Stalap Investments (Pvt) Ltd and Others v Willoughby's Investments (Pvt) Ltd and Others

The applicants (Stalap Investments, Zimre Holdings Ltd, Douglas Mamvura, and Ramsway (Pvt) Ltd) and the first respondent (Willoughby's Investments) are shareholders in the third respondent (CFI Holdings Ltd). In October 2015, an Extraordinary General Meeting (EGM) of CFI Holdings passed a resolution to dispose of 81% equity in Langford Estates 1962 (Pvt) Ltd for US$18 million (the Langford transaction). In October 2017, the first respondent convened another EGM, chaired by the second respondent (Itai Valerie Pasi), where a resolution was passed setting aside the 2015 Langford transaction on grounds of alleged fraud by the applicants. The applicants sought a declaratur to set aside the 2017 EGM on grounds including non-compliance with Zimbabwe Stock Exchange Listing Rules, improper appointment of the chairperson, and irregular conduct of the meeting.

• Whether the respondents' opposing affidavits should be struck out based on hearsay evidence
• Whether pleadings filed by MushoriwaPasi Corporate Attorneys should be struck out due to conflict of interest
• Whether there were material disputes of fact precluding determination on the papers
• Whether there was material non-disclosure by the applicants
• Whether the applicants were estopped from relying on breaches of listing requirements
• Whether the applicants should have exhausted domestic remedies through the Zimbabwe Stock Exchange Committee before approaching the court

The preliminary points raised by both the applicants and the respondents were dismissed. Costs were ordered to be in the cause.

The binding legal principles established are: (1) Hearsay evidence in an affidavit does not justify striking out the entire affidavit where other parts contain admissible evidence within the deponent's personal knowledge, and where the hearsay portions are in any event irrelevant to the determination of the matter. (2) A party seeking to strike out pleadings on grounds of conflict of interest must establish that confidential information was reposed in the legal practitioner and that such information is being used to the party's detriment. (3) The rule requiring exhaustion of domestic remedies is not absolute; courts will exercise discretion to hear matters where the domestic tribunal lacks jurisdiction to grant the relief sought. The Zimbabwe Stock Exchange Committee's powers under s 1.14 of the Listing Rules are limited to censure and do not extend to granting declaratory orders. (4) Preliminary points relating to matters not directly in issue before the court (such as the validity of a previous meeting when the application concerns a subsequent meeting) are irrelevant and will be dismissed.

The court made several non-binding observations: (1) The court expressed concern that the numerous preliminary points raised by both parties served only to delay resolution of the main matter, which was "quite disheartening." (2) The court noted that the respondents "literally lost the cast" by focusing on the 2015 meeting when it was not the issue before the court, characterizing these as "peripheral issues." (3) The court observed that even if information is hearsay, it may be of "little or no probative value" in the resolution of the case. (4) The court noted that procedurally, the applicants' preliminary points were not properly taken as no proper application to strike out was made in terms of Rule 137, though it proceeded to consider the substantive merits for completeness. (5) The court commented that where a respondent is cited in their personal capacity, it must be shown that confidential information could not have been furnished to whatever law firm they instructed.

This case is significant for clarifying several procedural and substantive principles in Zimbabwean company law and civil procedure: (1) it confirms the proper procedure for raising preliminary objections regarding hearsay evidence and conflict of interest requires a formal application under Rule 137 of the High Court Rules; (2) it demonstrates the principle of relevancy in assessing preliminary points—matters not directly at issue need not be disclosed or addressed; (3) it clarifies the limited jurisdiction of the Zimbabwe Stock Exchange Committee to censure companies but not to grant declaratory orders; (4) it affirms the court's discretion to hear matters despite the existence of domestic remedies where those remedies are inadequate or lack jurisdiction to grant the relief sought; and (5) it addresses ethical issues regarding legal practitioners acting where there may be perceived conflicts of interest.