Safeage (Private) Limited v Petrotrade (Private) Limited

### Preamble
1
HH
446-24
HCH
C 1/23
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SAFEAGE (PRIVATE) LIMITED
Versus
PETROTRADE (PRIVATE LIMITED)

HIGH COURT OF ZIMBABWE
COMMERCIAL DIVISION
CHIRAWU-MUGOMBA J
Harare, 23 and 30 September, 1, 2 and 3 October 2024

SPECIAL CASE -R52

CHIRAWU-MUGOMBA J: This matter was dealt with as a special case in terms of R52 of the High Court Rules of 2021. The dispute relates to the construction of a fuel station commonly called a service station.

The salient facts as stated in the agreed statement of facts are as follows. The plaintiff was awarded a tender for the construction of a service station in a residential area known as Mabvuku on stand number 1180 Ventesburg. An entity known as KAN Consult (pvt) Ltd was appointed by the defendant as the project engineers and resultingly they became project administrators. The initial contract was originally for the sum of US$ 912 460.72. It was reviewed due to various factors to US$ 2 812 622.24 on the 28th of February 2019. A total of twenty -three certificates of payment were generated by KAN Consult and paid by the defendant. On interim certificate of payment number 13, plaintiff paid the performance bond through deductions in the sum of US$33 668.91. Such sum has not yet been released to the plaintiff. Certificates for payment issued after the 22nd of February 2019 were prepared in United States Dollars but issued in ZWL/RTGS so as to comply with S.I 33/2019.


On March 2019, the Procurement Regulatory Authority of Zimbabwe (PRAZ) issued a circular number 4 of 2019 to the effect that construction works were not to be subjected to a wholesome application of the exchange rate but to a line-by-line examination of procurement entities. On the 12th of December 2019, the service station was handed over to the defendant. KAN consult engineers prepared the final account. The defendant then engaged an entity known as Soko Consult Africa to review this account independently. They assessed and approved a final account of ZWL$18 960 337.17. The procurement management Unit of the defendant recommended that the plaintiff be paid the amount as assessed by Soko Consult Africa. This was approved by the accounting officer of the defendant on the 13th of September 2021. To preserve value, the plaintiff and defendant agreed to lock the value of the final figure in United States dollars in the sum of USD$ 221 957.18. It was further agreed that this figure be paid in Zimbabwean dollars using the exchange rate as at the date of payment. Based on this, the defendant on the 21st of November 2021 instructed KAN Consult to prepare a final certificate in the stated amount in favour of the plaintiff. This was duly complied with and the sum in Zimbabwean dollars at the exchange rate of the day equated to RTGS 24 119 198.92. After deducting previous payments and the retention amount the final figure due as at the 16th of December 2021 was RTGS 21 039 004.34.

The plaintiff’s claim is for USD 221 656.18 and performance bond in the sum of USD 33 668.91 giving a total globular figure of USD$ 255 656.09. The defendant’s contention is that during the running of the project, SI33/2019 came into force as from the 22nd of February 2019 and made the Zimbabwean dollar the sole functional currency which meant that the payment certificates prepared by the project manager after that date were prepared in Zimbabwean dollars. The defendant disputes that there was a contract between the parties for the assessment of the final account by an independent assessor called Soko Consult Africa. The contract price that was approved by PRAZ was for USD$ 2 812 622.24. In November 2021, the defendant wrote a letter to the Chief Executive Officer of PRAZ seeking condonation for variations after the independent consulting firm’s final report. This was not approved. On the 15th of November 2021, the defendant wrote to KAN Consult (pvt) Ltd to prepare a certificate in Zimbabwean dollars. The defendant disputes the plaintiff’s claim as it is not based on the approved contract sum by PRAZ but on an alien concept termed as locking value.

The parties have put three issues for determination before this honourable court. These are:-

a. Whether or not the defendant is liable to plaintiff in the sum and the currency claimed?

b. Whether or not the plaintiff’s claim is based on the approved sum by PRAZ?

c. Whether or not there is a cause of action based on an unknown principle of locking value by the plaintiff is allowable at law?

d. Costs of suit.

The parties filed heads of argument and the matter proceeded with a hearing akin to an opposed court application as per R52(5) of the High Court Rules of 2021. Before I deal with the submissions, there is something to be said about the heads of argument filed. Rule 36(7) of the High Court (Commercial Division) Rules, 2020 is very explicit in the nature of heads of argument to be filed. It states as follows.

7. Heads of argument filed before the court shall comply with **all** the following requirements.

   a) be no more than ten pages long, and; b) not contain any factual averments or repetition of the averments made in the affidavits filed of record, and;
 c) be rescripted to the presentation of a short summary of the party’s case on the facts and at law accompanied by the correct citation of the relevant pages of the record, case law or other legal writings relied on including the specific page and section references relied upon.

This is all in keeping with the speedy resolution of disputes. Instead, we are inundated by pages and pages of submissions that often repeat factors that are common cause or set out a detailed background of the case. By the time, we get to the tenth page, oftentimes no meaningful submissions would have been made.

In their heads of argument and as amplified by Mr. Madzoka at the hearing, the plaintiff made the following submissions. The issue of liability to pay was beyond doubt as the plaintiff has delivered the service station as per the contract- DD Transport(pvt) Ltd vs Abbot, 1988(2) ZLR 92(S). It is common cause that on the 1st of July 2021, Soko Consultants submitted to the defendant on behalf of the plaintiff a final account in the sum of ZWL 18 960 337.17 which became due and payable. The parties agreed to lock the value of the unpaid sum to US$ 221 957.18. The plaintiff claims this amount plus US$ 33 668.91 which amount has not been contested. This amount is further admitted in the defendant’s heads of argument and the defendant is bound by such admission. The deduction of this amount was made through certificate dated the 14th of March 2019 and hence it is not affected by SI 33/2019. The obligation to pay the balance arose after the handover in December 2019 and hence this also remained unaffected by SI33/2019. As for the US$ 221 957.18, the parties agreed to have the unpaid balance fixed at that figure and hence that is what the defendant is obliged to pay and also payable at the local currency. The parties are bound by their contract- Book vs. Davidson, 1988 (1) ZLR 368 (S). On the second issue put before the court, the defendant admits that the contract amount as approved was US$ 997 285.72 and it was varied to US$ 2 812 622.24 by PRAZ. The contract value was varied in United States Dollars well after SI 33/2019. This places the contract amount beyond the reach of section 4(1) (d) of the statutory instrument- Chimbandi vs. Mabel
 Canvas (pvt) Ltd, SC 68/22. PRAZ refused to grant condonation to vary the contract amount from US$2 812 622. 24 to ZWL 20 850. 45. The value of the work was assessed after SI33/2019 and does not fall within the ambit of payment at the parity rate- Zambezi Gas Zimbabwe (pvt) Ltd vs. N. R Barber (pvt) Ltd, 2020 (1) ZLR 138. The value was not yet ascertainable - Ingalulu Investments (pvt) Limited and Anor. Vs. National Railways of Zimbabwe, SC 42/22. On the third issue, the cause of action is not based on the locking of value. It is that the plaintiff rendered service to the defendant and having done so, agreed on a figure in United States Dollars as the balance due and owing. The defendant has failed to pay the amount claimed and the plaintiff seeks payment at the rate prevailing as at the date of payment. The inquiry on the concept of locking value is unnecessary. Locking value is meant to avoid unjust enrichment.

The defendant in its heads of argument and as amplified by Ms. Mahuni at the hearing made the following submissions. That during the running of the project, SI 33/2019 subsequently incorporated into the Finance Act, no 2 of 2019 was introduced. The Zimbabwean dollar was made the sole legal currency which meant that the project certificates that were prepared after the 22nd of February 2019 were prepared in Zimbabwe dollars. Further, that PRAZ rejected the application for condonation of currency variations. The plaintiff has approached the court with an unknown concept of locking value on a final figure in United States dollars as claimed. On the first identified issue, the defendant is not liable because all 28 certificates issued for payment were settled in Zimbabwe dollars at the interbank rate prevailing as at the date of payment. From the conversions, the outstanding amount remains at ZWL$ 954 838.45 plus ZWL$ 91 246.10 giving a total amount of ZWL$ 1 046 084.55. Liability is also contested because in the same month that the contract figure was varied, SI 33/2019 was introduced and introduced the functional currency to ZWL. This meant that the certificates of payment after the 22nd of February 2019 were in Zimbabwe dollars. This is supported by the *Zambezi Gas Zimbabwe* decision (*supra*). Further, the sum claimed was not approved by PRAZ. The amount was as varied after engagement with PRAZ and there was no other variation approved – section 81 of the Public Procurement and Disposal of Assets Act [Chapter 22:23] is relevant. There was no contract signed by the independent assessor and the parties. Any lawful variation could only be done through PRAZ. Sanctity of a contract is key- *National Pharmaceutical Company vs DRAX Consult SAGL*, SC 66/23. There is no valid cause of action advanced by the plaintiff. Statutory instrument 212/2019 in section 4 prohibits any person from receiving consideration in respect of a domestic transaction in any currency other than the Zimbabwe dollar. The claim in United States dollars contravenes the Exchange control regulations. The concept of locking value does not generate a valid cause of action.

Faced with these issues, in my view, the starting point is that the amount claimed by the plaintiff is not in United States dollars solely. The plaintiff claims the amount stated either in United States dollars or the equivalent in local currency. The defendant does not deny liability. Its point of departure is that the money claimed by the plaintiff was calculated in Zimbabwean dollars and that is what the plaintiff ought to be paid. It is pertinent to note that the defendant has not paid this amount which it avers is owing to the plaintiff.

I will now deal with the issues raised by the parties in the agreed statement of facts in sequence.

**Whether or not the defendant is liable to plaintiff in the sum and the currency claimed and whether or not the plaintiff’s claim is based on the approved sum by PRAZ?**

On the 15th of November 2021, the defendant addressed a letter to KAN Consult P/L. It is important to reproduce the letter in full.
 Re: Final account for the proposed construction of foreign canopy and ancillary facilities at Mabvuku Service Station Tender No. P.T/FCA/01/2017.

The above refers.

In June 2021, Petrotrade received a final account form Kan Consult for the aforementioned tender. The completed account was subsequently forwarded to Soko Consult Africa, the independent Consultant, for an independent assessment in accordance with Circular No. 4 of 2019.

The independent consultant’s report was received, with a Final Assessment of ZWL$20 850 540.45 as the final contract amount and a recommendation that Petrotrade pay Safeage (Pvt) Ltd the outstanding amount of ZWL 18, 960, 337, 17. To preserve value, Safeage and Petrotrade concurred to use the exchange of : 85, 42340 as of the 1st of July 2021 which translated to US$221,957.18.18 payable in ZWL dollars using the ruling exchange rate on the day of payment.

Petrotrade hereby instruct KAN Consult to prepare a payment certificate in the amount of US$221, 957, 18 in favour of Safeage (pvt) Ltd as per independent Consultant’s recommendation.

In the face of this clear and unequivocal letter, it is fallacious for the defendant to feign ignorance on the amount and the manner of payment. The amount is clearly stated and the crucial date remains that of the rate prevailing as at the date of payment and that it would be in Zimbabwean currency. KAN Consult was through the letter instructed to prepare a payment certificate in United States dollars and not in Zimbabwe dollars. The parties are bound by that agreement- Book vs Davidson, (supra). The defendant cannot be heard to claim that the amount was converted into ZWL and that is the amount due to the plaintiff. The sum of USD$221, 957,18 as converted into Zimbabwean dollars remains unpaid. As long as the money remains unpaid, it must still be paid at the rate prevailing as at the date of payment. The parties are bound by what they agreed. In my view, the doctrine of estoppel applies. In *Aris Enterprises (Finance) (Pty) Ltd v Protea Assurance Co Ltd* 1981 (3) SA 274 (A), Corbett JA (as he then was) said at 291 on the doctrine:

“The essence of the doctrine of estoppel by representation is that a person is precluded, i.e. estopped, from denying the truth of a representation previously made by him to another person if the latter, believing in the truth of the representation, acted thereon to his prejudice (see Joubert *The Law of South Africa* vol 9 para 367 and the authorities there cited).

The representation may be made in words, i.e expressly, or it may be made by conduct, including silence or inaction, i.e tacitly (Ibid para 371); and in general it must relate to an existing fact (Ibid para 372).”

The defendant is estopped from seeking to place reliance on the *Zambezi Gas Zimbabwe* decision nor indeed on the provisions of the Finance Act (no. 2 of 2019) especially given the fact that the letter clearly preserving the amount owed in United States dollars, came way after the 22nd of February 2019. As at the date of the letter, there was nothing at law that precluded the determination of liabilities in United States Dollars. The plaintiff relied on this figure as agreed to claim payment. Nothing more, nothing less.

Reliance too on S.I 212/2019, is misplaced because what is prohibited is paying for a domestic transaction in any currency other than the Zimbabwe dollars for domestic transactions. The letter does not state that the payment should be in United States dollars but the *equivalent* in Zimbabwe currency. In any event, SI 85/2020 amended SI 212/19 to allow payment for goods chargeable in Zimbabwean currency in foreign currency using free funds. The argument that there is breach of exchange control regulations is clearly misplaced.

As for the claim for USD$33 668.91, the defendant did not contest the figure and only locked in in the Zimbabwean currency. The defendant is liable to pay this amount as it was based on completion and handover of the service station which was done by the plaintiff. In my view, there is no basis for converting this figure into Zimbabwe dollars when it has not been paid. It must be paid at the rate prevailing as at the date of payment.

The defendant contends that the agreed to amount required the approval of PRAZ. Reliance is placed on s81 of the Public Procurement and Disposal of Assets Act. This section reads as follows,

81. Variation of procurement contract

(1) Any variation of a procurement contract that exceeds the maximum variations allowed in the contract documents or necessitated by any law enacted after the award shall be effected by a modification of the contract signed by both parties.

(2) The parties to a procurement contract shall not agree to vary the contract if the variation would result in a contract materially different from the original contract or would significantly alter nature or scope of the contract.

(3) Where a procuring entity wishes to vary a procurement contract—

(a) in a manner referred to in subsection (2); or

(b) so as to increase the contract price to a greater extent than is prescribed or permitted by section 80 (“Approaches to pricing in procurement contract”); the procuring entity shall either initiate fresh procurement proceedings or, where appropriate, embark on direct procurement in terms of section 33.

I do not perceive how s81 advances the defendant’s case. This section was never mentioned in the letter of the 15th of November 2021. In any event, PRAZ had actually approved an increase from US$ 997 285.72 to US$ 2 812 622.24. The plaintiff cannot be prejudiced by any internal processes that were supposed to be conducted. No information or evidence of the thresholds was placed before the court. This would have placed the court in a good position to determine whether or not a modification of the contract was necessary. The amount finally settled for falls far below the varied figure. In my view, the defendant is again estopped from placing reliance on issues that are between it and PRAZ that were never even brought to the attention of the plaintiff.

Whether or not there is a cause of action based on an unknown principle of locking value by the plaintiff is allowable at law?

I did not read and understand the plaintiff’s case as being anchored on the concept of locking value. The defendant links this concept to that of no cause of action. There was nothing to prohibit the defendant from filing an exception in terms of the provisions of R12(1) of the High Court (Commercial Division) Rules, of 2020. Plaintiff’s case is one for specific performance and is as clear as daylight. The letter of the 15th of November 2021 authored by the defendant is very clear on the reason, that it was to preserve value. This letter was authored by the defendant and it is the one that introduced the concept of preserving value. This value is to be preserved in United States dollars but payable in Zimbabwe dollars at the rate prevailing as at the date of payment. Despite the service station being handed over, the plaintiff who hitherto had been paid in Zimbabwean dollars is still awaiting payment of the balance. There cannot be any clearer cause of action.

In my view, the plaintiff has made its case on a balance of probabilities. Where the plaintiff’s claim falters is by claiming payment in United States dollars or the Zimbabwe dollar equivalent. The preserved amount is clearly stated as payable in Zimbabwe currency at the rate prevailing against the United States dollar as at the date of payment.

It is trite that costs follow the cause. I however do not perceive of any reason why costs should be on a higher scale.

DISPOSITION

1. The defendant shall pay plaintiff the equivalent in ZWG calculated on the sum of USD$ 255 626. 09 (Two-Hundred and Fifty- Five Thousand Unites States dollars, six hundred and twenty -six dollars and nine cents) at the rate prevailing on the date of payment.

2. The defendant shall pay costs of suit.

Maunga, Maanda and Associates, plaintiff’s legal practitioners.


Muvingi Mugadza Legal Practitioners, defendant’s legal practitioners.
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