Chidanti-Malunga v Fintec Consultants (A Firm) and Another (Commercal Casee No. 6 of 2008) [2008] MWCommC 16 (25 June 2008);

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REPUBLIC OF MALAWI

 

IN THE HIGH COURT OF MALAWI

 

BLANTYRE REGISTRY

 

COMMERCIAL DIVISION

 

COMMERCIAL CASE NO. 6 OF 2008

 

BETWEEN

 

JOSEPH CHIDANTI-MALUNGA……………………………………PLAINTIFF

 

AND

 

FINTEC CONSULTANTS (A FIRM)…………………………..1ST DEFENDANT

 

BUA CONSULTING ENGINEERS (A FIRM)…………………2ND DEFENDANT

 

 

CORAM:

 

HON. JUSTICE DR. M.C. MTAMBO

Mpaka, of Counsel for the Plaintiff

Chirwa, of Counsel for the Defendants

Mchacha, Court Clerk

 

 

 

JUDGMENT

 

 

 

 

 

 

 

 

Dr. Mtambo J.

 

BACKGROUND

 

By Originating Summons, the Plaintiff seeks the following reliefs against the Defendants:

 

  1. A declaration that on the true construction of the Agreement for consulting services between the Department of Irrigation Services, Government of Malawi and Fintec Consultants of Cairo, Egypt dated 24th May 2004 (exhibit JCM1 “the main contract”) there existed a collateral contract for services under the main contract between the Plaintiff and Defendants.

 

  1. A declaration that on the true construction of the paragraphs 2.2 and 10 of the entire main contract the terms of the collateral contract are to be found in appendices C and E thereto.

 

  1. A declaration that on the true construction of the appendix E1 and the entire main contract, the Plaintiff had the full benefit of and right to the sum of US$62,370.00 under the main contract payable from the Defendants to the Plaintiff.

 

  1. A declaration that the Defendants are in breach of the main contract by removing the Plaintiff or causing the Plaintiff to be removed from the project subject matter of the main contract.

 

  1. An order that the Defendants pay the Plaintiff the sum of US$62,370.00 with interest at such rate as the court shall deem proper representing special damages emanating from the breach of the collateral contract.

 

  1. An order that the Defendants pay to the Plaintiff the sum of K854,000.00 and K48,799.38 as well as US$290 by way of refund of the Plaintiff’s travel and vehicle importation expenses respectively representing special damages attributed to the wrongful removal of the Plaintiff from the project subject matter of the contract.

 

  1. An order that the Defendants pay the costs of this action.

 

The Plaintiff is a Civil Engineer by profession and is currently pursuing a doctorate degree (PhD) by research at Cranfield University in the United Kingdom. The first Defendant is an Egyptian firm of Engineers and the second Defendant is a local firm of Engineers.

 

On 20th May 2003 the Defendants submitted a proposal to the Malawi Government’s Ministry of Irrigation styled Small Farms Irrigation Project in the Region of Lake Malawi Littoral. The proposal so submitted was by way of curriculum vitae of the proposed fourteen personnel to carry out different roles under the project should the proposal be successful. Such personnel were either of Arabic (Egyptian) or Malawian origin. All Egyptian personnel fell under the first Defendant while all Malawian personnel fell under the second Defendant.

 

On the expectation that should the bid succeed the Plaintiff would be the Site/Resident Engineer and carry out the duties in CV 7(p.35 of the agreement JCM 1) of the proposal and receive the remuneration in Appendix E1(p.46-47 of JCM), the Plaintiff allowed the Defendants to present his credentials as part of the said proposal. The bid succeeded. On 24th May 2004, the first Defendant and the Malawi Government signed the agreement for consulting services (“JCM 1”) as proposed.

 

Although the project was by contract scheduled to start in June 2004, it did not kick off until sometime in or around or soon after September 2007. While the commencement of the project was pending, particularly in December 2005, the Plaintiff traveled to United Kingdom for further studies.

 

In early September 2007, the second Defendant by telephone advised the Plaintiff by that the project was starting off. The parties then exchanged e-mails in one of which on 11th September 2004 the Plaintiff sought clarification on the time frame involved for the whole assignment, the breakdown of the remuneration involved and any other issues attached to the contract which the first Defendant felt the Plaintiff should know before hand. The Plaintiff concluded that these issues would be important as they would influence his decision (exhibit JCM 3).

 

The first Defendant did not reply to the Plaintiff’s enquiry but proceeded to remove him from the project and replace him with a Dr. Kara as they were of the view that the Plaintiff’s schedule did not suit the project where breaks in between work as desired by the Plaintiff to attend his conferences in the United Kingdom would not be possible. Although the main contract required the Defendants to replace any of the fourteen personnel placed on site upon approval by the Malawi Government, there is nothing in evidence suggesting that such consultation with or approval by the government was ever sought or obtained.

 

Without communicating to the first Defendant of his travel plans the Plaintiff traveled to Malawi to take up the appointment and without the knowledge or sanction of the first Defendant he shipped a car which he says was to be used by him for the project work.

 

 

 

ISSUES

 

  1. Whether the Plaintiff can rely on and/or enforce the contract exhibited as JCM1 to which he is not party.

 

  1. Whether the Plaintiff can adduce parol evidence to show that the agreement for the provision of irrigation services was infact between the Malawi Government and both Defendants when the agreement clearly states that it is between the Malawi Government and the first Defendant.

 

  1. Whether on the facts a contract of employment had been concluded between the Plaintiff and the first Defendant.

 

  1. Whether on the facts a collateral contract exists on which the Plaintiff can claim that there was a binding obligation on the part of the Defendants to employ him.

 

THE PLEADINGS

 

The Plaintiff filed an Originating Summons together with two affidavits in support the first one sworn by the Plaintiff himself to which were attached six exhibits marked “JMC 1” to “JMC 6” and the second one being a supplementary affidavit sworn by Mr. I.K. Majoni who acted on behalf of the Plaintiff in the importation of his car from the United Kingdom to Malawi. The supplementary affidavit has two exhibits attached to it marked “KM1” and “KM2”. The first Defendant did not file an affidavit in opposition but the second Defendant filed one sworn by Christopher Lovemore Chirwa, a partner in the second Defendant to which are attached five exhibits marked “CL1” to “CL5”. Apparently, second Defendant is content to rely on the second Defendant’s defence on the premise that the second Defendant its agent and as such the Defence of the agent is in fact the defence of the principal.

 

Both counsels for the Plaintiff and Defendant raised several arguments in their submissions which were not pleaded. These were, on the part of the Plaintiff, that the first Defendant suffered themselves to be represented as partners of the first Defendant and as such could be sued jointly. On the part of the second Defendant, it was that the Plaintiff could not rely on secondary evidence in the form of exhibit JMC1 to support an action on an Originating Summons which was not by its nature an interlocutory matter. The Defendants also submitted on the unpleaded defences of illegality and frustration. In short, both parties were guilty of engaging in fishing expeditions by shifting the bases of their cases at every possible twist and turn.

 

THE LAW AND ARGUMENTS

 

Privity of Contract

 

According to Halsbury’s Laws of England, 4th ed. Volume 9 Paragraphs 329, 334:

 

The doctrine of privity of contract is that, as a general rule, a contract cannot confer rights or impose obligations on strangers to it, that is, persons who are not parties to it. The parties to a contract are those persons who reach agreement and whilst it may be clear in a simple case who those parties are, it may not be so obvious where there are several contracts, or several parties, or both, for example in the case of multilateral contracts or collateral contracts.”

 

 

This passage was quoted with approval by Tembo J. in National Finance Company Limited v Royal Company Limited Civil Cause Number 2170 of 2001.

 

In Zeyaur Rahman Hashmi v DHL Express Civil Cause Number 423 of 2005, there was a written contract between DHL Express and Finance Bank Limited for the shipment of goods. When the goods went missing, the Plaintiff sued DHL Express. DHL Express argued that the Plaintiff could not sue as he was not a party. The Plaintiff argued that even though it was Finance Bank Limited that appeared to be a party to the contract, the actual party was him, a top official at Finance Bank Limited. It was held that not being a party, he could not sue on the contract.

 

On the basis of these authorities, learned Counsel for the Defendants Ms. Chirwa argues that the Plaintiff not being a party to the contract between the Malawi Government and the first Defendant can not derive any benefits from its provisions.

 

Parol evidence

 

Parol evidence will not be allowed to add or alter the terms of a contract. This includes an allegation that some other party other than the party in fact appearing in the contract ought to have been the actual party. In the Zeyaur Rahman Hashmi v DHL Express case, the Plaintiff attempted to adduce parol evidence to show that even though it was Finance Bank Limited that appeared to be a party to the contract, the actual party was him only that he was a top official at Finance Bank Limited. Kapanda, J stated:

 

The question then becomes whether oral evidence can be adduced to add to the express written stipulations in a contract. Put differently, can the Plaintiff be allowed to adduce oral evidence to dispute the fact that the circumstances appearing in the express written contract herein were different from what they in fact prima- facie appear to be. Indeed, can the Plaintiff at this late lay evidence that the parties to the contract were not Finance Bank of Malawi Limited and the Defendant as is clearly shown on “PF1” but that it was himself and the Defendant”.

 

The learned judge concluded:

 

It is obvious from the foregoing authorities that oral or extrinsic evidence cannot be tendered to vary or add to the terms of an express contract. The contract hence remains as it is expressly appearing i.e. that it is between Finance Bank of Malawi Limited and the Defendant”

 

And in K.S. Kamwendo v Bata Shoe Company Malawi Limited, Civil Cause Number 2380 of 2003, Mkandawire, J stated:

Rules on documentary evidence are very clear that a document speaks for itself. One cannot introduce parol evidence to contradict a document.”

As such, learned Counsel for the Defendant argues that as the main contract the subject matter of this action clearly spelt that the parties thereto are the Malawi Government and the first Defendant, the Plaintiff can not bring parol evidence to show that in fact the second Defendant was also a party to the contract.

Contract

For there to be a valid contract one of the essentials is that there must be an agreement. The agreement is made up of offer and acceptance. An offer is an expression of willingness by one person the offeror to enter into a relationship with another person the offeree with an intention that the relationship shall be binding on the offeror as soon as the offer is accepted by the offeree. An acceptance is a final and unqualified assent to all the terms of an offer. It must not treat the negotiations as still underway otherwise it fails as valid acceptance.

 

According to Cheshire’s Contract Law, 12th Edition, 37:

Whatever the difficulties, and however elastic their rules, the judges must, either upon oral evidence or by the construction of documents, find some act from which they can infer the offeree’s intention to accept, or they must refuse to admit the existence of an agreement. This intention, moreover, must be conclusive. It must not treat the negotiations between the parties as still open to the process if bargaining. The offeree must unreservedly assent to the exact terms proposed by the offeror. If, while purporting to accept the offer as a whole, he introduces a new term which the offeror has not had the chance of examining, he is in fact merely making a counter-offer. The effect of this in the eyes of the law is to destroy the original offer.”

In Abeles v Viola 15 MLR 1, 4, Banda, J stated:

In order to decide whether parties have reached an agreement, it is usual to enquire whether there has been a definite offer by one party and a definite acceptance of that offer by the other party.”

 

Ms. Chirwa therefore argues that, as the inclusion of the Plaintiff as one of the personnel is expressly stated to be ‘proposed’ such an expression cannot amount to a promise to engage the Plaintiff in reliance of which the Department of Irrigation could have entered into the contract with the Defendants. According to her, this becomes even more pertinent when one considers that under clause 10.6 of the main contract, the first Defendant could replace any of the proposed personnel. No presence of any one proposed member alone was influential to the entering into of the contract.

 

Over and above the fact that there was no definite offer made to the Plaintiff herein, she argues, it is clear that even if such offer had been made, there was no acceptance by the Plaintiff. What comes out from the affidavits herein is that the parties had been discussing towards the possibility of entering into a contract. From the plaintiff’s own affidavit, the last part of the discussion was from him through an email exhibited as JCM3. in the said exhibit, the Plaintiff inquires for further information. He then expressly states that “these issues will be important as they will influence my decision”. Her argument further proceeds, it is obvious from the said exhibit that by this time, the Plaintiff had not yet made his decision. There was no guarantee on the part of the Defendants that after the information was furnished to the Plaintiff, he would make his decision in favour of taking up the job with the Defendant. Negotiations were still underway as there had not yet been a definite position by the Plaintiff to amount to acceptance.

 

Collateral Contract

 

A collateral contract is a contract based on or whose consideration is the making of another contract and co-exists side by side with the main contract. It may be between one of the parties to the main contract and a third party. All the rules of offer, acceptance and consideration apply. The only distinguishing factor is that its consideration is the making of another contract. In the case of Heilbut, Symons & Co. v Buckleton (1913) AC 30, 47 Lord Moulton, stated:

 

It is evident, both on principle and on authority, that there may be a contract the consideration for which is the making of some other contract. ‘If you will make such and such a contract I will give you one hundred pounds,’ is in every sense of the word a complete legal contract.

 

To this extent there is a school of thought to the effect that collateral contracts are an exception to the doctrine of privity of contract in so far as a third party benefits from the main contract. This view is reflected in Shanklin Pier Ld v. Detel Products Ld [1949] K.B. 854. It was held in this case that a seller of goods is liable on an express warranty given by him to the promisee who in consideration of the warranty causes a third party to buy the goods so warranted and suffers damage by reason of the breach of the warranty.

 

Strictly speaking, however, a collateral contract is not an exception to the privity of contract rule in that the third party is a party to the collateral contract although not a party to the main contract. And the collateral contract is a full and independent contract of its own although related to the main contract. The Australia High Court case of David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48 has made it clear that a collateral contract is no less a contract than the main contract and clarified the relationship between the two. In that case, Mason CJ said that:

 

Collateral contracts are so called not because they are subordinate or of lesser importance (although they may well be, depending on the facts of the case), but because they impinge upon and are related to another contract. The primary/subordinate distinction is not supported by the case of, Heilbut, Symons Co. v. Buckleton,… in which Lord Moulton stated that collateral contracts have "an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract". Once the notion of primacy is jettisoned, "collateral" must be understood in the sense of "related to" or even "in addition to". So understood, the word covers the present case”

 

Learned Counsel for the Plaintiff Mr. Mpaka argues that the signing of the main contract between Malawi Government and Fintecs Consultants, created a collateral contract between Mr. Chidanti Malunga and the Defendants. In effect, he aregues, the Defendants said to the Plaintiff (and the Malawi Government): should JCM 1 come into being you will be assigned the tasks outlined in your personal profile (CV 7) at a remuneration stated in appendix E1 and the Plaintiff said well if JCM comes into being I will serve under the project on those terms-let us submit my CV to see if brings about JCM 1. This was a collateral contract the consideration for which was the making of the contract marked as JCM 1. JCM 1 is the main contract. It was forged prior to or contemporaneously with the main contract. The two contracts do not differ in respect of their possessing to the full the character and status of a contract.

 

On the other hand, learned Counsel for the Defendants Ms. Chirwa argues that from the above authorities and in particular an illustration by Tembo J. in the National Finance Company case, before the Plaintiff herein can succeed, he must demonstrate that (i) there was a promise by the Defendants (in particular) the first Defendant to the Department of Irrigation Services as parties to the original contract that the Defendants would employ the Plaintiff (ii) that the Department of Irrigation Services entered into the contract with the Defendants in reliance to this promise and (iii) that there was in fact eventually a contract between the Plaintiff and the Defendant.

 

CONCLUSIONS AND DISPOSITION

 

The Plaintiff was not a party to the contract between the Malawi Government and the first Defendant and as such can not bring this action in reliance on the terms as to removal and others spelt therein even though perhaps intended to benefit him. It is of interest to note that the provision on the need for consultation with the Malawi Government before the Defendants could remove a listed member of staff only relates to staff already placed on site of which the Plaintiff was not.

 

The parties to the main contract are clearly stated to be the Malawi Government and the first Defendant. The Plaintiff can not therefore bring extrinsic evidence to show otherwise that it is in fact between the Malawi Government and both Defendants.

 

In the e-mail communication by the Plaintiff to the second Defendant when he asks for clarification of the terms of the employment, the Plaintiff states that the matters are important as they will affect his decision. One may ask, a decision to do what. The most reasonable construction would be whether the Plaintiff would travel to Malawi to take up his proposed post in the project. This clearly shows that the parties were still at the negotiation stage and no definite terms had been agreed. Full and complete agreement on all the terms is a prerequisite for the existence of a contract.

 

One way of contextualizing the conduct of the parties in this case would be to say that if the Defendants offered to employ the Plaintiff in the project, then the e-mail the Plaintiff sent to the Defendant referred to in the paragraph above amounted to a counter offer in so far as it introduced the new term of taking breaks in between the job to attend to his academic programme in the United Kingdom which had no relationship with his employment. In that event, then the Defendants’ offer terminated and was no longer available for acceptance at the time that the Plaintiff arrived in Malawi and notified the first Defendant of his availability.

 

The Plaintiff’s conduct in importing a vehicle purportedly to be used in his presumed employment without informing the first Defendant particularly that there is no term in the main contract that staff had a right to procure their own vehicles and claim reimbursement from the project just emphasizes the irrational conduct of the Plaintiff in this matter. I would have expected a man of the Plaintiff’s education to have communicated to the second Defendant each crucial step he took by the e-mail mode which the parties were at the time in question engaged in before committing himself to unnecessary expense and waste.

 

As a collateral contract is a contract in its own right, it goes without saying that the arrangement must satisfy all the requirements for the existence of a valid contract and in the case at hand, the presence of an offer and acceptance. The Plaintiff has not clearly demonstrated to this court which of the events narrated is an expression of intent by the Defendants to enter into a binding relationship of employment with him especially that the Plaintiff is described as a proposed as opposed to definite employee. Further, the Plaintiff has not shown to me what act or conduct on his part is the acceptance. If it is the mere allowing of his CV to be used in the bid or the travelling to Malawi to take up the employment without communicating the fact to the first Defendant then I am afraid that does not constitute acceptance even in the slightest of fanciful imagination.

 

The long and short of it all is that there is no shred of evidence of the existence of a collateral contract between the Plaintiff and the second Defendant. It is an inordinate and unwarranted stretch of the mental faculties to say that the signing of the main contract between the Malawi Government and Fintecs Consultants created a collateral contract between the Plaintiff and the Defendants. On the evidence, I find no basis to find, as learned Counsel for the Plaintiff would wish that in effect the Defendants said to the Plaintiff (and the Malawi Government): should JCM 1 come into being you will be assigned the tasks outlined in your personal profile (CV 7) at a remuneration stated in appendix E1 and the Plaintiff said well if JCM comes into being I will serve under the project on those terms-let us submit my CV to see if brings about JCM 1.

 

I accordingly dismiss the Plaintiff’s claim.

 

The issue of costs is at the discretion of the court. The second Defendant’s conduct leaves a lot to be desired as well. I would have expected them to have communicated to the Plaintiff of his removal and replacement on the project even though it may be argued that their offer to him had been terminated by his counter offer. They had the Plaintiff’s e-mail address.

 

It is clear from the foregoing that the Plaintiff and second Defendant both failed to appreciate the centrality of the requirement for communication in the law of contract. In the circumstances I order that each party pays their own costs.

 

Pronounced in open court this 25th day of June 2008.

 

 

Dr. M.C. Mtambo

JUDGE