S v Manyimo (CA 606 of 2015; HH 400 of 2016) [2016] ZWHHC 400 (13 July 2016)

1 HH 400-16 CA 606/15 FORTUNATE MANYIMO versus THE STATE HIGH COURT OF ZIMBABWE HUNGWE & MUSHORE JJ HARARE, 31 May 2016 & 13 July 2016 Criminal Appeal Mrs R Mabwe & N Chamisa, for the appellant Mrs S Fero, for the respondent MUSHORE J: The appellant was convicted in the Magistrate’s Court of two counts of fraud and sentenced to five years imprisonment of which one (1) year was suspended on the grounds of good behaviour and the remaining four (4)years suspended on condition that he restitutes the complainant the sum of US$78 000-00. The circumstances which arose leading to his prosecution and conviction were as follows:- The appellant and complainant entered into a partnership agreement wherein the appellant invited the complainant to invest US$78 000-00 in order to participate as a 50% shareholder in the appellant’s company Bluemark Distributors (Pvt) Ltd. The number of shares which would be allocated to the complainant (and his wife) were a total of 12000 shares. In accordance with that agreement complainant invested US$78 000-00. At a subsequent stage the complainant parted with a further US$22 000-00 as a company loan at the behest of the complainant. Complainant trusted the appellant with the preparation and filing of documents with the Company’s office etc. because he had no basis for distrusting appellant at that stage. Be that as it may the nub of the matter was that without any reference to the complainant appellant filed company documents which did not properly or truthfully reflect the 50-50 equity arrangement and in fact the documents filed showed that the appellant had allocated or allotted himself a far larger shareholding that that of the complainant unbeknownst to the complainant. It was also discovered that the appellant had HH 400-16 CA 606/15 also filed fraudulent C. R.14’s which reflected that complainant and his wife as having resigned as directors from the company, which was not in actual fact the case. As a result of the fraudulent actions by the appellant, complainant suffered prejudice as he never recovered his investment. Dissatisfied with both conviction and sentence, the appellant filed an appeal in which he sought the setting aside of the conviction and quashing of the sentence, which appeal was opposed. The Grounds upon which the appellant premised his appeal were as follows:- “AD CONVICTION 1. The court a quo erred in concluding that the Sate proved its case beyond reasonable doubt. There was insufficient evidence to lead to the conclusion that the alleged facts were the truth. The evidence did not prove either intention to deceive another person or the realisation of the real risk or possibility of deceiving another person. 2. The learned Magistrate erred in disregarding, failing to treat and considering the Appellant’s evidence that the complainant and wife had verbally consented to the alteration of directorship and allotment of shares. 3. The learned Magistrate erred by failing to take cognizance of the Appellant’s exculpatory evidence was to be given due consideration and complete attention. 4. The court a quo misdirected itself as there was no evidence to prove the essential elements of fraud. For a competent charge of fraud to stand, the complainant ought to have acted upon the misrepresentation to his or her prejudice. This was not the case. Correspondingly, the Registrar of Companies did not allege neither did the state, prejudice on the basis of the alleged misrepresentation. 5. The court a quo grossly misdirected itself to act merely on the absence of documentation in writing proving that a resolution on share transfers had been reached as the basis of fraudulent conduct. The lack of documentation is not evidence of fraud but was common practice in the company. 6. A fortiori, the court a quo grossly misdirected itself in failing to take proper account of the fact that at no point did the complainant get prejudiced on account of acting on the basis of the alleged fraud. AD SENTENCE 1. The sentence is challenged and appealed against on account of its foundation in an improper conviction. 2. Assuming the conviction was proper, which is vigorously contested, the sentence in respect of restitution without the court’s verification of value claimed is proper.” At the appeal hearing itself, counsel for the appellant correctly conceded that Grounds 1,2,3,5 and 6 against conviction as laid out were not in accordance with the r 22 of the Supreme Court (Magistrates Court) (Criminal Appeals) Rules, 1979, and were therefore fatally defective. The appellant’s counsel then proceeded to argue the appeal against conviction on the remaining ground; that being ground 4. HH 400-16 CA 606/15 Initially appellant’s counsel maintained that appellant had never misrepresented himself to the complainant, but was forced to abandon that position when she realised that the record showed otherwise. At p 70 the appellant himself had testified a quo that as averred by the state the partnership agreement should have culminated in a 50-50 shareholding of the company. “Page 70 Q Do you understand my question confirm you had 50% equal to complainant who got 50% also? We can say that but we had not distributed shares. A. When complainant joined you and equal shares? Q. Yes A. Meaning to say yourself and complainant had equal sharing for the business? Q. A. Yes ……………………… ……………………. ……………………. Q. A. Bluemark consisted of equal shares yourself and complainant Yes” The appellant had also admitted that he prepared the company documents which are being complained of and that he had personally presented them for filing at the Companies Office alone without the knowledge or involvement of the complainant. “Page 66:- Q. Let’s go to restructuring of shareholding, what document did you prepare to evidence the change? C. R.2 Between joining of complainants and their exit from the company how many returns did you prepare? There were 2 C. R.2’s and 2 C. R. 14’s”. A. Q. A. Mrs Fero for the respondent contended that the documentary evidence supported complainant’s testimony that there was a misrepresentation. She submitted that the returns filed by the appellant contain the inaccurate information wherein appellant unilaterally allotted himself a larger shareholding than that of the complainant and unilaterally divested complainant and his wife from their Directorships the information furnished by the appellant to the Companies Office. The said documents which were exhibits a quo reveal the following facts. Firstly, there is the C. R. 14, Exh 3 at p 125, which reflects the complainant and his wife to have resigned and which document was challenged a quo by the complainant as being HH 400-16 CA 606/15 a misrepresentation of the factual position. With reference to that document, Mrs Fero for the respondent submitted that the alleged resignations were irregularly presented for filing because complainant and his wife were not privy to their own resignations, neither had they ever been compensated for their investment. They also did not derive any benefit by way of any financial return whatsoever prior to or after their purported resignations. That much is clear from the testimony of the complainant particularly when one pays due regard to complainant’s indignation at the suggestion that he had resigned. At p 45 of the record when he was asked whether he had resigned he retorted:- “Page 45 So I should give money for nothing, if a person is removed from Directorship he should be given money” Secondly the C. R. 2s submitted by the appellant demonstrate the fraudulent misrepresentation which he made with respect to the allocation of shares. Instead of reflecting an equitable shareholding, the C. R. 2 which was Exh 4 record p 126 is culpatory to the appellant’s case. Instead of reflecting an equal allocation of shares as between the appellant and the complainant, it shows that appellant allocated himself 190,000 shares as against the 80,000 shares he allocated to the complainant. In the face of the evidence of record, appellant’s counsel was forced to concede a misrepresentation, which concession was proper in our considered view. Complainant suffered a considerable loss at the behest of the appellant and it is an understatement to state that complainant’s loss was in the sum of US$78 000-00 given the fact that in addition to this initial investment from which he realised nothing, he advanced business loans totalling US$22 000-00 which he has never recovered. After making her concession viz the misrepresentation, counsel for appellant submitted that even though the appellant made have misrepresented the facts to the complainant, he did so without an intention to deceive. It is difficult to appreciate the thrust of the appellant’s point because the point taken ignores the evidence on record that even after the complainant and his wife were divested of their shareholding and Directorships without their knowledge, they continued to attend Board meetings in blissful ignorance that they owned noting and were no longer Directors of the company. Mrs Fero for the respondent argued convincingly that appellant did intend to deceive the complainants to his own HH 400-16 CA 606/15 advantage. Mrs Fero directed the court to the totality of the evidence and then highlighted that the appellant had not challenged the following facts:- (i) That the appellant and complainant agreed to own 50% of the shares in the company; (ii) The investment which complainant made in consideration of his 50% shareholding was US$ 78 000-00 (iii) The complainant had never received any benefit, pecuniary or otherwise from his shareholding in the company and had never recouped his investment even when he was divested of his equal shareholding and Directorship. Against this backdrop it is noted that appellant himself admitted that he did not have the power to unilaterally allocate shares on behalf of his co-shareholders and himself, yet that is what he did. Appellant admitted that he ought never have done what he did in a letter he admits he wrote and filed in amongst the company records, and which letter appears on p 74 of the record:- “Page 74 This is to confirm that I, Fortunate Marimo, Director of Blue Mark tyres confirm and acknowledge that the following is true I have not kept up my agreement with Yakoob Mohammed on June the 1st 2009 up to this day 29th July 2013 I have not given him profits after inviting a sum of US$90,000-00. I also admit that I further borrowed funds as follows unapplied funds US$22,000-00”. It is therefore our finding that the convictions a quo were proper under the circumstances. AD SENTENCE. Counsel for the appellant abandoned the first ground against sentence citing non- compliance with the Rules. We find the concession to have been properly made. Appellant’s counsel persisted with the second ground which read as follows:- “2. Assuming the conviction was proper, which is vigorously contested, the sentence in respect of restitution without the court’s verification of value claimed is improper”. It was appellant’s contention that there should have been a working out of the value after evaluating the performance of the company against the initial investments made by the appellant, and that once that value had been ascertained and resulted in a loss occasioned to the complainant, then and in that event, restitution be ordered to the extent of that loss. To this end appellant strayed away from the central issue which was simply whether the appellant misrepresented himself to the complainant and if so whether complainant suffered HH 400-16 CA 606/15 prejudice. In our view it is clear that complainant was prejudiced because of appellant’s misrepresentations. Thus the court a quo did not have to concern itself with company performance issues. Those issues fall within the province of a civil court for determination. The finding of the court a quo was thus correct when it arrived at a restitution order which would have the effect of placing the complainant in the position he was in before he was defrauded by the appellant. In actual fact, it is our view that the court a quo would have been at-large to incorporate the unrecovered loans advanced by the complainant to the business in the amount of US$22,000-00 into the restitution order. Accordingly it is the finding of this court that the court a quo acquitted itself properly and correctly in its determination of the criminal charges levelled against the appellant and that it also ordered restitution in a manner which reflects that it applied its mind properly in applying its residual discretion to order appellant to restitute the complainant. In the result, the appeals against both conviction and sentence are dismissed. HUNGWE J agrees…………………………. Atherstone & Cook, appellant’s legal practitioners National Prosecuting Authority, respondent’s legal practitioners