REPORTABLE (75)

Judgment No S.C.85\2002

Civil Appeal No 176\99

CLEVER MABHAUDHI MUTOMBA t/a MUTOMBA SUPERMARKET v R AND C INVESTMENTS (PRIVATE) LIMITED

SUPREME COURT OF ZIMBABWE

SANDURA JA, CHEDA JA & GWAUNZA AJA

HARARE JULY 11 & OCTOBER 21, 2002

H. Zhou, for the appellant

G. Mandizha, for the respondent

GWAUNZA AJA: This is an appeal against the judgment of the High Court, in which the appellant was ordered to pay to the respondent the sum of $105 594,39, together with interest at the prescribed rate from 22 January 1998 to the date of payment.

The background to the matter is common cause. The respondent leased certain business premises in Chitungwiza from one Chigovanyika. The lease terminated at the end of November 1997, following the appellant’s failure to generate enough business to make the enterprise viable. At the time of termination of the lease agreement, the respondent, in fact, owed the landlord certain rent arrears.

Upon the termination of the lease the appellant concluded an agreement with Chigovanyika, in terms of which it was agreed that he would take over the premises from the respondent as the new lessee. When the respondent vacated the premises in question, certain of its merchandise was left behind. A stock-take of this merchandise was conducted by representatives of the parties to determine the quantity and value of the stock. An agreed retail value of $105 594,39 was put on the merchandise. The merchandise was not removed from the premises. The appellant started trading in similar business, i.e. a supermarket, a day or so later. On the 22^nd of January 1998, the director of the respondent, Mr Rushambwa, (“Rushambwa”) addressed a letter to the appellant, demanding the value of the stock that had been left on the premises, on the ground that the appellant had “taken over” such stock. Having received no response to this letter, nor payment of the amount demanded, the respondent issued summons against the appellant for that amount.

In the particulars of claim, it is asserted as follows in paragraph 6:-

“By virtue of agreeing to conduct the taking of stock of plaintiff’s merchandise defendant by implication agreed to take over the goods and reimburse plaintiff their value in the sum of $105 594,39.”

The respondent maintained this argument throughout the proceedings in the court a quo and in this Court. Rushambwa asserted, in addition, that the appellant had neither returned the merchandise to him, nor challenged his letter of demand for the amount in question. This, Rushambwa contended, was further evidence of the implied agreement of sale between the parties.

The appellant denied he ever intended to buy the merchandise in question. His response to the question why he had participated, through his representative, in the stocktaking and evaluation of the merchandise in question, is given as follows at page 26 of the record:-

“… we wanted to count the goods so that we know when they come in and they say we want four pots, we know there were four pots, we want so many items, we know those were the items and it was the time when there was looting and all. If those things had been looted we would know what quantities were there for the previous tenant. So our stock-take was for inventory purposes only as far as we were concerned.”

He denied that the representatives had in effect evaluated the goods, saying all they had done was note down the retail prices as marked on the goods, and add them up.

The appellant went on to say that after the exercise of stocktaking, the merchandise that could be so packed, was packed in boxes while those items that could not be so packed were left as they were. He added, however, that all the merchandise had been stored in the mezzanine floor of the building. He asserted the merchandise had stayed there during the entire period of his tenancy (some thirteen or so months) and had thereafter been removed by the landlord, i.e. Chigovanyika, and taken to his home. He did not feel he had any obligation to “return” the goods to the respondent since he had told the landlord that he did not want them.

It is not in dispute that about two months after the appellant commenced business a meeting at which the fate of the goods was to be discussed had been called between the appellant, Rushambwa and the landlord, but had failed to take place due to the appellant’s late arrival at the venue. The appellant denied personally seeing the letter of demand from the respondent’s director, Rushambwa, but asserted it had been received by his manager and taken to the landlord. The reason for the manager having taken that action was because, the appellant asserted, he himself had hitherto dealt only with the landlord over the respondent’s goods.

It is significant that the landlord, Chigovanyika, was not called by either party to give evidence. It is, however, not in dispute that the appellant and Rushambwa had never met nor spoken directly with each other before the day of the pre-trial conference. It was on that day that they saw each other for the first time. Each had dealt separately with the landlord over issues concerning the other. Therefore, neither could challenge the other’s evidence as to what had been said or agreed between the other party and the landlord concerning the merchandise in question.

That being the case, and in the absence of other evidence to contradict it, the court must accept that the respondent, having fallen into arrears in his rentals, did, through Rushambwa, agree with the landlord that upon its vacation of the premises, whoever took over the premises would take the remaining stock, i.e. buy it, sell it and then remit the proceeds to either the respondent or the landlord. By the same token, the court must accept the evidence of the appellant that he told the landlord, whom he believed (not unreasonably given the arrears owed to him by the respondent) had a landlord’s lien over the merchandise to take away the stock because he did not need it for himself. Once the court has accepted this uncontroverted evidence, it must accept the appellant’s evidence that the goods in question were never displayed by him on the shelves, had therefore been stored on the mezzanine floor of the building and had ultimately been removed by the landlord.

What this evidence establishes is that Rushambwa, having assumed his offer that the new tenant should buy the left over goods had been conveyed to the appellant by the landlord, sent his representatives to undertake stocktaking of the goods. He assumed the participation of the appellant’s representative in this exercise constituted an acceptance of his offer. The appellant who, however, was not, even by Rushambwa’s admission, privy to the agreement between Rushambwa and the landlord, nevertheless sent his representative to do a stocktaking of the merchandise together with the respondent’s representatives.

According to their evidence, each party believed there was a different purpose to the stocktaking. As already indicated the two had never before this exercise, met to discuss this possible relationship between them. In the absence of information to the contrary, the respondent’s assumption that the stocktaking, done together with the appellant’s representatives, was an indication of the appellant’s willingness to buy stock, is clearly understandable. He was not to know that his agreement with the landlord had not been conveyed to, nor accepted, by the appellant. At the same time, I find reasonable the appellant’s explanation for what he thought was the purpose of the stocktaking. There is nothing in the evidence before the court to suggest that before the stocktaking, he had been informed, much less agreed, that he was to “take over” the merchandise left over by the respondent for a fee. As long as it was his understanding that the goods were not to be removed the same day the respondent vacated the premises and that his rejection of the offer to buy the stock had been conveyed to the respondent the appellant’s explanation for why he sent his representative to participate in the stocktaking is, in my view, both credible and reasonable. It should be noted that the learned judge a quo made no adverse comment concerning the credibility of both Rushambwa and the appellant as witnesses.

The learned judge in the court a quo found, in essence, that the appellant had accepted the offer to buy the respondent’s stock leading to the establishment of a tacit contract between the parties. In reaching this conclusion, the learned judge drew guidance from the following passage from Christie’s “The Law of Contract in South Africa”:-

“In order to establish a tacit contract, it is necessary to prove, by the preponderance of probabilities, conduct and circumstances which are so unequivocal that the parties must have been satisfied beyond reasonable doubt that they were in agreement. If the court is satisfied on the preponderance of probabilities that the parties reached agreement in that manner it may find the tacit contract established."

See also Landmark Real Estate (Pty) Ltd v Brand 1992 (3) SA 983.

Citing the same authority the learned trial judge noted that the inquiry involves three stages. The first is to decide on a balance of probabilities, what facts have been established. The second stage is to decide how the proved facts, that is, the conduct of each party and surrounding circumstances must have been interpreted by the other. The third, and final stage, is to decide also on the preponderance of probabilities, what conclusion consistent with those facts is most likely to be correct.

Applying this test, the learned trial judge considered the facts as presented to the court, and was satisfied that the facts pointed “unmistakably” to the fact that there must have been an arrangement that the appellant would purchase the stock. The main factor considered by the learned judge was the appellant’s participation in the stocktaking in question.

I have already explained why I do not find to be unreasonable the appellant’s understanding of the purpose of the stock-take. It appears to me that the learned trial judge did not attach sufficient weight to the role the landlord played in that whole matter. An appreciation of the consequences of that role is central to a proper determination of whether or not an implied agreement of sale was concluded between the parties.

As correctly contended for the appellant by his counsel, Mr Zhou, the fundamental principle is that the parties must have, in fact, intended to enter into a binding contract with each other.¹ This principle is also implicit in the words of Christie, cited above. In this case the landlord is the one with whom Rushambwa of the respondent discussed the possibility that the latter’s left over stock would be taken over by the appellant. It was to and through the landlord that the appellant conveyed the information that he (appellant) did not require the respondent’s merchandise. According to the appellant, this was communicated to the landlord during the same month, i.e. December 1998, that he started trading. It is evident that the landlord must have communicated something of this rejection to the respondent’s director, hence his (landlord’s) attempt to broker a meeting between the appellant and Rushambwa two months after the appellant had started trading. Apart from the total lack of direct contact between the appellant and Rushambwa there is also uncertainty in the evidence before the court, regarding who between the landlord and those of the parties’ representatives who did the stocktaking, would have been their agent on the matter of the alleged agreement of sale. There is no evidence that the representatives who participated in the stocktaking had a mandate to do more than that. Nor is there any conclusive evidence that the landlord conveyed the appellant’s rejection of the offer to buy the merchandise to the respondent.

In the circumstances of this case, for a valid agreement of sale to be implied from the parties’ conduct, it would be necessary to show, on a balance of probabilities, that the appellant accepted the offer in circumstances where the two were ad idem on the matter. In the absence of testimony from Chigovanyika as to what information he conveyed to the parties from each other, I find there is no evidence to suggest, even on a balance of probabilities, that the parties’ conduct in jointly participating in the stocktaking in question, evinced a mutual intention to enter into a binding agreement of sale in relation to the goods in question.

Because the appellant’s conduct in participating in the stocktaking was open to more than one credible interpretation, including the one given by the appellant, it was necessary to look to other conduct by him, in order to determine whether or not he had accepted the offer to buy the respondent’s merchandise.

The court a quo, therefore, quite correctly considered other factors, one of which was the failure by the appellant to “return” to the respondent the merchandise in question.

The court regarded the appellant’s failure to return the merchandise in question to the respondent as further evidence of his having accepted the offer to buy the merchandise in question. However, a conclusion based on such a fact is not supported by the authorities. In Charles Velkes Mail Order 1973 (Pty) Ltd v Commissioner for Inland Revenue 1987 (3) SA 345 (A)² NESTADT JA had this to say in this respect at 357I – 358C:-

“Where the acceptance of an offer by conduct is relied on, it must be shown that the offeree acted with the intention (actual or apparent) of accepting the offer (Chitty on Contracts : General Principles 25 ed (1983) para 55 at 34) … In the case of contracts of sale such conduct may be the retention by the ‘purchaser’ of [358] goods sent to him (Christie – The Law of Contract in South Africa at 62) … The factor underlying these cases is a prior or existing business relationship or course of dealings between the parties. Where, however, this is absent the position will ordinarily be otherwise. In this situation, ie, where unsolicited goods are sent to a person, the failure per se to return them would not normally found a sufficient inference that they had been accepted. As Corbin on Contracts Vol 1 s 72 at 306 puts it:

‘It may indicate that he preferred to give no thought to the offer and to waste no time and effort in making a reply, whether orally or by a writing. In such cases, the offeror is not reasonable in giving to the offeree’s mere silence an interpretation that he accepted. So, if a party sends a book or paper or other goods to another, with a letter saying he is offering it for sale at a specified price, the party to whom it is sent is not bound by contract to pay for it if he does nothing and says nothing.’” (my emphasis)

The above can aptly be applied to the circumstances in casu. The merchandise in question was certainly unsolicited. The appellant told the landlord that he did not wish to buy it and left it at that. Based on the reasoning outlined above, it can therefore not be said that by not returning the goods, he had impliedly accepted them. The position would, of course, be different had the appellant traded in the goods. In this respect at 358F the learned Judge of Appeal went on to say:-

“On the other hand, were the offeree to make beneficial use of the goods or otherwise exercise ownership over them, an acceptance may and probably would be inferred (see Williston on Contracts 3 ed Vol 1 s 91 (D) at 333-4).”

The appellant in casu, quite apart from not making any beneficial use of the merchandise in question, had it packed and stored away from the shelves where the goods he traded in were displayed.

The learned trial judge found there were other factors pointing to the existence of a tacit agreement of sale between the parties. He noted as follows at page 7 of the judgment:-

“The stock was valued at $105 000 odd. There must have been considerable quantities, presumably stacked on shelves. No stock-take was done on 2 December and the defendant started trading the following day. If the defendant did not purchase the plaintiff’s stock then I cannot but wonder when it is on 3 December that the defendant had the time to remove the plaintiff’s stock, stow it away and bring in its stock and commence business. It is not far fetched to infer that the defendant commenced to trade in plaintiff’s stock on 3 December. If that be so, it reinforces the inference that the defendant purchased the plaintiff’s stock.”

My reading of the record of the proceedings in the court a quo suggests that the learned trial judge misrepresented the evidence of the appellant, which was that after the stock-take was completed, the merchandise in question was taken “upstairs” to the mezzanine floor. The specific evidence of the appellant is on page 35 of the record and it was given under cross-examination:-

“Q. Where were the goods stored?

1. They were stored upstairs on the mezzanine floor.

17. On the floor?

1. They were stored in cardboard boxes, yes, on the floor.

17. In cardboard boxes, you say.

1. Uhu.

17. All these goods were stored in cardboard boxes?

1. Those that fitted (sic) but you had hardware, hardware was in the open. Like cloth material …”

Rushambwa, in his evidence asserted he never established where the goods had been stored after he vacated the premises. He, therefore, could not dispute that they were stored in the manner stated by the appellant.

That being the case, one sees no basis for the learned trial judge’s presumption that the goods in question were stacked on shelves. If they were never stacked on the shelves, it follows that the appellant would not have required a lot of time to stow the goods away and bring in his own stock. To state, as the learned trial judge did, that the appellant must have commenced to trade in the respondent’s stock is to suggest that the former did not have, at hand, his own stock. That this was not the case is made clear by the evidence of the appellant, which was to the effect that he had brought in his own stock and did not need the respondent’s. This evidence was not challenged by the respondent.

The learned trial judge’s assessment of these material facts, as outlined above was therefore premised on a misinterpretation of the evidence placed before the court. Such assessment is, therefore, in my view, patently defective.

Given all of the above, there can be no doubt that the respondent failed to prove conduct on the part of the appellant that could have been construed as an acceptance of its offer to him to buy the stock in question.

It follows that the respondent failed to prove the existence of a tacit agreement of sale between it and the appellant.

Two other issues call for comment. The first is that much reliance was placed by both the respondent and the learned trial judge, on the appellant’s failure to respond to the letter of demand written to him by Rushambwa, dated 22^nd January 1998. The learned trial judge dismissed as highly unlikely the appellant’s evidence that the letter had been received by his subordinate who had, without showing it to him, passed the letter on to the landlord. Whatever the fate of the letter may have been, the fact that the appellant did not respond to the letter does not, in my view, carry the respondent’s case any further. Rushambwa believed the landlord had conveyed his offer to sell the merchandise to the appellant and that the latter had accepted such offer. The evidence before the court is to the effect that while such offer may have been conveyed to the appellant, it had not been accepted by him. As long as the appellant as a result did not believe himself bound to any contract of sale, he could not be said to have been under any obligation to respond to the letter of demand. That he did not respond to it cannot, under these circumstances, be taken as an admission that he was bound by the implied contract of sale alleged by the respondent.

The second issue is the exchange between the respondent’s director, Rushambwa, and the landlord, Chigovanyika, of two letters. The first letter, written by Rushambwa and dated 19 May 1998, acknowledged receipt of a letter received by him from Chigovanyika two or so weeks earlier. The other letter apparently demanded the arrears that were due to Chigovanyika by the respondent. Rushambwa, in response to this demand, and without revealing the subject of such sale, requested “the agreement of sale entered between you and Mr C Mutomba” so that he could reconcile some “figures”. Chigovanyika, in his response dated 20 May 1998 informed Rushambwa:-

“I write to advise that no sale has been entered into between C Mutomba and myself save for a lease agreement.”

It was contended for the appellant that this correspondence not only confirmed Rushambwa’s evidence that he and the landlord had agreed the merchandise would be “sold” to the appellant but also suggested that Rushambwa had been informed by Chigovanyika that the appellant was not willing to buy the stock in question. Rushambwa, in his evidence in the court a quo, was so evasive when he was asked about the subject matter of the agreement of sale referred to, that no sense could be made out of his answer to the question.

When the probabilities are considered, however, I find there may be merit in the appellant’s contention, firstly, that the lease agreement and the merchandise in question were the only factors linking the three of them together, ie, the appellant, Rushambwa and Chigovanyika, and secondly, therefore, that since the lease agreement is directly mentioned in the correspondence “the sale agreement” could only have related to the left over merchandise. The implication of this would be that the respondent insisted on an implied agreement of sale when its director knew very well that the appellant had not accepted its offer to buy the merchandise in question.

If that is indeed the case, that evidence would certainly lend further credence to the appellant’s assertion that nothing in his conduct and the facts surrounding this case could have justified a finding that the parties intended to enter into a binding contract of sale. However, even without this evidence, as already shown, the appellant would still have sufficiently disproved conduct consistent with an acceptance of the offer, and therefore, an implied agreement of sale between him and the respondent.

In all circumstances the appeal must, therefore, succeed.

It is accordingly ordered as follows:

1. The appeal is allowed with costs.

2. The judgment of the court a quo is set aside and is substituted with the following:

“The Plaintiff’s claim is dismissed with costs.”

SANDURA JA: I agree

CHEDA JA: I agree

Muvingi and Mugadza, appellant's legal practitioners

Mapfumo, Debwe and Partners, respondent's legal practitioners