This is an appeal against the decision of the High Court granting
the respondent leave to proceed with the execution of a judgment that it
obtained against the appellant bank which is under judicial
liquidation.
The appellant, Tetrad Investment Bank Limited (under
Liquidation) is a bank duly registered under the laws of Zimbabwe. It
was placed under provisional judicial management by an order of the High
Court on 29 January 2015.
The first respondent, Bindura
University of Science Education, is a university duly established under
the Bindura University of Science Education Act [Chapter 25:22].
The second respondent is the Sheriff of Zimbabwe, cited in his official capacity.
The
appellant and the first respondent were involved in a dispute which
culminated in a judgment under HC2106/14, on 2 April 2014, in favour of
the first respondent, for the payment of the sum of US$473,025=52
together with interest and collection commission. Thereafter, the
appellant filed an urgent chamber application in the High Court for stay
of execution of the said judgment. The application was removed from the
roll on 17 April 2014 on the ground that the matter was not urgent. The
appellant then filed an appeal against the decision of the High Court.
The appeal was struck off the roll by this Court on 30 June 2014.
After
the matter was struck off the roll, the first respondent issued a writ
of execution for the attachment of the appellant's property on 16
September 2014.
Whilst the first respondent was attempting to
execute on the appellant's property, the appellant filed an application
for a scheme of arrangement which stayed all execution. The application
was granted on 24 September 2014.
The appellant was placed under provisional judicial management on 29 January 2015.
Paragraph 1(f) of the order placing the appellant under provisional liquidation provides as follows:
“All
actions and applications, and the execution of all writs, summons, and
other processes against the Applicant shall be stayed and not proceeded
with without leave of this court.”
The first respondent
approached the High Court, on 18 November 2015, with an application for
leave to execute its judgment against the appellant.
In its
application, the first respondent submitted that it was just and
equitable that it be granted leave to execute in view of the fact that
it was in a unique position in comparison to other creditors as it had
in its favour a court order which had been confirmed by the Supreme
Court.
The amount that was owed to it was thus a confirmed amount, or figure, that was no longer open to contestation.
The
first respondent further submitted, that, its operations were suffering
and it was struggling to keep running many of them as they have been
paralysed by lack of funds; which funds are held up in the appellant
bank.
Furthermore, the first respondent averred that it was just
and equitable for the court to grant it leave to execute as that would
not result in the appellant suffering any irreparable harm.
The
application was opposed by the appellant, who submitted that the first
respondent cannot seek leave to execute its judgment for the reason that
the appellant is a bank.
The appellant also disputed that the first respondent was on the brink of collapse.
The
appellant further contended, that, it would suffer irreparable harm if
leave to execute was granted in favour of the first respondent.
It prayed for the dismissal of the application for leave to execute.
The
court a quo found in favour of the first respondent and granted leave
to execute. The court found, that, it was just and equitable for the
first respondent to execute its judgment against the appellant,
particularly when consideration was given to the period that had lapsed
since the placing of the first respondent under judicial management. The
court also found, that, the granting of leave to execute would not
defeat or frustrate the reason for the placement of the appellant under
judicial management. It also considered that the appellant would not be
going into liquidation.
The appellant was aggrieved by that decision and it filed this appeal on the following grounds:
1.
The High Court erred in placing the onus on the appellant to prove why
execution should not have been undertaken by the first respondent
pending the judicial management.
2. The High Court grossly
misdirected itself in granting the first respondent an advantage over
other creditors simply because the appellant is a bank and the first
respondent, an investor, which is a public institution.
3. The
High Court further grossly erred in finding, that, the operations of the
first respondent were hampered in any way in the absence of any
evidence to that effect from the first respondent.
4. The High
Court further grossly erred in the exercise of its discretion in
finding, that, the first respondent was entitled to an order for leave
to execute its judgment, there being no special circumstances justifying
the grant of such leave.
Although the notice of appeal raises
four (4) grounds of appeal, these grounds raise only one issue for
determination by this Court. The issue is whether the court a quo erred
in finding that the first respondent was entitled to execute its
judgment.
During the hearing of the appeal, counsel for the
appellant placed great reliance on the case of Samuel Osborn (SA) Ltd v
United Stone Crushing Co. (Pty) Ltd (Under Judicial Management) 1938 WLD
229.
He submitted, that, although the court a quo exercised its
discretion in granting the first respondent leave to execute its
judgment against the appellant, the appellant took issue with the manner
in which such judicial discretion was exercised.
Firstly,
counsel for the appellant argued, the court a quo erred in placing on
the appellant the onus to prove why execution should not be granted.
Secondly,
he submitted, the court a quo erred in finding that the operations of
the first respondent would be hampered if leave to execute was not
granted.
He submitted, that, there was no evidence to show that
the operations of the first respondent would be hampered if leave to
execute was not granted.
He also submitted, that, the order
granting leave to execute should be set aside because it gave the first
respondent advantage over other creditors when no special circumstances
justifying such an order have been proven.
In response, counsel
for the first respondent submitted that the court a quo properly
exercised its discretion in granting leave to execute.
He
submitted, that, the court a quo considered all the circumstances of the
case and properly exercised its discretion. On the issue of onus, he
submitted that there had been no reversal because at all material times,
the onus to prove that leave should be granted was upon the first
respondent (who was the applicant in the court a quo).
As a
result, counsel for the first respondent submitted, nothing had been
shown to warrant this Court's interference with the exercise of
discretion by the court a quo.
He accordingly prayed for the dismissal of the appeal.
From
the submissions made, the parties are ad idem on the position of the
law to the effect, that, an application for leave to appeal entails the
exercise of discretion by the court in deciding whether or not to grant
such leave.
In Mupini v Makoni 1993 (1) ZLR 80 (S) the court stated…,.:
“Execution
is a process of the court, and the court has an inherent power to
control its own process and procedures, subject to such rules as are in
force. In the exercise of a wide discretion, the court may, therefore,
set aside or suspend a writ of execution or, for that matter, cancel the
grant of a provisional stay. It will act where real and substantial
justice so demands. The onus rests on the party seeking a stay to
satisfy the court that special circumstances exist. The general rule is
that a party who has obtained an order against another is entitled to
execute upon it.”
As noted from the above case, when the court a
quo was called upon to determine whether the first respondent was
entitled to execute its judgment against the appellant, who is under
judicial management, the court was called to exercise its discretion.
As such, the principles relating to interference with the exercise of judicial discretion apply in this case.
This
Court, as an Appellate Court, should be slow to interfere with the
exercise of that discretional power: see the case of Barros and Anor v
Chimphonda 1999 (1) ZLR 58 (S)…, where the court said that:
“The
attack upon the determination of the learned judge, that there were no
special circumstances for preferring the second purchaser above the
first, one which clearly involved the exercise of a judicial discretion,
may only be interfered with on limited grounds: see Farmers
Co-operative Society (Reg.) v Berry 1912 AD 343 at 350.
These grounds are firmly entrenched.
It
is not enough that the Appellate Court considers, that, if it had been
in the position of the primary court, it would have taken a different
course. It must appear that some error has been made in exercising the
discretion. If the primary court acts upon a wrong principle, if it
allows extraneous or irrelevant matters to guide or affect it, if it
mistakes the facts, if it does not take into account relevant some
consideration, then, its determination should be reviewed and the
Appellate Court may exercise its own discretion in substitution,
provided always has the materials for so doing.”…,.
On
the basis of this position, which is settled at law, it is clear that,
for this Court to interfere with the exercise of judicial discretion by
the court a quo, it must be proved that some error was made in the
exercise of that discretion in the manner enunciated in the case
authorities. In this regard, it is necessary to consider whether the
court a quo grossly misdirected itself in the manner in which it
exercised its judicial discretion, as alleged by the appellant.
It
is not in dispute, that, where a company is under judicial management,
all processes which defeat the purpose of judicial management should be
avoided.
Judicial management is defined in Feigenbaum & Anor v Germanis N.O. & Ors 1998 (1) ZLR 286 (H)…, in the following terms:
“Judicial
management is an extraordinary procedure made available to a company by
the court, in special circumstances, and for statutorily prescribed
purposes: Silverman v Doornhoek Mines Ltd 1935 TPD 349.
The
procedure is only adopted when the court is satisfied, on the facts
contained in the application, that, there is a reasonable probability,
that, if placed under judicial management, the company, which is unable
to pay its debts, will be able to pay its debts in full, meet its
obligations, and become a successful concern.”
The purpose of
judicial management was explained in Cellular (Pvt) Ltd v Post and
Telecommunications Corporation SC77-04 where the court said the
following…,.:
“The object of judicial management is to obviate a
company being placed in liquidation if there is some reasonable
probability, that, by proper management or by proper conservation of its
resources, it may be able to surmount its difficulties and carry on.”
Thus,
the main goal of a judicial management order is to provide a company
sufficient time to make a financial recovery and so avoid liquidation.
This
is why judicial management has also sometimes been referred to as
business rescue; see Energy Drive System (Pty) Ltd v Tin Can Man (Pty)
Ltd & Ors 2017 (3) SA 539 (GP).
The effect of a judicial
management order is that, subject to certain exceptions, a general
moratorium on legal proceedings against the company comes into effect
and the property and interests of the company are protected: see Diener
N.O. v Minister of Justice & Ors 2018 (2) SA 399 (SCA).
However,
in the case of Energy Drive System (Pty) Ltd v Tin Can Man (Pty) Ltd
& Ors 2017 (3) SA 539 (GP) it was stated, that, the purpose and
context of business rescue are not aimed at the destruction of the
rights of a secured creditor.
This is why the law allows the
court, when placing a company under judicial management, to order that
all actions and proceedings, and the execution of all writs, summonses
and other processes against the company, be stayed and be not proceeded
with without the leave of the court: see section 301(1) of the Companies
Act [Chapter 24:03]).
Thus, the law allows parties who wish to
proceed against a company under judicial management to approach the
court for leave to proceed against that company.
This is what the first respondent did in the present case.
Where
a party applies for leave of the court to execute a judgment against a
company under judicial management, the onus of satisfying the court,
that, it should allow the institution of processes for the execution of
the judgment, rests upon the applicant.
For the court to exercise
its wide discretion whether or not to grant leave, the applicant must
have a claim against the company. It is irrelevant whether the claim
arose before or after the company was put under judicial management. The
applicant also has to show to the court, that, it might suffer
irremediable loss and that no injustice would be done if leave to
proceed with the action were granted: see Samuel Osborn (SA) Ltd v
United Stone Crushing Co. (Pty) Ltd (Under Judicial Management) 1938 WLD
229…, where the court held that:
“There is, however, great force
in the contention advanced on behalf of the applicant, that, it is
inequitable that, by the refusal of leave, the applicant should be
deprived of the possession and use of the property, with at least the
potential risk of depreciation, for the benefit of creditors, of whom it
is not one when the applicant stands to gain nothing by the eventual
success of the judicial management.”
In this case, it is alleged that the onus of proving that leave to execute must be granted was shifted to the appellant.
The appellant is not correct in this regard.
A
reading of the record, and the judgment of the court a quo, shows,
that, at all material times, the onus was upon the first respondent to
prove the existence of special circumstances which justified the
granting of leave to execute.
The first respondent alleged, that,
it was suffering and that its operations were being paralysed because
of lack of funds which were being held by the appellant. The first
respondent also contended, that, if leave to execute was granted, the
appellant would not suffer any irreparable harm.
The appellant
relied on the order placing it under judicial management, and denied
that the first respondent would suffer irreparable harm if leave to
execute was not granted.
The order placing the appellant under
judicial management cannot help the appellant in this case, simply
because that order noted the need for the first respondent, and other
creditors, to approach the court for leave to execute their judgment.
In
addition, the order placing the appellant under judicial management was
granted in 2015 and the court a quo heard the application for leave in
2017, a period of two years after the appellant was placed under
judicial management. There has been a change of circumstances, and,
therefore, the appellant cannot rely merely on factors which were
considered when it was placed under judicial management.
As the
first respondent approached the court a quo and applied for leave to
execute its judgment, on the strength of the allegation that its
operations were severely compromised, and that the appellant would not
suffer any irreparable harm if leave was granted, it was for the
appellant to have rebutted that allegation.
It is trite that he who alleges must prove.
In
casu, the first respondent set out facts that entitled it to the relief
sought. The facts that it alleged in support of its application, having
stood unrebutted by the appellant, were, as provided at law, taken as
accepted.
This is clearly articulated in the case of Chihwayi
Enterprises (Pvt) Ltd v Attish Investments (Pvt) Ltd 2007 (2) ZLR 89
(S)…, where the court said the following:
“It is pertinent to
note, that, the averments made by Patel in para 23 of the founding
affidavit were not denied by the Hardware in its opposing affidavit.
What that means, is that, the averments were admitted by the Hardware.”
As McNALLY JA said in Fawcett Security Operations (Pvt) Ltd v Director of Customs and Excise and Ors 1993 (2) ZLR 121 (S)…,.:
“The simple rule of law is that what is not denied in affidavits must be taken to be admitted.”
Given
the allegations set out by the first respondent, we find that the first
respondent established a prima facie case which was accepted by the
court a quo. Such allegations ought to have been rebutted by the
appellant with clear evidence. The appellant had a duty to rebut the
respondent's averments and evidence.
It cannot be said that the
court a quo shifted, from the first respondent, the onus of proving that
leave to execute was warranted.
