This is an appeal against the whole judgement of the High Court (the court a quo) sitting at Harare, dated 11 January 2023, wherein it declared that the procurement contract entered into between the appellant and the respondent was valid and binding between them. The court a quo proceeded, consequently, to grant an order of specific performance of the contract.
It also dismissed the appellant's counter claim and ordered that the appellant pays the respondent's costs in the claim in reconvention.
Aggrieved by the decision of the court a quo, the appellant has noted the present appeal.
THE FACTS
On 23 October 2015, the parties entered into a Public Procurement Engineering, Procurement and Construction Contract (the contract). In terms of that contract, the respondent was required to construct one solar Photovoltaic Power Station to the capacity of 100MV in Gwanda (the project).
A dispute arose during the implementation of the project.
The respondent issued summons in the court a quo seeking the following relief:
“1. An order declaring that the procurement contract for the Engineering, Procurement and Construction (EPC) of the 100 MV Gwanda Solar Project (ZPC 304/2015) between the parties, as amended, is valid and binding between the parties.
2. Consequent to the declaration of the validity of the EPC contract, an order for specific performance.
Alternatively:
Damages in the sum of US$25,000,000 (twenty five million United States dollars) for repudiatory breach of the EPC contract by the defendant.
3. Costs of suit at the attorney and client scale.”
In its declaration, the respondent amplified its claim as follows:
The agreed contract price for the project was US$172,848,597=60 exclusive of taxes. The respondent was to secure and facilitate the funding of the project as well as bear most of the risks associated with the construction of the plant up to the point of commissioning.
The contractual terms were derived from the FIDIC Silver Book (General Conditions of Contract for EPC/Turnkey Project) 1999, First Edition. The General Conditions were applicable to the extent that they were amended by the Particular Conditions of contract agreed to by the parties.
The appellant was to borrow the funds sourced by the respondent in its name, superintend over both the construction works, and facilitate payments due to the respondent.
The appellant would only take over the risk and liability in the power infrastructure upon successful completion of the solar plant, that is, at the “turn of the key”.
The commencement of the contract was subject to certain suspensive conditions which were to be satisfied or achieved by both parties within a period of 24 months reckoned from 23 October 2015, the date of signature of the contract. The period within which the suspensive conditions were to be satisfied (the Conditions Precedent Satisfaction Period”) could be extended by a period of 6 months through an amendment to the contract. Such extension was to be done before the expiry of the tenure of the conditions precedent satisfaction period.
Beyond the conditions precedent satisfaction period, either party became entitled to terminate the contract, provided that the party seeking to terminate the contract was not responsible for the delays in the fulfilment of the conditions precedent.
Before the expiry of the conditions precedent satisfaction period, on 23 October 2017, the parties agreed to enter into an addendum to the contract, the terms of which would allow the appellant to pay some of the respondent's subcontractors directly in order to carry out the pre-commencement works at the project site.
The arrangement was in anticipation of the commencement of the contract.
The addendum was executed on 21 September 2017, prior to the expiry of the conditions precedent satisfaction period set for 23 October 2017.
The addendum set different timelines for the conclusion of the pre-commencement works. The appellant undertook to pay for that work.
The appellant, however, failed to pay for such works, and, as a result, these were not executed at all or were not executed timeously.
The appellant sought to extend the conditions satisfaction period by a period of six months, on 29 November 2017. The extension was to be reckoned from 23 October 2017.
The respondent objected to the extension, which it regarded as a breach of the contract, given the new terms of the addendum to the contract and the appellant's failure to perform its obligations under the addendum.
According to the respondent, the appellant unilaterally demanded that the suspensive conditions be completed on or before 23 April 2018, a demand that the respondent viewed as a material breach of the express provisions of the contract.
By way of notices dated 10 April 2018, 6 July 2018, and 31 July 2018, the appellant informed the respondent that the contract had expired by operation of law.
All contractual obligations between the parties were, in terms of these notices, terminated.
The appellant insisted on such termination despite its admission that it had failed to perform its obligations to pay the respondent's sub-contractors.
The respondent further contended, that, the termination was also unlawful in view of the appellant's direct liability in causing delays in the fulfilment of the conditions precedent within the agreed time frames.
It was thereafter that the respondent approached the court a quo, by way of application, seeking a declaration of validity of the contract and an order for specific performance.
The application was granted on 13 December 2018 under HC8159/18.
The appellant appealed that determination to this Court under SC39/21.
In the meantime, the respondent applied for leave to execute judgment pending appeal.
The court a quo granted that application on 19 June 2019 under HC2425/19.
The respondent claims, that, during the two year period in which the parties awaited the outcome of the appeal at the Supreme Court, the parties implemented the contract, as amended, and engaged in a series of meetings that culminated in the drafting of an amended and restated contract.
On 13 May 2021, this court upheld the appellant's appeal and set aside the judgment of the court a quo. This Court determined, that, the matter was replete with material disputes of fact which could not have been resolved on the papers before the court a quo.
It was for that reason that the respondent returned to the court a quo and instituted action procedure, seeking the same relief.
In its plea in the court a quo, the appellant raised two points:
(i) Firstly, it contended that the contract never took off because the conditions precedent were not fulfilled. There was thus no basis at law for the respondent to seek the declaration of validity.
(ii) Secondly, it averred that this court had dismissed the respondent's claim. It therefore pleaded res judicata.
The appellant also filed a counter-claim seeking an order in the following terms:
“(a) An order that the EPC contract, and the Addendum entered into by the parties, did not commence due to the plaintiff's failure to meet the prescribed conditions precedent.
(b) Damages for breach of contract and misrepresentation in the sum of US$96,673,236=30 (ninety-six million six hundred and seventy-three thousand two hundred and thirty-six United States dollars thirty cents.”
The matter was referred to trial on the following agreed issues:
In respect of the main claim:
“(a) Is the procurement contract entered into by and between the plaintiff and the defendant, dated 23 October 2015, valid and binding on the parties?
(b) Depending on the conclusion reached on the above question, did the plaintiff suffer damages, and what is the quantum thereof?
In respect of the claim in reconvention:
(a) Was the agreement entered into by and between the parties induced by misrepresentation on the part of the plaintiff?
(b) If the plaintiff breached the agreement, then, did the defendant suffer damages as pleaded by it or at all and what is the quantum?”
At the commencement of the trial in the court a quo, the appellant abandoned the claim in paragraph (b) of its prayer, that is, the claim for damages for breach of contract and misrepresentation action in the sum of US$96,673,236.
The appellant, however, persisted with the claim for US$3,330,736=30, being the advance payment made to the respondent in respect of the pre-commencement works.
PROCEEDINGS BEFORE THE COURT A QUO
The Respondent's Evidence
The respondent's sole witness was its Managing Director, Wicknell Munodaani Chivhayo. His evidence was summarized by the court a quo as follows:
He told the court, that, when the tender for the project was flighted, the appellant had no funds for the project. For that reason, the appellant was looking for a contractor that would also assist it in raising funds for the project.
The respondent's partner, CHINT, was roped into the project to bring in the required funds. He told the court, that, CHINT had the required financial and technical capacity to execute the project.
The contract price was US$172,848,597=60.
Mr Chivhayo said, that, the commencement of the contract was subject to the satisfaction of the conditions precedent set out in clause 5 of the contract. These included the sourcing of the funds for the project and the completion of the feasibility studies. The appellant was responsible for funding the pre-commencement works and the respondent was required to assist with the fundraising.
To that end, the respondent had engaged financial consultants and financial partners such as the China Exim Bank and the Ministry of Finance and Economic Development. These engagements were done before the commencement of the project.
The witness blamed the appellant for the collapse of the engagements that were intended to birth the necessary financial agreements.
China Exim Bank required that the Government of Zimbabwe guarantees the loan facility.
The witness approached the Ministry of Finance on behalf of the appellant. The Ministry indicated its interest to support the project and had agreed, at the witness's suggestion, that the project be given national status.
The Ministry of Finance undertook to provide the Government guarantees required by China Exim Bank and had written a letter, dated 10 March 2016, addressed to the Export-Import Bank of China, undertaking to issue a sovereign guarantee for the project in the sum of US$147,000,000.
However, the Government of Zimbabwe had been blacklisted for defaulting on a loan of US$400 million. For that reason, the China Export and Credit Insurance Corporation (China Sinosure), a state funded insurance company established to support China's foreign and trade development co-operation, refused to secure the loan.
Thereafter, the parties mooted other sources from which to raise capital.
One of these was the proposed raising of energy bond through the CBZ Bank. This proposal had the full support of the SPB (State Procurement Board). However, the appellant was not interested, even after its own Ministry directed it to pursue that route.
The witness further told the court, that, the appellant frustrated the signing of the financial arrangements, contrary to the spirit of clause 5(a) of the contract.
The witness had this to say about the advance payment demand guarantee:
During meetings with the appellant's officials, feasibility studies had been carried out and the appellant owed the respondent funds for the work done. There was no need for such guarantee once work had been completed and payment now due to the plaintiff. The advance payment received was therefore in respect of the feasibility studies that had been performed.
With regards the performance security, the witness said it was not provided for, partly because the appellant still had some outstanding amounts still to be paid, and that, at any rate, it had not been asked for.
He also confirmed, that, the appellant had carried out its due diligence in terms of clause 5(f) of the contract.
Both parties representatives travelled to China for the purpose of evaluating the respondent's partner, CHINT. Both parties were aware that CHINT had successfully carried out some projects in Zimbabwe.
The witness stated, that, the production of the Environmental Impact Assessment was the responsibility of the appellant. It was only produced through his intervention, when he directly engaged the responsible Ministry.
The land for the project was also acquired through his efforts when he approached the Ministry of Lands.
He confirmed that both parties had secured the necessary authorizations as required by clause 5(f) of the contract.
Only one condition remained outstanding, that is, the financing agreements.
He said that the amendments of the contract, through the addendum, were occasioned by the loss of time.
In terms of the agreement, as re-affirmed by the addendum, the total cost of the pre-commencement works was US$5,111,224=50. The respondent was supposed to contribute to that amount in the sum of US$1,000,000 with the appellant contributing the remainder.
The respondent did not pay its contribution as it was only required to perform work of an equivalent value.
He said that after the payment of the feasibility studies, and part of the fee for the pre-commencement works, the appellant still had an outstanding liability in the sum of US$1,232,322=87 for part of the pre-commencement works carried out.
The respondent's sub-contractors were to be paid from that outstanding amount.
He stated that the appellant caused his arrest by ZACC officials for non-performance of the contract. He wrote to the appellant's Managing Director complaining about the unfounded allegations of corruption. His arrest negatively affected the execution of some of the works by the respondent's subcontractors.
He insisted that the conditions precedent satisfaction period was extended by the parties, and yet, the appellant went on to raise a criminal complaint for non-performance.
He made reference to clause 5(i) of the contract which provided, that, if the conditions precedent were not satisfied on or before 24 months after the date of signature of the contract, the parties should meet, and, if need be, the appellant could, in its sole discretion on or at any time before the lapse of the 24 month period, elect to extend the conditions precedent satisfaction period by a further six months.
He referred to a letter from the appellant to the respondent, dated 29 November 2017, in terms of which the period was extended by a further 6 months from 23 October 2017 to 23 April 2018.
The witness made reference to various correspondences between the parties, and other stakeholders, tending to show that the appellant was responsible for the failure to sign financial agreements during the extended period.
He averred, that, in terms of clause 5(i) of the contract, the appellant was estopped from relying on its own breach to cancel the contract.
He said that the respondent declared a dispute between the parties in terms of the contract. The dispute was declared through a letter dated 15 January 2018. In terms of the contract, the dispute was to be adjudicated by the Dispute Adjudication Board, which was duly constituted.
The appellant's attitude was that there was no need for the constitution of the Board as the parties could meet and resolve the dispute.
The respondent then sought to refer the matter to arbitration, but, the appellant objected saying that it was not an arbitration matter. It was then that the respondent approached the court a quo for an order of specific performance, alternatively, damages.
It succeeded in its quest for specific performance. The appellant appealed that decision to this Court.
Pending the hearing of the appeal, the respondent applied in the court a quo for an order to execute the judgment of that court pending appeal. That application was granted, but, the appellant did not comply with it.
In the meantime, according to the witness, the Ministry of Energy directed that the parties further engage in order to give effect to the contract. The directive was contained in a letter dated 15 June 2020.
As a result, the parties prepared an amended contract which they are yet to sign.
That development was seen by the witness as dispelling the notion that specific performance was no longer possible.
Thereafter, various engagements were initiated by the Ministry of Energy to iron out the problems bedeviling the implementation of the contract. On 6 July 2020, the Minister of Energy wrote to the Executive Chair of ZESA Holdings intimating to the Chair that his office was required “to urgently conclude the drafting of all the pertinent agreements and financial instructions necessary for the available financier to avail the funds required to implement the project.”
This letter was copied to the witness.
The witness asserts, that, the Government of Zimbabwe, through the Ministry of Energy, as the shareholder in the appellant, wanted the project to be implemented without delay. It was for that reason, that, the Ministry had intervened calling on both parties to implement the project.
However, the appellant remained defiant.
The witness indicated, that, in July 2020, the parties arranged a joint visit to the site. The purpose of the visit was to assess the work done and that which remained to be done, since both parties were negotiating a revised contract.
Thereafter, the parties prepared a report, comprising pictures and video evidence, demonstrating their findings on the ground. The report was jointly signed by the parties representatives. The appellant was represented by its project manager, Mr Mugwagwa, and its officials Mr Fambi and Mr Chinho. On the other hand, the respondent was represented by the witness, its project manager, Mr Magweza, and an official called Mr Mubviri. The witness participated in both the joint visit and in the compilation of the joint report.
The witness opined, that, the exercise was an indication that the contract was temporarily on hold.
The witness stated, that, the appellant's counter claim for the sum of US$3,310,736=30 was devoid of merit if considered in the context of the joint report. It was made on the premise that the pre-commencement works were not carried out, yet, the report showed otherwise. The report confirmed that the appellant owed the respondent some money for work done at the conclusion of the pre-commencement works. It also confirmed that the advance payment guarantee was no longer necessary.
He was adamant that the objective of the pre-commencement activities, as set out in the contract, were satisfied. In that regard, he was of the view that the appellant was being malicious in suggesting that the contract was not implemented at all.
The witness justified the respondent's alternative claim for damages as follows:
The respondent had incurred expenses to do with the tendering process as well as the due diligence exercise when the parties had to travel to countries such as China and India. That included the cost of air fares of the appellant's personnel that had to be covered by the respondent. The respondent also claimed risk, occupational damages, and damages for reputational loss occasioned by the negative publicity caused by the appellant. The witness also stated, that, the respondent's security guards were kicked off the project site by the appellant at a time the respondent was prepared to carry on with the project.
Under cross examination, he insisted that discussions for a new contract started in earnest in 2020 after the new Minister of Energy had assumed office.
He said the Minister was unhappy over the delays in implementing the project. The Minister was displeased with the appellant's failure to comply with CHITAPI J's order granting the respondent leave to execute the High Court judgment pending appeal.
The parties met again to discuss the way forward - with no positive results.
He insisted that there were financiers ready to fund the project, but, for the obstinacy of the appellant; a fact he communicated to the Minister. He said that the execution of the Amended and Restated Contract Agreement was not an admission that the respondent had failed to perform. The idea was simply to kick start the project, with the respondent required to source funds for the initial phase of 10MW with the rest of the MW coming later as provided in the contract.
He said it was the EPC contract that is sought to be enforced and not the Amended Restated Contract.
The respondent had even offered to reduce the price to demonstrate its commitment to the implementation of the contract.
Asked whether a guarantee was provided by the respondent, as required by the contract, the witness stated that CHINT wrote to the appellant advising that they had the guarantee in place, but the appellant dithered. The offer was not accepted by the appellant because it had no money.
However, the appellant did make payments for the feasibility and pre-commencement works without an advancement payment guarantee.
This was justifiably so because the respondent had delivered those activities.
He insisted that the appellant's letters of 7 and 10 April 2018 and 6 July 2018, which confirmed the non-extension of the condition satisfactions period beyond 23 April 2018, prevented the respondent from fulfilling the conditions precedent as set out in clause 5a. This was because the appellant failed to pay the respondent's sub-contractors, and, as a result, the pre-commencement works could not be completed.
He further stated, that, although the actual project had not yet commenced, save for the pre-commencement works, the respondent needed only 6 months to complete the first 10MW once it secured the necessary funding.
He accepted that the respondent had revised the project costs downwards in the Amended and Restated Contract because the costs of solar products had generally gone down on the international market.
He dismissed the ADB integrity report on the debarment of CHINT on the basis, that, the respondent was not seeking funding from ADB. In any case, the debarment was lifted as CHINT was never found guilty of any fraudulent conduct.
Asked how the project could be implemented since the appellant did not have financial resources, he responded as follows:
The respondent had presented to the appellant China Exim Bank as a willing financier in 2015. The respondent could not access the funding set aside by China Exim Bank because the appellant's shareholder owed the bank's export credit insurance adviser, Sinosure, and its account was in arrears; China Exim Bank said it could still lend the money using other insurers. There were alternative funders that did not even require underwriters. The respondent introduced other local financiers, such as CBZ and the African Transmission Cooperation (ATC), as prospective funders. The Ministry of Energy even approved the funding proposal by ATC in June 2020.
The appellant was mandated to amend and restate the terms of the contract to give effect to the new funding model but it failed to do so.
The witness said he had also approached NSSA, on behalf of the appellant, requesting assistance in raising US$25,927,289.
The offer was also not taken up by the appellant.
The witness stated, that, the annexure to the joint report prepared during the joint visit to the site, dated 13 July 2020, was part of the main report prepared by the parties representatives. He said that the report, together with the annexure, was actually sent to the respondent by the appellant after the joint visit.
The Appellant's Evidence
The appellant called one witness, Cleopas Fambi, its Assistant Project Manager.
During the period 2015-2017, his duties included the management of the project between the appellant and the respondent. He was involved in the tendering stage, contract negotiations, and the pre-commencement works. His evidence was to the following effect:
Sometime in 2013, the appellant, through the State Procurement Board (SPB), floated a tender for the construction of 3 x 100MW photovoltaic solar plants at Gwanda, Insukamini and Munyati.
The respondent was awarded the tender to construct the solar plant at Gwanda.
The parties concluded the contract on 23 October 2015. The contract was to commence in full force and effect after the satisfaction of the conditions precedent stipulated in the contract.
The respondent failed to fulfil the conditions precedent under clause 5 of the contract and the conditions remain unfulfilled to this date. As a result, the contract did not commence because of the respondent's failure to fulfil those conditions.
He stated that the addendum to the contract dealt with the pre-commencement works listed in schedule 11 of the contract. The appellant paid for the pre-commencement works in advance. The respondent, however, failed to provide the bank guarantee for the advance payments. It also failed to provide its portion that it was meant to contribute to the pre-commencement works. The respondent also misrepresented its capacity to perform the contract.
The witness said, that, he was part of the joint team that visited the project site on 13 July 2020. The visit took place in the context of a proposal to implement the project in phases. The works had been partially completed on the ground. No maintenance or repairs had been carried out since July 2020.
With regards the documentation attached to the joint report showing the various activities of the pre-commencement works undertaken on site and the bill of quantity amounts, the witness said that he was seeing these papers for the first time in court.
He said that the amount of US$2,031,230 representing the value of the ground site clearing was overstated since there was still need to carry out ripping of the top soil, clearing, and site levelling.
He dismissed the allegation that the appellant did not wish to implement the project, saying that the appellant's conduct was consistent with a desire to see the project completed. It was for that reason that the appellant had paid for the pre-commencement works.
Under cross-examination, the witness admitted that the appellant was a State commercial entity and therefore subject to the law governing procurement by State entities.
He agreed that according to the law, the appellant's accounting officer was its Managing Director who was wholly responsible for the administration of the project.
He conceded that he could not account for the project within the contemplation of the law as he was not the appellant's accounting officer. The accounting officer was the person with the complete records of all the transactions.
Asked whether he could provide insight on the issue of financing agreements, he stated that his insight was limited. He could not comment as to why there was no financial closure because he did not have the required information. He could also not comment on whether the appellant deliberately frustrated the financial closure as alleged by the respondent. He could not deny that CHINT had procured funding from China since he was not the accounting officer. Neither could he deny that the respondent had, as an alternative, engaged domestic funders to finance the project and that its efforts had been frustrated by the appellant's ambivalence. He could also not deny that CHINT had offered a US$52 million guarantee but the appellant had not embraced it because it did not have the required funds.
He said the best person to comment would be the accounting officer since all correspondence was directed to him.
The witness admitted, that, the parties did not refer their dispute to a consultant or engineer because there was no disagreement on the value of the pre-commencement works carried out.
The witness was also part of the team that carried out a site visit in July 2020. The parties agreed that the fence was erected and completed. He agreed that the appellant therefore received value at the conclusion of that part of the project. He also agreed that the feasibility study had been done and completed. Repairs and maintenance works had also been carried out.
Although he denied the value delivered, ascribed to the pre-commencement works, in the sum of US$3,382,697 as recorded in the bill of quantities report, he conceded that he could not tell the value that had been delivered to date.
Further, he could not comment on how the sum of US$3,310,736=30 representing the appellant's counterclaim was arrived at. It would require the accounting officer, his team, and the contractor to confirm how the figure was arrived at.
He also admitted that, at some point, the appellant had ordered the respondent's workmen off the site.
The witness could not comment on the Ministry's directive that the project be completed.
His attention was drawn to the fact, that, on 6 July 2020, the minister had, by letter of that date, communicated Government's position to the chairperson of ZESA Holdings. Another letter, dated 15 June 2020, had been written to the ZESA chairperson by the minister. In it, the minister had reiterated Government's desire for the parties to move with speed to implement the project without delay.
The witness could not deny that the contract was still capable of performance and that the respondent could still secure funding to achieve financial closure. He also admitted, that, the appellant was desirous of addressing power shortages. That desire is what had given impetus for the project.
SUBMISSIONS IN THE COURT A QUO
At the end of the trial, the parties filed written closing submissions.
The respondent submitted, that, the only issue that remained for determination was whether or not the contract remained valid and capable of performance. As to the counter claim, it submitted that the issue to be determined was whether the respondent was liable for the advance payment made for the pre-commencement works. The respondent submitted, that, no evidence had been adduced to support the counter-claim. The respondent submitted that it was ready to perform the contract and that it had the capacity to perform the contract.
It also submitted that it was able to provide the required finances. It relied on the case of His Holiness Acharya Swami Dasji (1996) 4 SC 526 for that contention.
The respondent argued, that, the onus rested on the appellant to show that performance was no longer possible.
It contended, that, at law, where one party to a contract repudiated the agreement, the innocent party could elect to claim specific performance of the contract or damages in lieu of specific performance.
It submitted that specific performance was in the court's discretion and that its case had to be determined on its own merits.
The respondent cited the case of Benson v SA Mutual Life Assurance Society 1986 (1) SA 776 (A) where it was held, that, the plaintiff had the right to elect 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. On the other hand, the defendant did not have that right of election.
According to the respondent, the appellant did not lead any evidence to show that specific performance was impossible. It contended that the appellant could not rely on evidence in prior litigation because it had not led that evidence in the present matter.
The respondent submitted, that, the evidence showed that it had done enough to secure the finances required for the project but the appellant failed to come to the party. It further blamed the conduct of the respondent's shareholder, the Government of Zimbabwe, as being partly to blame for the appellant's failure to perform.
The respondent dismissed the evidence given by the appellant's sole witness as ineffectual because the witness admitted that he was not competent to testify on matters which only the appellant`s CEO could shed light on. This witness was, according to the respondent, unable to give evidence proving the value of the pre-commencement work done, nor could he dispute the contention that it was the appellant that actually owed the respondent.
The respondent insisted, that, the addendum to the contract was not a separate document running parallel to the main agreement as contended by the appellant. Rather, the addendum should be interpreted as an integral part of the main agreement.
Further, the respondent contended that the appellant had frustrated the financing agreements, and, for that reason, the court should deem the condition precedent to have been fulfilled in line with the doctrine of fictional fulfilment.
Reliance was placed on the case of Scott & Anor v Poupard & Anor 1971 (2) SA 373 (A) wherein the factors to be established in order to invoke the doctrine of fictional fulfilment were set out as follows:
(i) Non fulfilment of the condition;
(ii) The defendant's breach of his duty with intent to frustrate the fulfilment; and
(iii) A causal link between the non-fulfilment and the defendant's intentional frustration of the fulfilment of the condition.
The respondent averred, that, generally, the court does not have a discretion to refuse to enforce a term contained in a lawfully concluded agreement. In determining whether or not to enforce such a term, the court will be guided by the dictates of public policy.
It submitted, that, the evidence adduced showed that the appellant had frustrated the conclusion of financial agreements. The appellant, argued the respondent, should not be allowed to benefit from its own wrongdoing.
The appellant had not placed before the court the FIDIC document, despite its plea that the agreement should be read in light of the provisions thereof. For this reason, the respondent contends that the FIDIC cannot be a factor in the interpretation of the agreement.
The appellant's closing remarks were to the following effect:
It submitted that Mr Chivhayo's evidence was unreliable and thus the respondent had failed to discharge the onus on it to prove its claim. It accused this witness of changing his evidence when it suited him. It said that his evidence was inconsistent with contemporaneous documents, and that he referred to non-existent documents.
The appellant also made reference to the proceedings in case number SC 39/21 and submitted, that, in that case, this Court made a finding that the respondent had failed to meet the conditions precedent set out in clause 5 of the contract.
This Court, according to the appellant, had established that the respondent had conveniently avoided the action procedure in a bid to stay away from the truth and hoodwink the court.
The appellant also argued that in its evidence, the respondent based its claim on contentious issues raised by the appellant in its replication and not based on its own declaration. The appellant argued, that, the respondent ought to have amended its declaration to incorporate the claims that were never pleaded in the declaration.
The areas of evidence of concern included the China-Exim Bank financing issue, the CBZ and ATC funding and the allegation that the appellant filed fictitious and malicious charges of fraud and corruption against Mr Chivhayo.
The appellant also submitted that the letters of 10 April, 6 July and 31 July 2018 which were alleged to constitute a breach of the contract in the respondent's declaration were never referred to in the examination in chief of the respondent's witness.
The court a quo observed that the matters complained against in this regard are matters of evidence which would not ordinarily be set out in the pleadings but in the evidence.
The appellant further submitted, that, it was common cause that the conditions precedent satisfaction period expired on 23 October 2017 and that the purported extension of that period, by six months, after that date, though not in accordance with the contract, was not a nullity as the respondent could have accepted it.
It averred, that, although its notice to terminate was not delivered in a letter headed “Notice of Termination” it remained a valid notice.
It contended that the issue is not about the absence of notice, but, rather, whether the appellant had the right to terminate the contract, it being alleged that it (the appellant) was responsible for the delay in the satisfaction of the conditions precedent.
The appellant submitted, that, the respondent alleged a breach of Addendum 1, which breach would only affect Schedule 11 of the contract but not clause 5 of the contract.
It submitted that the respondent had failed to indicate when these breaches had occurred.
It further contended, that, Addendum 1 was only executed one month before the expiry of the conditions precedent satisfaction period, or 23 months after signature of the contract. An alleged breach of Addendum 1, it is contended, could not explain the failure to complete the conditions precedent in the preceding 23 months.
The appellant argued, that, this was not a proper case in which the court could exercise its discretion in granting specific performance because the present position was at odds with the parties original position.
The original intention was that the project would take four years. It is contended that the construction and hand over of the solar plant would thus have been completed by October 2019.
The appellant argued, that, if specific performance were to be granted, as requested, the project would be implemented between March 2029 to 2034 - 10 to 15 years later than originally projected.
In any event, argued the appellant, the project was no longer viable because the cost of constructing the plant had decreased due to advances in solar technology. As a result, the respondent stands to make an additional USD33 million profit should specific performance be granted.
The appellant further argued, that, the fact that the parties negotiated a new contract after the judgment of the court a quo, in case number HC8159/18, was testimony to the fact that the parties had realized that the present contract was no longer viable.
It was for that reason that the parties carried out a joint visit to the project site on 13 July 2020.
The Minister of Energy had urged the parties to implement this amended contract. The appellant averred that the Ministerial report related to the amended contract and not the original contract.
Another reason for negotiating the new contract was that the African Development Bank had debarred CHINT for fraudulent practices.
Further, the appellant averred that the introduction of a new currency regime, in February 2019, had implications on the funding of the project as all transactions in USD terms done before February 2019 were now valued in RTGS dollars at the rate of one to one with the USD.
It was also the appellant's argument, that, the respondent had failed to plead relief relating to fictional fulfilment and the factual basis upon which the court could grant the relief of fictional fulfilment.
The appellant further argued, that, fictional fulfilment would not make sense because the project needed to be funded, and that, in any event, the appellant would not be able to pay the contractual amount.
It was submitted by the appellant, that, its Board could not authorise the commencement of the project knowing fully well that it was not going to be funded.
The appellant also argued, that, if fictional fulfilment were granted, there would be implications on third parties in line with the definition of “financial agreements.”
It was, for example, a requirement that the Government of Zimbabwe be a co-signatory to the financial agreements. That requires that the Government be a fictional party to the fictional finance agreement. It was submitted, that, there was no basis upon which the court could exercise jurisdiction over Government when it was not cited as a party to the present proceedings.
The appellant denied that it intended to frustrate the project, citing its actions in paying the sum of USD5.6 million to the respondent and in extending, through its letter dated 29 November 2017, the conditions precedent satisfying period.
It argued, that, it was the one that took steps to secure funding for the project by communicating with key stakeholders such as Ministry of Finance, the Procurement Board and NSSA. It had also carried out all the conditions precedent which required its attention, such as the feasibility studies, due diligence, getting the Environmental Impact Assessment Certificate, and acquiring land for the project.
On the contrary, the appellant submitted that the respondent had failed to provide an Advance Payment Guarantee and the performance security as required in terms of the contract. The appellant also blamed the respondent for the collapse of the China Exim Bank funding stating, that, if the respondent had done its due diligence, it would have known, from the beginning, that, the financial institution would not be in a position to assist in view of the Government of Zimbabwe's arrears with the financial institution.
With regards the respondent's claim for the sum of US$3 million for expenses incurred, the appellant submitted that no evidence had been led to prove that it was responsible for causing the damages complained of. It argued, that, it cannot be held liable for the expenses incurred by the respondent during the tendering process. Such expenses could be recovered through performance of the contract when profit is then earned.
The appellant also denied liability for the respondent's loss of profit arguing, that, such a claim is only tenable where the appellant had terminated the contract. In casu, the respondent avers that the contract was not terminated. There is therefore no basis upon which it could raise such a claim.
Concerning its claim in reconvention, the appellant submitted that it provided the respondent with an advance of US$5.6 million. Of this amount, the sum of US$2.3 million went towards the feasibility studies. Its claim is for the balance in the sum of US$3,310,736=30.
The respondent was required to contribute the sum of US$1 million towards pre-commencement works. The contribution was to be done through the carrying out of works, with no cash payments. However, the appellant avers that the pre-commencement works were not completed, as indicated in the joint site visit report, hence the claim for US$3,310,736=30.
Alternatively, the appellant was willing to be compensated in terms of the respondent's own computation which puts the figure at US$2,299,563=13.
It was on that basis, that, the appellant moved for dismissal of the respondent's claim. It also prayed that its claim in reconvention be granted with costs.
FINDINGS OF THE COURT A QUO
The court a quo found in favour of the respondent and dismissed what remained of the appellant's counterclaim. Its specific findings on the issues before it were as follows:
1. The Supreme Court judgment in SC39/21
The appellant had raised the defence of res judicata premised on the decision of this Court in SC39/21. That proved untenable as the papers clearly showed, that, the appeal was determined on a technicality, namely, that, the application in the court a quo had been replete with material disputes of fact which could not be determined without hearing viva voce evidence. The court a quo held, that, this Court had not delved into the merits of the matter as alleged by the appellant. No decision on the merits had been made, and, therefore, the appellant's claim to the contrary was rejected.
2. Whether the EPC contract remained valid and binding on the parties
The court a quo noted, that, the appellant had abandoned its claim to the effect that the contract had been induced by fraudulent misrepresentation on the part of the respondent. That being the case, the court a quo noted, that, in the absence of the appellant's assertion to the contrary, it must be presumed that the validity of the contract is no longer in contention.
That being the case, the court a quo took the view that the only issue left for determination was the status of that contract. It observed, that, the status of the contract was the central issue upon which the consequential reliefs sought by the respective parties would be determined.
The respondent's contention was that the amended contract remained valid and binding, hence its claim for consequential relief in the form of specific performance. On the other hand, noted the court a quo, the appellant sought a declaratur to the effect that the contract never commenced as a result of the respondent's failure to meet the prescribed conditions precedent.
The appellant also averred, that, it had cancelled the contract as a result of that breach on the part of the respondent.
It further claimed (falsely in the opinion of the court a quo) that the cancellation had been confirmed by this Court under SC39/21.
The court a quo reiterated its earlier findings, namely, that, this Court had merely upheld the appellant's preliminary point to the effect that the court a quo should have proceeded not by application, but by action, as there were material disputes of fact which could not be resolved on the papers. It did not determine the merits of the matter, let alone confirm the appellant's cancellation of the contract.
The court a quo proceeded to consider the clauses of the contract which the respondent alleged had been breached.
Clause 5 provided that the contract would commence in full force when the conditions listed in paragraphs (a) to (i) were satisfied. These conditions precedent were to be satisfied within a period of 24 months after signature of the contract.
It was common cause that this period would expire on 23 October 2017.
The appellant could, at its sole discretion, on or at any time prior to that date, elect to extend the conditions precedent satisfaction period by a further 6 months by giving notice to the respondent.
More importantly, clause 5 of the contract provided as follows:
“If the conditions precedent are not satisfied on or before the expiry of the CP satisfaction period (as may have been extended), either party may elect to terminate the contract by notice to the other provided that if a party is causing a delay to the satisfaction of any of the conditions precedent, as at the date on which it seeks to terminate, such party shall not be entitled to exercise such right of termination while such cause of delay subsists.”
The court a quo noted the implications of the above provisions, particularly with regards the right of termination.
Clause 5 of the contract also provided for the waiver of conditions precedent as follows:
“Each party shall use its reasonable endeavours to ensure the satisfaction of the conditions precedent set out above, provided that:
(a) The employer may waive the contractor conditions precedent and such waived contractor condition(s) precedent will be deemed satisfied for the purposes of this Agreement;
(b) The contractor may waive the employer conditions precedent and such waived employer conditions precedent will be deemed satisfied for the purposes of this Agreement; and
(c) Except where a party has failed to use its Reasonable Endeavours to ensure the satisfaction of such conditions precedent, neither party shall be liable in any damages to the other in respect of any failure to satisfy any of its conditions precedent.”
The court a quo analysed and took note of these provisions.
Of significance to the status of the contract, the parties signed Addendum 1 to the contract. The court a quo noted, that, in paragraph 2 of the preamble to the Addendum 1, the parties expressed their wish “to amend the contract through this addendum.”
More importantly, clause 4 of the Addendum provided that “the parties agree and acknowledge, that, with effect from the effective date of this Addendum, that the contract shall be amended in accordance with this Addendum and that the provisions of the contract, except as amended by this Addendum, will remain in full force and effect.”
The court a quo concluded, that, the Addendum amended the contract and that the two documents must be read together.
The court a quo analysed the nature and scope of the amendments to the original contract brought about by the provisions of Addendum 1. It observed as follows:
At the time that the parties signed the Addendum, on 21 September 2017, they were aware that, in terms of the original contract, the period during which the conditions precedent were to be fulfilled was to lapse on 23 October 2017, a month after the date of signature of the Addendum.
However, the addendum gave lead times of the various pre-commencement works well beyond 23 October 2017.
In other words, the new lead times exceeded the effective date of 23 October 2017, when all conditions precedent should have been met, and, hopefully, the main works would have commenced.
From the above facts, the court a quo concluded, that, by their conduct, the parties waived not only the commencement date of the contract, but, by the same token, the date of the accomplishment of the conditions precedent upon which the commencement date was predicated.
It was for this reason that the court a quo held, that, it would defy logic for the appellant to insist on the termination of the contract on the grounds that the respondent had failed to satisfy the conditions precedent when, only a month before the expiry date, the parties had agreed to certain contractual obligations that further tied them.
The court a quo concluded, in the circumstances, that, the conditions precedent satisfying period did not lapse on 23 October 2017 as submitted by the appellant.
The parties must be regarded as having waived their right to enforce that date as previously provided in the original contract before the Addendum 1 was signed, amending it.
The parties had set their eyes beyond 23 October 2017 concluded the court a quo.
Indeed, the appellant had written to the respondent, on 29 November 2017, purporting to extend the conditions precedent satisfying period by a further six months in terms of clause 5 of the main contract.
The court a quo noted that such correspondence confirmed that the appellant did not regard that this period ended on 23 October 2017, contrary to its assertions.
Secondly, the correspondence wrongly ignored the provisions of the Addendum 1, amending the contract thus disregarding the effective date, of 23 October 2017, the date originally set for the expiry of that period.
Thirdly, in terms of section 5 of the original contract, such election by the appellant, to extend such a period by a further six (6) months, was to be done in terms of clause 6 of the contract, which provides that the contract may only be amended by a written document duly executed by the parties.
In this case, the appellant acted unilaterally, there being no evidence of the parties agreement to such an amendment.
Further, any such election could only be effected on or before 23 October 2017. In casu, the appellant's election came on 29 November 2017 - well out of time.
The court a quo also noted, that, in terms of clause 5(i) of the contract, if the conditions precedent were not satisfied within twenty-four (24) months from the date of signature of the contract, the parties were to meet and review progress towards the satisfaction of those conditions.
Thus, the court a quo found that the election to extend the satisfaction period by a further six (6) months could only be exercised after the parties had reviewed their progress towards the satisfaction of those conditions precedent.
No such meeting was proved to have taken place, and, accordingly, no valid election to extend the period could have been exercised.
For these reasons, the court a quo found that the purported extension of the conditions precedent satisfying period, by the appellant, was inconsistent with the provisions of the contract, and, consequently, null and void.
Accordingly, the court a quo ruled that the contract remained valid and extant.
3. Fictional Fulfilment
Having determined that the contract was not terminated and remained extant, the court a quo considered the relief sought by the respondent, namely, whether there was fictional fulfilment of the contract, and, if so, whether it was appropriate to grant the remedy of specific performance.
It observed, that, the doctrine of fictional fulfilment was defined in case law. It relied on the definition in MacDuff & Company Limited v Johannesburg Consolidated Investments Company Limited 1924 AD 573 where the court stated as follows:
“I am therefore of the opinion, that, in our law, a condition is deemed to have been fulfilled as against a person who would, subject to its fulfilment, be bound by an obligation, and who had designedly prevented its fulfilment, unless the nature of the contract, or the circumstances, show an absence of dolus on his part.”
RH CHRISTIE in “Business Law in Zimbabwe”…, explains that dolus, in this context, does not allude to fraud or dishonesty, but, a deliberate intention to prevent the fulfilment of the condition, no matter how laudable the motive.
Based on both the documentary and viva voce evidence before it, the court a quo found that the appellant purposefully prevented, or frustrated, the fulfilment of the condition precedent pertaining to the signing of the financing agreements.
The court a quo also found the appellant's conduct to have been contrary to clause 5(i) of the contract, which required each party to use its “reasonable endeavours” to ensure the satisfaction of the conditions precedent.
The court a quo noted, that, the right to terminate the contract in terms of clause 5 was not absolute because the party responsible for frustrating the fulfilment of any of the conditions precedent was estopped from seeking the termination of the contract.
For that reason, having found that the appellant frustrated the fulfilment of the financing arrangements, the court a quo ruled that the appellant was precluded from asserting the right to terminate the contract on the grounds that the condition precedent concerned had not been met.
It was in that context that the court a quo held, that, the conditions precedent pertaining the financial arrangements had been fictionally fulfilled.
4. Specific Performance
In determining whether it could grant the relief of specific performance, as sought by the respondent, or, the alternative relief of damages, the court a quo relied, inter alia, on the decision in Grandwell Holdings (Pvt) Ltd v Zimbabwe Mining Development Corporation & 3 Ors SC05-20 where this Court had this to say:
“However, the right to claim specific performance is predicated on the concept that the party claiming it must first show that he or she has performed all his or her obligations under the contract or is ready, willing, and able to perform his or her side of the bargain. Even then, the court has a discretion, which should be exercised judicially, to grant or refuse a decree of specific performance. It follows, therefore, that, the court's discretion should not be exercised arbitrarily or capriciously.”
The court a quo also relied on the case of Minister of Public Construction and National Housing v Zescon (Pvt) Ltd 1989 (2) ZLR 311 (S) where…, this Court stated as follows:
“The law is clear. This is a remedy to which a party is entitled as of right. It cannot be withheld arbitrarily or capriciously.”
The court a quo noted, that, in exercising its discretion to grant an order for specific performance, it must look at the circumstances of this case, and, on that basis, map the way forward.
It observed, that, the appellant had not placed before it any evidence to show the measures it took in order to achieve financial closure. In other words, nothing had been put forward to show that specific performance was no longer achievable.
It noted, that, both parties had accepted that the question of funding was central to the implementation of the project.
The court a quo rejected the submission by the appellant, that, the project was no longer viable and that it would take years to complete. It referred to clause 1.1.3.3 of the contract which gave the time of completion to be 540 days.
It noted, that, it had ruled that the contract was still valid and not terminated, that Addendum 1 had amended the main contract and extended the conditions precedent satisfying period beyond the contemplated date. It further noted that clauses 5(ii) and 6 oblige the parties to meet and review progress on the project and effect such appropriate measures and amendments as may from time to time be required.
For that reason, the court a quo was of the view, that, any challenges arising from the effect of the changes to the currency regime can be similarly resolved by the parties in terms of clause 5(i) and clause 6.
In short, the court a quo dismissed the appellant's submissions against the grant of specific performance.
The court a quo noted, that, at some point, the parties could have agreed to implement the project in phases and that the respondent had obtained funds for the implementation of the initial phase. That position was captured in the draft Amended Restated Contract, which the parties are yet to sign.
It concluded its observations as follows:
“The point is that the question of the unavailability of funding is clearly not an excuse going by the evidence that was placed before the court.”
It was for these reasons that the court a quo ordered specific performance.
5. Whether the claim in reconvention had merit
The court a quo held, that, the counterclaim could only become relevant if it had held that the contract did not commence as a result of the respondent's failure to fulfil the conditions precedent.
In view of its finding that the contract remained valid and binding on the parties, the counter claim was no longer sustainable.
It noted that the amount paid towards the pre-commencement works was not entirely wasted and observed, that, this was an issue that the parties could discuss in terms of clause 5(i) of the contract. This clause provided for periodical performance reviews.
Consequently, the court a quo found in favour of the respondent and issued the following order:
“1. The procurement contract for the Engendering, Procurement and Construction (EPC Contract) of the 100 MW Gwanda Solar Project (ZPC 304/2015) between the plaintiff and the defendant, as amended, is valid and binding between them.
2. Consequent to the declaration of the validity of the EPC Contract, an order for specific performance of the said contract is hereby granted.
3. The defendant's claim in reconvention is hereby dismissed with costs.
4. The defendant shall pay the plaintiff's costs in the claim in convention.”
It is that order that the appellant appeals against on no less than 17 grounds as follows:
