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JudgmentAssests Recovery Agency VS GEOSPATIAL ENGINEERS AND BUSINESS CONSULTANTS LTD16 min read

Assests Recovery Agency VS GEOSPATIAL ENGINEERS AND BUSINESS CONSULTANTS LTD

High Court at Milimani High Court · · Francis Gikonyo


Forfeiture of proceeds of crime

  1. This matter is premised on investigations conducted by the Applicant which established that the respondent's account had received funds of which, there are reasonable grounds, are proceeds of crime. The investigations into the matter commenced following receipt of information on fictitious payments of funds amounting to Ksh 430,000,000 paid to the Respondent and two other business entities namely; Universal Land Services and Theodore Surveys by REREC.
  2. The investigations established that Ksh 430,000,000 was fraudulently paid to the Respondent, Universal Land Services, and Theodore Surveys between January 2022 and June 2022 which fraud was revealed through an audit report dated 20th July 2022. The fraud involved the Respondent, the aforesaid two business entities, and officers from REREC, and was executed through irregular payments of invoices and payment certificates of survey of projects that did not exist.
  3. The Applicant obtained court orders from the Chief Magistrate Court vide Misc. Appl. No E111/2022 and 119/2022 authorizing it to investigate and restrict debits in respect of the funds held in the Respondent, business entities, and other parties' bank accounts suspected to have received the proceeds of crime. The orders were served upon the bank where Ksh 13,867,254.28 was traced in the Respondent's bank account and restricted.
  4. Following the findings of the investigations, the Applicant filed a preservation application and obtained preservation orders on 14th December 2022 vide NRB HCMISC App No. E060 of 2022, Assets Recovery Agency -Vs- Geospatial Engineers and Business Consultants Ltd according to sections 81 and 82 of POCAMLA preserving Ksh. 13,867,254.28.
  5. The Applicant gazetted the preservation orders on 23rd December 2022 pursuant to section 83(1) of POCAMLA vide Gazette Notice No.15939
  6. The Applicant sought preservation orders on the funds held by the Respondent with Equity Bank, orders which were granted on 14/12/2022.
  7. The applicant applied vide originating motion dated 21st March, 2023 for orders;
  8. THAT this Honourable Court be pleased to issue an order declaring that Kshs.13,867,254.28 held in the Respondent's bank account held at Equity Bank Kenyatta Avenue are proceeds of crime and are liable for forfeiture to the government.
  9. THAT this Honourable Court be pleased to issue an order declaring that Kshs.13, 867,254.28 held in the Respondent's bank account held at Equity Bank Kenyatta Avenue be forfeited to the government.
  10. The applicant is seeking the forfeiture of Kshs. 13,867,254.28 held in the Respondent's bank account held at Equity Bank.
  11. The Application is based on allegations that the Respondent on diverse dates received money from REREC, which monies are alleged to have been obtained irregularly. The investigations by the Applicant established the payment of Kshs. 430,000,00 to three companies, Respondent being amongst them.
  12. The Respondent filed a response to the Application vide a Replying Affidavit dated 20th June 2023.
  13. The Applicant further filed a supplementary affidavit sworn on 18th July 2023.

Directions of the court

  1. The application was canvassed by way of written submissions.

The applicant’s submissions.

  1. The applicant submitted that it has discharged its burden and demonstrated that the respondent benefited from the fraudulent payments from REREC and therefore the balance of Ksh 13,867,254.24 traced in the respondent's account constitutes proceeds of crime as defined under section 2 of POCAMLA. The applicant relied on Schabir Shaik & Others-Vs-State CCT86/06(2008) ZACC 7, Assets Recovery Agency -Vs-James Thuita Nderitu & 6 others [2020] eKLR, Civil Application No. E006 of 2022 Assets Recovery Agency-vs-Felista Nyamathira Njoroge & Another, Assets Recovery Agency -Vs-Lillian Wanja Muthoni Mbogo & Others, (2020) eKLR
  2. The applicant submitted that it has demonstrated that the funds held in the Respondent's account were illegitimately acquired and are proceeds of crime liable for forfeiture. The applicant relied on Director of Assets Recovery and Others, Republic vs Green & Others [2005] EWHC 3168, Section 92(1) of POCAMLA, Assets Recovery Agency -Vs- Joseph Wanjohi & 3 Others (2020) eKLR, Assets Recovery Agency-Vs-Rose Monyani Musanda & Others Civil Application No.2 of 2020, NDPP-Vs- Rebuzzi quoted in the case of Schabir Shaik & Others-vs-State Case CCT 86/06(2008) ZACC 7, Assets Recovery Agency-Vs-Quorandum Limited & 2 others [2018] eKLR
  3. The applicant submitted that the funds held in the Respondent's bank account being proceeds of crime and unlawfully acquired as demonstrated by the Applicant, are not protected by Article 40 of the Constitution. The applicant relied on Article 40(6) of the Constitution, Teckla Nandjila Lameck-Vs- President of Namibia 2012(1) NR 255(HC), Martin Shalli -Vs-Attorney General of Namibia High Court of Namibia case No: POCA 9/2011, and Assets Recovery Agency-Vs-James Thuita Nderitu & others, ACEC Civil Suit No 2 of 2019.
  4. The applicant submitted that the standard of proof in these proceedings is balance of probability, whether the funds held in the Respondent's bank account are proceeds of crime. And, that civil forfeiture is not affected by the fact that the respondent has not yet been charged, or by the outcome of any future criminal proceedings against the respondent. The applicant relied on Assets Recovery Agency -Vs-Quorandum Limited & 2 others [2018] eKLR, Section 92 (4) of POCAMLA, Director of Assets Recovery and Others, Republic -Vs-Green & Others [2005] EWHC 3168, and Teckla Nandjila Lameck -Vs-President of Namibia 2012(1) NR 255(HC)

The Respondent’s submissions.

  1. The respondent relied on the definition of proceeds of crime in, sections 2 and 58 of the Proceeds of Crime and Anti-Money Laundering Act, and Assets Recovery Agency vs. Pamela Aboo [2018] eKLR.
  2. The respondent submitted that it provided a reasonable explanation of the sources of the disputed funds as it was prequalified for the contract with the then REREC and it was approved and contracted by the REREC to install leave ways for 11V, he was paid for contracted works, which is lawful and legitimate. The respondent relied on Section 92(1) of the Proceeds of Crime and Anti-Money Laundering Act, Director of Assets Recovery and others vs Green & others [2005] EWHC 3168, Assets Recovery Agency Vs Pamela Aboo[2018] eKLR.
  3. The respondent submitted that the Respondent has demonstrated how he lawfully came into possession of the funds in its accounts thereby discharging its evidential burden. The respondent relied on section 81 of POCAMLA, Kanyungu Njogu Vs Daniel Kimani Maingi [2000] eKLR, Miller v. Minister of Pensions [1947] 2 All ER 372, Section 107 of the Evidence Act,  and Muriungi Kanoru Jeremiah vs Stephen Ungu M'mwarabua [2015] eKLR.
  4. The respondent submitted that the Applicant did not establish a link between the funds in the Respondent's accounts to illegal conduct and hence proceeds of crime within the meaning in the Proceeds of Crime and Anti-Money Laundering Act. The Respondent has been operating a lawful business as a contractor, he was prequalified and awarded tender with the then REREC, and the monies contained in the bank accounts were obtained from legitimate business/trading. The Respondent contends that it has justified to this court how he ended up with monies in the frozen account; it was out of merit at the prequalification stage of award of tender and a hard sweat payment for services rendered to the then REREC. The respondent relied on Abdulrahman Mahmoud Sheikh & 6 others v Republic & others

ANALYSIS AND DETERMINATION

  1. This court has considered the applicant’s affidavit in support of the application, the supplementary affidavits, the replying affidavits, and the respective parties’ submissions.
  2. Issues for determination;
  3. Whether the funds in the Respondents’ impugned accounts are proceeds of Crime liable to forfeiture to the Government of Kenya.

Proceeds of crime

  1. According to Section 2 of the POCAMLA, proceeds of crime:

‘…means any property or economic advantage derived or realized, directly or indirectly, as a result of or in connection with an offence irrespective of the identity of the offender, and includes, on a proportional basis, property into which any property derived or realized directly from the offence was later successively converted, transformed or intermingled, as well as income, capital or other economic gains or benefits derived or realized from such property from the time the offence was committed.’

  1. The definition of proceeds of crime is broadly cast in section 2 of POCAMLA, primarily; i) to navigate through the extremely complicated designs and webs created by criminal to conceal the illicit property; ii) to capture illicit property in whatever form, wherever and with whomever it may be situated; and ii) to enable disgorgement of the criminals-to give up any profits, gain or benefit made as a result of the illegal or wrongful conduct, thereby impoverishing the criminals as well as making crime unworthy venture, and therefore, unattractive.
  2. On this, see the case of Schabir Shaik & others v State case CCT 86/06 (2008) ZACC 7 that: -

“One of the reasons for the wide ambit of the definition of “proceeds of crime” is, as the Supreme Court of Appeal noted, that sophisticated criminals will seek to avid proceeds being confiscated by creating complex systems of camouflage”

The Supreme Court of Appeal held that a person who has benefited through the enrichment of a company as a result of a crime in which that person has an interest will have indirectly benefited from that crime.”

  1. In forfeiture proceedings, the applicant is not required to prove the commission of any specific criminal offence but must set out the matter that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained.
  2. Burden and standard of proof
  3. Civil forfeiture are civil proceedings to which, the rules of evidence that apply to civil proceedings apply.
  4. The standard of proof is on the balance of probabilities. This degree of proof was explained in the case of Miller vs Minister of Pensions [1947] 2 ALL ER 372 by Denning MR thus: -

“That degree is well settled.  It must carry a reasonable degree of probability, but not so high as is required in a criminal case.  If the evidence is such that the tribunal can say; “We think it more probable than not’, the burden is discharged, but, if the probabilities are equal, it is not.  thus, proof on a balance or preponderance of probabilities means a win, however narrow.  A draw is not enough.  So, in any case in which the tribunal cannot decide one way or the other which evidence to accept, where both parties’ explanations are equally (un)convincing, the party bearing the burden of proof will lost because the requisite standard will not have been attained.”

  1. The applicant bears the burden of proof- legal burden of proof and evidential burden. But, where preponderant evidence is adduced, evidential burden will shift to the party who would fail without further evidence. Evidential burden is the basis for the explanations required of a respondent in forfeiture proceedings. These explanations are commonly referred to as rebuttal evidence.
  2. See the case of Assets Recovery Agency vs Pamela Aboo:  EACC Interested party [2018] eKLR where the court stated: -

“63.   Forfeiture proceedings are Civil in nature and that is why the standard of proof is on a balance of probabilities. See section 92(1) of the Proceeds of Crime and Anti-Money Laundering Act. In the case of Director of Assets Recovery and Others, Republic vs Green & Others [2005] EWHC 3168 the court stated as follows:

“In civil proceedings for recovery under part 5 of the Act, the Director need not allege the commission of any specific criminal offence but must set out the matter that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained.”

The proceedings before this court are to determine the criminal origins of the property in issue and are not a criminal prosecution against the Respondent where presumption of innocence is applicable. In the case of ARA & Others vs Audrene Samantha Rowe & Others Civil Division claim No 2012 HCV 02120 the Court of Appeal stated:

“....that in deciding whether the matters alleged constituted unlawful conduct when a civil recovery order is being made is to be decided on a balance of probability. Civil recovery proceedings are directed at the seizure of property and not the convicting of any individual and thus there was no reason to apply the criminal standard of proof...” (Emphasis mine)

In the case of Assets Recovery Agency v Fisher Rohan and Miller Delores, Supreme Court of Jamaica, Claim No. 2007 HCV 003259 it was held:-

“……Even though these proceedings are quasi-criminal in nature there is an evidential burden of proof on the Defendant.  It is incumbent on them to demonstrate evidentially how they lawfully came into possession of the assets seized.”

  1. See also the case of Stanley Mombo Amuti v Kenya Anti-Corruption Commission [2019] eKLR where the Court of Appeal discussed explanations to rebut albeit it was in regard to the Anti-Corruption & Economic Crimes Act which has more or less similar provisions: -

“79.   Under Section 55(2) of ACECA, the theme in evidentiary burden in relation to unexplained assets is prove it or lose it.  in other words, an individual has the evidentiary burden to offer satisfactory explanation for legitimate acquisition of the asset or forfeit such asset.  the cornerstone for forfeiture proceedings of unexplained assets is having assets disproportionate to a known legitimate course of income.   tied to this is the inability of an individual to satisfactorily explain the disproportionate assets. A forfeiture order under ACECA is brought against unexplained assets which is tainted property; if legitimate acquisition of such property is not satisfactorily explained, such tainted property risk categorization as property that has been unlawfully acquired. The requirement to explain assets is not a requirement for one to explain his innocence. The presumption of innocence is a fundamental right that cannot be displaced through a Notice to explain how assets have been acquired”

  1. Thus, where the evidential burden shifts to, the Respondent is expected to explain the source of the funds lest he should fail; and the explanations may also be sought on the basis that such evidence is within the special knowledge of the respondent. (See Sections 109 and 112 of the Evidence Act.)

Applying the test…

  1. It is not in dispute that between January 2022 and June 2022, a total of Ksh 430,000,000. The applicant, through investigations, proved that the payments were fraudulently made to the respondent and two other business entities namely; Universal Land Services and Theodore Surveys from REREC. The Applicant established that Mr. Robinson Murithi Ndwiga is the owner and operates the three business entities namely; the respondent, Universal Land Services, and Theodore Surveys.
  2. The fraudulent payments of Ksh 430,000,000 paid to the respondent and the two business entities were revealed through the audit report dated 20th July 2022 prepared by Mr. Hassan Yusuf Suleiman, the General Manager Internal Audit of REREC. The audit report also revealed the respective amounts the respondent and the two business entities received. The fraudulent payments made to the Respondent and the two business entities were below 10 million that is between Ksh7.6 million and 9.8 Million and this was structured deliberately to avoid surpassing 10 million which would require approval from a higher management level at REREC. These pieces of evidence were not controverted whatsoever. The respondent did not tendered any evidence to controvert the foregoing facts and evidence.
  3. The Applicant established from Mr. Hassan Yusuf Suleiman, the General Manager Internal Audit of REREC that the payments to the Respondent, Universal Land Services, and Theodore Survey were paid using projects not in their System Application Programme, and the payments were charged to old completed projects. The Applicant also demonstrated vide the statement of the Chairperson of REREC's Board, Ms. Wacuka Wanjiku Ikua who stated that the fictitious payments were made using power distribution projects that did not exist and the fraudulent payments were made by officers from the Finance Department in REREC. There was no evidence to disprove these findings. The respondent did not also tendered any evidence to controvert the foregoing facts and evidence.
  4. The Applicant has further demonstrated vide the statement of the Manager Supply Chain Management of REREC, Mr. Wilfred Ouma Oduor who stated that the Respondent was only prequalified in 2009 in tender ref; REA1/1PRQ/027 for survey services and was never prequalified again after that period rendering it difficult to conduct business with REREC or receive payments after that period.
  5. The technician at REREC, Mr. Collins Chakali Mukwana disputed and denied appending his signatures in the Survey certificates of Completion which was part of the payment vouchers paid to the respondent. He also stated that the signatures appended on the Survey certificates of Completion were forged.
  6. The Applicant also established from Mr. Symon Mbaria Ndirangu, the senior engineer at REREC who in his statement disputed and denied the signature appended on the Survey certificates of completion attached to the payment vouchers paid to the respondent and he affirmed that his signature was forged.
  7. The Respondent has not presented any evidence to controvert the statements of Mr.Wilfred Ouma Oduor, the Manager of Supply Chain Management at REREC, Mr. Collins Chakali Mukwana, the technician at REREC, and Mr. Symon Mbaria Ndirangu, the senior engineer at REREC or any statements of the employees at REREC.
  8. The Applicant has further demonstrated in paragraph 22 of the supporting affidavit sworn by the investigating officer, Mr. Alfred Musalia, in support of the originating motion herein that the respondent received fraudulent payments of Ksh 98,211,725between January 2022 and April 2022. The investigations traced Ksh 13,867,254.24 as the only balance traced in the account, out of the Ksh 98,211,725 received in the respondent's account. The respondent has not denied receiving the said fraudulent payments from REREC or tendered any evidence to controvert the same.
  9. With respect to the other two business entities namely; Universal Land Services and Theodore Surveys, the applicant found nothing in their respective bank accounts and only traced a small amount of Ksh 53.95 in Universal Land Services' bank account and Ksh 699.39 in Theodore Surveys' bank account, both accounts held at Equity bank. They stated that, the aforesaid amounts are paltry compared to the total Ksh 430,000,000 million received in the respondent and the two business entities' bank accounts.
  10. The applicant contends that Mr. Robison Murithi Ndwiga came to the Applicant's office, recorded his statement, and admitted to own and operate the three business entities namely the Respondent, Universal Land Services, and Theodore Surveys. The said Mr.Robison also provided copies of notification of awards letters for the three business entities purporting that they were prequalified for surveys and wayleave contractors for the design and construction of 11KV and 33KV. He also alleged that the said notification of award letters was issued and signed by Mr. Ng'ang'a Munyu, the former CEO of REREC, and the current CEO of REREC Mr.Peter K. Mbugua.
  11. The Applicant controverted the aforesaid evidence and demonstrated in the supplementary affidavit dated 18th July 2023 that the former CEO of REREC, Mr.Ng'ang'a Munyu, and the current CEO of REREC Mr. Peter K. Mbugua who were alleged to have signed the notification of awards letters presented by Mr.Robinson, disputed and denied signing the notification of awards letters. They also stated that the notification of awards letters did not exist in their records.
  12. The fraudulent payments to the Respondent, Universal Land Services, and Theodore Surveys by employees of REREC, resulted in summary dismissal of five employees of REREC.
  13. The Applicant has proved on a balance of probabilities that the funds in issue held in the Respondent's account were obtained from the fraudulent payments to the Respondent and two other business entities on fictitious projects. Therefore, are therefore proceeds of crime liable to forfeiture. So the court finds.
  14. Before concluding, these payments involved huge sums of money paid on non-existent or fictitious projects by unscrupulous employees of REREC to gullible persons. It is suffocating and distressing that such shameless theft of public funds continues in Kenya. It is the view of the court that, asset recovery practitioners and agencies should not restrict themselves to only money in the bank accounts. In forfeiture, the court may issue a personal judgment against the respondent to be executed upon any property of the respondent: or against any person including third parties to whom the proceeds of crime are traced; the original asset or traceable product (the asset to which the illicit asset is converted into or exchanged for or invested into etc. which in law stands in place of the original stolen asset) through evidential process or tool of tracing of assets. The basis of the latter is the doctrine of unjust enrichment and the legal obligation to restitute illicit property. It is painful that a paltry sum of Kshs. 18 million is being recovered out of a stolen sum of Kshs. 430,000,000.

Conclusions and orders

  1. The applicant has proved on a balance of probabilities that the payments made to the respondent were made fraudulently on fictitious projects, and therefore, proceeds of crime. It was utter theft of public funds.
  2. Consequently, this court finds that Kshs.13,867,254.28 held in the Respondent's bank account held at Equity Bank Kenyatta Avenue are proceeds of crime as defined in Section 2 of the Proceeds of Crime and Anti-Money Laundering Act.
  3. Accordingly, a finding that the funds held in the Respondent's bank are proceeds of crime and unlawfully acquired, is made within the framework in article 40(6), thus, are not protected by Article 40 of the Constitution.
  4. Similarly, a forfeiture order made under section 92 of POCAMLA should therefore, be understood and seen within the framework of article 40(6) of the Constitution. Thus, property rights’ claim by the respondent falls flat.
  5. In the upshot, the application dated 21/03/2023 succeeds. The court enters judgment for the applicant against the Respondents as follows: -
  6. That in accordance with section 92 of POCAMLA, the sum of Kshs.13,867,254.28 held in the Respondent's bank account at Equity Bank Kenyatta Avenue being proceeds of crime, are hereby forfeited to the State.
  7. That the funds in the said accounts shall be transferred to the applicant.
  8. That the Respondents shall bear the costs of this Originating Motion.
  9. Orders accordingly.

Dated, signed and delivered at Narok through Microsoft Teams online application this 15th day of July, 2024

-----------------------------

F. Gikonyo M.

Judge

In the presence of: -

Ms. Kamanja for respondent

Ms. Muciri for applicant

Raymond C/A