BARNSLEY v HARAMBE HOLDINGS (PVT) LTD & ANOR 2012 (1) ZLR 265 (H)

Flynote

Company — corporate veil — lifting of — when permissible — companies forming part of a single economic entity — when permissible to treat such companies as a whole instead of as separate units

Headnote

The applicant was employed as group engineering director by the first respondent, which represented itself as a holding company, comprising several subsidiaries, with the second respondent as its chief executive officer. The applicant remained in employment for 11 months, and when he did not receive his salary and allowances in accordance with the employment contract, he referred the dispute to arbitration. An arbitral award was issued in his favour. He was unable to execute against the first respondent's property to recover the judgment debt because, each time an attachment of property was made, such property was claimed by a third party, one of the holding companies.

Held, that the cardinal principle of our company law is that a company enjoys separate legal personality, generally referred to as the legal persona principle. For that reason, its property and its liabilities should be maintained distinct and separate from those of its members. However, the courts have always readily lifted the corporate veil where the company is used as a vehicle for fraud or to justify wrong. Although the companies in a group are separate legal entities, the courts have in the mercantile context dealt with the group as an economic entity. This lifting of the corporate veil is indicated, especially when a parent company owns all the shares of the subsidiaries, so much so that it can control movement of the subsidiaries. The present case was a classic one for the lifting of the corporate veil: not to do so would enable the first respondent to rely on its legal personality to defeat a lawful claim, to justify wrong and indeed to protect fraud. If this were to be allowed, an injustice would occur.

Editor's note: see also Deputy Sheriff v Trinpac Invstmts (Pvt) Ltd & Anor 2011 (1) ZLR 548 (H), a judgment of Patel J, where the corporate veil was lifted in similar circumstances.