Bernard Leigh Gadsden v Kitwe Meat Market Limited ((S.C.Z. JUDGMENT NO 9 OF 1985)) [1985] ZMSC 29 (19 April 1985)

BERNARD LEIGH GADSDEN v KITWE MEAT MARKET LIMITED (1985) Z. R. 152 (S. C.) SUPREME COURT NGULUBE, D. C. J., GARDNER AND MUWO, JJ. S. 27TH MARCH, 1984 AND 19TH APRIL, 1985 (S. C. Z. JUDGMENT NO 9 OF 1985) I I Flynote Company - Winding up - Money Repaid to company by mistake - Plaintiff 's claim admitted - Constructive trust - Action for money had and received pointless. Company - Winding up - Voluntary liquidation - Stay of proceedings - Power to stay proceedings against company - Companies Act, ss.141 and 189. Headnote The plaintiff, through a mistake of fact, repaid to a company much more than was owing on a loan. The company went into voluntary liquidation and the plaintiffs claim was readily admitted. The plaintiff sued for the sum paid by mistake as money had and received order to gain preference over the other creditors. The liquidator applied for a stay of the proceedings, and the application was dismissed by the High Court which held that a stay could only be granted where a company is being wound up by the court. The defendant appealed. Held: (i) (ii) There is power under ss.141 and 189 of the Companies Act, in the discretion of the court, to stay proceedings against a company in liquidation, whether voluntary or not; A person who has paid money under a mistake of fact has an equitable proprietary right in priority to other creditors; the money is held by the defendant as constructive trustee. The action for money had and received was pointless. Case referred to: (1) Chase Manhattan Bank N. A. v Israel - British Bank (London) Ltd. [1981] lCh. D.105. Legislation referred to: Companies Act, Cap. 686, ss.141 and 189. For the appellant: For the respondent: ___________________________________________ Judgment J. H. Jeary, of D. H. Kemp and Co. H. H. Ndhlovu of Jaques and Partners. NGULUBE, D. C. J.: delivered the judgment of the court. On 27th March last, we allowed this appeal with costs. As promised at the time, we now give our reasons. This is an appeal against the refusal initially by a District Registrar and subsequently by High Court judge to stay proceedings brought against the liquidator of a Company, namely, Industrial Finance Company Limited (henceforth called the Company). For convenience, we shall call the respondent, the plaintiff, and the appellant, the defendant, which is what they are in the action. The plaintiff owed the Company some money which it borrowed by way of a loan. The loan was repaid but through a mistake of fact the plaintiff made further payments in the sum of K7,157.12n, which sum represented an excess of what was required to liquidate the loan. This mistaken overpayment was made during the period November,1976 to May,1977. In August, 1977, the Company went into voluntary liquidation. The plaintiff proved its claim which was readily admitted by the defendant in the liquidation. Some payments have been made to the Company's preferential creditors but none to the plaintiff and the p154 ordinary creditors. On 25th February, 1982, the plaintiff took out a specially endorse writ against the defendant claiming the sum in question as money had and received by the defendant to the use of the plaintiff. The defendant applied to the High Court for a stay of the proceedings on the ground that, as the plaintiff's claim had already been admitted, and since the liquidation was still in progress, further prosecution of the plaintiff's admitted claim would have the effect of preferring the plaintiff over the other ordinary creditors of the Company. For that reason, the defendant prayed that the action be stayed in accordance with the provisions of s.189 as read with s.141 of the Companies Act, Cap. 686. Section 189 reads: "Where a company is being wound up voluntarily the liquidators or any contributory to the company may apply to the Court to determine any question arising in the matter of such winding-up or to exercise, as respects the enforcing of calls, or in respect of any other matter, all or any of the powers which the Court might exercise if the Company were being wound up by the Court, if satisfied that the determination of such question, or the required exercise of power, will be just and beneficial, may accede wholly or partially to such application on such terms and subject to such conditions as the Court thinks fit, or it may make such _________________________________________