High Court rejects attempt to hold University of Zimbabwe liable for debt owed by trust

High Court judge Justice Maxwell Takuva has dismissed an application by two former employees who sought to enforce a judgment debt against the University of Zimbabwe, ruling that the institution cannot be held liable for obligations owed by the Tropical Resources Ecology Programme Trust.

The court found that the applicants had failed to establish sufficient grounds to disregard the trust’s separate legal identity and hold the University of Zimbabwe liable for its obligations, despite evidence of a close working relationship between the two entities.

The matter arose after Gloria Mugauri and Enock Manyere, who were employed by the trust, obtained a favourable ruling in earlier labour proceedings.

Although they succeeded against the trust, the university had been absolved of liability on the basis that there was no contractual relationship between it and the employees.

After registering the judgement with the High Court, the applicants sought to enforce the debt against the university and its Vice Chancellor, Paul Mapfumo, arguing that the trust was effectively an extension of the institution.

They contended that the trust lacked genuine independence, pointing to the fact that its trustees included senior university officials, its operations were conducted within university structures, and administrative and financial functions were closely linked to the university.

They also argued that their employment arrangements bore hallmarks of university involvement, including the use of university letterhead.

On this basis, they maintained that the trust functioned as an “alter ego” of the university and that justice required the court to disregard its separate legal personality.

The university opposed the application, maintaining that the trust was a distinct legal entity established and governed by its own trust deed.

It argued that the applicants were employed solely by the trust and that the issue of liability had already been conclusively determined in earlier proceedings.

The respondents further denied any improper conduct or abuse of the trust structure that would justify piercing the corporate veil.

Justice Takuva emphasised that piercing the corporate veil is an exceptional remedy, reserved for cases involving fraud, dishonesty, or other improper conduct.

Piercing the corporate veil is a legal concept where a court sets aside the separate legal identity of a company or trust and holds the people or entity behind it responsible for its debts or actions.

But in this case, the judge noted that mere control, association, or operational proximity between entities does not suffice to disregard separate legal personality.

“Piercing the corporate veil is an exceptional remedy,” the judge noted.

“It is not enough to show control, ownership, or close association between entities. There must be evidence of impropriety such as fraud, dishonesty, or abuse of the corpor-ate form.

“There must be a nexus between the misuse of the corporate structure and the prejudice complained of.”

The court found that the trust had been established in 2002, long before the applicants’ employment, and there was no evidence that it was created as a façade to evade obligations.

While acknowledging the close institutional ties between the trust and the university, the judge held that these did not amount to proof of misuse or abuse of the corporate form.

The involvement of university officials in the trust’s governance, as well as the use of university facilities, was described as indicative of operational convenience rather than legal identity.

The court also observed that the applicants were effectively seeking to revisit the issue of the university’s liability, which had already been determined in earlier labour proceedings.

It held that the doctrine of piercing the corporate veil cannot be used to circumvent such findings in the absence of clear evidence of impropriety.

In dismissing the application, Justice Takuva stated that the difficulty of enforcing a judgement against the trust did not justify holding the university liable.

“What has been established is a close institutional relationship between the Trust and the University of Zimbabwe. However, that relationship falls short of the legal threshold required to disregard the Trust’s separate existence.

The Applicants have therefore failed to discharge the onus resting upon them,” the judge stated.

The application was accordingly dismissed, with costs awarded against the applicants.