Guilty by association, only in Judge Makarau’s world, says Ms. Miriam Mutizwa

The attention of Ms. Miriam Mutizwa, a member of the Friends of SMM (FOSMM) was brought to the existence of a judgment by Makarau J dated 23 March 2005 whose constitutional legitimacy and validity defies any logic.

The parties to the dispute were as follows: THZ Holdings Limited (THZH), a company duly incorporated and operating in terms of the laws of the UK that was the direct and indirect holder of shares in Endurite Properties (Private) Limited (“Endurite”), and apart from holding 24.32% shares directly in Zimre Holdings Limited (Zimre), a company registered in Zimbabwe, it also held through Endurite 75% of the issued share capital in Ukubambana- Kubatana Investments (Pvt) Ltd. (“UKI”), a company registered in Zimbabwe, that held 22.23% of the shares issued in Zimre.

It is common cause that THZH directly and indirectly held 46.59% of Zimre shares.  It is also worth highlighting that Zimre was and remains listed on the Zimbabwe Stock Exchange (ZSE).

Ordinarily one would expect the ZSE to promote and protect all the companies that are listed on the exchange.  However, the facts of this matter confirm otherwise.

“As I started reading the Makarau J judgment, I could not help but imagine under what constitutional order would it be permissible for a reconstruction order issued in respect of SMM Holdings Private Limited (SMM) to be automatically be applied in respect of a separate listed company with diverse shareholders and have the Court recognize and affirm such absurdity.

In this matter, on 6 September 2004, the then Minister of Justice, Hon. P. Chinamasa, issued an extrajudicial order pursuant to s 4 of the Presidential Powers (Temporary Measures)((Reconstruction of State Indebted Insolvent Companies) Regulations 2004, placing SMM under a reconstruction order in terms of the regulations.

The Minister also appointed Mr. Afaras Mtausi Gwaradzimba as the Administrator for SMM.  It is significant that the notice issued in relation to SMM did not refer to Zimre specifically but by employing the deeming provisions in the regulations but surprisingly both Zimre and Mr Gwaradzimba accepted that the reconstruction order was also in respect of Zimre simply due to its having carried some business activities in conjuction with SMM.

Advocate Adrian de Bourbon acted for THZH with Mr. A. Chinake acting for Zimre.  Hon. Biti acted for the ZSE and Advocate C. Andersen acted for the Administrator with Dube, Manikai and Hwacha (DMH) as the instructing attorney on behalf of the Administrator.

This judgment is 13 years old and since it has not been overturned, is now the law in Zimbabwe that a company can be found liable in a suit involving another juristic entity simply on account of the fact that the two companies carried some unspecified business together.

I twitted yesterday as follows: “Best @ what? presided over a ZSE case 13 yrs ago, a case whose judgement violates the constitution. But all I see is the best lawyers after power and not rule of law. Rule of law weeds out poverty and creates path to prosperity!Its unconstitutional 4 gnu after loss v11.”

I erroneously used the word “presided” instead of acting for ZSE in a matter in which the integrity of the ZSE was under attack by the government that is instituted to protect the rights and freedoms of citizens including shareholders.

It is significant that the Learned Judge concluded as follows: “I am of the view that the acceptance of the situation by both the Administrator and Zimre is proper and accordingly accept that Zimre is under the reconstruction order issued by the Minister.”

It is clear that for the past 13 years, the lawyers who acted for the parties in this matter have been possessed with this material finding by a senior judge that: (a) a Ministerial order has the same force and effect as a judicial order; (b) If a company carries some business activities with a targeted company for expropriation by way of reconstruction, such a company is also deemed to be under reconstruction by association; and (c) that the Court would not only condone this but give life to this absurd construction.

I am intrigued that Hon. Biti has not chosen to make this travesty of justice part of the cause for change. It is also instructive that subsequent to the granting of this order, Hon Biti served as Minister of Finance but saw no need to use his office to correct this nonsense.

I must confess that until the Hwange matter and the oral hearings by the Parliamentary Committee on Mines and Mining Development, I was not aware that the SMM matter had tentacles beyond the affairs of the two asbestos mines.

In fact, it appeared from the submissions of a representative of the ZSE that he had no clue that Zimre, a listed company, preceded Hwange as a victim of the Reconstruction Act.

I am convinced that not too many investors are aware that one can be guilty by association and the Courts will recognize this.

For the whole judgement, please click here:

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