Chiawa Agriculture Enterprises Limited v Kawambwa Tea Company Limited (Appeal No. 166/2001) [2005] ZMSC 59 (28 April 2005)

IN THE SUPREME COURT OF ZAMBIA Appeal No. 166/2001 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: CHIAWA AGRICULTURE ENTERPRISES LIMITED Appellant AND KAWAMBWA TEA COMPANY LIMITED Respondent Coram: Sakala, CJ, Chibesakunda and Chitengi, JJS on 26th June, 2003 and 28th April, 2005. For the Appellants : Mr. M. V. Kaona of Messrs Nakonde Chambers For the Respondent : Mr. T. S. Chilembo of Messrs T. S. Chilembo Chambers JUDGMENT Chitengi, JS, delivered the Judgment of the Court. ~ Case referred to: - (1) Salomon v Salomon and Company (1897} AC 22 We regret the delay in delivering this judgment. During the past three years the court has been very busy with the Presidential Election Petition whose judgment has just been delivered. J2 In this appeal, we shall refer to the Appellant as the Plaintiff and the Respondent as the Defendant, which is what they were in the court below. This matter has a rather chequered history. On 11th October, 1993 the Plaintiff supplied the Defendant bananas to the value of Kl,451,450.00 which the Defendant did not pay for, necessitating the Plaintiff to commence an action in the High Court to recover the amount owing. After the Defendant had entered Appearance, the Plaintiff took out a Summons under Order XIII and on 4 th October, 1994 signed summary judgment. It would appear the Defendant had no sufficient funds to pay the judgment sum and on 4th October 1994 sought and obtained an order to liquidate the judgment sum by installments. Again, it appears that the Defendant did not even have the money to liquidate the judgment sum by installments as ordered because by July, 1997 the Defendant had not yet finished paying the sum owing, necessitating the Plaintiff to issue two Writs of Fieri Facias, one in 1995 whose service was abortive because there was no service address given, and another on 9 th July, 1997. It is the Writ of Fieri Facias issued on 9 th July, 1997 which precipitated the issues leading to this appeal When the Plaintiff was about to execute the Writ of Fieri Facias at the premises they thought were for the Defendant, Kawambwa Tea Company Limited, a company called Kawambwa Tea Company 1996 Limited applied to court to join the Minister of Finance and Zambia Industrial and Mining Corporation (ZIMCO) (In Liquidation) as third parties and sought and obtained stay of execution of the judgment pending the outcome of the application to join the Third Parties. Kawambwa Tea Company 1996 Limited also took out a summons set aside the Writ of Fieri Facias for irregularity. In its affidavits supporting the applications, Kawambwa Tea Company 1996 Limited showed that Kawambwa Tea - - - ··- ~ -- -... --~- - ... -· . . .. ........_ _ _ ,__~ Company was in 1996 purchased by a company called Metal Distributors (U. K) Limited, the share holders of Kawambwa Tea Company 1996 Limited, and that under Clause 13.2 Kawambwa Tea Company 1996 Limited undertook the liabilities of the sold company that were disclosed by the vendor, ZIMCO (In Liquidation). It was stated in the Affidavits that the vendor provided a schedule of debtors but the Plaintiff's claim does not appear on the schedule of debtors. The schedule of debts was exhibited. The Plaintiffs filed an affidavit in opposition to the summons to set aside the Writ of Fieri Facias for irregularities. It was stated in the affidavit that liability is not disputed; that the Defendant is merely trying to evade paying the Defendant; that the judgment is valid and that the only recourse open to the Defendant is to sue Zambia Privatisation Agency. It was further stated in the Affidavit that the incorporation of the second company does not take away liability from the Defendant because the companies are one and the same person. On these facts, the learned Deputy Registrar, who heard the application, held the view that the two companies were different; that the proper application was not to set aside Writ; that since from the application it appeared that Kawambwa Tea Company ( 1996) Limited was occupying the premises where the Defendant used to be, the proper application was one of Inter Pleader by the Sheriff. The learned Deputy Registrar also held that Kawambwa Tea Company ( 1996) Limited was a claimant and ordered it to issue to the Sheriff the appropriate Notice so that the Sheriff could inter plead. The Plaintiff was not satisfied with the learned Deputy Registrar's Ruling and appealed to a Judge at Chambers. The learned appellate Judge dismissed the Plaintiff's appeal. The learned appellate Judge held that J4 Kawambwa Tea Company (1996) Limited was a separate legal entity from Kawambwa Tea Company. Further, relying on the case of Salomon v Salomon and Company1J, the learned appellate Judge held that a company 1s a separate and distinct legal personality from its shareholders. The learned appellate Judge found that there was no evidence to show that Kawambwa Tea Company (1996) Limited purchased Kawambwa Tea Company with the claim in question. Consequently, the learned appellate Judge dismissed the Plaintiffs appeal. The Plaintiff now appeals to this court. Mr. Kaona, learned counsel for the Plaintiff, filed detailed heads of argument with three grounds of appeal based on the Memorandum of Appeal and addressed us briefly. He also referred us to several authorities. Mr. Chilembo also filed written heads of argument and addressed us briefly. On account of the view we take of this appeal, it is not necessary for us to recite the details of these arguments and the cases cited. Suffice it to say that we have carefully considered the submissions by counsel and I the authorities cited therein. As we see it, the critical issue in this appeal is whether the Plain tiffs claim was one of those transferred to the Kawambwa Tea Company 1996 Limited by the sale agreement. As Mr. Chilambo rightly submitted, it cannot be seriously argued that Kawambwa Tea Company is not a separate legal entity from Kawambwa Tea Company (1996) Limited. The arguments by Mr. Kaona that these two companies are one and the same person are not tenable in law. Clearly, Kawambwa Tea Company (1996) Limited is a separate Legal entity. Mr. Kaona raised the issue of lifting the corporate veil and cited cases to support his arguments on lifting of corporate veil. As Mr. J5 Chilembo rightly submitted, the cases cited are not applicable to this case because the issue of lifting the corporate veil does not arise. We can in fact say that it is far fetched. We find nothing in the evidence to suggest that Kawambwa Tea Company (1996) Limited was either trading fraudulently or did anything to justify lifting of the corporate vehicle. In the event, it is unnecessary for us to discuss the law relating to lifting of the corporate veil. As we have already said, the critical issue is whether the Plaintiffs claim was one of those liabilities inherited by Kawambwa Tea Company ( 1996) Limited. We have perused the sale agreement and the attached schedule of liabilities transferred to Kawambwa Tea Company (1996) Limited and the Plaintiffs claim is not one of them. On the evidence, we find no explanation for this omission. And we cannot s·peculate that this was an inadvertent omission on the part of the parties to the agreement. The Plain tiffs claim not being one of those inherited by Kawambwa Tea Company ( 1996) Limited, the Plaintiff should look to sellers of Kawambwa Tea Company Limited for redress and not to Kawambwa Tea Company ( 1996) Limited. The learned appellate Judge was, therefore, on firm ground when she dismissed the Plaintiffs appeal and we cannot fault her. I There is no merit in this appeal and we dismiss it with costs to the Defendant to be taxed in default of agreement. E. L. SAKALA CHIEF JUSTICE ......... i: ......................... . L. P. CHIBESAKUNDA SUPREME COURT JUDGE