Betty Dube and Keenlord Dube v Wack Drive Properties Private Limited and Freddy Kapuya

The applicants, a married couple, purchased two properties (Stand Nos. 1243 and 1244) in Senka Township, Gweru from the 1st respondent (Wack Drive Properties Private Limited) for US$27,200.00. The 1st respondent failed to pass transfer because it had previously sold the same properties to one Mr Makara. In early 2017, the 1st respondent, represented by its director (the 2nd respondent, Freddy Kapuya), undertook to refund the full amount with a payment plan from March to June 2017, but failed to honour this undertaking. The applicants obtained judgment against the 1st respondent on 14 February 2018 from Moyo J, which was also not honoured. Nearly a year after the judgment and almost two years after the acknowledgement to refund, the applicants filed the current application on 2 November 2018 seeking to pierce the corporate veil and hold the 2nd respondent personally liable.

• Whether the corporate veil should be pierced to hold the director personally liable for the company's debts
• Whether the 1st respondent carried on business recklessly, with gross negligence, or with intent to defraud within the meaning of section 318 of the Companies Act Chapter 24:03
• Whether the 2nd respondent should be held personally responsible for the judgment debt of the 1st respondent

1. The piercing of the corporate veil separating the 1st and 2nd respondents was granted. 2. The 1st and 2nd respondents were ordered, jointly and severally, to pay the amount of US$27,200.00 to the applicants. 3. The respondents were ordered to pay the costs of the application on an attorney and client scale.

Where a company is used as a mere shell or vehicle controlled by a director for their own benefit, and where the company has carried on business recklessly, with gross negligence, or with intent to defraud, the court is entitled to pierce the corporate veil and hold the director personally liable for the company's debts under section 318(1) of the Companies Act Chapter 24:03. Personal liability extends not only to past or present directors but also to any other persons who were knowingly parties to the carrying on of the company's business in an improper manner. A director who sells property which has already been sold to another purchaser, fails to disclose material disputes, and fails to comply with agreements and court orders acts recklessly, negligently and/or fraudulently, justifying the lifting of the corporate veil.

The court observed that certain companies are practically 'one man bands' with a second director included merely to satisfy the numerical requirements of the Companies Act, typically comprising a man and his wife, child, cousin or brother-in-law. In such cases, only one person effectively controls the company and does whatever they wish to the detriment of others. The court cannot allow people of devious characters to use the vehicle of a company to amass wealth and acquire properties improperly on other people's sweat and then hide behind the company's corporate veil. The court also noted that respondents cannot seek rescission of a judgment 'through the back door' by taking advantage of a current application to argue what should have been their defence in the original case.

This case is significant in Zimbabwean company law as it demonstrates the willingness of courts to pierce the corporate veil where a company is used as a vehicle for fraudulent, reckless or negligent conduct. It reinforces the principle that directors cannot hide behind the corporate personality to avoid personal liability when they have knowingly participated in improper business practices. The case provides guidance on when section 318 of the Companies Act will be invoked, particularly in situations involving 'one-man band' companies where the corporate structure is merely a facade for an individual's actions. It also illustrates that costs on an attorney and client scale are appropriate in cases involving fraudulent or improper conduct.