Anthony Ernest Pahwaringira and Davy Fukwa Mutingwende v Warren Park Trust

The appellants, together with their spouses, were directors and shareholders of Saltana Enterprises (Private) Limited. In March 2005, they concluded an agreement to sell their entire shareholding in the Company to the respondent. The agreement contained suspensive conditions for the benefit of the purchaser (respondent), including due diligence, resignation of directors, appointment of consultants, and payment terms. On 20 June 2005, the respondent waived all suspensive conditions and indicated it would pay the outstanding funds by 10 July 2005. The directors then cancelled the agreement. The respondent applied to the High Court for specific performance. Before the respondent's answering affidavit was filed, the Company was placed under provisional judicial management by court order, which stayed all proceedings against the Company and divested directors of management control. Despite this order, the High Court proceeded to hear the matter and granted specific performance against all five respondents (the four individual directors/shareholders and the Company).

• Whether the High Court had jurisdiction to entertain proceedings involving a company placed under judicial management in the face of an order staying proceedings against that company
• Whether an order could be granted against directors who had been divested of control and right to represent the company
• Whether specific performance was properly granted where there was a dispute about payment and where the applicant had not demonstrated fulfillment of its own contractual obligations

The appeal was allowed. The order of the High Court was set aside and substituted with an order dismissing the application with costs. The respondent was ordered to bear the costs of the appeal.

Where a court order places a company under provisional or final judicial management and stays all proceedings against the company, no proceedings may continue against that company without leave of the court being first sought and formally granted. A judicial manager's informal indication that they will abide by the court's decision does not constitute sufficient leave. Where directors and shareholders are cited in proceedings and the orders sought against them in their official capacities would effectively bind the company (such as requiring transfer of shares, delivery of company assets and documents, and resignation as directors), those proceedings are proceedings against the company itself and are subject to the stay order. A judgment granted in breach of a stay order is irregular and a nullity for lack of jurisdiction.

The Court made non-binding observations regarding the grant of specific performance. Ziyambi JA noted that specific performance is a discretionary remedy that must be based on proper exercise of judicial discretion with reasons given. In this case, the Court observed that it was improper to grant specific performance where: (1) there was no evidence that the purchase price had been calculated or paid as required by the contract; (2) there was an unresolved dispute about whether a payment of $200 million had been made; and (3) the applicant had not demonstrated fulfillment of its own contractual obligations. The Court commented that the lower court gave no reasons for this unusual order granting specific performance before the applicant had performed its part of the contract, making it difficult to ascertain whether discretion was properly exercised. These observations were made despite the issue not being raised by the parties on appeal.

This case establishes important principles regarding the effect of judicial management orders on litigation involving companies under judicial management. It confirms that stay orders must be strictly complied with and that leave of court must be formally sought and granted before proceedings can continue against a company under judicial management. The case also demonstrates that where directors are cited in their official capacities and orders effectively bind the company, those proceedings are subject to the stay order. The judgment reinforces procedural requirements for protection of companies under judicial management and their creditors.