This is an appeal against the whole judgment of the High Court (the court a quo) wherein it confirmed a provisional order against the appellants.
THE PARTIES
Both appellants are directors and shareholders of the second respondent, a company under liquidation, duly registered in terms of the laws of Zimbabwe. The first respondent is the executor dative of the estate of the late Kennedy Mangenje who was a founder and director of the second respondent company. The third respondent is cited in his official capacity as the liquidator of the second respondent, whereas the fourth respondent is the Sheriff of the High Court of Zimbabwe cited in his official capacity as well.
FACTUAL BACKGROUND
The first respondent brought an application in the court a quo for the provisional liquidation of the second respondent in terms of section 5(1)(b)(iii) of the Insolvency Act [Chapter 6:07] (the Act). The section authorizes one or more members of a company to apply for an order to wind up a company in circumstances where it is just and equitable that the company be liquidated.
Section 4(1) of the Insolvency Act clothes the first respondent, in his capacity as executor, with the authority to apply for the liquidation of the second respondent as a debtor of the deceased estate.
The first respondent brought the application in a bid to protect the interests and rights of the deceased estate for the benefit of its beneficiaries. The appellants, in turn, countered by seeking to prove the quantum of damages they suffered, placing reliance on section 8 of the Insolvency Act [Chapter 6:04] (the Act).
The court a quo granted the provisional order on May 2022. A final liquidation order was granted on 28 September 2022 in the following terms:
“IT BE AND IS HEREBY ORDERED THAT:
1. The first respondent, MANGENJE BROTHERS (PRIVATE) LIMITED be and is hereby finally wound up.
2. Subject to section 41 of the Insolvency Act [Chapter 6:07], CECIL MADONDO is hereby appointed as the final liquidator of the first respondent company with the powers set out in Part X of the Insolvency Act.
3. The first respondent shall meet the costs of this application and the liquidation proceedings.”
The court a quo found that the appellants, as interested parties, could not claim for damages in terms of section 8 of the Insolvency Act. Consequently, it ruled that the provision exclusively permits a debtor to claim the relief sought by the appellants. It therefore ruled, that, the express mention of debtor excludes all other parties to claim damages with the exception of a debtor.
The outcome of the confirmation proceedings did not go down well with the appellants, hence this appeal. They accordingly mounted the appeal on the following nine grounds:
GROUNDS OF APPEAL
“1. The court a quo grossly misdirected itself and erred at law in failing to find, as it ought to have done, that the provisional order issued on 4 May 2022 was a legal nullity on account of the application's fatal non-compliance with the mandatory provisions of section 5(4) of the Insolvency Act.
2. The court a quo erred at law and grossly misdirected itself in failing to find, as it ought to have done, that the application before it was fatally defective and could not be granted due to first respondent's failure to attach a statement of affairs of the company as contemplated by section 5(4) of the Insolvency Act.
3. The court a quo erred in finding that the two paged statement of assets and liabilities and statement of liabilities, attached to the application, constituted a statement of affairs of the 2nd respondent as required in terms of section 5(4) of the Insolvency Act.
4. The court a quo grossly misdirected itself when it held, that, the appellant refused to supply the requisite information for the sake of compliance with the statute, when there was never any such request made by the Provisional Liquidator as required in terms of the law, and in circumstances where the 1st respondent was in possession of the company documents.
5. The court a quo erred at law and grossly misdirected itself when it held that appellant did not show that they were prejudiced by the nature of the application mounted by the 1st respondent without complying with Rule 59(1) of the High Court Rules notwithstanding the clear demonstration made that the 2nd respondent was not given any chance to oppose the application before the granting of the provisional order, and that once the provisional order was granted, the appellants lost a right to oppose that application before the granting of the provisional order, and that, once the provisional order was granted, the appellants lost a right to oppose the liquidation on behalf of the 2nd respondent which prejudice could not be cured by costs.
6. The court a quo erred and grossly misdirected itself in finding, that, the minutes of proceedings of the first meeting of the creditors of the 2nd respondent was the Master's report thereby proceeding without the requisite Master's report as required in terms of the law.
7. The court a quo erred in failing to find, that, by leasing out its properties, the 2nd respondent was actually trading and carrying on business as its memorandum of association authorised it to do so.
8. The court a quo erred and grossly misdirected itself in finally winding up the 2nd respondent when there was no just and equitable cause for its winding up, yet, the court never got to relate to the merits of all the other grounds which the appellants had resisted the success of the application, save for the issue concerning first respondent's non-compliance with section 5(4) of the Insolvency Act.
9. The court a quo erred at law and grossly misdirected itself in winding up the company on the basis that it was now defunct when there was never any evidence led or submissions made to the effect that the company was defunct. In so doing, it went on a frolic of its own.”...,.
The relief sought by the appellants is couched in the following terms:
“RELIEF SOUGHT
FURTHER TAKE NOTICE that the appellant seeks the following relief:
1. The present appeal be and is hereby allowed with costs.
2. The judgment of the court a quo be and is hereby set aside and substituted with the following:
'(a) The provisional order granted by the High Court, on 4 May 2022, be and is hereby discharged.
(b) The respondent be and is hereby granted leave to prove the damages suffered as a result of the winding up proceedings in terms of section 8 of the Insolvency Act.
(c) The applicant shall pay the costs of suit on an attorney and client scale.'”...,.
ISSUES FOR DETERMINATION
The grounds of appeal raise two pertinent issues for determination. These are:
(a) Whether or not the court a quo erred in finding that there was compliance with section 5(4) of the Insolvency Act.
(b) Whether or not the court a quo erred in dismissing the appellant's claim for damages....,.
Whether or not the court a quo erred in dismissing the appellant's claim for damages
Counsel for the first respondent further took umbrage at the appellants suitability to claim damages as prayed for in paragraph 2(b) of the relief sought above. She contended, that, section 8 of the Insolvency Act does not permit anyone, other than a debtor, to claim damages. The section provides as follows:
“8. Abuse of Court's procedures or malicious or vexatious application for liquidation
1. Whenever the Court is satisfied that an application for the liquidation of a debtor's estate is an abuse of the Court's procedures or is malicious or vexatious, the Court may allow the debtor forthwith to prove any damages which he or she may have sustained by reason of the application, and award him or her such compensation as it considers appropriate.”…,.
Section 8 of the Insolvency Act is couched in clear and unambiguous language. It specifically mentions a debtor as the only person who may prove his or her damages. The non-mention of any other person who may be entitled to prove their damages excludes those not mentioned in the section.
This is embodied in the maxim “expressio unius est exclusio alterius.”
What this means is that it is only a debtor who is allowed to prove his or her damages and not any other person who is not a debtor.
It is common cause that the appellants are not debtors of the second respondent but its directors. It is clear that section 8 of the Insolvency Act makes no provision for directors of a company to prove damages on behalf of anyone.
The appellants are therefore non-suited and lack the necessary locus standi to prove or claim any damages in terms of section 8 of the Insolvency Act....,.
The fact that the appellants lack the necessary locus standi to claim the relief that they seek in this respect disposes of the appellants second issue in favour of the respondents.
