CHAMBER
APPLICATION
BHUNU
JA:
Primer
[1] This
is an application for condonation of late noting of appeal and
extension of time within which to note the appeal in terms of Rule 43
of the Supreme Court Rules 2018. The application is opposed.
[2] The
matter was argued on 24 November 2020. At the conclusion of argument
the parties were granted the opportunity to canvas the possibility of
an amicable settlement. The matter was then postponed sine
die
pending settlement failure of which the court would proceed to
determine the application.
[3] The
parties did not however come back to the court within a reasonable
time to advise it of the outcome of their negotiations. Prompted by
the inordinate delay, on 1 June 2021 I asked the Registrar to write
to the parties enquiring about the outcome of the envisaged
settlement. The enquiry elicit no response. Having received no
response, I directed that the matter be set down for 11 October 2021.
At that hearing the parties again agreed to a further two weeks
postponement to canvas settlement. The matter was then postponed to
18 October 2021 by consent of the parties.
[4] At
the resumed hearing on 18 October 2021, the applicant was in default.
Counsel for the respondent however advised that the parties had
failed to settle their dispute thereby paving the way for me to
determine the application. I now proceed to determine the application
on the merits.
FACTUAL
BACKGROUND
[5] The
applicant is a trust duly registered in terms of the laws of Zimbabwe
whereas the respondent (the company) is a duly registered juristic
person in accordance with the laws of Zimbabwe.
[6] It
is common cause that the applicant owns 50 per cent shares in the
respondent. On 19 February 2019 the applicant made an application in
the High Court (the court a
quo)
for the liquidation of the respondent company. It sought liquidation
of the company on the basis that the directors had irretrievable
differences as they were deadlocked on the management of the company.
[7]
The respondent opposed the application raising a counterclaim
coupled with a point in
limine
in the process. It is convenient to deal with the point in
limine
first before delving into the merits of the application.
THE
POINT IN LIMINE
[8] The
point in
limine
raised by the company is procedural in nature. Counsel for the
company submitted that the application before the court a
quo
was
fatally defective for failure to comply with the mandatory provisions
of section 5(4)(a) and (b) of the Insolvency Act [Chapter
6:07].
The court a quo upheld the point in
limine
hence the appeal.
[9] The
section provides as follows:
“5.
Application by debtor for the liquidation of a trust, company,
private business, corporation, co-operative or other debtor other
than a natural person or partnership
(1)…
(b)
By the company, or one or more directors or by one or more members
for an order to wind up the company on the grounds that –
(i)
The directors are deadlocked in the management of the company, and
the members are unable to break the deadlock; and
A. irreparable
harm is resulting or may result from the deadlock; or
B. the
company business cannot be conducted to the advantage of members
generally, as a result of the deadlock: or
(ii) the
members are deadlocked in voting power, and have failed for a period
that includes at least two financial years to elect successors to
directors whose terms have expired; or
(iii) it
is just and equitable for the company to be liquidated.
…
(4) Every
application to the court referred to in subsection (1) except an
application by the registrar of companies in terms of subsection 1(e)
and the Master in terms of paragraph (h) of that subsection must
be accompanied by - (My emphasis)
(a) a
statement of affairs of the debtor corresponding substantially with
Form A of the First Schedule; and
(b) a
certificate of the Master, not issued more than four days before the
date on which the application is to be heard by the Court, that
sufficient security has been given for the payment of all costs in
respect of the application that might be awarded against the
applicant.”
[10] It
is common cause that the applicant did not comply with the mandatory
provisions set out in section 5(4)(a) and (b) of the Act in so far as
the application was not accompanied by a statement of affairs of the
debtor corresponding substantially with Form A of the First Schedule.
That omission was in contravention of para (a) above. Secondly, there
was no Master's certificate as is required by para (b).
[11] In
para 5.9 of its heads of argument the applicant concedes that the
application before the court a
quo
was in fact a nullity where it says:
“In
casu,
the application a
quo
was fatally defective and same should have been struck off the roll
and not determined on the merits.”
[12] On
that score counsel for the applicant argues that the court a
quo
committed a gross irregularity by proceeding to deal with the merits
of proceedings which were a nullity at law.
[13] It
is correct to say that the learned judge a
quo
found that the applicant failed to comply with the strict mandatory
provisions of the law and that therefore the application before him
was a nullity. At page 5 of his cyclostyled judgment the learned
judge properly relied on the dictum in Air
Duct Fabricators (Pvt) Ltd v A M Machado & Sons (Pvt) Ltd.
That
case is authority for the proposition that failure to comply with a
mandatory course of action invalidates the thing done.
[14] Having
correctly articulated the law the learned judge a
quo
appreciated that he ought to have struck the application off the roll
as a nullity for want of compliance with the law. He however did not
strike off the application but went on to consider the company's
counter application. In his own words this is what he had to say:
“So
much for the preliminary point which the entity raised. It is not
without merit. But for the need on my part to consider the
application as a whole, the
same would have been struck off the roll with costs. I
remain alive to the fact that the parties placed before me an
application and a counter-application. It is therefore necessary for
me to consider both and make a determination which in my view serves
the interests of the parties.”
[15] Having
said that the learned judge a
quo
went on to consider the merits of the counter application and issued
the following order:
“I
have considered all the circumstances of this case. I remain alive to
the fact that the counter-application in favour of the entity in
terms of para (d) of subs (2) of section 197 of the Companies Act. I
am satisfied that the requirements which are mentioned in section 196
of the Companies Act are met.
It
is in the result ordered that:
(a) The
main application be and is hereby dismissed with costs.
(b) The
main order in the draft of the counter application be and is hereby
granted.”
Thus
the learned judge a
quo
determined both the main application and the counter-application
notwithstanding the fact that he had previously observed that the
proper course of action to take was to strike off the main
application for want of compliance with the mandatory provisions of
the law.
ANALYSIS
OF THE FACTS AND THE LAW
[16] On
the facts before him, the learned judge was undoubtedly correct in
his view that the main application ought to be struck off for
none-compliance with the law. The applicant's failure to comply
with the mandatory procedural requirements of the law meant that the
application was not properly before the court a
quo.
The proper order in that regard is to strike off the proceedings as a
nullity. In Chirosva
Minerals (Pvt) Ltd v Minister of Mines and Ors,
the court held that, the
disregard of a peremptory provision in a statute is fatal to the
validity of the proceedings affected.
[17] What
this means is that the main application that was launched in the
court a
quo
without the statement of affairs of the debtor and the master's
certificate as required by law was void and to that extent a legal
nullity.
[18] The
leading case on the effect and import of void proceedings is Mcfoy
v United Africa Co Ltd.
In that case Lord DENNING observed that:
“If
an act is void, then, it is in law a nullity. It is not only bad but
incurably bad. There is no need for an order of court for it to be
set aside. It is automatically null and void without more ado,
although it is sometimes more convenient to have the court declare it
to be so. And
every proceeding which is founded on it is also bad. You cannot put
something on nothing and expect it to stay there. It will collapse.”
(My
emphasis).
[19] On
the basis of the law as articulated through the cases once the
learned judge had taken the correct view that the main application
upon which the counter application was founded was a nullity, he
ought to have declared the application a nullity and stop there.
Since the counterclaim was founded on a nullity it had no independent
existence of its own. It would therefore have collapsed together with
the main application as it was riding on the back of the main
application. Faced with the same situation in Care
International Zimbabwe v ZIMRA & Ors
MTSHIYA J sitting in the same court had this to say:
“I
agree with the first respondent that there is no valid application
before the court and accordingly the rest of the issues raised by the
respondents cannot be delved into. The finding estops me from going
any further.”
MTSHIYA
J was undoubtedly correct that once an application is found to be
fatally defective the court cannot go on to determine any other
issues based on the defective application.
[20]
In light of established precedent, it is plain that the learned
judge a
quo
strayed into the morass of irregularity when he proceeded to
determine both the main application and the counter application in
circumstances where it was clear to him that the main application was
a nullity.
[21] There
is therefore merit in the applicant's complaint that the court a
quo
could have misdirected itself by failure to strike off the main
application and by extension the counter application.
DISPOSITION
[22] For
the foregoing reasons I find that the applicant has bright prospects
of success on appeal. It is accordingly ordered that:
1.
The application for condonation of late noting of appeal and
extension of time within which to note the appeal be and is hereby
granted.
2. The
notice of appeal shall be filed and served within 5 days of this
order.
3.
There shall be no order as to costs.
Messers
Mlotshwa & Muguwadze,
applicant's legal practitioners
IEG
Musimbe and Partners, respondent's legal practitioners
1.
HH54/16
2.
At page 5 of HH606-20
3.
At page 17 of HH606-20
4.
2011 (2) ZLR 274
5.
[1961] 3 ALL ER 1169 at 1172
6.
HH373–15 at p9; 2015 (1) 567 p577A
