Dalabani Swadiki and Others v Mazowe Mining Company (Private) Limited

The applicants are five former managers of Mazowe Mining Company (Pvt) Ltd who mutually terminated their employment contracts in July 2023 following negotiations that resulted in written agreements specifying substantial terminal benefits to be paid in instalments totaling over US$415,000. The respondent initially complied for two months but then defaulted on payments. In February 2024, an application was made to place the respondent under corporate rescue in terms of Section 125(2) of the Insolvency Act, which was still pending. This triggered an automatic moratorium on legal proceedings against the company. The applicants sought authority under Section 126 of the Insolvency Act to pursue their unpaid terminal benefits despite the moratorium, arguing they had no other remedy as no corporate rescue practitioner had been appointed to provide written consent.

• Whether the application for leave to sue under Section 126 of the Insolvency Act was premature given that the corporate rescue process had not officially commenced and no creditors' meeting had been held
• Whether the absence of a draft Labour Court application constituted a fatal defect in the application for leave to sue
• Whether points in limine raised for the first time in heads of argument should be considered by the court
• Whether applicants were required to first exhaust remedies under the Insolvency Act, including lodging and proving claims at the first creditors' meeting

The application was struck from the roll with costs.

An application for leave to sue under Section 126 of the Insolvency Act is premature when brought before the corporate rescue process has officially commenced and before creditors' meetings have been held, as applicants must first exhaust remedies available under the Insolvency Act, including the requirement to lodge and prove claims at the first creditors' meeting. While Section 126 does not explicitly require the attachment of a draft application to the intended proceedings, the absence of such a draft constitutes a fatal defect as it prevents the court from adequately assessing whether the claims are substantial and whether the proposed forum is appropriate, thereby rendering the court unable to properly exercise its discretion.

The court observed that points in limine raised for the first time in heads of argument do not have automatic consideration, citing Delta Beverages (Pvt) Ltd v Kudakwashe Murandu SC 38/2015. However, the court distinguished that case (where the point was raised for the first time on appeal) from the present matter where the points were raised in heads of argument and the matter was argued almost two months later, suggesting that the timing and context of raising preliminary points matters. The court also noted that even if the applicants were not seeking to execute a court order, their claims would still be classified as preferential creditors under the existing legal framework, and this status would not change whether a court order was granted or not. The court further observed that if the sole purpose of the application was to have the applicants' claims recognized by the corporate rescue practitioner, the proceedings would be essentially academic and would only create unnecessary expenses for a company already struggling financially.

This case clarifies the procedural requirements for applications under Section 126 of the Insolvency Act seeking leave to sue a company under corporate rescue. It establishes that such applications are premature when made before the corporate rescue process has officially commenced and before creditors' meetings have been held. The judgment emphasizes the importance of exhausting remedies available under the Insolvency Act before seeking court intervention. It also highlights the practical importance of attaching draft applications to guide the court's discretion, even where not explicitly required by statute. The case demonstrates the protective nature of the corporate rescue moratorium and the need to balance individual creditor claims against the collective interests of all creditors in the rescue process.