On 23 July 2013, the parties entered into a deed of settlement whereby the applicant agreed to pay the respondent US$4,556,777.78 as a compromise. The applicant defaulted in making payments (though it claimed it purposely ceased payments) and the respondent sought to enforce the deed through a High Court application seeking payment of the balance of US$3,629,586.57. Makoni J dismissed the application, pronouncing the deed of settlement as voidable. The respondent lodged an appeal with the Supreme Court, set to be heard on 5 June 2018. The applicant had proved its claim for US$532,800.04 (which it believed it had overpaid) at a meeting of creditors on 31 July 2015, and this claim was accepted by the liquidator. The applicant then sought leave to sue the respondent (a company under liquidation) for the same amount, while simultaneously filing a counter-claim for the identical amount on 29 January 2018.
The application was dismissed with costs on an attorney-client scale.
Where a creditor has proved a claim against a company under liquidation in terms of section 220 of the Companies Act and that claim has been provisionally accepted by the liquidator, the creditor must await the final determination of the claim through the liquidation process and has no basis to seek leave to sue for the same claim. Leave to sue a company under liquidation will not be granted where the application is premature because a pending appeal will determine the central issue in dispute (in this case, the validity of the deed of settlement upon which the claim is based). An application for leave to sue that is filed alongside a counter-claim for the identical amount, after an appeal has been noted on the central issue, constitutes an abuse of court process.
The court observed that litigation must be paid for and the opportunity to be heard is priced due to the number of cases awaiting hearing, and therefore conduct amounting to "throwing nets wide and far in the hope of a catch" can never be allowed in courts of law. The court also noted that section 213 of the Companies Act preserves the assets of companies under liquidation by staying all actions without leave of court and preventing dispositions of assets, ensuring that any action proceeds under the scrutinizing eye of the court. The court cited Hockly's Insolvency Law to explain that a creditor's right to recover a claim in full through judicial proceedings is replaced by the right to share with other proved creditors in the proceeds of estate assets upon proving a claim.
This case reinforces the principle that the liquidation process established by the Companies Act provides the proper mechanism for creditors to pursue claims against companies under liquidation. It demonstrates the courts' reluctance to grant leave to sue where creditors have already engaged the statutory liquidation process and their claims have been accepted. The case also illustrates the court's approach to applications that are premature due to pending appeals on the central issues in dispute, and the court's willingness to impose punitive costs where conduct amounts to abuse of court process through multiplicitous proceedings.