mattheus de klerk vs cassava stach of tanzania corporation ltd 2020 tzhccomd 53 29 may 2020

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION) AT DAR-ES-SALAAM MISC.COMMERCIAL CAUSE NO.17 OF 2020 IN THE MATTER OF THE COMPANIES ACT, CAP. 212 [R. E. 2002] AND IN THE MATTER OF A PETITION BY THE COMPANY FOR AN ADMINISTRATION ORDER AND IN THE MATTER OF CASSAVA STARCH OF TANZANIA CORPORATION LIMITED BETWEEN MATTHEUS DE KLERK................................................. PETITIONER v CASSAVA STARCH OF TANZANIA CORPORATION LTD....RESPONDENT RULING 27/ 5/2020 & 29/ 5/2020 NANGELA, 3 .: This Petition has been filed pursuant to section 247 (1) (b), (2), (3) (a) and (c) and section 248 (1) of the Company Act, Cap.212, Page 1 of 13 [R.E.2002]. It is supported by an affidavit of the Petitioner, (Mr. Mattheus de Klerk). In his affidavit, Mr. Mattheus de Klerk states that, he is duly authorized to institute, sign and verify the Petition, as well as overseeing its progress to the end. The Respondent, on the other hand, is a private company duly incorporated and existing under the laws of Tanzania. In this Petition, the Petitioner is praying for the following: (i) That, the honourable court be pleased to appoint KNOWLES LUMAMBO, as an Administrator of the Company for a duration of up to one year from the date of the Order. (ii) That, subject to granting prayer number (i), the honourable Court be pleased to order or direct the Administrator to make available to the Court quarterly reports on performance and discharge of his duties as sanctioned by law. (iii) That, the honourable Court be pleased to order that the costs of this petition be borne by the Company and settled by the Administrator and; Page 2 of 13 (iv) That, the Honourable Court be pleased to grant such other reliefs or orders that may, in the circumstances, consider just, proper, fair, and fit to grant to the Petitioner. On 28th May, 2020, when this Petition was called on for hearing, the Petitioner was represented by Mr. Patrick Sanga, learned advocate, while the Respondent was represented by Mr. Herman Lupogo, also a learned counsel. At the hearing, Mr Sanga submitted that the Petitioner, who is representing all other members of the Respondent Company, himself being also one of its members, is seeking for orders of administration of the Respondent Company because, for some time now, the company has been facing a financial distress. Mr. Sanga submitted that, due to the above factual position concerning the Respondent Company, its members have been working hard to find solutions to the company's financial difficulties. To support that submission, reference was made to a resolution adopted during the shareholders' annual general meeting held on 17th December 2019. Page 3 of 13 Mr. Sanga submitted, therefore, that, by a Special Resolution dated 25th March 2020, the shareholders resolved that the Respondent Company be placed in the hands of an administrator. It was also resolved that, Mr. Knowles Lumambo, be appointed to act as an administrator and, a Petition be filed in Court by the Petitioner, seeking for the orders to that effect. Upon being asked why the Petitioner had earlier indicated in the Petition that the same was to be heard ex-parte, Mr.Sanga responded that, the matter should have been heard ex-parte because it is not a contentious one. Nevertheless, the Respondent was represented by Mr. Lupogo, who, apart from supporting the submissions made by Mr. Sanga, agreed that the matter before the Court was not a contentious one. I have read the Petition and also seen the original Board * Resolutions in respect of the Respondent Company, which form the basis for this Petition. Besides, I have read the affidavit of Mr. De Klerk, the Petitioner, in support of the Petition. The issue I am called upon to address is whether, in the circumstances as explained in the Page 4 of 13 Petition and the supporting affidavit, this Court should grant the prayers and orders sought. As stated earlier, this Petition is filed under 247 (1) (b), (2), (3) (a) and (c) and section 248 (1) of the Company Act, Cap.212, [R.E.2002]. Section 247 (1) (b), (2), (3) (a) and (c) of the Act provides as follows: "247 (1) Subject to this section, if the Court - (a) is satisfied that a company is or is likely to become unable to pay its debts (within the meaning given to that expression by section 280), and; (b) considers that the making o f an order under this section would be likely to achieve one or more o f the purposes mentioned below, the Court may make an administration order in relation to the Company. (2) An administration order is an order directing that, during the period for which the order is in force, the affairs, business, and property o f the company shall be managed by a person ("the Administrator") appointed for the purpose by the Court. (3) The purposes for whose achievement an administration order may be made are- (a) the survival o f the Company, and the whole or any part o f its undertaking; Page 5 of 13 (b) the sanctioning under section 229 o f a compromise or arrangement between the company and any such persons as are mentioned in that section; and, (c) a more advantageous realization o f the company's assets than would be effected on a winding up; and, the Order shall specify the purposes or purpose for which it is made." On the other hand, section 248 (1) of the Company Act, Cap.212, provides that: "An application to the Court for an administration order shall be by petition presented either by the company or the directors or by a creditor or creditors (including any contingent or prospective creditor or creditors), or by any o f those parties, together or separately." Looking at the above quoted provisions, it is clear to me, that, where a Court is convinced that the issuing of an administration . order in relation to a Company under this section would be likely to achieve one or more of the purposes set out in subsection 3 of Section 247 of the Act, the Court may proceed and make such order. However, for the Court to make such order, it must be fed with sufficient information regarding how the company/business is Page 6 of 13 intended to be turned around to achieve status of "a going concern". Borrowing a leaf from a Kenyan case, in the matter of Insolvency Cause No. 10 and 13 of 2017 (consolidated) The High Court of Kenya, the Court had this to say: "A speculative suggestion is not enough neither is a statement simpliciter that the company or proposed administrator believes that an objective of administration will be achieved. It is the applicant who seeks to and must satisfy the court the prospect. He must [do] this by way of affidavit in support of the motion establishing] the reasonable grounds, including [an] indication of how long the turnaround is expected to take place." From the above case, it is clear that, the Court should not act on speculations, but rather the documents filed by the Petitioner and all supporting attachments and the affidavit, must contain sufficient information which will enable the Court to make proper considerations when deciding whether it is appropriate to grant the orders sought. It means, therefore, that, an examination of what has been placed before the Court is necessary before it decided to grant or refuse to grant an order of administration under the Act. Page 7 of 13 In view of the above, I will now turn to the documentation and information availed to the Court. As stated earlier, the Petitioner is seeking that the Respondent Company be placed under an administrator. In his affidavit, he states, in paragraph 18, that, the company has never been under an Administrative Receiver. Reading paragraph 5 of his affidavit, the Petitioner has disclosed the rationale for the orders sought, stating that, it is because the Company is still having a viable long term business of growing crops and manufacturing food products with a guaranteed market, hence it can generate adequate cash flow to cater for, not only its operational costs, but also to pay to its creditors. What I may glean from the above paragraph is that, to a certain extent, the Company is still a going concern, only that it has faced financial challenges which it now seeks to surmount by way of being placed under an administrator. This is an important piece of information because, in essence, the placing of a company under an administrator, as one of the insolvency procedures provided for under our laws, is for companies that are solvent but are facing issues from their creditors. Page 8 of 13 As such, while in terms of section 249 of the Company Act, such a procedure insulates the company from all possible legal actions against it, the company is not denied the opportunity to continue doing business as a going concern. Under paragraph 8 of the Petition, the Petitioner has disclosed the efforts which have so far been taken by the Board to salvage the company's state of affairs, which includes, a resolution to take direct control of the Company. A copy of the Board Resolution, dated 17th December 2019, and which indicates the proposed remedial actions which the Board considers useful in turning around the company's state of affair, was annexed. Besides, a copy of a Special Resolution extracted from the minutes of an extra-ordinary annual general meeting of the shareholders of the Respondent Company, dated 25th March 2020, was also annexed to the Petition. It was during the extra-ordinary annual general meeting of the shareholders of the Respondent Company that a Special Resolution resolving that the company should be placed under administration was made. Under such a Resolution, the Petitioner was granted powers to file this Petition and seek for orders of administration. Page 9 of 13 Moreover, Mr. Knowles Lumambo was proposed to be appointed as an administrator. It is worth noting that, on 27th May 2020, this Court directed Petitioner to avail it with the Original Board Resolutions, since what was attached to the Petition was a copy. I am grateful that such original documents were availed to the Court for its perusal and I am satisfied as to their authenticity. In both, his petition (paragraph 16) and the affidavit (paragraphs 7 and 8), the Petitioner further discloses other strategies being pursued to turn around the company once placed under an administrator, which includes looking for new investors as well as improving the company's operations costs, thus achieving the objective stated under section 247 (3) (a). In view of the above considerations, I am satisfied, therefore, that, there are convincing grounds and sufficient details regarding why the orders sought and the prayers made should be granted. That being the case, this Court proceeds to state and make the following orders as hereunder: Page 10 of 13 (i) THAT, by the ORDER OF THIS COURT, dated this 29™ MAY 2020, THIS COURT, acting under Section 247 (1) (b), (2) and 3 (a) & (c) DOTH HEREBY APPOINTS MR. KNOWLES LUMAMBO, as an Administrator of the affairs of the Company in the name of CASSAVA STARCH OF TANZANIA CORPORATION LTD, which is duly registered under the Companies Act, Cap.212 R.E.2002] with Certificate of Registration No.87782, issued on 16th April 2012, and the appointment of the Mr. LUMAMBO is for a duration of ONE YEAR from the date of this Order, and which appointment is made FOR THE FOLLOWING PURPOSES: (a) To carry on and manage the business affairs of the company in an efficient, profitable, transparent and less costly manner, so as to ensure the survival of the company, and the whole or part of its business undertaking, as a going concern, and to timely perform the company's creditor payment obligations; Page 11 of 13 (b) To restructure the Company's operational and financial affairs in a manner that best serves the interests of its creditors and other relevant stakeholders. (ii) THAT, consequent to the above appointment of the Administrator, THIS HONOURABLE COURT DOTH HEREBY Order and Direct the Administrator TO MAKE AVAILABLE TO THE COURT, on a quarterly basis, reports on the performance and discharge of his duties as sanctioned by the law. (iii) THAT, the costs of this petition shall BE BORNE BY THE COMPANY AND SETTLED by the Administrator. Ordei Ruling delivered on this 29thday of May 2020, in the presence of Mr. Patrick Sanga, Advocate for the Petitioner and Mr. Herman Lupogo, Advocate for the Respondent. Page 12 of 13 High Court of Tanzania (Commercial Division) 29/ 05 /2020