Judgment No. SC 41/15 Civil Appeal No. SC 307/13

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1.     TONDERAYI    ABEL     MASANGO     (2)     WEBSTER     NYAMAYEDENGA     BEPURA     (3)     GODFREY     MEDA     (4)     TRUST     CHINYAMA     (5)     JEAN     CHIKUVANYANGA     (6)     DAVIDZO     ETHEL     SHIRIHURU

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1.     PETER     KENNETH     (2)     FARMERS     COMMODITY     STOCK     EXCHANGE     (PRIVATE)     LIMITED    

                                                                                          

 

 

SUPREME COURT OF ZIMBABWE

GWAUNZA JA, GOWORA JA & PATEL JA

HARARE, OCTOBER 27, 2014 & JULY 20, 2015

 

 

 

 

W.N. Nyakudenga, for the appellants

R.J. Gumbo, for the second respondent

 

 

                        GWAUNZA JA:       This is an appeal against the entire High Court judgment of MAFUSIRE J, which dismissed with costs the appellants’ claims against the respondents.  It was handed down on 12 August 2013. The appellants pray that the appeal succeeds and that the respondents be ordered to pay the costs of suit on a higher scale.

 

                        The facts of and background to the dispute are explicitly set out in the judgment of the court a quo, and are as follows:

In September 2010 some 11 farmers from the Glendale farming area of Zimbabwe sued, on separate summonses, a company called Farmers Commodity Stock Exchange (Private) Limited (“FCSE”)in the one case, and one Peter Kenneth (“Peter Kenneth”) jointly with that company in the other cases.  The claims were for payment of various sums of money.  The farmers claimed they had sold maize grain to Farmers Commodity Stock Exchange (Private) Limited (hereafter referred to as FCSE) through Peter Kenneth.  They alleged that Peter Kenneth was an employee or agent of FCSE.  The plaintiff in case no. 1, Tonderai Abel Masango (hereafter referred to as “the first plaintiff”), alleged that he had sold and delivered soya beans as well.

 

The background to the claims was common cause.  FCSE was in the business of buying maize from various parts of the country.  In the Glendale area they were buying the maize through Peter Kenneth.  Peter Kenneth was renting premises from the local authority.  He used those premises as a collection depot.  The bagged grain would be collected from the different farms by trucks contracted by FCSA or Peter Kenneth.  At Peter Kenneth’s depot were large containers belonging to FCSE.  The grain would be stored in those containers before dispatch to the various customers in and around Harare.  Peter Kenneth dealt directly with the farmers.  He sourced the grain and paid the farmers.  His terms of payment were said to be cash within 7 days of delivery.  FCSE was supplying the cash.  Peter Kenneth moved around with a Mazda van emblazoned with FCSE’s name and logo.

 

Problems soon arose.  Peter Kenneth did not pay for all the grain delivered.  The famers complained.  Peter Kenneth became evasive.  The famers reported the matter to the police.  Initially more than 50 farmers were involved.  Both Peter Kenneth and certain representatives of FCSE were arrested.  Peter Kenneth took rat poison in a suicide attempt.  He was rushed to hospital just on time.  He survived.  FCSE’s representatives Mark Oliver Hutchings (Mark Hutchings) and Jonathan Paul Kennedy (J.P. Kennedy) were detained in custody for several weeks before being released on bail. They were eventually acquitted.

 

The farmers were disgruntled by the outcome of the criminal proceedings.  11 of them decided to bring civil proceedings before this Court.  But of the initial 11 only 6 actually turned up at the trial. The other 5 were in default and their claims were dismissed with costs.

 

Peter Kenneth was a co-defendant in all but one of the 11 cases. However he neither filed any papers nor appeared at the trial.

 

The farmers’ cases before this court were all based on the allegation that Peter Kenneth was an “employee” of FCSE whose duty had been to procure grain on behalf of that company.  They all claimed that they had contracted with FCSE through Peter Kenneth; that they had delivered their grains to FCSE through him; that they had been paid for part of the deliveries by FCSE through Peter Kenneth and that they looked to FCSE for the remainder of their money.

 

On the other hand FCSE denied that Peter Kenneth had been their employee at the time or any other, but that he was someone the company had contracted as an independent agent to procure maize for it in the Glendale – Mvurwi area.  He had been on a commission.

 

                       

The court a quo determined correctly that the crisp issue before it was whether the first respondent, Peter Kenneth, was an employee and/or agent of Farmers Commodity Stock Exchange, or whether he was an independent contractor.  The court a quo determined the matter against the appellants and they have now appealed to this Court on essentially two grounds:

1.         that the court a quo erred by holding that the first respondent was “plainly” an independent contractor, rather than an agent of the second respondent, and

2.         that the court a quo misdirected itself in failing to find that the appellants had established their case on a balance of probabilities in circumstances where the respondents had failed to prove a defence to their claims.

                        It appears to me that the essential facts of the matter are not in dispute.  What is in dispute is what those facts established as being the true nature of the relationship between the first respondent and the second respondent.  The parties, as already indicated took opposite positions on this matter.  What therefore falls to be determined in casu is whether or not in adopting the position of the second respondent – thereby rejecting the appellants’ – the court a quo erred or misdirected itself.

 

                        The court a quo commendably and extensively considered the law and authorities governing what at law constitutes an employer/employee relationship on the one hand and a principal\independent contractor relationship on the other. The court started from the premise that an employee, agent or independent contractor, all render services to another for a consideration.  It then properly considered what the relevant authorities have laid down as elements that enable a distinction of one from the other to be made.

 

                        Of the numerous authorities[1] cited by the court a quo in order to highlight and underline the distinction between an employee and an independent contractor, I find the following dictum[2] to be apposite as well as particularly instructive;

“Bowstead on Agency … is equally clear: ‘The difference,’ he says, ‘between an agent and an independent contractor is, that an agent is bound to act in the matter of the agency subject to the directions and control of the principal, whereas an independent contractor merely undertakes to perform certain specified work, or produce a certain specified result, the manner and means of performance of production being left to his discretion, except as far as they are specified by the contract.’  This is a distinction which in our law cannot be ignored for the contract between master and servant is one of letting and hiring of services (locatio conductio operarum) whereas the contract between the principal and a contractor is the letting and hiring of some definite piece of work (locatio conductio operis).  In the former case the relation between the two contracting parties is much more intimate than in the latter, the servant becoming subordinate to the master, whereas in the latter case the contractor remains on a footing of equality with the employer.  The crucial difference between these two cases lies in the fact that where a master engages a servant to work for him the master is entitled under the contract to supervise and control the work of the servant.  He is entitled at any time to order the servant to desist, and if the matter is sufficiently serious may even dismiss him for disobedience.” 

                       

 

                        A useful definition of “control” according to Joubes JA in the Smit’s case (above) is given as follows:

“… it includes inter alia the right of an employer to decide what work is to be done by the employee, the manner in which it is to be done by him, the means to be employed by him in doing it, the time when and the place where it is to be done by him … Supervision implies the right of the employer to inspect and direct the work being done by the employee[3]”.

 

The authorities cited above also re-state the principle that a principal is liable for the delict of his agent where such agent is a servant but not where he is a contractor, sub- contractor or their servant.

                       

 

The appellants argue that all the elements of an employee/employer relationship existed between the first and the second respondent.  The court a quo found this not to be the case, and opined as follows;

“I find that there is no evidence that Peter Kenneth was an employee of FCSE.  Even the best evidence of some of the plaintiffs such as first plaintiff’s claim that PJ Kennedy had told him that Peter Kenneth was their employee; or that of the fourth plaintiff that PJ Kennedy had told him that Peter Kenneth was “their man”; or that of several other plaintiffs that Peter Kenneth drove a motor vehicle emblazoned with FCSE’s name and logo; all falls woefully short of what is required to establish a master and servant relationship.  What the parties call each other in such a contractual relationship, or what they perceive their relationship to be is not decisive and may actually be irrelevant.  The court looks at the totality of the evidence and all the circumstances to determine the true nature of the relationship.

 

The point is, even accepting the first plaintiff’s claim in casu that PJ Kennedy had told him that Peter Kenneth was “their employee”, this takes the plaintiffs’ cases no further.  Apart from the fact that it is highly unlikely that PJ Kennedy would have been using “employee” in its more technical sense, the nature of the relationship between Peter Kenneth and FCSE, as disclosed by the totality of the evidence, was completely nowhere near that of master and servant.  Peter Kenneth was plainly an independent contractor.”

 

 

                        I find the above analysis of the evidence before the court a quo and the conclusions the judges drew from it to be eminently sound.

 

                        To start with, the appellants, not being privy to the contract between the first and second respondent, had little with which to challenge the assertion by the second respondent that it exercised little or no control over how the first respondent was to carry out his obligation under the contract.  Nothing that the appellants said in relation to what they perceived to be indicia of a servant rendering services for his employer could in my view, be taken as disproving the second respondent’s evidence to the following effect;

1. that beyond being given money by the second respondent to buy maize, the first respondent was entirely his own agent in deciding where to go in order to source the maize in question, who specifically to approach for this purpose, and how, when exactly he was to do so; and on;
2. that in all this, the second respondent neither “inspected nor directed” the work done by the respondent beyond his delivery of the required maize; and
3. that the second respondent did not get to know of what quantities of grain were sourced from which farmer and on what terms, until Peter Kenneth’s arrest.

 

The appellants aver that the payment of a commission to the first respondent by the second respondent was further evidence of an employee/employer relationship. The court a quo was not swayed by this averment and, relying on a number of authorities, the learned judge stated;

“In the cases of Denniss Edwards and Co. v Lloyd 1919 TPD 29 and the judgement of the lower court in Smit v Workman’s Compensation 1978 (1) SA 339 (c)(at page 345 G-H) it was noted that the provision in a contract, of remuneration by commission, although not by itself decisive, is a strong indication against a relationship of master and servant” . 

 

 

 

When the issue of the payment to Peter Kenneth of a commission is considered together with the evidence pointing to the independent manner by which he discharged his obligations, I find that the decision of the court a quo on this point cannot be assailed.

 

 

The facts in the Colonial Mutual Life Assurance Society case (above) are almost on all fours with the case at hand. In that case, a life insurance agency used a car sold to him by the life assurance company to perform duties related entirely to the business of the company. He was paid a commission for the work. In holding that the agent in question was an independent contractor rather than an employee, the learned judge remarked as follows;

“The agreement about the motor vehicle does not order Britain to use the car. He may use any means he likes and in addition he may use the motor car in any way which he chooses but only for the business of the Society. This cannot affect the nature of his position or relationship between him and the Society.”

 

 

And so it is in casu. The appellants did not allege that the first respondent was bound by contract to use only the vehicle in question to transport the maize that he collected on behalf of the second respondent. There is also no suggestion by the appellants that, without the vehicle in question or the storage containers, the first respondent would not have been able to perform his obligations under the contract.  He could have used other means to transport the maize and still been able to discharge his obligations under the contract.

 

In relation to the use of a vehicle emblazoned with the second respondent’s logo, the court in my view correctly found that this did not carry the appellant’s case any further. They could not disprove the second respondent’s assertion that the vehicle in question was under purchase by the first respondent in terms of a credit scheme agreed between the respondents. The court a quo found the explanation of the second respondent to be credible, that certain measures were taken merely for convenience and to facilitate effective performance by the first respondent, of his obligations under the contract.  These included the loan agreement in respect of, and the allocation of, the vehicle to the first respondent, and the placement of containers within the first respondent’s premises, for the storage of the maize. Under these circumstances, not much significance can be placed on the fact that the vehicle in question bore the logo of the second respondent.

 

I am accordingly not persuaded that the existence of and use by him of the disputed vehicle should be taken as conclusive evidence of the employee/employer relationship alleged.

There were also other indications relied on by the second respondent to dispute the existence of an employee/employer relationship between it and the first respondent. One was the fact that all invoices tendered in evidence by the appellants and issued in relation to the receipt of and partial payments made for, the maize received by the first respondent, reflected the name of his own company, not the second respondent’s.  The other evidence tendered by second respondent which the appellants could not in truth dispute was that it had instructed the first respondent to procure maize from unspecified farmers at a price of $150 per tonne.  The second respondent would then sell it to its customers at a price of $290, an amount which fell short of the $300 per tonne that the first respondent is said to have promised to pay the farmers for the maize collected by him.  The fact that it would not have made economic sense for the second respondent to buy maize at a cost that exceeded what they would sell the maize for, seriously undermined the integrity of the first respondent in his dealings with and utterances to the farmers. More importantly, it lent credence to the second respondent’s averments that it exercised neither control nor supervision over the first respondent’s activities, beyond giving him money to buy maize at $150 per tonne.  It also belies the first respondent’s assertion that the second respondent was his “boss”.  As the court a quo correctly observed, it was the first respondent’s conduct, rather than what he said to the appellants, that defined his relationship with the second respondent.

 

The appellants made much of the definition of “employee” that is contained in the s 2 of Labour Act [Chapter 28:01], which reads as follows;

“Employee” means any person who performs work or services for another person for remuneration or reward on such terms and conditions as agreed upon by the parties or as provided for in this Act, and includes a person performing work or services for another person-

1. in circumstances where, even if the person performing the work or services supplies his own tools or works under flexible conditions of service, the hirer provides the substantial investment in or assumes the substantial risk of the undertaking; or
2. in any other circumstances that more closely resemble the relationship between an employee and employer than that between an independent contractor and hirer of services.”

 

 

I agree with the observation of the judge a quo that this definition was unhelpful in determining whether the first respondent was, at the relevant time, an employee of the second respondent, or an independent contractor.  In the light of all that has been stated regarding the first respondent’s conduct in his dealing with the appellants, there can in my view, be little doubt that the first respondent rendered services for the second respondent in circumstances that deviated from those that would “more closely resemble the relationship between an employee and employer”. The circumstances clearly established a relationship between an independent contractor and hirer of services. I find that they disclose what, in the Colonial Mutual Life Assurance case cited above, was described as a locatio conductio operis.

 

The first respondent, in my view, also fell squarely within this definition of an independent contractor, that is to be found at p 540 of De Villies MacInthosh’s “Law of Agency in South Africa”

“One who is his own master free of his employer’s control and representing no one else, when performing the obligations he was called to perform under the contract which he has entered into with his employer, such obligations not being those of contracting legal relations with third parties on behalf of his employees”.

 

 

This statement is echoed in the following words by Jonathan M Silke in his book The Law of Agency in South Africa, 3rd ed. at p 26;

“An accurate test for distinguishing the agent from the independent contractor is that the agent has authority to bind his principal in contract whereas the independent contractor has no such power.”

 

It is not in dispute that there were no direct dealings between the second respondent and the appellants. As already stated, economic considerations would have ruled out the notion that the second respondent could have instructed the first respondent to buy the appellant’s maize at the price of $300 per tonne.  Clearly, the first respondent made misrepresentations to them in this respect. Under such circumstances, I am persuaded there can be no basis for holding the second respondent liable for such conduct.

 

It is a matter of regret that the appellants lost huge amounts of money earned through sweat and hard work. Quite clearly, the circumstances under which it happened bear all the hallmarks of a fraudster’s scam. The second respondent appears to have been a pawn in a reprehensible game in which its money was used to lure the trusting and seemingly naïve farmers into the first respondent’s trap. The second respondent on its evidence was also a victim in another sense. Only after it made detailed reconciliations did it transpire that there was a huge discrepancy between the money they had given to Peter Kenneth and the quantities of grain that he delivered to them. It seems unlikely that both the appellants and the second respondent will succeed in any effort to recover their losses.

 

Whilst all one can feel for the appellants is some degree of sympathy, I find in the final analysis that the appeal has no merit.

 

 

It is accordingly ordered as follows:

 

The appeal be and is hereby dismissed with costs

 

 

                        GOWORA JA:                      I agree

 

 

                        PATEL JA:                           I agree

 

 

T.K. Hove & Partners, appellants’ legal practitioners

 

Messrs Gumbo & Associates, second respondent’s legal practitioners