Shareholding re: Shareholder Meetings, Notices, Quorums, Passing of Resolutions & Shareholder Rights

HB74-10 : REBECCA SIZIBA vs BAMSLOVE INVESTMENTS (PVT) LTD and MARTIN SIMMONS and REGISTRAR OF COMPANIES
Ruled By: MATHONSI J

The applicant and the second respondent have been fighting for control of the first respondent company for a number of years. All in all seven applications have been filed by either of them in this Court. This culminated in an order granted by consent on the 17^th May 2007 in terms of which the applicant lost her directorship in the first respondent and was interdicted from conducting any business in the name of the company and visiting its operation centres in Zimbabwe without written consent.

Since her banishment from the company, the applicant has remained only as a shareholder of the company with 40% shares against the second respondent's 60% shareholding.

However, it does appear that after inviting the applicant to about two Shareholders' Meetings in 2007, the respondents have either not held any such meeting at all or ignored the applicant completely for almost three (3) years. She has not received any notice to attend a General Meeting and has not been allowed access to any books of account of the company. More importantly, during all the years of the applicant's banishment, not only has the company failed to convene an Annual General Meeting, it has also failed to provide her with the accounts of the business.

In terms of section 125(1) of the Companies Act [Chapter 24:03] and section 125(2) of the Companies Act [Chapter 24:03]:

(1) Subject to this section, every company shall, within the period specified in subsection (2), hold general meetings to be known and described in the notice calling such meetings as annual general meetings of that company.

(2) Annual General Meetings of a company shall be held:-

(a) In the case of the first meeting, within a period of 18 months after the date of the incorporation of the company concerned; and

(b) Thereafter, within not more than 6 months after the end of every ensuing financial year of the company; and

Section 125(5) of the Companies Act [Chapter 24:03] allows the Registrar of Companies to direct that such meeting be held on application by an interested party.

In this case, it would appear that once an order was made removing the applicant from Directorship and preventing her from visiting the place of business of the company, the respondents started running the business to her complete exclusion without convening the Annual General Meeting. There is criminal sanction for failure to comply with the above provisions showing that non-compliance is a very serious breach.

Section 128(2) of the Companies Act [Chapter 24:03] empowers the court to compel a company to hold its meetings and to also give any ancillary or consequential directions regarding those meetings….,.

(1) …,.

(2) That the first and second respondents be and are hereby directed to convene an Annual General Meeting to which the applicant should be invited and notified in terms of the provisions of the Companies Act [Chapter 24:03]. Such meeting to be convened within 30 day of this order.

(3) ….,.

(4) ….,.

(5) That at the meeting referred to in Clause 2 above, the exact stake of the applicant and the second respondent in the company should be determined.

HB74-10 : REBECCA SIZIBA vs BAMSLOVE INVESTMENTS (PVT) LTD and MARTIN SIMMONS and REGISTRAR OF COMPANIES
Ruled By: MATHONSI J

A company is required, by law, to maintain proper books of account in respect of all sums of money received and expended by the company and where no books exist as to give a true and fair view of the state of the company's affairs and explaining all transactions, this is a serious violation ...

HH621-15 : DELTA CORPORATION LTD vs ZIMABWE REVENUE AUTHORITY
Ruled By: HLATSHWAYO J

At the hearing of this matter I dismissed the appeal with costs and indicated that the reasons would follow. These are they.The facts of this case are largely common cause.On 23 May 1996, a firm of accountants, Messrs Deloitte and Touche (hereinafter “Deloitte and Touche”) wrote the following letter to ...

At the hearing of this matter I dismissed the appeal with costs and indicated that the reasons would follow. These are they.

The facts of this case are largely common cause.

On 23 May 1996, a firm of accountants, Messrs Deloitte and Touche (hereinafter “Deloitte and Touche”) wrote the following letter to the then Commissioner of Taxes (COT):

“Dear Sir,

BONUS SHARES (NINTH AND FIFTEENTH SCHEDULES TO THE INCOME TAX ACT)

The above term is not defined in the statute.

We would be grateful if you would advise us whether it is accepted that where a company, in declaring a dividend, allows its shareholders a choice of accepting cash or shares, those who opt for the latter receive “bonus shares”.

Yours faithfully

D and T”

The Commissioner of Taxes (COT) responded, on 8 July 1996, as follows:

“Dear Sirs

BONUS SHARES (NINTH AND FIFTEENTH SCHEDULES TO THE INCOME TAX ACT [CHAPTER 181])

You letter dated 23rd May 1996, reference RHMM/LWH/spw/12080, refers.

Please be advised that where a company declares a dividend which is immediately satisfied by issue of shares of an identical amount, no dividend is paid by the company and such shares constitute bonus shares.

Since there is no distribution of profits by the company and no property passed from the company to shareholders, what company does is to capitalise a portion of its profits. This does not constitute the payment of a dividend for income tax purposes. The fact that the company allows its shareholders an option of accepting cash or shares is not material.

Shares received in lieu of dividend are “bonus shares”.

Yours faithfully

T.I NCUBE (MRS)
For: ACTING COMMISSIONER OF TAXES”

The appellant, apparently acting on the strength of the above letter, did not pay withholding tax on scrip dividends issued subsequent to that letter.

On 24 November 2006, the Commissioner-General (COG) of the Zimbabwe Revenue Authority, who is the successor to the Commissioner of Taxes (COT), wrote to the appellant requesting it to deduct and account for withholding tax for three years prior to that date on scrip dividends issued.

The appellant wrote back, on 5 December 2006, objecting and averred that in 1996 the Commissioner of Taxes (COT) had given a ruling upon the strength of which the appellant had acted. Such ruling, the appellant alleges, is binding on the current respondent.

The respondent disallowed the objection on 30 January 2007 and maintained that the withholding tax was due and payable chiefly because a scrip dividend was a dividend and not bonus shares.

The appellant was aggrieved by the decision and filed the present appeal.

The appellant's case is that the letter by the Commissioner of Taxes (COT) amounts to an advance tax ruling which binds the respondent and suggests that the benefits which are derived from the 1996 letter to Deloitte and Touche accrue to it as well. The appellant also avers that a scrip dividend is equivalent to bonus shares which type of shares are not subject to income tax in terms of the 9th and 15th Schedules to the Income Tax Act [Chapter 23:06]. It is also the appellant's case that a scrip dividend is incorporeal property in lieu of cash. The appellant further contends that it would not be proper for the respondent to demand arrear taxes when it acted in line with an understanding with the Commissioner of Taxes (COT).

The respondent's main line of defence is that the Commissioner of Taxes (COT) letter to Deloitte and Touche, in 1996, did not amount to a tax ruling. Rather, the respondent argues, it was just a confirmation of a position as perceived by Deloitte and Touche. The respondent also avers that if any benefit is to be derived from the said letter, such benefit can only accrue to Deloitte and Touche and not to the present appellant because it was not privy to the communication or transaction between Deloitte and Touche and the Commissioner of Taxes (COT), the respondent's predecessor....,.

The respondent has taken the position that a scrip dividend is not the same as bonus shares, and, for that reason, is not exempt from tax in terms of the 9th and 15th Schedules to the Income Tax Act [Chapter 23:06].

In terms of sections 26 and 28 of the Income Tax Act, shareholders are liable to pay tax on their dividends. The company distributing such dividends is, at law, required to withhold such tax when it distributes the dividends and remit the same to the respondent. See sections 2(1) of both the 9th and 15th Schedules to the Income tax Act.

Dividends, for the purposes of shareholders' taxes, are defined in terms of the 9th and 15th Schedules to the Income Tax Act as follows:

“'dividend' means any amount which is distributed by a company to its shareholders…,.”

The most important principle, in relation to this, emanates from the reading of the section itself.

The wording of the letter from Messrs Deloitte and Touche, to the Commissioner of Taxes, becomes relevant. It speaks to the state of the transaction involved. It says in part “…, where a company, in declaring a dividend, allows…,.”

The very act of declaring a dividend is distribution of an amount to the shareholders.

At this stage, before any further considerations are made, the amount so declared is a dividend and subject to the withholding tax.

The fact that the shareholders are then allowed an election, after the declaration of the dividend, matters not. By then, taxes would already have accrued by operation of law.

The act of declaring a dividend is not linked to the choice the shareholders are given in whether to accept cash or take a scrip dividend. The former precedes the latter. At the point the former is declared, tax is chargeable. Therefore, as at the time a dividend is declared, the appellant is obliged to withhold tax for onward transmission to the respondent. What happens to the dividend after that stage matters not for purposes of taxation.

This position is buttressed by section 1(2) under both the 9th and 15th Schedules to the Income Tax Act. The sections are similar and they provide for the following:

“A dividend shall be deemed to be distributed when it is paid to the shareholder, credited to his account or so dealt with that he becomes entitled to it, whichever occurs first.”

The question whether the appellant capitalized its profits can only be determined by having due regard to the circumstances surrounding the transaction. This position was succinctly put forward by BENJAMIN J in Wilson v Commissioner for Inland Revenue 1926 CPD 63 70 in the following words:

“From a consideration of the judgment in that case, it appears the test to be applied is what was the intention of the company dealing with the matter; did the company intend that the sum dealt with should become income or capital. Thus, INNES CJ, in discussing the case of Bouch v Sproule (12 AC 385) said (at p.357):-

'It was a dispute as to whether the tenant for life or the remainder man was entitled to a bonus dividend applied in part payment of certain bonus shares. That depended upon whether the bonus was income passing to the tenant for life under the will or was an accretion of capital enuring to the ultimate benefit of the remainder man. So that the point which lies at the root of the present appeal fell to be decided: The facts were that the directors distributed certain accumulated profits (which had been temporarily capitalized) as a bonus dividend and allocated the new shares (partly paid up) to each shareholder, applying the bonus dividend in part payment of the new shares. Under these circumstances, it was held…, that the company did not pay or intend to pay any sum as dividend, but intended to do, and did, appreciate the undivided profits as an increase of the capital stock; the bonus dividend was therefore capital of the estate and the life tenant was not entitled to it or the shares.'

Again, in discussing the case of the Commissioner for Inland Revenue v Blott (35 T.L.R 687, 36 T.L.R. 575, 125 L.T 4970 he said (at p.358):

'The principle of Bouch v Sproule was applied – namely, that where the company has the power of capitalizing or distributing profits and decided to capitalize them, then the nature issued in respect of such profits was determined by the company's intention; and it was held that the procedure followed did not alter the real nature of the transaction.'

Again, a little lower down in the judgment he said (at p.361):

'The company ought, in the words of LORD HALDANE, to be 'dominant on the question whether the money in question was to be income or capital for all purposes.'”

It immediately becomes clear that for the shares to be considered bonus shares, it must have been a capitalisation of the undistributed profits at the instance of the company.

Once a dividend is paid out and the shareholder is given the option to use such cash dividend to buy more shares, such shares so bought are not bonus shares. This is no more than the shareholder electing to use his dividend to purchase more equity in a company.

The letter by Deloitte and Touche is clear in its tenor.

The choice is given to the shareholder whether to take the dividend in cash or in shares. There is nothing which stops the company from distributing the dividends in cash. In the same vein, there is nothing which would stop a shareholder from accepting some of the dividend in cash and the other part in shares. The intention of the company is paramount here - it was to distribute dividends to its members. It then gave the members a choice of accepting either cash or shares. The scrip dividend in this case does not cease to be a dividend. It is a dividend dealt in a particular way by the shareholder and not the company and it does not lose its status as a dividend. The scrip dividend, in these circumstances, is a dividend and not 'bonus shares.'

The submission by the appellant that “the company's accumulated profits have, as a matter of accounting practice, therefore been capitalised and thus the shareholder has received nothing out of the assets of the company for his separate use and benefit” cannot be correct.

The election to receive shares in lieu of a cash dividend in itself is a purchase of shares.

The choice given to the shareholder is that which shows that the profits have been distributed and the shareholder has elected to use his dues to buy more equity. Since a shareholder who accepts the dividend in cash is liable to pay tax, the fact that another has elected to deal with their dividend in a different manner does not make the dividend so received and utilised any less a dividend. The election to receive shares is a purchase of shares and the shareholder would have received something out of the assets of the company for his separate use and benefit. By distributing the dividend in the first place, the amount representing that dividend would have ceased to be part of the company's assets. The mere declaration of a dividend payable in one manner or the other means that such dividend ceases to be part of the company's assets and can be used by the shareholder in any manner he or she pleases.

On this premise, the contents of the letter by the Commissioner of Taxes (COT) to Deloitte and Touche do not capture the correct position of the law.

Equally untenable is the argument that a scrip dividend is not a dividend in that it is not an “amount distributed by a company to its shareholder.”

The fact of the matter is that the election only arises after the dividend is declared, the default position is that the dividend will be paid out in cash, an amount. When the shareholder elects to have shares instead, the shareholder would have disposed of his cash dividend and bought shares with it. The cash dividend which finances the purchase of shares is an 'amount.' The scrip dividend in that regard is also an amount.

It is not in doubt that after the appellant declared dividends, it invited its shareholders to decide whether to accept cash for the dividends or accept shares in lieu of cash. The acceptance of shares in lieu of cash simply means that the shareholders would have used their dividends to buy more shares in the appellant. The acceptance of shares in lieu of cash is no more than an instruction by the shareholder that his dividend ought to be used to purchase shares. This is totally independent from the declaration of the dividend. The declaration of the dividend is the act of the company and the acceptance of a scrip dividend is the act of a shareholder after the dividend has been declared.

Now, 'bonus shares' are shares which are given out by the company to its shareholders on a pro-rated basis and they are paid for from the company's undistributed reserve profits.

The intentions of the appellant are clear from the letter.

There was no scheme of the capitalisation of capital going on. The shareholders were given an election which they duly exercised. This is distinctly different from capitalization of undistributed profits.

The moment a company declares a dividend, and issues it out, the profits are distributed in the form of cash. The question of bonus shares does not arise as the company, by declaring a cash dividend, would have distributed the profits to its member. The question of bonus shares, which come about where a company does not distribute profits in cash and gives the members more shares in line with their shareholding in the company, does not arise in this case because the profits were distributed to the shareholder in cash as dividends.

'Bonus shares' are fully paid up using the company's reserve un-distributed profits.

The declaration of a dividend is, in its own, a distribution of profit. As such, the question of bonus shares cannot arise where such shares are paid for by proceeds from a dividend. In other words, a scrip dividend is not the same as a bonus share.

The Commissioner of Taxes was clearly wrong in saying that, in a script dividend situation, there is no distribution of profits and no property is passed from the company to the shareholders.

In a scrip dividend scenario, it is the individual shareholder who invests his dividend by purchasing more shares. In a bonus share arrangement, it is the company which pays for shares from the undistributed reserve profits and distribute the same to the members on a pro-rated basis. Both of these schemes result in shares for the members of a company but a scrip dividend is shareholder-driven and a 'bonus share' scheme is company-driven. As such, the principle relating to the two ought not to be conflated.

Perhaps the most important point to note is that where a dividend is declared, the shareholder becomes entitled to it and it attracts tax as at that point and the choice to take a scrip dividend can only be made after such tax is due by operation of law.

Now, regarding the retrospective effect of the Commissioner-General's (COG) measures, the revenue authority is not entitled, at law, to give anyone unlawful tax breaks and prejudice the fiscus.

Where the revenue authority has made an error, it is allowed to rectify it - even retrospectively.

The appellant relies on Commissioner of Taxes v Astra Holdings (Pvt) Ltd 2003 (1) ZLR 417 (S) for the proposition that the taxing authority is required, at law, to act fairly towards both the taxpayer and the fiscus.

In this light, the allegation is that the appellant has acted on the strength of the Commissioner of Taxes (COT) ruling and requiring it to pay withholding tax going three years back would be unfair.

However, as a matter of law, the respondent is not precluded from assessing a tax legally due only because the taxpayer has relied upon the respondent's predecessor's prior mistaken view of the law. In Dixon v United States 381 US 68 (1965), it was said, in part:

“Commissioner is empowered, retroactively, to correct the mistakes of law in the application of the tax laws to particular transactions. He may do so even where a taxpayer may have relied, to his detriment, on the Commissioner's mistake…,. This principle is no more than a reflection of the fact that Congress, not the Commissioner, prescribes tax law.”

The argument by the appellant, that the decision to have it pay withholding tax for the three prior years is unlawful, is untenable.

The point here is that the appellant cannot require the respondent to continue acting unlawfully in order that its actions be fair.

The main duty on the respondent is to act lawfully, and, in demanding the withholding tax, it acted lawfully. There is no question of the respondent acting unfairly when it acts in accordance with the law; in other words, lawfully. Implicit in lawfulness is fairness.

A similar principle can be derived from Tregers Industries (Private) Limited v Commissioner General of the Zimbabwe Revenue Authority 2006 (2) ZLR 62 (H) wherein GARWE JP…, said:

“The applicant argued that the respondent is 'estopped' by the actions of his subordinates from denying that the applicant's interpretation of section of the Act is correct.

I do not accept this submission.

What the applicant is saying is that irrespective of the correct interpretation, the fact that the respondent's employees accepted that the goods in question were zero rated estops the respondent from arguing to the contrary.

As a matter of law, that cannot be correct.

If an interpretation of the law is not correct, then that interpretation is not correct. The fact that respondent's employees may not have looked into the matter more carefully cannot estop the respondent from arguing that such interpretation is not correct.”

The respondent cannot be estopped from acting lawfully.

What is apparent is that the appellant cannot seek to enforce an unlawful position on the basis that it would be unfair on it should the respondent revert to acting lawfully.

Sight should not be lost of the fact that tax law is strict liability law.

The fact that the respondent's predecessor made a mistake upon which it relied does not save the appellant. It would be still required to remit all taxes as is required at law.

It is for these reasons that I dismissed the appeal with costs.

HH223-13 : HWANGE COLLIERY CO. LTD and HWANGE COAL GASIFICATION CO. PL vs HWANGE COAL GASIFICATION CO. PL and TENDAI SAVANHU and KINGDOM BANK LTD and STANBIC BANK LTD and GUO FENG and ORS
Ruled By: MAFUSIRE J

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 1^st 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 1^st 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 24^thofJune 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, 4^th 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. The hearing was adjourned to a later date to be advised.

Hwange Colliery's three applications were subsequently filed under HC5171/13, being case no.1 above; HC5105/13, being case no.2 above and HC5331/13, being case no.3 above.

Eventually, I caused the matters to be set down for hearing on 5 July 2013.

Hwange Colliery was now represented by Advocate T Mpofu and Stanbic by Mr I Chagonda.

On that day, a new issue arose. It was on the consent order by DUBE J. It was for that single issue that Mr Chagonda was appearing. The new issue was this: it transpired that the parties could not agree on the interpretation of that order. Stanbic thought that the order could either mean that the three signatories Feng, Fred Moyo and Gadzirai had all to sign for any bank withdrawals but that the order could also mean that any two of them could sign for as long as one such signatory was Gadzirai.

The two factions favoured the interpretation that allowed any two to sign for as long as one of the signatories was Gadzirai. On the other hand, Hwange Colliery was vehemently opposed to that interpretation as it was feared that there could be connivance just to facilitate withdrawals. Consequently, Hwange Colliery favoured a restrictive interpretation that would allow withdrawals only when all the three signatories would sign.

On behalf of Stanbic, Mr Chagonda submitted that given the several threats for damages against it, the Bank would not permit any withdrawals until such time that the new signing arrangement was clarified.

The matter was adjourned to 11 July 2013 because Mr Samukange did not have some of the papers in the applications by Hwange Colliery. Before the resumption of the hearing on 11 July 2013 the Dzvetero faction had withdrawn its application under 4897/13. Therefore, the issue as to whether the interim management of the Bank accounts could be placed in the hands of the chartered accountants had automatically fallen away.

But, yet again, a new issue had arisen! It was also on the consent order by DUBE J.

Previously, on the day that the order had been granted, i.e. 24 June 2013, the Samukange faction had been represented by Advocate Firoz Girach. When the parties had come unstuck at Stanbic, as aforesaid, they had convinced themselves that what really they had consented to was the arrangement that any two of the three signatories could sign for any withdrawals for as long as one of such signatories was Gadzirai. Thus, the parties had then arranged to instruct Advocate Girach to approach DUBE J and seek an amendment of the consent order so that it would align with what allegedly was their true intention and true agreement. With Mr Dzvetero's consent, DUBE J had amended the order.

But there was a problem. Hwange Colliery had not been consulted.

Both factions had become aware, during the second sitting before me, that Hwange Colliery was disagreeing with such an interpretation and that not only would it be opposed to such an amendment but also that in its own application to be joined to those proceedings and for an amendment to that order it would move for an express provision that all the three signatories would have to sign for any withdrawals. Furthermore, since all the matters had been consolidated and would be heard by me, the propriety of pulling out the single record for purposes of amending the single order in terms which were disputed and in the absence of such an interested party as Hwange Colliery and without disclosing to both Advocate Girach and DUBE J that Hwange Colliery had in fact since filed its urgent chamber applications aforesaid was questioned.

Advocate Mpofu, for Hwange Colliery, expressed serious concern on the development. Be that as it may, I concluded the hearing on 11 July 2013. The crisp issues were;

(1) Whether Hwange Colliery was entitled to have the consent order by DUBE J amended in such a way as to remove Fred Moyo from the list of the Bank signatories and have him replaced by someone else from its stable;

(2) Whether Hwange Colliery was entitled to have that consent order further amended so that it would reflect that all withdrawals from the Bank accounts would be signed for by all the three signatories, whoever they would eventually be;

(3) Whether Hwange Colliery was entitled to the anti-dissipation interdict against the property of the Coal Gasification Company pending the resolution of its action for the cancellation of the contract and for damages in HC537/13; and

(4) Whether Savanhu should be interdicted from holding himself out as one with authority to represent the Coal Gasification Company and from attending meetings of, signing documents for and on behalf of and representing himself as one with authority to represent that company.

I now deal with each of these matters in turn.

HB140-16 : ADELE FARQUHAR vs BANKNOTE ENTERPRISES (PVT) LTD t/a BANKABLE REAL ESTATE and RODWELL MBIRIMI and BETTY MBIRIMI
Ruled By: MATHONSI J

The applicant must be regretting tying her retirement, and, indeed, the twilight of her career to an estate agency business that had the second respondent in it. After what may have been an illustrious career as a Commercial Letting Manager of a well-known estate agency in Bulawayo, John Pocock and Company Limited, the applicant decided to resign ...

The applicant must be regretting tying her retirement, and, indeed, the twilight of her career to an estate agency business that had the second respondent in it.

After what may have been an illustrious career as a Commercial Letting Manager of a well-known estate agency in Bulawayo, John Pocock and Company Limited, the applicant decided to resign from that respectable company and start her own real estate business. Not being a registered estate agent herself, she is a Property Manager and a trained lawyer, she badly needed a partner registered as an estate agent with the Estate Agents Council and the Real Estate Institute Zimbabwe in order to start that business.

That is where the second respondent came in, a registered estate agent and a fellow of the Real Estate Institute.

If the facts of this matter are anything to go by, perhaps that is all that the second respondent had.

I say so because he had purchased a shelf company in 2006 which had absolutely nothing but a single issued share and had never traded. He did not have the means to set it in motion. He had just left formal employment armed with his qualifications and certificates of registration but without the wherewithal to commence trading. It is that shelf-company which was chosen as a vehicle for business. When the parties came together, as they certainly needed each other, and agreed to start an estate agency, under the banner of the first respondent, which existed in name only, they had to take a soft loan of $1,350= from the applicant's husband to find their feet.

This was in January 2014.

From then, the company progressed in leaps and bounds. The applicant and the second respondent were allotted 500 shares each reflecting their equal standing in the company. The company started trading in May 2014. No sooner had the new kid in town hit the ground running than differences between the members started emerging. They traded accusations and the inevitable happened on 13 October 2014, when, at the instance of the applicant, this court, per MOYO J, granted an order placing the first respondent company under provisional liquidation. A provisional liquidator was appointed but is said to have quickly resigned after the second respondent took issue with his appointment.

It is the granting of the final order of liquidation which has been strenuously opposed by the second respondent and his loving wife, the third respondent, who has dutifully deposed to a three-line affidavit supporting every word uttered by the second respondent.

The applicant has approached the court seeking the winding up of the first respondent in terms of section 206(g) of the Companies Act [Chapter 24:03] on the ground that it is just and equitable that the company be wound up. This is because the applicant and the second respondent, who are the only members of the company, holding an equal shareholding, and the only directors of it, are incompatible and unable to work together. They are unable to agree on anything resulting in them reaching a deadlock each time there is a meeting or there is need to make a decision.

The applicant paints a picture of the precincts of the company having been turned into a war zone. Intrigue and trickery are the order of the day as the second respondent desperately tries to elbow the applicant out of the business using every trick in the book. She accuses the second respondent of delinquency and poor time-keeping regularly failing to keep office hours, mismanagement of the company's accounts and contributing very little in the furtherance of the company's affairs. In addition, the second respondent is accused of deliberately keeping the applicant in the dark about the finances of the company.

As if that was not bad enough, the second respondent is accused of having convened a shareholders meeting in October 2014 for the sole reason of removing the applicant as a director. To achieve that, he has suddenly claimed that the applicant was never a shareholder - despite the issuance of a share certificate to her. Instead, he now claims that his wife, the third respondent, who, according to the applicant, has never held shares in the company, was allotted 122,000 shares with the second respondent being allotted 127,500 shares, much to the chagrin of the applicant.

To justify that shareholding, the second respondent has pulled out and dusted a Shareholders Agreement allegedly signed by himself and his wife on 20 December 2012 long before the applicant came into the picture and at a time when, by his own admission, the first respondent company was not trading but a mere shelf-company. To cap it all, the second respondent has suddenly produced share certificates issued in favour of himself and his wife on 31 December 2012.

In opposing the application and the confirmation of the provisional order of liquidation, the second respondent has submitted that the applicant lacks locus standi in judicio to make such an application because she “indicated her intention to sell her shares and withdraw her capital she had injected from the company.” After she collected $1,230=, being the capital she injected in the company, the applicant ceased to be a shareholder and remained only a director.

Unfortunately, the second respondent did not indicate who bought the shares of the applicant and did not produce proof of such a sale.

To make a bad situation worse, he did not explain how, in law, the withdrawal of $1,230= from the company (and not from a potential buyer of the 500 issued shares of the applicant) could equate to a sale of shares when there was no buyer of those shares and no price for the shares. Quite to the contrary, the sum of $1,230= was paid by the company itself, buttressing the applicant's point that it was a loan repayment and nothing more.

The second respondent insisted that although himself and his wife had received an allotment of shares in December 2012, pursuant to an agreement the two had signed on 20 December 2012, he had not prepared any returns for the allotment as he “had no money and […,.] was not using the company.” He has since rectified the anomaly by filing them belatedly and paying late allotment filing costs. All this is to justify the argument that it is him, out of the goodness of his heart, who allowed the applicant to join his company before he, again, allowed her to “withdraw her shareholding” leaving him and his wife in the driving seat. Never mind that when the parties came together, in January 2014, there was no company to join as it was not trading and he “was not using the company” and that no returns adverting to the allotment were submitted to the Registrar of Companies “as [he] had no money.”

Alice in Wonderland.

With those facts, counsel for the applicant had a point when he called the whole episode an elaborate fabrication.

In terms of section 206 of the Companies Act [Chapter 24:03];

“A company may be wounded up by the court –

(a) If the company has, by special resolution, resolved that the company be wound up by the court;

(b) If default is made in lodging the statutory report or in holding the statutory meeting;

(c) If the company does not commence business within a year from its incorporation or suspends its business for a whole year;

(d) If the company ceases to have any members;

(e) If seventy-five per centum of the paid up share capital of the company has been lost or has become useless for the business of the company;

(f) If the company is unable to pay its debts;

(g) If the court is of opinion that it is just and equitable that the company should be wound up.”…,.

The court has a discretion to grant or withhold an order for winding up of a company in terms of section 206(g) of the Companies Act [Chapter 24:03]. As stated by CHATIKOBO J in Sultan v Fryfern Enterprises (Pvt) Ltd and Another 2000 (1) ZLR 188 (H)…,:

“Section 206(g) of the Act has been said to postulate not facts, but only a broad conclusion of law, justice and equity as a ground for winding up.

'In its terms and effect, (the section) confers upon the court a very wide discretionary power the only limitation, originally, being that it had to be exercised judicially with due regard to the justice and equity of the competing interests of all concerned.' Per TROLLIP J in Moosa NO v Manjee Bhawan (Pvt) Ltd and Another 1967 (3) SA 131 (T) 136H.”

The discretion of the court arises out of the use of the word “may” in section 206 of the Companies Act [Chapter 24:03] and the inherent jurisdiction of the court to prevent abuse of its process. See Croc-Ostrich Breeders of Zimbabwe (Pvt) Ltd v Best of Zimbabwe (Pvt) Ltd 1999 (2) ZLR 410 (H)…,.

These two sources, namely, the use of the word “may” and the inherent jurisdiction of the court, provide a judicial discretion, based on all the relevant circumstances of any case, to withhold an order of winding up - even if grounds for it have technically been established. That discretion is, however, very narrow. See Dominion Trading FZ–LLC v Victoria Foods (Pvt) Ltd 2013 (2) ZLR 332 (H)…,.

Counsel for the second and third respondents has not asked me to exercise that narrow discretion and withhold the grant of a final order of liquidation. Instead, he has commenced his onslaught on the application by asserting that the applicant lacks locus standi to bring this application because she is not a member of the company she having withdrawn her capital injection from the first respondent company.

In terms of section 207(1) of the Companies Act [Chapter 24:03]:

“An application to the court for the winding up of a company shall be by petition presented, subject to this section, by the company or by any creditor or creditors, including any contingent or prospective creditor or creditors, contributory or contributories or by all or any of those parties, together or separately, or, in a case falling within subsection (2) of section one hundred and sixty two, by the Minister, accompanied, save in the case of a petition by the Minister, by a certificate of the Master, Assistant Master or a magistrate that due security has been found for payment of all fees and charges necessary for the prosecution of all proceedings until the appointment of a liquidator.

Provided that -

(1) A contributory shall not be entitled to present a petition for winding up a company unless -

(a) The number of members of the company is reduced below two; or

(b) The shares in respect of which he is a contributory, or some of them, were originally allotted to him or have been held by him and registered in his name for at least six months during the eighteen months before the commencement of the winding up or have devolved upon him through the death of a former holder.”

Section 202 of the Companies Act defines a contributory as every person liable to contribute to the assets of a company in the event of its being wound up, and, in terms of section 201 of the Companies Act, every present or past member of the company is liable to contribute to the assets of the company to the extent of his unpaid up shares in the case of a limited liability company.

Clearly, therefore, a shareholder is a contributory or member.

The applicant was allotted 500 shares and issued with a share certificate on 14 January 2014 before the company commenced business in May 2014. At that time, the second respondent was also issued with the same amount of shares, and without paying for them, and the third respondent had none. The applicant was therefore a shareholder and a contributory to the first respondent company.

It is a fact that cannot be wished away because some months down the line merely because it then suited one member an attempt was made to dis-engage her for him to remain with the whole company for himself.

It must be appreciated that the moment the parties elected to conduct their business through the medium of an incorporation they were making the conscious decision to be governed by Company Law and could not, when it suited them, run away from its tentacles in preference to customary law or some other obscure and indeterminable law as would entitle the second respondent to fob off the applicant from the company for no other reason than that he is the one who bought it as a shelf company in 2006. For the applicant to lose her shareholding something had to happen to her 500 shares. She had to alienate them in one way or the other.

The second respondent has argued that the applicant lost her shareholding when she accepted payment of the sum of $1,230= from the company which is the amount she had injected into the business as capital.

It begs the question: What amount was injected by the second and third respondents for them to claim a shareholding in the company?

There has been a studious failure to allude to anything suggesting any capital injection done by that couple although in their myopic view they own the company.

Which then brings me to the issue of the shareholding agreement allegedly signed on 20 December 2012 between husband and wife and their share certificates bearing the date 31 December 2012 which counsel for the applicant has called “an elaborate hoax.”

The respondents cannot rely on those documents without burning their fingers. They have not disputed that at the time of engagement with the applicant, in January 2014, the company only had one issued share which was held by Tevison Makuwe - as so often happens with self-companies. If the company had one issued share in January 2014 it is not possible that the shareholding agreement relied upon could have been signed two years earlier, on 20 December 2012; neither is it possible that the share certificates for 127,500 and 122,000, in favour of the second and third respondents, respectively, could have existed then especially as the applicant was issued with Share Certificate Number Two.

Of course, they claim that they held certificates 1(a) and 1(b) respectively. If one believes that they would believe anything.

Even if I be wrong in drawing that conclusion, I would still find those documents invalid for other reasons.

Counsel for the applicant has drawn my attention to the Annual Return lodged by the company, through none other than the second respondent, on 14 January 2014, which shows that as at that date only one ordinary share had been issued. If indeed the couple held the massive shares they claim to have allotted in December 2012, surely that would have appeared on the return.

The inescapable conclusion is that the shareholding agreement and the share certificates, in favour of the couple, are demonstrably a most recent and extremely shameless fabrication by individuals prepared to pull all the stops in order to divest a benefactor of everything that she has put into the company; a company that has enabled a down and out estate agent, unable to find his radius, to take off the ground.

In any event, in terms of section 136(1) of the Companies Act [Chapter 24:03]:

“Within one month after the passing of any special resolution, a copy of that resolution shall be transmitted to the Registrar who shall, subject to subsection (2) register that resolution and that resolution shall be of no force or effect until it is so registered.”

That provision has been relied upon by the applicant in seeking to nullify the Shareholders Agreement of 20 December 2012 and the share allotment made under it.

One would have expected the second and third respondents to address that issue but counsel for the second and third respondents was unable to respond to that; content to rely on the issue of lack of locus standi only.

What is not disputed can only be taken as admitted.

It is unimaginable that the second and third respondents would have entered into such a shareholding agreement and allotted to each other shares in December 2012 and fail to submit the resolution and/or return to the Registrar recording such allotment. Thereafter, the second respondent commenced trading with the applicant, in the name of the company, after they joined forces in January 2014 all the way until they hit turbulence in October 2014. Only then did the second respondent see the wisdom of lodging the resolution and the returns. He says he has since paid late allotment filing costs - an exercise in futility in my view.

I am satisfied that what the second respondent has done clearly demonstrates that he cannot be trusted at all. He has cunningly tried to elbow the applicant out of the company in the most despicable way. He has dishonestly tried to bring his wife into a company she has no interest in as a way of diluting the interest of the applicant and has exhibited the uncanny readiness to fabricate company documents at will in the pursuit of ill-gotten gain. Nothing can illustrate the pressing need, in the name of equity, to liquidate the company more than what the second respondent has done.

This is a person who, even as this application was pending, and a provisional liquidation order had been issued, did not hesitate to register another company, Bankable Real Estates (Pvt) Ltd, on 23 October 2014 - exactly 10 days after the grant of the provisional liquidation order.

It would be recalled that the first respondent's trading name is Bankable Real Estate.

What the second respondent has done is to appropriate that trading name, register it as an incorporation and then continue trading in that name, on his own, as if nothing has happened. A breach of the duty of utmost good faith between directors, and, indeed, members of a company has never been so crass. Such conduct shows a disdain of all that a provisional liquidation order stands for and a complete disregard of all principles of fairness. To cap it all, the second respondent has continued to contest the winding up proceedings all the way. This development also points to the fact that equity demands that the company be wound up.

In addition, it also goes to the question of costs because by registering another company in the trading name of the company whose liquidation is sought, the second respondent not only displayed a contemptuous regard of the process of the court, but a readiness to circumvent the due process for his personal aggrandizement….,.

In the result, it is ordered that:

1. The provisional order granted by the Honourable Mrs Justice MOYO in this matter, on 13 October 2014, be and is hereby confirmed as a final order save that Antony Morris-Davies is not confirmed as the final liquidator.

2. The final liquidator shall be appointed in terms of the Chamber Application in case number HC3005/2014 or in terms of section 218 as read with section 219 of the Companies Act [Chapter 24:03].

3. The costs shall be borne by the second and third respondents, jointly and severally, the one paying the other to be absolved on a legal practitioner and client scale.

HH192-10 : AEPROMM RESOURCES (PVT) LTD vs SAMUEL MAZOWE and PATTERSON TIMBA and STEVENSON TIMBA and MAGGIE DITIMA and TONDESAI KAPONDO
Ruled By: MTSHIYA J

On 20 August 2010, I dismissed this application with costs. The applicant has now placed before me a written request for the full reasons behind my dismissal of its application. The applicant says it needs the reasons because it intends to file an appeal in the Supreme Court urgently.

I give here below the reasons for my ruling.

On 12 August 2010, the applicant filed an urgent application in this court seeking the following interim relief:-

“Pending the finalization of the applicant is granted the following relief:

1. The 'Notice of Extraordinary General Meeting, issued by the first respondent, for a meeting to be held on 21 August 2010, is hereby declared null and void.

2. The respondents are hereby interdicted from purporting to act as Directors of the applicant and interfering with and/disrupting the applicant's management.

3. The respondents shall pay costs of this application.

4. That leave is granted to the applicant's legal practitioners to serve this order upon the respondents.”

The application was heard and dismissed for lack of urgency by HLATSHWAYO J on 19 August 2010. The result slip in the record confirms as follows:-

“Matter dismissed as not urgent.”

On 19 August 2010, the day HLATSHWAYO J made his ruling, the applicant noted an appeal in the Supreme Court. The Notice of Appeal states that the appeal is against the whole of the judgment of HLATSHWAYO J and grounds of appeal are then given as follows:-

“1. The learned Judge erred in finding that the applicant's application, HC5500/10, was not urgent on the basis that there was an inordinate delay between the time the issue of applicant's contested Directorship came to the attention of the applicant's deponent in HC5500/10 and the time of filing of HC5500/10.

In so doing, the learned Judge failed to appreciate the fact that the issue that has instigated urgency in HC5500/10 is the serving of notices of an Extraordinary General Meeting of the applicant, proposed by the respondents purportedly in their capacity as applicant's Directors.

The fact of speculative knowledge about the improper claim to Directorship by the respondents could not ground urgency in that that would essentially amount to creating urgency where none exists.

Prior to the issuance of the notice to attend an Extraordinary General Meeting therefore, the dispute as to Directorship could be resolved by way of an ordinary court application.

Upon the service of the notice to attend the Extraordinary General Meeting however, scheduled for 21 August 2010, the need arose to interdict the respondents from acting in a manner inconsistent with the position that their status as directors is disputed. Such an interdiction could not be dealt with by way of an ordinary court application. It could only be resolved by way of an urgent chamber application; as such, the learned Judge erred in finding that the matter was not urgent.

2. The learned Judge also erred in finding that the averment contained in the Supporting Affidavit of Ann Rushwaya, was evidence of the fact that as far back as the 22 August of June the applicant was aware of its purported change of Directorship. This is so because a speculative suspicion that party has done something unlawful does not ground urgency but the very act of actuating that illegal action, eg. by calling for an Extraordinary General Meeting, does ground such urgency; thus, despite the existence of that speculative suspicion in June 2010, the basis of urgency has only arisen upon the serving of the notices to attend an Extraordinary General Meeting.”

The judgment appealed against does not form part of the papers before me.

On 20 August 2010, the applicant filed this application seeking the following interim relief:-

“Pending the finalization of the applicant's appeal in the Supreme Court (SC197/10), the applicant is granted the following relief:

1. The respondents be and are hereby interdicted from holding the purported Extraordinary General Meeting of the applicant, scheduled for the 21st of August 2010.

2. The respondents shall pay the costs of this application.”

Clearly, the above is the same relief that was prayed for on 12 August 2010.

I heard the application on the same day it was filed, and, indeed, after hearing argument from both counsel I dismissed the application with costs.

The certificate of urgency in support of the application indicated that since the dismissal of the earlier application the issue of an interdict remained alive because the Extraordinary General Meeting proposed by the respondents was likely to be held on 21 August 2010. Furthermore, the certificate went on, the dismissed matter (HC5500/10) remained res litigiosa on account of the appeal noted in the Supreme Court. Accordingly, it was stated, if an interdict was not granted, the holding of the meeting on 21 August 2010, by the respondents, would stand to ignore the fact that there was pending litigation on the issue. The applicant therefore believed there was need for the matter to be dealt with through an urgent application.

I must hasten to mention that a few hours before the hearing of the application I had asked for heads of argument on whether or not leave to appeal was required in respect of the appeal filed in the Supreme Court on 19 August 2010.

I am indebted to counsel for the applicant who quickly filed heads of argument which I found useful.

In his heads of argument, counsel for the applicant drew my attention to section 43(2)(d)(ii) of the High Court Act [Chapter 7:06] which provides as follows:

“(2) No appeal shall lie -

(a)…,.

(b)…,.

(c)…,.

(i)…,.

(ii)…,.

(d) From an interlocutory order or interlocutory judgment made or given by a judge of the High Court, without the leave of that judge, or, if that has been refused, without the leave of a judge of the Supreme Court, except in the following cases -

(i) Where the liberty of the subject or the custody of minors is concerned;

(ii) Where an interdict is granted or refused;

(iii) In the case of an order on a special case stated under any law relating to arbitration.”…,.

Clearly, the relief sought is that of an interdict referred to in exception (ii) above.

Counsel for the applicant also advised, that, upon dismissing the application, the judge had intimated that his decision was final and definitive and did not therefore require leave of the judge for purposes of appeal.

I concur: see Mwatsaka v ICL Zimbabwe 1998 (1) ZLR 1 (H).

Counsel for the respondents, although intimating that leave should have been formally sought, was, however, of the view that since the appeal was already before the Supreme Court, the applicant should have applied to that court for an urgent hearing. He said the applicant could have done so in terms of Rule 58 of the Supreme Court Rules which provides as follows:-

“In any matter not dealt with in these Rules the practice and procedure of the Supreme Court shall, subject to any direction to the contrary by the Court or a Judge, follow, as near as may be, the practice and procedure of the High Court.”

He said the above Rule opened a window for urgent applications to be brought before the Supreme Court and that many cases had been handled through that window.

Without denying the fact that indeed many cases had reached the Supreme Court through that window, counsel for the applicant, relying on Lloyd Guwa (2) Hazel Claris Kumire v Willoughby Investments (Pvt) Ltd SC31-09, said, unlike the High Court, the Supreme Court had no inherent jurisdiction. He said it was a creature of statute whose powers are clearly defined in the Supreme Court Act [Chapter 7:13]. That being the case, there was no opening for urgent applications.

Counsel for the respondents was of the view that the route taken by the applicant was simply a way of bringing back the same refused application to the same court. This was so because, if granted, the effect of the relief sought meant a reversal of the earlier decision of this court.

I agree.

Indeed, if the interdict is granted, the effect is to reverse the earlier ruling of this court. As can be seen, the relief sought is the same as the one earlier prayed for.

However, counsel for the applicant's argument was that the court's duty was merely to determine whether or not, given the fact that an appeal now lies in a superior court, it could be proper for the respondents to proceed with their proposed meeting on 21 August 2010. In support of that stance, the applicant, in its founding affidavit, and in line with the certificate of urgency, states, in part:

“6. Pending the determination of that appeal, therefore, the issue of the application for the interdiction of the respondents from holding the proposed meeting of the 21st August 2010 remains a matter that is subject of pending litigation.

7. The applicant has a clear right to have that issue determined before any action as to holding the proposed meeting can take place. This is in line with protecting its right to proper recourse before the law.

8. To allow the meeting to proceed, therefore, would amount to the sanctioning of the dealing in and with issues that are res litigiosa. Such a situation would inevitably cause the applicant irreparable harm as the proposed meeting seeks to make various resolutions in respect of the applicant, which resolutions are intended, thereafter, to be put into effect. Such a situation must be stopped by this honourable court.

9. The risk of this irreparable harm is very imminent as the proposed meeting is scheduled for the 21st of August 2010 (the day after tomorrow). It is on this basis that the applicant prays for an order interdicting the respondents from holding the proposed Extraordinary General Meeting on the 21st of August 2010, pending finalization of the applicant's appeal in HC5500/10.”

The details relating to the business of the meeting to be held on 21 August 2010 were not given.

Whilst I am of the view that it is possible for the Supreme Court to be moved to grant an urgent hearing to an appeal already before it, my assessment in this application is that I am being asked to review the earlier decision of my brother HLATSHWAYO J.

That cannot be and is not permissible.

That being the case, there would therefore, in the main, be no compelling reason for me to have the earlier judgment placed before me. I simply do not have the power to review that judgment.

To the extent that the parties were heard on the merits of the case, relating to the sole issue of urgency, I hold the view that this matter is now res judicata.

I come to this conclusion on the basis that the relief being sought is the same one that was before my brother HLATSHWAYO J. As argued by counsel for the respondents, I believe I am being asked to grant the same relief under the excuse of an appeal now pending in the Supreme Court.

In addition to the above, I also want to recognise that generally, in civil matters, an appeal to the Supreme Court suspends the operation of the decision appealed against: see Founders Building Society v Mazuka 2000 (1) ZLR 52P (HC). However, given the fact that no operational order was ever granted by this court, I do not think the general rule applies.

The Judge, after having heard the parties, merely refused to hear the matter on the basis of urgency and there was never any consideration of the merits of the case. There was no executable order issued by the judge.

That is why it was not necessary for the respondents to make an application for execution pending appeal.

In line with its acceptance of that fact, the applicant, in its appeal, prays for the matter to be “remitted to the High Court to be heard and determined on an urgent basis.”

All in all, and for the reasons I have given above, I find myself totally disabled from granting the relief sought. The above conclusions preclude me from going any further because the appeal in the Supreme Court is indeed intended to direct this court to go into the merits of the matter.

The prayer in the appeal specifically reads as follows:

“That the ruling by the High Court in HC5500/10 be and is hereby set aside, and the matter is remitted to the High Court to be heard and determined on an urgent basis.”

It would therefore be improper for me to do what the Supreme Court has not yet directed this court to do.

In light of the foregoing, I dismissed the application with costs.

HH66-16 : MEIKLES LIMITED vs ZIMBABWE STOCK EXCHANGE and ALBAN CHIRUME
Ruled By: MAKONI J

The plaintiff (Meikles) issued summons against the two defendants, Zimbabwe Stock Exchange (ZSE) and Alban Chirume (Chirume) claiming a declaratur and damages in the sum of $50,000,000.

The background to the matter is that on 16 February 2013, the defendants suspended the trading of Meikles shares on the Zimbabwe Stock Exchange.

The suspension was done without affording Meikles an opportunity to make representations before such a serious adverse action was taken.

On 26 February, the defendants placed an advert in the Herald Newspaper cautioning the public to “exercise caution in dealing with the plaintiff's shares.”

The suspension was eventually lifted.

The defendants entered appearance to defend and filed an exception on behalf of both defendants and a special plea in bar in respect of Alban Chirume.

I must, at the onset, deal with the nature of pleadings before me.

The plaintiff's summons and declarations is ten pages and to it is attached two letters as annexures. The defendants' exception is three pages and the second defendant's plea in bar is one page.

Order 3 Rule 11 of the High Court Rules 1971 on this issue provides:

“Before issue, every summons shall contain -

(a)…,.

(b)…,.

(c) A true and concise statement of the nature, extent, and grounds of the cause of action and the relief or remedies sought in the action.”

The author, ISAACS. in Beck's Theory and Principles of Pleading in Civil Actions, 5ed…, had this to say:

“17. Before the court is asked to decide any question which is in controversy between litigants it is in all cases necessary (except as hereinafter indicated) that the matter to be submitted to it for decision shall be clearly ascertained.

The plaintiff shall state, in concise terms, what facts he intends to rely on and to prove and the defendant shall do the same so that on the day of trial neither party shall be taken by surprise and that it may not be necessary to have the case adjourned, thereby causing wasted expense both litigants from which the State and the lawyers alone derive profit.

It has therefore often been stated by our courts, and it cannot be too often stated, that, the object of requiring the parties to file pleadings is to enable each side to come to trial prepared to meet the case of the other.”

The authors HERBASTEIN and Van WINSEN in The Civil Practice of the High Courts of South Africa, 5th ed…, stated the following about pleadings:

“The requisites of good pleading are said to be that it should contain a statement of -

(1) Fact, not law;

(2) Material facts only;

(3) Facts not evidence; and

(4) Facts stated in a summary form and that 'material facts' are all facts which must be proved in order to establish the ground of claim or defence.”

MATHONSI J, in Fungai Nhau v Memory Kipe and Anor HH73-15, confronted with what he terms long winding special plea in bar/abatement, had this to say:

“By definition, pleadings must be concise and to the point.

They must identify the branch of the law under which the claim or defence to it is made and should not contain evidence.

Pleadings which are long-winding and argumentative should not find their way to these courts. It is a serious dereliction of duty for legal practitioners to continue, presenting such offensive pleadings when they have the aid of literature guiding the drafting of pleadings. I associate myself fully with the sentiments of MAKARAU JP (as she then was) in Chifamba v Mutasa & Ors HH16-08 (unreported) that:-

'Legal practitioners are urged to read on the law before putting pen to paper to draft pleadings in any matter is that what they plead is what the law requires their clients to prove to sustain the remedy they seek…,.. Litigation in the High Court is serious business and the standard of pleadings in the court must reflect such.'”

I associate myself fully with the above remarks.

Maybe if the legal practitioners in this matter had taken heed of the advice, the present application might not have been made....,.

The Exception

The defendants contend, that, the plaintiff failed to establish a cause of action against the defendants in that it failed to aver, with particularity, all the essential requirements for liability in a delictual claim.

They further contend that there is no link between the alleged negligence and the loss suffered by the plaintiff.

The declaration does not state the manner in which the patrimonial loss arose. The claim for the alleged fall in the share price of the plaintiff's shares cannot be made by the plaintiff as it does not own the shares.

The defendants contend that there is no recognizable cause of action which is contained in the plaintiff's declaration both in respect of the declaration and the claim for damages.

The plaintiff relies on section 14 of the High Court Act [Chapter 7:06] for the issuance of a declaration.

No right has been identified. Instead, the plaintiff seeks a declaration on a state of affairs which are factual and are in the past.

He relied on MDC v The President of the Republic of Zimbabwe 2007 (1) ZLR 257 (H) for his submissions.

The plaintiff also alleges a breach of administrative law duties in terms of Administrative Justice Act [Chapter 10:28] in order to justify the declaration and the claim for damages.

The relief provided for in terms of section 4 of the Administrative Justice Act does not include a declaratory order.

The plaintiff seeks to rely on section 66 of the Administrative Justice Act on the basis that once it establishes a breach, it must be granted the relief that it seeks.

That is a misreading of the Rules.

Section 66 follows section 65 which provides that the Zimbabwe Stock Exchange has power to make rules regulating the conduct of their members. The plaintiff cannot rely on section 66 as it gives power to the Zimbabwe Stock Exchange to control its own members. The power is not available to a member.

Counsel for the plaintiff submitted that, at this stage, the plaintiff has to set up a framework for the court to go by. Whether it can prove facts is another issue.

The Declaratur

He submitted that many grounds were pleaded, viz;

(i) That the defendants acted outside the law;

(ii) That the defendants did not accord the plaintiff the right to be heard;

(iii) That was in breach of section 3 of the Administrative Justice Act.

He further submitted that there is a concrete controversy between the parties. The action is not in the past and the grant of the declaratur raises the question of whether the defendant must pay damages or not.

The Damages Claim

Counsel for the plaintiff submitted that section 66 of the Administrative Justice Act is binding upon both the plaintiff and the defendants. The question would be whether the defendants are capable of breaching the rules in section 66. If so, then they caused damage to the plaintiff.

Whether they did so or not is a matter of evidence.

He further submitted that if one attacks the reputation of a company, shares of the company will suffer loss. The price at which a share trades is directly linked to how the company performs. The question of quantum is an actuarial issue.

Paragraph 22 of the declaration makes the allegation that the illegality has affected the plaintiff. The plaintiff claims for purely economic loss.

The Law

An exception is a pleading in which a party states his objection to the contents of a pleading of the opposite party on the grounds that the contents are vague and embarrassing or lack averments which are necessary to sustain a specific cause of action or the specific defence relied upon: see HERBSTEIN and Van WINSEN, The Civil Practice of the High Court of South Africa 5th ed…,.

The learned authors…, continue by saying:

“In order to disclose a cause of action, the pleading must set out every fact (material fact) which it would be necessary for the plaintiff to prove, if traversed in order to support his right to judgment of the court.”

See also Peebles v Dairiboard Zimbabwe (Pvt) Ltd 1999 (1) ZLR 41 (H); Dube v Banana 1998 (2) ZLR 92 (H); and Abrahamse & Sons v SA Railways & Harbours 1933 CPD 626.

The fundamental question to ask is whether the plaintiff had pleaded every material fact to be proved to entitle it to succeed in its claim.

The material facts are the facta probanda (the facts which are required to be proved in order to succeed in the cause of action) and not the facta probantia (the facts which would serve to prove the facta probanda); see Jowel v Bramwele Jones & Ors 1998 (1) SA 836 W…,.

The Declarator

In MDC v The President of Zimbabwe & Ors 2007 (1) ZLR 257 (H)…, MAKARAU JP…, set out the legal principles applicable when a declaratur is sought and the mental steps that the court must follow in determining whether to issue a declarator.

These principles include that the plaintiff must show that there is a right or obligation which becomes the object of enquiry. At p269C she made the following observation:

“It appears to me, from a reading of the above authorities, that what is required to be contended is a legal right and not the factual basis upon which a right may be found.”

The defendants contend that the plaintiff, in its pleadings, did not identify any right.

In casu, there can be no doubt that the legal right, subject to the claim, has been identified and properly articulated.

The plaintiff pleaded that the defendants did not accord the plaintiff the right to be heard. This is a principle established in the Constitution, Administrative Law, and in terms of common law.

The plaintiff has therefore established, that, there is a right whose existence has been pleaded. Whether the plaintiff will be able to establish that right, it is a different issue.

The Damages Claim

My view is that the plaintiff has pleaded the essential elements of a delictual claim. If it were to succeed in obtaining a declaratur, then, it could have established a link between the defendant's conduct and its loss.

As counsel for the plaintiff correctly pointed out, the issue of quantum is a matter of actuarial evidence.

The plaintiff pleaded, that, as a result of the unlawful activities of the defendants, which affected its share price, certain losses were caused to it which are recoverable from the plaintiff.

This is a purely delictual claim whereby the plaintiff alleges that its patrimony has been diminished by the conduct of the defendant and that it should be restored.

The concerns by the defendants, of lack of particularity, can be cured by making a request for further particulars.

I want to conclude by saying that one can sympathise with the position taken by the defendants in that although one can discern a cause of action for the summons and declaration, it is a long winding and inelegantly drafted pleadings.

For this reason, although the plaintiff has succeeded, I will depart from the norm that costs follow the cause. This is due to the fact, that, had the pleadings been drafted in terms of the Rules, the exception would not have been taken.

My view is that the plaintiff's pleading disclose a cause of action.

In the result, I will make the following order:

(1) The exception is hereby dismissed.

(2)...,.

(3) There is no order as to costs.

SC67-21 : COSSAM CHIANGWA and OTHERS vs APOSTOLIC FAITH MISSION IN ZIMBABWE and OTHERS
Ruled By: MAVANGIRA JA, MAKONI JA and KUDYA AJA

This is an appeal against the entire judgment of the High Court, dated 4 September 2019, in which the court a quo granted a declaratur and consequential relief sought by the respondents against the appellants and dismissed the application for a declaratur sought by the appellants against the respondents.

The order of the court a quo erroneously confirmed the terms of a provisional order of the initial urgent chamber application that had, by consent of the parties, been removed from the roll of urgent chamber matters, on 8 October 2018, and enlisted on the opposed roll. The provisional order was substituted by an “amended draft order” filed together with the respondents answering affidavits and heads of argument on 2 November 2018.

The erroneous order was, with the consent of the parties, corrected by this Court in terms of section 22(1)(a) of the Supreme Court Act [Chapter 7:13] in Civil Appeal No. SC527/2019, which was specially lodged by the respondents for that purpose and heard just before the present appeal.

The corrected order of the court a quo, therefore forms the basis of the present appeal.

THE FACTS

The appeal concerns a church dispute between two formations for the control and leadership of the Apostolic Faith Mission in Zimbabwe (the AFM or the church).

The appealed judgment is a consolidation of two applications that were filed separately by the parties.

The first application, HC9149/18, was filed by the first five respondents (Apostolic Faith Mission in Zimbabwe, Aspher Madziyire, Amon Madawo, Munyaradzi Shumba and Tawanda Nyambirai) against the seven hominal appellants (Cossam Chiangwa, Amon Chinyemba, Nathan Nhira, Shepherd Sebata, Donard Mdoni, Arthur Nhamburo and M. Mashumba) on 4 October 2018; while the second application, HC179/19, was filed by the first five appellants (Cossam Chiangwa, Amon Chinyemba, Nathan Nhira, Shepherd Sebata and Apostolic Faith Mission in Zimbabwe) against the second (Aspher Madziyire), third (Amon Madawo), sixth (Clever Mupakaidzwa), seventh (Briton Tembo) and eighth (Christopher Chembere) respondents on 10 January 2019.

In the first application, the respondents sought the nullification of a meeting held by the appellants on 22 September 2018, and all subsequent acts flowing from it while in the second application the appellants sought recognition as the duly elected office bearers of the church and consequential relief.

The High Court granted the first application and dismissed the second, with costs.

The church is a universitas with a written Constitution and consequent regulations, which inscribe its foundational values, confession of faith, mission and governance structures and reposes the power to sue and be sued in its national office bearers in clauses 1.2, 1.3, 1.4 1.4. 6(f) and 12.4.1, respectively.

The dominant protagonists in the two applications were the second respondent (Aspher Madziyire) and the first appellant (Cossam Chiangwa), respectively, who were elected President and Deputy President of the church at the triennial elections in April 2015. The third (Amon Madawo) and fourth (Munyaradzi Shumba) respondents were elected, at the same elections, as General Secretary and National Administrator.

Between August 2015 and 15 September 2018, the Church, led by the Apostolic Council and Workers Council, conducted a Constitutional Review Process (CRP) through a Constitutional Review Committee (CRC) chaired by the fifth respondent (Tawanda Nyambirai), a co-opted member of the Apostolic Council.

The Constitutional Review Process (CRP) was designed to address acute electoral, financial, and governance shortcomings through the amendment of the Constitution and geared to deliver free, fair and credible church elections; strengthen accountability and transparency; and engender parity and equity in the conditions of service of the clergy and development programs of the church in both rural and urban areas.

The Constitutional Review Process (CRP) culminated in the Extraordinary General Meeting (EGM) of the Workers Council of 10 February 2018, which resolved to hold the triennial Provincial and Workers Council elections, due on 28 April 2018, after “the Workers Council considers, and, if deemed fit, passes, with or without amendment, the proposed amendments to the Constitution of the Apostolic Faith Mission in Zimbabwe in terms of the attached draft” at its scheduled meeting of 28 April 2018.

The meeting of 28 April 2018 was terminated unceremoniously without resolving the proposed resolution.

Tonderai Mathende took the Church, the first (Apostolic Faith Mission in Zimbabwe), second (Aspher Madziyire) and fifth (Tawanda Nyambirai) respondents and the first appellant (Cossam Chiangwa) to court under HC4756/18 and obtained an order compelling the 2015 office bearers to reconvene and conclude the aborted Workers Council meeting of 28 April 2018.

By a letter dated 31 July 2018, the second respondent (Aspher Madziyire) called for a Workers Council Meeting to be held on 15 September 2018 in compliance with the court order issued under HC4756/18.

On 15 September 2018, the Workers Council met and considered the proposed Constitutional amendments and “accepted” them subject to the suspension of all the provisions, except for the provisions relating to the conduct of elections, in order to give other church members an opportunity to propose further amendments to the amendments.

The resolution was carried by 2,021 votes, inclusive of the appellants votes, against 35, with no abstentions.

The optimum number of councillors supplied by the respondents was 3,475 councilors against 2,056 provided by the appellants.

On 21 September 2018, the Apostolic Council met to consider the dates and rules for the impending triennial elections.

The provincial elections were to be held on 29 September and 3 October 2018, while the national elections would be on 3 November 2018.

The first appellant (Cossam Chiangwa) told the meeting that “he would go his own way because he did not accept the resolution that was passed by the Workers Council on 15 September 2015.”

Whereupon, he served written notice, dated 20 September 2018, and co-signed by all the appellants (Cossam Chiangwa, Amon Chinyemba, Nathan Nhira, Apostolic Faith Mission in Zimbabwe, Donard Mdoni, Arthur Nhamburo and M. Mashumba), except the fourth (Shepherd Sebata), on his fellow national office bearers of the meeting of 22 September 2018.

Paragraph 2 of the notice implored the targeted audience to:

“Please note that this is a National Workers Council of all those councilors who strongly feel the adoption of the DRAFT resulted in the formation of a totally different church and is in itself a departure from the church that they have always cherished and loved. It is, therefore, a National Workers Council of those councilors who would like to remain in the AFM in Zimbabwe Church which is governed by the old Constitution which the 15th September National Workers Council attempted to repeal.”…,.

The meeting of 22 September 2018, was purportedly attended by 2,056 councillors, comprised of 1,562 delegates and 567 pastors from 513 assemblies with apologies from 137 assemblies.

The attendees ignored the cease and desist call from the second respondent (Aspher Madziyire).

The meeting, inter alia, reviewed and nullified the resolution of 15 September 2018, and, by a total 1,557 affirmative votes, dismissed the serving national bearers, other than the first appellant (Cossam Chiangwa), arrogated to themselves the power to conduct triennial elections on 6, 13 and 20 October 2018 and incited the members to revolt against the defrocked office bearers.

On 25 September 2018, the Apostolic Council abandoned the saved electoral amendments because they were in complete dissonance with the preserved governance structures of the amended Constitution.

On 26 September 2018, the appellants (Cossam Chiangwa, Amon Chinyemba, Nathan Nhira, Shepherd Sebata, Apostolic Faith Mission in Zimbabwe, Donard Mdoni, Arthur Nhamburo and M. Mashumba) spurned the cease and desist order and call to return to the mainstream fold issued by the third respondent (Amon Madawo).

They appointed their own 26 provincial overseers and the fourth appellant (Shepherd Sebata) as the National Administrator to whom church funds were to be remitted.

They also urged all church members to ignore the triennial dates set by the Apostolic Council.

On 27 September 2018, the appellants were suspended without pay and benefits and subsequently charged with participating in an illegal meeting and formenting rebellion, disharmony, confusion, destabilization, disorder, and disturbances against the church; forming a splinter group and usurping the powers of the Apostolic Council and the other office bearers in violation of clauses 1.4.2 and 1.4.6 of the Constitution.

They snubbed the charges and notices of hearing, and were dismissed from their official positions on 15 October 2018 with effect from their respective dates of suspension.

They refused to vacate church premises and surrender church assets in their possession or under their control.

They were permanently replaced as office bearers at the national elections held by the respondents (Apostolic Faith Mission in Zimbabwe, Aspher Madziyire, Amon Madawo, Munyaradzi Shumba, Tawanda Nyambirai, Clever Mupakaidzwa, Briton Tema and Christopher Chembere) on 3 November 2018.

The appellants conducted parallel provincial elections on 3, 6, 7, 13 and 14 October 2018 and Worker's Council elections on 20 October 2018, where the first four appellants (Cossam Chiangwa, Amon Chinyemba, Nathan Nhira and Shepherd Sebata) were elected as President, Deputy President, General Secretary and National Administrator.

It was in their collective capacity, as purported office bearers, that they lodged the second application.

THE ARGUMENTS PRESENTED IN THE COURT A QUO

The First Application

In the first application, the respondents submitted, that, they were the duly elected office bearers of the church, who had legal standing to sue on its behalf for the vindication and protection of its assets through a declaratur and an interdict.

They contended that they had satisfied the requirements for a declaratur prescribed in section 14 of the High Court Act [Chapter 7:06] and the common law requirements for a final interdict and were thus entitled to such relief.

They argued that the meeting of 22 September 2018 was ultra vires the Constitution in that it violated the notice and quorum requirements stipulated in clause 12.7.1 as read with 12.3, clause 13.3.1 of the Regulations and clauses 12.6 and 12.9 and the financial probity arrangements enshrined in clause 12.5 and 12.6 of the Constitution.

They also argued that the vote of no confidence was not only alien to the Constitution but also violated the audi alteram rule.

Lastly, they contended that the appointment, instead of election, of office holders in the church, was anathema to the Constitution.

The appellants took five preliminary points. These were;

(i) That the application was not urgent;

(ii) The respondents did not have locus standi to represent the church as their tenure of office, as national office bearers, had expired on 28 April 2018 and had not been renewed;

(iii) The matter was lis pendens in Mujokeri v Madziyire HC4583/18, in which judgment had been reserved;

(iv) The application was a disguised review of the outcomes of the meeting of 22 September 2018 which could not be sought urgently, on review, or through a declarator; and

(v) Lastly, that there were material disputes of fact, pertaining to the quorum of the meeting of 22 September 2018, which could not be resolved on the papers.

On the merits, the appellants implicitly conceded that their meeting was not convened in terms of the Constitution by ascribing the call to “a big constituency of the church which was clearly not happy with the way the church was going about the Constitutional changes.”

They, however argued, that, this amorphous grouping had the power to dis-appoint just as it had the power to appoint the respondents.

They strongly contended that the resolution of 15 September 2018 was in breach of the mandatory procedural requirements of the two-thirds quorum prescribed in clause 12.6 of the Constitution.

The Second Application

In the second application, the appellants, who baptized themselves as 'the Originals' submitted, that, as the office bearers elected by the church at the triennial elections of 20 October 2018, they had the power to vindicate and protect the assets of the church from the respondents, whom they christened 'the Reform Side' whose tenure of office expired by the effluxion of time on 28 April 2018.

They further submitted, that, the respondents, by violating the amendment clause, clause 12.6 to the Constitution, had, by public acclamation, forfeited their claims to the leadership of the church to the appellants.

The respondents took two preliminary points:

(i) They contended, that, the appellants had no locus standi to represent the church as their election to the national offices was tainted by the illegality of the meeting of 22 September 2018 from which they traced their authority.

(ii) The second was that there were material disputes of fact on the procedure, substance, and effect of the meeting of 22 September 2018 which could not be resolved on the papers.

On the merits, the appellants contended, for the first time in argument, that, the respondents had seceded from the church on 22 September 2018 and therefore did not have locus standi to represent the church.

They argued, that, the respondents sought to overhaul the Constitution and reframe the church in their own image by abandoning the confession of faith and the fundamental doctrines of the church.

THE DETERMINATION OF THE COURT A QUO

The court a quo criticized both parties for raising preliminary points “in such a contentious matter.” It prefaced its decision on the preliminary objections by remarking that:

“Both Madziyire and Chiangwa should have realized that preliminary matters, though permissible in terms of the rules of court, served no purpose in such a contentious matter as the present one.

They should have remained alive to the fact, that, the same required the court to consider the merits of the case as opposed to having the same resolved on the basis of technical issues.

Any technical issue which is not capable of resolving the dispute of the parties is not worth the paper on which it is written. It becomes a time-wasting exercise which does not enhance the work of the court. It should, therefore, be avoided as it constitutes an exercise in futility which is of no benefit to anyone. It does not benefit the party which raises it, let alone the party against which it is raised.

Apart from the issue of lis pendens, which Chiangwa raised, I shall, therefore, deal with all the parties preliminary issues in the body of this judgment. They all relate to the reasons which prompted Madziyire and Chiangwa to file their respective applications.”

In regards to the preliminary objections moved by the appellants in the first application, the court a quo ruled, that, the question of urgency was no longer a live issue; lis pendens could not be sustained as the pending judgment in Mujokeri v Madziyire HC4583/18 had been handed down on 25 March 2019, prior to the hearing before it; there were no material disputes of fact on the quorum of 15 September 2018; and the use of a declarator rather than a review, in the circumstances of the application, was proper, as a nullity could not be reviewed; and, lastly, that, as the respondents were the only office bearers of the church at the time the proceedings were instituted, they had the requisite locus standi to do so.

On the merits, the court a quo, found, that, on a proper application of the operative Constitution of the church, the respondents had established their case on a balance of probabilities and granted them the relief set out in the amended draft order filed on 2 November 2018, as corrected by this Court.

It specifically found, that, they were the office bearers of the church vested with the power to call for, hold, and preside over the Workers Council meetings.

It also held, that, although the triennial anniversary date had passed, on 28 April 2018, clause 13.3.1 of the Constitution as read with clause 13.1.1 of the Regulations, preserved their term of office until the holding of triennial elections in the calendar year in which the triennial year fell; and, in the alternative, that, the common law extended their appointment beyond the triennial anniversary date to the date of the investiture of their elected successors.

It thus found, that, the respondents had proved that the conduct of the appellants, on 22 September 2018, had been motivated by selfish ambition to “illegally snatch power within the church through a coup” and “split the church in their quest for power” and not over any constitutional reform dispute - which reforms they voted in favour of.

It further determined that the meeting of 22 September 2018 suffered from fatal and incurable extrinsic and intrinsic irregularities that were in violation of the Constitution, which rendered the meeting void ab initio.

Lastly, it held that any outcomes that flowed from that meeting were also void and of no force or effect.

On the preliminary issues raised by the respondents in the second application, the court a quo ruled that there were no material disputes of fact which could not be resolved on the averments on quorum on the papers of the appellants in respect of the meeting of 22 September 2018; it upheld the respondents objection on locus standi; it found that the meeting violated the Constitution of the church; further, that, as the Workers Council elections held by the appellants on 20 October 2018 were premised on the meeting of 22 September 2018 they were tainted by these violations; it found both the meeting and the elections invalid and of no force or effect.

On the merits, it held that the appellants bore the onus of establishing, on a balance of probabilities, that the respondents had seceded from the mainstream church and formed a new church by abandoning the church Constitution and adopting the proposed amendments to that Constitution.

It found that the appellants had not placed any evidence capable of discharging the onus.

They had not filed the proposed amendments nor particularized the clauses in the accepted but suspended Constitution that violated the operative Constitution.

Rather, they had produced and relied on the same Constitution as the respondents.

The court dismissed the appellants contention, that, at the time the meeting of 15 September 2018 was held, the respondents tenure of office had expired on two grounds:

(i) The first was that clause 13.3.1 of the Constitution as read with clause 13.3 of the Regulations allowed the office bearers to continue in office beyond the triennial anniversary of their election to any date within the calendar year of such anniversary.

(ii) The second was that the common law abhorred a vacuum and thus allowed office bearers of a universitas to continue in office until elections were held to replace them.

It was on the basis of these findings that the court a quo granted the first application and dismissed the second application with costs.

THE GROUNDS OF APPEAL

The five grounds of appeal raised by the appellants were framed as follows:

“1. The High Court erred in failing to find that the adoption of a new Constitution by the second to eighth respondents and their followers, on 15 September 2018, was unprocedural and not in accordance with the provisions of the Constitution of the fifth appellant.

2. The High Court consequently erred in failing to find that the second to eighth respondents and their followers seceded from the church of the fifth appellant as from 15 September 2018 and therefore had not locus standi to challenge the proceedings of the fifth appellant's church subsequent to that date.

3. The High Court further erred in finding that the appellants had no locus standi to institute the proceedings in case number HC179/19, and, having so found, in going ahead to determine the merits of that application.

4. The High Court further grossly erred in finding that the new Constitution, adopted by the second to eighth respondents, was not a renunciation of the fifth appellant's Constitution when the said Constitution was not placed before the court by the respondents who had the onus to place it before the court.

5. The High Court further erred in finding that the appellants could not seek consequential relief upon the grant of a declarator unless it was combined with an interdict or a claim for a vindicatory relief.”

ISSUES FOR DETERMINATION ON APPEAL

The cumulative import of the first four grounds of appeal was that the court a quo grossly misdirected itself in finding that the respondents, and not the appellants, were the proper office bearers of the church imbued with the requisite legal standing to act on its behalf.

The last ground of appeal interrogates the correctness of the observation of the court a quo that the declarator sought by the appellants was fatally defective for want of vindicatory consequential relief.

The two issues for determination on appeal that arise from all the grounds are:

1. Whether the court a quo was correct in finding that the respondents, and not the appellants, were the recognized office bearers of the church who had locus standi to act on its behalf.

2. Whether the declarator sought by the appellants was not conjoined with consequential relief and therefore fatally defective.

SUBMISSIONS IN THIS COURT

In this Court, counsel for the appellants submitted that the respondents did not have locus standi to institute or defend legal proceedings on behalf of the church because they seceded from the church on 15 September 2018.

He contended that the adoption of the constitutional amendments by the Workers Council, on 15 September 2018, constituted the act of secession in two respects:

The main one was that the adoption was in breach of the peremptory notice and quorum requirements prescribed in clause 12.6 of the Constitution: and, the alternative was that the very adoption of the amendments, whose content was materially at variance with the content of the amended Constitution constituted a renunciation of the original Constitution, and was therefore an act of secession.

He also contended, that, the duty to place the constitutional amendments before the court a quo, which would have established secession, lay on the respondents.

He argued, that, the effect of the act of secession was that the respondents ceased to be office bearers of the church and concomitantly lost the right to represent the church in any legal proceedings lodged after that date.

He further contended, that, it was remiss of the court a quo to further determine the second application on the merits once it had decided the issue of locus standi against the appellants.

Lastly, he contended that the finding of the court a quo, that the relief sought in the second application was fatally defective for failing to con-join the declarator with an interdict cum vindication was incorrect.

Counsel for the respondents submitted, that, the secession argument could not be properly raised in the court a quo or in this Court because it had not been pleaded by the appellants in their opposing affidavits in the first application and founding affidavits in the second application.

He contended, that, the appellants case, in both claims, was based on the purported illegal stay in office subsequent to 28 April 2018.

In the alternative, he argued that the resolution accepting and immediately suspending the constitutional amendments, other than those relating to elections, did not constitute secession.

He contended, that, the respondents remained the only office bearers of the church imbued with the power to represent it in all legal proceedings launched by or against the church.

In reply, counsel for the appellants argued, that, the oblique reference to the negation of the “foundational and fundamental doctrines of the AFM in Zimbabwe and of the AFM International” in the appellants memorandum of 24 September 2018, and the averments in paragraph 46 to 49 of the appellants founding affidavits sufficed to found secession as a cause of action.

THE LAW

The principles on which secession is based are well settled in this country. They are crystallized in the case of The Church of the Province of Central Africa v Diocesan Trustees, Harare Diocese 2012 (2) ZLR 392 (S).

In that case…, and in Sibanda & Ors v The Apostolic Mission of Port Oregon (Southern African Headquarters) SC49-18…, secession was equated to schism and unilateral declaration of independence and was authoritatively defined as “the separation of a Church into two Churches or the secession of a group owing to doctrinal, disciplinary differences.”...,.

The alternative contention, on secession, submitted by counsel for the appellants is unsustainable.

The import of the submission is to deny the Church the constitutional power to reframe itself in tandem with evolving contemporary religious developments and thought, which would impact on its shared fundamental religious doctrines and principles.

The Constitution of any organisation is a living document, which must evolve and be amenable to necessary periodic reviews to remain relevant to its vision, mission, and core values.

The church is no exception. It cannot remain trapped in a time warp of a bygone era.

In casu, there were no entrenched or pillar clauses in the church Constitution which precluded the Workers Council from amending the Constitution.

Rather, the Constitution contemplated its own amendment - including the clauses relating to the church's confession of faith, ecclesiastical doctrines, governance, worship, and discipline.

All that was required of the Workers Council was to follow the requirements of Clause 12.6 and the prescribed consultative processes.

It did so subject to the intervening order of court that had to be obeyed in accordance with the doctrine of obedience to the law; an aspect the rule of law.

In any event, a reading of The Church of the Province of Central Africa v Diocesan Trustees, Harare Diocese 2012 (2) ZLR 392 (S)…, suggests that the passing of an invalid resolution does not constitute a renunciation of the fundamental doctrines of the church but merely makes the resolution void ab initio.

I am unable to find, that, by passing an invalid resolution, the Workers Council evinced an intention to secede from the Church.

A void ab initio resolution would be of no force or effect. It would have preserved the subsisting status quo ante, thus guaranteeing the continued validity of the subsisting Constitution and tenure of the elected office bearers.

The alternative submission, predicating secession on the content of the constitutional amendments, would, therefore, be dismissed for lack of merit.

There is a further basis for dismissing the secession argument.

It is, that, the appellants were aware, before their meeting of 22 September 2018, that, the resolution had suffered a still birth at inception and would not be applied to the impending triennial elections.

The awareness is shown by the following factors:

(i) Firstly, the appellants characterized the resolution in the notice of meeting of 20 September 2018 as an “attempt to repeal” the Constitution.

(ii) Secondly, they boasted, in their memorandum of 26 September 2018, that, their unsanctioned meeting had prompted the Apostolic Council to abandon the electoral amendments.

(iii) Lastly, they declined to return to the mainstream fold when entreated to do so on 26 September 2018.

There was therefore no secession by the respondents emanating from the adoption of the resolution at the time the appellants held the meeting of 22 September 2018, conducted their own triennial elections in September and October 2018 and lodged the second application in January 2019.

The further contention by counsel for the appellants, that the appellants were prevented from particularizing the decimation of the subsisting Constitution by the respondents failure to attach the constitutional amendments to their pleadings a quo is clearly disingenuous.

This contention, which relates to the fourth ground of appeal, seeks to place the onus of placing the amendments on the respondents.

In so doing, the appellants overlooked the trite principle of our law, that, he who alleges must prove.

This point was emphatically restated by this Court in Zimbabwe United Passenger Company Limited v Packhorse Services (Pvt) Ltd SC13-17…, as follows:

“The cardinal rule on onus is that a person who claims something from another in a Court of law has to satisfy the Court that he is entitled to it: see Pillay v Krishna 1946 AD 946 at 952–953. It is also settled that he who alleges must prove: see MB Investments (Pvt) Ltd v Oliver & Partners 1974 (3) SA 269 (RA).”

See also Goliath v Member of the Executive Council for the Eastern Cape [2014] ZASCA 182…,.

It is trite that the existence of secession is a question of fact.

The appellants bore the onus to establish secession by producing the proposed constitutional amendments.

They disingenuously claimed that the amendments were hidden from them by the respondents when it was common cause that both hard and soft copies of the documents had been dispatched to all structures on 18 February 2018 and 31 July 2018.

It is clear that the appellants did not attach the proposed amendments to their own pleadings because they were not necessary to establish the case they pleaded in the second application.

This last point on secession is also unmeritorious.

The appellants failed to establish the jurisdictional facts upon which they sought to predicate the secessionist argument....,.

The meeting of 22 September 2018 was the genesis of the appellants secession from the mainstream church which had matured by the time they held their own parallel elections in October 2018 and filed the second application in January 2019....,.

The ratio decidendi was that the appellants did not have the requisite locus standi to institute HC179/19 because they were not office bearers of the Church.

This is how the court a quo expressed itself on the question of locus standi…,:

“The question which begs the answer is: did Chiangwa act in terms of the Constitution and its Regulations when he convened the meetings of 22 September 2018?

The answer to the same is in the negative.

The second question which flows from the first and its answer is: was the meeting of 22 September 2018, which was called in violation of the Constitution, valid?

The answer is in the negative.

The third and final question is: does any act which resulted from the invalid meeting carry any semblance of validity?

The answer is, once again, in the negative.

On the strength of the above mentioned three questions and their respective answers, therefore, it cannot be said that Chiangwa has any locus standi to apply as he did under HC179/19.

His conduct, which emanated from the meeting of 22 September 2018, is a complete nullity. All the activities which he undertook on the basis of that meeting were a nullity.

Madziyire, and not Chiangwa, has locus standi to sue as he did. He has substantial interest in the affairs of the Church. Chiangwa does not have such.”

The finding a quo, that it was the appellants who seceded, is therefore unassailable.

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Shareholding re: Shareholder Meetings, Notices, Quorums, Passing of Resolutions & Shareholder Rights

HB74-10 : REBECCA SIZIBA vs BAMSLOVE INVESTMENTS (PVT) LTD and MARTIN SIMMONS and REGISTRAR OF COMPANIES Ruled By: MATHONSI J

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HB74-10 : REBECCA SIZIBA vs BAMSLOVE INVESTMENTS (PVT) LTD and MARTIN SIMMONS and REGISTRAR OF COMPANIES
Ruled By: MATHONSI J

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