The first applicant claimed to be the sole shareholder of the second applicant company (Adlecraft Investments), owning all 20 issued shares since purchasing it as a shelf company in March 2011. The company specialized in technical and mining equipment. The first respondent loaned USD 9 million worth of equipment to the second applicant in March 2015 and was appointed as a non-executive director to safeguard his interests. The second and third respondents were also appointed as directors in May 2015. The first applicant opened bank accounts with STANBIC and FBC Banks as the sole signatory. A dispute arose when the first respondent, without board resolution or consultation with the first applicant, took over negotiations for payments owed by Zimbabwe Consolidated Diamond Company (ZCDC) to the second applicant. The first respondent directed ZCDC to deposit funds totaling USD 1,300,000 into newly opened Getbucks Bank accounts which he controlled, operating them without the first applicant's knowledge. The first applicant alleged misappropriation of funds from these accounts, evidenced by numerous payments to supermarkets, restaurants and other personal expenses. The respondents claimed the new accounts were opened because the first applicant was misappropriating funds from the original accounts. The parties became embroiled in a toxic shareholder and director dispute, with parallel management structures operating the company. The first and second respondents attempted to place the company under voluntary corporate rescue, which was later suspended by court order.
The court granted a provisional order with the following interim relief pending determination of HC 4541/21: (1) The first and second respondents are interdicted from operating Getbucks Bank accounts ZWL 001203000000423 and FCA001206000000086 held in the name of Adlecraft Investments (Pvt) Ltd; (2) The first and second respondents shall not solicit for business on behalf of Adlecraft Investments (Pvt) Ltd outside the knowledge and consent of the first applicant who is their co-director. The court noted that the corporate rescue practitioner remained free to seek variation or discharge of the order if needing to access the frozen funds.
The binding legal principles established are: (1) Derivative actions under section 62 of the Companies and Other Business Entities Act [Chapter 24:31] may be brought by application procedure and not only by action procedure; (2) For purposes of granting an interim interdict, an applicant need only establish a prima facie case, including: (a) a prima facie right which may be open to some doubt; (b) a well-grounded apprehension of irreparable harm if interim relief is not granted; (c) that the balance of convenience favours the grant of the interdict; and (d) that there is no other satisfactory remedy; (3) A matter is urgent where failure of the court to act would result in irreversible prejudice to the applicant's legal interests; corporate disputes involving parallel management structures and potential dissipation of company assets can constitute urgent matters; (4) Where a company is being operated through parallel management structures with different directors controlling different bank accounts, the court is justified in urgently intervening to preserve the corporate persona and prevent asset dissipation pending resolution of the underlying dispute; (5) The burden is on those who have opened and operated bank accounts without proper authorization and without the knowledge of co-directors to demonstrate that funds were properly applied for company purposes; (6) An appeal noted against an interlocutory order on jurisdiction does not automatically suspend continuation of proceedings in the court below.
The court made several non-binding observations: (1) A company cannot properly operate with parallel management structures where different directors control different bank accounts without mutual consultation; (2) An order freezing disputed company accounts is a "win-win order" for warring parties as it preserves the subject matter of the dispute for whoever ultimately prevails; (3) The court suggested that respondents operating the disputed accounts should have offered to submit to an audit to demonstrate that withdrawals were genuinely for company benefit; (4) The court noted that bank statements showing numerous payments to supermarkets and restaurants "raise the eye" as potentially non-business expenses, though a full audit would be needed to determine if there was actual misappropriation; (5) The court observed that the purpose of provisional orders or interlocutory injunctions is to regulate and where possible preserve the rights of parties pending final determination of the matter; (6) The court noted that employees who may be subject to disciplinary hearings can assert their own rights separately and it would be premature for the court to interfere in such domestic corporate affairs in proceedings to which the employees are not party; (7) The court indicated that the corporate rescue practitioner could seek variation or discharge of the freezing order if needing to access the funds for legitimate rescue purposes.
This case is significant in Zimbabwean company law for several reasons: (1) It confirms that derivative actions under section 62 of the Companies and Other Business Entities Act [Chapter 24:31] can be brought by application procedure, not only by action; (2) It establishes that corporate disputes involving parallel management structures and potential dissipation of company assets can constitute urgent matters justifying urgent court intervention to protect the corporate persona; (3) It applies the principles for interim interdicts in the context of internal company disputes and shareholder/director conflicts; (4) It demonstrates the court's willingness to intervene urgently to preserve company assets where there are legitimate concerns about misappropriation or unauthorized operations, even where there are disputes about shareholding and directorship; (5) It illustrates how courts balance competing interests in shareholder disputes by crafting orders that preserve the status quo without predetermining final rights; (6) It confirms that noting an appeal against an interlocutory order on jurisdiction does not automatically suspend the continuation of proceedings in the court below.