There
has been ferocious litigation in a space of four months pitting
several protagonists. The dispute was convoluted and the issues
multi-faceted. At the centre was a company called Hwange Coal
Gasification Company (Private) Limited. For ease of reference I shall
refer to this company as the Coal Gasification Company. The one
protagonist was a Chinese ...
There
has been ferocious litigation in a space of four months pitting
several protagonists. The dispute was convoluted and the issues
multi-faceted. At the centre was a company called Hwange Coal
Gasification Company (Private) Limited. For ease of reference I shall
refer to this company as the Coal Gasification Company. The one
protagonist was a Chinese company by the name of Taiyuan Company
Limited. The variants to that name, vehemently disputed by the other
protagonists, were Taiyuan Sanxing Company Limited and Taiyuan
Sanxing Economic and Trade Company Limited….,.Hereafter I shall
refer to it as “Taiyuan”.
The
other protagonists were two Chinese nationals and businessmen called
Guo Feng (“Feng”) and Su Longmin (“Longmin”).
In
the hearing before me, and for convenience, the two were referred to
as the “Samukange faction”.The reason shall soon become apparent.
The
next lot of protagonists were Zimbabwean nationals and businessmen
Cephas Msipa (“Msipa”) and Gilbert Chahwanda or Chawanda
(“Chawanda”). In the hearings they were referred to as the
“Dzvetero faction”.
The
next lot was Hwange Colliery Company Limited (“Hwange Colliery”).
Three commercial Banks, Stanbic Bank Zimbabwe (“Stanbic”),
Kingdom Bank Zimbabwe (“Kingdom”), and Allied Bank Zimbabwe
(“Allied Bank”) were cited in some of the cases.
The
last protagonist was one Tendai Savanhu (“Savanhu”).
Apart
from the urgent chamber applications listed as cases 1 to 6 above
there had been two others before them. They had pitted essentially
the same parties. At the time of the hearing three other proceedings,
in the form of a court application and two actions, were still
pending.
The
litigation related to the protagonists' investment in, and control
of the two companies Taiyuan and the Coal Gasification Company.
The
brief background is that in October 2006 some Chinese nationals,
including Feng and Longmin, got associated in a joint venture with
some Zimbabwean nationals that included Msipa, Chawanda and one Leo
Mugabe (“Mugabe”). The object of the joint venture was to invest
in various ventures. For that purpose, the Chinese nationals used
Taiyuana as the special purpose vehicle. Both Feng and Longmin were
directors. The special purpose vehicle used by the Zimbabwean
nationals was a company called Stoat Mining (Private) Limited
(“Stoat”) in which Mugabe, Msipa and Chawanda were directors.
In
2007, Taiyuan, now comprising both the Chinese and the Zimbabwean
nationals, on the one part, and Hwange Colliery on the other, entered
into a written agreement for the construction of a coke oven and a
battery at Hwange Colliery on the basis of build, operate, own, and
transfer (“the BOOT agreement”). In June 2011 the parties
obtained an investment licence from the Zimbabwe Investment Authority
(“the ZIA licence”). The ZIA licence stipulated a shareholding
configuration of 75% for Taiyuan and 25% for Hwange Colliery.
The
Coal Gasification Company was the special purpose vehicle formed by
both Taiyuan and Hwange Colliery. The shares were held 75% by Taiyuan
and 25% by Hwange Colliery.
The
principal object of the Coal Gasification Company was the processing
and carbonization of coal from resources within Zimbabwe. In terms of
the BOOT agreement, the configuration of the Board of Directors for
the Coal Gasification Company would be five (5) from Taiyuan and two
(2) from Hwange Colliery. The chairman of the Board would be a
Taiyuan appointee. Taiyuan's representatives on the first Board
comprised Feng and Longmin as executive directors; Msipa and Chawanda
as non-executive. Another Chinese national by the name of Zhang Jin
Yuan (“JinYuan”) was the chairman. From Hwange Colliery came
Savanhu and one Fred Moyo (“Fred Moyo”) then chairman and
managing director respectively.
Taiyuan
and Hwange Colliery soon clashed.
One
of the points of contention by Hwange Colliery was that the Coal
Gasification Company had breached the BOOT agreement. Hwange Colliery
moved to cancel that agreement and to seek damages. Under HC537/13 it
sued both Taiyuan and the Coal Gasification Company for damages
amounting to $21 million. The matter was still pending at the time of
the urgent chamber applications.
The
other bone of contention by Hwange Colliery was that it had been
induced to enter into an agreement with a non-existent company. This
allegation stemmed from the confusion surrounding the identity of
Taiyuan. The BOOT agreement and the ZIA licence identified Taiyuan as
Taiyuan Sanxing Company Limited. However, Hwange Colliery alleged
that such a company did not exist and that only after the BOOT
agreement had been executed was a company called Taiyuan Sanxing
Economic and Trade Company Limited formed in China.
Hwange's
further bone of contention was that its BOOT partner, Taiyuan, was in
turmoil. Its shareholders were at each other's throat. This
allegation stemmed from the fact that the Chinese and the Zimbabwean
nationals were bringing a series of applications against each other
in the name of the Coal Gasification Company with both factions
claiming to be the legitimate and authorised representatives of that
company. Hwange Colliery was apprehensive that its investment in the
Coal Gasification Company would be dissipated.
Hwange
Colliery further claimed that Taiyuan had reneged on its pledge to
bring into the country an amount of US$40 million as part of its
injection into the joint venture. Therefore, Hwange Colliery was
seeking cancellation of the BOOT agreement.
Within
the Coal Gasification Company itself matters soon came to a head.
In
March 2013 JinYuan, as chairman, called for the holding of an Annual
General Meeting. It was scheduled for 24 April 2013. Feng and Longmin
were vehemently opposed to that meeting. They moved to block it. On
19 April 2013 they filed an urgent chamber application under case no
HC3003/13 in the name of Taiyuan Sanxing Economic and Trade Company
Limited. Messrs G N Mlotshwa & Co represented the applicant.
Hwange Colliery was cited as the substantive respondent. One Ananias
Banda, the Company Secretary, and the Registrar of Deeds, were cited
as nominal respondents.
The
matter came before MAWADZE J.
A
point in limine was taken that the Taiyuan as cited was not the
Taiyuan as was recorded on the ZIA licence and with which Hwange
Colliery had entered into an agreement. Mr Mlotshwa conceded. The
application was dismissed with costs on the point in limine.
The
Annual General Meeting (AGM) went ahead as scheduled. Among other
resolutions, Feng and Longmin would be suspended from the Coal
Gasification Company.
A
day after the Annual General Meeting (AGM), i.e. on 25 April 2013,
Feng and Longmin, in the name of Taiyuan Sanxing Economic and Trade
Company Limited, filed an ordinary court application under HC3160/13
for an order nullifying the AGM and all the resolutions taken
thereat. At the time of the hearings that application was still
pending.
In
May 2013 Feng and Longmin were formally suspended and called to a
disciplinary hearing to answer various charges including one of
fraud. The suspension letters were signed by Msipa as director. Feng
and Longmin were eventually dismissed as executive directors in
default of appearance at the disciplinary committee.
The
Coal Gasification Company reconstituted its Board of Directors. The
new Board wrote to the Banks, Stanbic, Kingdom and Allied Bank to
“freeze” the company's accounts.
On
5 June 2013 Feng and Longmin, together with three other Chinese
nationals, were barred access to some Harare premises rented by the
Coal Gasification Company from Hwange Colliery. The one letter was
signed by Chawanda. The other, in long hand, was signed by one
Chininga who was said to be from Hwange Colliery. But this was
disputed.
Feng
and Longmin went on the attack.
They
threatened the Banks and warned them not to take instructions from
persons that were not signatories to the accounts. Feng reminded them
that he was the signatory and that the signing instructions had been
given by him. On 6 June 2013, before BERE J, Feng and Longmin
obtained a spoliation order in the name of the Coal Gasification
Company against Mugabe and Hwange Colliery. They were granted
unhindered possession and control of the aforesaid premises. Mugabe
and all those claiming rights through him were ordered to maintain
peace and to allow undisturbed access to the applicant and to return
any company documents and office keys. However, in subsequent
proceedings, Hwange Colliery claimed that Feng and Longmin had been
mala fide in that they had obtained the spoliation order not with any
genuine intention to re-occupy the premises but merely to gain access
in order to pilfer company assets such as office furniture and to
cart them away to unknown destinations.
On
20 June 2013 Feng and Longmin filed two further urgent chamber
applications (“the twin applications”). They were almost
identical. They were both in the name of the Coal Gasification
Company as the applicant. The applicant, in reality Feng and Longmin,
was now represented by Venturas and Samukange. The one application
was under HC4861/13. It is case no. 4 above. In that application it
was sought to “unfreeze” the account at Kingdom Bank. The
respondents were Kingdom, Chawanda and Msipa. Antonio & Dzvetero
represented Chawanda and Msipa. Hwange Colliery was not cited.
Kingdom remained neutral and sought to abide by the court order.
The
other application was filed under HC4895/13. It is case no. 5 above.
In that application the first respondent was Stanbic. That Bank also
remained neutral and agreed to abide by the order of the court.
Again, Hwange Colliery was not cited. HC4895/13 came before DUBE J.
She heard it on 24 June 2013. The matter was settled by consent. The
parties agreed to an interim order. The freeze on the Stanbic account
would be uplifted. The authorised signatories would be Fred Moyo, one
Tafara Gadzirai (“Gadzirai”) and Feng. These would have
unconditional access to the account. Gadzirai would countersign for
all withdrawals. The actual wording of the material portion of the
order was as follows:
“That
pending the final determination of this matter, Applicant is granted
the following relief:
1.
The 1st
Respondent be and is hereby ordered immediately and forthwith upon
service of this order to unfreeze the Applicant's account being
0240057759001 held by the 1st
Respondent.
2.
Applicant's authorised signatories named Fred Moyo, Tafara Gadzirai
and Feng Guo shall have unconditional access to the account for the
purposes of transacting on behalf of applicant provided that Tafara
Gadzirai shall counter-sign for all payments.”
HC4861/13
came before MATHONSI J. He heard it on 26 June 2013. The parties also
agreed to an interim order. It was almost identical to the one by
DUBE J. However, before MATHONSI J could consider the application and
the draft order by consent, Hwange Colliery applied to be joined to
the proceedings. This was granted. The matter was postponed to the
following week. As the Samukange faction filed the twin applications
aforesaid the Dzvetero faction also filed its own. This was done on
21 June 2013, i.e. a day after the twin applications.
The
Dzvetero application was filed under HC4897/13. It is case no.6
above. It was also in the name of the Coal Gasification Company as
the applicant. The respondents were Feng, Longmin, Hwange Colliery,
Allied Bank, Stanbic, Kingdom and a firm of chartered accountants
called Welsa International Chartered Accountants. The Dzvetero
application came before me. The basic relief sought was also to
unfreeze the Bank accounts but to appoint the accountants as the sole
administrators of those accounts pending the determination of the
court application by the Samukange faction under HC3160/13. That was
the application in which the validity of the Annual General Meeting
(AGM) and the resolutions made thereat were being challenged.
It
was upon perusal of the Dzvetero application that I became aware of
the one Samukange application under HC4895/13 which had been placed
before DUBE J. At that stage, I was neither aware of the other
Samukange application under HC4891/13 that had been placed before
MATHONSI J nor of the rest of the other proceedings referred to
above. I did not immediately set down the Dzvetero application.
I
had queries.
One
of the averments in that application was that an Extraordinary
General Meeting to resolve the entire shareholder issues in the Coal
Gasification Company had been scheduled for 24 June 2013. Excluding
the intervening weekend, the 24th
of
June
2013 was the next business day. So, in my view, there could have been
no reasonable apprehension of an irreparable harm ensuing in that
short space of time. Furthermore, it was common cause that it was the
Dzvetero faction that had ordered the freeze on the Bank accounts.
Therefore, I wondered why the intervention of the courts was being
sought when the issue was now properly set for resolution in the
boardroom by the “corporate parliament” of the company.
The
supreme rule-making authority of a company rests with a general
meeting of the members; see GOWER's Principles of Modern Company
Law, 4th
ed…,.
At
that stage, I was unaware that one of the issues that had triggered
the twin Samukange applications was that the Banks had taken the
position that given the apparent turmoil in the Coal Gasification
Company, and that given the conflicting instructions and threats that
they were receiving in respect of those accounts, the Banks would not
unfreeze the accounts in the absence of a court order.
I
called for the record of the one Samukange application under
HC4895/13. But, by that time, the aforesaid order by consent by DUBE
J had already been granted. However, I then became aware of the other
Samukange application under HC4861/13 which had been placed before
MATHONSI J and of the rest of the other applications referred to
above. I then called for all the records.
Only
thereafter did I get to appreciate the multifaceted disputes.
I
set down the Dzvetero application for hearing on 27 June 2013. Mr T
Mawere represented Hwange Colliery. Mr T Dzvetero represented the
Dzvetero faction and the Coal Gasification Company. Mr J Samukange
represented the Samukange faction and also the Coal Gasification
Company.
At
the hearing, Mr Mawere expressed concern that Hwange Colliery had not
been cited in the twin Samukange applications and that the consent
order by DUBE J had far reaching consequences that were prejudicial
to Hwange Colliery in that, among other things, Fred Moyo, whom the
two warring factions had selected as a co-signatory to the Bank
accounts, was no longer employed by Hwange Colliery and that
therefore he could not possibly represent it. It was further pointed
out by Mr Mawere that the resolutions that the Samukange faction had
used as authority to bring their twin applications in the name of the
Coal Gasification Company had been signed by Savanhu - yet Savanhu
had since been dismissed from the Board of Hwange Colliery.
In
the premises, Mr Mawere gave notice that Hwange Colliery had filed,
or would be filing, three urgent chamber applications;
(1)
For an order that Hwange Colliery be joined to HC4895/13 and to vary
the consent order by DUBE J so that Fred Moyo would be removed from
the list of signatories and replaced by someone else properly
appointed by Hwange Colliery;
(2)
For an anti-dissipation interdict to prohibit the disposal of any of
the assets of the Coal Gasification Company, especially the coal
stocks, coking oven, and battery, by anyone purporting to act on
behalf of that company until Hwange Colliery's claim for the
cancellation of the contract and for damages under HC537/13 was
determined; and
(3)
For an interdict against Savanhu to stop him from masquerading as a
director, representative, and appointee of Hwange Colliery on the
Board of the Coal Gasification Company because he had been dismissed.
Mr
Samukange vehemently opposed the intended applications.
Essentially,
Mr Samukange's submission was that the choice of Fred Moyo as a
co-signatory to the Bank accounts, in terms of the consent orders,
was motivated not by his previous connection to Hwange Colliery but
by the fact that he was a neutral person and that he was still a
director of the Coal Gasification Company anyway even though he might
have lost his employment with Hwange Colliery. Mr Samukange further
submitted that, in terms of the agreement between the parties, Hwange
Colliery would not be involved in the day to day management of the
Coal Gasification Company; that the issue of signing on Bank accounts
was one of management and that therefore Hwange Colliery was in
effect seeking to sneak into the management of the Coal Gasification
Company by the back door. He further submitted that the dispute
between the two factions was not one for shareholders but one
involving company management and that the interdict against Savanhu
would be opposed on essentially the same basis, namely, that until
Savanhu was properly removed from the Board of the Coal Gasification
Company by that company itself Hwange Colliery had no right to do so
especially given that it was just a minority shareholder.
The
anti-dissipation order would be opposed on the basis that its effect
would virtually paralyse and collapse the Coal Gasification Company
the business of which was essentially the processing and disposal of
coal.
Given
the multi-faceted nature of the dispute and the issues between the
parties, and given that they were so intertwined, it was readily
agreed that all the matters would be consolidated and heard by a
single judge.
Barring
any unforeseen objections or complications it was agreed that I would
hear the matters myself.
