George Chishimba and Ors v Public Service Pension Fund ( Bisonite Zambia Limited) (2023/HN/148) [2024] ZMHC 47 (31 January 2024)

IN THE HIGH COURT FOR ZAMB AT THE DISTRICT REGISTRY HOLDEN AT NDOLA (Civil Jurisdiction) BETWEEN: / 148 / REPUBLlC OF ZA~ HIGH COURT OF ZAW'K 11:\ 3 1 JAN 1a2 1~ TWO C IVIL REGI STRY N DO LA HIG H COU RT P. O. B O X 700 04. N DO LJ\. GEORGE CHISHIMBA AND 87 OTHERS PLAINTIFFS AND PUBLIC SERVICE PENSION FUND (ti a Bisonite ~ .... Zambia Limited) ~.,.~EN_Il). NT •. J. • ' - Before: The Honourable Lady Justice Dr. Winnie Sithork-Mw/~qai i~_,., · •' \ · .. ....... ' ' \~ t - . • Chambers at Ndola this 31 5 1 day of January, ~~f~' ; , ,, : f . ) ·~·, . ~ .. '::,,_ .. , Mr. S. Chipoya, In-House Counsel for thi:/Defe!fidant .";!~ ,~~, , . .. ..._ ..... :::-,·,~... ~.,. • , "' ~ •a ~- , ~, .. .• • ~~ In Person ~ . ' ~·;, . /, , , ~? ; . - ') / ~ ·~ i--.. ,..--:. . .. ~ ... '4 ..... , • "'f • For the Plaintiffs: For the Defendant: Cases re ferred to: RULING 1. Salomon v. Salomon and Company Limited (1897)A. C. 22. 2. Letang v. Cooper (1965) 1 QB 232. 3. Wise v. EF Hervey Limited {195) Z. R. 179. 4. Chrispin Lwali, Saviour Chishimba v. Michael Chilufya Sata and Others, SCZ Judgment No. 7 of 2009. 5. Associated Chemicals Limited v. Hill & Delamain Zambia Limited and Ellis & Company (as a Firm) (1998) Z. R. 9 (S. C.). 6. Littlewoods Mail Order Stores Limited v. IRS (1984) 1 WLR 427. 7. Madison Investment, Property and Advisory Company Limited v. Peter Kanyinji, SCZ Selected Judgment No. 48 of 2018. 8. Ebbau Vale Urban District Council v. South Water Traffic Licencing Authority (1951) 2K 366. R2 9. Food Lovers Market Lusaka Limited and Others v. National Pension Scheme Authority, CAZ Appeal No. 019/2017. 1 0. African Milling Company Limited v. Chambala Sikazwe and Others, CAZ Appeal No. 173/ 2019. 11. John Paul Mwila Kasengele and Others v Zambia National Commercial Bank, SCZ Judgment No. 11 of 2000. 12. Ruharo Limited v. Jan Willem Kloppers, SCZ Appeal No. 188/2016. 13. Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116. 14. Emporium Fresh Foods Limited t/ a Food Lovers Market (in Receivership) and Others v. Graduare Property Development Limited and Lloyd Nkandela, CAZ Appeal No. 207/2022. 15. Corpus Legal Practitioners v. Mwanandani Holdings Limited SCZ Judgment No. 50 of 2014. 16. Mike Hamusonde Mweemba v. Obote Kasongo, Zambia State Insurance.(2006) ZR 10.1 Legislation referred to: 1. Order 14, Rule 5 (2) of the High Court Rules, Chapter 27 of the Laws of Zambia. 2. Order 15, rule 6 (2) (a) and Order 18, rule 15 (1) of the Rules of the Supreme Court of England and Wales, 1965 (1999 Edition) (the White Book). 3. The Companies Act, Chapter 388 of the Laws of Zambia. 4. The Companies Act No. 10 of 2017. 1. Introduction 1.1 On 5 th April, 2023, the Plaintiffs herein issued a Writ of Summons from the N dola District Registry against the Defendant, accompanied by a Statement of Claim for the following reliefs: R3 1. Payment of each Plaintiff's unpaid benefits 1n the sum of K14,170,073.24 for all the Plaintiffs; 11. The remittance of statutory contributions to NAPSA; 111. Payment of interest on K14, 170,073.24 according to each Plaintiff's amount of claim due; 1v. Costs for this action, and v. Payment of any further reliefs this Honourable Court may deem fit. 1.2 The Plaintiffs' claims as per the Statement of Claim are that they were at all material times employees of the Defendant's wholly owned company Bisonite Zambia Limited and the Defendant was at all material times the proprietor of Bisonite Zambia Limited and at all material times responsible for all the proceeds made by their appointed agents concerning Bisonite Zambia Limited. 1.3 Further, that the Defendant was at all material times responsible for the welfare of the Board, management and employees of Bisonite Zambia Limited and that the Defendant, at all times, had the final decision and say on all matters relating to Bisonite Zambia Limited. 1.4 Further, that the Defendant was solely responsible for appointing the management team and Board members for Bisonite Zambia Limited who were at the same time either management senior officials or Board members for the Defendant. R4 1.5 That, on or about 3 rd November, 2016, the Defendant or its agent terminated employment for the Plaintiffs and calculated their terminal benefits totaling the amount of K14, 801,785.31 and on or about 11th December, 2020, the Defendant or its agent, paid a total amount of K631,712.07 to all the Plaintiffs to share leaving a total balance of K14, 170,073.24, which is still outstanding 2. The Defendant's Defence 2.1 The Defendant entered an appearance to the Writ of Summons on 26th April, 2023 and filed a Defence 1n which it denied having ever wholly owned Bisonite Zambia Limited and that all the Plaintiffs herein were employees of Bisonite Zambia Limited and not the Defendant. 2.2 The Defendant further, stated that Bisonite Zambia Limited was a registered company with its own distinct personality at law and had its own procedures for the purposes of managing the company and appointing directors. 2.3 Further, that it was Bisonite Zambia Limited that terminated the Plaintiffs' contracts of employment and later calculated their terminal benefits. 2.4 The Defendant asserted, further, that Bisonite Zambia Limited underwent a voluntary separation and a liquidator was duly appointed to administer the affairs of the company. The Plaintiffs further averred that the RS creditors, including the Plaintiffs herein, met and appointed a liquidator in or around 2016. That, the money that was paid out in 2020 to the Plaintiffs by the liquidator of the company were proceeds of a sale of a piece of land which had belonged to Bisonite Zambia Limited. 2.5 The Defendant, lastly, denied owing the Plaintiffs the sum of K14, 170,073.24 and said it would aver at trial that it was merely a shareholder in Bisonite Zambia Limited and therefore, the Plaintiffs should be claiming from the liquidator and not from a shareholder. 3. The Plaintiffs' Reply 3.1 On 13th September, 2023, the Plaintiffs filed a Reply to the Defen~e wherein they asserted that contrary to the denial by the Defendant in its Defence, the Defendant was at all times the major, if not the only shareholder and parent company of Bisonite Zambia Limited. Further, that in as much as the Plaintiffs were initially employed by Bisonite Zambia Limited, then a subsidiary company of the Defendant, the parent company took over the responsibility of being the employer before and at the time of terminating the employment of the Plaintiffs and calculating their terminal benefits. 3.2 That, the undisputed evidence and facts on record are that Bisonite Zambia _Limited was a subsidiary company of the Defendant and that the Defendant was directly R6 involved in managing the affairs of Bisonite Zambia Limited and were the ones who were appointing the directors of Bisonite Zambia Limited. That, despite Bisonite Zambia Limited being incorporated and registered as a separate, legal entity, the Defendant being the parent ·company had removed the boundary of separation by actively and directly being involved 1n managing its subsidiary company up to the time of voluntary winding it up. 3.3 It was further contended in the Reply, that contrary to the Defendant's averments in its Defence, the undisputed evidence on the record is that the Defendant's Company Secretary and Senior Legal Officer signed the employment termination letters for the Plaintiffs and the Defendant's Chief Internal Auditor calculated and signed the terminal benefits statements for the Plaintiffs under the authority of the Defendant. 3.4 The Plaintiffs denied having put Bisonite Zambia Limited on voluntary separation or appointing a liquidator and averred that the evidence and facts on record are that the Defendant's management decided to voluntarily wind up their subsidiary company and were at the helm of managing all the affairs of Bisonite Zambia Limited until its voluntary closure. 3.5 Further, that contrary to the Defendant's assertions in its Defence, the Defendant was the major shareholder, if not the only owner of Bisonite Zambia Limited and was R7 actively at the helm of running the affairs of its subsidiary company to the extent of appointing the directors and management of Bisonite Zambia Limited whom it removed and finally, directly extended its control of Bisonite Zambia Limited by placing its Senior Legal Officer and Chief Internal Auditor to oversee the business of Bisonite Zambia Limited until it wound up its company voluntarily. 3.6 It was further stated that the Defendant, apart from being the parent company of Bisonite Zambia Limited, was the one who was solely appointing the directors to manage its subsidiary company and it finally took over the running of its company and voluntarily closed it. 3. 7 That, by vi!tue of the foregoing, the Defendant is solely responsible for settling the redundancy (separation) dues for the Plaintiffs because it is the one with the final mandate to answer over all the affairs of Bisonite Zambia Limited. 4. The Application ' 4.1 On 5 th October, 2023, the Defendant filed a Summons for an Order to Strike out the Defendant for Misjoinder pursuant to Order 14, Rule 5 (2) of the High Court Rules, Chapter 27 of the Laws of Zambia, accompanied by an Affidavit in Support and Skeleton Arguments in Support. 4.2 The Affidavit in Support was sworn by Sydney Chipoya, an Advocate of the High Court of Zambia and Legal RS Counsel at the Defendant Board seized with the conduct of the matter on behalf of the Defendant (hereinafter referred to as "the deponent"). 4.3 The deponent deposed that the Defendant is a statutory body established under the Public Service Pensions Act, No. 35 of 1996 and the Plaintiffs were in the employ of a company called PG Bisonite Zambia, which is a public company registered under the Patents and Companies Registration Agency ("PACRA") and was operating in Ndola. As evidence of this averment, a copy of the Certificate of Incorporation for PG Bisonite Plc was produced and marked "SC I". 4.4 That PG Bisonite Zambia Plc having been duly incorpor8:ted in 2003 in accordance with the Companies Act, has its own legal and separate identity from the Public Service Pensions Fund and through its directors entered into employment contracts with the Plaintiffs on various dates. 4.5 It was further averred that, in accordance with the Companies Act, PG Bisonite Zambia Plc underwent a voluntary separation and a liquidator was duly appointed to administer the affairs of the company. 4.6 That, sometime in 2020, the Liquidator sold a piece of land owned by PG Bisonite Plc and the Plaintiffs were paid their benefits. Further, that the Defendant was merely a shareholder in PG Bisonite Zambia Plc and R9 therefore, the Plaintiffs cannot make any claims against a shareholder but rather PG Bisonite Plc or its liquidator charged with managing the company affairs. 4. 7 Further, that the Plaintiffs' assertion that the Defendant traded as PG Bisonite Plc is not truthful and is calculated to mislead the Court because the Defendant was a mere shareholder in PG Bisonite Plc and equally suffered loss when the company was placed under liquidation. 4.8 That, the Plaintiffs herein have failed to show the Court that PG Bisonite Plc was a sham, a company used to commit fraud or that its directors knowingly breached their fiduciary duties. 4.9 On 19th October, 2023, the Plaintiffs filed their Affidavit in Opposition to Summons for an order to Strike out the Defendant for Misjoinder. The Affidavit in Opposition was sworn by George Chishimba, one of the Plaintiffs herein. It was his evidence that contrary to the averments in the Affidavit in Support, at the time of the Plaintiffs' termination, they were all employees of Bisonite Zambia Limited, a private company, and not PG Bisonite Zambia Plc, a public company. A copy of the Certificate of Incorporation of Bisonite Zambia Limited was produced and marked "GCl". 4.10 That, the Defendant had eonverted PG Bisonite Zambia Plc to Bisonite Zambia Limited, a private company, in 2003. In this regard, copies of the Application for RlO Conversion of Company and Special Resolution of the Board of Directors for change of company name and conversion of company from a public limited company to a private limited company were produced and marked "GC2" and "GC3", respectively. 4.11 It was further avowed that, contrary to the assertions of the Defendant in the Affidavit in Support, despite the Plaintiffs being employed by Bisonite Zambia Limited, the Defendant was in charge of running its subsidiary company and it was the management of the Defendant that terminated the Plaintiffs' employment whose letters of termination and terminal benefits statements were authenticated by the Defendant's Senior Legal Officer and Internal Chief Auditor, respectively. 4.12 It was further asserted that it was the Defendant itself which removed the veil of separate entity liability by removing the then Bisonite Zambia Limited management from being in charge when it took over the administration of its subsidiary company, Bisonite Zambia Limited. Further, that the Defendant's responsibility included the running and closing of Bisonite Zambia Limited voluntarily apart from terminating the Plaintiffs' employment and calculating their terminal benefits 4.13 Further, that contrary to the assertion in the Affidavit in Support, prior to the so-called appointment of the liquidator, the Defendant itself was in charge of the administration of Bisonite Zambia Limited under its R12 funds and fraud concerning the funds of Bisonite Zambia Limited. As evidence of this averment, copies of newspaper cuttings of 26th July, 2014 and 4 th April, 2016, were produced and marked "GC6"and "GC7", respectively. 4.17 That, the Defendant's management directly controlled and managed Bisonite Zambia Limited by assigning its senior employees to manage its subsidiary company. As proof that a single Chief Executive Officer (CEO) controlled the two entities, exhibits "GC2", "GC6", "GC8" and "GC9" were produced. 4.18 Further, that the assigned sen10r employees for the Defendant were being deployed to Bisonite Zambia Limited for some periods of time and after working at Bisonite Zambia Limited, they would go back to the parent company, the Defendant, interchangeably. 4.19 That, the current CEO at the Defendant institution, Mr. Francis Pindani Nyirenda, was also CEO for Bisonite Zambia Limited before it was voluntarily closed. That, despite Bisonite Zambia Limited being incorporated as a separate entity, the Defendant and Bisonite Zambia Limited operated as one in terms of management due to the fact that some senior employees were rotating between the said two institutions and some of them are still the ones running the Defendant. Rll Senior Legal Officer and Chief Internal Auditor, Mrs. Emmah Mwamba Kapuka and Mr. Lazarous Walaza Kamanga, respectively. 4.14 It was stated that Bisonite Zambia Limited was incorporated as a fundraising venture for the Defendant as the major shareholder and owner of the subsidiary company and the said two entities were being ran by one management. As evidence of this averment, a copy of a letter addressed to the Labour Commissioner regarding the liquidation of Bisonite Zambia Limited and unpaid salary arrears, typed on the Defendant's letter head, was produced and marked "GC5" In the Affidavit In Opposition to Affidavit in Support of Summons for an Order to Strike out Defendant for Misjoinder. 4.15 Further, that contrary to the Defendant's assertion, Bisonite Zambia Limited was incorporated to scale up finances of the Defendant as the major shareholder and as the parent company of the said subsidiary company and that is the reason why the Defendant allegedly suffered loss when Bisonite Zambia Limited closed as stated in the Affidavit in Support. That, having closed Bisonite Zambia Limited voluntarily, that is evidence enough that it had achieved its goal of making Bisonite Zambia Limited a money spinner for the Defendant. 4.16 It was alleged that, it is in the public domain that the Defendant's management/board with some named directors were being investigated for mismanagement of R13 5. Legal Arguments 5.1 The Respondent filed Skeleton Arguments in Support of the Summons for an Order to Strike Out the Defendant for Misjoinder while the Plaintiffs did not file any. 5.2 It was submitted by the Defendant that the application before this Court has been made pursuant to Order 14, rule 5 (2) of the High Court Rules, Chapter 27 of the Laws of Zambia which gives the Court or a Judge the power, at any stage of the proceedings, and on such terms as appear to the Court or a Judge to be just, to order that the name or names of any party or parties, whether as plaintiffs or defendants, improperly joined, be struck out. 5.3 The Defendant argued that the above provision is fortified by Order ·15, rule 6 (2) (a) of the Rules of the Supreme Court of England and Wales, 1965 ( 1999 Edition) (the White Book), which provides that the Court may, at any stage of the proceedings, in any cause or matter, on such terms as it thinks just and either of its own motion or on application, order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party. 5.4 That, the above prov1s1ons are proof that this Court .is well vested with the auth0rity to grant the Defendant's application herein. R14 5.5 Further, that Section 16 of the Companies Act No. 10 of 2017 provides as follows: A company registered in accordance with this Act, acquires a separate legal status, with the name by which it is registered, and shall continue to exist as a corporate until it is removed from the Register of Companies 5.6 It was also submitted that, 1n the landmark case of Salomon v. Salomon 1 , the House of Lords held as follows: As the company was duly incorporated, it is an independent person with its rights and liabilities appropriate to itself, and that "the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are". 5. 7 That, thus, the legal fiction of "corporate veil" between the company and the its owners/ controllers was firmly created by the Salomon case. It was further submitted that the legal fiction of corporate veil enunciates that a company has a legal personality separate and independent from the identity of its shareholders. 5.8 Hence, any rights, obligations or liabilities of a company are distinct from those of its shareholders, where the latter are responsible only to the extent of their capital contributions, known as "limited liability". That, this corporate fiction was devised to enable groups of individuals to pursue an economic purpose as a single unit, without exposure to risks or liabilities in one's RlS personal capacity. Accordingly, a company can own property, execute contracts, raise debt, make investments and assume other rights and obligations, independent of its members. Moreover, a company can sue and be sued. 5.9 It was argued that the Defendant was created by an Act of Parliament, Act No. 35 of 1996. On the other hand, PG Bisonite Plc was incorporated as a company on 15th April, 2003 under the Companies Act and as per Section 16 of the Companies Act, PG Bisonite acquired a separate legal status when it was incorporated in 2003, Therefore, PG Bisonite is capable of suing and being sued in its capacity. 5.10 It was further submitted that in any matter that a plaintiff de~ides to institute, a cause of action must be established against the defendant the matter is instituted against. That, it is a trite and cardinal rule that a statement of claim must contain material facts and those material facts must disclose a reasonable cause of action against the defendant. 5. 11 That, in the case of Letang v. Cooper2 , a cause of action was defined as: "A factual situation, the existence of which entitles one person to obtain from the Court a remedy against another person." (Emphasis added by the Defendant) 5. 12 Further, that, in the case of Wise v . EF Hervey Limited3 , it was held that a cause of action is disclosed Rl6 only when a factual situation 1s alleged which contains facts upon which a party can attach liability to the other or upon which he can establish a right or entitlement to a judgment in his favour against the other. (emphasis added). 5.13 It was further submitted that, it was elaborated in the case of Chrispin Lwali, Saviour Chishimba v. Michael Chilufya Sata and Others4 , that a cause of action must be endorsed and a person seeking relief must indicate the nature and cause of action. The applicant must show why he is aggrieved by a particular defendant, if the statement of claim endorses no cause of action the plaintiff is not entitled to judgment. 5.14 It was argued that a thorough perusal of the Plaintiffs' Statement of Claim shows that they were in the employ of PG Bisonite Zambia Plc, which company has a separate legal personality and is capable of being sued in its own capacity. That, it will therefore, be very prejudicial to the Defendant who was a mere shareholder in PG Bisonite Zambia Plc as it will suffer great financial expenses 1n defending the action. That, in the premises, the Plaintiffs have failed to establish any cause of action against the Defendant and it is the Defendant's prayer to be struck off as a party for misjoinder. That, the Defendant further prays for costs for improperly and without cause, being added to the matter. R17 5.15 It was submitted with regard to the reliefs claimed, that Order 18, Rule 15 (1) of the Rules of the Supreme Court of England and Wales, 1965 (1999 Edition) provides that a statement of claim must state specifically the relief or remedy which the plaintiff claims; but costs need not be specifically claimed. 5.16 That, even though the Plaintiffs' Statement of Claim has outlined reliefs and remedies, none of the reliefs or remedies claimed are against the Defendant. That, consequently, the Defendant prays that this Court orders a misjoinder and strikes off the Defendant from the proceedings. 5.17 It was argued that, since the Defendant has demonstrated that no cause of action has been established against it or any relief or remedy has been sought against it, the Plaintiffs will not suffer any prejudice by the granting of this application in favour of the Defendant. Therefore, this is a proper case for the Court to order a misj oinder in favour of the Defendant. 6. The Hearing 6.1 The application came up for hearing on 25th October, 2023. Mr. Chipoya, In-House Counsel for the Defendant, submitted that the Defendant would rely on the Summons, Affidavit in Support and Skeleton Arguments, all filed on 5 th October, 2023. Rl8 6.2 Mr. Elijah Chama, one of the Plaintiffs herein, submitted on behalf of the Plaintiffs that they would rely on the Affidavit in Opposition filed into Court on 19th October, 2023 but added that the application has no merit in totality due to the fact that there is no corresponding evidence in the Defendant's assertions. 6 .3 Further, that the Defendant took over the running and administration of Bisonite Zambia Limited and was supervising the accountants in the operations of Bisonite Zambia Limited. Further, that the CEO for the Defendant, Mr. Phiri, was also the Board Chairperson of Bisonite Zambia Limited and that this happened after the Defendant had pumped in a colossal amount of money for operations. 6.4 That, in the premises, it is the Plaintiffs' prayer that this Court dismisses the Defendant's application with costs for lack of merit. 6.5 In reply, Mr. Chipoya submitted that he had nothing to add as all the issues the Defendant had raised had been covered in its Skeleton Arguments. 7. Analysis and determination of the Application 7. 1 The application before th is Court is for an order to strike out the Defendant from these proceedings for misjoinder, pursuant to Order 14, Rule 5 (2) of the High Court Rules, Chapter 27 of the Laws of Zambia, fortified by Order 15, rule 6 (2) (a) of the Rules of the Supreme Court of R19 England and Wales, 1965 (1999 Edition) (the White Book). 7.2 Order 14, Rule 5 (2) of the High Court Rules gives the Court or a Judge the power, at any stage of the proceedings, and on such terms as appear to the Court or a Judge to be just, to order that the name or names of any party or parties, whether as plaintiffs or defendants, improperly joined, be struck out. 7.3 The question which this Court must answer is whether on the facts before the Court, the Defendant has been improperly joined to these proceedings. 7.4 As correctly pointed out by the Defendant, when a company is in_corporated and registered in terms of the Companies Act, it becomes a distinct, artificial person at law, distinct from its shareholders and other entities. This was confirmed by the Supreme Court of Zambia in Associated Chemicals Limited v. Hill & Delamain Zambia Limited and Ellis & Company (as a Firm)5 held that "A principle of the law which is now too entrenched to require elaboration is the corporate existence of a company as a distinct person." (Emphasis Mine) 7.5 Although this rule on separate legal personality is now embodied in section 16 of the Companies Act which was referred to by the Defendant, I should point out that the Act did not apply at the material time of the dispute. R20 7.6 The rule relating to separate legal personality is not absolute and the corporate veil can be lifted. In Littlewoods Mail Order Stores Limited v. IRS,6 the court held that "Incorporation does not fully cast a veil over personality of a limited company which the courts cannot say. The court can and often do pull off the mask. They look to see what really lies behind". (Emphasis Mine) 7. 7 In other words, in appropriate circumstances, the veil of incorporation may be pierced or lifted to hold the controllers of the company to account. According to the seminal decision of Madison Investment, Property and Advisory Company Limited v Peter Kanyinji7 the veil may be pierced where an attempt is made by those truly in control ·of a company to seek to evade or conceal an obligation to a third party. Further, the court clarified that the veil may be lifted or pierced where: - 7. 7. 1 the veil of incorporation is being used for some fraudulent or improper purpose; 7. 7. 2 it becomes necessary to determine the character of the company; 7.7.3 a trust and agency relationship is involved; or 7.7.4 a group of companies are operating in a single economic unit and there 1s an agency relationship involved; R21 7.7.5 the interests of third parties are at stake. 7.8 Even where a company operates within a group of companies, each company in the group 1s in law a separate legal entity with its own separate legal personality and its own rights, privileges, duties and liabilities separate and distinct from those of the other subsidiary companies. 7.9 The Supreme Court in Peter Kanyinji (supra) held, inter alia, that "The law takes the position that companies in a group are separate entities and are not agents of each other. At a general level, therefore, the effect of the rule in Salomon v. Salomon & Co. as it relates to individual subsidiaries within a conglomerate or group of companies is that they will be treated as separate entities and the parent company cannot be made liable for their legal obligations. " (Emphasis Mine) 7.10 The fact that a group of companies effectively forms one economic unit does not necessarily mean that the separate identity of each company is ignored and that the group is treated as one entity. From the Peter Kanyinji (supra) decision the Supreme Court was emphatic that the acts of a holding company are not per se the acts of its subsidiary companies, or vice versa, since the holding company is a separate legal entity from its subsidiary. · 7.11 However, in certain, albeit limited instances, companies that operate as one may be treated as one entity, particularly where they are managed, administered and R22 operate as a single economic unit and there is evidence of an agency relationship. In Peter Kanyinji (supra), the Supreme Court stated thus: "One exception to this has to do with agency. Where there is an express agency relationship between a parent and a subsidiary - the veil of incorporation could be pierced." (Emphasis Mine) 7 .12 The Supreme Court was clear that where there is an agency relationship between two or more companies, the veil of incorporation may be lifted and the entities may be treated as one for the purposes of ascribing liability. The Court in Peter Kanyinji (supra) made reference to the case of Ebbau Vale Urban District Council v. South Water Traffic Licencing Authority, 8 where the English Court of Appeal considered the relationship between the parent and a wholly owned subsidiary company. Cohen J., pertinently observed that: "under the ordinary rules of law, a parent company and a subsidiary company, even a hundred percent subsidiary company, are distinct legal entities, and in the absence of a contract of agency between the two companies one cannot be said to be the agent of the other. " (Emphasis Mine) 7. 13 The above underscores the fact that two or more companies cannot be treated as one, except where there is an agency relationship. 7. 14 The Court of Appeal in Food Lovers and Others v. National Pension Scheme Authority, 9 held that: R23 "Yet another instance in which the corporate veil will be lifted is one where there are several companies in a group. The courts may consider the companies as one. It can be seen that the corporate shell will in exceptional instances be cracked open, where grave iniustice will be int],icted on a party affected if the corporate curtain remains undisturbed." (Emphasis Mine) 7.15 From the above authorities, it is clear that whilst companies are separate legal entities, they may be treated as one economic unit where there is proof that there is an agency relationship between various entities and injustice will occur if they are not treated as one entity. 7.16 I am cognisant of the position of the law as stated in the Supreme Court case of Peter Kanyinji (supra), that each company in a group of companies is a separate legal entity with its own separate legal personality and rights, privileges, duties and liabilities separate from those of the other member companies. Therefore, the fact that a group of companies effectively forms one economic unit does not mean that the separate identity of each company is to be ignored and that the group is to be treated as one entity. 7.17 However, where it can be shown that a subsidiary company such as Bisonite Zambia, acted as an agent of its holding entity, then on ordinary agency principles, liability will attach to the holding entity, as principal of the subsidiary company\ It is thus, imperative to establish if based on the principles of agency law, Bisonite Zambia was an agent of the Defendant. R24 7 . 18 Agency refers to a relationship where a person ('the agent") has legal authority to bind another ("the principal"), by entering into a contract with a third party on that principal's behalf. An agency relationship can arise and be formed in a variety of ways. In African Milling Company Limited v. Chambala Sikazwe and Others, 10 the Court of Appeal confirmed that: "The case of agency is a unique one because an agent will ordinarily bind his principal provided he acted with authority; express or apparent. The key to determining whether a principal is liable for contracts made by his agent is authority. There are three types of authority, express, implied and apparent. In the circumstances of this case, we are concerned with apparent authority. In agency relationship, the agent's action in dealing with third party will affect the legal rights of the principal. What the third party knows about the agency agreement is irrelevant to the authority to act. The authority runs from principal to agent." (Emphasis Mine) 7 .19 From the above, it is clear that an agency relationship may arise by:- 7.19.1 Actual authority by express appointment/ agreement - where the agent is entitled to exercise the powers actually given to him/her under a contract of agency and will bind the principal by the exercise of these powers. 7.19.2 Actual authority by implication/implied agreement - which occurs where authority is R25 conferred by implication. Agency may be implied from the conduct of the parties or the circumstances. The most common way this occurs is by an unwritten request, or by implication from the recognition of the principal of, or from the acquiescence in, the acts of another. 7.19.3 Apparent or ostensible authority - Apparent authority is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal's conduct, that the principal granted such power to the agent. 7.20 Actual authority by express agreement 1n the circumstances of this case could be gleaned from Bisonite Zambia's Articles of Association which, according to Sections 3 and 26 of the Companies Act, are the mandatory internal governing rules that bind shareholders, such as the Defendant and other shareholders in Bisonite Zambia. 7. 21 In this case, I have not had sight of the Bisoni te Zambia's Articles of Association or any shareholders' agreement or other document that would allow me to make such a determination of express authority. This notwithstanding, I form the view that, at the very least, Bisonite Zambia had either actual authority by implication or implied R26 authority to act agent of the Defendant, based on the manner in which the Defendant acted in relation to Bisonite Zambia. This can be gathered from the manner in which Bisonite Zambia was administered by the Defendant. 7 .22 It is an undisputed point of law and corporate governance that the shareholders are responsible for appointing the directors of a company, who thereafter appoint the senior executive officers, i.e. management, unless the articles of association provide otherwise. This is underscored by Section 206 of the Companies Act, Chapter 388 of the Laws of Zambia which was applicable at time. It is worth noting that Section 85 ( 1) of the current Companies Act retains the position from the old Act and expressly states that appointment of directors is by ordinary resolution. 7. 23 The circumstances of the case before me are peculiar in that it appears that the Defendant was not only solely responsible for appointing the Board members of Bisonite Zambia Limited, but also appointing the management team. 7.24 Ordinarily a shareholder's role is, subject to the articles of association, limited to, inter alia, approving major decisions and transactions and appointing directors, but the apparent extension of the Defendant's role by dictating the members of senior management and playing a key role in termination of employment, including assigning its employees like Mrs. Emmah Mwamba R27 Kapuka and Mr. Lazarous Walaza Kamanga to administer Bisonite Zambia, is telling. 7.25 The Supreme Court had previously stated in cases such as, John Paul Mwila Kasengele and Others v. Zambia National Commercial Bank11 , that shareholders enjoy and have overriding authority over the affairs of the company including over decisions of the Board of Directors and managers. This was notwithstanding that Section 215 of the now repealed Companies Act, Chapter 388 of the Laws of Zambia, which was applicable at the time, expressly provided that the business of a company was to be managed by the directors. 7.26 The subsequent decision of the Supreme Court in Ruharo Limited v. Jan Willem Kloppers 12 , which was given when the repealed Companies Act was in effect, guided as follows:- "Firstly, we must start our discourse by rejecting the appellant's assertion which seems to suggest that shareholders have overriding authority over company affairs to the extent of usurping the power which by statute, is vested in directors." 7 .27 The Ruharo decision appeared to depart from the earlier Kasengele decision on the role of shareholders in the affairs of an entity. I should state, albeit obiter, that Section 131 of the current Companies Act No. 10 of 2017, clarifies the position on the role of shareholders by stating that shareholders can only interfere with the affairs of the company where permitted by the Act and R28 the articles of association. Directors are thus, the sole party entrusted with managing a company, thereby abrogating the old rule that they could override the directors. 7.28 Despite the law guiding on the role of directors, the level of intrusion into the affairs of Bisonite Zambia by the Defendant, demonstrates that the Defendant was the principal of Bisonite Zambia, seeking to control most, if not all of Bisonite Zambia's affairs, despite administration of Bisonite Zambia being the sole preserve of the directors. 7.29 It was therefore, the mandate of directors of Bisonite Zambia to manage the entity but the evidence on record seems to -suggest that the Defendant had overreaching powers in the entity, confirming the agency relationship. The Defendant has not disputed that the Board and management of Bisonite Zambia were at the same time either management senior officials or Board members for the Defendant. 7. 30 The fact that Francis Pindani Nyirenda was Managing Director of both the Defendant and Bisonite Zambia coupled with the fact that other senior management of the Defendant entity, such as Mrs. Emmah Mwamba Kapuka and Mr. Lazarous W alaza Kamanga, also held roles in Bisonite Zambia, leads to a reasonable inference that Bisonite Zambia was an agent of the Defendant, R29 with the same management 1n both entities geared to protecting the Defendant's interests on its behalf. 7.31 In the case of Smith, Stone & Knight Ltd v. Birmingham Corporation, Smith, Stone & Knight Ltd, 13 Smith, Stone & Knight Limited owned some land, and a subsidiary company operated on this land. Birmingham Corporation issued a compulsory purchase order on this land. Any company which owned the land would be paid for it, and the Corporation would reasonably compensate any owner for the business they ran on the land. Since the subsidiary company did not own the land, Birmingham Corporation claimed they were entitled to no compensation. The Court held that the subsidiary company was an agent and Birmingham Corporatien was obliged to pay compensation. 7.32 According to the Smith, Stone & Knight Ltd (supra) decision, in considering whether a subsidiary is carrying on its business as the parent company's business or as the subsidiary's own business, there is a six-pronged inquiry, namely: 7.32.1 Were profits of the business treated as profits of the parent? 7 .32.2 Did the parent appoint persons to carry on the business? 7.32.3 Was the parent the 'head and brain' of the R30 trading venture? 7.32.4 Did the parent govern the adventure? 7.32.5 Did the parent make profits via that direction? 7.32.6 Was the parent in effectual and constant control? 7.33 From the record, applying the above tests to the present case, it would appear that all six questions are answered in the affirmative. Bisonite Zambia was incorporated and managed with a view to making profits for the Defendant, as part of its investment mandate of administering pensioners' contributions. It is for this reason that the Defendant ·admitted on record, that when Bisonite Zambia suffered losses, the Defendant also suffered losses. This in my view, assists in outlining the agency relationship between the two entities. 7 .34 The Defendant managed and governed the entity not only as majority shareholder, but through management, and was thus, in effective control of the entity. The fact that the management of the Defendant and Bisonite Zambia were similar or the same, indicates to me that Bisonite Zambia was an agent of the Defendant. This is proven by the fact that the Defendant deployed management to administer Bisonite Zambia with a view to controlling its R31 affairs for and on behalf, and for the benefit of the Defendant. 7 .35 It is clear that Bisonite Zambia was not operating solely on its own behalf, but for the benefit of and as an agent of the Defendant. This is evident from the undisputed facts that Bisonite Zambia was tasked with scaling up the Defendant's income and the Defendant suffered losses when Bisonite Zambia was liquidated. 7.36 Further, the undisputed fact that the termination process of the Plaintiffs was administered by the Defendant's agents, such as the Defendant's Senior Legal Officer and Chief Internal Auditor, proves the agency relationship between Bisonite Zambia and the Defendant. 7.37 In my estimation, considering the fact that the Defendant was not only a majority shareholder of Bisonite Zambia but also controlled its affairs with the same management and seemingly directed its affairs, as gleaned from the letter to the Ministry of Labour; and the fact that the termination of the Plaintiffs was approved by the Defendant, it is clear that Bisonite Zambia was an agent acting for its principal, the Defendant. The degree of close control exercised by the principal attested to this. 7.38 Further, the Plaintiffs have provided evidence that the Defendant and Bisonite Zambia were in an agency relationship. To illustrate, the eighty-two (82) termination letters on record show that the Plaintiffs were signed off R32 by Mrs. Emmah Mwamba-Kapuka, 1n her capacity as Administrator, when she served the role of Senior Legal Officer in the Defendant. This demonstrates that Bisonite Zambia was an agent of the Defendant, which controlled the affairs of Bisonite Zambia, which operated as an investment/business agent of the Defendant. 7.39 Further and more glaringly, is the exhibit marked "GCS". The said exhibit is a letter to the Labour Commissioner relating to affairs of Bisonite Zambia, written on the letterhead of the Public Service Pension Fund, the Defendant. This demonstrates to me that Bisonite Zambia was indeed an agent of the Defendant, with those responsible for managing and administering it being at the behest of the Defendant. 7. 40 The Defendant asserted in the letter to the Ministry of Labour that Bisonite Zambia and the Defendant were separate legal entities and the decision to terminate the Plaintiffs was made by Bisonite and not the Defendant. Whilst they were separate entities, the Defendant has not disputed that the management of Bisonite Zambia was similar, if not the same, as the management of the Defendant. 7.41 Where two entities are managed and administered by the same people, this is clear evidence of operation under a single economic unit based on agency relationship that justifies lifting of the corporate veil to hold the Defendant liable for the acts of Bisonite Zambia. The fact that the R33 Defendant was speaking on behalf of Bisonite Zambia's Board 1n "GCS", underscores the point that the Defendant and Bisonite Zambia could be held liable jointly and severally as one single entity. 7.42 The facts on record elucidate an agency relationship between the Defendant and Bisonite Zambia and satisfy the test from Smith, Stone & Knight Ltd (supra) to hold the holding company liable under the principles and exceptions relating to lifting the veil where the entities operate as a single economic unit and agency is established. 7.43 As an agency relationship is established, the principal and agent are seen as one and the same in the eyes of the law. In my view, the Defendant and Bisonite Zambia were not independent entities that could be treated as separate entities based on the above. 7.44 I wish to point out that p1erc1ng and lifting of the corporate veil is not limited to cases of fraud, but can be done in the manner discussed above. In Emporium Fresh Foods Limited t/ a Food Lovers Market (in Receivership) and Others v. Graduare Property Development Limited and Lloyd Nkandela, 14 the Court of Appeal guided that:- "A court, even without reference to actual fraud, can pierce the veil of a corporate entity. The substance, as opposed to the Jann in arriving at the true facts and liability, should be attributed where it rightly lies." R34 7.45 The holding above highlights that a court can look behind the veil of incorporation to determine who is truly in control and who should face liability. In the circumstances of this case, I have determined that the Defendant had sufficient control, as principal of its agent Bisonite Zambia, under a single economic unit. 7.46 The substratum of the above, is that the relationship between the Defendant and Bisonite Zambia satisfies the exception to lifting the veil for entities in a single economic unit from the case authorities of Peter Kanyinji (supra) and Smith, Stone & Knight Ltd (supra), as an exception to the separate legal personality rule based on agency and single economic unit. 7. 4 7 Having established that there was an agency relationship between the Defendant and Bisonite Zambia, I am of the view that under the single economic unit exception established in the Peter Kanyinji (supra) case, the Defendant could be joined to these proceedings as the principal to Bisonite Zambia. 7.48 In Corpus Legal Practitioners v Mwanandani Holdings Limited, 15 the Supreme Court held that:- " .. . In order for the Court to determine the matter, it is necessary that all the persons who must help the Court to come to a ;1-!-st decision are ;oined and made parties to the case. (Emphasis Mine) R35 7.49 In the above case the Supreme Court was of the view that all parties who may be entitled to, or who may claim some share or interest in the subject matter of the case or who may be likely to be affected by the result of the case should be joined to the proceedings in order to assist the court in coming up with a just decision. A similar holding was reached in Mike Hamusonde Mweemba v. Obote Kasongo, Zambia State Insurance. 16 7.50 In the present case, a misjoinder would not be appropriate because clearly the Defendant has an interest in the subject of the dispute before the Court. In the circumstances, I have no hesitation in holding that the Defendant has a stake in these proceedings and it will be necessary for them to be part of these proceedings to ensure a f-air and equitable outcome for all parties, in the interests of justice. 7. 51 As such, I find and hold that the Defendant was correctly joined to these proceedings as an exception to the rule relating to separate legal personality. For the above reasons, the Defendant's application for misjoinder is devoid of merit and is here by dismissed. 8. Conclusion and Orders 8.1 The preliminary issue relating to misjoinder having failed, I hereby order that the matter shall come up for status conference on 13th February, 2024, at 11 :00 hours. R36 8. 2 The costs of this application shall be borne by the Defendant. 8.3 Leave to appeal is granted. Delivered at Ndola this 31 st day of January, 2024 . ... ~ .... Winnie Sithole Mwenda (Dr.) HIGH COURT JUDGE