Afrasia Bank Limited v K. S. Trust and Master of the High Court

Afrasia Bank Zimbabwe Limited (the bank) sold a property to KS Trust (the trust) for US$176,000 on 18 February 2015. The trust paid a deposit of US$35,901 and deposited the balance with conveyancers. The bank tendered transfer on 24 February 2015. However, on 18 March 2015, the bank was placed under provisional liquidation by the Reserve Bank of Zimbabwe, and the Deposit Protection Corporation appointed a provisional liquidator (LA). The LA's agent delayed the transfer process for months, informing the trust's conveyancers in November 2015 that the sale was not sanctioned and the property had been sold to a third party for US$140,000. The bank's liquidation resulted from the board's resolution to surrender its banking licence, not from inability to pay debts. The trust sought leave to sue for specific performance. The bank opposed and filed a counter-application to set aside the agreement, alleging it was a voidable disposition or preference under the Companies Act and Insolvency Act.

• Whether the non-citation of the second purchaser, creditors, and liquidator was fatal to the application
• Whether the sale to the trust constituted a voidable disposition under s 213(c) of the Companies Act
• Whether the sale constituted a voidable or undue preference under ss 42 and 43 of the Insolvency Act
• Whether the provisions of the Insolvency Act applied to a winding up not based on inability to pay debts
• Whether the court should exercise its discretion to grant specific performance

The appeal was dismissed with costs. The High Court order compelling the liquidator to transfer the property to the trust in terms of the contract was upheld.

The binding legal principles are: (1) Section 270 of the Companies Act only applies the provisions of the Insolvency Act (including ss 42 and 43 on voidable and undue preferences) to companies wound up on grounds of inability to pay debts under s 206(f), not to companies wound up for other reasons under s 206. (2) A disposition of company property under s 213(c) made before commencement of winding up is not caught by that section. (3) Even where s 213(c) applies, it renders dispositions voidable (not void) as the court retains discretion to validate them. (4) Where a party files a substantive application (such as a counter-application), that party bears the onus of citing all interested parties whose rights may be affected. (5) Under Rule 87 of the High Court Rules, non-joinder of parties does not defeat a cause of action. (6) A party alleging voidable or undue preference must prove that the company's liabilities exceeded its assets and that the disposition was made with intent to prefer one creditor over others.

The court made several non-binding observations: (1) The deliberate silence of the liquidator's agent regarding the identity of the second purchaser, combined with failure to produce any sale agreement or evidence of auction, and the lower purchase price with no proof of payment, cast serious doubt on the integrity and bona fides of the alleged second sale. (2) The interests of creditors (if any existed) would be better protected by enforcing the contract with the trust at US$176,000 with funds readily available, rather than an alleged sale at US$140,000 with no evidence of payment. (3) The liquidator's agent misled the trust by representing that their concerns were receiving attention while simultaneously selling the property to another party. (4) Even if the Insolvency Act provisions applied, the court would retain discretion whether to set aside dispositions under ss 42 and 43.

This case clarifies important principles in Zimbabwean company and insolvency law: (1) the provisions of the Insolvency Act apply only to companies wound up due to inability to pay debts under s 270 of the Companies Act, not to companies wound up for other reasons under s 206; (2) dispositions under s 213(c) of the Companies Act are voidable, not void, and the court has discretion to sanction them; (3) the timing of dispositions relative to commencement of winding up is critical; (4) parties bringing substantive applications bear the responsibility to cite all interested parties; (5) non-joinder is not necessarily fatal under Rule 87; and (6) allegations of voidable preferences require proof of insolvency and preferential intent. The case also demonstrates judicial scrutiny of liquidators' conduct and the importance of transparency in post-liquidation transactions.