The issues to be decided in applications of this nature are aptly summed up in...It reads:-

The respondent...has shown, on a balance of probabilities, that it has assets whose combined value exceeds the debt complained of...a bond of security has been issued in favour of the applicant to secure this very debt by way of title deeds. The respondent has also secured a bank guarantee to meet part of its debts.

Zimbank had for some time been granting CDH overnight accommodation. It is not in dispute that this is an arrangement commonly used in the market between individual banks and the Reserve Bank of Zimbabwe in terms of which the bank requesting the facility is credited overnight with the agreed amount of the facility and the amount repaid the following day.

The overnight facilities granted to CDH were not secured. Although conditions applying to such loan facilities included the need for security, Zimbank does not appear to have insisted on compliance with these conditions...,.

On 5 December 2003, CDH, who were the holder and owner of GMB bills with a maturity value of $..., executed a security deposit form and delivered this to Zimbank. The CDH account with Zimbank, at that stage, was overdrawn to the tune of about $...,. On 30 December 2003, Zimbank dishonoured all cheques issued by CDH and on 5 January 2004 Zimbank liquidated the GMB bills in its possession.

In the meantime, the RBZ had, on 2 January 2004, closed the doors of CDH after concluding that it was an ailing institution. On 22 January 2004, at the instance of the Reserve Bank of Zimbabwe, the High Court granted an order placing CDH in liquidation.

In or about 1992, the Trustees of the applicant decided to employ Sagit Stockbrokers to manage its share portfolio...,. Some of the shares were registered in the applicant's name and others in the name of Sagit's nominee company called Trust Nominees. The mandate given by the applicant to Sagit was to manage the applicant's portfolio on the applicant's behalf. This entailed the purchase and sale of appropriate shares which, when purchased, were either held in the name of Trust Nominees or in the applicant's name. At no time did any of these shares become the property of Sagit but were held in Trust for the applicant...,. The applicant learnt that Sagit had filed for voluntary liquidation and that a second creditors' meeting was about to be held. The applicant managed to lodge its claim using the last reconciled position which both parties had agreed to.

The applicant submitted its claim to the first respondent.

The first respondent's legal practitioners wrote to the applicant's legal practitioners in a “without prejudice” letter..., in which the first respondent acknowledged that the Old Mutual Shares were due to the applicant and agreed to release them to the applicant...,.

The record shows that in subsequent correspondence the first respondent actually undertook to deliver the shares it was holding...,. However, on..., the first respondent's legal practitioners advised the applicant's legal practitioners that a sum of US$25,706.94 had been paid to the applicant in respect of the shares held by the first respondent. The applicant had rejected the payment preferring instead to receive the actual shares. At the end of it all, the first respondent ended up offering to pay the applicant           US$25,706.94 in respect of the shares in question contrary to the applicant's expectation of receiving the actual shares

The election by the first respondent to pay US$25,706.94 instead of delivering shares is what led to the filing of this application..., wherein the applicant seeks the following relief:

1. That the respondents deliver to the applicant 913,253 shares in OK Zimbabwe Limited, 370,356 in Pelhams Limited and 46,025 in Old Mutual.

In making submissions on the points in limine, counsel 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.'

Counsel for the respondents also said that in the given circumstances section 25A(5)(c) of the Labour Act [Chapter 28:01] was clear on the need for workers to be consulted in situations of such a voluntary winding up.

Counsel for the applicant submitted that the applicant had properly proceeded in terms of section 207 of the Companies Act [Chapter 24:03]. 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. Counsel for the applicant submitted that winding up through the court was a public process and to that end the applicant had complied with the provisions of the Companies Act [Chapter 24:03].

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 Companies Act [Chapter 24:03] provides for the following two modes of company winding up-

“(a) By the Court; or

(b) Voluntary.”

Section 206 of the Companies Act [Chapter 24:03] and section 207 of the Companies Act [Chapter 24:03] 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 Companies Act [Chapter 24:03].

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 section 206 of the Companies Act [Chapter 24:03] and section 207 of the Companies Act [Chapter 24:03]. The Members' resolution, in my view, dictates that we be guided by the provisions of section 242 of the Companies Act [Chapter 24:03] and section 243 of the Companies Act [Chapter 24:03]. 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 s121 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. Counsel for the applicant submitted that the resolution was imprecise.

I disagree.

The special resolution quoted at p2 of this judgment clearly expresses the wishes of the Members and is unambiguous. That position enjoys full support from the applicant's own averments. The 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 section 242 of the Companies Act [Chapter 24:03] and section 243 of the Companies Act [Chapter 24:03] quoted above.

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 section 242 of the Companies Act [Chapter 24:03] and section 243 of the Companies Act [Chapter 24:03] as read together with section 25A(5) of the Labour Act [Chapter 28:01] and section 25A(6) of the Labour Act [Chapter 28:01]. The applicant departed from its resolution and proceeded in terms of section 207 of the Companies Act [Chapter 24:03]. 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:

This matter came on a certificate of urgency with the applicant seeking a provisional liquidation order of the first respondent setting out an array of reasons why this should be done. The grounds for seeking a winding up order, as can be gleaned from the founding affidavit, are that:-

(a) The shareholders are not on talking terms and their relationship has seriously deteriorated over the years as seen by endless litigation that has been playing out in the Courts between them.

(b) The company has failed to lodge a statutory report or hold a statutory meeting for more than 6 years and there are no annual returns lodged either. It should be recalled that the first respondent is a private company and as such this requirement does not apply to it. See section 124 of the Companies Act [Chapter 24:03].

(c) The company has no bank account and no deposits are being made into a bank.

(d) Very little gold is being deposited at the Reserve Bank of Zimbabwe suggesting that the company is dealing illegally in gold that is being mined.

(e) The company is not paying taxes and other statutory deductions and has not been paying its accounts.

(f) No dividend has been declared for over 6 years.

(g) Attempts to resolve the matter amicably have failed and there is a high risk that second respondent is plundering the assets of the company.

At the commencement of proceedings, the attention of the applicant's counsel was drawn to the provisions of section 200 of the Companies Act [Chapter 24:03] and section 207 of the Companies Act [Chapter 24:03] providing for the jurisdiction of the Master and the requirement for a Master's certificate in a petition for winding up. Section 207(1) of the Companies Act [Chapter 24:03] is peremptory by virtue of the use the word “shall” and it reads:-

“An application to the court for the winding up of a company shall be by petition presented, subject to this section, by…, contributory or contributories…, accompanied…, by a certificate of the Master, Assistant Master or a Magistrate that due security has been found for payment of all fees and charges necessary for the prosecution of all the proceedings until the appointment of a liquidator.”

There is no such certificate in this application, and, although counsel for the applicant undertook to regularise the defect, that has not been done. As it is, the application for winding up is without a certificate for security in clear breach of the mandatory provisions of section 207(1) of the Companies Act [Chapter 24:03].

In the circumstances a provisional liquidation order cannot be granted….,.

The grounds relied upon by the applicant in her founding affidavit in seeking a liquidation order, are not grounds upon which liquidation can be ordered. Except for the allegation that the company is unable to pay its debts, which is embodied in item (e) above, the rest in the list, even if proved, would not entitle the applicant to an order for winding up.

For instance, the breakdown of relations between shareholders is not sufficient ground for winding up; so is the rest of the claims.

It has not been shown that the company is unable to pay its debts, and, in any event, this remedy would be available to an unpaid creditor. That there is an outstanding ZESA bill of just above $700= cannot give rise to winding up. In any event I have a discretion to refuse to order liquidation notwithstanding proven grounds for liquidation as stated by GILLESPIE J in Croc-Ostrich Breeders of Zimbabwe (Pvt) Ltd v Best of Zimbabwe (Pvt) Ltd 1999 (2) ZLR 410 and 414 F-G:

“Such a discretion is deliberately provided for by the use of the permissive “may” in the enactment providing the grounds of winding up by the court (section 206). Even without this, the court would, in the proper case, have the discretion flowing from its inherent jurisdiction to prevent abuse of its process. These two sources, together, provide a judicial discretion, based on all the relevant circumstances of any case, to withhold an order of winding up even if grounds have technically been established.”

See also CF Tuckers Land and Development Corp (Pvt) Ltd v Soja (Pty) Ltd 1980 (3) SA 253 (W)…,.

Accordingly, it is ordered as follows:-

Grounds for Winding Up

Section 206 of the Companies Act [Chapter 24:03] specifies the circumstances in which a company may be wound up:

“A company may be wound up by the court -

(a) If the company has by special resolution resolved that the company be wound up by the court;

(b) If default is made in lodging the statutory report or in holding the statutory meeting;

(c) If the company does not commence its business within a year from its incorporation or suspends its business for a whole year;

(d) If the company ceases to have any members;

(e) If seventy-five per centum of the paid-up share capital of the company has been lost or has become useless for the business of the company;

(f) If the company is unable to pay its debts;

(g) If the court is of opinion that it is just and equitable that the company should be wound up.”

It is clear that the circumstances enumerated in this section are to be read disjunctively and not conjunctively. With particular reference to paragraph (f) of section 206 of the Companies Act [Chapter 24:03]. Section 205 of the Companies Act [Chapter 24:03] provides that:

“A company shall be deemed to be unable to pay its debts -

(a) If a creditor, by cession or otherwise, to whom the company is indebted in a sum exceeding one hundred United States dollars then due, has served on the company a demand requiring it to pay the sum so due by leaving the demand at its registered office and if the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) If the execution or other process issued, on a judgment, decree or order of any competent court in favour of a creditor, against the company is returned by the Sheriff or Messenger with the endorsement that no assets could be found to satisfy the debt or that the assets found were insufficient to do so; or

(c) If it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.”

For the purposes of section 205(c) of the Companies Act [Chapter 24:03] as read with section 206(f) of the Companies Act [Chapter 24:03], the test that is generally applied is that of commercial insolvency. See RAG (Pvt) Ltd v Huizenga N.O. 1986 (2) ZLR 203 (S)…,. With reference to the equivalent provisions of the South African Companies Act 61 of 1973, the test was expounded in ABSA Bank Ltd v Rhebokskloof (Pty) Ltd & Others 1993 (4) SA 436 (C)…, as follows:

“The concept of commercial insolvency as a ground for winding up a company is eminently practical and commercially sensible. The primary question which a Court is called upon to answer in deciding whether or not a company carrying on business should be wound up as commercially insolvent is whether or not it has liquid assets or readily realisable assets available to meet its liabilities as they fall due to be met in the ordinary course of business and thereafter to be in a position to carry on normal trading – in other words, can the company meet current demands on it and remain buoyant? It matters not that the company's assets, fairly valued, far exceed its liabilities: once the Court finds that it cannot do this, it follows that it is entitled to, and should, hold that the company is unable to pay its debts…, and is accordingly liable to be wound up.”

As regards the just and equitable criterion set out in section 206(g) of the Companies Act [Chapter 24:03], which postulates not facts but only a broad conclusion of law, it is necessary to take into account all the relevant circumstances, including the competing interests of all the parties concerned. See Moosa N.O. v Mavjee Bhavan (Pty) Ltd & Another 1967 (3) SA 131 (T)…,.  There are five broad categories that have been identified for winding up on just and equitable grounds: the disappearance of the company's substratum; the illegality of its objects and fraud committed in connection therewith; a deadlock in the management of the company's affairs; grounds analogous to those for the dissolution of a partnership; and where there is oppression. See Hughes v John Dory Trucking (Pty) Ltd & Others 2008 (5) SA 300 (N)…,. These circumstances are not exhaustive and it is open to the courts to identify other circumstances or devise other categories in the future. The first step is to determine the facts relevant to the formation of an opinion as to justice and equity. The second step is for the court to decide whether or not to exercise the discretion to wind up. See Asla Devco (Pty) Ltd v Bubesi Investments 74 (Pty) Ltd [2011] ZAWCHC 24 (WC)…,.

Whether Respondents should be Wound Up

Dealing with the commercial solvency of the respondents prior to the granting of the provisional order, it is fairly clear, despite their attempt at denial, that they had several outstanding liabilities. These included the following: lease fees and good tenancy deposit owing to the applicant, sums due to several financial institutions, and levies due to the Ministry of Agriculture and Tobacco Industry Marketing Board. After they were placed under provisional liquidation, they have incurred further liabilities in the form of overdue wages and salaries and related statutory levies. According to the provisional liquidator's interim report, submitted on 11 May 2011, the respondent's liabilities stand at US$6,937,633= while their assets are estimated at US$300,000=, leaving a negative solvency of US$6,663,633=.

The respondents dispute most of their liabilities before their provisional liquidation. They also dispute the extent of liabilities tabulated by the provisional liquidator as being inflated and inaccurate. In my assessment, their assertions in this regard are not borne out by the documentary evidence adduced by them. For instance, in their letter dated 4 June 2010, addressed to the applicant, the respondents admit the accrual of deposit rent, monthly rentals and commissions, and openly plead for time to pay off the arrears due. Moreover, their liability for these amounts is confirmed in the arbitrator's interim award in April 2010 and the final award in September 2010.

In light of all of the documentation before the Court, it is clear that, before the provisional order was granted in February 2011, the respondents did not meet their liabilities as they arose. It is equally clear that, after February 2011, their inability to satisfy their indebtedness has been exacerbated by the accumulation of further liabilities. In this regard, I am not persuaded by the argument that their predicament has been deliberately orchestrated through the machinations of the applicant in collusion with the provisional liquidator. Critical to this argument is the interdict of this Court restraining the Tobacco Industry Marketing Board from issuing an auction licence to the respondents. This interdict was granted many months ago, in November 2010, and remains in force to this day. The respondents claim to have challenged it but have not demonstrated what further steps they have taken to have the matter finalised in their favour.

Related to the auction licence is the argument that, but for the interdict, the respondents would have generated approximately US$6 million in the 2011 season and would have been more than able to meet their normal trading debts. They further contend that their goodwill and volume of business must be included in the valuation of their tobacco auction business. By their calculation, that business is worth US$18 million and, therefore, their assets far exceed their liabilities.

In my view, this contention is entirely spurious and fallacious in the present context. From a commercial perspective, goodwill based on prospective revenues may be treated as an asset in valuating a company's business when it is sold or transferred as a going concern. However, goodwill is utterly valueless and cannot assist in discharging the company's debts and liabilities as and when they arise. I am fortified in this view by The Shorter Oxford English Dictionary definition of “goodwill” as:

“the privilege, granted by the seller of a business to the purchaser, of trading as his recognised successor; the possession of a ready-formed connection of customers, considered as a separate element in the saleable value of a business.”

In the final analysis, it is abundantly clear that the respondents did not, and presently do not, have liquid or readily realisable assets available to meet their liabilities as they fall due in the ordinary course of business. I am adequately satisfied that they are not in a position to carry on normal trading and are therefore commercially insolvent. It follows that they are unable to pay their debts within the meaning of section 205(c) of the Companies Act [Chapter 24:03] as read with section 206(f) of the Companies Act [Chapter 24:03].

This is sufficient to warrant a final order for their liquidation.

In view of this conclusion, it seems unnecessary to consider the additional or alternative ground for winding up envisaged by section 206(f) of the Companies Act [Chapter 24:03]. However, for the sake of completeness, it may be as well to do so.

As I have already indicated, the interdict against the issuance of an auction licence still stands and effectively operates to hamstring the respondents from carrying out their operations. The further practical impediment to their business is the requirement of the Tobacco Industry Marketing Board that they rehabilitate the auction floor infrastructure. Thus, even if they were duly licensed, they do not have the requisite capital base in order to rectify the necessary infrastructure. What all of this means is that the substratum of the respondent companies has effectively disappeared. Moreover, whilst they remain in legal existence, they will continue to incur further liabilities in the form of bank interest and charges, unpaid wages and salaries and attendant statutory levies. To avoid further financial prejudice to the applicant and other creditors, it is imperative that the respondents be liquidated so as to enable the proportional sharing of their remaining assets amongst all of their confirmed creditors. All in all, it seems eminently just and equitable that the respondents be finally wound up.

The second ground of appeal has no merit, in my view, because there is no court order placing the fifth respondent under final liquidation. 

The matter is as simple as that. 

The first respondent has not attached any such order. The ffith respondent was placed under a provisional winding up order on the 4^th of December 2009. This provisional order was never confirmed by any order of this court. It should be noted that the winding up of a company is done in accordance with the strict provisions of the Companies Act without exception. These statutory provisions make it mandatory to follow the procedure laid down therein. 

This is an appeal against a decision of the High Court sitting at Harare in which that court dismissed an application for the setting aside of a final order for the liquidation of the first respondent granted by that court on 8 May 2013….,.

The first appellant averred that he was the first respondent's largest creditor, which entity he alleged owed him USD486,818=48. He averred, further, that the first respondent also owed the second appellant the sum of USD241,616=61.

Until its liquidation, the first respondent was engaged in the manufacture of specified food items under a contract with the World Food Program. It owned an extruder plant for the process.

It is common cause that in order to enable it to perform its obligations under the contract, the first respondent obtained a loan, from the second respondent, in the sum of USD200,000=. The date and the instrument in terms of which the loan was advanced is a matter of dispute between the parties. The first respondent made payments towards the settlement of the debt but failed to extinguish the debt in full. The parties subsequently entered into negotiations in an attempt to restructure the debt but these failed. Those negotiations are not germane to the resolution of the dispute.

In the meantime, the first respondent's landlord, the fifth respondent herein, sought and obtained judgment against the former in respect of arrear rentals, and, as a consequence, an order for its ejection from the premises where the extruder plant was situate. The fifth respondent, in execution of the order for arrear rentals, caused the attachment of the first respondent's extrusion plant. It was at that juncture that the second respondent sought to protect its interest based on the loan agreement.

On 20 March 2013, the second respondent obtained an order for the provisional liquidation of the first respondent. The first respondent did not oppose the application. On 8 May 2013, the provisional order for liquidation was confirmed - again, it was unopposed.

On 20 December 2013, the appellants filed an application in the High Court in terms of which they sought an order pursuant to the provisions of section 227 of the Companies Act [Chapter 24:03], “the Act”, for the setting aside of the final order for the liquidation of the first respondent. The basis upon which the order was sought was premised on an allegation that the second respondent was not, at law, entitled to seek the liquidation of the first respondent. They alleged that the second respondent was a shareholder in the first respondent. They alleged, further, that as a shareholder, the second respondent lacked the requisite locus standi as only a creditor is entitled, under the law, to apply for such relief. Consequently, the appellants contended that the order for the liquidation of the first respondent was invalid by virtue of the lack of standing by the second respondent to seek it.

The court a quo dismissed the application with a punitive order of costs. The court concluded that the application was mala fide thus warranting an order of costs to show the displeasure of the court.

This appeal is against the dismissal of the application as well as the level of costs awarded against the appellants.

The first ground of appeal raised by the appellants was that the court a quo erred by concluding, mero motu, that the application had been brought in breach of Rule 63 of the High Court Rules, and that, the court erred further in finding that the Rule applied in the determination of the application before the court.

The court said:

“The ordinary rules that govern applications for rescission of judgment apply. Order 9 Rule 63 of the Rules of the High Court 1971 provides that such an application must be made within one month of acquisition of knowledge of the judgment. This application was filed in December 2013. The judgment or order that is sought to be set aside, the final liquidation order is dated May 2013. No explanation was given for the delay in bringing this application in terms of the rules of this court and no application for condonation was placed before the court. It is my view that, s 295 of the Companies Act does not assist the applicants because it expressly relates to dissolution of a company, not the granting of a final liquidation order, which is only the first step towards dissolution. It follows that the two-year time period allowed in terms of s 295 does not apply to the applicants, it being common cause that the first respondent has not yet been dissolved.”

The appellants contended that the court a quo clearly misunderstood the matter that it had to determine and that, as a result, it did not have recourse to the written submissions filed by the parties. It was contended, further, that Rule 63 did not apply and that due to the error by the court in considering the application in the light of the provisions of the said Rule, the court could not have come to the correct conclusion on the matter.

The record reveals that the first respondent filed an opposing affidavit deposed to by the liquidator. She did not oppose the relief sought and chose to abide by the decision of the court. However, she sought an order of costs against the unsuccessful party. The second respondent mounted a spirited opposition to the relief being sought. The second respondent did not, however, advert to the provisions of Rule 63 of the High Court Rules. It seemed that the second respondent accepted that the application had been properly brought in terms of section 227 of the Companies Act [Chapter 24:03]. The fifth respondent also chose to challenge the merits of the application. It did not raise any procedural issues.

Counsel for the second respondent argued that the court a quo was correct in its approach as it would have been “acutely aware of the need to bring the litigation between the parties to finality.”

Without a doubt, the procedure adopted by the court a quo of raising a technical issue, determining it, and pronouncing judgment on it, without hearing submissions from the parties, was highly irregular.

In Proton Bakery (Pvt) Ltd v Takaendesa 2005 (1) ZLR 60…, GWAUNZA JA, said:

“The appellant argues, in the light of all this, that the action of the court a quo in reaching a material decision on its own, amounted to gross irregularity justifying interference by this court on the principles that have now become trite.

I am, for the reasons outlined below, persuaded by this argument.”

And later, at 63C-D:

“Fourthly, and most importantly, the court a quo had ample opportunity, in the five days during which viva voce evidence was led on the merits of the case, to solicit evidence on the specific issue of the respondent's suspension, if as now appears; it considered such evidence decisive. The court, however, did not solicit this evidence. Instead, it went on, mero motu, and after the event, to pick on a procedural irregularity neither raised nor argued before it, and base its determination solely on that technicality. This it did to the exclusion of the not insubstantial evidence placed before it on the merits of the case.”

A perusal of the submissions presented by the respective parties before the court a quo establishes that the court was never addressed on the issue of whether or not the application was properly before the court in terms of section 227 of the Companies Act [Chapter 24:03] or whether or not it would run foul of Rule 63 of the High Court Rules. And yet despite this, the court was able to find that section 227 of the Companies Act [Chapter 24:03] was not the appropriate section for the court to exercise its discretion as the appellants had not brought the application in terms of the provisions of the High Court Rules.

In my view, the court was in error when it concluded that an application such as the one before it as in this case had to be brought under the aegis of Rule 63, and that further to that, it had to be filed within a month from the date on which the applicant had knowledge of the order or judgment in question.

The court a quo was alive to the fact that the application before it was premised on section 227 of the Companies Act [Chapter 24:03]. Notwithstanding that premise, the court went on to find that the section was inapplicable. It is clear that the decision by the court a quo was informed by the fact that the application had been granted unopposed. As a consequence, the court was of the view that since this was a matter in which an order had been obtained in default of opposition by the parties affected by the order, then the Rules of the High Court had to be considered in determining whether or not to grant relief.

Rule 63 of the High Court Rules 1971 reads:

“63. Court may set aside judgment given in default

(1) A party against whom judgment has been given in default, whether under these rules or under any other law, may make a court application, not later than one month after he has had knowledge of the judgment, for the judgment to be set aside.”

A simple reading of the Rule brings to the fore two issues;

(i) The first is that a party against whom a judgment had been obtained in default, whether under these Rules or any other law, is entitled to approach the court to have such a judgment rescinded or set aside.

(ii) The second, and most important requirement under the Rule, is that a litigant wishing to avail himself of this indulgence from the court must file a court application for relief not more than a month after he has knowledge of the default judgment.

The default related to in terms of Rule 63 speaks to a situation where a party has been served with court process and fails to either respond to it or attend a scheduled hearing in relation thereto.

The respondent cited in the application for liquidation is the first respondent. This was the party upon whom the application was served, against which party specified relief was sought, and, as a consequence, the party that could technically be said to have been in default. From a perusal of Rule 63, it is obvious that the first respondent, as the party against whom a judgment has been entered in default is the one permitted to make an application for the rescission of that judgment within a month of learning of the same.

As against that, the appellants did not have a judgment entered against them in default. Neither appellant was a party against whom a judgment was entered in default in relation to the orders for the liquidation of the first respondent.  No relief was ever sought against either of them by the second respondent. Despite having an interest in the proceedings relating to the liquidation of the first respondent, they were never cited at all.  

The appellants, therefore, were not the parties that the Rule is aimed at.

In addition, the provisional order issued by the court called upon interested parties to respond to the order by a specified date if they so wished. The court a quo did not specify, however, that a failure to respond to the same would be a default as envisaged in the Rule, and, as a consequence, warranting an application in terms of Rule 63.

The appellants contend that the applicable law in this case is section 227 of the Companies Act [Chapter 24:03] which reads as follows:

“227 Court may stay or set aside winding up

The court may, at any time after the making of an order for winding up, on the application of the liquidator or of any creditor or contributory and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed or set aside, make an order staying or setting aside the proceedings on such terms and conditions as the court deems fit.”

In direct contrast to Rule 63, section 227 of the Companies Act [Chapter 24:03] does not provide for a timeframe within which such application may be made. It provides that the “court may, at any time after the making of an order for the winding up” stay or set aside such order….,.

The contradiction in the provisions of section 227 of the Companies Act [Chapter 24:03] and Rule 63 is obvious.

Whilst the latter places a limitation on the time frame within which an application for rescission of a default judgment may be brought, section 227 of the Companies Act [Chapter 24:03] grants the court latitude in so far as when such an order may be granted; regard being had always to whether or not the period in which relief is sought can be considered as being reasonable. Therefore, in placing a limitation on the time that the appellants ought to have made their application to have the proceedings set aside the court was guilty of serious misdirection.

Section 227 of the Companies Act [Chapter 24:03] avails an applicant a unique remedy for the setting aside of a winding up order and is not related to an application for rescission of a default judgment. The provision does not confine itself to orders granted in default of any party affected by it. In concluding that the application had to comply with Rule 63 of the Rules of the High Court, the court a quo was seeking to limit the rights of parties affected by the winding up order without regard to section 227 of the Companies Act [Chapter 24:03].

The legal basis of the application itself was not in issue between the parties to the dispute. The parties confined themselves to the question whether or not the appellants had met the requirements attendant upon an application of the nature confronting the court a quo.

The misdirection is clear.

When the affairs of a company have been completely wound up, the Master of the High Court is obliged to make an application to the court for an order that the company be dissolved. The court a quo invoked the provisions of section 295 of the Companies Act [Chapter 24:03] in finding that the application was not merited on the premise that the first respondent had not yet been wound up. The provision reads:

“295 Power of court to declare dissolution of company void

When a company has been dissolved, the court may, at any time within two years of the date of the dissolution, on an application by the liquidator of the company or by any other person who appears to the court to be interested, make an order, upon such terms as the court thinks fit, declaring the dissolution to have been void and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.”

In my view, the court a quo applied the wrong law in deciding whether or not the application should have been brought within a specified time. The company had not been wound up, and, clearly, section 295 of the Companies Act [Chapter 24:03] did not apply. The court should simply have asked itself if the application met the requirements in the Act as outlined in section 227.

However, notwithstanding the errors alluded to above, the court a quo correctly captured the issue before it, viz; whether or not the second respondent was a creditor or a shareholder of the first respondent.

The resolution of this issue would determine the standing of the second respondent in seeking an order for the liquidation of the first respondent.

The second respondent contended that it had standing but that in any event, there was a material dispute of fact which was incapable of resolution on the papers and that the appellants ought to have anticipated this dispute of fact which could not be resolved on the papers. The second respondent prayed that on that basis alone the application should be dismissed with costs.

The position of the appellants was that the first and second respondents had entered into an agreement on 12 September 2009 wherein the latter lent to the former the sum of USD200,000=. In terms of the agreement, repayment had to be effected within 45 days failing which shares equal to 25 per cent of the equity in the first respondent must be transferred to the second respondent.

It is not in dispute that one Casper Mombeshora did deliver to the second respondent Share Certificates in transferable form representing such shareholding in the first respondent. The second respondent admits receiving such certificates, has not returned them, but avers that the delivery of the shares without a concomitant notation in the company register and Share Certificates in its name does not make the second respondent a shareholder in the first respondent. The position taken is that the second respondent remains but a creditor. It reiterates that as such it is entitled to seek the order it obtained for the liquidation of the first respondent.

In heads of argument filed before the court a quo, the second respondent conceded that there was a material dispute of fact on the issue of the shares and the Share Certificates. Despite the concession by the second respondent of a material dispute of fact on the papers, the court a quo went on to find that there was, in fact, no such dispute. The court said:

“The court did not find this submission persuasive, being of the view that the dispute of fact referred to was not so material or complex as to be incapable of resolution on the papers filed of record. There was sufficient evidence in the affidavits filed of record, and in the terms of the three agreements alluded to by the parties, to assist the court to make a determination of the question of which agreements governed the relationship between the parties. It is not every apparent dispute of fact which is incapable of ascertainment.”

The court was correct in its approach on how to resolve a dispute of fact. Before the court were the following documents:-

(i) Agreement dated 12 September 2009 for a loan sum of USD200,000=;

(ii) Agreement dated 14 September 2009 for a loan amount of USD100,000=;

(iii) Agreement dated 5 October 2009 for a loan amount of USD100,000=;

(iv) Notarial General Covering Bond dated 11 December 2009 executed by the first respondent in favour of the second respondent for the sum of USD200,000=.

There is merit in the argument by the appellants that had the court a quo had proper regard to the documents before it, it would have become apparent that there was a material dispute of fact which called for resolution. In the absence of a resolution of this dispute, it was not clear, on the papers, whether the second respondent was a creditor or a shareholder. Instead, it embarked on what meaning was to be ascribed to a creditor at insolvency.

The court a quo, further, went on to consider that the acceptance by the Master of the High Court of the second respondent's claim was sufficient for it to find that indeed the second respondent was a creditor instead of a shareholder. It also accepted that the two later agreements were the basis upon which the status of the second respondent was premised.

Against this finding is the fact that the first agreement was never cancelled by either party to the same. I say this for the following reasons. The final clause in the Agreement provided as follows:

“In the event that Makonde Industries default on the repayment of $230,000= within 45 days, Glen Moor will give written notice that they have 15 days to rectify the default failing which Makonde Industries selected shareholders agree to transfer a 25 per cent stake in Makonde Industries to Glen Moor Trading.”

Despite denials from the second respondent, the record shows that this Agreement was consummated by the parties. Proof of such consummation is be found in the concession by the second respondent that Casper Mombeshora handed over Share Certificates to the second respondent. The second reason is that on 11 December 2009, the first respondent registered a Notarial General Covering Bond in favour of the second respondent. The causa for the mortgage bond was the agreement of 12 September 2009. The mortgage bond was registered by the second respondent's legal practitioner of record…,.

Given that the mortgage bond was registered on 11 December 2009, which date was after the execution of the agreements of 14 September 2009 and 5 October 2009, it seems to me that one is left wondering as to which of the various agreements concluded by the parties was the operative agreement. In view of the conflicting conditions between the first agreement and the last two, there is confusion as to the status of the second respondent in relation to the first respondent, especially when regard is had to the contention by the appellants that the second respondent was a shareholder of the latter as opposed to contention by the second respondent that it was a creditor.

Going by the facts outlined above, it is clear that the application to have the order winding up the company set aside had merit. The status of the second respondent, as an applicant for that order, could, at best, be described as unclear.

It required closer scrutiny.

In my view, the material disputes of fact are incapable of resolution on the papers. It did not seem as if the appellants ever became aware of the two agreements that the second respondent alleges were the agreements in respect of which the parties conducted their relationship vis-a-vis the loan. As such, it cannot be said that the appellants should have anticipated the existence of material disputes of fact.

Accordingly, due to the disputes of fact, the resolution of which would clarify whether or not the second respondent had standing to make the application for the liquidation of the first respondent, it is only proper that the matter be remitted for trial on that aspect. It becomes unnecessary to consider the other grounds of appeal.

In the result, it is ordered as follows:

1. The appeal succeeds with costs.

2. The judgment of the court a quo be and is hereby set aside.

3. The matter is remitted for the court a quo to hear oral evidence on the question of whether or not the second respondent is a shareholder or creditor of the first respondent.

This is an opposed application for the compulsory winding up of the respondent on the basis that it is commercially insolvent and unable to pay its debts. The application is brought in terms of the provisions of section 206(f) of the Companies Act [Chapter 24:03].

The applicant contends that, on the basis of the papers filed, it has been established that the applicant is entitled to an order for the liquidation of the respondent, and an order to that effect is sought. The respondent argues that this application is nothing but a debt collection tool disguised as an application for compulsory liquidation. It is contended, by the respondent, that the application is an abuse of court process, regard being had to the fact that the debt sought to be enforced is disputed on bona fide grounds.

The respondent raised three main points in limine, but before I deal with these preliminary issues I propose to set out the brief factual background to this dispute.

Background

The Agricultural Rural Development Authority (ARDA), a body corporate, plans, promotes, co-ordinates and carries out services for the development, exploitation, utilization, settlement or dispersion of State land. The respondent concluded a written Build, Operate and Transfer Agreement (BOT) with the Agricultural Rural Development Authority (ARDA) for a period of 20 years, commencing 1 March 2009. In terms of this agreement, the respondent had to crop, build and develop upon land made available by the Agricultural Rural Development Authority (ARDA) at Chisumbanje. The respondent was required to cultivate crops, more specifically sugar-cane. Such sugar-cane was, in due course, produced for the production of ethanol. A close relationship exists between the respondent and a company known as Green Fuel (Pty) Ltd which operates a large factory/plant on the Chisumbanje Estates manufacturing bio-ethanol from sugar-cane. Such bio-ethanol is a source of high quality, high octane, clean, efficient, renewable energy used as a vehicle fuel on its own, blended with petrol (up to 20%), or used as petrol octane enhancer. The Zimbabwe Government has awarded the Green Fuel venture national Project Status in view of the long term energy solution which it provides. The respondent, by necessity, requires agricultural inputs for the production of sugar-cane. It is against this background that the applicant became involved in the sale and delivery of substantial quantities of fertilizer products to the respondent.  During the year 2009 through to 2010, the respondent purchased certain quantities of fertilizer from a company known as Brocline Investment (Pty) Ltd, trading as Nutrichem. In due course, the name of this company was formally changed to Profert (Zimbabwe) (Pvt) Ltd. 

This application has been instituted by Profert (Zimbabwe) (Pvt) Ltd and essentially deals with the non-payment of fertilizer delivered to the respondent.

The applicant has two claims for payment against the respondent. The first claim relates to what is termed the “Legacy Debt.” This amount refers to amounts dating before 28 November 2013 and allegedly acknowledged in writing by the respondent. The amount being claimed in the first instance is US$567,879=80. The second claim refers to amounts in terms of a Memorandum of Agreement executed on 28 November 2013. The figure claimed by the applicant is US$682,221=81. Both amounts have been disputed by the respondent who alleges that the applicant grossly inflated the prices of the fertilizer products. The respondent contends that as soon as the correct prices have been quantified, sufficient guarantees have been put in place to liquidate the debt.

The Basis of the Applicant's Claims

From about 2014, the dispute between the parties dragged on without an end in sight. A considerable volume of e-mail communications was exchanged between the parties. As usual, there were allegations and counter-allegations but the debt remained unpaid. On 10^th October 2014, the applicant's legal practitioners addressed the following letter to the respondent:-

“10 October 2014

The Directors

Macdom Investments (Pvt) Ltd

54 Edinburg Road

Vainona

Harare

To be served by the Sheriff

Re: PROFERT ZIMBABWE (PVT) LTD

1. We are instructed to direct the notices set out hereunder on behalf of our said client, Profert (Zimbabwe) (Pvt) Ltd (“Profert”).

2. We are instructed that Macdom Investments (Pvt) Ltd ('Macdom') is indebted to Profert as follows:

2.1 Fertilizer products sold and delivered at your special instance and request for the period prior to 28 November 2013 ('the legacy debt'); and

2.2 Written memorandum of agreement dated 28 November 2013 ('the MOA'), read together with a written amendment dated 14 February 2014, in respect of additional credit in addition to the legacy debt.

3. The legacy debt already due and payable at the conclusion of the MOA was duly recorded and acknowledged by Macdom in the MOA to wit US$545,698=62.

4. Limited payments have been made in respect of the said legacy debt with the amount presently due and payable being US$567,879=80 as set out in Annexure “A” hereto.

5. The amount presently due and payable in respect of the MOA is US$682,221=82, as set out in Annexure 'B' hereto.

6. Demand in terms of the Companies Act:

6.1 Profert, in terms of section 205(a) of the Companies Act [Chapter 24:03] ('The Companies Act'), hereby requires of Macdom to pay the said amounts of US$567,879=80 and US$682,221=82, respectively, already due and payable.

6.2 This demand shall be served and a copy left by the Sheriff at the registered office of Macdom.

6.3 Should Macdom neglect to pay the said amounts for a period of three weeks after receipt of this notice, Macdom shall be deemed to be unable to pay its debts.

6.4 In such event, Macdom may be wound up by the court as it is unable to pay its debts, in terms of section 206(f) of the Companies Act.

6.5 We hold instructions accordingly.

7. Notice in respect of release Orders

7.1 In terms of the MOA, and in order to secure payment for the fertilizer provided to Macdom, Green Fuel (Pvt) Ltd ('GF') has executed Release Orders in favour of Profert, or its duly nominated agent, for anhydrous ethanol fuel.

7.2 It was agreed in the MOA that in the event that Macdom fails to pay Profert for fertilizer supplied in terms of the MOA, Profert shall be entitled, upon giving 10 days written notice to GF and Macdom to use the Release Orders so that Profert may be able to recover the outstanding purchase price.

7.3 GF has executed the following replacement Release Orders in terms of the MOA;

7.3.1 Release Order GF000635 dated 30 June 2014: 39,600 litres;

7.3.2 Release Order GF000697 dated 11 July 2014: 536,800 litres; and

7.3.3. Total 932,800 litres.

7.4 Macdom is, in addition to the demand and remedy set out in paragraph 6, hereby notified that should payment not be made within 10 days of receipt hereof, Profert shall, through its nominated agent, RAM Petroleum, have the said fuel released and liquidated.

7.5 Any such proceeds shall be credited to the amounts due and payable, as set out above.

7.6 Any balance then owing shall remain due and payable in terms of the demand in paragraph 6.

7.7 This notice shall also be served on GF and the Msasa Depot in Harare of the National Oil Infrastructural Company.

8. Your speedy response would be appreciated.

Yours faithfully

MATIZANADZO & WARHURST”

On 3 November 2014, the respondent's legal practitioners responded to the demands and threats to apply for compulsory liquidation by indicating as follows:-

“…,. As previously advised in our letter dated 5^th September 2014, our clients took issue to your client's irregular pricing and your client duly obliged and agreed to the adjustment of same. The reconciliation that your client had agreed to undertake from inception of supply to date was never done and hence our clients still dispute your client's invoices. The fact that your client has failed and/or refused to undertake the reconciliation has compounded our client's suspicion of pricing irregularities.

Our clients are, accordingly, not failing to pay your client's supposed debt but rather disputing the quantum due to your client.

In the light of the above, your client is thus misguided in seeking to apply for liquidation of Macdom Investments (Pvt) Ltd and Rating Investments (Pvt) Ltd in terms of section 205 of the Companies Act (Chapter 24:03) given that our clients cannot be 'deemed unable to pay its debts.'

In any event, our clients are not insolvent…,.”

On 7 April 2015, the application for the winding up of the respondent, in terms of section 206(f) of the Companies Act [Chapter 24:03] was duly filed. The application is opposed on the broad grounds outlined in the letter by the respondent's legal practitioners. 

I now proceed to deal with the points in limine that have been raised by the respondent.

Preliminary Points

In oral argument, counsel for the respondent raised three preliminary issues. All but one of these points was seriously pursued and calls for determination by this court.

1. Non-compliance with Companies (Winding-Up) Rules, 1972

The respondent averred that the application before the court does not comply with the provisions of section 5 of the Companies (Winding Up) Rules, 1972, RGN 841 of 1972, neither does the applicant show any awareness of those Rules. Resultantly, it is argued, this application fails to comply with section 5(1)(a) of the Rules.

It is beyond dispute that the clear provision of Rule 5 of the Companies (Winding-Up) Rules, 1972, RGN 841 of 1972 requires a petition for the winding-up of a company to state:-

“The capital, object, and nature of the company.”

The issue to be decided is, however, whether the failure to state those terms, as stipulated in the Companies (Winding-Up) Rules, 1972, RGN 841 of 1972 is fatal to the present application.

The respondent contends that in application proceedings, an application stands to be determined on the basis upon which it has been made. Put differently, an application based on a defective or inadequate founding affidavit must be dismissed.

In my view, when determining whether the application for a winding-up of a company is fatally defective by reason of non-compliance with the Companies (Winding Up) Rules, 1972, RGN 841 of 1972, one has to consider whether the failure to state the capital, object and nature of the company is relevant to the issues brought before this court for the winding up of the respondent. As was stated by VAN WINSEN AJA in Federated Trust Ltd v Botha 1978 (3) SA 645 (A)…, albeit in different circumstances;

“Rules are not an end in themselves to be observed for their own sake. They are provided to secure the inexpensive and expeditious completion of litigation before the courts…,.”

I am persuaded by counsel for the applicant's argument that the point taken on behalf of the respondent '“propounds no more than sterile formalism.' See Jockey Club of South Africa v Forbes 1993 (1) SA 649…, where the learned KRIEGLER AJA stated:

“This case is a good example of the stultification inherent in reading Rule 53 as a law of the Medes and Persians…,.”

The above position finds favour in the case of Scottish Rhodesian Finance Ltd v Honiball 1973 (2) SA 747 (R)…, where BECK J stated as follows:

“The Rules of Court are not laws of the Medes and Persians, and, in suitable cases, the court will not suffer sensible arrangements between the parties to be sacrificed on the altar of slavish obedience to the letter of Rules.”

I hold the view, therefore, that the omission of certain formal allegations in the application which are not relevant to the issues before this court do not render the application defective and bad in law.

The decision of the Supreme Court in African Gold (Zimbabwe) (Pvt) Ltd v Modest (Pvt) Ltd 1999 (2) ZLR 61 (SC) did not deal with the issue before this court, and, specifically did not deal with the general applicability of Rule 5 of the Companies (Winding-Up) Rules, 1972, RGN 841 of 1972, and, therefore, affords no authority for the preliminary point taken by the respondent. 

In that matter, the requirement of service upon the company, stipulated in Rule 5(2) of the Companies (Winding Up) Rules, 1972, RGN 841 of 1972 had not been met. Because no notice had been given, the provisional order of liquidation was set aside.

That is not the position in this matter. 

In this matter, the omission relates to the failure to state the “capital, object and nature of the company,” in the founding affidavit. I take the view that the omission does not offend any notions of justice or rules of the common law. 

I therefore dismiss the first preliminary point….,.

The Winding-Up

In terms of section 206(f) of the Companies Act [Chapter 24:03], a company may be wound up by the court if it is unable to pay its debts. In terms of section 205 of the Companies Act [Chapter 24:03], a company will be deemed to be unable to pay its debts in the circumstances set out. So far as is relevant to the present matter, paragraphs (a) and (c) of that section provide as follows:

“A company shall be deemed to be unable to pay its debts –

(a) If a creditor, by cession or otherwise, to whom the company is indebted in a sum exceeding one hundred United States dollars then due, has served on the company a demand requiring it to pay the sum so due by leaving the demand at its registered office and if the company has, for three weeks thereafter, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

(c) If it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.”

The applicant contends that as far as the requirements of section 205(a) of the Companies Act [Chapter 24:03]  are concerned, the applicant caused to be served, by the Deputy Sheriff, a demand requiring the respondent to pay the outstanding debt within a three week period.

Service of the demand was effected on the respondent's legal practitioners on 14 October 2014. The response from the respondent, through its legal practitioners, was sent via a letter dated 3 November 2014. The applicant contends that since the debt outstanding is in excess of the statutory limit, the requirements of section 205(a) of the Companies Act [Chapter 24:03] result in it being deemed that the respondent is unable to pay its debts. It was argued by counsel for the applicant, passionately, that the general rule is that since the respondent cannot meet its day to day obligations, and pay its debts, creditors are entitled to an order ex debito justitiae, save in exceptional circumstances. It was argued that the court has a very narrow discretion on the matter where it is established that the debtor is unable to pay its debts.

I must observe that the applicant appears to be the only creditor that has chosen to apply for the liquidation of the respondent. The court has not been favoured with any details of any other major creditors pursuing the respondent for non-payment of debts. 

It is trite law that for an order for liquidation to be granted, the court must be satisfied that the applicant has proved that the respondent is insolvent and is not able to meet its financial obligations. An order for liquidation will not be granted under circumstances where the petitioner seeks to abuse the process of the court by pursuing some ulterior design.

In the case of Dominion Trading FC–LLC v Victoria Foods (Pvt) Ltd HH324-13, the court stated…, as follows:

“It occurs to me that the insistence of the applicant on a winding up against this background is indicative of an abuse of process, the employment of the judicial process for a purpose other than that for which it was intended…,. This is unacceptable as it amounts to harassment of the respondent.”

It seems to me that there is ample evidence in this matter to show that there is a genuine dispute regarding the applicant's claims.

It is a basic principle of our law that an applicant must establish and prove its claims. 

What the applicant seeks to avoid is to sue out a summons against the respondent as the claim will lead to a trial action. The applicant may not avoid proving its claims by seeking the liquidation of the respondent. The respondent's defence to the claims is that certain figures were inflated resulting in gross over-pricing. That defence has not been tested. The existence and extent of the debt needs to be readily ascertainable. In view of the apparent disputes of fact in the matter, which abound, the court has a discretion in its consideration for an application for a liquidation order.

This court must take into account the fact that the respondent has not been proved to be insolvent.  The respondent has stated that it has sufficient money to pay the applicant, but will not tender payment until the fair market value, or rate, prevailing at the time the fertilizer was delivered has been determined and affixed to the quantity of fertilizer that was supplied.

The respondent's assertion that it has assets in excess of US$6 million has not been controverted by the applicant.

I must turn to consider the issue of the notice given to the respondent in terms of section 205 of the Companies Act [Chapter 24:03]. The applicant has referred, for its contention that the respondent is insolvent, to the case of De Waard v Andrew & Thiehaus Ltd 1907 TS 727…, where INNES CJ stated as follows:-

“Now, when a man commits an act of insolvency he must expect his estate to be sequestrated. The matter is not sprung upon him; first, a judgment is obtained against him then a writ is taken out, and he must expect, if he does not satisfy the claim, that his estate will be sequestrated. Of course, the court has a large discretion in regard to making the rule absolute; and in exercising that discretion the condition of man's assets and his general financial position will be important elements to be considered. Speaking for myself, I always look with great suspicion upon, and examine very narrowly, the position of a debtor who says:

'I am sorry that I cannot pay my creditors, but my assets, far exceed my liabilities.'

To my mind, the best proof of solvency is that a man should pay his debts, and, therefore, I always examine in a critical spirit the case of a man who does not pay what he owes.”

In this matter, there can be no doubt that the applicant has not sued out a summons against the respondent. The applicant has not sought and obtained judgment against the respondent. The applicant has not obtained a writ of execution against the respondent. I have already observed that the respondent's claims are disputed. The basis of the dispute is known to the applicant. The applicant has not sought to obtain judgment, preferring instead to proceed with an application for liquidation. The explanation for the adoption of this procedure is that the respondent is by all accounts “commercially insolvent.”

In Badenhorst v Northern Construction Enterprises Ltd 1956 (2) SA 346 (T), HIEMSTRA J, referred with approval to the following extract from BUCKLEY's On Companies:

“A winding-up petition is not a legitimate means of setting to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and, under circumstance, may be stigmatized as scandalous abuse of the process of court.

Some years ago, petitions founded on disputed debts were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on petition and make the order.”

In the circumstances, I find that the respondent has succeeded in establishing that the debt is disputed on bona fide and reasonable grounds which can only be resolved by way of action proceedings. Further, and in any event, the applicant has not proved that the respondent is insolvent. The respondent has indicated that it has secured adequate finance to settle the applicant's claims once these are established. It seems to me that the winding-up order has been instituted to harass the respondent and compel it to pay the disputed amounts. I have reached this conclusion because in spite of the respondent's demands to reconcile the disputed invoices, particularly to attend to the “irregular” pricing of fertilizer, the applicant has spurned all attempts to do so.

Case number 5264/05 is a court application, brought on 17 October 2005, by Turner and Sons (Pvt) Ltd against Zambezi Paddle Steamer (Pvt) Ltd (ZPS) and Dobrock (Pvt) Ltd. It prayed for the winding up of Zambezi Paddle Steamer (Pvt) Ltd (ZPS) and that a liquidator be appointed in the following terms:-

1. That first respondent, Zambezi Paddle Steamer (Pvt) Ltd, be provisionally wound up pending the granting of an order in terms of paragraph 3 hereof or the discharge of this order.

2. That Mrs Theresa Grimmel of KPMG Chartered Accountants, Mutual Gardens 100, The Chase, Emerald Hill, Harare be appointed as provisional liquidator of first respondent company with the powers set out in section 221 of the Act.

3. Any interested party appear before this court sitting at Harare on (a date sixty days from the date of the order) to show cause why an order should not be made placing first respondent's company in liquidation and order that the costs of these proceedings all be costs of the liquidation.

4. That this order shall be published once in the Government Gazette and once in the Herald Newspaper. Publication shall be in the short form annexed to this order.

5. Any person intending to oppose or support the application on the return day of this order shall:-

5.1. Give due notice to the applicant at Messrs Byron Venturas & Partners, 2^nd Floor Tanganyika House, Corner 3^rd Street/Kwame Nkrumah Avenue, Harare.

5.2. Serve on the applicant at the address given above a copy of any affidavit which he files with the Registrar of the High Court…..,.

Turner and Sons seeks the liquidation of Zambezi Paddle Steamer (Pvt) Ltd (ZPS) on the basis that the two shareholders, in Turner and Sons and Dobrock (Pvt) Ltd, have had a disharmonius and tumultuous working relationship….,.

Turner and Sons need only to establish, on a prima facie basis, that it is just and equitable that the company be provisionally wound up….,.

Clearly, there is a justifiable lack of confidence in the conduct of the company's affairs. There are accusations, supported by documentary evidence, that foreign currency generated by Zambezi Paddle Steamer (Pvt) Ltd (ZPS) has not been utilized for the benefit of Zambezi Paddle Steamer (Pvt) Ltd (ZPS) business activities.

Zambezi Paddle Steamer (Pvt) Ltd (ZPS) is a small domestic company. In accordance with the principal guidelines set out in Sultan v Fryfern Enterprises (Pvt) Ltd & Another 2000 (1) ZLR188, which approved the remarks of the House of Lords in Ebrahimi v Westbourne Galleries [1972] 2 ALL ER 492, I find that it is just and equitable that Zambezi Paddle Steamer (Pvt) Ltd (ZPS) be provisionally wound up on that ground.

There does not appear, to me, to be any realistic, sufficient and reasonable remedy other than provisional liquidation. The bickering that has gone on can only be resolved by protracted negotiations whose outcome is uncertain. There is no alternative remedy, in my estimation, to winding up. The applicant has thus discharged the onus on it to justify the order sought….,.

1….,.

2. In case HC5264:

2.1 The first respondent company, Zambezi Paddle Steamers (Private) Limited, is provisionally wound up pending the granting of an order in terms of paragraph 2.3 or the discharge of this order.

2.2 Mrs Theresa Grimmel of KPMG Chartered Accountants, Mutual Gardens, 100 The Chase, Emerald Hill, Harare be appointed as Provisional Liquidator of the First Respondent Company with the powers set out in section 221 of the Companies Act [Chapter 24:03].

2.3 Any interested party may appear before this court sitting at Harare on the 14^th day of February 2007 to show cause why an order should not be made placing the first respondent company in liquidation and the costs of these proceedings all be costs of liquidation.

2.4 This order shall be published once in the Government Gazette and once in the Herald Newspaper. Publication shall be in the short form approved by the Registrar of this Honourable Court.

2.5 Any person intending to oppose or support the application on the return day of this order shall:

2.5.1 Give due notice to the applicant at Messrs Byron Venturas & Partners, 2^nd Floor Tanganyika House, corner 3^rd Street/Kwame Nkurumah Avenue, Harare.

2.5.2 Serve on the applicant, at the address given above, a copy of any affidavit which he files with the Registrar of the High Court.

The first respondent was placed under provisional liquidation on the 13^th of June 2013 which was confirmed on the 11^th of July 2013. The second and third respondents were then appointed provisional liquidators.

Subsequently, on 19 December 2013, the creditors held a meeting before the fourth respondent where they passed a resolution that the first respondent be placed under judicial management. At this meeting, over 200 creditors voted that the company be placed under judicial management while 4 creditors were for liquidation. The applicants then filed an application seeking an order removing the first respondent from liquidation and placing it under provisional judicial management. This court, per KAMOCHA J, granted an interim order on the 14^th day of March 2014 in the following terms:

“Interim relief granted

Pending the finalisation of this matter, applicants be and are hereby granted the following relief:

(a) The 1^st respondent be and is hereby removed from provisional liquidation and placed under provisional judicial management.

(b) Pending the return date, this order shall operate as a provisional Order of Judicial Management.

(c) The Assistant Master be and is hereby ordered to appoint Thabani Lihle Siziba of Waterbuck Trust (Pvt) Ltd as the Judicial Manager of the applicant with powers conferred by section 221(2)(a) to (h) as read with section 303 of the Companies Act [Chapter 24:03].

(d) A copy of this order shall be served on the Assistant Master.

(e) This order shall be published once in the Government Gazette and in one Friday edition of the Chronicle newspaper.

(f) All court actions and proceedings and the execution of all writs, summons and other court processes against the company be and are hereby stayed and must not be proceeded with without the leave of the court.

(g) Whilst the Provisional Judicial Management Order is in force, all actions, executions of writs, summons and other proceedings against the 1^st respondent shall not be proceeded with without leave of this honourable court. Any goods attached or removed shall forthwith be released from such attachment and placed in the custody of the Provisional Judicial Manager.

(h) Any existing directors of the company be and are hereby divested of their power and authority as directors and managers of the 1^st respondent.

(i) Any interested party may inspect a copy of the application at the office of the Assistant Registrar of the High Court, Bulawayo or at the office of the Assistant Master of the High Court, Bulawayo.

(j) Any interested party may appear before this court sitting at Bulawayo on the 17^th day of April 2014 to show cause why a final order should not be made placing the respondent's company in Judicial Management.

(k) Any person (including creditors) intending to oppose or support the application on the return date of this order shall:-

Give due notice to the applicant c/o Cheda and Partners Legal Practitioners, 6^th Floor LAPF House, 8^th Ave/Jason Moyo Street, Bulawayo within twelve (12) days of date of publication of this order.”

The terms of the final order sought by the applicants are as follows:

“That you show cause why a final order should not be made in the following terms:-

1. The 1^st respondent, Geozing Pawnbrokers (Pvt) Ltd, be and is hereby placed under final judicial management.

2. The Assistant Master be and is hereby ordered to appoint Thabani Lihle Siziba of Waterbuck of the 1^st respondent with powers conferred by section 221(2)(a) to (h) as read with section 303 of the Companies Act (Chapter 24:03).”

The applicants are now seeking confirmation of the provisional order referred to above. The application is opposed by the second and third respondents.

The relevant facts that are either common cause or not seriously disputed are that:-

1. Geozing Pawnbrokers (Pvt) Ltd, a duly incorporated private limited company was in the business of money lending and investment.

2. The applicants, who are the creditors of Geozing Pawnbrokers (Pvt) Ltd, invested various sums of money into the company with the investments bearing interest at the rate of 30% per month.

3. Around March 2013, the company failed to pay the investments which were due and its various schemes collapsed leaving a vast number of creditors exposed.

4. The applicants applied and obtained the orders cited above.

The applicants have relied on section 305 of the Companies Act [Chapter 24:03] (the Act) which sets out the grounds which the court must consider in deciding whether or not to confirm the provisional order. These grounds are encapsulated in section 305(1) as follows:

“305 Return day of judicial management order

(1) On the return day filed in the provisional judicial management order, or on the day to which the court or a judge may have extended it, the court, after considering –

(a) The opinion and wishes of the creditors and members of the company; and

(b) The report of the judicial manager prepared in terms of section three hundred and three; and

(c) The number of creditors who did not prove claims at the first meeting of creditors and the amounts and nature of their claims; and

(d) The report of the Master; and

(e) The report of the Registrar;

may grant a final judicial management order if it appears to the court that there is a reasonable probability that the company concerned, if placed under judicial management will be enabled to become a successful concern and that it is just and equitable to grant such an order, it may discharge the provisional judicial management order or make any other order that it thinks just.”…,.

Reliance was also placed on Zimbabwe Textile Workers Union v David Whitehead Textiles Ltd & Ors HH170-14.

In casu, the creditors and members of the company's opinion and wishes are contained on page 5 of the minutes of a meeting held on the 19^th of December 2013. The relevant portion states:

“Over 200 creditors voted that the company be placed under Judicial Management while 4 present were for liquidation.”

The report of the provisional judicial manager supports the confirmation of the order. In his report, the provisional judicial manager states:

“It is my considered opinion that Geozing Pawnbrokers (Pvt) Ltd should be nursed back into financial health and must be given another chance in life to resume its course as a successful entity based on the following reasons:

(a) The protection of the judicial management order enables all creditors to their money in an orderly manner as opposed to who gets the writ first and those who move in later get nothing. The current graph at the pawn broking shop shows a positive result.

(b) The rock sampling at the mine shows an output of 30 grammes per tonne and once the mine runs at 100% capacity we are assured of not less than 2kg a month which amounts to about $95,000= gross. I wish to stress that this could not have been done in the past as we were operating at 30% since the matter was opposed. The 30% was done as a trial to assess the mine's viability and the results were impressive.

(c) Our marketing staff at the pawn shop are doing a sterling job in securing clients and at present they have widened their customer base as everyone is in need of money.

(d) Payments of some creditors in full shows that if the company is given another chance then it will definitely pay all the creditors.

(e) The current projects that are running are long term and if allowed to mature they will reach out to more clients and bring in more income to pay off creditors.

It is therefore my humble opinion that if Geozing Pawnbrokers (Pvt) Ltd is given another chance it will recover from this financial set-back, but, most importantly, it will manage to pay all its creditors. It is also pertinent to note that the Geozing Pawnbrokers (Pvt) Ltd assets are now in the form of running businesses and if the company is liquidated creditors will not receive anything.”

The report also covered the following areas:

1. An account of the general state of affairs of Geozing Pawnbrokers (Pvt) Ltd;

2. Reasons why Geozing Pawnbrokers (Pvt) Ltd is unable to pay its debts at the moment;

3. A statement of Geozing Pawnbrokers (Pvt) Ltd assets;

4. A complete list of Geozing Pawnbrokers (Pvt) Ltd creditors; and

5. Particulars of sources of funding to resuscitate Geozing Pawnbrokers (Pvt) Ltd.

As regards the number of creditors who did not prove claims at the first meeting of creditors, the provisional judicial manager provided the following data:

“(a) The approved creditors are now at 1,846 from 1,873 with a claim value of $3,605,921=67 compared to the previous amount of $3,625,540=67.

(b) The unapproved creditors are 1,791 with a claim value of $2,838,366=58.”

The Master, in his report dated 25 February 2016, believes that it will be to the best interest of the company if an order for final judicial management is granted. His opinion is based on the fact that the company has kick-started the following business operations:

(a) Pawn shop business;

(b) Poultry project;

(c) Bottle store; and

(d) Mining of gold.

Finally, the Master recommended that the creditors' wish be taken into consideration and the final judicial manager be given at least a year to try to trade and pay creditors.

The applicants argued that the second and third respondents have no locus standi in judicio since they have absolutely no interest in the affairs of this company in that their mandate expired when the order for provisional judicial management was granted.

It is common cause that the second and third respondents are ex co-liquidators. Their opposition is solely based on their views of the company. The two respondents, however, argued that they had a “judiciary duty to protect the interests of the creditors by liquidating the company.”

While I have my doubts over the validity of this submission, this point is moot for the simple reason that lack of opposition does not entitle the court to dispense with the requirements set out in section 305(1) of the Companies Act [Chapter 24:03].

The respondents have set out two broad grounds for opposing this application, namely;

(a) That the applicants have failed to discharge the onus to prove that the winding up proceedings of Geozing Pawnbrokers (Pvt) Ltd should be set aside in terms of section 227 of the Companies Act; and

(b) That the applicants have failed to prove that Geozing Pawnbrokers (Pvt) Ltd can be enabled as a successful concern through the process of judicial management.

Section 227 of the Companies Act [Chapter 24:03] states:

“227 The court may, at any time after the making of an order for winding up, on the application of the liquidator or of any creditor or contributory and on proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed or set aside, make an order staying or setting aside the proceedings on such terms and conditions as the court deems fit.”

The respondents' argument is that section 227 applies where some new factor has rendered the order of winding up unnecessary thereby justifying its setting aside. See Storti v Nugent & Ors 2001 (3) SA 783 (W) where GAUTSCHI AJ, commenting on section 354 of the South African 1976 Companies Act (now repealed), which is similar to section 227 of the Zimbabwean Act, said;

“A moment's reflection reveals that an application to set aside or stay winding up proceedings may arise in two broad situations. On the one hand, the winding up order may be attacked on the basis that it should never have been granted by reason of some defect in the procedure or the merits of the application; on the other hand, the winding up order may be unassailable in itself but later events may render a stay or a setting aside of the winding up proceedings necessary or desirable. In my view, the section is intended to cover the latter situation not the former. My reason for this is the following: firstly, the winding up order is assailable and it may be rescinded under the common law and there is no need for a section in the Companies Act to provide for such a situation.”…,.

See also Ward & Another v Smit & Others: In Re Gura v Zambia Airways Corp Ltd 1998 (3) SA 175 (SCA) where it was held that “exceptional circumstances” had to be disclosed in order to grant a discharge of a winding up order which was, in effect, a rescission.

It was contended, for the respondents, that in casu the applicants have not led any evidence to prove that the order winding up the company should be set aside, nor have they led any evidence to suggest that the circumstances have changed since the granting of the original winding up order.

In my view, this submission has no merit in that the applicants filed minutes of a creditors meeting attended by Mr M. Ncube (one of the liquidators) where a compromise was reached and a resolution passed to apply for the setting aside of the final liquidation order. At this meeting, Mr Zingane, the former director was asked to present a statement of the company's affairs which he did. These developments, in my view, can be classified as 'later events' or exceptional circumstances justifying a setting aside of the winding up proceedings – see R. H. CHRISTIE, Business Law in Zimbabwe 2^nd Ed 1998…, where the learned author states:

“If the liquidator, authorized by a joint meeting of creditors and contributories (s 221(4) is able to arrive at a compromise with creditors, it may be possible to apply for the cancellation of the winding up order, reinstatement of the company and discharge of the liquidator: Ex parte Osmond and Shacklock 1944 SR 181: Ex parte Beretta & Sons (Pvt) Ltd 1963 R & N 66 1963 (2) SA 146.”

On that basis, therefore, and on the basis of the evidence relating to the company's state of affairs, the provisions of section 227 of the Companies Act [Chapter 24:03] were satisfied.

The second and third respondents also submitted that the company cannot be enabled as a successful concern through the process of judicial management because of the following reasons:

(1) Judicial management, in casu, is an improper vehicle in that the company owes its creditors over US$5,000,000= while its assets total approximately US$1,000,000=. Consequently, less the costs of liquidation, the creditors can expect to be paid approximately seventeen cents on the dollar.

(2) The business of Geozing Pawnbrokers (Pvt) Ltd is illegal, and, therefore, the appointment of a judicial manager would be of no purpose as there is no legitimate business to manage.

I take the view that the fact that there is a huge gap between the amount of debt and the value of the company's assets does not render the vehicle of judicial management improper. The test is whether or not there is a reasonable probability that the company, if placed under judicial management, will be enabled to become a successful concern and that it is just and equitable to grant such an order. I am satisfied, from the evidence on record, that the company can operate profitably. It is common cause that liquidation will result in creditors earning six cents for every dollar invested. While it is accepted that it would take the company a considerable period to pay off all the debt, this cannot be the basis for denying the creditors their wish to have the company placed under judicial management. It has not been denied that Geozing Pawnbrokers (Pvt) Ltd owns mining claims in Turk Mine which, although ill-equipped, have the potential to produce profits. Also, the second and third respondents have not challenged the existence of various businesses or projects being run by the company. What they have simply said is that they will generate very little over the years.

Finally, the argument over the illegality of Geozing Pawnbrokers (Pvt) Ltd's operations is untenable in that it was not disputed that whatever charges had been preferred against the company were withdrawn and preferred against Mr Zingane in his personal capacity. The Articles of Association of Geozing Pawnbrokers (Pvt) Ltd were not produced. Therefore, the unlawful operations remain a bold and unsubstantiated allegation.

In the final analysis, I find that the applicants have satisfied the requirements for the confirmation of the Judicial Management Order. Put differently, I find that the proposed business rescue constitutes a better option than the liquidation of Geozing Pawnbrokers (Pvt) Ltd.

Accordingly, it is ordered that:-

1. The first respondent, Geozing Pawnbrokers (Pvt) Ltd, be and is hereby placed under final judicial management.

2. The Assistant Master be and is hereby ordered to appoint Thabani Lihle Siziba of Waterbuck Trust (Pvt) Ltd as the Judicial Manager of the first respondent with powers conferred by section 221(2)(a) to (h) as read with section 303 of the Companies Act [Chapter 24:03].

The applicant must be regretting tying her retirement, and, indeed, the twilight of her career to an estate agency business that had the second respondent in it.

After what may have been an illustrious career as a Commercial Letting Manager of a well-known estate agency in Bulawayo, John Pocock and Company Limited, the applicant decided to resign from that respectable company and start her own real estate business. Not being a registered estate agent herself, she is a Property Manager and a trained lawyer, she badly needed a partner registered as an estate agent with the Estate Agents Council and the Real Estate Institute Zimbabwe in order to start that business.

That is where the second respondent came in, a registered estate agent and a fellow of the Real Estate Institute.

If the facts of this matter are anything to go by, perhaps that is all that the second respondent had.

I say so because he had purchased a shelf company in 2006 which had absolutely nothing but a single issued share and had never traded. He did not have the means to set it in motion. He had just left formal employment armed with his qualifications and certificates of registration but without the wherewithal to commence trading. It is that shelf-company which was chosen as a vehicle for business. When the parties came together, as they certainly needed each other, and agreed to start an estate agency, under the banner of the first respondent, which existed in name only, they had to take a soft loan of $1,350= from the applicant's husband to find their feet.

This was in January 2014.

From then, the company progressed in leaps and bounds. The applicant and the second respondent were allotted 500 shares each reflecting their equal standing in the company. The company started trading in May 2014. No sooner had the new kid in town hit the ground running than differences between the members started emerging. They traded accusations and the inevitable happened on 13 October 2014, when, at the instance of the applicant, this court, per MOYO J, granted an order placing the first respondent company under provisional liquidation. A provisional liquidator was appointed but is said to have quickly resigned after the second respondent took issue with his appointment.

It is the granting of the final order of liquidation which has been strenuously opposed by the second respondent and his loving wife, the third respondent, who has dutifully deposed to a three-line affidavit supporting every word uttered by the second respondent.

The applicant has approached the court seeking the winding up of the first respondent in terms of section 206(g) of the Companies Act [Chapter 24:03] on the ground that it is just and equitable that the company be wound up. This is because the applicant and the second respondent, who are the only members of the company, holding an equal shareholding, and the only directors of it, are incompatible and unable to work together. They are unable to agree on anything resulting in them reaching a deadlock each time there is a meeting or there is need to make a decision.

The applicant paints a picture of the precincts of the company having been turned into a war zone. Intrigue and trickery are the order of the day as the second respondent desperately tries to elbow the applicant out of the business using every trick in the book. She accuses the second respondent of delinquency and poor time-keeping regularly failing to keep office hours, mismanagement of the company's accounts and contributing very little in the furtherance of the company's affairs. In addition, the second respondent is accused of deliberately keeping the applicant in the dark about the finances of the company.

As if that was not bad enough, the second respondent is accused of having convened a shareholders meeting in October 2014 for the sole reason of removing the applicant as a director. To achieve that, he has suddenly claimed that the applicant was never a shareholder - despite the issuance of a share certificate to her. Instead, he now claims that his wife, the third respondent, who, according to the applicant, has never held shares in the company, was allotted 122,000 shares with the second respondent being allotted 127,500 shares, much to the chagrin of the applicant.

To justify that shareholding, the second respondent has pulled out and dusted a Shareholders Agreement allegedly signed by himself and his wife on 20 December 2012 long before the applicant came into the picture and at a time when, by his own admission, the first respondent company was not trading but a mere shelf-company. To cap it all, the second respondent has suddenly produced share certificates issued in favour of himself and his wife on 31 December 2012.

In opposing the application and the confirmation of the provisional order of liquidation, the second respondent has submitted that the applicant lacks locus standi in judicio to make such an application because she “indicated her intention to sell her shares and withdraw her capital she had injected from the company.” After she collected $1,230=, being the capital she injected in the company, the applicant ceased to be a shareholder and remained only a director.

Unfortunately, the second respondent did not indicate who bought the shares of the applicant and did not produce proof of such a sale.

To make a bad situation worse, he did not explain how, in law, the withdrawal of $1,230= from the company (and not from a potential buyer of the 500 issued shares of the applicant) could equate to a sale of shares when there was no buyer of those shares and no price for the shares. Quite to the contrary, the sum of $1,230= was paid by the company itself, buttressing the applicant's point that it was a loan repayment and nothing more.

The second respondent insisted that although himself and his wife had received an allotment of shares in December 2012, pursuant to an agreement the two had signed on 20 December 2012, he had not prepared any returns for the allotment as he “had no money and […,.] was not using the company.” He has since rectified the anomaly by filing them belatedly and paying late allotment filing costs. All this is to justify the argument that it is him, out of the goodness of his heart, who allowed the applicant to join his company before he, again, allowed her to “withdraw her shareholding” leaving him and his wife in the driving seat. Never mind that when the parties came together, in January 2014, there was no company to join as it was not trading and he “was not using the company” and that no returns adverting to the allotment were submitted to the Registrar of Companies “as [he] had no money.”

Alice in Wonderland.

With those facts, counsel for the applicant had a point when he called the whole episode an elaborate fabrication.

In terms of section 206 of the Companies Act [Chapter 24:03];

“A company may be wounded up by the court –

(a) If the company has, by special resolution, resolved that the company be wound up by the court;

(b) If default is made in lodging the statutory report or in holding the statutory meeting;

(c) If the company does not commence business within a year from its incorporation or suspends its business for a whole year;

(d) If the company ceases to have any members;

(e) If seventy-five per centum of the paid up share capital of the company has been lost or has become useless for the business of the company;

(f) If the company is unable to pay its debts;

(g) If the court is of opinion that it is just and equitable that the company should be wound up.”…,.

The court has a discretion to grant or withhold an order for winding up of a company in terms of section 206(g) of the Companies Act [Chapter 24:03]. As stated by CHATIKOBO J in Sultan v Fryfern Enterprises (Pvt) Ltd and Another 2000 (1) ZLR 188 (H)…,:

“Section 206(g) of the Act has been said to postulate not facts, but only a broad conclusion of law, justice and equity as a ground for winding up.

'In its terms and effect, (the section) confers upon the court a very wide discretionary power the only limitation, originally, being that it had to be exercised judicially with due regard to the justice and equity of the competing interests of all concerned.' Per TROLLIP J in Moosa NO v Manjee Bhawan (Pvt) Ltd and Another 1967 (3) SA 131 (T) 136H.”

The discretion of the court arises out of the use of the word “may” in section 206 of the Companies Act [Chapter 24:03] and the inherent jurisdiction of the court to prevent abuse of its process. See Croc-Ostrich Breeders of Zimbabwe (Pvt) Ltd v Best of Zimbabwe (Pvt) Ltd 1999 (2) ZLR 410 (H)…,.

These two sources, namely, the use of the word “may” and the inherent jurisdiction of the court, provide a judicial discretion, based on all the relevant circumstances of any case, to withhold an order of winding up - even if grounds for it have technically been established. That discretion is, however, very narrow. See Dominion Trading FZ–LLC v Victoria Foods (Pvt) Ltd 2013 (2) ZLR 332 (H)…,.

Counsel for the second and third respondents has not asked me to exercise that narrow discretion and withhold the grant of a final order of liquidation. Instead, he has commenced his onslaught on the application by asserting that the applicant lacks locus standi to bring this application because she is not a member of the company she having withdrawn her capital injection from the first respondent company.

In terms of section 207(1) of the Companies Act [Chapter 24:03]:

“An application to the court for the winding up of a company shall be by petition presented, subject to this section, by the company or by any creditor or creditors, including any contingent or prospective creditor or creditors, contributory or contributories or by all or any of those parties, together or separately, or, in a case falling within subsection (2) of section one hundred and sixty two, by the Minister, accompanied, save in the case of a petition by the Minister, by a certificate of the Master, Assistant Master or a magistrate that due security has been found for payment of all fees and charges necessary for the prosecution of all proceedings until the appointment of a liquidator.

Provided that -

(1) A contributory shall not be entitled to present a petition for winding up a company unless -

(a) The number of members of the company is reduced below two; or

(b) The shares in respect of which he is a contributory, or some of them, were originally allotted to him or have been held by him and registered in his name for at least six months during the eighteen months before the commencement of the winding up or have devolved upon him through the death of a former holder.”

Section 202 of the Companies Act defines a contributory as every person liable to contribute to the assets of a company in the event of its being wound up, and, in terms of section 201 of the Companies Act, every present or past member of the company is liable to contribute to the assets of the company to the extent of his unpaid up shares in the case of a limited liability company.

Clearly, therefore, a shareholder is a contributory or member.

The applicant was allotted 500 shares and issued with a share certificate on 14 January 2014 before the company commenced business in May 2014. At that time, the second respondent was also issued with the same amount of shares, and without paying for them, and the third respondent had none. The applicant was therefore a shareholder and a contributory to the first respondent company.

It is a fact that cannot be wished away because some months down the line merely because it then suited one member an attempt was made to dis-engage her for him to remain with the whole company for himself.

It must be appreciated that the moment the parties elected to conduct their business through the medium of an incorporation they were making the conscious decision to be governed by Company Law and could not, when it suited them, run away from its tentacles in preference to customary law or some other obscure and indeterminable law as would entitle the second respondent to fob off the applicant from the company for no other reason than that he is the one who bought it as a shelf company in 2006. For the applicant to lose her shareholding something had to happen to her 500 shares. She had to alienate them in one way or the other.

The second respondent has argued that the applicant lost her shareholding when she accepted payment of the sum of $1,230= from the company which is the amount she had injected into the business as capital.

It begs the question: What amount was injected by the second and third respondents for them to claim a shareholding in the company?

There has been a studious failure to allude to anything suggesting any capital injection done by that couple although in their myopic view they own the company.

Which then brings me to the issue of the shareholding agreement allegedly signed on 20 December 2012 between husband and wife and their share certificates bearing the date 31 December 2012 which counsel for the applicant has called “an elaborate hoax.”

The respondents cannot rely on those documents without burning their fingers. They have not disputed that at the time of engagement with the applicant, in January 2014, the company only had one issued share which was held by Tevison Makuwe - as so often happens with self-companies. If the company had one issued share in January 2014 it is not possible that the shareholding agreement relied upon could have been signed two years earlier, on 20 December 2012; neither is it possible that the share certificates for 127,500 and 122,000, in favour of the second and third respondents, respectively, could have existed then especially as the applicant was issued with Share Certificate Number Two.

Of course, they claim that they held certificates 1(a) and 1(b) respectively. If one believes that they would believe anything.

Even if I be wrong in drawing that conclusion, I would still find those documents invalid for other reasons.

Counsel for the applicant has drawn my attention to the Annual Return lodged by the company, through none other than the second respondent, on 14 January 2014, which shows that as at that date only one ordinary share had been issued. If indeed the couple held the massive shares they claim to have allotted in December 2012, surely that would have appeared on the return.

The inescapable conclusion is that the shareholding agreement and the share certificates, in favour of the couple, are demonstrably a most recent and extremely shameless fabrication by individuals prepared to pull all the stops in order to divest a benefactor of everything that she has put into the company; a company that has enabled a down and out estate agent, unable to find his radius, to take off the ground.

In any event, in terms of section 136(1) of the Companies Act [Chapter 24:03]:

“Within one month after the passing of any special resolution, a copy of that resolution shall be transmitted to the Registrar who shall, subject to subsection (2) register that resolution and that resolution shall be of no force or effect until it is so registered.”

That provision has been relied upon by the applicant in seeking to nullify the Shareholders Agreement of 20 December 2012 and the share allotment made under it.

One would have expected the second and third respondents to address that issue but counsel for the second and third respondents was unable to respond to that; content to rely on the issue of lack of locus standi only.

What is not disputed can only be taken as admitted.

It is unimaginable that the second and third respondents would have entered into such a shareholding agreement and allotted to each other shares in December 2012 and fail to submit the resolution and/or return to the Registrar recording such allotment. Thereafter, the second respondent commenced trading with the applicant, in the name of the company, after they joined forces in January 2014 all the way until they hit turbulence in October 2014. Only then did the second respondent see the wisdom of lodging the resolution and the returns. He says he has since paid late allotment filing costs - an exercise in futility in my view.

I am satisfied that what the second respondent has done clearly demonstrates that he cannot be trusted at all. He has cunningly tried to elbow the applicant out of the company in the most despicable way. He has dishonestly tried to bring his wife into a company she has no interest in as a way of diluting the interest of the applicant and has exhibited the uncanny readiness to fabricate company documents at will in the pursuit of ill-gotten gain. Nothing can illustrate the pressing need, in the name of equity, to liquidate the company more than what the second respondent has done.

This is a person who, even as this application was pending, and a provisional liquidation order had been issued, did not hesitate to register another company, Bankable Real Estates (Pvt) Ltd, on 23 October 2014 - exactly 10 days after the grant of the provisional liquidation order.

It would be recalled that the first respondent's trading name is Bankable Real Estate.

What the second respondent has done is to appropriate that trading name, register it as an incorporation and then continue trading in that name, on his own, as if nothing has happened. A breach of the duty of utmost good faith between directors, and, indeed, members of a company has never been so crass. Such conduct shows a disdain of all that a provisional liquidation order stands for and a complete disregard of all principles of fairness. To cap it all, the second respondent has continued to contest the winding up proceedings all the way. This development also points to the fact that equity demands that the company be wound up.

In addition, it also goes to the question of costs because by registering another company in the trading name of the company whose liquidation is sought, the second respondent not only displayed a contemptuous regard of the process of the court, but a readiness to circumvent the due process for his personal aggrandizement….,.

In the result, it is ordered that:

1. The provisional order granted by the Honourable Mrs Justice MOYO in this matter, on 13 October 2014, be and is hereby confirmed as a final order save that Antony Morris-Davies is not confirmed as the final liquidator.

2. The final liquidator shall be appointed in terms of the Chamber Application in case number HC3005/2014 or in terms of section 218 as read with section 219 of the Companies Act [Chapter 24:03].

3. The costs shall be borne by the second and third respondents, jointly and severally, the one paying the other to be absolved on a legal practitioner and client scale.

The applicant, an incorporation registered in the United Arab Emirates, has made an approach to this court, on court application, seeking a provisional liquidation order against the respondent, another incorporation, cherishing its domicile in Zimbabwe, on the basis that it is unable to pay its debts and that it is just and equitable that the respondent be wound up.

The application is made in terms of section 207 of the Companies Act [Chapter 24:03] (the Act)….,.

The applicant, which is in the business of selling bulk grain commodities to wholesale customers, entered into written Commodity Supply Agreements with the respondent, which is into the business of purchasing such commodities for resale to the local retail market.

In pursuance thereof, the applicant supplied wheat, maize and rice to the respondent and invoiced the respondent for payment which was due within a period of 60 days from the date of invoice. The total invoiced by the applicant was a sum of US$6,542,048=60. It would appear that the responded made certain payments towards the debt and was credited for such payment as well as for some wheat which was damaged by rain and weight variance thereby reducing the claim of the applicant to US$5,685,841=61.

On 29 February 2012, the parties signed a document with the title “Victoria Food Sign off” which sets out figures of what was allegedly delivered to the respondent, in terms of which they agreed that what was owed by the respondent to the applicant was a sum of US$6,542,048=60. Subsequent to that, a dispute arose as to the exact amount owing, and, despite the agreement signed on 29 February 2012, the respondent disputed the figures presented by the applicant, the quantities allegedly delivered, and the values. It turned out that some of the wheat allegedly delivered was still locked up in the applicant?s silos and had not in fact been delivered. During the process of reconciliation conducted by the parties, the applicant agreed to reduce its claim from the original figure of US$6,542,048=60 to US$5,685,841=61. However, the respondent still disputed that figure.

In terms of the agreements entered into between the parties between February 2010 and August 2011, the standard terms of the Grain and Feed Trade Association's Rules 100 (GAFTA No.100) applied, meaning that all disputes between the parties were to be resolved by arbitration in the United Kingdom. It is probably for that reason that the parties, instead, agreed to refer the dispute to arbitration but not in the United Kingdom. It was referred to the Commercial Arbitration Centre in Harare and retired Justice SMITH had the privilege of being appointed to arbitrate.

Presumably having grown extremely impatient with that process, as the debt remained unpaid, the applicant made an about turn and launched this application in terms of section 206(f) and (g) of the Companies Act [Chapter 24:03], namely, that the respondent is unable to pay its debts and that it is just and equitable that it be wound up.

The applicant insisted that when demand for payment was made the respondent failed to effect payment even as it acknowledged indebtedness and repeatedly undertook to pay. Additionally, the applicant maintained that it has lost confidence in the manner in which the respondent company is run, and, as creditor, it would rather have it wound up, it being just and equitable to do so.

As proof of the respondent's inability to pay, the applicant made reference to various correspondence penned by CFI Holdings Limited, the holding company of which the respondent is a subsidiary, between March 2011 and March 2012 wherein promises to pay were made but none was effected.

I must mention, however, that throughout that correspondence, no specific figure was cited as the amount owing, although the respondent expressed a willingness to settle the debt….,.

The respondent also stated, in the supplementary affidavit of Stephen Paradzai Kuipa, which I have admitted, that it has secured an investor to inject capital in its business. The liability to the applicant having been disclosed to the investor, the debt owed to the applicant will be paid from that investment. Meanwhile, the respondent has paid to the applicant a total sum of $2,165,000,= towards the reduction of the debt.

Counsel for the applicant submitted that the best evidence of solvency is the payment of debts and the respondent, having failed to pay on demand, it is insolvent and should be wound up. In his view, the disputation of the amount owing by the respondent is merely a ruse to buy time. The respondent has not shown that the debt is not due, it has not produced a reconciliation showing what it regards as being due, a clear sign that the respondent wants to leave the issue hanging in order to buy time.

In terms of section 205 of the Companies Act [Chapter 24:03];

“A company shall be deemed to be unable to pay its debts -

(a) If a creditor, by cession or otherwise, to whom the company is indebted in a sum exceeding one hundred United States dollars then due, has served on the company a demand requiring it to pay the sum so due by leaving the demand at its registered office and if the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) If the execution or other process issued, on a judgement, decree or order of any competent court in favour of a creditor, against the company is returned by the Sheriff or Messenger with the endorsement that no assets could be found to satisfy the debt or that the assets were insufficient to do so; or

(c) If it is proved, to the satisfaction of the court, that the company is unable to pay its debts; and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.”

In approaching this case, I am mindful of the fact that in an application for a provisional order for liquidation the applicant is only required to establish a prima facie case. I am also mindful of the fact that even where reliance is placed on section 206(g) of the Companies Act for seeking the relief sought by the applicant, the court has a very wide discretionary power to accede to the application or not. Indeed, even where it has been shown that the company is unable to pay its debts, the court still has a narrow discretion. The point is made by GILLESPIE J in Croc Ostrich Breeders of Zimbabwe (Pvt) Limited v Best of Zimbabwe (Pvt) Limited 1999 (2) ZLR 410 (H)…, that:

“Even were I incorrect in such a finding, I would still not countenance the winding up of the respondent. Mr Girach, for Best of Zimbabwe, urged upon me the discretion inherent in the court to refuse to order liquidation notwithstanding the proven existence of grounds for liquidation. Such discretion is deliberately provided for by the use of the permissive “may? in the enactment providing the grounds of winding up by the court. Even without this, the court would, in the proper case, have the discretion flowing from its inherent jurisdiction to prevent abuse of its process. These two sources, together, provide a judicial discretion, based on all the relevant circumstances of any case, to withhold an order of winding up even if grounds have technically been established. The discretion is regarded as a narrow one. Narrow, in the sense that a creditor is entitled to a winding up exdebito justitiae save in exceptional circumstances. The essence of the discretion is a decision as to whether to withhold relief, objective grounds for the granting of which have been established. The factors to be considered differ depending on the grounds advanced for the granting of which have been established. The factors to be considered differ depending on the grounds advanced for winding up. The discretion is a judicial value judgement to be made on all the relevant factors.”

In making a pronouncement on the ground for winding up set out in section 206(g) of the Companies Act, CHATIKOBO J stated, in Sultan v Fryfern Enterprises (Pvt) Limited & Anor 2000 (1) ZLR 188 (H)…,:

“Section 206(g) of the Act has been said to postulate not facts, but only a broad conclusion of law, justice, and equity as a ground for winding up.

'In its terms and effect (the section) confers upon the court a very wide discretionary power the only limitation originally being that it had to be exercised judicially with due regard to the justice and equity of the competing interests of all concerned.' Per TROLLIP J in Moosa N.O. v Mavjee Bhawan (Pvt) Limited & Anor 1967 (3) SA 131 (T) at 136 H.”

I have been called upon to decide whether the respondent is unable to pay its debts and whether it is just and equitable to order liquidation of the respondent in the circumstances of this matter.

The facts show, clearly, that the respondent owes the applicant substantial sums of money - the exact figure of which remains in dispute. Although the respondent admits to owing some of the money, it has not admitted a specific amount. The respondent has continued to pay to the applicant, and has, since the dispute started, paid a total sum of $2,165,000=. But for the dispute on the figure, it should have been paid within 60 days of the date of invoicing. The question of the exact amount owing has been referred to arbitration, a process which the applicant does not appear keen to follow, it having elected instead, to go for the winding up of the respondent.

When setting out the grounds for winding up by the court, the learned author, R H CHRISTIE, Business Law in Zimbabwe, 2^nd ed, Juta & Company Limited, stated…., of the inability to pay debts:

“The cases make clear that it will not avail the company to show that its assets exceed its liabilities if it is in a state of commercial insolvency, i.e. that it cannot meet its liabilities without liquidating its assets - the liquidation of assets for this purpose being one of the objects of winding up.

But, if the company can show that it has a bona fide and reasonable defence to the petitioning creditor's claim the creditor cannot succeed. Mazongororo Paper Converters (Pvt) Limited v Mazongororo Sales (Pvt) Limited 1987 (1) ZLR 81(S).

Nor can he succeed if, by his own actions, he is causing the company's inability to pay its debts: Goodhope Enterprises (Pvt) Limited v Caps Holdings Limited 1991 (1) ZLR 9 (S).”

Indeed, where, prima facie, it appears that the respondent is indebted to an applicant, in an application for liquidation, the onus is on the respondent to show that such indebtedness is disputed on bona fide and reasonable grounds: Stamboli & Anor v Nyamutambo Transport (Pvt) Limited 1985 (2) ZLR 320 (H); Badernhost v Northern Construction Enterprises (Pty) Limited 1956 (2) SA 346.

In casu, it is clear that the respondent is indebted to the applicant and that it has not paid the debt on demand. Prima facie the applicant would be entitled to an order of winding up.

However, the respondent has shown that the amount being claimed by the applicant is disputed and that such dispute is awaiting arbitration. The respondent has pointed to discrepancies in the applicant's figures, and, indeed, the applicant has also made some small concessions, reducing the amount claimed in the process. In my view, the respondent has discharged the onus resting upon it to show that the indebtedness is disputed on bona fide and reasonable grounds. It would be unsafe to allow the liquidation of the respondent, regard being had to its far reaching consequences, only for the liability to be successfully contested. I would therefore not countenance the winding up of the respondent in the circumstances….,.

More importantly, the respondent has been shown to have assets of substantial value.

While the existence of assets will not necessarily dis-entitle the creditor to a winding up order, it is a factor that I cannot overlook especially in the circumstances of this case where the respondent has shown that not only has it been paying the debt, it having paid in excess of $2 million, but also that it is in the genuine process of recapitalisation. It occurs to me that the insistence of the applicant on a winding up, against this background, is indicative of an abuse of process - the employment of the judicial process for a purpose other than that for which it was intended.

To my mind, the applicant is aware that arbitration, which was agreed by the parties, would not yield positive results and has therefore elected to employ the procedure for winding up in order to enforce payment of a disputed debt. This is unacceptable as it amounts to harassment or oppression of the respondent; Millward v Glaser 1950 (3) SA 547 (W)…,.

In the result, the application is hereby dismissed with costs.

The effect of a liquidation order is to freeze the affairs of the company with a view to preserve its assets. Any disposal of the assets of the company, without the leave of the court, is void (section 213(c) of the Companies Act). When the affairs of the company have been frozen it means that they have been stopped or rendered motionless. The assets of the company are prevented from being used for that time. So when a liquidator is appointed he starts running the affairs of the company.

Section 253 of the Companies Act [Chapter 24:03]…, provides that on liquidation:

“(1) All the powers of the directors shall cease except so far as the liquidator or the creditors of the company sanction their continuance.”