Kerries Engineering (Pvt) Ltd v Hwange Colliery Company Ltd

Kerries Engineering (the plaintiff) hired a mobile crane to Hwange Colliery Company (the defendant) in April 2009. The plaintiff's managing director, Donovan Keith Jones, was initially reluctant to hire the crane due to past payment problems with the defendant, but was persuaded by defendant's engineer Victor Rakabopa who assured payment would be timeous under new management. A contract was signed on 24 April 2009 by A. Todd on behalf of the defendant, stipulating weekly hire at US$6,440.00, with payment to be made within 7 days of invoice and interest at the plaintiff's bank borrowing rate for late payment. On 29 June 2009, the plaintiff sent a letter varying the hire rates to US$8,050.00 per week due to currency depreciation, effective 26 June 2009. The defendant received this letter but never objected to the new rates. Instead, the defendant consistently failed to pay on time, making only sporadic payments when convenient. Despite numerous letters, emails, phone calls, and meetings demanding payment, the defendant only made excuses and pleaded for more time. The plaintiff eventually withdrew the crane and issued summons on 1 February 2010 claiming US$102,709.48 (later reduced to US$62,420.48 after a partial payment of US$40,287 in June 2010), plus interest at 60% per annum.

• Whether the parties entered into a binding written contract on 24 April 2009
• Whether the contract was validly varied by the letter of 29 June 2009 increasing hire rates
• Whether the defendant accepted the varied hire rates
• Whether the defendant was indebted to the plaintiff in the claimed amount
• Whether the plaintiff was entitled to interest at 60% per annum based on its bank borrowing rates
• Whether the plaintiff was entitled to costs on an attorney and client scale

The court ordered the defendant to pay the plaintiff: (1) US$62,420.48 as capital; (2) US$30,423.95 interest for the period up to 31 December 2009; (3) Interest at 60% per annum calculated from 1 January 2010 up to date of payment; (4) Collection commission on the total sum collected; and (5) Costs on a legal practitioner and client scale.

The binding legal principles established are: (1) A company is bound by contracts signed on its behalf by employees it holds out as having authority, regardless of whether actual authority exists (principle of ostensible/apparent authority); (2) Contractual variation can be validly accepted by conduct, including silence and failure to object within a reasonable time after receiving notice of variation, particularly where the party continues performing under the contract and makes payments consistent with the varied terms; (3) Where a contract provides for interest at the creditor's bank borrowing rate, the creditor is entitled to recover interest at the actual rate charged by its bank, provided this is proven by evidence; (4) A party that enters into a contract with full knowledge it lacks the financial capacity to perform, and subsequently persistently breaches payment obligations despite numerous demands and opportunities to pay, acts fraudulently and deserves the court's censure through an award of costs on the higher attorney-client scale.

The court observed that the defendant's suggestion that new rates were unacceptable was "preposterous" given the extensive correspondence demanding payment at the new rates without any objection. Kamocha J noted that Todd was "not only an untruthful and unreliable witness but was also a dangerous employee who signed important documents without checking and verifying them" and was "not worth to be believed." The court commented that the defendant's conduct warranted "the highest form of censure" as it "sought to justify its fraudulent behaviour on the basis that it needed the crane urgently." The judge observed that "this court must show its displeasure for such conduct by an award of costs on an attorney and client scale." These comments emphasize the court's strong disapproval of the defendant's commercial conduct and lack of good faith in its contractual dealings.

This Zimbabwean High Court case establishes important principles regarding commercial hire agreements and contract variation. It demonstrates that: (1) A party is bound by contracts signed by its employees where it holds out that the employee has authority, regardless of actual authority; (2) Variation of contract terms can be accepted by conduct, specifically by silence and failure to object when given reasonable notice, particularly where subsequent conduct is consistent with acceptance (such as making payments calculated on new rates); (3) Courts will scrutinize defenses raised for the first time long after the contractual relationship, treating them as afterthoughts; (4) Interest rates reflecting actual bank borrowing costs can be recovered where stipulated in the contract, even if apparently high (60% per annum in this case was justified by economic conditions in Zimbabwe in 2009-2010); (5) Punitive costs on an attorney-client scale are appropriate where a party enters into a contract knowing it lacks funds to perform and then persistently fails to honor obligations despite repeated demands. The case also illustrates the court's willingness to make credibility findings and prefer the evidence of truthful witnesses over evasive ones.