The plaintiff and defendant were joined in holy matrimony in terms of the Marriages Act [Chapter 5:11] on 8 January 1988 at Harare. Their marriage subsists.

Their marriage was blessed with two children who are now adults.

During the subsistence of the marriage they acquired both movable and immovable properties.

After many years of marriage, some irreconcilable differences arose which led to the plaintiff filing for divorce and other ancillary relief against the defendant. The plaintiff alleged that the marriage relationship has irretrievably broken down to such an extent, that, there are no prospects of restoration of a normal marriage relationship in that:

(a) The parties do not have any meaningful communication resulting in each party living his/her own life.

(b) The plaintiff has lost love for the defendant.

(c) There is disharmony, distrust, and disrespect between the parties, and, as a result, there is no peace between the parties.

At the time of issuance of the summons, the children were still minors and so the plaintiff had asked to be granted custody of the minor children.

On immovable property, she asked for a 50% share in the matrimonial house; namely, 18 Normanton Close, Marlborough, Harare. She provided what she deemed an equitable distribution of the movable property.

The defendant initially contended, that, the marriage had not irretrievably broken down; he envisaged it could be salvaged.

He also made a counter claim in which he claimed custody of the minor children, and that the immovable property, 18 Normanton Close, be donated to the children of the marriage.

He later amended his claim to include that, in the alternative, he be declared the sole and absolute owner of Number 18 Normanton Close, Marlborough, Harare. This amendment came about because the plaintiff had categorically rejected the suggestion that the property be donated to the children.

At a pre-trial conference held on 13 September 2005, most of the issues were resolved. The major issue referred to trial pertained to the distribution of the immovable property.

On the date of trial, all issues, except on the immovable property, were confirmed as having been settled.

The two children were now adults and so any issue relating to children was no longer sustainable.

The parties had distributed the movable assets in terms of a document they tendered as exhibit 3.

Both had finally accepted that the marriage has irretrievably broken down.

The parties could not settle on the immovable property due to the fact, that, apart from the Marlborough house, the plaintiff had also bought Number 60 Garlands Ride, Mt Pleasant during the subsistence of the marriage.

They could not agree on how to treat that property.

The defendant wanted it to be considered in the division, apportionment, and distribution of the assets of the spouses whilst the plaintiff contended that it should not be considered as it was registered in the name of a company whose shareholding was 100% held by Garlands Trust.

The plaintiff gave evidence after which the defendant gave evidence.

From the evidence adduced, it is common cause that both parties had contributed financially to the purchase of the Marlborough house. That property is registered in their joint names and so joint ownership is not disputed.

It is common cause, that, after living in the Marlborough house for some time the couple moved to Number 60 Garland Ride, Mt Pleasant in 1993 which the plaintiff had bought that same year.

They have since been living in that house serve for a period of two years when they moved back to the Marlborough house.

The Mt Pleasant property was bought by the plaintiff and is registered in the name of a company, Linford Investment (Pvt) Ltd.

It is common cause that the couple lived in that property rent free.

The plaintiff's argument was to the effect, that, as the Mt Pleasant property was registered in the name of a company it should not be considered as matrimonial property. In any case, she is not a shareholder in that company. The entire shareholding is held by a trust - Garlands Trust of which she is one of the three Trustees. She formed that Trust for the benefit of the children, her parents, and her sister.

The plaintiff indicated that she and her daughter, Chiedza, were the directors in Linford Investment (Pvt) Ltd.

The plaintiff confirmed, that, she was the accounting officer of the company and that for all intents and purposes she controls the assets of Linford Investment (Pvt) Ltd. She is the one with the power to make decisions concerning the company. She does the annual returns which are then signed by herself and Chiedza.

It was clear that the plaintiff did not want this property considered in anyway in the distribution of assets of the spouses.

She contended, that, the only immovable property for sharing is the Marlborough house which she insisted must be shared equally.

On his part, the defendant contended, that, the Mt Pleasant house must be considered in the apportionment and distribution of the property. It is a property that was acquired during the subsistence of the marriage and the plaintiff still stands to gain from it by living in it rent-free.

Though registered in the name of a company, it is, for all intents and purposes, the plaintiff's property.

The division of assets, consequent to a divorce, is governed by section 7 of the Matrimonial Causes Act [Chapter 5:13] (herein after referred to as “the Act”).

Section 7(1)(a) of the Matrimonial Causes Act states that:

“Subject to this section, in granting a decree of divorce, judicial separation, or nullity of marriage, or at any time thereafter, an appropriate court may make an order with regard to -

(a) The division, apportionment, or distribution of the assets of the spouses, including an order that any asset be transferred from one spouse to the other;”

Subsection (4) of section 7 of the Matrimonial Causes Act then enjoins the appropriate court to consider all the circumstances of the case in the exercise of its discretion in this regard by stating that:-

“In making an order in terms of subsection (1), an appropriate court shall have regard to all the circumstances of the case including the following -

(a) The income-earning capacity, assets, and other financial resources which each spouse and child has or is likely to have in the foreseeable future;

(b) The financial needs, obligations, and responsibilities which each spouse and child has or is likely to have in the foreseeable future;

(c) The standard of living of the family, including the manner in which any child was being educated or trained or is expected to be educated or trained;

(d) The age and physical and mental condition of each spouse and child;

(e) The direct or indirect contribution by each spouse to the family, including contributions made by looking after the house and caring for the family and any other domestic duties;

(f) The value to either of the spouses or to any child of any benefit, including a pension or gratuity, which such spouse or child will lose as a result of the dissolution of the marriage;

(g) The duration of the marriage;

and, in so doing, the court shall endeavour, as far as is reasonable and practicable, and, having regard to their conduct, is just to do so, to place the spouses and the children in the position they would have been in had a normal marriage relationship continued between the spouses.”

As aptly noted by MALABA JA in Gonye v Gonye 2009 (1) ZLR 232…,:

“It is important to note, that, a court has an extremely wide discretion to exercise regarding the granting of an order for the division, apportionment, or distribution of the assets of the spouses in divorce proceedings.

Section 7(1) of the Act provides that the court may make an order with regard to the division, apportionment, or distribution of 'assets of the spouses' including an order that any asset be transferred from one spouse to the other.'

The rights claimed by the spouses, under s7(1) of the Act, are dependent upon the exercise by the court of broad discretion…,.

The terms used are the 'assets of the spouses' and not matrimonial property.

It is important to bear in mind the concept used, because the adoption of the concept 'matrimonial property' often leads to the erroneous view that assets acquired by one spouse before marriage or when the parties are separated should be excluded from the division, apportionment, or distribution exercise.

The concept 'assets of the spouses' is clearly intended to have assets owned by the spouses individually (his or hers) or jointly (theirs) at the time of the dissolution of the marriage by the court considered when an order is made with regards to the division, apportionment, or distribution of such assets.”

The wide discretion must of course be exercised judicially taking into account the circumstances of each case. The object of the exercise must be to place the spouses in the position they would have been in had a normal marriage relationship continued between them.

In an effort to achieve this object, the court has demanded of spouses to be candid with the court in respect of their assets individually and jointly.

The question, in the instant case, is whether the Mt Pleasant house should be considered in assessing a fair and equitable manner in the division, apportionment, and distribution of assets of the spouses.

The plaintiff says it must not be considered because it is owned by a company. The defendant says it must be considered, as, for all intents and purposes, it is the plaintiff's property, or, at least, it is for her benefit.

It is important to examine the relationship between the plaintiff and the company in question.

In Sibanda & Anor v Sibanda 2005 (1) ZLR 97 (S), when the marriage failed, the wife obtained a decree of nullity. The parties were possessed of nine immovable properties, as well as numerous vehicles. Apart from one property and one car, all the property, movable and immovable, including the matrimonial home, was registered in the name of one or other company or nominee of the appellant. The directors of those companies were the appellant's parents and one of his girlfriends – but, the sole signatory on the various bank accounts was the appellant, who controlled all the companies. The trial judge awarded the wife a house which was registered in the name of one of the companies. That house had been the matrimonial home for ten years before the marriage was annulled. The husband contended, that, as the house was owned by a company wholly owned by the appellant, it did not constitute matrimonial property which fell to be divided in terms of the Matrimonial Causes Act.

The Supreme Court, at p103E-F, whilst acknowledging the fact that a company duly incorporated is indeed a distinct legal entity endowed with its own legal personality went on to state that:

“However, the veil of incorporation may be lifted, where necessary, in order to prove who determines or who is responsible for the activities, decisions, and control of a company.”

Upon finding that the appellant was the one who controlled the company, the court of appeal dismissed the appeal.

In Mangwendeza v Mangwendeza 2007 (1) ZLR 216 (H) NDOU J followed the above reasoning and considered property registered in the name of a company in the division, apportionment, and distribution of assets of the spouses.

Equally, in Gonye v Gonye 2009 (1) ZLR 232 …, the Supreme Court held that:

“Where the issue arises of whether the property rights, a proportion of the value of which is claimed by the one of the spouses, in reality lay with the other spouse or a company run by him, it is permissible to 'lift the corporate veil' in order that justice could be done in the apportionment of the assets in terms of s7(1) of the Act. Where the company can be said to be the spouse's alter ego, the company's assets and proceeds can be said to be the spouse's and thus can be subject of an order under s7(1).”

It is apparent that a primary consideration is on the relationship between the person seeking to distance the assets and the company or entity in whose name the property may be registered.

In casu, the plaintiff said that, in about 1993, she bought the house in question by buying shares in the company that previously owned the house. In 1992 she had created a Trust in which she is one of the three Trustees. She said the Trust is for the benefit of the couple's children, her parents, and her sister. The other trustees are apparently people of her choice. The directors of the company, herself and Chiedza, were apparently out of her choice as well.

As already alluded to above, it is common cause that the plaintiff has been the accounting officer for the company since its inception. She will continue to be so. There is no denying that she is the one in total control of the company. From her own evidence, it is clear, that, she is the one who has been and will continue to make decisions for the company. Other persons mentioned, even as Trustees, appear to be her nominees.

It is common cause, that, since the family started living at 60 Garland Ride, they have not been paying rent. The family has been living rent-free. The plaintiff will continue to live in the house in question rent free for as long as she desires.

Apparently, no one has the power to deny her of this.

It is my view, that, all this points to the fact that the plaintiff has more interests in the house in question than she would like the court to believe. The property is virtually hers as she has the mandate to do as she pleases with it.

In the circumstances, I am of the view, that, the property ought to be considered in the division, apportionment, and distribution of assets of the spouses.

The defendant's claim is not for a share in the Mt Pleasant house but that it be considered in determining his claim for an award of the Marlborough house since he needs a roof over his head. The plaintiff will have the Mt Pleasant house.

Taking into account the object of section 7(4) of the Matrimonial Causes Act, particularly the need to place the spouses in the position they would have been in had a normal marriage relationship continued, it is clear that each party would have remained entitled to live in the Mt Pleasant house rent-free at the determination of the plaintiff. The defendant would not be without a roof over his head.

It is only fair that whatever apportionment or distribution is done does not burden the defendant so much that he is left without accommodation.

Mention was made that the defendant has a farm which he can use.

Unfortunately, not much was said about this farm save to say it is far away and the defendant would not be able to commute thereto and from on a daily basis in order to run his business. Not much was said on the suitability of the accommodation at this farm for a husband who had been used to living in the Mt Pleasant house.

In deciding on the issue of how much to award the defendant as his share of the Marlborough house, I will also consider the fact, that, whilst in the Marlborough house, both parties contributed in its purchase; in the Mt Pleasant house, the defendant did not make a direct contribution towards its purchase.

The Marlborough house is registered in the joint names of the parties whilst the Mt Pleasant house is not.

Registration in joint names is prima facie proof of a 50:50 ownership in the property.

The question to be answered is whether the justice of the case requires that a spouse's share be awarded to the other, if so, how much of that share?

After a careful assessment of the parties contributions, needs, and other factors, as detailed in section 7(4) of the Matrimonial Causes Act, I am of the view this is a case where a part of the plaintiff's share should be transferred to the defendant to achieve a just and equitable distribution of the assets of the spouses. A deduction of 15% would, in my view, be appropriate in the circumstances. I thus conclude, that, the defendant deserves a 65% share in the Marlborough house and the plaintiff a 35% share.

The defendant will be granted the option to buy out the plaintiff's share within 120 days.

Accordingly, it is hereby ordered that:

1....,. 

2. The movable property be distributed in terms of exhibit 3, with the plaintiff being awarded items under annexure A and the defendant items under annexure B. The document, as agreed by the parties, is hereby attached as part of this order.

3. The plaintiff is hereby awarded a 35% share in the immovable property, namely, No.18 Normanton Close, Marlborough, Harare, also known as Stand 728 of Stand 558A Marlborough Township, Harare.

4. The parties shall agree on the value of the property within 14 days of the date of this order failing which they shall appoint a mutually agreed evaluator to evaluate the property within 30 days of the date of this order.

5. Should the parties fail to agree on an evaluator, the Registrar of the High Court shall be and is hereby directed to appoint one from his list of independent evaluators to evaluate the property.

6. The parties shall share the cost of evaluation in the ratio 35:65 (as per their shares in the property). The defendant shall pay off the plaintiff her share within 120 days from the date of evaluation unless the parties agree on a longer period.

7. Should the defendant fail to pay or to make a payment plan acceptable to the plaintiff within the period stipulated in (6) above, the property shall be sold to best advantage by a mutually agreed estate agent or one appointed by the Registrar of the High Court and the net proceeds therefore shall be shared as per their respective shares in the property.

8. Each party shall bear their own costs of suit.

Through her declaration, the plaintiff expressed the desire to be awarded a..., 25% share of the value of the Flat, namely, Stand number 585 Bulawayo Township (Share 102 thereof)....,.

It is clear to the court that the defendant barricaded himself behind the corporate veil to register the Flat in the name of Josro Enterprises (Pvt) Ltd and so were the motor vehicles.

It was particularly interesting to note that whereas the defendant tried to convince the court that his late mother was the source of the funds that purchased the flat, he was unable to tell how much was raised by his mother for the purposes of that purchase. He could hardly remember how much his mother had in the form of a retirement package.

Other than alleging it was a mistake, the defendant could not explain why, if the Flat was purchased by his mother, the Agreement of Sale reflected Josro Enterprises (Pvt) Ltd as the purchaser of the Flat.

There were other unconvincing aspects about the circumstances surrounding the acquisition of this Flat. The defendant was unable to explain, to the satisfaction of the court, why, six years after the death of his mother, the flat continued to be registered in her name.

It was also not made clear why it became necessary for Josro Enterprises (Pvt) Ltd to make a donation of the same flat to the defendant's mother after which the mother drew up a Will allocating the same flat to the defendant.

In the court's view, all these factors, taken cumulatively, demonstrated the defendant's stout effort to hide behind the corporate veil. All these efforts by the defendant were contrived to conceal the fact that all these assets are clearly matrimonial property. ...,.

In the final analysis, the court could not fail to see the corporate mischief of the defendant.

The law is clear on those who try to hide behind the corporate veil. The case of Cattle Breeders (Pvt) Ltd v Veldman 1974 (1) SA 169…, immediately comes to mind.

In that case, in an application by a company, of which the respondent's husband was the sole shareholder and the Managing Director, the company sought to eject the wife and children from the dwelling house on a farm leased by the company, which house had been regarded as the family's matrimonial house. The court a quo dismissed the application. On appeal, BEADLE CJ…, did not hesitate to lift the corporate veil to unmask what the husband was up to. It was held that the company was nothing more than the husband's alter ego.

See also the case of Wamambo v Wamambo HB03-92 and In re Budle Pres Ltd 1961 CH.D.270.

In casu, the unilateral and fraudulent de-registration of Ronoe Enterprises (Pvt) Ltd and the subsequent registration of Josro Enterprises (Pvt) Ltd was designed to hide the parties' matrimonial assets.

I hold the view that the Flat was part of the joint matrimonial property and require to be distributed and apportioned between the parties.

What remains in contention is 66 Seke Road, where the plaintiff is involved in the business of manufacturing cement bricks. This was the business that was incorporated in 1988.

The plaintiff's contention is that this was not a family business as he formed it in partnership with the late Steven Madovi after he and the defendant separated. On the other hand, the defendant's contention is that the business evolved from Shambidzo Investments.

In his written submissions, counsel for the plaintiff contended that the assets owned by Selfast Industries (Private) Limited are separated from the plaintiff. He further contended that it cannot be said that the plaintiff is the alter ego of the company as he was co-director together with the late Steven Madovi. What cannot be denied is that if the Caledon Avenue business was distributed to the late Steven Madovi's spouses the plaintiff remained in sole control of the 66 Seke Road business. The plaintiff did not lead any evidence to show the nature of the shareholding since the death of Steven Madovi, or, alternatively, to show that additional directors were appointed. In fact, he admitted during cross-examination that he remained in control of the brick-making business.

Counsel for the defendant cited the case of Masiyiwa Cleopas Gonye v Stella Mavis Gonye SC15-09 in support of the contention that it is necessary to pierce the corporate veil in order to do justice to the matter. In that case, the appellant formed a company in which he and the respondent, and two sons, were the shareholders. The respondent did not play any active role in the management of the company's affairs. In dismissing the appeal, MALABA JA..., said, for all practical purposes the company was a one-man company in which the appellant was the sole active director.  The share held by the respondent was not an income-generating asset. The learned Judge of Appeal went on to say..., - 

“Stripped of the corporate veil, the proceeds from the farming operations belonged to the appellant. The company was nothing more than the appellant's alter ego. It had no greater right to the money than he possessed.”

In the present matter, I would therefore hold that the defendant is entitled to a share in Selfast Industries (Private) Limited.

However, in making the award, I will take into account that the business was formed after the parties had separated, and that the defendant did not make any contribution. Had a normal marriage relationship continued, she would have benefitted from the business. However, taking into account that she is going to be awarded the bulk of the immovable properties I will only award her fifteen percent of the share.

Accordingly it is ordered as follows -

1. That a decree for divorce be and is hereby ordered.

2. That the plaintiff be awarded Lot 3 of Lot 99 Block C of Hatfield as his sole property.

3. That the plaintiff is awarded 85% of Selfast Industries (Private) Limited trading as Mega Bricks.

4. That within two months of the granting of this order the plaintiff shall transfer his 50% in the following properties; Lot 1 of Lot 75 Chisipite Township of Chisipite also known as Number 9 Harare Drive, Chisipite; Stand Number 3471 Warren Park Township of Stand 2372 Warren Park Township of Warren Park; Stand Number 11817 (9809) also known as Number 16 Maruta Crescent, Beatrice Cottages, Mbare, to the defendant.

5. That the plaintiff shall, within two months of the granting of this order, pay the defendant 15% of the value of Selfast Industries (Private) Limited trading as Mega Bricks.

6. ....,.

7. ...,.

The second and third defendants are husband and wife and the only Directors of the first defendant.

The plaintiff has prayed, as against the two, for an order lifting the corporate veil and for judgment against them jointly and severally with the first defendant, on the basis that they cannot be divorced from the latter.

The first defendant was incorporated as a company in 2006 and commenced operations in full in 2007. When the contract, which is the subject matter of this dispute, was concluded the first defendant had been operational for just a year. The second and third defendants, who are husband and wife are the only Directors of the first defendant.

The second defendant indicated to the court that he is, in fact, the alter ego of the first defendant.

The plaintiff averred, in its declaration, that the second and third defendants, where the contract with the plaintiff was concerned, had, instead of ensuring that due compliance by the first defendant of its obligations to the plaintiff, wrongfully, unlawfully and fraudulently diverted funds paid by the plaintiff in terms of the Agreement for their own purposes.

Counsel for the defendants, in his submissions at the close of the trial, did not seek to address the question of whether or not the corporate veil should be lifted as prayed for by the plaintiff. He, in fact, conceded that the second defendant was the alter ego of the first defendant. He did not mention the third defendant.

Per contra, it is contended by counsel for the plaintiff that the shares in the company are all owned by the second and third defendants and that therefore judgment should be entered against all the defendants jointly and severally.

It is a fundamental and trite principle of law that a registered company is a legal persona in its own right and endowed with its own separate legal persona which is distinct from its shareholders. See Salomon v Salomon & Co. Ltd [1887] A.C. 22.

It is also settled law that in certain exceptional circumstances where the company is controlled in terms of activities and decisions by another person the courts have allowed the corporate veil to be lifted to reveal the real person behind the company. I will respectfully refer to a passage by MARGO J in Gering v Gering & Anor 1974 (3) S.A. 358…, where the learned judge stated -

“There are three companies, apart from Lauren Lyn (Pty) Ltd, in which the first defendant has a 100 per cent interest in the shareholding. It is true that, in the case of these companies, their records are not, stricto sensu, in the possession, custody or control of the first defendant in his personal capacity. However, on the facts, these companies are his creatures and his instruments. He is conducting business through them, or holding assets through them, and, they are separate juristic personalities, they are in substance merely part of the machinery by which he alone conducts his business affairs.”

In certain cases courts have gone as far as stating that a company is the agent of the controlling shareholder. In the English case of Wallersteiner v Moir (No. 1) (1974) 3 All ER 217 (CA) LORD DENNING had this to say….,-

“I am prepared to accept that the English concerns - those governed by English company law or its counterparts in Nassau or Nigeria – were distinct legal entities. I am not so sure about the Liechtenstein concerns such as Rothschild Trust, the Cellpa Trust or Stawa AG. There was no evidence before us of Liechtenstein law. I will assume too, that they were distinct legal entities, similar to an English limited company. Even so, I am quite clear that they were just the puppets of Doctor Wallersteiner. He controlled their every movement. Each danced to his bidding. He pulled the strings. No one else got within reach of them. Transformed into legal language they were his agents to do as he commanded. He was the principal behind them. I am of the opinion that the court should pull aside the corporate veil and treat these concerns as his creatures-for whose doings he should be and is responsible. At any rate, it was up to him to show that anyone else had a say in their affairs and he never did so…,.”

I have been urged by the plaintiff's counsel to enter judgment against all three defendants jointly and severally. This is, however, despite a concession from counsel that the third defendant played a minimal role in the affairs of the first defendant. The extent of her shareholding in the company was not established in evidence.

I did not hear counsel for the defendants argue against the lifting of the corporate veil.

The second defendant was candid enough to admit that he was the alter ego of the first defendant. The evidence of the extent of personal control of the company on his part could not be disputed. He controlled its finances. He personally responded to the offer to tender from the plaintiff. He attended the meetings with the representatives of the plaintiff to decide the terms and conditions of the contract. He signed the contract for the supply of the vehicles to the plaintiff.  He wrote every single letter that was addressed to the plaintiff regarding the contract. He personally made commitments to assist the plaintiff in disposing of the Ford trucks at a good price when they would have been delivered in an effort to persuade the plaintiff into purchasing alternative vehicles from Willowvale Motor Industries because the first defendant had not delivered in terms of the contract.

More telling, however, is the manner in which the money deposited into the first defendant's bank was treated by him - if I accept the contention by him that a billion dollars was deposited into an investment account of the company to secure the value of the deposit. Although he was quizzed on the whereabouts of the billion dollars the second defendant was unable to state how much was in the investment account; his response being that he would have to check with the bank.

It is not in dispute that the second defendant drew cheques in his personal name against the account into which the purchase price paid by the plaintiff was deposited. It is further not in dispute that within a week from the date of such money being deposited almost the entire amount had been consumed. When the purchase price was deposited the account held an amount of $177,107,578=64. After the deposit the balance shot to $1,864,607,578=64. By 11 December 2006 the balance in the account stood at $218,294,649=64. Of the amount withdrawn from the account $2,200,000= went into the second respondent's account. The evidence adduced by the investigator of the plaintiff was to the effect that the defendants purchased an immovable property and a motor vehicle from the deposit. It cannot be gainsaid that the entire amount has been consumed but the vehicles have not been purchased.

The first defendant itself has no assets and it is obvious from an examination of the transactions on the bank account that it is the vehicle through which the second defendant mobilized funds with which to enhance his estate. The two million odd dollars that he paid himself soon after the plaintiff deposited money into the business account of the second defendant cannot be justified. The second defendant was unable to explain why this money had been paid to him.

It is worth noting that in the summary of evidence filed on behalf of the defendants that the contention is made that there is nothing prohibiting the first defendant from accessing or investing any money paid into the business account. It is also not disputed that an amount of $180 million was used from the account to pay for a property in Marlborough, although it is contended that the purchase of the property had been planned well before the plaintiff paid any money into the account. The point is made that the $180 million constitutes the 10 per cent deposit that the defendants had paid to the plaintiff in terms of the contract.

It is very obvious that the second defendant did not differentiate between himself and the company and he felt clearly that whatever was in the account of the company belonged to him to deal with as he pleased. In fact, he admitted that the company was solely his and his counsel described the company as his alter ego. It is only appropriate, therefore, that the corporate veil be lifted where he is concerned and that whatever liability may found to attach to the company should also attach to the second defendant.

The third defendant's position in relation to the activities of the company is not so clear.

She did not attend and give evidence on her own accord despite the fact that an order was sought against her jointly with the first and second defendants.

The question exercising my mind is whether or not the plaintiff is entitled to obtain an order against the third defendant jointly with the other two.

She is, undoubtedly, a shareholder, although the extent of her shareholding in the first defendant has not been stated. She chose not to enlighten the court.

In its declaration, the plaintiff made the averment that the purchase price paid by it had been diverted by the second and third defendants and used in purchasing luxury items such as vehicles. Specific mention of an immovable property in Marlborough was made. The purchase was not denied nor was it denied that it was purchased for the second and third defendants. Apart from the issue of the properties purchased with the funds belonging to the plaintiff there is no other reason advanced before me justifying my uplifting the corporate veil.

Is this sufficient reason in the absence of control on the part of a defendant?

The authorities from this jurisdiction that I was referred to do not touch on this aspect of the dispute and in my research I was able to find a South African case which may assist me in determining whether or not the corporate veil should also be lifted in relation to the third defendant. I wish to quote, with respect,  a few excepts from the judgment of LE ROUX J in Lategan & Anor NNO v Boyes & Anor 1980 (4) S.A. 191. At 200E-F the learned judge stated -

“In his admirable work, Modern Company Law, L.C.B GOWER devotes a full chapter [Chap 10] to the subject 'Lifting the Veil' (3ed at 189-217). He deals with it as exceptions to the principle of Salomon v Salomon & Co 1897 AC 22 (HL), which finally enshrined the sanctity of a separate corporate personality distinct from its members.”

And at 200H-201C he stated:

“I was also referred to an interesting article in the Tydskrif vir Heden-daagse Romeins Reg vol 30 (1967) at 216 et seq by M. L. BENADE, where the author pleads for a more realistic view of corporate identity in South Africa to bring it in line with the 'positive' approach of American courts, which may be summed up in the words of JUDGE SANBORNE in US v Milwaukee Refrigerator Transit Co (1905) 42 Fed 247 at 255, where he held that a company should be seen as an entity:

'but when the notion of a legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation as an association.'

This approach appears to be in line with that in modern England (as sketched by GOWER (supra)) and is based on common sense and a developed sense of equity. An excellent example is afforded by the case of Gilford Motor Co v Horne 1933 Ch 935 (CA) where the defendant, who was a former employee of the plaintiff, had contracted with the latter not to approach its customers. He promptly formed a company and it proceeded to contravene the contract. The court interdicted both the defendant and the company which it described as a device with a stratagem, a mere cloak and a sham, which it considered an instrument in the defendant's hands.”

And further on at 210F-H the learned judge concluded -

“A true precedent for this principle does exist in our case law, namely the case of Orkin Bros Ltd v Bell 1921 TPD 92, where the Directors of a company were held personally liable to a seller who sold goods to a company at the instance of its Directors when they knew the company to be in insolvent circumstances and completely unable to pay for the purchase and it appeared that the sole purpose of the transaction was to diminish the personal liability of the Directors under a contract of suretyship. This was held to constitute a fraud on the seller and he obtained judgment against the Directors personally.

I have no doubt that our courts would brush aside the veil of corporate identity time and again where fraudulent use was made of the fiction of legal personality. In the present case, however, there is no evidence that the second defendant fraudulently failed to mention the position of the sureties…,.”

The authorities are agreed that where there has been fraudulent or improper use of a company a court is entitled to disregard the separate corporate personality of a company and pierce the veil.

The first defendant herein was the vehicle through which the second and third defendants acquired property to enhance their estate. The two are husband and wife and although the title of the immovable property was not produced to court there was no denial from the defendants to the allegations in the declaration that the plaintiff's purchase price had been used to buy luxury items for themselves. The improper use of the money paid towards the purchase of the vehicles is evident from the manner in which the account was virtually depleted within a week of almost the entire sum. No reasonable explanation was forthcoming from the second defendant and the third defendant offered no explanation at all. An allegation of fraud is serious and it would have been in the interests of all the defendants if the third defendant had come to court to try and dispel the accusations by the plaintiff on the alleged use of the money. I can therefore only go by the bank account submitted to the court which showed improper usage of the money deposited by the plaintiff into the first the defendant's bank account.

It would not be uncharitable to describe the first defendant as a shell. It has no assets in its own name, this much being admitted by the second defendant. It operates a bank account which is at the sole disposal of the second defendant to deal with as he pleases. He does as he pleases with money in the account, which apparently is the only asset that could be said to be in the name of the company. But that said, even the money does not remain long in the account as it is utilized almost as soon as it is credited to the account; and such usage is not in the business of the company but for the benefit of its shareholders. It does not have on its books any of the vehicles it tendered to supply. It actually required payment in full of the purchase price in advance from the plaintiff in order to source for the vehicles and once that payment was made the second defendant dealt with it in a manner that would result in the enhancement of the estate of the second and third defendants.

This is an example of a fiction of separate corporate entity of a registered company. The second and third defendants, in the manner in which they make use of the first defendant, might as well have described themselves as a partnership as that is in effect what they are. The enterprise that is the first defendant is a mere tool for their exclusive use. In my view, the company exists for the convenience of its shareholders. The fiction of a separate corporate entity does not in fact exist in this case and it would only be just and proper for me to order that the corporate veil be lifted and judgment entered against all the defendants including the third defendant who is clearly benefitting from the existence of the company.

In my view, the plaintiff has therefore established a proper case for the lifting of the corporate veil in relation to both the second and the third defendants.

Dumisani Pitso Murindagomo admitted that there was no application for piercing the corporate veil before the court….,.

Lastly, it was submitted, on behalf of the defendants, that the summons and declaration failed to disclose a cause of action against the second, third, and fourth defendants, contrary to the provisions of Order 3 Rule 11(c).

Order 3 Rule 11(c) provides as follows:

“11. Contents of summons

Before issue, every summons shall contain -

(a) …,.

(b) …,.

(c) A true and concise statement of the nature, extent and grounds of the cause of action and of the

relief or remedies sought in the action;

(d) …,.

Disposition

The evidence of both witnesses was that the transaction was entered into with the first defendant. There was no evidence placed before the court that the transactions between the parties were entered into by the second, third and fourth defendants in their personal capacities. No evidence was placed before the court that the second to fourth defendants bound themselves as sureties or co-principal debtors with the first defendant or entered into any other formalities necessary to assume joint liability with the first defendant to the plaintiffs. A private limited company is a juristic person, a separate and distinct legal persona which can sue and be sued. See section 9 of the Companies Act [Chapter 24:03].

9 Capacity and powers of company

A company shall have the capacity and power of a natural person of file capacity in so far as a body corporate is capable of exercising such power. A company's liability is limited, and may only be extended to cover other legal persons by the use of very distinct legal documents such as an agreement to be bound as surety or co-principal debtor. Where Directors or officers of a private limited company are found to have conducted the business of the company fraudulently or negligently, with deliberate intent to cause prejudice to the company's creditors, an application can be made in terms of the Companies Act that those Directors be held personally liable for the debts of the company.

No such application has been made, so the corporate veil remains firmly in place. It is noteworthy that only the second defendant is a Director of the first defendant. The rest are mere officers, employees.

Neither the summons, nor the declaration, contained averments that showed liability to the plaintiffs by the second, third or fourth defendants. This is contrary to the provisions of Order 3 Rule 11(c). There is no “true and concise statement of the nature, extent and grounds of the cause of action” as against the second to fourth defendants. The plaintiffs did not, in the evidence in chief, testify to anything that might remotely be said to constitute admissible evidence, that the second, third and fourth defendants are liable to them for the amount claimed, or any amount at all. In the absence of any evidence at all, from both plaintiffs, that the Director and other officers of the company conducted themselves in such a manner that personal liability for the debts of the first defendant ought to be imputed to them, the court finds that the second, third and fourth defendants are entitled to be discharged.