Ofer Svan v Gilad Shabtai and Others

The applicant (Ofer Svan) and the first and second respondents (Gilad Shabtai and Munyaradzi Gonyora) were directors of Adlecraft Investments (Private) Limited, a Zimbabwean company operating earth moving equipment business. A dispute arose between the directors after the first and second respondents passed a circular resolution on 1 October 2021 placing the company under corporate rescue and supervision in terms of section 122 of the Insolvency Act, appointing the fourth respondent (Alexious Dera) as corporate rescue practitioner. The applicant claimed to be the sole shareholder holding 100% of the company's 20 issued shares. He contended the circular resolution was invalid because: (1) no directors' meeting was held; (2) the resolution was not signed by all directors as required; (3) proper meeting procedures were not followed; (4) the company was not in financial distress; and (5) the company's articles of association contained no provision for circular resolutions. The first and second respondents disputed the applicant's shareholding claim, pointing to a ZIA investment licence showing different shareholders including Adlecraft Holdings (Pvt) Ltd (49%) and several individuals. They maintained the resolution was validly passed by majority directors and was necessary due to shareholder disputes threatening the company's financial health.

• Whether the applicant's supplementary founding affidavit filed after the fourth respondent's opposing affidavit was irregular and should be expunged
• Whether the matter was urgent and whether the certificate of urgency was valid despite being undated and referring to two applicants when only one existed
• Whether there was an applicant properly before the court given initial confusion about the number of applicants
• Whether the applicant had locus standi to institute proceedings in his personal capacity as a director or whether he should have brought a derivative action as a shareholder
• Whether the applicant had a cause of action or whether the court's jurisdiction was ousted by section 123 of the Insolvency Act which prescribes specific grounds for setting aside corporate rescue resolutions
• Whether the proper interpretation of section 196 of the Companies and Other Business Entities Act required all directors to sign a circular resolution or whether majority rule applied
• Whether the founding affidavit contained material falsehoods regarding the applicant's shareholding
• Whether the applicant approached the court with dirty hands by allegedly refusing to cooperate with the corporate rescue practitioner
• Whether material disputes of fact existed that could not be resolved on the papers

All preliminary objections were dismissed for lack of merit. The supplementary founding affidavit was expunged from the record. Costs were reserved to be in the cause (to be determined with the merits).

1. A supplementary founding affidavit filed after an opposing party has already filed their opposing affidavit, without prior leave of court, is irregular and will be expunged where it would prejudice that opposing party. 2. Technical defects in a certificate of urgency (such as being undated or incorrectly referring to the number of parties) are not fatal if, reading the certificate together with all the papers, it is clear the certifying practitioner applied their mind to the circumstances and genuinely believes the matter to be urgent. 3. A director of a company has standing to personally challenge the conduct of co-directors (such as the passing of a circular resolution) without needing to institute a derivative action, which is the remedy available to shareholders for wrongs done to the company. 4. The question of whether section 196 of the Companies and Other Business Entities Act requires unanimous consent of all directors for a valid circular resolution, or whether majority rule applies, is a substantive merits issue that cannot be conclusively determined at the preliminary objection stage. 5. Allegations that a founding affidavit contains material falsehoods regarding disputed shareholding in a company are not properly raised as preliminary objections but rather go to the merits of the substantive dispute. 6. The 'dirty hands' doctrine will not be applied to refuse jurisdiction where no actual evidence is presented to substantiate allegations of improper conduct by the applicant.

The court noted that a shareholders' dispute existed involving the company, as previously acknowledged in Adlecraft Investments (Private) Limited v Myburgh & Another HH 538/21. The court observed that sections 122 and 123 of the Insolvency Act presume that a resolution placing a company under corporate rescue was validly made, and do not specifically address instances where an interested party seeks to challenge the validity of the resolution itself on procedural grounds. The court suggested that section 196 of COBE provides the 'fallback position' for such challenges. The court commented that the slight variation in the new Rule 60(6) requiring submission to a 'duty judge' instead of a 'judge' does not alter the law's intention. The judge emphasized that a certificate of urgency must not be read in the abstract but together with all the papers before the court, citing and distinguishing the principles in Chidawu & Others v Shaa & Others SC 12/13.

This case provides important guidance on procedural matters in Zimbabwean corporate rescue litigation, particularly: (1) the requirements for valid certificates of urgency and when technical defects (such as being undated) will not be fatal if the certifying practitioner demonstrably applied their mind to the circumstances; (2) the distinction between when a director may sue in their personal capacity versus when a derivative action is required - directors may personally challenge the conduct of co-directors; (3) the relationship between section 196 of the Companies and Other Business Entities Act (governing circular resolutions) and section 123 of the Insolvency Act (governing challenges to corporate rescue resolutions); (4) that questions going to the validity of corporate rescue resolutions under section 196 COBE are substantive merits issues, not preliminary matters that oust jurisdiction; and (5) the proper treatment of supplementary affidavits filed without leave of court after opposing papers have been filed. The case illustrates the court's willingness to take a robust approach to procedural objections that do not cause actual prejudice while maintaining strict requirements where prejudice is demonstrated.