This is an appeal against the entire High Court judgment of
MAFUSIRE J
which dismissed with costs the appellants' claims against the
respondents. It was handed down on 12 August 2013. The appellants pray
that the appeal succeeds and that the respondents be ordered to pay the costs
of suit on a higher scale.
The facts of and background to the dispute are explicitly
set out in the judgment of the court a
quo, and are as follows:
In September 2010, some eleven (11) farmers from the
Glendale farming area of Zimbabwe sued, on separate summonses, a company called
Farmers Commodity Stock Exchange (Private) Limited (“FCSE”) in the one case,
and one Peter Kenneth
(“Peter Kenneth”)
jointly with that company in the other cases. The claims were for payment
of various sums of money. The farmers claimed they had sold maize grain to
Farmers Commodity Stock Exchange (Private) Limited (hereafter referred to as
FCSE) through Peter Kenneth. They alleged that Peter Kenneth was an employee
or agent of Farmers Commodity Stock Exchange (Private) Limited. The
plaintiff in case no. 1, Tonderai
Abel Masango (hereafter referred to as “the first plaintiff”),
alleged that he had sold and delivered soya beans as well.
The background to the claims was common cause.
Farmers Commodity Stock Exchange (Private) Limited was in
the business of buying maize from various parts of the country. In the
Glendale area, they were buying the maize through Peter Kenneth. Peter Kenneth was renting premises from the
local authority. He used those premises as a collection depot. The
bagged grain would be collected from the different farms by trucks contracted
by Farmers Commodity Stock Exchange (Private) Limited or Peter Kenneth. At Peter Kenneth's depot were
large containers belonging to Farmers Commodity Stock Exchange (Private)
Limited. The grain would be stored in those containers before dispatch to
the various customers in and around Harare. Peter Kenneth dealt directly with the farmers.
He sourced the grain and paid the farmers. His terms of payment were said
to be cash within 7 days of delivery. Farmers Commodity Stock Exchange
(Private) Limited was supplying the cash. Peter Kenneth moved around with a mazda van
emblazoned with Farmers Commodity Stock Exchange (Private) Limited's name and
logo.
Problems soon arose.
Peter Kenneth did not pay for all the grain
delivered. The famers complained. Peter
Kenneth became evasive. The famers reported the matter to the
police. Initially, more than fifty (50) farmers were involved. Both Peter Kenneth and certain
representatives of Farmers Commodity Stock Exchange (Private) Limited were
arrested. Peter Kenneth took rat poison in a suicide attempt. He was
rushed to hospital just on time. He survived. Farmers Commodity Stock
Exchange (Private) Limited's representatives, Mark Oliver Hutchings (Mark
Hutchings) and Jonathan Paul Kennedy (J.P. Kennedy) were detained in custody
for several weeks before being released on bail. They were eventually acquitted.
The farmers were disgruntled by the outcome of the criminal
proceedings. Eleven (11) of them decided to bring civil proceedings before
this Court. But of the initial eleven (11) only six (6) actually turned up
at the trial. The other five (5) were in default and their claims were
dismissed with costs.
Peter Kenneth was a co-defendant in all but one of
the eleven (11) cases. However, he neither filed any papers nor appeared at the
trial.
The farmers' cases before this court were all based on the
allegation that Peter Kenneth
was an “employee” of Farmers Commodity Stock Exchange (Private) Limited whose
duty had been to procure grain on behalf of that company. They all claimed
that they had contracted with Farmers Commodity Stock Exchange (Private)
Limited through Peter Kenneth;
that they had delivered their grains to Farmers Commodity Stock Exchange
(Private) Limited through him; that they had been paid for part of the
deliveries by Farmers Commodity Stock Exchange (Private) Limited through Peter Kenneth and that they
looked to Farmers Commodity Stock Exchange (Private) Limited for the remainder
of their money.
On the other hand, Farmers Commodity Stock Exchange
(Private) Limited denied that Peter
Kenneth had been their employee at the time or any other, but that
he was someone the company had contracted as an independent agent to procure
maize for it in the Glendale-Mvurwi area. He had been on a commission.
The court a
quo determined, correctly, that the crisp issue before it was
whether the first respondent, Peter
Kenneth, was an employee and/or agent of Farmers Commodity Stock
Exchange (Private) Limited or whether he was an independent contractor.
The court a
quo determined the matter against the appellants and they have now
appealed to this Court on essentially two grounds:
1. That the court a
quo erred by holding that the first respondent was “plainly” an
independent contractor rather than an agent of the second respondent; and
2. That the court a
quo misdirected itself in failing to find that the appellants had
established their case on a balance of probabilities in circumstances where the
respondents had failed to prove a defence to their claims.
It appears to me that the essential facts of the matter are
not in dispute. What is in dispute is what those facts established as
being the true nature of the relationship between the first respondent and the
second respondent. The parties, as already indicated, took opposite positions
on this matter. What therefore falls to be determined in casu is whether or not in
adopting the position of the second respondent – thereby rejecting the
appellants' – the court a quo
erred or misdirected itself.
The court a
quo commendably, and extensively, considered the law and
authorities governing what, at law, constitutes an employer/employee
relationship on the one hand and a principal/independent contractor
relationship on the other. The court started from the premise that an employee,
agent or independent contractor, all render services to another for a
consideration. It then properly considered what the relevant authorities
have laid down as elements that enable a distinction of one from the other to
be made.
Of the numerous authorities cited by the court a quo in order to highlight
and underline the distinction between an employee and an independent contractor
(among others; Smit v Workmans
Compensation Commissioner 1979 (1) SA 51 A; Southampton Assurance Co of
Zimbabwe Ltd v Mutuma & Anor 1990 (1) ZLR 12 (HC)), I find the
following dictum, Colonial Mutual Life Assurance Society Ltd v Mcdonald 1931
SA 412 (AD), to be apposite as well as particularly instructive;
“Bowstead
on Agency…, is
equally clear: 'The difference,' he says, 'between an agent and an independent
contractor is, that an agent is bound to act in the matter of the agency subject
to the directions and control of the principal, whereas an independent
contractor merely undertakes to perform certain specified work, or produce a
certain specified result, the manner and means of performance of production
being left to his discretion, except as far as they are specified by the
contract.' This is a distinction which, in our law, cannot be ignored for
the contract between master and servant is one of letting and hiring of
services (locatio conductio
operarum) whereas the contract between the principal and a
contractor is the letting and hiring of some definite piece of work (locatio conductio operis). In
the former case, the relation between the two contracting parties is much more
intimate than in the latter, the servant becoming subordinate to the master,
whereas in the latter case the contractor remains on a footing of equality with
the employer. The crucial difference between these two cases lies in the
fact that where a master engages a servant to work for him the master is
entitled, under the contract, to supervise and control the work of the servant. He
is entitled, at any time, to order the servant to desist, and, if the matter is
sufficiently serious, may even dismiss him for disobedience.”
A useful definition of “control” according to JOUBES JA in Smit v Workmans Compensation
Commissioner 1979 (1) SA 51 A is given as follows:
“…, it includes, inter
alia, the right of an employer to decide what work is to be done by
the employee, the manner in which it is to be done by him, the means to be
employed by him in doing it, the time when and the place where it is to be done
by him…,. Supervision implies the right of the employer to inspect and direct
the work being done by the employee. JONATHAN M. SILKE's
“The Law of Agency in South Africa”, 3rd ed.”
The authorities cited above also re-state the principle
that a principal is liable for the delict of his agent where such agent is a
servant but not where he is a contractor, sub-contractor or their servant.
The appellants argue that all the elements of an
employee/employer relationship existed between the first and the second
respondent. The court a
quo found this not to be the case, and opined as follows;
“I find that there is no evidence that Peter Kenneth was an
employee of FCSE. Even the best evidence of some of the plaintiffs, such
as first plaintiff's claim that PJ Kennedy had told him that Peter Kenneth was their
employee; or that of the fourth plaintiff that PJ Kennedy had told him that Peter Kenneth was
“their man”; or that of several other plaintiffs that Peter Kenneth drove a motor
vehicle emblazoned with FCSE's name and logo; all falls woefully short of what
is required to establish a master and servant relationship. What the
parties call each other in such a contractual relationship, or what they
perceive their relationship to be is not decisive and may actually be
irrelevant. The court looks at the totality of the evidence and all the
circumstances to determine the true nature of the relationship.
The point is, even accepting the first plaintiff's claim in casu that PJ Kennedy had told him that
Peter Kenneth was
“their employee”, this takes the plaintiffs' cases no further. Apart from
the fact that it is highly unlikely that PJ
Kennedy would have been using “employee” in its more technical
sense, the nature of the relationship between Peter Kenneth and FCSE, as
disclosed by the totality of the evidence, was completely nowhere near that of
master and servant. Peter
Kenneth was plainly an independent contractor.”
I find the above analysis of the evidence before the court a quo and the conclusions
the judges drew from it to be eminently sound.
To start with, the appellants, not being privy to the
contract between the first and second respondent, had little with which to
challenge the assertion by the second respondent that it exercised little or no
control over how the first respondent was to carry out his obligation under the
contract. Nothing that the appellants said in relation to what they
perceived to be indicia
of a servant rendering services for his employer could, in my view, be taken as
disproving the second respondent's evidence to the following effect;
(a) That beyond being given money by the second respondent
to buy maize, the first respondent was entirely his own agent in deciding where
to go in order to source the maize in question, who specifically to approach
for this purpose, and how, when exactly he was to do so; and on;
(b) That in all this, the second respondent neither
“inspected nor directed” the work done by the respondent beyond his delivery of
the required maize; and
(c) That the second respondent did not get to know of what
quantities of grain were sourced from which farmer and on what terms, until Peter Kenneth's arrest.
The appellants aver that the payment of a commission to the
first respondent by the second respondent was further evidence of an
employee/employer relationship. The court a
quo was not swayed by this averment, and, relying on a number of
authorities, the learned judge stated;
“In the cases of Denniss
Edwards and Co. v Lloyd 1919 TPD 29
and the judgement of the lower court in Smit
v Workman's Compensation 1978 (1) SA 339 (C) (at page 345 G-H) it
was noted that the provision in a contract, of remuneration by commission,
although not by itself decisive, is a strong indication against a relationship
of master and servant.”
When the issue of the payment to Peter Kenneth of a
commission is considered together with the evidence pointing to the independent
manner by which he discharged his obligations, I find that the decision of the
court a quo on
this point cannot be assailed.
The facts in Colonial
Mutual Life Assurance Society Ltd v Mcdonald 1931 SA 412 (AD) are
almost on all fours with the case at hand. In that case, a life insurance
agency used a car sold to him by the life assurance company to perform duties
related entirely to the business of the company. He was paid a commission for
the work. In holding that the agent in question was an independent contractor
rather than an employee, the learned judge remarked as follows;
“The agreement about the motor vehicle does not order
Britain to use the car. He may use any means he likes, and, in addition, he may
use the motor car in any way which he chooses but only for the business of the
Society. This cannot affect the nature of his position or relationship between
him and the Society.”
And so it is in
casu.
The appellants did not allege that the first respondent was
bound by contract to use only the vehicle in question to transport the maize
that he collected on behalf of the second respondent. There is also no
suggestion by the appellants that, without the vehicle in question or the
storage containers, the first respondent would not have been able to perform
his obligations under the contract. He could have used other means to
transport the maize and still been able to discharge his obligations under the
contract.
In relation to the use of a vehicle emblazoned with the
second respondent's logo, the court, in my view, correctly found that this did
not carry the appellant's case any further. They could not disprove the second
respondent's assertion that the vehicle in question was under purchase by the first
respondent in terms of a credit scheme agreed between the respondents. The
court a quo found
the explanation of the second respondent to be credible, that certain measures
were taken merely for convenience and to facilitate effective performance by the
first respondent of his obligations under the contract. These included the
loan agreement in respect of, and the allocation of, the vehicle to the first
respondent, and the placement of containers within the first respondent's
premises, for the storage of the maize. Under these circumstances, not much
significance can be placed on the fact that the vehicle in question bore the
logo of the second respondent.
I am, accordingly, not persuaded that the existence of and
use by him of the disputed vehicle should be taken as conclusive evidence of
the employee/employer relationship alleged.
There were also other indications relied on by the second
respondent to dispute the existence of an employee/employer relationship
between it and the first respondent. One was the fact that all invoices
tendered in evidence by the appellants, and issued in relation to the receipt
of and partial payments made for the maize received by the first respondent,
reflected the name of his own company, not the second respondent's. The
other evidence tendered by the second respondent, which the appellants could
not in truth dispute, was that it had instructed the first respondent to
procure maize from unspecified farmers at a price of $150= per tonne. The
second respondent would then sell it to its customers at a price of $290=, an
amount which fell short of the $300= per tonne that the first respondent is
said to have promised to pay the farmers for the maize collected by
him. The fact that it would not have made economic sense for the second
respondent to buy maize at a cost that exceeded what they would sell the maize
for, seriously undermined the integrity of the first respondent in his dealings
with and utterances to the farmers. More importantly, it lent credence to the
second respondent's averments that it exercised neither control nor supervision
over the first respondent's activities, beyond giving him money to buy maize at
$150= per tonne. It also belies the first respondent's assertion that the
second respondent was his “boss”.
As the court a
quo correctly observed, it was the first respondent's conduct,
rather than what he said to the appellants, that defined his relationship with
the second respondent.
The appellants made much of the definition of “employee”
that is contained in the section 2 of Labour Act [Chapter 28:01], which reads as follows;
“Employee” means any person who performs work or services
for another person for remuneration or reward on such terms and conditions as
agreed upon by the parties or as provided for in this Act, and includes a
person performing work or services for another person -
(a) In circumstances where, even if the person performing
the work or services supplies his own tools or works under flexible conditions
of service, the hirer provides the substantial investment in or assumes the
substantial risk of the undertaking; or
(b) In any other circumstances that more closely resemble
the relationship between an employee and employer than that between an
independent contractor and hirer of services.”
I agree with the observation of the judge a quo that this definition
was unhelpful in determining whether the first respondent was, at the relevant
time, an employee of the second respondent, or an independent contractor.
In the light of all that has been stated regarding the
first respondent's conduct in his dealing with the appellants, there can, in my
view, be little doubt that the first respondent rendered services for the
second respondent in circumstances that deviated from those that would “more
closely resemble the relationship between an employee and employer.” The
circumstances clearly established a relationship between an independent
contractor and hirer of services. I find that they disclose what, in Colonial Mutual Life Assurance Society
Ltd v Mcdonald 1931 SA 412 (AD), was described as a locatio conductio operis.
The first respondent, in my view, also fell squarely within
this definition of an independent contractor that is to be found at page 540 of
De VILLIES MacINTHOSH's “Law of
Agency in South Africa”;
“One who is his own master, free of his employer's control,
and representing no one else, when performing the obligations he was called to
perform under the contract which he has entered into with his employer, such
obligations not being those of contracting legal relations with third parties
on behalf of his employees.”
This statement is echoed in the following words by JONATHAN M SILKE in his book The Law of Agency in South Africa, 3rd
ed….,.;
“An accurate test for distinguishing the agent from the
independent contractor is that the agent has authority to bind his principal in
contract whereas the independent contractor has no such power.”
It is not in dispute that there were no direct dealings
between the second respondent and the appellants. As already stated, economic
considerations would have ruled out the notion that the second respondent could
have instructed the first respondent to buy the appellant's maize at the price
of $300= per tonne. Clearly, the first respondent made misrepresentations
to them in this respect. Under such circumstances, I am persuaded there can be
no basis for holding the second respondent liable for such conduct.
It is a matter of regret that the appellants lost huge
amounts of money earned through sweat and hard work. Quite clearly, the
circumstances under which it happened bear all the hallmarks of a fraudster's
scam. The second respondent appears to have been a pawn in a reprehensible game
in which its money was used to lure the trusting and seemingly naïve farmers
into the first respondent's trap. The second respondent, on its evidence, was
also a victim in another sense. Only after it made detailed reconciliations did
it transpire that there was a huge discrepancy between the money they had given
to Peter Kenneth and the quantities of grain that he delivered to them. It
seems unlikely that both the appellants and the second respondent will succeed
in any effort to recover their losses.
Whilst all one can feel for the appellants is some degree
of sympathy, I find in the final analysis that the appeal has no merit. It is
accordingly ordered as follows:
The appeal be and is hereby dismissed with
costs.
