On 5 June 2014, I granted an order for the confirmation of
the provisional order granted in this matter on 31 January 2013 and gave brief
reasons. I advised the parties that my written reasons could be availed upon
request by any of the parties. The applicant has asked for those written
reasons.
These are the reasons.
This matter was instituted as a chamber application under a
certificate of urgency on 30 January 2013. On 31 January 2013, a provisional
order was granted in the following terms:
“TERMS OF FINAL
ORDER SOUGHT
That you show cause to this Honourable Court why a final
order should not be made in the following terms –
1. The writ of execution issued by the 7th Respondent under
High Court Case No. HC 8400/11 be and is hereby declared to void.
2. The writ of execution issued by the 7th Respondent under
High Court Case No. HC8400/11 be and is hereby set aside.
3. The first to 6th Respondents shall bear the costs of
suit.
INTERIM RELIEF GRANTED
That pending determination of this matter, the applicant is
granted the following relief:
1. The 7th Respondent be and is hereby ordered to forthwith
suspend the writ of execution issued under High Court Case number HC8400/11.
2. The 8th Respondent be and is hereby ordered to refrain
from proceeding with the implementation of the writ of execution issued under
High Court Case No. HC 8400/11.
3. The first to sixth respondents shall bear the costs of
this application.
SERVICE OF PROVISIONAL
ORDER
This provisional order shall be served on the respondents
by the applicant's legal practitioners or by a person in the employ of the
applicant's legal practitioners or by the Deputy Sheriff.”
The applicant is a company incorporated in terms of the
Companies Act [Chapter 24:03]. The first to sixth respondents are employees of
the applicant. In September 2004, the applicant was placed under reconstruction
by the Minister in terms of the provisions of section 4 of the Reconstruction
of State-Indebted Insolvent Companies Act [Chapter 24:27]. Afaras Mtausi
Gwaradzimba was appointed to be the Administrator to manage the affairs of the
applicant during the period of the reconstruction. The applicant failed to pay
the salaries and benefits of the first to sixth respondents. The dispute
relating to non-payment of salaries and benefits was referred to arbitration in
terms of the provisions of the Labour Act [Chapter 28:01]. On 14 June 2011, the
arbitrator rendered an arbitral award in terms of which he ordered the
applicant to pay to the employees a sum of US$294,591=06. The arbitral award
was registered by this court in terms of section 98(14) of the Labour Act [Chapter
28:01] for the purpose of enforcement. A writ of execution was issued to
enforce the order. In response, the applicant applied for and was granted a
provisional order as referred to above.
The basis of the application was that in terms of the
Reconstruction of State Indebted Insolvent Companies Act (hereinafter referred
to as the 'Reconstruction Act) the writ was invalidly issued.
The first to sixth respondents opposed both the granting of
the provisional order and its confirmation.
The basis of the opposition is that section 6(c) of the
Reconstruction of State-Indebted Insolvent Companies Act [Chapter 24:27]
applied only to creditors who were owed debts before the company concerned was
placed under reconstruction. As the salaries owed to the respondents relate to
the period after the applicant had been placed under reconstruction, so goes
the argument, the right to the protection afforded by section 6(c) of the
Reconstruction of State-Indebted Insolvent Companies Act were not available to
the applicant.
Section 4(1) of the Reconstruction of State Indebted
Insolvent Companies Act [Chapter 24:27] provides the following:
“If it appears to the Minister that, by reason of fraud,
mismanagement or for any other cause –
(a) A State-indebted company is unable or is unlikely to be
able to make any repayment of a credit made to it from public funds on a date
when the repayment is due; or
(b) The State has become or is likely to become liable to
make any payment from public funds in terms of a guarantee issued in favour of
a State-indebted company;
And it further appears to the Minister that –
(c) The State-indebted company has not become or is
prevented from becoming a successful concern; and
(d) There is a reasonable probability that if the company
is placed under reconstruction it will be enabled to pay its debts or meet its
obligations and become a successful concern; and
(e) It would be just and equitable to do so;
the Minister may, after affording the company an adequate
opportunity to make representations in the matter, issue a Reconstruction Order
in relation to the company and publish the order by notice in the Gazette:
Provided that where the Minister considers that immediate
action is necessary to prevent irreparable harm to the company or its
creditors, members or employees, the Minister may take such action before
affording the company an opportunity to make representations in terms of this
subsection.”
The Reconstruction Order, in relation to the applicant, was
published in the Government Gazette of 6 September 2004.
The purpose of a Reconstruction Order has been adequately
explained in this jurisdiction. See African Resources Ltd & Ors v
Gwaradzimba NO & Ors 2011 (1) ZLR 105 (S)…,. Further discussion on that
aspect will not serve any meaningful purpose.
Section 6 of the Reconstruction of State-Indebted Insolvent
Companies Act [Chapter 24:27] provides for the effect of a Reconstruction Order
as follows:
“A Reconstruction Order shall have the following effect,
namely, that –
(a) The Administrator shall assume the control and
management of the company and recover and take possession of all the assets of
the company; and
(b) No action or proceeding shall be proceeded with or
commenced against the company except by leave of the Administrator and subject
to such terms as the Administrator may impose; and
(c) Any attachment or execution put in force against the
assets of the company after the commencement of the reconstruction shall be
void; and
(d) Every disposition of the property, including rights of
action, of the company and every transfer of shares or alteration in the status
of its members, made after the commencement of the reconstruction, shall,
unless the Administrator otherwise orders, be void.”
Paragraph (c) is the provision applicable to the instant
case.
The clear meaning of that provision is that any execution
or attachment of the assets of a company under reconstruction is null and void
ab initio. That provision seals the fate of the writ of execution issued
pursuant to the registered arbitral award.
The writ is invalid.
I should go further and point out that section 6(b) of the
Reconstruction of State Indebted Insolvent Companies Act invalidates even the
arbitration proceedings pursuant to which the award was rendered, as those
proceedings were commenced after the Reconstruction Order had been published
and the applicant was already under reconstruction.
Section 6 of the Reconstruction of State-Indebted Insolvent
Companies Act [Chapter 24:27] applies to creditors whose debts arose when the
company was already under reconstruction as well as those whose debts arose
before the Reconstruction Order was issued. The prohibition of execution is not
a denial of the existence of the debt. It is only a remedy availed to a company
under reconstruction to ensure that its assets are not depleted by execution
thereby frustrating the purpose of reconstruction; which is to enable the
company to become a successful concern in order to prevent loss of public funds
and protect the interests of creditors.
In the circumstances, the writ of execution
issued by the Registrar at the instance of the first to sixth respondents was
invalid, and must to be set aside.
