Stand Five Four Nought (Private) Limited v Salzman ET CIE SA

Stand Five Four Nought (Pvt) Ltd (the appellant) owned property known as Stand 540 Salisbury Township. It entered into a suretyship agreement binding itself as co-principal debtor and surety for $750,000 to Salzman ET CIE SA (the respondent), a Panamanian company, in respect of a loan of US$1,245,000 granted to Myramar Farming (Pvt) Ltd, the appellant's sister company. The appellant registered a mortgage bond over its property as security. When Myramar Farming failed to pay the debt and was placed under judicial management, the respondent demanded payment from the appellant. The appellant sought to avoid liability by secretly obtaining an ex parte provisional judicial management order without citing the respondent. On the return day, the High Court dismissed the provisional judicial management order, finding it was sought to circumvent contractual obligations rather than for genuine business rescue purposes. The appellant appealed.

• Whether the deponent to the respondent's opposing affidavit had proper authority to represent the respondent
• Whether the respondent was barred for failure to file its notice of opposition by the deadline specified in the short form of the provisional order
• Whether it was just and equitable to place the appellant under final judicial management in terms of section 305 of the Companies Act
• Whether the provisional judicial management order was properly granted and whether the application constituted an abuse of process
• The proper authentication of powers of attorney executed in foreign jurisdictions
• The requirements for documents in foreign languages to be translated for use in court proceedings

The appeal was dismissed with costs on a legal practitioner and client scale. The High Court's dismissal of the provisional judicial management order was upheld.

Judicial management (or business rescue) is not available where the application is made solely to avoid paying a due debt or to circumvent contractual obligations under suretyship and mortgage agreements. For a final judicial management order to be granted under section 305 of the Companies Act, the court must be satisfied that: (1) there is a reasonable probability that if placed under judicial management the company will become a successful concern; and (2) it is just and equitable to grant such an order. An application is not just and equitable where: the company has no genuine operational difficulties or mismanagement issues; the sole purpose is to obtain a moratorium from creditor claims; the application is made ex parte without proper notice to known creditors in breach of procedural requirements; and there is deliberate circumvention of contractual terms (such as clauses making debts immediately due upon commencement of judicial management proceedings). The court must look at the substance of the application, not merely its form, and will not permit abuse of the judicial management procedure.

UCHENA JA made important observations on procedural matters: (1) On authentication of foreign documents: Courts cannot take judicial notice of alleged errors in notarial authentication, particularly for documents executed in foreign jurisdictions. Proper authentication guarantees that required solemnities have been complied with and signatures are genuine. Any alterations to notarial documents must be done in accordance with proper procedure (words deleted must remain legible, alterations noted in margins and attested by all parties). (2) On translation requirements: Documents in foreign languages must be translated into English for use in South African/Zimbabwean courts in terms of section 49 of the High Court Act. Just as oral evidence in foreign languages requires an interpreter, documentary evidence must be translated. A power of attorney partially in an untranslated foreign language has 'no legal value'. (3) On ex parte applications: These breach the audi alterem partem rule and should not be lightly entertained. They require a legal practitioner's certificate explaining why respondents have not been or should not be served. Court applications (as opposed to chamber applications) should be served on respondents in accordance with the rules. The judge noted that it would take approximately 30 years for the appellant to pay the debt from its rental income of US$15,000 per year, making any offer to pay over time through judicial management manifestly unjust and inequitable to the creditor.

This Zimbabwean Supreme Court decision is significant for establishing clear boundaries on the availability of judicial management (business rescue) procedures. It confirms that judicial management cannot be used as a strategic device to avoid paying legitimate debts or to circumvent contractual obligations, particularly suretyship and security agreements. The judgment provides important guidance on: (1) the 'just and equitable' requirement in sections 300 and 305 of the Companies Act—courts must look beyond formal compliance to the genuine purpose of the application; (2) abuse of process in insolvency/business rescue contexts, particularly ex parte applications that deliberately avoid serving creditors; (3) authentication requirements for foreign powers of attorney and the need for translation of foreign language documents; and (4) the limitations of judicial management where a company has no genuine operational difficulties but simply wishes to delay payment to creditors. While this is Zimbabwean law, it would be persuasive in South African courts given the similarity of business rescue/judicial management provisions and principles across Southern African jurisdictions.