NFC Africa Mining Ltd v Lofoyi Enterprises Ltd (Appeal 27 of 2006) [2007] ZMSC 183 (5 June 2007)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 27/2006 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: NFC AFRICA MINING PLC APPELLANT AND LOFOYI ENTERPRISES LIMITED RESPONDENT Coram: CHIBESAKUNDA, SILOMBA, US and KABALATA, AG. JS on 5th September 2006 and 5th June, 2007. For the Appellant: Mr. W. M. Forrest of Messrs Forrest Price & Co. For the Respondent: Mr. D. Muzumba of Messrs Douglas & Partner ______________________ JUDGMENT____________ _____ Chibesakunda, JS, delivered the Judgment of the Court Legislation referred to: 1. 2. Sale of Goods Act 1893 Secs 4, 13,14,15,and 35 Order 58 (2) 68(2) of Cap 25. Cases referred to: 3. Sithole vs. State Lotteries Board (1972) ZR 219. 4. Wieller vs. Schilizzi, 1856 17 CB page 619. This is an Appeal against a High Court Judgment, which was in favour of the Respondent. In this Appeal we will use the same designations, which the J2 parties used at the High Court in the consolidated Cause of action No. 2004/HK/278 for convenience sake. In this consolidated cause of action, the Plaintiffs, NFC Africa Mining PLC, sued the Defendants claiming for damages for breach of contract between them. The Defendants in this Agreement, agreed to supply the Plaintiffs with crude copper oxide ore of a copper oxide content of at least 30 percent. The Plaintiffs' claim is that the Defendant delivered the material of less value of copper content amounting to a figure of US $60,000.00 plus interest. So they have claimed damages plus interest and costs for breach of contract. The evidence before the High Court was that these two parties had business dealings in oxide ore and copper concentrates since December 2003. On 7th May 2004 they entered into a written contract known as "Copper Ore Purchase Agreement" which was produced before the court. As a result of this Agreement in May 2004 the Defendants delivered to the Plaintiffs a number of deliveries. The Defendants made four deliveries on llth/12th, 15th, 16th/17th and 26th May 2004. These consignments were expected, according to the Plaintiffs to be 30 Percent of copper content and expected to be copper oxide ore. When these consignments were delivered the Plaintiffs acknowledged receipt. As per routine the Plaintiffs went through the process of mixing the materials taking samples analyzing and testing these samples. These samples were analyzed and tested and reports of this analysis and testing indicated a higher percentage of copper content. However, later the Plaintiffs discovered that these reports were fake. They discovered that, there was substitution of the samples. The samples taken from the bulk deliveries of 11th, 16th, 17th and 26th J3 were substituted with other samples, which were examined and tested, thus producing a higher percentage of copper content. The Plaintiffs concluded that these fake reports resulted from the fact that the Defendants corrupted their members of staff in the Laboratory thus making it possible for them to cook up the figures. The Plaintiffs discovered that these reports did not correspond with the bulk deliveries. They reported to the police and fresh samples were collected from the Defendants. These new samples were subjected to fresh analyzation and testing. The reports of these fresh analyses and testing indicated low copper content as compared to the tests, which were originally done in the Plaintiffs' laboratory. The evidence of the Plaintiffs is also that by this time of this re-analyzation and retesting the Plaintiffs had used most of the delivered consignments. They informed the court that they were unable to say whether the four samples that were earlier tested and analyzed were supplied by the Defendants from the bulk consignment delivered in May 2004. In cross-examination PW1 accepted that the Plaintiffs' members of staff did the preparation for the testing and that they actually did the first testing. So he did not really know what had happened during the preparation for testing. He informed the court that he was not able to say whether the four samples that were subsequently re-tested, supplied by the Defendants were from the bulk consignment. PW2 gave a detailed account of the procedure used in testing the samples. He testified that the samples were collected in the day. The preparations were done in the evening and the testing was done in the night. He testified that he did the preparation and tested the samples. According to him, he was never approached by the Defendants or anybody to falsify the J4 results of the first test of the samples of May 2004 deliveries. He signed all the reports after tests and analyzation as a sign of approval. PW3, a Scientist Chemist with a 10-11 years experience in actual testing of samples, testified that he was an employee of the Plaintiffs and that he was in charge of the sampling and sample preparation and tests. He testified that he did all the invoicing after analyzation. According to him the report in relation to 12th May 2004 delivery, the copper content of the samples analyzed was 36.25%. In the second report dated 16th May 2004, the copper content was 32.51%. In the third report of the analyzation and testing of the samples collected from the 17th May 2004 delivery, the copper content showed 33.35%. The delivery of 26th May 2004 was never processed as the Plaintiffs declined to accept it. He testified that he was the author of documents in the Plaintiffs Bundle of documents. He told the court that these were the invoices from the Defendants. According to him before he tested and examined the samples in the Plaintiffs' laboratory, he was not in a position to tell who delivered the consignment and how the consignments were delivered at the Plaintiffs premises. He went on to say that at the time of analyzing all these samples and testing them he did not even know the company name of the suppliers or even the trucks, which brought the consignments. These were the details, which came to him, much later. PW4, the Manager Administration of the Plaintiffs in charge of sampling testified that he personally carried out the investigations relating to the allegation that the Defendant were cheating the Plaintiffs. After suspecting fraud he physically took four samples to Alfred H. Knight, Laboratory that he collected J5 from the deliveries made by the Defendants to the Plaintiffs in may 2004. He got samples 2 and 3 from the bulk deliveries by the Defendants of 12th and 26th May 2004. The other two samples were 1 and 4, which he collected from the deliveries by the Defendants of the 16th and 17th May 2004. PW4 stated in his evidence that Alfred Knight recorded as copper concentrate because they were told to record it so instead of copper ore. (See page 145) He testified that looking at the Agreement in particular Clause 3, which described the materials to be sold as copper ore, according to that Agreement, the Defendants expected copper content of 30 - 35 percent in these deliveries. He further testified that in accordance with Clause 3 of the Agreement, they expected the deliveries to be of copper ore. He further said that although under Clause 4 of the Agreement, the Defendants were at liberty to either deliver copper ore or copper concentrate, the Plaintiffs never placed an order for copper concentrate. However, he went on to tell the court that if the Defendants delivered copper concentrate and not copper ore they would not be in breach of the Agreement. PW5, a Police officer, testified that he investigated the allegation that the samples first sent to the Plaintiffs's Lab to be tested and analyzed were not from the bulk delivered by the Defendants to the Plaintiffs in the course of May 2004. The Plaintiffs complained that there was substitution of samples and that the Defendants were cheating the Plaintiffs. The results of the investigations were that they was no such substitution of samples as according to him there was no sufficient evidence to establish fraud. So the police were instructed not to prosecute any of the Plaintiffs workers or anybody. J6 The Defendants' story is that they started dealing with the Plaintiffs in December 2003. In May 2004, they had entered into a contract with the Plaintiffs to supply copper ore and or copper concentrate. DW1 described the procedure of delivering the materials. He testified that they used to deliver in truckloads and that they would get samples and send those to the Plaintiffs Laboratory for testing. He testified that after the Lab's analysis the materials from the Lab would then be graded into categories according to the copper contents. He testified also that the Defendants would issue invoices according to copper content. When issuing these invoices the Plaintiffs and the Defendants would be present and would then both sign on the invoices signifying approval. The original invoices would be taken to Accounts Department for payment. He referred to some of the invoices, which had not been honoured. He then explained to court the procedure that was used each time they delivered any consignment to the Plaintiffs. The procedure was that as soon as the delivery truck entered the premises of the Plaintiffs, it had to be inspected at the gate. One of the workers of the Plaintiffs would meet the truck, accompany it to the weight bridge of the Plaintiffs. Then it would be weighed and the weight would be recorded. The Defendants would offload that consignment with the help of casual workers. After off loading, the Plaintiffs would bring the contents for mixing. After mixing, the Plaintiffs workers would come and collect about 10 small bags of samples. The contents of these small ten bags would be mixed again and then divided into smaller samples and they would be put into smaller bags. The supplier would then be given some samples. According to the Defendants the Plaintiffs used special sample bags in which they used to pack J7 these smaller samples. These smaller bags belonging to the Plaintiffs were special because when sealing the bags the Plaintiffs would put a tag of the name of the supplier and truck number of the truck that delivered the material to ensure that the samples were not tampered with. According to DW1 the suspicion about fraud arose from the fact that there were 2 companies that were suspected to have connived with the Plaintiffs' workers thus cooking up the report and the percentage of the copper content. In cross-examination, he testified that they supplied the Defendants from December 2003 to May 2004 with copper concentrate not copper ore. He went on to say that the material they delivered was copper concentrate although it looked like copper ore. He went on to testify that the Plaintiffs used to record the weight of the contents they delivered. He told the court that the Plaintiffs received each consignment after weighing the consignment. He told the court that the samples taken by the Plaintiffs for the 1st testing were from the bulk deliveries of the 11th, 15th, 16th/17th and 26th May 2004. That was the evidence before the court. The Learned Trial Judge found for the Defendants hence this Appeal against the High Court Judgment. Before us the Plaintiffs raised four Grounds of Appeal. These are: 1) That the Learned Judge in the High Court misdirected herself in making the following findings: That "this permits the inference that the words copper oxide, copper ore and copper concentrate were used interchangeably" (Page 8 lines 11 and 12 of the Judgment). Following the above misdirection the Learned Judge gave Judgment for the Defendant J8 when on a balance of probability there was no justification for the same. 2) That the Agreement - the Copper Ore Purchase Agreement was entered into on the 7th of May 2004. It provides expressly as the title indicates that it was for the purchase by the Plaintiffs and sale by the Defendant of copper ore. The first three paragraphs of the Agreement and the heading refer to "copper ore." The Plaintiffs bought and the Defendant sold "copper ore" and not copper concentrate. 3) That the Witness PW 1 Mr. Gao gave evidence of the fact that copper ore is a naturally occurring substance which at the stage of purchase by the Plaintiffs had not been processed. Copper concentrate is a mixture of substances, which the Plaintiffs did not buy from the Defendant. The Plaintiffs manufacture at its own premises at Chambeshi Mine Copper concentrate. 4) That although the Learned Judge in the High Court recorded in the Judgment that the Plaintiffs' Advocates failed to file Written Submissions as ordered by the Court, it was in fact filed in Court on the 15th November 2005. Both parties filed heads of argument and authorities. Both parties at the hearing relied on the heads of argument filed in court. But Mr. Forrest in his submission urged us to take into account his submissions before the lower court. J9 According to the written heads of argument, the Plaintiffs's main attack on the High Court Judgment in Grounds (1) and (2) was on the conclusions by the Learned trial Judge that in the contract of sale signed between the two parties, the words "copper oxide" and "copper ore" and "copper concentrate" were used interchangeably by both parties. It was argued that, according to the evidence adduced before the lower court, the Plaintiffs and the Defendants contracted to buy and to sell "copper ore" and not "copper concentrate". Counsel for the Plaintiffs described in his written arguments the difference between "copper ore" and "copper concentrate". He argued that whereas "copper ore" is a naturally occurring substance, which naturally occurs, copper concentrate has to be processed. The Plaintiffs' argument was that the Agreement made on the 7th of May 2004 expressly provided for the selling/buying of "copper ore" as per introductory paragraph and Clause 3 and not "copper concentrates." It was therefore argued that the Defendants breached the Agreement when they delivered consignments of "copper concentrates" instead of "copper ore." On ground 3, in the written arguments the Plaintiffs argument was that the Defendants manipulated the samples and substituted the samples. According to the Plaintiffs, the samples that were tested and first analyzed by the Plaintiffs that indicated higher percentage of copper content were not taken from the bulk consignments delivered to them on 11,15,16/17 and 26th May 2004. They argued that these samples that were sent first to the Lab were from a very different delivery. They referred to pages 81,84,88 of the record to establish that there was this fraudulent manipulation. According to them, the Plaintiffs on belief that they were receiving copper oxide ore and on the belief that the J10 consignments contained copper of higher copper content, received these deliveries and that this was contrary to Section 13, 14, and 15 of the Sale of Goods Act(l). The Plaintiffs' argument was that because of this fraudulent manipulation of the samples, the consignment delivered on 26th May 2004 was never accepted by the Plaintiffs. So the lower court was wrong to have ordered the Plaintiffs to pay for this consignment. In response the Defendant argued that the lower court was on firm ground in holding that the words "copper ore" and "copper concentrates" in the sale Agreement were used interchangeably. The Defendants referred to Clause 4 and 6 of this Copper Ore the Sale Agreement, which defined the materials to be sold/bought: "4. Seller shall deliver 150dmt +/-5% copper ore ore/and copper concentrate monthly from May to December in 2004 to Buyer." And Clause 6 also says: 11 The Price for per dry metric ton copper ore or/and copper concentrates shall be calculated base on five LME trading days average copper cash settlement price after the delivery date according to following 1% copper content price chart:" They submitted that looking at Clause 4 of the Sale Agreement the Defendants were within the ambit of the Agreement when they delivered copper concentrates. They argued that this interpretation was confirmed by the evidence of the Plaintiffs' own witness PW4 in cross-examination at page 146, where he said, " If Lofoyi supplied copper concentrate they would not be in breach of this Agreement." They referred to Section 15 of the Sale of JU Good Act (1), which covers contract of sale by sample. According to them the goods delivered corresponded with the samples and description in Clause 4-6 and that the goods were certainly of merchantable quality, fit for the purpose they were bought. Hence the Plaintiffs did not only receive them but also used them even by the time the matter came to court. On Grounds 1 - 2 the Defendant argued that the Plaintiffs failed to prove fraud. They referred to PW2 and PW3's evidence in which they categorically denied having being bribed. PW2's evidence was that he carried out his duties in the best way he knew. He did not know who delivered the consignment nor did he know the Defendants before carrying out the tests and analysis. He testified that the Defendants' workers did not have access to him as he carried out his work in the laboratory. Both PW4 and DW1 gave details of the process of receiving the consignments, recording, analyzing and testing samples collected from these bulk deliveries. This evidence was not challenged. This evidence according to them established that the system was fully controlled by the Plaintiffs and that there was no possibility of the samples being substituted. On the Sale of Goods Act (1), the Defendants argued that the Plaintiffs accepted the goods and utilized the consignment even before the matter came to court. According to the Defendants the Plaintiffs had ample time and opportunity to examine the goods before accepting them and utilizing them. The Defendants further more urged that if the goods were not the right goods as the Plaintiffs now claim, they should have declined to receive them. But the Plaintiffs received the consignments, tested and analyzed the samples from these deliveries and placed them in categories according to the copper contents. The J12 Plaintiffs moreover used these same materials even before the case come to court. It was therefore argued that the Plaintiffs are bound by this Agreement. They further argued that if the claim by the Plaintiffs was that the Defendant's delivery was wrong because they delivered copper concentrates instead of copper ore, then, the Plaintiffs' central argument is that the Defendant's conduct was inconsistent in with the claim. The Plaintiffs according to their own evidence received the consignment, recorded the consignment, and went through the process of testing, analyzing and graded them and even used most of the goods. They should then be deemed to have accepted the goods. The Defendants further argued that by using the concentrates, which were delivered, the Plaintiffs cannot now dispute the quality of the consignment, which were delivered, to them. The Defendants further argued that looking at the argument of the Plaintiffs it is not clear as to what exactly their dispute is. Are they disputing the quality of the goods because of the copper content, which according to them was at low percentage, or they are disputing the quality because the copper delivered to them was "copper concentrate" instead of "copper ore'? We have looked at the issues raised in the Appeal. Looking at the record of appeal and in particular the Judgment of the lower court we are compelled to make the following remarks. Firstly, we have some difficulties in following the judgment of the lower court. This is so because of the way the Learned trial Judge structured her judgment. We feel obliged to bring out this point that it is trite practice in our courts that a judgment must state succinctly and concisely relevant facts as per evidence adduced before it, which facts any member of the J13 public reading the judgment would follow as a basis of the conclusions drawn by that court. In all the judgments it is a cardinal rule that the court must reveal its mind as to why it drew certain conclusions and the facts supporting these conclusions. It is mandatory that any judgment must be anchored on evidence adduced before the court. In the case before us, there was no such summary to explain the basis of the lower court's conclusions. Secondly, looking at the memorandum of appeal on page 9, we hold the view that this Memorandum of appeal falls short of the provisions of Order 58 Rule 2 of the Supreme Court Rules (2). This Rule prescribes how a Memorandum of appeal must be set out. It says "The Memorandum of appeal shall be substantially in Form CIV/3 of the Third Schedule and shall set forth concisely and under distinct heads, without argument or narratives, the grounds of objection to the judgment appealed against, and shall specify the points of law or fact which are alleged to have been wrongly decided, such grounds to be numbered consecutively" According to Order 68 Rule (2) of the Supreme Court Rules (2), total failure to comply with this requirement, set out in Order 58 may inter alia render the appeal being dismissed. However, in this case before us since this ground was never argued before us so as to allow the other parties to be heard on this point, according to 58 Rule 3 (proviso) this appeal cannot be dismissed on this ground. Coming to the other grounds of Appeal presented to us, in our view the central issues are, (i) Whether the Learned trial Judge was wrong to come to the conclusion as she did, that the words "copper ore" and "copper consecrates" were used interchangeably in the Agreement of 7 May 2004. (ii) Whether or not J14 the Learned trial Judge was wrong to conclude in the way she did that the Plaintiffs had not proved fraud and that the Defendants were not in breach of the Agreement of 7th May 2004. We have looked at the evidence before the Lower court and we hold the view that the three grounds of appeal can be dealt with together. We hold that there was no dispute on a number of facts in this case. There was no dispute that there was a sale Agreement of the 7th May 2004 between these two parties. There was also no dispute that as a result of this Agreement the Defendants delivered to the Plaintiffs in May 2004 four (4) consignments. There was no dispute that these four (4) consignments a per routine went through a process of being received, recorded, weighed, samples taken, and analyzed and tested and then graded in categories according to copper contents. This established that the Plaintiffs were in full control of the whole process of analyzing, taking sample and testing. The Plaintiffs want us to accept that there was substitution at the stage of analyzing and testing the samples. We have difficulties in accepting that proposition, as there was evidence from their own PW2 and PW3 that there was no conspiracy between the two parties and that the Defendants had no access to the Plaintiffs' laboratory employees before testing and analyzing the samples. Therefore the evidence on record does not support the Plaintiffs' assertion that there was fraud. In any case the standard of proof in any allegation of fraud is higher than one required in civil litigation see. Sithole vs. State Lotteries Board (3). The Plaintiffs have also argued that the Agreement was to sell/buy copper ore. They rightly based this argument on document No. 46 at page 75, which is JI 5 athe "Copper Ore Purchase Agreement." The Plaintiffs referred to Clause 3 of this Agreement which says: " The copper ore to be delivered under this Agreement shall be crushed with average copper content of 30% and above. The size of delivered copper ore shall be less than 25mm. Silicon content shall be below 13%." Their claim was that since the Defendants delivered copper concentrates instead of copper ore they were in breach of this Agreement. Subject to Section 14 (2) of Sale of Goods Act (1), the general rule, as to quality or fitness of goods sold, is governed by the Maxim of Caveat Emptor Section 14 of the Sale of Goods Act (1) provides that " Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:" (1) "Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purposes, provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose." The Defendants in response to this argument have argued that as per Clause 4 of the Agreement the Defendants could either supply copper concentrates or copper oxide ore. The Defendants referred to the evidence of J16 the Plaintiffs PW4 at page 46 where he had said in cross-examination that although they had not placed an order for copper concentrates, the Defendants were within the spirit of the contract if they delivered copper concentrates. We are persuaded by the argument of the Defendants that although the Agreement of 7th May 2004 stated categorically that it was a "Copper Ore Purchase Agreement" and although Clause 3 and the introductory part of the Agreement also emphasized that the goods to be sold were copper ore, nonetheless looking at the evidence of DW1 that this was not the first time during the duration of the contract that the Defendants delivered to the Plaintiffs copper concentrates and because PW2 at page 46 stated categorically that if the Defendants delivered copper concentrates they would not be in breach of this contract. We are satisfied that the Defendants were not in breach of this Agreement by delivering copper concentrates. Also although Section 13 of Sale of Goods Act (1) provides that" where there is a contract for sale of goods, by description, there is an implied condition that the goods shall correspond with the description"(1), and according to one English authority of Wieller Us. Schiiizzi, (4) " if your contract is to sell peas you cannot oblige the other party to buy beans," In this case before us the Plaintiffs had ample time and opportunity to examine and reject the goods delivered to them. Section 15(2) of the Sales of Goods (1) provides that: "(2) In the case of a contract by sample - (a) There is an implied condition that the bulk shall correspond with the sample in quality: (b) There is an implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample..." So we hold the view that if the J17 claim by the Plaintiffs is that the goods delivered to them did not correspond to the description of the goods in the Agreement of 7th May 2004 then the claim is ✓ not attainable at law. We hold this view because Section 4 of the Sale of goods Act defines acceptance as: "there is acceptance of goods where the buyer does an act in relation tothe goods which recognizes a pre-existing contract of sale." In this case before us the buyer "the Plaintiffs" received the goods recorded then, weighed them, mixed the contents, got sample, analyzed the samples, tested them .and even used some of the goods. In our view the Plaintiffs by the operation of Section 35 of the Sale of Goods Act (1) the Plaintiffs are deemed to have accepted the goods. We also hold the view that the Plaintiffs by using these goods delivered must be deemed to have accepted then as goods of merchantable quality. We therefore hold the view that the Plaintiffs perfected this sale Agreement. They cannot depart from this Agreement now. There are bound by it. In our conclusion we hold that it is irrelevant whether or not they used all the materials in the four consignments. We therefore find no merit in the appeal. We dismiss the appeal with costs. L P Chibesakunda SUPREME COURT JUDGE