HARARE – A 2018 decision by Justice Minister Ziyambi Ziyambi to place Hwange Colliery Company under reconstruction and appoint an administrator to run the company was unjustified and cannot stand, the High Court has ruled.
Justice David Mangota, in a judgement delivered on February 14, said Ziyambi “appears to have issued the order out of nothing”.
The judge was making a ruling in an application filed by Ziyambi to have his reconstruction order issued under the controversial Reconstruction of State Indebted Insolvent Companies Act confirmed by the High Court.
His application was challenged by the ousted Hwange board, trustees and shareholders who argued that Ziyambi abused his powers in issuing the order and could not undo a court-sanctioned scheme of arrangement which Hwange concluded with its creditors, including the government of Zimbabwe.
Justice Mangota said: “The question which begs an answer is should an order, the existence of which is premised on nothing, be confirmed? Evidence is the hallmark of all court proceedings. Where the same is adduced to the satisfaction of the court, the litigant who produces such is more likely than not to rule the day. Where he fails to do so, he cannot blame the court when, on the basis of lack of evidence, it rules against him.
“The application, it has already been shown, hangs on nothing. The order which the minister issued is premised on nothing.”
With his order, the judge said, Ziyambi created a “potentially unwholesome situation for Hwange”, the country’s biggest coal miner in Matabeleland North.
Justice Mangota said the scheme of arrangement which Hwange entered into with its creditors “must, in my view, be afforded an opportunity to bear fruit.”
He added: “The government, it has been claimed, was at the forefront of its inception. It must, therefore, satisfy the court with concrete evidence that the scheme of arrangement has outlived its usefulness.
“The minister, in my considered view, failed to prove his case on a balance of probabilities. The application which he filed cannot, therefore, stand. It is, accordingly, dismissed with costs.”
Ziyambi’s application, the judge said, had suffered a fatal setback when he failed to submit the advice which he says he received from mines minister Winston Chitando, upon which he acted to place Hwange under reconstruction.
At the time of issuing the order, whose effect was to divest the Hwange board of the control and management of the company and place all control in his appointed administrator Bekithemba Moyo, Ziyambi said Hwange was indebted to the state to the tune of US$220 million and the company was unlikely to repay the debt owing to gross mismanagement which was preventing the company from becoming a successful concern.
Hwange’s directors argued that the reconstruction order was a weapon which the mines minister Chitando had hatched to remove them from the Hwange board. They claimed that Chitando had targeted them for ordering a forensic audit of the company, covering the period from May 2016 to December 2017 when Chitando was the company’s board chairman.
Justice Mangota said he was “unpersuaded by the allegation that the minister issued the order with a view to removing the directors…”
Mangota, however, said Ziyambi stated in his founding affidavit that he relied upon advice he received from Chitando – but critically failed to attach this advice to his application to help the court in its decision.
The judge said before a reconstruction order is issued, four critical issues must be considered. The minister should be satisfied that the state-indebted company “is suffering either fraud or mismanagement or any cause which is adverse to it; because of the observed vice is unable to repay a credit made to it from public funds when the repayment becomes due; has not become or is prevented from becoming a successful concern; and if placed under reconstruction, the reasonable probability is that it will be able to pay its debts, meet its obligations and become a successful concern.”
Justice Mangota added: “It is evident from the record that the minister (Ziyambi) does not have first-hand knowledge of Hwange’s operations. He states that he issued the reconstruction order after he consulted with the minister of mines who gave a report to him on the state of affairs of Hwange.”
Justice Mangota said without the report, “I remain constrained to think that the minister exercised his statutorily provided discretion properly.”
The judge went on: “He should justify not only the issuance of the order but also the fact that the circumstances which relate to the issuance of the same made it necessary for him to issue it without hearing Hwange, its creditors and shareholders.
“The reconstruction order is the starting point of the application which the minister placed before me for confirmation. The starting point does not tell me of the circumstances which compelled him to act in the manner which he did.
“What he states in the bulk of the application is what he gleaned from the report of the administrator whom he appointed following the issuance of the order. That cannot justify the issuance of the order. That is so because he issued the order before he appointed the administrator. Any tendency, therefore, to base the issuance of the order on the report of the administrator would be like to put a cart before the horse. The cart cannot pull the horse.”
Reacting to the judgement, Advocate Thabani Mpofu, who represented Messina Investments Limited who own 16.76 percent of the issued share capital in Hwange, said: “The effect of the judgement is that the reconstruction order is set aside and the administrator is now jobless.”
Advocate Thembinkosi Magwaliba represented Ziyambi while Advocate Lewis Uriri represented some of the respondents.
Hwange voluntarily delisted from the Johannesburg Stock Exchange, the Zimbabwe Stock Exchange and last week from the London Stock Exchange for the duration of the reconstruction order.
The company could now seek to relist following the High Court judgement.
