General Leasing (Pvt) Ltd. v Allied Timbers Zimbabwe (Pvt) Ltd. (HC 1548 of 2014) [2016] ZWHHC 36 (13 January 2016)

1 HH 36-16 HC 1548/14 GENERAL LEASING (PRIVATE) LIMITED versus ALLIED TIMBERS ZIMBABWE (PRIVATE) LIMITED HIGH COURT OF ZIMBABWE TSANGA J HARARE, 12 & 13 January 2016 Special Plea WN Chirongoma, for the plaintiff NM Phiri with TC Mashamba, for the defendant TSANGA J: The plaintiff, General Leasing (Private) Limited issued summons for the sum of US$ 30 696.00 being an amount due by the defendant, Allied Timbers Zimbabwe (Private) Limited for what it described as being services rendered in the form of lease of PABX Systems and telephones from 31 December 2008 to March 2013. These services were said to have been provided at two sites, namely Chinhokwe site and Stapleford site in Mutare. It was averred that despite demand the defendant had refused to pay. The defendant raised the special plea of prescription as well as that of lack of cause of action against it. The parties having failed to adhere to the time frames for setting down and arguing the special plea before the trial, the issues raised where therefore argued as preliminary points at the commencement of the actual trial. What was common cause was that the actual contractual agreement for the lease of the PABX systems in 1996 for an initial period of five years renewable yearly thereafter was not with the defendant but with the Forestry Commission. This contract which the plaintiff had with the Forestry Commission contained Clause 7.1 which specifically forbade the cession, assignment or transfer or alienation of any of the lessee’s rights under the agreement without the prior written consent of the company – being the plaintiff in question. The plaintiff’s claim was brought for services it says it rendered from 2008 to 2013. Unbeknown to it, at some unspecified point in time, the premises had been taken over by Allied Timbers, the defendant in this matter. HH 36-16 HC 1548/14 In terms of prescription the defendant, through its counsel Mr Phiri, argued that the summons having been issued in February 2014, the debts arising from 2008 had become prescribed in 2011; those that arise in 2009 had become prescribed in 2012; whilst those that arose in 2010 had become prescribed in 2013. This was premised on the argument that the nature of the services rendered involved a monthly rental which meant that the debts became due on a monthly basis. He also argued that the plaintiff was aware at all times of the identity of its debtor as the Forestry Commission evidenced by the statements invoiced to the Forestry Commission. He argued that it was unreasonable for the plaintiff to suggest that it was not aware who its debtor was. The defendant’s prayer on prescription was therefore that the plea be upheld. The defendant’s second point by way of a special plea was that there is no relationship between the plaintiff and the defendant, in that the defendant is a different entity from the Forestry Commission. It was explained by defendant’s counsel, that the defendant is a separate company from Forestry Commission in that the latter is a regulator of forests whereas Allied Timbers operates as its limited commercial company. He also submitted that there was no contract to pay in US$ whether between the plaintiff and the Forestry Commission, or the plaintiff and the defendant. More importantly, he further argued that the Forestry Commission did not cede any rights to Allied Timbers as would need to have been done as per the original agreement. Again, with regard to these issues, his prayer on behalf of the defendant was that the claim should be dismissed with costs on a higher scale. Ms Chirongoma who appeared on behalf of the plaintiff argued that the identity of the debtor was hidden from it and that when the defendant took over the estates from the Forestry Commission it took over the equipment in use at those mills. She also pointed out that no response had been sent to the statements it despatched and therefore it could not have known that it was now dealing with a different entity from that it had entered into a contractual arrangement with. Moreover, she placed reliance on a letter plaintiff had written to the defendant in which it highlighted that following dialogue between the two, the defendant had agreed to settle the sums in question over a period of four months. She relied on this as establishing a cause of action and also argued that the letter interrupted prescription. It was her submission that the issue of the real; debtor had been resolved at the time. She also relied on a letter written by the defendant on 29 March 2013, which though disputing the existence of a contract, nonetheless went on to indicate that the contract was being terminated and thanked the plaintiff for services rendered. She insisted that the reason why the defendant had HH 36-16 HC 1548/14 agreed to take over the debt in question was because it acknowledged it had made use of the equipment. Ms Chirongoma pointed out that there was no contract between it and the defendant there was evidence that the defendant had made use of the plaintiff’s equipment and as such could not be unjustly enriched. She relied on the English case of Henderson v Merrex Syndicate Ltd & Ors 1994 [3] All ER 506 that it is possible for one to assume liability of a benefit that they have derived. In her view the very fact that the defendants enjoyed benefits would make them liable. Whilst Ms Chirongoma argued that the defendant should not be let off on the basis of unjust enrichment, Mr Phiri rightly pointed out that the claim as per summons is based on contract. In my view, it is this issue which goes to the crux of the special plea in the sense of whether the defendant assumed in any way the debts of the Forestry Commission. The issue of prescription is only relevant if there is indeed evidence that the right defendant is properly before this court. The real issue in this regard is whether there was a cession of rights and duties that would make the defendant legitimately liable for the debts incurred for the hire and use of the said equipment. The fact that the defendant wrote a letter terminating the agreement would be of no force and effect if in fact there was no contract between the two. A contract cannot be terminated by a party who is not a party to it. If there was never a contract between the plaintiff and the defendant, there cannot be prescription to talk about in the face of a non-existent contract. In terms of general principles on the law of lease, the authors Bradfied and Lehman in Principles of the Law of Sale and Lease (Juta) 3 ed at p 177 point out as follows as regards assignment: “Although rights are freely transferable, and the consent of the debtor is normally not required, duties are not freely transferable, and the consent of the creditor is always required. Duties are transferable by delegation which is an agreement between the debtor, the creditor and the person to whom the duties are to be transferred. Consequently, if there is to be a complete substitution of one lessee for another, it has to be effected by a combined cession and delegation or by an assignment of rights and duties. Assignment is a term taken over in South African law from English law and refers specifically to the substitution of one lessee for another. The effect of an assignment is that the assignee becomes the debtor and the creditor of the lessor, while the relationship between the lessor and the original lessee comes to an end, and since an assignment always involves a delegation, it can never take place without the concurrence of the lessor. A clause in lease prohibiting assignment is HH 36-16 HC 1548/14 consequently superfluous. Consent to an assignment may however be given in advance or even tacitly. ”1 Equally, Hutchisn (Ed) et al Wille’s Principles of South African Law 8 ed at 497 explain assignment as follows: “An assignment is the complete substitution of a third person (the assignee) for one of the parties to a contract (the assignor). The assignee steps into the shoes of the assignor, replacing him both as creditor and debtor under the contract. Outwardly, therefore assignment resembles a combined cession and delegation, but it is important to note that the rights and duties of the assignor are not transferred to the assignee, but extinguished. The original contract is terminated and replaced with a new one with the same content but different parties. Hence an assignment requires the consent of all parties, unless the original contract makes provision to the contrary.” In the case of Pedzisai v Chikonyora 1992 (2) ZLR 445 SC Gubbay CJ as he then was, emphasised that where a contract of lease contains provisions that prohibit subletting or cession or assignment, either absolutely or without the lessor’s consent, any cession or assignment that is entered without authority, is of no value and confers no rights on a third party. Applying the above principles to the facts before me, the issue is whether the defendant was assigned the obligations in terms of the lease and whether defendant is correctly before me. The answer is no. Without the plaintiff as lessor being informed by the Forestry Commission that it was assigning its rights and duties to the defendant, there was nothing for it to approve. Its contract remained with the Forestry Commission and it is the Forestry Commission that should have been the main defendant in this matter for its breach of the contractual provisions. To the extent that in reality the Forestry Commission was no longer the one using the equipment, then it would have been up to the Forestry Commission to harness Order 14 r 93 of the High Court Rules, 1971, which would permit it to join the defendant as a third party on the basis that it would be entitled to a contribution or indemnity from it with respect to the debt in question. It is unclear why despite its own contractual expectations with the Forestry Commission regarding assignment, plaintiff chose to omit the Forestry Commission as party to this matter since it was the one that was clearly in breach of the agreement not only by not paying but by not informing the plaintiff that a new party was now on the premises. That the conditions as per the original agreement, save for the payment being in US$, remained the same is evidenced by plaintiff’s insistence in correspondence to 1 C Bradfied and K Lehman Principles of the law of Sale and Lease ( Juta ) 3rd Edition 2013 at p 177 HH 36-16 HC 1548/14 the defendant dated 3 June 2013, that a three month termination period as per original contract was required. Whilst observing that it is indeed unethical business conduct on the part of both the Forestry Commission and the defendant to have failed to pay for services rendered, my conclusion is that the defendant as a standalone party to plaintiff’s claim is not a legitimate party to the contract. The defendant is therefore not properly before me. Equally the argument of prescription that it raises is not for it to make. In the same vein, the cancellation of the contract should rightly have been made by the Forestry Commission. The defendant sought costs on a higher scale. Whilst I find that there is no valid cause of action against it from a contractual standpoint, I do not think that costs on a higher scale are at all justified. From a common sense standpoint, there is no reason why the defendant did not point out to the plaintiff when it was receiving the statements meant for the Forestry Commission that the latter was no longer in occupation of the site. Accordingly, it is ordered that the special plea that there is no cause of action against defendant is upheld with costs on an ordinary scale. C Kuhuni Attorneys, plaintiff’s legal practitioners Muvingi & Mugadza, defendant’s legal practitioners