Zimbabwe Platinum Mines (Pvt) Ltd v Plantech (Pvt) Ltd (HC 8963 of 2013) [2015] ZWHHC 286 (24 March 2015)

1 HH 286-15 HC 8963/13 ZIMBABWE PLATINUM MINES (PRIVATE) LIMITED versus PLANTECH (PRIVATE) LIMITED HIGH COURT OF ZIMBABWE MAFUSIRE J HARARE, 9, 10, 16 & 24 February 2015 & 25 March 2015 Civil Trial S. Bhebhe, for the plaintiff R. K. H. Mapondera, for the defendant MAFUSIRE J: The plaintiff’s claim was for a refund of an amount in the sum of US$104 550, the cost of a 3-phase electric motor sold and supplied by the defendant but which the plaintiff claimed turned out to be counterfeit. Most facts were common cause. Sometime in 2011 the plaintiff requested suppliers to submit quotations for the procurement, supply and delivery of an 850 kW 3-phase electric motor made by a company called TECO which was based in Taiwan (“TECO-Taiwan”). There were detailed specifications (“specs”). Three companies submitted their quotations (“quotes”) on the basis of the plaintiff’s specs. The defendant was one of them. Its quote was the most competitive. Among other things, not only was it the lowest, but also payment could be made after delivery. In contrast, the other two companies, apart from their quotes being higher, also required a huge deposit paid up front. When the motor arrived in Zimbabwe in May 2012, the parties arranged that it be freighted straight to the plaintiff’s premises to avoid double handling. It was a huge piece of equipment said to weigh upwards of 12 tonnes. It required a crane of that rating or more to handle it. Upon delivery at plaintiff’s premises it was inspected by its employees from the engineering and stores departments. The defendant’s engineers were also present. Thirty days after delivery, i.e. on 15 June 2012, the plaintiff remitted the purchase price to the defendant. The dispute that came to court was this. The plaintiff said sometime in July 2012, following a more thorough inspection by its Engineering Manager (who had not been present during the first inspection) it had been discovered that the electric motor was counterfeit. HH 286-15 HC 8963/13 Although on cursory inspection it appeared to have been made by TECO-Taiwan and to meet the plaintiff’s specs, on closer inspection it was clear that it was a TECO-Taiwan imitation and that some specs were different from those that the plaintiff had detailed and which the defendant had duplicated on its quote. The plaintiff’s case was told by two witnesses. The one was Relax Masoka (“Masoka”) who was then the Group Supplies Manager in charge of, inter alia, procurement. The other was Chamunorwa Nyakurerwa, the Engineering Manager who carried out the second and more comprehensive inspection. The evidence of these witnesses dovetailed in every material respect. It was this. The first inspection of the equipment that had been done upon delivery had been led by an engineering foreman who, though not a holder of a university degree, had vast experience in the field. The inspection team must have been deceived because the counterfeit motor was a close imitation of the genuine TECO-Taiwan motors. The new equipment was required as a spare. The plaintiff had four other TECO- Taiwan motors of similar size in operation. It had been a condition of the procurement that the new equipment had to be one made by TECO-Taiwan. Focus was placed on the defendant’s quote which both sides produced as part of their exhibits. Part of that quote read as follows: “We submit our offer for the supply of the following goods and or services: 1. Motor details, MADE IN TAIWAN ….. Manufacturer: TECO. 3 Phase induction motor.” There followed a detailed list of the specs. The plaintiff said that what triggered a more thorough examination of the motor, some two months after delivery, were some inscriptions that were observed in certain parts of the motor and which were in the Chinese language. It was said genuine TECO-Taiwan motors have all their inscriptions in the English language. As part of its investigations the plaintiff engaged TECO-Taiwan itself to confirm the authenticity of the motor delivered by the defendant. In turn TECO-Taiwan instructed its South African based agent or franchisee, Arm Coil Afrika (“Armcoil”), to carry out a physical inspection of the equipment and to compile a report on their investigation. Armcoil sent one of its personnel to the plaintiff. At the end of its investigation Armcoil produced a report for TECO-Taiwan. TECO-Taiwan relayed it to the plaintiff. Focus was also placed on the Armcoil report. It highlighted several differences between the equipment supplied by the defendant and the genuine TECO-Taiwan motors. Among others, genuine TECO-Taiwan motors would be emblazoned with “MADE IN HH 286-15 HC 8963/13 TAIWAN” on the name plate. There was nothing on the motor supplied by the defendant. Furthermore, one of the plaintiff’s specs was that the motor had to be an AECK-PA type. That was not stated on the defendant’s equipment. Other notable differences were on the frame type and size, the rated speed, the shaft height, the stator current, mechanical protection, the cooling method and the lubrication specs. Most importantly, the serial number on the defendant’s motor had been disowned by TECO-Taiwan as not being one from their series. With the results of the investigation the plaintiff contacted the defendant and sought the importation documents. The plaintiff said it wanted to check from those documents the origins of that motor. However, the defendant declined to supply the documents. The plaintiff called for a meeting with the defendant. Its Managing Director, one Ian Nyawayi (“Nyawayi”), who had been the person dealing with the plaintiff all along, excused himself from the first meeting, citing prior commitments outside the country. However, his stand-in took minutes of the meeting. It was said that at the meeting the plaintiff expressed its concerns about the equipment that the defendant had supplied stating that it was not a genuine TECO-Taiwan motor. In response to the plaintiff’s concerns, the defendant, through Nyawayi, made a proposal, in writing, on the way forward. The material portion of his e-mail, dated 10 September 2012, read as follows: “We find ourselves in this seemingly difficult situation, however our proposal is as follows. A: WORST CASE I refer you to the summary of [the] discussion you had with Tawanda Chigariro of Plantech. This summary was circulated. Now for our proposal, we start with the worst case. In the worst case we recover the motor and arrange to repay Zimplats or supply another motor as per minutes of the previous meeting. This proposal is based on our focus to maintain a good and long term relationship with our customers for our mutual benefit. B: CASE B We are able to fit the ZORC surge suppressor, which is the missing part. Note that the ZORC surge suppressor is made by Strike Technologies in RSA. We have this in stock in Harare. We have also asked our supplier to provide a bigger terminal box which accommodates the suppressor. …….” Masoka, both in his evidence-in-chief and under cross-examination, insisted that the plaintiff had opted for defendant’s option A: “Worst Case”, and that this acceptance had been communicated to Nyawayi. However, the defendant was said not to have done anything about it afterwards. HH 286-15 HC 8963/13 The plaintiff then sent a letter of demand to the defendant which, though undated, was said to have been delivered under cover of an e-mail dated 2 October 2012. The material portion of that letter read as follows: “On the 6th of September 2012 I wrote to you and requested the following documents referring to the motor that you supplied us:  Proforma invoice from your Taiwan OEM  Bills of Entry that was (sic) used to clear the motor.  Bills of lading documents I just want to confirm that to date I have not yet received the requested documents!!!. Given that we received a motor with different specifications from the one we had ordered on purchase order 4500941641.(sic) We request therefore that you refund Zimplats USD$104, 550.00, being the amount paid for the motor. This refund should be processed within 30 days so as to enable us to purchase the correct motor elsewhere. You can therefore collect your motor from our premises as soon as the refund has been processed. Attached is your quotation which references the correct motor that we ordered, which is completely different from the one you delivered. Please respond to my complaint in the next 14 days.” It was said the defendant did not respond to the letter, either within the stipulated time, or at all. In November 2012 there was another meeting between the parties. Nyawayi attended. It was said he promised to submit a payment plan for the refund. However, he never did. The plaintiff then referred the matter to its lawyers. They sent a letter of demand on 30 April 2013. The letter basically recited the agreement of purchase and supply and the delivery of the wrong equipment. It then stated that the plaintiff had cancelled the agreement and was demanding a refund of the purchase price but that the defendant had failed to pay despite several promises to do so. On 13 May 2013 the defendant responded to the lawyers’ letter as follows: “RE: ZIMPLATS CLAIM OF $104,550.00 We refer to your letter referenced SB/em and request a time of 10 working days starting from 14 May 2013 to respond to your claim. This time is necessary for us to liaise with Zimplats to confirm the amounts they owe PLANTECH as per the invoices for other goods and services rendered to them. This discussion has been in progress and we hope they will quickly confirm the amounts owing to PLANTECH. Once such confirmation is received, we will quickly respond to the claim as written in your letter referenced SB/em. We ask you to confirm acceptance of this request.” HH 286-15 HC 8963/13 There seemed to have been no further developments. The plaintiff maintained that it had not installed the motor for fear there could be a disaster, the equipment being an unknown item from an unknown source. It also maintained that nothing should be read from its payment of the purchase price some thirty days after the delivery of the equipment as it was merely observing the terms of the contract. Masoka confirmed that at that time the plaintiff did owe the defendant an amount in the region of US$34 000 in respect of services previously rendered by the defendant but which the plaintiff had decided to withhold until the issue of the fake motor had been resolved. However, the defendant had proceeded to issue summons for this amount. Agreement had eventually been reached at the pre-trial conference. The defendant had eventually been paid. With the refund still outstanding, and the defendant no longer willing to settle it, the plaintiff issued summons in October 2013. Through its one and only witness, Nyawayi, the defendant raised a number of defences. It said that the motor that it had supplied had been according to the specs on its quote; that given that there had been an inspection of the equipment upon delivery by engineers from both sides, and, not only that, but given that the plaintiff had gone on to pay the purchase price thirty days after delivery, showed that the plaintiff had been satisfied that the product that the defendant had delivered had been genuine and according to specs. Although not raised in its plea, the defendant resisted the plaintiff’s claim on the further grounds that it did not accept the authenticity of the alleged investigation and subsequent report by Armcoil. Its reason was that it had never been invited to be part of that investigation. It said Armcoil was seriously compromised. It had been one of the companies that had quoted for the supply of the motor and lost. So its conclusions would not be impartial. It was also said that as the alleged agent for TECO-Taiwan, Armcoil would be eager to retain and maintain that relationship and would therefore not recognise any product that might have been supplied by any of its competitors. It was claimed that it was in fact Armcoil that had planted in the plaintiff’s mind the idea that the motor was counterfeit and that the plaintiff had blindly accepted it. The defendant stated that it had procured the motor from a company based in Chinese Hong Kong known by the name of Royal Crown. This company had been its long-time partner in that part of the world. Nyawayi argued that it had never been part of the agreement between the plaintiff and the defendant that the motor had to be procured solely from Taiwan. HH 286-15 HC 8963/13 He said he had declined to supply the shipping documents because it would not have been strategic to disclose to a customer and to competitors like Armcoil its cost structures and margins of profit. Furthermore, and at any rate, Nyawayi continued, the bills of lading would not have helped the plaintiff to prove what it intended to prove because they would have only disclosed that the motor had originated from Royal Crown’s warehouse, something that the defendant had not hidden away from the plaintiff. On the question of the options that he had given the plaintiff in terms of his e-mail in September 2012, and his apparent about turn, Nyawayi said a number of things. Firstly, the offer had been made without prejudice in an effort to settle the matter amicably in order to preserve the business relationship that had endured between the parties for the preceding five years. Secondly, the plaintiff had been a lucrative account for the defendant. It was of huge strategic importance, especially given that there were signs that the plaintiff was expanding operations. As such there were prospects of more business deals between the parties. Thirdly, the plaintiff had never signified its acceptance of any of the defendant’s options. Fourthly, when the plaintiff started employing demand language at a time when negotiations for an out of court settlement had been on-going it became apparent to the defendant that the plaintiff was now angling for a legal confrontation. In those circumstances the defendant had thought it prudent to let litigation take its course. The defendant’s next ground of defence was that the plaintiff’s purported cancellation of the contract had not been in accordance with the terms and conditions of the agreement as read against the prevailing custom in the industry. Nyawayi drew attention to the last sentence on the quote that it had submitted to the plaintiff: It read: “CONDITIONS OF SALE: Our standard conditions of Sale shall apply, copies can be supplied on request.” A document titled “PLANTECH Pvt Ltd TERMS AND CONDITIONS OF SALE” was part of the defendant’s exhibits. Clause 7 thereof started with sub-clause 7.1 and 7.2 that stated that the risk in the goods [sold by the defendant] passed to the buyer upon the receipt of such goods by the buyer or its representative and that the seller remained the owner of such goods until it had been paid in full. Then the clause continued with sub-clause 7.3 as follows: “The Buyer shall inspect the Goods immediately upon receipt and shall notify the Seller of any damage to the goods or shortages or non-compliance with specifications given by the Seller, within a reasonable time of receipt of goods, which time shall not exceed 10 calendar days. Such notification shall … clearly list the said damage or shortage or non-compliance HH 286-15 HC 8963/13 with specifications, such specifications as originally given by the Seller on his quotation. …. If the Buyer fails to do this he is deemed to have accepted the Goods and or services in their totality.” Nyawayi stressed that the defendant could no longer proceed with any of its options because of the time the plaintiff had taken to purportedly cancel the contract. He said it had taken the plaintiff several months after the delivery of the equipment, and about two months after it had paid for it before it purported to cancel, yet in terms of the conditions of sale the plaintiff had only ten days from the date of delivery. To Masoka’s evidence that no such terms and conditions of sale had ever been brought to the plaintiff’s attention at the time of the agreement or at any time before, Nyawayi insisted that they had been the same terms and conditions that had governed the parties in all their previous dealings and that, at any rate, Masoka’s assertion was immaterial because the defendant’s quote had clearly stipulated that those terms and conditions would apply and that the plaintiff had been free to request a copy. Yet another ground relied upon by the defendant to resist the plaintiff’s claim was that the plaintiff had tampered with the equipment in breach of the warranty and cancellation/return of goods clauses in its terms and conditions. Nyawayi pointed out that the equipment’s control box had been opened up during the alleged investigation by Armcoil. As such, the defendant could no longer approach the manufacturer for any remedy under the warranty. That was the case before me. The pre-trial conference minute settled by the parties before a judge in chambers listed three issues for trial. They were these: 2 Whether the electric motor delivered by the defendant [was] the one [that] the plaintiff had ordered, and whether or not delivery of such electric motor discharged the defendant’s obligations in terms of the agreement. Whether or not the defendant owe[d] the plaintiff US$104 550-00; Whether the plaintiff’s alleged cancellation of the order [had been] procedurally done. With all due respect, issue No. 3 did not arise from the pleadings. In its plea the defendant confined itself to the defence that the motor that it delivered was in accordance with the specs, that the plaintiff had been satisfied by its authenticity as confirmed by its HH 286-15 HC 8963/13 payment of the purchase price some thirty days after delivery and that therefore it did not owe the plaintiff anything arising from that contract. Since issue No. 3 did not arise from the pleadings it ought not to have been listed on the joint pre-trial conference minute. One of the purposes of holding a pre-trial conference in terms of Order 26 of the Rules of this Court is to define the real issues and the manner in which they may be proved at trial. An issue, in my view, defines the point of difference between the parties. That difference can be factual, legal or both. It properly arises from the pleadings. For this reason the pleadings must be drafted with precision so that the real issues can be identified. The essence of a case is contained in the pleadings1. The function of pleadings is three-fold, namely:  to ensure that the parties know the points of issue between them so that they know what case they have to meet;  to assist the court by defining the limits of the action;  to place the issue raised in an action on record so that a judgment on such action may bar further litigation on the same issues again; See BECK’s Theory and Principles of Pleading in Civil Actions, 5th ed. at p 32. Most of the defendant’s so-called defences that I was saddled with at the trial had not been pleaded. For example, the defendant’s arguments about the plaintiff’s alleged failure to signify acceptance of one of the options; the plaintiff’s alleged breach of the cancellation procedures, and the plaintiff’s alleged tampering with the equipment, had all not been pleaded. But nonetheless, I shall deal with them later. The defendant’s substantive defence that the motor that it supplied was in accordance with the specs cannot succeed. The motor that it delivered was not a genuine TECO-Taiwan product. Its origin was unknown. The defendant may have sourced it from Royal Crown of Hong Kong, and the contract may not have specified or insisted that the motor had to be shipped from Taiwan only. However, it was the agreement between the parties that the motor had to be made by TECO-Taiwan. So it did not matter where the defendant procured it from. I find no reason to reject TECO-Taiwan’s report, through Armcoil, to the plaintiff. Despite the absence of a signature on it, a point stressed by the defendant, I nonetheless find it authentic. The defendant cannot cry foul that the investigation had been carried out in its 1 Hackleton Investments (Private) Limited v Time Bank of Zimbabwe Ltd 2000 (1) ZLR 60 (H) HH 286-15 HC 8963/13 absence. I accept Masoka’s evidence that from the time that the plaintiff informed it of its concerns, the defendant chose not to come for an inspection. Masoka’s evidence was that the equipment was at all times available for the defendant to carry out its own checks. Nyawayi was undoubtedly the soul and brains of the defendant. He was the Managing Director. He was the frontman. He was an engineer by profession. Given the strategic importance of the plaintiff to the defendant, as he himself highlighted, and given that when the equipment had arrived in Zimbabwe it had been ferried straight to the plaintiff’s site without passing through the defendant’s workshop, it was imperative that Nyawayi satisfied himself that what the defendant had delivered had been the right thing. At no stage had he himself checked it. The evidence produced by the plaintiff on the differences between the motor that the defendant actually delivered and the one that it had quoted was overwhelming. It was manifestly obvious that the defendant’s motor was counterfeit. Armcoil’s report was backed up by, among other things, colour photographs of certain parts of the counterfeit motor. I have no reason to think that those pictures were not genuine. Other than a bare denial the defendant had nothing else to counter them with. Armcoil’s report was quite detailed. Among other things, it noted differences on such seemingly mundane things like the number of rivets attaching the name plates to the frame of the motors. On the genuine motor the rivets were six. On the counterfeit one they were four. Even the type of grease specified on the counterfeit motor was different from that listed on the genuine one. Nyawayi tried to play down certain differences. For example, in relation to the rated speed, the shaft height, and the like, he maintained that the differences were in most cases a minuscule 2% and that as such they were within the tolerance levels of any equipment. Thus, where the shaft height on the genuine TECO-Taiwan motor was 710mm and that on the counterfeit 690mm, Nyawayi said the equipment could easily be adjusted and aligned on installation. The rated speed on the genuine motor was 595 rpm. On the counterfeit one it was 592. Nyawayi explained that any rated speed varies with the load and that the normal range is between 580 rpm and 600 rpm. Therefore, he argued, 592 rpm were well within the range. However I opted for the plaintiff’s evidence. The equipment was a sensitive electrical component of high voltage. By its own e-mail in September 2012, under option B: “Case B”, the defendant did acknowledge that its motor had a missing component. There was no reason to subject the plaintiff to an unknown risk. I find that the plaintiff’s action in refraining from installing and operating such a piece of equipment whose history, origins and capacity were HH 286-15 HC 8963/13 unknown was prudent. The defendant was obliged to supply and deliver an electric motor according to specs. What it supplied was not according specs. That was a breach of contract. The plaintiff was entitled to repudiate. The defendant was obliged to deliver another one according to specs, or refund the purchase price. The rest of the defences that were not pleaded but were raised by the defendant afterwards were plainly subterfuge. For example, the defendant could not revert to the cancellation clause that prescribed a ten day cancellation period when, clearly it had, by its e- mail of 10 September 2012, waived those conditions. It offered to refund the purchase price some four months after the delivery of the equipment; some three months after the plaintiff’s payment, and some two months after the plaintiff had notified it of the intention to cancel the contract. Plainly, the defendant accepted the plaintiff’s cancellation. Its motive for doing so is immaterial. Nyawayi said that the defendant’s motive was to retain the plaintiff’s custom as it was of strategic importance to it. The plaintiff was allegedly a lucrative account. Therefore, the waiver was a well thought-out, deliberate and conscious decision. In fact, Nyawayi stressed that the move to refund the purchase price was a risk and expense but which the defendant had been prepared to bear. I am satisfied that the plaintiff did accept the defendant’s option A: Worst Case, and that such acceptance was duly communicated. However, the defendant subsequently purported to resile from that agreement. That was unlawful. On the alleged tampering with the equipment allegedly in breach of the warranty, I consider that the plaintiff was entitled to open up the control box and any other component that could be opened up for examination so as to be satisfied of the equipment’s genuineness. This was more so given that the equipment turned out to be a clever imitation of the real thing. Some of the specs could only be verified upon closer inspection. It is quite telling that the plaintiff’s foreman and stores staff, together with the defendant’s own engineers, had all been deceived during the initial inspection and had therefore missed the fake details. Therefore, even if this defence had been pleaded, it could not have succeeded. There was no breach of warranty. In all the circumstances therefore, I am satisfied that the plaintiff proved its case on a balance of probabilities. The plaintiff asked for costs on a legal practitioner and client scale. I have found no basis for such an order. In my view, it was not unreasonable for the defendant to have defended the matter, especially given the amount involved, the time the plaintiff had taken to HH 286-15 HC 8963/13 make its claim, and the very reasonable possibility that the defendant could itself have been cheated by its own suppliers. Therefore the costs shall be on the ordinary scale. The plaintiff claimed interest on the principal amount at the prescribed rate from 30 April 2013 to the date of payment. It was not explained why the interest should be reckoned from 30 April 2013. However, since the letter of demand from the plaintiff’s legal practitioners to the defendant was dated 30 April 2013 I assume that that was the basis. If that was the case then it should have been stated. I cannot speculate. In the circumstances I consider it safer that the interest be reckoned from the date of service of summons, namely 7 November 2013. In the result I make the following order: The defendant shall pay the plaintiff the sum of US$104 550 (one hundred and four thousand five hundred and fifty United States dollars), together with interest thereon at the rate of 5% per annum from 7 November 2013 to the date of payment. The defendant shall pay the costs of suit. 25 March 2015 Kantor & Immerman, plaintiff’s legal practitioners Mapondera & Company, defendant’s legal practitioners