REPORTABLE (18)

Judgment No. SC 10/06

Civil Appeal No. 293/05

(1) TAPSON MADZIVIRE (2) PHINIAS NGARAVA (3) JOSEPH MUBWANDARIKWA (4) CRUSH SECURITY (PRIVATE) LIMITED v

(1) MISHECK BRIAN ZVARIVADZA (2) COBRA SECURITY (PRIVATE) LIMITED (3) THE REGISTRAR OF COMPANIES

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, SANDURA JA & CHEDA JA

HARARE, JANUARY 17 & JUNE 27, 2006

H Zhou, for the appellants

H Simpson, for the respondents

CHEDA JA: The first, second and third appellants are directors of the fourth appellant. The first respondent is also a director of the fourth appellant. The first appellant is the managing director of the fourth appellant.

Sometime in March 2004 the first appellant discovered that there were documents filed in the office of the third respondent which related to the fourth appellant. According to him, these documents were forged. The documents were allotment forms for shares to persons who were not allocated shares in the fourth appellant, and minutes of meetings which had never taken place.

The first appellant proceeded to make an application to the High Court asking for the following order:

“1. The Return of Allotments form No. CR 2 filed of record with the Registrar of Companies (the third respondent) on 28 February 2003 and date-stamped on 13 March 2003 be and is hereby declared null and void ab initio.

2. The third respondent be and is hereby ordered to cancel the Return of Allotments form No. Cr 2 (referred to in paragraph 1 above).

3. The forms of Annual Returns for 2000, 2001, 2002, 2003 and form CR 6 be and are hereby declared null and void ab initio.

4. The third respondent be and is hereby ordered to cancel the said forms of Annual Returns for 2000, 2001, 2002, 2003 and form CR 6.

5. In the event that the third respondent fails to act in accordance with the terms of paragraphs 2 and 4 of this order, the Deputy Sheriff be and is hereby directed to cancel all documents/forms mentioned in this order.

6. The first, second and third applicants be allowed/authorised to regularise the fourth applicant’s papers/documents/forms to be properly filed of record with the third respondent as required by the Companies Act.

7. The first and second respondents be and are hereby ordered to (the one paying the other to be absolved) pay the costs on Attorney-client scale.”

The High Court dismissed this application.

However, it was established at the hearing in the High Court that the documents had in fact been forged, but the first respondent denied that he was the one who had forged the documents.

On appeal the appellants have submitted the following as their main arguments:

“1. There was only one issue which the court a quo was being called upon to determine in the light of the evidence placed before it, which was whether the impugned documents must be expunged from the record of the fourth appellant kept by the Registrar of Companies.

2. The question of the locus standi of the appellants or the authority of the fourth appellant to institute the application did not arise from the papers.”

While it is correct that the issue of the locus standi of the appellants or the authority of the fourth appellant was not raised in the papers, there is no indication at all that authority was granted to the first appellant by the fourth appellant to institute proceedings on its behalf.

In his affidavit, the first appellant says he was making the founding affidavit on his own behalf and on behalf of the fourth appellant, as well as on behalf of the second and third appellants. These last two appellants have filed affidavits to confirm this, but there is nothing to that effect from the fourth appellant.

Section 9 of the Companies Act [Chapter 24:03] reads as follows:

“A company shall have the capacity and powers of a natural person of full capacity in so far as a body corporate is capable of exercising such powers.”

It is clear from the above that a company, being a separate legal person from its directors, cannot be represented in a legal suit by a person who has not been authorised to do so. This is a well established legal principle, which the courts cannot ignore. It does not depend on the pleadings by either party.

The fact that the first appellant is the managing director of the fourth appellant does not clothe him with the authority to sue on behalf of the company in the absence of any resolution authorising him to do so.

In Burnstein v Yale 1958 (1) SA 768, it was held that the general rule is that directors of a company can only act validly when assembled at a board meeting.

There is no evidence that there was any service of a notice of a meeting to pass the required resolution authorising the first appellant to represent the fourth appellant. Even if the first, second and third appellants had agreed on the action, there is no indication that the first respondent, who is one of the directors, was served with a notice of a meeting of directors to pass the resolution of authority. Both the fourth appellant and the first respondent are entitled to be served with a notice of meeting so that a resolution be passed authorising the first appellant to represent the fourth appellant. This was not done, and failure to do so renders the decision to represent the fourth appellant invalid.

An exception where a meeting of directors and a resolution would not be required is where a company has only one director who can perform all judicial acts without holding a full meeting. See African Diamond Distributors (Pvt) Ltd v Van de Wetheuzen N.O. and Ors 1988 (4) SA 726.

Having said that, I should add that even if the appellants could have sought an order in their own right, such an order would not be proper if the order would have the effect of interfering with the records of the fourth appellant when it had not been served.

The above reasons support the conclusion that the court a quo arrived at, and I find no misdirection in its refusal to grant the application.

However, it is clear that the appellants have a genuine case that needs to be resolved, because the fact that the entries in the company’s records are false is not disputed by the respondents.

For that reason, closing the door by dismissing the application is not the appropriate resolution of the matter.

I therefore make the following order –

“1. The appeal is dismissed.

2. The order of the court a quo dismissing the application is set aside.

3. The respondents are granted leave to file a resolution duly passed by the fourth respondent’s board of directors, authorising the institution of legal proceedings against the respondents.

4. The matter is remitted to the court a quo (before the same or a different judge) to determine it on the merits after the resolution in paragraph 2 of this order has been filed.

5. The costs of this appeal shall be borne by the first, second and third appellants jointly and severally, the one paying the others to be absolved.”

CHIDYAUSIKU CJ: I agree.

SANDURA JA: I agree.

Mhiribidi, Ngarava & Moyo, appellants' legal practitioners

Mushonga & Associates, respondents' legal practitioners