Ultra Energies Zambia Limited v Anthony Kabuswe Mubanga and Ors (2024/HPC/0329) (5 July 2024) – ZambiaLII

IN THE HIGH COURT FOR ZAMBIA 2024/HPC/0329 AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) 7: BETWEEN: ,.!:...!:.£." PLAINTIFF ULTRA ENERGIES ZAMBIA LiMI!J>~ D-, _ \4E> AND \ /ill I - -,s-TRY ANTHONY KABUSWE MUBANGA RE~O::. AV.A 1 ST DEFENDANT o. eox ~ .,0067. LUS TINASHE MUBANGA 2ND DEFENDANT TISHA INVESTMENTS LIMITED 3RD DEFENDANT Before: The Honourable Lady Justice Chilombo Bridget Maka. For the Plaintiff: Messrs. FCK Chambers - No Appearance. For the Defendant: Mr. A. Phiri - Mesdames Jane Bulaya and Partners. RULING Legislation Referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. Cases Referred to: 1. Salomon vs. Salomon & Company Limited ( 1897) AC 22. 2. Anti-Corruption Commission vs. Serioes Farms Limited SCZ Judgment No. 1 of 2014. 3. Saasa Shamambo vs. Jonathan Mwanza & 13 Others CAZ Appeal No. 020 of 2020. 1. Introduction. 1.1. This Ruling addresses the 1st and 2nd Defendants' application for misj oinder. The application was made pursuant to Order 14 Rule 5(2) of the High Court Rules via summons supported by affidavit and skeleton arguments. 1.2. The Plaintiff contested the application by submitting its affidavit in opposition on 5th June, 2024. 2. Background. 2.1. On 8th May, 2024, and vide Writ of Summons accompanied by statement of claim, the Plaintiff commenced an action against the 1st, 2 nd and 3rd Defendants, claiming the following reliefs:- i. An Order for payment in refund for the sum of USD130,560.00 paid by the Plaintiff to the Defendant on the Agreement for the supply and delivery of diesel, with interest at the commercial lending rate from date of payment to date of Judgment; ii. Payment of the sum ofUSD994,140.34 associated with the business loss, special damages, loss of use of its capital and various reminders to correct the abrogation of the Agreement for dereliction of duty and negligence on the part of the Defendants under the Agreement; R2 iii. Damages for breach of contract/ Agreement and non-delivery of the consignment; iv. Damages for the stress, mental anguish, torture and distress suffered by the Plaintiff's Directors caused by the Defendants' negligence in abrogating the Agreement and receiving payments and failing to fulfil their obligations under the Agreement; v. Interest on the sums in 1, 2, 3, 4 and 5 above; vi. Costs of the proc.eedings; and vii. Any relief the Court may deem fit. 2.2. The 1st 2nd and 3rd Defendants entered appearance and , settled a composite defence on 23rd May, 2024. 3. The 1st and 2nd Defendant's Case. 3.1. The central argument supporting the application for misjoinder was that the 3rd Defendant possesses distinct legal personality separate from the 1st and 2nd Defendants. The 1st and 2nd Defendants' contention was based on contracts entered exclusively with the 3rd Defendant. Exhibited as evidence were copies of these contracts, along with the certificate of incorporation of the 3rd Defendant, marked as exhibits 'AKM 1', 'AKM 2', and 'AKM 3' respectively. R3 3.2. In their legal arguments, reference was made to Order 14 Rule 5(2) of the High Court Rules, emphasizing the Court's authority to strike out the names of improperly joined parties. 3.3. It was argued that the 1st and 2nd Defendants did not engage in any agreements with the Plaintiff, thus asserting they were improperly joined. 3.4. Additionally, it was argued that the 3rd Defendant maintains a distinct legal identity separate from the 1st and 2nd Defendants, who serve as its directors and shareholders. This assertion was buttressed by citing the decisions in Salomon vs. Salomon & Company Limitedl1l and Anti-Corruption Commission vs. Serioes Farms Limitedl2l, which elaborate on the principle of the separate legal personality of incorporated companies. 3.5. The 1st and 2nd Defendants prayed that their respective names be struck out for being improperly joined. 4. The Plaintifrs Case. 4. 1. The core of the evidence in opposition was that the 3rd Defendant being a separate metaphysical entity carried out its functions through the 1st and 2nd Defendants, who were alleged to have misapplied the sums advanced to the Defendant. That this was evident in a copy of rd 3rd 3 Defendant's Bank account statement that was produced as exhibit "MK 1". R4 5. Hearing. 5.1. The application by the 1st and Defendants was heard 2nd on July 24, 2024, with only Counsel for the 1st and 2nd Defendants present. 5.2. Satisfied that the Plaintiffs Advocates were aware of the hearing, I proceeded to hear the application. 5.3. Representing the 1st and 2nd Defendants, Mr. Phiri relied on the summons for misjoinder, affidavit and skeleton arguments in support of the application all dated 23rd May, 2024. 5.4. Mr. Phiri reiterated that the Plaintiff entered into a contract with the 3rd Defendant which has a separate legal personality from the 1st and 2nd Defendants. · 5. 5. Mr. Phiri prayed that the names of the 1st and 2nd Defendants be struck out as they were improperly joined to the matter and that costs be for the 1st and 2nd Defendants. 6. Consideration and Determination. 6.1. I have considered the application for misjoinder. The evidence and arguments for and against it. 6.2. The 1st and 2nd Defendants application for misjoinder is anchored on the provisions of Order 14 Rule 5(2) of the High Court Rules which enacts that: - RS "The Court or a Judge may, at any stage of the proceedings, and on such terms as appear to the Court or a Judge to be just, order that the name or names of any party or parties, whether as plaintiffs or as defendants, improperly joined, be struck out." 6.3. The foregoing clearly imbues this Court with the power to strike out names of parties improperly joined to a matter. 6.4. In casu, the 1st and 2nd Defendants argued that they were improperly joined to the main action, as they were not parties to the contract between the Plaintiff and the 3rd Defendant. They relied on the legal principle of separate legal personality, which applies to incorporated companies. 6.5. The Plaintiff on the other hand asserted that the 1st and 2nd Defendants were responsible for not applying the sums advanced to the 3rd Defendant for the intended purpose. 6.6. This application revolves around the principle of separate legal personality which is the basic tenet on which company law 1s premised as was established in the seminal case of Salomon vs. Salomon & Company Limited(1l cited by the 1st and 2nd Defendants. Therein, it was held in part that:- "The company is at law a different person altogether from the subscribers ... " R6 6. 7. Consequently, any rights, obligations or liabilities of a company are distinct from those of its shareholders. 6.8. It is not in dispute that the Plaintiff entered into agreements with the 3rd Defendant. Therefore, the rights and liabilities that arise from the agreements are solely for the parties to the agreements. 6.9. While it is true that a company, as an artificial legal entity, acts through its directors, the corporate veil protects the directors and shareholders from the company's liabilities. The Plaintiffs main action and claims are clearly based on a contract entered into with the 3rd Defendant, to which the 1st and 2nd Defendants were not parties. Therefore, the 1st and 2nd Defendants' application has merit. I am fortified in this finding by the case of Saasa Shamambo vs. Jonathan Mwanza & 13 Others13l, where the Court of Appeal held on page J18 as follows:- "It is clear from the reliefs being sought by the Respondents that the claim arose as a result of contracts of employment executed between the Respondents and the Company as a separate legal entity to which contract the Appellant was not privy. The Appellant can only be made liable upon lifting the Company's corporate veil by challenging the doctrine of separate legal personality and limited liability which was not done in this matter." R7 7. Conclusion. 7 .1. On account of the principle of separate legal personality and the fact that the Plaintiff's action arose from contracts executed between itself and the 3rd Defendant to which the 1st and 2nd Defendants were not privy, the suit against the 1st and 2nd Defendants cannot be sustained. 7.2. I therefore find that the 1st and 2nd Defendants were improperly joined to the main action and Order that their names be struck out forthwith. 7. 3. Costs are for the 1st and 2nd Defendants to be taxed in default of agreement. 7.4. Leave to appeal is hereby granted. Delivered at Lusaka this 25th July, 2024 . .. . . . . . . . . . . . . ® .!:?.'. . .......... . Chilombo Bridget Maka HIGH COURT JUDGE R8