Fanwelll Kabulwebulwe and Ors v Zambia Porl Products Limited (In Receivership) and Ors (2002/HP/298) [2004] ZMHC 3 (25 November 2004)

IN THE HIGH COURT FOR ZAMBIA AT THE COMMERCIAL REGISTRY AT LUSAKA BETWEEN: FANWELL KABULWEBULWE JOHN CHIRWA AND 9 OTHERS AND ZAMBIA PORK PRODUCTS LIMITED (IN RECEIVERSHIP) SIPHO P. M. PHIRI SIMON CAPPER (Sued as Joint Receiver Managers of Zambia Pork Limited) ·"' !t' ~ E. G i.51' JlAR '\" ◊'? \, ~~~· 151 PLAINTIFF 2ND PLAINTIFF 151 DEFENDANT 2ND DEFENDANT 3RD DEFENDANT FOR THE PLAINTIFF MR. M. V. KAONA- NAKONDE CHAMBERS FOR THE DEFENDANTS MR. A. DUDHIA - MUSA DUDHIA & CO. RULING ON APPEAL Cases referred to: 1. Chisata v A. G. 1990/1992 Z. R. 154 2. Mwinanyambe & two others v Hybrid Poultry Farmers (Z) Ltd & three others. Legislation referred to: 1. Rules of the Supreme Court. Order 18, Rule 19 This is an appeal by the Plaintiffs, against the ruling of the Learned Deputy Registrar of 8th June 2004, summarily dismissing the Plaintiffs' case. The ruling, which is very short, reads as follows:- RULING Having heard the application from Counsel for the defendants and having gone through the exhibits contained in the affidavit filed on 30th October 2002, I find that the Plaintiffs were paid their preferential payment in full in accordance with Section 346 of the Companies Act. I also find that the claims by the Plaintiff fall under the category of an unsecured claims and cannot be sustained against the receiver. I therefore Order that the Plaintiff's action is hereby dismissed. Dated the day of June 2004. Mwamba Chanda DEPUTY REGISTRAR The facts of the matter are as per Statement of Claim and Defence. These are reproduced below: STATEMENT OF CLAIM 1. The Plaintiffs are former employees of Zambia Pork Products in receivership. 2. The 1st Defendant is a Limited Liability Company incorporated in the Republic of Zambia. 3. The 2nd and 3rd Defendants are Joint Receiver Managers of Zambia Pork Products Limited. 4. The Plaintiffs contracts of employment in the Defendant Company were terminated by letters dated 15th September, 2001 and signed by the 2nd Defendant. 5. The said termination was contrary to clause 9 of the conditions of service governing the Plaintiffs as well as the provisions of the employment (Amendment) Act No. 15 of 1997. In that no approval was obtained from the Ministry responsible for labour and request notice was given to the representatives of the employees of the pending redundancy. 6. By letter dated 16th June 1002 and signed by the 2nd Defendant the Plaintiffs were paid the following:- (i) (ii) (iii) 3 months pay accruing prior to date of termination 3 months notice pay leave pay 7. The said payments didn't include the Plaintiffs Redundancy/ terminal benefits which the Defendants in their letter of 16th June 2002 aforesaid claim they and not liable to pay as the Same are classified as unsecured claims. 8. That the Plaintiff aver that they are entitled to payment of a redundancy package as per clause 9 of the conditions of service. NAME NO. OF SALARY RETRENCH- REPARTRIA- ACCOMMO- TOTAL YEARS SERVED MENT TION DATION BENEFIT ALLOWANCE ALLOWANCE FANWELL KABULWEBULWE KSS0,000 K33,000,000 KS00,000.00 K390,000.00 K33,890.000 JOHN CHIRWA K242,000 Kl4,520,000 KS00,000.00 KlS0,000.00 KlS,170,000 AARON MUMBA K145,000 K 8,750,000 KS00,000.00 KlS0,000.00 K 9,380,000 BENSON SHAMANGANA KlSS,750 K 9,345,000 KSO0, 000. 00 KlS0,000.00 K 9,995,000 !FORCE ZULU KlSS,000 K 9,345,000 KS00,000.00 KlS0,000.00 K 9,995,000 KENSTON NDAWA STALF NYANGU STEPHEN MHANGO DAVID PHIRI QUEEN KAMBOBE PETER FOLOKO K207,000 K12,420,000 KS00,000.00 KlS0,000.00 K13,070,000 K161,000 K 9,660,000 KS00,000.00 KlS0,000.00 Kl0,310,000 K770,000 K46,200,000 KS00,000.00 K480,000.00 K 4,718,000 K475,000 K28,500,000 KS00, 000. 00 K390,000.00 K29,390,000 K310,000 K 7,440,000 KS00, 000. 00 K150,000.00 K 8,090,000 K164,500 K 5,922,000 KS00,000.00 KlS0,000.00 K 6,572,000 TOTAL KlSS,082,000 KS,S00,000 K2,460,000 K193,042,000 9. That as a result of the Defendants refusal to pay the retrenchment package, the Plaintiffs have suffered lose and damage. AND The Plaintiffs therefore claims:- (i) The sum of K193,042,000.00 being redundancy benefits. (ii) The sum of K33,665,000.00 being salary arrears from date of retrenchment to 16th June 2002. Interest thereon at current bank rate. A declaration that the termination of employment of the Plaintiffs was contrary to the conditions of service and the Employment Amendment Act No. 15 of 1997 and therefore unlawful. Damages for wrongful termination of employment. Any other relief the Court may deem fit. (iii) (iv) (v) (vi) (vii) Costs. DEFENCE 1. The Defendants admit paragraphs 1 to 3 of the statement of claim and will add that the 2nd and 3rd Defendants were appointed as receivers on 18th September 2001 pursuant to a Debenture dated th August 1998. 2. The employment of the Plaintiffs was terminated as a result of the insolvency of Zambia Pork Products Ltd, which frustrated the same. 3. The Defendants deny that the termination of the Plaintiffs employment was in breach of contract and/or unlawful. Alternatively, even if the Plaintiffs allegations are true, which Is denied, at law the 2nd and 3rd Defendants have no liability As the contract of employment was entered into prior to Receivership and were not adopted by the receivers. 4. The receivers have paid the Plaintiffs all preferential amounts, including a severance payment, as required under the law and as such any remaining claims for damages for any alleged breach of contract are unsecured claims to be made to the Zambia Pork Products Ltd or the liquidator thereof (as the Case may be) after the receivership is lifted. Furthermore, Even the preferential payments to employees were made From the proceeds of the sale of the assets under the fixed Charge. Therefore the charge holders at the request of the 2nd and 3rd Defendants waived their rights to the proceeds to allow payments to employees as an act of goodwill. The company only realized US$1,096 from assets under the floating charge which amount could not have been sufficient to pay workers" preferential claims. 5. Save as hereinbefore expressly admitted the Defendants deny each and every allegation contained in the statement of claim as if the same were set forth herein and specifically traversed. On 30th October 2002, the Defendants filed Summons to strike out Writ and Statement of Claim. The ground advanced was that the Writ of Summons and Statement of Claim disclosed no reasonable cause of action and that they were an abuse of the Court process. The application was made under Rules of the Supreme Court (R. S. C.), Order 18, Rule 19. That application culminated into the ruling appealed against. On behalf of the Plaintiffs Mr. Kaona advanced two arguments. Firstly, he argued that there was no rule of law which states that no action can be commenced against a Receiver Manager or a Company in receivership once preferential claims were paid out. Secondly, he argued that the Plaintiffs were claiming, inter alia, the balance due on their terminal benefits as well as damages for wrongful termination of employment, as per pleadings. He stated that they have sued the Company in its own right and the Receivers vicariously. He added that the pleadings disclose reasonable cause of action and therefore the matter should proceed to trial. In response, on behalf of the Defendants, Mr. Dudhia, argued that there was a rule of Law which empowered the Court to dismiss an action that has no reasonable prospect of success or that was an abuse of the Court process. That in this case the Court should exercise its power because the Plaintiffs' action against the Receivers can't succeed. He argued that the Receivers have no liability to pay damages for wrongful determination of employment. That such damages were payable by the Company when the Receivership was lifted or by the Liquidator, when one was appointed. That the Plaintiffs should have waited and then sue the Company or the Liquidator. That that was so because the Plaintiffs were unsecured Creditors. He relied on:- 1. Section 346(1) of the Companies Act. 2. Lightman and Moses - the Law of Receivers and Administration of Companies. Page 176 paragraph 80006 3. Mwananyambe v Hybrid Poultry Farms (Z) Ltd. I have examined R. S. C. Order 18, Rule 19, under which the Defendants' application was made. Order 18/19/6 specifically deals with the exercise of powers under this Rule. It states that it is only in plain and obvious cases that recourse should be had to the summary process under this Rule. It cannot be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the Plaintiff really has a cause of action. If there is a point of law which requires a serious discussion, an objection should be taken on the pleadings, and the point set down for an argument under R. S. C. Order 33, Rule 3. Where an application to strike out pleadings involves a prolonged and serious argument, the Court should as a rule decline to proceed with the argument unless it not only harbours doubts about the soundness of the pleadings but, in addition, is satisfied that the striking out would obviate the necessity for trial. In Chisata v A. G. (1), the Supreme Court dealt with the Court's exercise of power under Order 18, rule 19. They observed that: " .... The discretion to strike out should only be exercised in the clearest cases. The best course in nearly every case is to allow the whole matter to come to trial and leave it to the trial Judge to decide what claims are sustainable ................................................................. . We cannot stress too strongly what we have said in the past, that such cases should, whenever possible, and where there is no prejudice to either party by some irregularity be allowed to come to trial so that the issue may be properly resolved. Interlocutory orders which prevent this should be avoided. For these reasons this appeal is allowed". In that case the Claim was for damages against the State for unlawful detention; first by the Police and later on by the Presidential order. Article 28(8) of the Constitution did not permit claims based on Presidential Order. The High Court Ordered that the Claim be amended to omit such a claim. The Plaintiff refused to amend. The Judge dismissed the case on the ground that the pleadings disclosed no reasonable cause of action. The Supreme Court observed that in that type of case, although there appeared to be a general prohition against claims arising out of Presidential detention Orders, claims would still lie if it was shown that the detention was improperly enforced, for example that the claimant was detained in an unauthorized place. I have also looked at Mwinanyambe and 2 others v Hybrid Poultry Farm (Z} Ltd and 3 others (2), which Mr. Dudhia cited. That case is the best example of the clearest and obvious case wherein the Court can exercise its discretion under Order 18, Rule 19, to strike out a case for disclosing no reasonable cause of action. The facts were that the Appellants used to be employees of Hybrid Poultry Farms (Z) Ltd. They were aggrieved when the Company sold its shares to the 2nd , 3rd and 4th Respondents; without affording them an opportunity to buy some of the shares. It was not in dispute that the 1st Respondent was an entirely private Company. The sale of shares were straight forward commercial transactions to which the Appellants were not privy. They felt cheated and defrauded. So they sued the Respondents. They sought an injunction to restrain the sale transaction. They also sought a cancellation of the sale of the shares and a declaration that they too, were entitled to buy some shares. They asserted that there was a Management Buy Out Scheme (M. B.0). The truth was that there was not such a Scheme. On application by the Respondents, the High Court dismissed the case for disclosing no reasonable cause of action, under Order 18, Rule 19. On appeal, the Supreme Court upheld the summary dismissal of the case. It held, that the Appellants had no locus standi and no Cause of action; because the 1st Respondent was not a parastatal; but a private company; the sale agreement on record being a regular commercial transaction. The Chisata case did not fall under the category of plain or obvious cases within Order 18, Rule 19, because there was a question of fact and law to be determined at trial. These were considered triable issues. Hence, it was allowed to proceed to trial on merits. The Mwinanyambe case did not have such triable issues. It fell under the category of cases which plainly and obviously disclosed no reasonable cause of action. The case at hand, in my view, does not fall under the category of cases that plainly and obviously disclose no reasonable cause of action. There is a question of law to be determined. This question is whether the Plaintiffs can recover their claims from the Defendant Company. The claim is not against the Receivers only. This is evidenced by the fact that at the hearing of this appeal there was prolonged and serious arguments on both side. The case raises triable issues and therefore is not fit for summary dismissal under Order 18, Rule 19. Therefore, appeal is hereby allowed. The Learned Deputy Registrar's ruling of 8th June 2004, is hereby reversed and set aside. I award Costs to the Plaintiffs, to be taxed in default of agreement. Leave to appeal is granted. Delivered this 25th day of November 2004. 15