RIO TINTO (AFRICA) PENSION FUND v GWARADZIMBA NO & ANOR 2011 (2) ZLR 140 (S) 2011 (2) ZLR p140

Flynote

Company — winding up — distribution account — confirmation by Master — effect — account thereby becoming final — subsequent claim by creditor have shares forming part of estate delivered to creditor not competent — once account confirmed, creditor only entitled to payment in terms of account

Headnote

The High Court dismissed an application for an order compelling the respondents to deliver to the applicant (now the appellant) certain shares. The trustees of the appellant, a self-administered pension fund, decided to employ a stockbroking company, Sagit, to manage its share portfolio. The appellant delivered the portfolio to Sagit, whose mandate was to manage the portfolio. Such management entailed the purchase and sale of shares which, when purchased, would be held in a Sagit nominee company or in the appellant's name. Following further deliberations, the appellant resolved to administer its own scrip and requested Sagit to surrender all the shares it was holding on its behalf. Sagit delivered most of the scrip but a dispute arose regarding the quantity of the shares due to the appellant from the nominee company. After further investigations, a new reconciliation of the outstanding shares was agreed between the appellant and Sagit. However, Sagit was placed under liquidation and the first respondent was appointed liquidator. In correspondence between the appellant and himself, the first respondent acknowledged that the shares were due to the appellant and undertook to deliver them against delivery of other shares that the appellant was holding.

In the meantime, following the liquidation of Sagit, the appellant submitted its claim at the second meeting of creditors. The claim was provisionally accepted by the Master. After verification of the facts, the first respondent accepted the appellant's claim for payment, calculating the amount by using the price per share from the Zimbabwe Stock Exchange. He then prepared the first interim and distribution account, which he submitted to the Master in terms of s 279 of the Companies Act [Chapter 24:03]. Acting in terms of s 281 of the Act, he advertised the account in the Gazette as lying open for inspection at the Master's Office. No creditor, including the appellant, filed any objection against the contents, the form or amount awarded to each of the creditors. Accordingly, the Master confirmed the account. The first respondent then gave notice of such confirmation in the Gazette and advised that he would start paying the proved creditors. No objections were received. He paid all proved creditors, including the appellant, who was paid the sum he had calculated. The appellant rejected the payment and transferred it back to the first respondent. The appellant then instituted proceedings for the delivery to itself of the shares. The High Court dismissed the application. The appellant appealed.

Held, that the provisions of the Companies Act relating to the accounts, plan of distribution, notification to creditors, confirmation and distribution had all been complied with. The first respondent lodged his account with the Master in terms of s 279. Thereafter, the account lay open for inspection for the required period and the liquidator gave due notice thereof by advertisement in the Gazette. There were no objections lodged with the Master at any time before the confirmation of the account. In terms of s 283, because no objection had been lodged, the Master confirmed the account. When the Master confirmed the account, the account ceased to be an interim account. It became a final account. Nowhere in the Act is there provision for the Master to confirm an interim account. In terms of s 283, such confirmation has the effect of a final sentence, save as against such persons as may be permitted to re-open the account before any dividend has been paid thereunder.

Held, further, that the shares were included in the estate of Sagit. No objection to such inclusion was lodged with the Master. What the appellant did was to file a claim as an ordinary creditor. Once the account was confirmed, the question whether the shares actually belonged to Sagit became irrelevant as those shares, or the value thereof, became the subject of distribution in terms of the confirmed account. Once the account was confirmed, the shares could not be delivered to the appellant except in terms of the plan of distribution. In any event, the first respondent was not holding share certificates in the name of the appellant. The shares, or some of them, were held in the name of a subsidiary of Sagit.

Held, further, that what the appellant should have done was seek a declarator to the effect that these were its shares and that they should not form part of the estate. The appellant instead behaved like an ordinary creditor. Even when the account lay open for inspection, the appellant should have filed an objection and ensured that the shares were not the subject of a plan of distribution in the estate. The need to object before confirmation of the account is a legal one. The objection is made to the Master, who is obliged to make a decision on the objection. Such decision is even subject to review. The purpose of an objection is to enable the Master to arrive at a correct decision before confirming the account. Once the account was confirmed, the appellant's claim was not competent, unless the account was re-opened or set aside in terms of the law.

Held, further, on the issue of whether the respondents were equitably estopped from denying the appellant its right to the shares after having undertaken to deliver them, that estoppel cannot, generally, found a cause of action.

Held, further, that although, in terms of s 221 of the Act, a liquidator has power to compromise or admit any claim, this is subject to leave being given by the court or by a resolution of creditors and contributories. The liquidator can use this before the final account is presented for confirmation, but once the account is confirmed, a liquidator would have no power to enter into a compromise, as any payment made pursuant thereto could amount to an undue preference and would not be in accordance with the account confirmed by the Master.