Fremius Enterprises (Private) Limited v Zimbabwe National Road Administration

Between 2011 and 2013, the plaintiff (Fremius Enterprises) entered into agreements to rehabilitate roads in Buhera, Gutu and Zaka Rural District Councils. The plaintiff completed the work and was paid by the defendant (Zimbabwe National Road Administration - ZINARA) through Interim Payment Certificates (IPCs) totaling US$628,130.38. No VAT was charged on the IPCs as the plaintiff was not registered for VAT at the time. In early 2013, the Zimbabwe Revenue Authority (ZIMRA) demanded 15% VAT from the plaintiff on all its claims, despite the plaintiff not being registered for VAT. In May 2013, the defendant allegedly undertook in writing to refund the plaintiff the total VAT it would pay to ZIMRA. The plaintiff paid US$628,130.38 to ZIMRA as VAT. Despite repeated demands, the defendant failed to refund the VAT. The plaintiff sued the defendant for recovery of the VAT amount. At the close of the plaintiff's case, the defendant applied for absolution from the instance.

• Whether the plaintiff sued the correct defendant
• Whether there was privity of contract between the plaintiff and the defendant
• Whether the defendant had a legal obligation to pay VAT on behalf of the plaintiff
• Whether the plaintiff established a prima facie case to resist absolution from the instance
• Who bears the statutory obligation to pay VAT under the Value Added Tax Act

The defendant was absolved from the instance. The plaintiff was ordered to pay the defendant's costs.

1. A plaintiff must sue the correct party with whom it has privity of contract. Where contracts are entered into between a plaintiff and local authorities, with a government agency merely acting as a paying agent, the plaintiff cannot sue the paying agent for breach of contract. 2. The statutory obligation to pay VAT under the Value Added Tax Act rests with the registered operator (or person required to be registered) who supplies goods or services. This obligation arises when the invoice is issued, regardless of whether VAT was separately charged or whether payment has been received. 3. Where VAT is not separately charged on an invoice, the price is deemed by statute to include VAT. 4. A registered operator includes any person who is required to be registered under the Act, not only those actually registered. 5. Third party agreements or undertakings cannot override or transfer statutory tax obligations imposed by law.

The court noted that the corresponding legislation in South Africa (referencing Masango and Another v Road Accident Fund and others 2016 (6) SA 508) is to the same effect regarding VAT obligations. The court also observed that if, for example, the plaintiff did not render the services and an order for specific performance were to be sought, the defendant would not have been ZINARA but each of the local authorities affected. Similarly, if payment was not effected for services rendered, the plaintiff should have sued the defaulting local authority, not ZINARA.

This case clarifies important principles regarding privity of contract in public procurement arrangements where a government agency pays contractors on behalf of local authorities. It also reinforces the strict application of statutory VAT obligations under Zimbabwean tax law, confirming that the obligation to pay VAT rests with the supplier/registered operator regardless of whether VAT was charged on invoices or whether a third party agreed to reimburse such amounts. The case demonstrates that contractual arrangements cannot override or transfer statutory tax obligations. It also provides guidance on the test for absolution from the instance in Zimbabwean civil procedure.