Civil
Trial
MUREMBA
J:
The
plaintiff issued summons claiming the following:
“(i)
payment of the sum of US$119,300-00 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$209,300-00 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$90,000-00 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$119,300-00.
In
its plea, the defendant raised a point in
limine
stating that the matter was improperly before the court. However, it
later on abandoned this point in limine
before the close of pleadings. So I shall not deal with the point in
limine
in
this judgment.
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$140,000-00. 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$140,000-00 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$140,000-00 being the deposit paid as part of the
purchase price.
(c)
An order compelling defendant in reconvention to pay US$30,000-00 as
damages for breach of contract.
(d)
An order compelling defendant in reconvention to pay US$20-00 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 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$5,000-00.
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 exh(s) 4 and 5 – (p73-75 & p76-77 of the record)
respectively.
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 undercarriage life
percentage was 76% meaning that 24% was already warn out or gone
because of use.
He
said that in exh 5 which is the quotation he quoted a 20 tonne
Excavator valued at $182,000-00.
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 exh 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.”
Darlington
Chirara said that in August 2011 the plaintiff received a purchase
order and a transfer copy of the RTGs from Metropolitan Bank dated 24
August 2011 showing that the defendant had paid the 50% deposit as
per the plaintiff's request in the quotation.
The
purchase order was produced as exh 7 at p78.
It
is dated 18 July 2011, but it was signed on 1 August 2011. It is for
the purchase of a tracked excavator 20 tonne for US$182,000-00.
The
RTGs – exh 8 at p80 shows that it is dated 24 August 2011 for
US$91,000-00 for the benefit of the plaintiff by the defendant.
However, on top of the date stamp it is crossed and written “not
processed”.
Darlington
Chirara said that to the plaintiff's surprise the money never came
through. It was only paid after the plaintiff had issued summons.
The
defendant finished paying the deposit for both the excavator and the
Front Loader in February 2014. $90,000-00 was paid for the excavator
and $50,000 was paid for the front end loader.
He
then delivered a 20 tonne excavator on 19 June 2014.
On
delivering the machinery he saw the Director of Works, Mr Gwanzura
who called the now current Town Clerk Mr George Mukunde who in turn
called 7 councillors who were there. They came and inspected it and
then instructed the Chief Internal Auditor Mr Chipunza to accompany
him to the workshop with the machine. At the workshop they saw Mr
Musiwa and the Worksop Foreman who inspected the machine and tested
it for almost 2 hours. After that they signed the delivery note which
was produced by consent as exh 9 at p 103.
The
delivery note shows that it was signed by one Innocent on behalf of
the defendant and it is states that the machinery was received in
good working order.
Darlington
Chirara said that the machinery had tips and a cigarette lighter. The
fuel gauge and the wipers were working.
On
the tender form he had stated that the machinery which was going to
be supplied was a 7 series model i.e. 210 LC-7.50. He said that the
defendant knew from the onset about the type of machinery that was
going to be supplied.
He
said the defendant even had the Ministry of Local Government, Public
Works and National Housing write a letter to ZIMRA indicating that it
(the defendant) had been granted a duty free certificate to
facilitate the delivery of a Robex 210 LC-7H Hyundai Excavator valued
at US$182,000-00.
It
was signed on 14 April 2014. The letter was produced by consent as
exh 12 at p140.
Darlington
Chirara said that after delivering the excavator on 19 June 2014, he
was then furnished with a report dated 11 July 2014 from the
defendant listing the defects it said it found on the excavator.
He
said that he was disputing all of them.
He
said that he was not even aware of the qualifications of the person
who did this report, but he suspected that this person was an
interested party in the same business as the plaintiff because after
issuing the report he went on to issue a quotation to supply the same
machinery to the defendant.
He
said that when he delivered the excavator it was in good working
order.
When
the inspection was done and the report was compiled 3 weeks later no
one from the plaintiff's company was present. The plaintiff was not
made aware of the inspection.
He
said that there was need for him to train the defendant's employees
on how to operate the machinery. He said that in his quotation he had
indicated that he would provide Basic Operator Orientation under the
heading “Handover”. He said that he has not yet trained them
because he has not been paid the outstanding amount.
During
cross examination the witness said that he did not respond to the
Tender Notice which was flighted in the Herald Newspaper, but the one
on the notice board of the Registry section at defendant's
headquarters.
He
said he did not have proof of such since it was on the noticeboard.
He
admitted that the delivery note that was signed by Innocent on behalf
of the defendant was prepared by the plaintiff.
He
disputed that the excavator was not inspected on delivery as it was
inspected by defendant's employees and signed for by Innocent as to
have been received in good working order.
He
said that he would have done the commissioning of the excavator once
the purchase price had been paid in full within 7 days from the date
of delivery.
He
was shown minutes of a meeting which was held on 17 September 2013
between the plaintiff's directors and the defendant's management.
These minutes were later produced by the defendant as exh 20 (at
p134).
He
admitted that he attended that meeting.
Although
in those minutes it is stated that it was agreed that the plaintiff
would supply and deliver brand new equipment, Darlington Chirara
disputed this saying that these minutes were not a true record of
what was agreed on.
He
said that these minutes were prepared by the defendant.
He
maintained that when he delivered the machinery it had no defects and
US$182,000.00 was its value.
He
said that the minutes were not sent to him before they were
confirmed.
Referring
to exh 10 at p79 which is a letter which he wrote to the defendant's
Town Clerk on 22 August 2011, he said that it was the defendant which
was supposed to prepare the tender contract between the parties but
it was never prepared. He said that instead the defendant furnished
the plaintiff with a purchase order.
During
the defendant's case Mary Mukonyora who is its Acting Chamber
Secretary testified as follows:
The
Tender Notice by the defendant inviting tenders to supply an
excavator and a front end-loader was placed in the Herald
Newspaper.
The closing date which was set for the submission of tenders was 31
May 2011.
The
Tender Notice was produced as exh 13 at p72.
It
shows that the defendant advertised for the supply of a 30 tonne
excavator and a 3 tonne front end loader.
The
witness said that on 23 June 2011 there was a procurement meeting
that was held by the Procurement Committee and in that meeting the
Procurement Committee recommended the awarding of the tender for the
supply of the excavator and front end loader to the plaintiff.
The
minutes were produced as exhibit 14 at p113.
These
minutes show that the plaintiff was accorded the tender to supply a
20 tonne Tracked Excavator for US$182,000.00 and a 3 tonne Front End
loader for US$105,000.00. However, it was specified that the
machinery was supposed to be new.
The
minutes also show that the Town Clerk Mr. G Tanyanyiwa was in
attendance of the meeting.
The
witness said that these recommendations were being made to the full
council which later held its meeting on 21 July 2011.
The
minutes of the full council meeting were also produced by consent as
exh 15 at p116.
They
show that G Tanyanyiwa the Town Clerk was in attendance again.
The
full Council adopted the recommendations of the procurement board on
the award of tenders for the supply of the machinery.
Mary
Mukonyora said that when the plaintiff then delivered a second hand
excavator the new Town Clerk Mr. G. Makunde wrote to the plaintiff on
11 July 2014 raising the issue.
The
letter was produced as exh 16 at p147.
In
that letter Mr Makunde stated that the defendant noted with great
disappointment that the excavator was second hand.
The
witness said that according to an expert the defendant engaged, the
machinery was not in good working condition.
The
report that was compiled by the expert was produced as exh 19 at
p144.
It
enumerates about 19 defects and states that key accessories were
missing. It states that the machine is an old machine that was
repaired and resprayed.
The
witness disputed that the Tender Notice was ever flighted on the
Registry notice board for the supply of a refurbished excavator.
She
said that from the time the excavator was delivered it has never been
used by the defendant. It is at the defendant's workshop.
The
witness also made reference to the minutes of a meeting which was
held on 17 September 2013 involving the directors of the plaintiff
and the defendant's management.
These
minutes were produced as exh 20 at p134.
They
show that the meeting was held following the issuance of summons by
the plaintiff for breach of contract in that the defendant had not
paid the deposit for the supply of the machinery by the plaintiff
despite the plaintiff having won the tender in 2011. The plaintiff
was suing for damages for breach of contract or for the payment for
the equipment since the machinery was already there.
The
minutes show that the parties agreed that the defendant would pay for
the machinery and the plaintiff was to supply brand new equipment
after payment of 50% deposit of the total value.
During
cross examination the witness 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 (exh 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.
She
also said that she sent the minutes of 17 September 2013 to the
plaintiff for authentication, but admitted that she had no evidence
to prove that she had indeed sent the minutes for confirmation.
She
said that Innocent who received the excavator on behalf of the
defendant and signed the delivery note is not an expert in such
machinery, but is just a clerk who works at the stores department.
She
said that the machine had not even been commissioned yet its standard
practice to have equipment demonstrated to be in good working order.
She
said that all the defendant's Tender Notices are done through the
newspapers.
She,
however, explained that if all tenderers say they can supply a 20
tonne excavator instead of a 30 tonne excavator which would have been
advertised for, the defendant can make adjustments and accept the
supply of a 20 tonne.
She
said that the excavator was received by the defendant on 19 June
2014. It was inspected by the expert on 30 June 2014. The letter of
complaint to the plaintiff about the defects on the excavator was
written on 11 July 2014.
She
said that the tender number on the Tender Notice which was flighted
by the defendant is 5/11 yet on the tender documents that the
plaintiff submitted quoted the tender number as CH/05/11. She said
that showed that the plaintiff was responding to a different Tender
notice than the one advertised in the Herald
Newspaper
with a deadline for submissions of 31 May 2011.
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.
He
also reiterated that the tender required that the plaintiff supplied
a brand new 20 tonne excavator and a 3 tonne front end loader.
He
disputed that the excavator that was delivered was in good working
order saying that although he saw the excavator on the day it was
delivered he did not inspect it to satisfy himself that it was in
good working order as he lacked the expertise in testing the
machinery.
He
said that inspection of machinery is contained in the regulations
that guide procurement and it is a process and not an event.
He
also said that Innocent the clerk who received the machinery has no
qualifications to test its condition.
He
said that the excavator was not able to perform its obligations and
was never used by the defendant.
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.
The
witness evidence with regards to the minutes of 17 September 2013
(exh 20) was similar to the evidence that was given by Mary
Mukonyora. He also testified that in that meeting it was agreed that
the plaintiff would supply a brand new excavator and a brand new
front end loader, but the plaintiff did not deliver brand new
machinery.
During
cross examination the witness explained that receiving machinery on
its delivery and commissioning of the machinery are two different
things.
He
also explained that the delivery note that was signed by Innocent,
the defendant's employee is a document which was prepared by the
plaintiff and it already had the words “received in good working
order” printed on it and all that Innocent did was to affix his
signature after those words.
It
is not Innocent who wrote those words.
He
said that initially it was the transport personnel who observed that
the excavator was second hand and this prompted the defendant to
invite an expert, Nicnel to come and inspect it.
Before
that, Automobile Association of Zimbabwe (AAZ) had been called to
come and check if the equipment was new.
He
explained that the defendant never invited the plaintiff to be in
attendance because in business ethics you would not want to give the
impression that you are dealing with a dubious institution. He said
that the defendant wanted to satisfy itself about the excavator hence
it called in AAZ to inspect it.
The
witness said that the plaintiff gave them the price of US$182,000.00
for an old excavator yet Nicnel gave the defendant a quotation for a
new excavator from Hyundai going for US$159,275.00 on 30 June 2014.
He said that although the models are different the disparity in
prices showed that the plaintiff was not dealing with the defendant
in good faith.
Ryan
Edward Berry testified as follows:
He
is and has been employed by Nicnel Plant and Equipment (Private)
Limited as the Technical Sales Manager for 4 years now.
He
was called by the defendant to inspect the excavator which is in
issue.
He
noticed that it was a second hand, having done over 6,000 hours yet
the meter read that it had only done 6 hours. The bucket had no tips
similar to a car delivered with no tyres. The engine pipes were
damaged from the breather which would allow dust to enter if the
engine was to run for an extended period. The machine could start and
run, but it could not perform its functions properly because it did
not have tips and the engine was in a poor state of repair.
He
said that the excavator is an LC-7 model, which is an old model which
was manufactured until 2012, but a 9 model was manufactured from 2012
onwards.
About
his qualifications, he said that he has “O” level with technical
experience from being on the job for about 8 years in the industry.
He
said that because of this, he took a technician with him to inspect
the machine.
He
said that as the sales and technical manager he oversees his
technicians using their expertise.
He
said that Wency is the technician who inspected the machine as he
(witness) filled out the report. However, he admitted that his name
does not appear on the report. He said that Wency refused to come to
court as he had been phoned, harassed and intimidated.
He
admitted to supplying his own quotation for an excavator to the
defendant on the same day of 30 June 2014, the excavator supplied by
the plaintiff was inspected.
Analysis
of Evidence
It
is necessary to first determine whether or not the parties entered
into a contract for the supply and delivery of brand new or
refurbished machinery.
Having
listened to the evidence given by the witnesses of both parties, it
is clear that there is a dispute as to which tender notice the
plaintiff responded to when it submitted its tender documents and
quotation to the defendant's registry section on 9 June 2011.
This
is because although the defendant's witnesses said that the
response was to the Tender Notice it flighted in the Herald Newspaper
with a deadline for submissions of the tenders of 31 May 2011, the
defendant's date stamp on the plaintiff's tender documents show
that they were received by the defendant's registry section on 9
June 2011 and the Tender Notice reference number that is quoted which
is CH/05/11 is different from the Tender Notice reference number
which is on the Tender Notice that was flighted in the Herald
Newspaper
by the defendant.
Whilst
the plaintiff's witness said that the plaintiff was responding to a
revised tender notice that was flighted on the defendant's registry
noticeboard, he did not furnish the proof thereof saying that since
the tender notice was on the notice board he could not get a copy
thereof as other people also needed to see the notice.
However,
despite this explanation by the plaintiff, I am convinced by the
evidence which was given by the defendant's witnesses, that the
defendant flights tender notices in the national newspapers and not
on noticeboards.
They
made reference to the provisions of the Procurement Act [Chapter
22:14]
which Act makes provision for the procurement of goods, construction
work and services by the State and Statutory bodies.
Section
30(1)(a) thereof states that the procurement of goods, construction
work and services by a procuring entity shall be done by means of
tendering proceedings in accordance with section 31.
Section
31(1)(a)(ii) then reads:
“Subject
to this Act, in any tendering proceedings conducted by a procuring
entity the invitation to suppliers to tender shall
be published in a newspaper
circulating in the area in which the procuring entity has
jurisdiction or carries on business, where the procuring entity is
not the State.” (my emphasis)
The
use of the word 'shall' in section 31 means that it is peremptory
for the tender notice to be flighted in a national newspaper.
I
also looked at section 211(1) and (2) of the Urban Councils Act which
deals with tender proceedings by municipals. It reads;
“211
Tenders
(1)
In this section —
'municipal
procurement board' means a municipal procurement board appointed by
a municipal council in terms of section two
hundred and ten.
(2)
Subject to subsections (8) and (9), before entering into a contract
for the execution of any work for the council or the supply of any
goods or materials to the council which involves payment by the
council of an amount exceeding such sum or sums as may be prescribed,
the council or, in the case of a municipal council, the municipal
procurement board shall
call
for tenders,
by notice posted at the office of the council and advertised in two
issues of a newspaper,
..” (my emphasis)
Whilst
in terms of the Urban Councils Act a tender notice shall be posted at
the office of the municipal council, it should also be advertised in
a newspaper.
The
defendant must therefore flight tender notices in accordance with the
provisions of the Procurement Act and the Urban Councils Act.
If
the defendant only flighted a tender notice on its noticeboard and
did not do so in the newspaper it did not comply with the law.
However,
if this is what happened the plaintiff ought to have produced proof
of the advertisement of such tender notice.
In
the absence of such proof I am led to conclude that the plaintiff's
director was not being honest with the court about having seen such a
tender notice on the noticeboard of the defendant on 8 June 2011.
Such advertisement would not have been in compliance with section 31
of the Procurement Act and section 211(2) of the Urban Councils Act.
Besides,
the defendant has no such tender notice in its files or records.
He
who alleges must prove and the plaintiff failed to prove the
existence of Tender Notice CH.05/11.
The
only tender documents that were produced are those that came from the
plaintiff which were said to be its copies.
The
defendant's witnesses had no knowledge that the tender notice 05/11
which had a deadline of 31 May 2011 was ever revised and extended.
There is nothing that shows that in the defendant's records.
With
this I am not satisfied that Tender Notice 05/11 which was flighted
by the defendant in the Herald Newspaper was ever revised and
extended.
In
any case it defies logic that the defendant, a municipality, would
invite tenders for the supply of second hand machinery. I cannot
think of a reason why it would do that.
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 set,
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, Mr Zhuwarara
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.
Mr
Zhuwarara
went on to cite the case of Potchefstroom
se Stadsraad v Kotze
1960 (3) SA 616 AA at 621 B-C. 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, Mr Zhuwarara
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 the Potchefstroom
se Stadsraad
case 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 [Chapter29:15],
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 maybe
assigned to him by the council.
The
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
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) 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):
“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.” (My emphasis)
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
the Potchefstroom
se Stadsraad
case, 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.
In
any case even if the Turquand rule was applicable and even if the
defendant as a municipality was bound by the actions of its town
clerk, looking at the circumstances of this case, I would make a
finding that the parties did not enter into a valid contract.
I
say this because this is a contract which is supposed to be based on
a tender notice which should have been properly advertised in terms
of the Procurement Act and the Urban Councils Act.
Section
211(2) of the Urban Councils Act states that before entering into a
contract for the execution of any work for the council or the supply
of any goods or materials to the council, the council shall call for
tenders, by notice posted at the office of the council and advertised
in two issues of a newspaper.
The
plaintiff was not able to produce the revised tender notice CH.05/11
which it said it responded to.
Since
the defendant was disputing its existence, the plaintiff ought to
have produced it to show that the contract which was entered into was
entered into in compliance with the law.
The
only tender notice that was produced is the one referenced 05/11 with
a closing date for the submission of tenders of 31 May 2011 which the
defendant is saying it is the only one it flighted in the Herald
Newspaper.
The
plaintiff's tender documents were submitted to the defendant's
registry section on 9 June 2011 according to the date stamp on them.
They were submitted way out of time, after the deadline of 31 May
2011.
To
make matters worse they only bear the date stamp, but bear no name of
the registry person who received them.
Mary
Mukonyora even queried their authenticity on this basis alone.
I
also query their authenticity.
It
is my conclusion that these tender documents were submitted on the
basis of a non-existent tender notice.
On
this basis alone, any contract that flowed from it is a nullity as it
has no leg to stand on.
Clearly,
the circumstances under which the contract was concluded are
suspicious. This is even worsened by the fact that G. Tanyanyiwa as
the town clerk mero
motu
wrote a letter to the plaintiff well before full council had passed
the resolution that the tender be awarded to the plaintiff.
To
make matters worse, contrary to the recommendations of the
procurement board, he said that the plaintiff had won a tender to
supply refurbished machinery.
What
this shows is that both Darlington Chirara, the director of the
plaintiff and G. Tanyanyiwa, the town clerk were probably acting in
connivance and were probably involved in underhand dealings because
their actions are highly suspicious.
In
light of the foregoing, I thus make a finding that there was never a
contract between the plaintiff and the defendant.
Having
concluded that there was never a contract between the parties, I will
therefore not go on to deal with the issues of novation of the
contract.
The
defendant's second witness, Mr George Makunde had said in his
evidence that if it is held that the defendant is bound by the letter
which was written by the then town clerk, Mr. G. Tanyanyiwa then that
contract was novated by what the parties agreed upon in the meeting
of 17 September 2013 (exh 20) that the plaintiff was to supply a
brand new excavator and front end loader.
Novation
is the substitution of a new contract for an old one. The new
agreement extinguishes the rights and obligations that were in effect
under the old agreement.
Since
no contract was entered into in the first place, there is no novation
to talk about.
Disposition
Since
there was never a contract between the parties, the plaintiff is not
entitled to payment of the remaining balance of US$119,300-00 that it
is claiming. The plaintiff is entitled to collect its machinery from
the plaintiff.
In
respect of the counter-claim, the plaintiff in reconvention (the
municipality) is entitled to a refund of US$140,000-00 being the
money it paid as deposit of the purchase price.
Since
there was no contract between the parties, I cannot order the
defendant in reconvention (Upset Investments (Private) Limited) to
deliver a brand new excavator and a brand new front end-loader.
Consequently the plaintiff in reconvention cannot be entitled to any
damages for breach of contract or any storage charges.
In
any case the plaintiff in reconvention did not lead any evidence to
prove its claim for US$20-00 per day for storage charges.
On
costs of suit, the defendant prayed that the plaintiff's claim be
dismissed with costs on a higher scale, but I see no justification
for the award of such costs.
In
the result, I order as follows:
1.
The plaintiff's claim is dismissed.
2.
The plaintiff pays to 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.
Kachere
Legal Practice,
plaintiff's legal practitioners
Matsikidze
and Mucheche,
defendant's legal practitioners
