1
HH 396/15
HC 4138/14
REF CASE NO. HC 9833/13
THE SHERIFF OF THE HIGH COURT (applicant)
versus
AFRICAN INSTITUTE OF BIOMEDICAL & SCIENCE
TECHNOLOGY (claimant)
and
LAZARUS CHIROMBE (judgment creditor)
HIGH COURT OF ZIMBABWE
MUREMBA J
HARARE, 22 January 2015 and 22 April 2015
Opposed Mater – Interpleader Proceedings
I.S. Bhebhe, for the applicant
O.D. Mawadze, for the claimant
S.M. Nyathi, for the judgment creditor
MUREMBA J: Lazarus Chirombe who is the judgment creditor obtained an arbitral award against his employer The Collen Masimirembwa Foundation. He had the arbitral award registered as a judgment of this court on 24 January 2014.
On 5 May 2014 a writ of execution against movable property was issued out of this court. On 7 May 2014 the applicant, the Sheriff of the High Court proceeded to No. 211 Herbet Chitepo Avenue, Harare and attached the following property:-
Qiagen bio Robot 8 000;
Honda Mindong generator;
2 Sano Incubators;
Vacueccenter (Salvis Lab);
2 Centrifugs;
2 Hydrogen tanks
The claimant, the African Institute of Biomedical Science and Technology (hereafter called AIBST) claims that the property is its property.
In the affidavit deposed to by Zvikomborero Mutibiri who is the finance officer of the claimant on 8 May 2014 it is stated that the claimant’s place of business is No. 211 Herbert
Chitepo Avenue Harare. Zvikomborero Matibiri further stated that the Collen Masimirembwa Foundation (judgment debtor) is not housed at all under AIBST.
He said that the judgment debtor and the claimant are two different persons at law. He said that he told the applicant when he came to attach property that the judgment debtor is not part of AIBST. He said that the property that was attached belongs to the claimant not the judgment debtor. He went on to attach proof of ownership of the property by the claimant.
On 21 May 2014 the applicant filed the interpleader notice and asked the claimant and the judgment debtor to deliver the particulars of their claims to the attached property together with opposing affidavits.
In his opposing affidavit issued on 6 June 2014 the judgment creditor stated that the judgment debtor’s business address has always been number 211, Herbert Chitepo street, Harare since the inception of the proceedings against it. He attached correspondence pertaining to the proceedings which correspondence indeed shows that number 211, Herbert Chitepo Street, Harare is the judgment debtor’s business address. He disputed that the attached property belongs to the claimant. The judgment creditor also succeeded in showing that the judgment debtor and the claimant are two separate, but interrelated entities. He went on to attach the judgment debtor’s Deed of Trust which was registered on 23 June 2008 which states that Collen Masimirembwa who is the Founder was desirous of creating a Trust called the Collen Masimirembwa Foundation by initially donating the sum of one trillion dollars and all the shares (100 %) of AIBST (claimant) to the Trust.
The judgment creditor also attached his letter of appointment as Director of Infrastructure Development of AIBST. This letter is dated 31 October 2007. He stated that letter served as his contract of employment and that averment was not disputed by the claimant in its opposing affidavit of 11 June 2014. That letter of appointment was on the claimant’s letterhead not on the judgment debtor’s letterhead. The judgment creditor said that it was only when he was served with a letter purporting to retrench him that the judgment debtor’s letterhead was used. He also attached that letter to the opposing affidavit.
That retrenchment letter was proposing a retrenchment package of US$20 255-00. It also said;
“This package has been calculated from your having started to work for CMF/AIBST in 2004.
Given the many years you dedicated to CMF/AIBST, I would like to thank you very much for your contribution to the organization even as it experiences operational challenges.
Sincerely
Prof Charles Nhachi
Chairman
CMF/AIBST”
For the avoidance of doubt, CMF are the initials for the judgment debtor while AIBST are the initials for the claimant.
In its opposing affidavit of 11 June 2014 the claimant did not rebut that the judgment creditor’s letter of appointment was on its letterhead while the retrenchment letter was on the judgment debtor’s letterhead. It did not even make an attempt to explain how this could have been if the two entities are not interrelated and have nothing to do with each other. The judgment debtor’s Deed of Trust makes it clear in clause 3.1 that “the Foundation will work towards the realization of the Founder’s vision for the promotion of pharmaceutical and biomedical sciences and technologies in Africa.” This is stated as one of the two objectives of the judgment debtor.
What this shows is that the work that is done by the claimant as a private company is done for the benefit of the judgment debtor as per the Deed of Trust. Even the notarial deed of amendment of the judgment debtor’s Deed of Trust which was attached to the claimant’s opposing affidavit issued on 11 June 2-14 states in clause 2 that;
“The Collen Masimirembwa Foundation shall assume total ownership and possession of all of the African Institute of Biomedical Science and Technology (AIBST)(Registration No. 3427/2002) assets and liabilities after its deregistration as a private company. The Foundation will also inherit all research projects, collaborative agreements, research grants, memoranda of understanding or agreement, affiliate statuses, lease agreements, students and staff and any other relationship entered with AIBST during its existence as a private company. The Foundation will keep the African Institute of Biomedical Science and Technology (AIBST) Trade Mark Name for the continuation of this project as a biomedical technical arm of the Foundation”.
This amendment to the Deed of Trust of the judgment debtor was done on 23 June 2010. The amendment is quite extensive, but in clause 26, which is the last clause, it goes on to say that the rest of the terms and conditions of the Collen Masimirembwa Foundation Notarial Deed of Trust MA 732/2008 remain in full force and binding. What this means is that the judgment debtor continues to own 100 % shares of the claimant which were donated to it by the founder, Collen Masimirembwa upon its formation. So Zvikomborero Matibiri was not being honest in the opposing affidavit when he said that it is not written in the Notarial Deed that the judgment debtor owns 100% shares of the claimant.
Mr Nyathi argued for the judgment debtor that the court should pierce the corporate veil in order to prevent a manifest injustice to the judgment creditor. The argument is that the two entities are interrelated and that the claimant’s sole purpose is to serve the interests of the judgment debtor.
Mr Mawadze argued for the claimant that the argument that the corporate veil should be lifted is defective at law and misleading. He argued that since the judgment debtor is a trust it has trustees who have property. In the event that the trust cannot pay its debts it is the trustees who should be held accountable not a different company. He argued that the veil that should be lifted is that of the trust itself not a “distant related neighbour”. He further argued that procedurally it is wrong for the judgment creditor to ask the court to lift the corporate veil through interpleader proceedings. He said that that should be done through an application in terms of Order 32 of the rules of this court.
Lifting the Corporate Veil
All the shares of the claimant (AIBST) were donated to the judgment debtor The Collen Masimirembwa Foundation. This means that the judgment debtor is the sole shareholder in the claimant. This means that the claimant is wholly owned by the judgment debtor. However, despite that, it (claimant) says that the property that was attached is its property. I will thus equate the relationship between the claimant and the judgment debtor as that of a holding company and its subsidiary company, the judgment debtor being the holding company and the claimant being the subsidiary company.
As a general principle of company law a company is a separate entity from its members. See Saloman v Saloman and Co Ltd (1897) AC 22 (HL), Dadoo Ltd and Ors v Krugersdorp Municipal Cochal 1920 A.D 530 at 550 and Deputy Sheriff Harare v Trinpac Investments (Pvt) Limited and Anor HH 121-2011.
However, in certain instances the courts have disregarded the separate legal personality of companies and lifted the veil in the interests of equity or justice and policy considerations. See Lategan and Anor NNO v Boyes and Anor 1980(4) SA 191 @ 200-2001; Van Niekerk & Ors 1999(1) ZLR 421 (S) at 427 and Mawere v Minister of Justice 2005(1) ZLR 317 (H) @ 327.
In Cape Pacific Ltd v Lubner Controlling Investments (Pty) Ltd and Ors 1995(4) SA 790 AD at 803-804 it was said:
“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 to 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 the amendment to the judgment debtor’s notarial deed in clause 2 states that
the judgment debtor shall assume total ownership and possession of all of the claimant’s assets and liabilities after its deregistration as a private company. This clearly means that as long as the claimant is still registered as a company it should assume its liabilities. This is the reason why it is being argued that the two entities are at the moment 2 separate entities with separate civil liabilities.
Analysis
The claimant is wholly owned by the judgment debtor. The two entities are located together at the same address where the property was attached. The judgment creditor was appointed to work for the claimant according to the letter of appointment that he attached to his opposing affidavit. This particular letter was written on the claimant’s letterhead. It was signed by Dr Collen Masimirembwa. However, when retrenchment time came, it is Professor Charles Nhachi who wrote the retrenchment letter. He wrote it in his capacity as the chairman of Collen Masimirembwa Foundation and African Institute of Biomedical Science and Technology i.e both the judgment debtor and the claimant respectively. He used the judgment debtor’s letterhead and thanked the judgment creditor for having worked for both the claimant and the judgment debtor.
The appointment letter and the retrenchment letter make it clear that the two entities are being run as one and the same entity.
Under the circumstances it will be an injustice to permit the claimant to hide behind the veil of its separate incorporation when in fact, by its own conduct it has not respected it. It appears to me that the claimant is only trying to defeat and evade the judgment creditor’s claim.
On the issue of the right procedure to be followed in asking the court to lift the corporate veil, Patel J (as he then was) in the case of Deputy Sheriff Harare v Trinpac Investments (Pvt) Ltd supra also dealt with interpleader proceedings. A holding company and a subsidiary company were involved as judgment debtor and claimant respectively. The lifting of the corporate veil was also an issue and this same issue on the procedure to be followed was raised by the claimant’s counsel. He was arguing that in interpleader proceedings, the property of the subsidiary entity cannot be seized without a court order lifting the corporate veil.
Patel J had this to say:
“….. mere procedural technicalities should not be used or 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”.
I totally share the same sentiments as Patel J and I could not have said it any better.
Having reached the conclusion that both the judgment creditor and the claimant cannot be separated for purposes of liability and execution of the judgment creditor’s claim there is therefore no need for me to determine whether or not the attached property belongs to the claimant. Whether it belongs to the claimant or to the judgment debtor that property has to be sold to satisfy the judgment creditor’s claim.
In the result, the applicant is ordered to proceed with the warrant of execution. The claimant shall pay the costs of the applicant and those of the judgment creditor.
Kantor and Immerman, applicant’s legal practitioners
Manase & Manase, claimant’s legal practitioners
Coghlan, Welsh and Guest, judgment creditor’s legal practitioners
