Acol Chemical Holdings (Pvt) Ltd v Senziwani Sikhosana and Fungai Sikhosana

The plaintiff, Acol Chemical Holdings (Pvt) Ltd, obtained judgment against Plastech Designs (Pvt) Ltd in case HC 13679/12 for US$51,140.67 with interest. The defendants, Senziwani Sikhosana and Fungai Sikhosana, were executive directors of Plastech Designs but were not cited in the initial case. The plaintiff failed to execute the judgment as all assets of the company were claimed by third parties and the second defendant. The plaintiff alleged that the defendants carried on the business of Plastech Designs recklessly and with intent to defraud creditors, having sold all company assets and paid the proceeds to a third party, Transvale Trading CC. The plaintiff brought an action (summons procedure) seeking to hold the defendants personally liable for the company's debts under section 318 of the Companies Act. At trial, the defendants raised a preliminary point that the matter should have been brought by way of application procedure, not action procedure, as required by section 318.

• Whether a claim under section 318 of the Companies Act [Chapter 24.03] must be brought by way of application procedure or can be brought by way of action procedure
• Whether the court can entertain proceedings brought under section 318 via summons action where the statute prescribes application procedure
• Whether a party can deviate from the procedure prescribed by statute

The preliminary point was upheld. The case was declared to be not properly before the court and was removed from the roll. Each party was ordered to bear its own costs.

Where section 318 of the Companies Act [Chapter 24.03] expressly provides that a court may act "on the application of" a creditor or other specified parties to declare directors personally liable for company debts, the proper procedure is by way of application and not by way of action (summons). Where a statute prescribes a specific procedure to be followed, that statutory procedure must be adhered to and parties cannot elect to use alternative procedures unless the nature of the relief or the emergence of factual disputes that cannot be resolved on affidavits justifies a different approach. A creditor seeking to hold directors personally liable under section 318 must first bring the matter by application procedure; only if disputes of fact emerge that cannot be resolved by affidavit evidence may the court then direct that the matter proceed by action procedure.

The court noted that the plaintiff's approach might have been proper if: (1) in the initial case the plaintiff had sued both the company and the defendants, and disputes of fact had emerged from their defenses that led to the defendants being exonerated; or (2) if the plaintiff had brought the case as an application under section 318 and the defendants in their notice of opposition had raised disputes of fact, whereupon the court could have directed the matter to proceed by action procedure. The court also observed that the fact that counsel for the plaintiff was caught by surprise does not assist, as any point of law can be raised at any point without notice. The court noted in passing that the provisions of section 318 embody the concept of lifting the corporate veil (citing the Railings Enterprises case).

This case reinforces the principle in Zimbabwean company law that where a statute prescribes a specific procedure, that procedure must be followed. It clarifies that claims under section 318 of the Companies Act seeking to hold directors personally liable for company debts must be brought by way of application procedure, not action procedure. The case emphasizes the binding nature of statutory procedure and limits the discretion of litigants to choose their preferred procedural route. It aligns with and applies the principles established in Courtesy Connection and confirmed by the Supreme Court in Mtetwa that statutory procedures cannot be circumvented. The judgment provides important procedural guidance for creditors seeking to lift the corporate veil and pursue directors for company debts.