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[2012] ZASCA 193
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S v Tshopo and Others (29/12) [2012] ZASCA 193 (30 November 2012)
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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 29/12
Not Reportable
In the matter between:
S J TSHOPO
...........................................................................................
1
ST
APPELLANT
N M NQULO
...........................................................................................
2
ND
APPELLANT
N D MAKATHINI
....................................................................................
3
RD
APPELLANT
and
THE STATE
...............................................................................................
RESPONDENT
Neutral citation
:
Tshopo v State
(29/12)
[2012] ZASCA 193
(30 November 2012)
Coram:
HEHER,
LEACH AND THERON JJA
Heard:
13 November
2012
Delivered:
30
November 2012
Updated:
Summary:
Criminal
law – fraud – failure to disclose in tender declaration
that person connected with the tenderer was employed
by the Free
State province, the invitor for the tender – fraudulent
misrepresentation established.
Criminal procedure –
sentence – fraud in tender process – custodial sentence
required.
___________________________________________________________________________________
ORDER
On appeal from:
Free State High Court
(Bloemfontein) (Cillie and Moloi JJ sitting as court of first
instance):
‘
1.
The appeals of the appellants against their convictions are
dismissed.
2. The appeal of the
first appellant against his sentence is upheld, the sentence
confirmed by the high court is set aside and replaced
with a sentence
of three years’ imprisonment.’
__________
_______________________________________________________________________
JUDGMENT
_____________________________________________________________________
HEHER JA (LEACH AND
THERON JJA concurring):
[1] The appellants, a
brother and sister, were charged before a magistrate with fraud. They
pleaded not guilty. They were convicted
and sentenced, respectively,
to four years imprisonment in terms of
s 276(1)(b)
of the
Criminal
Procedure Act 51 of 1977
and two years imprisonment conditionally
suspended for five years. A third accused, one Makathini, was
likewise charged and convicted
and sentenced to four years
imprisonment of which two years was conditionally suspended.
[2] The three accused
appealed unsuccessfully to the High Court against their convictions
and sentences. They were all granted leave
to appeal further to this
Court. Only the two appellants have pursued the appeal. The second
appellant limited her appeal to her
conviction.
[3] The charge sheet
contained a lengthy preamble to the charge of fraud. The basic
averments were clearly regarded by the State
as fundamental to an
appreciation of the charge:
1. The Free State
Education Department (‘the Department’) issued a tender
for the delivery of school books.
2. An objective of the
tender was to attract tenderers from previously disadvantaged
communities, to benefit and to uplift them.
3. The Treasury
instructions which formed part of the tender document and had to be
complied with provided that no nepotism, bias,
favour, or abuse of
power would be allowed.
4. The tender application
also contained a ‘Declaration of Interest’ in which
tenderers were required to declare any
bond, whether family,
friendship or work-related, with any member of the Tender Board or
the Free State Department of Education.
The purpose of this
declaration was to satisfy the objectives and ensure transparency.
5. Second appellant
signed the tender application on behalf of Abelusi Enterprises.
6. According to the
tender application accused no 3 held a 50% interest in Abelusi
Enterprises and he applied for the tax clearance
certificate which
was required from the tenderer.
7. First appellant
controlled the bank account of Abelusi Enterprises. He himself
withdrew R429 533.06 from that account. R48 000
was transferred from
the account to the bank account of the first appellant.
8. First appellant used
the second appellant as a front to apply for the tender because he
foresaw that he might not be successful
because of his work and
family connections.
[4] In the context of
this preamble the State alleged that the accused were guilty of the
crime of fraud, in that, on or about 4
July 2001 and at or near
Bloemfontein the accused tendered as set out in the preamble, and
wrongfully and unlawfully, falsely and
with the intention to defraud,
represented to the Department of Education that:
(a) the applicant and
persons connected with the tender were not employees of the Free
State Provincial Administration (‘the
Administration’);
(b) the applicant and
persons connected with the tender had no relationship with an
employee of the Department or the Administration;
(c) the tax number of
Abelusi Enterprises was 0594536424;
(d) the accused were the
owners of Abelusi Enterprises.
By such false pretences,
the charge alleged, the accused induced the Department to its loss
and prejudice, actual or potential,
and to that of other potential
tenderers, to accept that the facts in representations (a) to (d)
existed, whereas in truth and
in fact the accused made the
representations well knowing that-
accused no 1 was an
employee of the Administration and also married to Mantseng Anna
Tshopo, an MEC in the Free State Government;
the tax number of
Abelusi Enterprises was not 0594236424;
accused no 2 was the
sister of accused no 1;
they were not the owners
of Abelusi.
[5] The accused pleaded
not guilty and made no admissions.
[6] All three accused
closed their cases without adducing evidence. The cross-examination
of the State witness although prolonged
had been largely ineffective
in relation to material questions. The result is that the telling
evidence stood unimpugned and once
its thrust has been identified the
essential enquiry is whether it is capable of sustaining the
inferences that the State would
have us draw from it.
The material facts
[7] On 8 June 2001 the
Acting Head: Education in the Free State Department of Education
published an invitation to tender in relation
to the distribution of
learner study materials / text and prescribed books to various
schools in the Province.
[8] On 4
July an entity called Abelusi Enterprise submitted the required
tender documents. In each case they were signed on its
behalf by the
second appellant, variously describing herself as ‘Manager’,
‘Partner’ and ‘50% owner’,
(or, in a number
of instances, not qualifying her signature). For present purposes it
is necessary to dwell on only one of those
documents, the
‘Declaration of Interest’. This consisted of a preamble
and three questions with provision for particulars
if any answer was
positive. Only the first question and answer are relevant to the case
against the accused.
1
The relevant portions of the Declaration read as
follows:
‘
Any
legal person, including persons employed by the Province, or persons
who act on behalf of the Province or persons having a kinship
with
persons employed by the Province, including a blood relationship, may
make an offer or offers in terms of this tender invitation.
In view
of possible allegations of favouritism, should the resulting tender,
or part thereof, be awarded to persons employed by
the Province, or
to persons who act on behalf of the Province, or to persons connected
with or related to them, it is required
that the tenderer or his
authorized representative shall declare his position vis-à-vis
the evaluating authority and/or
take an oath declaring his interest,
where
-
the tenderer is employed by the Province of acts on behalf of the
Province; and/or
-
the legal person on whose behalf the tender document is signed, has a
relationship with persons/a person who are/is involved with
the
evaluation of the tender(s), or where it is known that such a
relationship exists between the person or persons for or on whose
behalf the declarant acts and persons who are involved with the
evaluation of the tender.
In
order to give effect to the above, the following questionnaire shall
be completed and submitted with the tender.
2.
Are you or any person connected with the tenderer, employed by the
Province?
NO
3.
Do you, or any person connected with the tenderer, have any
relationship (family, friend, other) with a person employed in the
department concerned or its administration and who may be involved
with the evaluation or adjudication of this tender?
NO
4.
Are you, or any person connected with the tenderer, aware of any
relationship (family, friend, other) between the tenderer and
any
person employed by the department concerned, or its administration
who may be involved with the evaluation or adjudication
of this
tender?
NO’
The answers were, in each
case, apparently furnished by the second appellant in her own hand.
[9] In the document
called a ‘preference certificate’ which embodied a claim
for a price preference of 10% for an enterprise
owned by previously
disadvantaged individuals the second appellant furnished information
about Abelusi Enterprise as follows:
‘
Postal
address P.O. Box 720
VIRGINIA
Physical
address 400 EUREKA PARK
VIRGINIA
9430
Telephone
No 0722280193.
Contact
person JOHNNY
Company/Enterprise
ENTERPRISE
Income
tax reference no 0594236424
VAT
registration no (if applicable) TO FOLLOW
Company/Close
Corporation registration no N/A.
Type
of firm
X
Partnership’.
The second appellant
described the principal business activity of Abelusi as ‘supply
and distribution of school stationery’
and stated that it had
been in business for two years. In a schedule to the certificate she
listed the partners and their ownership,
identifying herself and the
third accused as having owned 50% each since 1999.
[10] The Department
awarded the tender to Abelusi Enterprise and on 10 October 2001 the
second appellant signed a memorandum of
agreement on its behalf for
the distribution and delivery of school stationery, text- and
prescribed books. The agreement was countersigned
on behalf of the
Department on 25 October.
[11] The state led
evidence of the history of Abelusi Enterprise preceding the
submission of its tender. A certain Lizwe Winston
Magope testified
that he caused it to be registered as a close corporation in the year
2000 for the purpose of applying for a tender
for the supply of
school books to the Department for one year. The application for the
tender was successful. The business promoted
a partnership between
himself and the first appellant who was his brother-in-law. When the
tender was awarded Mogope was employed
as a teacher by the Department
and it was agreed that the first appellant would run the affairs of
Abelusi. Before the completion
of the services that had to be
provided by Abelusi, Mogope became aware that he should not, as an
employee of the Department, have
been involved in a contract with it.
He then ceased to take any further part in the administration of
Abelusi. As far as he was
aware the contract ended after the first
year. He had no knowledge of the second tender and contract, ie for
the distribution of
books.
[12] The state called a
Mr Heinrich Vermaas to testify about his relationship with the first
appellant. At some stage they contemplated
a joint business venture
and for that purpose set up a close corporation. The postal address
of the corporation was to be Vermaas’s
personal business
address viz P O Box 720, Virginia. He confirmed that the telephone
number furnished by the second appellant in
the preference claim, viz
0722280183, was the number of his own business and had been such
since 1997. It was the intention of
himself and the first appellant
to use all the facilities of his business in the joint venture.
[13] The criminal
investigation into irregularities in tenders employed a forensic
partner of Deloitte & Touche, accountants
and auditors, Mr Jaco
Spies. He prepared a report pertinent to the prosecution of the three
accused and testified about and confirmed
its contents. Twenty-one
bank accounts were identified as relevant to the investigation held
in the names of each of the three
accused. The report was handed in
by consent. Both counsel for the defence admitted its contents and
accepted its correctness.
The attitude of counsel was that the entire
report was irrelevant to the issues in the case.
[14] The mandate
conferred on Mr Spies was described in his report in the following
terms:
‘•
Analyse
the flow of funds between the identified bank accounts for the period
1 January 2001 to 31 January 2003 of the following
entities and
individuals:
º
Abelusi Enterprises;
º
SJ Tsopo [the first appellant];
º
MA Tsopo [his wife, the MEC for Health];
º
M Nqulo [the second appellant];
º
ND Makhathini [the third accused];
º
LE Segobo.
•
Establish
the flow of funds between the accounts with emphasis on:
º
Deposits made by the Department of Education into the account of
Abelusi for the tender;
º
Funds received by MA Tsopo;
º
Funds received by SJ Tsopo;
º
Income of SJ Tsopo and MA Tsopo above their salaries;
º
Withdrawals, transfers and payments from the accounts of SJ Tsopo and
MA Tsopo;
º
Income of SJ Tsopo and MA Tsopo generated by this tender;
º
Funds received by the directors (Nqulo and Makhathini) for the
tender;
º
How much money was paid to LE Segobo.’
[15] According to the
Spies report:
‘•
MN
Nqulo signed a document requesting the Head: Education Department to
pay any amount due to Abelusi Enterprise into a transmission
account
with account number 908 649 7737. . . . ;
•
According
to the “Signing Instructions” obtained from the SAPS . .
. the account had the following two authorised signatories,
and any
one of them could sign the document;
º
SJ Tsopo ID 600720 5642 084
º
MN Nqulo ID 770603 0877 083;
•
None
of the available documentation regarding transactions processed on
this account was signed by MN Nqulo;
•
SJ
Tsopo, a registration clerk at the Provincial Government Traffic
Department in Virginia and husband of MA Tsopo (MEC Health Free
State
Province) controlled the account in the name of Abelusi Enterprises.
He also signed the available documentation relating
to transactions
on the account;
•
The
account was opened on 2 November 2001.’
[16] During the period 2
November 2001 to 31 January 2003 the Department paid R138 162,74
and the Free State Provincial Administration
paid R160 679,59
into the bank account of Abelusi. In addition there was a Department
of Education cheque for R56 314,20
deposited in the account and
a direct credit of R8876,53 from the Department. These amount,
totalling R364 033,06, represented
the income generated by the
distribution tender.
[17] The principal
findings made by Spies after having conducted his analysis were:
1. The Abelusi account
appears to have been controlled by the first appellant. Cash
withdrawals amounting to R248 470 were
made from the account by
him and R13 500 was transferred from the account to his credit
card account.
2. R48 000 was
transferred from the Abelusi account to the cheque account of M A
Tshopo, the wife of the first appellant, and
R27 348,86 was
deposited into her Nedbank loan account from the Abelusi account.
3. The second appellant
did not receive any funds directly from Abelusi.
4. The third appellant
did not receive any funds directly from Abelusi, except apparently a
cheque for R2000 derived from an internal
transfer slip signed by the
first appellant.
5. An amount of R3000,00
was transferred from Abelusi to L E Segobo an employee of the
Department.
[18] The
original documents making up the tender application seem to have
consisted of some relating to a tender for the distribution
of the
learner materials (E7) and one for the supply of such materials (E6).
The declaration of interest that embodied the representation
relied
on by the state, and the preference certificate, containing the
particulars of the tenderer, both bore the prefix E6 to
the tender
number. Counsel argued in consequence that the second appellant had
furnished the information contained in those two
documents in
relation to a tender not the subject of the charge. Counsel was
clutching at straws. Any apparent ambiguity in the
substance of the
tender application was, as the magistrate recognised, clarified by
the award and conclusion of the agreement to
implement the tender
which unambiguously related to the distribution of materials. The
failure of the second accused to offer an
alternative explanation in
evidence simply strengthens further the inference that Abelusi’s
only interest was in distribution.
That the second appellant signed
two
tender
applications on behalf of Abelusi (E6 and E7), the documentation for
which had been confused by the state, remained counsel’s
speculation. It finds no foundation in fact or in the
cross-examination of the witnesses.
[19] The first appellant
signing a warning statement that was produced as an exhibit (‘F’)
in court. Commenting on this
in his judgment the magistrate said:
‘
As
per his answer to question 7 on his warning statement, exhibit F,
accused 1 said that he assisted his sister, accused 2, with
the
completion of the tender document. It is not clear whether by that he
meant that he actually completed the documents in his
own
handwriting. But be that as it may, he certainly knows that his
sister’s address and telephone number are not as they
appear on
those documents, namely P.O. Box 720, Virginia, that is the post-box
number and the telephone number 057-2126653. These
numbers belong to
Mr Heinrich Vermaas who testified that he and accused 1 had discussed
the possibility of getting into business
together. It is obvious that
accused 2 would not have known of this address and telephone number
and that the only person who knew
about them was accused 1.’
The magistrate’s
deductions are valid (and counsel conceded as much). It must also be
remarked of the admission that it demonstrates
active participation
in the preparation of the tender application by the first appellant
and justifies the inference that he had
insight into the replies
furnished by the second appellant in the declaration of interest. All
the documents were apparently signed
by the second appellant on the
same day, 4 July 2001. The warning statement of the first appellant
also reflects the following
answer to the question ‘Are you in
any way involved in Abelusi?’:
‘
Yes . . . I am
handling the financial side of Abelusi.’ The first appellant’s
extra-curial admission and the conclusions
justified in relation to
them were however not evidence against his co-accused.
[20] In the judgment of
the court a quo there is a reference to Exhibit H as support for the
proposition that ‘the first accused
personally indicated to
SARS that he traded as Abelusi’. Exhibit H comprised the
‘Annual Financial Statements’
of ‘S J Tsopo (sic)
Trading as Abelusi Enterprises’ for the periods ended 28
February 2002, 28 February 2003 and 29
February 2004 respectively.
They contain no indication of the involvement of the second
appellant, Makathini or any other person
in the business of Abelusi.
[21] The only reasonable
inference to be drawn from the evidence is that the first appellant,
who held a 50% interest in the original
Abelusi (albeit as a sleeping
partner because of his potential conflict of interest) continued in
the same or a similar capacity
to influence the affairs of Abelusi in
its second manifestation (when it tendered for and obtained the
contract for distribution).
Whether the second appellant and the
third accused actually held a proprietary interest in Abelusi is of
little consequence. What
matters is that the first appellant
undoubtedly did and that it entitled him to enjoy the fruits of the
contract clinched by the
successful tender. The business of Abelusi
was, in short, carried on solely or principally in the interest of
the first appellant.
What further matters is that the second
appellant misrepresented the true ownership of Abelusi by failing to
disclose and, indeed,
denying his interest in the tender application
that she signed.
[22] In the absence of
evidence to the contrary, it is also the sole reasonable inference
that the second appellant was aware when
she completed and submitted
the tender application that-
(i) her brother, the
first appellant, was employed by the Province;
(ii) her sister-in-law
was an MEC in the Free State Administration;
(iii) the first appellant
wished to have his interest in Abelusi suppressed in relation to the
application;
(iv) she was required by
the declaration of Interest to state whether she or any person
connected with the tenderer was employed
by or acted on behalf of the
Province, in order to lessen the possibility of allegations of
favouritism on the part of the evaluation
authority and the province
if it should afterwards appear that an employee of the province was
connected with the tenderer.
[23] The meaning that
should be given to the use of the word ‘connection’ in
the declaration is that which the ordinary
reader would attach to it.
Because the State relies on fraud the subjective understanding of the
appellants must be decisive, but
the appellants did not tell the
court that they possessed an understanding that differs from that of
the ordinary reader. In the
context of the explanation in the
preamble to the Declaration the ordinary reader would have
interpreted ‘connected with
the tenderer’ as including
any person who stood to derive financial benefits from the
performance of the contract by reason
of his or her interest in the
tenderer and / or one who directed its affairs. In both senses the
second appellant must have known
that the first appellant was
‘connected with’ Abelusi.
[24] The first appellant
in his extra-curial statement admitted to having helped the second
appellant with the completion of the
tender application.
[25] Since both
appellants knew that the first appellant was financially and
personally involved in the direction of Abelusi’s
affairs and
was an employee of the Province, they must necessarily have known
that the tenderer was bound to disclose that connection.
Not only did
they not make such a disclosure but the second appellant (with the
knowledge and concurrence of the first appellant)
denied the
connection. The inference drawn by the magistrate that the deception
was carried out so as not to place the award in
jeopardy was the only
reasonable inference consistent with the proved facts, including the
unchallenged reason for the status of
a sleeping partner adopted by
the first appellant during the initial activities of Abelusi. The
misrepresentation relied on in
the charge sheet (subpara (a) of para
4 of this judgment read with the answer to question 2 in the
Declaration of Interest) was
thus proved beyond a reasonable doubt,
as was the intention to deceive the Department. That the Department
relied on the misrepresentation
is inherent in the substance of the
preamble. That it did so is not in dispute.
[26] As to the element of
prejudice by the fraudulent representation I agree with the finding
of the court a quo:
‘
It
was argued that the Department of Education has not suffered any
prejudice or potential prejudice as it paid monies for services
actually rendered and not more. The state has an interest in keeping
strict control over state tenders which are being unscrupulously
used
for self enrichment by the public servants. So does the general
public whose funds are used to finance such projects and also
other
tenderers. There is evidence that the members of the public complain
that the employees of the state misuse their position
to obtain
tenders. The failure to reveal in tender application the employment
relationship with the state and the relationship
with the MEC, the
first appellant’s wife and the relationship between the first
and second appellants is prejudicial to other
tenderers and the
community at large and frustrate the state’s efforts to
eliminate the favouritism the declaration of interest
seek to
combat.’
Sentence
[27] The first appellant
appeals against a sentence of four years direct imprisonment imposed
by the magistrate and confirmed by
the full bench of the High Court
on appeal.
[28] The magistrate seems
to have accepted that the services required by the contract concluded
between the Department of Education
and Abelusi in consequence of the
award to it of the tender were not performed. He said:
‘
The
rest of the money went to accused 1 as either cash withdrawals or
transfers into his various accounts. All this makes it clear
that
accused 1 dealt with that money as his own and that there was no
intention on his part to use it for the reason for which
the
Department of Education had intended it. His failure to take the
court into his confidence meant that he could not show the
court that
the money was indeed used for the supply and / or distribution of
study material to the designated schools and this
is in spite of what
Dr Moilia said. Because clearly Dr Moilia’s testimony differs
to that of Inspector Calitz as far as the
credibility of these
tenders is concerned.’
[29] This finding was, it
seems to me, a misdirection, since it was neither alleged nor proved
that Abelusi had defaulted in any
of its obligations to the
Department. There was no reason to assume that it did not give full
value for its tender. Indeed, the
prosecutor put it to Dr Moilia, a
defence witness in mitigation of sentence, that ‘it has always
been the case that delivery
did in fact take place’.
[30] The sentencing of
the first appellant was also influenced by certain misdirections in
the judgment of the magistrate at the
conviction stage, which could
not but have coloured his assessment of the moral blameworthiness of
the appellant.
[31] First, the
magistrate found that the first appellant knew that the appellant
would not qualify for the award of the tender
because he was employed
by the province. That was not proved. At worst the evidence shows
that proper disclosure might have jeopardized
the award of the
contract to him or an entity with which he was connected. There is no
justification for inferring more than an
intention on his part to
avoid that possibility.
[32] Second, the
magistrate found that the Department suffered actual prejudice
amounting to R364 033,06 (the tender price) because
that amount
‘would not have been paid to Abelusi had there been no
misrepresentation’. This is untrue for the reason
I have
already identified. Moreover, an award of the distribution tender was
inevitably going to necessitate the same or a like
payment to
whomever should be the successful bidder. In so far as the magistrate
intended to suggest that Abelusi did not provide
the required
reciprocal performance for the price it received, that is also, for
the reasons previously given, untrue.
[33] The consequence of
relying on these misleading conclusions was that the magistrate
regarded the circumstances of the crime
as more aggravating than they
warranted.
[34] In its judgment on
the merits of the appeal the court a quo appreciated that the
prejudice occasioned by reliance on the misrepresentation
lay
elsewhere. I have earlier quoted with approval its comment in this
regard. When it came to sentence, however, the court a quo
did not
take into account either the misdirections of the magistrate or
appreciate their effects. It was of the view that the magistrate
had
considered and balanced all the relevant factors and that no grounds
had been established to the exercise of his discretion.
Inasmuch as
the court a quo overlooked the misdirections and their effects it too
erred. We are in the circumstances at liberty
to consider the
sentence afresh.
[35] The appellant was
about 40 years old at the time of the offence, married to the MEC for
Health in the Free State government,
with five dependent children. He
was employed in the provincial licensing department at Virginia but
apparently lost that employment
before his conviction. He was a first
offender. Neither during his trial or subsequently has he shown or
expressed insight into
or remorse concerning his conduct.
[36] The fraud was
committed in the face of an explicit statement of the justification
for honest disclosure in the interests of
the openness of the tender
process. This is made clear in the preamble to the Declaration of
Interest in the tender application.
[37] Fraud in the
procurement of state tenders is a particularly pervasive form of
dishonest practice. It undermines public confidence
in the government
that awards tenders, apparently without regard for nepotism, and it
creates perceptions unfavourable to the services
provided pursuant to
such tenders. It is proving notably difficult for the authorities to
identify and root out such malpractices.
The courts are obliged to
render effective assistance lest the game be thought to be worth the
candle.
[38] In this instance the
contract price secured by the misrepresentation was not overly large
but nevertheless not insubstantial
either.
[39] I am satisfied that
the seriousness of the offence requires a custodial sentence even
when tested against the circumstances
personal to the first
appellant. A period of three years direct imprisonment will answer
the requirements of justice in this instance.
[40] In the result the
appeals of the appellants against their convictions are dismissed but
the appeal of the first appellant against
the sentence confirmed by
the high court is upheld and replaced by a sentence of imprisonment
for three years.
_________________
J A HEHER
JUDGE OF APPEAL
APPEARANCES
APPELLANTS: W J Edeling
Eugene Holtzhausen,
Bloemfontein
RESPONDENT: J B K
Swanepoel
Director of Public
Prosecution, Bloemfontein
1
The
question numbered ‘2’ and its answer; there is no
question 1.