The
applicant is a university duly constituted in terms of section 3 of
the Bindura University of Science Education Act [Chapter 25:22]. Its
objects, as set out in section 4(1) of that Act, are:
“The
advancement of knowledge, the diffusion and extension of arts,
science education and learning, the preservation, dissemination and
enhancement of knowledge that is relevant for the development of the
people of Zimbabwe through teaching and research, and, so far as is
consistent with those objects, the nurturing of the intellectual,
aesthetic, social and moral growth of the students at the
university.”
The
first respondent is a company duly incorporated in accordance with
the laws of Zimbabwe and carries on the business of banking. On 2
April 2014, the applicant, as the plaintiff, was granted a judgment
against the first respondent, which was the defendant, by this court
in Case No.HC2106/14. The order in that case reads as follows:
“IT
IS ORDERED THAT:
1.
Defendant pays to plaintiff the sum of US$473,025=52.
2.
Interest at the prescribed rate of interest.
3.
Costs of suit.
4.
Collection Commission in terms of the Law Society of Zimbabwe
tariff.”
The
respondent sought a stay of execution of the judgment on an urgent
basis. The matter was removed from the roll on the basis that it was
not urgent. An appeal to the Supreme Court against the order removing
the urgent application from the roll was struck off the roll. On 16
September 2014, the applicant caused a writ of execution to be issued
in order to recover the judgment debt. Pursuant to the issuing of
that writ of execution the Sheriff attached goods belonging to the
respondent on 26 September 2014 and arranged for their removal on 1
October 2014. The applicant states that the goods attached were
insufficient to pay the judgment debt. When an attempt was made to
make a further attachment the applicant was then met with the issue
of the Scheme of Arrangement sanctioned by an order of this court.
By letter dated 23 October 2014 the respondent's legal
practitioners notified the applicant's legal practitioners that
there was in existence an order of this court given in Case No.
HC1532/14 which stayed execution of all writs against the respondent.
That order sanctioned a Scheme of Arrangement between the respondent
and its creditors.
On
29 January 2015 the respondent was placed under provisional judicial
management pursuant to an application under Case No. HC219/15. In
terms of the provisional order for judicial management, all actions
and applications and the execution of all writs, summonses and other
processes against the applicant are stayed and may not be proceeded
with without leave of this court.
The
applicant has now instituted the instant application seeking leave to
proceed with the execution of the writ of execution issued on 16
September 2014 notwithstanding the placement of the first respondent
under judicial management.
The
application is opposed by the first respondent.
The
applicant states that the debt owed by the first respondent arose
from an investment deal note which was duly executed by the first
respondent on 9 October 2013. In terms of that deal note the first
respondent acknowledged its obligation to pay a total sum of
US$555,958=33, but only paid a sum of US$82,942=91 leaving an
outstanding amount of US$473,025=52 which is the judgment debt. The
applicant states that there is a Banker/costumer
relationship between it and the first respondent which justifies the
relief being sought given that the first respondent is still
operating the banking business and the money being demanded
constitutes an investment by the applicant. The applicant submitted
that it is in a unique situation when compared with the other
creditors of the first respondent by reason of the fact it has a
judgment in its favour, and, further, that its operations have been
adversely affected by the fact that it cannot access its money. The
applicant also states that the first respondent frustrated execution
of the judgment before a Scheme
of Arrangement
was sanctioned and before its placement under judicial management by
applying for stay of execution and noting an appeal to the Supreme
Court against the order of this court which removed the matter from
the roll of urgent matters on the basis that it was not urgent. The
order sanctioning the Scheme
of Arrangement
and the order for provisional judicial management were obtained in
the High Court at Bulawayo.
The
first respondent, in its opposing affidavit, argues that it is
entitled to the protection granted by the order from execution on the
basis of the provisions of section 301(1) of the Companies Act
[Chapter 24:03]. The first respondent further states that the
applicant is not excused from the consequences of that section merely
because it has a judgment in its favour or that the first respondent
is a Bank. There are many other creditors who have obtained orders
against the first respondent, according to the opposing affidavit,
such that allowing the applicant to proceed with the execution would
amount to preferring the applicant over the other creditors….,.
The
power of the court to grant an order of judicial management is a
creature of statute and the circumstances in which that power is
exercisable are provided for in the Companies Act [Chapter 24:03].
See section 299 and section 300 of the Companies Act; TETT &
CHADWICK, Zimbabwe Company Law 2nd ed….,.
The
effect of a judicial management order is to take away the management
of the company from its directors and place the company under the
management, first of a provisional, and then of a final judicial
manager if the provisional order is confirmed. See TETT &
CHADWICK, Zimbabwe Company Law 2nd ed….,.; PRETORIUS et al, Hahlo's
South African Company Law Through the Cases 6th ed….,.
The
Companies Act provides for the contents of a provisional judicial
management order as follows in section 301(1):
“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;
(b)…,.
(c)…,.
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.”
In
the present case, the return date was 2 April 2015. There is no
information as to what happened on the return date. However, nothing
turns on that fact for the purposes of the instant application. The
order to stay all legal processes, including execution of writs,
without the leave of the court during the time that the company is
under judicial management is one that is within the discretion of the
court, as illustrated by the use of the word “may” in the above
section. Put in other words, the court is not obliged to grant the
directions that while the company is under judicial management all
legal processes against it be stayed and not proceeded with without
the leave of the court.
See
ZFC Ltd v KM Financial Solutions (Pvt) Ltd HH47-15; Samuel Osborn
(SA) Ltd v United Stone Crushing Co (Pty) Ltd 1938 WLD 229; Irvin &
Johnson Ltd v Oelofse Fisheries Ltd 1954 (1) SA 231E…,.
The
Companies Act does not provide for the circumstances in which the
court may permit legal processes to be proceeded with or executed
against the company notwithstanding the existence of the judicial
management order. However, the order, being an order of this court,
is one in respect of which the court has inherent powers to control
the execution thereof whenever real and substantial justice so
demands. See Mupini v Makoni 1993 (1) ZLR 80 (S); Jere v Chitsunge
2003 (1) ZLR 116 (H).
The
discretion reposed in the court, in respect of execution of a writ
against a company which is under judicial management, must, like in
every case where the court has a discretion, be exercised judicially
upon a consideration of the relevant factors and circumstances. Where
the discretion is conferred by statute, it must be exercised in the
light of the objects of the statute concerned. As was held in Millman
NO v Swartland Huis Meubeleerders (Edms) Bpk: Repfin Acceptances Ltd
Intervening 1972 (1) SA 741 (C)….., (per BAKER AJ):
“The
objectives of a judicial management order are to postpone a
liquidation of a company which is in difficulties and to provide a
moratorium for that company for a period long enough…, to enable
that company to meet its obligations and to become a successful
concern.”
In
the case of Pellow NO & Ors v Zondagh & Ors (41/02) [2002]
ZANWHC 24, the court said:
“It
is clear…, that the court has a discretion to grant leave. Such
discretion must be exercised by taking into account, inter alia, the
purpose of judicial management…,. A material consideration is the
effect on the judicial management of the granting of leave…,.“
The
court would not readily accede to a request for leave to execute
against a company under judicial management where such execution
would destroy the company and prejudice all the other creditors. See
Western Bank Ltd v Laurie Fossati Construction (Pty) Ltd 1974 (4) SA
607€…,.
The
court is mindful of the fact that the moratorium against execution
was granted in the light of the evidence which had been placed before
it, and that the effect of granting the relief sought in the present
case would be to give the applicant an advantage over the other
creditors. But, the court must equally be sensitive to the reality
that the interests of the applicant are also relevant and must be
protected, especially as a client which invested money with the
respondent which is a financial institution. As a Bank, the first
respondent must be aware that those who invest money with it expect
to get their money back when it becomes due. The applicant is a
public institution, a State university. The students who pay their
fees expect to get value for their investment, which, as stated by
the applicant, is being severely compromised by the fact that its
funds are locked in the first respondent. The applicant is expected
to attain its statutory objects which have been referred to above.
The respondent has not shown that if execution takes place it will go
into liquidation or will be prevented from recovering. It is not
enough to make unsubstantiated allegations which are not backed by
figures in order to justify denying a party which is owed its money
the right to recover the money owed. It must be remembered that the
applicant is not asking for a loan but is seeking to recover what is
due to it. For the first respondent to merely allege that it is
protected by the order is insufficient as that order clearly provides
that with the leave of the court execution may proceed.
The
first respondent has not taken the court into its confidence by
providing evidence of its exposure to more severe consequences if the
relief being sought herein is granted. It has been under judicial
management for almost two and a half years now. That is a long
period. The purpose of judicial management, as noted above, is to
enable companies suffering a temporary setback due to mismanagement
or other special circumstances, to once more become successful
concerns. Silverman v Doorndoek Mines Ltd 1935 TPD 349; CILLIERS et
al, Corporate Law 3rd ed…,.. Put in other words, the object of that
“special and extraordinary procedure” of judicial management is
to obviate a company's being liquidated where there is a reasonable
probability that, by proper management or by proper conservation of
its assets, it may be able to overcome its challenges and become a
successful concern. See Le Roux Hotel Management (Pty) Ltd & Anor
v E Rand (Pty) Ltd (FBC Fidelity Bank Ltd (Under Curatorship)
Intervening) 2001 (2) SA 727 (C)…,.; VISSER et al, Gibson South
African Mercantile & Company Law 8th ed…,.
No
evidence has been placed before this court to suggest that the
purpose of judicial management would be defeated by allowing the
applicant to execute its writ against the first respondent. The first
respondent cannot seriously suggest that two and half years after it
was granted the moratorium it is not in a position to offer a cent.
It cannot claim that the setback which justified the granting of a
judicial management order was temporary in those circumstances.
Judicial management must not be used as an excuse to frustrate the
just claims of those who have deposited their money with the first
respondent. The first respondent is a banking institution whose
business it is to give people, especially those who have invested,
money.
Given
the above facts, it would not be a judicial exercise of discretion to
expose a university to liquidation in order to protect the interests
of the first respondent. In the circumstances of this case, and in
view of the factors noted above, it seems to me that this is an
appropriate case for the court to suspend the moratorium in relation
to the applicant and permit it to execute its writ against the first
respondent.
In
the result, IT IS ORDERED THAT:
1.
The applicant be and is hereby granted leave to execute the writ
issued pursuant to the judgment of this court in Case No. HC2106/14
against the first respondent.
2.
The first respondent shall pay the costs of this application.
