Michelle Osvaldo Filannino v Shepherd Chimutanda N.O and Newton Jaravani and Baledale Investments (Pvt) Ltd and Master of the High Court N.O and Registrar of Deeds N.O

The applicant held 70% shares in Harare Produce Sales (Pvt) Ltd (HPS), which was placed under judicial management on 28 May 2013. The first respondent was appointed as HPS's provisional judicial manager. The main dispute concerned Stand 45A Spurrier Road, Adbennie, Harare (the Property), which was purchased with HPS's money but transferred into the name of the third respondent (Baledale Investments). The second respondent, who was managing director of HPS and a director of the third respondent (where his wife and child were directors), allegedly used HPS's funds to purchase the property and registered it in the third respondent's name. The first respondent became aware of this matter on 22 March 2016 when the second respondent confirmed by email that the property belonged to HPS, but failed to take action to reverse the transfer despite being requested to do so by the applicant's legal practitioners on 17 November 2016. The applicant sought removal of the first respondent as judicial manager and cancellation of the title deed in favor of the third respondent.

• Whether the first respondent failed to properly execute his duties as provisional judicial manager
• Whether the property was fraudulently transferred to the third respondent using HPS's funds
• Whether the title deed in favor of the third respondent should be cancelled
• Whether the claim for cancellation of the deed of transfer had prescribed
• Whether a judicial manager requires authorization from company directors to execute his duties
• Whether fraud vitiates title to property

The application was granted as prayed: (1) The first respondent was relieved of his duties as judicial manager of HPS; (2) Theresa Grimmel of Trivade (Pvt) Ltd was appointed as judicial manager of HPS; (3) Title deed No. 1069/07 in favor of the third respondent was cancelled in terms of section 6 of the Deeds Registries Act; (4) Upon cancellation, Stand 45A Spurrier Road, Adbennie, Harare was to be transferred to HPS.

The binding legal principles established are: (1) No legal right or court order can stand if obtained through fraud - fraud unravels everything (applying Lazarus Estates Ltd v Beasley); (2) A judicial manager, once appointed, does not require authorization from company directors to execute his duties and is not answerable to them (applying Feignbaum v Germanis); (3) The object of judicial management is that the judicial manager must independently carry on the business so the company can pay its debts, meet obligations and become a successful concern; (4) Title to property obtained through fraudulent use of company funds by a director for the benefit of another company in which he has an interest is vitiated and can be cancelled; (5) Prescription does not run in favor of a party holding property fraudulently obtained where the 30-year period under section 4 of the Prescription Act has not elapsed; (6) A judicial manager can be removed where there is justified loss of confidence based on failure to perform duties and protect company assets.

The court made several non-binding observations: (1) Competition is the lifeline of any business enterprise and cannot be avoided - a judicial manager should not use competition as an excuse for failure; (2) The old adage "when the going gets tough the tough get going" should guide a judicial manager; (3) A judicial manager should act with resolve as the captain of a ship, not allowing it to sink; (4) The recommendation for liquidation was unfortunate where the company had property that could turn its fortunes around; (5) The respondents' assertion in their heads of argument that the transaction involved a loan was tantamount to giving evidence from the bar and was not supported by evidence in the affidavits; (6) The third respondent cannot unjustly enrich itself at the expense of HPS by retaining property purchased with HPS funds.

This case is significant in South African/Zimbabwean jurisprudence for several reasons: (1) It reinforces the principle that fraud vitiates all transactions and no legal right can stand on fraud; (2) It clarifies the independent powers and duties of a judicial manager, emphasizing that a judicial manager does not require authorization from company directors to execute duties; (3) It demonstrates the fiduciary duties of company directors and the consequences of breach through fraudulent use of company funds; (4) It clarifies the application of prescription principles to ownership disputes involving fraudulently obtained property; (5) It establishes grounds for removing an ineffective judicial manager where there is loss of confidence based on failure to perform duties.