THERESA GRIMMEL N.O
FAWCETT SECURITY OPERATIONS (PRIVATE) LIMTED
HIGH COURT OF ZIMBABWE
HARARE, 13 & 20 January 2016
D.Ochieng, for the plaintiff
T. Mpofu, for the defendant
MATANDA-MOYO J: The plaintiff issued summons against the defendant for payment of $24 277.73 being payment made by Securitas (Pvt) Ltd, in liquidation within the period of six months immediately preceding the liquidation of Securitas (Pvt) Ltd, which payment the plaintiff alleges had the effect of preferring the defendant above the other creditors of Securitas (Pvt) Ltd thereby constituting a voidable preference. The plaintiff claimed interest at the prescribed rate and costs of suit.
Pleadings were closed and matter was referred to trial. The defendant on the day raised three points in limine, namely:
1. That there is no proper plaintiff before the court as a liquidator has no right or title to bring proceedings on behalf of a company in liquidation;
2. That the proceedings brought by the plaintiff are invalid, the plaintiff not having sought and obtained leave of court prior to instituting same; and
3. That the claim for the rescission in part is incompetent at law. The defendant prayed that the plaintiff’s claim be struck with costs being borne de bonis propriis on the higher scale by Theresa Grimmel.
Firstly the defendant argued that there is no proper plaintiff before this court. The
defendant’s counsel argued that in terms of s 221 of the Companies Act [Chapter 24:03] proceedings should have been brought in the name of the company under liquidation. He submitted that statutory provisions are meant to be complied with.
Counsel for the plaintiff on the other hand argued that s 221 deals with debts owed to the company. That should be distinguished from the present application which is a claim by the liquidator to correct peccadilloes that put the company into liquidation. Such a claim falls outside the realm of s 221 and falls squarely within the ambit of s 269 of the Companies Act. This is an action by the Liquidator and not the company. Section 221 (2) (a) provides:
“The Liquidator shall have power, with the leave of court or with the authority mentioned in subsection 4 of in paragraph (a) of subsection (4) of section 218 –
- To bring or defend in the name and on behalf of the company any action or other legal proceedings of a civil nature and, subject to any law relating to procedure….”.
Section 221 (2) (a) requires that proceedings be brought in the name and on behalf of
the company. This is so in view of the fact that a company under liquidation does not lose its legal persona status. That company does not cease to exist because it is under liquidation. The assets of such company remain vested in the company. See also De Villiers and Ors NNO v Electronic Media Network (Pvt) Ltd 1991 (2) SA 180. See also the words of Williamson J in Letsitele Stores (Pvt) Ltd v Roes and Ors 1958 (2) SA 224 T where he said:
“Immediately upon winding up order becoming operative the control of the company’s affairs passes out of the hands of the directors… into those of the liquidator; but the company’s cooperate identity remains and its property vested in the corporation …. The assets are therefore held upon a trust in which the creditors are interested, and they can apply to the court to have their rights enforced”.
So no doubt a company under liquidation does not lose its legal persona. The question falling for determination is whether it is a fatal flaw for a liquidator to bring an action in his or her name, on behalf of the company. From the papers before me it is clear that the plaintiff here is suing in her capacity as liquidator and not in her personal capacity. All the pleadings show that the litigation is on behalf of the company. The plaintiff is suing in a representative capacity. It is clear which counsel for the defendant also conceded, that the plaintiff is not acting in her own capacity. I share the same sentiments as expressed by the courts in the case of Shepstone V. Wylie and Ors v Geyser N.O 1998 (1) SA 354 (N) @ 359 F-G and Gainford & Ors v Hiab AB 2000 (3) SA 635 (W) that to disqualify the liquidators so acting would be tantamount to elevating form against substance. Once it is clear that the liquidator brought proceedings on behalf of the company and in the absence of any prejudice to the other party, the courts should allow the matter to proceed. It is my finding that the defendant has not alluded to any prejudice it may suffer by allowing the matter to proceed with the liquidator cited in her official capacity. In the premise that point in limine fails.
Secondly the defendant submitted that the liquidator did not seek leave of court nor obtained leave before pursuing such litigation. Before a liquidator can pursue any action on behalf of the company, leave of court ought to be sought and obtained. Counsel for the plaintiff challenged the manner in which the defendant has taken the point in limine. Counsel for the plaintiff submitted that he had been ambushed and as a result was denied any opportunity to submit the authority granted by the creditors. Counsel argued that he only received the challenges that morning. It is clear that on papers no authority was availed as such authority was never challenged. However it became clear that the points in limine were raised before my sister judge Chigumba the last time the matter came for trial. The plaintiffs then asked that the matter be removed from the roll whilst they consider the points raised. Counsel representing the plaintiff currently was not then seized with the matter. It is unfortunate that the instructing attorney failed to bring such points as raised to the present counsel’s attention. It is therefore not correct that these points were raised for the first time during these proceedings. The plaintiff had ample opportunity to provide the authority. The plaintiff has failed to do so.
Section 221 (2) as quoted above apply. Before a Liquidator can bring a claim in the name of the company he/she should seek leave of court or be authorised in terms of s 218 (4) (a) of the Companies Act. The plaintiff had time from date of initial challenge to bring such authority. Since the plaintiff has failed to prove that authority I am unable to find that she is properly authorised to institute these proceedings.
Counsel for the defendant prayed for costs de bonis propriis on a higher scale by Theresa Grimmel. Generally where a liquidator brings an action on behalf of a company, and loses the matter, costs are awarded against such company in liquidation.
However a court can grant costs de bonis propriis against the liquidator personally as a way of showing its displeasure on the conduct of the liquidator. This is only where the court has some disapproval in the liquidator’s conduct in connection with the matter in dispute. In other words a devastavit must be proved, that is, there should be evidence of maladministration, direct abuse or negligence. The law requires due diligence by liquidators in carrying out their mandates.
In this matter I am unable to say the liquidator was negligent to the extent warranting granting of costs de bonis propriis. I am unable to say she brought the proceedings without the authority of the creditors. There is a possibility she was confused with the manner in which the matter progressed when parties attempted a settlement after the initial appearance. It is possible the plaintiff simply forgot about the once raised points in limine. I shall give her the benefit of the doubt and refuse to order costs out of her pocket on a higher scale. Ordinary costs shall suffice against her in such representative capacity.
Accordingly the claim is struck out with costs.
Coghlan, Welsh & Guest, Plaintiff’s legal practitioners
Coghlan, Welsh & Guest, defendant’s legal practitioners