AGRICULTURAL BANK OF ZIMBABWE LTD v NICKSTATE Investments (Pvt) Ltd & Ors 2010 (2) ZLR 419 (H)

Flynote

Company - corporate veil - lifting of- when permissible - company a shell controlled entirely by two persons for their own benefit - court entitled to lift veil and enter judgment against them

Contract - breach - remedies - specific performance - innocent party's right to elect specific performance in lieu of damages - compensation payable if guilty party fails to perform - value fixed as at date of trial - assessment of value if contracted item no longer available

Practice and procedure -pleadings - amendment of - procedure to be adopted - need to make written application to court

Headnote

A registered company is a legal persona in its own right and endowed with its own separate legal persona which is distinct from its shareholders. However, in certain exceptional circumstances, where the company is controlled in terms of activities and decisions by another person, the courts will allow the corporate veil to be lifted to reveal the real person behind the company. When the notion of a legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation as an association. Thus, where there has been fraudulent or improper use of a company a court is entitled to disregard the separate corporate personality of a company and pierce the veil. In a situation where the company was the vehicle through which the directors acquired property to enhance their estate, it would be just and proper to order that the corporate veil be lifted and judgment entered against both the company and its directors.

Where there has been a breach of contract, the innocent party has a choice of claiming for specific performance or claiming a sum of money (ad pecuniam solvendam) as a remedy. Where a purchaser claims specific performance in respect of the item contracted for, he chooses not to crystallise his claim. By making this choice, he shows a willingness to treat the obligation by the seller as still continuing, with the value the item may have at the date of trial. Where the court awards specific performance, with an order of damages failing delivery, the compensation is fixed in relation to the value of the item at the date of trial. If the item is not longer available - for example, if it is no longer in production - the value of an equivalent item may be used to assess what should be paid. Pleadings can be amended at any time before judgment is issued. The courts will grant an amendment to pleadings unless the application to amend is mala fide and provided the amendment should not be seen to cause prejudice to the other litigant which cannot be cured by an order of costs necessitated by the need to further postpone the matter. The overriding consideration is that the parties should be, so far as is possible, able to place all the issues in contention between them before the court and enable the court to ventilate all aspects of the dispute between the parties. The procedure is not specifically laid down in the rules of court, but the practice is that an application has to be made to court for the amendment to be granted, the procedure being governed by r 226 of the High Court Rules 1971. An amendment made other than by a written application is irregular, though in appropriate circumstances the irregularity may be condoned under r 4C.