Economic
challenges, liquidity crunch, viability problems, competition – the list is not
exhaustive for these and other phenomena which have conspired to hamstring a
lot of business entities in this country with the consequent result of
threatening their very existence. Too ghastly to contemplate are the
possible consequences. But is the flagrant abuse of court process the
panacea to these ills?
It
is my considered view that it certainly is not. It only provides temporary
refuge.
On
12 April 2012, under case number HC3387/11, the applicant obtained summary
judgment in an opposed application in an amount in excess of US$16,591=. This
judgment was closely followed by a writ of execution issued on 17 April
2012. The Deputy Sheriff proceeded to attach the first respondent's movables
on 7 May 2012. On 14 May 2012, the first respondent, in HC1528/12, filed
an urgent chamber application seeking an order for provisional judicial
management which was granted on 22 May 2012. That provisional judicial
management order contained the following notable features:
(a) The
2nd respondent volunteered to be appointed provisional judicial
manager;
(b) 26
July 2012 was set as the return date for the confirmation of the provisional
order;
(c) All
actions, summons and writs were stayed pending the return date.
The
applicant has lodged the current application in terms of section 301(2) of the
Companies Act [Chapter 24:03]. That section provides:
“301
(2) The court or a judge may at any time, and in any manner, on the application
of creditor, a member, the provisional judicial manager, the Master, or any
person who would have been entitled to apply for the provisional judicial
management order concerned, vary the terms of a provisional judicial management
order, including the date of the return day, or discharge it.”
The
following pertinent issues are material to the outcome of this application:
(i)
The return date for the provisional judicial management order was pegged at 26
July 2012. On that date, the order was further extended to 15 November
2012. Thereafter, there was no further extension made which means that the
provisional order is lying dormant.
(ii)
On 26 July 2012, the applicant's current legal practitioners wrote to the second
respondent lodging the applicant's claim as per the judgment in
HC3387/11. The letter fell on deaf ears prompting another follow up
correspondence dated 8 August 2012. On 24 September 2012, the second
respondent replied advising that he was aware of the applicant's claims but the
provisional order had been extended to 15 November 2012 to allow for time to
advertise and file a statement of affairs. He undertook to keep the
applicant informed of new developments.
It
should be noted that on 9 July 2012, the applicant's legal practitioners of
record had also written to the first respondent's erstwhile legal practitioners
requesting for an update of the judicial management and any reports filed with
the Master's office.
Nothing
was provided.
(iii)
The provisional judicial manager has not, to date, been issued with a
certificate of appointment by the Master. He also has not lodged a bond of
security with the Master.
(iv)
The provisional judicial management order has not yet been advertised;
(v) No
meeting of creditors has been convened by the second respondent.
The
bottom line here is that the process of provisional judicial management has
clearly failed to take off; not because of the applicant's fault but that of
the respondents.
Over
and above the foregoing, it is pertinently laughable (excuse the pun) that in
the founding affidavit by Zenzo Moyo, the first respondent's Managing Director,
in the urgent chamber application for provisional judicial management order, in
annexure “H”, he gave a list of the applicant's creditors and what it owed each
as follows:
1.
Zesa Pension Fund– Rent =$ 92,920=71 (which, as at May 2012, stood at $126,952=60)
2. Applicant
– Rentals = $16,591=
3. Zesa
= $ 5,900=
4. Bulawayo
City Council = $ 1,301=67
5. Legal
Costs
= $ 1,200=__
Total
= $117,913=38
It
is settled law that the object of a judicial management order is not an
experiment of jiggling around to see whether any judicial manager might be able
to turn around a distressed company's fortunes at his/her leisure. It is
to avoid the drastic remedy of winding up when a company is in financial
difficulties due to mismanagement or some other cause, and there is a
reasonable probability that under carefully controlled management it will
surmount its difficulties. Section 300(a)(ii) of the Companies Act
[Chapter 24:03] expressly requires such a reasonable probability to be
established in an application for a provisional judicial management order. Under
Section 299(i)(a) of the Companies Act [Chapter 24:03], lack of opposition does
not entitle the court to dispense with this requirement: R H CHRISTIE, Business
Law in Zimbabwe, Juta & Company Ltd 1998…,.
This
is so even in casu where there is lack of
opposition on account of failure to file notices of opposition and heads by the
respondents. In spite of that, it goes without quarrel that in view of the
foregoing circumstances surrounding the first respondent's precarious financial
position, coupled with failure to put even the provisional judicial management
machinery into motion, there is nothing to suggest that a reasonable
probability exists that the company can at all be enabled to pay its debts and
become a successful concern or that it is just and equitable to let it continue
wallowing in its current dormant state of provisional judicial management. The
conduct by the respondents in this matter points to only one thing, viz that the provisional judicial management order was not
applied for in good faith. It was simply designed to frustrate the
applicant who was on the verge of recovering what is duly owed to it thereby
delaying execution. I find such conduct to amount to abuse of court
process. In this regard, the words of MACDONALD ACJ in Beresford Land Plan (Pvt) Ltd v Urquhart 1975 (1) RLR 260….,
bear useful repetition for driving the point home. The learned ACTING
CHIEF JUSTICE said:
“There
are numerous ways in which the legal process in civil cases may be abused by
unscrupulous litigants, and, of these, by far the most common, persistent and
deleterious in its adverse effect on the administration of justice is the use
of such process to delay the enforcement of just claims. It is this aspect
of the administration of the civil law which more than any other has tended to
bring it into disrepute and there can scarcely be a more important duty imposed
upon the courts than to suppress firmly and without delay any manifestation of
this all too common abuse. The greater the law's delays, the greater the
temptation for unscrupulous litigants to defend claims solely to gain time and,
in the result the evil, unless it is eliminated at its first appearance, tends
to escalate.”
I
found similar abuse of court process along similar lines in Ellingbarn Trading (Pvt) Ltd v Assistant Master and Another
HB82-13, a matter I also heard on the same day. I do not know how many
more such cases have found their way into the system but such conduct has to be
nipped whenever it rears its pernicious head for the sake of smooth and
credible administration of justice. A warning must be sounded to both the
legal practitioners who institute such litigation as well as those who rush to
certify the litigation as being urgent that in future they may find themselves
being visited with costs on attorney-client scale de bonis
propriis.
In the
result, I make the following order:
(1)
The provisional judicial management order granted in favour of the 1st
respondent on 22 May 2012 be and is hereby discharged in its entirety;
(2)
The 1st respondent shall pay the applicant's costs of suit on the
scale of legal practitioner and client.
