High Court Condemns DEC-Shoprite Move

…as Justice Phiri order entails Alita Mbhawe’s action will cost taxpayers

By Correspondent
The Lusaka High Court has condemned the Drug Enforcement Commission (DEC) seizure of Lewis Nathan Advocates and partner Lewis Mosho on grounds that include going beyond the realm of the relevant confines and scope of investigations.

This is in a matter in which the elite law firm as first applicant and Mosho sued the Attorney General as first respondent and the DEC as second respondent challenging the action of the Commission which seized their bank accounts on December 5 last year and January 30 this year.

Justice Christine Phiri added in her judgment of the judicial review delivered on May 9 2012 that DEC’s Commissioner Alita Mbhawe’s action to have the accounts seized also over-stepped confines and scope of investigations logical to the facts at issue.

“In the circumstances especially that the 2nd respondent’s investigators have continued not only to seize the applicants’ bank account but also going beyond the realm of the relevant confines and scope of the investigations relevant and logical to the fact in issue,” the judgment reads in part.

The Justice also took note of the applicants’ submission in which DEC senior investigations officer, Frederick Chishala lied on oath in his sworn affidavit.

“The 2nd respondent stated further that Mr. Frederick Chishala is lying on oath that he interviewed the partners of the 1st applicants, the officers who sent call outs and interviewed that partners were one Shubert Sinkala and acting with one Isaac Chimbukuma in the presence of the lady officer, further he states that while Sinkala heading the investigations and issuing call outs in his own handwriting and interviewing the partners was already a compromised officer in that he is still a defendant in the matter in which he has been sued in the High Court by a person represented by the applicants,” the judgment reads.

On Chishala’s submission that the commission took the action because the applicant was mandated to account for the shares on a daily basis, Justice Phiri said there was nothing in the authority to that effect. “All the sales that occur on the stock Exchange are published on a daily basis to the knowledge of all market players including Shoprite,” the Justice approved Mosho’s submission.

In his submission, Mosho had also laid facts showing that Shoprite had through their South Africa-based officer acknowledged the remittance of funds. In agreeing with the unchallenged submission, Justice Phiri also noted that “it is not in conflict that the applicants received the funds as stated in paragraph 17 of the deponent’s affidavit in support on record.”

Justice Phiri also ordered that “the decision by the 2nd respondent (DEC) to seize the applicants bank accounts aforesaid is illegal, irrational, procedurally improper and malafide” and consequently entitles them to damages sought in their application.

The High Court has since ordered and directed that the Commissioner (Mbhawe) of the 2nd respondent withdraw the seizures served on the banks and further ordered that costs will follow the event in default of agreement to be taxed.

In quashing the DEC action, Justice Phiri said she was satisfied that the applicants have proved their case on the balance of probabilities before granting leave to the respondents to appeal.

“I have considered this application and I have referred to the submissions and the authorities cited in this matter.
“I have firstly noted that the applicants have submitted on facts and law extensively whereby the respondents have only argued that they have continued seizing the applicants accounts due the fact that they are investigating the same, however, I have noted that the respondents have not attached any exhibits to their affidavits to show that there are criminal proceedings against the applicants in respect of these accounts, neither have they shown which persons have been arrested and charged in respect of these accounts, I will therefore not depart from my brother’s ruling in the High Court that the accounts seized are clients’ accounts with funds belonging to clients,” she noted in her judgment.

She took note that the Kitwe High Court February 2, 2012 ruling in quashing the ex-parte’s action in which Shoprite had the lawyers’ bank accounts seized, effectively dismissed the civil suit, injunction and freezing order with costs.

The justice said the DEC action in two separate incidents was done while the Kitwe freezing order was still subsisting.

“Sinkala on 5th December 2011 issued a notice of seizing the 1st applicant (Lewis Nathan Advocates) clients account of K1, 420,628,476 held at Barclays Bank Elunda branch,” and added, “ On 30th January, 2012 Chishala issued a notice of seizure No 000615 on the applicants’ premier account No 1006565 with K59,290,841.04 held at Barclays Bank Elunda branch.”

The court also found that the DEC had continued to seize the accounts in bad faith thereby making their actions illegal, unreasonable and procedurally improper more so that lead investigator Sinkala is an accused in the High Court.

“Sinkala has been sued in the High Court but did not declare his interest in the matter as can be seen, he is the one who was issuing seizure notices on the accounts,” the judgment reads.

The Justice noted the deposed claim by the 2nd applicant that Shoprite had in a bid to hide their own fraud and show their innocence visited large shareholders who had bought the Zambian shares to confirm if they had been receiving dividends paid by the applicant who were appointed transfer sectaries. She added that the shareholders confirmed receipt of the dividends that the applicants paid.

“Thereafter Shoprite officers moved fast even before they could obtain an account of proceeds from the applicants and commenced a civil suit against the applicants in the Kitwe High Court in cause No. 2011/HP/408 and obtained an injunction and freezing order to the applicants’ client account No. 0011038727 with US $10,690 held at Barclays Bank Elunda branch in Lusaka.

She agreed with the applicants that the Shoprite action was meant to prevent the lawyers from proceeding with the claim to damages the Kitwe High Court awarded them.

Justice Phiri also observed that the applicant showed that the complainants (Shoprite) had received their monies and that the DEC did not dispute this fact “showing that the applicants are not hiding anymore monies for the complainants in the seized accounts.”

The Justice also noted that the DEC failed to show the identity of the complainant and that they also failed to exhibit the complaint and the date when it was submitted to them. “The 2nd applicant has disputed the commission of fraud as all the proceeds of sale for Shoprite were received by Shoprite through the agent (T Van Tonder) in accordance with the instructions by Shoprite letter dated 3rd September 2009.”

She alluded to affidavit evidence that also showed on June 3, 2009 that Shoprite Checkers through its new secretary via email confirmed had issued the instruction on how to remit the funds and that twenty days later, Mosho sought direction from Mr. Peter Gerrit Dupreez via email whether they had obtained appropriate legal advice to have large cash withdrawals for remittance to the agent.

Dupreez confirmed that they had consulted and received advice in respect of matters raised that included the issue of withholding tax.

“On 3rd September 2009, the applicants wrote the 2nd respondent in confidence (and the letter was acknowledged by the 2nd respondent on 4th September, 2009) to inform them about the instructions the applicants had received from Shoprite Checkers (Pty) Ltd,” the judgments further reads.

The justice also took note of the October 4, 2009 letter that Mosho wrote Barclays Bank about Shoprite instructions to be drawing cash from time to time in accordance with Shoprite instructions.

“Accordingly, following the sale of shares during the period 2009 and 2011 proceeds of the sale to Mr. T Van Tonder, an agent of Shoprite on several occasions and on such occasion, Mr T Van Tonder acknowledged receipt.

“On 19th November 2010 (Mosho) proceeded to ask if Shoprite had been receiving proceeds of the sale of shares and Shoprite acting through Mr. Gerrit Du Preez confirmed via email that Mr T Van Tonder had been remitting the funds as instructed by Shoprite and that part of payment of the proceeds were applied towards payments of dividends to Zambian shareholders as per instruction referred to above,” the Judgment reads.

It has also been established that the DEC in their evidence have failed to show that the monies in the seized accounts are proceeds of crime. “To the contrary, the applicants have shown that the monies in the seized accounts are for the clients legitimately acquired,” the Justice said and added, “the respondents cannot only claim to have seized the accounts as the same are being investigated when they have not satisfied the court that these accounts are holding monies from crime.”

The Justice noted after disposal of the 2, 220,897 shares Shoprite secretary had on December 9 2005 also informed the applicants the retail giants were in the process of regularizing their internal shareholding records and that to that effect nay shareholding reporting was to reflect the status that prevailed on the date of listing on LuSE. This, Justice Phiri noted, was notwithstanding any transactions in the balance of the Shoprite shares.

The judgment also revealed that the remainder of the shares arose from the initial 2,700 million shares held by LuSE central shares depository and that they were not held by Mosho.

Posted by Admin on May 11, 2012. Filed under LATEST NEWS. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry