MAVANGIRA
JA: 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 HC 2106/14 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 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, Mr
Zhuwarara
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,
Mr
Zhuwarara
argued, the court a
quo
erred in placing on the appellant the onus to prove why execution
should not 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, Mr
Chamisa
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, Mr
Chamisa
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 appeal 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 at p83:
“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) at page 63 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 has the materials for so doing.” (emphasis
added)
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)
at
294
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
SC
77-04 where the court said the following at page 10 of the
cyclostyled judgment:
“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 (supra)
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 at 235 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 unrebutted 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)
at
93E-F 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) at 127F:
“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.”
GWAUNZA
JA: I
agree
GUVAVA
JA: I
agree
Maware
& Sibanda,
appellant's legal practitioners
Mutangamira
& Associates,
1st
respondent's legal practitioners
