Galaunia Farms Ltd v National Milling Company Ltd (SCZ 1 of 2004) [2004] ZMSC 106 (13 January 2004)

IN THE SUPREME COURT FOR ZAMBIA SCZ APPEAL NO. 84 OF 2002 HOLDEN AT KABWE AND LUSAKA (CIVIL JURISDICTION) (P.l) SCZ NO. 1 OF 2004 GALAUNIA FARMS LIMITED APPELLANT AND NATIONAL MILLING COMPANY LIMITED NATIONAL MILLING CORPORATION LIMITED 1st RESPONDENT 2nd RESPONDENT Coram: Sakala, CJ., Chibesakunda and Chitengi JJS 7th August and 13th January, 2004. For the Appellants: Mr. A Dudhia of Musa Dudhia & Company. For the Respondents: Mr. P. Matibini with Mr. M. Nchinto and N. Nchinto of MNB. JUDGMENT ' * Sakala, CJ., delivered the Judgment of the Court. Cases Referred to: 1. Nkhata and Others Vs The Attorney-General (1966) ZLR 124 2. Mobil Oil Zambia Ltd Vs Ramesh M. Patel (1988-89)ZLR 12 3. Augustine Kapembwa Vs Danny Maimbolwa and Attorney-General (1981)ZR 127 4. Attorney-General Vs Peter Mwakha Ndhlovu (1986)ZLR 12 5. Chizonde Vs The People (1975) ZLR 66 6. Mohammed Vs Attorney-General (1982) ZR 49 7. Zulu Vs Avondale Housing Project Limited (1982) ZR 172 8. Hyde Vs Wrench (1840) 3 Beav 334 (P-2) This is an appeal against the Judgment of the High Court dismissing the Appellant's claim for damages and consequential loss for the first Respondent's breach of an agreement to purchase wheat from the Appellant. The action was dismissed on the ground that the counter-offer by the Appellant did not constitute an acceptance of the Respondents' offer and therefore that no contract existed between the parties. The facts of the case are not in dispute and were common cause. In about March or April,1998, the Appellant issued a tender document in the form of a letter inviting potential clients, including the first Respondent, to tender for the purchase of wheat that was to be harvested in that year. The first Respondent reacted to the tender by making an offer. The first Respondent, however, extensively amended the tender document. In the amended tender document, the first Respondent inserted the figure 2,000 metric tons of wheat as the quantity to be purchased. The amended tender document was signed on behalf of the first Respondent and subsequently sent to the Appellant. The Appellant accepted the amended tender document and counter signed it. Thereafter, the Appellant prepared another document referred to in the proceedings as " a cleaned up document" or "a cleaned up contract." Subsequently, the Appellant wrote the first Respondent accepting the first Respondent's offer. In the letter, they enclosed a tender, " a cleaned up contract", which eliminated all the alterations and specifically asked the first Respondent to sign and return the " cleaned up contract." It was common cause that the 'cleaned up contract" was not signed by (P-3) the first Respondent. It was also common cause that the "cleaned up contract" contained provisions or terms which were different from those contained in the accepted extensively amended and signed offer. For instance, in the extensively amended tender document, the first Respondent's offer was to buy 2,000 metric tons of wheat, while the " cleaned up contract" provided 2,500 metric tons of wheat to be purchased by the first Respondent. The only evidence adduced at trial was that given on behalf of the Appellant. The Respondent did not adduce any evidence at trial. The brief and relevant evidence of PW1, the Managing Director of the Appellant Company, was that in May, 1998, he requested various companies to submit tenders to buy wheat from the Appellant. He received an offer from the first Respondent. He signed the offer on behalf of the Appellant, while a Mr. Ron Darby had earlier signed on behalf of the first Respondent. PW1 testified that the tender document had hand written amendments made by Mr. Ron Darby. He, PW1, accepted the tender as amended. PW1 conceded that the signing of the amended tender document meant that he was bound by it. He communicated his acceptance to Mr. Ron Darby. The acceptance was not conditional. PW1 further testified that after he accepted the tender document, he spoke to Mr. Ron Darby and went to see him to discuss with him whether he could accept extra tonnage of the wheat. According to PW1, it was a good (P.4) meeting. Mr. Ron Darby understood him why he wanted them to take extra tonnage as he had always sold his complete crop to one buyer. PW1 also testified that after the meeting with Mr. Ron Darby, he sent him what he called a "cleaned up contract". PW1 explained that the difference between the tender document and the clean contract was that the tonnage and the quantity in the clean contract was different from that in the amended tender document. According to PW1, Mr. Ron Darby had agreed to the terms as a result of their discussions. He testified that Mr. Ron Darby did not sign the clean contract because he went away. He, PW1, subsequently exchanged correspondence with Mr. Eran Wilson on behalf of the first Respondent. PW1 further testified that he was relying on the "clean contract" although it had not been signed by the first Respondent. According to PW1, he treated the silence from the first Respondent as a response to the "clean contract". The witness insisted that he had a contract with the first Respondent and the first Respondent never told him that they did not have a contract with him. The witness further explained that he sent a "clean contract" to the first Respondent because it eliminated all the hand written alterations to the original contract. He stated that the first Respondent did not revoke their original contract . According to him, the first Respondent, through their Mr. Eran Wilson, contacted him and told him that he should rely on the contract. He explained also that he visited the first Respondent and examined the area where the wheat was to be put. He sent them samples of the wheat that had to be examined. The first Respondent examined the samples and gave him the results. (P-5) PW1 explained that on 20th September, 1998, they had a meeting with the first Respondent. He went with his lawyer and the General Manager. At the meeting the first Respondent was represented by a Mr. Fourie on behalf of the shareholders. There was also the Managing Director and a Director. According to the witness, the meeting was to discuss whether to deliver the wheat or not. According to PW1, the first Respondent did not dispute the contract but that it was in financial difficulties. The first Respondent informed him that if he delivered the wheat, he may find that he would never get paid for it. They advised him to sale the wheat immediately to somebody else. Another meeting was held on 26th September, 1998 at which he was given a letter releasing the Appellant from the contract and informing them that they were free to sale their wheat elsewhere. The remainder of this witness's evidence relates to the arrangements he made to sell the wheat to another buyer and the loss he made as a result of the first Respondent's alleged failure to buy the Appellant's wheat. In cross examination, PW1 testified that the difference between the extensively amended document and the "clean contract" was the quantity, the buyer's option as well as the option of payments. He insisted that the changes were discussed. He conceded that the changes or clarifications in the "clean contract" were not signed by the first Respondent. He also conceded that 2,500 metric tons, in business, was not the same as the 2,000 metric tons as there was a difference of 500 tons. (P.6) PW2, a Certified accountant with the Appellant, gave evidence about the Loan the Appellant had obtained for the 1998 wheat. Since this appeal centers on the question of whether any contract existed between the parties, we find this witness's evidence not relevant to the issue. The learned trial Judge examined the only evidence before him and considered the principles of law relating to offer and counter - offer. He observed that on the facts of the case, it could rightly be argued that the acceptance was at variance with the terms of the offer. He noted that the Appellant did not accept all the terms contained in the offer. The learned trial judge considered what amounts to a counter - offer. He observed that the issue of quantity was a fundamental term of the offer and that it should not have been altered in the tender document without the concurrence of the first Respondent. The learned trial Judge rejected the argument that the first Respondent had, by its conduct and silence accepted the terms of the counter- offer. The learned trial Judge observed that from the evidence on record, at no time did the first Respondent conduct itself so as to give the impression that the counter- offer was accepted. The learned trial Judge also observed that the counter- offer had not been signed for at the time of the trial despite the Appellant's witness personal efforts to secure the signature of the first Respondent's employees. The learned trial Judge also rejected the (P.7) arguments of late acceptance as there had been no acceptance at any one time. The court finally held that no contract existed between the parties. The Appellant's claim failed. The Appellants filed a memorandum of appeal containing four grounds. These grounds are that: 1. There was no basis in fact and in law for the learned judge to ignore the evidence of PW1 that there was a verbal agreement between Mr. Darby and himself whereby the Respondents would purchase an additional 500 tons of wheat from the Appellant. Since no evidence had been called to contradict PWl's testimony the learned judge was duty bound to accept PWl's testimony unless the Court expressly stated that he was unreliable and not credible. 2. The learned judge erred in law by not holding that the silence and acquiescence of the Respondents was an acceptance of the terms of the contract for the additional 500 tons. The learned judge also erred in fact and in law by not taking into account the evidence of PW1 that Mr. Eran Wilson on behalf of the Respondents told him to rely on the contract. 3. The learned judge erred by not finding that even if there was no new contract for 2500 tons, there was a valid contract for 2000 tons. The learned judge should not have ignored the fact that the original offer for the 2000 tones had been unconditionally accepted and therefore constituted a valid and binding agreement. The learned judge ought to have properly taken into account the Respondent's conduct, which clearly showed it was bound by the contract it had with the Appellant. The Respondents even admitted in writing to being bound to this agreement. 4. The learned judge failed to take into proper account that at no time did any of the parties indicate an intention to reject the contract. The learned judge erred in fact and law in his finding that the Plaintiff were challenging the whole contract and not only the new terms relating to early payment and the additional 500 tons. (P. 8) In arguing the appeal, Mr. Dudhia, on behalf of the Appellant, argued grounds 1 and 2 together and grounds 3 and 4 together. All the learned counsel filed written heads of argument supplemented by oral arguments. In arguing grounds 1 and 2, Mr. Dudhia informed the court that essentially, they were challenging the findings of fact. He pointed out that in the instant case, the facts were particularly important in the area of the law of offer and acceptance. He submitted that for this reason, it was essential that the learned trial judge explained the findings of fact fully and clearly and that more importantly that these findings were supported by the evidence. According to counsel, the basis in law, for the appellate court to disturb the findings of fact of a trial court is the case of Nkhata and Others Vs The Attorney-General (1) cited with approval in the cases of Mobil OH Zambia Ltd Vs Ramesh M. Pate! (2) and in Augustine Kapembwa Vs Danny Maimboiwa and and Attorney- Generai(3). He urged the court on the authority of the Nkhata case to overturn the findings of fact of the trial court. He contended that it was a misdirection by the learned trial Judge not to accept the testimony of PW1 that the Defendant verbally agreed to the variations of the original agreement. He pointed out that PW1 had told the court that the first Respondent, through his authorized officers, verbally agreed to the new terms for the supply of the wheat but that these witnesses were never called to challenge the evidence of PW1. He submitted that the learned trial judge had no basis to reject, as he did, the evidence of PW1. Counsel contended that the only reason that the learned trial judge could have rejected the evidence of PW1 was if he thought that PW1 was not a credible witness and should not be believed. According to (P-9) counsel, the learned trial judge had a duty to give reasons for not finding the witness credible. For this, he cited the case of Attorney-Genera! Vs Peter Mwakha Ndhlovu(4) and Chizonde Vs The Peop!e(5). Counsel pointed out that these cases held that there must be a reason for rejecting the evidence of a witness which must be recorded. In the instant case, he submitted that no findings were made to that effect by the learned trial judge as to why he rejected PWl's evidence. Counsel submitted that this was a misdirection. He invited the court to substitute these findings and that if the findings are substituted with a finding that the variations had been agreed, then the effect will be that there was a valid contract, albeit, partly verbal but which is possible in law. He cited Halsburys Laws of England Vol. 9, 4th Edition paragraph 212 as authority for the submission. Counsel also contended that another misdirection by the learned trial judge was that he erroneously referred, in his judgment, to matters which he attributed to PW1, which were never said and do not appear in the record. Counsel submitted that this was a material misdirection as it contradicted what the witness had said; namely that he had reached a verbal agreement with both Mr. Wilson and Mr. Darby, that the new terms would be part of the contract and that PW1 did not say that he was waiting for the board's approval of the contract or that he was relying on a signed contract. Another misdirection pointed out by counsel was that the learned trial judge failed to appreciate that Mr. Darby had agreed on behalf of the first Respondent to the additional terms. Other misdirections argued related to the findings that the first Respondent's agreement was not obtained;, that the learned trial judge ignored the testimony of PW1 which had not been contradicted that there was a verbal agreement to the variation; that the learned trial judge did not give any reasons why he ignored the facts; that it was also a misdirection for the Court to state that if the employees of the first Respondent could have signed the "cleaned up contract" if they agreed; and that it was a misdirection on the part of the trial judge to have found that there was no acceptance at any one time. (P.10) On the basis of the foregoing argued misdirections, we were urged to overturn the decision of the trial court and find that there was a contract for 2500 metric tons, which was breached by the first Respondent. Grounds 3 and 4 were argued as an alternative. It was contended that the court in the alternative should have found that there was a valid contract to purchase 2000 metric tons from the Appellant. According to counsel, on the evidence, it was clear that the Appellant had accepted the offer of 2000 metric tons. It was submitted that at the very least, the court should have found that there was a contract for 2000 metric tons, as the counter-offer of 2500 metric tons did not destroy the first offer of 2000 metric tons. Both Respondents were represented by Mr. Matibini, who was assisted by Mr. M. Chinto and N. Chinto. In responding to arguments on grounds 1 and 2, Mr. Matibini also relied on the case of Nkhata and Others as to the powers of an appellate court to interfer with the findings of fact by a trial court. He submitted that the position set out in that case does not warrant any fresh debate. He further submitted that the Appellant had not demonstrated the grounds on which this court should interfer with the findings of the trial court. Mr. Matibini pointed out that the cases of Attorney - General Vs Peter Mwakha Ndhovu and Chizonde Vs The People were distinguishable from the instant appeal in that in these cases, there were unsatisfactory reasons given for accepting the evidence and that the learned trial judge did not take the advantage of having heard and seen the witnesses. In the instant appeal, he submitted that it could not be argued that the reasons were either unsatisfactory or inexplicable. Mr. Matibini also submitted that it is trite law that, he, who asserts must prove. He referred the court to the cases of Mohammed Vs Attorney-General (6) as re­ stated in the case of Zulu Vs Avondale Housing project Limited.(7) He submitted (P.ll) that the contention by counsel for the Appellant that the failure of the first Respondent's witnesses to come to court to explain the matters flies in the teeth of the well settled law as to the burden of proof which lies on the Appellant despite the fact that the first Respondent was unable to call a witness to contradict PWl's testimony. Mr. Matibini quoted at great length, the verbatim evidence of PW1. He submitted that the contradictions and inconsistencies in the evidence of PW1 made the trial court to question the credibility of PWl's testimony. In specifically dealing with ground two, counsel submitted that it is now settled law that mere silence on the part of the offeree does not constitute an acceptance of the offer. On ground three, Mr. Matibini submitted that it is trite law that for a contract to be said to be in existence there must be a definite offer and definite acceptance. He submitted that from the sequence of events, it is clear that from the out set, there was no contract between the parties. Mr. Matibini submitted that the said "cleaned up contract" amounted to a counter offer in law. He further submitted that the bottom line was that there was no consensus ad idem for a contract to be said to have come into existence. He pointed out that there was no meeting of the minds between the parties. What they were discussing was at variance. Finally on ground 4, it was submitted that the learned trial judge made a finding of fact and law that the purported "cleaned up contract" did not amount to acceptance of the Respondent's offer, that the counter offer was a total rejection of the initial offer. Counsel concluded that the court below was entitled to come to the conclusion that there was no contract between the parties. Although we have delved into the evidence and arguments in some great detail, the relevant facts are short. The issue for determination on the facts is also very clear. The principles laid out in the Nkhata case, followed in subsequent decisions of this court still stand as good law and do not require restating. In the case of Mohammed (6) restated with approval in Zulu's case (7) we (P-12) said:- "An unqualified proposition that a Plaintiff should succeed automatically whenever a defence has failed is unacceptable to me. A Plaintiff must prove his case and if he fails to do so the mere failure of the opponent's defence does not entitle him to Judgment. I would not accept a proposition that even if a Plaintiff's case has collapsed of its inanition or some reason or other Judgment should nevertheless be given to him on the ground that a defence set up by the opponent has also collapsed. Quite clearly a defendant in such circumstances would not even need a defence." We reaffirm that position. The burden to prove any allegation is always on the one who alleges. The pertinent facts in this appeal are that the Appellant invited tenders to purchase their wheat. The first Respondent responded to the invitation. After extensively amending the tender, the Respondent offered to purchase 2000 metric tons of the wheat. They signed their offer. The Appellant altered the 200 metric tons to read 2500 metric tons. It is not in dispute that despite alleged meetings and discussions between the parties the 2500 metric tons was not signed for. In his own evidence, PW1 testified that there were fundamental differences between the extensively amended tender document and the "cleaned contract". But the Appellant would like the court to accept that there was a verbal agreement. But then, the purported verbal agreement and discussions that followed appear to us to have come after the "Cleaned up Contract." A scrutiny of the "cleaned up contract" reveals that not only the alterations were eliminated but the figure 2000 metric tons offered by the first Respondent was also eliminated and substituted by 2500 metric tons. PWl's evidence was that this figure was not agreed. (P-13) On these clear facts, we are satisfied that the sending of a "clean contract" amounted to a counter offer. What amounts to a counter-offer was settled in an old case of Hyde Vs Wrench (8) The facts of that case are on all fours with the facts in the present appeal. These are: The Defendant offered to sell a farm to the Plaintiff for £1000. The Plaintiff replied offering to buy for £950 and when the counter-offer was rejected, purported to accept the Defendant's original offer to sell for £1000. It was held that there was no contract as the Plaintiff had, by making a counter offer of £950, rejected, and so terminated, the original offer. In the instant appeal, we can substitute money figures with tons of wheat. The first Respondent offered to the Appellant to buy 2000 metric tons of wheat. The Appellant replied offering 2500 metric tons. The first Respondent did not Respondent. It was argued that the silence on the part of the first Respondent must be construed to have accepted to buy 2500 metric tons of wheat from the Appellant. We have difficulties to accept this proposition. Chitty On Contracts, General principles, under the subject Silence, para 81 headed " "offeree generally not bound" at page 62 states: "An offeree who does nothing in response to an offer is not bound by its terms. This is so even though the offer provides that it can be by silence". After citing some authority the authors further state in the same paragraph "Where the offeree does not wish to accept the offer, it is generally undesirable to put him to trouble and expense of refusing the offer." We consider this to be good law. We are therefore satisfied that the present case does not meet the test set out in the Nkhata case upon which this court can reverse the trial court on the facts. In our view, the findings of fact are fully supported by the evidence. There was no contract between the parties. On the authority of Hyde case, we can not also accept the alternative argument that the court should have at least found that there was a contract to purchase 2000 metric tons of wheat because there was no contract as the Appellant had, by making a counter offer of 2500 metric tons rejected, and so terminated, the original offer of 2000 metric tons. (P.14) Having considered the evidence on record, the judgment of trial court and the industrious submissions by counsel, we find no merit in this appeal. It is therefore dismissed with costs to be taxed in default of agreement. E. L. Sakala CHIEF JUSTICE L. P. Chibesakunda SUPREME COURT JUDGE P. Chitengi SUPREME COURT JUDGE