Opposed
Application
TAKUVA
J: The
applicant applied for an order placing the respondent under
provisional liquidation in terms of sections 207, 206(f)(g) ad read
with section 205(c) of the Companies Act [Chapter 24:03].
This
Court, per MAKONESE J on 18 September 2014 issued the following
provisional order:
“1.
The respondent, Aquirium Trading (Pvt) ltd is provisionally wound up,
pending the grant of an order in terms of paragraph 3 or the
discharge of this order.
2.
Subject to subsection (1) of section 274 of the Companies Act
[Chapter 24:02], Mr Knowledge Hofisi of Aurifin Capital (Pvt) Ltd is
appointed as provisional liquidator of the respondent company with
the powers set out in section 221(2)(a) to (g) of the Act.
3.
Any interested party may appear before the court sitting at Bulawayo
on 11th
December, 2014, to show cause why a final order should not be made
placing respondent company in liquidation and ordering that the costs
of these proceedings shall be costs of liquidation.
4.
This order shall be published once in the Zimbabwe Government Gazette
and once in the Herald newspaper. Publication shall be in the short
form annexed to this order.
5.
Any person intending to oppose or support the application on the
return day of this order shall-
(a)
Give due notice to the applicant at care of its legal practitioners,
Messrs G. N. Mlotshwa & Company c/o Majoko and Majoko Legal
Practitioners, 1st
Floor, Triumphant House, 111a Josiah Tongogara Street, between 11th
and 12th
Avenue Bulawayo.
(b)
Serve on the applicant a copy of an affidavit which he files with the
Registrar of the High Court.”
Respondent
filed a notice of opposition on 18 October 2014. It also filed its
heads of argument on 28 November 2014 and its legal representative
appeared in court on 11 December 2014 and opposed the confirmation of
the provisional order.
Initially
Mr Masamvu
applied for a postponement of the matter on the grounds that he was a
correspondent legal practitioner who was not versed with the facts of
the matter. He later withdrew the application adopting the stance
that the matter should proceed and he will stand by the papers filed
of record.
This
concession was proper in my view because the record does not contain
any explanation why the principal legal practitioners did not avail
themselves.
Further,
no heads of argument were filed despite the fact that the provisional
order had the 11th
of December as the return date.
Quite
clearly an application for a postponement was illogical and
prejudicial to the respondent.
Respondent's
opposition is based on a number of grounds. Perhaps it would be
instructive to state the brief background facts before I consider the
respondent's grounds for opposing the matter.
The
respondent company was incorporated in 2004 by one Taleb Mohamad and
Sandra Van Rooyen to among other things pursue mining interests in
the Midlands Province.
Sometime
in 2012, applicant company Tamira Overseas SA sought to invest in
Acquirium Trading (Pvt) Ltd. In pursuant of that quest, various
tentative agreements were entered into subject to the fulfillment of
certain conditions.
On
or about the 28th
of August 2014, applicant filed for respondent's liquidation
alleging that the respondent was heavily indebted to applicant. On 18
September 2014, applicant obtained the order referred to earlier in
this judgment.
Let
me come back to the notice of opposition and the grounds thereof.
They are as follows:
1.
The order for provisional liquidation was improperly prayed for and
granted and must be set aside. The respondent submitted that it was
not served in terms of the rules before this provisional order was
granted.
2.
That Messrs G.N. Mlotshwa and Company Legal Practitioners are
conflicted out in this matter.
3.
That the application has not been properly brought before the court.
4.
That on the facts respondent company should not be placed under
liquidation as there are no proper grounds for the placement of
respondent company under liquidation.
5.
That at the very least respondent should be placed under judicial
management.
In
respect of the first ground, it was submitted on respondent's
behalf that before the provisional order was granted the application
for the provisional order was not served on the respondent at its
registered address. The application was purportedly served on Heena
Joshi who is not a director of respondent. The notice of set down was
not served on anyone.
Further,
there was no affidavit of service filed with the court before the
order was obtained.
Respondent
also contended that the manner in which applicant proceeded under the
circumstances is in breach of section 5(2) of the Companies (Winding
up) Rules, 1972 which provides;
“Except
where the petition is presented by the company itself a copy of the
petition and the notice of set down for hearing shall be served upon
the company by delivering of such copy at its registered office or to
a responsible person at its place of business, failing such service,
to a director or secretary of the company or, if the company is in
voluntary liquidation, to the liquidator. An affidavit of service
shall be filed with the petition.”
Reliance
was placed on the principle set out in African
Gold (Zimbabwe) (Pvt) Ltd
v Modest
(Pvt) Ltd
1999 (2) ZLR 61 (SC) at 63A-B where the court observed as follows:
“A
respondent company must not be deprived of the opportunity to put
forward its opposition to the grant of an order which will have the
effect of causing it to suffer an immediate diminution in personal
status and a removal of control over all its assets. The manifestly
serious consequences flow from the issue of a provisional winding up
order. The provisional liquidator is almost invariably vested by the
court with the wide powers set out in paragraphs (a) to (h) of
section 221(2) of the Companies Act [Chapter 24:03]. See the remarks
of HOFMEYER J in Mackay
v Cahi
1962
(4) SA 193 (O) at 203G-H, which, though referring to sequestration
proceedings, are nonetheless apposite and Walsh
v Kugar
1965
(2) SA 756 (E) at 760B.
A
fortiori,
so it seems to me, the present appellant, being the victim of an
inexcusable breach of procedure, the High Court ought to have
afforded it the opportunity to oppose the application for the
provisional order by the only
means available, namely, by setting aside of the order that had been
improperly obtained.”
(my emphasis)
See
also Reserve
Bank of Zimbabwe
v Trust
Bank Corporation Ltd
HC 1070/13.
For
this reason, respondent prayed for the discharge of the provisional
order with costs without even considering any other issues.
As
pointed out above, applicant did not file any heads of argument
despite having been served with respondent's heads.
Also,
applicant's principal legal practitioners did not attend and no
explanation for their absence was proffered.
Mr
Masamvu
submitted that he was a mere corresponding legal practitioner who was
not versed with the facts of the matter. He indicated that he would
stand by the papers filed of record.
There
is no proof of service of the application for a provisional order in
the record.
Consequently,
the only inference is that it was granted on an ex
parte
basis.
This
is irregular and I would discharge the provisional order for this
reason.
Had
the respondent not prayed for an order that respondent be placed
under judicial management the matter would have ended here.
It
was submitted on behalf of the respondent that one way of protecting
the interests of both parties is to place the respondent under
judicial management.
The
court has a discretion in ordering that a company be placed under
judicial management.
Generally,
where a court has been required to place a company under liquidation
it may, using its discretion or if requested to do so, place the
company under judicial management if it is of the opinion that the
company will be able during the period of judicial management to
recover from the difficulties and that it has reasonable opportunity
to do so.
In
Lief
N.O.
v Western
Credit (Africa) (Pvt) Ltd
1966 (3) SA 344 and 348, SUYMAN J stated the following:
“A
winding up order, in its nature is intended to bring about the
dissolution of the company whereas the purpose of a judicial
management order is to save the company from dissolution.
An
important feature of a winding up order is that upon such an order
being granted there is a concursus
creditorium.
A
judicial management order on the other hand usually provides for a
moratorium in respect of the company's debts in the hope that it
will lead ultimately to the payment of all its creditors and the
resumption by it of normal trading.
Furthermore,
it is true that for judicial management orders provision is made in
the section of the order in which payments to creditors are to be
effected, and that preference is given to older creditors over later
ones. But this is the result of equitable consideration because of
the moratorium.
It
is clear from all authority that it is not a form of concursus
creditorium
as in winding up orders.
A
winding up order is usually granted where a company is in fact
insolvent, whereas judicial management order is granted where a
solvent company has run into financial difficulties because of
mismanagement and because there is hope that with better management
it will overcome its difficulties.”(my emphasis)
Section
299 of the Companies Act [Chapter 24:03] stipulates circumstances in
which provisional judicial management order may be obtained. It
states:
“(1)
Subject to section three hundred, the court may –
(a)…
(b)
On an application being made to it for the winding up of the company,
grant a provisional judicial management order.”
Section
300 of the same Act sets out the requirements for provisional
judicial management order. It states:
“(1)
The court may grant a provisional judicial management order in
respect of a company –
(a)…;
or
(b)
on an application referred to in paragraph (b) of subsection (1) of
section two hundred and ninety-nine, if it appears to the court that
–
(i)
if the company is placed under judicial management the grounds for
its winding up may be removed and that it will become a successful
concern; and
(ii)
that it would be just and equitable to do so.”
In
casu,
the respondent's submissions show that there are no good and
sufficient reasons for the court to grant a winding up order.
From
a reading of the founding affidavit, it is not clear on which ground
the applicant seeks to rely. Also, the grounds are raised without
substantiation.
What
comes up from the deponent of the founding affidavit is that
applicant advanced money which was invested in the respondent.
However, it was not disputed that respondent's mineral deposits are
enormous. Further, it has also not been disputed that investors are
on hand to chip in and put funds for the continued operations of the
respondent.
Quite
clearly applicant wants its money repaid and for that reason, it
would not be in its interests that the respondent wound up.
In
my view, one way of protecting the interests of all parties is to
allow respondent to continue operating under judicial management.
Accordingly,
it is ordered that:
1.
The provisional order placing respondent under provisional
liquidation granted by this honourable court on 24th
of September 2014 be and is hereby discharged.
2.
The respondent company Aquirium Trading (Pvt) Ltd be and is hereby
placed under provisional judicial management.
3.
The Master of the High Court, Bulawayo be and is hereby directed to
appoint a provisional judicial manager within ten (10) days of the
service of this order upon him.
4.
The provisional liquidator Mr Knowledge Hofisi of Aurifin Capital
(Pvt) Ltd be and is hereby discharged from being the respondent's
provisional liquidator.
5.
The applicant is to pay the costs of Taleb Mohamad and Sandra Van
Rooyen on an ordinary scale.
G.N.Mlotshwa
& Company c/o Majoko & Majoko,
applicant's legal practitioners
Mbidzo,
Muchadehama & Makoni,
respondent's legal practitioners
