MAFUSIRE
J:
No
one stops Government from governing. No one stops Government
functionaries from crafting and implementing government policy. But
in all this, the rule of law must be observed. This is paramount. It
is a tenet the courts will defend to the last judge standing. The
alternative is anarchy. Law and order are indispensable elements of
civilised society. This must sound like a broken record. But unless
the need for it falls away, the principle may continue to be
re-stated. CHIDYAUSIKU CJ, in Minister of Lands & Ors v
Commercial Farmers Union1
put it this way:
“… [T]he
law is supreme over decisions and actions of government and private
persons. There is … one law for all. … [T]he exercise of all
public power must find its ultimate source in a legal rule. ….
[T]he relationship between the State and the subject must be
regulated by law. So must the relationship between subjects in order
to prevent resort to self-help. The rule against self-help is
necessary for the protection of the individual against arbitrary and
subjective decisions and conduct of an adversary …”
[a]
Summary of the dispute
The
proceedings before me were an urgent chamber application for an order
mandament van spolie and an interdict. The crux of the matter was
whether or not certain actions by the first respondent, aided and
abetted by one or other of the officials of the second and third
respondents, and with officers of the sixth respondent being the
executioners, amounted to an illicit dispossession of the fifth
respondent in respect of one of the diamond mining sites at the
Chiadzwa Diamond Concessions [“Chiadzwa”]. Before deciding the
main issue above, there were four points in limine. The first was
whether or not the applicant was peregrinus and therefore one
required by law to furnish security for the costs of the respondents
before the application could proceed. The second was whether
respondents 2 to 4 had soiled themselves and were coming to court
with 'dirty hands', and therefore unfit for the court's
audience. The third was whether the applicant had locus standi in
judicio. The fourth was a variant of the third. It was whether the
application was a derivative action as that expression is understood
in company law. But before the details, the background to the whole
dispute is necessary.
[b]
Background to the dispute
Despite
occasional attempts at splitting hairs whenever some inconvenient
detail stood in the way, it was clear to me that in August 2009 the
government of Zimbabwe [“the government”], through the first
respondent [hereafter referred to as “the Minister”], went into a
commercial marriage with some foreign investors. The marriage was for
the purpose of exploiting diamonds in Chiadzwa for mutual benefit.
The marriage was in the form of a joint venture. The marriage would
be consummated through proxies. For the foreign investors, the
applicant was the proxy [hereafter referred to as “Grandwell”].
For the government, the proxy was the second respondent, a parastatal
or statutory corporation set up in terms of its enabling Act
[hereafter referred to as “the ZMDC”]. In turn, ZMDC was fronted
by the third respondent, its wholly owned subsidiary [hereafter
referred to as “Marange”]. Except for the sixth respondent who
got joined to the proceedings in the middle, respondents 1 to 4 were
effectively a single economic unit for the purposes of this marriage.
During
courtship, all the necessary approvals were incepted, not least
foreign exchange control authority, foreign investment licences and a
Cabinet endorsement. The Cabinet endorsement, addressed to Grandwell
on 10 February 2010, read like this:
“Re:
IMPLEMENTATION OF THE JOINT VENTURE ARRANGEMENT FOR MARANGE DIAMONDS
MINING PROJECTS: MBADA DIAMONDS PVT LTD
This
is to confirm that the Government of Zimbabwe has approved and
therefore fully supports the joint venture project between Grandwell
Holdings Ltd, a company registered in Mauritius and Marange Resources
Pvt Ltd a ZMDC investment vehicle, currently carrying on the business
of diamond mining under the name Mbada Diamonds [Pvt] Ltd.
Appropriate
Government approval was duly obtained both for the identification of
investor and the subsequent joint venture agreement.”
Pre-nuptial
contracts were executed. They included a joint venture agreement
[“the JVA”] and a shareholders' agreement. The parties to these
agreements were Marange, on the one hand, and Grandwell, on the
other. ZMDC ceded for the project some of the Special Grants, the
dispensation under which the diamonds would be mined and exploited.
In the JVA, ZMDC and Marange gave certain undertakings, warranties
and guarantees. Among other things, the marriage was virtually in
perpetuity. Marange would ensure the continued validity of the
Special Grants. On its part, Grandwell would invest US$100 million in
tranches. The day to day management of the operations and the control
of the mine, the recruitment and deployment of staff, the development
of business strategies, and the like, were entrusted to it. Born out
of that marriage was the fifth respondent [hereafter referred to as
“Mbada”]. It was duly incorporated as a private company, owned
50% by Grandwell, and 50% by Marange.
[c]
The facts of the dispute
The
marriage endured for six or seven years. Mbada was happily mining.
But apparently the government was brooding. Apart from its marriage
with Grandwell, it had entered into several others with other foreign
investors. But the government felt its partners were being
unfaithful. It felt it was getting little or no remittances. To
remedy this, it crafted a policy to merge all the diamond mining
companies at Chiadzwa into one single entity. The fourth respondent
was born out of this. It would be the special purpose vehicle for the
new venture. All the disparate companies would take up 50% of the
equity in it. The government reserved the remaining 50% to itself.
Meetings were convened from about March 2015 over this new
initiative. Grandwell was apprehensive. But it said it was not
opposed in principle. It required a blue print and certain other
details. There were some exchanges. But on 22 February 2016 events
took a dramatic turn. Apparently government felt there was little or
no progress towards the consolidation. On that date it wrote to
Mbada advising, among other things, that it had discovered that the
Special Grants had expired, and that, with no title, Mbada had to
cease all mining activities with immediate effect and vacate the
mining site. Mbada was given 90 days to remove all its equipment and
other valuables. Any further access to the mining site would be upon
request. The Minister called a press conference to announce the new
development. On the same day of the letter, Mbada's operations were
forcibly stopped through armed police. Processing plants were shut
down. Mbada's security team was disbanded and expelled from site.
Other employees were forcibly evicted both from the workstations and
from their site residences. Security systems were paralysed. It seems
diamonds are to humans what fluorescent light bulbs are to flying
insects. Despite the perils, they flock to them in droves. Grandwell
said utter chaos ensued in the aftermath of the government's
actions. There was massive looting of both the crushed and uncrushed
diamonds by artisanal miners and other characters that seemed to have
had prior knowledge of the events to unfold. Equipment was
vandalised. Containers were stolen. Personal belongings from private
residences were looted. The loss was said to be phenomenal. It was
said government efforts to incept replacement security was woefully
inadequate. The bleeding continued. On 27 February 2016, Grandwell
ran to the law. It filed this application. After laying out the above
background and complaining about the government's breach of
contract, it sought the following relief:
1.
an order that the respondents 1 to 4, their agents or anyone acting
on their behalf, should vacate the mining site;
2.
an order that Mbada's peaceful and undisturbed possession of the
mining site be restored;
3.
an interdict restraining any further interference with Mbada's
operations at the mine;
4.
an interdict restraining the forcible or inducement or procurement of
a breach of contractual obligations.
I
now turn to deal with all the issues in the order that they arose.
[d]
Points in limine
(i)
Security
for costs, applicant a peregrinus
The
respondents 2 to 4 said Grandwell was a peregrinus. It was a foreign
company registered and operating from Mauritius. As such, it had no
automatic right of audience with our courts. It was obliged to
provide security for their costs. Until it did, the application could
not proceed. In counter, Grandwell and Mbada argued that Grandwell
might have been registered in Mauritius, but that a company was
capable of having more than one place of residence. In casu, by
virtue of the agreements, it was carrying on business at Chiadzwa,
where it was resident. Among other things, it was the manager of the
diamond mine and the one in charge of the day to day operations. In
such circumstances, there was no need for security for costs.
Furthermore, no prior demand for such costs had been made. In any
case, it was capable of furnishing such security in a reasonable
amount, or through a bond by its legal practitioners. I summarily
dismissed the point in limine. Plainly, it was raised in bad faith.
The idea was manifestly to thwart the application before it could
even begin. There had been no prior demand for such costs.
Admittedly, events were unfolding very fast, the application having
been launched on an urgent basis. But for an application that had
been served on a Saturday, and an interim hearing held the next
Monday, only for the issue to be raised for the first time on the
Wednesday to which the matter had been postponed, and without any
prior warning, was an unacceptable ambush. Furthermore, given
Grandwell's financial muscle that was manifest in the body of the
application, there could have been no genuine fear by any of the
respondents that it would be unable to meet any costs of suit that
could be awarded against it. The JV seemed a multimillion dollar
project. Grandwell was the manager and operator. Among other things,
it was due a management fee. The application also showed that
Grandwell had high value equipment on site. But substantively, an
order for security for costs is one entirely in the discretion of the
court. It is a rule of practice, not one of substantive law: see
Saker & Co Ltd v Grainger2.
Admittedly, the discretion has to be exercised judiciously, not
capriciously. Many considerations are taken into account, not least
the particular circumstances of the case, the equities and fairness
of the request, and even the character of the peregrinus itself: see
Magida v Minister of Police3
and SA Iron & Steel Corporation Ltd v Abdulnabi4.
Only when there is reason to believe that a company, whether local or
foreign, may be unable to pay the costs of the defendant or
respondent may the court order security for costs. This is what s 350
of the Companies Act [Cap 24: 03] says. In casu, I did not have such
belief. It was for those reasons that I summarily dismissed the
point in limine.
(ii)
Whether respondents 2 to 4 were coming to court with 'dirty hands'
The
issue of 'dirty hands' arose during the course of the
proceedings. It is now water under the bridge. It is raised herein as
an historical account, and for the purposes of furnishing my reasons
for the view that I took. I concluded that the respondents had indeed
got themselves dirty at some stage after the start of the
proceedings. Thus, until they cleansed themselves, I would not hear
them. The respondents had eventually complied. The urgent chamber
application had been filed on 27 February 2016. That was a Saturday.
Grandwell had made out a very strong case of dire emergency
warranting judicial intervention on an urgent basis. It was said that
each hour that passed worsened the plight of Grandwell, Mbada and its
workers who had been expelled from their homes. I caused the matter
to be set down for hearing on the morning of Monday, 29 February
2016. Come the Monday, the respondents 2 to 4 sought a two day
postponement to enable proper briefing of their legal practitioners.
Grandwell strenuously opposed the postponement unless the respondents
were prepared to concede to some interim measure to safeguard the
property that was continuously under threat at the mine. All parties
appreciated the need for some contingency measure pending the proper
hearing of the matter. However, they could not agree the terms. In
the end, I granted the postponement but directed that pending the
hearing in the following two days, all of Mbada's security
personnel, together with their chain of command, would be allowed
back on the mining site for the purposes of safeguarding assets at
both the work stations and the residences [hereafter referred to as
“the Monday order”]. When the hearing resumed on the Wednesday,
Mr Moyo, supported by Mr Mpofu, charged that there had been complete
defiance of the Monday order. He said upon the order being granted,
the Minister had gone on national television to announce his
disappointment with it and to express his intention to appeal. To Mr
Moyo, all that talk about being disappointed and wanting to appeal
was just euphemism for defiance. Mr Uriri, for the Minister, and Mr
Hashiti, for the respondents 2 to 4, strenuously denied that the
Monday order had been defied. They submitted that Mbada's security
personnel had been allowed back on site but that to get into the more
sensitive zone they had had to undergo some security clearance but
that they had declined to do so. The respondents applied to lead viva
voce evidence on the real situation on the ground before I could be
called upon to condemn them. Despite fierce opposition, I granted the
application. For the respondents, evidence was led from the Minister
and a Mr Mark Mabhudhu [“Mabhudhu”] who was Marange's Chief
Executive Officer. For Grandwell and Mbada, evidence was led from one
Jabulani Mukoko [“Mukoko”], Mbada's Chief Security Officer. The
totality of the evidence was that the Monday order had not been
complied with. The Minister stressed that he was a law-abiding
citizen. It was not in his nature to disobey court orders. On the
Monday order, all he had been shown had been a draft. Nonetheless, he
had telephoned Mabhudhu advising that he understood that an order for
the return of Mbada's security personnel had been issued. He said
he had instructed Mabhudhu to facilitate compliance. On the
television interview, the Minister said he had been called to the
station and had reacted to a question from one of the journalists. He
said he saw no wrong that he had committed as he had merely expressed
his disappointment with the Monday order and his intention to appeal
as it was his democratic right to do. On the issue of security
clearance, the Minister said diamond sites are highly security
sensitive areas. No visitor, no matter who, accesses the red zone
without security clearance.
He
gave the example of himself and a former head of state of a foreign
country when they had visited the mining sites some time before the
events of this case. The entire entourage had had to undergo advance
security clearance. As for Mabhudhu, it was clear that he would not
take orders from any one, including the court, unless and until his
Minister had instructed him to do so. Regarding the Monday order,
Mabhudhu, contrary to the Minister's evidence, said the Minister
had instructed him to wait for the final order to be issued. He was
still waiting. Mukoko's evidence was that he and his security team
had never been asked to undergo any security clearance by anyone but
that the police had simply blocked them access at the entrance to the
red zone. He had got hold of the Monday order the day it had been
issued. He had driven to site the following day. He had passed
through three security check points without any problems. It was on
the fourth and last check point that he and his team had been told by
the police to wait. Consultations had been made on the telephone.
Some police detail had been deployed to come and deal with him. His
name and that of his team had been jotted down. But from about 6:00
hours to about 12:00 hours no one had come back to him. In the end he
and his team had simply left. They had had no food or any ablution
facilities. It was upon the totality of such evidence that I ruled
that there had been non-compliance with the Monday order. I ruled
that the non-compliance had been due to the wilful and/or deliberate
acts of commission or omission by the respondents 1 to 4. I was
satisfied that if the Minister had really wanted, all he would have
done was to instruct whoever mattered that Mbada's security
personnel be allowed back on site. The buck stopped with him. The
police were on site on his account. I was satisfied that the reason
why Mukoko and his team had not been allowed back on site was not
because they had refused to undergo any security clearance. No such
thing had been asked of them. At any rate, the need for such
clearance was manifestly superfluous. Mbada's security personnel
had been riding on the back of a court order. Furthermore, it was
that very team that had provided adequate security at the mine for
all the preceding years until the disruption on 22 February 2016. I
was also satisfied that to Mabhudhu, the court order meant nothing,
unless it was given some badge of authority by his minister. That was
brazenly contemptuous.
Having
been satisfied that the respondents were coming to court with 'dirty
hands', I issued another order on Friday, 4 March 2016. It
confirmed the respondents' default. It then withdrew the
jurisdiction of this court over the respondents' cause until such
time that they had purged their default. The matter was postponed to
Tuesday, 8 March 2016. On that day it would proceed in default of the
respondents unless there was evidence of compliance. This was on the
basis of the 'dirty hands' principle, as enunciated in a number
of cases, the leading one of which, in this jurisdiction, is
Associated Newspapers of Zimbabwe [Private] Limited v The Minister of
State for Information and Publicity in the President's Office &
Ors5.
In that case the Chief Justice said:
“This
Court is a court of law, and as such, cannot connive at or condone
the applicant's open defiance of the law. Citizens are obliged to
obey the law of the land and argue afterwards.” [my emphasis].
However,
on the return day, all parties advised that the Monday order had
since been complied with. The matter then proceeded in earnest.
(iii)
Whether the applicant had locus standi in judicio
The
respondents said it did not lie in the mouth of Grandwell to complain
that it had been despoiled. The argument was that Mbada, and not
Grandwell, had been the one that had been in peaceful and undisturbed
possession of the mine. Grandwell was merely a shareholder in Mbada.
At 50% equity, Mbada could not even be regarded as Grandwell's
subsidiary. So, the argument concluded, only Mbada, and not
Grandwell, was the one with the requisite locus standi in judicio to
move for an order mandament van spolie. Intrinsically linked to the
question of locus standi, was the question of the competency of
Grandwell to bring a derivative action. Although locus standi and the
right to a derivative action are not necessarily cognates, in the
circumstances of this case I found them speaking to the same thing.
Therefore, I deal with both at one go.
(iv)
Whether it was competent for Grandwell to bring a derivative action
In
its founding affidavit, Grandwell said its right to sue, as I
understood it, and in my own words, stemmed from the desire to
protect its investment in Mbada. Such investment had suddenly become
under threat owing to the abrupt actions by government. Grandwell
also said that government's action threatened the very existence of
Mbada as a JV project. To the extent that Mbada could not, of its
own, seek relief by itself, it being a progeny of Grandwell and the
government, it had been open to Grandwell to bring the application in
its name, but for the benefit of Mbada itself. Grandwell argued that
government was the sole cause and sole source of the grief. Mbada's
board was made up of an equal number of appointees from both
shareholders. Under such circumstances, it would have been futile for
Grandwell to have sponsored or motivated a resolution to sue
government. It was argued that a derivative action was available
where not only those controlling the company and bringing harm to it
were in the majority. Even negative control suffices. Mr Moyo
explained negative control as being where, even though not in the
majority, as was the case in this matter, the directors could, by
their negative vote, defeat a resolution. The respondents countered
that it was not correct to say that Mbada had been unable to bring,
or had been disabled from mounting, the application in its own name
and in its own right. They gave two illustrations. The one was a
letter of demand on 23 February 2016 from Werksmans, Mbada's South
African based attorneys. The letter was reacting to the one from the
Minister's Permanent Secretary the day before. After recapping the
events of the previous day and referring to the agreements, and after
demanding the restoration of the status quo ante, Werksmans' letter
concluded:
“Should
you fail to provide us with the written confirmation as hereinbefore
demanded, our Clients will have no alternative but to take whatever
legal steps/action as are available to them in order to protect their
rights against the appropriate parties, which it shall do forthwith
and without any further notice. Such remedies shall include, without
limitation, an urgent court application to secure our Clients'
rights and/or a claim for damages suffered.”
To
the respondents, the letter was sufficient evidence that Mbada had
been conscious of the fact that only it alone could have brought the
application that was now before me. The other illustration by the
respondents was an affidavit by the Chief Executive Officer of Mbada,
one Thomas Lusiyano [“Lusiyano”]. It was filed on the day of the
hearing on the first day. In it, Lusiyano said Mbada supported the
application and the relief sought. He said he had taken instructions
from Mbada's Chairman, to whom he reported. Whilst questioning
Lusiyano's authority to file such an affidavit, the authenticity of
that affidavit and the veracity of certain allegations in it, the
Respondents' major argument was that if Lusiyano could file papers
supporting the application, purportedly on behalf of Mbada, then
there was no reason why Mbada itself could not have brought the
application. As such, the argument concluded, the right to a
derivative action was not available to Grandwell.
A
derivative action is recognised in our law: see L Piras & Son
[Pvt] Ltd v Piras6.
It is one of the exceptions to the general rule of company law that
says that only the company can sue for wrongs done to it. In such a
situation, the company is the proper plaintiff. This principle is
called the rule in Foss v Harbottle7,
after the nineteenth century English case in which it was espoused.
The rule in Foss v Harbottle is of universal application. But there
are exceptions. One such is the derivative action. In its classical
form, this exception says that if a shareholder alleges that a wrong
has been done to the company by persons in control of it, he may
bring a derivative action against the wrongdoers, deriving his
authority from his corporate right to sue on behalf of the company.
The company is also cited as a co-defendant so that it is also
brought before the court. The benefit from the suit flows directly to
the company, not the disgruntled shareholder. He will be content with
getting justice, and, to an extent, the appreciation or preservation
of the value of the shares in the company, including his own. That
there could be exceptions to the proper plaintiff rule was even
recognised by the court in the Foss v Harbottle case itself when one
of the judges, WIGRAM VC8
talked of the unfairness that would ensue if shareholders, just
because of their corporate status, would be deprived of their civil
rights inter se:
“If
a case should arise of injury to a corporation by some of its
members, for which no adequate remedy remained, except that of a suit
by individual corporators in their private characters, and asking in
such character the protection of the rights to which in their
corporate character they were entitled, I cannot but think that the
principle so forcibly laid down by Lord Cottenham…. would apply,
and the claims of justice would be found superior to any difficulties
arising out of technical rules respecting the mode in which
corporations are required to sue.” [my emphasis]
The
exception was subsequently adopted and restated in various ways in
various jurisdictions. In Wallersteiner v Moir [No2]9,
a case quoted with approval by our Supreme Court in L Piras above10;
LORD DENNING MR, with characteristic clarity of expression, said11:
“It
is a fundamental principle of our law that a company is a legal
person, with its own corporate identity, separate and distinct from
the directors or shareholders, and with its own property rights and
interests to which alone it is entitled. If it is defrauded by a
wrongdoer, the company itself is the one person to sue for damage.
Such is the rule in Foss v Habottle. The rule is easy enough to apply
when the company is defrauded by outsiders. The company itself is the
only person who can sue. Likewise, when it is defrauded by insiders
of a minor kind, once again the company is the only person who can
sue. But suppose it is defrauded by insiders who control its affairs
– by directors who hold a majority of the shares – who then can
sue for damages? These directors are themselves the wrongdoers. If a
board meeting is held, they will not authorise proceedings to be
taken by the company against themselves. If a general meeting is
called, they will vote down any suggestion that the company should
sue them themselves. Yet the company is the one person who is
damnified. It is the one person who should sue. In one way or another
some means must be found for the company to sue. Otherwise the law
would fail in its purpose. Injustice would be done without redress.”
[my emphasis]
GOWER's
Principles of Modern Company Law, 4th ed. at p 650, says that English
case law authority, unlike American, establishes that there is no
point in the disgruntled shareholder formally asking the directors to
institute the proceedings where they will end up being the
defendants. Further, it is not necessary to convene a general meeting
and to invite it to resolve upon proceedings in the name of the
company, provided that the court can be satisfied aliunde that the
wrongdoers are in effective control. GOWER also notes that it is not
necessary to prove control [of the company by the wrongdoers], but
merely to allege facts which, if proved, would establish control. The
author however, further notes that the American courts are generally
stricter in that they insist upon proof of an abortive demand having
been made on the directors and, sometimes, a reference to the
shareholders in a general meeting.
In
casu, the position of the American courts, as stated by GOWER above,
seemed to have been Mr Hashiti's point. He submitted that in the
absence of an invitation by Grandwell to Marange for a meeting to
pass a resolution to sue in the name of Mbada; that in the absence
of evidence that such an invitation had been turned down; that
coupled with Werksmans' letter aforesaid, and Lusiyano's
affidavit, it could not be said Mbada had been unable to bring the
urgent chamber application by itself and that therefore the
derivative action was not available to Grandwell.
I
recognise the force of the respondents' argument. But in my view,
the position of the English courts seems to accord more with notions
of justice and the spirit of the derivative action. The law must not
be rendered impotent. In casu, the Minister moved with exceeding
speed. For six or seven years operations at Chiadzwa had gone on
unhindered. But on 22 February 2016, in one fell swoop, things were
turned upside down. Mining was abruptly terminated; Mbada's
personnel were forcibly expelled from site; inadequate security had
exposed the precious diamonds, the expensive equipment, personal
belongings, and more, to destruction and theft. The situation was one
of dire emergency. Werksmans letter of demand on 23 February 2016,
sent by e-mail, had been ignored. There had been no let-up in the
looting, forcing Grandwell, four days later, to run to the law.
Marange itself had already passed a resolution to adopt the
Minister's plans for the consolidation of diamond mining companies,
including Mbada, into one single entity without agreement with
Grandwell, its co-shareholder. This was in spite of the outstanding
details Grandwell had requested on the proposed scheme. Furthermore,
the evidence showed that it was officials from Mbada, as the
Minister's representatives, with the assistance of the police, who
had executed the Minister's directive. In my view, the spirit of
the derivative action, being an exception to the rule in Foss v
Harbottle, is that “… the claims of justice would be found
superior to any difficulties arising out of technical rules
respecting the mode in which corporations are required to sue” [my
emphasis].
In
L Piras, supra, there were only two shareholders. They were also the
sole directors. They had equal control of the company. The one
shareholder started doing sinister things behind the other's back:
like suing the company for a debt that he knew the company did not
owe; like serving the summons on his own wife, at his own residence,
albeit also the company's registered office; and like not only
refraining from entering an appearance to defend on behalf of the
company, but also proceeding to enter judgment against it. When the
other director eventually got to know about it, he applied to be
joined to the suit against the company. The Supreme Court allowed the
application under the derivative action.
I
agree with Mr Moyo. The derivative action is available, not in
situations of fraud to the company only, but also in all situations
in which the company is harmed by those in control. The term fraud
covers more than just the ordinary common law fraud. It also covers
situations of intentional or unintentional, fraudulent or negligent
wrongdoing: see Daniels v Daniels12.
Control
need not be control by the majority shareholders. Negative control,
that is, where a resolution to sue in the name of the company is
defeated by a negative vote cast, should suffice: see East Pant Du
Lead Mining Co v Meryweather13.
In
casu, it would have been futile for Grandwell to have sponsored a
resolution to sue the respondents given the stance Marange had
already taken. At any rate, I was satisfied with events aliunde that
Marange would not have tagged along with Grandwell. Among other
things, it energetically opposed the application. Not only that, but
Mabhudhu consciously and openly defied the Monday order. The
reference to Werksmans' letter and Lusiyano's affidavit was a red
herring. In spite of them, it would still have been futile for
Grandwell to successfully sponsor a resolution to sue the
respondents. Therefore, the respondents' point in limine that the
right to a derivative action was not available to Grandwell is hereby
dismissed. That should put paid to the objection on locus standi. But
there is an additional point. Locus standi refers to the direct and
substantial interest one has in a lis, or suit: see Zimbabwe Teachers
Association & Ors v Minister of Education and Culture14.
In my view, there can be no question that Grandwell had such a direct
and substantial interest in the present matter. Colloquially, it
'owned' half of Mbada. That, by itself is a huge legal interest.
Furthermore, the application before me was for spoliatory relief. By
virtue of the agreements, not only did Grandwell have the right to
the occupation of the mine as the day to day manager of the project,
but also, and as a matter-of-fact, it had been in physical occupation
until the respondents abruptly caused the operations to stop. In the
circumstances, Grandwell had the requisite locus standi in judicio to
bring the derivative action.
[e]
The merits: Whether or not Grandwell is entitled to an order
mandament van spolie and to an interdict.
The
remedy of spoliation, or mandament van spolie, is designed to restore
at once possession that has been deprived unlawfully: see SILBERBERG
AND SCHOEMAN'S The Law of Property, 5th ed., para 13.2.1.2 at p
288. See also Kama Construction [Pvt] Ltd v Cold Comfort Farm
Co-operative & Ors15.
The applicant must show that he was in peaceful and undisturbed
possession of the thing and that he was unlawfully deprived of such
possession: Kama Construction (Pvt) Ltd, supra, and Botha & Anor
v Barrett16.
Spoliation is a quick remedy. Its rationale is to prevent anarchy in
society: see Muller v Muller17.
People must not resort to self-help each time they want to recover
things they feel belong to them and which may be in the possession of
another. In Shoprite Checkers Ltd v Pangbourne Properties Ltd18,
the rationale was expressed this way19:
“All
of this of course is based upon the fundamental principle that no man
is allowed to take the law into his own hands and that no one is
permitted to dispossess another forcibly or wrongfully and against
his consent 'of the possession of property, whether movable or
immovable' and that if he does so 'the Court will summarily
restore the status quo ante and will do that as a preliminary to any
enquiry or investigation into the merits of the dispute.'”
[emphasis added]
In
casu, the respondents argued that the dispensation by which Mbada was
able to be mining the diamonds, to be on the site, and to be enjoying
all the rights that went with the JVA and the shareholders agreement,
had since expired. This dispensation was the Special Grants. They had
not been renewed. Some had expired way back in 2010 and others in
2013. Although a third lot suggested that the period of expiry was
still open, there was nothing of the sort. Despite the agreements
purporting to grant a perpetual right to the diamonds, the Mines and
Minerals Act, Cap 21: 05, gave no such right. Mining rights are
granted, or are required to be granted, for specified periods which
have to be spelt out and incorporated in the Special Grants. In this
case, the respondents submitted, those Special Grants said to be
still open had to be deemed to have been valid for twelve months only
as had been stated in them. Relevant portions of s 291 of the Mines
and Minerals Act say:
“291
Issue of special grants
[1]
The Secretary may issue to any person –
[a]
a special grant to carry out prospecting operations; or
[b]
a special grant to carry out mining operations or any other
operations for mining purposes; upon a defined area situated within
an area which has been reserved against prospecting or pegging under
section thirty-five for a period which shall be specified in such
special grant and on such terms and conditions, including terms and
conditions relating to the amendment or cancellation thereof, as may
be approved by the Minister and shall be incorporated in such grant.”
Both
Mr Uriri and Mr Hashiti argued forcefully that, without the right to
mine, Mbada or Grandwell's continued presence at the site had
become illegal. The Special Grants had expired by reason of their own
failure to renew. That the JVA and the shareholders' agreements
might have provided for certain rights in perpetuity could not
override the provisions of an Act of Parliament which are superior to
any provisions of a private agreement. The Minister is the regulator
of all mining rights. The action that he took was to restore the law.
The respondents' additional argument was that, on the authority of
Kama Construction, supra, Grandwell had moved for the wrong remedy.
Spoliation was unavailable to it. All it could have sued for was
specific performance, coupled with an interdict. In Kama
Construction the applicant had a management agreement with the
respondent cooperative society, to restore its financial viability.
It was the applicant that ran the day to day operations of the
cooperative society. Later on, the cooperative society abruptly
terminated the management agreement. There was a dispute as to
whether or not the keys to the offices, the workshops, the vehicles,
etc. had been forcibly taken away from the possession of the
applicant. In this court, the applicant got a provisional order of
spoliation. However, on the return day, the provisional order was
discharged. On appeal, the Supreme Court confirmed the discharge. It
held that a spoliation order had not been the proper remedy for the
kind of wrong complained of by the applicant/appellant. It should
have sued for specific performance of the management contract,
together with interlocutory relief in the form of an interdict. The
Supreme Court also said that the appellant could have been entitled
to an interdict if it had established possession and unlawful
dispossession. However, the court held that the appellant had not
been in possession of the cooperative society's farmlands but that
it merely had had rights of access as a member of the society.
Mr
Moyo and Mr Mpofu blasted the respondents' attempted reliance on
the expired Special Grants. They argued that, among other things, in
terms of the agreements, the obligation to renew those Special Grants
and to ensure their continued validity had been thrust on Marange,
the government company. That they had not been renewed on expiry was
the government's own fault. As such, the respondents were precluded
from trying to profit from their own wrong. The law says no one
maintains an action from his own wrong: see Riggs v Palmer20. But
the major argument by Messrs Moyo and Mpofu was that the matter
before me was not about the rights and wrongs of the respective
parties. It was not about the validity or otherwise of Mbada's
title to mine. That was a matter for another court on another day.
Spoliatory relief was confined to the restoration of rights of
possession, not ownership. Grandwell had shown that Mbada had been in
peaceful and undisturbed possession of the mining site immediately
prior to 22 February 2016. The respondents had taken the law into
their own hands and had deprived Mbada of such possession. On that
basis Mbada was entitled to relief. On the Kama Construction case,
Messrs Moyo and Mpofu said the case was distinguishable. Among other
things, in casu, the Minister had not been a party to the agreements.
Therefore, Grandwell could not have sought specific performance
against a nonparty. Furthermore, unlike Grandwell, in Kama
Construction the applicant/appellant had not been in possession. In
my view, the respondents' actions were classically an act of
spoliation. The matter before me was not about the right to
possession [ius possidendi]. It was about the right of possession
[ius possessionis] having been lost. The purpose of the mandament van
spolie is to restore at once possession to the possessor where he has
been unlawfully deprived of it.
This
is so, in order to prevent people, governments included, from taking
the law into their own hands: see Mans v Marais21.
The purpose of spoliatory relief is merely to restore the right of
possession, to restore the status quo ante. As ZULMAN J said in
Shoprite Checkers Ltd:
“… the
Court will summarily restore the status quo ante and will do that as
a preliminary to any enquiry or investigation into the merits of the
dispute.”
If
the respondents suddenly discovered that the Special Grants had
expired and wanted to terminate the marriage, they were obliged to
follow the law. They were not entitled to take the law into their own
hands and cause the forcible closure of the mine. At any rate, in
the circumstances of this case, the respondents' actions are
difficult to understand. It seemed true that some of the Special
Grants had indeed expired in 2010 and others in 2013. Yet Mbada had
remained mining. For action only to be taken as late as February 2016
seemed to lend credence to the complaint by Grandwell that the
government was punishing the foreign investors for seemingly dragging
their feet, or refusing to comply, with the consolidation scheme.
Furthermore, the claim in the letter from the Minister's Permanent
Secretary on 22 February 2016, among other things, that it had come
to his attention that the Special Grants in question had since
expired seemed to suggest a sudden discovery of that fact. Yet, as
early as 30 September 2015, ZMDC had written to the Permanent
Secretary himself, expressly pointing out that the Special Grants had
expired, and seeking a further exemption. The government did not move
in to shut down the mine then. The government had had all the time to
act lawfully. So why the rush? Why the sudden emergency? The case of
Kama Construction is distinguishable, not because the Minister was
not a party to the agreements in question as Mr Moyo submitted. I
have already intimated the government was the other party to the
agreements, albeit indirectly. The respondents 1 to 4 formed a single
economic unit. Kama Construction is distinguishable because there the
court found, as a matter of fact, that the applicant/appellant had
not been in possession of the cooperative society's farming units.
Therefore, in my finding, an act of spoliation was committed by the
respondents on Mbada. However, that is not the end of the matter. I
must deal with the nature of the relief sought.
[f]
The nature of the relief sought
The
substance of the relief sought by Grandwell is a return to the status
quo ante so that the operations at the mine may resume as before, and
continue unhindered by the respondents. The order seeks that
respondents 1 to 4, their agents, or anyone acting on their behalf,
or under their instructions or authority, be ordered to vacate the
mining site. In principle, and in my view, such a remedy would be
available under normal circumstances. If one lends one's vehicle to
another, with permission for the borrower to drive it anywhere and
everywhere, but with instructions to return the car on a particular
day, the owner/lender is precluded by law from forcibly recovering
his vehicle if the borrower should fail to return the vehicle by the
given date. If the owner/lender forcibly recovers the vehicle, the
law will brand his action as self-help, i.e. an act of spoliation.
The court will order the owner/lender to restore at once possession
of the vehicle to the borrower until he comes to court for an order
to recover his vehicle. The issue of his ownership of the vehicle or
of his instruction which was disobeyed, will not be determined at
that stage. However, in ordering the restoration of the status quo
ante, it would be, in my view, contrary to public policy were the
court to allow the borrower, or create a situation where the
borrower, can drive the vehicle everywhere and anywhere as before
when, to the court's knowledge, the vehicle's licence and/or
roadworthy permit and/or third party insurance has/have expired,
these being the basis upon which the owner/lender may have lent the
vehicle to the borrower. In the present case, whilst the issue
pertaining to the propriety of the Minister's desire to consolidate
all the mining companies at Chiadzwa into a single conglomerate in
the face of the contractual agreements; the issue whether or not
Mbada's title to mine had expired, and if so, the issue as to whose
fault it was, were not the primary matter before me, nonetheless, it
seems obvious that the relevant Special Grants in question had
expired. With that, Mbada's right to possession [ius possidendi]
had terminated. Efforts to renew the Special Grants in September 2015
failed. In terms of s 291 of the Mines and Minerals Act, a Special
Grant is the authority that grants one the title to the minerals. In
terms of s 2, the dominium in, and the right of searching, mining and
disposing of all minerals is vested in the State President. In casu,
to allow Mbada to resume mining operations as before, when the right
to do so expired, is to sanction an illegality. That, in my view, is
contrary to public policy. In the circumstances, the remedy that
Mbada, or Grandwell, may be entitled to cannot be one that entitles
the enjoyment of the rights accorded by the Special Grants when title
to them has not been regularised.
[g]
Costs
The
issue of costs is normally one for determination on the return date.
It was not argued before me. But an order of spoliation is a final
order. It does not have an interlocutory nature: see Mankowitz v
Loewenthal22 and SILBERBERG AND SCHOEMAN, supra, para 13.2.1.3 at p
292. The two elements of spoliation, namely peaceful and undisturbed
possession, and the act of spoliation, have to be proved on a balance
of probabilities. Thus, Grandwell having proved spoliation on a
balance of probabilities, it is entitled to a final order. Costs
normally follow the event. However, given that in this matter
Grandwell did not seek a final order of spoliation, and given that
the issue of costs was not argued, and given the manner that I have
decided to dispose of the matter, it is only proper that the costs be
in the cause.
[h]
DISPOSITION
(i)
The following final relief is hereby granted:
1.
It is hereby declared that the actions of the respondents on 22
February 2016 amounted to an act of spoliation against the fifth
respondent in respect of its occupation of, and operations at, the
diamond mining site at the Chiadzwa Concession.
2.
However, notwithstanding the declaration in paragraph 1 above, but
subject to paragraph 7 below, the rights normally accorded by the
relevant Special Grants in respect of the Chiadzwa Concession as they
pertain to the fifth respondent, shall not be restored until such
time that the validity of such Special Grants has been regularised in
accordance with the law.
3.
The costs shall be in the cause.
(ii)
The following interim relief is hereby granted:
4.
Once the validity of the Special Grants aforesaid has been
regularised as envisaged in paragraph 2 above, the first, third,
fourth and sixth respondents, their agents, or anyone acting on their
behalf, or under their instructions, shall be interdicted from
interfering with the fifth respondent's lawful operations at the
mine.
5.
The first, second, fourth and sixth respondents are hereby
interdicted from inducing, or forcing, or in any manner procuring, a
breach of the third respondent's contractual relationships with the
applicant and the fifth respondent.
6.
Furthermore, the first and fourth respondents are hereby interdicted
from inducing, or forcing, or in any manner procuring, a breach of
the contractual relationships between the applicant and the fifth
respondent on the one hand, and the second and third respondents on
the other.
7.
For the purposes of safeguarding assets, all of the fifth
respondent's security personnel, with all their chain of command,
shall be entitled, authorised and empowered to remain at the fifth
respondent's mining site at Chiadzwa Diamond Concession, as
directed in paragraph 2 of the order of this court on 29 February
2016, until the resolution of this matter.
16
March 2016
Scanlen
& Holderness, legal practitioners for the applicant;
Civil
Division, Attorney-General's Office, legal practitioners for the
first and sixth respondents;
Sawyer
& Mkushi, legal practitioners for the second, third and fourth
respondents.
1.
2001 [2] ZLR 457 [S], at pp 479 – 480
2.
1937 AD 223, at pp 226 – 227
3.
1987 [1] SA 1 [A] at p 12B – D
4.
1989 [2] SA 224 [T], at p 233C – I
5.
2004 [1] ZLR 538
6.
1993 [2] ZLR 245 [S]
7.
[1843] 2 Hare 461, 67 ER 189
8.
At p 492 -493
9.
[1975] 1 All ER 849 [CA]
10.
At pp 250H – 251A – D
11.
At p 857d – f
12.
[1978] Ch 406
13.
(1864) 2 H & M 254
14.
1990 (2) ZLR 48 (HC)
15.
1999 [2] ZLR 19 [SC]
16.
1996 [2] ZLR 73 [S], at p 79D – F
17.
1915 TPD 29, at p 31
18.
1994 [1] SA 616 [W]
19.
At p 619H, per ZULMAN J
20.
[1899] 115 NY 506, NE 188: “All courts may be controlled in their
operation and effect by general, fundamental maxims of the common
law. No one shall be permitted to profit from his own fraud, or to
take advantage of his own wrong, or to found his own claim upon his
own inequity or to acquire property by his own crime.”
21.
1932 CPD 352 at 356
22.
1982 [3] SA 758, at p 767F - H
