Tapson Madzivire AND Phinias Ngarava AND Joseph Daniel Mubwandarika AND Crush Security (Pvt) LTD Versus Misheck Brian Zvariwadzwa AND Cobra Security (Pvt) LTD AND THE Registrar OF Companies

### Preamble
HH 74-2005
HC 11884/04
TAPSON MADZIVIRE
and
PHINIAS NGARAVA
---------


==============================

TAPSON MADZIVIRE
and
PHINIAS NGARAVA
and
JOSEPH DANIEL MUBWANDARIKA
and
CRUSH SECURITY (PVT) LTD
versus
MISHECK BRIAN ZVARIWADZWA
and
COBRA SECURITY (PVT) LTD
and
THE REGISTRAR OF COMPANIES

HIGH COURT OF ZIMBABWE
MAKARAU J
Harare 26 May and 7 September 2005

Opposed Application

Mr Zhou, for applicants
Mr Simpson, for respondents

MAKARAU J: The first applicant is the Managing Director of the fourth applicant. The second and third applicants are also directors of the fourth applicant. So is the first respondent. It may be pertinent at this stage to mention that the parties are involved in other litigation before this court relating to the respective shares each holds in the company and more specifically, to who has the controlling stake.

On 4 November 2004, the applicants brought the above application seeking an order that certain documents filed with the third respondent, relating to the shareholding structure of the fourth applicant be declared of no force and effect as having been forged. It was specifically alleged that the first respondent had forged these documents.

The first respondent, who although not denying that the information in the documents complained of was false, denied being the author of such. In his opposing affidavit, the first respondent avers that he invited the first to third applicant to join as directors of the fourth applicant and that they did not pay for any of the shares allocated to them in the fourth respondent. He claims to have financed the capital of the company through the second respondent where he is also a director.


The first, second and third applicants purport to bring this application on behalf of the fourth applicant as well as on their own beables as directors of the fourth applicant. I shall deal with each of these capacities separately.

The fictional legal persona that is a company still enjoys full recognition by the courts. Thus, for any acts done in the name of a company, a resolution, duly passed by the board of directors of the company, has to be produced to show that the fictional persona has authorised the act. In my view, so trite is this proposition or so settled is this position at law that no authority need be cited. The applicant are well aware of this position at law for in paragraph 17 of the first paragraph, issue is taken that no resolutions were passed by the company authorising the first respondents and others to do certain acts complained of in that paragraph. Due to lack of such authority stemming from the Board of Directors, the applicants argue that the purported acts by the first respondent are null and void. Such may be the case, but the irony of it all is that the applicants themselves are guilty of the oversight forming the basis of their complaint to this court. No resolution was produced before me to show that the first to third applicants are authorised to bring this action on behalf of the fourth respondent.

In seeking to lay a foundation for purporting to act on behalf of the fourth applicant, the first applicant had this to say in paragraph 2 of his founding affidavit:

“I am making this Affidavit on my own behalf and on behalf of the Fourth Applicant who is a Legal persona wherein I am the Managing Director and shareholder respectively and in that capacity, I am authorised to make the following statements on behalf of the Fourth Applicant”.

Needless to say, this is woefully inadequate to clothe the deponent with authority to make any statement on behalf of the fourth applicant. The paragraph does not even attempt to lay a basis for holding that the bringing of the proceedings in the name of the fourth applicant is authorised.

The second and third applicants each filed an affidavit styled “Confirmatory Founding Affidavit”. In both documents appears a paragraph in identical wording to this effect:


“I confirm that I have authorised the First Applicant to depose to the contents of the Main Founding Affidavit on behalf of the Fourth Respondent and on my behalf.”

The impression I gather from this averment by the second and third applicants is a belief on the part of the deponents that they can confer authority on the first applicant to act on behalf of the fourth respondent. This is of course erroneous for outside a Board Meeting, individual directors of a company cannot speak for and in the name of the company even if they are of the same mind and are in the majority as appears to have been the case in this matter. The belief of the applicants in *casu* are reminiscent of the facts in *D’Arcy v The Tamar, Kit Hill And Carlington Railway Company* (1867) LR 2 Exch 158 where two directors of the company wrote to the company secretary approving the passing of a bond by the company. The third director met the secretary in the street and gave his oral consent. The three never met as a board to pass the resolution. In declaring the bond so passed as invalid, the court was not persuaded that the three directors were of the same mind and comprised a quorum for the board of directors.

On the basis of the above, it does appear to me that the first, second and third respondents have no authority to bring the above application on behalf of the fourth applicant nor to seek on its behalf, the relief that they seek from me.

The first to third applicants have expressly averred in their respective affidavits that they also bring this application on their own behalves as directors and shareholders of the fourth respondent.

The wrong complained of in the application is a wrong done primarily to the fourth respondent in that its records have allegedly been falsified. The falsified records comprise of a return filed on the allotment of shares in the company which excludes the second and third applicants and annual returns for the company for the years 2000 to 2003 which allegedly bear the forged signature of the first applicant.

The general rule under company law referred to as the rule in *Foss and Harbottle* [1843] 2 Hare 461, 67 E.R. 189 and also known as “the proper plaintiff rule”, holds that no member (or shareholder), can sue to redress a wrong done to the company. Thus, where the company itself can use its corporate character to obtain redress for the alleged wrong, no suit can lie at the instance of shareholders. This encompasses the entire philosophy on which company law is based and upon which our courts’ respect for the fictional persona of the company rests. The company as a fictional legal persona is separate and distinct from its members or shareholders.

In *casu*, no averment has been made before me that after discovery of the alleged falsified and forged documents, the directors of the company attempted to convene a meeting for the requisite resolutions to be passed by the company to correct the wrong done to it. In saying this, I do not lose sight of the fact that the parties have been before this court in other cases referred to in the affidavits in which allegations of lack of good faith amongst the directors have been exchanged. If that was the case, then in my view, it behoved the applicant to show that that the company itself, using its corporate character, cannot procure the redress that they as members are now seeking.

I have considered whether this is a case where the three directors may be permitted to bring an action on behalf of the company on allegations of fraud. This right relates mainly to minority shareholders who, in a formal meeting, fear defeat by the fraudulent majority. This is hardly the case before me. The applicants appear to me to be in the majority and I cannot find a legal principle justifying turning the courtroom into the boardroom of the fourth applicant to resolve issues that the company itself should resolve at a meeting of its directors.

It is therefor my finding that the applicants, acting on their own behalves have not established a proper basis upon which they as members, can seek bring this application. having also failed to prove that they are authorised to bring this application for and on behalf of the fourth applicant, I find no basis upon which this application can succeed. In the result, I make the following order:

1. The application is dismissed.
2. The first second and third applicants are to meet the respondents’ costs.

*Mhiribidi Ngarava & Moyo*, applicants; legal practitioners.


Mushonga & Associates, first and second respondents’ legal practitioners.
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