GOWORA
J:
The
applicants have jointly approached this court for an order in the
following terms:
“That
the confirmation of the liquidation and distribution account by the
third respondent in respect of Shagelok Chemicals (Private) Limited
(in liquidation) be and is hereby set aside.
That
the third respondent be and is hereby directed to re-open the account
referred to above for inspection for a period of 14 days with effect
from the date of judgment in this matter.
It
is hereby declared that the exchange rate to be applied regarding any
conversion of foreign currency on Applicants claim regarding Shagelok
Chemicals (Private) Limited (in liquidation) is the going rate on the
date of payment.
That
the first and second respondents jointly pay the costs of suit on a
legal practitioner client scale.”
The
background to this application is based on the following facts.
On
23 August 2003 the applicants jointly petitioned with this court that
a company called Shagelok Chemicals (Private) Limited be placed under
liquidation. The first respondent was appointed liquidator for the
process of liquidation of Shagelok.
At
a creditors meeting held before the third respondent (the Master) the
applicants proved claims as follows -
(i)
US$1,600,000 for the first applicant; and
(ii)
US$1,944,757.70 for the second applicant.
In
the execution of his duties the first respondent disposed of assets
belonging to Shagelok and from the proceeds paid out the creditors
proven claims.
The
second respondent dispatched cheques in the sums of Z$35,789,794.20
for the first applicant and Z$36,338,172.05.
The
applicants returned the payments on the grounds that the second
respondent had erred by using a conversion rate against the US Dollar
which was prevailing at the time of liquidation instead of the rate
prevailing when payment was actually effected.
To
this end, the applicant were therefore seeking that the court grant
the order to have the distribution account re-opened and for the
recalculation of the Zimbabwe dollar equivalent of their claims.
The
fourth to seventh respondents were concurrent creditors in the
liquidation process. They have not responded to the application. The
Master has not filed any papers in response to the order being
sought.
The
respondents have, in addition to opposing the matter on its merits,
raised preliminary issues which I must dispose of before I delve into
the merits of the application.
(i)
The first issue relates to whether or not the second applicant is
properly before me.
In
the founding affidavit deposed to by one Dumisani Sibanda, a credit
controller in the employ of the first applicant, the second applicant
is described as a division of the World Bank. The deponent, it is
common cause, is not an employee of the second applicant and there
has been no document filed which authorizes the deponent to depose to
an affidavit on behalf of the second applicant.
Attached
to the papers filed by the applicants is a document titled
'Affirmation of Affidavit', signed by one Michael Tiller at
Johannesburg.
He
describes himself as an authorized signatory and in the document he
confirms that Dumisani Sibanda is authorized to depose to an
affidavit on behalf of the second applicant.
There
is no indication in the affirmation as what position the 'authorized
signatory' holds in the second applicant and whether or not he has
the capacity to give authority to Sibanda to represent the applicant.
I
have not been appraised as to the exact nature of the 'affirmation'
which does not pretend to be a resolution by the second applicant.
In
the premises I must uphold the objection of the respondents as to the
capacity of Sibanda to represent the second applicant in these
proceedings and I accordingly find that the second applicant is not
properly before me.
(ii)
The respondents have also raised the question of the citation of the
second respondent as a party and have contended that the first
respondent was appointed as a liquidator in his personal capacity and
therefore should be the only party cited in connection with the
liquidation process. They argue that there is no substantive relief
sought against the second respondent and that accordingly its
inclusion in this suit is irregular if the contention is that the
second respondent was acting as an agent for the first respondent.
It
is not pertinent in my view that I determine this point as nothing
turns on it.
Whether
or not the second respondent has been incorrectly cited, the fact of
the matter is that it is before me and in the event that I grant the
relief sought by the applicants, such relief would only be effective
against the first and third respondents.
In
the event an order for costs would then follow for the benefit of the
second respondent if incorrectly cited.
(iii)
The respondents have questioned the nature of the relief sought by
the applicants and, whether if what is sought is a review, the
applicants have complied with the High Court Rules in so far as time
limits relating to reviews are concerned and the requirements of the
rules in so far as the form of the application is concerned.
The
applicants are of the view that what they seek is not a review but an
order setting aside the confirmation of the liquidation and
distribution account.
The
application is predicated on the manner in which the first respondent
is alleged to have performed his duties as a liquidator of Shagelok
and it is obvious therefore that the applicants can only rely on the
provisions of the Companies Act for whatever relief they seek.
The
effect of placing a company in liquidation is to replace contractual
rights that existed prior to liquidation with special rights created
and governed by the Companies Act [Chapter
24:03]
(the Act). See Central
Africa Building Society v Pierce.1
The
rights of creditors against a company in liquidation are derived from
the provisions of the Act and it follows therefore that the
applicants must look to the (the Act) in seeking redress in the event
that the first respondent has not performed his duties as is required
of him by the Act.
Strangely
the applicants have not referred to any provision in the Act on which
they seek reliance. It has been left to the respondents to point to
the pertinent sections of the Act which would be operable in the
circumstances.
According
to the respondents, the right sought to be exercised by the
applicants is derived from s283 of the Act and further that the
procedure for the exercise of those rights has been prescribed in
terms of the Act. Therefore, contend the respondents, the applicants
should have followed the outlined procedure in seeking to have those
rights enforced by this court.
Critically,
the respondents argue, the applicants ought to have proceeded by way
of a review, which they have not done, and further that it is not
clear what procedure they have adopted in seeking redress.
The
Act, in s296 provides as follows:
"(1)
Any person aggrieved by any decision, ruling order appointment or
taxation of the Master under this Act may bring the same under review
by the court and to that end may apply to the court by motion, after
due notice has been given to the Master and to any person whose
interests are affected: Provided that where the general body of
creditors or contributors is affected notice to the liquidator shall
be notice to them.
(2)....
not applicable
(3)
Nothing in this section shall authorize the court to re-open any duly
confirmed account or plan of distribution or of contribution
otherwise than as provided for in section two hundred and eighty
three."
Apart
from providing for the bringing of a review of the decision of the
Master under the said section, the Act does not make provision for
the manner in which the review proceedings must be launched.
The
High Court, in the exercise of its functions has made provision for
Rules of Court which govern its procedures. It stands to reason
therefore that the proceedings for review have to done in accordance
with those rules as the Act does not provide for the procedure to
bring the decision of the Master for scrutiny under a process of
review.
Accordingly,
the applicants were obliged to comply with Order 33 Rule 259, which
requires that an application for review be brought within a period of
eight weeks from the date on which the suit action or decision being
complained of occurred.
In
casu,
the
Final Liquidation and Distribution account which is the subject
matter of these proceedings was confirmed by the Master on 29
September 2004. The applicants became aware of the decision on 4
October 2004, yet it was not until 18 November 2005 that an
application to have the decision to confirm the account set aside was
launched.
Clearly
the applicants are out of time in so far as the review of the
confirmation of the account is concerned.
They
have not, as one would have assumed, sought condonation for the
failure to abide by the provisions of Order 33 despite an indication
in the opposing papers that the application was out of time in so far
as the Rules were concerned.
I
am inclined to think that in approaching this matter the applicants
and their legal practitioners did not have recourse to the Act
because if they had they would have noted that the correct way of
seeking redress was by filing an application for review. Their
failure to do so can only mean they had not read the Act.
The
re-opening of an account, in terms of the Act, is provided for in
terms of s283. The relevant portions of the section are in following
terms:
"When
an account has been open to inspection as herein-before prescribed
and -
(a)
no objection has been lodged; or
(b)
(not applicable)
(c)
(not applicable)
the
Master shall confirm the account and his confirmation shall have the
effect of a final sentence, save as against such persons as may be
permitted by the court to re-open the account before any dividend has
been paid thereunder."
As
matters stand in this application, all the creditors have been paid
and in fact as pointed out by the respondents, the account was
confirmed some fourteen or so months before the applicants thought of
launching these proceedings.
There
is no doubt that the section precludes the re-opening of a final
distribution account where there has been payment of a dividend. The
court is allowed to open an account where no dividend has been paid.
In
this jurisdiction the question has not yet come up for discussion by
the court. I am therefore indebted to the respondents for providing
the court with an authority from South Africa.
In
Wispeco
v Herrigel NO and Another2,
the court therein had to consider an application for the re-opening
of an account in an insolvent estate. The applicant, one of the
creditors to the estate had submitted an account which had been
accepted. The claim was presented as a preferent claim as it had been
secured by a general covering cession and pledge but when the claim
was submitted to the Master by the trustee it was reflected as a
concurrent one.
A
query was raised with the trustee who gave an explanation to the
Master.
The
account was thereafter advertised for inspection but no objections
were lodged and accordingly the Master confirmed the account.
An
hour after such confirmation it became known to the applicant that
the account had been confirmed and that cheques for dividends had
been prepared and sent out for posting to the creditors.
The
applicant filed an application for a rule nisi
for
the respondents to show cause on the return day why the confirmation
of the account should not be set aside and for the account to be
re-opened.
At
issue in the application was the meaning to be ascribed to s112 of
the Insolvency Act 24 of 1936 of South Africa which provided that
when a trustee account had been open to inspection by creditors and
no objection had been made, or having been made the account was
amended or an objection, once made, had been withdrawn, then the
Master shall confirm such account and that such confirmation shall be
final save as against a person who may have been permitted by the
court before any dividend has been paid under the account, to re-open
it.
The
provision is almost identical to our s283 of the Companies Act.
After
reviewing a number of authorities, the court found that once a
dividend had been paid under an account the court was precluded from
re-opening the account.3
In
so far as the payment of the dividend is concerned, it matters not
whether payment has been made to one or more creditors, once a
payment having been made the court is precluded from opening the
account.
I
have not been able to have sight of Mars -The Law of Insolvency on
which reliance was sought by the respondents in opposing the
application.
I
have had occasion to peruse The Law of Insolvency by Catherine Smith
3rd
Edition.
At p272 of her book, the learned author states that once a dividend
has been paid under an account, the court is precluded from
re-opening the account. The learned author goes further to state:
"The
intention of the legislature was to ensure that once an account has
been confirmed, without objection prior to confirmation, and a
dividend has been paid, the trustee should not be put in a position
subsequently of having to try to recover that dividend from those to
whom he has made distribution as required of him by the Act.
There
must be actual payment of a dividend and such payment has not taken
place where dividend cheques, although posted to creditors were
stopped by the trustee; accordingly a creditor was not precluded from
applying for an order for the re-opening of an account by the mere
posting of cheques by the trustee.
One
cannot ignore the confirmation of the account and the payment of
dividends.
The
extent of the relief which can be granted in terms of s111 is
limited; it grants an aggrieved party the right to contest the
master's decision prior to confirmation of the account and payment of
dividends. After confirmation and payment of dividends the court has
no power to grant the relief envisaged in s111(2)(a) read with s112."
As
I have already indicated above the applicants did not attempt to
invoke the provisions of the Act in seeking redress herein. They have
applied for an order for restitutio
in integrum
on
the basis that there is a just cause for the relief being sought.
Despite
this matter having arisen as a result of the perceived irregularities
in the manner in which the liquidator performed his duties, they have
completely overlooked the provisions of the Act and whether or not
such relief is provided in the Act.
The
authorities that they seek to rely are not, in my view, apposite to
the resolution of this matter.
The
case of Uzande
v Katsende4
concerned an application for rescission of a judgment granted in
default and the court had to consider what constituted just cause for
the granting of the application for rescission.
The
case of RB
Ranchers v Estate Mclean5
is
also of no assistance to the application as the court did not go into
the criteria for the re-opening of an account. The court focused on
the alleged breach of contract, implied terms in the contract and the
payment of cheques under the Bills of Exchange Act [Chapter
277].
In
Barclays
Bank of Zimbabwe Ltd v Sheriff of Zimbabwe & Anor6
the court had to consider an appeal on the issue as to whether it was
permissible for a court, and if so in what circumstances, to set
aside a plan of distribution prepared by the Sheriff subsequent to a
sale in execution, after confirmation by the Sheriff of such account
and implementation thereof in terms of the rules. In considering the
appeal, GUBBAY CJ had recourse to cases on insolvency and
acknowledged that the principles applicable to the confirmation of
distribution accounts in the law of insolvency served as guideline.
In
Central
Africa Building Society v Pierce N.O7
his LORDSHIP, BEADLE CJ stated thus:
"....There
is no doubt that under the provisions of s250 of the Companies Act
[Chapter
223],
the confirmation of a distribution account has the effect of a final
sentence; it has precisely the same effect as a judgment of a court,
and, before another court can go behind such a judgment, an
application must be made to have it set aside."
Before
therefore the distribution account can be set aside it must be
re-opened, and the applicants can only have it re-opened in terms of
the Act.
The
court is precluded, in terms of the Act, from re-opening an account
once a dividend has been paid.
The
purpose of the Act is to provide for a speedy liquidation and
distribution of monies to creditors, which is why the court is in
terms of the Act precluded from re-opening the accounts once there
has been confirmation of such by the Master. Before payment a person
wishing to have an account has to show that his failure to object to
the account was induced by justus
error or
by fraud.
Once
an account has been confirmed by the Master it has the effect of a
final sentence and cannot be re-opened by the court under the
provisions of the Act.
The
question as to whether there could be merit for the re-opening of the
account on the grounds of a restitutio
in intergrum
do
not here arise due to the clear provisions of the Act in prohibiting
the re-opening upon the confirmation of the account and payment of
any dividend.
For
purposes of this matter it is not necessary that I determine whether
or not those grounds would have assisted the applicants, in view of
the finding that the payment of a dividend precludes the court from
re-opening the account.
The
court in fact has no discretion to re-open the account once the
dividend has been paid. The application for the re-opening of the
account is therefore not properly premised.
The
parties have gone into the issue whether or not concursus
creditorum
had
been reached.
Having
determined that the court has no discretion to re-open the account, I
do not see how I can go ahead to determine the question of concursus
creditorum.
That issue would in my view arise if I had found that it was
necessary to re-open the account. A finding that the account cannot
be re-opened is in my view the end of the matter. To go into the
question of concursus
creditorum would
in the circumstances be to embark on an exercise for the sake of the
same.
That
is not in my view necessary in this matter.
The
application was not well taken and is hereby dismissed. The
applicants are ordered to pay the respondents costs.
Sawyer
& Mkushi,
legal practitioners for the applicants
Wintertons,
legal practitioners for 1st
and
2nd
respondents
1.
1969 (1) SA 445 (RAD)
2.
1983
(2) SA 20 (CPD)
3.
At p26E-F
4.
1988 (2) ZLR 47 (H)
5.
1985 (2) ZLR 24
6.
2000 (2) ZLR 143 (S)
7.
1969 (1) SA 445 at 455 H
