Chimanga Changa Limited v Export Trading Limited (APPEAL NO. 20/2020) [2023] ZMCA 417 (21 February 2023)

.. IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) APPEAL NO. 20/2020 CHIMANGA CHANGA AND OF ZA OF APPf D 2 1 fES 2023 APPELLANT EXPORT TRADING LIM RESPONDENT CORAM: CHASHI, SIAVWAPA AND BANDA-BOBO On 18th January and 21 st February, 2023 FOR THE APPELLANT: · MR. M. A. MUKUPA OF MESSRS ISAAC AND PARTNERS FOR THE RESPONDENT: MR. P. G. KATUPISHA WITH MRS. K. T. MUYOMBE BOTH OF MESSRS MILNER AND PAUL LEGAL PRACTITIONERS JUDGMENT SIAVWAPA JA delivered the Judgment of the Court. 1.0 INTRODUCTION 1.1 This appeal is against the Judgment of the Honourable Mrs. Justice Ireen Zeko Mbewe, sitting in the Commercial Division of the High Court. 1.2 The learned Judge awarded the herein Respondent, which was the Plaintiff in the Court below, most of the reliefs sought including an order for specific performance of the contract and payment of the sum of K9,03i2,713 for the value of the maize the Respondent had delivered to the Appe]lant pursuant to the contract. 2.0 BACKGROUND 2 .1 On 10th May, 2017, the Appellant and the Respondent executed a contract by which the Respondent was to supp]y 6,172 metric tonnes of grade A non-GMO white maize to the Appellant within thirty days of executing the contract. 2.2 The Respondent went on to supply 3,947.833 metric tons of the commodity but the Appellant only acknow]edged receipt of 3,000 metric tonnes via email dated 26th May, 2017. 2.3 The Appellant however, refused to pay for the delivered maize arguing that it had rejected the supply via a Notice of Rejection purportedly contained in the letter addressed to the Food Reserve Agency dated 19th May, 201 7. 3.0 ACTION IN THE HIGH COURT 3.1 The Respondent commenced an action in the High Court by filing a writ of summons accompanied by a statement of claim dated 27th September, 2017. J2 ,3.2 The Appellant entered Conditional Memorandum of Appearance on 11th October, 2017 and filed a defence and counterclaim on 2nd March 2018. 3.3 In its defence, the Appellant stated that at the time of the delivery of the maize, it had already terminated the contract by letter dated 19th May, 201 7. 3.4 It also disputed the assertion that it needed to serve a Notice of Rejection on the Respondent before it could terminate the contract. 3.5 In its counterclaim, the Appellant stated that by letter of 19th May, 2017 to the Food Reserve Agency, it made it clear that it was unable to honour the contract. 3.6 It further stated that the Respondent proceeded to deliver the 3,970 metric tonnes of maize despite the Appellant's cancellation of the contract and its failure to pay the deposit in breach of Clauses 11 and 13 of the Contract. 3.7 It accordingly claimed the sum of Kl2, 116.00 being money spent on fumigating the maize wrongly delivered as well as storage charge of USD2.00 per metric ton per month. J3 3.8 In its defence to the counterclaim, the Respondent submitted that the consignment of maize in issue was delivered during the subsistence of the contract and that the delivery was not in breach of any of the Clauses in the contract including Clauses 11 and 13. 4.0 DECISION OFT. HE HIGH COURT 4.1 The learned Judge considered all the claims as well as the counterclaim in light of the evidence adduced and the relevant provisions of the law, the contract and reference materials. 4.2 The learned Judge then set out the following as the issues for de:termination:- 1. Whether the Plaintiff received a valid Notice of Termination of the contract from the Defendant. 2. Whether the Plaintiff delivered the maize 1n accordance with t he terms of the contract and the Defendant accepted the said maize voluntarily. 3. Whether the Plaintiff is entitled to the reliefs sought. 4. Whe ther t he Defendant is entitled to the counterclaim. 4. 3 In determining the first issue, the learned Judge examined the relevant provisions of the contract and came to the conclusion that the contract was neither terminate d nor varied. As a result, :all the rights and obligations of the parties were in force. J4 4. 4 As regards the condition precedent for the purchaser to pay a specified portion of the purchase price within ten ( 10) days of s1gn1.ng the contract as per Clause 13 of the contract, the learned Judge held that the provision allowed the supplier, (Respondent) to supply the maize within the first ten days of the contract without being paid the said advance payment. 4.5 The learned Judge however, found that although the Respondent did not receive the said payment it continued supplying as it did not repudiate the contract. 4 .. 6 The learned Judge however, dismissed the claim for specific performance for the reason that it was discretionary and that damages would be a .more appropriate remedy for breach of contract. 4. 7 The learned Judge granted the claim for value of the maize delivered in the sum ofK:9, 032, 713.05 as well as damages for breach of contract to be assessed by the Registrar. 4.8 The learned Judge however, dismissed the counterclaim in its entirety. 5.0 THIS APPEAL 5.1 Dissatisfied with the Respondent's success in its claims, the Appellant filed a Notice and Memorandum of Appeal on 28th August, 2019 advancing four grounds of Appeal. JS 5.2 The grounds 1n the Memorandum of Appeal are set out as follows; 1. The Court below erred in law and fact when it found that Clause 13.2 related to the performance of the contract and triggered the first payment obligation to be met by the Appellant without taking into consideration the fact that Clause 13 .. 2 is a condition precedent and was to be read together with Clause 5 and having not been met by the Appellant, rendered the contract a nullity and ineffective. 2. The Court below misdirected itself in law and fact when it found that all the rights and obligations by the respective parties were in force as per the contract as it was neither varied nor was the said contract lawfully terminated in accordance with the terms of the contract without taking into consideration the literal interpretation of the contract as a whole and the fact that the contract did not take effect. 3 .. The Court below misdirected itself in law and fact when it ordered that the Appellant's failure or refusal to pay for _the delivered maize constituted breach of contract pursuant to Clauses 13.2 and 13.6 and that the Appellant is liable to pay the Respondent for the maize delivered in the claimed sum ofK9, 032,7l3.05 on a quantum meruit basis without having regard to the fact that the Appellant timeously J6 advised the Respondent that they would not accept the delivery of the goods. 4. The Court below erred in law and fact when it held that the maize having been delivered, the Appellant was wholly responsible for its storage and any fumigation costs without taking into consideration the meaning of Clause 12.4 of the contract. 6.0 ARGUMENTS IN SUPPORT 6.1 In arguing ground one, the Appellant has asserted that the learned Judge below did not interpret Clauses 5 and 13 of the contract correctly. It is the Appellant's position that since Clause 5 of the contract which provides for the contract to take effect upon the appending of the last signature is made subject to Clause 13 which provides for advance payment within ten ( 10) days of signing the contract, the advance payment is a condition precedent to the operation of the contract. 6.2 On the basis of the Appellant's view above , it has been argued that the Respondent was in breach of the contract for supplying the maize before the Appellant paid the deposit to operationalize the contract. 6.3 In arguing grounds two and three together, the Appellant has criticized the learned Judge for holding that the letter of 19th J7 May 2017 did not terminate the contract but that it was a request to vary the contract. 6.4 The Appellant has charged that the learned Judge departed from the modern way of interpreting contracts when she did not take into account the evidence of past contractual relationships between the parties. In this case, the Appellant argued that in the past, the Respondent did not supply any maize until the Appellant had paid the deposit. 6.5 In ground four, the Appellant argues that having rejected the goods, the risk reverted to the Respondent and as such storage and fumigation costs became the responsibility of the Respondent, as the seller. This argument is anchored on Clause 12.4 which, it is alleged the learned Judge did not take into consideration. 7.0 ARGUMENTS IN OPPOSITION 7. 1 After reproducing excerpts from some English decisions which discussed and drew a distinction between promissory and contingent conditions, the Respondent submitted that Clause 13 in general and sub-clause (2) in particular was not a condition precedent to the formation of the contract. It is submitted that it is instead a payment clause whose provisions depend on an operational contract. J8 7.2 Further that Clause 5, which is stated as subject to Clause 13, is merely a fundamental term of the contract whose breach entitles the Respondent, being the innocent party, to sue for damages. 7 .3 With regard to grounds two and three, the Respondent maintains that the contract was in force at the time of the delivery of the 3,947.833 tons of maize which the Appellant: accepted. 7.4 It further reiterates that the letter of l 9 th May, 2017 neither terminated nor varied the contract and as such aU the rights and obligations of the parties under the contract remained in force as determined by the trial Judge. 7.5 On the question of who was liable for storage and fumigation costs of the delivered maize as per ground four, the Respondent argues that the Appellant's failure or refusal to pay for the maize did not revert control of the maize to the Respondent as the Appellant did not invoke Clause 12.2 of the contract. 7 .6 It is accordingly argued that the Appellant had the obhgation to store the maize at its cost since no application for extension of time for uplifting the maize was made under Clause 12.2 to activate the invocation of Clause 12.4 which reverts the unpaid for maize after the extension period to the supp Her. J9 8.0 ANALYSIS AND DECISION 8.1 At the heart of this appeal is the effect of the letter dated 19th May, 201 7 by the Appellant addressed to the Food Reserve Agency, which was a party to the contract and copied to the Respondent, which was the Plaintiff in the Court below. 8.2 The said letter occurs at page 190 of the Record of Appeal. In essence, the letter highlights what may be termed negative developments in tlhe maize market due to the introduction of maize cheaper than that contracted £or by the Appellant. 8 .. 3 The Appellant then expresses its inability to meet the contract to purchase 8,000 metric tons of maize from the Respondent and the Food Reserve Agency in full. 8 .4 The letter concludes by inviting comments from the Food Reserve Agency in order to maintain the existing warm relations between the Appellant and Food Reserve Agency. 8.5 Based on the contents of the above stated letter, the Appellant refused to pay for the 3, 169 .. 397 metric tons of maize supplied by the Respondent. 8.6 The AppeUant's main argument is that by the said letter it gave notice to the Re spondent of its termination of the contract on JlO the basis that it had not complied with Clause 5 of the contract which is subject to Clause 13.2. 8.7 Clauses 5 of the contract provides as follows; "Subject to Clause 13 hereof, the contract shall take effect once the last signatory has signed this contract which for the avoidance of doubt is the Agency Secretary of the Agency and the contract shall continue being in effect until the expiry of 30 days from the effective date of the contract when the total tonnage of 8000 MT of the goods would have been delivered and uplifted from the suppliers and the Agency as provided under Clause 11 and paid for as provided for under Clause 6 and Clause 13. " 8.8 Clause 13 provides as foUows; "The purchaser shall within 10 (ten) days of signing the contract make payment the supplier of the sum of Zambian Kwacha K2, 850) 000. 00 in advance for 1 00MT in favour of the supplier.'' to 8.9 In the understanding of the Appellant, the two Clauses make the advance payment within 10 days of the Appellant signing the contract, a condition precedent to the coming into effect of the contract. 8.10 It has argued therefore, that since it did not comply with that condition precedent and within 9 days of the Agency signing the contact, on 10th May, 2017, it wrote to the Agency on 19th May, 2017, terminating the contract, the contract did not take effect. 8 .. 11 Consequent upon the contract not taking effect, the Appellant holds the Respondent in breach of Clause 13.2 for supplying Jll the maize in issue and that consequently the Appellant was discharged from its duty to pay for and retain custody of the maize. 8.12 Two questions then anse from the Appellant's contention namely; whether the non-performance of C]ause 13.2 of the contract by the Appellant that is to say, fai]ure to p ay K2, 850,000.00 within ten ( 10) days of its signing the contract, rendered the contract non-operational. The second question is whether the letter of 19th May, 2017 amounted to a Notice to terminate the contract. 8.13 The starting point is that Clause 5 prescribes the condition precedent for the contract to take effect as the date it is signed by the last signatory, being the Food Reserve Agency. This Clause is however, subject to Clause 13 in its entirety which deals with matters related to payment. 8.14 We do not understand Clause 5 to mean that it is upon compliance with Clause 13.2 that breathes life into the Contract after the last signatory signs it. We instead take the view that once all the parties have signed the contract, the supplier has the obligation to start supplying the commodity while the purchaser has the obligation to pay for the 1,.000 metric tons within ten days of the last signatory signing. J12 8.15 The contract shows at page 128 of the Record that the Agency's representative signed the contract on 9 th May, 2017 while the witness signed it on 10th May, 2017. 8.16 It follows therefore, that the contract became effective or operational on 10th May, 2017 and from then onwards, it remained for the parties to fulfill their obligations under the contract. 8.17 As rightly pointed out by the trial Judge, Clause 27 provides incidents that may lead to termination of the contract and sub clause 1 allows each party to terminate by giving a seven-day written notice. 8.18 Of more relevance to this appeal is Clause 27 .3 which provides as follows; "Should the purchaser fail to fulfill the terms of upliftment agreement hereto in terms of Clause 11 and 12 above or breach other obligations under this contract, the Agency or supplier shall have the right to terminate the contract in addition to and without prejudice to any other rights which it may have under the law or this contract. " 8.19 Under the above cited Clause, the Agency and the supplier are entitled to terminate the contract upon the purchaser breaching its obligations. 8.20 We have also painstakingly combed the entire contract and nowhere does it provide for non-effect or non-operation of the contract by reason of one party 's breach of a term. Once Clause J13 5 is fulfilled, the contract comes into effect and it can only be rendered ineffective by an innocent party terminating it upon breach by another party or by one party giving a seven day written notice. 8.21 It is therefore clear that the Appellant argues amiss when it contends that its failure to pay the advance amount pursuant to Clause 13.2 rendered the contract ineffective and as such the subsequent deliveries by the Respondent were made in breach of or without due regard to Clause 13.2. 8.22 In any case, it is trite law that no person or entity should stand to benefit out of its own default. In this case, it is the Respondent which had the right to terminate the contract upon the Appellant's default. 8.23 We are therefore in agreement with the trial Judge that the Appellant's failure to pay the deposit amount within ten ( 10) days of signing the contract did not render the contract ineffective and the Respondent had the right to either terminate it or continue supplying the maize within the duration of the contract. 8.24 The next issue 1s whether the letter dated 19th May, 2017 constituted a Notice to terminate pursuant to Clause 27 .1 of the contract. J14 8.25 We have taken a close look at the letter which occurs at page 190 of the Record which is addressed to the Executive Director of the Food Reserve Agency with paragraph three stating as follows; "As stated above, we would .like to draw your attention that we will not be able to honour the 8,000 MT, contract in full." 8.26 In our view, the above cited paragraph does not convey a sense of intention to terminate the contract but the Appellant's inabiHty to honour it in full. The learned trial Judge was therefore correct to hold that the letter was not a termination of the contract. 8.27 We would further state that since this was a tripartite contract, and the bulk of the contract maize was to be supplied by the Respondent, a specific seven-day notice of termination of contract should have been addres • : to the Respondent. 8.28 In the view we have taken, w d . no merit in the appeal and dismiss it with costs to . i · default of agreement. ,J .. CHASHI COURT OF APPEAL JUDGE M~J. SIAVWAPA COURT OF APPEAL JUDGE A. M. BANDA-BOBO COURT OF APPEAL JUDGE JlS