Enet Mukurazita v Young Africa Development

### Preamble
Judgment No SC 54/25
1
Civil Appeal No SC 82/22
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REPORTABLE    (54)

ENET     MUKURAZITA

v

YOUNG     AFRICA     DEVELOPMENT

SUPREME COURT OF ZIMBABWE

BHUNU JA, CHIWESHE JA & MUSAKWA JA

HARARE: 20 JUNE 2024 & 3 JULY 2025

T.G. Mboko, for the appellant

B. Mahuni, for the respondent

CHIWESHE JA:

This is an appeal against part of the judgment of the High Court (the court a quo) dated 2 February 2022.  The appellant appeals against only paras 1 and 3 of that judgment wherein the court a quo ordered, respectively, that the appellant pays to the respondent the sum of US $ 14 832.00 and that each party bears its own costs.

THE FACTS

The respondent is a common law universitas, engaged in charitable activities.  The appellant is its former director.  She was employed in that role for some time.  The employment relationship was terminated by the voluntary resignation of the appellant. Soon after her resignation, the respondent instituted a civil claim against her in the court a quo.  It sought the following relief:

“(a) Payment of the sum US $60 455.55 being patrimonial loss suffered by the respondent as a result of the appellant’s wrongful and negligent conduct during her employment by the respondent.

Interest on the  aforesaid amount calculated from the date of summons to the date of full and final payment, and

Costs of suit.”

In its declaration, the respondent stated as follows:

“The appellant was employed by the respondent as director from January 2016 to 8 May 2017 when she resigned.  During her tenure, the appellant conducted the affairs of the respondent in a manner that was reckless or grossly negligent or outright fraudulent.  Such conduct caused the plaintiff to lose the sum of US                         $60 455.55 broken down as follows:

Unaccounted for cash withdrawals US $25000.00

Fraudulent travel and subsistence allowance claims US $ 2775.00

Uncounted for eco-cash student feed payments US $3 688.55

Conflict of interest claim on purchases from her company US $28 992.00

Total    US $ 60 455.55.”

The appellant`s plea was to the following effect: She denied that the respondent was a common law universitas insisting that a trust was not a legal persona capable of suing or being sued in its own name.  She claimed she had been employed for nine years and not just for the period 2016 to 2017.  She had been appointed director in 2007 and had managed the respondent`s affairs very well.  She denied any wrongdoing causing financial prejudice to the respondent.  She indicated that three audits had been conducted between January 2016 and May 2017 and no fault had been established against her.  She averred that she was not responsible for cash withdrawals and that all withdrawals were properly accounted for.  The eco-cash transactions complained of were performed with the full knowledge of respondent’s board.  Further, she averred that she had made a declaration of conflict of interest and no objections were made regarding those transactions in which she may have been conflicted.  In any event, authorizations for purchases were made by the board and not by her.  She said she had voluntarily resigned and that her offer for a smooth hand over takeover of the respondent`s assets had been turned down by the respondent.  She avers that the present claims only arose after she had approached the Ministry of Labour with a complaint over unpaid salaries.

At the pre-trial conference the following issues were agreed:

Whether the appellant was liable to the respondent in the sum of US                              $60 455.55 as claimed.

Whether the appellant acted wrongfully and negligently during her employment resulting in the respondent suffering financial loss, and

Costs of suit.

PROCEEDINGS IN THE COURT A QUO

In support of the respondent`s case two witnesses were called.  The first witness was Jacqueline Joseph who was the chairperson of the respondent`s Board.  She told the court a quo that in 2014, the respondent was awarded a European Union (EU) grant and the appellant, as director, travelled to Belgium to receive it.  The grant was more than two million Euros.  The first disbursement was in the sum of seven hundred thousand Euros.

After the disbursement, the European Union sent a verification mission to check whether the grant was utilized in line with European Union guidelines and general rules of administration of such funds.  The mission came in early 2016.  Some irregularities were unearthed following an audit by KPMG.  These were to do with the management and disbursements of funds and conflict of interest.  The appellant, as director, was responsible for the management of the grant.  The European Union wrote to the respondent advising that due to the irregularities, it was cancelling the grant.  On 8 May 2017 the respondent suspended the appellant from her duties pending a disciplinary hearing.  However, the appellant chose to resign with immediate effect.  In a letter dated 29 June 2017, the respondent advised the appellant that it was working out her terminal benefits.

A dispute as to the sums payable then arose.  The dispute was referred to the Labour Officer who made a ruling.  The Labour Court declined to confirm the ruling because in his computation the Labour Officer had failed to set off the amounts owed to the respondent by the appellant.  However, the Labour Court found that in an email dated 11 May 2017, the appellant had acknowledged owing the respondent the sum of $ 2400.00 for conflict of interest.  The witness stated that the appellant had rejected the respondent`s offer of $ 8 145.45 after deducting the US $ 2400.00 and the amount appellant was to pay for the purchase of a staff vehicle owned by the respondent.

The witness also said that the claim from the European Union was reduced to Euro 256 215.59 after a revised computation.  Some partial payment had also been made after the respondent sold one of its cars and put the money received towards liquidation of the European Union debt.  As some of the allegations against the appellant were criminal in nature, a report was made to the police.

The second witness for the respondent was Gertrude Sibanda, an auditor running her own consultancy.  She is not however registered as a Public Accountant in terms of the Public Accountants and Auditors Act [Chapter 27:12].  She told the court a quo that she was a certified forensic auditor holding the degree of Master of Business Administration (MBA).  She had been engaged by the respondent as a consultant to analyse the contract between the European Union and the respondent pursuant to a KPMG audit, which established a liability of Euro 466 068.15 on the part of the respondent to the European Union.  She was to go through the documents and help the respondent to identify any amounts which could be contested by the respondent against the European Union`s claim.  That verification would assist the respondent reduce its liability to the European Union.  She managed to reduce that amount to Euro 256 215.59.

The witness was also tasked to do a forensic audit on the appellant.  She found that a cash withdrawal of US $21 500.00 had been made on 14 January 2015 from the European Union ECOBANK account.  The withdrawal was made by the appellant.  The amount was not accounted for in the respondent’s books of accounts.

A further sum of US $4 000.00 was withdrawn from the same account by an unidentified person.   The appellant was implicated together with the finance manager as both of them were authorized signatories to that account.  The amount was not accounted for in terms of the respondents accounting procedures.  The witness also told the court a quo that the appellant was receiving fees paid by students through her eco-cash payment platform.  A total of US $3 688.50 of such fees remained unaccounted for.  The witness said that the appellant had, contrary to the European Union contract, used her company, Women`s Capital, to make purchases for the respondent.  Such conduct was in conflict with her duties as director of the respondent.  The purchases made from that company amounted to US $28 000.00.  This witness was extensively cross examined by the appellant`s counsel.

The evidence of the appellant was tendered through affidavit as agreed by the parties.  She confirmed her defence as outlined in her plea.  Further, she said that Sibanda was biased in her testimony.  She denied all the allegations levelled against her.  Regarding student eco-cash fees, she said the fees were not part of the European Union funds.  She said that she could not send the amounts to the respondent as the respondent did not have eco- cash facilities.  She would need to withdraw funds from the bank and then deposit the same into the respondent`s account.  This was difficult due to cash shortages at the time.  The funds ended up being used to buy goods and services for the respondent.  She also said she declared her company to the respondent who knew that purchases were being done through it.

Accordingly, there was neither conflict of interest nor did her conduct in that regard contradict any European Union policy.  She also said that the respondent`s chairperson had made recommendations for her expulsion from the university she was attending and recommended to the embassy of the United States for the revocation of her family visa, clear signs that the chairperson was out to get her.  The appellant also called one Casper Ngome, employed by the respondent as a Project Accountant from 2015 to 2016.  He gave evidence as to the procedures to be followed when handling and accounting for cash received or disbursed.

FINDINGS OF THE COURT A QUO

The court a quo noted from the outset that the respondent had, in its closing submissions, dropped its claim for fraudulent travel and subsistence allowances in the sum of US $ 2 775.00.  Accordingly, the respondent`s overall claim was reduced from US $ 60 455.00 to US $ 57 680.50.

With regards the competency of Sibanda to testify as a forensic auditor, the court                a quo found that documentary evidence placed before it, in particular her valid registration certificate as such, proved that she was a forensic auditor.  Accordingly, it dismissed the objection raised by the appellant to the effect that she was not competent to testify as a forensic auditor.

As to the claim that the appellant had misappropriated cash withdrawals from the bank, the court a quo found that there was no evidence to show that the appellant had recklessly, negligently or fraudulently caused the loss of cash in the sums claimed.  It observed that the appellant had stated that all cash withdrawn was handed over to the accounts department which department should account for its fate.  It was therefore incumbent for the respondent to lead evidence from persons manning that department to shed light as to whether the cash was received and how it was accounted for.  No such evidence was adduced.  As a result, the respondent was unable to prove its claim on a balance of probabilities.  The court a quo absolved the appellant of any liability in that regard.  The court a quo also criticized the respondent for initiating the forensic audit well after its claim was instituted in the court                       a quo.  Even then, persons who had been implicated by the report had not been given an opportunity to comment on the findings of the auditors.  For that reason, the court a quo held that it could not safely rely on the contents of the forensic report.

With regards the claim for conflict of interest in the sum of US $28 000.00, the court   a quo noted that the claim by appellant that the respondent had no policy on conflict of interest had no merit as the appellant herself had signed her conflict of interest statement long before the forensic audit had been commissioned.  The appellant had of her own volition signed such a statement.  She bound herself to it and in that way acknowledged that she was aware of her duty not to be conflicted in transactions involving her own company and the respondent.  In any event, in her email to the respondent’s chairperson, the appellant had made a proposal to contribute towards conflict of interest claim.

The court a quo held that the respondent`s claim for conflict of interest should be limited to the findings  of the KPMG audit, which the appellant must be taken to have accepted in that she had not challenged the full value of the transactions that the auditors disallowed despite having had an opportunity to do so.

The court a quo also found that the claim for student eco-cash fees was not recoverable on behalf of the European Union as the fees were not part of the European Union grant.

The court a quo noted that the KPMG report found that conflict of interest amounted to Euro 12 157.38 (US$14 832.00).  It noted that these funds constituted foreign obligations as contemplated under s 21 (2) (b) of the Finance Act No. 2/2019 (incorporated into the Reserve Bank of Zimbabwe Act as s 44C).   Such funds are claimable and payable in the foreign currency in which they were expended.

In the result, the court a quo made the following order:

“1. Judgment is hereby granted in favour of the plaintiff in the sum of US                           $14 832.00 in respect of the conflict of interest claim for purchases made from a related company.

2. The plaintiff’s claim for unaccounted for cash withdrawals in the sum of US                  $25 000.00 and unaccounted for eco-cash student fees payments in the sum of US$3 688.55 are hereby dismissed.

3. Each party shall bear its costs.”

Aggrieved by paras 1 and 3 of the order of the court a quo the appellant noted the present appeal on the following grounds:

GROUNDS OF APPEAL

“1. The court a quo grossly erred and misdirected itself when it ordered payment of USD $14 832 yet there was no loss alleged or suffered by the respondent.

2. The court a quo grossly erred when it ordered payment in United States dollars yet the alleged amount was a local currency transaction in light of S.I. 33 of 2019.

3. The court a quo grossly misdirected itself when it ignored the KPMG report that showed that the amount was not for under the heading of payment to related parties.

4. The court a quo grossly misdirected itself when it ignored its own findings that no loss was proven yet it proceeded to award the claimed amount.

5. The court a quo grossly misdirected itself when it ignored its own finding that the appellant had admitted owing money yet there was overwhelming evidence that she had only made on a without prejudice basis proposal which was rejected by the respondent.”

RELIEF SOUGHT

The appellant seeks the following relief:

“1. The appeal succeeds with costs.

2.  Paragraphs 1 and 3 of the High Court judgment under case HH 69/22 be and is hereby set aside and substituted with the following:

(a) The claim for conflict of interest be and is hereby dismissed.

(b) The plaintiff shall pay costs of suit.”

ISSUES FOR DETERMINATION

The grounds of appeal raise the following issues for determination by this Court:

Whether the respondent suffered loss in the sum of USD 14 832.00.

Whether the amount of USD 14 832.00 represented payments to a party in respect of which the appellant was conflicted.

Whether the loss, if any, was payable in foreign or local currency.

Whether the appellant admitted liability for the loss arising from conflict of interest.

The facts also give rise to a further issue, namely,

Whether the appellant was personally liable for the breach of EU regulations prohibiting transactions tainted with conflict of interest.

SUBMISSIONS BEFORE THIS COURT

Mr Mboko, for the appellant, submitted that there was no proof of the loss suffered by the respondent for conflict of interest.  The KPMG report had not attributed such loss to the transactions made with the appellant’s company.  There being no such loss, the court a quo’s finding to the contrary cannot be sustained.  He submitted that the court a quo erred in ordering payment in US dollars when the transactions in question were made in local currency.  He further submitted that the appellant had, on a without prejudice basis, proposed to contribute towards the loss arising out of conflict of interest but the respondent rejected this offer.  It cannot now seek to benefit from an offer that it rejected by saying that the appellant had admitted liability.

On the other hand, Mr Mahuni for the respondent, insisted that the appellant had voluntarily admitted liability.  He stated that the amount granted by the court a quo was based on the KPMG audit and thus unassailable.  He urged the court to dismiss the appeal as it had no merit.  He was however unable to give a satisfactory answer when asked by the court what purchases had been made and whether the prices charged by the appellant’s company were different from the prices prevailing on the open market.

ANALYSIS

The fifth issue for determination is dispositive of this appeal.  Was the appellant personally liable for the breach of EU Regulations prohibiting transactions tainted with conflict of interest and the consequences thereof? The appellant stated in the court a quo that she had from the outset disclosed to the Board her conflict of interest regarding transactions involving her company and the respondent.  The respondent has not controverted this fact.  Secondly, the appellant stated that all purchases by the respondent were approved by its board.  Again the respondent did not deny that fact.   It is common cause therefore, that the appellant had declared her interest and that the purchases now alleged to constitute conflict of interest were in fact approved by the respondent’s Board.  The Board knew, or ought to have known, that approval of such purchases, under circumstances where the appellant had openly disclosed her interest, would be in breach of EU regulations on conflict of interest.  The Board ought to have appreciated the consequences of that breach, namely that the whole EU grant would be recalled and, in addition, any moneys expended on such purchases were required to be refunded to the EU.  With that knowledge and awareness, the Board nonetheless proceeded to approve and authorize the purchases which are the subject of this matter.  The respondent now seeks to shift the blame to its director, when its board in fact had approved the tainted transactions.  The blame for the drastic actions taken by the EU must be shouldered by the board, representing the respondent.  In short, it is the respondent, as an organisation and through its Board that must accept responsibility for the consequences of its action.  Singling out its director or any other officer does not absolve the respondent.

In the circumstances, the appellant cannot personally take responsibility for what was to all intents and purposes the fault of the organisation itself.

DISPOSITION

For these reasons the appeal has merit.  It is not necessary in the circumstances to consider the rest of the issues in view of our finding that the respondent itself must shoulder the blame for incurring the displeasure of the European Union.  Costs shall follow the cause.

Accordingly, it is ordered as follows:

“1. The appeal succeeds with costs.

Paragraphs 1 and 3 of the order of the court a quo be and are hereby set aside and substituted with the following:

“1. The conflict of interest claim be and is hereby dismissed.

The applicant shall pay the respondent’s costs.”

BHUNU JA		:	I agree

MUSAKWA JA	 	:	I agree

Mboko T.G Legal Practitioners, applicants’ legal practitioners

Zimbabwe, Scanlen & Holderness Legal Practitioners, respondent’s legal practitioners