Charlene Hewat and Veronica Ann Chapman v Brim Investments (Private) Limited and Others

Brim Investments (Private) Limited was a non-trading private company that owned property called Kuimba Shiri with 30 residential cottages around Lake Chivero. Membership was limited to 50 shareholders, with each shareholding entitling exclusive use of specific cottages. The second and third respondents owned two fully paid-up shares entitling them to Cottage 16, which they sold to the applicants in May-June 2012. At the time of sale, the second respondent owed over $23,000 in levies to the company. The company had instituted proceedings for forfeiture of shares, but the matter was settled in July 2013 with full payment of outstanding levies from funds received from the applicants. Article 30 of the company's Articles of Association prohibited share transfers without prior directors' consent, but such consent could not be unreasonably withheld. Despite settlement of the levy dispute, the company refused to register the transfer of shares to the applicants. The applicants sought an order directing the company to transfer the shares to them.

• Whether the applicants had locus standi to sue the company directly despite not being members of the company
• Whether the applicants could rely on Article 30 of the Articles of Association when they were not parties to the Memorandum and Articles
• Whether the doctrine of stipulatio alteri applied to confer rights on the applicants
• Whether the directors' refusal to register the share transfer was unreasonable under Article 30
• Whether Brim was a company contemplated by section 27 of the Deeds Registries Act and whether this affected the applicants' cause of action

The court ordered: (1) The first respondent to transfer to the applicants the second and third respondents' shares relating to Cottage 16 (share certificate numbers 121, 122, 166 and 167) by signing transfer documents, registering the transfer and recording the applicants as shareholders; (2) If the company failed to comply within 7 days, the Sheriff was authorized to sign documents and effect the transfer in the company's stead; (3) The first respondent to pay the costs of suit.

Where a company's articles of association deliberately depart from the model articles in Table A to restrict directors' discretion by providing that consent to share transfers shall not be unreasonably withheld, a prospective purchaser who invests with knowledge of those publicly available articles has standing to sue the company directly to compel a share transfer where the directors' refusal is unreasonable and in bad faith, notwithstanding the absence of formal membership or contractual privity, based on broad principles of company law and equity. Articles of association are not purely ordinary contracts governed solely by contractual privity principles, but are public documents creating a special framework of rights and obligations. A share in a company represents a complex set of rights in the company, not an undivided share in land owned by the company; section 27 of the Deeds Registries Act applies only to undivided shares in urban land held under sectional title, not to shares in a company that owns land.

The court observed that even though not required for its decision, it was satisfied on the totality of documentary evidence that there was tacit approval of the applicants' investment despite denials by the company's managing director. The court noted that the matter appeared to have become personal for the directors, with the chairman stating the settlement was a 'disappointing result' and that they felt 'badly advised.' The court commended both counsel for their industry in providing additional written submissions after the hearing was reserved, though noted with respect that their treatment of the locus standi issue remained unsatisfactory. The court also observed that stipulatio alteri could possibly be read into the second part of Article 30 in relation to spouses or descendants of members expressly identified therein, such that those beneficiaries could sue directly to effect transfers intended for them.

This case is significant in Zimbabwean company law for establishing that non-members may have standing to sue a company directly to enforce share transfers where: (1) the company's articles deliberately limit directors' discretion (departing from model articles) by requiring consent not be unreasonably withheld; (2) the articles are public documents and the purchaser invested with knowledge of their terms; (3) there is evidence of tacit approval by the company; and (4) the refusal to transfer is unreasonable and in bad faith. The judgment clarifies the distinction between shares in a company and undivided shares in land under sectional title, rejecting attempts to apply section 27 of the Deeds Registries Act to ordinary share capital companies. It demonstrates the court's willingness to apply equitable principles and look beyond strict contractual privity where directors act unreasonably in contravention of modified articles that create more liberal transfer provisions than the statutory default.