In re Z (PVT) LTD (For a provisional order placing it under judicial management and for the appointment of a provisional judicial manager)

HIGH COURT, HARARE

[Civil Application HH 53-16]

December 23 and 29, 2015 and January 13, 2016

CHITAPI J

Practice and procedure  –  Provisional order  –  Application for provisional judicial management  –  Whether an interested party has the right to resist such application before the grant of a provisional order  –  Procedure to be followed in the filing of such applications.

Applicant approached the court ex parte for an order for its provisional winding up. Some of its creditors became aware that applicant sought such relief from the court and appeared on the unopposed roll with an opposition to the relief sought. The court considered whether they had the right to be heard ante the grant of a provisional order.

Held, that an application made in terms of s 299 (1)(a) of the Companies Act [Chapter 24:03] is brought ex parte. Opposition is not permitted at the initial hearing stage by the court but the Master upon whom the application must be served prior to its filing with the court in terms of s 299 (2) of the same Act, may report to court such circumstances which in his view might merit or justify the court having to postpone or dismiss the application. Any notice of opposition filed by an interested party must be expunged from the record as the application remains unopposed.

Held, further, that the procedure to be followed in the filing of an application for provisional judicial management as set out under s 299 (2) of the Companies Act is as follows:

(i) The applicant prepares the application which must include a supporting affidavit and other documents (if any) which are relied upon.

(ii) The applicant should lodge the application with the Master who is then afforded an opportunity if he so wishes to prepare a report on any circumstances, which may justify the court in postponing or dismissing the application. If he prepares such a report he provides the court with the report and transmits a copy to the applicant.

(iii) The applicant thereafter files the application with the court.

Held, further, that the failure to observe the provisions of s 299 (2) regarding the procedure for the filing of an application for judicial management is inexcusable as the court has no power to vary the provisions of the Act nor to condone non-compliance therewith.

Cases cited:

Ellingbarn Trading (Pvt) Ltd v Assistant Master 2013 (1) ZLR 332 (H), not followed

In re Graphic Age Advertising HH 97-08 (unreported), not followed

Millman, NO v Swartland Huis Meubileerders (Edms) Bpk; Repfin Acceptances Ltd Intervening 1972 (1) SA 741 (C), not followed

National Air Workers Union & Anor v Air Zimbabwe Holdings (Pvt) Ltd & Ors SC 14-15 (unreported), not followed

Zimbabwe Textile Workers Union v Merlin (Pvt) Ltd t/a Merspin & Anor HB 194-11 (unreported), not followed

Legislation considered:

Zimbabwe:

Companies Act [Chapter 24:03], ss 2, 299, 299 (1), (1)(a), (1)(b), (2), 300, 301, 301 (2), 302, 304, 305

Companies (Winding Up) Rules, 1972 (RGN 841 of 1972), r 2

High Court Rules, 1971 (RGN 1047 of 1971), O 1 r 4C, O32 rr 226 (1), (1)(a), 240, 247

South Africa:

Companies Act (46 of 1926), s 195 (2)(a)

A Mugandiwa, for the applicant

D Ndawana and H Mutasa, for intervening parties

CHITAPI J:

This application was set down as one of several other matters enrolled on the unopposed roll of 23 December, 2015. I had read through the application the previous day. There was no indication at all prior to the matter being called in court that there was any interested party who would seek to be heard other than the applicant. When the matter was called, however, Mr Mugandiwa for the applicant submitted that he had been served with a notice of opposition which had been filed in the morning. A copy of the notice of opposition was not in the record. Miss Ndawana then rose from the bar and advised that she represented four banks namely, MBCA Bank Ltd, Nedbank Ltd, Stanbic Bank and Central Africa Building Society (“the respondents”) who intended to intervene in the application. She submitted that owing to the fact that the so called respondents had only come to know of the application by chance and upon a perusal of the court roll, her principal Mrs Brighton, had only been able to draft opposing papers hurriedly and the same had been signed in the morning of the hearing date and filed. She applied to hand over a copy of the filed notice of opposition with opposing papers. I allowed Miss Ndawana to hand over the opposing papers across the bar. Mr Mugandiwa then requested that the matter be deferred to the end of the roll to enable him and Miss Ndawana to discuss and reflect on their positions. I granted the request and the matter was stood down to the end of the roll.

On resumption of the hearing, it turned out that counsel had not settled the matter. Mr Mugandiwa was not persuaded to have the matter postponed because in his submission, the notice of opposition had been improperly filed in that the opposition was premature. He argued that the respondents had no right to file any opposing papers prior to the granting of the order. As such, so Mr Mugandiwa argued further, the respondents had no locus standi to appear before the court or be heard. He further submitted that the respondents were creditors in regard to which there had been no service of the application. The respondents could only be properly before the court and be heard after service of the provisional order like every other interested party (i.e. assuming that the court did grant the provisional order).

I asked Miss Ndawana to address me on the propriety of filing opposing papers prior to the grant of the provisional order and whether the respondents had locus standi to oppose the application at this stage. She submitted that there was nothing in the High Court Rules, 1971 (RGN 1047 of 1971) or the Companies Act [Chapter 24:03] which precluded an interested party from intervening in the application and that the respondents had locus standi to be heard at this juncture. In answer to my question whether or not s 301 (2) of the Companies Act should not be treated as granting interested parties the right to be heard after the grant of a provisional order of judicial management, she responded that the section provided for or entitled interested parties as therein listed to apply for a variation or discharge of the provisional order at any time after the grant of a provisional order. She was however insistent that it was permissible for an interested party to intervene before the provisional order had been granted. In her understanding of s 301 (2), the section did not debar an interested party from intervening prior to the granting of the order. In other words I understood her to be arguing that whilst s 301 (2) was permissive as granting rights to interested parties therein to apply to court to vary or discharge the provisional order at any time, the section was however not prohibitive of interested parties who may wish to oppose an application for the granting of the provisional order.

As it became apparent that counsel were not agreed on the issue of whether or not an interested party could oppose an application for a provisional order of judicial management before it was granted, I directed that the parties’ legal practitioners should prepare and file heads of argument to further ventilate their opposed positions. I then postponed the matter to 29 December, 2015 to allow counsel time for the preparation and filing of heads of argument.

I directed further that the parties’ counsel should appear in chambers on the same date to speak to their heads of argument. Counsel duly filed their heads of argument and appeared before me in chambers with representatives of their clients. Miss Ndawana was now deputised by Mr Mutasa her principal. The arguments presented were sustained and I wish to commend both counsels for having put their best endeavours in preparing the heads of argument at a time that their respective firms were closed for the holiday.

In his heads of argument, Mr Mugandiwa further addressed the merits of the application in addition to the legal issue of locus standi. Mr Mugandiwa argued that even if the court was to rule that the respondents’ notice of opposition was properly before the court and that the respondents had locus standi to intervene at this stage, the court should find that the opposition was not sufficient in its substance, to defeat the application and that the applicant should be found to have made its case for the grant of a provisional order of judicial management on a balance of probabilities. I enquired of Mr Mutasa as to what his position was. He submitted that it made practical sense and logic for the court if it ruled that the respondents were properly before the court, to decide the application taking into account the opposing affidavit rather than refer the matter to the opposed roll. I agreed with counsel for the parties that if I ruled in favour of the respondents on the points in limine I would adopt a procedure akin to what obtains with urgent chamber applications whereby the respondent files opposing papers and is heard and where the opposition is dismissed, a provisional order is nonetheless issued with the respondent being afforded another opportunity to oppose confirmation of the provisional order. Mr Mutasa then applied to withdraw the respondents’ prayer in para 16.1 which read:

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