On 18 February 2015, KS Trust concluded an agreement to purchase immovable property (Lot 2 of Lot 19 Block C of Avondale, measuring 1982 square metres) from Afrasia Bank Zimbabwe Limited for $176,000. The trust paid a deposit of $35,905.81 and deposited the balance of $140,000 into its conveyancers' trust account on 27 February 2015. The bank's general manager signed the power of attorney to pass transfer on 24 February 2015, and the conveyancers obtained rates assessment and tax assessments in March 2015. However, on 18 March 2015 (one month after the sale), the bank was placed under provisional liquidation following a members' voluntary winding up after the major shareholder decided to surrender the banking license to the Reserve Bank of Zimbabwe. The liquidator delayed making a decision on the sale for several months, giving the impression he was considering it, before advising on 24 November 2015 that he would not sanction the sale. The liquidator then sold the same property to another purchaser for $140,000 (which was $35,000 less than the trust's offer) without canceling the original contract.
The trust's application for leave to sue was granted as prayed. The liquidator's counter-application to set aside the agreement of sale was dismissed. The trust's counter-application (seeking confirmation of the agreement of sale) was granted with costs.
Section 213 of the Companies Act, which renders dispositions of company property void after commencement of winding up unless the court orders otherwise, applies only to court-ordered windings up and not to members' voluntary windings up. A disposition of property made before liquidation is voidable (not void) and may be set aside under sections 42(2) and 43(2) of the Insolvency Act only if: (a) it was made within six months of sequestration/liquidation; (b) it had the effect of preferring one creditor over another; (c) immediately after the disposition, liabilities exceeded assets; and (d) there was intention to prefer one creditor over others. The court has discretion whether to set aside such dispositions based on the circumstances. The party seeking to set aside a disposition bears the burden of proving these elements. Where a liquidator is aware of a pre-liquidation contract of sale, he must act transparently and cannot simply ignore or fail to cancel the contract before disposing of the property to another party.
The court made several non-binding observations: (1) Liquidators and the Master, as officers of the court, are enjoined to always be clear and transparent in dealing with cases, as lack of transparency and accountability negatively impacts the justice delivery system. (2) It does not make economic sense for a liquidator to accept a lower price for property when a higher offer exists, as this works to the disadvantage of creditors whom the liquidator is meant to protect. (3) Under Rule 87 of the High Court Rules 1971, misjoinder or non-joinder of a party is not fatal to a cause or matter. (4) The constitutional right of access to courts under section 69(3) allows parties to choose to have disputes determined by the court. (5) A delay of two months in instituting proceedings cannot be considered inordinate, particularly when compared to the three-year prescription period under the Prescription Act.
This case is significant for clarifying the distinction between court-ordered liquidations and members' voluntary liquidations under Zimbabwean company law. It establishes that section 213 of the Companies Act (which renders dispositions void after commencement of winding up) only applies to court-ordered windings up, not voluntary windings up. The case also demonstrates the standard of conduct expected of liquidators as officers of the court, emphasizing their duty to act transparently, accountably, and in the genuine interests of creditors. It confirms that courts will exercise their discretion under sections 42(2) and 43(2) of the Insolvency Act based on the specific circumstances, and will not set aside pre-liquidation transactions merely because they occurred within six months of liquidation if there is no evidence of intent to prefer one creditor over others or that liabilities exceeded assets. The judgment reinforces constitutional rights of access to courts under section 69(3) and the High Court's original jurisdiction under section 171(1)(a) of the Constitution.