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.'”
THE SUBMISSIONS
The applicants submitted, in their heads of argument, that, the court below was duty bound to apply its mind to the question brought before it, id est, whether the facts alleged disclosed an offence.
The court a quo failed to determine the issue which was brought before it: see Makandi Tea & Coffee Estate (Pvt) Ltd v A.G & Anor HH595-15.
It went on a tangent.
It considered whether the charge was properly crafted. That was never the issue before it.
A failure to apply its mind to the question before it was a grossly unreasonable failure of the judicial function. It was not only unreasonable. It was also patently contrary to the law.
On that basis, the applicants submitted, that, the decision of the court a quo be vacated, on review, because, if the court had addressed the question that had been brought before it, it would have arrived at a decision that the facts do not disclose a criminal offence.
See also Bridges & Hulmes (Pvt) Ltd v The Magistrate, Kwekwe & Ors 1996 ZLR 189 (HC)…, where it was stated:
“Because of the wrong question of law, he directed his inquiry at matters he should not have considered, and failed to apply his mind to the matters in issue.”
The applicants further submitted, in their supplementary heads of argument, that, the second applicant should not have been charged in his personal capacity since he was acting only as a representative of the first applicant which is a legal persona.
The first respondent, on the other hand, submitted, that, it appeared the applicants purported to except to the charges in terms of both section 170 and section 180 of the Criminal Procedure and Evidence Act [Chapter 9:07,] and, thereat, lied the problem that then led the second respondent to proceed in the manner he did.
The first respondent submitted, that, the applicants should have excepted in terms of section 180 and not 171 of the Criminal Procedure and Evidence Act.
However, the first respondent further conceded, that, indeed, the second respondent misdirected himself by determining an issue that was not meant for him to decide, but, however, argued, that, the misdirection was not one so fatal as to go to the root of the matter.
It further submitted, that, the trial has since commenced in respect of Counts 1, 2 and 4 hence this application has been overtaken by events.
As regards the third Count, the first respondent conceded, that, there was no offence shown and agreed with the findings of MUSAKWA J to which counsel for the first respondent urged the court to take note of in reviewing this matter.
On the other hand, the applicants referred this court to the judgment by CHITAPI J and urged the court to take into account the sentiments of CHITAPI J in deciding whether the facts disclose an offence or not when reviewing this matter.
It is therefore clear, that, the second respondent misdirected himself when he dismissed the exception because he dealt with an issue that was not before him. He decided whether the charges disclosed an offence or not yet what he had been asked to adjudicate upon was whether the facts, as stated in the Outline of the State Case, disclosed any offence or not.
This misdirection, in my view, goes to the root of the matter.
Having found that there was a misdirection, what is left is for the court to decide whether, if the court had decided the correct issue, the court would have arrived at the same findings in view of the relief being sought by the applicants.
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.
Before dealing with the justification for the above conclusion, I need to comment on two procedural issues arising from the opposition to the exception by the prosecution:
(i) The first issue is whether or not it was proper for the exception to be filed in terms of section 171 of the Criminal Procedure and Evidence Act [Chapter 9:07] instead of section 180(4) of the same Act.
(ii) The second issue is whether it is constitutional for the court to, in terms of section 171(2) of the Criminal Procedure and Evidence Act, have a discretion to dispose first of the exception or to hold the disposal in abeyance pending the completion of the trial and then render the judgment on the exception at the end of the trial.
My conclusion on the first issue is that the prosecution is wrong to contend, that, an exception ought to be filed in terms of section 180(4) of the Criminal Procedure and Evidence Act. My justification for the conclusion is the following:
Section 171 of the Criminal Procedure and Evidence Act reads as follows:
“171 Exceptions
When the accused excepts only and does not plead any plea, the court shall proceed to hear and determine the matter forthwith; and, if the exception is overruled, he shall be called upon to plead to the indictment, summons, or charge.
When the accused pleads and excepts together, it shall be in the discretion of the court whether the plea or exception shall be first disposed of.”
Exceptions are therefore taken in terms of section 171 of the Criminal Procedure and Evidence Act. That is the first and only provision in the Criminal Procedure and Evidence Act dedicated to dealing with exceptions. They are not dealt with under section 180. To prove this point, one has to consider section 180 of the Criminal Procedure and Evidence Act.
Section 180 of the Criminal Procedure and Evidence Act provides, in part, as follows:
“180 Pleas
(1) If the accused does not object that he has not been duly served with a copy of the indictment, summons or charge or apply to have it quashed under section one hundred and seventy-eight, he shall either plead to it or except to it on the ground that it does not disclose any offence cognisable by the court.
(4) The accused may plead and except together.”
The clear conclusion which can be drawn is that pleas are made in terms of section 180 while exceptions are taken in terms of section 171 of the Criminal Procedure and Evidence Act.
The mention of the discretion to the accused person for him to plead and except at the same time is not the substantive power to make exceptions. It is a reference to an exception which would have been taken in terms of section 171 of the Criminal Procedure and Evidence Act, if it were to be taken without being combined with the plea.
The submission by the prosecution, that the exception must be dismissed because it is made in terms of the wrong section, is, accordingly, without substance.
The position is that an exception is taken in terms of section 171 and a plea in terms of section 180 of the Criminal Procedure and Evidence Act.
The possibility of combining the two is provided for in section 180(4); but, that does not supplant the specific provision in section 171(2) which shows that an accused can plead and except “together”.
The second point relates to section 171(2) of the Criminal Procedure and Evidence Act which provides, that, the court can exercise a discretion, when an accused has pleaded and excepted at the same time, as to whether to dispose of the plea or exception first.
I conclude, that, the statute's grant of discretion to the Magistrate appears unconstitutional.
The following is my justification for this conclusion:
Invariably, an accused, as in the present matter, excepts on the basis, that, the facts alleged, even if proven, do not constitute an offence.
When an accused has pleaded not guilty and has not yet provided an outline of his defence on the facts, he is entitled to a determination as to whether the facts alleged would disclose an offence as an antecedent to the commencement of a trial.
To hold otherwise would allow the prosecution of an accused person on a charge which potentially does not disclose an offence. That amounts to a violation of the constitutional rights of the accused person to a fair trial.
Section 69(1) of the Constitution provides that:
“69 Right to a fair hearing
(1) Every person accused of an offence has a right to a fair and public trial within a reasonable time before an independent and impartial court.”
Section 70(1) of the Constitution provides, in part, as follows:
“70 Rights of accused persons
(1) Any person accused of an offence has the following rights –
(a) To be presumed innocent until proven guilty;
(b) To be informed promptly of the charge, in sufficient detail, to enable them to answer to it;
…,.;
(i) To remain silent and not to testify or be compelled to give self-incriminating evidence.”
The permission granted to a Magistrate, to hear the defence on the merits, in his discretion, where an accused has pleaded and excepted at the same time does not sit well with the above constitutional provisions.
It allows for a Magistrate to hear a defence on the merits to a charge which may not disclose an offence, and, therefore, permit the self-incrimination of the accused person. It violates the right of the accused person to be promptly informed of the charge, in sufficient detail, in order for him to answer to it.
How can an accused answer to a charge when he alleges that it does not disclose an offence?
Equally, the presumption of innocence, which is cardinal in human rights jurisprudence, is violated.
The remarks of KUDYA J, in Tobacco Sales Producers (Pvt) Ltd v Eternity Star Investments HH121-06 and 2006 (2) ZLR 293 (H)…, are therefore called to mind:
“In my view, that an exception can only be properly filed before the excipient pleads to the merits of the matter. In terms of the heading of Rule 137, it is an alternative to pleading to the merits. Once the excipient pleads before the exception, he is in fact telling the other party, that, its declaration discloses a cause of action and that it is neither vague nor embarrassing. Otherwise, if it did not disclose a cause of action or was vague and embarrassing, then, the defendant would, of necessity, raise an objection, either through an exception or the other recognised ways laid out in the Rules.”
I recognise, that, the above remarks apply to civil matters which are regulated by Rule 137 of the High Court Rules 1971. There is no reason why the same rule and principle of justice should not apply in criminal matters. Moreso when the prospect of an improper conviction in criminal matters has potential consequences of incarceration for the accused person.
More safeguards must therefore be given in criminal procedure to ensure that the trial is as fair as possible.
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.
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.
I now turn to the final exchange control charge.
This charge relates to an allegation, that, exchange control approval have been granted for the “loading” of the sum of US$849,479.00, the accused has not submitted acquittals in violation of Exchange Control Authority GR1776/2016.
Again, the Exchange Control Authority, GR1776/16, is subject to my views above, on the absence of a criminal offence and not having been promulgated by the President.
I therefore consider, that, even if it were established that the facts alleged did take place, there is no criminal offence established.
On the basis of the above, I consider that the exception taken was properly taken.
Prospects of success of the criminal suit
“This is a matter that does not enjoy any much prospects of success. Apart from the compelling submissions contained herein, the High Court has also had occasion to express its opinion on the merit or otherwise of the criminal case. In the case of Wicknel Munodaani Chivayo v The State B1118/18, the learned judge, CHIKOWERO J, in granting bail to the accused noted that:
'There was nothing on the record that demonstrates that the State had a strong case against the applicant [accused two herein]. There was therefore no justification for a finding that the strength of the State case was likely to induce the accused to flee to avoid possible conviction and long incarceration.'”
The High Court went on to find, that, the effect of the testimony of the investigating officer was to show that “the State case was extremely weak and the defence very strong.'…,.
In respect of the alleged fraud, the High Court observed, that, the investigating officer was unable to point out where the misrepresentation was. He could not dispute that there was no “dirty money” in respect of the money laundering charge which the State later decided to drop at commencement of the trial. The source of the money was known - it was the State itself. The Investigating Officer was unable to prove that neither the accused or co-accused took any money outside Zimbabwe in contravention of the Exchange Control Act [Chapter 22:05]. On the basis of all these flaws, the High Court was at the verge of declaring the State's case to be totally without merit, and, as a candidate suitable for discharge at the close of the State's case.
It is such compelling dicta of a superior court that leaves no doubt in respect of the merits (if any) of the criminal suit by the State. The High Court, properly exercising its mind, found, that, the State's case is without merit. It can only follow, as guided by the Honourable Court, that, the State's case is hollow and devoid of merit. It can only be dismissed with costs.
The complainant has also failed to support its civil suit satisfactorily.
In the case of Intratrek Zimbabwe (Pvt) Limited v Zimbabwe Power Company (Pvt) Limited HH818-18, the complainant [respondent therein] denied ever instituting criminal suit against the accused persons herein.
It invites confusion and uncertainty on how the State formulated the charges preferred against the accused persons if the known complainant has denied ever instituting same. Apart from being suggestive of a skirmish, a mere witch hunt, and a phishing expedition, it tells more of a hidden hand or mala fides intention in the institution of the criminal proceedings brought about by the State in the circumstances.
CHITAPI J, presiding in the civil suit, retorted that:
'What concerns the Court is the Respondent's [ZPC] denial that it had nothing to do with the arrest of the Applicant and its Managing Director. The denial is telling and has ramification because it then leads to the conclusion that a third force, the Police, which is an organ of the State, frustrated the contractual relationship between the Parties. The Court found the Respondent's denial, that it had nothing to do with the arrest of the Applicant and its Managing Director [Accused Persons herein], to be glaringly and palpably false.'
The findings of the court cannot be over-emphasized; suffice to opine, that, it establishes the complainant as being untruthful under oath and incredible. This characteristic cannot be overlooked in respect of the criminal suit instituted at the instance of ZPC.
It is a pinnacle of criminal procedure, that, in order for a person to be competently charged and tried of a criminal offence, there should be a person (natural or juristic) who should complain of the criminal conduct of the accused.
Put differently, a competent and credible complainant should place before the court the basis upon which any allegation of the commission of a crime may be founded. The complainant, in unison with any other witness, should submit before the court a prima facie case and evidence beyond reasonable doubt to secure a conviction.
Without a competent and credible complainant, the charges and allegations of criminal conduct upon an accused become speculative and unsubstantiated.
CHITAPI J casted further reservations on the nature of the criminal allegations levelled against the accused persons herein.
In verbatim, he intimated, on p20 of the same judgement, as follows:
“What is however mind boggling is that the criminal allegations against the Applicant [Intratrek] and its Managing Director, that they defrauded the Respondent [ZPC] of USD5,624,607=60 in payments for work not done directly contradict the Addendum to the Contract produced before this Court on oath. The allegations also contradict the Respondent's [ZPC's] Managing Director's deposition that work was done but had not been completed. The Addendum also clearly shows that a further amount was due to sub-contractors employed by the Applicant [Intratrek]. The fraud is, at least on the facts before this Court, difficult to fathom.”…,.
That two different judges, in separate sittings, and dealing with different issues but relating to a similar cause of action concur on the lack of merit in the criminal case is no coincidence. Rather, it demonstrates the extent of common acceptance that the criminal case is, at best, a causa non grata; a high sounding nothing.
The learned Judge continues purging the criminal suit, justifiably so, in the manner which follows hereunder:
“The Form 242 on which the [Accused Persons] were brought before the Criminal Court in CRB9114-5/18 alleged that there was an accomplice involved, being the Minister of Energy and Power Development, Samuel Undenge who was [at the time of the judgement] still to be arrested. It was alleged that the Minister had corruptly interfered with the tender process and directed the Respondent's [ZPC] Managing Director, Noah Gwariro, to award the contract (the subject of this application) to the accused person.”
It is imperative at this stage to note, that, it is now common cause that the aforesaid Minister was later arraigned and tried of the criminal offence at the Magistrates Court and thereafter acquitted.
The learned judge extended his judicial observation and noted that the “duplicity of the conduct of the respondent [ZPC] in causing the arrest of its contracting partner and denying so in this Court has been amply demonstrated and smacks of mala fides or bad faith. If one must accept the respondent's Managing Director's denial, that the respondent filed the criminal report, then, the inescapable probability is that there is discord within the respondent company in that the Board says one thing and the Management says another.”
On the basis of the foregoing, the totality of the facts and merits surrounding same, it is highly improbable that the criminal suit may find merit in any court of law reasonably exercising its mind. It stands to reason, that, any further tolerance of this criminal suit, or, at worst, conviction of the accused persons will amount to a violation of the supreme law of the land, the Constitution.
Section 49(2) of the Constitution of Zimbabwe (Amendment No.20) is express in that:
“No person may be imprisoned merely on the ground of inability to fulfil a contractual obligation.”
This constitutional provision establish constitutional protection upon the doctrine of sanctity of contracts, which the accused persons also enjoy.
No criminal sanction is capable of execution when it is in violation of the Constitution.
The perpetuation of this criminal case is inherently null and void to the extent that it is ultra vires the supreme law of the land - the Constitution.
CONCLUSION
The charges preferred against the applicants, as revealed by the facts, are undoubtedly contrived and were properly excepted to.
They arise from a cause of action that is contractual in nature and therefore incapable of being resolved through the criminal justice system. The relationship between the complainant and both applicants is contractual, and, therefore, any remedy for a dispute arising therefrom should be civil and in terms of the contract.
The State cannot be enjoined, through the apparatus of the criminal justice system, to determine contractual obligations of private persons and the performance or otherwise of such obligations.
The facts, therefore, do not disclose any criminal offence.
It is assumed, and rightfully so, that the Engineering Procurement and Construction Contract (EPC) Contracts are clear on how any non-performance by a party is resolved. The dispute resolution mechanism, which should be available in the EPC Contract, is not suggestive of, neither does it impugn criminal liability on either party's failure or delay to perform contractual obligations.
To that extent, the proper remedy available to the complainant is claiming specific performance in terms of the provisions of the EPC Contract.
The EPC Contract always speaks for itself.
In terms of the well-known parole evidence rule, no one can speak on its behalf as it is the exclusive memorial of the parties agreement. The parties are strictly bound by the four corners of the contractual document. The parties cannot add or subtract anything from the contractual document.
The Criminal Court, therefore, does not have jurisdiction to hear or otherwise determine a case of a civil nature, such as this one.
To buttress the foregoing, it suffices to record, that, it is settled practice, that, 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.
Notwithstanding the lack of merit in the State's charges and facts, it is palpably a wrong procedure for redress altogether.
The matter in casu is therefore purely a civil matter which should be resolved by simply enforcing the dispute resolution provisions of the Engineering Procurement and Construction Contract (EPC). The complainant negotiated and participated in the drafting of this contract; was and remains fully aware of the existence of a dispute resolution clause; it was there, but has elected not to utilize same, ostensibly for the purpose of frustrating the applicants ability to fully perform its obligations.
In consideration, it is prudent, at this stage, to observe the dicta of CHITAPI J in the case of Intratrek Zimbabwe (Pvt) Limited v Zimbabwe Power Company (Pvt) Ltd HH818-18 which counsel for the applicants urged me to take note of.
In determining an application for specific performance by the first applicant herein, the learned judge had occasion to intimate that -
“…,. the Addendum was entered into and it took into account that the advance payment guarantee was still outstanding. There was no fraudulent misrepresentation made by the applicant (accused) in relation to the Advance Payment guarantee as would have influenced the respondent [ZPC] to make the payment. Both parties were aware that the guarantee was yet to be given for its availing. A failure to meet the deadline agreed would not amount to a fraud per se but would constitute a breach of an agreed condition. The papers show that the applicant [accused] subsequently offered to provide a guarantee of USD52 million against a similar amount, less payments already made, but the respondent [ZPC] refused the offer arguing that the contract had lapsed.”
In consideration of the foregoing, the criminal charges stand on a frail footing and cannot be sustained at law or before any Court reasonably exercising its legal mind.
If the learned magistrate had endeavoured to answer the correct question asked of him, he would have realized, that, the contractual remedies to give the complainant the proper redress are provided for in terms of the EPC Contract.
It seems compelling, that, having a civil matter determined by the State, through the criminal justice system, is not only wrong but sets a dangerous precedent if not tamed at its inception.
This approach bears the greater danger of opening every commercial transaction to criminal liability; a situation that may degenerate into chaos if left to prowl freely. No investor would open themselves to the extreme exigencies of having the fate of their investment determined by a Criminal Court where, inter alia, the standard of evidence should be beyond reasonable doubt.
I am not blind to the dicta by MUSAKWA J where he said, that, there were no prospects of success, on review, in respect of Counts 1, 2, and 4 which case the respondent urged me to take into account wherein the learned judge was dealing with an urgent chamber application in the case of Intrateck Zimbabwe (Private) Limited and Wicknel Munodaani Chivayo v Prosecutor General of Zimbabwe and L Ncube N.O. HH849-18.
However, these were his prima facie opinions which are not binding on this court having heard the full submissions and read the papers presented before me.
On the basis of the foregoing, the totality of the facts and merits surrounding same, it is highly improbable that the criminal suit may find merit in any court of law reasonably exercising its mind.
At best, the exception to the facts should have been upheld had the court a quo properly exercised its mind, and, in the least, the State's case should be discharged for want of merit.
IT IS ORDERED 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.”
