Divvyman Enterprises (Pvt) Ltd v Cesperk Marketing (Pvt) Ltd and Edmore Makureya

Edmore Makureya, the applicant's former employee, fraudulently ordered goods on credit from the first respondent, pretending to act on behalf of the applicant (Divvyman Enterprises). Edmore used the applicant's stationery and signed as an authorized signatory, but paid for goods from his personal account. He eventually defaulted, leaving first respondent exposed to debts of US$7,783.50 and ZWL 60,750.00. Edmore was arrested and criminally charged. First respondent sued both applicant and Edmore in HC 3504/22. The parties attended three pre-trial conferences before Kwenda J and Chitapi J, where a roadmap with timelines was agreed on 15 March 2022. Applicant failed to file heads of argument by the 4 April 2022 deadline and did not attend the 10 May 2022 pre-trial conference, resulting in a default judgment being entered against it. The default occurred during a changeover between applicant's legal practitioners (Magoge Law to Mr. Samuel Rusike), with confusion about who would file the heads of argument.

• Whether the applicant demonstrated good and sufficient cause for rescission of the default judgment under Rule 49 of the High Court Rules 2021
• Whether the applicant's explanation for default was reasonable
• Whether the application was brought in good faith
• Whether the applicant had a bona fide defence with prospects of success
• Whether the presumption of regularity under section 24(1) and (2) of the Companies and Other Business Entities Act (COBA) bound the applicant to the fraudulent acts of its former employee
• Whether the proviso to section 24(1) limiting the presumption where a party has actual or constructive knowledge to the contrary applied

The application for rescission of judgment was granted. The default judgment entered in HC 1669/21 was set aside. Applicant was ordered to pay the costs of the application on an ordinary scale.

For rescission of a default judgment under Rule 49, an applicant must demonstrate good and sufficient cause by establishing: (i) a reasonable explanation for the default; (ii) that the application is brought in good faith; and (iii) a bona fide defence with prospects of success. These factors must be considered individually and cumulatively. Default caused by confusion during a handover between legal practitioners, where the client itself took no part in the mishap and where substantial prior compliance had been demonstrated, does not constitute wilful default. While a litigant may bear responsibility for legal practitioners' dereliction, this is not absolute where the circumstances show the default was due to poor coordination during transition rather than deliberate non-compliance. The presumption of regularity under section 24 of COBA is limited by its proviso where a party has actual or constructive knowledge that an employee or agent is acting without authority.

The court observed that where fraud and illegality taint a contract, a number of legal considerations automatically come into play, which would be best determined by the trial court. The court noted that section 24 of COBA has a dual effect: it protects commerce from businesses attempting to evade responsibility to outsiders by citing internal disaffection, while also urging all parties to exercise diligence in commercial transactions. The court commented that while supporting affidavits from legal practitioners should be obtained where their conduct allegedly led to breach of court rules, the absence of such an affidavit is not necessarily fatal where other evidence (such as the letter from Magoge Law) explains the default. The court also noted that costs on a punitive scale were not warranted despite the tardiness and failures by applicant's legal practitioners, as the circumstances were not sufficiently extraordinary.

This case clarifies the application of the rescission test under Rule 49 of the High Court Rules 2021 in circumstances involving negligence by legal practitioners during a changeover period. It demonstrates judicial willingness to distinguish between wilful default by a litigant and confusion arising from transitions between legal representatives. The judgment also provides important guidance on the interpretation and limits of section 24 of the Companies and Other Business Entities Act (COBA), particularly the proviso limiting the presumption of regularity where a party has actual or constructive knowledge that undermines the apparent authority. The case emphasizes that while COBA protects third parties dealing with companies, it also requires commercial parties to exercise due diligence. The judgment balances the interests of finality in litigation with access to justice where default is attributable to legal practitioner error rather than client misconduct.