Border Transport (Pvt) Ltd. v Tectrans (Pvt) Ltd. (HC 9542 of 2013) [2016] ZWHHC 80 (27 January 2016)

1 HH 80-16 HC 9542/13 BORDER TRANSPORT (PVT) LIMITED versus TECTRANS (PVT) LIMITED HIGH COURT OF ZIMBABWE TSANGA J HARARE, 18-21 September 2015 & 27 January 2016 Trial Cause Z Macharaga, for the plaintiff P S Jonhera, for the defendant TSANGA J: The dispute in this trial centred on certain vehicles which the defendant acquired from the plaintiff company, but which the latter denied selling to the defendant on the basis that the agreements that gave rise to the purported sale and acquisition of the vehicles by the defendant, were in fact null and void. Six purported agreements produced by the defendant when confronted with the return of these vehicles, formed the subject matter of the trial. In particular, the signature of the plaintiff’s then managing director, one Blessing Chikumbo, since deceased from an apparent suicide, was said to have been forged. The logo on the letter heads used for the agreements was also said to have been forged. The vehicles forming the subject matter of the dispute were described as follows: i. A vehicle double CAB ISUZU of chassis number ADMTFSSDIA99001 of original registration number AAG 9154 of year 2001. According to the purported agreement it was sold to defendant for the sum of US$9 000.00. ii. A tanker chassis number MLB 5569A of otherwise registration number ABB 0971 of year 1999. This was sold for US$ 7000.00. iii. A tanker Chassis number TLB 1088 of otherwise registration number AAZ 0858 of year 1982. It was sold for US$ 8000.00. iv. A tanker with chassis number GT 195529 of otherwise registration number ABS 1305 of year 1986. It was sold for US$ 10 000.00. v. A tanker with chassis number STP0608 of otherwise registration number AAZ 0862 of year 1993. This was sold for US$ 7 000.00. vi. A tanker of chassis number STP 0609 registration number AAZ 0861. HH 80-16 HC 9542/13 The purported sales of the six vehicles took place between November 2010 and August 2011. The plaintiff’s late director Mr Blessing Chikumbo is to have committed suicide sometime in September 2011. The plaintiff’s case rested on three witnesses, two being former employees in managerial positions and the third being a forensic expert. The plaintiff’s evidence was fully canvassed in HH695/15, when I dismissed the defendant’s application for absolution from the instance. Suffice it to reiterate that the first witness Mr Dalend Chikukwa, its former workshop manager, spoke to the fact that the vehicles in question could not have been disposed of without his knowledge as a workshop manager. He also stated that according to his knowledge, only one vehicle had been under lease to the defendant. He further averred that the plaintiff’s financial manager, David Mazvidza was being sought by the police on account of a report in another matter having been made against him by the late managing director, Blessing Chikumbo. He had however conceded in cross examination that to his knowledge no report had been made regarding the actual vehicles in question, now under dispute. Materially, defence counsel had indicated in its cross examination that the finance manager was in fact available to testify to what had actually occurred. Mr Chikukwa’s evidence was also challenged on the basis that the disposal of company assets is an executive act and that he was not a board member at the time. It was argued that his evidence on board issues was merely hearsay evidence. Furthermore, his evidence was also challenged on account of the fact that although he had also initially entered into an arrangement to purchase a tanker from the plaintiff, he had been unable to produce the agreement that had formed the basis of that agreement in order to show how that one differed from the ones that had been produced by the defendant which he was challenging. Having been unable to pay for his tanker (ABB 0971), it was one of those that had been subsequently purchased by the defendant. The second witness Mr Leonard Nhari, a forensic expert spoke to the fact that there were discrepancies in the signatures purportedly belonging to the late Blessing Chikumbo, in the said agreements. This was based on a comparison of the alleged forged signatures as against the genuine ones contained in his passport and a letter he had signed at work regarding the appointment of an employee. Significantly, he had noted a clear difference in the logo used in the letter heads with the company’s usual logo. The evidence of the third witness Mr Gideon Shongatu, the plaintiff’s former buyer and stores supervisor, was that he was responsible for the stencil for letter-heads and that the letter-head in the agreement was forged. He had also said that the defendant had leased only HH 80-16 HC 9542/13 one vehicle from the plaintiff. He had equally asserted that the plaintiff’s finance manager had been reported for fraud in a matter relating to fraud and finances which he said he assumed included finances relating to the company. The defendant also called three witnesses, its primary witness being the plaintiff’s own former finance manager, one David Mazvidza. The second witness was also plaintiff’s former employee, a petrol attendant who had subsequently worked as a security guard. The third witness was the defendant’s director, Mr Webster Samhembere. Mr Mazvidza gave evidence to the effect that the authority to sell the vehicles/tankers had been done at the behest of the plaintiff’s directors in light of financial challenges that the company was facing and the need to raise finances to pay off workers and creditors. He named the directors in question as Mr John Honywill, Mr Botha and the late Mr Chikumbo. This evidence with regards to the company having decided to sell off assets in order to raise finances was indeed collaborated by the sworn statement of Mr Honywill, plaintiff’s director who was now based in South Africa. His statement confirmed that the decision had been made in 2010 to sell off the company’s assets. However, the actual company resolution was not produced but this court therefore assumes from his confirmatory statement that there was such a company resolution in compliance with s183 (1) of the Companies Act [Chapter 24:03] regarding disposal of the assets. (See also National Blankets v David Whitehead HB 154/11 on the need for a company resolution to dispose of assets). Mr Mazvidza further stated that the disputed agreements were in fact generated by himself on his computer and that they were approved by the late director Mr Blessing Chikumbo. As such he argued that they were therefore legitimate. He also averred that it was the late Mr Chikumbo who received the money from the vehicles sold in terms of these agreements. He said the witnesses to these agreements had been the late Mr Blessing Chikumbo and himself on behalf of the plaintiff, while the defendant’s witnesses had been its director Mr Webster Samhembere and a senior driver in the employ of that company, one D Maruva. As regards the purported differences in signature, he denied that there were any such variations insisting that the said agreements had been signed by the late Mr Chikumbo in his presence as well as that of the other parties to the agreement. He also emphasised that the registration books were being kept by Mr Chikumbo at his residence and had been released to the defendant’s director upon conclusion of each sale. He also admitted that the defendant’s HH 80-16 HC 9542/13 director was a former employee of the plaintiff’s and that they had worked together in the finance department. As regards the letter-head having a different log to that used by the plaintiff, he agreed that this was indeed the case but proffered an explanation as to why the logo was different. He said that the use of a different letter-head had arisen from the fact that Mr Blessing Chikumbo and himself had been intending to form another company called Border Petroleum. He said three samples of letter-heads had been generated in preparation for this and that the one used on the agreements had been chosen. He said that its use in the agreement was so as not to cause confusion when the letter-head was eventually put into wider circulation. This explanation made little sense as the use of a letter-head for a company which was still in the formulation stages to sell assets of an existing company with its own logo, could only be but confusing. As regards the circumstances surrounding the sale of each of the vehicles, he explained that two of the six vehicles were already under lease to the defendant. These were the ones which registration numbers AAZ 0858 and ABS 1305. Another two, AAZ 0861 and AAZ 0862 were released to the defendant from the plaintiff’s premises, upon the late Director’s instructions, whilst ABB 0971 had been in Mr Dalend Chikukwa’s possession and had been sold to the defendant as Mr Chikukwa had failed to pay for it. He said this vehicle had been released to the defendant directly from Mr Chikukwa’s workshop. The sixth vehicle AAG 9154 had been allocated to the witness himself by management but as he needed money, he had been authorised to look for a buyer and had spoken to the defendant’s director who had paid the company $9000.00 for this vehicle. In a nutshell, according to him, all the sales for all six vehicles / tankers were above board. Materially, there were no receipts issued by the plaintiff’s finance manager for receipt of the monies received under the agreements. The agreements all appeared to suggest that half the money would be paid as deposit and the registration book would be released upon payment of the balance. One would have expected records capturing the graduated payments. His explanation and rationalisation for the absence of company records on the purported sales was that the money was being given directly to the director, the late Mr Blessing Chikumbo. As regards the report to the police by the now deceased that had been mentioned by Dalend Chikukwa in his evidence, his position was that the matter which involved the theft of trust property in a private deal involving himself and the late Blessing Chikumbo whereby they had both borrowed money from CBZ Bank. He denied ever having been on the run in HH 80-16 HC 9542/13 relation to company funds and emphasised that no report had ever been made regarding theft of the plaintiff’s finances. He said he had in fact subsequently met with the deceased’s widow following the report and had made arrangements to repay the loan. Asked why Mr Honywill in his sworn statement had indicated that he was unsure if the said vehicles had indeed been sold to defendant, Mr Mazvidza’s explanation was that since Mr Honywill was now resident in South Africa, the decisions as to which vehicles to sell had been made by the late Mr Chikumbo who was the only director on the ground at the time. Mr Botha was also in South Africa. According to him, Mr Blessing Chikumbo had therefore been given a blanket authority to make the decisions. Regarding his failure to maintain proper records, his explanation was that Mr Chikumbo as a director had waived the necessity of so doing as he was the one who received the money. Whilst he conceded that the company did have a cash book, it was not made use of. He also said that Mr Chikumbo had copies of the agreements, although they were not in Border Transport’s records. He agreed upon examination that this way of conducting business would indeed have raised an auditor’s concern. As a qualified accountant with experience, he had the duty to conduct himself according to the expected standards of his profession at all times. It cannot be an excuse that he failed to do so because his director was involved. The second witness for the defendant was Mr Jealous Sithole who said he worked for the plaintiff as a security guard between 2010 and 2011 having initially worked as a petrol attendant. His evidence was that upon instruction from the late director, he had facilitated the release of two vehicles bought by the defendant that were at Border’s premises. His evidence was challenged on account of his claim that he had seen these two of the vehicles in question recently with their old number plates, failing to appreciate that they had since changed number plates. His denial that he had not had conversations with the defendant’s director prior to the trial was also latched on as not credible. His evidence in my view neither bolstered nor subtracted from the evidence led in any material way as it was far from being the lynch pin of the dispute. The defendant then gave evidence through its director Mr Webster Samhembere. He confirmed leasing a tanker AAZ 0858 whilst still working for Border Transport and then a bigger one, ABS 1305 after he left in 2009. He indicated that at no time was he issued receipts even when he was leasing the tanker – a sign which he said showed that there was nothing unusual in the failure to issue receipts for the subsequent sale of these tankers. He HH 80-16 HC 9542/13 said he did not think much of it when he was not issued receipts for the actual purchases of the vehicles in question particularly as he was dealing with one of the plaintiff’s Directors, the late Mr Chikumbo. He said he had not kept any records as the parties knew each other. He too was thus unable to produce evidence from defendant’s records showing that it had indeed made payments to the plaintiff for the vehicles in question. He stated that the agreements had been brought to him by Mr Chikumbo and Mr Mazvidza. His evidence was that he had paid in instalments save in the case of one vehicle. He stated that the registration books would be brought to him once he had made the final payment. The failure to keep records by both parties is indeed strange and raises negative inferences. Materially, this court noted that the thrust of Mr Honywill’s affidavit admitted in evidence was that the indicator as to whether the assets had been legitimately sold to the defendant would of necessity be found in the “company’s books” meaning the books of the plaintiff. They were none, save for the self-generated agreements from the finance manager’s computer which were produced in evidence. A company is legally expected to keep proper books of account and records of all transactions. Section 140 (1) of the Companies’ Act [Chapter 24:03] provides as follows: “(1) Every company shall cause to be kept in the English language proper books of account with respect to- (a) All sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place (b) All sales and purchases of goods by the company (c) All assets and liabilities of the company “ Directors are generally liable for the failure to keep proper books of account although it is a valid to defence to show that there were reasonable grounds for believing that a competent and reliable person was charged with the duty of seeing that the requirements were complied with. See s 148 of the Companies Act [Chapter 24:03]. A key reason behind the requirement that proper books of account be maintained, and for the issuance of receipts and vouchers, is so that a company can provide proof of dealings when needed. As such, in light of clear statutory requirements, the failure to keep proper books of account itself raises suspicion and an inference of criminality. What we have in this case is a situation where the vehicles / tankers are said to have been sold. The accountant of the company selling the vehicles confirms the sale and maintains that the money was received for the vehicles purchased, yet he fails to keep records of the transactions. Also as stated, the buyer too fails to keep records regarding his purchase. With no records in place by either the purchaser or HH 80-16 HC 9542/13 the seller, and with the plaintiff’s own finance manager giving evidence to the effect that money was in fact paid, it is difficult to escape the conclusion that the intention by all involved was to deliberately operate from the margins and the periphery of acceptable corporate practice, most likely for reasons of their own personal gain. In the case of the plaintiff’s finance manager and very likely the deceased director, this appears to have been a case of defrauding the plaintiff. Against this failure to keep proper records must also be taken into account the expert witnesses’ evidence that the signature on the agreements was questionable in so far as it was said to belong to the late Mr Chikumbo. It was argued by Mr Jonhera, counsel for the defendant, that the legal duty to establish that it did not enter into certain agreements lay with the plaintiff. As stated in Merchand & Anor v Butler Furniture Factory 1963 (1) SA 885 at p887 F “the receipt is that of the giver” and as further observed in that case: “It would appear to be self-evident that before the production of a receipt can have any substantial effect upon onus in a case, or indeed upon any of the proceedings in a case, it must be shown to be that of a party in the case or of someone authorised by him to give a receipt”. In this case we are not dealing with a receipt as such but with agreements that are disputed as emanating from the plaintiff. For the evidence of the forensic examiner to be acceptable with regard to his examination of the documents in question, he must be certified and hold certificates from accredited organisations. He must also have credible work experience in this field in order to be adjudged as an expert. In this regard, this court had no misgivings with the credentials of the expert witness and his findings that there were discrepancies and variations in the signature used in the agreements that was attributed to the late Mr Blessing Chikumbo when compared with his signature in availed documents. Granted, it was also his evidence that it is to be generally expected that there will be some variations in a person’s writing and that signatures may change. Pertinently, it was not only the hand writing that he examined. He raised concerns regarding the letter-head. Mr Mazvidza’s own evidence regarding the use of the new letter- head so as “not to confuse its customers”, lacked credulity further adding to the likely conclusion that there was in fact some fraud by the company’s own employee and possibly its late director regarding the absence of propriety in the sale of these vehicles / tankers. Little weight in my view can therefore be attached to the written agreements. They appear to have been manufactured by the finance manager after the fact, simply to be able to produce some paper work for the transactions. The internal culture of the company appears to have been highly problematic. No lease agreements were ever drawn up as Mr Samhembere said in his HH 80-16 HC 9542/13 evidence. Even Mr Chikukwa was himself unable to show this court any agreement that had been drawn up in his case when he had initially entered into a similar purchase arrangement, leading to the inference that the arrangement had been verbal. However, the issue is also whether the oral evidence given by the plaintiff’s finance manager should also be rejected because of lack of documentary proof to support any form of payment. Whilst the absence of proof of payment on the part of the defendant raises the presumption of non-payment, this court cannot ignore the fact that plaintiff’s own finance manager gave oral evidence to the effect that the money had been received. Also, given that it is the totality of the evidence that is considered, and that it is the probabilities raised in a civil trial that are balanced against the evidence disclosed as a whole, the conclusion which seems most likely in this case is that the vehicles were most likely sold as a result of verbal agreements and that payments from the sales were received by both the late director and the finance manager. This would be why the finance manager was prepared to come and give evidence for the defendant because money had indeed been received. Also, if the registration books were being kept by the late director, then I am inclined to agree with the finance manager that if the late Mr Chikumbo had not received the money, he would not have released the said registration books. The reasonable inference would appear to be that the agreements were prepared as an afterthought when the plaintiff’s employees raised concerns regarding the company assets for purposes of getting their terminal benefits. It is difficult to escape the conclusion that if money was paid and received by its own employee and director as explained, then the whole scheme of disposal was being implemented in such a way as to defraud the plaintiff. Since the plaintiff’s own finance manager says the money was paid, the responsibility to unearth any internal financial fraud that may have taken place against it and to take action against its employee(s) is not with its employees. Centrally, as acknowledged by two of the plaintiff’s witnesses, this trial action was largely instituted by the former workers albeit on the authority of existing director (s) for recovery of monies owed to the workers following the liquidation of the company. Mr Honywill as Director, speaks in his sworn statement to the need for the finance manager to be held accountable for having stolen money from Border Transport. Yet other than relying on the information given to him by the widow of the late Mr Blessing Chikumbo regarding the circumstances and causes of his death, and allegations of theft by the finance director, nothing was placed before this court by Mr Honywill to indicate a thorough internal investigation of the purported fraud. It is the directors’ responsibility to HH 80-16 HC 9542/13 vigorously unearth what happened within in own internal setting and to lodge a criminal complaint where possible. This action was brought against the defendant yet if the reality is that money was received internally as averred, then whatever action for the recovery of the money must of necessity be centred on the finance manager in light of the totality of the evidence indicative of internal fraud by both the finance manager and most likely its late Director, Mr Blessing Chikumbo. The action against the defendant is unsustainable in light of the finance manager’s own evidence in its favour. Furthermore, there is an acknowledgment by Mr Honywill that it is Mr Mazvidza who should account for the money. Accordingly, it is ordered that the plaintiff’s claim against the defendant be and is hereby dismissed with costs. Mugiya & Macharaga, plaintiff’s legal practitioners Wintertons, defendant’s legal practitioners