Emmanuel Nkatia Chirumba v Union Bank Zambia Ltd (In Liquidation) (SCZ 7 of 2003; SCZ 80 of 2002) [2003] ZMSC 139 (28 February 2003)

IN THE SUPREME COURT OF ZAMBIA SCZ JUDGMENT NO. 7OF 2003 HOLDEN AT LUSAKA SCZ APPEAL NO. 80/2002 (86) (Civil Jurisdiction) BETWEEN: EMMANUEL NKATIA CHIRUMBA Appellant AND UNION BANK ZAMBIA LIMITED (In Liquidation) Respondent CORAM: Chirwa, Chitengi and Silomba, JJJS On 17th October, 2002 and 28th February, 2003 For the Appellant: Not present For the Respondent: Mr. Kachapulula, In-house Counsel JUDGMENT Silomba, JS, delivered the Judgment of the court. 1. Legislation referred to: Companies Act, Chapter 388 of the Laws, Section 281. 2. Works or material referred to: Parmer's Company Law, 21st Edition by C. M. Schmitthoff and J. H. Thompson. (Stevens & Sons Ltd, London 1968). J 2 (87) This is an appeal against the ruling of the 19th of April, 2002 in which the learned trial Judge refused to grant leave to the appellant that would have entitled him to proceed with an action against the respondent bank which had gone into liquidation. Under Section 281 of the Companies Act, Chapter 388 of the Laws, it is mandatory upon a party wishing to commence or proceed with an action against a limited liability company in liquidation to obtain such leave from the High Court. In refusing to grant leave the learned trial Judge was of the view that the claim based on tort of slander did not disclose a cause of action against the respondent bank in liquidation. However, when the appeal came up for hearing on the 17th of October, 2002 we were unanimous in allowing the appeal and made an Order for the matter to be remitted back to the High Court for trial before another learned Judge. We promised then to give reasons for our decision, which we now do in this judgment. We note from the statement of claim at pages 9 to 13 of the record of appeal that the appellant took out a writ of summons claiming damages for defamation of character against the respondent bank on the basis of certain allegations made against him by employees of the respondent which he considered to be defamatory of him. We also note from the record of appeal that the writ of summons was filed on the 14th of December, 2002 before the respondent bank went into liquidation on the 13th of February, 2001. In compliance with Section 281 of the Companies Act, Chapter 397 of the Laws of Zambia the appellant applied to the lower court for leave of the High Court to continue or proceed with the existing action against the respondent bank in liquidation. The application was heard on the 19th of April, 2002. Although there was an objection to the grant of leave from the Counsel for the respondent bank there were no reasons advanced in support of the objection. At the end of the submissions the learned trial Judge made the following order:- J 3 ‘ (88) "The action is premised on tort and there is no apparent cause of action against the bank in liquidation. I do not see any cause for me to grant the leave sought. Leave is, therefore, refused.” At the hearing of the appeal the appellant, who is representing himself, was not in attendance and no reasons were furnished to the court to excuse his absence. The learned Counsel for the respondent, Mr. Kachapulula, was equally in the dark as to the whereabouts of the appellant. Notwithstanding the absence of the appellant Mr. Kachapulula urged us to either dismiss the appeal for want of prosecution or determine the appeal on the basis of the submissions as contained in the heads of arguments of both parties. He briefly told us that it was within the learned trial Judge’s discretion to say that there was no cause of action. In his view the rationale for the need to obtain leave of the High Court before commencing an action against a limited liability company in liquidation was meant to leave matters affecting the company in the hands of the liquidator. There are two grounds of appeal, which are duly supported in the appellants’ heads of arguments. In opposition, the respondent has also filed its heads of arguments. In dealing with the two grounds of appeal we have endeavoured to refer to the heads of arguments filed by both parties. The first ground of appeal is to the effect that the learned trial Judge misdirected himself in law and in fact by stating that there is no cause of action against the bank in liquidation. The appellant has submitted, in support of the first ground, that the reason for the refusal to grant leave cannot hold water. It is evident from the record of appeal that earlier, on the 30th of October, 2001 the J 4 (89) learned Deputy Registrar had ruled that the statement of claim filed by the appellant disclosed a cause of action. At that time the respondent did not dispute the holding by way of appeal to the High Court. In the view of the appellant the ruling of the learned trial Judge on a later application for leave to proceed against the respondent, to the effect that the claim did not disclose a cause of action, amounted to a review of the learned Deputy Registrar’s decision. He strongly contends that the learned trial Judge’s reasoning that the claim did not disclose any cause of action should not stand in the face of the ruling of the learned Deputy Registrar, which was never appealed against. The respondents’ learned Counsel has argued in the heads of arguments that the ruling of the learned trial Judge was never an exercise intended to review the ruling of the learned Deputy Registrar. In his view the learned trial Judge exercised his discretion judiciously in refusing to grant leave because there was nothing in the claim entitling the appellant to proceed against the respondent. We are, to say the least, amazed by the submission of the respondents’ Counsel. We say so because, the stand taken by the respondent’s Counsel now is not consistent with what he had done or said in the proceedings before the learned Deputy Registrar and the learned trial Judge. In the application before the learned Deputy Registrar the respondent applied to strike out the statement of claim and dismiss the entire action under Order 83 of the Rules of the Supreme Court and Order XI of the High Court Rules on the ground that the statement of claim did not disclose a cause of action. The application was dismissed because, in the view of the learned Deputy Registrar, the words alleged to have been uttered against the appellant imputed criminality against him and as such the slander was actionable per se. The respondent never J 5 (90) appealed against this ruling and as far as we are concerned the absence of a challenge to the ruling by way of appeal meant that the respondent was satisfied with the ruling of the learned Deputy Registrar. In a later application for leave to proceed against the respondent bank in liquidation as per the requirement of Section 281 of the Companies Act the respondent’s Counsel opposed the application but gave no reasons whatsoever for opposing the application. As a man who is learned in law we expected him to state the reasons that he thought militated against the granting of leave. If he was not able to submit orally before the learned trial Judge he should have filed an affidavit in opposition. The record of appeal clearly shows that the respondent did not file an affidavit in opposition. Coming to the ruling of the learned trial Judge in which he refused to grant leave to the appellant to continue with his claim against the respondent bank our view is that the learned trial Judge acted in excess of jurisdiction. The application before him was for the leave of the court under Section 281 of the Companies Act and instead of restricting himself to the application and the principles that govern such an application the learned trial Judge ventured into prejudging the claim to the prejudice of the appellant. By refusing the application for leave on the basis that the claim did not disclose any cause of action the learned trial Judge sought to deal with a matter that was not in issue before him. A careful perusal of the record before him would have revealed that the learned Deputy Registrar had ruled that the claim should stand and since the respondent did not deem it necessary to appeal the ruling there was no need to revisit the matter. J 6 (91) The second ground of appeal runs like this:- that the learned trial Judge misdirected himself in law and in fact by refusing to grant leave to proceed with an action against a company pursuant to Section 281 of the Companies Act. The appellant submits in support of the second ground that the law in Section 281 allows for such an action to proceed to trial so long as permission is sought from the High Court. As if the appellant was responding to the submission of the respondent’s Counsel in open court he has stated in his heads of arguments that when a liquidator takes over the company in liquidation his responsibility also extends to the assets and liabilities of the company. We have not come across the respondent’s submission in its heads of arguments in relation to this ground. We note with satisfaction that this action arose when the respondent bank was still viable. We also note with satisfaction that when the bank went into liquidation the appellant properly directed himself to apply for leave in accordance with the mandatory requirement of Section 281 of the Companies Act which reads as follows:- “281. When a winding up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court and subject to such terms as the court may impose.” In disposing of an application for leave under the Act one has to be mindful of the fact that the wording of Section 281 is not of our own creation but rather something that we have borrowed from the English Companies Acts that have evolved over the years. Bearing this in mind we have ventured to find out from the English authorities in what circumstances such applications (for leave) have been disposed of. J 7 (92) The learned authors of Palmer’s Company Law, Twenty-first Edition, at page 771, under the sub-heading "Liberty to proceed” assert that the court often exercised power to allow actions and other proceedings to be brought, taken or proceeded with notwithstanding a winding up order. As for secured creditors, the liberty to proceed with any action for enforcing their securities is a matter of course. With regard to an outsider, such as, is the case in the present appeal, the learned authors assert that the liberty to proceed against a company in liquidation is often given where the outsider or individual is “involved in some dispute with the company and it is desirable that the dispute should be decided in an action by the ordinary tribunals: For instance, in the case of an action against the company ... for specific performance or for trespass In our view, the principle is that if there is a dispute involving a company in liquidation that ought to be settled through a trial it is immaterial to argue that leave should not be granted because the liquidator has taken full charge of the matters affecting the company. We say so because in this kind of arrangement one of the matters a liquidator inherits, apart from known assets and liabilities, are pending suits for and against the company. Bearing in mind that the dispute was pending at the time the respondent bank went into liquidation our considered view is that the appellant should have been granted leave to proceed or continue with the action, especially that the dispute is based on aspersions or allegations made against him by the respondent’s employees, which of necessity will require him to provide proof at trial by way of viva voce evidence. It is for these reasons that we allowed the appeal and remitted the matter back to the High Court for trial before another learned Judge. As per our J 8 earlier order we shall not make any order as to costs as these will abide the outcome of the proceedings in the lower court. (93} D. K. Chirwa, SUPREME COURT JUDGE. P. Chitehgi, SUPREME COURT JUDGE. S. S. Silomba, SUPREME COURT JUDGE.