Edwin Chimanye v Knowledge Hofisi N.O. and David Whitehead Textiles (under Judicial Management) and Master of the High Court and Marumanzeve Charumbira and Sehen Musapuri and Tadious Maweto

### Preamble
1
HH 193-21
HC 10129/19
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EDWIN CHIMANYE

versus

KNOWLEDGE HOFISI N.O.

and

DAVID WHITEHEAD TEXTILES (under Judicial Management)

and

MASTER OF THE HIGH COURT

and

MARUMANZEVE CHARUMBIRA

and

SEHEN MUSAPURI

and

TADIOUS MAWETO

HIGH COURT OF ZIMBABWE

CHAREWA J

HARARE, 25 March & 28 April 2021

Opposed Application – Application for leave to institute proceedings

Ms Vera, for the applicant

Ms R Mabwe with Ms C Damiso, for 1st and 2nd respondents

Mr T Chagudumba, for 4th  to 6th respondents

CHAREWA J: This is an application for leave to institute proceedings in which applicant seeks the removal of first respondent, as  the judicial manager of second respondent, on the grounds that first respondent has conducted himself in a manner prejudicial to creditors and shareholders of second respondent and is thus a threat to their interests. The application is brought in terms of s301 (1) of the Companies Act [Chapter 24:03].

Background

Applicant is a shareholder in second respondent, which was placed under provisional judicial management on 1 December 2010. Subsequently, second respondent was placed under final judicial management and on 7 April 2014, first respondent was appointed the final judicial manager, upon removal of the original judicial manager. He remains second respondent’s judicial manager to date.

Applicant contends that first respondent’s tenure has caused more harm than good to both creditors and shareholders of second respondent and must therefore vacate the office of judicial manager lest creditors and shareholders will lose their investments. He therefore seeks the leave of this court in terms of s 301 (1) to “institute proceedings against second respondent”.

In limine

The first and second respondent raise the preliminary point that the application is fatally defective and should be struck out as s301 does not provide for the remedy sought. Fourth to sixth respondent add their voice to the effect that, in any event, the removal of a final judicial manager does not require leave as s 313 as read with s 273 is applicable. Further s 305(3) gives the court power to vary a final judicial management order at any time and in any manner on the application of the Master, the judicial manager or a duly authorised representative of the majority of the general body of creditors. Thus the application is improperly brought.

Ms Vera, for applicant, concedes that s301 does not support this application and that should have been the end of the matter. However, she argues that there is a lacuna in the provisions of the law in so far as removal of a final judicial manager is concerned, hence the provisions of s 301 relating to removal of a provisional judicial manager must be resorted to. Further, in response to fourth and sixth respondent, applicant also concedes that the dispute is between himself and first respondent and no relief is sought against second respondent. No explanation was proffered as to why paragraph 1 of the draft order incisively seeks leave to sue second respondent in circumstances where all applicant wants is that the final judicial manager be removed. However, applicant insists that removal of the final judicial manager impacts on second respondent, hence it must be cited as party to the proceedings and consequently leave must be sought.

Analysis

Section 301(1) provides as follows:

“301	Contents of provisional judicial management order

A provisional judicial management order shall contain-

the date of the return day, which shall not be less than sixty days from the date of the grant of the provisional judicial management order; and

directions that the company named therein shall be under the management, subject to the supervision of the court, of a provisional judicial manager appointed in terms of section 302, and that any other person vested with the management of the company’s affairs shall from the date of the making of the order be divested thereof; and

such other directions as to the management of the company, or any matter incidental thereto, including directions conferring upon the provisional judicial manager the power, subject to the rights of the creditors of the company, to raise money in any way without the authority of shareholders, as the court may consider necessary;

and may contain directions that while the company is under judicial management, all actions and proceedings and the execution of all writs, summonses and other processes against the company (my emphasis) be stayed and be not proceeded with without the leave of the court.”

Clearly, s 301(1) does not ground any application for leave to remove a final judicial manager. It provides for the contents of a provisional judicial management order. Hence an aggrieved party does not obtain the method or manner of seeking relief against the misdeeds of the provisional judicial manager from s 301. In fact, s301 provides that only actions and proceedings and execution of writs, summons and other processes against the company shall be stayed and shall not be proceeded with without the leave of the court. I must agree with the respondents that the removal of a final judicial manager for his own misdeeds is not an action against the company. In fact, the applicant admits that he seeks no recourse against the company under judicial management, a position which is commensurate with the ordinary interpretation of “actions and proceedings” against the company envisioned in s 301(1).

It seems to me that applicant totally misconstrues the rationale behind the requirement to seek leave to sue a company under judicial management or in liquidation. This requirement is predicated on the need to maintain the status quo so as to preserve and protect the assets of the company for the benefit of its creditors and shareholders. Removal of a judicial manager does not affect or diminish the assets of a company such that leave would be required.

Secondly, except in so far as s 41 of the Administration of Estates Act [Chapter 6:01] is intended to protect the interests of beneficiaries and creditors in the same manner that s301 is intended to protect the rights of the company and its creditors by requiring leave to litigate against the company under judicial management, I do not see much relevance in the case of Muchini v Adams cited by first and second respondent. However, the principle stated therein at p 70 A, that an application stands or falls on the averments made in the founding affidavit is apposite. And in his founding affidavit, applicant predicates his application on s 301(1).

The applicant argues that the company was placed under provisional judicial management in terms of s 301(2) which permits an application for removal of a provisional judicial manager. He further submits that such provisional judicial manager may only be removed with leave of the court as provided for in s 301(1) as read with paragraph 5 of the provisional judicial management order. By extension, because there is no similar provision relating to the removal of final judicial manager, applicant is entitled to resort to the provisions relating to removal of a provisional judicial manager to seek removal of a final judicial manager.

I cannot agree. Provisional judicial management and a provisional judicial manager are interim. In its wisdom, the legislature distinguished the requirements for provisional judicial management from final judicial management by providing that leave must be sought to remove a provisional judicial manager to protect the company in the interim, pending final processes. It is for this reason that leave to remove a provisional judicial manager is necessary.

Besides, in so far as the removal of a final judicial manager is concerned, I do not see that there is any lacuna in the law. S313 provides as follows:

“313 Application of certain provisions of winding up to judicial management

In every case in which a company is placed under judicial management, sections two hundred and sixteen, two hundred and thirty-five, two hundred and thirty-seven, two hundred and thirty-eight, two hundred and seventy-two, two hundred and seventy-three,(my emphasis) two hundred and seventy-four, two hundred and seventy-five, two hundred and eighty-nine, two hundred and ninety and two hundred and ninety-eight and, where the court so orders, sections two hundred and sixty-seven, two hundred and sixty-eight, two hundred and seventy, two hundred and eighty-six and two hundred and ninety-seven shall apply in a judicial management as they apply in a winding up of a company which is unable to pay its debts, any reference to—

(a) the liquidator being taken as a reference to the judicial manager; and

(b) a winding-up order being taken as a reference to a judicial management order; and

(c) a contributory being taken as a reference to a member of the company.”

For its part, s 273 provides as follows:

“273 Power of court to declare person disqualified from being liquidator or to remove liquidator

(1) The court, on the application of the Master or person having an interest in the winding up—

(a) may declare that any person proposed or appointed as liquidator is disqualified under section two hundred and seventy-two from holding the office and, if he has been appointed, may remove him therefrom;

(b) may remove any liquidator from his office upon any of the following grounds—

(i) absence from Zimbabwe, ill-health or any other factor tending to interfere with the performance of his duties as liquidator;

(ii) that he has accepted or offered or agreed to accept or has solicited from any auctioneer, agent or other person employed on behalf of the company any share of the commission or remuneration or of any other benefit whatever accruing to such auctioneer, agent or other person;

(iii) misconduct, including any failure to satisfy a lawful demand of the Master or of a commissioner appointed by the court;

(iv) failure to perform any of the duties imposed on him by this Act;

(v) any other good cause.

(2) The court may, in respect of any person removed by it—

(a) under paragraph (a) of subsection (1) as a person disqualified for reasons set out in paragraph (e) of subsection (1a) of section two hundred and seventy-two; or

[Paragraph as amended by section 70 of Act No. 16 of 1998]

(b) under subparagraph (ii), (iii) or (iv) of paragraph (b) of subsection (1);

declare such person to be incapable of being appointed a liquidator under this Act during his lifetime or any other period.

The Master shall give notice in the Gazette of the removal of any liquidator from his office in  terms of this section “

The import of this is that in terms of s 313, the provisions of s 273 relating to removal of a liquidator apply equally to removal of a judicial manager. The removal of a final judicial manager does not require leave. Having used statute to ground his application, the applicant has no option but to adhere to the statutory requirements.

Therefore, the concession having been made by the applicant that his fight is with the judicial manager, not the company, and the substantive relief being sought being the removal of the judicial manager rather than the protection of the assets of a company under judicial management, I cannot but find that any application for leave to remove a final judicial manager predicated on s 301(1) is bad in law and fatally defective.

DISPOSITION

In the premises, the point in limine is upheld. The application is struck out with costs.

Messrs Tamuka Moyo Attorneys, applicant’s legal practitioners

Messrs Zinyangere Rupapa, 1st and 2nd  respondent’s legal practitioners

Messrs Atherstone & Cook, 4th and 6th respondent’s legal practitioners