Zimra loses case to terminate 85 vehicles deal

THE Zimbabwe Revenue Authority has lost its bid to cancel a tender for the supply of 85 vehicles worth more than US$3,9 million after the High Court Commercial Division threw out the appeal.

 The revenue authority failed to prove on a balance of probabilities that Mike Harris, a company that sells Toyota vehicles and parts, and which delivered 15 Toyota Hilux vehicles, had deliberately failed to supply the remaining 70, despite full payment.

The Commercial Division upheld the decision of the arbitrator the two had used, and agreed that Zimra was in effect seeking a rewrite of the contract.

Mike Harris had delays in getting foreign currency allocations, and fluctuations in the exchange rate meant that top-up payments would be required for vehicles still to be delivered.

Zimra, although it had paid in local currency, wanted to cancel the contract with the refund being calculated at the present local currency equivalent of the foreign currency the original payment would have bought.

 As it stands Zimra has received the first batch of 15 vehicles following payment of an equivalent of US$876 000.

 However, after making another payment of Z$209, 658, 911 on February 24, last year, Mike Harris did not deliver the next batch of the 70 remaining vehicles, mainly Toyota Corollas, with full payment having been made to the car dealer.

 Several meetings held by the parties to resolve the delay in delivering the 70 vehicles yielded nothing, with Mike Harris insisting that it could not deliver the vehicles due to challenges in procuring foreign currency.

Zimra declared a dispute by sending a notice of termination to the car dealer accusing the car dealer of breach of contract and sought reimbursement in the sum of US$3,063,000.

 The stalemate prompted Zimra to activate a clause in their contract which required a resolution of the dispute before an arbitrator.

 However, after a hearing, the arbitrator, Mr Kevin Terry, ruled in favour of Mike Harris after finding that the contract between the parties was not cancelled on September 28, 2022 and that Zimra was not entitled to payment by the car dealer in the sum claimed payable in ZWL at the RBZ auction rate together with interest.

 The arbitrator rejected Zimra's prayer for damages in the sum of US$ 3 063 000 payable in local currency at the RBZ auction rate at the date of payment. Unhappy with the arbitration decision that was rendered in June this year, Zimra took the matter up to the High Court Commercial Division on appeal seeking to set aside the decision.  After hearing counsel for both parties, Justice Sylvia Chirawu-Mugomba upheld the arbitrator's decision finding no merit in the Zimra appeal.

She rejected submissions by Zimra's lawyer Mr Nyasha Munyuru that the award was contrary to the terms of the agreement between the parties which was binding on them and that Mr Terry attempted to rewrite the contract for the parties.

"I do not perceive how this can be so," said Justice Chirawu-Mugomba.

 "The parties entered into the contract freely. They submitted to arbitration freely.

"They both accept that after the second batch of cars was not delivered, they held several meetings to try to resolve the matter. This ground has no merit at all and is as a matter of fact an attempt by the applicant to compel this court to re-write a contract entered into freely between the parties."

In this case, the judge noted that Zimra expected the arbitrator to uphold the termination of the contract and when he did not, the revenue authority was unhappy.

 "The contentions by the applicant who freely entered into an arbitration contract and put specific issues before the second respondent, in my view amount to asking this court to review the award," she said.

"That is not our duty. As cited above, the ground of public policy is very limited.

"A litigant cannot found a claim on its general unhappiness over an award and claim that it is in conflict with public policy."

It was Zimra's contention that the award conflicted with public policy in several respects, firstly, that it was contrary to the terms of the agreement between the parties which is binding on them and that Mr Terry attempted to rewrite the contract for the parties.

 Secondly, that Mr Terry failed to consider Zimra's position and failed to make a determination on breach of contract while such breach formed the basis of the revenue collection claim and lastly that Mr Terry's reasoning was grossly outrageous in failing to award anything to the revenue authority when it was apparent that it made payment to the car dealer for the remaining batch of vehicles.

 In opposing the appeal, Mike Harris, represented by Advocate Tawanda Zhuwarara, argued that the contract was affected by currency fluctuations, a fact that both parties were aware of. In this regard, Adv Zhuwarara, argued that it was wrong for Zimra to make a claim in the United States dollars that it never paid.

 Instead, what it paid were Zimbabwean dollars and the RBZ would then allocate funds as it did for the 15 delivered vehicles, argued Adv Zhuwarara.

It was further argued that the total amount, which Zimra paid to Mike Harris, if converted does not equate to the claim made. The judge also heard that there was no wilful default on the part of the car dealer as the allocation of money from the RBZ was beyond its control, hence force majeure applies.

Zimra, the lawyer argued, was refusing to take heed of the currency fluctuations and pay a top-up amount.