Diamond claims saga: Judge erred

AS part of our investigative series on the Marange diamond mining activities — which were characterised by shady dealings and looting — the Zimbabwe Independent commissioned a veteran lawyer with a wealthy of experience to write about the legal background to the issue. The article will be published in installments over a number of weeks to provide context and perspective on the investigation. The investigation will be running for months since we began in December last year.

By Legal Correspondent.

When ACR was removed from Marange, the diamond fields were swamped by multitudes of illegal miners.

When ACR was removed from Marange, the diamond fields were swamped by multitudes of illegal miners.

Before mining officially started in Marange, there was a fierce court battle between government and the African Consolidated Resources (ACR), a local firm which owned the Chiadzwa diamond claims after South African global mining giant, the De Beers Group — the world’s leading diamond company — had moved out following the expiry of its exploration permit.

ACR, listed on the London Stock Exchange’s Alternative Investment Market for smaller and growing companies, laid claim to the concession, but government fought hard to seize it away through the courts.

High Court Justice Charles Hungwe on September 6 2010 handed down a judgment in which he set aside his initial ruling of September 24 2009 in HC6411/07. This gave government a momentous victory which opened the way for the start of formal diamond mining at Chidzwa and the beginning of a dramatic story.

Hungwe ruled ACR had concealed important information in the September 2009 case, as it did not disclose that its subsidiaries were not yet registered at the time it secured the mining rights.

“Only a person can be granted a prospecting licence. Since none (of the subsidiaries) was incorporated, there was no person to release a certificate of mining,” Hungwe said, further ruling that ACR’s subsidiaries were guilty of fraud through misrepresentation.

Hungwe also ruled the Marange area had been reserved by government against prospecting at the time that ACR sought the mining claims, something which he claimed was displayed on the mining commissioners’ notice boards.

As a result, the government seized ACR’s diamond fields in October 2006 and allocated them to the state-owned Zimbabwe Mining Development Corporation. The seizure, backed by Zimbabwe’s security forces, took place amid chaos as thousands of illegal miners had descended on Marange in Kimberley-style fortune-hunting missions.

De Beers had an Exclusive Prospecting Order (EPO) which covered a large area in Manicaland province. It was issued in 2002 for a two-year period and extended in 2004 for a further two-year period. The EPO was due to expire on March 25 2006 and De Beers had applied for an extension.

However, the Mining Affairs Board did not hold its meeting in February that year and so it could not recommend the extension of the EPO. Consequently, the EPO expired. ACR sent some geologists to the Marange area and they pegged claims which were registered in the names of four shelf companies which the firm had purchased from Paracor.

When ACR wanted to start fencing the claims Amos Midzi, the then Minister of Mines, who is now late, told the police that ACR should be kicked out because he intended to extend the EPO. He then told the assistant mining commissioner in Mutare to cancel the registration of the claims.

The assistant mining commissioner wrote to ACR, saying that he had cancelled the claims because the minister had instructed him to do so. ACR filed an application in the High Court applying for an order to set aside the cancellations. At the hearing, the representative of the Attorney-General (AG) admitted that he had no grounds for arguing that the cancellation was valid.

Hungwe handed down his judgment ordering that ACR was the valid holder of the claims because the minister could only extend the EPO on the recommendation of the Mining Affairs Board. The new Minister of Mines Obert Mpofu asked him to note an appeal. The AG did so and renounced agency because he could not support the appeal.

A few years later Mpofu asked Hungwe how he could get him to rescind his judgment because ACR had fraudulently withheld information from him in order to obtain a favourable judgment.

Hungwe told the minister that he should apply for directions in terms of Rule 4C of High Court Rules. ACR argued that the judge could not issue a direction since the matter was not before him, as it was on appeal before the Supreme Court.

However, Hungwe issued a direction to the minister that he make an application in terms of Rule 449. Hungwe admitted that “strictly speaking”, the matter was not before him but, in the interests of finality of litigation, he would issue a direction. He also directed the registrar to refer the application papers from Mpofu to him.

Rule 449 stipulates three specific grounds under which a party can apply for rescission. These grounds extend the judge’s common law powers of review. After directing that the application be made under Rule 449, and notwithstanding the fact that he had already declared himself functus officio, the judge proceeded to hear the matter as if it was a common law application alleging fraudulent non-disclosure of “facts” at the original hearing.

As he had issued directions, Mpofu had to file an application under Rule 449. If the minister did not he would be in contempt of court. In view of the significant and substantial disputes of fact which clearly existed, this matter (if indeed it was properly before the court) should have been brought by way of an action, where the evidence could be heard and tested in open court. It was grossly improper for the judge to make a decision on the papers. In effect, he merely accepted Mpofu’s affidavits and rejected ACR’s papers with no cogent reason for doing so.

In his application Mpofu alleged that ACR had fraudulently failed to inform Hungwe that the four shelf companies in whose names the mining claims were registered had not been incorporated at the time of registration; the mining claims fell within the boundaries of a Reserved Area (RA) 1518.

The allegation that RA1518 covered the Marange area where the claims were registered has been strenuously and consistently denied by ACR, both in the papers before Hungwe and in other related litigation.
Not least of the reasons for doubting its existence is that the assistant mining commissioner Mutare registered the claims at the time — an inexplicable “error” if the RA, which they themselves were tasked to administer, covered the area in which the claims were situated.

Even the minister (and all his senior officials) appear to have been “unaware” of the supposed fact that RA1518 covered the claims area, right up to and subsequent to the original hearing. This supposed “fact” was mysteriously discovered only in early 2010, leading to a second abortive “cancellation” of the claims by the assistant mining commissioner of Mutare.

Even if RA1518 had covered the claims area at the time, the judge erred in finding that pegging in an RA is ipso facto void. Section 50 of the Mines and Minerals Act gives the mining commissioner a discretion as to whether or not he or she should cancel claims pegged in the RA, thereby making it clear that such pegging and resultant registration of claims, is valid until and unless cancelled under the Act.
When ACR was removed from the claims, the mining commissioners in Harare and Mutare visited the Marange area and saw the multitude of panners. They agreed that when Chimanimani was swamped with gold panners the problem had been solved by the mining commissioner Harare declaring the area to be an RA1518. Since that meant that no one could prospect or mine in the area, the army could be called in to evict them.

The mining commissioners agreed to recommend to the chief mining commissioner to extend the boundaries to include Marange. The chief mining commissioner accepted the recommendation and the boundaries of RA1518 were duly extended.
In terms of the Mines and Minerals Act, when an RA is declared the mining commissioner must publish a notice in the Government Gazette declaring the boundaries thereof and the RA must be demarcated.

However, no notice was published when RA1518 was declared nor was one published when the area was extended. The area was also not demarcated. As the provisions of the Act were not complied with, the legality of the RA is very dubious.

No evidence was produced before Hungwe as to the notice issued by the mining commissioner Harare, declaring boundaries of RA1518 or the notice extending RA1518 or of the boundaries of the extension.

In any event, the judge erroneously, and despite relevant case law (Robinson v Trojan Nickel Mine 1970 (4) SALR 555), ignored the provisions of Section 58 of the Mining Act, which states: “When a mining location or a secondary reef in a mining location has been registered for a period of two years it shall not be competent for any person to dispute the title in respect of such location or reef on the ground that the pegging of such location or reef was invalid or illegal or that provisions of this Act were not complied with prior to the issue of the certificate of registration.”

Hungwe appears to have failed to appreciate that Section 58 is an absolute bar to the minister’s challenge, even had there been any substance to his allegations regarding the non-incorporated companies and RA1518, which of course, there was not.

Hungwe surprisingly appears to have adopted the minister’s skewed and unsubstantiated allegations of fraud on the part of ACR, despite the fact that the elements of fraud were clearly not presented.

There are numerous other strange anomalies and unusual features, two of which stand out: for no apparent reason, and entirely mero motu, he attacked the probity and “aptitude” of the officers of the civil division of the AG’s Office — having first agreed that concessions had properly been made by them at the original hearing; the final printed copy of the rescission judgment differs markedly from the judgment read out in open court by the judge, (and captured in the original copy transcribed from the tapes).

In the judgment read out in open court, no mention was made of any fraud relating to the registration of the claims in the names of companies which had not been incorporated. However, in the final printed copy of the judgment, there was an additional page inserted in which the alleged fraud was stated.

Hungwe ruled that Section 2 of the Mines and Mineral Act provides that rights to minerals vest in the president and he holds them on behalf of the people of Zimbabwe. The people are entitled to know who registers mining claims and, if the companies are not incorporated, they would be misled. This is a previously unknown phenomenon and unfortunately suggests an ex post facto attempt to bolster the original judgment.

The appeal noted by ACR against the judgment of Hungwe should be followed up. The basis of the appeal would be that the judge legally erred in deciding that he could issue a direction to the minister.

The matter was not before him, it was before the Supreme Court because an appeal had been noted. If ACR (now Vast Resources) sets the appeal down for hearing the minister could decide not to oppose the application. Once the judgment is set aside, it would mean that Hungwe’s initial judgment would be reinstated.

That would mean that the various mining claims that ACR registered in the names of the four shelf companies would be retained. The result would be that all the mining claims in the Marange area that the ZMDC had been mining on with joint venture partners ceased to exist. The Mines ministry could not be penalised for issuing the mining claims. It had acted in accordance with Hungwe’s judgment. Once that judgment is set aside, the ministry must act in accordance with the initial judgment and respect that the mining claims belong to ACR.

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