Charles Nhamo Nyambuya v Sakunda Holdings (Private) Limited & Mutare Toyota

### Preamble
Judgment No. SC 92/23
Civil Appeal No. SC 620/22 1
Civil Appeal No. SC 661/22
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REPORTABLE (92)

SC 620/22

CHARLES     NHAMO     NYAMBUYA

v

(1)     SAKUNDA     HOLDINGS     (PRIVATE)     LIMITED

(2)     MUTARE     TOYOTA

SUPREME COURT OF ZIMBABWE

MAKONI JA, MATHONSI JA & MWAYERA JA

HARARE:	13 JUNE 2023 & 25 SEPTEMBER 2023

K. Maeresera, for the appellant

T. Magwaliba, for the first respondent

K. Rangarirai, for the second respondent

SC 661/22

MUTARE     TOYOTA

v

(1)     SAKUNDA     HOLDINGS     (PRIVATE)     LIMITED

(2)     CHARLES     NHAMO     NYAMBUYA

SUPREME COURT OF ZIMBABWE

MAKONI JA, MATHONSI JA & MWAYERA JA

HARARE:	6 JULY 2023 & 25 SEPTEMBER 2023

K. Rangarirai, for the appellant

T. Sena, for the first respondent

K. Maeresera, for the second respondent

MATHONSI JA:	This judgment is a two-in-one disposing of two appeals against the same judgement of the High Court handed down on 16 November 2022.  The judgment in question directed the appellant in the first appeal (hereinafter referred to as “Nyambuya”) and the appellant in the second appeal (hereinafter referred to as “Mutare Toyota”) jointly and severally, the one delivering, the other to be absolved, to deliver four (4) brand new Toyota Land Cruiser LC200 motor vehicles to the first respondent (hereinafter referred to as “Sakunda”) within thirty (30) days of the date of judgment.

Alternatively, Nyambuya and Mutare Toyota were directed to pay to Sakunda the sum of US$633,257 or its Zimbabwe Dollar equivalent at the prevailing auction rate at the time of payment, together with interest thereon at the prescribed rate from the date of service of the summons to the date of payment. They were also ordered to pay Sakunda’s costs of suit.

Both Nyambuya and Mutare Toyota were aggrieved by the judgment and noted separate appeals. The first appeal was heard by this Court on 13 June 2023 but, for some unknown reason, none of the parties saw it fit to bring to the Court’s attention that there existed a second appeal against the same judgment.

It was only fortuitous that two members of the panel of judges who heard the first appeal by Nyambuya and reserved judgment were also part of the bench that sat on 6 July 2023 when the second appeal by Mutare Toyota was set down for hearing. This necessitated reconstituting the bench to enable the second appeal to be heard by the same bench. It is completely undesirable to conduct appeals the way the parties in this matter did. These appeals should have either been consolidated or at least heard at the same time to avoid the possibility of conflicting judgments emanating from the same court.

THE FACTS

The parties are embroiled in a dispute involving a botched deal for the sale of motor vehicles. The facts in respect of both appeals are the same.

Sometime in January 2017, Mutare Toyota entered into an agreement of sale with Sakunda in terms of which it was to deliver, on or before 28 February 2017, five Toyota Landcruiser LC 200 VX and three Toyota Prado motor vehicles at a cumulative price of about US$1,274,000.00.  The parties agreed that Sakunda would pay the full purchase price upon an invoice being raised by Mutare Toyota.

In pursuance of the agreement, Sakunda duly paid the full purchase price for the motor vehicles to Mutare Toyota. However, there was short delivery of four Toyota Landcruiser LC 200 VX motor vehicles which, despite demand, remain undelivered to date.

It is common cause that following the failure to deliver the motor vehicles by the agreed date, Nyambuya did a lot in an effort to rescue the situation.  He made an undertaking through his lawyers to deliver the motor vehicles to Sakunda. He made a promise to Sakunda that the motor vehicles would be supplied to Mutare Toyota by Xsigma Corporation (Pvt) Ltd. He also wrote follow up emails to Phoelm Trading, which had been subcontracted to avail the vehicles, to provide updates on the delivery of the Land Cruiser vehicles. As a result, Sakunda understandably got the impression that he was still part of the contract. Unfortunately, Nyambuya’s efforts still failed to yield any positive result.

PROCEEDINGS BEFORE THE COURT A QUO

On 19 August 2019, Sakunda sued out a summons at the High Court at Harare against Nyambuya and Mutare Toyota, for the delivery of four imported brand new Toyota Land Cruiser LC 200 motor vehicles, within thirty (30) days of the order failing which, both were to pay damages in the sum of ZWL$16,000,000.00, together with interest at the prescribed rate. Costs of suit were sought on a legal practitioner and client scale.

The claim was defended by both Mutare Toyota and Nyambuya.  Mutare Toyota strenuously denied ever entering into a purchase agreement with Sakunda insisting instead that the agreement had been with Nyambuya in his personal capacity.  Two principal grounds were advanced for the denial.  The first was that Nyambuya was a former shareholder and director of Mutare Toyota who had acted without a resolution nor any other form of authority to enter into such agreement.  The second was that Mutare Toyota only entered into contracts with government or parastatals after going to tender and securing tender documents, which had not been done in this case.  Mutare Toyota added that Nyambuya had entered into an oral agreement with Sakunda for motor vehicles that were meant for command agriculture and he accordingly went ahead to engage Xsigma Corporate (Pvt) Ltd to supply the said motor vehicles without any resolution from itself.

On his part, Nyambuya pleaded that he was acting for Mutare Toyota in his capacity as its chairperson. He insisted that the agreement was between Sakunda and Mutare Toyota. He also refuted the suggestion that money would be paid into his personal account asserting that no payment was ever made to him and that payment to Mutare Toyota did not necessarily translate to payment to himself. He prayed for the dismissal of the claim with costs.

After a full trial, the court a quo considered the central issue that fell for resolution before it as being who contracted with Sakunda between Mutare Toyota and Nyambuya and by extension, who was liable for the claim by Sakunda.  It made several pertinent findings.

The court a quo found that the contract could not have been illegal because Sakunda is a private company which is not governed by the procurement laws of Zimbabwe and as such, it was not required to go to tender for the procurement of the motor vehicles. On the question of whether Mr Nyambuya had the authority to act for Mutare Toyota, the court a quo found that he had such authority. This was so because he was the highest executive officer of Mutare Toyota and all other officials of that company were his subordinates. The court a quo, thus concluded that the argument by Mutare Toyota that Nyambuya had no authority was an attempt to redefine business customs.

The conduct of the officers of Mutare Toyota was specifically found to be supportive of a conclusion that Nyambuya acted on behalf of Mutare Toyota and that he had the requisite authority to do so. In this regard, the court a quo reasoned that:

“… the first defendant’s officers [that is Mutare Toyota’s officers] went on to act on the contract by sending plaintiff quotations and giving him the first defendant’s banking details, using the first defendant’s letterheads. How were the plaintiff and the world supposed to know or suspect that Mr. Nyambuya did not have the mandate to contract, assuming he did not, in light of the conduct of the first defendant through its officers?  There is no evidence that those officials acted under duress.  To say Mr. Nyambuya abused the first defendant’s bank account when no fraud charges were laid against him is an excuse of a lame nature.  Mr. Nyambuya in any case told the court that he informed his co-director Mr. Mtisi of the contract.  Mr. Mtisi did not tell the court that he protested and took Mr. Nyambuya to task over anything related to this contract.”

Notwithstanding its earlier finding that Nyambuya had acted on behalf of Mutare Toyota, the court a quo also concluded that Nyambuya was also liable to Sakunda for the delivery of the motor vehicles on the basis of his conduct throughout the lifespan of the controversy between the parties. He had, at one time, sought a resolution from Mutare Toyota to pursue a refund of the money paid to the foreign supplier. Long after he had left Mutare Toyota, Nyambuya was found to have continued involving himself in the dispute over the outstanding motor vehicles. The court a quo was of the view that by his conduct, Nyambuya delayed or prevented the settlement of the matter. This was so, according to the court a quo, because he had refused to accept a company resolution offered to him at the insistence of the judge who presided over the pretrial conference, to pursue a refund on behalf of the parties. Nyambuya was found blameworthy especially as he had earlier on requested such company resolution.

An order for specific performance was therefore granted in favour of Sakunda against Mutare Toyota and Nyambuya. In the event that such specific performance was not done within 30 days of the order, Nyambuya and Mutare Toyota would pay Sakunda the sum of US$633,257.00 or its equivalent in ZWL$ at the prevailing auction rate at the time of payment plus interest at the prescribed rate, from the date of service of the summons to date of full and final payment.

PROCEEDINGS BEFORE THIS COURT

Both Nyambuya and Mutare Toyota were irked by the judgment of the court a quo which imputed liability on them jointly and severally. Nyambuya noted an appeal under case number SC 620/22 on two grounds of appeal reading as follows:

The court a quo misdirected itself both in law and in fact by holding the appellant liable to the first respondent’s claim jointly with the second respondent yet it had found that there was no evidence that the appellant had contracted with the first respondent in his personal capacity.

The court a quo seriously misdirected itself both in law and in fact by holding that the appellant was liable for the first respondent’s claim yet the first respondent’s claim was one based on contract only and not on any other cause of action.

For its part, Mutare Toyota noted an appeal on the following grounds of appeal:

Having correctly found that the second respondent had left the company and was acting without the company’s authority throughout the life of the controversy, the court a quo erred in holding that the appellant is jointly liable with the second respondent.

The court a quo fell into error at law in holding that a former director of a company’s actions can bind a company in perpetuity.

The court a quo erred in granting relief that was never prayed for, in that the sum of US$ 633 257 was never prayed for.

The court a quo misdirected itself by making findings of facts contrary to the evidence presented, particularly that the first respondent admitted in court that the contract for the purchase of vehicles was supposed to go to tender and that the first respondent had an exemption letter.

From the grounds of appeal in both appeals, the critical issue arising for determination is whether or not Sakunda contracted with Mutare Toyota or with Nyambuya in his personal capacity. The resolution of this issue will enable the question of liability to, as it were, automatically fall into place. A connected issue relates to the competency of the court a quo awarding damages in the sum of US$633,257.00 to Sakunda.

The parties made the following submissions in SC620/22.  Mr Maeresera submitted that the court a quo erred in ordering specific performance against Nyambuya after having found that there was no contract between Nyambuya and Sakunda. He submitted that Sakunda bore the onus to prove that Nyambuya was liable in his personal capacity. To buttress his contention, he submitted that the witness called by Sakunda to testify on its behalf was not privy to the contract nor did he testify that Nyambuya had tied himself to the contract in his personal capacity when the negotiations were conducted.

It was firmly contended on behalf of Nyambuya that the moment the court a quo found that there was no contract between his client and Sakunda that should have been the end of the matter as no liability could attach to a non-party.  In counsel’s view, whichever way Nyambuya conducted himself after the conclusion of the contract was immaterial and could not give rise to personal liability in a contract in which he was not privy.  Counsel for Nyambuya asserted that the court a quo found him liable on what was not Sakunda’s cause of action and had not been pleaded at all.  He made the pertinent observation that once the court a quo removed Nyambuya from the contract, it could not go on to order him to render performance in respect of a contract to which he was not privy.

Regarding the police report made by Nyambuya, which Mutare Toyota sought to rely on as pointing to Nyambuya’s personal liability, Mr Maeresera took the view that the statements recorded in the report were inconsistent. He submitted that the police report was prepared by a police officer in terms of that officer’s understanding of the case. Citing s 36 of the Civil Evidence Act [Chapter 8: 01], it was contended that the report could not be relied on as it was not pleaded before the court a quo.

In response, Mr Magwaliba, for Sakunda, submitted that Mutare Toyota’s argument was based merely on one sentence in the judgment of the court a quo, and that Mutare Toyota ignored the critical elements of the contract. In counsel’s view, the totality of the actions of Nyambuya throughout the lifespan of the contract were a relevant consideration.  Mr Magwaliba considered the approach by the court a quo, which took into account the fact that Nyambuya set the contract in motion, personally promised delivery of the vehicles, used his personal e-mail address to communicate with Sakunda and instructed the Chief Dealer of Mutare Toyota to perform the contract as relevant in determining the issue of his personal liability.

In his submissions, Mr Magwaliba also adverted to the police report which had been prepared by the police after Nyambuya had reported the matter.  Counsel emphasised that in that report, Nyambuya referred to himself as the one who had personally entered into the contract with Sakunda.  While acknowledging that the police report had not been pleaded before the court a quo, Mr Magwaliba submitted that it could be relied on as evidence in terms of s 36 of the Civil Evidence Act which, in counsel’s view, does not require one to prove that the report was pleaded before adducing it. In defending the judgment of the court a quo as being beyond reproach Mr Magwaliba concluded by making the point that Mutare Toyota and Nyambuya were dual suppliers who were jointly and severally liable.

Mr Rangarirai defended Mutare Toyota preferring to characterise the conduct of Nyambuya as a clear example of a company executive who was abusing the corporate veil. He submitted that the conduct of Nyambuya showed that the contract was entered into between himself and Sakunda.  He added that Nyambuya’s former legal practitioners wrote a letter purporting to be acting for him personally and not Mutare Toyota, for the transfer of money to a South African account for the purchase of the vehicles in question.  Mr Rangarirai found it necessary to point out that when Nyambuya settled the contract with Sakunda, he was, at that time, negotiating his departure from Mutare Toyota.

In rooting for Nyambuya’s personal liability, Mr Rangarirai said a lot but the thrust of his delivery was that Nyambuya’s overall conduct pointed to that and nothing else. Attention was drawn to the fact that Nyambuya once approached Mutare Toyota requesting a board resolution authorising him to settle the dispute with the foreign suppliers.  Counsel also noted that at the pre-trial conference stage, the presiding judge suggested that Mutare Toyota avail a board resolution to Nyambuya to enable the finalisation of the matter, which suggestion Nyambuya rejected, which conduct, according to counsel, showed that Nyambuya did not need a board resolution as it was his own contract.  Since the law, as Mr Rangarirai submitted, concerns itself with the external manifestation of a contract, the contract in the case was said to point to the fact that Nyambuya had entered into the contract in his personal capacity.

Turning to Mutare Toyota’s submissions in SC 661/22, they are generally the same as what was argued in the first appeal, except that Mr Rangarirai’s point of departure was that the relief that was granted by the court a quo was not sought by any of the parties.  He emphasised that the summons did not contain a claim for US$633,257.00.  He also attacked the court a quo’s  finding that the relief sought was amended to include a claim for US$633,257.00, as being factually incorrect, as no such amendment was ever sought or granted.

Mr Rangarirai further argued that the court a quo erred by ordering specific performance in a case where the contract of sale was invalid by reason that Sakunda did not satisfy the procurement process required for the conclusion of a valid supply contract.  It was submitted on behalf of Mutare Toyota that each time it supplies government associated clients, it does so through a tender process.

Per contra, Mr Sena for Sakunda,submitted that the court a quo was correct in its finding that Mutare Toyota was liable to Sakunda.  He noted that no submissions had been made in respect of the first and the second grounds of appeal in SC 661/22 dealing with Mutare Toyota’s liability. To him, Mr Nyambuya had the ostensible authority to represent Mutare Toyota as he was its executive chairman and the quotation forming the basis of the contract was given to Sakunda by Mutare Toyota.  In addition, so it was argued, the purchase price was to be, and was indeed, paid into Mutare Toyota’s bank account which undertook to deliver the motor vehicles.

Mr Sena cited s 21 of the Companies and Other Business Entities Act [Chapter 24:31], to trash Mutare Toyota’s defence that it was not liable because its internal procedures were not followed.  To him, Mutare Toyota could not be absolved because Sakunda was entitled to rely on Mr Nyambuya’s authority.  It was his view that the court a quo’s conclusion in respect of Mutare Toyota’s liability was beyond reproach.

Regarding the validity of the contract, it was submitted on behalf of Sakunda that Mutare Toyota was approbating and reprobating at the same time.  It could not, on one hand, seek to deny the existence of a contract and on the other, seek to argue that it was illegal.  In developing that point, Mr Sena submitted that Mutare Toyota failed to show that the parties were required to go to tender.  That the contract was between two private parties was regarded as common cause. In relation to the fourth ground of appeal in SC 661/22, counsel conceded that the court a quo granted alternative relief which was not prayed for by Sakunda.  He conceded that there had been no evidence led before the court a quo to quantify the damages awarded.

On behalf of Nyambuya, Mr Maeresera contended that Mutare Toyota could not avoid liability since Nyambuya had acted on Mutare Toyota’s behalf while serving as its executive director at the time.  Counsel further argued that Mutare Toyota had failed to establish that Sakunda was a procuring entity and as such, was required to follow the procurement process. Regarding the fourth ground of appeal, counsel admitted that the court a quo had granted relief that Sakunda had not entreated the court a quo to grant and that no evidence had been presented to support the quantification of the awarded damages.

THE LAW

These appeals test the elementary principles of contract law.  It is trite that the validity of a contract is dependent on the convergence of several essential elements including an offer which must be accepted, the corresponding animus contrahendi, as well as contractual capacity in respect of the contracting parties among other elements.  In addition to the basic elements of a contract, certain specific types of contracts may require particular germane conditions, to be met before they can become recognizable in the eyes of the law. A contract of sale is one such contract.

The requirements of a valid contract of sale were set out in the case of Ashanti Goldfields Zimbabwe Ltd v Mdala S–60–17 as being that there must be an agreement between the parties to buy and sell; an agreement on the thing or commodity sold known as the merx; and an agreement on the price known as a pretium.  The moment the requirements of a valid contract converge, a contract becomes perfecta, that is, complete, valid and binding on the parties to it without further ado.

It seems to me that the instant appeals require more to be said about the formation of a contract in general and the significance of the persons involved in its formation.  A good starting point are the remarks of this Court in Ashanti Goldfields Zimbabwe Ltd v Kovi S–7–09 at pp 5 – 6, where the following appears:

“Professor R.H. Christie makes it clear in his Rhodesia Commercial Law Book p 43, that:

‘There must obviously be at least two parties to every contract and the necessary agreement between them will always manifest itself in the form of an offer from the one side and an acceptance of that offer by the other side.’

In this case, the document signed by the appellant was clearly an offer to dispose of its houses to its workers who were sitting tenants.  There is no acceptance of that offer from the respondent.”

In Kovi v Ashanti Goldfields Zimbabwe Ltd 2007 (2) ZLR 354 (H), the High Court, reproduced a passage from Mackeurtan’s Sale of Goods in South Africa, in which the following appears:

“… If these essentials are complied with there will be consensus ad idem; but subject to the qualification that though the external indicia of agreement are present, it may not exist as a fact because of mistake or other factors vitiating consent.”

Earlier in the Kovi judgment, at p 358C, the High Court had specifically concluded that:

“It seems to me that as long as the essential requirements of an agreement of sale are present, the absence of detail does not vitiate the agreement.”

A contract is formed when its essential elements can be objectively identified. The date of contract is, thus, the date when all the essential elements converge to form a binding agreement. In many cases, particularly those involving written contracts, this is achieved by the signing of the contract.

It also follows from the above that in considering which of the parties are the true contractants, a court is enjoined to consider the totality of the conduct of the persons involved in its formation.  It is through the conduct of such persons that an objective assessment of, not only the point in time when a contract was formed can be settled, but also the persons who formed the contract.  This proposition finds expression in a respectable body of authorities.  The Federal Supreme Court in Levy v Banket 1956 (3) SA 558 (FC), per Tredgold CJ at 561F to 562A, remarked thus:

“In the case of Collen v Rietfontein Engineering Works, 1948 (1) SA 413 (AD), the Appellate Division had to consider a situation which was, in many ways, strikingly similar to that now before the Court. The express communications between the partners were quite inconclusive and the Court had to consider those communications in the light of the conduct of the parties. In the event it was held that a contract had been concluded. In his judgment CENTLIVRES, J.A., was at pains to point out that, in considering whether a contract is concluded between two parties, a court is not interested in the state of mind of the parties considered in the abstract. It must decide the issue on the state of mind of the parties as manifested by word or deed. It is idle for a party to avow mental reservations or unspoken qualifications if these are inconsistent with what is said or done. In his judgment he fully reviewed the authorities on the point. It is sufficient here to quote two that were cited with approval. …

In S.A. Railways and Harbours v National Bank of SA Ltd., 1924 AD 704 at p. 715, WESSELS, J.A., said:

‘The law does not concern itself with the working of the minds of parties to a contract, but with the external manifestation of their minds. Even therefore if from a philosophical standpoint the minds of the parties do not meet, the law will, when fraud is not alleged, look to their acts and assume that their minds did meet and that they contracted in accordance with what the parties purport to accept as a record of their agreement. This is the only practical way in which Courts of law can determine the terms of a contract.’” (The underlining is for emphasis)

A similar test was applied with equally striking eloquence by Gubbay CJ in Dube and Anor v Law Society of Zimbabwe 1999 (2) ZLR 424 (S) at p427 thus:

“It was of no assistance to the appellants to proclaim that what it was sought to convey to the recipients of the letters was that, if litigation became necessary, legal practitioners would be engaged. The appellants were to be judged objectively by what was written and not allowed to take refuge in any unexpressed mental reservation or unstated intent. Their situation was rightly viewed as being analogous to quasi-mutual consent.” [underlining in original]

The learned author R. H. Christie in Business Law in Zimbabwe, 1998 at p 31 provides helpful guidance as to the test to be applied in determining whether a contract has been formed between two parties.  He states:

“The concept of agreement in its ordinary sense is sufficiently familiar to need no explanation. Agreement by consent, true agreement, a meeting of the minds, a coincidence of the wills, consensus ad idem all mean the same thing, and there is ample authority, from Inst 3 15 1 to Salisbury Employers Association v Salisbury City Council 1957 R & N 127 131H, 1957 (2) SA 554 557E, for first looking for such true agreement. This having been said, it must immediately be added that the courts are not equipped with any magical instrument that can provide a true reading of the state of each party's mind when they made or did not make their contract. The judge or magistrate must listen to the evidence, read the exhibits and arrive at the human judgment which, if it is to be sufficiently predictable to meet the business community’s need for fixed criteria on which to plan its activities, must be objectively based on the evidence and exhibits and not on a subjective assessment of what the parties say was hidden in their minds at the time.”

Hence, the evidence relative to the conduct of the parties at the time of formation of the contract must be closely examined in consideration, inter alia, of the question as to the parties between whom the contract is formed and the terms thereof.

The evidence before this Court in the instant appeals is assessed against these principles in order to decide whether the contract was between Sakunda and Mutare Toyota, or Sakunda and Nyambuya or Sakunda and both Mutare Toyota and Nyambuya.

EXAMINATION

The starting point is to find out at what stage the contract was concluded and with whom.  Upon a consideration of the available evidence, the unavoidable conclusion is that a contract was entered into between Sakunda and Mutare Toyota. Both the documentary and oral evidence placed before the court a quo point to that fact.

I begin the inquiry by considering the documentary evidence that was before the court a quo, the authenticity of which was not in dispute.  Firstly, quotations authored by one Brighton Matsaira in his capacity as the Dealer General of Mutare Toyota were addressed to Sakunda.  One such quotation is dated 26 January 2017 and it is for three Toyota Land Cruiser LC 200 motor vehicles. The other, dated 10 February 2017, is addressed to “Command Agriculture” and it was for five Toyota Land Cruiser LC200 VX Auto [V8 S] motor vehicles.

Secondly, the documents recording the payments made by Sakunda in satisfaction of its part of the bargain, are also critical evidence. The record of proceedings shows that on 13 February 2017, Sakunda deposited an amount of US$1,247,000.54 to Mutare Toyota for “Command Agric car purchase”. On 14 February 2017, Brighton Matsaira, by letter addressed to Command Agriculture in the care of Sakunda Holdings, expressed his gratitude for the payment and set out a delivery plan for the motor vehicles.  It will be recalled that Matsaira was an employee of Mutare Toyota.

The moment the purchase price for the motor vehicles was deposited into Mutare Toyota’s account an indication emerged that a contract had been consummated between Sakunda and Mutare Toyota. To borrow from the dicta in the case of Walezim Investments (Pvt) Ltd v The Sheriff of the High Court and Others S-44-21 at p. 11, para 29, albeit appearing in a different context, one cannot but equally remark that “without an agreement, [Mutare Toyota] would have no basis ... for accepting payment of the full purchase price.”

Thirdly, there was a pro forma invoice by Xsigma Corporation (Pvt) Ltd addressed to Mutare Toyota for two Toyota Landcruiser Prado VX and two Toyota Landcruiser LC200 VX motor vehicles.  The pro forma invoice is dated 14 February 2017.  The parties were agreed that Xsigma Corporation was facilitating the purchase of the vehicles.  One questions why Xsigma would address its invoice to Mutare Toyota by 14 February 2017 if Mutare Toyota was not involved in the sale of the motor vehicles to Sakunda.

Fourthly, on 21 February 2017, a letter by Xsigma Corporation was addressed to the director of Mutare Toyota on the subject of “delivery of vehicles”.  The letter reads in the relevant part:

“With reference to the above, we would like to thank you for your valued business and acknowledge receipt of your payments through our partners in Zimbabwe, Xsigma Corporation (Pvt) Ltd. Your stock has been allocated and pending delivery with the first delivery coming through this week.

We are committed to fulfilling your order within the stipulated delivery period as indicated on the Proforma invoices you paid against issued by Xsigma of 7 – 14 days from the date of receipt of payment.

We confirm that all the LC200 Series units are full spec. We will be forwarding the VIN numbers as we dispatch.”

Fifthly, on 26 June 2017, Sakunda wrote a letter to the director of Mutare Toyota demanding the undelivered command agriculture Toyota Land Cruiser LC 200 VX motor vehicles.  The letter specifically stated that:

“We refer to your quotations of 10 February 2017 (copies attached) and our subsequent payment made on 13 June 2017 (proof of payment attached).

As you are aware four LC200 VX Auto vehicles remain undelivered by yourselves. This is despite numerous reminder calls and meetings with your Mr Charles Nyambuya requesting delivery of the said vehicles.”

The actions made by Nyambuya subsequent to the demand by Sakunda are also revealing. Nyambuya wrote an email to his former co-director, Elton Mtisi, captioned “Xsigma demand letter” which read:

“EM

That’s the letter I need a board resolution for.

We need to do a demand letter to Xsigma. Anesu a lawyer has drafted a letter which I will send to you by 2pm.

Regards.”

All the documentary evidence demonstrates the fact that the contract was between Sakunda and Mutare Toyota.  It is not by happenstance that a quotation on Mutare Toyota’s letterhead was delivered to Sakunda and that such quotation bears the name of the Dealer General. Given that at all material times, communication with Sakunda was carried out by Nyambuya, there is no doubt that the Dealer General prepared the quotations in his capacity as an employee and for Mutare Toyota, such instructions having been relayed to him. By equal measure, it is also unlikely that payment would be made to Mutare Toyota and acknowledged by an employee of Mutare Toyota in the absence of a contract.  Also, the letters by Xsigma to Mutare Toyota during the early days of the contract corroborate the view that the understanding was that Sakunda had contracted Mutare Toyota.

A critical element of the documentary evidence is that the letter of demand by Sakunda dated 26 June 2017, was written almost six months after the contract had been formed.  By that time Nyambuya had already left Mutare Toyota.  Equally, Mtisi, who was a co-director, was fully aware of the existence of such a transaction between Sakunda and Mutare Toyota. This much is evident from the email sent to him by Nyambuya requesting for a board resolution. Nyambuya used the pronoun “we” in that communication.  He indicated that they had “to do a demand letter to Xsigma”.  There was a tone of togetherness in the email.  This suggests that from February to June, the understanding between the parties, by their own conduct, pointed to a contract between Sakunda and Mutare Toyota.

It is also noted that there is a police report dated 16 November 2018 made by Mr Nyambuya against Xsigma corporation (Pvt) Limited in which he states that he won a tender to supply eight motor vehicles to Sakunda.  It was argued that the statement by Nyambuya that he had won a tender was an acceptable admission in terms of s 36 of the Civil Evidence Act [Chapter 8:01].  Although the parties made submissions regarding the interpretation of that section, my view is that the argument can be resolved by a common-sense approach.  Nyambuya is recorded to have stated that he won a tender.  The truthfulness of the statement that he won a tender resolves the question regarding the relevance of the police report.  The evidence before us shows that there was no tender process.  Nyambuya could not therefore have been truthful when he claimed to have won a tender.

I turn now to the oral evidence.  That evidence, in the material respects, tallies with the documentary evidence. Mr Charles Mberikwazvo Chitambo who gave evidence on behalf of Sakunda, testified that it was clear from the beginning of their exchanges with Nyambuya that either he was working for or working together with Mutare Toyota. Under cross-examination by Mr Rangarirai he stated that Sakunda’s primary transaction was with Mutare Toyota through Mr Nyambuya.  In this regard, there was an explanation that they would talk to Nyambuya but receive replies from Mutare Toyota.  Chitambo also testified that Sakunda was exempt from going through the normal tender procedure because of a cabinet authority which the government had showed him.

The evidence of Chitambo must be considered together with that of the other witnesses.  Elton Mutisi, who gave evidence on behalf of Mutare Toyota, stated that their understanding was that the contract was between Sakunda and Nyambuya in his personal capacity.  Although he acknowledged that Matsaira would communicate on behalf of Mutare Toyota, he testified that his communication in respect of the agreement with Sakunda was not “formalised for Mutare Toyota”. Pertinently, he could not deny that Nyambuya was acting as a representative of Mutare Toyota.  The record of proceedings shows that during cross examination by Mr Maeresera, Mr Mtisi stated the following:

“Q. So you cannot dispute if I actually put it to you that when second defendent agreed with a representative to claim he did in a representative capacity to represent the first defendant because of the terms of that our agreement, you cannot dispute?

A. My Lord if I get it right it was at the point when the second defendant announced a deposit that I asked to formalise it and that did not happen.

Q. Do not create your own question. My question is very simple and straightforward.

A. Sorry my Lord.

Q. You cannot dispute it because you were not there, if I put it to you that second defendant was agreeing with a representative of the plaintiff. The terms of their agreement was that the second defendant was acting on behalf of the first defendant, you cannot dispute it?

A. No my Lord I cannot.”

On his part, Nyambuya asserted that Sakunda dealt and contracted with Mutare Toyota.  His explanation for his continued involvement in the transaction even after his departure was that Chitambo, from Sakunda, insisted that the person he knew in respect of the transaction was him.  Besides, his continued involvement was because he also wanted to ensure that Sakunda’s vehicles were delivered in order to maintain good business relations with them for the future.

It admits of no doubt that the oral evidence of all the witnesses establishes a contract between Sakunda and Mutare Toyota.  That was borne out of the understanding and conduct of the contractants and their proxies in word or deed. In reaching this conclusion, I am mindful of the approach set out in the case of Chikoma v Mukweza 1998 (1) ZLR 541 (S) at 543 that:

“Against this scenario, the approach to be adopted to the issue of vagueness must be that expressed by Price J in Hoffmann & Carvalho v Minister of Agriculture 1947 (2) SA 855 (T) at 860, namely:

‘Where parties intend to conclude a contract, think they have concluded a contract, and proceed to act as if the contract were binding and complete, I think the court ought rather to try to help the parties towards what they both intended rather than obstruct them by legal subtleties and assist one of the parties to escape the consequences of all that he has done and all that he has intended …’”

The foundations of our contract law would be undermined were this court to find that there was no contract between Sakunda and Mutare Toyota when all the essentials of one exist.  The business community in Zimbabwe would be led astray and totally confused and left unable to deduce whether a binding contract has been formed in circumstances akin to those of this case.  The conduct of the parties in casu, following the conclusion of the contract, showed that they both understood, correctly so, that they were dealing with one another.

The pleadings by Mutare Toyota and the submissions made on its behalf before this Court sought to raise a defence that there was no valid contract between it and Sakunda because Nyambuya lacked authority to act on its behalf.  Such a defence is, however, not available at law to a party in the position of Mutare Toyota.  This is principally on account of what has become known as the Turquand rule which prescribes that a person dealing with a company is entitled to assume that all internal formalities, arrangements, prerequisites, procedures or preconditions necessary for the company to enter into the transaction have been complied with.  See Walenn Holdings (Pvt) Ltd v Intergrated Contracting Engineers (Pvt) Ltd & Anor 1998 (1) ZLR 333 (H) at 347ff.  MAKARAU J (as she then was) restated the rule in Victoria Falls Steam Train Co (Pvt) Ltd v Wankie Colliery Co Ltd 2004 (1) ZLR 7 (H) at p 10A, as follows:

“It does appear to me from a reading of the cases in which the rule has been applied and from texts on the subject, that the contracting party must itself be acting in good faith and that the entire transaction must have been carried out in good faith. It must be a genuine transaction in all other respects save the internal formalities necessary to clothe it with the authority laid down in the statutes of the company. The third party must have been a genuine outsider to be afforded protection by the rule.”

A close examination of the facts of this matter shows that Nyambuya engaged in the contract in his capacity as an Executive Director of Mutare Toyota.  Anyone dealing with him was rightly entitled to assume that he was clothed with the powers of an executive director of a company.  See Chikumbu v Bryden Technical Services (Pvt) Ltd and Others 2009 (2) ZLR 140 (H) at 145G.  The observations of Goldin J in R P Crees (Pvt) Ltd v Woodpecker Industries (Pvt) Ltd 1975 (2) SA 485 (R) at 447F are apt in this case.  They are that:

“A company can be under complete control of and its activities entirely dictated by another person but that does not deprive it of its distinct legal personality. A person in captivity may be entirely subject to and his conduct completely dictated by his captor. Nevertheless he still retains an existence and is a separate entity from the person who has complete power over and direction of him.”

The fact that Nyambuya was in control of the entire transaction does not mean that Mutare Toyota did not itself contract as he did so on its behalf because as a fictitious person, the company could only act through its officials.  The Turquand rule precludes Mutare Toyota from denying the validity of the contract on account of non-compliance with its own internal procedures.  See also s 12 of the repealed Companies Act [Chapter 24:03], which was applicable at the time. Frankly speaking, it is inappropriate for Mutare Toyota to perceive the contract through the eyes of its relationship with Nyambuya following his exit from the company.  The formation of the contract between Sakunda and Mutare Toyota must be objectively looked at in accordance with the tests set out in the above discussion of the law.

Another defence that Mutare Toyota raised related to the legality of the contract. It was argued that the contract was illegal because no tender process was conducted before it was consummated.  The misplaced basis for this argument is that Sakunda was a procuring entity since it was procuring motor vehicles for the government sponsored Command Agriculture programme. A procuring entity is defined in the Public Procurement and Disposal of Public Assets Act [Chapter 22:23] as:

“(a) a Ministry, department or other division of the Government; or

(b) a corporate body established by or in terms of any Act for special purposes laid down in that Act; or

(c) any company in which the State has a controlling interest, whether by virtue of holding or controlling its shares or by virtue of a right of appointment of members to its controlling body or otherwise, and includes any company which is a subsidiary, as determined in accordance with section 143 of the Companies Act [Chapter 24:03], of such a company; or

(d) a provincial or metropolitan council or a local authority; or

(e) any partnership or joint venture between the State and any person, which is prescribed in terms of this Act or the Public Finance Management Act [Chapter 22:19] (No. 11 of 2009).”

In order to succeed in its argument that the contract was illegal for want of compliance with the Procurement and Disposal of Public Assets Act, Mutare Toyota had to prove that Sakunda fell within the ambit of the Act.  This much had to be done against the presumption of legality of a contract.  The presumption was discussed in Hewlett v Chipunza 1983 (1) ZLR 148 (H) at 155 per McNally J, citing Comninos & Frangs v Couvaras & Others 1940 OPD 54 thus: “the presumption of legality would prevail unless the informer succeeds in putting before the Court material sufficient to rebut the presumption.”

In light of the approach recommended above, there can be no doubt that Mutare Toyota failed to prove that Sakunda fell within the ambit of the Act.  I agree with Mr Maeresera that there was no proof that Sakunda was a procuring authority.

I also agree with Mr Sena that Mutare Toyota cannot argue in the one breath that the contract was illegal while at the same time denying the existence of the contract.  Once Mutare Toyota accepted the existence of the contract it could not assert that it was illegal.  They must make an election of where to stand instead of skipping from place to place Kangaroo style.

The moment a valid contract between Sakunda and Mutare Toyota was concluded, the doctrine of privity of contract kicked in.  The doctrine restricts the participation in and enforcement of a contractual right or remedy to the actual parties to it and no one else.  Third parties cannot enforce the contract other than if they fall within the accepted limitations of the doctrine.  Neither can they have contractual obligations provided for in the contract enforced against them. See TBIC Investments (Pvt) Ltd and Anor v Mangenje and Others 2018 (1) ZLR 137 (S) at 144C-D.  Therefore, it was impossible, and indeed, legally incompetent for Nyambuya, a mere third party, to take over the contract other than through the recognised means such as novation or variation of the contract.  A contract cannot be formed ad infinitum.  Once it is formed, it becomes binding on all the parties to it.

The court a quo cannot be faulted in its finding that Mutare Toyota was a party to the contract.  By dint of the doctrine of privity of contract, Sakunda was at large to enforce its contractual rights against Mutare Toyota and certainly not against Nyambuya.

Whether or not the court a quo properly ordered Mutare Toyota and Nyambuya to pay the sum of US$633,257.00 or its equivalent in ZWL$ at the prevailing auction rate.

This issue relates to the third ground of appeal in SC 661/22.  The court a quo made an alternative award sounding in money.  Prior to making such an order, it had remarked thus:

“The Plaintiff is entitled to specific performance. In the event that specific performance is not possible the Plaintiff is entitled to damages.  The liability of the 2 (two) Defendants is joint and several.  Neither Defendant has claimed that specific performance is no longer possible or would be unduly harsh. It is therefore to be assumed that they are in a position to perform.”

It is clear that the alternative order sounding in money was an award of damages. Accordingly, the principles regulating the award of damages, which are settled, ought to be invoked.  The onus is on the aggrieved party to formulate and prove a claim for damages.  See Hugh Davies & Company v Educational Business Suppliers (Pvt) Ltd S-133-97 at p. 7. Relatedly, in Lonhro Logistics (Pvt) Ltd v Ram Petroleum (Pvt) Ltd S-50-22, this Court made the following remarks about the granting of relief that would not have been sought:

“However just the court a quo may have considered the respondent’s tender of the sum of $159 300.00 to be, it was plainly incompetent for it to ratify it through an unsolicited court order. Doing so was a gross misdirection.”

The same principle was emphatically stated in Nzara and Others v Kashumba NO and Ors 2018 (1) ZLR 194 (S) at 202A, thus:

“This position has become settled in our law. Each party places before the court a prayer he or she wants the court to grant in its favour. The Rules of court require that such an order be specified in the prayer and the draft order.  These requirements of procedural law seek to ensure that the court is merely determining issues placed before it by the parties and not going on a frolic of its own. The court must always be seen to be impartial and applying the law to facts presented to it by the parties in determining the parties’ issues.”

In the present case, no claim for the amount awarded by the court a quo was contained in the plaintiff’s pleadings and prayer.  The record of proceedings does not bear testimony that such amount was formulated, proved and quantified by evidence.  The court a quo had no basis for granting the order for damages, which in all honesty, was a thumb suck figure of sorts.  Accordingly, the concession made by Mr Sena that the court a quo misdirected itself in this regard was proper.  The third ground of appeal in SC 661/22 must succeed.

DISPOSITION

Having considered the facts of these cases and the law my considered view is that the appeal in SC 620/22 has merit and it must succeed.  Nyambuya was not a party to the contract and he cannot be ordered to perform obligations imposed by the contract.  The appeal in SC 661/22 ought to partially succeed. The court a quo had no basis for ordering an award of damages which was not sought and which damages were not proved.

The findings made in these appeals require an order for specific performance to be made in favour of Sakunda and against Mutare Toyota. The principle regarding orders of specific performance, which was restated in Grandwell Holdings (Pvt) Ltd v Zimbabwe Mining Development Corporation and Others S-5-20 at p 6, is that specific performance is the primary or default remedy for breach of contract and is accordingly claimable.  Sakunda is entitled to demand Mutare Toyota to perform its part of the bargain.

Regarding costs, it seems to me just that each party must bear its own costs. All the parties appear to have been successful in varying degrees and on different aspects of the appeals.

In the result, it is orders as follows:

The appeal in SC 620/22 is allowed.

The appeal in SC 661/22 is partially allowed.

The judgment of the court a quo is amended to read as follows:

“(a) Judgment be and is hereby entered in favour of the plaintiff against the first defendant for the delivery of four brand new Toyota Land Cruiser LC200 motor vehicles to the plaintiff within thirty days of this order.

(b) The plaintiff’s claim against the first defendant be and is hereby dismissed with costs”.

Each party shall bear its own costs in respect of both appeals.

MAKONI JA		:	I agree

MWAYERA JA	:	I agree

Chizengeya Maeresera & Chikumba Legal Practitioners, appellant’s legal practitioners in SC 620/22 and the 2nd respondent’s legal practitioners in SC 661/22

Chimuka Mafunga Commercial Attorneys, 1st respondent’s legal practitioners in SC 620/22 and in SC 661/22

Rangarirai & Co. Legal Practitioners, second respondent’s legal practitioners in SC 620/22 and the appellant’s legal practitioners in SC 661/22