Prometheus (Private) Limited v Fairdrop Trading (Pvt) Limited t/a Rock Foundation Medical Centre (Under Judicial Management)

The plaintiff (Prometheus) issued summons against the defendant (Fairdrop Trading) to recover USD 850,000.00 paid as a security deposit under a lease agreement. The defendant was a company under judicial management at the time the lease was concluded and when action was commenced. After the defendant entered an appearance to defend, it filed a special plea in bar, arguing that the plaintiff failed to seek leave of court before proceeding against it as required by an extant court order granted on 11 March 2015 in case HC 10095/14 under the old Companies Act [Chapter 24:03]. That order provided that all actions against the company shall be stayed and not proceeded with without leave of court. The defendant raised this as a plea in abatement. The plaintiff argued that under section 126(1)(e) of the new Insolvency Act [Chapter 6:07], which replaced the old judicial management regime with corporate rescue, no leave was required for proceedings to recover trust funds (such as the security deposit). The old Companies Act had been repealed and replaced by the Companies and Other Business Entities Act [Chapter 24:31] and the new Insolvency Act.

• Whether an abrogating law can repeal or override an existing court order granted in terms of its predecessor statute
• Whether section 126(1)(e) of the Insolvency Act [Chapter 6:07] applies retrospectively to court orders granted under the repealed Companies Act
• Whether the plaintiff was required to seek leave of court before commencing action against a company under judicial management despite the repeal of the Companies Act and replacement with new corporate rescue provisions
• The binding nature of court orders and the doctrine of obedience to court orders until lawfully invalidated
• The presumption against retrospective application of legislation

The special plea was upheld. The plaintiff was required to seek leave of court before proceeding with the action against the defendant. There was no order as to costs.

A court order granted under repealed legislation remains valid and binding until lawfully set aside, and is not automatically overridden by new legislation in the absence of express provisions to that effect. Section 17(1)(b) of the Interpretation Act [Chapter 1:01] preserves anything duly done or suffered under a repealed enactment, including court orders. Section 126 of the Insolvency Act [Chapter 6:07], including its exception in subsection (1)(e) for proceedings concerning trust property, does not apply retrospectively to court orders granted under the old judicial management regime pursuant to the repealed Companies Act [Chapter 24:03]. A party seeking to bring proceedings against a company subject to an existing judicial management order requiring leave of court must comply with that order and seek such leave, notwithstanding that the legislation under which the order was granted has been repealed. The presumption against retrospective application of legislation applies unless the legislature has expressly provided for retrospective effect.

The court acknowledged that the security deposit funds held by the defendant would fall under the category of trust funds or money held in trust, which would ordinarily benefit from the exception in section 126(1)(e) of the Insolvency Act. However, the court noted this exception is only beneficial to cases falling under the new corporate rescue regime, not to cases under the old judicial management orders. The court observed that the respondent (defendant) suffered no prejudice by having to comply with the requirement to seek leave of court before bringing the action. The court noted the legislative shift from judicial management (under the old Companies Act) to corporate rescue (under the new Insolvency Act and Companies and Other Business Entities Act), including the policy reasons for this change relating to the shortcomings of the old regime. The court referenced conflicting High Court authorities on the scope of section 126 (ZFC Limited v KM Financial Solutions and G.N. Mlotshwa & Company v David Whitehead Textiles Ltd) but noted these had been resolved by the Supreme Court in Zimbabwe (Pvt) Ltd v N R Barber (Pvt) Ltd.

This case is significant in Zimbabwean law for establishing important principles regarding the interaction between repealing legislation and existing court orders. It confirms that court orders granted under repealed legislation remain valid and enforceable until lawfully set aside, and that new legislation does not automatically override or invalidate previous court orders unless there is express provision to that effect. The judgment reinforces the constitutional principle of the binding nature of court orders under section 164(3) of the Constitution and the rule of law. It also clarifies that section 126 of the Insolvency Act [Chapter 6:07] does not apply retrospectively to judicial management orders granted under the old Companies Act, following the Supreme Court precedent in MCA Venture Capital. The case demonstrates the application of section 17 of the Interpretation Act [Chapter 1:01] which preserves actions taken under repealed legislation. It provides guidance on the transition from the old judicial management regime to the new corporate rescue framework and confirms that companies under pre-existing judicial management orders remain subject to the terms of those orders despite legislative changes.