Anti- Corruption Commissionv Serioes Farms Limited (Appeal No 155/2009; SCZ/8/199/2009; SCZ. JUDGMENT No 1/2014) [2014] ZMSC 268 (6 January 2014)

. I ( CiviLJ.uris.diction )-- BETWEEN: AND J1 SCZ. JUDGMENT No. 1/2014 01 · SCZ/8-/199/2009 Appeal No 1$5/2009 .~PPELLANT SERlOES FARMS LIMITED RES. POND ENT CORAM: Chibesakunda, Ag C. J, Chibomba JS and Lengalcnga Ag. JS On 12 th February, 2013, and 6 th January, 2014 FOR THE APPELLANT ~ilr~}L Nchito of Messrs Nch:ito & Nchito FOR THE RESPONDENT Mr. J. Banda of Messrs A. M. Wood & Co. JUDGMENT Chibesakunda, Ag. C. J, delivered the Judgment of the Court. Cases referred to: 1. The Anti-Corruption Commission v Ng'ona Mwelwa Chibesakunda Appeal No 9 .9 of 2003 (unreported) 2. Salomon v Salomon and Company [1897] AC 22 3. Anti-Corruption Commission v Barnett Development Corporation Limited (ZOOS) ZR 69 Vol 1 4. Associated Chemicals Ltd v Hil1 and De1amain Zambia Limited and Ellis and Company (as ·a law firm) (1999) ZR 9 5. King Farm Products Limited, Mwanamuto Investments Limited v Dipti Rani Sen {Executrix and Administratrix of the Estate of Ajit Barab Sen (2008) ZR - 7.2 Vol 2 I • I • J2 Legislation referred to: __ 1. A,:t!i-Cor~ption Ac_t .t-r!'· 42 of 1996 ?~c-~!~~~4(1) ·wo:rks referred to: 1. Gower and Davies Principl~·:s ~Jlllodern Company Law 8 th Edition ·- --- -- - - - This is an_ap.peal againsL.the_JudgmenLof the High Court.dated .. 6~~---- -·· August, 200-6 reve:rs:ing a Restriction Notice issued by the Appellartt (Respondent in the Court below) in respect of the following farms: F/2915 Mkushi, F/2924 Mkushi, F/3168 Mkushi, F/3170 lVIkushi and F / 3171 Mkushi, properties of the Respondent Company {P..,pplicant in the Court below}. The Respondent commenced --action against the--AppeUant- by way of· originating summons and sought the following orders: 1. That the Restriction Notice dated 8th May 2007 and issued by the Respondent pursuant to Section 24(1) of the Anti Corntption Commission Act No 42 of 1996 in respect of Property Nos. F/2915 Mkushi, F/2924 Mkushi, F/3168 . Mkushi, F/31 70 Mkushi and F/3171 Mkushi otherwise known as Serioes Farms be reversed. 2. 'That the Applicant be at liberty to deal with the properties 711.entioned in paragraph (1) above in any manner as it shall <l.eem fit~ 3. "That the Respondent do pay the Applicant damages for :znisfeasance in public office. 4. __ "That the Respondent do pay the 4pplicant the costs of this <tction." J3 The evidence b:e[o:re . the court below was by Affida..yit. This was augmented·· --by-urai==submissions from both eounse-1-. .!f-he - -affidavit evidence of Faustin--Mwenya Kabwe, a Director and Shareholder of the _ _Re_s_p. Qnde.nt CQ.mpany, was that he bought. sli.~r~s jn the Responder.it _c.ompany._from_.the_shar.eholders, Serio.es~Limited.in o.r._aho_ut. 1987 . . He deposed that the shares were purchased using the Company's loan facilities and his earnings as Group Finance Director of Chibote Group of Companies. Mr. Kabwe further deposed that he was paid sum of $90,000.00 by one Xavier Franklin Chungu as deposit towards the acquisition of his interest in the Respondent Company. He deposed -that the sale was subject to valuatien·-ef the farm properties and assets as well as agreement as to the structure of the transaction in terms of it being a sale of shares or sale of assets .. According to Mr. Kabwe's written testimony, the sale was never concluded because of investigations, which were commenced against Xavier Franklin Chungu by the Taskforce on Corruption. Mr. Kabwe further deposed that on 2 nd June, 2005, the Appellant served him with a Restriction Notice dated 28 th rviay, 2005 and issued against the Respondent Company. That he commenced an action against the Appellant under cause no. 20-05/HP / 1035 but b efore the matter was heard, the Appellant reversed the Restriction Notice and the rn..atter was discontinued. That on 8 th May, 2007 the Appellant re issued the Restriction Notice. That the renewed Restriction Notice was illegal as there was no provision for renewal of the Notice. Mr. Kabwe J4 deposed' that the imp osition of the said N_oti~~---was done in -t:>ad faith. - . - -- -- . - ---:.- ·Th-ar-it:-w.-as-ne>t- tr-tle tha t there were inves-tigations · going-:::on a gainst the Respondent Company and that this was evidenced by the r eturn of the In response, F riday Tembo, a Senior Investigation Officer of the Appellant deposed, in an Affidavit in Opp osition, that while it was true that the Title d eeds of the said properties were released to th e Resp onde nt, that did not m ean the Appellant had ab andoned investigations on the matter. That to the contra ry, investigations had resumed-and weFe on-going:· Th-at the--nature of the ·investigations- was· complex a nd sophisticated, and included the following: cc(i) Determining the source of the money, which the deponent of the Affidavit in Support by h is own admission, received from Mr. Xavier Franklin Chungu ... in respect of and re lated to the properties in issue. (ii) To ascertain whether those were the only monies paid in respect thereof; ("i.ii) To determine whether the said monies paid were or were not in fact in-full and final settlement of the acquisition of all the shares in the Applicant by one X. F. Chungu and whether the purchase was in fact on behalf- of the Office of the President Special Division." JS Mr. T~mbo further deposed th~_t -_-tbe Restriction Notjce was not a . -__ _ - - - renewal but a fresh notice:::-:--He·-.. argned-that:-c-the ·same Notice was:··st:iJJ-~--= subsisting because of the action in-the Court below. - - -- -----"--A="f-=ter~pnsid-~riug__g}l J he evidence , . the· learn.e_d ··frial. _J_u.dge held.,. __ ·-··· and rightly .so., . .lhat, from_.its.wor.ding, the RestrictioILNotice issued_on__ 8 th May, 2007 was a fresh notice arid not a renewal. ··--- · The learned trial Judge then went on to comment 1n his Judgment that, ,cWhether or not the directive contained in the Restriction Notice should be reversed or varied depends on the explanation·that··the ·Respondent has given-in-its Affi:dau-f.t in Opposition. ',;It seems to me that, although the Respondent has issued 1:he Restriction Notice, its investigations are not yet properly focused. For example, in its investigations the Respondent would like to determine whether or not the sum. of $90,000.00 which Mr Xavier Franklin Chungu paid to Mr. Faustin Kabwe was in full and final settlement of the a.cquisition of all the shares in the Applicant Company. It is obvious that those shares belonged to Mr. Faustin Kabwe. In "terms of Section 5 7(1) of the Companies Act, Chapter 388 of 1:he Laws of Zambia, those shares were the personal estate Dl.nd moveable property of Mr. Faustin Kabwe. By buying shares .in the Applicant Company, Mr .... Xavier Franklin Chungu would not be buying farms listed in the Restriction \ J6 Notice becau$_°i;. _-:~fhQse ff:l.rms wer-e and still r~tna.i.n the property · of---the--.-:Applic-ant Company and:-:- n-ot:--,-tha:t-cc-·of--Mr;.,... · Faustin Kabwe.---Therefore if the transaction ·concerns ·the _ jiy.rc;hq.$e_ of shares, the Restr.i_ct_ion N.._Qtic_e sh.oul.d_he-·dir_ecte_il~--- _____ to Mr .. . F..austin_Kabwe in .. his p .ersonal capac.i.ty_,and .. should. ·-- relate to the shares that he is alleged to have sold to Mr. · Xavier Frank Zin Chungu and not the property of the Applicant Company. ~<The Respondent has not shown that its investigations include determining the possibility that the Applicant - ···- ··---Go·m.pany was --directly ·se-lling·-fts -··farms to ·Nlr; Xavier· Franklin Chungu. In the circumstances, the Restriction Notice dated 8th May, 2007 directed to the Applicant Company ought to be reversed.'' Thi s is the Judgment that has been a ppealed a gain s t. The Appellant raised b efore this Court one ground of appeaL Namely that, 1. The learned trial Judge erred in law and fact when he purported to delve into the issue of what type of investigations were being conducted and thereafter held -that the investigations were unfocused and on that basis reversed--the Notice of Restriction when all the law requires for a Restricted Notice is that investigations are being conducted. At .t h e h earing of the appeal Mr. Nchito,. Counsel for the Appellant a p plie d for leave to file into Court, rath er belatedly, written Heads of J7 Argurnenf· on · which he rel.ied entirely. Mr~- . Nohito also tendered ·apologie-s:-on--behal-f---o-f Counsel ·for the-·Resp-ond-ent=;-~Mr:-··Banda., ·who-he said was- not in Court as he was before anothe-r· Court where he was a _ h tig?n t. Mr. Banda l~Je_:r:_gppcarec;l _ . .b..efQre. the .. ·c 6urt in the GQ\lrse of _ .. . procee..dings._and apologiz_e_d _ fcir..his absence . . He_alsQ sought le.ave tu_file. Heads of Arguments, which ·application was granted. The gist of Mr. Nchito's argument was that the learned trial Judge erre d in law and fact when he delved into the m erits or otherwise the nature of the investigations that were being carried out by the Appellant in respect of the Restriction Notice. He submitted that ··--Section 24 of the Anti~G0rruption·-Gommission Act No 42 · of- --i-996 m erely r equired that there be an "investigation in respect of the offence alleged or suspected to have been committed under the Act'' in order for a Restriction Notice to issue. According to Mr. Nchito, there -was no specification of what nat ure or manner the investigations ought to have assume d. He submitted that from the provisions in Section 24 there were no special qualifications that had been spelt out to define the nature of the investigations b e ing carried out under the Act. He argued that while the learned trial Judge properly found that the Restriction Notice was legal and that investigations were ongoing (at page 11, paragraphs 8-10 of the Record of Appeal), he erred in cons idering the nature as that amounted to the Court attempting to supervise the conduct of criminal investigations. J8 Mr. Nchito reJerre;d. us to the GB,:se of The Ant_i-CorruptiQn ---,,.--... ·Commission v Ng,ona 1dwelwa-Chi-be-sakun-da1 where we held--that----.,....,... ·· - - -- the Director General of the Appellant- needed not specify the offence -· -- that w as bc;.iug _in vesEig0,ted io_ SUI2-J20rt his a rgJ. Jment. -· ,,. __ ··--· .. -·- ... . In response~~Mr. Banda submitted that . the learned.. trial Judge ..... ____ _ was on firm ground when he held that the Appellant's--investigations were directed at Mr. Faustin Kabwe in his personal capacity and not at the Respondent Company, and whether it {the Respondent) was selling the properties directly to Mr. Xavier Franklin Chungu. Mr. Banda further submitted that the transaction between Mr. Kabwe and Mr. ·· - Chungu related---t:o-the purchase of shares and as such;-the- Restriction Notice should have been directed at Mr. Kabwe in his personal capacity and should have related to the shares allegedly sold to Mr. Chungu, and not to the property of the Respondent. Mr. Banda submitted that the provisions of Section 24 were very clear and referred us to the celebrated case of Salomon v Salomon and Company2 and to the learned authors of Gower and Davies Principles of Modern Company Law gth. Edition at page 33 to enforce his proposition that one of the attributes of incorporation was that the Company becomes a separate legal entity from its members or shareholders, and has a separate-legal personality. Counsel submitted that th_e Restriction Notice which was issued against the Respondent was wrongfully placed and was rightfully reversed by the learned trial Judge. He submitted that the learned trial Judge could not bt:'.. faulted for ven ""turing into the nature of the investigations as it was crucial to - - - - -= jg determining whether trier~ were. investigat_ions against the ·_p_erson _ whom-the Restr-iet-i0'I'l-:N0tiee,-w-as· -is-sued. Mr. - Banda fur-fuer;--s·1:1:en:f.l:itted.a··-·-- that from the record;-it .was c-lear that the investigations into -.the---matter <?-.~ h _9-nd'-had concluded and that the A_ppellant had eyep. handed back · th~ . ., Certifica,te~-- ot_Ii.tk~:.... Qf. . the prope;rtie._~..:..- tq the. _J~e~p.o_n.ct.~ut._ He concluded by stating that the Restriction Notice was illegally issued as there were no investigations that were going on. We have carefully considered the evidence on the record and the submissions. We have also studied the authorities, cited by both Counsel, for which we are grateful. It is common ground that the Appellant -- -issued -a Re-striction Notice------against---the -Respondent's properties collectively known as Serioes Farms Limited in respect of some investigations into offences alleged or suspected to have been comn1.itted under Part IV of the Anti-Corruption Commission Act. It is also common ground that the Appellant first issued the Restriction Notice on 28th May, 2005 which was revoked on 10th March, 2006. Again, the Appellant issued a Restriction Notice on 8 th May, 2007, the subject of this appeal. We have already concurred with the learned trial Judge that the Notice was a fresh one and not a renewal. The main issue :is whether the learned trial Judge was in order to reverse the Restriction Notice, for tne reasons that he did. Mr. Nchito argued that for the Restriction Notice to issue under Section 24(1} of the Anti-Corruption Commission Act there ought only to have been an investigation. According to Counsel, there was no specification of the nature or manner of investigation. That it was JlO sufficient tfi~fthere was an on-going investig_atio:ef. ~Qn the other hand, Mr;:---B-anda-Mgued---that· it was ·crucial for-.,the-lear.ned-·--trial---Judge to venture i:nt0 .. the-nature· of investigations in order to-determine whether =---=_ __ t~ er~ was incleed airy i~~~!?.tig-atiop __ c1,gajpst the -·per s·on ·· whom tpe __ _ R~_$Jric.tio:Q __ N otice. h,a,d __ b.hen i$SJJ..ed ... A.ccor.ding_.t_Q __ Mr ... B.anda,. .. no.t doiug ____ _ so would have left room for miscarriage of Justice. \Ve have anxiously read and considered Section 24(1) of the Anti Corruption Commission Act No 42 of 1996 which we have reproduced hereunder. The provision states as follows: "The Director-General may, by written notice to a person who -is the---subject- of-an in-:,.1estigation in-r~spe£t- •· • - of an offence alleged or suspected to have been committed under this Act, or against whom a prosecution for such offence has been instit;uted, direct that such person shall not dispose of or otherwise deal with any property specified in such notice without the consent of the Di.rector-General." We hasten to observe that this Court has had occasion before to consider the interpretation of the Section 24(1). This was in the case of The Anti-Corn.1.ption Commission v Ng'ona Mwelwa Chibesakunda1 referred to us by Mr. Nchito and also in a later case, Anti-Cornl.ption Comn..ission v Barnett Deve 1opment Corporation Limited3 though the issues raised in the later case have n~ relevance for our present purposes. On the other hand, the Chibesakunda case provides some Hl · dlfection, not to all, but one of the issues at hand. __ We shall explain -.,..,-------wBat- -we--m.ean- later. In that- -case-,--the=-lower.,. eourt had reversed.-- a=-::-:---:c . Restriction .. Notice on the ground that.it-lacked specificity because it did . .. , .. -------~oggni tted. µnq.er. th_~_f\f~- I_n. 9_y~rturriingJ;).1,e low~r __ C:_Ql:1:rt'§ __ d~-~ is ion, . Yf..~ .. .. _._. - stated as follows: '~We are satisfied that when issuing a Restriction 1. Votice the Defendant's Director General is not required to specify the offence being investigated. All that the Director-General is required to state is that the offence being investigated is unr1er. Part--W-o.f- the.--Act. The----Act specificaJly ... r1ea.ls -with corruption and corruption-related offences and a person who is served a Restriction Notice under Section 24(1) of the Act should have an idea that he is being investigated for an offence re la ting to corruption. :n We confirm our holding as good law so far as it relates to the investigations and the nature thereof. For this reason, we agree with Mr. N chito that the Act does not require anything more than an investigation for the Restriction Notice to issue. However, there is force in Mr:· Banda's argument that the investigations were not directed at the Respondent Company but at a Shareholder/Member of the Company, in this case, Mr. Faustin Kabwe. We say so for the following reasons. Firstly, the Appellant in its own Affidavit in Opposition to J12 Originating Summons. at::. P93ges 35-36 of the Record of Appeal g~f.:e the - ·•- · --- scope of--the inves-tiga1-i@ns:::a:s:=:f oHows:=-· · · •··· "That the nature. •··Df----the investigations was complex-- and ___ ~ ~p histi ca.ted an4 includea:· -- -- deponent of · the Affidavit in ... "Support by his· own admission, received from iYlr. Xav-i.er Franklin Chungu ... in respect of and re lated to the properties in issue. b. To ascertain whether those were the only monies paid -··· ........ ,-•--···-·····in ··respect thereof; c. To determine whether the said monies paid were or were not in fact in full and final settlement; of the acquisition of all the shares in the Applicant by one X. F. Chungu and whether the purchase was in fact on beha if of the Office of the President Special Division." Quite clearly, and as rightly observed by the learned trial Judge and also submitted by Mr. Banda1 these investigations were pointed at or ·were in reference to the sale or transfer of Mr. Faustin Kabwe's interest in Serioes Farms Limited to Mr. Xavier Franklin Chungu-the interest, in this case, being his shares. Although we note from t he record that the inclusion of the scope of investigations in the Appellant's Affidavit in Opposition was meant to prove to the Court that investigations were indeed on-going (see page 54), we hold the view, that this piece of evidence was equally necessary in determining - - - -- ----- J13 whether theff __ -F er~ any investigations at all iµsti f_llted against the_. Res poncl:e~Gempa:ny:.0 ccW e dare not think - ,tha-t7-1:J1-is=sert ·--of--:cinq uiry amounts t0--sup@-rvising investigating organs, as aFgued by Mr. -Nchito . . . ···- !P. any_ event;-w e ao riot iliiDk. _it was -the inteption of tlie legislator!'3_ t.tiat _ _ . ,,_______ the in ve_stigatiQn.s_.~_bo11Jd_ he. a blarik_Gbeque._fo.r .a .fis hirig_exped ition. _ ..... ..: Secondly, the case before us relates to a Company that is an incorporated entity, and not a partnership. Therefore, the Appellant ought to have taken into account the distinction between the Members of the Company and the Company, itself. This follows the age-old --- ·· principle of corporate peFsonality--as-pronounced in the celebrated case---- of Salomon v Salomon and Company2, which this Court has adopted vvith approval. We have stated in a plethora of cases that, ,cA principle of the law which is now too entrenched to require elaboration is the corporate existence of a company czs a distinct legal person. In the eyes of the law it (the Company) is a person distinct from its members or shareholders.'' (Emphasis ours) See Associated Chemicals Ltd v Hill and Delamain Za1nbia Limited and Ellis and Company (as a· zaw firm)4 and also King Farm Products Limited, Mwanamuto Investments Limited v Dipti Rani Sen (Executrix and Administratrix of the Estate of Ajit Barab Sen (2008) ZE. 72 Vo 1. 2 5 J14 ··.· --· Apart from the investigations . ?e\q~ t<:3-rgeted at Mr. Faus tin -- cc--·----Ka.11:w~,-we, .. fa,J;ld , as the. learned-.-ct:rial-:-.,Jud..gb.ciid.,.-.t;ba t the farms, which . .. . wer..e_the property of the Respondent . Compa ny, ought not to have been made a s ubJect of the R estnc~~~ N_obce:·In- fact, the _lea~ned auth<:>rs of . 5-}ower __ ?-nd Davies Princj:Ples otMo1ern Co_!!:?,pany Law stated _'?-t page, _____ _ 40 that, 't:On incorporation, the corporate property be longs to the Company and the Nlembers have no direct proprietary rights to it but merely to their '~shares" in the undertaking. "' --- For the reasons....stated. abo.ve., we find that the learne d_triaLJ udge was perfectly within jurisdiction to consider the issues raised. There is no b a sis to overturn his decision to r everse the Restriction Notice . Accordingly, we dis miss this appeal with costs to the Responde nt to b e taxed in default of agreement. ffe. L. P. Chibesakunda ACTING CHIEF JUSTICE ' -=.--~c-) Q_ H. Chibomba, JS SUPREME COURT JUDGE lt -~ F. Lenga:lenga-;-Kg. JS SUPREME COURT JUDGE