The Garrat Trust v Creative Credit (Private) Limited

The applicant trust owned 50% of shares in the respondent company. On 19 February 2019, the applicant applied to the High Court for liquidation of the respondent company on grounds that the directors had irretrievable differences and were deadlocked on management of the company. The respondent opposed the application and raised a point in limine that the application was fatally defective for failure to comply with mandatory provisions of section 5(4)(a) and (b) of the Insolvency Act. Specifically, the application was not accompanied by a statement of affairs of the debtor corresponding with Form A of the First Schedule, and there was no Master's certificate as required. The respondent also raised a counterclaim. The court a quo upheld the point in limine, finding the application to be a nullity, but nevertheless proceeded to dismiss the main application and grant the counter-application. The applicant sought condonation for late noting of appeal and extension of time to appeal this decision.

• Whether the High Court application was fatally defective for non-compliance with mandatory provisions of section 5(4)(a) and (b) of the Insolvency Act
• Whether the court a quo erred by determining the merits of both the main application and counter-application after finding the main application to be a nullity
• Whether void proceedings can support dependent proceedings such as a counter-application
• Whether the applicant had reasonable prospects of success on appeal to justify granting condonation for late noting

1. The application for condonation of late noting of appeal and extension of time within which to note the appeal was granted. 2. The notice of appeal was to be filed and served within 5 days of the order. 3. There was no order as to costs.

Where an application fails to comply with mandatory provisions of a statute (in this case section 5(4)(a) and (b) of the Insolvency Act requiring a statement of affairs and Master's certificate), the application is void and a legal nullity. A court that correctly identifies an application as void must strike it off and cannot proceed to determine it on the merits. Furthermore, a counter-application or any other proceeding founded upon a void main application has no independent existence and must collapse together with the main application. The principle is that 'you cannot put something on nothing and expect it to stay there' - proceedings founded on a nullity are themselves nullities.

The court noted with apparent disapproval the parties' delay in reverting to the court following postponements granted to facilitate settlement negotiations. After the matter was argued on 24 November 2020 and postponed sine die for settlement discussions, the parties failed to advise the court of the outcome within a reasonable time, requiring the judge to direct the Registrar to enquire about progress on 1 June 2021. The court also observed that the proper course when faced with non-compliance with mandatory provisions is to strike off the application rather than dismiss it with costs, though this distinction did not affect the ultimate outcome in this case.

This case is significant in Zimbabwean law (though this is a Zimbabwean case, not South African) for reaffirming the strict application of mandatory procedural requirements in insolvency applications. It establishes that courts cannot proceed to determine applications that are void for non-compliance with statutory requirements, and importantly, that counter-applications or dependent proceedings founded on void main applications must also fall away. The case reinforces the principle from Mcfoy v United Africa Co Ltd that void proceedings are incurably bad and anything built upon them cannot stand. It provides guidance on proper judicial procedure when faced with fatally defective applications.