Hatuma Chimuka T/A Hatuchi Ch Enterprises v Mapepi Bible College Registered Trustees (2018/HP /1975) [2025] ZMHC 102 (5 November 2025)

IN THE HIGH COURT FOR ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA (CIVIL JURISDICTION) 2018/HP /1975 BETWEEN HATUMA CHIMUK. A TI A HATUCHI CH ENTERPRISES AND PRINICIPAL u 5 NOV 2025 EGISTRY • ox 50067, PLAINTIFF MAPEPI BIBLE COLLEGE REGISTERED TRUSTEES DEFENDANT BEFORE THE HON. LADY JUSTICE. G. MILIMO- SALASINI ON THE 5m DAY OF NOVEMBER, 2025. For the Plaintiff Mr. R. Musumali, Messrs SLM Legal Practitioner For the Defendant Mr. A. Banda, Messrs. Apton & Partners RULING CASES REFERRED TO: 1) Ethiopian Airlines Limited v Sunbird Safaris Limited, Sharma's Investment Holding Limited and Vijay Babula! Sharma(2007) Z. R. 235 Stanbic Bank Zambia Ltd v Kumalo and Others Appeal No. 182 of2014 2) 3) Madison Investment, Property and Advisory Company Limited v Kanyinji Appeal No. 10 of 2016 LEGISLATION REFERRED TO: 1) 2) 3) 4) The Insolvency Act No. 9 of 2017 The High Court Rules, Chapter 27 of the Laws of Zambia The Rules of the Supreme Court of England (1999) The National Payment Systems Act No. I of 2007 1.0 1.1 INTRODUCTION R2 This is a ruling on the Plaintifrs application for leave to pierce the corporate veil. The application was made pursuant to section! 75 (1) of the Insolvency Act No. 9 of 2017, as read together with Order 3 Rule 2 and Order 16 Rule 1 of the High Court Rules, Chapter 27 of the Laws of Zambia. 1.2 Although the application is for leave to pierce the corporate veil, there is no requirement for a party seeking to pierce the corporate veil to ask for leave. In the circumstances, the application will be treated as an application to pierce 2.0 2.1 the corporate veil. AFFIDAVIT IN SUPPORT The affidavit in support was deposed by Hatuma Chimuka and filed on 4th February 2022. The deponent gave a background of the matter, stating that the action was commenced against the Defendant on 14th November 2021, where the Plaintiff claimed payment of K512,000.00, interest and costs. The action arose from the Defendant dishonouring cheque numbers 000176, 000172 and 000177 in March and September 2018 drawn on Inda Zambia Bank Limited in favour ofHatuchi CH Enterprises. 2.2 A Consent Order was executed, where the Plaintiff was to be paidK512,000.00. However, the Defendant did not pay the entire amount, and the sum of K212,000.00 plus interest remains outstanding. 2.3 He deposed that he believes that the drawing of cheques on insufficiently funded accounts was at the instance of the Directors and the natural persons running the affairs of the Defendant. Further, that the Defendant is being used for fraudulent purposes to obtain a pecuniary advantage by its members and/ or directors. 2.4 The deponent averred that the only way he can recover the judgment debt is by piercing the corporate veil and pursuing the Directors and members of the Defendant Company involved in the fraudulent conduct. The named R3 3.0 3 .1 directors are listed as Elton Phiri, Patrick Zimba, Charles Kamboyi, Hubrey Musalu, Ernest Chileya and Gibson Lubasi Kalenga, as shown in the PACRA exhibit marked "HCl" SKELETON ARGUMENTS IN SUPPORT The Plaintiff submitted that the application for leave to pierce the corporate veil is anchored on Order 32 Rule 6 of the Rules of the Supreme Court. However, Order 32 Rule 6 RSC cited by the Plaintiff relates to the Court's power to set aside ex parte orders. 3.2 The Plaintiff also referred to Order 3 Rule 2 of the High Court Rules (HCR), stating that the Court may make any order in the interest of justice. Reliance was also placed on Order 16 Rule 1 HCR, which provides that: "Where, after the institution of a suit, any change or transmission of interest or liability occurs in relation to any party to the suit, or any party to the suit dies or becomes incapable of carrying on the suit, or the suit in any other way becomes defective or incapable of being carried on, any person interested may obtain from the Court or a Judge any order requisite for curing the defect, or enabling or compelling proper parties to carry on the proceedings: Provided that any person served with such an order may within such time as the Court or a Judge in the order directs apply to the Court or a Judge to discharge or vary the order." 3. 3 It was argued that it is apparent that the Directors and/ or shareholders of the Defendant issued cheques on an insufficiently funded account, which is fraudulent and contravened section 33 of the National Payment Systems ActNo.1 of 2007, which states that "Any person who wilfu.lly, dishonestly or with intent to defraud issues a cheque on an insufficiently funded account or causes R4 to be issued a cheque to be drawn on that account and which cheque, when it is presented for payment, is dishonoured, commits an offence and is liable on conviction to a fine not exceeding one hundred thousand penalty units or to imprisonment for a term not exceeding two years, or to both." 3.4 In arguing its position, the Plaintiff contended that the conduct of the officers of the Defendant company was criminal, thereby warranting the piercing of the corporate veil. In support, the Plaintiff cited the case of Ethiopian Airlines Limited v Sunbird Safaris Limited, Shanna's Investment Holding Limited and Vijay Babulal Sharma<1>, where it was held that the Directors of the company allowed the company to be involved in fraudulent trading, and they would be personally liable for the debts. On the strength of this case, the Plaintiff argued that similarly, the Directors of the Defendant Company allowed the Defendant to engage in fraudulent trading and are hiding behind 4.0 4.1 the corporate veil. HEARING When the matter came up for hearing on 30th June 2022, the Defendant was not in attendance. I therefore decided to render a Ruling based on the documents before me. Before I could render my Ruling, the Defendant, on 22nd December 2022, applied for special leave to review the decision to hear the Plaintiff in its absence. The Defendanfs application was granted on 9th March 2023. Subsequently, the Defendant was ordered to file its affidavit in opposition. 4.2 However, the Defendant did not file its affidavit in opposition to the application. In addition, when the matter came up for hearing on 23rd May 2025, the Defendant was not in attendance and the Defendant's application for review was dismissed. 4.3 Therefore, this Ruling is based on the evidence before me submitted by the RS 5 .0 5.1 Plaintiff. ANALYSIS The Plaintiff moved the Court pursuant to section 175 (1) of the Corporate Insolvency Act as well as Order 3 Rule 2 and Order 16 Rule 1 of the HCR. It is common cause that the Plaintiff obtained Judgment in Default of Defence and Appearance and was granted the sum of K512,000.00 sought. By a Consent Order dated 1st April 2019, it was agreed that the Defendant would pay the Judgment sum in instalments as follows: i. The first instalment of KJ00,000.00 shall be paid on or before 1st March2019 ii. The second instalment of K106,000.00 shall be paid on or before 30th April 2019 iii. The third instalment of K106,000.00 and accrued interest shall be paid on or before 31st May 2019 iv. The agreed legal costs of KJ0,000.00 (inclusive of VAT and disbursements) shall be paid in two (2) monthly instalments of KlS,000.00 commencing at the month end of March 2019; and v. That should there be any default by the Defendant in paying any of their respective instalments as aforesaid, then the entire amount outstanding shall become due and payable forthwith, and the Plaintiff shall be at liberty to execute for the said balance without leave of Court. 5.2 The Defendant has only paid the Plaintiff K300,000.00 out of K512,000.00, leaving a balance of K212,000.00. The Plaintiff seeks to hold the directors of the Defendant liable for the Judgment sum outstanding, as the Plaintiff RG alleges that the directors allowed the Defendant to engage in fraudulent trade, which resulted in the accrual of the Judgment sum. 5.3 In the statement of claim, the Plaintiff alleged that the cheques issued by the Defendant in respect of construction and building materials were either dishonoured for being issued on an insufficiently funded account, which was a dormant account or that the Defendant stopped the Plaintiff from depositing the cheques. The Defendant did not allege any fraudulent conduct by the Defendant. 5 .4 Order 18 RSC requires a party alleging fraud to specifically plead fraud and to give the particulars of fraud . This was also reiterated in the case of Stanbic Bank Zambia Ltd v Kumalo and Others<2>. However, in casu, the Plaintiff did not plead fraud by the Defendant. The importance of specifically pleading fraud is to demonstrate or explain how the fraud occurred and to give warning to the other party of the claim they are to face. In this case, the Plaintiff in the statement of claim needed to have pleaded the particulars of fraud. 5.5 The Plaintiff averred that the Defendant dishonoured some cheques and also stopped the Plaintiff from depositing the said cheques. The Plaintiff did not explain how it was prevented from depositing the cheques, or whether the same was done fraudulently. 5.6 A perusal of the exhibit marked "HC2" shows copies of three cheques for K25,000.00 each dated 20th , 21st and 22nd March 2018. The cheques, however, do not show that they were dishonoured. The Plaintiff did not show the relevance of the exhibited cheques regarding the present application. 5. 7 The Plaintiff contends that the Directors permitted the Defendant to engage in fraudulent trading and are now attempting to rely on the corporate veil for protection. While the Court recognises and upholds the principle of separate legal personality, the corporate veil cannot be invoked as a shield for R7 fraudulent conduct. Accordingly, the main issue is whether there is sufficient evidence for the Court to infer that the Defendant carried on its business for fraudulent purposes or with the intent of defrauding the Plaintiff, thereby rendering the directors personally liable for the judgment debt ofK212,000.00 owed to the Plaintiff. 5. 8 Section 17 5 (1) of the Corporate Insolvency Act, by which the Plaintiff has moved the Court, provides as follows : "If, in the course of the winding up, receivership or business rescue proceedings or in any other proceedings against a company, it is shown that business of a company has been carried on for fraudulent purposes, or with intent to defraud creditors, the Court shall, on the application of an insolvency practitioner or creditor, order that any person who was knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for the debts or liabilities of the company as the Court orders." 5.9 Section 175 (1) of the Corporate Insolvency Act allows for piercing of the corporate veil where it is established that a person was knowingly part of carrying on the business of a company for fraudulent purposes or with intent to defraud creditors. The person(s) shall be personally responsible. 5 .10 In Madison Investment, Property and Advisory Company Limited v Kanyinji<3>, the Supreme Court noted two vital elements in considering whether to lift the corporate veil, i.e. concealment (where the corporate personality is used to hide the true state of affairs) and evasion (where an individual or entity being under an existing legal obligation which he or it seeks to avoid by using the corporate personality which is under the control of the individual or entity). In that case, the Supreme Court was not satisfied R8 that the corporate veil was used by the appellant to conceal the true state of affairs or to evade an existing obligation or for any improper or fraudulent purpose. 5.11 Similarly, there is no proof that the directors of the Defendant concealed the true state of affairs of the company or were using the company to carry out any fraudulent or illegal activities. Although the Plaintiff alleged that the Defendant dishonoured certain cheques, this alone does not meet the threshold of fraudulent conduct contemplated under section 175(1) of the Corporate Insolvency Act. 5 .12 Regarding the recovery of the judgment debt, it is my view that the Plaintiff has other avenues through which it can enforce and recover the judgment debt, rather than piercing the corporate veil and imposing personal liability on the directors. It is from the foregoing that I find that this is not an appropriate case to pierce the corporate veil. The application is dismissed. Given that the Defendant did not file its opposition to the application or appear to argue the case, I make no order as to costs. 5.13 Leave to appeal is granted. HO