This is an application for the review of the second respondent's ruling dismissing the applicants exception to criminal charges preferred against them in the court of the Provincial Magistrate at Harare under case number CRB P9114-5/2018. The ruling was handed down on the 19th of November 2018.
The first applicant is Intratrek Zimbabwe (Pvt) Ltd represented by the second applicant, Wicknel Munodaani Chivayo, as its Managing Director.
THE FACTS
The applicants were arraigned before the Magistrates Court sitting at Harare for contravening section 136 of the Criminal Law (Codification and Reform) Act [Chapter 9:23] - Fraud (2 counts); contravening section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05] as read with section 4.1.18 of the Foreign Exchange Guidelines to authorised dealers, ECDI of 2009; and contravening section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05] as read with Exchange Control Authority GR1776 of 26 April 2016.
The allegations, as appearing on the outline of the State case, were that -
“…,.
4. On the 23rd of October 2015, Zimbabwe Power Company (ZPC) signed an Engineering, Procurement and Construction Contract (EPC) with accused (1) being represented by accused (2) for the construction of 100-Megawatt Solar Power Generation Plant in Gwanda. The performance/scope of the work was guided by schedule 11 of the contract.
5. Clause 2(a) and (b) of the terms and conditions of the contract under schedule 11 stated, that, the employer's advance for feasibility study and pre-commencement activities was to be considered part of the contract advance payment. A Bank guarantee was to be provided against all payments made by ZPC towards the project implementation.
6. Subsequently, between 4 December 2015 and 22 January 2016, the accused submitted two separate invoices amounting to US$803,765=82 and US$1,631,888=81 dated 9 November 2015 and 11 January 2016, respectively, on the pretext of feasibility study implementation.
ZPC'S Finance Director, Hubert Chiwara, acted upon the misrepresentation and released the full payment of US$2,435,654 in 9 different instalments, without the requisite bank guarantee, between 4 December 2015 and 22 January 2016 on the understanding that Shanghai Electric Power Design Institute Co. Ltd was going to carry out the feasibility study.
The payments were made from ZPC'S Stanbic Bank account numbers…, and Stanbic Bank…, into accused (1)'s CBZ bank account number…,.
7. However, ZPC Technical Director, Robson Chikuri, ZPC Projects Manager, Cleopas Fambi, and the suspended ZPC Managing Director, Noah Gwariro, indicated, that, they never met sub-contractor, Shanghai Electric Power Design Institute Co. Ltd during the alleged study period. There also no record of sub-contractor's representative entering Zimbabwe during the period in question.
8. Again, between 15 February 2016 and 25 April 2016, the accused submitted 3 invoices of US$1,219,476=80 each supported by payment release certificates; being advance payment claims, purportedly for the implementation of the following works -
(i) Site establishment (basic ablutions, communication network, temporary housing, preliminary foundation for 20-megawatt power plant and water citing and borehole drilling and storage).
(ii) Access roads.
(iii) Ground clearing.
9. Similarly, Hubert Chiwara acted upon the misrepresentation and released a total advance payment of US$3,188,476=80 on 12 different instalments, without bank guarantee, into the same bank account highlighted above.
10. On 26 April 2016, Hubert Chiwara requested the accused to provide a schedule of commitment in respect of funds released by ZPC towards the implementation of the project. The accused, again, through his Company Secretary, K. Makoni, misrepresented to the Finance Director, that, a total of US$1,960,125=40 had been paid to subcontractors. The sub-contractors distanced themselves from the invoices submitted by accused.
11. The paper trail indicated, that, accused used the funds meant for feasibility study and pre-commencement works for his own person benefit by diverting them into various individual and companies who were not involved in the intended activities for which the pre-funding was intended for. Investigations established, that, the funds were used to purchase vehicles; air tickets for the girls stranded in Kuwait; school fees; settlement of civil suits.
12. Further, the accused loaded a total of US$684,150 into five different VISA cards, purportedly for the importation of earthmoving equipment from Pietznack Plant and Earth Moving Service, a company resident in Dallas in the United States of America.
13. The accused person entered into a recurring fees agreement with Pietznacle Plant & Earth moving services company based in Dallas, United States of America for the importation of earth moving equipment without seeking prior approval from Exchange Control Authority, contrary to the provisions of the said Act.
14. In violation of the Exchange Control Act, the Accused persons did not clear, with Exchange Authority, through CDI forms, within 90 days as required by the said Act.
15. The offence came to light after the ZPC Board, through its Chairperson, Engineer Stanley Kazhanje, who discovered that the payments were made without bank guarantee and he reported the matter to the police, through his letter dated 18 December 2017, for investigations.
16. ZPC suffered a total prejudice of US$5,624,130=80 and nothing was recovered.”
Upon arraignment, the applicants pleaded and excepted to the charges in terms of section 171(2) of the Criminal Procedure and Evidence Act [Chapter 9:07] on the basis, that, the facts do not disclose an offence.
The exception was contested by the State.
On the 19th of November 2018, the court a quo dismissed the application for exception.
Dissatisfied with the court a quo's ruling dismissing the application for exception, the applicants approached this Honourable Court with the present application.
The applicants also filed an urgent chamber application for stay of criminal proceedings pending the determination of the present review application.
The urgent chamber application was filed under case number HC11205/18.
The urgent chamber application was partially dismissed on the merits, on 31 December 2018, under case number HH849-18, by MUSAKWA J, who ordered that the criminal trial had been suspended only in respect of the third Count.
Consequently, the applicants are currently undergoing trial in the Magistrates Court in respect of the other counts.
The application for review is opposed by the State.
THE LAW
The applicants have approached this Honourable Court in terms of section 26 as read with section 27 of the High Court Act [Chapter 7:06]. Part V of the High Court Act [Chapter 7:06] provides for powers of the High Court on review. Section 26 provides for the High Court's power to review proceedings and decisions of inferior courts. There are three grounds on which an application for review of criminal proceedings can be brought to the High Court in terms of section 27(1) of the High Court Act [Chapter 7:06]. These are -
(a) Absence of jurisdiction on the part of the court or authority concerned;
(b) Interest in the cause, bias, or malice on the part of the person presiding over the court or tribunal concerned or on the part of the authority concerned, as the case may be; and
(c) Gross irregularity in the proceedings or decision.
In casu, the applicants raise one major ground of review. It is captured on record p1 as -
“The second respondent's decision is grossly unreasonable and patently contrary to law such that no reasonable judicial officer who had applied his mind to the facts would have reached the same decision.”
The parties agree on the law applicable in an application of this nature.
RELIEF SOUGHT
The remedy that the applicants seek is that -
“1. The second respondent's ruling, of 19 November 2018, in case number CRB P9114-5/18 be and is hereby set aside.
2. The following is substituted in its place:
'In the result, the exception succeeds. The charges be and are hereby quashed. Consequent to the accused's plea, both accused be and are hereby acquitted.'”...,.
MY ANALYSIS OF THE FACTS IN THE OUTLINE OF STATE CASE
In reviewing the decision of the court a quo, and having found that the court a quo did not deal with the actual basis of the exception, the court is now at large to decide whether the facts disclose or support the criminal offences/charges the applicants are facing or not.
The starting points are paragraphs 4 and 5 of the Outline of the State Case which contain the full facts pertaining to the charges the applicants are facing. They read as follows -
“4. On 23 October 2015, ZPC signed an Engineering, Procurement and Construction Contract (EPC) with accused (1) being represented by accused (2) for the construction of 100-Megawatt Solar Power Generation Plant in Gwanda. The performance/scope of the work was guided by schedule 11 of the contract.
5. Clause 2(a) and (b) of the terms and conditions of the contract, under schedule 11, stated that the employer's advance for feasibility study and pre-commencement activities was to be considered part of the contract advance payment. A bank guarantee was to be provided against all payments made by ZPC towards the project implementation.”
I shall now turn to the nature of the exception to the charges and facts preferred against the applicants in the court a quo.
The exceptions were taken on the basis, that, even if the facts which are alleged in the charges and the outline of the State's case are proven, no criminal offence would have been established.
I say so because, the reading of the whole Outline of the State Case shows, that, this is purely a civil rather than a criminal matter. It therefore amounts to a futile enterprise if the trial were to proceed as I will demonstrate below....,.
I now turn to address the prospects of success of the exception filed on behalf of the accused persons on the merits. I shall not repeat the terms of each of the charges and facts for brevity....,.
I now proceed to consider the exchange control charges.
These are two:
It is alleged, that, the accused persons committed offences by entering into an agreement “involving recurring fees amounting to US$849,479” with Pietznack Plant and Earth Moving Services of Dallas, USA without seeking exchange control approval.
The judgment in McCosh v Pioneer Corporation Africa Ltd 2010 (2) ZLR 211 (H) held, that, the entering into an agreement does not violate the Regulations. It is the payment which violates the Regulations. In other words, after entering into the contract, the parties could still seek exchange control approval.
Assuming, therefore, that, the alleged facts are accepted as they are by the accused persons, no criminal offence was committed.
In addition, the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009, were not promulgated by the President in terms of section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05].
Section 2 of the Exchange Control Act provides that:
“2. Regulatory Powers of the President
(1) Notwithstanding anything to the contrary contained in any enactment, the President may make such regulations relating directly or indirectly to –
(a)…,.
(b) Exchange transactions.”
In terms of subsection (2), it is elaborated what such Regulations may relate to. In terms of sub-section (5), the Regulations may provide for penalties for contravention of the Regulations and criminal offences.
In the present matter, the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009 relate to authorised dealers, as defined, and not other persons.
In addition to not having been made by the President in terms of the Exchange Control Act, they do not create themselves a criminal offence.
This is admitted in the response by the Prosecution to the exception.
In any event, it is the first accused who entered into a public procurement contract with the Zimbabwe Power Company (“ZPC”). The second accused is not a party to the contract. He, however, represented the first accused.
There is therefore no valid charge for the contravention of the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009 in his capacity as Managing Director.
The contractual obligations related to, and flowed as between the complainant and the first accused only.
At all material times, the second accused represented the first accused in his capacity as Managing Director.
There is no allegation that the second accused did anything pursuant to the contract alleged in his own capacity.
There is no allegation that the corporate veil of the first accused was abused for a criminal enterprise and that the second accused, fully aware of this abuse, could have prevented the same, and, nonetheless, proceeded, recklessly, without regard to the consequences.
The following legal principles are trite:
A company is an entity distinct and separate from its shareholders and directors: see Salomon v Salomon & Co Ltd (1897) AC22 (HL) and Modern Company Law, 4th Ed (Stevenson and Sons 1979), by Prof GOWER LCB…,.
A director who acts for a company, on the basis of its resolution in that regard, does so as an agent of the company and does not attract personal liability for the conduct of the company.
The law is that, a company is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members. A company has its own legal personality. That is, in fact, without statutory intervention, company directors would not be liable for damages in Civil Law in respect of commission or omissions by companies: see Burley Appliances Ltd v Grobbelar N.O. 2004 (1) SA…, per NEIL J.
The State alleges, that, the second accused made certain misrepresentations (which is denied) in the course of the implementation of the procurement contract.
Apart from the fact, that, the facts alleged do not disclose a criminal offence, the conduct alleged remains the conduct of the first accused regardless of who represented it.
The second accused is wrongfully charged in his personal capacity.
The basis of the charge, as appears from the Outline of the State Case (OSC), is his alleged conduct in a representative capacity in respect of the procurement contract.
To that end, the charges are merely frivolous and vexatious.
In giving last consideration to the foregoing, the basis for charging the second accused, in his personal capacity, is without merit and has not been clearly set out in the Charge and the Outline of the State Case (OSC).
It should be noted, that, the only basis for charging an accused person in their personal or representative capacity of a corporate entity is found in section 277(5) of the Criminal Law (Codification and Reform) Act [Chapter 9:23]; it being alleged, that, in his personal capacity, he is liable for the alleged criminal conduct of a separate legal persona.
The provisions of section 277(5) of the Criminal Law (Codification and Reform) Act notwithstanding, to the extent that it imputes vicarious criminal liability on the second accused in respect of an offence allegedly committed by another (in this case a company) in respect of an offence which requires actual intention to be proven, such a charge amounts to a breach of the protective provisions in sections 56(1) and 49(1) of the Constitution of Zimbabwe, and, as such, invalid.
