Wiphand Investments (Pvt) Ltd and Others v Infrastructure Development Bank Zimbabwe Ltd

In November 2009, the respondent extended a facility to the sixth applicant (National Blankets Ltd) for $500,000, of which $300,000 was disbursed by April 2010. The loan was secured by guarantees from the first to fifth applicants, including first surety mortgage bonds passed by the first applicant over property in Hillside South for $140,000 and by the second applicant over stand number 2156 Bulawayo for $160,000. The sixth applicant defaulted, leading to litigation in HC 402/11 where the sureties were sued for $394,300.18, but this was settled and withdrawn. Between March and November 2012, the sureties paid $109,130 to the respondent. In 2010, the sixth applicant was placed under judicial management, and in June 2013 (HC 1424/13) the High Court approved a scheme of arrangement between the sixth applicant and its creditors, with the respondent filing a claim of $362,387.95. The applicants sought an order declaring that the sixth applicant's obligation to the respondent was discharged by the scheme of arrangement and that the sureties should be released. The respondent declined to release the sureties, contending they had not been discharged at law.

• Whether the application was fatally defective for failure to comply with section 191 of the Companies Act [Chapter 24:03]
• Whether essential averments regarding the validation and registration of the scheme of arrangement were required in the founding affidavit
• Whether the point in limine raised by the respondent was a point of law or one requiring proof of facts
• Whether the sureties had been discharged by the scheme of arrangement

The point in limine was upheld and the application was dismissed with costs on the ordinary scale.

A scheme of arrangement under section 191 of the Companies Act [Chapter 24:03] has no force or effect unless registered with the Registrar of Companies as required by section 191(3). When an applicant seeks relief based on a scheme of arrangement, it is an essential averment that must be pleaded in the founding affidavit that the scheme complied with all statutory requirements, including registration. The absence of such essential averments renders the application fatally defective, as an application must stand or fall by its founding affidavit. A court cannot properly adjudicate the rights and obligations arising from a scheme of arrangement without being satisfied through proper pleadings that the scheme is valid, lawful and binding in accordance with statutory requirements.

The court observed that even if the point in limine had been dismissed and the matter proceeded to argument on the merits, the essential evidence regarding compliance with section 191 could not be adduced at that stage, leaving the court unable to properly determine the matter. The court noted that the omission did not constitute conduct warranting punitive costs at an attorney-client scale. The court also distinguished cases cited by the applicant where registration of schemes was not mentioned, noting that each case depends on its own facts and issues, and those judgments may simply not have mentioned registration as a matter of style if it had been properly pleaded and was not challenged.

This case is significant in Zimbabwean company law and civil procedure for establishing the strict requirement that applicants must plead compliance with statutory formalities in their founding affidavits when relying on schemes of arrangement. It reinforces the principle that section 191(3) of the Companies Act renders unregistered schemes of arrangement ineffectual and that courts cannot adjudicate rights arising from such schemes without proper averments regarding statutory compliance. The case emphasizes the fundamental procedural principle that applications must stand or fall by their founding affidavits and that essential averments cannot be omitted and remedied later in the proceedings. It provides guidance on distinguishing between points in limine based on law versus those requiring proof of facts.