Arthur Ndhlovu v Edgar Hamuwele (In his capacity as Zimco Joint Liquidator) and Anor (APPEAL NO. 141/2004) [2005] ZMSC 63 (11 November 2005)

IN THE SUPREME COURT OF ZAMBIA APPEAL NO. 141/2004 HOLDEN AT LUSAKA (CIVIL JURISDICTION) BETWEEN: ARTHUR NDHLOVU APPELLANT AND EDGAR HAMUWELE (IN HIS CAPACITY AS ZIMCO JOINT LJQUIDATOR) BASIL CHILESHE (IN HIS CAPACITY AS ZIMCO JOINT LIQUIDATOR) 1ST RESPONDENT 2ND RESPONDENT Coram: LEWANIKA, DO., CHIBESAKUNDA and CHITENGI, JJS on 2nd November 2004 and 11th November 2005 For the Appellants: Hon. ES Silwamba of Messrs. Eric Silwamba & Co. For the Respondent: Maj. G Mubanga of Messrs. G. Mubanga & Co. JUDGMENT Chibesakunda, JS, delivered the Judgment in Court Laws referred to: 1. Sections 280, 297 and 333(1) of the Companies Act Cap 388 2. 3. Order 7 Rule 2 of the Supreme Court Practice Cap 25 Order 2 Rule 2 of the Rules of the Supreme Court 1999 Edition This is an appeal against Mwanza J's ruling dated 5th December 2003. This ruling was delivered in an application taken out by the Appellant to set aside the : J2 : originating process. This originating process was taken out by the Respondents pursuant to Order 7 Rule 2 of the Supreme Court Practice (2), seeking an order that the Appellant deliver to the Respondents for them to take possession of all assets and books of accounts currently in the custody of the Appellant relating to the following liquidations: 1. 2. 3. 4. 5. 6. Zambia Industrial and Mining Corporation (in Liquidation) SUpa Baking Company Limited (in Liquidation) Zambia Consumer Buying Corporation (in Liquidation) Zambia Agricultural Development Limited (in Liquidation) Zambia Cold Storage Limited (in Liquidation) City Radio and Refrigeration Suppliers Limited (in Liquidation) The Appellant filed a conditional appearance on 5th November 2003 and on the same day filed an application to set aside the origination process pursuant to Order 2 Rule 2 of the Rules of the Supreme Court (3). In support of this application the Appellant flied an affidavit deposing inter alia in paragraphs 5 - 8: ''5 That in March, 1995 the Zambia Industrial and Mining Corporation Limited {in Liquidation} resolved to appoint Messrs. Norman B Mbazlma of Delloite and Touche {Lusaka), S, Brian Musonda of Delloite and Touche (Kitwe) and Ralph S. Preece of Touche Ross (London) as joint I am now shown a facsimile of various Liquidators. documentation pertaining to the said appointment and the same are exhibited hereto and marked as '~NMN 1n collectively : 6. That I wish to rely on exhibit "EH22" of one EDGAR : J3 HAMUWELE's Affidavit in support of Originating Summons which has catalogued the Liquidators of Zimco Limited {in Liquidation) and its subsidiaries (in Liquidation). 7. That I was never appointed Liquidator nor Liquidation Manager of Zimco Limited (in Liquidation) nor its subsidiaries (in Liquidation) but I was merely an employee in the Firm of Messrs Paragon Consulting and I only joined the liquidation team late in 1998 after returning from the United Kingdom where I was working for the Zambia Consolidated Copper Mines Limited ZCCM {UK) Limited B. That as an employee of Messrs Paragon Consulting it is a gross misnomer to designate me as Liquidation Manager in the absence of an appointment as such Liquidation Manager." He further deposed in the same affidavit in paragraph 10, that although he was offered to be appointed as a Provisional Liquidator in a letter dated 2nd January 2003 from the Acting Secretary to the Treasury, he, on the other hand, in a letter dated 20th January, 2003 indicated his willingness to accept that appointment on condition; 1. that he signed an agreement with the Governement of the Republic of Zambia stating his terms and references as Provisional Liquidator; and 2. that the remaining creditors ratified his appointment as Provisional liquidator. He deposed that he never received any response from the Acting Secretary to the Treasury nor from anybody else. He wrote a follow up letter on 22nd January 2003 to the Acting Secretary to the Treasury reminding her that there had been no appointment to manage the state liquidation process. : J4 : On 18th March 2003 instead of getting a response from the Acting Secretary to the Treasury, the Acting Secretary to the Treasury wrote him a letter terminating his provisional appointment. His contention therefore is that he was never at any time appointed as a provisional liquidator. Mr. S. Brian Musonda who on the 28th of March 2003 was by a resolution of Committee of Inspection appointed as sole liquidator, was a member of Paragon Consulting. The Appellant at the time was an employee of Paragon Consulting. Therefore, he joined the liquidation team as an employee of Paragon Consulting. He was therefore improperly sued. He argued that Mr. Musonda, the sole liquidator, should have been the proper person to be sued even though he was out of jurisdiction. The Respondents in the response to the application to set aside the originating process as well as in support of their own originating summons, counter submitted that the Appellant was appointed as Provisional Liquidator/Liquidation Manager. They submitted that even though he was not officially appointed he nonetheless conducted and held himself up as a provisional liquidator/liquidation manager. See "EH 1" - "EH 7". They cited the letter of 20th August 2003 written by Dr. Musokotwane, Secretary to the Treasury, Ministry of Finance, in which he referred to the Appellant as a Liquidation Manager and Provisional Liquidator and even confirmed the termination of these two appointments. They went on to depose that when the Appellant's appointment was terminated the two Respondents were both appointed as liquidators. They referred to the exhibits "EH81 ' to "EH25". In order for us to deal with all the issues raised we find it necessary to state briefly the history of the matter before us. Before the Respondents commenced the originating action pursuant to Order 7 Rule 2 of the Supreme Court Practice (2), on 31st March 1995 by a resolution of an Extra-Ordinary Meeting of Zimco Group of Companies, the Zimco Group of Companies was wound up. This winding up was a 'Creditors' winding up' - see "ANMN1". : J5 : At this same Extra-Ordinary Meeting it was resolved in the Extra Ordinary Resolution that Messrs. Norman B Mbazima of Touche, Lusaka and SB Musonda of Delloite and Touche, Kitwe and Relph S Preece of Delloite Touche, London, be appointed as liquidators. As per documents "ANMN 1 - ANMN6", the liquidators appointed by the shareholders and creditors were:- 1. ZIMCO Limited Messrs. NB Mbazima, SB Musonda and R Preece Supa Baking Limited Mr. SB Mudonsa Zambia Cold Storage Limited Mr. SB Musonda Kales Fisheries Limited Anros Limited Mr. N B Mbazima Mr. N B Mbazima Mwinilunga canneries Limited Mr. N B Mbazima & S B Musonda Zambia Consumer Buying Corp. ltd - SB Musonda Zambia Agricultural Development Ltd - SB Musonda City Radio Limited S B Musonda & Ms C Kateka 2. 3. 4. 5. 6. 7. 8. 9. It is also part of this brief history that by a resolution passed by the Committee liquidation) on 28th March, 2001 the of Inspection of Zimco Limited (in resignations of Messrs. Mbazima and Preece were accepted. The same Committee of Inspection resolved to retain Mr. Musonda as the sole liquidator of Zimco and its subsidiary Companies. Mr. Musonda continued to be the sole liquidator to complete sundry matters. On the 21st of March, 2003 the Committee of Inspection of Zimco Limited (In liquidation) resolved to terminate the appointment of Mr. Musonda as the sole liquidator. By Gazette Notice dated 23rd June 2003, the two Respondents were appointed as liquidators of Zimco Limited (ln liquidation). : J6 : Toe learned trial Judge, having listened to the two sides, ruled in favour of the Respondents. He ruled firstly that the Appellant was the proper party to the proceedings and secondly that the Appellant deliver all the documents and all information he handled as liquidation manager of Zimco Limited (in liquidation) between March 2002 and 20th August, 2003. Before us it was argued on behalf of the Appellant that he was never appointed as liquidator nor liquidation manager. It was, however, argued that Mr. Musonda although absent from Zambia was the sole liquidator after Messrs Mbazima and Preece's appointments were terminated. It was pointed out that the letter from the Acting Secretary to the Treasury was for the appointment of a provisional liquidator. The Appellant on the other hand never accepted this appointment as he in his letter categorically stated that he was only accepting that appointment if the two conditions were accepted by the Ministry of Finance. It was argued that it was common ground that the Acting Secretary to the Treasury never responded even after he the Appellant wrote seeking the appointment to clarify the position. It was further argued that the Appellant was never appointed as liquidation manager or special manager under Section 297 of the Companies Act (1). The Respondents in response argued that there was no official appointment of the Appellant. But he the Appellant held himself as provisional liquidator/liquidator manager. They referred to Exhibit EH1 - EH7 and the letter of Dr. Musokotwane and to the letter by the Acting Secretary to the Treasury, Mrs. Chifungula. The main contention before us, as we see it, which argument was before the High Court is whether or not, the Appellant was appointed as Provisional Liquidator and or Liquidator manager. : J7 Responding to the question, perusing the evidence adduced by way of affidavit : both in support and in opposition and in reply, we note that there is very little controversy on the facts as stated in the affidavit evidence. There is no dispute that initially Messrs Mbazima, Musonda and Preece were appointed as liquidators up to 28th March 2001. Post 28th March 2001 Mr. Musonda remained the sole liquidator of Zimco Group of Companies (in liquidation). He remained as sole liquidator up to the 21st of March, 2003. On 23rd of June, 2003 the two Respondents were Gazette as liquidators. The learned trial Judge found that between 21st March 2003 and 23rd June, 2003 the Appellant was appointed as provisional liquidator and or liquidation manager. We agree that In exhibits "EH 1 - EH 7" attached to the 1st Respondent's affidavit sworn- on ~6tn November 2003 in reply the Appellant wrote describing himself as liquidation manager. Mrs. Chifungula also In her letter terminating the appointment referred to him as provisional liquidator. However, we note that there was no other evidence giving him that authority to describe himself as such. Section 297(1} of the Companies Act (1) provides for appointment of "special manager". It says: "297. (1.) The liquidator may, if satisfied that the nature of the estate or business of the company, or the interests of the creditors or members generally, require the appointment of a special manager of the estate or business of the company other than himself, request the court to appoint a special manager of the estate or business to act during such time as the court directs with such powers, including any of the powers of a receiver or receiver and manager, as are entrusted to him by the court." There is no provision for "liquidation manager". We agree with the learned trial Judge that the Appellant must have loosely described himself as "liquidation manager" and must have held himself as such without any legal authority. Our conclusion on that point is buttressed by the fact that there was no such appointment under Section 297(1) of the Companies Act (1). Section 280 (1)(2) of the Companies Act (1) is the only section which deals with the : JS : appointment of a provisional liquidator. Section 280 (1){2) of the Companies Act (1) provides: "280. (1) The court may appoint the official receiver or any other person to be liquidator provisionally at any time after the presentation of a winding-up order. (2) The provisional liquidator shall have and may exercise all the functions and powers of a liquidator subject to such limitations and restrictions as may be prescribed, or as the court specifies in the order appointing him. 0 We note that this section which is the only Section which deals with the appointment of Provisional Liquidator, falls under Division 132 which division applies to 'Winding up' of Company by court. In the case before us there is no evidence indicating that Zimco was wound up by a Court Order. There is evidence that the Winding up of Zimco was by creditors and shareholders. See page 27 of the record. We also do not have evidence that the Appellant was appointed by the court. Therefore, we hold the view that even applying the most liberal interpretation of the letter from the Acting Secretary to the Treasury, Mrs. Chifungula, dated 20th June, 2003, which the Respondents would want us to accept as the letter of appointing the Appellant as provisional liquidator, even taking into account Section 333(1) of the Companies Act (1), which says: "333. (1.) Subject to this Act, the acts of a liquidator shall be valid notwithstanding any defect that may afterwards be discovered in his appointment or qualification. the Appellant was never appointed liquidator. There was a letter offering such an appointment but that appointment was never accepted. Therefore he is not the proper party to the proceedings. : ]9 : Secondly, the learned trial Judge misdirected himself in ordering that he deliver to the Respondents all documents relating to the winding up of Zimco Group of Companies. He has no locus standi. We find merit in the appeal. We quash the lower court's order. We award costs to the Appellant. ••.•.........•••..••••.••.•.•..........••• D M Lewanika DEPUTY CHIEF JUSTICE •.•..••.•.•.•••...............••••..• LP Chibesakunda SUPREME COURT JUDGE ........................................ P Chitengi SUPREME COURT JUDGE