Herpworth Suppliers Limited v Innovative Material Systems Division of Liquid Waste Technology LLC (Appeal No. 178 of 2023) [2024] ZMCA 144 (4 July 2024)

IN THE COURT OF APPEAL OF ZAMBIA Appeal No. 178 of 2023 HOLDEN AT LUSAKA {Civil Jurisdiction) BETWEEN: HERPWORTH SUPPLIERS LIMITED U 4 j :_;~ 2024 APPELLANT AND INNOVATIVE MATERIAL SYSTEMS DIVISION OF LIQUID WASTE TECHNOLOGY, LLC RESPOND ENT CORAM: SIAVWAPA JP, CHISHIMBA & PATEL, JJA On 13th May & 4th July 2024 For the Appellant: Mr. M . Haimbe Messrs. Haimbe Lega l Practitioners For the Respondent: Mrs. M. S. Namwila-Mwala Messrs. Corpus Lega I Practit ioners JUDGMENT Patel, JA, delivered the Judgment of the Court. Jl Cases Refe rred to : 1. Creasy v Breachwood Motors Limited (1999) 2 BBC 486 2. Ethiopian Airlines Limited v Sunbird Safaris Limited, Sharma's Investment Hold ing Limited Vijay Babu la I Sharm a {2007) Z. R . 235 3. Clement Chuuya and Hilda Chuuya v JJ Hankwena (2002) ZR 11 4. In re Diplock. Diplock v Wintle (And Associated Actions) (1948) Ch. D 465 5. Kitwe Supermarket Limited v Southern African Trade- 2007 / HK/243 6. Southern Cross Company Limited v None Syst ems Technology Limited - {201 2) 1 ZR 524 7. Madison Investment Property and Advisory Company Limited v Peter Ka nyi nj i- SCZ Judgme nt No 48 of 2018 8. Salomon v. Salomon & Co. Ltd (1897) AC 22, {1895-9) ALL ER Rep 33. 9. Sithole v Zambia State Lotteries Board (1975) ZR 106. 10. Wilson Masauso Zulu v Avondale Housing Project Limited (1982} ZR 175 11. Prest v Petrode l Resources Limited {2013) UKS C 34 12. Emporium Fresh Foods Limited (T/A Foodlovers Market (In Receivership) and others v Graduare Property Development Limited and another- CAZ Appeal No. 207/2022 13. Mol ly Pelekamoyo v Ardy Mnjaidi -CAZ Appeal No. 265 of 2021 14. Molly P. Pe lekamoyo v New Plaza Enterprises Lim ited - CAZ Appeal No. 147 of 2021 Legislation & Rules Referred to : 1. The Corporate Insolvency Act No. 9 of 2017. 2. The Rules of t he Supreme Court of England 1965 (White Book 1999 Ed it ion). 3. The Companies Act Chapt er 388 of the Laws of Zambia (repealed) J2 Texts referred to: 1. R. Blankfein Gates, 'Understand ing Zambian Corporate Insolvency Law' , 2019. 2. Halsbury's Laws of England 4th Edition, Volume 7 (1). 3. L. C. Gower, 'The Principles of Modern Company Law' (3rd Edition, Stevens & Sons). 1.0 INTRODUCTION 1.1 This is an appeal against the post-Judgment Ruling of Mwenda-Zimba K. E. J, delivered on 31st May 2022, relating to two applications made by the Respondent, (the Plaintiff in the lower Court), for a charging order and for an order, that James Chungu and Babsie Chungu, directors in the ist Defendant, (the Appellant in this Court), be held personally liable for payment of the judgment debt. 1.2 This appeal brings to the fore, a cardinal issue of interest, in applications to pierce the corporate veil, and in what limited circumstances, they may be allowed . 1.3 It also requires, although we have not been asked to do so, to pronounce on the propriety of charging orders in our Jurisdiction. 2.0 BACKGROUND 2.1 For the purpose of this section, we will address the Parties as they we re in the Court below. J3 2.2 On 22nd May 2019, the Plaintiff commenced an action in the Commercial Division of the High Court, by way of Writ of Summons against the Defendant, seeking fifteen reliefs, details of which are seen on page 55 of the Record of Appeal (RoA}. This appeal will look at the first six rel iefs, which are noted as follows: The Plaintiff's claim is for: 1. A declaration, that the Defendant is liable to account to the Plaintiff, for the sum of USDl,630,107.35 or such other sum as the Court thinks fit on the ground of breach of fiduciary duty of breach of trust; 2. An account, as at 17 April 2019, of all proceeds received by the Defendant, and/or its officers, servants or agents, from the Ministry of Transport and Communications of the Republic of Zambia, on behalf of the Joint Venture Partnership, by virtue of the Joint Venture Agreement dated 3 June 2014, between the Plaintiff and the Defendant, and the manner in which the Defendant or its officers, servants or agents applied the sa id money; 3. An order for payment by the Defendant to the Plaintiff the sum of USDl,630,107.35 or any other sum found to be due to the Plaintiff on the taking of account; 4. A declaration that the Defendant and its officers, servants or agents, are constructive trustees of such of the Plai nt iff's property in the sum of USDl,630,107.35, as were in the possession, and, or control of the Defendant; J4 5. Further, a declaration that the Plaintiff is equitably entitled to trace the sum of USDl, 630, 107.35 that the Defendant held in trust for the Plaintiff; 6. An order to trace the sum of USDl,630,107.35 received and held in trust by the Defendant on behalf of the Plaintiff. 2.3 Of relevance to the appeal, is the undisputed fact, that the Plaintiff and Defendant, entered into a Joint Venture Agreement, (The JVA), for the supply and delivery of 5 dredging machines to the Ministry of Transport, Works and Supply and Communications. The contract value was USO 7,560,000.00 apportioned as to USO 4,392,200.00 and USO 3,167,800.00 for the Plaintiff and Defendant respectively. 2.4 The Plaintiff, having supplied the 5 dredgers, was paid piece-mea l by the Defendant, who upon completion of the JVA, accounted for part of the monies to the Plaintiff, and the balance due and payable to the Plaintiff, was the sum of USO 1,630,017.35 which formed the subject of the action in the lower Court. 2.5 Upon application by the Plaintiff, th e lower Court entered Judgme nt on Admission, for the sum of USO 1,630,017.35 on 5th February 2020. 2.6 At the conclusion of the trial, which included a counterclaim by the Defendant, the lower Cou rt delivered its judgment, on 18th August 2021, and granted the following orders, which are of relevance to the appeal: a. The Plaintiff had proved its case against the Defendant for breach of contract. JS b. The Defendant had breached its fiduciary duty to the Plaintiff, by failing to disclose payments made and transmitting them to the Plaintiff. c. The lower Court, in the exercise of its discretion, and having found that the Defendant had breached its fiduciary duty to the Plaintiff, imposed a constructive trust, as an equitable alternative remedy, to satisfy the ends of justice and good conscious, and found the Defendant liable to account to the Plaintiff in the sum of USO 1,630,107.35. d. The Plaintiff was granted an Order for equitable tracing, to trace its share, in equity, within the confines of the law. 2.7 In its final determination, the lower Court ordered as follows: a. The 1st Defendant is ordered to pay the Plaintiff the sum adjudged in the Judgment on Admission of USD1, 630,107.35 plus interest within 30 days from today if not already paid failing which the 1st Defendant shall be deemed to be a constructive trustee of the Plaintiff. To this end, the Plaintiff will be at liberty to enforce the remedy of a constructive trust against the 1st Defendant and trace the Judgment sum plus interest from the 1st Defendant using any of the bank accounts belonging to the 1st Defendant where the 2nd Defendant transferred payments to. The Plaintiff shall be at liberty to trace the money into the hands of anyone except a bonafide purchaser for value. J6 b. I award the Plaintiff damages for breach of contract against the 1st Defendant. These are to be assessed by the Registrar of this Court. c. The 1st Defendant shall pay the costs of the Plaintiff and 2nd Defendant. The costs are to be taxed in default of agreement. 2.8 It is important to note that although reference is made to the 2nd Defendant, being the Attorney General, there was no liability attached and the matter remained in the lower Court, as it does on appeal, as being one, essentially between the Plaintiff and the Defenda nt. 2.9 It is noted that the Judgment on admission was not appealed and remains binding on the Defendant. It is also cardinal to note that the Judgment of the lower Court, including all orders narrated in paragraphs 2.5 to 2.7 above, were not appealed. 3.0 THE POST-JUDGMENT APPLICATIONS IN THE LOWER COURT 3.1 The Plaintiff filed its application at page 169 of the RoA, by summons, for an order, that James Chungu and Babsie Chungu, being directors of the Defendant, be held personally liable for payment of the judgment sum in accordance with the Judgment dated 18th August 2021, pursuant to section 175 (1) of the Corporate Insolvency Act (CIA) 1 and for a Charging Order nisi pursuant to Order 50 rule 1 of the Rules of the Supreme Court of England 2 • The supporting Affidavit, skeleton arguments and the Charging Order Nisi are noted on pages 171 to 460 of volume 2 of the RoA. J7 3.2 The Affidavits in opposition to holding the directors personally liab le, and in opposit ion to charging order nisi, and list of authorit ies and ske leton arguments are noted on pages 461 to 536 of volume 2 & 3 of the RoA. 3.3 The Affid avit and ske let o n argu ments in Reply, are noted at pages 537 to 555 along wit h t he proceedings in t he lower Court, from pages 556 to 762 of volume 3 of the RoA respectively. 4.0 DECISION OF THE COURT BELOW 4.1 The learned t rial Judge cons ide red th e applications, t he Parties' affidavits, oral and w ritten arguments and the authorities cited, fro m t he pleadings as noted above. 4.2 To begin w ith, th e learned Judge considered the applicat ion t o lift the corporat e veil and for an o rde r t hat t he direct o rs of t he Appe ll ant, name ly, James Ch ungu and Babsie Chungu be held personally liable for the judgment sum pursuant to Section 175 (1) of the CIA1 . 4.3 The learned Judge, established t hat what was in d ispute, was whether the actions by th e directors of t he Appe llant, met the test fo r lifting the corporate veil. 4.4 The learned Judge noted that the Appe llant did not deny fail ing to pay the j udgme nt sum . She not ed that the directors made various personal cash w ithdrawals fro m t he accou nt, fol lowi ng t he deposit of t he mo ney and did not rem it the mon ies in f ull owed t o the Respondent. J8 4.5 In view of the circumstances of the case, the learned Judge took the view, that the actions of the directors, warranted the lifting of the corporate veil. She placed reliance on the holding in the case of Creasy v Breachwood Motors Limited,1 where the court pierced the corporate veil, as the business of a Defendant company in litigation, was transferred to an associated company, to leave the company without any assets. In her opinion, this is what happened in casu. 4.6 In the learned Judge's view, the behavior by the Appellant's directors, amounted to carrying on the business with intent to defraud creditors. She placed further reliance on the case of Ethiopian Airlines Limited v Sunbird Safaris Limited, Sharma's Investment Holding Limited Vijay Babula! Sharma2, in which the director was aware of the day-to-day affairs of the company, on the one hand, and the debt owed to the Plaintiff on the other hand, but failed to pay. 4.7 The learned Judge arrived at the conclusion, that the test for lifting the corporate veil, had been met and found it to be a suitable case where the Court could exercise its powers under Section 175 of the CIA1 . Consequently, she held the two directors of the Appellant liable for the judgment debt. 4.8 The learned Judge, in addressing the Respondent's application for a charging order, pursuant to Order 50 Rule 1 of the Rules of the Supreme Court2 , referred to the case of Clement Chuuya and Hilda Chuuya v JJ Hankwena3, and stated that a judgment creditor in possession of a charging order is in the same position as a mortgagee, and that Order 88 of the J9 Rules of the Supreme Court2 on mortgage actions applied to proceedings to enforce a charging order by sale. 4.9 Ultimately, the learned Judge took the view, that the requisites for a charging order were met by the Respondent. On the application for a charging order, the lower Court ordered that four of the properties, the subject of the application for a charging order, be made absolute, the properties belonging to the named directors, being: 1. LUS/3705; 2. L/ 25269/M; 3. SAM/863; and 4. SAM/1450. 4.10 The learned Judge turned to the next issue, being the tracing orde r of the Court. The lower Court placed reliance on the case of In re Diplock. Diplock v Wintle (And Associated Actions),4 and stated that before a tracing order is granted, three ingredients must be present. Firstly, that there was originally a fiduciary, or quasi fiduciary relationship, between the claimant and the recipient of his money, as to give rise to an equitable proprietary interest in the claimant. Secondly, the claimant's money should be identifiable and thirdly the equitable remedy available, that is, a charge on the mixed fund or assets, does not work an injustice. 4.1 1 The learned Judge noted that it is not in dispute, that there was a fiduciary relation ship between the Respondent and the Appellant. On whether the money was identifiable, the learned Judge noted that the bank statements JlO show the exact amounts transferred to Chita Lodge and Ntumba Chushi Adventures. She found that the transfers were ident ifiable. As regards the last requirement, the learned Judge was of the view that no injustice would arise to Chita Lodge, Ntumba Chushi Adventures and other recipients of the money, as they are separate entities not party to the suit. 4.12 The learned Judge noted that despite finding that two of the three requirements outlined in the Diplock case 4 were met, the recipients of the money, aside from the directors, cannot be charged with payment of the money as they are not party to the proceedings and have not been heard on the issue. She found that despite the tracing order being granted, the recipient's properties can only be charged with payment if they are heard. Consequently, the learned Judge refused to charge the properties of the non-party recipients of the funds, except those of the directors. 4.13 All in all, the lower Court arrived at the conclusion, that the Re sp ondent's applications largely succeeded and ordered that the directors of the Appellant be held personally liable for the judgment debt and that their properties be charged with payment of the judgment debt. It was further ordered that if the properties were mortgaged, the charging order would follow the queue of creditors, and be paid after the subsisting mortgages were discharged. Jll 5.0 THE APPEAL 5.1 Being dissat isfied with the Ru ling of the lower Court, the Appellant filed a Notice of Appeal and Memorandum of Appeal on 17th July 2023, advancing five (5) grounds of appeal: i. The learned trial Judge erred in law and fact when she held the Directors of the Appellant, namely, James Chungu and Babsie Chungu, liable to pay the Appellant's debt in absence of evidence to the effect that the latter was run for fraudulent purposes as per her finding in the Judgment dated 18th August, 2021. ii. The learned trial Judge erred in fact and law when she found that the Appellant's Directors acted dishonestly and with intent to defraud as it was contrary to her finding in her Judgment of 18th August, 2021 as the issue of deceit, dishonesty or fraud was settled after full enquiry at trial. iii. The learned trial Judge erred in fact and law when she held that the test under Section 175 of the Corporate Insolvency Act does not require that fraud should be specifically pleaded. iv. The learned trial Judge erred in fact and law in lifting the Appellant's Corporate Veil based largely on the fact that conventional remedies were not available to the Respondent as the Appellant had no assets or other bank accounts to which the Judgment debt could be attached. J12 v. The learned trial Judge erred in fact and law when she found that the Appellant's Directors spent their share and that of the Respondent on their personal properties or properties where they had interest. 6.0 APPELLANTS' ARGUMENTS IN SUPPORT OF THE APPEAL 6.1 We have du ly co nsidered and appreciated t he Appe llant's Heads of Argument, and Reply, file d on 14th Sept ember 2023 and 18th April 2024. 6.2 In our recap of t he Appellant's argument, as well as that of the Respondent's, we bemoan the lack of pagination in the said Heads of Argu ment respect ive ly and not e that th is is becoming a distu rbing trend. We advise Counsel t o take note of our sentiments. 6.3 The Appellant proposed to argue grounds 1 and 2 jointly. We have t ho ro ughly interrogat ed the su bmissions and w ill o nly summarize a few contentions to avoid repetition. It was the Appellant's submission that certain ingredients must be established to require that a director should be held personally liable for a company's debt and referred to t he pu blication of R. Blankfein Gates in the book entitled Understanding Zambian Corporate Insolvency Law 1 at page 216 which stated as follows: "Patent from the preceding is the fact for the Court to grant the order sought under the circumstances envisaged in Section 175 (1), the following elements must be present: (1) That the business of a company has been carried on for fraudulent purposes, or with intent to defraud creditors; J13 (2) That any person against whom the order is sought was party to the carrying on of the business for fraudulent purposes, or with intent to defraud creditors; (3) That the person against whom the order is sought participated in the running of the business for fraudulent purposes or with intent to defraud creditors did so knowingly." 6.4 It is the submission, that the party seeking to pierce the corporate veil, ought to prove that fraud, or intent to defraud creditors, existed in the running of the affairs of the company. It was the contention that to hold the directors personally liable for the debt, it was not enough to merely take into consideration that some of the monies rea lized from the execution of the contract was utilized by the directors. It was the opinion, th at it was necessary to have taken into consideration, all th e circumstances prevailing at the time. 6.5 The Appellant further submitted, that the finding of intent to defraud is unsubstantiated, as there was no evidence to that effect on record. The Appellant argued that the lower Court fell in grave error in finding that the directors of the Appellant acted with intent to defraud, since that finding is in conflict with the learned trial Judge's finding, in the Judgment of 18th August 2021, as regards fraud . It was further submitted that the application to pierce the corporate veil, ought not to have been entertained at all to avoid the possibility of confl icting decisions. 6.6 The Appellant abandoned Ground 3 and proceeded to address Ground 4. Reliance was placed on the cited cases of Kitwe Supermarket Limited v Southern African Trade5, Southern Cross Company Limited v None J14 Systems Technology Limited 6 and the cited case of Ethiopian Airlines Limited 2 • The Appel lant reiterated its submission, that no evidence was presented, to sustain the allegation by th e Respondent that the Appellant was carrying on business with intent to defraud creditors or for fraudulent purposes. It was argued that the mere fact that some money was utilized by the Directors of the Appellant company, did not constitute fraud. 6.7 In relation to Ground 5, the gist of the Appellant's argument is that the learned Judge did not consider all the crucial factors and circumstances surrounding the said transactions. One of which, is that the lower Court, glossed over in the Ruling of 31st May 2022, the evidence of the Respondent' s witness at trial, as shown in the proceedings in the Court below at pages 556-762 of the RoA. 6.8 It is the submissio n, that there is no proof on record, w hatsoever to support the assertion that the directors used the Respondent's money for personal use. It is also argued, t hat the transactions were in the normal course of doing business and not with the intent to defraud the Appellant . 7.0 RESPONDENT'S HEADS OF ARGUMENT 7.1 We have also considered the Respondent' s Heads of Argument and will briefly capture the essence of t heir argument . 7.2 The Respondent equal ly addressed Grounds 1 and 2 together. The Respondent in addressing the Appellant' s argument, referred this Court to the case of Madison Investment Property and Advisory Company Limited v Peter Kanyinji 7 , at page J24, paragraph 3 where it was held as follows : JlS "In this jurisdiction, as in England and Wales, the circumstances in which the corporate veil may be lifted can be classified into two categories; first under the common law through judicial interpretation, and second, under statute." 7.3 It was argued that the Respondent correctly invo ked the statutory means of lifting the corporate veil of the Appellant, to ascertain the persons or entity, who were, and are, in charge of the affairs of the subject matter. It argued, that this was following the way the business of the Appellant was being conducted and the failure of the Appellant to settle the Judgment Sum. 7 .4 It was th e submission that what is key, is that it is not only proof of fraudulent action, that would entitle th e lifting of the corporate vei l, but also any act, that would be seen to deprive a creditor, of its benefit or actions that improperly use the corporate veil. 7.5 The Respondent equally referred to the cited cases of Kitwe Supermarket v Southern Africa Trade Limited 5 and Southern Cross Company Limited v None Systems Technology Limited 6 • Ultimately, its submission in re lation to grounds 1 and 2, was that the test under section 175 of the CIA 1, is not only grounded in fraud, but also an inte ntion to defraud creditors, which in view of the facts and th e finding of the High Court, was not perverse, in that an intention to defraud a creditor, is a ground for liftin g the co rp orate veil. 7.6 Furthermore, it was the submission that the finding of the High Court was not based on fraud, but on an intention to defraud creditors, w hich was evident from the facts. In the circumstances of the finding of the lower Court, it was well founded, as the directors actively ran the business of the J16 Appellant, to the detriment of the Respondent, who was a creditor. To this extent, it was argued that there was no contradiction in the reasoning of the lower Court in its Judgement and subsequent Ruling, the subject of this appeal. 7.7 With respect to Ground 4, it was the Respondent's contention, that there was proof on record, that there was intent to defraud creditors, as not only did the directors withdraw all sums due to the Respondent, for their personal use, but also, there were no assets for purposes of allowing conventional remedies to succeed. It argued that this was evident from the actions of the directors, who used the Appellant, as a con du it, to obtain funds, which they later dissipated. 7.8 It was further submitted that the Appellant's submission on this ground is misconceived, as the basis upon which the directors were found liable, was not only on the fact that there were no other remedies available, but that the latter, coupled with the conduct of the directors, evidenced the nefarious nature of the directors. It is the submission that the power of the High Court under Section 175 of the CIA, 1 was correctly exercised . 7.9 In terms of Ground 5, the Respondent addressed the Appellant's allegation that the High Court erroneously found that the Appe llant spent the Respondent's share of the profits under the Joint Venture. It is the Respondent's submission, that the Appellant in its submissions, seeks to mislead the Court as to the facts of the matter. It is the submission that the Appellant failed, in the High Court as well as in the RoA, to show that it had paid the Respondent, the balance of USO 1, 630, 107.35 plus interest. It is the submission that this amount of money remains unpaid. J17 7.10 The Respondent submitted that the directors acted in this manner, knowing fully well, that the Appellant has not paid its dues to the Respondent. It is the submission that the High Court made a correct finding of fact and ground 5 should be dism issed for lack of merit. 7.11 The Respondent also addressed the alleged contradiction between the Ruling and the Judgment, in which it was submitted that the Judgment did not find the Appellant guilty of fraud. However, it is the argument that the Ruling, found the Directors wanting, with respect to the running of the Appellant's business, and as such the lower Court, was right to find that there was an intent to defraud creditors, by the directors, and not the Appellant. Ultimately, it was submitted that there was no contradiction between the Ruling and the Judgment. 8.0 THE HEARING 8.1 At the hearing, learned Counsel placed reliance on the arguments filed in support of their respective positions. 9.0 DECISION OF THE COURT 9.1 We have carefully considered the grounds of appeal reproduced in paragraph 4 above, the impugned Ruling, the arguments and submissions of the Parties. We will deal with the grounds of appeal, in the same manner, as they have been canvassed by the Appellant, and will interrogate grounds 1 and 2 together which relate to the finding by the lower Court, that James Chungu and Babsie Chungu (the directors), carried on the business of the Appellant for an improper purpose or to defraud creditors. J18 9.2 It is not disput ed, that t he Respondent moved t he lower Court, for an order to hold the directors persona lly liable for the judgment debt in accordance wi t h the Judgme nt of 18th August 2021. The application was made pursuant to section 175 (1) of the CIA 1, which provides as fol lows: "(1} If, in the course of the winding up, receivership or business rescue proceedings against a company, it is shown that business of a company has been carried on for fraudulent purposes, or with intent to defraud creditors, the Court shall, on the application of an insolvency practitioner or creditor, order that any person who was knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for the debts or liabilities of the company as the Court orders." 9.3 Sin ce th e ce lebrated decision in th e case of Salomon v Salomon & Co 8 , it has been wel l settled in English law, t hat a company has separate persona lity to that of its members, and that such members cannot be liable for t he debts of a company beyond t heir initial fi na ncial contribut ion to it. This has been referred to as the principle of separate corporate persona lity. It has however been settled, in our jurisd iction, and elsewhere, that the corporate vei l may be lifted, through judicial intervention or legislation . Th is posit ion has so firmly been settl ed by the Supre me Court, in the seminal case, of Madison Investment Property and Advisory Company Limited v Peter Kanyinj i 7 , such that further debate on this issue would be moot . 9.4 The Appellant, has strongly canvassed the position that a party seeking to pierce the corporate veil, ought to prove t hat fraud o r intent to defraud J19 creditors existed in the running of the affairs of the company. In support of this argument, the Appellant placed firm relia nce on the book entitled: Understanding Zambian Corporate Insolvency Law 1 . The Appellant also argued that the threshold to discharge allegations of fraud, is higher th an that on a balance of probabilities. It relied on the case of Sithole v Zambia State Lotteries Board 9 • 9.5 In our considered opinion, the Appellant, appears to have brazenly, glossed over the key fundamentals to be established, for a Court to lift the corporate veil. It is not only proof of fraudulent action, but also any acts that would be seen to deprive a creditor of its benefit, or actions that improperly use the corporate veil. It is these circumstances, that were interrogated by the lower Court, on the application of the Respondent. 9.6 It is noted, that although the Appellant throughout its submissions, laments that the Court below ought to have considered all the circumstances prevailing in the matter based on the evidence available on record, they do not actually point to which evidence and whe re on the record it is to be found. 9.7 Prior to the enactment of the CIA, section 383 (1) of the Companies Act 3, (repealed) was instrumental in applications to pierce the corporate veil. The Respondent has called in aid two decisions, Kitwe Supermarket v Southern African Trade Limited 5 and the case of Southern Cross Company Limited v None Systems Technology Limited 6 , which, albeit decisions of the High Court, have settled jurisprudence in our j urisdiction that applied at the time under section 383 (1) of the Companies Act 3 and which reasoning is applicable in casu. J20 9.8 In the Kitwe Superma rket case 5 , the Court lifted the veil of incorporation because the directors of the debtor company, disposed of assets of the company in a manner designed to circumvent the company's obl igation to settle a sum of money, arising from a contract for the supply of wines and spirits. 9.9 It is noted that sect ion 175 (1) of the CIA 1, affords a Court of competent j urisdict ion, wide discretionary powers to lift the veil of incorporation and to look behind the veil, to assign personal responsibility without limitation of liability in appropriate circumstances. The gu idance of the Supreme Court, in the instructive case of Madison Investment Property and Advisory Company Lim ited / speaks to the discretionary power of the Court, not being limited to proof of fraudulent action, but also applicable where there is improper use of the veil of incorporation. We take the considered view that the use of the word 'improper, 1 must as a matter of necessary interpretation, confer wide situational discret ion on the part of the Court. 9.10 In the words of the Apex Court, we also conside r that each application to pierce t he corporat e veil, will rest on its own set of facts and circumstances. The Court at page J36 guided as follows: "What emerges from all this is that each new action brings a different set of facts and circumstances into the equation and a separate determination must be made based on individual facts as to whether an applicant for lifting the veil has deployed sufficient evidence of control, domination, improper purpose or use, and above J21 all absence of another means of achieving the same object than through lifting of the veil." 9.11 The Appellant, appears to have clutched at the findings of the lower Court in its Judgment, which is noted from pages 92 to 168 of the RoA, where it dismissed the cla im for deceit, based on its reasoning that in proceedings for deceit, the concurrence of fraud and damage is essential, if damages are to be recovered , and neither is sufficient without the other. In support of this argument, the Appellant has relied on the finding of the lower Court in its judgment at page 157 of the RoA where it noted: " There has been no evidence produced of fraud in this case. Neither have the particulars of fraud been outlined. It therefore follows that the claim cannot be sustained." 9.12 It is the Appellant's contention, that the findings of the lower Court were not challenged, and that in the absence of an appeal, the finding of the lower Court, in the now assailed Ru li ng, is inconsistent, at page 43 of the RoA, where it states the following: "In my opinion, the behavior by the 1st defendant's directors amounted to carrying on business with intent to defraud creditors." It is the argument that the Ruling has resulted in an absurdity, by the contradiction that it has created, is perverse and amenable to being set aside. On this principle, the Appellant relied on the case of Wilson Masauso Zulu v Avondale Housing Project Limited 10 , in persuading us to reverse this finding. J22 9.13 The Appellant has argued the position, that issu es of dishonesty, deceit or fraud, having been settled by the judgment of the Court, the said issues cannot be re-litigated, on the principle of there being an end to litigation and to prevent two or more conflicting decisions on the same issue. 9.14 We are not sure if this line of argument by the Appellant, is a deliberate attempt to mislead the Court, or displays a serious lack of comprehension on the part of the Appellant, of the effect of, and consequences of, invoking section 175 (1) of the CIA 1 . It is evident that the findings of the lower Court in its Judgment, as repeated above, were findings directed against the Appellant Company, in response to claim 11 in the originating process. This claim was seeking damages against the defendant for deceit resulting in loss to the Plaintiff. It is in response to that claim, that the lower Court made those findings . 9.15 What the Appellant appears to have casually glossed over, is that fraud, or intent to defraud creditors, by the directors was not settled or considered by the Judgment of the lower Court. In paragraphs 2.2 & 2.6 of our Judgment, we had referred to the claims raised by the Respondent and referred to the orders granted by the lower Court, such as the order of tracing, the declaration of constructive trust and the order to account. These orders were directed against the Respondent, its officers, se rvants or agents. As correctly noted by the Respondent, t he Judgment has not been appealed against by either party, such that the findings made, and orders granted, are on firm ground. 9.16 It is also clear, that the lower Court was moved, post-judgment, following an application under section 175 {1) of the CIA 1, to consider the actions of J23 the Directors with respect to fraud or intention to defraud creditors. We therefore dismiss the submissions on grounds of multiplicity and conflicting decisions, as being inapplicable in casu, and plucked out of context. 9.17 Grounds 1 & 2 are accordingly dismissed . 9.18 Ground 3 having been abandoned; we escalate our enquiry to ground 4. The Appellant challenges the decision of the lower Court in lifting the corporate veil, based largely on the fact t hat conventional remedies were not available, as the Appellant had no assets or other ban k accounts to which the judgment debt could be attached. It has already been noted that both Parties have made extensive reference to the case of Madison Investment Property and Advisory Company Limited 7 • The Supreme Court guided on two considerations to be establ ished by the applicant in an application to pierce the corporate veil as follows: "(1} Whether the veil of incorporation is misused a) b) c) d} To conceal the true state of affairs To evade an existing obligation/restriction For a fraudulent purpose; or For an improper purpose; and (2) Whether there are no other conventional remedies available to the applicant instead of the drastic measure of lifting the veil of incorporation. 11 9.19 The Supreme Court, in its lengthy discourse, considered other authorities and circumstances, relating to companies operating as one economic unit and other factors which are not relevant to the facts in casu. A common thread , running through the authoriti es, established the fact, that cou rt s J24 .. will not allow corporate personality, to be used to protect individuals from wrongdoing. It cautioned, however, that the power to intervene and lift t he veil, must be exercised spa ringly, and frugally, and with utmost circumspection. There ought to be a hidden untoward intent. From a review of t he auth o rities already conside red above, Cou rts have been inclined to lift the ve il where fraud or improper conduct is establ ished . 9.20 The Supreme Court in the Madison Investment Property and Advisory Company Limited case 7 , at page J36/7 concluded its detailed analysis by stating as follows: " We believe the turning point in lifting the corporate veil was the Ho use of Lords decision in Prest v Petrodel Resources Ltd which is notable for its extended dictum." 9.21 In the cite d case of Prest v Petrodel Resources Li mited 11 , the Sup reme Court of England, reviewed English Law in lifting the corporate veil, and unanimously, overturned t he decision of t he Court of Appeal. The Supreme Co urt not ed t hat t he law in this area had been rife w ith confl icting principles, and many commentators felt that the decis ion by the Court in the Prest v Petrodel case 11 , provided a un ique opportunity to reso lve what was termed the " never end ing story" of when the corporate veil may be pierced. Lo rd Sumption was of t he considered view that t he terms 'sham' or 'fac;ade' should be replaced with 'evasion' and ' con cealment' . It was stated that two principles should reflect the Court's decision to pie rce the corporate ve il. These are the concealment and evasion princip le, coupled with the absence of other conventional remedies. This ought to be clearly J25 demonstrated before a court can be invited t o consider pie rcing the corporate veil. Sumption JSC stated as follows: "But the recognition of a small residual category of cases where the abuse of the corporate veil to evade or frustrate the law can be addressed by disregarding the legal personality of the company is, I believe consistent with authority and with long-standing legal policy." 9.22 We also refer to Halsbury's Laws of England 4th Edition 2 at paragraph 90, where t he principles governing the lifting of the corporate vei l are stated as follows: "Notwithstanding the effect of a company's incorporation, in some cases the court will pierce the corporate veil in order to enable it to do justice by treating a particular company, for the purpose of litigation before it, as identical with the person or persons who control that company. This will be done only where there is fraud, or improper conduct but in all cases where the character of the company or the nature of the persons who control it, is a relevant feature. In such a case, the court will go behind the mere status of a company as a separate legal entity distinct from its shareholders and will consider who the persons, as shareholders or even as agents, directing and controlling the activities of the company. However, where this is not the position, even though an individual's connection with that company may cause a transaction to be subjected to a strict scrutiny, the corporate veil will not be pierced." J26 • 9.23 In our recent Judgment , delivered in the case of Emporium Fresh Foods Limited (T / A Food lovers Market (In Receivership) and others v Graduare Property Development Limited and another 12 , we stated at page J34, "There is a strong presumption against the piercing of the corporate veil by the courts, the equitable authority to do so is exercised reluctantly and cautiously. It is lifted upon proving presence of control and impropriety i.e. use of the company as a fa~ade, cloak, or sham to evade the law. It must be shown that there was fraudulent misuse of the company structure, and a wrongdoing was committed, such as use of the corporate structure to avoid or conceal liability". 9.24 It is clear, that in the now assailed Ruling, the Appellant has failed to appreciate t hat the Ruling was not premised on proof of fraud alone, or that other conventional remedies had failed, but emphasis was placed by the lower Court, on the incontrovertible fact, that the directors had acted in a manner, that proved that their intention was to deprive creditors of their entitlements. This led to the fai lu re of conventional remedies. It is also trite that section 175 (1) of the CIA, {quoted at paragraph 9.2 above), high lights two circumstances under which the corporate veil may be lifted, and that thes e two circumstances are independent of each other. 9.25 The Court noted that the directors withdrew all sums of money, including that which was due to the Respondent, for their personal use, thereby using the Appellant Company, to obtain funds, which they left dissipated. In the cited case of Madison Investment Property and Advisory Company Limited 7 , the Supreme Court stated: J27 • "The learned author, L. C. Gower in The Principles of Modern Company Law at page 216 3 , gives four examples of situations when it will be justified for a court to pierce the corporate veil. These are: (a) where the veil of incorporation is being used for some fraudulent or improper purpose; (b) where it becomes necessary to determine the character of the company; (c) where a trust and agency relationship is involved; and (d) where the interests of third parties are at stake. The statutory instances are of course discernible from various pieces of legislation, section 175 of the Corporate Insolvency Act to which we have earlier alluded, being one of them." 9.26 It is cardinal to appreciate that the significance in the above, lies in the understanding that the Court will not only lift the corporate veil where there is proof of fraud, but also where there is improper use of the veil of incorporation combined with the failure of conventional remedies. It is therefore misguided to canvass the position that the corporate veil may only be lifted after proof of fraud. It was also noted, from the numerous exhibits to the supporting application, that the directors carried out the business of the Appellant, with an intention to defraud creditors. It was also admitted by James Chungu, one of the directors, that the Appellant executed a JVA with the Respondent for the pu rpose of fulfilling the GRZ contract. This was noted in paragraph 2.3 above. J28 9.27 The Record of Appeal, is replete with evidence of confirmation, that the full contract value in the sum of USO 7,560,000 was received by the Appellant who has attempted to argue that the directors have explained that whatever monies were disbursed, were in the normal day to day operations of the Defendant, and as such they were not illegal transactions. It has further been canvassed that the said funds were genu inely earned from its share of the proceeds under the JVA. The Appellant has relied on its affidavit evidence at pages 461 to 463 of the RoA. 9.28 In sharp contrast to the argument of disbursements, being for the normal day to day operations, pages 274 to 369 in volume 2 of the RoA, show withdrawals made by the directors, towards personal drawings and properties or properties of third parties, in which the directors had an interest. The lower Court made a finding that the directo rs improperly used the corporate veil, with intent to defraud the Respondent as a creditor. 9.29 In the cited case of Emporium Fresh Foods Limited 12 , we stated at page J38 as follows : 11 A court, even without reference to actual fraud, can pierce the veil of a corporate entity. The substance, as opposed to the form in arriving at the true facts and liability, should be attributed where it rightly lies. From the facts and evidence on record, we find that the corporate veil was properly pierced. We take the view that courts should not be seen to be shielding untruthful and/or deceitful actors seeking to avoid personal liability by hiding behind the corporate veil.,, J29 • 9.30 In the face of such overwhelming evidence, coupled with the incontrovertible fact that the Appellant, other than the money received through the JVA, had no assets upon which the Respondent could levy execution, the finding of the lower Court (made at pages 41A to 42 of the RoA}, that the directors conducted themselves in an iniquitous manner, that evidenced intent to defraud, cannot be faulted. 9.31 We therefore dismiss ground 4 as being complete ly without merit. 9.32 In ground 5, the Appellant challenged the finding of the lower Court, that the Appellant's directors spent their share, and that of the Respondent, on their personal properties or properties where they had interest. 9.33 It is noted that in arguing ground 5, the Appellant has not placed rel iance on any authority or any argument for our consideration. To the contrary, the Appellant, in paragraphs 6.1 to 6.23 of its heads of argument, purportedly being in support of this ground, is simply re-hashing the evidence before the lower Court. The Appellant, has again purported to fault the finding of the lower Court, without narrating or proving where the fault lay. It is trite, that as an appellate Court, we w ill not set aside findings of fact that are fully supported by the evidence on record, and properly reasoned. 9.34 For the avoidance of doubt, and at the risk of repetition, the lower Court in its judgment, not assailed, granted orders against the Appellant, which are stated at paragraph 2.6 above. J30 • 9.35 It has been argued that the Appellant, only used as much of the proceeds of the JVA, that it was entitled to as its earning from the JVA. This evidence is also repeated at paragraph 6.16 of the Appellant' s heads of argument, to support the contention that the Appellant only spent its share of the JVA. It is also not disputed that full payment of the JV was made and received, as admitted by the Appellant. The simple question that begs asking is: 11 Where did the balance go? It did not vanish into thin air. The lower Court examined the bank statements, and found as a fact, from a detailed scrutiny of the bank account in which the JVA proceeds were paid, that the directors withdrew all the money, and applied it to all sorts of payments. The argument that the transactions were in the normal course of business, and not with intent to defraud, has already been dismissed as being without merit and not supported by a shred of evidence. We have no hesitation in dismissing ground 5 of the appeal. 9.36 We now revert to the finding of the lower Court granting the Respondent liberty to enforce the charging order absolute on the properties cited at paragraph 7.39 of the Ruling on page 53 of the RoA. In as much as we are alive to the fact that this issue was not raised as a ground of appeal, we are of the considered view that as a Court, we have settled the position in our jurisdiction, of the applicability of a Charging Order obtained under the provisions of Order 50 of the Rules of The Supreme Court. Our Judgments in the case of Molly Pelekamoyo v Ardy Mnjaidi13 and Molly P. Pelekamoyo v New Plaza Enterprises Limited 14 refer. To this extent, we accordingly set aside the Charging Order granted by the lower Court. J31 9.37 Having dismissed all the grounds of appeal, we dismiss the appeal with costs to the Respondent. 10.0 CONCLUSION 10.1 The net effect of our determination is that we find no favour in the appeal and dismiss it with costs to the Respondent, payable by the directors, James Chungu and Babsie Chungu personally. The same to be agreed or taxed in default. M. J. SIAVWAPA JUDGE PRESIDENT ~ F. M. CHISHIMBA COURT OF APPEAL JUDGE A. N. PATEL S. C. COURT OF APPEAL JUDGE J3 2