Barzem Enterprises (Private) Limited v Release Power Investments (Private) Limited and Onias Zidanda Gumbo and Evelyne Winnite Gumbo

The plaintiff issued summons against the defendants for payment of USD 207,344.16, being the purchase price of equipment (a Caterpillar Model 140K Motor Grader) purchased by the 1st defendant (a company) represented by the 2nd defendant in September 2012. The debt was acknowledged verbally and in writing by the 1st defendant, with the last undertaking dated 26 February 2018. The claim against the 2nd and 3rd defendants in their personal capacities as directors of the 1st defendant was based on section 318 of the Companies Act [Chapter 24:03]. The plaintiff alleged that: (1) the 2nd defendant personally undertook to liquidate the debt from his personal resources (evidenced by a letter dated 7 February 2018); and (2) the 2nd and 3rd defendants acted with fraudulent intent or recklessly or with gross negligence when they authorized the purchase of equipment and made written undertakings for payment when they knew the 1st defendant would not be able to pay. The 2nd and 3rd defendants filed an exception to the summons.

• Whether the claim against the 2nd and 3rd defendants was based on contract, thus requiring proof of lifting the corporate veil
• Whether a separate application for leave is required under section 318 of the Companies Act before instituting an action against directors in their personal capacities
• Whether intention to defraud must be proven in the pleadings before invoking section 318
• What constitutes an 'application' for purposes of section 318 of the Companies Act

The exception by the 2nd and 3rd defendants was dismissed with costs. The defendants were ordered to file their plea within ten (10) days of the date of the order.

For purposes of section 318 of the Companies Act [Chapter 24:03], an 'application' to hold directors personally liable for company debts may be made by way of summons commencing action, and does not require a separate application to be filed under Order 32 of the High Court Rules. Section 15 of the Interpretation Act [Chapter 1:01] provides that where an enactment requires an application to be made to a court, it may be made in any appropriate form permitted by the rules of court, whether by way of action, application or otherwise. Claims against directors under section 318 are based on statutory obligations and personal undertakings, not on the contract between the plaintiff and the company, and therefore do not require proof of grounds for lifting the corporate veil as would be required for contractual claims. At the pleading stage, it is sufficient to traverse the facts upon which the cause of action is based; proof of those facts, including fraudulent intent, recklessness or gross negligence, is a matter for trial.

The court observed that while the case of David Govere & Another v Ordeco (Private) Limited SC 225/13 was distinguishable on facts (as it involved an application on notice), the principle that directors can be held personally liable despite the company's separate legal persona remained applicable. The court also made the general observation that directors must act with probity as prescribed by section 318, and that the matter of proving fraudulent intent, recklessness or gross negligence is for trial and not to be determined at the exception stage.

This case is significant in Zimbabwean company law and civil procedure as it clarifies that: (1) creditors may pursue directors personally under section 318 of the Companies Act by way of summons rather than being required to file a separate application on notice; (2) the Interpretation Act permits flexible procedural approaches, allowing summons to constitute an 'application' under section 318; and (3) claims against directors under section 318 are distinct from contractual claims against the company and do not require proof of lifting the corporate veil on the same grounds. The judgment promotes access to justice by simplifying the procedural requirements for holding directors personally liable for company debts where the statutory requirements are met.