Vanledge Investment (Private) Limited and 2 Others v Chemical Procument Services Africa (Private) Limited (805 of 2022) [2022] ZWHHC 805 (16 November 2022)

1 HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 VANLEDGE INVESTMENT (PRIVATE) LIMITED and BAONING GUO and MUHAMMAD ISHFAQ and TAYMOOR TASADAQ versus CHEMICAL PROCUMENT SERVICES AFRICA (PRIVATE) LIMITED HIGH COURT OF ZIMBABWE TAGU & MUCHAWA JJ HARARE, 21 October 2021 & 16 November 2022 Consolidated Civil Appeals R Nyapadi, for appellants B C Chidzamba with E Jera, for respondent TAGU J: The appellants are appealing against the whole judgment of the Magistrate Court handed on 29 January 2018 at Harare. The respondent, on the other hand filed its Cross appeal to the appeal filed by the appellants against part of the judgment of the Honourable Magistrate sitting at Harare on 29 January 2018. Hence the two appeals have been consolidated because they involve the same parties, relate to the same judgment of the court a quo and raise the same issues. The Respondent instituted proceedings and obtained judgment in the Magistrates court against Vanledge Investments (Private) Limited, Baoning Guo, Muhammad Ishfaq and Taymoor Tasadaq. The Court order against the appellants reads as follows- “IT IS ORDERED THAT: 1. Defendants be and are hereby, jointly and severally ordered to pay US$130 629.58 being the amount agreed as balance in terms of the written contract. HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 2. The first defendant be and is hereby ordered to collect and pay for the products valued at US$27 249.00. 3. The first defendant be and is hereby ordered to pay US$14 730.21 for products alleged to have failed to meet specifications. 4. The defendant to bear the costs of suit at the ordinary scale.” All the parties were dissatisfied by the order made above. The appellants’ grounds of appeal are: 1. The learned trial Magistrate erred and misdirected himself on a point of law and fact when he found the agreement between the parties to have been cancelled on 15 November, 2016, and yet sustained a cause of action based on that same agreement. 2. The court a quo erred and misdirected itself when it ordered specific performance without an alternative of damages by ordering appellants to collect and pay for stock valued at USD 27 249.00. 3. The court a quo erred on point of law when it ordered appellants to collect stock valued at USD 27 249.00, which order is an interdict in nature which should have been brought by way of application proceedings and not action proceedings in the court a quo. The respondent’s sole ground of appeal is that “Having found that the respondent could sue the appellants on the basis of the agreement, the court erred in not ordering the appellants to pay costs on a higher scale, collection commission and interest on the overdue amounts in accordance with the provisions of the agreement.” Before dealing with each ground of appeal, it is necessary to give a brief history of the dispute. It is common cause that the respondent’s cause of action against the appellants emanated from the Credit Facilities Agreement of 8 October 2015 and the subsequent Deed of surety executed by the second to fourth appellants in favour of that same Credit Facility Agreement. Pursuant to the Credit Facility Agreement, Vanledge Investments (Private) Limited made several orders of different flavours from the Respondent in the period ending April 2017. In terms of the Credit Facility Agreement, Vanledge Investments (Private) Limited was supposed to pay its account within fourteen (14) days from the date of invoice. In breach of the Agreement, Vanledge Investments (Private) Limited failed, refused or neglected to pay for the product it took on time or at all. The amount now due and outstanding in respect of the credit purchases is US$202 150.55. Further, the Vanledge failed, refused or neglected to take delivery of stock worth US$27 249.00 which the Respondent has been storing on its behalf for several months. In terms of clause 21 of the Credit Facility Agreement, Vanledge consented to the jurisdiction of the Magistrates Court notwithstanding the fact that the amount claimed exceeded the monetary jurisdiction of the Honourable court. In terms of clause 20 (c) of the Credit Facility Agreement Vanledge (Private) HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 Limited undertook to pay all legal expenses incurred by the respondent in recovering the Debt on an attorney -client scale plus collection commission chargeable at law. Following the breach the Credit Facility Agreement was cancelled on the 15 November 2016. However, despite it having been cancelled the parties continued to trade as before from the 15 November 2016. The issues for determination in this appeal are: 1. Whether or not the learned trial Magistrate erred and misdirected himself on a point of law when he found the agreement between the parties to have been cancelled on November 15, 2016, yet sustained a cause of action based on that same agreement? 2. Whether or not the court a quo erred and misdirected itself when it ordered specific performance without an alternative of damages by ordering Vanledge Investments (Pvt) Ltd (herein referred to as the first appellant) to collect and pay for the stock valued at USD 27 249.00? 3. Whether or not the Court a quo erred on a point of law when it ordered Vanledge Investments (Pvt) Ltd to collect stock valued at US$ 27 249.00, which order is an interdict in nature and therefore should have been brought by way of application proceedings and not a summons action? 4. Whether or not, the Honourable Court having found the agreement to be cancelled it erred on a point of law when it granted a relief which exceeded its monetary jurisdiction? 5. Whether or not, having found that the respondent could sue the appellants on the basis of the agreement, the court erred in not ordering the appellants to pay costs on a higher scale, collection commission and interest on the overdue amounts in accordance with the provisions of the agreement? WHETHER OR NOT THE TRIAL MAGISTRATE ERRED BY RELYING ON A CANCELLED AGREEMENT It is common cause that the respondent’s cause of action against the appellants emanated from the Credit Facility Agreement of 8 October 2015 and the subsequent Deed of surety executed by the second to the fourth appellants in favour of the same Credit Facility Agreement. It is common cause that the Credit Facility Agreement was cancelled by the letter filed of record dated 15th November 2016. The appellants averred that by sustaining a cause of action which was based on the same agreement found to have been cancelled is irregular. They said upon cancellation of the Agreement between the parties, the rights of the parties in terms of that Agreement fell away and so did the right for Respondent to sue based on it. Reference was made to the cases of HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 Honeycomb Hill (PVT) Ltd v Herentals College (Pvt) Ltd HC 366/14 where the Honourable Court had this to say: “The applicant in the summons for eviction, holding over damages and costs did not rely on the lease agreement which existed between the parties. He chose to found his cause of action on a non- existent sale agreement. This means the respondent has a bona fide defence against the claim since there is no valid sale agreement between the parties…… The plaintiff is bound by his declaration and since he has relied on a non-existent agreement for his cause of action, he cannot succeed in getting summary judgment because defendant has a bona fide defence on that issue.” We were also referred to MCfoy v United Africa Company Limited [1961] 3 ALL ER, 1169 where it was said: “You cannot put something on nothing and expect it stays there. It will collapse.” The respondent’s view is that cancellation of a contract does not bar a party from enforcing obligations arising from the contract accruing before cancellation, neither does the dispute resolution mechanism in agreement fall away with the cancellation of the same. As stated elsewhere above, the parties entered into a credit facility agreement dated 8 October 2015. Pursuant to the credit facility agreement, on 5 July 2016, Vanledge placed orders for various quantities of flavours for the supply every month from August 2016 t0 January 2017. Pursuant to this order placed on 5 July 2016, in terms of the credit facility agreement, the respondent stocked the flavours as required by Vanledge for the period in question. The flavours ordered by Vanledge were specific to Vanledge’s requirements. These could only be supplied to Vanledge. They cannot be sold to any other person. These facts establish that Vanledge incurred obligations in terms of the agreement entered into between the parties before it was cancelled. It is for these obligations that Vanledge and the appellants herein were required to settle the debts due. We were further referred to the case of Firstel Cellular (Private) Limited v Netone Cellular (Private) Limited SC 1/2015 where Patel JA (as he then was) stated that; “It is trite that courts will be astute not to exonerate a party from performing the obligations under a contract that it has voluntarily entered into at arms’ length.” HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 In the present case there is no dispute that there was an agreement and obligations were incurred in terms of that agreement before it was cancelled. The Agreement was cancelled and not set aside on 15 November 2015. It is on this basis that the Magistrate stated that: “This court do not know a law which provides that if a contract is effectively cancelled by (sic) either party in terms of the contract the prior obligations of either party die (sic) away with the effective cancellation.” It is critical to note that the appellants have not been able to provide any authority to substantiate the argument that they seek to raise before this honourable court that once the agreement was cancelled parties lose their rights arising out of a cancelled agreement. Reference was made of the Case of Honeycomp Hill (Private) Limited v Herentals College (Private) Limited HH 15/15. In my view, this is not authority to the proposition that the appellants seek to advance before this court. The facts in Honeycomp supra, are entirely different from the facts in this case. The dispute in Honeycomp supra, was whether there was a sale or a lease agreement. The court having found that there was a sale agreement, ruled that Honeycomp could not have based its claim on the non- existent agreement. I am persuaded by the counsel for the respondent. Looking at it from this angle, where there has been a lease agreement with certain conditions to be fulfilled, including payment of rentals, if the lessee fails to pay rent on time or at all, and falls into rental arrears, there is nothing to stop the lessor from cancelling the lease agreement and proceed to claim arrear rentals and or holding over damages. The mere fact that the lease agreement has been cancelled does not automatically mean the rights of the parties up to the date of cancellation have fallen away. This is the same scenario in this case. The court a quo therefore did not err when it relied on the cancelled agreement to enforce outstanding obligations. In Malunga and Another v Wede 2016 (1) ZLR (H) at 399E, the court stated in respect of a cancelled agreement and an agreement that is null and void that: “….the consequences of cancellation of an agreement are different from consequences of nullification of an agreement. For the avoidance of doubt, a cancelled agreement retains the rights accruing up to the date of cancellation whereas an agreement that is null and void does not give rise to any rights at all and the court cannot enforce any in respect thereto.” A cancelled agreement therefore retains the rights accruing up to the date of cancellation. They do not fall away as suggested by the appellants. HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 DID THE COURT ERR BY ORDERING SPECIFIC PERFOMANCE WITHOUT AN ALTERNATIVE OF DAMAGES? The respondent sought an order for specific performance against the first appellant, that first appellant collects and pays for stock valued at USD 27 249.00 without an alternative of payment of damages. By granting this order the Court a quo acted outside its jurisdiction. Reference was made to Section 14 (1) (d) of the Magistrates Court Act [Chapter 7.10] which provides that: “Section 14 When court has no jurisdiction (1) No court shall have jurisdiction in or cognizance of any action or suit wherein- (a) ……………………………….. (b) ……………………………….. (c) ……………………………….. (d) the specific performance of an act is sought without an alternative of payment of damages.” The argument by the appellants is that the court clothed itself with powers it does not have and granted specific performance without an alternative for damages. They argued further that the moment the court realized that the respondent was seeking specific performance without an alternative for damages, the court should not have entertained the matter. The respondent maintained that the court a quo had jurisdiction to entertain the claim for specific performance. Firstly, in this case there was consent to the jurisdiction of the court. The order sought is contractual. Section 11 (1) (c) of the Magistrates Court Act [Chapter 7.10] states that the Magistrates Court has jurisdiction in cases where both parties agree by a memorandum signed by them or their respective legal practitioners that the court named in such memorandum shall have power to try such action. Besides section 14 (d) relied upon has a proviso allowing the court jurisdiction where the issue involves delivery of both movable and immovable property whose value does not exceed its monetary jurisdiction. The answer to the question whether the court a quo did not have jurisdiction or not is answered by a look at Clause 21 of the Credit Facility Agreement which reads as follows: “The Customer agrees and consents that the supplier shall be entitled at its option to institute any legal proceedings which might arise out of or in connection with this contract in the Magistrate’s HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 Court in Zimbabwe having jurisdiction in respect to the Customer’s person notwithstanding that the claim or value of the matter in dispute might exceed the jurisdiction of such Magistrates Court.” Clearly, the parties agreed/consented in the memorandum to the jurisdiction of the Magistrate Court. This ground of appeal lacks merit. DID THE COURT ERR BY ORDERING FIRST RESPONDENT TO COLLECT GOODS The contention by the appellants is that the court should not have proceeded by way of application but by action procedure since the order granted was an interdict and there was no option to pay damages. The respondent disputed that the court granted an interdict. It said the court made an order for specific performance. It argued that the provisions of the Rules requiring a party to approach the court by way of an application do not have a peremptory provision requiring a party to approach the court by way of an application where an interdict is sought. In saying the court a quo did not err by granting specific performance without an order for damages, the respondent referred the court to the case of Zivanomoyo v Dingani HMA 2-19 where the court held that: “a plaintiff has the right to choose whether to hold a defendant to his contract and claim performance by him of what he bound himself to do, or claim damages for the breach …the defendant has no such right of election.” I agree with the respondent’s submissions and am not persuaded by the appellants’ argument. THE COURT HAVING FOUND THE AGREEMENT TO BE CANCELLED DIT IT ERR WHEN IT GRANTED RELIEF EXCEEDING ITS MONETARY JURISDICTION. I outlined above where the court a quo drew its jurisdiction from. There is no more to add save to say the parties in their memorandum consented to the Magistrate Court’s jurisdiction as provided for in Clause 21. The Court a quo therefore did not err by granting relief exceeding its normal jurisdiction. The parties themselves clothed the Court a quo with the necessary jurisdiction when they chose the Magistrates Court with power to deal with any dispute arising out of breach of agreement. DID COURT A QUO ERR BY NOT GRANTING RELIEF IN ACCORDANCE WITGHTHE AGREEMENT BETWEEN THE PARTIES? HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 It was submitted in respect of the cross appeal that once the Magistrate had found that it was competent for the respondent to sue on the basis of the credit facilities agreement, it ought to have granted the relief sought in accordance with the agreement between the parties. The appellants’ position is that once the agreement was cancelled no rights accrue from the cancelled agreement. In short they say the court a quo did not err by refusing to order them to pay costs on a higher scale, collection commission and interest on the overdue amounts in accordance with the provisions of the agreement. It is trite law that once a party has issued summons, a party may not be entitled to claim collection commission. However, there are exceptions to the Rule. Where parties agreed in a contact that in breach of the terms of the contract, another party may sue and in accordance with their agreement, claim both costs, collection commission and interest. In the present case Clause 20 (c) of the Credit Facilities Agreement Vanledge undertook to pay all legal expenses incurred by the Respondent in recovering the Debt on an attorney –client scale plus collection commission chargeable at law. For avoidance of doubt Clause 20 (c) reads: “I/WE undertake to pay interest on overdue accounts as more fully set out above together with Attorney client legal costs, and commission which I/WE will be liable for in law should it be necessary for the Supplier to engage Attorney to collect monies from me/us.” On p 8 of the record the court a quo made a clear analysis of the situation. It said: “The fact that the credit facility was effectively cancelled is neither here nor there for the parties agreed that indeed there was a credit facility contract which bound the parties prior to its cancellation for which the defendants owed the plaintiff some monies. In my view of the above it is immaterial that the credit facility between the parties was effectively cancelled by the plaintiff in terms of the contract. The plaintiff is legally entitled to base its claim in those prior obligations by the defendants.” Having made the above pronouncements the court a quo went on to contradict itself on the issue of payment of collection commission and the rate at which costs should be put at. The court a quo on pages 9 to 10 of the record had this to say: “In the present case the initial contract was effectively cancelled despite the fact that the parties continued to deal with each other on the same terms of supply. The fact that the parties agreed to deal with each other on the terms or less similar to those contained in the original contract do not translate HH 805-22 CIV/A/350/18 CIV /A/ 206/19 MC 14167/17 that the original called contract was re-written. That contract as it was reduced into writing was effectively cancelled and its terms and conditions died with it. So for all intent and purposes the parties had two separate contacting phases with the initial one having been reduced into writing and the second one not written. It is not doubted that a legal practitioner cannot collect both costs on a higher scale and collection after issuance of summons unless the other party agreed to it in a contract. In the circumstances it is clear that the defendants in the second contract agreed to deal with the plaintiff on the issue of products to be supplied but it is not clear that they agreed to the clause that has to do with them bearing costs on higher scale together with collection commission. That is the problem posed with unwritten contracts. In the above premises this court cannot judiciously order the defendants to bear costs on a higher scale together with collection commission.” With the greatest of respect, once the court found that the respondent could sue the appellants on the basis of the cancelled agreement, the court erred in not ordering the appellants to pay cost on a higher scale, collection commission and interest on the overdue amounts in accordance with the provisions of Clause 20 (c) of the Credit Facility Agreement. In the result I will dismiss the appellants’ appeal in its entirety. The respondent’s cross appeal will succeed. IT IS ORDERED THAT 1. The appellants’ appeal be and is hereby dismissed with costs. 2. The respondent’s cross appeal be and is hereby allowed with costs. 3. The judgment of the court a quo be and is hereby upheld. Further to that the following is ordered: The Court a quo’s 4th order be and is hereby set aside and replaced by “The defendants shall pay costs of suit on an attorney and client scale, collection commission and interest as provided for in the agreement between the parties.” Muda & Nyapadi, appellants’ legal practitioners Moyo and Jera, respondent’s legal practitioners