MATHONSI
JA: This
is an appeal against the judgment of the High Court (the court a
quo)
rendered in favour of the respondent on 24 July 2019 following a full
trial. The judgment directed the appellant to pay to the respondent
interest on the sum of $84,827,17 at the rate of 19.5% per annum from
1 November 2010 to the date that amount was paid to the respondent.
In
addition, the appellant was ordered to pay to the respondent the sum
of US$3,207,450,68 together with interest thereon at the rate of
19.5% per annum from 1 November 2010 to date of payment and costs of
suit.
This
Court observes that the dispute between the parties was resolved
purely on findings of credibility of the two witnesses pitted against
each other in respect of whose evidence the trial court made factual
findings.
That
led the court a
quo
to conclude that at the time the appellant gave instructions for
cessation of work which was being performed by the respondent in
terms of the contracts, the latter had already completed its mandate
of designs and drawings for the appellant. Payment in terms of the
contracts entered into by the parties was therefore due.
The
court finds that on appeal the appellant has not made a case for
interference by the appellate court with the credibility and factual
findings of the court a
quo.
The appellant has not even begun to set out any valid grounds for
impugning the findings of the court a
quo
in that regard.
Regarding
the relief in United States dollars granted a
quo,
the court finds that it was incompetent as the court a
quo
was precluded from granting relief denominated in foreign currency.
The liability of the appellant fell due several years before 22
February 2019, the effective date.
In
terms of section 4(1)(d) of Statutory Instrument 33/19, as
interpreted by this Court in Zambezi
Gas Zimbabwe (Pvt) Ltd v N.R. Barber
(Pvt) Ltd & Anor SC3/20, the liability of the appellant having
been expressed in United States dollars immediately before the
effective date of 22 February 2019, fell within the remit of that
provision. As such, relief should have been granted in Zimbabwe
dollars at the rate of one to one to the Unites States dollars.
The
court also finds that the question of interest on the sum of
US$84,827,17 paid by the appellant following admissions it made at
the pre- trial conference of the parties before a judge, was an issue
placed before the court a
quo
for determination. That court was obliged to determine it.
Having
found the appellant liable, the court a
quo
was correct to award interest on that amount. The court however
finds that, as with the rest of the liability, that interest should
also be reckoned in the local currency at the same rate.
BACKGROUND
FACTS
The
appellant, a tertiary institution established in terms of section 3
of the Midlands State University Act [Chapter
25:21],
engaged the respondent, a company involved in the business of
providing civil engineering services, to design civil and engineering
works for it on 3 September 2003.
The
appellant desired the respondent to design and produce drawings for
the construction of certain buildings and Master Site Services at its
main University Campus in Gweru. As a result, the parties concluded
and signed seven contracts, four of which form the basis of the
present dispute. These are:
(a)
Contract 1 for the construction of the Faculty of Commerce and
Information Systems, Faculty of Law and Administration on Block;
(b)
Contract 2 for the Faculty of Architecture, Art and Design;
(c)
Contract 3 for the Vice Chancellor's House; and
(d)
Contract 4 being the Master Site Service Design for the whole site,
that is the Master Plan.
Contract
5 for the Faculty of Natural Resources; Contract 6 for the Faculty of
Science & Technology; and Contract 7 for the Commercial Centre
and Sports facilities fall outside the scope of the present case.
The
contracts entered into by the parties comprised of the Standard Form
Zimbabwe Association of Consulting Engineers (ZACE) contracts and
memorandum of agreement for each of them.
The
conditions of engagement prescribed the manner in which the
engineering works contained in the contracts were to be undertaken.
These included:
(i)
stage one; a report relating to consultation between the parties,
inspection of the site and collation of data.
(ii)
Stage two related to the preliminary design involving preparation of
plans, drawings and making modifications on the designs.
(iii)
Stage three related to the establishment of final design criteria and
included the development of the design.
(iv)
In stage four, the consultant would work on the drawings themselves.
The
respondent performed certain work in terms of the contracts although
there is no convergence between the parties as to the stage reached
by the works at the time of disengagement.
What
is however common cause is that the construction of the relevant
buildings had advanced when, on 14 June 2005 and 5 August 2005, the
appellant addressed letters to the respondent instructing it to stop
work on all the projects.
It
is at that point that the dispute arose as to the amount of work the
respondent had already performed in fulfilment of the contracts when
it was instructed to stop working. The balance due by the appellant
for what had been done was also disputed.
The
position taken by the respondent was that at that point it had
already completed all the work that needed to be done on all the four
contracts. The respondent insisted that, having fulfilled its
contractual mandate, it was entitled to payment for the full services
rendered within the scope of clause 18 of the Zimbabwe Association of
Consultant Engineers Standard Contract.
On
the other hand the appellant was adamant that the respondent had not
completed the work as per the contracts. It contended that when it
directed the respondent to stop all work on the project on 5 August
2005, it had not completed its mandate.
The
appellant insisted that the respondent had continued to work after
being instructed to stop and as such, any work performed by the
respondent after the instruction to stop had been given could not be
paid for, the respondent having been on a frolic of its own.
The
appellant also took the position that an amendment had been effected
to the original contracts to introduce a clause which placed the
obligation to pay for the projects on a third party, the government
of Zimbabwe until such time that the third party gave a signal that
it had allocated funds for payment, no payment was due to the
appellant in terms of the contracts.
In
any event, so the appellant continued, the respondent had been paid
in full for the works that it performed.
PROCEEDINGS
BEFORE THE HIGH COURT
On
16 July 2015 the respondent instituted summons action against the
appellant based on the four contracts mentioned above. The respondent
claimed payment of the sum of $3,292,277,90 together with interest on
that amount at the rate of 19,5% annum calculated from 1 November
2010 to date of payment. It also claimed collection commission.
The
basis of the claim was that the respondent had provided professional
consulting civil engineering services in respect of the first,
second, third and fourth construction projects for the appellant in
fulfilment of all its contractual obligations. The respondent averred
that following its issuance of invoices for settlement, the appellant
failed or neglected to pay in breach of the contracts between the
parties.
The
appellant contested the action.
It
refuted that the respondent fulfilled all its contractual
obligations. The appellant asserted that it stopped the respondent
from carrying out any further work on the project on 5 August 2005
before completion of the mandate.
As
such, so the appellant contended, the respondent was not entitled to
payment for any additional work performed after that date.
Regarding
payment, the appellant relied on an addendum to the agreement which
was signed by the parties and introduced clause 4.1 to it. According
to the appellant, the clause in question regulated how the respondent
was to be paid. It contained a suspensive condition which was not
satisfied. For that reason, no further payment was due to the
respondent.
In
terms of clause 4:
“4.
Fees
Chargeable and Reimbursements
Notwithstanding
the provisions in paragraph 17 (under the heading Fees
and Expenses)
of the conditions of Engagement ZACE Forum 2 1999:
4.1
The parties herein agree that the client is a public institution,
wholly funded in its operations by the Government of Zimbabwe and
that it is wholly dependant on the national budget for its funding,
which budget is announced once every year. It is therefore agreed
that the Consultant will hold in abeyance all invoices until advised
by the client that funds are now available. In this case the client
will act in good faith and advise the Consultant to submit invoices
within 14 days of receiving funds. Thereafter
the client shall settle invoices within 60 days of receipt from the
Consultant.
If
such accounts are then not paid within 60 days from date of invoice,
interest may be charged at 1.2 times the prevailing bank overdraft
rate available to the Consulting Engineer.”(The underlining is for
emphasis).
At
the pre-trial conference of the parties before a judge, the appellant
made an admission recorded in the statement of agreed facts, later
prepared and submitted to the trial court, as follows:
“7
It is also common cause that defendant paid the sum of US$84,827.17,
of Project 1. The parties agree that, this was in full and final
payment in respect of that project and it is no longer in contention
save for [ ] only
the interest amount that remains upaid.”
(The underlining is for emphasis)
Following
the submission of a statement of agreed facts in terms of which the
matter was referred to trial, only 3 narrow issues were placed before
the court a
quo
for determination. These are:
“(a)
Whether or not the plaintiff had completed all the works as at the
5th
of August 2005, when the defendant gave instruction to stop all work.
(b)
If so, what is the quantum
of fees due to the plaintiff.
(c)
If not, what stage of work had plaintiff reached by the 5th
of August 2005 and what quantum
of
fees is it entitled (to) for such work if any.”
FINDINGS
OF THE COURT A
QUO
At
the trial, each party led evidence from one witness. The respondent
relied on the evidence of Engineer Wilfred Tamayi Vengesai to prove
its case while the appellant brought in Engineer Innocent Masunungure
to disprove it.
In
assessing the credibility of the two witnesses the court a
quo
found;
“It
is Engineer Wilfred Tamayi Vengesai's evidence which accords with
the documentary evidence. It accords also with the statement of
agreed facts.
His
testimony was clear and straight forward. It was not dented under
cross-examination. The same cannot be said of defendant's evidence.
It went against the grain of documentary evidence.
The
defendant's witness contradicted the Statement of Agreed Facts in
fundamental respects. I also was not impressed with the demeanor of
the defendant's witness. He was evasive under cross-examination. It
was clear to me that he was simply ducking and diving in a desperate
endeavour to avoid the truth.
The
net result is that I will accept the plaintiff's testimony wherever
it conflicts with that of the defendant.”
The
court a
quo
went on to find that the appellant had commissioned the respondent to
design and produce drawings for use by contractors in erecting the
structures so designed. It further found that by November 2004 the
designs had been completed and forwarded to the appellant.
The
court a
quo
based its finding in that regard on the fact that, after completion
of the contractual mandate, the respondent had proceeded to break
down the designs into nine sub-contracts to allow for stage
implementation of the works to suit priority and funding of the
appellant.
In
the court a
quo's
view, this could not have been done if the contractual mandate had by
then not been fulfilled.
In
addition, the court a
quo
applied the doctrine of fictional fulfilment to conclude that the
appellant, having acted in bad faith in failing to invite the
respondent to submit estimates of fees owed, and in not bidding for
funding from the Government of Zimbabwe for an unreasonably long
time, the suspensive condition in clause 4:1 had been fulfilled.
The
court a
quo
then entered judgment in favour of the respondent as already stated.
PROCEEDINGS
BEFORE THIS COURT
The
appellant was aggrieved. It noted the present appeal on the following
grounds:
1.
The court a
quo
erred and misdirected itself in granting an order denominated in
United States dollars when it was incompetent to do so.
2.
The court a
quo
erred and misdirected itself in awarding respondent interest on the
sum of US$84,827.17 when such an issue was not among the issues which
were submitted to the court a
quo
for determination by the parties.
3.
The court a
quo
further erred in holding that respondent had completed all its
contractual obligations when appellant instructed respondent to stop
work in circumstances where the evidence showed that the respondent
had not completed all the work.
4.
The court a
quo
erred in awarding respondent's claim for an amount for the
completion of the work in full, whereas the evidence before it
pointed to the fact that the work was incomplete as at the cut-off
date.
5.
It was an error of law on the part of the court
a quo
to apply the doctrine of fictional fulfilment against the appellant
in circumstances where a third party (Government of Zimbabwe) was the
one which had an obligation to fulfil the suspensive condition.
6.
The High Court misdirected itself in ignoring that the respondent
neither pleaded nor proved the fulfilment of the suspensive
condition.
The
grounds of appeal may be six but they are generally repetitive and
speak to only two issues for determination in this appeal. They are:
(i)
whether the court a
quo
erred in entering judgment in favour of the respondent and ordering
the appellant to pay interest; and
(ii)
whether the court a
quo
erred in granting judgment denominated in the United States dollars.
(a)
Whether the court a
quo
erred in entering judgment in favour of the respondent
Mr
Uriri,
who
appeared for the appellant, submitted that the finding of the court a
quo
that the respondent had completed all its contractual obligations at
the time it was instructed to stop work cannot withstand scrutiny. In
counsel's view, such a finding runs counter to documentary evidence
on record which indicates the contrary.
To
support that assertion, counsel for the appellant drew attention to
correspondence exchanged between the parties which discussed the
works performed by the respondent. The letters in question, so it was
argued, tend to show that right up to 5 August 2005, the parties were
still discussing work which had not been completed.
Per
contra, Mr Zhuwarara
who appeared for the respondent, submitted in the main that the
appellant's case at the trial and on appeal remains vexing in that
while on one hand the appellant argues that the mandated work was not
completed, on the other hand it argues that payment is not yet due.
This is by virtue of the suspensive condition in clause 4.1 reposing
the duty to pay on the Government of Zimbabwe.
Counsel
for the respondent drew attention to a letter dated 6 November, 2004
written by the appellant's own architects, Maboreke Architects, as
proof that the work of producing drawings had been completed. He also
referred to another letter dated 29 May 2015 to the Permanent
Secretary in the Ministry of Higher & Tertiary Education, Science
& Technology Development by the appellant's Vice Chancellor.
The latter entreats the Ministry to assist with funds to settle the
debt which had been demanded.
By
virtue of their importance in the resolution of this appeal, I
produce the letters hereunder.
On
6 November 2004 Maboreke Architects wrote to the appellant as follows
words:
“RE:
MSU - PROPOSED CONTRACT FOR THE IMPLEMENTATION OF THE MASTER SITE
SERVICES
Forwarded
herewith is a set of drawings from the Civil Engineer depicting the
proposed works in eight different contracts for the realisation of
the Master Site Services for your approval.
We
are in concurrence with the Civil Engineer that the development of
the structure precedes the building programme in order that the
buildings will be adequately serviced on completion.”
It
was submitted on behalf of the respondent that the contents of that
letter suggest that as early as November 2004 work on the drawings
had been completed. It is for that reason that the drawings had been
forwarded to the architects who relayed them to the appellant.
On
29 May 2015, Professor N. M. Bhebe, the Vice Chancellor, wrote to the
Ministry in the following:
“RE:
OUTSTANDING FEES FOR GALAXY ENGINEERING CONSULTANCY SERVICES:
MIDLANDS STATE UNIVERSITY
The
following matter refers.
Following
our telephone conversation, please find attached demand letters from
Gill, Godlonton & Gerrans Legal Practitioners who are
representing Galaxy Engineering.
The
demands are arising from the non-payment of services provided for the
development of Midlands State University Master Plan (Civil
Engineering Works, preliminary designs), services which were rendered
in September 2003. The total bill was ZWD33,114,907,800.00.
As
discussed please kindly go through the letters and determine how far
the Ministry had paid for the services rendered. By copy of this
letter, Galaxy Engineering Consultancy are being advised through
their lawyers that their claim has been submitted to our parent
Ministry for actioning.”
In
the respondent's view the foregoing letter was a clear acceptance
that work was performed fully and that payment was due.
Regarding
the issue of the suspensive condition, Mr Uriri
submitted that it was an error on the part of the court a
quo:
(i)
firstly to invoke the doctrine of fictional fulfilment because it was
not pleaded by the respondent.
(ii)
Secondly the doctrine does not apply in circumstances where the party
accused of having deliberately prevented the fulfilment of the
obligation had no such obligation in the first place. This is so, it
was submitted, because the obligation to pay lay with the Government
of Zimbabwe.
To
counter that argument, Mr Zhuwarara
submitted that the court a
quo
was invited to relate to the doctrine by none other than the
appellant itself.
This
is so because in its closing submissions, the appellant had, citing
the authority of R.H. Christe, Business
Law In Zimbabwe
at p57, argued that clause 4.1 of the contract was a condition
precedent or suspensive condition. It suspended the payment of fees
due to the respondent until such time that the appellant was placed
in funds for the project by the Government of Zimbabwe.
To
that extent, according to respondent's counsel, the court a
quo
was within its mandate to inquire into the issue. In doing so, the
court a
quo
concluded that the appellant had deliberately frustrated the
fulfilment of the condition precedent. For that reason fictional
fulfilment applied.
On
the order for payment of interest on the sum of $84,827,17, it was
submitted on behalf of the appellant that the question whether the
respondent was entitled to claim interest on that sum was not one of
the issues placed before the court a
quo
for determination.
Relying
on the authority of Nzara
v Kashumba N.O & Ors
SC18/18,
counsel made the point that the function of the court is to determine
only those disputes placed before it by the parties.
Again
Mr Zhuwarara
was of a different view.
He
pointed to a passage in the statement of agreed facts, which I have
already quoted above, placing the issue of that interest squarely
within the ambit of what the court a
quo
was asked to determine.
Finally,
on the relief granted in United States dollars, counsel for the
appellant submitted that it was incumbent upon the court a
quo,
in terms of section 4(1)(d) of Statutory Instrument 33/19, to
pronounce an order that does not conflict with that provision.
Accordingly, so it was argued, the judgment should have sounded in
the local currency.
While
conceding the effect of section 4(1)(d) of SI33/19, counsel for the
respondent sought to defend the judgment a
quo
on the basis that the United States dollars denominated judgment
shall be converted on the day of execution.
ANALYSIS
What
was before the court a
quo
were two mutually destructive positions of the disputants.
The
respondent took a position, using documentary as well as viva
voce
evidence, that at the time it was instructed to cease operation, it
had completed the work. On the other hand, the appellant, again using
documentary and viva
voce
evidence, took the position that the work had not been completed.
I
have related to both the viva
voce and
documentary evidence which confronted the court
a quo
above.
The
court a
quo
resolved the dispute on the basis of credibility of witnesses.
It
found the appellant's witness to be evasive and unreliable. It
embraced the evidence of the respondent's witness as being reliable
and in sync with the documentary evidence.
On
the letters I have reproduced above, the court a
quo
cannot be faulted for making those findings.
More
importantly, neither the grounds of appeal relied upon by the
appellant nor its submissions on appeal advert to the basis upon
which an appellate court may interfere with factual and credibility
findings of the lower court.
As
stated in Hama
v National Railways of Zimbabwe
1996 (1) ZLR 664 (S) at p670C-D:
“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 or of
acceptable moral standards that no sensible person who had applied
his mind to the question to be decided could have arrived at such a
conclusion….”
On
the issue of credibility of witnesses, again it is trite that an
appellate court will not lightly interfere with findings of fact
based on the credibility of witnesses. This is so because the trial
court is eminently better placed to assess credibility than an
appellate court.
In
my view no foundation has been laid to allow this Court to interfere
with the findings made a
quo
that at the time that the appellant gave instructions for cessation
of work, the respondent had already completed its mandate.
In
that regard it was entitled to payment in full.
The
issue of interest on the money paid by the appellant following its
admission at the pre trial conference resolves itself upon reference
to the statement of agreed facts. I have quoted the part wherein the
parties invited the court to determine interest.
In
any event a claim for interest on the whole amount claimed was
pleaded and was prayed for. The appellant made a partial admission.
The
court a
quo
was correct to grant interest on the sum of $84,827,17 which was paid
without interest.
That
then brings me to the question of fictional fulfilment which was
given undue attention by counsel.
The
way I understand it, the appellant seeks to be excused from liability
on the basis that it inserted clause 4:1 in the contract through an
addendum.
The clause, quoted verbatim
above,
only recognises that the appellant is funded by a third party. It is
not a novation or a substitution of the third party as a party to the
contract. Significantly, it does not absolve the appellant, as the
contracting party, from liability.
It
occurs to me that the mere fact that a creditor may agree to receive
payment from a third party on behalf of a debtor does not absolve the
debtor from liability to perform in terms of the agreement. See Dube
v Mbokazi
(15843/ 2017) [2018] ZAGPPHC 699 (28 September 2015).
The
reason why that is so is pretty obvious.
It
is because there is no privity of contract between the respondent and
the Government which remained firmly outside the contract.
In
that regard, whether the funding came from the Government or not
paled. The appellant remained liable. It was its responsibility to
lobby for funding and settle its debt. It cannot seriously argue that
it is still awaiting funding 16 years later.
I
reject that argument.
Finally,
there is the issue of currency.
I
agree with Mr Uriri
for the appellant that it was incompetent for the court a
quo
to grant judgment sounding in United States dollars. It is common
cause that the liability of the appellant arose several years prior
to 22 February 2019.
In
terms of section 4(1)(d) of SI33/19 all assets and liabilities due
immediately before that date and in United States dollars were to be
paid in the local currency at the rate of 1:1.
This
court has already interpreted that provision in the case of Zambezi
Gas (Pvt) Ltd v N. R. Barber & Another, supra.
In
that case the court held that contractual obligations valued in
United States dollar, immediately before the effective date were to
be paid in RTGS dollars at parity or at a one-to-one rate.
DISPOSITION
Accordingly,
there is merit in the first ground of appeal which is hereby upheld.
The remaining grounds are completely devoid of merit and cannot
succeed.
Regarding
the issue of costs, a prayer was made on behalf of the respondent for
costs to be awarded at an adverse scale. In submissions made before
the court, that prayer was not motivated.
In
any event the appellant has been partially successful.
Accordingly
this is a case in which each party should bear its own costs.
In
the result, it be and is hereby ordered as follows:
1.
The appeal partially succeeds with each party to bear its own costs.
2.
The judgment of the court a
quo
is amended by the deletion of paragraphs 1 and 2 and their
substitution with the following:
“1.
Interest on the sum of RTGS$84,827,17 at the rate of 19,5% per annum
from 1 November 2010 to the date that sum was paid.
2.
RTGS$3,207,450.68 together with interest thereon at the rate of 19,5%
per annum from 1 November 2010 to date of payment.”
GWAUNZA
DCJ: I
agree
BHUNU
JA: I
agree
Dzimba
Jaravaza & Associates,
appellant's legal practitioners
Gill,
Godlonton & Gerrans,
respondent's legal practitioners
