Willdale Limited was a 50% shareholder and first creditor of Willdale Transport Services (Private) Limited (Willtrans), which was under final liquidation. The other 50% shareholder was Terriers-Laxtop Banks (second respondent). Phibion Gwatidzo (first respondent) was appointed as the liquidator on 5 June 2019 and as final liquidator on 7 August 2019. The liquidator disposed of Willtrans' assets without seeking creditors' approval and refused to disclose details of the sale despite several demands from the applicant. It was later discovered that the liquidator had sold the assets to the second respondent (Terriers-Laxtop Banks), thereby preferring one creditor over another. The liquidator subsequently called a Special Meeting of creditors on 20 May 2020 to retroactively authorize and ratify the sale that had already been completed. The applicant sought the liquidator's removal, an interdict against the meeting, and disclosure of all sale particulars.
The court ordered: (a) the first respondent be removed as liquidator; (b) the Master to appoint a new liquidator; (c) the first respondent restrained from selling any assets until full disclosure and creditor approval; (d) the Special Meeting of 20 May 2020 be set aside and any decisions declared a nullity; (e) the first respondent to disclose all particulars of the sale within 24 hours; (f) the purported sale of assets be set aside; and (g) costs awarded against the first respondent on a higher scale in his personal capacity, not as a charge against the liquidation.
A liquidator of an insolvent company holds a fiduciary position in relation to both the insolvent company and its creditors. A liquidator may not dispose of the assets of an insolvent estate without the prior authorization of the creditors and/or the Master of the High Court. Attempts to retroactively ratify unauthorized disposals of estate assets through subsequent creditor meetings do not cure the unlawful conduct. A liquidator must not prefer one creditor over another and must provide full disclosure of material information to creditors when reasonably requested. Failure to discharge these duties and unreasonable intransigence in the face of legitimate creditor queries renders a liquidator unfit to continue in office and justifies removal.
The court noted that when asked whether the Insolvency Act contains a provision allowing ratification of a liquidator's unauthorized actions, counsel initially responded that this could happen at common law and that there was no such provision in the Act. The court found reference to section 179 of the Act not valuable to the issue. The court observed that if the first respondent had addressed the applicant's queries timeously, the matter would not have escalated to court proceedings. The court emphasized that creditors are entitled to protect their assets and need not wait for mistakes to be escalated before seeking judicial intervention.
This case establishes important principles regarding the duties and powers of liquidators in Zimbabwe. It confirms that liquidators cannot dispose of insolvent estate assets without proper authorization from creditors and/or the Master, and that attempts to retroactively ratify unauthorized sales are invalid. The case reinforces the fiduciary duties owed by liquidators to both the insolvent company and creditors, including duties of disclosure and impartiality. It also demonstrates that liquidators who prefer one creditor over another or fail to respond reasonably to legitimate queries may be removed from office. The case provides guidance on when personal cost orders against liquidators are appropriate.