The applicant, under case number
HC310/13, seeks the removal of the first respondent from the office of the provisional
liquidator and other ancillary relief.
The facts and circumstances in the
application for removal of the first respondent from office are identical to
the facts and circumstances of the application for confirmation of the
provisional order interdicting the first respondent from alienating or
disposing of any assets belonging to the second respondent.
CONFIRMATION OF PROVISIONAL ORDER (HC419/13)
I, therefore, propose to deal first
with the application for confirmation of the provisional order granted under
case number HC419/13.
The legal issues addressed in this
matter are, however, interlinked to those issues for consideration under case
number HC310/13….,.
In seeking confirmation of the
provisional order, the applicant has pointed out that the second respondent is
not in final liquidation and is still operating under the Provisional Order for
liquidation granted on the 4th December 2009. The first respondent
is not the liquidator of the second respondent and was never appointed as
such. In consequence, the respondent does not have any authority to
dispose of the second respondent's assets.
It is settled and beyond argument
that a provisional liquidator has no power, in terms of section 221(2)(h) of
the Companies Act [Chapter 24:03] to dispose of the company's assets. See
the case of Nyathi v Tagarira Brothers
SC74-05.
There is no court order which
authorises the first respondent to sell the second respondent's immovable
properties. In the result, the first respondent was, and is, not in a
position to lawfully dispose of any assets of the second respondent. Any
such disposals are null and void and must be set aside.
The applicant avers that the first respondent
has deliberately, and with intent to defeat the present action, attempted to
transfer the immovable property unlawfully sold to the fifth respondent, after
the granting and service of the provisional order upon him.
It is clear that any sale of any
immovable property to the fifth respondent, not sanctioned by the Court and the
Assistant Master of the High Court, is of no consequence and must be set
aside.
In respect of the sixth respondent, the
first respondent was not forthright on providing information regarding the sale
of property belonging to the second respondent.
The first respondent has generally
not dealt with the assets of the second respondent in a legal and transparent
manner. Although he admits having received payment for the properties that
he has unlawfully sold, the proceeds of such sales remain unaccounted for and
misappropriated. To this end, therefore, it is imperative for this
Honourable Court to confirm the Provisional Order so that the first respondent
is compelled to give a full account of his dealings in relation to the second respondent's
assets since the date of his appointment as a provisional liquidator.
APPLICATION FOR REMOVAL OF 1ST RESPONDENT FROM
OFFICE OF PROVISIONAL LIQUIDATOR (CASE NO. HC310/13)
I now turn to deal with the issues
raised under case number HC310/13. In this matter, the applicant seeks the
removal of the first respondent (Victor Muzenda) N.O., from the office of
Provisional Liquidator of the second respondent. The first respondent was
appointed to such office by the third respondent on 17th February
2010 in accordance with the terms of the court order placing the second respondent
under a winding up order granted on 4th December 2009.
In terms of Section 273(1)(b) of the
Companies Act [Chapter 24:03], a liquidator may be removed from office for the
following reasons:-
(a) Misconduct, including failure to
satisfy the lawful demand of the Master or of a Commissioner appointed by the
court.
(b) Failure to perform any duties
imposed on him by the Act.
(c) Any other good cause.”
Notwithstanding the fact that the
provisions refer to the removal of a liquidator from office, it is respectfully
submitted that the same provisions apply in the case of an application for the
removal of a provisional liquidator.
The first respondent has averred
that the courts have always been hesitant to remove liquidators, trustees, and
executors where the winding up process is nearing completion. The first respondent
referred the court to the case of Ma
Afrika Greoplienge Pty v Millman and Powell NNO 1997 (1) SA 547.
The above case is authority for the
proposition that the act of removal of a liquidator is a drastic process which
should only be resorted to where the court is satisfied that a proper case has
been made for the removal of such liquidator. I must hasten to underline
the fact that this general rule should be applied after examining each case on
its own merits. The principle on the cited case takes into account a situation
where the liquidation process is nearing completion and where the liquidator
has already done considerable work in the winding up exercise.
In casu, the situation is entirely different one.
The first respondent has failed to
demonstrate that he has exercised his duties for the benefit of the second respondent
and the shareholders. He has not conducted his activities in a transparent
manner. He has not properly accounted for the assets of the second respondent.
In the four years he has held the position of provisional liquidator he has
sold, or attempted to dispose, assets belonging to the second respondent
without lawful authority. He has failed to properly account for the proceeds
thereof. He has not acted in the best interests of, or for the benefit of,
the second respondent and the shareholders. He has, however, been spirited
in his efforts to remain in the position of provisional liquidator without
showing any interest for the shareholders. It seems evident that the first
respondent is benefitting from his current position and is quite comfortable
for the status quo to be maintained.
In his Heads of Argument, the first respondent
states, in paragraph 5, as follows:-
“Removal from office
The issue
of rendering an account, to surrender of documents, etc, as prayed by the
applicants, only arises after the issue of whether or not to remove 1st
Respondent has been decided.
In fact,
the prayer to render an account may be superflous as it follows naturally if he
is ordered off the position of a liquidator or provisional liquidator.”
This submission by the first respondent
reveals the thinking of the first respondent and what his real intentions in
the matter are. If he is ordered by the court to relinquish his position
as liquidator he will consider himself absolved of any responsibility to render
an account in respect of the second respondent's assets. In the meantime,
however, what is more revealing from the submission is that the first respondent
has not rendered an account. The court is therefore justified in
concluding that the first respondent in either unwilling or unable to account
for his activities since he became provisional liquidator. In this regard,
it is incumbent upon the court to ensure that the first respondent's activities
are placed in check in accordance with the provisions of the Companies
Act. It is clear that the first respondent has not taken the opportunity
to refute the allegations of impropriety, which allegations are of a serious
nature. The first respondent has chosen to studiously stonewall the
allegations in the papers filed of record.
It is trite that one of the most
important functions of a liquidator is to keep creditors and all interested
parties, including shareholders, informed of the proceedings in relation to the
liquidation process so that creditors can monitor the payments and receipts to
ensure that everything is properly done. The first respondent has not
called a single meeting with the creditors and has even defied a directive of
the Assistant Master to hold such a meeting. The creditors have not had a
chance to examine the first respondent's accounts or to know how he is
utilizing the funds that have been received for and on behalf of the second respondent.
In the case of Standard Bank of SA v Master of High Court
2010 (4) SA 405, the court held that liquidators are required to act with the
right motivation in the best interests of the creditors and that, at the very
least, they must have knowledge of the relevant legal principles relating to
their duties and functions. In another South African case, cited in the applicants
Heads of Argument, of Spurling v
Brever 1955 (1) SA 398, the Court held that a liquidator may be removed
from his office “on good cause shown” in accordance with the provisions of the
Companies Act and that this was not an exhaustive definition.
The court has a discretion to remove
a liquidator if there is some unfitness on the part of the person who holds
such office and if it is satisfied, on evidence, that it is desirable to do so
in the interests of all the interested parties in the liquidation. In my
view, the same principles apply to a provisional liquidator.
Having carefully considered all the
facts presented to me in this application, I am satisfied that the first respondent
is not fit to continue as provisional liquidator for these reasons:-
(a) Disposing of the second respondent's
assets without lawful authority.
(b) Disposing of the second respondent's
assets without the consent of the Assistant Master of the High Court.
(c) Failing to convene creditors
meetings from the year 2009 to date, a period in excess of 4 years.
(d) Failure to render a proper
account of the assets of the second respondent.
(e) Failure to account for proceeds
of assets of the second respondent sold without lawful authority.
(f) Failure to perform the duties of
a liquidator in accordance with the provisions of the Act.
(g) Failure to satisfy a lawful
demand by the Assistant Master to convene a creditors meeting and to render an
account.
I hold the firm view, therefore,
that it is in the interests of the second respondent, and the liquidation
process that the first respondent be removed from office forthwith to protect
whatever assets of the second respondent remain….,.
I accordingly make the following
order:-
1. The Provisional Order granted to
the applicant on 27th February 2013, under case number HC419/13, be
and is hereby confirmed save for the 6th Respondent against whom the
provisional order is hereby discharged.
2. The 1st Respondent
shall pay costs of the application on an attorney and client scale.
3. It is hereby declared that the 1st
respondent does not hold the office of liquidator of the 2nd
Respondent and accordingly all actions, all deeds, of whatsoever nature,
performed or undertaken by him while purporting to hold the office of
liquidator be and are hereby declared null and void and of no force or effect.
4. 1st Respondent be and
is hereby removed from the office of Provisional Liquidator of the 2nd
Respondent with effect from the date of this Order.
5. 1st Respondent be and
is hereby ordered to render to the 3rd Respondent full accounts in
respect of all financial activities undertaken by him in respect of the 2nd
respondent with effect from 17th February 2010 to the date of this
order, such accounts to be filed with the 3rd Respondent within ten
(10) days of the service of this Order upon the 1st Respondent.
6. 1st Respondent be and
is hereby ordered to surrender to 3rd Respondent all assets of 2nd
Respondent including movables and immovables, documents, deeds, records,
including financial records, bank accounts, liquidation files, legal documents,
equipment and any other assets, whatsoever nature, in his possession, within
ten (10) days of this order failing which the Deputy Sheriff be and is hereby
authorized to carry out a diligent search and recover all such assets from the
1st Respondent.
7. 3rd Respondent be and is hereby to
appoint Barbra Lunga as Provisional Liquidator of the 2nd Respondent
with powers conferred by Section 221(2)(a) or (g) of the Companies Act [Chapter
24:03].
