Balasore Alloys Ltd v Zimbabwe Alloys Ltd and Others

The first and second respondents (Zimbabwe Alloys Ltd and Zimbabwe Alloys Chrome (Pvt) Ltd) were placed under provisional judicial management by court order on 24 July 2013. The court ordered the Master to appoint Reggie Saruchera as provisional judicial manager. A scheme of arrangement was proposed to resuscitate the companies, which was sanctioned by the court on 20 December 2017. The applicant, Balasore Alloys Ltd (an Indian company), became involved as an investor under the scheme of arrangement, undertaking to inject over $90 million. A dispute arose when the judicial manager (fourth respondent Bulisa Mbano) accused the applicant of failing to fulfil its undertakings. On 3 April 2018, the judicial manager wrote to the applicant stating that major creditors and members had resolved to terminate the applicant's bid and invite other bidders. On 6 April 2018, the applicant filed an urgent application seeking to protect its rights and interests under the scheme of arrangement.

• Whether the application was urgent and could be heard on an urgent basis
• Whether the applicant had established a prima facie case for interim relief
• Whether the purported termination of the applicant's bid was lawful and in accordance with the scheme of arrangement
• Whether the conditions precedent under the scheme of arrangement had been complied with
• Whether the fourth respondent had locus standi to act as judicial manager in place of the third respondent
• The proper test and standard for granting a provisional order in urgent applications
• The proper procedure for dealing with urgent chamber applications under Rule 244 and 246 of the High Court Rules

The court granted the provisional order with a variation. In paragraphs (a) and (b) of the interim relief, the court added the words "without an order of this court" after the word "Respondents" at the end of each paragraph. This effectively interdicted the respondents from taking steps to cancel the scheme of arrangement and from engaging in fresh bid or tender procedures, or from publishing information purporting to cancel the applicant's interests in the scheme of arrangement, unless authorized by court order. The matter was set down for return date for full argument on confirmation or discharge of the provisional order.

In urgent applications for a provisional order under Rule 246(2) of the High Court Rules, the judge must grant a provisional order where satisfied that the papers establish a prima facie case. A prima facie case is one that does not merit absolution from the instance - the applicant need only place evidence from which a court properly directed could or might find for the applicant, a standard much lower than proof on a balance of probabilities. The procedure requires the applicant to satisfy the judge on the existence of a prima facie case, and once satisfied, the judge must grant temporary relief as prayed for or on such terms as considered just and equitable. Urgency in applications involving commercial or financial interests is situational and depends on all facts and circumstances, ultimately revolving on whether the applicant can get relief in due course if the matter is not determined on the urgent roll. A judicial manager appointed to conduct the affairs of a company under judicial management cannot invoke immunity when sued over issues arising from his or her management actions, as this would be absurd and illogical.

Chitapi J observed that urgent applications should be sparingly used and not abused, as they give an unfair advantage to applicants and reduce time for the opposing party to prepare. The judge noted a "worrying tendency" where judges allow parties to argue beyond what is required to establish a prima facie case, causing urgent applications to take half or full days. The court suggested that once a prima facie case is established, parties should anticipate the return date and arrange for urgent set down to present full argument for discharge or variation of the provisional order. The judge commented that whether a threat to commercial or financial interests grounds urgency should not be a rule of thumb but should be informed by consideration of all facts and circumstances. The court also observed that the fourth respondent should have adduced evidence of how he came to be judicial manager in place of the third respondent whom the court had ordered to be appointed, especially since the applicant challenged his appointment. The judge noted that certificates of appointment by the Master cannot validate an appointment that conflicts with a court order without explanation. The court also commented on the protectionist provisions against companies under judicial management, stating they were not intended to be futuristic in effect but to arrest existing situations that would worsen the company's viability.

This case is significant for its comprehensive discussion of the proper procedure for dealing with urgent chamber applications in Zimbabwe. It clarifies the test for establishing a prima facie case in urgent applications (lower than balance of probabilities) and emphasizes that judges should not require applicants to argue their full case at the urgent application stage. The judgment provides guidance on Rule 246(2) of the High Court Rules, emphasizing that once a judge is satisfied that papers establish a prima facie case, a provisional order should be granted as a matter of course. The case also addresses important issues of judicial management, including the locus standi of judicial managers and the distinction between bidding stages and concluded contractual relationships under schemes of arrangement. It clarifies that protections afforded to companies under judicial management are not intended to be futuristic but to arrest existing situations, and that judicial managers cannot hide behind immunity when sued over issues arising from their management actions.