THE Supreme Court has reversed a High Court judgment in which Charles Nyambuya, former Mutare Toyota director, was ordered to deliver four brand new Toyota Land Cruiser LC200 motor vehicles to Sakunda Holdings.
The parties were embroiled in a dispute involving a botched deal for the sale of motor vehicles.
Mutare Toyota and Nyambuya were alternatively directed to pay Sakunda US$633 257 or its Zimbabwe dollar equivalent at the prevailing auction rate at the time of payment when the matter was heard at the High Court. They were also ordered to pay Sakunda’s costs of suit.
The background was that 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.
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.
The court heard Nyambuya also 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 sub-contracted to avail the vehicles, to provide updates on the delivery of the Land Cruiser vehicles,” the court heard.
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.
On 19 August 2019, Sakunda issued summons via the High Court in Harare against Nyambuya and Mutare Toyota, for the delivery of four imported brand new Toyota Land Cruiser LC 200 motor vehicles, within 30 days of the order, failing which both were to pay damages in the sum of ZW$16 million, plus 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 the 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 High Court 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 High Court 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 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 High Court, 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.
Notwithstanding its earlier finding that Nyambuya had acted on behalf of Mutare Toyota, the court a quo also concluded that Nyambuya was 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 High Court was of the view that by his conduct, Nyambuya delayed or prevented the settlement of the matter.
This was so, according to the lower court, because he had refused to accept a company resolution offered to him at the insistence of the judge who presided over the pre-trial 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 or its equivalent in Zimdollars 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.
Aggrieved, Nyambuya and Mutare Toyota appealed at the Supreme Court where they noted appeals.
Nyambuya argued that the High Court had misdirected itself both in law and in fact by holding him liable to the claim.
“The court a quo seriously misdirected itself both in law and in fact by holding that Nyambuya was liable for Sakunda’s claim yet Sakunda’s claim was one based on contract only and not on any other cause of action,” he said.
For its part, Mutare Toyota argued that having correctly found that Nyambuya 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 Nyambuya.
“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,” the company submitted.
In coming up with its judgement, the Supreme Court said the critical issue arising for determination is whether or not Sakunda contracted with Mutare Toyota or with Nyambuya in his personal capacity.
“A connected issue relates to the competency of the court a quo awarding damages in the sum of US$633,257.00 to Sakunda.”
K Rangarirai, the lawyer representing Mutare Toyota, defended the company, 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.
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, 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.
The court found that 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.”
The court said 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.
“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.”
Leading the bench, Justice Nicholas Manthonsi ruled: “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 Supreme Court however noted that the findings made in these appeals required an order for specific performance to be made in favour of Sakunda and against Mutare Toyota.
“Sakunda is entitled to demand Mutare Toyota to perform its part of the bargain.
“In the result, it is ordered 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 (Sakunda) against the first defendant (Mutare Toyota) for the delivery of four brand new Toyota Land Cruiser LC200 motor vehicles to the plaintiff within thirty days of this order.” — STAFF WRITER.
