Minimart Development Corporation Company Limited v Ackim Chirwa and Ors (SCZ/8/25/2023) [2025] ZMSC 4 (15 January 2025)

Rl IN THE SUPREME COURT OF ZAMBIA HOLDEN AT LUSAKA (Civil Jurisdiction) SCZ/8/25/2023 BETWEEN MINIMART DEVELOPMENT CORPORATION COMPANY LIMITED APPLICANT AND ACKIM CHIRWA LEVY JOSEPH NGOMA U-FUEL (Z) LIMITED CORAM: E. M. Hamaundu, JS BLICOF l:COURiop Juo,c,ARY ~ JAN 2u1j ---- ·------ 9llArr 50067,LU RESPONDENT RESPONDENT 0 RESPONDENT For the Applicant Dr L. Kalinde and Ms I. Lishomwa, Messrs Equitas Legal Practitioners For the Respondents Mr F. Besa, Messrs Friday Besa & Associates HAMAUNDU, JS, delivered the Ruling of the Court RULING 1.0 Introduction 1.1 I must first point out that in this case there was an error in the documents filed by the parties, in that the three respondents were reflected as the appellants, while the R2 applicant was reflected as the respondent was reflected as the respondent, the way they were in the court below. The correct position is the opposite. 1.2 The applicant, Minimart Development Corporation Company Limited, is applying for leave to appeal to this Court against a judgment of the Court of Appeal which upset a judgment of the High Court that had been in its favour. 1.3 The proposed grounds of appeal read as follows: " 1. That the Court of Appeal by its majority decision erred in law and in fact when it upheld the personal liability transfer agreement which did not satisfy the requirements of clause 13 of the loan agreement and to which the transferee company, the intended 3 rd respondent, was neither a party nor sanctioned; (ii) That the Court of Appeal by its majority decision erred in law and in fact when it glossed over fundamental principles of company law in construing purported advice at a meeting of Zambian shareholders to constitute consent to the appellant in the absence of a valid resolution which forms the basis of any corporate decision; (iii) That the Court of Appeal by its majority decision erred in law and in fact when it approved a general principle that the majority shareholders in a company have an overriding voice in the control of a company generally without regard to the statutory R3 prov1s1ons relating to companies which prescribe the realm of resolutions at validly constituted meetings as a basis of exercise of any power by shareholders over a company; (iv) That the Court of Appeal by its majority decision erred in law and in fact when it held that Victor Makuza, in his capacity as a Managing Director, had no power to overrule the shareholders by refusing to implement the personal liability agreement in view of the fiduciary duty placed on directors towards the company and the limitations of shareholder's power unless through established channels, which were never satisfied in casu; and (v) That the Court of Appeal by its majority decision erred in law and in fact when it granted the reliefs to the respondents and specifically when it ordered that the appellant be removed from the register of shareholder of UFZ despite a finding that the appellant has always been a shareholder in the said company". 1.4 According to the applicant, it is in the public interest for the proposed appeal to be heard because the grounds of appeal set out above raise fundamental principles of company law which are of general application to all companies 1.5 It is also the applicant's application that should leave to appeal be granted then there should b e a stay of execution R4 of the judgment of the Court of Appeal until this matter is disposed of. 1.6 The respondents, particularly Ackim Chirwa and Levy Joseph Ngoma, oppose this application. They have pointed out that by the time the applicant was filing this application in July, 2023, they had already taken steps to enforce the Court of Appeal's judgment: to that effect, their shares in the 3 rd respondent company had been restored, their positions as Directors had a lso been restored and registered at PACRA, and the applicant had been removed from the register of shareholders of the 3 rd respondent company. 1. 7 The respondents also contend that the said grounds of appeal not only reveal that the proposed appeal has no prospects of success but that they raise no points of law of public importance. 2.0 Background 2.1 I must begin by lamenting the omission by the applicant to provide, on record, the judgment of the High Court and the originating pleadings. This makes the task of deciding whether or not this application h as merit a bit more RS difficult. And so, the little background that I am about to set out is that which I have been able to glean from the two judgments of the Court of Appeal. 2.2 The background to the dispute is this: The 1st and 2 nd respondents, Ackim Chirwa and Levy Joseph Ngoma, respectively, were the promoters and, subsequently, shareholders of the 3 rd respondent company U-Fuel (Z) Limited. Between them, they held the majority shares in the said company. There were four other shareholders; namely, U-fuel International which held 10% of the shares, African Site Masters Limited which had about 16% shares, Claydon Kalambo who had 2% shares and Christopher Besa who also had 2% shares. 2.3 There is no dispute that Ackim Chirwa and Levy Joseph Ngoma borrowed 1n their personal capacity, and individually, the sum of US$90,000 each making it a total of US$180,000 which was said to have been pumped into the operations of U-Fuel (Z) Limited. The money was borrowed from Minimart Development Corporation Company Limited, the applicant herein. R6 2.4 The two respondents signed separate loan agreements in their respective sums of US$90,000. It appears that they executed further agreements pledging their respective shares in U-Fuel (Z) Limited as security for their loans. 2.5 Minimart Development Corporation Company Limited was incorporated by a company known as U-Fuel International Limited, which was the majority shareholder therein. One Victor Makuza was appointed the chief executive officer of Minimart Development Corporation Company Limited. 2.6 It is not in dispute that initially Ackim Chirwa and Levy Joseph N goma personally made some payments towards their loans; and that subsequently U-Fuel (Z) Limited, refunded the initial instalment payments that the two had made. It is also not in dispute that, thereafter, U-Fuel (Z) Limited continued making payments towards the loans on behalf of the two respondents. 2.7 Subsequently, the shareholders ofU-Fuel (Z) Limited, with the exception of Ackim Chirwa (the 1st respondent), executed a power of attorney in favour of their fellow shareholder U-Fuel International Limited to act as their proxy. This effectively put the management of U-Fuel (Z) R7 Limited in the hands ofU-Fuel Internal Limited which then appointed Victor Makuza as its representative in running the affairs of U-Fuel (Z) Limited. 2.8 As Managing Director of U-Fuel (Z) Limited, one of the issues that Victor Makuza raised was the justification for the payments that U-Fuel (Z) Limited was making towards the personal loans of Ackim Chirwa and Levy Joseph Ngoma. It was resolved that the shareholders would sign a resolution formally authorizing that the loans that Ackim Chirwa and Levy Joseph Ngoma obtained from Minimart Development Corporation Company Limited would be paid for by U-Fuel (Z) Limited. In the meantime, Victor Makuza, as Managing Director of U-Fuel (Z) Limited suspended the payment of the loans on behalf of Ackim Chirwa and Levy Joseph Ngoma. 2.9 It is not clear whether the resolution was drafted and signed; and meanwhile Ackim Chirwa and Levy Joseph Ngoma fell into serious default regarding repayment of their loans. Hence Minimart Development Corporation Company Limited (the lender) enforced the pledge agreements and foreclosed on the shares pledged. 2.10 It appears that aggrieved by the foreclosure notices issued R8 by the applicant, the three respondents commenced an action by writ of summons and statement of claim. Although the claims were couched as declarations it is clear that their ultimate object was to reverse the foreclosure notices. 2.11 The trial judge upheld the claim upon finding that; first, the 3 rd respondent U-Fuel (Z) Limited was not a party to the loan agreement between the borrowers, Ackim Chirwa and Levy Ngoma, and the lender, Minimart Development Corporation Company Limited; secondly, that the provision in the agreements directing the use of the loans solely and exclusively as capital for U-Fuel (Z) Limited did not place any obligation on the latter to settle the debt, thirdly, that the Liability Transfer Agreement which the borrowers subsequently executed was not enforceable because U-Fuel (Z) Limited was not a party to the agreement, and fourthly that the original loan agreements provided that the transfer of liability would only be with the written consent of the lender; 2. 12 The trial judge ordered foreclosure on the shares of Ackim R9 Chirwa and Levy Ngoma, with the result that the applicant now held those shares which Ackim Chirwa and Levy ngoma had held in U-Fuel (Z) Limited. The changes were duly effected at the PACRA offices. 2.13 The appellants appealed to the Court of Appeal. The court by its majority decision said that the only issue in the dispute was whether or not there was a valid transfer of liability of the loans obtained by Ackim Chirwa and Levy Ngoma to U-Fuel (Z) Limited. 2 .14 The majority decision came to the conclusion that the liability transfer agreement met the requirements of clause 13(1) of the Loan Agreement which required the consent of the lender in that the court found that Victor Makuza who chaired the meeting at which a resolution was passed to execute the liability transfer agreement was also the Managing Director of the lender, Minimart Development Corporation Company Limited; and also that it was not the appellants as borrowers who executed the personal liability transfer but the shareholders of U-Fuel (Z) Limited. 2.15 The dissenting judge, however, was of the op1n1on that R 10 there was no evidence that prior written consent of the applicant was obtained to show that it had agreed that the liability of Ackim Chirwa and Levy Ngoma could be transferred to a third party, U-Fuel (Z) Limited. According to the dissenting judge, the only evidence before court was of a loan transfer agreement which was executed by five shareholders of U-Fuel (Z) Limited, minus one; that, there was no evidence of a board resolution having been secured showing that U-Fuel (Z) Limited had accepted the debt. 2.16 On the strength of the majority decision, however, the appeal was allowed; resulting in the court reversing the order that the High Court had made. The changes were again effected at the PACRA office. 3.0 The Decision 3. 1 One of the grounds for which a proposed appeal may be allowed to come to the Supreme Court is the reasonable prospect of success. In my view that ground exists in this case because it appears doubtful that the conditions of clause 13(1) of the loan agreements were met. I doubt if R 11 Victor Makuza could be said to have worn three hats during that meeting because it seems clear to me that Victor Makuza was running the affairs of U-Fuel (Z) Limited to take care of the interest not only of the other shareholders who appointed him, but also those of U-Fuel International Limited which had a 10% shareholding in U Fuel (Z) Limited. 3.2 It seems to me again that, when he questioned the source of the authority for U-Fuel (Z) Limited to pay the debts that Ackim Chirwa and Levy Ngoma had contracted with the applicant, he was merely doing so to protect the 10% stake that U-Fuel International had in U-Fuel Zambia. Seen from that perspective, it appears to me that even though that meeting appeared to have resulted into U-Fuel (Z) accepting to assume responsibility for the debts, there was further evidence required specifically from the applicant accepting the transfer of the debt to U-Fuel (Z) Limited. 3.3 Therefore, it is from these observations, coupled with the fact that one judge dissented from the majority decision, that I am of the view that there are reasonable prospects R 12 for the proposed appeal to succeed. Hence, I am inclined to accept this application. 3 .4 Coming to the applicant's application for an order of stay of execution pending the hearing, I do not think that it is necessary to grant such order because enforcement can still be effected at the end of the hearing of the appeal, if successful. This is evidenced by the fact that changes have previously been made in this case. 3.5 Consequently, I grant .the applicant leave to appeal to the Supreme Court. Each party shall bear the costs of this application. Dated the ...... .. . / .~ day of ........ )..:s,.;:: .... ?..-,J···· 2025 E. M. ~ ~ / SUPREME COURT JUDGE