This is an appeal against the whole judgment of the High Court (the court a quo) in which it dismissed the appellant's application for a declarator.
FACTUAL BACKGROUND
The appellant is a company under liquidation. The first respondent (Sheriff of Zimbabwe) is cited in his official capacity. The second respondent (Interfin Banking Corporation) is a banking institution incorporated in terms of the laws of Zimbabwe. The third respondent (Al Shams Global BVI Limited) is a company incorporated in terms of the laws of the British Virgin Islands. The fourth respondent (Jayesh Shah) is a male adult who is also the director of the third respondent. The fifth and sixth respondents (Registrar of Deeds and Master of the High Court) have been cited in their official capacities.
On 12 December 2019, the appellant filed an application for a declarator through its liquidator, who was acting in terms of a certificate of appointment issued by the sixth respondent. In that application, the appellant sought a declaration to the effect, that, it is the owner of a certain piece of land known as Stand 666 Marlborough Township Extension 5 of Subdivision A of Strathmore held under Deed of Transfer No. 8810/2003 (hereinafter called the property).
The appellant also wanted delivery of the original copy of the Deed of Transfer No. 8810/2003, under which the property was held, from the first and third respondents.
The events that led to the application are as follows:
On a date that was not specifically stated, the appellant obtained a loan from the second respondent (Interfin Banking Corporation) which was secured under Mortgage No.2069/2010. The second respondent subsequently went under liquidation, but, before that, it ceded the debts and rights in the mortgage bond registered in its favour, to the third respondent (Al Shams Global BVI Limited). The third respondent later obtained a judgment against the appellant and issued a writ against the property which was sold in execution.
During the sale of the property, which had been declared specially executable by the court on 4 May 2016, the appellant instituted voluntary liquidation proceedings. The first respondent (Sheriff of Zimbabwe) placed the property under a caveat on 24 August 2016. The appellant was placed under provisional liquidation on 9 August 2017 and the order was confirmed on 11 October 2017.
The first respondent conducted a sale in execution on 6 February 2017.
Initially, the fourth respondent (Jayesh Shah) was confirmed as the highest bidder but failed to pay the purchase price. The second highest bidder, who happened to be the third respondent (Al Shams Global BVI Limited), was offered the property and was subsequently confirmed as the winning bidder.
The appellant claimed, that, the sale had been confirmed without it being given the required fifteen (15) days notice to object to the sale in terms of the repealed High Court Rules 1971. In addition, the appellant claimed, that, there had been a sham scheme by the third and fourth respondents, with the fourth respondent being a major shareholder of the third respondent. The appellant claimed, that, the fourth respondent was competing with himself by offering the highest bid which he failed to pay so that the third respondent would be declared the second highest bidder.
When the order for the final liquidation of the appellant was granted by the court, on 11 October 2017, the property had not been transferred to the third respondent.
The appellant's liquidator requested the first respondent to give him the title deeds of the property. However, the first and third respondents are said to have refused to hand over the original copy of the Deed of Transfer.
This prompted the appellant to file an application for a declaratur in the court a quo.
It is in that application that the liquidator of the appellant disclosed that he had already sold the property to one Mr Manyika, on 24 July 2017, for the amount of US$190,000 and that the purchaser had paid the full purchase price and was awaiting transfer of the property.
The liquidator submitted, that, he was allowed, at law, to sell the mortgaged property in order to pay off creditors.
The application was opposed by the second respondent who contended, that, it had been unnecessarily joined to the proceedings as it would not be affected by the relief sought by the appellant.
The third respondent also opposed the application and raised four points in limine:
(i) Firstly, the third respondent argued, that, there was an existing matter pending before the court a quo, under HC11203/17, which was premised on the same cause of action as the court application that was before the court.
(ii) The second issue raised was that the non-joinder of Mr Manyika as a party to the proceedings was fatal to the application.
(iii) The third respondent also argued, that, the appellant ought to have sought leave to institute proceedings against the second respondent which was under liquidation.
(iv) In addition, the third respondent contended, that, the application was fatally defective due to the appellant's failure to obtain leave to institute proceedings against it as it is a peregrinus.
In relation to the merits of the case, the third respondent opposed the application on the basis, that, the appellant had no real right of dominium over the property which had been declared specially executable by the court. The third respondent asserted, that, the property had been sold in execution before the appellant was placed in liquidation. It also argued, that, as the property had been bonded owing to the debt due to the third respondent, as ceded by the second respondent, the appellant ought to have sought the consent of the second and third respondents before selling the property.
Moreover, the third respondent prayed for the application to be dismissed, with costs borne by the liquidator of the appellant in his personal capacity.
The fourth respondent also opposed the application. As the fourth respondent had deposed to the third respondent's opposing affidavit, in his capacity as its director, he associated himself with the averments made in that affidavit.
Nonetheless, the fourth respondent added that the application was unwarranted and motivated by a desire to assist the appellant's shareholders. He argued, that, there was no basis, at law, in terms of which the appellant's liquidator could set aside an entire sale in execution and sell the property to a third party.
He stressed, that, liquidation does not automatically set aside a sale in execution and permit the appellant to resell the property.
Additionally, the fourth respondent submitted, that, the order confirming the liquidation of the appellant only set out parts of section 221(2)(a)–(h) of the repealed Companies Act [Chapter 24:03] (hereinafter referred to as the Act) as the powers which the liquidator could exercise in terms of the Act. As the liquidator of the appellant relied upon other provisions of the Companies Act, the fourth respondent was of the view, that, he was acting in breach of the terms of his appointment.
Lastly, the fourth respondent alleged collusion between the appellant's legal practitioners and its liquidator and prayed for costs de bonis propriis to be granted against the legal practitioners.
Regarding the merits of the case, the appellant submitted, that, the liquidator had acted in terms of section 276 of the Companies Act which empowered him to recover and take the assets of the appellant under liquidation.
The appellant submitted, that, as the transfer of the property to the third respondent had not taken place, the property was still owned by the appellant.
In addition, the appellant argued that the first respondent had not notified its directors, at the material time, of the sale of the property before confirming it, and this nullified the whole procedure as it was done contrary to the rules of the court. The appellant also argued, that, the sale was invalid because it was not given fifteen (15) days notice within which to object to the confirmation of the sale in terms of the rules.
Lastly, the appellant asserted that in terms of section 213 of the Companies Act, transfer of the property could not proceed without the leave of the court.
Per contra, the third and fourth respondents argued that the judicial attachment of an immovable property creates a judicial mortgage, and, because of this, the appellant was deprived of any rights over the property.
The respondents also submitted, that, when the property was attached, it became vested in the first respondent and nothing could be done without the first respondent's consent or authority.
Furthermore, the respondents were of the view that, as the second respondent had ceded the debt to the third respondent, the third respondent assumed the position of caveator whose interests in the property were protected by the caveat. The appellant therefore should have sought the consent of the third respondent before selling the property.
Moreover, the respondents submitted that the Deposit Protection Corporation had the right to restrain dealings with the mortgaged property until payment of the debt and interest in full. As such, the disputed property could not be sold without the consent of the Deposit Protection Corporation.
The court a quo dismissed the points in limine raised by the third respondent.
It found, that, the preliminary point of lis pendens was devoid of merit as the litigation in HC11023/17 did not involve the same parties as those in the application before it.
The court also dismissed the point, that, the appellant should have sought leave to institute proceedings against the third respondent which is a peregrinus. The court a quo held, that, the conduct of the third respondent showed that it had submitted to the jurisdiction of the court.
Furthermore, the point in limine to the effect that there was a material non-joinder of Mr Manyika was also dismissed as the court found that such non-joinder was not fatal to the application.
On the merits, the court a quo found that the application by the appellant sought the setting aside of the sale of the property to the third respondent - which property had already been declared specially executable by the High Court.
It was the court's observation, that, such an order could not be sought without first seeking the setting aside of the order which declared the property specially executable.
In reference to the appellant's claim, that, the sale of the property to the third respondent was not perfecta, the court a quo held that the judicial sale had been completed by the time the appellant was declared to be under provisional liquidation on 9 August 2017.
The court further noted, that, the appellant purported to sell a property that the first respondent had already sold to the third respondent in the execution of a judgment debt. Likewise, the court a quo held that there was a judicial caveat on the property which the appellant ought to have respected.
In addition, the court a quo was of the view that the appellant's conduct frustrated the transfer of the property to the third respondent when the sale was perfecta. The court held, that, the attachment of the property by the Sheriff vests a real right in the judgment creditor which means the property cannot be disposed of without the judgment creditor's consent. As such, the appellant could not deal with the property as it pleased.
It was the court's finding, that, in light of the appellant's failure to set aside the order that declared the property specially executable, or nullifying the writ which attached the property, the disputed property did not form part of the appellant's assets. The application was subsequently dismissed for lack of merit.
It is against this decision that the appellant has noted an appeal on the following grounds:
GROUNDS OF APPEAL
The grounds of appeal are as follows:
1. The court a quo erred in holding, that, the contention of the appellant was that the sale was not perfecta and should be set aside because transfer had not been effected and proceeded to accept that the first respondent had followed and fulfilled the correct procedure.
2. The court a quo erred and grossly misdirected itself in not finding that the first respondent failed to follow due process when conducting and confirming the sale thereby rendering the sale not perfecta.
3. The court a quo erred in holding, that, the third respondent had become the owner of Stand 666 Marlborough Township despite the fact that no transfer had been effected by way of registration of title at the Deeds Registry.
The relief sought by the appellant is as follows:
“RELIEF SOUGHT
WHEREFORE, the appellant prays for the following relief:
1. That, the instant appeal succeeds.
2. That, the order of the High Court be and is hereby set aside and substituted with the following:
“(a) That, the immovable property, namely, a certain piece of land situated in the District of Salisbury called Stand 666 Marlborough Township Extension 5 of Subdivision A of Strathmore held under Deed of Transfer No. 8810/2003 forms part of the assets of the applicant company in liquidation.
(b) That, the first and third respondents deliver the original copy of the Deed of Transfer No. 8810/2003 in terms of which applicant holds a certain piece of land situated in the District of Salisbury called Stand 666 Marlborough Township Extension 5 of Subdivision A of Strathmore to the applicant within ten (10) days from date of service of this order.”
Before this Court, the following submissions were made:
APPELLANT'S SUBMISSIONS
Counsel for the appellant submitted, that, the effect of the order placing the appellant under liquidation was the creation of a common law principle known as concursus creditorum which is codified in terms of section 212 of the repealed Companies Act. He submitted, that, section 213 of the repealed Companies Act provided for the stay of any proceedings against the property of a company under liquidation. As such, the property in question became part of the company's estate upon the granting of the order of liquidation.
Furthermore, counsel submitted that ownership of the property remained vested in the appellant in whose name the title deed was registered.
Counsel for the appellant also submitted, that, the judicial sale of the property was not perfecta as a sale only becomes perfecta upon registration with the Deeds Registry.
Moreover, counsel argued that the judicial attachment of the property created a judicial mortgage (pignus judiciale) which did not have greater powers than an ordinary mortgage and had no effect on the liquidation proceedings.
SECOND RESPONDENT'S SUBMISSIONS
In response, counsel for the second respondent submitted that it would abide by the decision of the court as it had no direct and substantial interest in the matter and the relief sought did not affect it.
THIRD RESPONDENT'S SUBMISSIONS
Counsel for the third respondent submitted, that, by the time the appellant was placed under liquidation, the judicial sale of the property was perfecta. Due to this, section 213 of the repealed Companies Act was inapplicable as the property did not form part of the assets of the appellant which the liquidator had the power to recover.
Counsel further submitted, that, registration of a title deed in one's name was not the sole proof of ownership of immovable property. He stated that there are special circumstances where the court goes beyond the title deed to ascertain the true owner of the property.
He averred, that, in casu, the judicial sale of the property and payment of the purchase price, were special circumstances that warranted a finding by the court a quo that ownership of the property had passed to the third respondent.
FOURTH RESPONDENT'S SUBMISSIONS
The fourth respondent submitted, that, section 213(b) of the repealed Companies Act makes an exception to the provision that anything done after liquidation proceedings have commenced is void.
He further submitted, that, the court a quo had resolved the matter on the basis of equity as the sale had been confirmed and the third respondent had paid the purchase price and all that was outstanding was the transfer of the property and registration of the title deed in its name at the Deeds Registry.
ISSUES FOR DETERMINATION
The issues for the determination of this appeal are as follows:
1. Whether or not the court a quo erred by finding that the third respondent is the owner of Stand 666 Marlborough Township.
2. Whether or not the court a quo erred in finding that the judicial sale was perfecta.
APPLICATION OF THE LAW TO THE FACTS
WHETHER OR NOT THE COURT A QUO ERRED BY FINDING THAT THE THIRD RESPONDENT IS THE OWNER OF STAND 666 MARLBOROUGH TOWNSHIP
The issue of whether or not the court a quo erred in finding, that, the third respondent is the owner of Stand 666 Marlborough Township is central to the determination of what prevails over the other between a liquidation and a judicial attachment.
Counsel for the appellant argued, that, in terms of section 213 of the repealed Companies Act, all actions and proceedings against a company in liquidation cannot to be proceeded with without the leave of the court. As the transfer of the property had not been done when the appellant was placed under final liquidation, he submitted that the third respondent had to seek leave from the court for the transfer to be effected.
In addition, counsel for the appellant maintained that the appellant holds a real right over the property whereas the third respondent only has a personal right.
The thrust of these submissions is that since the appellant had been placed under liquidation, the liquidator had the authority to dispose of the appellant's assets despite the fact that there was a judicial attachment or caveat operating against the property in question.
The term 'real right' is defined in section 2 of the Deeds Registry Act [Chapter 20:05] as “any right which becomes a real right upon registration.”
In the case of Mavhundise v UDC Ltd & Ors 2001 (2) ZLR 337 (H)…, the court held that:
“Ownership of land can only be acquired by transfer of the ownership from the previous owner, and such transfer must be registered in the Deeds Registry.”
In light of the above, it is clear that a real right in an immovable property is established by the registration of that right in the Deeds Registry.
Nonetheless, this Court, in the case of CBZ Bank Limited v (1) David Moyo (2) Deputy Sheriff, Harare SC170-18, stated the following:
“In any event, the registration of transfer in the Deeds Registry or registration of cession at the offices of a local authority or Deeds Registry does not always reflect the true state of affairs. A title deed or registered cession is therefore prima facie proof of ownership or cessionary rights which can be successfully challenged. When the validity of title or registered cession is challenged, it is the duty of the court to determine its validity in order to make a ruling which is just and equitable.”
From the above, it is pertinent to note that there are instances where the registration of a real right to an immovable property at the Deeds Registry can only be prima facie proof of ownership. This prima facie right is subject to challenge by any other person who may claim to have a real right over the same property.
These special circumstances were explained by this Court in CBZ Bank Limited v (1) David Moyo (2) Deputy Sheriff Harare SC170-18 in the following manner:
“Special circumstances exist where a purchaser has failed to have the property registered in his name, when he and the seller have demonstrated a clear intention to effect transfer, and when there was no legal impediment to such transfer or the impediment does not justify the refusal to grant protection to the purchaser.”
In the case of Van Niekerk v Fortuin 1913 CPD 457, the Court highlighted that:
“It seems to me that the plaintiff, being a judgment creditor, and the property being still registered in the name of the defendant, prima facie the plaintiff has the right to ask that the property shall be seized in execution, unless the party interested can show that there are special circumstances why such an order should not be granted.”
Based on the above, the court a quo found that the sale of the property to the third respondent had been completed before the appellant was placed under liquidation, hence, there was no legal impediment affecting the sale.
This finding cannot be faulted.
In addition, the first respondent had attached the property in question and issued a writ of execution against it. The appellant did not challenge the attachment and the writ of execution was not set aside.
The writ is still extant and valid.
The effect of a judicial attachment of immovable property was dealt with by the court in the case of Cold Chain Zambia Limited v Kingsley (nee Nehonde) & Ors HH370-20 as follows:
“The attachment in execution of property, at the instance of the judgment creditor, creates a real right in favour of the judgment creditor in the property in question.”
The above puts to rest the contention by the appellant, that, the court a quo erred by declaring that the third respondent had become the owner of the property in the absence of transfer from the appellant and registration of ownership at the Deeds Registry.
Moreover, in the case of The Sheriff for Zimbabwe & Anor v Willdale Limited t/a Willdale Bricks HH387-17, MAKONI J…, cited with approval the case of Liquidators Union and Rhodesia Wholesale Limited v Brown & Company 1922 AD 549…, as follows:
“…,. While an ordinary arrest of the property under the Roman-Dutch law gives no preference, an arrest effected on property in execution of a judgment creates a pignus praetorium or to speak more correctly, a pignus judiciale, over such property.
The effect of such a judicial arrest is that the goods attached are thereby placed in the hands or custody of the officer of the Court. They pass out of the estate of the judgement debtor, so that, in the event of the debtor's insolvency, the curator of the latter's estate cannot claim to have the property attached delivered up to him to be dealt with in the distribution of the insolvent's estate.”…,.
In light of the above authority, I am of the view that the appellant cannot claim to have a right over the disputed property as it is no longer part of its assets.
The appellant tried everything so that the property could not be attached.
The property is vested in the first respondent and awaiting transfer, whilst the third respondent has a real right of ownership over it. It is on this basis, that, I am inclined to remark that since judicial attachment took place first, it prevails over liquidation.
Therefore, the appellant is not the owner of the property.
