Deposit Protection Corporation (in its capacity as the Provisional Liquidator of Trust Bank Corporation Limited) v Riozim Limited

On 12 March 2014, Trust Bank Corporation Limited obtained a court order against Riozim Limited (respondent) for payment of $1,824,505.05 plus interest arising from a loan advanced to the respondent. On 8 October 2014, Trust Bank was placed under provisional liquidation by court order, with the Deposit Protection Corporation (DPC) appointed as provisional liquidator in terms of s 57(1)(b) of the Banking Act. On 7 May 2015, the respondent filed an application for variation of the original court order without obtaining leave of court, citing Trust Bank and John Mafungei Chikura (DPC's CEO) but not citing DPC itself. A default judgment was granted on 27 May 2015 varying the original order by reducing the debt to $634,336.14 and reducing the interest rate from 45% to 25% per annum. The DPC subsequently applied for rescission of this variation order under Rule 449(1)(a) of the High Court Rules, arguing that the variation order was erroneously granted because: (1) leave of court had not been obtained as required by s 213 of the Companies Act to proceed against a company in provisional liquidation, and (2) DPC as provisional liquidator was not cited despite having a direct and substantial interest in the matter.

• Whether the variation order was erroneously granted within the meaning of Rule 449(1)(a) of the High Court Rules
• Whether leave of court was required under s 213 of the Companies Act to file an application against a company under provisional liquidation
• Whether the Deposit Protection Corporation had locus standi to bring the rescission application
• Whether the DPC should have been cited as a party in the variation application
• Whether Mr Chikura had authority to depose to the founding affidavit on behalf of DPC
• Whether the requirement for leave of court could be waived by consent of the parties

1. The order of this court granted in favour of the respondents on 27 May 2015 under case number HC 4155/15 be and is hereby rescinded. 2. The Respondent shall pay the costs.

The binding legal principles established are: (1) Under Rule 449(1)(a) of the High Court Rules, once it is established that a judgment was erroneously granted in the absence of an affected party, the court must rescind the judgment without requiring the applicant to establish "good cause" - it need only be shown that a relevant fact which ought to have been placed before the court was not placed before it. (2) Section 213 of the Companies Act, which requires leave of court before commencing or proceeding with any action against a company in liquidation or provisional liquidation, is peremptory and mandatory, and cannot be waived by consent of parties. (3) An application filed without the required leave of court renders the resultant order void ab initio and a nullity. (4) Under s 57(1)(b) of the Banking Act, the Deposit Protection Corporation must be appointed as provisional liquidator of banking institutions, and by virtue of this statutory provision, the DPC has locus standi in all matters involving liquidation or judicial management of banking institutions falling under the Banking Act. (5) The Deposit Protection Corporation, as statutory provisional liquidator, is a necessary party with a direct and substantial interest that must be cited in proceedings affecting the company under liquidation.

The court made several non-binding observations: (1) The Master of the High Court should have been cited in the variation application because a company under provisional liquidation is under the supervision of the Master. (2) The court cited with approval the South African case of Theron NO v United Democratic Front stating that Rule 449(1)(a) is a procedural step designed to correct an irregularity and restore parties to the position they were in before the order was granted, and that the court will normally exercise its discretion in favor of an applicant who, through no fault of his own, was not afforded an opportunity to oppose an order and who takes expeditious steps to rectify the position upon discovering it. (3) The court endorsed the principle from Grantully (Pvt) Ltd v UDC Ltd that Rule 449 is available to cater for situations where a judgment erroneously sought or issued in error would occasion an injustice if allowed to stand. (4) The court observed that Mr Chikura, as Chief Executive Officer of DPC, must be deemed authorized to act on behalf of DPC by virtue of holding that appointment. (5) The court noted that the respondent's explanation of the merits was irrelevant to the determination of a Rule 449(1)(a) application.

This case establishes important principles regarding the protection afforded to companies under liquidation or provisional liquidation in Zimbabwean law. It confirms that the requirement under s 213 of the Companies Act to obtain leave of court before commencing proceedings against a company in liquidation is mandatory and cannot be waived by consent. The case also clarifies the statutory role and locus standi of the Deposit Protection Corporation under s 57 of the Banking Act in relation to the liquidation of banking institutions. The judgment reinforces procedural safeguards for liquidators and demonstrates the application of Rule 449(1)(a) for rescission of orders erroneously granted, distinguishing this from the more onerous "good cause" requirement under Rule 63 for default judgments. The case is significant for insolvency practitioners and banking law, establishing that failure to obtain required leave renders subsequent proceedings and orders void ab initio.