GN MLOTSHWA & CO LEGAL PRACTITIONERS v DAVID WHITEHEAD TEXTILES LTD & ORS

HIGH COURT, HARARE

[Provisional Sentence HH 78-17]

January 24, 2017 and February 8, 2017

MUREMBA J

Company Law – Companies – Judicial management – Leave to sue a company under – Actions stayed under section 301 of the Companies Act
[Chapter 24:03] – Factors court takes into account in granting leave to sue.

Plaintiff instituted provisional sentence proceedings to recover legal fees owed it by companies under judicial management. The companies together with the judicial manager took in limine the point that leave ought to have been sought and obtained before the institution of proceedings. The plaintiff counter argued that the proceedings having been instituted subsequent to the grant of the order for judicial management could not be considered to have been stayed by that order.

Held, that the effect of s 301 (1) of the Companies Act [Chapter 24:03] is to stay both pending and future legal proceedings against a company under judicial management. This covers even claims for debts that arise after the company has been placed under judicial management.

Held, further, that when an application for leave to sue is made, the court will investigate the intended litigation and decide on its impact before it grants leave. The factors that it takes into account are not exhaustive and its discretion cannot be circumscribed.

Case cited:

ZFC Ltd v KM Financial Solutions (Pvt) Ltd & Anor 2015 (1) ZLR 63 (H), referred to

Legislation considered:

Companies Act [Chapter 24:03], ss 213 (a), 301 (1)

Books cited:

Cambridge Advanced Learner’s Dictionary (3rd edn, Cambridge University Press, Cambridge, 2008)

Longman Dictionary of Contemporary English (5th edn, Emerald Group Publishing Limited, 2009)

F Mahere, for the plaintiff

FG Gijima, for the defendants

MUREMBA J:

It is the plaintiff’s averment that between 4 January 2011 and
19 March 2014 it rendered legal services to the DWT Companies whilst they were under provisional judicial management. The legal fees for the services rendered amounted to US$ 250 000. On 1 November 2013 Winsley Militala,
the then provisional judicial manager wrote an acknowledgement of the debt, but since then the debt has not been paid despite several undertakings having been made to pay it. The defendants’ failure and/or refusal to pay the debt prompted the plaintiff to issue summons for provisional sentence. However, the DWT Companies are now under final judicial management under a different judicial manager, the seventh defendant, Knowledge Hofisi.

In response to the summons the defendants raised two points in limine. Firstly, that the plaintiff has not obtained the leave of the court to sue the first to sixth defendants who are under judicial management yet para 5 of the court order placing the companies under judicial management states that, “all actions and applications and execution of all writs, summonses and other process against the first, second, third, fourth, fifth and sixth respondent companies shall be stayed and not proceed without the leave of this court”.

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