The
dispute between the parties first appeared before me as a chamber
application for a default judgment. The application was instituted by
the first respondent who was then the applicant. The application was
against the second respondent and the applicants who were the
defendants in the main case.
The
default judgment was premised on the second respondent not having
entered appearance to defend.
The
application cites the second defendant and the applicants as
respondents though the body of the application specifically states
that “application for default judgment is hereby made against the
first defendant only”. The second respondent is the first defendant
in the main action. The applicants, who are the second and third
defendants in the main action, had entered appearance to defend.
The
default judgment was granted on the following terms:
“The
first defendant is hereby barred, restrained and interdicted from
issuing to either the second defendant or the third defendant or both
the second and third defendants a tobacco auction floor licence
issued in terms of section 44 of the Tobacco Marketing and Levy Act
[Cap
18:12],
in respect of premises known as the Boka Tobacco Auction Floors
situate on the 13 kilometer peg along Simon Mazorodze Road Harare.”
The
applicants have, after initially asking the court to rescind the
default judgment through correspondence,
which was vigorously opposed by the first respondent, now filed a
chamber application, for the rescission of the default judgment in
terms of Rule 449(1)a) of the High Court Rules. It was submitted on
their behalf that the default judgment was erroneously granted in the
absence of interested parties. Rule 449 provides as follows:
“(1)
The court or a judge may, in addition to any other power it or he may
have, mero
motu
or
upon the application of any party affected, correct, rescind, or vary
any judgment or order —
(a)
That was erroneously sought or erroneously granted in the absence of
any party affected thereby; or
(b)
In which there is an ambiguity or a patent error or omission, but
only to the extent of such ambiguity, error or omission; or
(c)
That was granted as the result of a mistake common to the parties.
(2)
The court or a judge shall not make any order correcting, rescinding
or varying a judgment or order unless satisfied that all parties
whose interests may be affected have had notice of the order
proposed.”
Counsel
for
the applicants filed heads of arguments in which he submitted that
the applicants were not given notice of the application for default
judgment, and that the default judgment was therefore granted in the
absence of interested parties. He submitted that the applicants are
interested parties because the order sought and granted directly
affect them.
Counsel
for the respondents filed heads of arguments in which he argued that
there is no rule which obliges an applicant for a default judgment
against a co-defendant who will not have entered appearance to
defend, to serve co-defendants who will have entered appearance to
defend.
The
first issue is, therefore, whether or not, I should have directed
that they be served as the order sought and granted, was intended to
and affects them directly. It effectively takes from them that which
they had entered appearance to defend.
The
second issue is whether or not the default judgment was erroneously
sought and erroneously granted and can be rescinded in terms of Rule
449(1)(a).
The
parties filed heads of arguments for and against the rescission of
the default judgment. I set the case down for counsel for the
applicants and the respondents to present any further arguments in
terms of Rule 246(1)(b) of the High Court Rules. Rule 246(1)(b)
provides as follows:
“(1)
A judge to whom papers are submitted in terms of Rule 244 or 245 may
-
(a)…,.
(b)
Require either party's legal practitioner to appear before him to
present such further argument as the judge may require.”
Rule
246 enables a judge to, where necessary, call legal practitioners for
the parties and ask them to present further argument as the judge may
require.
In
this case, the parties had filed detailed Heads of Arguments, which
did not, however, deal with what I thought was the determining factor
in this case. When the parties appeared before me, on 24 February
2011, I allowed them to amplify their Heads of Arguments, after which
I asked them to address me on the provisions of Rule 4C(a) and (b)
for which I had invoked the provisions of Rule 246(1)(b). Rule 4C
provides as follows:
“The
court or a judge may, in relation to any particular case before it or
him, as the case may be —
(a)
Direct, authorize or condone a departure from any provision of these
rules, including an extension of any period specified therein, where
it or he, as the case may be, is satisfied that the departure is
required in the interests of justice;
(b)
Give such directions as to procedure in respect of any matter not
expressly provided for in these rules as appear to it or him, as the
case may be, to be just and expedient.”
Counsel
for the applicants submitted that Rule 4C authorised a judge to
direct a departure from the rules, and to fill gaps not provided for
in the rules. Counsel for the respondents submitted that the rule
shows that the court is not made for the rules but that the rules are
made for the court. He agreed with counsel for the applicants that
Rule 4C entitles a judge or the court to give directions on procedure
where the rules do not provide for a matter before the court.
The
legal practitioners are agreed on the court's power to direct a
departure from any provision of the High Court Rules, (Rule 4C(a)),
and to fill gaps in the rules where the rules do not provide for the
circumstances of a case before the court (Rule 4C(b)).
I
then reserved judgment and started working on it but was interrupted
by the respondents' counsel's letter dated 7 March 2011, in which
he advised that the proceedings of 24 February 2011 were null and
void as the applicants' companies had been provisionally wound up
by an order granted by JUSTICE MAKONI on 23 February 2011. He relied
on section 213 of the Companies Act [Chapter
24:03],
which provides as follows;
“In
a winding up by the court —
(a)
No action or proceeding shall be proceeded with or commenced against
the company except by leave of the court and subject to such terms as
the court may impose;
(b)
Any attachment or execution put in force against the assets of the
company after the commencement of the winding up shall be void;
(c)
Every disposition of the property, including rights of action of the
company, and every transfer of shares or alteration in the status of
its members, made after the commencement of the winding up, shall,
unless the court otherwise orders, be void.”
I
caused the letter to be brought to the attention of the applicants'
counsel for his comment. He, by letter dated 7 April 2011, commented
that it is only proceedings to be proceeded with or commenced against
the company being wound up which are affected by section 213(a) of
the Companies Act. He submitted that proceedings instituted by the
company are not affected. I caused the applicants' counsel's
letter to be referred to the respondents' counsel for his reply to
the applicants' counsel's comments. By letter dated 20 April 2011
the respondents' counsel referred the court to section 213(c) of
the Companies Act which provides as follows:
“(c)
Every disposition of the property, including rights of action of the
company and every transfer of shares or alteration in the status of
its members, made after the commencement of the winding up, shall,
unless the court otherwise orders, be void.”
The
determination of this application will lead to the disposition of the
liquidated applicants' right of action which enabled it to make
this application.
There
is no doubt in my mind that section 213(a) of the Companies Act deals
with the proceeding with or commencement of actions against the
company. This means actions by the company itself are not covered
under section 213(a) of the Companies Act. I am also satisfied that
section 213(c) of the Companies Act is aimed at preserving the
property and rights of action of the company wound up by the court
unless the court winding up the company orders otherwise. This, in my
view, means proceeding with this case mero
moto
or at the instance of the company which has now been liquidated will
lead to the disposition of its right of action without the leave of
the court or the involvement of the Master or the Provisional
Liquidator who has been appointed. Once a determination is made, on
that right of action, the Master or Liquidator cannot revisit that
right of action as the cause of action will have been finalized by
the court's determination.
Section
213(c) of the Companies Act provides that such action (the extinction
of the right of action) shall be void unless “the court orders
otherwise”. This, in my view, means the proceedings of 24 February
2011 are void as there was no order of the court authorizing them.
This view is supported by section 221(2) of the Companies Act which
provides as follows:
“(2)
The liquidator shall have power, with the leave of the court or with
the authority mentioned in subs (4) or in para (a)
of subs (4) of section two
hundred and eighteen—
(a)
To bring or defend in the name and on behalf of the company any
action or other legal proceeding of a civil nature, and, subject to
any law relating to criminal procedure, any criminal proceeding:
Provided
that immediately upon the appointment of a liquidator or a
provisional liquidator the Master may authorize, upon such terms as
he thinks fit, legal proceedings for the recovery of any outstanding
accounts, the collection of which appears to him to be urgent.”
This
section makes it clear that any action, after liquidation, can be
started or continued by the Master or the liquidator. Section 253 of
the Companies Act also supports this view as it provides that on
liquidation:
“(1)
All the powers of the directors shall cease except so far as the
liquidator or the creditors of the company sanction their
continuance.”
There
is, in this case, no indication that the directors were authorised to
continue with the prosecution of this application.
It
therefore seems to me that the proceedings of 24 February 2011 were
authorized
by persons whose powers to act on behalf of the company had ceased.
In the result, I hold that the proceedings of 24 February 2011 are a
nullity as they were not by the leave of the court or at the instance
of the Master or the liquidator.
The
provisions of section 213(c) of the Companies Act have the effect of
freezing the disposition of the company's assets - including
disposition of the company's rights of action through this
application. The use of the word “every disposition” disables me
from proceeding with these proceedings, mero
moto
or on the applicants' application, as it is every disposition which
is rendered void unless the court orders otherwise.
A
judge hearing a chamber application cannot make the order referred to
in section 213(c) of the Companies Act, as such an order can only be
made by a court as defined in Order 1 Rule 3 of the High Court Rules,
1971. Order 1 Rule 3 defines chamber application, court application,
court and a judge as follows;
“'chamber
application' means an application to a judge in terms of paragraph
(b)
of subrule (1) of Rule 226;
'court'
means the general division of the High Court;
'court
application' means an application to the court in terms of
paragraph (a)
of subrule (1) of Rule 226;
'judge'
means a judge of the court, sitting otherwise than in open court;”
This
means where a statute provides that certain things can be done by a
court, the doing of such things, must be triggered by a court
application to a court. Rule 226(1)(a) and (b) makes a distinction
between court applications and chamber applications and to whom they
are made.
In
the result, the determination of the applicants' application is
held in abeyance until the applicant takes the necessary steps to
enable the court to finalise the application.
