MATHONSI
JA:
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
2000 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 interpleader 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
LAW
It
is settled that a party claiming ownership of a property placed under
judicial attachment in interpleader proceedings must produce clear
and satisfactory evidence to prove such ownership. Such a party bears
the onus
to prove ownership on a balance of probabilities. See Sabarauta
v Local Government Pension Fund & Anor
SC77/17.
I
should add however that in situations where the goods are attached in
the possession of the claimant, there is a presumption that they
belong to the claimant. In those circumstances, the execution
creditor has the onus
to prove otherwise.
It
is probably for that reason that in this case, having clearly failed
to adduce direct evidence of ownership of the movable goods, the
appellant deployed all its energies at trying to prove ownership of
the venue of the attachment.
Unfortunately,
this may not have been a useful investment of time and energy.
Apart
from the fact that ownership of land does not equate to possession of
the movable items on the land, the appellant did not even begin to
prove ownership even of the land.
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]
A.C 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.
APPLICATION
OF THE LAW
Before
the court a
quo
the appellant did not submit any tangible evidence of ownership of
the listed items placed under attachment. It was content to try and
make a case merely out of a claim for ownership of the stand where
the property was found by the sheriff.
I
mention in passing that ownership of the land was not the issue
before the court a
quo.
Ownership of the movable property placed under judicial attachment
was.
I
have said that by seeking to prove ownership of the land on which the
movable property was attached the appellant hoped to stand on
possession of the disputed property in order to shift the onus
onto the first respondent.
If
the appellant was in possession, then the first respondent, as
judgment creditor, would have to prove that despite such possession,
the property belonged to the judgment debtor and was therefore
executable.
The
court a
quo
made a factual finding that the appellant was not in possession of
the property when it was placed under attachment.
In
the court a
quo's
view, the agreement of sale between the appellant and the judgment
debtor, upon which the appellant claimed ownership, was a clumsy
fabrication.
As
I have already pointed out, the court a
quo
took the view that there existed no explanation why the judgment
debtor would have consented to a court order on 21 August 2017
involving the stand in question, if it had alienated it more than a
year earlier.
In
addition to that, the court a
quo
also made a factual finding that at the time of the grant of the
consent order, the judgment debtor had been in possession of the
stand and not the appellant as it claimed.
It
accordingly found that the appellant's testimony was untruthful.
It
is trite that an appellate court may only interfere with the factual
findings of a lower court on the ground of gross unreasonableness.
See Chioza
v Siziba
SC16/11.
No
gross unreasonableness in the findings of the court a
quo
has been alleged or established. Quite to the contrary, there is an
existing order of the High Court showing that as at 21 August 2017,
the judgment debtor was in occupation of the premises. In that regard
the court a
quo
was standing on firm ground when it concluded that the appellant's
story that it had moved into the premises in 2016 was unbelievable.
It
cannot be faulted at all.
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 Mr Diza
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) at 467.
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 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.
The
appeal is without merit.
Regarding
the issue of costs, there is no way the appellant can avoid meeting
the costs having prosecuted an appeal devoid of merit. The costs
should follow the cause.
In
the result, it is ordered as follows:
The
appeal be and is hereby dismissed with costs.
BHUNU
JA: I
agree
CHITAKUNYE
AJA: I
agree
Mhishi
Nkomo Legal Practice,
appellant's legal practitioners
V.
Nyemba Associates,
2nd
respondent's legal practitioners
