This
is an application for an order for the provisional winding up of the
first respondent and for the appointment of a provisional liquidator.
The application is being made on the grounds set out in section
206(f) and (g); that the respondent is unable to pay its debts, and,
further, that it is just and equitable that the respondent company be
wound up.
The
first respondent is a company which was placed under provisional
judicial management by an order of this court granted in Case No.
HC8479/13.
The
application is opposed by the provisional judicial manager of the
first respondent. At the hearing of the application, counsel
for
the applicant applied for this application to be heard together with
Case No. HC8479/13 which is now due for the confirmation or discharge
of the provisional order of judicial management.
The
second respondent objected to the request and insisted on
determination of the point in
limine
taken
in its opposing papers viz. that the application is invalid as it was
instituted without obtaining the leave of this court.
I
therefore heard argument on the question of the validity or otherwise
of the instant application and indicated that my conclusion on that
point would inform the decision on whether or not to direct that this
matter be set down for argument together with Case No. HC8479/13.
The
brief background facts to the dispute between the parties are as
follows:
The
first respondent applied for and was granted an order placing it
under provisional judicial management in Case No. HC8479/13. The
order was granted on 12 March 2014. According to the order, the
return date was 30 July 2014.
The
applicant is one of the creditors of the first respondent.
The
applicant filed opposing papers in Case No. HC8479/13 in which it
contested the placement of the respondent under judicial management.
Case No. HC8479/13 is still pending. On 17 July 2014, the applicant
instituted the instant application for an order for the provisional
winding up of the respondent on the grounds referred to above.
The
Provisional Judicial Manager's contention is that the instant
application is null and void as it was instituted without first
obtaining the leave of this court. Counsel for the second respondent
submitted that the application is invalid for want of compliance with
the provisions of section 301(1) of the Companies Act [Chapter 24:03]
as read with paragraph 1(e) of the provisional judicial management
order given in Case No. HC8479/13.
Section
301(1) of
the Companies Act [Chapter 24:03]
provides as follows:
“A
provisional judicial management order shall contain –
(a)
The date of the return day, which shall not be less than sixty days
from the date of the grant of the provisional judicial management
order; and
(b)
Directions that the company named therein shall be under the
management, subject to the supervision of the court, of a provisional
judicial manager appointed in terms of section three
hundred and two,
and that any other person vested with the management of the company's
affairs shall, from the date of the making of the order, be divested
thereof; and
(c)
Such other directions as to the management of the company, or any
matter incidental thereto, including directions conferring upon the
provisional judicial manager the power, subject to the rights of the
creditors of the company, to raise money in any way without the
authority of shareholders, as the court may consider necessary;
and
may contain directions that while the company is under judicial
management, all actions and proceedings and the execution of all
writs, summonses and other processes against the company be stayed
and be not proceeded with without the leave of the court.”
Paragraph
1(e) of the order granted in HC8479/13 reads:
“All
actions and applications and the execution of all writs, summons
(sic)
and other process against the applicant company shall be stayed and
not proceeded with without the leave of this Honourable Court.”
This
matter turns on whether the provisions of section 301(1) of
the Companies Act [Chapter 24:03],
and the relief granted in the order quoted above, invalidate any
proceedings which are instituted after a company has been placed
under provisional judicial management.
The
first point to be made is that the staying of actions, applications
and execution of writs and summonses, in terms of section 301(1) of
the Companies Act [Chapter 24:03], is not an automatic or inevitable
consequence of an order of provisional judicial management. Rather,
it is relief which the court, in its discretion, may grant.
See
Samuel
Osborn (SA) Ltd v United Stone Crushing Co (Pty) Ltd
1938
WLD 229; Irvin
& Johnson Ltd v Oelofse Fisheries Ltd
1954
(1) SA 231(E)…,.
That
the court has a discretion whether or not to grant that relief is
evident from the use of the word “may” in the section. Put in
other words, the court is not enjoined to grant an order staying
actions, proceedings and execution of writs in all circumstances when
it grants an order for provisional judicial management. Only the
contents set out in paragraphs (a), (b) and (c) of section 301(1) of
the Companies Act [Chapter 24:03] are peremptorily provided for as
required in any provisional judicial management order.
The
consequences which ensue automatically upon the granting of a
provisional judicial management order are those set out in section
301(2) of the Companies Act [Chapter 24:03], namely, that all the
property of the company is, upon the granting of the order, deemed to
be in the custody of the Master, but as soon as the provisional
judicial manager assumes office the property will be in his custody.
Put differently, the effect of a judicial management order is to take
away management and control of a company from the Directors and place
it in the hands of the judicial manager or his nominees.
H.
S. CILLIERS et
al,
Cilliers
& Benade Corporate Law
3rd
Ed….,.;
N. CHADWICK & P. L. VOLPE, Zimbabwe
Company Law
2nd
Ed….,.
The
second aspect is that the use of the words “be stayed and be not
proceeded with” in section 301(1) of
the Companies Act [Chapter 24:03]
means, to me, that the section applies to actions, proceedings,
writs, summonses and other processes already in existence at the time
that the provisional order is granted.
In
the Longman Dictionary of Contemporary English, the word 'stay'
is explained as follows:
“To
stop from going on, moving or having effect; hold back.”
Put
in other words, it is only an action, proceeding, writ etc which is
already in existence which can be stayed. If it is not yet in
existence then there would be nothing to stay. If the legislature had
intended that once an order of provisional judicial management has
been granted the instituting of proceedings against the affected
company should be prohibited then it would have expressed the
provision in the appropriate language. The language used in sections
209 and 213 of
the Companies Act [Chapter 24:03],
which relate to the winding up of a company, illustrates the
distinction between 'staying' of proceedings and prohibition of
commencement of proceedings against a company.
In
section 213(a) of the Companies Act [Chapter 24:03], the words used
are:
“No
action or proceeding shall be proceeded
with or commenced against
the company except by leave of the court….,.”…,.
In
that section, the expression 'proceeded with' would apply to
actions or proceedings already in motion at the time that the winding
up process is instituted, while the term 'commenced' would apply
to actions and proceedings which have not yet been instituted.
In
the light of the above analysis of the meaning of section 301(1) of
the Companies Act [Chapter 24:03], and paragraph 1(e) of the order
given in HC8479/13, the application in
casu
is
not invalid. The application is not defective.
The
point in
limine
taken
on behalf of the second respondent is therefore dismissed….,.
In
view of the conclusion which I have reached, that the instant
application is not invalid by reason of the fact that no leave of
this court was granted before it was instituted, I consider it
appropriate that it be dealt with together with Case No. HC8479/13.
That
course is appropriate to avoid the potentiality of having two
inconsistent orders relating to the same company. Such an undesirable
scenario could arise if the court grants a final order for judicial
management or discharges the provisional order in Case No. HC8479/13
and an order for the provisional winding up of the first respondent
is granted in the instant application. I consider, too, that if the
two matters are heard together, the court will be in a position to
dispose of both of them one way or the other given that in terms of
section 305(1) of
the Companies Act [Chapter 24:03],
on the return day of a provisional judicial management order, the
court has the power to grant a final judicial management order or
discharge the provisional judicial management order or “make any
order that it thinks just.”
The
moratorium granted to the first
respondent to prevent attachment of its goods by creditors is not in
any way prejudiced by having the two matters heard together….,.
In
the result, it is ordered as follows:
1.
Case No. HC8479/13 shall be set down for hearing together with Case
No. HC5984/14.
