MATHONSI J: At the close of submissions by counsel in this
matter, I granted the 1st respondent leave to file additional
affidavits incorporating knew facts which arose after the opposing affidavit
was filed. In particular, Mr Majoko for the first respondent had
submitted that the management of the first respondent had unlocked funding in
the region of US$800 000-00 which was to be injected into the business thereby
making it unnecessary to introduce new management.
I
directed that such supplementary affidavit be filed by close of business on 25
November 2011 and once so filed and served upon the applicant the latter should
file its response thereof, if any, by close of business on 30 November 2011
after which I would determine the matter on the basis of submissions made and
the extra documentation filed.
The
first respondent has not filed any supplementary affidavit as directed and
needless to say, the applicant has not filed any either. Instead, by letter to the Registrar dated 28
November 2011, the applicant's legal practitioners requested that I proceed to
determine the matter on the basis of the papers filed already and submissions
made by both counsel. That is what I am
proceeding to do.
That
the first respondent is a troubled company in serious financial dire straits is
self evident. It was suspended from the
Zimbabwe Stock Exchange. It has not paid
its employees at all since January 2010 when it employs about 200 employees. It has not engaged in any production since
September 2010 and the factory from where it operates looms large but dormant.
The
applicant is a duly registered trade union whose members are employed by the
first respondent. The workers committee of
the first respondent employees authorised the applicant to institute these
proceedings on behalf of the employees.
In addition to that, the applicant is a creditor owed by the first
respondent, which has failed to pay union fees in terms of regulations
governing that namely section 8(2) of Statutory Instrument 19/2002. A sum of US$35 757-00 is owed to the
applicant in that regard.
In
my view the objection made by Mr Majoko
for the first respondent, to the applicant's locus standi in judicio, is baseless. The applicant clearly has authority to
institute these proceedings.
In
this application, the applicant seeks an order placing the first respondent
under provisional judicial management.
The applicant has advanced the argument that by reason of mismanagement
the first respondent is unable to pay its debts as symbolised by its failure to
pay its employees for almost two (2) years resulting in a wage bill which stood
at US$891 903-01 as at August 2011. It
has also failed to pay statutory dues as shown by the ballooning debt owed to
the applicant which stood at US$35757-00 as at August 2011.
The
applicant argues further that the first respondent, which is a textile
manufacturing concern whose line is spinning, weaving, dying and making
napkins, towels and juvets, has not embarked on any form of manufacturing since
August 2010 even though the factory is fully equipped with machinery for the
undertaking.
It
is stated that the financial books of the enterprise have not been audited for
a considerable period of time as management neglects its duties. Faced with these insurmountable financial
problems the management of the first respondent has not even retrenched
employees and has not come up with any measures to harness the situation at all
content to let the situation continue unabated.
In
its opposing affidavit sworn to by its director, Danisa Nkomo, the first
respondent admits most of the allegations levelled against it. On the issue of its inability to pay its
debts and the failure to produce goods, it states at paragraph 6;
“Per 7.2. first respondent
admits owing its workers some salary arrears, but denies the amount alleged,
averring instead that the aforesaid amount includes statutory payments due to
statutory authorities, and for which the applicant has no locus standi to claim. Even
so, the amount includes monies for days the workers were not at work.
Per 7:3 first
respondent admits that it is not producing goods at the moment but denies that
this is so in spite of machinery that (is) in good working order.
---
---
Per 7:5 first
respondent admits that when it faced viability problems, as a result of
frequent machine breakdowns and lack of spares, it sought to retrench
applicant's members, they refused. The
first respondent then sought to introduce a shorter working week, again the
workers refused.”
The
first respondent denies that the problems of the company are attributable to
poor management and claims that with financial backing, the company can be a
successful concern.
It
matters not that what the first respondent owes includes statutory deductions
due to various statutory bodies. The
first respondent remains owing both the wages due to employees and the
deductions due to statutory bodies. It
is unable to pay those debts.
While
admitting its inability to engage in any form of production for well over a
year, the first respondent attributes this to breakdowns in machinery. It has not been explained why the machines
are breaking down and why they have not been repaired. It is unthinkable that since September 2010,
management has been trying to source for spares.
Management
would also want the court to believe that while retrenchment was a viable
option, it has not been undertaken because the workers refused. There is nothing to suggest that management
is aware of the procedure for retrenchment as they can still submit an
application to the retrenchment board even without the co-operation of the
workers.
Section
299(1) of the Companies Act [Chapter 24:03] provides:
“Subject
to s300, the court may –
(a) on an application being
made to it for such an order by any person who would be entitled to apply for
the winding up of the company, grant a provisional judicial management order,
or
(b) on an application being
made to it for the winding up of the company, grant instead a provisional
judicial management order.”
Persons
who may apply for a winding up order are set out in section 207 of the Act and
they include “any creditor or creditors” of the company. Therefore the applicant in its capacity as a
creditor and as a representative of employees, who are also creditors of the
first respondent, is entitled to make an application for a provisional judicial
management order.
The
next issue to be determined is whether a good case has been made for the relief
sought. Section 206 sets out the grounds
upon which a company may be wound up and they include where it is unable to pay
its debts. Section 300 of the Act sets
out the requirements for a provisional judicial management order. It reads;
“The
court may grant a provisional judicial management order in respect of a company
–
(a)
on an application referred to in paragraph (a) of subsection (1) of section
299, if it appears to the court –
(i) that by reason of
mismanagement or for any other cause the company is unable to pay its debts or
is probably unable to pay its debts and has not become or is prevented from
becoming a successful concern; and
(ii) that there is a
reasonable probability that if the company is placed under judicial management
it will be enabled to pay its debts or meet its obligations and become a
successful concern; and
(iii)
that it would be just and equitable
to do so”
I have already alluded to the fact
that the first respondent is a troubled enterprise which is unable to pay its
debts. I have also made reference to the
inexplicable conduct of its management to stand akimbo, doing virtually nothing
about the ballooning wages bill, which continues to accumulate, from as far
back as January 2010. Management has
also not given any satisfactory explanation for its failure to retrench some of
the employees or the failure to engage in any form of production for well over
a year.
The story that production was halted
by the breakdown of machinery and that spares are still being sourced 15 months
later is simply disingenuous. Even after
according management an opportunity to place before me further affidavits to
address what exactly they propose to do for the future of the company they
failed to do so. The only reasonable
conclusion to be made is that poor management has contributed to the problems
of the company.
In any event, section 300 (a)(i)
provides that a court may grant the order if it appears that “by reason of
mismanagement or for any other cause”
Even if I am wrong that mismanagement is to blame, I am of the view that
this is a case where someone else should be given the stewardship of the
enterprise to try and breathe in fresh ideas.
Therein lies “any other cause” for granting the order.
The applicant has already approached
Cecil Madondo of Tudor House Consultants (Pvt) Ltd who has agreed to take up
the responsibility. The first respondent
has not suggested that he is not a fit and proper person to assume the task. In fact, he has in the past acted in that
capacity.
In conclusion, I am satisfied that a
good case has been made for the relief sought.
Accordingly I grant an order for provisional judicial management in
terms of the draft order filed of record as amended.
James, Moyo-Majwabu and Nyoni, applicant's
legal practitioners
Dube-Banda, Nzarayapenga
and Partners respondent's legal practitioners
