Zambia Revenue Authority v Mwewa and Anor (Appeal 9 of 2003) [2003] ZMSC 162 (17 October 2003)

IN THE SUPREME COURT FOR ZAMBIA APPEAL NO. 9 OF 2003 HOLDEN AT NDOLA/LUSAKA (CIVIL JURISDICTION) BETWEEN: ZAMBIA REVENUE AUTHORITY APPELLANT AND CAPTAIN RHOEY MWEWA COMATE SECURITY LIMITED 1st RESPONDENT 2nd RESPONDENT CORAM: SAKALA, CJ., CHI BES AKUND A AND CHITENGI, JJS On 4th June and 17th October, 2003 For the Appellant : Mr. L. Muka, Legal Counsel For the Respondents : Mrs. I. M. Kunda, of George Kunda and Company JUDGMENT Sakala, CJ., delivered the judgment of the Court. This is an appeal against a judgment of the High Court entered in favour of the Respondents for damages for trespass to the premises, illegal search, confiscation of documents, loss of business, harassment and intimidation inflicted on the respondents by the servants or agents of the respondents’ premises for purposes of conducting an inspection under Section 38(1) which does not need a search warrant and not an inspection under Section 38(2). It was submitted that the trial court erred because the appellant was not at any time carrying out a search pursuant to Section 38(2). In support of this submission, Counsel cited the case of Kalundu Mini Mart V. Zambia Revenue Authority, SCZ appeal No. 204 of 2000 where this Court acknowledged that under Section 38(1) the appellant’s officers need not have a search warrant to undertake their duties. The short response to arguments on ground one by Mrs. Kunda on behalf of the respondents was that on the facts not in dispute, as accepted by the learned trial Judge, the appellants servants or agents conducted a search at the respondents’ premises without a search warrant contrary to Section 38(2). As we see it, the submissions and arguments on ground one centre on whether the acts and conduct of the appellant’s officers at the premises of the respondents fall within subsections (1) or (2) (a) (b) and (c) of Section 38 of Cap 331. Subsection (1) of Section 38 reads as follows:- “38(1) For the purpose of exercising any power conferred on him by or under this Act, an authorized officer may, at any reasonable time, enter any premises which he has reason to believe are used the respondents premises; and that the acts of the officers, while on the premises, were intimidatory, harassment and embarrassing to the respondents, resulting in the loss of business. The appellant appealed against the whole judgment. On behalf of the appellant, Mr. Muka relied on written heads of argument based on four grounds of appeal. These grounds are: that the Court erred in law and fact by finding that the Appellant conducted an illegal search of the Respondents premises contrary to Section 38(2) of the Value Added Tax Act, Cap 331 of the Laws of Zambia; that the trial Court erred in law and fact by finding that section 38(1) of the Value Added Tax Act empowers only a single authorized officer of the Appellant organization, and not a group of authorized officers, to conduct an inspection; that the court erred in law and fact by finding that the Respondent suffered loss of business based on a single letter with no supporting evidence; and that the court misdirected itself in law and fact by finding that the Respondent was entitled to damages for trespass, illegal search, confiscation of documents, harassment and intimidation. The argument on the first ground was that while it was not disputed that a search under Section 38(2) of the Value Added Tax Act can only be done with the use of a search warrant, the appellant’s officers visited the officer as opposed to authorized officers to enter premises; and that an authorized officer is empowered to enter such premises where he has reason to believe that the same are being used for or in connection with the carrying out of business. The trial Court found that Sub-Section (1) of Section 38 does not apply or permit a horde of authorized officers to enter premises nor does it apply to premises already known to be used for business. The learned trial Judge observed that; where an authorized officer wishes to enter and s'earch some business premises; and would like to take with him a number of persons and further search for and seize and remove any goods or documents or other tilings from the premises, the relevant Sub­ Section of Section 38 is Sub-Section (2). The Court pointed out that for this Sub-Section to apply, an authorized officer must obtain a warrant, on sworn information from a Magistrate. On the facts not in dispute, the Court found that D W1 entered the premises with a “horde” of other officers. They searched the premises, they interviewed several persons including the Respondent; and finally took away some documents. The Court held that the acts of the appellants’ servants fell within Section 38(2) of the Value Added Tax Act, CAP. 331; but that they did not have a warrant. The Court concluded that the failure to obtain a warrant constituted a violation of Section 38(2) of the Act, which amounted to an act of trespass to appellants. The Court ordered that damages be assessed by the Deputy Registrar. The facts, as accepted by the trial court, were brief and short. On 17th August 1998, about eight of the Appellant’s officers entered the Respondents’ premises for the purposes of Value Added Tax (VAT) inspection. The officers had not given the Respondents prior notice before the visit. They did not have a search warrant authorizing them to search the Respondents’ premises and to seize the Respondents’ documents. While at the premises, the officers interviewed various employees and blocked anybody from entering or going out of the premises. Business came to a standstill. It was common cause that the officers took books belonging to the Respondents some of which were returned only after two years. On these facts and the evidence, the learned trial Judge examined some of the provisions of the Value Added Tax Act, CAP.331. The Court noted that Section 8(1), dealing with imposition and scope of tax and Section 35, dealing with appointment of authorized officers, relied upon by the appellant for not obtaining a search warrant for the inspection, did not deal with the issue of entry and search of the business premises. The Court then examined Section 38 of the Act dealing with entry and search. The Court noted that Sub-Section (1) of Section 38 only empowers an authorized for or in connection with the carrying on of a business, including any premises used only for the storage of goods or documents, and shall have full and free access therein to open any packaging, take stock of any goods and do all such things as are reasonably necessary for the performance of his duties.” The important phrase in the subsection is that “............ an authorized officer may, at any reasonable time, enter any premises which he has reason to believe are used for or in connection with the carrying on of a business, including any premises used only for the storage of goods or documents. It is clear that in subsection (1) the basis of entry is reasonable belief of premises being used for business. In these circumstances, no warrant is required. In the instant case, the evidence is that the appellant’s officers already knew that the respondents’ premises are used for business. * Subsection (2) reads as follows:- “38(2) Where a magistrate is satisfied on sworn information that there is reason to suspect that any premises contain goods in respect of whose supply tax has been evaded, or tax deductions or credits have been wrongly made, or contain documents or other evidence of an offence against this Act, he may issue a warrant authorizing an authorized officer to enter and search those premises, and the authorized officer executing the warrant may - (a) take with him such persons as appear to him to be necessary for its due execution. (b) search for and seize and remove any goods, documents or other things found on the premises which he has reason to believe to be evidence for the purpose of proceedings in connection with such an offence or for the assessment of any tax; and (c) search or cause to be searched any person found on the premises who he has reason to believe has committed such an offence or to be in possession of any such goods, documents or other things: Provided that no person shall be searched by a person of the opposite sex.” This subsection entails an element of reasonable suspicion of a possible criminal act. Thus, an authorized officer must swear the information before a magistrate; who then issues a warrant to the authorized officer. Only upon obtaining a warrant can an authorized officer enter and search business premises and seize and remove any goods or documents in connection with some offence. The evidence of DW1 was that when they visited the respondents’ premises, they explained the purpose of the visit. According to DW1, they wanted to check whether the 2nd respondent submitted correct VAT returns. The evidence of DW1 also goes on to say that they were investigating the 2nd respondent that it was not submitting correct returns as the analysis showed that the 2nd respondent was under declaring VAT. On the evidence of DW1, we are unable to say that the appellants officers entered the respondents’ premises on reasonable belief that they were used for or in connection with the carrying out of business in terms of subsection (1) of Section 38. On the evidence of DW1, the appellant’s officers already knew that the respondents premises were used for carrying out business. They suspected tax evasion; they suspected evidence of an offence against the VAT Act. They searched and removed documents which they had reason to believe to be evidence for purposes of proceedings in connection of a possible offence or for the assessment of any tax. We are satisfied that the inspection by the appellants’ officers was not under Section 38(1) but under Section 38(2) which makes it a requirement for an authorized officer to obtain a search warrant. The officers did not obtain a warrant. The trial Judge was therefore on firm ground when he held that the appellants conducted an illegal search contrary to Section 38(2). Ground one of appeal, therefore, fails and is dismissed. The arguments on ground two centered on the trial Judge’s finding that Section 38(1) of the Value Added Tax Act empowers only a single authorized officer of the Appellant organization and not a group of authorized officers to conduct an inspection. The submission was that the Court misdirected itself in the interpretation of this Section for allowing only J singular and not plural. In response, Mrs. Kunda submitted that the learned trial Judge was on firm ground when he found that Section 38(1) of the Value Added Tax Act empowers only a single and not a group of authorized officers to enter premises that are not already known to be business premises. According to Mrs. Kunda, the Section referred to “an authorized officer” and not to “authorized officers.” Mrs. Kunda referred to Section 2(1) of the same Act which defines an authorized officer as a person appointed under Section 35, which talks of sufficient persons to be appointed as officers. According to her, the Section talks of a number of persons and not officers. We have< examined the judgment of the learned trial Judge in relation to his interpretation of “an authorized officer” as contained in Section 38(1). According to the trial Judge, Section 38(1) does not apply or permit a horde of “authorized officers” to enter premises reasonably believed to be used for or in connection with the carrying out of business nor does it apply to where the premises are already known to be used for business as it was the case here. We take note that in interpreting “an authorized officer”, the learned trial Judge did not and was not referred to the Interpretation and General Provisions Act, Cap 2 of the Laws of Zambia. Section 4 of Cap2, that deals with the grammatical variations, gender and number, states in sub-Section (3) as follows:- “4.(3) Words and expressions in a written law in the singular include the plural and words and expressions in the plural include the singular.” We are satisfied that ground two on interpretation of “an authorized officer” was well taken. This ground of appeal succeeds. Grounds three and four of appeal centered on the finding of the learned trial Judge that the Respondent suffered loss of business based on a single letter with no supporting evidence and that the Respondent was entitled to damages for trespass, illegal search, confiscation of documents, harassment and intimidation. The gist of the argument on these grounds is that the Respondent had the burden of proving both the fact and the amount of damages before he could recover them; that the Respondent must prove his loss with relevant evidence; that the Respondent failed to show quantification of loss of business and that this being a special claim, it must be proved by figures. In response to these arguments, it was pointed out that the Court having found that the search and seizure were in contravention of Section 38(2) of the Value Added Tax Act; the entry amounted to trespass entitling the respondents to recover damages. We have considered these arguments. We agree that the Court having held that the entry was in contravention of Section 38(2) in that the authorized officers entered the premises without a search warrant; the Respondents were entitled to damages for trespass, illegal search, confiscation of documents, harassment, loss of business and intimidation. The quantum of damages suffered will only be proved on assessment before the Deputy Registrar. This appeal, based on grounds three and four can, therefore, not succeed. The Appellant has succeeded on one ground only. It has not succeeded on the three grounds out of four. For this reason, the whole appeal is dismissed with costs to be taxed in default of the agreement. E. L. SAKALA CHIEF JUSTICE ............ a..-........................... L. P. CHIBESAKUNDA SUPREME COURT JUDGE SUPREME COURT JUDGE