Links Express Logistics and Ors v One World Logistics (UK) Ltd (APPEAL No. 232 of 2022) [2024] ZMCA 103 (3 May 2024)

IN THE COURT OF APPEAL OF ZAMBIA APPEAL No. 232 of 2022 HOLDEN AT LUSAKA (Civil Ju risd iction) BETWEEN: LINKS EXPRESS LOGISTICS LANDILANI SHUMBA LAMECK GOMEZYANI NYIRENDA SHADRECK MBEWE AND 1 ST APPELLANT 2 ND APPELLANT 3 RD APPELLANT 4 TH APPELLANT ONE WORLD LOGISTICS (UK) LTD RESPONDENT CORAM : SIAVWAPA JP, CHISHIMBA and PATEL, JJA th On 26 March & 3 rd May 2024 Fo r the Appel lant s: Ms . M. Seketi Mesdame s Ch alwe and Ka bala t a Legal Practitioners For th e Res po nde nt: Mr. I. Sia me & Mrs . A. M . Mapipo Messrs. TM S Lega l Practitioners JUDGMENT Patel, JA, delivered the Judgment of the Court. J1 : Cases Referred to: 1. 2. Salomon v. Salomon & Co. Ltd (1897} AC 22, (1895-9} ALL ER Rep 33. Food Lovers Market Lusaka Limited and others v National Pension Scheme Authority-CAZ Appeal No. 019/2017 3. Madison Investment, Property and Ad visory Company Limited v Peter 4. 5. 6. 7. 8. Kanyinji Selected Judgment No. 48 of 2018. Dimpleby and Sons v National Union of Journalists (1984) UKHLJ0301-5 Bank Voor Handel en Scheepvaart N. V. v Slatford (1953} 1 Q. B. 248 Commissioners of Inland Revenue v Sansom (1921} 2 KB 492 Gilford Motor Co., Limited v Horne (1933) Ch 935 Associated Chemicals Limited v Hill and Delamain Zambia Limited & Another SCZ Judgment No 2 of 1998. 9. Swallow Freight Services (Z) Limited v Kapiri Transport Co Ltd Appeal No . 81 of 2006 10. Ethiopian Airlines Ltd. v. Sunbird Safaris Limited, Sharma's Investment Limited and Vijay Babulal Sharma (2007} Z. R. 235. 11. Prest v Petrodel Resources Limited (2013) UK SC 34 12. Wilson Masauso Zulu v Avondale Housing Project Limited (1982) Z. R 172 13. Susan Mwale Harman v Bank of Zambia Limited - SCZ Appeal o. 191 of 2015 14. The Attorney General vs Marcus Kampumba Achiume (1983} ZR 1 15. Borniface K. Mwale v Zambia Airways Corporation Ltd (In Liquidation)- SCZ Appeal No. 230 of 2016 16. Isaac Lungu v Mbewe Kalikeka SCZ Appeal No.114 of 2013 17. Haroon Muhomed Hussein v Ebenzer Prem Chellepa T/A Knight High School) ZMSC 153 (2020) J2 Legislation & Rules Referred to: 1. 2. 3. 4. 5. 6. The Corporate Insolvency Act No. 9 of 2017. The High Court Rules Chapter 27 of the Laws of Zambia. The Rules of the Supreme Court, 1999 Edition (White Book). The Companies Act No. 10 of 2017. The Evidence Act Chapter 43 of the Laws of Zambia. The Companies Act Chapter 388 of the Laws of Zambia (repealed) Other Works Referred to: 1. LC Gower, 'The Principles of Modern Company Law' (3rd Edition, Stevens & Sons). 2. 3. Halsbury's Laws of England , Fourth Edition, Volume 37, paragraph 304. Patrick Matibini, Zambian Civil Procedure: Commentary and Cases. Volume 1. Lexis Nexis. 1.0 INTRODUCTION 1.1 This appeal interrogates the principle of corporate personality as laid down by the landmark decision of Salomon v Salomon and Another. 1 The principle has stood the test of time and has been j ealously safe guarded. In this appeal, we examine the circumstances in which th e corporate veil may be pierced or lifted. We have placed reliance on many authorities both from within and outside the jurisdiction, including our decision in the case of Food Lovers Market Lusaka Limited and others v National Pension Scheme Authority2, (though based on an appeal arising out of an application for misjoinder) in as far as it was relevant in our analysis to the facts in casu. J3 = 1.2 This appea l emanates from a Ruling of Bah-Matandala J delivered on l ih June 2022, in respect of two post-judgment applications made by each of the Parties, in the lower court respectively. 2.0 BACKGROUND 2.1 For convenience, in this and the subsequent section, we will refer to the Parties as they were in the court below. 2.2 The Plaintiff (now Respondent}, a private company limited by sha res, incorporated in the United Kingdom and in the business of supply of sundry goods and services in Zambia, commenced these proceedings aga inst the Defendant (now 1st Appellant), by way of Writ of Summons and Statement of Claim filed on 6th December 2019 claiming the following re liefs: i. Payment of the sum of GBP 75,353.59 the same being the amount owed by the Defendant to the Plaintiff; Damages for non-payment of the amount aforesaid; Further or other relief as the Court may deem fit; and Costs ii. iii. ,v. 2.3 In a nutshell, this dispute arises from an agreement entered into by the parties in which it was agreed that the Pla intiff would ship chattels for and on behalf of its clients from the United Kingdom to the Defendant in the Republic of Zambia. J4 2.4 Consequent to the non-payment, the Plaintiff accumulated a total sum of GBP 75, 353.59 as amounts owing by the Defendant. 2.5 The Defendant settled its defence, which is not the bone of contention in this appeal, the Parties having settled the claim by way of a Consent Judgment dated 15th May 2021, a copy of which appears on page 80 of the Record of Appeal. 2.6 The terms of the Consent Judgment settled the Judgment debt in the sum of Fifty-Five Thousand British Pounds {GBP55,000.00) the first installment of GBP 11,000.00 (being 20% of the Judgment Sum) was payable on or before 30th May 2021, and the balance thereof to be settled in six {06) equal monthly installments of Seven Thousand Three Hundred and Thirty Three British Pounds and Thirty-Three {GBP 7,333.33) payable before the 30th of every subsequent month from June 2021, until full settlement of the Judgment sum. 2.7 The Consent Judgment further awarded the Plaintiff interest at the rate specified, liberty to levy execution in the event of default and costs in the sum of GBP 4,000.00. 2.8 The Defendant, not having paid the first installment in terms of the Con sent Judgment, the Plaintiff issued a Writ of Fieri Facias on 11th June 2021. The Sheriff of Zambia executed the said Writ at the last known address of the Defendant, but the goods seized were not worth the value of the judgment sum. JS 2.9 On i h September 2021, the Plaintiff filed an application to pierce the corporate veil and to substitute parties and make the directors of the Defendant Company namely, Landilani Shumba, Lameck Gomezyani Nyirenda and Shadreck Mbewe (Intended Defendants) personally liable on the basis that they had full knowledge that the Defendant was defunct at the time of execution of the Consent Judgment and that their conduct amounted to wrongful and dishonest conduct as they concealed the status of the finances of the company so as to evade any existing legal obligation. It was also alleged that the directors may have moved the business and or its assets to other locations in anticipation of and to fru strate the execution . 2.10 On 10th February 2022, the intended defendants fi led an application for an order for security for costs in the sum of ZMW 60,000.00. 3.0 DECISION OF THE LOWER COURT 3.1 The composite Ruling of the Learned Judge followed applications made by the Plaintiff and Defendant respectively, that is: 1. Summons for an Order to Pierce the Corporate Veil and Substitute Parties to the Proceedings pursuant to Order 3 Rule 2 of the High Court Rules Chapter 27 of the Laws of Zambia and section 175 of the Corporate Insolvency Act No. 9 of 2017; and 2. Summons for an Order for Security for Costs pursuant to Order 40 Rule 7 of the High Court Rules Chapter 27 of the Laws of Zambia. J6 3.2 Upon hearing both parties, in a Ruling delivered on 1 t h June 2022, the learned Judge in the lower Court ordered that the corporate vei l be pierced and that the intended defendants be added t o the proceed ings. As regards th e applicat ion for security for costs, the lower court dismissed the application on the basis that it had been overtaken by events. 3.3 In relation t o the first application, the learned judge took the view that this applicatio n hinges on Section 175 of the Corporate Insolvency Act. 1 3.4 The learned judge noted the enactment of the Corporate Insolvency Act1, and referred t o the case of Madison Investment, Property and Advisory Company Limited v Peter Kanyinjij3 in which the Supreme Court had occasion to revisit the position on the Law on piercing of the veil of Incorporation . 3.5 Having considered the first application, the learned judge was of the considered view that the Plaintiff had demonstrated th at the intended Defendants misused the ve il of incorporation by concealing th e t rue sta t e of affairs of the Defendant Company. The learned judge held that the intended Defendants, as directors of the Defendant Company, knew the true status of the Defendant, especially that the first installment was to be paid that same month. 3.6 Th e learned judge concluded that the applica t ion was successful and joined the intended defendants. She however noted that since the actual amount remaining on th e consent j udgme nt sum was not known, as no account had been rendered by the Plaintiff, she ordered that the matter be sent for J7 assessment before the Deputy Registrar, after wh ich the Plaintiff could enforce the Consent Judgment either by renewal of the Writ of Fieri Facias or by any other lawful means of enforcement. The learned judge ordered that should the execution fail to satisfy the judgment debt; the directors shall pay the same and be liable to execution without any further order of the court. 3.7 In relation to the second application before the lower court, the learned Judge considered the Defendant's arguments and submissions and noted that the main argument in the submissions is centered on the fact that the Plaintiff is a foreign company incorporated and conducting its business in the United Kingdom outside the Court's jurisdiction. 3.8 The learned judge noted that the application for security for costs hinged on Order 40 rule 2 of the High Court Rules2 • The court placed reliance on Order 23 rules 1 and 2 of the Rules of the Supreme Court of England.3 The learned Judge noted that the inte nded Defendants asked the court to make the payment of security for costs, a condition precedent to the hearing of the application for an order to pierce the corporate veil and substitute parties to the proceedings. The learned judge, however, could not reconcile the application which was heard after the application to pierce the corporate veil and was of the considered view that the intended defendants' application had been overtaken by events and therefore failed. 3.9 The full reasoning and analysis of the lower court is on record and the Orders have been noted from pages 29 to 31 of the Record of Appeal. J8 4.0 THE APPEAL 4.1 Being dissatisfied w ith the whole Ru ling of t he lower court, the Defendant and intended Def endants, now the Appellants in this Court, fi led a Notice of Appeal and Memorandum of Appeal on 1st July 2022, advancing five (5) grounds of appeal as follows : 1. The learned High Court Judge erred in law and fact when she held that the Intended Defendants concealed the true financial status of the Defendant in the absence of evidence on record; 2. The learned high court judge erred in law and fact when she held that the corporate veil be pierced and the Intended Defendants be joined to the proceedings without proof of no other conventional remedies available to the Appellant; 3. The learned high court judge erred in law and fact when she granted an Order for piercing the corporate veil of incorporation to satisfy the Judgment sum without due consideration of the evidence on record that the Plaintiff did not render an account of the goods seized; 4. The learned high court Judge misdirected herself when she held that the goods seized were not worth the value of the Judgment sum when no evidence was exhibited to prove the same as the record will show; 5. The learned judge erred in law and fact when she held that the application for security for costs is overtaken by events and falls off without applying the legal principles governing security for costs; and J9 5.0 APPELLANT'S ARGUMENTS IN SUPPORT OF THE APPEAL 5.1 We have duly considered and appreciated the Appellant's Heads of Argument filed on i h October 2022. In support of ground 1 of the appeal, the Appellants have placed reliance on their submissions that there was no evidence placed before the lower court by the Respondent in support of its allegation that 2nd,3 rd and 4 th Appellants had perpetrated fraud, wrongdoing and or injustice to third parties to wa rrant the lower court t o pierce the corporate veil. 5.2 The Appellants have also placed reliance on the cited case of Madison Investment Property and Advisory Committee Limited and sections 248 and sections 279 to 281 of the Companies Act4 and argued that the lower court in arriving at its findings that the financial statu s was concealed, erred in law and fact and urged us t o set aside those findings as being perverse and not supported by the evidence. 5.3 With respect to ground 2, the Appe llant s have argued that other conventional remedies available to the Respondent were not exhausted and that the lower court erred by ordering that the corporate veil be pierced. This was in conflict with settled law and precedent of the Supreme Court as settled by the case of Madison Investment Property and Advisory Committee Limited . 5.4 With respect to its combined submissions in support of ground 3 and 4, the Appellants have argued that the lower court erred by simp ly relying on affidavit evidence sworn by Counsel for the Respondent without due JlO consideration of the evidence on record and indeed the fact that the goods seized had neither been identified nor their corresponding value, computed. 5.5 With respect to ground 5, the Appellant has submitted that the Respondent being based out of jurisdiction, and not having shown that it had substantial property in the country, the lower court erred in dismissing the Appellants application for an order for security for costs. 6.0 RESPONDENT'S HEADS OF ARGUMENT 6.1 We have considered and appreciated the Respondent' s Heads of Argument filed on 14th November 2022. In opposing grounds 1 and 2, reference was made to section 5 of the Evidence Act 5 in support of the argument that the lower court correctly placed reliance on the affidavit evidence and attached weight to its content. 6.2 The Respondent has also submitted that the Court' s reasoning was in tandem with the facts in this matter and precedent. It is their further submission that the fact of signing the consent judgment and defaulting within the same month is proof that the Appellant knew or ought to have known that it did not have the capacity to settle the judgment debt. 6.3 The Respondent has also submitted that the only option available to it was to pierce the veil of incorporation based on strong reasons to suspect that the Appellants had moved assets to prevent a successful execution. Jll 6.4 With respect to grounds 3 & 4, the Respondent has submitted that the lower court correctly referred the matter to assessment to determine the exact amount owed and that the lifting of the corporate veil was the only option available to the Respondent. 6.5 With respect to ground 5, the Respondent has argued that the lower court correctly exercised its discretion on the fact that the application for security for costs was made after the application to pierce the corporate veil had been heard, and that costs, if any, had already been incurred. The Respondent also placed reliance on Order 23 rule 3 (3) of the Rules of the Supreme Court to argue the principle that the court in exercising its discretion, would have regard to all the circumstances of the case and that in casu, this was a proper exercise of the court's discretion . 7.0 THE HEARING 7.1 At the hearing of the appeal, Counsel Seketi placed reliance on the Appellant's heads of argument while Counsel Siame offered oral submissions to augment the Respondent's submissions on record. 7.2 It was the thrust of Counsel Siame's submission that the fact of concealment had been proved by the fact that the consent judgment had been executed merely 15 days before the first installment was due in the full knowledge by the directors that the company would not be able to pay the same. 7.3 He also referred to page 90 of the Record of Appeal, to canvass the position that all conventional methods of recovering the judgment debt having failed, J12 the only option open was that of piercing the corporate veil. It was also the thrust of his submission with reference to the cited case of Madison Investment, that the fact of concealment, is essential in an application to pierce the corporate veil. 8.0 DECISION OF THIS COURT 8.1 We have noted that the Appellant has raised five grounds of appeal before this Court. However, we are of the considered view, that the grounds of appeal present two main issues namely: i. Whether the lower court was on firm ground in piercing the corporate veil given the circumstances of the case and joining the directors to the proceedings? ii. Whether the judge was on firm ground to have dismissed the Appellants (Defendants) application for security for costs. 8.2 We have duly considered the arguments and submissions of both counsel as it relates to the grounds of appeal. Grounds 1 to 4 of the appeal, in our view, are related as they seek to impugn the Learned Judge's decision to pierce the corporate veil. We shall therefore address them collectively and will address ground 5 separately. 8.3 In support of their arguments, the Appellants have submitted that the trial Judge, in the court below, in exercising its liberty to draw inferences of fact which flow from the documents before it, erred, when she failed to consider the fact that the Respondent did not produce evidence to J13 demonstrate the allegations. Our attention was drawn to the case of Madison Investment, Property and Advisory Company Limited v Peter Kanyinji aforementioned . 8.4 It is the Appellants' submission that the Respondent did not adduce evidence to prove that the 2nd to 4th Appellants had indeed concealed the financial status of the 1st Appellant and placed reliance on Section 248 of the Companies Act4 · It was also their contention that the law is clear as it provides where a company should keep its accounting records and who can inspect the same . Unlike public companies, a private company is not required to disclose its financial information to the public. 8.5 It was further submitted that the Respondent did not attempt to write to a member or director requesting information on the financial status of the company or inspect the company's financial statement. It is their argument that it is unprecedented for the court to hold that the financial status was concealed when in fact the procedure for inspecting company records was not followed and overlooked the fact that private companies are not mandated to publish or disclose their financial statements to third parties or public unless as per the procedure laid down in the Companies Act. 8.6 The Respondent has countered the Appellants' argument above and submitted that it is clear from the record that the Appellants signed the Consent Judgment with the knowledge that the 1st Appellant was not in a position to comply with the terms of the Consent Judgment. It is their submission that this is made clear from the facts of the case when the 1st Appellant defaulted on the Agreement within the same month that the Jl4 Consent Judgment was executed and made no attempt to the settle the said Judgment sum. The Respondent placed reliance on Section 5 of the Evidence Act and argued that the Affidavit on record, as produced in the lower court, was enough evidence of the outcome of execution on the 1st Appellant. It was further their submission that the Appellants ought to have known at the time of signing the Consent Judgment that the 1st Appellant did not have the capacity to settle the Judgment Sum. 8.7 The Appellants have also called in aid the cited case of Madison Investment, Property and Advisory Company Limited v Peter Kanyinji3 in which Malila JS, as he then was, guided on the second consideration to be established as follows: ... Whether there are no other conventional remedies available to the applicant instead of the drastic measure of lifting the veil of incorporation." 8.8 The Appellants have argued that it is on record that the Respondent did not exhaust other possible alternative conventional remedies. 8.9 The Respondent submitted to the contrary, arguing that the only option available was to pierce the veil of incorporation as there were strong reasons to suspect that the 1st Appellant had moved assets from the company to prevent a successful execution. It is their contention that it was an agreed term of the consent judgment that: JlS ... the Plaintiff shall be at liberty to exercise its rights against the Defendant and to enforce this Judqment by any lawful means without further recourse." 8.10 In considering the following point addressed in this appeal, we note the Appellants' submission, that the lower court, in piercing the corporate veil, did not take into consideration that the Respondent failed to render an account of the goods seized and their said value. 8.11 To counter this line of submission, the Respondent's contention is that due consideration was made by the Honourable Court in arriving at the conclusion to pierce the corporate veil. It is their submission that the court's decision was to refer the matter to assessment, in order to determine the exact amount still outstanding to be paid by the Appellants. Their argument is that the Appellants prematurely opted to appeal the Court's judgment and did not wait for the conclusion of the matter in the Court below. It is their further submission that piercing the veil of incorporation, was the only option remaining to the Respondent in light of the obvious fact that the Appellants had seemingly moved the company's assets to avo id execution. 8.12 Having critically reviewed the submissions and arguments by Counsel above, we note the words of Malila JS, as he then was, in the Madison Investment Property case, referring to the lifting of the corporate veil, when he stated as follows: "It is vitally important that we preface our judgment with a general but pertinent observation. It is this, that with its distinctive features of J16 separate corporate personality and limited liability, the company is the most dominant legal vehicle, the world over, employed by commercial men and women in conducting business. It, therefore, forms the foundation of the market economy as it offers businesspersons, especially those operating across borders, a way of not only increasing competitiveness, but also of managing risk that comes with venturing into precarious enterprises especially in unfamiliar territories. However, although the veil of incorporation of limited liability companies offers enormous commercial and legal benefits to the owners of corporate entities, it also gives even bigger worries to persons dealing with those corporate entities when the veil of incorporation is used fraudulently or improperly to shield wrongdoing. It is in the context of these conflicting positions that we view the present appeal." 8.13 In casu, the corporate veil was pierced on the basis that the lower court was satisfied that the Respondent had demonstrated that the Appellants misused the vei l of incorporation by concealing the true state of affa irs of the company. Reliance was placed on the decision of the Supreme Court in the cited case of Madison Investment Property. 8.14 It has long been settled that a company, upon incorporation, has a separate legal personality, distinct from its shareholders. Salomon v Salomon & Company is the landmark decision in which this principle was espoused. Lord McNaughten described it as follows: J17 11the Company is at law a different person altogether from the subscribers ..... and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits. The company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers, as members liable, in any shape or form, except to the extent and in the manner provided by the Act." 8.15 This principle was restated by the House of Lords in the case of Dimpleby and Sons v National Union of Journalists4 in the following terms: "the reason why English statutory law, and that of all other trading countries, has long permitted the creation of corporations as artificial persons distinct from their shareholders and that from any other corporation even though the shareholders of both corporations are identical is to enable business to be undertaken with limited financial liability in the event of business proving to be a failure. The 1corporate veil' in the case of companies incorporated under the Companies Act is drawn by statute and it can be pierced by some other statute if such other statute so provides; but in view of its raison d'etre and its consistent recognition by the court since Salomon v Salomon and Company Limited, one expects that any parliamentary intention to pierce the corporate veil would be expressed in clear and unequivocal language." J18 8.16 It is equally settled that the corporate veil can be lifted. In the case of Bank voor Handel en Scheepvaart N. V. v Slatford,5 Denning J remarked: "The legislature can forge a sledgehammer capable of cracking the corporate shell.' 8.17 In the case of Commissioners of Inland Revenue v Sansom6 Lord Sterndale M. R., remarked as follows: "There may be, as has been said by Lord Cozens- Hardy, MR, be a position such that although there is a legal entity within the principles of Salomon v Salomon & Co, that legal entity may be acting as the agent of an individual and may really be doing his business and not its own at all. " 8.18 The Court in those circumstances, will look behind the corporate veil whenever the company is a "mere cloak or sham." Gilford Motor Co., Limited v Horne 7 is another clear illustration of this principle. 8.19 In our jurisdiction, it is an accepted position that a company enjoys legal capacity separate from its shareholders. In support of this principle, we note the case of Associated Chemicals Limited v Hill and Delamain Zambia Limited & Another8 , in which Ngulube CJ (as he then was) stated, following the decision in Salomon v Salomon & Co that "a principle of the law which is now too entrenched to require elaboration is the corporate existence of a company as a distinct legal person ... upon the issue of the certificate of incorporation, the company becomes a body corporate." J19 8.20 Section 16 of the Companies Act4 provides the legislative framework on corporate personality and 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." 8.21 We are further guided by the lea rned author, L. C. Gower in The Principles of Modern Company Law at page 2161, which gives four examples of situations when it may be justified for a court to pierce the corporat e 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. 8.22 In casu, the action, and the consent judgment before the lower court, was between the Respondent and Appellant. It was as a result of the failed execution that the Respondent brought an application by summons to pierce the corporate ve il and to substitute parties to the proceedings under Order 3 rule 2 of the High Court Rules and section 175 of the Corporate Insolvency Act. The supporting affidavit and skeleton arguments are noted from pages 85 to 98 of the Record of Appeal. J20 8.23 The Supreme Court, in the Madison Investment Advisory case clarified t he position t hat t he proceedings in the lower court were premised on section 383 of the repealed Companies Act. The Court also noted t hat though the new Companies Act had no provis ion equivalent to section 383, section 175 of the Corporate Insolvency Act contained a reformu lat ed version of section 383 of the repealed Companies Act. 8.24 Section 175 of the Corporate Insolvency Act 1 states as follows: " (1) If, in the course of the winding up, receivership or business rescue proceedings or in any other proceedings against the company, it is shown that business of a company has been carried on for fraudulent purposes, or with intent to defraud creditors, the Court shaft 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 liabi lity, for the debts or liabilities of the company as the Court orders. " 8.25 The Lower Court noted in its Ruling, at page Rll (page 18 of the Record of Appeal) that before t he enact ment of t he Corporate Insolvency Act1, t he position taken by the Courts on piercing the vei l of incorporation was noted in the case of Swallow Freight Services (Z} Limited v Kap iri Transport Co Ltd 9 as an instance where the provisions of section 383 of the repea led Companies act was applied. 8.26 It is trite however that for such an application to be made to the court, it must be shown that the persons who control and direct a company are engaged in fraudulent or improper condu ct to frustrate the recovery of J2 1 monies owed by that company for personal liability to be attached to them for the said monies . 8.27 It is critical to note that the evidence placed before the lower court consisted of averments of counsel as seen from paragraphs 8 to 11 of the supporting affidavit to justify the application to pierce the corporate veil. The exhibit marked '1S1' and referred to at page 90 of the Record of Appeal, by Counsel Sia me to justify that other conventional methods had been applied, is simply the result of a search conducted on the 1st Appellant at the Patents and Companies Registry (PACRA}. The exhibit marked '1S2' is an exchange of e mail correspondence between the Respondent and Landilan i Shumba the 2nd Appellant, in his capacity as Managing Director of the 1st Appellant. 8.28 The fundamental question that needs to be determined is if there was obvious and blatant conduct on the part of the 2 nd to 4th Appellants and which falls within any of the four examples cited in paragraph 8.21 above. We are of the considered view that the lower court ought to have examined this application on the following terms: Is the veil of incorporation being used for some fraudulent or improper purpose? On a critical examination of the record before us, it is clear that there was no evidence placed before the court to justify arriving at the find ings made by the Court. To prove fraud or improper purpose, evidence has to be led to a standard sufficient to allow the Court to pierce the corporate veil to prove that the company was set up as a "cloak or sham" following the guidance in provided by the case of Gilford Motor Co., Limited v Horne. J22 8.29 We have also noted that the 2nd Appellant in its affidavit in opposition, filed before the lower court, deposed to facts and challenges faced by the 1st Appellant at a time when the Covid pandemic was in full force and also denied any allegations of having concealed the position of the company or having shifted assets. We are of the considered opinion that the lower court fell into grave error by giving weight to the averments of counsel, unsubstantiated as they were, against the equally plausible explanations tendered by the 2nd Appellant, to make findings of fraud , and concealment to warrant piercing the veil. 8.30 We have noted that the lower court followed the decision of the Supreme Court that was taken in the case of Ethiopian Airlines Ltd. v. Sunbird Safaris Limited, Sharma's Investment Limited and Vijay Babulal Sharma10 in which the Supreme Court held that the third respondent, who was the Managing Director of the first respondent, and responsible for the day to day, running of the company, was personally liable, in terms of the repealed section 383 of the Companies Act6, for the first respondent's debts because he fraudulently allowed the first respondent to continue trading in the circumstances it was in . In our considered view, there is a fundamental difference in procedure in the Ethiopian Airlines case and the same cannot be applied to the facts in casu. 8.31 In the Ethiopian Airlines decision, the Appellant, Ethiopian Airlines Limited, had petitioned for the winding up of the 1st respondent and sought an order that the 2nd and 3rd respondent be held liable personally for the debts of the 1st respondent. The amended petition was accompanied by a verifyi ng J23 affidavit and the 3 rd respondent filed his affidavit in opposition. There were a number of facts that were pleaded, and not challenged by the 3rd respondent. The Supreme Court held that the averments that were not challenged, were deemed to have been accepted by the 3rd respondent and he was on that premise held personally liable for the debts of the 1st respondent. It will be noted that the application to impose liability on the 3rd respondent as managing director of the 1st respondent was not made separately, but at the time the action commenced and in the course of winding up proceedings. 8.32 We have made reference to our judgment rendered in the matter of Food Lovers Market Lusaka Limited, albeit emanating out of a Ruling on misjoinder, in which we did consider issues and circumstances in which a court would allow the corporate veil to be pierced. We stated therein that in limited circumstances, a court could pierce the corporate veil, if the court was satisfied that the company was a mere cloak or sham. Further, we noted that a court may look to the economic reality when considering questions of public policy. Ultimately, we guided that the corporate veil, will, in exceptional circumstances, be cracked where grave injustice will be inflicted on a party if the corporate curtain remains undisturbed. 8.33 We have already noted that though both parties have referred to the decision of the Supreme Court in the cited case of Madison Investment Property, we have reason to believe that the Respondent may not have fully appreciated this decision, by its attempt to clutch at statements that may appear to favor the Respondent's position, when in fact, not. The Apex Court, J24 guided on two considerations to be established by the applicant in an application to pierce the corporate veil as follows: 11(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. " 8.34 It is clear that in the circumstances of this case, the 2nd Appellant {the 2nd intended defendant in the lower court) in opposing the application deposed to facts from his own personal knowledge as Managing Director of the 1st Appellant. Paragraphs 19 and 20 of the opposing affidavit, is seen on page 120 of the Record of Appeal. 8.35 It is fundamental to note from a scrutiny of the decision of the Supreme Court in the Madison case, that although the Court found that the Appellant and Perfect Milling Limited, were operating as one economic unit, and although the appellant had made assurances to settle the debt of Perfect Milling Limited, the Court did not find the appellant liable . The Court on page J22, echoed the principle of corporate personality in the following terms: "Indeed, the basic notion of a corporate entity being distinct and separate from its owners provides the basis of the whole fabric of J25 company law. And instances are not few when the courts, for very good cause, have successfully resisted the temptation to pierce the veil of incorporation". 8.36 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 authorities, established the fact that courts will not allow the corporate personality to be used to protect individuals from wrongdoing. It cautioned, however, that the power to intervene and lift the veil must be exercised sparingly and frugally and with utmost circumspection. There ought to be a hidden untoward intent. From a revi ew of the authorities already considered above, it is clear that courts have been inclined to lift the veil where fraud or improper conduct is established, and more importantly, is the fact that all the cases cited above, were anchored in section 383 of the repealed Companies Act. 8.37 The Supreme Court in the Madison Investment case, at page J36/7 concluded its detailed analysis by stating 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 all absence of another means of achieving the same object other than through lifting J26 • of the veil ..... We believe the turning point in lifting the corporate veil was the House of Lords decisions in Prest v Petrodel Resources Ltd." 8.38 In the case of Prest v Petrodel Resources Limited 11 , the UK Supreme Court reviewed English law in the area of lifting the corporate veil. It was stated that two principles should reflect the Court's decision to pierce the corporate veil. These are the concealment and evasion principle, coupled with the absence of other conventional remedies. These, ought to be clearly demonstrated before a court can be invited to consider piercing the corporate veil. (emphasis is ours). 8.39 Reverting to the appeal before us, we are of the considered view that the learned judge made findings which are not supported by the evidence presented before the lower court when she he ld that: i. the Appellants concealed the true financial status of the Appellant company as no proof of this has been led to the standard required to warrant an order to pierce the corporate veil. ii. that the corporate veil be pierced and the Appellants be joined to the proceedings without proof of other conventional remedies available to the Respondent; iii . that the corporate veil be pierced without due consideration of the evidence on record that the Respondent did not render an account of the goods seized; iv. that the said goods were not worth the value of the Judgment sum when no evidence was exhibited to prove the same. J27 8.40 The lower Court in examining the application before it, and in considering the relationship of the Appellants to the 1st Appellant, including the print out from PACRA, made a finding that she was satisfied that the Appellants had misused the veil of incorporation, by concealing the true state of affairs, more especially that the Consent Judgment was executed and sealed a mere 15 days before the date the first installment was payable. We are not satisfied that the corporate vei l was used by the Appel la nts to conceal the true state of affairs or to evade an existing obligation or for any improper or fraudulent purpose nor are we convinced that other methods of recovering are unavailable. We are of the considered view that had the lower court applied its mind to this stringent test, it would have taken a different position. 8.41 In the circumstances, and based on the cases of Wilson Masauso Zulu v Avondale Housing Project Limited 12 , Susan Mwale Harman v Bank of Zambia 13and The Attorney General vs Marcus Kampumba Achiume , we are of the considered view that this is an appropriate case for us to interfere with findings made as they were perverse, made upon a misapprehension of the facts and they were findings which on a proper view of the evidence, no trial court acting correctly could make. 8.42 We accordingly find merit in grounds 1, 2 ,3 and 4 and uphold them . We set aside the Order to pierce the corporate veil and add the 2nd and 3 rd Appellants (we have noted that the 4th Appellant is since deceased paragraph 20 of the opposing affidavit as seen on page 120 of the Record of Appeal refers). J28 8.43 We now turn our attention to ground 5 of the appeal, to consider whether the lower court was on firm ground when it dismissed the Appellants' application for security for costs made pursuant to Order 40 rule 7 of the High Court Rules . We recognize the rationale for granting an order for security for costs which is to ensure that a Party who was successful in Court is assured of collecting costs incurred in defending the action against it. 8.44 Order 40 Rule 7 of the High Court Rules 2 provides that: "The Court or a Judge may, on the application of any defendant, if it or he sees fit, require any Plaintiff in any suit, either at the commencement or at any time during the progress thereof, to give security for costs to the satisfaction of the Court or a Judge, by deposit or otherwise, or to give further or better security, and may require any defendant to give security, or further or better security, for the costs or any particular proceeding undertaken in his interest." 8.45 It is also trite that in accordance with Order 23 Rule 1 of the RSC 3 that when granting an order for security for costs the court is guided by the need to do justice after considering all the circumstances of the case. It is for that reason that in considering whether or not to grant or make an order for security for costs, the Court considers the prospects of success. It also acknowledged that costs are generally awarded in the discretion of the court, acting in light of the relevant circumstances of each case. We note the case of Borniface K. Mwale v Zambia Airways Corporation Ltd (In Liquidation) regarding the issue of security for costs when the Apex Court held as follows: J29 • "According to Rule 1 of Order 40 of the High Court Rules, costs are monies incurred in defending oneself or in proving one's case. Therefore, costs do not include the actual amount claimed. Security for costs is generally provided by the plaintiff. However, the proceedings in which the defendant can be ordered to provide security for costs are only those proceedings taken in his own interest. To hold otherwise would be a paradox since the defendant is forced to appear before court to defend his own rights. 11 8.46 It is fundamentally clear that the decision whether or not to grant secu rity for costs vests in the discretion of the court faced with such an application . The Supreme Court in its decision in the case of Isaac Lungu v Mbewe Kalikeka 16 (unreported) stated as follow s: " it is clear that the Court has complete or real discretion whether to order security, and it will act in light of all the relevant circumstances of the case. In other words, the court must carefully consider the effect of making such order, and in the light thereof to determine to what extent or for what amount a plaintiff (or defendant as the case may be) may be ordered to provide security for costs ... 11 8.47 We are also alive to the principle that in exercising such discretion, the court ought to consider the full circumstances of the case. According to the learned authors of Halsbury's Laws of England Volume 37 Fourth Edition paragraph 3042 , they state as follows: J30 "The Court may order security for costs, in the cases in which power to do so exists, only if having regard to all circumstances of the case, it thinks it just to do so. The Court thus has a discretion whether or not to order the security for costs to be given, both under the Rules of the Supreme Court and under its statutory power ... " 8.48 The Appellants referred to the learned author of Zambian Civil Procedure Commentary and Cases Volume 1 at page 522 3 which stated the fol lowing : "A Plaintiff ordinarily resident out of the jurisdiction may be ordered to give security for costs. The onus is on the defendant to prove the ordinary resident out of jurisdiction. In this regard, the residence is determined by the Plaintiff's habitual or normal residence as opposed to any temporary or occasional residence. " 8.49 It is the Appellants submission that from the evidence adduced and affidavits attested by the Respondent, it is clear that the Respondent is a resident out of jurisdiction and that should the Appellants succeed in the appeal, they would be prejudiced . 8.50 We are alive to the fact that the exercise of the discretion of the lower court should only be interfered with, if we are of the considered opinion that the discretion was not judicious or used wrong principles of law. On this settled principle of law, we place reliance on the case of Haroon Muhomed Hussein v Ebenzer Prem Chellepa T/A Knight High School)17 where the Supreme Court stated as follows: J31 "The exercise of discretionary power by a court is indeed appealable. The onus lies on the appellant to show that the exercise of discretion by the lower court was injudicious or otherwise improper. " 8.51 We have noted the reasoning and finding of the lower court when she found that the application for security for costs was overtaken by events as is evident at page 28 of the Record of Appeal {R21). The learned Judge noted that the Respondents application to pierce the corporate veil was filed on i h September 2021 and heard on lih February 2022. She further noted that the Appellants' application for security for costs was only made on 10th February 2022 and heard on 24th March 2022, at which time it had become otiose or academic, the Respondent's application to pierce the corporate vei l having already been heard. 8.52 In light of the above, we are also alive to the provisions of Order 23/3/3 of the Rules of the Supreme Court of England 3 which states : "In exercising its discretion under r. 1 (1) the Court will have regard to all the circumstances of the case. Security cannot now be ordered as of course from a foreign plaintiff, but only if the Court thinks it just to order such security in the circumstances of the case ...... It may be a denial of justice to order a plaintiff to give security for the costs of a defendant who has no defence to the claim. Again, if a defendant admits so much of the claim as would be equal to the amount for which security would have been ordered, the Court may refuse him security, for he can secure himself by paying the admitted amount into Court (Hogan v. Hogan (No. 2) {1924} 2 lr. R. 14). Further, where J32 defendant admits his liability, plaintiff will not be ordered to give security ... . In considering an application for security for costs the Court must take account of the plaintiff's prospects of success, admissions by the defendant, open offers and payments into Court. " 8.53 In our considered opinion, we do not fault the lower Court for arriving at its final determination though not necessarily for its reasoning. We have noted that in casu, it is without doubt that the Respondent is the Judgment Creditor who is owed money by the Appellants. It is inconceivable that an order for security for costs should be made against it purely based on its status as a Company incorporated outside the Jurisdiction and more especially that the facts in casu refer to a consent judgment. An order for security for costs, in the circumstances, would be unconscionable and akin to the Appellant having its cake and eating it too. 8.54 For the above reasons, we find it difficult to depart from the ultimate finding of the lower court. We therefore find that the learned judge in the court below exercised her discretion judiciously, and hold the view, that she was on firm ground in dismissing the application for an order for security for costs. Ground 5 is accordingly dismissed. 9. CONCLUSION 9.1 From the position we have taken, we uphold grounds 1, 2,3 & 4 of the appeal, although we have considered them holistically as one ground of appeal. Ground 5 was dismissed. J33 .. 9.2 The net effect of this appeal is that the assailed Ruling of the lower court is set aside and that t he Parties revert to the status quo. 9.3 In the interest of j ustice, and based on the principle of equity, we make no order for costs. M. J. SIAVWAPA JUDGE PRESIDENT F. M. CHISHIMBA A. N. PATEL S. C. COURT OF APPEAL JUDGE COURT OF APPEAL JUDGE J34