Elphas Kawa v Victor Muzenda N.O. and Others

The Applicant, Elphas Kawa, was a shareholder of the 2nd Respondent (Zexcom Pvt Ltd), which was placed under provisional liquidation on 4 December 2009. The 1st Respondent, Victor Muzenda N.O., was appointed as Provisional Liquidator on 17 February 2010. On 27 February 2013, this court granted a provisional order interdicting the 1st Respondent from disposing, selling or alienating any immovable properties of the 2nd Respondent. The Applicant alleged that the 1st Respondent had unlawfully disposed of the 2nd Respondent's assets without court authorization or consent of the Assistant Master, entered into agreements of sale with the 5th and 6th Respondents, failed to account for proceeds of sales, failed to convene creditors' meetings for over 4 years since 2009, and failed to render proper accounts of the company's assets. Two consolidated applications were brought: HC 419/13 seeking confirmation of the provisional order, and HC 310/13 seeking removal of the 1st Respondent from office as Provisional Liquidator.

• Whether the Applicant was properly before the court given the provisions of section 213(a) of the Companies Act requiring leave to bring proceedings against a company under liquidation
• Whether the provisional order interdicting the 1st Respondent from disposing of the 2nd Respondent's assets should be confirmed
• Whether a Provisional Liquidator has power to dispose of a company's assets without court authorization
• Whether the 1st Respondent should be removed from office as Provisional Liquidator under section 273(1)(b) of the Companies Act for misconduct, failure to perform duties, or other good cause
• Whether agreements of sale entered into by the 1st Respondent without lawful authority were null and void

1. The Provisional Order granted on 27 February 2013 under HC 419/13 was confirmed, save for the 6th Respondent against whom it was discharged. 2. The 1st Respondent was ordered to pay costs on an attorney and client scale. 3. It was declared that the 1st Respondent does not hold the office of liquidator and all his actions while purporting to hold that office are null and void and of no force or effect. 4. The 1st Respondent was removed from office as Provisional Liquidator with immediate effect. 5. The 1st Respondent was ordered to render full accounts of all financial activities to the 3rd Respondent (Assistant Master) within 10 days. 6. The 1st Respondent was ordered to surrender all assets, documents, records and files to the 3rd Respondent within 10 days, failing which the Deputy Sheriff was authorized to search and recover such assets. 7. The 3rd Respondent was directed to appoint Barbra Lunga as Provisional Liquidator with powers under section 221(2)(a) or (g) of the Companies Act. 8. The 1st Respondent was ordered to pay costs on an attorney and client scale.

A Provisional Liquidator has no power under section 221(2)(h) of the Companies Act [Chapter 24:03] to dispose of a company's assets without court authorization. Any disposal of assets by a Provisional Liquidator without court sanction and without the consent of the Assistant Master of the High Court is null and void and of no force or effect. A Provisional Liquidator may be removed from office under section 273(1)(b) of the Companies Act on grounds of misconduct (including failure to satisfy lawful demands of the Master), failure to perform duties imposed by the Act, or any other good cause. The court has discretion to remove a Provisional Liquidator if satisfied on evidence that there is unfitness on the part of the person holding office and that removal is desirable in the interests of all interested parties in the liquidation. Section 213(a) of the Companies Act, which prohibits proceedings against a company under liquidation without leave of court, does not apply where the company is cited merely as an interested party with no order sought against it.

The court observed that citing a company under liquidation as a party to proceedings merely gives it an opportunity to comment on the order sought, and the Provisional Liquidator would be expected to approach creditors and shareholders for their views before filing opposing papers on behalf of the company. The court also noted that one of the most important functions of a liquidator is to keep creditors and interested parties informed of proceedings in the liquidation process so they can monitor payments and receipts. The court expressed displeasure at the conduct of the 1st Respondent throughout the proceedings, which it described as bordering on abuse of his appointment as Provisional Liquidator, and indicated that costs should reflect this displeasure. The court also observed that the 1st Respondent appeared to believe that if ordered to relinquish his position, he would be absolved of any responsibility to render an account, revealing his true intentions and demonstrating that he was either unwilling or unable to account for his activities.

This case is significant in Zimbabwean company law and liquidation practice as it clarifies: (1) the limited powers of a Provisional Liquidator under the Companies Act, specifically that a Provisional Liquidator has no power to dispose of company assets without court authorization; (2) the grounds for removal of a Provisional Liquidator under section 273(1)(b) of the Companies Act, including misconduct, failure to perform statutory duties, and other good cause; (3) the fiduciary duties of a Provisional Liquidator to act in the best interests of creditors and shareholders, including the duty to convene creditors' meetings, render proper accounts, and operate transparently; (4) that the court will not hesitate to remove a Provisional Liquidator where there is evidence of unfitness, impropriety, or failure to perform duties, even where the general principle is that removal is a drastic measure; and (5) the proper application of section 213(a) of the Companies Act, clarifying that citing a company under liquidation as an interested party with no order sought against it does not require leave of court. The case reinforces the supervisory role of the Master and the court over liquidation proceedings.