Plumed Horse (Pvt) Ltd and Stella Nyandoro and George Nyandoro v Dundurn (Pvt) Ltd and Others

The second and third applicants (husband and wife) obtained judgment against them in favour of Hamilton Mandizvidza for US$30,000 in February 2016. To avoid a forced sale by public auction of property at 517 Jacaranda Road, Victoria Falls, the second applicant sold the property to the first respondent by oral agreement. Part of the purchase price was used to settle the judgment debt to Mandizvidza. The applicants subsequently reneged on the agreement. The first respondent obtained a provisional order on 7 August 2018 (MOYO J) and final order on 13 September 2018 (MAKONESE J) in case HC 2127/18 for transfer of the property. Transfer was effected in December 2018. Seven and a half months later, in April 2019, the applicants filed for rescission, claiming the orders were obtained through fraud, improper service, and that they were unaware of the proceedings. They also claimed the property belonged to the first applicant company (of which the second and third applicants were directors) and that no shareholder resolution had been passed authorizing the sale. One day before filing the rescission application, Mr. C. Nhema (the applicants' attorney) was appointed as Corporate Rescue Practitioner of the first applicant company.

• Whether the court orders in HC 2127/18 were erroneously sought or erroneously granted in the applicants' absence
• Whether there was fraud or improper service justifying rescission of the judgment
• Whether the applicants showed good and sufficient cause for rescission
• Whether Rule 449 of the High Court Rules applied to the circumstances
• Whether the corporate veil of the first applicant company should be pierced
• Whether the first applicant company was used as a vehicle to defeat the court order and evade obligations
• Whether the corporate rescue procedure was being abused to circumvent execution of a valid court order

The application for rescission of judgment in case HC 2127/18 was dismissed with costs on an attorney and client scale.

The binding legal principles established are: (1) A court will not rescind a judgment under Rule 449 or common law where there has been no fraud, no improper service (as determined by earlier court decisions), and no good and sufficient cause shown. (2) Where a company is merely a shell or alter ego of individuals, used to defeat public convenience, justify wrong, protect fraud, or evade legal obligations, the court is entitled to pierce the corporate veil and disregard the separate corporate personality. Section 318(1) of the Companies Act empowers the court to do so where business was carried on recklessly, with gross negligence, or with intent to defraud. (3) Litigants cannot use their own non-compliance with legal requirements (such as failure to pass company resolutions) as a basis to seek relief that would benefit them and prejudice innocent third parties - the "dirty hands" doctrine. (4) Corporate rescue procedures are intended for genuine struggling but operational companies, not to circumvent execution of validly obtained court orders. (5) Applications for rescission must be brought timeously; delays of seven months without proper explanation and attempts to avoid procedural requirements will not be countenanced. (6) Once service has been accepted as proper by a court, a subsequent court will not revisit that determination in the guise of a rescission application.

The court made several important obiter observations: (1) MABHIKWA J endorsed the view expressed in Trastar (Pvt) Ltd v Golden Ribbon Plant Hire that litigants cannot be allowed to spend years "skipping from one rule to the other, kangaroo style" attempting to have the same judgment rescinded - there must be finality in litigation. (2) The judge expressed concern about applications where it is left to the court to guess which rule or law is relied upon, describing such applications as often being "a fishing expedition" with the motive "to use an unwary court to salvage a lost cause." Such applications should be discouraged. (3) The court observed that the first applicant company "suffered a still birth" and was "a shell of a company which was nothing more than the mere alter ego or business conduit of a person improperly and fraudently used to the financial loss of another." (4) The judge commented that it was "a brazen show of ungratefulness" for the applicants to scheme to repossess the property after the first respondent had saved them from their indebtedness. (5) The court noted that Mr. C. Nhema, the attorney, "should himself have refused to be part of such a scheme," given the elaborate nature of the deception involving his appointment as Corporate Rescue Practitioner just one day before filing the rescission application.

This case is significant in Zimbabwean jurisprudence for: (1) Reinforcing the principle that there must be finality in litigation and that applicants cannot endlessly skip between different rescission procedures to avoid adverse judgments. (2) Demonstrating the court's willingness to pierce the corporate veil where a company is used as a vehicle for fraud, to defeat court orders, or to evade legal obligations, particularly in situations involving husband-and-wife directors controlling a shell company. (3) Establishing that litigants who come to court with "dirty hands" - using their own non-compliance with the law to seek relief - will not be assisted. (4) Clarifying that corporate rescue procedures under the Insolvency Act are intended for genuine struggling operational companies, not to circumvent execution of valid court orders. (5) Emphasizing that applicants must elect clearly which rule or legal basis they rely upon for rescission, rather than throwing "the whole kitchen sink" at the court. (6) Illustrating the importance of candor with the court and the consequences of scheming to mislead or deceive the court.