 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 preowned
dysfunctional excavator without the necessary accessories. To date
the appellant has not delivered the brand new machinery in terms of
the contract.
[10] That
being the case, the respondent counterclaimed for specific
performance in terms of the contract or alternatively a refund of the
deposit of US$140,000.00 paid in anticipation of the fulfilment of
the terms and conditions of the contract.
[11]
The respondent also claimed payment of damages in the sum of
US$30,000.00 for breach of contract as well as storage charges at the
rate of US$20.00 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
[12] 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
counterclaim. 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$140,000-00 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
[13] 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
[14] 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.
[15] The
parties relied on deferent contracts for their competing claims. The
terms of the two contacts 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 deferent 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.
[16] 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
Ms Mutindindi
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.” (My
emphasis)
[17] 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.
[18] 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.
[19] 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 Act. 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.
[20] 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$162,000.00.
3. Upset
Investments (Pvt) Ltd Front End Loader, 3–ton for US$105,000.00.”
[21] 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.” (My emphasis)
[22] The
documentary evidence proffered by the respondent was corroborated in
every material respect by oral evidence from four witnesses.
[23] 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”.
[24] 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.
[25] It
is noteworthy that the appellant vacillated between saying that it
responded to a notice pinned on the noticeboard and saying that it
responded to an amended tender revised notice. Such vacillation and
inconsistence undermines the appellant's case.
[26] 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 Act 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.”
[27] 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.”
[28] 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.
[29] 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 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.”
[30] 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. Tanganyika's unlawful
and irregular conduct.
[31]
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.
[32] This
case can easily be distinguished from the Turquand case 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 the Turquand
case
(supra).
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 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.
[33] 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.
[34] 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.
[35] In this case no contract came into existence because there was no meeting of the minds regarding the object of the sale. The respondent intended to purchase brand new machinery whereas the appellant was bent on providing refurbished second hand machinery. It is clear that both parties did not intend to contract on the basis of each other's terms. Consensus being the essence of contract there can be no contract in the absence of agreement on all material terms of the contract. In the absence of agreement on the nature and quality of the object of the intended sale no binding obligations came into being. In the absence of a valid enforceable contract, the learned judge a quo cannot be faulted for dismissing the appellant's claim for payment of the balance of the purchase price of a non-existent contract.
[36] Turning to the respondent's counterclaim, it is clear that it paid the deposit of US$140,000.00 in anticipation of a valid contract that never came into being. The obligation to refund the deposit paid is a natural consequence of the respondent's failure to supply the brand new machinery in terms of the respondent's offer.
[37] No dispute arose regarding the appellant's right to collect his unwanted refurbished excavator. In the result the appeal can only fail. It is accordingly ordered as follows:
1. The appeal be and is hereby dismissed.
2. The appellant shall bear costs of the appeal.
GARWE JA: I agree
HLATSHWAYO JA: I agree
Kachere Legal Practitioners, the appellant's legal practitioners
Matsikidze and Mucheche, the respondent's legal practitioners
