ZESCO Limited v E.L. Sewedy Illumination and Zambia Electrometer Limited (APPEAL No. 354/2023) (9 May 2024) – ZambiaLII

IN THE COURT OF APPEAL OF ZAMBIA APPEAL No. 354/2023 HOLDEN AT LUSAKA (Civil Jurisdiction) tlCOF BETWEEN: nnm-APP ZESCO LIMITED APPELLANT 0 9 MAY 2024 ~ AND ILREGJSTR E.L SEWEDY ILLUMINATIO XSo06 ,Lu 1 ST RESPONDENT ZAMBIA ELECTROMETER LIMITED 2ND RESPONDENT CORAM: Chashi, Sichinga and Sharpe-Phiri, JJA ON: 30th April and 9th May 2024 For the Appellant: G. Hakainsi, Messrs L.M Chambers For the 1st Respondent: M. Nkunika and N. Mwila, Messrs Simeza Sangwa & Associates For the 2nd Respondent: N/A JUDGMENT CHASHI JA, delivered the Judgment of the Court. Cases referred to: 1. Molly Pelekamoyo Washington v New Plaza Enterprises Ltd - CAZ Appeal No. 147 of 2021 2. Mike Hamusonde Mweemba v Kamfwa Obote Kasongo and Zambia State Insurance Corporation Limited (2006) ZR, 101 3. Macaura v Northern Insurance Limited (1925) AC, 619 4. Bacha F. Gudzar v Commissioner of Income Tax (1955) AIR, -J 25. Salomon v Salomon & Co. Ltd (1897) AC, 22 6. Chri.stopher James Thorne v Chri.stopher Mulenga & 2 Others (201 OJ ZR, 221 Rules referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia 2. The Court of Appeal Rules, Statutory Instrument No. 65 of 1.0 INTRODUCTION 1.1 This is an appeal against the Ruling of Honourable Mr Justice E.L Musona, delivered on 29th May 2023. 1.2 In the said Ruling, the learned Judge refused to grant the Appellant's application for joinder to the proceedings as an intervener. 2.0 BACKGROUND 2.1 The 1st Respondent, who was the Plaintiff in the court below, commenced an action against the 2nd Respondent, as the Defendant, by way of writ of summons on 4th August 2022, claiming the following reliefs: (i) The sum of US$1,288,112.00 being outstanding balance on a contract for the -J 3supply of goods and services at the Respondent's request and instance; (ii) Interest on the sum due. 2.2 On 23rd September 2022, a default judgment was entered in favour of the 1st Respondent. On 30th September 2022, the court granted a charging Order nisi, pending hearing of the proceedings to make the charging Order absolute. 2.3 On 6th December 2022, the Appellant filed an application for joinder to the proceedings on the basis that it was a 40% shareholder in the 2nd Respondent. Further, that it had invested huge sums of money into the company, as well as in Stand No. 5252 Ndola, the subject property. 2.4 In opposing the application, the 1st Respondent asserted that, the Appellant had not demonstrated its interest in the subject matter or established how it will be affected by making the charging Order absolute, when the subject property belongs to the 2nd Respondent. 3.0 DECISION OF THE COURT BELOW 3.1 After considering the application, the learned Judge was of the view that, notwithstanding that the Appellant is a -J 4shareholder in the 2nd Respondent, it had not demonstrated how its interest will be affected by the charging Order. 3.2 The learned Judge opined that, a party challenging a charging Order must sufficiently demonstrate how its interests will be affected by the charging Order. Consequently the application for joinder was dismissed. 4.0 THE APPEAL 4.1 Dissatisfied with the Ruling, the Appellant has appealed to this Court advancing four grounds couched as follows: (i) The learned Judge in the court below erred in law and fact by refusing to join the Appellant to the proceedings on the basis that the Appellant did not demonstrate how its interest will be affected by the charging Order when the evidence on record clearly shows how the Appellant will be affected by any decision which the court would make; (ii) The learned Judge in the court below erred in law and fact by refusing to join the -J 5Appellant to the proceedings when the law is that any party or person who demonstrates that he has sufficient interest in the subject matter of proceedings and may be affected by any decision which the court will make ought to be joined as a party to the proceedings; (iii) The learned Judge in the court below erred in law and fact by refusing to join the Appellant to the proceedings thereby ignoring the fact that the Appellant is not only a shareholder in the 2nd Respondent's company but is also a creditor claiming interest/payment of debt from the 2nd Respondent; (iv) The learned Judge in the court below erred in law and fact when he refused to join the Appellant to the proceedings paving way for enforcement of the charging Order under Order 50 of The Rules of Supreme -J 6Court of England 1999 Edition which is not applicable under the Laws of Zambia. 5.0 ARGUMENTS IN SUPPORT OF THE APPEAL 5.1 The first and second grounds have been argued together. According to the Appellant, the court below erred when it ignored the evidence that was presented before it to demonstrate the nature of interest the Appellant had in the proceedings, particularly Stand No. 5252, Ndola, subject of the charging Order. 5.2 In arguing the third ground, the Appellant submitted that it had shown sufficient interest in the matter, which would have persuaded the court that the Appellant was an interested party, so as to be joined to the proceedings and heard. 5.3 In respect to the fourth ground, our attention was drawn to the case of Molly Pelekamoyo Washington v New Plaza Enterprises Ltd1 and we were urged to upset the Ruling, as Order 50 RSC, was not applicable under the Laws of Zambia. -J 76.0 1 RESPONDENTS ARGUMENTS IN OPPOSITION sT 6.1 In response, the 1st Respondent argued the first, second and third grounds together. According to the 1 st Respondent, the gist of the appeal under these grounds is that, the Appellant should have been joined to the proceedings because it is a shareholder in the 2nd Respondent and therefore has an interest in the charging Order proceedings against the 2nd Respondent. 6.2 It was submitted that the Appellant could not be joined to the proceedings, as it did not meet the threshold under Order 14/5 (1) of The High Court Rules1 (HCR). Reliance was placed on the case of Mike Hamusonde Mweemba v Kamfwa Obote Kasongo and Another2 where the Supreme Court had this to say: "A Court can Order a joinder if it appears to the court or a Judge that all persons who may be entitled to or claim some share of interest in the subject matter of the suit or who may be likely to be affected by the result or require to be joined." -J 86.3 It was submitted that a shareholder has no interest whatsoever, in the property of a company as it is trite that a company is a separate and distinct legal entity from its shareholders. Our attention was drawn to the English case of Macaura v Northern Insurance Limited3 where it was held that: "Now, no shareholder has any right to any item or property owned by the company, for he has no legal or equitable interest therein." 6.4 The 1 st Respondent further relied on the case of Bacha F. Gudzar v Commissioner of Income Tax4 where it was held as follows: "As shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decided to divide them." 6.5 The Respondent in view of the aforestated authorities, 1st submitted that a shareholder cannot claim to be a beneficiary interested in the property of a company. -J 9According to the 1 st Respondent the court below was on firm ground when it declined to join the Appellant to the proceedings on the basis that it had not demonstrated how its interest would be affected by the charging Order. 6.6 According to the 1 st Respondent, even assuming the Appellant met the threshold, it cannot be joined to the proceedings, as after the charging Order was made absolute, the court below became functus officio. 6.7 In response to the fourth ground, it was submitted that the ground of appeal does not seek to assail the Ruling of the court below. Our attention was drawn to Order 10/3 of The Court of Appeal Rules2 (CAR), which requires that an appeal should be against the judgment or ruling of the court, which is the subject of that appeal. 6.8 It was further submitted that the grounds of appeal should challenge the court's holding on points of law or findings of fact arising from the ruling or judgment. Reference was made to Order 10/ 9 (2) CAR, which provides as follows: -J 10- "A memorandum of appeal shall set forth concisely and under distinct heads, without argument or narrative, the grounds of objection to the judgment appealed against and shall specify the points of law of fact which are alleged to have been wrongly decided ... " 6.9 According to the 1st Respondent, the Ruling forming the basis of the appeal relates to the joinder of the Appellant to the proceedings and not the applicability of the charging Order in the jurisdiction. 7.0 ANALYSIS AND DECISION 7.1 We have considered the Ruling being impugned and the arguments by Counsel for the Appellant and the 1 st Respondent. We shall consider grounds one to three together as they are entwined. 7.2 The argument by the Appellant basically is that they had in the court below demonstrated and shown that, by being a shareholder in the 2nd Respondent and having lent money to the 2nd Respondent and also having spent money on the improvement of stand No. 5252 Ndola, they -J 11had shown sufficient interest in the proceedings and the subject property. 7 .3 It is our view that the learned Judge in the court below was on firm ground in dismissing the Appellant's application for joinder. The first port of call is the case of Salomon v Salomon & Co. Ltd5 which set out the , principle of separate legal personality for companies. The House of Lords ruled that a company is a separate legal entity from its shareholders and directors. Despite having shares in the 2nd Respondent, the Appellant and the 2nd Respondent are two distinct and separate legal entities. 7.4 Order 14/ 5 (1) HCR, provides for joinder, upon an applicant showing the following: (i) The applicant is entitled to or claims some share or an interest in the subject matter. (ii) The party to be joined is likely to be affected by the result of the action. 7.5 Kajimanga, J as he then was, in the case of Christopher James Thorne v Christopher Mulenga and 2 Others6 -J 12cited the Macaura case with approval, where he stated as follows: " Now, no shareholder has any right to any item or property owned by the company, for he has no legal or equitable interest therein ..... He is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up. .. " 7 .6 It is manifest that the Appellant's prime interest is to salvage the property which belongs to and is owned by the 2nd Respondent as a separate legal entity. The Appellant has no legal or equitable interest in the subject property and consequently, the proceedings to entitle it to be joined to the matter. Grounds one to three fail accordingly. 7.7 As regards the fourth ground of appeal, we agree with the 1 Respondent that this was not an issue before the st court below and neither is the ground speaking to the Ruling of the court below. In our view, this ground is an argument for another day. The charging Order having -J 13been made absolute and the Appellant having been refused to join the proceedings, the Appellant ought not to argue the 2nd Respondent's case, who has not shown any interest in the appeal. 8.0 CONCLUSION 8.1 All the four grounds of appeal have failed for lack of merit. The appeal is acco gly dismissed with costs to taxed in default COURT OF APPEAL JUDGE . . A, SC COURT L JUDGE