Deputy Sheriff v Shamu Pen Tip Company (Pvt) Ltd and Electrical & Pulley Components (Private) Limited

### Preamble
1
HH 466-2012
HC 4786/06
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DEPUTY SHERIFF

versus

SHAMU PEN TIP COMPANY (PVT) LTD

and

ELECTRICAL & PULLEY COMPONENTS

(PRIVATE) LIMITED

HIGH COURT OF ZIMBABWE

MUTEMA J

HARARE, 4 September 2012

Opposed Application

No appearance for the applicant

I.E.G. Musimbe, for the claimant

F. Nyamayaro, for the judgment creditor

MUTEMA J: The dispute in casu found its way to court by way of interpleader. Here are the facts: the judgment creditor (Electrical & Pulley) obtained a judgment in its favour in case No HC 4786/06 against Shamu Trading and Investment (Private) Limited, William Oliver Shamu, George Leonard Shamu and Cephas Leonard Shamu. Also common cause is that the claimant (Shamu Pen Tip) was not a party to the said judgment. Electrical & Pulley issued out a writ of execution in HC 4786/06 against the debtors therein. In executing that writ, the Deputy Sheriff attached certain piece of land in the district of Umtali called Lot 1 of Willows of Clare Estate Ranch measuring 2, 4147 hectares held under Deed of Transfer 5152/94 by Shamu Pen Tip.

Since Shamu Pen Tip had nothing to do with the judgment in question it put into motion these interpleader proceedings to have its immovable property released from attachment. Electrical & Pulley, however, is contesting Shamu Pen Tip’s claim.  Its argument is this:-

In October, 1994 Electrical & Pulley passed a surety mortgage bond in favour of Scotfin Ltd at the instance of William Oliver Shamu to cover for money lent to Shamu Trading and Investment (Pvt) Ltd. The judgment debtors in HC 4786/06 had undertaken to service the Scotfin loan thereby ensuring that Electrical & Pulley’s mortgaged property would not be sold. When the judgment debtors defaulted on their repayments Scotfin demanded that they settle the debt or it would foreclose on the security they held. At that juncture, William Oliver Shamu, who is a director in both Shamu Trading and Investment (Pvt) Ltd and Shamu Pen Tip connived with his fellow director (who was not named) and “donated” the attached property from Shamu Trading and Investment (Pvt) Ltd to Shamu Pen Tip. This was designed to shield the property against attachment should Scotfin sue Shamu Trading and Investment (Pvt) Ltd. When Scotfin eventually sued Shamu Trading and Investment (Pvt) Ltd and Electrical & Pulley, the latter’s mortgaged property was sold to satisfy the debt which Shamu Trading and Investment (Pvt) Ltd owed to Scotfin. It would be unjust for the judgment debtors in HC 4786/06 to come to court clothed as Shamu Pen Tip and argue that the attached property be not sold in execution to settle a debt they incurred after Electrical & Pulley’s own property was sold for their debt. The court should therefore pierce the corporate veil of Shamu Pen Tip.

There exists a plethora of cases reiterating the time honoured legal principle that once incorporated, a company acquires separate legal personality and exists separately from its members. It can thus sue and be sued in its own name and can own assets in its own name. The courts throughout the world have been steadfast in upholding this concept of separate legal persona even in a company with only one shareholder. See Salomon v Salomon & Co (1897) AC 22 (HL); R P Crees (Pvt) Ltd v Woodpecker Industries (Pvt) Ltd 1975 (1) RLR 151 (G): S v Stead 1991(2) ZLR 54 (SC), Mkombachoto v Commercial Bank of Zimbabwe Ltd & Anor 2002 (1) ZRR 21 (H).

It is only in exceptional circumstances that courts have lifted the corporate veil – S v Stead supra, for instance where the notion of separate legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime see Van Niekerk v Van Niekerk & Ors 1999 (1) ZLR 421 (SC), U.S. v Milwaukee Refrigerator Co. 42 Fed 247 (1905). This approach is based on common sense and developed sense of equity: Lategan & Anor NNO v Boyes & Anor 1980 (4) SA 191 (T).

In the instant case, it is common cause that the attached property belongs to Shamu Pen Tip, a separate legal entity from the judgment debtors in HC 4786/06. It is also trite law that a deed of transfer constitutes absolute proof of ownership of real rights in immovables – s 14 of the Deeds Registries Act, [Cap 20:05].

There are a number of insurmountable hurdles besetting Electrical & Pulley in this case. Firstly, piercing the corporate veil is a common law remedy which cannot be obtained via the interpleader proceedings route. It should be pursued via a court application. In casu there is no such court application.

Secondly, Electrical & Pulley should have joined Shamu Pen Tip as a party to the suit in HC 4786/06. It did not do that. After exhausting property belonging to the judgment debtors, it out of the blue instructed the deputy sheriff to attach property belonging to Shamu Pen Tip which has nothing to do with the owed debt.

Thirdly, Electrical & Pulley has not established any ground warranting the piercing of the corporate veil. There is no proof that the donation of the property was designed to defeat public convenience or justify wrong or protect fraud let alone defend crime. Electrical & Pulley is not even sure as regards the exact date when the donation inter vivos was made. In para 4.1 of its opposing affidavit it avers that the donation was effected in 1996. In para 4.3, it avers that it passed the surety mortgage bond in favour of Scotfin “on (sic) October 1994”. If this be correct then the donation sought to be impugned could not have been made to “shield the property (donated) from attachment for a debt that Sham (sic) Trading was at that time owing to Scotfin,” as alleged in para 4.2 of the opposing affidavit because the deed of transfer of the property into Shamu Pen Tip’s name was executed on 23 August, 1994. This means that the donation was made well before 23 August, 1994 so it could not have be designed to shield this property from attachment to satisfy the Scotfin debt thereby exposing Electrical & Pulley’s mortgaged property well before the surety mortgage bond was passed in October, 1994.

In the result I find that this is not one of those exceptional cases warranting the lifting of the corporate veil and I therefore order that the property in question be removed from judicial attachment with the judgment creditor paying costs on a legal practitioner and client scale.

I.E.G. Musimbe & Partners, claimant’s legal practitioners

Mutamangira & Associates, judgment creditor’s legal practitioners