MATTER NO. IRC 304 OF 2002
C. Kazoka Legal Practitioner
Joseph Kankhwanga for the CIAWU
Ngalauka Official Interpreter
i) Being wrongly commenced contrary to sections 222 and 219 of the Companies Act;
ii) Being an abuse of court process
iii) For an order to strike out the applicant for being wrongly joined in the proceedings; and
iv) For costs of this application to be provided for contrary to section 227 of the Companies Act
The motion was supported by an affidavit and opposed by the applicants.
Upon a careful examination of the facts as presented by the respondents and the applicant in this motion, the court finds that:
The conduct of winding up Import and Export Malawi Limited (hereinafter referred to as the company) was placed in the hands of a liquidator. During this time, there was still a corporate personality; and all corporate acts such as the institution of legal proceedings must be done in the name of the company. The liquidator has powers under section 230 of the Companies Act to bring or defend any action or other legal proceedings in the name and on behalf of the company. He is also empowered to pay any class of creditors in full subject to section 287 of the said Act.
On the other hand, a receiver and manager is appointed to realise the companys assets to satisfy outstanding debt of the creditor on whose behalf he has been appointed. He is also entrusted with managing the business until when a liquidator is appointed. Once a liquidator is appointed, he allows the receiver and manager to continue to act until the claims of his debenture-holder are met out of the security.
There is no duty on the receiver and manager to bring or defend legal action for or on behalf of the company. His primary duty is to preserve the rights of the debenture-holder who has appointed him.
The applicants brought the action against the respondent before a liquidator was appointed. During this time the respondent had several meetings including the signing of an addendum with the applicants, which outlined applicants terminal benefits. However, the termination and addendum signed by the respondent did not vest any powers in the respondent to defend legal actions on behalf of the company. The law is clear that a receiver and manager is appointed to perform specific tasks and these do not include bringing or defending legal actions on behalf of a company in liquidation. Therefore, the applicants had indeed erred in bringing this action against the respondent when the company was in the course of liquidation.
The respondents asked the court for an order that the action be struck off for being an abuse of court process. The applicants are claiming terminal benefits after termination of their services. The Employment Act 2000 stipulates that upon termination of employment, an ex- employee should receive terminal benefits within a specified period of time.
Nevertheless, the court takes notice of the fact that the company is going through a process of liquidation and there might be a number of processes taking place. These include appointment of liquidator; handing over of management from directors of the company to the liquidator; valuation of assets of the company; and assessing its creditors and debtors. These processes might take time and thereby slow down the process of paying off creditors including salaried employees, who have priority over all other creditors. It is clear that the company, through letters of termination acknowledges being indebted to the employees. As such, it is the view of this court that the action might have been brought prematurely.
However, the court appreciates the anxieties of the applicants, to be paid off their dues. Therefore, the action will not be struck off but rather, the action will pend in the court files till such time when the liquidator will have finalised his preliminary duties and started paying off creditors on behalf of the company in liquidation.
The court will not decide on the claim in (i) because it falls away with the decisions in (ii) and (iii) above.
As for costs, there are two situations under section 72 of the Labour Relations Act, 1996, when this court can make such order. In this case, I cannot condemn the applicants to costs due to the finding in (ii) above.
It is therefore ordered that:
i. Respondent, Receiver and Manager in this action be substituted with the company in liquidation;
ii. Hearing of the action pend in the court files until a time when the company will have started paying off its creditors; and that time
iii. Procedure for commencing action against a company in liquidation should be adhered to.
Made in Chambers this 21st day of November 2002 at LIMBE.
R. Zibelu Banda (Ms.)