Tamira Overseas SA, a foreign registered company and the largest creditor of Aquarium Trading (Pvt) Ltd (under judicial management), applied for an urgent interim interdict against Oliver Masomera, the appointed Judicial Manager. The applicant discovered that the 1st respondent had appointed forensic auditors (Inonge Management Consultancy) without consulting creditors, despite a costly forensic audit having already been conducted. This decision would incur further expenses on behalf of the 2nd respondent. The applicant was concerned that the Judicial Manager was conducting the affairs of the company in a manner that increased its financial obligations. The applicant had also instituted two other related proceedings: HC 595/17 seeking cancellation of the Final Judicial Management Order and provisional liquidation of Aquarium, and HC 1868/17 seeking removal of Masomera as Judicial Manager and his replacement with Reggie Saruchera.
The court granted a provisional order on 2 May 2018 interdicting the 1st respondent from conducting the affairs of the 2nd respondent in any way that increases the 2nd respondent's financial obligations pending finalization of matters under case numbers HC 595/17 and HC 1868/17. All preliminary objections were dismissed.
The binding legal principles established are: (1) Courts have exclusive discretion whether to require security for costs from a peregrinus applicant, and will consider whether the incola would suffer prejudice - where the peregrinus is a substantial creditor, no security may be required. (2) Foreign companies are not required to register locally before approaching Zimbabwean courts. (3) Section 301(1) of the Companies Act [Chapter 24:03] staying proceedings against a company under provisional judicial management applies only to actions, proceedings, writs, summonses and processes already in existence at the time the provisional order is granted, not to institution of new proceedings. (4) For lis alibi pendens to succeed, there must be identity of parties, subject matter AND cause of action - a different cause of complaint defeats the plea even if parties and subject matter are substantially similar. (5) The standard for establishing a prima facie case in urgent interdict applications requires facts from which a court, properly directed, could or might find for the applicant - a lower threshold than balance of probabilities. (6) A judicial manager has a duty and obligation to consult with creditors before incurring extraordinary expenses such as engaging forensic auditors, particularly where a forensic audit has already been conducted.
The court observed that the protectionist provisions of section 301(1) against companies placed under provisional judicial management were not intended to be futuristic in their effect but to arrest existing situations which would otherwise worsen the viability of the company if ongoing legal suits were not arrested. The court also noted that urgency itself cannot be defined with scientific precision, and emphasized that in determining urgency, the guiding question is whether, to avoid the harm apprehended, the matter cannot wait, along with consideration of whether there is another satisfactory remedy available. The court elaborated that in determining whether a prima facie case is established, the focus should not be on whether the applicant has provided evidence to establish what must finally be established, but rather whether evidence has been placed before the court from which a court could or might find for the applicant.
This case is significant for clarifying several important procedural principles in Zimbabwean law: (1) the discretionary nature of security for costs orders against foreign litigants (peregrini) and that substantial debts owed to the peregrinus may justify not requiring security; (2) that foreign companies need not register locally to access Zimbabwean courts; (3) the interpretation of section 301(1) of the Companies Act regarding stay of proceedings against companies under judicial management - that it applies to existing proceedings, not new institution of proceedings; (4) the proper application of the lis alibi pendens doctrine requiring identity of parties, subject matter AND cause of action; (5) the standard for establishing a prima facie case in urgent interdict applications - being lower than balance of probabilities and focusing on whether a court could or might find for the applicant; and (6) the duties of judicial managers to consult with creditors before incurring extraordinary expenses.