Legal Personality re: Lifting Corporate Veil, Personal Liability of Directors, Alter Ego & Fiction of Separate Legal Entity

Appealed
HH34-12 : CHRISTIANE KWEDZA (nee MARTIN) vs MUSA KWEDZA
Ruled By: CHITAKUNYE J

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.

HB34-09 : NOKUKHANYA MOYO vs ROBERT MOYO
Ruled By: BERE J

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 ...

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.

HH68-10 : ALVIN CRISP vs STELLA MARY MASVIKENI
Ruled By: MUSAKWA J

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. ...

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. ...,.

8. ...,.

HH373-13 : KEEFEX INVESTMENTS and ARENSON INVESTMENTS (PVT) LTD vs WEDZERA PETROLEUM (PVT) LTD and ERIC NHODZA and TOBIAS MUPINGA and MUKAI MAHACHI
Ruled By: CHIGUMBA J

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 ...

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) …,.

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.

Accordingly, the second, third and fourth defendants are hereby absolved from the instance.

HB23-11 : REGINA GUMBO vs COMPANY WHITE SPACE SALES (PVT) LTD and ALBERT TONHOMA and STANBIC BANK ZIMBABWE LIMITED
Ruled By: KAMOCHA J

The Bank has already filed a court application wherein it is seeking to have the corporate veil pierced so that the property can be declared to be the sole property of Boniface Tonhoma and executable.

HH23-15 : FARISAI NANDO and RECSKILL INVESTMENTS (PVT) LTD vs PRIME INVESTMENTS (PVT) LTD Represented by Godwills Masimirembwa and SHERIFF FOR ZIMBABWE
Ruled By: MAFUSIRE J

The urgent chamber application pitted the applicant on the one hand, and the first and second respondents on the other. The first respondent (hereafter referred to as “Recskill”) was a company. It was the registered owner of the property situate 73 Orange Grove Drive, Highlands, Harare, the subject-matter of the dispute (hereafter referred to ...

The urgent chamber application pitted the applicant on the one hand, and the first and second respondents on the other.

The first respondent (hereafter referred to as “Recskill”) was a company. It was the registered owner of the property situate 73 Orange Grove Drive, Highlands, Harare, the subject-matter of the dispute (hereafter referred to as “the property”). The second respondent (hereafter referred to as “Prime Ventures”) was also a company. Its principal shareholder, principal officer and principal representative was one Godwills Masimirembwa, whom the applicant referred to as G.M. I shall also refer to him as G.M. But to the applicant, there was no distinction between Prime Ventures and Godwills Masimirembwa (G.M.) They were both one and the same person.

In legal parlance, she was saying Prime Ventures was Godwills Masimirembwa's alter ego.

Counsel for the applicant, with much passion, urged me to lift Prime Venture's corporate veil and see for myself what evil Godwills Masimirembwa was perpetrating against the applicant. From the papers, it required little persuasion. So I did. I did not like what I 'saw'.

Here is it.

The applicant and Godwills Masimirembwa had been husband and wife under an unregistered customary union. They had had three children together. They were all minors. The eldest was twelve years old, the second born ten, and the last seven. The customary union had been dissolved. Upon its dissolution, and in terms of an agreement penned by him or his legal practitioners, Godwills Masimirembwa, a lawyer by profession, had expressly and unequivocally undertaken that:

“The [applicant] and the minor children shall continue residing at 73 Orange Grove Drive, Highlands, Harare until such time as [Godwills Masimirembwa] procures and purchases an alternative but similar property for them given that No.73 Orange Grove is not owned by [Godwills Masimirembwa].”

That was on 15 March 2013. But that is not what I saw - and did not like.

When I pierced the corporate veil and peered into Prime Ventures, what I saw, and did not like, was the fact that, contrary to his undertaking, Godwills Masimirembwa was not only contesting, vigorously, the applicant's application in the Magistrates Court to have the undertaking registered as an order of court, but also that he was literally abandoning the applicant and the children, leaving them at the mercy of Recskill and the Sheriff for Zimbabwe, the third respondent herein (hereafter referred to as “the Sheriff”).

On 30 December 2014, the Sheriff had served on the property a writ of ejectment. The subject of the writ was Prime Ventures, represented by Godwills Masimirembwa “…, and all persons claiming rights and occupation through him…,.” But neither Prime Ventures nor Godwills Masimirembwa “lived” at the property. It was the applicant and the minor children that did. The Sheriff would come back to evict, on 6 December 2014 (that obviously was a patent error. He must have meant 6 January 2015).

The background to that writ was somewhat convoluted. It was this.

In May 2011, Godwills Masimirembwa, fronting Prime Ventures, had signed an agreement to buy all the shares in Recskill for US$550,000=. The amount would be paid between June 2011 and August 2011 in three tranches of US$183,333= each. It seems Godwills Masimirembwa did make some payments. But there was considerable dispute between the parties as to just how much he had paid. The applicant said by August 2011, Godwills Masimirembwa had paid virtually the full purchase price, except for a paltry US$13,333=. Therefore, according to her, Godwills Masimirembwa had, in reality, become the owner of the property.

On the other hand, G.M. and Recskill maintained he had only paid US$110,000=….,.

On the basis that Godwills Masimirembwa, or Prime Ventures, had breached the sale agreement, Recskill had taken out a summons in November 2014 under HC10241/14. It had been served on the property. Naturally, the applicant had picked it. She guessed or suspected Godwills Masimirembwa would do nothing about it. Indeed, it transpired that he had gone on to consent to judgment. Armed with Godwills Masimirembwa's consent, Recskill had filed a chamber application, under HC10698/14, for a judgment by consent. It had been granted on 11 December 2014.

However, none of this was known to the applicant.

On 8 December 2014, through her lawyers, the applicant had written to Recskill's lawyers informing them of her interest in the property in terms of Godwills Masimirembwa's undertaking. She also advised of her intention to be joined to the action. Therefore, she enquired whether Recskill would oppose such an application.

There was no response to the applicant's letter.

On 19 December 2014, she had lodged her application for joinder. But the next development was the Sheriff serving the writ of ejectment. That was on 30 December 2014. Attached to that writ was the order of this court for ejectment. The applicant said she only saw that order for the first time on the day the writ was served. On 5 January 2015, she filed the urgent chamber application.

In the urgent chamber application, the applicant's case, in brief and in my own words as I understood it, was this.

Recskill was far from being innocent. Its summons against Prime Ventures was a ruse. It was colluding with Godwills Masimirembwa to get her and the children out of the property. The summons was based on falsehoods. It said Godwills Masimirembwa had paid only US$110,000= of the purchase price. That was a lie. Part of her evidence for saying that were two receipts or acknowledgements of payments by Recskill's representative, one Elson Toendepi (“Elson”). The one, signed by both Godwills Masimirembwa and Elson Toendepi, on 1 July 2011, read:

“I, ELSON TOENDEPI…., received $70,000=…, as part payment of the purchases price of shares in Recskill Investments which owns House No. 73 Orange Groove, Highlands, Harare. Another $60,000=…, payable on the 8/07/2011. The balance of $53,333= shall be spread over the remaining in two instalments of 30/07/2011 and 30/08/2011.”

The other receipt, on 12 August 2011, read:

“I, ELSON TOENDEPI…, received $40,000= as part payment of the share purchases price of shares in Recskill Investments which owns house.”

The applicant collated the payments acknowledged in the two receipts and deduced that only US$13,333= had remained outstanding….,.

On the merits, Godwills Masimirembwa and Recskill said the applicant was mistaken. The sums of $70,000=, $60,000= and $53,333= mentioned in the first receipt added up to $183,333=. That amount related to the first instalment. They said the reference in the first receipt to “[t]he balance of $53,333=…,” was a reference to the balance on the first tranche, not of the entire purchase price. They said Godwills Masimirembwa never got to pay anything other than the $40,000= mentioned in the second receipt. Recskill summons for eviction against Prime Ventures mentioned $110,000=. It was that $70,000= of the first receipt and the $40,000= of the second. So there had been no lie.

At the hearing, Recskill produced some documents. One of them was titled Memorandum of Agreement of Refund. It was dated 23 December 2011. In it, Godwills Masimirembwa was admitting to have failed to pay for the property and was agreeing to be refunded his $110,000=.

Godwills Masimirembwa substantively relied on the corporate personality of Prime Ventures to deny the applicant the relief she sought. He said her rights were personal against him. The agreement of sale of the property had not been between himself in person, but between two companies. As such, the applicant had no right to be involved, or to be interested in the property.

When I enquired what Godwills Masimirembwa was doing to fulfil his undertaking to the applicant and the children, seeing that their eviction from the property was imminent, counsel for Prime Ventures or Godwills Masimirembwa pointed to G.M.'s plea to the applicant's claim in the Magistrates Court and expressly blamed her for the impending peril. In that plea, Godwills Masimirembwa was vigorously opposing the applicant's efforts to have the agreement registered as an order of court. Incidentally, her claim in that court included custody, access, school fees, maintenance and other ancillaries. On the promise to provide the applicant and the children with accommodation at the property, or its equivalent, Godwills Masimirembwa's plea was that such clause must be varied as he no longer had the capacity to do so. Instead, he averred, the children had to be moved into cheaper Government schools, and the applicant had to move to cheaper accommodation, i.e. of rentals of not more than $800= per month. Incidentally, and by way of comparison, the rentals for the property, according to some lease agreement produced by Recskill, were US$2,300= per month. Counsel for Prime Ventures or Godwills Masimirembwa said all the applicant needed do was to accept the $800= per month, move into alternative accommodation and avert the eviction. But he could not say whether or not Godwills Masimirembwa had already procured the alternative accommodation.

Recskill's position was that it was an innocent party. It should not be prejudiced by squabbles between ex-spouses. It denied it was in cahoots with Godwills Masimirembwa. The applicant had no right to cling to its property.

However, despite the stiff opposition, I granted the interim relief.

There was something about Recskill's case and documents that did not quite add up. For example, it was said that the total sum of $183,333= that the figures on the first receipt added up to, only related to the first tranche. But Elson Toendepi was not saying that in that receipt. He was talking of a balance of $53,333= to be spread over two instalments up to 30 August 2011. The Agreement of Sale said the entire purchase price would be paid by 31 August 2011. The receipt did not say the balance of $53,333= was for the first instalment. According to the Agreement, the first tranche would be paid by June 2011. So, in my view, the $183,333= in the first receipt was more likely for the last tranche than for the first.

That was not all.

Recskill's case was that after Prime Ventures had breached the Agreement of Sale by failing to make any further payment, and that after that agreement had been cancelled, Prime Ventures had been given a lease over the property but that, again, it had breached that lease. According to the second receipt, the $40,000= that was said to have brought up the total payments to $110,000= had been paid on 12 August 2011. Yet, according to the Memorandum of Refund, Godwills Masimirembwa was getting back his full $110,000= without any deductions for the arrear rentals. That did not make any business sense.

That was not all.

In her letter to Recskill, on 8 December 2014, aforesaid, the applicant expressly advised Recskill that Godwills Masimirembwa was not staying at the property but that she and the children were. She advised that Godwills Masimirembwa was unlikely to defend the claim but that she intended to be joined to the suit and defend it. Most importantly, she sought an assurance from Recskill that it would not “snatch a judgment” as she awaited joinder. The letter was ignored. Counsel for Recskill did not say why there had been no response. And sure enough Recskill had gone on to obtain a consent judgment.

There were other salient features that persuaded me that the applicant had established a prima facie case for an interim stay of execution pending the determination of her pending cases. For example, the lease that was pleaded in the summons was not consonant with the lease the applicant had stumbled upon and attached to her application.

The requisites for an interim interdict are;

(i) A prima facie right, even if it be open to some doubt;

(ii) A well-grounded apprehension of an irreparable harm if the relief is not granted;

(iii) That the balance of convenience favours the granting of the interim interdict; and

(iv) That there is no other satisfactory remedy.

See Setlogelo v Setlogelo 1914 AD 221…,.; Tribac (Pvt) Ltd v Tobacco Marketing Board 1996 (1) ZLR 289 (SC)…,.; Hix Networking Technologies v System Publishers (Pty) Ltd & Anor 1997 (1) SA 391…,.; Flame Lily Investment Company (Pvt) Ltd v Zimbabwe Salvage (Pvt) Ltd and Anor 1980 ZLR 378; and Universal Merchant Bank Zimbabwe Ltd v The Zimbabwe Independent & Anor 2000 (1) ZLR 234 (HC)…,.

I was satisfied that the applicant had met all the requirements for an interdict.

She and her children had a right to stay on the property until Godwills Masimirembwa had provided her with alternative accommodation of similar value. Her fears that the Sheriff was coming back to evict her was real. Actually, it was what all the respondents, Godwills Masimirembwa included, desired. On the balance of convenience, they weighed heavily in her favour. All I had to look at was her right vis-à-vis that of Recskill in relation to the property. Even if she was wrong in her accusations of collusion, which seemed unlikely from the evidence that she produced, nonetheless she stood to be thrown in the streets with her children and her property in this rainy season. On the other hand, all Recskill stood to lose was simply more money in rentals. It had waited since 2011. It could wait some more. At any rate, such loss did not seem beyond recovery. Lastly, for someone who is about to be evicted from the house that has been her only home for all the while, and who yearns for an opportunity to assert her right to that home, it becomes pedantic to talk about an alternative remedy to an interdict.

For these reasons, I granted the interim relief.

HH49-15 : AMEN SITHOLE vs RINNEX OIL (PVT) LTD
Ruled By: ZHOU J

The question of whether the defendant was improperly joined in these proceedings depends upon the court's finding as to the parties to the contract. The documentary evidence produced by the parties shows that the capital sum of US$28,350= was paid based upon a proforma invoice which was in the name of the defendant. The documents from the ...

Appealed
SC03-18 : CHRISTOPHER SAMBAZA vs AL SHAMS GLOBAL BVI LIMITED
Ruled By: GARWE JA, MAVANGIRA JA and UCHENA JA

The appellant is a Zimbabwean who resides in South Africa. He is a former Director of Rodstreet Trading (Private) Limited (“Rodstreet”), a company registered in terms of the laws of Zimbabwe. The respondent is a company registered in the British Virgin Islands but operating from Dubai though engaging in financial transactions in Zimbabwe. Factual Background The common cause facts on ...

Factual Background

The common cause facts on which the dispute arose are as follows:

On 22 August 2011, Rodstreet Trading (Private) Limited drew and issued a Bankers Acceptance (hereinafter called “the BA”) in the sum of US$117,335=91 in favour of Interfin Bank. Interfin Bank accepted the Bankers Acceptance. The BA's due date was 21 November 2011, that is, 91 days after sight.

Interfin Bank subsequently sold the Bankers Acceptance to the respondent on a buyback basis. By letter dated 7 March 2012, Interfin Bank advised Rodstreet Trading (Private) Limited that it had sold the BA to the respondent on a buyback basis but the respondent was demanding immediate payment of the Bankers Acceptance. The respondent demanded payment of the BA from both Interfin Bank and Rodstreet Trading (Private) Limited.

They both failed to pay.

The respondent issued a letter of demand to Rodstreet Trading (Private) Limited demanding payment in the sum of US$117,335=91. Rodstreet Trading (Private) Limited was not able to make any payment.

On 27 April 2012, the respondent issued summons against Rodstreet Trading (Private) Limited in the High Court, under case no. HC4556/12. On 18 June 2012, a default judgment was granted against Rodstreet Trading (Private) Limited. The respondent instructed the Deputy Sheriff to proceed to Rodstreet's place of business to execute a writ issued in terms of the order granted on 18 June 2012. On 3 August 2012, the Deputy Sheriff filed a return indicating that Rodstreet Trading (Private) Limited was no longer operating from its registered premises.

The respondent applied to the court a quo for an order in terms of section 318 of the Companies Act [Chapter 24:05] declaring the appellant personally liable to pay the respondent the sum of US$117,335=91 plus interest at the rate of 30 per cent per annum from 21 November 2011 to the date of full payment plus costs of suit.

The respondent sought the order against the appellant in his capacity as a Director of Rodstreet Trading (Private) Limited.

It alleged that at all material times, the appellant knew, or should have known, that Rodstreet Trading (Private) Limited would not be able to pay the amounts owed in terms of the Bankers Acceptance which it issued. The respondent argued that the appellant, being a Director of the company, negligently and/or fraudulently misrepresented to Interfin Bank that Rodstreet Trading (Private) Limited would liquidate the amount owed on the Bankers Acceptance on its maturity date.

The respondent submitted that, due to his gross negligence and reckless trading, the appellant must be held personally liable in terms of section 318 of the Companies Act [Chapter 24:03] for monies owed by Rodstreet Trading (Private) Limited to the respondent. In the respondent's view, the appellant owed a duty of care to all parties which conducted business with Rodstreet Trading (Private) Limited, including the respondent, to ensure Rodstreet Trading (Private) Limited would be able to meet its financial obligations.

The appellant opposed the respondent's application in the court a quo arguing that he was no longer a Director of Rodstreet Trading (Private) Limited having resigned from its Board on 3 November 2011 when he sold his shareholding in the company. He further stated that the Bankers Acceptance, which forms the main issue in these proceedings, was issued entirely and signed by his two co-directors, Mr Herbert Rinashe and Phillip Jonasi, without his knowledge, and that, to the best of his knowledge, no Board resolution was ever made in his presence to issue the Bankers Acceptance.

The court a quo found the appellant personally liable for the amount owed to the respondent by Rodstreet Trading (Private) Limited, holding that the directors of Rodstreet Trading (Private) Limited, including the appellant, had acted recklessly, negligently, if not fraudulently, in drawing up the Bankers Acceptance and accepting money despite their knowledge of the company's precarious financial position.

Aggrieved by the court a quo's decision, the appellant appealed to this court. He filed a 'notice of appeal' against which the respondent raised preliminary issues.

View Appeal
HH373-16 : AL SHAMS GLOBAL BVI LIMITED vs CHRISTOPHER SAMBADZA
Ruled By: TAGU J

BACKGROUND This is an application based on the provisions of section 318(1) of the Companies Act [Chapter 24:03] (“the Companies Act”) which has the effect of, on the direction of this Honourable Court, holding the past and present Directors of a company personally responsible, without limitation of liability, for all or any of the debts or other liabilities ...

BACKGROUND

This is an application based on the provisions of section 318(1) of the Companies Act [Chapter 24:03] (“the Companies Act”) which has the effect of, on the direction of this Honourable Court, holding the past and present Directors of a company personally responsible, without limitation of liability, for all or any of the debts or other liabilities of a company as the court may direct where they have conducted the business of the company in a fraudulent, negligent or reckless manner. The section says:

“318 Responsibility of directors and other persons for fraudulent conduct of business

(1) If, at any time, it appears that any business of a company was being carried on –

(a) Recklessly; or

(b) With gross negligence; or

the court may, on the application of the Master, or liquidator or judicial manager or any creditor of or contributory to the company, if it thinks it proper to do so, declare that any of the past or present directors of the company or any other persons who were knowingly parties to the carrying on of the business in the manner or circumstances aforesaid shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

What is being alleged in casu is as follows:

The applicant is a company registered in the British Virgin Island whose principle place of business is Shed No.B1, AL Khabaissi, Dubai, U.A.E. The respondent is a private individual and director of Rodstreet Trading (Private) Limited (Rodstreet) of 14 Crowbrugh Road, Groombridge, Harare. Sometime in or about 22 August 2011, Rodstreet accessed certain facilities from Interfin Bank secured by a certain Bankers Acceptance (BA) issued by Rodstreet and drawn on to the tune of US$117,335=91 availed and accepted by Interfin Bank. The Bankers Acceptance's due date was 21 November 2011. Interfin Bank then sold the Bankers Acceptance to the applicant and the applicant became the legal holder of the Bankers Acceptance.

On or about 7 March 2012, Interfin Bank advised Rodstreet Trading (Private) Limited that it had sold the BA to the applicant and that when the amount due on the Bankers Acceptance became due and payable such amount was to be paid to the applicant.

The Bankers Acceptance was presented for payment by the applicant to Interfin Bank on the due date but Rodstreet Trading (Private) Limited and Interfin Bank failed to honour or discharge the Bankers Acceptance. The applicant issued a letter of demand to Rodstreet demanding payment of the sum of US$117,335=91. Rodstreet Trading (Private) Limited was unable to make any payment towards the amount demanded. The applicant then issued summons against Rodstreet on 27 April 2012 in case HC4556/12. A default judgment was obtained against Rodstreet on the 18^th of June 2012. The applicant instructed the Deputy Sheriff to proceed to Rodstreet's place of business and execute the order. On 3 August 2012, the Deputy Sheriff advised that Rodstreet was no longer operating from their premises.

Despite a diligent search and enquiry, the applicant failed to establish where Rodstreet Trading (Private) Limited is now operating from.

The applicant averred that the respondent, as a Director of Rodstreet Trading (Private) Limited at all material times knew, or should have known, that his company would not be able to pay amounts owed in terms of the Bankers Acceptance that Rodstreet issued in the ordinary course of its business. They alleged that despite such knowledge of the company's incapacity to pay in the ordinary course of business, the respondent, being the Director of the company, negligently and/or fraudulently represented to Interfin Bank that Rodstreet Trading (Private) Limited would liquidate the amount owed on the Bankers Acceptance on the maturity date of the same. Further, the applicant submitted that the respondent knew, or ought to have known, of the financial position of the company and its inability to pay amounts owed to the applicant in terms of the Bankers Acceptance. Hence, this knowledge, or lack of such knowledge of the company's financial position amounted to gross negligence and reckless trading on the part of the respondent for which the respondent must be personally liable for at law. In its view, the respondent owed a duty of care to all parties that Rodstreet conducted business with, including the applicant, to ensure Rodstreet Trading (Private) Limited would be able to meet its financial obligations.

The applicant is now seeking an order that the respondent be declared personally liable to pay the applicant the sum of USD117,335=91, interest at the rate of 30% per annum from 21 November 2011 to date of full payment plus costs of suit.

The respondent opposed the application.

In his founding affidavit, the respondent stated that he is no longer a Director of Rodstreet Trading (Private) Limited having resigned from the Board of the company on 3 November 2011 when he sold his shareholding in the company. He, however, conceded that as far he was aware, for a period of time that he cannot remember, the company operated an overdraft facility with Interfin Banking Corporation Limited. He further stated that the Bankers Acceptances, which forms the main issue in these proceedings, was issued entirely and signed by his two co-directors, Mr Herbert Rinashe and Phillip Jonasi, without his knowledge. To the best of his knowledge, no Board resolution was ever made to issue the Banker Acceptance in his presence. He said, as a Banker, he would have strenuously opposed the issuance of a Bankers Acceptance as a way of financing trading stock as he was aware that a Bankers Acceptance has a defined tenure and would therefore be wholly unsuitable to finance trading stock since the company would not be able to tell with any degree of certainty how long it would take to sell the stock. In his view, this would risk creating a mismatch between the maturity of the Bankers Acceptance and the realization of cash from trade.

In short, the respondent denied that, as a Director of Rodstreet Trading (Private) Limited, he knew, or should have known, that the company would not be able to pay amounts owed in terms of the Bankers Acceptance because -

(i) At all material times he was a non- Executive Director and not involved in the day to day operations of the company;

(ii) The Board of Directors never, to the best of his knowledge, information, and belief authorised any person to sign the Bankers Acceptance;

(iii) He did not sign the said Bankers Acceptance nor did he ever deal with it in any way;

(iv) He never made any representation to Interfin, or any other person whatsoever, that Rodstreet Trading (Private) Limited would liquidate the Bankers Acceptance on maturity or at any time thereafter;

(v) He was not grossly negligent or fraudulent or reckless in anyway whatsoever with respect to the issuance of the Bankers Acceptance as he did not even know of its issuance;

(vi) Further, the applicant chose to exclude from suing the existing Directors who signed the Bankers Acceptance; and

(vii) Further, to his knowledge, neither Rodstreet Trading (Private) Limited nor himself had any dealings whatsoever with the applicant. It was his contention that the applicant put itself in the position that it found itself in buying or accepting a Bankers Acceptance from Interfin without doing its own due diligence for the applicant had a duty to perform at least some minimum amount of due diligence to satisfy itself. Hence no reckless or fraudulent or gross negligent trading is attributable to him.

(viii) Lastly, he challenged the rate of interest, at 30% per annum, and argued that this has not been proved.

What is not in dispute is that on or about the 3^rd of November 2011 the respondent was still one of the Directors of Rodstreet Trading (Private) Limited. He resigned from the said company with effect from 3 November 2011. The Bankers Acceptance in issue was drawn on the 22^ndof August 2011. Its due date was the 21^st of November 2011. It is therefore common cause that at the material time when the Bankers Acceptance was drawn, and the money was advanced, the respondent was a Director of Rodstreet Trading (Private) Limited.

Interfin Bank Limited sold the said Bankers Acceptances to the applicant before the respondent resigned from Rodstreet Trading (Private) Limited. Interfin Bank advised Rodstreet that it had sold the Bankers Acceptance to the applicant on or about the 7^th of March 2012 - after the respondent had resigned from the company.

The Bankers Acceptance was presented for payment by the applicant to Interfin Bank on due date but Rodstreet Trading (Private) Limited and Interfin Bank failed to honour or discharge the Bankers Acceptance. This resulted in a default judgment being granted against Rodstreet Trading (Private) Limited after it was sued by the applicant. The company's whereabouts is now unknown.

The main issue to be decided is whether or not the respondent, as a past Director of Rodstreet Trading (Private) Limited is personally liable in terms of section 318(1) of the Companies Act [Chapter 24.03] for the liability of Rodstreet Trading (Private) Limited in accessing certain facilities secured by a Bankers Acceptance which Rodstreet Trading (Private) Limited defaulted in honouring on its due date.

It is trite that the provisions in section 318(1) of the Companies Act [Chapter 24.03] extends personal liability not only to “the past or present directors of the company” but also to “any other persons who were knowingly parties to the carrying on of [its] business” recklessly or with gross negligence or with intent to defraud. See David Govere v Ordeco (Private) Limited and Registrar of Deeds SC25-14.

In casu, once it is found that the respondent was liable, further issues to be decided are whether or not the respondent carried on the business of Rodstreet Trading (Private) Limited recklessly, with gross negligence, or with intent to defraud.

In the present case, although the respondent resigned mere days before the maturity of the Bankers Acceptance, this does not protect him from being personally liable for the debt arising therefrom, as the material time was actually the time when the Bankers Acceptance was drawn up and the sum in question was advanced. This is because this was the time when due consideration of the financial and business state of the company and whether or not the company could afford to repay any loans or other debts falling on it. Liability therefore falls squarely on the respondent's shoulders.

The respondent sought to deny liability on the basis that he was not an Executive Director of Rodstreet Trading (Private) Limited.

I do not agree with that.

In the case of Howard v Herrigel and Another 1991 (2) SA 662…, the court held:

“In my opinion, it is unhelpful, and even misleading, to classify company directors as “Executive” or “non-Executive” for purposes of ascertaining their duties to the company or when any specific or affirmative action is required of them. No such distinction is to be found in any statute. At common law, once a person accepts an appointment as a director, he becomes a fiduciary in relation to the company and is obliged to display utmost good faith towards the company and in his dealings on its behalf. That is the general rule and its application to any particular incumbent of the office of the director must necessarily depend on the facts and circumstances of each case. One of the circumstances may be whether he is engaged full time in the affairs of the company…,. However, it is not helpful to say of a particular director that, because he is not an “Executive Director”, his duties were less onerous than they would have been if he were an Executive Director. Whether the enquiry be one in relation to one's negligently, reckless conduct or fraud, the legal rules are the same for all directors.”

Therefore, the fact that the respondent was not an Executive Director does not absolve him from personal responsibilities for the company's debts and liabilities under section 318(1) of the Companies Act [Chapter 24:03].

As to what constitutes recklessness, gross negligence, and fraud; this was decided in a number of cases.

In the case of Chibwe t/a Ross Motors (Private) Limited v Fawcett Security Operations (Private) Limited & Anor HH79-06, BHUNU J…, citing Rosenthal v Marks 1944 TPD 172, described gross negligence as being tantamount to wilful non-performance of one's contractual duties and obligations. See also Philotex (Pty) Ltd and Others v Snyman and Ors; Braitex (Pty) Ltd and Ors v Snyman and Others 1998 (2) SA 138 (SCA); Ozinsky NO v Lloyd and Ors 1992 (3) SA 396. Ebrahim and Another v Airport Cold Storage (Pvt) Ltd 2008 (6) SA 585 and Expart Lebowa Development Corporation Ltd 1989 (3) SA 71 (T).

Given the facts of this matter, it is my view that drawing up the Bankers Acceptance and accepting the money despite knowledge of the company's precarious financial position was within the respondent's knowledge. The liability, at law, is not in a company accepting a time-bound debt, but in allowing an insolvent company to keep on trading to create a good impression of the company. As a Director, the respondent had a duty of care in the running of the company which he failed to uphold. As submitted by the applicant, it is inconceivable that, of the extent of liability owed by Rodstreet Trading (Private) Limited, only the Bankers Acceptance were recklessly taken by Rodstreet Trading (Private) Limited and the remainder of the debt was good debt. The facts in this case show that Rodstreet Trading (Private) Limited failed to service the indebtedness arising out of the Bankers Acceptance at all despite the fact that funds were received. Therefore, it can safely be concluded that the Directors, including the respondent, traded recklessly, in general, and, in particular, in the securing debt with Bankers Acceptances. The Board of Directors, which then included the respondent, conducted the business of the company in a manner which contravenes the provisions of the Companies Act. The respondent, therefore, conducted the business of Rodstreet Trading (Private) Limited recklessly, negligently, if not fraudulently, and, in this regard, is consequently personally liable.

In the result, the application is granted and I accordingly make the following order -

IT IS ORDERED THAT;

Respondent be and is hereby declared personally liable to pay to the applicant:

(a) The sum of USD117,335=91;

(b) Interest on the sum of USD117,335=91 at the rate of 30% per annum from 21 November 2011 to the date of payment in full; and

HH564-15 : LAMECK KUFANDADA vs DAIRIBOARD ZIMBABWE LIMITED and JANAWAYS (PRIVATE) LIMITED and MICHAEL MUSAMIRAPAMWE
Ruled By: MTSHIYA J

Due to the fact that the applicant could have obtained authority to sue on behalf of the second respondent, the prayer for lifting the corporate veil has no merit.

View Appeal
HH412-17 : DOCKING STATION SAFARIS (PRIVATE) LIMITED vs YUNUS AHMED
Ruled By: MUREMBA J

The plaintiff seeks an order in terms of section 318(1) of the Companies Act [Chapter 24:03] for the defendant to be declared jointly and severally liable with Foldaway Investments (Pvt) Ltd for all the debts of Foldaway Investments (Pvt) Ltd to the plaintiff. The provision reads as follows; “Responsibility of directors and other persons for fraudulent conduct ...

“Responsibility of directors and other persons for fraudulent conduct of business

(1) If, at any time it appears that any business of a company was being carried on -

(a) Recklessly; or

(b) With gross negligence; or

the court may, on the application of the Master, or liquidator or judicial manager, or any creditor of or contributory to the company, if it thinks it proper to do so, declare that any of the past or present directors of the company, or any other persons who were knowingly parties to the carrying on of the business in the manner or circumstances aforesaid, shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

In short, the provision simply states that if a company director, or any other person, carries on the business of a company fraudulently, recklessly, or with gross negligence he or she can be held personally liable for the debts of the company.

In casu, it is a fact that the defendant was the director of Foldaway Investments (Pvt) Ltd. It is also a fact that the plaintiff and Foldaway Investments (Pvt) Ltd used to conduct business together. The plaintiff, which is into cattle marketing, auctioning, and trading would sell cattle to Foldaway Investments (Pvt) Ltd through a credit facility agreement the parties had entered into. It is not in dispute that as the parties transacted, Foldaway Investments (Pvt) Ltd fell into debt, and, pursuant to the debt, the plaintiff instituted legal proceedings against Foldaway Investments (Pvt) Ltd for the recovery of its money. It succeeded and obtained judgment, by consent, in HC12769/12.

Now, the plaintiff wants the defendant in the present matter declared jointly and severally liable for the same debt as it avers that the defendant, in conducting the business of Foldaway Investments (Pvt) Ltd, he did so fraudulently or with the intent to defraud it. Alternatively, he conducted the business of Foldaway Investments (Pvt) Ltd recklessly or with gross negligence.

In instituting the present legal proceedings against the defendant, as the Director of Foldaway Investments (Pvt) Ltd, the plaintiff made averments, in its declaration, to the effect that in late 2012 the defendant, in carrying on the business of Foldaway Investments (Pvt) Ltd, acted fraudulently or with intent to defraud the plaintiff and other creditors in that he began to dissipate the movable assets of Foldaway Investments (Pvt) Ltd so as to frustrate the enforcement of its (plaintiff's) claim in contempt of the order by consent entered into in case number HC12769/12. The plaintiff further averred that the defendant went on to cause bogus legal proceedings to be instituted by Foldaway Investments (Pvt) Ltd against it in case numbers HC13926/12 and HC546/13 purely as a ruse to delay further enforcement of the admitted claim. The plaintiff further averred that, in the circumstances, the defendant deliberately misled it as regards Foldaway Investments (Pvt) Ltd's capacity and intention to pay thereby inducing the plaintiff to grant Foldaway Investments (Pvt) Ltd credit.

In the alternative, the plaintiff averred that the defendant conducted the business of Foldaway Investments (Pvt) Ltd recklessly or with gross negligence by continuing to incur liabilities and encumber its assets in circumstances in which there were no reasonable prospects of satisfying the debts.

In his plea, the defendant denied carrying on the business of Foldaway Investments (Pvt) Ltd recklessly or with gross negligence as alleged. He also denied that he misled the plaintiff with regards to Foldaway Investments (Pvt) Ltd's capacity and intention to pay. He said that he made some payments towards clearing the debt of Foldaway Investments (Pvt) Ltd to the plaintiff. He further averred that it just happened that Foldaway Investments (Pvt) Ltd ran into some serious financial and viability problems and was placed under judicial management. He averred that on the contrary, it is the plaintiff which, at one time, acted with fraudulent intent and malice when it induced Foldaway Investments (Pvt) Ltd to register a Notarial General Covering Bond in its (plaintiff's) favour on the promise that it would supply Foldaway Investments (Pvt) Ltd with beasts on credit only for it (the plaintiff) to renege on the undertaking.

The plaintiff's evidence

Mark Robert Hayter (Mr Hayter) was the sole witness for the plaintiff. His evidence was as follows:

He is the Executive Director of the plaintiff with the responsibility of running the affairs of the plaintiff in a General Manager's position. Initially, well before 2004, there was an entity called CC Sales which was in the business of selling cattle. Foldaway Investments (Pvt) Ltd (Foldaway) was its client which was buying cattle from it on a credit facility arrangement. In 2004, Mr Hayter took over the running of CC Sales with Foldaway as an already existing client. In 2007, there was a management buy-out in CC Sales as some shareholders, who were retired, sold their shares. This resulted in the incorporation of the plaintiff trading as CC Sales that same year. The plaintiff continued with Foldaway Investments (Pvt) Ltd as its client enjoying the same credit agreement Mr Hayter found in place when he took over management of CC Sales in 2004. Mr Hayter said that over the years the challenge they had had with the credit agreement with Foldaway was that there had been moments of delayed payments but payments would be made. He said that in dealing with Foldaway Investments (Pvt) Ltd the plaintiff only dealt with the defendant and no other representative from Foldaway Investments (Pvt) Ltd. Mr Hayter said that the plaintiff regularly updated the credit agreement between the parties as it did with all its clients who enjoyed the credit facility. He produced a copy of the latest credit agreement the parties signed on 20 October 2010. In that agreement Foldaway Investments (Pvt) Ltd was represented by the defendant who, in filling in the details of the purchaser, wrote 'Foldaway Investments t/a Zim Halaal Meats'.

The said agreement was produced as an exhibit.

Mr Hayter said that with the adoption of the multi-currency system, the plaintiff decided to upgrade its security system. It thus asked for security from its clients who were benefitting from the credit facility arrangement. To that end, the defendant was requested to provide assets of value which he himself indicated to valuers appointed by the plaintiff. Pursuant to that, a valuation report was compiled on 28 July 2011 bearing the name Zim Halaal Meats (Pvt) Ltd instead of Zim Halaal Meats which is the trade name of Foldaway Investments (Pvt) Ltd. Mr Hayter said that the description of Zim Halaal Meats, as a (private) limited company, was a mistake. He said that when the valuation of the assets was done, the defendant held out to the plaintiff that the assets belonged to Foldaway Investments (Pvt) Ltd since the name Zim Halaal Meats was just a trade name.

The valuation report was produced as an exhibit.

The witness said that under the direction of the defendant, Foldaway Investments (Pvt) Ltd then approved the registration of a Notarial General Covering Bond over its assets in September 2011 and the registration was duly done by the plaintiff's lawyers. The Notarial General Covering Bond was produced as an exhibit. It contains the usual covenants against the alienation of the encumbered assets. Meanwhile Foldaway Investments (Pvt) Ltd had accumulated huge arrears on its account. The parties had mutually agreed that Foldaway Investments (Pvt) Ltd was to settle the debt first before it could be allowed to buy on credit again.

Mr Hayter does not believe that after the registration of the bond Foldaway Investments (Pvt) Ltd bought cattle again because of the outstanding arrears. Foldaway Investments (Pvt) Ltd had gone over the limit of the terms of the credit agreement which had deadlines for payments. A statement showing the arrears of Foldaway was produced. It shows that as at 1 February 2012, Foldaway Investments (Pvt) Ltd owed US$94,633=70. By 25 September 2012 some payments had been made and the debt stood at US$66,996=78. It is at that time that the plaintiff sued Foldaway Investments (Pvt) Ltd in 2012, under case number HC11213/12, for the recovery of US$66,996=78. Before the matter had been determined, the plaintiff learnt that Foldaway Investments (Pvt) Ltd was disposing of its assets in violation of the covenants in the Notarial General Covering Bond to the prejudice of the plaintiff's security interests. The plaintiff learnt of this from one Daniel Benjamin Palmer, a former General Manager of Foldaway Investments (Pvt) Ltd, who advised it that Foldaway had sold a T35 lorry in August 2012 and that all the other assets were being offered for sale.

The plaintiff therefore sought an interdict, in October 2012, under HC12769/12, restraining this conduct.

Foldaway Investments (Pvt) Ltd, under the directions of the defendant, consented to the relief sought on 9 November 2012. Foldaway Investments (Pvt) Ltd simultaneously consented to judgment for the debt under HC11213/12 and the parties entered into a payment plan which Foldaway Investments (Pvt) Ltd subsequently failed to honour.

Pursuant to this, on 13 November 2012, the plaintiff instructed the Deputy Sheriff to go to 10 Craster Road Southerton, Harare and attach, in execution, the assets which had been registered under the Notarial General Covering Bond. When that happened, the defendant caused the Deputy Sheriff to launch interpleader proceedings under HC546/13 based on an allegation that the attached assets did not belong to Foldaway Investments (Pvt) Ltd but to Zim Halaal Meats which he claimed to be a separate entity from Foldaway Investments (Pvt) Ltd.

In the affidavit, the defendant stated that Zim Halaal Meats was in fact his own trading name in his personal right whilst on the other hand he was the director of Foldaway Investments (Pvt) Ltd. Mr. Hayter said that it was the first time the defendant mentioned that Foldaway Investments (Pvt) Ltd and Zim Halaal Meats were distinct entities which traded amongst themselves with each entity having its own portfolio of assets registered in its name. It was stated that Foldaway Investments (Pvt) Ltd was in the business of cattle ranching and procuring livestock for slaughter for Zim Halaal Meats. In that affidavit the defendant went on to say that the property of Zim Halaal Meats could therefore not be attached to satisfy the judgment of Foldaway Investments (Pvt) Ltd.

The affidavit was produced as an exhibit.

Mr Hayter said that this was surprising because all along, throughout their dealings over the years, Foldaway Investments (Pvt) Ltd had always traded as Zim Halaal Meats. However, the inter-pleader proceedings were later abandoned, on 4 February 2013, when the then defendant's legal practitioners, Kadzere, Hungwe and Mandevere wrote to the Deputy Sheriff asking him to withdraw them on the basis that the decision to bring those proceedings had been based on an erroneous representation of facts on the part of the defendant.

The letter to that effect was produced as an exhibit.

Mr Hayter said that just before abandoning the interpleader proceedings in February 2013, the defendant had caused Foldaway Investments (Pvt) Ltd to be placed under provisional judicial management in January 2013 under HC13926/12. The provisional judicial management order stayed all proceedings and execution against Foldaway Investments (Pvt) Ltd assets.

The order was produced as an exhibit.

Considering this measure to be an insincere ploy to avoid or delay the enforcement of Foldaway Investments (Pvt) Ltd's obligations, the plaintiff successfully opposed confirmation of that order on 25 September 2013.

The order discharging the provisional order was produced as an exhibit.

Just days later, and in October 2013, the defendant caused Foldaway Investments (Pvt) Ltd to apply, again, for its provisional judicial management. It obtained another provisional judicial management order on 30 October 2013 under HC8502/13. The order was granted without the knowledge of the plaintiff. Foldaway Investments (Pvt) Ltd never moved for the confirmation of this order until it lapsed.

Mr Hayter testified that throughout the process of judicial management there was no clarity from the successive provisional judicial managers, or from the defendant, as regards the whereabouts of the assets. The correspondences that the plaintiff's legal representative wrote to the second provisional judicial manager enquiring about the whereabouts of the assets were produced as exhibits. He said that after the interdict had been granted, in November 2012, the plaintiff was never given an opportunity to inspect the assets by the defendant yet the Notarial General Covering Bond entitled the plaintiff to inspect the assets at any time. He said that he went to the place where the assets were supposed to be but he was not allowed to see them.

Mr Hayter was subjected to rigorous cross examination by counsel for the defendant. However, counsel for the defendant was very confusing in the manner he asked his questions. Initially, he sounded like the defendant was in agreement with the plaintiff that the assets that had been registered under the Notarial General Covering Bond belonged to Foldaway Investments (Pvt) Ltd. It was even suggested to Mr. Hayter that the registration of the bond did not leave any assets for Foldaway Investments (Pvt) Ltd to operate and that the bond had gone further than Foldaway Investments (Pvt) Ltd had intended as it left it incapacitated to operate. Later on, counsel for the defendant shifted goal posts and attempted to demonstrate that Foldaway Investments (Pvt) Ltd and Zim Halaal Meats were two (2) separate entities and that the assets that had been registered under the Notarial General Covering Bond belonged to Zim Halaal Meats and not to Foldaway Investments (Pvt) Ltd.

Mr Hayter maintained that the defendant had been negligent in that he had disposed of assets that had been tendered to the plaintiff as security under the Notarial General Covering Bond. Mr Hayter maintained that he went to Foldaway Investments (Pvt) Ltd premises on a number of occasions and did not find the assets. As at the time of the trial, the plaintiff did not know where these assets were as the defendant was not forthcoming with information about their whereabouts.

The defendant's evidence

The defendant was the sole witness for his case. His evidence was as follows:

He was a director of Foldaway Investments (Pvt) Ltd, which, at the time of trial, was now under liquidation. The other director was Margaret Ncube. Zim Halaal Meats is a separate entity wherein he is into partnership with other people. Zim Halaal Meats has its own directors and assets which it acquired between 1998 and 2008. Foldaway Investments (Pvt) Ltd was incorporated in 2007 and it does the purchasing of cattle for Zim Halaal Meats whose business is to sell meat for the purpose of catering for the Moslem Community. He said that since the marketing of the meat was done under Zim Halaal Meats it is the name that became publicly known, and, as such, people refer to him personally as Zim Halaal Meats hence people confuse Zim Halaal Meats as Foldaway Investments (Pvt) Ltd. Foldaway is an abattoir that purchases cattle for slaughtering. Throughout the years, Foldaway Investments (Pvt) Ltd was trading with the plaintiff for the supply of cattle.

He was in agreement with Mr Hayter that Foldaway Investments (Pvt) Ltd accumulated a debt on its credit account with the plaintiff which amounted to $96,000= when trading stopped in 2011. When trading stopped he was still in charge of Foldaway Investments (Pvt) Ltd. The defendant stated that Mr Hayter then approached him and said that due to policy change in its trading, the plaintiff now required security to the value of $150,000=. Mr Hayter then asked what assets they had and he told Mr Hayter that they had movable assets. Mr Hayter indicated that he wanted to register a bond on those assets and once that was done Foldaway Investments (Pvt) Ltd could continue trading with the plaintiff. The defendant said that he was agreeable to that arrangement. He said that the plaintiff then sent a valuer to view and value the assets at No.10 Craster Road, Southerton. He said that since it was Foldaway Investments (Pvt) Ltd which was trading with the plaintiff it was Foldaway Investments (Pvt) Ltd which was registering the bond. Thereafter, the bond was registered over movable assets worth US$116,460=. He said that all these assets, which included motor vehicles, belonged to Zim Halaal Meats, but he did not make this clear to Mr Hayter since he had said that the defendant should just list whatever property he used. He said that as the director of Foldaway Investments (Pvt) Ltd he authorised the registration of the bond by the plaintiff's legal practitioners. He said that the plaintiff never requested to register a bond against Zim Halaal Meats. The defendant said that after the bond had been registered Foldaway Investments (Pvt) Ltd continued to trade and to make payment towards the debt of US$96,000= but stopped after paying US$48,000= because it had employed one Daniel Benjamin Palmer as the General Manager. He was negligent in handling the company's affairs, and, at the same time, Foldaway Investments (Pvt) Ltd's supply chain had been cut off by the plaintiff. There was no option but to place the company under judicial management as a way of trying to resuscitate it. The plaintiff never lodged its claim with the judicial manager. The defendant sated that he never at any time sold any of the assets he had mortgaged as security to the plaintiff.

He denied that he was negligent or that he acted fraudulently.

He said that he had traded with the plaintiff for almost 20 years, and, as such, he had no reason to behave in such a manner. He said that when Foldaway Investments (Pvt) Ltd was placed under judicial management its assets were handed over to the provisional judicial manager. He admitted that Foldaway Investments (Pvt) Ltd was placed under provisional judicial management on two occasions. Now it is under liquidation. He said that the assets in question are now under the possession of the liquidator.

The defendant said that the allegation that was made by Daniel Benjamin Palmer, that Foldaway Investments (Pvt) Ltd was selling the assets, were false. He said Mr Palmer was doing this because he was a disgruntled former employee who had a score to settle with him over how he was dismissed from employment.

Under cross-examination, the defendant was asked if Zim Halaal Meats was a private limited company and he initially said yes. He then changed and said that it is a partnership with no directors.

He denied the averments that had been made on his behalf, in his application for absolution from the instance at the close of the plaintiff's case, that Zim Halaal Meats is a common law universitas. The defendant admitted that at Foldaway Investments (Pvt) Ltd he was the person who had been in charge although he had a manager who reported to him. He said that at one time when he was dealing with the plaintiff he was the single shareholder in the company although some shares were later sold. He did not say when exactly he later sold some of the shares. He admitted that Foldaway Investments (Pvt) Ltd also traded as Zim Halaal Meats and it was common knowledge that Foldaway Investments (Pvt) Ltd traded as Zim Halaal Meats. He said he controlled both entities.

He changed his story and said that when the plaintiff asked for security he indicated that Foldaway Investments (Pvt) Ltd had no assets but the plaintiff was welcome to value the assets that Foldaway Investments (Pvt) Ltd used. As a result, the plaintiff used the assets of Zim Halaal Meats and these are the same assets which were handed over to the judicial managers to enable them to use for the resuscitation of Foldaway Investments (Pvt) Ltd since it had no assets of its own. These are the same assets that are now under the possession of the liquidator. The defendant said that Zim Halaal Meats was never closed….,.

The next issue that needs to be determined is: Whether or not the defendant should be declared liable for the debts of Foldaway Investments (Pvt) Ltd to the plaintiff in terms of section 318(1) of the Companies Act

As I have already outlined above, the plaintiff made averments that the defendant, as the director of Foldaway Investments (Pvt) Ltd conducted its business fraudulently or with intent to defraud it as a creditor.

Fraud consists of unlawful making, with intent to defraud, a misrepresentation which causes actual prejudice or which is potentially prejudicial to another. See Ex parte Lebowa Development Corporation Ltd 1989 (3) SA 71 (T).

The plaintiff said that, alternatively, the defendant carried on the business of Foldaway Investments (Pvt) Ltd recklessly or with gross negligence.

In Ex parte Lebowa Development Corporation Ltd 1989 (3) SA 71 (T) it was held that recklessness implies the existence of an objective standard of care that would be observed by a reasonable man in conducting the business of the company in the particular circumstances. A departure from that standard constitutes negligence. A more serious departure constitutes gross negligence which is the same thing as recklessness.

In casu, the plaintiff has been looking for the mortgaged movable property from the time Foldaway Investments (Pvt) Ltd was placed under provisional judicial management in 2013 - and the defendant has not been forthcoming with information as to its whereabouts. It was only during trial, and during the defence case, that the defendant said that the property is with the liquidator. However, he did not lead evidence from the liquidator or adduce any tangible evidence to prove this - it was just his word. There is therefore no reason for the court to believe him. The plaintiff cannot be faulted for concluding that the defendant disposed of this property as he failed to account for the property. It appears that he indeed disposed of the property. Disposal of property which is mortgaged clearly breaches the terms of the Notarial General Covering Bond which prohibit the disposal of the property pending the discharge of the plaintiff's claim.

It is a wrongful deception which was done by the defendant on behalf of Foldaway Investments (Pvt) Ltd when he knew very well that the judgment that was obtained by the plaintiff in HC12769/12 had not been satisfied. The disposal of the assets was done with the intention to defeat the enforcement of the plaintiff's claim thereby resulting in financial loss to the plaintiff. The plaintiff thus managed to show, on a balance of probabilities, that the defendant, as the director of Foldaway Investments (Pvt) Ltd, acted fraudulently in conducting business with it. He should therefore be held personally liable for the debts of Foldaway Investments (Pvt) Ltd to the plaintiff….,.

In view of the foregoing l hereby order that:

1. The defendant is liable, jointly and severally, with Foldaway Investments (Pvt) Ltd for all the debts of that company to the plaintiff, the one paying the other to be absolved.

HB53-16 : RAILINGS ENTERPRISES (PVT) LTD T/A PAROAN TRUCKING vs DOWOOD SERVICES (PVT) LTD /T/A BRADFIELD MOTORS and DAVID LUWO and ROSE LUWO
Ruled By: MATHONSI J

Some people simply will not settle a debt. No matter how many times the creditor runs around the walls of Jericho the walls remain unshakeable and will simply not fall. So steadfast are they that the debtor would rather spend so much on the legal fees of a very senior counsel defending an unassailable claim all ...

Some people simply will not settle a debt.

No matter how many times the creditor runs around the walls of Jericho the walls remain unshakeable and will simply not fall. So steadfast are they that the debtor would rather spend so much on the legal fees of a very senior counsel defending an unassailable claim all the way to the highest court in the land - even if the legal fees surpass the amount of the debt owed.

It is just in their nature that they incur a debt which they have no intention whatsoever of paying back.

Bradfield Motors is, or was, a small family business run by Mr and Mrs Luwo, the second and third respondents, through the medium of an incorporation called Dowood Services (Pvt) Ltd which owns nothing at all. In March 2011, that company, no doubt with the Luwos firmly behind it and pulling the strings as they had the beneficial interest in it, entered into a consignment agreement with the applicant, a purveyor of fuel, in terms of which the company would receive fuel for sale. Immediately after sale, the company would pay the applicant the cost price of the fuel and pocket the profit.

Simple, easy and straight forward if done by honest people.

It however turned out to be not so simple and easy because the company sold the fuel, made the money, and, instead of paying the cost price to the applicant, it diverted it to other uses. In the end it remained owing the applicant US$58,335= and has done everything possible not to pay back even as it had no earthly defence to the applicant's claim.

In HC499/13 the applicant sued the company for payment of the outstanding $58,335=.

The company contested the action, never mind that on 17 April 2012 Mr Luwo had penned an acknowledgment of debt on behalf of the company - even generously spelling out the terms of the consignment agreement that had been breached.

Concluding that the company's defence was “baseless” and that “no conceivable injustice” could be occasioned by the grant of summary judgment, KAMOCHA J promptly entered it.

The company was not done yet.

Displaying what, in the circumstances, could only be a never-say-die attitude, it launched an appeal to the Supreme Court. The apex court was not impressed and quickly dismissed the appeal with admonitory costs. By the time the applicant returned from the long months of travail chasing the company around all the way to the Supreme Court, to try and execute against its property, it had, according, to counsel for the applicant, divested itself of all things executable. The applicant reaped a nulla bona return.

It is against that background that this application, for an order declaring the directors of the company personally responsible for the debts of the company, has been made.

The application has been brought in terms of section 318 of the Companies Act [Chapter 24:03] on the basis that the directors of the company have acted fraudulently or been reckless or grossly negligent in their handling of the affairs of the company which conduct should attract personal liability.

This is because although the company was required by the consignment agreement to sell the fuel and forthwith pay the money to the applicant, the directors converted the money to their own use thereby incapacitating the company and leaving it unable to honour its obligations in terms of the agreement. Having driven the company into a mess the directors then spent time pursuing a doomed defence to the applicant's claim for payment which was as ill-advised as it was dishonest. As the directors are also the sole shareholders in the company, whose business they have conducted in that shoddy manner, they are the alter ego of the company who should not have the benefit of the veil of incorporation.

As predictable as the sun rising from the east every day, the respondents have opposed the application.

Having exhausted all defences on the merits, they have succeeded in only raising a volley of points in limine and apart from what counsel for the respondents conceded to be a bare denial, the respondents have waded clear of the troublesome waters of the merits. Four points in limine were taken by the respondents, namely, that;

1. The matter is res judicata in that a judgment was delivered against the company in HC499/13.

2. The first and second respondents cannot be joined after a judgment has been issued as that amounts to a breach of the audi alteram partem rule. They should have been afforded an opportunity to be heard.

3. The remedy provided for in section 318 of the Companies Act [Chapter 24:03] is only available in respect of companies being wound up or under judicial management.

4. There are disputes of fact in this matter which cannot be decided on affidavits. The matter should have come by summons action.

I intend to deal with the points in limine in turn....,.

Counsel for the respondents submitted that the remedy provided for in section 318 of the Companies Act [Chapter 24:03] is not available to the applicant because the company is not under liquidation nor is it under judicial management.

It is not clear why the question of liquidation and judicial management has been roped in. Section 318(1) of the Companies Act [Chapter 24:03] reads:

“If, at anytime, it appears that any business of a company was being carried on –

(a) Recklessly; or

(b) With gross negligence; or

the court may, on the application of the master, or liquidator or judicial manager or any creditor of or contributory of the company, if it thinks it proper to do so, declare that any of the past or present directors of the company or any other persons who were knowingly parties to the carrying on of the business in the manner or circumstances aforesaid shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”…,.

I agree with counsel for the applicant that the remedy provided for in section 318 of the Companies Act [Chapter 24:03] is available to any creditor of the company at any time and must be brought by way of an application as opposed to action proceedings. That is what the section says and that is what the applicant has done.

It was also half-heartedly submitted that there is present in this matter disputes of fact as cannot be resolved on affidavits.

The dispute, according to counsel for the respondents, arises from the fact that the directors dispute being fraudulent, reckless or grossly negligent in transacting the affairs of the company.

Counsel for the respondents was the first to concede that it is a bare denial which the respondents had no energy to substantiate. They saw no wisdom in presenting their own side of the story.

The resolution of the dispute without doing an injustice to the other party is one of the prime considerations in allowing or disallowing the use of application procedure; Ex-combatants Security Co v Midlands State University 2006 (1) ZLR 531 (H)…,.

My attention has also been drawn to the remarks of WESSELS JA in Da Matta v Otto N.O 1972 (3) SA 858 (A) 882 I, that:

“In the preliminary inquiry, i.e as to the question whether or not a real dispute of fact has arisen, it is important to bear in mind that, if a respondent intends disputing a material fact deposed to on oath by the applicant in his founding affidavit or deposed to in any other affidavit filed by him, it is not sufficient for a respondent to resort to bare denials of applicant's material averments, as if he were filing a plea to a plaintiff's particulars of claim in a trial action. The respondent's affidavits must at least disclose that there are material issues in which there is a bona fide dispute of fact capable of being properly decided only after viva voce evidence has been heard.”

Unfortunately, that is what the respondents have fallen foul of. They have stuck to a bare denial and have not disclosed any material issues from which one could discern a dispute of fact.

A party does not create a real dispute of fact by merely denying the allegations made by the applicant in the founding affidavit. That party must present a story in its defence which would lead the court to the conclusion that indeed a dispute of fact exists as cannot be resolved on the papers.

In any event, even where there exists a material dispute of fact, the court should still try to take a robust and common sense approach to the dispute and endeavour to resolve the dispute. If it succeeds, that would be a first prize. If it does not, then it still has an election to either dismiss the application, where the dispute must have been apparent when the applicant embarked on application procedure, or refer the matter to trial for a resolution of that dispute.

That is the recommendation made by GUBBAY JA…, in Zimbabwe Bonded Fibreglass (Pvt) Ltd v Peech 1987 (2) ZLR 338 (S)…, where the following pronouncement appears:

“It is, I think, well established that in motion proceedings a court should endeavour to resolve the dispute raised in affidavits without the hearing of evidence. It must take a robust and common sense approach and not an over fastidious one; always provided that it is convinced that there is no real possibility of any resolution doing an injustice to the other party concerned. Consequently, there is a heavy onus upon the applicant seeking relief in motion proceedings, without the calling of evidence, where there is a bona fide and not merely an illusory dispute of fact. See Room Hire Co (Pty) Ltd v Jeppe Street Mansions (Pty) Ltd 1949 (3) SA 1155 (T) at 1165; Soffiantini v Mould 1956 (4) SA 150 (E) at 154; Joosab and Others v Shah 1972 (1) RLR 137 (G) at 138 G-H; Lalla v Spafford NO and Others 1973 (2) RLR 241 (G) at 243 B; Masukusa v National Foods Ltd and Another 1983 (1) ZLR 232 (HC).”

In the present case, there is no bona fide dispute of fact.

In fact, what we have is a situation where the facts speak for themselves. A company run by a family, the directors are husband and wife, received fuel on a consignment basis. It was aware that immediately after selling the fuel it was required to remit payment to the applicant. It did not. Instead, it diverted the money to other uses, probably for the benefit of those, the directors, who are the sole shareholders, who have a beneficial interest in the company. All that cannot be disputed; and to make a bad situation worse, the company is now wallowing in poverty with nothing executable in its name.

I conclude, therefore, that there are no disputes of fact in this matter….,.

Counsel for the respondents submitted, rather strangely, if one has regard to the fact that the directors are sued in this application and accused of certain transgressions they have to answer for, that there has been a breach of the audi alteram partem rule. The directors have been denied an opportunity to be heard in the main action where they were not cited.

I have struggled to understand the thrust of that argument, not because there is anything wrong with my thought process but because the argument does not make sense.

The liability of the company was the subject of the summons action in HC499/13. It has been determined. To the extent that the company is liable but unable to pay its debts and has divested itself of property that could be attached to satisfy that debt, the directors are now being accused of bringing about that situation.

They have an opportunity to challenge the application now and the fact that they have spurned that opportunity, content to raise technical issues only, is their business. They have not been denied their right to be heard.

The audi alteram partem rule connotes that both parties must be heard before a decision is taken - nothing more and nothing else. See Decimal Investments (Pvt) Ltd v Arundel Village (Pvt) Ltd and Another 2012 (1) ZLR 581 (H)…,.

This application offers the directors the best opportunity to dispute liability for the debts of the company. Accordingly, the audi alteram partem rule has not been breached….,.

It is a cardinal principle of our company law that a company enjoys separate legal personality quite distinct from its members, and, as such, that its liabilities should not be visited upon its members. The courts have however always readily lifted the corporate veil where the company is used as a locomotive for fraud or to justify wrong. See Barnsley v Harambe Holdings (Pvt) Ltd and Another 2012 (1) ZLR 265 (H)…,.; Deputy Sheriff v Trinpac Investments (Pvt) Ltd and Another 2011 (1) ZLR 548 (H); Mangwendeza v Mangwendeza 2007 (1) ZLR 216 (H)…,.

The provisions of section 318 of the Companies Act [Chapter 24:03], in terms of which this application is made, are an embodiment of the concept of lifting the corporate veil.

The court will not hesitate to visit the liabilities of the company upon a director who is using it as a front for fraud and wrong. It cannot be right that directors syphon money belonging to a business partner and convert it to their own use thereby rendering the company incapable to meet its obligations. Thereafter, having benefited from that conduct, they hide behind the corporate status of the company to avoid paying.

Having danced to the tune it is now time to pay the piper.

In the result, it is ordered that:

1. It is declared that the second and third respondents are personally responsible, without limitation of liability, for the debt owed to the applicant by the first respondent by virtue of the judgment of this court in HC499/13 (Judgment number HB171-13).

2. The respondents shall bear the costs of this application jointly and severally, the one paying the others to be absolved on the scale of legal practitioner and client.

Appealed
SC15-09 : MASIYIWA CLEOPAS GONYE vs STELLA MARIS GONYE
Ruled By: SANDURA JA, ZIYAMBI JA and MALABA JA

In Shipping Corp of India Ltd v Evdomon Corp Anor 1994 (1) SA 550 (A)…, quoted with approval by SANDURA JA in Van Niekerk v Van Niekerk Ors 1999 (1) ZLR 421 (S)…, CORBETT CJ said: “It seems to me that, generally, it is of cardinal importance to keep distinct the property ...

View Appeal
HH261-17 : NJZ RESOURCES (HK) LIMITED vs ANDREW ZINYEMBA AND 18 OTHERS
Ruled By: MWAYERA J and MUNANGATI-MANONGWA J

In Mkombachoto v Commercial Bank of Zimbabwe Ltd Anor 2002 (1) ZLR 21 (H)..., the court held that: “The court may 'lift the veil' only where otherwise as a result only of its existence fraud would exist or manifest justice would be denied. See Botha Van Niekeck 1983 (3) SA 513 W at 522 – 24…,.”

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

The plaintiff, N.R Barber (Private) Limited (hereinafter referred to as “plaintiff”) is a company duly registered in terms of the laws of Zimbabwe, whose registered office is 114 Seke Road, Graniteside, Harare. The plaintiff specialises in mining operations, underground, open cast, mining plans, transport logistics for ferrying the ore from one place to the supplier and related business.

The first letters of the plaintiff stand for Nolan Robert whose surname is Barber. Incidentally, he is the Managing Director and alter ego of the plaintiff.

The defendant, Zambezi Gas Zimbabwe (Private) Limited (hereinafter referred to as the “defendant”) is equally a duly registered company in terms of the law of Zimbabwe whose offices are situated at Number 28 Transtobac Complex, Hillside Road Extension, Msasa, Harare.

Mr Francis Chirimuuta, the Managing Partner of Chirimuuta and Associates, is the Board Chairman of the defendant; Mr E. Raradza is the Managing Director; Mr Thomas Nherera is the Executive Director for Finance and Administration; Mr M. Raradza is the Executive Director for Operations and Marketing; Mrs R.M Kajese being the fifth Director.

The defendant is a proprietor and hence holder of a coal mine situated in Hwange under a special Grant Number 4084 in respect of coal reserves which comprise of approximately 20,000,000 (twenty million) tonnes mineable and extractable in situ tons of coal. The defendant then formed a Special Purpose Vehicle under the name of Entuba Coal Fields of Zimbabwe (Private) Limited whose registered office address is given as 28 Hillside Road Extension Transtobac Complex, Msasa, Harare whose directors are Dr C. Msipa, Mr Hlongwani, Mr E. Raradza, Mr T. Nherera and Mr M. Raradza.

Dr C. Msipa and Mr Hlongwani are directors of another entity called Coal Brick which company is known to the plaintiff. Hence, Mr E. Raradza and Mr T. Nherera are both directors of the defendant and Entuba Coal Fields of Zimbabwe (Private) Limited.

On 28 August 2017, the plaintiff issued summons against the defendant for the following relief;

(a) Payment of the amount of USD3,885,000, being payment of money due and owed to the plaintiff by the defendant in terms of an acknowledgment of debt which was executed by the defendant in favour of the plaintiff on the 15th of February 2017;

(b) Interest on the amount at the prescribed rate of 5% per annum calculated from the date of summons to the date of payment in full; and

(c) Costs of suit on attorney client scale.

In paragraph 3 of the plaintiff's declaration it summarises the plaintiff's cause of action as follows:

“3. On the 15th of February 2017 the defendant executed an acknowledgement of debt in favour of the plaintiff wherein it admitted that the amount of $3,885,000 (three million eight hundred and eighty five thousand United States dollars) was due and owed to the plaintiff as a debt arising from the work done by the plaintiff at Entuba Mine at the instance and request of the defendant.”

In paragraph 5 of its declaration the plaintiff adds:

“The defendant failed to pay the monthly instalments as per the acknowledgement of debt and the amount of US$3,885,000 is now due and owed to the plaintiff.”

The defendant entered appearance and filed its plea and the gravamen of its plea is contained in paragraph 3 which states the following:

“3: Ad Paragraph 3 Defendant denies;

(a) The existence of any privity of contract between plaintiff and itself and denies that any work was allegedly performed on its behalf.

(b) That plaintiff performed work on its behalf or for whomsoever at its special instance and request. It puts plaintiff to the proof thereof.

Defendant, consequently, denies that there was any legal cause for the alleged acknowledgement of debt.”

On the strength of this plea, the defendant prays that the plaintiff's claim be dismissed with costs.

On 29 January 2018 the parties signed a joint pre-trial conference minute which streamlined issues for trial as follows:

“1. Whether there was legal cause for the acknowledgement of debt.

2. Whether the debt acknowledged by the defendant arises from work done by the plaintiff at the instance and request of the defendant.

3. What amount is due by the defendant to the plaintiff?”

On 13 June 2018 the matter proceeded to trial.

Mr N R Barber, the plaintiff's Managing Director, gave evidence. He stated that between 2013 and 2014 he was tasked to do work at Hwange by Entuba Mine, a company owned by the defendant company. The total amount due from Entuba was $3,012,493=46, and, on 12 May 2016, the defendant's Chief Executive Officer, Mr Thomas Nherera, wrote to the plaintiff acknowledging its indebtedness to the plaintiff for that amount.

The first acknowledgement of debt, authored and signed by the defendant's Directors, was produced by the plaintiff in court and accepted as exhibit number 1.

In the contents of exhibit 1, the witness pointed out that the defendant thought it acknowledged its indebtedness to the plaintiff in the sum of $3,012,493=46, a reconciliation of the total capital owed was going to be carried out and factor in any amount towards fuel expense issued to the plaintiff during the operations, thereafter, interest was going to be added to the capital.

On 15 February 2017, Mr N.R. Barber told the court that indeed a second acknowledgement of debt showing a deduction in capital and a figure of interest was signed by the defendant. The second acknowledgement of debt, exhibit 2, was produced in court.

Mr NR Barber further clarified and confirmed that although all the invoices were reflecting Entuba Coal Mine, those were subsequently accepted by the defendant and the defendant acknowledged its indebtedness to the plaintiff and what was more crucial to the plaintiff were the acknowledgements of debt specifically created, authored, and signed, by the defendants which formed the plaintiff's cause of action.

He clearly testified that Entuba Mine was a special purpose vehicle formed by the defendant and he was not surprised when the defendants delivered to him exhibit(s) 1 and 2. He believed the defendant when it told him that it was going to take over the debt.

In any case, according to the witness, the defendant was the beneficiary of the product the plaintiff produced.

He added that at all material times Mr T Nherera was aware of all the invoices issued to Entuba and Mr T. Nherera used the same invoices to prepare and reconcile figures which he ultimately used to compile the acknowledgement of debts.

Mr N.R. Barber was extensively cross examined by the defendant's counsel but he maintained his stance, and, further, added that although the defendant was joined by Linos Masimura, well after the signing of the acknowledgement of debt, the defendant did not challenge the authenticity of the acknowledgment.

Mr NR Barber was actually surprised when Mr E Raradza and Mr T Nherera refused to honour the defendant's indebtedness. The amount of $3,885,000 was calculated and reconciled by the defendant and it ought to be honoured he contended.

The plaintiff's second witness was Mr Antiock Kuraone who was appointed as agent by the plaintiff to recover the outstanding debt.

When the witness was appointed he engaged the Directors of the defendant, the Managing Director, Mr E Raradza, and Mr T. Nherera. The defendants unreservedly acknowledged owing the plaintiff an amount of $3,885,000 and they produced exhibit no. 2 where the defendant indicated the proposed date of payment with a cut-off date for last payment being February 2020.

The witness reiterated the fact that in as far as the legal cause of the acknowledgement of debt was concerned, the acknowledgements themselves, prepared by the defendant, succinctly disclosed the cause, that is, for payment of money for the work done for the defendants at Entuba Mine in Marange.

Exhibit 2 was signed by the Managing Director, Mr E Raradza, and Director Finance and Administration, Mr T Nherera.

The two were not forced and co-operated throughout the engagement, he said.

He also clarified that at no time did the defendant raise the issue of liability; the sticking issue that arose when he came into the matter was basically reconciliation, more particularly, of factoring in the fuel aspect. Otherwise, the parties were in agreement as to the amount.

During cross examination by the defendant's counsel, the witness remained adamant that the issue of legal causa did not arise during the engagement.

Mr T. Nherera was fully aware of all the verifications and he (Mr T Nherera) is the one who did the reconciliation.

Mr Kuraone rejected the amount of $896,884 as the correct amount and denied that Mr Masimura engaged him for a revisit on the alleged reconciliation of the figures contained on the acknowledgements.

After the acknowledgement, what Mr Kuraone and the plaintiff were waiting for was payment. When the defendant did not honour the payment he advised the plaintiff to take legal action, which the plaintiff did.

Mr Antiock Kuraone impressed the court as an honest witness, he did not exaggerate but remained forthright. He actually confirmed Mr N.R. Barber's testimony and both witnesses were credible. Their evidence tallies with the exhibits produced in court....,.

Defendant's Evidence

The defendant called Mr Edward Raradza, its Managing Director; to give evidence. I will deal with portions of his evidence relevant to the matter before me.

He told the court that sometime in September 2013 the defendant and Coal Producers and Processors Trust Zimbabwe entered into a joint venture agreement where the two parties formed a Special Purpose Vehicle, Entuba Coalfields (Private) Limited. The defendant was to avail its mining concession to the joint venture and Coal Producers Trust was to provide resources to mine the coal.

The plaintiff was brought on site to Entuba Coalfields to provide mining contractor services.

According to the witness, it was Coal Producers Trust which brought the plaintiff to Entuba and payment of work done by the plaintiff, per Entuba, was Coal Producers Trust's responsibility. He repeated what is contained in the defendant's plea, that there was no contractual arrangement between the plaintiff and the defendant.

In July 2015, the Special Purpose Vehicle, Entuba Coal Mine Company, became dysfunctional and the defendant repossessed its mining concession. The defendant was aware of the plaintiff's debt, and, according to Mr E Raradza, the defendant, without any legal obligation thereto, executed an acknowledgement of debt in favour of the plaintiff in the amount that the plaintiff had indicated was wrong subject to a reconciliation being conducted.

He added that the defendant could not pay because the income flows from the mining operations did not permit fulfilment of such undertakings that the defendant had made.

During cross-examinations by the plaintiff's legal practitioner, Mr Raradza unequivocally admitted that the Directors and the defendant company confirm that the plaintiff is owed but the only contentious issue was the amount. He accepted the authenticity of both exhibit 1 and 2, and, per exhibit 2, he accepted that he co-signed it but he was not familiar with issues relating to costing mining invoices. He admitted that efforts were made to reconcile the figures acknowledged but was not clear as to when such efforts were made before the drafting of exhibit 2 or after it was already signed.

Most of his evidence actually substantiated the plaintiff's case.

The defendant's second witness was Mr Thomas Nherera. In principle, the witness dwelt more on corporate divisibility, that, as long as there are two existing companies, the liability of one does not cross the demarcating line to the other side. Each company is accountable to its own liabilities. Hence, the defendant did not enter into any contractual relationship with the plaintiff, and, as such, there was no pretext for the writing of the acknowledgement of debt.

He however brought a very crucial revelation which greatly assisted this court. He admitted, under cross examination, that the Managing Director of the defendant and himself were both directors of Entuba. He was its Chief Executive Officer and he is the one who received all the invoices from the plaintiff. Using those invoices, he prepared exhibit 1 and 2. However, when exhibit 1 and 2 were prepared and signed, the real motive was to retain business relationship and rapport with Mr NR Barber but thus far.

He also admitted that Entuba had no assets at all and was fictitious in principle.

Mr T Nherera was evasive during cross-examination and had difficulties in answering simple questions. He contradicted Mr E Raradza especially on the aspect of liability of the defendant to the plaintiff.

Mr Linos Masimura was the defendant's third witness.

He holds a Masters in Business Leadership and is involved in mining operations in Zimbabwe and South Africa. He is the Deputy Managing Director of the defendant from June 2017. When he joined the defendant he was briefed about the defendant's status, its employees and liabilities. He was shown exhibit 1 and 2 and undertook to do a verification exercise. He visited the mine at Hwange with Mr E Raradza, the Mining Manager, and Mr Kurauone. He worked out a reconciliation thereafter and came out with a figure of $896,884 as being the “real” amount per the work done by the plaintiff. He also worked out the total sum of payments made to the plaintiff by Entuba or payments made to the plaintiff for work done.

He strengthened the defendant's plea that there was no legal causa between the plaintiff and the defendant.

During “conciliation” of figures, he worked with Mr Kurauone who was representing the plaintiff but when the witness engaged Mr Kurauone with the figure of $896,884 Mr Kurauone could not accept it.

The witness is not an accountant, he did not produce a comprehensive audit report based upon the acknowledgement figures and show the deductions of double invoicing. The document shown by the witness is but scanty. It does not show the reconciliation process for one to come up with the amount of $896,884.

The witness was cross-examined by the plaintiff's counsel and was at pains to explain how he arrived at that figure of $896,884.

He did not agree with the Managing Director's evidence that the defendant owes the plaintiff money.

After the testimony of Mr L Masimura, the defendant closed its case....,.

Analysis of plaintiff's Exhibits

Exhibit 1

Exhibit 1 is the first acknowledgment of debt dated 12 May 2016. The exhibit reads as follows:

“AGREEMENT OF INDEBTEDNESS

We acknowledge our indebtedness to your company, N R Barber (Pvt) Ltd, in regards to the contract mining work your company carried out for us at Zambezi Gas's Entuba Coal Concession in Hwange, Zimbabwe.

We acknowledge the capital amount of USD3,012,493=46 (USD Three million and twelve thousand four hundred and ninety three dollars and forty six cent) subject to the reconciliation of the total amount of fuel issued out to NR Barber (Pvt) Ltd mining team during the period between 16 May 2014 to 4 June 2014. This amount excluding interest. This interest will be added after reconciliation of total capital amount owing as per the contract.

We are also agreeable to your proposal that as soon as inflows of income from our mining operations start to come in the proceeds will be shared amongst us at the agreed percentages that shall be agreed between Zambezi Gas and NR Barber (Pvt) Ltd at that time. We are also agreeable to giving you full access to our books of accounts so as to have full transparency between us.

This agreement is without prejudice to prior contracts made between our two parties….,.”

The letter was written by the defendant company and signed by Mr Thomas Nherera, its Chief Executive Officer, the defendant's second witness in this trial. It originates from the defendant company written on the defendant's letter head. The defendant's witnesses acknowledge same.

Exhibit 2

This letter was written and signed by Mr E Raradza (the Managing Director of the defendant) and Mr Thomas Nherera (Executive Director Finance and Administration) dated 15 February 2017 on behalf of the defendant.

It is equally central to this matter and it needs extensive quotation and analysis. It is necessary to quote it as is:

“Zambezi Gas Zimbabwe Private Limited

15 February 2017, Mr J.M Kurauone, Harare, Attn: Mr Kurauone

Dear Sir

REPAYMENT PROPOSAL FOR THE PAYMENT OF N.R BARBER (PVT) LTD

We, as Zambezi Gas Zimbabwe (Pvt) Ltd, are committed to the repayment of the principle debt of USD2,715, 000 (two million seven hundred and fifteen thousand dollars) and an interest amounting USD1,170,000 (one million one hundred seventy thousand dollars) to the work done at Entuba Coal Mine in Hwange between 2014 and 2015. We are proposing the following repayments starting from February 2017 onwards to February 2020.

MONTH AMOUNT (USD)
February 2017 10,000
March 2017 10,000
April 2017 15,000
May 2017 15,000
June 2017 20,000
July 2017 20,000
August 2017 30,000
September 2017 30,000
October 2017 40,000
November 2017 40,000
December 2017 40,000
Total 265,000

January 2018 50,000
February 2018 50,000
March 2018 70,000
April 2018 70,000
May 2018 90,000
June 2018 90,000
July 2018 100,000
August 2018 100,000
September 2018 100,000
October 2018 100,000
November 2018 100,000
December 2018 100,000
Total 1,020,000

January 2019 150,000
February 2019 150,000
March 2019 200,000
April 2019 200,000
May 2019 200,000
June 2019 200,000
July 2019 200,000
August 2019 200,000
September 2019 200,000
October 2019 200,000
November 2019 200,000
December 2019 200,000
Total 2,300,000

January 2020 150,000
February 2020 150,000
Total 300,000

Total all arrears $ 3,885,000

We are hopeful that you will find this a fair way of settling this outstanding debt.

Yours faithfully

E RARADZA (ER)
T NHERERA (TN)
MANAGING DIRECTOR, EXECUTIVE DIRECTOR FINANCE & ADMINISTRATION”

Exhibit 1 and 2 gave rise to the action taken by the plaintiff. The following aspects seem not to be controverted by the parties;

(a) The defendant and the plaintiff are known to each other in business.

(b) The defendant's own agents/Directors, Mr E Raradza (the Managing Director) and Mr T Nherera (Executive Director: Finance & Administration) wrote exhibit 2 above proposing to settle the debt of the exact amount owed by the defendant to the plaintiff in the sum of $3,885,000.

(c) The defendant unconditionally undertook, and promised, to pay specified amounts of money per month from 2017 to the month of February 2020.

(d) The acknowledgments of debt are of a specific sum of money and made in writing by the defendant's authorised agents and accepted by the plaintiff.

(e) The defendant is bound by the actions of its agents, Mr E Raradza and Mr T Nherera; resultantly, the defendant, through, the actions of its agents, rendered itself liable as the principal.

(f) Exhibit 2, written by the defendant acknowledging indebtedness to the plaintiff, is not denied by the defendant in its pleadings, hence, it is deemed authentic and accepted by the defendant.

Contrary to what is contained in the defendant's plea, more particularly paragraph 3 thereto, the defendant, in its letter of 15 February 2017, unreservedly acknowledge that the US$3,885,000 was due “to the work done at Entuba Coal Mine in Hwange between 2014 and 2015.”

The opening of the letter/acknowledgment of debt dated 15 February 2015 reads as follows:

“We, as Zambezi Gas Zimbabwe (Pvt) Ltd, are committed to the repayment of the principle (sic) debt of…,.”

This, in this court's view, is not disputed by the defendant.

If the foregoing are issues of common cause then what is the reason proffered by the defendant to impugn or perjure the acknowledgment of debts duly signed by it?...,.

When the defendant, on its own letter head, signed by its own Directors acknowledging the amount due and proposing sums of payments per month, then disown such evidence, defies all logic....,.

Entuba Coal Mine was created by the defendant's Directors. The registered office of Entuba was the same with that of the defendant, 28 Transtobac Complex, Hillside Road Extension, Msasa, Harare. Mr Thomas Nherera was Entuba Coal Mine's Chief Executive, and, the defendant's Managing Director, Mr E Raradza, was a co-Director of Entuba. Entuba was formed to operate the defendant's mining concession in Hwange and all the invoices for Entuba were sent to the defendant's address for the attention of Mr T Nherera.

Entuba Cola Mine was hence purely an alter ego of Mr Raradza and Mr Nherera. One cannot differentiate the defendant from Mr Raradza and Mr Nherera and from Entuba....,.

Assuming that the defendants are stating the truth that the court should treat Entuba and the defendant as separate legal entities, which I do not accept; from the day exhibits 1 and 2 were written by the defendant such acknowledgments bound the defendant and exhibit 2 became the cause of action at the instance of the plaintiff.

View Appeal
HB159-11 : HILDA SIBANDA vs TEEJAY SIBANDA
Ruled By: NDOU J

(d) Simpson Electrical (Pvt) Ltd and Muntomuhle Investments (Pvt) LtdThe plaintiff wants to be given twenty-five (25%) percent of the shares in Simpson Electrical (Private) Ltd and fifty percent (50%) of the value of the immovable property owned by Muntomuhle Investments (Pvt) Ltd.Simpson Electrical was incorporated in 1989 before the ...

(d) Simpson Electrical (Pvt) Ltd and Muntomuhle Investments (Pvt) Ltd

The plaintiff wants to be given twenty-five (25%) percent of the shares in Simpson Electrical (Private) Ltd and fifty percent (50%) of the value of the immovable property owned by Muntomuhle Investments (Pvt) Ltd.

Simpson Electrical was incorporated in 1989 before the defendant met the plaintiff. The defendant and his late brother were the only shareholders when it was incorporated. It is the defendant's case that he is no longer a shareholder of Simpson Electrical having donated his shares to his children from a previous marriage as per share certificates dated 3 December 1995 - that is almost a year before the parties were married.

The courts have accepted as trite the principle that a company duly incorporated is a distinct legal entity endowed with its own legal personality. It is equally trite that the veil of incorporation may be lifted where necessary in order to prove who determines or who is responsible for its activities, decisions, and control of the company; Sibanda & Anor v Sibanda 2005 (1) ZLR 97 (S)…, and Mangwendeza v Mangwendeza 2007 (1) ZLR 216 (H)…,.

In my view, this is a case that requires the lifting of the veil of incorporation because of the reasons that will be explained hereinunder.

According to the credible testimony of the plaintiff, when she got married to the defendant, Simpson Electrical was situated in Robert Mugabe Way between 14th and 15th Avenue. It was a small shop. They moved the shop into bigger premises in Pioneer House. The latter premises proved too big for the level of their trading. More stock was required. The defendant's resources proved inadequate for stocking a shop of that magnitude. They sold their cars to raise capital for the business. She also put in her funds. She was the one doing the buying of stock for the business. This involved her travelling up and down to South Africa.

She was told that the business was registered under the names of the defendant and his late brother.

The business grew in leaps and bounds. The family benefitted a lot from the growth of the business. They were able to carry out extensive extensions of the Woodlands property as alluded to above. Because the business was flourishing, they acquired the Hillcrest property and two Stands in Pumula South; built houses thereon.

These latter houses were registered in the names of the family members.

The business had some substantial disposable income - even after these investments. They decided to expand the business further. According to the plaintiff, they then approached her uncle (who was in the employ of the Bulawayo City Council). Through her said uncle, they were offered an industrial Stand in Donnington West. They used money from the business to pay for the industrial Stand.

When the defendant went to pay for the Stand he registered it in his name.

She said they toiled to build a factory i.e. double storey structure. They sent their children abroad. She also said that she sold her Paddonhurst house to the defendant's cousin and ploughed the proceeds thereof to Simpson Electrical by way of purchasing stock. This factory was massive. They rented it out to a company known as Setex. The tenants developed interest in the factory and offered to purchase it. The parties agreed to sell it. The proceeds of the sale of the factory were used to buy and reconstruct the building in 129-130 Robert Mugabe Way, which is the major asset of Muntomuhle Investments.

This fact is admitted by the defendant as evinced by his letter dated 5 March 2007 in the bundle of documents. In the same letter, drafted by his legal practitioners of record, the defendant concedes that the plaintiff is a shareholder of Simpson Electrical holding 25% shares.

After the acquisition of the Robert Mugabe Way property she fell ill. She was away for three months. She was first hospitalized and operated at Mater Dei Hospital, and, later, at St Annes Hospital, Harare where she was further operated. When she recovered, she approached the defendant for the title deeds of the property and he refused to show her. She said she was not amused and accused him of trying to make her “his slave”. They eventually decided to go separate ways.

The defendant offered her 25% of this property saying the other shares belonged to his children and himself (i.e. 25% and 50% respectively).

She said that she was later surprised to be told that the same building belongs to Muntomuhle Investments. It is her case that this company was incorporated to cheat her.

I am in agreement with this testimony.

The evidence points to a major contribution by the plaintiff in the growth of Simpson Electrical. After the plaintiff got involved in the running of Simpson Electrical there was fundamental expansion, thanks to the joint effort of both parties.

As far as Muntomuhle Investments (Pvt) Ltd is concerned it is a creature of the defendant for the dissipation of the assets of Simpson Electrical in order to defeat the plaintiff's just claims. Even the defendant's own witness, Nomalanga Sibanda, conceded that Muntomuhle Investments was a family project. More importantly, she evinced that -

(a) Muntomuhle Investments company never had an Annual General Meeting or directors' meeting;

(b) The shareholders had never been paid dividends;

(c) They were never (as shareholders) made aware of the donation of the shares or the company affairs; and

(d) That as far as she was aware Muntomuhle was the defendant's project and he could do as he wished or liked with the company or the shares.

The defendant was, therefore, the alter ego of Muntomuhle Investments (Pvt) Ltd. He was not only running the show at Muntomuhle Investments (Pvt) Ltd - he and Muntomuhle Investments (Pvt) Ltd have become one.

In light of the plaintiff's immense contribution towards the main asset of Muntomuhle Investments (Pvt) Ltd, as explained above, this court has no option but unmask Muntomuhle Investments (Pvt) Ltd and declare the plaintiff an owner of 50% of the market value of the building owned by Muntomuhle Investments (Pvt) Ltd known as Downings Buildings, Robert Mugabe Way, Bulawayo.

HH551-15 : W AND D CONSULTANTS (PRIVATE) LIMITED vs SEAN THOMAS NIELSON DORAN
Ruled By: DUBE J

This dispute came before me as a trial matter. The parties agreed to dispense with the need to call oral evidence there being no disputes of fact arising from the facts. Thereafter, the parties filed heads of argument and a Statement of Agreed Facts.After argument, the court granted the following ...

This dispute came before me as a trial matter. The parties agreed to dispense with the need to call oral evidence there being no disputes of fact arising from the facts. Thereafter, the parties filed heads of argument and a Statement of Agreed Facts.

After argument, the court granted the following order;

“IT IS ORDERED THAT:

1. The defendant shall give vacant possession of No.7 St. Michaels Lane, Borrowdale otherwise known as the remaining extent of Stand 10 Reitfontein Township of Lot 1AB Reitfontein measuring 4,714 square meters within (7) seven days from the date on which the order is served on the defendant.

2. If the respondent, or any person occupying the property through him, remains on the property after that date, the Sheriff is authorised to remove them and their possessions from the property.

3. Payment of holding over damages in the sum of US$2,000 dollars per month from the 7th of February 2013 to the date of ejectment.

4. Costs of suit.”

Brief reasons for the order were given. The court has now been requested for detailed reasons for its order.

The salient facts of this dispute are common cause.

On 12 July 2013, the plaintiff issued summons claiming the ejectment of the defendant and all persons claiming occupation through him from No.7 St Michael's Lane, Borrowdale, Harare and holding over damages at $3,000 per month from January 2013 to the date the defendant vacates the property.

The plaintiff is the registered owner of the property in dispute having bought it at a sale in execution and subsequently transferred it into its name. The defendant, who is in occupation of the property with his family, has refused to vacate the property.

The brief background of this case is aptly summarised in the Statement of Agreed Facts as follows;

“1. A judgment by default for the payment of an amount of US$415,951=91, under case number HC5917/10, was obtained by Kingdom Bank against the defendant, Dreibond Investments (Private) Limited (“Dreibond”) and 9 other defendants on the 14th of February 2011.

2. The judgment also provided that a certain piece of immovable property known as certain piece of land situate in the District of Salisbury called the Remaining Extent of Stand 10 Rietfontein Township of Lot 1AB Reitfontein measuring 4,714 square meters (“the Property”) be declared executable.

3. The Property was registered in the name of Dreibond. Dreibond is not a trading company.

4. The defendant holds all the issued shares in Dreibond.

5. The directors of Dreibond, as per the Company Office records, are Louise Nielson-Doran and the defendant.

6. A writ of execution against immovable property was issued in matter HC5917 on the 15th of April 2011.

7. The Property was attached into execution and duly advertised for sale by public auction on the 19th of October 2012.

8. The Plaintiff, represented by Tsitsi and Prince Zireva, bid for the Property, and the Sheriff for Zimbabwe, on the 7th of November 2012, duly declared the Plaintiff the highest bidder and purchaser of the Property at a purchase price of US$284,000.

9. The Property was transferred to and registered in the name of the Plaintiff on the 5th of February 2013.

10. On the 7th of February 2013, the Plaintiff demanded that the Defendant vacates the Property.

11. The Defendant has refused to vacate the Property and contends that he has the right to remain in occupation in terms of a lease agreement allegedly executed between Dreibond and his wife, Louise Nielsen Doran, on the 28th of September 2012. A copy of the alleged lease agreement is attached hereto marked Annexure “A”. The alleged lease agreement provides for the payment of rentals at the rate of US$1,500 per month.

12. The Defendant and/or his wife have not paid any rentals whatsoever to the Plaintiff. The Defendant tendered rent to the Plaintiff on the 24th of July 201.

13. The Defendant and the other 10 defendants applied for the rescission of the default judgment of the 14th of February 2011 under case number HC9634/11. The application was dismissed on the 17th of October 2013. Judgment HH363-13 refers.

14. On the 19th of March 2013, the Plaintiff obtained a report from Clipcrunt Real Estate which put market rentals for the property at US$3,000 per month. A copy of the report is attached hereto marked Annexure “B”.

15. Defendant obtained two (2) independent evaluation reports from Estate Agents which put the rentals for the Property at US$1,500. Copies are attached marked as Annexure “C” and “D”.

16. The Parties have agreed that a fair market rental for the Property is in the amount of $2,000 per month.”

At the hearing of this matter, the defendant raised preliminary points which I will deal with in seriatim....,.

The defendant further submitted that the defendant has the lawful right to remain in occupation of the premises through his wife, Louise Nielsen, who has a legal and binding lease with the former owners of the property thus, Dreibond Investment (Private) Limited.

The defendant submitted that the new owner, the plaintiff, is bound to observe and adhere to that lease agreement on the basis of the huur gaat voor koop concept.

Further, that the defendant's wife ought to have been joined to these proceedings on the basis that she is the holder of that lease.

I propose to deal with this point when I deal with the merits of this case as this point is intrinsically intertwined with the merits of this matter....,.

I now come to the merits of this matter.

I will deal, first, with issues related to the making of the lease agreement and the correctness of the parties before the court.

The ownership structure of the company reveals the following:

(i) The defendant is the sole shareholder of Dreibond Investments (Pvt) Ltd, the former owner of the property which is subject of this dispute.

(ii) The company is not a trading company.

(iii) The defendant and his wife are the only directors of that company.

(iv) The property was registered under the defendant's company and was sold in order to settle the defendant and his company's indebtedness to Zimbank Bank.

The cardinal principle is that a company is a separate entity which has a separate and distinct legal existence from that of its members: see Salomon v Salomon (1897) AC 22 (HL). There are exceptions to this rule and these are grounded on policy considerations.

In US v Milwaukee Refrigerator Transit Company (1905) 42 Fed 247…, the court said of exceptions to the rule;

“When the notion of a legal entity is used to defect public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association.”

In such cases, the courts will lift the corporate veil and investigate the activities of the company.

In Cape Pacific Ltd v Lubner Controlling Investment (Pty) Ltd and Others 1993 (2) SA 784 (C) the court held as follows;

“The general principle underlying this aspect of the law, of lifting the veil, is that, when the corporation is the mere ego or business conduit of a person, it may be disregarded. This rule has been adopted by the courts in those cases where the idea of the corporate entity has been used as a subterfuge and to observe it would work an injustice.”

In Waltersteiner v Moir; Moir v Waltersteiner and Others (1974) 3 ALL ER 217 (CA) DENNING MR was prepared to treat various companies through which the appellant, Dr Waltersteiner, had operated as if they were “just puppets of Dr Waltersteiner.” At 1013 of the judgment, LORD DENNING held as follows;

“He controlled their every movement. Each danced to his biding. He pelted 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 being his creatures for whose doings he should be and is responsible.”

The evidence that emerged during the trial shows that the defendant and his wife have always been in occupation of the house. They then devised a scheme to save the property from the sale that was imminent. They entered into a lease agreement between themselves on the eve of a sale in execution of the house.

It is necessary to unwrap the lease agreement and reveal its true nature.

On 14 February 2011, Kingdom Bank obtained a default order against the defendant's company. A writ of execution against the property was issued on 15 April 2011 resulting in the property being attached. The property was advertised for sale by the Sheriff on 19 August 2011. The defendant tried to stop the sale by filing an urgent chamber application under HC12308. That application was not to yield any fruit.

The defendant's company states that he only got to know of the default judgment on 19 August 2011 when adverts appeared in the Herald Newspaper advertising the sale in execution. The property was going to be sold on 2 September 2011. The property was sold soon after the urgent chamber application on 7 November 2012.

On 28 September 2011, the defendant's company entered into an agreement of lease over the property. The defendant signed the agreement on behalf of his company. The defendant and his wife continued in occupation of the property.

The lease agreement was entered into after the Sheriff had indicated that the property was going to be sold.

The defendant and his wife were aware, from as far back as April 2011, when judgment was entered against them, that this property was going to be sold. The defendant's company and his wife entered into a lease agreement solely for purposes of defeating the sale in execution that was imminent and so that they could remain in occupation of the property after the sale.

The circumstances of the making of this lease agreement call for the court to pierce the corporate veil and investigate the activities taking place thereunder.

This case is akin to the Cattle Breeders Farm (Pvt) Ltd v Veldman (2) 1973 (2) RLR 261 case. This case involved a husband who used his company to try and evict his wife. The court ruled that the husband could not hide behind the company to seek eviction of his wife.

The defendant has tried to hide behind his wife and the company by leasing the property in issue to her and to escape eviction.

The lease agreement was deliberately offered to the wife even though there is no actual distinction between the wife, the defendant, and the company.

Our courts have held that a husband and wife hold a uniquely special relationship and that they normally have a common interest and household: see Warren Park Trust v Antony Ernest Pahwaringira and Others HH39-09 and Masiyiwa Cleopas Gonye v Stella Mavis Gonye SC15-09.

The facts of the case involved a company formed by the appellant which he, his wife, and sons were shareholders. The court held that the company was part of the matrimonial estate. The court held as follows:

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

When one considers the defendant's position in the company, and that of his wife, one cannot avoid the conclusion that the property was, before the sale, part of the matrimonial estate of the defendant and his wife.

The transaction entered into is a simulated and dishonest transaction.

The court is not deceived by its form but is concerned about its substance. It appears to me that this is a mere paper agreement. It cannot become a real agreement.

In Kilburn v Estate Kilburn 1931 AD 501 the court held that;

“…, a court of law will not be deceived by the form of a transaction; it will rend aside the veil in which the transaction is wrapped and examine its true nature and substance.”

In Boots Company (Pvt) Ltd v Somerset West Municipality 1990 (3) SA 216 (C)…, the court set out the law on simulated contracts as follows:

“I take the law on this question from the case of Skjelbreds Rederi A/S and Others v Hartless (Pvt) Ltd 1982 (2) SA 710 (A) in particular, I cite the following passage from the (as he then was), reading from p732:

'The law relating to the question of simulated, or disguised, agreements is summed up in the well-known Roamanism, plus valet quod I agituraquam quod simulate concipitur. In Justiniaris Codex 4.22.1 the rule is briefly stated in the following terms: In Contractibusrei veritas debet, i.e. in contract the truth of the matter, rather than the writing, must be looked at.'”

In Zandberg v Van Zyl 1910 AD 302 INNES JA dealt with this subject and held that in a simulated contract, parties enter into such a contract in order to secure some advantage which otherwise the law would not give or escape some disability which the law would otherwise impose. He says, at 309, that such parties;

“Endeavour to conceal its (transaction) real character. They call it by a name, give it a shape intended not to express but to disguise its nature, and, when a court is asked to decide any rights under such agreement, it can only do so by giving effect to what the transaction really is and not what it, in form, purports to be.”

It is easy to detect this simulation.

This is to be done by considering the facts leading up to the contract and circumstances under which it was made.

It is apparent that the transaction, or agreement, was entered into simply to retain the property.

The defendant company and the defendant's wife entered into the lease agreement in order to thwart the sale of the house. They devised a plan wherein they would remain in occupation of the property despite the sale and defeating the sale in execution that was in progress. The agreement was entered into after the writ of execution had been issued and after the property had been placed under judicial management. They wanted to defeat the sale at all costs. They devised a strategy to defeat the sale.

The defence of huur gaat voor koop is being raised to frustrate the plaintiff's rights.

The defendant now resists the eviction on the basis of this lease agreement. He seeks to hide behind his wife. His partner in crime. It is clear that the lease agreement was made simply to save the property. The parties to the lease agreement were not bona fide when they entered into the lease agreement.

The court has considered, in coming up with this position, that the defendant is a sole shareholder and owner of the company. He is, in effect, the sole owner of the company. His company, represented by himself, entered this contract with his own wife, a director of the company. The defendant signed the lease agreement in the face of a pending execution. The defendant benefits from the existence of the lease. He is actually in occupation of the property with his wife. He was well aware that he would benefit from the agreement he was signing. The parties were in occupation of the property without a lease agreement prior to the sale.

One wonders why there was now a need for a lease agreement.

The defendant clearly sought to protect his property. Any threat to the property was a threat to him. This cannot be a genuine lease agreement. There is no doubt in my mind that the lease agreement was simulated.

The evidence reveals that the defendant entered into the lease agreement to evade a creditor who was pursuing his company and property. The lease agreement was fraudulently entered into.

This is a proper case in which to lift the corporate veil and investigate the activities of the company.

The defendant is the alter ego of the company. The defendant controlled the company as he was the sole shareholder. He and his wife were the only two directors of the company. The company is a one-man company. He is the company. The defendant's company is his. There is no separation between the defendant and his company. The company is simply a tool through which the defendant owned the property. He cannot be separated from the company. The defendant has involved in activities, through the company, which are irregular and fraudulent. The defendant used his company to justify wrong and protect fraud.

This lease agreement is irregular. This agreement cannot stand in the way of the plaintiff's claim. The lease agreement is a nullity and no rights flow from it.

The plaintiff is, on the basis of this reason alone, entitled to evict the defendant, his company, and his family from the house in issue.

HH75-10 : A.C. CONTROLS (PVT) LTD vs EMMANUEL MIDZI and ALPADETAIL (PVT) LTD t/a E AND Z ENTERPRISES P/L
Ruled By: UCHENA J

The applicant is a company duly incorporated in terms of the laws of Zimbabwe. It carries on the business of electrical engineering. The first respondent was its employee. He was its Chief Executive Officer. He tendered his letter of resignation on 8 February 2010.The second respondent is the first respondent's ...

The second respondent is the first respondent's company duly registered in terms of the laws of Zimbabwe. It, like the applicant, carries on the business of electrical engineering.

In terms of clause 16.1 of the applicant and first respondent's contract of employment the first respondent is restrained from competing with the applicant. Clause 16.1 provides as follows:

“You are required to devote your attention at work to the affairs of A C Controls. You may not be involved, either directly or indirectly, during or after business hours, in any undertaking that is adverse to, prejudicial to or competing with the interests of A C Controls. All business interests must be declared at commencement of this appointment, and approval for subsequent outside business interest must be obtained from the Chairman.”

The first respondent, believing he had resigned and was no longer bound by clause 16.1, on 8 March 2010, wrote to Netone, on behalf of the second respondent, seeking to be put on its contractors list.

The request was brought to the applicant's attention by Netone. Net One is the applicant's client. The first respondent, in his capacity as the applicant's CEO, used to communicate with it on the applicant's behalf.

The applicant, believing the first respondent was still its employee, filed this application to stop the first and second respondents from competing with it. It sought a provisional order on the following terms:

“(a) That the first and second respondents are hereby interdicted from engaging in any business in competition with the applicant.

(b) That the first and second respondents are barred from providing any service to Netone.”

The applicant's counsel submitted, that, the second respondent, though not the applicant's employee, is being sued on the understanding that it is the first respondent's alter ego.

The respondents opposed the applicant's application, raising the defence, that, the first respondent is no longer the applicant's employee, as he resigned from its employment on 8 February 2010.

This case depends on the interpretation of clauses 16.1 and 23.4 of the applicant and the first respondent's contract of employment, and the determination of whether or not the first respondent's letter of resignation, dated 8 February 2010, terminated the employer/employee relation which existed between the applicant and the first respondent.

Counsel for the applicant submitted that clause 16.1 is still binding between the applicant and the first respondent because the first respondent, in spite of the purported resignation, is still the applicant's employee. He argued that the unilateral resignation violates the terms of clause 23.4 of the contract of employment which reads as follows;

“Where neither party is in breach, but termination is desirable, this shall be settled by mutual agreement.”

Counsel for the respondents submitted, that, the relationship between the applicant and the first respondent was terminated by the first respondent's letter of resignation. He further submitted, that, resignation is a unilateral act which need not be accepted by the employer. He further submitted that there was breach of contract which led to the first respondent's resignation.

Clause 16.1and 16.2

Clause 16.1 clearly deals with a situation where the employee is still in the employer's employment. It does not extend to a period after the employee's resignation.

Once the employer/employee relationship has come to an end it ceases to be of any effect.

Counsel for the applicant sought to argue, that, the first respondent is a director of the applicant and a shareholder of its subsidiary, and is therefore, by virtue of those positions, still barred from competing with the applicant.

That argument is not tenable.

It does not fall within the terms of clause 16.1 and 16.2, and the first respondent's acceptance of those positions has not yet been agreed.

In his letter of resignation, the first respondent sought to be informed of the terms on which he was being offered those positions. This means there is no agreement on those positions. The applicant's argument cannot succeed because clause 16.1 does not restrain trade for the first respondent's directorship or his being a shareholder of the applicant's subsidiary, and, the agreement between the parties on these appointments has not yet been finalized.

Clause 23.4

The applicant's counsel submitted, that, this clause was not breached, and because there was no breach therefore the applicant's letter of resignation did not terminate the contract of employment.

Counsel for the respondents submitted, that, the first respondent's letter of resignation clearly states that there was breach of contract and specifies the aspects of the contract which were breached. He, on p1 of the letter of resignation, said;

“I also indicated that the current revenue base does not allow the company to pay for my family's (immediate and extended) needs and basic survival. Since October 2009 I had to liquidate family assets to survive. I should underline that I have no ill feelings on the company for this situation. The business environment dictated the present situation.”

The letter of resignation is complaining of the applicant's failure to meet its contractual obligations. The fact that he says he understands the underlying reasons for the breach does not mean that there was no breach.

In the circumstances, the applicant breached the first respondent's conditions of service, resulting in his having to liquidate his family assets to survive. The applicant cannot, in these circumstances, be heard to say that there was no breach and the first respondent had to resign by mutual agreement in terms of clause 23.4. The first respondent was entitled to resign in the manner he did because there was a breach of contract by the applicant.

Notice

The first respondent resigned without giving the applicant notice. He, in paragraph 4 of his opposing affidavit, states:

“I am no longer an employee of the applicant company since I resigned from my post as its Chief Executive Officer on the 8th of February 2010, and the applicant's representative had knowledge of the resignation as from the 9th February 2010.”

The letter of resignation, in the first paragraph, states:

“I hereby formally advise that I am resigning from the position of Chief Executive of A C Controls with effect from 8 February 2010.”

The letter is dated 5 February 2010, and the first respondent says the applicant's representative became aware of it on 9 February 2010.

There was therefore no notice at all, and this was a unilateral termination of the contract of employment.

If a contract of employment can be terminated unilaterally the first respondent is now free to compete with his former employer, the applicant, as clause 16.1 is restricted to the period during which he was under the applicant's employment. On the other hand, if a contract of employment cannot be terminated unilaterally then the first respondent is still the applicant's employee and cannot compete with his employer, the applicant, until the contract of employment is properly terminated.

The Resignation

Counsel for the respondents submitted, that, resignation is a unilateral act which entitles the employee to terminate the contract of employment without the consent of the employer. Counsel for the applicant submitted, that, resignation does not terminate the contract until it is accepted by the employer.

I agree with counsel for the respondents submission, that, an employee's resignation unilaterally terminates the contract of employment. His submission is supported by the decision of this court in the case of Muzengi v Standard Chartered Bank & Anor 2000 (2) ZLR 137 (HC) where it was held, that, a letter of resignation constitutes a final act of termination by an employee, the effects of which he cannot avoid without the permission of the employer.

This means, once the employee tenders a letter of resignation to his employer, the contract of employment is terminated as the employer cannot refuse to accept his resignation, but can only agree to the employee's withdrawal of his resignation if he is inclined to doing so. The employer can, however, institute a claim for the damages he may suffer as a result of the employee's resignation without giving him adequate notice: see also the case of Mudakureva v Grain Marketing Board 1998 (1) ZLR 145 (SC) where the Supreme Court confirmed the finality of a letter of resignation pointing out that the employee could only have avoided it by proving that the employer forced him to resign, and thereby turning it into a constructive dismissal.

In the result, the first respondent's unilateral resignation terminated the contract of employment which existed between him and the applicant.

In view of the termination of the contract of employment, the first respondent is no longer bound by clause 16.1 of the contract of employment. It therefore follows, that, the second respondent, whom the applicant sought to restrain on the basis of its being the alter ego of the first respondent, cannot be bound by a contract which no longer binds the first respondent.

The applicant's application is therefore dismissed.

The applicant shall pay the respondent's costs.

HH84-12 : CHRISTOPHER BARNSLEY vs HARAMBE HOLDINGS (PVT) LTD AND ANOTHER
Ruled By: MATHONSI J

The applicant was employed as Group Engineering Director by the first respondent, which represented itself as a holding company comprising several subsidies with the second respondent as its Chief Executive Officer.The letter of his appointment containing the terms of employment, dated 7 May 2009, was signed by the second respondent ...

The letter of his appointment containing the terms of employment, dated 7 May 2009, was signed by the second respondent in his capacity as the Chief Executive Officer. It reads as follows:

“REF: APPOINTMENT TO THE POSITION OF GROUP ENGINEERING DIRECTOR EFFECTIVE 1 JUNE 2009

Following the initial discussion with me, and the subsequent interview conducted at our Head Office, I wish to confirm your appointment to the above position whose duties include the following:

(i) Management of all Group Engineering Projects and Installations.

(ii) Production process improvements to include automation and plant simplifications.

(iii) Advise and liaison with divisions on safety matters.

(iv) Advise and liaison with divisions on procurement issues.

(v) Developing preventive maintenance programmes for all divisions.

(vi) Building inspections for structured works.

(vii) Introduction to best practices in all manufacturing processes.

As a Director, you will be expected to undertake full executive functions for the Group from time to time at fora and engagements inside and outside the Group.

Your initial package will be as follows:

Basic salary: US$3,000 per month
Education Allowance: US$ 500 per month
Cellphone Allowance: US$ 250 per month

Total ___________

Salaries are reviewed upward periodically in line with Group performance. After your 3 months probation you will be offered participation in the share options; have no doubt that you will be able to make immense contributions given your attitude to work and vast experience and that you will work well with our executive dynamic team that has created a very robust and fast growing organisation.

Yours faithfully

D. Govere
CHIEF EXECUTIVE OFFICER”

The appointment letter, which was copied to the Chief Operations Officer and Chief Finance Officer clearly refers to a “Group” of entities and “divisions” of what was presumably a family of businesses falling under the umbrella of Harambe Holdings.

In addition, an organogram was generated and made available to the applicant showing the structural layout of the group of subsidiaries making up the first respondent holding company.

The applicant remained in employment for 11 months, and, when he did not receive his salary and allowances in accordance with the employment contract, he referred the dispute to arbitration.

An arbitral award was issued in his favour in the sum of US$61,879.

He has been unable to execute against the first respondent's property to recover the judgment debt because each time an attachment of property is made, such property is claimed by a third party.

This has prompted the applicant to make this application seeking an order to compel the respondents to disclose the addresses and places of business of the subsidiaries of the first respondent.

In the event of failure to disclose, he wants the second respondent to be held personally liable for what is owed to him.

The basis of the application is that the respondents represented to him that the first respondent was a holding company or a conglomeration comprising, inter alia, of, The Vinyl Tile Company; Freshbak; Downings; Superbake; Ecoplastics (Pvt) Ltd; Horeca; Household Converters; Intertec (Pvt) Ltd; and Tacoola Beverages (Pvt) Ltd.

By such fraudulent misrepresentation, he was persuaded to take up employment as the Group Engineering Director of these entities - only for the employer to fail to pay him.

In support of that claim, the applicant has submitted, in addition to the organogram I have alluded to, a letter-head and trading brochures of the various entities representing each entity as “a division of Harambe Holdings.” This, according to the applicant, shows that both the first respondent and these other entities have been announcing to the whole world, and, indeed, the applicant, that they are one family.

He would therefore want the veil of incorporation to be lifted to expose them for what they are.

The application is contested by the respondents on the basis that no fraud has been established and therefore there is no basis for lifting the corporate veil. In his opposing affidavit, the second respondent states…, as follows:

“The correct position is that the first respondent holds shares in these companies. I deny that I ever told him that it carries its operations through the subsidies. These companies do their own business, and, like any other shareholder, the first respondent would get a dividend whenever it is declared. This is not the same as operating through other entities or in the name of these entities.”

Significantly, the second respondent does not take the court to his confidence as to the nature of the shareholding and does not even bother to produce the respective share certificates held by the first respondent.

True to his refusal to let out any information relating to the affairs of the businesses, the second respondent states, at paragraph 6, that “silence does not disclose any fraud” and that himself and the first respondent “have no duty to make the disclosures asked for.”...,.

The cardinal principle of our Company Law is that a company enjoys separate legal personality, generally referred to as the legal persona principle. For that reason, its property and its liabilities should be maintained distinct and separate from those of its members.

However, the courts have always readily lifted the corporate veil where the company is used as a vehicle for fraud or to justify wrong.

Counsel for the applicant has strongly argued that the second respondent represented to the applicant and produced an organogram to justify his representation that the entities from which the applicant now seeks relief were the first respondent's subsidiaries. He submitted, further, that, both the first and second respondents stood akimbo as all the entities masqueraded as subsidiaries of the first respondent - even through brochures.

For instance, one of the entities advertised on its brochures as “The Vinyl Tile Company is a subsidiary of Harambe Holdings, a wholly owned Zimbabwean Company.”

Counsel for the applicant insisted that the entities are all vehicles through which Harambe Holdings (Pvt) Ltd fraudulently avoids its obligations - including the payment of the applicant's salary and allowances.

I am persuaded by that argument.

This is particularly so as both the first and second respondents have signally failed to even produce the certificates of incorporation of these entities and their lists of directors. They have simply remained mum on anything to do with the status of both the first respondent and its subsidiaries.

In respect of holding companies, my attention has been drawn to seminal words of LORD DENNING in DHN Food Distributors Ltd v London Borough of Tower Hamlets 1976 (3) ALL ER 462 (CA)…, where that celebrated law Lord said;

“Although the companies in a Group are separate legal entities, the courts have, in the mercantile context, dealt with the Group as an economic entity. This lifting of the corporate veil is indicated especially when a parent company owns all the shares of the subsidiaries so much so that it can control movement of the subsidies.”

I am in total agreement with that pronouncement.

As stated by CORBETT CJ in The Shipping Corp of India Ltd v Evdomon Corp and Anor 1994 (1) SA 550 (A)…, which was quoted with approval by SANDURA JA in Van Nickerk v Van Niekert & Ors 1999 (1) ZLR 421 (S)…,:

“It is of cardinal importance to keep distinct the property rights of a company and those of its shareholders - even where the latter is a single entity; and that the only permissible deviation from this rule known to our law occurs in those (in practice) rare cases where the circumstances justify 'piercing' or 'lifting' the corporate veil.

I do not find it necessary to consider, or attempt to define, the circumstances under which the court will pierce the corporate veil. Suffice it to say, that, they would generally have to include an element of fraud or other improper conduct in the establishment or use of the company or the conduct of its affairs.”

See also Mangwendeza v Mangwendeza 2007 (1) ZLR 216 (H)…, and Manyathela v Manyathela HB44-11.

The second respondent, purporting to be the Chief Executive Officer of the first respondent, engineered the employment of the applicant as Group Engineering Director on the understanding that he would work within a conglomeration of companies all of whom gave themselves out to the whole world as subsidiaries of the first respondent.

Eleven (11) months down the line he had not been sufficiently remunerated, only for the respondents to turn round and deny what they claimed to stand for at the beginning, that is, a Group of companies.

The applicant was made to shift his position to his prejudice on the strength of a representation that he was joining a Group of companies, complete with an organogram to that effect, as the Group's Engineering Director. His duties also traversed all the entities given that the employment contract made reference to “all Group Engineering Projects and Installations”; “advise and liaison with divisions”; “undertake full executive functions for the Group” et al.

In my view, this is a classic case for the lifting of the corporate veil, because, the applicant is alleging the reliance on the legal personality of the first respondent to defeat a lawful claim, to justify wrong, and, indeed, to protect fraud. If this were to be allowed to perpetuate an injustice would occur.

It remains for me to deal with the issue of costs.

The respondents have been extremely un-cooperative: if indeed they were acting in good faith and have nothing to hide, they would have no difficulty with divulging the true status of the businesses and proving that the applicant has no recourse to the entities. They have, however, seen it fit to hedge behind incorporation while at the same time saying nothing that would assist both the court and the applicant to understand the dynamics of the businesses. If anything, the second respondent's declaration that “silence does not disclose any fraud” is arrogance of a very high order.

This conduct has put the applicant unnecessarily out of pocket. He deserves to be compensated, and, in my view, this is a case calling for costs to be awarded on a higher scale.

In the result, I make the following order, that;

1. The first and second respondents should, within 7 days of the date of this order, disclose to the applicant or his legal practitioners, the incorporation status of entities which operated as subsidiaries of the first respondent during the period extending from 1 May 2009 to 30 April 2010, namely, Freshbake, Downings, Superbake, Ecoplastics (Pvt) Ltd, Horeca, The Vinyl Tile Company, Household Converters, Intertec (Pvt) Ltd and Tacoola Beverages (Pvt) Ltd.

2. The first and second respondents should, within 7 days of the date of this order, furnish the applicant or his legal practitioners the addresses and places of businesses of the entities of the first respondent mentioned in paragraph 1 above during the period extending from 1 May 2009 to 30 April 2010.

3. In the event of the first and second respondents' failure to comply with para(s) 1 and 2 above, then the second respondent be and is hereby held personally liable for the judgment debt of the first respondent registered under case number HC6651/10.

4. The first and second respondents shall bear the costs of this application, jointly and severally, on a legal practitioner and client scale.

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: PATEL JA, BHUNU JA and BERE JA

This is an appeal against the judgment of the High Court granting an application for specific performance lodged by the first respondent against the appellants. Apart from granting the relief sought, including the payment of damages in the alternative, the court a quo also ordered the appellants to pay costs ...

Background

The first respondent is an association of residents of the Knowe Housing Development based in the town of Norton. These residents purchased Stands on the development site from the first appellant whose business is to develop and sell housing Stands.

The second appellant is apparently the only active director of the first appellant.

The second respondent is the Norton Town Council. It did not appear at the hearing of this appeal, having filed heads of argument indicating that it would abide by the decision of this Court.

The first appellant, as the owner and seller of Lot 2 of Knowe Suburb, entered into sale agreements with the first respondent's members in 1998 (Phase 2) and later in 2003 (Phase 3). The Phase 2 residents complied with their respective agreements by paying the first appellant in full over a period of 30 months. The Phase 3 residents also duly complied by paying the first appellant in full within the agreed period of 60 months that ended on 1 February 2008.

The first respondent averred that the first appellant had breached its contract of sale with the Knowe residents. It filed an application for specific performance or the payment of damages in the alternative.

The appellants opposed the application on the merits and also raised three points in limine at the hearing a quo.

High Court Judgment

The court a quo dismissed all three points in limine.

As regards the first point, relating to prescription, the court found that the permits granted to the first appellant did not give any time limit within which the infrastructural development was to be completed and that the contracts with the residents did not specify any time limits for suing the first appellant. Whatever was to be done by the first appellant was to be done within a reasonable time.

With respect to the second point, the court found that there were no material disputes of fact and that, therefore, it was proper for the first respondent to proceed by way of application rather than by way of action.

Lastly, the court dismissed the third point objecting to the citation of the second appellant in his personal capacity on the basis that he was responsible for the first appellant's administrative affairs.

On the merits, the court a quo found that the members of the first respondent had duly performed their part of the agreements. Conversely, the first appellant had performed some part of the agreements but had not fully complied with the agreements and development permits. The court was not satisfied that this failure to perform was mainly because of inflation. The court further found that the first appellant had failed to establish that performance was now impossible in the era of dollarisation.

If the first appellant had serviced the Stands at the time the purchase prices were paid, between 1998 and 2008, there would have been no difficulty in the performance of the contracts. The court rejected the defence of impossibility of performance on the basis that any hardships now encountered by the appellants were self-created.

Finally, the court held, that, if the appellants were unable to comply with an order for specific performance, they must, in the alternative, pay damages.

In the event, the court ordered the appellants to fully service the Stands in Phases 2 and 3 within 90 days to the second respondent's satisfaction and specifications. The latter was ordered to ensure that the relevant statutory requirements were met. Alternatively, the appellants were ordered to pay the sum of US$192,901,995 to the first respondent's members within 30 days. If they failed to pay, the Sheriff was authorised to attach and sell the appellants' property in execution in satisfaction of the damages awarded. Lastly, the appellants were ordered to pay the costs of suit on an attorney and client scale.

Grounds of Appeal and Relief Sought

The 10 grounds of appeal hereunder are unduly prolix and repetitive. They attack the judgment a quo on the following broad bases:

(i) The appellants were not in breach of their obligations in the absence of a finding as to the time when performance was due, and, therefore, the application a quo was premature and not enforceable.

(ii) The claims in casu were prescribed following the execution of their obligations by the residents, and, in that respect, the court misconstrued the first appellant's contractual obligations and its duties in terms of the permits issued by the second respondent.

(iii) The claim for damages required the quantification of damages by way of action, and, consequently, the claim for damages was not proven according to law.

(iv) The court erred in ordering the second appellant to pay damages personally, and, in so doing, it mis-applied the doctrine of piercing the corporate veil.

(v) The court failed to deal with and pronounce upon the defence of currency nominalism and ordered the payment of damages in the currency of circulation and not the currency of performance.

(vi) The court improperly failed to consider the feasibility of performance against the defence of supervening impossibility.

The appellants pray that the appeal be allowed with costs and that the judgment a quo be set aside and substituted with an order dismissing the application with costs.

At the hearing of the appeal, counsel for the appellants moved an amendment to the relief sought, substituting the prayer for dismissal with one for remittal to the court a quo. Counsel for the first respondent had no difficulty with the prayer being substituted as amended. The prayer was accordingly amended, by consent, to provide for the remittal of the matter rather than the dismissal of the application a quo....,.

Personal Liability of Second Appellant

The remaining seventh and eighth grounds of appeal impugn the judgment a quo for having mis-applied the doctrine of piercing the corporate veil, and, consequently, visiting personal liability on the second appellant to pay damages as an alternative to the order for specific performance.

Counsel for the appellants submits, in this regard, that questions of fraud or dishonesty are relevant to lifting the corporate veil.

The only basis for citing the second appellant was that he is the director of the first appellant and responsible for the administrative affairs of the company. There was no evidence, whatsoever, to justify the citation of the second appellant in his personal capacity or lifting the corporate veil to render him personally liable.

Counsel for the first respondent submits that the courts can pierce the corporate veil in the interests of justice.

The founding affidavit clearly lays out the basis for piercing the corporate veil in casu and there is no specific attempt to contradict this in the opposing affidavit. The second appellant was the administrator of the company who took all the monies paid by the first respondent's members. The failure to hold him accountable would result in manifest injustice.

In response, counsel for the appellants reiterates that there is no basis for imputing liability to a director as opposed to a shareholder. It is only if the company was run grossly negligently that a director can be held personally liable. In casu, the doctrine of piercing the corporate veil simply does not apply.

In its founding affidavit, the first respondent avers that the first appellant is a family business with the second appellant being the sole active director for all practical purposes. According to the history of directorship in the company, as per the records availed in the Company's Registry, it is no more than the second appellant's alter ego. It is a one-man company with all its equipment, assets, and income belonging to the second appellant. Accordingly, the court a quo was urged to pierce the corporate veil to ensure that justice is done. The second appellant must not be allowed to benefit from his improper conduct by hiding behind the first appellant's corporate personality.

In his opposing affidavit, the second appellant does not dispute that he has been a director of the first appellant since 1980 and that the other directors, at different times, were or are his personal relations.

However, he denies that these allegations constitute an acceptable basis for lifting the corporate veil and disregarding the separate personality of the company. He contends that the first respondent does not cite a single incident in which the distinction between himself and the company was diluted. Consequently, none of the legal requirements for piercing the corporate veil have been pleaded or established. The first respondent's averments in this regard are characterised by nothing more than surmise and conjecture.

In its answering affidavit, the first respondent restates the averment that the second appellant is the sole active director of the first appellant and is responsible for taking up its administrative affairs. This reveals the capacity in which he was cited.

In any case, his citation was to ensure compliance with any order that the court a quo might have granted.

In Mkombachoto v CBZ Ltd & Anor 2002 (1) ZLR 21 (H)…, it was observed that the courts may lift the corporate veil and disregard the separate legal personality of a company in limited circumstances, for instance, so as to avoid manifest injustice.

Again, in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A), at 802, it was held that a court would be justified, in certain circumstances, in disregarding a company's separate personality and lifting or piercing the corporate veil. The focus then shifts from the company to the natural person behind it or in control of its activities. Personal liability is then attributed to someone who misuses or abuses the principle of corporate personality. Each case involves a process of enquiring into the facts which may be of decisive importance.

However, at 803-804, it was cautioned that the courts should not lightly disregard a company's separate personality but should strive to give effect to and uphold it. But, where fraud, dishonesty, or other improper conduct is found to be present, the need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil. A court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie.

The decision in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A) was followed in Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd & Anor HH121-11, and, more recently, by this Court in Chris Stylianou & Ors v Moses Mubita & Ors SC07-17.

In the latter case…, it was noted that no allegation of fraud, dishonesty, or other improper conduct was levelled against the first appellant which might have justified the lifting of the corporate veil of the other two appellants.

Indeed, no good explanation was given to justify the citation of the first appellant save to state that he was the owner of the two appellant companies.

In the instant case, the court a quo found that the second appellant had been properly cited in his personal capacity because he was solely responsible for the first appellant's administrative affairs.

On this basis, the court proceeded to hold the former jointly liable with the latter to fully service the residential areas in question, and, alternatively, to pay damages in the sum of US$192,901,995 within 30 days, failing which the appellants' property was to be attached and sold in execution in satisfaction of the damages.

In principle, the fact that the second appellant is the sole active director in charge of the first appellant's administrative affairs does not, per se, constitute an adequate basis for lifting the corporate veil.

There is no clear evidence on record to indicate that the second appellant was involved in any fraudulent or dishonest activity or other improper conduct. In the absence of such evidence, this Court should not lightly disregard the first appellant's separate corporate personality.

In this regard, I am mindful of the salutary caveat expressed in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790 (A)…, that, to do so “would negate or undermine the policy and principles that underpin the concept of separate legal personality and the legal consequences that attach to it.”

However, the enquiry does not necessarily end there, as “each case involves a process of inquiring into the facts which, once determined, may be of decisive importance: and, in determining whether or not it is legally appropriate, in given circumstances, to disregard corporate personality, one must bear in mind 'the fundamental doctrine that the law regards the substance rather than the form of things'…,.”– ibid, at 802.

In casu, given the history of the first appellant's corporate directorship from 1980 to the present, it is relatively clear that the second respondent is its sole active director. He is quite evidently its alter ego and its paterfamilias, so to speak.

He was and continues to be the principal protagonist in the administrative and contractual arrangements underlying the development of Knowe Suburb.

In these circumstances, it becomes difficult to sustain the juridical dichotomy between the two appellants and to uphold the façade of their separate legal personality.

I am persuaded to agree with the first respondent's submission, that, citing the second appellant in the proceedings a quo was the only way of ensuring compliance with any order that might have been granted against the first appellant. Any such order would otherwise have constituted nothing more than a brutum fulmen.

Moreover, in the exceptional circumstances of this case, it would be manifestly unjust if the members of the first respondent, having timeously fulfilled their contractual obligations, by paying the full purchase price, were to be deprived of the ability to secure the effective enforcement of any judgment granted in their favour.

In the event, I am satisfied that the court a quo, in the exceptional situation before it, quite correctly pierced the corporate veil of the first appellant so as to attribute its liability jointly to the second appellant, not only for the performance of its contractual obligations but also in respect of any damages payable in the alternative.

It follows that the seventh and eighth grounds of appeal cannot be upheld. They are accordingly dismissed.

HH121-11 : DEPUTY SHERRIF HARARE (Applicant) vs TRINPAC INVESTMENTS (PVT) LTD (Claimant) and CHRISTOPHER BARNSLEY (Judgment Creditor)
Ruled By: PATEL J

The applicant herein presently holds certain equipment attached by him pursuant to execution of judgment in Barnsley v Harambe Holdings HC6651/10. The judgment creditor obtained an arbitral award in September 2010 for the payment by Harambe Holdings of arrear salary amounting to US$61,879. After the registration of the award with this Court, the notice of seizure and attachment of the equipment in question was issued in October 2010.

The claimant is a wholly owned subsidiary of Harambe Holdings. However, it asserts that the seized property belongs to it and not to Harambe Holdings. The judgment creditor disputes this on the basis that the judgment debtor is inseparable from its subsidiaries and that any separation within the Harambe Holdings Group is deceitful.

On these facts, the principal issue for determination is whether the Harambe Holdings Group is a single entity or whether it should be separated for purposes of civil liability and execution.

The Arguments

Counsel for the claimant submits that the claimant is a separate company controlled by Harambe Holdings as its subsidiary. If Harambe Holdings were claiming the seized property, it would be possible to lift the corporate veil against it as it is a shareholder in the claimant. However, the veil cannot be lifted in the converse situation presently under consideration. What the judgment creditor should have done is to first apply for the veil to be lifted, and, if it succeeded in so doing, it could then seize the assets of the subsidiary company. In inter-pleader proceedings, the property of the subsidiary entity cannot be seized without a court order lifting the corporate veil.

Counsel for the judgment creditor counters that the veil should be lifted because the claimant is a vehicle through which Harambe Holdings carries out its operations. The judgement creditor was employed by the latter as its Chief Engineer, deployable to serve any entity within the Harambe Holdings Group - including the claimant.

All the Group subsidiaries are located together at the same address with Harambe Holdings.

Moreover, various documents (including letters, brochures, and annual returns, as well as newspaper articles and the pleadings in Case No. HC5756/10) all demonstrate that the claimant is an integral entity within the Harambe Holdings Group. The claimant's plea is merely a ruse to avoid attachment so as to defeat the judgment creditor's just claim.

Lifting or Piercing the Corporate Veil

The cardinal principle of Company Law, as enunciated in Salomon v Salomon & Co Ltd [1897] AC 22 (HL) and Dadoo Ltd & Others v Krugersdorp Municipal Council 1920 AD 530…, is that a company is a separate entity distinct from its members.

Nevertheless, there are well established exceptions to the principle grounded in policy considerations. As was held in US v Milwaukee Refrigerator Transit Co (1905) 42 Fed 247…,:

“…, 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 has been regularly adopted and consistently followed in our law: see Lategan & Anor NNO v Boyes & Anor 1980 (4) SA 191 (T)…,; Van Niekerk v Van Niekerk & Ors 1999 (1) ZLR 421 (S)…,; Mawere v Minister of Justice 2005 (1) ZLR 317 (H)…,.

In Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Ors 1993 (2) SA 784 (C)…, it was observed that:

“…, when the corporation is the mere alter ego or business conduit of a person, it may be disregarded. This rule has been adopted by the Courts in those cases where the idea of the corporate entity had been used as a subterfuge and to observe it would work an injustice…,.

In cases of fraud, whether actual or constructive, the Courts regard the real parties responsible and grant relief against them or deny their claims and defences based on the principles of equity…,. So, where a corporation is organised or maintained as a device in order to evade an outstanding legal or equitable obligation, the Courts, even without reference to actual fraud, refuse to regard it as a corporate entity.”

On appeal, in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Others 1995 (4) SA 790 (AD)…, the notion of equity was re-affirmed as follows:

“It is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it.

But, where fraud, dishonesty, or other improper conduct (and I confine myself to such situations) is found to be present, other considerations will come into play.

The need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil…,.; and, a court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a mis-use of corporate personality, to disregard it and attribute liability where it should rightly lie.

Each case would obviously have to be considered on its own merits.”

The exceptions to the general principle have been extended beyond the realm of fraudulent or improper conduct to the situation where a single economic entity owns all the shares in its subsidiaries and controls every aspect of their operations.

Thus, in DHN Food Distributors Ltd v London Borough of Tower Hamlets [1976] 3 All ER 462 (CA)…, it was stated as follows:

“Professor Gower, in his book on Company Law, says:

'There is evidence of a general tendency to ignore the separate legal entities of various companies within a Group, and to look, instead, at the economic entity of the whole Group.'

This is especially the case when a parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries. These subsidiaries are bound, hand and foot, to the parent company and must do just what the parent company says….,.

This Group is virtually the same as a partnership in which all the three companies are partners….,. The three companies should, for present purposes, be treated as one, and the parent company, DHN, should be treated as that one.”

The rationale for this extension, as I perceive it, is that where the operations of an economic group are so close as to be virtually indivisible, considerations of policy tend to militate against any legal separation of its integral units, for, to do so, would be to perpetuate an essentially corporate fiction.

Of course, this may not invariably be the case, but, the equities would certainly favour such an approach in dealings at arms length with innocent outsiders.

Disposition

The undisputed facts in casu are these:

The claimant is a wholly owned subsidiary of Harambe Holdings and all the subsidiaries within the Group are located together at the same physical address.

The judgment creditor was employed by the Group and was deployable to serve any entity within the Group - including the claimant.

The relevant documentary evidence amply demonstrates that the claimant is an integral entity within the Group. To all intents and purposes, the claimant is effectively a vehicle or instrumentality through which Harambe Holdings carries out its bakery operations.

On these facts, it seems to me that the claimant's assertion of ownership over the seized assets is nothing more than a subterfuge designed to defeat the judgment creditor's claim, which claim is uncontroverted and is undeniably a just one.

Even in the absence of any fraudulent or other improper motive, the over-arching control exercised by Harambe Holdings over its subsidiaries clearly justifies the treatment of the Group as a single economic entity for the purpose of enforcing a debt incurred by any unit within the Group, particularly where the creditor, as in this case, is a former senior employee who was engaged to serve the entire Group.

The remaining question is this:

Is it procedurally necessary for a judgment creditor to have obtained a prior court order lifting the corporate veil before attempting to attach the property of a subsidiary company?

Counsel for the claimant was unable to cite any case authority in support of this proposition. In advancing the counter-proposition that there is no such condition precedent, counsel for the judgment creditor relies upon the following passage in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Others 1995 (4) SA 790 (AD …,:

“In principle, I see no reason why piercing of the corporate veil should necessarily be precluded if another remedy exists….,.

If the facts of a particular case otherwise justify the piercing of the corporate veil, the existence of another remedy, or the failure to pursue what would have been an available remedy, should not, in principle, serve as an absolute bar to a court granting consequential relief….,.

Whatever laxity or 'fault' there may have been on the part of the appellant in failing to pursue its rights under the doctrine of notice pales into insignificance compared to the impropriety of Lubner's conduct. Yet, respondents seek to rely upon such failure to deny the appellant relief.

Policy considerations dictate that they should not be permitted to do so.

In the circumstances, the appellant's failure to pursue its remedy under the doctrine of notice does not, in my view, operate as a bar to the relief it seeks.”

While these observations may not be directly pertinent to the question at hand, they certainly fortify the principle that mere procedural technicalities should not be allowed to frustrate or impede the effective satisfaction of a just claim.

In any event, I see no logic or practical reason in requiring the judgment creditor to institute fresh proceedings in this Court to pierce the corporate veil in circumstances where those proceedings would entail the same conclusion that I have reached earlier.

In the result, the claimant's position cannot be sustained.

Its prayer for an order declaring the attached assets as belonging to it and for stay of execution is hereby dismissed.

The applicant is ordered and authorised to proceed with the warrant of execution. The claimant shall pay the costs of the applicant and those of the judgment creditor.

HH83-14 : RITENOTE PRINTERS (PVT) LTD and JOHN KANOKANGA vs A.ADAM & COMPANY (PVT) LTD and TARIK ADAM and MOOSA ADAM
Ruled By: CHIGUMBA J

The plaintiffs issued summons against the three defendants on 20 August 2012 seeking payment of:

(a) US$230,000 being losses suffered as a result of failure by the plaintiffs to trade owing to wrongful eviction.

(b) US$25,000 being damages for injuria.

(c) US$50,000 being damages for permanent chronic depression.

(d) US$450,000 being the difference between the value of the business and the price at which it was sold.

(e) US$4,000,000 being the amount the second plaintiff would have made but for the chronic depression he has suffered as a result of wrongful eviction.

(f) US$12,060 plus US$15 per day reckoned from the date of summons to the date of payment, being storage charges incurred by goods attached by the Messenger of Court at the defendants' unlawful instance.

(g) Interest on the sums set out above at the prescribed rate from the date of summons to the date of payment.

(h) Costs of suit.

The plaintiffs averred, in the declaration, that, on 1 November 2010, the defendants unlawfully, wrongfully, and intentionally procured the first plaintiff's eviction from premises known as Number 147 Mbuya Nehanda Road, Harare and from Winston House, 109 Leopold Takawira Street, Harare.

The first plaintiff carried on its printing, photocopying, and related business from those premises which belong to the first defendant.

The plaintiffs averred, further, that, as a result of the aforesaid eviction, they suffered losses by reason of failure to trade from those premises, 147 Mbuya Nehanda Road, for the period ranging from 1 November 2010 to date, and from Winston House from 1 November 2010 to 29 June 2011.

The plaintiffs' claim was founded on injuria, and, on consequent damages arising therefrom, such as loss of business, and chronic depression arising as a result of the defendants' conduct.

On 24 September 2012, the defendants entered appearance to defend themselves in this matter, and filed a combined exception and plea on 30 January 2013.

The exception was based on the fact that paragraphs 5,6,7 and 8 of the plaintiffs' summons allegedly failed to disclose a cause of action, and that, it was not specifically pleaded, that, at the material time, the defendants acted in an unreasonable manner.

It was averred, that, the plaintiffs ought to have specifically pleaded that the defendants foresaw the possibility of harm being occasioned to the plaintiffs by their action of evicting them.

The defendants denied acting unreasonably, and averred that they had been issued with a valid and competent eviction order before the Magistrate's Court, and were entitled to act on it.

The defendants' plea on the merits was to deny that they caused any harm to the plaintiffs, either intentionally or negligently; to deny being at fault in any way in causing the plaintiffs' eviction; and to aver that they acted reasonably at all times.

Intention to cause injuria was denied; knowledge of the second plaintiff's depression was denied; illegal conduct was denied; and the defendants prayed for dismissal of the action together with costs on a higher scale.

The plaintiffs replicated to the exception on 13 February 2013, and reiterated that they clearly pleaded fault on the part of the defendants. The plaintiffs prayed for the dismissal of the defendants' exception, together with costs on a higher scale.

At the pre-trial conference, on 24 September 2013, a joint pre-trial conference minute was filed of record, in terms of which the following issues were referred to trial:

1. Whether or not the plaintiffs' summons and declaration disclose a cause of action at law.

2. Whether or not the second and third defendants have been erroneously joined to the present matter....,.

At the hearing of the matter, counsel for the defendants moved for the 'exception' to be upheld, and for the dismissal of the plaintiffs' claim on the basis that the summons and the declaration did not disclose a cause of action.

Counsel for the defendants opposed this application, and counter-claimed that the second and third defendants had been erroneously joined to the proceedings.

I will deal with the second issue for trial first, because, in my view, it can be disposed of more easily than the first issue for trial, that of the exception.

In considering whether or not the second and third defendants have been erroneously joined to these proceedings, the court had regard to the reason for their citation in the declaration to the summons first.

On p3 of the declaration, the plaintiffs state that:

“1st defendant is A. Adam & Company, a corporate body established in terms of the laws of the republic…,. 2nd and 3rd defendants are…, adult Zimbabweans who control the activities of the 1st defendant and through whose agency it acts.”

Order 13 Rule 87 sub-rule (2) of the High Court Rules 1971 provides as follows:

“87. Misjoinder or nonjoinder of parties

(1)…,.

(2) At any stage of the proceedings, in any cause or matter, the court may, on such terms as it thinks just, and either of its own motion or on application —

(a) Order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b)…,.

(3)…,.”

It was submitted, on behalf of the plaintiffs, that it is trite law, that “…, a court will not pierce the corporate veil of a company because, as a registered company, it is a legal persona in its own right and endowed with its own legal persona, which is distinct from its shareholders.”

See Salomon v Salomon & Co Ltd [1897] AC (HL); Dadoo Ltd & Ors v Krugersdorp Municipal Council 1920 AD 530…,.

The plaintiffs submitted, however, that there are exceptions to this principle, which are based and grounded in policy considerations; that, 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: see US v Milwaukee Refridgerator Transit Co 42 Fed 247 (1905)…,.

It was submitted, further, that, when the corporation is the mere alter ego or business conduit of a person, it may be disregarded, and that where fraud, dishonesty, or other improper conduct is found, the need to preserve the separate corporate identity would have to be balanced against policy considerations which arise in favour of piercing the corporate veil.

The plaintiffs relied on the case of Deputy Sheriff v Trinpac Investments (Private) Limited & Anor 2011 (1) ZLR 548…, as authority for this proposition.

It is my considered view, that, whilst counsel for the plaintiffs correctly cited this case as authority for the proposition that, in proper cases, depending on the merits of each case, the corporate veil can be pierced, mero motu by the court, this case does not advance the plaintiffs case any further.

It is of persuasive import, being a judgment of my brother judge.

However, the case, in my view, turned on its peculiar facts, and, it cannot be said that the corporate veil should be pierced willy-nilly at the court's instance in every case.

The question for determination is whether the second and third defendants were properly joined to the proceedings.

The court must consider the question of joinder or mis-joinder, not, in my view, that of the piercing of the corporate veil which is being raised for the first time and was not pleaded....,.

In Deputy Sheriff v Trinpac Investments (Private) Limited & Anor 2011 (1) ZLR 548, the court found that the control exercised by the holding company over its subsidiaries justified the treatment of the Group as a single economic entity. In deciding whether it was necessary to apply for upliftment of the corporate veil, the court found, that, in the circumstances of the case before it, such application was not necessary as the conclusion would be the same.

That is not so in this case before me.

Each case depends on its merits and on the facts.

There is no evidence that the second and third defendants exercised the same level of control over the first defendant. There is no evidence that out of all the officers of the first defendant, the second and third defendants caused the eviction of the first plaintiff.

I accept the submission made by counsel for the defendants, that, in order for the corporate veil to be uplifted, in the circumstances of this case, an application for piercing the veil ought to be made and considered.

It was not up to the plaintiffs to merely include the second and third defendants as parties to the proceedings in the absence of sufficient legal basis to do so. This imputes personal liability to them for the first defendant's actions. No justification for imputing personal liability was proffered in the summons or in the declaration.

Accordingly, in terms of Order 13 Rule 87(2)(a), I order, that, the second and third defendants cease to be parties to these proceedings. Costs shall remain in the cause. The plaintiffs may have recourse against those defendants in terms of section 318 of the Companies Act [Chapter 24:03], or may make a proper application for piercing of the corporate veil.

The summons shall be amended accordingly, as provided by Order 13 Rule 88...,.

It is ordered, that, the first and second defendants be removed as parties to these proceedings...,.

Appealed
SC08-21 : WELLI-WELL (PVT) LTD vs MALVERN IMBAYAGO and THE SHERIFF OF ZIMBABWE
Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE AJA

In the process of executing a judgment of the High Court against B.M. Graphics (the judgment debtor), the Sheriff placed under judicial attachment certain movable property found at Stand No. 499 Goodwin Road, Willowvale, Harare.

The appellant lay a claim to that property resulting in interpleader proceedings being instituted.

In a judgment delivered on 20 November 2019, the High Court dismissed the appellant's claim to the property in question and declared it executable. The appellant appealed against the whole judgment of the High Court to this Court. After hearing argument, we dismissed the appeal and stated that the reasons would follow. These are the reasons.

THE JUDGMENT

The facts of the matter are clearly set out in the judgment a quo. They are that a consent order was granted by the court a quo on 21 August 2017 in terms of which the judgment debtor was required to pay to the first respondent (the judgment creditor), the value of 2,000 square metres of Stand No. 449 Goodwin Road, Willowvale, Harare together with improvements thereon. On his part, the first respondent would vacate the Stand in question, which he was occupying, within a given period of time.

Following valuation of the property in terms of the order of the court, the judgment debtor failed to pay. The sheriff attached an assortment of property found at Stand No. 499 Goodwin Road, Willowvale, Harare which he believed belonged to the judgment debtor.

The property was claimed by the appellant as its own.

The High Court correctly found, that, in inter pleader proceedings, the onus was on the claimant to prove ownership of the property in dispute on a balance of probabilities.

The claimant does so by setting out facts which establish ownership of the property in question on a balance of probabilities.

The court a quo noted, that, the basis of the appellant's claim to the property was that it owned the Stand where the property was found by virtue of being the sole shareholder of a company known as Jon's Engineering (Private) Limited. It is the latter company which is said to be the registered owner of Stand No. 499.

The court a quo observed that the judgment debtor was initially the holder of two ordinary paid up shares in Jon's Engineering (Private) Limited. It then sold its shares to the appellant.

The argument before the court a quo was that given the fact that the property in dispute was attached in execution as an immovable property owned by a company wholly owned by the appellant, that property belonged to the appellant and the onus was on the first respondent, as judgment creditor, to prove that it belonged to the judgment debtor.

The appellant's claim was rejected by the court a quo which found discrepancies in the purported sale agreements involving the immovable property. The court a quo found, that, despite the two agreements allegedly signed by the appellant and the judgment debtor, initially on 30 October 2015, and a second one signed on 28 October 2016, the judgment debtor had consented to the court order being executed. It was the reasoning of the court a quo that the judgment debtor would not have consented to a court order on 21 August 2017, in terms of which an immovable property it had already sold was to be valued and its value paid to the judgment creditor.

The court a quo concluded from those facts, that, the agreement of sale was a most recent fabrication, an afterthought meant to stem the appellant's claim that it had purchased the entire shareholding in Jon's Engineering (Private) Limited. The claim by the appellant, that it bought the immovable property from the judgment debtor and took occupation as far back as 28 October 2016 was rejected because the evidence before the court showed that the judgment debtor had in fact been in occupation of same at the time of the consent order on 21 August 2017.

The court a quo further found that the appellant's claim could not succeed for yet another reason.

It is that the appellant is not the owner of the Stand at which the movable property was attached for sale in execution. The Stand is owned by Jon's Engineering (Private) Limited, a separate legal entity from the appellant.

There was no suggestion before the court a quo that Jon's Engineering (Private) Limited was a subsidiary of the appellant.

By virtue of the separate legal persona principle, that, once a company is incorporated, it exists independently and separately from its members, the appellant could not possibly claim ownership of property belonging to a separate registered company.

The court a quo found that the appellant had failed to discharge the onus resting on it to prove ownership of the movable property placed under attachment. It found that not a single piece of evidence was submitted by the appellant to show that it owned the property in question. That way, the appellant's claim was dismissed.

THE APPEAL

The appeal was motivated on three grounds speaking to the same issue. They are that:

1. The court a quo grossly misdirected itself when it found that the property attached by the Sheriff did not belong to the appellant despite the evidence presented.

2. The court a quo misdirected itself in finding that the agreement of sale between the judgment debtor and the appellant was not authentic.

3. The court a quo erred at law when it concluded, that, the appellant did not have possession of the attached goods at the time.

From these grounds of appeal, there can only be one issue for determination on appeal. It is:

Whether the court a quo erred in finding that the appellant had failed to prove ownership of the goods placed under attachment....,.

The concept of separate legal personality of a company is the cornerstone of our company law. It has its parentage in the case of Salomon v Salomon & Co Limited [1897] AC 22.

The concept of corporate personality is that a company, once it is registered, acquires a personality of its own quite distinct from its members or shareholders.

Courts of law will not lightly disregard a company's separate legal personality except in very limited circumstances where fraud, dishonesty, or other improper use of a company's personality are found to exist. Before a court of law can disregard the veil of incorporation or lift the veil, a case for doing so must be made....,.

On appeal, it was argued, for the appellant, that, the finding by the court a quo, that the appellant did not own the attached goods was faulty because it owns the entire shareholding in Jon's Engineering (Private) Limited. The court a quo, so the argument goes, should have found that the appellant is the beneficial owner of the property owned by Jon's Engineering (Private) Limited.

That argument should not detain this Court.

To begin with, it is not clear why, if indeed the property belongs to Jon's Engineering (Private) Limited, the latter did not lay a claim to it.

In advancing the argument, counsel for the appellant relied on authorities in which remarks were made that courts have a general tendency to ignore the separate legal entities of various companies within a Group and regard them as one economic entity where the parent company owns all the shares of the subsidiaries: see DHN Food Distributers Limited v London Borough of Tower Hamlets [1976] 3 ALL ER 462 (CA)…,.

The court a quo's finding, that the appellant had not shown that Jon's Engineering (Private) Limited was its subsidiary, cannot be faulted.

In this case, the appellant is a distinct entity from Jon's Engineering (Private) Limited which owns the Stand on which the property was attached. The subsidiaries argument is not available to the appellant.

More importantly, the court a quo made a factual finding that the agreement of sale relating to the shares in Jon's Engineering (Private) Limited was a façade.

I have stated that there is no legal basis for interfering with that finding.

Either way, the appellant cannot ride on Jon's Engineering (Private) Limited in laying a claim to the property that was attached.

Appealed
SC09-21 : ANDERSON MANJA and 98 OTHERS vs SHERIFF OF ZIMBABWE and GURTA MINING AG
Ruled By: MAVANGIRA JA, UCHENA JA and MATHONSI JA

This is an appeal against the whole judgment of the High Court handed down on 3 June 2020 which upheld the second respondent's claim to immovable property and/or mining claims located in Mashonaland West placed under judicial attachment by the first respondent for sale in execution of a judgment.The judgment ...

BACKGROUND FACTS

The appellants were employed by Amble Mining (Private) Limited. A labour dispute between them and their employer yielded an arbitral award which was registered as a judgment of the High Court. Upon execution of that judgment, a chrome mine comprising of mining claims, 110 compound houses, a shop, 6 round thatched guest houses, 3 separate guest houses, and a workshop were seized by the Sheriff.

The Sheriff sought to recover the judgment debt of USD1,199,251=88.

Following attachment, the second respondent, a company incorporated in terms of the laws of Switzerland, claimed all the property as its own.

The appellants did not admit the claim. This forced the Sheriff to institute interpleader proceedings in the court a quo to settle the conflicting claims.

The second respondent admitted that the mining claim once belonged to the judgment debtor. Its case, however, was that it had bought the property from the judgment debtor in 2009 during which year it also took transfer of the claims.

As proof of the sale, the second respondent produced a Board Resolution of a company known as Maranatha Ferrochrome (Private) Limited, the holding company of Amble Mining (Private) Limited.

The second respondent also produced a copy of a certificate of registration of the mining claim issued by the Ministry of Mines and Mineral Development in its name.

In addition to that, the second respondent also produced two letters written by the Acting Provincial Mining Director for Mashonaland West.

The letters in question are contradictory.

The first, dated 31 May 2018, stated that the mining claims belonged to the judgment debtor. The second, dated 5 July 2018, apologised for what it referred to as a “gaffe” in the earlier letter and stated that the mining claims belonged to the second respondent.

The appellants' case was that there was collusion between the Acting Provincial Mining Director, the second respondent, the judgment debtor, and Maranatha Ferrochrome (Private) Limited in order to confound creditors.

The appellants moved for the lifting of the veil of incorporation so as to expose the second respondent, the judgment debtor, and Maranatha Ferrochrome (Private) Limited as companies of the same Group.

The purported sale of the mining claims would be shown to be a sale between subsidiary companies.

The court a quo found that after producing the documents I have alluded to, the second respondent had discharged the onus of proving ownership. It had set out a prima facie case of ownership which had the effect of shifting the onus to the judgment creditors, the appellants herein, to prove otherwise.

The court a quo further found that the appellants did not adduce any evidence. As such, the prima facie case provided by the second respondent “mutated” to proof of ownership.

The appellants were aggrieved and noted this appeal on four (4) grounds.

GROUNDS OF APPEAL

1. The court a quo grossly erred by granting inter-pleader claim in the circumstances where the second respondent failed to prove ownership of the attached property on a balance of probabilities.

2. The court a quo grossly erred by failure to consider connivance between the judgment debtor and the second respondent to defeat execution of a court order.

3. The court a quo grossly erred by shifting the burden of proof to the appellants instead of the second respondent.

4. The court a quo erred by granting costs on an attorney client scale against the appellants where there was no basis for such.

THE APPEAL

Although there are four grounds of appeal, they crystallize around essentially one issue that falls for determination in this appeal. It is whether the court a quo erred in upholding the claimant's claim to the property.

It was submitted, on behalf of the appellants, that, the second respondent did not discharge the burden of proving ownership because the evidence tendered by the second respondent shows that itself, Maranatha Ferrochrome (Private) Limited, and the judgment debtor are one and the same thing. The whole arrangement, so the argument goes, to transfer the mining claims from the judgment debtor to the second respondent was meant to shield the property from execution.

To illustrate that point, counsel for the appellants drew attention to the Board Resolution relied upon as evidence of the existence of a sale agreement involving the mining claims. It was argued that a resolution is not a sale agreement but is a pre-requisite for the conclusion of a sale agreement by a company. If indeed the judgment debtor had gone on to enter into an agreement of sale, in terms of which it alienated the property to the second respondent, it was argued, then the latter would have produced, not only the agreement of sale, but also proof of payment as consideration for the mining claims.

Apart from that, counsel submitted, the fact that it is common cause that Andrew Lawson, who attended the Board of Directors' meeting of 13 October 2009, in Italy, at which the resolution was made, is also a director of the judgment debtor, is suggestive of the resolution being a sham and the transfer of the claims being an elaborate hoax.

In view of its centrality in the resolution of this appeal, the resolution, which is an extract from the minutes of an Extraordinary Meeting of the Board of Directors of Maranatha Ferrochrome (Private) Limited held on 13 October 2009 is reproduced below:

“Minutes of an Extraordinary Meeting of the Board of Directors of Maranatha Ferrochrome (Pvt) Ltd held on Tuesday 13 October 2009 in the offices of Sineco Spa in Ceparano, Italy

Present:
Mr Gialuigi Ghezzi - Chairman
Mr Giorgio Barelli – Director
Mr Andrew Lawson – Director

Apologies:
Mr. George Mashavatu – Director

The following resolutions were agreed and passed unanimously by the board of directors of Maranatha Ferrochrome (Private) Limited -

1. Maranatha Ferrochrome (Private) Limited hereby agrees to sell all mining claims and leases owned by this company and its subsidiary, Amble Mining (Pvt) Ltd, Gurta A.G. of Switzerland. These claims are, in total, to be sold for a sum of USD1,350,000 (one million three hundred and fifty thousand united state dollars). It was noted that Mr. Andrew Lawson has authority to sign and accept ownership of the said claims and mining lease on behalf of Gurta A.G. by means of a Power of Attorney from Gurta A.G.

2. Mr Keith Beck – ID NO. - 32-058218 N00 is hereby empowered to transfer ownership of the above-mentioned mining claims and leases on behalf of Maranatha Ferrochrome (Pvt) Ltd and Amble Mining (Private) Limited.”…,.

A simple interpretation of this resolution, which is obviously not an agreement of sale, is that Andrew Lawson, a director of the alleged seller of the mining claims (Maranatha) was given a power of attorney by the alleged purchaser of those claims, the second respondent, to receive delivery of the claims from the same seller in which he is a director. He was to hold the claims on behalf of the alleged new owner.

This was a classic case of the seller selling to itself.

It is also remarkable, that, after agreeing to sell the mining claims, the alleged seller does not appear to have progressed further to accomplish the mission. No sale agreement was produced. In addition, the closest the second respondent came to proving movement of funds to purchase the claims, is an invoice dated 18 December 2018 setting out the values of the 54 Blocks of Ngezi mining claims being US$1,050,000. It also shows the value of the 6 Blocks of Mapanzura mining claims, being US$300,000.

It is needless to say that the invoice, being neither a receipt nor a bank statement, does not prove anything.

I mention, in passing, that, if indeed money had changed hands, the second respondent would not have had any difficulties producing proof of payment.

Counsel for the appellants also made reference to the lease agreements produced by the second respondent.

Again, because of its importance in shedding light to the dispute between the parties, I reproduce the pertinent part of the standard document hereunder:

“LEASE AGREEMENT

A settlement agreement was negotiated between Upthrow Trading (Private) Limited, Maranatha Ferrochrome (Pvt) Ltd, Amble Mine (Private) Limited, Gurta AG, Glossy Investments (Private) limited and Honourable Paul Mangwana and signed in Italy on 3 October 2013. In terms of this settlement agreement, following the completion of the handover of the mining claims, Maranatha Ferrochrome (Private) Limited representing Gurta AG who are the legitimate owners of the mining claims in Ngezi do hereby offer the Lease Agreement Arrangement for the property known as:

WHITE HOUSE ROOM 3

The lessee hereby agrees to rent the said property (on) for a period of 3 months with effect from 1 September 2015 expiring on 3 November 2015 subject to the payment of monthly rentals amounting to US$25 to Maranatha Ferrochrome (Private) Limited. Lease may be terminated by either party giving two weeks as notice of termination.”…,.

Again, a simple interpretation of the lease agreements which the second respondent entered into with its alleged tenants shows that six (6) years after the second respondent had purportedly purchased the mining claims and their environs from the judgment debtor, the latter was still being listed on the lease agreements as having an interest in the property.

Not only that, the second respondent was still not visible on the ground to an extent that the leases were written on the letterhead of Maranatha Ferrochrome (Private) Limited - the parent company of the judgment debtor.

If that set of facts was not disconcerting enough, then, it should indeed be remarkable to note that Maranatha Ferrochrome (Private) Limited was also receiving rentals for the leased properties.

Those facts cannot be ignored.

The documents from the Ministry of Mines and Mineral Development, relied upon by the second respondent, had their own challenges.

Counsel for the appellants submitted that the certificate of registration purportedly showing that the claims had changed hands was a photocopy. Although the second respondent was challenged to produce the original, it failed to do so.

More importantly, when the Ministry was requested to confirm the status of the mining claims, it initially wrote a letter dated, 31 May 2018, signed by one M. Maisera, the Acting Deputy Provincial Mining Director for Mashonaland West, which states in part:

“This office acknowledges receipt of your letter dated 24 May 2018 in which information of mines held by Amble Mining (Private) Limited is requested.

According to records held by this office, Amble Mining (Private) Limited is the holder of the following chrome blocks…,.”

It is common cause that the listed blocks are those that were placed under attachment and form the dispute between the parties.

There may have been a change of the Acting Provincial Mining Director for Mashonaland West because, on 5 July 2018, S. Mpindiwa, writing under that title, was singing a different tune.

In S. Mpindiwa's letter to the appellants' legal practitioners, he/she apologised for what he/she referred to as “a gaffe” in stating that the judgment debtor owned the mining claims. Instead, that office then stated that the mining claims were long transferred to the second respondent.

Unfortunately, the letter did not explain how the “gaffe” came about.

Counsel for the appellants pointed to this contradiction as proof of collusion, or, at the very least, that the information from the Ministry of Mines could not be relied upon.

Counsel for the second respondent strongly defended the judgement of the court a quo.

He submitted that sufficient proof of ownership of the property in dispute was produced by the second respondent in the form of the certificate of registration of the mining claims in the second respondent's name and the confirmation letter from the Mines Ministry.

Counsel for the second respondent insisted that the court a quo was correct in finding that the second respondent had managed to adduce prima facie evidence of ownership.

Counsel for the second respondent further submitted that the court a quo could not possibly pierce the corporate veil because the appellants never asked it to do so.

In addition, so it was argued, there exists no grounds for piercing the veil in the circumstances of this case.

In my view, that argument is misleading.

On that issue, the court a quo pronounced itself…, thus:

“Still, on lifting the corporate petticoat (sic) of Gurta and peering behind it, I see no other exceptional circumstance justifying the same. The judgment creditors told me, both in heads of argument and at the hearing, that, Maranatha Ferrochrome (Private) Limited, the judgment debtor, and the claimant are a single economic entity. I was therefore invited to go behind the claimant's skirt (sic), disregard the three companies' separate corporate personalities and order execution of the mining claim even though registered in the claimant's name to satisfy the judgment debt owed by Amble Mining (Private) Limited.

Mr Zimudzi referred me to Deputy Sheriff Harare v Trinpac Investments (Private) Limited and Anor HH121-11.

That case is distinguishable.

Here, there is no evidence at all as to who the shareholders of the claimant are. There is completely no evidence to prove that they are the same persons as the shareholders of the judgment debtor and its holding company, Maranatha Ferrochrome (Private) Limited. Neither is there any evidence that the directorship of the claimant is the same as that of the other two companies. The bare allegation that claimant is a 'baby' of the 'Ghezzi family' was not substantiated. I therefore refuse to interfere with claimant's corporate regalia.”

It is apparent from the foregoing passage in the judgment that indeed the court a quo was invited to lift the corporate veil. It considered the submissions made justifying such course of action and rejected them.

The issue before this Court now is the correctness of that finding.

APPLICATION OF THE LAW TO THE FACTS

Although the evidence of ownership of the mining claims was discredited by the appellants; in my view, the case turns on whether the second respondent, as the claimant, could be said to be a different entity from the judgment debtor sufficiently to dis-entitle the appellants from executing against the mining claims.

The position of the law regarding the separate legal persona principle is well established. It was succinctly articulated by PATEL J…, in Deputy Sheriff Harare v Trinpac Investments (Private) Limited and Anor 2011 (1) ZLR 548 (H)…, where the learned judge quoted with approval Cape Pacific Limited v Labner Controlling Investments (Private) Limited & Ors 1995 (4) SA 790 (A)…,:

“It is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it.

But, where fraud, dishonesty, or other improper conduct (and I confine myself to such situations) is found to be present, other considerations will come into play.

The need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil…,; and, a court would then be entitled to look to substance rather than form in order to arrive at the true facts; and, if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie. Each case would obviously have to be considered on its own merits.”

This court approved that judgment is Stylianou & Ors v Mubita & Ors SC07-17.

The courts have purposely refrained from attempting to define all the circumstances under which the corporate veil will be lifted. This has been done, commendably, to avoid unnecessarily fettering with what is clearly the exercise of a wide judicial discretion.

What comes out from the authorities is that the court will disregard a company's separate personality where an element of fraud or other improper conduct in either the establishment or use of a company or in the conduct of the company's affairs exists.

When refusing to lift the veil of incorporation, the court a quo was exercising judicial discretion.

An Appeal Court is generally loathe to interfere with the exercise of discretion. The basis for interference, on appeal, is however well settled in this jurisdiction.

An Appeal Court may interfere where it appears that some error has been made in the exercise of discretion. Where the lower court acts on a wrong principle; if it allows extraneous or irrelevant matters to guide or affect it; if it mistakes the facts; if it does not take into account some relevant consideration; the Appeal Court will review the lower court's decision and substitute its own discretion: see Barros and Anor v Chimphonda 1999 (1) ZLR 58 (S)…,.

I am of the firm view that the court a quo completely disregarded important facts pointing to the inseparable nature of the second respondent and the judgment debtor. The court a quo completely ignored the evidence showing that even the alleged sale of the mining claims by the judgment debtor to the second respondent was a hoax.

The Board resolution, which stood as proof of the sale agreement, there being no agreement of sale at all, shows that a director of the seller also represented the purchaser. Andrew Lawson attended the meeting which resolved to sell the claims to the second respondent as a director of the judgment debtor. He was part of the decision-making process.

At the same time, he was the holder of a power of attorney issued to him by the second respondent. It empowered him to take delivery of the mining claims from the judgment debtor on behalf of the second respondent. He literally acted as both the seller and the purchaser.

If that does not point to a sham, nothing will.

That is not all.

The court a quo completely overlooked the lease agreements relied upon by the second respondent. I have already stated that those agreements were written on Maranatha Ferrochrome (Private) Limited letterhead. They show that Amble Mine (Private) Limited, the judgment debtor, was also listed as one of the lessors of the premises being leased out. More importantly, they show that rentals were being paid to Maranatha Ferrochrome (Private) Limited, which is literally the judgment debtor by virtue of its controlling authority over the judgment debtor.

DISPOSITION

These factors, together with the absence of any evidence pointing to the existence of a proper agreement of sale, and the payment of the purchase price, can only lead to one conclusion. It is that there was collusion between the judgment debtor and the second respondent.

Indeed, there is no distinction between the judgment debtor and the second respondent. They are one and the same thing. The purported transfer of the mining claims from the judgment debtor was an elaborate scheme designed to confound creditors.

This is a classic case for disregarding the separate corporate personality of the companies in order to assign liability where it belongs.

Corporate personality is being misused in order to dodge liability, and, for that reason, policy considerations require that it be disregarded.

The appeal has merit given that the court a quo clearly misdirected itself in material respects.

The appellants asked for costs to be awarded on the higher scale owing to the dishonest manner in which the second respondent conducted itself.

No good case for such a punitive measure has been made, but, there is no reason why costs should not follow the result in the usual manner.

In the result, it is ordered as follows:

1. The appeal be and is hereby allowed with costs.

2. The judgment of the court a quo be and is hereby set aside and substituted with the following:

“(a) The claimant's claim to all the property which was placed under attachment in execution of the judgment in case number HC5852/17 be and is hereby dismissed.

(b) A certain chrome mine, comprising of the mining claim, being a block of 25 mining claims known as BEE 47, registered as number G31 OBM be and is hereby declared executable.

(c) The claimant shall bear the costs.”

View Appeal
HH351-20 : THE SHERIFF OF ZIMBABWE and GURTA AG vs ANDERSON MANJA and 98 OTHERS
Ruled By: CHIKOWERO J

JUSTIFICATIONThe HOLY BIBLE, CONCORDANCE AUTHORIZED KING JAMES VERSION, 2013 p1078 reads, in Ecclesiastes 4:09-12:“9. Two are better than one; because they have a good reward for their labour.10. For, if they fall, the one will lift up his fellow: but woe to him who is alone when he falls; for ...

JUSTIFICATION

The HOLY BIBLE, CONCORDANCE AUTHORIZED KING JAMES VERSION, 2013 p1078 reads, in Ecclesiastes 4:09-12:

“9. Two are better than one; because they have a good reward for their labour.

10. For, if they fall, the one will lift up his fellow: but woe to him who is alone when he falls; for he has not another to help him up.

11. Again, if two lie together, then they have heat: but how can one be warm alone?

12. And, if one prevail against him, two shall withstand him; and a threefold cord is not quickly broken.”

I therefore refer to a number of legal sources as well as illustrations in determining this inter pleader application.

CLAIMANT BEARS THE ONUS TO PROVE THAT THE ATTACHED PROPERTY BELONGS TO IT AND MUST DISCHARGE THAT ONUS ON A BALANCE OF PROBABILITIES

In Sabarauta v Local Authorities Pension Fund and the Sheriff SC77-17, UCHENA JA, writing for the Zimbabwe Supreme Court, said:

“Interpleader proceedings are instituted by the Sheriff in respect of property attached by him when a third party claims ownership of that property. In such proceedings, it is necessary for the party claiming the attached property to prove ownership by clear and satisfactory evidence.”

In The Sheriff for Zimbabwe v Mahachi and Leomarch Engineering HMA34-18, MAFUSIRE J puts it thus…,:

“One common thread running through such cases, and several others on the point, is that there is a rebuttable presumption that where someone is found in possession of movable goods, they are presumed to be the owner of that property.

Where someone else other than the possessor claims to be the owner of those goods, they have the onus to prove, on a balance of probabilities, that they are the owner. There are no hard and fast rules on how they may go about proving such ownership. Every case depends on its own facts. The claimant may have to produce some evidence, such as receipts or other documents, if available, to prove ownership. A bald assertion that they are the owner is not enough.”…,.

The facts of each matter ultimately resolves the question whether clear and satisfactory evidence has been tendered by a claimant to satisfy the court, that, on a balance of probabilities, the property attached belongs to the claimant. The road to proving ownership is not a one way street.

WHERE THE CLAIMANT HAS PRODUCED SUFFICIENT EVIDENCE TO CONSTITUTE PRIMA FACIE PROOF OF OWNERSHIP THE ONUS SHIFTS TO THE JUDGMENT CREDITOR TO DISPROVE SAME BY PRODUCING EVIDENCE TO THE CONTRARY

The claimant does not need, at this stage, to prove, on a balance of probabilities, that the attached property belongs to it. All that is required of it is to show, on the face of it, that the property probably belongs to it.

That is what prima facie proof means in civil cases.

The onus then shifts to the judgment creditor to disprove the claimant's prima facie evidence of ownership by producing its own evidence to the contrary.

If the contrary evidence satisfies the court, the claim fails and execution proceeds. The converse is true.

The judgment creditor cannot successfully disprove the claimant's prima facie evidence of ownership by making unsubstantiated assertions in its own opposing affidavit. Neither can it do so through composing heads of argument based on the bare assertions in the opposing affidavit.

It follows also that argument at the hearing of the inter pleader application is no substitute for a judgment creditor's failure to produce contrary evidence to disprove the claimant's prima facie evidence of ownership of the attached goods.

If the judgment creditor cannot disprove the claimant's prima facie evidence of ownership, the result is this: What was prima facie evidence of ownership is transformed into proof on a balance of probabilities. The attached goods are then declared not executable and their release from attachment ensues.

This procedure has a parallel in Criminal Law.

If the State establishes a prima facie case against an accused who then opens and closes his defence case without without leading any evidence at all that person will be convicted. The conviction is not based on the prima facie case. It is no longer that. It has graduated to become proof beyond a reasonable doubt for want of any competing evidence.

In (1) Smit Investments Holdings SA (Proprietary) Limited (2) Genet Mining (Proprietary) Limited v (1) The Sheriff of Zimbabwe (2) Pungwe Mining (Private) Limited SC33-18 PATEL JA, with whom MALABA CJ and HLATSHWAYO JA concurred, said…,:

“In a bid to prove its ownership of the assets, the first appellant produced statements of account for Mbada Mine which showed that some payments, but not all, had been made by Mbada Mine. In addition, both appellants produced detailed agreements concluded with Mbada Mine (on 15 July 2012 and 22 July 2015), respectively, which stipulated that ownership of the assets would remain with the appellants until the full purchase price was paid. It was the court a quo's finding that the agreements were not authentic and that there was collusion between the appellants and Mbada Mine.

It was alleged, by the second respondent, that, the agreements were doctored by Mbada Mine and the appellants ex post facto and that there was no paper trail to show that the assets belonged to the appellants.

However, no evidence was led to substantiate the second respondent's allegations of collusion.

The court relied on the bald averment by the second respondent that the documents were not authentic and simply took that to be correct.

It is the second respondent that levelled allegations of inauthenticity and collusion. Consequently, it is the second respondent that should have proven the same.

This position was succinctly captured in the case of Circle Tracking v Mahachi SC4-07, where the court held that the principle that he who alleges must prove is a basic concept of our law.

No evidence was adduced by the second respondent to substantiate the alleged inauthenticity of the agreements.

The appellants produced documents which show that the assets had been procured by them and initially belonged to them. They also produced the agreements concluded with Mbada Mine in 2012 and 2015 which show that ownership was reserved in favour of the appellants until the full purchase price was paid. The relevant provisions are contained in clauses 4.3 and 11.6 of the first appellant's agreement and clause 7.7 of the second appellant's agreement.

The second respondent alleged that the documents supporting the appellants' claims were a recent fabrication meant to frustrate the execution of the assets, but, the dates when the agreements were concluded reveal that they were executed well before the second respondent instituted any legal proceedings in this matter. There is also nothing in the record to give credence to the allegations that the documents were fabricated by the appellants in collusion with Mbada Mine. It is my view, therefore, in the absence of any evidence to the contrary, that the agreements are genuine and that their provisions and the agreed compacts contained therein must be accepted as being authentic, as well as commercially and legally cognizable.”

This court's decision in the Sheriff of Zimbabwe v Senital (Pvt) Ltd t/a Frank B Mine and Zimbabwe United Passenger Company Ltd HB233-18 underscores this point. There, MAKONESE J expressed it in these words…,:

“The claimant refuted the allegations that the property belonged to the judgment debtor, and, in a bid to prove ownership of the attached property, the claimant attached some receipts and agreements of sale as proof of the attached assets. An agreement of sale is taken as prima facie proof of ownership. Where a claimant tenders some acceptable proof of ownership the onus must necessarily shift to the judgment creditor disproving the claimant's ownership of the attached goods.”

Similarly, CHITAPI J explained in The Deputy Sheriff Marondera v Hombarume and 7 Ors HH521-18…,:

“In my view, this claimant's claim is not far fetched. The claimant did not just attach the registration book as proof of legal ownership. He attached the official motor vehicle extract from Central Vehicle Registry. It gives details of the importation of the vehicle by the claimant and proof of payment of import duty and police clearances. In such a situation, the onus to prove that the third claimant is not the owner of the vehicle must shift to the judgment creditor. Where the claimant places before the court acceptable evidence of ownership or of some other legally recognizable ground warranting release of the attached property from execution, the onus shifts on the party who impugns such evidence to controvert it.”...,.

THE FACTS

The judgment creditors were employees of Amble Mining (Private) Limited. The latter traded as Amble Mine.

On 24 May 2010, an Independent Arbitrator granted an award ordering the Mine to reinstate the 99 employees with effect from March 2006 without loss of salary and benefits. As an alternative, the Mine was to pay them certain sums for back pay, damages for loss of employment, punitive damages, housing allowance, cash in lieu of leave and cash in lieu of notice. The total amount was US$1,199,251=88.

The date when the matter was referred to the Arbitrator is not disclosed in the papers. Also kept under wraps is the history of the labour matter leading up to the award.

Amble Mining (Pvt) Ltd is the judgment debtor.

On 28 June 2017, the employees filed a court application for registration of the arbitral award. The application to register the award as an order of this court was granted, unopposed, on 16 August 2017.

A Writ of Execution Against Movable Property must have been issued. I have not seen it. What I have perused, both in the court record relating to registration of the arbitral award and the present matter is a Writ of Execution against immovable property. It was issued on 18 June 2018. In the writ is a statement speaking to a nulla bona return of service. The nulla bona return of service was not placed before me. I do not know when it was issued. I am also in the dark as to where the Sheriff had sought to effect the attachment.

However, as regards the immovable property, the Sheriff was instructed to attach and execute what was said to be the judgment debtor's property being a certain chrome mine comprising of:

(i) The mining claim, being a block of 25 mining claims known as BEE 47 registered as No. G310 BM.

(ii) 110 compound houses.

(iii) 1 x shop.

(iv) 6 x round thatched guest houses tiled/geyser.

(v) 3 separate guest houses.

(vi) Workshop.

This was to realize the sum of US$1,199,252=99 which was the alternative remedy to reinstatement.

On 26 June 2018 the Sheriff wrote to the Provincial Mining Director, Mashonaland West Province attaching the mining claim in question together with everything else listed on the writ of execution against immovable property.

Gurta AG is the claimant. It is a company incorporated in terms of the laws of Switzerland. It is therefore a peregrinus. It has paid security for costs.

Gurta AG filed an affidavit with the Sheriff claiming ownership of all the attached property. The affidavit was deposed to by Carlo Ghezzi. He is a Board member and Chairman of the claimant.

The claimant admits that the mining claim used to belong to the judgment debtor. However, the claimant purchased the same sometime in 2009 and took transfer the same year.

In an endeavor to prove its claim, Gurta AG annexed certain documents to the affidavit delivered to the Sheriff.

Those documents are copies each of the certificate of registration of the mining claim after transfer; a Board Resolution of Maranatha Ferro Chrome (Pvt) Ltd, signed by the chairman and secretary on 15 October 2009, reflecting that the Board agreed, on 13 October 2009, to sell all its mining claims as well as those of its subsidiary, Amble Mining (Pvt) Ltd, to Gurta AG for US$1,350,000; an unsigned document on Maranatha Ferrochrome's letterhead said to be an invoice relating to the Sale and a Lease Agreement on Maranatha Ferrochrome's letterhead, dated 9 September 2015, in terms whereof Joseph Wirima rented one of the rooms at the mining claim for a period of 3 months running from 1 September 2015 to 30 November 2015 at a rental of US$25 per month.

The judgment creditors rejected the claim.

This led to the Sheriff instituting these inter-pleader proceedings.

The claimant, in a bid to prove its claim before this court, again filed an affidavit by the same deponent. It annexed thereto copies of the same documents as previously laid before the Sheriff. This time, it attached also copies of two letters written by the Acting Provincial Mining Director Mashonaland West on behalf of the Secretary for Mines and Mining Development. The letters are dated 5 July 2018. One was addressed to the judgment creditor's then legal practitioners, Citizens Legal Society and Advisory Trust. The other was addressed to the Sheriff's office.

In both letters, the Ministry of Mines and Mining Development, through the author, set the record straight by advising that the mining claim in question belongs to the claimant as evidenced by records reflecting transfer as having been effected to Gurta AG on 26 October 2009.

The author apologized to both addressees for a mistake which had been made in an earlier letter to Citizens Legal Society and Advisory Trust on 31 May 2018 which stated that the mining claims, and two other claims, belonged to the judgment debtor.

THE JUDGMENT CREDITORS' POSITION

Besides the letter of 31 May 2018 from the Ministry of Mines and Mining Development (which was superseded by the letters of 5 July 2018 from the same Ministry) the judgment creditors did not produce any evidence to contradict that tendered by the claimant.

They alleged collusion between the Acting Provincial Mining Director, Mashonaland West, the claimant, the judgment debtor, and Maranatha Ferrochrome (Pvt) Ltd to cook up the documentary evidence which the claimant placed before me.

I was told that there was therefore no sale of the mining claim in question to the claimant because all the documents speaking to such sale and transfer of the claim were fabricated.

The judgment creditors, in opposing papers, heads of argument, supplementary heads of argument, and oral argument at the hearing said this:

No paper trail leading up to transfer of the mining claim to the claimant had been put before me. There was therefore neither sale nor transfer of the mining claim in favour of Gurta AG. The claim was still registered in the name of the judgment debtor and therefore executable.

The argument was premised upon section 275 of the Mines and Minerals Act [Chapter 21:05] which reads in relevant part:

“275 Registration of transfer of mining locations and transfer duty payable

1. When any registered mining location or any interest therein is sold or otherwise alienated in any manner whatsoever, the seller or person who so alienates shall notify the mining commissioner of the transaction within sixty days of the date of such transaction, and shall inform him of the name of the person to whom such location or interest is sold or otherwise alienated and of the amount of the valuable consideration, if any, agreed upon and the date of the transaction.

2. When any registered mining location, or any interest therein, has been sold or otherwise alienated, whether before or after the first November, 1961, in any manner whatsoever, for valuable consideration, transfer duty at the rate fixed by Parliament shall be paid by the purchaser, which terms shall include any person becoming entitled to such location or interest therein by way of sale, exchange or other like transaction;

1….,.

2….,.

3….,.

4. Subject to this Act, any person entitled to be registered as the holder of a registered mining location, or any interest therein, shall make application to the mining commissioner for the transfer of such location or interest, and every such application shall be in writing and signed by or on behalf of the applicant, and shall be accompanied by the following particulars -

(a) The last issued certificate of registration or of special registration of the location or the holder's copy of the mining lease, as the case may be;

(b) Certificates by the transferor and transferee in the prescribed form;

(c) A duplicate original grosse or notarially certified copy of any and every existing written agreement affecting or bearing upon the sale, alienation, exchange or transfer;

(d) In the event of there being no such existing written agreement, certificates by the transferor and transferee to that effect;

(e) The original or notarially certified copy of any power of attorney which may be required to authorize an agent to act on behalf of any party to the transfer; if the original power is lodged with the mining commissioner and the applicant does not wish the mining commissioner to retain it, he shall furnish with it a copy which the mining commissioner shall compare with the original, certify to be a true copy and retain;

(f) If such application is in respect of the transfer of any mining location registered for precious stones or any interest therein, a certificate from the secretary that the Minister has granted the permission required under section two hundred and eighty two in respect of such transfer.

5. The mining commissioner shall, on receipt of such application and other documents, and of the transfer duty or, if no such duty is or may in the future be payable or the whole of such duty has been remitted under subsection (9) of the prescribed fee, and if he is satisfied that the other provisions of this Act have been complied with, register transfer by making the necessary entries in his registers and other records: Provided that -

(i) No transfer, as aforesaid, shall be valid unless it has been registered by the mining commissioner, and no such registration shall be made -

(a) Where such location is liable for forfeiture or under attachment;

(b) Until dues, fees, royalties, rents or other moneys due and payable to the mining commissioner under this Act in respect of the property to be transferred have been paid;

(c)…,.

(d) Where the transferee is not a permanent resident of Zimbabwe, unless the mining commissioner, after consultation with the Reserve Bank of Zimbabwe, is satisfied that all requirements imposed by or under the Exchange Control Act [Chapter 22:05] have been complied with;

(i)…,.

(ii)…,.

(8) The mining commissioner shall also, on receipt of the prescribed fee, issue to the transferee a certificate in the form prescribed and such certificate shall record the interest of the transferor, whether whole or otherwise, in such block.”

The judgment creditor's alternative argument was this:

Should I find that there was a sale then I should pierce the corporate veil on two grounds:

(i) Gurta AG, Amble Mining (Pvt) Ltd, and Maranatha Ferrochrome (Pvt) Ltd were companies in the same Group. The first two were subsidiaries of the third. Therefore, the sale was between subsidiary companies.

(ii) Secondly, there was fraud involved because the sale and transfer of the mining claim were designed to defeat the judgment creditors' entitlement to attach the mining claim by taking it out of the judgment debtor's hands.

THE ANALYSIS

I am satisfied that the claimant established, prima facie, that the mining claim belongs to it. The precise legal position is that the holder of a mining claim has the right to work such claim to the exclusion of everyone else.

The totality of the documentary evidence tendered by the claimant satisfies me in this regard.

It is true that the date stamp on the copy of the certificate of registration on record is not legible to the extent that the day and month of registration of the transfer is not visible. But the year of registration of that transfer is reflected on the document as being 2009. The two letters from the Ministry of Mines and Mining Development, dated 5 July 2018, clearly state the date of registration of the transfer as 26 October 2009. So, the letters cure the deficiency appearing on the copy of the certificate in question.

What I have is a copy of the certificate, not the original.

The transfer number for the certificate in question is given in the letter which was addressed to Citizens Legal Society and Advisory Trust. It is TR 6627. That is the transfer number appearing on the copy of the Certificate of Registration after transfer tendered by the claimant. When issuing a duplicate original Certificate of Registration to a holder, the office of the Mining Commissioner obviously retains the original on file.

The Certificate of Registration is documentary evidence issued and signed by the Mining Commissioner in Harare. The letters of 5 July 2018 are pieces of documentary evidence authored by the Acting Provincial Mining Director, Mashonaland West in Chinhoyi. All three documents confirm that the claimant is the registered holder of the claim in question since 2009.

No contrary evidence was led by the judgment creditors to demonstrate that the certificate of registration was cancelled by the Mining Commissioner for whatever reason or disowned by him as being inauthentic or that the letters of 5 July 2018 contain falsehoods.

This court is not the Mining Commissioner. This court does not issue certificates of registration of mining claims. The person who must be satisfied that section 275 of the of the Mines and Minerals Act has been complied with is the Mining Commissioner. It is him, and not myself, who is under obligation to receive, peruse, and be satisfied with the documentation required before he issues a certificate of registration.

No evidence was placed before me, by the judgment creditor, to demonstrate that the certificate of registration in question was issued outside the statutory requirements.

The judgment creditor's criticism of the Board resolution to sell the mining claim to the claimant, the invoice, and the lease agreement, cannot be evidence tendered by the judgment creditor disproving the authenticity of the sale and transfer.

The courts have accepted that business persons often record their dealings in terms which perfectly make sense to them but are often wanting in clarity to the legal mind. One must therefore read commercial documents sensibly. A mere reading of a commercial document, standing alone, may not make much sense because the context of its making may not appear within the four (4) corners of the document.

This is how I have looked at the invoice, the lease agreement, and the Board resolution.

For example, the lease agreement entered into on 9 September 2015, at Ngezi Mining Area, with the tenant, Joseph Wirima, is recorded as:

“A Settlement Agreement was negotiated between Upthrow Trading (Pvt) Ltd, Maranatha Ferro Chrome (Pvt) Ltd, Amble Mining (Pvt) Ltd, Gurta AG, Glossy Investment (Pvt) Ltd and Honourable Paul Mangwana and signed in Italy on 3 October 2013. In terms of this Settlement Agreement, following the completion of the handover of the mining claims, Maranatha Ferro Chrome (Pvt) Ltd, representing Gurta AG who are the legitimate owners of the mining claims in Ngezi, do hereby offer the Lease Agreement/Arrangement for the property known as: WHITE HOUSE ROOM 3…,.”

The judgment creditor led no evidence from Joseph Wirima (the tenant), C Mutema (the witness to the lease agreement), Upthrow Trading (Pvt) Ltd, Glossy Investments (Pvt) Ltd and Honourable Paul Mangwana.

In respect of Joseph Wirima and C Mutema, there was no evidence that the lease agreement between the former and the claimant, represented by Maranatha Ferro Chrome (Pvt) Ltd, was inauthentic and not entered into on 9 September 2015 but after the attachment of the mining claim on 27 June 2018 - almost 3 years later.

Similarly, the judgment creditor adduced no evidence from Upthrow Trading (Pvt) Ltd, Glossy Investments (Pvt) Ltd and Honourable Paul Mangwana on the nature of the Settlement Agreement between these companies, Paul Mangwana, the judgment debtor, and the claimant.

(1) Smit Investments Holdings SA (Proprietary) Limited (2) Genet Mining (Proprietary) Limited v (1) The Sheriff of Zimbabwe (2) Pungwe Mining (Private) Limited SC33-18, Sheriff of Zimbabwe v Senital (Pvt) Ltd t/a Frank B Mine and Zimbabwe United Passenger Company Ltd HB233-18, and The Deputy Sheriff Marondera v Hombarume and 7 Ors HH521-18 are clear that where the claimant has made out a prima facie case that it is the owner of the attached goods the onus shifts to the judgment creditor to controvert such evidence.

Evidence can only be controverted by other evidence, not through heads of argument or oral submissions - the sole purpose of which is to endeavour to punch holes into a case which is already prima facie established.

The sale and transfer of the mining claim occurred in 2009.

This arbitral award was not yet in existence. Accordingly, there was no basis for the judgment creditor's assertions of fraudulent conduct and collusion between the claimant, the judgment debtor, and Maranatha Ferro Chrome (Pvt) Ltd.

There was no execution to defeat at the time of sale and transfer of the mining claims.

It was not even disclosed by the judgment creditor when it is that litigation in their labour case with the judgment debtor was instituted: see S v Stead 1991 (2) ZLR 54 (S); Mkombachoto v Commercial Bank of Zimbabwe Ltd and Another 2002 (1) ZLR 21 (H).

Still, on lifting the corporate petticoat of Gurta and peering behind it, I see no other exceptional circumstance justifying the same.

The judgment creditor told me, both in heads of argument and at the hearing, that, Maranatha Ferro Chrome (Pvt) Ltd, the judgment debtor, and the claimant are a single economic entity. I was therefore invited to go behind the claimant's skirt, disregard the three companies' separate corporate personalities and order execution of the mining claim, even though registered in the claimant's name, to satisfy the judgment debt owed by Amble Mining (Pvt) Ltd.

Counsel for the judgment creditor referred me to Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd and Anor HH121-11.

That case is distinguishable.

Here, there is no evidence at all as to who the shareholders of the claimant are. There is completely no evidence to prove that they are the same persons as the shareholders of the judgment debtor and its holding company, Maranatha Ferro Chrome (Pvt) Ltd. Neither is there any evidence that the directorship of the claimant is the same as that of the other two companies.

The bare allegation that the claimant is a 'baby' of the “Ghezzi family” was not substantiated.

I therefore refuse to interfere with the claimant's corporate regalia: see Sibanda v JLF (Pvt) Ltd & Anor SC117-04.

HB233-18 : THE SHERIFF OF ZIMBABWE vs SENITAL (PVT) LTD t/a FRANK B MINE and ZIMBABWE UNITED PASSENGER COMPANY LTD
Ruled By: MAKONESE J

The proceedings in this matter relate to interpleader relief being sought by the claimant pursuant to the provisions of Order 30 of the High Court Rules, 1971.

As contemplated by the provisions of Order 30, Rule 208 of the Rules, the applicant has declared no interest in the matter other than in respect of his costs and charges. The applicant undertakes to comply with any order or direction given by this court in accordance with the provisions under Rule 208 of the Rules.

The judgment creditor was awarded judgment against Christian Van Wyk under case number HC12341/15 for the payment of the sum of US$64,643=20 together with interest and costs of suit. In execution of the order, the judgment creditor instructed the applicant to attach various movables.

On 24 April 2018, the applicant attached, in execution, property located at Henfrick Mine, Shangani. The property included a compressor, a John Deere tractor, a Nissan NP 300 motor vehicle, a grinding mill, an electric motor, 2 x tractor bodies, 6 trailers, 10,000 tonnes of metal and a KIPO generator and various other movables.

The claimant lay claim to the attached property and duly instructed the applicant to institute inter pleader proceedings.

The claimant contended that the property belonged to it and not to the judgment debtor. Both the claimant and the judgement creditor have filed documents in support of their claims. It is against this background that this court is being called upon to decide on these three principal issues:

1. Whether the claimant is a separate legal entity from the judgment debtor.

2. Whether the circumstances of the case justify the lifting of the corporate veil.

3. Whether the inter-pleader claim should succeed.

It is a well established principle of our law that a company bears separate legal personality from the individuals who incorporate it. This time honoured principle was laid out in Salomon v Salomon & Company Ltd [1897] AC 22.

It is trite that for the corporate veil to be lifted there ought to be a justifiable legal and factual basis for doing so.

On the facts of this matter, there can be no dispute that the claimant is a separate legal entity from the judgment debtor. The fact that the judgment debtor may be a director of the claimant does not, per se, imply that the claimant and the judgment debtor are one and the same entity.

The courts will not lightly pierce the corporate veil, and will do so only when it is demonstrated that a party is seeking to hide behind the shield of the corporate veil.

In Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd & Another HH121-11, the court cited with approval US v Milwaukee Refrigerator Transit Company (1905) 42 Fed…, as follows:

“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.”

The question which therefore arises is whether the judgment debtor, Christian Van Wyk, is the alter ego of the claimant.

I hold the view, that, a company is considered to be a mere alter ego if it is incorporated for the sole benefit of the person in question, who seeks to hide behind the veneer of corporate liability. Further, the day to day running of that company ought to be that of the person in question.

On the papers filed by the parties in this matter, it cannot be said, by any stretch of the imagination, that, it has been established that the business of the claimant is solely that of the judgment debtor.

In any event, the judgment debtor is not the sole director of the company.

This issue was addressed in the case of Cape Pacific Ltd v Lubner Investments (Pvt) Ltd and Others 1993 (2) SA 784 (C), where the court observed as follows:

“When the corporation is the mere alter ego or business conduct of the person it may be disregarded….,.”

In the matter before me, no fraud has been alleged. The judgment creditor has not alleged that the claimant was organised as a device to evade an outstanding legal obligation and to frustrate execution.

The separate legal existence between Christian Van Wyk and the claimant has to be maintained and observed by this court.

In interpleader proceedings, it is trite that the onus is usually upon the claimant to set out such facts as would prove his/her ownership of the attached property on a balance of probabilities. In such proceedings, the claimant is, as a general rule, made the plaintiff, and the burden rests upon him where the goods seized were, at the time of seizure, in the possession of the judgment debtor; possession being prima facie evidence of title.

If, however, the claimant was in possession at the time of seizure, the burden of proof may be upon the execution creditor, thus reversing the ordinary rule, and the execution creditor may be made plaintiff: see The Deputy Sheriff of the High Court v Shepherd Mayaya & Ors HH494-15.

The claimant refuted the allegations that the property belonged to the judgment debtor, and, in a bid to prove ownership of the attached property, the claimant attached some receipts and agreements of sale as proof of the attached assets.

An agreement of sale is taken as prima facie proof of ownership.

Where a claimant tenders some acceptable proof of ownership of the attached goods, then, the onus must necessarily shift to the judgment creditor disproving the claimant's ownership of the attached goods.

It is not disputed that the attachment was made at the claimant's business address at Henfrick Mine at Shangani. The property was not attached at the debtor's personal address and therefore the presumption that the property belonged to the debtor does not arise: see Deputy Sheriff Marondera v Travese Investments (Pvt) Ltd & Anor HH11- 09.

The issue to be resolved is whether, in the circumstances of this case, the claimant has proved, on a balance of probabilities, that, all the attached property belonged to it and not the judgment debtor.

I have already noted that the claimant produced documentation proving ownership of most of the attached goods. In particular, an agreement for the Nissan NP 300 motor vehicle, an invoice for the purchase of the KIPO generator, and a fixed asset register for property belonging to the claimant as at 31st December 2017 were produced.

What is required in inter pleader proceedings is proof, on a balance of probabilities, indicating that the attached property belongs to the person claiming it. The claimant is not required to prove beyond reasonable doubt that each and every item listed on the writ of execution belongs to it. This is moreso where the attached property is not found at the judgment debtor's personal address.

The claimant has shown that most of the attached property belongs to the company and relevant documents have been produced. In the result, the claimant has succeeded in proving, on a balance of probabilities, that the attached property does not belong to the judgment debtor.

I therefore make the following order:

1. The claimant's claim succeeds.

2. The Deputy Sheriff is ordered to release forthwith all the attached property to the claimant.

3. The judgment creditor is ordered to pay the costs of suit including the costs of execution.

HH542-15 : THE SHERIFF OF THE HIGH COURT vs RONGXIN MINING (PRIVATE) LIMITED and FREDDY MAKUVISE
Ruled By: MTSHIYA J

This is an interpleader application.On 5 September 2014, the following consent order was granted in favour of the judgement creditor;“IT IS ORDERED BY CONSENT THAT:1. The defendants shall pay US$60,000 being 10% commission on an investment of U$600,000 brokered by the plaintiff.2. The US$60,000 shall be paid through plaintiff's legal ...

This is an interpleader application.

On 5 September 2014, the following consent order was granted in favour of the judgement creditor;

“IT IS ORDERED BY CONSENT THAT:

1. The defendants shall pay US$60,000 being 10% commission on an investment of U$600,000 brokered by the plaintiff.

2. The US$60,000 shall be paid through plaintiff's legal practitioners on or before 30 September 2014.

3. The balance of plaintiff's claim shall be referred to trial in terms of the joint pre-trial conference minute signed by the parties' legal representatives.

4. There be no order as to costs.”

On the basis of the above court order, and on the instructions of the judgment creditor, on 6 November 2014, the Sheriff of Zimbabwe attached various goods allegedly belonging to the judgement debtors who have not been cited in casu. The judgment debtors, in the consent order, were Zhuwakinyu Chazarira (first defendant) and Xingrong Hu (second defendant).

On 19 November 2014 the claimant herein advised the applicant that the attached goods belonged to it. That led to the applicant filing this inter pleader application on 5 December 2014.

The attached goods included mining equipment, vehicles, and office equipment.

As already stated, the claimant alleges that the attached goods belong to it and that it has no relationship with the judgment debtors. It states that the assets were imported into Zimbabwe following the grant to it of an investment licence by the authorities in Zimbabwe. It says the equipment was meant for its mining operations in Zimbabwe and it had legally imported it into the country as evidenced by documentation from the Zimbabwe Revenue Authority (ZIMRA).

The claimant went on to argue that, although the judgement debtors might have had an interest in the claim, the court should recognise the fact that it is a separate legal entity whose property did not belong to them (judgement debtors).

On its party, the applicant, who has no interest in the matter, stated that it would abide by the court's decision....,.

I fully agree that the property of the company should be distinguished from that of its shareholders. That is exactly what the law says.

However, the judgement creditor has, in my view, correctly argued that the claimant has failed to place before the court proof that the attached assets indeed belong to it. The assets can only be removed from attachment upon ample proof of ownership by the claimant.

There is no such proof in casu.

It is true that some assets may have been a listed on the ZIMRA receipts. That alone, however, does not tell us that the judgment debtors, whose interests on the claimant were not denied, could not have imported some of the assets through “their” company. It is not only the claimant who could import the listed items.

In any case, why would the claimant fail to produce such evidence as clear receipts and registration books for the attached vehicle(s).

It would be inappropriate for this court to allow judgment debtors to hide behind the corporate veil in order to avoid payment of personal proven and accepted debts.

The claim in casu becomes even more dismissable when the judgment creditor states;

“(ii) Immediately after the attachment of defendant's property, and on 11 November 2014, one Anqi Hu, a Director of Rongxin Company (Private) Limited, approached me and made an undertaking to repay the debt on terms. I attach as Annexure 'B' hereto her payment proposal on behalf of defendants which I then accepted. I confirm that I received the initial payment of US$8,000. Again, this proposal was not made in good faith as it made with a view to buying more time for defendants while they finds ways of defeating my claim. The present application is nothing but a way of trying to defeat my claim.

(iii) I am aware that defendants own 65% shares of Rongxin Mining Company (Private) Limited. I attach as Annexure 'C' the company's Investment License No.1870 dated 26 June 2013. The Defendants are, therefore, direct owners of the attached goods to the extent of their shareholding, which goods may well be individually owned.

3.3. The mention of Rongxin Mining Company (Private) Limited is designed to mask defendants' ownership of the goods attached.”

It is worth noting, that, it is actually the deponent to the claimant's affidavit who, on 11 November 2014, signed the following document:

“11 November 2014

I, Anqi Hu, on behalf of Zhuwankinyu Chazarira, to pay USD60,000 which is 10% of the sum of $600,000 in following terms:

12 Nov 2014 USD$ 8,000

12 Dec 2014 USD$14,000

12 Jan 2015 USD$14,000

12 Feb 2015 USD$14,000

13 Mar 2015 USD$10,000

Anqi Hu”

When the above note was written, the assets being claimed had already been attached.

Surely, by that time, Mr Anqi Hu, a Director of the claimant, must have known that wrong assets had been attached. He did not say so but went on to propose settlement terms and even made a payment of $8,000.

A week later his colleague, Mr Xingron Hu, made this claim to the applicant.

Like his colleague, Mr Anqi Hu also knew what had been imported under the investment licence. However, as at 11 November 2014, Mr Anqi Hu pretended not to know and only came up with a different position on 28 January 2015 when he swore to the affidavit herein in support of the claimant's claim.

The papers before me do not even challenge the place of execution.

This is so because that is where the judgement debtors operated from.

That also reinforces the principle that possession of a movable asset raises a presumption of ownership.

The assets were attached at the premises used by the judgment debtors. The assets, in my finding, belonged to the judgement debtors: see Bruce NO v Josiah Parkes & Sons (Rhodesia) (Pvt) Ltd and Another 1972 (1) SA 68 (R).

In view of the foregoing, I am not satisfied that the claimant has a valid claim to the attached assets.

The claimant's claim is dismissed with costs.

HB10-15 : INTRO-WISE CATERING (PVT) LTD vs COSIRA COMMUNICATIONS GLOBAL and COSIRA AFRICA (PTY) LIMITED and ZIMBABWE PLATINUM MINES (PVT) LTD
Ruled By: MAKONESE J

This is an application for a declaratory order.

This court is invited to declare that Cosira Communications Global (first respondent) and Cosira South Africa (Pty) Ltd (second respondent) which was previously known as Cosira International (SA) (Pty) Ltd are one and the same entity.

To make such declaration, this court is asked to lift the veil of corporate personality on the grounds that such corporate personality has been used as a device to cover up fraud or improper conduct.

It is contended, on behalf of the applicant, that although the first and second respondents have distinct and separate legal personas, they are in fact one economic entity.

The first and second respondents strenuously resist the order sought and argue that there is no factual or legal basis for an order that the liabilities of one corporate entity be deemed to be liabilities of another.

The first and second respondents aver that the order sought is not legally competent and that where the corporate veil is lifted the court must effectively look behind the corporate veil to establish the shareholders of the corporate entity and then attach such liability to them.

The respondents pray that the application be dismissed for lack of merit.

Background

The facts that are common cause are these:

In November 2012, Intro-wise Catering (Pvt) Ltd (applicant) entered into a contract with Cosira South Africa (Pty) Ltd (second respondent) in terms whereof the applicant was to provide catering, housekeeping, and laundry services to Cosira South Africa (Pty) Ltd (the 2nd respondent) at the mining site of Zimbabwe Platinum Mines (Pvt) Ltd (third respondent).

The said agreement was to run continuously from November 2012 until termination by either party giving the appropriate notice in accordance with the agreement.

As a result of the agreement, the applicant supplied catering, housekeeping, and laundry services to the second respondent up to May 2013.

Invoices were raised regularly and a balance of US$155,144=22 remained outstanding for the period up to the end of May 2013.

It was the belief and understanding of the parties that the applicant was being sub-contracted to provide service to a company which had a running contract with Zimbabwe Platinum Mines (Pvt) Ltd (third respondent).

It later transpired that it was Cosira Communications Global (the first respondent), instead, that had a running contract with Zimbabwe Platinum Mines (Pvt) Ltd.

It was established that Cosira South Africa (Pty) Ltd (second respondent) never had any contract with Zimbabwe Platinum Mines (Pvt) Ltd at all.

It is Cosira Communications Global (the first respondent) that had a contract with Zimbabwe Platinum Mines (Pvt) Ltd and it is Cosira Communications Global which consumed the services which were provided by the applicant.

The applicant argues that Cosira Communications Global and Cosira South Africa (Pty) Ltd (first and second respondents) were aware, at all material times, that it was only Cosira Communications Global (first respondent) and not Cosira South Africa (Pty) Ltd (second respondent) which had a contractual relationship with Zimbabwe Platinum Mines (Pvt) Ltd.

Cosira South Africa (Pty) Ltd (second respondent) has tendered into court authenticated documents which reflect, that, on the 10th July 2013, Cosira South Africa (Pty) Ltd was placed under provisional liquidation by order of the North Gauteng High Court, sitting at Pretoria, South Africa.

Cosira South Africa (Pty) Ltd (second respondent) was placed under final liquidation on the 27th August 2013.

An order of the High Court of South Africa was issued on the 30th July 2013, authorizing the liquidators to sue on behalf of, and to defend proceedings against, Cosira South Africa (Pty) Ltd (second respondent).

Cosira South Africa (Pty) Ltd's liquidators dispute liability of the outstanding amount and further state that the applicant has failed to make out a case for the piercing of the corporate veil as Cosira Communications Global and Cosira South Africa (Pty) Ltd are separate legal personalities....,.

The applicant argues that the application is not opposed by Cosira Communications Global (first respondent) and Zimbabwe Platinum Mines (Pvt) Ltd (third respondent). The only opposition before the court is on behalf of Cosira South Africa (Pty) Ltd (second respondent)....,.

The Merits

I shall deal with the merits of this matter.

In order to establish whether the applicant has succeeded in making a case for the piercing of the corporate veil I need to have regard to the following issues:

(a) Whether Cosira South Africa (Pty) Ltd and Cosira Communications Global have the same shareholding;

(b) Whether Cosira South Africa (Pty) Ltd and/or Cosira Communications Global used their company structures to avoid or conceal liabilities due to the applicant;

(c) Whether Cosira South Africa (Pty) Ltd or Cosira Communications Global was used as a device of facade to conceal some wrongdoing in terms of the contract concluded with the applicant;

(d) Whether Cosira South Africa (Pty) Ltd acted fraudulently or dishonestly in relation to the applicant;

(e) Whether there is any compelling reason as to why the corporate veil between Cosira South Africa (Pty) Ltd and Cosira Communications Global should be pierced.

I now propose to deal with the above issues ad seriatim:

(a) Whether Cosira South Africa (Pty) Ltd and Cosira Communications Global have the same shareholding

The two companies, Cosira South Africa (Pty) Ltd and Cosira Communications Global enjoy the legal personalities conferred upon them by the law.

Cosira South Africa (Pty) Ltd is a company with limited liability incorporated in South Africa. Its shareholder is FT Construction (Pty) Ltd.

On the other hand, Cosira Communications Global is an entity incorporated in Mauritus. The shareholder of this company is JOAO DA NOVA.

It is therefore clear that the shareholders of the two companies are not the same.

The applicant realised this undisputed fact and sought to argue that the two entities fall within the same economic group known as the Cosira Group of companies.

This may be so, but there is nothing to establish that the shareholding of the two separate entities is held by the same personas.

(b) Whether Cosira South Africa (Pty) Ltd and/or Cosira Communications Global used their company structures to avoid or conceal liabilities due to the Applicant

The applicant's case is premised on the fact, that, although it concluded a contract with Cosira South Africa (Pty) Ltd to provide catering services, it actually contracted with Cosira Global.

The applicant clearly has a dilemma in that the evidence clearly points to the fact that the contractual arrangement was entered into between the applicant and Cosira South Africa (Pty) Ltd.

The fact that some of the invoices raised by the applicant were settled by Cosira Global does not, in my view, necessarily create a contractual relationship between the applicant and Cosira Global.

The fact that Cosira South Africa (Pty) Ltd may not now be in a position to pay for the services rendered by the applicant does not create any legal or contractual obligation on Cosira Global.

(c) Whether Cosira South Africa (Pty) Ltd or Cosira Communications Global was used as a device or facade to conceal some wrongdoing

There is simply no evidence to prove that Cosira South Africa (Pty) Ltd was used as a device to conceal some wrong doing.

My view is that it is up to contracting parties to perform due diligence exercises with the companies or entities they do business with. When a company makes a free expression to contract with another legal entity it is imperative for the contracting parties to establish who exactly they are contracting with.

In the fast changing world, where contracts can be concluded via the internet and other electronic media, it is, in my view, essential that the contracting parties make themselves familiar with the real personas behind these companies.

The applicant categorically states, that, in or about 1 November 2012 it concluded a contract with Cosira South Africa (Pty) Ltd to provide catering services.

A copy of the Intro-wise Catering contract (“the contract”) is annexed to the applicant's papers as annexure “GG 7”.

The contract is not signed by Cosira South Africa (Pty) Ltd. Cosira South Africa (Pty) Ltd is not a party to that contract.

The contract was in fact signed by Cosira Construction Solutions, with its address at Brakpan, Johannesburg, South Africa, on behalf of Cosira South Africa (Pty) Ltd.

I am satisfied that there is nothing to suggest that Cosira Global was used as a device to conceal some wrongdoing.

(d) Whether Cosira South Africa (Pty) Ltd acted fraudulently or dishonestly in relation to the Applicant

The applicant contends that the two legal entities acted in connivance to defraud it.

Whilst payments for services were effected by either Cosira South Africa (Pty) Ltd or Cosira Global there is no justification to infer fraud or improper conduct. It would seem that the applicant was happy to receive and accept payment as long it was getting paid. It did not matter who was making such payment. The only problem arose when payments ceased. It would seem that is the stage when the applicant sought to establish who exactly was behind the two legal entities.

As I have stated above, fraud or improper conduct cannot be proved in this matter.

(e) Whether there is any compelling reason as to why the corporate veil should be pierced between Cosira South Africa (Pty) Ltd and Cosira Communications Global

Where the piercing of the corporate veil is sought, the court is invited to look at the two separate companies and their shareholders or controllers. The corporate veil is lifted where a company, otherwise legitimately established and operated, is misused in a particular instance to perpetrate fraud or for a dishonest or improper purpose.

The principles governing the piercing of the corporate veil were established and set out in the landmark case of Salomon v Salomon and Company Ltd [1897] AC 22.

The effect of the ruling in this case was to uphold, firmly, the doctrine of corporate personality as set out in the United Kingdom's Companies Act, 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay outstanding debts.

In the decades since Salomon v Salomon and Company Ltd [1897] AC 22, various exceptional circumstances have been delineated, both by legislatures and the judiciary, in England and other jurisdictions, when courts can legitimately disregard a company's separate legal personality, such as where crime or fraud has been committed.

See the case of Adams v Cape Industries PLL [1990] Ch 433.

The other recent English case of Prest v Petrodel Resources Ltd [2013] UKSC 34 is significant in that it proposes that the piercing of the corporate veil was usually a last resort, and that remedies outside of “piercing” the veil, particularly in equity, or the law of tort, could achieve appropriate results on the facts of each case.

In the South African case of Cape Pacific v Lubner Controlling Investments (Pty) Ltd and Others 1995 (4) SA 790, SMALBERGER JA states…, as follows:

“It is undoubtedly a salutary principle that our courts should not lightly disregard a company's separate personality, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it. But, where fraud, dishonesty, or improper conduct is found to be present, other considerations would come into play. The need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil.”

On the facts of this matter, it is clear that the shareholders of Cosira South Africa (Pty) Ltd and Cosira Communications Global are different.

No evidence has been placed before the court to show that the two legal entities used their structures to avoid or conceal liabilities due to the applicant.

Additionally, it has not been shown that Cosira South Africa (Pty) Ltd was used as a device or facade to conceal some wrongdoing in terms of the contract with the applicant.

I am satisfied that it is not been proved that either Cosira South Africa (Pty) Ltd or Cosira Communications Global acted fraudulently or dishonestly. There is, therefore, no compelling reason why the corporate veil should be lifted.

In the circumstances, I come to the conclusion that a case has not been made for the relief sought.

The application is hereby dismissed with costs.

SC65-21 : STARAFRICA CORPORATION LIMITED vs ZIMBABWE SUGAR REFINERY WORKERS UNION
Ruled By: GWAUNZA DCJ, BHUNU JA and BERE JA

This is an appeal against part of the judgment of the Labour Court (the court a quo) handed down on 26 January 2018. The appeal is against that part of the judgment which upheld the arbitrator's award granting the respondent's members an 11 percent wage increase.FACTUAL BACKGROUND OF THE CASEThe ...

FACTUAL BACKGROUND OF THE CASE

The facts giving rise to this appeal are by and large common cause. The undisputed facts are that the appellant is the owner of a group of companies whereas the respondent is a trade union representing employees of Gold Star, a trading division of the appellant.

The parties deadlocked during collective bargaining negotiations for wage increases for the period 1 January 2011 to 30 June 2011. The respondent was claiming a basic salary increase from US$157 to US$180 per month.

It did not claim any increase for housing allowance on behalf of its members.

On the other hand, the appellant objected to the respondent's members being awarded any increase pleading economic hardship.

Both parties proffered evidence before the arbitrator. Having carefully considered the evidence before him, he issued the following order:

“I herein award as follows:

(a) Basic salary is increased from US$157, by 11 percent, to US$174.27 per month for the lowest paid employee.

(b) Housing allowance is increased from US$50, by 11 percent, to US$56.50.

(c) The total award per lowest paid employee is US$230.77.”

In coming up with that award, the arbitrator took into account the employees basic needs and weighed them against the employer's economic hardship.

In exercising his discretion, he came to the conclusion, that, although the company was in economic dire straits, with proper management and re-alignment of its operations, it could afford an increase of 11 percent across the board for both wages and housing allowances.

This is what the arbitrator had to say at p2 of his award:

“The 2011 financial statement also showed a loss of US$16,375,557. Clearly, the fortunes of the company are not that bright. The cost of employment seems to be on the higher side, but, it appears the management salaries chew also a huge chunk. Those are some of (the) things that also need alignment. The other costs were for was sugar (sic) production which seems to be on the higher side.

However, the cost should be recovered from sale through proper pricing.”

In assessing the basic needs of the employees, the arbitrator accepted and took into account that it was common cause that rentals in the high density suburbs were pegged at US$60 to US$80 per month. He also found, that, it was common cause that groceries amounted to US$100 per month per person.

The arbitrator also took into account the comparative evidence placed before him, that employees in related sub-sectors earned a total of between US$250 to US$281 per month.

In conclusion, he remarked that…,.:

“For the avoidance of doubt, I have taken into consideration the harsh environment the employees are in and the company…,. However, had the company been performing, I would have awarded a US$300 basic salary increase and housing allowance of over US$100 - but that would be to bury the company.”

Aggrieved by the arbitrator's award, the appellant appealed to the court a quo with partial success.

Its complaints were that the arbitrator erred in relying on financial statements of the entire Group of companies instead of only on those of Gold Star.

It further complained that the arbitrator awarded the employees an increase in housing allowance which they had not asked for.

The court a quo upheld the appellant's complaint that the arbitrator had misdirected himself in awarding an increase in housing allowances which no one had asked for. It however dismissed the appellant's appeal against the award on wage increases of 11 percent.

The appellant's grounds of appeal raise a single issue for determination by this Court.

The sole issue for determination is whether or not the court a quo erred in upholding part of the award granting the employees an 11 percent salary increase.

ANALYSIS OF THE FACTS AND THE LAW

Whether or not the court a quo erred in upholding the arbitrator's award, of an 11 percent wage increase, is a question of fact.

It is trite and a matter of elementary law, that, for the appellant to succeed, it must prove, on a balance of probabilities, that, the award was so irrational in its defiance of logic such that no arbitrator properly exercising his or her discretion would have made such an award: see Hama v National Railways of Zimbabwe 1996 (1) ZLR 64 (S) and Sable Chemical Industries Ltd v Easterbrook 2010 (2) ZLR 342 (S).

THE LAW

The appellant's appeal is premised on the well-known principle of Company Law, to the effect that a company has a separate and distinct existence from other personalities as enunciated in the familiar case of Salomon v Salomon & Co Ltd [1897] AC 22 (HL).

In that case, LORD HALSBURY LC had this to say:

“It seems to me impossible to dispute, that, once a company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself: and that the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are.”

The principle of law laid down in Salomon v Salomon & Co Ltd [1897] AC 22 (HL) has found wide recognition in our jurisdiction in a plethora of cases.

In Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd & Anor HH121–11, PATEL J…, restated the legal principle as follows:

“The cardinal principle of Company Law, as enunciated in Salomon v Salomon & Co Ltd [1897] AC 22 (HL) and Dadoo Ltd & Others v Krugersdop Municipal Council 1920 AD 530 at 550 is that a company is a separate entity distinct from its members.”

Applying the timeless dictum laid down in Salomon v Salomon & Co Ltd [1897] AC 22 (HL), it is plain that entities comprising a Group of companies maintain their separate and distinct legal personalities although they fall under one umbrella or legal owner.

Latching onto that doctrine, learned counsel for the appellant argued, that, as the appellant had a separate and distinct legal personality, the arbitrator erred in having regard to the financial statements of the whole Group. He ought to have restricted himself to the financial statements of Gold Star; so the argument goes.

The rule in Salomon v Salomon & Co Ltd [1897] AC 22 (HL) is however not cast in stone.

It is only a general rule subject to exceptions, particularly in labour matters, where the courts and tribunals are enjoined to dispense equitable social justice.

In DHN Food Distributors Ltd v London Borough of Tower Hamlets [1976] 3 All ER 462 (CA)…, the court observed that:

“PROFESSOR GOWER, in his book on Company Law, says:

'There is evidence of a general tendency to ignore the separate legal entities of various companies within a Group and to look, instead, at the economic entity of the whole group.'

This is especially the case when the parent company owns all the shares of the subsidiaries, so much so that it can control every movement of the subsidiaries. These subsidiaries are bound hand and foot to the parent company and must just do what the parent company says….,.

This Group is virtually the same as a partnership in which all the three companies should, for present purposes, be treated as one and the parent company should be treated as that one.”

The principle that emerges quite clearly from DHN Food Distributors Ltd v London Borough of Tower Hamlets [1976] 3 All ER 462 (CA), is that, in appropriate cases involving Group or holding companies and their subsidiaries, the court or tribunal is not strictly bound by the dictates of the doctrine of separate corporate legal personality.

This enables them to look at the economic outlook of the whole Group in order to do real and substantial justice between the parties as the economic perspective of the Group and its subsidiaries may be intricately interwoven and difficult to unravel unless holistically considered.

It is ironic, that, the appellant is objecting to being treated as a partner of Gold Star when it sowed the seeds of implied partnership by intervening on behalf of Gold Star and litigating on its behalf. By so doing, it became the employer, in partnership with Gold Star, which was not a party to the proceedings.

At p17 of the record of proceedings, learned counsel for the appellant acknowledged that the appellant was legally obliged to produce the questioned statements in terms of section 76(1) of the Labour Act.

The section provides as follows:

“76 Duty of full disclosure when financial incapacity alleged

(1) When any party to the negotiation of a collective bargaining agreement alleges financial incapacity as a ground for his inability to agree to any terms or conditions, or to any alteration of any terms or conditions thereof, it shall be the duty of such party to make full disclosure of his financial position, duly supported by all relevant accounting papers and documents, to the other party.”

It is common cause, that, it is the appellant that was pleading financial incapacity to pay the increased wages claimed by the respondent.

Thus, by virtue of section 76(1) of the Labour Act, it was obliged to produce its own financial statements to justify financial incapacity to pay the amounts claimed.

Gold Star was not obliged to produce any financial statements as it was not a party to the proceedings and had not pleaded incapacity to pay the amounts claimed.

In any case, at p12 of the record of proceedings, the appellant makes it clear that there were no separate financial statements for Gold Star. Learned counsel for the appellant submitted that:

“There is need for full disclosure; we have consolidated accounts for the whole Group it does not make individual company (statements) financials.”

That statement puts this case squarely within the ambit of DHN Food Distributors Ltd v London Borough of Tower Hamlets [1976] 3 All ER 462 (CA). This is for the simple, but good, reason that the appellant was in absolute control of the Group's finances to the exclusion of its subsidiaries - including Gold Star.

This explains why it litigated in its capacity as the employer, without joining Gold Star, which it now alleges is the real employer separate and distinct from it.

Had it been so, then the appellant would undoubtedly have joined Gold Star to the proceedings considering that it was ably represented by counsel at every stage of the protracted proceedings.

This it did not do, thereby exposing itself as the real employer. Had it not been the real employer, it could not have fought Gold Star's battles in its absence and without its mandate.

Section 3(1) of the Labour Act only applies to employers and employees except those excluded under section(3). The appellant, not being one of those excluded by the Labour Act, it is fully bound by the Labour Act as the employer.

Thus, the arbitrator's award binds the appellant, and not Gold Star, which was not a party to the proceedings.

That being the case, we find no merit in the appellant's protestations that the arbitrator improperly pierced the corporate veil.

We come to that conclusion because the appellant appeared before the arbitrator and argued the case in its capacity as the employer and not a proxy of Gold Star; thus, the arbitrator correctly treated it as such.

The appellant's reliance on the cases of Mkombachoto v Commercial Bank of Zimbabwe & Anor 2002 (1) ZLR 21; Sheriff & Ors v Dube & Ors 2014 (2) ZLR 688…, and Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Ors 1993 (2) SA 784 (C) is misplaced as the award had nothing to do with ordering the appellant to pay anyone's debts or piercing the corporate veil.

The appellant was simply being ordered to pay, in its personal capacity, as the employer.

Appealed
SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD
Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

This is an appeal against the entire judgment delivered by the Honourable Justice Zhou in the High Court of Zimbabwe.The order sought to be impugned reads as follows:“IT IS ORDERED THAT:1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly ...

This is an appeal against the entire judgment delivered by the Honourable Justice Zhou in the High Court of Zimbabwe.

The order sought to be impugned reads as follows:

“IT IS ORDERED THAT:

1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly and severally the one paying the others to be absolved for:

(a) Payment of US$1,105,748=90 plus interest at the rate of 15 per cent per annum from the 9 September 2015; such interest calculated monthly and in advance on the said sum and capitalized to the date of payment in full.

(b) Payment of collection commission in accordance with the Law Society's By-Laws.

(c) Payment of plaintiff's costs of suit on the legal practitioner and client scale.

(d) A declaration that the immovable property, being a certain piece of land situate in the district of Salisbury called Remainder of Lot 6 Rietfontein, measuring, 1,2129 hectares held by the second defendant under Deed of Transfer No.4388/1991 is executable.

2. The first defendant's claim in reconvention be and is hereby dismissed with costs on the legal practitioner and client scale.”

The background of this matter may be summarised as follows:

The second appellant is a shareholder in the respondent and has previously occupied the positions of Chief Executive Officer, Executive Director, and Director therein.

The respondent in this matter issued summons against the appellants in the court a quo claiming USD$1,105,748=90 being indebtedness arising from a loan agreement between the first appellant and the respondent.

The second and third appellants bound themselves as guarantors/sureties and co-principal debtors of the first appellant in relation to the loan agreement.

As security, the second appellant gave Power of Attorney to register a mortgage bond over his property, in favour of the respondent. As further security, the third appellant pledged certain executable shares.

It was the respondent's case a quo that the first appellant defaulted in the performance of its obligations in terms of the loan agreement, necessitating the institution of legal proceedings for the recovery of the outstanding amount.

The respondent sought that the appellants be held jointly and severally liable for the indebtedness.

The appellants disputed the respondent's claim on two main premises:

It was argued, for the first appellant, that, the person who purported to enter into the loan agreement with the respondent was not authorised to do so.

Additionally, the second appellant disputed that he granted the Power of Attorney used to register the mortgage bond over his property.

The appellants further lodged a counter claim against the respondent's claim, which counter-claim was subsequently sought to be withdrawn during the course of the proceedings a quo.

The application for withdrawal was unsuccessful and the counterclaim was eventually dismissed.

At the conclusion of proceedings, the court a quo made adverse credibility findings against the second appellant, who it determined was untruthful.

It was found, that, the first appellant was the alter ego of the second appellant, who used the former to secure funds for his benefit from the respondent.

Additionally, the court a quo was of the view, that, the second appellant had signed a Power of Attorney for the registration of a mortgage bond in order to secure an advance from the respondent.

With regard to the third appellant, it was found that it had properly bound itself as surety to the loan facility agreement.

Resultantly, it was determined that the appellants were jointly and severally liable for the indebtedness and that the respondent was entitled to recover from the appellants the principal sum owing in terms of the loan facility agreement.

Aggrieved, the appellants have lodged the present appeal on the following grounds:

GROUNDS OF APPEAL

1. With respect, the court a quo erred at law in dismissing the first appellant's claim in reconvention; which claim was withdrawn before the conclusion of leading evidence. At law, the respondent was not entitled to insist on judgment pertaining a disputation to which not all datum had been made available and the contestation inter parties not finalised.

2. The court a quo also erred in sustaining the respondent's claim as against the appellants. At law, the respondent was enjoined to prove the existence of loan agreement and that the attendant funds were advanced in terms of that agreement. In casu, the evidence led a quo clearly demonstrated that the monies claimed to have been advanced were never paid out in accordance to the structures of the agreement on which the claim was predicated; resultantly, no sustainable claim could have been mounted by the respondent.

3. The court a quo grossly misdirected itself in conflating the affairs of the first appellant with those of the second appellant. At law, the first and second appellant's obligation to the respondent were independent of each other. More critically, no evidence was led substantiating the notion that the first appellant ever received funds from the respondent thereby actuating the need to resort to the second and third respondent's suretyship and securitisation.

4. The court a quo grossly misdirected itself in dismissing the second appellant's evidence on the back of its anomalous finding that he was dishonest and not a credible witness. Such findings are palpably irregular in that the court a quo did not take full cognisance of all the second appellant's evidence and attendant explanation regarding the existence of his independent loan with the respondent which loan the respondent was not relying on.

From the foregoing, two identifiable issues are before the court:

(i) Firstly, there is need to determine whether or not the court a quo properly dismissed the appellants counterclaim given their application for withdrawal of the same.

(ii) The second issue for determination is whether or not the court a quo misdirected itself in holding the appellants jointly and severally liable to the respondent for the indebtedness arising from the disputed loan facility agreement....,.

With regard to the second issue for consideration before the court, that is, whether or not the court a quo misdirected itself in holding the appellants jointly and severally liable to the respondent for the indebtedness arising from the disputed loan facility agreement, the findings made a quo turned on considerations of fact.

It is settled at law that this Court will only interfere with factual findings of a lower court in limited circumstances. The case of Zimre Property Investments Limited v Saintcor t/a V. Track & Anor SC59-16…, is instructive, wherein it was stated:

“The position is now settled, that, an Appellate Court will not interfere with the findings of fact made by a trial court unless the court comes to the conclusion that the findings are so irrational that no reasonable tribunal, faced with the same facts, would have arrived at such a conclusion. Where there has been no such misdirection, the Appeal Court will not interfere. This position was aptly captured by this Court in Hama v National Railways of Zimbabwe 1996 (1) ZLR 664 (S). At 670, KORSAH JA remarked:

'The general rule of law as regards irrationality is that an Appellate Court will not interfere with a decision of a trial court based purely on a finding of fact unless it is satisfied, that, having regard to the evidence placed before the trial court, the finding complained of is so outrageous in its defiance of logic that no sensible person who had applied his mind to the question to be decided could have arrived at such a conclusion….,.'”

Remaining mindful of the foregoing, it is evident from the record, that, there existed a loan facility agreement between the first appellant and the respondent, and to which the second and third appellants were sureties.

Although the first and second appellants disputed the authority upon which the loan facility and the mortgage bond were entered into on their behalf, they did not challenge the allegation that they were indebted to the respondent and that the said indebtedness had not been extinguished.

In terms of the law, it is generally accepted, that, what is not denied is taken to be admitted: see Fawcett Security Operations P/L v Director of Customs and Excise and Ors 1993 (2) ZLR 121 (S)…,.; Nhidza v Unifreight Ltd SC27-99; and Minister of Lands and Agriculture v Commercial Farmers Union SC111-01…,.

In view of the factual nature of the findings of the court a quo, it is necessary to consider the evidence presented and the relevant findings made thereon.

On the issue of the validity of the loan facility, the evidence of record establishes, that, a trustee of the first appellant, named Mr D. Higginson, concluded the loan facility agreement on behalf of the first appellant.

The second appellant sought to dispute Mr Higginson's authority to enter into the purported agreement with the respondent, and, ultimately, the validity of the entire loan facility agreement.

A perusal of the record makes it apparent that there was scant evidence to support the submissions of the second appellant.

It was found a quo that the second appellant accessed and utilised the loan overdraft facility on numerous occasions, leading the court to the conclusion that there was no merit to the second appellant's contention that Mr D. Higginson entered into the loan agreement without the requisite authority to do so.

Further to that, it was the court's view that the first appellant was merely a vehicle of the second appellant in order to access funds from the respondent.

I am of the view that the finding of the court a quo is supported by the fact that the second appellant utilised the accessed loan facility funds (through the medium of the first appellant) to attend to his personal expenses.

In light of the foregoing considerations, it does not appear to me, that, the second appellant can seek to avoid liability on the premise that the loan facility was not validly entered into.

To do so would essentially constitute an exercise in which the second appellant seeks to approbate and reprobate. In other words, the second appellant cannot seek to dispute the validity of the loan facility agreement from which he consistently sought and derived benefit.

The position was well articulated in the case of S v Marutsi 1990 (2) ZLR 370…, wherein it was stated that:

“It is trite that a litigant cannot be allowed to approbate and reprobate a step taken in the proceedings. He can only do one or the other - not both.”

Moreover, in the case of Alliance Insurance v Imperial Plastics (Pvt) Ltd & Another SC30-17, the court took the view that such conduct amounts to a classic display of mala fides.

An application of the mind to the facts would dictate, that, had the loan agreement been improperly concluded, the second appellant would have, at the very first opportunity, alerted the respondent to the fact and sought to resolve the situation as opposed to accessing and deriving benefit from the agreement, then denying liability when called upon to service the said debt.

Significantly, the second appellant undertook to repay the outstanding loan when called upon to do so by the respondent, which makes plain the fact that the second appellant was aware and a willing participant to the loan agreement.

The evidence is overwhelming and the conclusions of the court a quo, in that regard, cannot be said to have been improperly arrived at.

In determining that the first appellant acted as the second appellant's alter ego for the purpose of accessing funds from the respondent; the court a quo took cognisance of witness evidence that established that the funds availed to the first appellant by the respondent were utilised by the second appellant for his personal expenses.

As both the Founder and Director of the first appellant and the respondent respectively, the second respondent was, in my view, not only involved in a conflict of interest but actively abusing his status and position in order to access funds from the respondent.

It is equally telling that the loan facility was regarded as an “insider loan” by the respondent when it sought recovery of the indebtedness due to it from the second appellant. It is also established that the second appellant did not seek to dispute that it was indeed an insider loan.

In the circumstances, the court a quo's findings appear well grounded in evidence and cannot be said to be irrational or a misdirection.

View Appeal
HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST
Ruled By: ZHOU J

The plaintiff, a commercial Bank, claims against the three defendants payment of a sum of money amounting to US$1,105,748=90 together with interest thereon at the rate of 15% per annum calculated from the 9th September 2015 to the date of payment in full; such interest to be calculated monthly and in advance and capitalized.

The plaintiff also claims collection commission and costs of suit on the legal practitioner and client scale, as well as an order declaring a certain immovable property, described in the summons as a certain piece of land situate in the District of Salisbury called the Remainder of Lot 6 of Reitfontein, measuring 1,2129 hectares, to be specially executable.

The claim is for money advanced to the first defendant pursuant to loan and overdraft facilities and in respect of which the second and third defendants are said to have executed deeds of suretyship and guarantorship.

The claim is contested by all the defendants....,.

On the main claim, the plea which was filed on behalf of the defendants is very brief. In that plea, the defendants deny that the person who entered into the agreements pursuant to which the plaintiff advanced money to the first defendant had the authority to represent the first defendant.

The other aspect, which is denied, is that the second defendant executed the power of attorney which was used to register a mortgage bond over his immovable property in favour of the plaintiff.

Going by the pleadings, the other material allegations made in the plaintiff's declaration are not disputed and must therefore be taken as admitted. These include:

(i) The existence of the facilities (save for the alleged lack of authority of the person who represented the first defendant).

(ii) The terms of the loan facility as set out in paragraph 6 of the plaintiff's declaration.

(iii) The facts alleged in paragraph 7 of the plaintiff's declaration that the second and third defendants executed deeds of suretyship and guarantees by which they bound themselves as sureties and co-principal debtors for performance of the first defendant's contractual obligations to the plaintiff under the facilities.

(iv) There is also no denial of the failure by the first defendant to pay the amount due to the plaintiff in terms of the agreements.

(v) The amount claimed in the summons and declaration is also not disputed in the plea.

Although three issues were outlined in the joint pre-trial conference minute, a resolution of those issues depends on the determination of whether the loan facilities were validly concluded on behalf of the plaintiff and whether the mortgage bond over the immovable property known as a Certain Piece of Land Situate in the District of Salisbury Called the Remainder of Lot 6 of Rietfontein measuring 1,2129 hectares, held by the second defendant under Deed of Transfer Number 4388/1994, was validly executed.

The plaintiff led evidence, oral and documentary, from Alwyn Tafadzwa Chinyoka, Leonard Tendai Nhari, Lazarus Marume, Benson Ndachena, and Lionel Chinyamutangira, all of whom are its employees save for Leonard Tendai Nhari who is a handwriting expert.

The essence of the evidence of these witnesses is that the second defendant, Julius Tawona Makoni, was a founder and director of the plaintiff. He was still a director of the plaintiff when the facility upon which the claim arose was granted to the first defendant.

A composite facility of call loans and overdraft of US$760,000 was extended to the first defendant. The first defendant is the second defendant's Trust through which he operated to access money from the plaintiff.

Alwyn Tafadzwa Chinyoka testified, that, Dr Makoni signed the power of attorney to pass a mortgage bond over his property. The guarantee executed by the third defendant was signed by Dr Higginson, who, together with the second defendant, was the authorized signatory. The two were also the signatories for the first defendant.

The second defendant would give instructions to the plaintiff's employees for draw-downs on the facility.

He stated that the plaintiff engaged the second defendant about recovery of the amounts owed following a directive from the Reserve Bank of Zimbabwe that all insider loans be settled by 31 December 2014.

When the second defendant was approached about the debt, he acknowledged it and advised that he was making arrangements to settle it.

The matter was discussed at some Board meetings of the plaintiff in the presence of the second defendant. The minutes of Board meetings were produced in evidence.

The witness also gave evidence of the emails which were exchanged between the second defendant and the plaintiff's officials in connection with the debt in which the second defendant acknowledged the debt.

The witness disputed the signatures on the alleged loan agreement upon which the first defendant's counter-claim was based.

He also gave evidence of payments made on behalf of, and, at times, on the instructions of the second defendant from the account of the first defendant.

He testified that the facility availed to the first defendant was to cater for the personal needs of the second defendant.

The first defendant held shares in the plaintiff on behalf of the second defendant, according to the witness.

Lazarus Marume, who was employed by the plaintiff as Branch Manager at Mutare, stated that he knew the second defendant as the founder of the plaintiff and as a Bishop of the Church of the Province of Central Africa.

He confirmed, that, the second defendant signed the power of attorney to pass a mortgage bond at Mutare.

The witness had always known the second defendant's signature as he had dealt with him many times before that. He signed as a witness after the second defendant had signed in his presence. The document was signed at the second defendant's office to which the witness had taken the document.

Significantly, at no time during cross-examination was it suggested to this witness that the signature on the document was not that of the second defendant; neither was it suggested that the second defendant had not signed the document.

The evidence of Leonard Tendai Nhari and Benson Ndachema pertains to the first respondent's claim in reconvention, which, as already noted, has been abandoned.

In relation to the main claim, Benson Ndachema's evidence confirmed the instruction from the Reserve Bank of Zimbabwe for the recovery of insider loans. He also stated, that, the second defendant, as representative of the first defendant, owed money to the plaintiff, and that he resigned from his directorship owing to his failure to repay the loan.

The second defendant, according to the witness, had indicated that he would settle his indebtedness to the plaintiff from the proceeds of his shares in MBCA Bank which he would dispose of.

Lionel Chinyamutangira was Chief Banking Officer at the plaintiff at the time that he gave his evidence.

When he was Relationships Manager he reported directly to the second defendant, and got to deal with the first and third defendants as well. He explained that the purpose of the facility extended to the first defendant was in fact to take care of the second defendant's affairs when he was away, such as paying for his family's expenses and motor vehicle expenses. The second defendant would instruct him, and the other employees of the plaintiff, on the transactions to be performed, and Higginson would do the paperwork.

He identified some e-mails exchanged between him and the second defendant in terms of which the second defendant would sometimes instruct him to debit the first defendant's account for the purposes of paying his (second defendant's) expenses.

This witness identified various documents pertaining to payments to or on behalf of the second defendant made from the account of the first defendant. He confirmed that the second defendant stepped down from the Board of the plaintiff because of his failure to discharge his financial obligations to the plaintiff.

Two witnesses testified on behalf of the defendants. These are James Friedlander and the second defendant, Julius Makoni.

James Friedlander's evidence pertained to the claim in reconvention. It is therefore not necessary to consider it in any detail in view of the abandonment of that claim.

The second defendant's evidence was that he is the one who founded the plaintiff. He was its Chief Executive Officer, Executive Director, and Non-Executive Director at different times. He is also a shareholder of the plaintiff.

His evidence was that he was not clear as to what the basis of his liability for the first defendant's debts to the plaintiff was.

He recognized and identified the signature on the Deed of Suretyship, executed on 10 July 2002, to be his. He then sought to state that he did not understand why he was to act as surety for the first defendant's obligations to the plaintiff.

He stated that he never enjoyed any benefit from the facility granted to Cornerstone.

He stated that he resigned voluntarily from the Board of the first defendant and that his resignation was unconnected to the debt owed by the first respondent.

The first issue, of whether or not there was a valid loan agreement between the plaintiff and the first defendant, can be easily disposed of.

The facility letter, dated 19 June 2013, was duly signed on behalf of the first defendant. The person who signed on behalf of the defendant, David Higginson, was a duly authorized signatory on the account.

Both the first and second defendants benefited from the facilities as shown by the evidence of the witnesses for the plaintiff.

There is documentary evidence, in the form of emails, exchanged with the second defendant in which instructions to make payments from the account of the first defendant were given by the second defendant.

It is clear that the first defendant was a just vehicle by which the second defendant accessed loan facilities from the plaintiff using his position in the plaintiff.

It was clear that the second defendant is a dishonest person who was being deliberately untruthful and sought to mislead the court about his involvement in the financial transactions of the first defendant. He is the typical businessman who started the business of a Bank in order to give money from the bank to himself.

The unchallenged evidence of the witnesses for the plaintiff was that when the second defendant was approached about the need to settle the loan account he advised that he would do that from the proceeds of the sale of his shares in MBCA Bank.

At no time did he dispute the amount or that he owed it.

Minutes of a meeting of the plaintiff's Board of the Credit Committee held on 30 January 2015 deliberated on the first defendant's debt and the undertaking by the second defendant to settle it. Under item 12.7 of the minutes, the following is recorded:

“CORNERSTONE $1,059,432: Management advised that Dr Makoni had advised that he intended to repay the loan from proceeds of a share sale as he held shares in another financial institution.”

In the same minutes, under item 14 (from 14.1 to 14.10) the second defendant is the subject of discussion, and the resolution that he must resign his directorship, owing to his non-performing loan, is recorded.

The second defendant feigns ignorance of that resolution in the face of such documentary evidence.

His evidence is unconvincing.

The first defendant pretended not to know anything about the Reserve Bank of Zimbabwe's directive concerning insider loans. Yet, that matter was discussed at a Board meeting which he attended on 19 March 2014, and appears as item 5.4 in the minutes of that meeting.

The evidence led establishes that the first defendant entered into a valid facility agreement in terms of which it accessed funds availed by the plaintiff.

The court finds, that, the first defendant was an entity established and controlled by the second defendant for the purposes of accessing money from the plaintiff. Through the first defendant, the second defendant accessed money from the plaintiff, and, from time to time, gave instructions to Bank officials to pay his expenses from the account of the first defendant.

The second defendant signed a Deed of Suretyship for the first respondent's obligations to the plaintiff. He is accordingly liable on the basis of that Deed of Suretyship.

The third defendant is equally liable to the plaintiff for the debts of the first defendant on the basis of the suretyship agreement.

As noted above, the existence of these deeds of suretyship is not challenged by the defendants.

On the power of attorney used to register the mortgage bond over the second defendant's property, the document was duly signed by the second defendant on 10 July 2013.

The second defendant did not dispute the signature on that power of attorney when he gave evidence.

It is clearly his signature.

The court finds, that, he is the one who signed the power of attorney to pass a mortgage bond on his immovable property.

The debt secured by the mortgage bond has been proved. The plaintiff is accordingly entitled to recover the debt through the sale of the mortgaged property.

In terms of clause 5.7 of the facility agreement, the plaintiff is entitled to recover collection charges and its legal fees on the attorney-client scale.

In any event, such costs would still have been justified by the vexatiousness of the defence to the claim in the instant case.

In the result, IT IS ORDERED THAT:

1. Judgment be and is hereby given in favour of the plaintiff against the first, second, and third defendants jointly and severally the one paying the others to be absolved for:

(a) Payment of US$1,105,748=90 plus interest thereon at the rate of 15% per annum from the 9th September 2015; such interest calculated monthly and in advance on the said sum and capitalized to the date of payment in full.

(b) Payment of collection commission in accordance with the Law Society By-Laws.

(c) Payment of plaintiff's costs of suit on the legal practitioner and client scale.

(d) A declaration that the immovable property, being a certain piece of land situate in the district of Salisbury called the Remainder of Lot 6 of Rietfontein, measuring 1,2129 hectares, held by the second defendant under Deed of Transfer No.4388/1994, is executable.

2. The first defendant's claim in reconvention be and is hereby dismissed with costs on the legal practitioner and client scale.

View Appeal
SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD
Ruled By: GARWE JA, GOWORA JA and UCHENA JA

This is an appeal and cross-appeal against parts of the judgment of the High Court dated 4 September 2014 granting a decree of divorce and ancillary relief for and against the appellant (the plaintiff in the court a quo and the appellant in this appeal) and the cross-appellant (the defendant ...

FACTUAL BACKGROUND

The facts of the case can be summarised as follows:

On 1 September 1990, the appellant and the first respondent were married in terms of the then Marriages Act [Chapter 37].

During the subsistence of the marriage, the parties were blessed with three children, namely, Murray John Coumbis, who was already an adult at the commencement of divorce proceedings, and the twins, Julian Ronald Coumbis and Anton Phillip Coumbis. Julian and Anton were minors when divorce proceedings were instituted.

They are now adults, but, Julian remains a perpetual minor on account of his mental incapacity.

On 5 August 2010, the appellant instituted divorce proceedings against the first respondent. As Julian and Anton were minors, the appellant claimed their custody and maintenance. She also claimed personal maintenance and a share of the assets of the parties.

The appellant also claimed €10,400 from the respondent which she had advanced as a loan to Stir Crazy (Pvt) Ltd, a family business. She contended that the money was part of her inheritance. She claimed to have loaned it to the first respondent through Stir Crazy (Pvt) Ltd. She claimed the money from him alleging that the aforementioned company was an alter ego of the first respondent.

The first respondent opposed the appellant's claims and made a claim in reconvention wherein he claimed the custody of the minor children and their maintenance. He contested the appellant's claim for personal maintenance and matrimonial property. He alleged that some of the properties claimed by the appellant did not form part of their matrimonial estate.

The matter proceeded to a joint pre-trial conference where the following issues were identified and referred to trial:

“(a) The custody of Julian and Anton;

(b) What amount of maintenance was to be paid to the plaintiff if custody is awarded to her;

(c) Whether the plaintiff could be awarded the right to reside in the matrimonial home until both children became self-supporting;

(d) Whether the defendant was obliged to pay personal maintenance to the plaintiff;

(e) Which properties constituted the matrimonial estate;

(f) What appropriate order the High Court was supposed to make for the sharing of property.”

PROCEEDINGS IN THE HIGH COURT

When the trial commenced, Julian and Anton were no longer minors. However, the parties agreed that Julian was to be treated as a perpetual minor due to his mental incapacity.

The parties claim for custody and maintenance, therefore, only related to Julian.

The parties adduced a lot of documentary evidence to support their respective claims.

During examination-in-chief, the appellant admitted that she had a broken relationship with Julian. She admitted that she had exchanged nasty emails with him. The appellant also admitted to smoking marijuana. The fact that she smokes marijuana was confirmed by Dr Chibanda who pointed out its adverse effect on her health and especially on her recovery from temporal lobe epilepsy.

After hearing the evidence, the judge a quo interviewed Julian in his chambers.

The court a quo found that Julian was closer to the first respondent and took into consideration the fact that the two had been staying together after the parties separation.

It also found, that, the appellant needed to start a new life independent from the first respondent but still needed financial assistance to cushion her from the effects of the divorce.

The court a quo found that the first respondent was dishonest and not credible in respect of evidence relating to the matrimonial estate.

The order granted by the court a quo, quoted verbatim, reads as follows:

“Accordingly, it is ordered as follows:

1. A decree of divorce be and is hereby granted.

2. Custody of the perpetual minor child, Julian Ronald Coumbis, born on 3 July 1994, be and is hereby awarded to the defendant.

3. The plaintiff be and is hereby granted reasonable access rights to the said perpetual minor child which shall be exercised as follows:

3.1 She shall have the right to stay with the said perpetual minor child on alternate weekends.

3.2 She shall have the perpetual minor child on any other special occasions, including, but not limited to, each alternate Easter holidays and Christmas holidays.

4. The defendant shall solely be responsible for the upkeep of the said perpetual minor child.

5. The defendant shall pay maintenance in respect of the plaintiff in the sum of US$2,000 per month, as per the order granted by the Magistrate's Court, for a period of six (6) months from the date of granting of this order inclusive of the month of September 2014.

5.1 Payments shall be made directly into the plaintiff's Bank Account whose details shall be provided forthwith to the defendant by the plaintiff.

6. The plaintiff is awarded as her sole and exclusive property all household furniture, contents and effects, inclusive of all her personal items and jewellery, at the matrimonial house, No.6 Northwood Rise, Mt Pleasant Harare, excluding the TV set, dinning suite, and lounge suite which are awarded to the defendant.

7. The defendant shall transfer into the plaintiff's name a motor vehicle, Nissan Navara Registration Number ABD 6847, presently being used by the plaintiff, at his sole cost, within thirty (30) days of the grant of this order.

8. The defendant is awarded, as his sole and exclusive property, immovable property known as No.6 Northwood Rise, Mt Pleasant, Harare currently registered in the names of the plaintiff and the defendant.

8.1 The defendant shall transfer, against payment by him of all transfer costs, the said property into his names and the plaintiff shall sign all relevant papers to effect such transfer within 30 days of being requested, failure of which the Sheriff shall sign all the documents.

8.2 The defendant shall be solely responsible for any encumberances, mortgages, or other obligations duly existing or registered by law over the said property.

9. The defendant shall transfer all shares of OPIUM INVESTMENTS (PVT) LTD, a property-owning company whose sole asset is an immovable property known as No.13 Bates Street, Milton Park, Harare to the plaintiff within thirty (30) days of the grant of this order at his cost.

9.1 The defendant shall be solely responsible for any encumberancies or obligations duly existing or duly registered by law over the said property.

9.2 The defendant shall sign all the relevant documents to effect such transfer failure of which the Sheriff is authorised to sign all such documents.

10. The plaintiff is awarded, as her sole and exclusive property, an immovable property known as No.6 Rosefriars, Avondale, Harare.

10.1 The plaintiff shall transfer, against payment by her of all transfer costs, the rights, title, and interest in the said property, No.6 Rosefriars, Avondale Harare.

10.2 The defendant, shall, within thirty (30) days of being requested to, sign all relevant documents to effect such transfer, failure of which the Sheriff is authorized to sign all such documents.

11. The plaintiff's claim for cash, in the sum of US$100,000, be and is hereby dismissed.

12. Absolution from the instance be and is hereby granted in respect of the distribution of the following assets:

(a) 94 Matumi Sands Lonehill (Pty) Ltd.

(b) 112 Matumi Sands, Lonehill (Pty) Ltd.

(c) 182 Shingara (Pty) Ltd.

(f) Theright Investments (Pvt) Ltd.

(g) Stir Crazy (Pvt) Ltd.

(h) Incavat Enterprises (Pvt) Ltd.

(i) Telehic Investments (Pvt) Ltd.

(j) Natsbury Trading (Pvt) Ltd.

(k) Plaintiff's claim of £10,400.

13. The defendant shall bear the costs of suit.”

Aggrieved by parts of the court a quo's decision, the appellant and the first respondent noted the present appeal and cross-appeal respectively.

GROUNDS OF APPEAL

The appeal involved an appeal and a cross-appeal, but, the cross appeal was withdrawn during the hearing of the appeal.

The appellant's grounds of appeal attack the court a quo's decision on the following issues:

1. Custody and maintenance of Julian, the perpetual minor;

2. Her claim for inheritance money loaned to a company from the respondent;

3. The propriety or otherwise of the decision handed down by the court a quo concerning the distribution of the assets of the parties;

4. Her claim for a lump sum maintenance payment in the sum of US$100,000;

5. The granting of absolution from the instance mero motu by the court a quo at the end of the defence case; and

6. Whether or not the respondent should be heard in view of his contemptuous conduct against proceedings in this Court, the court a quo, and its orders.

APPLICATION BY THE APPELLANT

In September 2018, the appellant made an application to adduce further evidence to prove that the respondent had, pending the determination of the appeal, interfered with and defied the High Court's orders.

We, in terms of section 22(1)(b)(ii) and (v) of the Supreme Court Act [Chapter 7:13], ordered that the matter be remitted to MAWADZE J (the trial judge), for him to conduct an enquiry into the appellant's allegations and submit a report to us.

On 3 April 2019, after holding an enquiry, in compliance with our order, MAWADZE J submitted to us his report in which he made the following factual findings:

FINDINGS OF FACT MADE BY MAWADZE J

“1(a) The perpetual minor, Julian Ronald Coumbis (born on 3 July 1994), was removed from Zimbabwe by the respondent and taken to South Africa in 2013 well before the judgment of the court on 4 September 2014.

(b) The respondent has not placed any credible evidence before this Court for such conduct.

(c) Julian remains in South Africa to date.

(d) The appellant, Philippa, has not been able to exercise any access rights in respect of Julian (the perpetual minor) as awarded to her in terms of para 3 of this Court's order.

2(a) The respondent sold two immovable properties in South Africa, being No.94 Matumi Sands and No.112 Matumi Sands and transferred them to third parties.

(b) The only available immovable property in South Africa is No.182 Shingara against which the appellant successfully placed a caveat.

3. The respondent removed all movable household goods which had been awarded to the appellant, Philippa, in terms of para 6 of this Court's order from No.6 Northwood Rise, Mt Pleasant, Harare and took them to South Africa without the appellant's knowledge or consent.

The respondent has not explained his conduct.

4. The motor vehicle, a Nissan Navara, Registration Number ABD 6847, awarded to the appellant, Philippa, in terms of para 7 of this Court's order, was taken by the Vehicle Theft Squad as it was deemed to be subject to criminal investigations for which the respondent is allegedly accountable.

5. The respondent has not done anything to remove the encumbrances on immovable properties either awarded to him or the appellant as per this Court's order.

6. After the order of this Court, the respondent transferred about USD$2.8 million from Stir Crazy (Pvt) Ltd to Incavat Enterprises (Pvt) Ltd.

7. The respondent has not complied with the maintenance order granted in favour of the appellant, Phillipa, in terms of para 5 of this Court's order and has not paid a single cent.

8. Lastly, the following assets are still available;

(a) No.6 Northwood Rise, Mt Pleasant, Harare, Zimbabwe but is still encumbered.

(b) Belgravia House, Harare but is still encumbered.

(c) No.6 Rosefrias, Avondale, Harare, Zimbabwe.

(d) No.13 Bates Street, Milton Park, Harare but is still encumbered.

(e) No.182 Shingara in South Africa.”

APPELLANT'S SUBMISSIONS ON APPEAL

In submissions before this Court, counsel for the appellant argued, that, the report to the Supreme Court, following due inquiry by MAWADZE J, dated 3 April 2019, confirmed that the first respondent was in contempt of the court a quo's order. He further submitted that such disobedience went to the root of the matter.

Counsel for the appellant further submitted, that, the court a quo's decision, on custody, was influenced by the first respondent's alienation of Julian against the appellant and that the decision does not promote a bond between the appellant and the perpetual minor.

Counsel for the appellant submitted, that, from 4 September 2014 to the last date of the hearing, the appellant had not enjoyed access to the perpetual minor because he had been removed from the jurisdiction of this court. He submitted, that, it was in the best interests of the perpetual minor that he be in the custody of the appellant.

In respect of the court a quo granting the first respondent absolution from the instance mero motu, counsel for the appellant submitted, that, the court a quo erred in view of the fact that the first respondent had made offers which were equivalent to an admission. He also submitted, that, the first respondent had given evidence of his shareholding in some of the companies which could have enabled the court a quo to distribute those shares between the parties.

Counsel for the appellant submitted, that, the distribution of the matrimonial assets was limited to three properties.

He contended that evidence led before the court a quo on these assets established that the assets belonged to companies owned by the parties. He further submitted, that, the properties had been encumbered by the first respondent, and, consequently, the appellant was disabled from acquiring any title in them in spite of their having been awarded to her by the court a quo.

In relation to the appellant's inheritance funds loaned to Stir Crazy (Pvt) Ltd, counsel for the appellant argued, that, the latter, being the respondent's alter ego, they had to be returned to the appellant by the first respondent.

He prayed that the appeal succeeds with costs.

THE FIRST RESPONDENT'S SUBMISSIONS ON APPEAL

Counsel for the first respondent submitted, that, even though the first respondent had breached the order of the court a quo, he had a right to be heard in terms of section 69 of the Constitution of Zimbabwe 2013 (the Constitution).

Counsel for the first respondent argued, that, it was in the best interest of the perpetual minor that the first respondent be heard.

He contended, that, even if it was found that the first respondent had no right of audience before this court, there were no documents relating to the companies proving that the court a quo was handicapped in making its determination.

Regarding the issue of the court a quo granting absolution from the instance mero motu, counsel for the first respondent argued, that, the court a quo came to that conclusion because there was no evidence on the ownership of the companies as the appellant failed to present it to the court a quo.

In concluding his submissions, counsel for the first respondent submitted, that, the first respondent was withdrawing his cross-appeal.

APPELLANT'S RESPONSE

In response, counsel for the appellant contended, that, the enjoyment of the constitutional right to be heard comes with an obligation to obey court orders. He argued, that, the first respondent is in court to protect something yet he disobeys court orders.

Counsel further argued, that, the court has inherent jurisdiction in terms of section 176 of the Constitution to determine who can or cannot be heard.

He submitted, that, the perpetual minor's best interests remained with the court as the first respondent's contempt dis-entitles him from saying anything that benefits him.

Counsel for the appellant submitted that an Appellate Court does not only deal with the direct dictates of the judgment but also deals with its effects.

FURTHER SUBMISSIONS

By letter dated 31 January 2020, Musekiwa and Associates, Legal Practitioners for Doves Funeral Assurance (Pvt) Ltd, informed the Registrar of this Court that its client had bought a half share of No.6 Northwood Rise, Mt Pleasant, Harare (the matrimonial home) from a sale in execution conducted by the Sheriff and that that half share of the property had been transferred to their client on 20 February 2019.

As a result of this information, which had not been placed before us when we heard the appeal on 23 January 2020, parties were invited to appear before us on 24 June 2020 to give them an opportunity to address us on this issue. At that hearing we granted the following order:

“IT IS ORDERED BY CONSENT THAT:

1. Doves Funeral Assurance be and is hereby joined as a party to these proceedings as 2nd Respondent with Ronald John Coumbis becoming the 1st Respondent.

2. Mr Musekiwa, for Doves Funeral Assurance, is to avail documentation confirming the transfer of the half share in the property to itself and file heads of argument in connection therewith by the 30th June 2020 and serve the same immediately on the appellant and first respondent's legal practitioners.

3. Advocate Mpofu is to file additional heads of argument in response to the heads of argument filed by Doves Funeral Assurance by Friday 3rd July 2020.

4. Mr Ndlovu, for the 1st Respondent, Ronald John Coumbis, is to file his additional heads of argument, if any, by Wednesday 8 July 2020.”

In his additional heads of argument, counsel for the appellant submitted, that, the matrimonial home, which was jointly owned by the appellant and the first respondent, be awarded to the appellant who will thereafter institute proceedings in the High Court to claim back the half share sold to Doves Funeral Assurance (Pvt) Ltd.

He submitted, that, Doves Funeral Assurance (Pvt) Ltd took a risk when it bought the half share without the consent of the appellant.

The first respondent, whose conduct caused the sale of his half share to Doves Funeral Assurance (Pvt) Ltd, did not file additional heads.

In their heads, Musekiwa & Associates, for Doves Funeral Assurance (Pvt) Ltd, submitted, that, it bought the respondent's half share through the Sheriff's sale in execution after due notice had been given to the appellant. They submitted, that, the half share is no longer part of the appellant and first respondent's matrimonial assets and is no longer available for distribution to either of them.

ISSUES FOR DETERMINATION BY THIS COURT

The appellant raised several grounds of appeal, but, the material issues for determination are as follows:

1. Whether or not the first respondent should be heard in view of his contempt of proceedings of the court a quo and its orders and proceedings before this Court.

2. Whether or not the court a quo erred in awarding custody of Julian to the first respondent.

3. Whether or not the court a quo erred in granting absolution from the instance against part of the appellant's claims.

4. Whether or not the appellant is entitled to claim her monetary inheritance from the first respondent.

5. Whether or not the court a quo erred in distributing the immovable property without taking into account the value of the properties.

6. Whether or not the distribution of the immovable property was fair.

7. Whether or not the appellant's claim for a lump sum maintenance payment in the sum of US$100,000 was correctly dismissed....,.

Whether or not the appellant is entitled to claim her inheritance money from the first respondent

The appellant contends that she advanced a loan of €10,400, which was part of her inheritance, to the first respondent through a company called Stir Crazy (Pvt) Ltd.

She claimed the money from the first respondent alleging that the aforementioned company was his alter ego.

The first respondent disputed that he borrowed the money in his personal capacity and argued that the loan was advanced to Stir Crazy (Pvt) Ltd hence the appellant cannot seek to recover this money pursuant to section 7(1)(a) of the Matrimonial Causes Act but has to claim it as a debt owed by Stir Crazy (Pvt) Ltd.

The appellant did not dispute this clear position of the law.

In his submissions before us, counsel for the appellant did not persist with this ground of appeal. He in fact submitted, that, the value of the claim was not worth pursuing as it has been affected by this Court's decision in Zambezi Gas Limited v NR Barber (Pvt) Ltd & Another SC03-20.

The evidence on record does not prove that Stir Crazy (Pvt) Ltd was an alter ego of the first respondent.

In evidence, the appellant claimed that she used to hold 49 percent shares in that company.

It is trite, that, a company, duly incorporated, is a separate legal entity endowed with its own legal personality. The acts of a company are attributable to it, and not to any one else, as a company is a separate legal persona with a separate existence from its shareholders. It can sue or be sued in its own right: see Salomon v Salomon & Co Ltd [1897] AC 22.

While there are instances in which the court may pierce or lift the corporate veil, as held in Van Niekerk v Van Niekerk & Ors 1999 (1) ZLR 421 (S)…, I do not believe that a case has been made for such an approach as the appellant did not give evidence in that regard.

The appellant should claim her money from Stir Crazy (Pvt) Ltd as it is a distinct and separate legal entity which can sue and be sued in its own right.

The court a quo therefore correctly granted absolution from the instance against the appellant's claim on this issue.

SC07-17 : CHRIS STYLIANOU and FRED DRIVER AND SONS (PVT) LTD and D.R. HENDRY (PVT) LTD vs MOSES MUBITA AND 25 OTHERS
Ruled By: GWAUNZA JA, GUVAVA JA and BHUNU JA

This is an appeal against the entire judgment of the Labour Court sitting at Bulawayo, handed down on 18 January 2010. After reading documents filed of record and hearing counsel, we made the following order:“IT IS ORDERED:1. The appeal be and is hereby allowed.2. There shall be no order as ...

“IT IS ORDERED:

1. The appeal be and is hereby allowed.

2. There shall be no order as to costs.

3. The judgment of the Labour Court, in cases No. LC/URG/MT/25/08 and LC/MT/37/08 be and is hereby set aside and substituted with the following:

'(i) The urgent chamber application by the respondents be and is hereby struck off the roll.

(ii) The urgent chamber application by the applicants be and is hereby struck off the roll.

(iii) The retrenchment agreement entered into between the parties and approved by the Retrenchment Board be and is hereby upheld.

(iv) There shall be no order as to costs.'”

This judgment contains the reasons for the order....,.

The factual background to the matter is as follows:

The first appellant was, at the time of the institution of these proceedings in the court a quo, said to be the 'owner' of the second and third appellants. In legal terms he was the director and sole shareholder thereof.

The second and third appellants were companies duly registered in terms of the laws of Zimbabwe.

The respondents were employed by the second and third appellants, and, due to viability constraints, a decision was taken to retrench them.

A notice to retrench, dated 15 April 2008, was duly issued, and bore the names of those affected by the decision to retrench.

Efforts were made to negotiate a retrenchment package but no agreement was reached, prompting the parties to seek the assistance of the relevant National Employment Council (“NEC”).

The National Employment Council (NEC) gave the parties up to 15 May 2008 to reach a compromise, failure of which the matter would be referred to the Retrenchment Board.

The parties reached an agreement before this deadline.

As required by section 12C(3) of the Labour Act [Chapter 28:10] (“the Act”), approval for the retrenchment of employees was signed by the parties and sent to the Retrenchment Board, which, in turn, gave its approval in terms of the same section of the Labour Act.

When the appellants were about to implement the approved settlement, the respondents changed their minds and approached the Labour Court with a chamber application for an interdict whose effect would be to stop the appellants from implementing the retrenchment package that was approved by the Retrenchment Board.

The respondents also cited irregularities in how the retrenchment agreement came about, in particular, that it was not agreed upon because some members of the Workers Committee had not signed it. They further alleged, that, the approved settlement was not ratified by the affected employees and neither was it approved by the Minister.

In the same urgent chamber application, the respondents were seeking a final order that the agreement for the retrenchment package be declared null and void and the Retrenchment Board's approval thereto set aside. The final order would allow reinstatement of the respondents without loss of wages or benefits.

A provisional order was granted on 23 May 2008. It interdicted the first appellant from paying out retrenchment packages to the respondents without an order of court.

The main matter on the final order sought was set down for hearing on 4 July 2008 but was not heard on that day.

The parties negotiated further and signed another settlement document. When the appellants sought to implement the new agreement, the respondents refused to accept the package.

The matter was then heard on 18 January 2010 and the learned judge essentially held, that, the retrenchment itself was not done procedurally and was therefore a nullity.

In the judge's view, this was a consequence of the fact that the Minister did not approve the retrenchment - despite the agreement of the parties thereto.

Aggrieved by the decision of the Labour Court, the appellants unsuccessfully sought the leave of that court to note an appeal to this court. They, thereafter, and successfully, approached this court for leave to appeal to it, hence the instant appeal.

The appeal was brought on nine grounds. However, a number of the grounds were struck out for not being concise as required by the Rules of this court, for containing argument or for making no sense at all.

It hardly needs re-emphasizing, that, grounds of appeal must conform to laid down requirements.

The issues that arose from the valid grounds of appeal were as follows:

(i) Whether or not the court a quo erred in making an order against the first appellant.

(ii) Whether or not the Labour Court has the jurisdiction to grant an interdict and a declaratory order.

I will proceed to deal with the issues as outlined.

Whether or not the court a quo erred in making an order against the first appellant

The first issue raises the important principle, under Company Law, pertaining to the lifting of the corporate veil.

The first appellant was cited in the court a quo as the first respondent, in his perceived capacity as the 'owner' or alter ego of the second and third appellants herein.

The first appellant challenged this citation as improper, arguing that he could not be cited in legal proceedings against and together with the two companies, since they were, at law, separate legal personae capable of suing and being sued in their own names.

The respondent's counsel conceded, at the hearing of the appeal, that, the first appellant had not been properly cited, even as a respondent, in the court a quo.

This concession, we find, was properly made.

The principle of lifting the corporate veil was aptly enunciated by PATEL J…, in the case of Deputy Sherriff Harare v Trinpac Investments (Pvt) Ltd & Another HH121-11, where, among other authorities, he cited the following apposite remarks from the South African case of Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Others 1995 (4) SA 790 (AD)…,:

“It is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality, but, should strive to give effect to and uphold it.

To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it.

But, where fraud, dishonesty or other improper conduct (and I confine myself to such situations) is found to be present, other considerations will come into play. The need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil…, and a court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie.

Each case would obviously have to be considered on its own merits.”

In casu, no allegation of fraud, dishonesty, or other improper conduct was levelled against the first appellant, which might have justified the lifting of the corporate veil of the other two appellants.

Indeed, the applicants gave no good explanation before the court a quo to justify the citation of the first appellant save to state that he was the 'owner' of the two appellant companies.

The first appellant was therefore improperly cited and no part of the court a quo's judgment was binding on him.

The appeal therefore succeeds in this respect.

HHH229-19 : INTRATREK ZIMBABWE (PVT) LTD and WICKNELL CHIVAYO vs PROSECUTOR GENERAL OF ZIMBABWE and L. NCUBE N.O.
Ruled By: TAGU J

This is an application for the review of the second respondent's ruling dismissing the applicants exception to criminal charges preferred against them in the court of the Provincial Magistrate at Harare under case number CRB P9114-5/2018. The ruling was handed down on the 19th of November 2018.The first applicant is ...

THE FACTS

The applicants were arraigned before the Magistrates Court sitting at Harare for contravening section 136 of the Criminal Law (Codification and Reform) Act [Chapter 9:23] - Fraud (2 counts); contravening section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05] as read with section 4.1.18 of the Foreign Exchange Guidelines to authorised dealers, ECDI of 2009; and contravening section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05] as read with Exchange Control Authority GR1776 of 26 April 2016.

The allegations, as appearing on the outline of the State case, were that -

“…,.

4. On the 23rd of October 2015, Zimbabwe Power Company (ZPC) signed an Engineering, Procurement and Construction Contract (EPC) with accused (1) being represented by accused (2) for the construction of 100-Megawatt Solar Power Generation Plant in Gwanda. The performance/scope of the work was guided by schedule 11 of the contract.

5. Clause 2(a) and (b) of the terms and conditions of the contract under schedule 11 stated, that, the employer's advance for feasibility study and pre-commencement activities was to be considered part of the contract advance payment. A Bank guarantee was to be provided against all payments made by ZPC towards the project implementation.

6. Subsequently, between 4 December 2015 and 22 January 2016, the accused submitted two separate invoices amounting to US$803,765=82 and US$1,631,888=81 dated 9 November 2015 and 11 January 2016, respectively, on the pretext of feasibility study implementation.

ZPC'S Finance Director, Hubert Chiwara, acted upon the misrepresentation and released the full payment of US$2,435,654 in 9 different instalments, without the requisite bank guarantee, between 4 December 2015 and 22 January 2016 on the understanding that Shanghai Electric Power Design Institute Co. Ltd was going to carry out the feasibility study.

The payments were made from ZPC'S Stanbic Bank account numbers…, and Stanbic Bank…, into accused (1)'s CBZ bank account number…,.

7. However, ZPC Technical Director, Robson Chikuri, ZPC Projects Manager, Cleopas Fambi, and the suspended ZPC Managing Director, Noah Gwariro, indicated, that, they never met sub-contractor, Shanghai Electric Power Design Institute Co. Ltd during the alleged study period. There also no record of sub-contractor's representative entering Zimbabwe during the period in question.

8. Again, between 15 February 2016 and 25 April 2016, the accused submitted 3 invoices of US$1,219,476=80 each supported by payment release certificates; being advance payment claims, purportedly for the implementation of the following works -

(i) Site establishment (basic ablutions, communication network, temporary housing, preliminary foundation for 20-megawatt power plant and water citing and borehole drilling and storage).

(ii) Access roads.

(iii) Ground clearing.

9. Similarly, Hubert Chiwara acted upon the misrepresentation and released a total advance payment of US$3,188,476=80 on 12 different instalments, without bank guarantee, into the same bank account highlighted above.

10. On 26 April 2016, Hubert Chiwara requested the accused to provide a schedule of commitment in respect of funds released by ZPC towards the implementation of the project. The accused, again, through his Company Secretary, K. Makoni, misrepresented to the Finance Director, that, a total of US$1,960,125=40 had been paid to subcontractors. The sub-contractors distanced themselves from the invoices submitted by accused.

11. The paper trail indicated, that, accused used the funds meant for feasibility study and pre-commencement works for his own person benefit by diverting them into various individual and companies who were not involved in the intended activities for which the pre-funding was intended for. Investigations established, that, the funds were used to purchase vehicles; air tickets for the girls stranded in Kuwait; school fees; settlement of civil suits.

12. Further, the accused loaded a total of US$684,150 into five different VISA cards, purportedly for the importation of earthmoving equipment from Pietznack Plant and Earth Moving Service, a company resident in Dallas in the United States of America.

13. The accused person entered into a recurring fees agreement with Pietznacle Plant & Earth moving services company based in Dallas, United States of America for the importation of earth moving equipment without seeking prior approval from Exchange Control Authority, contrary to the provisions of the said Act.

14. In violation of the Exchange Control Act, the Accused persons did not clear, with Exchange Authority, through CDI forms, within 90 days as required by the said Act.

15. The offence came to light after the ZPC Board, through its Chairperson, Engineer Stanley Kazhanje, who discovered that the payments were made without bank guarantee and he reported the matter to the police, through his letter dated 18 December 2017, for investigations.

16. ZPC suffered a total prejudice of US$5,624,130=80 and nothing was recovered.”

Upon arraignment, the applicants pleaded and excepted to the charges in terms of section 171(2) of the Criminal Procedure and Evidence Act [Chapter 9:07] on the basis, that, the facts do not disclose an offence.

The exception was contested by the State.

On the 19th of November 2018, the court a quo dismissed the application for exception.

Dissatisfied with the court a quo's ruling dismissing the application for exception, the applicants approached this Honourable Court with the present application.

The applicants also filed an urgent chamber application for stay of criminal proceedings pending the determination of the present review application.

The urgent chamber application was filed under case number HC11205/18.

The urgent chamber application was partially dismissed on the merits, on 31 December 2018, under case number HH849-18, by MUSAKWA J, who ordered that the criminal trial had been suspended only in respect of the third Count.

Consequently, the applicants are currently undergoing trial in the Magistrates Court in respect of the other counts.

The application for review is opposed by the State.

THE LAW

The applicants have approached this Honourable Court in terms of section 26 as read with section 27 of the High Court Act [Chapter 7:06]. Part V of the High Court Act [Chapter 7:06] provides for powers of the High Court on review. Section 26 provides for the High Court's power to review proceedings and decisions of inferior courts. There are three grounds on which an application for review of criminal proceedings can be brought to the High Court in terms of section 27(1) of the High Court Act [Chapter 7:06]. These are -

(a) Absence of jurisdiction on the part of the court or authority concerned;

(b) Interest in the cause, bias, or malice on the part of the person presiding over the court or tribunal concerned or on the part of the authority concerned, as the case may be; and

(c) Gross irregularity in the proceedings or decision.

In casu, the applicants raise one major ground of review. It is captured on record p1 as -

“The second respondent's decision is grossly unreasonable and patently contrary to law such that no reasonable judicial officer who had applied his mind to the facts would have reached the same decision.”

The parties agree on the law applicable in an application of this nature.

RELIEF SOUGHT

The remedy that the applicants seek is that -

“1. The second respondent's ruling, of 19 November 2018, in case number CRB P9114-5/18 be and is hereby set aside.

2. The following is substituted in its place:

'In the result, the exception succeeds. The charges be and are hereby quashed. Consequent to the accused's plea, both accused be and are hereby acquitted.'”...,.

MY ANALYSIS OF THE FACTS IN THE OUTLINE OF STATE CASE

In reviewing the decision of the court a quo, and having found that the court a quo did not deal with the actual basis of the exception, the court is now at large to decide whether the facts disclose or support the criminal offences/charges the applicants are facing or not.

The starting points are paragraphs 4 and 5 of the Outline of the State Case which contain the full facts pertaining to the charges the applicants are facing. They read as follows -

“4. On 23 October 2015, ZPC signed an Engineering, Procurement and Construction Contract (EPC) with accused (1) being represented by accused (2) for the construction of 100-Megawatt Solar Power Generation Plant in Gwanda. The performance/scope of the work was guided by schedule 11 of the contract.

5. Clause 2(a) and (b) of the terms and conditions of the contract, under schedule 11, stated that the employer's advance for feasibility study and pre-commencement activities was to be considered part of the contract advance payment. A bank guarantee was to be provided against all payments made by ZPC towards the project implementation.”

I shall now turn to the nature of the exception to the charges and facts preferred against the applicants in the court a quo.

The exceptions were taken on the basis, that, even if the facts which are alleged in the charges and the outline of the State's case are proven, no criminal offence would have been established.

I say so because, the reading of the whole Outline of the State Case shows, that, this is purely a civil rather than a criminal matter. It therefore amounts to a futile enterprise if the trial were to proceed as I will demonstrate below....,.

I now turn to address the prospects of success of the exception filed on behalf of the accused persons on the merits. I shall not repeat the terms of each of the charges and facts for brevity....,.

I now proceed to consider the exchange control charges.

These are two:

It is alleged, that, the accused persons committed offences by entering into an agreement “involving recurring fees amounting to US$849,479” with Pietznack Plant and Earth Moving Services of Dallas, USA without seeking exchange control approval.

The judgment in McCosh v Pioneer Corporation Africa Ltd 2010 (2) ZLR 211 (H) held, that, the entering into an agreement does not violate the Regulations. It is the payment which violates the Regulations. In other words, after entering into the contract, the parties could still seek exchange control approval.

Assuming, therefore, that, the alleged facts are accepted as they are by the accused persons, no criminal offence was committed.

In addition, the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009, were not promulgated by the President in terms of section 5(1)(a)(ii) of the Exchange Control Act [Chapter 22:05].

Section 2 of the Exchange Control Act provides that:

“2. Regulatory Powers of the President

(1) Notwithstanding anything to the contrary contained in any enactment, the President may make such regulations relating directly or indirectly to –

(a)…,.

(b) Exchange transactions.”

In terms of subsection (2), it is elaborated what such Regulations may relate to. In terms of sub-section (5), the Regulations may provide for penalties for contravention of the Regulations and criminal offences.

In the present matter, the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009 relate to authorised dealers, as defined, and not other persons.

In addition to not having been made by the President in terms of the Exchange Control Act, they do not create themselves a criminal offence.

This is admitted in the response by the Prosecution to the exception.

In any event, it is the first accused who entered into a public procurement contract with the Zimbabwe Power Company (“ZPC”). The second accused is not a party to the contract. He, however, represented the first accused.

There is therefore no valid charge for the contravention of the Foreign Exchange Guidelines to Authorised Dealers, ECD1/2009 in his capacity as Managing Director.

The contractual obligations related to, and flowed as between the complainant and the first accused only.

At all material times, the second accused represented the first accused in his capacity as Managing Director.

There is no allegation that the second accused did anything pursuant to the contract alleged in his own capacity.

There is no allegation that the corporate veil of the first accused was abused for a criminal enterprise and that the second accused, fully aware of this abuse, could have prevented the same, and, nonetheless, proceeded, recklessly, without regard to the consequences.

The following legal principles are trite:

A company is an entity distinct and separate from its shareholders and directors: see Salomon v Salomon & Co Ltd (1897) AC22 (HL) and Modern Company Law, 4th Ed (Stevenson and Sons 1979), by Prof GOWER LCB…,.

A director who acts for a company, on the basis of its resolution in that regard, does so as an agent of the company and does not attract personal liability for the conduct of the company.

The law is that, a company is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members. A company has its own legal personality. That is, in fact, without statutory intervention, company directors would not be liable for damages in Civil Law in respect of commission or omissions by companies: see Burley Appliances Ltd v Grobbelar N.O. 2004 (1) SA…, per NEIL J.

The State alleges, that, the second accused made certain misrepresentations (which is denied) in the course of the implementation of the procurement contract.

Apart from the fact, that, the facts alleged do not disclose a criminal offence, the conduct alleged remains the conduct of the first accused regardless of who represented it.

The second accused is wrongfully charged in his personal capacity.

The basis of the charge, as appears from the Outline of the State Case (OSC), is his alleged conduct in a representative capacity in respect of the procurement contract.

To that end, the charges are merely frivolous and vexatious.

In giving last consideration to the foregoing, the basis for charging the second accused, in his personal capacity, is without merit and has not been clearly set out in the Charge and the Outline of the State Case (OSC).

It should be noted, that, the only basis for charging an accused person in their personal or representative capacity of a corporate entity is found in section 277(5) of the Criminal Law (Codification and Reform) Act [Chapter 9:23]; it being alleged, that, in his personal capacity, he is liable for the alleged criminal conduct of a separate legal persona.

The provisions of section 277(5) of the Criminal Law (Codification and Reform) Act notwithstanding, to the extent that it imputes vicarious criminal liability on the second accused in respect of an offence allegedly committed by another (in this case a company) in respect of an offence which requires actual intention to be proven, such a charge amounts to a breach of the protective provisions in sections 56(1) and 49(1) of the Constitution of Zimbabwe, and, as such, invalid.

HH231-10 : AGRICULTURAL BANK OF ZIMBABWE LTD t/a AGRIBANK vs NICKSTATE INVESTMENTS (PVT) LTD and RICHARD MAKWARA and PLAXEDES MAKWARA
Ruled By: GOWORA J

At the commencement of the trial, the plaintiff sought an amendment to its claim by the deletion of the amounts of fourteen billion eight hundred million and six hundred and sixty six billion dollars and their substitution with the amounts of US$ twenty two thousand five hundred and sixty dollars and one million fifteen thousand four hundred and seventy dollars, respectively; the first amount being the replacement cost of one vehicle and the second amount being the global sum for forty-five brand new trucks.

I granted the application to amend in the face of opposition from counsel for the defendants and indicated that I would furnish my reasons together with the reasons for judgment....,.

I turn now to the determination of the matter on the merits.

The plaintiff in this matter is a commercial bank which is primarily involved in lending to persons, both corporate and individuals, engaged in agricultural pursuits. It is a statutory corporation.

In 2006, it flighted an invitation for the tender of supply of trucks of an engine capacity ranging from 1.8 to 2 litres.

The invitation to tender, the tender by the first defendant, and the contract itself were the main documents produced before me by the parties.

The invitation is dated 2 November 2006, and calls upon established companies to urgently tender for the supply and delivery of brand new trucks within the range of 1.8L to 2L. Certain other specifications not germane to this dispute are listed. The invitation then spells out information that is 'mandatory' to enable the plaintiff to make a concrete acceptance of the quotation and contract decision.

Firstly, it is stated, that, prices quoted shall be in Zimbabwe dollars, which price shall be fixed during the bidder's performance of the contract and not subject to any variation of any account.

The invitation also spelt out, that, a bid submitted with an adjustable price condition would be treated as non-responsive and would be rejected.

Prices were required to be inclusive of value added tax.

The invitation to tender also required the company profile of the bidder as well as a list of major clients and contactable references.

Added to this was the requirement of payment schedules, delivery, and fallback position should delivery not be effected as anticipated.

Other stipulated requirements are not germane to this dispute and will consequently not be referred to.

The first defendant was amongst the companies that responded to the tender. After an adjudication process, it was decided to award the tender to the first defendant and a contract for the supply of the vehicles was concluded between the parties.

Two days after the signing of the contract, the plaintiff paid an amount in excess of $1.8 billion Zimbabwe dollars into a current account operated by the first respondent with a commercial bank.

The contract provided for specific dates for delivery of the vehicles to the plaintiff.

Needless to say, the delivery schedule stated in the delivery clause was not adhered to, as the defendant defaulted; and, in fact, it has not made any delivery up to today necessitating the plaintiff issuing summons for relief from this court.

In its summons, the plaintiff prays for the delivery of the vehicles in question, or, in the alternative, for payment of the value of the vehicles as at the time of judgment.

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.

At the pretrial conference, three issues were extracted for trial. I will therefore dispose of the dispute on the basis of those issues.

The first issue for trial was whether the agreement made and entered into by and between the parties was conditional upon the first defendant obtaining foreign currency from the Reserve Bank of Zimbabwe.

It is pertinent, therefore, in resolving this issue, to examine the contract documents and other documents have a bearing on the relationship between the parties.

The tender bid document from the first defendant focused on the Ford Ranger 1800 STD.

A brief description of the vehicle is given, which description is on the physical features of the vehicle not its mechanical capacity. The quoted price is Z$37,500,000 per unit with a total price of Z$1,687,500,000 for the forty-five vehicles.

The quotation confirms that the price is inclusive of Value Added Tax.

A warranty is given for three years or 100,000kms whichever comes first.

The first respondent also confirmed an ability to supply and deliver at a stipulated time.

There were no indications of conditions that required to be met before delivery could be effected.

Next, the first defendant provides, in the tender document, a list of vehicles and motor cycles, that are presumably available.

There is no caption with the list to state whether these are readily available or whether the first defendant is able to easily source the same.

Pictures of the vehicles and motor cycles, together with specifications, are provided in detail.

Included in the tender documents is a letter written by the second defendant. The letter, written on 27 November 2006, opens with the sentence:

“We, the undersigned, hereby tender and should this letter be accepted in whole or part, undertake to supply Motor Vehicles as per the requirement of the tender, and in conformity with the Fund's General Conditions of Tender, and the specifications, the articles described or referred to in this document or such said articles as may be ordered by the Fund in consideration of the prices as Nickstate Investments (Pvt) Ltd are concerned.”

The contract was then concluded on the basis of these documents.

Clause 3 of the contract is in the following terms:

“It is agreed that the seller sells forty five (45) brand new Ford Ranger, pick up trucks….,. It is further agreed that the pick up trucks shall comply with the following specifications -

(i) They shall be long wheel base.

(ii) The engine capacity shall be 1.800 litres.”

Clause 4 provides that “the vehicles are bought with the following accessories on each one of them” and a list of the accessories is then provided….,.

Clause 5 of the contract reads:

“The purchase price of the vehicles is the sum of (Z$1,687,500,000) (One billion six hundred and eighty seven million, five hundred thousand Zimbabwe dollars) based on a unit price of ZW$37,500,000 (thirty seven million five hundred thousand).”

Clause 7 reads as follows:

“It is agreed that the price referred to in clause 5 above is fixed and not subject to any variation whatsoever.”

Delivery is covered in clause 9 which is in the following terms:

“The motor vehicles shall be delivered to the customer's premises, that is to say, Hurudza House No.14-16 Nelson Mandela Avenue, Harare duly registered in two batches as follows:

(i) 15 (fifteen) vehicles by 31 January 2007.

(ii) 30 (thirty) vehicles by 28 February 2007.”

In its declaration, the plaintiff alleged, that, the first defendant had breached the terms of the agreement and that despite being paid in full for the vehicles the first defendant had failed to deliver any of the vehicles, and further, that, despite numerous requests by the plaintiff, the first defendant had failed and/or neglected to deliver the said vehicles.

In response to this averment, the defendants had denied that they had failed, neglected, or refused to deliver and that the plaintiff was aware that the defendants had applied to the Reserve Bank for the allocation of foreign currency.

It was further averred by the defendants, that, the allocation was approved on 9 February 2007 but the Bank did not have the required foreign currency to avail to the defendants to fulfill the terms of the contract.

The contract concluded by the parties does not make mention of the need for the defendants to source for foreign currency to purchase the vehicles.

This is accepted by the defendants.

Their contention, however, is that the fact that the vehicles had to be imported should be presumed and it did not need to be written down.

It was contended, that, the vehicles could not be purchased in Zimbabwe dollars and payment had to be made in a currency acceptable to the manufacturer; and it is precisely because the defendants had to import the vehicles that they had approached the Reserve Bank for the allocation of foreign currency.

Although accepting that the written contract was never varied in writing, it is suggested, by the defendants, that, the parties communicated through correspondence which clearly established that there was an understanding between the parties that the defendants needed to source funds, through the Reserve Bank of Zimbabwe, in order to import the vehicles to be delivered to the plaintiff by the first defendant.

The defendants produced to court a number of letters written by the second defendant explaining or seeking to explain the delay in delivery of the vehicles.

The first letter is dated 29 January 2007 which was a mere two days before the date scheduled for the delivery of the first batch; and the explanation given for the anticipated delay in delivery is the late approval of the allocation of foreign currency.

An assurance is given, in the letter, that everything was under control.

The second letter, dated 15 February 2007, again speaks of the delays in obtaining foreign currency allocation (approval?).

The writer goes further to state, that, arrangements had been made for the first batch of fifteen vehicles to be in the country by 28 February 2007.

It was stated further, that, the supplier had refused to accept an advance payment that had been arranged due to the fact that it had come from a bank in South Africa.

The last sentence in the letter is to the effect, that, correspondence from the Reserve Bank was being attached and the defendants were vigorously pushing for payment and the vehicles would be released 'soon'.

Attached to the letter in question was a Reserve Bank approval for the defendants to pay for the vehicles through their Bank. There was no allocation of funds on the certificate produced.

The letters addressed to the plaintiff were not responded to.

The plaintiff's witness, Mrs Chinodya, explained that when the defendants started coming up with excuses on the delivery of the vehicles, they were requested to put their explanations in writing.

The witness told the court, that, the position of the plaintiff was that the contract was for the supply and delivery of vehicles and not for the importation of the same.

The plaintiff was hopeful that the endevours by the defendants would succeed, but, when the contract was concluded, it was never a term of the contract that the defendants would require an allocation of foreign currency from the Reserve Bank of Zimbabwe in order for them to perform their obligations on the contract.

The contract was never varied - a position accepted by the defendants.

I was unable to accept the contention by counsel for the defendants, that, the fact that the vehicles would be imported was presumed and it did not need to be written in the contract.

He did not cite any authority for this submission, and I am not persuaded that this is a correct principle of the law of contract.

Apart from the letters written by the second defendant, after the contract was concluded, I have not seen any evidence pointing to a condition that the defendants had to obtain foreign currency from the Reserve Bank of Zimbabwe in order to comply with their obligations under the agreement.

The plaintiff's witness, Mrs Chinodya, emphasized, that, what was concluded was in fact an agreement of sale of the stated number of vehicles and that tenders were invited for supply of the vehicles in the local currency.

She was adamant, that, any tenders that were quoted in foreign currency were turned down.

She also said, that, the issue of the need for foreign currency arose after the first defendant failed to meet the delivery dates, and, in her view, it was nothing but an excuse.

I find no reason to doubt the veracity of her evidence on this issue.

I find for the plaintiff.

Her evidence was given in a straight forward manner and she made a better impression on the court than did the second defendant who was very evasive and unwilling to answer difficult questions under cross examination.

Overall, looking at the evidence of the two witnesses against the backdrop of the documents which preceded the contract, and the contract itself, it is my view that the contract was not conditional upon the first defendant being allocated foreign currency by the Reserve Bank as pleaded by the defendants.

I find that, therefore, that performance by the defendants was not conditional upon obtaining foreign currency from the Reserve Bank.

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 and 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] AC 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) SA 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 any one 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 her 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) SA 191. At 200E-F the learned judge stated:

“In his admirable work, Modern Company Law, LCB 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 Saloman v Saloman & 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 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 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.

Appealed
SC92-22 : VALENTINE ZISWA and MARGARET ZISWA vs GRAEME CHADWICK and LANDOS FARM (PRIVATE) LIMITED
Ruled By: UCHENA JA, MAKONI JA and KUDYA AJA

On 11 March 2015, the High Court granted part of the claim sought by Valentine Ziswa and his wife Margaret Ziswa (the cross appellants) against Graeme Shaun Chadwick and Landos (Pvt) Ltd (the cross respondents).

The court a quo dismissed the claims of the cross-appellants as against the second cross-respondent in their entirety and granted part of the claims as against the first cross respondent.

The cross appellants seek a reversal of the dismissal orders issued a quo.

The order issued by the court a quo reads as follows:

“In the result, it is ordered that:

1. The plaintiffs claims against the second defendant are hereby dismissed with costs.

2. The plaintiffs claim (a) against the first defendant succeeds only in the sum of $8,808 which the first defendant is directed to pay the plaintiffs.

3(a) The plaintiffs claim (e) partially succeeds to the extent of the 4km LTC Electric cable while the rest is hereby dismissed.

(b) The first defendant shall pay to the plaintiffs the sum of $84,000 being the replacement value of the LTC electric cable removed from the plaintiffs farm.

4. The first defendant shall pay the plaintiffs the sum of $780 being value of labour hired to clear tobacco stalks and related expenses.

5. The plaintiffs claims (b), (c), (d), (f), (g), (j) and (l) are hereby dismissed.

6. Absolution from the instance is granted in respect of plaintiffs claims (h) and (k).

7. The plaintiffs shall pay 20% of the first defendant's costs of suit.”

The first cross appellant is Valentine Ziswa (Ziswa) while the second cross-appellant is his wife, Margaret Ziswa. I will cumulatively refer to them in this judgment as the lessor.

The first cross-respondent is Graham Shaun Chadwick (Chadwick) and the second cross-respondent is Landos (Pvt) Ltd (the Company).

Graham Shaun Chadwick was a director in Landos (Pvt) Ltd, which he also used as his special purpose vehicle or agent to conduct his farming operations on Ziswa Farm (the farm) and on three other surrounding farms, namely, Gijima, Kelvin, and Landos.

THE BACKGROUND

On 20 March 2015, Graham Shaun Chadwick filed a defective Notice of Appeal against the cross appellants, which did not indicate the part of the judgment he sought to impugn.

He, thereafter, filed a contested chamber application for condonation and extension of time within which to appeal on 11 January 2018, which was dismissed with costs on 21 March 2018.

The effective disposal of the main appeal in this manner left the cross appeal pending.

FACTS

On or before 1 September 2008, Valentine Ziswa and Graham Shaun Chadwick entered into a verbal agreement for the lease of the farm and the inventoried equipment. The description, quantities, and state of the leased equipment was recorded in the comprehensive inventory the parties drew in October 2008.

The tobacco season in Zimbabwe generally runs from September to August and sales generally take place between March and June.

Graham Shaun Chadwick was on the farm during the 2008-2009, 2009-2010, 2010-2011, and 2011-2012 seasons (hereinafter called the first, second, third, and fourth seasons, respectively).

On 9 January 2009, Valentine Ziswa and Graham Shaun Chadwick signed a 10-year lease agreement.

On the same date, Valentine Ziswa and his wife (the First Partner) executed a second “Joint Venture Agreement” (JVA) with Graham Shaun Chadwick (Second Partner) for the “long term development” of the farm.

The two agreements were backdated to 1 September 2008.

Graham Shaun Chadwick not only leased the farm and the inventoried property, but, in addition, undertook to erect permanent structures (in each season) of an equivalent value to the seasonal rental payable.

In terms of clause 1 and clause 2, Graham Shaun Chadwick leased “the land, together with all buildings and other permanent improvements and certain immovables” for the ten year period from 1 September 2008 to 31 August 2018 for the purpose of growing “30ha of tobacco, 40ha of maize, 20ha of wheat and any other crop agreed between the parties.”

In terms of clause 3, the rental payable would be “6 per cent on the US$ of the gross turnover of the crops produced on the said land inclusive of bonuses and hailstorm insurances.”

In respect of tobacco, the rent was to be paid into the lessor's FCA by stop order raised at the auction floor, and cash payments were to be made in respect of other crops.

In addition to the rental, Graham Shaun Chadwick would, in terms of clause 4(d), be responsible for the repairs and maintenance of tractors and the inventoried equipment leased to him with effect from 1 September 2008.

Lastly, clause 9 stipulated that:

“This agreement constitutes the entire agreement between the parties, and no representation or undertakings given by one of them to the other of them prior to the execution hereof, and no variation of the conditions hereof, shall have any force or effect unless recorded in writing and executed by the parties hereof.” (The underlining covers the handwritten portions of the otherwise typeset agreement).

The Joint Venture Agreement (JVA) substantially duplicates the lease agreement. Clause 3 thereof reads as follows:

“3. The rent payable by the lessee to the lessor shall be 6 per cent per centum of the gross turnover in respect of the crops produced on the said land, and payment of such rent/lease shall be secured by means of STOP ORDER given by the lessee in favour of the Company against proceeds of tobacco sold through TOBACCO SALES FLOOR. Such PAYMENT shall be executed and registered as soon (sic) may be after the signing of this lease. 31 MARCH, 3 APRIL, 6 END OF JULY. MAIZE 1.5 TON MONTHLY.” (The underlined words and figures are handwritten)

It was common cause that the two agreements are complementary and separate and distinct. The requirements of the Joint Venture Agreement (JVA) were additional to the rental payable.

It was also common cause, that, Graham Shaun Chadwick was an active councillor for the Zimbabwe Tobacco Association (ZTA) for six (6) years and had been its Vice-President for another two (2) years.

He introduced the Zimbabwe Tobacco Association (ZTA) proforma lease and Joint Venture (JV) agreements, and, together with Valentine Ziswa, supplemented and annotated the terms and conditions therein by hand.

Graham Shaun Chadwick grew maize during the first season only and abandoned it in subsequent seasons in preference to the more lucrative tobacco crop. He never grew wheat on the farm.

Graham Shaun Chadwick did not abide by the direct deduction method prescribed in the agreements. He did not disclose to the lessor his prior preferential stop order obligations to the Zimbabwe Leaf Tobacco Company (Pvt) Ltd.

By 10 May 2010, Graham Shaun Chadwick had repaired a weir, put in a pump and generator, laid underground irrigation pipes, erected a centre pivot, paid for the labour for the reconstruction of a burnt down tobacco barn “maintained” all 14 barns by putting in place the necessary appurtenances for curing tobacco, repaired furnaces and sheds, and, at a cost of US$2,700 constructed 11 two roomed staff houses.

By letter dated 22 February 2011, Graham Shaun Chadwick offered to increase lease rental to 8%.

The offer was not accepted.

Instead, the lessor made the counter offer proposed in the detailed draft agreement, which the lessor signed on 13 March 2011.

The counter-offer was, in turn, rejected by Graham Shaun Chadwick.

Between 10 January 2012 and 18 May 2012, the parties failed to amicably resolve the lessor's demands for arrear rentals, maintenance of the leased equipment, and the repatriation of leased property that Graham Shaun Chadwick allegedly took to other farms.

In frustration at the impasse, the lessor sought to exercise a lien over the tobacco produce that was on the farm.

They were, by consent, interdicted by Graham Shaun Chadwick and Landos (Pvt) Ltd, on 24 May 2012 in case No. HC5477/12.

On 10 June 2012, the Ziswas instigated the arrest of Graham Shaun Chadwick for theft of some of the 2008 inventoried property. The complete police docket, compiled by Sergeant N'andu (IO), was produced by consent as exhibit 5.

Sergeant N'andu (the IO) first attended at the farm on 12 June 2012. On 19 June 2012, he conducted a verification or “exit” inventory with Valentine Ziswa and a proxy of Graham Shaun Chadwick, at the direction of the Area Public Prosecutor for Rusape (APP).

By letter dated 2 July 2012, Graham Shaun Chadwick cancelled the lease agreement and immediately vacated the farm.

On 5 September 2012, the Area Public Prosecutor for Rusape declined to prosecute, adjudging the criminal complaint to be a civil dispute.

On 26 September 2012, the lessor issued summons against the defendants claiming an aggregate sum of US$456,699 under 13 heads. These comprised of the following claims:

(a) Arrear rentals of US$64,160 for the fourth farming season;

(b) A refund of rates and levies of US$1,980 paid to the Makoni Rural District Council for the fourth farming season;

(c) The lessor's share of the hailstorm insurance proceeds of US$5,500 in respect of the second farming season;

(d) The outstanding developments for the first three farming seasons, represented by the value of the centre pivot that was removed from the farm, in the sum of US$67,507;

(e) Other enumerated property valued at US$187,707 that was also removed from the farm;

(f) The estimated damages to recovered property of US$15,905;

(g) US$7,600 for the damage to the fence and gates on the farm;

(h) US$15,008 for the repairs to the damaged tobacco barns and flue pipes;

(i) US$780 for removing the fourth season tobacco stalks;

(j) US$26,313 for vandalized overhead water storage tanks, pipes, workers houses, electrical underground cables, dams, pump unit, boreholes, and transformer;

(k) US$15,000 for maize deliveries contractually due to the lessor during the second to fourth farming seasons;

(l) US$4,240 for the tobacco seedlings grown on the farm and sold to other farmers;

(m) US$45,000 damages for loss of income in respect of the 2012/2013 tobacco cropping season caused by the premature and abrupt termination of the agreements.

THE PROCEEDINGS A QUO

The lessor made the following contentions:

The two agreements had separate and distinct obligations. Landos (Pvt) Ltd had a direct and substantial interest in the two agreements, and was, together with Graham Shaun Chadwick, therefore liable for the various contractual breaches that gave rise to the 13 claims.

The lessor's documentary and oral evidence established both liability and quantum in respect of claim (a), (d), (e), (f), (g), (h), (j), (k) and (l) at the higher rate of 8 per cent and not at the 6 per cent in the two agreements.

The lessor abandoned claim (m) and conceded that Graham Shaun Chadwick and Landos (Pvt) Ltd be absolved from the instance in respect of claims (b), (c) and (i) on the ground that the lessor had failed to established the due amounts.

Graham Shaun Chadwick conceded that the annotations formed part of the terms agreed by the parties on 9 January 2009.

Counsel for Graham Shaun Chadwick argued, that, the lessor failed to establish both liability and quantum.

He submitted, on the authority of Agricultural Finance Corporation v Pocock 1986 (2) ZLR 229 (S), that, the oral variation of the rental rate from 6 per cent to 8 per cent in violation of the non-variation clause (Clause 9 of both agreements) of the agreements was inefficacious and invalid.

He also relied on the twin principles of privity and sanctity of contracts enunciated in CHRISTIE: The Law of Contract in South Africa, 6th ed, 2010 Lexis Nexis…, to call for the dismissal of all the claims sought against Landos (Pvt) Ltd.

Counsel, however, conceded that Graham Shaun Chadwick was liable for unpaid rental of US$8,808 for the fourth season and US$36,000 for the LTC line [falling under claim (e)] and not the respective US$64,160 and US$84,000 sought by the lessor.

He further contended, that, as the lessor had failed to establish liability or where liability had been established, the quantum thereof in respect of claims (b), (c), (d), the remainder of (e), (f), (g), (h) and (j), the claims fell to be dismissed.

Counsel requested the court a quo to discard the evidence of the valuator for the reason that it was unconventional and unprofessional.

He argued, that, the valuation was in breach of the 'objective' and 'appreciable help' standards expected of expert evidence that are propounded in Stock v Stock 1981 (3) SA 1280 (A)…,; Gentiruco AG v Firestone SA (Pty) Ltd 1972 (1) SA 589 (A)…,; and Menday v Protea Assurance Co. Ltd 1976 (1) SA 565 (E)…, and articulated in SCHWIKKARD & Van der MERWE's Principles of Evidence, Juta 2009…,.

He, therefore, prayed for the dismissal of claims (d) (e), (f), (g), (h) and (j), which rested on the valuator's computations.

Counsel further contended, that, the claims ought to be dismissed for the further reason that the lessor had not amended the quantum to reflect the new amounts touted by the valuator some of which were higher than the individual breakdowns set out in annexures 2 and 3 to the summons.

THE FINDINGS A QUO

The court a quo made the following findings:

The only effectual agreements were the lease and the Joint Venture agreements dated 9 January 2009 and not the draft agreement of 13 March 2011.

The operational rental rate was 6 per cent and not 8 per cent. This was because the offer of 22 February 2011 had not been accepted nor had the non-variation clause been invoked.

Valentine Ziswa was an inconsistent, unreliable, untruthful, and greedy witness.

He prevaricated on whether the tenure of the agreements was 5 years, 8 years, or 10 years and whether the rental rate was 6 per cent, 8 per cent, or 10 per cent.

He was greedy because he unjustifiably claimed for municipal imposts, maize deliveries, seedlings, and hailstorm insurance proceeds, which were all not covered by the two agreements. He also demanded for the value of the centre pivot, which he had categorically rejected as constituting a permanent structure.

The court a quo also excoriated the valuator for flaunting his professional qualifications and experience at the expense of conventional valuation principles. It, therefore, discarded his depreciated replacement cost computations.

Graham Shaun Chadwick, whose demeanour was highly extolled, was found to be a truthful, good, and reliable witness.

His status as an accomplished tobacco farmer with 20 years experience, and who exuded confidence and conceded where he was liable, endeared himself to the court a quo at the expense of Valentine Ziswa whose penchant for renting out instead of farming on his own account was deplored by the court.

Notwithstanding the contrary general findings on credibility of Valentine Ziswa and the valuator, the court a quo believed Valentine Ziswa's oral testimony on the US$780 claim on tobacco de-stalking and the chartered accountant's valuation of the LTC line. It, however, dismissed the rest of their evidence on the valuation of all the other claims. It further held that seedlings were not a crop as they could not be sold at the auction floors.

The court a quo dismissed the claims against Landos (Pvt) Ltd on the twin basis of lack of privity of contract and sanctity of contracts.

It held, that, these cardinal legal principles could not be negated by Graham Shaun Chadwick's directorship of the company, his use of the company's letterhead in correspondence with the lessor and bank account to effect payment of his lease obligations.

It issued the order that I adverted to at the commencement of this judgment.

Aggrieved by the order granted a quo, the lessor appealed to this Court on the following grounds:

“1. The court a quo erred in not finding that the reduction of part of the agreement between the parties to writing and the existence of the non-variation clause notwithstanding, on the entirety of the evidence before the court, the agreement between the parties consisted in part of the written portion and in part of the oral agreement sworn to by the cross appellants.

2. The court a quo erred, for the stronger reason, in not finding that the second cross respondent was privy to the whole of the agreement between the parties and in dismissing the claim against it.

3. The court a quo erred in its treatment of the evidence and assessment of the cross appellants claim with the result, that, the court misdirected itself in its gratuitous conclusions on the first cross-appellant's demeanour and motives culminating in the rejection of the cross-appellants claims on this flawed basis.

4. The court a quo erred in not finding that the rent for the use of the cross-appellants farm varied from 6 per cent to 8 per cent of the gross annual turnover realised on the farm.

5. The court a quo erred, in any event, in accepting the appellant's bare testimony that the sum of US$21,000 paid to the cross appellants was towards the rental for the 2011-12 season and in deducting the same from the rental due and owing to the cross appellants.

6. The court a quo erred in its treatment of the evidence in concluding, that, the claim for the tonnage of maize was not within the parameters of the agreement of the parties and in rejecting the cross-appellants testimony regarding the quantum thereof.

7. The court a quo erred in holding, that, the claims for the centre pivot and generator did not fall within the parameters of the developmental agreement.

8. The court a quo erred in holding that the seedlings produced on the cross appellants farm, but sold elsewhere, were not produce for the purposes of the parties agreement, and in rejecting the cross-appellants quantification thereof.

9. The court a quo erred in finding, as it did, that there was no evidence to substantiate the cross appellants claim (e) (property removed and not returned) and claim (g) (removed and/or damaged fences and gates) and in finding the property could have been unusable.

ALTERNATIVELY

The court a quo erred, in any event, in dismissing the said claims as opposed to granting absolution from the instance.

10. The court a quo erred in rejecting the evidence of Pange purely on the basis that he had used one as opposed to three quotations which had been sourced by the cross-appellants, and had applied the general accounting depreciation formulae without a physical examination of the property in question.

11. The court a quo erred in not awarding the claim for the irrigation pump, which the appellant conceded in his evidence and offered to compensate for the same.

12. The court a quo erred in accepting as true the appellant's testimony based solely on the fact that he managed to impress the judge in terms of his demeanour.”

The cross-appellants sought the success of the cross appeal with costs, the amendment of the judgment a quo by granting, jointly and severally, the one paying the other to be absolved:

(i) Arrear rentals of $67,502=40 for the 2011-12 season (being 8 per cent of gross realization of US$843,780 from sale of 205,800kgs at US$4=10 per kg);

(ii) Alternatively, judgment in the sum of US$50,626=80 being 6 per cent of the above gross realisation;

(iii) Judgment in respect of claims (d), (f), (j) and (i);

(iv) Judgment for the reduced sum of US$364,729 as particularised in exhibit 3; and

(v) Costs of suit against the cross respondents.

THE ISSUES

The issues that arise from the grounds of appeal are the following:

1. Whether the variation clause was waived by the parties to the lease agreement.

2. Whether the second cross-respondent was liable to the lessor's claims.

(a) Rentals for the fourth season (a portion of claim (a)).

(b) The value of the developments in lieu of the Centre Pivot (claim (d)).

(c) Damages for missing equipment (including the irrigation diesel pump whose liability was conceded) (claim (e)) and for damaged property and equipment on the farm (claim (f)).

(d) Repairs to tobacco barns (claim (h)).

(e) Vandalized overhead water tanks, reservoirs, boreholes, and staff houses and their connecting pump unit, cables, electrics, and pipes claim (j).

(f) Maize deliveries due for the second to fourth seasons (claim (k)).

(g) Value of tobacco seedlings (claim (l)).

3. Whether or not the court a quo properly exercised its discretion in respect of costs.

THE ARGUMENTS BEFORE THIS COURT

At the onset of his submissions before this Court, counsel for the lessor abandoned claims (b), (c) and (g).

He persisted with the appeal against the dismissal of the entire claim against the company, the part dismissed in respect of claims (a) and (e), and the dismissals against claims (d), (f) (h), (j), (k) and (l).

Counsel for the lessor contended, that, the dismissal of the lessor's claims against Landos (Pvt) Ltd was erroneous.

He argued, that, the resolution passed by Landos (Pvt) Ltd, on 18 May 2012, authorising Graham Shaun Chadwick to “represent the company in any legal matter against Mr and Mrs Ziswa” before the institution of action proceedings on 26 September 2012, showed that it had a direct and substantial interest in the two agreements.

He further argued, that, the main credibility findings in favour of Graham Shaun Chadwick and against Valentine Ziswa, upon which the court a quo premised its dismissal of the lessor's claims were, on the totality of the adduced evidence, irrational.

He argued, that, notwithstanding the embodiment of the non-variation clause in the lease agreement, the lessor had, contrary to the finding a quo, established that Graham Shaun Chadwick had, by conduct, waived the lease rental rate from 6 per cent to 8 per cent on the second and subsequent seasons.

He further argued, that, the valuation testimony of the chartered accountant had proved the damages suffered by the lessor as at the date Graham Shaun Chadwick cancelled the agreements and vacated the farm.

Lastly, he contended that the costs order granted a quo constituted a patent failure in the exercise of discretion warranting interference by this Court.

Per contra, counsel for Graham Shaun Chadwick and Landos (Pvt) Ltd vehemently supported the impugned findings and conclusions of the court a quo.

He argued, that, the claims against Landos (Pvt) Ltd were rightly dismissed because it was not privy to the lease agreements.

He strongly contended, that, having acted as an agent, it could not be sued either separately or together with its principal.

He further contended, that, the non-variation clause precluded the lessor from relying on any variation derived from an oral agreement or on the offer to increase the rate to 8 per cent which they did not accept.

He submitted, that, an oral agreement could not waive a non-variation clause.

He further contended, that, the court a quo had not relied on the demeanour of the witnesses only but also on the inconsistencies that characterized the evidence of the lessor's star witness, Valentine Ziswa.

Lastly, he contended that the valuator's testimony was rightly discarded for being both unconventional and unprofessional.

Counsel impugned his competence on two bases:

(i) The first was that he had relied on the quotations availed to him by Valentine Ziswa without conducting a physical inspection of the equipment.

(ii) The second was that he had further relied on internet sites, that he failed to disclose, in ascertaining the life span of some of the equipment listed in exhibit 3.

ANALYSIS OF THE LAW AND THE FACTS

WHETHER LANDOS (PVT) LTD (THE COMPANY) WAS LIABLE FOR ALL OR ANY OF THE CLAIMS SOUGHT BY THE LESSOR

Counsel for the lessor argued, that, Landos (Pvt) Ltd was privy to the whole agreement in the following respects:

(i) Firstly, the lessor regarded Graham Shaun Chadwick as a representative of Landos (Pvt) Ltd.

(ii) Secondly, Landos (Pvt) Ltd, through its various employees, carried out Graham Shaun Chadwick's obligations. It, in fact, exhibited its direct and substantial interest in the two agreements by being the first applicant in the urgent chamber application between the same parties in case No. HC5477/12, so argued counsel.

(iii) Thirdly, the correspondence that emanated from Graham Shaun Chadwick was invariably on the company's letterheads.

(iv) Fourthly, the company not only acknowledged indebtedness to the lessor but had the tobacco auction floor sales sheets issued in its name.

Counsel for Graham Shaun Chadwick and Landos (Pvt) Ltd made the contrary contention, that, the company was a separate and distinct person from Graham Shaun Chadwick. It could therefore not be vicariously liable for its director's personal debts.

He further argued, that, the lessor had not demonstrated the pre-conditions for lifting the corporate veil such as fraud, dishonesty, or improper motive.

He further relied on the twin principles of privity and sanctity of contract to countervail counsel for the lessor's contentions.

He further argued, that, in our law, an agent cannot be sued in its own name for the contractual or delictual breaches of its principal notwithstanding its intimate involvement in the principal's farming operations or the use of its letterheads and personnel.

The basis provided in the lessor's further particulars for suing the company was delictual.

They averred, that, the company breached “a general duty imposed on it by law to ensure that no damage would be caused on plaintiffs' property.”

This delictual basis was not pursued in evidence nor motivated in argument a quo. It was neither raised as a ground of appeal nor motivated in this Court.

In fact, the second ground of appeal impugns the failure a quo to find the company to have been privy to the two agreements.

I agree with counsel for Graham Shaun Chadwick and Landos (Pvt) Ltd, that, the company was not privy to the two agreements. Rather, it was an agent of Graham Shaun Chadwick: see Printing Registering Co. v Sampson 19 EQ 462…,.

In any event, it is clear from our law, that, where the principal is known, an agent cannot be sued for the contractual or delictual breaches committed by its principal.

In this respect, MALABA J…, pertinently remarked in Taunton Enterprises (Pvt) Ltd & Anor v Marais 1996 (2) ZLR 303 (H)…, that:

“The general rule is that a person who acts as an agent and contracts with a third party in the name of the disclosed principal is not a party to the contract and is not personally liable on the contract: Wood v Visser 1929 CPD 55; Marais v Perks 1963 (4) SA 802(E); de Villiers & Macintosh, The Law of Agency in South Africa, 3ed at 560.”

The converse position, that an agent cannot sue on behalf of a principal, was also set out in AMI Zimbabwe (Pvt) Ltd v Casalee Holdings (Successors) (Pvt) Ltd 1997 (2) ZLR 77 (SC)…, thus:

“Without such a cession of action, Casalee Zim cannot sue AMI on behalf of Casalee Belgium because an agent cannot sue on behalf of its principal: see SWA Amalgameerde Afslaers (Edms) Bpk v Louw 1956 (1) SA 346 (A) at 355C:

'…, the auctioneer can sue for the purchase price without cession of action from the seller only if, in the transaction, he sold as principal.'

…,. So, if Casalee Zim is suing as agent, it is out of court.”

In the circumstances, the finding a quo that the lessor had no legal basis for suing the company cannot be faulted.

The second ground of appeal ought to fail.

Appealed
SC94-22 : ROBERT TINDWA vs THE SHERIFF FOR ZIMBABWE and INSTITUTE OF MINING RESEARCH
Ruled By: HLATSHWAYO JA, BHUNU JA and MAKONI JA

This is an appeal against the dismissal by the High Court of the appellant's claim to property placed under attachment in execution, being a piece of land situate in the district of Salisbury called Stand 262 Mount Pleasant Township 9 of Lot 50 Mount Pleasant, measuring 4144 square meters also ...

FACTUAL BACKGROUND

The facts giving rise to the dispute are as follows:

On 23 March 2015, the second respondent obtained judgment against a company called Westcott Speciality Chemicals (Pvt) Ltd, the judgment debtor, in the sum of twenty four thousand four hundred and twenty one united states dollars (US$24,421).

Pursuant to the judgment, the second respondent instructed the Sheriff of Zimbabwe (the first respondent herein) to attach the judgment debtor's property at its principal registered office, being Number 187 Munhondo Street, Ruwa.

Upon arrival, the first respondent discovered that the property had already been attached in another matter. The judgment debtor apparently had ceased to operate from that address when the property was attached and had left no forwarding address.

In the circumstances, the first respondent issued a nulla bona return as an indication that there was nothing to attach.

The second respondent investigated the matter and discovered that the judgment debtor had moved its offices to No.5 Westcott Road, Mt Pleasant, being the appellant's residence.

The findings by the second respondent also revealed that the appellant was the director of the judgment debtor as well as its company secretary.

The second respondent formulated the view, that, the appellant was the alter ego of the judgment debtor.

It is at that point that the second respondent instructed the first respondent to attach the appellant's immovable property, namely, Stand No.5 Westcott Road, Mt Pleasant.

Upon such attachment, the appellant advised the first respondent that the property attached was owned by him in his personal capacity and not by the judgment debtor.

In the result, the first respondent instituted interpleader proceedings in terms of Rule 205A of the High Court Rules 1971.

During the proceedings in the court a quo, the second respondent argued, that, the court should pierce the corporate veil.

The second respondent further contended, that, where the director is the alter ego of the company he/she is always aware of the happenings of the company at any time. It was further submitted, that, the appellant has been running the company from his own premises and that the company is just a 'sham.'

Per contra, the appellant submitted that he is one of the four directors of the company and that it is the cardinal principle of Company Law that a company is a separate legal entity from its members.

He further submitted, that, because he is a separate entity from the company, the courts should be reluctant to pierce the corporate veil as to do so would negate or undermine the policy and the principles that underpin the concept of separate corporate personality and its legal consequences.

In determining the matter, the court a quo held that the appellant, although he was one of the four directors of the judgment debtor, was the only director who had been dealing with creditors.

He was also the Company Secretary and appeared in all meetings between the parties to discuss their business dealings.

It was also found that efforts to contact other directors who were indicated on the CR14 Form had yielded no response and that the only contact person in the company was the appellant.

The court a quo made findings to the effect, that, the appellant was the alter ego of the judgment debtor. He was the company and the company was him, and, the interests of justice required the lifting of the corporate veil to enable the second respondent to recover its dues.

In the result, the court a quo dismissed the appellant's claim to the immovable property.

Aggrieved, the appellant has noted an appeal to this Court on the following grounds:

(i) The court a quo erred in law in not finding that the lifting of the judgment debtor's corporate veil as a pre-condition to declaring the appellant's immovable property executable, required separate and specific proceedings against the appellant, and, as a consequence, further erred in not finding that such lifting of the corporate veil could not be done in inter pleader proceedings.

(ii) Alternatively, the court a quo improperly exercised its discretion and made an irrational decision in lifting the judgment debtor's corporate veil and in thereafter finding that the appellant and the judgment debtor were so inseparable as to permit the attachment of the appellant's immovable property in execution of the judgment in HC1566/15.

SUBMISSIONS BEFORE THIS COURT

Counsel for the appellant submitted, that, there were two issues that ought to be determined:

(i) Firstly, he argued that the writ of execution issued against the property of the appellant was void ab initio since the property was not registered in the name of the judgment debtor.

(ii) Secondly, he claimed that it was irrational for the court a quo to lift the corporate veil so as to attach liability to the appellant; liability that would otherwise not exist.

On the other hand, counsel for the second respondent submitted that the lifting of the corporate veil in inter-pleader proceedings was permissible in order to prevent manifest injustice from being committed.

ISSUE FOR DETERMINATION

From the submissions made, it appears to me that the sole issue arising for determination is as follows:

Whether or not the court a quo erred in exercising its discretion by ordering the lifting of the judgment debtor's corporate veil during interpleader proceedings

THE LAW AND THE FACTS

The concept of separate legal personality of a company is the cornerstone of Company Law.

The cardinal principle of Company Law, as enunciated in Salomon v Salomon & Co. Ltd [1897] AC 22 (HL) and Dadoo Ltd & Others v Krugersdorp Municipal Council 1920 AD 530…, is that a company is a separate entity that is distinct from its members.

The concept of corporate personality is that a company, once it is registered, acquires a personality of its own, quite distinct from its members or shareholders: see Welli-Well (Pvt) Ltd v Malvern Imbayago & Anor SC08-21…,.

Because a company is separate from its members, the courts will not readily disregard such corporate legal personality and lift the corporate veil so as to attach liability to individuals who are related to the company.

This principle was buttressed in the case of Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Ors 1995 (4) 790 (A) SA..., wherein the court held as follows:

“It is undoubtedly a salutary principle that our Courts should not lightly disregard a company's separate personality, but should strive to give effect to and uphold it. To do otherwise would negate or undermine the policy and principles that underpin the concept of separate corporate personality and the legal consequences that attach to it.

But, where fraud, dishonesty, or other improper conduct is found to be present, other considerations will come into play.

The need to preserve the separate corporate identity would, in such circumstances, have to be balanced against policy considerations which arise in favour of piercing the corporate veil…, and a court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a misuse of corporate personality, to disregard it and attribute liability where it should rightly lie. Each case would obviously have to be considered on its own merits.”

Legislation also prescribes certain exceptions to the prevention of piercing of the corporate veil.

Section 318(1) of the Companies Act [Chapter 24:03] provides:

“(1) If at any time it appears that any business of a company was being carried on -

(a) Recklessly; or

(b) With gross negligence; or

(c) With intent to defraud any person or for any fraudulent purposes;
the court may, on the application of the Master, or liquidator, or judicial manager, or any creditor of or contributory to the company, if it thinks proper to do so, declare that any of the past or present directors of the company or any other persons who were knowingly parties to the carrying on of the business in the manner or circumstances aforesaid shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

Now that it has been established that the corporate veil can be lifted in the case of fraud or dishonest conduct, the question that follows is whether it is procedurally necessary for a judgment creditor to have obtained a prior court order lifting the corporate veil before attempting to attach the property.

The case of Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd & Ors 1995 (4) 790 (A) SA has indicated, that, even if there are other routes that can be taken, the mere failure to do so does not block the lifting of the corporate veil. The Court held as follows at p805G–806B:

“In principle, I see no reason why piercing of the corporate veil should necessarily be precluded if another remedy exists….,. If the facts of a particular case otherwise justify the piercing of the corporate veil, the existence of another remedy, or the failure to pursue what would have been an available remedy, should not, in principle, serve as an absolute bar to a court granting consequential relief….,.

Whatever laxity or 'fault' there may have been on the part of the appellant in failing to pursue its rights under the doctrine of notice pales into insignificance compared to the impropriety of Lubner's conduct. Yet, respondents seek to rely upon such failure to deny the appellant relief.

Policy considerations dictate that they should not be permitted to do so.

In the circumstances, the appellant's failure to pursue its remedy under the doctrine of notice does not, in my view, operate as a bar to the relief it seeks.”…,.

PATEL J…, commenting on the above excerpt in the case Deputy Sheriff v Trinpac Investments (Pvt) Ltd & Anor 2011 (1) ZLR 548 (H)…, held as follows:

“While these observations may not be directly pertinent to the question at hand, they certainly fortify the principle that mere procedural technicalities should not be allowed to frustrate or impede the effective satisfaction of a just claim. In any event, I see no logic or practical reason in requiring the judgment creditor to institute fresh proceedings in this Court to pierce the corporate veil in circumstances where those proceedings would entail the same conclusion that I have reached earlier.”…,.

There are no compelling reasons why the second respondent was obliged to institute fresh proceedings.

If the end result would be that the corporate veil would be pierced, certainly that order could still be granted in interpleader proceedings.

This is so because the court a quo found, that, the appellant was the only director dealing with the second respondent, he appeared at all meetings between the parties, and that only his email address appeared on the judgment debtor's letter heads. In the result, it was found that “the impression that one gets from the above facts is that the appellant is the company and the company is the appellant and that the two were in fact, and in truth, inseparable.”

Accordingly, in such circumstances, it is not necessary to institute fresh proceedings for the lifting of the corporate veil as all facts point to the conclusion that the appellant is the alter ego of the judgment debtor. The interests of justice do not require the institution of fresh proceedings as insisting on the same would be tantamount to denying the second respondent what is due to it: see Sibanda v Sibanda SC07-14…,.

While it is accepted that there are no hard and fast rules on the circumstances that justify the lifting or piercing of the corporate veil, with each case generally having to depend on its own facts and merits, I find this dictum from the case of Mkombachoto v Commercial Bank of Zimbabwe & Anor 2002 (1) ZLR 31 (H)…, to be apposite.

The court held as follows:

“In my view, the court has no general discretion to disregard the company's separate legal personality whenever it considers it just to do so. The court may 'lift the veil' only where otherwise as a result of its existence fraud would exist or manifest justice would be denied.”…,.

From the evidence placed on record, and the observations of the court a quo thereof, it can be seen that the appellant has been running the company from his residential address. He has been the one dealing with the second respondent throughout, and, from that alone, the impression that one gets is that the appellant and the judgment debtor are inseparable.

As a result, I am satisfied that there exists some element of dishonesty in the operations of the appellant in trying to evade liability. The court a quo cannot be faulted in exercising its discretion to lift the judgment debtor's corporate veil as a failure to do so would have resulted in manifest injustice being done.

DISPOSITION

In the result, the court a quo exercised its discretion properly by lifting the judgment debtor's corporate veil during interpleader proceedings. Failure to do so would have caused great injustice to the second respondent.

The appeal ought to fail with costs following the cause.

Accordingly, the appeal is dismissed with costs.

View Appeal
HH54-18 : THE SHERIFF FOR ZIMBABWE vs ROBERT TINDWA and INSTITUTE OF MINING RESEARCH
Ruled By: CHITAKUNYE J

This is an application pursuant to the provisions of Rule 205A as read with Rule 207 of the High Court Rules 1971.

On 23 March 2015, the judgement creditor obtained judgment against Westcott Speciality Chemicals (Pvt) Ltd (hereinafter referred to as the judgement debtor) in the sum of $24,421 in HC1566/15.

Pursuant to the judgment, the judgment creditor instructed the applicant to attach the judgment debtor's property at its principal registered office at number 187 Munhondo Street, Ruwa.

When the applicant attended at the stated address, he failed to attach any property as the property he found had already been attached in another matter. The applicant later made a nulla bona return, the import of which was that there was nothing to attach.

The judgment debtor had apparently ceased operating from that address when its property was attached and had left no forwarding address.

Upon its investigations, the judgment creditor discovered that the judgment debtor was now operating from No.5 Westcott Road, Mt Pleasant - this is the claimant's address as well.

It also discovered, that, the claimant was the director of the judgment debtor as well as its company secretary.

The judgement creditor was of the view, that, the claimant was the alter ego of the judgment debtor and so instructed the applicant to attach the claimant's immovable property, namely, Stand 262 Mount Pleasant Township 9 of Lot 50 of Mount Pleasant, Harare also known as No.5 Westcott Road, Mt Pleasant.

Consequent upon the attachment, the claimant advised the applicant, in terms of Rule 205A of the High Court Rules, that the property was owned by him and not the judgment debtor, hence these interpleader proceedings.

From the papers filed of record and submissions made, it is common cause that the attached property is registered in the claimant's name. It is thus the claimant's property.

The judgment creditor's position was that the claimant is merely the alter ego of the judgement debtor and that it should be allowed to realize its dues from that property as the claimant and judgment debtor are one.

The judgment creditor thus sought the lifting of the corporate veil so that the real person behind the company is made to account for the debt.

The claimant, on the other hand, contended that he is not an alter ego of the debtor and that he is a separate entity from the judgment debtor which is a registered company. He is only one of the four directors of the company. He thus contended, that, there is no justification for lifting the corporate veil.

The claimant also contended, that, in terms of section 318(1) of the Companies Act [Chapter 24:03] the judgement creditor was required to first make an application to the High Court for the lifting of the corporate veil wherein it must prove that the business of the company was being carried on recklessly, with gross negligence, or with the intent to defraud any person, or for any fraudulent purpose.

The first issue is whether or not the judgment creditor ought to have first sought the lifting of the corporate veil, in terms of section 318(1) of the Companies Act, before attaching the property, as contended by the claimant.

It is pertinent to note, that, section 318(1) of the Companies Act is under Part V of the Companies Act. That part deals with winding up and judicial management of companies, and it provides that:

“(1) If at any time it appears that any business of a company was being carried on —

(a) Recklessly; or

(b) With gross negligence; or

(c) With intent to defraud any person or for any fraudulent purpose;
the court may, on the application of the Master, or liquidator or judicial manager or any creditor of or contributory to the company, if it thinks it proper to do so, declare that any of the past or present directors of the company or any other persons who were knowingly parties to the carrying on of the business in the manner or circumstances aforesaid shall be personally responsible, without limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct.”

Given the above provision, the claimant contended that the judgement creditor ought to have applied separately for the lifting of the corporate veil before attaching the property. The failure to do so entails that this application should not be heard till section 318(1) of the Companies Act has been complied with.

The judgment creditor, on the other hand, argued, that, it is not in every case that a judgement creditor must first proceed in terms of section 318 of the Companies Act; each case must be treated on its own basis.

In any case, the procedural failure to seek the piercing of the veil of incorporation before attaching the property should not be fatal to the present matter. The circumstances of this case warranted that the matter be heard and be decided without the need for fresh proceedings in terms of section 318 of the Companies Act.

It must be decided on the substance and not on the form.

The question is thus: is it procedurally necessary for a judgement creditor to have obtained a prior court order lifting the corporate veil before attempting to attach the claimant's property?

It is pertinent to refer to the words of SMALLBERGER JA in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790…, where, in dealing with the issue of piercing the corporate veil where another remedy was available, the learned judge stated, inter alia, that:

“In principle, I see no reason why piercing the corporate veil should necessarily be precluded if another remedy exists…,.; if the facts of a particular case otherwise justify the piercing of the corporate veil, the existence of another remedy, or the failure to pursue what would have been an available remedy, should not, in principle, serve as an absolute bar to a court granting consequential relief…,.

Whatever laxity or 'fault' there may have been on the part of the appellant in failing to pursue its rights under the doctrine of notice pales into insignificance compared to the impropriety of Lubner's conduct. Yet, respondents seek to rely upon such failure to deny the appellant relief. Policy considerations dictate that they should not be permitted to do so. In the circumstances, the appellant's failure to pursue its remedy under the doctrine of notice does not, in my view, operate as a bar to the relief it seeks.”

In Deputy Sheriff v Trinpac Investments (Pvt) Ltd and Anor 2011 (1) ZLR 458…, PATEL J…, alluded to the above observations and stated that:

“…, while these observations may not be directly pertinent to the question at hand, they certainly fortify the principle, that, mere procedural technicalities should not be allowed to frustrate or impede the effective satisfaction of a just claim. In any event, I see no logic or practical reason in requiring the judgement creditor to institute fresh proceedings in this court to pierce the corporate veil in circumstances where those proceedings would entail the same conclusion that I have reached earlier.”

In casu, I am of the view that the contention that the judgement creditor should have first obtained a court order lifting the corporate veil, in terms of section 318(1) of the Companies Act, is not sustainable.

If, as aptly noted in Deputy Sheriff v Trinpac Investments (Pvt) Ltd and Anor 2011 (1) ZLR 458, the facts are such as enable the court to make a decision, then, surely, why should the judgement creditor be required to start fresh proceedings for lifting of the corporate veil?

I do not think, that, in enacting that section, the legislature intended such a scenario.

The claimant's counsel could not cite any authority to the effect that failure to seek the lifting of the corporate veil, in terms of section 318(1) of the Companies Act, is a bar to a party seeking the lifting of the corporate veil through another procedure.

Clearly, the issue of lifting or piercing the corporate veil can be determined in the present proceedings.

The next issue for determination is whether or not the corporate veil should be lifted.

It is a cardinal principle of Company Law that a company is a separate legal entity from its members: see Saloman v Saloman and Co. Ltd (1897) AC 22 (HL).

It is also trite, that, the courts are reluctant to pierce the corporate veil, as to do so would negate or undermine the policy and principles that underpin the concept of separate corporate personality and its legal consequences.

There are, however, exceptions that have of late been alluded to as justifying the piercing of the corporate veil.

The veil of incorporation may be pierced where there is proof of fraud, dishonesty, or other improper conduct in the establishment or use of the company or in the conduct of its affairs.

In T Sibanda v H M Sibanda SC07-14…, GWAUNZA JA aptly noted that:

“While it is accepted, that, there are no hard and fast rules on the circumstances that justify the lifting or piercing of the corporate veil, with each case generally having to depend on its own facts and merits, I find this dictum from the case of Mkombachoto v Commercial Bank of Zimbabwe & Anor 2002 (1) ZLR 21 at p26D-C to be apposite;

'In my view, the court has no general discretion to disregard the company's separate legal personality whenever it considers it just to do so. The court may 'lift the veil' only where otherwise as a result of its existence, fraud would exist or manifest justice would be denied.'”…,.

A further illustration of the exceptions may be noted in Deputy Sheriff v Trinpac Investments (Pvt) Ltd and Anor 2011 (1) ZLR 458 wherein court held, inter alia, that:

“While the cardinal principle of Company Law is that a company is a separate entity distinct from its members, there are well established exceptions to the principle, grounded in policy considerations.

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.

When the corporation is the mere alter ego or business conduit of a person, it may be disregarded.

Where a corporation is organised or maintained as a devise in order to evade an outstanding legal or equitable obligation, the courts, even without reference to actual fraud, refuse to regard it as a corporate entity.

Where fraud, dishonesty, or other improper conduct is found, the need to preserve the separate corporate identity would have to be balanced against policy considerations which arise in favour of piercing the corporate veil.

The court would then be entitled to look to substance rather than form in order to arrive at the true facts, and, if there has been a mis-use of corporate personality, to disregard it and attribute liability where it should rightly lie. Each case would have to be considered on its merits.”

Further, in Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd 1995 (4) SA 790…, SMALLBERGER JA aptly noted that:

“The law is far from settled with regard to the circumstances in which it would be permissible to pierce the corporate veil.

Each case involves a process of enquiring into the facts, which, once determined, may be of decisive importance: and, in determining whether or not it is legally appropriate, in given circumstances, to disregard corporate personality, one must bear in mind 'the fundamental doctrine that the law regards the substance rather than the form of things — a doctrine common, one would think, to every system of jurisprudence and conveniently expressed in the maxim plus valet quod agitur quam quod simulate concipitur:' Dadoo Ltd and Others v Krugersdorp Municipal Council 1920 AD 530 at 547.”

What should exercise the court's mind is whether, on the facts or evidence placed before it, the corporate veil should be lifted in the interests of justice, failure of which manifest justice will be denied.

Courts must not be seen to be shielding proven fraudsters or deceitful actors who seek to avoid personal liability by hiding behind the mask of corporate veil.

The facts which the creditor alluded to, as justifying the lifting of the corporate veil, include the following:

(i) The judgement debtor had its property attached in another matter, hence, when the applicant went to attach property in the matter in question he found nothing to attach and that the debtor had ceased operating from its registered office. There was no notification of change of address. There was no change of address at the companies registry; the judgment creditor had to carry out its own investigations to locate where the debtor was now operating from.

(ii) The claimant, whilst being one of the four directors of the judgement debtor, was the only director who had been dealing with the creditor; he was the contact person and no other; besides being the director, he was also the company secretary; it is the claimant who would appear in all meetings between the parties to discuss their business dealings.

In short, the judgment creditor only knew the claimant as the representative of the judgment debtor. Efforts to contact other directors who are indicated on the CR14 form yielded no response. Thus, the only contact with the judgment debtor was the claimant.

(iii) Another pointer to the claimant being the alter ego is that even the debtor's letter heads have the claimant's email address only.

(iv) Further, in his letter of 21 September 2012, attached to the creditors papers, the claimant undertook to pay the debt in these words:

“As I stated to you, we want to have the matter settled, I am proposing to have the full amount ($24,421) paid on or by October 31, 2012.”

Clearly, he was the one proposing and undertaking to pay as the one in control.

It is pertinent to note that most of these facts were not denied.

I did not hear the claimant to deny, that, in all the dealings with the judgment creditor he was the contact person and that the debtor's letter-heads in fact only bore his e-mail address and no other.

The claimant did not deny that when the debtor relocated from 187 Munhondo, Ruwa it did not notify anyone or change its registered office address at the companies registry.

There was no denial that the judgment creditor had to do its own investigations to discover that the judgment debtor was now operating from the claimant's residential address.

The judgment debtor was safely tucked away at the claimant's address and the claimant was busy operating the company business from his residence.

There is no doubt that the claimant has been running the company, even from his residential address, as his company. He is the face of the company and is fully conversant with the goings on in the company.

The impression one gets from the above facts is that the claimant was the company and the company was the claimant, the two were, in fact and in truth, inseparable. The claimant was in full control of the company. The separateness between the claimant and the company has not been maintained in operating the business.

Indeed, as noted from the claimant's papers and submissions, no averments were made on the whereabouts of other directors or properties for the judgment debtor - if at all it existed separate from the claimant.

The claimant hoped to evade liability by hiding behind the guise of the debtor being a company.

It is my view, that, there is some element of dishonesty in the manner the claimant operated the company and attempted to evade liability. He just could not own up and pay what was due to the judgment creditor. Manifest injustice will occur if the claimant is allowed to get away with such a scheme. He clearly must be personally made to account for the debt in question.

This is a case where the interests of justice require that the veil of incorporation be lifted to enable the judgement creditor to recover its dues.

I am of the view, that, the manner in which the claimant attempted to avoid liability, despite the indisputable facts on his role in the company, calls for costs on the higher scale.

The applicant and judgement creditor have been put to great expense when the noble thing would have been for the claimant to simply arrange a payment plan for the debt and save his property from being sold.

Accordingly, it is hereby ordered that:

1. The claimant's claim to a certain piece of land situate in the district of Salisbury, called Stand 262 Mount Pleasant Township 9 of Lot 50 of Mount Pleasant, measuring 4,144 square meters dated 11 March 1988, also known as 5 Westcott Road, Mount Pleasant, Harare placed under attachment in execution of judgement HC1566/15 is hereby dismissed.

2. The Notice of Intention to Sell Immovable Property in Execution, dated 7 January 2016, both of which were issued by the applicant, are confirmed and the property stated therein is declared executable.

3. The claimant is to pay the judgement creditor and applicant's costs on a legal practitioner and client scale.

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Law Portal Zimbabwe

Legal Personality re: Lifting Corporate Veil, Personal Liability of Directors, Alter Ego & Fiction of Separate Legal Entity

Appealed HH34-12 : CHRISTIANE KWEDZA (nee MARTIN) vs MUSA KWEDZA Ruled By: CHITAKUNYE J

HB34-09 : NOKUKHANYA MOYO vs ROBERT MOYO Ruled By: BERE J

HH68-10 : ALVIN CRISP vs STELLA MARY MASVIKENI Ruled By: MUSAKWA J

HH373-13 : KEEFEX INVESTMENTS and ARENSON INVESTMENTS (PVT) LTD vs WEDZERA PETROLEUM (PVT) LTD and ERIC NHODZA and TOBIAS MUPINGA and MUKAI MAHACHI Ruled By: CHIGUMBA J

HB23-11 : REGINA GUMBO vs COMPANY WHITE SPACE SALES (PVT) LTD and ALBERT TONHOMA and STANBIC BANK ZIMBABWE LIMITED Ruled By: KAMOCHA J

HH23-15 : FARISAI NANDO and RECSKILL INVESTMENTS (PVT) LTD vs PRIME INVESTMENTS (PVT) LTD Represented by Godwills Masimirembwa and SHERIFF FOR ZIMBABWE Ruled By: MAFUSIRE J

HH49-15 : AMEN SITHOLE vs RINNEX OIL (PVT) LTD Ruled By: ZHOU J

Appealed SC03-18 : CHRISTOPHER SAMBAZA vs AL SHAMS GLOBAL BVI LIMITED Ruled By: GARWE JA, MAVANGIRA JA and UCHENA JA

View Appeal HH373-16 : AL SHAMS GLOBAL BVI LIMITED vs CHRISTOPHER SAMBADZA Ruled By: TAGU J

HH564-15 : LAMECK KUFANDADA vs DAIRIBOARD ZIMBABWE LIMITED and JANAWAYS (PRIVATE) LIMITED and MICHAEL MUSAMIRAPAMWE Ruled By: MTSHIYA J

View Appeal HH412-17 : DOCKING STATION SAFARIS (PRIVATE) LIMITED vs YUNUS AHMED Ruled By: MUREMBA J

HB53-16 : RAILINGS ENTERPRISES (PVT) LTD T/A PAROAN TRUCKING vs DOWOOD SERVICES (PVT) LTD /T/A BRADFIELD MOTORS and DAVID LUWO and ROSE LUWO Ruled By: MATHONSI J

Appealed SC15-09 : MASIYIWA CLEOPAS GONYE vs STELLA MARIS GONYE Ruled By: SANDURA JA, ZIYAMBI JA and MALABA JA

View Appeal HH261-17 : NJZ RESOURCES (HK) LIMITED vs ANDREW ZINYEMBA AND 18 OTHERS Ruled By: MWAYERA J and MUNANGATI-MANONGWA J

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED Ruled By: MUZENDA J

View Appeal HB159-11 : HILDA SIBANDA vs TEEJAY SIBANDA Ruled By: NDOU J

HH551-15 : W AND D CONSULTANTS (PRIVATE) LIMITED vs SEAN THOMAS NIELSON DORAN Ruled By: DUBE J

HH75-10 : A.C. CONTROLS (PVT) LTD vs EMMANUEL MIDZI and ALPADETAIL (PVT) LTD t/a E AND Z ENTERPRISES P/L Ruled By: UCHENA J

HH84-12 : CHRISTOPHER BARNSLEY vs HARAMBE HOLDINGS (PVT) LTD AND ANOTHER Ruled By: MATHONSI J

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL Ruled By: PATEL JA, BHUNU JA and BERE JA

HH121-11 : DEPUTY SHERRIF HARARE (Applicant) vs TRINPAC INVESTMENTS (PVT) LTD (Claimant) and CHRISTOPHER BARNSLEY (Judgment Creditor) Ruled By: PATEL J

HH83-14 : RITENOTE PRINTERS (PVT) LTD and JOHN KANOKANGA vs A.ADAM & COMPANY (PVT) LTD and TARIK ADAM and MOOSA ADAM Ruled By: CHIGUMBA J

Appealed SC08-21 : WELLI-WELL (PVT) LTD vs MALVERN IMBAYAGO and THE SHERIFF OF ZIMBABWE Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE AJA

Appealed SC09-21 : ANDERSON MANJA and 98 OTHERS vs SHERIFF OF ZIMBABWE and GURTA MINING AG Ruled By: MAVANGIRA JA, UCHENA JA and MATHONSI JA

View Appeal HH351-20 : THE SHERIFF OF ZIMBABWE and GURTA AG vs ANDERSON MANJA and 98 OTHERS Ruled By: CHIKOWERO J

HB233-18 : THE SHERIFF OF ZIMBABWE vs SENITAL (PVT) LTD t/a FRANK B MINE and ZIMBABWE UNITED PASSENGER COMPANY LTD Ruled By: MAKONESE J

HH542-15 : THE SHERIFF OF THE HIGH COURT vs RONGXIN MINING (PRIVATE) LIMITED and FREDDY MAKUVISE Ruled By: MTSHIYA J

HB10-15 : INTRO-WISE CATERING (PVT) LTD vs COSIRA COMMUNICATIONS GLOBAL and COSIRA AFRICA (PTY) LIMITED and ZIMBABWE PLATINUM MINES (PVT) LTD Ruled By: MAKONESE J

SC65-21 : STARAFRICA CORPORATION LIMITED vs ZIMBABWE SUGAR REFINERY WORKERS UNION Ruled By: GWAUNZA DCJ, BHUNU JA and BERE JA

Appealed SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

View Appeal HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST Ruled By: ZHOU J

View Appeal SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD Ruled By: GARWE JA, GOWORA JA and UCHENA JA

SC07-17 : CHRIS STYLIANOU and FRED DRIVER AND SONS (PVT) LTD and D.R. HENDRY (PVT) LTD vs MOSES MUBITA AND 25 OTHERS Ruled By: GWAUNZA JA, GUVAVA JA and BHUNU JA

HHH229-19 : INTRATREK ZIMBABWE (PVT) LTD and WICKNELL CHIVAYO vs PROSECUTOR GENERAL OF ZIMBABWE and L. NCUBE N.O. Ruled By: TAGU J

HH231-10 : AGRICULTURAL BANK OF ZIMBABWE LTD t/a AGRIBANK vs NICKSTATE INVESTMENTS (PVT) LTD and RICHARD MAKWARA and PLAXEDES MAKWARA Ruled By: GOWORA J

Appealed SC92-22 : VALENTINE ZISWA and MARGARET ZISWA vs GRAEME CHADWICK and LANDOS FARM (PRIVATE) LIMITED Ruled By: UCHENA JA, MAKONI JA and KUDYA AJA

Appealed SC94-22 : ROBERT TINDWA vs THE SHERIFF FOR ZIMBABWE and INSTITUTE OF MINING RESEARCH Ruled By: HLATSHWAYO JA, BHUNU JA and MAKONI JA

View Appeal HH54-18 : THE SHERIFF FOR ZIMBABWE vs ROBERT TINDWA and INSTITUTE OF MINING RESEARCH Ruled By: CHITAKUNYE J

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Appealed
HH34-12 : CHRISTIANE KWEDZA (nee MARTIN) vs MUSA KWEDZA
Ruled By: CHITAKUNYE J

HB34-09 : NOKUKHANYA MOYO vs ROBERT MOYO
Ruled By: BERE J

HH68-10 : ALVIN CRISP vs STELLA MARY MASVIKENI
Ruled By: MUSAKWA J

HH373-13 : KEEFEX INVESTMENTS and ARENSON INVESTMENTS (PVT) LTD vs WEDZERA PETROLEUM (PVT) LTD and ERIC NHODZA and TOBIAS MUPINGA and MUKAI MAHACHI
Ruled By: CHIGUMBA J

HB23-11 : REGINA GUMBO vs COMPANY WHITE SPACE SALES (PVT) LTD and ALBERT TONHOMA and STANBIC BANK ZIMBABWE LIMITED
Ruled By: KAMOCHA J

HH23-15 : FARISAI NANDO and RECSKILL INVESTMENTS (PVT) LTD vs PRIME INVESTMENTS (PVT) LTD Represented by Godwills Masimirembwa and SHERIFF FOR ZIMBABWE
Ruled By: MAFUSIRE J

HH49-15 : AMEN SITHOLE vs RINNEX OIL (PVT) LTD
Ruled By: ZHOU J

Appealed
SC03-18 : CHRISTOPHER SAMBAZA vs AL SHAMS GLOBAL BVI LIMITED
Ruled By: GARWE JA, MAVANGIRA JA and UCHENA JA

View Appeal
HH373-16 : AL SHAMS GLOBAL BVI LIMITED vs CHRISTOPHER SAMBADZA
Ruled By: TAGU J

HH564-15 : LAMECK KUFANDADA vs DAIRIBOARD ZIMBABWE LIMITED and JANAWAYS (PRIVATE) LIMITED and MICHAEL MUSAMIRAPAMWE
Ruled By: MTSHIYA J

View Appeal
HH412-17 : DOCKING STATION SAFARIS (PRIVATE) LIMITED vs YUNUS AHMED
Ruled By: MUREMBA J

HB53-16 : RAILINGS ENTERPRISES (PVT) LTD T/A PAROAN TRUCKING vs DOWOOD SERVICES (PVT) LTD /T/A BRADFIELD MOTORS and DAVID LUWO and ROSE LUWO
Ruled By: MATHONSI J

Appealed
SC15-09 : MASIYIWA CLEOPAS GONYE vs STELLA MARIS GONYE
Ruled By: SANDURA JA, ZIYAMBI JA and MALABA JA

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HH261-17 : NJZ RESOURCES (HK) LIMITED vs ANDREW ZINYEMBA AND 18 OTHERS
Ruled By: MWAYERA J and MUNANGATI-MANONGWA J

HH352-18 : N.R BARBER (PRIVATE) LIMITED vs ZAMBEZI GAS ZIMBABWE (PRIVATE) LIMITED
Ruled By: MUZENDA J

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HB159-11 : HILDA SIBANDA vs TEEJAY SIBANDA
Ruled By: NDOU J

HH551-15 : W AND D CONSULTANTS (PRIVATE) LIMITED vs SEAN THOMAS NIELSON DORAN
Ruled By: DUBE J

HH75-10 : A.C. CONTROLS (PVT) LTD vs EMMANUEL MIDZI and ALPADETAIL (PVT) LTD t/a E AND Z ENTERPRISES P/L
Ruled By: UCHENA J

HH84-12 : CHRISTOPHER BARNSLEY vs HARAMBE HOLDINGS (PVT) LTD AND ANOTHER
Ruled By: MATHONSI J

SC02-21 : EDDIES PFUGARI (PVT) LTD and EDWARD NYANYIWA vs KNOWE RESIDENTS AND RATEPAYERS ASSOCIATION and NORTON TOWN COUNCIL
Ruled By: PATEL JA, BHUNU JA and BERE JA

HH121-11 : DEPUTY SHERRIF HARARE (Applicant) vs TRINPAC INVESTMENTS (PVT) LTD (Claimant) and CHRISTOPHER BARNSLEY (Judgment Creditor)
Ruled By: PATEL J

HH83-14 : RITENOTE PRINTERS (PVT) LTD and JOHN KANOKANGA vs A.ADAM & COMPANY (PVT) LTD and TARIK ADAM and MOOSA ADAM
Ruled By: CHIGUMBA J

Appealed
SC08-21 : WELLI-WELL (PVT) LTD vs MALVERN IMBAYAGO and THE SHERIFF OF ZIMBABWE
Ruled By: BHUNU JA, MATHONSI JA and CHITAKUNYE AJA

Appealed
SC09-21 : ANDERSON MANJA and 98 OTHERS vs SHERIFF OF ZIMBABWE and GURTA MINING AG
Ruled By: MAVANGIRA JA, UCHENA JA and MATHONSI JA

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HH351-20 : THE SHERIFF OF ZIMBABWE and GURTA AG vs ANDERSON MANJA and 98 OTHERS
Ruled By: CHIKOWERO J

HB233-18 : THE SHERIFF OF ZIMBABWE vs SENITAL (PVT) LTD t/a FRANK B MINE and ZIMBABWE UNITED PASSENGER COMPANY LTD
Ruled By: MAKONESE J

HH542-15 : THE SHERIFF OF THE HIGH COURT vs RONGXIN MINING (PRIVATE) LIMITED and FREDDY MAKUVISE
Ruled By: MTSHIYA J

HB10-15 : INTRO-WISE CATERING (PVT) LTD vs COSIRA COMMUNICATIONS GLOBAL and COSIRA AFRICA (PTY) LIMITED and ZIMBABWE PLATINUM MINES (PVT) LTD
Ruled By: MAKONESE J

SC65-21 : STARAFRICA CORPORATION LIMITED vs ZIMBABWE SUGAR REFINERY WORKERS UNION
Ruled By: GWAUNZA DCJ, BHUNU JA and BERE JA

Appealed
SC97-21 : THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST vs NMB BANK LTD
Ruled By: HLATSHWAYO JA, PATEL JA and MAVANGIRA JA

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HH466-18 : NMB BANK LTD vs THE TRUSTEES FOR THE TIME BEING OF CORNERSTONE TRUST and JULIUS MAKONI and THE TRUSTEES FOR THE TIME BEING OF RYVONNE TRUST
Ruled By: ZHOU J

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SC130-21 : PHILIPPA COUMBIS vs RONALD COUMBIS and DOVES FUNERAL ASSURANCE (PVT) LTD
Ruled By: GARWE JA, GOWORA JA and UCHENA JA

SC07-17 : CHRIS STYLIANOU and FRED DRIVER AND SONS (PVT) LTD and D.R. HENDRY (PVT) LTD vs MOSES MUBITA AND 25 OTHERS
Ruled By: GWAUNZA JA, GUVAVA JA and BHUNU JA

HHH229-19 : INTRATREK ZIMBABWE (PVT) LTD and WICKNELL CHIVAYO vs PROSECUTOR GENERAL OF ZIMBABWE and L. NCUBE N.O.
Ruled By: TAGU J

HH231-10 : AGRICULTURAL BANK OF ZIMBABWE LTD t/a AGRIBANK vs NICKSTATE INVESTMENTS (PVT) LTD and RICHARD MAKWARA and PLAXEDES MAKWARA
Ruled By: GOWORA J

Appealed
SC92-22 : VALENTINE ZISWA and MARGARET ZISWA vs GRAEME CHADWICK and LANDOS FARM (PRIVATE) LIMITED
Ruled By: UCHENA JA, MAKONI JA and KUDYA AJA

Appealed
SC94-22 : ROBERT TINDWA vs THE SHERIFF FOR ZIMBABWE and INSTITUTE OF MINING RESEARCH
Ruled By: HLATSHWAYO JA, BHUNU JA and MAKONI JA

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HH54-18 : THE SHERIFF FOR ZIMBABWE vs ROBERT TINDWA and INSTITUTE OF MINING RESEARCH
Ruled By: CHITAKUNYE J