MTSHIYA J: This is an opposed application where the
applicant seeks confirmation of a provisional liquidation order granted on 24
March 2010, which order read as follows:-
“1. The applicant, RADIATOR
& TINNING (PRIVATE) LIMITED, is provisionally would up, pending the grant
of an order in terms of paragraph 3 of the discharge of this order.
2. Subject to subs (1) of s
274 of the Companies Act. [Cap 24:03],
THERESA GRIMMEL is appointed as provisional liquidator of the above company
with he powers set out in s 221(2)(a)-(g) of the Act.
3. Any interested party may
appear before the court sitting at Harare
on 5 May 2010, to show cause why a final order should not be made placing the
applicant company in liquidation and ordering that the costs of these
proceedings shall be costs of liquidation.
4. A copy of this order
shall be served on the applicant at its registered office.
5. This order shall be
published once in the Government Gazette, once in the Herald and once in the
Chronicle newspapers in a Friday edition. Publication shall be in the short
form annexed to this order.
6. Any person intending to
oppose or support the application on the return day of this order shall:
(a)
give due notice to the applicant at Coghlan Welsh &
Guest, Legal Practitioners, 3rd Floor Executive Chambers, 16 George
Silundika Avenue, Harare, ref N. Moyo
(b)
serve on the applicant a copy of any affidavit which he
files with the Registrar of the High Court.”
The
applicant, in its application filed on 9 March 2010, has, in terms of s
207 of the
Companies Act [Cap 24:03], ('the
Act') petitioned this court for the above relief because, as per the founding
affidavit:-
“(i) the company is unable to pay its debts;
(ii)
the company has resolved, by special resolution, to
wind up;
(iii)
I believe that it is just and equitable that the
company be wound up, so that the assets of the company can be liquidated to
provide for some equitable distribution to creditors”.
In its founding
affidavit the applicant also states the following:-
“Applicant has
102 employees, and its outstanding wage bill is US103 215-00. The company has
no prospect of generating enough money to settle this bill”.
Indeed on 22
February 2010, at a special meeting of shareholders held at Helier, Jersey, the Directors of the applicant had passed the
following resolutions:-
- “It was resolved that
the notice period required for the holding of a Special General Meeting be
waived.
- It was resolved that
Radiator & Tinning (Private) Limited be put into “Members Voluntary
Liquidation”, due to the inability of the Company to continue to meet it's
obligations.
- It was resolved that
Jeremy Hodgskin, ID No. 08 051413K00, be empowered to do all things and sign
all documents in regard to effecting and facilitating this liquidation.
- It was resolved that
Robert Charles Jenkinson, ID No. 63010327K00, be empowered to do all things and
sign all documents in regard to effecting and facilitating this liquidation.
- It was resolved that Theresa Grimmel
be appointed Liquidator”
The second resolution above relating
to members voluntary liquidation is the one to occupy us in this judgment. It
is on the basis of that resolution that the applicant then approached this
court for the relief it seeks.
The provisional order quoted in full
at p 1 of this judgment, was published in both the Herald and The Chronicle on
9 April 2010 and 30 April 2010 respectively.
On 10 May 2010 the respondents filed
a Court Application (i.e case no. HC 3093/10) for joinder in terms of Order 13
r 85 of the High Court Rules 1971. In the founding affidavit in support of that
application, the second respondent, representing the view of all other
respondents, stated the following as the basis of their application to be
joined to the proceedings:-
“4. The respondent through
its legal practitioners filed a court application being a petition for its
winding up on 9 March 2010 without consulting the workers committee since it is
an interested party which is directly affected as one of the applicants'
creditors.
5. On 22 April 2010, upon
arrival at the workplace with other workers, we saw that the gate was locked.
Upon enquiring that is when I was given a letter by the liquidator to the
effect that a court application for liquidation had been made by the
respondents.
6. On 30 April 2010, we had
a meeting as the workers committee and resolved to duly appoint Messrs
Matsikidze & Mucheche as our legal practitioners to act on our behalf. A
copy of the extract of minutes has been attached herein as Annexure 'A'.
7. Being representatives of
employees and the application in question being one which affects the welfare
of such, with respect I submit that we should be joined to the application so
as to give us an opportunity to be heard as an interested party. The applicants
have a direct and substantial interest in the matter for which the joinder is
being sought herein.
8. With respect I humbly
submit that an order of this Honourable Court allowing the joinder will enable
the respondents to be heard by this Honourable Court during the proceedings of
the petition.”
The
record does not show how that application was handled.
However,
it appears upon the respondents' application having been opposed by the
applicant, this court, on 26 May 2010, issued the following order:-
“1. The matter is referred to the opposed
roll.
2. The provisional order be
and is hereby extended until the matter is resolved on the opposed roll.
3.
The applicants in Case No. 3093/10 shall file their
Notices of Opposition within 10 days of service of this order”.
On 8 June 2010 and in terms of the above order the
respondents (applicants in case no.
3093/10) filed
their notice of opposition in which they raised the following points in limine:-
“NON COMPLIANCE WITH THE PROCEDURE
With respect, I
am reliably advised by my esteemed counsel, which advice I embrace that the
procedure as laid down in s 25A(4)(a) and (5)(c) of the Labour Act [Cap 28:01] was not followed before the
matter was filed in this Honourable Court. It is respectively submitted that
the applicant should have conducted a Works Council meeting with the workers in
order to discuss its financial status and the way forward but this was not
done. At the same time nothing was attached to the petition to the effect that
such communication had been done to the workers. I will leave my legal counsel
to deal with the legal issues in the Heads of Arguments to be filed with this
Honourable.
EXISTENCE OF
MATERIAL DISPUTE OF FACTS
This matter if
full of material disputes of facts which can only be cured by leading evidence
from witnesses as will be elaborated from para 3 downwards. I therefore pray
that the Honourable Court allows oral evidence to be led during the hearing”
At
the hearing of this matter and after listening to addresses on the points in limine, I allowed the parties to also
address me on the merits of the application. I indicated then that my finding
on the points in limine would dictate
whether or not I should proceed to determine the application on the merits.
In
making submissions on the points in
limine, Mr Marara for the
respondents pointed out that in view of the fact that this was a voluntary
winding up of the applicant (company), the procedure adopted was flawed. He
said in terms of the law and since this was a voluntary winding up, the
employees (herein represented by the respondents) were supposed to have been
consulted. He correctly pointed out that in its answering affidavit the
applicant clearly admitted that this was a members' voluntary winding up. This
was indeed in line with the shareholders' second resolution which specifically
made reference to 'Members Voluntary Liquidation.' Mr Marara also said that in the given circumstances, s 25A (5)(c) of
he Labour Act [Cap 28:01] was clear
on the need for workers to be consulted in situations of such a voluntary
winding up.
Mr
Marara went on to submit that the
fact that the applicant had not produced audited accounts and the respondents
disputed what was presented, meant that there were triable issues in the matter
(i.e the disputes of fact could not therefore be resolved by way of application).
He therefore urged the court to deny the applicant the relief it seeks.
Advocate
Ochieng, for the applicant, submitted
that the applicant had properly proceeded in terms of s 207 of the Act. He said
if the matter was one of voluntary winding up, there would have been no court
proceedings. He also said that although the resolution was 'imprecise' the
applicant had followed the correct procedure. Advocate Ochieng submitted that winding up through the court was a public
process and to that end the applicant had complied with the provisions of the
Act.
Advocate
Ochieng did not agree that there were
material disputes of fact
For
reasons I shall give here below, I am persuaded to agree with the respondents
that the procedure followed by the applicant is fatally irregular and therefore
the provisional order granted by this court on 24 March 2010 should not be
confirmed.
Section
199 of the Act provides for the following two modes of company winding up:
“(a) by the Court or
(b) Voluntary”
Sections
206 and 207 of the Act then provide for circumstances under which a company may
be wound up by court and how the process may be commenced. Given the import of
the resolution that led to this process and the applicant's own admission in
the answering affidavit, I shall not concern myself with the provisions of
those sections of the Act. The resolution upon which the application is
anchored specifically refers to “Members Voluntary Liquidation”. The resolution
does not therefore bring us into the ambit of ss 206 and 207 of the Act. The
members' resolution, in my view, dictates that we be guided by the provisions
of ss 242 and 243 of the Act. The said sections provide as follows:-
“242 Circumstances in which company may be
wound up voluntarily
A
company may be wound up voluntarily-
(a) when the period, if any,
fixed for the duration of the company by the articles expires or the event, if
any, occurs on the occurrence of which the articles provide that the company is
to be dissolved, and the company in general meeting has passed a resolution
requiring the company to be wound up
voluntarily;
(b) if the company resolves
by special resolution that the company be wound up voluntarily.
243 Notice of resolution for voluntary winding up
(1) In this section-
“workers' committee” means a
workers' committee appointed or elected in terms of Part VI of the Labour
Relations Act (Cap 28:01].
(2) A resolution for the
voluntary winding up of a company shall not be deemed to have been passed
unless the company has given not less than four weeks' notice of the
resolution-
(a)
to the Registrar of Labour Relations referred to in s
121 of the Labour Relations Act [Cap 28:01];
and
(b)
to the company's workers' committee or, where the
company has no worker's committee, to the company's employees:
Provided that
this subsection shall not apply in relation to a company all of whose employees
are officers of members of the company.
(3)
Where a company has passed a resolution for its
voluntary winding up it shall-
(a)
within two weeks after passing the resolution, give
written notice of it to the master and the Registrar; and
(b)
within one month after passing the resolution-
(i)
publish notice of it in the Gazettee; and
(ii)
…..
(iii)
…..
(4)
…….
(5)
……
In
casu, a special resolution “that the
company be wound up voluntarily” was indeed passed. Advocate Ochieng submitted that the resolution
was imprecise. I disagree.
The
special resolution quoted at p 2 of this judgment clearly expresses the wishes
of the members and is unambiguous. That position enjoys full support from the
applicant's own averments. Applicant admits to the passing of the special
resolution and also that it has a workforce it owes wages and salaries. The
affected employees are not members of the applicant. It would, in my view, be
highly irregular for this court to amend or indeed to interfere with the
applicant's resolution. As I have already said, the applicant's resolution
dictates that the procedure it should have followed is the one provided for in
ss 242 and 243 of the Act quoted above.
It is also important to note that s 2A(3)
of the Labour Act [Cap 28:01]
provides as follows:-
“This
Act shall prevail over any other enactment inconsistent with it”
Section
243 of the Act removes any possibility of inconsistence between the two pieces
of legislation. The said section caters for the interests of the workers in a
situation of a voluntary winding up of a company such as in casu. Furthermore the provisions of s 243 of the Act are in line
with the spirit of the law as captured in subss 5 & 6 of s 25A of the
Labour Act [Cap 28:01].
All
in all, my finding is that, as per its resolution of 22 February 2010, the
applicant should have followed the procedure laid down in ss 242 and 243 of the
Act as read together with subs 5 & 6 of s 25 A of the Labour Act [Cap 28:01]. The applicant departed from
its resolution and proceeded in terms of s 207 of the Act. That action by the
applicant does not enjoy the support of the resolution it purports to be the
basis of the relief it seeks. Even without taking into account the fact that
there might be disputes of facts, as argued by the respondents, the point in limine on the procedure adopted
should succeed on the basis of it being fatally irregular. The application
cannot therefore succeed. I therefore order as follows:-
The
application for the confirmation of the provisional order granted by this court
on 24 March 2010 be and is hererby dismissed with costs.
Coghlan, Welsh & Guest, applicant's legal practitioners
Matsikidze &
Mucheche, respondents' legal practitioners
