Crown Brothers CB Limited and Ors v Basi Steel Limited (CAZ/08/162/2022) [2022] ZMCA 142 (23 June 2022)

IN THE COURT OF APPEAL OF ZAMBIA HOLDEN AT LUSAKA ( CIVIL JURISDICTION) .\.f\l~uc OF l,1.,"'18 CAZ/08/162/2022 BETWEEN: ~ ii[ 2 3 JUN 202~ Ll]:! CROWN BROTHERS CB LIM FADEL HAMZE FOUAD INVESTMENT LIMITED KRISHNA THAKUR kt:. G !~r y I APPLICANT ·O. Sox 5000 , L\}~~\-!--· D APPLICANT 3RD APPLICANT 4™ APPLICANT AND BSI STEEL LIMITED RESPONDENT Coram: Hon. Lady Justice N . A Sharpe-Phiri in Chambers on 23rd June 2022. For the Applicants: For the Respondents: Mr. N. Muyatwa and Ms. C. Mulenga of Messrs KBF & Partners Mr. T. Mukuka of Messrs AMW & Co. Legal Practitioners RULING Legislation Referred to: 1. The Court of Appeal Rules, SI No. 65 of 2016. 2. The Supreme Court of England Practice Rules, 1965 (1999 Edition) White Book 3 . The High Court Rules, Chapter 27 of the Laws of Zambia Rl Cases Referred to: 1. Salomon v Salomom & Company Limited (1897) AC 2. Madison Investment Properties and Advisory Company Limited v Peter Kanyinji SCZ Selected Judgment No. 48 of 218 3. Macaura v Northern Assurance Company Limited (1925) AC 619 4. Nyimba Investment Limited v Nico Insurance Zambia Limited Selected Judgment No. 12 of2017 5. Kitwe Supermarket Limited v Southern Africa Trade Limited (2002) Z. R. 36 6. Mubila Sianyama Mwilu V Kayuni Social Services and 5 Others appeal No. 36/2019 7. Law Association of Zambia V The President of the Republic of Zambia, the Attorney General and the National Assembly, Petition number 13/ CCZ/ 2019 8. Merchandise Transport Limited v British Transport Commission (1962) 2 QB 173. This is a ruling on an application brought by the Applicants for leave to appeal against a decision of Zimba, J delivered on 5 th May 2022. The application is supported by an affidavit which was initially filed on 9 th May 2022 but was ordered to be regularized and a new affidavit was filed on 1st June 2022. It was sworn by one Fouad Hamze, a Director of the 3 rd Applicant. He states that a default judgment was entered against the 1st and 2nd Applicant herein in the Republic of South Africa under case No. 12507 /2017P for the sum of Rl,748,406.46 (South African Rands) plus interest. Following the entry of this judgment, the Respondent commenced an action in Zambia under cause No. 2019/HPC/0082 before Hon. Justice K. E. M. Zimba to enforce the default judgment obtained in South Africa against the 1st and 2nd Applicant. R2 In her Ruling of 1st May 2021, the Hon. Justice Zimba recognized the South Africanjudgment for enforcement in favour of the Respondent. The Respondent proceeded to issue a Writ of fieri facias which was executed by the office of the Sheriff of Zambia on 30th July 2022. That amongst the goods taken in execution was a motor vehicle registration number BAF 7048ZM belonging to the 3 rd Applicant, one Fouad Investment Limited. Accordingly on 22nd April 2022, the 3 rd Applicant filed a Notice of Claim to goods seized in execution under cause 2019/HPZ/0082. This prompted the Sheriff of Zambia to file an Interpleader Summons which was heard before the said Zimba, J on 5 th May 2022. After determining the matter, the Court rejected the claims, except for motor vehicle registration number BAF 3590ZM and awarded costs to the Respondent herein. Being dissatisfied with the ruling of Zimba, J, the Appellants intend to appeal against the said decision. The 3 rd Appellant exhibited the intended Notice of Appeal and Memorandum of Appeal and submitted that the appeal has a very high chance of success and therefore urged this Court to grant the application. The Respondent opposed the application by filing an affidavit in opposition on 17th June 2022 sworn by Victor Mtambula Nyirenda, the Finance Manager of the Respondent Company. R3 She stated firstly that the issue relating to the motor vehicle registration number BAF 3590ZM was resolved and it had been returned to the 4 th Applicant. The deponent also admitted the background of the matter as laid out by the Applicants in paragraphs 1-5 and 7-11 of the affidavit in support. The Respondent however disputed that the Applicants had demonstrated that the intended appeal has high prospects of success. Further, the Respondent contended that the Applicants had also failed to satisfy the law in relation to the application before the lower Court, particularly:- 1. That the Notice of Claim upon which the inter-pleader proceedings were founded were incompetent as they were taken out more than 5 days after the execution of the Writ of fifa. 2 . That the Respondent did move the Court to pierce the veil in relation to the 1st and 3 rd Applicants on the ground that they operate as a single economic unit, having the same shareholders, sharing the same office and using the same email address. The deponent further stated that the learned Judge found that from the foregoing facts, there was an apparent chance of the 1s t and 3 rd Applicant colluding and that this was a ground upon which the interpleader relief ought to be refused. The Respondent urged the Court to decline the application. R4 The matter was heard on 21 st June 2022 . Both counsel for the Applicants and the Respondents were in attendance. The Applicants relied on the affidavit in support of 1st June 2022 and the Skeleton Arguments and list of authorities of 9 th May 2022. The gist of the Applicants' arguments is that the application for leave to appeal has been made to this Court pursuant to Order VII Rule 1(1) and (2), Rule 2(1), (2) and (4) as read together with Order X Rule 4(1), (5) and (7) of the Court of Appeal Rules 2016 1 . The basis for making this application for leave to appeal to a single Judge of the Court of Appeal is due to the fact that the learned Judge in the Court below expressly denied leave to appeal. Counsel for the Applicants submitted that a single Judge of this Court is clothed with power and jurisdiction to grant the application sought. Reference was made to Order 1 Rule 1 of the Court of Appeal Rules 2016 which provide that: "The jurisdiction vested in the Court shall, as regards practice and procedure, be exercised in the manner provided by the Act and these Rules, the Criminal Procedure Code or any other written law, or by such rules, RS order or directions of the Court as may be made under the Act, the Criminal procedure Code or any other written law, and in default thereof, in substantial conformity with the Supreme Court Practice, 1999 (White Book) of England and the Law and practice applicable in England in the Court of Appeal up to 31st December 1999." Accordingly, Order 59 / 14/ 18 of the Rules of the Supreme Court, 1999 Edition provides that: "The general test which the Court applies in deciding whether or not to grant leave to appeal is this: leave will normally be granted unless the grounds of appeal have no realistic prospects of success. The Court of Appeal may also grant leave if the question is one of general principle, decided for the first time or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage." The Applicants' Counsel further submitted that when a Court is deciding on an application for leave to appeal, the question for consideration is whether the Applicant's appeal has reasonable prospects of success. If the answer is in the affirmative, the Applicant must be granted leave to appeal. R6 Counsel therefore urged the Court to preview the Applicant's grounds of appeal enumerated in the Memorandum of Appeal as follows: 1. The learned trial Judge in the Court below erred in law and fact when she refused the interpleader relief to motor vehicle registration number BAF7048ZM belonging to Fouad Investment Limited (3rd Applicant), relying on Order 43 Rule 2(b) of the High Court Rules Chapter 27, on the ground that chances of collusion were apparent between Fouad Investment Limited and the Defendants because "VMA 1" and "VMN 2" of the Plaintiffs affidavit in opposition of 25th November 2001, shows that the 1st Defendant (Crown Brothers CB Limited) and Fouad Investment Limited have the same shareholders, share the same office space and email addresses; 2. That the learned trial judge erred in law and fact when she proceeded to find and hold, in determining ownership, that the 3 rd and 1st Appellant have the same shareholders, email and physical address without a formal application and/ or order to pierce the 3 rd and 1st Appellants' corporate veil on any of the grounds set out at law. 3. That the learned trial Judge erred in law and fact when she failed and/ or neglected to consider that the 3 rd Appellant R7 (2nd Claimant in the Court below) and the 1st Appellant (1st Defendant in the Court below) have separate legal personality independent from each other and capacity for each to own its own property; 4. That the learned trial Judge erred in law and fact when she dismissed, inter alia, Fouad Investment Limited claim to motor vehicle registration number 7048ZM and ordered the Sheriff to proceed with the execution except for motor vehicle registration number BAF 3590ZM; On the first ground of appeal, the Applicants argued that the learned trial Judge erred in dismissing the 3 rd Applicant's claim to motor vehicle registration number 7048ZM despite finding that the 3rd Applicant was the owner and certificate of registration was in the name of the 3 rd Applicant. The Court below instead found that there was collusion between the 1st and 3 rd Applicants relying on Order XLII Rule 2(b) of the High Court Rules. Under the said Rule 2(b), the Applicant must satisfy the Court or a Judge by affidavit or otherwise that the applicant does not collude with any of the claimants. Counsel argued that the collusion envisaged under Order XLII Rule 2(b) of the High Court Rules is between an Applicant and Claimant. The Applicant in the interpleader proceedings was the Sheriff of Zambia. R8 The 3 rd Applicant had merely filed it Notice of Claim on 22nd April 2022. Therefore, it was the Sheriff of Zambia that ought to have satisfied the Court that he had not colluded with any of the claimants. Counsel further argued that it was therefore wrong for the learned Judge to have dismissed the 3 rd Applicant's claim on the basis of potential collusion between the 1st and 3rd Applicants as it was not supported by any provision of the law. Based on the foregoing arguments, counsel argued that the ground of appeal has reasonable prospects of success. Regarding grounds 2 ,3 and 4 of appeal, counsel argued that the learned Judge in the Court below erred by failing to recognize that the 1st and 3 rd Applicants were separate legal entities independent of its shareholders. To support this contention, the cases of Salomon V Salomon and Company Limited1 and Madison Investment Properties and Advisory Company Limited V Peter Kanyinji2 were referred to. Counsel also argued that the 3 rd Applicant was capable of owning property independent and exclusive of its members and directors and cited the cases of Macaura V Northern Assurance Company Limited3 and Nyimba Investment Limited V Nico Insurance Zambia Limited4 • R9 Lastly, Counsel argued that the learned Judge erred by purporting to lift the corporate veil of the 1st and 3 rd Applicants without a finding or establishment of a statutory or common law ground for lifting of the corporate veil or indeed a formal application. The case of Kitwe Supermarket Limited V Southern African Trade Limited5 was cited to support this position of law. Counsel argued that the foregoing showed that the 3 rd Applicant's appeal has reasonable prospects of success. In opposing the application, the Respondent's counsel relied on the List of Authorities and Skeleton Arguments filed in support of the affidavit in opposition on 17th June 2022. The gist of the Respondent's arguments were that the Applicants have not met the threshold for the Court to grant leave to appeal and therefore there were no cogent grounds upon which the application should be granted. The Respondent contended that, contrary to the Applicants' assertions, they had failed to demonstrate that their appeal has any prospects of success. That the entire inter-pleader proceedings were a nullity as the Notices of Claim upon which they were based were not filed within the stipulated five (5) days provided under Order 42 Rule 6 of the High Court Rules. R 10 Counsel argued that the Court had interpreted the above provision in the Mubila Aianyama Mwila V Kayuni Social Services and 5 others6 case where the Court held that: " .... Order 42 Rule 6 of the High Court Rules cited above is very clear that would be Applicants have five days in which to lodge claims with the sheriff over ownership of seized goods which they did not do ..... while the 2 nd Respondent had good claim for his cattle, the same ended when he failed to lodge his claim with the sheriff of Zambia within five days of the same having been seized." Counsel argued further that the Applicants did not file the notice of claim within five (5) days from the seizure and on that basis, the intended appeal lacks merit. Regarding ground one of the appeal, the Respondent argued that it has no merit on account of the nature of the operations of the 1st and 3 rd Applicants which are such that they are so interrelated such that the learned trial Judge formed the view that the chances of the two companies colluding to the detriment of the Respondent was high. With respect to ground 2 and 3 , the Respondent's counsel argued that there was no need to make a formal application to lift the R 11 corporate veil of the two companies as the Respondent had, in opposing the inter-pleader proceedings, requested the Court to treat the 1st and 3 rd Applicant as a single economic unit. Counsel argued that the Court had urged litigants to raise all issues at once to minimize possibility of multiple hearings. Counsel relied on the Law Association of Zambia V The President of the Republic of Zambia, the Attorney General and the National Assembly7 , Petition number 13/CCZ/2019 and argued that the Court is entitled to make orders it considers appropriate and that the Court was on firm ground in deciding as she did. The Respondent urged the Court to dismiss the application. I have carefully considered the application and the submissions by both counsel. The application b efore this Court is for leave to appeal made pursuant to Order VII Rule (1) and (2), Rule 2(1), (1) and (4) as read with Order X Rule 4(1), (5) and (7) of the Court of Appeal. Order VII Rule ( 1) and (2) provides that an interlocutory application shall be brought by notice or summons and can be heard and determined by a single Judge of the Court. Order X Rule 4(1), (5) and (7) of the Court of Appeal Rules provides that the High Court may grant or refuse leave to appeal to the Court and where leave is refused, an application for leave to appeal to the Court may be made to a single Judge. R 12 Similarly, Section 12 of the Court of Appeal Act empowers a single Judge of the Court to grant leave to appeal where an Appellant is denied leave to appeal by the High Court. The question for my consideration is whether or not to grant leave to appeal. Order 59 / 14/ 18 of the Rules of the Supreme Court is applicable by virtue of Order 1 Rule 1 of the Court of Appeal Rules. It provides that the general test applicable in deciding whether to grant leave to appeal is that a Court will normally grant leave unless the grounds have no realistic prospects of success. Therefore, the issue for my determination is whether the intended grounds of appeal reveal reasonable prospects of success in order to allow the application. Having considered the grounds of appeal and without addressing the merits thereof, I am of the considered view that the intended grounds of appeal have realistic prospects of success as the trial Judge merely assumed collusion between the 1st and 3 rd Applicants who are independent persons at law without making an actual finding of collusion. Furthermore, the Applicants have raised an important issue which warrants consideration by this Court regarding the parties and grounds envisaged in proving collusion in interpleader applications as provided for under Order XLII Rule 2(b) of the High Court Rules. Accordingly, the application for leave to appeal is allowed. R13 The Notice of Appeal and the Memorandum of Appeal shall be filed within fourteen (14) days from the date hereof. Each party shall bear their own costs of this application. Dated at Lusaka this 23rd June 2022. ~ A-J; . ~ N. A. Sharpe-Phtri COURT OF APPEAL JUDGE R 14