Ultra Energies Zambia Limited v Anthony Kabuswe Mubanga and Ors (2024/HPC/0329) [2024] ZMHC 221 (5 July 2024)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: ULTRA ENERGIES ZAMBIA Li MI!J>~ D-, _ ,.!:...!:.£."57: AND \ /ill I \4E> ANTHONY KABUSWE MUBANGA TINASHE MUBANGA TISHA INVESTMENTS LIMITED - -,s-TRY RE~O::. ~ o. eox .,0067. LUS AV. A 2024/HPC/0329 PLAINTIFF 1 ST DEFENDANT 2ND DEFENDANT 3RD DEFENDANT Before: The Honourable Lady Justice Chilombo Bridget Maka. For the Plaintiff: Messrs. FCK Chambers - No Appearance. For the Defendant: Mr. A. Phiri - Mesdames Jane Bulaya and Partners. RULING Legislation Referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia. Cases Referred to: 1. Salomon vs. Salomon & Company Limited ( 1897) AC 22. 2. Anti-Corruption Commission vs. Serioes Farms Limited SCZ Judgment No. 1 of 2014. 3. Saasa Shamambo vs. Jonathan Mwanza & 13 Others CAZ Appeal No. 020 of 2020. 1. Introduction. 1.1. This Ruling addresses the 1st and 2 nd Defendants' application for misj oinder. The application was made pursuant to Order 14 Rule 5(2) of the High Court Rules via summons supported by affidavit and skeleton arguments. 1.2. The Plaintiff contested the application by submitting its affidavit in opposition on 5 th June, 2024. 2. Background. 2 . 1. On 8 th May, 2024, and vide Writ of Summons accompanied by statement of claim, the Plaintiff commenced an a ction against the 1st, 2 nd and 3rd Defendants, claiming the following reliefs:- i. An Order for payment in refund for the sum of USD130,560.00 paid by the Plaintiff to the Defendant on the Agreement for the supply and delivery of diesel, with interest at the commercial lending rate from date of payment to date of Judgment; ii. Payment of the sum ofUSD994,140.34 associated with the business loss, special damages, loss of use of its capital and various reminders to correct the abrogation of the Agreement for dereliction of duty and negligence on the part of the Defendants under the Agreement; R2 iii. Damages for breach of contract/ Agreement and non-delivery of the consignment; iv. Damages for the stress, mental anguish, torture and distress suffered by the Plaintiff's Directors caused by the Defendants' negligence in abrogating the Agreement and receiving payments and failing to fulfil their obligations under the Agreement; v. Interest on the sums in 1, 2, 3, 4 and 5 above; vi. Costs of the proc.eedings; and vii. Any relief the Court may deem fit. 2.2. The 1st, 2 nd and 3 rd Defendants entered appearance and settled a composite defence on 23rd May, 2024. 3 . The 1st and 2 nd Defendant's Case. 3.1. The central argument supporting the application for misjoinder was that the 3 rd Defendant possesses distinct legal personality separate from the 1st and 2 nd Defendants. The 1st and 2 nd Defendants' contention was b a s ed on contracts entered exclusively with the 3 rd Defendant. Exhibited as evidence were copies of these contracts , along with the certificat e of incorporation of the 3 rd Defendant, m ark ed as exhibits 'AKM 1', 'AKM 2', and 'AKM 3' respectively. R3 3.2. In their legal arguments, reference was made to Order 14 Rule 5(2) of the High Court Rules, emphasizing the Court's authority to strike out the names of improperly joined parties. 3.3. It was argued that the 1st and 2 nd Defendants did not engage in any agreements with the Plaintiff, thus asserting they were improperly joined. 3.4. Additionally, it was argued that the 3 rd Defendant maintains a distinct legal identity separate from the 1st and 2 nd Defendants, who serve as its directors and shareholders. This assertion was buttressed by citing the decisions in Salomon vs. Salomon & Company Limitedl 1l and Anti-Corruption Commission vs. Serioes Farms Limitedl2l, which elaborate on the principle of the separate legal personality of incorporated companies. 3 .5 . The 1st and 2 n d Defendants prayed that their respective names be struck out for being improperly joined. 4. The Plaintifrs Case. 4 . 1. The core of the evidence in opposition was that the 3 rd Defendant being a separate metaphysical entity carried out its functions through the 1st and 2 nd Defendants, who were alleged to have misapplied the sums advanced to the 3rd Defendant. That this was evident in a copy of 3 rd Defendant's Bank account statement that was produced as exhibit "MK 1". R4 5. Hearing. 5.1. The application by the 1st and 2nd Defendants was heard on July 24, 2024, with only Counsel for the 1st and 2 nd Defendants present. 5.2 . Satisfied that the Plaintiffs Advocates were aware of the hearing, I proceeded to hear the application. 5.3. Representing the 1st and 2 nd Defendants, Mr. Phiri relied on the summons for misjoinder, affidavit and skeleton arguments in support of the application all dated 23rd May, 2024 . 5.4. Mr. Phiri reiterated that the Plaintiff entered into a contract with the 3 rd Defendant which has a separate legal personality from the 1st and 2 n d Defendants. · 5. 5 . Mr. Phiri prayed that the names of the 1st and 2 nd Defendants be struck out as they were improperly joined to the matter and that costs be for the 1st and 2 nd Defendants. 6. Consideration and Determination. 6.1. I have considered the application for misjoinder. The evidence and arguments for and against it. 6.2. The 1 st and 2nd Defendants application for misjoinder is anchored on the provisions of Order 14 Rule 5(2) of the High Court Rules which enacts that: - RS "The Court or a Judge may, at any stage of the proceedings, and on such terms as appear to the Court or a Judge to be just, order that the name or names of any party or parties, whether as plaintiffs or as defendants, improperly joined, be struck out." 6.3 . The foregoing clearly imbues this Court with the power to strike out names of parties improperly joined to a matter. 6 .4. In casu, the 1st and 2 nd Defendants argued that they were improperly joined to the main action, as they were not parties to the contract between the Plaintiff and the 3rd Defendant. They relied on the legal principle of separate legal personality, which applies to incorporated companies. 6.5. The Plaintiff on the other hand asserted that the 1st and 2nd Defendants were responsible for not applying the sums advanced to the 3 rd Defendant for the intended purpose. 6.6 . This application revolves around the principle of separate legal personality which is the basic tenet on which company law 1s premised as was established in the seminal case of Salomon vs. Salomon & Company Limited( 1l cited by the 1st and 2 nd Defendants. Therein, it was held in part that:- "The company is at law a different person altogether from the subscribers ... " R6 6. 7. Consequently, any rights, obligations or liabilities of a company are distinct from those of its shareholders. 6.8 . It is not in dispute that the Plaintiff entered into agreements with the 3 rd Defendant. Therefore, the rights and liabilities that arise from the agreements are solely for the parties to the agreements. 6.9. While it is true that a company, as an artificial legal entity, acts through its directors, the corporate veil protects the directors and shareholders from the company's liabilities. The Plaintiffs main action and claims are clearly based on a contract entered into with the 3r d Defendant, to which the 1s t and 2 nd Defendants were not parties. Therefore, the 1s t and 2 nd Defendants' application has merit. I am fortified in this finding by the case of Saasa Shamambo vs. Jonathan Mwanza & 13 Others13l, where the Court of Appeal held on page J18 as follows:- "It is clear from the reliefs being sought by the Respondents that the claim arose as a result of contracts of employment executed between the Respondents and the Company as a separate legal entity to which contract the Appellant was not privy. The Appellant can only be made liable upon lifting the Company's corporate veil by challenging the doctrine of separate legal personality and limited liability which was not done in this matter." R7 7. Conclusion. 7 .1. On account of the principle of separate legal personality and the fact that the Plaintiff's action arose from contracts executed between itself and the 3 rd Defendant to which the 1st and 2 nd Defendants were not privy, the suit against the 1st and 2 nd Defendants cannot be sustained. 7.2. I therefore find that the 1st and 2 nd Defendants were improperly joined to the main action and Order that their names be struck out forthwith. 7. 3. Costs are for the 1st and 2 nd Defendants to be taxed in default of agreement. 7.4. Leave to appeal is hereby granted. Delivered at Lusaka this 25th July, 2024 . . . . . . . . . . . . . . . ®.!:?. ' ............ . Chilombo Bridget Maka HIGH COURT JUDGE R8