Associated Mine Workers Union of Zimbabwe v Redwing Mining Company (Private) Limited and 3 Others

### Preamble
1
HMT 58-20
HC 163/20
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ASSOCIATED MINE WORKERS UNION OF ZIMBABWE

versus

REDWING MINING COMPANY (PRIVATE) LIMITED

and

THE MASTER OF THE HIGH COURT

and

THE REGISTRAR OF COMPANIES

and

CECEIL HONDO MADONDO

(In his capacity as the Interim Corporate Rescue Practitioner)

HIGH COURT OF ZIMBABWE

MUZENDA J

MUTARE, 17 August 2020 and 3 September 2020

Urgent Chamber Application for Leave to execute judgment pending appeal

Mr G Gumbo assisted by W Chinembiri, for the applicant

Advocate T. Zhuwarara, for the 1st respondent

MUZENDA J: On 7 August 2020 the High Court of Mutare issued an urgent chamber application for execution pending appeal filed by the successful party, the applicant, Associated Mine Workers Union of Zimbabwe. It is a special application where the applicant wants to be given leave to execute the judgment granted under Case Number HC 99/19 dated 23 July 2020. Applicant is seeking the following relief:

TERMS OF FINAL ORDER SOUGHT

That you show cause to this Honourable Court why a final order should not be made in the following terms.

The provisional order is hereby confirmed.

The first respondent be and is hereby ordered to remain under corporate rescue management by the fourth respondent until and unless these proceedings are terminated in terms of the appeal in SC 327/20 or otherwise in terms of the Insolvency Act [Chapter 6:07]

An award for costs on the higher scale against first respondent which shall be the costs of the corporate rescue proceedings and paid through the fourth respondent.

INTERIM RELIEF GRANTED

Pending determination of this matter, the applicant is hereby granted the following relief;

Execution of the judgement obtained in this Honourable Court in HC 99/19 on 23 July 2020 be and is hereby granted pending the final determination of the appeal to the Supreme Court in SC 327/20

The fourth respondent to assume immediate control of the first respondent herein and take all steps as the interim corporate rescue practitioner as provided for in terms of the Insolvency Act [Chapter 6:07]

On 14 August 2020 the first respondent filed its notice of opposition.

BACKGROUND

Applicant made an application for the placement of first respondent under corporate rescue in terms of s 121, 124 and 131 of the Insolvency Act in case number HC 99/19. I granted the application and effectively placed first respondent under corporate rescue and I gave reasons for such an order in my judgement.

On 27 July 2020 the first respondent noted an appeal against my entire judgment and spelt out the grounds of appeal. At the time the appeal was noted the fourth respondent was already beginning to execute his duties of creating a trajectory for the resuscitation and re-engineering of the first respondent, he was suddenly stopped by a letter authored by the first respondents’ legal practitioners. The letter advised fourth respondent of the appeal lodged and the need for fourth respondent to leave all operations as rescue practitioner pending the determination of the matter in the Supreme Court.

The stoppage of fourth respondent by first respondent instantly prompted this application where applicant contends that the noting of the appeal has effectively suspended first respondent’s placement under corporate rescue. The effect of the appeal delays and frustrates the corporate rescue order. It allows the first respondent to continue operating under its leadership of the same directors and Senior Management Staff who forced the first respondent on its knees to reach the current insolvency status, applicant contended in its application.

On the date of hearing first respondent’s counsel raised a preliminary point of law. He challenged the validity of the relief sought. He submitted that the interim relief sought by the applicant is identical to the final order sought. He contended that the defective relief should render the application null and void and it must be struck off the roll. Mr Zhuwarara cited the case of the Econet Wireless (Private) Limited v (1) Trustco Mobile (Proprietary) Limited (2) Trustco Group International (Proprietary) Limited where Garwe ja stated

“It is correct that in general terms a court should not grant interim which is similar to or has the same effect as the final relief prayed for. The reason is obvious. Interim relief should be confined to interim measures necessary to protect any rights that stand to be confirmed or discharged, as the case maybe, on the return date. Indeed in Kuvarega v Registrar General and Another, the High Court slammed the tendency by some litigants to seek the same relief both as provisional and final order.”

Mr Zhuwarara went on to argue that the current application should have been brought as an ordinary application and the final order sought by the applicant could not have been reproached. An application for leave to execute pending appeal does not constitute an interlocutory relief and ought not to have been brought on a certificate of urgency by the applicant, he further submitted. He cited the case of Kuvarega v Registrar General and Another. He added that an urgent application cannot give birth to a final relief. He further argued that once fourth respondent takes charge of the first respondent whatever decision he makes will be finally in nature, unlike payment of money which can be reversed, business rescue is a judicial fact that is undone when it is finally completed. He cited the matter of Amorose Investments (Private) Limited (under liquidation) v Norwich Trading (Private) Limited and 2 Others where Zhou j remarked.

“The interim relief sought in this application is the same as the final relief which is being sought, a situation which this court has held to be undesirable. The applicant would have no motivation to seek confirmation of the provisional order if the interim relief sought was to be granted in its current formulation as it would have obtained that which it seeks in the final relief.”

On the question of urgency Mr Zhuwarara contended vigorously that the application was not urgent at all. According to the first respondent rescue proceedings were commenced on 2 April 2019 when the application under Case Number 99/19 was filed. The issues being raised by the applicant in the urgent chamber application were raised in the main application for corporate rescue. Applicant waited for more than fifteen (15) months for the application to be determined. The prejudice being alleged in the current application was canvassed in the court application, first respondent submitted. First respondent’s view is that the matter cannot suddenly become urgent now with the filing of the notice of appeal to the Supreme Court.

First respondent further argued that if the matter was urgent then applicant should have acted accordingly in April 2019, it did not, hence there is no legal basis for the application to jump the queue and be accorded any special treatment. To the first respondent employees have since been paid. First respondent has already started implementing a business plan for the revival of the mine. The dewatering programme is expected to be completed by February 2021. First respondent added that there is nothing in the enabling Act, Insolvency Act [Chapter 6:07] to the effect that applications for corporate rescue should be heard urgently. Mr Zhuwarara submitted that the application should be struck off the roll.

In response to the points raised in limine, Mr G Gumbo submitted that he had been ambushed by the first respondent’s legal practitioners more particularly on the issue of the nature of relief sought. He anticipated that he should at least been placed on alert about that aspect and prepare case law anthonties that could have assisted the court. He however argued that the point in limine on the relief sought was not properly raised. There are some sui generis cases where the relief sought is unavoidably identical to the interim relief. He cited the case of Lutuki Safaris (Private) Limited v Emmanuel Banda and 2 Others which was an application for a spoliation order. He also cited the matter of Shatirwa Investments (Private) Limited v Metallon Gold (Private) Limited where the court granted an order whose interim relief was identical to the final order sought. In any case, Mr Gumbo added, the two were not totally identical. He further submitted that corporate rescue matters belong to a different genre of applications whose main objective is to protect all stakeholders from being prejudiced by a corporate which had been placed under corporate rescue. They need a special treatment by the courts. Mr Gumbo further argued that the order can be varied by the court in the event that the application succeeds.

On whether the application is urgent or not, Mr Gumbo submitted that it is certainly urgent by virtue of its nature as a corporate rescue application. He added that the primary object and purpose of corporate rescue, by design, is to provide an urgent remedy in respect of a company sinking deeper and deeper, into insolvency. He cited the matter of Koen and Another v Wedgewood Village Golf and Country Estate (Private) Limited and Otherswhere the court held that:

“It is axiomatic that business rescue proceedings by their very nature must be conducted with maximum possible expedition”

Hence Mr Gumbo contended that corporate rescue proceedings by their very nature, are inherently urgent as their delay may result in grave prejudice for the creditors or a total collapse of a financially distressed company. It would defeat and negate the very essence of corporate rescue if the matter is not dealt with on urgent basis. He cited the matter of T.N Gold Arcturus Mine (Private) Limited v Zimbabwe Electricity Transmission and Distribution Company where Zhou j concluded that a matter is urgent if it cannot wait to be dealt with as a normal court application. Mr Gumbo argued further that the need to act arose on 3 August 2020 when the applicant was served with the notice of appeal from the first respondent, then quickly prepared the urgent application and filed it on 7 August 2020. He does not agree with first respondent’s submission that the cause of action arose in April 2019 when the application under Case Number HC 99/2019 was filed. In any case Mr Gumbo added, whether or not the matter is urgent is an exercise of court’s discretion.

Counsel for the applicant went on to submit that what constitutes urgency has been debated for long and what comes out of all that argument is that each case must be taken on its own peculiar circumstances. He further argued that one peculiar feature of this application is that fourth respondent, the corporate rescue practitioner has a limited initial period of three (3) months, within which to quick-start the exercise of resuscitating the first respondent, hence every single day is of utmost essence and should be put to good use for the good of the company, shareholders, employees and creditors. Mr Gumbo went on to cite the matter of Shatirwa Investments (Private) Limited v Metallon Gold (Private) Limited and 7 Others which case is squarely identical to the present one. Tagu j in that case granted the urgent chamber application for leave to execute pending appeal, he submitted. Mr Gumbo prayed that the two points in limine be dismissed and that the court proceed to deal with the merits.

Mr Zhuwarara urged the court to have the application struck of the roll because of the identical reliefs sought by the applicant. I need to pause a moment at this stage and comment about the raising of objections or points in limine during applications be they urgent or ordinary applications. Mr Zhuwarara for the first respondent raised a point of law from the bar about this alleged flawed forms of relief sought by the applicant. Mr Gumbo complained that the applicant had been taken by surprise. It is now accepted as a general rule that a point of law may be raised at any stage of proceedings. However the raising of the point of law should not result in prejudice to the party against whom it is revised. Courtesy demands that the other party should have been put on alert about the intended point in limine so that it adequately prepares for such. I also noted that the first respondent filed a notice of opposition and raised a point in limine on urgency but did not include the issue of the relief sought by the applicant. This is the reason the court allowed the applicant to file supplementary heads of argument addressing this aspect as it had requested.

Now coming back to the preliminary point raised by the first respondent, Garwe ja stated the following:

“I would agree with the above remarks. Although the learned judge in that case did not suggest that such a defect renders an application a nullity it seems to me that whilst no hard and fast rule can be laid down, there may well be cases where a court would be justified in holding in such a situation that the application is not therefore urgent and that it should be dealt with as an ordinary court application. There may also be cases where the court itself, as it is impressed to do, may amend the relief sought in order to make it clear that what is granted is interim protection whilst the final order sought would be the subject of argument on the return date. Rule 240 of the High Court Rules permits a court after hearing argument, to vary an order. It is this power to grant an order that is consistent with the facts which a court can use in order to obviate a situation where final relief is granted by way of a provisional order.”

I also agree with the judgment of the Supreme Court in the matter of Registrar General of Election v (1) Combined Harare Residents Association (2) David Samudzimu where the late CHIEF JUSTICE Chidyausiku crisply clarified the law as follows:

“…..Where the relief sought as interim relief is essentially the same as the relief sought on the return day the court’s correct approach should be to proceed by way of an urgent chamber application seeking final relief.”

Hence the mere fact that interim relief is similar to final relief is not fatal to the applicant’s case. The court can actually deal with the urgent chamber application and having considered all facts can grant a final order. All that applicant seeks to achieve is that the corporate rescue practitioner, fourth respondent be allowed to perform his duties. I agree with Mr Gumbo that the principle established in the Kuvarega case (supra), is not cast in stone and where there is similarity between the interim and final order sought, that is not fatal to the application. As already emphasized by his Lordship Garwe JA in the Econet Wireless (Private) Limited case supra, the court is at liberty to convert the interim relief sought. In any case the issue of prejudice to the first respondent would be appropriately considered taking into account the matter where corporate rescue proceedings ultimately benefit all stakeholders. The structure of draft order is not the paramount consideration since the order comes as a draft, the order to be granted is in order of the court and the judge is allowed to make modifications.

I am not satisfied that the point of law raised by the first respondent has any merit, accordingly it is dismissed. The first respondent submitted that the matter is not urgent as the applicant ought to have acted long back in 2019. It is not in dispute that on 3 August 2020 first respondent wrote a letter to the fourth respondent informing the latter that his appointment had been suspended by the noting of the appeal. According to the applicant that letter triggered this current application. Applicant cited the matter of Kawa v Muzenda and Others where the applicant submitted that a matter previously brought as a court application could gain urgency because of the noting of an appeal which had the effects of suspending the operation of the judgment appealed against.

Corporate rescue recognises that the failure of a business corporate enterprise and its liquidation can have disastrous and damaging effects on creditors, employees, shareholders, the government and community which benefits indirectly from the operations of the first respondent. Corporate rescue focuses on a fresh strategic planning ideally meant to reconstruct an entity facing challenges. I have already concluded under HC 99/19 that the first respondent was insolvent and in need of corporate reengineering. Insolvency can be due to many causes such as corporate governance failures, imprudent financial management, adverse changes in external factors both micro and macroeconomic as well as internal constraints such as inadequate funding or old equipment, loss of key suppliers, customers or personnel. The business can also be affected by external factors in different ways which are political, economic, social, technological, environmental or legal (PESTEL). A corporate rescue practitioner is then appointed to create or introduce a plan, which is not just a plan being alluded to by the first respondent in its opposing papers and s 144 of the Insolvency Act provides key requirements at the meeting to be held to consider the corporate rescue plan development by the corporate rescue practitioner, not by the same old management which caused the company to nearly collapse. Developing such a strategic corporate rescue plan requires excellent skills in financial trouble shooting, strategic planning and legal trouble shooting. In my view the plan should articulate what the practitioner intends to do differently from the management of the company under rescue to turn the company around. Strategic planning is about plotting winning paths and executing and prosecuting winning initiatives. A corporate rescue practitioner will help the company by raising questions that increase the management’s self-awareness, broaden the company’s vision and introduce spectacularly developmental ideas. First respondent speaks about its own self authored plan to “rescue” the company, surely one would pause a question that if the company had had such prospective ideas to push forward why would want it for the application to be brought to court by an affected person? In any case, self-facilitation has the obvious risk of amplifying one’s personal echo and then call it a chair. A well-executed strategic plan is prepared by an expert and it should increase the chances of winning odds and even if the environment changes, a good plan helps the company to have an idea of what to change and do differently and it determines the strategy game the company will play and its depth.

The process of corporate rescue is primarily regulated in order to protect various stakeholders’’ interests and once the corporate rescue practitioner is nominated and appointed, he should be given space to quickly commence the process since the statute gives him three (3) months to come up with the results. Indeed I agree with the appellant’s counsel that 3 months is too short a time that would require maximum use of each day.

As well propounded by makarau jp (as she then was) in the matter of Document Support Centre (Pvt) Limited v Mapuvire:

“In my view, urgent applications are those where if the court fails to act, the applicants may well be within their rights to dismissively suggest to the court that it should not bother to act subsequently as the position would have become irreversible and irreversibly so to the prejudice of the applicant.”

The first respondent stands to immensely benefit from corporate rescue than the applicant. So there is no prejudice to be suffered by the first respondent if the matter is urgently heard. I am more convinced by the fact this court had already held that matters involving corporate rescue should be treated on an urgent basis. The circumstances of that case are on all fours with the present matter. I have carefully read the grounds upon which the ruling was premised and I equally agree with the learned Judge. It means that issue of urgency is now settled. I therefore conclude that the application is urgent and dismiss the preliminary point of urgency.

I now proceed to deal with the merits of the application for leave to execute pending appeal. In Zimbabwe Mining Development Corp and Another v African Consolidated Resources p/c and Others  chidyausiku CJ quoting the matter of South Cape Corporation (Private) Limited v Engineering Management Services (Private) Limited, stated:

“In exercising this discretion the court should, in my view determine what is just and equitable in all the circumstances, and, in doing so, would normally have regard, inter alia, to the following factors:

The potentiality of irreparable harm or prejudice being sustained by the respondent on appeal (the respondent in the application) if leave to execute were to be granted;

The potentiality of irreparable harm or prejudice being sustained by the respondent on appeal (the applicant in the application) of leave to execute were to be refused;

The prospects of success on appeal, including more particularly the question as to whether the appeal is frivolous and vexatious or has been noted not with bona fide intention of seeking to reverse the judgment but for some indirect purpose, e.g. to gain time or harass the other party; and

Where there is the potentiality of irreparable harm or prejudice to both (the) appellant and (the) respondent, the balance of hardship or convenience, as the case may be.”

Although most of the cases just cited dealt with the exercise of the court’s discretion under a statutory provision or rule of court, the statute or rule concerned did not prescribe the nature of the discretion except in broad general terms to empower the court to give directions as:

“May in each case appear to be most consistent with real and substantial justice and the same general approach would be appropriate to the exercise of a discretion  under the aforementioned rule of practice.”

It has also been held by this court that a court whose judgment had been appealed against may grant leave to the successful party to execute the judgment pending appeal.

I have looked at all the requirements set out in the foregoing case law authorities and concluded that the first respondent does not suffer any prejudice nor irreparable harm if leave to execute pending appeal is granted. Corporate rescue proceedings are actually preponderantly favourable to the first respondent company. Given the legislative role endowed on the fourth respondent corporate rescue would ensure first respondent’s continued, existence and possibly avoid liquidation. The first respondent produced a list of documents showing payments to the creditors but did not confide in the court as to the source of that money. Surely the fears of the applicant that the first respondent may end up incurring more debts sinking first respondent deeper towards liquidation are justified. To avoid that the granting of leave to execute pending appeal will expeditiously place fourth respondent in the place to manage the first respondent for the best interests of all the parties, first respondent included.

To the contrary if leave is withheld applicant’s members stand to suffer prejudice more particularly considering the time value of their salaries. The first respondent admits that it owes the employees a lot of money backdated to the time of multi-currency now the workers will be subject to the RTGS regime of currency. It would be unjust to continue to with-hold their salary payment where the first respondent would hide behind the notice of appeal.

On the prospects of success on appeal I do hope that that aspect is subjudiced and would best be dealt with the Supreme Court, serve to mention that my judgment is quite comprehensive on the issues raised on appeal. The first respondent had an inherent right to note the appeal but it is in the best interests of all the parties that fourth respondent be allowed to perform his duties unimpeded. The first respondent’s holding company, Metallon Gold (Private) Limited is already under corporate rescue and the rescue practitioners are almost through with their work, that is well in line in putting the holding company back to its track to produce profits and meet its obligations per month.

I am satisfied that the applicant has met all the requirements for leave to execute pending appeal and ought to succeed. Having carefully considered the nature of this application and the law relating to provisional and final order dealt with herein. I am equally satisfied that this is an urgent chamber application which qualifies to have a final order and it shall be so.

The applicant had asked for costs on attorney-client scale against the first respondent. The whole thrust of corporate rescue is aimed at reconstructing the company for the best of all stakeholders including the applicant. It would be unfeasible for this court to pile first respondent with more debts if costs are awarded on a high scale. When the court sought Mr Gumbo’s views about extra expense he properly made a concession that in the event that the application is granted, costs be granted at an ordinary scale. It shall be so.

Accordingly the following order is granted with costs:

The urgent application for leave to execute pending appeal succeeds.

The first respondent be and is hereby ordered to remain under corporate rescue management by the fourth respondent until and unless these proceedings are terminated in terms of the law or otherwise in terms of the Insolvency Act [Chapter 6:07]

Messrs Gumbo & Associates, Applicant’s Legal Practitioners

Scanlen & Holderness, First Respondent’s Legal Practitioners