Mashonaland Tobacco Company (Private) Limited v Mahem Farms (Private) Limited & 1 Or

### Preamble
Judgment No. SC 152/2020
1
Civil Appeal No. SC 967/2018
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MASHONALAND     TOBACCO     COMPANY     (PRIVATE)     LIMITED

v

MAHEM     FARMS     (PRIVATE)     LIMITED     (2)     TIM     MAJOR

SUPREME COURT OF

PATEL JA, BHUNU JA & MAKONI JA

HARARE, OCTOBER 29, 2019 & N0VEMBER 20, 2020

T. Zhuwarara, for the appellant

F. Mahere, for the respondents

PATEL JA:		This is an appeal against the judgment of the High Court granting absolution from the instance in respect of appellant’s claim against the respondents. At the hearing of the matter before the court a quo, the claim against the first respondent was withdrawn, as the company no longer existed, leaving only the second respondent as the defendant being sued. For some unexplained reason, both defendants have continued to be cited as respondents on appeal.

Background

In July 2010, the parties concluded a contract farming agreement for the provision of crop inputs and financial assistance for the production of flue cured tobacco. The appellant asserts that it provided amounts totalling US$ 575,164.68. Its case was that, due to mismanagement of the crop, the respondents failed to supply enough tobacco and to pay outstanding amounts owing to the appellant.

The second respondent contended that the claim had prescribed. He further denied that crop inputs and finance to the value of US$ 575,164.68 was supplied and delivered for the season in question. Additionally, he averred that he was not given unimpeded access to maintain, develop and harvest the crop in sufficient quantity and quality, because of obstruction by a third party farm owner. He also contended that the appellant had delayed in supplying the necessary inputs and this resulted in a poor yield. Lastly, he alleged that the figure claimed by the appellant included a debt of US$ 418,820.73 which was owed by another corporate entity and was not part of what he owed under the agreement with the appellant.

Judgment of the High Court

The court a quo heard testimony on behalf of both parties. It observed that the witnesses on both sides had testified consistently and had maintained their respective versions of events.

As regards prescription, the court found that prescription began to run in April 2011 when the account balance was confirmed. However, it was interrupted by various communications between the parties and specific acknowledgements of debt by the second respondent. The court concluded that the debt was no longer prescribed.

With respect to the total amount claimed, the court found that a figure of US$ 418,820.73 arose from a previous crop loan involving both parties as well as a third corporate entity. This figure was acknowledged in a letter of confirmation of the balance due and was claimed as part of the sum of US$ 575,164.68. However, the appellant’s cause of action, as pleaded in the summons, arose from a later input supply agreement which did not incorporate the earlier debt. Although both debts were acknowledged in a single letter of acknowledgment, the summons did not make specific reference to both debts. Consequently, the appellant was confined to relief based on the 2010–2011 farming season, as pleaded in the summons, and the debt carried over from the previous season was not recoverable.

The court also found that the appellant failed to meet its part of the bargain by not supplying inputs and disbursing funds timeously. Therefore, the respondents could not be held responsible for the unsuccessful crop resulting from those delays. However, it was difficult to determine what impact they had on the total amount owed to the appellant.

Lastly, the court found that the second respondent had signed a confirmation of account balance totalling US$ 725,070.36 as at 31 March 2011. However, his assertion that the appellant did not take into account further deliveries of tobacco was not disputed. He maintained that he only owed about US$ 120,000.00. But the value of subsequent deliveries and to which account they were credited was not clear. The court was therefore unable to determine his indebtedness for the 2010–2011 season.

In the event, the court concluded that the appellant had not established its claim. However, because the amount owed was acknowledged, the appellant ought to be given the opportunity to prove its claim. The court proceeded to declare absolution from the instance and ordered the appellant to bear the costs of suit.

Grounds of appeal

The five grounds of appeal herein impugn the judgment a quo on the basis that the court erred in the following respects:

Granting absolution from the instance and disregarding evidence proving the appellant’s claim for US$ 575,164.68.

Granting absolution from the instance despite finding that the second respondent admitted to owing the sum of US$ 120,000.00.

Failing to find that the claim of US$ 575,164.68 incorporated deliveries made by the second respondent in amortising the debt.

Failing to find that the sum of US$ 418,829.73 had been incorporated in the 2010-2011 farming season and acknowledged by the second respondent in a letter dated 20 April 2011.

Concluding that the appellant was responsible for the second respondent’s failure to grow the tobacco crop, even though the appellant had duly supplied all inputs and the second respondent bore the risk of failing to provide tobacco crop required to extinguish the debt.

The relief sought by the appellant is that the appeal be allowed with costs and that the judgment of the court a quo be set aside and be substituted with an order requiring the second respondent to pay the sum of US$ 575,164.68 with costs or, alternatively, the sum of US$ 120,000.00 with costs.

In my view, the five grounds of appeal set out above can properly be redacted to two salient issues. The first is the extent, if any, of the second respondent’s liability to the appellant, having regard to the pleadings and the evidence adduced a quo. The second is whether or not the appellant was responsible for the second respondent’s failure to grow and deliver the agreed quantum and quality of tobacco.

Extent of liability

It is common cause that the appellant approached the court a quo on the basis of the Input Supply Agreement concluded in July 2010 pertaining to the 2010–2011 selling season. This appears clearly from paragraphs 4 to 7 of the declaration. Again, in their plea, at paragraph 2.1, the respondents also related to the terms and conditions of the July 2010 Agreement.

The Statement of Account that was prepared and relied upon by the appellant covers the period stretching from 30 July 2010 to 24 June 2011. However, this Statement of Account was not specifically alluded to in the pleadings. The contentious figure of US$ 418,820.73, which was debited to the first respondent’s account on 1 December 2010, is described in the Statement as being a “Previous Crop Loan Transfer From 2010”. With the inclusion of that figure, the balance outstanding as at 24 June 2011 is reflected in the Statement as US$ 575,164.68, being the total amount claimed by the appellant.

Ms Mahere, for the respondents, submits that the Statement of Account relates to a different cause of action, arising from a different contract with an entity called Valburn Enterprises (Pvt) Ltd and in respect of the previous farming season. This was accepted by the appellant’s witness under cross-examination. Ms Mahere further submits that Statement could not form an accurate basis for calculating deliveries of tobacco that might have been credited to the Account in amortising the debt. As regards the amount of US$ 120,000.00 admitted as owing by the second respondent, Ms Mahere submits that his evidence was hesitant and qualified. In any event, this admission did not discharge the onus on the appellant to prove its claim as there was no evidence to show how the figure of US$ 120,000.00 was arrived at. Consequently, the relief sought by the appellant cannot be granted, either on its main claim or on its alternative claim.

The appellant relies heavily on a letter, dated 20 April 2011, countersigned by the second respondent, in which he confirms his liability as at 31 March 2011 in the total sum of US$ 725,070.36, made up of the prior year’s balance of US$ 418,829.73 plus US$ 306,249.63 for 2010-2011. In his testimony, he confirmed this balance but explained that it arose from a different agreement with a different company in which he was a partner. In any event, as I have already indicated, the same figure of US$ 418,820.73 also appears in the Statement of Account.

In this regard, Mr Zhuwarara, for the appellant, submits that there was a joint debt with Valburn Enterprises, but it was split and shared equally, and the respondents’ share was fully acknowledged in the confirmation letter of 20 April 2011. He further submits that the claim for US$ 575,164.68 was fully justified. Additionally, the second respondent testified that he was willing to repay, if he were in a position to do so, and admitted his liability in the amount of US$ 120,000.00. In terms of s 36 of the Civil Evidence Act [Chapter 08:01], there was no need for the appellant to prove this admitted fact. With respect to both the main claim and the alternative claim, Mr Zhuwarara contends that the court a quo was too technical by placing undue emphasis on the pleadings, and thereby disregarded crucial evidence in favour of the appellant. With reference to subsequent deliveries of tobacco, he refers to the Statement of Account which reflects quantities of tobacco that were sold and delivered from 1 April 2011 to 15 July 2011 to amortise the loan. Although this was clearly attested to and explained by the appellant’s witness, the court a quo misdirected itself in finding that subsequent deliveries were not taken into account. Mr Zhuwarara concedes that the declaration was not clearly drafted. However, despite poor pleading, the relevant issues emerged clearly at the trial. The appeal should therefore succeed with costs.

As I have earlier stated, there can be little argument against the proposition that the cause of action as pleaded in the declaration is primarily predicated on the Agreement concluded between the parties in July 2010, which relates specifically to the 2010-2011 tobacco growing season. However, it is also averred in the declaration that the respondents acknowledged their indebtedness to the appellant in respect of the total claim for US$ 575,164.68. In their plea, the respondents admitted the July 2010 Agreement, but took issue with the contractual terms and conditions pleaded by the appellant. Furthermore, they denied that indebtedness in the amount claimed by the appellant manifested itself or was agreed upon. In its replication, the appellant reasserted the fact that the respondents had acknowledged their indebtedness to the appellant.

Ex facie the pleadings, there appears to be some merit in the appellant’s position that its claim was premised on the 2010 Agreement coupled with respondents’ acknowledgement of indebtedness. These two elements taken together would have constituted a single cause of action. Additionally, the letter of 20 April 2011 clearly confirms the inclusion of the balance of US$ 418,820.73 from the previous season in the overall liability of the respondents towards the appellant. This was not disputed by the second respondent in his testimony.

What is not clear, however, is precisely how much of this debt was to be carried over from the previous season. The matter is confounded by the testimony of the appellant’s witness who explained that the debt was incurred by Valburn Enterprises, in which the second respondent was a partner, “and they ended up with a large debt which was split in half when Mr Major [the second respondent] took the one half of the $ 418,820.73” (my emphasis). This anomaly in the exact quantum of indebtedness to be carried over and borne by the respondents remains unexplained. On the other hand, the respondents did not produce any documentary or oral evidence to controvert or challenge the evidence contained in the Statement of Account. This reflected that the full amount of US$ 418,820.73, as opposed to only half of that amount, was to be carried over from the previous crop loan and debited to the respondents’ account.

As stated earlier, the court a quo found that the debt of US$ 418,820.73 had been acknowledged. However, because it was not part of the 2010-2011 season and because it had not been specifically pleaded as such, the court declined to grant the total amount of US$ 575,164.68 claimed by the appellant.

As a general rule, judgment cannot be granted on a cause of action that is not pleaded. The pleadings must clearly set out the precise parameters of the issues contested between the parties. Thus, in the Namibian case of Courtney-Clarke v Bassingthwaighte 1991 (1) SA 684 (Nm), at 698, it was explained that:

“…. there is no precedent or principle allowing a court to give judgment in 	favour of a party on a cause of action never pleaded, alternatively there is no 	authority for ignoring the pleadings …. and giving judgment in favour of a plaintiff 	on a cause of action never pleaded. In such a case the least a party can do if he 	requires a substitution of or amendment of his cause of action, is to apply for an 	amendment.”

This decision was cited with approval by this Court in Medlog Zimbabwe (Pvt) Ltd v Cost Benefit Holdings (Pvt) Ltd SC 24/18, at p. 11. However, it is also a principle of our law that a court should not place undue emphasis on pleadings where it can decide the case on the real issues canvassed during the course of the trial and where it is clear from the outset what a litigant is relying on. See Marais & Anor v Kennedy & Anor 1996 (2) ZLR 610 (H), at 629. Moreover, it would be idle for a court not to determine the real issue that emerged during the course of the trial, even though a contract relied upon by a party had not been pleaded. See Collen v Rietfontein Engineering Works 1948 (1) SA 413 (A), at 433; cited in Herbstein and Van Winsen: The Civil Practice of the Superior Courts in South Africa (3rd ed.), at p. 361.

In casu, it cannot be disputed that the appellant’s claim for the payment of US$ 575,164.68, incorporating the debt of US$ 418,820.73 arising from the previous farming season, was not properly pleaded as founding the appellant’s cause of action. On the other hand, it is equally clear that the second respondent expressly acknowledged liability for the previous year’s balance of US$ 418,820.73 in the letter of confirmation, dated 20 April 2011. This amount was also reflected in the first respondent’s Statement of Account compiled by the appellant, adding up to its total indebtedness in the sum of US$ 575,164.68. The crucial difficulty with the appellant’s case, which difficulty I have adverted to earlier, is that the documentary evidence adduced at the trial shows the figure of US$ 418,820.73 as being the debt carried over from the previous season, while the oral testimony of the appellant’s own witness evinces that the respondents only inherited half of the debt of US$ 418,820.73 incurred by Valburn Enterprises.

What all of this means is that there is a fundamental discrepancy in the evidence that effectively precludes the accurate computation of the total indebtedness of the respondents towards the appellant. Was the amount to be carried over from the previous season the sum of US$ 418,820.73 or merely half of that amount, i.e. US$ 209,410.36? If it was the latter figure, the total amount of US$ 575,164.68 claimed by the appellant is manifestly incorrect. In any event, what is not at all clear is why this patent incongruity was not grasped or related to either by the court a quo or by the parties themselves.

As for the supposedly admitted liability for the lesser sum of US$ 120,000.00, the second respondent testified that he did not know the exact figure as he was not an accountant. When asked to provide an estimate, he stated “I believe in the region of one hundred and twenty thousand” (my emphasis). The court a quo found that there was no basis for this figure and that, therefore, it was not possible to determine the extent of the respondents’ indebtedness. I am unable to find any error or misdirection in this regard. There was no evidence before the court a quo to show how the figure of US$ 120,000.00 was arrived at. The supposed admission did not discharge the evidential onus on the appellant to prove its claim with a legally acceptable measure of exactitude. In short, an award “in the region of US$ 120,000.00” would have been patently invalid and unenforceable.

As regards the value of subsequent deliveries of tobacco crop, the second respondent asserted that these deliveries had not been taken into account in reducing his indebtedness to the appellant. The appellant’s position was that they were duly credited, as reflected in the Statement of Account covering the period from 1 April 2011 to 15 July 2011. However, there is very little evidence on record, whether oral or documentary, to establish that these tabulated credits covered all the deliveries that might have been made by the respondents after 15 July 2011. The court a quo found, quite correctly, that the value of subsequent deliveries and the account to which they were credited was not clear. It therefore appeared that subsequent deliveries might not have been taken into account, particularly as the parties were unable to provide their specific values and the figure by which the debt for the 2010-2011 season had been reduced. Again, in my view, the reasoning and findings of the court a quo in this respect cannot be faulted.

Responsibility for failure to grow and deliver crop

The court a quo found that the appellant failed to supply inputs and disburse funds to the respondents timeously. It also found that this failure on the part of the appellant in turn resulted in the respondents failing to have a successful crop.

In their plea, the respondents averred that they were impeded in maintaining, developing and harvesting the tobacco crop to completion by some unnamed third parties, whose conduct constituted a supervening impossibility, making it impossible for the respondents to extinguish their contractual obligations in full. Furthermore, after this interference with and disruption of normal farming activities took place, the appellants’ promised support or backing did not materialise, and this led to the effective termination of the agreement by operation of law. Due to the supervening events which made it impossible for the respondents to perform to the full extent initially agreed upon by the parties, the repayment obligation under the Agreement was extinguished.

In its replication, the appellant admitted that not all inputs and financial assistance amounting to US$ 575,164.68 were advanced in the same season. However, it categorically refuted the allegation that the respondents’ failure to perform their obligations in terms of the Agreement or to discharge their indebtedness to the appellant was as a result of any supervening impossibility. The appellant further averred that the respondents’ failure to deliver sufficient quantities of tobacco was as a result of their failure to adequately monitor the tobacco crop and failure to take due advice. Moreover, in terms of the Agreement between the parties, the respondents assumed the risk in respect of the tobacco crop up to the time of delivery to the appellant.

From the pleadings, it is abundantly clear that the respondents did not allege any delay on the part of the appellant in supplying inputs or disbursing funds as being the cause of their failure to perform their obligations under the Agreement. This was simply not part of their defence. Rather, they attributed their failure to perform to some unspecified interference or disruption by some unidentified third parties. Additionally, there was no evidence from the respondents that they requested or demanded inputs or funds and that the appellant refused to provide the inputs or funds as demanded. They did not produce any evidence that the appellant had in fact delayed in performing its obligation to supply inputs or disburse funds. It was incumbent upon the respondents to prove their allegations of breach on the part of the appellant. Their allegations were simply not proved. In this regard, the findings by the court a quo that the appellant was responsible for the crop failure is not supported by the record or the evidence adduced at the trial.

As for the element of risk, the terms of the Agreement between the parties leave no doubt whatsoever that it was the respondents themselves who bore the risk of any failure to provide the tobacco crop required in order to extinguish their indebtedness to the appellant. The following provisions of the Agreement make this position crystal clear.

Clause 6 sets out the obligations of the respondents, qua Grower, to take all necessary steps for the proper cultivation of the crop, take all reasonable precautions against infestation, ensure that the crop is properly reaped, cured and graded, comply with instructions given by the appellant, and render periodic reports in relation to progress in growing the crop. Clause 9 makes it the sole obligation of the Grower to satisfy himself as to the quality of the inputs sought and absolves the appellant of any liability in respect of any defect or deficiency in any inputs supplied, save for any loss occasioned by its gross negligence. Clause 10 categorically stipulates that risk and profit in the tobacco sold by the Grower to the appellant passes only upon delivery to the appellant. In terms of Clause 11, the Grower is required to take out and pay for specified policies of hail insurance and register such stop orders as may be required in favour of the appellant. Clause 13 entitles the appellant to summarily terminate the Agreement and claim immediate repayment of the Grower’s debt in the event of any breach by the Grower or should circumstances arise which in the sole discretion of the appellant may place the recovery of the Grower’s debt at risk. Lastly, Clause 16 provides that the Agreement constitutes the entire contract between the parties, who acknowledge that no warranties, representations, promises or undertakings have been given or made or relied upon by either party, save to the extent recorded in the Agreement. Clause 16 also stipulates that no variation of the Agreement shall be valid unless reduced to writing and signed by or on behalf of both parties.

The cumulative effect of the foregoing provisions embodied in the Agreement between the parties is incontrovertibly clear. It was the respondents who assumed the risk of any failure to comply with their obligations under the Agreement, including the production and delivery of tobacco crop of sufficient quantity and adequate quality as specified in the Agreement.

Disposition

As regards the extent of the respondents’ liability towards the appellant, I am satisfied that the appellant failed in the proceedings a quo to establish the exact amount of the respondents’ indebtedness, in respect of both the main claim for US$ 575,164.68 as well as the alternative claim for US$ 120,000.00. Given the deficiencies and discrepancies in the evidence adduced on behalf of the appellant, the court a quo cannot be faulted for finding itself ill-equipped to determine the extent of the respondents’ indebtedness. Moreover, having regard to the fact that the amount owed was acknowledged by the respondents, the court quite properly exercised its discretion to declare absolution from the instance rather than dismiss the appellant’s claim in its entirety. It follows that the first four grounds of appeal cannot be sustained and must be dismissed.

On the other hand, having regard to the pleadings and the evidence adduced, in particular, the terms and conditions stipulated in the Agreement between the parties, I must conclude that the court a quo grossly misdirected itself in holding the appellant responsible for the respondents’ failure to grow and deliver the requisite tobacco crop in terms of the Agreement. The respondents clearly bore the risk of their own failure to provide the tobacco crop required to extinguish their debt. It follows that the fifth ground of appeal succeeds and must therefore be upheld.

As regards costs, although the preponderance of the grounds of appeal have failed, I think it just and equitable in casu that neither party should be penalised with the burden of having to pay the other party’s costs.

It is accordingly ordered that:

The appeal is dismissed in respect of grounds one to four and is allowed in respect of ground five.

Each party shall bear its own costs.

BHUNU JA			:		I agree

MAKONI JA			:		I agree

Gill, Godlonton & Gerrans, appellant’s legal practitioners

Honey & Blanckenberg, respondents’ legal practitioners