Allied Bank Limited v Celeb Dengu and Wilson Tendai Nyabonda

The appellant bank entered into a credit facility agreement with Onclass Investments (Pvt) Ltd in December 2012. The respondents bound themselves as sureties and co-principal debtors. The principal debtor breached the agreement by failing to repay the loan and was placed under provisional liquidation. In 2013, the appellant sued the respondents as sureties in the High Court. After the respondents entered appearance to defend and filed a plea, and after a Pre-Trial Conference was held, the appellant was placed under liquidation on 4 March 2015. The appellant's legal practitioners filed a notice of change of status in terms of Rule 85A(1) of the High Court Rules, 1971. When the matter was set down for trial, the respondents raised a preliminary point that the appellant had no locus standi to continue with proceedings without leave of the court.

• Whether an objection to locus standi raised after litis contestatio must comply with the special plea procedure under Rules 137 and 139 of the High Court Rules, 1971
• Whether a company placed under liquidation during proceedings loses locus standi to continue with litigation initiated before liquidation
• Whether the word 'to bring' in section 221(2) of the Companies Act includes 'to continue' with proceedings
• Whether section 213 or section 221(2) of the Companies Act [Cap. 24:03] applies where a plaintiff company is placed under liquidation during proceedings
• Whether leave of court is required for a company in liquidation to continue proceedings commenced before liquidation

The appeal succeeded with costs. The judgment of the court a quo was set aside and substituted with the following order: "The point in limine is dismissed with costs."

1. A company placed under liquidation after commencing proceedings does not lose locus standi to continue those proceedings, as locus standi depends on the relationship between the cause of action and relief sought, not the party's status. 2. Section 213 of the Companies Act [Cap. 24:03] is the relevant provision governing the effect of liquidation on existing proceedings, not section 221(2). 3. Under section 213, leave of court is required only for proceedings against a company in liquidation (where it is defendant), not for continuation of proceedings by a company in liquidation (where it is plaintiff). 4. The words 'to bring' in section 221(2) do not include 'to continue' with proceedings, as these are separate and distinct concepts expressly differentiated in section 213. 5. Applying the principle of expressio unius est exclusio alterius, the legislature's omission of a leave requirement for plaintiff companies in liquidation continuing proceedings means no such leave is required. 6. The discretion to continue or discontinue proceedings lies with the liquidator, not with the court through a leave requirement. 7. Special pleas, including those relating to locus standi raised after litis contestatio, must be raised formally in compliance with court rules, with proper notice to the other party, even though they may be raised at any stage of proceedings.

The Court observed that the purpose of requiring leave to proceed against a company in liquidation (under section 213) is to protect the company's assets from dissipation through speculative litigation and to ensure orderly administration of the liquidation. However, this mischief does not affect the right of a company in liquidation to recover what it is owed by its debtors. The Court noted that liquidators will typically be guided by the state of the company's assets, available funds, and prospects of success when deciding whether to continue proceedings commenced before liquidation. The Court criticized the Kenyan case of Trade Bank Ltd and Anor v Elysium Ltd and 2 Ors (2012) EklR as not persuasive, stating it incorrectly interpreted 'to commence' to mean the same as 'to continue' despite these being distinct concepts. The Court also commented that the lower court's order striking the matter off the roll after hearing arguments and finding in favor of one party was problematic and had no legal effect, as striking off can only be done where there are no valid proceedings, and the party in whose favor findings were made was entitled to an order protective of its rights.

This case establishes important principles regarding the continuation of litigation by companies placed under liquidation in Zimbabwe. It clarifies that a company that commences proceedings before being placed under liquidation does not require leave of court to continue those proceedings, distinguishing between the commencement of new proceedings (which requires leave under section 221(2)) and continuation of existing proceedings (which does not). The judgment provides authoritative guidance on the interpretation of sections 213 and 221(2) of the Companies Act [Cap. 24:03], emphasizing that these provisions distinguish between companies as plaintiffs and defendants, and between commencing and continuing proceedings. The case also reinforces procedural requirements for raising special pleas, confirming that even points of law that can be raised at any stage must be raised formally with proper notice. The decision protects the rights of creditors of companies in liquidation to pursue legitimate claims against debtors without unnecessary procedural obstacles, while clarifying that the liquidator retains discretion over whether to continue such proceedings based on commercial considerations.