5
HH 305-17
HC 2747/17
DR WESLEY SIMBA SIBANDA
versus
BETACK FASHIONS (PRIVATE) LIMITED
and
TAKAWIRA NYAMASOKA
and
BEAUTY CHABAYA
and
CONCORD HOLDINGS (PRIVATE) LIMITED
and
FBC BANK LIMITED
and
THE REGISTRAR OF COMPANIES N.O.
and
THE REGISTRAR OF DEEDS N.O.
and
THE SHERIFF OF THE HIGH COURT N.O.
and
THE MASTER OF THE HIGH COURT N.O.
HIGH COURT OF ZIMBABWE
MUREMBA J
HARARE, 13 April 2017 and 17 May 2017
Urgent Chamber Application
Ms S Nyagura, for the applicant
O Machuvaire, for the 1st, 2nd, 3rd & 4th respondents
T Tandi, for the 5th respondent
No appearance for the 6th to 9th respondents
MUREMBA J: This is an application for an order for stay of execution of a High Court order under HC 5652/11 pending determination of proceedings under HC263/17. The order that the applicant seeks is as follows:
“Terms of Final Order Sought
That you show cause to this Honourable Court, if any, why a final Order should not be made in the following terms: -
The execution of the order by consent of the Honourable Justice Bhunu granted under HC5652/11 on the 21st of March 2014 be and is hereby stayed pending the outcome of the summons of the declaratory order under HC263/17.
The 8th Respondent be and is hereby directed not to proceed with the sale of 4th Respondent’s immoveable property being certain piece of land situate in the district of Salisbury called Lot 15 of Lot 1 of Lot 388A Highlands Estate measuring 4241 square meters as more fully appears under Deed of Transfer Number 3121/96 dated 3 May, 1996 pending the outcome of the summons for a declaratory order under HC263/17.
The 1st 2nd and 3rd Respondents, jointly and severally, the one paying the other to be absolved, shall pay costs of suit on a legal practitioner and client scale.
Interim Relief Granted
Pending the determination of this matter it be and is hereby ordered that:
The execution of the order by consent of the Honourable Justice Bhunu granted under HC5652/11 on the 21st of March 2014 be and is hereby stayed pending the outcome of the present application on the return date.
The 8th Respondent be and is hereby directed not to proceed with the sale of 4th Respondent’s immoveable property being certain piece of land situate in the district of Salisbury called Lot 15 of Lot 1 of Lot 388A Highlands Estate measuring 4241 square meters as more fully appears under Deed of Transfer Number 3121/96 dated 3 May, 1996 pending the outcome of the present application on return date.
In the event that the sale in execution would have been proceeded with notwithstanding the service of this application on the 8th Respondent, the sale in execution shall be reversed. ”
The facts of the matter as given by the applicant are as follows. The fourth respondent, Concord Holdings (Pvt) Ltd (Concord) was incorporated on 20 August 1987. Its shareholders were John Myamasoka Njenda (John) who held 1999 shares out of a total of 2 000 shares while his wife Norah Njenda held one share. John later died on 11 April 2003 and Norah died on 1 February 2017. John and Norah were also the directors of the company. Lillian Nyamasoka their daughter was appointed company secretary in 2002.
After the death of John and in 2007 the second and third respondents who are husband and wife fraudulently appointed themselves as directors of Concord. The second respondent is the son of the late John and the late Norah Njenda. After appointing themselves as directors the second and the third respondents filed a CR 14 with the sixth respondent, the Registrar of Companies showing that they were added as directors with effect from 11 April 2003 (the day John died). The CR 14 was submitted to the Registrar of Companies on 30 March 2007. The second and the third respondents later removed Norah Njenda from directorship and submitted another CR 14 on 10 April 2007 to the Registrar of Companies indicating that Norah Njenda had resigned from directorship on 10 April 2007. The relevant CR 14s were attached to the application.
In December 2010, the second and the third respondents who also happen to be directors of the first respondent, Betack Fashions (Pvt) Ltd borrowed money on behalf of the first respondent from the fifth respondent, FBC Bank Limited in the sum of US$10 000-00 which money they failed to pay back. In 2011, the fifth respondent issued summons against the first to the fourth respondents for the recovery of its money under case number HC 5652/11. The first to the third respondents consented to judgment leading to an order by consent on 21 March 2014. In that order by consent the fourth respondent’s immovable property called Lot 15 of Lot 1 of Lot 388 A Highlands Estate measuring 4241 square metres under Deed of Transfer No. 3121/96 dated 3 May, 1996, was declared specially executable. When the second and third respondents took out the loan they had mortgaged the fourth respondent’s immovable property as security for the loan. The fourth respondent did not consent to judgment. The fifth respondent tried to have the order by consent corrected to include the fourth respondent in 2014, but the correction was not carried through.
On 12 February 2015, the fifth respondent had a writ of execution sued out. Pursuant to the writ, the eighth respondent, the Sheriff attached the fourth respondents’ immovable property. The Sale in execution was scheduled for 31 March 2017. The potential beneficiaries of the estate of the Late John Nyamasoka only became aware of all the happenings on 6 March 2017, when they were served with the notice of the sale in execution of the property. Lillian Nyamasoka deposed to a supporting affidavit to this effect.
Lillian Nyamasoka one of the potential beneficiaries of the estate of the late John Nyamasoka immediately followed up with the ninth respondent, the Master of the High Court for the appointment of an Executor to administer the affairs of the late John Nyamasoka. The applicant was appointed Executor Dative and was issued with letters of Administration on 24 March 2017. Upon being advised of the state of affairs relating to the shares held by the Late John Nyamasoka, the applicant issued summons for a declaratory order on 27 March 2017 under HC 263/17. In the declaratory order the applicant wants all the CR 14 forms filed by the second respondent with the Registrar of Companies declared null and void. In other words he wants a declaration that the appointment of the second and the third respondents was null and void. The applicant also wants all acts done by the second and third respondents on behalf of the fourth respondent declared null and void. He further wants the order by consent dated 21 March 2014 and the writ of execution issued on 12 February 2015 under HC 5632/11 declared a nullity and set aside in so far as they relate to the fourth respondent’s immovable property. The applicant wants the fourth respondent’s immovable property declared not executable for the debts of the first to the third respondents with the fifth respondent.
On 29 March 2017, the applicant filed the present application to stop the sale in execution scheduled for 31 March 2017 pending determination of the summons case under HC 263/17 for a declaratory order.
The applicant stated that the present application ought to succeed because it satisfies the requirements for an interim interdict. He went on to list the requirements thereof.
The applicant also stated that the matter is urgent because the need to act arose on 6 March 2017 when the potential beneficiaries of the estate of the late John became aware of the sale in execution. On 8 March 2017 Lillian Nyamasoka approached the Master for the appointment of an executor. On 10 March 2017 the edict meeting was held. On 24 March 2017, the applicant was appointed executor. On 27 March 2017, he issued summons for a declaratory order. On 29 March 2017, he filed the present application. The applicant said that both himself and the beneficiaries of the estate of the Late John Nyamasoka acted when the need to act arose and did not sit on their laurels.
I received the application on 30 March 2017 and set it down for hearing on 3 April 2017 whereupon the parties requested for two postponements to enable them to discuss the matter with a view of settling it. I granted them their requests on the two occasions, but they failed to settle the matter. On 13 April 2017, I proceeded to hear argument. The first to the fourth respondents did not raise any points in limine, but the fifth respondent raised quite a number. The points in limine are as follows.
When the matter was argued on 13 April 2017, the Sheriff had proceeded with the sale in execution on 31 March 2017. Lillian Nyamasoka was the highest bidder. At the time of the hearing of this matter the sale was awaiting confirmation by the Sheriff. Mr. Tandi submitted a point in limine to the effect that the purchase of the property by Lillian Nyamasoka who attested to the supporting affidavit to the applicant’s application compromises the application. Mr. Tandi said that Lillian Nyamasoka who had agreed to buy the property cannot turn around and support the interdict. He said that she cannot approbate and reprobate at the same time. He said on this basis the application should be dismissed.
In response Ms. Nyagura argued that the point in limine is without merit as the applicant is not Lillian Nyamasoka, but the executor dative of the estate of the late John Nyamasoka. She argued that all Lillian did was to depose to a supporting affidavit in relation to facts which do not fall within the personal knowledge of the applicant. Ms. Nyagura submitted that the fact that Lillian Nyamasoka participated in the sale and became the highest bidder does not take away the applicant’s right to get the relief he is seeking. She said that the applicant did not approbate and reprobate. I am in total agreement with Ms. Nyagura’s submissions. The applicant’s application cannot be affected by the fact that the deponent to a supporting affidavit to his application went ahead and participated in the sale. For this reason I dismiss the point in limine.
The second point in limine was that the interdict that the applicant is seeking is no longer competent since the sale in execution was proceeded with on 31 March 2017 and the sheriff declared the property sold. Mr Tandi submitted that the applicant cannot seek to stop a sale that has already gone through. He said that para B of the interim relief that the applicant is seeking is no longer capable of being granted.
Ms. Nyagura in response argued that when the applicant approached this court on 29 March 2017, he was aware that the sale could proceed before the application had been heard and as such he had inserted para C in the interim relief that he is seeking by saying that, “In the event that the sale in execution would have been proceeded with notwithstanding the service of the application on the eighth respondent the sale in execution shall be reversed.” Ms. Nyagura submitted that in that regard she was seeking to amend the provisional order so as to interdict the Sheriff from confirming the sale. She submitted that she was seeking to amend para C to read that, “In the event that the sale in execution would have been proceeded with notwithstanding the service of this application on the eighth respondent, the eighth respondent shall not confirm the sale in execution.”
Ms. Nyagura’s submissions are with merit. Sale in execution is a process not an event. The sale in execution that happened on 31 March 2017 has not yet been confirmed so the court can still order that the Sheriff should not proceed to confirm the sale. The sale process has not yet been finalised, so it can be stopped at the stage where it is. In fact, it was not proper for the Sheriff to proceed with the sale on 31 March 2017, after he had been served with this application. This point in limine is also dismissed.
The third point in limine related to urgency. The fifth respondent averred that the matter is not urgent arguing that Lillian Nyamasoka the company secretary to the fourth respondent who deposed to the applicant’s supporting affidavit must have become aware of the second and third respondents’ alleged fraudulent activities as far back as 2007 when they allegedly unlawfully appointed themselves as directors. The fifth respondent averred that a company is obliged to file annual returns with the Registrar of Companies in terms of s 123 of the Companies Act and these are certified by the secretary. The fifth respondent submitted that it follows therefore that Lillian Nyamasoka knew or ought to have known that the second and third respondents were unlawfully holding themselves as directors of the fourth respondent since 2007. In arguing the matter, Mr. Tandi submitted that Lillian Nyamasoka must have known that the property in issue was mortgaged in June 2016 and thus should have sprung to action then to protect the property. Mr. Tandi said that failure to act by the beneficiaries of the estate or by Lillian then resulted in self-created urgency. In making this argument the fifth respondent was relying on Annexure P to the applicant’s application, being an uncommissioned affidavit that was written by the Late Norah Njenda .
In response, Ms. Nyagura argued that Annexure P that the fifth respondent was relying on is dated 21 July 2010 not 2016 and by July 2010 the loan agreement between the fifth respondent and the first to third respondents had not yet been entered into. It was only entered into in December 2010. Ms. Nyagura’s observation on the dates is quite correct and in deed the beneficiaries of the estate could not have sprung into action then since the property had not yet been mortgaged. I am in agreement with Ms. Nyagura’s submissions that urgency in this matter only arose on 6 March 2017 when it came to the attention of the beneficiaries of the estate that the property had been mortgaged and that it was due for sale in execution on 31 March 2017. In any case it is pertinent to note that the applicant in this matter is the executor dative who was only appointed on 24 March 2017 and not the beneficiaries of the estate. As soon as the executor dative was appointed he sprang into action and filed this application on 29 March 2017 after having filed the summons for a declaratur on 27 March 2017. The executor dative did not sit on his laurels and the urgency should relate to him and not to the beneficiaries of the estate who are not the applicants. That Lillian Nyamasoka knew or should have known about the fraudulent activities of the second and third respondents as far back as 2007 and should have acted does not have a bearing on the present application because she is not the applicant. That she deposed to the supporting affidavit in the present application is neither here nor there. I thus dismiss the third point in limine.
The fourth point in limine is that the applicant is seeking a final order in the provisional order. The fifth respondent submitted that the order that the applicant is seeking is final in nature. This submission by the fifth respondent is without merit because the reliefs that are being sought in the provisional order and in the final order are different. In the interim the applicant wants execution stayed pending determination of the matter on the return date whilst in the final order the applicant wants execution stayed pending determination of the summons matter under HC 263/17. It is not correct that the wording of the interim relief is exactly the same as that of the final relief that the applicant is seeking. I also dismiss this point in limine.
The fifth point in limine is that the applicant has no locus standi. The fifth respondent submitted that the property which is up for sale belongs to the fourth respondent and as such it is only the fourth respondent which can bring an application for stay of execution of its property and not a third party such as a shareholder. The fifth respondent argued that being a shareholder of a company does not entitle a person to manage the assets of a company or act on behalf of a company. It averred that because a company has a separate legal personality its shareholders have no rights or title in the company’s assets. It averred that the applicant has no locus standi to bring the present application as he has no direct and substantial interest in the property in issue. The fifth respondent submitted that the only time a shareholder can sue on behalf of a company is through a derivative action which is not the case herein. Mr. Tandi cited the case of L Piras & Son (Pvt) Ltd & Another Intervening v Piras 1993 (2) ZLR 245 (SC) wherein one of the directors sued the company and obtained a default judgment. Another director attempted in his personal capacity to have the default judgment against the company set aside. He failed because he had no locus standi. On appeal the Supreme Court confirmed the decision of the lower court.
In response Ms. Nyagura argued that shares in a company form estate property. I agree with this submission. The late John Nyamasoka being the owner of 1999 out of 2000 shares in the fourth respondent, the beneficiaries of his estate are entitled to these shares, so they have the requisite legal interest in what happens to the company and its assets as they stand to benefit from the company and its properties.
The person who is ceased with the administration of the estate has a duty to protect the assets of the estate. That gives the executor in this matter sufficient interest to enforce a legal right. Clearly, the executor dative has a direct and substantial interest in the matter. An executor has a duty to submit to the Master an inventory of the assets of the estate and maintain the property until it can be distributed to the heirs or sold. The executor must be sure to find all personal property in the estate and protect it until distribution. These duties give the executor sufficient interest to sue as was done by the applicant in the present matter.
The case of L Piras that Mr. Tandi cited is distinguishable from the present case. In the present matter the executor who represents the shareholder is not suing on behalf of the fourth respondent in order to protect its property. He is actually suing the fourth respondent as a respondent in a bid to protect the interests of the beneficiaries of the late John Nyamasoka. The executor dative is trying to protect the shares of the beneficiaries because if the property of the company from which they are supposed to benefit is disposed of they stand to be prejudiced. It is the executor dative’s averment that the directors who acted on behalf of the fourth respondent in mortgaging the property as security in favour of the fifth respondent appointed themselves fraudulently and as such their appointments are null and void. It is argued that consequently, everything that they did on behalf of the company is null and void. If it is indeed true that the second and third respondents appointed themselves fraudulently then it means that their mortgaging of the property as security was also null and void. In that case it will be unrealistic to expect the second and third respondents to sue on behalf of the fourth respondent in a bid to stop the sale in execution of the immovable property which they mortgaged themselves. They would not do that because it would not be in their interest. This leaves out the executor dative as the only person who can sue to protect the property which he alleges was unlawfully mortgaged by directors who fraudulently appointed themselves. The executor is saying the company being represented by fraudulently appointed directors disposed of its property and he is suing to protect the interests of the beneficiaries of the late John Nyamasoka, the major shareholder. The executor dative therefore has locus standi. The point in limine is thus dismissed.
Although the fifth respondent had raised another point in limine to the effect that the certificate of urgency is defective and therefore invalid, Mr. Tandi did not pursue it at the hearing. I thus take it that it was abandoned.
The merits
The applicant submitted that execution should be stayed pending determination of the summons case because he managed to satisfy all the requirements of an interim interdict. He said that he has shown that:
he has a prima facie right as the appointed Executor Dative. As part of his duties he has a duty to protect the interests and assets of the estate of the late John Nyamasoka which holds 1999 out of 2000 shares in the fourth respondent.
an injury was actually committed or is reasonably apprehended. He said that the sale of the property of the fourth respondent pending finalisation of HC 263/17 will cause harm to the estate and the potential beneficiaries of the Late John Nyamasoka. He said that if the property is sold this will lead to the value in the shares held by the estate losing value and the potential beneficiaries will lose value of their inheritance.
The applicant said that the fourth respondent’s property should not be executed for the debts of the first, second and third respondents because the appointment of the second and third respondents as directors of the fourth respondent was fraudulently done. No meeting was held by the directors of the fourth respondent to appoint the two as directors on 11 April 2003 as depicted by the CR14 forms of 2 April 2007 and 13 April 2007. He said that 11 April 2003 is the day John Nyamasoka died and as such the only director Norah Njenda was mourning her husband. So she could not have appointed new directors for the company on the date of her husband’s passing away. The executor dative also averred that the purported notification of change in directorship to the sixth respondent was done approximately 4 years later. The said Norah Njenda did not resign from being a director as depicted by CR14 form of 13 April 2007. No annual general meeting of the fourth respondent happened on 20 August 2006 as depicted by the form of the annual return. The signature of the company secretary Lillian Nyamasoka was forged on the form of the annual return.
The applicant also averred that the acts of the second and third respondent should be declared a nullity because no meeting was held by the fourth respondent in or around 2010 and no resolution was ever made resulting in it agreeing to:
To be a surety, co-principal debtor of the loan granted to the first respondent by the fifth respondent.
To have a deed of hypothecation executed over its property concerning the debts of the first to third respondents.
Authorising the first to third respondents to represent it in any legal proceedings.
The applicant also averred that the property should not be sold in execution because the fourth respondent did not consent to the order nor was any order made against it.
3) There is no similar protection that can save the property from being sold at the
moment. He said that if the property is sold the estate will suffer irreparable harm and
the potential beneficiaries will be prejudiced.
4) The balance of convenience favours the granting of the interdict pending the outcome of HC 263/17 which is pending. The executor averred that if the sale proceeds the property will be bought by an innocent third party and its recovery will be impossible rendering the summons matter in HC 263/17 merely academic if he succeeds yet on the other hand if the summons matter fails, the fifth respondent will be entitled to proceed with execution. Better still, the fifth respondent has other avenues of recovering the debt against the first to third respondents. The second respondent is a potential beneficiary of the Estate of the late John Nyamasoka, once he gets his inheritance, the fifth respondent can execute upon his inheritance to recover its debt.
In response the second and the third respondents denied that they were appointed as directors fraudulently. The averred that the fourth respondent was run like a family business and most things were done orally. They said Lillian Nyamasoka is aware of how they became directors of the fourth respondents. They said that the late John Nyamasoka borrowed money from Gias Investments which he failed to pay back. The second and third respondents paid the debt after John Nyamasoka had asked for their help. However, he failed to pay back the second and third respondents due to illness. An agreement was done orally for the second and third respondents to be appointed directors of the fourth respondents with the consent of the now late Norah Njenda who had always been an inactive director. They said that Lillian Nyamasoka was well aware of all these developments. The second and third respondents averred that they had a right and authority to mortgage the property of the fourth respondent as security.
The first to fourth respondents averred that the summons case under HC 263/17 seeks to invalidate the order granted by this court which is incompetent. They said that Lillian Nyamasoka was not truthful in her averments in the supporting affidavit that she only became aware of the mortgaging of the property when it was advertised for sale. It was submitted that the second and third respondents are willing to pay back the money they borrowed to the fifth respondent subject to a payment plan. They do not intend to have the property which is a house sold. The second and third respondents averred that there is just a misunderstanding in the family.
The fifth respondent averred that the relief that the applicant is seeking is incompetent because he filed an application for a prohibitory interdict under the guise of an application for stay of execution. This is an issue the fifth respondent had initially raised as a point in limine in the opposing affidavit but on arguing the matter, Mr. Tandi argued it in the merits. It was argued on behalf of the fifth respondent that the requirements that the applicant listed or dealt with are the requirements for a temporary interdict. Mr. Tandi submitted that the applicant is seeking to interdict the execution of a valid court order which is improper. Mr. Tandi submitted that stay of execution has different requirements from those of an interdict. He said that a party seeking stay of execution should satisfy the court that there are special circumstances which justify the stay. He submitted that execution may be stayed only where real and substantial justice so demands. The fifth respondent averred that in the circumstances of this case there are no special circumstances which justify the granting of the application for stay of execution as the fourth respondent specifically hypothecated its property and as such it (the fifth respondent) is entitled to have it sold in execution. The fifth respondent said that even assuming that the allegations by the applicant and Lillian Nyamasoka are true, any remedy the fourth respondent has is against the first to third respondents and not staying the present execution. The fifth respondent averred that the action proceedings instituted by the applicant in HC 263/17 have no prospects of success as the applicant has no locus standi to seek the relief he is seeking. Further, the fifth respondent averred that it disputes that the issued shares belong to the estate of the late John Nyamasoka as no share certificates or return of allotments form have been attached as proof of the shareholding of the company.
In response Ms. Nyagura argued that in the application for stay of execution the applicant wants an order which interdicts the Sheriff from selling the property and as such the requirements of an interdict should be satisfied by the applicant.
In the case of Zesa Staff Pension Fund v Clifford Mushambadzi SC 57/02 it was held that stay of execution is granted only where real and substantial justice requires such stay or where an injustice would otherwise result. See also Santam Insurance Ltd v Paget 1981 (2) ZLR 132 (G) at 134G-135B. In Santam Insurance Ltd v Paget it was further stated that the party seeking a stay of execution has the onus to satisfy the court that special circumstances against execution exist.
As was correctly argued by Mr. Tandi, the requirements for an interdict are different from those for stay of execution. However, I do not agree with his submission that a litigant cannot seek to interdict the execution of a lawfully obtained or valid court order because an application to stay execution is in essence an application to interdict the execution of a court order. Interdicts are court orders which prohibit (prohibitory interdict) or compel (mandatory interdicts) the doing of a particular act to avoid injustice and hardship. See Herbstein & Van Winsen The Civil Practice of the High Courts of South Africa 5th ed p 1454. Whether or not the act or conduct being complained against is legal or not is immaterial. The execution of a valid court order may be interdicted if real and substantial justice so demands. In view of this, I will in the present matter consider whether or not the requirements of justice dictate that there should be a stay of execution irrespective of the fact that instead of addressing the requirements for stay of execution the applicant addressed the requirements for a temporary interdict. I have taken this approach because dismissing this application simply because the applicant did not address the court on the requirements of stay of execution specifically might result in gross injustice.
Looking at the facts as outlined by the applicant in the founding affidavit the requirements of justice dictate that there should be a stay of execution. The applicant avers that the second and third respondents fraudulently appointed themselves as directors of the fourth respondent and then went on to mortgage the fourth respondent’s property as security for a loan taken by the first respondent. The second and third respondents hotly contest this issue arguing that they were lawfully appointed as directors. Lillian Nyamasoka, the sister to the second respondent and the company secretary of the fourth respondent aver that the two forged her signature and fraudulently appointed themselves as directors. She said that she became aware of this when the Sheriff served at the property the notice of the sale in execution on 6 March 2017. She said she then approached this court’s registry, went through the file and realised that the second and third respondents had fraudulently appointed themselves as directors and thereafter used the immovable property of the fourth respondent as security.
The legality of the appointment of the second and third respondents as directors of the fourth respondent being in dispute, real and substantial justice demands that a stay of execution be granted to enable the parties to deal with the summons case which is pending under HC 263/17. In that matter it will be determined whether or not the two respondents were properly appointed as directors.
In view of the foregoing the provisional order is granted on the following amended terms.
Pending the determination of this matter on the return date, it be and is hereby ordered that:
The execution of the order by consent of the Honourable Justice Bhunu granted under HC5652/11 on the 21st of March 2014 is stayed.
The 8th respondent shall not proceed with the sale of 4th respondent’s immoveable property being certain piece of land situate in the district of Salisbury called Lot 15 of Lot 1 of Lot 388A Highlands Estate measuring 4241 square metres as more fully appears under Deed of Transfer Number 3121/96 dated 3 May, 1996.
In the event that the sale in execution would have been proceeded with notwithstanding the service of this application on the 8th respondent, the 8th respondent shall not confirm the sale in execution.
Mbidzo, Muchadehama and Makoni, applicant’s legal practitioners
Obedience Machuvaire Attorneys At Law, 1st – 4th respondents’ legal practitioners
Kantor and Immerman, 5th respondent’s legal practitioners