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.
The first two charges constitute of allegations that the accused persons committed fraud as defined in section 136 of the Criminal Law (Codification and Reform) Act [Chapter 9:23].
The said section provides:
“Any person who makes a misrepresentation –
(a) Intending to deceive another person or realising that there is a real risk or possibility of deceiving another person; and
(b) Intending to cause another person to act upon the misrepresentation to his or her prejudice, or realizing that there is a real risk or possibility that another person may act upon the misrepresentation to his or her prejudice;
shall be guilty of fraud if the misrepresentation causes actual prejudice to another person or is potentially prejudicial to another person…,."
The essential elements for the charge of fraud are therefore -
(a) The existence of a misrepresentation;
(b) The existence of an intention to deceive or realisation of the risk or possibility of deception;
(c) The intention to cause another person to rely upon the misrepresentation to their prejudice or the realisation that the possibility of reliance on the misrepresentation exists; and
(d) Causation of prejudice or potential prejudice.
These requirements are confirmed in the judgment relied upon by the State, to a large extent, the judgment in S v Chikukwa HH813-16.
The intention to deceive must exist at the time that the misrepresentation is made.
In this case, such intention must be alleged to have existed on each of the dates on which invoices were presented to the Zimbabwe Power Company (ZPC) for payment. The non-existence of such intention immediately becomes apparent if one considers, that, the relationship between the parties was regulated by an Engineering Procurement and Construction Contract (EPC) which authorised payment before works had been done.
All payments made by the Zimbabwe Power Company (ZPC) were advance payments. They were authorised by the contractual document. The intention by both parties, as expressed in the contract, was that work would be done after the payments.
That negates the intention on the part of the accused persons to cause any prejudice to the Zimbabwe Power Company (ZPC).
Any prejudice which may be alleged to have fallen upon the Zimbabwe Power Company (ZPC) or may potentially fall upon it was contemplated by the parties at the time of entering the contract and mitigatory measures were taken to guard against such prejudice.
In each case, therefore, a performance bond was required to have been supplied before payments were made.
The fact that it is alleged, that, no performance bonds had been supplied at the time of the making of some of the payments does not mean that there was any fraud.
The parties contemplated the possibility of breach of the contract by non-performance of the first accused person and took appropriate mitigatory measures. The non-implementation of the mitigatory measures can only be a breach of the contract if established.
In fact, the loss, in that event, would have been caused not by the malperformance of the contract but by the negligence of the Zimbabwe Power Company (ZPC) in paying where the contract provided that payments should have been made only when the performance bond or an advance payment guarantee was in place.
Such loss is not the loss or prejudice contemplated in terms of section 136 of the Criminal Law (Codification and Reform) Act.
The State also contends, that, the Public Procurement and Disposal of Public Assets Act [Chapter 22:23] does not apply to the facts because it was not in existence when the contract between the parties was concluded.
The Public Procurement and Disposal of Public Assets Act came into effect on 1 January 2018.
The facts in the present matter took place from about the year 2015 when the contract was entered into.
Section 103 of the Public Procurement and Disposal of Public Assets Act provides, that, a procurement entity may apply to the Procurement Regulatory Authority of Zimbabwe, established in terms of the Act, to proceed with procurement under the new Act, or, alternatively, the Authority may direct a procurement entity to proceed under the new Act.
All procurement proceedings which were pending at the time the new Act came into force must therefore be concluded under the old Act.
The reliance by the accused persons on the new Act, and its specific clauses for dispute resolution, will therefore not likely succeed.
However, even in terms of the old Procurement Act, there was no criminalisation of non-performance on procurement contracts.
In addition, and even more telling, is the fact, that, the present matter is contractual.
It is one based on an Engineering Procurement and Construction Contract (EPC) Contract.
It is therefore supposed to be resolved contractually.
The law is that whenever a matter is contractual, and where the contract thereto is capable of providing effective redress, the parties wishes concerning dispute resolution, as captured in the contract, must be resorted to.
No room for extension of liability under a different remedial regime, like criminal law, must be allowed.
Put differently, the rule is that where the matter is entirely contractual, and where the contractual remedies provide sufficient redress, public policy dictates, that, contractants pursue their remedies contractually.
The complainant is a private company owned by the State. Like the accused persons, it must have the same rights and liabilities.
The law is that whenever the State or its affiliate enters into a contract, it must be treated equally as the other party to the contract. It must find its remedies and/or incur its liabilities in terms of the contract. The contract must be the beginning and the end in resolving whatever dispute that might arise between the parties - Minister of Natural Resources & Tourism v F C Hume (Pvt) Ltd 1989 (3) ZLR 55 (SC).
Intrinsically related to the above, the State stands in the same position as any other private commercial player, subject to the statutory regulation of its commercial activity; see GCO QUINOT, State Commercial Activity, Juta & Co 2009…,.
The ordinary principles of contract should therefore ordinarily apply.
In addition, the common law and statutory principles of administrative justice bind the State, which is required to adhere to fairness, transparency, integrity, and, amongst other things in the administration of public power; see PHOEBE BOLTON, The Law of Government Procurement in South Africa, Lexis Nexis, 2017 reprint…,.
This is because of the source of the power exercised despite the description of the complainant as a private limited company (GCO QUINOT, State Commercial Activity, Juta & Co 2009…,. quoting the leading case of Mustapha v Receiver, Litchenburg on the classification approach; PHOEBE BOLTON, The Law of Government Procurement in South Africa, Lexis Nexis, 2017 reprint…,.
The case of State v Lovemore Kurotwi & Anor HH270-16 is instructive.
It establishes, that, as a matter of law, where Government, as a contracting party, freely enters into a written contract, any subsequent negation of the terms thereof by the State depicts lack of candour on its part.
In verbatim, BHUNU J…, had this to say in the cyclostyled judgement:
“Both Government and ZMDC cannot be heard to complain that they were duped into signing the contractual document under the mistaken belief that BSGR was standing as guarantor for Core Mining when the contractual document makes no mention of BSGR at all.
It is also inconceivable that both Government and ZMDC could have believed that BSGR was the guarantor for Core Mining when Subithry Naidoo and Licht Yehuda signed the contractual document in their personal capacities as guarantors without any reference to BSGR. Considering that the contractual document was subjected to scrutiny by Government lawyers before execution it is highly unlikely and not in the least probable that they too could have been mistaken that BSGR were the guarantors for Core Mining when the written contract stipulated in clear and unambiguous terms that Subithry Naidoo and Licht Yehuda were the guarantors.
It is wholly unbelievable that Government, ZMDC, and Marange Resources could have genuinely believed that BSGR was standing as guarantor for Core Mining with the full knowledge that they had not accepted its counter offer. It therefore boggles the mind how all these three eminent entities, backed up by proficient lawyers, could have entertained the idea of contracting with BSGR without the contractual basics of offer and acceptance.”
From the foregoing, it is clear that Government entities are taken to have carried out all due diligence on the competencies of the contractor before entering into a contract with them. By equal measure, the complainant is considered to have been satisfied by the technical and financial capacity of the accused persons together with their partners.
It is improbable, that, the State would consider itself a victim of fraud when it was a willing participant in entering into the Engineering Procurement and Construction Contract (EPC) with the accused persons.
Even in cases involving private entities alone, Criminal Law has never been recognised as a competent remedy to compel a party to a contract to perform in terms thereof.
In the case of Brian Tarisai Kambasha & Anor v The State HH36-17, the court took occasion to remind the parties, that, their relationship was contractual, and, in instances where money was exchanged in the anticipation of performance of certain agreed contractual obligations, the relationship becomes civil, in the form of a debtor and a creditor.
In the above case, the accused persons were convicted of theft of trust property in terms of section 113(2)(d) of the Criminal Law (Codification and Reform) Act [Chapter 9:23] and sentenced to 5 years in prison at the Harare Magistrates Court.
The charges arose from a contractual undertaking, in terms of which the accused persons undertook to erect a 100KVA solar plant at the complainant's farm. The complainant's discontent arose when he became frustrated with the accused's failure to complete the installation of the solar plant within the time limits agreed by the parties in a written and signed memorandum of agreement. In pursuance of the first phase of the agreement, the complainant advanced the sum of US$50,125 to the accused and they cleared the ground and erected metal poles, but failed to put into place the solar panels to complete the project.
According to the accused, the work which they did constitutes 80% of the project. The complainant estimated the value of the work done to have been US$3,000 of work. After the poles had been erected, the accused persons stopped work. They said it was because the US$50,125 had been used up due to a failure to get a 60% discount promised to the complainant upon entering into the agreement. On the other hand, the complainant's concerns, when he reported the accused to the police, were that they had downed tools because they had converted the funds to their own use.
This case is almost at all fours with the matter in question.
In determining this case, on appeal, MUSHORE J sitting with HUNGWE J were correct in the reasoning that:
“The State failed to establish a prima facie case at the closure of the State case and the [Accuseds'] application for absolution from the instance should have been granted. It is our considered view, that, the essential elements for the offence of theft of trust property, as cited and appearing in section 113(2)(d), were not met. The complainant should have proceeded with a civil claim for breach of contract and sued for either specific performance or for cancellation and damages. The facts of this case fall within the exceptions which are expressly provided for in section 112 of the Criminal (Codification and Reform) Act [Chapter 9:23].”…,.
This case clearly sets out similar procedure which the complainant in the current case, the Zimbabwe Power Company (ZPC), ought to have followed.
By reason and standard of this case, it is correct to propound, that, the criminal proceedings against the accused persons are unfounded, misled, and misdirected.
Criminal Law is not a procedure for the enforcement or the remedy of alleged breach of contract.
There are specific measures provided for this under both the contract itself and the regulatory statutory regime.
It has been held, that, the State does not need the help of the Criminal Law to relate to the enforcement and remedy of public contracts: see State v Lovemore Kurotwi & Anor HH270-16.
The complainant is a procuring entity regulated by the procurement regime and wholly owned by the State in its commercial activity. To that end, its commercial activities cannot be assisted by the criminal arm of the State in enforcing obligations which arise from private commercial transactions governed by a contract.
It is clear, that, the allegations against the accused persons were an arbitrary ploy by the State to get an unfair advantage in a contractual issue for which the State is indirectly a party. The State, being party to a contract, must enforce its rights, civilly, without flexing its muscles needlessly in order to intimidate a private party....,.
Where a fraudulent misrepresentation is alleged in the performance of contractual obligations, the remedies available to the aggrieved party are not criminal but rather civil in the form of a claim of damages, specific performance, or termination of the contract.
