GWAUNZA JA
[1] This is an appeal against the
judgment of the High Court which dismissed the appellant's appeal
against a decision of the Magistrates` Court. The latter judgment had
dismissed the appellant`s interpleader claim to goods attached by the
nineteenth respondent on the instructions of the first to seventeenth
respondents. The goods were in the possession of the eighteenth
respondent.
FACTUAL BACKGROUND
[2] The appellant, NJZ Resources
(HK) Limited, is a company incorporated according to the laws of Hong
Kong. It is the subsidiary of a company called NJZ Group Holdings
(Private) Limited ('NJZ Group'), which is duly registered in
Singapore. The eighteenth respondent, Mine Mills Trading (Private)
Limited ('Mine Mills'), is a company duly registered in Zimbabwe.
The appellant avers that it was instrumental in the formation of Mine
Mills, a company in which the NJZ Group holds 49 percent of the
shareholding.
Among others, the three companies
have two mutual directors, Michael Lai and Johannes Thormahlen.
Mine Mills was the judgment
debtor in the Magistrates Court while the first to seventeenth
respondents, who were its former employees, were the judgment
creditors. They won an arbitral award against Mine Mills for payment
of outstanding wages and salaries on the 20 May 2014.
The nineteenth respondent is the
Messenger of Court, Gweru who is cited in his official capacity.
[3] The facts of this case can be
summarised as follows:
Sometime in 2010 the appellant
and Mine Mills entered into what they termed an 'Equipment Sales
Contract' in terms of which the appellant sourced and Mine Mills
bought from it, certain machinery and other equipment.
Clause 2 of the contract reads as
follows in part:
“Title and ownership of all
imported equipment and any locally purchased equipment and assets
including vehicles from loan/cash advances made by the seller to the
buyer shall remain the property of NJZ Resources (HK) Limited until
paid for IN FULL.”
It is not in dispute that Mine
Mills breached the agreement by failing to pay the relevant purchase
price. This prompted the appellant to file an application in the High
Court under case number HC2111/13, seeking repossession of the
property.
Before this matter was
determined, the appellant filed an urgent chamber application for a
provisional order seeking return of the property pending the
determination of HC2111/13. The High Court per BHUNU J (as he then
was) found that it could safely be inferred from the evidence that
the applicant had established that it was the owner of the property.
He granted the provisional order on 9 October 2013.
[4] Aggrieved by that decision,
Mine Mills unsuccessfully appealed to this Court against BHUNU JA's
provisional order. Thereafter, the directors of Mine Mills signed
company resolutions to return the property to the appellant,
resulting in the appellant withdrawing the main application under
HC2111/13. The resolutions were signed from 13 May 2014 to 25 May
2014.
During this period the judgment
creditors won the arbitral award against Mine Mills. By the time the
judgment creditors sought to enforce the award, some of the property
had already been handed back to the appellant. The rest of the
property is what was then attached by the Messenger of Court, leading
to the interpleader proceedings being instituted by the appellant.
[5] The Magistrates` Court
dismissed the appellant`s claim on the basis that its assertion of
ownership over the seized property was designed to defeat the
judgment creditors` claim. The magistrate was of the view that the
appellant and Mine Mills, being both subsidiaries of the NJZ Group
and run by the same people, would obviously protect the interests of
the two companies through all means possible.
The appellant unsuccessfully
noted an appeal to the High Court against the decision of the
Magistrates` Court. The High Court found that manifest injustice
would have been visited upon the judgment creditors had the
Magistrates` Court not traversed the intricate relationship between
the appellant, the holding company NJZ Group and Mine Mills. This was
particularly so, given the conduct of two mutual directors of the
three companies. Notwithstanding that NJZ Group was not cited in
these proceedings, the court expressed the view that the holding
company, owning as it did 49 percent of Mine Mills, had an obligation
to honour liabilities incurred by Mine Mills to the extent of its
shareholding. The court a quo also upheld the magistrate's finding
that the conduct of the mutual directors exposed the appellant`s
claim as an act of connivance aimed at frustrating enforcement of the
judgment creditors' award. This is evident from the following
concluding remarks to its judgment:
“It is this conduct, where
Michael Lai signed the original agreement (where the assets are the
subject matter) in his capacity as buyer representing the judgment
creditor (sic) in a transaction where his company (the appellant) was
the seller, that makes the whole claim wreak (sic) of connivance.
Upholding the claim would have resulted in manifest injustice as the
behaviour of the directors clearly and largely defied the whole
essence of the sanctity of the companies' separate legal
personality. There was thus no misdirection by the court a quo on
this point.”
ISSUES FOR DETERMINATION
[6] The appellant was aggrieved
by the decision of the High Court and noted this appeal on grounds
that raised two main issues for determination, namely:
(i) whether or not the appellant
proved, on a balance of probabilities, that the property at the
centre of the dispute was owned by it; and
(ii) whether the property in
question, if proved to belong to the appellant, was nevertheless
executable on the basis that the NJZ Group, which owned 49 percent
shareholding in Mine Mills, was the holding company of both parties.
These issues will be dealt with
separately.
WHETHER OR NOT THE APPELLANT
PROVED ON A BALANCE OF PROBABILITIES THAT THE PROPERTY AT THE CENTRE
OF THE DISPUTE WAS OWNED BY IT
[7] A determination of this
issue in the positive would entitle the claimant, that is the
appellant, to the relief that it sought in its interpleader claim.
A perusal of the judgment a quo,
however, shows that neither the court a quo, nor for that matter, the
Magistrates' Court, pronounced a definite finding on the issue of
ownership of the property. The Magistrate's Court, while finding
that the appellant and Mine Mills could not be said to have been
incorporated with 'deceptive intent' despite the suspicious
conduct of their mutual directors, concluded as follows:
“On the above facts, it seems
that the claimant's assertion of ownership over the seized property
is merely designed to defeat the judgment creditor's claim which
claim is undeniably a just cause. In the result, the claimant's
prayer cannot be sustained…”
These words make it clear that
the claim by the appellant to ownership of the attached property was
a live issue between the parties a quo and therefore properly before
the court. Indeed, ownership of attached property is at the core of
any interpleader proceedings. The point is succinctly stated thus in
the case of Ackerman v Kritzinger and Others 1974 (4) SA 666 whose
facts are similar to those in casu:
“As I have indicated, the
crucial issue in this case is: who is the rightful owner of the goods
under attachment, namely JAK (claimant) and JHK (judgment debtor).”
[8] The magistrate in casu
however, and at the expense of an explicit finding on whether the
claim had substance, or been proved on a balance of probabilities,
chose to pronounce himself on what he perceived to have been the
motive behind the filing of such a claim.
Be that as it may, I am satisfied
that the court a quo was correct in its statement found at page 5 of
the judgment, that the Magistrates' Court's 'stance' was
simply that the attached assets had not been proved to belong to the
appellant. The perceived ulterior motive on the part of the
appellant, could therefore only have been informed by the fact that
the magistrate was not persuaded there was any merit in the
appellant's claim to ownership of the property in question.
[9] It is not in dispute that
when the property was attached, it was in the possession of Mine
Mills, the judgment debtor. In this respect, DE VILLERS CJ in the
case of Zandberg v Van Zyle 1910 AD at 302 had the following to say:
“The principle however
underlying the decision in that case appears to me quite in accord
with our law, namely that possession of a movable raises a
presumption of ownership and that therefore a claimant in an
interpleader suit claiming the ownership on the ground that he has
bought such movable (property) from a person whom he has allowed to
retain possession of it must rebut that presumption by clear and
satisfactory evidence.” (my emphasis)
On the basis of this authority,
the onus was on the appellant, as claimant, to prove that it owned
the goods that were attached so as to rebut the presumption of
ownership that arose from the fact that the property was in the
possession of Mine Mills.
Ownership had to be proved by
clear and satisfactory evidence.
In the case of Bruce N.O. v
Josiah Parkes & Sons (Rhodesia) Limited & Another (supra)
which was cited with approval by MAVANGIRA JA in Joyce Muzanenhamo v
Fishtown Investments (Pvt) Ltd & 3 Others SC 8/17, the court
opined as follows:
“In proceedings of this nature
the claimant must set out facts and allegations which constitute
proof of ownership. The claimant must prove on a balance of
probabilities that the property is his or hers.”
[10] The first inquiry in this
appeal therefore is whether the appellant proved, through evidence
that is clear and satisfactory, that it was the owner of the property
in question.
Implicit in this is the fact that
only the property that rightfully belongs to the judgment debtor, may
be sold in execution of a judgment against it. It follows therefore
that a finding in favour of the claimant on the issue of ownership of
the goods in question, would settle the matter. This is because by
nature, interpleader claims are determinable only on the narrow issue
of whether ownership of the attached goods has been proved in favour
of or against the claimant. It therefore in my view falls to reason,
that once the property is proved to belong to the claimant, no other
basis should be sought for an order declaring the same property to be
executable. An order of that nature would clearly make nonsense of
the whole essence of interpleader claims. It would also unfairly
deprive the claimant of its property, which would be sold in
execution of a judgment that is against the judgment debtor and not
the claimant itself.
[11] In view of the foregoing, a
consideration of the evidence that the appellant put before the court
to support its claim to ownership of the property in question, is
apposite.
THE EQUIPMENT SALE CONTRACT
The first to seventeenth
respondents denounce this contract, dated 18 March 2010 as being
illegal. Their heads of argument before this court, which are quite
brief and cover just one and half pages, do not elaborate on the
basis for their assertion that the contract concerned was a sham. In
the court a quo, the following was stated in their heads of argument:
“In view of the above
quotation, NJZ Resources was carrying (sic) business through and by
the name of eighteenth respondent. The equipment sale was a device, a
subterfuge in order to mask the loss which the eighteenth respondent
would possibly incur … .”
The first to seventeenth
respondents were not privy to the contract signed between the
appellant and Mine Mills. They could therefore not dispute, for
instance, that the agreement was signed in 2010, several years before
the dispute between the two principals over the property, arose in
2013. The prohibitory interdict of BHUNU J (as he then was) was
handed down on 9 October 2013, and on 22 July 2014, the main matter
in the dispute, HC2111/13, was withdrawn. This was after the parties
agreed that the property was indeed owned by the appellant and was to
be returned to it. Part of the property, according to the appellant,
was duly returned but before the rest could follow, it was attached
by the Messenger of Court at the instance of the first to seventeenth
respondents.
Against this background, the
assertion by the first to seventeenth respondents that the Equipment
Sales Contract was a 'device' to mask any loss suffered by Mine
Mills is difficult to understand. If any loss was to be 'masked',
it clearly in my view could not have been one relating to the wages
and salaries of the first to seventeenth respondents.
That 'loss' accrued several
years later and could clearly not have been anticipated by the
parties at the time of signing. I find that this assertion lacks
substance and certainly does not disprove ownership of the property
in question by the appellant.
[12] The other argument advanced
in the court a quo by the first to seventeenth respondents was that
the property in question belonged to Mine Mills because it had always
been kept within the premises of, and used by, that company.
While these respondents may
denounce the contract in question as a sham, one does not hear them
to dispute that the appellant was the one that at its own expense,
sourced the equipment in question and passed it on to Mine Mills.
Since the equipment, according to the contract, was to be delivered
directly to Mine Mills, the first to seventeenth respondents are
correct in their statement that the property had 'always' been in
the possession of Mine Mills.
It is however trite that
possession of a thing does not always denote ownership thereof by the
possessor. It only raises a rebuttable presumption of ownership in
his favour.
It is worthy of note that the
Equipment Sales Contract clearly spelt out that ownership of the
property remained with the appellant until such time as it was fully
paid for by Mine Mills. The first to seventeenth respondents do not
contend, and indeed cannot, that Mine Mills duly paid for the
property. That being the case, the appellant by tendering into
evidence the contract in question, whose validity and import have not
been disproved, can in my view be said to have successfully rebutted
the presumption of ownership by Mine Mills of the property that was
in its possession.
There simply was no evidence
placed before the court, to support a finding that Mine Mills had
fully paid for and therefore acquired ownership of the property in
question. The appellant in reality never relinquished ownership
thereof.
[13] THE
PROVISIONAL ORDER
The appellant also relied on the
provisional order of BHUNU J (as he then was), to support its
argument that the question of its ownership of the property in
question had already been determined by the High Court.
I have noted above that the
appellant took Mine Mills to court in 2013, claiming repossession of
the property which was subject of the contract between them. Before
the matter could be heard, the appellant successfully sought an
interim order to take possession of the property pending the hearing
of the main matter. In his judgment, BHUNU J (as he then was)
described the appellant's claim as one falling into the class of
interdicts called anti-dissipation interdicts 'which translated
into a prohibitory interdict.' The judge found as follows:
“Considering that it is not in
dispute that the applicant sourced the property and handed it over to
the first respondent and it has not been paid anything, it can safely
be inferred that the applicant has established that it is the owner
of the property though the validity of the contract of sale is
subject to debate.” (my emphasis)
[14] Although Mine Mills had
initially opposed the appellant's claim for ownership and return of
the property, its shareholders, Kevin Makoni and Charles Chisango,
later signed resolutions acknowledging that Mine Mills breached the
contract and agreeing to return the property to the appellant. These
are the two men whom the appellant avers had taken over the running
of Mine mills' local operations. The resolutions specifically
contemplated the consequent withdrawal by the appellant, of the suit
against Mine Mills.
Even though the judgment of BHUNU
J (as he then was) did not specifically conclude that the appellant
was indeed the owner of the property, I find its import to be
persuasive in casu. This is because subsequent to this order the
parties found each other in relation to the main dispute between
them. They not only agreed in resolutions that are on record that the
disputed property, not having been paid for, be returned to the
appellant, they also started to implement the agreement. The process
was only interrupted when the rest of the property was then attached
by the Messenger of Court at the instance of the first to seventeenth
respondents.
[15] I am satisfied that the
resolutions passed and signed by the directors of Mine Mills amounted
to a clear concession by Mine Mills that the appellant was the owner
of the property in question. Mine Mills by that token, effectively
renounced all claims to ownership thereof and in the process answered
the crucial question pertinent to proceedings of this nature, which
is, “Who was the rightful owner of the attached property, the
claimant, or the judgment debtor?”
The first to seventeenth
respondents did not place before the court evidence that would have
elicited an answer to this question, in favour of Mine Mills.
[16] It is also significant that
the resolutions referred to duly led to the withdrawal of the main
action in HC2111/13.
I am satisfied that this
circumstance resulted in a final resolution, by settlement, of the
dispute as to who owned the property in question. It is not to be
ignored that the issue in the main application in HC2111/13, in the
case before BHUNU J (as he then was) and in casu, has consistently
been the same. Did the property in dispute belong to the appellant,
or to Mine Mills? I therefore find to be without foundation, the
court a quo's conclusion that the issue of the appellant's
ownership of the property was at law still undetermined. I find
further that the appellant successfully discharged the onus that it
bore, to prove, on a preponderance of probabilities, that it was the
owner of the property in question. This should have settled the
matter.
The court a quo accordingly erred
in neither making this finding nor consequently, allowing the
appellant's appeal.
[17] That said, I find that one
other matter merits comment. This was the court a quo's misplaced
preoccupation with issues concerning the perceived connivance between
the appellant and Mine Mills to frustrate enforcement of the award in
favour of the judgment creditors.
Instead of properly limiting
themselves to the inquiry as to whether the appellant had placed
before the court clear evidence that it was the owner of the disputed
property, both the magistrate and the judge a quo delved into issues
that at law were not relevant to a determination of the matter before
them.
The court a quo found no
misdirection on the part of the Magistrates' Court in its finding
that the appellant's claim to ownership of the disputed property
was designed merely to frustrate the first to seventeenth respondents
attempt to execute on the award made in their favour. In this finding
the Magistrates' Court implicated Mine Mills as the appellant's
co-conspirator. The court a quo went on to uphold these findings as
well as the determination premised on them, and dismissed the
appellant's claim.
In my view, these findings
postulated a wrong principle for the determination of an interpleader
claim.
As already pointed out, an
interpleader claim is not determined on the basis of some perceived
conspiracy to frustrate the judgment creditor's claim. It is
determinable on the basis of whether or not the claimant has put
before the court clear evidence to support its claim to ownership of
the disputed property. Thus, no amount of connivance especially of
the nature alleged, between the appellant and Mine Mills could have
negated the reality that the former was the proven owner of the
property in question.
[18] Further to the foregoing,
nothing turned on the fact that Michael Lai who was a director of
both the appellant and Mine Mills, signed the resolution to return
the property in question to the appellant. This did not detract from
the fact that the appellant was the owner of the property.
It is pertinent to note in this
respect that in addition to Lai, Mine Mills' two other
shareholders, Kevin Makoni and Charles Chisango signed the
resolutions on the company's behalf. It may in casu have been ill
advised given the adverse impression that such an action created, for
the mutual and to an extent conflicted directors of the appellant and
Mine Mills, to have signed the resolutions referred to. This however
did not per se have the effect of disproving ownership of the
disputed property by the appellant. Nor conversely, did it mean that
the property belonged to Mine Mills.
I find therefore that the court a
quo erred in relying for its decision, less on whether or not
ownership of the disputed property had been proved, and more on
speculative factors not relevant to a determination of the matter
before it.
WHETHER THE PROPERTY IN
QUESTION, HAVING BEEN PROVED TO BELONG TO THE APPELLANT, WAS
NEVERTHELESS EXECUTABLE ON THE BASIS THAT THE NJZ GROUP, WHICH OWNED
49 PERCENT SHAREHOLDING IN MINE MILLS, WAS THE HOLDING COMPANY OF
BOTH PARTIES
[19] The point has already been
made that in interpleader proceedings, the issue to be determined is
who between the claimant and the judgment debtor owns the property
that has been attached. The court's determination on that issue
settles the matter.
Considerations that go beyond
this determination to provide a basis for nevertheless declaring the
property concerned executable, clearly go beyond the scope of the
dispute and are not legally sustainable.
The court a quo took the view
that the appellant's holding company, the NJZ Group, which owned 49
percent of Mine Mills, had an obligation to honour 'the liabilities
in Mine Mills' to the extent of its shareholding.' This
circumstance, so the reasoning goes, justified the attachment and
sale of the property in question. The court also took a dim view of
the conduct of the mutual directors of the appellant, the NJZ Group
and Mine Mills, as outlined above, and stated that such conduct
'clearly and largely defied the whole essence of the sanctity of
the companies' separate legal personalities'. Based on this view,
the perceived connivance between the appellant and Mine Mills through
their mutual directors and the perceived resultant 'injustice' to
the judgment creditors, the court dismissed the appellant's appeal.
This partly premised the decision
on a wrong principle and rendered the property in question
executable, a circumstance that I have already indicated was legally
unsustainable in interpleader claims.
[20] It hardly merits mention
that, while the appellant and Mine Mills were connected to each other
through common directors and through the holding company NJZ Group,
the three companies were separately incorporated and had separate
legal personae.
The first to seventeenth
respondents properly sued only Mine Mills, their former employer, for
outstanding wages and salaries and the award was properly ordered
against Mine Mills.
A holding company and its
subsidiaries, by virtue of being separate legal entities have rights
and liabilities of their own. This is notwithstanding the fact that
they may share common directors who may have had ulterior motives in
incorporating the companies in the manner that they did. The case of
Salomon v Salomon and Co. Ltd [1897] AC 22 (HL) put this view beyond
any doubt, as the following excerpt indicates:
“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 … . A company
has legal existence with rights and liabilities of its own.” (my
emphasis)
[21] This however, is not to say
that the relationship between a judgment debtor and the claimant is
not a pertinent consideration in interpleader proceedings. This is so
because the nature of such a relationship may be exploited by some
unscrupulous parties in a conspiracy to frustrate the judgment
creditor in his attempt to execute the judgment in his favour. The
relationship between the appellant and Mine Mills has been set out
above. However, while the intricate relationship between the
appellant, the NJZ Group and Mine Mills including their mutual
directors, might look suspicious, it did not negate the independent
and separate nature of their respective legal personae, not only from
each other, but from their mutual directors as well. The companies
shared neither obligations nor liabilities. They owned property
separately. Thus the property of one company cannot be declared
executable in order to meet the obligations of the other company
which happens to be the judgment debtor in interpleader proceedings.
In any case the appellant's
property cannot be declared executable in circumstances where it was
not a party to the legal proceedings.
[22] A company's separate
personality is not one that the courts may lightly interfere with as
the following text from the case of Cape Pacific Ltd v Lubner
Controlling Investments (Pvt) Ltd and Ors 1995 (4) SA 790 AD at
803-804 illustrates;
“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.”
To the extent that the court a
quo premised its decision on considerations that went beyond the
question of whether or not ownership of the property in question was
proved to be the appellant's, it clearly misdirected itself. Such a
decision cannot stand.
DISPOSITION
[23] There is little doubt that
the appellant discharged the burden of proving, on a balance of
probabilities, that it was the rightful owner of the disputed
property. On this basis, it is entitled to success in respect of its
interpleader claim. I find therefore that the appeal has merit and
ought to succeed. It is in the result ordered as follows:
1. The appeal succeeds with
costs.
2. The judgment of the court a
quo be and is hereby set aside and substituted with the following:
“(i) The appeal be and is hereby allowed with costs;
(ii) The judgment of the
Magistrates' Court be and is hereby set aside and substituted with
the following:
“(a) The claimant`s claim to
ownership over the attached property be and is hereby granted.
(b) The property attached by the
Messenger of Court be and is hereby released to the claimant.”
MAKARAU JA: I agree
BHUNU JA: I agree
Muvirimi Law Chambers, appellant`s legal practitioner.
Mhaka & Associates, 1st – 17th respondents` legal
practitioners.
