This
is an appeal against the decision of the High Court granting the
respondent leave to proceed with the execution of a judgment that it
obtained against the appellant Bank which is under judicial
liquidation.
The
appellant, Tetrad Investment Bank Limited (under Liquidation) is a
Bank duly registered under the laws of Zimbabwe. It was placed under
provisional judicial management by an order of the High Court on 29
January 2015. The first respondent, Bindura University of Science
Education, is a university duly established under the Bindura
University of Science Education Act [Chapter
25:22].
The second respondent is the Sheriff of Zimbabwe cited in his
official capacity.
The
appellant and the first respondent were involved in a dispute which
culminated in a judgment under HC2106/14 on 2 April 2014 in favour of
the first respondent, for the payment of the sum of US$473,025=52
together with interest and collection commission. Thereafter, the
appellant filed an urgent chamber application in the High Court for
stay of execution of the said judgment. The application was removed
from the roll on 17 April 2014 on the ground that the matter was not
urgent. The appellant then filed an appeal against the decision of
the High Court. The appeal was struck off the roll by this Court on
30 June 2014.
After
the matter was struck off the roll, the first respondent issued a
writ of execution for the attachment of the appellant's property on
16 September 2014. Whilst the first respondent was attempting to
execute on the appellant's property, the appellant filed an
application for a Scheme
of Arrangement
which stayed all execution. The application was granted on 24
September 2014. The appellant was placed under provisional judicial
management on 29 January 2015. Paragraph 1(f) of the order placing
the appellant under provisional liquidation provides as follows:
“All
actions and applications and the execution of all writs, summons and
other processes against the Applicant shall be stayed and not
proceeded with without leave of this court.”
The
first respondent approached the High Court, on 18 November 2015, with
an application for leave to execute its judgment against the
appellant. In its application, the first respondent submitted that it
was just and equitable that it be granted leave to execute in view of
the fact that it was in a unique position in comparison to other
creditors as it had in its favour a court order which had been
confirmed by the Supreme Court. The amount that was owed to it was
thus a confirmed amount or figure that was no longer open to
contestation. The first respondent further submitted that its
operations were suffering and it was struggling to keep running many
of them as they have been paralysed by lack of funds; which funds are
held up in the appellant Bank. Furthermore, the first respondent
averred that it was just and equitable for the court to grant it
leave to execute as that would not result in the appellant suffering
any irreparable harm.
The
application was opposed by the appellant who submitted that the first
respondent cannot seek leave to execute its judgment for the reason
that the appellant is a Bank. The appellant also disputed that the
first respondent was on the brink of collapse. The appellant further
contended that it would suffer irreparable harm if leave to execute
was granted in favour of the first respondent. It prayed for the
dismissal of the application for leave to execute.
The
court a
quo
found in favour of the first respondent and granted leave to execute.
The court found that it was just and equitable for the first
respondent to execute its judgment against the appellant particularly
when consideration was given to the period that had lapsed since the
placing of the first respondent under judicial management. The court
also found that the granting of leave to execute would not defeat or
frustrate the reason for the placement of the appellant under
judicial management. It also considered that the appellant would not
be going into liquidation.
The
appellant was aggrieved by that decision and it filed this appeal on
the following grounds:
1.
The High Court erred in placing the onus
on the appellant to prove why execution should not have been
undertaken by the first respondent pending the judicial management.
2.
The High Court grossly misdirected itself in granting the first
respondent an advantage over other creditors simply because the
appellant is a Bank and the first respondent an investor which is a
public institution.
3.
The High Court further grossly erred in finding that the operations
of the first respondent were hampered in any way in the absence of
any evidence to that effect from the first respondent.
4.
The High Court further grossly erred in the exercise of its
discretion in finding that the first respondent was entitled to an
order for leave to execute its judgment there being no special
circumstances justifying the grant of such leave.
Although
the Notice
of Appeal
raises four (4) grounds of appeal, these grounds raise only one issue
for determination by this Court. The issue is whether the court a
quo
erred in finding that the first respondent was entitled to execute
its judgment.
During
the hearing of the appeal, counsel for the appellant placed great
reliance on the case of Samuel
Osborn (SA) Ltd v United Stone Crushing Co (Pty) Ltd (Under Judicial
Management)
1938
WLD 229. He submitted that although the court a
quo
exercised its discretion in granting the first respondent leave to
execute its judgment against the appellant, the appellant took issue
with the manner in which such judicial discretion was exercised.
Firstly,
counsel for the appellant argued, the court a
quo
erred in placing on the appellant the onus to prove why execution
should not be
granted. Secondly, he submitted, the court a
quo
erred in finding that the operations of the first respondent would be
hampered if leave to execute was not granted. He
submitted that there was no evidence to show that the operations of
the first respondent would be hampered if leave to execute was not
granted. He also submitted that the order granting leave to execute
should be set aside because it gave the first respondent advantage
over other creditors when no special circumstances justifying such an
order have been proven.
In
response, counsel for the first respondent submitted that the court a
quo
properly
exercised its discretion in granting leave to execute. He submitted
that the court a
quo
considered all the circumstances of the case and properly exercised
its discretion. On the issue of onus,
he submitted that there had been no reversal because at all material
times the
onus
to prove that leave should be granted was upon the first respondent
(who was the applicant in the court a
quo).
As a result, counsel for the first respondent
submitted
nothing had been shown to warrant this Court's interference with
the exercise of discretion by the court a
quo.
He accordingly prayed for the dismissal of the appeal.
From
the submissions made, the parties are ad
idem
on the position of the law to the effect that an application for
leave to execute
entails the exercise of discretion by the court in deciding whether
or not to grant such leave. In Mupini
v Makoni
1993
(1) ZLR 80 (S)
the
court stated…,:
“Execution
is a process of the court, and the court has an inherent power to
control its own process and procedures, subject to such rules as are
in force. In the exercise of a wide discretion, the court may,
therefore, set aside or suspend a writ of execution or, for that
matter, cancel the grant of a provisional stay. It will act where
real and substantial justice so demands. The onus rests on the party
seeking a stay to satisfy the court that special circumstances exist.
The general rule is that a party who has obtained an order against
another is entitled to execute upon it.”
As
noted from the above case, when the court a
quo
was called upon to determine whether the first respondent was
entitled to execute its judgment against the appellant, who is under
judicial management, the court was called to exercise its discretion.
As such, the principles relating to interference with the exercise of
judicial discretion apply in this case. This Court, as an Appellate
Court, should be slow to interfere with the exercise of that
discretional power. See the case of Barros
and Anor v Chimphonda
1999
(1) ZLR 58 (S)…, where the court said that:
“The
attack upon the determination of the learned judge that there were no
special circumstances for preferring the second purchaser above the
first - one which clearly involved the exercise of a judicial
discretion - may only be interfered with on limited grounds. See
Farmers' Co-operative Society (Reg.) v Berry 1912 AD 343 at 350.
These grounds are firmly entrenched. It
is not enough that the Appellate Court considers that if it had been
in the position of the primary court, it would have taken a different
course. It must appear that some error has been made in exercising
the discretion. If the primary court acts upon a wrong principle, if
it allows extraneous or irrelevant matters to guide or affect it, if
it mistakes the facts, if it does not take into account relevant some
consideration, then its determination should be reviewed and the
Appellate Court may exercise its own discretion in substitution,
provided always it
has the materials for so doing.”…,.
On
the basis of this position, which is settled at law, it is clear that
for this Court to interfere with the exercise of judicial discretion
by the court a
quo,
it must be proved that some error was made in the exercise of that
discretion in the manner enunciated in the case authorities. In this
regard, it is necessary to consider whether the court a
quo
grossly misdirected itself in the manner in which it exercised its
judicial discretion, as alleged by the appellant.
It
is not in dispute that where a company is under judicial management,
all processes which defeat the purpose of judicial management should
be avoided. Judicial management is defined, in Feigenbaum
& Anor v Germanis N.O. & Ors
1998
(1) ZLR 286 (H)…,
in
the following terms:
“Judicial
management is an extraordinary procedure made available to a company
by the court in special circumstances and for statutorily prescribed
purposes: Silverman
v Doornhoek Mines Ltd 1935 TPD 349.
The procedure is only adopted when the court is satisfied, on the
facts contained in the application, that there is a reasonable
probability that if placed under judicial management, the company
which is unable to pay its debts will be able to pay its debts in
full, meet its obligations and become a successful concern.”
The
purpose of judicial management was explained in Cellular
(Pvt) Ltd v Post and Telecommunications Corporation
SC77-04
where the court said the following…,:
“The
object of judicial management is to obviate a company being placed in
liquidation if there is some reasonable probability that, by proper
management or by proper conservation of its resources, it may be able
to surmount its difficulties and carry on.”
Thus,
the main goal of a judicial management order is to provide a company
sufficient time to make a financial recovery and so avoid
liquidation. This is why judicial management has also sometimes been
referred to as business rescue; see Energy
Drive System (Pty) Ltd v Tin Can Man (Pty) Ltd & Ors
2017
(3) SA 539 (GP).
The
effect of a judicial management order is that, subject to certain
exceptions, a general moratorium on legal proceedings against the
company comes into effect and the property and interests of the
company are protected. See Diener
N.O. v Minister of Justice & Ors
2018
(2) SA 399 (SCA).
However,
in the case of Energy
Drive System (Pty) Ltd v Tin Can Man (Pty) Ltd & Ors
2017
(3) SA 539 (GP) it was stated that the purpose and context of
business rescue are not aimed at the destruction of the rights of a
secured creditor. This is why the law allows the court, when placing
a company under judicial management, to order that 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. See section 301(1) of the Companies
Act [Chapter
24:03].
Thus, the law allows parties who wish to proceed against a company
under judicial management to approach the court for leave to proceed
against that company.
This
is what the first respondent did in the present case.
Where
a party applies for leave of the court to execute a judgment against
a company under judicial management, the onus of satisfying the court
that it should allow the institution of processes for the execution
of the judgment rests upon the applicant. For the court to exercise
its wide discretion, whether or not to grant leave, the applicant
must have a claim against the company. It is irrelevant whether the
claim arose before or after the company was put under judicial
management. The applicant also has to show to the court that it might
suffer irremediable loss, and that no injustice would be done if
leave to proceed with the action were granted. See Samuel
Osborn (SA) Ltd v United Stone Crushing Co (Pty) Ltd (Under Judicial
Management)
1938
WLD 229…, where the court held that:
“There
is, however, great force in the contention advanced on behalf of the
applicant that it is inequitable that by the refusal of leave, the
applicant should be deprived of the possession and use of the
property, with at least the potential risk of depreciation, for the
benefit of creditors, of whom it is not one when the applicant stands
to gain nothing by the eventual success of the judicial management.”
In
this case, it is alleged that the onus of proving that leave to
execute must be granted was shifted to the appellant.
The
appellant is not correct in this regard.
A
reading of the record and the judgment of the court a
quo
shows that, at all material times, the onus was upon the first
respondent to prove the existence of special circumstances which
justified the granting of leave to execute. The first respondent
alleged that it was suffering and that its operations were being
paralysed because of lack of funds which were being held by the
appellant. The first respondent also contended that if leave to
execute was granted the appellant would not suffer any irreparable
harm.
The
appellant relied on the order placing it under judicial management
and denied that the first respondent would suffer irreparable harm if
leave to execute was not granted.
The
order placing the appellant under judicial management cannot help the
appellant in this case simply because that order noted the need for
the first respondent, and other creditors, to approach the court for
leave to execute their judgment. In addition, the order placing the
appellant under judicial management was granted in 2015 and the court
a
quo
heard the application for leave in 2017 - a period of two years after
the appellant was placed under judicial management. There has been a
change of circumstances, and, therefore, the appellant cannot rely
merely on factors which were considered when it was placed under
judicial management.
As
the first respondent approached the court a
quo
and applied for leave to execute its judgment on the strength of the
allegation that its operations were severely compromised and that the
appellant would not suffer any irreparable harm if leave was granted,
it was for the appellant to have rebutted that allegation.
It
is trite that he who alleges must prove.
In
casu,
the first respondent set out facts that entitled it to the relief
sought. The facts that it alleged in support of its application
having stood un-rebutted by the appellant, were, as provided at law,
taken as accepted. This is clearly articulated in the case of
Chihwayi
Enterprises (Pvt) Ltd v Attish Investments (Pvt) Ltd
2007 (2) ZLR 89 (S)…, where the court said the following;
“It
is pertinent to note that the averments made by Patel in para 23 of
the founding affidavit were not denied by the Hardware in its
opposing affidavit. What that means is that the averments were
admitted by the Hardware.”
As
McNALLY JA said in Fawcett
Security Operations (Pvt) Ltd v Director of Customs and Excise and
Ors
1993 (2) ZLR 121 (S)…,:
“The
simple rule of law is that what is not denied in affidavits must be
taken to be admitted.”
Given
the allegations set out by the first respondent, we find that the
first respondent established a prima
facie
case which was accepted by the court a
quo.
Such allegations ought to have been rebutted by the appellant with
clear evidence. The appellant had a duty to rebut the respondent`s
averments and evidence. It cannot be said that the court a
quo
shifted,
from the first respondent, the onus
of proving that leave to execute was warranted.
Contrary
to the submission made by the appellant that there were no special
circumstances justifying the grant of leave to execute, we find that
the first respondent managed to establish its entitlement to the
relief that it sought. The court a
quo
considered the duration of the judicial management, the effect of the
order granting leave to execute on the stability of the appellant and
the interests of the first respondent and it found that it was just
and equitable for it to grant leave to execute. The court a
quo
assessed
the evidence that was before it and found that the first respondent
was entitled to leave to execute its judgment. That assessment cannot
be regarded as grossly unreasonable and thereby empowering and
enabling this Court to interfere. The court a
quo
applied the correct principles and exercised its discretion
reasonably.
For
these reasons, we find that the appeal is without merit. The settled
grounds for interference with the exercise of judicial discretion
have not been established in this appeal.
Accordingly,
it is ordered as follows:
“The
appeal is dismissed with costs.”
