Stephen Hove v Trust Banking Corporation Limited (In Liquidation)

The respondent, a financial institution under liquidation, had advanced loans to Matfield Operations (Pvt) Ltd and Shareview Enterprises (Pvt) Ltd. The applicant, a businessman, secured these loans by registering a mortgage bond over his property (remainder of Lot 3 of subdivision 6 of Quinnington, Borrowdale Estate, Harare). When the companies failed to repay, the respondent successfully sued the applicant and obtained judgments in HC 3254/12 ($21,336.01 plus interest) and HC 8650/12 ($206,253.93 plus interest at 45% per annum). The applicant alleged he made efforts to satisfy the judgment debts to secure release of his title deed, but the respondent was placed under liquidation. He claimed the respondent acted negligently and breached a compromise agreement, causing him damages of $569,881.61. He sought leave to sue the respondent under section 213(a) of the Companies Act and Rule 226(1)(a) of the High Court Rules.

• Whether leave should be granted to sue a company under liquidation in terms of section 213(a) of the Companies Act [Chapter 24:03]
• Whether the applicant established a clearly defined cause of action against the respondent
• Whether the applicant's claim had arguable merit
• The effect of false statements in affidavits on the credibility of the applicant's case
• Whether the citation in the draft summons was fatally defective

The application for leave to sue was dismissed with costs.

An applicant seeking leave to sue a company under liquidation in terms of section 213(a) of the Companies Act [Chapter 24:03] must: (1) show a clearly defined cause of action; (2) advance clear and cogent reasons which justify granting the application; (3) demonstrate that refusal would visit him with serious injustice; and (4) substantiate material allegations with documentary evidence. Applications that are frivolous, vexatious, or lack a clearly defined cause of action will not succeed. Where a litigant gives false evidence, his story will be discarded and adverse inferences may be drawn. The general principle is that a company under liquidation shall not be sued to prevent any creditor from taking unfair advantage of having his claim satisfied to the exclusion of other creditors.

The court observed that the respondent incorrectly characterized the applicant as its creditor when he was in fact its debtor, though this misstatement was immaterial given the applicant's failure to prove his case. The court noted that a draft summons is not yet before the court and can be amended, so objections to its form are premature. The court made persuasive reference to foreign case authorities (Australian cases: Swaby v Lift Capital Partners Pty Ltd [2009] FCA 749; Cassegrain v Gerarad Cassegrain & Co Pty Ltd [2012] NSWCA 435; and Ridgeal Artist Management Pty Ltd [2015] NSWC 936) which identified relevant factors for granting leave: (i) the amount and seriousness of the claim; (ii) whether the claim has arguable merit; and (iii) whether proceedings will prejudice creditors.

This case clarifies the requirements for obtaining leave to sue a company under liquidation in Zimbabwe. It reinforces the principle that creditors cannot take unfair advantage over other creditors by suing a company in liquidation without leave. The judgment emphasizes that applicants must establish a clearly defined cause of action with clear and cogent reasons, and that vague, unsubstantiated claims will not succeed. The case also demonstrates the serious consequences of making false statements in affidavits, reaffirming that courts will draw adverse inferences against parties who lack probity or honesty in their evidence. It serves as an important reminder that leave to sue under section 213(a) of the Companies Act is an exception to the general rule and must be justified by substantive evidence, not mere allegations.