The Lusaka High Court has thrown out and dismissed as irregular a notice to raise preliminary issues that would have removed Fred M’membe, Post Newspaper owner from personal liability from the K14million loan obtained from the Development Bank of Zambia by defunct Zambian Airways of which he was a director.
The application argued that the corporate veil should not be removed so that M’membe and another director Nchima Nchito should not be included in the matter in which JCN Limited and Post Newspapers and Mutembo Nchito have been sued for the recovery of the money.
In a previous appealed ruling judge Nigel Mutuna determined that the K14 billion was obtained by fraudulent misrepresentation as there was no desire to pay it back.
However lawyers for DBZ Ellis and Company represented by State Counsel Bonaventure Mutale told the court that Fred M’membe and Nchima Nchito should be included in the matter and has asked the court to dismiss the notice to raise the preliminary issues.
By virtue of the corporate veil the two would not have been personally included in the suit, meaning that any recovery of the loan would not have affected them personally.
Lawyers for DBZ have now applied that Mine Air Services Limited should be included as the first defendants, Zambian Airways Limited as second defendant, Fred M’membe as the sixth defendant and Nchima Nchito as the seventh defendant. Making a ruling Judge Chashi described the notice to raise the preliminary issue as fatally flawed because it was irregular and unnecessary and therefore dismissed it.
He observed that the application included law and fact making the application untenable at law.
In his ruling of September 18, 2015, High Court Justice Justin Chashi said as a commercial matter, the applications did not meet the preserve of the Supreme Court Order which should have been by Summons or Motion. “Firstly as rightly observed by State Counsel Mr Mutale, the defendants have elected to raise the preliminary issued by way of Notice, which is not permitted under Order 14 Rule 2 of the Supreme Court Rules. In the view that I have taken, the notice to raise preliminary issues is irregular and was unnecessary and is therefore dismissed,” said the ruling.
He further explained that issues raised and the questions raised by the defendants were irrelevant to the preliminaries heard in the Plaintiff’s application to re-amend the writ of summons and substitute the statement of claim pursuant to Order 18 of the High Court Rules and Order 20 Rule 10 of the Supreme Court Rules. DBZ through its lawyers Ellis and Company applied for leave to change witness statements of Richard Phiri and James Bilias Kapesa, to file additional Bundles of documents and witness statements and to expunge the diligence report from the defendants bundle of documents pursuant to orders 53 rule 7 (3) and Order 3 Rule 2 of the High Court Rules.
However, before the application was heard, the defendants advocate Nchito and Nchito Associates filed a Notice of Intention to raise preliminary issues pursuant to Order 14A of the Supreme Court They wanted to know whether it was legal to join parties to an action by amending pleadings in such a manner that the effect was to commence actions that are statute barred. They also wanted to know whether it was lawful to amend a writ and statement of claim by adding new claims which have passed the statute of limitation period.
They further wanted to know whether there was property in a witness and if it was lawful to seek to expunge a witness statement.
Was there a legal basis, they asked, for expunging the legal due diligence report when it was supplied by the plaintiff and finally whether it was lawful for the plaintiff to seek to pierce the corporate veil when its cause of action against the alleged principle debtor was statutory barred. But lawyers for DBZ in their objection against the application have dismissed all the grounds, explaining that the matter was not time barred and that the application was on firm ground.
Judge Chashi has now asked JCN, The Post Newspaper and Mutembo Nchito to file a proper application within 14 days and has given DBZ seven days to respond. A hearing will be held on 15th of October.2015