ZKH Investment Limited and Anor v Machemba Multi-Purpose Cooperative and Anor (APPEAL NO. 77 /2023) (26 February 2025) – ZambiaLII

IN THE COURT OF APPEAL OF ZAMBIA APPEAL NO. 77 /2023 HOLDEN AT NDOLA (Civil Jurisdiction) BETWEEN: 1 ST APPELLANT AHMED AGARIA 2ND APPELLANT AND MACHEMBA MULTI PURPOSE COOPERATIVE 1ST RESPONDENT MANSON MWENDA 2ND RESPONDENT CORAM: Chashi, Makungu and Banda-Bobo, JJA ON: 19th and 26th February 2025 For the 1st Appellant: K. Phiri of Messrs Malambo and Company For the 2nd Appellant: N/A For the 1st and 2nd Respondents: J. Phiri of Messrs JMP Associates JUDGMENT CHASHI JA, delivered the Judgment of the Court. Cases re erred to: 1. Hygrotech Zambia Limited v Greenbelt - SCZ Judgment No. 138 of 2015 2. Price v Easton (1833) HO, ER 518 3. Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd (1915) AC 847 -J24. Communications Authority of Zambia v Vodacom Zambia Limited (2009) ZR, 196 5. Datang Construction Limited v Fraser Associates (Suing as a Firm) - CAZ Appeal No. 163 of 2019 6. Royal British Bank v Turquand (1856) 6 E & B 32 7. Zambia Bata Shoe Company Limited v Vin Mas Limited (19931994) ZR, 136 Legislation referred to: 1. The Cooperative Societies Act, No 20 of 1998 Other Works referred to: 1. Halsbury's Law of England, 4th Edition, Re-Issue 2. Commercial Law in Zambia, Cases and Materials (Lusaka, UNZA Press, 2006) 1.0 INTRODUCTION 1.1 This appeal is against the Judgment of Honourable Lady Justice E.P Mwikisa, delivered in the High Court on 22nd June 2022. 1.2 In the said Judgment, the learned Judge found in favour of the 1st and 2nc1 Respondents who were the 1st and 2nd plaintiffs in the court below. 1.3 The appeal herein is solely by the 1st Appellant, who was the 1st defendant in the court below. -J32.0 BACKGROUND 2.1 The 1st Respondent commenced an action in the court below on 13th January 2020, by way of writ of summons, claiming the following reliefs: (i) Delivery of 343 bags of fertilizer or its monetary equivalent; (ii) Damages for breach of contract; (iii) Interest and costs. 2 .2 According to the attendant statement of claim, the 1st Respondent is a Cooperative Society registered under The Cooperative Societies Act1 whilst the 2nd , Respondent was at the material time its Chairman. It was averred that, the 1st Appellant is a limited company, registered as an agro dealer under the Government's Farmer Input Support Programme (FISP). According to the 1st Respondent, the 2 nd Appellant, was at the material time, the manager in the employ of the 1st Appellant. 2.3 It was averred that in the 2017 farming season, the 1st Respondent, through the 2nd Respondent, delivered 49 FISP cards belonging to its farmer members to the 1st Appellant for redemption. That the 1st Appellant was -J4under an obligation to ensure that it collected its payment by debiting the farmers' e-vouchers cards, by swiping the cards and thereafter releasing the 343 bags of fertilizer to the 1st Respondent. 2 .4 According to the Respondents, the 1st Appellant debited the cards using its own point of sale machine. That contrary to its obligations and conditions set out under FISP, the 1st Appellant failed to supply the fertilizer. 2.5 It was further averred that, without the Respondents knowledge and consent, the 1st Appellant indicated that it had handed over the fertilizer to the 2nd Respondent, its manager, which fertilizer has never been handed over to the Respondents. According to the Respondents, they used their own resources to supply the farmers with the 343 bags of fertilizer. 2 .6 The 1st Appellant settled its defence on 26th March 2020 and averred that, the 2nd Respondent delivered the cards to the Respondent's own agent the 2nd Appellant. It also averred that the 1st Appellant after swiping the cards, released the fertilizer to the 2nd Appellant, whom the Respondents had engaged as their agent. That this -JSposition was clarified through an agreement dated 15th November 2018. 2.7 In their reply settled on 3rd April 2020, the Respondents reiterated that they did not have any agent and they only came to know the 2nd Appellant from the 1st Appellant's premises as the 1st Appellant's manager, who was running its affairs and business. That the 2nd Appellant handled all transactions with the Respondents at the 1st Appellant's offices as its manager. 2.8 It was further averred that under FISP, there is no provision for dealing with or appointing agents. That the registered agro dealers equally do not deal with agents but directly with the beneficiaries under FISP. 3.0 DECISION OF THE COURT BELOW 3 .1 After considering the pleadings, evidence and the parties' respective submissions, the learned Judge opined that the following facts were not in dispute: (i) That the 2nd Respondent on behalf of the 1st Respondent's members handed over 49 e-voucher cards to the 2nd Appellant, who -J6in turn gave them to the 1st Appellant manager (DWl) to be swiped; (ii) That the 2nd Appellant had worked with the 1st Appellant from 2016 to 2017, where he performed the same duties of counting fertilizer bags and swiping e-voucher cards; (iii) That the Appellants did not give the Respondents the 343 bags of fertilizer, which were swiped for, as evidenced by the agreement dated 15th November 2018; (iv) That the Director of the 1st Appellant dictated the said agreement to the 2nd Appellant, which he signed with the 2nd Respondent with the witnesses. That the 2nd Appellant acknowledged personal liability for paying back in full the amounts owed in lieu of the fertilizer bags. 3 .2 The learned Judge then formulated the issue for determination as follows: -J7- "Whether the 1st Appellant was liable for the actions of the 2nd Appellant and consequently liable to pay back the Respondents the 343 bags off ertilizer or its monetary equivalent as claimed by the Respondents." 3.3 The learned Judge then had recourse to the learned authors of Halsbury's Laws of England, 4th Edition, Re-issue where an agent was defined as follows: "In law, the word agency is used to connote the relationship which exists where one person has an authority or capacity to create legal relations between a person occupying the position of principal and third parties. The relation of agency arises whenever one person called the agent has authority to act on behalf of another, called the principal and consents to so act. Whether that relation exists in any situation depends not on the precise terminology employed by the parties to describe their relationship, but on the true nature of their agreement or circumstances of -J8the relationship between the alleged principal and agent." 3.4 Further at paragraph 19, the learned authors state as follows: "The relation of agency is created by the express or implied agreement of the principal or agent, or by ratification by the principal of the agents act done on his behalf. Express agency is created where the principal or some person authorized by him, expressly appoints the agent whether by deed, by writing under his hand or orally. Implied agency arises from the conduct or situation of the parties." 3.5 The learned Judge also placed reliance on the case of Hygrotech Zambia Limited v Greenbelt,1 where the Supreme Court stated as follows: ". .. in modern times commercial transactions, agency is a vital tool in bringing goods and services to the market. So, it is often convenient for the business enterprises to appoint one or more agents whose business is -J9to effect sales. Therefore, the question whether or not a person was an agent of another person is a question of fact." 3.6 The learned Judge, based on the evidence of the Respondent's witnesses, observed that the 2nd Appellant was at all material times at the 1st Appellant's premises. The witnesses also testified that the 1st Appellant's director, Zacks Motala, dictated the agreement to the 2nd Appellant. 3. 7 Further, that the testimony of DW 1, was that, during the time he was the manager, the 2nd Appellant would organize e-voucher cards, which DW 1 would swipe and give the 2nd Appellant a commission. On the aforestated basis, the learned Judge found that the 2nd Appellant by conduct and circumstances, was an agent of the 1st Appellant. 3.8 Having found as such, the learned Judge opined that the 2nd Appellant was the agent of the 1st Appellant and therefore the 1st Appellant was liable to deliver 343 bags of fertilizer or its money equivalent. The learned Judge awarded interest on the amount to be paid in default of -JlOdelivery of the fertilizer. The learned Judge also awarded the Respondents damages for breach of contract, to be assessed by the Deputy Registrar. 4.0 THE APPEAL 4.1 Disenchanted with the Judgment, the 1st Appellant has appealed to this Court advancing the following grounds of appeal: (i) The court below misdirected itself in law and fact when it found that the 1st Plaintiff was entitled to recover 343 bags of fertilizer despite evidence that it received the same from the 2nd plaintiff; (ii) The court below erred in law and fact when it held that there was a breach of contract between the Plaintiff and the 1st defendant; (iii) The court below erred in law and fact when it found that the 2nd Plaintiff could recover 343 bags offe rtilizer or its money equivalent from the 1st Defendant despite not being privy to the alleged contract; -Jl 1- (iv) The court below misdirected itself in law and fact when it found that the 2nd Defendant was agent of the 1st Defendant against the weight of the evidence; (v) The court below misdirected itself in law and fact when it failed to recognize the contract entered into between the 2nd plaintiff and the defendant for payment of the said 343 bags offe rtilizer (vi) The court below misdirected itself when it found that the 2nd Defendant worked in the employ of the 1st Defendant between 2016 and 2017 without evidence to that effect; (vii) The court below misdirected itself in law and fact when it found that the 1st Defendant did not deliver the 343 bags of fertilizer to the plaintiff when the said bags off ertilizer were delivered to the 2nd Defendant who brought cards for swiping. -J125.0 ARGUMENTS IN SUPPORT OF THE APPEAL 5 .1 At the hearing of the appeal, Mr. K. Phiri relied on the 1st Appellant's heads of argument which he augmented with brief oral submissions. In arguing ground one, it was submitted that the court below misdirected itself in law and fact when it found that the 1st Respondent was entitled to recover 343 bags despite there being evidence that it received the same from the 2nd Appellant. According to the 1st Appellant this would result in unjust enrichment. 5.2 It was submitted that the enrichment would be unjust, as the 1st Respondent has already been supplied the 343 bags of fertilizer through the 2nd Appellant, its agent. 5.3 Grounds two and seven were argued together, as according to the 1st Appellant they are interrelated. According to the 1st Appellant, there was no breach of contract between the Respondents and the 1st Appellant, as they entered into a contract with the 2nd Appellant to supply them with fertilizer and the 2nd Appellant approached the 1st Appellant to swipe cards -J13and collect the fertilizer, which bags of fertilizer were collected. 5.4 It was contended that the 1st Appellant having dealt with the 2nd Appellant and having delivered to him the fertilizer, it was not privy to the agreement between the 2nd Appellant and the Respondents and therefore cannot be in breach of the purported contract. 5.5 In arguing the third ground, it was submitted that no evidence in the court below was advanced, that there existed any contract between the 1st Appellant and the 2nd Respondent. That all the evidence shows that it was the 1st Respondent which was contracting and not the 2nd Respondent. That therefore the court below fell into grave error when it veered off the purported contract and found that the Respondent was entitled to 2nd recover under the contract he was not privy to. 5.6 The 1st Appellant cited a myriad of cases on privity of contract, notable amongst them, Price v Easton2 and Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd3 and submitted that the 2nd Respondent had no -J14locus standi, on account of not being pnvy to the contract. 5. 7 Grounds four and six were argued together. It was submitted that, as the 2nd Appellant was the agent of the 1st Respondent, the 2nd Appellant is wholly liable for the fertilizer as an agent of the 1st Respondent. 5.8 It was submitted that the Respondents have lamentably failed to show that the 2nd Appellant was an agent of the 1st Appellant. That there is no evidence on record to suggest that the 2nd Appellant was an agent of the 1st Appellant, as the purported allegation had been vehemently rejected by DWl, who actually stated that, as far as the 1st Appellant was concerned, the said 2nd Appellant was an agent of the 1st Respondent, as he was the one who brought the said cards to the 1st Appellant. 5. 9 According to the 1st Appellant, there is nothing on record to suggest that the 1st Appellant allegedly held out the 2nd Appellant as its agent or that the 1st Respondent was induced by any such alleged representation. -JlS5.10 In respect of the fifth ground, it was submitted that the 2nd Respondent and the 2nd Appellant executed a contract for the payment of cash, equivalent of 343 bags of fertilizer or the supply of fertilizer. In the said agreement, the 2nd Appellant acknowledges collection of the cards for swiping and collecting the fertilizer for onward transmission to the 1st Respondent, which he admitted he did not deliver. That this was not captured in the Judgment of the court below as the court merely stated that the 2nd Appellant acknowledged personal liability. 5.11 According to the 1st Appellant, the court below fell into grave error in disregarding a legally binding agreement executed by the parties for the payment of a debt. It was submitted that the agreement was enough evidence that the 2nd Appellant was an agent of the 1st Respondent. 6.0 ARGUMENTS IN OPPOSING THE APPEAL 6.1 The Respondents filed their heads of argument into Court on 4th May 2023, which Mr. K. Phiri counsel for the Respondent relied on and augmented with brief oral submissions. In response to the first ground, it was -J16submitted that this ground 1s misconceived and misplaced. It was submitted that the 1st Appellant derived benefit through swiping of the cards, without delivering the fertilizer subject of the contract. It was submitted that the 1st Appellant is contractually mandated to discharge its role in the contract by delivering the 343 bags of fertilizer. 6.2 According to the Respondents, the contract was between the 1st Appellant and the 1st Respondent and as such, the 1st Appellant is legally and morally bound to deliver the fertilizer. That therefore the argument of unjust enrichment is misplaced. 6.3 In response to the second and seventh grounds, it was submitted that there was a clear contract between the 1st Appellant and the 1st Respondent, which was breached by the 1st Appellant's failure to deliver the fertilizer. In specific response to ground seven, it was submitted that the facts in the court below state otherwise than is alleged by the 1st Appellant on this ground. It was submitted that under cross examination (DWl) conceded that the 2nd Appellant was an agent of -Jl 7the 1st Appellant. DWl further told the court that FISP did not allow dealing with agents. 6.4 In respect of the third ground, it was submitted that the interest of the 2nd Respondent was derived from the fact that he sold his personal property, whose proceeds together with the 1st Respondent's resources went to the procurement of 343 bags of fertilizer, which was given to the farmers, its members as an interim measure. That in that respect, constructive trust was created and therefore the 2nd Respondent had sufficient interest to claim from the 1st Appellant. 6.5 In response to the fourth and sixth grounds, it was submitted that the court below properly directed itself when it inferred that the 2nd Appellant worked in the employ of the 1st Appellant between 2016 and 2018, as evidence was adduced to that effect. That there was evidence that the Respondent dealt with the 1st Appellant through the 2nd Appellant and (DWl) in the previous farming season. That (DWl) testified on oath that the 2nd Appellant was the agent of the 1st Appellant -J18and therefore the 1st Appellant 1s estopped from disowning its agent. 6.6 In respect of the fifth ground, the Respondents reiterated their arguments on grounds 1,2,3,4,6 and 7 and prayed that this ground be dismissed. 7.0 ANALYSIS AND DECISION OF THE COURT 7 .1 We have considered the arguments by the parties and the authorities cited, as well as the Judgment being impugned. The primary issue which was formulated by the learned Judge for determination and rightly so, was "whether the 1st Appellant was liable for the actions of the 2nd Appellant and consequently liable to pay back the Respondents the 343 bags of fertilizer or its monetary equivalent as claimed by the Respondents." 7 .2 In its determination, the court below opined that the 2nd Appellant was an agent of the 1st Appellant and therefore the 1st Appellant was liable to deliver 343 bags of fertilizer or its money equivalent to the Respondents. In that respect, we will begin by addressing grounds four and six which revolves around the roles of the 1st Appellant and 2nd Appellant in relation to the 1st -J19Respondent. The resolution of the two grounds will have a bearing on the outcome of the other grounds of appeal. 7 .3 In our view, there is no dispute that there was a contractual relationship between the 1st Respondent as a cooperative incorporating farmers under FISP, as beneficiaries holding e-voucher cards under FISP and the 1st Appellant as a registered agro dealer under FISP. The dealings for all intents and purposes were between the 1 st Appellant and the 1st Respondent. It would therefore be futile for the 1st Appellant to attempt to exonerate itself from the contractual relationship herein especially in view of the testimony by DW1, both in examination in chief and cross examination. 7.4 As held in the Hygrotech Zambia Limited1 case, the question whether or not a person was an agent of another person is a question of fact. It is evident that the determination by the learned Judge was based on findings of fact, taking into consideration the facts and circumstances of the case and the conduct of the parties. -J207.5 We are guided by the case of Communications Authority of Zambia v Vodacom Zambia Limited4 where the Supreme Court held inter alia as follows: "The appellate court will not reverse findings of fact made by a trial Judge unless it is satisfied that the findings in question were either perverse or made in the absence of any relevant evidence or upon a misapprehension of facts or that they were findings which on a proper view of the evidence, no trial court acting correctly can reasonably make." 7 .6 We note from the excerpt from the learned authors of Halsbury Laws of England1 , relied upon by the learned Judge, that for the principal and agent relationship to exist, there must be an agreement between the principal and agent, which agreement can be express or implied. The agent must also have authority to act on behalf of the principal. This authority can also be express, implied or apparent. It must here be emphasized that, in certain circumstances, an agency relationship can be -J21implied based on the conduct of the parties, even without an express agreement. 7.7 An agent is empowered to represent the principal and brings the principal into a legal relationship with a third party. The contract entered into is between the principal and the third party. In the normal course of events, the agent has no personal rights or liabilities in relation to the contract. This represents an accepted exception to the usual operation of the doctrine of privity in contract law. 7 .8 That therefore, the agent is not actually entering into contractual relations with the third party. The contract is between the principal and the third party. 7. 9 There is evidence of PW 1, J osta Mwenda the 1st Respondent's Secretary at page 99 of the record of appeal (the record), that the agreement of 15th November 2018, which appears at page 3 of the supplementary record of appeal, was dictated to the 2nd Appellant by Zacks Motala, the Director in the 1st Appellant. This shows the prevailing conduct and control the 1st -J22Appellant had over the 2nd Appellant. This evidence was not rebutted by the 1st Appellant. 7 .10 There is also unrebutted evidence by the Respondent 2 nd (PW2), at pages 104 -105 of the record where he testified as follows: "Then the 49 cards which I gave them were shared between Ahmed Agari.a and Jones Motala but after swiping, they discovered that those cards also had no money in them. I also left the cards with them when they insisted that I leave them behind. It was not the first time to work with them as we trusted them since we worked with them in 2016. We had no problem in 2016, as all the farmers received their fertilizer. .. " 7 .11 From the aforestated, it was evident that the 1st Appellant had a continuing contractual relationship with the 1st Respondent from 2016 farming season. It was also evident that the 2nd Appellant was actively involved with the 1st Appellant as he even participated in the swiping of the cards on the 1st Appellants point of -J23sale machine. This was also witnessed by (PW3). Equally this evidence was not rebutted. 7 .12 In our view, what compounds this matter and adds a damning complexion to the 1st Appellant's case, is the testimony of its own witness (DWl), who was its manager from 2014 to 201 7. This was the testimony of (DWl): as it appears at pages 117 to 121 of the record: "Ahmed Agaria came to our company (ZKH) informing us that he had cards (e-voucher cards). He came to see me being the manager. When he brought the cards, we swiped them, all 49 cards. ..A hmed Agaria had no position in the company. I don't know where he is now. ..A hmed Agaria used to come to the shop telling me that he can organize so many e voucher cards and bring to me. He was my good friend. We used to give commission to Ahmed Agaria." 7.13 In cross examination, DWl 's evidence was as follows (refe r page 120 of the record) -J24- "Yes I took part in FISP programme in 2017 and used to get e-voucher cards and swipe them after which I would give fertilizer to farmers. Yes Agaria came to our company with 49 cards. Yes he came to the company called ZKH investments. Yes the cards were for farmers and not Agaria... yes Ahmed is my friend and that he used to find customers for us. .. Yes I have evidence that Agaria was our of agent. .. Yes Agaria was an agent the of company as shown at paragraph 2 the agreement. .. FISP doesn't allow dealing with agents." 7 .14 In the face of the overwhelming unrebutted evidence as regards the conduct of the 1st Appellant and the 2nd Appellant and the admissions by DWl that the 2nd Appellant was a commissional agent, we find no basis on which to fault the learned Judge's findings of law and fact. -J257 .15 According to the learned author, Mumba Malila, on Commercial Law in Zambia, Cases and Materials2 at page 50: "The key feature of any agency relationship, is the power of the agent to affect the principal's legal position vis a vis third parties." 7 .16 In the case of Datang Construction Limited v Fraser Associates5 (Suing as a.firm), we did at page J36, opine that, connected to agency relationship, is the principle of indoor management rule, popularly known as the Turquand's rule, which is a fundamental tenet of the law of agency and it is concerned with the protection of outsiders against the actions of the company. 7 .17 This rule has its genesis in the case of Royal British Bank v Turquand6 where it was held that an outsider , contracting with a party in good faith is entitled to presume that the internal regulations and procedures have been complied with and will not be affected by irregularities of which they had no notice. This rule was formulated in order to keep an outsider's duty to inquire into the affairs of a company within reasonable bounds. -J267 .18 The Turquand's rule has been adopted by the Supreme Court in a raft of authorities, notable amongst them, the case of Zambia Bata Shoe Company Limited v Vin Mas Limited7 where it was held inter alia as follows: "(i) That the company's authorized agents bound the company to comply with the contract and such liability cannot be avoided." 7.19 Although the doctrine of indoor management is subject to certain exceptions, it is evident in this matter that the 1st Respondent did not have actual knowledge of any irregularity or deficiency in authority or suspicion which ought to have put it on notice to inquire into the 2nd Appellant's actual authority. 7 .20 Grounds four and six should be dismissed, as the finding that the 2nd Appellant was an agent of the 1st Appellant is premised on the evidence which was before court and on admissions by the 1st Appellant. 7. 21 We will address grounds one and seven together as they both relate to the allegation that the 1st Respondent received the 343 bags of fertilizer through the 2nd -J27Appellant. Having determined that the 2nd Appellant was the agent of the 1st Appellant and not the 1st Respondent, this argument falls away. In any case DW1 categorically stated in his evidence that after swiping the cards, he would give the fertilizer to the farmers. There is no evidence that the 343 bags of fertilizer were given to the 1st Respondent. Therefore, the issue of unjust enrichment on the part of the 1st Respondent does not arise. 7 .22 As regards the second ground, we have already alluded to the determination that, the 2nd Appellant was an st agent of the 1 Appellant and therefore the contract was t st between the 1s Appellant and the 1 Respondent. No st contract in that respect existed between the 1 Respondent and the 2nd Appellant. By extension, also no st contractual relationship existed between the 1 Appellant and the 2nd Respondent. 7 .23 In view of the aforestated, ground three succeeds as the 2nd Respondent cannot claim rights under the contract it was not a party to. Whatever arrangements were made between the 1st Respondent and the 2nd Respondent as -J28its Chairman in reimbursing the farmers, its members, were internal and have no bearing on the contract between the 1st Appellant and the 1st Respondent. 7 .24 As regards the fifth ground, having found that the 2nd Appellant was an agent of the 1st Appellant, the agreement of 15th November 2018, has no effect. As earlier alluded to, the agent cannot bear personal liabilities. It was also not disclosed in the said agreement as in what capacity the 2nd Appellant executed the agreement. In any case, since the 2nd Appellant was not a del credere agent for the 1st Respondent and having not given a guarantee at inception to pay, in default, the issue does not arise. 7 .25 With the exception of ground three, the appeal substantially fails. For clarity, we vary the award of the court below as follows: (i) We award the 1st Respondent, the market value of 343 bags of fertilizer as at 13th January 2020; (ii) The said amount shall attract interest at the average short term bank deposit rate .. -J29from the date of issuance of the writ of summons to the date of our Judgment and thereafter at the current bank lending rate as determined by Bank of Zambia up to the date of settlement; (iii) General damages to the 1st Respondent for breach of contract, to be assessed by the Deputy Registrar; (iv) All the awards aforestated to be borne by the 1st Appellant and to be paid to the 1st Respondent. (v) Costs to the 1st Respondent, to be borne by the 1st Appellant and same to be taxed in J. CHASHI COURT OF APPEAL JUDGE C.K.MAKUU A.M. BANDA-BOBO COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE