Mudondo N.O. (In his capacity as the Court Appointed Corporate Rescue Practitioner of Amcast (Private) Limited (under Corporate rescue)) and Another v Kwangwari and 5 Others (296 of 2024) [2024] ZWHHC 296 (9 July 2024)

1 HH 296-24 HCH 2789/24 OBERT MADONDO N. O. (In his capacity as the Court Appointed Corporate Rescue Practitioner of Amcast (Private) Limited (under corporate rescue)) and ZIMBABWE DIAMOND AND ALLIED MINERAL WORKERS UNION (ZDAMWU) versus JOHN KWANGWARI and LEVI BARRINGTON NYAHUNZVI and ROBSON MOYO and TENDAI CHITUNGO and THE MASTER OF THE HIGH COURT and THE REGISTRAR OF COMPANIES N. O. HIGH COURT OF ZIMBABWE MAMBARA J HARARE 1, 4, 5 and 9 July 2024 Urgent Chamber Application S Evans, for the applicants T K Hove, for the 1st – 4th respondents No appearance for 5th and 6th respondent MAMBARA J: The Applicants, Obert Madondo N. O., the appointed Corporate Rescue Practitioner (hereinafter referred to as the “CRP”) of Amcast (Private) Limited, and Zimbabwe Diamond and Allied Mineral Workers Union (hereinafter referred to as “ZDAMWU”), have filed an urgent chamber application seeking a provisional order to interdict the Respondents from interfering with the operations of Amcast (Private) Limited ( hereinafter referred to as “Amcast”). The Respondents challenge the urgency of the application and raise several preliminary points in limine. Amcast was placed under corporate rescue in terms of the Insolvency Act [Chapter 6:07] by order of the High Court dated 19 October 2022. The first applicant was appointed the Corporate Rescue Practitioner by this order. However, due to litigation initiated HH 296-24 HCH 2789/24 by the respondents challenging the first applicant’s appointment, the assumption of duties by the Corporate Rescue Practitioner was delayed. Only on 29 April 2024 was the Corporate Rescue Practitioner issued with a certificate of appointment by the Master of the High Court. Despite this, the first applicant has been denied access to the company’s premises on two occasions, prompting the current urgent chamber application. Points in Limine The Respondents have raised several preliminary points in limine challenging the validity and urgency of the application filed by the Applicants. These preliminary points include the lack of urgency, the issue of lis pendens, the locus standi of the 1st Applicant, and alleged material non-disclosure by the Applicants. Each of these points will be analyzed in detail to determine their validity and impact on the current application. Urgency The first point raised by the Respondents is the lack of urgency in the application. According to the Respondents, the Applicants have not demonstrated that the matter is urgent and warrants immediate intervention by the court. The Respondents argue that the delay in the assumption of duties by the Corporate Rescue Practitioner (CRP) does not justify the urgency claimed by the Applicants. However, the Applicants contend that the urgency of the matter is driven by the need to prevent further prejudice to the creditors and employees of Amcast (Private) Limited. The Applicants argue that the denial of access to the company’s premises by the Respondents directly impacts the CRP’s ability to perform his duties and implement the corporate rescue plan. The immediate and irreparable harm caused by the Respondents’ actions necessitates urgent intervention by the court. The principle of urgency in legal proceedings is well-established in our jurisdiction. See Kuvarega v The Registrar General and Anor 1998(1) ZLR 188. Urgency is determined by the nature of the harm and the immediacy of the required remedy. The court emphasized that an urgent application must demonstrate that the applicant will suffer irreparable harm if the matter is not heard immediately. In this case, the Applicants have demonstrated that the denial of access to the company’s premises by the Respondents prevents the CRP from performing his duties, which directly impacts the possibility of rescuing the distressed company. The inability of the CRP to access the premises hampers his ability to assess the HH 296-24 HCH 2789/24 company’s financial situation, engage with employees, and implement necessary changes for the company’s recovery. Furthermore, the Insolvency Act [Chapter 6:07] emphasizes the need for timely intervention to facilitate the rehabilitation of financially distressed companies. The Act provides that the CRP must be able to take control of the company’s operations and implement the rescue plan without undue delay. In the meeting held on 29th May 2024 that resulted in the issuance of the certificate of appointment the Master gave the CPR three months within which to conclude the rescue operations. The Respondents’ actions in denying access to the premises undermine the purpose of the corporate rescue proceedings and necessitate urgent intervention by the court to protect the interests of creditors and employees. In Metallon Gold Zimbabwe (Private Limited) and 3 Others v Shatirwa Investments (Private) Limited SC107/21 the court emphasized the need for corporate rescue proceedings to be done expeditiously. It wrote at p 16 of the cyclostyled judgment that, “The law requires the protection of the troubled company’s assets so that the corporate rescue practitioners do not inherit shells.” In the present matter the allegation, which is not being refuted, is that the 1st to 3rd respondents with the assistance of the 4th respondent are working the dump at the mine, selling the gold extracted therefrom and appropriating the proceeds to themselves. The 2nd respondent’s members, the ones who initiated the rescue proceedings are not benefitting at all and their hope is pinned on the assumption of duty of the CPR and the return to profitable operations of Amcast. Lis Pendens The second point raised by the Respondents is the issue of lis pendens. The Respondents argue that there are pending matters related to the corporate rescue proceedings, and therefore, the current application should not proceed. The principle of lis pendens is based on the idea that a court should not hear a matter that is already pending before another court. This principle aims to avoid conflicting judgments and ensure judicial efficiency. However, the Applicants contend that the relief sought in the current application is distinct from the pending matters referred to by the Respondents. The Applicants argue that the pending matters do not seek the same relief as the current application and therefore, do HH 296-24 HCH 2789/24 not preclude the current application from proceeding. The principle of lis pendens requires that the pending matters be identical in cause and relief, which is not the case here. In the present case, the relief sought by the Applicants is specific to enabling the CRP to perform his duties without interference. The Applicants argue that the denial of access to the premises by the Respondents is a new issue that has arisen after the issuance of the certificate of appointment. The pending matters cited by the respondents do not address this specific issue and therefore, do not preclude the current application from proceeding. Furthermore, the principle of lis pendens is not absolute and must be balanced against the need for timely intervention in urgent matters. The courts have emphasized that the principle of lis pendens should not be applied rigidly and must be considered in light of the specific circumstances of each case. In this case, the immediate and irreparable harm caused by the denial of access to the premises necessitates urgent intervention by the court to protect the interests of creditors and employees. While the principle of lis pendens aims to ensure judicial efficiency and consistency, it must not be used to obstruct the timely resolution of urgent matters. The court has a duty to ensure that justice is served in a timely manner, especially in cases where delay could result in significant harm to the parties involved. In this context, the court must prioritize the immediate and pressing needs of the applicants and other stakeholders over procedural technicalities raised by the respondents. Locus Standi The third point raised by the Respondents is the locus standi of the 1st Applicant. The Respondents question the legal standing of the 1st Applicant to bring the current application. They argue that the 1st Applicant’s appointment as CRP is invalid and therefore, he lacks the necessary locus standi to bring the application. However, the Applicants contend that the 1st Applicant’s appointment as CRP was duly made by a court order and has been certified by the Master of the High Court. The Applicants argue that the certificate of appointment provides the 1st Applicant with the necessary legal standing to bring the current application. The Applicants further argue that any challenge to the validity of the 1st Applicant’s appointment should be addressed in the appropriate forum and does not preclude the current application from proceeding. The respondents base their argument on the fact that they have a pending application for the removal of the CPR and that once the appointment of the CPR is challenged the CPR HH 296-24 HCH 2789/24 loses the locus standi to bring any proceedings in court. The applicants countered this challenge by referring the court to the case of Kurt Robert Knoop and Another v Chetaali Gupta and Another 116/2020 ZASCA 163 where the court remarked that, “Two general principle will be that the removal is not something to be ordered lightly and that the primary reason in justifying removal will be actual or potential prejudice or harm to the interest of the company, and those in whose interests the administration was established, creditors in the circumstance of insolvency.” In any case “ any person aggrieved by a decision , ruling, order or taxation of the Master may bring it under review by the court and to that end may apply to the court, after notice to the Master” See; Jeeva and Anor v Tuck N. O and Others 1998(1) SA 785 (SE) 72. The court in Lange N. O & Others v Maartens N. O & Others (1094/2019) [2020] ZANCHC 8 (20 March 2020) held that the valid appointment and certificate of the CRP provide the necessary locus standi to act in their capacity. The court emphasized that the certificate of appointment is a critical document that legally empowers the CRP to take control of the company’s operations and implement the rescue plan. In the present case, the 1st Applicant’s appointment as CRP has been certified by the Master of the High Court, providing him with the necessary legal standing to bring the current application. Furthermore, the Insolvency Act [Chapter 6:07] provides that the CRP must be able to perform his duties without undue interference. The denial of access to the premises by the Respondents directly interferes with the CRP’s ability to perform his duties and necessitates urgent intervention by the court to protect the interests of creditors and employees. Material non-disclosure The fourth point raised by the Respondents is the alleged material non-disclosure by the Applicants. The Respondents argue that the Applicants have failed to disclose all relevant facts necessary for the court to adjudicate on the urgent application. They contend that the Applicants have withheld material information that is critical to the court’s decision-making process. However, the Applicants dispute this allegation and argue that they have provided all material facts necessary for the court to adjudicate on the urgent application. The Applicants contend that the certificate of appointment and the denial of access to the company’s premises are central to the relief sought and have been fully disclosed to the court. The HH 296-24 HCH 2789/24 Applicants further argue that the relevant facts related to the corporate rescue proceedings and the actions of the Respondents have been disclosed in their affidavits. The court in Sean Crowder Bastos Tuna v Pioneer Foods (Pty) Ltd (A5001) (2015) [2016] ZAGP JHC.298 (18 November 2016) emphasized the necessity of full and frank disclosure of relevant facts in urgent applications. The court held that material facts relevant to the specific relief sought must be disclosed to enable the court to make an informed decision. In the present case, the Applicants have disclosed the certificate of appointment and the denial of access to the premises, which are central to the relief sought. The Applicants have also provided a detailed account of the corporate rescue proceedings and the actions of the Respondents, which are relevant to the court’s decision-making process. Furthermore, the principle of full and frank disclosure must be balanced against the need for timely intervention in urgent matters. The court in Crowder Bastos v Pioneer Foods (Pty) Ltd (supra) recognized that the requirement for full disclosure should not be applied rigidly and must be considered in light of the specific circumstances of each case. In this case, the immediate and irreparable harm caused by the denial of access to the premises necessitates urgent intervention by the court to protect the interests of creditors and employees. During the hearing of this matter Mr Hove for the respondents tried to introduce other points in limine that were not raised in the papers filed of record. He stated that in fact the applicants had filed an urgent chamber application that they then withdrew after the presiding judge had made observations that the matter had been set down before the dies induciae had expired, immediately thereafter the applicants filed the present application and that the contents of the certificate of urgency was exactly the same as those in the withdrawn application. Counsel for the respondents relied on the authority set in Oliver Mandishona Chidawu and 3 Others v Jayesh Sha and 4 Others, SC 12/2013 to move for the dismissal of this application. The certificate of urgency for the first withdrawn application was not placed before the court. In any case Mrs Evans, counsel for the applicants seriously disputed that the certificates of urgency were identical in content. Without the certificate of urgency that was attached to the withdrawn application I had no reason to doubt Mrs Evans’ submissions in that regard. Based on the analysis of the preliminary points in limine raised by the Respondents, it is clear that the urgency of the application is justified. The preliminary points raised by the Respondents are dismissed. HH 296-24 HCH 2789/24 On the merits In this part, an analysis of the factual circumstances that has led to the current urgent application shall be made. This involves a comprehensive examination of the events and circumstances surrounding the corporate rescue proceedings of Amcast (Private) Limited, the actions of the respondents, and the consequent implications on the company's operations. By analyzing these facts in detail, it is aimed to establish a clear context for the legal arguments and the necessity of the relief sought by the applicants. Amcast (Private) Limited was placed under corporate rescue in terms of the Insolvency Act [Chapter 6:07] by order of the High Court dated 19 October 2022. The initiation of corporate rescue proceedings was primarily driven by the deteriorating financial condition of Amcast, which posed a significant risk to its creditors, employees, and other stakeholders. The appointment of Obert Madondo N. O. as the Corporate Rescue Practitioner (CRP) was a strategic decision intended to facilitate the restructuring and recovery of Amcast. As per the provisions of the Insolvency Act, the CRP is endowed with extensive powers to take control of the company's operations, investigate its affairs, and formulate a rescue plan aimed at returning the company to a solvent position. Despite the court's order and the critical role of the CRP, the appointment of Obert Madondo N. O. faced significant opposition from the Respondents. The Respondents initiated a series of legal challenges aimed at contesting the validity of the CRP’s appointment. These legal proceedings caused substantial delays in the assumption of duties by the CRP, thereby hindering the timely implementation of the corporate rescue plan. The respondents' legal challenges primarily centred around questioning the procedural aspects of the CRP’s appointment and raising various technical objections. These objections were addressed through the legal process, culminating in the issuance of a certificate of appointment by the Master of the High Court on 29 April 2024. This certificate is a vital document that legally empowers the CRP to take control of Amcast's operations and execute the rescue plan. The respondents raise the issue in this application and in their pending application that the CPR’s mandate has expired by operation of the law. A reference is made to s125(3)(a) of the Insolvency Act to the fact that corporate rescue proceedings should not take more than three months to complete. The respondents are also alive to the provisions of s125(2)(a) – (c) of the same Act that provide for the way and manner corporate rescue proceedings are HH 296-24 HCH 2789/24 terminated and they list them in their heads of argument. They write, “In terms of s125(2)(a)- (c) of the insolvency Act, corporate rescue proceedings are terminated in one of the following ways – by court order, the filing of a notice of termination with the Master, and by rejection of substandard implementation of a corporate rescue plan.” The respondents thereafter did not want to further develop this argument and say that rescue proceedings were terminated in any one of the methods mentioned above. What is clear is that the rescue proceedings had not been terminated. Perhaps the respondents are not clear of what happens in the interim until the CRP is issued with the letter of appointment by the Master. Once an order for corporate rescue or liquidation has been granted the company is vested in the Master of High Court and after issuance of his or her certificate of appointment by the Master the company is vested in the Corporate Rescue Practitioner. The Immediate consequence of a provisional order is that all the company’s property is deemed to be in the custody of the Master until the assumption of the CPR. See; DeVilliers N. O. v Delta Cables (Private) Limited 1992 (1) SA 9 (A) and Visser et al in South African Mercantile Law 8th Edition at p.413. The issuance of the certificate of appointment marked a significant milestone in the corporate rescue proceedings. It validated the CRP’s authority and provided the necessary legal backing to perform the duties mandated by the court. The delay in issuing this certificate, primarily due to the Respondents’ litigation, had adverse effects on Amcast’s operations and its prospects for recovery. The period between the initial court order and the issuance of the certificate was marked by uncertainty and operational disruptions. The company’s financial condition continued to deteriorate, and the lack of effective management oversight further exacerbated its distress. The issuance of the certificate was therefore crucial to stabilizing the company and initiating the recovery process. Upon receiving the certificate of appointment, the first applicant, Obert Madondo N. O., made attempts to visit Amcast to commence the execution of his duties. However, on two separate occasions, he was denied access to the company’s premises by the Respondents. This denial of access represents a direct obstruction to the CRP’s ability to perform his legally mandated functions. The denial of access had several immediate and long-term implications. Firstly, it prevented the CRP from conducting a thorough assessment of the company’s financial and operational status. Such an assessment is critical for formulating an effective rescue plan. HH 296-24 HCH 2789/24 Secondly, it hindered the CRP’s ability to engage with employees and other key stakeholders, thereby delaying the implementation of necessary changes to stabilize the company. The actions of the Respondents in denying access to the premises are particularly detrimental given the urgent need for intervention to prevent further financial deterioration of Amcast. The CRP’s role involves taking decisive actions to restructure the company, which includes reviewing financial records, meeting with creditors, and implementing cost-saving measures. The inability to access the premises effectively paralyzes these efforts. Moreover, the denial of access sends a negative signal to creditors and other stakeholders about the prospects of the corporate rescue process. It undermines confidence in the company’s ability to recover and may lead to further withdrawal of support from key stakeholders. This can exacerbate the company’s financial distress and make the task of rescuing the company even more challenging. An essential aspect of the CRP’s duties involves engaging with various stakeholders, including creditors, employees, and shareholders. This engagement is critical for building consensus on the rescue plan and ensuring that all parties are aligned towards the common goal of rescuing the company. The denial of access to the premises severely hampers this engagement process. For instance, employees need to be reassured about the company’s future and their job security. The CRP’s presence and direct communication can help in stabilizing the workforce and ensuring continued productivity. Similarly, creditors need to be engaged to negotiate terms and gain their support for the rescue plan. Without access to the premises, the CRP is unable to facilitate these crucial engagements effectively. The legal framework provided by the Insolvency Act [Chapter 6:07] emphasizes the importance of the CRP’s role in managing and restructuring a distressed company. The Act grants the CRP extensive powers to investigate the company’s affairs, take control of its operations, and implement a rescue plan. The actions of the Respondents in denying access to the premises directly contravene the provisions of the Act and undermine its objectives. Operationally, the CRP needs unrestricted access to the company’s premises to review financial records, meet with management, and assess operational efficiencies. This access is critical for identifying areas that require immediate intervention and for formulating a comprehensive rescue plan. The denial of access effectively stalls this process and jeopardizes the company’s recovery efforts. HH 296-24 HCH 2789/24 The court plays a pivotal role in ensuring that the corporate rescue process is conducted in accordance with the law and that the CRP is able to perform his duties without undue interference. The court’s intervention is necessary to uphold the legal provisions of the Insolvency Act and to protect the interests of creditors, employees, and other stakeholders. In the current case, the court’s intervention is sought to issue a provisional order to interdict the Respondents from interfering with the operations of Amcast (Private) Limited. This order is critical to enabling the CRP to perform his duties and to ensuring that the objectives of the corporate rescue process are achieved. The court’s role in issuing such orders is to ensure that the legal framework is respected and that the interests of all stakeholders are protected. The factual analysis presented in this part underscores the critical importance of the CRP’s role in the corporate rescue process and the detrimental impact of the Respondents’ actions in denying access to the premises. The urgency of the application is justified given the immediate and irreparable harm caused by the Respondents’ actions. The court’s intervention is necessary to uphold the legal framework of the Insolvency Act and to protect the interests of creditors, employees, and other stakeholders. The provisional order sought by the Applicants is essential to enable the CRP to perform his duties and to ensure the successful restructuring and recovery of Amcast (Private) Limited. Resultantly it is ordered that: Pending the determination of this matter on the return date, the applicants are granted the following relief in the interim; 1st to 4th respondents are hereby ordered forthwith to cease any form of mining or processing of gold dump at Amcast Mine (under corporate rescue) at No. 1 Chiriseri Road, Virginia Farm, turnoff, Glendale 1. 1st to 4th Respondents be and are hereby ordered forthwith to avail access to 1st Applicant and not to interfere, interrupt and prohibit operations of corporate rescue proceedings. 2. The Sheriff be and is hereby ordered and directed to enforce paragraphs 1 and 2 above of this interim order and where necessary seek the assistance of the Zimbabwe Republic Police. HH 296-24 HCH 2789/24 Mabuye Zvarevashe-Evans, applicant’s legal practitioners TK Hove& Partners 1st to 4th, respondents’ legal practitioners