DISTRIBUTABLE (83)

Judgment No S.C. 100\2002

Civil Appeal No 344\2000

APOTEX INCORPORATED v SURGIMED (PRIVATE) LIMITED

SUPREME COURT OF ZIMBABWE

CHIDYAUSIKU CJ, CHEDA JA & GWAUNZA AJA

HARARE JUNE 20 & NOVEMBER 11, 2002

R.M. Fitches, for the appellant

F. Girach, for the respondent

CHEDA JA: The appellant (hereinafter referred to as “Apotex”) made an application to the High Court for an order for the provisional winding up order of the respondent (hereinafter referred to as “Surgimed”).

The High Court dismissed the application with costs. Apotex appealed against the decision.

After hearing both counsel, we dismissed the appeal with costs, reserved our decision on the level of costs and said our reasons would follow. These are the reasons.

Apotex, a Canadian company, entered into an agreement with Surgimed in 1992, whereby Surgimed was granted exclusive agency to import and sell Apotex’s products in Zimbabwe.

Surgimed was able to pay for the products initially, but by 1995 Apotex said Surgimed was in arrears in the sum of US$280 000. Surgimed disputed the figure.

When Surgimed could not pay, Apotex applied for a provisional winding-up order against Surgimed.

At the hearing of the application Apotex argued that it had shown that Surgimed was unable to pay its debt and the provisional winding-up order should be granted.

While conceding that to be so the court still refused to grant the order and gave other reasons for doing so.

I now proceed to deal with those reasons. The main grounds of appeal by Apotex were that having found that Surgimed was unable to pay its debts the court should have issued the order, and the court erred in taking into account mero motu the issue of prescription.

As clearly stated above the main ground was conceded by the court and there is no basis for raising the same ground on appeal.

On the issue of prescription Apotex applied and was granted leave to file an amendment to its grounds of appeal, raising the issue.

In his judgment, the judge who heard the application stated that the issue of prescription was raised by Mr Girach in his argument. The record also shows that Mr Fitches appeared for the appellant. In that case he would have been aware that the issue was raised in court at the hearing of the application.

Section 20 of the Prescription Act, [Chapter 8:11] provides as follows:-

“20. Prescription to be raised in pleadings.

1. No court shall of its own motion take notice of prescription.

Provided that a court may allow prescription to be raised at any stage of the proceedings.”

While it would have been a misdirection for the court to take notice of prescription mero motu, in this case, it was raised and argued during the proceedings. It is, therefore, not correct to state that the court took notice of it mero motu. The point was raised as it was said that Surgimed had admitted owing a certain amount in a letter written three years before the application.

The judge went into detail to discuss whether the running of prescription was interrupted by the service of the application. He decided that this was not so. His decision is supported by the authority of Misnun’s Heilbron Roller v Nobel Str. Central Inv. 1979 (2) SA 1127.

This case made it very clear that an application for a winding-up order is not a legal proceeding for the enforcement of a right relating to the applicant’s debt and it is not a process whereby the applicant claims that debt. The service of such an application does not, therefore, have the effect of interrupting the running of the prescription of a debt in terms of s 6(1) of Act 18 of 1943 or s 15(1) of Act 68 of 1969.

The above Act had the same provisions as s 19 of our Prescription Act 8:11.

Section 19 of our Act reads as follows:-

“19. Judicial interruption of prescription

1. In this section -

‘process’ includes -

1. petition

2. notice of motion

3. a rule nisi

6. any document whereby legal proceedings are commenced.

3. The running of prescription shall, subject to subsection (3) be interrupted by the service on the debtor of any process whereby the creditor claims payment of a debt.”

It was also pointed out that an application for the winding-up of a company is not process for the purposes of enforcing payment. See also Prudential Shippers SA Ltd v Tempest Clothing (Co) Pvt Ltd and Ors 1976 (2) SA 856 (W) and Collet v Priest, 1931 AD 290.

The court a quo also dealt with the point of a disputed liability although in this case liability was not disputed completely but the quantum. The court found support for its decision in Stambolie & Anor v Nyamutamba Transport (Pvt) Ltd 1985 ZLR 320 wherein SANDURA JP, as he then was, pointed out that winding-up proceedings should not be resorted to in order to enforce payment of a debt, the existence of which is bona fide disputed on reasonable and substantial grounds; the procedure is not designed for the resolution of disputes as to the existence or non-existence of a debt. See also McLeod v Gesade Holdings (Pty) Ltd 1958 (3) SA 672.

These cases clearly support another ground for not granting the order sought.

There was a further ground that the court found to be also a good basis for not issuing the order.

It was pointed out in Badenhorst v Northern Construction Enterprises (Pvt) Ltd 1956 (2) SA 346, that the liquidation of a company affects the interest of all creditors and shareholders and an order for its liquidation should not be lightly granted on the application of a single creditor.

The court also took into account that there had been a long delay in making the application and it was possible that Surgimed’s financial situation could have changed.

Authority for this was found in Clarke v Protein Foods (Pvt) Ltd 1970 (2) ZLR 278.

The above authorities show that the court a quo did not determine the application on the basis of Surgimed’s inability to pay or the issue of prescription only but on all the various reasons given.

When we dismissed the appeal with costs we reserved the issue of the level of costs. Mr Fitches conceded that the application was for winding-up and not for enforcement of payment of the debt. He said it was left open to the court whether it could grant an order for winding-up on a claim that had prescribed.

Mr Girach pointed out that there was no service of a claim for the debt. He submitted that the court should show its displeasure by ordering costs on a legal practitioner and client scale as there were no merits at all for the appeal and it was an abuse of the court process.

Mr Fitches conceded that if there were no merits the court should exercise its discretion.

I agree with Mr Girach’s submission.

The appeal was based partly on what the court had conceded on the proof of failure by the respondent to pay its debts. The court pointed out that the evidence led was sufficient to prove that, but based its decision on other grounds.

On the issue of prescription, the court did not take the point mero motu as stated by the appellant. The point had been raised in argument as stated in the judgment.

The above points were, therefore, not proper points to base an appeal on. The court made clear several other reasons for dismissing the application.

In view of the above I agree that this was an abuse of the court process and I therefore order as follows:

The appellant is ordered to pay costs on a legal practitioner and client scale.

CHIDYAUSIKU CJ: I agree

GWAUNZA AJA: I agree

Wichwar Chitiyo, appellant's legal practitioners

Stumbles & Rowe, respondent's legal practitioners