MATHONSI
JA:
On
15 August 2019, the High Court (the court a
quo)
issued a provisional order for the provisional winding up of the
appellant at the instance of the respondents who are its former
employees. The court a
quo
confirmed
the provisional liquidation order by judgment delivered on 20
November 2019.
This
appeal is against the judgment confirming the liquidation.
BACKGROUND
The
respondents filed a court application for the winding up of the
appellant in terms of s206(f) and (g) of the repealed Companies Act
[Chapter
24:03]
on the basis that it was unable to pay its debts and that it was just
and equitable that the company be wound up.
They
alleged that the appellant had admitted owing them a combined sum of
US480,330.00 in wage arrears as at 9 June 2014. In total, they
alleged that the appellant owed over US$1,3 million in arrear
salaries and wages alone and that its legacy debt in respect of all
its creditors was estimated at US3,670,241.00.
The
respondents stated further that the appellant had cited “operational
challenges,” that the company had closed shop and was
“non-operational” as the reasons for its inability to pay debts.
In that regard, the respondents' case was that the appellant was
commercially insolvent, being unable to discharge debts it
acknowledged as owing.
As
I have said, a provisional liquidation order was granted on 15 August
2019.
When
no opposition was filed, except for what was called “affidavits of
the interested parties” by individuals who stated that they did not
support the liquidation, confirmation of the provisional liquidation
order was sought on an unopposed basis.
DECISION
A
QUO
The
court a
quo
noted that the handwritten affidavits by the interested parties
merely dissociated the individuals in question, some of whom were
also former employees of the appellant, from the application for
winding up. It found that none of the interested parties had tendered
evidence to challenge the basis upon which the winding up of the
appellant was sought.
The
court a
quo
further found that one of the individuals who had submitted an
affidavit of interest was Mathias Ndere, the Finance Manager of the
appellant, who had made an admission that the appellant had failed to
pay its debts.
It
concluded that the admitted failure to pay the respondents what was
due to them is evidence of inability to pay debts and that it was not
up to the appellant to choose how and when it was to pay what was
long overdue.
As
the confirmation of the provisional liquidation order remained
unopposed, the court a
quo
confirmed it.
THE
APPEAL
The
appellant was aggrieved by that turn of events and appealed to this
Court on five grounds. At the hearing of the appeal, Mr Magwaliba
who appeared for the appellant sought to amend ground four, which
amendment was granted. He then abandoned the remaining grounds of
appeal electing to motivate the appeal entirely on the amended ground
four. It reads:
“A
fortiori,
the
court a
quo
grossly misdirected itself in confirming the provisional order on the
basis that it was just and equitable to do so.”
Having
elected to ground the appeal on the basis that the court a
quo
confirmed the liquidation because it was just and equitable to do so,
it becomes apparent that the appellant does not assail the court a
quo's
finding that it was unable to pay its debts.
A
close reading of the judgment of the court a
quo
shows that the final order of liquidation was based on the proven
inability to pay debts as provided for in s206(f). The court a
quo
made reference to that provision of the repealed Act.
SUBMISSIONS
ON APPEAL
At
the commencement of the hearing Mr Magwaliba
made
an application to adduce further evidence on appeal.
An
application had been filed on 22 October 2020 to which was attached
the evidence sought to be adduced. The evidence consists mainly of
schedules and proof of payments made to some of the appellant's
creditors after the judgment of the court a
quo.
According
to the appellant, the evidence would show that, subsequent to the
liquidation, the appellant's shareholder had mobilised resources
and paid off “all the creditors” save for a few whose account
details were not available at the time of payment.
Mr
Stewart
for the respondent did not oppose the application having taken the
view that the evidence sought to be adduced on appeal did not advance
the appellant's case in any way.
The
application to adduce evidence was then granted by consent.
It
was Mr Magwaliba's
submission that the court a
quo
considered the circumstances of the appellant which prevailed at the
time the matter was heard but had no regard to its future
circumstances. What has since transpired is that the inability to pay
debts has morphed into ability to pay. The appellant has paid all the
debts since the liquidation order was granted. As a result, there is
no longer any cause for liquidation. It has no purpose, so it was
argued, and should be set aside.
Per
contra,
Mr Stewart
for the respondents premised his case on two fundamental points.
(i)
Firstly, he submitted that at the time the court a
quo
determined the matter the appellant was hopelessly insolvent. Its
inability to pay debts was admitted and a request had been made on
its behalf for a moratorium of about six months during which time it
hoped to pull itself out of that incongruent financial quagmire.
The
appellant was not trading and is still in that position up to now.
For that reason, so it was argued, the court a
quo
correctly granted the final order of liquidation.
(ii)
Secondly, Mr Stewart
submitted, even the further evidence adduced on appeal clearly
demonstrates that the appellant is still in the same state of
insolvency. The evidence shows that the appellant has not paid all
that it owes to its creditors. Months after the final liquidation
order was made, the schedule of payments shows that part payments
were made to a number of former employees leaving outstanding
balances.
Mr
Stewart
submitted further that the debts were denominated in United States
dollars. What the appellant has done is to take advantage of the
judgment of this Court in Zambezi
Gas Zimbabwe (Private) Limited v N.R Barber (Private) Limited and
Another
SC3/20 which determined the rate of exchange following the
introduction of the Zimbabwe dollar at the rate of one to one to the
United States dollar.
According
to Mr Stewart
the appellant has made part-payments to its creditors in Zimbabwean
currency several months after liquidation and used that to seek to
claw its way out of insolvency. He submitted that there is no legal
basis for setting aside the judgment of the court a
quo
even if regard is had to the evidence adduced on appeal.
ANALYSIS
The
winding up of the appellant was sought on the basis that it was
unable to pay its debts. This is set out at p10 of the founding
affidavit in the following terms:
“This
is an application for the winding up of the respondent company GML
Explosives (Private) Limited based upon the fact that the respondent
is unable to pay its debts when due and critically, the fact that it
has persistently failed to provide proof that:
10.1
It is in a position to pay its debts;
10.1
(sic) It is not preferring one creditor above another”.
It
is common cause that at the time the application for winding up was
made the appellant had failed to pay its employees and that some of
the arrears dated back to 2009.
In
a memorandum written by the appellant's Human Resources Officer on
22 February 2018, it was admitted that “the company is still
experiencing operational challenges,” and further that “the
company is not operational.”
Section
206(f) of the then Companies Act [Chapter
24:03]
gave the court a
quo
a discretion to order the winding up of a company unable to pay its
debts. The discretion arose from the use of the word “may” in
that section.
The
court a
quo
found
that the appellant's failure to pay the respondents what was due to
them “is evidence of its inability to pay the debts”.
In
my view that finding cannot be faulted at all.
In
granting the relief sought, the court a
quo
was engaged in the exercise of judicial discretion. A creditor is
ordinarily entitled to a winding up ex
debito justitiae
where
the grounds for it provided for in the Act have been satisfied. The
court is however said to have a narrow discretion to withhold the
winding up in very exceptional circumstances. See Croc-Ostrich
Breeders of Zimbabwe (Private) Limited v Best of Zimbabwe (Private)
Limited
1999
(2) ZLR 410 (H) at 414 G 415 A.
The
onus
of
proving the existence of exceptional circumstances as would inform
the withholding of a winding up where grounds for it exist lies on
the party opposing it.
In
this case it rested on the appellant.
The
application was not opposed and the affidavits of interested parties
did not raise any exceptional circumstances.
There
was therefore no basis for withholding the winding up where it had
been shown, and indeed admitted, that the appellant was unable to pay
its debts, an ailment which continues to afflict the appellant long
after the court a
quo
rendered judgment.
In
any event, an appeal court will only interfere with judicial
discretion where, first and foremost, it appears in the grounds of
appeal that an improper or incorrect exercise of the court's
discretion is what is put in issue. See African
Century (Private) Limited v Megalink Investments (Private) Limited &
Ors
SC 44/18.
The
often cited case of Barros
and Anor v Chimponda
1999
(1) ZLR 58 (S) AT 62F-63A is authority for the proposition that the
general rule governing an appellate court in an appeal against a
judgment of a lower court granted in the exercise of its judicial
discretion, is that it is not enough that the appellate court
considers that if it had been in the position of the lower court, it
would have adopted a different course.
For
the appellate court to interfere, it must appear that some error has
been made in exercising the discretion:
“If
the primary court acts upon a wrong principle, if it allowed
extraneous or irrelevant matters to guide or affect it, if it
mistakes the facts, if it does not take into account some relevant
consideration, then its determination should be reviewed and the
appellate court may exercise its own discretion in substitution....”
Mr.
Magwaliba's
suggestion that the court a
quo
failed to consider the future ability of the appellant to mobilise
funds to pay its creditors does not even begin to meet the threshold
for interference with judicial discretion set out in the authorities.
For
a start, no evidence was placed before the court a
quo
to show that the appellant would, in future, be able to mobilise
funds. So the court a
quo
was not equipped with material with which to look into the future.
More
importantly, the appellant did not discharge the onus
of
setting out exceptional circumstances that would trigger the exercise
of discretion in favour of withholding a winding up.
As
if that was not enough, even the further evidence adduced on appeal
almost a year after the court a
quo
determined the matter, does not show that the appellant is out of the
woods.
DISPOSITION
There
is no basis upon which this Court may interfere with the judgment of
the court a
quo.
The appeal is demonstrably devoid of merit and ought to be
dismissed.
On
the issue of costs, they normally follow the result. It has not been
suggested that the usual position should be departed from and I see
no reason why that should be resorted to.
Accordingly
it be and is hereby ordered that the appeal is hereby dismissed with
costs.
MAVANGIRA
JA: I
agree
MAKONI
JA: I
agree
Hogwe
Nyengedza Attorneys,
appellant's legal practitioners
Messrs
Matizanadzo & Warhurst,1st
to 34th
respondent's legal practitioners
